FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Act of 1934
Date of Report (date of earliest event reported): April 17, 1997
LIVE Entertainment Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-17342 95-4178252
(State of other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) Number)
15400 Sherman Way, Suite 500, Van Nuys, CA 91406
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (818) 988-5060
Not applicable
(Former name or former address, if changed since last report)
<PAGE>
LIVE Entertainment Inc., a Delaware corporation ("Registrant"),
hereby files this Form 8-K with respect to the transaction described below.
Item 1. Changes in Control of Registrant
The transaction contemplated in the Merger Agreement and
Stockholder Agreement (defined below) may constitute a change of
control. Please see the description of the transaction in Item 2
below.
Item 2. Acquisition or Disposition of Assets
Registrant has entered into a definitive Agreement and Plan
of Merger dated April 17, 1997 (the "Merger Agreement") by and
among Registrant, Film Holdings Co. ("Parent") and Film
Acquisition Co. ("Sub"). Pursuant to the Merger Agreement, on
the Effective Date of the Merger, holders of Registrant's Common
Stock will receive $6.00 per share in cash; holders of
Registrant's Series B Preferred Stock will receive $10.00 per
share in cash (the liquidation value of the Series B Preferred
Stock), plus accrued and unpaid dividends, and holders of
Registrant's Series C Preferred Stock will receive $944.8624 per
share in cash (which amount will include any accrued but unpaid
dividends thereon through the Effective Date), the liquidation
value of which will equal $1,235.33 per share on June 30,
1997. Registrant's outstanding indebtedness will also be
redeemed at par plus accrued interest immediately following and
subject to the Effective Date. The Boards of Directors of
Registrant, Parent and Sub have each approved the merger (the
"Merger") of Sub with and into Registrant in accordance with the
applicable provisions of the Delaware General Corporation Law.
Registrant has been advised by its investment advisor,
Houlihan Lokey Howard & Zukin, that, in its opinion, as of the
date of the Merger Agreement, the Common Stock Merger Price
($6.00 per share) set forth therein is fair to the holders of
Registrant's Common Stock (other than Pioneer Electronic
Corporation ("Pioneer"), as to which no opinion is rendered) from
a financial point of view. Registrant has agreed as soon as
practicable to prepare and file a Proxy Statement to be sent to
the stockholders of Registrant in connection with a special
meeting (the "Stockholders Meeting") of its stockholders to
consider the Merger. Registrant's Board of Directors has
recommended approval of the transactions contemplated by the
Merger Agreement.
Registrant has agreed that prior to the earlier of the
Effective Time or the termination of the Merger Agreement, that
it will not, directly or indirectly, through any officer,
director, employee, representative or agent of Registrant or any
of its subsidiaries, (i) solicit, initiate or encourage the
initiation of any inquiries or proposals regarding any merger,
recapitalization, sale of substantial assets, sale or exchange of
shares of capital stock (including, without limitation, by way of
a tender offer) or similar transactions involving Registrant or
any significant subsidiaries of Registrant other than the Merger
(any of the foregoing inquiries or proposals being hereinafter
referred to as an "Acquisition Proposal"), (ii) engage in
negotiations or discussions concerning, or provide any nonpublic
information to any person relating to, any Acquisition Proposal
or (iii) agree to, approve or recommend any Acquisition Proposal;
provided, however, that the Board of Directors of Registrant may
respond to and consider, negotiate, discuss, approve and
recommend to the stockholders of Registrant a bona fide
Acquisition Proposal not solicited in violation of the Merger
Agreement, provided the Board of Directors of Registrant
determines in good faith (after consultation with outside
counsel) that the Acquisition Proposal may present a more
favorable alternative to Registrant's stockholders than the
Merger and therefore that they should, consistent with their
duties as fiduciaries to Registrant's stockholders, respond to
and negotiate such alternative Acquisition Proposal. In the
event the Board of Directors determines that such Acquisition
Proposal presents a more favorable alternative, the Board of
Directors may approve and recommend such Acquisition Proposal and
terminate Registrant's obligations under the Merger Agreement.
In such event, the Merger Agreement provides that, under certain
circumstances, Registrant would be obligated to pay Parent a
termination fee of $3 million and reasonable out-of-pocket
expenses up to $1 million. In addition, Registrant may continue
to discuss an alternative financing with CPI Securities L.P.
should the Merger fail to be consummated.
As a condition and inducement to Parent's and Sub's entering
into the Merger Agreement, Pioneer (the holder of approximately
50.3% of the outstanding voting power of Registrant), Registrant
and Parent entered into a Stockholder Agreement ("Stockholder
Agreement") on April 17, 1997, included as Exhibit JJ to the
Schedule 13D filed by Pioneer on April 28, 1997. Pursuant to the
Stockholder Agreement, Pioneer agreed to (i) vote its shares in
favor of the Merger and granted Parent an irrevocable proxy with
respect thereto, all in connection with the stockholder meeting
of Registrant to approve the Merger and the transactions
contemplated thereby, (ii) not dispose of any of its shares of
Registrant Common Stock and (iii) pay to Parent a Topping Fee
equal to fifty percent (50%) of the excess of any cash or non-
cash consideration (excluding securities of Registrant) or any
successor corporation received by Pioneer or any of its
affiliates in connection with a transaction not involving Parent
which results in a (a) direct or indirect sale or other
disposition by Pioneer of shares of Registrant Stock, (b) merger
or consolidation of Registrant, (c) sale of all or substantially
all of the assets of Registrant or (d) other Topping Fee Event,
as such term is defined in the Stockholder Agreement, over the
aggregate consideration which would have been payable to Pioneer
if Pioneer had disposed to Parent in accordance with the Merger
Agreement of a proportion of each of Registrant's shares of (x)
Common Stock and (y) Series C Preferred Stock, par value $1.00
per share ("Series C Preferred Stock" and, collectively with the
Common Stock, the "Registrant Stock") held by Pioneer that is
equal to that transferred pursuant to the Topping Fee Event.
Payment of the Topping Fee is triggered if Pioneer engages in a
Topping Fee Event or a definitive written agreement with respect
thereto within twelve (12) months after the date of the
Stockholder Agreement.
Parent and Sub have provided Registrant with Commitment
Letters aggregating $150 million from Chase Manhattan Bank, CPI
Securities L.P., Bain Capital Fund V and V-B, and Alan D. Gordon,
all dated April 17, 1997, in favor of Parent (the "Commitment
Letters"). In the Merger Agreement, Parent and Sub represented
to Registrant that the Commitment Letters are in full force and
effect as of the date hereof and that they have no reason to
believe that such Letters will not continue to be in full force
and effect prior to the Effective Date.
The Chase Manhattan Bank Commitment Letter provides for a
Secured Term Loan of $30,000,000, and a Secured Revolving Credit
Facility in the amount of $90,000,000 to be made available to
Registrant's principal subsidiary, LIVE Film and Mediaworks Inc.,
the proceeds of which are to be used to refinance existing senior
and subordinated Debt and redeem existing Series B and Series C
Preferred Stock and Common Stock and employee and director Stock
Options, to finance production, distribution, or acquisition of
feature films and video products, to acquire rights to television
product for exploitation in other media and for general corporate
purposes. The Chase Commitment Letter is subject to customary
closing conditions including closing of the Merger, lack of a
Material Adverse Change in the Registrant prior to the Effective
Date, negotiation and execution of satisfactory documentation.
In addition to the Chase Manhattan Bank Commitment Letter,
Registrant has received a Commitment Letter from CPI Securities
L.P., to provide $15,000,000, of Senior Subordinated Secured
Notes to be issued by LIVE Film and Mediaworks. Parent and Sub
provided to Registrant copies of two equity Commitment Letters in
the aggregate amount of $15,000,000 from Bain Capital Fund
V & V-B, L.P. and Alan D. Gordon to be funded at the Effective Date.
Finally, in addition to funds provided by the Commitment Letters
described above, a portion of the aggregate Merger consideration
may be paid with cash on hand at the Registrant at the Effective
Date.
The Merger is subject to customary closing terms and
conditions (as more fully set forth in Article VI of the Merger
Agreement), including completing the necessary financing under
the Commitment Letters delivered by Parent and Sub. The
transaction is also subject to approval by holders of a majority
of Registrant's outstanding Common Stock and Series C Preferred
Stock at the Stockholders Meeting which is expected to be held in
June. The holders of the Company's Series B Preferred Stock are
not entitled to vote on the Merger.
The Merger Agreement provides that on the Effective Date,
the current Board of Directors of Registrant will resign and be
replaced by directors designated by Parent and Sub. In addition,
CPI Securities L.P. will have the right to designate one director.
Item 7. Pro Forma Financial Information and Exhibits.
10.1 Agreement and Plan of Merger dated April 17, 1997 by
and among LIVE Entertainment Inc., Film Holdings Co.
and Film Acquisition Co.
10.2 Press Release
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, hereunto duly authorized.
LIVE ENTERTAINMENT INC.
Date: April 29, 1997 By: /s/ RONALD B. CUSHEY
______________________________
Name: Ronald B. Cushey
Title: Executive Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Description of Exhibit Page
10.1 Agreement and Plan of Merger dated April 17, 1997 by 7
and among LIVE Entertainment Inc., Film Holdings Co.
and Film Acquisition Co.
10.2 Press Release dated April 18, 1997 53
Exhibit 10.1
Execution Copy
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
LIVE ENTERTAINMENT INC.
FILM HOLDINGS CO.
AND
FILM ACQUISITION CO.
Dated April 17, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. . . . . . . . . . . . . . . . . . 2
SECTION 1.2 Effective Time. . . . . . . . . . . . . . . . 2
SECTION 1.3 Effect of the Merger. . . . . . . . . . . . . 2
SECTION 1.4 Certificate of Incorporation; ByLaws. . . . . 2
SECTION 1.5 Directors and Officers. . . . . . . . . . . . 3
SECTION 1.6 Effect on Capital Stock.. . . . . . . . . . . 3
SECTION 1.7 Exchange of Certificates. . . . . . . . . . . 4
SECTION 1.8 Stock Transfer Books. . . . . . . . . . . . . 6
SECTION 1.9 No Further Ownership Rights in Company Stock. 6
SECTION 1.10 Lost, Stolen or Destroyed Certificates. . . . 6
SECTION 1.11 Reserved. . . . . . . . . . . . . . . . . . . 6
SECTION 1.12 Taking of Necessary Action; Further Action. . 6
SECTION 1.13 Material Adverse Effect.. . . . . . . . . . . 7
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 2.1 Organization and Qualification; Subsidiaries. 7
SECTION 2.2 Certificate of Incorporation and ByLaws . . . 8
SECTION 2.3 Capitalization. . . . . . . . . . . . . . . . 8
SECTION 2.4 Authority Relative to this Agreement. . . . . 9
SECTION 2.5 No Conflict; Required Filings and Consents. . 10
SECTION 2.6 Compliance; Permits.. . . . . . . . . . . . . 11
SECTION 2.7 SEC Filings; Financial Statements.. . . . . . 12
SECTION 2.8 Absence of Certain Changes or Events. . . . . 12
SECTION 2.9 No Undisclosed Liabilities. . . . . . . . . . 13
SECTION 2.10 Absence of Litigation.. . . . . . . . . . . . 13
SECTION 2.12 Labor Matters.. . . . . . . . . . . . . . . . 14
SECTION 2.13 Proxy Statement.. . . . . . . . . . . . . . . 15
SECTION 2.14 Reserved. . . . . . . . . . . . . . . . . . . 15
SECTION 2.15 Title to Property.. . . . . . . . . . . . . . 15
SECTION 2.16 Taxes.. . . . . . . . . . . . . . . . . . . . 15
SECTION 2.17 Environmental Matters.. . . . . . . . . . . . 16
SECTION 2.18 Intellectual Property.. . . . . . . . . . . . 17
SECTION 2.19 Interested Party Transactions.. . . . . . . . 18
SECTION 2.20 Insurance . . . . . . . . . . . . . . . . . . 19
SECTION 2.21 Reserved. . . . . . . . . . . . . . . . . . . 19
SECTION 2.22 Opinion of Financial Advisor. . . . . . . . . 19
SECTION 2.23 Brokers.. . . . . . . . . . . . . . . . . . . 19
SECTION 2.24 Change in Control Payments. . . . . . . . . . 19
SECTION 2.25 Expenses. . . . . . . . . . . . . . . . . . . 19
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
SECTION 3.1 Organization and Qualification; Subsidiaries. 20
SECTION 3.2 Charter and ByLaws. . . . . . . . . . . . . . 20
SECTION 3.3 Reserved. . . . . . . . . . . . . . . . . . . 20
SECTION 3.4 Authority Relative to this Agreement. . . . . 20
SECTION 3.5 No Conflict, Required Filings and Consents. . 21
SECTION 3.6 Financing . . . . . . . . . . . . . . . . . . 21
SECTION 3.7 Reserved. . . . . . . . . . . . . . . . . . . 21
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.1 Conduct of Business by the Company Pending
the Merger. . . . . . . . . . . . . . . . . . 31
SECTION 4.2 No Solicitation.. . . . . . . . . . . . . . . 24
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 HSR Act; Etc. . . . . . . . . . . . . . . . . 26
SECTION 5.2 Proxy Statement.. . . . . . . . . . . . . . . 26
SECTION 5.3 Stockholders Meeting. . . . . . . . . . . . . 27
SECTION 5.4 Access to Information; Confidentiality. . . . 27
SECTION 5.5 Consents; Approvals.. . . . . . . . . . . . . 27
SECTION 5.6 Actions Respecting Commitment Letters.. . . . 28
SECTION 5.7 Indemnification and Insurance.. . . . . . . . 28
SECTION 5.8 Notification of Certain Matters.. . . . . . . 29
SECTION 5.9 Further Action. . . . . . . . . . . . . . . 29
SECTION 5.10 Public Announcements. . . . . . . . . . . . . 30
SECTION 5.11 Conveyance Taxes. . . . . . . . . . . . . . . 30
SECTION 5.12 Warrant Agreements. . . . . . . . . . . . . . 30
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.1 Conditions to Obligation of Each Party to
Effect the Merger . . . . . . . . . . . . . 30
SECTION 6.2 Additional Conditions to Obligations of
Parent and Merger Sub . . . . . . . . . . . 31
SECTION 6.3 Additional Conditions to Obligations of
the Company . . . . . . . . . . . . . . . . 31
ARTICLE VII
TERMINATION
SECTION 7.1 Termination . . . . . . . . . . . . . . . . . 32
SECTION 7.2 Effect of Termination . . . . . . . . . . . . 33
SECTION 7.3 Fees and Expenses . . . . . . . . . . . . . . 33
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Effectiveness of Representations, Warranties
and Agreements, Etc. . . . . . . . . . . . . 34
SECTION 8.2 Notices . . . . . . . . . . . . . . . . . . . 35
SECTION 8.3 Definitions . . . . . . . . . . . . . . . . . 36
SECTION 8.4 Other Definitions.. . . . . . . . . . . . . . 38
SECTION 8.5 Amendment . . . . . . . . . . . . . . . . . . 39
SECTION 8.6 Waiver. . . . . . . . . . . . . . . . . . . . 39
SECTION 8.7 Headings. . . . . . . . . . . . . . . . . . . 40
SECTION 8.8 Severability. . . . . . . . . . . . . . . . . 40
SECTION 8.9 Entire Agreement. . . . . . . . . . . . . . . 40
SECTION 8.10 Assignment; Guarantee of Merger Sub . . . . . 40
SECTION 8.11 Parties in Interest.. . . . . . . . . . . . . 40
SECTION 8.12 Failure or Indulgence Not Waiver; Remedies
Cumulative. . . . . . . . . . . . . . . . . . 40
SECTION 8.13 Governing Law . . . . . . . . . . . . . . . . 40
SECTION 8.14 Counterparts. . . . . . . . . . . . . . . . . 41
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated April 17, 1997 (this
"Agreement"), among Film Holdings Co., a Delaware corporation
("Parent"), Film Acquisition Co., a Delaware corporation and a
wholly owned subsidiary of Parent ("Merger Sub"), and LIVE
Entertainment Inc., a Delaware corporation (the "Company").
