EXHIBIT 10.38
SHARE EXCHANGE AGREEMENT
by and between
NEWS CORPORATION
and
LIBERTY MEDIA CORPORATION
----------
As of December 22, 2006
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TABLE OF CONTENTS
Page
ARTICLE I. CERTAIN DEFINITIONS AND OTHER MATTERS 2
Section 1.1. CERTAIN DEFINITIONS 2
Section 1.2. TERMS DEFINED IN OTHER SECTIONS 14
ARTICLE II. INTERPRETATION 15
Section 2.1. INTERPRETATION 15
ARTICLE III. EXCHANGE OF STOCK; CLOSING 15
Section 3.1. EXCHANGE OF STOCK 15
Section 3.2. CLOSING 16
Section 3.3. PARENT'S DELIVERIES AT THE CLOSING 16
Section 3.4. LMC'S DELIVERIES AT THE CLOSING 16
Section 3.5. PERFORMANCE 17
Section 3.6. ADJUSTMENT TO NUMBER AND TYPE OF SECURITIES 17
Section 3.7. PARENT RESTRUCTURING AND RELATED MATTERS 18
Section 3.8. ESTIMATED NET WORKING CAPITAL ADJUSTMENT 18
Section 3.9. FINAL NET WORKING CAPITAL ADJUSTMENT 18
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT 20
Section 4.1. ORGANIZATION AND STANDING 21
Section 4.2. CAPITALIZATION 21
Section 4.3. CORPORATE POWER AND AUTHORITY 23
Section 4.4. SHAREHOLDER VOTES REQUIRED 23
Section 4.5. CONFLICTS; CONSENTS AND APPROVALS 24
Section 4.6. OPERATIONS OF THE TRANSFERRED BUSINESS 25
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Section 4.7. COMPLIANCE WITH LAW 25
Section 4.8. INTELLECTUAL PROPERTY 25
Section 4.9. ABSENCE OF SPLITCO OPERATIONS; SPLITCO ASSETS AND LIABILITIES 26
Section 4.10. ENVIRONMENTAL MATTERS 26
Section 4.11. LITIGATION 27
Section 4.12. EMPLOYEE BENEFIT PLANS 28
Section 4.13. CONTRACTS 30
Section 4.14. LABOR MATTERS 32
Section 4.15. RSN SUBSIDIARIES FINANCIAL STATEMENTS 32
Section 4.16. PERMITS 33
Section 4.17. REAL ESTATE 34
Section 4.18. GUARANTEES 34
Section 4.19. TITLE TO DTV SHARES 34
Section 4.20. CERTAIN TAX MATTERS 34
Section 4.21. AFFILIATE TRANSACTIONS 36
Section 4.22. BROKERS OR FINDERS 36
Section 4.23. INVESTIGATION; RELIANCE 37
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF LMC 37
Section 5.1. ORGANIZATION AND STANDING 37
Section 5.2. CORPORATE POWER AND AUTHORITY 37
Section 5.3. NO VOTE REQUIRED 38
Section 5.4. CONFLICTS; CONSENTS AND APPROVALS 38
Section 5.5. LMC PARENT SHARES 39
Section 5.6. LITIGATION 39
Section 5.7. GOVERNMENTAL ACTIONS 39
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Section 5.8. FCC MATTERS 39
Section 5.9. INVESTMENT PURPOSE AND EXPERIENCE 40
Section 5.10. Investigation; Reliance 40
Section 5.11. BROKERS AND FINDERS 40
ARTICLE VI. COVENANTS AND AGREEMENTS 41
Section 6.1. ACCESS AND INFORMATION 41
Section 6.2. CONDUCT OF BUSINESS BY PARENT 41
Section 6.3. CONDUCT OF BUSINESS BY LMC 44
Section 6.4. PROXY STATEMENT 44
Section 6.5. PARENT STOCKHOLDERS' MEETING 46
Section 6.6. APPROPRIATE ACTION; CONSENTS; FILINGS 47
Section 6.7. FURTHER ASSURANCES 49
Section 6.8. STANDSTILL AGREEMENTS 49
Section 6.9. CONFIDENTIALITY; ACCESS TO RECORDS AFTER CLOSING 53
Section 6.10. EMPLOYEE MATTERS 55
Section 6.11. INTERCOMPANY SERVICES AND ACCOUNTS 57
Section 6.12. COOPERATION WITH RESPECT TO FINANCIAL REPORTING 57
Section 6.13. NO SOLICITATION 57
Section 6.14. DTV CHARTER RESTRICTIONS 59
Section 6.15. CERTAIN TAX MATTERS 60
Section 6.16. ANCILLARY AGREEMENTS 60
Section 6.17. PLEDGED SHARES 60
ARTICLE VII. CONDITIONS TO CLOSING 60
Section 7.1. MUTUAL CONDITIONS 60
Section 7.2. CONDITIONS TO LMC'S OBLIGATIONS 61
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Section 7.3. CONDITIONS TO PARENT'S OBLIGATIONS 62
Section 7.4. FRUSTRATION OF CLOSING CONDITIONS 63
ARTICLE VIII. INDEMNIFICATION 63
Section 8.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS 63
Section 8.2. INDEMNIFICATION 64
Section 8.3. PROCEDURES 65
Section 8.4. EXCLUSIVITY 67
Section 8.5. CERTAIN RIGHTS AND LIMITATIONS 67
ARTICLE IX. TERMINATION 67
Section 9.1. TERMINATION 67
Section 9.2. EFFECT OF TERMINATION 69
ARTICLE X. MISCELLANEOUS 70
Section 10.1. NOTICES 70
Section 10.2. EXPENSES 71
Section 10.3. GOVERNING LAW; CONSENT TO JURISDICTION 71
Section 10.4. WAIVER OF JURY TRIAL 71
Section 10.5. ASSIGNMENT; SUCCESSORS AND ASSIGNS; NO THIRD PARTY RIGHTS 72
Section 10.6. COUNTERPARTS 72
Section 10.7. TITLES AND HEADINGS 72
Section 10.8. AMENDMENT AND MODIFICATION 72
Section 10.9. PUBLICITY; PUBLIC ANNOUNCEMENTS 72
Section 10.10. WAIVER 73
Section 10.11. SEVERABILITY 73
Section 10.12. NO STRICT CONSTRUCTION 73
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Section 10.13. ENTIRE AGREEMENT 73
Section 10.14. EQUITABLE REMEDIES 73
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EXHIBITS
Exhibit A-I Tax Matters Agreement
SHARE EXCHANGE AGREEMENT
This
SHARE EXCHANGE AGREEMENT, dated as of December 22, 2006 (this
"Agreement"), is entered into by and between NEWS CORPORATION, a
Delaware
corporation ("Parent") and
LIBERTY MEDIA CORPORATION, a
Delaware corporation
("LMC").
WITNESSETH:
WHEREAS, Greenlady Corp. ("Splitco"), a
Delaware corporation, as an
indirect wholly owned subsidiary of Parent;
WHEREAS, the Networks (as defined in Article I) conduct a business
consisting of regional sports programming networks (the "Transferred Business");
WHEREAS, Parent through its wholly owned subsidiary Fox Entertainment
Group, Inc. ("FEG") owns the DTV Shares (as defined in Article I);
WHEREAS, the Stockholders (as defined in Article I) are indirect
wholly owned subsidiaries of LMC;
WHEREAS, the Stockholders collectively own the LMC Parent Shares (as
defined in Article I);
WHEREAS, as of the Closing (as defined in Article III) the assets of
Splitco will consist solely of (i) all issued and outstanding equity interests
of each RSN Subsidiary (as defined in Article I), (ii) the DTV Shares and (iii)
the Cash Amount (as defined in Article I);
WHEREAS, upon the terms and subject to the conditions set forth in
this Agreement, (a) Parent desires to exchange the Splitco Shares (as defined in
Article I) for the LMC Parent Shares, and (b) LMC desires to cause the
Stockholders to exchange the LMC Parent Shares for the Splitco Shares;
WHEREAS, the parties hereto intend that the Exchange (as defined in
Section 3.1) qualify as a tax-free exchange under Section 355(a) of the Code (as
defined in Article I) and this Agreement, together with the Tax Matters
Agreement (as defined in Article I), constitute a "plan of reorganization," as
defined in Section 368 of the Code;
WHEREAS, concurrently with the execution of this Agreement, Parent and
certain of its Affiliates party thereto, on the one hand, and LMC and certain of
its Affiliates party thereto, on the other hand, are entering into the Tax
Matters Agreement;
WHEREAS, at or prior to the Closing Parent and LMC shall enter into
the Global Affiliation Agreement Side Letter (as defined in Article I);
WHEREAS, at or prior to the Closing, Parent and certain of its
Affiliates (other than the Transferred Subsidiaries) party thereto, on the one
hand, and the Transferred Subsidiaries and DTV, on the other hand, shall enter
into the following agreements, each in a form reasonably satisfactory to each of
Parent and LMC: (i) the NSP Agreements, (ii) the NAP
Agreements, (iii) the Technical Services Agreement, (iv) the Transitional
Services Agreement, (v) the Production Services Agreement, (vi) the Sports
Access Agreement, (vii) the Webpage Services Agreement, (viii) the FSD
Representation Agreement, (ix) the Fox College Sports License Agreement, (x) the
DTV Non-Competition Agreement and (xi) the RSN Subsidiary Non-Competition
Agreement (such agreements, together with the Global Affiliation Side Letter and
the Tax Matters Agreement, the "Ancillary Agreements");
WHEREAS, the Board of Directors of Parent and the Board of Directors
of LMC and each Stockholder have, in each case, determined that it is in the
best interests of their respective corporations and their respective
stockholders to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, and intending to be legally bound, the parties hereto agree as
follows:
ARTICLE I.
CERTAIN DEFINITIONS AND OTHER MATTERS
Section 1.1. CERTAIN DEFINITIONS. As used in this Agreement and the
schedules hereto, the following terms have the respective meanings set forth
below.
"ACTION" means any demand, action, claim, suit, countersuit,
litigation, arbitration, prosecution, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court, grand jury or other Governmental
Authority or any arbitrator or arbitration panel.
"AFFILIATE" means, with respect to any Person, any other Person that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person; PROVIDED, however
that (i) the Transferred Subsidiaries will be treated as Affiliates of Parent
prior to the Closing and as Affiliates of LMC after the Closing, and (ii) the
term "Affiliate" when used with respect to Parent or any Affiliate of Parent
prior to the Closing, or LMC or any Affiliate of LMC after the Closing, shall
not include DTV or any of its Subsidiaries. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise, including the ability
to elect the members of the board of directors or other governing body of a
Person, and the terms "controlled" and "controlling" have correlative meanings.
"ANTITRUST LAWS" means the HSR Act, the ▇▇▇▇▇▇▇ Act, as amended, the
▇▇▇▇▇▇▇ Act, as amended, the Federal Trade Commission Act, as amended, and all
other federal, state, and foreign statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines and other laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade or lessening competition through merger
or acquisition.
"ASSOCIATE" shall have the meaning ascribed to such term under the ASX
Listing Rules.
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"ASX" means the Australian Stock Exchange.
"BENEFICIAL OWNERSHIP" shall have (and related terms such as
"beneficially owned" or "beneficial owner") the meaning set forth in Rule 13d-3
under the Exchange Act; PROVIDED, HOWEVER that a Person shall be deemed to
beneficially own any securities which such Person has the right to acquire
whether such right is exercisable immediately or only after the passage of time
or upon the satisfaction of one or more conditions (whether or not within the
control of such Person) pursuant to any agreement, arrangement or understanding
(whether or not in writing) or upon the exercise of conversion rights, exchange
rights, other rights, warrants or options.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or other
day on which banking institutions in New York, New York are authorized or
required by Law or executive order to close.
"BUSINESS FCC LICENSES" means the material licenses, permits,
authorizations, and approvals issued by the FCC to each of the RSN Subsidiaries
which are used in connection with the operation of the Networks.
"CASH AMOUNT" means five hundred and fifty million dollars
($550,000,000), plus the Estimated Net Working Capital Deficiency Amount (if
any) or minus the Estimated Net Working Capital Excess Amount (if any).
"CLEANUP" means all actions required to (a) clean up, remove, treat or
remediate Hazardous Materials in the indoor or outdoor environment, (b) perform
pre-remedial studies and investigations and post-remedial monitoring and care,
(c) respond to any requests by a Governmental Authority for information or
documents relating to cleanup, removal, treatment or remediation or potential
cleanup, removal, treatment or remediation of Hazardous Materials in the indoor
or outdoor environment or (d) prevent the Release of Hazardous Materials so that
they do not migrate, endanger, or threaten to endanger public health or welfare
or the indoor or outdoor environment.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMUNICATIONS ACT" means the Communications Act of 1934, as amended,
and the rules, regulations and published orders of the FCC thereunder.
"COMMUNICATIONS REGULATION" means the Communications Act, the
Telecommunications Act of 1996, any rule, regulation or policy of the FCC,
and/or any statute, rule, regulation or policy of any other Governmental
Authority with respect to the operation of channels of radio communication
and/or the provision of communications services (including the provision of
direct-to-home video programming).
"CONFIDENTIALITY AGREEMENT" means the letter agreement, dated
September 5, 2006, by and between Parent and LMC.
"CONTRACT" means any agreement, contract, lease, power of attorney,
note, loan, evidence of indebtedness, purchase and sales order, letter of
credit, settlement agreement, franchise agreement, undertaking, covenant not to
compete, employment agreement, license,
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instrument, obligation, option, commitment, understanding and other executory
commitment, whether oral or written, express or implied.
"CUSTOMER AGREEMENTS" means all Contracts between any RSN Subsidiary
and a customer of the Transferred Business.
"DAMAGES" means any and all losses, Liabilities, claims, damages,
deficiencies, fines, payments, costs and expenses, whenever or however arising
and whether or not resulting from third party claims (including all amounts paid
in connection with any demands, assessments, judgments, settlements and
compromises relating thereto; interest and penalties with respect thereto; and
costs and expenses, including reasonable attorneys', accountants' and other
experts' fees and expenses, incurred in investigating, preparing for or
defending against any such Actions or other legal matters or in asserting,
preserving or enforcing an Indemnified Party's rights hereunder). Damages shall
expressly exclude special, punitive and consequential damages and any and all
losses, Liabilities, claims, damages, deficiencies, fines, payments, costs or
expenses with respect to diminution of value; PROVIDED that Damages shall
include any of the foregoing awarded in an Action (or settlement thereof) to any
third party against an Indemnified Party, without regard to the foregoing
limitations.
"DIT" means any "deferred intercompany transaction" or "intercompany
transaction" within the meaning of the Treasury Regulations (or predecessors
thereto) that does not occur pursuant to the Parent Restructuring.
"DTV" means The DirecTV Group, Inc., a
Delaware corporation.
"DTV NON-COMPETITION AGREEMENT" means the letter agreement relating to
Parent's confidentiality, non-competition and non-solicitation provisions
relating to DTV to be entered into by and between Parent and DTV.
"DTV SHARES" means, the shares of common stock of DTV held by FEG, as
specified in Section 1.1 of the Parent Disclosure Letter, and to be transferred
to Splitco pursuant to Section 3.1.
"ELA" means any "excess loss account" within the meaning of the
Treasury Regulations (or predecessors thereto).
"ENCUMBRANCES" means security interests, liens, charges, claims, title
defects, deficiencies or exceptions (including, with respect to the Leased Real
Property, defects, deficiencies or exceptions in, or relating to, marketability
of title, or leases, subleases or the like affecting title), mortgages, pledges,
easements, encroachments, restrictions on use, rights-of-way, rights of first
refusal, rights of first negotiation or any similar right in favor of any third
party, any restriction on the receipt of any income derived from any asset and
any limitation or restriction on the right to own, vote, sell or otherwise
dispose of any security, conditional sales or other title retention agreements,
covenants, conditions or other similar restrictions (including restrictions on
transfer) or other encumbrances of any nature whatsoever, other than Permitted
Encumbrances.
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"ENVIRONMENTAL CLAIM" means any claim, action, cause of action,
investigation, request for information or notice (written or oral) by any Person
or entity alleging potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries, or penalties arising out of, based on or resulting from (a)
the presence, or Release into the environment, of any Hazardous Material at any
location, whether or not owned or operated by such Person or any of its
Subsidiaries or (b) circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law or (c) any contractual liabilities.
"ENVIRONMENTAL LAWS" means all Laws relating to pollution or
protection of human health and safety or the environment (including ambient air,
surface water, groundwater, land surface, natural resources or subsurface
strata), including all such Laws relating to Releases or threatened Releases of
Hazardous Materials into the environment or work place, or otherwise relating to
the environmental or worker health and safety aspects of manufacturing,
processing, distribution, importation, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, including the Comprehensive
Response, Compensation, and Liability Act and its state equivalents, chemical
inventories in all relevant jurisdictions, and all such Laws relating to the
registration of products of the Transferred Business or Splitco under the
Federal Insecticide, Fungicide and Rodenticide Act, the Food Drug and Cosmetic
Act, the Toxic Substances Control Act, the European List of Notified Chemical
Substances, the European Inventory of Existing Commercial Chemical Substances or
similar Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FCC" means the United States Federal Communications Commission,
including a Bureau or subdivision thereof acting on delegated authority.
"FCC CONSENT" means the grant, without regard to whether such grant
has become a final order, by the FCC of its consent to, or approval of, the
transfer of control of Splitco, and consent to, or approval of, transfer of the
DTV Shares and any transfer of control of DTV, to LMC (or any Affiliate of LMC),
pursuant to appropriate applications filed by the parties with the FCC, as
contemplated by this Agreement.
"FLSA" means the Fair Labor Standards Act, 29 U.S.C. Section 201, as
amended.
"FSD REPRESENTATION AGREEMENT" means the FSD representation agreement
entered into by and among Fox Sports Direct and each of the RSN Subsidiaries,
respectively.
"FOX COLLEGE SPORTS LICENSE AGREEMENT" means the agreement relating to
the license of Network programming by the RSN Subsidiaries to Fox College
Sports, Inc.
"GAAP" means United States generally accepted accounting principles,
consistently applied.
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"GLOBAL AFFILIATION AGREEMENT SIDE LETTER" means the letter agreement
relating to global affiliation agreements entered into by and between LMC and
Parent.
"GOVERNMENTAL AUTHORITY" means any supranational, national, federal,
state or local government, foreign or domestic, or the government of any
political subdivision of any of the foregoing, or any entity, authority, agency,
ministry, department, board, commission, court or other similar body exercising
executive, legislative, judicial, regulatory or administrative authority or
functions of or pertaining to government, including any authority or other
quasi-governmental entity established by a Governmental Authority to perform any
of such functions.
"HAZARDOUS MATERIALS" means any substance which is listed, defined or
regulated as a pollutant, contaminant, hazardous, dangerous or toxic substance,
material or waste, or is otherwise classified as hazardous, dangerous or toxic
in or pursuant to any Environmental Law or which is or contains any explosives,
radon, radioactive materials, asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum and petroleum products (including waste
petroleum and petroleum products) as regulated under any applicable
Environmental Law.
"INDEBTEDNESS" of any Person means, without duplication, (i) all
obligations of such Person for money borrowed, whether current or unfunded, or
secured or unsecured; (ii) all obligations of such Person evidenced by notes,
debentures, bonds or other similar instruments or debt securities for the
payment of which such Person is responsible or liable (excluding current
accounts payable incurred in the ordinary course of business); (iii) all
obligations of such Person issued or assumed for deferred purchase price
payments associated with acquisitions, divestments or other transactions; (iv)
all obligations of such Person under leases required to be capitalized in
accordance with GAAP, (v) all obligations of such Person for the reimbursement
of any obligor on any letter of credit, banker's acceptance, guarantees or
similar credit transaction, (vi) all interest, fees, prepayment premiums and
other expenses owed with respect to the indebtedness referred to above and (vii)
all indebtedness of others referred to above which is directly or indirectly
guaranteed by such Person or which such Person has agreed (contingently or
otherwise) to purchase or otherwise acquire or in respect of which it has
otherwise assured a creditor against loss, including through the grant of a
security interest upon any assets of such Person.
"INTELLECTUAL PROPERTY" shall mean all United States and foreign (i)
patents, patent applications, patent disclosures, and all related continuations,
continuations-in-part, divisionals, reissues, re-examinations, substitutions,
and extensions thereof, (ii) trademarks, service marks, trade names, domain
names, logos, slogans, trade dress, and other similar designations of source or
origin, together with the goodwill symbolized by any of the foregoing, (iii)
copyrights and copyrightable subject matter, (iv) rights of publicity, (v) moral
rights and rights of attribution and integrity, (vi) trade secrets and all
confidential information, know-how, inventions, proprietary processes, formulae,
models, and methodologies, (vii) all rights in the foregoing and in other
similar intangible assets, (viii) all applications and registrations for the
foregoing, and (ix) all rights and remedies against infringement,
misappropriation, or other violation thereof.
"IRS" means the Internal Revenue Service of the United States of
America.
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"KNOWLEDGE" means (i) with respect to Parent, the actual knowledge of
any of the individuals set forth on Schedule 1.1(a) of the Parent Disclosure
Letter, and (ii) with respect to LMC, the actual knowledge of any of the
individuals set forth on Schedule 1.1(b) of the LMC Disclosure Letter. "Know,"
"knows" and correlative terms will be read to have similar meanings.
"LAWS" means all United States federal, state or local, foreign or
supranational laws, constitutions, statutes, codes, rules, regulations,
ordinances, orders, judgments, writs, stipulations, awards, injunctions,
arbitration awards or findings decrees or edicts by a Governmental Authority
having the force of law, including any of the foregoing as they relate to Tax.
"LEASED REAL PROPERTY" means any real property leased or subleased by
the Transferred Subsidiaries and set forth (and designated as leased) in Section
4.17.2 of the Parent Disclosure Letter.
"LIABILITIES" means any and all Indebtedness, liabilities, commitments
and obligations, whether or not fixed, contingent or absolute, matured or
unmatured, direct or indirect, liquidated or unliquidated, accrued or unaccrued,
known or unknown, whether or not required by GAAP to be reflected in financial
statements or disclosed in the notes thereto, including those arising under any
Action, Law, order, judgment, injunction or consent decree of any Governmental
Authority or any award of any arbitrator of any kind, and those arising under
any contract, commitment or undertaking.
"LIBERTY BASKET AMOUNT" means $12,000,000.
"LIBERTY BASKET BREACH" means the failure of any representation or
warranty contained in this Agreement and made by LMC (other than those
representations or warranties contained in Sections 5.1, 5.2, 5.3, 5.5, 5.10 and
5.11) to be true and correct when made or deemed made.
"LIBERTY BASKET EXCEPTION BREACH" means the failure of any
representation or warranty contained in Sections 5.1, 5.2, 5.3, 5.5, 5.10 and
5.11 of this Agreement to be true and correct when made or deemed made.
"LMC DISCLOSURE LETTER" means the disclosure letter that LMC has
delivered to Parent on the date of this Agreement prior to the execution hereof,
which letter is incorporated by reference herein.
"LMC INDEMNITEES" means, collectively, LMC, its Affiliates, and their
respective stockholders, members, partners, officers, directors, employees,
attorneys, representatives and agents.
"LMC PARENT SHARES" means the 324,637,067 Shares of Parent Class A
Common Stock and 188,000,000 shares of Parent Class B Common Stock owned by the
Stockholders.
"LMC TAX OPINION" means the written opinion of LMC's Tax counsel,
addressed to LMC and dated as of the Closing Date, in form and substance
reasonably satisfactory to LMC,
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to the effect that, based upon the Rulings, the Tax Opinion Representations, and
any other facts, representations and assumptions set forth or referred to in
such opinion, and subject to such qualifications and limitations as may be set
forth in such opinion, for United States federal income tax purposes, no gain or
loss will be recognized by (and no amount will be includible in the income of)
the Stockholders on the Exchange.
"LMC TAX OPINION REPRESENTATIONS" means the representations set forth
in a letter, which shall be executed by LMC on the Closing Date and dated and
effective as of the Closing Date, to be made by LMC to each of the firms
providing the Tax Opinions as a condition to, and in connection with, the
issuance of the Tax Opinions, including representations in form and substance
substantially as set forth in Schedule A to this Agreement (amended as necessary
to reflect changes in relevant facts occurring after the date of this Agreement
and on or before the Closing Date).
