Exhibit 99.1
Metromedia International Group, Inc.
Xxx Xxxxxxxxxxx Xxxxx
Xxxx Xxxxxxxxxx, Xxx Xxxxxx 00000
November 30, 1995
Alliance Entertainment Corp.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx
Ladies and Gentlemen:
This letter sets forth our understanding with respect to a
contemplated transaction (the "Proposed Transaction") between Metromedia
International Group, Inc., a Delaware corporation ("Metromedia"), and
Alliance Entertainment Corp. ("Alliance"), a Delaware corporation.
1. THE PROPOSED TRANSACTION. The Proposed Transaction will have the
principal terms set forth on Exhibit A hereto.
2. CONDITIONS. Consummation of the Proposed Transaction is subject to
the following conditions: (i) execution and delivery of definitive
agreements providing for the Proposed Transaction containing
representations, warranties, covenants and closing conditions
(excluding any financing conditions) customary for transactions of
this type and which are mutually acceptable to the parties hereto;
(ii) approval of the Proposed Transaction by the Boards of Directors
and stockholders of each of Metromedia and Alliance; (iii) the
receipt of fairness opinions by each of Metromedia and Alliance;
(iv) receipt of all required consents and approvals; and (v) receipt
of all requisite regulatory approvals, including approval with
respect to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended.
3. PRESS RELEASE. Promptly after the execution and delivery of this
letter by the parties hereto, Metromedia and Alliance shall issue a
joint press release in the form of Exhibit B hereto. Thereafter,
except as may be required by applicable law or pursuant to the rules
and regulations of the New York Stock Exchange or the American Stock
Exchange, neither Metromedia nor Alliance shall, and each shall
cause their respective affiliates, agents, advisors and
representatives not to, issue or cause the publication of any press
release or other announcement with respect to the Proposed
Transaction without the consent of the other party hereto.
4. EXCLUSIVITY. (a) From the date hereof until the termination of
this letter, neither Alliance nor any of its subsidiaries shall, nor
shall it or any of its subsidiaries authorize or permit any of their
respective officers, directors, employees, attorneys, accountants,
investment bankers, financial advisors, representatives, agents or
other authorized persons to (i) solicit, initiate, encourage
(including by way of furnishing information) or take any other
action to facilitate, any inquiry or the making of any proposal
which constitutes, or may reasonably be expected to lead to, any
acquisition or purchase of a substantial amount of assets of, or any
equity interest in, Alliance or any of its subsidiaries or any
tender offer (including a self tender offer) or exchange offer,
merger, consolidation, business combination, sale of substantially
all assets, sale of securities, recapitalization, liquidation,
dissolution or similar transaction involving Alliance or any of its
subsidiaries (other than the transactions contemplated by this
letter) or any other material corporate transaction the consummation
of which would or could reasonably be expected to impede, interfere
with, prevent or materially delay the Proposed Transaction
(collectively, "Transaction Proposals") or agree to or endorse any
Transaction Proposal or (ii) propose, enter into or participate in
any discussions or negotiations regarding any of the foregoing, or
furnish to any other person or entity any information with respect
to its business, properties or assets or any of the foregoing, or
otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any other person
or entity to do or seek any of the foregoing.
(b) Notwithstanding the foregoing paragraph 4(a), nothing herein
shall prohibit Alliance from (i) furnishing information pursuant to
an appropriate confidentiality letter concerning Alliance and its
businesses, properties or assets to a third party who has made a
Qualified Transaction Proposal (as defined below), (ii) engaging in
discussions or negotiations with such a third party who has made a
Qualified Transaction Proposal or (iii) following receipt of a
Qualified Transaction Proposal, taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a) under the
Securities Exchange Act of 1934, as amended, but in each case
referred to in the foregoing clauses (i) through (iii) only after
the Board of Directors of Alliance concludes in good faith following
receipt of a written opinion addressed to Metromedia and Alliance of
Alliance's outside counsel that such action is reasonably necessary
for the Board of Directors of Alliance to comply with its fiduciary
obligations to stockholders under applicable law. If the Board of
Directors of Alliance receives a Transaction Proposal, then Alliance
shall immediately inform Metromedia of the terms and conditions of
such proposal and the identity of the person or entity
making it and shall keep Metromedia fully informed of the status and
details of any such Transaction Proposal and of all steps it is taking
in response to such Transaction Proposal.
(c) For purposes of this letter, the term "Qualified Transaction
Proposal" shall mean a Transaction Proposal that the Board of
Directors of Alliance determines in good faith, after consultation
with its financial advisors, is reasonably capable of being
consummated and is not subject to any material contingencies
relating to financing.
5. EXPENSES. Each of the parties hereto will pay their respective fees
and expenses incurred in connection with the Proposed Transaction.
6. GOVERNING LAW. This letter shall be governed by the laws of the
State of New York without regard to the conflict of laws principles
thereof.
