Execution Copy
EXHIBIT 10.1
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MEMBERSHIP INTEREST PURCHASE AGREEMENT
Dated as of February 23, 2001
Among
LIBERTY DIGITAL, INC.
LDIG GAMENET, INC.
LIBERTY MEDIA CORPORATION
(Solely With Respect To Article II, Section 6.1 and Section 9.2(f) Hereof)
SONY PICTURES ENTERTAINMENT INC.
SONY PICTURES CABLE VENTURES I INC.
And
TGSC MANAGEMENT, INC.
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TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS AND CONSTRUCTION.................................................................... 1
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1.1 Certain Definitions.................................................................... 1
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1.2 Additional Definitions................................................................. 8
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1.3 Terms Generally........................................................................ 9
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ARTICLE II. THE PURCHASE................................................................................... 10
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2.1 The Purchase........................................................................... 10
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2.2 Closing................................................................................ 11
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2.3 Allocation............................................................................. 13
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ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SPE, TGSC AND SPCV WITH RESPECT TO THE COMPANY.............. 14
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3.1 Organization and Qualification......................................................... 14
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3.2 Subsidiaries........................................................................... 14
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3.3 Authorization and Validity of Agreement................................................ 15
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3.4 Capitalization......................................................................... 15
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3.5 Financial Statements; Additional Obligations........................................... 17
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3.6 Noncontravention....................................................................... 17
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3.7 Absence of Certain Changes or Events................................................... 18
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3.8 Legal Proceedings...................................................................... 18
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3.9 Compliance with Applicable Laws; Environmental......................................... 19
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3.10 Brokers................................................................................ 20
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3.11 Tax Matters............................................................................ 21
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3.12 Employee Matters....................................................................... 23
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3.13 Contracts; Debt Instruments............................................................ 26
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3.14 Title to Properties.................................................................... 28
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3.15 Patents, Trademarks & Copyrights and Similar Rights.................................... 28
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3.16 Dealings with Officers and Directors; Sony Services.................................... 30
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3.17 No Excise Tax Obligations.............................................................. 31
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3.18 Full Disclosure........................................................................ 31
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3.19 Cable Subscribers...................................................................... 31
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3.20 Company Territories.................................................................... 32
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3.21 Contribution of Indebtedness; Book Up of Assets........................................ 32
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3.22 Dissolution/Conversion of Subsidiaries................................................. 32
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SPE, TGSC AND SPCV........................................... 33
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4.1 Organization and Qualification......................................................... 33
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4.2 Authorization; Validity of Agreement; Sony Approval.................................... 33
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4.3 Conversion............................................................................. 33
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4.4 Noncontravention....................................................................... 34
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4.5 Legal Proceedings...................................................................... 35
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4.6 No Other Game Show Interests........................................................... 35
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i
4.7 Investment Purpose..................................................................... 35
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4.8 Brokers................................................................................ 36
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4.9 Ultimate Parent Entity................................................................. 37
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4.10 SPE Knowledge.......................................................................... 37
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ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PURCHASER SUB................................... 37
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5.1 Organization and Qualification......................................................... 37
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5.2 Authorization and Validity of Agreement................................................ 38
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5.3 Capitalization......................................................................... 39
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5.4 Issuance of Shares..................................................................... 39
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5.5 Reports and Financial Statements....................................................... 40
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5.6 Absence of Certain Changes or Events................................................... 40
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5.7 Noncontravention....................................................................... 40
