<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d)
of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): October 12, 1995
ALL AMERICAN COMMUNICATIONS, INC.
---------------------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
--------
(State or Other Jurisdiction of Incorporation)
0-14333 95-3803222
------- ----------
(Commission File (I.R.S. Employer
Number) Identification Number)
2114 Pico Boulevard, Santa Monica, California 90405
---------------------------------------------------
(Address of Principal Executive Offices)
(310) 450-3193
--------------
(Registrant's Telephone Number, Including Area Code)
Not Applicable
--------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
ITEM 5. OTHER EVENTS
All American Communications, Inc. (the "Company") entered into an Asset
Purchase Agreement, dated as of October 6, 1995, pursuant to which a
newly-formed New York limited liability company (the "LLC") to be jointly
owned, directly or indirectly, by the Company and The Interpublic Group of
Companies, Inc. ("Interpublic"), agreed to acquire substantially all of the
assets (excluding assets relating to the lottery business) and to assume
certain specified liabilities (the "Mark Goodson Acquisition") of Mark Goodson
Productions, L.P. and The Child's Play Company (collectively the "Sellers").
The assets of Mark Goodson Productions include ownership rights to
approximately 45 game show formats, including "The Price Is Right," and a tape
library of approximately 17,000 broadcast hours of programming and 30,000
episodes.
The Asset Purchase Agreement provides that the purchase price will
consist of payment by the Company of $25.0 million in cash and issuance by
Interpublic of $25.0 million in its common stock to the Sellers, together with
a contingent earn-out described below. Under the earn-out, the LLC will
initially pay to an assignee of the Sellers a specified percentage of "Domestic
Net Profits" (i.e. generally gross receipts less production costs, if
applicable, a distribution fee to the Company under certain circumstances and
residual payments) realized from the exploitation in the U.S. and Canada
(currently, primarily consisting of "The Price Is Right") of the Goodson game
shows and other purchased television formats during the five-year period
following October 6, 1995 (which period is subject to extension for an
additional five years if total earn-out payments do not equal $48.5 million, in
which case the earn-out shall be payable in neither a minimum nor a maximum
amount). The specified percentage of Domestic Net Profits payable to the
Sellers with respect to "The Price Is Right" is 75% during the network
exhibition of the program during the five years after October 6, 1995. However,
the earn-out does not apply to any net profits realized from the international
exploitation of any of the purchased game show or other purchased television
formats.
Consummation of the Mark Goodson Acquisition is subject to expiration
or termination of the regulatory waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 ("HSR") and satisfaction of other customary
closing conditions. On October 24, 1995, the Company received notice of the
early termination of the HSR waiting period. The parties executed and
delivered most of the principal operative documents (including the delivery by
the Company of a $25.0 million letter of credit covering the cash portion of
the purchase price) into escrow, pending final closing.
As of the final closing, the LLC will enter into a long-term license
with a wholly-owned subsidiary of the Company which will exploit, in
consideration of customary distribution fees and recoupment of certain
out-of-pocket expenses, all of the Goodson formats world-wide. Accordingly,
while the Company's ownership interest resulting from the Mark Goodson
Acquisition will be limited to a 50% interest, the Company will be responsible
for the world-wide exploitation of the underlying rights, subject only to
rights under certain existing licenses. The Company's wholly-owned subsidiary
has agreed to sublicense the right to continuously exploit "The Price Is Right"
on U.S. network television during the earn-out period to a wholly-owned
subsidiary of Interpublic, which will hire an affiliate of mark Goodson
Productions, L.P., as producer of the show on a "for hire" basis under an
agreed-upon production budget.
2
<PAGE> 3
It is anticipated that Interpublic and the Company will enter into an
agreement pursuant to which the Company will have a six-month option to acquire
Interpublic's undivided 50% share in the LLC commencing in April 1996 for
$25.9 million (increasing during the option exercise period at a rate of 7%
per annum). In addition, under the operative documents relating to the LLC,
Interpublic will have certain rights to "put" its interest in the LLC to the
Company and the Company will have certain additional rights to "call"
Interpublic's interests under certain circumstances, which may be accelerated
upon certain changes of control or ownership (as defined) of the Company.
The description contained herein of the Asset Purchase Agreement and
related agreements, which does not purport to be complete, is qualified in its
entirety by reference to the Asset Purchase Agreement and such related
agreements, which are attached as exhibits hereto.
3
<PAGE> 4
ITEM 7.
(a) Financial Statements of Business Acquired.
REPORT OF INDEPENDENT AUDITORS
To the Partners of
Mark Goodson Productions, L.P.,
The Childs Play Company and Affiliates:
We have audited the accompanying combined statements of net assets of THE
GAME SHOW DIVISION of MARK GOODSON PRODUCTIONS and AFFILIATES (the "Division")
as of December 31, 1993 and 1994, and the related combined statements of
operating income and cash flows for the years ended December 31, 1992, 1993 and
1994. These financial statements are the responsibility of the Division's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
As indicated in Note 1, the combined financial statements have been
prepared from the books and records of certain commonly controlled entities and
reflect significant assumptions and allocations of costs and expenses.
Accordingly, they are not necessarily indicative of the financial position or
results of operations of the Division had it operated as a stand alone entity.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined net assets of the Game Show
Division of Mark Goodson Productions and Affiliates at December 31, 1993 and
1994, and the combined operating income and their combined cash flows for the
years ended December 31, 1992, 1993 and 1994, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
September 8, 1995.
4
<PAGE> 5
THE GAME SHOW DIVISION OF MARK GOODSON PRODUCTIONS
AND AFFILIATES (NOTE 1)
COMBINED STATEMENTS OF NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- JUNE 30, 1995
1993 1994 (UNAUDITED)
------ ------ -------------
<S> <C> <C> <C>
ASSETS (NOTE 1)
Current assets:
Accounts receivable........................................ $6,231 $6,091 $4,105
Deferred production costs.................................. 1,541 1,985 992
Prepaid expenses and other current assets.................. 82
------ ------ ------
Total current assets............................... 7,854 8,076 5,097
Property and equipment, net of accumulated
depreciation of $2,033, $381, and $402 (Note 2)............ 275 296 276
Deferred tape library costs, net of accumulated amortization
of $97 and $269 (Note 3)................................... 1,344 1,733
Programs in the process of development....................... 338 326 205
Other assets................................................. 88 113 104
------ ------ ------
Total assets....................................... 8,555 10,155 7,415
------ ------ ------
LIABILITIES (NOTE 1)
Current liabilities:
Accounts payable and accrued expenses...................... 2,096 3,483 1,539
Deferred syndication revenue............................... 692
------ ------ ------
Total current liabilities.......................... 2,096 4,175 1,539
------ ------ ------
Total liabilities.................................. 2,096 4,175 1,539
Commitments and contingencies (Note 4)
------ ------ ------
Net assets......................................... $6,459 $5,980 $5,876
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
THE GAME SHOW DIVISION OF MARK GOODSON PRODUCTIONS
AND AFFILIATES (NOTE 1)
COMBINED STATEMENTS OF OPERATING INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
----------------------------- --------------------------
1992 1993 1994 1994 1995
------- ------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Revenues (Note 1):
Network................................ $20,105 $18,808 $12,720 $ 5,586 $ 6,095
Syndication............................ 6,746 7,405 11,454 3,429 3,750
Advertising............................ 1,440 460 1,111 167 276
Foreign royalties...................... 8,047 8,503 6,890 3,432 2,921
Music and other royalties.............. 630 447 487 175 228
----- ----- ----- ----- -----
Total operating revenues....... 36,968 35,623 32,662 12,789 13,270
Operating expenses (Note 1):
Production costs....................... 13,847 12,873 14,023 4,142 4,986
General and administrative............. 18,255 12,919 11,278 5,611 4,776
Depreciation and amortization.......... 1,662 653 156 28 194
----- ----- ----- ----- -----
Total operating expenses....... 33,764 26,445 25,457 9,781 9,956
----- ----- ----- ----- -----
Operating income............... 3,204 9,178 7,205 3,008 3,314
Other:
Gain/(loss) on sale of fixed assets.... 2,665 (30) (32)
----- ----- ----- ----- -----
Operating income............... $ 3,204 $11,843 $ 7,175 $ 2,976 $ 3,314
===== ===== ===== ===== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
THE GAME SHOW DIVISION OF MARK GOODSON PRODUCTIONS
AND AFFILIATES (NOTE 1)
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
-------------------------------- -------------------------
1992 1993 1994 1994 1995
------- -------- ------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Operating income...................... $ 3,204 $ 11,843 $ 7,175 $ 2,976 $ 3,314
Adjustments to reconcile operating
income to net cash provided by
operating activities:
Depreciation and amortization...... 1,662 653 156 28 194
(Gain)/loss on disposal of property
and equipment.................... (2,665) 30 32
Changes in:
Accounts receivable.............. (836) (1,111) 140 1,272 1,986
Prepaid expenses................. (90) 82 83 57
Deferred production costs........ 215 (185) (444) 423 993
Programs in the process of
development................... 400 (79) 12 (67) 121
Other assets..................... 15 1 (25) (25) 9
Accounts payable and accrued
expenses...................... (1,062) (788) 1,387 (649) (1,945)
Deferred syndication revenue..... (72) 692 (692)
------- -------- ------- ------- -------
Net cash provided by operating
activities.................. 3,436 7,751 9,206 4,047 3,980
------- -------- ------- ------- -------
Cash flows from investing activities:
Purchase of property and equipment.... (73) (21) (116) (91) (1)
Sale of marketable securities......... 1,008
Proceeds from sale of property and
equipment.......................... 4,532 5
Deferred tape library costs........... (1,441) (516) (561)
------- -------- ------- ------- -------
Net cash used in investing
activities.................. (73) 5,519 (1,552) (607) (562)
------- -------- ------- ------- -------
Cash flows from financing activities:
Repayment of long term debt........... (426) (4,224)
Cash distribution to Parent........... (2,937) (9,046) (7,654) (3,440) (3,418)
------- -------- ------- ------- -------
Net cash used in financing
activities.................. (3,363) (13,270) (7,654) (3,440) (3,418)
------- -------- ------- ------- -------
Net cash and cash
equivalents................. $ -- $ -- $ -- $ -- $ --
======= ======== ======= ======= =======
Non cash distribution to Parent......... (220)
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 8
THE GAME SHOW DIVISION OF MARK GOODSON PRODUCTIONS
AND AFFILIATES (NOTE 1)
NOTES TO THE COMBINED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES AND TRANSACTIONS
(A) BASIS OF PRESENTATION:
The Game Show Division of Mark Goodson Productions and Affiliates (the
"Division") is not a separate legal entity, but was operated as part of the
overall business of Mark Goodson Productions, L.P., The Childs Play Company and
certain affiliates under common control (collectively the "Parent" or "Owner").
The Division is in the business of producing and licensing television game shows
(primarily Price is Right, Family Feud and Concentration), for network and
syndicated broadcasters, in domestic and foreign markets. The Parent is
currently negotiating an Asset Purchase Agreement for the sale of the Division's
net assets. Under the terms of the proposed agreement, the Parent will sell
substantially all the assets of the Division, except the assets relating to the
operations of the Video Lottery Business, the Sony Game Show Channel and other
assets as specified in the agreement.
The accompanying statements have been prepared from the books and records
of Mark Goodson Productions, L.P., The Childs Play Company and certain
affiliates under common control and present substantially all the revenues and
expenses of the Division for the years ended December 31, 1992, 1993 and 1994
and the net assets of the Division at December 31, 1993 and 1994.
The statements of net assets and statements of operations and cash flows
may not necessarily be indicative of the financial position or results of
operations that would have resulted had the Division been operated as a
stand-alone entity. General and administrative expenses, deemed reasonable by
management, totaling $18,255,000 in 1992, $12,919,000 in 1993 and $11,278,000 in
1994, are net of expenses allocated by the Parent to the Video Lottery Business
and the Sony Game Show Channel in the amounts of $444,000, $939,000 and
$1,228,000 for 1992, 1993 and 1994, respectively. The allocation procedures
include various bases such as employee numbers and estimated time spent.
Expenses not allocated to the Division include taxes on income, pension, post
retirement and interest, other than interest expense incurred for the airplane
financing amounting to $334,000 in 1992 and $208,000 in 1993. Rental expense
incurred by the Division amounted to $1,532,000 in 1992, $1,325,000 in 1993 and
$1,138,000 in 1994. These amounts are included in general and administrative
expenses.
The financial statements do not include any adjustments which may be
required by the consummation of the agreement of sale nor do they consider any
adjustments which may result from changes in the operations of the Division by
the Buyer.
(B) UNAUDITED SIX MONTH FINANCIAL STATEMENTS:
The unaudited six month financial statements as of June 30, 1994 and 1995
include all adjustments, consisting only of normal recurring adjustments which
in the opinion of the Division's management, are necessary for a fair
presentation of the results of operations for the six months presented. The
results for the six months ended June 30, 1995 are not indicative of the results
which may be expected for the entire year ended December 31, 1995.
(C) REVENUE RECOGNITION:
Revenue from television licensing agreements is recognized in the
accounting period in which the game shows become available for broadcast or when
identified and broadcast according to the terms of the license agreements.
Foreign, music and other royalty income is recognized upon receipt of earnings
reports from licensees. Advertising revenue is recognized when the
advertisements are broadcast. Deferred revenues consists of advance payments
received on television contracts for which the revenue has not yet been
recognized.
8
<PAGE> 9
THE GAME SHOW DIVISION OF MARK GOODSON PRODUCTIONS
AND AFFILIATES (NOTE 1) -- (CONTINUED)
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(D) PRODUCTION COSTS:
Game show production costs are recognized in a manner consistent with the
revenue recognition policies. Program development costs are deferred unless
management's estimates indicate that such costs are non-recoverable, in which
case the costs are charged against operations currently.
(E) PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost. Depreciation and amortization
are recorded by the declining-balance method for furniture and equipment, and by
the straight-line method for leasehold improvements, over the shorter of lease
term or estimated useful lives of the assets.
(F) INCOME TAXES
No provision for income taxes has been reflected in the accompanying
statement of operating income because income tax expense is not allocated by the
Parent to the Division.
(G) DIVISION EQUITY
For cash flow purposes, all transfers of cash between the Division and the
Parent are recorded through Division Equity.
2. PROPERTY AND EQUIPMENT
The components of property and equipment are:
<TABLE>
<CAPTION>
DECEMBER 31,
------------- ESTIMATED
1993 1994 LIFE
------ ---- --------------
<S> <C> <C> <C>
Office furniture and equipment........................ $1,937 $411 5 to 7 years
Automobiles........................................... 147 126 5 years
Leasehold improvements................................ 224 140 7 shorter of
lease term or
life of assets
------ ----
2,308 677
Less: Accumulated depreciation and amortization..... 2,033 381
------ ----
Property and equipment, net................. $ 275 $296
====== ====
</TABLE>
Depreciation and amortization expense for the years ended December 31, 1993
and 1994 amounted to $653,000 and $59,000 respectively, and $22,000 for the six
months ended June 30, 1995.
3. DEFERRED TAPE LIBRARY COSTS
Deferred tape library costs consists of costs incurred to upgrade and copy
the Division's program library. Amortization of these costs is provided by the
straight-line method over a five-year period and amounted to $97,000 in 1994 and
$172,000 for the six months ended June 30, 1995.
9
<PAGE> 10
THE GAME SHOW DIVISION OF MARK GOODSON PRODUCTIONS
AND AFFILIATES (NOTE 1) -- (CONTINUED)
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
4. COMMITMENTS AND CONTINGENCIES
(A) TALENT AGREEMENTS:
The Division is committed under four talent agreements relating to the game
show productions. The gross compensation due on the agreement's, which extend
through the end of the 1995-1996 broadcast year is $6,193,000 (net of network
reimbursements -- $1,102,000).
(B) LITIGATION:
In the opinion of management and its counsel, the Division is not a party
to any litigation that would have a material adverse effect on its business,
results of operations, or financial condition if settled in an unfavorable
manner.
10
<PAGE> 11
(b) Pro Forma Financial Information
CERTAIN PRO FORMA INFORMATION
The following unaudited pro forma condensed consolidated balance sheet as
of June 30, 1995 and the pro forma condensed consolidated statements of
operations for the six months ended June 30, 1995 and 1994 and the year ended
December 31, 1994 give effect to the October 1995 agreement of Mark Goodson
Productions, LLC (the "LLC") to purchase substantially all of the assets of Mark
Goodson Productions, L.P. and The Child's Play Company (the "Sellers") (the
"Mark Goodson Acquisition"), the August 1994 acquisition (the "Fremantle
Acquisition") of certain net assets and all of the outstanding non-voting common
stock of Fremantle International, Inc. ("Fremantle") and the offering.
The pro forma information is based on the historical financial statements
of the Company, the Sellers and Fremantle, giving effect to: (i) the Mark
Goodson Acquisition under the equity method of accounting, (ii) the Fremantle
Acquisition under the purchase method of accounting, (iii) the offering and (iv)
the assumptions and adjustments described in the accompanying notes to the pro
forma condensed consolidated financial statements. The unaudited pro forma
condensed consolidated statements of operations have been prepared as if the
above transactions had occurred at the beginning of the earliest period
presented (January 1, 1994). The unaudited pro forma condensed consolidated
balance sheet data has been prepared as if the Mark Goodson Acquisition and the
offering had occurred at the end of the period presented (June 30, 1995).
These pro forma statements may not be indicative of the results that would
have occurred if the above transactions had occurred on the dates indicated or
which may be obtained in the future. The pro forma financial statements should
be read in conjunction with the Consolidated Financial Statements and notes of
the Company for the year ended December 31, 1994 and the condensed consolidated
financial statements and notes of the Company for the six months ended June 30,
1995 contained or incorporated by reference herein.
THE MARK GOODSON ACQUISITION
As of October 6, 1995, the Company agreed to form the LLC as a 50/50 joint
venture with Interpublic. The LLC entered into an agreement to purchase
substantially all of the assets of the Sellers. The purchase price paid by the
Company for its undivided 50% interest of the Sellers' net assets acquired
consisted of a cash payment of $25.0 million plus an as yet undetermined
contingent purchase price. The contingent purchase price, payable to the
Sellers, is to be earned and paid based on the income (as defined) resulting
from a domestic television network contract and the exploitation of certain
other domestic television rights. The contingent purchase price, in total, is
limited to $48.5 million if paid (whether earned or not) during the first five
years following October 6, 1995. Otherwise the amount of contingent purchase
price is unlimited to the extent it is earned within the first ten years
following October 6, 1995. At the end of ten years no additional contingent
purchase price accrues. The Company shares equally with Interpublic in the
contingent purchase price.
Based upon a preliminary review and evaluation, substantially all of the
Company's $25.0 million portion of the initial purchase price has been allocated
to goodwill. The contingent purchase price, to the extent earned, will be
treated as an increase in goodwill and will be amortized coterminously with the
original 25 year period. To the extent additional contingent purchase price
payments are made, amortization will increase in future periods. Management of
the Company is in the process of reviewing the allocation of the purchase price
and, when completed, may modify its preliminary allocation. The Mark Goodson
Acquisition will be accounted for by the Company under the equity method of
accounting.
THE FREMANTLE ACQUISITION
In August 1994 the Company completed the Fremantle Acquisition. The
purchase price paid by the Company consisted of the following: (i) a cash
payment of $31.5 million and (ii) the issuance of 630,000 shares of Common Stock
and 2,520,000 shares of Class B Common Stock.
The Company has accounted for the Fremantle Acquisition as a purchase and
has allocated the purchase price based on the estimated fair value of assets and
liabilities acquired. The total consideration of $52.5 million (including
expenses related to the acquisition of $1.0 million) exceeded the estimated fair
value of net assets acquired by $50.3 million (goodwill); such goodwill is being
amortized over 25 years. The amounts shown as historical Fremantle have been
adjusted to reflect contractual terms with respect to the Fremantle Acquisition.
11
<PAGE> 12
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, 1995
----------------------------------------------
AS ADJUSTED
FOR THE
MARK GOODSON
ACQUISITION
HISTORICAL PRO FORMA AND THE
COMPANY ADJUSTMENTS OFFERING
----------- ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents........................................ $ 10,126 $ 7,095(1) $ 17,221
Trade receivables, net........................................... 65,553 65,553
Inventory........................................................ 1,173 1,173
Advances to recording artists.................................... 1,357 1,357
Television program costs, net.................................... 88,109 88,109
Property and equipment, net...................................... 3,725 3,725
Investment in unconsolidated affiliate........................... -- 25,000(2) 26,000
1,000(3)
Goodwill, net.................................................... 50,476 50,476
Debt issue costs................................................. 5,031 400(4) 5,431
Deferred income taxes............................................ 1,373 1,373
Other............................................................ 1,591 (400)(3) 1,191
-------- ------ --------
Total assets................................................ $228,514 $ 33,095 $261,609
======== ====== ========
Liabilities:
Accounts payable and accrued expenses............................ $ 20,464 $ 600(3) $ 21,464
400(4)
Royalties payable................................................ 2,555 2,555
Deferred revenues................................................ 2,878 2,878
Due to producers................................................. 29,295 29,295
Participations payable........................................... 18,862 18,862
Due to banks..................................................... 67,475 (37,475)(1) 55,000
25,000(5)
Notes payable.................................................... 60,000 60,000
-------- ------ --------
Total liabilities........................................... 201,529 (11,475) 190,054
Stockholders' equity:
Preferred stock.................................................. -- --
Common stock..................................................... 1 1
Class B common stock............................................. -- 1(6) 1
Additional paid in capital....................................... 28,751 44,569(6) 73,320
Accumulated deficit.............................................. (1,880) (1,880)
Other............................................................ 113 113
-------- ------ --------
Total stockholders' equity.................................. 26,985 44,570 71,555
-------- ------ --------
Total liabilities and stockholders' equity.................. $228,514 $ 33,095 $261,609
======== ====== ========
</TABLE>
12
<PAGE> 13
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1995
---------------------------------------------
AS ADUSTED
FOR THE
MARK GOODSON
HISTORICAL ACQUISITION
----------- PRO FORMA AND THE
COMPANY ADJUSTMENTS OFFERING
----------- ------------ ------------
(IN THOUSANDS -- EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues........................................................................ $75,027 $ $ 75,027
Cost of sales................................................................... 59,971 (1,461)(7) 58,510
Selling, general and administrative............................................. 12,094 12,094
Goodwill amortization........................................................... 1,070 826(8) 1,896
------- ------- --------
Operating income.............................................................. 1,892 635 2,527
------- ------- --------
Equity earnings in unconsolidated affiliate..................................... -- 1,657(9) 2,681
2,485(10)
(1,461)(7)
Other income, net............................................................... 127 127
Interest income/(expense), net.................................................. (4,728) 1,400(11) (4,590)
(1,195)(12)
(67)(13)
------- ------- --------
Income (loss) before taxes.................................................... (2,709) 3,454 745
Provision (benefit) for income taxes............................................ (1,138) 1,451(14) 313
------- ------- --------
Net income (loss)............................................................. $(1,571) $2,003 $ 432
======= ======= ========
Net income (loss) per share................................................... $ (0.20) $ 0.04
======= ========
Weighted average number of common shares and common share equivalents 105(15)
outstanding................................................................. 7,976 4,000(6) 12,081
======= ========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1994
-----------------------------------------------------------------------------------
AS FURTHER
ADJUSTED
FOR THE
AS ADJUSTED MARK GOODSON
HISTORICAL FOR THE ACQUISITION
------------------- PRO FORMA FREMANTLE PRO FORMA AND THE
COMPANY FREMANTLE ADJUSTMENTS ACQUISITION ADJUSTMENTS OFFERING
------- --------- ----------- ----------- ------------ -------------
(IN THOUSANDS -- EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Revenues.................................... $27,607 $ 26,882 $ $54,489 $ $54,489
Cost of sales............................... 20,348 21,546 255(17) 42,149 (1,716)(7) 40,433
Selling, general and administrative......... 8,815 2,491 11,306 11,306
Goodwill amortization....................... 46 383 967(18) 1,013 670(8) 1,683
(383)(19)
------- ------- ------- ------- ------ -------
Operating income.......................... (1,602) 2,462 (839) 21 1,046 1,067
------- ------- ------- ------- ------ -------
Equity earnings in unconsolidated
affiliate................................. -- -- 1,488(9) 2,592
2,820(10)
(1,716)(7)
Other income/(expense), net................. -- 428 428 428
Interest income/(expense), net.............. (2,124) 85 (1,500)(12) (3,722) (1,195)(12) (4,984)
(183)(13) (67)(13)
------- ------- ------- ------- ------ -------
Income (loss) before taxes................ (3,726) 2,975 (2,522) (3,273) 2,376 (897)
Provision (benefit) for income taxes........ 31 1,729 (1,370)(14) 390 (767)(14) (377)
------- ------- ------- ------- ------ -------
Net income (loss)......................... $(3,757) $ 1,246 $(1,152) $(3,663) $3,143 $ (520)
======= ======= ======= ======= ====== =======
Net income (loss) per share............... $ (0.78) $ (0.46) $ (0.04)
======= ======= =======
Weighted average number of common shares
and
common share equivalents outstanding.... 4,826 3,150(21) 7,976 4,000(6) 11,976
======= ======= ======= ====== =======
</TABLE>
13
<PAGE> 14
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1994
------------
SEVEN MONTH
YEAR ENDED PERIOD ENDED AS ADJUSTED
DECEMBER 31, JULY 31, 1994 FOR THE
1994 HISTORICAL PRO FORMA FREMANTLE
AS REPORTED(16) FREMANTLE ADJUSTMENTS ACQUISITION
--------------- ------------- ------------ ------------
(IN THOUSANDS -- EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues................................................. $ 114,901 $30,564 $ $145,465
Cost of sales............................................ 85,946 25,820 298(17) 112,064
Selling, general and administrative...................... 21,523 2,992 24,515
Goodwill amortization.................................... 971 447 1,183(18) 2,154
(447)(19)
-------- ------- ------- --------
Operating income....................................... 6,461 1,305 (1,034) 6,732
-------- ------- ------- --------
Equity earnings in unconsolidated affiliate.............. -- -- --
Other income, net........................................ 49 64 113
Interest income/(expense), net........................... (5,725) 99 (1,750)(12) (7,590)
(214)(13)
-------- ------- ------- --------
Income (loss) before taxes............................. 785 1,468 (2,998) (745)
Provision (benefit) for income taxes..................... 330 992 (965)(14) 357
-------- ------- ------- --------
Net income (loss)...................................... $ 455 $ 476 $ (2,033) $ (1,102)
======== ======= ======= ========
Net income (loss) per share............................ $ 0.07 $ (0.14)
======== ========
Weighted average number of common shares and common (66)(20)
share equivalents outstanding........................ 6,201 1,841(21) 7,976
======== ========
<CAPTION>
YEAR ENDED
DECEMBER 31, 1994
------------------------------
AS FURTHER
ADJUSTED
FOR THE
MARK GOODSON
ACQUISITION
PRO FORMA AND THE
ADJUSTMENTS OFFERING
----------- ------------
(IN THOUSANDS -- EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Revenues................................................. $ $145,465
Cost of sales............................................ (3,445)(7) 108,619
Selling, general and administrative...................... 24,515
Goodwill amortization.................................... 1,340(8) 3,494
------ -------
Operating income....................................... 2,105 8,837
------ -------
Equity earnings in unconsolidated affiliate.............. 3,588(9) 5,860
5,717(10)
(3,445)(7)
Other income, net........................................ 113
Interest income/(expense), net........................... 1,000(11) (9,114)
(2,391)(12)
(133)(13)
------ -------
Income (loss) before taxes............................. 6,441 5,696
Provision (benefit) for income taxes..................... 2,035(14) 2,392
------ -------
Net income (loss)...................................... $ 4,406 $ 3,304
====== =======
Net income (loss) per share............................ $ 0.27
=======
Weighted average number of common shares and common 66(15)
share equivalents outstanding........................ 4,000(6) 12,042
=======
</TABLE>
- ---------------
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following footnotes relate to the pro forma balance sheet as of June
30, 1995 and the pro forma statements of operations for the six month periods
ended June 30, 1995 and 1994 and the year ended December 31, 1994.
(1) Reflects expected use of net proceeds in connection with the offering based
upon an assumed aggregate offering amount of $49.0 million before expenses.
(2) Reflects the Company's investment in the LLC.
(3) Reflects closing costs incurred by the Company in connection with the Mark
Goodson Acquisition ($.4 million of such costs were included in the
Company's other assets as prepaid items in the June 30, 1995 historical
balance sheet).
(4) Reflects debt issue costs incurred in connection with the Mark Goodson
Acquisition.
(5) Reflects the bank financing incurred in connection with the Mark Goodson
Acquisition.
(6) Reflects the issuance of Class B Common Stock in connection with the
offering.
(7) Reflects the intercompany elimination of the Company's 50% share of
Fremantle license fees paid to Mark Goodson Productions, L.P.
(8) Reflects amortization of initial goodwill in connection with the Mark
Goodson Acquisition of $26.0 million, plus amortization of estimated
contingent purchase price of $7.5 million in 1994 over 25 years and
amortization of additional estimated contingent purchase price of $3.8
million for the 1995 six month period over 24 years. To the extent
additional contingent purchase price payments are made, amortization will
increase in future periods.
14
<PAGE> 15
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(9) Reflects the Company's 50% interest in the historical net earnings of Mark
Goodson Productions, L.P.
(10) Reflects the elimination of the Company's 50% share of Mark Goodson
Productions, L.P. historical selling, general and administrative costs
which will not be incurred subsequent to the date of the Mark Goodson
Acquisition. The Mark Goodson Productions, L.P. day to day operations will
be absorbed into the Company's existing operations.
(11) Reflects expected reduction in interest expense from the use of the net
proceeds from the offering to pay down short term debt (no short term debt
was outstanding during the six months ended June 30, 1994).
(12) Reflects interest expense on debt incurred in connection with the
acquisitions.
(13) Reflects amortization of debt issuance costs.
(14) Reflects income tax effects of the pro forma adjustments.
(15) Reflects the inclusion of dilutive common stock equivalents for earnings
per share purposes.
(16) The historical results for the year ended December 31, 1994 include the
five months of operations of Fremantle from August 1994, the date of the
Fremantle Acquisition.
(17) Reflects additional amortization of television program costs, as adjusted,
acquired in connection with the Fremantle Acquisition.
(18) Reflects amortization of goodwill in connection with the Fremantle
Acquisition of $50.3 million over 25 years.
(19) Reflects the elimination of goodwill amortization recorded by Fremantle
prior to the Fremantle Acquisition.
(20) Reflects the elimination of anti-dilutive common stock equivalents for
earnings per share purposes.
(21) Reflects the weighted average number of shares issued in connection with
the Fremantle Acquisition.
15
<PAGE> 16
(c) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
10.1 Asset Purchase Agreement dated as of October 6, 1995
between and among Mark Goodson Productions, L.P., The
Child's Play Company, Mark Goodson Productions, LLC, The
Interpublic Group of Companies, Inc., the Estate of Mark
Goodson and All American Communications, Inc.
10.2 Network License Agreement between All American Goodson,
Inc. and Interpublic Game Shows, Inc., dated as of October 6,
1995.
10.3 License Agreement between Mark Goodson Productions, LLC
and All American Goodson, Inc. dated as of October 6, 1995.
10.4 Network Production Agreement between Interpublic Game Shows, Inc.
and TPIR LLC, dated as of October 6, 1995.
10.5 Operating Agreement between All American Communications,
Inc. and All American Goodson, Inc., dated as of September 18,
1995.
10.6 Amended and Restated Operating Agreement among All
American Communications, Inc., All American Goodson, Inc.,
The Interpublic Group of Companies, Inc. and Interpublic
Game Shows, Inc., dated as of October 6, 1995.
11.1 Statement re Computation of Per Share Earnings -- Pro Forma
Information, Six Months Ended June 30, 1995.
11.2 Statement re Computation of Per Share Earnings -- Pro Forma
Information, Year Ended December 31, 1994.
11.3 Statement re Computation of Per Share Earnings -- Pro Forma
Information, Six Months Ended June 30, 1994.
99 Press Release dated October 12, 1995.
</TABLE>
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in New York City, New York, on
October 27, 1995.
All American Communications, Inc.
By: /s/ ANTHONY J. SCOTTI
-------------------------
Name: Anthony J. Scotti
Title: Chairman
17
<PAGE> 1
EXHIBIT 10.1
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
BETWEEN AND AMONG
MARK GOODSON PRODUCTIONS, L.P.
AND
THE CHILD'S PLAY COMPANY,
AS SELLERS,
AND
MARK GOODSON PRODUCTIONS, LLC,
THE INTERPUBLIC GROUP OF COMPANIES, INC.,
AS BUYERS,
AND
MARVIN GOODSON, RICHARD SCHNEIDMAN AND
JEREMY SHAMOS, AS EXECUTORS OF THE
ESTATE OF MARK GOODSON
AS GUARANTOR
AND
ALL AMERICAN COMMUNICATIONS, INC.
DATED AS OF OCTOBER 6, 1995
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . . . . 22
2.1 Purchase and Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.3 Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.4 Contracts to Be Assigned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 3 ESCROW CLOSING; PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.1 Escrow Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.2 Escrow Closing Deliveries by Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.3 Payment of Cash and Stock Portion of Purchase Price After Final Closing . . . . . . . . . . . 28
3.4 No Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.5 Restrictions on Transferability of Interpublic's Stock. . . . . . . . . . . . . . . . . . . . 30
3.6 Legend. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.7 Assignment of Put Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.8 Earn-Out . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.9 Estimated Adjusted Net Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
3.10 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
3.11 Installment Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
3.12 Adjustment For Period Between Escrow Closing and Final Closing . . . . . . . . . . . . . . . . 48
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE SELLERS . . . . . . . . . . . . . . . . . . . . . . . . 49
4.1 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
4.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
4.3 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
4.4 Library Physical Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
4.5 Library Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
4.6 Copyrights, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
4.7 Marks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
4.8 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
4.9 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
4.10 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
4.11 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
4.12 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
4.13 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
4.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
4.15 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
4.16 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
4.17 Third Party Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
4.18 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
4.19 The Price Is Right Budget. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
4.20 Reorganization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
4.21 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
4.22 Third Party Proposals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
4.23 Investment Representation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
4.24 Sony Agreement and Sony Lien. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
4.25 The Representative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND AACI . . . . . . . . . . . . . . . . . . 78
5.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
5.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
5.3 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
5.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF INTERPUBLIC . . . . . . . . . . . . . . . . . . . . . . . 81
6.1 Organization of Interpublic and Interpublic Sub . . . . . . . . . . . . . . . . . . . . . . 81
6.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
6.3 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
6.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
6.5 Interpublic Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
ARTICLE 7 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
7.1 Conduct of the Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
7.2 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
7.3 Filings, Authorizations and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
7.4 Employees, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
7.5 No Shop . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
7.6 Notice to Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
7.7 Notice of Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
7.8 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
7.9 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
7.10 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
7.11 Sales and Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
7.12 Non-Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
7.13 Use of Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
7.14 The Sony Agreement etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
7.15 Interpublic Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
7.16 Delivery of Tax Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
7.17 Other Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
7.18 Satisfaction of Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
ARTICLE 8 CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYERS . . . . . . . . . . . . . . . . . . . . . . . 105
8.1 Representations and Warranties Accurate . . . . . . . . . . . . . . . . . . . . . . . . . . 105
8.2 Performance by the Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
8.3 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
8.4 Delivery of Assets and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
8.5 Opinions of Counsel for the Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
8.6 HSR Act, Etc.; Authorizations; Financing; Legal Prohibition . . . . . . . . . . . . . . . . 109
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
8.7 Estate Guaranty, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
ARTICLE 9 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS . . . . . . . . . . . . . . . . . . . . 111
9.1 Representations and Warranties Accurate . . . . . . . . . . . . . . . . . . . . . . . . . . 111
9.2 Performance by the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
9.3 Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
9.4 Assumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
9.5 Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
9.6 Opinions of Counsel for the Buyers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
9.7 HSR Act, Etc.; Authorizations; Legal Prohibition. . . . . . . . . . . . . . . . . . . . . 114
ARTICLE 10 POST-CLOSING ADJUSTMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
10.1 Post-Closing Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
10.2 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
10.3 Determination and Payment of Post-Closing Adjustments . . . . . . . . . . . . . . . . . . . 117
10.4 Expenses of Post-Closing Adjustment or Earn-Out Adjustment . . . . . . . . . . . . . . . . 118
ARTICLE 11 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
11.1 Termination Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
11.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
ARTICLE 12 BULK TRANSFER LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
ARTICLE 13 INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
13.1 Indemnification by the Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
13.2 Indemnification by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
13.3 Procedure for Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
13.4 Right of Set Off; Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
13.5 Obligations of the Estate and the Partnership . . . . . . . . . . . . . . . . . . . . . . . 133
13.6 Purchase Price Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
13.7 Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
ARTICLE 14 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
14.1 Expenses, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
14.2 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
14.3 Limited Survival of Representations and Warranties; Liability . . . . . . . . . . . . . . . 136
14.4 Due Diligence Investigation; Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
14.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
14.6 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
14.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
14.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
14.9 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
14.10 Binding Effect; Assignment; Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
14.11 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
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<S> <C>
14.12 Consent of Buyers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
14.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
14.14 Governing Law and Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
Schedules
1.1(a) Agreed Procedures
1.1(b) Domestic Net Profits
1.1(c) Limitations on Library Music Rights
2.1(a) Partnership Assets To Be Transferred
2.1(b) CPC Assets To Be Transferred
2.2 Excluded Assets
2.3 Assumed Liabilities
2.4 Assigned Contracts Requiring Consent
3.3 Purchase Price Allocation
3.5 Assignees of the Partnership
3.8 Earn-Out Allocations
3.8(b)(ix) Allocations Regarding "The Price Is Right"
3.9 Allocation Between Sellers
3.10 Purchase Price Allocation
4.1(a) Limited Partners of the Partnership
4.2 Required Consents
4.3(c) Defaults
4.4(a) Master Tapes
4.4(c) Location of Library Physical Properties
4.5(a) Library Programs
4.5(b) Third Party Obligations, Exceptions to Ownership
4.5(c) Restrictions on Exploitation, Liens, Charges, Encumbrances and Security Interests
4.5(d) Notices of Infringement
4.5(e) Library Music Rights
4.6(a) Validity of Copyrights
4.6(b) Registrations of Copyrights
4.7(a) Marks
4.7(b) Restrictions on Marks
4.7(c) Marks Infringing Third Party Rights
4.7(d) Third Party Infringements of the Marks
4.7(e) Other Users of the Marks "Mark Goodson", "Mark Goodson Company" and
"Mark Goodson Productions"
4.7(g) Third Party Licensees of Marks
4.9 Seller Liabilities
4.11 Absence of Certain Changes
4.12(a) Contracts
4.12(b) Contract Defaults and/or Breaches and Required Consents
4.12(d) Invalid or Unenforceable Contracts; Exercisable Renewals of Licenses, Sublicenses;
Reports and Material Disputes
4.12(e) Defaulted or Breached Contracts
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C> <C>
4.13 Litigation
4.14 Withholding Taxes
4.17(b) Guild Encumbrances
4.20 Entities
4.24 Sony Performance
5.2 Exception to Authority; Required Approvals
7.1(b) Permitted Contracts
7.12 Sellers' Affiliates
7.14 Restrictions under the Sony Agreement
8.6(b) Required Governmental Approvals
8.6(c) Sellers' Obligations regarding Governmental and other Approvals
9.4 HSR Act, Etc.; Authorizations; Legal Prohibitions
Exhibits
3.2 Escrow Agreement
3.5 Put Agreement
8.4(a)(iv) Partnership General Assignment and Bill of Sale
8.4(a)(v) Partnership Assignment of Copyrights
8.4(a)(vi) Partnership Assignment of Trademarks
8.4(a)(vii) Network Production Agreement
8.4(b)(iv) CPC General Assignment and Bill of Sale
8.4(b)(v) Assignment of Copyright for "Child's Play"
8.4(b)(vi) CPC Assignment of Trademarks
8.5(a) Opinions of Counsel for the Sellers
9.4(a) Assumption
9.4(b) Guild Agreement Assumption - AFTV
9.4(c) Guild Agreements - Directors Guild of America
9.5(a) License Agreement
9.5(b) Network License Agreement
9.6(a) Opinion of Counsel for the Company
9.6(b) Opinion of Counsel for Interpublic
13.1 Seller Letter of Credit
13.5 Estate Guaranty
</TABLE>
v
<PAGE> 7
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of
October 6, 1995, between and among MARK GOODSON PRODUCTIONS, L.P., a California
limited partnership (the "Partnership") and The Child's Play Company, a joint
venture ("CPC" and together with the Partnership, the "Sellers") on the one
hand, and Mark Goodson Productions, LLC, a New York limited liability company
(the "Company") and The Interpublic Group of Companies, Inc., a Delaware
corporation ("Interpublic" and together with the Company, the "Buyers") on the
other hand, and Marvin Goodson, Richard Schneidman and Jeremy Shamos, as
executors of the Estate of Mark Goodson (the "Estate") and All American
Communications, Inc., a Delaware corporation ("AACI").
RECITALS
The Partnership is engaged in the creation, production and
licensing of television game programming, reality based programming and other
television programming in the United States and throughout the world.
The Partnership desires to sell to the Buyers, and the
Buyers desire to purchase from the Partnership, all of the assets of the
Partnership other than Excluded Assets (as hereinafter defined), and the
Company is willing to assume the Assumed Liabilities (as hereinafter defined),
pursuant to the terms and conditions hereinafter set forth.
<PAGE> 8
CPC is engaged in the licensing of the right to produce the
television game show "Child's Play" throughout the world.
CPC desires to sell to the Buyers and the Buyers desire to
purchase from CPC, all of the assets of CPC other than Excluded Assets, and the
Company is willing to assume the Assumed Liabilities of CPC, pursuant to the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. The terms defined in this Section
1.1, whenever used herein, shall have the following meanings for all purposes
of this Agreement.
"AAG" shall mean All American Goodson, Inc., a wholly-owned
subsidiary of AACI.
"AAG License" shall have the meaning set forth in Section
9.5(a).
"Accounts Receivable" shall mean the unpaid amounts, as of
the Escrow Closing, which immediately prior to the Escrow Closing are
contractually obligated to be paid to or for the account and benefit of the
Partnership or CPC on payment dates certain, minus, with respect to such unpaid
amounts, the corresponding reserves for bad debts; provided, however, that any
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<PAGE> 9
payments to be received with respect to the Sony Agreement, the 1994-1995
season of "Family Feud" (which payments the Partnership acknowledges have been
made) or any Excluded Assets shall not be included in Accounts Receivable. For
purposes of determining Adjusted Net Current Assets, Accounts Receivable shall
be calculated in accordance with the Agreed Procedures.
"Act" shall mean the Securities Act of 1933, as amended, and
any rules and regulations promulgated thereunder.
"Additional Domestic Net Profits" shall mean all Domestic
Net Profits other than Domestic Net Profits-Price is Right Network.
"Adjusted Net Current Assets" shall mean, without
duplication, the sum of Accounts Receivable and prepaid expenses, but in each
case excluding Excluded Assets and any amounts receivable under the Sony
Agreement, less, without duplication, (i) current liabilities, if any, assumed
by the Company as Assumed Liabilities, (ii) Third Party Costs, Taxes (if any),
unpaid collection/distribution expenses and releasing costs included in Assumed
Liabilities, and (iii) liabilities which can be quantified associated with
Permitted Encumbrances, in each case calculated as of the Escrow Closing Date
in accordance with the Agreed Procedures. To the extent not deducted in the
calculation of Adjusted Net Current Assets in accordance with the foregoing
sentence, there shall be a reduction in Adjusted Net Current Assets for the
amount of any payable arising to Grundy
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<PAGE> 10
under the license dated June 28, 1991 in respect of an Account Receivable
included in Adjusted Net Current Assets.
"Affiliate" shall mean, in respect of any specified Person,
any other Person that, directly or indirectly, controls, is controlled by, or
is under common control with, such specified Person; in the case of the Estate,
the term "Affiliate" shall exclude the individuals acting as the executors of
the Estate solely in their respective individual capacities and, in the case of
the Sellers, the term "Affiliate" shall include the Representative.
"Agreed Procedures" shall have the meaning specified in
Schedule 1.1(a).
"Arbitrator" shall have the meaning specified in Section
10.2.
"Assets" shall mean all the assets, properties, rights and
businesses owned or held by the Partnership or CPC (or any of their respective
Related Persons) and any other assets used or useful in the Business and owned
or held by the Partnership or CPC (or any of their respective Related Persons),
of every kind and description and wherever located, including, without
limitation, all property, tangible or intangible, real, personal or mixed; all
notes, accounts receivable, all contracts and agreements (including but not
limited to the CBS Network License and the related host, announcer and model
agreements with Bob Barker and other talent, the Sony Agreement, the license
and merchandising agreements with Fremantle International, Inc. and
4
<PAGE> 11
the license agreements with Grundy and the other Contracts, including all
benefits under any non-assigned contracts or agreements pursuant to Section
2.4); all contract rights and other rights to receive payment; all rights to
rebates, recoupment, claims and rights of recovery or setoff, reserves,
prepayments, deferred and other charges; all inventory, machinery, fixtures,
equipment; all rights in computer software; the Library Rights; all Library
Tangible Assets; all Marks; all writings and other works, whether copyrightable
or not, in any jurisdiction; all registrations or applications for registration
of copyrights in any jurisdiction, and any renewals or extensions thereof; all
patents, applications for patents, and any renewals, extensions or reissues
thereof, in any jurisdiction; any similar intellectual property rights; all
non-public information, trade secrets, confidential information, and rights in
any jurisdiction to limit the use or disclosure thereof by any Person; all
concepts, formats, marketing and technical data, and all books, records and
documents; any and all claims or causes of action arising out of or related to
any infringement or misappropriation of any of the foregoing; and any and all
past or current claims or future claims relating to the Business, including any
claims the Partnership, CPC or any of their respective Related Persons had,
have or may have against AACI or Interpublic or any of their Affiliates, except
for such rights as expressly arise in favor of either of the Sellers,
Representative or Producer solely under this Agreement or the Related
Agreements to which any of them is
5
<PAGE> 12
a party or as to which any of them is a third party beneficiary; provided,
however, that the foregoing shall not include the Excluded Assets.
"Assumed Liabilities" shall have the meaning specified in
Section 2.3.
"Assumption" shall have the meaning specified in Section 9.4.
"Bible" shall mean an outline, treatment or format of a
particular game show.
"Business" shall mean (i) in the case of the Partnership
(together with the Partnership Related Persons), the Exploitation of Library
Rights and/or Library Physical Properties and (ii) in the case of CPC (together
with the CPC Related Persons), the Exploitation of the Library Rights and/or
Library Physical Properties relating to the television game show "Child's Play"
or any other Program. Without limiting the generality of the foregoing, the
Business shall include the entire business of the Partnership relating to
television game shows, episodic series, reality based programming, but
excluding the Lottery Business.
"Business Day" shall mean any day that is not a Saturday,
Sunday or other day on which banking institutions in New York, New York, are
authorized or required by law or executive order to close.
"Buyer Indemnities" shall have the meaning specified in
Section 13.1.
6
<PAGE> 13
"Claims" shall have the meaning specified in Section 13.1(c).
"Closing Adjusted Net Current Assets" shall have the meaning
specified in Section 10.2.
"Code" shall mean the United States Internal Revenue Code of
1986, as amended from time to time, and, unless the context otherwise requires,
the rules and regulations promulgated thereunder from time to time.
"Company" shall mean Mark Goodson Productions, LLC, a New
York limited liability company.
"Competitive Business" shall have the meaning set forth in
Section 7.12(a).
"Confidentiality Agreements" shall mean the agreements
between Interpublic or AACI and the Partnership, dated September 16, 1994 and
July 21, 1994, respectively, regarding the confidentiality of the Evaluation
Material (as defined therein), as superseded to the extent of any conflict or
inconsistent provision, by Section 7.12 hereof.
"Copyright" shall have the meaning set forth in Section
4.6(a).
"Copyright Law" shall mean the applicable United States
copyright law, as amended, the Universal Copyright Conventions, the Berne
Convention or any other applicable statutory or common law copyright law in any
country in the world.
"CPC Related Person" shall mean the Estate.
7
<PAGE> 14
"Domestic Net Profits" shall have the meaning specified in
Schedule 1.1(b).
"Domestic Net Profits-Price Is Right Network" shall have the
meaning set forth in Schedule 1.1(b).
"Earn-Out Payments" shall have the meaning set forth in
Section 3.8(a).
"Earn-Out Period" shall have the meaning set forth in
Section 3.8(a) as may be extended pursuant to Section 3.8(b).
"Episode" shall mean any single audio, visual, or
audiovisual production of any kind, whether intended for initial Exploitation
by means of television or in or by any other medium, means or manner now known
or hereafter developed.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time, and, unless the context otherwise
requires, the rules and regulations promulgated thereunder from time to time.
"Escrow Agent" shall mean U.S. Trust Company of California,
N.A. or any successor escrow agent pursuant to the Escrow Agreement.
"Escrow Agreement" shall mean the escrow agreement among the
Partnership, CPC, the Company, Interpublic, the Estate, AACI and the Escrow
Agent, substantially in the form of Exhibit 3.2 hereto.
"Escrow Closing Date" shall mean the date the Escrow Closing
takes place in accordance with Section 3.1.
8
<PAGE> 15
"Estate" shall have the meaning specified in the Preamble.
"Estate Guaranty" shall have the meaning set forth in
Section 8.7.
"Estimated Adjusted Net Current Assets" shall have the
meaning specified in Section 3.9.
"Excluded Assets" shall have the meaning specified in
Section 2.2.
"Existing Licensee" shall mean, as to any Library Program,
Library Literary Property or Library Music Right in a particular territory the
Person or Persons to whom the Sellers have granted any rights to Exploit such
Library Program, Library Literary Property or Library Music Right as of the
date hereof.
"Exploit" or "Exploitation" shall mean the sale, lease,
production, distribution, ownership, marketing, licensing, sublicensing, use,
exercise, broadcasting, transmission, exhibition or other exploitation of the
Library Rights, Library Physical Properties, or portions thereof or rights
therein. "Exploit" or "Exploitation" includes, without limitation, (i) the
right to do any of the foregoing with respect to any Library Right or Library
Physical Property so as to give rise to new Programs, Literary Properties or
Library Music Rights; and (ii) the right to sell, lease, own, create, develop,
produce, license, sublicense, distribute, market, use, exercise, broadcast,
transmit, exhibit or otherwise Exploit such new Programs, Literary Properties
or Library Music Rights.
9
<PAGE> 16
"Final Closing" shall mean the completion of the sale and
purchase of the Assets by Buyers upon delivery by the Escrow Agent of the
Escrowed Items defined in and pursuant to the Escrow Agreement.
"Final Judgment" shall have the meaning set forth in the
Estate Guaranty.
"Financial Statements" shall have the meaning specified in
Section 4.8.
"GAAP" shall mean United States generally accepted
accounting principles consistently applied.
"Grundy" shall mean Grundy International Operations Limited.
"Guild Encumbrances" shall have the meaning set forth in
Section 4.17(b).
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder.
"Interim Period" shall have the meaning set forth in Section
3.12.
"Interpublic" shall mean The Interpublic Group of Companies,
Inc.
"Interpublic Common Stock" shall mean the common stock, par
value $0.10 per share, of Interpublic.
"Interpublic Sub" shall mean Interpublic Game Shows, Inc., a
wholly-owned, special purpose subsidiary of Interpublic.
10
<PAGE> 17
"IRS" means the United States Internal Revenue Service.
"Library Agreements" shall mean all contracts to which any
Seller or any of its Related Persons is a party, whether written or oral,
pertaining to the creation, development, production, distribution or other
Exploitation of any Library Rights or Library Physical Properties.
"Library Episode" shall mean any and all Episodes that
either Seller, or any of its Related Persons, owns or for which either Seller,
or any of its Related Persons, has a license to Exploit as of immediately prior
to the Final Closing.
"Library Literary Properties" shall mean any and all
Literary Properties that either Seller, or any of its Related Persons, owns or
for which either Seller, or any of its Related Persons, has a license to
Exploit as of immediately prior to the Final Closing.
"Library Music Rights" shall mean all master use, music
synchronization, performance, mechanical, publication, soundtrack album,
composition, music publishing and other rights in connection with the Business,
including all theme songs, incidental music and underscoring, subject only to
the composer's share (i.e., the so-called writer's share) of performance rights
held by Score Productions, Inc. or Kalehoff Productions, Inc. in those songs
set forth on Schedule 1.1(c).
"Library Physical Properties" shall mean (i) all
audiovisual, audio and visual recordings and other materials
11
<PAGE> 18
produced by any technology, manner or means relating to any Library Program,
including, without limitation, prints, negatives, duplicating negatives, fine
grains, music and sound effects tracks, master tapes and other duplicating
materials of any kind, all various language dubbed and titled versions, prints
and negatives of stills, trailers and television spots, all promos and other
advertising and publicity materials, stock footage, trims, tabs, outtakes,
cells, drawings, storyboards, (ii) all physical properties relating to any
Library Program, including without limitation sets, props, backdrops, costumes,
models, sculptures, puppets, sketches, and continuities, in each case,
including, without limitation, any of the foregoing in the possession, custody
or control of the Sellers or any Related Persons, or in the possession of its
assigns or any film laboratories, storage facilities or other Persons plus
(iii) any and all reversionary rights either Seller or any Related Persons has
to the master and duplicate masters of any original negative or master tape or
elements thereof delivered pursuant to the Sony Agreement (which rights are
assigned to Buyers pursuant hereto).
"Library Program" shall mean each Program which either
Seller, or any of its Related Persons, owns or has a right to Exploit as of
immediately prior to the Final Closing, including, without limitation, each
Program as listed on Schedule 4.5(a), but excluding the Lottery Business.
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<PAGE> 19
"Library Rights" shall mean, collectively, all Library
Programs, Library Literary Properties, Library Music Rights and Library
Agreements.
"Library Tangible Assets" shall mean, collectively, all
Library Physical Properties and all written contracts and other documents to
which any Seller, or any of its Related Persons, is a party or a beneficiary
evidencing, memorializing or otherwise relating to the Library Rights,
including, without limitation, the Library Agreements.
"License Agreement" shall mean the license agreement between
the Company and AAG substantially in the form of Exhibit 9.5(a).
"Lien" shall mean any mortgage, pledge, lien, encumbrance,
charge, adverse claim or restriction of any kind affecting title or resulting
in an encumbrance against property, real or personal, tangible or intangible
(including any Copyright or right under Copyright Law, and any Mark or right
under Trademark Law) or a security interest of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell and any filing of or agreement
to give, any financing statement under the Uniform Commercial Code (or
equivalent statute) of any jurisdiction), other than any Library Agreement and
other than Permitted Encumbrances or liens, encumbrances, charges, adverse
claims or restrictions that are insubstantial in character and do
13
<PAGE> 20
not materially detract from the value or interfere with the present use of the
property or asset subject thereto.
"Literary Properties" shall mean (i) any and all of the
following works and other properties: screenplays, teleplays, stories,
adaptations, scripts, outlines, treatments, formats, Bibles, scenarios,
characters, titles and any and all other literary, dramatic and other works and
properties of any kind and (ii) any and all of the following rights in any and
all of the foregoing: remake, sequel, prequel, series, mini-series, spin offs,
specials, character, legitimate stage, theme park, installation, live
performance, print and electronic publication, interactive, computer-assisted
media, merchandising and other subsidiary, derivative, compilation, ancillary,
promotional, advertising and publicity rights (in or by any and all media,
manner and means now known or hereafter developed), and all rights under any
trademark, copyright, trade secret, patent or similar intellectual property
rights including, without limitation, any applicable "author's rights",
"neighboring rights" and any other rights provided by the law of any country or
by industry protocol which provide for payment to rights holders for certain
uses of their works; and any and all other rights of any kind in any of the
foregoing, whether now known or hereafter recognized.
"Lottery Business" shall mean the creation, production,
distribution or other exploitation of television programs, games (including
game shows) and non-televised
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<PAGE> 21
performances the primary purpose of which is to sell or promote the sale of
lottery tickets or which otherwise primarily relates to lotteries; provided
that the foregoing shall in any event not include the exploitation of any game
show formats or reality-based properties set forth in Schedules 2.1(a) or
2.1(b) or any formats confusingly similar thereto (it being understood that the
shows now in distribution entitled "Illinois Instant Riches" and "Bonus
Bonanza" are not confusingly similar thereto).
"Mark" shall mean trademarks, service marks, brand names,
certification marks, trade dress, assumed names, slogans, trade names and other
indications of origin owned by or licensed to either Seller or any of its
Related Persons, whether or not registered; and to the extent of the foregoing
is owned, the associated goodwill and registrations and applications to
register in any jurisdiction, the foregoing, including any extension,
modification or renewal of any such registration or application.
"Market Price Per Share" shall mean (a) the average per
share closing price, regular way, of a share of Interpublic Common Stock on the
New York Stock Exchange for the ten (10) Business Days immediately following
the Final Closing Date or (b) in the case that such closing prices are not
available for such period, the average of the reported high bid and low asked
prices for the ten (10) Business Days immediately following the Final Closing
Date, as reported by The Wall Street Journal, Eastern Edition, or if not so
reported, a reputable quotation service.
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<PAGE> 22
"Networks" shall mean the following television networks:
ABC, NBC, CBS and FOX.
"Network Alternates" shall mean the following television
networks: UPN and WBN.
"Network License Agreement" shall mean the license agreement
between AAG and Interpublic Sub substantially in the form of Exhibit 9.5(b).
"Network Production Agreement" shall mean the production
agreement between Interpublic Sub and Producer, substantially in the form of
Exhibit 8.4(a)(vii).
"Non-Assumed Liabilities" shall have the meaning specified
in Section 2.3.
"Notice of Disagreement" shall have the meaning specified in
Section 10.1.
"Other Accounts Receivable" shall have the meaning specified
in Section 3.9.
"Participation" shall mean any right to receive money or
other consideration in respect of any asset constituting or relating in any way
to any Library Right, including, without limitation, consideration based on the
Exploitation of any such asset however measured.