"MATERIAL ADVERSE EFFECT" means, with respect to a Person or the
Transferred Business, any change, effect, event, occurrence, development,
condition or circumstance that, individually or in the aggregate with all other
adverse changes, effects, events, occurrences, developments, conditions or
circumstances, is, or is reasonably likely to be, materially adverse to the
business, operations, results of operations, assets, liabilities, or condition
(financial or otherwise) of such Person and its Subsidiaries, taken as a whole,
or the Transferred Business, taken as a whole, or on the ability of such Person
to consummate the Transactions, other than any change, effect, event,
occurrence, development, condition or circumstance resulting from, or relating
to (i) the United States economy in general or (ii) the industry in which such
Person or the Transferred Business operates in general, and not having a
materially disproportionate effect (relative to the effect on other Persons
operating in such industry) on such Person or the Transferred Business; PROVIDED
that for the purposes of any determination as to the existence of a "Material
Adverse Effect" with respect to Splitco, Splitco's assets shall be deemed to
consist of the following as of the time of such determination: (i) all issued
and outstanding equity interests of each RSN Subsidiary and (ii) the DTV Shares;
PROVIDED further that any determination as to the existence of a "Material
Adverse Effect" with respect to Splitco shall be made after taking into account
(without duplication) any amounts actually recovered, under any insurance policy
maintained by Parent or any of its Affiliates or DTV, and/or by Parent, any
Affiliate of Parent or DTV from any other third party, and, in each case, after
giving effect to the application of any such amounts for the benefit of the
Transferred Subsidiaries or DTV. No change, effect, event or occurrence arising
or resulting from any of the following, either alone or in combination, shall
constitute or be taken into account in determining whether there has been, a
Material Adverse Effect: (i) the announcement or performance of this Agreement
and the transactions contemplated hereby (including compliance with the
covenants set forth herein, or any action taken or omitted to be taken by
Parent, any Transferred Subsidiary, Splitco or DTV at the request or with the
prior written consent of LMC), including, to the extent arising therefrom, any
termination of, reduction in or similar negative impact on relationships,
contractual or otherwise, with any customers, suppliers, distributors, partners
or employees of the Transferred Business or DTV, (ii) acts of war or terrorism
or natural disasters, (iii) changes in any Laws or regulations or applicable
accounting regulations or principles or the interpretations thereof, (iv) the
fact, in and of itself (and not the underlying causes thereof) that any
Transferred Subsidiary or DTV failed to meet any projections, forecasts, or
revenue or earnings predictions for any period, or (v) any
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change, in and of itself (and not the underlying causes thereof) in the stock
price of the LMC Parent Shares or the DTV Shares.
"MAXIMUM AMOUNT" means $75,000,000 (provided that it is the
understanding of the parties that such $75,000,000 amount shall not have
deducted therefrom the amount of the Parent Basket Amount or the Liberty Basket
Amount, as the case may be).
"MULTIEMPLOYER PLAN" means any "multiemployer plan" within the meaning
of Section 3(37) of ERISA.
"▇▇▇▇▇▇▇ INTERESTS" means each of Mr. K. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, the ▇▇▇▇▇▇▇
Family Trust and Cruden Financial Services LLC and (x) any successor to any of
the foregoing and (y) any transferee of Parent Class B Stock of any of the
foregoing.
"NAP AGREEMENTS" means each national advertising sales representation
agreement by and among National Advertising Partners and each of the RSN
Subsidiaries.
"NETWORK" means each of the regional sports programming cable networks
operated by the RSN Subsidiaries and listed on Section 1.1 of the Parent
Disclosure Letter.
"NET WORKING CAPITAL" means the (A) current assets (excluding cash and
excluding Tax assets) less (B) current liabilities (excluding Tax liabilities,
and calculated after giving effect to the settlement of intercompany accounts
contemplated by Section 6.11), in each case, of the RSN Subsidiaries on a
consolidated basis, all as determined in accordance with the methods, principles
and classifications used in preparing the Interim Balance Sheet included in the
Financial Statements and set forth on Schedule B attached hereto and in
accordance with GAAP (excluding footnotes and normal year-end adjustments).
"NSP AGREEMENTS" mean each national sports programming service license
agreement by and among National Sports Programming and each of the RSN
Subsidiaries.
"PARENT BASKET AMOUNT" means $12,000,000.
"PARENT BASKET BREACH" means the failure of any representation or
warranty contained in this Agreement and made by Parent (other than those
representations or warranties contained in Sections 4.1, 4.2, 4.3, 4.4, 4.19,
4.22 and 4.23 and other than the representations and warranties contained in
Section 4.20 which shall not be the subject of any claim for indemnification
under Article VIII) to be true and correct when made or deemed made.
"PARENT BASKET EXCEPTION BREACH" means the failure of any
representation or warranty contained in Sections 4.1, 4.2, 4.3, 4.4, 4.19, 4.22
and 4.23 of this Agreement to be true and correct when made or deemed made.
"PARENT COMMON STOCK" means, collectively, the Class A Common Stock,
par value $0.01 per share, of Parent ("Parent Class A Stock") and the Class B
Common Stock, par value $0.01 per share, of Parent ("Parent Class B Stock").
9
"PARENT DISCLOSURE LETTER" means the disclosure letter that Parent has
delivered to LMC on the date of this Agreement prior to the execution hereof,
which letter is incorporated by reference herein.
"PARENT INDEMNITEES" means, collectively, Parent, its Affiliates and
its and their respective stockholders (other than LMC and any of its
Affiliates), members, partners, officers, directors, employees, attorneys,
representatives and agents.
"PARENT RESTRUCTURING" means the restructuring effected by Parent and
its Affiliates pursuant to the steps set forth on Schedule C hereto, as the same
may be modified in accordance with the Tax Matters Agreement.
"PARENT TAX OPINION" means the written opinion of Parent's Tax
counsel, addressed to Parent and dated as of the Closing Date, in form and
substance reasonably satisfactory to Parent, to the effect that, based upon the
Rulings, the Tax Opinion Representations and any other facts, representations
and assumptions set forth or referred to in such opinion, and subject to such
qualifications and limitations as may be set forth in such opinion, for United
States federal income tax purposes, no gain or loss will be recognized by (and
no amount will be includible in the income of) Parent or any of its Affiliates
on the Exchange or the Parent Restructuring, except with respect to any DITS or
ELAs.
"PARENT TAX OPINION REPRESENTATIONS" means the representations set
forth in the letter, which shall be executed by Parent on the Closing Date and
dated and effective as of the Closing Date, to be made by Parent to each of the
firms providing the Tax Opinions as a condition to, and in connection with, the
issuance of the Tax Opinions, including representations in form and substance
substantially as set forth in Schedule D to this Agreement (amended as necessary
to reflect changes in relevant facts occurring after the date of this Agreement
and on or before the Closing Date).
"PERMITTED ENCUMBRANCES" means (i) Encumbrances for Taxes not yet due
or being contested in good faith by appropriate proceedings and for which
adequate accruals or reserves have been established, (ii) the claims of
mechanics, materialmen or like Persons that have arisen in the ordinary course
of business or imperfections of title, restrictions and other Encumbrances that,
in any such case, do not materially interfere with the use of (in the ordinary
course of business) or the value (as so used) of, the property subject thereto,
(iii) rights granted to any licensee of any Intellectual Property Rights in the
ordinary course of business consistent with past practices, (iv) Encumbrances
securing Indebtedness not yet in default for the purchase price or lease
payments on property purchased or leased in the ordinary course of business, (v)
Encumbrances created by actions of LMC or its Affiliates, (vi) with respect to
securities, including capital stock, Encumbrances imposed by the Securities Act
or the Exchange Act or (vii) Encumbrances arising from the rights and
obligations under this Agreement or any Ancillary Agreement.
"PERSON" means an individual, partnership (general or limited),
corporation, limited liability company, joint stock company, unincorporated
organization or association, trust, joint venture or other entity, or a
Governmental Authority.
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"PLEDGED SHARES" means the 60,000,000 shares of Parent Class A Common
Stock owned beneficially and of record by the Stockholders pledged, as of the
date hereof, to secure certain of the Stockholders' obligations under variable
forward OTC contracts.
"PRODUCTION SERVICES AGREEMENT" means the agreement relating to the
provision of production services identified therein by the Transferred
Subsidiaries to be entered into by and among each of the Transferred
Subsidiaries and Fox Sports Net, Inc.
"REAL PROPERTY LEASE" means the lease or sublease agreement pursuant
to which a Leased Real Property is leased or subleased.
"RELEASE" means any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, dispersal, leaching or migration into the
indoor or outdoor environment (including ambient air, surface water, groundwater
and surface or subsurface strata) or into or out of any property, including the
movement of Hazardous Materials through or in the air, soil, surface water,
groundwater or property.
"RSN SUBSIDIARIES" means each of Fox Sports Net Rocky Mountain, LLC,
Fox Sports Net Pittsburgh, LLC, and Fox Sports Net Northwest, LLC.
"RSN SUBSIDIARY NON-COMPETITION AGREEMENT" means the letter agreement
relating to Parent's confidentiality, non-competition and non-solicitation
obligations relating to the RSN Subsidiaries to be entered into by and among
Parent, Splitco and each RSN Subsidiary.
"RULINGS" shall mean the Exchange Rulings and the Parent Restructuring
Ruling.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the United States Securities Act of 1933.
"SECURITIES ENCUMBRANCES" means security interests, liens, charges,
claims, title defects, deficiencies or exceptions, mortgages, pledges, rights of
first refusal, rights of first negotiation or any similar right in favor of any
Person, any restriction on the receipt of any income derived from any security
and any limitation or restriction on the right to own, vote, sell or otherwise
dispose of any security, conditional sales or other title retention agreements,
covenants, conditions or other similar restrictions (including restrictions on
transfer) or other encumbrances of any nature whatsoever, other than (i)
Encumbrances imposed by the Securities Act or the Exchange Act or (ii)
Encumbrances arising from the rights and obligations under this Agreement.
"SPLITCO COMMON STOCK" means the common stock, par value $0.01 per
share, of Splitco.
"SPLITCO SHARES" means all of the issued and outstanding shares of
Splitco Common Stock.
"SPORTS ACCESS AGREEMENTS" means the agreements relating to the
license of highlights and clips for news access by media organizations to the
RSN Subsidiaries to be
11
entered into by and among each of the RSN Subsidiaries and Sports Access, a
division of ARC Holding, Ltd.
"STOCKHOLDERS" means Liberty NC, Inc., Liberty NC II, Inc., Liberty NC
IV, Inc., Liberty NC V, Inc., Liberty NC VI, Inc., Liberty NC VII, Inc., Liberty
NC VIII, Inc., Liberty NC IX, Inc., Liberty NC XII, Inc. and LMC Bay Area
Sports, Inc.
"SUBSIDIARY" when used with respect to any Person, means (i)(A) a
corporation of which a majority in voting power of its share capital or capital
stock with voting power, under ordinary circumstances, to elect directors is at
the time, directly or indirectly, owned by such Person, by a Subsidiary of such
Person, or by such Person and one or more Subsidiaries of such Person, whether
or not such power is subject to a voting agreement or similar Encumbrance, (B) a
partnership or limited liability company in which such Person or a Subsidiary of
such Person is, at the date of determination, (1) in the case of a partnership,
a general partner of such partnership with the power affirmatively to direct the
policies and management of such partnership or (2) in the case of a limited
liability company, the managing member or, in the absence of a managing member,
a member with the power affirmatively to direct the policies and management of
such limited liability company, or (C) any other Person (other than a
corporation) in which such Person, a Subsidiary of such Person or such Person
and one or more Subsidiaries of such Person, directly or indirectly, at the date
of determination thereof, has (1) the power to elect or direct the election of a
majority of the members of the governing body of such Person, whether or not
such power is subject to a voting agreement or similar Encumbrance, or (2) in
the absence of such a governing body, at least a majority ownership interest or
(ii) any other Person of which an aggregate of more than 50% of the equity
interests are, at the time, directly or indirectly, owned by such Person and/or
one or more Subsidiaries of such Person. For the purposes of the foregoing, the
Transferred Subsidiaries will be treated as Subsidiaries of Parent until the
Closing is completed and as Subsidiaries of LMC immediately after the Closing,
and neither IAC/InterActiveCorp nor Expedia, Inc., or any of their respective
Subsidiaries, will be treated as Subsidiaries of LMC.
"TAX" or "TAXES" means (i) any and all taxes, charges, fees, levies,
customs, duties, tariffs, or other assessments, including income, gross
receipts, excise, real or personal property, sales, withholding, social
security, retirement, unemployment, occupation, use, goods and services, service
use, license, value added, capital, net worth, payroll, profits, withholding,
franchise, transfer and recording taxes, fees and charges, and any other taxes,
charges, fees, levies, customs, duties, tariffs or other assessments imposed by
the IRS or any taxing authority (whether domestic or foreign including any
state, county, local or foreign government or any subdivision or taxing agency
thereof (including a United States possession)), whether computed on a separate,
consolidated, unitary, combined or any other basis; and such term shall include
any interest thereon, fines, penalties, additions to tax, or additional amounts
attributable to, or imposed upon, or with respect to, any such taxes, charges,
fees, levies, customs, duties, tariffs, or other assessments; (ii) any Liability
for the payment of any amounts described in clause (i) as a result of being a
member of an affiliated, consolidated, combined, unitary or similar group or as
a result of transferor, successor or similar Liability; and (iii) any Liability
for the payments of any amounts as a result of being a party to any Tax sharing
agreement or as a result of any express or implied obligation to indemnify any
other Person with respect to the payment of any amounts of the type described in
clause (i) or (ii).
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"TAX MATTERS AGREEMENT" means the Tax Matters Agreement by and among
Parent and LMC, attached as Exhibit A-I hereto.
"TAX OPINIONS" means the Parent Tax Opinion and the LMC Tax Opinion.
"TAX OPINION REPRESENTATIONS" means the LMC Tax Opinion
Representations and the Parent Tax Opinion Representations.
"TAX RETURNS" means any return, report, certificate, form or similar
statement or document (including any related or supporting information or
schedule attached thereto and any information return, amended Tax Return, claim
for refund or declaration of estimated Tax) required to be supplied to, or filed
with, a Taxing Authority in connection with the determination, assessment or
collection of any Tax or the administration of any laws, regulations or
administrative requirements relating to any Tax.
"TAXING AUTHORITY" shall have the meaning given to such term in the
Tax Matters Agreement.
"TAX SHARING AGREEMENT" shall have the meaning given to such term in
the Tax Matters Agreement.
"TECHNICAL SERVICES AGREEMENT" means the agreement relating to the
provision of uplink, engineering and other services identified therein by and
among Fox Sports Net, Inc. and each of the RSN Subsidiaries.
"TRANSACTIONS" means the transactions contemplated hereby and each of
the Ancillary Agreements, including the Exchange and the Parent Restructuring.
"TRANSFERRED EMPLOYEES" means the individuals listed on Section 1.1 of
the Parent Disclosure Letter (which section of the Disclosure Letter shall be
updated as of the Closing Date to reflect individuals hired following the date
hereof and prior to the Closing Date in compliance with Section 6.2 hereof,
PROVIDED, HOWEVER that any individual listed on Section 1.1.1(a) of the Parent
Disclosure Letter as of the Closing Date whose employment with any Transferred
Subsidiary terminates in the ordinary course of business following the date
hereof and prior to the Closing Date shall not be deemed to be a "Transferred
Employee").
"TRANSFERRED SUBSIDIARIES" means, collectively, Splitco and each RSN
Subsidiary.
"TRANSITIONAL SERVICES AGREEMENT" means the agreement relating to the
provision of corporate transitional services identified therein by and among Fox
Sports Net, Inc. and each of the RSN Subsidiaries.
"TREASURY REGULATIONS" mean the regulations promulgated under the
Code.
"WARN ACT" means the Worker Adjustment and Retraining Notification Act
and any similar state or local Law of any jurisdiction in the United States of
America.
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"WEBPAGE SERVICES AGREEMENT" means the agreement relating to the
provision of website management and other information technology services
identified therein by and among Fox Interactive Media, Inc. and each of the RSN
Subsidiaries.
Section 1.2. TERMS DEFINED IN OTHER SECTIONS. The following terms are
defined elsewhere in this Agreement in the following Sections:
Ancillary Agreements Recitals
Affiliate Transaction Section 4.21
Agreement Preamble
Broker Section 4.22
Broker Fees Section 4.22
Business Records Section 6.9.3
Closing Section 3.2
Closing Certificates Section 3.4.3
Closing Date Section 3.2
Collective Bargaining Agreement Section 4.14.1
Conclusive Net Working Capital Statement Section 3.9.3
Controlled Group Liability Section 4.12.2
Disinterested Stockholder Approval Section 6.4.1
Disputed Items Section 3.9.2
Employee Benefit Plan Section 4.12.1
Employment Agreement Section 4.12.1
ERISA Affiliate Section 4.12.2
Estimated Net Working Capital Section 3.8.1
Estimated Net Working Capital Deficiency Amount Section 3.8.2
Estimated Net Working Capital Excess Amount Section 3.8.2
Exchange Section 3.1
Exchange Rulings Section 7.2.4
Extended Termination Date Section 9.1.2
Extraordinary Transaction Section 6.13.2
FCC Applications Section 6.6.3
Final Net Working Capital Deficiency Amount Section 3.9.4
Final Net Working Capital Excess Amount Section 3.9.4
HSR Act Section 4.5.4
Indemnified Party Section 8.3.1
Indemnifying Party Section 8.3.1
L Acquisition Proposal Section 6.13.2
Licensed Intellectual Property Section 4.8.2
LMC Preamble
LMC Exchange Ruling Section 7.2.4
LMC Related Party Section 10.5
LMC Ruling Section 7.2.4
Material Contracts Section 4.13
Net Working Capital Statement Section 3.9.1
Neutral Arbitrator Section 3.9.3
Owned Intellectual Property Section 4.8.1
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Parent Preamble
Parent Acquisition Proposal Section 6.13.1
Parent Change in Recommendation Section 6.4.1
Parent Exchange Ruling Section 7.2.4
Parent Group Section 4.20.5
Parent Recommendation Section 6.4.1
Parent Restructuring Date Section 3.7
Parent Restructuring Ruling Section 7.3.5
Parent Stockholder Approval Section 4.4
Parent Stockholders' Meeting Section 6.5
Permits Section 4.16
Proxy Statement Section 6.4.1
Records Section 6.9.3
Representatives Section 6.13.1
Requisite Parent Stockholder Approval Section 6.4.1
Resolution Period Section 3.9.2
Seller Disability Plans Section 6.10.2
Settlement Section 6.6.5
Splitco Recitals
Subsidiary Employee Benefit Plan Section 4.12.1
Termination Date Section 9.1.2
Termination Fee Section 9.2.2
Transfer Section 6.8.1
Transferred Business Recitals
ARTICLE II.
INTERPRETATION
Section 2.1. INTERPRETATION. Unless otherwise indicated to the contrary in
this Agreement by the context or use thereof: (a) the words, "herein," "hereto,"
"hereof" and words of similar import refer to this Agreement as a whole and not
to any particular Section or paragraph hereof; (b) words importing the masculine
gender shall also include the feminine and neutral genders, and vice versa; (c)
words importing the singular shall also include the plural, and vice versa; and
(d) the word "including" means "including without limitation"; and (e) the words
"as of the date hereof" means "as of the date of this Agreement."
ARTICLE III.
EXCHANGE OF STOCK; CLOSING
Section 3.1. EXCHANGE OF STOCK. Upon the terms and subject to the
conditions of this Agreement, at the Closing, (a) Parent shall assign, transfer,
convey and deliver to the Stockholders (in accordance with instructions relating
to allocation of such shares provided by LMC to Parent no later than three (3)
Business Days prior to the Closing Date) and LMC shall cause the Stockholders to
accept and acquire from Parent, all of the Splitco Shares (free and clear
15
of all Securities Encumbrances) in exchange for the LMC Parent Shares, and (b)
LMC shall cause the Stockholders to assign, transfer, convey and deliver to
Parent, and Parent shall accept and acquire from the Stockholders, the LMC
Parent Shares (free and clear of all Securities Encumbrances) in exchange for
the Splitco Shares (collectively, the "Exchange).
Section 3.2. CLOSING. The closing of the Exchange and the other
transactions contemplated hereby (the "Closing") shall take place at the offices
of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, 4 Times Square, New York, New York,
as soon as practicable, but in no event later than three (3) Business Days after
the satisfaction or waiver of the conditions set forth in Article VII (excluding
conditions that, by their terms, cannot be satisfied until the Closing, but
subject to the satisfaction or waiver of such conditions at the Closing), or at
such other place or on such other date as Parent and LMC may mutually agree. The
date upon which the Closing shall be effective is referred to herein as the
"Closing Date."
Section 3.3. PARENT'S DELIVERIES AT THE CLOSING. At the Closing, Parent
shall deliver or cause to be delivered to LMC or the Stockholders, as
applicable, the following:
3.3.1 one or more stock certificates, together with stock powers executed
in blank, representing all of the issued and outstanding capital
stock of Splitco;
3.3.2 the stock books, stock ledgers and minute books of each of the
Transferred Subsidiaries;
3.3.3 each of the Ancillary Agreements (other than the Tax Matters
Agreement which shall be executed and delivered concurrently with
this Agreement) duly executed by Parent and any of its Affiliates
party thereto;
3.3.4 letters of resignation, dated as of the Closing Date, from (i) each
of the directors and officers of Splitco and each RSN Subsidiary
and (ii) each of K. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇
from the Board of Directors of DTV;
3.3.5 a certificate of an authorized officer of Parent pursuant to
Sections 7.2.1 and 7.2.2 hereof; and
3.3.6 such other documents as are reasonably required by LMC to be
delivered to effectuate the Transactions or to evidence the
authority, existence and good standing of Parent and its relevant
Subsidiaries, including evidence of the possession by Splitco of
the Cash Amount; PROVIDED that LMC shall use its reasonable best
efforts to identify such documents to Parent in writing reasonably
in advance of the anticipated Closing Date.
Section 3.4. LMC'S DELIVERIES AT THE CLOSING. At the Closing, LMC shall
deliver or cause to be delivered to Parent the following:
3.4.1 one or more stock certificates, together with stock powers executed
in blank, representing the LMC Parent Shares owned by the
Stockholders, or a confirmation from Parent's transfer agent,
Computershare Investor Services, LLC, of a book-entry transfer of
the LMC Parent Shares to Parent;
16
3.4.2 each of the Ancillary Agreements to which LMC and any of its
Affiliates are party (other than the Tax Matters Agreement which
shall be executed and delivered concurrently with this Agreement)
duly executed by LMC and any of its Affiliates party thereto;
3.4.3 a certificate of an authorized officer of LMC pursuant to Sections
7.3.1 and 7.3.2 hereof (together with the certificate delivered
pursuant to Section 3.3.5 hereof, the "Closing Certificates"); and
3.4.4 such other documents as are reasonably required by Parent to be
delivered to effectuate the Transactions or to evidence the
authority, existence and good standing of LMC and its relevant
Subsidiaries; PROVIDED that Parent shall use its reasonable best
efforts to identify such documents to LMC in writing reasonably in
advance of the anticipated Closing Date.
Each document of transfer or assumption referred to in this Article III (or in
any related definition set forth in Article I) that is not attached as an
Exhibit to this Agreement or is not otherwise an Ancillary Agreement shall be in
customary form and shall be reasonably satisfactory in form and substance to the
parties hereto.
Section 3.5. PERFORMANCE.
3.5.1 LMC undertakes to Parent that to the extent that any Subsidiary of
LMC fails to comply with any of its obligations under this
Agreement and the Tax Matters Agreement when performance of such
obligation has become due, LMC shall either (i) procure that such
Subsidiary shall perform such obligation; or (ii) if such
Subsidiary fails to so perform or if the Parent so elects, itself
perform any such unperformed obligation.
3.5.2 Parent undertakes to LMC that to the extent that any Subsidiary of
Parent fails to comply with any of its obligations under this
Agreement, the Tax Matters Agreement, the DTV Non-Competition
Agreement or the RSN Non-Competition Agreement, when performance of
such obligation has become due, Parent shall either (i) procure
that such Subsidiary shall perform such obligation; or (ii) if such
Subsidiary fails to so perform or if LMC so elects, itself perform
any such unperformed obligation.
Section 3.6. ADJUSTMENT TO NUMBER AND TYPE OF SECURITIES.
3.6.1 If, after the date of this Agreement, there is a subdivision, share
split, consolidation, share dividend, combination, reclassification
or similar event with respect to the securities referred to in this
Agreement, then, in any such event, the numbers and types of such
securities (and if applicable, the share prices thereof) shall be
appropriately adjusted.
3.6.2 In the event that DTV pays any dividend or makes any distribution
(other than any periodic cash dividends paid or set aside in the
ordinary course), in each case on the DTV Shares, in cash, property
or other securities (other than any dividend
17
or distribution for which appropriate adjustment is made in
accordance with Section 3.6.1 above) to holders of record prior to
the Closing Date, then upon payment of such dividend or the making
of such distributions, such cash, property or other securities will
(A) continue to be held by Parent and (B) be contributed (including
any dividend or distributions thereon and, in the case of cash,
interest thereon) to Splitco in connection with the Parent
Restructuring without the payment of any additional consideration.
Section 3.7. PARENT RESTRUCTURING AND RELATED MATTERS. Prior to the Closing
Date, Parent shall complete the Parent Restructuring such that after the Parent
Restructuring (the date on which the Parent Restructuring is complete, the
"Parent Restructuring Date"):
(a) Parent will be the sole shareholder of Splitco;
(b) Splitco will be the sole record and beneficial owner of (i) all of
the outstanding equity securities of each RSN Subsidiary and (ii) the DTV
Shares; and (iii) will hold directly the Cash Amount; and
(c) the RSN Subsidiaries will own, directly or indirectly, the
Transferred Business.