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5.8 Legal Proceedings...................................................................... 41
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5.9 Brokers................................................................................ 42
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5.10 Investment Purpose..................................................................... 42
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5.11 Full Disclosure........................................................................ 42
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5.12 Compliance with Applicable Laws........................................................ 43
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5.13 No Other Game Show Interests........................................................... 43
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ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF LMC AND PURCHASER SUB........................................ 43
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ARTICLE VII. FURTHER AGREEMENTS............................................................................ 45
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7.1 Conveyance Taxes....................................................................... 45
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7.2 Subsidiaries' Board of Directors....................................................... 45
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7.3 Account Restructuring.................................................................. 45
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7.4 Book Up of Assets; Tax Election........................................................ 46
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ARTICLE VIII. INTENTIONALLY OMITTED........................................................................ 46
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ARTICLE IX. SURVIVAL AND INDEMNIFICATION................................................................... 46
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9.1 Survival and No Waiver................................................................. 46
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9.2 Indemnification........................................................................ 46
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9.3 Third Party Claims..................................................................... 48
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ARTICLE X. MISCELLANEOUS................................................................................... 49
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10.1 Notices................................................................................ 49
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10.2 Entire Agreement....................................................................... 50
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10.3 Assignment; Binding Effect; Benefit.................................................... 51
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10.4 Amendment.............................................................................. 51
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10.5 Waiver of Compliance; Consents......................................................... 51
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10.6 Headings............................................................................... 51
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10.7 Counterparts; Execution by Facsimile Signature......................................... 51
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10.8 Applicable Law......................................................................... 51
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10.9 Enforcement............................................................................ 52
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10.10 Severability........................................................................... 52
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ii
10.11 Transfer of Shares..................................................................... 52
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10.12 Further Assurances..................................................................... 53
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10.13 Expenses............................................................................... 53
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10.14 Arbitration............................................................................ 53
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iii
EXHIBITS
Exhibit A Distribution Agreement
Exhibit B Employee Leasing Agreement
Exhibit C Note
Exhibit D Restated Operating Agreement
Exhibit E Programming Agreement
Exhibit F Registration Rights Agreement
Exhibit G Services Agreement
Exhibit H Sublease(s)
Exhibit I Parents Agreement
Exhibit J Opinion of Counsel to SPE
Exhibit K Opinion of Counsel to Purchaser
Exhibit L Business Plan
Exhibit M Opinion of Xxxxxxx and Xxxxxx, Counsel to LMC
Exhibit N Opinion of Potter, Xxxxxxxx & Xxxxxxx LLP, Delaware Counsel
to SPE, SPCV and TGSC
Exhibit O Opinion of Xxxx Xxxx, Deputy General Counsel to SPE
Exhibit P Opinion of Xxxxxxxx, Xxxxxx & Finger, Delaware Counsel to
LMC
SCHEDULES
Schedule 1.3 Knowledge of SPE
Schedule 3.1(a) Filings
Schedule 3.2(a) Company Subsidiaries
Schedule 3.2(b) Equity Interests in Other Persons
Schedule 3.2(c) Transferred Rights
Schedule 3.4(c) Payments
Schedule 3.5 Financial Statements
Schedule 3.6(a) Noncontravention
Schedule 3.6(b) Governmental Consents
Schedule 3.7 Absence of Certain Changes or Events
Schedule 3.8 Legal Proceedings
Schedule 3.9(c) Environmental Documents
Schedule 3.10 Brokers
Schedule 3.11 Tax Matters
Schedule 3.12(a) Company Plans
Schedule 3.12(b) Multiemployer Plans
Schedule 3.12(c) Voluntary Employee's Beneficiary Association
Schedule 3.12(e) Labor Disturbances
Schedule 3.12(h) Welfare Benefits
Schedule 3.12(i) Plan Claims and Proceedings
Schedule 3.12(j) Employment Agreements
Schedule 3.13 Contracts; Debt Instruments
Schedule 3.13(n) Notice of Termination
Schedule 3.15(a) Patents, Trademarks, Copyrights and Similar Rights
Schedule 3.15(b) Restrictions
iv
Schedule 3.15(c) Filing and Maintenance
Schedule 3.15(d) Infringements
Schedule 3.16 Dealings with Officers and Directors; Sony Services
Schedule 3.19(a) Cable Subscribers
Schedule 3.20 Foreign Distribution
Schedule 4.3 Conversion
Schedule 4.8 SPE Brokers
Schedule 5.3 Purchaser Capitalization
Schedule 5.7 Governmental Consents
Schedule 5.9 Purchaser Brokers
Schedule 5.13 Liberty Game Show Interests
Schedule 7.3 Account Restructuring
Schedule 9.2(e) Exceptions to Representation Contained in Section 3.15(d)
v
MEMBERSHIP INTEREST PURCHASE AGREEMENT
THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT (this "Agreement," which
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term shall include all Exhibits and Schedules hereto) is made as of February 23,
2001, by and among Liberty Digital, Inc., a Delaware corporation (the
"Purchaser"), LDIG Gamenet, Inc., a Delaware corporation ("Purchaser Sub"), Sony
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Pictures Entertainment Inc., a Delaware corporation ("SPE"), Sony Pictures Cable
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Ventures I Inc., a Delaware corporation ("SPCV"), TGSC Management, Inc., a
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California corporation ("TGSC") and, solely for purposes of Article II and
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Sections 6.1 and 9.2(f) hereof, Liberty Media Corporation ("LMC").