"Partnership Related Persons" shall mean Mark Goodson
Television Productions, Inc., Celebrity Productions, Inc., Mark Goodson Games,
L.P., Goodson TV Enterprises, Inc., Goodson Television Productions, Inc.,
Strong Productions, Inc., Price Productions, Inc., Mark Goodson Telecasts,
Inc., The New Family
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<PAGE> 23
Company, The Trivia Trap Company, The Tattletale Company, The B.B. Company, The
Concentration Company, The Card Sharks Company, The MG Company, The Now You See
It Company, The TTTT Company, The Super Password Company, The Tattle Tale
Company, The Body Language Company, Tattletale Productions, Granny Fannie
Trusts, the Estate, FF&E Trust, Mark Goodson Advertising Sales, Producer,
Representative and Mark Goodson Promotions.
"Permitted Encumbrances" shall mean (i) any lien,
encumbrance, charge, adverse claim or restriction of any kind with respect to
taxes, assessments and other governmental charges or levies not yet due and
payable, (ii) landlords', mechanics', workmen's, materialmen's and similar
liens for charges which are not yet delinquent and (iii) the security interest
set forth in the Sony Lien.
"Person" shall mean any natural person, corporation,
division of a corporation, partnership, trust, joint venture, association,
company, limited liability company, estate, unincorporated organization or
governmental entity.
"Post-Closing Adjustment" shall have the meaning specified
in Section 10.3.
"Producer" shall mean TPIR LLC, a California limited
liability company which on the Final Closing Date shall be directly or
indirectly controlled and majority-owned by the Estate.
"Program" or "Programs" shall mean or refer to a series,
set, collection or other group of Episodes produced,
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<PAGE> 24
marketed, broadcast, exhibited, distributed or otherwise Exploited as a
so-called "series" or otherwise as a related group of Episodes (whether
intended for initial Exploitation by means of television or in or by any other
medium, means or manner now known or hereafter developed). Episodes of a
Program share some (but not necessarily all) of the following characteristics:
the same (or similar) title; the same (or similar) format, Bible, story,
outline, treatment, scenario, pilot script, teleplay, screenplay, or other
underlying literary or other work upon which such Program is based or from
which it is derived; and substantial continuity of production elements among
consecutively-produced Episodes, such as on-air personalities (for example,
host/master of ceremonies in the case of a game show Program and principal cast
in the case of a dramatic Program), sets, props, and theme music. Program
shall also mean or refer to the following, whether or not a subsequent or
related Episode has been or is hereafter commissioned or produced: a so-called
"pilot" Episode; a theatrical, television or other motion picture; a so-called
"special"; a so-called "mini-series"; and any other Episode produced, marketed,
broadcast, exhibited, distributed or otherwise Exploited as a single production
(regardless of length).
"Purchase Price" shall mean the sum of (i) $25 million in
cash (the "Cash Portion") subject to reduction pursuant to Section 3.9 hereof,
(ii) $25 million in restricted shares of Interpublic Common Stock (the "Stock
Portion") with the
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<PAGE> 25
purchase price of each such share equal to the Market Price Per Share, and
(iii) such amounts, if any, to be paid under Section 3.8 hereof (the "Earn-Out
Portion") or Section 3.9 hereof ("Estimated Adjusted Net Current Assets")
subject to adjustment pursuant to Article 10 hereof.
"Purchase Proposal" shall have the meaning specified in
Section 7.5.
"Put Agreement" shall have the meaning specified in Section
3.5.
"Related Agreements" shall mean the Assumption, the
Assignment of Copyright for "Child's Play", the CPC General Assignment and Bill
of Sale, the CPC Assignment of Trademarks, the Escrow Agreement, the Estate
Guaranty, the License Agreement, the Network License Agreement, the Network
Production Agreement, the Partnership General Assignment and Bill of Sale, the
Partnership Assignment of Copyrights, the Partnership Assignment of Trademarks,
the Put Agreement, the Seller Letter of Credit, the Standby Letter of Credit,
and any other contract, agreement or instrument contemplated in this Agreement
or in any of the foregoing.
"Related Person" shall mean either a CPC Related Person or a
Partnership Related Person, or both, as the context requires.
"Representative" shall mean the representative of the
partners of the Partnership and following the liquidation of the corporate
partners of the Partnership, the former stockholders of
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such corporate partner (all as set forth in Schedule 3.5 hereto), who shall
receive the Purchase Price payable to the Partnership or any other assets of
the Partnership distributed after the Final Closing (subject to the obligations
set forth herein), which representative shall be appointed pursuant to Section
3.3 hereof on or prior to the second Business Day following the Final Closing.
"Restricted Period" shall have the meaning specified in
Section 7.12(a).
"Seller Indemnities" shall have the meaning specified in
Section 13.2.
"Seller Letter of Credit" shall have the meaning specified
in Section 13.1.
"Sony" shall mean Sony Pictures Cable Ventures I, Inc. or
its successor or permitted assigns.
"Sony Agreement" shall mean collectively (i) that certain
Master Programming Agreement, dated as of November 25, 1992, by and among Sony,
Mark Goodson, individually and doing business as "Mark Goodson Productions"
("Goodson"), FF&E Trust and the other parties signatory thereto, as amended by
that certain Letter Agreement, dated as of April 13, 1993, by and between Sony
and the Estate (as further amended, supplemented or modified to the date hereof
as identified in Schedule 4.12(a)) and (ii) that certain Security Agreement
(the "Security Agreement"), dated as of November 25, 1992, by and among Sony,
Goodson, FF&E Trust, and the other parties signatory thereto, as
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amended by that certain Letter Agreement, dated as of April 13, 1993, between
Sony and the Estate (as further amended, supplemented or modified to the date
hereof as identified in Schedule 4.12(a)) and the related Copyright Mortgage
and Assignment.
"Sony Lien" shall mean the security interest and lien in
favor of Sony pursuant to the Security Agreement and the related Copyright
Mortgage and Assignment.
"Sony Receivable" has the meaning set forth in Section
7.14(a).
"Standby Letter of Credit" shall mean an irrevocable standby
letter of credit in the amount of the Cash Portion of the Purchase Price issued
by Chemical Bank or another commercial bank reasonably acceptable to Sellers,
on behalf of itself or a syndicate of participating lenders, upon which the
Representative may draw in the event that the Company does not pay the Cash
Portion of the Purchase Price on or prior to the fifth Business Day after the
Final Closing.
"Taxes" shall mean all domestic and foreign taxes, charges,
fees, levies or other assessments, including, without limitation, all net
income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, excise,
estimated, severance, stamp, renters/occupancy, occupation, property or other
taxes, customs duties, fees, assessments or charges of any kind whatsoever,
together with any interest and any penalties,
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additions to tax or additional amounts imposed by any taxing authority.
"Third Party Costs" shall mean any rerun, reuse, or residual
costs, license fees, royalties, production costs or other amounts paid or
payable to third parties including, without limitation, to the Sellers'
Affiliates or to performers, actors, musicians, hosts, writers, directors,
producers and other persons employed in the Exploitation of any Library
Programs or other Library Rights (including, but not limited to, Participations
or other profit sharing arrangements), guilds or unions based on any rights in
the Library Programs or other Library Rights or any receipts from the Library
Programs on other Library Rights.
"WARN" shall mean the Worker Adjustment and Retraining
Notification Act of 1988, as amended from time to time, and, unless the context
otherwise requires, the rules and regulations promulgated thereunder from time
to time.
ARTICLE 2
PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES
2.1 Purchase and Sale of Assets. Upon the terms and
subject to the conditions contained herein, at the Final Closing (a) Sellers
(together with their respective Related Persons) shall sell, convey, assign and
transfer to the Buyers, and the Buyers shall purchase and acquire from Sellers
(together with their respective Related Persons), all of the Assets, including,
but not limited to, those assets of the Partnership listed on Schedule 2.1(a)
hereto and those assets of CPC listed
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on Schedule 2.1(b) hereto (which lists are not intended by the parties to be
exclusive or to otherwise limit the Assets being acquired by negative
implication), free and clear of all Liens, other than the Assumed Liabilities
and Permitted Encumbrances. Such Assets being sold, conveyed, assigned and
transferred to the Buyers shall include all right, title and interest in and to
(i) all items of furniture, fixtures and equipment (except to the extent listed
as Excluded Assets), and (ii) the Marks "Mark Goodson", "Mark Goodson Company,"
"Mark Goodson Productions" or any combination or derivation thereof, and all
right, title and interest of Sellers (together with their respective Related
Persons) in and to the Mark "Goodson" or any combination or derivation thereof,
together, in the case of each such Mark, with all good will associated
therewith. Sellers have no rights in the names "The Estate of Mark Goodson,"
"Jonathan Goodson," "Marvin Goodson," "Goodson and Wachtel" and "The Goodson
Newspaper Group" and no rights with respect thereto are being conveyed to
Buyers. Each Buyer shall acquire an undivided interest in the Assets being
acquired pursuant hereto. Immediately following the Final Closing, Interpublic
shall transfer its undivided interest in the Assets to the Company.
2.2 Excluded Assets. The assets of the Sellers listed on
Schedule 2.2 hereto and any assets otherwise designated by the Buyers on or
prior to the Final Closing as not being transferred to Buyers hereunder (the
"Excluded Assets") shall be
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retained by the Sellers and shall not be sold, assigned or transferred to the
Buyers pursuant to this Agreement.
2.3 Assumption of Liabilities. Upon the terms and
subject to the conditions contained herein:
(a) At the Final Closing, the Company shall assume and
thereafter pay, discharge, perform or otherwise satisfy in accordance with
their respective terms and be responsible for the liabilities and obligations
of the Sellers listed on Schedule 2.3 hereto (the "Assumed Liabilities"). Each
of the Sellers shall remain liable for, and hold the Company harmless against,
all of their respective liabilities other than the Assumed Liabilities and for
the other liabilities indemnified herein (e.g. liabilities under the Sony
Agreement arising prior to the Final Closing or under the Network Production
Agreement even though assumed by Buyers). Except for the Assumed Liabilities,
the Company does not assume and shall not be liable or responsible for any
liabilities or obligations of either Seller or any of its predecessors,
constituent partners, joint venturers, Related Persons or Affiliates, whether
now or hereafter due, including liabilities or obligations incurred in
connection with, in any way arising out of, or related to, the execution of
this Agreement, the purchase of the Business, the ownership or use of any of
the Assets or the conduct of the Business prior to the Final Closing (the
"Non-Assumed Liabilities").
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(b) Without limiting the generality of the foregoing
clause (a), except for the Assumed Liabilities, the Company expressly shall not
assume any liabilities or obligations of Sellers, or any of their respective
predecessors, constituent partners, Related Persons or Affiliates for the
following (which shall be part of the Non-Assumed Liabilities): (i) for any
liability or obligation arising out of or relating to any claims,
controversies, litigation or administrative proceedings whether pending,
threatened or existing on or prior to the Final Closing Date or based on facts
existing on or prior to the Final Closing Date; (ii) for any liability or
obligation with respect to any employee, consultant or contractor or former
employee, consultant or contractor (including without limitation any performer,
actor, musician, host, writer, director, producer or other person employed in
the Exploitation of any Library Right or Library Tangible Asset), relating to
or arising out of employment with or engagement by either Seller, or any of
their respective predecessors, constituent partners, Related Persons or
Affiliates whether pursuant to the terms of any contract, agreement,
commitment, undertaking, benefit plan or other arrangement or otherwise; (iii)
any liability of either Seller to any of their predecessors, constituent
partners, Related Persons or Affiliates; or (iv) for any liability or
obligation with respect to any environmental damage or any violation or alleged
violation of any real estate lease or for any environmental law relating to the
Assets to the extent that the foregoing is associated with
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<PAGE> 32
any condition, or based on any fact or circumstances, that occurred or existed
on or prior to the Final Closing, whether or not such liabilities or
obligations were known on the date hereof or at the Final Closing.
(c) Immediately following the Final Closing, Interpublic
and/or its Affiliate owning any interest shall transfer all of its undivided
interest in the Assets to the Company. Sellers shall hold the Interpublic,
such Affiliate, Interpublic Sub and AACI harmless against, any liabilities or
obligations of either Seller or any of its predecessors, constituent partners,
joint venturers, Related Persons or Affiliates, whether now or hereafter due,
including liabilities or obligations incurred in connection with, in any way
arising out of, or related to the execution of this Agreement (other than with
respect to liabilities arising out of the Interpublic's, Interpublic Sub's or
AACI's breach, respectively, of its obligations under this Agreement or the
Related Agreements), the purchase of the Business, the ownership or use of any
of the Assets or the conduct of the Business prior to the Final Closing.
2.4 Contracts to Be Assigned. To the extent that any of
the contracts or agreements which are to be assigned to Buyers pursuant to this
Agreement are not assignable without the consent of a third party, which
contracts or agreements Sellers represent are limited to those contracts or
agreements identified on Schedule 2.4 hereto, the Partnership and CPC, as
applicable, shall use their reasonable best efforts to obtain the consent of
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<PAGE> 33
the other such party to the assignment to Buyers, provided that the failure to
obtain any such consent (other than consents required to be obtained prior to
the Final Closing by Section 8.6(c)), shall not constitute a failure to satisfy
a condition to the obligations of the Buyers to consummate the transactions
contemplated by this Agreement. If any required consent is not obtained before
the Final Closing and the Final Closing is consummated, Sellers agree to use
their reasonable best efforts to obtain all such required consents and to
enforce, on behalf of Buyers, the rights of either Seller or any of its Related
Persons, under any such non-assigned contracts or agreements. Buyers shall
reasonably assist Sellers in obtaining all such required consents without
derogation of Buyers' rights hereunder in the event any such consents are not
obtained. Sellers further agree to cooperate with Buyers after such date in
any reasonable arrangement (such as, but not limited to, sub-contracting,
sub-licensing or sub-leasing) designed to ensure for Buyers, on terms no less
favorable than contemplated hereby, all of the economic benefits (after
reflecting the related reasonable and necessary costs) under the applicable
contracts without causing any such breach or right of termination. Without
limiting the generality of the foregoing, after the Final Closing, the Company
shall receive the benefit (subject to all of the obligations arising after the
Final Closing) of all Sellers' rights (whether exercisable through Sellers or a
Related Person) in "Classic Concentration," "A Fly on the Wall," "House Calls,"
"Con Man" and
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"I'm Sorry." Sellers shall remain liable for the performance of all duties and
obligations relating to any contract or agreement not assigned hereunder.
ARTICLE 3
ESCROW CLOSING; PURCHASE PRICE
3.1 Escrow Closing. The Escrow Closing shall be deemed
to take place at the offices of Kaye, Scholer, Fierman, Hays & Handler, 425
Park Avenue, New York, New York at 2:00 p.m., local time, on October 6, 1995.
The Escrow Closing may be held at such other place, time and date as the
parties hereto may agree in writing.
3.2 Escrow Closing Deliveries by Sellers, etc. At the
Escrow Closing, the Sellers shall enter into the Escrow Agreement and shall
deliver, or cause to be delivered into escrow pursuant to the Escrow Agreement,
the opinions, certificates and other documents required to be delivered by or
on behalf of the Sellers pursuant to Sections 8.3, 8.4, 8.5, 8.7 and 13.5.
3.3 Payment of Cash and Stock Portion of Purchase Price
After Final Closing. (i) At the Fifth Business Day after the Final Closing,
the Company shall deliver to, or to the order of Sellers (which, in the
instance of the Partnership, shall be through delivery to the Representative),
the Cash Portion of the Purchase Price, by wire transfer, in immediately
available funds, and (ii) at the Eleventh Business Day after the Final Closing
Interpublic shall deliver one or more stock certificates for the Stock Portion
of the Purchase Price, in each case, allocated
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between the Sellers as set forth in Schedule 3.3 hereto (such delivery, in the
instance of the Partnership, shall be through delivery to the Representative).
The Partnership shall appoint or cause to be appointed the Representative on or
prior to the second Business Day following the Final Closing, such appointment
to be subject to the consent of the Company and Interpublic, which consent
shall not be unreasonably withheld or delayed. The Company and Interpublic
agree that they shall consent to the appointment of the Producer as
Representative. Within three Business Days following the Final Closing, the
Sellers shall provide to Buyers sufficient information to enable (x) the
Company to transfer funds to a designated account or accounts for the Cash
Portion of the Purchase Price and (y) Interpublic to issue such certificate or
certificates registered in such name or names as so designated for the Stock
Portion of the Purchase Price. At the Escrow Closing, AACI shall deliver the
Standby Letter of Credit into escrow pursuant to the Escrow Agreement. The
Standby Letter of Credit may be drawn upon by the Representative in accordance
with its terms in the event the Company does not pay the Cash Portion of the
Purchase Price on the fifth Business Day after the Final Closing. At the
Escrow Closing, Sellers will reimburse the Company and AACI for all of its
costs and expenses (including bank fees and expenses and reasonable attorneys'
fees) relating to the issuance of the Standby Letter of Credit. At the Escrow
Closing, each of the Company and Interpublic shall enter into the Escrow
Agreement and
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shall deliver, or cause to be delivered into escrow pursuant to the Escrow
Agreement the opinions, certificates and other documents required to be
delivered by or on behalf of them pursuant to Sections 9.4(a), 9.5(a) and 9.6
and, to the extent practicable, Sections 9.3 and 9.5(b). Notwithstanding
anything to the contrary herein, all rights in and to the Assets shall
irrevocably vest in Buyers on the Final Closing Date, irrespective of whether
the Cash Portion and the Stock Portion of the Purchase Price are delivered in
accordance herewith on the fifth Business Day and the eleventh Business Day,
respectively, after the Final Closing, as to which Sellers' sole remedy shall
be against the Standby Letter of Credit, in the case of non-payment of the Cash
Portion of the Purchase Price, or Interpublic, in the case of non-payment of
the Stock Portion of the Purchase Price, respectively.
3.4 No Fractional Shares. Interpublic shall not be
required to issue any fractional shares of Interpublic's Common Stock, and
Interpublic shall pay to the Representative on the eleventh Business Day after
the Final Closing, in lieu thereof, cash in an amount equal to the Market Price
Per Share multiplied by the fractional portion of a share of Interpublic's
Common Stock to which Sellers otherwise would have been entitled.
3.5 Restrictions on Transferability of Interpublic's
Stock. The shares of Interpublic's Common Stock to be issued and delivered in
accordance with the provisions hereof will not have been registered under the
Securities Act of 1933,
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as amended (the "Act"), or under the securities law of any jurisdiction. Each
of the Sellers agrees not to (and to cause the Representative and each of the
Persons set forth on Schedule 3.5 not to) transfer any of the shares of
Interpublic's Common Stock (together with any other shares received pursuant to
conversions, exchanges, stock splits, stock dividends or other
reclassifications or changes thereof, or consolidations or reorganizations of
Interpublic) issued hereunder except (i) pursuant to an effective registration
statement covering such shares of Interpublic Common Stock under the Act or
(ii) pursuant to an exemption from registration under the Act in connection
with an assignment of the Put Agreement, substantially in the form of Exhibit
3.5 hereto, between Interpublic and the Sellers, to be delivered into escrow
pursuant to the Escrow Agreement at the Escrow Closing, upon the conditions
specified therein and in the Assignment (as such term is defined in Section 3.7
hereof) which conditions are intended to insure compliance with the provisions
of the Act.
3.6 Legend. Each certificate representing Interpublic's
Common Stock issued hereunder shall be stamped or otherwise imprinted with a
legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT") OR UNDER THE SECURITIES LAW OF ANY STATE. SUCH
SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE
HYPOTHECATED OR DISTRIBUTED EXCEPT (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER
THE ACT, OR (B) PURSUANT TO A VALID EXEMPTION FROM SUCH
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REGISTRATION UNDER THE ACT AND UNDER THE SECURITIES LAW OF
ANY STATE AND UPON RECEIPT BY THE INTERPUBLIC GROUP OF
COMPANIES, INC. OF AN OPINION OF COUNSEL REASONABLY
SATISFACTORY IN FORM AND SUBSTANCE TO IT THAT ANY SUCH SALE
IS IN COMPLIANCE WITH THE ACT AND STATE SECURITIES LAWS"
3.7 Assignment of Put Agreement. The Put Agreement may
be assigned only in accordance with the assignment provision and the procedures
contained therein. Interpublic may require any assignee of the Put Agreement
to execute and deliver an assignment (the "Assignment"), substantially in the
form attached as Exhibit A to the Put Agreement.
3.8 Earn-Out. (a) In addition to the consideration to
be paid to Sellers pursuant to Section 3.3, subject to the provisions hereof
(including, but not limited to, Section 3.12) and the occurrence of the Final
Closing, with respect to the five-year period following the Escrow Closing (the
"Earn-Out Period"), the Company shall pay to the Representative an amount
("Earn-Out Payments") equal to (i) 75% of the Domestic Net Profits-Price Is
Right Network following the Final Closing and during the Earn-Out Period plus
(ii) 50% of the Additional Domestic Net Profits following the Final Closing and
during the Earn-Out Period; provided, however, that in no event shall the Earn-
Out Payments, before giving effect to any deductions or offsets provided for
herein, be greater than $48.5 million in the aggregate pursuant to this Section
3.8(a) (subject to reduction pursuant to Section 3.12 hereof); provided,
further, that, without limiting the rights of the Representative against the
Company to the extent of non-payment by the Company or
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Interpublic Sub, (A) it is intended that, subject to and upon the terms and
conditions set forth in the Network License Agreement, Interpublic Sub will
pay, on behalf of the Company, to the Representative the portion of the
Earn-Out Payments due under Section 3.8(a)(i) and (B) the Partnership
acknowledges and agrees for itself and on behalf of the Representative that the
payments received by the Representative from Interpublic Sub pursuant to the
immediately preceding clause (A) will be credited in full against the Company's
obligations under Section 3.8(a)(i).
(b) All determinations under this Section 3.8 shall be
made in accordance with the following provisions:
(i) Following the Final Closing, the Company
shall cause an estimated amount of the Earn-Out Payments with respect to The
Price Is Right under Section 3.8(a)(i) above due in any week following the
Final Closing and during the Earn-Out Period (so long as the applicable Network
or Network Alternate pays the Company or its licensee or sublicensee on a
weekly basis) to be paid to the Representative no later than five Business Days
after receipt of the related payment. The Company shall cause an estimated
amount of the Earn- Out Payments with respect to Section 3.8(a)(i) above (in
the event the applicable Network or Network Alternate does not pay on a weekly
basis) and with respect to Section 3.8(a)(ii) above due each month, if any,
following the Final Closing and during the Earn-Out Period to be paid to the
Representative no later than 15 Business Days after the last day of such month
so long as the Company or its licensee
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or sublicensee receives the related payment during such calendar month. In the
event that the Company or its Affiliate receives such related payment after the
last day of such calendar month, the Company shall cause such estimated amount
of Earn-Out Payments to be paid to the Representative in the next succeeding
monthly payment. In the event that as of the end of any weekly or monthly
period, the Company (or Interpublic Sub) has overpaid the cumulative Earn-Out
Payments to date, such amount may be offset against any additional amounts then
due or thereafter becoming due to the Partnership or the Representative. At
the end of each broadcast year during the Earn-Out Period, the Company shall
calculate the total Earn-Out Payment, if any, for such broadcast year or
portion of such broadcast year following the Final Closing and within the
Earn-Out Period. Subject to Section 3.8(b)(v), on the date 120 days after the
end of such broadcast year, the Company shall deliver a final accounting of the
Earn-Out Payments for such year. To the extent the total Earn-Out Payment due
to the Representative in respect of a broadcast year exceeds the cumulative
estimated Earn-Out Payments for such broadcast year, the Company shall pay or
cause to be paid such excess to the Representative at such time as it delivers
the final accounting. To the extent the total Earn-Out Payment due to the
Representative in respect of a broadcast year is less than the cumulative
estimated Earn-Out Payments for such broadcast year, the Company shall deduct
such deficit from future estimated Earn-Out Payments until such deficit is
recouped from
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the Representative or, if the Earn-Out Period has expired, the Partnership or
the Representative shall pay such deficit to the Company in cash no later than
10 days after the Partnership receives the final accounting which, in the event
of a dispute, shall be according to Article X hereof.
(ii) If for any broadcast year (or portion
thereof) following the Final Closing and during the Earn-Out Period, 75% of the
Domestic Net Profits-Price Is Right Network represents a loss for such
broadcast year (or portion thereof), no payment will be made with respect to
clause 3.8(a)(i) above and the amount of such loss shall be carried forward to
and netted against any amount payable with respect to clause 3.8(a)(i) above
for the next succeeding broadcast year (or for the balance of the then current
broadcast year) and shall continue to be carried forward until so netted.
(iii) If, for any broadcast year (or portion
thereof) following the Final Closing and during the Earn-Out Period, 50% of the
Additional Domestic Net Profits represent a loss for such broadcast year (or
portion thereof), no payment will be made with respect to clause 3.8(a)(ii)
above and the amount of such loss shall be carried forward to and netted
against any amount payable with respect to clause 3.8(a)(ii) above for the next
succeeding broadcast year (or for the balance of the then current broadcast
year) and shall continue to be carried forward until so netted.
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(iv) In the event the aggregate Earn-Out Payments,
before giving effect to any deductions or offsets provided herein (the "Earned
Amounts") payable pursuant to this Section 3.8 with respect to the Earn-Out
Period, do not equal $48.5 million (subject to reduction pursuant to Section
3.12 hereof), irrespective of the characterization of such amount as to
principal and interest, the Company shall have the option, in its sole
discretion, exercisable on or prior to the fifth anniversary of the Escrow
Closing Date, either to (x) make an additional payment to the Representative on
or prior to the date 30 days after the later of the fifth anniversary of the
Escrow Closing and the date the final regular Earn-Out Payment is due which,
when added to the Earned Amounts, would equal $48.5 million (as reduced
pursuant to Section 3.12 hereof) or (y) extend the Earn-Out Period for an
additional five-year period (i.e., until the tenth anniversary of the Escrow
Closing Date) on the terms hereof (except that the percentage of Domestic Net
Profits-Price Is Right Network used for calculation of the Earn- Out Payments
during the extension shall be reduced to 50%); provided that the aggregate
Earn-Out Payments during the Earn-Out Period, as extended, shall not be subject
to any maximum or minimum amount and provided, further, that in no event shall
the Earn-Out Period be extended beyond the tenth anniversary of the Escrow
Closing Date. If no election is made on or prior to the fifth anniversary of
the Escrow Closing Date, the Company shall
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be deemed to have elected to extend the Earn-Out Period pursuant to clause (y)
above.
(v) With respect to any Earn-Out Payments, the
Company (or Interpublic Sub) may establish a reasonable reserve for related
contingencies (e.g., potential make-good obligations with respect to
syndication revenues or disgorgements of amounts paid by obligors subject to a
bankruptcy or similar proceeding), other than with respect to the (x)
Memorandum of Agreement dated as of February 3, 1972 between CBS Television
Network and Price Productions, Inc., as amended through February 28, 1995 (the
"CBS Network License"), or any extension or modification thereof for The Price
Is Right and (y) any other contract with a Network for the broadcast of "The
Price Is Right" on such Network during the term of the Network Production
Agreement, in each case for which no such reserves will be established.
Notwithstanding the foregoing, it is understood that the Company (or
Interpublic Sub) shall be entitled to pay any current production or other costs
deductible in the calculation of an Earn-Out Payment prior to making the
related Earn-Out Payment, and that such deductions may include a reasonable
reserve for future production or other costs where the Company (or Interpublic
Sub) believes in good faith that such reserve is necessary to assure continuity
of production or if the Company (or Interpublic Sub) fails to receive
reasonable assurances as to the timely payment of such future production or
other costs. It is understood, however, that reserves for future production
costs with respect to "The Price
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Is Right" shall be limited during the term of the Network Production Agreement
to circumstances in which Producer has not paid any of its material obligations
on a timely basis or is in breach in any material respect of the Network
Production Agreement (other than any breach of the Network Production Agreement
if and to the extent resulting from Interpublic Sub's failure to pay production
costs to Producer in material compliance with the terms of the Network
Production Agreement). In addition, to the extent provided in and subject to
the provisions of Section 13.4(b) hereof, the Company may offset (or cause to
be offset) from any Earn-Out Payment any amount payable by either Seller to the
Company hereunder (including but not limited to Section 10.3). If the Company
is exercising its right of offset, it will give the Partnership and (if payable
pursuant to the Network Production Agreement) Interpublic Sub notice of the
nature and the amount of such claim and it and/or Interpublic Sub (if payable
pursuant to the Network Production Agreement) shall withhold such amount from
the Earn-Out Payment or Payments otherwise due. Any dispute with respect to
such withholding shall be subject to arbitration in accordance with Article 10.
(vi) The Company shall maintain accurate books,
records and documents reasonably necessary for the calculation (including, to
the extent required, on a Program-by-Program basis) of the Earn-Out Payments
and Domestic Net Profits, including records of relevant revenues, costs, and
expenses. The Representative and its authorized representatives shall, upon
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request received by the Company in writing, have reasonable access during
normal business hours to any books, records and documents relevant to the
calculation of any Earn-Out Payment. All calculations of Domestic Net Profits
shall be made by the Company or Interpublic Sub in accordance with the Agreed
Procedures and, to the extent not governed thereby, by the Company or
Interpublic Sub in accordance with GAAP as in effect at the time in question.
Any disputes arising under this Section 3.8 as to the calculation of the
Earn-Out Payments shall be subject to resolution pursuant to Article 10.
(vii) The methodology for characterization of the
Earn-Out Payments as to principal and interest is set forth on Schedule 3.8 and
has been agreed upon by Buyers and Sellers consistent with the requirements of
Proposed Treasury Regulation 1.1275-4. Buyers and Sellers (on behalf of
themselves and the Representative) agree that no party will take a position on
any income, transfer or any other tax return, or before any governmental agency
charged with the collection of any such tax or in any judicial proceeding that
is in any manner inconsistent with the methodology set forth on Schedule 3.8.
(viii) Producer has received certain consultation
and approval rights during the Earn-Out Period under, and subject to the terms
of, the Network Production Agreement. If the Network Production Agreement
terminates prior to the expiration of the Earn-Out Period, the Company will or
will cause its licensee to consult with Producer concerning the
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potential broadcast of "The Price Is Right" domestically and permit
representatives of Producer to attend any major meetings with domestic
broadcasters concerning such potential domestic broadcast; however, upon such
termination of the Network Production Agreement, Producer shall no longer have
any approval rights and all decisions concerning the Exploitation (domestically
or otherwise) of "The Price Is Right" shall, insofar as the Partnership,
Representative or Producer are concerned, be made by the Company.
(ix) The parties hereto agree that with respect to
the 1995/1996 broadcast year for The Price Is Right, the permitted production
costs in the approved budget and the revenues earned and license fees paid in
respect of shows produced will be allocated for the period prior to the Escrow
Closing and the period after the Escrow Closing as set forth on Schedule
3.8(b)(ix).
(c) The following provisions shall apply to the
exhibition of new productions of Library Programs included in or based on
Library Programs existing prior to the Final Closing in the United States on
any Network, a basic or pay cable service provider (each a "U.S. Cable
Network") or on first-run syndication ("first-run syndication") following the
Final Closing and during the Earn-Out Period:
(i) If, following the Final Closing and during
the Earn-Out Period, AACI wishes (directly or through any subsidiary or
affiliate) to produce, or distribute new episodes
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<PAGE> 47
of any Library Programs included in or based on Library Programs existing prior
to the Final Closing (other than "The Price Is Right" so long as it is being
produced pursuant to the Network Production Agreement) on a Network or U.S.
Cable Network, AACI will or will cause All American Television, Inc. ("AATV")
to present a proposal to Representative outlining the proposed costs and
Network or U.S. Cable Network license fee for such new production and
exhibition, together with the proposed security, if any, to be provided to
Representative to ensure payment of any Earn-Out Payment with respect thereto.
The Representative shall have 10 days to notify AATV and AACI that it is not
satisfied with the proposed security, if any. Subject to Section 3.8(c)(iii),
if Representative so notifies AATV and AACI in such 10-day period,
Representative will have the right to request that a letter of credit be issued
by a commercial bank with respect to any Earn-Out Payments due to
Representative with respect thereto. Such letter of credit shall be issuable
in a maximum amount reasonably calculated to assure any Earn-Out Payments
projected to become due with respect to the then applicable broadcast season
based on the budget for the applicable new Library Program and the other
assumptions set forth by the Company and AATV. Upon the renewal of such
Library Program by such Network or U.S. Cable Network for a subsequent
broadcast season or seasons following the Final Closing and during the Earn-Out
Period, unless otherwise agreed by Representative, the related letter of credit
shall be renewed (or a substitute letter of credit shall
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be obtained) on similar terms. Such letter of credit shall be available to be
drawn upon in the event Representative does not receive the Earn-Out Payment
relating to such new Library Program within 10 Business Days after the date
when due based upon and in accordance with the accounting rendered by the
Company. In such event, all costs and fees with respect to the letter of
credit shall be deducted from the calculation of "Domestic Net Profits - Other
Programs" as set forth in Schedule 1.1(b). It is expressly understood that any
letter of credit is not intended to guarantee that Earn-Out Payments will
actually be earned by Representative with respect to the applicable Library
Program, but only that the Representative shall have recourse to the letter of
credit only in the event that Earn-Out Payments are earned and are not paid by
the Company when due.
(ii) If, following the Final Closing and during
the Earn-Out Period, AACI wishes (directly or through any subsidiary or
affiliate) to produce, or distribute new episodes of any Library Programs
included in or based on Library Programs existing prior to the Final Closing
for U.S. domestic exhibition on first-run syndication, AACI will or will cause
AATV to present a proposal to Representative outlining the estimated number of
episodes to be produced, the estimated revenues and costs of such episodes and
the estimated net profit of such episodes, together with the proposed security,
if any, to be provided to Representative to ensure payment of any Earn-Out
Payment with respect thereto. Subject to Section 3.8(c)(iii), if
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Representative so notifies AATV and AACI in such 10-day period, Representative
will have the right to request that a letter of credit be issued by a
commercial bank with respect to any Earn-Out Payments due to Representative
with respect thereto. Such letter of credit shall be issuable in a maximum
amount reasonably calculated to assure any Earn-Out Payments projected to
become due with respect to the then applicable broadcast season based on the
budget for the applicable new Library Program and the other assumptions set
forth by the Company and AATV. If such Library Program is renewed for such
first-run syndication, the related letter of credit shall be renewed (or a
substitute letter of credit shall be obtained) on similar terms. Such letter
of credit shall be available to be drawn upon in the event Representative does
not receive the Earn- Out Payment relating to such new Library Program within
10 Business Days after the date when due based upon and in accordance with the
accounting rendered by the Company. In such event, all costs and fees with
respect to the letter of credit shall be deducted from the calculation of
"Domestic Net Profits - Programs" originally produced for "First-Run
Syndication" as set forth in Schedule 1.1(b). It is expressly understood that
any letter of credit is not intended to guarantee that Earn-Out Payments will
actually be earned by Representative with respect to the applicable Library
Program, but only that Representative shall have recourse to the letter of
credit only in the event that Earn-Out Payments are earned and are not paid by
the Company when due.
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(iii) The right of Representative to request a
letter of credit shall be made in good faith solely based on the question of
security, if any, necessary for any Earn-Out Payments. No letter of credit
shall extend beyond the Earn-Out Period. All outstanding letters of credit
shall terminate in the event all required Earn-Out Payments have been made
under this Section 3.8 relating to all Library Programs or the Library Program
to which such letter of credit relates. Any letter of credit may provide for
payment to the Company by way of offset against any amount payable by either
Seller to the Company hereunder, including but not limited to Section 10.3 or
Article 13 hereof. Nothing herein shall require AACI or AATV to proceed with
production or distribution of new episodes of any Library Program if either the
Company or AATV does not wish to provide a letter of credit to Representative.
(d) The Company acknowledges that the provisions of this
Section 3.8 are of the essence to this Agreement, and shall use commercially
reasonable efforts, subject to the Company's exercise of its business judgment,
to exploit the Library Rights. Without limiting the generality of the
foregoing, the parties acknowledge their mutual intent that "The Price Is
Right" remain the Network or Network Alternate production by Producer under,
and subject to the terms of (and Producer's compliance with), the Network
Production Agreement for the Earn-Out Period, and the Sellers, the Producer
and the Representative will be materially damaged in the event that
Interpublic Sub or AAG refuses in
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violation of the Network Production Agreement to approve or enter into a
renewal or extension of the current CBS Network License or any other Network or
Network Alternate license or takes any other action in violation of their
obligations thereunder that frustrates such intentions. Nothing in this
Section 3.8(d) shall (i) modify or expand the obligations of the Company,
Interpublic Sub or any other Person under the related Agreements, including
without limitation, obligations of any of the foregoing to enter into any
agreement with respect to "The Price Is Right" or to retain Producer except as
expressly required under the Related Agreements or (ii) shall require the
Company, Interpublic Sub or any other person to exploit the Library Rights
after the Final Closing except as they shall, in their sole discretion,
determine.
3.9 Estimated Adjusted Net Current Assets. Not later
than five Business Days prior to the Final Closing, the Sellers shall compute
an estimate of the Adjusted Net Current Assets as of the Escrow Closing Date
(the "Estimated Adjusted Net Current Assets") and provide Buyers with a
schedule setting forth the basis of such computation in reasonable detail.
Buyers and their representatives shall have the right to review the work
papers, schedules, memoranda and other documents and information prepared or
reviewed by or for the Sellers and to communicate with the persons conducting
such preparation or review by or for the Sellers. Not later than three
Business Days prior to the
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Final Closing, following discussions with Buyers and their representatives, the
Sellers shall deliver to Buyers a notice containing the Estimated Adjusted Net
Current Assets accompanied by a certificate of the general partner of the
Partnership and a certificate of the Estate, as managing partner of CPC, to the
effect that such estimate represents a good faith effort to determine
accurately (neither underestimating or overestimating) the Adjusted Net Current
Assets as of the Escrow Closing Date. The Cash Portion of the Purchase Price
payable on the fifth Business Day after the Final Closing (and drawing under
the related Standby Letter of Credit) shall be decreased by the amount, if any,
by which the Estimated Adjusted Net Current Assets as of the Escrow Closing
Date is less than zero in accordance with the Agreed Procedures (and also
decreased to the extent of collections of Accounts Receivable by Sellers during
the Interim Period net of repayment of accounts payable included in the
calculation of Estimated Adjusted Net Current Assets). If the Estimated
Adjusted Net Current Assets exceeds zero, after taking into account and
deducting collections of Accounts Receivable by Sellers during the Interim
Period (the "Excess"), the Company shall pay or cause to be paid to the
Partnership on behalf of the Sellers, at the Final Closing an amount equal to
the aggregate Accounts Receivable due from any Affiliate of AACI at the Escrow
Closing Date (and not thereafter paid during the Interim Period) in accordance
with the Agreed Procedures but not in excess of the amount of the Excess
calculated by Buyers. The
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Partnership acknowledges that AATV has already paid to the Partnership an
amount equal to the aggregate accounts receivable ("Other Accounts Receivable")
due on or prior to the Escrow Closing Date in accordance with the Agreed
Procedures in respect of the 1994-1995 domestic season of Family Feud. The
calculation by AACI and its Affiliates of such Accounts Receivable and Other
Accounts Receivable due in respect of the period ended June 30, 1995 shall be
final and binding provided that the Final Closing has occurred. With respect
to such Accounts Receivable and Other Accounts Receivable in respect of the
period after June 30, 1995 up to and including the Final Closing and due to
Sellers in accordance with the Agreed Procedures, the Sellers shall have a
period ending 60 days after the Escrow Closing to deliver a Partnership Notice
of Disagreement (as defined in Section 10.1). If the Sellers do not deliver a
Partnership Notice of Disagreement within such period, the calculation of such
Accounts Receivable and Other Accounts Receivable by AACI shall be final and
binding. To the extent that the Excess exceeds the payments set forth above
(the "Remaining Excess"), the Company shall pay or cause to be paid to the
Partnership, on behalf of the Sellers, when and promptly after receipt by the
Company after the Final Closing, on a current basis, any amount it receives
with respect to other Accounts Receivables up to the amount of the Remaining
Excess. The Company shall not compromise or forgive any such Accounts
Receivables without the prior written consent of the Partnership, which will
not be unreasonably withheld or delayed.
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To the extent the Company receives payments from third parties, not directly or
indirectly affiliated with the Company, who are obligated to pay Accounts
Receivable and who have continuing commercial relations with the Company or the
Business and have other receivables payable to the Company or the Business, the
Company shall apply such payments to the Accounts Receivable unless it has
received notice from such third party to apply such payment to another
receivable. From time to time until any Remaining Excess is paid in full, upon
reasonable notice, the Sellers, at their expense shall have the right to review
the Company's records with respect to its application of monies received with
respect to Accounts Receivable and only to the extent necessary to confirm that
such application is in conformance with this Section 3.9. Any adjustment of
the Purchase Price pursuant to this section shall be allocated between the
Sellers as the Sellers shall determine, subject to the approval of the Company
and consistent with Schedule 3.9.
3.10 Allocation of Purchase Price. The allocation among
the Assets of the consideration paid by Buyers for the Assets is set forth on
Schedule 3.10 and has been agreed upon by Buyers and Sellers consistent with
the requirements of Section 1060 of the Code and the regulations thereunder.
Buyers and the Sellers agree (i) jointly to complete and separately file Form
8594 with their respective federal income tax returns for the tax year in which
the Final Closing occurs, and (ii) that no party will take a position on any
income, transfer or any other tax
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return, or before any governmental agency charged with the collection of any
such tax or in any judicial proceeding that is in any manner inconsistent with
the terms of the allocation set forth on Schedule 3.10.
3.11 Installment Sale. Sellers will report the sale of
an undivided interest in the Assets to the Company as an installment sale for
income tax purposes under Section 453 of the Code in exchange for an obligation
by the Company to pay (i) the Cash Portion of the Purchase Price and (ii) its
allocable portion of the Earn-Out Payments. Sellers also will report the sale
of an undivided interest in the Assets to Interpublic as an installment sale
for income tax purposes under Section 453 of the Code in exchange for an
obligation by Interpublic to (i) deliver the Stock Portion of the Purchase
Price and (ii) pay its allocable portion of the Earn-Out Payments. Buyers
agree that they will report the transaction for income tax purposes in a manner
consistent with the reporting of such transaction by Sellers as an installment
sale.
3.12 Adjustment For Period Between Escrow Closing and Final
Closing. Subject to the occurrence of the Final Closing, the parties intend
that Buyers shall have the benefits of owning the Assets commencing with the
Escrow Closing Date through the Final Closing (the "Interim Period").
Accordingly, the Company shall be entitled to receive a payment from the
Partnership on or prior to the date five Business Days after the Final Closing
equal to 25% of the Domestic Net Profits - Price Is
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Right during the Interim Period (and the $48.5 million maximum Earn-Out
Payments referenced in Section 3.8(a) shall be reduced by 75% of the Domestic
Net Profits - Price Is Right during the Interim Period), all as if the Final
Closing had occurred on the Escrow Closing Date. Notwithstanding any other
provisions to the contrary herein but without derogation of the right of the
Partnership to retain 75% of the Domestic Net Profits -- Price Is Right during
the Interim Period and to receive reimbursement of production costs during the
Interim Period with respect to The Price is Right at a rate based upon the
1995/1996 production budget approved by Buyers (as if such budget had been in
place as of the Escrow Closing Date), subject to the occurrence of the Final
Closing, Buyers shall receive the benefit of any additional Adjusted Net
Current Assets arising during the Interim Period. The parties will cooperate
with each other in good faith during the Interim Period to determine the
applicable amounts to be paid or credited to Buyers and the procedures for
implementing the provisions of this Section 3.12.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Partnership represents and warrants to Buyers and AACI
as follows (and, to the extent relating to CPC and to that portion of the
Business conducted by CPC, the Partnership and CPC jointly and severally
represent and warrant to Buyers and AACI as follows):
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4.1 Organization and Qualification. (a) The Partnership
is a limited partnership duly organized, validly existing and in good standing
under the partnership laws of the State of California with all requisite
partnership power and authority to own, lease and operate its assets and carry
on its business as presently owned or conducted. Buyers have been furnished
with access to complete and correct copies of the agreement of limited
partnership and the certificate of limited partnership of the Partnership as
currently in effect and as will be in effect at the Closing. The Partnership
is a California limited partnership, the general partner of which is Mark
Goodson Television Productions, Inc. and the limited partners of which are set
forth on Schedule 4.1(a) hereto. None of the limited partners of the
Partnership that do not constitute Partnership Related Persons hold or ever
held any of the assets, properties, rights or businesses used or useful in the
Business or any other interest in the Business except for their respective
limited partnership interests.
(b) Mark Goodson Television Productions, Inc., the
general partner of the Partnership, is a corporation duly organized, validly
existing and in good standing under the laws of the State of California with
all requisite corporate power and authority to own, lease and operate its
assets, act as general partner of the Partnership, and carry on its business as
presently owned or conducted.
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(c) Buyers have been furnished with access to
complete and correct copies of the joint venture agreement of CPC as currently
in effect. CPC is a joint venture among Jill Bishop, the Estate of Mark
Goodson, Majorie Goodson Cutt 1995 Revocable Trust, Royal E. Blakeman as
Trustee for the Shamos Children's Trust, Jonathan Goodson and Carol Boas
Goodson with all requisite power and authority to own, lease and operate its
assets and carry on its business in all respects as presently owned or
conducted. None of the venturers of CPC that do not constitute CPC Related
Persons hold or ever held any of the assets, properties, rights or businesses
used or useful in the Business or any other interest in the Business except for
their respective economic interests in the joint venture.
4.2 Authority. (a) Each of the Sellers, the Producer
and the Estate has all requisite power and authority to enter into and perform
its obligations under this Agreement and under the general assignment and bill
of sale and each other assignment to be delivered by it as contemplated by
Section 8.4 and under any Related Agreement to which either Seller, the
Producer or the Estate is a party, and to consummate the transactions
contemplated herein and therein. This Agreement has, and each of the Related
Agreements to which it is a party will upon execution and delivery thereof will
have been duly executed and delivered by such Person pursuant to all necessary
approvals, including any necessary approval by the general partners and the
limited partners of the Partnership or the joint
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venturers of CPC, and authorizations, and this Agreement is, and each of the
Related Agreements to which such Person is a party upon execution and delivery
thereof will be, the legal, valid and binding obligation of the Seller or
Related Person party thereto enforceable against it in accordance with its
terms.
(b) Neither the execution and delivery of this
Agreement or the Related Agreements by the Sellers, nor the consummation of the
transactions contemplated herein and therein, will (i) conflict with, result in
a breach of or constitute a default under (A) the agreement of limited
partnership or the certificate of limited partnership of the Partnership or the
certificate of incorporation and by-laws of Mark Goodson Television
Productions, Inc., (B) the joint venture agreement of CPC or the organizational
documents for the entities which formed CPC and the relevant order governing
the administration of the Estate, or (C) any court or administrative order or
process or any agreement or commitment to which either of the Sellers is a
party or by which either of the Sellers (or any of the Assets) is subject or
bound; (ii) result in the creation of, or give any party the right to create,
any lien, charge, encumbrance or other security interest upon any of the
Assets; (iii) except as set forth on Schedule 4.2 hereto, terminate, accelerate
or modify, or give any third party the right to terminate or modify, the
provisions or terms of any contract or agreement or commitment relating to the
Business or the Assets to which either of the Sellers (together with its
predecessors, constituent partners,
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joint venturers, Related Persons or Affiliates) is a party or by which either
of the Sellers (together with its predecessors, constituent partners, joint
venturers, Related Persons or Affiliates), or any of the Assets, is subject or
bound; or (iv) except as set forth on Schedule 4.2 hereto, require either of
the Sellers (together with their respective predecessors, constituent partners,
joint venturers or Affiliates) to obtain any authorization, consent, approval
or waiver from, or to make any filing with, any Person, court or public body or
authority other than the filings and the expiration or termination of the
respective waiting periods under the HSR Act.
4.3 Assets. (a) Together, the Sellers have, and at the
Final Closing there will be delivered (subject to receipt of the approvals
specified in Schedule 4.2 as to the particular Assets specified in such
Schedule 4.2) to Buyers, good and marketable title to, or, to the extent
Sellers' interest is limited to a leasehold, valid leasehold interests in, all
the Assets free and clear of all Liens, except for (i) the Assumed Liabilities,
and (ii) Permitted Encumbrances. The Assets to be sold to Buyers pursuant to
this Agreement include all of the assets owned by either Seller or its
respective Related Persons necessary for or used in the conduct of the Business
in the manner in which it is presently or is contemplated as being or has been
conducted by the Sellers (together with their respective Related Persons), and
except for assets the absence of which would not interfere in any material
respect with the conduct of
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the Business and except for the Sellers' employees, consultants and other
personnel. The Sellers (together with their respective Related Persons) do not
own fee title to any real property utilized in connection with the Business.
(b) The instruments of sale, conveyance, assignment and
transfer executed and delivered by each of the Sellers at the Escrow Closing
will effectively vest in Buyers the interest of the Sellers (together with
their respective Related Persons) in the Assets subject only to the occurrence
of the Final Closing.
(c) Except as set forth on Schedule 4.3(c) with respect
to real property or personal property leased by the Sellers as lessee that is
included in the Assets, there exist no defaults by the Sellers (together with
their respective predecessors, constituent partners, joint venturers, Related
Persons or Affiliates) or, to the knowledge of the Sellers, by any third party
that could materially and adversely affect any of the Assets.
4.4 Library Physical Properties. (a) Except as set
forth on Schedule 4.4(a), an original negative or master tape of each of the
Library Physical Properties (i) has been properly stored, in each case in
accordance with standards customarily applied by major theatrical, television
and home video distributors, as applicable, in the United States, and (ii) may
be used for the purpose of making a first class, fine grain print or broadcast
quality master tape and a first class, fine grain or
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digital or one-inch production master. All masters and duplicate masters of
any such original or elements thereof that currently exist are included in the
Library Rights and Library Tangible Assets, subject to Sony's rights to certain
masters and duplicates pursuant to the Sony Agreement described in Schedule
4.4(a).
(b) Other than such Library Physical Properties that do not
constitute master materials and which are currently in exhibit or distribution,
or in the hands of third parties preparing Library Physical Properties for
exhibition or distribution, the Library Physical Properties are stored and
maintained directly by Sellers or on their behalf by authorized distributors or
licensees in storage or post- production facilities in accordance with
recognized industry standards for the use and preservation of such materials.
(c) Schedule 4.4(c) sets forth a list, which is true,
accurate and complete in all material respects, of the physical location of the
Library Physical Properties. There are no restrictions on the right to access
or remove such materials except as set forth on Schedule 4.4.
4.5 Library Rights. (a) Schedule 4.5(a) sets forth a
list of all Library Programs, which is true, accurate and complete. Sellers
own, are licensed or otherwise possess the necessary right, title and interest
in the Library Rights to permit the Exploitation without restriction, except as
expressly set forth herein, for the terms and in the media set forth in
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Schedule 4.5(a) (which schedule also includes Third Party Costs with respect to
each Library Program and Library Right). Since January 1, 1993 through the
date hereof, none of the Library Programs has been canceled or discontinued nor
have any Existing Licensees for any territory been changed except as set forth
in Schedule 4.5(a).
(b) Except as set forth in Schedule 4.5(b), Sellers are
the sole and exclusive owners of the Library Programs, and otherwise have the
full right to Exploit the Library Programs as set forth in Schedule 4.5(a).
(c) Upon the Final Closing, Buyers will own, or be
licensed or otherwise possess the necessary right, title and interest in the
Library Rights to permit the Exploitation of such Library Rights without
restriction, except as expressly set forth herein or in the Network Production
Agreement or on Schedules 4.5(c) or Schedule 7.14(c).
(d) (i) Neither the Library Programs, nor any element
thereof, as they currently exist, nor the Exploitation thereof by Sellers
(together with their respective Related Persons), nor the transfer thereof to
Buyers, libels, defames, violates the rights of privacy or publicity, or
violates any copyright, patent, trademark, common law or other similar right,
of any Person or violates any other applicable law. Sellers have not received
any notice of infringement or other violation of any of the foregoing rights,
except as set forth on Schedule 4.5(d). Sellers have (x) taken all reasonably
prudent actions (in
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accordance with industry custom and practice with respect thereto) necessary to
ensure that none of the Library Rights, nor any element thereof, as they
currently exist, nor the Exploitation thereof by Sellers (together with their
respective Related Persons), nor the transfer thereof to Buyers, libels,
defames, violates the rights of privacy or publicity or violates any copyright,
patent, trademark, common law or other similar right of any Person or violates
any other applicable law, and (y) complied with all requirements of their
respective errors and omissions insurance policies necessary to ensure coverage
thereunder of any claims of the type described in the preceding clause (x)
hereof.
(ii) All material contained in the Library Rights
is either (A) a wholly original "work made for hire" (as such term is construed
under the United States Copyright Law) created by writer(s) duly employed by
Sellers or their predecessors and not copied, in whole or in part, from any
other work, (B) duly licensed to, or otherwise acquired by, Sellers, (C) in the
public domain throughout the world, (D) permitted to be Exploited by Sellers
pursuant to the provisions of 17 U.S.C. Section 107, as such provision is
construed, for all uses to the full extent of the rights of Sellers (together
with their respective Related Persons) with respect thereto or (E) a
combination of any of the foregoing.
(e) Schedule 4.5(e) sets forth a list of the Library
Music Rights. Except as set forth on Schedule 4.5(e),
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all the Library Music Rights are (i) owned by either Seller and licensed to the
American Society of Composers, Authors and Publishers ("ASCAP"), Broadcast
Music Inc. ("BMI") or the Society of European Stage Authors and Composers
("SESAC"); (ii) in the public domain throughout the world, or duly licensed to
either Seller (with public performance licenses); or (iii) otherwise owned by
or licensed to the Sellers.
(f) The credits that are contained in the Library
Programs are complete and accurate in all material respects and include any
information required by section 317 of the Federal Communications Act of 1934
(as amended) to be disclosed to the public. The Library Programs that were
produced by Sellers (together with their respective Related Persons), and to
Sellers' knowledge, the Library Programs that were produced by a third party,
do not omit credit owed to any party or entity entitled to any credit for
providing services or rights in connection with the Library Programs. No
credit accorded in any Library Program that was produced by Sellers (together
with their respective Related Persons), and to Sellers' knowledge, no credit
provided in any Library Program that was produced by a third party, is
inaccurate, improper or insufficient under any applicable law, contract or
otherwise.
(g) Where required under the Copyright Law to preserve
the copyright in such Library Programs, a valid copyright notice which conforms
to the requirements of Copyright
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Law relating to the elements, placement and other requirements of such notice
appears on each Library Program.
(h) The Library Literary Properties include all Literary
Properties of any kind on which any of the Library Programs is based.
4.6 Copyrights, Etc. (a) Except as set forth in
Schedule 4.6(a), (i) the copyrights in the Library Programs (including any
Episode or other Program), and except for material in the public domain
throughout the world, the elements thereof, the Library Physical Properties,
the Library Music Rights and the Library Literary Properties (including any
Bible) (the "Copyrights") that are, in each case, owned or controlled by a
Seller (together with its Related Persons) are valid, existing, unexpired and
enforceable in the United States and all countries party to the Universal
Copyright Convention or the Berne Convention; and (ii) none of the Copyrights
owned by a Seller (together with its Related Persons) is in the public domain
in the United States or, to the knowledge of Sellers, any country party to the
Universal Copyright Convention or the Berne Convention. Sellers have received
no notice to the effect that the validity of any Copyright is contested.
(b) A registration for each Copyright set forth in
Schedule 4.6(b) has been properly issued by the United States Copyright Office
in either of the Sellers' names or in the name set forth on Schedule 4.6(b)
(and are owned in each case by the Partnership). The application to register
each Copyright listed
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in Schedule 4.6(b) was duly and properly filed in the United States Copyright
Office, and required materials have been deposited with the Library of Congress
and the United States Copyright Office. Schedule 4.6(b) sets forth the
registered title, registration number and registration date for each such
registered Copyright.
4.7 Marks. (a) Schedule 4.7(a) lists (i) all Marks
owned by a Seller (together with its Related Persons), whether or not in its
own name, including, where applicable, the registration number and date for
each Mark for which a registration has been issued by, or the application
number and date for each Mark for which an application for registration is
pending in, the United States Patent and Trademark Office or other similar
office in any foreign jurisdiction, and (ii) all Marks to which a Seller
(together with its Related Persons) has been granted a license to use. The
information relating to the Marks presented in Schedule 4.7(a) is true,
accurate and complete. The Sellers have all right, title and interest in and
to the Marks listed in Schedule 4.7(a), other than the Mark "Goodson." Each
Mark that is necessary or useful to the conduct of the Business is valid,
subsisting, unexpired, enforceable and has not been abandoned. Each
application for the federal registration in the United States of a Mark
(including, without limitation, any renewals thereof) has been duly and
properly filed, and each registration has been properly issued. Each of the
Sellers has all licenses or other rights to use all Marks
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necessary for the conduct of the Business as presently conducted or
contemplated by Sellers to be conducted.
(b) Except as set forth on Schedule 4.7(b), there are no
Liens, administrative or other proceedings or lawsuits, whether pending or, to
Sellers' knowledge, threatened, involving or against any of the Marks, and
Buyers shall have the same rights in and to the Marks used in connection with
the Business as the Sellers (together with their respective Related Persons)
have on the date of this Agreement and shall be able to use and exploit the
Marks to the full extent provided by applicable law for the term and throughout
the territories set forth in Schedule 4.7(a), without any material restriction
on such use or exploitation. No holding, decision or judgment has been
rendered by any governmental authority which would limit, cancel or question
the validity of any Mark. No action or proceeding is pending seeking to limit,
cancel or question the validity of any Mark.
(c) Except as set forth on Schedule 4.7(c), none of the
Marks used in the conduct of the Business, any element thereof as they
currently exist, or the exploitation thereof by Sellers (together with their
respective predecessors, constituent partners, joint venturers, Related Persons
or Affiliates), or the transfer thereof to Buyers, libels, defames, violates
the rights of privacy or publicity, or violates any trademark or service mark,
common law or other similar right of any Person or violates
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any other applicable law. Sellers have not received any notice relating to any
claim thereof.
(d) To Sellers' knowledge, except as set forth on Schedule
4.7(d), there are no Marks that conflict with or infringe on the Marks used in
the conduct of the Business, third party claims against such Marks, or
potential infringements against such Marks.