Section 3.8. ESTIMATED NET WORKING CAPITAL ADJUSTMENT.
3.8.1 For the purpose of determining the Cash Amount, two (2) Business
Days prior to the Closing Date, Parent shall cause to be prepared
and delivered to LMC a statement setting forth a good faith
estimate of the Net Working Capital (the "Estimated Net Working
Capital") and the components thereof as of the Closing Date,
together with a certificate from the principal financial officer of
Parent stating that the Estimated Net Working Capital has been
calculated in accordance with GAAP (excluding footnotes and normal
year-end adjustments) and in accordance with the methods,
principles and classifications used in preparing the Interim
Balance Sheet included in the Financial Statements.
3.8.2 If the Estimated Net Working Capital is a positive amount (the
"Estimated Net Working Capital Excess Amount"), the Cash Amount
shall be decreased by the Estimated Net Working Capital Excess
Amount. If the Estimated Net Working Capital is a negative amount
(the "Estimated Net Working Capital Deficiency Amount"), the Cash
Amount shall be increased by the Estimated Net Working Capital
Deficiency Amount. If the Estimated Net Working Capital is equal to
zero dollars ($0), no adjustment pursuant to this Section 3.8.2
shall be made to the Cash Amount.
Section 3.9. FINAL NET WORKING CAPITAL ADJUSTMENT.
3.9.1 Within forty-five (45) calendar days after the Closing Date, LMC
shall cause to be prepared and delivered to Parent a statement (the
"Net Working Capital Statement") setting forth the Net Working
Capital and the components thereof as of the Closing Date, together
with a certificate from the principal financial officer
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of LMC stating that the Estimated Net Working Capital has been
calculated in accordance with GAAP (excluding footnotes and normal
year-end adjustments) and in accordance with the methods,
principles and classifications used in preparing the Interim
Balance Sheet included in the Financial Statements. For purposes of
preparing such Net Working Capital Statement, no effect shall be
given to any new accounting pronouncements that may be issued
following the delivery of the statement pursuant to Section 3.8.1.
Following the delivery of such Net Working Capital Statement, LMC
shall provide Parent and any of Parent's Representatives (as
defined below) with access during normal business hours to (and to
examine and make copies of) all documents, records, work papers
(including those of accountants), facilities and personnel of the
Transferred Subsidiaries as is reasonably necessary for purposes of
reviewing the Net Working Capital Statement.
3.9.2 After receipt of the Net Working Capital Statement, Parent will
have thirty (30) calendar days to review the Net Working Capital
Statement. Unless Parent delivers written notice to LMC setting
forth the specific items disputed by Parent on or prior to the
thirtieth (30th) day after Parent's receipt of the Net Working
Capital Statement, Parent will be deemed to have accepted and
agreed to the Net Working Capital Statement and such statement (and
the calculations contained therein) will be final, binding and
conclusive. If Parent notifies LMC of its objections to the Net
Working Capital Statement (or specific calculations contained
therein) within such thirty (30) day period, Parent and LMC shall,
within thirty (30) days following delivery of such notice by Parent
to LMC (the "Resolution Period"), attempt in good faith to resolve
their differences with respect to the disputed items (or
calculations) specified in the notice (the "Disputed Items"), and
all other items (and all calculations relating thereto) will be
final, binding and conclusive. Any resolution by Parent and LMC
during the Resolution Period as to any Disputed Item shall be set
forth in writing and will be final, binding and conclusive.
3.9.3 If Parent and LMC do not resolve all Disputed Items by the end of
the Resolution Period, then all Disputed Items remaining in dispute
will be submitted to an independent accounting firm not retained by
Parent or LMC or such other United States national independent
accounting firm, in each case, mutually acceptable to Parent and
LMC (the "Neutral Arbitrator"). The Neutral Arbitrator, acting as
an expert and not as an arbitrator, shall determine only those
Disputed Items remaining in dispute, consistent with this Section
3.9.3, and shall request a statement from Parent and LMC regarding
such Disputed Items. In resolving each Disputed Item, the Neutral
Arbitrator (i) may not assign a value to any Disputed Item greater
than the greatest value for such Disputed Item claimed by any party
or less than the lowest value for such Disputed Item claimed by any
party and (ii) shall make its determination in accordance with the
methods, principles and classifications used in preparing the
Interim Balance Sheet included in the Financial Statements and in
accordance with GAAP (excluding footnotes and normal year-end
adjustments). All fees and expenses relating to the work, if any,
to be performed by the Neutral Arbitrator will be allocated between
19
Parent and LMC based upon the percentage which the portion of the
contested amount not awarded to each party hereto bears to the
amount actually contested by such party hereto. In addition, Parent
and LMC shall give the Neutral Arbitrator access to all documents,
records, work papers, facilities and personnel of such party and
its Subsidiaries as reasonably necessary to perform its function as
arbitrator. The Neutral Arbitrator will deliver to Parent and LMC a
written determination (such determination to include a work sheet
setting forth all material calculations used in arriving at such
determination and to be based solely on information provided to the
Neutral Arbitrator by Parent and LMC) of the Disputed Items
submitted to the Neutral Arbitrator within thirty (30) days of
receipt of such Disputed Items, which determination will be final,
binding and conclusive. The final, binding and conclusive Net
Working Capital Statement based either upon agreement or deemed
agreement by Parent and LMC or the written determination delivered
by the Neutral Arbitrator in accordance with this Section 3.9.3,
will be the "Conclusive Net Working Capital Statement." If any
party fails to submit a statement regarding any Disputed Item
submitted to the Neutral Arbitrator within the time determined by
the Neutral Arbitrator or otherwise fails to give the Neutral
Arbitrator access as reasonably requested, then the Neutral
Arbitrator shall render a decision based solely on the evidence
timely submitted and the access afforded to the Neutral Arbitrator
by Parent and LMC.
3.9.4 If the amount of Net Working Capital on the Conclusive Net Working
Capital Statement is less than the Estimated Net Working Capital
(the "Final Net Working Capital Deficiency Amount"), Parent shall
pay to Splitco an amount in cash equal to the Final Net Working
Capital Deficiency Amount. If the amount of Net Working Capital on
the Conclusive Net Working Capital Statement is greater than the
Estimated Net Working Capital (the "Final Net Working Capital
Excess Amount"), Splitco shall pay to Parent an amount in cash
equal to the Final Net Working Capital Excess Amount. If the amount
of Net Working Capital on the Conclusive Net Working Capital
Statement is equal to the Estimated Net Working Capital, no payment
shall be required.
3.9.5 All payments to be made pursuant to this Section 3.9 will (i) be
made by wire transfer of immediately available funds on the second
(2nd) Business Day following the date on which Parent and LMC agree
or are deemed to have agreed to, or the Neutral Arbitrator
delivers, the Conclusive Net Working Capital Statement, and (ii)
will bear interest from the Closing Date through the date of
payment at the prime rate of Citibank, N.A. in effect on the date
such payment was required to be made.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PARENT
Except as set forth in the Parent Disclosure Letter delivered by
Parent to LMC prior to the execution of this Agreement, Parent hereby represents
and warrants to LMC as follows:
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Section 4.1. ORGANIZATION AND STANDING. Each of Parent and the Transferred
Subsidiaries is (a) a corporation, limited liability company or other legal
entity duly organized, validly existing and duly qualified or licensed and in
good standing under the Laws of the state or jurisdiction of its organization
with full corporate or other power, as the case may be, and authority to own,
lease, use and operate its properties and to conduct its business as currently
conducted, and (b) duly qualified or licensed to do business and, to the extent
applicable, in good standing in any other jurisdiction in which the nature of
the business conducted by it or the property it owns, leases, uses or operates
requires it to be so qualified, licensed or in good standing, except where the
failures to be so qualified, licensed or in good standing have not had a
Material Adverse Effect on the Transferred Business. Parent has made available
to LMC a complete and correct copy of the certificate of incorporation and
by-laws (or other comparable organizational documents) of each of the
Transferred Subsidiaries as in effect on the date hereof.
Section 4.2. CAPITALIZATION.
4.2.1 As of the Closing, Splitco's authorized capital stock will consist
of one thousand (1,000) shares of Splitco Common Stock (the
"Splitco Shares"). As of the date of this Agreement, Parent owns
indirectly, through wholly owned Subsidiaries of Parent, all of the
issued and outstanding shares of Splitco beneficially and of
record, free and clear of any Securities Encumbrances. Immediately
prior to the Closing, Parent shall own directly all of the issued
and outstanding shares of Splitco beneficially and of record, free
and clear of any Securities Encumbrances. There are no shares of
capital stock of Splitco issued or outstanding other than the
Splitco Shares. Parent has the sole, absolute and unrestricted
right, power and capacity to exchange, assign and transfer all of
the Splitco Shares to the Stockholders.
4.2.2 Parent, indirectly through one of its Subsidiaries, owns all of the
issued and outstanding equity interests of each of the RSN
Subsidiaries beneficially and of record, free and clear of any
Encumbrances. A Subsidiary of Parent has the sole, absolute and
unrestricted right, power and capacity to exchange, assign and
transfer all of the equity interests of each RSN Subsidiary to
Splitco.
4.2.3 The Splitco Shares are duly authorized, validly issued, fully paid
and nonassessable, and have not been issued in violation of any
preemptive or similar rights. Other than this Agreement, there are
no outstanding subscriptions, options, warrants, puts, calls,
agreements or other rights of any type or other securities (a)
requiring the issuance, sale, transfer, repurchase, redemption or
other acquisition of any shares of capital stock of Splitco or any
equity interests of any RSN Subsidiary, (b) restricting the
transfer of any shares of capital stock of Splitco or any equity
interests of any RSN Subsidiary, or (c) relating to the voting of
any shares of capital stock of Splitco or any equity interests of
any RSN Subsidiary. There are no issued or outstanding bonds,
debentures, notes or other indebtedness of Splitco or any RSN
Subsidiary having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote), upon the
happening of a certain event or otherwise, on any matters on which
the equity holders of Splitco or any RSN Subsidiary may vote.
21
4.2.4 Neither Splitco nor any RSN Subsidiary is in default under or in
violation (and no event shall have occurred which, with notice or
the lapse of time or both, would constitute such a default or
violation) of any term, condition or provision of its certificate
of incorporation or bylaws except for any such defaults or
violations which would not materially delay or impair the
performance of this Agreement by Parent.
4.2.5 As of the date hereof, Parent or one of its Subsidiaries has good
and valid title to the Splitco Shares and all issued and
outstanding equity interests of each of the Transferred
Subsidiaries, free and clear of any and all Securities
Encumbrances. As of the Closing, Splitco will have good and valid
title to all shares of the RSN Subsidiaries, free and clear of any
and all Securities Encumbrances. Except as specified in this
Agreement, as of the Closing, Splitco shall not have entered into
any agreement, arrangement or understanding to purchase, capital
stock or other equity interests in any other Person. There exists
no Subsidiary of any RSN Subsidiary. No RSN Subsidiary owns any
equity interest of any Person.
4.2.6 Except as set forth in this Section 4.2, there are no outstanding
subscriptions, options, warrants, puts, calls, trusts (voting or
otherwise), rights (including conversion or preemptive rights and
rights of first refusal), exchangeable or convertible securities or
other commitments or agreements of any nature relating to the
capital stock or other securities or ownership interests of Splitco
(including any phantom shares, phantom equity interests, stock or
equity appreciation rights or similar rights) or obligating Splitco
or any of its Subsidiaries, at any time or upon the happening of
any event, to issue, transfer, deliver, sell repurchase, redeem or
otherwise acquire, or cause to be issued, transferred, delivered,
sold, repurchased, redeemed or otherwise acquired, any of its
capital stock or any phantom shares, phantom equity interests,
stock or equity appreciation rights or similar rights, or other
ownership interest of Splitco or obligating Splitco to grant,
extend or enter into any such subscription, option, warrant, put,
call, trust, right, exchangeable or convertible security,
commitment or agreement.
4.2.7 Immediately after the Closing, the Stockholders will have good
title to all of the Splitco Shares free and clear of all Securities
Encumbrances. As of the Closing, except for the Splitco Shares,
there shall be no outstanding (i) shares of capital stock or voting
securities of, or other ownership interests in, Splitco, (ii)
securities of Splitco or any of its Subsidiaries convertible into
or exchangeable for shares of capital stock or other voting
securities of, or ownership interests in, Splitco or (iii) options
or other rights to acquire from Splitco or any of its Subsidiaries,
or other obligations of Splitco or any of its Subsidiaries to
issue, any capital stock or other voting securities of, or other
ownership interests in, or any securities convertible into or
exercisable or exchangeable for any capital stock or other voting
securities of Splitco. As of the Closing, there will be no
outstanding obligations of any Transferred Subsidiary to
repurchase, redeem or otherwise acquire any such securities from
any other Person.
22
Section 4.3. CORPORATE POWER AND AUTHORITY. Parent has all requisite
corporate power and authority to enter into and deliver this Agreement and to
consummate the Transactions. Each of Parent, Splitco and the other Subsidiaries
of Parent party thereto has all requisite corporate or similar power, as the
case may be, and authority to execute and deliver the Ancillary Agreements and
the other agreements, documents and instruments to be executed and delivered by
it in connection with this Agreement, including the Parent Tax Opinion
Representations, the Closing Certificates required by Sections 7.2.1 and 7.2.2,
or the Ancillary Agreements and to consummate the transactions contemplated
thereby. The execution, delivery and, subject to receipt of the Parent
Stockholder Approval, performance of this Agreement by Parent and the
consummation by Parent, Splitco and the other applicable Subsidiaries of Parent
of the Transactions, including the execution, delivery and performance of the
Ancillary Agreements and the other agreements, documents and instruments to be
executed and delivered in connection with this Agreement or the Ancillary
Agreements by Parent, Splitco and the other applicable Subsidiaries of Parent
and the consummation (other than the payment of any Termination Fee) of the
Transactions, have been duly authorized by all necessary action on the part of
Parent, Splitco and the other applicable Subsidiaries of Parent. Each of this
Agreement and the Tax Matters Agreement has been duly executed and delivered by
Parent and constitutes the legal, valid and binding obligation of Parent,
enforceable against Parent in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar Laws now or hereafter in effect relating to or affecting
creditors' rights generally, including the effect of statutory and other Laws
regarding fraudulent conveyances and preferential transfers and subject to the
limitations imposed by general equitable principles (regardless of whether such
enforceability is considered in a proceeding at Law or in equity). When signed,
each of the Ancillary Agreements (other than the Tax Matters Agreement which is
the subject of the preceding sentence) and the other agreements, documents,
certificates (including the Parent Tax Opinion Representations) and instruments
to be executed and delivered by Parent, Splitco and each Subsidiary of Parent in
connection with this Agreement and the Transactions shall have been duly
executed and delivered by Parent, Splitco and the other Subsidiaries of Parent
party thereto and shall constitute the legal, valid and binding obligations of
Parent, Splitco and such other Subsidiaries of Parent, enforceable against each
such Person in accordance with their respective terms, except as may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other
similar Laws now or hereafter in effect relating to or affecting creditors'
rights generally, including the effect of statutory and other Laws regarding
fraudulent conveyances and preferential transfers and subject to the limitations
imposed by general equitable principles (regardless of whether such
enforceability is considered in a proceeding at Law or in equity).
Section 4.4. SHAREHOLDER VOTES REQUIRED. At the Parent Stockholders'
Meeting (as defined in Section 6.5), the affirmative vote of a majority of the
votes cast in person or by proxy by holders of Parent Class B Shares other than
LMC, the Stockholders and any of their respective Associates (the "PARENT
STOCKHOLDER APPROVAL"), in accordance with Chapter 10.1 of the ASX Listing Rules
is the only vote of the holders of any class or series of capital stock of
Parent or any of its Subsidiaries required by any applicable Law to approve the
Exchange. Other than the Parent Stockholder Approval, no vote or other action of
the stockholders of Parent is required by Law, the organizational documents of
Parent, the ASX Listing Rules, the rules and regulations of the New York Stock
Exchange or otherwise in order for Parent to consummate the Transactions. The
Board of Directors of Parent, by vote at a meeting duly called and held, has
23
approved this Agreement, determined that the Exchange is fair to and in the best
interests of Parent's stockholders and has adopted resolutions recommending
approval of the Exchange by the stockholders of Parent. The ▇▇▇▇▇▇▇ Interests
have agreed with Parent and LMC to be present, in person or by proxy, at the
Parent Stockholder Meeting and to vote all shares of Parent Class B Stock
beneficially owned by them at the Parent Stockholder Meeting (or any adjournment
thereof) in favor of the approval of the Exchange; provided that the foregoing
shall be deemed not to have been violated if the shares held by the ▇▇▇▇▇▇▇
Interests shall have been disregarded for purposes of the Parent Shareholder
Approval under the ASX listing rules.
Section 4.5. CONFLICTS; CONSENTS AND APPROVALS. Except as set forth in
Section 4.5 of the Parent Disclosure Letter, neither the execution, delivery and
performance by Parent of this Agreement, nor the execution, delivery and
performance by Parent, the Transferred Subsidiaries and the other Subsidiaries
of Parent party thereto of the Ancillary Agreements and the other agreements,
documents and instruments to be executed and delivered by each of them in
connection with this Agreement and the Ancillary Agreements, will:
4.5.1 conflict with, or result in a breach of any provision of, the
organizational documents of Parent, any Transferred Subsidiary any
applicable Parent Subsidiary;
4.5.2 violate, or conflict with, or result in a breach of any provision
of, or constitute a change of control or default (or an event that,
with the giving of notice, the passage of time or otherwise, would
constitute a default) under, or require any action, consent, waiver
or approval of any third party or entitle any Person (with the
giving of notice, the passage of time or otherwise) to terminate,
accelerate, modify or call a default under, or give rise to any
obligation to make a payment under, or to any increased, additional
or guaranteed rights of any Person under, or result in the creation
of any Encumbrance upon any of the properties or assets of any
Transferred Subsidiary or under any of the terms, conditions or
provisions of any material Contract to which Parent or any
Transferred Subsidiary is a party or pursuant to which any of their
respective properties or assets are bound, except for any such
conflicts, violations, breaches, defaults or occurrences which
would not prevent or materially delay the performance of this
Agreement by Parent;
4.5.3 assuming the approvals required under Section 4.5.4 are obtained,
violate any order, writ, or injunction, or any decree, or any
material Law applicable to Parent or any Transferred Subsidiary, or
any of their respective properties or assets; or
4.5.4 require any consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Authority, except
for (i) (A) applicable requirements of the Exchange Act, the
Securities Act, and state securities or "blue sky" Laws, (B) the
pre-merger notification requirements of the ▇▇▇▇- ▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended, and the rules and
regulations thereunder (the "HSR Act"), and (C) approval of the
Transactions under the Communications Act and (ii) where the
failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications
24
would not prevent or materially delay the performance of this
Agreement by Parent.
Section 4.6. OPERATIONS OF THE TRANSFERRED BUSINESS. Except as set forth in
Section 4.6 of the Parent Disclosure Letter, since October 1, 2006 and through
the date of this Agreement, the Transferred Business has been conducted in the
ordinary course of business consistent with past practice and there has not been
since such date the occurrence of any fact, event or circumstance described in
Sections 6.2.8, 6.2.9, 6.2.12 - 6.2.17 (assuming that the period referred to
therein is effective beginning October 1, 2006).
Section 4.7. COMPLIANCE WITH LAW. The Transferred Business is currently
being conducted, and since January 1, 2004, has been conducted, in compliance
with all material Laws applicable to the Transferred Business or the Transferred
Employees. Since January 1, 2004 and prior to the date of this Agreement, none
of Parent, Splitco or any of the RSN Subsidiaries has received any material
notice from any Governmental Authority that the Transferred Business has been or
is being conducted in violation of any applicable material Law or that an
investigation or inquiry into any noncompliance with any applicable material Law
is ongoing, pending or, to the Knowledge of Parent, threatened. This Section 4.7
does not relate to matters with respect to Taxes, which are the subject of
Section 4.20 or the Tax Matters Agreement, as the case may be, to Environmental
Matters, which are the subject of Section 4.10, to Employee Benefits Plan
matters, which are the subject of Section 4.12 or to Labor and Employment
Matters, which are the subject of Section 4.14.
Section 4.8. INTELLECTUAL PROPERTY.
4.8.1 Section 4.8.1 of the Parent Disclosure Letter sets forth a list of
all patents, patent applications, registered trademarks, material
unregistered trademarks, registered copyrights and Internet domain
name registrations that are, as of the date of this Agreement,
owned by the RSN Subsidiaries (the "Owned Intellectual Property").
The RSN Subsidiaries own the Owned Intellectual Property, free and
clear of all Encumbrances and have the exclusive right to use and
sublicense, without payment to any other Person, all of the Owned
Intellectual Property. As of the date hereof, no license relating
to any of the Owned Intellectual Property has been granted, except
as provided in the Ancillary Agreements, and except for Customer
Agreements entered into in the ordinary course of business.
4.8.2 Section 4.8.2 of the Parent Disclosure Letter sets forth a list
that includes all material Intellectual Property that is held for
use under license by the RSN Subsidiaries as of the date hereof
(the "Licensed Intellectual Property"). As of the date hereof,
neither Parent nor the RSN Subsidiaries have given or received any
notice of material default or of any event which with the lapse of
time would constitute a material default under any material
agreement relating to the Licensed Intellectual Property; neither
Parent nor the Transferred Subsidiaries, nor, to Parent's
Knowledge, any other Person, currently is in material default under
any such agreement.
25
4.8.3 To Parent's Knowledge, as of the date hereof, no third party is
infringing in any material respect a proprietary right in any Owned
Intellectual Property. To Parent's Knowledge, the use of any Owned
Intellectual Property or Licensed Intellectual Property in
connection with the Transferred Business as currently conducted
does not materially infringe upon, misappropriate, violate or
conflict in any way with any material Intellectual Property rights
of any Person.
4.8.4 There is no pending or, to Parent's Knowledge, threatened material
claim (i) challenging the validity or enforceability of, or
contesting the Parent's or the Transferred Subsidiaries' right to
make, sell, offer to sell, and/or use any of the Owned Intellectual
Property or Licensed Intellectual Property; (ii) challenging the
validity or enforceability of any agreement relating to the Owned
Intellectual Property or Licensed Intellectual Property; or (iii)
asserting that the manufacture, sale, offer of sale, and/or use of
any Owned Intellectual Property or Licensed Intellectual Property
infringes upon, misappropriates, violates or conflicts in any way
with the Intellectual Property rights of any Person.
4.8.5 The making, using, selling, offering to sell, or other
implementation of any apparatus, systems, processes, methods, or
other technologies (and/or combination thereof) used in or
necessary for operation and conducting of the Transferred Business
as currently conducted do not infringe upon, misappropriate,
violate, or conflict in any way with the material Intellectual
Property rights of any Person.
Section 4.9. ABSENCE OF SPLITCO OPERATIONS; SPLITCO ASSETS AND LIABILITIES.
Splitco has conducted no activities other than in connection with the execution
and delivery of the Ancillary Agreements to which it is or will be a party. As
of the Closing, the assets of Splitco will consist solely of (i) all issued and
outstanding equity interests of each RSN Subsidiary, (ii) the DTV Shares and
(iii) the Cash Amount (collectively, the "Splitco Assets"). As of the Closing,
the Transferred Subsidiaries will have no Liabilities other than Liabilities
arising as a result of its ownership of the Splitco Assets and any Liabilities
set forth in Section 4.9(a) of the Parent Disclosure Letter. Except as set forth
in Section 4.9(b) of the Parent Disclosure Letter, the assets of the RSN
Subsidiaries, along with the rights of Splitco and the RSN Subsidiaries under
the Ancillary Agreements, are sufficient to permit the RSN Subsidiaries to
conduct immediately following the Closing the Transferred Business in all
material respects in the manner as the Transferred Business was being conducted
as of the date hereof.
Section 4.10. ENVIRONMENTAL MATTERS.
4.10.1 The Transferred Business is currently being conducted in compliance
in all material respects with, and, since January 1, 2004 has been
conducted in compliance in all material respects with, all
applicable Environmental Laws.