WITNESSETH:
WHEREAS, the Boards of Directors of Parent, Merger Sub and
the Company have each determined that it is advisable and in the
best interests of their respective stockholders for Parent to
enter into a business combination with the Company upon the terms
and subject to the conditions set forth herein;
WHEREAS, as a condition and inducement to Parent's and
Merger Sub's entering into this Agreement and incurring the
obligations set forth herein, concurrently with the execution and
delivery of this Agreement, Parent is entering into a Stockholder
Agreement (the "Stockholder Agreement") with Pioneer Electronic
Corporation (the "Stockholder"), pursuant to which, among other
things, the Stockholder has agreed to vote the shares of Company
Common Stock and Company Series C Preferred Stock (both as
defined below) then owned by it in favor of the Merger (as
defined below); and
WHEREAS, in furtherance of such combination, the Boards of
Directors of Parent, Merger Sub and the Company have each
approved the merger (the "Merger") of Merger Sub with and into
the Company in accordance with the applicable provisions of the
Delaware General Corporation Law (the "DGCL").
WHEREAS, pursuant to the Merger, (A) each outstanding share
(a "Share") of the Company's common stock, $0.01 par value (the
"Company Common Stock"), shall be converted into the right to
receive the Common Stock Merger Price (as defined in Section
1.7(b)), (B) each Share of the Company's Series B Cumulative
Convertible Preferred Stock, $1.00 par value (the "Company Series
B Preferred Stock"), shall be converted into the right to receive
the Series B Merger Price (as defined in Section 1.7(b)) and (C)
each Share of the Company's Series C Convertible Preferred Stock,
$1.00 par value (the "Company Series C Preferred Stock"), shall
be converted into the right to receive the Series C Merger Price
(as defined in Section 1.7(b)) (the Company Common Stock, Company
Series B Preferred Stock and the Company Series C Preferred Stock
are referred to collectively herein as the "Company Stock"), all
upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending
to be legally bound hereby, Parent, Merger Sub and the Company
hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger.
(a) Effective Time. At the Effective Time (as defined in
Section 1.2), and subject to and upon the terms and conditions of
this Agreement and the DGCL, Merger Sub shall be merged with and
into the Company, the separate corporate existence of Merger Sub
shall cease, and the Company shall continue as the surviving
corporation. The Company as the surviving corporation
immediately after the Effective Time is hereinafter sometimes
referred to as the "Surviving Corporation."
(b) Closing. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have
been abandoned pursuant to Section 7.1, and subject to the
satisfaction or waiver of the conditions set forth in Article VI,
the consummation of the Merger will take place as promptly as
practicable (and in any event within two business days) after
satisfaction or waiver of the conditions set forth in Article VI,
at the offices of Sidley & Austin, 555 West Fifth Street, Suite
4000, Los Angeles, California, unless another date, time or place
is agreed to in writing by the parties hereto.
SECTION 1.2 Effective Time. As promptly as practicable
after the satisfaction or waiver of the conditions set forth in
Article VI, the parties hereto shall cause the Merger to be
consummated by filing a certificate of merger as contemplated by
the DGCL (the "Certificate of Merger"), together with any
required related certificates, with the Secretary of State of the
State of Delaware, in such form as required by, and executed in
accordance with the relevant provisions of, the DGCL (the date
and time of such filing being hereinafter referred to as the
"Effective Time").
SECTION 1.3 Effect of the Merger. At the Effective Time,
the effect of the Merger shall be as provided in this Agreement,
the Certificate of Merger and the applicable provisions of the
DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of the Company and Merger Sub
shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Merger Sub shall become
the debts, liabilities and duties of the Surviving Corporation.
SECTION 1.4 Certificate of Incorporation; By-Laws.
(a) Certificate of Incorporation. At the Effective Time,
the Certificate of Incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be the Certificate
of Incorporation of the Surviving Corporation until thereafter
amended, subject to Section 5.7 hereof, in accordance with the
DGCL and such Certificate of Incorporation.
(b) By-Laws. The By-Laws of the Company, as in effect
immediately prior to the Effective Time, shall be the By-Laws of
the Surviving Corporation until thereafter amended in accordance
with the DGCL, the Certificate of Incorporation of the Surviving
Corporation and such By-Laws; provided, however, that the Board
of Directors of the Surviving Corporation shall consist of the
same number of directors as the number of directors of Merger Sub
immediately prior to the Effective Time.
SECTION 1.5 Directors and Officers. The directors of
Merger Sub immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation, each to hold
office in accordance with the Certificate of Incorporation and
By-Laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation, in each case until
their respective successors are duly elected or appointed and
qualified.
SECTION 1.6 Effect on Capital Stock. At the Effective
Time, by virtue of the Merger and without any action on the part
of either the Parent, Merger Sub, the Company or the holders of
any of the following securities:
(a) Conversion of Securities. Each Share issued and
outstanding immediately prior to the Effective Time (excluding
any Shares to be canceled pursuant to Section 1.6(b)) shall be
converted into the right to receive the Applicable Merger Price
(as defined in Section 1.7(b)).
(b) Cancellation. Each Share held in the treasury of the
Company and each Share owned by Parent, Merger Sub or any direct
or indirect wholly owned subsidiary of the Company or Parent
immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof,
cease to be outstanding, be canceled and retired without payment
of any consideration therefor and cease to exist.
(c) Stock Rights. Prior to the Effective Time, the Board
of Directors of the Company (or, if appropriate, any Committee
thereof) shall adopt appropriate resolutions and take all other
actions necessary to provide that, except as may be otherwise
agreed in writing between Merger Sub and any holder of any vested
and currently exercisable option to purchase Company Stock (each,
a "Company Option Security"), each such vested and currently
exercisable Company Option Security issued and outstanding
immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof,
(i) in the case of Company Option Securities (including those
unvested Company Option Securities which Parent agrees the
Company may cause to vest immediately prior to the Effective
Time) with a per share exercise price that is less than the
Applicable Merger Price (as defined in Section 1.7(b)), be
converted into the right to receive, upon the surrender of the
instrument evidencing such Company Option Security, a cash
payment equal to the product (the "Company Option Security
Price") of (A) the number of shares of Company Stock subject to
such Company Option Security and (B) the excess, if any, of the
Applicable Merger Price over the per share exercise price of the
Company Option Security, and each Company Option Security so
converted will, upon such payment, be canceled and, (ii) in the
case of all other Company Option Securities (except Company
warrants disclosed in Section 2.3 hereof which may continue after
the Effective Time), shall be canceled immediately prior to the
Effective Time without payment of any consideration therefor and
without any conversion thereof. Anything herein to the contrary
notwithstanding, no interest or dividends shall accrue or be
payable or paid on the Company Option Security Price to any
person hereunder.
(d) Capital Stock of Merger Sub. Each share of common
stock, $0.01 par value, of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into
and exchanged for one validly issued, fully paid and
nonassessable share of common stock, $0.01 par value, of the
Surviving Corporation.
SECTION 1.7 Exchange of Certificates.
(a) Exchange Agent. At or prior to the Effective Time,
Parent shall deposit, or shall cause to be deposited, to or for
the account of American Stock Transfer and Trust Company , or
such other bank or trust company as shall be designated by Parent
(the "Exchange Agent"), in trust for the benefit of the holders
of Company Stock, for exchange in accordance with this Section
1.7, through the Exchange Agent, an amount, in immediately
available funds, equal to the aggregate amount payable in
accordance with Section 1.7(b). The Exchange Agent shall agree
to hold such funds (together with earnings thereon, being
referred to herein as the "Exchange Fund") for delivery as
contemplated by this Section 1.7 and upon such additional terms
as may be agreed upon by the Exchange Agent, the Company and
Parent before the Effective Time. If for any reason (including
losses) the amount of funds in the Exchange Fund is inadequate to
pay the amounts to which holders of Company Stock shall be
entitled pursuant to this Section 1.7, Parent shall pay to the
Exchange Fund additional funds, also in immediately available
funds, for the payment thereof.
(b) Exchange Procedures. As soon as reasonably practicable
after the Effective Time, Parent will instruct the Exchange Agent
to mail to each holder of record of a certificate or certificates
which immediately prior to the Effective Time represented
outstanding Shares of Company Stock (each, a "Certificate") (i) a
letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other
provisions as Parent may reasonably specify), and (ii)
instructions to effect the surrender of the Certificates in
exchange for the Applicable Merger Price (as defined below).
Upon surrender of a Certificate for cancellation to the Exchange
Agent together with such letter of transmittal, duly executed,
and such other customary documents as may be required pursuant to
such instructions, the holder of such Certificate shall be
entitled to receive in exchange therefor (A) in the case of
holders of Company Common Stock, $6.00 per share of such Company
Common Stock in cash (the "Common Stock Merger Price"), (B) in
the case of holders of Company Series B Preferred Stock, $10.00
per share of such Company Series B Preferred Stock in cash (the
"Series B Merger Price") plus dividends thereon accrued and
unpaid through the Effective Time and (C) in the case of holders
of Company Series C Preferred Stock, $944.8624 per share of such
Company Series C Preferred Stock in cash (which amount will
include any accrued but unpaid dividends thereon through the
Effective Time) (the "Series C Merger Price"), the merger price
applicable to any given Share being referred to herein as (the
"Applicable Merger Price"), and the Certificate so surrendered
shall forthwith be canceled. In the event of a transfer of
ownership of shares of Company Stock which is not registered in
the transfer records of the Company as of the Effective Time, the
Applicable Merger Price may be paid in accordance with this
Article I to a transferee if the Certificate evidencing such
Shares is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer pursuant
to this Section 1.7(b) and by evidence that any applicable stock
transfer taxes have been paid. Anything herein to the contrary
notwithstanding, no interest or dividends shall accrue or be
payable or paid on any portion of the Applicable Merger Price
payable to any holder of Company Stock or Company Option
Securities hereunder. At and after the Effective Time, each
holder of a Certificate to be canceled pursuant to Section 1.7(b)
or Dissenting Shares (as defined below) shall cease to have any
rights as a stockholder of the Company, except for the right to
surrender Certificates in the manner prescribed by Section 1.7(b)
in exchange for payment of the Applicable Merger Price or, in the
case of a holder of Dissenting Shares, the right to perfect the
right to receive payment for Dissenting Shares pursuant to
Section 262 of the DGCL. No transfer of Company Stock shall be
made on the stock transfer books of the Surviving Corporation at
or after the Effective Time.
(c) No Liability. At any time following one year after the
Effective Time, Parent shall be entitled to require the Exchange
Agent to deliver to Parent any remaining amount of the Exchange
Fund which had been made available to the Exchange Agent by or on
behalf of Parent and which has not been disbursed to holders of
Certificates, and thereafter such holders shall be entitled to
look to Parent only as general creditors thereof with respect to
the Applicable Merger Price payable upon due surrender of their
Certificates. Notwithstanding the foregoing, neither Parent,
Merger Sub nor the Company shall be liable to any holder of
Company Stock for any Applicable Merger Price delivered to a
public official pursuant to any applicable abandoned property,
escheat or similar law.
(d) Withholding Rights. Parent or the Exchange Agent shall
be entitled to deduct and withhold from the Applicable Merger
Price otherwise payable pursuant to this Agreement to any holder
of Company Stock such amounts as Parent or the Exchange Agent is
required to deduct and withhold with respect to the making of
such payment under the Internal Revenue Code of 1986, as amended
(the "Code"), or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by Parent or the
Exchange Agent, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of
the shares of Company Stock in respect of which such deduction
and withholding was made by Parent or the Exchange Agent.
