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SECURITIES AND EXCHANGE COMMISSION
the Securities Exchange Act of 1934 (Amendment No. )
Filed by a Party other than the Registranto
Check the appropriate box:
þ | Preliminary Proxy Statement | |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
o | Definitive Proxy Statement | |
o | Definitive Additional Materials | |
o | Soliciting Material Pursuant to §240.14a-12 |
o | No fee required. | |
þ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
(1) | Title of each class of securities to which transaction applies: | ||
(2) | Aggregate number of securities to which transaction applies: | ||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | ||
(4) | Proposed maximum aggregate value of transaction: $113,250,000 | ||
(5) | Total fee paid: $8,075 | ||
o | Fee paid previously with preliminary materials. | |
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
(1) | Amount Previously Paid: | ||
(2) | Form, Schedule or Registration Statement No.: | ||
(3) | Filing Party: | ||
(4) | Date Filed: | ||
Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. |
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This proxy statement does not constitute an offer to sell or a solicitation of an offer to buy any securities.
12300 Liberty Boulevard
Englewood, Colorado 80112
(720) 875-5622
William R. Fitzgerald
Chairman and Chief Executive Officer
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12300 Liberty Boulevard
Englewood, Colorado 80112
(720) 875-5622
to be Held on [_________], 2011
1. | A proposal (thetransaction proposal) to approve the sale of 100% our content distribution business unit, which under Delaware law may constitute the sale of “all or substantially all of the property and assets” of the Company, to Encompass Digital Media, Inc. and its direct wholly-owned subsidiary, Encompass Digital Media Limited (together,Encompass) on the terms and subject to the conditions set forth in the Purchase and Sale Agreement dated December 2, 2010, attached asAnnex B to this proxy statement (thePurchase Agreement). Pursuant to the Purchase Agreement, we will sell all our interest in certain of our subsidiaries, which, following an internal reorganization, will at closing hold in the aggregate the worldwide assets and operations of our content distribution business unit, to Encompass for a purchase price of $113,250,000 in cash, plus the assumption of certain liabilities and obligations with an estimated value on the date of the Purchase Agreement of approximately $6.75 million, subject to net working capital and certain other adjustments. |
William E. Niles
General Counsel and Secretary
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12300 Liberty Boulevard
Englewood, Colorado 80112
Telephone: (720) 875-5622
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Ascent Media Network Services, LLC
Ascent Media Networks Services Europe Limited
Ascent Media Pte. Ltd.
Four Media Company LLC
Ascent Media Limited
Ascent Media Holdings Ltd.
• | Ascent Media Network Services, LLC(theUS Company), which will own the assets and operations of Content Distribution in the United States; |
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• | Ascent Media Networks Services Europe Limited(theUK Company), which will own the assets and operations of Content Distribution in the United Kingdom; and |
• | Ascent Media Pte. Ltd. (theSingapore Company), which will own the assets and operations of Content Distribution in the Republic of Singapore. |
• | Four Media Company LLC(4MC), is an intermediate holding company and a direct wholly owned subsidiary of our company. At the closing of the Content Distribution transaction, 4MC will own 100% of the US Company. | ||
• | Ascent Media Limited(AML), is an intermediate holding company and an indirect wholly owned subsidiary of our company. At the closing of the Content Distribution transaction, AML will own 100% of the UK Company. | ||
• | Ascent Media Holdings Ltd. (AMHL), is an intermediate holding company and an indirect wholly-owned subsidiary of our company. At the closing of the Content Distribution transaction, AMHL will own 100% of the Singapore Company. |
Encompass Digital Media Limited
• | we intend to sell our worldwide Content Distribution business through the sale of all of our interests in the Content Distribution Group Entities to Encompass US and Encompass UK; and | ||
• | in exchange for our interests in the Content Distribution Group Entities, Encompass US and Encompass UK have agreed to pay us, in the aggregate, $113,250,000 in cash, plus the assumption of certain liabilities and obligations with an estimated value on the date of the Purchase Agreement of approximately $6.75 million, subject to net working capital and certain other adjustments. |
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• | the trading history of the Company’s Series A common stock on The NASDAQ Global Select Market; | ||
• | the strong competition faced by the Content Distribution business, and the likely need to increase the scale of the business to meet such competition successfully; | ||
• | the board’s assessment that the consideration to be received by the Company in the Content Distribution transaction was a fair price for the Content Distribution business; | ||
• | the receipt of the opinion of Moelis & Company LLC (Moelis), which is described under the heading “Opinion of our Financial Advisor”; and | ||
• | the board’s determination that the process undertaken by the Company to identify potential opportunities or strategies for maximizing the value of the AMG operating businesses, for the benefit of the Company’s stockholders, as described below under the heading “Background of the Content Distribution Transaction”, was sufficient to identify the Content Distribution transaction as the most attractive opportunity or strategy reasonably available at this time for the Content Distribution business. |
• | determined that the Content Distribution transaction, the Purchase Agreement and the transactions contemplated thereby are advisable and are fair to, and in the best interests of, our company and our stockholders; | ||
• | approved the Content Distribution transaction; and | ||
• | recommends that you voteFORthe transaction proposal. |
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§ | following the consummation of the Content Distribution transaction and the Creative/Media transaction, our assets will consist primarily of cash, we will have relatively insignificant revenue and we will be subject to the risk of inadvertently becoming an investment company under the Investment Company Act of 1940; | ||
§ | there can be no assurances that we will be successful in acquiring another operating business; | ||
§ | because we are currently seeking potential acquisition candidates in a number of different industry segments, stockholders will have no basis to ascertain the merits or risks of any business that we may ultimately operate; | ||
§ | the Content Distribution transaction may not be completed if the conditions to closing are not satisfied or waived; and | ||
§ | the Creative/Media transaction may not be completed if the conditions to closing are not satisfied or waived. |
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• | approval of the transaction proposal by the holders of a majority of the voting power of the outstanding shares of our common stock entitled to vote thereon, voting as a single class; | ||
• | the requisite regulatory approvals shall have been obtained; and | ||
• | specified third-party consents shall have been obtained. |
• | by mutual written consent of us and Encompass US; and | ||
• | by us or Encompass US, if (1) the closing has not occurred by February 28, 2011, (2) any governmental authority of competent jurisdiction has issued an order or taken any other action permanently restraining, enjoining or otherwise prohibiting or imposing materially burdensome conditions on the consummation of the transactions contemplated by the Purchase Agreement, and such order or other action has become final and non-appealable, or (3) stockholder approval of the transaction proposal is not obtained at the special meeting; |
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• | by us, if our board of directors has determined, in good faith, that a competing proposal is a superior proposal, subject to certain conditions; |
• | by Encompass US, (i) if our board of directors makes a change of recommendation, fails to recommend against a competing tender offer, enters into an acquisition agreement, or publicly announces an intention to take any of such actions, or (ii) if any of certain specified customers terminates contracts with our company representing, in the aggregate, all or substantially all the revenue received by us from such customer for network origination, playout and master control services in the UK. |
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Q: | Why am I receiving this proxy statement and proxy card? | |
A: | You are receiving a proxy statement and proxy card because you owned shares of our common stock as of the record date. This proxy statement and proxy card relate to our special meeting of stockholders (and any adjournment thereof) and describe the proposal that will be voted on at the special meeting. | |
Q: | Who is soliciting my proxy? | |
A: | Our board of directors is soliciting your proxy for use at the special meeting. | |
Q: | What proposals will be voted on at the special meeting? | |
A: | You will be asked to consider and vote on a proposal, which we refer to as thetransaction proposal, to approve the sale of 100% of our content distribution business unit to Encompass for $113,250,000 in cash, plus assumption of certain liabilities and obligations with an estimated value on the date of the Purchase Agreement of approximately $6.75 million, and subject to net working capital and other adjustments, on the terms and subject to the conditions set forth in the Purchase Agreement. We refer to this transaction as theContent Distribution transaction. | |
Q: | Why are we asking for stockholder approval for the sale of the content distribution business unit? | |
A: | Our company is incorporated under Delaware law, which requires that a corporation obtain approval from its stockholders for the sale of “all or substantially all” of its property and assets. The proposed sale of our content distribution business, following the previously announced sale of our creative services business unit and media management services business unit, may be deemed to constitute such a sale. We are therefore seeking stockholder approval for the Content Distribution transaction. Stockholder approval is also a condition to closing under the purchase agreement relating to the Content Distribution transaction. | |
Q: | Will there be a stockholder vote regarding the sale of the creative services and media management services business units? | |
A: | No. The previously announced sale of our creative services business unit and media management services business unit, which we refer to as theCreative/Media transaction, to Deluxe Entertainment Services Group Inc. and Deluxe UK Holdings Limited is a separate and independent transaction, and we do not currently intend to submit the Creative/Media transaction to a stockholder vote. The Content Distribution transaction is not conditioned on the closing of the Creative/Media transaction. | |
Q: | Will any of the proceeds from the Content Distribution transaction be distributed to me as a stockholder? | |
A: | No. We do not contemplate a distribution to our stockholders of any net proceeds we receive from the Content Distribution transaction. We expect to use those proceeds, after transaction expenses, to support our acquisition strategy of identifying and acquiring one or more operating businesses as well as for general corporate purposes. | |
Q: | Has the Company entered into a definitive agreement with respect to the acquisition of a new operating business? | |
A: | No. While we are actively seeking to acquire one or more operating businesses that management believes will offer the opportunity for attractive returns on equity, no definitive agreement to acquire such a business has yet been agreed to. | |
Q: | Will the Company consider acquisition candidates outside the entertainment and media services sector? |
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A: | Yes. As part of our acquisition strategy, we are considering potential targets in a variety of industries, which would likely result in significant changes in our operations from those historically conducted by us in the media and entertainment services sector. Please see “The Transaction Proposal—Risk Factors” below. | |
Q: | Will the Company’s common stock still be publicly traded if the Content Distribution transaction is completed? | |
A: | Yes. Our Series A common stock is currently traded on The NASDAQ Global Select Market under the symbol “ASCMA” and will continue to trade under that symbol if we complete the Content Distribution transaction. Our Series B common stock is currently eligible for quotation on the OTC Bulletin Board under the symbol “ASCMB”, but it is not actively traded. The completion of the Content Distribution transaction will not affect that eligibility. | |
Q: | How does the board of directors recommend that I vote? | |
A: | Your board of directors unanimously recommends that you vote“FOR”the transaction proposal. | |
Q: | What stockholder vote is required to approve the proposal? | |
A: | Approval of the transaction proposal requires the affirmative vote of the holders of record, as of the record date, of a majority of the aggregate voting power of the shares of our common stock outstanding and entitled to vote at the special meeting, voting together as a single class. | |
Q: | How many votes do stockholders have? | |
A: | At the special meeting: |
• | holders of Series A common stock have one vote per share; and | ||
• | holders of Series B common stock have ten votes per share. |
A stockholder is only entitled to vote any shares owned as of the record date at the special meeting. | ||
Q: | What do I need to do to vote on the transaction proposal? | |
A: | After carefully reading and considering the information contained in this proxy statement, you should complete, sign, date and return the enclosed proxy card by mail, or vote by telephone or through the Internet, in each case as soon as possible so that your shares are represented and voted at the special meeting. Instructions for voting by using the telephone or the Internet are printed on the proxy voting instructions attached to the proxy card. In order to vote via the Internet, have your proxy card available so you can input the required information from the card, and log on to the Internet website address shown on the proxy card. When you log on to the Internet website address, you will receive instructions on how to vote your shares. The telephone and Internet voting procedures are designed to authenticate votes cast by use of a personal identification number, which will be provided to each voting stockholder separately. | |
Q: | If my shares are held in “street name” by a broker, bank or other nominee, will the broker, bank or other nominee vote those shares for me? | |
A: | Your broker or other nominee will vote your sharesonlyif you provide instructions on how to vote to such broker or other nominee. You should follow the voting instruction card provided by your broker, bank or other nominee in instructing them how to vote your shares. | |
If you hold your shares in street name and do not provide voting instructions to your broker, bank or other nominee, your shares willnotbe voted on the transaction proposal. Your broker, bank or other nominee will vote your shares held in “street name” on the transaction proposalonlyif you provide instructions on how to vote. If a broker, who is a record holder of shares, indicates on a form of proxy that the broker does not have discretionary authority to vote those shares on the transaction proposal, or if those shares are voted in circumstances in which proxy authority is defective or has been withheld with respect to the transaction proposal, these shares are considered “broker non-votes” with respect to such proposal. |