4.10.2 Except as would not reasonably be expected to form the basis of any
material Environmental Claim against the Transferred Business,
since January 1, 2004, the Transferred Business has not disposed
of, Released, transported, stored, or arranged for the disposal of
any Hazardous Materials to, at or upon: (i) any
26
location other than a site lawfully permitted to receive such
Hazardous Materials; (ii) any premises currently or formerly owned
or leased by any of the RSN Subsidiaries, except for the use of
household cleaners and office products in the ordinary course of
business in compliance with applicable Environmental Laws; or (iii)
any site which has been placed on the National Priorities List,
CERCLIS or their state equivalents;
4.10.3 Since January 1, 2004, the operations of the Transferred Business
have not resulted in any Release of Hazardous Materials at or from
any Leased Real Property that requires Cleanup that has not been
completed to the satisfaction of the relevant Governmental
Authority or would reasonably be expected to form the basis of any
material Environmental Claim against the Transferred Business;
4.10.4 The Transferred Business is not subject to, and, since January 1,
2004, none of the RSN Subsidiaries has received written notice of,
any existing, pending, or, to the Knowledge of Parent, threatened
material Action, by any Person under any Environmental Laws or
involving the presence, Release or threatened Release of any
Hazardous Material at any location currently or formerly owned or
operated as part of the Transferred Business.
Section 4.11. LITIGATION.
4.11.1 Other than Actions of the type contemplated by Section 4.11.2 and
judgments, decrees, written agreements, memoranda of understanding
or orders of Governmental Authorities of the type contemplated by
Section 4.11.3, (i) as of the date hereof, there are no Actions
pending or, to the Knowledge of Parent, threatened against any of
the Transferred Subsidiaries, by or before any Governmental
Authority, (ii) there are no material Actions pending, or to the
Knowledge of Parent, threatened against any of the Transferred
Subsidiaries, by or before any Governmental Authority, (iii) as of
the date hereof, there is no judgment, decree, injunction, ruling
or order of any Governmental Authority outstanding against any
Transferred Subsidiary and (iv) there is no material judgment,
decree, injunction, ruling or order of any Governmental Authority
outstanding against any Transferred Subsidiary.
4.11.2 As of the execution of this Agreement, there is no Action pending
or, to Parent's Knowledge, threatened against Parent or any of its
Affiliates that seeks, or would reasonably be expected, to prohibit
or restrain the ability of Parent or any of its Affiliates to enter
into this Agreement or any of the Ancillary Agreements to which it
is a party or to timely consummate the Transactions.
4.11.3 As of the execution of this Agreement, there are no material
judgments, decrees, written agreements, memoranda of understanding
or orders of any Governmental Authority outstanding against Parent
or any of its Affiliates which would reasonably be expected to
prevent, prohibit, materially delay or enjoin the consummation of
the Transactions.
27
Section 4.12. EMPLOYEE BENEFIT PLANS.
4.12.1 Section 4.12.1 of the Parent Disclosure Letter sets forth, as of
the date of this Agreement, a list of all material "employee
pension benefit plans" (as defined in Section 3(2) of ERISA),
"employee welfare benefit plans" (as defined in Section 3(1) of
ERISA), and deferred compensation, bonus, retention bonus,
incentive, severance, stock bonus, stock option, restricted stock,
stock appreciation right, stock purchase, holiday pay, and vacation
pay plans, and any other employee benefit plan, program, policy or
arrangement covering Transferred Employees as of the date hereof,
that are currently either maintained by or contributed to by Parent
or any of its Subsidiaries or to which Parent or any of its
Subsidiaries is obligated to make payments or otherwise have any
liability (collectively, the "Employee Benefit Plans"), and each
employment, severance, retention, consulting or similar agreement
currently in effect that has been entered into by Parent, any
Transferred Subsidiary or any of their respective Affiliates, on
the one hand, and any Transferred Employee, on the other hand
(collectively, the "Employment Agreements"). Each Employee Benefit
Plan which provides, as of the date of hereof, benefits solely with
respect to the Transferred Employees and no other active employees
of Parent or any other Subsidiary is separately identified on
Section 4.12.1 of the Parent Disclosure Letter (collectively, the
"Subsidiary Employee Benefit Plans"). Summaries of all Employee
Benefit Plans (except for plans contributed to pursuant to a
Collective Bargaining Agreement set forth on Section 4.12.1 of the
Parent Disclosure Letter), copies of all such written Subsidiary
Employee Benefit Plans and Employment Agreements and written
summaries of all unwritten Subsidiary Employee Benefit Plans have
been made available to LMC.
4.12.2 No Controlled Group Liability has been incurred by any Transferred
Subsidiary or any trade or business that together with any
Transferred Subsidiary would be deemed a "single employer," within
the meaning of section 4001(b) of ERISA (an "ERISA Affiliate"), no
condition exists that presents a material risk to any Transferred
Subsidiary or any ERISA Affiliate of incurring any Controlled Group
Liability, and no Controlled Group Liability would reasonably be
expected to be incurred by the Transferred Subsidiaries following
the Closing by reason of such Transferred Subsidiaries having been
an ERISA Affiliate of Parent (or of any other ERISA Affiliate of
Parent) prior to the Closing. For purposes of this Agreement,
"Controlled Group Liability" means any and all liabilities (i)
under Title IV of ERISA, other than for payment of premiums to the
Pension Benefit Guaranty Corporation (which premiums have been paid
when due), (ii) under Section 302 or 4068(a) of ERISA, (iii) under
Sections 412(n) or 4971 of the Code and (iv) for violation of the
continuation coverage requirements of Section 601 et seq. of ERISA
and Section 4980B of the Code or the group health requirements of
Sections 9801 et seq. of the Code and Sections 701 et seq. of
ERISA. The consummation of the Transactions will not result in the
occurrence of any reportable event within the meaning of Section
4043(c) of ERISA with respect to any pension plan maintained by
Parent or an ERISA Affiliate. None of the
28
Subsidiary Employee Benefit Plans is subject to Title IV of ERISA
or Section 412 of the Code.
4.12.3 No Transferred Subsidiary has any liability, fixed or contingent,
with respect to a Multiemployer Plan.
4.12.4 Each Employee Benefit Plan has been operated and administered in
all material respects in accordance with its terms and applicable
law, including but not limited to ERISA and the Code. As of the
date hereof, there are no actions, suits or claims pending (other
than routine claims for benefits) or, to the Knowledge of Parent,
threatened against, or with respect to, any of the Employee Benefit
Plans or their assets. There are no material actions, suits or
claims pending (other than routine claims for benefits) or, to the
Knowledge of Parent, threatened against, or with respect to, any of
the Employee Benefit Plans or their assets. There have been no
"prohibited transactions" (as described in Section 406 of ERISA or
Section 4975 of the Code) with respect to any of the Employee
Benefit Plans. Other than routine filings, there is no matter
pending or audit in progress with respect to any of the Employee
Benefit Plans before or by any Governmental Authority.
4.12.5 Each Employee Benefit Plan intended to be qualified, within the
meaning of Section 401(a) of the Code, has received a favorable
determination letter regarding the Employee Benefit Plan's
qualification from the IRS with respect to all amendments required
by applicable law (or such plan has been submitted to the IRS for a
determination as to its qualification within the applicable
remedial amendment period).
4.12.6 The execution and delivery of this Agreement and the consummation
of the Transactions will not (except as otherwise provided in this
Agreement) (A) require any Transferred Subsidiary to make a larger
contribution to, or pay greater benefits or provide other rights
under, any Employee Benefit Plan, any Employment Agreement or any
other employee benefit plan or arrangement than it otherwise would,
whether or not some other subsequent action or event would be
required to cause such payment or provision to be triggered or (B)
create, give rise to or accelerate any additional benefits, vested
rights or service credits under any Employee Benefit Plan,
Employment Agreement or any other employee benefit plan or
arrangement. In connection with the consummation of the
Transactions, no payment of money or other property, acceleration
of benefits or provision of other rights has been made under this
Agreement, any Employee Benefit Plan or otherwise that would be
nondeductible for income Tax purposes by Splitco or the Transferred
Subsidiaries by virtue Section 280G of the Code.
4.12.7 No Subsidiary Employee Benefit Plan provides post employment
medical, disability, life insurance benefits or other welfare
benefits, except as required by Section 4980B of the Code or Part 6
of Title I of ERISA and at no expense to any Transferred
Subsidiary.
29
4.12.8 Except as disclosed on Section 4.12.8 of the Parent Disclosure
Schedule, no Subsidiary Employee Benefit Plan, Employment Agreement
or payment or benefit provided pursuant to any Subsidiary Employee
Benefit Plan, Employment Agreement or other contract, agreement or
benefit arrangement covering any "service provider" (within the
meaning of Section 409A of the Code), including the grant, vesting
or exercise of any option or appreciation right, will or may
provide for the deferral of compensation subject to Section 409A of
the Code, whether pursuant to the execution and delivery of this
Agreement or the consummation of the transactions contemplated
hereby (either alone or upon the occurrence of any additional or
subsequent events) or otherwise. Each Subsidiary Employee Benefit
Plan that is a nonqualified deferred compensation plan subject to
Section 409A of the Code has been operated and administered in good
faith compliance with Section 409A of the Code from the period
beginning January 1, 2005 through the date hereof.
Section 4.13. CONTRACTS. Section 4.13 of the Parent Disclosure Letter
contains a complete list, as of the date hereof, of all Contracts (together with
each material amendment, modification, change or waiver thereto) by and between
any Transferred Subsidiary and one or more third parties (other than this
Agreement or the Ancillary Agreements), pursuant to which any Transferred
Subsidiary is obligated or liable or is entitled to any rights or benefits or
pursuant to which any Transferred Subsidiary or any of its properties or assets
is subject, in each case, which fall within any of the following categories
(such Contracts as are required to be set forth in Section 4.13 of the Parent
Disclosure Letter, the "Material Contracts"):
(a) each advertising and sponsorship Contract pursuant to which
payment of more than $100,000 annually is required to be paid to any Transferred
Subsidiary;
(b) each Contract providing for the sale, lease or other disposition
of a material portion of the assets of any Transferred Subsidiary other than in
the ordinary course of business;
(c) each material Contract relating to the production or licensing of
any programming for any Network;
(d) each affiliation, distribution, carriage or similar agreement
between any Transferred Subsidiary (or under which any Transferred Subsidiary is
bound or is liable or pursuant to which any Transferred Subsidiary or any of its
properties or assets is subject) and any of its affiliates, distributors,
carriers, over-the-air broadcast operators and multichannel video programming
distributors, in which such affiliate, distributor, carrier or operator accounts
for at least 50,000 subscribers to a Network operated by such Transferred
Subsidiary as of July 31, 2006;
(e) each material definitive rights agreement relating to the telecast
of professional, collegiate conference, university or high school sports teams
or any sports related tournaments or events on any Network;
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(f) each Contract pursuant to which any Transferred Subsidiary is
obligated (or assuming performance of any Contract in effect at the date hereof,
would be obligated) to any Person for payments in respect of capital
expenditures in excess of $1,000,000;
(g) each currently effective joint venture or partnership or similar
agreement and each Contract providing for the formation of a joint venture,
limited liability company, long-term alliance or partnership or involving an
equity investment;
(h) each currently effective Contract (including any Employment
Agreements) which (A) materially restricts the ability of any Transferred
Subsidiary or any of its Affiliates or the Transferred Business to engage in any
business activity in any geographic area or line of business following the
Closing or (B) materially restricts the ability of any Transferred Subsidiary or
any of its Affiliates or the Transferred Business to compete with any Person
following the Closing;
(i) each Contract (or group of related Contracts) under which there
has been created, incurred, assumed, or guaranteed any Indebtedness, or that
relates to the lending or advancing of amounts or investment in any other
Person, in each case, in excess of $100,000, or providing for the creation of
any Encumbrance securing an obligation likely to exceed $100,000 upon any asset
of any Transferred Subsidiary;
(j) each lease, sublease or similar agreement relating to tangible
personal property used or held for use in the Transferred Business, for an
annual rent in excess of $100,000, or agreement regarding the purchase of real
property;
(k) each currently effective material Real Property Lease;
(l) any currently effective Contract concerning the marketing or
distribution by third parties of any products or services of the Transferred
Business (including any Contract requiring the payment of any sales or marketing
or distribution commissions or granting to any Person rights to market,
distribute or sell such products or services) involving sales of products of
more than $100,000 annually;
(m) any other currently effective Contract which was entered into
other than in the ordinary course of business involving payments to or from
third parties in excess of $500,000 over the remaining term of such Contract;
and
(n) each satellite and transponder agreement to which any Transferred
Subsidiary is a party or pursuant to which any Transferred Subsidiary or under
which any Transferred Subsidiary is bound or is liable or pursuant to which any
Transferred Subsidiary or any of its properties or assets is subject.
Parent has made available to LMC or its Representatives (as defined below)
correct and complete copies of all such Material Contracts (other than such
Material Contracts referenced in Section 4.13(n) pursuant to which the
Transferred Subsidiaries shall have no liabilities or obligations of any kind
after Closing other than pursuant to the Technical Services Agreement) with all
amendments thereto. Each such Material Contract is valid, binding and
enforceable against a Transferred Subsidiary and the other parties thereto in
accordance with its terms and is
31
in full force and effect, subject to expiration in accordance with its terms.
Except as set forth in Section 4.13 of the Parent Disclosure Letter, none of the
Transferred Subsidiaries is in material default under or in material breach of
any such Material Contract, and no event has occurred that, with notice or lapse
of time, or both, would constitute such a material default. Except as set forth
in Section 4.13 of the Parent Disclosure Letter, each of the other parties to
the Material Contracts has performed in all material respects all of the
obligations required to be performed by it under, and is not in material default
under, any such Material Contract, and to the Knowledge of Parent, no event has
occurred that, with notice or lapse of time, or both, would constitute such a
material default.
Section 4.14. LABOR MATTERS.
4.14.1 Except as set forth in the Parent Disclosure Letter, as of the date
hereof, there are no collective bargaining agreements, union
contracts or similar agreements or arrangements in effect that
cover any Transferred Employee (each, a "Collective Bargaining
Agreement"). With respect to the Transferred Business, (a) there is
no material labor strike, dispute, slowdown, lockout or stoppage
pending or, to the Knowledge of Parent, threatened, and no
Transferred Subsidiary has experienced any labor strike, dispute,
slowdown, lockout or stoppage relating to the Transferred Business
or any Transferred Employee since January 1, 2004; (b) there is no
material unfair labor practice charge or complaint pending or, to
Parent's Knowledge, threatened before the National Labor Relations
Board or before any similar state or foreign agency; (c) there is
no material grievance or arbitration arising out of any Collective
Bargaining Agreement or other grievance procedure; (d) no material
charges are pending before the Equal Employment Opportunity
Commission or any other agency responsible for the prevention of
unlawful employment practices; and (e) Parent, Splitco and the
Transferred Subsidiaries have complied in all material respects
with all laws relating to the employment of labor, including
provisions thereof relating to wages, hours, equal opportunity,
collective bargaining, affirmative action, occupational safety and
health, immigration and the withholding and payment of social
security and other taxes, and no claim to the contrary has been
made by any employee or Governmental Authority.
4.14.2 Neither Parent nor any of its Affiliates has effected any of the
following with respect to any Transferred Employee: (a) a "plant
closing" (as defined in the WARN Act) affecting any site of
employment or one or more facilities or operating units within any
site of employment or facility; or (b) a "mass layoff" (as defined
in the WARN Act) affecting any site of employment or facility. None
of the Transactions or any of the actions taken by Parent or its
Affiliates in preparation for the Closing have or will result in
plant closing or mass layoff under the WARN Act.
Section 4.15. RSN SUBSIDIARIES FINANCIAL STATEMENTS.
4.15.1 Attached as Section 4.15.1 of the Parent Disclosure Letter are the
unaudited consolidated interim balance sheet (with respect to each
RSN Subsidiary, the
32
"INTERIM BALANCE SHEET") of each RSN Subsidiary as of October 1,
2006 (the "INTERIM BALANCE SHEET DATE"), and the unaudited
consolidated statements of operations and partners' deficit and
cash flows for each RSN Subsidiary for the fiscal year ended July
2, 2006 (such unaudited consolidated financial statements,
collectively, the "FINANCIAL STATEMENTS"). Except as provided in
Section 4.15.1 of the Parent Disclosure Letter, the Financial
Statements (i) conform to the books and records of the RSN
Subsidiaries in all material respects, (ii) present fairly in all
material respects the financial position of the RSN Subsidiaries as
of the dates indicated and the results of operations and partners'
deficit and cash flows for the respective periods indicated, and
(iii) were prepared in accordance with GAAP, consistently applied;
PROVIDED that each Interim Balance Sheet is subject to normal,
recurring year-end audit adjustments (none of which are material,
individually or in the aggregate, to Parent's Knowledge).
4.15.2 From the Interim Balance Sheet Date to the date hereof, except as
set forth on Section 4.15.2 of the Parent Disclosure Letter, (i)
the business of the RSN Subsidiaries has been conducted in the
ordinary course of business consistent with past practices, (ii)
there has not been any event, circumstance, change or effect that
has had or could reasonably be expected to have, individually or in
the aggregate, Material Adverse Effect on the Transferred Business,
(iii) no RSN Subsidiary has redeemed any ownership interests in any
RSN Subsidiary, (iv) no RSN Subsidiary has waived, released,
compromised or settled any right or claim of substantial value to
such RSN Subsidiary or any other Person and (v) no RSN Subsidiary
has engaged in any transaction or taken any other action except in
the ordinary course of business consistent with past practices. No
RSN Subsidiary has engaged in any activity other than the operation
of the Networks.
4.15.3 There are no Liabilities of the RSN Subsidiaries, and there is no
existing condition, situation or set of circumstances that could
reasonably be expected to result in such a Liability, other than:
(i) Liabilities disclosed or provided for in the Interim Balance
Sheet or in the notes to the Financial Statements; (ii) the
Liabilities set forth on Section 4.15.3 of the Parent Disclosure
Letter; and (iii) Liabilities incurred in the ordinary course of
business consistent with past practice since the Interim Balance
Sheet Date that have not had and could not reasonably be expected
to have, individually or in the aggregate, a Material Adverse
Effect on the Transferred Business.
4.15.4 Except as set forth in Section 4.15.4 of the Parent Disclosure
Letter, each RSN Subsidiary is, and since the Interim Balance Sheet
Date has been, in compliance with and, as of the date hereof, to
the Knowledge of Parent is not under investigation with respect to
and has not been threatened to be charged with or given any notice
of any violation of, any applicable Law.
Section 4.16. PERMITS. The RSN Subsidiaries are in possession of, all
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary to own, lease
and operate the Transferred Business as it is being operated as of the date
hereof, other than such franchises, grants, authorizations, licenses,
33
permits, easements, variances, exemptions, consents, certificates, approvals and
orders which the failure to hold would not adversely affect the ability of the
RSN Subsidiaries to conduct the Transferred Business in all material respects as
it is currently conducted by the RSN Subsidiaries (collectively, the "PERMITS").
As of the date hereof, there are no Business FCC Licenses. Except as set forth
in Section 4.16 of the Parent Disclosure Letter (a) (i) as of the date hereof,
there is no Action pending, or, to the Knowledge of Parent, threatened,
regarding any of the Permits and (ii) there is no material Action pending, or to
the Knowledge of Parent, threatened regarding any of the Permits and (b) each
such Permit is in full force and effect. The RSN Subsidiaries do not possess any
Business FCC Licenses.
Section 4.17. REAL ESTATE.
4.17.1 None of the Transferred Subsidiaries owns or has owned any real
property.
4.17.2 As of the date hereof, the RSN Subsidiaries have good and valid
leasehold interests in all Leased Real Property except for any such
Leased Real Property which is no longer used or useful in the
conduct of the Transferred Business.
4.17.3 Each of the RSN Subsidiaries has complied in all material respects
with the terms of all Real Property Leases to which it is a party
and under which it is in occupancy, and all such Real Property
Leases and deeds are in full force and effect. Section 4.17.3 of
the Parent Disclosure Letter sets forth a complete list, as of the
date hereof, of all leases pursuant to which parcels of the Leased
Real Property are held. The RSN Subsidiaries enjoy peaceful and
undisturbed possession under all such leases and there are no
existing material defaults beyond any applicable grace periods
under such leases.
Section 4.18. GUARANTEES. Except to the extent contemplated by this
Agreement or as set forth in Section 4.18 of the Parent Disclosure Letter, none
of the Transferred Subsidiaries is directly or indirectly (a) liable, by
guarantee or otherwise, upon or with respect to or (b) obligated to provide
funds with respect to, or to guarantee or assume, any Indebtedness or other
Liability of any other Person.
Section 4.19. TITLE TO DTV SHARES. As of the date hereof, FEG is the sole
record owner and has good and valid title to the DTV Shares, free and clear of
any and all Securities Encumbrances. As of the Closing, Splitco will be the sole
record beneficial owner of, and will have good and valid title to the DTV
Shares, free and clear of any and all Securities Encumbrances. The DTV Shares
are duly authorized, validly issued, fully paid and nonassessable, and have not
been issued in violation of any preemptive or similar rights. The DTV Shares
constitute all shares of common stock of DTV beneficially owned by Parent.
Section 4.20. CERTAIN TAX MATTERS.
4.20.1 FILING AND PAYMENT. (i) All material Tax Returns required to be
filed with any Taxing Authority by or on behalf of the Transferred
Subsidiaries or otherwise with respect to the Transferred Business
have been filed when due (taking into account any extension of time
within which to file) in accordance with all applicable Laws; (ii)
all such Tax Returns are accurate and complete in all
34
material respects and have been prepared in substantial compliance
with all applicable Laws; (iii) all material Taxes due and payable
by the Transferred Subsidiaries or with respect to the Transferred
Business have been timely paid, or withheld and remitted to the
appropriate Taxing Authority; (iv) no written claim has been made
by any Taxing Authority in a jurisdiction where any of the
Transferred Subsidiaries does not file a Tax Return that it is, or
may be, subject to Tax by that jurisdiction; and (v) there are no
Encumbrances on any of the assets of any of the Transferred
Subsidiaries that arose in connection with any failure (or alleged
failure) to pay any Tax (except for Encumbrances that arise by
operation of Law for Taxes not yet due and payable).
4.20.2 WITHHOLDING. Each of the Transferred Subsidiaries has complied with
all applicable Laws relating to the payment and withholding of any
material amount of Taxes and have, within the time and the manner
prescribed by applicable Law, withheld from and paid over to the
proper Taxing Authorities all material amounts required to be so
withheld and paid over under all applicable Laws.
4.20.3 PROCEEDINGS AND COMPLIANCE. (i) No outstanding written claim has
been received, and no audit, action, suit or proceeding is in
progress, against or with respect to any of the Transferred
Subsidiaries in respect of any material Tax; and (ii) all material
deficiencies, assessments or proposed adjustments asserted against
any of the Transferred Subsidiaries by any Taxing Authority have
been paid or fully and finally settled.
4.20.4 AVAILABILITY OF TAX RETURNS. Parent has furnished or made available
to LMC complete and accurate copies of all portions of United
States federal income Tax Returns and material state income Tax
Returns relating to the Transferred Subsidiaries, and including, in
each case, any amendments thereto, filed by or on behalf of any
such Transferred Subsidiaries for all taxable periods beginning
after December 31, 2000.
4.20.5 CONSOLIDATION AND SIMILAR ARRANGEMENTS; TAX SHARING AGREEMENTS.
None of the Transferred Subsidiaries (i) is or has been a member of
an affiliated group (within the meaning of Section 1504 of the
Code) filing a consolidated federal income Tax Return, other than
an affiliated group the common parent of which is or was Parent (a
"Parent Group"), (ii) is or has been a member of any affiliated,
combined, consolidated, unitary or similar group for state, local
or foreign Tax purposes other than a group the common parent of
which is Parent, (iii) is a party to, or has any liability for any
Tax under, any Tax Sharing Agreement or (iv) has any liability for
the Taxes of any Person under Treasury Regulations Section 1.1502-6
(or any similar provision of state, local, or foreign Law) or as a
transferee or successor, except for such liability arising from
membership in a Parent Group.
4.20.6 TIMING. None of the Transferred Subsidiaries will be required to
include any item of income in, or exclude any item of deduction
from, taxable income for any taxable period (or portion thereof)
ending after the Closing Date as a result of any
35
(i) change in method of accounting for a taxable period (or portion
thereof) ending on or prior to the Closing Date (other than any
change in method of accounting made by LMC or any of its
Affiliates, except for any change in method of accounting made on
any Tax Return of or including the Transferred Subsidiaries which
Parent is responsible for preparing pursuant to Section 2.1(a) of
the Tax Matters Agreement), (ii) "closing agreement" as described
in Section 7121 of the Code (or any corresponding or similar
provision of state, local or foreign income Tax Law) executed prior
to the Closing, or (iii) installment sale or open transaction
occurring prior to the Closing.
4.20.7 STATUTE OF LIMITATIONS. No waiver or extension of any statute of
limitations in respect of material Taxes or any extension of time
with respect to a material Tax assessment or deficiency is in
effect for any of the Transferred Subsidiaries.
4.20.8 SECTION 355. Except with respect to the Transactions, none of the
Transferred Subsidiaries has constituted either a "distributing
corporation" or a "controlled corporation" (or is otherwise a
successor to a "distributing corporation" or a "controlled
corporation") in a distribution of stock qualifying or intended to
qualify under Section 355 of the Code.
4.20.9 REPORTABLE TRANSACTIONS. None of the Transferred Subsidiaries has
participated in a "listed transaction" within the meaning of
Treasury Regulations Section 1.6011-4(b)(2).