(e) Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary but only in the circumstances and to
the extent provided by the DGCL, shares of Company Stock which
are outstanding immediately prior to the Effective Time and which
are held by stockholders who were entitled to and did not vote
such shares in favor of the Merger or consent thereto in writing
and who shall have properly and timely delivered to the Company a
written demand for payment of the fair cash value of shares of
Company Stock in the manner provided in and complied with all of
the relevant provisions of Section 262 of the DGCL ("Dissenting
Shares") shall not be converted into or represent the right to
receive the Applicable Merger Price. Instead, the holders
thereof shall be entitled to payment of the fair cash value of
such shares in accordance with the provisions of Section 262 of
the DGCL; provided, however, that (i) if any holder of Dissenting
Shares shall subsequently deliver a written withdrawal of his
demand for payment of the fair cash value of such shares and the
Board of Directors of the Company or the Surviving Corporation,
as the case may be, shall consent thereto, or (ii) if any holder
fails to establish and perfect his entitlement to the relief
provided in such Section 262 or if the right of such holder to
receive the fair cash value of such shares of Company Stock as to
which he seeks relief otherwise terminates pursuant to Section
262 of the DGCL, such shares shall thereupon cease to be deemed
to be Dissenting Shares and shall be deemed to have been
converted into and represent the right to receive, upon the
surrender of the Certificates representing such shares, as of the
Effective Time, the Applicable Merger Price. The Company will
not settle any demand with respect to any Dissenting Shares
without the consent of Parent.
SECTION 1.8 Stock Transfer Books. At the Effective Time,
the stock transfer books of the Company shall be closed, and
there shall be no further registration of transfers of Company
Stock thereafter on the records of the Company.
SECTION 1.9 No Further Ownership Rights in Company Stock.
The Applicable Merger Price delivered upon the surrender for
exchange of Shares of Company Stock in accordance with the terms
hereof shall be deemed to have been issued in full satisfaction
of all rights pertaining to such Shares, and there shall be no
further registration of transfers on the records of the Surviving
Corporation of shares of Company Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in
this Article I.
SECTION 1.10 Lost, Stolen or Destroyed Certificates.
In the event any Certificates shall have been lost, stolen or
destroyed, the Exchange Agent shall issue in exchange for such
lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof and delivery of bond
in such sum as the Exchange Agent may reasonably direct as
indemnity against any claim that may be made against Parent or
the Exchange Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed, such Applicable Merger Price
as may be required pursuant to Section 1.7.
SECTION 1.11 Reserved.
SECTION 1.12 Taking of Necessary Action; Further
Action. Each of Parent, Merger Sub and the Company will take all
such reasonable and lawful action as may be necessary or
appropriate in order to effectuate the Merger in accordance with
this Agreement as promptly as possible. If, at any time after
the Effective Time, any such further action is necessary or
desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation with full right, title and possession
to all assets, property, rights, privileges, powers and
franchises of the Company and Merger Sub, the officers and
directors of the Company and Merger Sub immediately prior to the
Effective Time are fully authorized in the name of their
respective corporations or otherwise to take, and will take, all
such lawful and necessary action.
SECTION 1.13 Material Adverse Effect. When used in
connection with the Company or any of its subsidiaries, or Parent
or any of its subsidiaries, as the case may be, the term
"Material Adverse Effect" means any change, effect or
circumstance that, individually or when taken together with all
other such changes, effects or circumstances that have occurred
prior to the date of determination of the occurrence of the
Material Adverse Effect, is or is reasonably likely to be
materially adverse to the business, assets (including intangible
assets), financial condition, prospects or results of operations
of the Company and its subsidiaries taken as a whole (excluding,
for purposes of this definition, general changes in the economy
or changes affecting the film industry in general and changes
caused by operations in accordance with the terms of this
Agreement).
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and
Merger Sub as follows:
SECTION 2.1 Organization and Qualification; Subsidiaries.
Each of the Company and each of its significant subsidiaries (as
defined in Section 8.3 or listed in Section 2.1 of the Company
Disclosure Schedule (as defined below)) is a corporation duly
organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has the requisite
corporate power and authority and is in possession of all
franchises, grants, authorizations, licenses, permits, easements,
consents, certificates, approvals and orders ("Approvals")
necessary to own, lease and operate the properties it purports to
own, operate or lease and to carry on its business as it is now
being conducted except where the failure to possess the Approvals
has not had, and would not have, a Material Adverse Effect. Each
of the Company and each of its subsidiaries is duly qualified or
licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its
properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary except
where the failure to be so qualified or licensed has not had, and
would not have, a Material Adverse Effect. Substantially all of
the business and operations of the Company and its subsidiaries
are conducted through, and substantially all of the properties
and assets of the Company and its subsidiaries are owned by, the
Company and its significant subsidiaries.
SECTION 2.2 Certificate of Incorporation and By-Laws. The
Company has heretofore furnished to Parent a complete and correct
copy of its Certificate of Incorporation and By-Laws as most
recently restated and subsequently amended to date. Such
Certificate of Incorporation and By-Laws are in full force and
effect. The Company is not in violation of any of the provisions
of its Certificate of Incorporation or By-Laws.
SECTION 2.3 Capitalization. The authorized capital stock
of the Company consists of (i) 24,000,000 shares of Company
Common Stock, (ii) 15,000,000 shares of Series A Common Stock and
(iii) 15,000,000 of Series Preferred Stock, of which (A)
9,000,000 shares are Company Series B Preferred Stock, (B) 15,000
shares are Company Series C Preferred Stock and (C) 500,000
shares are Series R Junior Participating Cumulative Preferred
Stock. As of March 31, 1997, (i) approximately 2,448,267 shares
of Company Common Stock were issued and outstanding, all of which
are validly issued, fully paid and nonassessable, and no shares
of Company Common Stock were held in treasury, (ii) no shares of
Company Common Stock were held by subsidiaries of the Company and
(iii) approximately 715,000 shares of Company Common Stock were
reserved for future issuance pursuant to outstanding stock
options granted under the Company Stock Option and Stock
Appreciation Rights Plan or similar plans (collectively, the
"Company Stock Option Plans") and approximately 476,567 shares of
Company Common Stock were reserved for issuance pursuant to
outstanding warrants. As of March 31, 1997, (i) 3,819,802 shares
of Company Series B Preferred Stock were issued and outstanding,
all of which are validly issued, fully paid and nonassessable,
and no shares of Company Series B Preferred Stock were held in
treasury, (ii) no shares of Company Series B Preferred Stock were
held by subsidiaries of the Company and (iii) no shares of
Company Series B Preferred Stock were reserved for future
issuance pursuant to outstanding warrants or stock options
granted under Company Stock Option Plans. As of March 31, 1997,
(i) 15,000 shares of Company Series C Preferred Stock were
validly issued, fully paid and nonassessable, (ii) no shares of
Company Series C Preferred Stock were held by subsidiaries of the
Company, and (iii) no shares of Company Series C Preferred Stock
were reserved for future issuance pursuant to outstanding
warrants or stock options granted under Company Stock Option
Plans. As of March 31, 1997, no shares of Series A Common Stock
were issued, held by subsidiaries of the Company, or reserved for
future issuance pursuant to outstanding warrants or stock options
granted under Company Stock Option Plans. As of March 31, 1997,
no shares of Company Series R Junior Participating Cumulative
Preferred Stock were issued, held by subsidiaries of the Company
or reserved for future issuance pursuant to outstanding warrants
or stock options granted under Company Stock Option Plans. No
material change in the capitalization of the Company has occurred
between March 31, 1997 and the date hereof. The Company also has
issued Preferred Stock Purchase Rights to its holders of Common
Stock in connection with the Rights Agreement, and Contingent
Payment Rights in connection with its 1991 acquisition of the
assets of Vestron, Inc. to the former holders of securities of
Vestron, Inc. Except as set forth in Section 2.3 of the written
disclosure schedule delivered on or prior to the date hereof by
the Company to Parent that is arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained
in this Article II or as discussed above (the "Company Disclosure
Schedule"), there are no options, warrants or other rights,
agreements, arrangements or commitments of any character relating
to the issued or unissued capital stock of the Company or any of
its subsidiaries or obligating the Company or any of its
subsidiaries to issue or sell any shares of capital stock of, or
other equity interests in, the Company or any of its
subsidiaries. None of the options, rights, agreements,
arrangements or commitments identified in Section 2.3 of the
Company Disclosure Schedule provide that a holder thereof or a
party thereto shall receive cash in respect of such options,
rights, agreements or arrangements absent action by the Board of
Directors or a committee thereof and no such action of the Board
of Directors or a committee thereof has been taken (except as may
be provided herein). True, correct and complete copies of the
forms of all options, warrants, rights, agreements, arrangements
or commitments identified in Section 2.3 of the Company
Disclosure Schedule have been delivered to Parent. All shares of
Company Stock subject to issuance as aforesaid, upon issuance on
the terms and conditions specified in the instruments pursuant to
which they are issuable, shall be duly authorized, validly
issued, fully paid and nonassessable. Except as disclosed in
Section 2.3 of the Company Disclosure Schedule, there are no
obligations, contingent or otherwise, of the Company or any of
its significant subsidiaries to repurchase, redeem or otherwise
acquire any shares of Company Stock or the capital stock of any
significant subsidiary or to provide funds to or make any
investment (in the form of a loan, capital contribution, guaranty
or otherwise) in any such subsidiary or any other entity. Except
as set forth in Section 2.3 of the Company Disclosure Schedule,
all of the outstanding shares of capital stock of each of the
Company's Significant Subsidiaries is duly authorized, validly
issued, fully paid and nonassessable, and all such shares (other
than directors' qualifying shares) are owned by the Company or
another subsidiary of the Company free and clear of all security
interests, liens, claims, pledges, agreements, limitations in the
Company's voting rights, charges or other encumbrances of any
nature whatsoever (collectively, "Liens").
SECTION 2.4 Authority Relative to this Agreement.
(a) The Company has all necessary corporate power and
authority to execute and deliver this Agreement and to perform
its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action, and no other
corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions so
contemplated (other than the adoption of this Agreement by the
holders of at least a majority of the outstanding shares of
Company Stock entitled to vote in accordance with the DGCL and
the Company's Certificate of Incorporation and By-Laws). This
Agreement has been duly and validly executed and delivered by the
Company and, assuming the due authorization, execution and
delivery by Parent and Merger Sub, as applicable, constitutes a
legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
(b) The Board of Directors of the Company has duly and
validly approved and taken all corporate action required to be
taken by the Board of Directors for the consummation of the
transactions contemplated by this Agreement, including, but not
limited to, all actions necessary to render the provisions of
Section 203 of the DGCL inapplicable to this Agreement, the
Merger and the Stockholder Agreement. The Board of Directors of
the Company has determined that it is advisable and in the best
interest of the Company's stockholders for the Company to enter
into a business combination with Parent upon the terms and
subject to the conditions of this Agreement, and will recommend,
or has resolved to recommend in the Proxy Statement, in each case
subject to Section 4.2 hereof, that the Company's stockholders
approve and adopt this Agreement and the Merger.
(c) The Board of Directors of the Company (or the requisite
members thereof, as the case may be) has (or have) (i) approved
the transactions contemplated by this Agreement for purposes of
Paragraph B of Article SEVENTH of the Certificate of
Incorporation of the Company and (ii) taken all action necessary
to ensure that such transactions will not (A) give rise to a
Distribution Date (as defined in the Rights Agreement) or (B)
cause any Rights (as defined in the Rights Agreement) to
otherwise become exercisable.
SECTION 2.5 No Conflict; Required Filings and Consents.
(a) The exhibit index to the Company's most recently filed
Annual Report on Form 10-K, as supplemented by Section 2.5(a) of
the Company Disclosure Schedule, includes each agreement,
contract or other instrument (including all amendments thereto)
to which the Company or any of its subsidiaries is a party or by
which any of them is bound and which would be required pursuant
to the Exchange Act and the rules and regulations thereunder to
be filed as an exhibit to an Annual Report on Form 10-K, a
Quarterly Report on Form 10-Q or a Current Report on Form 8-K.
The Company has made available to the Parent on or prior to the
date hereof true, correct and complete copies of each such
agreement, contract, instrument and amendment.
(b) Except as disclosed in Section 2.5(b) of the Company
Disclosure Schedule, (i) neither the Company nor any of its
subsidiaries has breached, is in default under, or has received
written notice of any breach of or default under, any of the
agreements, contracts or other instruments referred to in Section
2.5(a), (ii) to the best knowledge of the Company, no other party
to any of the agreements, contracts or other instruments referred
to in Section 2.5(a) has breached or is in default of any of its
obligations thereunder, and (iii) each of the agreements,
contracts and other instruments referred to in Section 2.5(a) is
in full force and effect, except with respect to (i), (ii) and
(iii) in any such case for breaches, defaults or failures to be
in full force and effect that have not had, and would not have, a
Material Adverse Effect.
(c) Except as set forth in Section 2.5(c) of the Company
Disclosure Schedule, the execution and delivery of this Agreement
by the Company does not, and the performance of this Agreement by
the Company and the consummation of the transactions contemplated
hereby will not, (i) conflict with or violate the Certificate of
Incorporation or By-Laws of the Company, (ii) conflict with or
violate any federal, foreign, state or provincial law, rule,
regulation, order, judgment or decree (collectively, "Laws")
applicable to the Company or any of its significant subsidiaries
or by which its or any of their respective properties is bound or
affected, or (iii) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both
would become a default) under, or impair the Company's or any of
its significant subsidiaries' rights or alter the rights or
obligations of any third party under, or give to others any
rights of termination, amendment, acceleration or cancellation
of, or result in the creation of a Lien on any of the properties
or assets of the Company or any of its significant subsidiaries
pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument
or obligation to which the Company or any of its significant
subsidiaries is a party or by which the Company or any of its
significant subsidiaries or its or any of their respective
properties is bound or affected, except in the case of clauses
(ii) and (iii) for any such conflicts, violations, breaches,
defaults or other occurrences that do not constitute a Material
Adverse Effect.
(d) The execution and delivery of this Agreement by the
Company does not, and the performance of this Agreement by the
Company will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any domestic or
foreign governmental or regulatory authority except (i) for
applicable requirements, if any, of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), applicable "Blue Sky"
requirements, the pre-merger notification requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and the filing and recordation of appropriate
merger or other documents as required by the DGCL, and (ii) where
the failure to obtain such consents, approvals, authorizations or
permits, and to make such filings or notifications, would not
prevent or delay consummation of the Merger, or otherwise prevent
or delay the Company from performing its obligations under this
Agreement, or would not constitute a Material Adverse Effect.
