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Exhibit 99.32
[CONFORMED COPY]
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INVESTMENT AGREEMENT
among
UNIVERSAL STUDIOS, INC.,
for itself and on behalf of certain of its Subsidiaries
HSN, INC.,
HOME SHOPPING NETWORK, INC.
and
LIBERTY MEDIA CORPORATION,
for itself and on behalf of certain of its Subsidiaries
dated as of October 19, 1997,
as amended and restated as of December 18, 1997
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TABLE OF CONTENTS
ARTICLE 1. THE TRANSACTIONS............................................ 1
1.1. Formation of LLC.............................................. 1
1.2. Formation of Investor Newcos.................................. 1
1.3. Parent and Sub Contributions.................................. 1
1.4. Assumption of Liabilities..................................... 1
1.5. Closing....................................................... 2
1.6. Parent Shares................................................. 4
1.7. Investor's Preemptive Right................................... 4
1.8. Holder's Preemptive Right..................................... 8
1.9. Holder To Exchange LLC Shares................................. 9
1.10. Issuance of LLC Shares to Parent or Sub....................... 9
1.11. Business of the LLC........................................... 9
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF INVESTOR.................. 10
2.1. Organization, Standing, and Authority......................... 11
2.2. Authorization and Binding Obligation.......................... 11
2.3. Absence of Conflicting Agreement; Consents.................... 11
2.4. Licenses...................................................... 12
2.5. Real Property................................................. 12
2.6. [Intentionally omitted]....................................... 13
2.7. Contracts..................................................... 13
2.8. Intangible Property........................................... 13
2.9. Financial Statements.......................................... 14
2.10. Personnel..................................................... 15
2.11. Claims and Legal Actions...................................... 16
2.12. Compliance with Laws.......................................... 17
2.13. Transactions with Affiliates; Completeness of Assets.......... 17
2.14. Cable Subscribers............................................. 17
2.15. Ownership of the Partnership.................................. 17
2.16. Investment.................................................... 18
2.17. Conduct of Business........................................... 18
2.18. Brokers....................................................... 19
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF PARENT.................... 19
3.1. Organization and Good Standing................................ 19
3.2. Capitalization................................................ 20
3.3. Due Authorization; Execution and Delivery..................... 21
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3.4. Absence of Breach; No Conflict............................... 21
3.5. Shares to Be Issued........................................... 22
3.6. Investment Purpose............................................ 22
3.7. Brokers....................................................... 22
3.8. Commission Documents; Financial Information................... 22
3.9. Approvals..................................................... 23
3.10. Personnel..................................................... 23
3.11. Conduct of Business........................................... 25
3.12. Licenses...................................................... 26
3.13. Claims and Legal Actions...................................... 26
3.14. Compliance with Laws.......................................... 26
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF HOLDER.................... 26
4.1. Organization, Standing, and Authority......................... 26
4.2. Authorization and Binding Obligation.......................... 27
4.3. Absence of Conflicting Agreements; Consents................... 27
ARTICLE 5. INTERCOMPANY TRANSFER OF FUNDS.............................. 27
5.1. General....................................................... 27
5.2. Transfers from LLC............................................ 27
5.3. Transfers to LLC.............................................. 28
5.4. Other Transactions............................................ 28
5.5. Interest...................................................... 28
ARTICLE 6. INVESTOR EXCHANGE OPTIONS; DISTRIBUTIONS; STOCK DIVIDENDS,
SPLITS, ETC................................................. 28
6.1. Exchange Options.............................................. 28
6.2. Distributions to LLC Stockholders............................. 30
6.3. Tax Treatment................................................. 32
6.6. Anti-dilution................................................. 32
ARTICLE 7. TRANSFERABILITY; ISSUANCE TO OTHER PARTIES.................. 32
7.1. No Transfer of Shares of the LLC.............................. 32
7.2. Transfer by Investor or Holder................................ 32
ARTICLE 8. TAX MATTERS................................................. 32
8.1. Tax Representations........................................... 32
8.2. Tax Indemnification by Investor............................... 33
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8.3. Tax Indemnification by Parent................................. 33
8.4. Allocation of Certain Taxes................................... 33
8.5. Filing Responsibility......................................... 34
8.6. Refunds....................................................... 34
8.7. Cooperation and Exchange of Information....................... 34
8.8. Section 754 Election.......................................... 36
8.9. Certificate of Non-Foreign Status............................. 36
8.10. Definitions................................................... 36
ARTICLE 9. ADDITIONAL COVENANTS........................................ 36
9.1. Annual or Special Meeting..................................... 36
9.2. HSR Filings................................................... 37
9.3. Related Agreements............................................ 37
9.4. Other Businesses.............................................. 37
9.5. Information and Access........................................ 38
9.6. Reservation................................................... 38
9.7. Further Action................................................ 38
9.8. [Intentionally omitted]....................................... 39
9.9. Employees..................................................... 39
9.10. Investor Give-Back Provision.................................. 40
9.11. Disclosure Schedule........................................... 42
9.12. Financing..................................................... 42
9.13. Representations and Warranties................................ 42
9.14. Spinoff of Regulated Subsidiaries............................. 42
9.15. Partnership Interest Purchase Agreement....................... 43
9.16. USA Network Cash.............................................. 43
9.17. Consents...................................................... 43
9.18. Viacom Non-Competition Covenant............................... 44
9.19. Ownership of Licenses......................................... 44
ARTICLE 10. CONDITIONS.................................................. 44
10.1. Conditions to Investor's Obligations.......................... 44
10.2. Conditions to Parent's Obligations............................ 45
10.3. Conditions to Holder's Obligations and Option................. 47
ARTICLE 11. SURVIVAL AND INDEMNIFICATION................................ 47
11.1. Survival...................................................... 47
11.2. Indemnification by Investor, Holder or Parent................. 47
11.3. Third-Party Claims............................................ 49
ARTICLE 12. TERMINATION; LIQUIDATION.................................... 50
12.1. Termination by Mutual Written Consent......................... 50
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12.2. Termination by Parent or Investor............................. 50
12.3. Termination by Parent......................................... 50
12.4. Termination by Investor....................................... 50
12.5. Termination Following Closing................................. 51
12.6. Effect of Termination......................................... 51
ARTICLE 13. GENERAL..................................................... 51
13.1. Definitions................................................... 51
13.2. Efforts to Proceed Promptly................................... 60
13.3. Maintenance of Business....................................... 61
13.4. Notices....................................................... 61
13.5. Specific Enforcement.......................................... 62
13.6. Severability.................................................. 62
13.7. Entire Agreement.............................................. 63
13.8. Amendment; Waiver............................................. 63
13.9. Headings; References.......................................... 63
13.10. Expenses...................................................... 63
13.11. Counterparts.................................................. 63
13.11. Governing Law................................................. 63
13.13. Public Announcement........................................... 63
13.14. No Third Party Beneficiaries.................................. 64
Exhibit A Governance Agreement
Exhibit B LLC Operating Agreement
Exhibit C 1. Domestic and International Distribution Agreements
2. Studio Facilities Agreement
3. Ancillary Business Agreements
4. International Joint Venture Agreement
5. Transition Services Agreement
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INVESTMENT AGREEMENT
INVESTMENT AGREEMENT (the "Agreement") dated as of October 19, 1997,
as amended and restated as of December 18, 1997, among UNIVERSAL STUDIOS, INC.,
for itself and on behalf of certain of its Subsidiaries ("Investor"), HSN, INC.
("Parent"), HOME SHOPPING NETWORK, INC. ("Sub"), a direct subsidiary of Parent,
and LIBERTY MEDIA CORPORATION, for itself and on behalf of certain of its
Subsidiaries ("Holder") (Investor, Holder, Parent and Sub, collectively, the
"Parties"). The Parties agree to consummate the following transactions (the
"Transactions") upon the terms and subject to the conditions set forth herein.
Capitalized terms used herein without definition have the meanings ascribed to
such terms in Article 13 hereof.
ARTICLE 1.
THE TRANSACTIONS
1.1. Formation of LLC. On or prior to the Closing Date, Parent
agrees to cause Sub to, and Sub agrees to, organize a new Delaware limited
liability company (the "LLC"). Upon formation of the LLC pursuant to this
Section 1.1, the LLC shall become a party to this Agreement, shall be bound by
all the terms and conditions hereunder and shall constitute a "Party" hereunder.
1.2. Formation of Investor Newcos. On or prior to the Closing Date,
Investor agrees to organize and form one or more holding companies, or to
designate one or more existing companies reasonably acceptable to Parent (each,
an "Investor Newco" and collectively, the "Investor Newcos") solely for the
purpose of acquiring an equity interest in LLC. Investor agrees that except as
contemplated hereby, during the term of this Agreement it shall be the sole
owner of all of the outstanding equity interest of Investor Sub and each
Investor Newco, and it shall cause Investor Sub and each Investor Newco not to
(i) engage in any other business, except the Transactions contemplated hereby,
or (ii) incur any liability.
1.3. Parent and Sub Contributions. On or before the Closing, Parent
and Sub shall, subject to Section 1.11(b), contribute, transfer, assign and
convey (collectively, "Contribute") or cause to be Contributed to the LLC,
(i) all of the assets, rights and businesses owned, held or conducted by Parent
and Sub described on Schedule 1.3 ("Contributed Businesses"), (ii) the portion
of the Acquired Partnership Interest described in Section 1.5(b)(ii) and (iii)
an agreement to contribute the stock or assets of an agreed-upon Subsidiary of
Parent (the "Excluded Sub") as promptly as practicable consistent with tax
efficiencies, in exchange for an aggregate number of LLC Shares to be issued to
Parent or Sub equal to the Parent LLC Shares Number.
1.4. Assumption of Liabilities. On or before the Closing, the LLC
will assume, and agree to pay and discharge, as and when they become due, or
otherwise take subject to, all liabilities of Parent and Sub, other than the
liabilities set forth on Schedule 1.4 (collectively, the "Assumed Liabilities").
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1.5. Closing. (a) Subject to the conditions set forth below, the
closing of the transactions contemplated hereby (the "Closing") shall take place
at the offices of Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇, ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m. on the date three days after satisfaction or waiver
of all of the conditions to the Parties' respective obligations to consummate
the transactions contemplated hereby (other than those requiring the delivery of
documents or the taking of other action at the Closing) or such earlier date as
may be agreed upon by the parties. The date on which the Closing is consummated
is hereinafter called the "Closing Date".
(b) At the Closing, USA Networks Partner, Inc. ("Investor Sub")
shall sell (i) to the LLC a portion of the Acquired Partnership Interest in
exchange for (A) a payment of cash equal to the Cash Amount (but such payment
shall not exceed $1.43 billion) to an account specified by Investor Sub in
writing not less than three days prior to the Closing, and (B) a number of LLC
Shares equal to the Acquired LLC Amount, and (ii) to Parent the remainder of the
Acquired Partnership Interest in exchange for 6.75 million shares of Parent
Class B Stock (provided, however that if FCC Regulations prevent Investor from
acquiring 6.75 million shares of Parent Class B Stock, then any amount in excess
of such amount so permitted shall consist of Parent Common Stock, and provided,
further, that Parent shall cooperate with Investor to provide Investor with the
same voting power that it would have in the absence of FCC Regulations at such
time, if any, as FCC Regulations would permit, including, without limitation,
agreeing to exchange Parent Common Stock for Parent Class B Stock) (the "Parent
Stock Number"), issued to Investor Sub.
(c) At the Closing, Investor shall Contribute or cause to be
Contributed to the LLC by the Investor Newcos, (i) the Owned Partnership
Interest and (ii) all of the assets, rights and businesses owned, held or
conducted by Investor and its Subsidiaries in its one-hour as well as certain
half-hour domestic television production business and domestic television
distribution business, including and excluding, as the case may be, those
described on Schedule 1.5 (the "UT Contributed Business"), and the LLC will
assume, and agree to pay and discharge, as and when they become due, or
otherwise take the UT Contributed Business subject to, all liabilities of the UT
Contributed Business set forth on Schedule 1.5 excluding any liabilities for
Taxes except as provided in Article 8 hereof (the "Assumed UT Liabilities") in
exchange for a number of LLC Shares equal to the Owned LLC Amount and issued in
such names and denominations as Investor shall request in writing not less than
three days prior to the Closing.
(d) To the extent that the Cash Amount exceeds the amount of cash
paid under Section 1.5(b), such excess shall be distributed in cash pro rata to
the Investor Newcos in proportion to their LLC Shares and indebtedness of the
LLC shall be allocated to such Investor Newcos in the amount of such
distribution for purposes of Sections 707 and 752 of the Code.
(e) Notwithstanding the foregoing, LLC may, at its option,
substitute LLC Shares valued at $40 per share for up to $75 million in cash
payable pursuant to paragraph (b) above. In addition, at the Closing, the LLC
shall reduce the cash to be paid or distributed to Investor and the Investor
Newcos pursuant to Sections 1.5(b) and 1.5(d) by $300 million, which amount
shall be paid or distributed or applied to reduce any amount payable by
Universal in connection with the exercise of its preemptive rights on or prior
to the Holder Closing (as defined
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below), as the case may be, together with interest thereon from the date of the
Closing to the date of payment at a rate per annum equal to the average rate of
borrowing of Investor's ultimate parent company plus 50 basis points, upon the
earlier of the Holder Closing or June 30, 1998, provided that Investor, in its
sole discretion, may elect to waive the interest described in this sentence
after considering various factors that (and to the extent) Investor deems
appropriate. Amounts to be distributed at Closing pursuant to Section 1.5(d)
shall be reduced before amounts payable under Section 1.5(b) are reduced.
(f) (i) No later than June 30, 1998, the parties shall consummate a
transaction relating to Holder as follows:
(A) Subject to the provisions of this Section, Holder agrees
to purchase, for cash, 7.5 million in the aggregate of LLC Shares
and/or of Parent Common Shares at an initial purchase price of $40
per share, which price shall increase by 7.5% per annum from the
date of the Closing through the date of the closing of the Holder
transaction described in this paragraph (the "Holder Closing"). The
Holder Closing (with respect to the cash and shares described in
this subparagraph) shall be subject only to the conditions that
(i) the LLC or Parent, as the case may be, deliver properly
evidenced LLC Shares and/or Parent Common Shares, duly authorized
and issued against payment therefor; (ii) the condition set forth in
Section 10.1(a) was satisfied as of the Closing; (iii) the
conditions described in Sections 10.1(b)-(j) are satisfied (as
appled to Holder, the Holder Closing and the transactions described
by this Section, mutatis mutandis) and (iv) the Closing has
occurred. Holder shall be entitled to reduce the number of shares
(valued for this purpose at $40 per share) to be acquired pursuant
to this subparagraph (A) by the product of 0.45 and the Holder Asset
Value.
(B) Following the date hereof, Parent and Holder shall discuss
the possibility of a contribution by Holder at the Holder Closing of
assets acceptable to Parent, Holder and Investor in exchange for LLC
Shares. If the Parties (including Investor) reach agreement on the
terms of any such contribution (including on appropriate and
reasonable representations, warranties, covenants or other terms and
conditions with respect to such contribution), this Agreement shall
be amended to provide for such contribution, subject to the
conditions so agreed upon. The purchase price for each LLC Share
acquired by Holder pursuant to this subparagraph (B) shall be $40
(the aggregate value (at $40 per share) of the LLC Shares issued to
Holder pursuant to this subparagraph being the "Holder Asset
Value").
(C) Shares acquired by Holder at the Holder Closing shall be
issued in such names and denominations as Holder shall request in
writing not less than three days prior to the Closing. Holder shall
be entitled to acquire any such LLC Shares through one or more
newly-formed Subsidiaries on terms comparable to the Investor Newcos
as set forth in Section 1.2, mutatis mutandis, above (each, a
"Holder Newco"), as agreed upon by Parent and Holder.
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(ii) Investor shall not have any preemptive right with respect
to the first 7.5 million in the aggregate of LLC Shares and/or Parent Common
Shares issued to Holder at the Holder Closing. Investor shall have a preemptive
right (at 45% and at $40 per LLC Share) with respect to shares issued to Holder
in excess of such amount. Investor's preemptive right shall be mandatory to the
extent that Holder elects to reduce the number of shares purchased under Section
1.5(f)(i)(A), with respect to the net related asset contribution by Holder under
Section 1.5(f)(i)(B) that resulted in such reduction (e.g., if Holder elects
with respect to a nominal $100 million asset contribution to reduce the shares
purchased for cash by $45 million, Investor shall have a mandatory preemptive
right with respect to 1,375,000 shares ($55 million divided by $40)).
(iii) It is contemplated that Holder's total net contribution
to the LLC or Parent pursuant to this Section 1.5 would be in an amount that,
assuming Universal exercises its preemptive right with respect to such
contribution, would result in Holder's aggregate equity beneficial ownership
interest (including all LLC Shares and Parent Common Shares acquired by Holder
pursuant to this Section 1.5) in Parent (based on the Assumptions) not exceeding
25%. Subject to tax efficiencies and regulatory requirements, Holder agrees to
acquire Parent Common Shares to the extent possible.
1.6. Parent Shares. (a) Nothing set forth in this Agreement shall be
construed to prevent Parent from issuing additional Parent Common Shares or any
other capital stock to any other person or entity.
(b) From and after the Closing Date, at such time that Parent shall
issue any additional Parent Common Shares (including, without limitation, upon
exercise of options or warrants or conversion of convertible securities, other
than shares of Parent Common Stock issued either upon conversion of shares of
Parent Class B Stock or upon issuance of Parent Common Shares pursuant to
Holder's Contingent Shares or Exchange Shares), Parent or Sub shall purchase
from the LLC a number of LLC Shares equal to the number of Parent Common Shares
issued, at a price per share equal to the Issue Price received by Parent for
such Parent Common Shares issued. Parent shall pay the LLC for such LLC Shares
with the same form of consideration as Parent or Sub receives in connection with
the issuance of such Parent Common Shares.
(c) From and after the Closing Date, at such time that Parent shall
repurchase or redeem any Parent Common Shares, Parent or Sub shall sell to the
LLC a number of LLC Shares equal to the number of Parent Common Shares so
repurchased or redeemed, for an amount per share equal to the Redemption Price
per Parent Common Share paid by Parent for the Parent Common Shares so
repurchased or redeemed. The LLC shall pay Parent for such LLC Shares with the
same form of consideration as Parent or Sub pays in connection with the
repurchase or redemption of such Parent Common Shares, or if such form of
consideration is not available to the LLC, with cash.
1.7. Investor's Preemptive Right. (a) (i) In the event that after
the Closing Date (and in addition to the mandatory and optional preemptive
rights of Investor pursuant to
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Section 1.5(f)(ii)), Parent issues or proposes to issue (other than pursuant to
an Excluded Issuance) (I) any Parent Common Shares (including Parent Common
Shares issued upon exercise, conversion or exchange of options, warrants and
convertible securities, but excluding (w) shares of Parent Common Stock issued
upon conversion of shares of Parent Class B Stock, (x) Parent Common Shares
issued upon exercise of the Exchange Options with respect to LLC Shares issued
to Investor Sub, the Investor Newcos, Holder and the Holder Newcos,
(y) Contingent Shares and Exchange Shares issued in accordance with the Holder
Exchange Agreement and (z) shares of Parent Common Stock issued pursuant to a
public offering described in clause (ii) of the definition of "Stock Amount") or
(II) LLC Shares (other than to Parent and its Affiliates, or to Investor and its
Affiliates), and such issuance in clause (I) or (II), together with any prior
issuances of less than 1% with respect to which Investor had no rights under
this Section 1.7(a)(i), shall be in excess of 1% of the total number of Parent
Common Shares (based on the Assumptions) outstanding after giving effect to such
issuance, Parent shall give written notice to Investor not later than five
business days after the issuance (an "Additional Issuance"), specifying the
number of Parent Common Shares issued or to be issued and the Issue Price (if
known) per share. Investor shall have the right (but, subject to the provisions
of paragraphs (ii) and (iii) of this Section 1.7(a), not the obligation) to
cause Investor Sub and/or one or more Investor Newcos to purchase for cash a
number (but not less than such number) of shares of Parent Common Stock, or at
the request of the Investor, LLC Shares, or any combination thereof, so that
Investor Sub and the Investor Newcos shall collectively maintain the identical
percentage equity beneficial ownership interest (but not in excess of 45%) or
such other percentage equity beneficial ownership as in effect from time to time
pursuant to the standstill provisions contained in the Governance Agreement
(defined below) (but without giving effect to the exceptions to the thresholds
therein)) (it being agreed that under no circumstances shall the preemptive
rights granted to Investor under this Section 1.7 permit Investor to maintain a
percentage equity beneficial ownership interest in excess of 57.5%) in Parent
that Investor Sub and Investor Newcos collectively owned immediately prior to
the notice from Parent to Investor described in the first sentence of this
paragraph (assuming that all Parent Common Shares issuable upon the exercise of
Exchange Options with respect to LLC Shares have been issued and all Contingent
Shares and Exchange Shares not yet issued are outstanding, with such assumptions
being referred to herein as the "Assumptions") after giving effect to such
Additional Issuance and to shares of Parent Common Stock and/or LLC Shares that
are to be issued to the Investor Newcos pursuant to this Section 1.7(a) and to
Holder in accordance with Section 1.8 below by sending an irrevocable written
notice to Parent not later than fifteen business days after receipt of such
notice (or, if later, two business days following the determination of the Issue
Price) from Parent that it elects to cause one or more Investor Newcos to
purchase all of such shares of Parent Common Stock or LLC Shares, as the case
may be (the "Additional Shares"). The closing of the purchase of Additional
Shares shall be the later of ten business days after the delivery of the notice
of election by Investor and five business days after receipt of any necessary
regulatory approvals.