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Broker non-votes will not count as present and entitled to vote for purposes of determining a quorum, and have the same effect as votes “against” the transaction proposal. You should follow the directions your broker, bank or other nominee provides to you regarding how to vote your shares of common stock or when granting or revoking a proxy. | ||
Q: | What if I do not vote on the transaction proposal? | |
A: | If you do not submit a proxy or you do not vote in person at the special meeting, your shares will not be counted as present and entitled to vote for purposes of determining whether a quorum exists for the special meeting. Because approval of the transaction proposal requires the affirmative vote of a majority of the voting power of outstanding shares entitled to vote, a failure to vote has the same effect as a vote “against” the transaction proposal (assuming a quorum is present at the special meeting). If you submit a proxy but do not indicate how you want to vote, your proxy will be counted as a vote “FOR” the transaction proposal. | |
Q: | What if I respond and indicate that I am abstaining from voting? | |
A: | If you submit a proxy in which you indicate that you are abstaining from voting, your shares will count as present for purposes of determining a quorum, but your proxy will have the same effect as a vote “against” the transaction proposal. | |
Q: | May I change my vote after returning a proxy card or voting by telephone or over the Internet? | |
A: | Yes. Before the start of the special meeting, you may change your vote on the transaction proposal by telephone or over the Internet (if you originally voted by telephone or over the Internet), by person at the special meeting or by delivering a signed proxy revocation or a new signed proxy with a later date to Ascent Media Corporation [c/o _________________________]. | |
Any signed proxy revocation or new signed proxy must be received before the start of the special meeting.Your attendance at the special meeting will not, by itself, revoke your proxy. If your shares are held in an account by a broker, bank or other nominee who you previously contacted with voting instructions, you should contact your broker, bank or other nominee to change your vote. | ||
Q: | What if a quorum is not present at the special meeting? | |
A: | To conduct the business of the special meeting, our bylaws require that the holders of a majority of the aggregate voting power represented by the shares of our common stock outstanding on the record date and entitled to vote be present in person or by proxy at the special meeting. Because applicable New York Stock Exchange rules do not permit discretionary voting by brokers with respect to the transaction proposal to be acted upon at the special meeting, broker non-votes will not count as present and entitled to vote for purposes of determining a quorum. This may make it more difficult to establish a quorum at the special meeting. If a quorum is not present at the special meeting, we expect the chairman of the meeting to adjourn the meeting in accordance with the terms of our bylaws for the purpose of soliciting additional proxies. Although our Series A common stock is traded on The NASDAQ Global Select Market, the rules of the New York Stock Exchange for this purpose are binding on all brokers that are members of the New York Stock Exchange. | |
Q: | Who will bear the cost of this solicitation? | |
A: | The expenses of preparing, printing and mailing this proxy statement and the proxies solicited hereby will be borne by the Company. Additional solicitation may be made by telephone, facsimile or other contact by certain directors, officers, employees or agents of our Company, none of whom will receive additional compensation therefor. We will, upon request, reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable expenses for forwarding material to the beneficial owners of shares held of record by others. | |
Q: | Will I be entitled to appraisal rights if I oppose the Content Distribution transaction? | |
A: | No. You will not be entitled to appraisal or dissenters’ rights in connection with the Content Distribution transaction. |
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Q: | What do I do if I have additional questions? | |
A: | If you have any questions prior to the special meeting or if you would like copies of any document referred to or incorporated by reference in this document, please call Investor Relations at (720) 875-5622. |
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December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
amounts in thousands | ||||||||||||||||||||
Summary Balance Sheet Data: | ||||||||||||||||||||
Current assets | $ | 416,891 | 490,042 | 362,725 | 316,381 | 385,868 | ||||||||||||||
Property and Equipment, net | $ | 185,891 | 211,846 | 241,834 | 251,670 | 230,742 | ||||||||||||||
Total assets | $ | 682,483 | 745,304 | 830,986 | 952,919 | 996,627 | ||||||||||||||
Current liabilities | $ | 70,872 | 91,202 | 119,600 | 114,229 | 84,783 | ||||||||||||||
Stockholders’ equity | $ | 582,596 | 625,310 | 686,896 | 814,696 | 890,029 |
Years ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
amounts in thousands, | ||||||||||||||||||||
except per share amounts | ||||||||||||||||||||
Summary Statement of Operations Data: | ||||||||||||||||||||
Net revenue | $ | 453,681 | 581,625 | 570,731 | 553,326 | 585,049 | ||||||||||||||
Operating income (loss)(a) (c) | $ | (39,559 | ) | (120,956 | ) | (175,740 | ) | (118,244 | ) | 2,533 | ||||||||||
Net earnings (loss) from continuing operations (a) (c) | $ | (56,844 | ) | (114,070 | ) | (151,202 | ) | (92,334 | ) | 5,703 | ||||||||||
Net earnings (loss) (a) | $ | (52,897 | ) | (64,619 | ) | (132,331 | ) | (83,007 | ) | 8,970 | ||||||||||
Basic and diluted earnings (loss) per common share (b) | $ | (3.76 | ) | (4.60 | ) | (9.41 | ) | (5.90 | ) | 0.64 |
(a) | Includes impairment of goodwill of $95,069,000, $165,347,000 and $93,402,000 for the years ended December 31, 2008, 2007 and 2006, respectively. | |
(b) | Basic and diluted net earnings (loss) per common share is based on (1) 14,061,618 shares, which is the number of shares issued in the spin off, for all periods prior to 2008, the year of the spin off, and (2) the actual number of basic and diluted shares for all periods subsequent to the spin off. | |
(c) | The 2009 and 2008 amounts do not agree to our previously filed Annual Report on Form 10-K for the year ended December 31, 2009 as the amounts have been adjusted to reflect the results of operations of GMX as a discontinued operation. The adjusted financial statements were filed with the SEC on form 8-K on December 7, 2010 and are incorporated by reference into this proxy statement. |
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• | the occurrence of any event, change or other circumstance that could give rise to the termination of the Purchase Agreement; | ||
• | the outcome of any legal proceedings that may be instituted against the Company, Encompass and others relating to the Purchase Agreement; | ||
• | any inability to complete the Content Distribution transaction due to the failure to obtain stockholder approval or the failure to satisfy any other conditions set forth in the Purchase Agreement; | ||
• | the failure of the Content Distribution transaction to close for any other reason; | ||
• | any inability to complete the Creative/Media transaction due to the failure to satisfy conditions set forth in the Deluxe Purchase Agreement, or any other reason, by the expected closing date or at all; | ||
• | any failure by the Company to identify attractive acquisition candidates, to negotiate favorable terms and conditions for any proposed acquisition, and to obtain any third-party financing required to consummate any proposed acquisition; | ||
• | the failure of any proposed acquisition by the Company to close for any reason; | ||
• | business risks and uncertainties inherent in the development of new business lines and business strategies; | ||
• | business risks and uncertainties inherent in the integration of acquired businesses; | ||
• | the possibility that any business or entity acquired by the Company in connection with its acquisition strategy may have unanticipated or undisclosed liabilities or obligations; | ||
• | the possibility that, if the Company fails to identify and consummate the acquisition of another operating business on a timely basis, the Company may become subject to regulation as an investment company pursuant to the Investment Company Act of 1940, as amended; | ||
• | general economic and business conditions and industry trends including the timing of, and spending on, feature film, television and television commercial production; | ||
• | the regulatory and competitive environment of the industries in which we, and the entities in which we have interests, operate; | ||
• | continued consolidation of the broadband distribution and movie studio industries; | ||
• | retention of our largest customer accounts; | ||
• | uncertainties associated with product and service development and market acceptance; | ||
• | rapid technological changes; |
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• | present and future financial performance, including availability and terms of capital; | ||
• | fluctuations in foreign currency exchange rates; | ||
• | political unrest in international markets; | ||
• | the ability of suppliers and vendors to deliver products, equipment, software and services; | ||
• | the outcome of any pending or threatened litigation; | ||
• | availability of qualified personnel; | ||
• | changes in, or failure or inability to comply with, government regulations, including, without limitation, regulations of the FCC, and adverse outcomes from regulatory proceedings; | ||
• | changes in the nature of key strategic relationships with partners and joint venturers; | ||
• | competitor and overall market response to our products and services including acceptance of the pricing of such products and services; | ||
• | threatened terrorists attacks and ongoing military action in the Middle East and other parts of the world; and | ||
• | risk of loss from earthquakes and other catastrophic events. |
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• | holders of shares of Series A common stock will have one vote per share; and | ||
• | holders of shares of Series B common stock will have ten votes per share; |
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• | financial characteristics, including recurring revenue streams and free cash flow; | ||
• | growth potential; and | ||
• | potential return on investment incorporating appropriate financial leverage, including the target’s existing indebtedness and opportunities to restructure some or all of that indebtedness. |
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• | Network origination, playout and master control. Content Distribution provides outsourced network origination services to cable, satellite and pay-per-view programming networks. This suite of services involves the digitization and management of client-provided media assets (programs, advertisements, promotions and secondary events) and their aggregation into a continuous linear playout stream in accordance with the programming schedule. Currently, more than one hundred programming feeds — running 24 hours a day, seven days a week — are supported by Content Distribution facilities in the United States, United Kingdom and Singapore. Network origination services are provided from large-scale technical platforms with integrated asset management, hierarchical storage management (a data storage technique which automatically moves data between high-cost and low-cost storage media), and broadcast automation capabilities. Associated services include cut-to-clock and compliance editing, tape library management, ingest & quality control, format conversion, and tape duplication. For multi-language television services, Content Distribution facilitates the collection, aggregation, and playout of language-specific materials, including subtitles and foreign language dubs. On-air graphics and other secondary events are also integrated with the content. In conjunction with network origination services, Content Distribution operates television production studios and provides complete post-production services for on-air promotions for some clients. | ||
• | Transport and connectivity. Content Distribution operates satellite earth station facilities in Singapore, California, New York, New Jersey, Minnesota and Connecticut. Content Distribution facilities are |
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staffed 24 hours a day and are used for uplink, downlink and turnaround services. Content Distribution’s facilities access various distribution points, including basic and premium cable, broadcast syndication, direct-to-home and DBS markets and resell transponder capacity for both occasional and full-time use. Content Distribution’s “teleports” are high-bandwidth communications gateways with video switches and facilities for satellite, optical fiber and microwave transmission. Content Distribution’s facilities offer satellite antennae capable of transmitting and receiving feeds in both C-Band and Ku-Band frequencies. Content Distribution operates a global fiber network to carry real-time video and data services between various locations in the United States, United Kingdom, and Singapore. This network is used to provide full-time program feeds and ad hoc services to clients and to transport files and real-time signals between locations. Content Distribution also provides industry standard encryption and compression services as needed for customer satellite transmission. Content Distribution’s transport and connectivity services may be directly associated with network origination services or may be provided on a stand-alone basis. |
• | Digital media management services that enable content owners to digitize content once, then store, manage, re-purpose and distribute such content globally in multiple formats and languages to numerous providers; | ||
• | Assembly, formatting and master creation and duplication; | ||
• | Transferring film to video or digital media masters; | ||
• | Professional duplication and standards conversion; | ||
• | Advertising distribution; | ||
• | Syndicated television distribution; | ||
• | Restoration, preservation and asset protection of existing and damaged content; | ||
• | DVD compression and authoring and menu design; and | ||
• | Storage of elements and working masters in physical archives with a highly controlled environment protected from temperature and humidity variation, seismic disturbance, fire, theft and other external events. |
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• | Creative editorial services, tools and talent required through all stages of the “finishing” process necessary for creation and distribution of completed advertising content; | ||
• | Color correction for the development of a creative look and feel for media content utilizing creative colorizing techniques, equipment and processes; | ||
• | Digital intermediate services to convert film to a high resolution digital master file for color correction, creative editorial and electronic assembly of masters in other formats; | ||
• | Visual effects to create images that cannot be created physically through a more cost-effective means; and | ||
• | The services necessary for clients to view principal photography on a daily basis (known as “dailies” in the United States and “rushes” in Europe). |
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• | the trading history of the Company’s Series A common stock on The NASDAQ Global Select Market; | ||
• | the high degree of competition faced by the Content Distribution business, and the likely need to increase the scale of the Content Distribution business to meet such competition successfully; | ||