SECTION 2.6 Compliance; Permits.
(a) Except as disclosed in Section 2.6(a) of the Company
Disclosure Schedule, neither the Company nor any of its
significant subsidiaries is in conflict with, or in default or
violation of, (i) any Law applicable to the Company or any of its
significant subsidiaries or by which its or any of their
respective properties is bound or affected or (ii) any note,
bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the
Company or any of its significant subsidiaries is a party or by
which the Company or any of its subsidiaries or its or any of
their respective properties is bound or affected, except, in each
case of (i) or (ii), for any such conflicts, defaults or
violations which do not constitute a Material Adverse Effect.
(b) Except as disclosed in Section 2.6(b) of the Company
Disclosure Schedule or where such failure has not had, or would
not have, a Material Adverse Effect, the Company and its
significant subsidiaries hold all permits, licenses, easements,
variances, exemptions, consents, certificates, orders and
approvals from governmental authorities which are material to the
operation of the business of the Company and its subsidiaries
taken as a whole as it is now being conducted (collectively, the
"Company Permits") and the Company and its significant
subsidiaries are in compliance with the terms of the Company
Permits.
SECTION 2.7 SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports and documents
required to be filed with the Securities and Exchange Commission
(the "SEC") and has made available to Parent (i) its Annual
Report on Form 10-K for the fiscal year ended December 31, 1996,
(ii) all other reports or registration statements filed by the
Company with the SEC since January 1, 1996, (iii) all proxy
statements relating to the Company's meetings of stockholders
(whether annual or special) since January 1, 1996 and (iv) all
amendments and supplements to all such reports and registration
statements filed by the Company with the SEC pursuant to the
requirements of the Exchange Act ((i)-(iv) collectively, the
"Company SEC Reports"). The Company SEC Reports (i) were
prepared in all material respects in accordance with the
requirements of the Securities Act of 1933, as amended, or the
Exchange Act, as the case may be, and (ii) did not at the time
they were filed (or if amended or superseded by a filing prior to
the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. None
of the Company's subsidiaries is required to file any forms,
reports or other documents with the SEC.
(b) Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in
the Company SEC Reports was prepared in accordance with generally
accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may be indicated in
the notes thereto), and each fairly presents in all material
respects the consolidated financial position of the Company and
its subsidiaries as at the respective dates thereof and the
consolidated results of its operations and cash flows and
stockholder equity for the periods indicated, except that the
unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not or are
not expected to be material in amount.
SECTION 2.8 Absence of Certain Changes or Events. Except
as set forth in Section 2.8(a) through Section 2.8(g) of the
Company Disclosure Schedule or the Company SEC Reports, since
January 1, 1997, the Company has conducted its business in the
ordinary course and there has not occurred: (a) any Material
Adverse Effect; (b) any amendments or changes in the Certificate
of Incorporation or By-laws of the Company or similar
organizational documents of its significant subsidiaries; (c) any
damage to, destruction or loss of any asset of the Company or any
of its subsidiaries (whether or not covered by insurance) that
constitutes a Material Adverse Effect; (d) any material change by
the Company in its accounting methods, principles or practices
except as required by any change in generally accepted accounting
principles; (e) any material revaluation by the Company of any of
its or any of its subsidiaries' assets, including, without
limitation, writing down the value of inventory or writing off
notes or accounts receivable other than in the ordinary course of
business; (f) any sale, pledge, disposition of or encumbrance
upon any assets of the Company or any of its subsidiaries (except
(i) sales, pledges, dispositions of or encumbrances upon assets
in the ordinary course of business and in a manner consistent
with past practice, (ii) dispositions of obsolete or worthless
assets and (iii) sales of immaterial assets not in excess of
$500,000 in the aggregate); or (g) any other action or event
prohibited by Section 2.8(f) that would have required the consent
of Parent pursuant to any of the following provisions of Section
4.1 had such action or event occurred after the date of this
Agreement: Section 4.1(d) (except that for purpose of this
Section 2.8(g), clause (iii) of Section 4.1(d) shall not apply to
the repurchase in the ordinary course of any options from any
employee of the Company or any of its subsidiaries who is not an
officer or director), and Sections 4.1(e) through Section 4.1(j),
except that with respect to Section 4.1(e) and Section 4.1(j)
only to the extent that the Company has outstanding on the date
hereof unpaid commitments in excess of $1,000,000 with respect to
any Film Asset.
SECTION 2.9 No Undisclosed Liabilities. Except as is
disclosed in Section 2.9 of the Company Disclosure Schedule,
neither the Company nor any of its subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise), except
liabilities (a) in the aggregate adequately reserved or provided
for in the Company's audited balance sheet (including any related
notes thereto) for the fiscal year ended December 31, 1996 (the
"1996 Company Balance Sheet"), (b) incurred in the ordinary
course of business and not required under generally accepted
accounting principles to be reflected on the 1996 Company Balance
Sheet, (c) incurred since December 31, 1996 in the ordinary
course of business consistent with past practice, or (d) incurred
in connection with this Agreement.
SECTION 2.10 Absence of Litigation. Except as set
forth in Section 2.10 of the Company Disclosure Schedule or the
Company's 1996 Form 10-K, there are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of the
Company, threatened against the Company or any of its
subsidiaries, or any properties or rights of the Company or any
of its subsidiaries, before any court, arbitrator or
administrative, governmental or regulatory authority or body,
domestic or foreign, the adverse resolution of which would have a
Material Adverse Effect.
SECTION 2.11 Employee Benefit Plans; Employment
Agreements. Except in each case as set forth in Section 2.11 of
the Company Disclosure Schedule, (i) neither the Company nor any
subsidiary has engaged in, and to their knowledge, no other
person has engaged in any transaction prohibited by Section 406
of ERISA and Section 4975 of the Code which could result in any
material liability of the Company or any of its subsidiaries;
(ii) all employee pension plans (as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), employee welfare plans (as defined in Section 3(1) of
ERISA) and bonus, stock option, stock purchase, incentive,
deferred compensation, supplemental retirement, severance and
other similar fringe or employee benefit plans, programs or
arrangements (collectively, the "Company Employee Plans") are in
compliance in all material respects with the requirements
prescribed by Laws (including ERISA and the Code) currently in
effect with respect thereto (including all applicable
requirements for notification to participants or the Department
of Labor, Pension Benefit Guaranty Corporation (the "PBGC"),
Internal Revenue Service (the "IRS") or the Secretary of the
Treasury), and the Company and each of its subsidiaries have
performed all material obligations required to be performed by
them under, are not in any respect in default under or violation
of, and have no knowledge of any material default or violation by
any other party to, any of the Company Employee Plans; (iii) each
Company Employee Plan intended to qualify under Section 401(a) of
the Code and each trust intended to qualify under Section 501(a)
of the Code is the subject of a favorable determination letter
from the IRS, and to the knowledge of the Company and its
subsidiaries, nothing has occurred which may be reasonably
expected to impair such determination; (iv) all contributions
required to be made by the Company or its subsidiaries to any
Company Employee Plan pursuant to Section 412 of the Code, or the
terms of the Company Employee Plan or any collective bargaining
agreement, have been made on or before their due dates (including
any extensions thereof); (v) with respect to each Company
Employee Plan, no "reportable event" within the meaning of
Section 4043 of ERISA (excluding any such event for which the 30-
day notice requirement has been waived under the regulations to
Section 4043 of ERISA) nor any event described in Section 4062,
4063 or 4041 of ERISA has occurred; (vi) neither the Company nor
any subsidiary has engaged in a withdrawal (including a partial
withdrawal) with respect to any multiemployer plan within the
meaning set forth in Section 3(37) of ERISA that has resulted in,
or could reasonably be expected to result in, any withdrawal
liability for the Company or any of its subsidiaries; and (vii)
neither the Company nor any of its subsidiaries has incurred,
or reasonably expects to incur, any liability under Title IV of
ERISA (other than liability for premium payments to the PBGC, and
contributions not in default to the respective plans, arising in
the ordinary course). Section 2.11 of the Company Disclosure
Schedule lists all employment and consulting agreements to which
the Company is a party that are in effect on the date hereof.
Notwithstanding the foregoing, to the extent any Company Employee
Plan is a multi-employer plan within the meaning of Section
3(37) of ERISA, the representations contained in clauses (ii),
(iii), (v) and (vi) are made only to the knowledge of the Company
and its subsidiaries.
SECTION 2.12 Labor Matters. Except as set forth in
Section 2.12 of the Company Disclosure Schedule: (i) there are
no claims or proceedings pending or, to the knowledge of the
Company or any of its subsidiaries, threatened, between the
Company or any of its subsidiaries and any of their respective
employees, which claims or proceedings constitute a Material
Adverse Effect; (ii) neither the Company nor any of its
subsidiaries is a party to any collective bargaining agreement or
other labor union contract applicable to persons employed by the
Company or its subsidiaries, nor does the Company or any of its
subsidiaries know of any activities or proceedings of any labor
union to organize any such employees; and (iii) neither the
Company nor any of its subsidiaries has any knowledge of any
strikes, slowdowns, work stoppages, lockouts, or threats thereof,
by or with respect to any employees of the Company or any of its
subsidiaries.
SECTION 2.13 Proxy Statement. The information
supplied by the Company for inclusion or incorporation by
reference in the proxy statement to be sent to the stockholders
of the Company in connection with the meeting of the stockholders
of the Company to consider the Merger (the "Company Stockholders
Meeting") (such proxy statement as amended or supplemented is
referred to herein as the "Proxy Statement"), will not, on the
date the Proxy Statement is first mailed to stockholders, at the
time of the Company Stockholders Meetings or at the Effective
Time, contain any statement which, at such time and in light of
the circumstances under which it shall be made, is false or
misleading with respect to any material fact, or shall omit to
state any material fact necessary in order to make the statements
made therein not false or misleading or omit to state any
material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the
Company Stockholders Meetings which has become false or
misleading. If at any time prior to the Effective Time any event
relating to the Company or any of its respective affiliates,
officers or directors should be discovered by the Company which
should be set forth in a supplement to the Proxy Statement, the
Company shall promptly inform Parent and Merger Sub.
Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to any information
supplied by Parent or Merger Sub which is contained or
incorporated by reference in any of the foregoing documents.
SECTION 2.14 Reserved.
SECTION 2.15 Title to Property. Except as set forth
in Section 2.15 of the Company Disclosure Schedule or where such
has not had, and would not have, a Material Adverse Effect, the
Company and each of its subsidiaries have good and defensible
title to all of their properties and assets, free and clear of
all liens, charges and encumbrances; and, to the knowledge of the
Company, all leases pursuant to which the Company or any of its
subsidiaries lease from others material amounts of real or
personal property, are in good standing, valid and effective in
accordance with their respective terms, and there is not, to the
knowledge of the Company, under any of such leases, any existing
material default or event of default (or event which with notice
or lapse of time, or both, would constitute a material default).
SECTION 2.16 Taxes.
(a) For purposes of this Agreement, "Tax" or "Taxes" shall
mean taxes, fees, levies, duties, tariffs, imposts, and
governmental impositions or charges of any kind in the nature of
(or similar to) taxes, payable to any federal, state, local or
foreign taxing authority, including (without limitation) (i)
income, franchise, profits, gross receipts, ad valorem, net
worth, value added, sales, use, service, real or personal
property, special assessments, capital stock, license, payroll,
withholding, employment, social security, workers' compensation,
unemployment compensation, utility, severance, production,
excise, stamp, occupation, premiums, windfall profits, transfer
and gains taxes, and (ii) interest, penalties, additional taxes
and additions to tax imposed with respect thereto; and "Tax
Returns" shall mean returns, reports, and information statements
with respect to Taxes required to be filed with the IRS or any
other federal, foreign, state or provincial taxing authority,
domestic or foreign, including, without limitation, consolidated,
combined and unitary tax returns.
(b) Other than as disclosed in Section 2.16(b) of the
Company Disclosure Schedule, or except where the failure to do so
has not had, and would not have, a Material Adverse Effect, (i)
the Company and its subsidiaries have filed all United States
federal income Tax Returns and all other Tax Returns required to
be filed by them, (ii) the Company and its subsidiaries have paid
and discharged all Taxes due in connection with or with respect
to the periods or transactions covered by such Tax Returns and
have paid all other Taxes as are due, except such as are being
contested in good faith by appropriate proceedings (to the extent
that any such proceedings are required) and with respect to which
the Company is maintaining adequate reserves, and (iii) there are
no other Taxes that would be due if asserted by a taxing
authority, except with respect to which the Company is
maintaining reserves to the extent currently required. Except as
disclosed in Section 2.16(b) of the Company Disclosure Schedule:
(i) there are no tax liens on any assets of the Company or any
subsidiary thereof; and (ii) neither the Company nor any of its
subsidiaries has granted any waiver of any statute of limitations
with respect to, or any extension of a period for the assessment
of, any Tax. The accruals and reserves for Taxes (including
deferred taxes) reflected in the 1996 Company Balance Sheet are
in all material respects adequate to cover all Taxes required to
be accrued through the date thereof (including interest and
penalties, if any, thereon and Taxes being contested) in
accordance with generally accepted accounting principles applied
on a consistent basis audited balance sheets of the Company for
prior fiscal years, and the accrual and reserves for Taxes
(including deferred taxes) reflected in the books and records of
the Company as of the last day of the Company's most recently
completed fiscal month end are in all material respects adequate
to cover all Taxes required to be accrued through such date
(including interest and penalties, if any, thereon and Taxes
being contested) in accordance with generally accepted accounting
principles applied on a consistent basis with the 1996 Company
Balance Sheet.
(c) The Company is not, and has not been, a United States
real property holding corporation (as defined in Section
897(c)(2) of the Code) during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code. To the best knowledge of
the Company, neither the Company nor any of its subsidiaries owns
any property of a character, the indirect transfer of which,
pursuant to this Agreement, would give rise to any material
documentary, stamp or other transfer tax.