(e) To Sellers' knowledge, except as set forth on
Schedule 4.7(e), no other Person uses, has the right to use or claims the right
to use the Marks "Mark Goodson", "Mark Goodson Company", "Mark Goodson
Productions" or any combination or derivation thereof, and no other Person uses
or claims the right to use the Mark "Goodson," in each case in connection with
the Business or the entertainment industry.
(f) Subject to the immediately succeeding sentence, the
Sellers have taken all reasonably necessary steps to secure, protect and
maintain the Marks (other than the Mark "Goodson") in the United States and
have disclosed to Buyers in a Schedule hereto all infringements or potential
infringements, known to Sellers, against the Marks outside the United States.
The Buyers acknowledge that the Sellers have not registered the Marks "Mark
Goodson", "Mark Goodson Company", "Goodson" and "Mark Goodson Productions".
(g) Except as set forth in Schedule 4.7(g), there are no
third party licensees of the Marks used in the conduct of the Business.
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4.8 Financial Information. The Sellers have furnished to
Buyers (with respect to the combined Business and net assets of the Sellers) in
each case including the applicable notes and schedules (i) the combined
statements of operating income and cash flows of the Sellers for the years
ended December 31, 1994, 1993 and 1992, audited by Coopers & Lybrand, L.L.P.
(ii) the unaudited combined statements of operating income and cash flows for
the six months ended June 30, 1995 and 1994, which have been reviewed by
Coopers & Lybrand L.L.P., (iii) the combined statements of net assets at
December 31, 1994 and 1993 audited by Coopers & Lybrand, L.L.P., and (iv) the
unaudited combined statements of net assets as at June 30, 1995, which has been
reviewed by Coopers & Lybrand L.L.P. The foregoing statements and applicable
notes, hereinafter referred to as the "Financial Statements", have been
prepared by Seller's management from the books and records of the Seller in
accordance with GAAP, accurately reflect in all material respects and fairly
present the operating income of the combined Business and net assets, excluding
in any event the operations of the Lottery Business and the Sony Game Show
Channel and of any other Excluded Assets or Non-Assumed Liabilities, and the
financial position, excluding the Lottery Business and the Sony Game Show
Channel and any other Excluded Assets or Non-Assumed Liabilities, of the
Sellers for the periods and as of the dates set forth above.
4.9 Undisclosed Liabilities. Neither Seller (together,
insofar as it relates to the Business, with its
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predecessors, constituent partners, joint venturers, Related Persons or
Affiliates) has any debts, obligations or liabilities, whether known or
unknown, accrued, absolute, contingent or otherwise, that are not specifically
reflected or provided for in the Financial Statements or in the Schedules
hereto except those debts, liabilities and obligations arising after June 30,
1995 which (a) (i) were incurred in the ordinary course of the Business as set
forth on the Estimated Net Current Assets calculation, in each case in
accordance with prior practice or are part of the Non-Assumed Liabilities, and
(ii) could not individually or in the aggregate have a material adverse effect
on the Business or (b) are reflected on Schedule 4.9.
4.10 Accounts Receivable. The accounts receivable of
Sellers reflected in the Financial Statements and the Accounts Receivable of
Sellers reflected in the Estimated Adjusted Net Current Assets or the Closing
Adjusted Net Current Assets, as the case may be (the accounts receivable,
together with the Accounts Receivable, shall be referred to for the purposes of
this Section 4.10 only as the "Accounts Receivable") as of the date thereof and
all the Accounts Receivable arising after such date are valid and arose from
bona fide transactions in the ordinary course of the Business and have been
recorded in accordance with historical revenue recognition policy. No Account
Receivable has been assigned or pledged to any other Person except to Buyers
pursuant to this Agreement. All Accounts Receivable (net of reserves reflected
in the Estimated Adjusted Net Current Assets) are or
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are reasonably expected to be collectable in the ordinary course of the
Business.
4.11 Absence of Certain Changes or Events. Since December
31, 1994, except as set forth on Schedule 4.11 there has not been: (a) any
material adverse change affecting the assets, liabilities, condition (financial
or otherwise), results of operations, or prospects of the Business; (b) any
damage, destruction or casualty loss not covered by insurance materially and
adversely affecting the Business, taken as a whole; (c) any entry into any
material agreement, commitment or transaction (including, without limitation,
any capital expenditure, but excluding any of the foregoing related to any
Excluded Asset which will not have any adverse effect on the transactions
contemplated hereby) by either of the Sellers (together, insofar as it relates
to the Business, with its predecessors, constituent partners, joint venturers,
Related Persons or Affiliates), except agreements, commitments or transactions
in the ordinary course of business (none of which are or will be individually,
or collectively, material) or as permitted by this Agreement; or (d) any change
in the Sellers' accounting methods, principles or practices.
4.12 Contracts.
(a) Schedule 4.12(a) hereto lists or describes, and Buyers
have been furnished access to true and accurate copies (together with any
amendments, modifications, supplements or waivers) of, all contracts to which
either of the Sellers
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(together with their respective Related Persons) is a party as of the date
hereof with respect to the Business and the Assets (other than contracts solely
relating to the Excluded Assets) which are to be assumed by Buyers, and which
(A) obligate such Seller (or other Person) to pay more than $10,000 in any
year; (B) are agreements providing for the guarantee of the obligations of any
party (other than the Sellers), in each case in excess of $10,000; (C) are
distributorship, sales agency, marketing or other agreements providing for the
Exploitation of the Library Rights or the Library Physical Properties,
including any Library Agreement; (D) are contracts to be performed over a
period ending later than one year after the date hereof and cancelable only
upon more than 90 days' notice without material penalty; (E) are contracts
limiting the freedom of such Seller (together with its Related Persons) to
engage in any line of business; (F) are leases of real property; or (G) are
contracts relating to the licensing of any Mark, by or to either of the Sellers
(together with its Related Persons) (the contracts in (A) through (G),
collectively, the "Contracts".
(b) With respect to all such Contracts, neither the
Seller (together with its predecessors, constituent partners, joint venturers,
Related Persons or Affiliates) party thereto nor, to the knowledge of such
Seller and, except for the Contracts specified on Schedule 4.12(b) hereto, any
other party to any such Contract is in breach thereof or default thereunder
and, except for the Contracts specified on Schedule 4.12(b)
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hereto, there does not exist under any such Contract any event which, with the
giving of notice or the lapse of time, would constitute such a breach or
default, except for such breaches, defaults and events as to which requisite
waivers or consents have been obtained or which would not, in the aggregate,
have a materially adverse effect on the Business, taken as a whole. Except as
separately identified on Schedule 4.12(b), no approval or consent of, or notice
to or filing with, any Person is needed under the terms of such Contract in
order that the Contracts described in this Section 4.12(b) continue in full
force and effect (without giving any contractual party the right to modify,
accelerate or terminate) following the consummation of the transactions
contemplated by this Agreement.
(c) The Library Agreements listed in Schedule 4.12(a)
constitute (i) all contracts in effect as of the date hereof, whether written
or oral, with writers, directors, producers, actors, artists, animators, voice
talent or other parties relating to the Exploitation of any of the Library
Programs or other Library Rights, whether as licensor, licensee, grantor or
grantee or otherwise, relating to the Business, to which either Seller
(together with its Related Persons) is a party; and (ii) all contracts in
effect as of the date hereof concerning the licensing, exhibition or other
Exploitation of the Library Programs or other Library Rights or the Library
Physical Properties, whether as licensor, licensee, distributor, grantor
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or grantee or otherwise, relating to the Business, to which either Seller
(together with its Related Persons) is a party.
(d) Each Contract has been duly executed and delivered by
the Seller party thereto (except in the case of oral contracts), is in full
force and effect and is valid, binding and enforceable in accordance with its
terms against the Seller party thereto and, to Seller's knowledge and, except
for the Contracts specified on Schedule 4.12(d) hereto, and assuming the due
authorization and execution of such Contract by the other party thereto, any
other party thereto. Without limiting the generality of the foregoing, (i) all
minimum and other payments required to be made or received by Sellers (together
with their respective Related Persons) or which are necessary to extend the
term of any Contract have been fully made or received and all options and
renewal rights have been duly exercised by Sellers, (ii) all sublicenses and
other material actions required to be approved by any Person have been approved
by such Person and all material reports required to be provided to such Persons
have been timely provided, and (iii) to Sellers' knowledge, and except for the
Contracts specified on Schedule 4.12(d), there are no material disputes between
the Sellers (together with their respective Related Persons), on the one hand,
and any licensor or licensee, on the other hand.
(e) Except for the Contracts specified on Schedule
4.12(e), neither the execution and delivery of this Agreement or any Related
Agreement nor the consummation of the
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transactions contemplated hereby or thereby, will violate, result in a breach
of any of the terms or provisions of, constitute a material default (or any
event that, with the giving of notice or the passage of time or both, would
constitute a default) under, result in any right of termination under, increase
any material amounts payable under, or conflict with any Contract, including
the Sony Agreement and the CBS Network License. The Assets and the Business
constitute substantially all of the assets of the Partnership. No amounts are
owed by the Sellers or any of their respective Related Persons under the CBS
Transfer Agreement.
(f) Notwithstanding the other provisions of this Section
4.12, neither the Partnership nor CPC nor any of their respective Affiliates
makes any representations or warranties pursuant to this Section 4.12 or
Section 4.2(b)(iii) or (iv) with respect to Contracts between either Seller and
Fremantle International, Inc. or AACI (or their respective Affiliates), or any
sublicenses by Fremantle International, Inc. pursuant to its contract with the
Partnership.
4.13 Litigation. Except as set forth on Schedule 4.13 or
Schedule 4.5(d), as of the date hereof there is no suit, claim, action,
proceeding or investigation pending or, to the knowledge of either of the
Sellers, threatened against or relating to the Assets or the Business at law or
in equity before any court, arbitrator, mediator, administrator or governmental
or regulatory authority or body, domestic or foreign. As of the date hereof,
there is no significant possibility of a
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determination including, without limitation, with respect to the matters listed
on Schedule 4.13 or any other suit, claim, action, proceeding or investigation
brought prior to the date hereof (whether or not now pending), which would
reasonably be expected to (a) have a materially adverse effect on the Assets or
the Business, taken as a whole, or (b) prevent or delay the transactions
contemplated in this Agreement. As of the date hereof, neither the
Partnership, CPC nor any of their respective predecessors, constituent
partners, joint venturers, Related Persons or Affiliates is subject to any
outstanding judgment, stipulations, order, writ, injunction or decree affecting
the Assets or the Business.
4.14 Taxes. All Federal, state, local, foreign and other
tax returns and reports required to be filed by the Sellers (together with
their respective predecessors, constituent partners, joint venturers, Related
Persons or Affiliates) in connection with the Business or the Assets have been
duly filed by Sellers and all Taxes owed in connection with the business of the
Sellers (together with their respective predecessors, constituent partners,
joint venturers, Related Persons or Affiliates) or the Business or the Assets
have been paid by Sellers. Each of CPC and the Partnership is properly
characterized as a partnership for federal income tax purposes. Except as
provided on Schedule 4.14 with respect to withholding in Canada on certain
distribution contracts identified on such Schedule and under certain of the
contracts referenced in
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Section 4.12(f), all payments received or receivable under any of the Contracts
being assumed by Buyers are payable to Buyers free of the withholding of any
Taxes. All Taxes which either Seller (together with its predecessors,
constituent partners, joint venturers, Related Persons or Affiliates) is or was
required by law to withhold, to deposit or to collect in connection with
amounts paid or owing to any employee, independent contractor, creditor.
stockholder or other third party have been duly withheld, deposited or
collected and, to the extent required, have been paid to the relevant taxing
authority. There are no Liens for Taxes upon the Assets other than Liens for
Taxes not yet due and payable. No Tax is required to be withheld pursuant to
section 1445 of the Code as a result of the transfers contemplated by this
Agreement.
4.15 Compliance with Law. The Sellers (together with their
respective predecessors, constituent partners, joint venturers, Related Persons
or Affiliates) have conducted, and are now conducting, the Business
substantially in compliance with all applicable laws, rules, regulations and
court or administrative orders and processes, domestic or foreign, except for
violations, if any, which singly, or in the aggregate, do not, and are not
reasonably likely to, have a material adverse effect on the Business, taken as
a whole.
4.16 ERISA. As a result of the consummation of the
transactions contemplated herein (including, without limitation, the execution
by AAG of certain assumption agreements as set
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forth in Section 9.4(b)), (a) neither Buyers nor AACI nor AAG nor Interpublic
Sub shall become an "employer" as defined in Section 3(5) of ERISA with respect
to any plans subject to Title IV of ERISA (the "Plans"), (b) neither Buyers nor
AACI nor AAG nor Interpublic Sub shall become subject to any provision of the
collective bargaining agreements pursuant to which contributions are made to
any Plans (other than the obligations expressly assumed by AAG as set forth in
section 9.4(b)) and (c) neither the Sellers nor Buyers nor AACI (nor AAG) nor
Interpublic Sub shall be liable for any withdrawal or other liability under
Title IV of ERISA with respect to any Plans.
4.17 Third Party Costs. (a) All Third Party Costs payable
that have been or should be accrued have been paid in full or accrued in
accordance with GAAP by Sellers in their books and records and are reflected on
the Financial Statements and will be reflected in the Estimated Adjusted Net
Current Assets and in the Closing Adjusted Net Current Assets. Sellers have
paid or accrued on the appropriate books and records all amounts that are due
and payable (and all amounts that have accrued but are not yet payable) under
all applicable collective bargaining agreements with any union or guild or
otherwise by reason of any past or current television re-runs or theatrical,
home video, television or other exhibitions or Exploitation of any of the
Library Rights.
(b) Schedule 4.17(b) lists (i) each guild, union or other
collective bargaining agreement (true, accurate and
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complete copies of which have been furnished to Buyers to the extent reasonably
available to Sellers), including any outstanding obligations for residuals or
otherwise under such agreements ("Guild Encumbrances") to which either Seller
(together with its predecessors, constituents partners, joint venturers,
Related Persons or Affiliates) is a party which is applicable to the
Exploitation of any Library Rights by the Sellers (together with their
respective predecessors, constituents partners, joint venturers, Related
Persons or Affiliates) and (ii) a list of all union, collective bargaining and
guild agreements to which either Seller (together with its predecessors,
constituents partners, joint venturers, Related Persons or Affiliates) is a
party or relating to, or that may restrict in any way, the right to Exploit any
Library Rights. There are no claims or foreclosures under any Guild
Encumbrance.
4.18 Brokers. Other than Lazard Freres & Co. L.L.C.
("Lazard"), the fees and expenses of which shall be paid by the Sellers, there
is no broker, finder, investment banker or other similar intermediary which has
been retained by or is authorized to act on behalf of the Sellers (together
with their respective predecessors, constituents partners, joint venturers,
Related Persons or Affiliates) who might be entitled to any fee or commission
from Buyers or any of their Affiliates upon consummation of the transactions
contemplated by this Agreement. In connection therewith, Sellers have
delivered to Buyers the letter specified in Section 8.4(a)(ix).
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4.19 The Price Is Right Budget. Sellers have delivered the
budget for the 1995/1996 season of "The Price Is Right" on the CBS Network.
The budget has been reasonably prepared in good faith and on bases reflecting
the best current available estimates and judgments of the management of
Sellers, including assumptions as to the continued payment or reimbursement by
the CBS Network of allotted prize overages, promotional costs and other "below
the line" costs but, except as specifically identified therein, without
overhead or contingency costs. The budget does not and shall not exceed
$3,229,000 for balance of the 1995/1996 production year commencing with the
Escrow Closing Date.
4.20 Reorganization. Sellers have taken all necessary
actions to ensure that good and marketable title to (i) all of the assets
related to the Business previously held or owned by any of the entities
specified on Schedule 4.20, including any predecessor, constituent partner,
joint venturer, Related Persons or Affiliate of either Seller, or any entity
which has ever held or owned any rights with respect to the Assets or the
Business and (ii) all of the Assets have been transferred to the Partnership or
CPC prior to the Closing. Without limiting the generality of the foregoing,
the Assets transferred to Buyers include all rights under Contracts entered
into by predecessors or Partnership Related Persons (whether purported to have
been entered into prior or subsequent to the reorganization). None of such
transfers is subject to a claim or
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challenge (x) as to the validity of such transfer or (y) which would result, if
successful, in the creation of a Lien against any of the Assets. Such entities
represent all of such Persons who held any assets used or useful in the
Business immediately prior to such transfer.
4.21 Disclosure. No representation or warranty by the
Sellers in this Agreement nor any of the Related Agreements, nor any
certificate, schedule, document or instrument delivered or to be delivered to
Buyers pursuant hereto or thereto contains or will contain an untrue statement
of any material fact or omits or will omit to state any material fact required
to be stated herein or therein or necessary to make the statements contained
herein or therein not false or misleading.
4.22 Third Party Proposals. Neither Seller nor any of
their respective Affiliates, venturers, officers, directors, employees,
representatives or agents are engaged in any existing activities, discussions
or negotiations with any third party or entity with respect to a Purchase
Proposal.
4.23 Investment Representation. The Partnership represents
and warrants as to itself, the Representative and the Persons set forth on
Schedule 3.5 (on behalf of itself and each of the foregoing Persons) that each
such Person is taking Interpublic Common Stock for investment only and not with
a view towards distribution in violation of the Act. It is understood that the
Put Agreement and the shares constituting the Stock Portion of the Purchase
Price (or the right to receive such
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shares) will be assigned initially to the Persons set forth on Schedule 3.5 and
thereafter to Lazard Freres & Co., L.L.C. promptly following the Final Closing
and the Partnership represents and warrants that each of the foregoing
assignments is in compliance with the Act and any applicable state securities
laws and will not require registration of such shares under the Act or such
state securities laws. Schedule 3.5 is a true, accurate and complete list
setting forth the name, type of entity and, in the case of any Person other
than a corporation, the beneficial owner who will be the assignee of the shares
(or the right to receive the shares) of the Stock Portion of the Purchase Price
prior to the assignment of the foregoing shares or right to Lazard.
4.24 Sony Agreement and Sony Lien. The grant of the
security interest to Sony in respect of the collateral described in the Sony
Lien and the exercise by Sony of any its rights or remedies in respect of such
collateral does not presently and shall not upon exercise prevent, hinder,
impair, infringe or otherwise adversely affect the Buyers' ability to Exploit
the Assets, subject only to the restrictions set forth in Schedule 7.14.
Except as set forth on Attachment 2 to Schedules 2.1(a) and 2.1(b) and Schedule
7.14, Sellers are not in breach of the Sony Agreement and have fully performed
all obligations required to be performed by Sellers prior to the expiration of
the Sony Agreement (including obtaining and fully paying for all clearances
(including talent consents) required to be obtained in
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connection therewith) and, upon the Company's assumption of the Sony Agreement
in the Assumption, the Company will have no liability to Sony for any act or
omission prior to the Final Closing. Sellers represent and warrant that as of
the date hereof, they have received license and reimbursement payments in the
aggregate amount of $2,500,000 pursuant to the Sony Agreement.
4.25 The Representative. Each Buyer shall be entitled to
rely on the Partnership's instruction to direct the Cash Portion and the Stock
Portion, respectively, of the Purchase Price to the Representative, and neither
Buyer shall have any obligation with respect to the liquidation of the
Partnership or distribution of its assets. The instruction by the Partnership
to direct the Purchase Price to the Representative constitutes a representation
that such liquidation or distribution has occurred.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND AACI
The Company and AACI each represents and warrants to the
Sellers as follows:
5.1 Organization. The Company is a limited liability
company duly organized, validly existing and in good standing under the laws of
New York with the power and authority to own its properties and carry on its
business in all material respects as presently owned or conducted. Each of
AACI and AAG is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation with all requisite
corporate power and authority to own its properties and carry on its business
in all material respects as presently owned or conducted.
5.2 Authority. (a) Each of the Company, AACI and AAG
has all requisite power and authority to enter into and perform its obligations
under this Agreement and the Related Agreements to which it is a party, and to
consummate the transactions contemplated herein and such Related Agreements.
This Agreement has, and each of the Related Agreements to which the Company,
AACI or AAG is a party will, upon execution and delivery thereof, have been
duly executed and delivered by each of the Company, AACI or AAG pursuant to all
necessary authorization, and this Agreement is, and each of such Related
Agreements upon execution and delivery thereof will be, the legal, valid and
binding obligation of the Company, AACI or AAG
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as the case may be, enforceable against it in accordance with its terms. The
Assumption, upon execution and delivery thereof, will be duly executed and
delivered by the Company and will be the legal, valid and binding obligation of
the Company in accordance with its terms.
(b) Neither the execution and delivery of this Agreement
or the Related Agreements by the Company, AACI or AAG to the extent that it is
a party hereto or thereto, nor the Assumption by the Company, nor the
consummation of the transactions contemplated herein or therein or in the
Assumption will (i) conflict with, result in a breach of or constitute a
default under (A) the organizational documents of the Company, AACI or AAG, or
(B) any court or administrative order or process or any material agreement or
commitment to which the Company, AACI or AAG is a party or by which it (or any
of its properties or assets) is subject or bound; (ii) terminate or modify, or
give any third party the right to terminate or modify, the provisions or terms
of any material agreement or commitment to which the Company, AACI or AAG is a
party or by which it (or any of its properties or assets) is subject or bound;
or (iii) except as set forth on Schedule 5.2 hereto, require the Company, AACI
or AAG to obtain any authorization, consent, approval or waiver from, or to
make any filing with, any Person, court or public body or authority other than
the filings and the expiration or termination of the respective waiting periods
under the HSR Act.
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5.3 Brokers. There is no broker, finder, investment
banker or other similar intermediary which has been retained or is authorized
to act on behalf of the Company or AACI (and its Affiliates) who might be
entitled to any fee or commission from the Sellers upon consummation of the
transactions contemplated by this Agreement.
5.4 Litigation. As of the date hereof, there is no suit,
claim, action, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or relating to the Company or AACI (and its
Affiliates) before any court, arbitrator, mediator, administrator or
governmental or regulatory authority or body, domestic or foreign, with respect
to which there is a substantial possibility of a determination which would
prevent or delay the transactions contemplated in this Agreement; and as of the
date hereof the Company, AACI or AAG are not subject to any outstanding
judgment, stipulation, order, writ, injunction or decree which would prevent or
delay the transactions contemplated in this Agreement.
5.5 Standby Letter of Credit. On the Escrow Closing Date
the Company and AACI shall have delivered into escrow pursuant to the Escrow
Agreement the duly executed Standby Letter of Credit in respect of the Cash
Portion of the Purchase Price subject to reduction pursuant to the express
terms hereof.
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF INTERPUBLIC
Interpublic represents and warrants to the Sellers as
follows:
6.1 Organization of Interpublic and Interpublic Sub.
Interpublic is a corporation organized, validly existing and in good standing
under the laws of Delaware with all necessary corporate power and authority to
own its properties and carry on its business in all material respects as
presently owned or conducted. As of the Escrow Closing Interpublic Sub will be
a wholly owned subsidiary of Interpublic. Prior to the Escrow Closing Sellers
will be furnished with access to complete and correct copies of the
organizational documents of Interpublic Sub. All consents which are required
for Interpublic Sub to enter into the transactions contemplated in this
Agreement, the Network License Agreement and the Network Production Agreement
will be obtained prior to the Final Closing.
6.2 Authority. (a) Interpublic has all requisite power
and authority to enter into and perform its obligations under this Agreement
and the Related Agreements to which it is a party, and to consummate the
transactions contemplated herein and therein. As of the Final Closing
Interpublic Sub will have all requisite power and authority to enter into and
perform its obligations under the Network Production Agreement and the Network
License Agreement and to consummate the transactions contemplated thereby.
This Agreement
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has, and the Network License Agreement, the Network Production Agreement and
the Put Agreement will, upon execution and delivery thereof, have been duly
executed and delivered by Interpublic pursuant to all necessary authorization,
and this Agreement is, and the Network License Agreement, the Network
Production Agreement and the Put Agreement upon execution and delivery thereof
will be the legal, valid and binding obligations of Interpublic or Interpublic
Sub party thereto enforceable against it in accordance with its terms.
(b) Neither the execution and delivery of this Agreement
and the Related Agreements to which Interpublic or Interpublic Sub is a party,
nor the consummation of the transactions contemplated herein or therein will
(i) conflict with, result in a breach of or constitute a default under (A) its
certificate of incorporation or by laws, or (B) any court or administrative
order or process or any material agreement or commitment to which Interpublic
is a party or by which it (or any of its properties or assets) is subject or
bound; (ii) terminate or modify, or give any third party the right to terminate
or modify, the provisions or terms of any material agreement or commitment to
which Interpublic is a party or by which it (or any of its properties or
assets) is subject or bound; or (iii) require Interpublic or Interpublic Sub to
obtain any authorization, consent, approval or waiver from, or to make any
filing with, any Person, court or public body or authority other than the
filings
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and the expiration or termination of the respective waiting periods under the
HSR Act.
6.3 Brokers. There is no broker, finder, investment
banker or other similar intermediary which has been retained or is authorized
to act on behalf of Interpublic or Interpublic Sub who might be entitled to any
fee or commission from the Sellers upon consummation of the transactions
contemplated by this Agreement.
6.4 Litigation. As of the date hereof, there is no suit,
claim, action, proceeding or investigation pending or, to the knowledge of
Interpublic, threatened against or relating to Interpublic or any of its
subsidiaries before any court, arbitrator, mediator, administrator or
governmental or regulatory authority or body, domestic or foreign, with respect
to which there is a substantial possibility of a determination which would
prevent or delay the transactions contemplated in this Agreement; and as of the
date hereof, neither Interpublic nor Interpublic Sub is subject to any
outstanding judgment, stipulation, order, writ, injunction or decree which
would prevent or delay the transactions contemplated in this Agreement.
6.5 Interpublic Common Stock. The Interpublic Common
Stock to be issued and delivered in accordance with the provisions hereof has
been duly authorized, will be validly issued, fully paid and non-assessable
upon delivery to Representative in accordance herewith, and will be delivered
by
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Interpublic free and clear of all Liens other than Liens created or consented
to by Sellers or the holders thereof.
ARTICLE 7
COVENANTS
7.1 Conduct of the Business. Except as expressly
permitted or contemplated by this Agreement until the Final Closing, unless
Buyers shall otherwise agree in writing, each Seller shall conduct the Business
in the ordinary and usual course of business and consistent with past practice
and use its reasonable best efforts to preserve intact its business
organization and goodwill, and preserve the goodwill and business relationships
with suppliers, distributors, customers, licensors, licensees and others having
business relationships with such Seller. Without limiting the generality of
the foregoing, each of the Sellers (on behalf of itself and their respective
Related Persons) agree that, except as contemplated in this Agreement or with
prior written consent of Buyers:
(a) each of the Sellers shall prior to the Final Closing:
(i) except as prohibited by Section 7.1(b),
conduct its business and operations, including (without limitation) the
maintenance of books, accounts and records, only in the usual and ordinary
course of business and consistent with past custom and practice;
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(ii) use its reasonable best efforts to keep in
full force and effect or timely renew all governmental licenses and permits
relating to the Business;
(iii) notify Buyers of any emergency or other
change in the normal course of its business or in the operation of its
properties and of any Tax audits, Tax claims, governmental or third party
complaints, investigations or hearings (or communications indicating that the
same may be contemplated);
(iv) maintain its tangible assets in customary
repair, order and condition, replace in accordance with past practice its
inoperable, worn out or obsolete assets with assets of quality at least
comparable to the original quality of the assets being replaced;
(v) maintain and preserve in full force and
effect the existence of, and its ownership of or other rights to, all Assets,
and not waive any material license or other right with respect thereto;
(b) each of the Sellers shall not:
(i) sell, transfer, hypothecate or pledge, any
Asset material to the Business or which has a value in excess of $10,000;
(ii) lease or license any Assets or interests
therein, outside the ordinary course of business;
(iii) except as set forth on Schedule 7.1(b), enter
into, amend, terminate, renew (or in the event that Buyers request that a
contract or transaction be renewed, fail to use
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its reasonable best efforts to renew, provided that, Sellers shall not be
obligated to renew any contract with AACI or any of its affiliates or licensees
prior to the Final Closing solely by reason of this Agreement or the Related
Agreements) or renegotiate any contract, or transaction, in each case which is
not in the usual and ordinary course of the Business or that is material
(whether or not in the ordinary course of business);
(iv) make any capital expenditure or commit itself
to make any capital expenditure in excess of $10,000 in the aggregate except in
accordance with the 1995/1996 Price Is Right Production Budget approved by the
Buyers;
(v) make any change in its accounting practices;
(vi) fail to comply in any material respect with
any laws and contract obligations applicable to it or to the conduct of the
Business and to pay all applicable Taxes when due;
(vii) waive, modify, amend, release, settle or
terminate any rights, debts or claims of substantial value, including
infringement claims (all of which infringement claims shall accrue to the
benefit of Buyers);
(viii) incur any indebtedness for borrowed money or
issue any debt securities, guarantees, indemnities or similar obligations;
(ix) whether prior to or after the Final Closing,
adopt a plan of complete or partial liquidation (other than, in the case of the
Partnership, a plan of liquidation
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consistent with the provisions hereof but not effective prior to the Final
Closing), dissolution, merger, consolidation, restructuring, recapitalization
or reorganization it being acknowledged by the Buyers, however, that the
Partnership intends to distribute the right to receive the Purchase Price
immediately subsequent to the Final Closing;
(x) fail to pay any obligation relating to the
Business upon its becoming due, consistent with the past practices of the
Business, except if and to the extent that such obligation is subject to a bona
fide dispute, in which event the detailed circumstances of such failure to pay
shall be promptly related in a notice to Buyers; and
(c) neither Seller (on behalf of itself and its respective
Related Persons) shall take any action, including authorizing or entering into
a contract, that could reasonably be expected to prevent any of the events
referred to in Section 7.1(a) or result in any of the events referred to in
Section 7.1(b).
7.2 Access to Information. (a) During the period from
the date of this Agreement to the Final Closing, each Seller will, during
regular business hours and on reasonable prior notice, allow Buyers and AACI
and their respective authorized representatives such reasonable access to
employees, books, records, offices and other facilities and properties of the
Sellers (together with their respective Related Persons) related to the
Business as Buyers and AACI deem appropriate in
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the circumstances, provided that any such access shall not unreasonably
interfere with the businesses or operations of the Sellers.
(b) Any non-public information provided to or obtained by
Buyers or AACI pursuant to paragraph (a) above, or otherwise in connection with
this Agreement, shall be "Evaluation Material" under the Confidentiality
Agreement, and shall be held by Buyers in accordance with and be subject to the
terms of the Confidentiality Agreement until the Escrow Closing.
7.3 Filings, Authorizations and Consents. Each of the
Sellers and each of Buyers, within five Business Days after the date hereof,
shall (i) file or supply, or cause to be filed or supplied, at their own
expense, all notifications and information required to be filed or supplied by
such Seller or Buyer pursuant to the HSR Act in connection with the sale and
transfer of the Assets pursuant to this Agreement; and (ii) request early
termination of the waiting period under the HSR Act. Each of the Sellers and
each of Buyers, as promptly as practicable, shall (i) make, or cause to be
made, all such other filings and submissions under laws, rules and regulations
applicable to such Seller or Buyer, as may be required for it to consummate the
transfer of the Assets in accordance with the terms of this Agreement; (ii) use
its reasonable best efforts to obtain, or cause to obtain, all authorizations,
approvals, consents and waivers from all persons and governmental authorities
necessary to be obtained by it, or its subsidiaries
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or Affiliates (including, in the case of Sellers, their respective
predecessors, constituent partners and joint venturers), in order for it so to
consummate such transfer and for the preservation of all of its contracts,
licenses and other rights which may be affected by such transfer; and (iii) use
its reasonable best efforts to take, or cause to be taken, all other actions
necessary, proper or advisable in order for it to fulfill its obligations
hereunder. In addition, the Sellers shall use their reasonable best efforts to
obtain (and Buyers will reasonably cooperate in order to obtain) the consent of
the American Federation of Television and Radio Artists and the Directors Guild
of America, Inc., as applicable, to such changes in the form of assumption
agreements to be executed by AAG as set forth in Section 9.4(b) as may be
deemed necessary or desirable by Buyers. The Sellers and Buyers shall
coordinate and cooperate with one another in exchanging such information and
supplying such reasonable assistance as may be reasonably requested by each of
the other in connection with obtaining governmental or regulatory
authorizations, approvals, consents and waivers.
7.4 Employees, Etc. (a) Neither any Buyer nor AACI
shall be required to hire or offer employment to any employee of either Seller
or any of its predecessors, constituent partners, joint venturers or Affiliates
or to engage any consultant or independent contractor of either Seller or any
of their respective predecessors, constituent partners, joint venturers or
Affiliates and neither any Buyer nor AACI will be
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responsible or liable for any employment, consultant or independent contractor
arrangements or agreements entered into by either Seller or any of their
respective predecessors, constituent partners, joint venturers or Affiliates,
whether written or oral, or with individuals or any unions or guilds, or for
any salaries, severance pay, vacation accruals, medical benefits, pension or
retirement benefits or any other benefits, compensation or remuneration owed
current or future employees, consultants or contractors (including, without
limitation, performers, actors, musicians, hosts, writers, directors, producers
or other persons employed in the Exploitation of the Library Programs or other
Library Rights) of either Seller or any of their respective predecessors,
constituent partners, joint venturers or Affiliates at any time (other than the
obligations expressly assumed by AAG as set forth in Section 9.4(b)). However,
nothing contained herein shall be deemed to preclude Buyers or any of their
Affiliates from hiring or offering employment to employees of either Seller or
any of their respective predecessors, constituent partners, joint venturers or
Affiliates or engaging consultants or independent contractors of either Seller
or any of their respective predecessors, constituent partners, joint venturers
or Affiliates.
(b) With respect to all employees of either Seller
(together with their respective predecessors, constituent partners, joint
venturers and Affiliates), Buyers shall have no responsibility to comply with
WARN as to such employees of
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Sellers and Sellers shall hold Buyers harmless with respect to any claim
incurred or arising under WARN relating to such employees of Sellers.
7.5 No Shop. Unless and until this Agreement is
terminated in accordance with Section 11.1 hereof, Sellers and the Estate agree
that neither of them nor any of their predecessors, constituent partners or
corporate Affiliates, shall, and each of Seller and the Estate will use its
reasonable best efforts to cause its officers, directors, executors, employees,
representatives and agents not to directly or indirectly initiate or solicit
any inquiries or the making of any proposal with respect to any purchase of all
or any significant portion of the Business or the Assets (a "Purchase
Proposal") or engage in discussions or negotiations with, or provide any
non-public information to or otherwise cooperate with, or enter into any
agreement with or grant any option to, any third party or entity relating to a
Purchase Proposal. Sellers and the Estate will notify Buyers immediately if
any Purchase Proposals are received by, any information is requested from, or
any negotiations or discussions are sought to be initiated or continued with
either Seller or the Estate or, to Sellers' knowledge, any other Person
identified in this Section.
7.6 Notice to Escrow Agent. Each of the Sellers, the
Company and Interpublic agrees to promptly execute joint instructions (in one
or several counterparts) pursuant to the Escrow Agreement to the Escrow Agent
to such effect in the event
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that each condition precedent under Articles 8 or 9 of this Agreement to their
respective obligations to consummate the transactions contemplated hereby at
the Final Closing have been satisfied or waived. In the event that this
Agreement is terminated pursuant to the terms hereof, each of such parties
agrees to promptly execute joint instructions (in one or several counterparts)
pursuant to the Escrow Agreement to the Escrow Agent to such effect.
7.7 Notice of Events. During the period from the date of
this Agreement to the Final Closing Date, the Sellers shall give prompt notice
to Buyers and AACI, and Buyers and AACI shall give prompt notice to the
Sellers, of (i) the occurrence or non-occurrence of any event of which it has
knowledge, the occurrence or non occurrence of which would be likely (x) to
cause any of its or their representations or warranties contained in this
Agreement to be untrue or inaccurate in any material respect at or prior to
either the Escrow Closing or the Final Closing, or (y) to result in any of the
conditions it is or they are required to satisfy not being satisfied in any
material respect so as to permit the consummation of the transfer of the Assets
on the time schedule contemplated by this Agreement; and (ii) any material
failure on its or their part to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this Section 7.7 shall not
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limit or otherwise affect the remedies available hereunder to any party.
7.8 Further Assurances. From time to time after the
Final Closing, the Sellers shall, at their own expense, execute and deliver, or
cause to be executed and delivered, such documents to Buyers and do such other
things as Buyers may reasonably request in order to vest in Buyers good title
to the Assets more effectively and to otherwise carry out the intent of this
Agreement, and from time to time after the Final Closing, Buyers shall, at
their own expense, execute and deliver such documents to the Sellers and do
such other things as either of the Sellers may reasonably request in order to
consummate the sale of the Assets and, in the case of the Company only, the
assumption by the Company of the Assumed Liabilities pursuant to this Agreement
more effectively and to otherwise carry out the intent of this Agreement.
7.9 Public Announcements. The Sellers and Buyers shall
consult with one another before issuing any press release with respect to this
Agreement and the transactions contemplated hereby, and shall not issue any
such press release without prior approval of the other party, except as
required by applicable law, stock exchange or NASDAQ rule or legal process, in
which case the party required to make such disclosure shall give prior notice
to the other party hereto of the nature of such requirement and shall consult
with such party prior to issuing such press release. Sellers acknowledge that
Buyers intend to
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issue a press release immediately following the Escrow Closing, which release
shall be subject to the approval of the Sellers (which approval shall not be
unreasonably withheld or delayed beyond the close of business on the date of
execution hereof by the Sellers). AACI intends to file a copy of this
Agreement with the Securities and Exchange Commission and National Association
of Securities Dealers Automated Quotation System promptly after the execution
and delivery hereof, together with a summary of the transaction showing the pro
forma effect of the combination.
7.10 Records. With respect to the records, files and other
information of the Sellers either delivered to Buyers or retained by the
Sellers hereunder relating to matters on or prior to the Final Closing Date:
(a) to the extent that the Sellers or Buyers, as the case may be, have retained
such information in the ordinary course of business; and (b) where there is a
legitimate purpose, including, without limitation, an audit of any of the
Sellers or Buyers or any of their respective Affiliates by the IRS or any other
Taxing Authority, upon reasonable written notice Buyers and Sellers shall allow
each other and their respective representatives and Affiliates reasonable
access to, and shall allow them to make copies of, such books, records, files
and other information during regular business hours, provided that any such
access shall not materially interfere with the businesses or operations of the
party permitting such access.
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7.11 Sales and Transfer Taxes. All sales and transfer
Taxes, and all similar Taxes and charges, incurred in connection with this
Agreement and the transactions contemplated hereby, including, without
limitation, any recording charges, will be borne one-half by Buyers and
one-half by Sellers; provided, however, that any such Taxes incurred in
connection with the transfer by Interpublic of its undivided interest in the
Assets to the Company will be borne by Buyers. Buyers shall be responsible for
filing all necessary Tax Returns and other documentation with respect to all
such transfer Taxes and, if required by applicable law, the Sellers shall join
in the execution of any such tax return or other documentation.
7.12 Non-Competition. (a) (i) For a period of three years
after the Final Closing Date or (ii) so long as the Company or any of its
Affiliates shall engage in the Business or any portion thereof whichever is
shorter (the "Restricted Period"), neither of the Sellers (together with their
respective Related Persons and corporate Affiliates) nor the Estate nor any
Person in its capacity as an employee, representative or agent of either Seller
(or any of their respective Related Persons) or the Estate shall, and Sellers
and the Estate shall use their reasonable best efforts to cause their
respective corporate Affiliates listed on Schedule 7.12 not to, directly or
indirectly, anywhere in the world, own, manage, operate, participate in,
consult or perform services for or otherwise carry on or assist any business
that engages in the business of
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creating, producing, distributing or licensing television programming (the
"Competitive Business"); provided, however, that nothing contained in this
Section 7.12(a) shall prohibit Sellers, the Estate or their Affiliates from (x)
engaging in any activities relating to the Lottery Business or from performing
its obligations under the Sony Agreement or the Network Production Agreement or
(y) acquiring for investment not more than 5% of any class of any stock of a
company which is engaged in a Competitive Business and which stock is publicly
traded. For purposes of this Section 7.12, Jonathan Goodson shall not be
considered to be an Affiliate to the extent he acts in his individual capacity
or in any capacity other than on behalf of the Sellers or any of their
predecessors, constituent partners, joint venturers, Related Persons or
Affiliates or the Estate.
(b) Sellers and Buyers recognize that the laws and public
policies of various jurisdictions may differ as to the validity and
enforceability of covenants similar to those set forth in this Section 7.12.
It is the intention of Sellers and Buyers that the provisions of this Section
7.12 be enforced to the fullest extent permissible under the laws and policies
of each jurisdiction in which enforcement may be sought, and that the
unenforceability (or the modification to conform to such laws or policies) of
any provision hereof shall not render unenforceable, or impair, the remainder
of the provisions hereof. Accordingly, if any provision of this Section 7.12
shall be determined to be invalid or unenforceable, either in whole or in
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part, this Section 7.12 shall be deemed to be amended so as to delete or
modify, as necessary, the offending provision in order to render this Section
7.12 valid and enforceable, such amendment to apply only with respect to the
operation of this Section 7.12 in the particular jurisdiction in which such
determination is made.
(c) From and after the Escrow Closing, Sellers (together
with their respective predecessors, constituent partners, joint venturers,
Related Persons and Affiliates), except pursuant to and in compliance with the
terms of this Agreement or as required by legal process, shall not use for any
purpose, shall not disclose to others, and shall use all reasonable efforts to
prevent others (including without limitation their and their respective
Affiliates' respective directors, officers, employees, agents or
representatives) from using or disclosing to any Person, any non-public
information included in, or concerning, the Assets or the Business, other than
the Excluded Assets and the Lottery Business or as required to perform its
obligations under the Sony Agreement or the Network Production Agreement;
provided, however, that nothing in this Section 7.12 shall apply to any
information that Sellers demonstrate is now known to the public or which
becomes known to the public other than by acts or omissions by Sellers or their
respective Affiliates in breach of this Agreement.
(d) Buyers and their respective Affiliates recognize and
acknowledge that they may have access to certain
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confidential information of Sellers prior to and subsequent to the Escrow
Closing relating to matters other than the Business, the Assets, this
Agreement, the Related Agreements and the transactions contemplated hereby or
thereby. Buyers agree that neither of them will disclose, and that they will
use their reasonable best efforts to prevent disclosure by their respective
Affiliates or any other person of, any such confidential information for any
purpose whatsoever, except to authorized representatives of Sellers and except
as required by applicable law, stock exchange or NASDAQ rule or legal process
or otherwise permitted to be disclosed if such information were subject to the
Confidentiality Agreements; provided, however, that nothing in this Section
7.12 shall apply to any information that Buyers demonstrate is now known to the
public or which becomes known to the public other than by acts or omissions by
Buyers or their respective Affiliates in breach of this Agreement or the
Confidentiality Agreements.
(e) Each of the Sellers (on behalf of itself and its
Related Persons) and Buyers expressly agrees that the remedy at law for any
breach of the provisions of this Section 7.12 would be inadequate, and each
Seller and Buyers hereby consent, and shall cause their respective Affiliates
to consent, that each of Buyers and Sellers should be entitled, upon the proof
of breach of the provisions of this Section 7.12, to provisional or permanent
injunctive or other equitable relief, in addition to any other remedies and
damages available to it at law or
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otherwise, without the necessity of actual monetary loss being proved, and
without the necessity of any Buyer's or Seller's posting a bond or other
security, in order that any breach of such provisions may effectively be
restrained.
7.13 Use of Name. The parties shall take such reasonable
steps as shall be necessary (including, without limitation, appropriate notices
and disclaimers) to ensure that any use of the Sellers' Marks included with or
on any of the Assets or other conduct of Business shall not suggest that the
Sellers or their Affiliates continue to provide services with respect to the
operations of the Business (other than with respect to the network production
of "The Price Is Right" during the term of the Network Production Agreement or
any extension thereof); provided, however, that such obligation shall not limit
Buyers' right to use the Marks "Goodson," "Mark Goodson," "Mark Goodson
Company" or "Mark Goodson Productions" or any combination or derivation of such
words (in the case of the Mark "Goodson", insofar as Sellers, their respective
predecessors, Related Persons or corporate Affiliates have any rights thereto).
Sellers and their Affiliates shall not use the Marks "Mark Goodson" "Mark
Goodson Company" or "Mark Goodson Productions" or any combination or derivation
thereof in connection with any business or activity (other than the use of the
name "Mark Goodson" in connection with the sale of the art collection of Mark
Goodson or the ongoing administration of the Estate) and Buyers shall have the
exclusive rights to use such words or
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combination of such words (except that Buyers shall not use the Mark "Mark
Goodson" or any combination or derivation thereof in connection with the
Lottery Business). Subject to the immediately following sentence, Sellers and
their Related Persons shall not use the Mark "Goodson" or any combination or
derivation thereof in connection with any business or activity and, insofar as
Sellers and their Related Persons are concerned, Buyers shall have the
exclusive rights to use such words or combination of such words (except that
Buyers shall not use the Mark "Goodson" or any combination or derivation
thereof in connection with the Lottery Business). Simultaneous with the Final
Closing, or as soon as practicable thereafter, the Company shall enter into a
trade mark license agreement with the Partnership or, at the direction of the
Partnership, Jonathan Goodson pursuant to which the Partnership or, at the
direction of the Partnership, Jonathan Goodson shall be granted an exclusive
license, to the extent of the Company's rights therein, to use the Mark
"Goodson" solely in connection with the Lottery Business; provided, however,
that each Seller and its Affiliates shall not use the Mark "Goodson" in any
manner confusingly similar to the business conducted by the Company or its
successors, including without limitation the Exploitation of any of the Library
Rights. Sellers and its Affiliates shall take all such action as is necessary
to change their names effective promptly following the Final Closing so as to
comply with this Section.
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7.14 The Sony Agreement etc. (a) All rights of Sellers
under the Sony Agreement (including but not limited to the right to receive
after the date hereof additional license fee or reimbursement payments), and
all rights to enter into any renewals or new agreements with Sony or any
amendment of the Sony Agreement or to sue Sony in connection with any breach of
the Sony Agreement, shall be transferred to Buyers as Assets pursuant hereto.
License fee or reimbursement payments received by the Company after the date
hereof in respect of the Sony Agreement (but not as to any extension or renewal
thereof), up to $2,500,000 in the aggregate (prior to any offset or similar
adjustment by Sony except as a result of the breach by the Company of the
restrictions set forth in Schedule 7.14(c)) (the "Sony Receivable") shall be
paid, when and promptly after receipt by the Company after the Final Closing,
to the Partnership, subject to the provisions of Section 13.4. Any additional
license fee or reimbursement payments under the Sony Agreement (but not as to
any extension or renewal thereof) shall be divided equally, when and as
received, between the Partnership and the Company, without deduction and shall
not be considered to be Domestic Net Profits for the purpose of Earn-Out
Payments.
(b) As between Sellers and the Company, the Company shall
not be primarily responsible for (and the Partnership shall perform all
obligations under) the Sony Agreement, except as set forth on Schedule 7.14(c).
Except as set forth in Schedule 7.14(c), the Company shall not be subject
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to any restrictions under, the Sony Agreement with respect to the operation of
the Business after the Final Closing. The Partnership shall not purport to
enter into any amendment of or purport to grant any waiver under the Sony
Agreement after the date hereof, and the Partnership (together with the
Partnership Related Persons) shall have no right to any extension or renewal of
the Sony Agreement or any other rights under the Sony Agreement (except for the
right to payment from the Company pursuant to Section 7.14(a)). The Sellers
shall have no liability or obligations in respect of any amendments of the Sony
Agreement entered into by the Company after the Final Closing (as to which the
Company shall indemnify and hold the Sellers harmless); provided that no such
amendment shall release Sellers from any liabilities under the Sony Agreement
arising prior to the Final Closing or under the Network Production Agreement.
Upon termination of the Sony Agreement, to the extent requested by the Company,
the Partnership shall cooperate with the Company to obtain at a place
designated by the Company for such purpose all masters and duplicate masters of
any original negative or master tape or elements thereof that are included in
the Library Rights or Library Tangible Assets and that are required to be
delivered to pursuant to and upon termination of the Sony Agreement.
(c) Buyers and the Partnership acknowledge that from and
after the Escrow Closing Date, the Partnership shall continue to perform all
acts and discharge all liabilities and execute all instruments reasonably
necessary and proper to
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fulfill the Partnership's obligations under the Sony Agreement and shall
indemnify and hold Buyers harmless from any and all costs and expenses incurred
in connection therewith and any liability or any claims thereunder.
7.15 Interpublic Sub. From and after the Escrow Closing
Date and for so long as the Network Production Agreement is in effect, without
the consent of the Partnership (which shall not be unreasonably withheld or
delayed) Interpublic shall cause the Interpublic Sub not to, (i) engage,
directly or indirectly, in any business other than the ownership of the Assets
and engaging in the activities contemplated to be engaged in by it pursuant to
this Agreement or the Related Agreements, (ii) guaranty any material obligation
of any Person, (iii) incur, create, assume or allow to remain outstanding, any
material indebtedness or obligation other than any indebtedness or obligations
arising as a result of the formation of Interpublic Sub and any indebtedness or
obligations arising under on in connection with the transactions contemplated
by this Agreement or the Related Agreements, (iv) make or permit to remain
outstanding any material loan or advance to, or own or acquire any stock in
securities of, any Person, and (v) create or cause to be created, and will
promptly discharge, or cause to be discharged, any material lien, encumbrance
or charge upon the assets of Interpublic Sub.
7.16 Delivery of Tax Certificate. Sellers each agree to
provide to Buyers a certificate that, as of the Escrow
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Closing Date, such Seller is not a foreign person within the meaning of section
1445 of the Code and the Treasury regulations thereunder. If such certificate
is not delivered to Buyers, Buyers shall be entitled to withhold 10% of the
Purchase Price as required by section 1445 of the Code.
7.17 Other Taxes. Except as otherwise provided in this
Agreement, as among the parties hereto, (i) Sellers shall be responsible for
and pay all Taxes (including real property Taxes, personal property Taxes and
similar ad valorem obligations, if any) levied or imposed upon, or in
connection with, the Assets or the conduct or operation of the Business on or
before the Final Closing Date (including the days on or prior to the Final
Closing Date in any tax year or other tax period that ends after the Final
Closing) but not including (a) the period beginning on the day after the Final
Closing, (b) any Taxes resulting from transactions not in the ordinary course
of business which occur on the day of the Final Closing but after the Final
Closing and (c) Taxes levied or imposed upon, or in connection with the
transfer by Interpublic of its undivided interest in the Assets to the
Company); (ii) Buyers shall be responsible for and pay all Taxes levied or
imposed upon, or in connection with, the Assets or the conduct or operation of
the Business for the period beginning on the day after the Final Closing
(including the days after the Final Closing); and (iii) Sellers and the Company
will each be responsible for its own income and franchise Taxes, if
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any, arising from the transactions contemplated by this Agreement.
7.18 Satisfaction of Conditions Precedent. Each party
hereto agrees to use their respective best efforts so that the conditions
precedent to their respective obligations under Articles 8 and 9 of this
Agreement are fully satisfied at or prior to the Final Closing; provided,
however, without limiting the foregoing, that nothing herein shall require (i)
Interpublic to take any action in connection with the Company's and AACI's
obligation to tender the Cash Portion of the Purchase Price or the Standby
Letter of Credit with respect thereto (it being understood and agreed that only
AACI shall be liable for any breach by the Company of its obligation to tender
the Cash Portion of the Purchase Price or the Standby Letter of Credit with
respect thereto) or the (ii) Company or AACI to take any action in connection
with Interpublic's obligation to tender the Stock Portion of the Purchase
Price.
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYERS
The obligation of the Buyers under this Agreement to
consummate the purchase of the Assets and the obligation of the Company to
consummate the assumption of the Assumed Liabilities at the Final Closing shall
be subject to the satisfaction, at or prior to the Final Closing, of all of the
following conditions, any one or more of which may be waived by the Buyers by
written notice to the Sellers:
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8.1 Representations and Warranties Accurate. All
representations and warranties of each of the Sellers contained in this
Agreement shall be true and correct in all material respects at and as of the
Escrow Closing Date.
8.2 Performance by the Sellers. Each of the Sellers
shall have performed and complied in all material respects with all agreements,
obligations, covenants and conditions required by this Agreement to be
performed and complied with by it prior to or on the Final Closing.
8.3 Certificates. The Buyers shall have received
certificates, dated the Escrow Closing Date (and a second set of certificates
dated the Final Closing), signed on behalf of each of the Sellers reasonably
satisfactory in form and substance to each Buyer, to the effect that the
conditions set forth in Sections 8.1 and 8.2 as to such Seller have been
satisfied.
8.4 Delivery of Assets and Documents. (a) The
Partnership shall have delivered (or constructively delivered in the case of
(iii)) to the Buyers the following:
(i) access to the Library Physical Properties and
inventories pertaining thereto by way of delivery of laboratory access
agreements (and notifications of assignment of Sellers' rights) in a mutually
acceptable form in those cases where the Library Physical Properties and
inventories pertaining thereto are in the possession or custody of third
parties and, in those cases where such are in possession or custody of the
Partnership, by delivery of the Library Physical Properties and inventories
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pertaining thereto to a place designated by Buyers for such purpose;
(ii) all certificates of registration for the
registered Copyrights and registered Marks included in the Assets or related to
the Business;
(iii) all the Contracts, and all books, records,
formats, Bibles, other Literary Properties, and other documents included in the
Assets or related to the Business;
(iv) a duly executed general assignment and bill
of sale on behalf of the Partnership and the Partnership Related Persons
substantially in the form of Exhibit 8.4(a)(iv) hereto;
(v) a duly executed assignment of Copyrights on
behalf of the Partnership and the Partnership Related Persons substantially in
the form of Exhibit 8.4(a)(v) hereto;
(vi) a duly executed assignment of Marks on behalf
of the Partnership and the Partnership Related Persons substantially in the
form of Exhibit 8.4(a)(vi) hereto;
(vii) a duly executed Network Production Agreement
substantially in the form of Exhibit 8.4(a)(vii) hereto;
(viii) such other instruments and documents as
Buyers may reasonably request in connection with the transactions contemplated
hereby;
(ix) a letter duly executed by Lazard, in a form
satisfactory to Buyers, to the effect that Lazard will look only
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to the Sellers for payment and indemnification in connection with services
rendered to Sellers in connection with the transaction contemplated by this
Agreement and shall release Buyers from any claims with respect thereto;
(x) a duly executed Escrow Agreement substantially in the
form of Exhibit 3.2 hereto (countersigned by the Estate); and
(xi) reasonably satisfactory evidence of the release of
all liens on the Assets other than the Sony Lien and other liens disclosed in
UCC lien searches furnished to or obtained by the Buyers on or prior to the
date hereof to the extent Sellers have provided reasonable evidence to Buyers
that all related obligations have been fully discharged on or prior to the
Final Closing.
(b) CPC shall have delivered (or constructively delivered
in the case of (iii)) to the Buyers the following:
(i) access to the Library Physical Properties and
inventories pertaining thereto by way of delivery of laboratory access
agreements (and notifications of assignment of Sellers' rights) in a mutually
acceptable form in those cases where the Library Physical Properties and
inventories pertaining thereto are in the possession or custody of third
parties and, in those cases where such are in possession or custody of CPC, by
delivery of the Library Physical Properties and inventories pertaining thereto
to a place designated by Buyers for such purpose;
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(ii) all certificates of registration for the
registered Copyrights and registered Marks included in the Assets or related to
the Business;
(iii) all the Contracts, and all books, records,
formats, Bibles, other Literary Properties, and other documents included in the
Assets or related to the Business;
(iv) a duly executed general assignment and bill of
sale on behalf of CPC and the CPC Related Persons substantially in the form of
Exhibit 8.4(b)(iv) hereto;
(v) a duly executed assignment of the Copyright on
behalf of CPC and the CPC Related Persons for the "Child's Play" Bible for
Television Programming substantially in the form of Exhibit 8.4(b)(v);
(vi) a duly executed assignment of Marks on behalf of
CPC and the CPC Related Persons substantially in the form of Exhibit 8.4(b)(vi)
hereto;
(vii) a duly executed Escrow Agreement substantially in
the form of Exhibit 3.2 hereto; and
(viii) such other instruments and documents as Buyers
may reasonably request in connection with the transaction contemplated thereby.
8.5 Opinions of Counsel for the Sellers. The Buyers
shall have received from counsel for the Sellers one or more written opinions,
dated the Escrow Closing Date, in form and substance satisfactory to the Buyers
and as specified in Exhibit 8.5(a) hereto, with respect to the matters set
forth therein
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(and, to the extent reasonably requested by Buyers, a bring-down as to such
opinions at the Final Closing).
8.6 HSR Act, Etc.; Authorizations; Financing; Legal
Prohibition. (a) With respect to the transactions contemplated hereby, all
applicable waiting periods under the HSR Act shall have expired or been
terminated.
(b) Each of the Buyers shall have obtained all other
governmental authorizations, and all approvals, consents, waivers, permits,
exemptions, licenses or other approvals necessary or required for the
consummation of the transactions contemplated hereby set forth in Schedule
8.6(b) and none of the foregoing shall contain any conditions, which
individually or in the aggregate could be reasonably expected to have a
material adverse effect on the Business or the Assets.
(c) Each of the Sellers shall have obtained or made
all other governmental authorizations, and all approvals, consents, waivers,
permits, exemptions, licenses or other approvals specified in Schedule 8.6(c),
and none of the foregoing shall contain any conditions, which individually or
in the aggregate could be reasonably expected to have a material adverse effect
on the Business or the Assets.
(d) As of the Final Closing, there shall not exist any
temporary, preliminary or permanent injunction or other order issued by a court
or governmental or regulatory agency of competent jurisdiction which would
prohibit the purchase and sale of the Assets contemplated by this Agreement or
the consummation
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of any of the Related Agreements and no action, suit or proceeding shall have
been instituted by any Person which would reasonably be likely to prohibit any
of the foregoing.