(ii) Notwithstanding anything to the contrary contained in
paragraph (i) of this Section 1.7(a), Investor shall be required to exercise its
preemptive right in full (a "Mandatory Purchase Event") for (A) Additional
Issuances caused by the conversion of Sub's 5-7/8% Convertible Subordinated
Debentures due March 1, 2006 ("Sub Convertible Debt") into Parent Common Stock,
at a cash Issue Price to Investor of $40 per Additional Share, (B) Addi-
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tional Issuances within 4 months of the Closing Date in the aggregate amount of
up to $200 million in Parent Common Stock at a cash Issue Price to Investor of
$40 per Additional Share and (C) the transactions described in Section
1.5(f)(i), to the extent described in Section 1.5(f)(ii). The closing of the
purchase of Additional Shares shall be the later of (x) ten business days after
the delivery to Investor of a written notice by Parent ("Mandatory Purchase
Notice") specifying that an Additional Issuance has occurred and that such
Additional Issuance was caused by a Mandatory Purchase Event and (y) five
business days after receipt of any necessary regulatory approvals, including
under FCC regulations.
(iii) Notwithstanding anything to the contrary contained in
paragraph (i) of this Section 1.7(a), a Mandatory Purchase Event also shall
occur by reason of Additional Issuances in the aggregate amount up to 6.3
million Parent Common Shares in connection with the purchase of additional
equity in the Excluded Sub, whether by exchange offer, merger or otherwise (a
"Merger Transaction"), at a cash Issue Price to Investor of $40 per Additional
Share. If the Company issues more than 6.3 million Parent Common Shares in the
Merger Transaction, such excess Additional Issuances shall not be deemed to be a
Mandatory Purchase Event, and Investor shall have the right but not the
obligation to exercise its preemptive right in respect of such excess in
accordance with paragraph (i) of this Section 1.7(a). The closing of the
purchase referred to in this paragraph (iii) shall occur on the later to occur
of (v) the events specified in clauses (x) and (y) of paragraph (ii) above and
(w) in accordance with paragraph (i) above.
(iv) Notwithstanding anything to the contrary contained in
paragraphs (i) through (iii) above, in the event that as a result of any
Additional Issuance and the issuance of Parent Common Stock to the Investor
Newcos pursuant to Section 1.7(a) and to Holder pursuant to Section 1.8,
Investor's percentage voting power in Parent (based on the Assumptions) would be
below 67 percent, the Investor Newcos shall have the right to purchase Parent
Class B Stock pursuant to Section 1.7(a) in lieu of the number of shares of
Parent Common Stock permitted to be purchased pursuant to Section 1.7(a) in
order to maintain 67 percent voting power in Parent (based on the Assumptions);
provided that if such percentage voting power in Parent has been reduced due to
the failure of Investor to elect to exercise previously its rights pursuant to
Section 1.7(a), Investor Sub and the Investor Newcos shall only be permitted to
maintain such lower percentage voting power.
(v) Subject to subparagraph (vi) below, when calculating the
percentage ownership of Parent that Investor Sub and the Investor Newcos
beneficially own in connection with determining the percentage for a preemptive
right event (or an event covered by paragraph (c) below), (A) prior to the
Standstill Termination Date (as defined in the Governance Agreement)), transfers
of Parent Securities shall be taken into account, but acquisitions by Investor
of such securities shall not be included, other than in the case of acquisitions
from Parent or otherwise pursuant to this Section 1.7, and (B) after the
Standstill Termination Date, acquisitions and dispositions of Parent Securities
by Investor at such times and in such amounts permitted under the Governance
Agreement shall be taken into account in calculating the applicable percentage
for the exercise of the rights under this Section 1.7.
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(vi) Notwithstanding any other provision of this Agreement or
the Governance Agreement, Investor's percentage for purposes of the preemptive
rights (and for Parent's ability to redeem or purchase Investor's LLC Shares)
(A) shall be 45% for the period from and after the Closing through the Holder
Closing and (B) shall not take into account the effects of the exercise by
Parent of its option described in Section 1.5(e).
(b) In the event that Parent or any of its Affiliates purchases or
redeems, or proposes to purchase or redeem, any Parent Common Shares (other than
shares of Parent Class B Stock that may be deemed to be purchased or redeemed
upon conversion into shares of Parent Common Stock) following the Closing Date,
and such purchase or redemption, together with any prior purchases or
redemptions of less than 1% with respect to which Investor had no rights under
this Section 1.7(b), shall be in excess of 1% of the total number of Parent
Common Shares (based on the Assumptions) outstanding prior to such purchase or
redemption, Parent shall give written notice to Investor not later than five
business days prior to the purchase or redemption, specifying the number of
Parent Common Shares to be purchased or redeemed and the purchase or redemption
price (the "Redemption Price") (if known) per share. Parent shall have the right
to cause the LLC to purchase for cash a number of LLC Shares from, at Investor's
Option, Investor Sub and/or the Investor Newcos so that Investor Sub and the
Investor Newcos shall collectively beneficially own no greater than a 45 percent
equity beneficial ownership (adjusted to reflect Section 1.5(e)) or such other
percentage as in effect from time to time pursuant to the standstill provisions
contained in the Governance Agreement attached hereto as Exhibit A (or any
successor agreement, the "Governance Agreement") (but without giving effect to
the exceptions to the thresholds therein) (based on the Assumptions) after
giving effect to such purchases or redemptions of Parent Common Shares by Parent
and to purchases from Investor Sub and the Investor Newcos pursuant to this
Section 1.7(b), at a price per share equal to the Redemption Price, by sending
an irrevocable written notice to Investor not later than five business days
prior to the purchase or redemption that it elects to cause the LLC to purchase
all of such number of LLC Shares or, at Investor's election or to the extent
required under applicable FCC Regulations (but only to the extent of the
percentage increase in Investor's beneficial ownership of Parent Common Shares
that would otherwise result from such event), Parent Common Shares. The closing
of such purchase of LLC Shares and/or Parent Common Shares, as the case may be,
shall be simultaneous with the purchase or redemption of Parent Common Shares.
(c) In the event that there should occur (i) an event, circumstance
or condition with respect to which Investor has been granted a preemptive right
under Section 1.7(a) hereof but Investor is not permitted by law, rule or
regulation from exercising such right, or (ii) another event, circumstance or
condition (but not of the type included or excluded from the preemptive right in
Section 1.7(a)) occurs (excluding sales or transfers of Parent Common Shares or
LLC Shares by Investor and its Affiliates) that results in the percentage of
equity beneficial ownership in Parent of Investor (based on the Assumptions)
being reduced, then, subject to the last sentence of this paragraph (c), Parent
shall promptly agree to sell, at Investor's election, to Investor Sub and/or one
or more of the Investor Newcos a number (but not less than such number) of
shares of Parent Common Stock or, at the request of Investor, LLC Shares (or a
combination thereof) so that Investor, Investor Sub and the Investor Newcos
shall collectively maintain the identical percentage equity beneficial ownership
interest described in Section 1.7(a) with respect to an
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event that would give rise to a preemptive right. The purchase price for the
shares of Parent Common Stock or LLC Shares shall be the Issue Price (if such
event, circumstance or condition is identifiable and such Issue Price is
measurable) or the Fair Market Value of the Parent Common Stock (or LLC Shares,
based on the Fair Market Value of the Parent Common Stock and the
then-applicable Exchange Rate (as defined in the Exchange Agreement)). The
purchase price shall be paid in cash. The other procedures described in Section
1.7(a) regarding the exercise and consummation of Investor's preemptive right
shall apply to Investor's purchase under this paragraph. In the event that
Parent does not promptly (upon receipt of any required regulatory approvals or
consents so long as there is a reasonable prospect of such approvals or consents
being obtained) sell to Investor shares of Parent Common Stock or LLC Shares,
then Investor shall be permitted to purchase in the open market, in broker
transactions, a number of shares of Parent Common Stock that Investor would have
purchased from Parent hereunder. If an event, circumstance or condition
described in the first sentence of this paragraph shall occur and Investor
elects not to exercise the purchase right contained herein within a reasonable
period of time, then Investor's preemptive right percentage shall be reduced as
though such event were an event as to which the preemptive right in Section
1.7(a) arose and Investor elected not to exercise such right.
1.8. Holder's Preemptive Right. (a) Subject to paragraphs (b) and
(c) of this Section 1.8, in the event that Parent issues any Parent Common
Shares or LLC Shares (other than to Parent and its Affiliates or Holder and its
Affiliates) under the circumstances set forth in Section 1.7(a)(i) above
applicable to Investor, Holder shall be entitled to purchase, or cause one or
more Holder Newcos to purchase, for cash a number (but not less than such
number) of shares of Parent Common Stock so that the Holder and the Holder
Newcos shall collectively maintain the identical percentage equity beneficial
ownership interest in Parent that Holder and the Holder Newcos collectively
owned immediately prior to the notice from Parent described in Section 1.7(a)
(which shall be in substance the same as the notice provided to Investor
pursuant to Section 1.7(a) and subject to the terms thereof but shall be
addressed to Holder) of a contemplated Additional Issuance (but not in excess of
the percentage equity beneficial ownership interest in Parent that Holder and
the Holder Newcos collectively owned immediately following the Closing or
following Holder's contribution pursuant to Section 1.5(f)) on the same terms
and conditions specified therein and in Section 1.7(c); provided, that Holder
shall only be entitled to purchase LLC Shares if and to the extent the total
number of Parent Common Shares then owned directly or indirectly by Holder would
exceed the Holder Limit after giving effect to the closing of the purchase of
Parent Common Stock by Holder, in which event at such closing, Holder shall be
entitled to purchase a number of LLC Shares at the Issue Price equal to such
excess in lieu of the purchase of shares of Parent Common Stock.
(b) No Additional Issuance shall be a Mandatory Preemptive Event for
Holder. Additional Issuances in Section 1.7(a)(ii) and (iii), Additional
Issuances (i) caused by the conversion of Sub Convertible Debt as described in
Section 1.7(a)(ii) or (ii) in the aggregate amount up to 6.3 million Parent
Common Shares in connection with a Merger Transaction as described in Section
1.7(a)(iii) shall be governed by the terms applicable to permissive exercise of
the preemptive right under Section 1.7(a)(i), provided that (i) the Issue Price
to Holder shall be
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$40 per share in cash of Parent Common Stock and (ii) any such issuance shall,
in any event, be subject to the proviso set forth in the last sentence of
Section 1.8(a).
(c) The purchase or redemption of any Parent Common Shares by Parent
or any of its Affiliates shall not result in an increase in the percentage of
Parent equity that Holder may be entitled to acquire pursuant to the preemptive
right in paragraph (a) above. For purposes of exercise of Holder's preemptive
right pursuant to this Secton 1.8 prior to the Holder Closing, Holder shall be
deemed to own (and there shall be deemed to be outstanding) an additional 7.5
million LLC Shares.
1.9. Holder To Exchange LLC Shares. Following the issuance or
expiration of all Contingent Shares and prior to the exchange of any Exchange
Shares pursuant to Article 2 of the Holder Exchange Agreement, Holder shall be
required, subject to the terms and conditions described in Section 6.1(a) or as
may be set forth in the Exchange Agreement (including the future condition with
respect to a Holder Newco that such exchange is tax-free to Holder on terms
similar to those contained in the Holder Exchange Agreement), to consummate
transactions under the Exchange Agreement having the effect of exchanging that
number of LLC Shares for shares of Parent Common Stock equal to the then
Available Parent Amount (the "Holder Mandatory Exchange"); provided, however,
(i) if applicable, any such exchange shall only be exercised as to all shares
held by any individual Holder Newco and (ii) that Parent shall have the option,
which may be exercised at any time (or from time to time) after the issuance or
expiration of all Contingent Shares, to suspend the Holder Mandatory Exchange
and/or Holder's right to exchange shares of Sub for Parent Common Shares under
the Holder Exchange Agreement, in either case in connection with future
issuances of Parent Common Shares, in order to permit Parent to purchase or
redeem (in each case in compliance with applicable law, including without
limitation, FCC Regulations) up to 10 million Parent Common Shares, which
suspension shall remain in effect so long as Parent continues to make diligent
efforts to effect such purchase or redemption and to complete such repurchases
as promptly as reasonably practicable. Holder and Parent agree to take
appropriate action to amend the Holder Exchange Agreement to reflect the
provisions of this Section 1.9 (which shall not include a waiver or consent by
Holder of any conditions to an exchange thereunder or of any other rights of
Holder under such agreement other than the re-ordering of the order of the
exchanges contemplated by the Exchange Agreement and the Holder Exchange
Agreement and to reflect the Parent option described above). Capitalized terms
used and not defined in this paragraph shall have the meanings ascribed to them
in the Holder Exchange Agreement.
1.10. Issuance of LLC Shares to Parent or Sub. Neither Parent nor
Sub shall, and Parent and Sub shall cause the LLC not to, issue any LLC Shares
to Parent or Sub or any of their Affiliates, except pursuant to and in
accordance with the terms of this Agreement.
1.11. Business of the LLC. (a) From and after the Closing, Parent
and Sub shall conduct, subject to this clause (a) and clause (b) below, all
future business, whether now existing or hereafter created, in the LLC, other
than the Excluded Businesses, the Excluded Sub (but subject to Section 1.3) or
any other business which Parent reasonably determines should be conducted in a
separate company or corporate entity for regulatory or significant tax reasons
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(such business to be deemed an Excluded Business), provided that at such time,
if any, as such regulatory or significant tax restrictions no longer exist (it
being agreed that Parent shall use all reasonable best efforts to (i) avoid
businesses being deemed Excluded Businesses and (ii) eliminate the tax or
regulatory restrictions as soon as practicable with respect to any such Excluded
Businesses), such businesses shall not be Excluded Businesses and shall be
conducted in the LLC as promptly as reasonably practicable following the
elimination of such restrictions and compliance with applicable regulatory
requirements, and provided further that Parent shall not be restricted in any
manner, except as expressly set forth herein, including the Exhibits hereto,
from causing the LLC to engage in any transaction with any third party or Parent
or any subsidiary of Parent, including, without limitation, subsidiaries which
engage in Excluded Businesses (the "Regulated Subsidiaries").
(b) If any consent or approval is required in connection with, or
the terms or operation of law do not permit, the contribution to the LLC of any
agreement, lease, right, permit, franchise, authorization or other property or
asset relating to the Contributed Businesses or the UT Contributed Business,
other than the Regulated Subsidiaries (a "Consent Asset"), each of Parent, Sub,
Investor and each Investor Newco, as the case may be, agrees to use its
reasonable efforts to obtain any necessary consents or approvals for the
transfer of all Consent Assets contemplated to be transferred to the LLC;
provided that notwithstanding such efforts, if such consent or approval is not
obtained prior to the Closing and such Consent Asset is not contributed, each of
Parent, Sub, Investor and the Investor Newcos, as the case may be, in lieu of
contributing (or causing the contribution of) such Consent Asset, may hold such
Consent Asset for the use and benefit of the LLC (any Consent Asset so held is
referred to herein as a "Beneficial Asset"). In such event, Parent, Sub,
Investor or an Investor Newco, as the case may be, shall take all reasonable
actions necessary so that the LLC shall be afforded the full economic benefits
intended to be conferred by such Beneficial Asset, subject to the LLC satisfying
all of the transferor's liabilities in connection with such Beneficial Asset and
all of such transferor's duties, obligations and responsibilities incident
thereto, including without limitation, by assigning to the LLC the right to
receive all cash flow derived from such Beneficial Asset on and after the
Closing, such cash flow to be paid to the LLC as soon as reasonably practicable
but in no event more than 45 days after the end of each fiscal quarter of the
entity holding such Beneficial Asset. Following the Closing, Parent, Sub,
Investor and the Investor Newcos each agrees to continue to use its reasonable
efforts to obtain any consent or approval necessary to effectuate the
contribution to the LLC of any Consent Asset not contributed to the LLC on the
Closing, and shall take all reasonable action to effectuate the contributions of
such Consent Asset after such consent or approval is obtained.
(c) For purposes of Section 1.11(b), the Excluded Sub shall be
treated as a Beneficial Asset until such time as Parent Contributes the stock or
assets of the Excluded Sub to the LLC in accordance with the terms of Section
1.3.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor represents and warrants to Parent and the LLC as follows:
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2.1. Organization, Standing, and Authority. (a) Each of Investor and
Investor Sub is and, upon formation in accordance with Section 1.2 hereof, each
Investor Newco will be, a corporation duly organized, validly existing, and in
good standing under the laws of their respective jurisdictions of incorporation.
Each of Investor and Investor Sub has and, upon formation in accordance with
Section 1.2 hereof, each Investor Newco will have, all requisite corporate power
and authority (i) to own, lease, and use as now owned, leased, and used by them
all of their respective assets, (ii) to conduct the business and operations of
the UT Contributed Business as now conducted by Investor, and (iii) to execute
and deliver this Agreement and the documents contemplated hereby (to the extent
a party to this Agreement or such documents), and to perform and comply with all
of the terms, covenants, and conditions to be performed and complied with by
them hereunder and thereunder. Investor, Investor Sub and each Investor Newco
are, or will be, qualified to transact business in each jurisdiction in which
the nature of their businesses makes such qualification necessary, except where
failure to be so qualified would not have a Material Adverse Effect on Investor
and its Subsidiaries considered as a whole.
(b) The Partnership is a partnership duly organized, validly
existing, and in good standing under the laws of the State of New York. The
partnership agreement (as amended, and together with all other documents
governing the operation of the Partnership, the "Partnership Agreement") has
previously been provided to Parent, and is in full force and effect. The
Partnership has all requisite power and authority (i) to own, lease, and use as
now owned, leased, and used by it all of its assets, and (ii) to conduct the
business and operations of the Partnership as now conducted by it. The
Partnership is qualified to transact business in each jurisdiction in which the
nature of its business makes such qualification necessary except where failure
to be so qualified would not have a Material Adverse Effect on the Partnership.
2.2. Authorization and Binding Obligation. The execution, delivery,
and performance of this Agreement and the consummation of the transactions
contemplated hereby, and each of the agreements contemplated hereby, by Investor
(with respect to such agreements to which it is a party) have been duly
authorized by all necessary corporate action on the part of Investor. The
performance of this Agreement and the consummation of the transactions
contemplated hereby and each of the agreements contemplated hereby by Investor
Sub and each Investor Newco (with respect to such agreements to which it is a
party) will be duly authorized by all necessary corporate action on the part of
such entity. This Agreement has been duly executed and delivered by Investor and
constitutes the legal, valid, and binding obligation of Investor enforceable
against Investor in accordance with its terms, except to the extent limited by
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting creditors' rights generally and by general equity principles
regardless of whether such enforceability is considered in a proceeding in
equity or at law.
2.3. Absence of Conflicting Agreements; Consents. Except as set
forth on Schedule 2.3 and except for any filings, notices, applications and
other information as may be required to be made or supplied pursuant to the HSR
Act or the Exchange Act, the execution, delivery, and performance of this
Agreement and the consummation of the transactions contemplated hereby by
Investor, Investor Sub and the Investor Newcos (with or without the giving of
notice, the lapse of time, or both): (a) do not require any notices, reports or
other filings with any
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17
public or governmental authority to be made by Investor, Investor Sub, any
Investor Newco or the Partnership; (b) do not require the consent of any third
party (including any governmental or regulatory authority) (other than consents
that would not, if not given, have a Material Adverse Effect on the UT
Contributed Business and the Partnership considered as a whole); (c) will not
conflict with any provision of the Certificate of Incorporation, By-Laws,
Partnership Agreement or other organizational document, as the case may be, of
Investor, Investor Sub, any Investor Newco or the Partnership; (d) will not
violate or result in a breach of, or contravene any law, judgment, order,
ordinance, injunction, decree, rule, regulation, or ruling of any court or
governmental instrumentality applicable to any of Investor, Investor Sub, any
Investor Newco or the Partnership; (e) will not violate, conflict with, or
result in a breach of any terms of, constitute grounds for termination of,
constitute a default under, or result in the acceleration of any performance
required by the terms of, any mortgage, indenture, lease, contract, agreement,
instrument, license, or permit to which any of Investor, Investor Sub, any
Investor Newco or the Partnership is a party or by which any of Investor,
Investor Sub, any Investor Newco or the Partnership or their respective
properties may be bound; and (f) will not create any claim, liability, mortgage,
lien, pledge, condition, charge, encumbrance, or other security interest
(collectively, "Liens") upon any of the assets owned by Investor, Investor Sub,
any Investor Newco or the Partnership, except, in the case of clauses (a), (d),
(e) or (f), for violations, breaches, contraventions, conflicts, termination or
acceleration or Liens which would not have a Material Adverse Effect on the
Partnership and the UT Contributed Business considered as a whole, or would
impair, in any material respect, the ability of Investor to perform its
obligations under this Agreement and the other documents contemplated hereby.
2.4. Licenses. Schedule 2.4 is a true and complete list as of the
date of this Agreement of all material Licenses of the Partnership and the UT
Contributed Business. Each material License has been validly issued, and the UT
Contributed Business or the Partnership is the authorized legal holder thereof.
The material Licenses are in full force and effect, and the conduct of the
business and operations of the UT Contributed Business and the Partnership is in
accordance therewith in all material respects. As of the date of this Agreement,
there is no proceeding pending or, to Investor's knowledge, threatened, seeking
the revocation or limitation of any material Licenses. Each of the UT
Contributed Business and the Partnership is the holder of all material Licenses
necessary to enable it to continue to conduct its respective business as now
conducted.
2.5. Real Property. Schedule 2.5 contains a complete and accurate
description of all the Real Property providing individually for annual lease
payments in excess of $1 million (the "Material Real Property") of the UT
Contributed Business and the Partnership, and the respective interests of the UT
Contributed Business and the Partnership therein (including street address,
legal description, owner, and the use thereof). No fee estates are included in
the Material Real Property. Except as set forth on Schedule 2.5, the UT
Contributed Business or the Partnership has good title to all Material Real
Property, free and clear of all Liens or other restrictions on the Material Real
Property, except for Permitted Liens. Except for that portion of the Material
Real Property subject to leases where the Partnership is lessor or sublessor (as
identified on Schedule 2.5), the UT Contributed Business or the Partnership is
in possession of the Material Real Property. As of the date of this Agreement
there are no pending or, to the knowl-
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edge of Investor, threatened condemnation or appropriation proceedings against
any of the Material Real Property. The UT Contributed Business or the
Partnership has full legal and practical access to all Material Real Property.