SECTION 2.17 Environmental Matters. Except as set
forth in Section 2.17 of the Company Disclosure Schedule, the
Company and each of its subsidiaries: (i) have obtained all
Approvals which are required to be obtained under all applicable
federal, state, foreign or local laws or any regulation, code,
plan, order, decree, judgment, notice or demand letter issued,
entered, promulgated or approved thereunder relating to pollution
or protection of the environment, including laws relating to
emissions, discharges, releases or threatened releases of
pollutants, contaminants, or hazardous or toxic materials or
wastes into ambient air, surface water, ground water, or land or
otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants or hazardous or toxic materials or
wastes ("Environmental Laws") by the Company or its subsidiaries
or their respective agents; (ii) are in compliance with all terms
and conditions of such required Approvals, and also are in
compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and
timetables contained in applicable Environmental Laws; (iii) as
of the date hereof, are not aware of nor have received notice of
any past or present violations of Environmental Laws or any
event, condition, circumstance, activity, practice, incident,
action or plan which is reasonably likely to interfere with or
prevent continued compliance with Environmental Laws or which
would give rise to any common law or statutory liability, or
otherwise form the basis of any claim, action, suit or
proceeding, against the Company or any of its subsidiaries based
on or resulting from the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling, or the
emission, discharge or release into the environment, of any
pollutant, contaminant or hazardous or toxic material or waste;
and (iv) have taken all actions necessary under applicable
Environmental Laws to register any products or materials required
to be registered by the Company or its subsidiaries (or any of
their respective agents) thereunder.
SECTION 2.18 Intellectual Property.
(a) Except as set forth in Section 2.18(a) of the Company
Disclosure Schedule, the Company, directly or indirectly, owns,
or is licensed or otherwise possesses legally enforceable rights
to use, all patents, trademarks, trade names, service marks, and
any applications therefor, technology, know-how and tangible or
intangible proprietary information or material that are material
to the business of the Company and its subsidiaries as currently
conducted by the Company or its subsidiaries (the "Company
Intangible Property Rights").
(b) Either the Company or one of its subsidiaries is the
sole and exclusive owner of, or the exclusive or non-exclusive
licensee of, with all right, title and interest in and to (free
and clear of any liens or encumbrances not incurred in the
ordinary course of business, or except as disclosed in Section
2.18(b) of the Company Disclosure Statement or where such liens
or encumbrances have not had, and would not have, a Material
Adverse Effect), the Company Intangible Property Rights, and, in
the case of Company Intangible Property Rights owned by the
Company or any of its subsidiaries, has sufficient right to the
use thereof or the material covered thereby in connection with
the services or products in respect of which the Company
Intangible Property Rights are being used, except where such
failure has not had, and would not have, a Material Adverse
Effect. Except as set forth in Section 2.18(b) of the Company
Disclosure Schedule, and except where the adverse resolution of
the matters referred to in clauses (i), (ii) and (iii) below
would not have a Material Adverse Effect, no claims with respect
to the Company Intangible Property Rights have been asserted or,
to the knowledge of the Company, are threatened by any person (i)
to the effect that the manufacture, sale, licensing, or use of
any of the products of the Company or any of its subsidiaries as
now manufactured, sold or licensed or used or proposed for
manufacture, use, sale or licensing by the Company or any of its
subsidiaries infringes on any copyright, patent, trade mark,
service mark or trade secret, (ii) against the use by the Company
or any of its subsidiaries of any trademarks, service marks,
trade names, trade secrets, copyrights, patents, technology or
know-how and applications used in the business of the Company and
its subsidiaries as currently conducted or as proposed to be
conducted, or (iii) challenging the ownership by the Company or
any of its subsidiaries or the validity of any of the Company
Intangible Property Rights. All registered trademarks, service
marks and copyrights held by the Company are valid and
subsisting, except where such failure to be valid and subsisting
has not had, and would not have, a Material Adverse Effect.
Except as set forth on Schedule 2.18(b), to the knowledge of the
Company, there is no unauthorized use, infringement or
misappropriation of any of the Company Intangible Property Rights
by any third party, including any employee or former employee of
the Company or any of its subsidiaries where such use has not
had, and would have, a Material Adverse Effect. No Company
Intangible Property Right or product of the Company or any of its
subsidiaries is subject to any outstanding decree, order,
judgment or stipulation restricting in any manner the licensing
thereof by the Company or any of its subsidiaries. Neither the
Company nor any of its subsidiaries has entered into any
agreement (other than exclusive distribution agreements) under
which the Company or its subsidiaries is restricted from selling,
licensing or otherwise distributing any of its products to any
class of customers, in any geographic area, during any period of
time or in any segment of the market.
(c) Section 2.18(c) of the Company Disclosure Schedule
lists the Film Assets of the Company and its Subsidiaries as of
the date specified thereon, which list is accurate in all
material respects. The Company and its Subsidiaries have
sufficient right, title and interest in and to such Film Assets
to enable them to perform such Exploitation Agreements as have
been entered into by the Company and such Subsidiaries relating
to such Film Assets, except where such failure to possess such
right, title and interest in and to such Film Assets has not had,
and would not have, a Material Adverse Effect. To the best of
the Company's knowledge, neither the Film Assets nor the Company
or any Subsidiary's exploitation thereof violates or infringes,
or will violate or infringe upon any copyright, right privacy or
publicity, trademark, patent, trade name, performing right or any
literary, dramatic, musical, artistic, personal, private,
contract or copyright or any right of any other person or
contains any defamatory material in any manner, except for any
such violation or infringement which has not had, and would not
have, a Material Adverse Effect.
(d) The Company has made available to Parent documents
which accurately and completely identify as of the date hereof
all Laboratories at which material Masters relating to Films
Assets as to which the negative is owned by the Company are
located and the specific Masters that are located at each such
Laboratory.
(e) The Company has made available to Parent documents
which accurately and completely identify as of the date hereof
all material trademarks with respect to which the Company or any
of its Subsidiaries own any interest and describes the nature of
such interest.
SECTION 2.19 Interested Party Transactions. Except
as set forth in Section 2.19 of the Company Disclosure Schedule
or the Company's Annual Report on Form 10-K for 1996, since
December 31, 1996, no event has occurred that would be required
to be reported as a Certain Relationship or Related Transaction,
pursuant to Item 404 of Regulation S-K promulgated by the SEC.
SECTION 2.20 Insurance. The Company maintains fire
and casualty, general liability, business interruption, product
liability, professional liability and sprinkler and water damage
insurance policies with reputable insurance carriers, which it
believes provide full and adequate coverage for all normal risks
incident to the business of the Company and its subsidiaries and
their respective properties and assets and are in character and
amount similar to that carried by entities engaged in similar
business and subject to the same or similar perils or hazards.
SECTION 2.21 Reserved.
SECTION 2.22 Opinion of Financial Advisor. The
Company has been advised by its investment advisor, Houlihan
Lokey Howard & Zukin, that, in its opinion, as of the date
hereof, the Common Stock Merger Price set forth herein is fair to
the holders of the Company Common Stock (other than Pioneer
Electronic Corporation, as to which no opinion is rendered) from
a financial point of view.
SECTION 2.23 Brokers. Except as set forth in Section
2.23 of the Company Disclosure Schedule, no broker, finder or
investment banker or other party is entitled to any brokerage,
finder's or other similar fee or commission in connection with
the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company or its
subsidiaries or affiliates. The fees and expenses of the
entities listed on Section 2.23 of the Company Disclosure
Schedule will be paid by the Company. The Company has heretofore
furnished to Parent a complete and correct copy of all agreements
between the Company and the entities listed on Section 2.23 of
the Company's Disclosure Schedule pursuant to which such entities
would be entitled to any payment relating to the transactions
contemplated hereunder.
SECTION 2.24 Change in Control Payments. Except as
set forth on Section 2.24 of the Company Disclosure Schedule,
neither the Company nor any of its subsidiaries have any plans,
programs or agreements to which they are parties, or to which
they are subject, pursuant to which payments (or acceleration of
benefits) may be required upon, or may become payable directly or
indirectly as a result of, a change of control of the Company.
SECTION 2.25 Expenses. The Company has provided to
Parent a good faith estimate and description of the expenses of
the Company and its subsidiaries which the Company expects to
incur, or has incurred, in connection with the transactions
contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent
and warrant to the Company as follows:
SECTION 3.1 Organization and Qualification; Subsidiaries.
Each of Parent and each of its significant subsidiaries is a
corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has
the requisite corporate power and authority and is in possession
of all Approvals necessary to own, lease and operate the
properties it purports to own, operate or lease and to carry on
its business as it is now being conducted. Each of Parent and
each of its subsidiaries is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned,
leased or operated by it or the nature of its activities makes
such qualification or licensing necessary. All of the business
and operations of Parent and its subsidiaries are conducted
through, and substantially all of the properties and assets of
Parent and its subsidiaries are owned by, Parent and its
significant subsidiaries.
SECTION 3.2 Charter and By-Laws. Parent has heretofore
furnished to the Company a complete and correct copy of its
Certificate of Incorporation and By-Laws, as most recently
restated and subsequently amended to date. Such Certificate of
Incorporation and By-Laws are in full force and effect. Parent
is not in violation of any of the provisions of its Certificate
of Incorporation or By-Laws.
SECTION 3.3 Reserved.
SECTION 3.4 Authority Relative to this Agreement. Each of
Parent and Merger Sub has all necessary corporate power and
authority to execute and deliver this Agreement and to perform
its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement by Parent and Merger Sub and the consummation by Parent
and Merger Sub of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on
the part of Parent and Merger Sub, and no other corporate
proceedings on the part of Parent or Merger Sub (other than the
approval of the Merger in accordance with the DGCL). The Board
of Directors of Parent has determined that it is advisable and in
the best interest of Parent's stockholders for Parent to enter
into a business combination with the Company upon the terms and
subject to the conditions of this Agreement. This Agreement has
been duly and validly executed and delivered by Parent and Merger
Sub and, assuming the due authorization, execution and delivery
by the Company, constitutes a legal, valid and binding obligation
of Parent and Merger Sub enforceable against each of them in
accordance with its terms.
SECTION 3.5 No Conflict, Required Filings and Consents.
(a) The execution and delivery of this Agreement by Parent
and Merger Sub do not, and the performance of this Agreement by
Parent and Merger Sub and the consummation of the transactions
contemplated hereby will not, (i) conflict with or violate the
Certificate of Incorporation or By-Laws of Parent or Merger Sub,
(ii) conflict with or violate any Laws applicable to Parent or
any of its significant subsidiaries or by which its or their
respective properties are bound or affected, or (iii) result in
any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or
impair Parent's or any of its significant subsidiaries' rights or
alter the rights or obligations of any third party under, or give
to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a Lien on any of
the properties or assets of Parent or any of its significant
subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Parent or any of its
significant subsidiaries is a party or by which Parent or any of
its significant subsidiaries or its or any of their respective
properties are bound or affected, except in the case of clauses
(ii) or (iii) for any such conflicts, violations, breaches,
defaults or other occurrences that do not constitute a Material
Adverse Effect.
(b) The execution and delivery of this Agreement by Parent
and Merger Sub does not, and the performance of this Agreement by
Parent and Merger Sub will not, require any consent, approval,
authorization or permit of, or filing with or notification to,
any governmental or regulatory authority, domestic or foreign,
except (i) for applicable requirements, if any, of the Exchange
Act, compliance with applicable "Blue Sky" requirements, the pre-
merger notification requirements of the HSR Act and the filing
and recordation of appropriate merger or other documents as
required by the DGCL, and (ii) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such
filings or notifications would not (A) prevent or delay
consummation of the Merger, (B) otherwise prevent Parent or
Merger Sub from performing their respective obligations under
this Agreement, or (C) do not constitute a Material Adverse Effect.
SECTION 3.6 Financing. Parent and Merger Sub have provided
the Company with commitment letters from the Chase Manhattan
Bank, CPI Securities L.P., Bain Capital Fund V and V-B, and Alan
D. Gordon, all dated April 17, 1997, in favor of Parent (the
"Commitment Letters"). The Commitment Letters are in full force
and effect as of the date hereof and Parent and Merger Sub have
no reason to believe that such Letters will not continue to be in
full force and effect prior to the Effective Time.