• | the substantial ongoing capital commitments that would be required to maintain and grow the operations of the Content Distribution business; | ||
• | the dependence of the Content Distribution business on the media, entertainment and advertising industries, and the relative volatility of such industries; | ||
• | the board’s assessment that the consideration to be received by the Company in the Content Distribution transaction was a fair price for the Content Distribution business, under the present circumstances; | ||
• | the receipt of the opinion of Moelis & Company LLC described below, under the heading “Opinion of our Financial Advisor”; | ||
• | the board’s determination that the process undertaken by the Company to identify potential opportunities or strategies for maximizing the value of the AMG operating businesses, for the benefit of the Company’s stockholders, as described below under the heading “Background of the Content Distribution Transaction”, was sufficient to identify the Content Distribution transaction as the most attractive opportunity or strategy available at this time for the Content Distribution business; and | ||
• | the fact that the terms of the Content Distribution transaction were negotiated by the Company and Encompass at arms’-length, over a period of several months. |
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(a) | customary business and financial analysis of AMG, including, upon further request, an analysis of the feasibility and pricing of a potential strategic transaction involving AMG; | ||
(b) | identifying and evaluating transaction candidates for a potential strategic transaction involving AMG; | ||
(c) | contacting appropriate transaction candidates that AMG and Moelis agreed may be appropriate for a transaction, meeting with them, and providing them information regarding AMG as may be appropriate and acceptable to the Company, subject to customary business confidentiality; | ||
(d) | assisting the Company’s preparation of a marketing plan and a confidential information memorandum, or CIM, to be distributed to potential acquirors; | ||
(e) | assisting the Company in developing a strategy to effect potential transactions; | ||
(f) | assisting the Company, upon further request, in structuring, evaluating a potential acquiror’s financing for, and negotiating potential transactions and participating in such negotiations as requested; and | ||
(g) | at the Company’s request, meeting with the Company’s board of directors to discuss potential transactions, including financial implications. |
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• | the accuracy of the representations and warranties of all parties to the Purchase Agreement; | ||
• | that each party to the Purchase Agreement will perform all of the covenants and agreements required to be performed by such party; | ||
• | that the parties will comply with all of the material terms of the Purchase Agreement; | ||
• | that all conditions to the consummation of the Content Distribution transaction will be satisfied without waiver thereof; and | ||
• | that the Content Distribution transaction will be consummated in a timely manner in accordance with the terms described in the Purchase Agreement, without any modifications or amendments thereto or any adjustment to the consideration (through indemnification claims, offset, purchase price adjustments or otherwise). |
• | reviewed certain publicly available business and financial information relating to the Company that it deemed relevant; | ||
• | reviewed certain internal information relating to the Content Distribution business unit, including financial forecasts, earnings, cash flow, assets, liabilities and prospects of the Content Distribution business unit furnished to it by the Company; | ||
• | conducted discussions with members of senior management and representatives of the Company concerning the matters described above; | ||
• | reviewed publicly available financial and stock market data, including valuation multiples, for certain other companies in lines of business that it deemed relevant and compared them with the Content Distribution business unit; | ||
• | reviewed a draft of the purchase and sale agreement, dated November 17, 2010; | ||
• | participated in certain discussions and negotiations among representatives of the Company and Encompass and their financial and legal advisors; and |
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• | conducted such other financial studies and analyses and took into account such other information as Moelis deemed appropriate. |
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• | over the past six month period the Company traded at a market value that implied a total enterprise value for the Content Distribution business unit of close to zero; | ||
• | the financial projections for the Content Distribution business unit provided by the Company did not include overhead to operate the Content Distribution business unit on a standalone basis; accordingly, using a revenue-based pro rata share of the Company’s total corporate overhead, the Company estimated annual corporate overhead costs of $9.4 million to be allocated to the Content Distribution business unit in order to support standalone operations; | ||
• | transactions with publicly disclosed valuation multiples were completed during a more robust M&A environment; accordingly, analyses based on precedent transactions were not meaningful for the Content Distribution business unit; and | ||
• | the Systems Integration business was not included in the financial analyses because it was not part of the Content Distribution transaction. |
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• | Loral Space and Communications, Inc.; | ||
• | Hughes Communications, Inc.; and | ||
• | RRS at Global Communications Network Ltd. | ||
For each of the companies identified above, Moelis calculated various valuation multiples, including: | |||
• | the ratio of enterprise value to projected revenue for calendar year 2010; | ||
• | the ratio of enterprise value to projected revenue for calendar year 2011; | ||
• | the ratio of enterprise value to projected EBITDA for calendar year 2010; and | ||
• | the ratio of enterprise value to projected EBITDA for calendar year 2011. |
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Content | ||||||||||||||||||||
Range of All | Mean of All | Median of All | Selected | Distribution | ||||||||||||||||
Companies | Companies | Companies | Company | business unit | ||||||||||||||||
Enterprise Value/CY10E Revenue | 0.9x — 2.6x | 1.6x | 1.4x | 0.9x | 1.1x | |||||||||||||||
Enterprise Value/CY10E Revenue | 0.8x — 2.5x | 1.5x | 1.3x | 0.8x | 1.1x | |||||||||||||||
Enterprise Value/CY10E EBITDA | 4.1x — 7.4x | 5.9x | 6.2x | 4.1x | 6.2x | |||||||||||||||
Enterprise Value/CY10 EBITDA | 3.6x — 7.0x | 5.2x | 5.1x | 3.6x | 5.0x |
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• | Occasional satellite and fiber transmission and mobile satellite services; | ||
• | Disaster recovery services; | ||
• | Providing the Defense Video and Imagery Distribution System for the public affairs division of the U.S. military, which produces, edits, and distributes video footage to media outlets; and | ||
• | Creating digital files for distribution as video on demand for cable and telephone provider head ends, and for other digital distribution points specified by customers. |
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• | technical and information technology assistance (including with respect to content preparation and management information systems, computer, data storage network and telecommunications services); | ||
• | e-mail and data extraction services for the transition to new independent technological systems; | ||
• | routine information technology support services; | ||
• | hierarchical storage management, content preparation, encoding, transcoding and electronic delivery services; | ||
• | continuation of global interconnect and metro fiber, syndication and video on demand services; | ||
• | permission to contact a certain customer to assist the transition to new facilities; | ||
• | financial services to close the books of the Company; | ||
• | storage services and access to certain elements stored in the Content Distribution business facilities; | ||
• | the lease of certain office equipment; and | ||
• | certain back-up power and generator support services. |
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• | absence of a “material adverse effect” (as defined in the Purchase Agreement) with respect to the Content Distribution Group Entities, Encompass US and its subsidiaries, taken as whole; | ||
• | consummation of the Content Distribution transaction in accordance with the Purchase Agreement, with no amendments or waivers thereto that are materially adverse to the interests of the lenders under the New Credit Facility and the Existing Lenders being agreed to by the US Purchaser without the consent of such lenders; | ||
• | pro forma compliance with certain leverage ratios; | ||
• | solvency of Encompass US and each of the guarantors under each such facility; | ||
• | execution of documentation, including an intercreditor agreement, reasonably satisfactory to the lenders under the New Credit Facility and the Existing Lenders; and |
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• | closing no later than February 28, 2011. |
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• | Ascent Media Network Services, LLC (theUS Company), which will own the assets and operations of Content Distribution in the United States; | ||
• | Ascent Media Networks Services Europe Limited (theUK Company), which will own the assets and operations of Content Distribution in the United Kingdom; and |
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• | Ascent Media Pte. Ltd. (theSingapore Company), which will own the assets and operations of Content Distribution in the Republic of Singapore. |
• | Encompass US will purchase 100% of the outstanding ownership interests in the US Company; | ||
• | Encompass UK will purchase 100% of the outstanding shares of the UK Company; and | ||
• | Encompass UK will purchase 100% of the outstanding shares of the Singapore Company; |
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• | approval of the transaction proposal by the holders of a majority of the voting power of the outstanding shares of our common stock entitled to vote thereon; | ||
• | the waiting period under the HSR Act and any extension thereof shall have expired or been terminated; | ||
• | required approvals from the FCC and IDA shall have been obtained; |
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• | no governmental law or order shall be in force that makes the Content Distribution transaction illegal or otherwise prohibits or imposes materially burdensome conditions on the Content Distribution transaction; | ||
• | no person shall have instituted a claim that would reasonably be expected to prohibit or impose materially burdensome conditions on the Content Distribution transaction; and | ||
• | specified third-party consents shall have been obtained. |
• | each of certain fundamental representations made by our Company and its subsidiaries shall be true and correct as of the date of the Purchase Agreement and the date of the closing of the Content Distribution transaction; | ||
• | the other representations and warranties made by our Company and its subsidiaries shall be true and correct as of the date of the Purchase Agreement and the date of the closing of the Content Distribution transaction, except where failure of such representations and warranties to be true and correct would not have a material adverse effect; | ||
• | our Company and its subsidiaries shall have performed in all material respects their agreements and covenants under the Purchase Agreement; | ||
• | delivery of requisite items by us to Encompass pursuant to the Purchase Agreement, including executed copies of certain real property leases and a sublease and documents relating to the transfer of certain real property and the granting of certain easements; | ||
• | the Company Group Reorganization shall have been consummated and written proof thereof shall have been delivered to Encompass; | ||
• | the FCC approvals shall have become final, or no third-party shall have made any filing associated with the applications; and | ||
• | certain specified contracts between our Company and certain of our customers shall be in full force and effect, and we shall not be in material breach of our obligations thereunder. |
• | each of certain fundamental representations made by Encompass shall be true and correct as of the date of the Purchase Agreement and the date of the closing of the Content Distribution transaction; | ||
• | the other representations and warranties made by Encompass shall be true and correct as of the date of the Purchase Agreement and the date of the closing of the Content Distribution transaction, except where failure of such representations and warranties to be true and correct would not have a material adverse effect; | ||
• | Encompass shall have performed in all material respects their agreements and covenants under the Purchase Agreement; and | ||
• | delivery of requisite items by Encompass to us pursuant to the Purchase Agreement, including executed copies of certain real property leases and a sublease. |
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• | due organization, valid existence, good standing and other corporate matters; | ||
• | authorization, execution, delivery and enforceability of the Purchase Agreement and ancillary agreements; | ||
• | conflicts or violations under organizational documents, contracts or law; | ||
• | pending material litigation or outstanding material orders against our Company or certain subsidiaries; | ||
• | sufficiency of our title to the interests of the Content Distribution Group Entities; | ||
• | solvency of our Company and certain subsidiaries; | ||
• | governmental permits and licenses; | ||
• | material compliance with applicable laws; | ||
• | capitalization and corporate structure of the Content Distribution business; | ||
• | financial statements; | ||
• | absence of undisclosed liabilities; | ||
• | absence of certain material changes or events; | ||
• | material pending or threatened claims or orders related to the Content Distribution Group Entities or initiated by any of the Content Distribution Group Entities; | ||
• | related party transactions between the Company and our affiliates or their respective representatives; | ||
• | employees and employment matters relating to the Content Distribution business; | ||
• | matters relating to employee benefits applicable to us; | ||
• | taxes; | ||
• | intellectual property matters; | ||
• | leased and owned real property; | ||
• | material contracts and leases; | ||
• | material insurance policies; | ||
• | environmental matters; | ||
• | status of the Company’s business relationships with certain customers and suppliers, including the status of certain material contracts; |
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• | condition of tangible property used to conduct the Content Distribution business; | ||
• | sufficiency of properties and assets used to conduct the Content Distribution business; | ||
• | validity of accounts receivable relating to the Content Distribution business, subject to reserves and the adequacy of these reserves in accordance with GAAP; | ||
• | the preparation of any proxy statement related to the Content Distribution transaction; | ||
• | brokerage or finders’ fees with respect to the Content Distribution transaction; | ||
• | absence of certain indebtedness, and absence of certain expenses relating to the Content Distribution transaction; | ||
• | completion of the Company Group Reorganization; and | ||
• | the absence of any cash deposits that the Company Group would be obligated to return. |
• | due organization, valid existence and good standing and other corporate matters; | ||