(e) With respect to Interpublic's obligation to
consummate the transactions contemplated hereby, the Company or AACI shall have
delivered at the Escrow Closing to the Escrow Agent the Standby Letter of
Credit in respect of the Cash Portion of the Purchase Price.
(f) With respect to the Company's and AACI's
obligation to consummate the transactions contemplated hereby, Interpublic
shall have entered into the Put Agreement with respect to the Stock Portion of
the Purchase Price on the Escrow Closing Date.
8.7 Estate Guaranty, etc. Buyers shall have received
a duly executed guaranty of the Estate in the form of Exhibit 13.5 (the "Estate
Guaranty") and Buyers shall have received the Seller Letter of Credit in the
form of Exhibit 13.1, each of which shall have been delivered on the Escrow
Closing Date into escrow pursuant to the Escrow Agreement.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS
The obligation of the Sellers under this Agreement to
consummate the sale of the Assets to be sold by it shall be subject to the
satisfaction, at or prior to the Final Closing, of all of the following
conditions, any one or more of which may be waived by the Sellers by written
notice to the Buyers:
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9.1 Representations and Warranties Accurate. All
representations and warranties of each of the Buyers contained in Articles 5
and 6 shall be true and correct in all material respects at and as of the
Escrow Closing Date.
9.2 Performance by the Buyers. Each of the Buyers
shall have performed and complied in all material respects with all agreements,
obligations, covenants and conditions required by this Agreement to be
performed and complied with by it prior to or on the Final Closing.
9.3 Certificate. The Sellers shall have received
certificates, dated the Escrow Closing Date (and a second set of certificates
dated the Final Closing), signed on behalf of each of the Buyers reasonably
satisfactory in form and substance to each Seller, to the effect that the
conditions set forth in Sections 9.1 and 9.2 have been satisfied.
9.4 Assumption. (a) The Sellers shall have received
from the Company a duly executed assumption of the Assumed Liabilities
substantially in the form of Exhibit 9.4(a) hereto (the "Assumption"), which
shall have been delivered on the Escrow Closing Date into escrow pursuant to
the Escrow Agreement.
(b) The Sellers shall receive from AAG duly executed
assumption agreements regarding certain obligations of the Sellers with respect
to the Exploitation of Library Programs or other Library Rights pursuant to the
American Federation of Television and Radio Artists National Code of Fair
Practice for Network Television Broadcasting 1994-1997 and the Directors Guild
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of America, Inc. Freelance Live and Tape Television Agreement of 1995
substantially in the form of Exhibit 9.4(b) and (c) with such changes as may be
deemed necessary or desirable by Buyers. It is understood that Sellers hereby
waive such receipt as a condition to the Final Closing but Sellers shall use
their reasonable best efforts and AACI shall cause AAG to continue to use its
reasonable best efforts after the Final Closing to obtain such agreements and
Sellers shall continue to perform the applicable obligations until such receipt
has been obtained.
9.5 Other Agreements.
(a) The Company shall have entered into, and delivered on
the Escrow Closing Date into escrow pursuant to the Escrow Agreement, (i) the
License Agreement, (ii) the Network License Agreement, (iii) the Put Agreement,
(iv) the Network Production Agreement, and (v) the Escrow Agreement
substantially in the forms of Exhibits 9.5(a), 9.5(b), 3.5, 8.4(a)(vii) and 3.2
hereto respectively, and such agreements shall be in full force and effect.
(b) Buyers shall have delivered such other instruments
and documents as the Sellers may reasonably request in connection with the
transactions contemplated hereby.
9.6 Opinions of Counsel for the Buyers. The Sellers
shall have received from counsel for each of the Buyers written opinions, dated
the Escrow Closing Date, in form and substance satisfactory to the Sellers and
as specified in Exhibits 9.6(a) and 9.6(b) hereto, with respect to the matters
set forth therein
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(and, to the extent reasonably requested by the Sellers, a bring-down at the
Final Closing as to such opinions as have been duly executed and delivered as
of the Escrow Closing Date).
9.7 HSR Act, Etc.; Authorizations; Legal Prohibition.
(a) With respect to the transactions contemplated hereby, all applicable
waiting periods under the HSR Act shall have expired or been terminated.
(b) The Sellers shall have obtained or made the
governmental authorizations, approvals, consents and waivers specified on
Schedule 9.7(b).
(c) As of the Final Closing, there shall not exist any
temporary, preliminary or permanent injunction or other order issued by a court
or government or regulatory agency of competent jurisdiction which would
prohibit the purchase and sale of the Assets contemplated by this Agreement or
the consummation of any of the Related Agreements, and no action, suit or
proceeding shall have been instituted by any Person which would reasonably be
likely to prohibit any of the foregoing.
ARTICLE 10
POST-CLOSING ADJUSTMENT
10.1 Post-Closing Computations. (a) As soon as
practicable following the Final Closing and in any event within 90 calendar
days thereafter, the Company may provide written notice to Sellers of any
disagreement ("Company Notice of Disagreement") with any amounts set forth in
the notice containing the Estimated Adjusted Net Current Assets delivered
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pursuant to Section 3.9 hereof. Any such Company Notice of Disagreement shall
specify in reasonable detail the nature of any disagreement so asserted.
(b) No later than 30 Business Days following the
rendering by the Company (or Interpublic Sub) of an accounting of an Earn-Out
Payment, the Partnership (together with the Representative) may provide written
notice to the Company (with a copy to Interpublic Sub if pursuant to Network
Price is Right) of any disagreement ("Partnership Notice of Disagreement")
(both a Company Notice of Disagreement and a Partnership Notice of
Disagreement, a "Notice of Disagreement")) with any calculation set forth in
the accounting delivered pursuant to Section 3.8 hereof. Any such Partnership
Notice of Disagreement shall specify in reasonable detail the nature of any
disagreement so asserted.
10.2 Arbitration. (a) During a period of 20 Business Days
following receipt of a Notice of Disagreement, the Company and the Sellers (as
to whose position the Company may rely without regard to the Representative or
any Related Persons or Affiliates of either of the Sellers) shall attempt to
resolve any differences which they may have with respect to any matter
specified in any Notice of Disagreement. If at the end of such 20-Business-Day
period the Company and the Sellers have failed to reach agreement on all or any
of the matters set forth in the Notice of Disagreement (the "Disputed
Matters"), the Disputed Matters shall be submitted to and reviewed by an
arbitrator (the
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"Arbitrator"), which shall be the accounting firm of Price Waterhouse LLP or
such other accounting firm as the parties may mutually designate; provided that
the Company can defer or cause to be deferred resolution of any dispute with
respect to an Earn-Out Payment to the conclusion of the broadcast season
relating to the relevant Program other than "The Price is Right" pursuant to
the Network Production Agreement. In the event of any such deferral permitted
by the preceding sentence, any related Earn-Out Payments shall be made in
escrow with a financial institution or trust company having assets in excess of
$5 billion as escrow agent, other than Chemical Bank or a bank which is then
part of AACI's current loan syndicate. All issues with respect to Disputed
Matters specified in the Notice of Disagreement and any issue related to the
arbitration thereof, including any questions arising with respect to the
procedures described in this Article 10, shall be resolved by the Arbitrator,
and the Arbitrator's authority shall be limited to resolving such matters. The
parties hereto and the Arbitrator shall have the power to compel testimony and
the production of documents reasonably necessary in any proceeding under this
Section 10.2 and the parties shall make available to the Arbitrator all work
papers and other information in their possession or control relating to the
Disputed Matters. The Arbitrator shall resolve all Disputed Matters specified
in the Notice of Disagreement within 30 Business Days of the date that such
matters are referred to the Arbitrator, and its decision with respect to all
Disputed Matters shall be final and
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binding upon the Sellers and their Affiliates (including the Representative)
and the Company and their Affiliates (including Interpublic).
(b) The computation of Adjusted Net Current Assets
immediately prior to the Escrow Closing, as modified by agreement between
Buyers and Sellers or as determined by the Arbitrator, as set forth in Section
10.2(a), shall be the "Closing Adjusted Net Current Assets" hereunder.
10.3 Determination and Payment of Post-Closing Adjustments.
(a) If the Estimated Adjusted Net Current Assets exceeds the Closing Adjusted
Net Current Assets and the Sellers have received payments from the Company
pursuant to Section 3.9 in an amount in excess of the Closing Adjusted Net
Current Assets, then Sellers shall immediately make a cash payment to the
Company in the amount of such excess.
(b) If the Closing Adjusted Net Current Assets exceeds
the Estimated Adjusted Net Current Assets and the Sellers have not received
payments from the Company pursuant to Section 3.9 in an amount equal to the
Closing Adjusted Net Current Assets, Buyers shall continue to make payments of
Accounts Receivable to the Partnership as received in accordance with Section
3.9 until the Sellers have received pursuant to Section 3.9 and this Section
10.3 aggregate payments equal to the Closing Adjusted Net Current Assets.
(c) Any payment made by Sellers pursuant to Section
10.3(a) shall be allocated between the Sellers as they shall
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determine and the Partnership shall be liable to make such payment.
(d) If the Earn-Out Payments due to Representative are
determined pursuant to Section 10.2 to exceed the amounts paid by the Company
or Interpublic Sub, the Company or Interpublic Sub, as appropriate, shall make
a cash payment to Representative on its behalf in the amount of such excess
plus interest from the date such payment was due at the rate of 10% per annum.
If the Earn-Out Payments due to Representative are determined pursuant to
Section 10.2, or as a result of a true-up, to be less than the amounts paid by
the Company, the Partnership shall make or cause the Representative to make a
cash payment to the Company (or the Company may apply an offset against future
payments) in the amount of such deficiency plus interest from the date such
deficiency payment was made at the rate of 10% per annum.
10.4 Expenses of Post-Closing Adjustment or Earn-Out
Adjustment. The fees and expenses of the Arbitrator, if any, incurred in
connection with its review and determination of any Disputed Matter specified
in the Notice of Disagreement and any other matters under Section 10.2 shall be
apportioned between the parties as determined by the Arbitrator based on the
relative merits of the positions of the parties.
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ARTICLE 11
TERMINATION
11.1 Termination Events. This Agreement may be terminated
and abandoned by mutual written consent of the Sellers and Buyers, or by
written notice given at or prior to the Final Closing in the manner hereinafter
provided:
(a) By either Buyer if a material default or
breach shall be made by the Sellers or the other Buyer with respect to the due
and timely performance of any Sellers' or other Buyer's covenants and
agreements contained herein, and such default or breach shall not have been
cured within ten Business Days after receipt by such Sellers or other Buyer of
notice of such default;
(b) By the Sellers if a material default or
breach shall be made by either Buyer with respect to the due and timely
performance of any of such Buyer's covenants and agreements contained herein,
and, subject to clause (d) below, such default or breach shall not have been
waived or shall not have been cured within ten Business Days after receipt by
such Buyer of notice of such default;
(c) If the Final Closing shall not have occurred
on or before the earlier of (i) date 65 days after the date hereof and (ii)
five Business Days following the expiration or termination of the waiting
period under the HSR Act (subject to an extension of up to an additional five
Business Days by either Buyer or either Seller if consummation of the Final
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Closing in such five Business Day period is not practicable), or such later
date as may be unanimously agreed upon by the parties, by (i) either of the
Sellers, unless the Final Closing shall not have occurred through failure of
any Seller to comply in all material respects with its obligations hereunder;
or (ii) either of the Buyers, unless the Final Closing shall not have occurred
through failure of the terminating Buyer to comply in all material respects
with its obligations hereunder.
Each party's right of termination under this Section 11.1 is
in addition to any other rights it may have under this Agreement or otherwise.
11.2 Effect of Termination. In the event this Agreement is
terminated pursuant to Section 11.1, all further obligations of the parties
hereunder shall terminate, except that the obligations set forth in Sections
7.2(b), 7.6 and 7.8 and in Article 13 shall survive; provided, however, that if
this Agreement is so terminated by any party hereto because one or more of the
conditions to the obligations of any other party hereunder is not satisfied as
a result of such other party's failure to comply with its obligations under
this Agreement, it is expressly agreed and understood that the right of the
party terminating to pursue all legal remedies for breach of contract and
damages shall also survive such termination unimpaired. If either of the
Buyers terminates because the other Buyer has failed to comply with its
obligations under this Agreement, it is expressly agreed and understood that
the right of the Sellers to
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sue the breaching Buyer shall remain unimpaired. No termination of this
Agreement shall act to terminate or otherwise impair the Confidentiality
Agreement.
ARTICLE 12
BULK TRANSFER LAWS
The parties hereto agree and acknowledge that neither the
Buyers nor the Sellers shall be required to comply with the bulk transfer laws
of any jurisdiction. The Partnership and CPC shall indemnify each Buyer and
hold each Buyer harmless from and against any and all claims, costs, losses and
damages which may be incurred by such Buyer with respect to any claim made by
any creditors of the Partnership or CPC (other than by creditors with respect
to Assumed Liabilities) against or in respect of such Buyer or any of the
Assets arising out of the failure to comply with any such bulk transfer or bulk
sales laws.
ARTICLE 13
INDEMNITY
13.1 Indemnification by the Sellers. Each of the Sellers
and the Estate will jointly and severally indemnify and hold harmless each
Buyer, their respective Affiliates, and each of the respective officers,
directors, employees, consultants, agents and representatives of each of the
foregoing (together, "Buyer Indemnities"):
(a) with respect to any Claim (as hereinafter
defined) which the Buyer Indemnities, may incur or suffer as
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a result of any breach or inaccuracy of any of the representations or
warranties in this Agreement as of the Escrow Closing Date or in any
certificate, schedule, exhibit or other document required to be
delivered under this Agreement or the Estate Guaranty, or any failure
to perform or comply with any covenant or agreement of either of the
Sellers set forth herein or of the Estate pursuant to the Estate
Guaranty;
(b) with respect to any Claim arising out of the
failure of either of the Sellers to comply with the bulk transfer or
bulk sales laws of any jurisdiction in accordance with Article 12;
(c) with respect to any and all claims, demands,
causes of action, proceedings, losses, damages, expenses (including
without limitation, reasonable attorneys' fees and expenses),
liabilities, fines, excise taxes, penalties, deficiencies, judgments
or costs, including, without limitation, reasonable accountants' and
attorneys' fees, court costs, amounts paid in settlement and expenses
of investigation (collectively, "Claims") at any time asserted against
or incurred by the Buyer Indemnities insofar as such Claims arise out
of (i) any Permitted Encumbrance, (ii) the Sony Agreement (including
but not limited to the Sony Lien) except to the extent arising out of
the Company's failure to comply with the restrictions on and
obligations of the Company set forth on Schedule 7.14,
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(iii) any claim by any union or guild or any other Person for
residuals or other Third Party Costs (except to the extent assumed or
to be assumed by AAG pursuant to Section 9.4(b) or relating to
Programs (other than "The Price Is Right" during the term of the
Network Production Agreement) produced or delivered after the Final
Closing), (iv) any liability or obligation of either of the Sellers to
repay advances or to refund any amount received by Sellers prior to
the Closing or (v) any liability or obligation of either of the
Sellers other than a liability or obligation which is included in the
Assumed Liabilities;
(d) in the case of the Partnership, with respect
to any Claim in connection with items described on Schedule 4.13
hereto or any suit, claim, action, proceeding or investigation brought
prior to the date hereof (whether or not now pending);
(e) other than with respect to certain
obligations expressly assumed or to be assumed by AAG as set forth in
Section 9.4(b), (i) with respect to any Claims arising from or in
connection with the maintenance or contribution by either Seller or
any predecessors, constituent partners, joint venturers, Related
Persons or Affiliates of either Seller, at any time, of or to any
employee benefit plan (as defined in Section 3(3) of ERISA),
including, without limitation, any liability to the Pension Benefit
Guaranty Corporation, any plan subject to Title IV
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of ERISA, employees or former employees (or their beneficiaries) of
either Seller (together with their respective predecessors,
constituent partners, joint venturers, Related Persons and
Affiliates), guilds or unions arising out of or relating to the
maintenance, administration, contribution or termination or any other
reason of or with respect to any such plans, the trusts related to
such plans, or employment with either Seller (together with their
respective predecessors, constituent partners, joint venturers,
Related Persons and Affiliates), and (ii) with respect to any Claims
made by or with respect to employees, consultants or contractors or
former employees, consultants or contractors (including without
limitation performers, actors, musicians, hosts, writers, directors,
producers or other persons employed in the Exploitation of Library
Programs or other Library Rights) of either Seller (together with
their respective predecessors, constituent partners, joint venturers,
Related Persons and Affiliates) relating to or arising out of
employment with or engagement by either Seller (together with their
respective predecessors, constituent partners, joint venturers,
Related Persons and Affiliates), including without limitation any
Claims for severance pay, welfare and fringe benefits or for wrongful
discharge by any employee, consultant or contractor or former
employee, consultant or contractor of either Seller (together with
their predecessors, constituent
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partners, joint venturers, Related Persons and Affiliates) relating to
or arising out of employment with or engagement by either Seller
(together with their respective predecessors, constituent partners,
joint venturers, Related Persons and Affiliates) or which relates to
any unpaid wages, salaries, commissions, bonuses, vacation pay,
retiree medical payments or any other compensation or benefits, or any
Claims made by any union or guild or pursuant to any collective
bargaining agreement.
(f) with respect to Taxes for which Sellers are
liable pursuant to Sections 7.11 and 7.17 hereof. Notwithstanding the
foregoing, on and after the Final Closing the Sellers shall not be
required to make any indemnification payments pursuant to the terms of
clause (a) of this Section 13.1 (x) until the aggregate Claims with
respect to which the Buyer Indemnities are entitled to indemnification
thereunder shall have exceeded $250,000 (the "Threshold Amount"), but
then shall be required to pay the full amount of such Claims including
the Threshold Amount; or (y) with respect to any Claim of which the
Sellers shall not have received notice prior to the expiration and
termination of the representation, warranty, covenant or agreement the
breach of which forms the basis for indemnification hereunder (it
being understood that such notice shall be adequate if it specifies
the event or circumstance which is reasonably anticipated to cause an
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indemnifiable loss, but without specifying the actual amount of such
loss if such amount cannot at the time be finally determined);
provided, however, that the limitations set forth in this Section
shall not apply to any Claim against any Seller that is based upon
fraud or willful or deliberate wrongdoing by any Seller or its
Affiliates. The foregoing indemnity obligations and the other
obligations of Sellers, the Estate or their Related Persons pursuant
hereto or the Related Agreements shall be supported by an irrevocable
letter of credit (the "Seller Letter of Credit") from The Bank of New
York or another commercial bank reasonably acceptable to Buyers in
favor of the Buyer Indemnities in the form attached hereto as Schedule
13.1 and to be delivered on the Escrow Closing Date in escrow pursuant
to the Escrow Agreement. The Seller Letter of Credit shall be in
continuous effect for five years after the Final Closing (and
thereafter, so long as all claims in such period have not been
resolved unless the Seller Letter of Credit can be drawn upon with
respect to such claims) and shall be issued on the Escrow Closing Date
in an amount of $5,000,000.
(g) with respect to any Claim resulting from any
alleged or actual violation, breach, default, termination or
acceleration under the Sony Agreement as a result of the failure of
the Company, AAG, IPG Sub or Producer to obtain any agreement as to
television exclusivity from the CBS Network in connection with any
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extension or renewal of "The Price Is Right" after the 1995/1996
broadcast season.
13.2 Indemnification by the Company. The Company will
indemnify and hold harmless each of the Sellers, their respective Affiliates,
and each of the respective officers, directors, employees, consultants, agents
and representatives of each of the foregoing (together, "Seller Indemnities"):
(a) with respect to any Claim which the Seller
Indemnities may incur as a result of any breach or inaccuracy of any
of the representations or warranties of the Company in this Agreement
as of the Escrow Closing Date or in any certificate, schedule, exhibit
or any other document required to be delivered by the Company under
this Agreement, or any failure to perform or comply with any covenant
or agreement of the Buyers (including without limitation the
restrictions on and obligations of the Company set forth in Schedule
7.14 hereto) set forth herein;
(b) with respect to any Claims at any time
asserted against or incurred by either of the Seller Indemnities
insofar as such Claims arise out of any of the Assumed Liabilities;
and
(c) with respect to Taxes for which Buyers are
liable pursuant to Section 7.11 and 7.17 hereof.
Notwithstanding the foregoing, on and after the Closing Date the Company shall
not be required to make any indemnification payments pursuant to the terms of
clause (a) of this Section 13.2
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(x) until the aggregate Claims of Seller Indemnities with respect to which
Sellers are entitled to indemnification thereunder shall have exceeded the
Threshold Amount, but then shall be required to pay the full amount of such
losses, costs and expenses, including the Threshold Amount; or (y) with respect
to any Claim of which the Company shall not have received notice prior to the
expiration and termination of the representation, warranty, covenant or
agreement the breach of which forms the basis for indemnification hereunder (it
being understood that such notice shall be adequate if it specifies the event
or circumstance which is reasonably anticipated to cause an indemnifiable loss,
but without specifying the actual amount of such loss if such amount cannot at
the time be finally determined); provided, however, that the limitations set
forth in this Section shall not apply to any claim against the Company that is
based upon fraud or willful or deliberate wrongdoing by the Company or its
Affiliates (including Interpublic).
13.3 Procedure for Indemnification. (a) In connection
with any claim giving rise to indemnity under this Agreement resulting from or
arising out of any claim or legal proceeding by a Person who is not a party to
this Agreement, promptly after the receipt by any party hereto of notice of any
such claim or legal proceeding such party will give the indemnifying party
written notice of such claim or legal proceeding, provided, however, that if
such party fails to give notice of such claim to the indemnifying party, such
failure to
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give notice shall not limit the indemnified party's right to be indemnified
hereunder except to the extent that the indemnifying party can show material
prejudice arising from such failure and then only to the extent of such
material prejudice. The indemnifying party at its sole cost and expense and
with counsel reasonably satisfactory to the indemnified party (it being agreed
that Schulte Roth & Zabel and Kaye, Scholer, Fierman, Hays & Handler are
reasonably satisfactory) may, upon written notice to the indemnified party,
assume the defense of any such claim or legal proceeding if (a) the
indemnifying party acknowledges to the indemnified party in writing, within
fifteen (15) days after receipt of notice from the indemnified party, its
obligations to indemnify the indemnified party with respect to all elements of
such claim based upon the facts then reasonably known to such indemnifying
party, (b) the indemnifying party provides the indemnified party with evidence
reasonably acceptable to the indemnified party that the indemnifying party will
have the financial resources to defend against such third-party claim and
fulfill its indemnification obligations hereunder, (c) the third-party claim
involves only money damages and does not seek an injunction or other equitable
relief, and (d) settlement or an adverse judgment of the third-party claim is
not, in the good faith judgment of the indemnified party, likely to establish a
pattern or practice materially adverse to the continuing business interests of
the indemnified party. The indemnified party shall be entitled to participate
in (but not control) the defense of
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any such action, with its counsel and at its own expense; provided, however,
that if there are one or more legal defenses available to the indemnified party
that conflict with those available to the indemnifying party, or if the
indemnifying party fails to take promptly reasonable steps necessary to defend
diligently the claim after receiving notice from the indemnified party that it
believes the indemnifying party has failed to do so (specifying in reasonable
detail the alleged basis for such failure), the indemnified party may assume
the defense of such claim; provided, further, that the indemnified party may
not settle such claim without the prior written consent of the indemnifying
party, which consent may not be unreasonably withheld. If the indemnified
party assumes the defense of the claim, the indemnifying party shall reimburse
the indemnified party for the reasonable fees and expenses of one firm of
counsel retained by the indemnified party and the indemnifying party shall be
entitled to participate in (but not control) the defense of such claim, with
its counsel and at its own expense. The parties agree to render, without
compensation, to each other such assistance as they may reasonably require of
each other in order to insure the proper and adequate defense of any action,
suit or proceeding, whether or not subject to indemnification hereunder. No
indemnifying party shall settle, compromise or consent to the entry of any
judgment in any pending or threatened claim or legal proceeding unless such
settlement, compromise or consent shall contain an unqualified release from any
and all liability related
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to such claim in favor of the indemnified party and be, in all reasonable
respects, satisfactory to the indemnified party.
(b) If the indemnification of Seller Indemnities or
Buyer Indemnities provided for in this Article 13 is for any reason held
unenforceable, the party against whom indemnification was sought agrees to
contribute to the Claims for which such indemnification is unenforceable in
such proportion as is appropriate to reflect the relative fault of such party,
on the one hand, and the Buyer Indemnities or Seller Indemnities, as the case
may be, on the other hand, as well as any other relevant equitable
considerations.
13.4 Right of Set Off; Escrow. (a) Notwithstanding
anything to the contrary herein or in any of the Related Agreements, if the
Company or its licensees at any time during the Earn-Out Period Exploits a
Library Program or a Bible that either Seller or its respective Related Persons
owned or had a license to Exploit as of immediately prior to the Final Closing
but that was not on Network, Network Alternative or in U.S. first-run
syndication immediately prior to the Final Closing (other than Family Feud),
the Company shall be entitled, without limitation of its rights under Section
13.4(b), to hold back or cause to be held back for a period of two years from
the initial exhibition of such Library Program or Program based on such Bible
50% of any Earn-Out Payments otherwise due to Sellers with respect to such
Library or Program based on such Bible pursuant to Section 3.8. In the event
of expiration of such two-year
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period without the assertion of any Claim by any Buyer Indemnitee with respect
to such Program or Programs, any such amount held back, together with interest
actually earned thereon, shall be paid to Representative.
(b) If the Company or any other Buyer Indemnitee
notifies Sellers of a claim for indemnification or any other claim pursuant to
this Agreement or any Related Agreement to which a Seller is a party, the
Company shall thereafter be entitled to hold back or cause to be held back 100%
of any and all payments otherwise due to Sellers or their Affiliates (including
Representative) pursuant to Section 3.8(a)(ii). If the Company or any other
Buyer Indemnitee notifies Sellers of any claim pursuant to Section 4.24,
Section 7.14 or Section 13.1(g) or otherwise relating specifically to the Sony
Agreement, the Company shall thereafter be entitled to hold back or cause to be
held back 100% of all or any portion of the Sony Receivable or any other
amounts received from Sony which may be payable to Sellers hereunder. If the
Company exercises its right of set off in this Section 13.4(a) or (b), it shall
deposit the payments it would otherwise be required to pay pursuant to Section
3.8(a)(ii) into an interest-bearing escrow account, pending resolution of the
hold-back period or the claim, as the case may be, with a financial institution
or trust company having assets in excess of $5 billion as escrow agent, other
than Chemical Bank or a bank which is then part of AACI's current loan
syndicate pending resolution of the matter.
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<PAGE> 140
(c) In the event that a court of competent
jurisdiction renders a Final Judgment against either Seller or any of its
Affiliates in respect of a Company claim for indemnification or other claim
under or pursuant to this Agreement or any Related Agreement to which a Seller
is a party, the Company shall be entitled to offset or cause to be offset the
entire amount of such Final Judgment from (i) any Earn-Out Payments then due or
that thereafter become due hereunder, (ii) any payments due on Accounts
Receivable as specified in Section 3.9, (iii) any amount held in escrow pending
resolution of Claims hereunder, or (iv) any other amount due or becoming due to
Sellers or their Affiliates pursuant to any provision hereof or of any Related
Agreement (other than payment of production costs pursuant to the terms of the
Network Production Agreement).
(d) The set-off rights set forth herein are intended,
absent fraud or wilful or deliberate wrongdoing, to set forth the exclusive
sources of, and the exclusive manner in which, set-off rights may be exercised;
provided, however, that such rights shall not be in limitation in any way of,
any other rights which Buyers or any other Person may have, including but not
limited to recourse under the Estate Guaranty and/or the Seller Letter of
Credit, and nothing herein or in any Related Agreement or otherwise shall
require Buyers or any other Person to seek recourse in any particular manner or
order, all of which each of the foregoing may pursue and/or elect not to pursue
or to waive in their sole discretion, without release of any other
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Person or obligation, all of which shall remain in full force and effect.
13.5 Obligations of the Estate and the Partnership. (a)
The Estate has guaranteed the obligations of the Sellers pursuant to the Estate
Guaranty substantially in the form of Exhibit 13.5, which shall be delivered on
the Escrow Closing Date.
(b) Notwithstanding anything to the contrary herein,
the distribution of all or any portion of the Purchase Price by the Partnership
to its partners (and, in the case of corporate partners, the distribution to
their stockholders) as set forth on Schedule 3.5 following the Final Closing
shall be subject to Representative assuming the obligations of the Partnership
and Representative hereunder and under the Related Agreements on its own behalf
and on behalf of the other Persons set forth on Schedule 3.5 (which, in the
latter case, shall be recourse solely to the distributed proceeds), in form and
substance satisfactory to Buyers. Representative agrees not to liquidate prior
to the tenth anniversary of the Escrow Closing and the Partnership shall not
liquidate prior to the Final Closing. The Partnership shall, and shall cause
the Representative to, from time to time designate a joint representative,
satisfactory to the Company (it being agreed that any of the current executors
of the Estate and David Hurwitz are satisfactory), who will have full power and
authority to deal with the Company, Interpublic, Interpublic Sub, AACI and
their Affiliates as to all post-closing matters under
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<PAGE> 142
this Agreement and the transactions contemplated hereby. The Partnership
represents and warrants that said representative shall initially be Jeremy
Shamos.
(c) Notwithstanding anything to the contrary hereunder
or under any law, including, without limitation, Section 11-4.7 of the New York
State Powers and Trusts Law, or any successor statute, (a) the obligations of
the Estate hereunder shall not constitute a debt or any obligation whatsoever
of any of the executors of the Estate in their personal capacities in any
action to collect any amounts due under, or otherwise in respect of, this
Agreement or any Related Agreement to which the Estate is a party, (b) none of
such executors shall be personally liable for any amount due under this
Agreement and neither the Buyers nor any other Person shall seek a deficiency
or personal judgment against any of the executors in their personal capacities
for payment of the obligations evidenced by this Agreement or any Related
Agreement to which the Estate is a party and (c) no property or assets of any
of the executors other than the property of the Estate shall be sold, levied
upon or otherwise used to satisfy any judgment rendered in connection with any
action brought with respect to this Agreement or any Related Agreement to which
the Estate is a party.
13.6 Purchase Price Adjustment. The parties agree that any
payment made under this Article 13 shall be treated by such parties as an
adjustment to the Purchase Price.
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13.7 Exclusive Remedy. The indemnification provisions of
this Article 13 shall constitute the exclusive remedy after the Closing of each
party hereto with respect to the breach or inaccuracy of any representation or
warranty made by any other party hereto in this Agreement; provided, however,
that the indemnification provided for in this Article 13 shall not be the sole
and exclusive remedy of the parties with respect to provisions of Sections 3.8,
7.5, 7.12, 7.13, Article 10 and Section 13.5 hereof and with respect to any
matter that is based upon fraud or wilful or deliberate wrongdoing.
13.8 Limitation of Sellers' Indemnification. In the event
of a breach of any representation or warranty made by Sellers in Article IV or
in any document or other instrument delivered pursuant hereto ("Claims"), the
maximum aggregate dollar amount for which the Sellers and the Estate shall be
liable under Section 13.1 shall not exceed the sum of $50,000,000 plus the sum
of all Earn-Out Payments paid or payable by the Company or Interpublic Sub
pursuant to Section 3.8 plus the sum of all other amounts, including payments
pursuant to Section 3.9, 7.14(a) or 10.3 hereof, paid or payable to Sellers or
the Representative hereunder. Notwithstanding the foregoing, the Sellers and
the Estate shall not be liable in respect of Claims not initially asserted by
any Buyer Indemnitee until after the fifth anniversary of the Escrow Closing
Date in an aggregate amount in excess of the sum of $10,000,000 plus the sum of
all Earn-Out Payments paid or payable by the Company or Interpublic
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Sub with respect to the Library Program or Programs, if any, to which any such
Claim relates. Notwithstanding the foregoing, the indemnification limitations
set forth above shall not apply to any claim against Sellers or any of their
Affiliates, including the Estate, that is based upon fraud by Sellers or any of
their Affiliates, including the Estate.
ARTICLE 14
MISCELLANEOUS
14.1 Expenses, Etc. Each party to this Agreement shall pay
its own costs and expenses (including all legal, accounting, financial adviser,
broker, finder and investment banker fees) relating to this Agreement, the
negotiations leading up to this Agreement and the transactions contemplated by
this Agreement.
14.2 Amendment. This Agreement shall not be amended or
modified except by a writing duly executed by each of the Sellers and the
Buyers.
14.3 Limited Survival of Representations and Warranties;
Liability. All representations and warranties contained in Articles 4, 5 and 6
shall expire and be terminated and extinguished upon the close of business on
the second anniversary of the Escrow Closing Date (absent fraud or willful
breach or misrepresentation, the existence of which will extend such
representations or warranties indefinitely); except that the representations
and warranties contained in Section 4.14 shall extend through the applicable
statute of limitations period and
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the representations and warranties contained in Sections 4.2, 4.3, 4.4, 4.5,
4.6, 4.7, 4.12, 4.16, 5.2, 6.2 and 6.5 shall survive for ten years from the
Escrow Closing Date; each and every covenant contained in Article 7 (except for
the covenants that are operative on or after the Final Closing) shall expire
and be terminated and extinguished upon consummation of the Final Closing
(absent fraud or willful breach or misrepresentation, the existence of which
will extend such covenants indefinitely) and in all such cases, except as
provided herein, neither the Buyers nor the Sellers shall have any liability
whatsoever with respect to any such representation, warranty or covenant after
the termination or expiration thereof as provided in this Agreement.
Notwithstanding anything contained in this Agreement, including, without
limitation, this Section 14.3, any claims with respect to representations and
warranties made by the Sellers or the Buyers in this Agreement or in any
document or instrument relating hereto shall survive and continue following the
expiration of the respective survival periods stated above if such claim is
submitted in writing to Sellers or the Estate, or Buyers, as the case may be,
prior to the end of the respective survival periods stated in this Section 14.3
and identified as a claim for indemnification pursuant to this Agreement. In
such event, such claims shall survive until they are resolved.
14.4 Due Diligence Investigation; Knowledge. All
representations and warranties contained herein that are made to the knowledge
of a party shall require that such party make
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reasonable investigation and following inquiry with respect thereto to
ascertain the correctness and validity thereof. Without limiting the foregoing
sentence, when any fact is stated to be to the "knowledge of the Sellers," such
reference shall mean that one or more Sellers actually know of the existence or
non-existence of such fact based upon a reasonable investigation and following
inquiry of (i) the management of Sellers and their respective partners and (ii)
the following employees of Sellers or executors of the Estate: Jeremy Shamos,
Marvin Goodson, Richard Schneidman, Alan Sandler, Michael Brockman, Royal E.
Blakeman, and David Hurwitz; provided, however, that if the Sellers do not
conduct such reasonable investigation and inquiry, then such references shall
mean what one or more Sellers should have known based upon such reasonable
investigation and inquiry.
14.5 Entire Agreement. This Agreement, including the
Schedules and the Exhibits hereto which are incorporated herein by this
reference, the Related Agreements and the other documents delivered pursuant to
this Agreement or the Related Agreements, contain all of the terms, conditions
and representations and warranties agreed upon or made by the parties relating
to the subject matter of this Agreement and the Business, the Assets and the
Assumed Liabilities and supersede all prior and contemporaneous agreements,
negotiations, correspondence, undertakings and communications of the parties or
their representatives, oral or written, respecting such subject matter. This
Agreement shall be given fair and reasonable
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construction in accordance with the intentions of the parties hereto, and
without regard to or aid of canons requiring construction against the Sellers
or the party drafting this Agreement.
14.6 Headings. The headings contained in this Agreement
are intended solely for convenience and shall not affect the rights of the
parties to, or the interpretation of, this Agreement.
14.7 Notices. Any notice or other communication required
or permitted under this Agreement shall be in writing and shall be delivered
personally, telecopied, or sent by certified, registered or overnight mail or
courier, postage prepaid, and shall be deemed given when so delivered in person
or telecopied or, if given by mail or courier, on the earlier of the day
actually received and the close of business on the second Business Day next
following the day when deposited with an overnight courier or the close of
business on the fifth Business Day when deposited in the United States mail,
postage prepaid, certified or registered, addressed to the party at the address
set forth below, with copies sent to the persons indicated:
If to the Partnership or the Estate to it at:
Mark Goodson Productions, L.P.
5750 Wilshire Blvd.
Los Angeles, California 90036
Attention: General Partner
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with copies to:
Schulte Roth & Zabel
900 Third Avenue
New York, New York 10022
Attention: Stuart D. Freedman, Esq.
and
Goodson & Wachtel
10940 Wilshire Blvd.
Suite 1400
Los Angeles, California 90024
Attention: Marvin Goodson, Esq.
If to CPC:
5750 Wilshire Boulevard
Los Angeles, California 90036
Attention: General Partner
Fax No. (213) 965-6666
with copies to:
Schulte Roth & Zabel
900 Third Avenue
New York, New York 10022
Attention: Stuart D. Freedman, Esq.
and
Goodson & Wachtel
10940 Wilshire Blvd.
Suite 1400
Los Angeles, California 90024
Attention: Marvin Goodson, Esq.
If to the Company:
Mark Goodson Productions, LLC
c/o All American Television, Inc.
1325 Avenue of the Americas
New York, New York 10019
Attention: Chief Executive Officer
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with copies to:
The Interpublic Group of Companies, Inc.
1271 Avenue of the Americas
New York, New York 10020
Attention: William S. Keating
and
Kaye, Scholer, Fierman, Hays & Handler
1999 Avenue of the Stars
Suite 1600
Los Angeles, California 90067-6048
Attention: Barry L. Dastin, Esq.
If to Interpublic:
The Interpublic Group of Companies, Inc.
1271 Avenue of the Americas
New York, New York 10020
Attention: William S. Keating
with copies to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Richard Cooper
If to AACI:
All American Communications, Inc.
2114 Pico Boulevard
Santa Monica, California 90405
Attention: Thomas Bradshaw
with copies to:
Kaye, Scholer, Fierman, Hays
& Handler
1999 Avenue of the Stars
Suite 1600
Los Angeles, California 90067l-6048
Attention: Barry L. Dastin, Esq.
Such addresses may be changed, from time to time, by means of a notice given in
the manner provided in this Section 14.7.
14.8 Severability. If any provision of this Agreement, or
the application thereof to any person or
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circumstance, is invalid, prohibited or unenforceable in any jurisdiction, (i)
a substitute and equitable provision shall be substituted therefor in order to
carry out, so far as may be valid and enforceable in such jurisdiction, the
intent and purpose of the invalid, prohibited or unenforceable provision; and
(ii) the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be affected by such invalidity,
prohibition or unenforceability, nor shall such invalidity, prohibition or
unenforceability of such provision affect the validity or enforceability of
such provision, or the application thereof, in any other jurisdiction.
14.9 Waiver. Waiver of any term or condition of this
Agreement by any party shall only be effective if in writing and shall not be
construed as a waiver of any subsequent breach or failure of the same term or
condition, or a waiver of any other term or condition of this Agreement. No
delay on the part of any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof.
14.10 Binding Effect; Assignment; Release. (a) This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their permitted successors and assigns. Except as set forth in
Section 14.10(b), 14.10(c) or otherwise specified herein, no party to this
Agreement may assign or delegate, by operation of law or otherwise, all or any
portion of its rights, obligations or liabilities under this Agreement without
the prior written consent of each other party to this
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Agreement which consent will not be unreasonably withheld; provided, however,
that, immediately following the Final Closing: (i) Interpublic and/or its
Affiliate shall assign its undivided interest in the Assets to the Company in
exchange for a 50% equity interest in the Company; (ii) the Company will assume
all of Interpublic's obligations (and/or all of the obligations of
Interpublic's Affiliate assignee) under this Agreement (other than the
obligations under Section 3.3, 3.4, Article 6 and Section 7.15) and (iii) the
Partnership shall assign an undivided interest in the right to receive its
portion of the Purchase Price (including the Earn-Out Portion) to the Persons
and in the sequence set forth on Schedule 3.5.
(b) Without the consent of any other party hereto (i)
Interpublic may assign its rights and obligations (other than the obligations
under Section 3.3, 3.4, Article 6 and Section 7.15) under this Agreement to any
of its majority-owned Affiliates and (ii) the Company may assign its rights
under this Agreement to AACI or Interpublic or any other entity directly or
indirectly controlling, controlled by or under common control with one or more
such Persons, and on, or after the Final Closing, to any of its lenders or the
lenders of its members or to any Person which acquires substantially all of the
Business or the Assets, but, in such case, the assignor shall remain obligated
hereunder to the extent it would otherwise have been so obligated and in the
case of clause (ii) any such assignee shall assume the Company's obligations
under this Agreement (other than
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in the case of any assignment to lenders). Neither the Company nor any such
assignee shall sell substantially all of the Business or Assets without
expressly assuming all of the Company's obligations hereunder. A change in
control or ownership of the Company (or of any of its members) after the Escrow
Closing shall not be deemed an assignment and shall not require the written
consent of Sellers.
(c) Immediately following the Final Closing, but
subject to the continuing obligations of Interpublic under Sections 3.3, 3.4
and 7.15 hereof, each of the Sellers, on behalf of itself and its respective
predecessors, constituent partners, joint venturers and Affiliates and
successors and assigns, the respective officers, directors and employees of
each of the foregoing and the Representative (together, the "Releasors") shall
release and discharge (and shall be deemed to have released and discharged)
each of AACI, Interpublic, their respective Affiliates and successors and
assigns (other than the Company) and the respective officers, directors and
employees of each of the foregoing (together, the "Releasees") from all
actions, suits, debts, sums of money, liens, security interests, encumbrances,
bonds, bills, covenants, contracts, obligations, controversies, agreements,
promises, damages, judgments, executions, claims, and demands whatsoever, in
law or equity, against any Releasee, which any Releasor ever had, now has or
hereafter shall or may have, for, upon, or by reason of any matter, cause or
thing whatsoever arising out of or in any way
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related to a Releasee's obligations under this Agreement or any of the Related
Agreements; it being the intent of this clause that such Persons will look
solely to the Company for all remedies relating to the breach of Buyers'
obligations hereunder (except that such Person shall look solely to Interpublic
with respect to Sections 3.3, 3.4 and 7.15 hereof) or under the Related
Agreements (provided further, in the case of the Related Agreements, each party
thereto shall be obligated to comply with its agreements as expressly provided
for therein).
14.11 No Third Party Beneficiaries. Except for the
provisions of Section 7.2(b) with respect to the Confidentiality Agreement and
the access to records under Section 7.8, nothing in this Agreement shall
confer any rights upon any person or entity not a party or a permitted assignee
of a party to this Agreement.
14.12 Consent of Buyers. Any provision of this Agreement
that requires any consent, agreement, waiver, designation or other
determination or decision (together a "Consent") of Buyers prior to the Final
Closing shall require the Consent of both of the Buyers, unless such provision
expressly specifies that the Consent need be given or made by only one of the
Buyers or unless both Buyers jointly instruct otherwise.
14.13 Counterparts. This Agreement may be signed in any
number of counterparts with the same effect as if the signatures to each
counterpart were upon a single instrument, and
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all such counterparts together shall be deemed an original of this Agreement.
14.14 Governing Law and Jurisdiction. (a) This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York, applicable to contracts made and to be fully performed within such
State, without giving effect to the principles of conflict of laws thereof.
(b) To the extent permitted by law, each of the
Buyers and the Sellers hereby irrevocably submits to the exclusive jurisdiction
of any New York State court or United States federal court, in either case
sitting in the City of New York, Borough of Manhattan over any suit, action or
other proceeding brought by any party arising out of or relating to this
Agreement, and each of the Sellers and the Buyers hereby irrevocably agrees
that all claims with respect to such suit, action or other proceeding shall be
heard and determined in such courts, other than with respect to the enforcement
of any judgment. The Company hereby irrevocably appoints Kaye, Scholer,
Fierman, Hays & Handler, 425 Park Avenue, New York, New York 10022 (Attention:
Managing Attorney), and the Sellers hereby irrevocably appoint Schulte Roth &
Zabel, 900 Third Avenue, New York, New York 10022 (Attention: Stuart D.
Freedman, Esq.), as their respective agents to receive service of summons and
complaints and any other process which may be served in any such suit, action
or proceeding.
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IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
MARK GOODSON PRODUCTIONS, LLC
By: All American Communications,
Inc., its Operator
By: /s/ THOMAS BRADSHAW
------------------------------
Name: Thomas Bradshaw
Title: Chief Financial Officer
THE INTERPUBLIC GROUP OF COMPANIES,
INC.
By: /s/ THOMAS J. VOLPE
------------------------------
Name: Thomas J. Volpe
Title: Senior Vice President --
Financial Operation
MARK GOODSON PRODUCTIONS, L.P.
By: Mark Goodson Television
Productions, Inc., its
General Partner
By: /s/ RICHARD SCHNEIDMAN
------------------------------
Name: Richard Schneidman
Title: Secretary
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THE CHILD'S PLAY COMPANY
By: Estate of Mark Goodson,
its Managing Partner
By: /s/ RICHARD SCHNEIDMAN
----------------------------
Name: Richard Schneidman
Title: Executor
THE ESTATE OF MARK GOODSON (on
behalf of itself and as a Related
Person)
By: /s/ RICHARD SCHNEIDMAN
-------------------------------
Name: Richard Schneidman
Title: Co-Executor
ALL AMERICAN COMMUNICATIONS, INC.
By: /s/ THOMAS BRADSHAW
-------------------------------
Name: Thomas Bradshaw
Title: Chief Financial Officer
/s/ MARVIN GOODSON
-----------------------------------
Marvin Goodson, as Co-Executor of
the Estate of Mark Goodson
/s/ RICHARD SCHNEIDMAN
-----------------------------------
Richard Schneidman, as Co-Executor
of the Estate of Mark Goodson
/s/ JEREMY SHAMOS
-----------------------------------
Jeremy Shamos, as Co-Executor of
the Estate of Mark Goodson
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<PAGE> 157
The foregoing is hereby acknowledged and agreed to:
PARTNERSHIP RELATED PERSONS
By: /s/ RICHARD SCHNEIDMAN
------------------------------
Goodson Television Productions,
Inc.
REPRESENTATIVE:
By:
------------------------------
TPIR LLC
By: The Estate of Mark Goodson
Its: Managing Member
By: /s/ RICHARD SCHNEIDMAN
-------------------------
Name: Richard Schneidman
Title: Secretary and CFO
Treasurer
THE FF&E TRUST
By: /s/ MARVIN GOODSON
------------------------------
Name: Marvin Goodson
Its: Co-Trustee
THE ESTATE OF MARK GOODSON
By: /s/ RICHARD SCHNEIDMAN
------------------------------
Name: Richard Schneidman
Its: Co-Executor
CELEBRITY PRODUCTIONS, INC.
By: /s/ ROYAL E. BLAKEMAN
------------------------------
Name: Royal E. Blakeman
Its: Secretary
MARK GOODSON GAMES, L.P.
By: Goodson TV Enterprises, Inc.
Its: General Partner
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<PAGE> 158
By: /s/ ROYAL E. BLAKEMAN
----------------------------
Name: Royal E. Blakeman
Its: Secretary
GOODSON TV ENTERPRISES, INC.
By: /s/ ROYAL E. BLAKEMAN
--------------------------------
Name: Royal E. Blakeman
Its: Secretary
THE NEW FAMILY COMPANY
By: Goodson Television Productions, Inc.
Its: General Partner
By: /s/ ROYAL E. BLAKEMAN
----------------------------
Name: Royal E. Blakeman
Its: Secretary
GOODSON TELEVISION PRODUCTIONS, INC.
By: /s/ ROYAL E. BLAKEMAN
--------------------------------
Name: Royal E. Blakeman
Its: Secretary
STRONG PRODUCTIONS, INC.
By: /s/ ROYAL E. BLAKEMAN
--------------------------------
Name: Royal E. Blakeman
Its: Secretary
PRICE PRODUCTIONS, INC.
By: /s/ ROYAL E. BLAKEMAN
--------------------------------
Name: Royal E. Blakeman
Its: Secretary
MARK GOODSON TELECASTS, INC.
By: /s/ ROYAL E. BLAKEMAN
--------------------------------
Name: Royal E. Blakeman
Its: Secretary
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THE TATTLETALE COMPANY
By: The Estate of Mark Goodson
Its: General Partner
By: /s/ RICHARD SCHNEIDMAN
-----------------------------
Name: Richard Schneidman
Title: Co-Executor
THE TRIVIA TRAP COMPANY
By: The Estate of Mark Goodson
Its: General Partner
By: /s/ RICHARD SCHNEIDMAN
------------------------------
Name: Richard Schneidman
Title: Co-Executor
THE B.B. COMPANY
By: Goodson Television Productions, Inc.
Its: General Partner
By: /s/ ROYAL E. BLAKEMAN
------------------------------
Name: Royal E. Blakeman
Title: Secretary
THE CONCENTRATION COMPANY
By: Goodson Television Productions, Inc.
Its: General Partner
By: /s/ ROYAL E. BLAKEMAN
------------------------------
Name: Royal E. Blakeman
Title: Secretary
THE CARD SHARKS COMPANY
By: Goodson Television Productions, Inc.
Its: General Partner
By: /s/ ROYAL E. BLAKEMAN
------------------------------
Name: Royal E. Blakeman
Title: Secretary
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<PAGE> 160
THE MG COMPANY
By: Goodson Television Productions, Inc.
Its: General Partner
By: /s/ ROYAL E. BLAKEMAN
-------------------------------
Name: Royal E. Blakeman
Title: Secretary
THE NOW YOU SEE IT COMPANY
By: Goodson Television Productions, Inc.
Its: General Partner
By: /s/ ROYAL E. BLAKEMAN
-------------------------------
Name: Royal E. Blakeman
Title: Secretary
THE TTTT COMPANY
By: Goodson Television Productions, Inc.
Its: General Partner
By: /s/ ROYAL E. BLAKEMAN
-------------------------------
Name: Royal E. Blakeman
Title: Secretary
MARK GOODSON TELEVISION PRODUCTIONS,
INC. (Formerly MGTV, Inc.)
By: /s/ RICHARD SCHNEIDMAN
-----------------------------------
Name: Richard Schneidman
Its: Secretary
154
<PAGE> 161
THE SUPER PASSWORD COMPANY
By: THE ESTATE OF MARK GOODSON
-----------------------------
Its: Managing Partner
By: /s/ MARVIN GOODSON
-----------------------------
Name: Marvin Goodson
Its: Co-Executor
GOODSON GAMES, INC.
By: /s/ MARVIN GOODSON
-----------------------------
Name: Marvin Goodson
Its: Secretary
155
<PAGE> 162
Schedule 1.1(b)
Domestic Net Profits
"Domestic Net Profits" shall be comprised of the following:
(a) "Domestic Net Profits - The Price Is Right Network" shall mean the
gross receipts received by Interpublic Sub (or, without duplication of
receipts, the Company) after the Final Closing which were earned during the
Earn-Out Period with respect to the game show "The Price Is Right", from any
Network and relating to initial U.S. exhibition (and the initial Canadian
transmission thereof in the English language) of episodes delivered during the
Earn-Out Period to such Network and replays of existing Library Episodes of
"The Price Is Right" (whether or not produced during the Earn-Out Period)
exhibited by the Network as part of the series commitment, less
(i) with respect to such programs, all production costs
(including actual direct overhead), as generally understood
within the entertainment industry, attributable to the game
shows and/or series, which shall in any event include and,
during the term of such agreement, be limited to all such
costs (other than the per episode production fee otherwise
credited and deducted against Earn-out Payments as set
forth in the Network Production Agreement which shall not
be deducted from Domestic Net Profits) paid by Interpublic
Sub (or the Company) to the Partnership or its Affiliates
pursuant to the Network Production Agreement (as amended
from time to time);
(ii) all residual, re-use, supplemental market and/or
replay fees and/or other similar actual out-of-pocket costs
paid by the Company, Interpublic Sub or their respective
Affiliates and directly attributable to such programs,
including Third Party Costs; and
(iii) without duplication to the extent already deducted,
any unrecouped prior period deficits following the Escrow
Closing.
Notwithstanding anything to the contrary herein or in the Agreement, for
purposes of "Domestic Net Profits - The Price Is Right Network," (i) the term
"Network" shall also include Network Alternates, except that the applicable
percentage of related Domestic Net Profits - Price Is Right Network during the
Earn-Out Period referenced in Section 3.8(a) of the Agreement with respect to
all gross receipts received from any Network Alternate shall be deemed to be
50% (in lieu of 75%) and (ii) immediately
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<PAGE> 163
following the termination of the Network Production Agreement, any additional
gross receipts thereafter earned during the Earn-Out Period with respect to the
game show "The Price Is Right" from a Network (or Network Alternate) shall no
longer constitute "Domestic Net Profits - The Price Is Right Network."
(b) "Domestic Net Profits - Other Programs originally produced for
Networks" shall mean, computed on a Program-by-Program basis and then
aggregated except as provided below, the gross receipts received by the Company
after the Final Closing which were earned during the Earn-Out Period with
respect to game shows and/or series included in or based on existing Library
Programs (other than the game show "The Price Is Right" so long as it is
produced pursuant to the Network Production Agreement) from any Network and
relating to initial U.S. exhibition (and the initial Canadian transmission
thereof in the English language) of episodes delivered during the Earn-Out
Period on such Network, and replays of existing Library Programs of such game
show (whether or not produced during the Earn-Out Period) exhibited by the
Network as part of the series commitment, less the following, deducted in the
following order:
(i) with respect to such programs, all production costs
(including actual direct overhead), as generally understood
within the entertainment industry, attributable to such game
shows and/or series;
(ii) with respect to such programs, all residual, re-use,
supplemental market and/or replay fees and/or other similar
actual out-of-pocket costs directly attributable to the game
shows and/or series, including Third Party Costs; and
(iii) without duplication to the extent already deducted,
any unrecouped prior period deficits following the Escrow
Closing (excluding recoupment of prior year(s)' distribution
fees other than arising from the same game show and/or
series that were not previously fully included in the
calculation in a prior period due to the Zero Limitation set
forth below or otherwise with respect to such Program); and
(iv) a distribution fee equal to 10% of gross receipts with
respect to such Program but only to the extent that the
aggregate of gross receipts received during the relevant
period less the sum of the amounts specified in clauses (i),
(ii) and (iii) and this clause (iv) is not less than zero
(the "Zero Limitation").
157
<PAGE> 164
(c) "Domestic Net Profits - Programs originally produced for First-Run
Syndication" shall mean, computed on a Program-by-Program basis and then
aggregated, the gross receipts received by the Company after the Final Closing
which were earned during the Earn-Out Period from the production and
distribution during the Earn-Out Period of game shows and/or series included in
or based on existing Library Programs, and replays of existing Library Programs
of such game show (whether or not produced during the Earn-Out Period)
exhibited as part of the series commitment, with respect to the initial U.S.
domestic exhibition on first-run syndication of such Programs, less the
following, deducted in the following order:
(i) all marketing and distribution expenses (but excluding
any distribution fee) directly attributable to the
distribution of such game shows and/or series;
(ii) with respect to such programs, all production costs
(including actual direct overhead), as generally understood
within the entertainment industry, attributable to such game
shows and/or series;
(iii) all residual, re-use, supplemental market and/or
replay fees and/or other similar actual out-of-pocket costs
directly attributable to such game shows and/or series,
including Third Party Costs; and
(iv) without duplication to the extent already deducted,
any unrecouped prior period deficits after the Escrow
Closing (excluding recoupment of prior year distribution
fees other than arising from the same game show and/or
series that were not previously fully included in the
calculation in a prior period due to the Zero Limitation set
forth below or otherwise with respect to such Program); and
(v) a distribution fee equal to 30% of gross receipts
with respect to such Program but only to the extent that
the aggregate of gross receipts received during the relevant
period less the sum of the amounts specified in clauses
(i), (ii), (iii) and (iv) and this clause (v) is not less
than the Zero Limitation.
(d) "Domestic Net Profits - Library Sales" shall mean, computed on a
Program-by-Program basis and then aggregated, except as provided below, other
than pursuant to the Sony Agreement, the gross receipts received by the Company
after the Final Closing which were earned during the Earn-Out Period from the
distribution during the Earn-Out Period of game shows and/or series
158
<PAGE> 165
included in or based on existing Library Programs with respect to re-run
syndication in the United States or other sales of U.S. exhibition rights of
existing Library Programs (excluding sales governed by clauses (a), (b), (c),
(e) or (f) hereof), less the following, deducted in the following order:
(i) all marketing and distribution expenses directly
attributable to the distribution of such game shows and/or
series;
(ii) with respect to such programs, all production costs
(including actual direct overhead), as generally understood
within the entertainment industry, attributable to such game
shows and/or series;
(iii) with respect to such programs, all residual, re-use,
supplemental market, rerun and/or replay fees and/or other
similar actual out-of-pocket costs directly attributable to
such game shows and/or series, including Third Party Costs;
(iv) without duplication to the extent already deducted,
any unrecouped prior period deficits after the Escrow
Closing (excluding recoupment of prior year distribution
fees other than arising from the same game show and/or
series that were not previously fully included in the
calculation in a prior period due to the Zero Limitation set
forth below or otherwise with respect to such Program); and
(v) a distribution fee equal to 25% of gross receipts
from such Library Sales of such Program but only to the
extent that the aggregate of gross receipts received during
the relevant period less the sum of the amounts specified in
clauses (i), (ii), (iii) and (iv) and this clause (v) is not
less than the Zero Limitation.
(e) "Domestic Net Profits - Sony Extended Term" shall mean, computed on an
aggregate basis, the gross receipts received by the Company after the Final
Closing which were earned during the Earn-Out Period from the exhibition of
Programs on the Sony Game Show Channel after the expiration of the initial term
of the Sony Agreement as in effect on the date hereof (it being understood that
the Company shall have no obligation to Sellers to renew or extend the Sony
Agreement), less the following, deducted in the following order or priority:
(i) all marketing and distribution expenses directly
attributable to such gross receipts;
159
<PAGE> 166
(ii) all residual, re-use, supplemental market, rerun
and/or replay fees and/or all other similar actual
out-of-pocket costs directly attributable to such game shows
and/or series, including Third Party Costs, annual payments
of $250,000 (as amended from time to time) to Bob Barker
commencing with the fifth year of exhibition of "The Price
is Right" on the Sony Game Show Channel and payments to
certain models if 3,000 or more episodes are exhibited (as
amended from time to time);
(iii) without duplication to the extent already deducted,
any unrecouped prior period deficits after the Escrow
Closing (excluding recoupment of prior year distribution
fees other than arising from the same game show and/or
series that were not previously fully included in the
calculation in a prior period due to the Zero Limitation set
forth below or otherwise with respect to such Program); and
(iv) a distribution fee equal to 25% gross receipts from
such extended term but only to the extent that the aggregate
of gross receipts received during the relevant period less
the sum of the amounts specified in clauses (i), (ii), (iii)
and this clause (iv) is not less than the Zero Limitation.