4.20.10 CERTAIN AGREEMENTS AND RULINGS. None of the Transferred
Subsidiaries is a party to or bound by any advance pricing
agreement, closing agreement or other agreement or ruling relating
to Taxes with any Taxing Authority that will remain in effect with
respect to such Transferred Subsidiary after the Closing.
4.20.11 DTV SHARES. To the Knowledge of Parent, for United States federal
income Tax purposes the aggregate basis of the DTV Shares is $6.8
billion. Parent has not taken any position for Tax purposes or in
computing any deferred income tax provision or reserve for
financial reporting purposes that is inconsistent with the
representation set forth in the preceding sentence.
Section 4.21. AFFILIATE TRANSACTIONS. Section 4.21 of the Parent Disclosure
Letter sets forth, as of the date hereof, all Contracts and all material
allocations, obligations, transactions or other arrangements (oral or written)
between DTV, on the one hand, and Parent or any of its Subsidiaries, on the
other hand, that, in each case, shall be in effect following the Closing (each,
an "Affiliate Transaction").
Section 4.22. BROKERS OR FINDERS. Except as set forth in Section 4.22 of
the Parent Disclosure Letter, no agent, broker, investment banker, financial
advisor or other Person (any such Person, a "Broker") is or will be entitled to
any financial advisory, broker's, finder's or similar fee or commission in
connection with the Transactions (collectively, "Broker Fees") based upon
arrangements made by or on behalf of Parent, DTV, a Transferred Subsidiary or
any of their respective Affiliates.
36
Section 4.23. INVESTIGATION; RELIANCE.
4.23.1 Notwithstanding anything to the contrary set forth herein, the
express representations and warranties set forth in this Agreement,
the Parent Tax Opinion Representations and the Tax Matters
Agreement are the only representations and warranties concerning
Parent and the DTV Shares made to LMC by Parent. Such
representations and warranties are made expressly in lieu of all
other warranties and representations, express or implied.
4.23.2 Parent hereby acknowledges and agrees that LMC makes no
representations or warranties to Parent, express or implied, other
than those representations and warranties set forth in this
Agreement, the LMC Tax Opinion Representations, the Tax Matters
Agreement and the Ancillary Agreements. Parent hereby expressly
acknowledges and agrees that it is not relying on, is not entitled
to rely on and, except in the case of fraud or willful breach,
neither LMC nor any Person will have or be subject to any liability
to Parent or any other Person resulting from, any statements or
communications by LMC or any of its Affiliates or Representatives
with respect to any matter in connection with its investigation or
evaluation of the Transactions, except for the representations and
warranties expressly set forth in this Agreement, the Tax Matters
Agreement, the LMC Tax Opinion Representations and the Ancillary
Agreements.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF LMC
Except as set forth in the LMC Disclosure Letter delivered by LMC to
Parent prior to the execution of this Agreement, LMC hereby represents and
warrants to Parent as follows:
Section 5.1. ORGANIZATION AND STANDING. LMC and each Stockholder is (a) a
corporation, limited liability company or other legal entity duly organized,
validly existing and duly qualified or licensed and in good standing under the
Laws of the state or jurisdiction of its organization with full corporate or
other power and authority to own, lease, use and operate its properties and to
conduct its business, and (b) duly qualified or licensed to do business and in
good standing in any other jurisdiction in which the nature of the business
conducted by it or the property it owns, leases or operates requires it to so
qualify, be licensed or be in good standing, except where the failures to be so
qualified, licensed or in good standing have not had a Material Adverse Effect
on LMC or any of the Stockholders, as the case may be.
Section 5.2. CORPORATE POWER AND AUTHORITY. LMC and each Stockholder has
all requisite corporate or other power and authority to execute and deliver this
Agreement and to consummate the Transactions. LMC and each Stockholder has all
requisite corporate or other power and authority to execute and deliver the
Ancillary Agreements and the other agreements, documents and instruments to be
executed and delivered by it in connection with this Agreement, including the
LMC Tax Opinion Representations, the Closing Certificates required by Sections
7.3.1 and 7.3.2, or the Ancillary Agreements and to consummate the Transactions.
37
The execution, delivery and performance of this Agreement by LMC and each
Stockholder and the consummation by LMC and each Stockholder of the
Transactions, including the exchange and delivery by the Stockholders to Parent
of the LMC Parent Shares, and the execution, delivery and performance of the
Ancillary Agreements and the other agreements, documents, certificates and
instruments to be executed and delivered in connection with this Agreement or
the Ancillary Agreements by LMC and each Stockholder and the consummation of the
Transactions, have been duly authorized by all necessary action on the part of
LMC and each Stockholder. Each of this Agreement and the Tax Matters Agreement
has been duly executed and delivered by LMC and constitutes the legal, valid and
binding obligation of LMC, enforceable against LMC in accordance with its terms,
except as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar Laws now or hereafter in effect relating to or
affecting creditors' rights generally, including the effect of statutory and
other Laws regarding fraudulent conveyances and preferential transfers and
subject to the limitations imposed by general equitable principles (regardless
of whether such enforceability is considered in a proceeding at Law or in
equity). When signed, the Ancillary Agreements (other than the Tax Matters
Agreement which is the subject of the preceding sentence) and the other
agreements, documents, certificates (including the LMC Tax Opinion
Representations) and instruments to be executed and delivered by LMC and each
Stockholder in connection with this Agreement or the Transactions shall have
been duly executed and delivered by LMC and each Stockholder and shall
constitute the legal, valid and binding obligations of LMC and each Stockholder,
enforceable against LMC and each Stockholder in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar Laws now or hereafter in effect
relating to or affecting creditors' rights generally, including the effect of
statutory and other Laws regarding fraudulent conveyances and preferential
transfers and subject to the limitations imposed by general equitable principles
(regardless of whether such enforceability is considered in a proceeding at Law
or in equity).
Section 5.3. NO VOTE REQUIRED. No vote or other action of the shareholders
of LMC or any Stockholder is required by Law, the organizational documents of
LMC or any Stockholder otherwise in order for LMC and/or the Stockholders to
consummate the Exchange and the transactions contemplated hereby. The Board of
Directors of LMC, by vote at a meeting duly called and held, has approved the
Exchange.
Section 5.4. CONFLICTS; CONSENTS AND APPROVALS. Except as set forth in
Section 5.4 of the LMC Disclosure Letter, neither the execution and delivery by
LMC and each Stockholder of this Agreement, the Ancillary Agreements and the
other agreements, documents and instruments to be executed and delivered by LMC
and each Stockholder in connection with this Agreement and the Ancillary
Agreements, nor the consummation of the Transactions, will:
5.4.1 conflict with, or result in a breach of any provision of, the
organizational documents of LMC or any Stockholder;
5.4.2 violate, or conflict with, or result in a breach of any provision
of, or constitute a default (or an event that, with the giving of
notice, the passage of time or otherwise, would constitute a
default) under, or entitle any Person (with the giving of notice,
the passage of time or otherwise) to terminate, accelerate, modify
or call
38
a default under, or give rise to any obligation to make a payment
under, or to any increased, additional or guaranteed rights of any
Person under, or result in the creation of any Encumbrance upon any
of the LMC Parent Shares or any of the other properties or assets
of LMC or any Stockholder under any of the terms, conditions or
provisions of any Contract to which LMC or any Stockholder is a
party or pursuant to which any of its properties or assets are
bound, except for any such conflicts, violations, breaches,
defaults or occurrences which would not prevent or materially delay
the performance of this Agreement by LMC or a Stockholder;
5.4.3 assuming the approvals required under Section 5.4.4 are obtained,
violate any order, writ, or injunction, or any material decree, or
material Law applicable to LMC or any Stockholder or any of their
properties or assets except as would not have a Material Adverse
Effect on LMC's or the Stockholders' ability to consummate the
Exchange and the transactions contemplated hereby; or
5.4.4 require any consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Authority, except
for (i) (A) applicable requirements of the Exchange Act, the
Securities Act, and state securities or "blue sky" Laws, (B) the
pre-merger notification requirements of the HSR Act, and (C)
approval of the transactions contemplated by this Agreement under
the Communications Act or (ii) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such
filings or notifications would not prevent or materially delay the
performance of this Agreement by LMC.
Section 5.5. LMC PARENT SHARES. The LMC Parent Shares constitute all shares
of Parent Class A Common Stock and all shares of Parent Class B Common Stock
beneficially owned by the Stockholders and/or LMC. Except as set forth on
Section 5.5 of the LMC Disclosure Letter, each Stockholder has good and valid
title to the LMC Parent Shares owned by it, free and clear of any and all
Securities Encumbrances. Upon delivery to Parent of the certificates
representing the LMC Parent Shares at the Closing, or evidence of a book-entry
transfer of the LMC Parent Shares to an account of Parent, Parent will acquire
good and valid title to such shares, free and clear of any and all Securities
Encumbrances.
Section 5.6. LITIGATION. As of the execution of this Agreement, there is no
Action pending or, to LMC's Knowledge, threatened against LMC that seeks, or
would reasonably be expected, to prohibit or restrain the ability of LMC to
enter into this Agreement or any Ancillary Agreement to which it is a party or
to timely consummate any of the Transactions.
Section 5.7. GOVERNMENTAL ACTIONS. As of the execution of this Agreement,
there are no material judgments, decrees, written agreements, memoranda of
understanding or orders of any Governmental Authority outstanding against LMC
which would reasonably be expected to prevent, prohibit, materially delay or
enjoin the consummation of the Transactions.
Section 5.8. FCC MATTERS. LMC is legally and financially qualified under
the Communications Act to hold the Business FCC Licenses and the DTV Shares. To
LMC's Knowledge, there are no facts or circumstances pertaining to LMC or any of
its Subsidiaries
39
which, under the Communications Act, would reasonably be expected to result in
the FCC's refusal to grant the FCC Consent or which would require waiver of, or
exemption from, any provision of the Communications Act necessary to obtain the
FCC Consent.
Section 5.9. INVESTMENT PURPOSE AND EXPERIENCE. The Stockholders are
receiving the Splitco Shares, and indirectly the DTV Shares, for their own
account and not with a view towards, or for resale in connection with, the
public sale or distribution thereof, except pursuant to sales registered or
exempted under the Securities Act. Each Stockholder is an "accredited investor,"
as that term is defined in Regulation D promulgated under the Securities Act.
LMC acknowledges that each Stockholder can bear the economic risk and complete
loss of its investment in the Splitco Shares, and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment contemplated hereby.
Section 5.10. Investigation; Reliance.
5.10.1 Notwithstanding anything to the contrary set forth herein, the
express representations and warranties set forth in this Agreement,
the LMC Tax Opinion Representations and the Tax Matters Agreement
are the only representations and warranties concerning LMC and the
LMC Parent Shares made to Parent by LMC. Such representations and
warranties are made expressly in lieu of all other warranties and
representations, express or implied.
5.10.2 LMC hereby acknowledges and agrees that Parent makes no
representations or warranties to LMC, express or implied, other
than those representations and warranties set forth in this
Agreement, the Parent Tax Opinion Representations, the Tax Matters
Agreement and the Ancillary Agreements. LMC hereby expressly
acknowledges and agrees that it is not relying on, is not entitled
to rely on and, except in the case of fraud or willful breach,
neither Parent nor any Person will have or be subject to any
liability to LMC or any other Person resulting from, any statements
or communications by Parent, any Transferred Subsidiary, DTV or any
of their respective Affiliates or Representatives with respect to
any matter in connection with its investigation or evaluation of
the Transferred Business, the Transferred Subsidiaries, Splitco or
DTV (including any of the assets or liabilities of the Transferred
Business, the Transferred Subsidiaries, Splitco or DTV), including
any information, document or material made available in any
offering memorandum, in any "data room," in any management
presentations or in any other form, except for the representations
and warranties expressly set forth in this Agreement, the Parent
Tax Opinion Representations, the Tax Matters Agreement and the
Ancillary Agreements
Section 5.11. BROKERS AND FINDERS. Except as set forth in Section 5.11 of
the LMC Disclosure Letter, no Broker is or will be entitled to any Broker Fees
based upon arrangements made by or on behalf of LMC or any of its Affiliates.
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ARTICLE VI.
COVENANTS AND AGREEMENTS
Section 6.1. ACCESS AND INFORMATION. During the period from the date of
this Agreement to the Closing, except to the extent prohibited by applicable Law
or the terms of any Contract entered into prior to the date hereof for which
Parent has been unable, despite use of its reasonable best efforts, to obtain a
consent or waiver from the other parties thereto (other than any Affiliate of
Parent) to enable disclosure to LMC, or as would reasonably be expected to
violate or result in a loss or impairment of any attorney-client or work product
privilege (it being understood that the parties shall use reasonable best
efforts to cause such information to be provided in a manner that does not
result in such violation, loss or impairment), and subject to the obligations of
LMC under the Confidentiality Agreement with respect thereto, Parent will permit
(and will cause the Transferred Subsidiaries to permit) Representatives of LMC
to have reasonable access during normal business hours and upon reasonable
notice to all premises, properties, personnel, books, records, Contracts,
commitments, reports of examination, and documents of or pertaining to the
Transferred Business, and reasonable opportunity upon prior notice and
consultation with Parent to communicate with employees of the Transferred
Business (PROVIDED that Parent and the Transferred Subsidiaries shall have the
right to be present by representative for all such contacts between LMC and any
employee of the Transferred Business, whether in person, telephonic or
otherwise), except with respect to DTV, as may be necessary to permit LMC to, at
its sole expense, make, or cause to be made, such investigations thereof as are
reasonably necessary in connection with the consummation of the Transactions,
and Parent shall (and shall cause the Transferred Subsidiaries to) reasonably
cooperate with any such investigations; PROVIDED that Parent's designees on the
Board of Directors of DTV, subject to their fiduciary duties to DTV and its
stockholders, shall take no action to interfere with the investigation of DTV by
LMC. No information or knowledge obtained in any investigation pursuant to this
Section 6.1 or otherwise shall affect or be deemed to modify any representation
or warranty contained herein or delivered pursuant hereto or to modify the
conditions to the obligations of the parties hereto to consummate the
Transactions.
Section 6.2. CONDUCT OF BUSINESS BY PARENT. Except (i) as contemplated or
permitted by this Agreement and the Ancillary Agreements, (ii) as required by
applicable Law, (iii) as described in Section 6.2 of the Parent Disclosure
Letter or (iv) with the prior written consent of LMC (not to be unreasonably
withheld or delayed), during the period from the date hereof to the Closing
Date, Parent shall, and shall cause each of the Transferred Subsidiaries to,
conduct the Transferred Business only in the ordinary course of business
consistent with past practice and use reasonable best efforts to preserve intact
current business organizations of the Transferred Business and relationships
with third parties and keep available the service of the current officers and
employees of the Transferred Business. From the date hereof until the earlier of
the Closing or the termination of this Agreement, Parent will vote or cause its
Affiliates to vote all shares of DTV over which it has the power to vote or
cause to be voted against any action by DTV or any of its Subsidiaries, which is
outside its ordinary course of business (including amendments to DTV's Charter)
that is presented or proposed for consideration by DTV stockholders at any time
after the date of this Agreement and prior to the Closing or termination of this
Agreement, subject to Parent's obligations under Section 6.13.3 of this
Agreement. Without limiting the generality of the foregoing, except (i) as
contemplated or permitted by this Agreement and the
41
Ancillary Agreements, (ii) as required by applicable Law, (iii) as described in
Section 6.2 of the Parent Disclosure Letter or (iv) with the prior written
consent of LMC, prior to the Closing Date, Parent shall not take any action that
would violate the terms of the RSN Non-Competition Agreement (assuming that the
period referred to therein is effective beginning as of the date hereof) and
Parent shall cause each of the Transferred Subsidiaries not to:
6.2.1 make any change in or amendments to the charter, bylaws,
partnership agreement, membership agreement or other organizational
documents applicable to any Transferred Subsidiary;
6.2.2 issue, grant, sell or deliver any shares of capital stock or other
equity interests or securities of any Transferred Subsidiary, or
any securities convertible into, or options, warrants or rights of
any kind to subscribe for or acquire, any shares of capital stock
or other equity interests or securities of any Transferred
Subsidiary, or any phantom shares, phantom equity interests or
stock or equity appreciation rights of any Transferred Subsidiary,
or enter into any Contract, commitment or arrangement with respect
to any of the foregoing;
6.2.3 split, combine or reclassify the outstanding shares of capital
stock or other equity interests or securities of any Transferred
Subsidiary or issue any capital stock or other equity interests or
securities of any Transferred Subsidiary in exchange for any such
shares or interests;
6.2.4 redeem, purchase or otherwise acquire, directly or indirectly, any
shares of capital stock or any other equity interests or securities
of any Transferred Subsidiary;
6.2.5 adopt or authorize any stock or equity appreciation rights,
restricted stock or equity, stock or equity purchase, stock or
equity bonus or similar plan, arrangement or agreement applicable
to any Transferred Subsidiary;
6.2.6 make any other changes in the capital structure or the partnership
or membership structure of any Transferred Subsidiary;
6.2.7 make any change in any method of financial accounting or financial
accounting principles, practice or policy employed by or applicable
to a Transferred Subsidiary, except for any such change required by
reason of a concurrent change in GAAP;
6.2.8 except to the extent sold or otherwise disposed of in the ordinary
course of business consistent with past practices, sell, lease (as
lessor), mortgage, pledge or otherwise dispose of any material
asset of a Transferred Subsidiary to any Person;
6.2.9 except (A) in accordance with Parent's cash management system or
(B) for dividends and distributions permitted under clause (6.2.10)
below, make any loans or advances to, investments in, or guarantees
for the benefit of, any Person, except for travel and similar
advances made to employees, officers or directors, in the ordinary
course of business, or engage in or amend, or modify, or extend any
42
Contract, arrangement, commitment or transaction with any Affiliate
of Parent which will continue in full force and effect following
the Closing;
6.2.10 declare or pay any dividend or make any other distribution to its
stockholders whether or not upon or in respect of any shares of its
capital stock or equity interest; PROVIDED, HOWEVER, that LMC
acknowledges and agrees that (A) the Transferred Subsidiaries do
not maintain cash balances and, at the time of the Closing, Parent
will withdraw any cash balances of the Transferred Subsidiaries
(other than the material proceeds from an insurance claim) and (B)
from the date hereof until the Closing, dividends and distributions
of cash may continue to be made by the Transferred Subsidiaries to
wholly owned Subsidiaries of Parent in the ordinary course of
business consistent with past practices;
6.2.11 except to the extent required pursuant to the terms of any Employee
Benefit Plan or in effect on the date hereof, (i) increase salary,
wages or other compensation (including any bonuses, commissions and
any other payments) of any Transferred Employee whose annual
salary, wages and such other compensation is, or after giving
effect to such change would be, in the aggregate, $150,000 or more
per annum; (ii) hire any new employee who would be a Transferred
Employee or enter into a contract with any consultant to perform
services relating to the Transferred Business, in each case on
terms providing for annual salary, wages and other compensation, in
the aggregate, of $150,000 or more per annum; (iii) adopt, enter
into or amend any Employee Benefit Plan other than a Subsidiary
Employee Benefit Plan, except as required by applicable Law or
applicable to all participants of such plan; PROVIDED that such
plan does not disproportionately affect Transferred Employees; or
(iv) adopt, enter into or amend any Collective Bargaining Agreement
or other labor union contract, Subsidiary Employee Benefit Plan or
Employment Agreement applicable to Transferred Employees, or enter
into any Contract, commitment or arrangement with respect to any of
the foregoing; PROVIDED that it is the understanding of the parties
that Parent shall have the right, prior to or at the Closing, to
transfer the employment of each Transferred Employee not already
employed by one of the Transferred Subsidiaries to the applicable
Transferred Subsidiary;
6.2.12 pay, discharge or satisfy Liabilities, other than (i) the payment,
discharge or satisfaction of Liabilities reflected or reserved
against in the Interim Balance Sheet or incurred since the Interim
Balance Sheet Date in the ordinary course of business consistent
with past practices and (ii) scheduled repayments of indebtedness
reflected on any Interim Balance Sheet;
6.2.13 cancel any Indebtedness or waive or assign any claims or rights
(tangible and intangible), except in the ordinary course of
business and consistent with past practices;
6.2.14 (i) incur or assume or become obligated with respect to any
Indebtedness or guarantee any such Indebtedness of another Person,
issue or sell any debt securities or warrants or other rights to
acquire any debt securities, or guarantee
43
any debt securities of another Person, except, in each case, in the
ordinary course of business consistent with past practices, (ii)
secure any of its outstanding unsecured Indebtedness or provide
additional security for any of its outstanding secured Indebtedness
or (iii) except in the ordinary course of business consistent with
past practices, incur, impose or permit to exist any Encumbrance on
any asset;
6.2.15 (i) other than in the ordinary course of business, enter into any
Contract of a character required to be disclosed in Section 4.13 of
the Parent Disclosure Letter or terminate, renew, modify or amend
any of the Material Contracts; PROVIDED that, for the avoidance of
doubt, the expiration in accordance with its terms of any Material
Contract shall not constitute termination, renewal or amendment of
such Material Contracts; or (ii) cancel or terminate, or permit to
be cancelled or terminated, any material insurance relating to the
Transferred Business or any related assets;
6.2.16 (i) acquire any business or significant assets and properties of
any Person (whether by merger, consolidation or otherwise); (ii)
make any capital contribution or investment (or agree to make any
capital contribution or investment) in or acquire any securities or
debt or equity interests in any other Person; or (iii) except as
necessary in the ordinary course of business consistent with past
practices, dispose of, grant, or obtain, or permit to lapse any
rights to, any material Owned or Licensed Intellectual Property;
6.2.17 settle any Actions in a manner in which the settlement of such
Action would materially adversely affect the conduct of the
Transferred Business following the Closing Date, except where any
such material adverse effect on the conduct of the Transferred
Business resulting from the settlement of any such Action is not
disproportionate to the adverse effect of such settlement on the
conduct of the business of the regional sports programming cable
networks operated by Parent and its Subsidiaries (other than the
RSN Subsidiaries); or
6.2.18 enter into an agreement to do any of the foregoing.
Section 6.3. CONDUCT OF BUSINESS BY LMC. Except as described in Schedule
6.3, during the period from the date hereof to the Closing Date, or the date, if
any, on which this Agreement is earlier terminated in accordance with Article
IX, neither LMC nor any of its Subsidiaries shall acquire or make any investment
in any corporation, partnership, limited liability company, other business
organization or any division thereof that holds, or has an attributable interest
in, any license, authorization, permit or approval issued by the FCC if such
acquisition or investment would reasonably be expected to prevent or materially
delay or impede receipt of the FCC Consent.
Section 6.4. PROXY STATEMENT.
6.4.1 Within forty-five (45) days of the signing of this Agreement,
Parent shall prepare and shall cause to be filed with each of the
SEC and the ASX a proxy statement in
44
preliminary form (together with any amendments thereof or
supplements thereto, the "Proxy Statement") relating to the Parent
Stockholders' Meeting. Parent shall include in the Proxy Statement
the recommendation of the Board of Directors of Parent that the
Parent stockholders approve the Exchange (the "Parent
Recommendation"); PROVIDED that prior to the approval of the
Exchange by Parent's stockholders in accordance with this Agreement
the Board of Directors of Parent may fail to make or withdraw,
modify or change in a manner adverse to LMC its recommendation that
the stockholders vote in favor of this Agreement (a "Parent Change
in Recommendation"), if, and only if, the Board of Directors of
Parent has determined, in its good faith judgment and after
consultation with outside legal counsel, that the failure to effect
such action could reasonably be expected to be inconsistent with
the fulfillment of its fiduciary duties to Parent's stockholders
under applicable Law; PROVIDED that a Parent Change in
Recommendation shall not relieve Parent of its obligations pursuant
to Section 6.5 hereof. Parent shall use its reasonable best efforts
to respond as promptly as practicable to any comments of the SEC
and the ASX with respect to the Proxy Statement. Parent shall
promptly notify LMC upon the receipt of any comments (written or
oral) from the SEC or the ASX or their respective staff or any
request from the SEC or the ASX or their respective staff for
amendments or supplements to the Proxy Statement, shall consult
with LMC prior to responding to any such comments or request or
filing any amendment or supplement to the Proxy Statement, and
shall provide LMC with copies of all correspondence between Parent
and its Representatives, on the one hand, and the SEC and the ASX
and their respective staff, on the other hand. In addition to the
Parent Stockholder Approval required by Law, the parties have
agreed as a matter of contract that the affirmative vote of a
majority of the votes cast in person or by proxy by holders of
Parent Class B Shares other than LMC, the Stockholders and any of
their respective Associates, and the ▇▇▇▇▇▇▇ Interests (the
"Disinterested Stockholder Approval" and, together with the Parent
Stockholder Approval, the "Requisite Parent Stockholder Approval")
is required to approve the Exchange. Parent represents and warrants
that (i) none of the information with respect to Parent or its
Subsidiaries to be included in the Proxy Statement or incorporated
by reference therein will, at the time of the mailing of the Proxy
Statement or any amendments or supplements thereto, and at the time
of the Parent Stockholders' Meeting, contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made,
not misleading; and (ii) the Proxy Statement will comply as to form
in all material respects with the provisions of the Exchange Act
and the rules and regulations promulgated thereunder and any
applicable rules and regulations promulgated by the ASX, except for
any such failures to comply as to form which result from any
actions or omissions of LMC or any person authorized to act on its
behalf, and will include, or be accompanied by, a report from ▇▇▇▇▇
▇▇▇▇▇▇ & Associates as to the fairness and reasonableness of the
Exchange, which is qualified as an independent expert for these
purposes under the ASX Listing Rules and applicable Law (the
"Independent Expert Report"). Parent will provide LMC with drafts
of the
45
Independent Expert Report received by Parent to the extent
permitted by applicable Law and to the extent that Australian
counsel to Parent has advised Parent that such action will not
compromise the independence of such expert. LMC represents and
warrants that none of the information with respect to LMC or its
Subsidiaries supplied by LMC or any person authorized to act on its
behalf for inclusion in the Proxy Statement or incorporated by
reference therein will, at the time of the mailing of the Proxy
Statement or any amendments or supplements thereto, and at the time
of the Parent Stockholders' Meeting, contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made,
not misleading.