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WHEREAS, TGSC and SPCV are each indirect wholly-owned subsidiaries of
SPE, and TGSC and SPCV are the sole members of Game Show Network, LLC, a
Delaware limited liability company ("LLC");
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WHEREAS, TGSC was the sole general partner of The Game Show Network,
L.P., a Delaware limited partnership ("LP") and SPCV was the sole limited
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partner of LP;
WHEREAS, prior to the date hereof, TGSC, SPCV and SPE caused all of
LP's right, title and interest in and to the assets, businesses, liabilities and
other rights of LP to be transferred to and acquired by the LLC, by, among other
things, merging LP with and into the LLC; and
WHEREAS, the Purchaser and its Affiliates desire to acquire, and SPE
desires to cause SPCV and TGSC to, and SPCV and TGSC desire to, sell a fifty
percent (50%) interest in the LLC, upon the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I.
DEFINITIONS AND CONSTRUCTION
1.1 Certain Definitions. As used in this Agreement, the following
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capitalized terms have the corresponding meanings:
"Affiliate" means, with respect to any Person, any other Person that,
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directly or indirectly, through one or more intermediaries Controls, is
Controlled by, or is under common Control with, such Person.
"Affiliation Agreement" means any contract, agreement or other
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arrangement (including, but not limited to, arrangements regarding the
continuation of performance following the expiration of any agreement) for or
relating to the distribution of GSN Programming by a Covered System, whether or
not for a fee or other consideration.
"Agreement" has the meaning set forth in the preamble to this
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Agreement.
1
"AT&T" means AT&T Corp., a New York corporation.
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"AT&T Group" means AT&T, its Affiliates and Subsidiaries, other than
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the Liberty Media Group.
"Business Day" means any day other than a Saturday, Sunday or a day on
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which banking institutions in either the City of New York or the City of Los
Angeles are not required to be open.
"Cash Consideration" means $125,000,000 in cash.
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"Closing" means the consummation of the Transaction.
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"Closing Price" means, of any security for any day, the last reported
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sale price of such security regular way or, in case no such reported sale takes
place on such day, the average of the reported closing bid and asked prices
regular way, in either case on the composite tape, or if such security is not
quoted on the composite tape, on the principal United States securities exchange
registered under the Exchange Act on which such security is listed or admitted
to trading, or if such security is not listed or admitted to trading on any such
exchange, the last reported sale price (or the average of the quoted closing bid
and asked prices if there were no reported sales) on The Nasdaq Stock Market or
any comparable quotation system, or if such security is not quoted on The Nasdaq
Stock Market or any comparable system, the average of the closing bid and asked
prices as furnished by any member of the National Association of Securities
Dealers, Inc. selected from time to time by the mutual agreement of SPE and
Purchaser for that purpose or, in the absence of such quotations, such other
method of determining market value as SPE and Purchaser shall mutually agree.
"Code" means the Internal Revenue Code of 1986, as amended.
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"Commission" means the Securities and Exchange Commission.
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"Company" means prior to the Conversion, the LP, and following the
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Conversion, the LLC.
"Company Balance Sheet Date" means September 30, 2000.
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"Company Interests" means prior to the Conversion, the Partnership
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Interests of the Company, and after the Conversion, the Membership Interests of
the Company including, in each case, any Rights to acquire such interests.
"Company Material Adverse Effect" means any event, occurrence, fact,
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condition, change, or effect that is materially adverse to the business,
operations, results of operations, prospects, condition (financial or
otherwise), assets (including intangible assets) or liabilities of the Company
and the Company Subsidiaries, taken as a whole.
"Contract" means and includes any note, bond, indenture, mortgage,
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deed of trust, contract, instrument, or other agreement.
2
"Control" means the possession, direct or indirect, of the affirmative
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power to direct or cause the direction of the management and policies of a
Person (whether through ownership of securities, partnership interests or other
ownership interests, by contract, by membership or involvement in the board of
directors, management committee or management structure of such Person, or
otherwise).
"Controlled Affiliate" of any Person means any other Person which is
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Controlled by such first Person.
"Covered Systems" means any cable television system, satellite
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television system, or other distribution system capable of distributing linear
video programming (which may include data delivered in connection with the
provision of interactive functionality).
"Delaware LLC Act" means the Delaware Limited Liability Company Act,
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as amended from time to time.
"Delaware LP Act" means the Delaware Revised Uniform Limited
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Partnership Act, as amended from time to time.
"Distribution Agreement" means the distribution agreement between SPE
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and the LLC substantially in the form of Exhibit A hereto.