With respect to each leasehold or subleasehold interest included in the Material
Real Property, the UT Contributed Business or the Partnership has enforceable
rights to nondisturbance and quiet enjoyment, and no third party holds any
interest in the leased premises with the right to foreclose upon the UT
Contributed Business' or the Partnership's leasehold or subleasehold interest.
2.6. [Intentionally omitted]
2.7. Contracts. Schedule 2.7 is a true and complete list of all
Contracts of the UT Contributed Business and the Partnership as of the date of
this Agreement, which (i) at the time entered into, were outside the ordinary
course of business as then conducted by the business comprising the UT
Contributed Business or the Partnership, as applicable, or (ii) are (a) cable
television system affiliation agreements ("Affiliation Agreements") or other
Contracts providing for payments to or from the Partnership to cable television
system operators in excess of $1 million in any twelve month period, (b)
Contracts (other than with writer producers) with respect to the production,
development, broadcast, or distribution, of television programs with respect to
which the UT Contributed Business or the Partnership, as applicable, has a
commitment to pay in excess of $10 million ("Programming Agreements"), (c)
agreements with writer producers with respect to which the UT Contributed
Business or the Partnership, as applicable, has a commitment to pay in excess of
$2 million per year, and (d) agreements to buy or sell advertising where the
required payments to or from the UT Contributed Business or the Partnership, as
applicable, are in excess of $10 million (the Contracts described in the
foregoing clauses (i) and (ii), collectively the "Material Contracts"). Investor
has delivered or made available to Parent true and complete copies of all
Material Contracts. Except as disclosed on Schedule 2.7, all of the Material
Contracts are in full force and effect and are valid and binding agreements of
the Investor and, to the knowledge of the Investor, the other parties thereto,
enforceable in accordance with their terms. Except as disclosed on Schedule 2.7,
to the knowledge of Investor, no party is in default in any material respect
under any of the Material Contracts, nor does any condition exist that with
notice or the lapse of time or both would constitute such a default. Except for
the need to obtain the consents listed on Schedule 2.3, the transactions
contemplated hereby will not affect the validity or enforceability of any of the
Material Contracts. Except as disclosed on Schedule 2.7, as of the date of this
Agreement, no party to any Material Contract has informed Investor or, to
Investor's knowledge, its Affiliates or the Partnership, of its intention (a) to
terminate such Material Contract or amend the material terms thereof, (b) to
refuse to renew the Material Contract upon expiration of its term, or (c) to
renew the Material Contract upon expiration only on terms and conditions that
are more onerous to the Partnership or the UT Contributed Business, as the case
may be, than those now existing.
2.8. Intangible Property. Schedule 2.8 is a list of (a) any
intellectual property asset (other than such property licensed to the UT
Contributed Business or the Partnership, as applicable), with a value, as
reflected on the balance sheet of the UT Contributed Business or the Partnership
of $2.5 million or more and (b) all material patents, trademarks, trade names,
service marks, brand marks, brand names, proprietary computer programs,
proprietary databases, indus-
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trial design, copyrights or any pending application therefor (collectively, (a)
and (b), the "Intangible Property") of the UT Contributed Business and the
Partnership and indicates, with respect to each such item of Intangible
Property, whether it is registered or unregistered, the owner thereof and, if
applicable, the name of the licensor and licensee thereof. Except as set forth
on Schedule 2.8, to the knowledge of Investor, no other person has any claim of
ownership or right of use with respect thereto. The use of such Intangible
Property by the UT Contributed Business or the Partnership does not, and
immediately after the Closing will not, conflict with, infringe upon, violate,
or interfere with or constitute an appropriation of any right, title, interest,
or goodwill, including any intellectual property right, patent, trademark, trade
name, service ▇▇▇▇, brand ▇▇▇▇, brand name, computer program, database,
industrial design, copyright, or any pending application therefor of any other
Person (except for such conflicts, infringements, violations or appropriations
as would not have a Material Adverse Effect on the Partnership and the UT
Contributed Business considered as a whole), and, to the knowledge of Investor,
there have been no claims made, and the UT Contributed Business or the
Partnership has not received any written notice, that any such item of
Intangible Property is invalid or conflicts with the asserted rights of any
Person (other than such invalidity or conflicts as would not have a Material
Adverse Effect on the Partnership and the UT Contributed Business considered as
whole). Except as set forth on Schedule 2.8, neither the UT Contributed Business
nor the Partnership is party to or bound by any material contract, license, or
other agreements relating to such Intangible Property other than those entered
into in the ordinary course of the business. As of the Closing, none of Investor
or its Affiliates shall have any rights to, or ownership interest in, any of the
trademarks or trade names relating to the "USA Networks," "USA Network,"
"Sci-Fi" and "Sci-Fi Channel" names and the related trade names and trademarks,
logos, brand marks and brandnames, including those listed on Schedule 2.8,
except pursuant to the International Joint Venture Agreement attached hereto as
Exhibit C.4 (or any successor agreement). Prior to the Closing, Investor shall
effect any assignments or other filings in order to satisfy the representation
contained in the preceding sentence.
2.9. Financial Statements. Investor has furnished Parent with true
and complete copies of unaudited balance sheets and income statements for the
Partnership as at and for the fiscal years ended December 31, 1996 and December
31, 1995, and as at and for the eight months ended August 31, 1997
(collectively, the "Investor Financial Statements"). The Investor Financial
Statements present fairly as of their respective dates, in all material
respects, the consolidated financial position of the Partnership as at the dates
thereof and the consolidated results of its operations and its consolidated cash
flows for each of the respective periods, in conformity with GAAP, except that
the eight-month financial statements referred to above are subject to normal
year-end adjustments, none of which are expected to be material.
Except as and to the extent expressly set forth in the Investor
Financial Statements, (i) as of August 31, 1997, the Partnership did not have
any material liabilities or obligations (whether absolute, contingent, accrued
or otherwise) and (ii) since the August 31, 1997 balance sheet the Partnership
has not incurred any such material liabilities or obligations other than in the
ordinary course of business.
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2.10. Personnel. (a) Schedule 2.10 contains a true and complete list
as of the date of this Agreement of all active employees of the UT Contributed
Business and the Partnership who are currently engaged in the respective
businesses and operations of the UT Contributed Business and the Partnership
(including any employee on vacation, leave of absence, short-term disability, or
layoff with recall rights, but excluding retired employees of the UT Contributed
Business and any employee on long-term disability) (collectively, the "Business
Employees"). Schedule 2.10 also contains a true and complete list of all
material employee benefit plans or arrangements that cover any Business Employee
and any material employee benefit plans or arrangements that cover any former
employee of the Partnership, including any employment, severance, or other
similar contract, arrangement, or policy and each plan or arrangement (written
or oral) providing for insurance coverage (including any self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, or retirement benefits or for deferred
compensation, profit-sharing, bonuses, stock options, stock appreciation rights,
stock purchases, or other forms of incentive compensation or post-retirement
insurance, compensation, or benefits (collectively, "Benefit Arrangements").
Schedule 2.10 denotes all Benefit Arrangements sponsored or maintained by the
Partnership ("Partnership Plans").
(b) Except as set forth on Schedule 2.10(b), (i) no Benefit
Arrangement is an "employee pension benefit plan," as defined in Section 3(2) of
ERISA (a "Pension Plan"), that is subject to Title IV of ERISA or Section 412 of
the Code, and no Benefit Arrangement provides post-retirement welfare benefits,
except as required by law and (ii) neither Investor nor the Partnership has
incurred or expects to incur any liability or lien under Title IV of ERISA or
Section 412 of the Code, which liability or lien would be reasonably expected to
have a Material Adverse Effect on the Partnership and the UT Contributed
Business considered as a whole.
(c) Without limiting the generality of Section 2.10(b) and except as
set forth on Schedule 2.10(c), no Benefit Arrangement is a "multiemployer
pension plan," as defined in Section 3(37) of ERISA and neither Investor nor the
Partnership has incurred or expects to incur any liability or lien with respect
to any multiemployer pension plan which liability or lien would be reasonably
expected to have a Material Adverse Effect on the Partnership and the UT
Contributed Business considered as a whole.
(d) Except as set forth on Schedule 2.10(d), none of Investor, any
of its Affiliates, the Partnership or any entity required to be combined with
any of the foregoing entities under Section 414(b), Section 414(c), Section
414(m), or Section 414(o) of the Code (an "ERISA Affiliate") has incurred, or
expects to incur solely as a result of the consummation of the Transactions
(including any termination of employment in connection therewith), any cost,
fee, expense, liability, claim, suit, obligation, or other damage with respect
to any Pension Plan or any Benefit Arrangement that could give rise to the
imposition of any liability, cost, fee, expense, or obligation on the LLC or any
of its Affiliates, which would be reasonably expected to have a Material Adverse
Effect on the Partnership and the UT Contributed Business considered as a whole,
and, to Investor's knowledge, no facts or circumstances exist that could give
rise to any such cost, fee, expense, liability, claim, suit, obligation, or
other damage, which would be reasonably expected to have a Material Adverse
Effect on the Partnership and the UT Contributed
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Business considered as a whole. Except as set forth on Schedule 2.10(d), neither
the execution and delivery of this Agreement nor the consummation of the
Transactions (including any terminations of employment in connection therewith)
will (i) increase any benefits otherwise payable under any Benefit Arrangement,
which would be reasonably expected to have a Material Adverse Effect on the
Partnership and the UT Contributed Business considered as a whole or (ii) result
in the acceleration of the time of payment or vesting of any such payment, which
would be reasonably expected to have a Material Adverse Effect on the
Partnership and the UT Contributed Business considered as a whole.
(e) Investor will deliver or make available to Parent, within ten
days hereafter, true and complete copies of each of the following documents:
(i) Each Benefit Arrangement (and, if applicable, related
trust agreements) and all amendments thereto, and (if applicable) each summary
plan description together with any summary of material modifications;
(ii) Each written Benefit Arrangement and written descriptions
thereof that have been distributed to Business Employees or any former employee
of the Partnership, (including descriptions of the number and level of employees
covered thereby); and
(iii) Each employee handbook or similar document describing
any Benefit Arrangement.
(f) Except as set forth on Schedule 2.10, no controversies,
disputes, or proceedings are pending or, to Investor's knowledge, threatened,
between Investor, any of its Affiliates, or the Partnership and any Business
Employee or any former employee of the Partnership, which would be reasonably
expected to have a Material Adverse Effect on the Partnership and the UT
Contributed Business considered as a whole. Except as set forth on Schedule
2.10(f), no labor union or other collective bargaining unit represents or, to
Investor's knowledge, claims to represent any of the Business Employees or any
former employees of the Partnership and, to Investor's knowledge, there is no
union campaign being conducted to solicit cards from employees to authorize a
union to request a National Labor Relations Board Certification election with
respect to any of the Business Employees.
(g) Except where any such failure would not be reasonably expected
to have a Material Adverse Effect on the Partnership and the UT Business
considered as a whole, all Benefit Arrangements (i) comply in all material
respects with applicable law, including but not limited to ERISA and the Code,
and (ii) have been administered in all material respects in accordance with
their terms, and all required contributions have been made to such Benefit
Arrangements. Except as set forth on Schedule 2.10(g), all Partnership Plans
that are intended to be qualified under Section 401(a) of the Code have received
a favorable determination letter from the Internal Revenue Service, and neither
Investor nor the Partnership has knowledge of any events that would cause such
letter to be revoked.
2.11. Claims and Legal Actions. Except as set forth in Schedule
2.11, there are no judicial, administrative or arbitral actions, suits, claims,
inquiries, investigations or pro-
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ceedings in respect of the UT Contributed Business or the Partnership (whether
of a public or private nature) pending or, to the knowledge of Investor,
threatened against the UT Contributed Business or the Partnership which,
individually or in the aggregate, would have a Material Adverse Effect on the UT
Contributed Business and the Partnership considered as a whole.
2.12. Compliance with Laws. Each of the UT Contributed Business and
the business of the Partnership has been and is presently being conducted in
compliance with all applicable laws, except for any noncompliance that would not
have a Material Adverse Effect on the UT Contributed Business and the
Partnership considered as a whole, or impair or hinder the ability of Investor,
Investor Sub or any Investor Newco to perform in any material respect their
respective obligations under this Agreement and the documents and agreements
contemplated hereunder.
2.13. Transactions with Affiliates; Completeness of Assets. (a)
Except as set forth on Schedule 2.13(a) or pursuant to agreements on arms-length
terms, there are no material agreements relating to the business or operations
of the UT Contributed Business or the Partnership between the UT Contributed
Business or the Partnership, on the one hand, and Investor or any of its
Affiliates, on the other hand, and (b) except as set forth on Schedule 2.13(b),
neither the UT Contributed Business nor the Partnership has engaged in any
material business arrangement or relationship with Investor or any of its
Affiliates. With respect to the UT Contributed Business, neither Investor nor
any of its Affiliates owns any right, tangible or intangible, relating to the
shows listed on Schedule 2.13 and related agreements (other than as expressly
contemplated by this Agreement to be entered into between two or more of the
Parties) and, with respect to the Partnership, neither Investor nor any of its
Affiliates owns any asset, property or right, tangible or intangible, that is
primarily used in the business or operations of the Partnership, other than, in
each case, such assets, properties and rights that are being Contributed to the
LLC in accordance with this Agreement.
2.14. Cable Subscribers. Schedule 2.14 sets forth, with respect to
each cable television system operator with which the Partnership has an
Affiliation Agreement, under the column "Network Subsidiary" the number of cable
system subscribers to such cable television system operator as most recently
reported to the Partnership. Schedule 2.14 also designates those cable
television system operators that, to Investor's knowledge, make the USA Networks
available to subscribers without an Affiliation Agreement.
2.15. Ownership of the Partnership. Investor owns directly or
indirectly all of the issued and outstanding Owned Partnership Interest and
following Closing of the transactions contemplated by the Partnership Interest
Purchase Agreement (for purposes of this Section 2.15, the term Closing shall
have the meaning set forth in the Partnership Interest Purchase Agreement),
Investor Sub will own, directly or indirectly, all of the issued and outstanding
Acquired Partnership Interest which, together, constitute 100% of the ownership
interest in the Partnership, subject to no Liens. There exist no other
outstanding options, convertible securities or other rights to acquire
partnership or other interests in the Partnership. Immediately upon the Closing,
the LLC will own a 100% ownership interest in the Partnership, subject to no
Liens other than
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any Liens created by Parent or LLC. Except as set forth on Schedule 2.15, the
Partnership has no subsidiaries and owns no interest in any other entity.
2.16. Investment. Each of Investor, Investor Sub and each Investor
Newco (a) understands that the LLC Shares and Parent Common Shares to be issued
to it pursuant to this Agreement have not been, and will not be, registered
under the Securities Act or under any state securities laws, and are being
offered and sold in reliance upon federal and state exemptions for transactions
not involving any public offering, and (b) to the extent it or any of its
Affiliates acquires any of the LLC Shares or Parent Common Shares issued
pursuant to this Agreement, it or such Affiliate will be acquiring such shares
solely for its own account for investment purposes, and not with a view to the
distribution thereof.
2.17. Conduct of Business. Since August 31, 1997, the UT Contributed
Business and the business of the Partnership have been conducted in all material
respects in the ordinary course and there has not occurred any event or
condition having, or that would have, a Material Adverse Effect on the UT
Contributed Business and the business of the Partnership considered as a whole.
Without limiting the generality of the foregoing, other than as is disclosed on
Schedule 2.17 hereto, since August 31, 1997 there has not occurred:
(a) any change or agreement to change the character or nature of the
business of the UT Contributed Business or the Partnership in any material
respect;
(b) any purchase, sale, transfer, assignment, conveyance or pledge
of the assets or properties of the UT Contributed Business or the Partnership,
except in the ordinary course of business and except for the purchase of the
Acquired Partnership Interest pursuant to the Partnership Interest Purchase
Agreement;
(c) any waiver or modification by Investor, the Partnership or any
of their respective Subsidiaries, in respect of the UT Contributed Business or
the Partnership, of any right or rights of substantial value, or any payment,
direct or indirect, in satisfaction of any liability, in each case, having a
Material Adverse Effect on the UT Contributed Business and the Partnership
considered as a whole;
(d) any loan, advance or capital expenditure by the UT Contributed
Business, the Partnership or any of its Subsidiaries, except for loans, advances
and capital expenditures made in the ordinary course of business;
(e) any change in the accounting principles, methods, practices or
procedures followed in connection with the UT Contributed Business or the
Partnership or any change in the depreciation or amortization policies or rates
theretofore adopted in connection with the UT Contributed Business or the
Partnership; or
(f) other than sweeping cash in the ordinary course of business, any
declaration or payment of any dividends, or other distributions in respect of
the outstanding equity interest of the Partnership;
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(g) any issuance of any equity interest of the Partnership;
(h) any grant or award of any options, warrants, conversion rights
or other rights to acquire any equity interest of the Partnership by the
Partnership;
(i) except for any changes made as a result of the consummation of
the purchase pursuant to the Partnership Interest Purchase Agreement, which
changes shall be consistent with the methods employed by other Subsidiaries, any
change in the methods of collecting receivables or paying payables with respect
to the Partnership; or
(j) any agreement with respect to any of the foregoing.
2.18. Brokers. No broker, finder or investment banker (other than
▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co., the fees of which shall be the responsibility of Investor)
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Investor or its Affiliates.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to Investor and the LLC and, to the
extent Holder acquires any additional LLC Shares in accordance with this
Agreement, Holder, as follows:
3.1. Organization and Good Standing. Parent is a corporation duly
organized, validly existing and in good standing under the laws of Delaware, and
is duly qualified to transact business as a foreign corporation and is in good
standing in each jurisdiction in which the nature of the business transacted by
it or the character or location of the properties owned or leased by it requires
such qualification, except where the failure to be so qualified or in good
standing would not have a Material Adverse Effect on Parent and its Subsidiaries
considered as a whole. Each of Parent and Sub has full corporate power and
authority (i) to own, lease and use as now owned, leased and used by it all of
its assets, (ii) to conduct the business and operations of Parent as now
conducted by it, and (iii) to execute and deliver this Agreement and the
documents contemplated hereby (to the extent a party to this Agreement or such
documents), and to perform and comply with all of the terms, covenants and
conditions to be performed and complied with by it
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hereunder and thereunder. The copies of Parent's certificate of incorporation
(the "Parent Certificate") and by-laws (as amended and/or restated through the
date hereof), heretofore delivered to Investor, are true, complete and correct
copies thereof. Upon formation, the LLC will be a limited liability company duly
organized, validly existing and in good standing under the laws of Delaware and
will be duly qualified to transact business as a foreign corporation and will be
in good standing in each jurisdiction in which the nature of the business
transacted by it or the character or location of the properties owned or leased
by it requires such qualification, except where the failure to be so qualified
or in good standing would not have a Material Adverse Effect on the LLC. The LLC
will have full corporate power and authority to execute and deliver this
Agreement and the documents contemplated hereby, and to perform and comply with
all of the terms, covenants and conditions to be performed and complied with by
it hereunder and thereunder. Except as set forth on Schedule 3.1, each of the
Subsidiaries of Parent is duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or organization and has the
power and authority to own or lease its properties and to conduct its business
as now conducted, except as would not result in any Material Adverse Effect on
Parent and its Subsidiaries considered as a whole. All outstanding shares of the
capital stock of each of Parent's Subsidiaries have been validly issued and are
fully paid and nonassessable. Except as set forth in the Parent Form 10-K or
Schedule 3.1 or as contemplated by this Agreement, there are no outstanding
options, warrants, rights, agreements or commitments of any nature whatsoever of
any third party to subscribe for or purchase any equity security of any of
Parent's Subsidiaries or to cause any of such Subsidiaries to issue any such
equity security.
3.2. Capitalization. (a) The authorized capitalization of Parent as
of the date hereof consists of: 150,000,000 shares of Common Stock, $.01 par
value per share ("Parent Common Stock"), 30,000,000 shares of Parent Class B
Common Stock, $.01 par value per share ("Parent Class B Stock"), and 15,000,000
shares of preferred stock, $.01 par value per share, of Parent ("Parent
Preferred Stock"), of which, as of August 8, 1997, there were 43,526,372 shares
of Parent Common Stock outstanding, 12,227,647 shares of Parent Class B Stock
outstanding and no shares of Parent Preferred Stock outstanding. All such shares
outstanding on the date hereof are, duly authorized, validly issued and fully
paid and nonassessable. Other than (a) options to purchase an aggregate of
approximately 11,572,649 shares of Parent Common Stock issued pursuant to
employee benefit plans and agreements of Parent as of the date hereof and
options granted by Parent on the date hereof as set forth on Schedule 3.2, (b)
rights to acquire shares of Parent Class B Stock and Parent Common Stock under
this Agreement, (c) Contingent Shares entitling Holder to acquire 589,161 shares
of Parent Class B Stock and Exchange Shares entitling Holder to acquire 399,136
shares of Parent Class B Stock and 7,905,016 shares of Parent Common Stock, each
under agreements (the "Holder Agreements") described in a Joint Proxy
Statement/Prospectus dated November 20, 1996 filed by Parent with the Commission
on Form S-4 (the "Parent Form S-4"), (d) 28,449,846 shares of Parent Common
Stock issuable upon conversion of the Savoy Debentures (each such term as
defined in the Parent Form S-4), and (e) shares of Parent Common Stock issuable
under the Stock Exchange Agreement between ▇▇▇▇ ▇▇▇▇▇ and Parent dated May 20,
1997 and the letter agreement by and between Parent and ▇▇▇▇ ▇▇▇▇▇ dated May 20,
1997 (the Stock Exchange Agreement and the letter agreement together, the "TKTM
Agreements"), as of the date hereof, there are no outstanding options, warrants,
rights, puts, calls, commitments, or other contracts, arrangements, or
understandings issued by or binding upon Parent requiring or providing for, and
there are no outstanding debt or equity securities of Parent which upon the
conversion, exchange or exercise thereof would require or provide for, the
issuance by Parent of any new or additional shares of Parent Common Stock (or
any other securities of Parent) which, with notice, lapse of time and/or payment
of monies, are or would be convertible into or exercisable or exchangeable for
Parent Common Shares. There are no preemptive or other similar rights available
to the existing holders of Parent Common Stock or other securities of Parent
except as contemplated by this Agreement.