6.4.2 Parent and LMC shall cooperate and consult with each other in
preparation of the Proxy Statement and any other documents or
reports to be disseminated to holders of Parent Class B Common
Stock primarily in connection with such holders' consideration of
the Exchange (other than, except, to the extent permitted by
applicable Law, any factual matters contained in such report, the
Independent Expert Report). Without limiting the generality of the
foregoing, LMC will use reasonable best efforts to furnish to
Parent the information relating to it required by the Exchange Act
and the rules and regulations promulgated thereunder or any
applicable rules and regulations promulgated by the ASX to be set
forth or incorporated by reference in the Proxy Statement.
Notwithstanding anything to the contrary stated above, prior to
filing and mailing the Proxy Statement (or any amendment or
supplement thereto) or responding to any comments of the SEC or the
ASX with respect thereto, Parent shall provide LMC an opportunity
to review and comment on such document or response.
6.4.3 As promptly as reasonably practicable after the Proxy Statement has
been cleared by the SEC and the ASX, Parent shall mail the Proxy
Statement to the holders of Parent Class B Common Stock as of the
record date established for the Parent Stockholders' Meeting. If at
any time prior to the Parent Stockholders' Meeting any event,
occurrence or circumstance relating to the Parent, LMC or any of
their respective Subsidiaries, or their respective officers or
directors, should be discovered by Parent or LMC, respectively,
which, pursuant to the Securities Act or Exchange Act or any
applicable rule or regulation promulgated by the ASX, should be set
forth in an amendment or a supplement to the Proxy Statement, such
party shall promptly inform the other parties hereto. Each of LMC
and Parent agrees to correct any information provided by it for use
or incorporated by reference in the Proxy Statement which shall
have become false or misleading. Parent will be solely responsible
for all filing fees, costs and expenses relating to the preparation
of the Proxy Statement and matters related to the Parent
Stockholder Meeting.
Section 6.5. PARENT STOCKHOLDERS' MEETING. Unless this Agreement has been
earlier terminated in accordance with Article VIII, Parent shall, acting through
its Board of Directors, as promptly as reasonably practicable following the date
of this Agreement, establish a record date for, duly call, give notice of,
convene and hold a meeting of the holders of Parent Class B
46
Common Stock in accordance with the Listing Rules of the ASX and any other
applicable Laws, for the purpose of voting upon the approval of the Exchange
(the "Parent Stockholders' Meeting"). Except as required by any Governmental
Authority, and for matters to which LMC shall have provided its prior written
consent (which consent shall not be unreasonably withheld or delayed), the only
matters Parent shall propose to be acted on by the holders of Parent Class B
Common Stock at the Parent Stockholders' Meeting shall be the approval of the
Exchange. In connection with the Parent Stockholders' Meeting, Parent will use
reasonable best efforts to obtain the requisite quorum at the Parent
Stockholders' Meeting and to obtain the Requisite Parent Stockholder Approval,
including by soliciting from its stockholders proxies in favor of the approval
of the Exchange, PROVIDED that Parent shall have no obligation to solicit from
its stockholders proxies in favor of the approval of the Exchange from and after
the date upon which there shall have been a Parent Change in Recommendation in
accordance with Section 6.4.1; provided, however, Parent shall continue to be
obligated to convene and hold the Parent Stockholders' Meeting in accordance
with the terms of this Agreement.
Section 6.6. APPROPRIATE ACTION; CONSENTS; FILINGS.
6.6.1 The parties hereto will use their respective reasonable best
efforts to consummate and make effective the Transactions and to
cause the conditions to the Closing set forth in Article VII to be
satisfied, including (i) the obtaining of all necessary actions or
nonactions, consents and approvals from Governmental Authorities or
other Persons necessary in connection with the consummation of the
Transactions, and the making of all necessary registrations and
filings (including filings with Governmental Authorities if any)
and the taking of all reasonable steps as may be necessary to
obtain an approval from, or to avoid an Action by, any Governmental
Authority or other Persons necessary in connection with the
consummation of the Transactions; and (ii) the defending of any
lawsuits or other Actions, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions
performed or consummated by such party in accordance with the terms
of this Agreement, including the Exchange, including seeking to
have any stay or temporary restraining order entered by any court
or other Governmental Authority vacated or reversed.
6.6.2 Each of the parties hereto shall promptly (in no event later than
twenty (20) Business Days following the date that this Agreement is
executed) make its respective filings, and thereafter make any
other required submissions under the HSR Act with respect to the
Transactions.
6.6.3 LMC and Parent shall cooperate to prepare such applications as may
be necessary for submission to the FCC in order to obtain the FCC
Consent (the "FCC Applications"). LMC and Parent shall promptly (in
no event later than twenty (20) Business Days following the date
that this Agreement is executed) file the FCC Applications with the
FCC, and the parties shall diligently take, or cooperate in the
taking of, all necessary, desirable and proper actions, and provide
any additional information, reasonably required or requested by the
FCC. Each of LMC and Parent agrees not to, and shall not permit any
of its respective
47
Subsidiaries to, take any action that would reasonably be expected
to prevent or materially delay or impede receipt of the FCC
Consent.
6.6.4 Each of LMC and Parent shall give (or shall cause its respective
Subsidiaries to give) any notices to third parties, and each of LMC
and Parent shall use, and cause each of its Subsidiaries to use,
its reasonable best efforts to obtain any third party consents not
covered by Sections 6.6.1, 6.6.2 and 6.6.3 above, necessary, proper
or advisable to consummate Transactions. Each of the parties hereto
will furnish to the other such necessary information and reasonable
assistance as the other may request in connection with the
preparation of any required governmental filings or submissions and
will cooperate in responding to any inquiry from a Governmental
Authority, including promptly informing the other party of such
inquiry, consulting in advance before making any presentations or
submissions to a Governmental Authority, and supplying each other
with copies of all correspondence, filings or communications
between either party and any Governmental Authority with respect to
this Agreement. No party hereto shall independently participate in
any formal meeting with any Governmental Authority in respect of
any such filings, submissions, investigation, or other inquiry
without giving the other parties hereto prior notice of the meeting
and, to the extent permitted by such Governmental Authority, the
opportunity to attend and/or participate.
6.6.5 If any objections are asserted with respect to the Transactions
under any Antitrust Law or any Communications Regulation or if any
suit is instituted by any Governmental Authority or any private
party challenging any of the Transactions as violative of any
Antitrust Law or Communications Regulation, the parties shall use
their reasonable best efforts to resolve any such objections or
challenge as such Governmental Authority or private party may have
to such transactions under such law so as to permit consummation of
the Transactions. In furtherance of the parties' obligations under
this Section 6.6, LMC and Parent shall be required to (and, to the
extent required by any Governmental Authority, shall cause their
respective current and future Subsidiaries to), propose, negotiate,
commit to and enter into one or more settlements, undertakings,
conditions, consent decrees, stipulations and other agreements with
or to one or more Governmental Authorities (each, a "Settlement")
in connection with the Transactions (including obtaining the
requisite consent of such Governmental Authorities), including one
or more Settlements that require LMC or Parent to restructure the
operations of, or sell or otherwise divest or dispose of, its
assets and/or the assets of its current and future Subsidiaries;
provided, however, that (i) neither LMC nor any of its Subsidiaries
shall be required to take (or commit to take) any of the foregoing
actions, or any other action contemplated by this Section 6.6, (A)
if any such actions would reasonably be expected to have a material
adverse effect on the business or operations of LMC and its
Subsidiaries or any of their cable, television (including video or
electronic home shopping) or satellite businesses, or (B) if the
Board of Directors of LMC determines, in good faith, that the
taking of such actions would be reasonably likely to have a
Material Adverse Effect on Splitco (without giving effect, for
purposes of this Section
48
6.6.5, to the exception contained in clause (i) of the second
sentence of the definition of "Material Adverse Effect" relating to
the performance of this Agreement), (ii) neither Parent nor any of
its Subsidiaries shall be required to take (or commit to take) any
of the foregoing actions or any other action contemplated by this
Section 6.6, if the Board of Directors of Parent determines, in
good faith, that the taking of such actions would be reasonably
expected to have a Material Adverse Effect on Splitco (without
giving effect, for purposes of this Section 6.6.5, to the exception
contained in clause (i) of the second sentence of the definition of
"Material Adverse Effect" relating to the performance of this
Agreement), without the prior written consent of LMC, and (iii)
neither Parent nor any of its Subsidiaries shall be required to
take (or commit to take) any of the foregoing actions, or any other
action contemplated by this Section 6.6, if any such actions would
reasonably be expected to have a material adverse effect on the
business or operations of Parent and its Subsidiaries or any of
their cable programming or television businesses.
Section 6.7. FURTHER ASSURANCES.
6.7.1 Each of the parties shall use its reasonable best efforts to take,
or cause to be taken, all appropriate action, do or cause to be
done all things necessary, proper or advisable under applicable
Law, and execute and deliver such documents and other papers, as
may be reasonably required to consummate the Transactions.
Section 6.8. STANDSTILL AGREEMENTS.
6.8.1 LMC agrees that, during the period commencing on the date hereof
and ending on the earliest of (w) the valid termination of this
Agreement in accordance with Article IX hereof, (x) the 10th
anniversary of the date hereof, (y) the consummation of the sale of
all or substantially all of the assets of Parent and its
Subsidiaries to any Person and (z) the effective time of any
merger, consolidation or business combination of Parent with or
into any other Person, other than a merger, consolidation or
business combination in which the holders of Parent common stock
immediately prior to such consummation hold immediately following
the consummation of such merger, consolidation or other business
combination, shares of the surviving entity constituting at least a
majority of the outstanding voting power of such surviving entity,
it shall not, and shall not authorize or permit any of its
Affiliates or their respective Representatives to do or agree to do
any of the following, without the prior written consent of Parent:
(a) effect or seek, offer or propose (whether publicly or
otherwise) to effect, or announce any intention to effect or cause
or participate in or in any way assist, facilitate or encourage any
other Person to effect or seek, offer or propose (whether publicly
or otherwise) to effect or participate in, (i) any acquisition of
any equity securities (or beneficial ownership thereof), or rights
or options to acquire any equity securities (or beneficial
ownership thereof), or any securities convertible into or
exercisable or exchangeable for equity securities (or beneficial
ownership thereof) ("Convertible Securities") any assets,
indebtedness or businesses of Parent or any of its Affiliates, (ii)
any tender or exchange offer,
49
consolidation, business combination, acquisition, merger, joint
venture or other business combination involving Parent, any of
Parent's Affiliates or any of the assets of Parent or its
Affiliates, (iii) any recapitalization, restructuring, liquidation,
dissolution or other extraordinary transaction with respect to
Parent or any of its Affiliates, or (iv) any "solicitation" of
"proxies" (as such terms are used in the proxy rules of the SEC) to
vote any voting securities of Parent or consents to any action from
any holder of any voting securities of Parent or seek to advise or
influence any Person with respect to the voting of or the granting
of any consent with respect to any voting securities of Parent; (b)
form, join or in any way participate in a "group" (as defined under
the Exchange Act) in connection with the voting securities of
Parent or otherwise act in concert with any Person in respect of
any such securities; (c) otherwise act, alone or in concert with
others, to seek representation on or to control or influence the
management, Board of Directors or policies of Parent or to obtain
representation on the Board of Directors of Parent; (d) enter into
any discussions or arrangements with any third party with respect
to any of the foregoing; (e) request that Parent or any of its
Representatives amend or waive any provision of this paragraph, or
make any public announcement with respect to the restrictions of
this paragraph, or take any action which would reasonably be
expected to require Parent make a public announcement regarding the
possibility of a business combination or merger; or (f) advise,
assist or encourage, or direct any Person to advise, assist or
encourage any other Persons, in connection with any of the
foregoing; PROVIDED, HOWEVER, that, notwithstanding anything
contained herein, (1) any acquisition (or proposed acquisition) of
an indirect interest in equity securities of Parent or any of its
Affiliates arising out of an acquisition by LMC or any of its
Affiliates of an interest in another Person (which Person,
immediately following such acquisition, would be an Affiliate of
LMC) that beneficially owns equity securities or Convertible
Securities of Parent or any of its Affiliates will not constitute a
breach or violation of LMC's obligations under this Section 6.8.1
and, for all purposes of this Section 6.8.1, LMC will not be deemed
to have acquired beneficial ownership of, and following such
acquisition will not be deemed to have beneficial ownership of, any
such equity securities or Convertible Securities of Parent or any
of its Affiliates, so long as such equity securities and
Convertible Securities of Parent or any of its Affiliates
beneficially owned by such Person do not constitute, in the
aggregate, on an as-converted basis, more than two percent (2%) of
any class of Parent's or any of its Affiliate's equity securities
immediately prior to the execution in full of a binding purchase or
similar agreement relating to such acquisition (but after giving
effect to any sale or other disposition of equity securities or
Convertible Securities of Parent or any of its Affiliates by such
Person to occur on a reasonably prompt basis after the closing of
such acquisition pursuant to a binding agreement entered into by
such acquired Person prior to or in connection with the closing of
such acquisition to sell or dispose of such Person's shares of
equity securities or Convertible Securities of Parent or any of its
Affiliates, subject to such disposition closing; provided that
prior to such disposition, LMC shall vote, and shall cause its
Affiliates to vote, any such equity securities or Convertible
Securities at any special or annual meeting of the
50
shareholders of Parent or any of its Affiliates, as applicable, in
proportion to the votes cast by shareholders of Parent or its
Affiliates, as applicable, other than LMC and its Affiliates, at
such meeting), and (2) for all purposes of this Section 6.8.1, LMC
will not be deemed to have acquired beneficial ownership of, and
following such acquisition will not be deemed to have beneficial
ownership of, any equity securities or Convertible Securities of
Parent or any of its Affiliates to the extent that such equity
securities or Convertible Securities are received by LMC or its
Affiliates as a result of any dividend or other distribution made,
or similar action taken (including the receipt by LMC or any of its
Affiliates of any rights, warrants or other securities granting to
the holder the right to acquire equity securities or Convertible
Securities of Parent or its Affiliates, and any acquisition of
equity securities or Convertible Securities of Parent or its
Affiliates upon the exercise thereof), by Parent, any of its
Affiliates or any other Person which is not LMC or an Affiliate of
LMC. Except as provided on Section 6.8 of the LMC Disclosure
Letter, from the date hereof until the Closing Date or the date
upon which this Agreement is earlier terminated in accordance with
Article IX, LMC shall not, and shall cause its respective
Affiliates not to, without Parent's prior written consent, (i)
offer for sale, sell (including short sales), transfer, tender,
pledge, encumber, assign or otherwise dispose of (including by
gift) (collectively, a "Transfer"), or enter into any contract,
option, derivative, hedging or other agreement or arrangement or
understanding (including any profit-sharing arrangement) with
respect to, or consent to, a Transfer of, any or all of the LMC
Parent Shares; (ii) grant any proxies or powers of attorney with
respect to any or all of the LMC Parent Shares; (iii) permit to
exist any Encumbrance (other than pursuant to this Agreement or the
Ancillary Agreements) of any nature whatsoever with respect to any
or all of the LMC Parent Shares; or (iv) take any action that would
have the effect of preventing, impeding, interfering with or
adversely affecting LMC's ability to perform its obligations under
this Agreement.
6.8.2 Parent agrees that, during the period commencing on the date hereof
and ending on the earliest of (w) the valid termination of this
Agreement in accordance with Article IX hereof, (x) the 10th
anniversary of the date hereof, (y) solely with respect to the
securities of LMC or DTV, as applicable, the consummation of the
sale of all or substantially all of the assets of LMC and its
Subsidiaries or DTV and its Subsidiaries, as applicable, to any
Person and (z) solely with respect to the securities of LMC or DTV,
as applicable, the effective time of any merger, consolidation or
business combination of LMC or DTV, as applicable, with or into any
other Person, other than a merger, consolidation or business
combination in which the holders of LMC or DTV, as applicable,
immediately prior to such consummation hold immediately following
the consummation of such merger, consolidation or other business
combination shares of the surviving entity constituting at least a
majority of the outstanding voting power of such surviving entity,
it shall not, and shall not authorize or permit any of its
Affiliates or their respective Representatives to do or agree to do
any of the following, without the prior written consent of LMC: (a)
effect or seek, offer or propose (whether publicly or otherwise) to
effect, or announce any intention to effect or cause or participate
in or in any way assist, facilitate or encourage any other Person
to
51
effect or seek, offer or propose (whether publicly or otherwise) to
effect or participate in, (i) any acquisition of any equity
securities (or beneficial ownership thereof), or rights or options
to acquire any equity securities (or beneficial ownership thereof),
Convertible Securities or any assets, indebtedness or businesses of
LMC, DTV or any of their respective Affiliates, (ii) any tender or
exchange offer, consolidation, business combination, acquisition,
merger, joint venture or other business combination involving LMC,
DTV or any of their respective Affiliates or any of the assets of
LMC, DTV or their respective Affiliates, (iii) any
recapitalization, restructuring, liquidation, dissolution or other
extraordinary transaction with respect to LMC, DTV or any of their
respective Affiliates, or (iv) any "solicitation" of "proxies" (as
such terms are used in the proxy rules of the SEC) to vote any
voting securities of LMC, DTV or any of their respective Affiliates
or consents to any action from any holder of any voting securities
of LMC or DTV or seek to advise or influence any Person with
respect to the voting of or the granting of any consent with
respect to any voting securities of LMC or DTV; (b) form, join or
in any way participate in a "group" (as defined under the Exchange
Act) in connection with the voting securities of LMC or DTV or
otherwise act in concert with any Person in respect of any such
securities; (c) otherwise act, alone or in concert with others, to
seek representation on or to control or influence the management,
Board of Directors or policies of LMC or DTV or to obtain
representation on the Board of Directors of LMC or DTV; (d) enter
into any discussions or arrangements with any third party with
respect to any of the foregoing; (e) request that LMC or any of its
Representatives amend or waive any provision of this paragraph, or
make any public announcement with respect to the restrictions of
this paragraph, or take any action which would reasonably be
expected to require LMC make a public announcement regarding the
possibility of a business combination or merger; or (f) advise,
assist or encourage, or direct any Person to advise, assist or
encourage any other Persons, in connection with any of the
foregoing; PROVIDED, HOWEVER, that, notwithstanding anything
contained herein, (1) any acquisition (or proposed acquisition) of
an indirect interest in equity securities of LMC, DTV or any of
their respective Affiliates arising out of an acquisition by Parent
or any of its Affiliates of an interest in another Person (which
Person, immediately following such acquisition, would be an
Affiliate of Parent) that beneficially owns equity securities or
Convertible Securities of LMC, DTV or any of their respective
Affiliates will not constitute a breach or violation of Parent's
obligations under this Section 6.8.2 and, for all purposes of this
Section 6.8.2, Parent will not be deemed to have acquired
beneficial ownership of, and following such acquisition will not be
deemed to have beneficial ownership of, any such equity securities
or Convertible Securities of LMC, DTV or any of their respective
Affiliates, so long as such equity securities or Convertible
Securities beneficially owned by such Person do not constitute, in
the aggregate on an as-converted basis, more than two percent (2%)
of any class of LMC's or DTV's or any of their respective
Affiliates' equity securities, as applicable, immediately prior to
the execution in full of a binding purchase or similar agreement
relating to such acquisition (but after giving effect to any sale
or other disposition of equity securities or
52
Convertible Securities of LMC, DTV or any of their respective
Affiliates by such Person to occur on a reasonably prompt basis
after the closing of such acquisition pursuant to a binding
agreement entered into by such acquired Person prior to or in
connection with the closing of such acquisition to sell or dispose
of such Person's shares of equity securities or Convertible
Securities of LMC, DTV or any of their respective Affiliates,
subject to such disposition closing; provided that prior to such
disposition, Parent shall vote, and shall cause its Affiliates to
vote, any such equity securities or Convertible Securities at any
specified or annual meeting of the shareholders of LMC or DTV or
any of their Affiliates, as applicable, in proportion to the votes
cast by shareholders of LMC, DTV or their Affiliates, as
applicable, other than Parent and its Affiliates, at such meeting),
and (2) for all purposes of this Section 6.8.2, Parent will not be
deemed to have acquired beneficial ownership of, and following such
acquisition will not be deemed to have beneficial ownership of, any
equity securities or Convertible Securities of LMC, DTV or any of
their respective Affiliates to the extent that such equity
securities or Convertible Securities are received by Parent or its
Affiliates as a result of any dividend or other distribution made,
or similar action taken (including the receipt by Parent or any of
its Affiliates of any rights, warrants or other securities granting
to the holder the right to acquire equity securities or Convertible
Securities of LMC, DTV or their respective Affiliates, and any
acquisition of equity securities or Convertible Securities of LMC,
DTV or their respective Affiliates upon the exercise thereof), by
LMC, DTV, any of their respective Affiliates or any other Person
which is not Parent or an Affiliate of Parent. Notwithstanding
anything to the contrary in this Section 6.8.2, neither Parent nor
any Affiliate of Parent nor any of their respective Representatives
shall be bound by any of the restrictions set forth in this Section
6.8.2 with respect to DTV or the equity securities or Convertible
Securities of DTV from and after the date upon which LMC and its
Affiliates (including any LMC Related Party) shall have disposed
of, in the aggregate, in any transaction or series of transactions,
50% or more (by number, with appropriate adjustment for any
subdivision, share split, consolidation, share dividend,
combination, reclassification or similar event occurring following
the Closing) of the DTV Shares (or an equivalent amount of
securities (based on voting power) of any successor to DTV, whether
by consolidation, business combination, acquisition, or merger, or
any entity which shall acquire a majority of DTV's voting power,
whether by tender or exchange offer or otherwise, or any entity to
which DTV shall sell, lease or otherwise transfer all or
substantially all of its assets).
Section 6.9. CONFIDENTIALITY; ACCESS TO RECORDS AFTER CLOSING.
6.9.1 LMC acknowledges that the information being provided to it in
connection with the Exchange and the consummation of the other
transactions contemplated hereby, or by any of the Ancillary
Agreements, is subject to the terms of the Confidentiality
Agreement, the terms of which are incorporated herein by reference.
Effective upon, and only upon, the Closing, the Confidentiality
Agreement shall terminate with respect to information relating to
the Transferred Business; PROVIDED, HOWEVER, that LMC acknowledges
that any and all other
53
information provided to it by Parent or its Representatives
concerning Parent or any of its Affiliates (other than information
relating to the Transferred Business) shall remain subject to the
terms and conditions of the Confidentiality Agreement after the
Closing. Parent agrees to hold all Proprietary Information (as
defined in the Confidentiality Agreement) in its possession as of
the Closing Date confidential and to refrain from using such
Proprietary Information for a period of two (2) years following the
Closing Date; PROVIDED, that, notwithstanding anything to the
contrary herein, Parent may use such Proprietary Information to the
extent reasonably necessary for purposes of preparing and filing
Tax Returns, corresponding with tax authorities, preparing
accounting records, and in connection with any litigation,
including, without limitation, litigation arising out of, relating
to or resulting from the Transactions or the subject matter of such
Proprietary Information.
6.9.2 LMC acknowledges and agrees that Parent may from time to time,
subsequent to the consummation of the Transactions require access
to or copies of the business records of Splitco or Transferred
Subsidiaries to the extent relating to the operations of the
Transferred Business prior to the Closing and LMC agrees that upon
reasonable prior notice from Parent it will, during normal business
hours, provide or cause to be provided to Parent, at Parent's
option, access to or copies of such records. Parent hereby agrees
to hold any Proprietary Information so provided in confidence;
PROVIDED, that, notwithstanding anything to the contrary herein,
Parent may use such Proprietary Information to the extent
reasonably necessary for purposes of preparing and filing Tax
Returns, corresponding with tax authorities, preparing accounting
records, and in connection with any litigation, including, without
limitation, litigation arising out of, relating to or resulting
from the Transactions or the subject matter of such Proprietary
Information.