• | authorization, execution, delivery an enforceability of the Purchase Agreement and ancillary agreements; | ||
• | conflicts or violations under organizational documents, contracts or law; | ||
• | pending or threatened material litigation or outstanding material orders; | ||
• | no financing contingency; | ||
• | solvency; and | ||
• | brokerage or finders’ fees with respect to the transactions contemplated by the Purchase Agreement. |
• | amend its organizational documents; | ||
• | transfer, issue, sell, grant, redeem or dispose of any equity interests or securities of any Content Distribution Group Entity or grant any option, warrant, call or other right to purchase such interests; | ||
• | declare, set aside, or pay dividends or other distributions; | ||
• | sell, assign, transfer, lease or otherwise dispose of material assets or properties of the Content Distribution Group Entities or the Content Distribution business; |
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• | acquire or agree to acquire any business of any other person; | ||
• | incur any indebtedness, make loans or advances, or assume, guarantee or endorse the obligations of any other person (other than to another Content Distribution Group Entity); | ||
• | subject any material asset of the Content Distribution Group Entities to a non-permitted lien; | ||
• | make any material change to any accounting method or practice; | ||
• | enter into or modify any related party agreement; | ||
• | enter into, modify or terminate any material contract or leases (other than as permitted in accordance with the Purchase Agreement); | ||
• | increase compensation or benefits for, or grant severance or termination pay to, any employee of the Content Distribution Group Entities (other than as permitted in accordance with the Purchase Agreement); | ||
• | enter into, modify or terminate any employee benefit plan; | ||
• | enter into modify or terminate any collective bargaining agreement or otherwise make any commitment or incur any liability to any labor organization; | ||
• | make or change any tax elections, extend or waive the statute of limitations for material tax claims, surrender any tax refund, settle any material tax liability, or make any material change to the tax practice as each relates to the Content Distribution Group Entities; | ||
• | discount any receivables outside the ordinary course of business; | ||
• | settle any claim that would impose continuing obligations on any Content Distribution Group Entity; | ||
• | hire new employees above a certain pay grade; or | ||
• | terminate employees in the Content Distribution business without cause. |
• | solicit, initiate or encourage any competing proposal (as defined below); |
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• | participate in any negotiations or discussions regarding any competing proposal; | ||
• | furnish any nonpublic information with respect to any competing proposal; | ||
• | approve or recommend any competing proposal; or | ||
• | enter into any agreement or understanding providing for any competing proposal or requiring us to abandon, terminate or fail to consummate the Content Distribution transaction. |
• | participate in any negotiations or discussions regarding such competing proposal; or | ||
• | furnish any nonpublic information with respect to such competing proposal. |
• | obtaining necessary consents and approval from governmental authorities or other persons; | ||
• | making filings and submissions required to be made under the HSR Act by the Company and Encompass and preparing and submitting any applications necessary to receive the necessary regulatory approvals from the FCC and IDA; and |
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• | providing notice or obtaining consents from any third-parties necessary for the consummation of the transactions contemplated by the Purchase Agreement. |
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• | by mutual written consent of us and Encompass; | ||
• | by us or Encompass, if (1) the closing has not occurred by February 28, 2011, (2) any governmental authority of competent jurisdiction has issued an order or taken any other action permanently restraining, enjoining or otherwise prohibiting or imposing materially burdensome conditions on the consummation of the transactions contemplated by the Purchase Agreement, and such order or other |
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action has become final and non-appealable, or (3) stockholder approval of the transaction proposal is not obtained at the special meeting (in which case, we shall be required to pay Encompass’s out-of-pocket costs and expenses incurred in connection with the Content Distribution transaction not to exceed $2,000,000); | |||
• | by us, if (1) Encompass has breached representations, warranties, covenants or other agreements which leads to a violation of applicable closing conditions and cannot be cured by February 28, 2011 or if curable, is not cured within 30 days of our notice of intent to terminate, or (2) our board of directors has determined, in good faith, that a competing proposal is a superior proposal, subject to certain conditions; | ||
• | by Encompass, if (1) we have breached representations, warranties, covenants or other agreements which leads to a violation of applicable closing conditions and cannot be cured by February 28, 2011 or if curable, is not cured within 30 days of Encompass’ notice of intent to terminate, or (2) our board of directors makes a change of recommendation, fails to recommend against a competing tender offer, enters into an acquisition agreement, or publicly announces an intention to take any of such actions, or (3) if any of certain specified customers terminate contracts with our Company and its subsidiaries representing, in the aggregate, all or substantially all the revenue received by us from such customer for network origination, playout and master control services in the UK. |
• | a competing proposal is publicly announced, and, following such announcement, the Purchase Agreement is terminated (i) by us or Encompass because the closing of the Content Distribution transaction does not occur by February 28, 2011, (ii) by us or Encompass because the transaction proposal is not approved at the special meeting, or (iii) by Encompass because of our breach or failure to perform,and, in any such case, prior to, concurrently with or within twelve months after termination we enter into a definitive agreement with respect to any competing proposal; | ||
• | the Purchase Agreement is terminated by us due to the determination, in good faith, by our board of directors that a competing proposal is a superior proposal; or | ||
• | the Purchase Agreement is terminated by Encompass due to a change of recommendation effected by our board of directors. |
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State of incorporation: | Delaware | |||
Principal Offices: | 1377 North Serrano Avenue | |||
Hollywood, CA 90027 |
• | Deluxe US will purchase 100% of the outstanding ownership interests in AMG; and | ||
• | Deluxe UK will purchase 100% of the outstanding shares of AMGL; |
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• | the assignment, transfer or bifurcation of certain real property leases; and | ||
• | no governmental law or order shall be in force that makes the Creative/Media transaction illegal or otherwise prohibits the Creative/Media transaction. |
• | certain fundamental representations by our Company shall be true and correct as of the date of the Deluxe purchase agreement and the date of the closing of the Creative/Media transaction; |
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• | the other representations and warranties of our Company shall be true and correct as of the date of the closing, except where failure of such representations and warranties to be true and correct would not have a material adverse effect; | ||
• | our Company and its subsidiaries shall have performed in all material respects their agreements and covenants under the Deluxe purchase agreement; | ||
• | delivery of requisite items by us to Deluxe pursuant to the Deluxe purchase agreement, including executed copies of the ancillary agreements in connection with the Creative/Media transaction; | ||
• | the reorganization of the Company shall have been consummated in accordance with the terms and conditions previously described to Deluxe and written proof thereof shall have been delivered to Deluxe; | ||
• | completion of certain real property leases in the form agreed by the parties; | ||
• | the Company shall have taken all necessary steps for certain benefit plans and related liabilities of the Company relating to the Creative/Media business to be terminated upon closing; and | ||
• | Deluxe shall have taken all necessary steps to establish payroll, welfare and benefit plans for the continuing employees of the Creative/Media business. |
• | certain fundamental representations by Deluxe shall be true and correct as of the date of the Deluxe purchase agreement and the date of the closing of the Creative/Media transaction; | ||
• | the other representations and warranties of Deluxe shall be true and correct as of the date of the closing, except where failure of such representations and warranties to be true and correct would not have a material adverse effect; | ||
• | Deluxe shall have performed in all material respects their agreements and covenants under the Deluxe purchase agreement; and | ||
• | delivery of requisite items by Deluxe to us pursuant to the Deluxe purchase agreement, including executed copies of the ancillary agreements in connection with the Creative/Media transaction. |
• | amend its organizational documents; |
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• | transfer, issue, sell, dispose of pledge, encumber or grant any equity interests or securities of any of the Creative/Media Group Entities or grant any option, warrant, call or other right to purchase any such interests; | ||
• | declare, authorize, set aside, or pay dividends or other distributions; | ||
• | sell, assign, transfer, lease or otherwise dispose of, or mortgage or subject to any lien, any material assets or properties of the Creative/Media business; | ||
• | acquire or agree to acquire, through merger, stock acquisition or otherwise, any other business or entity; | ||
• | enter into a new line of business; | ||
• | acquire any real property; | ||
• | incur any indebtedness, make loans or advances, or assume, guarantee or endorse the obligations of any other person; | ||
• | make any material change to any accounting method or practice; | ||
• | enter into any related party agreement; | ||
• | amend any existing, or enter into any new material contract or leases (other than as permitted in accordance with the Deluxe purchase agreement); | ||
• | increase the compensation payable to, or grant any severance or termination pay to, any employee of the Creative/Media business, except in either case pursuant to existing contracts, or in the ordinary course of business up to specified limits; | ||
• | enter into or modify any employee benefit plan, except as provided in the Deluxe purchase agreement; | ||
• | enter into, modify or terminate any collective bargaining agreement, or otherwise make any commitment or incur any liability to any labor organization; | ||
• | make or commit to any capital expenditure, except in the ordinary course of business consistent with past practice; | ||
• | settle or commence any claim, in either case in an amount greater than $250,000 or that would by its terms restrict the ability of any Creative/Media group entity to operate the Creative/Media business; | ||
• | permit any permits to lapse; and | ||
• | allow any insurance policies to lapse or fail to maintain insurance. |
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• | by mutual written consent of us and Deluxe US; | ||
• | by us or Deluxe US, if (1) the closing has not occurred by February 28, 2011, subject to certain conditions or (2) any governmental authority of competent jurisdiction has issued an order or taken any other action permanently restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated by the Deluxe purchase agreement, and such order or other action has become final and non-appealable; | ||
• | by us, if Deluxe US or Deluxe UK has breached representations, warranties, covenants or other agreements which leads to a violation of applicable closing conditions and cannot be cured by February 28, 2011, or if curable, is not cured within 20 days of our notice of intent to terminate; | ||
• | by Deluxe US, if we have breached representations, warranties, covenants or other agreements which leads to a violation of applicable closing conditions and cannot be cured by February 28, 2011, or if curable, is not cured within 20 days of Deluxe’s notice of intent to terminate. |
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Name and Address | Title of | Amount and Nature of | Percent of | Voting | ||||||||||||
of Beneficial Owner | Class | Beneficial Ownership | Class | Power | ||||||||||||
Robert R. Bennett | Series A | 17,980 | (1)(2)(3) | * | 3.73 | % | ||||||||||
c/o Liberty Media Corporation | Series B | 76,212 | (1)(2) | 10.39 | % | |||||||||||
12300 Liberty Boulevard Englewood, CO 80112 | ||||||||||||||||
BlackRock, Inc. | Series A | 1,184,307 | (4) | 8.74 | % | 5.67 | % | |||||||||
40 East 52nd Street New York, NY 10022 | ||||||||||||||||
FMR LLC | Series A | 857,185 | (5) | 6.32 | % | 4.10 | % | |||||||||
82 Devonshire Street Boston, MA 02109 | ||||||||||||||||
Mario J. Gabelli | Series A | 1,331,356 | (6) | 9.82 | % | 6.37 | % | |||||||||
c/o GAMCO Investors, Inc. One Corporate Center Rye, NY 10580 | ||||||||||||||||
T. Rowe Price Associates, Inc. | Series A | 873,977 | (7) | 6.45 | % | 4.18 | % | |||||||||
100 E. Pratt Street Baltimore, MD 21202 |
* | Less than one percent. | |
(1) | Based upon the Schedule 13D filed on February 22, 2010 by Robert R. Bennett, which states that Mr. Bennett has sole voting power and sole dispositive power over 17,980 shares of Series A common stock and 76,212 shares of Series B common stock. | |
(2) | Includes 12,472 shares of Series A Common Stock and 76,210 shares of Series B common stock jointly held by Mr. Bennett and his wife, Deborah Bennett. Also includes 5,491 shares of Series A Common Stock and 2 shares of Series B Common Stock owned by Hilltop Investments, LLC, which is jointly owned by Mr. Bennett and his wife, Deborah Bennett. | |
(3) | Does not include beneficial ownership of shares of our Series A common stock issuable upon exercise of conversion rights relating to shares of our Series B common stock held by Mr. Bennett. |
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(4) | Based upon the Schedule 13G filed on January 29, 2010 by BlackRock, Inc., which states that BlackRock, Inc., a parent holding company, has sole voting power and sole dispositive power over 1,184,307 shares. All shares covered by the Schedule 13G are held by subsidiaries of BlackRock, Inc. | |
(5) | Based upon Amendment No. 1 to Schedule 13G filed on February 16, 2010 by FMR LLC, a parent holding company (FMR). Fidelity Management & Research Company, a wholly-owned subsidiary of FMR, is the beneficial owner of 781,124 shares as a result of acting as an investment adviser. Strategic Advisers, Inc., a wholly-owned subsidiary of FMR (SAI), is the beneficial owner of 11 shares as a result of acting as an investment adviser. Pyramis Global Advisors Trust Company, an indirect wholly-owned subsidiary of FMR (PGATC), is the beneficial owner of 76,050 shares as a result of acting as an investment manager. The Schedule 13G states that FMR has sole voting power over the 76,061 shares beneficially owned by SAI and PGATC and sole dispositive power over 857,185 shares. | |