(b) As of the Closing Date, the authorized capitalization of the LLC
will consist of a number of LLC Shares, consisting of one or more classes of
interests as set forth in the LLC Operating Agreement. As of the Closing Date,
other than contemplated by this Agreement,
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26
there will be no outstanding or authorized options, warrants, rights, puts,
calls, commitments, or other contracts, arrangements, or understandings issued
by or binding upon the LLC requiring or providing for, and there are no
outstanding debt or equity securities of the LLC which upon the conversion,
exchange or exercise thereof would require or provide for, the issuance by the
LLC of any new or additional LLC Shares (or any other securities of LLC, which,
with notice, lapse of time and/or payment of monies, are or would be convertible
into or exercisable or exchangeable for LLC Shares). As of the Closing Date,
there will be no preemptive or other similar rights available to the holders of
LLC Shares or other securities of the LLC except as contemplated by this
Agreement.
3.3. Due Authorization; Execution and Delivery. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by Parent's board of
directors (including such authorization as may be required so that no state
anti-takeover statute or similar statute or regulation including, without
limitation, Section 203 of the Delaware General Corporation Law, is or becomes
operative with respect to this Agreement or the transactions contemplated hereby
or with respect to Investor and its affiliates (as defined in Section 203) as of
October 19, 1997) and, when authorized by the Requisite Stockholder Vote and the
Certificate Amendment is filed with the Delaware Secretary of State, no other
corporate proceedings on the part of Parent are necessary to authorize this
Agreement and to consummate the transactions contemplated hereby. The
performance of this Agreement and the consummation of the transaction
contemplated hereby by LLC (with respect to such agreements to which it is a
party) will be duly authorized by all necessary corporate action on the part of
LLC. This Agreement has been duly executed and delivered by Parent and Sub and
constitutes the legal, valid and binding obligation of Parent and Sub,
enforceable against Parent and Sub in accordance with its terms, except to the
extent limited by bankruptcy, insolvency, reorganization, moratorium or other
laws relating to or affecting creditors' rights generally and by general equity
principles regardless of whether such enforceability is considered in a
proceeding in equity or at law.
3.4. Absence of Breach; No Conflict. Except as set forth on Schedule
3.4 hereto, the execution, delivery, and performance of this Agreement by
Parent, and the consummation by Parent of the transactions contemplated hereby,
(a) will not require the consent of any third party (including any governmental
or regulatory authority) (other than consents that would not, if not given, have
a Material Adverse Effect on Parent and its Subsidiaries considered as a whole);
(b) will not conflict with any provision of the Certificate of Incorporation,
By-Laws or limited liability company agreement, as the case may be, of Parent,
Sub or the LLC; (c) will not violate or result in a breach of, or contravene any
law, judgment, order, ordinance, injunction, decree, rule, regulation, or ruling
of any court or governmental instrumentality applicable to any of Parent, Sub or
the LLC; (d) will not violate, conflict with, or result in a breach of any terms
of, constitute grounds for termination of, constitute a default under, or result
in the acceleration of any performance required by the terms of, any mortgage,
indenture, lease, contract, agreement, instrument, license, or permit to which
any of Parent, Sub or the LLC is a party or by which any of Parent, Sub or the
LLC or their respective properties may be bound; and (e) will not create any
Liens upon any of the assets owned by any of Parent, Sub or the LLC, except, in
the case of clause (c), (d) or (e), for violations, breaches, contraventions,
conflicts, termination or accelera-
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27
tion or Liens which would not have a Material Adverse Effect on Parent and its
Subsidiaries considered as a whole, or would impair, in any material respect,
the ability of Parent to perform its obligations under this Agreement and the
other documents contemplated hereby.
3.5. Shares to Be Issued. The LLC Shares and the Parent Common
Shares to be issued pursuant to the transactions contemplated hereby, when
authorized by the Requisite Stockholder Vote and issued in accordance with
Articles 1 and 6, will be duly authorized and legally and validly issued, fully
paid and nonassessable.
3.6. Investment Purpose. Parent is acquiring the Partnership solely
for the purpose of investment and not with view to, or for offer or sale in
connection with, any distribution thereof. Parent acknowledges and understands
that the Partnership may not be sold except in compliance with the registration
requirements of the Securities Act, unless an exemption therefrom is available.
3.7. Brokers. Other than ▇▇▇▇▇ & Company Incorporated, the fees of
which shall be the responsibility of Parent, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or its Affiliates.
3.8. Commission Documents; Financial Information. The Parent Form
10-K in respect of the fiscal year ended December 31, 1996 (the "Parent Form
10-K"), and each report, schedule, proxy, information statement or registration
statement (including all exhibits and schedules thereto and documents
incorporated by reference therein) filed by Parent with the Commission following
the date thereof and on or before the Closing Date are collectively referred to
as the "Parent Commission Documents." As of their respective filing dates, the
Parent Commission Documents complied (or will comply) in all material respects
with the requirements of the Exchange Act and the rules and regulations of the
Commission thereunder applicable to such Parent Commission Documents, and as of
their respective dates none of the Parent Commission Documents contained (or
will contain) any untrue statement of a material fact or omitted (or will omit)
to state a 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. The financial statements of Parent included in the Parent
Commission Documents comply (or will comply) as of their respective dates as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the Commission with respect thereto (except
as may be indicated in the notes thereto or, in the case of the unaudited
statements, as permitted by Form 10-Q promulgated by the Commission), and
present fairly (or will present fairly) as of their respective dates, in all
material respects, the consolidated financial position of Parent and its
Subsidiaries as at the dates thereof and the consolidated results of their
operations and their consolidated cash flows for each of the respective periods,
in conformity with GAAP, except that interim financial statements are subject to
normal year-end adjustments, none of which are expected to be material. As used
in this Agreement, the consolidated balance sheet of Parent and its Subsidiaries
at June 30, 1997 included in the Parent Form 10-Q filed with the Commission in
respect of the fiscal quarter ended June 30, 1997 is hereinafter
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referred to as the "Parent Balance Sheet," and June 30, 1997 is hereinafter
referred to as the "Parent Balance Sheet Date."
Except as and to the extent expressly set forth in the Parent
Balance Sheet, (i) as of June 30, 1997, Parent did not have any material
liabilities or obligations (whether absolute, contingent, accrued or otherwise)
and (ii) since the date of the Parent Balance Sheet, Parent has not incurred any
material liabilities or obligations other than in the ordinary course of
business or as contemplated by the transactions contemplated hereby.
3.9. Approvals. Except (a) as set forth on Schedule 3.9(a) hereof,
(b) for any filings, notices, applications and other information as may be
required to be made or supplied pursuant to the HSR Act or the Exchange Act, (c)
for filing of the Certificate Amendment with the Delaware Secretary of State,
and (d) the filing of documents relating to Holder's investment in, and
relationship with, Parent and ▇▇. ▇▇▇▇▇▇, no notices, reports or other filings
are required to be made by Parent, or any of its Subsidiaries (including the
LLC) with, nor are any consents, registrations, applications, approvals,
permits, licenses or authorizations required to be obtained by Parent or any of
its Subsidiaries (including the LLC) from, any public or governmental authority
or other third party in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby (other
than consents that would not, if not given, have a Material Adverse Effect on
Parent and its Subsidiaries considered as a whole) or impair the ability of
Parent or Sub to perform its respective obligations under this Agreement and the
other documents contemplated hereby.
3.10. Personnel. (a) Schedule 3.10 contains a true and complete list
of all material employee benefit plans or arrangements that cover any employee
of Parent and its Subsidiaries (the "Parent Employees") including any
employment, severance, or other similar contract, arrangement, or policy and
each plan or arrangement (written or oral) providing for insurance coverage
(including any self-insured arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation benefits, or retirement
benefits or for deferred compensation, profit-sharing, bonuses, stock options,
stock appreciation rights, stock purchases, or other forms of incentive
compensation or post-retirement insurance, compensation, or benefits
(collectively, "Parent Benefit Arrangements").
(b) No Parent Benefit Arrangement is an "employee pension benefit
plan," as defined in Section 3(2) of ERISA (a "Parent Pension Plan"), that is
subject to Title IV of ERISA or Section 412 of the Code, and no Parent Benefit
Arrangement provides post-retirement welfare benefits, except as required by
law. Neither Parent nor any of its Subsidiaries has incurred or expects to incur
any liability or lien under Title IV of ERISA or Section 412 of the Code, which
liability or lien would be reasonably expected to have a Material Adverse Effect
on Parent and its Subsidiaries considered as a whole.
(c) Without limiting the generality of Section 3.10(b) except as set
forth on Schedule 3.10(c), neither Parent nor any of its Subsidiaries nor any
entity required to be combined with Parent or any of its Subsidiaries under
Section 414(b), Section 414(c), Section 414(m), or Section 414(o) of the Code (a
"Parent ERISA Affiliate") is a "multiemployer pension
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plan," as defined in Section 3(37) of ERISA and neither Parent nor any of its
Subsidiaries has incurred or expects to incur any liability or lien with respect
to any multiemployer pension plan which liability or lien would be reasonably
expected to have a Material Adverse Effect on Parent and its Subsidiaries
considered as a whole.
(d) Except as set forth on Schedule 3.10(d), none of Parent, any of
its Subsidiaries, or any Parent ERISA Affiliate has incurred, or expects to
incur solely as a result of the consummation of the Transactions (including any
termination of employment in connection therewith), any cost, fee, expense,
liability, claim, suit, obligation, or other damage with respect to any Parent
Pension Plan, or any Parent Benefit Arrangement that could give rise to the
imposition of any liability, cost, fee, expense, or obligation on the LLC or any
of its Affiliates, which would be reasonably expected to have a Material Adverse
Effect on the Parent and its Subsidiaries considered as a whole, and, to
Parent's knowledge, no facts or circumstances exist that could give rise to any
such cost, fee, expense, liability, claim, suit, obligation, or other damage,
which would be reasonably expected to have a Material Adverse Effect on Parent
and its Subsidiaries considered as a whole. Except as set forth on Schedule
3.10(d), neither the execution and delivery of this Agreement nor the
consummation of the Transactions (including any terminations of employment in
connection therewith) will (i) increase any benefits otherwise payable under any
Parent Benefit Arrangement, which would be reasonably expected to have a
Material Adverse Effect on the Parent and its Subsidiaries considered as a whole
or (ii) result in the acceleration of the time of payment or vesting of any such
payment, which would be reasonably expected to have a Material Adverse Effect on
Parent and its Subsidiaries considered as a whole.
(e) Parent will deliver or make available to Investor, within ten
days hereafter true and complete copies of each of the following documents:
(i) Each Parent Benefit Arrangement (and, if applicable,
related trust agreements) and all amendments thereto, and (if applicable) each
summary plan description together with any summary of material modifications;
(ii) Each written Parent Benefit Arrangement and written
descriptions thereof that have been distributed to Parent Employees (including
descriptions of the number and level of employees covered thereby); and
(iii) Each employee handbook or similar document describing
any Parent Benefit Arrangement applicable to Parent Employees.
(f) Except as set forth on Schedule 3.10, no controversies,
disputes, or proceedings are pending or, to Parent's knowledge, threatened,
between Parent, any of its Subsidiaries, or any Parent Employee, which would be
reasonably expected to have a Material Adverse Effect on Parent and its
Subsidiaries considered as a whole. Except as set forth on Schedule 3.10(f), no
labor union or other collective bargaining unit represents or, to Parent's
knowledge, claims to represent any of the Parent Employees and, to Parent's
knowledge, there is no union campaign being conducted to solicit cards from
employees to authorize a union to request a National Labor Relations Board
Certification election with respect to any of the Parent Employees.
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(g) Except where any such failure would not be reasonably expected
to have a Material Adverse Effect on Parent and its Subsidiaries considered as a
whole, all Benefit Arrangements (i) comply in all material respects with
applicable law, including but not limited to ERISA and the Code, and (ii) have
been administered in all material respects in accordance with their terms, and
all required contributions have been made to such Parent Benefit Arrangements.
Except as set forth on Schedule 3.10(g), all Parent Pension Plans that are
intended to be qualified under Section 401(a) of the Code have received a
favorable determination letter from the Internal Revenue Service, and Parent has
no knowledge of any events that would cause such letter to be revoked.
3.11. Conduct of Business. Except as disclosed in the Parent
Commission Documents, since the Parent Balance Sheet Date, Parent and its
Subsidiaries have, in all material respects, conducted their business operations
in the ordinary course and there has not occurred any event or condition having
or that would have a Material Adverse Effect on Parent and its Subsidiaries
considered as a whole. Without limiting the generality of the foregoing, other
than as is disclosed in the Parent Commission Documents filed prior to the date
hereof or on Schedule 3.11 hereto, since the Parent Balance Sheet Date there has
not occurred:
(a) any change or agreement to change the character or nature of the
business of Parent or any of its Subsidiaries in any material respects;
(b) any purchase, sale, transfer, assignment, conveyance or pledge
of the assets or properties of Parent or its Subsidiaries;
(c) any waiver or modification by Parent or any Parent Subsidiary of
any right or rights of substantial value, or any payment, direct or indirect, in
satisfaction of any liability, in each case, having a Material Adverse Effect on
Parent and its Subsidiaries considered as a whole;
(d) any loan, advance or capital expenditure by Parent or any of its
Subsidiaries, except for loans, advances and capital expenditures made in the
ordinary course of business;
(e) any change in the accounting principles, methods, practices or
procedures followed by Parent in connection with the business of Parent or any
change in the depreciation or amortization policies or rates theretofore adopted
by Parent in connection with the business of Parent and its Subsidiaries;
(f) any declaration or payment of any dividends, or other
distributions in respect of the outstanding shares of capital stock of Parent or
any Parent Subsidiary (other than dividends declared or paid by wholly-owned
Subsidiaries);
(g) other than pursuant to the Holder Agreements, the TKTM
Agreements or in connection with the exercise of employee stock options or the
conversion of outstanding convertible debt instruments, any issuance of any
shares of capital stock of Parent or any Parent Subsidiary or any other change
in the authorized capitalization of the Company or any Parent Subsidiary, except
as contemplated by this Agreement;
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(h) any grant or award of any options, warrants, conversion rights
or other rights to acquire any shares of capital stock of Parent or any Parent
Subsidiary, except as contemplated by this Agreement or except pursuant to
employee benefit plans, programs or arrangements in the ordinary course of
business; or
(i) any agreement with respect to any of the foregoing.
3.12. Licenses. Except as set forth on Schedule 3.12, each material
License of Parent and its Subsidiaries has been validly issued, and Parent or
its Subsidiaries are the authorized legal holder thereof. The material Licenses
are in full force and effect, and the conduct of the business and operations of
Parent and its Subsidiaries is in accordance therewith in all material respects.
As of the date of this Agreement, there is no proceeding pending or, to Parent's
knowledge, threatened, seeking the revocation or limitation of any material
Licenses. Each of Parent and its Subsidiaries is the holder of all material
Licenses necessary to enable it to continue to conduct its respective business
as now conducted.
3.13. Claims and Legal Actions. Except as set forth in Schedule
3.13, there are no judicial, administrative or arbitral actions, suits, claims,
inquiries, investigations or proceedings in respect of Parent or its
Subsidiaries (whether of a public or private nature) pending or, to the
knowledge of Parent, threatened against Parent or its Subsidiaries, which,
individually or in the aggregate, would have a Material Adverse Effect on Parent
and its Subsidiaries considered as a whole.
3.14. Compliance with Laws. Except as set forth on Schedule 3.14,
each of Parent and its Subsidiaries has been and is presently being conducted in
compliance with all applicable laws, except for any noncompliance that would not
have a Material Adverse Effect on Parent and its Subsidiaries considered as a
whole or impair or hinder the ability of Parent and its Subsidiaries to perform
in any material respect their respective obligations under this Agreement and
the documents and agreements contemplated hereunder.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF HOLDER
Holder represents and warrants to Parent, Investor and the LLC as
follows:
4.1. Organization, Standing, and Authority. Holder is and, upon
formation in accordance with Section 1.5(f) hereof, each Holder Newco will be, a
corporation duly organized, validly existing, and in good standing under the
laws of its jurisdiction of incorporation. Holder has and, upon formation in
accordance with Section 1.5(f) hereof, each Holder Newco will have, all
requisite corporate power and authority (i) to own, lease, and use as now owned,
leased, and used by them all of their respective assets, (ii) to conduct the
business and operations of Holder as now conducted by Holder, and (iii) to
execute and deliver this Agreement and the documents contemplated hereby (to the
extent a party to this Agreement or such documents), and to perform and comply
with all of the terms, covenants, and conditions to be performed and complied
with by them hereunder and thereunder. Holder and each Holder Newco is qualified
to transact busi-
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ness in each jurisdiction in which the nature of their businesses makes such
qualification necessary except where failure to be so qualified would not have a
Material Adverse Effect on Holder and its Subsidiaries considered as a whole.
4.2. Authorization and Binding Obligation. The execution, delivery,
and performance of this Agreement, and each of the agreements contemplated
hereby, and the consummation of the transactions contemplated hereby by Holder
(with respect to such agreements to which it is a party) has been duly
authorized by all necessary corporate action on the part of Holder. The
performance of this Agreement and each of the Agreements contemplated hereby and
the consummation of the transactions contemplated hereby by each Holder Newco,
if any (with respect to such agreements to which it is a party), will be duly
authorized by all necessary corporate action on the part of each Holder Newco.
This Agreement has been duly executed and delivered by Holder and constitutes
the legal, valid, and binding obligation of Holder, enforceable against Holder
in accordance with its terms, except to the extent limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or affecting
creditors' rights generally and by general equity principles regardless of
whether such enforceability is considered in a proceeding in equity or at law.
4.3. Absence of Conflicting Agreements; Consents. Subject to
obtaining the consents listed on Schedule 4.3 and for any filings, notices,
applications and other information as may be required to be made or supplied
pursuant to the HSR Act or the Exchange Act, the execution, delivery, and
performance of this Agreement and the documents contemplated hereby by Holder
and the Holder Newcos (with or without the giving of notice, the lapse of time,
or both): (a) do not require any notices, reports or other filings to be made by
Holder or any Holder Newco with any public or governmental authority; (b) do not
require the consent of any third party (including any governmental or regulatory
authority) (c) will not conflict with any provision of the Certificate of
Incorporation or By-Laws of Holder or any Holder Newco, if any; and (d) will not
violate or result in a breach of, or contravene any law, judgment, order,
ordinance, injunction, decree, rule, regulation, or ruling of any court or
governmental instrumentality applicable to Holder or any Holder Newco except, in
the case of clauses (a), (b) and (d), for violations, breaches, contraventions
or conflicts, which would not have a Material Adverse Effect on Holder or would
impair, in any material respect, the ability of Holder to perform its
obligations under this Agreement and the other documents contemplated hereby.
ARTICLE 5.
INTERCOMPANY TRANSFER OF FUNDS
5.1. General. Parent shall cause the LLC to keep records of all
movement of funds between the LLC, on the one hand, and Parent and its
Subsidiaries, on the other hand. Parent shall cause all Excess Cash held by
Parent and its Subsidiaries from time to time (but not less frequently than the
last business day of each month) to be transferred to LLC in accordance with the
terms of this Article 5.
5.2. Transfers from LLC. Subject to Section 5.4, all transfers of
funds from the LLC to Parent and its Subsidiaries (other than distributions on,
or redemptions of, the LLC
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Shares or payment of interest on indebtedness owed or assumed by the LLC) shall
either be (i) evidenced by a demand note from the recipient of such funds
payable to LLC or (ii) applied to repay indebtedness owed by LLC to such
recipient.
5.3. Transfers to LLC. Subject to Section 5.4, all transfers of
funds from Parent and its Subsidiaries (other than contributions of capital in
connection with the acquisition of the LLC Shares or payment of interest on
indebtedness owed to the LLC) shall either be (i) evidenced by a demand note
from the LLC payable to the transferor of such funds or (ii) applied to repay
indebtedness owed by such transferor to the LLC.
5.4. Other Transactions. The provisions of Sections 5.2 and 5.3
shall not apply to the payment of funds in respect of (i) the acquisition or
disposition of rights, property and interests by or to the LLC, on the one hand,
and by or to Parent and its Subsidiaries, on the other hand, (ii) the rights,
property and interests referred to in clause (i) of this Section 5.4, (iii) the
Beneficial Assets (which shall be contributed to the LLC in accordance with
Section 1.11(b)) or the Excluded Sub (which shall be contributed to the LLC in
accordance with Section 1.3), or (iv) the issuance of Parent Common Shares in
which case additional LLC Shares shall be issued to Parent at the Issue Price.
Parent shall cause any transactions between the LLC, on the one hand, and the
Regulated Subsidiaries, on the other hand, to be on terms, in the aggregate,
which are no less favorable to the LLC than the terms which the LLC would have
received in a transaction with an unaffiliated third party.
5.5. Interest. The outstanding demand notes referred to in Sections
5.2 and 5.3 shall bear interest at the Interest Rate from time to time and
interest shall be payable monthly in arrears.
ARTICLE 6.
INVESTOR EXCHANGE OPTIONS; DISTRIBUTIONS;
STOCK DIVIDENDS, SPLITS, ETC.