6.9.3 Parent recognizes that, after the Closing, it may have documents,
books, records, work papers and information, whether in written,
magnetic, electronic or optical form (collectively, "Records")
which relate to the Transferred Business with respect to the period
or matters arising prior to the Closing, including Records
pertaining to the assets and Liabilities related to the Transferred
Business and Splitco's or the Transferred Subsidiaries' respective
employees, assets and liabilities (the "Business Records") or other
Records relating to the Transferred Business. Parent recognizes
that LMC, the Stockholders or their respective Affiliates may need
access to such Business Records and other Records after the
Closing. Upon LMC's, a Stockholder's or Splitco's reasonable
request Parent shall provide LMC, the Stockholders or Splitco and
their respective Representatives access to, and the right to
photocopy (at LMC's, the Stockholders' or Splitco's expense),
during normal business hours on reasonable advance notice, such
reasonably requested Records. For a period of five (5) years
following the Closing, Parent shall use reasonable best efforts to
maintain all such Records or, at Parent's discretion or at LMC's,
the Stockholders' or Splitco's reasonable request (at LMC's, the
Stockholders' or Splitco's expense), transfer any such Records to
LMC, the Stockholders or ▇▇▇▇▇▇▇.
▇▇
6.9.4 Notwithstanding any provision herein to the contrary, from and
after the Closing, Records pertaining to Taxes shall be governed
solely by the Tax Matters Agreement.
Section 6.10. EMPLOYEE MATTERS.
6.10.1 Section 1.1 of the Parent Disclosure Letter sets forth the name of
each Transferred Employee, along with such employee's job title and
reporting position, current salary and incentive bonus
opportunities, and years of service, and designating such
employee's status as exempt or non-exempt under the FLSA, whether
such employee is full-time or part-time. Prior to the Closing,
Parent shall update Section 1.1 of the Parent Disclosure Letter.
6.10.2 LMC acknowledges and agrees that, effective as of the Closing Date,
each Transferred Employee, including any such employee on approved
leave of absence (whether family leave, workers' maternity or
parental leave, workers' compensation, short-term and long-term
disability, medical leave or otherwise) shall be employed in a
substantially comparable position to the position in which such
Transferred Employee was employed immediately prior to Closing
Date. As of and for no less than one year following the Closing,
LMC shall, and shall cause its Affiliates to, provide the
Transferred Employees who remain employed with LMC and its
Affiliates with the same rate of base salary and wages and
commissions and with employee benefit and compensation plans,
programs and arrangements that are substantially equivalent in the
aggregate to those provided to similarly situated employees of LMC
and its Affiliates. Any Transferred Employee who became entitled to
short-term or long-term disability benefits under the applicable
Employee Benefit Plans (the "Seller Disability Plans") prior to
Closing shall be entitled to continue to receive such benefits
under the terms of the Seller Disability Plans until his or her
return to active employment, so long as such benefits are payable
pursuant to third-party insurance coverage. Parent agrees to use
commercially reasonable efforts to cause the insurance policies
underlying the Seller Disability Plans to provide for such
payments. Notwithstanding anything to the contrary contained
herein, LMC and its Affiliates shall have no obligation to keep any
Transferred Employee employed for any period of time following the
Closing, PROVIDED that if the employment of any Transferred
Employee is terminated by LMC or its Affiliates during the 12-month
period beginning on the Closing Date, LMC or its Affiliates shall
pay to such terminated employee severance payments that are no less
favorable than those provided under the Employee Benefit Plans
immediately prior to the Closing Date. Parent and its Affiliates
shall cause the Employment Agreements and, to the extent necessary,
any talent Contract identified on Sections 4.13(c) of the Parent
Disclosure Letter, to be assigned to the appropriate Transferred
Subsidiary prior to the Closing. Notwithstanding the provisions of
the employment agreement between ▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇") and ▇▇▇
Cable Networks Services, LLC, dated as of July 16, 2006 (the
"Shuken Agreement"), during the period between the date of this
Agreement and Closing, Parent agrees to allow (and to cause its
Affiliates to allow) Shuken to discuss terms of potential
employment
55
with LMC and its Affiliates, and to waive (and cause its Affiliates
to waive) any restrictions in the Employment Agreement or any other
agreement that would prevent Shuken from accepting employment with
LMC or its Affiliates as of the Closing. Following the Closing, LMC
shall assume and honor and/or shall cause its Affiliates to assume
and to honor in accordance with their terms all Employment
Agreements, and take all actions necessary to update such
Employment Agreements to reflect such assumption, and Parent and
Parent Group shall cease to have any further obligations under the
Employment Agreements as of the Closing Date. Parent shall take all
actions necessary such that following the Closing, the LMC
Indemnitees, as applicable, shall have no liabilities with respect
to any Employee Benefit Plans or any other employee benefit plans,
arrangements or agreements sponsored or contributed to by Parent
Group other than the Subsidiary Employee Benefit Plans and the
Employment Agreements. For purposes of all plans, programs or
arrangements maintained, sponsored or contributed to by LMC or its
Affiliates in which the Transferred Employees shall be eligible to
participate, LMC shall cause each such plan, program or arrangement
to treat the prior service of each Transferred Employee with
Parent, the Parent Entities or any of their Subsidiaries as service
rendered to LMC for purposes of eligibility and vesting for all
purposes and levels of benefits for purposes of severance and
vacation, except to the extent such treatment would result in the
duplication of benefits with respect to the same period of service.
From and after the Closing, LMC and its Affiliates shall (i) cause
any pre-existing conditions, limitations and eligibility waiting
periods under any group health plans of LMC or its Affiliates to be
waived with respect to the Transferred Employees and their eligible
dependents to the extent such condition would have been covered, or
limitation or waiting period would not have applied, with respect
to such Transferred Employee (or dependent) under the terms of the
Employee Benefit Plan in which such Transferred Employee was a
participant immediately prior to the Closing and (ii) give each
Transferred Employee credit for the plan year in which the Closing
(or the transition from Parent's plans to LMC's plans) occurs
towards applicable deductibles and annual out-of-pocket limits for
expenses incurred prior to the Closing (or such later transition
date). LMC or its Affiliates shall not provide financial incentive
to any Transferred Employee to elect continued group health plan
coverage under Section 601 et seq. of ERISA and Section 4980B of
the Code (or any similar state Law) with respect to plans
maintained by Parent and its Affiliates, except to the extent LMC
or its Affiliates directly or indirectly pay for such continued
group health plan coverage for all Transferred Employees, whether
pursuant to the Transitional Services Agreement or otherwise.
6.10.3 Effective as of the Closing, Parent and its Affiliates shall cause
each Transferred Employee to be fully vested in his or her accrued
benefit under the savings plan in which such Transferred Employee
participates immediately prior to Closing.
6.10.4 Notwithstanding the foregoing, nothing contained herein, whether
express or implied, shall be treated as an amendment or other
modification of any Subsidiary Employee Benefit Plan, or shall
limit the right of LMC, Splitco, the Transferred
56
Subsidiaries or any of their Subsidiaries to amend, terminate or
otherwise modify any Subsidiary Employee Benefit Plan following the
Closing Date. In the event that (i) a party other than Parent makes
a claim or takes other action to enforce any provision in this
Agreement as an amendment to any Subsidiary Employee Benefit Plan,
and (ii) such provision is deemed to be an amendment to such
Subsidiary Employee Benefit Plan even though not explicitly
designated as such in this Agreement, then such provision shall
lapse retroactively and shall have no amendatory effect. Parent
acknowledges and agrees that all provisions contained in this
Section 6.10 with respect to the Transferred Employees are included
for the sole benefit of Parent, and that nothing in this Agreement,
whether express or implied, shall create any third party
beneficiary or other rights (i) in any other Person, including,
without limitation, any employees, former employees, any
participant in any Subsidiary Employee Benefit Plan, or any
dependent or beneficiary thereof, or (ii) to continued employment
with LMC, Splitco, the Transferred Subsidiaries or any of their
respective Affiliates.
Section 6.11. INTERCOMPANY SERVICES AND ACCOUNTS. Except for the Ancillary
Agreements, and except as set forth in Section 6.11 of the Parent Disclosure
Letter, all Contracts pursuant to which any goods, services, materials or
supplies have at any time been provided (i) by any RSN Subsidiary, on the one
hand, to Parent or any of its Affiliates (other than the RSN Subsidiaries), on
the other hand, or (ii) by Parent or any of its Affiliates (other than the RSN
Subsidiaries), on the one hand, to any RSN Subsidiary, on the other hand, will
be terminated as of the Closing. Parent shall use commercially reasonable
efforts to obtain at or before the Closing the written release and waiver from
all appropriate Persons of any Encumbrances arising therefrom. Without
derogating from the Parent's rights to withdraw cash from the RSN Subsidiaries
pursuant to Section 6.2.10, prior to the Closing, all intercompany receivables
or payables and loans then existing between Parent and its Affiliates (other
than the RSN Subsidiaries), on the one hand, and the RSN Subsidiaries, on the
other hand, shall be settled by way of capital contribution, dividend or
otherwise and all intercompany arrangements shall be terminated, except for
those arrangements contemplated by the Ancillary Agreements or as expressly set
forth in Section 6.11 of the Parent Disclosure Letter.
Section 6.12. COOPERATION WITH RESPECT TO FINANCIAL REPORTING. Until the
third anniversary of the Closing Date, each of Parent, on the one hand, and LMC,
on the other hand, shall, and shall cause each of their respective Affiliates
to, reasonably cooperate with the other (at the other's expense) in connection
with the other's preparation of historical financial statements of, or
including, the Transferred Business as required for the other's filings under
the Exchange Act following the Closing. Until the third anniversary of the
Closing Date, LMC shall, and shall cause Splitco to, (i) reasonably cooperate
with Parent (at Parent's expense) in connection with Parent's preparation of pro
forma and historical financial statements of the Transferred Business as may be
required for Parent's filings under the Exchange Act following the Closing and
(ii) use its reasonable best efforts to cause DTV to reasonably cooperate with
Parent (at Parent's expense) in connection with Parent's preparation of Parent's
financial statements as may be required for Parent's filings under the Exchange
Act following the Closing.
Section 6.13. NO SOLICITATION.
57
6.13.1 Parent and its Affiliates have ceased all, and, from the date of
this Agreement until the Closing or the earlier termination of this
Agreement, Parent shall not, nor shall it authorize or permit any
of its Affiliates nor any of its or their respective officers,
directors, employees, representatives, consultants, advisors,
accountants or agents ("Representatives") to, (A) directly or
indirectly, initiate, solicit or knowingly encourage or facilitate
(including, in each case, by way of furnishing information) any
inquiries or the making of any proposal or offer with respect to,
or any indication of interest in, any acquisition by any third
party of all or a substantial portion of the assets of any
Transferred Subsidiary, any acquisition by any third party of any
securities or other ownership interests of any of the Transferred
Subsidiaries or any acquisition of all or a portion of the DTV
Shares (any such proposal, offer or indication of interest, a
"Parent Acquisition Proposal"), (B) directly or indirectly, engage
in any negotiations or discussions concerning a Parent Acquisition
Proposal, or provide access to its properties, books and records or
any non-public information or data to, any third party that has
made, or to Parent's Knowledge, is considering making a Parent
Acquisition Proposal or any Representatives thereof, (C) approve or
recommend, or propose to approve or recommend, or execute or enter
into any letter of intent, agreement in principle, option
agreement, acquisition agreement or other agreement relating to a
Parent Acquisition Proposal or (D) propose publicly or agree to any
of the foregoing relating to a Parent Acquisition Proposal.
6.13.2 Parent will, and will take such lawful action solely in its
capacity as a stockholder of DTV as may be reasonable to cause DTV
and each of its Affiliates to, cease any ongoing, and not initiate
any new, activities, directly or indirectly, through any
Representative or otherwise, to solicit, initiate or encourage
inquiries or submission of proposals or offers from any Person
relating to (A) any sale or other disposition of all or any
substantial portion of the assets of DTV or its Affiliates or all
or any substantial portion of the equity interests in DTV or its
Affiliates or (B) any business combination involving DTV or any of
its Affiliates, whether by merger, consolidation, tender offer or
otherwise (any of the foregoing, an "Extraordinary Transaction") or
to participate in any negotiation regarding, or furnishing to any
other Person any information with respect to, or otherwise
cooperate in any way with or assist in, facilitate or encourage,
any effort or attempt by any other Person to do or seek to do any
of the foregoing; PROVIDED, HOWEVER, that nothing in this Section
6.13.2 shall prohibit (or require Parent to prohibit) any director
of DTV from exercising (solely in his or her capacity as a director
of DTV) fiduciary duties to DTV or its shareholders (other than
Parent) under applicable Law;
6.13.3 From the date hereof until the earlier of the Closing or the
termination of this Agreement, Parent will (A) vote all voting
shares of DTV or of any other Person held by Parent and any
Affiliate of Parent against any Extraordinary Transaction that is
presented or proposed to them at any time after the date of this
Agreement and prior to the Closing or termination of this
Agreement, (B) not solicit proxies or become a "participant" in a
"solicitation" with respect to the shares of capital stock of DTV
(as such terms are defined in Regulation 14A under the Exchange
58
Act) in opposition to or in competition with the consummation of
the Exchange or otherwise encourage or assist any party in taking
or planning any action which would compete with or materially
impede, interfere with, adversely effect or tend to discourage or
inhibit the timely consummation of the Exchange and (C) in the
event of a tender offer for all or a portion of the outstanding
shares of capital stock of DTV, not tender any DTV Shares in such
tender offer and publicly announce, within 5 days of the
announcement of such tender offer, Parent's intention not to tender
any DTV Shares in such tender offer; PROVIDED, HOWEVER that, in the
event this Agreement is terminated by Parent or LMC pursuant to
Section 9.1.6 or 9.1.7 or by LMC pursuant to Section 9.1.9,
Parent's obligations under clauses (A), (B) and (C) of this
sentence shall continue until the date that is six (6) months from
the date of such termination, and, solely with respect to any
transaction in respect of at least a majority of DTV's outstanding
shares or all or substantially all of DTV's assets with respect to
which a bona fide written proposal was publicly announced and not
withdrawn prior to such termination, until the date that is twelve
(12) months from the date of such termination. Parent will notify
LMC promptly if any inquiries or proposals are received by, any
information is requested from, or any negotiations or discussions
are sought to be initiated or continued with, Parent or, to the
knowledge of Parent, DTV or any of its Affiliates, in each case in
connection with any Extraordinary Transaction.
6.13.4 LMC and its Affiliates have ceased all, and from the date hereof
until the Closing or the earlier termination of this Agreement, LMC
shall not, nor shall it authorize or permit any of its Affiliates
nor any of its Representatives to, (A) directly or indirectly,
initiate, solicit or knowingly encourage or facilitate (including,
in each case, by way of furnishing information) any inquiries or
the making of any proposal or offer with respect to, or any
indication of interest in, any acquisition by any third party of
all or a portion of the LMC Parent Shares (any such proposal, offer
or indication of interest, a "L Acquisition Proposal"), (B)
directly or indirectly, engage in any negotiations or discussions
concerning an L Acquisition Proposal, or provide access to its
properties, books and records or any non-public information or data
to, any third party that has made, or to LMC's Knowledge, is
considering making an L Acquisition Proposal or any Representatives
thereof, (C) approve or recommend, or propose to approve or
recommend, or execute or enter into any letter of intent, agreement
in principle, option agreement, acquisition agreement or other
agreement relating to an L Acquisition Proposal or (D) propose
publicly or agree to any of the foregoing relating to an L
Acquisition Proposal.
Section 6.14. DTV CHARTER RESTRICTIONS. From the date of this Agreement to
the Closing, neither LMC nor Parent shall, and each shall cause its respective
Affiliates not to, propose to the Board of Directors of DTV, nor enter into any
discussion with the Board of Directors of DTV regarding, any amendment to the
DTV certificate of incorporation or bylaws. From the date of this Agreement
until the earlier of the termination of this Agreement or the Closing,
notwithstanding the foregoing, to the extent that any amendment to DTV's
certificate of incorporation is proposed by DTV for approval of DTV's
stockholders, Parent will publicly state its intention to vote against, and
cause all DTV Shares beneficially owned by Parent to be voted
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against any such amendment, unless LMC has consented to Parent voting in favor
of such amendment
Section 6.15. CERTAIN TAX MATTERS. Notwithstanding anything to the contrary
in this Agreement, except as expressly provided in the Tax Matters Agreement, as
set forth in Sections 4.20, 7.2.4, 7.2.5, 7.3.5, 7.3.6 or this 6.15, or as set
forth in Sections 4.12 or 6.10 (including any indemnities related to Sections
4.12 or 6.10), the parties' sole and exclusive representations, warranties,
agreements or other obligations (including indemnities) with respect to Tax
matters (interpreted in its broadest sense), including the Tax consequences of
the Transactions, shall be as set forth in the Tax Matters Agreement, and in the
event of any conflict or inconsistency between any provision of this Agreement
and any provision of the Tax Matters Agreement, the applicable provision of the
Tax Matters Agreement shall govern.
Section 6.16. ANCILLARY AGREEMENTS. Each of Parent and LMC shall, and shall
cause each of its respective Affiliates to, at or prior to the Closing, duly
execute and deliver each of the Ancillary Agreements (other than the Tax Matters
Agreement which shall be executed and delivered concurrently with this
Agreement) to which it is to become a party pursuant to the terms of this
Agreement.
Section 6.17. PLEDGED SHARES. Prior to or at the Closing, LMC shall unwind
or terminate any variable forward OTC contracts to which any or all of the
Pledged Shares are subject or substitute other securities, property or assets
for the Pledged Shares under any such contracts, such that, at the Closing all
of the Pledged Shares shall be delivered to Parent pursuant to Section 3.1;
provided, that, nothing in this Section 6.17 shall require LMC to terminate or
unwind such contracts; provided further, that, nothing in this Section 6.17
shall derogate from LMC's obligation to deliver the LMC Parent Shares in
accordance with Section 3.1.
ARTICLE VII.
CONDITIONS TO CLOSING
Section 7.1. MUTUAL CONDITIONS. The respective obligations of each party
hereto to consummate the transactions contemplated by this Agreement, including
the Exchange, shall be subject to the fulfillment or, if legally permitted,
waiver at or prior to the Closing of the following conditions:
7.1.1 No Governmental Authority of competent jurisdiction located in the
United States shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, judgment, decree, injunction
or other order of any nature that prohibits, enjoins or restrains
the consummation of the transactions contemplated by this
Agreement, including the Exchange.
7.1.2 Any waiting period (and any extension thereof) applicable to the
consummation of the transactions contemplated by this Agreement,
including the Exchange, under the HSR Act shall have expired or
been terminated.
7.1.3 Each of the Tax Matters Agreement and the Global Affiliation
Agreement Side Letter shall be valid, binding and in full force and
effect and shall not have been
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repudiated by any party thereto (PROVIDED that the right to assert
this condition shall not be available to any party if the failure
of such condition to be satisfied was due to any wrongful action or
omission by such party).
7.1.4 The Parent Stockholder Approval shall have been obtained.
Section 7.2. CONDITIONS TO LMC'S OBLIGATIONS. The obligations of LMC to
consummate the transactions contemplated by this Agreement, including the
Exchange, shall be subject to the fulfillment or waiver by LMC prior to or at
the Closing of each of the following conditions:
7.2.1 Except as set forth in the following sentence, the representations
and warranties of Parent contained in this Agreement and in Article
III of the Tax Matters Agreement shall be true and correct (without
giving effect to any limitation as to "materiality" or "Material
Adverse Effect" set forth therein) at and as of the Closing Date as
if made at and as of such time (except to the extent expressly made
as of an earlier date, in which case as of such earlier date),
except where the failure of such representations and warranties to
be true and correct (without giving effect to any limitation as to
"materiality" or "Material Adverse Effect" set forth therein) would
not, individually or in the aggregate, have a Material Adverse
Effect on Splitco. The representations and warranties of the Parent
contained in Section 4.2 and Section 4.19 shall be true and correct
in all respects at and as of the Closing Date as if made at and as
of such time (except to the extent expressly made as of an earlier
date, in which case as of such earlier date). LMC shall have
received a certificate, dated the Closing Date, signed on behalf of
Parent by an executive officer of Parent to such effect.
7.2.2 Parent shall have performed in all material respects each
obligation and agreement to be performed by it at or prior to
Closing, and shall have complied in all material respects with each
covenant required by this Agreement and by Article V of the Tax
Matters Agreement to be performed or complied with by it at or
prior to the Closing, and LMC shall have received a certificate,
dated the Closing Date, signed on behalf of Parent by an authorized
officer of Parent to such effect.
7.2.3 Prior to or at the Closing, Parent shall have delivered to the
Stockholders the items to be delivered by Parent pursuant to
Section 3.3.
7.2.4 (i) Parent shall have received a private letter ruling from the IRS
which includes rulings to the effect that, subject to customary
caveats, for United States federal income tax purposes, no gain or
loss will be recognized by (and no amount will be includible in the
income of) Parent or any of its Affiliates on the Exchange, except
with respect to any DITs or ELAs (the "Parent Exchange Ruling"),
(ii) LMC shall have received a private letter ruling from the IRS
which includes rulings to the effect that, subject to customary
caveats, for United States federal income tax purposes, no gain or
loss will be recognized by (and no amount will be includible in the
income of) the Stockholders on the Exchange (the "LMC
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Exchange Ruling," and collectively with the Parent Exchange Ruling,
the "Exchange Rulings"), (iii) each of the Exchange Rulings shall
be in form and substance reasonably satisfactory to LMC, and (iv)
neither LMC, Parent nor any of their respective Affiliates shall
have been notified by the IRS that either Exchange Ruling has been
withdrawn, invalidated or modified in an adverse manner.
7.2.5 LMC shall have received the LMC Tax Opinion.
7.2.6 No change, effect, event, occurrence, development, condition or
circumstance shall have occurred which has had or would be
reasonably expected to have a Material Adverse Effect on Splitco.
7.2.7 The FCC Consent shall have been obtained, without the imposition of
any conditions other than those contemplated by Sections 6.6.5 as
applicable to LMC and its Affiliates.
Section 7.3. CONDITIONS TO PARENT'S OBLIGATIONS. The obligations of Parent
to consummate the transactions contemplated by this Agreement, including the
Exchange shall be subject to the fulfillment or waiver at or prior to the
Closing of each of the following conditions:
7.3.1 Except as set forth in the following sentence, the representations
and warranties of LMC contained in this Agreement and in Article IV
of the Tax Matters Agreement shall be true and correct (without
giving effect to any limitation as to "materiality" or "Material
Adverse Effect" set forth therein) at and as of the Closing Date as
if made at and as of such time (except to the extent expressly made
as of an earlier date, in which case as of such earlier date),
except where the failure of such representations and warranties to
be true and correct (without giving effect to any limitation as to
"materiality" or "Material Adverse Effect" set forth therein) would
not, individually or in the aggregate, have a Material Adverse
Effect on LMC's ability to consummate the transactions contemplated
by this Agreement, including the Exchange. The representations and
warranties of LMC contained in Section 5.5 shall be true and
correct in all respects at and as of the Closing Date as if made at
and as of such time (except to the extent expressly made as of an
earlier date, in which case as of such earlier date). Parent shall
have received a certificate, dated the Closing Date, signed on
behalf of LMC by an executive officer of LMC to such effect.
7.3.2 LMC and each Stockholder shall have performed in all material
respects each obligation and agreement to be performed by it at or
prior to Closing, and shall have complied in all material respects
with each covenant required by this Agreement and by Article V of
the Tax Matters Agreement to be performed or complied with by it at
or prior to the Closing, and Parent shall have received a
certificate, dated the Closing Date, signed on behalf of LMC by an
authorized officer of LMC to such effect.
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7.3.3 Prior to or at the Closing, the Stockholders shall have delivered
to Parent the items to be delivered pursuant to Section 3.4.
7.3.4 The Disinterested Stockholder Approval shall have been obtained.
7.3.5 (i) LMC shall have received the LMC Exchange Ruling, (ii) Parent
shall have received the Parent Exchange Ruling, (iii) Parent shall
have received a private letter ruling from the IRS, in form and
substance reasonably satisfactory to Parent, which includes rulings
to the effect that, subject to customary caveats, for United States
federal income tax purposes, no gain or loss will be recognized by
(and no amount will be includible in the income of) Parent or any
of its Affiliates on the Parent Restructuring, except with respect
to any DITs or ELAs (the "Parent Restructuring Ruling"), (iv) each
of the Exchange Rulings and the Parent Restructuring Ruling shall
be in form and substance reasonably satisfactory to Parent, and (v)
neither LMC, Parent nor any of their respective Affiliates shall
have been notified by the IRS that either Exchange Ruling or the
Parent Restructuring Ruling has been withdrawn, invalidated or
modified in an adverse manner.