(6) | Based upon Amendment No. 10 to Schedule 13D filed on October 4, 2010, by Gabelli Funds, LLC, GAMCO Asset Management Inc., Gabelli Securities, Inc., Teton Advisors, Inc., Gabelli Foundation, Inc., GGCP, Inc., GAMCO Investors, Inc. and Mario J. Gabelli (whom we collectively refer to as theGabelli Reporting Persons). In addition to shares of our Series A common stock held directly by Mr. Gabelli, Mr. Gabelli is deemed to have beneficial ownership of those shares of our common stock held by the other Gabelli Reporting Persons. The Schedule 13D states that Mr. Gabelli has sole voting power and sole dispositive power over 1,300 shares. | |
(7) | Based upon Amendment No. 2 to Schedule 13G filed on February 12, 2010 by T. Rowe Price Associates, Inc. (T. Rowe Price), an investment advisor, which states that T. Rowe Price has sole voting power over 241,429 shares and sole dispositive power over 873,977 shares. T. Rowe Price is deemed the beneficial owner of such shares as a result of acting as an investment advisor. |
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Title of | Amount and Nature of | Percent of | Voting | |||||||||||||
Name of Beneficial Owner | Class | Beneficial Ownership | Class | Power | ||||||||||||
William R. Fitzgerald | Series A | 240,469 | 1.75 | % | * | |||||||||||
Chairman of the Board and | Series B | — | — | |||||||||||||
Chief Executive Officer | ||||||||||||||||
Philip J. Holthouse | Series A | 16,227 | * | * | ||||||||||||
Director | Series B | — | — | |||||||||||||
John C. Malone | Series A | 150,617 | 1.11 | % | 30.33 | % | ||||||||||
Director | Series B | 618,525 | 84.31 | % | ||||||||||||
Brian C. Mulligan | Series A | 16,207 | * | * | ||||||||||||
Director | Series B | — | — | |||||||||||||
William E. Niles | Series A | 15,593 | * | * | ||||||||||||
Executive Vice President, | Series B | — | — | |||||||||||||
General Counsel and Secretary | ||||||||||||||||
John A. Orr | Series A | 84,451 | * | * | ||||||||||||
Senior Vice President | Series B | — | — | |||||||||||||
George C. Platisa | Series A | 15,593 | * | * | ||||||||||||
Executive Vice President and | Series B | — | — | |||||||||||||
Chief Financial Officer | ||||||||||||||||
Michael J. Pohl | Series A | 16,207 | * | * | ||||||||||||
Director | Series B | — | — | |||||||||||||
Carl E. Vogel | Series A | 3,830 | * | * | ||||||||||||
Director | Series B | — | — | |||||||||||||
All directors and executive officers as a group (9 persons) | Series A | 559,194 | 4.12 | % | 32.28 | % | ||||||||||
Series B | 618,525 | 84.31 | % |
* | Less than one percent |
Name | Restricted Shares | |||
William R. Fitzgerald | 47,271 | |||
Philip J. Holthouse | 2,016 | |||
Brian C. Mulligan | 2,016 | |||
William E. Niles | 444 | |||
John A. Orr | 17,271 | |||
George C. Platisa | 444 | |||
Michael J. Pohl | 2,016 | |||
Carl E. Vogel | 1,915 |
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Name | Option Shares | |||
William R. Fitzgerald | 156,174 | |||
Philip J. Holthouse | 11,030 | |||
Brian C. Mulligan | 11,030 | |||
William E. Niles | 13,820 | |||
John A. Orr | 54,807 | |||
George C. Platisa | 13,820 | |||
Michael J. Pohl | 11,030 |
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12300 Liberty Boulevard
Englewood, Colorado 80112
Telephone: (720) 875-5622
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(File No. 001-34176) | Period | |
Annual Report on Form 10-K | Fiscal year ended December 31, 2009, filed on March 12, 2010, as amended by Amendment No. 1 to Annual Report on Form 10-K filed on April 3, 2010. | |
Proxy Statement on Schedule 14A | Filed on May 24, 2010. | |
Current Reports on Form 8-K | Filed on January 25, 2010, February 23, 2010, July 20, 2010, November 30, 2010, and December 7, 2010. | |
Quarterly Reports on Form 10-Q | Filed on May 7, 2010, August 6, 2010 and November 5, 2010. |
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Page Number | ||||
Combined Financial Statements for the Content Distribution business (unaudited) | A-1-1 | |||
Selected Pro Forma Condensed Consolidated Financial Information (unaudited) | A-2-1 |
A-1
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A-1-1
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Combined Balance Sheets
(Unaudited)
Amounts in thousands
September 30, | December 31, | December 31, | ||||||||||
2010 | 2009 | 2008 | ||||||||||
Assets | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 4,192 | 5,856 | 4,211 | ||||||||
Trade receivables, net | 13,810 | 13,904 | 19,972 | |||||||||
Prepaid expenses | 3,004 | 2,401 | 2,803 | |||||||||
Deferred income tax assets | — | 5,194 | — | |||||||||
Assets of discontinued operations | — | 2,817 | 1,918 | |||||||||
Other current assets | 221 | 162 | 17 | |||||||||
Total current assets | 21,227 | 30,334 | 28,921 | |||||||||
Property and equipment, net | 55,957 | 58,827 | 70,000 | |||||||||
Assets of discontinued operations | — | 9,261 | 11,211 | |||||||||
Other assets | 112 | 124 | 138 | |||||||||
Total assets | $ | 77,296 | 98,546 | 110,270 | ||||||||
Liabilities and Business Unit Equity | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ | 2,457 | 5,499 | 4,927 | ||||||||
Accrued payroll and related liabilities | 3,173 | 2,864 | 3,210 | |||||||||
Other accrued liabilities | 8,955 | 8,128 | 11,928 | |||||||||
Deferred revenue | 6,240 | 4,627 | 6,396 | |||||||||
Income taxes payable | 496 | 779 | 1,461 | |||||||||
Liabilities of discontinued operations | — | 4,098 | 3,796 | |||||||||
Total current liabilities | 21,321 | 25,995 | 31,718 | |||||||||
Deferred income tax liabilities | 947 | 802 | 1,174 | |||||||||
Other liabilities | 8,689 | 10,944 | 10,317 | |||||||||
Total liabilities | 30,957 | 37,741 | 43,209 | |||||||||
Business unit equity | 46,339 | 60,805 | 67,061 | |||||||||
Total liabilities and business unit equity | $ | 77,296 | 98,546 | 110,270 | ||||||||
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Combined Statements of Operations
(Unaudited)
Amounts in thousands
Nine Months Ended September 30, | Year Ended December 31, | |||||||||||||||
2010 | 2009 | 2009 | 2008 | |||||||||||||
Revenue from external customers | $ | 77,375 | 78,756 | 104,791 | 116,048 | |||||||||||
Revenue from related parties | 862 | 636 | 1,259 | 633 | ||||||||||||
Net revenue | 78,237 | 79,392 | 106,050 | 116,681 | ||||||||||||
Operating expenses: | ||||||||||||||||
Cost of services | 48,749 | 51,652 | 68,567 | 77,072 | ||||||||||||
Selling, general, and administrative (note 3) | 16,943 | 16,753 | 21,607 | 24,767 | ||||||||||||
Restructuring charges (note 5) | 371 | 423 | 3,249 | 1,619 | ||||||||||||
Loss (gain) on sale of operating assets, net | 49 | (220 | ) | (238 | ) | (123 | ) | |||||||||
Depreciation and amortization | 16,465 | 17,158 | 23,848 | 22,726 | ||||||||||||
82,577 | 85,766 | 117,033 | 126,061 | |||||||||||||
Operating loss | (4,340 | ) | (6,374 | ) | (10,983 | ) | (9,380 | ) | ||||||||
Other expense, net | (441 | ) | (501 | ) | (648 | ) | (569 | ) | ||||||||
Loss from continuing operations before income taxes | (4,781 | ) | (6,875 | ) | (11,631 | ) | (9,949 | ) | ||||||||
Income tax benefit from continuing operations (note 7) | 618 | 1,330 | 6,600 | 1,476 | ||||||||||||
Net loss from continuing operations | (4,163 | ) | (5,545 | ) | (5,031 | ) | (8,473 | ) | ||||||||
Discontinued operations: | ||||||||||||||||
Earnings from discontinued operations | 27,099 | 5,494 | 7,869 | 6,602 | ||||||||||||
Income tax expense from discontinued operations | (6,248 | ) | (1,538 | ) | (2,203 | ) | (1,849 | ) | ||||||||
Earnings from discontinued operations, net of income taxes | 20,851 | 3,956 | 5,666 | 4,753 | ||||||||||||
Net income (loss) | $ | 16,688 | (1,589 | ) | 635 | (3,720 | ) | |||||||||
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Combined Statements of Cash Flows
(Unaudited)
Amounts in thousands
Nine Months Ended | Year Ended | |||||||||||||||
September 30, | December 31, | |||||||||||||||
2010 | 2009 | 2009 | 2008 | |||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net income (loss) | $ | 16,688 | (1,589 | ) | 635 | (3,720 | ) | |||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||||||
Earnings from discontinued operations, net of income tax | (20,851 | ) | (3,956 | ) | (5,666 | ) | (4,753 | ) | ||||||||
Depreciation and amortization | 16,465 | 17,158 | 23,848 | 22,726 | ||||||||||||
Loss (gain) on sale of assets, net | 49 | (220 | ) | (238 | ) | (123 | ) | |||||||||
Deferred income tax expense (benefit) | 5,339 | 172 | (5,566 | ) | (477 | ) | ||||||||||
Other non-cash credits, net | (723 | ) | (1,277 | ) | (1,187 | ) | 4,248 | |||||||||
Changes in assets and liabilities, net of acquisitions: | ||||||||||||||||
Trade receivables | 94 | 4,220 | 6,068 | 2,296 | ||||||||||||
Prepaid expenses and other assets | (650 | ) | (534 | ) | 271 | 901 | ||||||||||
Payables and other liabilities | (2,369 | ) | (4,721 | ) | (4,884 | ) | (3,940 | ) | ||||||||
Operating activities from discontinued operations, net | (6,111 | ) | 5,447 | 8,029 | 13,529 | |||||||||||
Net cash provided by operating activities | 7,931 | 14,700 | 21,310 | 30,687 | ||||||||||||
Cash flows from investing activities: | ||||||||||||||||
Capital expenditures | (12,664 | ) | (8,332 | ) | (11,287 | ) | (9,255 | ) | ||||||||
Cash proceeds from the sale of discontinued operations | 34,828 | — | — | — | ||||||||||||
Cash proceeds from the sale of operating assets | — | 234 | 275 | 145 | ||||||||||||
Investing activities from discontinued operations, net | — | (1,108 | ) | (1,010 | ) | (2,291 | ) | |||||||||
Net cash provided by (used in) investing activities | 22,164 | (9,206 | ) | (12,022 | ) | (11,401 | ) | |||||||||
Cash flows from financing activities: | ||||||||||||||||
Net cash transfers to Ascent Media | (31,154 | ) | (4,960 | ) | (6,891 | ) | (16,520 | ) | ||||||||
Payment of capital lease obligations | (605 | ) | (558 | ) | (752 | ) | (694 | ) | ||||||||
Net cash used in financing activities | (31,759 | ) | (5,518 | ) | (7,643 | ) | (17,214 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents | (1,664 | ) | (24 | ) | 1,645 | 2,072 | ||||||||||
Cash and cash equivalents at beginning of year | 5,856 | 4,211 | 4,211 | 2,139 | ||||||||||||
Cash and cash equivalents at end of year | $ | 4,192 | 4,187 | 5,856 | 4,211 | |||||||||||
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Combined Statements of Business Unit Equity
(Unaudited)
Amounts in thousands
Balance at December 31, 2007 | $ | 87,301 | ||
Net loss | (3,720 | ) | ||
Net distributions to Ascent Media | (16,520 | ) | ||
Balance at December 31, 2008 | 67,061 | |||
Net income | 635 | |||
Net distributions to Ascent Media | (6,891 | ) | ||
Balance at December 31, 2009 | 60,805 | |||
Net income | 16,688 | |||
Net distributions to Ascent Media | (31,154 | ) | ||
Balance at September 30, 2010 | $ | 46,339 | ||
A-1-5
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A-1-6
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Buildings | 20 years | |
Leasehold improvements | 15 years or lease term, if shorter | |
Machinery and equipment | 5 — 7 years | |
Computer software (included in Machinery and Equipment in Note 4) | 3 years |
A-1-7
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A-1-8
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September 30, | December 31, | December 31, | ||||||||||
2010 | 2009 | 2008 | ||||||||||
Amounts in thousands | ||||||||||||
Property and equipment, net: | ||||||||||||
Buildings | $ | 48,973 | 49,710 | 60,848 | ||||||||
Machinery and equipment | 112,516 | 140,831 | 212,577 | |||||||||
161,489 | 190,541 | 273,425 | ||||||||||
Accumulated depreciation and amortization | (105,532 | ) | (131,714 | ) | (203,425 | ) | ||||||
$ | 55,957 | 58,827 | 70,000 | |||||||||
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Opening | Ending | |||||||||||||||
Balance | Additions | Deductions (a) | Balance | |||||||||||||
Amounts in thousands | ||||||||||||||||
Severance | $ | 283 | 1,378 | (786 | ) | 875 | ||||||||||
Excess facility costs | (105 | ) | 241 | (194 | ) | (58 | ) | |||||||||
December 31, 2008 | $ | 178 | 1,619 | (980 | ) | 817 | ||||||||||
Severance | $ | 875 | 545 | (1,105 | ) | 315 | ||||||||||
Excess facility costs | (58 | ) | 2,704 | 246 | (b) | 2,892 | ||||||||||
December 31, 2009 | $ | 817 | 3,249 | (859 | ) | 3,207 | ||||||||||
Severance | $ | 315 | 371 | (686 | ) | — | ||||||||||
Excess facility costs | 2,892 | — | (1,274 | ) | 1,618 | |||||||||||
September 30, 2010 | $ | 3,207 | 371 | (1,960 | ) | 1,618 | (c) | |||||||||
(a) | Primarily represents cash payments. | |
(b) | Amount includes a foreign exchange gain of $119,000 and allocation adjustments of $171,000, which offset cash payments of $44,000. | |
(c) | Substantially all of this amount is expected to be paid by the end of 2011. |
Nine Months Ended | ||||||||||||||||
September 30, | Year Ended December 31, | |||||||||||||||
2010 | 2009 | 2009 | 2008 | |||||||||||||
Amounts in thousands | ||||||||||||||||
Revenue | $ | 2,532 | $ | 13,425 | $ | 18,368 | 18,988 | |||||||||
Earnings before income taxes (a) | $ | 27,099 | $ | 5,494 | $ | 7,869 | 6,602 |
(a) | The nine months ended September 30, 2010 amount includes a $25,498,000 gain on the sale of the Chiswick Park facility. |
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Years Ended December 31, | ||||||||
2009 | 2008 | |||||||
Amounts in thousands | ||||||||
Current | ||||||||
State | (11 | ) | (9 | ) | ||||
Foreign | 1,129 | 748 | ||||||
1,118 | 739 | |||||||
Deferred | ||||||||
Foreign | 5,482 | 737 | ||||||
5,482 | 737 | |||||||
Total tax benefit | $ | 6,600 | $ | 1,476 | ||||
Years Ended December 31, | ||||||||
2009 | 2008 | |||||||
Amounts in thousands | ||||||||
Domestic | $ | (3,457 | ) | (2,093 | ) | |||
Foreign | (8,171 | ) | (6,821 | ) | ||||
$ | (11,628 | ) | (8,914 | ) | ||||
A-1-11
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Years Ended December 31, | ||||||||
2009 | 2008 | |||||||
Amounts in thousands | ||||||||
Computed expected tax benefit | $ | 4,070 | 3,120 | |||||
State and local income taxes, net of federal income taxes | 305 | 100 | ||||||
Change in valuation allowance affecting tax expense | 1,169 | (716 | ) | |||||
Foreign rate variances | (137 | ) | (10 | ) | ||||
Non-deductible expenses | (42 | ) | (73 | ) | ||||
United States tax on foreign income | 543 | (1,415 | ) | |||||
Other, net | 692 | 470 | ||||||
Income tax benefit | $ | 6,600 | 1,476 | |||||
September 30, | December 31, | |||||||||||
2010 | 2009 | 2008 | ||||||||||
Amounts in thousands | ||||||||||||
Current assets: | ||||||||||||
Accounts receivable reserves | $ | 267 | $ | 267 | 167 | |||||||
Accrued liabilities | 2,044 | 2,044 | 3,922 | |||||||||
Net operating loss carryforward | — | 5,194 | — | |||||||||
Total current deferred tax assets | 2,311 | 7,505 | 4,089 | |||||||||
Valuation allowance | (2,307 | ) | (6,367 | ) | (3,959 | ) | ||||||
4 | 1,138 | 130 | ||||||||||
Noncurrent assets: | ||||||||||||
Net operating loss carryforwards | 14,558 | 13,581 | 13,253 | |||||||||
Property, plant and equipment | 3,411 | 3,411 | 1,460 | |||||||||
Intangible assets | 11,079 | 11,079 | 12,894 | |||||||||
Total noncurrent deferred tax assets | 29,048 | 28,071 | 27,607 | |||||||||
Valuation allowance | (28,995 | ) | (23,813 | ) | (26,733 | ) | ||||||
53 | 4,258 | 874 | ||||||||||
Deferred tax assets, net | 57 | 5,396 | 1,004 | |||||||||
Current liabilities: | ||||||||||||
Other | (8 | ) | (8 | ) | (89 | ) | ||||||
Noncurrent liabilities: | ||||||||||||
Other | (996 | ) | (996 | ) | (2,089 | ) | ||||||
Total deferred tax liabilities | (1,004 | ) | (1,004 | ) | (2,178 | ) | ||||||
Net deferred tax assets (liabilities) | $ | (947 | ) | $ | 4,392 | (1,174 | ) | |||||
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September 30, | December 31, | |||||||||||
2010 | 2009 | 2008 | ||||||||||
Amounts in thousands | ||||||||||||
Current deferred tax assets (liabilities), net | $ | (4 | ) | $ | 1,130 | 41 | ||||||
Long-term deferred tax assets (liabilities), net | (943 | ) | 3,262 | (1,215 | ) | |||||||
Net deferred tax assets (liabilities) | $ | (947 | ) | $ | 4,392 | (1,174 | ) | |||||
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Year ended December 31: | ||||
2010 | �� | $ | 10,470 | |
2011 | $ | 9,514 | ||
2012 | $ | 5,944 | ||
2013 | $ | 2,138 | ||
2014 | $ | 2,166 | ||
Thereafter | $ | 5,459 |
Nine Months Ended | ||||||||||||||||
September 30, | Year Ended December 31, | |||||||||||||||
2010 | 2009 | 2009 | 2008 | |||||||||||||
Amounts in thousands | ||||||||||||||||
Revenue | $ | 862 | $ | 636 | $ | 1,259 | $ | 633 | ||||||||