"Employee Leasing Agreement" means the employee leasing agreement
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between SPE and the LLC substantially in the form of Exhibit B hereto.
"Equity Interest" means any capital stock, partnership interest,
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membership interest, limited liability company interest or other equity interest
in any Person.
"Exchange Act" means the Securities Exchange Act of 1934, and the
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rules and regulations thereunder, in each case as amended from time to time.
"Existing Operating Agreement" means the Operating Agreement of the
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LLC, dated as of December 5, 2000, between SPCV and TGSC.
"GAAP" means generally accepted accounting principles in the United
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States as in effect from time to time.
"GSN Programming" means the linear video television programming
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(interactive or non-interactive) created, acquired, licensed, produced or
distributed by the Company or any Company Subsidiary for distribution over
Covered Systems.
"Governmental Entity" means and includes any court, arbitrator,
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administrative or other governmental department, agency, commission, authority
or instrumentality, domestic (including federal, state or local) or foreign.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
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1976, as amended.
3
"Indebtedness" means with respect to any Person, without duplication,
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(i) indebtedness for borrowed money, (ii) obligations evidenced by bonds,
debentures, notes or other similar instruments, (iii) obligations or liabilities
of such Person under or in connection with letters of credit or bankers'
acceptances or similar items, (iv) obligations to pay the deferred purchase
price of property or services other than current trade payables incurred in the
ordinary course of business, (v) obligations as lessee under leases which shall
have been or should be, in accordance with GAAP, recorded as capital leases, and
(vi) obligations under direct or indirect guaranties in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kind referred to in clauses (i) through (v) above.
"Intellectual Property," is limited to the United States and Canada
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and shall mean: (a) inventions (whether patentable or unpatentable and whether
or not reduced to practice), including but not limited to and only to the extent
protectable under the criteria of 35 U.S.C. (S) 101 (or the Canadian equivalent)
but without necessarily satisfying 35 U.S.C. (S)(S) 102 and 103 (or the Canadian
equivalent), ideas, research and techniques, technical designs, discoveries and
specifications, improvements, modifications, adaptations, and derivations
thereto, and patents, patent applications, inventor's certificates, and patent
disclosures, together with reissuances, continuations, continuations-in-part,
revisions, extensions and reexaminations thereof; (b) trademarks, service marks,
logos, trade dress, brand names and trade names, together with the goodwill
associated therewith, assumed names, corporate names and other indications of
origin; (c) copyrights namely rights covering original works of authorship fixed
in a tangible medium of expression including but not limited to games and
television programs for any medium, including extensions, renewals, restorations
and resuscitations thereof; (d) trade secrets and confidential business
information; (e) computer software; and (f) domain names.
"Interest Consideration" means 692,835 shares of Purchaser Series A
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Common Stock.
"Liberty Media Group" shall have the meaning ascribed thereto in the
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Certificate of Incorporation of AT&T as amended to the date hereof (a copy of
which has been made available to SPE); provided, that Liberty Ventures Group
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LLC, a Delaware limited liability company and a wholly owned subsidiary of AT&T
which is Controlled by AT&T, shall be deemed not to be a member of the Liberty
Media Group.
"Lien" means any security interest, mortgage, pledge, hypothecation,
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charge, claim, option, right to acquire, adverse interest, assignment, deposit
arrangement, encumbrance, restriction, statutory or other lien, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including any conditional sale or other title retention
agreement, any financing lease involving substantially the same economic effect
as any of the foregoing, and any effective financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction).
"LLC" has the meaning given to such term in the recitals to this
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Agreement.
4
"LMC" means Liberty Media Corporation, a Delaware corporation
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(including any successor to, or assignee of, substantially all of the business
and assets of Liberty Media Corporation).
"LOI Date" means August 18, 2000.
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"LP" has the meaning given to such term in the recitals to this
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Agreement.
"Membership Interest" shall have the meaning given in the Operating
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Agreement.
"MSO" means either of (x) a Person (together with its Affiliates) that
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owns, operates or manages cable television systems in multiple locations or (y)
a Person which owns, operates or manages a direct broadcast satellite television
service.
"Note" means the promissory note, dated the Closing Date, in the
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aggregate principal amount of $100,000,000 made by LMC in favor of SPCV and
TGSC, substantially in the form of Exhibit C attached hereto.
"Operating Agreement" means prior to the Closing, the Existing
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Operating Agreement and following the Closing, the Restated Operating Agreement.
"Parents Agreement" means the parents agreement between SPE and
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Purchaser substantially in the form of Exhibit I attached hereto.