7.3.6 Parent shall have received the Parent Tax Opinion.
7.3.7 The FCC Consent shall have been obtained, without the imposition of
any conditions other than those contemplated by Sections 6.6.5 as
applicable to Parent and its Affiliates.
Section 7.4. FRUSTRATION OF CLOSING CONDITIONS. Neither Parent, nor LMC may
rely on the failure of any condition set forth in this Article VII to be
satisfied if such failure was caused by such party's failure to act in good
faith or to use its reasonable best efforts to cause the Closing to occur as
required by Section 6.6.
ARTICLE VIII.
INDEMNIFICATION
Section 8.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1.1 The representations and warranties contained in this Agreement
shall survive the Closing as follows: (i) the representations and
warranties contained in Sections 4.1 (Organization and Standing),
4.2 (Capitalization), 4.3 (Corporate Power and Authority), 4.4
(Shareholder Votes Required), 4.19 (Title to DTV Shares), 4.22
(Brokers and Agents), 4.23 (Investigation; Reliance), 5.1
(Organization and Standing), 5.2 (Corporate Power and Authority),
5.3 (No Vote Required), 5.5 (LMC Parent Shares), 5.10
(Investigation and Reliance) and 5.11 (Brokers and Agents) shall
survive indefinitely; (ii) the representations and warranties
contained in Sections 4.12 (Employee Benefit Plans) shall survive
until the date that is 60 calendar days following the expiration of
the statute of limitations applicable to actions with respect
thereto; (iii) the representations and warranties contained in
Sections 4.20.6, 4.20.10 and 4.20.11 (relating to Certain Tax
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Matters) shall survive, but solely for purposes of the Tax Matters
Agreement as provided therein; and (iv) all other representations
and warranties contained in this Agreement (other than the
representations and warranties contained in Sections 4.20.1 -
4.20.5 and Sections 4.20.7 - 4.20.9 (Certain Tax Matters), which
shall not survive the Closing) shall survive until the date that is
18 months following the Closing Date.
8.1.2 The covenants and agreements made by each party in this Agreement
shall survive the Closing, unless specified to the contrary herein.
Notwithstanding Section 8.1.1, any breach of representation,
warranty, covenant or agreement in respect of which indemnity may
be sought under this Agreement shall survive the time at which it
would otherwise terminate pursuant to Section 8.1.1 or 8.1.2 if
notice of the inaccuracy or breach thereof giving rise to such
right of indemnity shall have been given to the party against whom
such indemnity may be sought prior to such time.
Section 8.2. INDEMNIFICATION.
8.2.1 Provided that the Closing shall have occurred, subject to Sections
8.1 and 8.2.2, Parent hereby agrees to indemnify each LMC
Indemnitee against and agrees to hold each of them harmless
(without duplication) from any and all Damages incurred or suffered
by any LMC Indemnitee arising out of or resulting from (i) any
representation or warranty of Parent contained in this Agreement
(other than the representations and warranties contained in Section
4.20) not being true and correct (which representations and
warranties (except those made as of a specified date) shall be
deemed to have been made again as of the Closing Date for purposes
of this Section 8.2.1) or (ii) any breach or nonperformance of any
covenant or agreement made or to be performed by Parent.
8.2.2 No indemnification by Parent shall be due and payable under Section
8.2.1 in respect of any Parent Basket Breach unless and until the
cumulative amount of all Damages arising out of or resulting from
all such Parent Basket Breaches exceeds the Parent Basket Amount,
whereupon Parent will be obligated to indemnify the LMC Indemnitees
for the cumulative amount of Damages incurred or suffered by the
LMC Indemnitees in excess of the Parent Basket Amount, and only to
the extent of such excess. Parent shall not be obligated to
indemnify the LMC Indemnitees for Damages arising out of or
resulting from all Parent Basket Breaches under this Agreement in
an aggregate amount in excess of the Maximum Amount; PROVIDED that
the limitation on Parent's obligations set forth in this sentence
shall not apply to breaches of the representations and warranties
contained in Section 4.12. The limitations on indemnification set
forth in this Section 8.2.2 shall not be applicable to (x) any
Parent Basket Exception Breach (and the LMC Indemnitees will be
entitled to indemnification with respect to any Parent Basket
Exception Breach without regard to any Parent Basket Amount or any
Maximum Amount) and (y) any claim based upon fraud or knowing
misrepresentation. For purposes of determining the amount of
Damages arising from any Parent Basket Breach (but not for purposes
of determining whether any
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such Parent Basket Breach has occurred), the representations and
warranties shall be read without giving effect to any limitations
or qualifications as to "materiality" (including the words
"material" or "materially") or "Material Adverse Effect" set forth
therein.
8.2.3 Provided that the Closing shall have occurred, subject to Sections
8.1 and 8.2.4, LMC hereby agrees to indemnify each Parent
Indemnitee against and agrees to hold each of them harmless
(without duplication) from any and all Damages incurred or suffered
by any Parent Indemnitee arising out of or resulting from (i) any
representation or warranty of LMC contained in this Agreement not
being true and correct (which representations and warranties
(except those made as of a specified date) shall be deemed to have
been made again as of the Closing Date for purposes of this Section
8.2.3) or (ii) any breach or nonperformance of any covenant or
agreement made or to be performed by LMC pursuant to this
Agreement.
8.2.4 No indemnification by LMC shall be due and payable under Section
8.2.3(i) in respect of any Liberty Basket Breach unless and until
the cumulative amount of all Damages arising out of or resulting
from all such Liberty Basket Breaches exceeds the Liberty Basket
Amount, whereupon LMC will be obligated to indemnify the Parent
Indemnitees for the cumulative amount of Damages incurred or
suffered by the Parent Indemnitees in excess of the Liberty Basket
Amount, and only to the extent of such excess. LMC shall not be
obligated to indemnify the Parent Indemnitees for Damages arising
out of or resulting from all Liberty Basket Breaches under this
Agreement in an aggregate amount in excess of the Maximum Amount.
The limitations on indemnification set forth in this Section 8.2.4
shall not be applicable to (x) any Liberty Basket Exception Breach
(and the Parent Indemnitees will be entitled to indemnification
with respect to any Liberty Basket Exception Breach without regard
to any Liberty Basket Amount or any Maximum Amount) and (y) any
claim based upon fraud or knowing misrepresentation. For purposes
of determining the amount of Damages arising from any Liberty
Basket Breach (but not for purposes of determining whether any such
Liberty Basket Breach has occurred), the representations and
warranties shall be read without giving effect to any limitations
or qualifications as to "materiality" (including the words
"material" and "materially") or "Material Adverse Effect" set forth
therein.
Section 8.3. PROCEDURES.
8.3.1 The party or parties seeking indemnification under Section 8.2 (the
"Indemnified Party") agrees to give prompt notice to the party or
parties against whom indemnity is sought (the "Indemnifying Party")
of the assertion of any claim, or the commencement of any suit,
action or proceeding in respect of which indemnity may be sought
under such Section and will provide the Indemnifying Party such
information with respect thereto in its possession that the
Indemnifying Party may reasonably request; PROVIDED, HOWEVER, that
failure to give such notification shall not affect the
indemnification provided hereunder except to the
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extent the Indemnifying Party shall have been actually materially
prejudiced as a result of such failure.
8.3.2 In the case of a third party claim, the Indemnified Party shall be
entitled to exercise full control of the defense, compromise or
settlement of any third party claim, investigation, action, suit or
proceeding unless the Indemnifying Party within a reasonable time
after the giving of notice of such indemnity claim by the
Indemnified Party shall: (i) deliver a written confirmation to such
Indemnified Party that the indemnification provisions of Section
8.2 are applicable to such claim, investigation, action, suit or
proceeding and that the Indemnifying Party will indemnify such
Indemnified Party in respect of such claim, action or proceeding
pursuant to the terms of Section 8.2, (ii) notify such Indemnified
Party in writing of the Indemnifying Party's intention to assume
the defense thereof and (iii) retain legal counsel reasonably
satisfactory to such Indemnified Party to conduct the defense of
such claim, investigation, action, suit or proceeding.
8.3.3 If the Indemnifying Party so assumes the defense of any such claim,
investigation, action, suit or proceeding in accordance herewith,
then such Indemnified Party shall cooperate with the Indemnifying
Party in any manner that the Indemnifying Party reasonably may
request in connection with the defense, compromise or settlement
thereof. If the Indemnifying Party so assumes the defense of any
such claim, investigation, action, suit or proceeding, the
Indemnified Party shall have the right to employ separate counsel
and to participate in (but not control) the defense, compromise or
settlement thereof, but the fees and expenses of such counsel shall
be the expense of such Indemnified Party unless (i) the
Indemnifying Party has agreed to pay such fees and expenses, (ii)
any relief other than the payment of money damages is sought
against the Indemnified Party or (iii) such Indemnified Party shall
have been advised by its regular outside counsel that there may be
one or more legal defenses available to it that are different from
or additional to those available to the Indemnifying Party or that
a conflict of interest between the Indemnifying Party and the
Indemnified Party in the conduct of the defense of such action
would reasonably be expected (in which case the Indemnifying Party
shall not have the right to control the defense, compromise or
settlement of such action on behalf of the Indemnified Party), and
in any such case described in clauses (i), (ii) or (iii) the
reasonable fees and expenses of one such separate counsel, and one
local counsel, if necessary, shall be borne by the Indemnifying
Party. No Indemnified Party shall settle or compromise or consent
to entry of any judgment with respect to any such action for which
it is entitled to indemnification hereunder without the prior
consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed, unless the Indemnifying Party
shall have failed, after reasonable notice thereof, to undertake
control of such action in the manner provided above in this Section
8.3 to the extent the Indemnifying Party was entitled to do so
pursuant to this Section 8.3. The Indemnifying Party shall not,
without the consent of such Indemnified Party, settle or compromise
or consent to entry of any judgment with respect to any such claim,
investigation, action, suit or proceeding (x) in which any relief
other than the payment of money damages is or may be sought against
such Indemnified
66
Party or (y) that does not include as an unconditional term thereof
the giving by the claimant, party conducting such investigation,
plaintiff or petitioner to such Indemnified Party of a release from
all liability with respect to such claim, action, suit or
proceeding.
Section 8.4. EXCLUSIVITY. Following the Closing, except in the case of
common law fraud, the sole and exclusive monetary remedy of the parties with
respect to any and all claims arising from any breach of this Agreement or any
of the other matters addressed in Section 8.2 shall be pursuant to the
indemnification provisions set forth in this Article VIII; PROVIDED that this
Section 8.4 shall not be construed so as to derogate from or otherwise limit any
party's right to seek the remedy of specific performance, injunctive relief or
other non-monetary equitable remedies with respect to any such breach.
Section 8.5. CERTAIN RIGHTS AND LIMITATIONS.
8.5.1 The treatment of any Tax costs or Tax benefits to any party as a
result of any indemnification payment(s) pursuant to this Article
VIII shall be as set forth in the Tax Matters Agreement.
8.5.2 Notwithstanding anything to the contrary herein, no party shall be
entitled to assert any right to indemnification under this Article
VIII unless, and until, the Closing shall have occurred.
ARTICLE IX.
TERMINATION
Section 9.1. TERMINATION. This Agreement may be terminated and the Exchange
and other transactions contemplated hereby abandoned at any time prior to the
consummation of the Closing, whether before or after receipt of the Requisite
Parent Stockholder Approval, under the following circumstances:
9.1.1 by mutual written consent of Parent and LMC;
9.1.2 by LMC or Parent upon written notice to the other if the Closing
shall not have been consummated on or before December 22, 2007 (the
"Termination Date"); PROVIDED, that if, as of the Termination Date
all conditions to this Agreement shall have been satisfied or
waived (other than those that are satisfied by action taken at the
Closing) other than the conditions set forth in Sections 7.2.7,
7.3.7, 7.2.4 or 7.3.5 then the Termination Date shall be extended
to March 22, 2008 (the "Extended Termination Date");
9.1.3 by LMC upon written notice to Parent, if there has been a breach by
Parent or Splitco of any representation, warranty, covenant or
agreement contained in this Agreement or the Tax Matters Agreement
which would result in a failure of a condition set forth in Section
7.2 and either cannot be cured prior to the Termination Date, or is
not cured within 45 days after LMC shall have given Parent written
notice stating LMC's intention to terminate this Agreement
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pursuant to this Section 9.1.3 and the basis for such termination;
PROVIDED, at the time of the delivery of such notice, LMC shall not
be in material breach of its obligations under this Agreement or
the Tax Matters Agreement;
9.1.4 by Parent upon written notice to LMC, if there has been a breach by
LMC of any representation, warranty, covenant or agreement
contained in this Agreement or the Tax Matters Agreement which
would result in a failure of a condition set forth in Section 7.3
and either cannot be cured prior to the Termination Date, or is not
cured within 45 days after Parent shall have given LMC written
notice stating Parent's intention to terminate this Agreement
pursuant to this Section 9.1.4 and the basis for such termination;
PROVIDED, at the time of the delivery of such notice, Parent shall
not be in material breach of its obligations under this Agreement
or the Tax Matters Agreement;
9.1.5 by either LMC or Parent upon written notice to the other party
hereto, if any Governmental Authority of competent jurisdiction
shall have issued an order or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order or other action
shall have become final and non-appealable, PROVIDED that the party
seeking to terminate this Agreement pursuant to this Section 9.1.5
shall have used its reasonable best efforts to remove such order or
other action; PROVIDED, FURTHER, that the right to terminate this
Agreement under this Section 9.1.5 shall not be available to a
party if the issuance of such final, non-appealable order was
primarily due to the failure of such party to perform any of its
obligations under this Agreement, including, without limitation,
the obligation of LMC and Parent to comply with Section 6.6 of this
Agreement so as to allow the parties to close the transactions
contemplated by this Agreement as promptly as practicable;
9.1.6 by either LMC or Parent upon written notice to the other party
hereto if the Parent Stockholder Approval shall not have been
obtained by reason of the failure to obtain the required vote at
the Parent Stockholders' Meeting or any adjournment thereof;
9.1.7 by either LMC or Parent upon written notice to the other party
hereto, if the Disinterested Stockholder Approval shall not have
been obtained by reason of the failure to obtain the required vote
at the Parent Stockholders' Meeting or any adjournment thereof;
PROVIDED that LMC (i) shall not be entitled to exercise its
termination right pursuant to this Section 9.1.7 earlier than the
eleventh (11th) Business Day following the Parent Stockholders'
Meeting; and (ii) shall only be entitled to exercise such right if
Parent shall not have delivered written notice of its waiver of the
condition set forth in Section 7.3.4 and its termination right
under this Section 9.1.7 prior to such eleventh (11th) Business
Day;
9.1.8 by LMC if there shall have occurred following the date of this
Agreement a Material Adverse Effect on Splitco which is continuing
and has not been cured within 30 days after LMC shall have given
Parent written notice stating LMC's
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intention to terminate this Agreement pursuant to this Section
9.1.8 and describing in reasonable detail the basis for such
termination; or
9.1.9 by LMC upon written notice to Parent, if there shall have occurred
a Parent Change in Recommendation; PROVIDED that LMC's right to
terminate pursuant to this Section 9.1.9 shall terminate ten (10)
Business Days following the earlier of the date notice of the
Parent Change in Recommendation is filed with the SEC and the date
LMC receives written notice from Parent pursuant to Section 10.1 of
such Parent Change in Recommendation.
Section 9.2. EFFECT OF TERMINATION.
9.2.1 In the event of the termination of this Agreement pursuant to
Section 9.1, this Agreement, except for the provisions of (i)
Section 6.9.1 relating to the obligation of the parties to keep
confidential certain information obtained by them, (ii) Section
6.13.3 relating to Parents obligation with respect to the DTV
Shares, (iii) Article X, and (iv) this Section 9.2.1, which shall,
in each case, remain in full force and effect, shall become void
and have no effect, without any liability on the part of any party
hereto or its directors, officers or stockholders. Notwithstanding
the foregoing, nothing in this Section 9.2.1 shall relieve any
party hereto of liability for a willful breach of any of its
obligations under this Agreement.
9.2.2 If:
(i) either LMC or Parent terminates this Agreement pursuant to
9.1.6 (and the votes associated with the shares held by the ▇▇▇▇▇▇▇
Interests shall have been disregarded under the ASX listing rules
for purposes of the Parent Stockholder Approval) or 9.1.7 (and
prior to vote at the Parent Stockholders' Meeting there shall not
have occurred a Parent Change in Recommendation), then Parent shall
pay to LMC by wire transfer of immediately available funds an
amount equal to one hundred million dollars ($100,000,000); or
(ii) (A) (1) either LMC or Parent terminates this Agreement
pursuant to Section 9.1.7 and (2) prior to the vote at Parent
Stockholders' Meeting, there shall have occurred a Parent Change in
Recommendation, (B) (1) either LMC or Parent terminates this
Agreement pursuant to Section 9.1.6 and (2) the votes associated
with the shares held by the ▇▇▇▇▇▇▇ Interests shall not have been
disregarded under the ASX listing rules for purposes of the Parent
Stockholder Approval or (C) LMC terminates this Agreement pursuant
to Section 9.1.9, then Parent shall pay to LMC by wire transfer of
immediately available funds an amount equal to three hundred
million dollars ($300,000,000) (the amounts payable under
paragraphs (i) and (ii) of Section 9.2.2, as the case may be, the
"Termination Fee").
Parent acknowledges that the agreements contained in this Section
9.2.2 are an integral part of the transactions contemplated by this
Agreement and that, without these agreements, LMC would not enter
into this Agreement; accordingly, if
69
Parent fails to pay when due the amounts due pursuant to this
Section 9.2.2, LMC shall be entitled to interest on the amounts set
forth in this Section 9.2.2 at the prime rate of Citibank, N.A. in
effect on the date such payment was required to be made. All
payments made pursuant to paragraphs (i) and (ii) of this Section
9.2.2 shall be made by wire transfer of immediately available funds
within two (2) Business Days of the applicable termination date. If
payable, the Termination Fee shall not be payable more than once
under this Agreement.
ARTICLE X.
MISCELLANEOUS
Section 10.1. NOTICES. All notices or other communications required or
permitted hereunder shall be in writing and shall be delivered personally, by
facsimile (with confirming copy sent by one of the other delivery methods
specified herein), by overnight courier or sent by certified, registered or
express air mail, postage prepaid, and shall be deemed given when so delivered
personally, or when so received by facsimile or courier, or, if mailed, three
calendar days after the date of mailing, as follows:
If to Parent: News Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
with a copy to: Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
If to LMC:
Liberty Media Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
with a copy to: ▇▇▇▇▇ ▇▇▇▇▇ L.L.P.
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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or to such other address and with such other copies as any party hereto shall
notify the other parties hereto (as provided above) from time to time.
Section 10.2. EXPENSES. Regardless of whether the transactions provided for
in this Agreement are consummated, except as otherwise expressly provided
herein, each of the parties hereto shall pay its own expenses incident to this
Agreement and the transactions contemplated herein (including legal fees,
accounting fees, investment banking fees and filing fees). Notwithstanding
anything herein to the contrary, Parent shall pay and be responsible for all
reasonable and reasonably documented out-of-pocket fees, costs and expenses
incurred by DTV in connection with the negotiation of this Agreement and any of
the Ancillary Agreements, LMC's due diligence review of DTV and DTV's
Subsidiaries, and DTV's actions taken in anticipation of the consummation of the
Transactions, including the fees and expenses of the advisers, accountants and
legal counsel of DTV and of any special committee of the board of directors of
DTV and any filing fees paid to any Governmental Authority.
Section 10.3. GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement shall
be governed by, and construed in accordance with, the internal Laws of the State
of
Delaware, without reference to the choice of law principles thereof. Each of
the parties hereto irrevocably submits to the exclusive jurisdiction of the
courts of the
Delaware Chancery Courts, or, if the
Delaware Chancery Courts do
not have subject matter jurisdiction, in the state courts of the State of
Delaware located in Wilmington,
Delaware, or in the United States District Court
for any district within such state, for the purpose of any Action or judgment
relating to or arising out of this Agreement or any of the transactions
contemplated hereby and to the laying of venue in such court. Service of process
in connection with any such Action may be served on each party hereto by the
same methods as are specified for the giving of notices under this Agreement.
Each party hereto irrevocably and unconditionally waives and agrees not to plead
or claim any objection to the laying of venue of any such Action brought in such
courts and irrevocably and unconditionally waives any claim that any such Action
brought in any such court has been brought in an inconvenient forum.
Section 10.4. WAIVER OF JURY TRIAL. EACH PARTY HERETO ACKNOWLEDGES AND
AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND, THEREFORE, EACH SUCH PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT TO
ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
EACH PARTY HERETO CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT
OR ATTORNEY OF ANY OTHER PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF SUCH ACTION, SEEK TO ENFORCE
THE FOREGOING WAIVER, (B) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF THIS WAIVER, (C) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY,
AND (D) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
71
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.4.
Section 10.5. ASSIGNMENT; SUCCESSORS AND ASSIGNS; NO THIRD PARTY RIGHTS.
This Agreement may not be assigned by any party hereto without the prior written
consent of the other parties hereto, and any attempted assignment shall be null
and void; PROVIDED, HOWEVER, that following the Closing LMC will be permitted to
assign its rights hereunder, without obtaining the consent of Parent, to any
Person (any such Person a "LMC Related Party") to which ownership of one hundred
percent (100%) of the shares of capital stock of Splitco are or have been
transferred in connection with any spin off, split off or other distribution of
the securities of such transferee in which holders of LMC capital stock
immediately prior thereto are entitled to, or have the opportunity to,
participate in such distribution. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement shall be for the sole benefit of the parties
hereto, and their respective successors and permitted assigns and is not
intended, nor shall be construed, to give any Person, other than the parties
hereto and their respective successors and permitted assigns any legal or
equitable right, benefit, remedy or claim hereunder, except in the case of
Section 10.2, DTV.
Section 10.6. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original agreement, but all of which together
shall constitute one and the same instrument.
Section 10.7. TITLES AND HEADINGS. The headings and table of contents in
this Agreement are for reference purposes only, and shall not in any way affect
the meaning or interpretation of this Agreement.
Section 10.8. AMENDMENT AND MODIFICATION. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 10.9. PUBLICITY; PUBLIC ANNOUNCEMENTS. The initial press release
concerning this Agreement and the Transactions shall be a joint press release
approved in advance by Parent and LMC and thereafter each of Parent and LMC
shall consult with the other prior to issuing any press releases or otherwise
making public announcements with respect to this Agreement and the Transactions
and prior to making any filings with any third party or any Governmental
Authority (including any national securities exchange or interdealer quotation
system) with respect thereto, except as may be required by applicable Laws or
the requirements of any national securities exchange or interdealer quotation
system on which the securities of Parent or LMC are listed or quoted; PROVIDED
that the foregoing limitations shall not apply to any disclosure of any
information concerning this Agreement or the Transactions (i) which Parent or
LMC deems appropriate in its reasonable judgment, in light of its status as a
publicly owned company, including without limitation to securities analysts and
institutional investors and in press interviews; and (ii) in connection with any
dispute between the parties regarding this Agreement or the Transactions.
72
Section 10.10. WAIVER. Any of the terms or conditions of this Agreement may
be waived at any time by the party or parties hereto entitled to the benefit
thereof, but only by a writing signed by the party or parties waiving such terms
or conditions.
Section 10.11. SEVERABILITY. If any term, provisions, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such
determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent possible.
Section 10.12. NO STRICT CONSTRUCTION. LMC and Parent each acknowledge that
this Agreement has been prepared jointly by the parties hereto and shall not be
strictly construed against any party hereto.
Section 10.13. ENTIRE AGREEMENT. This Agreement (including the Disclosure
Letters, Schedules and Exhibits attached hereto or delivered in connection
herewith), the Ancillary Agreements and the Confidentiality Agreement constitute
the entire agreement among the parties hereto with respect to the matters
covered hereby and thereby, and supersede all previous written, oral or implied
understandings among them with respect to such matters.
Section 10.14. EQUITABLE REMEDIES. Neither rescission, set-off nor
reformation of this Agreement shall be available as a remedy to any of the
parties hereto. The parties hereto agree that irreparable damage would occur in
the event any of the provisions of this Agreement were not to be performed in
accordance with the terms hereof and that the parties shall be entitled to
specific performance of the terms hereof in addition to any other remedies at
Law or in equity.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
NEWS CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President & Deputy
CFO
LIBERTY MEDIA CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President & CEO
OMITTED SCHEDULES
The following schedules to the
Share Exchange Agreement have been omitted
pursuant to Regulation S-K Item 601(b)(2):
Schedule A: Form of LMC Tax Opinion Representations
Schedule B: Fox Sports net Current Assets & Liabilities Descriptions
Schedule C: Parent Restructuring
Schedule D: Form of Parent Tax Opinion Representations
The Registrant agrees to furnish supplementally a copy of any of the foregoing
to the Commission upon request.
2