Purchases (a) | $ | 3,872 | $ | 786 | $ | 1,052 | $ | 667 |
(a) | Included in cost of services on the statements of operations. | |
(11) | Information About Geographic Locations |
Nine Months Ended September 30, | Years Ended December 31, | |||||||||||||||
2010 | 2009 | 2009 | 2008 | |||||||||||||
Amounts in thousands | ||||||||||||||||
Net Revenue | ||||||||||||||||
United States | $ | 49,095 | 49,294 | 66,497 | 71,369 | |||||||||||
United Kingdom | 12,717 | 13,243 | 17,434 | 22,883 | ||||||||||||
Singapore | 16,425 | 16,855 | 22,119 | 22,429 | ||||||||||||
$ | 78,237 | 79,392 | 106,050 | 116,681 | ||||||||||||
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September 30, | December 31, | December 31, | ||||||||||
2010 | 2009 | 2008 | ||||||||||
Amounts in thousands | ||||||||||||
Property and equipment, net | ||||||||||||
United States | $ | 32,089 | 36,301 | 41,870 | ||||||||
United Kingdom | 8,216 | 7,861 | 10,439 | |||||||||
Singapore | 15,652 | 14,665 | 17,691 | |||||||||
$ | 55,957 | 58,827 | 70,000 | |||||||||
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CONDENSED CONSOLIDATED FINANCIAL INFORMATION
A-2-1
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A-2-2
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Unaudited Pro Forma Condensed Consolidated Balance Sheet
At September 30, 2010
(Amounts in thousands)
Pro Forma before | ||||||||||||||||||||||||||||
Content | Content | |||||||||||||||||||||||||||
Creative/Media | Distribution | Distribution | Pro forma | |||||||||||||||||||||||||
As Reported | adjustments | adjustments | adjustments | as adjusted | ||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||
Current assets: | ||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 279,023 | (51 | ) | A | 343,715 | (461 | ) | B | 452,274 | ||||||||||||||||||
64,743 | C | 109,020 | C | |||||||||||||||||||||||||
Trade receivables, net | 81,848 | (58,614 | ) | A | 23,234 | (13,810 | ) | B | 9,424 | |||||||||||||||||||
Prepaid expenses | 10,300 | (6,113 | ) | A | 4,187 | (2,889 | ) | B | 1,298 | |||||||||||||||||||
Deferred income tax assets, net | 75 | (61 | ) | A | 14 | (14 | ) | B | — | |||||||||||||||||||
Income taxes receivable | 15,945 | — | 15,945 | 229 | B | 16,174 | ||||||||||||||||||||||
Other current assets | 1,657 | (1,356 | ) | A | 301 | (221 | ) | B | 80 | |||||||||||||||||||
Total current assets | 388,848 | (1,452 | ) | 387,396 | 91,854 | 479,250 | ||||||||||||||||||||||
Investments in marketable securities | 96,906 | — | 96,906 | — | 96,906 | |||||||||||||||||||||||
Property and equipment, net | 172,903 | (53,817 | ) | A | 119,086 | (56,301 | ) | B | 62,785 | |||||||||||||||||||
Other assets, net | 11,362 | (8,702 | ) | A | 2,660 | (112 | ) | B | 2,548 | |||||||||||||||||||
Total assets | $ | 670,019 | (63,971 | ) | 606,048 | 35,441 | 641,489 | |||||||||||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||||||||||
Accounts payable | $ | 19,245 | (12,180 | ) | A | 7,065 | (2,457 | ) | B | 4,608 | ||||||||||||||||||
Accrued payroll and related liabilities | 19,822 | (13,003 | ) | A | 6,819 | (2,569 | ) | B | 4,250 | |||||||||||||||||||
Other accrued liabilities | 24,831 | (8,013 | ) | A | 16,818 | (9,027 | ) | B | 7,791 | |||||||||||||||||||
Deferred revenue | 9,254 | (2,352 | ) | A | 6,902 | (6,239 | ) | B | 663 | |||||||||||||||||||
Income taxes payable | — | — | — | — | — | |||||||||||||||||||||||
Liabilities related to assets of discontinued operations | 774 | — | 774 | — | 774 | |||||||||||||||||||||||
Total current liabilities | 73,926 | (35,548 | ) | 38,378 | (20,292 | ) | 18,086 | |||||||||||||||||||||
Deferred tax liabilities | 1,094 | (133 | ) | A | 961 | (961 | ) | B | — | |||||||||||||||||||
Other liabilities | 26,893 | (9,697 | ) | A | 17,196 | (8,486 | ) | B | 8,710 | |||||||||||||||||||
Total liabilities | 101,913 | (45,378 | ) | 56,535 | (29,739 | ) | 26,796 | |||||||||||||||||||||
Commitments and contingencies | ||||||||||||||||||||||||||||
Stockholders’ Equity: | ||||||||||||||||||||||||||||
Series A common stock | 136 | — | 136 | — | 136 | |||||||||||||||||||||||
Series B common stock | 7 | — | 7 | — | 7 | |||||||||||||||||||||||
Additional paid-in capital | 1,467,207 | — | 1,467,207 | — | 1,467,207 | |||||||||||||||||||||||
Accumulated deficit | (894,927 | ) | (19,819 | ) | E | (914,746 | ) | 77,498 | E | (837,248 | ) | |||||||||||||||||
Accumulated other comprehensive loss | (4,317 | ) | 1,226 | A | (3,091 | ) | (12,318 | ) | B | (15,409 | ) | |||||||||||||||||
Total stockholders’ equity | 568,106 | (18,593 | ) | 549,513 | 65,180 | 614,693 | ||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 670,019 | (63,971 | ) | 606,048 | 35,441 | 641,489 | |||||||||||||||||||||
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Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Nine Months Ended September 30, 2010
(Amounts in thousands)
Pro Forma before | ||||||||||||||||||||||||||||||||||||
Content | Content | |||||||||||||||||||||||||||||||||||
Creative/Media | Distribution | Distribution | Other | Pro forma | ||||||||||||||||||||||||||||||||
As Reported | adjustments | adjustments | adjustments | adjustments | as adjusted | |||||||||||||||||||||||||||||||
Service revenue | $ | 307,433 | (212,305 | ) | F | 95,128 | (78,237 | ) | G | 937 | I | 21,625 | ||||||||||||||||||||||||
3,797 | J | |||||||||||||||||||||||||||||||||||
Rental revenue | — | — | — | — | 3,455 | H | 3,455 | |||||||||||||||||||||||||||||
Net revenue | 307,433 | (212,305 | ) | 95,128 | (78,237 | ) | 8,189 | 25,080 | ||||||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||||||
Cost of services | 223,178 | (163,611 | ) | F | 59,567 | (48,774 | ) | G | 937 | I | 18,473 | |||||||||||||||||||||||||
2,946 | H | |||||||||||||||||||||||||||||||||||
3,797 | J | |||||||||||||||||||||||||||||||||||
Selling, general, and administrative | 80,813 | (46,474 | ) | F | 34,339 | (9,389 | ) | G | 509 | H | 25,459 | |||||||||||||||||||||||||
Restructuring charges | 2,013 | — | 2,013 | — | — | 2,013 | ||||||||||||||||||||||||||||||
Gain on sale of operating assets, net | (16 | ) | — | (16 | ) | — | — | (16 | ) | |||||||||||||||||||||||||||
Depreciation and amortization | 38,483 | (19,231 | ) | F | 19,252 | (16,618 | ) | G | — | 2,634 | ||||||||||||||||||||||||||
344,471 | (229,316 | ) | 115,155 | (74,781 | ) | 8,189 | 48,563 | |||||||||||||||||||||||||||||
Operating loss | (37,038 | ) | 17,011 | (20,027 | ) | (3,456 | ) | — | (23,483 | ) | ||||||||||||||||||||||||||
Other income: | ||||||||||||||||||||||||||||||||||||
Interest income | 2,666 | — | 2,666 | — | — | 2,666 | ||||||||||||||||||||||||||||||
Other (expense) income, net | (1,770 | ) | 1,285 | F | (485 | ) | 441 | G | — | (44 | ) | |||||||||||||||||||||||||
896 | 1,285 | 2,181 | 441 | — | 2,622 | |||||||||||||||||||||||||||||||
Loss from continuing operations before income taxes | (36,142 | ) | 18,296 | (17,846 | ) | (3,015 | ) | — | (20,861 | ) | ||||||||||||||||||||||||||
Income tax (expense) benefit from continuing operations | 2,331 | — | 2,331 | — | (2,331 | ) | D | — | ||||||||||||||||||||||||||||
Net loss from continuing operations | $ | (33,811 | ) | 18,296 | (15,515 | ) | (3,015 | ) | (2,331 | ) | (20,861 | ) | ||||||||||||||||||||||||
Basic and diluted per share amounts: | ||||||||||||||||||||||||||||||||||||
Net loss from continuing operations | $ | (2.38 | ) | $ | (1.47 | ) | ||||||||||||||||||||||||||||||
Weighted average number of common shares | 14,194,973 | 14,194,973 |
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Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2009
(Amounts in thousands)
Pro Forma before | ||||||||||||||||||||||||||||||||||||
Content | Content | |||||||||||||||||||||||||||||||||||
Creative/Media | Distribution | Distribution | Other | Pro forma | ||||||||||||||||||||||||||||||||
As Reported | adjustments | adjustments | adjustments | adjustments | as adjusted | |||||||||||||||||||||||||||||||
Service revenue | $ | 453,681 | (300,480 | ) | F | 153,201 | (106,050 | ) | G | 1,308 | I | 49,462 | ||||||||||||||||||||||||
1,003 | J | |||||||||||||||||||||||||||||||||||
Rental revenue | — | — | — | — | 4,893 | H | 4,893 | |||||||||||||||||||||||||||||
Net revenue | 453,681 | (300,480 | ) | 153,201 | (106,050 | ) | 7,204 | 54,355 | ||||||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||||||
Cost of services | 327,713 | (223,554 | ) | F | 104,159 | (68,410 | ) | G | 1,308 | I | 42,275 | |||||||||||||||||||||||||
4,215 | H | |||||||||||||||||||||||||||||||||||
1,003 | J | |||||||||||||||||||||||||||||||||||
Selling, general, and administrative | 101,943 | (61,970 | ) | F | 39,973 | (11,738 | ) | G | 678 | H | 28,913 | |||||||||||||||||||||||||
Restructuring and other charges | 7,273 | — | 7,273 | — | — | 7,273 | ||||||||||||||||||||||||||||||
Gain on sale of operating assets, net | (467 | ) | — | (467 | ) | — | — | (467 | ) | |||||||||||||||||||||||||||
Depreciation and amortization | 56,778 | (28,144 | ) | F | 28,634 | (24,130 | ) | G | — | 4,504 | ||||||||||||||||||||||||||
493,240 | (313,668 | ) | 179,572 | (104,278 | ) | 7,204 | 82,498 | |||||||||||||||||||||||||||||
Operating loss | (39,559 | ) | 13,188 | (26,371 | ) | (1,772 | ) | — | (28,143 | ) | ||||||||||||||||||||||||||
Other income: | ||||||||||||||||||||||||||||||||||||
Interest income | 2,660 | 18 | F | 2,678 | (4 | ) | G | — | 2,674 | |||||||||||||||||||||||||||
Other (expense) income, net | (1,412 | ) | 1,964 | F | 552 | 623 | G | — | 1,175 | |||||||||||||||||||||||||||
1,248 | 1,982 | 3,230 | 619 | — | 3,849 | |||||||||||||||||||||||||||||||
Loss from continuing operations before income taxes | (38,311 | ) | 15,170 | (23,141 | ) | (1,153 | ) | — | (24,294 | ) | ||||||||||||||||||||||||||
Income tax (expense) benefit from continuing operations | (18,533 | ) | — | (18,533 | ) | — | 18,533 | D | — | |||||||||||||||||||||||||||
Net loss from continuing operations | $ | (56,844 | ) | 15,170 | (41,674 | ) | (1,153 | ) | 18,533 | (24,294 | ) | |||||||||||||||||||||||||
Basic and diluted per share amounts: | ||||||||||||||||||||||||||||||||||||
Net loss from continuing operations | $ | (4.04 | ) | $ | (1.72 | ) | ||||||||||||||||||||||||||||||
Weighted average number of common shares | 14,086,075 | 14,086,075 |
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Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2008
(Amounts in thousands)
Pro Forma before | ||||||||||||||||||||||||||||||||||||
Content | Content | |||||||||||||||||||||||||||||||||||
Creative/Media | Distribution | Distribution | Other | Pro forma | ||||||||||||||||||||||||||||||||
As Reported | adjustments | adjustments | adjustments | adjustments | as adjusted | |||||||||||||||||||||||||||||||
Service revenue | $ | 581,625 | (322,276 | ) | F | 259,349 | (116,681 | ) | G | 1,300 | I | 143,968 | ||||||||||||||||||||||||
Rental revenue | — | — | — | — | 4,575 | H | 4,575 | |||||||||||||||||||||||||||||
Net revenue | 581,625 | (322,276 | ) | F | 259,349 | (116,681 | ) | G | 5,875 | 148,543 | ||||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||||||
Cost of services | 434,710 | (236,759 | ) | F | 197,951 | (76,793 | ) | G | 1,300 | I | 126,354 | |||||||||||||||||||||||||
3,896 | H | |||||||||||||||||||||||||||||||||||
Selling, general, and administrative | 117,475 | (67,133 | ) | F | 50,342 | (16,926 | ) | G | 679 | H | 34,095 | |||||||||||||||||||||||||
Restructuring and other charges | 8,801 | — | 8,801 | — | — | 8,801 | ||||||||||||||||||||||||||||||
Gain on sale of operating assets, net | (9,038 | ) | — | (9,038 | ) | — | — | (9,038 | ) | |||||||||||||||||||||||||||
Depreciation and amortization | 55,564 | (27,250 | ) | F | 28,314 | (22,914 | ) | G | — | 5,400 | ||||||||||||||||||||||||||
Impairment of goodwill | 95,069 | — | 95,069 | — | — | 95,069 | ||||||||||||||||||||||||||||||
702,581 | (331,142 | ) | 371,439 | (116,633 | ) | 5,875 | 260,681 | |||||||||||||||||||||||||||||
Operating loss | (120,956 | ) | 8,866 | (112,090 | ) | (48 | ) | — | (112,138 | ) | ||||||||||||||||||||||||||
Other income: | ||||||||||||||||||||||||||||||||||||
Interest income | 6,579 | — | 6,579 | (14 | ) | G | — | 6,565 | ||||||||||||||||||||||||||||
Other (expense) income, net | 1,007 | 46 | F | 1,053 | 380 | G | — | 1,433 | ||||||||||||||||||||||||||||
7,586 | 46 | 7,632 | 366 | — | 7,998 | |||||||||||||||||||||||||||||||
Loss from continuing operations before income taxes | (113,370 | ) | 8,912 | (104,458 | ) | 318 | — | (104,140 | ) | |||||||||||||||||||||||||||
Income tax (expense) benefit from continuing operations | (700 | ) | — | (700 | ) | — | 700 | D | — | |||||||||||||||||||||||||||
Net loss from continuing operations | $ | (114,070 | ) | 8,912 | (105,158 | ) | 318 | 700 | (104,140 | ) | ||||||||||||||||||||||||||
Basic and diluted per share amounts: | ||||||||||||||||||||||||||||||||||||
Net loss from continuing operations | $ | (8.11 | ) | $ | (7.41 | ) | ||||||||||||||||||||||||||||||
Weighted average number of common shares | 14,061,921 | 14,061,921 |
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Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
A | Reflects the adjustments to the Company’s historical consolidated balance sheet for the Creative/Media assets and liabilities to be sold under the Creative/Media Purchase Agreement. | |
B | Reflects the adjustments to the Company’s historical consolidated balance sheet for the Content Distribution assets and liabilities to be sold under the Content Distribution Purchase Agreement. | |
C | Reflects the adjustments to cash and cash equivalents related to the adjusted net cash proceeds of the sales of the Creative/Media and Content Distribution businesses as follows: |
Content | ||||||||
Creative/Media | Distribution | |||||||
Base Purchase Price per agreement | $ | 70,000 | $ | 113,250 | ||||
Capital Lease assumed in purchase | (2,177 | ) | — | |||||
67,823 | 113,250 | |||||||
Other purchase price adjustments | (1,170 | ) | (1,695 | ) | ||||
Adjusted purchase price | 66,653 | 111,555 | ||||||
Estimated transaction costs | (1,910 | ) | (2,535 | ) | ||||
Adjusted net cash proceeds | $ | 64,743 | 109,020 | |||||
D | Reflects an adjustment to income taxes. The Company does not anticipate that its remaining results of operations will generate any tax liability or benefit for the periods presented. |
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E | Reflects an estimated loss, net of tax, on the sale of the Creative/Media business and an estimated gain, net of tax, on the sale the Content Distribution business. The Company does not anticipate any tax liability as a result of these transactions due to the availability of net operating loss carryforwards. |
The estimated net loss on the sale of the Creative/Media business is computed as follows: |
Creative/ Media | ||||
Adjusted net cash proceeds | $ | 64,743 | ||
Total assets transferred (see Note A) | 128,714 | |||
Total liabilities and accumulated other comprehensive income (“AOCI”) assumed (see Note A) | (44,152 | ) | ||
84,562 | ||||
Pre-tax loss on sale | (19,819 | ) | ||
Income taxes on loss | — | |||
Net loss on sale of Creative/Media business | $ | (19,819 | ) | |
The estimated net gain on the sale of the Content Distribution business is computed as follows: |
Content | ||||
Distribution | ||||
Adjusted net cash proceeds | $ | 109,020 | ||
Total assets transferred (see Note B) | 73,579 | |||
Total liabilities and AOCI assumed (see Note B) | (42,057 | ) | ||
31,522 | ||||
Pre-tax gain on sale | 77,498 | |||
Income taxes on gain | — | |||
Net gain on sale of Content Distribution business | $ | 77,498 | ||
F | Reflects adjustments to remove the results of operations directly attributable to the Creative/Media business that is being sold. Such pro forma adjustments do not include general corporate expenses or other non-direct costs incurred by Ascent Media on behalf of the Creative/Media business. | |
G | Reflects adjustments to remove the results of operations directly attributable to the Content Distribution business that is being sold. Such pro forma adjustments do not include general corporate expenses or other non-direct costs incurred by Ascent Media on behalf of the Content Distribution business. | |