"Partnership Agreement" means the Agreement of Limited Partnership of
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LP, dated as of November 25, 1992, by and among TGSC, SPCV, UVI Cable Ventures,
I L.P., a Delaware limited partnership, and Xxxx Xxxxxxx, as amended to the date
of the Conversion and terminated in connection with the Conversion.
"Partnership Interests" means the limited partnership and general
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partnership interests in the LP, which represent the partners' shares of the
profits and losses of the LP and the partners' rights to receive distributions
of the LP's assets in accordance with the provisions of the Partnership
Agreement and the Delaware LP Act.
"Permitted Restrictions" means the following Restrictions with respect
----------------------
to the properties and assets of the Company and the Company Subsidiaries: (a)
Liens for taxes, assessments or other governmental charges or levies not at the
time delinquent and thereafter payable without penalty or being contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on the Company's books; (b) Liens
of carriers, warehousemen, mechanics, materialmen and landlords incurred in the
ordinary course of business for sums not overdue or being contested in good
faith by appropriate proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on the Company's books; (c) Liens incurred
in the ordinary course of business in connection with workmen's compensation,
unemployment insurance or other forms of governmental insurance; and (d)
easements, restrictions and other minor defects of title that are not, in the
aggregate, material and that do not, individually or in the aggregate,
materially and adversely affect the intended use of the property affected
thereby.
5
"Person" means an individual, partnership, corporation, limited
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liability company, trust, unincorporated organization, association, or joint
venture or a government or any agency, political subdivision or instrumentality
thereof.
"Programming Agreement" means the programming and license agreement
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between the LLC and SPE substantially in the form of Exhibit E attached hereto.
"Purchaser" has the meaning set forth in the preamble to this
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Agreement.
"Purchaser Series A Common Stock" means the Series A Common Stock, par
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value $.01 per share, of Purchaser.
"Purchaser Material Adverse Effect" means any event, occurrence, fact,
---------------------------------
condition, change, or effect that is materially adverse to the business,
operations, results of operations, prospects, condition (financial or
otherwise), assets (including intangible assets) or liabilities of Purchaser and
its Subsidiaries, taken as a whole; provided, however, that a decline in the
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market price of the Purchaser Series A Common Stock shall not constitute a
Purchaser Material Adverse Effect.
"Purchaser Sub" has the meaning given to such term in the preamble to
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this Agreement.
"Registration Rights Agreement" means the registration rights
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agreement between SPCV and TGSC, on the one hand, and Purchaser, on the other
hand, substantially in the form of Exhibit E attached hereto.
"Related Agreements" means, collectively, this Agreement, the
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Transaction Agreements and any other agreement entered into on the Closing Date
between Purchaser and/or Purchaser Sub, on the one hand, and SPE, TGSC, SPCV,
the LLC or any of their respective Affiliates, on the other hand, in connection
with the Transaction, but for clarity shall not include the Note.
"Representatives" means, as to each party, such party's Controlled
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Affiliates, and those Affiliates Controlling such party, and the respective
directors, officers, employees, attorneys, consultants and other agents and
advisors (including financial advisors) of such party, its Controlled Affiliates
and those Affiliates Controlling such party. For purposes of this Agreement,
the members of the AT&T Group shall be not deemed to be Affiliates or
Controlling Persons of Purchaser or its Affiliates.
"Restated Operating Agreement" means the Amended and Restated
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Operating Agreement of the LLC, among SPCV, TGSC, Purchaser, SPE and Purchaser
Sub substantially in the form of Exhibit D attached hereto.
"Restriction" means, with respect to any asset or property (tangible
-----------
or intangible, including, without limitation, any Equity Interest), (x) any
voting or other trust or agreement, option, warrant, escrow arrangement, proxy,
buy-sell agreement, power of attorney or other Contract, or (y) any law, rule,
regulation, order, judgment or decree that, in either case, conditionally or
unconditionally: (i) grants to any Person the right to purchase or otherwise
6
acquire, or obligates any Person to sell or otherwise dispose of or issue, or
otherwise results in (or, upon the occurrence of any event or with notice or
lapse of time or both or otherwise, may result in) any Person acquiring (A) any
such asset, (B) any of the proceeds of, or any distributions paid or that are or
may become payable with respect to, any such asset, or (C) any interest in such
asset or any such proceeds or distributions; (ii) restricts (or, upon the
occurrence of any event or with notice or lapse of time or both or otherwise,
may restrict) the transfer or voting of, or the exercise of any rights or the
enjoyment of any benefits arising by reason of ownership of, any such asset or
any such proceeds or distributions; or (iii) creates (or, upon the occurrence of
any event or with notice or lapse of time or both or otherwise, may create) a
Lien or purported Lien affecting such asset, or any such proceeds or
distributions, other than any applicable U.S. state or federal securities laws.