6.1 Exchange Options. (a) Subject to the following provisions and,
in the case of Holder, to Section 1.9, Parent hereby grants, effective as of the
Closing, (i) to Investor and Holder the right (the "Exchange Options"),
exercisable from time to time by written notice given to Parent with the number
of Exchange Options to be exercised, to cause the exchange of each outstanding
LLC Share held by Investor Sub, each Investor Newco or Holder or each Holder
Newco, as the case may be, for one Parent Common Share (it being agreed and
understood that as of the Closing Date the Parent Common Shares underlying such
Exchange Options for Investor shall consist of 40 million shares of Parent Class
B Stock (less any shares of Parent Class B Stock issued to Investor pursuant to
Section 1.5(b) and not including any shares of Parent Class B Stock issued to
Investor that are subsequently converted by Investor into shares of Parent
Common Stock in order to acquire additional shares of Parent Common Stock
pursuant to Sections 1.01(b) and (c) of the Governance Agreement or to otherwise
acquire Parent Common Shares permitted to be acquired pursuant to the Governance
Agreement or the Stockholders Agreement), and the remainder in shares of Parent
Common Stock and for Holder shall consist solely of shares of Parent Common
Stock) in accordance with the terms of the Exchange Agree-
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ment, it being understood that the applicable Parties shall negotiate in good
faith and enter into an Exchange Agreement (the "Exchange Agreement") on such
terms and conditions customary to such agreements and with a general view to the
terms of the Holder Exchange Agreement. In lieu of exchanging LLC Shares for
Parent Common Shares, Investor may, at its option, either (a) merge Investor Sub
and/or one or more Investor Newcos with and into Parent (or any wholly owned
Subsidiary) pursuant to which each share of Investor Sub's or each such Investor
Newco's common stock will be converted into a number of Parent Common Shares
equal to the quotient of (i) the number of LLC Shares owned by Investor Sub or
such Investor Newco divided by (ii) the number of shares of common stock of
Investor Sub or such Investor Newco issued and outstanding or (b) cause the
exchange by Parent for each outstanding share of common stock of Investor Sub
and/or one or more Investor Newcos of a number of Parent Common Shares equal to
the quotient of (i) the number of LLC Shares owned by Investor Sub or such
Investor Newco divided by (ii) the number of shares of common stock of Investor
Sub or such Investor Newco issued and outstanding. To the extent applicable,
Holder (and each Holder Newco) shall have the same right described in the
immediately preceding sentence. Exchanges pursuant to the exercise of Exchange
Options shall be consummated within five business days of Parent's reasonable
satisfaction that there have been obtained, received or effected (and all
applicable waiting and termination periods, if any, including any extensions
thereof, under any applicable law, statute, regulation or rule shall have
expired or terminated) all authorizations, consents, approvals, licenses,
franchises, permits and certificates by or of, and shall have made all filings
and effected all notifications, registrations and qualifications with, all
federal, state and local governmental and regulatory authorities necessary for
the consummation of the exchange.
(b) (i) Subject to applicable law, each of Investor Sub, the
Investor Newcos and Holder and the Holder Newcos agree to immediately exercise
the Exchange Options in the manner set forth in Section 6.1(a) with respect to
all LLC Shares held by it simultaneously with the consummation of a merger,
consolidation or amalgamation between Parent and another entity (other than an
Affiliate of Parent) in which Parent is acquired by such other entity or a
person who controls such entity, or a sale of all or substantially all of the
assets of Parent to another entity, other than a subsidiary of Parent (a "Sale
Transaction"); provided that if such Sale Transaction can be effected as a
tax-free exchange involving a merger or exchange of shares of Investor Sub, the
Investor Newcos, Holder or Holder Newcos, as the case may be, the Sale
Transaction shall be structured in such manner in lieu of Investor Sub, the
Investor Newcos, Holder or the Holder Newcos, as the case may be, exercising the
Exchange Options and, in lieu of receiving Parent Common Shares upon exercise of
the Exchange Options, such persons shall be entitled to receive the type and
amount of consideration that such persons would have received had they exercised
the Exchange Options immediately prior to the Sale Transaction unless such
structure would materially adversely affect the ability of Parent to consummate
such Sale Transaction.
(ii) To the extent that Investor Sub, an Investor Newco,
Holder or a Holder Newco is not permitted by law (including FCC Regulations) to
take the actions described in paragraph (b)(i) above, in connection with a Sale
Transaction, the Exchange Options shall be converted into the right to receive
for each Parent Common Share (the "Exchange Options
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Shares") issuable under the Exchange Options, the same consideration per share
to be received by the holders of Parent Common Stock in the Sale Transaction.
(c) If a tender offer has been commenced for Parent Common Stock
(other than by Parent or a subsidiary of Parent) and, to the extent permissible
under the terms of the Governance Agreement, either Investor or Holder wishes to
tender their respective LLC Shares or the stock of Investor Sub, the Investor
Newcos or the Holder Newcos, as the case may be, in such tender offer, Investor
or Holder may at its option, either: (i) simultaneously tender its Exchange
Options Shares to the exchange agent in such tender offer and exercise such
Exchange Options in accordance with the provisions of Section 6.1(a) and the
terms of the Exchange Agreement; provided that any such exercise of the Exchange
Options shall be conditioned on, and subject to, the consummation of such tender
offer; provided, further, that in the event that fewer than all tendered
Exchange Options Shares are purchased in the tender offer, the exchange shall
only occur with respect to such Exchange Options Shares that are purchased in
the tender offer and the remaining Exchange Options Shares shall be returned to
Investor or Holder, as the case may be, or (ii) transfer such LLC Shares or the
stock of Investor Sub, the Investor Newcos or the Holder Newcos, as the case may
be, to a person or entity (the "Transferee") which is not considered to be a
foreign owner for purposes of the Communications Act of 1934, as amended, and
the FCC alien ownership rules and who would otherwise be permitted to lawfully
hold the Parent Common Shares underlying the Exchange Option and who agrees to
be bound by the terms of this Agreement and such Transferee shall exercise such
Exchange Option immediately prior to the closing of the tender offer solely for
purposes of participating in such tender offer and pay the proceeds to Investor
or Holder, as the case may be. In the case of clause (ii) above, in the event
that less than all the LLC Shares are purchased in such tender offer or the
tender offer is not consummated, at Parent's election, either (x) Transferee
shall exchange with Parent the portion of the LLC Shares not purchased in the
tender offer for a number of LLC Shares equal to the number of shares not so
purchased and a new exchange option (which shall have the same terms as the
original Exchange Option) for each such LLC Share and Parent shall deliver such
shares and issue such replacement Exchange Options to Transferee and Transferee
shall transfer such LLC Shares and Exchange Option to Investor or Holder, as the
case may be, or (y) permit Investor or Holder, as the case may be, to hold the
portion of the LLC Shares not purchased in the tender offer.
(d) Except as set forth above and subject to Section 6.1(e), the
Exchange Options shall not be transferable by Investor Sub, any Investor Newco,
Holder or any Holder Newco.
(e) Without limiting the foregoing, Parent shall cooperate with
Investor Sub, the Investor Newcos and the Holder Newcos to ensure that, by
virtue of holding LLC Shares, neither Investor nor Holder is disadvantaged in
connection with a Sale Transaction or tender or exchange offer.
6.2. Distributions to LLC Stockholders. Simultaneously with (or in
the case of clause (b)(ii) below, not later than five business days after the
determination of Fair Market Value of the property distributed) the making of
any distributions of cash or property on the
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shares of Parent Common Stock or consummation of a tender offer by Parent or any
of its Subsidiaries for shares of Parent Common Stock (a "Self Tender Offer"),
the LLC shall make distributions on the LLC Shares in the following manner:
(a) for each cash dividend paid by Parent on its Parent Common
Shares, LLC shall pay an identical dividend per share on each LLC Share;
(b) for distributions of property (including, without limitation,
stock, options or other securities of Subsidiaries of Parent), other than cash,
on Parent Common Shares, the LLC shall (i) in the case of distributions of
property other than distributions of stock, options to purchase stock or other
securities in a Regulated Subsidiary, make an equivalent distribution of
property per share on the LLC Shares and (ii) in the case of distributions of
assets, shares, options or other securities of Regulated Subsidiaries,
distribute in cash to the LLC stockholders for each LLC Share an amount equal to
the Fair Market Value per Parent Common Share of the distribution made on Parent
Common Shares or, if the parties agree, an appropriate adjustment to the
exchange ratio; provided that, the distributions on the LLC Shares pursuant to
this clause (b) may be made in the form of a demand note of the LLC.
Notwithstanding the previous sentence, Parent shall use its best efforts to make
such distributions in cash with respect to LLC Shares; and
(c) in connection with a Self Tender Offer, not later than five
business days after receipt of notice from Parent of a proposed Self Tender
Offer, Investor and Holder shall each give irrevocable written notice of the
number (the "Tender Number") of Exchange Options Shares, if it owned such shares
of Parent Common Stock, it would want to have purchased in such tender offer
(which number shall be no greater than the product of the percentage of the
total outstanding LLC Shares owned by Investor, Investor Sub and the Investor
Newcos or Holder and the Holder Newcos, as the case may be, and the number of
shares of Parent Common Stock offered to be purchased in such Self Tender
Offer), and the LLC shall make a distribution to the Investor or Holder, as the
case may be, on the LLC Shares equal (in the aggregate) to the Tender Number
times the average price per share paid in the Self Tender Offer in redemption of
a number of LLC Shares equal to its respective Tender Number. In connection with
a Self Tender Offer for shares of Parent Common Stock, simultaneously with the
consummation of the tender offer a number of LLC Shares held by Sub or Parent
equal to the number of shares of Parent Common Stock purchased in the tender
offer shall be redeemed at the average price per share paid in the Self Tender
Offer.
(d) The adjustments described in this section shall take into
account (i) any related distributions to holders of LLC Shares in connection
with a distribution by the LLC to Parent related to such event, and (ii) changes
in the exchange rate for the LLC Shares, with the intention being that a holder
of LLC Shares shall receive or be entitled to receive what such holder would
have received had it exchanged LLC Shares for Parent Common Shares immediately
prior to such event (including any related distributions to holders of LLC
Shares).
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6.3. Tax Treatment. The Parties intend that LLC be treated as a
partnership for United States federal income tax purposes and agree to take no
actions inconsistent with such treatment.
6.4. Anti-dilution. If Parent: (i) pays a dividend or makes a
distribution on Parent Common Shares in Parent Common Shares; (ii) subdivides
its outstanding shares of Parent Common Shares into a greater number of shares;
(iii) combines its outstanding Parent Common Shares into a smaller number of
shares; (iv) makes a distribution on Parent Common Shares in shares of its
capital stock, other than Parent Common Shares, or rights, options or warrants
to purchase or acquire Parent Common Shares; (v) issues by reclassification of
its common stock any shares of its capital stock; or (vi) takes any other action
not described above (other than actions pursuant to which Investor or Holder has
rights pursuant to Sections 1.7, 1.8, 6.1 and/or 6.2) which would cause Investor
Sub, each Investor Newco, Holder or each Holder Newco (based on the Assumptions)
not to have an identical percentage equity ownership interest of Parent
following such action, then the LLC simultaneously shall effect a comparable
transaction on the LLC Shares or an appropriate adjustment to the Exchange
Options, in which case appropriate adjustments will be made, mutatis mutandis,
to Article 1 and Section 6.1 as well as any other provision of this Agreement
requiring appropriate adjustments, so that after such transaction, Investor Sub,
each Investor Newco, Holder and each Holder Newco, will have an identical
percentage beneficial equity ownership interest of Parent and the LLC as it had
before such transaction (based on the Assumptions).
ARTICLE 7.
TRANSFERABILITY; ISSUANCE TO OTHER PARTIES
7.1. No Transfer of Shares of the LLC. Except in connection with the
exercise of the Exchange Options (including a transfer pursuant to Section
6.1(b) or 6.1(c)), or the hypothecation, pledge or creation of a lien or
security interest in LLC Shares by Parent, except as specifically contemplated
by this Agreement or the Governance Agreement, none of Parent, Sub, Investor,
Investor Sub, any Investor Newco, Holder or any Holder Newco shall directly or
indirectly transfer, pledge or create a lien or security interest in their
respective LLC Shares to any other person or entity and any attempt to make or
create such transfer, pledge, lien or security interest shall be null and void
and of no force and effect.
7.2. Transfer by Investor or Holder. Except as permitted pursuant to
Section 6.1 hereof, Investor shall not sell or otherwise transfer any of its
shares in Investor Sub or any Investor Newco and Holder shall not sell or
otherwise transfer any of its shares in any Holder Newco. Parent shall not sell
or otherwise transfer any of its shares in Sub.
ARTICLE 8.
TAX MATTERS
8.1. Tax Representations. (a) Investor represents and warrants to
Parent and the LLC that all material Returns required to be filed for taxable
periods ending on or prior to the Closing Date by, or with respect to any
activities of the Partnership and the UT Contributed
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Business have been or will be filed in accordance with all applicable laws, and
all Taxes due have been or will be paid, except where the failure to so file or
so pay would not, in the aggregate, have a Material Adverse Effect on the
Partnership and the UT Contributed Business considered as a whole.
(b) Parent represents and warrants to Investor, Holder and the LLC
that all material Returns required to be filed for taxable periods ending on or
prior to the Closing Date by Parent and its Subsidiaries have been or will be
filed in accordance with all applicable laws, and all Taxes due have been or
will be paid, except where the failure to so file or so pay would not, in the
aggregate, have a Material Adverse Effect to Parent and its Subsidiaries
considered as a whole.
8.2. Tax Indemnification by Investor. Investor shall be liable for,
and shall hold Parent and the LLC and any successor thereto or Affiliates
thereof harmless from and against the following Taxes:
(a) any and all Taxes with respect to the Partnership or the UT
Contributed Business for any taxable period ending (or deemed pursuant to
Section 8.4 to end) on or before the Closing Date; and
(b) any several liability under Treasury Regulation Section 1.1502-6
or under any comparable or similar provision under state, local or foreign laws
or regulations for periods ending on or prior to the Closing Date.
8.3. Tax Indemnification by Parent. Parent shall be liable for, and
shall hold Investor harmless from and against, the following Taxes with respect
to the Partnership and the UT Contributed Business: (a) any and all Taxes (other
than Taxes attributable to the transactions contemplated by this Agreement or
the ownership of LLC Shares by Investor or Investor Newco) for any taxable
period beginning (or deemed pursuant to Section 8.4 to begin) on or after the
Closing Date, due or payable with respect to the Partnership or the UT
Contributed Business, and (b) any and all Taxes not incurred in the ordinary
course of business attributable to the acts or omissions of Parent after the
Closing.
8.4. Allocation of Certain Taxes. (a) The Parties agree that if any
entity transferred to the LLC is permitted but not required under applicable
foreign, state or local Income Tax laws to treat the day before the Closing Date
or the Closing Date as the last day of a taxable period, such day shall be
treated as the last day of a taxable period.
(b) For purposes hereof, in the case of any Taxes that are imposed
on a periodic basis and are payable for a period that begins before the Closing
Date and ends after the Closing Date, the portion of such Tax that shall be
deemed to be payable for the portion of the period ending on the Closing Date
shall (i) in the case of any Taxes, other than Taxes based upon or related to
income or receipts, be deemed to be the amount of such Taxes for the entire
period (or, in the case of such Taxes determined on an arrears basis, the amount
of such Taxes for the immediately preceding period), whether actually paid
before, during, or after such period, multiplied by a fraction the numerator of
which is the number of calendar days in the period ending on
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(and including) the Closing Date and the denominator of which is the number of
calendar days in the entire period, and (ii) in the case of any Taxes based upon
or related to income or receipts (including but not limited to withholding
Taxes), be deemed equal to the amount which would be payable if the taxable year
ended on the close of business on the Closing Date. Any credits for such a
period shall be prorated, based upon the fraction employed in clause (i) of the
preceding sentence. Such clause (i) shall be applied with respect to Taxes for
such period relating to capital (including net worth or long-term debt) or
intangibles by reference to the level of such items on the Closing Date. In the
event that Investor or any of its Affiliates has prepaid any Taxes referred to
herein to the extent that such Taxes exceed Investor's share of such Taxes under
this Section 8.4, Parent shall pay Investor the amount of such excess within
thirty (30) days of the Closing Date upon receipt from Investor at the Closing
of a statement detailing such prepayments. Such statement and the calculations
contained therein shall be reviewed within such 30-day period by a nationally
recognized accounting firm selected by and paid for by Parent and the
determination of such accounting firm shall be final.
8.5. Filing Responsibility. (a) Investor shall prepare and file or
shall cause to be prepared and filed the following Returns (and no other
Returns) with respect to the Partnership and the UT Contributed Business:
(i) all Tax Returns for any taxable period ending on or before
the Closing Date other than Returns subject to Section 8.4(b); and
(ii) all other Returns required to be filed (taking into
account extensions) prior to the Closing Date.
(b) With respect to any Income Tax Return for taxable periods
beginning before the Closing Date and ending after the Closing Date, Parent
shall consult with Investor concerning such Return and shall report all items
with respect to the period ending on the Closing Date in accordance with the
instructions of Investor, unless otherwise agreed by Investor and Parent. Parent
shall provide Investor a copy of its proposed Return at least 30 days prior to
the filing of such Return, and Investor may provide comments to Parent, which
comments shall be delivered to Parent within 15 days of receiving such copies
from Parent.
8.6. Refunds. (a) Investor shall be entitled to any refunds or
credits of Taxes attributable to or arising in taxable periods ending (or deemed
pursuant to Section 8.4 to end) on or before the Closing Date with respect to
the Partnership or the UT Contributed Business.
(b) Parent shall promptly forward to Investor or reimburse Investor
for any refunds or credits due Investor (pursuant to the terms of this Article)
after receipt thereof, and Investor shall promptly forward to Parent or
reimburse Parent for any refunds or credits due Parent (pursuant to the terms of
this Article) after receipt thereof.
8.7. Cooperation and Exchange of Information. (a) As soon as
practicable, but in any event within thirty (30) days after Investor's request,
from and after the Closing Date, Parent shall provide Investor with such
cooperation and shall deliver to Investor such information and data concerning
the pre-Closing operations of the Partnership and the UT Contributed
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Business and make available such knowledgeable employees of the Partnership and
the UT Contributed Business as Investor may reasonably request, in order to
enable Investor to complete and file all Returns which it may be required to
file with respect to the operations and business of the Partnership and the UT
Contributed Business through the Closing Date or to respond to audits by any
Taxing Authorities with respect to such operations and to otherwise enable
Investor to satisfy its internal accounting, tax and other legitimate
requirements. Such cooperation and information shall include provision of powers
of attorney for the purpose of signing Returns and defending audits and promptly
forwarding copies of appropriate notices and forms or other communications
received from or sent to any Taxing Authority which relate to the Partnership
and the UT Contributed Business, and providing copies of all relevant Returns,
together with accompanying schedules and related workpapers, documents relating
to rulings or other determinations by any Taxing Authority and records
concerning the ownership and tax basis of property, which Parent or its
Affiliates may possess. Parent shall make its employees and facilities available
on a mutually convenient basis to provide explanation of any documents or
information provided hereunder.
(b) For a period of seven (7) years after the Closing Date or such
longer period as may be required by law, Parent shall, and shall cause its
Affiliates to, retain, and neither destroy nor dispose of, all Returns, books
and records (including computer files) of, or with respect to the activities of,
the Partnership and the UT Contributed Business for all taxable periods ending
on or prior to the Closing Date. Thereafter, Parent shall not destroy or dispose
of any such Returns, books or records unless it first offers such Returns, books
and records to Investor in writing at Investor's expense and Investor fails to
accept such offer within sixty (60) days of its being made.
(c) Parent and Investor and their respective Affiliates shall
cooperate in the preparation of all Returns relating in whole or in part to
taxable periods ending on or before or including the Closing Date that are
required to be filed after such date. Such cooperation shall include, but not be
limited to, furnishing prior years' Returns or return preparation packages
illustrating previous reporting practices or containing historical information
relevant to the preparation of such Returns, and furnishing such other
information within such party's possession requested by the party filing such
Returns as is relevant to their preparation. In the case of any state, local or
foreign joint, consolidated, combined, unitary or group relief system Returns,
such cooperation shall also relate to any other taxable periods in which one
party could reasonably require the assistance of the other party in obtaining
any necessary information.
(d) Investor shall have the right, at its own expense, to control
any audit or examination by any Taxing Authority ("Tax Audit"), initiate any
claim for refund, contest, resolve and defend against any assessment, notice of
deficiency, or other adjustment or proposed adjustment relating to any and all
Taxes for any taxable period ending on or before the Closing Date with respect
to the Partnership or the UT Contributed Business. Parent shall have the right,
at its own expense, to control any other Tax Audit, initiate any other claim for
refund, and contest, resolve and defend against any other assessment, notice of
deficiency, or other adjustment or proposed adjustment relating to all other
Taxes with respect to the Partnership or the UT Contributed Business. Investor
shall furnish Parent and its Affiliates with its cooperation in a man-
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ner comparable to that described in paragraph (a) of this Section to effect the
purposes of this Section.
8.8. Section 754 Election. Investor shall cause an appropriate
Investor Newco to make an election for the taxable year of the Partnership that
includes the Closing Date under Section 754 of the Internal Revenue Code of
1986, as amended, and shall not revoke or cause or permit any Investor Newco to
revoke such election.
8.9. Certificate of Non-Foreign Status. The Investor Sub that sells
the Acquired Partnership Interest to the LLC under Section 1.5(b) shall deliver
to the LLC at or prior to the Closing, a certificate of non-foreign status
meeting the requirements of Treasury Regulation Section 1.1445-2(b)(2).
8.10. Definitions. For purposes of this Article, the following terms
shall have the meanings ascribed to them below:
(a) "Income Taxes" means all taxes based upon or measured by income.