(f) "Domestic Net Profits - Ancillary" shall mean, computed on a
Program-by-Program basis and then aggregated, the gross receipts received by
the Company after the Final Closing which were earned during the Earn-Out
Period, other than with respect to items within subparagraphs (a)-(e) above,
from the exploitation during the Earn-Out Period in the United States of game
shows and/or series included in or based upon existing Library Programs, paid
by Persons in the United States, less the following, deducted in the following
order of priority:
(i) all marketing and distribution expenses directly
attributable to such gross receipts;
(ii) with respect to such programs, all residual, re-use,
supplemental market, rerun and/or replay fees and/or all
other similar actual out-of-pocket costs directly
attributable to such game shows and/or series, including
Third Party Costs;
(iii) without duplication to the extent already deducted,
any unrecouped prior period deficits after the Escrow
Closing (excluding recoupment of prior year distribution
fees other than arising from the same game show and/or
series that were not fully
160
<PAGE> 167
included in the calculation in a prior period due to the Zero
Limitation set forth below or otherwise with respect to
such Program); and
(iv) a distribution fee equal to 10% of such gross receipt
from such Program but only to the extent that the aggregate
of gross receipts received during the relevant period less
the sum of the amounts specified in clauses (i), (ii) and
(iii) and this clause (iv) is not less than the Zero
Limitation.
In calculating "Domestic Net Profits, (a) any receipts or costs
arising from any receivable or payable included in the calculation of Closing
Adjusted Net Current Assets (as well as any Domestic Net Profits during the
Interim Period) shall be excluded, (b) gross receipts received by the Company
from the exploitation in the United States following the Final Closing and
during the Earn-Out Period of music rights included in the Assets transferred
to Buyers pursuant to this Agreement less Third Party Costs and other related
costs shall be allocated among and added to the appropriate gross receipts
under subdivisions (a) through (e) above, (c) gross receipts shall include,
without duplication, gross receipts of the Company or any of its Affiliates or
direct or indirect licensees, (d) the Company (or Interpublic Sub) shall
receive a credit (and may deduct) against the Earn-Out Payments the per episode
production fee payable under and upon the terms and conditions set forth in the
Network Production Agreement of the Agreement and (e) there shall be no
duplication of receipts or costs counted towards the calculation of "Domestic
Net Profits." In addition, Domestic Net Profits shall not include any gross
receipts from the sale of any securities of, or all or substantially all of the
assets of, or any merger or consolidation of the Company or any of its
Affiliates.
161
<PAGE> 1
EXHIBIT 10.2
"THE PRICE IS RIGHT"
NETWORK LICENSE AGREEMENT
1. IDENTIFICATION: This license (the "Agreement") agreement is dated as
of the 6th day of October, 1995 and is entered into between All
American Goodson, Inc. ("Sublicensor" or "AAG"), a wholly owned
subsidiary of All American Communications, Inc. ("AACI"), whose
address is 1325 Avenue of the Americas, New York, N.Y. 10019, and
Interpublic Game Shows, Inc. ("Sublicensee" or "Sub"), a wholly-owned
subsidiary of The Interpublic Group of Companies, Inc., whose address
is 1271 Avenue of the Americas, New York, N.Y. 10020, with respect to
the program entitled "The Price Is Right" (the "The Price Is Right" or
the "Program"). Capitalized terms used herein without definition
shall have the respective meanings set forth in the Asset Purchase
Agreement dated as of October 6, 1995 among Mark Goodson Productions,
L.P. and The Child's Play Company, as Sellers, and Mark Goodson
Productions, LLC and The Interpublic Group of Companies, Inc. as
Buyers, among certain other parties (the "Asset Purchase Agreement").
2. GRANT OF RIGHTS: Subject to the terms and conditions of this
Agreement and the existing licenses set forth in Schedule I hereto,
during the Term and within the Territory (as hereinafter defined),
Sublicensor hereby grants to Sub the following:
a. An exclusive license:
i. To arrange for the production of New Episodes based
on the format or formats for "The Price Is Right"
(the "Licensed Format"), which right includes the
right to allow the producer of "The Price Is Right"
to modify the Licensed Format or Licensed Formats to
the extent necessary to arrange for the production of
the New Episodes; and
ii. To arrange for the distribution of New Episodes
(together with replays of Library Episodes of the
Program as part of a series commitment to the extent
required by a Network or Network Alternate) for
telecast on a Network or Network Alternate;
<PAGE> 2
b. A nonexclusive license, for the sole purpose of promoting and
advertising the New Episodes:
i. To make and publish, or arrange for the making and
publication of, in any and all languages, synopses of
the New Episodes; and
ii. To make, exhibit and market, or to arrange for the
making, exhibition and marketing, television motion
picture trailers, sound records or stills based upon
or adapted from the New Episodes; and
c. A nonexclusive license to use the trademark "The Price Is
Right" (the "Licensed Trademark"), in connection with the
production and licensing of the New Episodes (and replays) in
the Territory as permitted by clauses (a) and (b) above.
All of Sub's rights under this Agreement are explicitly stated herein,
and nothing in this Agreement shall be construed to grant any implied
rights to Sub. Sub acknowledges that all rights granted to it by
Sublicensor hereunder are granted pursuant to the license agreement
dated as of October 6, 1995 between Mark Goodson Productions, LLC (the
"LLC") and AAG (the "Main License Agreement"). Notwithstanding
anything else contained in this Agreement, in the event of the
termination of the Main License Agreement during the Term hereof,
unless and until such time as the LLC has entered into a new license
agreement with Sub substantially in the form of this Agreement (unless
otherwise agreed by Producer), Sublicensor shall be deemed to have
assigned all of its rights pursuant to this Agreement after such
termination to the LLC and the LLC shall automatically be deemed to
have entered into this license on the terms hereof for the remaining
period hereof after such termination in favor of Sub as Licensee.
2A. ASSIGNMENT OF RIGHTS; PRODUCTION AGREEMENTS:
a. Sublicensor hereby irrevocably assigns its rights under and
assigns its obligations under the CBS network license for "The
Price Is Right" for the 1994/1995 and 1995/1996 broadcast
seasons (the "CBS Network License") to Sub and Sub hereby
assumes such rights and obligations. Notwithstanding the
foregoing, Sublicensor retains certain joint rights of
approval of renewals and extensions of the CBS Network License
pursuant to Section 3(b) hereof. Sub shall on behalf of the
LLC make certain payments out of Accounts
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<PAGE> 3
Receivable under the CBS Network License received after the
Final Closing, net of any costs and expenses incurred or paid
by Sub related thereto, to or to the order of the Partnership
(or its permitted assigns) pursuant to and subject to the
terms of Section 3.9 of the Asset Purchase Agreement.
b. During the term of this Agreement, Sublicensee shall not enter
into a production agreement with respect to the Program
without Sublicensor's consent, which will not be unreasonably
withheld or delayed. If Sublicensor does not consent to the
entering into of a production agreement, Sublicensee may
terminate this Agreement without incurring any liability for
such termination. Sublicensor hereby approves the Network
Production Agreement with TPIR LLC ("Producer") and agrees to
the provisions to be performed by AAG thereunder. For so long
as the Network Production Agreement is in effect, Sublicensor
and Sublicensee agree, for the benefit of Producer, without
the Producer's prior written consent, not to be unreasonably
withheld or delayed, that they shall not amend, modify or
terminate this Agreement (other than expressly in accordance
with the terms of this Agreement as in effect on the date
hereof and as modified in accordance herewith) or waive any
rights or consent to any of the foregoing, under this
Agreement, which in any case would have a material adverse
effect on Producer's rights under the Network Production
Agreement.
3. TERM; NETWORK EXTENSIONS OR RENEWALS:
a. The term hereof (the "Term") for the Program shall be for so
long as the Program is in continuous annual (i.e., broadcast
year) Network or Network Alternate production (i.e., each
broadcast year must consist of at least 130 new and original
episodes unless otherwise approved by the Network or Network
Alternate), but shall in no event exceed the Earn-Out Period
(including any extension thereof) as defined in the Asset
Purchase Agreement. In the event the Program does not remain
in continuous annual Network or Network Alternate production,
or the Network Production Agreement is terminated, this
Agreement shall terminate. Upon the termination of this
Agreement pursuant to the foregoing provision, Sublicensor
shall continue to have the right, through the Main License
Agreement, to produce, record, distribute, license, market,
broadcast,
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<PAGE> 4
transmit, exhibit or otherwise exploit the Program for
commercial purposes.
b. Sublicensor and Sublicensee shall have the sole right in their
business judgment to agree or refuse to agree to any Network
or Network Alternate license, extension or renewal of the
Program relating to the Program remaining in continuous annual
production, subject to the following provisions:
i) Sublicensor and Sublicensee shall each agree to
(and Sublicensee shall execute) any extension or renewal of
the current CBS Network License which expires on or before the
last day of the Term so long as (x) the LLC will receive at
least $1.0 million, net of expenses (such expenses shall
include amounts payable by Sublicensee pursuant to the Network
Production Agreement and costs and expenses payable by
Sublicensee pursuant to this Agreement), including Earn-Out
Payments and the Production Fees, annually in respect of such
license during its term based on the approved production
budget (including host fees and reasonably anticipated prize
and "below the line" overages not reimbursed by the Network or
Network Alternate) and (y) there are no other changes from the
current CBS Network License that Sublicensor or Sublicensee
believes in good faith could have a material adverse effect on
Sublicensor or Sublicensee.
ii) Sublicensor and Sublicensee will jointly
attend every meeting with CBS (unless the parties otherwise
agree) with respect to any extension or renewal of the current
CBS Network License and reasonably consult with each other
prior to and after such meeting. In the event that for any
reason the CBS Network License is canceled or it is determined
that the Program will not be renewed or extended (the
"Non-Renewal Event"), Sublicensee will have a 45-day period
from such date, jointly with Sublicensor, to negotiate with
other Networks or Network Alternates. Sublicensor shall agree
to approve Sublicensee's entering into a Network or Network
Alternate license (or an executed binding deal memorandum
setting forth the material terms of such license) during such
period so long as (x) the LLC will receive at least $1.0
million, net of expenses (such expenses shall include amounts
payable by Sublicensee pursuant to the Network Production
Agreement and costs and expenses payable by Sublicensor
pursuant to this Agreement), including Earn-Out
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<PAGE> 5
Payments and Production Fees, annually in respect of such
license during its term based on the approved production
budget (including host fees and reasonably anticipated prize
and "below the line" overages not reimbursed by the Network or
Network Alternate) and (y) there are no other changes from the
CBS Network License, or any other Network or Network Alternate
license agreement then in effect with respect to the Program,
that Sublicensor or Sublicensee believes in good faith could
have a material adverse effect on Sublicensor or Sublicensee.
iii) If Sub's negotiations with CBS for an
extension or renewal of the CBS Network License for The Price
Is Right shall terminate unsuccessfully and Sub shall receive
an offer from a Network or Network Alternate with respect to
the broadcast of The Price Is Right, which offer is acceptable
to Sub and AAG but is subject to a CBS first refusal, Sub
shall have the right to transmit such offer to CBS, and if CBS
does not accept such offer, to accept such Network or Network
Alternate offer within five business days after the expiration
of the CBS first refusal. Anything herein to the contrary
notwithstanding, Sub's 45-day period within which to secure a
commitment for an extension of the Network or Network
Alternate broadcasts of The Price Is Right shall be extended
accordingly.
iv) In the event that Sublicensor does not agree
to Sublicensee's entering into a new Network or Network
Alternate license (or an executed binding deal memorandum
setting forth the material terms of such license) not
expressly required by the terms hereof within 45 days after
the Non-Renewal Event, this Agreement shall terminate (and the
Term shall expire) for all periods after the then current
broadcast year and all rights in and to the Program shall
revert to the LLC, subject to AAG's rights under the Main
License Agreement.
4. TERRITORY: Sublicensee's rights shall be limited to the following
territory (the "Territory"): The United States, its territories and
possessions on the Networks or the Network Alternates (and
retransmission thereof in Canada in the English language only).
5. LICENSING AND COLLECTIONS: Except as otherwise provided herein,
Sublicensee shall be responsible for entering into
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<PAGE> 6
all Network and Network Alternate license agreements covering the
Program during the Term and shall bill and collect all revenues in
connection with its exploitation of the Program during the Term.
6. DELIVERY: Sublicensor shall deliver and make available to Sublicensee
copies of such tape material in its possession or under its control
with regard to the Program as Sublicensee may reasonably require and
all available promotional elements, including diagrams, blue prints,
advertising material and the like for purposes of creating sales
materials for the distribution efforts.
7. DIVISION OF REVENUES; ASSUMPTION OF EARN-OUT: Subject to the terms
and conditions set forth below, Sublicensee shall remit to Sublicensor
all monies received by Sublicensee from its licensing of the Program
in the Territory (excluding Earn-Out Payments made by Sublicensee and
payments to the Producer in accordance with the Network Production
Agreement), such amounts not being subject to any fee or to any
reimbursement not approved by Sublicensor. Notwithstanding the
foregoing, Sublicensee will be reimbursed by the Sublicensor for its
out-of-pocket expenses, administrative costs (including the cost of
any personnel dedicated solely to Sub and the direct and indirect
incremental cost of any personnel who are not dedicated solely to Sub)
and other of its organizational expenses, including, without
limitation, reasonable legal fees incurred after the effective date
hereof relating to the license granted hereunder, but excluding
over-head expenses. In addition, Sublicensee shall receive from
Sublicensor a sublicense fee equal to $1,000 per episode, with respect
to New Episodes of "The Price Is Right" produced and delivered by
Producer (the "License Fee"). The License Fee shall in no way effect
the calculation of the Earn-Out Payments owed to Sellers. Sublicensee
hereby agrees to make Earn-Out Payments to Sellers due under Section
3.8(a)(i) of the Asset Purchase Agreement to the extent described in
"Domestic Net Profits - Price Is Right Network" in Schedule 1.1(b) to
the Asset Purchase Agreement, but only to the extent of the net
receipts Sublicensee receives from the Network or Network Alternate in
connection with the exploitation of the Program as further provided in
the Network Production Agreement.
8. REPRESENTATION AND WARRANTIES:
a. Sublicensor represents, warrants to (in each case to the best
of Sublicensor's knowledge and except as
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<PAGE> 7
disclosed in the Asset Purchase Agreement and the Schedules
thereto) and agrees with Sublicensee as follows:
i) That Sublicensor has the right to grant the rights
herein granted, and that there are no liens, claims
or encumbrances whatsoever adversely affecting or
that would in any way prejudice Sublicensor's grant
of rights to Sublicensee herein;
ii) That neither the Licensed Formats nor any part
thereof (including without limitation its titles),
nor the exploitation of the rights granted herein,
will defame or constitute unfair competition with any
third party, violate any law or violate or infringe
upon the trademark, trade name, copyright, right of
privacy, right of publicity or any other right of any
third party;
iii) That Sublicensor has acquired and will maintain all
literary, dramatic, musical and other rights required
for the full and quiet enjoyment of all of the rights
granted herein, and that performance rights to all
musical compositions contained in the Program shall
be (i) controlled by ASCAP, BMI, SESAC or their
affiliates, (ii) in the public domain, or (iii)
controlled by Sublicensor;
iv) That Sublicensor has not and will not make or purport
to make any grant, license, assignment or other
transfer inconsistent with or that would in any way
prejudice Sublicensor's grant of rights to
Sublicensee herein;
v) That Sublicensor has the right to enter into this
agreement and to grant all rights herein granted and
to perform fully all of Sublicensor's obligations
hereunder;
vi) That Sublicensor has the right to assign its rights
under the CBS Network License for "The Price Is
Right" to Sublicensee; and
vii) That Sublicensor shall remain responsible for the
payment and discharge in a timely manner of any
obligations under any and all union, guild or
residual agreements arising in connection with the
production, distribution, licensing or other
-7-
<PAGE> 8
exploitation after the effective date hereof of the
Library Episodes and New Episodes of the Program to
the extent such obligations are not fully discharged
by Producer (or any other producer of the New
Episodes); it being understood that to the extent
Sublicensor is ultimately unable to recoup such
payments with respect to Library Episodes, Sublicensor
shall be indemnified by the LLC with respect thereto.
b. Sublicensee represents, warrants and agrees as follows:
i) That Sublicensee has the right to enter into this
Agreement and to perform fully all of Sublicensee's
obligations hereunder; and
ii) That the credits appearing on the New Episodes, as
delivered, shall be correct and consistent with all
credit obligations to third parties.
9. COPYRIGHTS
a. Pursuant to this Agreement, Sublicensor has commissioned Sub
to arrange for the production and licensing to Networks and
Network Alternates of the New Episodes; and to the extent
necessary for distribution in certain jurisdictions, to allow
for the modification of the Licensed Formats (to create
Modified Formats); and to create materials to advertise and
promote the foregoing. To the extent permitted by applicable
law, Sub acknowledges and agrees that the LLC shall be the
sole and original owner of, and shall have sole and exclusive
right, title and interest in and to, the New Episodes, the
Modified Formats, the advertising and promotional materials
relating thereto, and all copyright rights therein throughout
the world, including without limitation, all extensions and
renewals thereof and all causes of action related to any
infringement of such rights (the "New Copyrights"). In
addition, the LLC shall have the sole and exclusive right,
title and interest in and to, all media (including without
limitation videotapes, master tapes, prints, negatives and
duplicating negatives) in which any New Episode, Licensed
Format (including any Modified Format), or, in each case, any
portion thereof, is rendered, subject to the rights of AAG
under the Main License Agreement. Other than as set forth in
this Agreement, Sub shall have no right, title
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<PAGE> 9
or interest in any New Episode, Licensed Format (including
Modified Format) or New Copyright.
b. Without limiting the foregoing, Sub hereby assigns and agrees
to assign, and to the extent necessary, agrees to cause its
employees, consultants, agents or sublicensees to assign, to
the LLC or its nominee at any time and without additional
compensation and all right, title and interest, whether now
existing or hereafter arising, that Sub, or any of its
employees, consultants, agents or sublicensees, may have in or
to any New Episode, Modified Format, New Copyright, or related
advertising and promotional material. In the event that Sub
is unwilling or unable to execute any documents necessary to
assign any such rights, Sub hereby grants to the LLC an
irrevocable power of attorney to execute on behalf of Sub any
and all such documents. To the extent legally permitted, all
works included in the New Episodes, Modified Formats and
related advertising and promotional material shall constitute
works made for hire, as that term is used in the Copyright Act
of 1976, as amended, and any registration of this Agreement as
a copyright assignment shall not stop the LLC from asserting
that such work is a work made for hire and shall not be
evidence that such work is not a work made for hire.
c. In the event that the applicable law in any jurisdiction
prevents the ownership of any New Copyright (or any portion
thereof) by the LLC, Sub shall grant, and to the extent
necessary, shall cause its affected employees, consultants,
agents or sublicensees to grant, an exclusive (even as to
Sub), irrevocable, royalty-free, worldwide license to use,
modify, distribute, publicly display and publicly perform, and
to otherwise exploit all copyright rights in and to, the
affected New Episode or Modified Format or related advertising
and promotional material, for any lawful purpose, which
license shall expire upon the expiration of the copyright term
for the New Copyright in the affected work and shall include
the right to grant sublicenses with respect to the licensed
rights.
10. TRADEMARKS
Sub agrees that the Licensed Trademark is the exclusive property of
the LLC. Any goodwill associated with Sub's use of the Licensed
Trademark shall inure to the exclusive benefit of the LLC. Sub shall
not take any actions
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<PAGE> 10
inconsistent with the LLC's ownership of the Licensed Trademark, and
shall promptly notify the LLC of any unauthorized use of the Licensed
Trademark of which it becomes aware.
11. NO LIENS
Sub shall not permit any claims, liens, security interests or
encumbrances to be placed upon any of Sub's rights in any New Episode,
Licensed Format (including any Modified Format), advertising and
promotional material related thereto, or any New Copyright or Licensed
Trademark, except for liens approved by the LLC.
12. ACCOUNTING AND STATEMENTS; BOOKS AND RECORDS:
a. Sublicensee shall render accountings and statements to
Sublicensor concurrently with or promptly following its
delivery of Earn-Out Payments, if any, to the Representative
pursuant to the Asset Purchase Agreement. Each statement
shall be accompanied by payment of Sublicensor's share of all
revenues due and payable to Sublicensor hereunder. Each
statement shall become final unless objection is made thereto
within two years after Sublicensor's receipt thereof.
Sublicensee shall also render accountings and statements to
Sublicensor concerning any payments out of Accounts Receivable
pursuant to Section 2A hereof and periodic accountings in the
event no Earn-Out Payments are made.
b. Sublicensee shall maintain, at its address above, complete and
accurate books of account and records respecting the licensing
of the Program hereunder.
c. On a quarterly basis, Sub shall permit an auditor selected by
Sublicensor (whose expenses shall be paid by Sublicensor) to
inspect and make copies of all Sub's books of account and
records relevant to the calculation of "Domestic Net
Profits-Price is Right Network".
13. INSPECTION RIGHTS
a. Sub agrees that at all times during the term of this
Agreement, Sub shall adhere to the production standards and
other standards of quality then specified by the LLC, which
standards the LLC may amend from time to time (the
"Standards"). The Standards in effect as of
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<PAGE> 11
the date of this Agreement are set forth in Exhibit A hereto.
In addition, Sub shall comply with all applicable laws and the
prevailing standards of public decency.
b. Upon the LLC's request, Sub shall permit representatives of
the LLC to inspect the relevant parts of its premises during
normal business hours to ensure that the Standards are met.
In the event that the LLC notifies Sub that Sub is not in
compliance with the Standards, Sub shall promptly, but in no
event later than three weeks from the date such notice is
received, cure the noticed nonconformity.
14. APPROVALS: The 1995/1996 production budget for the Program, which is
limited to $3,229,000 for the balance of the 1995/1996 production year
commencing on the Escrow Closing Date (subject to reduction in the
amount of 30% of all payments from the CBS Network to the Partnership
during the Interim Period ending at the Final Closing) shall consist
of the production budget approved pursuant to the Asset Purchase
Agreement. Sublicensee shall provide Sublicensor in writing with a
detailed production budget prior to the commencement of production for
the 1996/1997 broadcast season (which budget shall not exceed
$5,000,000 for the entire 1996/1997 broadcast season) and each
applicable broadcast season thereafter. Sublicensor shall have a
right of approval, not to be unreasonably withheld, over all such
production budgets, it being understood that the LLC, as licensor of
the Rights to the Sublicensor, must approve each production budget to
the extent not in compliance herewith including, in the case of a
broadcast season, if any, after 1996/1997, to the extent that there
are more than 5% annual increases (on a compounded basis) over the
1996/1997 production budget, exclusive of increases in the Bob Barker
(or other to-be-selected host) host fees or increases in the prize
budget or "below the line" costs covered by the first paragraph of
Section 5 of the Network Production Agreement.
15. INDEMNIFICATION: Sublicensor and Sublicensee shall indemnify the
other party and hold the other party free and harmless from and
against any and all costs, claims, losses, liabilities and expenses
(including reasonable attorney's fees) resulting from or arising out
of any breach or alleged breach of any representations, warranties,
agreements or obligations of the indemnifying party hereunder.
In addition, Sublicensor shall, to the fullest extent permitted by
law, indemnify and hold harmless Sublicensee
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<PAGE> 12
from and against any loss, liability, damage, obligation, cost or
expense (including reasonable legal fees and expenses and any amount
paid in settlement) resulting from a claim, demand, lawsuit, action or
proceeding, including any appellate or bankruptcy proceeding, relating
to or arising from or in connection with the current, former or
prospective employment, retention or compensation of any person
(including, without limitation, any performer, actor, musician, host,
writer, director, producer or any person retained in any capacity as
an independent contractor) in connection with the production,
distribution, licensing or other exploitation of any and all of the
Library Episodes or New Episodes of the Price is Right, including,
without limitation, any obligation under any union, guild or residual
agreement, to the extent that the foregoing arises as a result of the
licensing of rights to the Program to Sublicensee or the entering into
by Sublicensee of the Network Production Agreement with the Producer.
16. ASSIGNMENTS ETC.:
a. This agreement may not be assigned by either party without
the other party's prior written approval, with the
understanding that no such assignment shall relieve the
assigning party of its obligations hereunder.
b. The parties agree that any direct or indirect change in
control of the ownership of the Sublicensor shall not
constitute a change in the rights of the Sublicensee.
c. Sublicensor and Sublicensee hereby assign to Producer, to the
full extent permitted by applicable law, and irrevocably
constitute and appoint Producer (and any of Producer's
officers or employees or agents) as Sublicensor's and
Sublicensee's true and lawful attorney-in-fact to execute any
and all documents and instruments, and to perform any and all
acts for and on behalf of Sublicensor and Sublicensee, in each
case at Producer's expense, which Producer reasonably deems
necessary or advisable, for the limited purpose, and only for
the purpose, of asserting or retaining any rights of
Sublicensor and Sublicensee arising under 11 U.S.C. Section
365(n) in order to affirm this agreement in the event of the
bankruptcy of Sublicensor. Producer agrees not to exercise
any of the rights set forth in this clause in the event
Producer receives effective assurance that such rights will be
protected by the appropriate party or parties hereto.
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<PAGE> 13
17. CONFIDENTIALITY: Neither party shall disclose any portion of this
agreement to any third party except to the extent necessary to
enforce, construe or carry out any term or provision of this agreement
(including any suit, action or claim, whether involving Sublicensor,
Sublicensee or any third party) or to the extent required by any
governmental or judicial order.
18. THIRD PARTY BENEFICIARIES:
The parties hereto agree that the LLC is an intended third- party
beneficiary of the provisions of this Agreement and the Producer is an
intended third party beneficiary of only the last sentence of Section
2A(b) and Sections 3(b) and 16(c) of this Agreement.
19. MISCELLANEOUS: This agreement shall be governed by the laws of the
State of New York applicable to agreements executed and to be wholly
performed therein and shall not be modified except by a written
document executed by both parties hereto. This agreement expresses
the entire understanding of the parties hereto and replaces any and
all former agreements or understandings, written or oral, relating to
the subject matter hereof. Paragraph headings are for convenience of
the parties only and shall have no legal effect whatsoever. All
notices hereunder, unless specified otherwise, shall be in writing and
shall be given at the addresses set forth in Section 1 either by
personal delivery, telegram, telefax or telex (toll prepaid) or by
registered or certified mail (postage prepaid) and shall be deemed
given on the date delivered, telegraphed, telefaxed or telexed or the
date mailed.
20. EXCLUSIVE REMEDY: Notwithstanding anything herein to the contrary, the
exclusive remedy for any breach of this Agreement by Sub, other than a
breach of its Earn-Out obligations or a breach of its payment
obligations to Sublicensor or Producer pursuant to Section 7(a)
hereunder, is termination of this agreement, except as otherwise
agreed between Sublicensor and Sublicensee.
21. DEFINITIONS
"Library Episodes" shall mean those audiovisual productions of the
Program constituting Assets acquired by the LLC at the Final Closing
of the Asset Purchase Agreement and licensed to Sublicensor under the
Master License Agreement, including any modifications thereof.
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<PAGE> 14
"Licensed Formats" shall mean the outlines, treatments or formats for
"The Price Is Right" shows in the Territory, including any
modifications thereof made by Sub.
"Licensed Trademark" shall mean the trademark "The Price Is Right".
"Modified Format" shall mean the work resulting from any modification
by Sub of the Licensed Formats. Each Modified Format shall also be
deemed a Licensed Format.
"New Copyrights" shall have the meaning specified in Paragraph 9(a) of
this Agreement.
"New Episodes" shall mean any audiovisual production based on the
Licensed Formats (including any Modified Format) produced by Sub or
its sublicensees pursuant to this Agreement.
22. EFFECTIVENESS: This agreement shall become effective at the Final
Closing of the Asset Purchase Agreement and shall be of no force or
effect if the Asset Purchase Agreement is terminated in accordance
with its terms.
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<PAGE> 15
IN WITNESS WHEREOF, the parties have executed this agreement
as of the date first above written.
ALL AMERICAN GOODSON, INC., as
SUBLICENSOR
By: /s/ THOMAS BRADSHAW
------------------------------
Name: Thomas Bradshaw
Its: Chief Financial Officer
Date: October 6, 1995
INTERPUBLIC GAME SHOWS, INC., as SUBLICENSEE
By: /s/ THOMAS J. VOLPE
------------------------------
Name: Thomas J. Volpe
Its: Chairman and President
Date: October 6, 1995
The undersigned acknowledge the assumption by Interpublic Game Shows, Inc. of
certain obligations as set forth herein.
MARK GOODSON PRODUCTIONS, L.P.
By: Mark Goodson Television Productions, Inc.,
its General Partner
By: /s/ RICHARD SCHNEIDMAN
------------------------------
Its:
-----------------------------
Date: October 6, 1995
TPIR LLC
By: /s/ RICHARD SCHNEIDMAN
------------------------------
Its:
-----------------------------
Date: October 6, 1995
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<PAGE> 16
Schedule I
1. CBS Network License
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<PAGE> 17
EXHIBIT A
PRODUCTION STANDARDS AND STANDARDS OF QUALITY
PRODUCTION STANDARDS
To be substantially consistent with the standards in effect prior to
the date hereof.
OTHER STANDARDS
Sub shall adhere to the following standards at all times:
1. No information of any sort with respect to questions to be asked or
materials to be used on any New Episode shall be supplied or suggested
in any way to, or asked or, contestants or participants in any game or
contest recorded in any New Episode in advance of broadcast.
2. No favoritism shall be exercised in the treatment of any contestant or
participant.
3. The winning contestant or participant shall be offered in full the
exact or substantially the same prize which is announced on the
program in accordance with the provisions of the contestant release
form.
4. No game or contest, or any element thereof, shall involve any unfair
treatment of any contestant, participant or any member of the public.
5. No ambiguous statement or representation that might be misleading to
the public shall be made, nor shall the game or contest be conducted
in a manner that might be misleading to the public.
6. No element of any program shall be injurious or prejudicial to the
interest of the public, Sublicensor, or honest programming or
reputable business in general.
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<PAGE> 1
EXHIBIT 10.3
LICENSE AGREEMENT
1. IDENTIFICATION: This license agreement (this "Agreement") is dated as
of the 6th day of October, 1995 and is entered into between Mark
Goodson Productions, LLC, a New York limited liability company
("Licensor") (presently directly or indirectly owned jointly by All
American Communications, Inc. ("AACI") and The Interpublic Group of
Companies, Inc. ("Interpublic")); and All American Goodson, Inc., a
wholly-owned subsidiary of AACI ("AAG"), whose address is 1325 Avenue
of the Americas, New York, N.Y. 10019 ("Licensee"), with respect to
the Library Rights, Library Physical Properties, Programs or portions
thereof or rights therein being acquired pursuant to the Asset
Purchase Agreement referred to below. All numbered schedules set
forth herein correspond to the numbered schedules contained in the
Asset Purchase Agreement dated as of October 6, 1995 between Licensor,
Interpublic and AACI on the one hand, and Mark Goodson Productions,
L.P., The Child's Play Company and the Estate of Mark Goodson, on the
other hand (the "Asset Purchase Agreement"). Capitalized terms used
herein without definition shall have the respective meanings set forth
in the Asset Purchase Agreement.
2. RIGHTS: GRANT OF RIGHTS. Subject to the terms and conditions of this
Agreement and the existing licenses listed on Schedule I hereto (the
"Existing Agreements"), during the Term and within the Territories (as
defined below), Licensor hereby grants to Licensee the following:
a) An exclusive license:
i. To produce and record New Episodes based on the
Licensed Formats in the Territories, which right
includes the right to modify the Licensed Formats to
the extent necessary to produce and record the New
Episodes;
ii. To distribute New Episodes and Library Episodes by
any means of broadcast or exhibition, which
distribution right includes the right to copy,
modify, distribute, license, publicly display and
publicly perform the New Episodes and the Library
Episodes; and
<PAGE> 2
iii. To market, broadcast, transmit, exhibit or otherwise
exploit for commercial purposes New Episodes and
Library Episodes.
b) A nonexclusive license, for the sole purpose of promoting and
advertising the New Episodes or the Library Episodes:
i. To make and publish, in any and all languages,
synopses of the New Episodes or Library Episodes; and
ii. To make, exhibit and market television motion picture
trailers, sound records or stills based upon or
adapted from the New Episodes or Library Episodes.
c) A nonexclusive license to use the Licensed Trademarks in
connection with the production of the New Episodes and the
distribution of the New Episodes and the Library Episodes in
the Territories as permitted by clauses (a) and (b) above.
During the term of this Agreement, Licensee shall have the right to
sublicense to Affiliates as provided in paragraphs 4(b) and 4(c) and
to sublicense nonaffiliated third parties to exploit the rights
granted in clauses (a) through (c) above, which sublicense may be on
an exclusive basis to the extent Licensee has exclusive rights
hereunder. Licensee agrees that any such sublicense shall not conflict
with the terms of this Agreement, and further agrees that in the case
of sublicenses relating to the AAFI Territory, unless Licensor shall
otherwise agree (which agreement will not be unreasonably withheld or
delayed), such sublicenses shall contain provisions that indemnify
Licensee from and against all taxes and excises (other than income
taxes) imposed on or levied against Licensee under any applicable law
of the AAFI Territory from time to time relating to the granting and
the exploitation of the rights granted to the sublicensee under any
such sublicense agreement. Prior to entering into any sublicense of
its rights hereunder, Licensee shall obtain Licensor's approval, which
approval shall not be unreasonably withheld or delayed. Licensor
shall have 10 business days to approve a draft of the sublicense and
if Licensor shall not have disapproved such sublicense within such
time period such sublicense shall be deemed to have been approved by
Licensor. In connection with the foregoing, the Network Production
Agreement, the Network License Agreement (each as defined in the Asset
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<PAGE> 3
Purchase Agreement) and the licenses referenced in paragraphs 4(b) and
4(c) are hereby approved by Licensor.
3. TERM: The term of this Agreement (the "Term") commences on the
effective date hereof and, unless and until this Agreement is
terminated as provided in paragraph 24, shall continue for a term of
ninety (90) years, and thereafter, shall be automatically renewed for
additional periods of thirty (30) years unless terminated by notice
from either party hereto.
Notwithstanding anything else contained in this Agreement, in the
event of the termination of this Agreement during the "Term" of the
Network License Agreement, unless and until such time as Licensor has
entered into a new license agreement with Interpublic Sub
substantially in the form of the Network License Agreement (unless
otherwise agreed by Producer), AAG shall be deemed to have assigned
all of its rights pursuant to the Network License Agreement after such
termination to Licensor and Licensor shall automatically be deemed to
have entered into a license on the terms of the Network License
Agreement with respect to "The Price Is Right" for the remaining
period thereof after such termination in favor of Interpublic Sub as
licensee. Licensor shall use its reasonable best efforts to provide
Producer, with the personnel, including on-screen talent, to produce
"The Price Is Right" during the Term of the Network License Agreement.
4. TERRITORIES: AAG's territorial rights hereunder shall consist of the
entire universe (the "Territories"). Concurrently herewith, AAG is
entering into three sublicenses:
(a) a network license agreement with Interpublic Sub with respect
to "The Price Is Right" attached as Exhibit 8.4(a)(vii)(a) to
the Asset Purchase Agreement (it being understood that
Licensor has assigned all of its rights and obligations under
the CBS Network License, through AAG, to Interpublic Sub);
(b) a license with All American Television II, Inc. ("AATV")
limited to the following territories (the "AATV Territories"):
the United States, its territories and possessions and Canada
attached as Exhibit A hereto; and
(c) a license with All American Fremantle II, Inc. ("AAFI")
limited to the following territories (the "AAFI Territories"):
the world, excluding the United States,
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<PAGE> 4
its territories and possessions and Canada attached as Exhibit
B hereto.
5. AFFILIATED TRANSACTIONS: Except as provided in paragraphs 4(b) and
4(c), Licensee shall not enter into any agreement or engage in any
transaction with any Affiliate with respect to the production,
distribution, licensing or other exploitation of the Library Rights,
Library Physical Properties, Programs or portions thereof or rights
therein being acquired pursuant to the Asset Purchase Agreement
without the prior written consent of Licensor (such consent not to be
unreasonably withheld or delayed). Notwithstanding the foregoing, if
Licensee does enter into sublicenses with its Affiliates, such
affiliated sublicensees (including AATV and AAFI) shall not be
entitled to any fees or other compensation, including, without
limitation, any distribution fees, under or in connection with their
respective sublicenses.
6. BEST EFFORTS: Licensee undertakes to use its reasonable best efforts
to actively promote and to distribute any New Episodes and the Library
Episodes and to maximize the amount of profits generated by the
production, distribution, licensing or other exploitation of the
Programs in the AATV and the AAFI Territories.
7. LICENSING AND COLLECTIONS: Licensee shall, and shall use reasonable
best efforts to cause its sublicensees (other than Interpublic Sub)
to, enter into license agreements covering the Programs and to bill
and collect all revenues in connection with the exploitation of the
Programs. Licensee shall notify Licensor of any material breach,
including, without limitation, a breach of a payment obligation, by
any sublicensee of such license agreements. Such notice shall set
forth the actions, if any, that Licensee proposes to take in respect
of curing such breach. If the breach has not been cured within 15
days of the date of such breach, Licensor shall have the right to act
on behalf of Licensee to remedy such breach and Licensee shall use its
reasonable best efforts to assist Licensor in connection therewith.
8. MARKETING AND DISTRIBUTION: Licensee shall be, and shall use
reasonable best efforts to cause its sublicensees (other than
Interpublic Sub) to be, responsible for the marketing and physical
distribution of the Programs and shall discharge and pay for all costs
in connection therewith (e.g., tapes, editing, traffic, shipping,
convention expenses, travel and entertainment, advertising and
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<PAGE> 5
promotion, collection costs, station compensation, residuals, etc.).
9. DELIVERY: Licensor shall deliver to Licensee or, at Licensee's
direction, its sublicensees copies of such tape material in its
possession or under its control with respect to each Program as
Licensee may reasonably require, which material may be duplicated at
Licensee's sole cost (such reproductions hereinafter referred to as
"Videotapes"). Licensor shall deliver to Licensee or, at Licensee's
direction, its sublicensees all available promotional elements
(including diagrams, blueprints, advertising material and the like)
for purposes of creating sales materials for the distribution efforts.
10. DIVISION OF REVENUES:
The division of revenues between Licensor and Licensee shall be in
accordance with Schedule II hereto which is incorporated by reference
herein.
11. EDITING AND MODIFICATIONS:
Licensee shall not have the right to edit any Library Episode
in any material respect unless Licensee shall have first
described to Licensor in writing the desired edits, and
received from Licensor its prior consent to the proposed
edits, which consent shall not be unreasonably withheld.
Licensor's prior consent shall not be necessary, however,
where the desired edits are made solely for the purpose of
ensuring that the Library Episode complies with the applicable
statute, regulation, rules, standards, orders, requests or
other requirements of any competent governmental body within
the Territory. Notwithstanding the foregoing, Licensee shall
not have right to delete the credits or copyright notices that
appear in any Library Episode.
12. REPRESENTATION AND WARRANTIES:
a. Licensor represents, warrants and agrees as follows:
i) To the best of Licensor's knowledge and except as
disclosed in the Asset Purchase Agreement and the
Schedules thereto, Licensor owns or controls the
copyrights to the Programs to the extent herein
granted, and, to the best of Licensor's knowledge,
that there are no liens, claims or encumbrances
whatsoever adversely affecting or that would in
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<PAGE> 6
any way prejudice Licensor's grant of rights to
Licensee herein;
ii) To the best of Licensor's knowledge and except as
disclosed in the Asset Purchase Agreement and the
Schedules thereto, neither the Programs nor any part
thereof (including without limitation their titles),
nor the exploitation of the rights granted herein,
defames or constitutes unfair competition with any
third party, violates any law or violates or
infringes upon the trademark, trade name, copyright,
right of privacy, right of publicity or any other
right of any third party;
iii) To the best of Licensor's knowledge and except as
disclosed in the Asset Purchase Agreement and the
Schedules thereto, (a) Licensor has acquired all
literary, dramatic, musical and other rights required
for the full and quiet enjoyment of all of the rights
granted herein, and (b) performance rights to all
musical compositions contained in the Programs are
(1) controlled by ASCAP, BMI, SESAC or their
affiliates, (2) in the public domain, or (3)
controlled by Licensor;
iv) To the best of Licensor's knowledge and except as
disclosed in the Asset Purchase Agreement and the
Schedules thereto, the credits appearing on the
Library Episodes, as delivered, are correct and
consistent with all credit obligations to third
parties;
v) To the best of Licensor's knowledge and except as
disclosed in the Asset Purchase Agreement and the
Schedules thereto, Licensor has not made or purported
to make any grant, license, assignment or other
transfer consistent with or that would in any way
prejudice Licensor's grant of rights to Licensee and
its sublicensees herein; and
vi) To the best of Licensor's knowledge and except as
disclosed in the Asset Purchase Agreement and the
Schedules thereto, Licensor has the right to enter
into this Agreement and to grant all rights herein
granted and to perform fully all of Licensor's
obligations hereunder.
For purposes of these representations and warranties,
Licensee is deemed to have knowledge of all matters
disclosed to Licensor by the
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<PAGE> 7
Sellers in the Asset Purchase Agreement and the
Schedules thereto.
b. Licensee represents, warrants and agrees as follows:
i) That Licensee has the right to enter into this
Agreement and to perform fully all of Licensee's
obligations hereunder;
ii) That Licensee and its sublicensees, other than
Interpublic Sub, shall fully pay and discharge in a
timely manner any obligations under any and all
union, guild and/or residual agreements arising in
connection with the production, distribution,
licensing or other exploitation of the Programs other
than guild and/or residual obligations arising prior
to the effective date hereof or under the license
referred to in paragraph 4(a) which shall be assumed
by the Partnership.
iii) To the extent that Licensee makes any union, guild
and/or residual payments and is ultimately unable to
recoup such payments with respect to Library
Episodes, Licensee shall be indemnified by Licensor
with respect thereto.
13. COPYRIGHTS:
(a) Pursuant to this Agreement, Licensor has commissioned Licensee
to produce and record the New Episodes; and to the extent
necessary for distribution in certain jurisdictions, to modify
the Licensed Formats (to create Modified Formats) and Library
Episodes (to create Modified Library Episodes); and to create
materials to advertise and promote the foregoing. To the
extent permitted by applicable law, Licensee acknowledges and
agrees that Licensor shall be the sole and original owner of,
and shall have sole and exclusive right, title and interest in
and to, the New Episodes, the Modified Formats, the Modified
Library Episodes, the advertising and promotional materials
relating thereto, and all copyright rights therein throughout
the world, including without limitation, all extensions and
renewals thereof and all causes of action related to any
infringement of such rights (the "New Copyrights"). In
addition, Licensor shall have the sole and exclusive right,
title and interest in and to, all media (including without
limitation videotapes, master tapes, prints, negatives and
duplicating negatives) in which any New Episode, Licensed
Format,
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<PAGE> 8
Modified Format, Library Episode or Modified Library Episode,
or, in each case, any portion thereof, is rendered. Other
than as set forth in this Agreement, Licensee shall have no
right, title or interest in any New Episode, Licensed Format,
Modified Format, Library Episode or Modified Library Episode
or New Copyright.
(b) Without limiting the foregoing, Licensee hereby assigns and
agrees to assign, and to the extent necessary, agrees to use
its reasonable best efforts to cause its employees,
consultants, agents or sublicensees to assign, to Licensor or
its nominee at any time and without additional compensation
any and all right, title and interest, whether now existing or
hereafter arising, that Licensee, or any of its employees,
consultants, agents or sublicensees, may have in or to any New
Episode, Modified Format, Modified Library Episode, New
Copyright, or related advertising and promotional materials.
In the event that Licensee is unwilling or unable to execute
any document necessary to assign any such rights, Licensee
hereby grants to Licensor an irrevocable power of attorney to
execute on behalf of Licensee any and all such documents. To
the extent legally permitted, all works included in the New
Episodes, Modified Formats, Modified Library Episodes, and
related advertising and promotional material shall constitute
works made for hire, as that term is used in the Copyright Act
of 1976, as amended, and any registration of this Agreement as
a copyright assignment shall not stop Licensor from asserting
that such work is a work made for hire and shall not be
evidence that such work is not a work made for hire.
(c) In the event that the applicable law in any jurisdiction
prevents the ownership of any New Copyright (or any portion
thereof) by Licensor, Licensee shall grant, and to the extent
necessary, shall cause its affected employees, consultants,
agents or sublicensees to grant, an exclusive (even as to
Licensee), irrevocable, royalty- free, worldwide license to
use, modify, distribute, publicly display and publicly
perform, and to otherwise exploit all copyright rights in and
to, the affected New Episode or Modified Format or Modified
Library Episode or related advertising and promotional
material, for any lawful purpose, which license shall expire
upon the expiration of the copyright term for the New
Copyright in the affected work and shall include the right to
grant sublicenses with respect to the licensed rights.
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<PAGE> 9
14. TRADEMARKS:
Licensee agrees that the Licensed Trademarks are the exclusive
property of Licensor. Any goodwill associated with Licensee's use of
the Licensed Trademarks shall inure to the exclusive benefit of
Licensor. Licensee shall not take any actions inconsistent with
Licensor's ownership of the Licensed Trademarks, and shall promptly
notify Licensor of any unauthorized use of the Licensed Trademarks of
which it becomes aware.
15. THIRD PARTY RIGHTS:
Licensee shall obtain all rights, licenses (including all licenses to
use music) and clearances necessary for Licensee and its sublicensees
to perform their obligations with respect to any New Episode, Modified
Format, or Modified Library Episode. The scope of any such right or
license shall be broad enough to permit Licensor (or its sublicensees)
to exploit its copyrights in any New Episode, Modified Format, or
Modified Library Episode following the termination of this Agreement
without the necessity of obtaining further rights or licenses. The
New Episodes, and to the extent modified, the Modified Formats and
Modified Library Episodes, shall not violate any law, or infringe the
rights of any third party.
16. NO LIENS:
Licensee shall not permit any claims, liens, security interests or
encumbrances to be placed upon any of Licensee's rights in any New
Episode, Library Episode, Modified Library Episode, Licensed Format,
Modified Format, advertising and promotional material related thereto,
or any New Copyright or Licensed Trademark, except for liens approved
by Licensor. Licensor has approved the assignment of Licensee's
rights granted to Chemical Bank, as Agent under the Chemical Facility
(including a refinancing thereof if such refinancing does not increase
the principal amount outstanding at the time of such refinancing).
17. STORAGE:
Licensee shall properly store each master or original negative of each
New Episode, Library Episode or Modified Library Episode in accordance
with standards customarily observed by major television producers in
the United States.
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<PAGE> 10
18. PAYMENTS; ACCOUNTINGS AND STATEMENTS; BOOKS AND RECORDS:
(a) Not later than 30 days after the end of each calendar quarter
or earlier if necessary to comply with the next succeeding
sentence, Licensee shall pay to Licensor in cash, by wire
transfer to an account or accounts specified by Licensor,
Licensor's share of all revenues due and payable to Licensor
hereunder except as otherwise set forth in this paragraph (a).
Licensee shall make such payments in a timely manner
sufficient to allow Licensor to comply with its remittance
obligations set forth in the Asset Purchase Agreement in a
timely manner. Notwithstanding anything to the contrary
herein, payments to Licensor hereunder shall be subject to the
provisions of the Intercreditor Agreement between Licensor and
Chemical Bank, as Agent, and any payment not made as a result
of Section 3b of such Intercreditor Agreement shall not
constitute a breach of this Agreement or a failure to pay any
amount due and payable by it, including but not limited to
Licensee's payment obligations under this paragraph. In
addition, so long as Tranche E of the Credit Facility (or, if
Tranche E is not in place the portion of AACI's working
capital facility utilized to fund the Cash Portion of the
Purchase Price) remains outstanding, any application of funds
in the LLC Funds Account by Chemical Bank, as agent, pursuant
to Secton 3b the Intercreditor Agreement shall be deemed to
discharge the obligations of Licensee to Licensor pursuant
hereto in an equal dollar amount.
(b) Each payment shall be accompanied by a statement setting forth
in reasonable detail the calculation of Domestic Net Profits
(as defined in Schedule II hereto) for the applicable period
(on a cash and accrual (GAAP) basis) and an accounting and
statement for each Program substantially in the form
heretofore provided by Interpublic to AACI. Each statement of
the calculation of Domestic Net Profits shall become final, in
the absence of manifest error, unless objection is made
thereto within two years after Licensor's receipt thereof.
Licensor shall be responsible for making any Earn-Out Payments
from its receipt of Domestic Net Profits to the
"Representative" pursuant to the Asset Purchase Agreement. In
the event the revenues are derived from licenses used outside
of the United States, the calculation of the division of
revenues for such licenses will be separately set forth in the
accounting statements accompanying such payments.
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<PAGE> 11
(c) In the event that Licensee shall fail to pay any amount due
and payable within 30 days of the end of each quarter (the
"Due Date"), Licensee shall be liable to Licensor for the sum
of the amount so due and payable plus interest on the amount
due and payable pursuant to clause (a) above from and
including such Due Date to but excluding the date of payment
thereof calculated at the rate per annum equal to Licensee's
borrowing rate plus 1%. Licensee shall indemnify Licensor
against any loss, liability, damage (or action in respect
thereof), including, but not limited to, out-of-pocket legal
fees and expenses, suffered or incurred in connection with the
enforcement, preservation or protection of any rights against
Licensee under this paragraph 18, other than in connection
with a bona-fide dispute, which shall be subject to
arbitration pursuant to paragraph 24 hereof.
(d) Licensor and Licensee agree to report the amounts due to
Licensor hereunder derived from AAFI's licensing of the
Programs as foreign source income within the meaning of
section 862 of the Internal Revenue Code, regardless of the
fact that books and records are kept in New York as described
in (c) below.
(e) Licensee shall maintain, at its address above, complete and
accurate books of account and records respecting the licensing
of the Programs hereunder.
(f) On a quarterly basis, Licensee shall permit an auditor
selected by Licensor to inspect and make copies of all
Licensee's books of account and records relevant to the
calculation of Domestic Net Profits.
19. PRODUCTION STANDARDS; INSPECTION RIGHTS:
(a) Licensee agrees that at all times during the term of this
Agreement, Licensee shall adhere to the production standards
and other standards of quality then reasonably specified by
Licensor, which standards Licensor may amend from time to time
(the "Standards"). The Standards in effect as of the date of
this Agreement with respect to production in the United States
are set forth in Exhibit A hereto. Licensee shall comply in
all material respects with all applicable laws with respect to
production outside the United States.
(b) Upon Licensor's request, Licensee shall (i) provide to
Licensor, at Licensee's expense, samples of the
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<PAGE> 12
Modified Formats, New Episodes, Library Episodes, Modified
Library Episodes, and advertising and promotional material
relating thereto, and (ii) permit representatives of Licensor
to inspect at any time during normal business hours the
production facilities used to produce the New Episodes and to
create Modified Library Episodes, and (iii) permit
representatives of Licensor to inspect during normal business
hours the storage facilities in which are maintained any
videotape, master tape, print, negative, duplicating negative
or other copy of a New Episode, Library Episode, or any
related advertising or promotional material. In the event
that Licensor notifies Licensee that Licensee is not in
compliance with the Standards, Licensee shall promptly, but in
no event later than three weeks from the date such notice is
received, cure the noticed nonconformity to the extent
curable.
20. INSURANCE:
Licensee shall obtain and maintain in full force and effect, at its
sole cost and expense, during the Term of this Agreement insurance of
the type and for the minimums set forth below, all to the extent
available at a reasonable premium:
(a) Comprehensive General Liability Insurance. Combined Bodily
Injury Liability, Including for Death, and Property Damage
Liability, with a limit of not less than $3,000,000 per
occurrence, including: Contractual Liability (to cover the
indemnification provisions contained in this Agreement);
Products & Completed Operations Liability, which will be
maintained for not less than one year following termination of
this Agreement; Bailee's Liability; Independent Contractor's
Liability, and Broad Form Property Damage liability;
(b) Physical Damage or Property Insurance. Covering nonowned
property in the custody of Licensee, including but not limited
to any copy in any media of any New Episode or Library
Episode, from physical damage, theft or loss with a limit of
not less than $1,000,000 per occurrence with respect to
Licensee. Each sublicensee other than Interpublic Sub shall
be required to carry Physical Damage or Property Insurance
covering nonowned property in such sublicensee's custody with
a limit of not less than $1,000,000 per occurrence;
(c) Errors and Omissions Insurance. Limit of not less than
$1,000,000 per occurrence with respect to Licensee.
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<PAGE> 13
Each sublicensee other than Interpublic Sub shall be required
to carry Errors and Omissions Insurance with a limit of not
less than $1,000,000 per occurrence; and
(d) Television Producer's Liability Insurance. Covering the New
Episodes and Library Episodes, bearing a minimum of $3,000,000
per occurrence. Standard coverage, including but not limited
to coverage with respect to defamation, infringement of common
law or statutory copyright, infringement of privacy rights,
and unauthorized use of material in any New Episode or
Modified Library Episode.
None of the premiums paid by Licensee for the insurance policies
listed above may be recouped from Licensor. Licensor shall be named
as an Additional Insured on each required policy. Each required
policy will be primary without right of contribution from any other
insurance maintained by Licensor, unless due to Licensor's gross
negligence or willful misconduct. All provisions in each required
policy, except the limits of liability, will operate in the same
manner as if there were a separate policy covering each insured. Each
required policy shall be issued by a reputable insurer approved by
Licensor, which approval shall not be unreasonably withheld. Licensee
shall furnish to Licensor certificates of insurance for each required
policy prior to the commencement of the first production under this
Agreement, and shall furnish certificates for each policy renewal
during the Term. Such policy shall include a provision requiring the
insurer to give Licensor prompt notice of any revision, modification
or cancellation thereof. Promptly after securing such policy,
Licensee shall furnish Licensor with a copy thereof.
21. APPROVALS:
As soon as practicable after Licensee concludes a deal with respect to
production of a New Episode, Licensee shall discuss the proposed
production budget with Licensor. Prior to commencing the production
of any New Episode in any jurisdiction within the Territory, Licensee
shall provide to Licensor a detailed production budget in writing.
Neither Licensee, any of its sublicensees, AATV nor AAFI shall have
the right to commence production of any New Episode unless Licensor
shall have first approved the production budget for that New Episode,
which approval shall not be unreasonably withheld or delayed. All
increases to an approved production budget shall require Licensor's
written approval not to be unreasonably withheld or delayed. Any
unapproved production budget overages shall not be deducted from gross
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<PAGE> 14
receipts but shall only be deducted from Licensee's share of net
revenues.
Licensor shall be deemed to have approved all such production budgets
not disapproved to Licensee within ten business days of Licensor's
receipt of such production budget.
For so long as the Network Production Agreement is in effect, Licensor
and Licensee agree, for the benefit of Producer, without Producer's
consent not to be unreasonably withheld or delayed, that they shall
not amend, modify, terminate this Agreement (except in accordance with
this Agreement, the Network License Agreement or the Network
Production Agreement) or waive any rights or consents to any of the
foregoing under this Agreement insofar as it relates to "The Price Is
Right" which would have a material adverse effect on Producer's rights
under the Network Production Agreement.
22. TERMINATION OF RELATED LICENSES:
If the license agreement described in paragraph 4(a) above is
terminated for any reason, all rights licensed to Interpublic Sub
pursuant thereto shall revert to the Licensor, subject to the rights
of Licensee hereunder.
23. INDEMNIFICATION: Licensor and Licensee shall indemnify the other
party and hold the other party free and harmless from and against any
and all costs, claims, losses, liabilities and expenses (including
reasonable attorney's fees) resulting from or arising out of any
breach or alleged breach of any representations, warranties,
agreements or obligations of the indemnifying party hereunder.
In addition, Licensee shall, to the fullest extent permitted by law,
indemnify and hold harmless Licensor from and against any loss,
liability, damage, obligation, cost or expense (including reasonable
legal fees and expenses and any amount paid in settlement) resulting
from a claim, demand, lawsuit, action or proceedings, including any
appellate or bankruptcy proceeding, relating to or arising from or in
connection with the current, former or prospective employment,
retention or compensation of any person (including, without
limitation, any performer, actor, musician, host, writer, director,
producer or any person retained in any capacity as an independent
contractor) in connection with the production, distribution, licensing
or other exploitation of any and all of the Programs by the Licensee.
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<PAGE> 15
24. TERMINATION:
(a) Licensor shall have the right to terminate this Agreement at
any time in the event that (i) Licensee commits a breach of
its payment obligations under paragraph 10 of this Agreement,
and fails to cure such breach (including any interest owed on
any amount that is unpaid) within 90 days of receiving a
written notice of default from Licensor, (ii) Licensee commits
a material breach of any of its other obligations under this
Agreement, other than a breach of its payment obligation
pursuant to paragraph 10, and fails to cure such breach within
90 days of receiving a written notice of default from
Licensor, or (iii) a petition is filed by or against Licensee
for voluntary or involuntary bankruptcy or pursuant to any
other insolvency law (which, in the case of an involuntary
petition, remains undismissed for a period of 60 days), or
Licensee makes or seeks to make a general assignment for the
benefit of its creditors or applies for or consents to the
appointment of a trustee, receiver or custodian for it or a
substantial part of its property.