7. NON-BINDING LETTER. This letter constitutes our current
understanding of the Proposed Transaction but, except as set forth
in the last sentence of this paragraph, shall not be binding upon
the parties, nor shall it impose any obligations on the parties.
Except as set forth in the last sentence of this paragraph, no
binding obligation with respect to the Proposed Transaction will
result unless the definitive agreements are executed and delivered
by the parties. Notwithstanding the foregoing, paragraphs 3, 4, 5,
6, 8, and 9 and this paragraph 7 shall constitute the legal, valid
and binding obligation of the parties.
8. TERMINATION. The Proposed Transaction may be abandoned and this
letter of intent may be terminated by any party if definitive
agreements representing the Proposed Transaction have not been
executed on or before December 31, 1995 (the "Termination Date").
In addition, Alliance may terminate this letter if it enters into a
letter of intent or definitive agreement for a Business Combination;
PROVIDED, THAT the amounts payable pursuant to Section 5(b) shall be
payable on any such termination by Alliance.
9. THIRD PARTY BENEFICIARIES. No third party beneficiary rights are
granted hereunder.
If this letter correctly sets forth our understanding, please so
acknowledge by signing in the space indicated below and returning the
enclosed copy of this letter.
Very truly yours,
METROMEDIA INTERNATIONAL GROUP, INC.
By:/S/ XXXXXX XXXXXXXXX
------------------------
Name:
Title:
ACCEPTED AND AGREED:
ALLIANCE ENTERTAINMENT CORP.
By:/S/ XXXXXX X. XXXXXX
------------------------
Name:
Title:
EXHIBIT A
Merger of Metromedia International Group, Inc. ("Metromedia"),
Metromedia Alliance Mergerco, a newly-formed, wholly-owned subsidiary
and Alliance of Metromedia ("Alliance Mergerco") and Alliance
Entertainment Corp. ("Alliance") will enter into a merger
agreement which will provide for the merger of Alliance
with Alliance Mergerco. Each Alliance stockholder will
receive for each share of Alliance common stock (i) a
number of shares of Metromedia common stock equal to the
number of shares of Alliance Common Stock held by such
holder multiplied by the ratio of $12.00 divided by the
average closing sale price of Metromedia common stock for
the 20 trading days ended 5 business days prior to the
date of the consummation of the merger (the "Average
Closing Price"); PROVIDED, THAT, if the Average Closing
Price is less than $13.00, then the Average Closing Price
shall be deemed to be $13.00 and if the Average Closing
Price is more than $23.00, the Average Closing Price shall
be deemed to be $23.00, plus (ii) .2 Warrants ("Warrants")
to purchase shares of Metromedia common stock having the
terms described below. Holders of options and warrants to
purchase shares of Alliance common stock will be entitled
to receive upon the exercise of such options or warrants
that number of shares of Metromedia common stock and
Warrants which such holder would have been entitled to
receive had the holder exercised such options or warrants
prior to the consummation of the Merger. It is the
parties intention to effect the exchange of Alliance
common stock for Metromedia common stock pursuant to a
transaction which will qualify as a "reorganization"
within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended.
Warrants Each Warrant will be immediately exercisable for shares of
Metromedia common stock at a price of $21.00 per share and
will be exercisable for five years from the date of
closing of the merger.
Subordinated Debt In connection with the consummation of the merger,
Repurchase Metromedia Company or its affiliate shall agree to provide
a guarantee of any financing required in connection with
the satisfaction of the repurchase obligations of Alliance
pursuant to the terms of Alliance's $125 million aggregate
principal amount of publicly traded subordinated
debentures.
Shelf Registration Metromedia shall file a registration statement on Form S-3
with the Securities and Exchange Commission to permit the
resale by "affiliates" of Alliance of the Metromedia
common stock received in the merger (and upon exercise of
the Warrants) and shall cause such registration statement
to be effective on the date of the consummation of the
merger and to remain effective for a period of three years
thereafter. In addition, Metromedia shall file
registration statements on Form S-8 or other appropriate
forms with the Securities and Exchange Commission to
permit the resale of shares of Metromedia common stock
received upon the exercise of stock options and warrants.
Metromedia Stock As a condition to the execution of the merger agreement,
Purchase certain affiliates of Metromedia desire to purchase from
certain present holders of Alliance common stock their
shares of Alliance common stock.
In order to satisfy this condition, the Chief Executive
Officer and the Chief Financial Officer of Alliance have
agreed to sell to such affiliates in the aggregate
3,600,000 shares of Alliance common stock owned by such
officers of Alliance.
Management and Xxxxxx Xxxxxx, Chairman and Chief Executive Officer of
Other Issues Alliance, will become the chief executive officer of all
of Metromedia's entertainment entities other than
Metromedia International Telecommunications, Inc.
Xxxxxx Xxxxxx, Chairman and Chief Executive Officer of
Alliance, will be elected to the Board of Directors of
Metromedia.
In connection with the merger, Alliance shall pay all
contractual bonuses and make other payments to certain
executives of Alliance, such other payments in an
aggregate amount not to exceed $6,000,000.