(b) "Returns" means returns, reports and forms required to be filed
with any domestic or foreign taxing authority.
(c) "Taxes" means (i) all taxes (whether federal, state, local or
foreign) based upon or measured by income and any other tax whatsoever,
including gross receipts, profits, sales, use, occupation, value added, ad
valorem, transfer, franchise, withholding, payroll, employment, excise, or
property taxes, together with any interest or penalties imposed with respect
thereto and (ii) any obligations under any agreements or arrangements with
respect to any Taxes described in clause (i) above.
(d) "Taxing Authority" means any government authority having
jurisdiction over the assessment, determination, collection, or other imposition
of Tax.
ARTICLE 9.
ADDITIONAL COVENANTS
9.1 Annual or Special Meeting. (a) As soon as practicable following
the execution of this Agreement, Parent shall prepare and file with the
Securities and Exchange Commission (the "Commission") preliminary proxy
materials, in form and substance reasonably satisfactory to Investor, with
respect to the matters described below. Parent agrees to use its reasonable best
efforts, after consultation with the other Parties hereto, to respond promptly
to any comments of the Commission and to cause the proxy materials approved by
the Commission to be mailed to its stockholders at the earliest practicable
time. Parent shall notify Investor promptly of the receipt of any comments from
the Commission or its staff and of any request by the Commission or its staff
for any amendments or supplements to the proxy materials. The proxy materials
shall comply in all material respects with all applicable requirements of law.
Whenever any event occurs which is required to be set forth in an amendment or
supplement to the proxy statement, Parent shall promptly inform Investor and
Holder of such occurrence and
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cooperate in filing with the Commission or its staff and/or the mailing to
stockholders of Parent, such amendment or supplement. Such proxy materials shall
include the recommendation of the Transactions of the Board of Directors of
Parent.
(b) Parent shall take all steps necessary in accordance with its
certificate of incorporation and by-laws to call, give notice of, convene and
hold a meeting of its stockholders as soon as practicable after the filing of
definitive proxy materials relating to such meeting, for the purpose of (a)
approving and adopting an amendment to the certificate of incorporation of
Parent (the "Certificate Amendment") reasonably acceptable to Investor to (i)
increase the number of authorized Parent Common Shares necessary to effect the
transactions contemplated hereby, and (ii) avoid the loss or non-renewal of a
broadcast or similar license as a result of shareholder alien ownership in
violation of FCC Regulations or applicable law and (b) authorizing the issuance
of Parent Common Shares in accordance with this Agreement under the Bylaws of
the NASD.
9.2. HSR Filings. Following the date hereof, Investor and Parent
shall file promptly any forms required under applicable law and take any other
action reasonably necessary in connection with obtaining the expiration or
termination of the waiting periods under the HSR Act applicable to the
Transactions.
9.3. Related Agreements. Prior to the Closing, the Parties shall in
good faith negotiate, to the extent not already provided for in the attached
definitive agreements and otherwise consistent with the terms therein and in the
stockholders agreement among Investor, Holder and ▇▇. ▇▇▇▇▇▇, dated as of the
date hereof, any additional terms with respect to the Governance Agreement, the
LLC Operating Agreement, the Ancillary Business Agreements, the Stockholders
Agreement and the Exchange Agreement; provided, that the agreements attached
hereto and the stockholders agreement referred to in this sentence shall
otherwise be binding and definitive.
9.4. Other Businesses. (a) Neither anything contained in this
Agreement, nor the ownership of Parent Common Shares, LLC Shares or Exchange
Options Shares, shall (i) restrict Investor or Holder or any of their respective
Affiliates from engaging in or owning an interest in any business which competes
with Parent, any Subsidiaries of Parent, or the LLC, or (ii) restrict Parent,
any Subsidiaries of Parent, or the LLC from engaging in or owning an interest in
any business which competes with Investor or Holder or any of their respective
Affiliates.
(b) Following the date hereof, Parent, LLC and Investor shall
negotiate in good faith the terms of a transition services agreement to the
extent not set forth in Exhibit C.5. (the "Transition Services Agreement")
between LLC and Investor or one of its Affiliates to be executed and delivered
on the Closing Date pursuant to which Investor or such Affiliate will agree to
provide LLC with services currently performed by Investor or its Affiliates and
as requested by Parent on behalf of the Partnership or the UT Contributed
Business following the Closing Date (i) until the 6 month anniversary of the
Closing Date, on the basis of fully allocated cost to Investor or such Affiliate
of such services and (ii) following the 6 month anniversary of the Closing Date,
such cost plus 5%, and subject to such termination provisions, all as may be
agreed upon by Parent, LLC and Investor. In the event that the parties cannot
agree on the terms
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of the Transition Services Agreement prior to the Closing, the Closing shall not
be delayed, the term sheet attached hereto shall be definitive and the parties
shall in their good faith promptly reach agreement with respect to such matters
(and in the interim such term sheet shall govern the provision of any services).
9.5. Information and Access. (a) From the date hereof and continuing
until the Closing, each of Investor, as to itself and its Subsidiaries and
Affiliates, and Parent, as to itself and its Subsidiaries, agrees that it shall
afford and, with respect to clause (b) below, shall cause its independent
auditors to afford, (a) to the officers, independent auditors, counsel and other
representatives of the other reasonable access to its properties, books, records
(including Tax Returns filed and those in preparation) and personnel in order
that the other may have a full opportunity to make such investigation as it
reasonably desires to make of the other, and (b) to the independent auditors of
the other, reasonable access to the audit work papers and other records of its
independent auditors. No investigation pursuant to this Section 9.5 shall affect
or otherwise obviate or diminish any representations and warranties of any party
or conditions to the obligations of any party. Except as required by law or
stock exchange or NASD regulation, any information furnished pursuant to this
Section 9.5 (including any information furnished to the other prior to the date
hereof) shall be held in confidence (except for such information as has
otherwise been made public (other than by reason of a violation of this Section
9.5)).
(b) From and after the Closing, each of LLC and Investor, as to
itself and its Subsidiaries and Affiliates, agrees that it shall afford to the
officers, independent auditors, counsel and other representatives of the other
reasonable access to its books, records and personnel for reasonable business
purposes, for example in order that the party requesting access can prepare tax
and other filings with respect to any periods prior to Closing, or respond to,
negotiate, settle or litigate any claims related to the UT Contributed Business
or the Partnership for which the requesting party has any liability hereunder.
9.6. Reservation. Parent hereby covenants to Investor and Holder
that it shall reserve and keep available out of its authorized but unissued
Parent Common Shares (including any Parent Common Shares held by Parent in its
corporate treasury), such number of its duly authorized Parent Common Shares as
shall be sufficient to issue upon the exercise of all of the Exchange Options,
if any, held by each such party. All Parent Common Shares to be issued pursuant
to this Agreement shall, upon issuance, be duly qualified for quotation for
trading on NASDAQ.
9.7. Further Action. (a) Each of the parties hereto shall use all
reasonable 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 required to
carry out the provisions of this Agreement and consummate and make effective the
transactions contemplated by this Agreement.
(b) In the event that at any time or from time to time (whether
prior to or after the Closing), any Party (or its Affiliates), shall receive or
otherwise possess any asset that is intended to be Contributed, assigned or
otherwise transferred at the Closing to another Party
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hereto, such Party shall promptly use all reasonable efforts (but, with respect
to matters covered by Section 9.17, such efforts shall not include the
expenditure of funds other than for incidental expenses) to transfer, or cause
to be transferred, such asset to the Party so entitled thereto. Prior to any
such transfer, the Party (or its Affiliates) possessing such asset shall hold
such asset (and all earnings generated by such asset from and after the Closing)
in trust for any such other Party.
9.8. [Intentionally omitted]
9.9. Employees. (a) Except as otherwise agreed to by Parent and
Investor, the active participation of Business Employees in Benefit Arrangements
that are not Partnership Plans shall cease as of the Closing Date, and no
additional benefits shall accrue thereunder for such Business Employees.
(b) From the date hereof to the Closing, except in the ordinary
course of business consistent with past practice or as required by law or other
contractual obligations existing on the date hereof, or as set forth in Schedule
9.9(b), neither the UT Contributed Business nor the Partnership shall (i)
increase the base compensation of or enter into any new bonus or incentive
arrangement with any of the Business Employees, (ii) pay or agree to pay any
pension, retirement allowance or similar employee benefit to any Business
Employee or former employees of the Partnership, (iii) enter into any new
employment, severance, consulting, or other compensation agreement with any
Business Employee or (iv) commit itself to any additional employee benefit or
compensation arrangement with respect to Business Employees or former employees
of the Partnership.
(c) Following the Closing Date, the LLC shall use its reasonable
best efforts to develop or maintain employee benefit plans which, among other
things, treat similarly situated employees of the Contributed Businesses, the
Partnership and the UT Contributed Business on a substantially equivalent basis,
taking into account all relevant factors, including, without limitation, duties,
geographic location, tenure, qualifications and abilities. In view of the
changed nature of the benefit programs which may be applicable to certain of
such employees after the Closing Date, the LLC shall use its reasonable best
efforts to develop equitable transition rules relating to the benefits to be
provided to one or more groups of such employees.
(d) The parties hereto intend that there shall be continuity of
employment with respect to all of the Business Employees and Parent Employees.
LLC shall offer employment, commencing on the Closing Date, to all Business
Employees (other than employees of the Partnership) and Parent Employees,
including any active employee as of the Closing Date who is hired by Investor
and its Affiliates or Parent and its Affiliates after the date of this
Agreement, and excluding any Business Employee or Parent Employee who is
terminated for any reason from employment with Investor and its Affiliates or
Parent and its Affiliates prior to the Closing Date (any such employee who
accepts such offer is hereinafter referred to as a "Continued Employee"), on
substantially the same terms (including salary, job responsibility and location)
as those provided to such employees immediately prior to the Closing Date.
(e) LLC will (i) waive all limitations as to preexisting conditions,
exclusions and waiting periods with respect to participation and coverage
requirements applicable to
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Continued Employees under any welfare plan that such employees may be eligible
to participate in after the Closing Date, to the extent that such conditions
would have been waived under the corresponding welfare plan in which any such
employee participated in immediately prior to the Closing Date, (ii) provide
each Continued Employee with credit for any co-payments and deductibles paid
prior to the Closing Date, for the calendar year in which the Closing Date
occurs, in satisfying any applicable deductible or out-of-pocket requirements
under any welfare plans that such employees are eligible to participate in after
the Closing Date, and (iii) provide each Continued Employee with credit for all
service for purposes of eligibility, vesting and the calculation of severance
benefits (but not for benefit accruals under any other benefit plan) with the
Investor and its affiliates or Parent and its Subsidiaries, as applicable, under
each employee benefit plan, program, or arrangement of the LLC or its affiliates
in which such employees are eligible to participate in after the Closing Date;
provided, however, that in no event shall the employees be entitled to any
credit to the extent that it would result in a duplication of benefits with
respect to the same period of service.
(f) Parent and Investor agree to cooperate reasonably and in good
faith to lower any costs that may be borne by Parent, Investor or the LLC as a
result of the contemplated Transactions (e.g., severance costs, and
multiemployer withdrawal liability to the extent agreed by Parent and Investor
in good faith) and to cooperate on other transition matters relating to the
Continued Employees and their benefits; provided, however, that nothing in this
provision shall require the LLC to continue to contribute to any benefit plans
or arrangements that existed prior to the Closing Date.
(g) Notwithstanding anything contained herein to the contrary, from
and after the Closing Date, Investor and its Affiliates shall jointly and
severally indemnify and hold harmless Parent, Parent's Affiliates and the LLC
and its Affiliates (other than Investor and its Affiliates) from any joint and
several "Controlled Group Liability" of Investor or its Affiliates. For this
purpose, "Controlled Group Liability" shall mean any and all claims, losses,
expenses, costs or obligations arising out of or relating to (i) Title IV of
ERISA; (ii) Section 302 of ERISA; (iii) Sections 412 and 4971 of the Code; and
(iv) the continuation coverage requirements of Section 601 et seq. of ERISA and
Section 4980B of the Code, with respect to any plan or program of Investor or
its Affiliates which is not a Benefit Arrangement and which becomes a liability
of Parent, Parent's Affiliates or the LLC solely as a result of the purchase of
the UT Contributed Business pursuant to the Transaction.
9.10. Investor Give-Back Provision. (a) Within 15 business days
after the preparation of the Statement or, if the accuracy of the Statement is
contested by Investor, within 15 business days after any differences have been
resolved in the manner set forth below, Investor shall pay to the LLC, in the
manner described below, an amount, if positive, equal to (i) $150 million minus
(ii) U-TV's EBITDA for the Determination Period; provided, however, that in no
event shall Investor be required to pay more than $75 million pursuant to this
Section. Any payment required to be made pursuant to this Section shall be made
by wire transfer of same day funds to an account or accounts specified in
writing by the LLC to Investor at least two business days prior to the date of
any such payment.
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(b) For purposes of this Agreement, "U-TV's EBITDA" shall mean the
sum of (a) the net income of the Current Programs (but excluding Current
Programs that are half-hour situation comedies) and made for television movies
included in the UT Contributed Business (including future made for television
movies) (the "U-TV Assets"), as determined in accordance with generally accepted
accounting principles as applied in the United States as of the date hereof and
consistent with accounting policies and procedures applied historically by
Investor, plus the sum of depreciation, amortization (excluding television
production and distribution amortization) income tax expense and interest
expense related to the U-TV Assets and (b) to the extent not included in the
previous clause, distribution fees received by the LLC pursuant to the
Distribution Agreements. In calculating U-TV's EBITDA, U-TV's EBITDA shall not
be reduced by more than $17 million of marketing costs (which are a "below the
contribution line" cost), $13 million of development costs and $30 million of
selling, general and administrative costs; provided that U-TV's EBITDA shall not
be reduced by any allocated corporate overhead expenses (although selling,
general and administrative costs shall include expenses paid by the corporate
office on behalf of U-TV). For purposes of calculating U-TV's EBITDA, sales by
the LLC to USA Networks, Inc. shall not be eliminated and shall be determined
pursuant to the agreements in effect on the date hereof. U-TV's EBITDA shall be
prepared on a U-TV historical basis excluding the effects of purchase accounting
and any severance costs in connection with the Transactions and shall otherwise
be determined based on the practices and principles used by Investor in the
consolidated audited financial statements as at and for the year ended June 30,
1997. Neither Parent nor the LLC shall (i) amend any Contract existing on the
date of this Agreement relating to the U-TV Assets to cause any revenue that
would otherwise be recognized in the Determination Period to be recognized after
the end of the Determination Period or (ii) prepay, accelerate or incur any
expense that would ordinarily be paid, due or incurred after the end of the
Determination Period to be paid, incurred or accrued during the Determination
Period; provided that in the event that any such Contract were so amended, or
expense so accelerated, for purposes of this Section, U-TV's EBITDA shall
include such revenue as if recognized in such period and shall exclude such
expense or prepayment.
(c) U-TV's EBITDA for the three year periods ending on December 31,
1998, December 31, 1999 and December 31, 2000 (such three year period, the
"Determination Period") shall be determined annually by Parent and shall be set
forth in a Statement of U-TV's EBITDA (the "Statement"). Each Statement shall be
accompanied by a certificate prepared by Ernst & Young LLP, or another
nationally recognized independent public accountant chosen by Parent, to the
effect that such Statement was prepared in accordance with this Agreement. A
copy of each such Statement and the certificate shall be delivered to Investor
no later than 120 days after the end of such period. Investor shall have the
option, at its expense, to have each Statement reviewed by a different major
independent certified public accounting firm of its choice within 60 calendar
days after receipt thereof. If any material differences exist between such
accounting firms in the determination of the Statement, the items in dispute
shall be submitted to a mutually acceptable third major firm of independent
certified public accountants for its determination, which shall be binding on
Investor and the LLC. The fees of such third accounting firm shall be shared
equally by Investor and the LLC.
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9.11. Disclosure Schedules. The parties acknowledge that for
business reasons, none of the parties has been able to deliver to the other
party the final schedules referred to in Articles 1, 2 and 3 of this Agreement.
On or before November 10, 1997, Investor shall deliver to Parent and Parent
shall deliver to Investor such final schedules or any additional schedules that
either party determines shall be necessary or appropriate. Each of Parent and
Investor shall have five business days to review such final schedules and to
notify the other party in writing of any objections to the items listed in such
schedules. If either Parent or Investor fails to so notify Investor or Parent of
any objections within such five-business-day period, then such final schedules
shall be deemed to have been accepted by Parent and Investor. After the delivery
by Parent or Investor of notice of objection to the other party, Parent and
Investor shall have five days to consult with each other with respect to any
such objections and, during such period, shall negotiate in good faith to
resolve any disagreements with respect to any such objections. Upon expiration
of such five-day period, either objecting party may terminate this Agreement on
five business days' written notice if the Board of Directors of such objecting
party determines in its reasonable good faith judgment that the net adverse
effect of the total mix of the additional information which was not otherwise
known to it prior to the date of this Agreement, individually or in the
aggregate, would materially decrease the economic benefit of the Transactions to
such party (after giving effect to any increases in value that are attributable
to positive aspects of any additional information made known to such party after
the date of this Agreement).
9.12. Financing. Parent shall use its best efforts to cause
financing necessary to consummate the transactions contemplated hereby to be
obtained.
9.13. Representations and Warranties. From the date hereof until the
Closing Date, no Party will take any action that would cause a breach of the
representation and warranty of such Party as set forth in Articles 2 or 3, as
the case may be, under the heading "Conduct of Business." In addition, from the
date hereof through the Closing Date, Parent shall not take any action that
would constitute a Fundamental Change pursuant to the Governance Agreement.
9.14. Spinoff of Regulated Subsidiaries. Upon the occurrence of the
CEO Termination Date (as defined in the Governance Agreement) or BD becoming
Disabled (as defined in the Governance Agreement) and as long as Investor has
the right to appoint at least two directors of Parent pursuant to the Governance
Agreement (or would, after such time that ▇▇. ▇▇▇▇▇▇ has exercised the ▇▇▇▇▇▇
Put, as defined in the Stockholders Agreement, beneficially own at least such
amount of Parent Common Shares including shares subject to the ▇▇▇▇▇▇ Put), at
the request of Investor, Parent shall, subject to applicable law (including FCC
regulations) and subject to the agreement, dated as of October 19, 1997, among
Holder, Investor and Parent, distribute the Regulated Subsidiaries
(collectively, the "Spinoff Company") in a distribution to the stockholders of
Parent (the "Spinoff"). Upon receipt of such notice, Parent shall effect the
Spinoff as promptly as practicable on terms and conditions that are reasonably
satisfactory to Investor. Prior to effecting the Spinoff, Parent shall enter
into ten-year affiliation agreements with the Spinoff Company that will provide
that the Spinoff Company shall broadcast programming produced by Parent on
customary terms and conditions, including arm's-length payment obligations. The
foregoing provisions shall not be deemed to amend the Holder Exchange Agreement
or waive any rights or obligations of Holder under the Holder Exchange
Agreement.
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9.15. Partnership Interest Purchase Agreement. Investor shall
perform its obligations in all material respects under the terms of the
Partnership Interest Purchase Agreement.
9.16. USA Network Cash. Notwithstanding any other provision of this
Agreement, following the date hereof, Investor and its Affiliates shall only
sweep cash and shall manage payables and receivables relating to the business of
the Partnership in the ordinary course of business and consistent with past
practices. At the Closing, Investor shall cause to remain in the Partnership as
of the Closing Date $5 million. If, at the end of the 30-day period following
the Closing (the "Post Closing Period"), the cash flow of the Partnership during
the Post Closing Period (adding back cash expenditures for furniture, fixtures
and equipment and extraordinary items) is (a) less than zero, then Investor
shall contribute to the LLC an additional $5 million, (b) between zero and $5
million, then Investor shall contribute an amount equal to $5 million minus the
cash flow or (c) more than $5 million, then Investor shall have no further
obligation to contribute additional cash to the LLC. During the Post Closing
Period, Parent will operate the Partnership in a manner consistent with past
practice for matters relating to cash and shall not intentionally take or fail
to take any action for purposes of affecting the foregoing calculation. In
determining the cash flow during the Post Closing Period, as well as the $5
million to remain in the Partnership as of the Closing, the following rules
shall also govern:
(i) payments (net of attorneys' fees, accountant's fees and other
related costs, if any) received prior to the Closing by the Partnership relating
to that certain settlement of carriage fees between the Partnership and Comcast
Corporation ("Comcast Payments") shall be divided equally between Investor and
the Partnership, with the Partnership portion remaining in the Partnership at
the Closing but not included for purposes of the initial $5 million;
(ii) Comcast Payments received after the Closing shall be for the
benefit of the Partnership only and shall not be included in measuring the cash
flow during the Post Closing Period; and
(iii) payments by the Partnership to the former owners of the Sci-Fi
Channel in respect of deferred purchase price pursuant to agreements in place
prior to the date hereof shall (A) be included (to the extent of 50% of such
payments) in determining the initial $5 million and (B) shall not be deducted in
measuring the cash flow during the Post Closing Period.
9.17. Consents. Promptly following the date hereof, Investor shall
make diligent efforts to identify those Material Contracts, assets and other
rights that are included in the UT Contributed Business or the Partnership and
the transfer of which to the LLC pursuant to this Agreement may in the
reasonable judgment of Investor require the consent, approval, waiver or other
action by a third party or otherwise would have been required to have been
included as an exception to Section 2.3(a) ("Consents"). Parent in consultation
with Investor shall thereafter identify those Consents which Parent elects to
attempt to obtain prior to the Closing Date. Investor shall use all reasonable
best efforts to obtain (but shall not be obligated to expend any funds in
connection therewith other than incidental expenses) such Consents.