(b) Any dispute relating to whether this License Agreement may be
terminated in accordance with this paragraph 24(a)(i) or
24(a)(ii) or amounts owed hereunder (a "Dispute") shall be
settled exclusively and finally by arbitration. It is
specifically understood and agreed that any Dispute may be
submitted to arbitration irrespective of the magnitude
thereof, the amount in controversy or whether such Dispute
would otherwise be considered justiciable or ripe for
resolution by a court. Such Arbitration shall be conducted in
accordance with and subject to the terms of Article XIV of the
Amended and Restated Operating Agreement among Interpublic,
its Affiliate, AACI and AAG with respect to the formation and
operation of the LLC.
(c) Upon the expiration or termination of this Agreement, the
licenses granted to Licensee shall immediately terminate, and
Licensee and its sublicensees shall immediately discontinue
the use or other exploitation (including telecast) of the
Licensed Formats, any Modified Format, the New Episodes, the
Library Episodes, Modified Library Episode, the Licensed
Trademarks, the New Copyrights, and any advertising or
promotional material relating thereto. Following the
expiration or termination of this Agreement, Licensee and its
sublicensees shall not produce, record or telecast, or permit
to be produced, recorded or
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<PAGE> 16
telecast, any audiovisual production of a similar format or
title to the New Episodes, Library Episodes, Licensed Formats
or Licensed Trademarks.
Upon request of Licensor, Licensee shall, at its expense,
deliver to Licensor at a location specified by Licensor, all
copies (including any video tape and master) of the New
Episodes, Library Episodes, Modified Library Episodes,
Licensed Formats, Modified Formats, and related advertising
and promotional material in the possession of Licensee or any
of its sublicensees.
The provisions of this Agreement concerning copyrights and
trademarks shall survive the expiration or termination of the
Agreement.
(d) Notwithstanding anything to the contrary herein, in the event
of the expiration of this Agreement or its termination
pursuant to paragraph 24(a)(iii) as a result of an involuntary
bankruptcy or other similar involuntary proceeding, Licensee
shall continue to have certain rights and obligations to the
extent set forth in the side letter between the parties dated
as of the date hereof.
25. ASSIGNMENTS:
(a) This Agreement may not be assigned by either party without the
other party's prior written approval; provided that no consent
shall be required in the event Licensor sells all or
substantially all of its assets or merges or consolidates with
another party and further provided that Licensee may assign
its rights hereunder to Chemical Bank as provided for in the
Intercreditor Agreement. No such assignment shall relieve the
original party of its obligations hereunder.
(b) The parties agree that any direct or indirect change of
control of AAG (other than as a result of a change of control
of AACI) shall be deemed to constitute an assignment of
Licensee's rights hereunder and shall require the Licensor's
prior written approval.
26. CONFIDENTIALITY: Neither party shall disclose any portion of this
Agreement to any third party except to the extent necessary to
enforce, construe or carry out any term or provision of this Agreement
(including any suit, action or claim, whether involving Licensor,
Licensee or any third
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<PAGE> 17
party) or to the extent required by any governmental or judicial order.
27. MISCELLANEOUS: This Agreement shall be governed by the laws of the
State of New York applicable to agreements executed and to be wholly
performed therein and shall not be modified except by a written
document executed by both parties hereto. This Agreement, together
with the related documentation entered into simultaneously herewith,
expresses the entire understanding of the parties hereto and replaces
any and all former agreements or understandings, written or oral,
relating to the subject matter hereof (other than the Existing
Agreements). Paragraph headings are for convenience of the parties
only and shall have no legal effect whatsoever. All notices
hereunder, unless specified otherwise, shall be in writing and shall
be given at the addresses set forth in paragraph 1 either by personal
delivery, telegram, telefax or telex (toll prepaid) or by registered
or certified mail (postage prepaid) and shall be deemed given on the
date delivered, telegraphed, telefaxed or telexed or the date mailed.
28. DEFINITIONS:
"Affiliate" shall mean, with respect to any person or entity, (i) any
person or entity directly or indirectly controlling, controlled by, or under
common control with such person or entity, (ii) any person or entity owning or
controlling twenty-five percent (25%) or more of the outstanding voting
securities of such person or entity, (iii) any officer, director, or general
partner of such person or entity, or (iv) any person or entity who is an
officer, director, general partner, trustee, or holder of twenty- five percent
(25%) or more of the voting securities of any person or entity described in
clauses (i) through (iii) of this sentence. For the purposes of this
definition, the terms "control," "is controlled by," or "is under common
control with" shall mean the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a person or
entity, whether through the ownership of voting securities, by contract or
otherwise. The exceptions to the definition of "Affiliate" in the Asset
Purchase Agreement are incorporated herein.
"Licensed Formats" shall mean the outlines, treatments or formats for
the shows constituting Assets acquired by Licensor at the Final Closing of the
Asset Purchase Agreement, including any modifications thereof made by Licensee.
"Library Episodes" shall mean those audiovisual productions
constituting Assets acquired by Licensor at the Final Closing of
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<PAGE> 18
the Asset Purchase Agremeent, including any modifications thereof made by
Licensee.
"Licensed Trademarks" shall mean the titles, trademarks and service
marks used in connection with the New Episodes and the Library Episodes.
"Modified Format" shall mean the work resulting from any modification
by Licensee of any of the Licensed Formats. Each Modified Format shall also be
deemed a Licensed Format.
"Modified Library Episode" shall mean the work resulting from any
modification by Licensee of a Library Episode. Each Modified Library Episode
shall also be deemed a Library Episode.
"New Copyrights" shall have the meaning specified in paragraph 13(a)
of this Agreement.
"New Episodes" shall mean any audiovisual production based on the
Licensed Formats (including any Modified Format) produced by Licensee or its
licensees pursuant to this Agreement.
"Programs" shall mean Library Episodes and New Episodes.
"Standards" shall have the meaning specified in paragraph 19(a) of
this Agreement.
"Term" shall have the meaning specified in paragraph 3 of this
Agreement.
29. EFFECTIVENESS: This Agreement shall become effective at the Final
Closing of the Asset Purchase Agreement and shall be of no force or
effect if the Asset Purchase Agreement is terminated in accordance
with its terms.
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IN WITNESS WHEREOF, the parties have executed this agreement as of the
date first above written.
MARK GOODSON PRODUCTIONS, LLC., as LICENSOR
By: ALL AMERICAN COMMUNICATIONS, INC.
Its: OPERATOR
By: /s/ THOMAS BRADSHAW
----------------------------
Name: Thomas Bradshaw
Its: Chief Financial Officer
Date: October 6, 1995
ALL AMERICAN GOODSON, INC., as LICENSEE
By: /s/ THOMAS BRADSHAW
------------------------------------
Name: Thomas Bradshaw
Its: Chief Financial Officer
Date: October 6, 1995
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SCHEDULE I
1. Memorandum of Agreement, dated as of February 3, 1972, between CBS
Television Network and Price Productions, Inc. (as heretofore amended,
supplemented, extended or modified).
2. Master Programming Agreement, dated as of November 25, 1992, among
Sony Pictures Cable Venturers I and certain predecessors and
constituent members of Mark Goodson Productions, L.P.
3. Agreement, dated June 28, 1991, between Goodson Television
Productions, Inc. and Grundy International Operations Limited.
4. Agreement, dated October 17, 1989 between the Family Company and
Grundy International Operations Limited.
5. Fremantle International Inc. Licenses i.e., "Goodson Agreements" as
defined under the Acquisition Agreement, dated August 3, 1994, between
Interpublic and All American.
6. Letter Agreement, dated February 4, 1994, between Direction Video Inc.
and Price Productions, Inc. (as heretofore amended, supplemented,
extended or modified).
7. Letter Agreement, dated April 7, 1994, between Colm O'Shea Limited and
Conscient, Inc. (as heretofore amended, supplemented, extended or
modified).
8. Letter Agreement, dated April 7, 1994, between Colm O'Shea Limited and
Price Productions, Inc. (as heretofore amended, supplemented, extended
or modified).
9. Letter Agreement, dated as of January 1, 1995, between Mark Goodson
Productions and Pressman Toy Corporation, extending the Trademark
License Agreement, dated as of November, 1989, between Pressman Toy
Corporation and The New Family Company.
10. License Agreement, dated July 1, 1994, between Interactive Network,
Inc. and Mark Goodson Productions, L.P.
11. License Agreement, dated May 23, 1994, between Interactive Network
Inc. and Mark Goodson Productions, L.P.
12. License Agreement Deal Memo of Agreement between Gametek, Inc. and The
New Family Company.
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Schedule II
(a) Pursuant to Paragraph 18 of the License Agreement, AAG shall
remit to Licensor (and shall use its reasonable best efforts
to cause its sublicensees to remit to it) the Domestic Net
Profits, as defined below, derived from AATV's exploitation of
the Programs in the AATV Territories.
"Domestic Net Profits" shall mean the sum of the following:
(i) "Domestic Net Profits - Programs originally produced
for Networks" (to include the ABC, CBS, NBC, FOX and
all U.S. Cable Television Networks) shall mean the
gross receipts received by AATV or Licensee after the
Final Closing under the Asset Purchase Agreement from
the production and distribution pursuant to the
rights granted in this license agreement (which shall
in any event exclude rights granted pursuant to the
license referred to in paragraph 4(a) for so long as
such license is in effect) of New Episodes in the
AATV Territories from either ABC, CBS, NBC, FOX or
any U.S. Cable Television Network less the following,
which, in the case of items (b), (c) and (d) below,
must be within the budget approved by Licensor (which
approval shall not be unreasonably withheld) or
otherwise approved by Licensor in writing:
(a) a distribution fee to AATV equal to 10% of
gross receipts,
(b) all production costs, as generally understood
within the entertainment industry,
attributable to the game shows and/or series,
and
(c) all residual, re-use, supplemental market
and/or replay fees and/or other actual
out-of-pocket costs directly attributable to
the game shows, and/or series, including
Third Party Costs, and
(d) any unrecouped prior period deficits
following the Final Closing (excluding
recoupment of prior year distribution fees
arising from the same game show and/or series
to the extent such recoupment would cause
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such game show and/or series to have a loss
on a cumulative basis).
(ii) "Domestic Net Profits - Programs originally produced
for First-Run Syndication" shall mean the gross
receipts received by AATV or Licensee after the Final
Closing from the production or distribution pursuant
to the rights granted in this license agreement of
New Episodes with respect to the initial exhibition
in the AATV Territories on first-run syndication,
less the following, which, in the case of items (b),
(c), (d) and (e) below, must be within the budget
approved by Licensor (which approval shall not be
unreasonably withheld) or otherwise approved by the
Licensor in writing:
a) a distribution fee payable to AATV equal to
25% of gross receipts,
b) all marketing and distribution expenses
directly attributable to the distribution of
the game shows and/or series,
c) all production costs as generally understood
within the entertainment industry,
attributable to the game shows and/or series,
d) all residual, re-use, supplemental market
and/or replay fees and/or other actual
out-of-pocket costs directly attributable to
the game shows and/or series, including Third
Party Costs,
e) any unrecouped prior period deficits after
the Final Closing (excluding recoupment of
prior year distribution fees arising from the
same game show and/or series to the extent
such recoupment would cause such game show
and/or series to have a loss on a cumulative
basis), and
f) fifty (50%) percent of the balance remaining,
after the deduction of items (a)-(e) above.
(iii) "Domestic Net Profits - Library Sales" shall mean the
gross receipts received by AATV or Licensee after the
Final Closing from the distribution of Programs with
respect to re-run syndication in the AATV
Territories, less the following, which, in
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the case of items (b), (c), (d) and (e) below, must
be within the budget approved by Licensor (which
approval shall not be unreasonably withheld) or
otherwise approved by the Licensor in writing:
a) a distribution fee payable to AATV equal to
25% of gross receipts,
b) all marketing and distribution expenses
directly attributable to the distribution of
the game shows and/or series,
c) all reformatting and duplicating costs,
d) all residual, re-use, supplemental market,
rerun and/or replay fees and/or other actual
out-of- pocket costs directly attributable to
the game shows and/or series, including Third
Party Costs, and
e) any unrecouped prior period deficits after
the Final Closing (excluding recoupment of
prior year distribution fees arising from the
same game show and/or series to the extent
such recoupment would cause such game show
and/or series to have a loss on a cumulative
basis).
(iv) Merchandising Licensing Activities: Receipts
received, net of expenses approved by Licensor, are
split 50% to AATV and 50% to Licensor (except in the
case of merchandising revenue, where the split of the
net will be 25% to AATV and 75% to Licensor).
(v) Other Licensing Activities: Receipts received, net
of expenses approved by Licensor, from any licensing
activity not addressed in clauses (i) through (iv)
above and entered into pursuant to Licensee's grant
of rights under paragraph 2 of this Agreement shall
be split 50% to AATV and 50% to Licensor (except, in
the case of licensing activities, when a third party
shares in the revenue, where the split of the net
will be 25% to AATV and 75% to Licensor).
(b) Pursuant to paragraph 18 of this license agreement, AAG shall
remit to Licensor (and shall use its reasonable best efforts
to cause its sublicensees to remit to it)
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the following applicable percentages of revenues derived from
AAFI's below-delineated licensing of the Programs in the AAFI
Territories:
(i) Local Co-Productions - "Local Co-Productions" are
defined as the production of local versions of the
Programs where AAFI provides creative supervision on
an ongoing basis but is not directly responsible for
the production budget. Said revenues from each
Program are divided in the following order of
priority:
a) AAFI recoups its actual out-of-pocket
production costs to the extent set forth in
the production budget for such Programs that
have been approved by Licensor, including its
per episode producer's fees but excluding any
overhead for production offices, except to
the extent within the production budget
approved by Licensor (which approval shall
not be unreasonably withheld).
b) AAFI receives a fee of 10% of remaining
revenues from production of such Program
until such time as the $25 million principal
amount comprising Tranche E of the Chemical
Facility (or, until Tranche E is consummated,
the equivalent amount of AACI's Working
Capital Line), together with all accrued
interest thereon is fully paid, or if the
Chemical Facility is refinanced, until the
earlier of repayment of such new facility and
April 13, 1999 whereupon AAFI shall no longer
be entitled to such fee.
c) Remainder is split: 50% to AAFI and 50% to
Licensor.
(ii) Local Full Productions - "Local Full Productions" are
defined as the production of local versions of the
Programs which are produced either by AAFI alone or
in association with the local production partner for
which AAFI is directly or indirectly responsible for
the production budget. Said revenues are divided in
the following order of priority:
a) AAFI recoups its actual out-of-pocket
production costs to the extent set forth in
the production budget for such Programs,
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including, but not limited to, all
above-the-line and below-the-line production
budget items (as such items are customarily
understood in the industry but only to the
extent set forth in the production budget
approved by Licensor (which approval shall
not be unreasonably withheld)), allocation of
overhead for specific production offices
(provided, that in no case may overhead
exceed 100% of AAFI's direct costs)
supervisory executive producers' fees, studio
costs at pre- agreed fixed day rate card
(provided, that AAFI shall not recoup any
costs associated with its failure to satisfy
any studio volume discount requirements or
other production-related discount
requirements) and local legal fees that
relate solely to the production of local
versions of the Programs.
b) AAFI receives a fee of 10% of remaining
revenues.
c) Remainder is split: 50% to AAFI and 50% to
Licensor
(iii) Format Licenses (i.e., the licensing of the right to
produce the Programs) where AAFI does not provide any creative
or other supervisory services:
receipts received, net of expenses approved
by Licensor, are split 50% to AAFI and 50% to
Licensor
(iv) Tape Licenses (i.e., the licensing of U.S.
productions (existing tapes) of the Programs):
receipts received, net of expenses approved
by Licensor, are split 35% to AAFI and 65% to
Licensor
(v) Merchandising and Ancillary Licensing Activities:
receipts received, net of expenses approved
by Licensor, are split 50% to AAFI and 50% to
Licensor (except, in the case of
merchandising, when the broadcaster shares in
merchandising revenue, the split of the net
will be 25% to AAFI and 75% to Licensor)
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(vi) Other Licensing Activities:
receipts received, net of expenses approved by
Licensor, from any licensing activity not addressed
by clauses (i) through (v) above and entered into
pursuant to Licensee's grant of rights under
Paragraph 2 of this Agreement are split 50% to AAFI
and 50% to Licensor (except, in the case of licensing
activities, when a third party shares in the revenue,
the split of the net will be 25% to AAFI and 75% to
Licensor).
(c) During the term of the license agreement referred to in
Paragraph 4(a), the division of revenues relating to such
license agreement shall be subject to and governed by the
provisions of said license agreement. Licensee agrees to remit
100% of the receipts received by it as Sublicensor under said
license agreement to the Licensor hereunder.
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EXHIBIT C
U.S. PRODUCTION STANDARDS AND STANDARDS OF QUALITY
PRODUCTION STANDARDS
To be substantially consistent with the standards in effect
prior to the date hereof.
OTHER STANDARDS
Licensee shall adhere to the following standards at all times:
1. No information of any sort with respect to questions to be asked or
materials to be used on any New Episode shall be supplied or suggested
in any way to, or asked of, contestants or participants in any game or
contest recorded in any New Episode in advance of broadcast.
2. No favoritism shall be exercised in the treatment of any contestant or
participant.
3. The winning contestant or participant shall be offered in full the
exact or substantially the same prize which is announced on the
program in accordance with the provisions of the contestant release
form.
4. No game or contest, or any element thereof, shall involve any unfair
treatment of any contestant, participant or any member of the public.
5. No ambiguous statement or representation that might be misleading to
the public shall be made, nor shall the game or contest be conducted
in a manner that might be misleading to the public.
6. No element of any program shall be injurious or prejudicial to the
interests of the public, Licensor, or honest programming or reputable
business in general.
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EXHIBIT 10.4
"THE PRICE IS RIGHT"
NETWORK PRODUCTION AGREEMENT
1. IDENTIFICATION
This production agreement (the "Agreement") is dated as of the 6th day
of October, 1995 and is entered into between Interpublic Game Shows,
Inc., a wholly-owned subsidiary of The Interpublic Group of Companies,
Inc., whose address is 1271 Avenue of the Americas, New York, N.Y.
10020 ("Sub"), and TPIR LLC, a California limited liability company,
directly or indirectly controlled and majority-owned by the Estate of
Mark Goodson, whose address is 5750 Wilshire Blvd., Los Angeles, CA
90036 ("Producer"), with respect to the program entitled "The Price Is
Right" (the "The Price Is Right" or the "Program").
2. THE SERIES
"The Price Is Right" is a game show series currently produced by Mark
Goodson Productions, L.P. and aired on the CBS Network. Pursuant to
an Asset Purchase Agreement dated as of October 6, 1995 between Mark
Goodson Productions, L.P., The Child's Play Company, and the Estate of
Mark Goodson on the one hand, and Mark Goodson Productions, LLC (the
"LLC"), The Interpublic Group of Companies, Inc., and All American
Communications, Inc. on the other hand (the "Asset Purchase
Agreement") and certain license agreements, specifically the Main
License Agreement from the LLC to All American Goodson, Inc. ("AAG")
as licensee and the Sublicense from AAG to Sub as sublicensee (the
"Network License Agreement"), Sub has the right to produce and license
new episodes of the Program (together with replays as part of the
series commitment) to either the CBS, NBC, ABC or FOX Television
Networks (each a "Network") or to the UPN or WBN Television Network
(each a "Network Alternate"), in the United States, its territories
and possessions (and to license retransmission thereof in Canada in
the English language) during the Term. The Program is currently being
produced through the 1995/1996 broadcast season on the CBS Network
pursuant to a network license agreement (the "CBS License") the rights
and obligations under which have been assigned from the LLC to AAG to
Sub. Without limiting the generality of the foregoing AAG has
irrevocably assigned its
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right to collect receivables earned under the CBS License to Sub. It
is currently anticipated that Sub may from time to time enter into a
license agreement for the Program with one or more of the Networks or
Network Alternates for the period after the 1995/1996 broadcast season
and during the Earn-Out Period referenced in the Asset Purchase
Agreement whereby Sub shall be responsible for causing the production
of the Program in accordance with the content, approval and delivery
requirements set forth in the Network License Agreement. For so long
as this Agreement is in effect, without the Producer's prior written
consent, which shall not be unreasonably withheld or delayed, Sub shall
not amend, modify, terminate (other than expressly in accordance with
the Network License Agreement's terms as in effect on the date hereof
and as thereafter modified in accordance therewith) the Network License
Agreement or waive any rights or consent to the foregoing, under the
provisions of the Network License Agreement, which would have a
material adverse effect on Producer's rights under this Agreement.
3. PRODUCTION FEE
Pursuant to this Agreement, Producer shall receive a production fee
(the "Production Fee") equal to $1,000 per episode, payable weekly
during the Term, with respect to New Episodes of "The Price Is Right"
produced and delivered during such week provided that in no event shall
such fees in the aggregate exceed $6,000 per week in any given week
and; provided further that the Production Fee shall be due and payable
only if and when the Earn-Out Payments due and payable are in excess of
the Production Fee then due. The LLC or Sub shall credit against the
Earn-Out Payments (including the maximum Earn-Out Payments payable
under Section 3.8(a) of the Asset Purchase Agreement) any Production
Fees paid under this Agreement. Producer shall not receive any
Production Fees with respect to any week during which New Episodes are
not produced. No Production Fee will be paid with respect to replays.
4. PRODUCTION
Sub hereby engages Producer and Producer hereby agrees to produce the
Program as a work-for-hire within the definition of the United States
Copyright Act of 1976, as amended, for the LLC and exclusively for
Network or Network Alternate exploitation and retransmission in Canada
in the English language only. Sub derives its rights to "The Price Is
Right" from AAG pursuant to the Network License Agreement. AAG in turn
derives its rights in "The Price Is Right" from the LLC, which is the
sole and exclusive owner of the
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copyright, trademark and other intellectual property rights in and to
"The Price Is Right". Therefore, because the LLC commissions the work
made for hire by Licensee, the LLC shall directly own the New Episodes
of "The Price Is Right" as a "work made for hire". Producer shall
produce the Program consistent with past practices of Mark Goodson
Productions, L.P. and shall discharge all above-the-line and
below-the-line costs in connection therewith (as such terms are
generally understood in the entertainment industry and set forth in the
approved budget), in accordance with the content, approval and delivery
requirements (inclusive of number of episodes of the Program to be
produced) set forth in the Network License Agreement. For the 1995/1996
broadcast year, Producer will be responsible for paying any increases
in the prize budget or other "below the line" costs or host fees not
reimbursed by CBS in excess of the approved production budget amounts.
For subsequent broadcast years, if any, during the term hereof, any
increases in the prize budget or "below the line" costs or host fees
for which the Producer is responsible and not reimbursed by the Network
or Network Alternate would be considered increased production costs
which would reduce the Domestic Net Profits and the resulting
computation of Earn-Out Payments, if any, due to the Representative
under the Asset Purchase Agreement. Producer will comply with all
applicable requirements under the CBS License as then in effect or
other Network or Network Alternate license agreement relating to the
Program. NOTE: Each broadcast year must contain at least 130 new and
original episodes except as approved from time to time by the Network
or Network Alternate. Producer agrees to fully pay and discharge all
fees, expenses, costs and other obligations incurred in connection with
the production, distribution, licensing or other exploitation of the
Library Episodes and the New Episodes of the Program, including without
limitation, any and all obligations under any union, guild and/or
residual agreement.
5. PRODUCTION BUDGET
The 1995/1996 production budget of the Program, which is limited to
$3,229,000 for the balance of the 1995/1996 broadcast season after
the Escrow Closing Date referred to in the Asset Purchase Agreement,
is attached as Exhibit A hereto (the "1995/1996 Budget"). The
portion of the 1995/1996 Budget applicable following the Final
Closing shall be equal to $3,229,000 less 30% of all payments from
the CBS Network to the Partnership during the Interim Period ending
at the Final Closing. The 1996/1997 production
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budget for the Program (if renewed on a Network or Network Alternate
in accordance with the terms hereof) shall be limited to $5,000,000
for the entire broadcast season. Production budgets for subsequent
broadcast years, if any, of the Program shall have increases only to
the extent reasonably necessary based on increased out- of-pocket
costs but in any event no more than 5% in annual increases (on a
compounded basis) over the 1996/1997 Budget, exclusive of increases
in the Bob Barker (or other to-be-selected host) host fees or
increases in the prize budget or "below the line" costs covered by
the first paragraph of Section 5 hereof. The production budget shall
contain no overhead reimbursement to the Producer, other than actual
direct overhead consistent in all material respects with the
1995/1996 Budget or as otherwise approved by Sub, and no contingency
amounts, unless approved in writing by Sub and AAG.
Except for Bob Barker, whose fees shall be subject solely to Network
approval, the host (and the fees for the host) shall be subject to
the approval of Sub and the Network (which approval, in the case of
Sub, shall not be unreasonably withheld or delayed).
Producer shall invoice Sub weekly for Programs produced during that
week up to an aggregate amount in any broadcast year of the amount
of the approved production budget for that year (or portion thereof
in accordance herewith), incurred in connection with the production
of the Program plus any amounts incurred by Producer that are
reimbursable by the Network or Network Alternate apart from and in
addition to the Network or Network Alternate license fee
("Reimbursements"). With respect to the 1995/1996 broadcast year,
unless Sub shall reasonably adjust the payment procedure in light of
a change in circumstances, each payment from the CBS Network
(exclusive of Reimbursements) shall be divided by Sub as follows:
30% shall cover production costs, 52.5% shall be remitted as
Earn-Out Payments pursuant to Section 3.8(a)(i) of the Asset
Purchase Agreement (less Production Fees credited against such
payments) and 17.5% shall be retained by Sub, for remittance to AAG
in accordance with the terms of the Network License Agreement.
Nothing herein shall reduce or increase the total production costs
payable to Producer for the balance of the 1995/1996 broadcast year,
and the above payments shall be adjusted from time to time
accordingly. Producer shall provide Sub with appropriate
documentation (i.e., copies of receipts for
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<PAGE> 5
out-of-pocket expenses if requested by Sub) in connection with such
out-of-pocket costs. Producer shall be responsible for all
production budget overages (except as expressly provided herein) and
Producer shall retain all production budget underages calculated for
the broadcast year.
Sub's obligation to reimburse Producer's production budget costs and
Reimbursements and to pay Producer its Production Fees shall be
subject to, and payable from, its receipt of license fee payments
and related Reimbursements from the Network or Network Alternate.
Within five Business Days of receipt of such license fee payments
and related Reimbursements from the Network or Network Alternate,
Sub shall reimburse Producer for its applicable production budget
cost and the Production Fees in accordance with paragraph 3. To the
extent that Producer's costs and expenses and Reimbursements exceed
the Network or Network Alternate license fee payments (and related
Reimbursements) to Sub, Producer shall not be reimbursed for such
excess.
Sub shall, on behalf of the LLC, make certain Earn-Out Payments to
Representative in accordance with, and subject to the terms of,
Section 3.8(a)(i) of the Asset Purchase Agreement to the extent
described in the Network License Agreement, but only to the extent
of receipts it receives from CBS or another Network or Network
Alternate net of any costs and expenses permitted to be incurred by
it under the Network License Agreement as in effect on the date
hereof and as thereafter modified in accordance herewith in
connection with the exploitation of the Program.
Representative and its authorized representatives shall, upon
request received by the Sub in writing, have reasonable access
during normal business hours to any books, records and documents
relevant to the calculation by the Sub (or, if in Sub's possession,
the LLC) of any Earn-Out Payment under Section 3.8(a)(i) of the
Asset Purchase Agreement with respect to Domestic Net Profits -
Price Is Right Network (as defined in the Asset Purchase Agreement).
All calculations of Domestic Net Profits - Price is Right Network
shall be made by the LLC or the Sub in accordance with the Asset
Purchase Agreement. Any disputes as to the calculation of the
Earn-Out Payments shall be subject to resolution pursuant to Article
10 of the Asset Purchase Agreement.
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6. TERM; NETWORK EXTENSIONS OR RENEWALS
a. The term (the "Term") of this agreement shall be for a period
coterminous with the Program remaining in continuous annual
(i.e., broadcast year) production (i.e., each broadcast year
must consist of at least 130 new and original episodes unless
otherwise approved from time to time by the Network or Network
Alternate), but not to exceed the Earn-Out Period, including
any extension thereof, as defined in and in accordance with the
Asset Purchase Agreement. In the event that the Program does
not remain in continuous annual Network or Network Alternate
production, this Agreement shall terminate.
b. Sub and AAG, as Licensor under the Network License Agreement,
shall have the right in their business judgment to mutually
agree or refuse to agree to any Network or Network Alternate
license, extension or renewal of the Program relating to the
Program remaining in continuous annual production, subject to
the following provisions:
Sub and AAG shall each agree to any extension or renewal
of the current CBS License or any license, extension or
renewal which ends on or before the last day of the
Earn-Out Period (including any extension thereof the
reasonable likelihood of which the parties will consider
in good faith at the relevant time of extension or
renewal) to be in effect during the term of this
Agreement so long as (x) the LLC will ultimately receive
at least $1.0 million, net of expenses (such expenses
shall include amounts payable by Sub pursuant hereto and
pursuant to the Network License Agreement) , including
Earn-Out Payments and the Production Fees, annually in
respect of such license during its term based on the
approved production budget (including host fees and
together with reasonably anticipated overages for
increased prize costs or other "below the line" costs
reimbursable to Producer in accordance herewith) and (y)
there are no other changes from the current CBS License
or any other Network or Network Alternate license then in
effect with respect to such Program that Sub or AAG
believes in good faith could have a material adverse
effect on Sub or AAG.
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Producer and Sub will jointly attend every meeting with
the CBS Network (unless the parties agree otherwise) with
respect to any extension or renewal of the current CBS
License and reasonably consult with each other prior to
and after such meeting (it being agreed that failure of
Producer to notify Sub of every meeting or to consult
with Sub following every meeting will not constitute a
material breach hereof except to the extent Sub, AAG or
the LLC is materially damaged thereby). In the event
that for any reason the CBS License is canceled or it is
determined that the Program will not be renewed or
extended (the "Non-Renewal Event"), Producer will have a
45-day period from such date (subject to extension in
accordance with the penultimate paragraph under this
paragraph 6), jointly with Sub, to negotiate with other
Networks or Network Alternates (provided that Sub shall
control any negotiations with UPN, subject to
consultation rights in favor of Producer). Sub shall
enter into a Network or Network Alternate license (or an
executed binding deal memorandum setting forth the
material terms of such license) to be in effect during
the term of this Agreement so long as (x) the LLC will
receive at least $1.0 million, net of expenses (such
expenses shall include amounts payable by Sub pursuant
hereto and pursuant to the Network License Agreement),
including Earn-Out Payments and the Production Fees,
annually in respect of such license during its term based
on the approved production budget (including host fees
and together with reasonably anticipated overages for
increased prize or other "below the line" costs
reimbursable to Producer in accordance herewith) and (y)
there are no other changes from the CBS License or any
other Network or Network Alternate license then in effect
with respect to such Program that Sub or AAG believes in
good faith could have a material adverse effect on Sub or
AAG.
If Producer's negotiations with CBS for an extension or
renewal of the CBS License shall terminate unsuccessfully
and Producer shall receive an offer from another Network
or Network Alternate with respect to the continuous
Network or Network Alternate broadcast of The Price Is
Right, which offer complies with the provisions of this
paragraph 6(b) or is otherwise acceptable to Producer,
Sub and AAG but is subject to a CBS
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<PAGE> 8
first refusal, Producer shall have the right to transmit
such offer to the CBS Network, and if the CBS Network
does not accept such offer, to accept such Network or
Network Alternate offering within five business days
after the expiration of the CBS Network first refusal
(subject to Sub's right to control negotiations, if any,
with UPN). Anything herein to the contrary
notwithstanding, Producer's 45-day period within which to
secure a commitment for an extension of the Network or
Network Alternate broadcasts of "The Price Is Right"
shall be extended accordingly.
In the event that Sub does not enter into a new Network
or Network Alternate license (or any executed binding
deal memorandum setting forth the material terms of such
license) not expressly required by the terms hereof
within 45 days after the Non-Renewal Event, this
agreement shall terminate (and the Term shall expire) for
all periods after the then current broadcast year.
7. COPYRIGHT
The LLC shall own all right, title and interest in and to all
copyrights in all New Episodes, the Licensed Formats and any Modified
Format and shall also own all right, title and interest in and to the
New Copyrights. Sub shall assign or otherwise convey to the LLC any
intellectual property ownership rights to any New Episode of the
Program that it may have or hereafter acquire pursuant to the terms of
Network License Agreement.
8. TRADEMARKS
Producer agrees that the Licensed Trademark is the exclusive property
of the LLC. Any goodwill associated with Producer's use of the
Licensed Trademark shall inure to the exclusive benefit of the LLC.
Producer shall not take any actions inconsistent with LLC's ownership
of the Licensed Trademark, and shall promptly notify LLC, AAG and Sub
of any unauthorized use of the Licensed Trademark of which it becomes
aware.
9. NO LIENS
Producer shall not permit any claims, liens, security interests or
encumbrances to be placed upon any of Producer's rights in any New
Episode, Library Episode Modified Library Episode, Licensed Format
Modified Format,
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advertising and promotional material related thereto, or any New
Copyright or Licensed Trademark, except for any of the foregoing
approved by the LLC and the Sony Lien.
10. STORAGE
Producer shall properly store each master or original negative of each
new Episode or Library Episode in accordance with standards
customarily observed by major television producers in the United
States and, to the extent applicable, as required by the Sony
Agreement.
11. DELIVERY
Producer shall deliver the final master tapes of the Program in
accordance with the content, approval and delivery requirements to be
provided to Producer by the Network or Network Alternate. During the
term of the Sony Agreement, Producer shall deliver copies of such
tapes, at its expense, to the extent required by the Sony Agreement
and shall inform the LLC of the time, quantity and content of such
deliveries.
12. APPROVALS
Sub shall have a right of approval in regard to the principal
production elements of the Program (i.e., the producer, director and
host of the Program). Sub acknowledges that the principal production
elements used for the 1994/1995 broadcast season are approved by it
for the 1995/1996 and subsequent broadcast seasons, if any. Sub shall
have a right of mutual approval in regard to all key creative elements
of the Program but not the production budget to the extent it is in
conformity with paragraph 5. Sub shall have the right to have a
representative present during all phases of the production of the
Program and at all significant production meetings.
13. MUSIC
Producer shall cause all original music (compositions and master
tapes, collectively the "Original Music") used or embodied in the
Program to be composed and produced as a work-for-hire within the
definition of the United States Copyright Act of 1976, as amended, for
the LLC. The LLC shall have the right to approve all agreements
relating to the music. Sub shall own all right, title and interest in
the Original Music subject to the composer's (i.e., the so-called
writer's) share of performance rights in which Score
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Productions, Inc. or Kalehoff Productions, Inc. has an interest as set
forth in the Asset Purchase Agreement.
14. PROMOS
If requested by the Network or Network Alternate and either included
as part of the approved production budget or reimbursed by the Network
or Network Alternate, Producer shall be responsible for producing and
discharging the cost of a number (agreed upon with the Network or
Network Alternate) of on-air promos for the Program, consistent with
the Network's or Network Alternate's requirements.
15. RESIDUALS
Producer, as part of the production budget, shall be responsible for
all residual and replay fees arising in connection with the Network
License Agreement during the Term.
16. NO PARTNERSHIP OR JOINT VENTURE
This Agreement shall not be construed to create a partnership or joint
venture between Producer and Sub.
17. INSURANCE
Producer shall procure or cause to be procured and maintain the
customary insurance carried by producers of television programs,
including Errors and Omissions Insurance or Broadcasters Liability
Insurance covering the exploitation of the program naming Sub as an
additional insured and insuring Producer, and the network broadcasting
the Program, the limits of such insurance being $1,000,000 for a
single claim and $3,000,000 for all claims in the aggregate. Such
insurance policy (policies) shall not contain any unusual exclusions
or deductions. Producer may not cancel, terminate, amend, modify or
otherwise alter such policy (policies) without thirty days' prior
written notice to Sub and without Sub's prior written consent, which
consent shall not be unreasonably withheld. Producer shall supply
certificates of insurance evidencing the above coverage to Sub
promptly upon execution of this agreement.
18. WARRANTIES, REPRESENTATIONS AND COVENANTS
Producer represents, warrants and agrees (i) that it has the full
right and power to enter into this Agreement and to perform all its
obligations hereunder; (ii) that neither the Program nor any parts
thereof including the titles shall
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contain any materials which will violate any law or infringe on or
violate any right of any third party, including, without limitation,
any copyright, trademark or trade name, patent or any contract or
agreement, any civil, personal or property right; right of privacy or
any other right whatsoever belonging to or constituting a slander or
libel against any person, firm or corporation whatsoever; (iii) that
all payments and rights clearances required to be made or secured in
connection with the production and exhibition of the Program in
accordance with this Agreement will have been fully made by Producer
including but not limited to, residuals, clip rights and fees, and
music rights and fees; (iv) Producer has not and will not, while this
agreement is in effect, grant any rights with respect to Library
Episodes of the Program in contravention of the rights herein granted
except for those rights which have already been previously granted
pursuant to the Sony Agreement; (v) Producer will deliver each Episode
of the Program during the Term to the applicable Network free and
clear of any and all claims, liens or encumbrances other than those
created by a party other than Producer; (vi) all credits appearing on
the New Episodes, as delivered to the network, shall be correct and
consistent with all credit obligations to third parties; (vii)
Producer shall fully pay and discharge in a timely manner any and all
obligations under any union, guild, and residual agreement arising
during the Term in connection with the Network or Network Alternate
production, distribution, licensing or other exploitation of Library
Episodes or New Episodes of the Program; (viii) Producer shall
indemnify and hold harmless Sub, its officers and directors, from any
claim resulting from any breach by Producer of the representations,
warranties and covenants herein made.
In addition, Producer shall indemnify and hold harmless Sub from and
against any loss, liability, damage, obligation, cost or expense
(including reasonable legal fees and expenses and any amount paid in
settlement) resulting from a claim, demand, lawsuit, action or
proceeding, relating to or arising from or in connection with (i) the
current, former or prospective employment, retention or compensation
of any person (including, without limitation, any performer, actor,
musician, host, writer, director, producer or any person retained in
any capacity as an independent contractor) in connection with the
Network or Network Alternate production, distribution, licensing or
other exploitation of Library Episodes or New Episodes of the Program
during the Term, including, without limitation, any obligation under
any union, guild or residual agreement or (ii) any obligation or
liability of the LLC, AAG or Sub under the Sony Agreement
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except to the extent arising from the LLC's breach of the provisions of
Schedule 7.14 of the Asset Purchase Agreement to be performed by it.
Sub represents and warrants: that it has full right and power to enter
into this Agreement; that it shall pay all sums for which it is
expressly responsible hereunder; Sub is, and during the term of this
Agreement shall continue to be, a wholly owned subsidiary of
Interpublic; no consents are required for Sub to enter into the
transactions contemplated by this Agreement or the Network License
Agreement; and that it shall indemnify and hold harmless Producer from
any claim resulting from any breach by Sub of its representations and
warranties herein made.
Producer shall, to the fullest extent permitted by law, indemnify and
hold harmless the LLC, AAG and Sub from and against any loss,
liability, damage, obligation, cost or expense (including reasonable
legal fees and expenses and any amount paid in settlement) resulting
from a claim, demand, lawsuit, action or proceeding, relating to or
arising from or in connection with the Assumed Contracts or otherwise
in connection with the employment, retention or compensation of any
person (including, without limitation, any performer, actor, musician,
host, writer, director, producer or any person retained in any
capacity) in connection with The Price Is Right or the other
obligations of Producer arising during the Term hereof. For purposes
hereof, the term "Assumed Contracts" shall mean the agreements with
Bob Barker (dated 4/9/91, as amended), Rod Roddy (dated 6/1/94, as
amended, between Trior Entertainment f/so/o Rod Roddy and the
Partnership, Holly Hallstrom (dated 3/16/94, as amended) and Janice
Pennington (dated 2/11/94, as amended), which contracts have been
assigned to the LLC.
19. MUSIC RIGHTS
Producer represents and warrants that it has secured or will secure
all necessary music rights, including without limitation, music
synchronization licenses in all musical compositions contained in the
Program and that all performing rights are: (a) controlled by American
Society of Composers, Authors and Publishers; SESAC, Inc., BMI; or (b)
in the public domain; or (c) controlled by Producer. Producer agrees
to indemnify and hold harmless Sub from and against any damages or
expenses which may arise out of the performance of any music in the
Program in connection with the exercise of its rights hereunder, the
performing rights of which come within category (c) above. Producer
agrees to furnish Sub with all information reasonably requested by Sub
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concerning the title, composer and publisher of all such music.
20. THIRD PARTY BENEFICIARIES
The parties hereto agree that AAG and LLC are intended third-party
beneficiaries of the provisions of this Agreement.
21. TERMINATION
Sub shall have the right to terminate this Agreement at any time in
the event that (i) Producer commits a material breach of any of its
obligations under this Agreement and fails to cure such breach within
60 days of receiving a written notice of default from Sub, (ii) a
petition is filed by or against Producer for voluntary or involuntary
bankruptcy or pursuant to any other insolvency law, or Producer makes
or seeks to make a general assignment for the benefit of its creditors
or applies for or consents to the appointment of a trustee, receiver
or custodian for it or a substantial part of its property, (iii)
subject to the provisions set forth in paragraph 6 hereof, the CBS
License terminates, or any other Network or Network Alternate license
terminates. In the case of termination of this Agreement pursuant to
the foregoing provision, AAG shall continue to have the right, through
the Main License Agreement and the Network License Agreement (if such
Network License Agreement is still in effect), to produce, record,
distribute, market, broadcast, transmit, exhibit or otherwise exploit
the Program for commercial purposes.
22. ASSIGNMENTS
This Agreement may not be assigned by either party without the other
party's prior written approval (which consent will not be unreasonably
withheld or delayed). The parties agree that any direct or indirect
change of control of Producer prior to the completion of the 1997/1998
broadcast season shall be deemed to constitute an assignment of
Producer's rights hereunder and shall require Sub's prior written
approval. The parties further agree that prior to any direct or
indirect change of control of Producer, whether or not prior to the
completion of the 1997/1998 broadcast season, the LLC and Sub shall be
given 30 days prior written notice of such proposed direct or indirect
change of control (disclosing the identity of the new controlling
party and the material terms of such proposed change of control) and
AACI shall have the right of first refusal to acquire control of the
Producer on the same terms proposed in such
13
<PAGE> 14
notice. In the event AACI does not exercise its right of first
refusal, but subject to any consent required in the second sentence of
this paragraph, Producer shall have the right to consummate such
direct or indirect change in control on terms no more favorable to the
transferee of such control than set forth in such notice within the 90
day period following non- exercise by AACI of such right of first
refusal. The parties acknowledge that a direct or indirect change of
control shall not be deemed to have occurred (x) as of a result of any
change in the identity of the Executors of the Estate in accordance
with the terms of the will of Mark Goodson or (y) so long as any of
Richard Schneidman, Jeremy Shamos, Marvin Goodson, David Hurwitz or
Royal E. Blakeman, or any combination of them, have direct or indirect
control of the Producer.
23. MISCELLANEOUS
This Agreement shall be governed by the laws of the State of New York
applicable to agreements executed and to be wholly performed therein
and shall not be modified except by a written document executed by
both parties hereto. This agreement expresses the entire
understanding of the parties hereto and replaces any and all former
agreements or understandings, written or oral, relating to the subject
matter hereof. Paragraph headings are for convenience of the parties
only and shall have no legal effect whatsoever. All notices
hereunder, unless specified otherwise shall be in writing and shall be
given at the addresses set forth in Paragraph 1 either by personal
delivery, telegram, telefax or telex (toll prepaid) or by registered
or certified mail (postage prepaid) and shall be deemed given on the
date delivered, telegraphed, telefaxed or telexed or the date mailed.
24. DEFINITIONS
Capitalized terms used in this Agreement without definition shall have
the meanings set forth in the Asset Purchase Agreement.
"Library Episodes" shall mean the audiovisual productions of the
Program constituting Assets acquired by the LLC at the Final Closing
of the Asset Purchase Agreement and licensed to Sub, directly or
indirectly by AAG through the Network License Agreement, including any
modifications thereof.
"Licensed Formats" shall mean the outlines, treatments or formats for
"The Price Is Right" shows in the Territory, including any
modifications thereof made by Sub.
14
<PAGE> 15
"Licensed Trademark" shall mean the trademark "The Price Is Right".
"Modified Format" shall mean the work resulting from any modification
by Sub of the Licensed Formats. Each Modified Format shall also be
deemed a Licensed Format.
"New Copyrights" shall have the meaning specified in paragraph 9(a) of
the Network License Agreement.
"New Episodes" shall mean any audiovisual production based on the
Licensed Formats (including any Modified Format) produced by Sub or
its sublicensees pursuant to this Agreement.
25. EFFECTIVENESS
This Agreement shall become effective at the Final Closing of the
Asset Purchase Agreement and shall be of no force or effect if the
Asset Purchase Agreement is terminated in accordance with its terms.
15
<PAGE> 16
IN WITNESS WHEREOF, the parties have executed this agreement as of
the date first written above.
INTERPUBLIC GAME SHOWS, INC. ("SUB")
By: /s/ THOMAS VOLPE
----------------------------
Its: Chairman and President
Date: October 6, 1995
TPIR LLC ("PRODUCER")
By: /s/ RICHARD SCHNEIDMAN
----------------------------
Name: Richard Schneidman
Title: Vice President
16
<PAGE> 1
EXHIBIT 10.5
OPERATING AGREEMENT
OF
MARK GOODSON PRODUCTIONS, LLC
DATED AS OF
SEPTEMBER 18, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. "Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. "Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3. "Articles of Organization" . . . . . . . . . . . . . . . . . . . . . . . 2
1.4. "Bankruptcy" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5. "Capital Contribution" . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6. "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7. "Majority-in-Interest of Members" . . . . . . . . . . . . . . . . . . . 2
1.8. "Membership Percentage Interest" . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
ORGANIZATION OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1. Formation; Qualification . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2. Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3. Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4. Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5. Principal Place of Business: Registered Office and Agent . . . . . . . . 3
2.6. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7. Organization Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III
MEMBERS AND MEMBERS' INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1. Names, Percentage Interest and Capital Contribution of Members . . . . . 4
3.2. Limitation on Liability . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE IV
MANAGEMENT OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE V
CAPITAL CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VII
TRANSFER OF MEMBER INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE VIII
DISSOLUTION OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE IX
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
9.1. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
9.2. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
9.3. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
9.4. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
9.5. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
9.6. Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
9.7. Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
9.8. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
9.9. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
9.10. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
ii
<PAGE> 4
OPERATING AGREEMENT
OF
MARK GOODSON PRODUCTIONS, LLC
This Operating Agreement of Mark Goodson Productions, LLC, a
New York limited liability company (the "Company"), dated as of September 18,
1995, is made by and between All American Goodson, Inc., a Delaware corporation
("AAG") and All American Communications, Inc., a Delaware corporation ("AACI")
(individually, a "Member" and, collectively, together with any additional
members hereafter admitted to the Company in accordance with this Agreement,
the "Members").
W I T N E S S E T H:
WHEREAS, the parties hereto desire to enter into this
Agreement to define and express all of their respective rights and obligations
with respect to the formation and operation of the Company as a limited
liability company;
WHEREAS, the parties hereto desire to be bound by the terms of
this Agreement.
NOW, THEREFORE, in consideration of the promises contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the
meanings specified (terms in the singular to have the correlative meaning in
the plural and vice versa):
1.1. "Act" means the New York Limited Liability Company Law,
as amended from time to time.
1.2. "Agreement" means this operating agreement (including
the Exhibits hereto), as originally executed and as amended from time to time,
and the terms "hereof", "hereto" and "hereunder", when used in reference to
this Agreement, refer to this Agreement as a whole, unless the context
otherwise requires.
1
<PAGE> 5
1.3. "Articles of Organization" means the Articles of
Organization of the Company to be filed with the New York Department of State
in the form of Exhibit A hereto, as the same may be amended from time to time
in accordance with the Act.
1.4. "Bankruptcy", when used with reference to any Member,
shall be deemed to occur (a) when the Member (i) makes an assignment for the
benefit of creditors, (ii) files a voluntary petition in bankruptcy, (iii) is
adjudged a bankrupt or insolvent or has entered against him or her an order for
relief in any bankruptcy or insolvency proceeding, (iv) files a petition or
answer seeking for himself or herself any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
statute, law or regulation, (v) files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against him or
her in any proceeding seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief or (vi) seeks,
consents to or acquiesces in the appointment of a trustee, receiver or
liquidator of the Member or of all or any substantial part of his properties,
or (b) (i) 120 days after the commencement of any proceeding against the Member
seeking reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation, the
proceeding has not been dismissed, or (ii) 90 days after the appointment
without his or her consent or acquiescence of a trustee, receiver or liquidator
of the Member or of all or any substantial part of his or her properties, the
appointment is not vacated or stayed, or within 90 days after the expiration of
any such stay, the appointment is not vacated.
1.5. "Capital Contribution" for each Member means the
aggregate of sums contributed by such Member pursuant to Section 3.1 and
Article V hereof.
1.6. "Code" means the Internal Revenue Code of 1986, as
amended.
1.7. "Majority-in-Interest of Members" means Members whose
aggregate Membership Percentage Interests exceed 50 percentage points. In the
case of determinations to be made by a Majority-in-Interest of Members upon
admission of a new Member, such percentage shall be calculated without giving
effect to the Membership Percentage Interest of the new Member.
1.8. "Membership Percentage Interest" means, as to any
Member, the percentage of the capital and profits interests in the Company.
See Exhibit B.
ARTICLE II
ORGANIZATION OF THE COMPANY
2.1. Formation; Qualification. The Company shall be formed
under the laws of the State of New York on the date of the filing of the
Articles of Organization with the
2
<PAGE> 6
New York Department of State. The Members shall cause to be executed and filed
the Articles of Organization and such other documents and instruments with such
appropriate authorities as may be necessary or appropriate from time to time to
comply with all requirements for the formation and operation of a limited
liability company in New York. In addition, the Members shall execute and file
all requisite documents and instruments to enable the Company to qualify to do
business as a foreign limited liability company in each jurisdiction in which,
in the reasonable judgment of the Members, such qualification may be necessary
or appropriate for the conduct of the business of the Company.
2.2. Name. The business of the Company shall be conducted
under the name "Mark Goodson Productions, LLC."
2.3. Purposes. The purpose for which the Company is formed
is to engage in any lawful business, purpose or other activity subject to the
provisions of section 202 of the Act.
2.4. Powers. The Company shall possess and may exercise
all powers necessary or convenient to the conduct, promotion or attainment of
its business, purposes or activities, to the fullest extent provided in the
Act.
2.5. Principal Place of Business: Registered Office and Agent.
(a) The principal place of business of the Company shall
be located at such place as shall be determined by the Members.
(b) The Company's registered office shall be at the
office of its registered agent located at 1633 Broadway, New York, NY 10019 and
the registered agent at such address shall be CT Corporation. The registered
office and agent may be changed from time to time by the Members by amending
the Articles of Organization in accordance with the provisions of this
Agreement and the Act.
2.6. Term. The term of the Company shall be fifty (50)
years from the date of the filing of the Articles of Organization with the New
York Department of State, unless the Company is earlier dissolved in accordance
with the provisions of this Agreement or the Act.
2.7. Organization Expenses. The Company shall pay all
expenses incurred in connection with the formation and organization of the
Company. Such expenses shall include, without limitation, fees of legal
counsel, fees of a registered agent, registration fees and other like expenses.
Each Member, however, shall bear its own expenses in connection with its
consideration of an investment and its acquisition of a membership interest in
the Company, including, without limitation, the fees of any attorney, financial
advisor or other consultant.
3
<PAGE> 7
ARTICLE III
MEMBERS AND MEMBERS' INTERESTS
3.1. Names, Percentage Interest and Capital Contribution of
Members. The names of the Members, their respective Membership Percentage
Interests in the Company and their initial Capital Contributions to the Company
are set forth on Exhibit B hereto.
3.2. Limitation on Liability. No Member shall be liable
under a judgment, decree or order of any court, or in any other manner, for a
debt, obligation or liability of the Company, except as provided by law or as
specifically provided otherwise herein.
ARTICLE IV
MANAGEMENT OF THE COMPANY
The Company shall be managed exclusively by the Members of the
Company in their membership capacity.
ARTICLE V
CAPITAL CONTRIBUTIONS
The Members shall make the Capital Contributions set forth on
Exhibit B.
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
The profits and losses shall be allocated and distributions
shall be made between the Members in accordance with their Membership
Percentage Interests.
ARTICLE VII
TRANSFER OF MEMBER INTERESTS
No Member shall have the right to confer upon a non-member all
the attributes of the Member's interests in the Company without the consent of
the non-transferring Member. No Member may transfer its interest in the
Company or any interest therein, and any attempt to do so will be null and
void.
4
<PAGE> 8
ARTICLE VIII
DISSOLUTION OF THE COMPANY
(a) The Company shall be dissolved, its assets disposed
of and its affairs wound up upon the first to occur of the following:
(i) the expiration of the Company's term as
stated in Section 2.6 hereof;
(ii) the death, insanity, retirement, resignation,
expulsion, incapacity, withdrawal, Bankruptcy or dissolution of a Member;
(iii) a determination by the unanimous written
consent of all the Members that the Company should be dissolved;
(iv) the sale of all or substantially all of the
assets of the Company;
(v) the entry of a decree of judicial dissolution
under section 702 of the Act; and
(vi) at such earlier time as may be required by
applicable law.
(b) Notwithstanding the foregoing, a Majority-in-Interest
of Members (determined on the basis solely of the remaining Members) may,
within 90 days of any event described in (a) hereof (i) continue the Company or
(ii) transfer the assets of the Company to a newly organized company and accept
an interest in the Company in exact proportion to their respective interests in
the Company at the time of dissolution.
ARTICLE IX
MISCELLANEOUS
9.1. Notices. All notices and other communications under
this Agreement shall be in writing and shall be deemed given when (a) delivered
by hand, (b) transmitted by telecopier (and confirmed by return facsimile), or
(c) delivered, if sent by Express Mail, Federal Express or other express
delivery service, or registered or certified mail, return receipt requested, to
the addressee at the following addresses or telecopier numbers (or to such
other addresses, telex number or telecopier number as a party may specify by
notice given to the other party pursuant to this provision):
5
<PAGE> 9
If to Mark Goodson Productions, LLC:
2114 Pico Boulevard
Santa Monica, CA 90405
Attention: All American Communications, Inc. (Operator)
Telecopier No.: (310) 452-9053
with a copy to:
Kaye, Scholer, Fierman, Hays & Handler
1999 Avenue of the Stars
Los Angeles, CA 90067
Attention: Barry Dastin, Esq.
Telecopier No.: (310) 788-1200
If to All American Goodson, Inc.
2114 Pico Boulevard
Santa Monica, CA 90405
Attention: Thomas Bradshaw
Telecopier No.: (310) 452-9053
with a copy to:
Kaye, Scholer, Fierman, Hays & Handler
1999 Avenue of the Stars
Los Angeles, CA 90067
Attention: Barry Dastin, Esq.
Telecopier No.: (310) 788-1200
If to All American Communications, Inc.
2114 Pico Boulevard
Santa Monica, CA 90405
Attention: Thomas Bradshaw
Telecopier No.: (310) 452-9053
6
<PAGE> 10
with a copy to:
Kaye, Scholer, Fierman, Hays & Handler
1999 Avenue of the Stars
Los Angeles, CA 90067
Attention: Barry Dastin, Esq.
Telecopier No.: (310) 788-1200
9.2. Amendments. Except as otherwise provided herein, this
Agreement may be amended, modified or revised, in whole or in part, by the
consent of a Majority-In-Interest of Members.
9.3. Binding Effect. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto, their
respective personal representatives, heirs, successors and permitted assigns;
provided, however, that nothing contained in this Section 9.3 shall be
construed to permit any attempted assignment or other transfer which would be
prohibited or void pursuant to any other provision of this Agreement.
9.4. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
9.5. Headings. All headings contained in this Agreement are
inserted as a matter of convenience and for ease of reference only and shall
not be considered in the construction or interpretation of any provision of
this Agreement.
9.6. Exhibits. All exhibits annexed hereto are expressly
made a part of this Agreement, as fully as though completely set forth herein,
and all references to this Agreement herein or in any of such exhibits shall be
deemed to refer to and include all such exhibits or schedules.
9.7. Terms. Common nouns and pronouns shall be deemed to
refer to masculine, feminine, neuter, singular or plural, as the identity of
the person or persons may require.
9.8. Severability. Each provision hereof is intended to be
severable. If any term or provision is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the validity of the
remainder of this Agreement.
9.9. Entire Agreement. This Agreement, including all
Exhibits hereto, constitutes the entire agreement of the parties hereto with
respect to the matters hereof and supersedes any prior oral and written
understandings or agreements.
7
<PAGE> 11
9.10. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to conflict of law principles thereof.
IN WITNESS WHEREOF, this Operating Agreement has been executed
as of the date first above written.
ALL AMERICAN GOODSON, INC.
A Delaware corporation
/s/ THOMAS BRADSHAW
----------------------------------------
Name: Thomas Bradshaw
Title: Senior Executive Vice President
ALL AMERICAN COMMUNICATIONS, INC.
A Delaware corporation
/s/ THOMAS BRADSHAW
----------------------------------------
Name: Thomas Bradshaw
Title: Senior Executive Vice President
8
<PAGE> 12
EXHIBIT A
ARTICLES OF ORGANIZATION
9
<PAGE> 13
EXHIBIT B
MEMBERS
<TABLE>
<CAPTION>
Initial Capital Membership
Name Contribution Percentage Interest
---- --------------- -------------------
<S> <C> <C>
All American Goodson, Inc., $25.00 25%
a Delaware corporation
All American Communications, Inc., $75.00 75%
a Delaware corporation
</TABLE>
10
<PAGE> 1
EXHIBIT 10.6
Amended and Restated Limited Liability Company
Operating Agreement
of
Mark Goodson Productions, LLC
This Amended and Restated Limited Liability Company Operating
Agreement of Mark Goodson Productions, LLC, a New York limited liability company
(the "Company"), made and entered into as of October 6, 1995 (the "Agreement"),
by and between The Interpublic Group of Companies, Inc., a Delaware corporation
("Interpublic"), Infoplan International, Inc., a Delaware corporation
("Infoplan"), All American Communications, Inc., a Delaware corporation ("All
American"), and All American Goodson, a Delaware corporation ("All American
Goodson"), as members (each, a "Member" and collectively, with any other persons
that hereinafter become a party to this Agreement pursuant to the terms of this
Agreement, the "Members").