H | Reflects adjustments to reclassify rent paid by the Creative/Media and Content Distribution businesses to rental revenue for facilities that are owned by Ascent Media. Both the Creative/Media and Content Distribution businesses have operating leases with Ascent Media to lease facilities to conduct their operations. These facilities are not included in the sale of the Creative/Media or Content Distribution businesses. | |
I | Reflects the elimination of intercompany transactions between the Creative/Media and Content Distribution businesses. | |
J | Reflects adjustments to reclassify intercompany purchases made by the Creative/Media and Content Distribution businesses to service revenue of the remaining Ascent Media businesses. |
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B-1
Table of Contents
Page | ||||
ARTICLE I DEFINITIONS | B-9 | |||
1.1 Certain Defined Terms | B-9 | |||
1.2 Additional Definitions | B-25 | |||
1.3 Terms Generally | B-29 | |||
ARTICLE II CLOSINGS; PURCHASE PRICE AND ADJUSTMENT | B-29 | |||
2.1 Purchases and Sales | B-29 | |||
2.2 Closings; Purchase Price; Pre-Closing Estimates | B-30 | |||
2.3 Post-Closing Adjustment | B-31 | |||
2.4 Tax Allocation | B-33 | |||
2.5 Intercompany Accounts | B-34 | |||
2.6 Transfer Taxes | B-34 | |||
2.7 Purchaser Closing Deliverables | B-34 | |||
2.8 AMC Entities Closing Deliverables | B-35 | |||
ARTICLE III REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE AMC ENTITIES | B-38 | |||
3.1 Organization and Qualification | B-38 | |||
3.2 Authority; Subsidiaries | B-38 | |||
3.3 No Conflicts | B-39 | |||
3.4 Legal Proceedings | B-40 | |||
3.5 Title to Equity Interests | B-40 | |||
3.6 Brokers | B-41 | |||
3.7 Solvency | B-41 | |||
ARTICLE IV REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COMPANY GROUP | B-41 | |||
4.1 Organization and Qualification; Subsidiaries | B-42 | |||
4.2 Organizational or Governing Documents | B-42 | |||
4.3 Authority | B-42 | |||
4.4 No Conflict; Required Filings and Consents | B-43 | |||
4.5 Company Permits; Compliance with Laws | B-44 | |||
4.6 Capitalization | B-44 | |||
4.7 Financial Statements | B-45 | |||
4.8 No Undisclosed Liabilities | B-47 | |||
4.9 Absence of Certain Changes or Events | B-47 | |||
4.10 Absence of Litigation | B-47 | |||
4.11 Related Party Transactions | B-47 | |||
4.12 Labor Matters | B-48 | |||
4.13 Employee Benefit Plans | B-49 | |||
4.14 Taxes | B-52 | |||
4.15 Intellectual Property | B-54 | |||
4.16 Real Property | B-55 |
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Page | ||||
4.17 Material Contracts and Leases | B-60 | |||
4.18 Insurance | B-63 | |||
4.19 Environmental Matters | B-63 | |||
4.20 Customers and Suppliers | B-65 | |||
4.21 Tangible Property | B-65 | |||
4.22 Sufficiency of Assets | B-65 | |||
4.23 Accounts Receivable | B-66 | |||
4.24 Information Supplied | B-66 | |||
4.25 Brokers | B-66 | |||
4.26 Indebtedness; Transaction Expenses | B-66 | |||
4.27 Company Group Reorganization | B-67 | |||
4.28 Cash Deposits | B-67 | |||
4.29 No Other Representations or Warranties | B-67 | |||
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASERS | B-67 | |||
5.1 Organization and Qualification | B-67 | |||
5.2 Authority | B-67 | |||
5.3 No Conflicts | B-68 | |||
5.4 Legal Proceedings | B-68 | |||
5.5 No Financing Contingency | B-69 | |||
5.6 Solvency | B-69 | |||
5.7 Brokers | B-69 | |||
5.8 No Other Representations or Warranties | B-69 | |||
ARTICLE VI CERTAIN COVENANTS | B-69 | |||
6.1 Conduct of the Business Prior to the Closings | B-69 | |||
6.2 Proxy Statement | B-72 | |||
6.3 Stockholders’ Meeting | B-74 | |||
6.4 No Solicitation of Competing Proposal | B-74 | |||
6.5 HSR and Other Required Filings | B-77 | |||
6.6 Third-Party Consents | B-78 | |||
6.7 Access to Information; Certain Projections; Business Records; Post-Closing; Confidentiality | B-79 | |||
6.8 Use of AMC Name | B-81 | |||
6.9 Insurance | B-81 | |||
6.10 Reasonable Best Efforts; Cooperation | B-81 | |||
6.11 Publicity | B-84 | |||
6.12 Excluded Assets | B-84 | |||
6.13 [Intentionally Omitted] | B-84 | |||
6.14 Termination of Affiliate Transactions | B-85 | |||
6.15 Releases | B-85 | |||
6.16 Resignations | B-85 | |||
6.17 Company Group Reorganization | B-85 | |||
6.18 Real Estate | B-87 | |||
6.19 Burbank Parcels | B-88 | |||
6.20 Assumed Guarantees | B-89 | |||
6.21 Certain Capital Expenses | B-90 |
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Page | ||||
6.22 Financial Updates | B-91 | |||
6.23 Audited Financial Statements | B-91 | |||
6.24 Microsoft Licenses | B-91 | |||
ARTICLE VII TAX MATTERS | B-92 | |||
7.1 Tax Matters | B-92 | |||
ARTICLE VIII EMPLOYEE MATTERS | B-99 | |||
8.1 Company Employees | B-99 | |||
8.2 Participation in AMC Plans | B-101 | |||
8.3 Workers’ Compensation | B-101 | |||
8.4 WARN Obligations | B-101 | |||
8.5 Welfare Plan Obligations | B-102 | |||
8.6 Vacation | B-102 | |||
8.7 401(k) Plan | B-102 | |||
8.8 No Additional Rights | B-103 | |||
8.9 Additional Matters | B-103 | |||
ARTICLE IX CONDITIONS TO THE CLOSINGS | B-103 | |||
9.1 Conditions to the Obligations of Each Party | B-103 | |||
9.2 Conditions to the Obligations of Purchasers | B-104 | |||
9.3 Conditions to the Obligations of AMC Entities | B-105 | |||
ARTICLE X INDEMNIFICATION | B-106 | |||
10.1 Survival of Representations, Warranties and Agreements | B-106 | |||
10.2 Indemnification by AMC Entities | B-106 | |||
10.3 Indemnification by Purchasers and the Company Group Members | B-107 | |||
10.4 Limits on Indemnification | B-107 | |||
10.5 Procedures Relating to Indemnification | B-108 | |||
10.6 Additional Matters | B-110 | |||
10.7 Limitation on Remedies | B-110 | |||
10.8 Tax Matters | B-110 | |||
10.9 Escrow | B-111 | |||
ARTICLE XI TERMINATION | B-111 | |||
11.1 Termination | B-111 | |||
11.2 Effect of Termination | B-113 | |||
11.3 Termination Fees | B-113 | |||
ARTICLE XII GENERAL PROVISIONS | B-115 | |||
12.1 Assignment | B-115 | |||
12.2 No Third-Party Beneficiaries | B-116 | |||
12.3 Expenses | B-116 | |||
12.4 Equitable Relief | B-116 | |||
12.5 Amendments | B-116 | |||
12.6 Notices | B-117 |
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Page | ||||
12.7 Interpretation; Schedules | B-118 | |||
12.8 Counterparts | B-118 | |||
12.9 Severability | B-118 | |||
12.10 Waiver of Compliance; Consents | B-118 | |||
12.11 Entire Agreement | B-118 | |||
12.12 Governing law; Submission to Jurisdiction | B-119 | |||
12.13 Time of Essence | B-119 |
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EXHIBITS | ||||
Sample Purchase Price Calculation and Closing Statement | Exhibit A | |||
Form of 2901 West Alameda Sublease | Exhibit B | |||
Form of Northvale Lease | Exhibit C | |||
Form of Tappan Lease | Exhibit D | |||
Form of Appurtenant Earth Station Easement Agreement | Exhibit E | |||
Form of 2813 West Alameda Lease | Exhibit F | |||
Form of Declaration for 2813 West Alameda Parcel | Exhibit G | |||
Form of Declaration for 2820 West Olive Parcel | Exhibit H | |||
Form of In-Gross Earth Station Easement Agreement | Exhibit I |
SCHEDULES | ||
Schedule A | AMC Entities and Companies Knowledge | |
Schedule 1.1(a) | Assumed Employee Benefit Plans | |
Schedule 1.1(b) | Networks Brands and Divisions | |
Schedule 1.1(c) | Excluded Liabilities | |
Schedule 1.1(d) | Major Customers | |
Schedule 1.1(e) | Working Capital Assets and Working Capital Liabilities | |
Schedule 1.1(f) | 2813 West Alameda Parcel | |
Schedule 1.1(g) | 2820 West Olive Parcel | |
Schedule 1.1(h) | Excluded Assets | |
Schedule 1.1(i) | Continuing Commercial Arrangements | |
Schedule 1.1(j) | 23 Research Drive Parcel | |
Schedule 1.1(k) | UK Company Employees | |
Schedule 1.1(l) | Services Agreements | |
Schedule 4.19 | Environmental Documents | |
Schedule 6.5(b) | FCC Licenses | |
Schedule 6.7(c) | Delivered Books and Records | |
Schedule 6.10(a)(i) | Disney Contracts | |
Schedule 6.10(a)(ii) | Sony Contracts | |
Schedule 6.17 | Acquired Assets | |
Schedule 6.18(b) | Transferred Owned Real Property | |
Schedule 6.18(c)(i) | 2901 West Alameda Premises | |
Schedule 6.18(c)(ii) | Northvale Premises | |
Schedule 6.18(c)(iii) | Tappan Premises | |
Schedule 6.20(a) | Assumed Guarantees | |
Schedule 6.21(a) | Approved Capital Projects | |
Schedule 6.24(a) | Microsoft Licenses | |
Schedule 8.1(c) | Services Employees | |
Schedule 8.1(d) | Non-Solicit Employees | |
Schedule 9.1(f) | Consents |
COMPANY DISCLOSURE LETTER | ||
4.1(b) | Subsidiaries and Equity Ownership | |
4.4(a)(iii) | Consents | |
4.6(d) | Equity Securities Obligations | |
4.7(b) | Non-GAAP Accounting | |
4.7(c) | GAAP Capital Expenditures | |
4.9 | Certain Changes or Events | |
4.11 | Related Party Transactions | |
4.12(a) | Labor Matters | |
4.12(c)(i) | Company Group Employees | |
4.12(c)(ii) | Certain Employee Arrangements | |
4.12(c)(iii) | Employment Agreements |
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Table of Contents
COMPANY DISCLOSURE LETTER | ||
4.13(a)(i) | Company Benefit Plans | |
4.13(a)(ii) | Other Company Benefit Plans | |
4.13(c) | Pension Plans | |
4.13(f) | Employee Participation under the Company Benefit Plans | |
4.13(g) | Non-US Company Benefit Plans | |
4.13(m) | Benefits Insurance Policies | |
4.14(a) | Tax Matters | |
4.14(c) | Tax Classification | |
4.15(a) | Company Intellectual Property Rights | |
4.15(b) | Intellectual Property Licenses | |
4.15(c) | Registered Intellectual Property | |
4.15(d) | Intellectual Property Claims | |
4.16(a) | Leased Real Property | |
4.16(b) | Owned Real Property | |
4.16(c) | Rent Roll | |
4.16(d)(vii) | Wetland, Flood Plain or Flood Insurance Area | |
4.16(d)(x) | Former Real Property Liability | |
4.17(a) | Company Material Contracts | |
4.17(c) | Third-Party Consents | |
4.18 | Insurance Policies | |
4.19 | Environmental Matters | |
4.20(a) | Customers and Suppliers | |
4.20(b) | Notices from Major Customers | |
4.20(c) | Notices from Major Suppliers | |
4.21 | Tangible Property | |
4.22 | Sufficiency of Assets | |
4.23 | Accounts Receivable | |
6.1 | Conduct of Business Prior to Closing | |
6.12 | Excluded Assets | |
6.14 | Affiliate Transactions | |
6.17(a)(i) | Plan of Reorganization | |
6.17(a)(ii) | Company Group Structure | |
8.1(a) | AMC Business Employees | |
Annex A | Company Financial Statements |
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B-8
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B-9
Table of Contents
B-10
Table of Contents
B-11
Table of Contents
B-12
Table of Contents
B-13
Table of Contents
B-14
Table of Contents
B-15
Table of Contents
B-16
Table of Contents
B-17
Table of Contents
B-18
Table of Contents
B-19
Table of Contents
B-20
Table of Contents
B-21
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B-22
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B-23
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B-24
Table of Contents
Term | Section | |
2813 West Alameda Lease | 6.19(b) | |
2813 West Alameda Title Commitment | 6.19(a) | |
2901 West Alameda Sublease | 6.18(c) | |
Accounting Arbitrator | 2.3(c) | |
Added Investment | 6.21(b) | |
Agreement | Preamble | |
Allocation Arbitrator | 2.4 | |
AMC | Preamble | |
AMC 401(k) Plan | 8.7 | |
AMC Acquisition Agreement | 6.4(d) | |
AMC Business Employee | 8.1(a) | |
AMC Consolidated Financial Statements | 4.7(a)(i) | |
AMC-Encompass Sublease and Leases | 6.18(c) |
B-25
Table of Contents
Term | Section | |
AMC Indemnified Parties | 10.3 | |
AMC Termination Fee | 11.3(a) | |
Antitrust Laws | 6.5(a) | |
Approved Capital Projects | 6.21(a) | |
Appurtenant Earth Station Easement Agreement | 6.19(b) | |
Assumed Guarantees | 6.20(a) | |
Audited Financial Statements | 6.23 | |
Authorizing Resolution | 3.2(a) | |
Business Assets | 4.22 | |
Cap | 10.4(a) | |
Capex Cash Payment Amount | 6.21(a) | |
Capex Shortfall | 6.21(a) | |
Carve Out Financial Statements | 4.7(a)(ii) | |
Certificate of Compliance | 6.19(a) | |
Change of Recommendation | 6.4(d) | |
Closing Date | 2.2(a) | |
Closings | 2.2(a) | |
Closing Notice | 2.2(e) | |
Closing Statement | 2.3(a) | |
Companies | Preamble | |
Company Benefit Plans | 4.13(a) | |
Company Filed Tax Returns | 4.14(a)(i) | |
Company Financial Statements | 4.7(a)(ii) | |
Company Group Reorganization | 6.17(a) | |
Company Group Reorganization Documents | 6.17(a) | |
Company Intellectual Property Rights | 4.15(a) | |
Company Interests | Recital B | |
Company Material Contract | 4.17(a) | |
Company Permits | 4.5 | |
Competing Proposal | 6.4(h) | |
Current Employees | 4.12(c) | |
Declarations | 6.19(c) | |
Deed | 6.18(b) | |
Discovery TSA | 4.14(b) | |
Disney Contracts | 6.10(a) | |
DOJ | 6.5(a) | |
Effective Date | Preamble | |
ERISA Plans | 4.13(b) | |
Estimated Added Investments | 2.2(c) | |
Estimated Capex Shortfall | 2.2(c) | |
Estimated Cash Deferred Revenue | 2.2(c) | |
Estimated Net Working Capital | 2.2(c) | |
Excluded Assets | 6.12 | |
Expiration Date | 10.1 | |
Final Closing Statement | 2.3(d) |
B-26
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Term | Section | |
Financing | 6.10(c) | |
Financing Sources | 6.10(c)(i) | |
FCC Licenses | 6.5(b) | |
FTC | 6.5(a) | |
Improvements | 4.16(d)(i) | |
In-Gross Earth Station Easement Agreement | 6.19(c) | |
Insurance Policies | 4.18 | |
Interim AMC Consolidated Financial Statements | 4.7(a)(i)(B) | |
Interim Balance Sheet | 4.7(a)(ii)(B) | |
Interim Balance Sheet Date | 4.7(a)(i)(B) | |
IRS | 4.13(b) | |
Land Use Permits | 4.16(d)(ii) | |
Maintenance Capex | 6.21(a) | |
Major Customers | 4.20(a) | |
Major Suppliers | 4.20(a) | |
Map Act Endorsement | 6.19(a) | |
Material Non-Public Information | 6.10(c)(iii) | |
Microsoft Licenses | 6.24(a) | |
Multiemployer Plan | 4.13(d) | |
Negotiated Amount | 6.24(a) | |
New Capex | 6.21(b) | |
Non-Imputation Endorsement | 6.18(b) | |
Non-US Company Benefit Plans | 4.13(a) | |
Northvale Lease | 6.18(c) | |
Notice of Superior Proposal | 6.4(f) | |
Owned Real Property | 4.16(b) | |
Outstanding Letters of Guarantee | 6.10(b) | |
Parent Recommendation | 6.3 | |
Pension Plan | 4.13(b) | |
Pension Scheme | 4.13(k) | |
Post-Closing Payees | 6.10(d) | |
Pre-Closing Statement | 2.2(c) | |
Proxy Statement | 6.2(a) | |
Purchaser 401(k) Plan | 8.7 | |
Purchaser Indemnified Parties | 10.2 | |
Purchasers | Preamble | |
Purchaser Termination Fee | 11.3(b) | |
Qualifying Offer | 8.1(a) | |
Real Property | 4.16(b) | |
Real Property Lease | 4.16(a) | |
Registered Intellectual Property | 4.15(c) | |
Related Party | 4.11 | |
Related Party Arrangement | 4.11 | |
Release Date | 10.1 | |
Remaining Cap | 10.9 |
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Term | Section | |
Rent Roll | 4.16(c) | |
Requisite Regulatory Approvals | 6.5(b) | |
Requisite Stockholder Vote | 3.2(a) | |
Retained Names and Marks | 6.8 | |
Sample Calculation | 2.2(b) | |
Sellers | Preamble | |
Services Employees | 8.1(c) | |
Singapore Company | Preamble | |
Singapore Company Interest | Recital B | |
Singapore Seller | Preamble | |
Sony Contracts | 6.10(a) | |
Specified Date | 2.2(e) | |
Stockholders’ Meeting | 6.3 | |
Straddle Return Arbitrator | 7.1(c) | |
Superior Proposal | 6.4(i) | |
Tangible Property | 4.21 | |
Tappan Lease | 6.18(c) | |
Tax Claim | 7.1(m) | |
Tax Indemnitee | 7.1(m) | |
Tax Indemnitor | 7.1(m) | |
Tax Records | 7.1(h) | |
Termination Date | 11.1(b) | |
Termination of Easement in Gross | 6.19(c) | |
Termination of Declarations | 6.19(c) | |
Third-Party Claim | 10.5(b) | |
Threshold Amount | 10.4(a) | |
Transfer Amount | 6.24(a) | |
Transfer Taxes | 2.6 | |
Transferred Date | 8.1(c) | |
Transferred Employee | 8.1(a) | |
Transferred Employment Agreement | 8.2 | |
UK Closing | 2.2(a) | |
UK Company | Preamble | |
UK Company Interest | Recital B | |
UK Purchaser | Preamble | |
UK Seller | Preamble | |
US Closing | 2.2(a) | |
US Company | Preamble | |
US Company Benefit Plans | 4.13(b) | |
US Company Interest | Recital B | |
US Purchaser | Preamble | |
US Seller | Preamble | |
WARN Obligations | 8.4 | |
Welfare Benefits | 8.5 |
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3030 Andrita Street
Los Angeles, CA 90065
Attention: Chief Executive Officer
Telephone: (323) 344-4605
Facsimile: (323) 344-4805
355 South Grand Avenue
35th Floor
Los Angeles, CA 90071-1560
Attention: Robert B. Knauss, Esq.