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9.18. Viacom Non-Competition Covenant. Investor shall take all
reasonable efforts to enforce Article 7 ("Article 7") of the Partnership
Interest Purchase Agreement for the benefit of the LLC, including, without
limitation, promptly providing to Viacom Inc., at the written request of Parent
or the LLC, a notice of violation in accordance with Section 7.1(f) thereof, and
shall not amend, reduce, modify or waive any rights of Investor under Article 7
without the prior written consent of Parent. Investor shall promptly advise
Parent of any knowledge it may have of breaches of Article 7 and shall consult
closely with Parent regarding any actions to be taken in connection therewith.
Investor and Parent shall enter into appropriate agreements regarding the
conduct of any disputes relating to Article 7, including with respect to
reimbursement of expenses and management of the dispute, all of which shall be
consistent with the terms of Article 7 and Investor's rights thereunder. In the
event that Investor merges, consolidates or otherwise effects a transaction with
a third party that results in such party succeeding to Investor's rights under
Article 7, Investor shall obtain the written agreement of such party that it
will comply with Investor's obligations under this Section.
9.19. Ownership of Licenses. Parent agrees that, so long as FCC
Regulations or other applicable law prohibits or limits the foreign ownership of
entities that directly hold broadcast licenses (in a manner that differs from
such prohibitions or limitations if held indirectly), it will not directly hold
such licenses and shall do so through subsidiaries or other controlled
affiliates.
ARTICLE 10.
CONDITIONS
10.1. Conditions to Investor's Obligations. The obligations
hereunder of Investor to consummate the Transactions, are subject to the
satisfaction, at or before the Closing, of each of the following conditions.
These conditions are for the sole benefit of Investor and may be waived by
Investor (in whole or in part) at any time in its sole discretion.
(a) Subject to the final disclosure schedules delivered pursuant to
Section 9.11, the representations and warranties of Parent contained in Article
3 which are not qualified as to materiality shall be true and correct in all
material respects and the representations and warranties contained in Article 3
which are qualified as to materiality shall be true and correct, in each case,
as of the date when made and as of the Closing Date, as though made on such date
(except that representations and warranties made as of a specific date need be
true and correct only as of such date), and Investor shall have received a
certificate attesting thereto signed by a duly authorized officer or agent of
Parent.
(b) Each of Parent, Sub and LLC shall have performed, satisfied and
complied with, in all material respects, all covenants, agreements, and
conditions required by this Agreement to be performed, satisfied or complied
with by it on or prior to the Closing Date, and Investor shall have received a
certificate attesting thereto signed by a duly authorized officer or agent of
Parent, Sub and LLC.
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(c) The waiting periods under the HSR Act applicable to the
Transactions shall have expired or have been terminated.
(d) No temporary, preliminary or permanent injunction or any order
by any federal or state court of competent jurisdiction shall have been issued
which prohibits or otherwise seeks to prohibit, restrain, enjoin or delay the
consummation of any of the transactions contemplated by this Agreement.
(e) Parent stockholders shall have approved the transactions
contemplated hereunder by the Requisite Stockholder Vote and the Certificate
Amendment shall have been duly filed and become effective.
(f) There shall be no action, suit, investigation or proceeding
pending with, or to the knowledge of Investor, threatened by, any public or
governmental authority, against or affecting Parent or Investor or their
respective properties or rights, before any court, arbitrator or administrative
or governmental body which (a) seeks to restrain, enjoin or prevent the
consummation of the transactions contemplated by this Agreement, or (b)
challenges the validity or legality of any transactions contemplated by this
Agreement or seeks to recover damages or to obtain other relief in connection
with any such transactions.
(g) BD shall not have ceased serving Parent as its Chief Executive
Officer.
(h) Parent shall have duly obtained, received or effected (and all
applicable waiting and termination periods, if any, including any extensions
thereof, under any applicable law, statute, regulation or rule shall have
expired or terminated) all authorizations, consents, approvals, licenses,
franchises, permits and certificates by or of, and shall have made all filings
and effected all notifications, registrations and qualifications with, all
federal, state and local governmental and regulatory authorities necessary for
the consummation of the transactions contemplated hereby.
(i) All corporate and other proceedings to be taken by Parent and
Sub in connection with the transactions contemplated by this Agreement and all
documents reflecting or evidencing such proceedings shall be reasonably
satisfactory in scope, form and substance to Investor and its legal counsel, and
Investor and its legal counsel shall have received all such duly executed
counterpart originals or certified or other copies of such documents and
instruments as they may reasonably request.
(j) Investor Sub shall have acquired the Acquired Partnership
Interest in accordance with the terms of the Partnership Interest Purchase
Agreement.
10.2. Conditions to Parent's Obligations. The obligations of Parent
and Sub hereunder to consummate the Transactions are subject to the
satisfaction, at or before the Closing, of each of the following conditions.
These conditions are for the sole benefit of Parent and Subsidiary and may be
waived (in whole or in part) at any time in their sole discretion.
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(a) Subject to the final disclosure schedules delivered pursuant to
Section 9.11, the representations and warranties of Investor and the Investor
Newcos contained in Article 2 hereof shall be true and correct in all material
respects and the representations and warranties contained in Article 2 which are
qualified as to materiality shall be true and correct, in each case, as of the
date when made and as of the Closing Date, as though made on such date (except
that representations and warranties made as of a specific date need be true and
correct only as of such date), and Parent shall have received a certificate
attesting thereto signed by Investor.
(b) Each of Investor and each Investor Newco shall have performed,
satisfied and complied with, in all material respects, all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with on or prior to the Closing Date, and Parent shall have received a
certificate attesting thereto signed by Investor and Investor Newco.
(c) There shall be no action, suit, investigation or proceeding
pending with, or to the knowledge of Parent, threatened by, any public or
governmental authority, against or affecting the UT Contributed Business or the
Partnership or their respective properties or rights, before any court,
arbitrator or administrative or governmental body which (a) seeks to restrain,
enjoin or prevent the consummation of the transactions contemplated by this
Agreement, or (b) challenges the validity or legality of any transactions
contemplated by this Agreement or seeks to recover damages or to obtain other
relief in connection with any such transactions.
(d) No temporary, preliminary or permanent injunction or any order
by any federal or state court of competent jurisdiction shall have been issued
which prohibits or otherwise seeks to prohibit, restrain, enjoin or delay the
consummation of any of the transactions contemplated by this Agreement.
(e) Investor and its Subsidiaries and the Partnership, as
applicable, shall have duly obtained, received or effected (and all applicable
waiting and termination periods, if any, including any extensions thereof, under
any applicable law, statute, regulation or rule, shall have expired or
terminated) all authorizations, consents, approvals, licenses, franchises,
permits and certificates by or of, and shall have made all filings and effected
all notifications, registrations and qualifications with, all federal, state and
local governmental and regulatory authorities necessary for the consummation of
the transactions.
(f) The waiting periods under the HSR Act applicable to the
Transactions shall have expired or have been terminated.
(g) Parent's stockholders shall have approved the transactions
contemplated hereunder by the Requisite Stockholder Vote and the Certificate
Amendment shall have been duly filed and become effective.
(h) All corporate and other proceedings to be taken by Investor and
the Investor Newcos in connection with the transactions contemplated by this
Agreement and all documents reflecting or evidencing such proceedings shall be
reasonably satisfactory in scope, form and substance to Parent and its legal
counsel, and Parent and its legal counsel shall have
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received all such duly executed counterpart originals or certified or other
copies of such documents and instruments as they may reasonably request.
(i) Debt or equity financing shall have been obtained, on terms
reasonably acceptable to Parent, sufficient to pay the Cash Amount.
10.3. Conditions to Holder's Obligations and Option. Subject to the
provisions of Section 1.5(f)(i)(A) (which specifies the only conditions
applicable to a purchase by Holder of LLC Shares for cash), Holder's obligation
to contribute assets at the Holder Closing shall be subject to the satisfaction,
at or before the closing, of appropriate conditions, to be mutually agreed upon
and based on Sections 10.1 (other than Sections 10.1(a)) and 10.2.
ARTICLE 11.
SURVIVAL AND INDEMNIFICATION
11.1. Survival. All representations, warranties and covenants and
agreements (other than those described in the penultimate sentence of this
paragraph) of the parties contained in this Agreement, including indemnity or
indemnification agreements contained herein, or in any Schedule hereto, or any
certificate, document or other instrument delivered in connection herewith shall
survive the Closing until March 31, 1999. No Action or proceeding may be brought
with respect to any of the representations and warranties, or any of the
covenants or agreements which survive until March 31, 1999 unless written notice
thereof, setting forth in reasonable detail the claimed misrepresentation or
breach of warranty or breach of covenant or agreement, shall have been delivered
to the party alleged to have breached such representation or warranty or such
covenant or agreement prior to March 31, 1999. Notwithstanding the foregoing,
Investor's indemnification obligations in respect of any breach of the
representations and warranties set forth in Article 8 hereof, or any related
Schedule, or other certificate, document or instrument delivered in connection
therewith, shall survive the Closing until the sixth anniversary of the Closing.
Those covenants or agreements that contemplate or may involve actions to be
taken or obligations in effect after the Closing shall survive in accordance
with their terms. Other than as set forth herein, indemnification pursuant to
this Article shall be the exclusive remedy for any breach of representations and
warranties in this Agreement by either party.
11.2. Indemnification by Investor, Holder or Parent. (a) From and
after the Closing Date, Investor and its Subsidiaries shall jointly and
severally indemnify and hold harmless (i) Parent, Parent's Affiliates, each of
their respective directors, officers, employees and agents, and each of the
heirs, executors, successors and assigns of any of the foregoing (collectively,
the "Parent Indemnified Parties") from and against any and all damages, claims,
losses, expenses, costs, obligations, and liabilities including, without
limiting the generality of the foregoing, liabilities for all reasonable
attorneys' fees and expenses (including, but not limited to, attorney and expert
fees and expenses incurred to enforce the terms of this Agreement) net of tax
benefits and any recovery from any third party including, without limitation,
insurance proceeds and taking into account tax costs (collectively, "Loss and
Expenses") suffered, directly or indirectly (other than through any equity
interest in the LLC) by any Parent Indemnified Party, and (ii) the LLC and its
managers, officers, employees and agents, and each of the heirs, execu-
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tors, successors and assigns of any of the foregoing (collectively, the "LLC
Indemnified Parties") from and against any and all Loss and Expenses suffered,
directly or indirectly by any LLC Indemnified Party by reason of, or arising out
of, (x) any breach of representation or warranty (without regard to any
materiality standard contained therein) made by Investor or any Investor Newco
pursuant to this Agreement (but excluding a breach of the representation
contained in Section 2.3(b) relating to a Consent), (y) any failure by Investor
or any Investor Newco to perform or fulfill any of its covenants or agreements
set forth in this Agreement (other than Sections 9.10 and 9.16), or (z) any
failure by Investor and its Subsidiaries to comply with the covenant contained
in Section 9.16 or to pay, perform or discharge any liabilities of the UT
Contributed Business other than the Assumed UT Liabilities but only (with
respect to items described in Sections 11.2(a)(x) and 11.2(a)(y)) to the extent
that the aggregate amount of all such Loss and Expenses of all such Parent
Indemnified Parties exceeds $50 million.
(b) From and after the Closing Date, Holder and its Subsidiaries
shall jointly and severally indemnify and hold harmless (i) the Parent
Indemnified Parties from and against any and all Loss and Expenses suffered,
directly or indirectly (other than through any equity interest in the LLC) by
any Parent Indemnified Party, and (ii) the LLC Indemnified Parties from and
against any and all Loss and Expenses suffered, directly or indirectly by any
LLC Indemnified Party, by reason of, or arising out of, (x) any breach of
representation or warranty (without regard to any materiality standard contained
therein) made by Holder pursuant to this Agreement, or (y) any failure by Holder
to perform or fulfill any of its covenants or agreements set forth in this
Agreement but only to the extent that the aggregate amount of all such Loss and
Expenses of all such Parent Indemnified Parties exceeds $50 million.
(c) From and after the Closing Date, Parent and its Subsidiaries
shall jointly and severally indemnify and hold harmless (i) Investor, Investor's
Affiliates, each of their respective directors, officers, employees and agents,
and each of the heirs, executors, successors and assigns of any of the foregoing
(collectively, the "Investor Indemnified Parties"), and (ii) Holder, Holder's
Affiliates, each of their respective directors, officers, employees and agents
and each of the heirs, executors, successors and assigns of any of the
foregoing, (collectively, the "Holder Indemnified Parties") from and against any
and all Loss and Expenses suffered, directly or indirectly by any Investor
Indemnified Parties, and (ii) the Holder Indemnified Parties from and against
any and all Loss and Expenses suffered, directly or indirectly by any Holder
Indemnified Party, by reason of, or arising out of, (x) any breach of
representation or warranty (without regard to any materiality standard contained
therein) made by Parent pursuant to this Agreement, (y) any failure by Parent to
perform or fulfill any of its covenants or agreements set forth in this
Agreement, or (z) any failure by Parent and its Subsidiaries to pay, perform or
discharge any liabilities (I) of the Contributed Businesses other than the
Assumed Liabilities or (II) of the Regulated Subsidiaries, but only (with
respect to items described in Sections 11.2(c)(x) and 11.2(c)(y)) to the extent
that the aggregate amount of all such Loss and Expenses of all such Investor
Indemnified Parties and Holder Indemnified Parties exceeds $50 million.
(d) Except with respect to third-party claims being defended in good
faith or claims for indemnification with respect to which there exists a good
faith dispute, the indemni-
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fying party shall satisfy its obligations hereunder within 30 days of receipt of
the indemnified party's notice of a claim under this Article 11.
(e) The provisions of this Section 11.2 shall not affect the
obligations and benefits of the parties set forth in Sections 8.2 and 8.3 of
this Agreement.
11.3. Third-Party Claims. If a claim by a third party is made
against an indemnified party (i.e., a Parent Indemnified Party, Investor
Indemnified Party, Holder Indemnified Party or LLC Indemnified Party), and if
such indemnified party intends to seek indemnity with respect thereto under this
Article, such indemnified party shall promptly notify the indemnifying party in
writing of such claims setting forth such claims in reasonable detail. The
indemnifying party shall have twenty (20) days after receipt of such notice to
undertake, through counsel of its own choosing and at its own expense, the
settlement or defense thereof, and the indemnified party shall cooperate with it
in connection therewith; provided, however, that the indemnified party may
participate in such settlement or defense through counsel chosen by such
indemnified party, provided that the fees and expenses of such counsel shall be
borne by such indemnified party unless the indemnified party shall have
reasonably determined that representation by the same counsel would be
inappropriate under the applicable standards of appropriate conduct due to
actual or potential differing interests between them, and in that event, the
fees and expenses of such counsel shall be paid by the indemnifying party. If
the indemnifying party assumes such defense, the indemnified party shall have
the right to participate in the defense thereof and to employ counsel, at its
own expense, separate from the counsel employed by the indemnifying party, it
being understood that the indemnifying party shall control such defense. In the
event that the indemnifying party assumes such defense, the indemnified party
shall cooperate with the indemnifying party in such defense and make available
to the indemnifying party, at the indemnifying party's expense, all pertinent
records, materials and information in its possession or under its control
relating thereto as is reasonably required by the indemnifying party. The
indemnified party shall not pay or settle any claim which the indemnifying party
is contesting without the prior written consent of the indemnifying party, which
consent shall not be unreasonably withheld. The indemnifying party shall not
settle any claim unless it contains an unconditional release of the indemnified
party from any and all liability with respect to such third party claim without
the prior written consent of the indemnifying party, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, the indemnified party
shall have the right to pay or settle any such claim, provided that in such
event it shall waive any right to indemnity therefor by the indemnifying party.
If the indemnifying party does not notify the indemnified party within twenty
(20) days after the receipt of the indemnified party's notice of a claim of
indemnity hereunder that it elects to undertake the defense thereof, the
indemnified party shall have the right to contest, settle or compromise the
claim but shall not thereby waive any right to indemnity therefor pursuant to
this Agreement.
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ARTICLE 12.
TERMINATION; LIQUIDATION
12.1. Termination by Mutual Written Consent. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned, for any
reason, at any time prior to the Closing Date, by the mutual written consent of
the Parties.
12.2. Termination by Parent or Investor. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned by action
of Parent or Investor if and to the extent that (a) the Closing shall not have
occurred at or prior to 5:00 p.m., Eastern time, on June 30, 1998; provided,
however, that the right to terminate this Agreement under this Section 12.2
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Closing Date to occur on or before such date; or (b) any court or governmental
authority of competent jurisdiction shall have issued an order, decree, writ or
ruling or taken any other action, or there shall be in effect any statute, rule
or regulation permanently restraining, enjoining or otherwise prohibiting the
Transactions.
12.3. Termination by Parent. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned by action of Parent, at
any time prior to the Closing Date, if (a) Investor or its Affiliates shall have
failed to comply in any material respect with any of the covenants or agreements
contained in this Agreement to be complied with or performed by Investor and its
Affiliates at or prior to such date of termination, and Investor shall not,
within a reasonable period of time after notice of such failure, have cured or
commenced prompt and diligent measures which would promptly cure such failure,
(b) there shall have been a misrepresentation or breach by Investor with respect
to any representation or warranty made by it in this Agreement which would
entitle Parent not to consummate the Transactions and such misrepresentation or
breach cannot be cured prior to the Closing Date or (c) on or before the close
of business on November 17, 1997 if Parent shall not be reasonably satisfied
with the results of its due diligence investigation of the Partnership and the
UT Contributed Business and shall have determined, in its reasonable good faith
judgment, that the net adverse effect of the total mix of the additional
information not otherwise known to it prior to the date of this Agreement,
individually or in the aggregate, would materially decrease the economic benefit
of the Transactions to Parent (after giving effect to any increases in value
that are attributable to positive aspects of any additional information first
made known to Parent after the date of this Agreement).
12.4. Termination by Investor. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned by action of Investor, at
any time prior to the Closing Date, if (a) Parent or its Subsidiaries shall have
failed to comply in any material respect with any of the covenants or agreements
contained in this Agreement to be complied with or performed by Parent and its
Affiliates at or prior to such date of termination and Parent shall not, within
a reasonable period of time after notice of such failure, have cured or
commenced prompt and diligent measures which would promptly cure such failure,
(b) there shall have been a misrepresentation or breach by Parent with respect
to any representation or warranty made by it
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in this Agreement which would entitle Investor not to consummate the
Transactions and such misrepresentation or breach cannot be cured prior to the
Closing Date, (c) BD shall have ceased serving Parent as its Chief Executive
Officer, (d) the Fair Market Value (as defined in the Stock Exchange Agreement,
dated May 20, 1997, between ▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇") and Parent) during any seven
out of the nine consecutive trading days ending on the third trading day
immediately prior to the Closing Date would not have resulted in the
extinguishment of Parent's obligation to issue additional Parent Common Stock to
▇▇▇▇▇ or (e) on or before the close of business on November 17, 1997 if Investor
shall not be reasonably satisfied with the results of its due diligence
investigation of the Contributed Businesses and shall have determined, in its
reasonable good faith judgment, that the net adverse effect of the total mix of
the additional information not otherwise known to it prior to the date of this
Agreement, individually or in the aggregate, would materially decrease the
economic benefit of the Transactions to Investor (after giving effect to any
increases in value that are attributable to positive aspects of any additional
information first made known to Investor after the date of this Agreement).
12.5. Termination Following Closing. If not earlier terminated, the
provisions of this Agreement (other than Sections 1.6(a), 1.7, 1.8, 1.9, Article
8, Sections 9.4, 9.5, 9.6, 9.7, 9.9(c), (e), (f), (g), 9.10, 9.14, 9.18 and 9.19
and Articles 11 and 13 (other than Sections 13.2 and 13.3)) shall terminate on
the date all of the Exchange Options are exercised.
12.6. Effect of Termination. In the event of termination of this
Agreement as provided herein prior to the Closing, this Agreement shall be of no
further force or effect, except (a) as provided in the last sentence of Section
9.5, this Section 12.6 and Article 13, each of which shall survive termination
of this Agreement, and (b) nothing herein shall relieve any party from liability
for any breach of this Agreement.
ARTICLE 13.