WITNESSETH:
WHEREAS, the Company was formed as a limited liability company
under the laws of the State of New York pursuant to the Articles of Organization
of the Company filed with the Department of State of the State of New York on
September 13, 1995;
WHEREAS, All American and All American Goodson executed an
Operating Agreement, dated as of September 18, 1995, with respect to the Company
(the "Original Agreement");
WHEREAS, pursuant to an Asset Purchase Agreement, dated as of
October 6, 1995, Interpublic has purchased an undivided interest in the Assets
(as hereinafter defined) and the Company has purchased an undivided interest in
the Assets;
WHEREAS, Interpublic has assigned a portion of its undivided
interest in the Assets to Infoplan;
WHEREAS, Interpublic and Infoplan desire to contribute their
respective undivided interests in the Assets to the Company;
WHEREAS, in exchange for Interpublic's and Infoplan respective
contribution of their undivided interests in the Assets and for other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, All American and All American Goodson desire to admit Interpublic
and Infoplan as additional Members in the Company, and Interpublic and Infoplan
desire to be so admitted; and
WHEREAS, All American, All American Goodson, Interpublic and
Infoplan desire to amend and restate the Original Agreement in the manner set
forth herein, and to continue the business of the Company pursuant to this
Agreement.
NOW THEREFORE, the undersigned hereby agree as follows:
1
<PAGE> 2
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. The following terms used in this
Agreement shall have the following meanings (all terms defined in the singular
have the correlative meanings when used in the plural and vice versa).
"Acceleration Event" shall mean any of the following acts or
events provided that such acts or events occur prior to the Third Ordinary
Distribution Period: (i) the dissolution or liquidation of the Company, (ii) the
Transfer by the All American Members of their respective Interests to Persons
other than to any direct or indirect wholly-owned subsidiary of All American
unless consented to in writing by Interpublic, (iii) the liquidation of any All
American Member, (iv) the occurrence and continuance of any Tranche E Event of
Default or the breach by Chemical of any material term of the Intercreditor
Agreement, including, without limitation, the seizure, taking or realization
upon the IPG Collateral by Chemical or any bank party to the Chemical Credit
Facility other than in accordance with the Intercreditor Agreement or (v) the
Distributable Cash of the Company is less than one million ($1,000,000) for any
consecutive twelve month period, commencing on September 30, 1996 and measured
at the end of each calendar quarter.
"Acceleration Request" shall have the meaning set forth in
Section 4.2.
"Acceptance" shall have the meaning set forth in Section 6.2.
"Act" shall mean the New York Limited Liability Company Act,
as amended from time to time.
"Advisory Committee" shall have the meaning set forth in
Section 3.1.
"Advisory Committee Members" shall have the meaning set forth
in Section 3.2.1.
"Affiliate" means, with respect to any Person, (i) any Person
directly or indirectly controlling, controlled by, or under common control with
such Person, (ii) any Person owning or controlling twenty-five percent (25%) or
more of the outstanding voting securities of such Person, (iii) any officer,
director, or general partner of such Person, or (iv) any Person who is an
officer, director, general partner, trustee, or holder of twenty-five percent
(25%) or more of the voting securities of any Person described in clauses (i)
through (iii) of this sentence. For purposes of this definition, (a) the term
"control," "is controlled by," or "is under common control with" shall mean the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person or Entity, whether through the ownership
of voting securities, by contract or otherwise, (b) Fremantle shall be deemed to
be an Affiliate of All American and not an Affiliate of Interpublic, (c)
Interpublic (or its designee on All American's Board of Directors) shall be
deemed not to be an Affiliate of All American and (d) the Company
2
<PAGE> 3
shall be deemed not to be an Affiliate of any Member and any Member shall be
deemed not to be an Affiliate of the Company.
"Agent" shall mean Chemical Bank or any successor agent under
the Chemical Credit Facility.
"Agreement" shall mean this Amended and Restated Operating
Agreement, as originally executed and as modified, amended or supplemented from
time to time.
"All American" shall mean All American Communications, Inc., a
Delaware corporation.
"All American Class A Common Stock" shall mean All American's
class of voting Common Stock, $.0001 par value per share, or any shares of any
class of voting stock resulting from any reclassification thereof which have no
preference in respect of dividends or of amounts payable in the event of
liquidation, dissolution or winding-up of All American.
"All American Class B Common Stock" shall mean All American's
class of non-voting Common Stock, $.0001 par value per share, or any shares of
any class of non-voting stock resulting from any reclassification thereof which
have no preference in respect of dividends or of amounts payable in the event of
liquidation, dissolution or winding-up of All American.
"All American Fremantle II" shall mean All American Fremantle
II, Inc., a Delaware corporation.
"All American Goodson" shall mean All American Goodson, Inc.,
a Delaware corporation.
"All American Members" shall mean All American and All
American Goodson.
"All American TV" shall mean All American Television, Inc., a
Delaware corporation.
"All American Television II" shall mean All American
Television II, Inc., a Delaware corporation.
"Arbitration Committee" shall have the meaning set forth in
Section 3.8.
"Articles of Organization" shall mean the Articles of
Organization of Mark Goodson Productions, LLC as filed with the Secretary of
State of the State of New York, as the same may be modified, amended or
supplemented from time to time.
"Assets" shall have the meaning specified in the Asset
Purchase Agreement.
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"Asset Purchase" shall mean the transaction pursuant to which
the Company and Interpublic each purchased an undivided interest in the Assets
from the Sellers.
"Asset Purchase Agreement" shall mean the Asset Purchase
Agreement, dated as of October 6, 1995, by and among Goodson, Childs Play, the
Company, All American, Interpublic and the Estate of Mark Goodson as modified,
amended or supplemented from time to time.
"Assumption and Assignment Agreement" shall mean the
Assumption and Assignment Agreement, to be dated as of the Final Closing Date
among Interpublic, Infoplan and the Company.
"Bona Fide Offer" shall mean, with respect to an offer from a
Person pursuant to Section 6.2, an offer from a Person who (i) in the reasonable
view of the recipient of such offer makes such offer in good faith and (ii) is
not an Affiliate of the Person receiving the offer.
"Business Day" shall mean any day on which commercial banks
are open for business in New York, New York.
"Call Notice" shall have the meaning set forth in Section 6.4.
"Call Notice Date" shall have the meaning set forth Section
6.4.
"Call Purchase Price" shall have the meaning set forth in
Section 6.4.
"Capital Account" shall mean, as of any given date, the
account established for each Member pursuant to and adjusted in accordance with
Section 4.3.
"Capital Contribution" shall mean any contribution to the
capital of the Company in cash or property by a Member whenever made.
"Cause" shall mean the occurrence and continuation of any of
the following with respect to the Operator (or any of the Operator's executive
officers performing, directly or indirectly, functions under this Agreement or
any of the Transaction Documents on behalf of the Company): (i) a material
breach of the Operator's obligations under this Agreement if such breach is not
cured within thirty (30) days after receiving notice of such breach; (ii) any
act of fraud, misappropriation, embezzlement or similar conduct involving or
affecting the Company; (iii) a Sale of All American; (iv) a Change in Ownership;
(v) the Transfer by any All American Member of its Interests other than to a
direct or indirect wholly-owned subsidiary of All American; (vi) the failure of
the Company to make Ordinary Distributions in accordance herewith for two (2)
consecutive quarters when there are sufficient funds to be distributed and there
are no legal or contractual restrictions on making such distributions; or (vii)
the declaration of a Tranche E Event of Default unless such Tranche E Event of
Default shall have been waived or rescinded.
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"Change in Ownership" shall mean the occurrence of any of the
following events: (i) the beneficial ownership of Anthony Scotti and Related
Parties prior to any conversion of any of the Debentures or exchange or
conversion of Class B Common Stock for or into Class A Common Stock is less than
twenty percent (20%) of All American's outstanding Class A Common Stock; (ii)
the beneficial ownership of Anthony Scotti and Related Parties following the
conversion of any of the Debentures or exchange or conversion of any shares of
Class B Common Stock for or into Class A Common Stock is less than ten percent
(10%) of All American's outstanding Class A Common Stock; or (iii) a Sale of All
American.
"Chemical Credit Facility" shall mean the loan agreement among
All American, Chemical Bank, as Agent, and the Banks named therein, dated as of
April 13, 1995 as modified, amended or supplemented from time to time.
"Childs Play" shall mean The Child's Play Company, a joint
venture among MG Productions Inc., Jill Shamos, Elizabeth Martin, Estate of Mark
Goodson, Marjorie Goodson Grantor Trust, Jerry Shamos, Jonathan Goodson and
Toasty Productions, Inc.
"Claims" shall have the meaning set forth in Section 10.2.
"Code" shall mean the Internal Revenue Code of 1986 as
amended, and the rules and regulations thereunder.
"Company" shall have the meaning set forth in the Introduction
to this Agreement.
"Contractual Obligation" shall mean, with respect to any
Person, any contract, agreement, deed, mortgage, lease, license, commitment or
understanding, whether or not in writing, pursuant to which such Person is bound
or otherwise legally obligated.
"Debentures" shall mean All American's 6.5% Convertible
Subordinated Debentures due 2003.
"Default Rate" shall mean interest at the rate which is three
(3) basis points above Chemical Bank's Alternate Base Rate as from time to time
in effect.
"Distributable Cash" shall mean all cash and cash equivalents
(including interest earned on any Permitted Investments) received by the Company
(including, for such purposes, funds deemed to be paid pursuant to the
Intercreditor Agreement from the LLC Funds Account referred to therein) other
than any moneys received by the Company pursuant to the Asset Purchase
Agreement, including without limitation, moneys received pursuant to
indemnification claims and as result of a decrease in the purchase price for the
Assets, less all amounts paid or set aside (excluding distributions to the
Members) by the Company (including, without limitation, amounts paid or set
aside for Earn-Out Payments) to operate its business or satisfy its obligations
under the Transaction Documents (other than pursuant to indemnification claims
arising thereunder).
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"Earn-Out Payments" shall mean, for the Earn-Out Period, the
obligation of the Company to make payments to the Sellers as required by Section
3.8 of the Asset Purchase Agreement.
"Earn-Out Period" shall mean the five or ten year period
following the closing of the Asset Purchase in which Earn-Out Payments may be
due as required by Section 3.8 of the Asset Purchase Agreement.
"Entity" shall mean any general partnership, limited
partnership, limited liability company, corporation, joint venture, trust,
business trust, cooperative or association or any foreign trust or foreign
business organization.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended and the rules and regulations thereunder.
"Final Closing" shall have the meaning set forth in the Asset
Purchase Agreement.
"Final Closing Date" shall mean the date of the Final Closing
of the Asset Purchase Agreement.
"First Ordinary Distribution Period" shall have the meaning
set forth in Section 5.3.
"Fiscal Year" shall mean the Company's fiscal year, which
shall be the calendar year.
"Fremantle" shall mean Fremantle International, Inc., a New
York corporation.
"GAAP" shall mean United States generally accepted accounting
principles.
"Goodson" shall mean Mark Goodson Productions, LLP, a
California limited partnership, including its successors and assigns.
"Governmental Authority" shall mean any court, government
(federal, state, local or foreign), department, commission, board, agency,
official or other regulatory, administrative, judicial or governmental
authority.
"Guarantee Agreements" shall mean the Guarantee provided by
All American Goodson in favor of Interpublic to be dated as of the Final Closing
Date, the Guarantee provided by All American Television II in favor of
Interpublic to be dated as of the Final Closing Date; and the Guarantee provided
by All American Fremantle II in favor of Interpublic to be dated as of the Final
Closing Date.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder.
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"Indemnified Person" and "Indemnified Persons" shall have the
meanings set forth in Section 10.2.
"Infoplan" shall mean Infoplan International, Inc., a Delaware
corporation.
"Intercreditor Agreement" shall mean the agreement among the
Company, Interpublic, the Agent, All American, AAG, All American Fremantle II
and All American Television II, to be dated as of October 6, 1995.
"Interest" shall mean each Member's interest as a Member in
the Company, including any and all rights and benefits to which the Member may
be entitled under this Agreement and the obligations of the Member under this
Agreement.
"Interpublic" shall mean The Interpublic Group of Companies,
Inc., a Delaware corporation.
"Interpublic Members" shall mean Interpublic and Infoplan.
"Interpublic Shares" shall mean the number of shares of
Interpublic Common Stock, $.10 par value, delivered to Sellers at the closing of
the Asset Purchase (as adjusted as a result of any stock split, stock dividend,
reclassification, combination or similar event).
"Interpublic Game Shows" shall mean Interpublic Game Shows,
Inc., a Delaware corporation.
"Interpublic's Costs of Funds" shall mean, as of any date,
Interpublic's average annual borrowing rate under its long term debt obligations
for the immediately preceding fiscal year as determined by Interpublic in good
faith.
"IPG Collateral" shall have the meaning set forth in the
Intercreditor Agreement.
"IPG Sub License Agreement" shall mean "The Price is Right"
Network License Agreement between All American Goodson and Interpublic Game
Shows dated as of October 6, 1995.
"Legal Requirement" shall mean any federal, state, local or
foreign law, statute, standard, ordinance, code, order, rule, regulation,
resolution or promulgation, or any order, judgment, requirement or decree of or
binding agreement with any Governmental Authority, or any applicable license,
franchise permit or similar right granted under any of the foregoing, or any
similar provision having the force and effect of law.
"License Agreement" shall mean the License Agreement dated
October 6, 1995, between the Company and All American Goodson, a copy of which
is attached hereto as Exhibit A.
"Liquidating Agent" shall have the meaning set forth in
Section 8.3.
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"LLC Funds" shall have the meaning set forth in the
Intercreditor Agreement.
"LLC Funds Account" shall have the meaning set forth in the
Intercreditor Agreement.
"Loss" shall have the meaning set forth in Section 10.2.
"Make Whole Amount" shall mean, as of any date, the sum of (i)
all Ordinary Distributions and Special Distributions distributed to the All
American Members as of such date minus the amount of Ordinary Distributions and
Special Distributions distributed to the Interpublic Members as of such date
plus (ii) interest on fifty percent (50%) of the average outstanding amount
calculated pursuant to clause (i) (from the date of the first of such
distributions until the Make Whole Amount is distributed to the Interpublic
Members in full) at a rate equal to Interpublic's Cost of Funds applicable to
such periods.
"Make Whole Default" shall have the meaning set forth in
Section 4.2.
"Member" and "Members" shall have the meanings set forth in
the Introduction to this Agreement.
"Membership Percentage" shall mean each Member's percentage
interest in the Company for purposes of voting as a Member and receiving
allocations or profit and loss and distributions.
"Nasdaq" shall mean the National Association of Securities
Dealers Automated Quotation System.
"Network Production Agreement" shall mean "The Price is Right"
Network Production Agreement between Interpublic Game Shows and TPIR LLC dated
as of October 6, 1995.
"Notice Date" shall have the meaning set forth in Section 6.2.
"Notice of Offer" shall have the meaning set forth in Section
6.2.
"Operator" shall mean All American or its legal successor.
"Ordinary Default Distributions" shall have the meaning set
forth in Section 5.3.
"Ordinary Distributions" shall have the meaning set forth in
Section 5.3.
"Original Agreement" shall have the meaning set forth in the
recitals.
"Payment" shall have the meaning set forth in Section 8.2.
"Permitted Investments" shall mean (i) those investments
unanimously
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consented to by the Members; (ii) negotiable certificates of deposit, demand
deposits (whether interest bearing or not) and time deposits having maturities
of not more than six (6) months from the date of acquisition; (iii) securities
issued or directly and fully guaranteed or insured by the United States of
America or any agency or instrumentality thereof (provided that the full faith
and credit of the United States of America is pledged in support thereof) having
maturities of not more than six (6) months from the date of acquisition; (iv)
corporate obligations rated P-1 by Moody's Investors Service, Inc. or A-1 by
Standard & Poor's Corporation having maturities not more than six (6) months
from the date of acquisition; and (v) investments in money market funds
substantially all of the assets of which are comprised of securities of the type
described in clauses (ii) through (iv) above.
"Person" shall mean any individual or Entity, and the heirs,
executors, administrators, legal representatives, successors, and assigns of
such Person where the context so permits.
"Pledge Agreement" shall mean the pledge agreement between the
All American Members and Interpublic, to be dated as of the Final Closing Date.
"Prospective Purchaser" shall have the meaning set forth in
Section 6.2.
"Public Float Requirements" shall mean, as of the date the
Interpublic Members are to receive shares of All American Class B Common Stock
pursuant to Section 4.2, that the following is true: (i) the number of shares of
All American Class B Common Stock issued and outstanding (not including treasury
shares or shares held by All American or its Affiliates) is at least equal to
twice the number of such shares that are to be issued to the Interpublic Members
pursuant to Section 4.2(a); and (ii) that the shares of All American Class B
Common Stock are registered under the Exchange Act and listed on or admitted to
trading on an authorized stock exchange or quoted on Nasdaq at the time of such
issuance.
"Put Notice" shall have the meaning set forth in Section 6.4.
"Put Notice Date" shall have the meaning set forth
Section 6.4.
"Put Purchase Price" shall have the meaning set forth in
Section 6.4.
"Related Agreements" shall have the meaning set forth in the
Asset Purchase Agreement.
"Related Parties" shall mean members of Anthony Scotti's
immediate family (including Benjamin J. Scotti), Persons for whom Anthony
Scotti, from time to time, holds an irrevocable proxy (while he holds such
proxy), the estate of Anthony Scotti, trusts established for the benefit of
Anthony Scotti or his immediate family and Interpublic.
"Remaining Members" shall have the meaning set forth in
Section 6.2.
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"Restricted Period" shall mean the period commencing on the
date hereof and ending on the date the Make Whole Amount has been distributed to
Interpublic and Ordinary Distributions are being made to the Members pursuant to
Section 5.3(a)(iii).
"Sale of All American" shall mean the occurrence of any of the
following events: (i) any Person or group (as defined under the Section 13(d)(3)
of the Exchange Act) other than Anthony Scotti or any Related Party beneficially
owns more than fifty percent (50%) of All American's Class A Common Stock; or
(ii) All American merges or consolidates with another Entity and All American is
not the surviving Entity. For purposes of this Agreement, the term "beneficial
ownership" shall have the meaning set forth in Rule 13d-3 of the Exchange Act
"Sale of All American Call Notice" shall have the meaning set
forth in Section 7.2.
"Sale of All American Call Notice Date" shall have the meaning
set forth Section 7.2.
"Sale of All American Call Purchase Price" shall have the
meaning set forth in Section 7.2.
"Sale of All American Put Notice" shall have the meaning set
forth in Section 7.1.
"Sale of All American Put Notice Date" shall have the meaning
set forth Section 7.1.
"Sale of All American Put Purchase Price" shall have the
meaning set forth in Section 7.1.
"Second Ordinary Distribution Period" shall have the meaning
set forth in Section 5.3.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Sellers" shall mean, collectively, Goodson and Childs Play.
"Selling Member" shall have the meaning set forth in Section
6.2.
"Special Distributions" shall have the meaning set forth in
Section 5.3.
"Tag-Along Rights" shall mean the rights of the Members
pursuant to Section 6.2.
"Tax Matters Partner" shall have the meaning set forth in
Section 9.5.
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"Taxes" shall mean all taxes, assessments, imposts and other
charges of every kind and nature arising under or imposed by any applicable law,
rule, regulation, ruling or order of any Governmental Authority including,
without limitation, all interest, penalties and additions assessed with respect
to any of the foregoing.
"Third Ordinary Distribution Period" shall have the meaning
set forth in Section 5.3.
"Tranche E Event of Default" shall have the meaning specified
in the Intercreditor Agreement.
"Transaction Documents" shall mean the Asset Purchase
Agreement; the License Agreement; the IPG Sub License Agreement; the Network
Production Agreement; the Intercreditor Agreement; the Put Agreement by and
among Interpublic, Goodson and Childs Play dated as of October 6, 1995; the
Pledge Agreement; the Guarantee Agreements; the letter agreement among
Interpublic, Infoplan, Interpublic Game Shows, All American, All American
Goodson, All American Fremantle II, All American Television II and the Company
dated as of October 6, 1995; and any of the Related Agreements.
"Transfer" shall have the meaning set forth in Section 6.1.
"Treasury Regulations" shall mean proposed, temporary and
final regulations promulgated under the Code in effect as of the date of filing
the Articles of Organization and the corresponding sections of any regulations
subsequently issued that amend or supersede such regulations.
SECTION 1.2 Interpretation. For all purposes of this
Agreement, except as otherwise expressly provided herein or unless the context
otherwise requires:
(a) words importing gender include all genders;
(b) any reference to an "Article" or a "Section" refers to an
Article or a Section, as the case may be, of this Agreement; and
(c) all references to this Agreement and the words "herein",
hereof", "hereto" and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular Article, Section or other
subdivision.
SECTION 1.3 Effectiveness. This Agreement shall not be
effective until the Final Closing Date. If the Final Closing Date does not occur
by December 5, 1995, this Agreement shall terminate and be null and void unless
the parties hereto agree in writing to extend such date.
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ARTICLE II
ORGANIZATION
SECTION 2.1 Office of the Company. The Company shall have its
principal office at the Operator's New York office and may establish such other
offices or places of business for the Company as the Members may deem
appropriate.
SECTION 2.2 Purposes of the Company. The purposes of the
Company shall be (i) to own and license the rights in its library of television
programs, including, without limitation, its rights in the Library Rights and
Library Tangible Assets (both terms as defined in the Asset Purchase Agreement),
to licensees, (ii) to exploit opportunities presented to the Company pursuant to
Section 3.10 and (iii) to engage in any other lawful business the Company is
permitted to under the Act with the consent of the Members.
SECTION 2.3 Term of the Company. The existence of the Company
commenced on the date the Articles of Organization were filed with the
Department of State of the State of New York and shall continue until October 6,
2085, unless sooner terminated in accordance with this Agreement or the Act.
ARTICLE III
MANAGEMENT OF COMPANY
SECTION 3.1 Management Generally.
(a) The business and affairs of the Company will be managed by
the Members. The Members, acting in their capacity as Members under the Act,
shall have full, complete and exclusive authority, power and discretion to
manage and control the business of the Company. Unless authorized to do so by
this Agreement or by the Members acting in accordance with this Agreement, no
attorney-in-fact, employee or other agent of the Company shall have the
authority to (i) manage the business and affairs of the Company or (ii) contract
for or incur on behalf of the Company any debts, liabilities or other
obligations.
(b) The Members shall direct, manage and control the business
of the Company to the best of their ability, and each Member shall perform its
duties as Member in good faith, in a manner it reasonably believes to be in the
best interests of the Company and with such care as an ordinary prudent Person
in a like position would use under similar circumstances. As of the effective
date of this Agreement, the All American Members and the Interpublic Members
each have equal Membership Percentages.
(c) The Members shall appoint an advisory committee to assist
in the management of the Company (the "Advisory Committee") through which the
Members will exercise their authority, power and discretion to manage and
control the business of the Company.
(d) All decisions and actions taken by the Members under the
authority of
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this Article III will be binding upon all the Members and the Company.
SECTION 3.2 The Advisory Committee; General Powers. There
shall be an Advisory Committee which shall have all powers of the Members except
for those set forth in Section 402 (c) and Section 402(d) of the Act including,
without limitation, the following powers and duties:
(a) Review of the performance of the Operator;
(b) Review and submission to the Members of a report prepared
by the Operator which sets forth the business activities of the Company each
fiscal quarter, submitted to the Members within forty-five (45) days after the
end of the fiscal quarter to which it corresponds;
(c) Review of any audits performed by the Members pursuant to
Section 9.2;
(d) Establishment of investment guidelines from time to time
in connection with investment of license payments received from any licensee;
(e) The taking of any action on behalf of the Members that
they may deem appropriate resulting from the actions set forth in paragraphs
(a) - (d) above; and
(f) Such other powers and duties as the Members may, from time
to time, delegate to it.
3.2.1 Number and Term of Office. The members of the Advisory
Committee ("Advisory Committee Members") shall be appointed by the Members. The
number of Advisory Committee Members which shall constitute the entire Advisory
Committee shall be two; one nominee of the Interpublic Members and one nominee
of the All American Members. Each Advisory Committee Member shall have an
alternate member to act in his stead when he is absent. The Interpublic Members
shall appoint Joseph Studley as their initial nominee for the Advisory Committee
and Thomas Volpe as his alternate and the All American Members shall appoint
Lawrence E. Lamattina as their initial nominee for the Advisory Committee and
Lou Festa as his alternate (and such alternates shall be considered to be the
Advisory Committee Members when acting in such alternate capacity). Appointments
made pursuant to this Section 3.2.1 and Section 3.2.9 (other than the initial
appointments designated in this Section 3.2.1) shall be evidenced by an
instrument in writing signed by the appointing Members and delivered to the
other Members and to the Operator. Each Advisory Committee Member (and
alternate) shall hold office until his successor is appointed and qualified or
until his earlier resignation, removal or death.
3.2.2 Quorum and Manner of Acting. The presence of both
Advisory Committee Members shall constitute a quorum for the transaction of
business. In the absence of a quorum, the Advisory Committee Member present may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum
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shall be present. The unanimous affirmative vote of each Advisory Committee
Member present at a meeting at which a quorum is present shall be an act of the
Advisory Committee.
3.2.3 Place of Meetings. The Advisory Committee may hold its
meetings at such place or places as the Advisory Committee may from time to time
determine.
3.2.4 Regular Meetings. Regular meetings of the Advisory
Committee shall be held not less than one (1) time each fiscal quarter. Any
business which properly may be transacted by the Advisory Committee may be
transacted at any regular meeting thereof.
3.2.4 Special Meetings. Special meetings of the Advisory
Committee shall be held whenever called by a Member. Unless otherwise agreed to
by all of the Advisory Committee Members present at a special meeting, the
business to be transacted at any special meeting shall be limited to that stated
in the notice of meeting.
3.2.5 Notice. Notice of all meetings of the Advisory Committee
shall be mailed by first class mail postage prepaid to each member of the
Advisory Committee addressed to him at his usual place of business, at least ten
(10) Business Days before the date on which the meeting is to be held, or shall
be sent to him at such place by telefax or express mail not later than the fifth
(5th) Business Day before the day on which such meeting is to be held. Such
notice shall state the place, date, and hour of the meeting and the purpose or
purposes for which it is called. In lieu of the notice to be given as set forth
above, a waiver thereof in writing, signed by the member or members of the
Advisory Committee entitled to receive such notice, whether before or after the
meeting, shall be deemed equivalent thereto for purposes of this Agreement.
Attendance of a Person at a meeting shall constitute a waiver of notice of such
meeting, except when the Person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not properly called or convened.
3.2.6 Action Without a Meeting. Any action required or
permitted to be taken at any meeting of the Advisory Committee may be taken
without a meeting if all members of the Advisory Committee consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the committee.
3.2.7 Telephonic Meetings. Members of the Advisory Committee
may participate in a meeting of the Advisory Committee by means of a conference
telephone or similar communication equipment by means of which all Persons
participating in the meeting can hear each other. Participation in a meeting
pursuant to this paragraph shall constitute presence in Person at such meeting.
3.2.8 Resignation. Any Advisory Committee Member may resign at
any time by giving written notice to the Advisory Committee or to the Members,
which initially appointed such Advisory Committee Member. The resignation of any
Advisory Committee Member shall take effect upon receipt of notice thereof or at
such later time as shall be specified in such notice; and unless otherwise
specified therein, the acceptance of such
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resignation shall not be necessary to make it effective.
3.2.9 Vacancies. Unless otherwise provided in this Agreement,
any vacancies resulting from the death, resignation or removal of any Advisory
Committee Member shall be promptly filled, in a manner consistent with this
Agreement, by the Members which initially appointed such Advisory Committee
Member. Each Advisory Committee Member so chosen shall hold office until his
successor is elected and qualified, or until his earlier resignation, removal or
death. When any Advisory Committee Member shall resign effective at a future
date, the Member which appointed such Advisory Committee Member shall have the
power to fill such vacancy, in a manner consistent with this Agreement, and the
appointment of a successor Advisory Committee Member shall take effect when such
resignation shall have become effective.
3.2.10. Removal. Any one or more Advisory Committee Members
may be removed, with or without cause, at any time upon the written direction of
the Member or Members which appointed such Advisory Committee Member, effective
upon the delivery of such written direction by the removing Members to the other
Members and to the Operator.
3.2.11. Compensation of Advisory Committee Members. No
Advisory Committee Member shall be entitled to any compensation from the Company
in respect of his service on such committee; provided, however, that the
out-of-pocket expenses of each Advisory Committee Member shall be reimbursed by
the Company if the Advisory Committee unanimously agrees that the Company shall
so reimburse such member.
SECTION 3.3 Appointment and Authority of Operator.
(a) All American is hereby appointed as the Operator. Subject
to Section 3.3(b), the Operator and its employees are hereby delegated the
right, power and authority to take all actions which it deems necessary, useful
or appropriate for the day-to-day management and conduct of the Company's
business. The Operator shall not be entitled to any fee, commission or other
compensation for its services as Operator other than as provided herein.
(b) Notwithstanding anything herein to the contrary and
subject to Sections 10.4 and 11.1 and paragraphs (c) and (d) below, the
following actions shall not be taken by the Company (or the Operator or any
Member acting on its behalf) either directly or indirectly, without receiving
the prior unanimous written consent of the Members:
(i) approve (which approval shall not be unreasonably
withheld or delayed) any production costs associated
with programming assets owned by the Company whether
such expenditures are by third parties or the
Company;
(ii) acquire any asset (tangible or intangible);
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(iii) enter into or assume any contract or amend, modify,
terminate, suspend performance or waive any rights in
respect thereof; provided that the Transaction
Documents as entered into as of the date hereof or to
be entered into by the Company pursuant to the Asset
Purchase Agreement or the Related Agreements are
deemed to be approved;
(iv) merge the Company into another Person, consolidate
the Company with another Person or enter into any
other similar kind of business combination with
another Person;
(v) incur or guarantee any indebtedness;
(vi) commence any suit or action in the name of the
Company, seek injunctive relief or specific
performance with respect to material matters or agree
to any settlement of any suit or claim involving the
Company, provided that the Company may join the
Operator in defending the Company's title to its
assets free from the claim of third parties;
(vii) distribute any cash or assets of the Company to the
Members or any of their respective Affiliates, other
than as provided for in this Agreement;
(viii) make, execute or deliver any assignment for the
benefit of creditors, or commence a voluntary case
seeking liquidation, dissolution, reorganization or
adjustment of debts pursuant to the provisions of any
state or federal bankruptcy or insolvency act, or
consent to the institution of an involuntary case
with respect to the same, or ask for or consent to
the appointment of a receiver, liquidator, custodian,
trustee, or similar official for all or any part of
the Company's property, except in accordance with
this Agreement;
(ix) use the name, credit or property of the Company for
any purpose other than a proper corporate purpose or
engage in any business other than those specified in
this Agreement;
(x) pledge, create a security interest or lien on or
otherwise encumber any assets of the Company;
(xi) assign, transfer, pledge, compromise or release any
claim of the Company except for full payment;
(xii) sell, assign, transfer, exchange, grant or otherwise
dispose of any assets of the Company except (a) for
distributions of cash to Members as provided in
Article V or (b) pursuant to agreements previously
approved by the Member in accordance with the terms
hereof,
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including without limitation, the Transaction
Documents as entered into as of the date hereof or to
be entered into by the Company pursuant to the Asset
Purchase Agreement or the Related Agreements;
(xiii) engage in any transaction not in the ordinary course
of business;
(xiv) cause the Company to indemnify any Person (other than
by operation of law);
(xv) approve or file the annual tax returns of the
Company, make or change any and all elections for
federal, state and local tax purposes including,
without limitation, any election, if permitted by
applicable law (i) to adjust the basis of the
Company's properties or (ii) to extend the statute of
limitations for assessment or tax deficiencies
against Members with respect to adjustments to the
Company's federal, state or local tax returns,
represent the Company before the taxing authorities
or courts of competent jurisdiction in tax matters
affecting the Company and the Members in their
capacity as Members, and execute any agreements or
other documents that bind the Members with respect to
such tax matters or otherwise affect the rights of
the Company or the Members;
(xvi) change any accounting principle or practice,
including the method of accounting for, and reporting
of, the Company's assets (tangible or intangible),
except as required by GAAP applied on a consistent
basis;
(xvii) use or approve the use of the name of, or any
information regarding, either Member or any Affiliate
of either Member, in any advertising materials or
public relations campaigns for the Company without
the consent of the affected Member;
(xviii) cause securities of the Company to be registered
under the Securities Act or state, local or foreign
securities laws, or register the Company or any
affiliate as a broker-dealer under applicable
securities laws;
(xix) employ or retain any employees or consultants or
approve, adopt or implement any pension, health,
savings or welfare plan or provide any similar types
of benefits;
(xx) engage in any restricted transaction referred to in
Section 3.8;
(xxi) approve or make any loan or investment except for
Permitted Investments;
(xxii) enter into any agreement or understanding pursuant to
which it shall become obligated to any Person
pursuant to any collective bargaining
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agreement, including, without limitation, to any
union, guild or residual agreement arising in
connection with the Assets, whether or not
contemplated by the Transaction Documents; and
(xxiii) agree or commit to agree to any of the foregoing.
(c) Notwithstanding anything herein to the contrary, so long
as All American and Interpublic are Members the Operator shall act at the
direction of Interpublic with respect to any action taken under or required by
the Transaction Documents or any future agreement (including any consent,
approval, amendment, waiver, release or other action contemplated by such
agreements) that All American or any Affiliate of All American is a party on the
one hand and the Company is a party on the other hand. Actions taken under this
Section 3.3(c) do not require approval under Section 3.3(b).
(d) Notwithstanding anything herein to the contrary, so long
as All American and Interpublic are Members the Operator shall act at the
direction of All American with respect to any action taken under or required by
the Transaction Documents or any future agreement (including any consent,
approval, amendment, waiver, release or other action contemplated by such
agreements) that Interpublic or any Affiliate of Interpublic is a party on the
one hand and the Company is a party on the other hand. Actions taken under this
Section 3.3(d) do not require approval under Section 3.3(b).
SECTION 3.4 Duties of Operator. The Operator shall perform all
duties necessary to operate the Company's day-to-day activities including, but
not limited, to the following: (a) taking all reasonable steps necessary or
desirable in the Operator's business judgment after consulting with the Advisory
Committee, within or outside the United States, to ensure that (i) the Company's
copyrights do not enter the public domain before their statutory expiration, its
patents and material trademarks are not deemed abandoned, and its confidential
business information does not lose trade secret status, (ii) the Company has, at
all times, all authorizations and approvals necessary to exploit fully all of
its rights in the Library Rights and Library Tangible Assets (both terms as
defined in the Asset Purchase Agreement) and in any new program (whether
produced or yet to be produced), (iii) the Company makes all filings with any
Governmental Authority necessary or desirable to preserve or protect its
material rights in any intellectual property, whether owned or licensed, such
filings may include, without limitation, an application for the registration of
an owned copyright or trademark, the recordation of the Company's interest in
the intellectual property rights of a third party, and the registration of the
Company as a registered user of a third party's intellectual property rights,
and (iv) no copyright, trademark, patent, trade secret or similar intellectual
property right of the Company is infringed by any third party; (b) monitoring
performance by third party licensees under all licensing agreements; (c)
overseeing new programs; (d) investing the proceeds received from any license
agreement as such proceeds become available, subject to the terms of this
Agreement and the guidelines established by the Advisory Committee from time to
time; and (e) preparing all Tax returns and filings.
SECTION 3.5 Expenses.
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(a) The Operator shall be responsible for the payment of (i)
salaries and fringe benefits of any of its personnel, (ii) the cost of
maintaining any office space used by the Operator in connection with the
performance of its obligations under this Agreement, including rent, utilities
and the cost of office equipment and supplies, (iii) travel and entertainment
expenses of personnel of the Operator and (iv) any other overhead charges or
expenses of the Operator, except as may otherwise be approved by Interpublic in
writing. Any such expenses paid by the Operator shall not be accounted for as
expenses of, contributions to or income of the Company and shall in no way
affect the capital accounts or capital contributions of the Members.
(b) The Company shall pay (or reimburse the Operator for) all
costs, expenses and obligations of the Company other than those specified in
Section 3.5(a).
SECTION 3.6 Removal and Withdrawal of the Operator:
(a) Upon not less than thirty (30) days prior notice, the
Operator may be removed by Interpublic for Cause. Such removal for Cause shall
not be effective until and unless Interpublic agrees to perform the duties of
the Operator.
(b) All American shall not have the right to withdraw from its
duties as Operator unless removed pursuant to Section 3.6(a) or unless the All
American Members Transfer all of their respective Interests other than a
Transfer to a direct or indirect wholly-owned subsidiary of All American.
SECTION 3.7 Meetings of Members. Any action taken by the
Members, in their capacity as Members, shall be authorized by a vote of the
Members. With respect to any such vote, each Member shall vote in accordance
with such Member's Membership Percentage. In the event the Operator wishes to
take an action that requires the consent or approval of the Members, it shall
promptly call a meeting of the Members or obtain the written consent or approval
of the Members pursuant to Section 3.7.7. Minutes of any meeting shall be
prepared and kept by a Person designated by the Members (which designee may be a
Member) and shall be delivered to the Members within thirty (30) days of any
such meeting.
3.7.1. Quorum and Manner of Acting. The presence of all of
Members shall constitute a quorum for the transaction of business. In the
absence of a quorum, the Members present may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present. The unanimous affirmative vote of all of Members present at a
meeting at which a quorum is present shall be an act of the Members.
3.7.2. Place of Meetings. The Members may hold their meetings
at such place or places as the Members may from time to time determine.
3.7.3. Annual Meeting. An annual meeting of the Members shall
be held each year, commencing in July 1996. Such meeting shall be held on such
date and time as
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shall be designated jointly by the Members, and specified in a notice given as
hereinafter provided for meetings of the Members or in a waiver of notice
thereof signed by each of the Members.
3.7.4. Regular Meetings. Regular meetings of the Members may
be held at such time and place as shall from time to time be determined by the
Members. Any business which properly may be transacted by the Members may be
transacted at any regular meeting thereof.
3.7.5. Special Meetings. Special meetings of the Members shall
be held whenever called by either Member, any member of the Advisory Committee
or the Operator. Unless otherwise agreed to by all of the Members present at a
special meeting, the business to be transacted at any special meeting shall be
limited to that stated in the notice of meeting.
3.7.6. Notice. Notice of all meetings of the Members shall be
mailed by first class mail postage prepaid to each Member addressed to it at its
usual place of business or shall be delivered personally or sent to it at such
place by telefax or express mail not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held. Such notice shall state
the place, date, and hour of the meeting and the purpose or purposes for which
it is called. In lieu of the notice to be given as set forth above, a waiver
thereof in writing, signed by the Members entitled to receive such notice,
whether before or after the meeting, shall be deemed equivalent thereto for
purposes of this Agreement. Attendance of a Member at a meeting shall constitute
a waiver of notice of such meeting, except when the Member attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not properly called or
convened.
3.7.7. Action Without a Meeting. Any action required or
permitted to be taken at any meeting of the Members may be taken without a
meeting if all of the Members consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Members.
3.7.8. Telephonic Meetings. Members may participate in a
meeting of the Members by means of a conference telephone or similar
communication equipment by means of which all persons participating in the
meeting can hear each other. Participation in a meeting pursuant to this
paragraph shall constitute presence in person at such meeting.
SECTION 3.8 Transactions with Affiliates. The Company may not
engage in any transaction, directly or indirectly, with a Member or any
Affiliate of a Member unless it receives prior written approval from the other
Member; provided that the Company, All American, Interpublic and their
respective Affiliates may engage in the activities contemplated by the
Transaction Documents in accordance with the terms thereof. All transactions
(except transactions expressly contemplated by the Transaction Documents or the
agreements approved in accordance with this Section 3.8) between the Company and
any Member or any Affiliate of any Member shall be conducted on terms no less
favorable
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to the Company than might be obtained in an arm's length transaction from a
Person who is not a Member or an Affiliate of a Member. If the Company is (i)
negotiating a transaction among the Company and a Member or an Affiliate of a
Member or (ii) settling any pending or threatened claim or proceeding relating
to or arising out of transactions among the Company and a Member or an Affiliate
of a Member, the non-affiliated disinterested Members, if any, shall act on
behalf of the Company. Nothing herein shall prohibit transactions between a
Member and its own Affiliates.
SECTION 3.9 Business Activities of Members. Pursuant to the
License Agreement, the Company will grant to All American and certain of its
Affiliates, certain rights to produce, license, sublicense and distribute the
Company's programming assets.
SECTION 3.10 Non-Competition with Company Activities.
(a) Each Member agrees that, prior to exploiting any new
opportunity (other than opportunities contemplated by existing contracts,
including the Fremantle license from Goodson) that involves the ownership,
production, distribution, marketing, licensing or exploitation of television
game shows with the financial and other assistance or participation of an
unaffiliated third party (other than a commercial bank or similar financial
institution or the public issuance by a Member of its securities or a private
placement for general corporate purposes) it shall consult with the other
non-affiliated Members and offer such other Members the opportunity to provide
such assistance or participation or transact such business through the Company
or through some alternative arrangements with such Members. If the other
non-affiliated Members do not agree to participate in such business on the terms
presented within thirty (30) days from notice thereof, the Member or Members
seeking to exploit such opportunity or engage in such activities may exploit
such opportunity or enter into such engagement on those terms with such third
party; provided that in no event shall such opportunity or engagement adversely
affect in any material respect the Company's business, operations, condition
(financial or other) or prospects and provided further that it may not exploit
such opportunity on any other terms without first offering the other Members the
opportunity to participate in such transaction on such other terms as provided
in this Section 3.10(a).
(b) Notwithstanding Section 3.10(a), any Member is free to
exploit any new game show opportunity covered by Section 3.10(a) that such
Member develops without the financial and other assistance or participation of
an unaffiliated third party (other than a commercial bank or similar financial
institution or the public issuance by a Member of its securities or a private
placement for general corporate purposes) without offering the other Members the
opportunity to participate in such opportunity through the Company or through
some alternative arrangements with such Members, provided that such new game
show opportunity does not infringe upon the Company's intellectual property
rights. Prior to the exploitation of any such opportunity that might infringe
upon the Company's intellectual property rights, the Member seeking to exploit
such opportunity shall consult with the other non-affiliated Members regarding
such opportunity. If the non-affiliated Member or Members believes that the
exploitation of such opportunity would infringe upon
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the Company's intellectual property rights, the Members shall consult with the
three member committee of the Board of Directors of All American (the
"Arbitration Committee") set forth on Schedule C regarding such disagreement. If
the Arbitration Committee does not agree that such opportunity does not infringe
upon the Company's intellectual property rights within thirty (30) days of it
being advised of such opportunity in writing, the Members shall promptly bring
the dispute to arbitration for resolution and the Member or Members seeking to
exploit such opportunity shall refrain from exploiting such opportunity pending
the issuance of the arbitral panel's determination regarding the issue. If the
arbitral panel determines in accordance with Article XIV that such opportunity
infringes upon the Company's intellectual property rights, the Member seeking to
exploit such opportunity shall not exploit such opportunity. If the Arbitration
Committee or the arbitral panel determines that such opportunity does not
infringe upon the Company's intellectual property rights, the Member seeking to
exploit such opportunity may exploit such opportunity.
(c) Each Member acknowledges that money damages would be both
incalculable and an insufficient remedy for any breach of this provision by it
and that any such breach would cause the Members and the Company irreparable
harm. Accordingly, each Member agrees that in the event of any breach or
threatened breach of this provision, both the non-breaching Members and the
Company, in addition to any other remedies at law or in equity they may have,
shall be entitled, without the requirement of posting a bond or other security,
to equitable relief, including injunctive relief and specific performance.
ARTICLE IV
CAPITAL CONTRIBUTIONS, CAPITAL
ACCOUNTS AND RELATED PROVISIONS
SECTION 4.1 Capital Contributions. The Interpublic Members'
and the All American Members' initial capital contribution shall be the amount
shown for such Members on Schedule A of this Agreement. In consideration for the
foregoing contribution, the Interpublic Members and the All American Members
each will hold a Membership Percentage equal to fifty percent (50%). The Members
shall not be required to make any additional capital contributions, except as
otherwise provided with respect to All American's obligation regarding a Make
Whole Amount.
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SECTION 4.2. The Make Whole Amount.
(a) Following the occurrence and during the continuation of an
Acceleration Event, All American shall, at the request of the Interpublic
Members (an "Acceleration Request"), make a payment in either (or in a
combination of) (i) cash, (ii) All American Class A Stock or (iii) All American
Class B Stock, all at All American's sole option, to the Interpublic Members in
an amount equal to a Make Whole Amount as of the Business Day immediately prior
to the date of such payment; provided that All American may only elect to
distribute All American Class B Common Stock to the Interpublic Members to the
extent that the Public Float Requirements are met as of such date. The payment
to the Interpublic Members of a Make Whole Amount shall be made on the sixtieth
(60th) day following the date of the Acceleration Request. After a Make Whole
Amount is received by the Interpublic Members, then, notwithstanding anything
herein to the contrary, all Ordinary Distributions shall be made to Members
pursuant to Section 5.3(a)(iii); provided, however that if the $25 million
principal amount comprising Tranche E of the Chemical Credit Facility and all
accrued interest thereon remains outstanding, distributions shall continue to be
made in accordance with Section 5.3(a)(i) until such principal and interest is
repaid and, upon the occurrence of an Acceleration Event, the Make Whole Amount
may, at the Interpublic Members' option, be accelerated again by the Interpublic
Members. The principal component of the Make Whole Amount paid by All American
to the Interpublic Members pursuant to this Section 4.2 shall reduce the
Interpublic Members' Capital Accounts in accordance with their respective
Membership Percentages. All American's payment of the interest component of any
Make Whole Amount shall be considered income to the Interpublic Members and
either a loss or a deduction to All American.
(b) If All American fails to make a Make Whole Amount payment
required by Section 4.2(a), and such failure continues unremedied for sixty (60)
days after the Interpublic Members shall have provided an Acceleration Request,
such failure unless and until cured shall be deemed to constitute a "Make Whole
Default" and the following shall apply:
(i) subject to the Chemical Credit Facility, any amounts
payable to All American or any of its Affiliates
pursuant to the License Agreements shall be paid to
the Interpublic Members and applied against such Make
Whole Default as if All American had made a Make
Whole Amount contribution pursuant to Section 4.2(a);
(ii) interest on the Make Whole Default shall accrue from
the date on which the amount of the Make Whole
Default becomes due until the date on which such Make
Whole Default is paid in full, at an annual rate
equal to the Default Rate (as in effect from time to
time) (which interest shall be reflected in the
Interpublic Members' Capital Accounts in accordance
with their Membership Percentages as a deemed special
allocation of net profit pursuant to Section
5.2(a)(ii)); and
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(iii) the provisions of Section 6.4 shall apply mutatis
mutandis.
4.2.1 Required Collateral.
(a) Until such time that a Make Whole Amount is distributed to
Interpublic in full and Ordinary Distributions have been made by the Company
pursuant to Section 5.3(a)(iii), each of All American and All American Goodson
hereby (i) grants to Interpublic a second priority security interest in its
Interest, (ii) subject and subordinated to the rights of Chemical Bank (or any
other agent under the Chemical Credit Facility or any other facility refinancing
such facility but only if such refinancing does not increase the principal
amount of Tranche E of the Chemical Credit Facility outstanding at the time of
such refinancing) as the holder of a first priority security interest in such
Interest, appoints Interpublic as its attorney-in-fact, with power to sign its
name on any financing statement, mortgage, notice of assignment or other
document or certificate as may be necessary or appropriate to evidence and
maintain its security interest in its Interest in accordance with applicable law
and (iii) agrees that Interpublic shall have such rights and privileges that are
available to a secured party under applicable law with respect to its Interest.
The appointment of Interpublic as attorney-in-fact as provided hereunder shall
(A) be deemed to be coupled with an interest and is irrevocable until the Make
Whole Amount has been fully paid, including interest pursuant to Section
4.2(b)(ii), in accordance with the terms hereof, (B) not be affected by the
subsequent dissolution, termination or bankruptcy of All American or its
subsidiaries or the Transfer of all or any portion of any Members' Interest in
the Company and (C) extend to All American's and its subsidiaries' successors
and assigns. Interpublic's security interest in All American's and its
subsidiaries' Interests shall be recorded on the books of the Company.
(b) Until such time that the Make Whole Amount is distributed
to Interpublic in full and Ordinary Distributions have been made by the Company
pursuant to Section 5.3(a)(iii), Interpublic shall have the right to receive All
American Class A Common Stock upon the occurrence and during the continuation of
a Make Whole Default. All American hereby agrees to deliver to Interpublic newly
issued shares of All American Class A Common Stock, together with endorsed stock
powers, equal in value to and in satisfaction of the total amount of the then
unpaid Make Whole Amount as of the date immediately prior to the date of
delivery. The purchase price for such shares shall be the satisfaction of a Make
Whole Amount plus the par value of such shares.
SECTION 4.3 Capital Accounts.
(a) The Company shall establish and maintain a separate
account (the "Capital Account") for each Member. The initial balance of the
Capital Account for each Member shall be such Member's initial Capital
Contribution to the Company. The Capital Account of each Member shall be
increased by:
(i) the dollar amount of any additional cash
contributions made by such Member;
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(ii) the fair market value of any property (other than
cash) contributed to the Company by such Member; and
(iii) allocations to such Member with respect to net profit
hereunder (determined as provided under Article V
hereof).
The Capital Account of each Member shall be decreased by:
(iv) the dollar amount of any cash distributions made to
such Member;
(v) the fair market value of any property (other than
cash) distributed to such Member, and
(vi) allocations to such Member of net loss pursuant to
Article V hereof.
(b) The provisions of this Section 4.3 and the other
provisions of this Agreement are intended to comply with Code Section 704(b) and
the Treasury Regulations thereunder in respect of the maintenance of capital
accounts.
SECTION 4.4 No Interest. No interest will be paid by the
Company on any capital contribution (excluding interest to be paid pursuant to a
Make Whole Amount) or on the balance of any Capital Account.
SECTION 4.5 Partnership Classification for Tax Purposes. Each
Member recognizes and intends that for federal income tax purposes, the Company
will be classified as a partnership and that the Members shall take all
necessary action to make any election by the Company necessary for such
treatment.
ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
SECTION 5.1 Calculation of Net Profits and Net Losses. The net
profits and net losses of the Company shall be determined for each Fiscal Year
in accordance with U.S. GAAP applied on a consistent basis.
SECTION 5.2 Allocation of Net Profits and Net Losses.
(a) Except as provided in Section 8.3(b)(i), all items of
income and loss shall be allocated among the Members in proportion to their
Membership Percentages, except that in any year in which the interest component
of the Make Whole Amount is paid to the Interpublic Members then an amount of
income equal to such amount so paid to the Interpublic Members shall be
allocated to the Interpublic Members instead of to the All American Members
(b) Notwithstanding any other provision of this Agreement, in
the event that at the end of any Fiscal Year any Member's Capital Account is
adjusted for, or such Member is allocated, or there is a distribution to such
Member of, any item described in Section
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1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Treasury Regulations in an amount
not reasonably expected at the end of the prior Fiscal Year, and such treatment
creates a deficit balance in that Member's Capital Account, then such Member
shall be allocated all items of income and gain of the Company for such Fiscal
Year and for all subsequent Fiscal Years of the Company until such deficit
balance has been eliminated. Any special allocations of items of income or gain
pursuant to this Section 5.2(b) shall be taken into account in computing
subsequent allocations pursuant to this Section 5.2 so that the net amount of
any item so allocated and all other items allocated pursuant to this Section 5.2
shall, to the extent possible, be equal to the net amount that would have been
allocated to each such Member pursuant to the provisions of this Section 5.2 if
such unexpected adjustments, allocations or distributions had not occurred.
(c) Any income or gain in an amount equal to a decrease in
"partnership minimum gain" of the Company shall be allocated to the Members that
were allocated nonrecourse deductions or received distributions or proceeds
attributable to "nonrecourse liabilities" of the Company in accordance with the
"minimum gain chargeback" provisions of Section 1.704-2 of the Treasury
Regulations. The terms used in the preceding sentence shall have the meanings
set forth in Section 1.704-2 of the Treasury Regulations. Any special
allocations of items of income or gain pursuant to this Section 5.2(c) shall be
taken into account in computing subsequent allocations of items of income or
gain pursuant to this Section 5.2 so that the net amount of any item so
allocated and all other items allocated to each Member pursuant to this Section
5.2 shall, to the extent possible, be equal to the net amount that would have
been allocated to each such Member pursuant to the provisions to this Section
5.2 if the allocations under this Section 5.2(c) had not been made.
(d) The Capital Accounts of the Members shall be adjusted in
accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(f) to reflect the
gross fair market value of the Company's property as determined by the Members,
as of the following times: (i) the admission of a new Member to the Company or
acquisition by an existing Member of an additional Interest in the Company from
the Company; (ii) the distribution by the Company of money or property to a
retiring or continuing Member in consideration for the retirement of all or a
portion of such Member's Interest in the Company; (iii) the termination of the
Company for federal income tax purposes pursuant to Section 708(b)(1)(B) of the
Code; and (d) such other times as determined by the Members.
(e) Notwithstanding any other provision in this Agreement,
income, gain, loss and deductions with respect to property contributed to the
Company by a Member shall be allocated under the principles of Treasury
Regulations Section 1.704-3(b) and with respect to cash contributions allocated
under the principles of Treasury Regulation Section 1.704-1(b).
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SECTION 5.3 Distributions.
(a) Except as provided in Section 8.3 and subject to Sections
5.3(b) and 5.3(c), Distributable Cash shall, from time to time (but in no event
less frequently than once each quarter), be distributed to the Members by the
Operator (or deemed to be distributed to the Members from the LLC Funds Account
pursuant to the Intercreditor Agreement) as follows ("Ordinary Distributions"):
(i) first, to the All American Members until they have
received the amount of cash required to satisfy all
principal and interest payments required under
Tranche E of the Chemical Credit Facility (as such
payments are required as of the date of the signing
of this Agreement) (the period when such
distributions are being made hereinafter referred to
as the "First Ordinary Distribution Period");
(ii) second, to the Interpublic Members up to the then
unpaid Make Whole Amount (but excluding the interest
component of such Amount set forth in clause (ii) of
the definition of Make Whole Amount) (the period when
such distributions are being made hereinafter
referred to as the "Second Ordinary Distribution
Period"); and
(iii) thereafter, to the Members in proportion to their
Membership Percentages (the period when such
distributions are being made being hereinafter
referred to as the "Third Ordinary Distribution
Period").
(b) Prior to the Company making any Ordinary Distributions,
but subject to the terms of the Intercreditor Agreement, Distributable Cash
shall be distributed to the Members as follows ("Special Distributions"):
(i) during the First Ordinary Distribution Period, (A) at
the end of each calendar quarter, (x) the Interpublic
Members shall receive a Special Distribution equal to
the sum of (1) 22.5% of the Company's estimated net
United States source taxable income for such calendar
quarter; plus (2) 5% of the Company's estimated net
foreign source taxable income for such calendar
quarter; and (y) the All American Members shall
receive a Special Distribution equal to 22.5% of the
Company's estimated net taxable income for such
calendar quarter, and (B) on or prior to December 31
of each year, Interpublic shall receive a Special
Distribution equal to the annual cash dividends paid
by Interpublic out of Interpublic's regular earnings
on the Interpublic Shares during the preceding year;
(ii) during the Second Ordinary Distribution Period, (A)
at the end of each calendar quarter, (x) the
Interpublic Members shall receive a Special
Distribution equal to 22.5% of the Company's
estimated net taxable income for such calendar
quarter; and (y) the All American Members
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shall receive a Special Distribution equal to 22.5%
of the Company's estimated net taxable income for
such calendar quarter, and (B) on or prior to
December 31 of each year, Interpublic shall receive a
Special Distribution equal to the annual cash
dividends paid by Interpublic out of Interpublic's
regular earnings on the Interpublic Shares during the
preceding year; and
(iii) during the Third Ordinary Distribution Period, (A)
the Members shall receive Special Distributions
pursuant to clause (ii) above mutatis mutandis and
(B) the Interpublic Members shall receive the unpaid
interest component of any Make Whole Amount
previously paid as set forth in clause (ii) of the
definition of Make Whole Amount plus interest on such
sum from the date of the commencement of the Third
Ordinary Distribution Period until the date such sum
is paid in full, at a rate equal to Interpublic's
Cost of Funds, payable from, and in priority to, All
American's share of Ordinary Distributions during
such period. If the Interpublic Members shall not
have received the full amount of such sum by the
first anniversary of the date of the commencement of
the Third Ordinary Distribution Period, All American
shall thereafter immediately pay such unpaid amount
in cash.
In the event that the Distributable Cash available for Special Distributions is
insufficient to satisfy the Company's Special Distribution obligations to the
Members and a Tranche E Event of Default has not occurred and is not continuing,
the Company shall make Special Distributions to the Interpublic Members and the
All American Members from the Distributable Cash on a pro rata basis.
(c) Any LLC Funds withdrawn from the LLC Funds Account by the
Agent and not distributed to the LLC (other than funds withdrawn by the Agent to
pay Sellers Earn-Out Payments) shall be deemed to have been distributed to the
All American Members pursuant to this Section 5.3 (i) as Ordinary Distributions
if a Tranche E Event of Default has not occurred and is not continuing and (ii)
as Ordinary and Special Distributions if a Tranche E Event of Default has
occurred and is continuing.
(d) Notwithstanding anything in this Section 5.3 to the
contrary, the Company shall not make any Ordinary Distributions or Special
Distributions until payments required to be made to Sellers pursuant to Section
3.8 of the Asset Purchase Agreement, if any, are made and the Earn-Out Payments,
if any, in respect of the prior month have been paid to Sellers by the Agent as
required by the Intercreditor Agreement or otherwise reserved or provided for in
a manner satisfactory to the Members; provided, however, that (i) if Interpublic
Game Shows fails to make Earn-Out Payments when due as required by the IPG Sub
License Agreement, the Company may make Ordinary Distributions and Special
Distributions to the All American Members but not to the Interpublic Members and
(ii) if the Agent fails to make Earn-Out Payments when due as required by the
Intercreditor
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Agreement, the Company may make Ordinary Distributions and Special Distributions
to the Interpublic Members but not to the All American Members.