Telephone: (213) 683-9137
Facsimile: (213) 687-3702
12300 Liberty Boulevard
Englewood, CO 80112
Attention: General Counsel
Telephone: (310) 434-7000
Facsimile: (310) 434-7002
30 Rockefeller Plaza
New York, New York 10112-4498
Attention: Marc A. Leaf, Esq.
Telephone: (212) 408-2500
Facsimile: (212) 408-2501
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AMC: ASCENT MEDIA CORPORATION | ||||
By: | /s/ William E. Niles | |||
Name: | William E. Niles | |||
Title: | Executive Vice President and General Counsel | |||
US SELLER: FOUR MEDIA COMPANY LLC | ||||
By: | /s/ William E. Niles | |||
Name: | William E. Niles | |||
Title: | Executive Vice President and General Counsel | |||
UK SELLER: ASCENT MEDIA LIMITED | ||||
By: | /s/ William E. Niles | |||
Name: | William E. Niles | |||
Title: | Director | |||
SINGAPORE SELLER: ASCENT MEDIA HOLDINGS LTD. | ||||
By: | /s/ William E. Niles | |||
Name: | William E. Niles | |||
Title: | Director | |||
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US COMPANY: ASCENT MEDIA NETWORK SERVICES, LLC, | ||||
By: | /s/ William E. Niles | |||
Name: | William E. Niles | |||
Title: | Executive Vice President and General Counsel | |||
UK COMPANY: ASCENT MEDIA NETWORK SERVICES EUROPE LIMITED | ||||
By: | /s/ William E. Niles | |||
Name: | William E. Niles | |||
Title: | Director | |||
SINGAPORE COMPANY: ASCENT MEDIA PTE LTD. | ||||
By: | /s/ William E. Niles | |||
Name: | William E. Niles | |||
Title: | Director | |||
US PURCHASER: ENCOMPASS DIGITAL MEDIA, INC. | ||||
By: | /s/ Simon Bax | |||
Name: | Simon Bax | |||
Title: | Chief Executive Officer | |||
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UK PURCHASER: ENCOMPASS DIGITAL MEDIA LIMITED | ||||
By: | /s/ Simon Bax | |||
Name: | Simon Bax | |||
Title: | Chief Executive Officer | |||
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1. | Ascent Media Network Services, LLC, a California limited liability company, operating out of the facilities at the following locations: |
Ø | 232 and 250 Harbor Drive, Stamford, CT | ||
Ø | 652 Glenbrook Road, Stamford, CT | ||
Ø | 500 square-foot storage area at 652 Glenbrook Road, Stamford, CT | ||
Ø | 60 Hudson Street, New York, NY | ||
Ø | 90 South 11th Street, Minneapolis, MN | ||
Ø | 545 5th Ave., New York, NY (12th Floor and a portion of the roof) | ||
Ø | 2901 West Alameda Ave., Burbank, CA (Shared common area on 1st floor and basement, 6th floor, the roof areas for all dishes and antennae currently located thereon (with the exception of a CSS Studios, LLC/Level 3 Post dish), and an additional specified area in the basement, as well as areas in the associated parking structure for parking and a generator, battery and the uninterruptible power supply (aka, the “UPS”) | ||
Ø | 240 Pegasus Avenue, Northvale, NJ | ||
Ø | 183 Oak Tree Road, Tappan, NY | ||
Ø | 6221 Holly Drive, Lino Lakes, MN | ||
Ø | 23 Research Drive, Stamford, CT | ||
Ø | 2813 West Alameda Avenue, Burbank, CA | ||
Ø | Antennae farm and bunker (aka, the “Earth Station”) located on the area of land straddling 2813 W. Alameda Avenue, Burbank, CA and 2820 W. Olive Avenue, Burbank, CA |
2. | Ascent Media Networks Services Europe Limited, a company organized under the laws of England with its registered office at 1 Stephen Street, London W1T 1AT (registered number 0226317), operating out of the facilities at the following locations: |
Ø | 1 Stephen Street, portion of ground floor, floors 1, 2 and 3, London, UK |
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Ø | Unit 2, Maryland Road, Tongwell, Milton Keynes, UK | ||
Ø | 184-192 Drummond Street, London, UK |
3. | Ascent Media Pte. Ltd. (registration number 199501194K), a company incorporated in Singapore with its registered address at 20 Loyang Crescent Singapore 508984, operating out of facilities at the following locations: |
Ø | 20 Loyang Crescent, Singapore | ||
Ø | 3 Changi Business Park Vista, Singapore |
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1. | Ascent Media Creative Services, Inc. | |
2. | Syndistro, LLC | |
3. | Javelin Distribution, LLC | |
4. | Company 3, LLC | |
5. | Bobco Productions, LLC | |
6. | Ascent Media Services, LLC | |
7. | Ascent Media Group Limited (UK) | |
8. | Rushes PostProduction Limited (UK) | |
9. | One Post Limited (UK) | |
10. | Co 3 London Limited (fka TVP Group Limited; fka 4MC Limited; fka The Original Video Dubbing Limited), a company organized under the laws of England) | |
11. | Method London Limited (fka TVP Multimedia Limited), a company organized under the laws of England) | |
12. | GMX-The Global Media Exchange, LLC, a Delaware limited liability company | |
13. | Four Media Company, LLC, a Delaware limited liability company | |
14. | Liberty Livewire LLC, a Delaware limited liability company | |
15. | CDP, LLC, a California limited liability company | |
16. | Hyper TV Productions, LLC, a California limited liability company | |
17. | HyperTV with Livewire, LLC, a Delaware limited liability company | |
18. | Ascent Media Holdings Limited (fka Liberty Livewire Limited; fka Four Media Company (UK) Limited), a company organized under the laws of England | |
19. | Todd-AO, Espana, a California corporation | |
20. | VSC MAL CORP., a Delaware corporation | |
21. | Ascent Media Systems Integration, LLC, a Delaware limited liability company | |
22. | TGS, LLC, a Virginia limited liability company | |
23. | 103 Todd-AO Estudio S.L., a company organized under the laws of Spain | |
24. | Rushes Televisión, S.A de C.V., a company organized under the laws of Mexico | |
25. | Servicios Administrativos de Post Produccion S.A. de C.V., a company organized under the laws of Mexico | |
26. | Ascent Media (Singapore) Pte. Ltd., a private company limited by shares organized under the laws of Singapore | |
27. | Ascent Media Holdings Ltd., a company incorporated under the laws of the Republic of Singapore | |
28. | Ascent Media Limited (fka Todd-AO Europe Holding Company Limited), a company organized under the laws of England | |
29. | Ascent Media GP Ltd. (fka Sanderson Vere Crane (Video Tape Editors) Limited), a company organized under the laws of England | |
30. | Ascent Media UK Limited Partnership | |
31. | 4MC Limited (fka TVP Group Plc), a company organized under the laws of England | |
32. | Soho Group Limited, a company organized under the laws of England |
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33. | Ascent Media 142 Limited (fka Visiontext Limited), a company organized under the laws of England | |
34. | Todd-AO Filmatic Limited, a company organized under the laws of England | |
35. | Liberty Livewire Limited (fka Ascent Media Holdings Limited; fka Tele-Cine Cell Group Limited), a company organized under the laws of England | |
36. | SVC Television Limited, a company organized under the laws of England | |
37. | Tele-Cine Limited, a company organized under the laws of England | |
38. | XTV Limited, a company organized under the laws of England | |
39. | Todd-AO UK Limited (fka Ascent Media Group Limited; fka XTV Cell Limited), a company organized under the laws of England | |
40. | Todd-AO Europe Holding Company Limited (fka Ascent Media Limited; fka TVI Limited), a company organized under the laws of England | |
41. | TVP Videodubbing Limited, a company organized under the laws of England | |
42. | R!OT London Limited (fka Television Presentations Limited), a company organized under the laws of England | |
43. | Ascent Media Systems & Technology Services Limited (fka A.F. Associates London Limited; fka POP Sound London Limited; fka TVP Broadcast Limited), a company organized under the laws of England | |
44. | Soundelux London Limited (fka Ketchup Limited; fka TVP Doublevision Limited), a company organized under the laws of England | |
45. | Stream Digital Media Limited, a company organized under the laws of England | |
46. | The London Switch Limited (fka POP London Limited; fka TVP Digital Media Limited), a company organized under the laws of England | |
47. | TVI Limited (fka Ascent Media Limited; fka Audio and Video Limited), a company organized under the laws of England | |
48. | London Playout Centre Limited (fka Ascent Media Network Services Europe Limited; fka Ascent Media Network Services Limited; fka Ascent Networks Europe Limited; fka Vergent Pictures Limited; fka SVC Communications Limited), a company organized under the laws of England | |
49. | St. Anne’s Post Limited (fka Sanderson Vere Crane (Film Editors) Limited), a company organized under the laws of England | |
50. | Studio Film and Video Holdings Limited, a company organized under the laws of England | |
51. | Soho Images Limited, a company organized under the laws of England | |
52. | Soho 601 Digital Productions Limited (fka One Post Limited; fka Video Time Limited), a company organized under the laws of England |
1. | Beast | |
2. | Beast Chicago | |
3. | Beast Detroit | |
4. | Company 3 / CO3 | |
5. | CO3 NY | |
6. | Encore Hollywood | |
7. | GMX | |
8. | Level 3 Post |
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9. | Method | |
10. | Method NY | |
11. | Riot Atlanta | |
12. | Ruby Pictures | |
13. | Method Labs | |
14. | The Foundation | |
15. | Soho Film Lab | |
16. | Ascent 142 | |
17. | Digital Media Distribution Center on Hollywood Way, Burbank, CA and in Northvale, NJ | |
18. | Cinetech | |
19. | Blink Digital | |
20. | DMDC | |
21. | Ascent Syndication | |
22. | FilmCore Distribution Hollywood | |
23. | FilmCore Distribution San Francisco | |
24. | FilmCore Distribution New York | |
25. | Todd-AO |
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Sample Purchase Price Calculation and Closing Statement | Exhibit A | |
Form of 2901 West Alameda Sublease | Exhibit B | |
Form of Northvale Lease | Exhibit C | |
Form of Tappan Lease | Exhibit D | |
Form of Appurtenant Earth Station Easement Agreement | Exhibit E | |
Form of 2813 West Alameda Lease | Exhibit F | |
Form of Declaration for 2813 West Alameda Parcel | Exhibit G | |
Form of Declaration for 2820 West Olive Parcel | Exhibit H | |
Form of In-Gross Earth Station Easement Agreement | Exhibit I |
Schedule A | AMC Entities and Companies Knowledge | |
Schedule 1.1(a) | Assumed Employee Benefit Plans | |
Schedule 1.1(c) | Excluded Liabilities | |
Schedule 1.1(d) | Major Customers | |
Schedule 1.1(e) | Working Capital Assets and Working Capital Liabilities | |
Schedule 1.1(f) | 2813 West Alameda Parcel | |
Schedule 1.1(g) | 2820 West Olive Parcel | |
Schedule 1.1(i) | Continuing Commercial Arrangements | |
Schedule 1.1(j) | 23 Research Drive Parcel | |
Schedule 1.1(k) | UK Company Employees | |
Schedule 1.1(l) | Services Agreements | |
Schedule 4.19 | Environmental Documents | |
Schedule 6.5(b) | FCC Licenses | |
Schedule 6.7(c) | Delivered Books and Records | |
Schedule 6.10(a)(i) | Disney Contracts | |
Schedule 6.10(a)(ii) | Sony Contracts | |
Schedule 6.17 | Acquired Assets | |
Schedule 6.18(b) | Transferred Owned Real Property | |
Schedule 6.18(c)(i) | 2901 West Alameda Premises | |
Schedule 6.18(c)(ii) | Northvale Premises | |
Schedule 6.18(c)(iii) | Tappan Premises | |
Schedule 6.20(a) | Assumed Guarantees | |
Schedule 6.21(a) | Approved Capital Projects | |
Schedule 6.24(a) | Microsoft Licenses | |
Schedule 8.1(c) | Services Employees | |
Schedule 8.1(d) | Non-Solicit Employees | |
Schedule 9.1(f) | Consents |
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Ascent Media Corporation
12300 Liberty Boulevard
Englewood, CO 80112
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Very truly yours, | ||||
/s/ MOELIS & COMPANY LLC | ||||
MOELIS & COMPANY LLC | ||||
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