SECTION 3.7 Reserved.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.1 Conduct of Business by the Company Pending the
Merger. The Company covenants and agrees that, during the period
from the date of this Agreement and continuing until the earlier
of the termination of this Agreement or the Effective Time,
unless Parent shall otherwise agree in writing, the Company shall
conduct its business and shall cause the businesses of its
subsidiaries to be conducted only in, and the Company and its
subsidiaries shall not take any action except in, the ordinary
course of business and in a manner consistent with past practice;
and the Company shall use all reasonable efforts to preserve
substantially intact the business organization of the Company and
its subsidiaries, to keep available the services of the present
officers, employees and consultants of the Company and its
subsidiaries and to preserve the present relationships of the
Company and its subsidiaries with customers, suppliers and other
persons with which the Company or any of its subsidiaries has
significant business relations. By way of amplification and not
limitation, except as contemplated by this Agreement, neither the
Company nor any of its subsidiaries shall, during the period from
the date of this Agreement and continuing until the earlier of
the termination of this Agreement or the Effective Time, directly
or indirectly do, or propose to do, any of the following without
the prior written consent of Parent:
(a) amend or otherwise change the Certificate of
Incorporation or By-Laws of the Company or similar organizational
documents of any of its subsidiaries;
(b) issue, sell, pledge, dispose of or encumber, or
authorize the issuance, sale, pledge, disposition or encumbrance
of, any shares of capital stock of any class, or any options,
warrants, convertible securities or other rights of any kind to
acquire any shares of capital stock, or any other ownership
interest (including, without limitation, any phantom interest) in
the Company or any of its subsidiaries (except for the issuance
of shares of Company Stock issuable pursuant to Company Option
Securities outstanding on the date hereof or upon conversion of
Company Series B Preferred Stock outstanding on the date hereof);
(c) sell, pledge, dispose of or encumber any assets of the
Company or any of its subsidiaries (except for (i) sales or
licenses of assets in the ordinary course of business and in a
manner consistent with past practice, (ii) dispositions of
obsolete or worthless assets and (iii) sales of immaterial assets
not in excess of $500,000 in the aggregate);
(d) (i) except for regular quarterly dividends on the
Company Series B Preferred Stock in the amount of $0.25 per
share, declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any
combination thereof) in respect of any of its capital stock,
except that a wholly owned subsidiary of the Company may declare
and pay a dividend to its parent, (ii) split, combine or
reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities or property in
respect of, in lieu of or in substitution for shares of its
capital stock, or (iii) except with respect to outstanding
Company Options the vesting of which will be accelerated and
which shall receive the Company Option Security Price at the
Effective Time, amend the terms or change the period of
exercisability of, purchase, repurchase, redeem or otherwise
acquire, or permit any subsidiary to purchase, repurchase, redeem
or otherwise acquire, any of its securities or any securities of
its subsidiaries, including, without limitation, shares of
Company Stock or any Company Option Security, or provide that
upon the exercise or conversion of any such Company Option
Security the holder thereof shall receive cash, or propose to do
any of the foregoing;
(e) (i) acquire (by merger, consolidation, or acquisition
of stock or assets) any corporation, partnership or other
business organization or division thereof, (ii) incur any
indebtedness for borrowed money or issue any debt securities,
except for short-term, working capital and commercial paper
borrowings at any one time outstanding incurred in the ordinary
course of business consistent with past practice and except for
intercompany indebtedness between the Company and any of its
wholly owned subsidiaries or between such wholly owned
subsidiaries, (iii) assume, guarantee or endorse or otherwise as
an accommodation become responsible for the obligations of any
person ("accommodate"), or make any loans or advances, except in
the ordinary course of business consistent with past practice or
in any case when such loans or advances or accommodations do not
exceed $1,000,000 in the aggregate, (iv) enter into or amend any
material contract or agreement (except with respect to
commitments described on Section 4.1(e)(iv) of the Company
Disclosure Statement), (v) authorize any capital expenditures
(other than for Film Assets) or purchase of fixed assets which
are, in the aggregate, in excess of $500,000 for the Company and
its subsidiaries taken as a whole or (vi) enter into or amend any
contract, agreement, commitment or arrangement to effect any of
the matters prohibited by this Section 4.1(e), provided, however,
that nothing herein shall restrict the Company from, in
accordance with its past practice: (A) licensing foreign rights
to a Film Asset provided that any new domestic "prints and ads"
commitments with respect to such Film Right license does not
exceed $1,000,000, or (B) licensing domestic rights to Film
Assets provided that such Film Asset licenses, individually or in
the aggregate, do not involve commitments of more than
$5,000,000, do not involve a license of all or substantially all
of the Company's Film Assets, are in accordance with industry
standards and are at rates reflecting fair market value (however,
notwithstanding the foregoing, the Company shall in no event
enter into any so-called output deals ), or (C) entering into
contracts to develop, acquire or produce Film Assets that,
individually or in the aggregate, do not require the Company to
expend more than $1,000,000, or (D) entering into any commitment
which, individually or in the aggregate, calls for total payments
(before or after the Effective Time) of not more than $1,000,000
and (E) completing the commitments and transactions respecting
Film Assets set forth on Section 4.1(e) of the Company Disclosure
Statement;
(f) (i) increase the compensation payable or to become
payable to its officers or employees, except for increases in
salary or wages of employees of the Company or its subsidiaries
who are not officers of the Company in the ordinary course of
business in accordance with past practice, (ii) grant any
severance or termination pay to, or enter into any employment or
severance agreement with any officer or other employee of the
Company or any of its subsidiaries who is compensated in excess
of $100,000 per year, or (iii) establish, adopt, enter into or
amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination,
severance or other plan, trust fund, policy or arrangement for
the benefit of any current or former directors, officers or
employees, except, in each case, as may be required by law;
(g) except as may be required as a result of a change in
law or in generally accepted accounting principles, take any
action to change accounting policies or procedures (including,
without limitation, procedures with respect to revenue
recognition, payments of accounts payable and collection of
accounts receivable);
(h) make any material tax election inconsistent with past
practice or settle or compromise any material federal, state,
local or foreign tax liability or agree to an extension of a
statute of limitations;
(i) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business and consistent
with past practice of liabilities either reflected or reserved
against in the financial statements contained in the Company SEC
Reports filed prior to the date of this Agreement, or incurred in
the ordinary course of business and consistent with past
practice;
(j) enter into any Exploitation Agreements, Film Asset
Acquisition Agreements or other agreements, written or oral,
involving the production, acquisition or distribution of Films or
Film Assets not permitted by Section 4.1(e)(A) through (D) above
(but the Company may discuss and negotiate such agreements); or
(k) take, or agree in writing or otherwise to take, any of
the actions described in Sections 4.1 (a) through (i) above, or
any action which would make any of the representations or
warranties of the Company contained in this Agreement untrue or
incorrect or prevent the Company from performing or cause the
Company not to perform its covenants hereunder.
SECTION 4.2 No Solicitation.
(a) The Company shall not, directly or indirectly, through
any officer, director, employee, representative or agent of the
Company or any of its subsidiaries, (i) solicit, initiate or
encourage the initiation of any inquiries or proposals regarding
any merger, recapitalization, sale of substantial assets, sale or
exchange of shares of capital stock (including without limitation
by way of a tender offer) or similar transactions involving the
Company or any significant subsidiaries of the Company other than
the Merger (any of the foregoing inquiries or proposals being
referred to herein as an "Acquisition Proposal"), (ii) except as
permitted herein, engage in negotiations or discussions
concerning, or provide any nonpublic information to any person
relating to, any Acquisition Proposal or (iii) except as
permitted herein, agree to, approve or recommend any Acquisition
Proposal. Nothing contained in this Section 4.2(a) shall prevent
the Board of Directors of the Company from responding to and
considering, negotiating, discussing, approving and recommending
to the stockholders of the Company a bona fide Acquisition
Proposal not solicited in violation of this Agreement, provided
the Board of Directors of the Company determines in good faith
(after consultation with outside counsel) that the Acquisition
Proposal may present a more favorable alternative to the
Company's Stockholders than the Merger and therefore that they
should, consistent with their duties as fiduciaries to the
Company's stockholders, respond to and negotiate such alternative
Acquisition Proposal. In the event the Board of Directors
determines that such Acquisition Proposal presents a more
favorable alternative, the Board of Directors may approve and
recommend such Acquisition Proposal and terminate the Company's
obligations hereunder (other than the provisions of Section 7.2
hereof) in accordance with the provisions of Section 5.2 or
Article VII. Nothing contained in this Section 4.2 shall
prohibit the Board of Directors of the Company from complying
with Rule 14e-2 promulgated under the Exchange Act with regard to
a tender or exchange offer.
(b) The Company shall immediately notify Parent after
receipt of any Acquisition Proposal, or any material modification
of or amendment to any Acquisition Proposal, or any request for
nonpublic information relating to the Company or any of its
subsidiaries in connection with an Acquisition Proposal or for
access to the properties, books or records of the Company or any
subsidiary by any person or entity that informs the Board of
Directors of the Company or such subsidiary that it is
considering making, or has made, an Acquisition Proposal. Such
notice to Parent shall be made orally and in writing, and shall
indicate whether the Company is providing or intends to provide
the person making the Acquisition Proposal with access to
information concerning the Company as provided in Section 4.2.
(c) If the Board of Directors of the Company receives a
request for material nonpublic information by a person who makes,
or indicates that it is considering making, a bona fide
Acquisition Proposal, and the Board of Directors determines in
good faith (after consultation with outside counsel) that it is
required to cause the Company to act as provided in this Section
4.2 in order to discharge properly the directors' fiduciary
duties, then, provided such person has executed a confidentiality
agreement substantially similar to the one then in effect between
the Company and Parent, the Company may provide such person with
access to information regarding the Company.
(d) The Company shall immediately cease and cause to be
terminated any existing discussions or negotiations with any
persons (other than Parent and Merger Sub) conducted heretofore
with respect to any of the foregoing, provided, however, that the
Company may continue its discussions with CPI Securities L.P.
and its affiliates relating to the alternative financing
arrangements that are set forth in the letter dated February 11,
1997, as amended April 2, 1997 and as of the date hereof (true
and complete copies of which have been delivered to Parent) as an
alternative to the Merger should the Merger fail to be
consummated. The Company agrees not to release any third party
from the confidentiality provisions of any confidentiality
agreement to which the Company is a party.
(e) The Company shall ensure that the officers, directors
and employees of the Company and its subsidiaries and any
investment banker or other advisor or representative retained by
the Company are aware of the restrictions described in this
Section 4.2.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 HSR Act; Etc. As promptly as practicable after
the date of the execution of this Agreement, the Company and
Parent shall file notifications under and in accordance with the
HSR Act. The Company and Parent shall respond as promptly as
practicable to any inquiries received from the Federal Trade
Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Antitrust Division") for additional
information or documentation and shall respond as promptly as
practicable to all inquiries and requests received from any State
Attorney General or other governmental authority (foreign or
domestic) in connection with antitrust matters.
SECTION 5.2 Proxy Statement.
(a) As soon as practicable following the date of this
Agreement, the Company shall prepare and file a the Proxy
Statement and shall use its reasonable best efforts to have the
Proxy Statement cleared by the Commission as promptly as
reasonably practicable, and, in addition, shall also take any
action required to be taken under applicable law in connection
with the consummation of the transactions contemplated by this
Agreement. Parent, Merger Sub and the Company shall promptly
furnish to each other all information, and take such other
actions, as may reasonably be requested in connection with any
action by any of them in connection with the provisions of this
Section 5.2.
(b) Prior to the date of approval of the Merger by
Company's stockholders, each of Parent, Merger Sub and the
Company shall correct promptly any information provided by it to
be used specifically in the Proxy Statement that shall have
become false or misleading in any material respect and shall take
all steps necessary to file with the Commission and have cleared
by the Commission any amendment or supplement to the Proxy
Statement as so corrected to be disseminated to the stockholders
of Company to the extent required by applicable law. Without
limiting the generality of the foregoing, the Company shall
notify the Parent promptly of the receipt of the comments of the
Commission and of any request by the Commission for amendments or
supplements to the Proxy Statement, or for additional
information, and shall supply the Parent with copies of all
correspondence between Company or its representatives, on the one
hand, and the Commission or members of its staff, on the other
hand, with respect to the Proxy Statement. If at any time prior
to the Company Stockholders Meeting (as defined in Section 5.3)
any event should occur relating to Parent, Merger Sub or the
Company or their respective officers or directors which is
required to be described in an amendment or supplement to the
Proxy Statement, the parties shall promptly inform each other.
Whenever any event occurs which is required to be described in an
amendment or a supplement to the Proxy Statement, Parent, Merger
Sub and the Company shall, upon learning of such event, cooperate
in promptly preparing, filing and clearing with the Commission
and mailing to the stockholders of Company such amendment or
supplement; provided, however, that, prior to such mailing, (i)
Parent, Merger Sub and the Company shall consult with each other
with respect to such amendment or supplement, (ii) shall afford
each other reasonable opportunity to comment thereon and (iii)
each such amendment or supplement shall be reasonably
satisfactory to the other.
SECTION 5.3 Stockholders Meeting. The Company shall call
and hold the Company Stockholders Meeting as promptly as
practicable and in accordance with applicable laws for the
purpose of voting upon the approval of the Merger and the
adoption of the Merger Agreement. Unless otherwise required
under the standards set forth in Section 4.2 as determined by the
Company's Board of Directors in good faith, the Board of
Directors of the Company shall (i) recommend approval of the
transactions contemplated by this Agreement by the stockholders
of the Company and include in the Proxy Statement such
recommendation and (ii) use all reasonable efforts to solicit
from stockholders of the Company proxies in favor of adoption of
this Agreement and approval of the transactions contemplated
hereby, and shall take all other action necessary or advisable to
secure the vote or consent of stockholders to obtain such
approvals.
SECTION 5.4 Access to Information; Confidentiality. Upon
reasonable notice and subject to restrictions contained in
confidentiality agreements to which the Company is subject (from
which the Company shall use reasonable efforts to be released),
the Company shall (and shall cause each of its Subsidiaries to)
afford to the officers, employees, accountants, counsel and other
representatives of Parent reasonable access, during the period
prior to the Effective Time, to all its properties, books,
contracts, commitments and records and, during such period, the
Company shall (and shall cause each of its Subsidiaries to)
furnish promptly to Parent all information concerning its
business, properties and personnel as Parent may reasonably
request, and shall make available to Parent the appropriate
individuals (including attorneys, accountants and other
professionals) for such discussion of the Company's business,
properties and personnel as Parent may reasonably request.
Parent shall keep such information confidential in accordance
with the terms of the letter between the Parent and the Company
dated July 24, 1996 (the "Confidentiality Letter").
SECTION 5.5 Consents; Approvals. The Company and Parent
shall each use all reasonable efforts to obtain all Approvals,
and the Company and Parent shall make all filings (including,
without limitation, all filings with federal, state and local
governmental or regulatory agencies), required in connection with
the authorization, execution and delivery of this Agreement by
the Company and Parent and the consummation by them of the
transactions contemplated hereby, in each case as promptly as
practicable. The Company and Parent shall furnish promptly all
information required to be included in the Proxy Statement or for
any application or other filing to be made pursuant to the rules
and regulations of any federal, state or local governmental body
in connection with the transactions contemplated by this
Agreement.
SECTION 5.6 Actions Respecting Commitment Letters. Parent
and Merger Sub agree to perform all obligations required to be
performed by them in accordance with and pursuant to the
Commitment Letters and not to amend or terminate such Commitment
Letters if the effect thereof would be reasonably likely to
prevent the consummation of the transactions contemplated hereby
on or before July 31, 1997.
SECTION 5.7 Indemnification and Insurance.