(e) Distributions as between the Interpublic Members shall be
made in proportion to their respective Membership Percentages and distributions
as between the All American Members shall be made in proportion to their
respective Membership Percentages.
ARTICLE VI
TRANSFERABILITY
SECTION 6.1 Transfer of Interests of Members.
(a) Except as provided in Section 4.2, Section 6.1(c), Section
6.2, Article VII or pursuant to the Pledge Agreements, no Member may, directly
or indirectly, transfer, assign, sell, pledge, hypothecate, encumber or
otherwise dispose (voluntarily or involuntarily) of its Interest (or any part
thereof), or any right or interest therein (a "Transfer"), without the other
Members' consent, which consent may be withheld in such non-transferring
Members' sole and absolute discretion. For purposes of this Section 6.1(a), a
sale of Interpublic or All American shall not be deemed to be a Transfer. Any
attempted disposition or substitution without such consent shall be void. No
such transfer or substitution (other than pursuant to the Pledge Agreements)
shall be valid unless the transferee agrees to be bound by this Agreement and to
assume all of the obligations of the transferring Member under this Agreement
with respect to such transferred Interest and executes such documents as may be
necessary, in the reasonable opinion of the non-transferring Members, to assume
such obligations including, without limitation, an amendment to the Articles of
Organization. If, notwithstanding the immediately preceding sentence, any such
transfer is held by a court of competent jurisdiction to be effective, then the
provisions of this Agreement shall apply to the transferee and to any subsequent
transferee as fully as if such transferee were a party hereto.
(b) Each Member hereby agrees that any Transfer of Interests
permitted under this Agreement shall result in the Transfer of all of the
rights, benefits and privileges of the transferor Member under this Agreement
with respect to such Interest.
(c) Each Member may Transfer all, but not less than all, of
its Interest to any direct or indirect wholly-owned subsidiary of All American
or Interpublic; provided, however, that prior to such Transfer (i) any such
Affiliate shall (A) execute and deliver to the Company a written agreement,
satisfactory in substance and form to the non-transferring Members, assuming all
of the obligations of the transferor Member and (B) agree that it will not cease
to be an Affiliate of such transferor Member unless, prior to the time the
transferee ceases to be such an Affiliate, such transferee transfers to such
Member its Interest and (ii) the transferring Member executes and delivers one
or more written agreements, reasonably satisfactory to the non-transferring
Members, pursuant to which it agrees to remain liable for the obligations of the
transferee hereunder and, if the transferring Member is an All American Member,
to grant to the Interpublic Members a second priority
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security interest in such All American subsidiary's Interest until such time as
the Make Whole Amount has been paid to the Interpublic Members.
(d) No Transfer of any Interest, or any right or interest in
such Interest, shall release the transferring Member from those liabilities to
the Company which such Member has as of the date of such Transfer.
(e) The Company agrees that it will record the Transfer of an
Interest and the admission of a new Member on its books only in accordance with
the terms and conditions of this Agreement. Any purported Transfer of an
Interest by a Member that is not in compliance with the terms and conditions of
this Agreement will be null and void, and the transferee under any such
purported Transfer will acquire no title or ownership thereby.
SECTION 6.2 Right of First Refusal and Tag-Along Rights. If at
any time after the Restricted Period has ended, a Member has a Bona Fide Offer
to purchase all, but not less than all, of its Interest (a "Selling Member")
from a third party purchaser (a "Prospective Purchaser") and such Selling Member
desires to accept such Offer, such Selling Member shall give prompt written
notice (a "Notice of Offer") to the remaining Members which are not Affiliates
of the Selling Member (the "Remaining Members"), which Notice shall contain, (i)
a true and complete copy of the Offer, (ii) the proposed purchase price and all
other material terms and conditions of the Offer, (iii) the identity of the
Prospective Purchaser and (iv) the intended closing date of any such sale. The
date on which the Notice is actually received by the Remaining Member is
referred to hereinafter as the "Notice Date". Each of the All American Members
and the Interpublic Members agrees that in the event it wishes to sell its
Interest to a Prospective Purchaser, the other All American Member or
Interpublic Member, as the case may be, shall sell its Interest to such Person
on the same terms and conditions and on the same date. The Notice of Offer shall
be deemed an irrevocable offer to sell, on the terms set forth in such Notice of
Offer and herein, and the Remaining Members shall have an exclusive right, as
hereinafter provided, either to buy the Interest that the Selling Member (and
its Affiliated Member) wishes to sell on the terms set forth in such Notice of
Offer (in proportion to their Membership Percentages unless otherwise agreed by
such Members) or to elect to exercise their Tag-Along Rights.
(i) Within thirty (30) days following the Notice Date,
the Remaining Members shall notify in writing the
Selling Members that they elect either to purchase
such Selling Members' Interests (in proportion to
their Membership Percentages unless otherwise agreed
by such Members) or exercise their Tag-Along Rights
(an "Acceptance"). If the Selling Members do not
receive an Acceptance within such thirty-day (30-day)
period, the Remaining Members shall be deemed to have
declined to purchase the Selling Members' Interests
and to have elected not to exercise their Tag-Along
Rights. The Acceptance shall be deemed to be an
irrevocable commitment either to purchase from
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the Selling Members such Selling Members' Interests
on the terms contained in such acceptance or to have
the Prospective Purchaser purchase the Remaining
Members' Interests at the same price and on the same
terms and conditions as are set forth in the Notice
of Offer, as the case may be.
(ii) If the Remaining Members do not elect to purchase the
Selling Members' Interests as set forth in the Notice
of Offer or to exercise their Tag-Along Rights, the
Selling Members may Transfer all, but not less than
all, of their Interests set forth in the Notice of
Offer to the Prospective Purchaser specified in the
Notice of Offer upon the terms and conditions set
forth in such Notice, provided such Transfer is
consummated within 180 days of the Notice Date. In no
event shall the Selling Members Transfer their
Interests to a Prospective Purchaser if such
Prospective Purchaser shall not have delivered to the
Company an executed agreement, reasonably
satisfactory in substance and form to the Remaining
Members, assuming all of the obligations of the
Selling Members contained in this Agreement and in
the Articles of Organization. If the Selling Members
do not complete the contemplated sale within the
180-day period, the provisions of this Section 6.2
shall again apply, and no Transfer of an Interest
shall be made otherwise than in accordance with the
terms of this Agreement.
(iii) If any Remaining Member elects to exercise its
Tag-Along Rights, the closing of the sale of the
Selling Members' Interests to the Prospective
Purchaser hereunder shall be conditioned on the
simultaneous purchase by the Prospective Purchaser of
the Interests from such Remaining Member.
Notwithstanding the foregoing, in the event any
Member breaches its obligations under this Section
6.2 or under any purchase agreement with the
Prospective Purchaser with respect to its Interest,
the non-breaching Members shall be free to sell their
Interests to the Prospective Purchaser without
liability to such breaching Member.
(iv) If the Remaining Members elect to purchase the
Selling Members' Interests as set forth in the Notice
of Offer, the closing of the purchase of the Selling
Members' Interests by the Remaining Members pursuant
to this Section 6.2 shall take place (subject to the
expiration of any waiting period under the HSR Act)
within thirty (30) days after the termination of the
thirty-day (30-day) period following the Notice Date,
at 11:00 a.m. at the principal offices of the
Company, or at such other time or place as the
parties may agree. At such closing, the Selling
Members shall sell to the Remaining Members full
right, title and interest in and to the Interests so
purchased in proportion to the Remaining Members
Membership Percentages (unless otherwise agreed by
such Members), free and clear of all liens, security
interests
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or adverse claims of any kind and nature. At the
closing, the Remaining Members shall deliver to the
Selling Members, in full payment of the purchase
price of the Interests purchased, cash payable by
wire transfer of immediately available funds to the
account or accounts of the Selling Members designated
by the Selling Members in writing not less than three
(3) Business Days prior to the closing of such
purchases.
SECTION 6.3 Admission of Members. Upon the consent of each
Member, which consent may be withheld in its sole discretion, the Members may
admit to the Company any Person as a Member. Any Person proposed to be admitted
as a Member shall, in connection with such admission, execute a counterpart of
this Agreement and an amendment to the Articles of Organization showing the
admission of such Member and agree to make a Capital Contribution to the Company
in such amount as shall be required by the Members.
SECTION 6.4 Put Right.
(a) Subject to the last sentence of this Section 6.4(a),
following the termination of the Second Ordinary Distribution Period or upon a
Change in Ownership, the Interpublic Members shall have the right (but not the
obligation) to require All American to purchase their respective Interests for
an amount equal to fifty percent (50%) of the product of (i) six (6) multiplied
by (ii) the sum of the average operating income (as reflected in the Company's
financial statements) of the Company during the fiscal year immediately
preceding the date the put right is exercised by the Interpublic Members and
during the fiscal year immediately following the date the put right is exercised
by the Interpublic Members (the "Put Purchase Price"). This put right will
become immediately exercisable for a sixty (60) day period on the occurrence of
a Make Whole Default as provided in Section 4.2. Notwithstanding the foregoing,
the Interpublic Members shall irrevocably waive their rights to put their
Interest to All American pursuant to this Section 6.4(a) (but not pursuant to
Section 7.1(a)) if, pursuant to Section 6.5(d), they have rejected the All
American Members' request to purchase their Interests.
(b) If the Interpublic Members choose to exercise their put
right they shall give prompt written notice (a "Put Notice") to All American,
which Notice shall state that the Interpublic Members wish to have All American
purchase all of their Interests for an amount equal to the Put Purchase Price.
The date on which the Notice is actually received by All American is referred to
hereinafter as the "Put Notice Date". The Put Notice shall be deemed to be an
irrevocable offer to sell, on the terms set forth in such Put Notice and herein,
and All American shall have the obligation to purchase, on the terms set forth
in such Put Notice and herein, the Interpublic Members' Interests.
Notwithstanding the foregoing, the Interpublic Members may not send a Put Notice
if they have previously received the All American Members' Call Notice or a
Notice of Offer from an All American Member pursuant to Section 6.2.
(c) The closing of the purchase of the Interpublic Members'
Interests by All
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American pursuant to this Section 6.4 shall take place (subject to the
expiration of any waiting period under the HSR Act) within thirty (30) days
after the Put Notice Date, at 11:00 a.m. at the principal offices of the
Company, or at such other time or place as the parties may agree. At such
closing, the Interpublic Members shall sell to All American full right, title
and interest in and to their Interests so purchased, free and clear of all
liens, security interests or adverse claims of any kind and nature. All American
shall deliver to the Interpublic Members, in payment of the Interpublic Members'
Interests, (i) at the closing of such transaction, 50% of (A) the Put Purchase
Price (based on the prior fiscal year's operating income) and (B) the then
unpaid Make Whole Amount by wire transfer of immediately available funds to an
account or accounts designated by the Interpublic Members in writing not less
than three (3) business days prior to the closing of such purchase and (ii)
after such closing, the balance of (A) the Put Purchase Price (including any
increase or decrease in the Put Purchase Price resulting from averaging the two
fiscal year's operating income) and (B) the remaining 50% of the then unpaid
Make Whole Amount plus (C) interest on such sum from the date immediately
following the closing of the purchase until the date such sum is paid in full,
at a rate equal to Interpublic's Cost of Funds plus 3%, shall be delivered to
the Interpublic Members, such sum to be payable in three equal annual
installments commencing on the first anniversary of the closing.
SECTION 6.5 Call Right.
(a) Subject to Section 6.5(d), following the second
anniversary of the date hereof, the All American Members shall have the right
(but not the obligation) to require the Interpublic Members to sell their
Interests to such Members for an amount equal to the sum of (i) $25 Million plus
(ii) an amount equal to the then unpaid Make Whole Amount as of the date of the
exercise of the call right (the "Call Purchase Price").
(b) If the All American Members choose to exercise their call
right they shall give prompt written notice (a "Call Notice") to the Interpublic
Members, which Notice shall state that the All American Members wish to have the
Interpublic Members sell all of their Interests to them for an amount equal to
the Call Purchase Price. The date on which the Notice is actually received by
All American is referred to hereinafter as the "Call Notice Date". The Call
Notice shall be deemed an irrevocable offer to purchase, on the terms set forth
in such Call Notice and herein, and, subject to Section 6.5(d), the Interpublic
Members shall have the obligation to sell, on the terms set forth in such Call
Notice and herein, the Interpublic Members' Interests. Notwithstanding the
foregoing, the All American Members may not send a Call Notice if they have
previously received the Interpublic Members' Put Notice or a Notice of Offer
from an Interpublic Member pursuant to Section 6.2.
(c) The closing of the purchase of the Interpublic Members
Interests by the All American Members pursuant to this Section 6.5 shall take
place (subject to the expiration of any waiting period under the HSR Act) within
thirty (30) days after the Call Notice Date, at 11:00 a.m. at the principal
offices of the Company, or at such other time or place as the parties may agree.
At such closing, the Interpublic Members shall sell to the
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All American Members full right, title and interest in and to their Interests so
purchased, free and clear of all liens, security interests or adverse claims of
any kind and nature. The All American Members shall deliver to the Interpublic
Members, in full payment of the Interpublic Members' Interests, the Call
Purchase Price payable by wire transfer at the closing of immediately available
funds to an account or accounts designated by the Interpublic Members in writing
not less than three (3) business days prior to the closing of such purchase.
(d) Notwithstanding paragraphs (b) and (c) above, the
Interpublic Members may reject the Call Notice whereupon the Interpublic Members
shall not be obligated to sell their respective Interests to the All American
Members and such rejection shall constitute an irrevocable waiver of the
Interpublic Members put rights set forth in Section 6.4.
ARTICLE VII
TRANSFERS UPON A SALE OF ALL AMERICAN
SECTION 7.1 Sale of All American Put Right
(a) Upon the occurrence of a Sale of All American if such Sale
of All American is publicly announced prior to the second anniversary of the
Final Closing Date, the Interpublic Members shall have the right (but not the
obligation) to require All American to purchase their respective Interests for a
cash amount (the "Sale of All American Put Purchase Price") equal to the sum of
(i) all Capital Contributions made by the Interpublic Members (with the initial
Capital Contribution being considered to be $25 million) to the Company through
the date of such Sale of All American plus (ii) an amount equal to interest on
the average outstanding Capital Contribution made by the Interpublic Members to
the Company computed at an annual rate of 12% less (iii) the sum of all amounts
distributed to the Interpublic Members by the Company prior to the payment of
the Sale of All American Put Purchase Price. For these purposes, the average
outstanding Capital Contribution of the Interpublic Members shall be an amount
equal to the Capital Contributions made by the Interpublic Members (computed as
provided above) reduced by the aggregate distributions to the Interpublic
Members theretofore made.
(b) If the Interpublic Members choose to exercise their put
right upon a Sale of All American they shall provide written notice (a " Sale of
All American Put Notice") within sixty (60) days from the closing of such event
to All American, which Notice shall state that the Interpublic Members wish to
have All American purchase all of their Interests for an amount equal to the
Sale of All American Put Purchase Price. The date on which the Notice is
actually received by All American is referred to hereinafter as the "Sale of All
American Put Notice Date". The Sale of All American Put Notice shall be deemed
to be an irrevocable offer to sell, on the terms set forth in such Sale of All
American Put Notice and herein, and All American shall have the obligation to
purchase, on the terms set forth in such Sale of All American Put Notice and
herein, the Interpublic Members' Interests.
(c) The closing of the purchase of the Interpublic Members
Interests by the All American Members pursuant to this Section 7.1 shall take
place (subject to the
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expiration of any waiting period under the HSR Act) within thirty (30) days
after the Sale of All American Put Notice Date, at 11:00 a.m. at the principal
offices of the Company, or at such other time or place as the parties may agree.
At such closing, the Interpublic Members shall sell to the All American Members
full right, title and interest in and to their Interests so purchased, free and
clear of all liens, security interests or adverse claims of any kind and nature.
The All American Members shall deliver to the Interpublic Members, in full
payment of the Interpublic Members' Interests, the Sale of All American Put
Purchase Price payable by wire transfer at the closing of immediately available
funds to an account or accounts designated by the Interpublic Members in writing
not less than three (3) business days prior to the closing of such purchase.
SECTION 7.2 Sale of All American Call Right.
(a) Upon the occurrence of a Sale of All American if such Sale
of All American is publicly announced prior to the second anniversary of the
Final Closing Date, the All American Members shall have the right (but not the
obligation) to require the Interpublic Members to sell their respective
Interests for a cash amount (the "Sale of All American Call Purchase Price")
equal to the sum of (i) all Capital Contributions made by the Interpublic
Members (with the initial Capital Contribution being considered to be $25
million) to the Company through the date of such Sale of All American plus (ii)
an amount equal to interest on the average outstanding Capital Contribution made
by the Interpublic Members to the Company computed at an annual rate of 12% less
(iii) the sum of all amounts distributed to the Interpublic Members by the
Company prior to the payment of the Sale of All American Call Purchase Price.
For these purposes, the average outstanding Capital Contribution of the
Interpublic Members shall be an amount equal to the Capital Contributions made
by the Interpublic Members (computed as provided above) reduced by the aggregate
distributions to the Interpublic Members theretofore made.
(b) If the All American Members choose to exercise their Sale
of All American right they shall provide written notice (a "Sale of All American
Call Notice") within sixty (60) days from the closing of such event to the
Interpublic Members, which Notice shall state that the All American Members wish
to have the Interpublic Members sell all of their Interests to them for an
amount equal to the Sale of All American Call Purchase Price. The date on which
the Notice is actually received by All American is referred to hereinafter as
the "Sale of All American Call Notice Date". The Sale of All American Call
Notice shall be deemed an irrevocable offer to purchase, on the terms set forth
in such Sale of All American Call Notice and herein, and the Interpublic Members
shall have the obligation to sell, on the terms set forth in such Sale of All
American Call Notice and herein, the Interpublic Members' Interests.
(c) The closing of the purchase of the Interpublic Members
Interests by the All American Members pursuant to this Section 7.2 shall take
place (subject to the expiration of any waiting period under the HSR Act) within
thirty (30) days after the Sale of All American Call Notice Date, at 11:00 a.m.
at the principal offices of the Company, or at such other time or place as the
parties may agree. At such closing, the Interpublic
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Members shall sell to the All American Members full right, title and interest in
and to their Interests so purchased, free and clear of all liens, security
interests or adverse claims of any kind and nature. The All American Members
shall deliver to the Interpublic Members, in full payment of the Interpublic
Members' Interests, the Sale of All American Call Purchase Price payable by wire
transfer at the closing of immediately available funds to an account or accounts
designated by the Interpublic Members in writing not less than three (3)
business days prior to the closing of such purchase.
ARTICLE VIII
DISSOLUTION AND TERMINATION OF THE COMPANY
SECTION 8.1 Dissolution. The Company shall be dissolved upon
the occurrence of the first to occur of any of the following:
(i) the expiration of the term of the Company pursuant to
Section 2.3;
(ii) the bankruptcy or liquidation of any Member, unless
the other Members elect to continue the Company
within sixty (60) days of such event;
(iii) the sale, transfer or other disposition of all or
substantially all the assets of the Company; provided
that a change of control of the Company shall not
constitute a sale, transfer or other disposition of
the assets of the Company for such purposes;
(iv) the unanimous written consent of the Members to
dissolve the Company; or
(v) as otherwise required under the Act including,
without limitation, in the case of judicial
dissolution under Section 702 of the Act.
SECTION 8.2 Articles of Dissolution. In accordance with the
Act, within ninety (90) days following the dissolution and the commencement of
winding up of the Company, the Members will cause to be executed and filed
Articles of Dissolution of the Company in such form as is prescribed by the
Secretary of State of the State of New York.
SECTION 8.3. Winding Up, Liquidation and Distribution of
Assets.
(a) Upon dissolution, an accounting shall be made by the
Members or, at any Member's request, an independent accounting firm mutually
acceptable to the Members, of the accounts of the Company and of the Company's
assets, liabilities and operations, from the date of the last previous
accounting until the date of the dissolution. The Members, a Person designated
by the Members by unanimous consent or the Person required by law to wind up the
Company's affairs (the Members or such other Person being referred to herein as
the "Liquidating Agent") shall immediately proceed to wind up the affairs of the
Company. Except as provided in Section 8.3(b)(i), the Members will continue
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to share profits and losses during the period of liquidation in accordance with
Article V. In performing its duties, the Liquidating Agent is authorized to
sell, distribute, exchange or otherwise dispose of the assets of the Company in
any reasonable manner that the Liquidating Agent shall determine to be in the
best interests of the Members, subject to applicable law.
(b) Following the payment of, or provision for, all debts and
liabilities (including liabilities to Members who are also creditors, to the
extent otherwise permitted by law, other than liabilities to Members for
distributions and the return of capital) of the Company and all expenses of
liquidation, and subject to the right of the Liquidating Agent to set up such
cash reserves as the Liquidating Agent may deem reasonably necessary for any
contingent or unforeseen liabilities or obligations of the Company, the proceeds
of the liquidation and any other funds (or other remaining assets) of the
Company will be distributed in the following order:
(i) If dissolution occurs during the Restricted Period,
the Interpublic Members shall receive a priority
distribution of any available funds or assets up to
the Make Whole Amount, if any. If any assets of the
Company are to be distributed in kind, the net fair
market value of such assets as of the date of
dissolution shall be determined by independent
appraisal or by agreement of the Members. Such assets
shall be deemed to have been sold as of the date of
dissolution for their fair market value. If
dissolution occurs during the Restricted Period, net
profits and net losses arising as a result of the
liquidation of the Company (including any net profits
and net losses attributable to the deemed sale of
assets pursuant to the immediately preceding
sentence) shall be allocated among the Members in
accordance with Article V; provided however, that
such allocations shall be modified to take account
of the priority distribution to the Interpublic
Members of a Make Whole Amount so that to the extent
possible the Capital Account balances of the Members
will reflect the amounts they are entitled to
receive on dissolution of the Company (including the
payment of a Make Whole Amount to the Interpublic
Members). If there are any assets available
following the priority distribution to the
Interpublic Members, such assets shall be
distributed to the Interpublic Members and the All
American Members in accordance with their
respective positive Capital Account balances.
(ii) If dissolution occurs after the termination of the
Restricted Period:
(A) If any assets of the Company are to be
distributed in kind, the net fair market
value of such assets as of the date of
dissolution shall be determined by
independent appraisal or by agreement of the
Members. Such assets shall be deemed to have
been sold as of the date of dissolution for
their fair market value,
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and the Capital Accounts of the Members
shall be adjusted pursuant to the provisions
of Article V.
(B) The positive balance (if any) of each
Member's Capital Account (as determined
after taking into account all Capital
Account adjustments for the Company's
taxable year during which the liquidation
occurs) shall be distributed to the Members
in cash or, if both Members agree, in kind
with the net fair market value of any assets
distributed in kind being determined by
agreement of the Members.
SECTION 8.4 Return of Contribution Nonrecourse to Other
Members. Except as provided by law or Section 4.2, each Member will look solely
to the assets of the Company for all distributions with respect to the Company
and such Member's Capital Contributions thereto and share of profits or losses
thereof, and will have no recourse therefore (upon dissolution of the Company or
otherwise) against any other Member.
ARTICLE IX
COMPANY EXPENSES, BOOKS AND RECORDS
SECTION 9.1 Fiscal Year and Method of Accounting. The fiscal
year of the Company shall begin on January 1 of each year (except for the first
fiscal year of the Company which shall begin on the date of this Agreement) and
end on the following December 31 of each year, unless otherwise agreed to by the
unanimous consent of all Members. The Company's books of account and records
shall be maintained in a manner consistent with GAAP applied on a consistent
basis and the Company shall elect to use the accrual method of accounting.
SECTION 9.2 Audits.
(a) The Members shall have the right to audit, at any time and
at their sole cost and expense, the books of account and records of the Company.
Such audit may be conducted by such Member or its external auditor. If a Member
elects to have its external auditor audit the Company's books and records, it
shall provide to the other Members a copy of any report or comments prepared by
such auditor relating to the Company, its books of account or records. If the
Members disagree about matters covered in such reports any Member may require
the Company to retain a nationally recognized independent accounting firm
mutually agreed upon by the Members to audit the books of account and records of
the Company until such time as the Members unanimously determine that it is no
longer necessary to retain such outside accounting firm.
(b) Interpublic shall have the right, on behalf of the
Company, to audit (up to four times in any Fiscal year) the books, records and
production budgets of All American Goodson, All American TV, All American
Television II, Fremantle and All American Fremantle II. Any such audit shall be
at the Company's sole cost and expense.
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(c) Interpublic shall have the right, on behalf of the
Company, to audit the books, records and production budgets, with respect to
production costs, of any sublicensee of All American Goodson and any other
Persons producing, licensing or distributing the Company's programming assets.
The All American Members will use their best efforts to cause their sublicensees
to agree to allow Interpublic to perform such audits.
SECTION 9.3 Right of Inspection. The books and records of the
Company shall be available for inspection by the Members at the principal office
and place of business of the Company. Additionally, Interpublic shall be given
access to the Operator's financial statements and, with respect to production
costs, will have the right to examine such financial statements at any
reasonable time or times for any purpose.
SECTION 9.4 Financial Statements and Reports. Each Member
shall receive unaudited reports, quarterly, setting forth with specificity the
Company's financial data. Such reports shall be delivered within thirty (30)
days of the end of such quarter. The Members shall also receive such other
information as may be reasonably requested by a Member or as is otherwise
required by law.
SECTION 9.5 Tax Matters Partner. The Operator will be the "Tax
Matters Partner" (as defined in Section 6231 of the Code) until such time as a
new Tax Matters Partner may be designated by the Members. The Tax Matters
Partner is authorized and required to represent the Company (at the Company's
expense) in connection with all examinations of the Company's affairs by tax
authorities, including administrative and judicial proceedings, and to expend
Company funds for professional services and costs associated therewith.
ARTICLE X
LIABILITY AND INDEMNIFICATION
SECTION 10.1 Liability to Company and Other Members.
(a) Neither the Operator nor any Member, in its capacity as
Operator or as a Member, shall be liable to the Company or to any other Member
for any losses arising from any act or omission performed or omitted by it in
connection with this Agreement, except for any losses determined to be
attributable to the Operator's or such Member's gross negligence, bad faith,
willful misconduct or breach of this Agreement. Notwithstanding anything herein
to the contrary, the provisions of this Section 10.1 shall not be construed so
as to relieve (or attempt to relieve) the Operator or any Member of any
liability, to the extent (but only to the extent) that such liability may not be
waived, modified or limited under applicable law, but shall be construed so as
to effectuate the provisions of this Section 10.1 to the fullest extent
permitted by law.
(b) The Members, as such, shall not be liable under a
judgment, decree, or order of a court, or in any other manner, for a debt,
obligation, or liability of the Company.
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SECTION 10.2 Indemnification.
(a) The Company shall, to the fullest extent permitted by law,
indemnify and hold harmless the Operator and each Member (each, an "Indemnified
Person" and collectively, the "Indemnified Persons") from and against any loss,
liability, damage, cost or expense (including reasonable legal fees and expenses
and any amount paid in settlement) ("Loss") resulting from a claim, demand,
lawsuit, action or proceeding, including any appellate or bankruptcy proceeding
(collectively, "Claims") relating to such Indemnified Person's actions or
omissions or such Indemnified Person's status or capacity as a Member or
otherwise concerning business or activities undertaken by or on behalf of the
Company pursuant to this Agreement unless and to the extent that the acts or
omissions are determined to be attributable to the Indemnified Person's gross
negligence, bad faith, willful misconduct or breach of this Agreement. With
respect to any Claim brought by another Member against the Indemnified Person
and containing allegations of gross negligence, bad faith, willful misconduct or
breach of this Agreement, including without limitation, a breach of any
representation or warranty made pursuant to Article XIV (which shall continue to
survive after the execution of the Agreement), by the Indemnified Person, the
prevailing party shall be entitled to be reimbursed by the unsuccessful party
for any Loss incurred by the prevailing party in connection with such Claim.
(b) All rights to indemnification provided herein shall
survive the termination of this Agreement and the withdrawal, removal or
insolvency of the Operator or any Member; provided that a claim for
indemnification hereunder is made by or on behalf of the Person seeking such
indemnification prior to the time distribution in liquidation of the assets of
the Company is made pursuant to Article VIII.
(c) The reimbursement and indemnity obligations of each
Member, as such, under this Article X shall be limited to the sum of such
Member's Interest and any Capital Contributions required to be made but not then
made by such Member hereunder, including contributions made pursuant to Section
4.2, and interest accrued (but not paid) thereon; provided that a Member shall
be reimbursed for 100% of any Losses incurred in connection with a breach by a
Member of any representation or warranty made pursuant to Article XIII
irrespective of the amount of such Loss or Losses.
SECTION 10.3 Indemnification of Company. If the Company is
made a party to any Claim, or otherwise incurs any Loss as a result of or in
connection with the Operator's, any Member's or any Ex-Member's obligations or
liabilities unrelated to the business of the Company, the Operator, such Member
or such Ex-Member shall reimburse the Company for all Losses incurred.
SECTION 10.4 Members Right to Bring Cause of Action.
Notwithstanding anything herein to the contrary, any right, claim or cause of
action by the Company against the Operator, any Member or any Affiliate of such
Member may be brought by the other Member on behalf of the Company.
SECTION 10.5 Authorizations. The execution, delivery and
filing of the
40
<PAGE> 41
Articles of Organization is hereby authorized, approved and ratified and each
Member is hereby authorized to execute, deliver and file any amendment to and
restatements of the Articles of Organization that are required or permitted by
the Act and any and all certificates or documents required by the Act.
ARTICLE XI
MATTERS RELATING TO THE ASSET PURCHASE AGREEMENT
SECTION 11.1 Unanimous Consent of Members Required. Any
actions to be taken by the Company pursuant to the terms of the Asset Purchase
Agreement, including without limitation, any actions (i) to extend the Earn-Out
Payments pursuant to Section 3.8 of the Asset Purchase Agreement, (ii) to
approve refunding agreements pursuant to the Estate Guaranty referred to in
Section 13.5(a) of the Asset Purchase Agreement, or (iii) to assert claims or
defenses to or to commence or defend lawsuits arising under the Asset Purchase
Agreement on behalf of the Company, shall require the unanimous written consent
of the Members.
SECTION 11.2 Assumption of Liabilities.
(a) Pursuant to the Assumption and Assignment Agreement, the
Company assumes and discharges the Interpublic Members for any and all
liabilities and obligations in connection with the Interpublic Members'
undivided interest in the Assets other than the obligations of Interpublic (i)
to deliver its equity securities to Sellers pursuant to Section 3.3 of the Asset
Purchase Agreement, (ii) to deliver cash in lieu of fractional shares of its
securities to Sellers pursuant to Section 3.4 of the Asset Purchase Agreement,
(iii) relating to the giving of representations and warranties pursuant to
Article 6 of the Asset Purchase Agreement and (iv) relating to the covenant to
maintain Interpublic Game Shows as a special purpose entity pursuant to Section
7.15 of the Asset Purchase Agreement.
(b) If the Interpublic Members incur any Loss as a result of
or in connection with it being a purchaser of the Assets (as opposed to being an
equity owner of the Company) pursuant to the Asset Purchase Agreement, other
than a Loss resulting from Interpublic's breach of the Asset Purchase Agreement
or a breach by either Seller under the Asset Purchase Agreement, the Company
shall reimburse such Members for 100% of all Losses incurred with respect
thereto. Notwithstanding anything in Article V to the contrary, such
reimbursement payments shall be distributed to the Interpublic Members prior to
distributions of Ordinary Distributions, Special Distributions and Earn-Out
Payments.
SECTION 11.3 Indemnification.
(a) If the Company or any Member incurs any Loss as a result
of Interpublic's or All American's breach of the Asset Purchase Agreement, such
breaching party shall reimburse the Company or the other non-Affiliated Members,
as the case may be, for 100% of all Losses incurred.
41
<PAGE> 42
(b) If the Company receives any indemnification payments
pursuant to Section 13.1 of the Asset Purchase Agreement or any funds as a
result of a decrease in the purchase price for the Assets, the Company shall
distribute such payments to the Members in accordance with their Membership
Percentages prior to making Ordinary Distributions, Special Distributions or
Earn-Out Payments notwithstanding anything in this Agreement to the contrary.
ARTICLE XII
LETTER AGREEMENT
The Members and certain other parties are entering into a
letter agreement simultaneously with entering into this Agreement.
ARTICLE XIII
REPRESENTATIONS AND WARRANTIES
SECTION 13.1. Representations and Warranties of All American.
Each of the All American Members hereby represents and warrants to the
Interpublic Members as of the date hereof as follows:
13.1.1 Organization. Each of the All American Members is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, has all requisite corporate power and authority to (i)
conduct its business as it is now being conducted and to own or lease its
properties and assets, (ii) execute and deliver this Agreement and the
Transaction Documents, (iii) perform its obligations under this Agreement and
the Transaction Documents and (iv) consummate all of the transactions
contemplated by this Agreement and the Transaction Documents.
13.1.2 Authorization; Binding Effect. The execution, delivery
and performance by such All American Member of this Agreement and the
Transaction Documents, and the consummation of the transactions contemplated
hereby and thereby to be performed by it, have been duly authorized by all
necessary corporate action on the part of such All American Member. This
Agreement and the Transaction Documents have been duly executed and delivered by
it and, assuming the due execution and delivery by the other parties hereto and
thereto, this Agreement and the Transaction Documents constitute valid and
binding obligations of such All American Member, enforceable against it in
accordance with their terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting creditors' rights generally
and to general principles of equity (whether considered in a proceeding in
equity or at law).
13.1.3 No Conflicts. The execution and delivery of this
Agreement and the Transaction Documents by such All American Member and the
performance by it of the transactions contemplated hereby and thereby, will not
(i) violate any Legal Requirement applicable to such All American Member, (ii)
conflict with or result in a breach of any of the provisions of the charter or
by-laws of such All American Member, (iii) violate or result in a breach or
default under or cause the termination, modification or acceleration of any
42
<PAGE> 43
term or condition of any Contractual Obligation binding upon such All American
Member or any of its assets, or (iv) result in the creation or imposition of any
encumbrance or claim of any kind upon any asset of such All American Member.
13.1.4 Consents. No consent, approval, authorization, order of
or filing with any Governmental Authority or other Person is required to be made
by such All American Member to consummate the transactions contemplated by this
Agreement or the Transaction Documents (other than such as have been received or
made).
13.1.5 No Finder. No All American Member nor any party acting
on behalf of any All American Member has paid or become obligated to pay any fee
or commission to any broker, finder or intermediary for or on account of the
transactions contemplated by this Agreement.
13.1.6 Investment Intent. Each All American Member is
acquiring its Interest for its own account for investment and not with a view
to, or for resale in connection with, the distribution or other disposition
thereof.
13.1.7 Investment Company Act. No All American Member is
required to be registered as an "investment company" under the Investment
Company Act of 1940, as amended.
13.1.8 The Company.
(a) The Company is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of New York
and has all requisite corporate power and authority to conduct its business as
it is now being conducted and to own or lease its properties and assets.
(b) The Company has no liabilities other than liabilities
assumed by the Company pursuant to the Asset Purchase Agreement or immaterial
liabilities incurred in connection with the organization of the Company.
SECTION 13.2 Representations and Warranties of Interpublic.
Each of the Interpublic Members hereby represents and warrants to the All
American Members as of the date hereof as follows:
13.2.1 Organization. Each of the Interpublic Members is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, has all requisite corporate power and authority to (i)
conduct its business as it is now being conducted and to own or lease its
properties and assets, (ii) execute and deliver this Agreement and the
Transaction Documents, (iii) perform its obligations under this Agreement and
the Transaction Documents and (iv) consummate all of the transactions
contemplated by this Agreement and the Transaction Documents.
13.2.2 Authorization; Binding Effect. The execution, delivery
and
43
<PAGE> 44
performance by such Interpublic Member of this Agreement and the Transaction
Documents, and the consummation of the transactions contemplated hereby and
thereby to be performed by such Interpublic Member, have been duly authorized by
all necessary action on the part of such Interpublic Member. This Agreement and
the Transaction Documents have been duly executed and delivered by such
Interpublic Member and, assuming the due execution and delivery by the other
parties hereto and thereto, this Agreement and the Transaction Documents
constitute valid and binding obligations of such Interpublic Member enforceable
against such Interpublic Member in accordance with their terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting creditors' rights generally and to general principles of equity
(whether considered in a proceeding in equity or at law).
13.2.3 No Conflicts. The execution and delivery of this
Agreement and the Transaction Documents and the performance by such Interpublic
Member of the transactions contemplated hereby and thereby will not (i) violate
any Legal Requirement applicable to such Interpublic Member or (ii) conflict
with or result in a breach of any of the provisions of the charter or by-laws of
such Interpublic Member, (iii) violate or result in a breach or default under or
cause the termination, modification or acceleration of any term or condition of
any Contractual Obligation binding upon such Interpublic Member or any of its
assets or (iv) result in the creation or imposition of any encumbrance or claim
of any kind upon any asset of such Interpublic Member.
13.2.4 Consents. No consent, approval, authorization, order of
or filing with any Governmental Authority or other Person is required to be made
by such Interpublic Member to consummate the transactions contemplated by this
Agreement or the Transaction Documents (other than such as have been received or
made).
13.2.5 Contracts. There are no Contractual Obligations to
which Interpublic or any of its Affiliates is a party or is otherwise bound
relating to the Assets.
13.2.6. No Finder. No Interpublic Member nor any party acting
on behalf of any Interpublic Member has paid or become obligated to pay any fee
or commission to any broker, finder or intermediary for or on account of the
transactions contemplated by this Agreement.
13.2.7 Investment Intent. Each Interpublic Member is acquiring
its Interest for its own account for investment and not with a view to, or for
resale in connection with, the distribution or other disposition thereof.
13.2.8 Investment Company Act. No Interpublic Member is
required to be registered as an "investment company" under the Investment
Company Act of 1940, as amended.
44
<PAGE> 45
ARTICLE XIV
ARBITRATION
SECTION 14.1 Nature of the Dispute. Any dispute arising out of
or relating to whether the Operator may be removed for Cause pursuant to Section
3.6 or to whether the Company's Assets have been infringed upon pursuant to
Section 3.10(b) (a "Dispute") shall be settled exclusively and finally by
arbitration. It is specifically understood and agreed that any Dispute may be
submitted to arbitration irrespective of the magnitude thereof, the amount in
controversy or whether such Dispute would otherwise be considered justiciable or
ripe for resolution by a court.
SECTION 14.2 Rules of Arbitration. The arbitration shall be
conducted in accordance with the Rules of Arbitration of the American
Arbitration Association as in effect on the date of this Agreement, except to
the extent those rules conflict with the provisions of this Article XIV, in
which event the provisions of this Article XIV shall control.
SECTION 14.3 Arbitration Procedure. The arbitral tribunal
shall consist of three (3) arbitrators. The arbitration shall be conducted in
New York, New York or such other place as is unanimously agreed by the parties
to the arbitration. Each party to the arbitration shall appoint one (1)
arbitrator, and the two (2) arbitrators thus appointed shall choose the third
(3rd) arbitrator, who will act as the chairman of the arbitral tribunal and if
the two (2) arbitrators appointed pursuant to the foregoing sentence are not
able to agree on the third (3rd) arbitrator within thirty (30) days from the
date the last such arbitrator was appointed, the third (3rd) arbitrator shall be
appointed by the American Arbitration Association.
SECTION 14.4 Binding Decision and Award. The arbitral tribunal
shall deliver a written decision or award and any such decision or award shall
be final and binding upon the parties to the arbitration proceeding. The Members
hereby waive to the extent permitted by law any rights to appeal or to review of
such award by any court or tribunal. The Members agree that the arbitral award
may be enforced against the parties to the arbitration proceeding or their
assets wherever they may be found and that a judgment upon the arbitral award
may be entered in any court having jurisdiction thereof.
SECTION 14.5 Miscellaneous. At any oral hearing of evidence in
connection with the arbitration, each party thereto or its legal counsel shall
have the right to examine its witnesses and to cross-examine the witnesses of an
opposing party. No evidence of any witness shall be presented in written form
unless the opposing party or parties shall have the opportunity to cross-examine
such witness, except as the parties to the dispute otherwise agree in writing or
except under extraordinary circumstances where the arbitrators determine that
the interests of justice require a different procedure. Without in any way
limiting the foregoing and notwithstanding anything herein to the contrary, the
Members may, upon the prior written consent of all parties to a Dispute, submit
any Dispute to an expert acceptable to all such parties for consideration and
advice. Each
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<PAGE> 46
Member agrees, in the event such submission is made, to reasonably consider the
advice of such expert in connection with such Dispute.
ARTICLE XV
MISCELLANEOUS
SECTION 15.1 Amendments to Operating Agreement. The terms and
provisions of this Agreement may be modified or amended only by the unanimous
written consent of the Members.
SECTION 15.2 Notices. The Company shall send the Members
copies of all notices which it receives within 5 Business Days of the receipt of
such notice. All notices to the Company shall be addressed to its principal
office and place of business as set forth in Section 2.1. All notices addressed
to a Member shall be addressed to such Member at the address set forth in
Schedule B hereto or at such other address as the Member may designate by notice
to the Company from time to time. Unless otherwise specifically provided in this
Agreement, a notice shall be deemed to have been effectively given when properly
mailed by registered or certified mail postage prepaid to the proper address or
when properly transmitted by telex or other means of telecommunications or when
delivered by hand.
SECTION 15.3 Articles of Organization. From time to time the
Members shall sign and acknowledge all such writings as are required to amend
the Articles of Organization or for the carrying out of the terms of this
Agreement or, upon dissolution of the Company, to cancel such Articles of
Organization.
SECTION 15.4 Entire Agreement. This Agreement supersedes all
prior agreements and understandings among the Members with respect to the
subject matter hereof.
SECTION 15.5 Modification. No change or modification of this
Agreement shall be of any force unless such change or modification is in writing
and has been signed by the Members.
SECTION 15.6 Waivers. No waiver of any breach of any of the
terms of this Agreement shall be effective unless such waiver is in writing and
signed by the Member against whom such waiver is claimed. No waiver of any
breach shall be deemed to be a waiver of any other or subsequent breach.
SECTION 15.7 Severability. If any provision of this Agreement
shall be held to be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 15.8 Further Assurances. Each Member shall execute
such deeds, assignments, endorsements, evidences of Transfer and other
instruments and documents and shall give such further assurances as shall be
necessary to perform its obligations hereunder.
46
<PAGE> 47
SECTION 15.9 Confidentiality. By executing this Agreement,
each Member expressly agrees, at all times during the term of the Company and
thereafter and whether or not at the time a Member, to maintain the
confidentiality of, and not to disclose to any Person other than the Company,
another Member, Chemical Bank (provided that Chemical Bank enters into a
confidentiality agreement acceptable to Interpublic and All American) or a
Person designated by the Company, any information relating to the business,
financial structure, financial position or financial results, clients or affairs
of the Company that shall not be generally known to the public or the securities
industry, except as otherwise required by law or by any regulatory or
self-regulatory organization having jurisdiction; provided that any Member may
disclose any such information it is required by law, rule, regulation, Nasdaq or
the New York Stock Exchange, as determined by its outside counsel, to disclose.
SECTION 15.10 Publicity. The All American Members and the
Interpublic Members will consult with each other and obtain the consent of the
other parties (such consent not to be unreasonably withheld) before issuing any
press release or otherwise making any public statement with respect to the
Company (other than ordinary course press releases to the trade press in which
Interpublic is not named) and shall not make any such public statement prior to
such consultation, except as required by law or rules and regulations of the New
York Stock Exchange or Nasdaq.
SECTION 15.11 Governing Law. This Agreement shall be governed
by and be construed in accordance with the laws of the State of New York.
SECTION 15.12 Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
SECTION 15.13 Limitation on Rights of Others. No Person other
than a Member shall have any legal or equitable right, remedy or claim under or
in respect of this Agreement.
SECTION 15.14 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Members and their respective
successors and permitted assigns.
SECTION 15.15 Securities Laws. All offerings and Transfers of
Interests shall be made in compliance with applicable federal and state
securities laws. Each Member indemnifies the other Members and the Company for
any loss, cost, liability or damage arising from its breach of the foregoing
sentence.
47
<PAGE> 48
IN WITNESS WHEREOF, the undersigned have executed this Amended
and Restated Limited Liability Company Operating Agreement as of the day and
year first above written.
ALL AMERICAN COMMUNICATIONS, INC.
By: /s/ THOMAS BRADSHAW
____________________________________
Name: Thomas Bradshaw
ALL AMERICAN GOODSON, INC.
By: /s/ THOMAS BRADSHAW
____________________________________
Name: Thomas Bradshaw
THE INTERPUBLIC GROUP OF COMPANIES
INC.
By: /s/ THOMAS J. VOLPE
____________________________________
Name: Thomas J. Volpe
INFOPLAN INTERNATIONAL, INC.
By: /s/ THOMAS J. VOLPE
____________________________________
Name: Thomas J. Volpe
48
<PAGE> 49
SCHEDULE A
INITIAL CAPITAL CONTRIBUTIONS OF MEMBERS
<TABLE>
<CAPTION>
Initial Initial
Capital Membership
Name Contribution Percentage
- ---- ------------ ----------
<S> <C> <C>
The All American Members __________ 50%
The Interpublic Members __________ 50%
</TABLE>
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<PAGE> 50
SCHEDULE B
NAMES AND ADDRESSES OF MEMBERS
<TABLE>
<CAPTION>
Name Address
- ---- -------
<S> <C>
All American Communications, Inc. 2114 Pico Boulevard
Santa Monica, CA 90405
All American Goodson, Inc. 1325 Avenue of the Americas
New York, NY 10019
The Interpublic Group of Companies, Inc. 1271 Avenue of the Americas
New York, NY 10020
Infoplan International, Inc. 1271 Avenue of the Americas
New York, NY 10020
</TABLE>
50
<PAGE> 51
SCHEDULE C
INITIAL MEMBERS OF THE ARBITRATION COMMITTEE
The members of the Arbitration Committee shall be appointed by the
Board of Directors of All American, provided that one member of the Arbitration
Committee shall consist of the nominee of the director appointed by Interpublic
to the All American Board of Directors. The members of the Arbitration Committee
shall consist initially of Eugene Beard (as the nominee designated by the
director appointed by Interpublic to All American's Board of Directors), Anthony
Scotti (as the nominee of the All American board designees) and David Mount. Any
member of the Arbitration Committee may be removed, with or without cause, by
the director who nominated such Arbitration Committee member, provided that any
successor to Mr. Mount will be nominated by the Interpublic board designee and
the All American board designee. Any vacancies on the Arbitration Committee
shall be filled by the director who initially nominated such member of the
Arbitration Committee after consultation with the other directors regarding such
Arbitration Committee member's replacement.
51
<PAGE> 1
EXHIBIT 11.1
ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1995
---------------------------------------------
AS ADJUSTED
FOR THE MARK
GOODSON
ACQUISITION
HISTORICAL PRO FORMA AND THE
COMPANY ADJUSTMENTS OFFERING
----------- ------------ ------------
<S> <C> <C> <C>
Weighted average number of common shares outstanding.... 7,976 4,000(1) 11,976
Assumed exercise of dilutive options and warrants under
the treasury stock method based on average market
price................................................. 105(2) 105
------- ------ -------
Weighted average number of common shares and common
share equivalents -- primary (B)...................... 7,976 4,105 12,081
Additional shares from assumed exercise of dilutive
options and warrants under the treasury stock method
based on ending market price.......................... 162(2) 162
Weighted average assumed conversion of 6 1/2%
Convertible Subordinated Notes due 2003............... 5,217 5,217
------- ------ -------
Weighted average number of common shares and common
share equivalents -- fully diluted (D)................ 13,193 4,267 17,460
======= ====== =======
Computation of net income (loss) for per share purposes:
Net income (loss) (A)................................... $(1,571) $2,003 $ 432
Add: After tax reduction of interest expense for assumed
conversion of 6 1/2% Convertible Subordinated Notes
due 2003........................................... 1,254 1,254
------- ------ -------
Net income (loss) for fully diluted per share
computation (C)....................................... $ (317) $2,003 $ 1,686
======= ====== =======
Net earnings (loss) per share -- Primary (A)/(B)........ $ (0.20) $ 0.04
======= =======
Net earnings (loss) per share -- Fully diluted
(C)/(D)............................................... $ (0.02)(*) $ 0.10(*)
======= =======
</TABLE>
- ---------------
(*) Calculation is antidilutive
(1) Reflects the issuance of Class B Common Stock in connection with the
offering.
(2) Reflects the inclusion of dilutive common stock equivalents.
<PAGE> 1
EXHIBIT 11.2
ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
--------------------------------------------------
AS ADJUSTED
SEVEN MONTH FOR THE
YEAR ENDED PERIOD ENDED AS ADJUSTED MARK GOODSON
DECEMBER 31, JULY 31, 1994 FOR THE ACQUISITION
1994 HISTORICAL PRO FORMA FREMANTLE PRO FORMA AND THE
AS REPORTED(1) FREMANTLE ADJUSTMENTS ACQUISITION ADJUSTMENTS OFFERING
--------------- ------------- ------------ ------------ ------------- -------------
(IN THOUSANDS -- EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Weighted average number
of common shares
outstanding............ 6,135 1,841(2) 7,976 4,000(5) 11,976
Assumed exercise of
dilutive options and
warrants under the
treasury stock method
based on average
market price.......... 66 (66) (3) -- 66(4) 66
-------- ------- ------- -------- ------ -------
Weighted average number
of common shares and
common share
equivalents -- primary
(B)................... 6,201 -- 1,775 7,976 4,066 12,042
Additional shares from
assumed exercise of
dilutive options and
warrants under the
treasury stock method
based on ending market
price................. -- 66(4) 66 (66)(3) --
Weighted average assumed
conversion of 6 1/2%
Convertible
Subordinated Notes due
2003.................. 5,217 5,217 5,217
-------- ------- ------- -------- ------ -------
Weighted average number
of common shares and
common share
equivalents -- fully
diluted (D)........... 11,418 -- 1,841 13,259 4,000 17,259
======== ======= ======= ======== ====== =======
Computation of net
income (loss) for per
share purposes:
Net income (loss) (A)... $ 455 $ 476 $ (2,033) $ (1,102) $ 4,406 $ 3,304
Add: After tax reduction
of interest expense
for assumed
conversion of
6 1/2% Convertible
Subordinated Notes
due 2003........... 2,508 2,508 2,508
-------- ------- ------- -------- ------ -------
Net income (loss) for
fully diluted per
share computation
(C)................... $ 2,963 $ 476 $ (2,033) $ 1,406 $ 4,406 $ 5,812
======== ======= ======= ======== ====== =======
Net earnings (loss) per
share -- Primary
(A)/(B)............... $ 0.07 $ (0.14) $ 0.27
======== ======== =======
Net earnings (loss) per
share -- Fully diluted
(C)/(D)............... $ 0.26(*) $ 0.11(*) $ 0.34(*)
======== ======== =======
</TABLE>
- ---------------
(*) Calculation is antidilutive
(1) The historical results for the year ended December 31, 1994 include the five
months of operations of Fremantle from August 1994, the date of the
Fremantle Acquisition.
(2) Reflects the weighted average number of shares issued in connection with the
Fremantle Acquisition.
(3) Reflects the elimination of anti-dilutive common stock equivalents.
(4) Reflects the inclusion of dilutive common stock equivalents.
(5) Reflects the issuance of Class B Common Stock in connection with the
offering.
<PAGE> 1
EXHIBIT 11.3
ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1994
-----------------------------------------------------------------------------------
AS FURTHER
ADJUSTED
FOR THE
AS ADJUSTED MARK GOODSON
HISTORICAL FOR THE ACQUISITION
------------------- PRO FORMA FREMANTLE PRO FORMA AND THE
COMPANY FREMANTLE ADJUSTMENTS ACQUISITION ADJUSTMENTS OFFERING
------- --------- ----------- ----------- ------------ -------------
(IN THOUSANDS -- EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Weighted average number of common shares
outstanding................................ 4,826 3,150(1) 7,976 4,000(2) 11,976
Assumed exercise of dilutive options and
warrants under the treasury stock method
based on average market price............. -- -- --
------- ------- ------- ------- ------ -------
Weighted average number of common shares and
common share equivalents -- primary(B).... 4,826 -- 3,150 7,976 4,000 11,976
Additional shares from assumed exercise of
dilutive options and warrants under the
treasury stock method based on ending
market price.............................. -- -- 197(3) 197
Weighted average assumed conversion of
6 1/2% Convertible Subordinated Notes due
2003...................................... 5,217 5,217 5,217
------- ------- ------- ------- ------ -------
Weighted average number of common shares and
common share equivalents -- fully
diluted(D)................................ 10,043 -- 3,150 13,193 4,197 17,390
======= ======= ======= ======= ====== =======
Computation of net income (loss) for per
share purposes:
Net income (loss)(A)........................ $(3,757) $ 1,246 $(1,152) $(3,663) $3,143 $ (520)
Add: After tax reduction of interest expense
for assumed conversion of 6 1/2%
Convertible Subordinated Notes due
2003................................... 1,254 1,254 1,254
------- ------- ------- ------- ------ -------
Net income (loss) for fully diluted per
share computation(C)...................... $(2,503) $ 1,246 $(1,152) $(2,409) $3,143 $ 734
======= ======= ======= ======= ====== =======
Net earnings (loss) per share -- Primary
(A)/(B)................................... $ (0.78) $ (0.46) $ (0.04)
======= ======= =======
Net earnings (loss) per share -- Fully
diluted(C)/(D)............................ $ (0.25)(*) $ (0.18)(*) $ 0.04(*)
======= ======= =======
</TABLE>
- ---------------
(*) Calculation is antidilutive
(1) Reflects the weighted average number of shares issued in connection with the
Fremantle Acquisition.
(2) Reflects the issuance of Class B Common Stock in connection with the
offering.
(3) Reflects the inclusion of dilutive common stock equivalents.
<PAGE> 1
EXHIBIT 99
NEWS ANNOUNCEMENT [JC LOGO]
JAFFONI & COLLINS
INCORPORATED
CONTACT:
Joseph N. Jaffoni
David C. Collins
Jaffoni & Collins Incorporated
All American Communications The Interpublic Group of Companies, Inc.
Thomas Bradshaw William S. Keating Eugene P. Beard
Chief Financial Officer Associate General Counsel Chief Financial Officer
310/450-3193 212/399-8078 212/399-8053
FOR IMMEDIATE RELEASE
ALL AMERICAN COMMUNICATIONS AND INTERPUBLIC GROUP
TO PURCHASE MARK GOODSON PRODUCTIONS
- Extends All American's Strong Presence
in Television Game Show Production and Distribution -
Santa Monica, CA, & New York, NY, (October 12, 1995) - All American
Communications, Inc. (NASDAQ: AACI) and The Interpublic Group of Companies, Inc.
(NYSE: IPG) announced today that they have formed a 50/50-owned, limited
liability company which has agreed to purchase substantially all of the assets
and assume certain liabilities of Mark Goodson Productions L.P. for $50 million
and contingent earn-out payments on domestic earnings. Mark Goodson Productions
is a leading producer and licensor of television game shows in the U.S. and
abroad.
The purchase closed into escrow with All American providing a $25 million
letter of credit through its bank facility led by Chemical Bank and Interpublic
agreeing to issue shares of its common stock with a fair market value of $25
million. The transaction will close on the expiration of certain contingencies
including Hart-Scott-Rodino filings. The final closing is expected in
approximately thirty days.
(more)
215 PARK AVENUE SOUTH - NEW YORK, NY 10003 - TEL 212.505.3015 -
FAX 212.505.8195
<PAGE> 2
All American and Interpublic To Acquire Mark Goodson Productions, 10/12/95
Page 2
All American Communications, through its All American Fremantle International
subsidiary, is currently the largest producer of Goodson game shows
internationally. Mark Goodson Productions has the largest portfolio of game
shows in the world with over forty game show formats including The Price is
Right, now on the CBS network, Card Sharks, Family Feud, Match Game, Password,
Rate Your Mate, To Tell The Truth, Winner Take All and What's My Line. Goodson
game shows are currently broadcast in more than eighteen countries throughout
North America, Europe, the Middle East and Asia.
The management of All American Television, a subsidiary of All American
Communications, will oversee day-to-day operations of Mark Goodson Productions.
Interpublic Group Owns 23 percent of All American Communications on a fully
diluted basis.
The current production team, led by Bob Barker, will continue to produce The
Price is Right which is in its 24th season on the CBS network. The acquisition
does not include the lottery-based television production business which will be
retained by the sellers.
Philip H. Geier, Jr., Chairman of the Board and Chief Executive Officer of the
Interpublic Group, said, "Our association with All American has achieved all of
our business and financial expectations and the current acquisition of Mark
Goodson Productions can only result in more benefits to all our shareholders."
Anthony J. Scotti, Chairman and Chief Executive Officer of All American, stated,
"The Goodson acquisition is an important element in our strategic plan to
produce and distribute programming for every country in the world. With the
addition of Mark Goodson Productions, we will significantly expand our game
show production and distribution capabilities in additional international
territories. Our international subsidiary, All American Fremantle
International, currently produces and distributes 93 game shows in 27 countries
and the Goodson formats are produced and broadcast in the local language in
more than 18 of these countries. Goodson expands our portfolio of game show
formats and increases the territories in which we can exploit these assets."
<PAGE> 3
All American and Interpublic To Acquire Mark Goodson Productions, 10/12/95
Page 3
All American Communications, Inc. is a diversified worldwide entertainment
company with operations in television and recorded music production and
distribution. All American Communications produces and distributes more than
100 shows a year in 27 countries. In addition to game shows and talk shows,
All American produces and distributes the successful, worldwide Baywatch
franchise: the weekly Baywatch series, the new Baywatch Nights and the Baywatch
strip.
The Interpublic Group of Companies is comprised of McCann-Erickson Worldwide,
Lintas Worldwide, The Lowe Group, Western International Media and other related
companies. The shares of The Interpublic Group of Companies, Inc. are listed
on The New York Stock Exchange.