GENERAL
13.1. Definitions. The capitalized terms used herein shall have the
respective meanings assigned to such terms set forth below (such definitions to
be equally applicable to both the singular and plural forms of the terms
defined):
(a) "Acquired LLC Amount" shall mean a number of LLC Shares (if any)
equal to 35.75 million less the quotient obtained by dividing the amount of cash
(if any) payable pursuant to Section 1.5(b)(i)(A) by 40;
(b) "Acquired Partnership Interest" shall mean that certain 50%
partnership interest in the Partnership acquired by Investor Sub pursuant to the
Partnership Interest Purchase Agreement;
(c) "Additional Issuance" shall have the meaning set forth in
Section 1.7(a)(i);
(d) "Additional Shares" shall have the meaning set forth in Section
1.7(a)(i);
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(e) "Affiliate" shall mean, with respect to any person, any direct
or indirect subsidiary of such person, and any other person that directly, or
through one or more intermediaries, is controlled by or is under common control
with such first person, and, if such a person is an individual, any member of
the immediate family (including parents, spouse and children) of such individual
and any trust whose principal beneficiary is such individual or one or more
members of such immediate family and any person who is controlled by any such
member or trust. As used in this definition, "control" (including, with
correlative meanings, "controlled by" and "under common control with") shall
mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise);
(f) "Affiliation Agreements" shall have the meaning set forth in
Section 2.7;
(g) "Agreement" shall have the meaning set forth in the Preamble;
(h) "▇▇▇▇▇" shall have the meaning set forth in Section 12.4;
(i) "Ancillary Business Agreements" shall mean the agreements
attached as Exhibit C hereto (or any successor agreements);
(j) "Assumed Liabilities" shall have the meaning set forth in
Section 1.4;
(k) "Assumed UT Liabilities" shall have the meaning set forth in
Section 1.5;
(l) "Assumptions" shall have the meaning set forth in Section
1.7(a)(i);
(m) "Available Parent Amount" shall mean, as of a given date of
determination, the number equal to the difference between (x) the Holder Limit,
and (y) the number of Parent Common Shares then Owned (for purposes of the FCC
Regulations) by such holder of LLC Shares, giving effect to the voting power of
the stock Owned or to be Owned by such holder (and including, with respect to
Holder, all Parent Common Shares, held by the entities known as "BDTV
Entities");
(n) "BD" shall mean ▇▇▇▇▇ ▇▇▇▇▇▇;
(o) "Beneficial Asset" shall have the meaning set forth in Section
1.11;
(p) "Benefit Arrangements" shall have the meaning set forth in
Section 2.10(a);
(q) "Business Employees" shall have the meaning set forth in Section
2.10(a);
(r) "Cash Amount" shall mean a dollar amount equal to the difference
between (i) $4,075,000,000 and (ii) the product of (x) $40 and (y) the Stock
Amount;
(s) "Certificate Amendment" shall have the meaning set forth in
Section 9.1(b);
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(t) "Closing" shall have the meaning set forth in Section 1.5;
(u) "Closing Date" shall have the meaning set forth in Section 1.5;
(v) "Code" shall mean the Internal Revenue Code of 1986, as amended;
(w) "Consent Asset" shall have the meaning set forth in Section
1.11;
(x) "Consents" shall have the meaning set forth in Section 9.17;
(y) "Contingent Shares" shall have the meaning set forth in the
Holder Exchange Agreement;
(z) "Continued Employee" shall have the meaning set forth in Section
9.9(d);
(aa) "Contracts" shall mean all executory written agreements,
contracts, commitments, understandings and other instruments or arrangements;
(bb) "Contribute" shall have the meaning set forth in Section 1.3;
(cc) "Contributed Businesses" shall have the meaning set forth in
Section 1.3;
(dd) "Current Programs" shall mean the "Current Programs" as defined
in Schedule 1.5 and, for purposes of Section 9.10, shall include all other
programming included in the UT Contributed Business produced during the
Determination Period (other than half-hour situation comedies) and derived from,
or which continues, a "Current Program" for purposes of Section 9.10;
(ee) "Determination Period" shall have the meaning set forth in
Section 9.10(c);
(ff) "disabled" shall have the meaning as to be defined in the
definitive Governance Agreement;
(gg) "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended;
(hh) "ERISA Affiliate" shall have the meaning set forth in Section
2.10(d);
(ii) "Excess Cash" shall mean cash held by an entity (including from
the proceeds of borrowings) on the last business day of each month which is
reasonably determined by such entity not to be needed by such entity to fund its
operations or repay indebtedness owed by such entity during the immediately
succeeding month;
(jj) "Exchange Act" shall mean the Securities Exchange Act of 1934
and the regulations promulgated thereunder, each as amended;
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(kk) "Exchange Agreement" shall have the meaning set forth in
Section 6.1(a);
(ll) "Exchange Options" shall have the meaning set forth in Section
6.1(a);
(mm) "Exchange Options Shares" shall have the meaning set forth in
Section 6.1(b)(ii);
(nn) "Exchange Shares" shall mean the Silver King Exchange Shares as
defined in the Holder Exchange Agreement;
(oo) "Excluded Businesses" shall mean, at any time, the businesses
of Parent and its Subsidiaries other than the Contributed Businesses;
(pp) "Excluded Issuance" shall mean any issuance of Parent Common
Stock (i) in a Sale Transaction, or (ii) which is "restricted stock" or the
ownership of which is otherwise subject to forfeiture ("Restricted Stock"),
provided that for purposes of this definition any stock covered by the
provisions of clause (ii) shall be deemed to have been issued on the date (the
"Lapse Date") the restrictions on such stock lapse or on which the stock is no
longer subject to forfeiture;
(qq) "Excluded Sub" shall have the meaning set forth in Section 1.3;
(rr) "Fair Market Value" for a security publicly traded in the
over-the-counter market (on either NASDAQ-NMS or NASDAQ) or on a recognized
exchange shall be the average closing price of such security for the three
trading days ending on the applicable day (or, if such day is not a trading day,
the trading day immediately preceding the applicable day), and for all other
securities or property "Fair Market Value" shall be determined, by a nationally
recognized investment banking firm which has not been engaged by Parent,
Investor, Holder (if Holder or a Holder Newco then holds LLC Shares), the holder
of stock of any Investor Newco (or Holder Newco, if applicable) or their
Affiliates for the prior three years selected by (i) Parent and (ii) Investor
and Holder (to the extent Holder at such time holds LLC Shares); provided that,
if Parent and Investor (or Investor and Holder, if applicable) cannot agree on
such an investment banking firm within 10 business days, such investment banking
firm shall be selected by a panel designated in accordance with the rules of the
American Arbitration Association. The fees, costs and expenses of the American
Arbitration Association and the investment banking firm so selected shall be
borne equally by the LLC and Investor (or Investor and Holder, if applicable);
(ss) "FCC" shall mean the U.S. Federal Communications Commission;
(tt) "FCC Regulations" shall have the meaning set forth in the
Holder Exchange Agreement;
(uu) "GAAP" shall mean United States generally accepted accounting
principles;
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(vv) "Governance Agreement" shall have the meaning set forth in
Section 9.3;
(ww) "Holder" shall have the meaning set forth in the Preamble;
(xx) "Holder Agreements" shall have the meaning set forth in Section
3.2;
(yy) "Holder Exchange Agreement" shall mean the Exchange Agreement,
dated as of December 20, 1996, by and between Parent and Holder;
(zz) "Holder Indemnified Parties" shall have the meaning set forth
in Section 11.2(c);
(aaa) "Holder Limit" shall mean the maximum number of Parent Common
Shares which the holder of the LLC Shares would, under the FCC Regulations then
in effect, then be permitted to Own (in accordance with FCC Regulations);
(bbb) "Holder Mandatory Exchange" shall have the meaning set forth
in Section 1.9;
(ccc) "HSR Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended, and the regulations promulgated
thereunder;
(ddd) "Intangible Property" shall have the meaning set forth in
Section 2.8;
(eee) "Interest Rate" shall mean (i) with respect to demand notes
representing loans which were funded from the proceeds of indebtedness owed to
entities other than Parent, its Subsidiaries and the LLC, the interest rate on
such indebtedness, (ii) with respect to demand notes representing loans the
proceeds of which are invested in interest bearing instruments issued by
entities other than Parent, its Subsidiaries and the LLC, the blended rate on
such instruments and (iii) with respect to demand notes representing all other
loans, 30-day LIBOR from time to time as determined on the first business day of
each month in accordance with the credit agreement of Parent in effect from time
to time (or if none is in effect, the last effective credit agreement) plus the
applicable margin set forth in such credit agreement;
(fff) "Investor" shall have the meaning set forth in the Preamble;
(ggg) "Investor Financial Statements" shall have the meaning set
forth in Section 2.9;
(hhh) "Investor Indemnified Parties" shall have the meaning set
forth in Section 11.2(c);
(iii) "Investor Newco" shall have the meaning set forth in Section
1.2;
(jjj) "Investor Sub" shall have the meaning set forth in Section
1.5;
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(kkk) "Issue Price" shall mean the price per share equal to (i)
except as otherwise provided in clause (iii) below, in connection with an
underwritten offering of shares of Parent Common Shares, the initial price at
which the stock is offered to the public or other investors, (ii) in connection
with other sales of Parent Common Shares for cash (other than sales covered by
clause (iii) below), the cash price paid for such stock, (iii) in connection
with the issuance of Parent Common Shares for cash within 4 months of the
Closing, $40 per share, (iv) in connection with the deemed issuances of
Restricted Stock, the Fair Market Value of the stock on the Lapse Date (as
defined in the definition of "Excluded Issuance" below), (v) in connection with
the issuance of Parent Common Shares as consideration in an acquisition by
Parent (other than a Merger Transaction), the average of the Fair Market Value
of the stock for the five trading days ending on the third trading day
immediately preceding the closing of the acquisition and in case of a Merger
Transaction, $40 per share, (vi) in connection with a compensatory issuance of
shares of Parent Common Stock, in the case of Parent and its Affiliates, the
amount received per share by Parent, and with respect to Investor and Holder and
their respective Affiliates, the Fair Market Value of the Parent Common Stock,
and (vii) in all other cases, including, without limitation, in connection with
the issuance of Parent Common Shares pursuant to an option, warrant or
convertible security (other than in connection with the conversion of the Sub
Convertible Debt, in which case the Issue Price shall be $40 per share, or in
connection with issuances described in clause (vi) above), the Fair Market Value
of the Parent Common Shares on the date of issuance;
(lll) "LLC" shall have the meaning set forth in Section 1.1;
(mmm) "LLC Indemnified Parties" shall have the meaning set forth in
Section 11.2(a);
(nnn) "LLC Operating Agreement" shall mean the LLC Operating
Agreement attached as Exhibit B hereto (or any successor agreement);
(ooo) "LLC Shares" shall mean shares representing a proportionate
interest in the capital and profits and losses of the LLC;
(ppp) "Licenses" means all licenses, permits, construction permits,
registrations, and other authorizations issued by any federal, state, or local
governmental authorities for use in connection with the conduct of the business
or operations of the relevant business, and all applications therefor, together
with any renewals, extensions, modifications, or additions thereto between the
date of this Agreement and the Closing Date;
(qqq) "Liens" shall have the meaning set forth in Section 2.3;
(rrr) "Loss and Expenses" shall have the meaning set forth in
Section 11.2(a);
(sss) "Mandatory Purchase Event" shall have the meaning set forth in
Section 1.7(a)(ii);
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(ttt) "Mandatory Purchase Notice" shall have the meaning set forth
in Section 1.7(a)(ii);
(uuu) "Material Adverse Effect" shall mean any event, occurrence,
fact, condition, change or effect that is materially adverse to the business,
operations, results of operations, prospects, condition (financial or
otherwise), properties (including intangible properties), assets (including
intangible assets) or liabilities of the relevant business, taken as a whole;
(vvv) "Material Contracts" shall have the meaning set forth in
Section 2.7;
(www) "Material Real Property" shall have the meaning set forth in
Section 2.5;
(xxx) "Merger Transaction" shall have the meaning set forth in
Section 1.7(a)(iii);
(yyy) "NASD" shall mean the National Association of Securities
Dealers;
(zzz) "Owned LLC Amount" shall mean a number of LLC Shares equal to
the difference between (i) the Stock Amount and (ii) 6.75 million plus the
Acquired LLC Amount;
(aaaa) "Owned Partnership Interest" shall mean that certain
partnership interest in the Partnership owned by Investor since the inception of
the Partnership;
(bbbb) "Parent" shall have the meaning set forth in the Preamble;
(cccc) "Parent Balance Sheet" shall have the meaning set forth in
Section 3.8;
(dddd) "Parent Balance Sheet Date" shall have the meaning set forth
in Section 3.8;
(eeee) "Parent Benefit Arrangements" shall have the meaning set
forth in Section 3.10;
(ffff) "Parent Certificate" shall have the meaning set forth in
Section 3.1;
(gggg) "Parent Class B Stock" shall have the meaning set forth in
Section 3.2;
(hhhh) "Parent Commission Documents" shall have the meaning set
forth in Section 3.8;
(iiii) "Parent Common Shares" shall mean shares of Parent Common
Stock and Parent Class B Stock;
(jjjj) "Parent Common Stock" shall have the meaning set forth in
Section 3.2;
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(kkkk) "Parent Employees" shall have the meaning set forth in
Section 3.10(a);
(llll) "Parent ERISA Affiliate" shall have the meaning set forth in
Section 3.10(c);
(mmmm) "Parent Form S-4" shall have the meaning set forth in Section
3.2;
(nnnn) "Parent Form 10-K" shall have the meaning set forth in
Section 3.8;
(oooo) "Parent Indemnified Parties" shall have the meaning set forth
in Section 11.2(a);
(pppp) "Parent LLC Shares Number" shall mean the aggregate number of
outstanding Parent Common Shares as of the fifth business day prior to the
Closing Date (assuming that all Parent Common Shares issuable pursuant to the
Contingent Shares and Exchange Shares have been issued and any Parent Common
Shares issued pursuant to a public offering consummated between the fifth
business day prior to Closing Date and the Closing Date are outstanding) less
8.25 million;
(qqqq) "Parent Pension Plan" shall have the meaning set forth in
Section 3.10(b);
(rrrr) "Parent Preferred Stock" shall have the meaning set forth in
Section 3.2;
(ssss) "Parent Securities" shall mean Parent Common Shares and LLC
Shares;
(tttt) "Parent Stock Number" shall mean 6.75 million;
(uuuu) "Parties" shall have the meaning set forth in the Preamble;
(vvvv) "Partnership" shall mean USA Networks, a New York
partnership;
(wwww) "Partnership Agreement" shall have the meaning set forth in
Section 2.1;
(xxxx) "Partnership Interest Purchase Agreement" shall mean the
Partnership Interest Purchase Agreement by and among Universal Studios, Inc.,
Universal City Studios, Inc., Viacom, Inc. and Eighth Century Corporation, dated
as of September 22, 1997;
(yyyy) "Partnership Plans" shall have the meaning set forth in
Section 2.10(a);
(zzzz) "Pension Plan" shall have the meaning set forth in Section
2.10(b);
(aaaaa) "Permitted Liens" shall mean, collectively, (1) all
statutory or other liens for taxes or assessments which are not yet due or the
validity of which is being contested in
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good faith by appropriate proceedings, (2) all mechanics', materialmen's,
carriers', workers' and repairers' liens, and other similar liens imposed by
law, incurred in the ordinary course of business, which allege unpaid amounts
that are less than 30 days delinquent or which are being contested in good faith
by appropriate proceedings, and (3) all other Liens which do not materially
detract from or materially interfere with the marketability, value or present
use of the asset subject thereto or affected thereby;
(bbbbb) "Post Closing Period" shall have the meaning set forth in
Section 9.16;
(ccccc) "Programming Agreements" shall have the meaning set forth in
Section 2.7;
(ddddd) "Real Property" shall mean real estate and buildings and
other improvements thereon and leases and leasehold interests, leasehold
improvements, fixtures and trade fixtures;
(eeeee) "Redemption Price" shall have the meaning set forth in
Section 1.7(b);
(fffff) "Regulated Subsidiaries" shall have the meaning set forth in
Section 1.11;
(ggggg) "Requisite Stockholder Vote" shall mean the affirmative vote
of (x) the holders of a majority of the outstanding shares of Parent Common
Stock and Parent Class B Stock, voting as separate classes, to the amendment to
Parent's certificate of incorporation increasing the authorized capital stock,
and (y) the holders of a majority of the voting power represented by the
outstanding Parent Common Shares, voting together as a single class, voting at
the special meeting (provided a quorum is present under the NASD by-laws) for
the issuance of shares of Parent Common Stock in accordance with this Agreement;
(hhhhh) "Sale Transaction" shall have the meaning set forth in
Section 6.1(b);
(iiiii) "Securities Act" shall mean the Securities Act of 1933 and
the regulations promulgated thereunder, each as amended;
(jjjjj) "Self Tender Offer" shall have the meaning set forth in
Section 6.2;
(kkkkk) "Spinoff" shall have the meaning set forth in Section 9.14;
(lllll) "Spinoff Company" shall have the meaning set forth in
Section 9.14;
(mmmmm) "Statement" shall have the meaning set forth in Section
9.10;
(nnnnn) "Stock Amount" shall mean an amount equal to 45% of the sum
of (i) the aggregate number of Parent Common Shares outstanding as of the fifth
business day prior to the Closing Date (assuming that all Parent Common Shares
issuable pursuant to the Contingent
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Shares and Exchange Shares have been issued), (ii) any shares issued pursuant to
a public offering consummated between the fifth business day prior to the
Closing Date and the Closing Date, (iii) 7.5 million and (iv) the Stock Amount;
(ooooo) "Sub" shall have the meaning set forth in the Preamble;
(ppppp) "Sub Convertible Debt" shall have the meaning set forth in
Section 1.7(a)(ii);
(qqqqq) "Subsidiaries" shall mean, with respect to any person, each
of the direct or indirect subsidiary of such person;
(rrrrr) "Tax Audit" shall have the meaning set forth in Section 8.7;
(sssss) "Tender Number" shall have the meaning set forth in Section
6.2(c);
(ttttt) "TKTM Agreements" shall have the meaning set forth in
Section 3.2;
(uuuuu) "Transactions" shall have the meaning set forth in the
Preamble;
(vvvvv) "Transferee" shall have the meaning set forth in Section
6.1;
(wwwww) "Transition Services Agreement" shall have the meaning set
forth in Section 9.4;
(xxxxx) "Unit" shall mean one LLC Share and one Preferred Share;
(yyyyy) "UT Contributed Business" shall have the meaning set forth
in Section 1.5;
(zzzzz) "U-TV Assets" shall have the meaning set forth in Section
9.10(b);
(aaaaaa) "U-TV's EBITDA" shall have the meaning set forth in Section
9.10(b).
13.2. Efforts to Proceed Promptly. Each of the Parties agrees to use
their respective reasonable best efforts to take all such action (including,
without limitation, executing such other agreements and instruments, and making
such filings, including filings required under the HSR Act) as may be necessary
or appropriate in order to effectuate the Transactions as promptly as
practicable. Each Party to this Agreement agrees to execute, acknowledge,
deliver, file and record such further certificates, amendments, instruments,
agreements and documents and to do all such other acts and things, as may be
required by law or as, in the opinion of the Parties, may be necessary or
advisable to carry out the intent and purposes of this Agreement. Each Party
agrees that it will act diligently and in good faith to carry out its respective
obligations under this Agreement.
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13.3. Maintenance of Business. Between the date of this Agreement
and the Closing, Parent and Sub agree that they shall continue to operate their
businesses in the customary and ordinary manner. Between the date of this
Agreement and the Closing, Investor agrees to operate the UT Contributed
Business in the customary and ordinary manner and to cause the Partnership to
operate its business in the customary and ordinary manner.
13.4. Notices. Any notices, requests, demands or other
communications to be given by a Party hereunder shall be in writing and shall be
deemed to have been duly given when delivered personally or by facsimile
transmission, in either case with receipt acknowledged, or three days after
being sent by registered or certified mail, return receipt requested, postage
prepaid, addressed (until another address is supplied by notice duly given
hereunder) as follows:
If given to Parent or Sub:
HSN, Inc.
▇ ▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If given to the Holder:
Liberty Media Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If given to Investor or the Investor Newcos:
Universal Studios, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
13.5. Specific Enforcement. The Parties hereto recognize and agree
that, in the event that any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are breached,
immediate irreparable injury would be caused for which there is no adequate
remedy at law. It is accordingly agreed that in the event of a failure by a
party to perform its obligations under this Agreement, the nonbreaching party
shall be entitled to specific performance through injunctive relief to prevent
breaches of the provisions of this Agreement and to enforce specifically the
provisions of this Agreement in any action instituted in any court having
subject matter jurisdiction, in addition to any other remedy to which such party
may be entitled, at law or in equity.
13.6. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable. The exercise of any rights or obligations
hereunder shall be subject to such rea-
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sonable delay as may be required to prevent a party from incurring any liability
under the federal securities laws, and the parties agree to cooperate in good
faith in respect thereof.
13.7. Entire Agreement. This Agreement, the schedules and exhibits
hereto and any documents delivered hereunder constitute the entire agreement
between the parties and supersede any prior agreement or understanding between
the parties with respect to the subject matter hereof. Except as specifically
set forth herein, nothing in this Agreement shall constitute a waiver, amendment
or termination of the terms of any Holder Agreement.
13.8. Amendment; Waiver. Except as provided otherwise herein, this
Agreement may not be amended nor may any rights hereunder be waived except by an
instrument in writing signed by Investor and Parent, and Holder (but only to the
extent that any such amendment would adversely affect the rights and obligations
of Holder). Parent hereby agrees with Holder that it will not enter into or
permit any material amendment to, or waiver or modification of material rights
or obligations under, this Agreement (including the exhibits attached hereto)
without the prior written consent of Holder, which shall not be unreasonably
withheld.
13.9. Headings; References. Article headings are inserted for
convenience and reference purposes only, and are not and shall not be deemed to
be a part of this Agreement or affect any meaning or interpretation hereof.
References herein to "the date hereof," "the date of this Agreement," and
similar references are to October 19, 1997.
13.10. Expenses. Each Party shall pay all of its own legal and
accounting fees and other expenses incurred in connection with the negotiation,
preparation and execution of the Transactions and any agreements associated
therewith.
13.11. Counterparts. This Agreement may be executed in one or more
counterpart copies and by facsimile; each of which shall be considered an
original, but together shall constitute one agreement.
13.12. Governing Law. This Agreement and all matters collateral
hereto shall be governed by and construed in accordance with the laws of the
State of New York except as and to the extent such laws are superseded by the
Federal laws of the United States, including the rules, regulations and
published policies of the FCC.
13.13. Public Announcement. So long as this Agreement is in effect,
each of Parent and Investor agree to consult with the others before issuing any
press release or otherwise making any public statement with respect to the
Transactions; and neither Parent nor Investor (or their respective Affiliates)
will issue any press release or make any such public statement with respect to
the Transactions without the consent of the other Party, except as may be
required by law (including, without limitation, disclosure required in public
filings required to be made by Parent or any Affiliates of Investor) or the
requirements of any securities exchange.
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13.14. No Third Party Beneficiaries. Nothing contained in this
Agreement is intended to or shall confer upon any person other than the Parties
any rights or remedies hereunder.
* * * * * *
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
HSN, INC.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
By: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman of the Board and
Chief Executive Officer
HOME SHOPPING NETWORK, INC.
/s/ ▇▇▇▇▇ ▇. Held
-----------------------------------------
By: ▇▇▇▇▇ ▇. Held
Title: President and Chief Executive
Officer
UNIVERSAL STUDIOS, INC.,
for itself and on behalf of certain of
its Subsidiaries
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Senior Vice President
LIBERTY MEDIA CORPORATION
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
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