(a) The By-Laws and Certificate of Incorporation of the
Surviving Corporation shall contain the provisions with respect
to indemnification set forth in the By-Laws and Certificate of
Incorporation of the Company on the date hereof, which provisions
shall not be amended, repealed or otherwise modified for a period
of five years from the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who on or
prior to the Effective Time were directors, officers, employees
or agents of the Company, unless such modification is required by
law.
(b) The Company shall, to the fullest extent permitted
under applicable law or under the Company's Certificate of
Incorporation or By-Laws and regardless of whether the Merger
becomes effective, indemnify and hold harmless, and, after the
Effective Time, Parent and the Surviving Corporation shall, to
the fullest extent permitted under applicable law or under the
Surviving Corporation's Certificate of Incorporation or By-Laws
as in effect at the Effective Time, indemnify and hold harmless,
each present and former director, officer or employee of the
Company or any of its subsidiaries and Pioneer Electronic
Corporation (collectively, the "Indemnified Parties") against any
costs or expenses (including attorneys' fees), judgments, fines,
losses, claims, damages, liabilities and amounts paid in
settlement in connection with any claim, action, suit, proceeding
or investigation, whether civil, criminal, administrative or
investigative, (x) arising out of or pertaining to the
transactions contemplated by this Agreement or (y) otherwise with
respect to any acts or omissions occurring at or prior to the
Effective Time, to the same extent as provided in the Company's
Certificate of Incorporation or By-Laws or any applicable
contract or agreement as in effect on the date hereof, in each
case for the period ending five years after the closing of the
Merger. In the event of any such claim, action, suit, proceeding
or investigation (whether arising before or after the Effective
Time), (i) any counsel retained by the Indemnified Parties for
any period after the Effective Time shall be reasonably
satisfactory to the Surviving Corporation, (ii) after the
Effective Time, the Surviving Corporation shall pay the
reasonable fees and expenses of such counsel, promptly after
statements therefor are received, and (iii) the Surviving
Corporation will cooperate in the defense of any such matter;
provided, however, that the Surviving Corporation shall not be
liable for any settlement effected without its written consent
(which consent shall not be unreasonably withheld); and provided,
further, that, in the event that any claim or claims for
indemnification are asserted or made within such five-year
period, all rights to indemnification in respect of any such
claim or claims shall continue until the disposition of any and
all such claims. The Indemnified Parties as a group may retain
only one law firm to represent them with respect to any single
action unless there is, under applicable standards of
professional conduct, a conflict on any significant issue between
the positions of any two or more Indemnified Parties.
(c) For a period of four years after the Effective Time,
Parent shall cause the Surviving Corporation to maintain in
effect, if available, directors' and officers' liability
insurance covering those persons who are currently covered by the
Company's directors' and officers' liability insurance policy (a
copy of which has been made available to Parent) on terms
comparable to those now applicable to directors and officers of
the Company; provided, however, that in no event shall Parent or
the Surviving Corporation be required to expend in excess of 125%
of the annual premium currently paid by the Company for such
coverage; and provided, further, that if the premium for such
coverage exceeds such amount, Parent or the Surviving Corporation
shall purchase a policy with the greatest coverage available for
such 125% of the annual premium and, provided further, that the
Company may acquire "tail insurance" for periods after the
Effective Time for a maximum one time premium of $1,000,000 in
lieu of the insurance continuation provision set forth above.
The Company may request that Pioneer Electronic Corporation be
named as an additional insured if it can do so at no additional
cost.
(d) This Section 5.7 shall survive the consummation of the
Merger at the Effective Time, is intended to benefit the Company,
the Surviving Corporation and the Indemnified Parties, shall be
binding on all successors and assigns of Parent and the Surviving
Corporation and shall be enforceable by the Indemnified Parties.
SECTION 5.8 Notification of Certain Matters. The Company
shall give prompt notice to Parent, and Parent shall give prompt
notice to the Company, of (i) the occurrence or nonoccurrence of
any event the occurrence or nonoccurrence of which would be
likely to cause any representation or warranty contained in this
Agreement to become materially untrue or inaccurate or which may
make a condition to the closing of the Merger incapable of
fulfillment, or (ii) any failure of the Company, Parent or Merger
Sub, as the case may be, materially 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 shall not limit or otherwise
affect the remedies available hereunder to the party receiving
such notice; and provided, further that failure to give such
notice shall not be treated as a breach of covenant for the
purposes of Sections 6.2(b) or 6.3(b) unless the failure to give
such notice results in material prejudice to the other party.
SECTION 5.9 Further Action. Upon the terms and subject to
the conditions hereof each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all other things necessary, proper or
advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement, to
obtain in a timely manner all necessary waivers, consents and
approvals and to effect all necessary registrations and filings,
and otherwise to satisfy or cause to be satisfied all conditions
precedent to its obligations under this Agreement.
SECTION 5.10 Public Announcements. Parent and the
Company shall consult with each other before issuing any press
release with respect to the Merger or this Agreement and shall
not issue any such press release or make any such public
statement without the prior consent of the other party, which
shall not be unreasonably withheld; provided, however, that a
party may, without the prior consent of the other party, issue
such press release or make such public statement as may upon the
advice of outside counsel be required by law or the rules and
regulations of NASDAQ.
SECTION 5.11 Conveyance Taxes. Parent and the
Company shall cooperate in the preparation, execution and filing
of all returns, questionnaires, applications, or other documents
regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any
transfer, recording, registration and other fees, and any similar
taxes which become payable in connection with the transactions
contemplated hereby that are required or permitted to be filed at
or before the Effective Time.
SECTION 5.12 Warrant Agreements. The Surviving
Corporation will assume the Company s obligations pursuant to (i)
the Warrant Agreement of LIVE Entertainment Inc. dated as of
November 26, 1990, (ii) the Loan Fund Warrant Agreement as of
LIVE Entertainment Inc. dated as of March 23, 1993 and (iii) the
Class B Warrant Agreement of LIVE Entertainment Inc. dated as of
March 26, 1993.
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.1 Conditions to Obligation of Each Party to
Effect the Merger. The respective obligations of each party to
effect the Merger shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions:
(a) Stockholder Agreement. The parties thereto shall have
fulfilled their respective obligations under the Stockholder
Agreement as of the Effective Time;
(b) Stockholder Approval. This Agreement and the Merger
shall have been approved and adopted by the requisite vote of the
stockholders of the Company;
(c) HSR Act, Etc. The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired
or been terminated;
(d) No Injunctions or Restraints; Illegality. No statute,
rule, regulation, executive order, decree, ruling, temporary
restraining order, preliminary or permanent injunction or other
order shall have been enacted, entered, promulgated, enforced or
issued by any court or governmental authority of competent
jurisdiction or shall otherwise be in effect which prohibits,
restrains, enjoins or restricts the consummation of the Merger.
(e) Financing. The closing of the financings on
substantially the terms and conditions described in each of the
Commitment Letters shall have taken place on or prior to the
Effective Time.
SECTION 6.2 Additional Conditions to Obligations of Parent
and Merger Sub. The obligations of Parent and Merger Sub to
effect the Merger are also subject to the following conditions:
(a) Representations and Warranties. The representations
and warranties of the Company contained in this Agreement shall
have been true and correct in all respects at and as of the date
hereof, and Parent and Merger Sub shall have received a
certificate to such effect signed by the Chief Executive Officer
and the Chief Financial Officer of the Company.
(b) Agreements and Covenants. The Company shall have
performed or complied in all material respects with all
agreements and covenants required by this Agreement to be
performed or complied with by it at or prior to the Effective
Time, and Parent and Merger Sub shall have received a certificate
to such effect signed by the Chief Executive Officer and the
Chief Financial Officer of the Company;
(c) No Material Adverse Effect. There shall not have
occurred since the date hereof any event or change in
circumstances involving the Company or any of its Subsidiaries
that, individually or when taken together with all other such
events or changes in circumstances, will or is reasonably likely
to result in a Material Adverse Effect.
(d) Notice of Redemption. On and subject to the Effective
Time, the Company shall have (i) issued a Notice of Redemption
pursuant to the Indenture dated September 1, 1992 relating to the
Increasing Rate Secured Senior Subordinated Notes due 1999 of the
Company, (ii) terminated the credit facility maintained pursuant
to the terms of Amended and Restated Loan and Security Agreement
dated November 14, 1994 among Foothill Capital Corporation and
the Company Affiliates party thereto.
(e) Company Option Securities. Prior to the Effective
Time, all outstanding "out of the money" options issued pursuant
to Company Stock Option Plans shall have expired or been canceled
in accordance with Section 1.6(c) hereof.
SECTION 6.3 Additional Conditions to Obligations of the
Company. The obligation of the Company to effect the Merger is
also subject to the following conditions:
(a) Representations and Warranties. The representations
and warranties of Parent and Merger Sub contained in this
Agreement shall be true and correct in all respects on and as of
the Effective Time, except for (i) changes contemplated by this
Agreement, (ii) those representations and warranties which
address matters only as of a particular date (which shall have
been true and correct as of such date) with the same force and
effect as if made on and as of the Effective Time, and the
Company shall have received a certificate to such effect signed
by the President of Parent;
(b) Agreements and Covenants. Parent and Merger Sub shall
have performed or complied in all material respects with all
agreements and covenants required by this Agreement to be
performed or complied with by them on or prior to the Effective
Time, and the Company shall have received a certificate to such
effect signed by the Chief Executive Officer and the Chief
Financial Officer of Parent; and
(c) Solvency Opinion. Prior to the Effective Time, Parent
and Merger Sub shall have provided to the Company an opinion from
a nationally recognized valuation firm, which firm and opinion
are both reasonably satisfactory to the Company, to the effect
that as of the Effective Time, and taking into account the
transactions contemplated hereby:
(i) The fair market going concern value of all of the
assets (including goodwill) of the Surviving Corporation
will be greater than the total amount of liabilities,
including contingent, subordinated, absolute, fixed, matured
or unmatured and liquidated or unliquidated liabilities, of
the Company.
(ii) The present fair market going concern value of the
assets of the Surviving Corporation (including goodwill) is
sufficient to pay the probable liability of the Company on
its debts as such debts become absolute and matured.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination. This Agreement may be terminated
at any time prior to the Effective Time, notwithstanding approval
thereof by the stockholders of the Company:
(a) by mutual written consent duly authorized by the Boards
of Directors of Parent and the Company; or
(b) by either Parent or the Company if the Merger shall not
have been consummated by July 31, 1997 (provided that the right
to terminate this Agreement under this Section 7.1(b) shall not
be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of or resulted in the
failure of the Merger to occur on or before such date); or
(c) by either Parent or the Company if a court of competent
jurisdiction or governmental, regulatory or administrative agency
or commission shall have issued a nonappealable final order,
decree or ruling or taken any other action having the effect of
permanently restraining order enjoining or otherwise prohibiting
the Merger (provided that the right to terminate this Agreement
under this Section 7.1(c) shall not be available to any party who
has not complied with its obligations under Section 5.9 and such
noncompliance materially contributed to the issuance of any such
order, decree or ruling or the taking of such action); or
(d) by either party if the other party is in material
default of its obligations hereunder and the defaulting party
fails to cure such default within five (5) business days of
receipt of written notice and demand to cure from the party not
in default; or
(e) by Parent or the Company, if (i) the Board of Directors
of the Company shall withdraw, modify or change its approval or
recommendation of this Agreement or the Merger in a manner
adverse to Parent or shall have resolved to do so in accordance
with Section 5.3 hereof; (ii) the Board of Directors of the
Company shall have approved and recommended to the stockholders
of the Company an Acquisition Proposal; or (iii) a tender offer
or exchange offer for 50% or more of the outstanding shares of
Company Common Stock is commenced (other than by Parent or an
affiliate of Parent) and the Board of Directors of the Company
recommends that the stockholders of the Company tender their
shares in such tender or exchange offer; provided, that, the
Company shall not be entitled to exercise any termination rights
under this Section 7.1(e) unless any action of the Board of
Directors of the Company is taken by the Board of Directors in
accordance with the standards set forth in Section 4.2.
SECTION 7.2 Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 7.1, this
Agreement shall forthwith become void and there shall be no
liability on the part of any party hereto or any of its
affiliates, directors, officers or stockholders except (i) as set
forth in Section 7.3 hereof, and (ii) nothing herein shall
relieve any party from liability for any breach hereof occurring
prior to termination. The Confidentiality Letter shall survive
termination of this Agreement as set forth therein.
SECTION 7.3 Fees and Expenses.
(a) Except as set forth in this Section 7.3, all fees and
expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party
incurring such expenses, whether or not the Merger is
consummated.
(b) The Company shall pay Parent as the sole remedy of
Parent, Merger Sub or any of their affiliates a fee of $3,000,000
(the "Fee"), plus Parent's documented out-of-pocket expenses
relating to the transactions contemplated by this Agreement
(including, but not limited to, reasonable fees and expenses of
Parent's counsel, accountants and financing sources) up to a
maximum of $1,000,000 ("Expenses"), upon the termination of this
Agreement by Parent or the Company pursuant to Section 7.1(f).
(c) The Company shall pay Parent as the sole remedy of
Parent, Merger Sub or any of their affiliates the Fee plus the
Expenses if either Parent or the Company terminates this
Agreement pursuant to Section 7.1(b) if the failure of the Merger
to be consummated is due to the material failure of the Company
to comply with any of its agreements or covenants under this
Agreement.
(d) The Company shall pay Parent, as the sole remedy of
Parent, Merger Sub or any of their affiliates, the Fee plus the
Expenses if this Agreement is terminated pursuant to Section
7.1(a) as a result of the material failure of the Company to
comply with any of its agreements or covenants contained in this
Agreement.
(e) The Fee and/or Expenses payable pursuant to Sections
7.3(b); 7.3(c) or 7.3(d) shall be paid within one business day
after the first to occur of any of the events described in
Sections 7.3(b); 7.3(c) or 7.3(d). Notwithstanding the preceding
sentences, in no event shall the Company be required to pay any
such Fee and/or Expenses to Parent if, immediately prior to the
termination of this Agreement, Parent was in material breach of
any of its agreements or covenants under this Agreement.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Effectiveness of Representations, Warranties
and Agreements, Etc.
(a) Except as otherwise provided in this Section 8.1, the
representations, warranties and agreements of each party hereto
shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any other party hereto,
any person controlling any such party or any of their officers or
directors, whether prior to or after the execution of this
Agreement. The representations, warranties and agreements in
this Agreement shall terminate at the Effective Time or upon the
termination of this Agreement pursuant to Section 7.1, as the
case may be, except that the agreements set forth in Article I
and Section 5.7 shall survive the Effective Time indefinitely and
those set forth in Section 7.3 shall survive such termination
indefinitely. Nothing in this Section 8.1(a) shall relieve any
party for any breach of any representation, warranty or agreement
in this Agreement occurring prior to termination.
(b) Any disclosure made with reference to one or more
sections of the Company Disclosure Schedule or the Parent
Disclosure Schedule shall be deemed disclosed only with respect
to such section unless such disclosure is made in such a way as
to make its relevance to the information called for by another
Section of such schedule readily apparent in which case, such
disclosure shall be deemed to have been included in such other
Section, notwithstanding the omission of a cross reference
thereto.
(c) The Company will update the Company Disclosure Schedule
from time to time through a date which is not more than five
business days prior to the Effective Time (the "Final Company
Disclosure Schedule Date"). On the Final Company Disclosure
Schedule Date, the Company shall deliver to Parent a revised
Company Disclosure Schedule which will be true, correct and
complete as if the representations and warranties to which such
Company Disclosure Schedule refers were made on such Final
Company Disclosure Schedule Date.
SECTION 8.2 Notices. All notices and other communications
given or made pursuant hereto shall be in writing and shall be
deemed to have been duly given or made if and when delivered
personally or by overnight courier to the parties at the
following addresses or sent by electronic transmission, with
confirmation of receipt, to the telecopy numbers specified below
(or at such other address or telecopy number for a party as shall
be specified by like notice):
(a) If to Parent or Merger Sub:
Film Holdings Co.
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Telecopier No.: (617) 572-3000
Telephone No.: (617) 572-3274
Attention: Geoffrey S. Rehnert
With a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Telecopier No.: (617) 951-7050
Telephone No.: (617) 951-7371
Attention: David C. Chapin, Esq.
(b) If to the Company:
LIVE Entertainment Inc.
15400 Sherman Way
Suite 500
Van Nuys, CA 91406
Telecopier No.: 818/908-9539
Telephone No.: 818/778-3167
Attention: Chief Financial Officer
With a copy to:
Sidley & Austin
555 West Fifth Street
40th Floor
Los Angeles, CA 90013-1010
Telecopier No.: 213/896-6600
Telephone No.: 213/896-6013
Attention: Gary J. Cohen, Esq.
SECTION 8.3 Definitions. For purposes of this Agreement, the term:
(a) "Affiliates" means a person that directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the first
mentioned person;
(b) "Beneficial Owner" with respect to any shares of
Company Common Stock means a person who shall be deemed to be the
beneficial owner of such shares (i) which such person or any of
its affiliates or associates (as such term is defined in Rule
12b-2 of the Exchange Act) beneficially owns, directly or
indirectly, (ii) which such person or any of its affiliates or
associates has, directly or indirectly, (A) the right to acquire
(whether such right is exercisable immediately or subject only to
the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise, or (B) the right to
vote pursuant to any agreement, arrangement or understanding, or
(iii) which are beneficially owned, directly or indirectly, by
any other persons with whom such person or any of its affiliates
or associates has any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of any
shares;
(c) "Business Day" means any day other than a day on which
banks in The Commonwealth of Massachusetts or the State of
California are required or authorized to be closed;
(d) "Control" (including the terms "controlled by" and
"under common control with") means the possession, directly or
indirectly or as trustee or executor, of the power to direct or
cause the direction of the management or policies of a person,
whether through the ownership of stock, as trustee or executor,
by contract or credit arrangement or otherwise;
(e) "Exploitation Agreements" means all agreements pursuant
to which the Company or any of its Subsidiaries has granted to
any Person, or any Person has acquired from the Company or any of
its Subsidiaries, rights to exploit all or any of the Company's
or Subsidiary's distribution rights in any Film Assets.
(f) "Film" means any and every motion picture, tape or
other recording of moving images by any means, manner, process or
device now known or hereafter devised.
(g) "Film Asset Acquisition Agreements" means all
agreements, licenses, instruments, writings and understandings
evidencing any Film Assets or any rights therein or thereto
acquired by the Company or pursuant to which such Film Assets and
rights were acquired by or granted to the Company.
(h) "Film Assets" means all rights and interests granted to
or acquired by the Company in connection with or related to the
distribution or exploitation of, or otherwise respecting, any
Films, including but not limited to any distribution rights,
license rights and rights as a subdistributor or sublicensee in
all media, including without limitation, distribution, license,
subdistribution and sublicense rights; all rights to distribute,
license, subdistribute, sublicense, copy, exhibit, transmit,
broadcast, package, edit, reformat, advertise or exploit a Film,
in any and all media, and any syndication, television or cable
television rights; all copyrights or interests in any copyright
on or relating to a Film; and any collateral, allied, subsidiary
or merchandising rights appurtenant or related to a Film.
(i) "Generally Accepted Accounting Principles" shall mean
United States generally accepted accounting principles.
(j) "Laboratory" means each laboratory where any Masters are
located.
(k) "Masters" means all film negatives, masters, prints,
pre-print and/or soundtrack materials and other physical
materials relating to any Film.
(l) "Person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or
group (as defined in Section 13(d)(3) of the Exchange Act);
(m) "Rights Agreement" means the Rights Agreement dated
July 19, 1990 between the Company and American Stock Transfer &
Trust Company, as amended;
(n) "Significant Subsidiary" means any subsidiary of the
Company or Parent, as the case may be, that constitutes a
Significant Subsidiary within the meaning of Rule 1-02 of
Regulation S-X of the SEC; and
(o) "Subsidiary" or "Subsidiaries" of the Company, Parent
or any other person means any corporation, partnership, joint
venture or other legal entity of which the Company, the Surviving
Corporation, Parent or such other person, as the case may be
(either alone or through or together with any other subsidiary),
owns, directly or indirectly, more than 50% of the stock or other
equity interests the holders of which are generally entitled to
vote for the election of the board of directors or other
governing body of such corporation or other legal entity.
SECTION 8.4 Other Definitions. The following terms are
defined in the Sections hereof listed below:
"1996 Company Balance Sheet" Section 2.9
"Acquisition Proposal" Section 4.2(a)
"Agreement" Preamble
"Antitrust Division" Section 5.1
"Applicable Merger Price" Section 1.7(b)
"Approvals" Section 2.1
"Certificate" Section 1.7(b)
"Certificate of Merger" Section 1.2
"Code" Section 1.7(d)
"Commitment Letters" Section 3.6
"Common Stock Merger Price" Section 1.7(b)
"Company" Preamble
"Company Common Stock" Recitals
"Company Disclosure Schedule" Section 2.3
"Company Employee Plans" Section 2.11
"Company Intangible Property Rights" Section 2.18(a)
"Company Option Security" Section 1.6(c)
"Company Option Security Price" Section 1.6(c)
"Company Permits" Section 2.6(b)
"Company SEC Reports" Section 2.7(a)
"Company Series B Preferred Stock Recitals
"Company Series C Preferred Stock Recitals
"Company Stock" Recitals
"Company Stockholders Meeting" Section 2.13
"Company Stock Option Plans" Section 2.3
"Confidentiality Letter" Section 5.4
"DGCL" Recitals
"Dissenting Shares" Section 1.7(e)
"Effective Time" Section 1.2
"Environmental Laws" Section 2.17
"ERISA" Section 2.11
"Exchange Agent" Section 1.7(a)
"Exchange Fund" Section 1.7(a)
"Expenses" Section 7.3(b)
"Fee" Section 7.3(b)
"Final Company Disclosure Schedule Date" Section 8.1(b)
"FTC" Section 5.1
"HSR Act" Section 2.5(d)
"Indemnified Parties" Section 5.7(b)
"IRS" Section 2.11
"Laws" Section 2.5(c)
"Liens" Section 2.3
"Material Adverse Effect" Section 1.13
"Merger" Recitals
"Merger Sub" Preamble
"Parent" Preamble
"PBGC" Section 2.11
"Proxy Statement" Section 2.13
"Series B Merger Price" Section 1.7(b)
"Series C Merger Price" Section 1.7(b)
"Share" Recitals
"Stockholder" Recitals
"Stockholder Agreement" Recitals
"Surviving Corporation" Section 1.1(a)
"Tax" or "Taxes" Section 2.16
"Tax Returns" Section 2.16
SECTION 8.5 Amendment. This Agreement may be
amended by the parties hereto by action taken by or on behalf of
their respective Boards of Directors at any time prior to the
Effective Time; provided, however, that, after approval of the
Merger by the stockholders of the Company, no amendment may be
made which by law requires further approval by such stockholders
without such further approval. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
SECTION 8.6 Waiver. At any time prior to the Effective
Time, any party hereto may with respect to any other party hereto
(a) extend the time for the performance of any of the obligations
or other acts, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered
pursuant hereto, or (c) waive compliance with any of the agreements
or conditions contained herein. Any such extension or waiver
shall be valid only if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
SECTION 8.7 Headings. The headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 8.8 Severability. If any term or other provision
of this Agreement is invalid, illegal or incapable of being
enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected
in any manner adverse to any party. Upon such determination that
any term or other provision is invalid, illegal or incapable of
being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of
the parties as closely as possible in an acceptable manner to the
end that the transactions contemplated hereby are fulfilled to
the fullest extent possible.
SECTION 8.9 Entire Agreement. This Agreement constitutes
the entire agreement and supersedes all prior agreements and
undertakings (other than the Confidentiality Letter), both
written and oral, among the parties, or any of them, with respect
to the subject matter hereof.
SECTION 8.10 Assignment; Guarantee of Merger Sub
Obligations. This Agreement shall not be assigned by operation
of law or otherwise, except that Parent and Merger Sub may assign
all or any of their rights hereunder to any direct wholly owned
subsidiary of Parent provided that no such assignment shall
relieve the assigning party of its obligations hereunder. Parent
guarantees the full and punctual performance by Merger Sub of all
the obligations hereunder of Merger Sub or any such assignees.
SECTION 8.11 Parties in Interest. This Agreement
shall be binding upon and inure solely to the benefit of each
party hereto, and nothing in this Agreement, express or implied,
is intended to or shall confer upon any other person any right,
benefit or remedy of any nature whatsoever under or by reason of
this Agreement, including, without limitation, by way of
subrogation, other than Section 5.7 (which is intended to be for
the benefit of the Indemnified Parties and may be enforced by
such Indemnified Parties).
SECTION 8.12 Failure or Indulgence Not Waiver;
Remedies Cumulative. No failure or delay on the part of any
party hereto in the exercise of any right hereunder shall impair
such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right
preclude any other or further exercise thereof or of any other
right. All rights and remedies existing under this Agreement are
cumulative to, and not exclusive of, any rights or remedies
otherwise available.
SECTION 8.13 Governing Law. This Agreement shall be
governed by, and construed in accordance with, the internal laws
of the State of Delaware applicable to contracts executed and
fully performed within the State of Delaware.
SECTION 8.14 Counterparts. This Agreement may be
executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
[Remainder of this page intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have
caused this Agreement to be executed as of the date first written
above by their respective officers thereunto duly authorized.
LIVE Entertainment Inc.
By: /s/ Roger A. Burlage
Title: President
Film Holdings Co.
By: /s/ Joseph P. Pretlow
Title: Vice President
Film Acquisition Co.
By: /s/ Joseph P. Pretlow
Title: Vice President
Exhibit 10.2
Richland, Gordon & Co. LIVE Contact: LIVE Investor Relations:
Contact: Ronald B. Cushey Lippert/Heilshorn & Assoc.
Richard E. Nicolazzo Executive Vice President/ Lillian Armstrong/Kris Otridge
Nicolazzo & Associates Chief Financial Officer 415-433-3777
617-951-0000 818-778-3167 Keith L. Lippert
212-838-3777
LIVE ENTERTAINMENT INC. ANNOUNCES BUYOUT AGREEMENT
Los Angeles, California, April 18, 1997 -- LIVE Entertainment
Inc. (Nasdaq NM: LIVE, Nasdaq SmallCap: LIVE P) today announced
that it has entered into a definitive merger agreement with an
investor group led by Richland, Gordon & Co. Pursuant to the
merger agreement, holders of LIVE's Series B Preferred Stock will
receive $10.00 per share in cash, plus accrued dividends, and
holders of LIVE's Common Stock will receive $6.00 per share in
cash. LIVE's outstanding indebtedness will also be redeemed at par
plus accrued interest. The Board of Directors of LIVE has
unanimously approved the merger agreement, and Pioneer Electronic
Corporation, the holder of approximately 50.3% of the outstanding
voting power, has agreed to vote its shares in favor of the merger.
The transaction is subject to customary terms and conditions,
including obtaining the necessary financing under commitment
letters aggregating $150 million delivered by the investor group.
The transaction is also subject to approval by holders of a
majority of LIVE's outstanding Common equity securities at a
special meeting which is expected to be held in June.
"We are excited about the opportunity to work with LIVE's
management team to continue the growth of the Company," said Alan
D. Gordon, President of Richland, Gordon & Co., a private equity
investment firm. Roger Burlage, Chairman and CEO of
-more-
<PAGE>
LIVE, stated that "LIVE is looking forward to continued growth
with the support of our new investor group. This transaction
rationalizes LIVE's capital structure and significantly enhances
our ability to expand LIVE's presence in the industry."
LIVE Entertainment Inc., headquartered in Los Angeles, is a
diversified entertainment company, specializing in the domestic and
international marketing and distribution of filmed entertainment
with its primary focus on motion pictures. The Company distributes
to the theatrical, non-theatrical, home video, interactive and
television markets both domestically and internationally through
its operating divisions, including LIVE Entertainment, LIVE
International, LIVE Home Video, LIVE Television, LIVE Interactive
and LIVE Film and Mediaworks.
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