"SCA" means Sony Corporation of America, a New York corporation.
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"Securities Act" means the Securities Act of 1933 and the rules and
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regulations thereunder, in each case as amended from time to time.
"Services Agreement" means the services agreement between SPE and the
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LLC in the form of Exhibit G attached hereto.
"Sony" means Sony Corporation, a corporation organized under the laws
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of Japan.
"SPCV" has the meaning set forth in the preamble to this Agreement.
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"SPE" has the meaning set forth in the preamble to this Agreement.
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"SPE Material Adverse Effect" means any event, occurrence, fact,
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condition, change, or effect that is materially adverse to the business,
operations, results of operations, prospects, condition (financial or
otherwise), assets (including intangible assets) or liabilities of SPE and its
Subsidiaries, taken as a whole.
"Stock Consideration" means 1,491,598 shares of Purchaser Series A
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Common Stock.
"Sublease(s)" means the sublease or subleases between the LLC and SPE
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substantially in the form of Exhibit H attached hereto.
"Subsidiary" when used with respect to any Person, means any other
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Person of which (i) an aggregate of 50% or more of the outstanding capital stock
or other securities having ordinary voting power to elect directors, managers,
trustees or other Controlling Persons, or an equivalent Controlling interest
therein, of such Person (irrespective of whether, at the time, capital stock or
other securities of any other class or classes of such entity shall have or
might have voting power by reason of the happening of any contingency) is, and
(ii) an aggregate of 50% or more of the equity interests in which are, at the
time, directly or indirectly, owned by such Person and/or one or more
Subsidiaries of such Person.
"TGSC" has the meaning set forth in the preamble to this Agreement.
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7
"Transaction" means the actions and transactions contemplated by this
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Agreement and the Transaction Agreements (including, without limitation, the
Conversion).
"Transaction Agreements" means the Distribution Agreement, the
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Employee Leasing Agreement, the Restated Operating Agreement, the Programming
Agreement, the Registration Rights Agreement, the Services Agreement, the
Sublease(s), and the Parents Agreement.
"Treasury Regulations" means the Treasury Regulations promulgated
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under the Code.
"United States" means the United States of America, including Puerto
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Rico and the United States Virgin Islands, but excluding any other territories
and possessions of the United States.
1.2 Additional Definitions. The following additional terms are used
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as defined in the indicated Sections:
Defined Term Section Defined In
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Allocation 2.3
Appraiser 2.3
Caribbean Damages 9.2(e)
Closing Date 2.2
Company Material Contracts 3.13
Company Plans 3.12(a)
Company Property 3.9(c)
Company Subsidiary 3.2
Company Territories 3.20
Conversion 4.3
Covered Person 3.16(a)
Employee Benefit Plan 3.12(a)
Environmental Laws 3.9(b)
ERISA 3.12(a)
ERISA Affiliate 3.12(a)
Fairfax Indemnitees 9.2(d)
Financial Statements 3.5
Governmental Consents and Filings 3.6
Hazardous Materials 3.9(c)
Intellectual Property Licenses 3.15(a)
Investment 3.2
IP Indemnified Parties 9.2(e)
IRS 3.11(e)
Knowledge Employee 4.10
Licenses 3.9
Losses and Expenses 9.2(a)
Material MSO 3.19
8
MSO Report 3.19
Multiemployer Plan 3.12(b)
PCBs 3.9(c)
Purchased Interests 2.1
Purchaser Commission Filings 5.4
Purchaser Indemnified Parties 9.2(a)
Purchaser Licenses 5.12
Purchaser Violation 5.7
Returns 3.11(b)
Rights 3.4
Shares 2.2(c)(x)
Similar Business 4.6
Single-Employer Plan 3.12(b)
South Fairfax Property 9.2(d)
SPE Indemnified Parties 10.2(b)
SPE Violation 4.4
Talent Agreement 3.13
Tax 3.11
Transferred Rights 3.2
Violation 3.6
Voting Debt 3.4(b)
1.3 Terms Generally. The definitions used herein apply equally to
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both the singular and plural forms of the terms defined. Whenever the context
requires, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include", "includes" and "including" shall be construed
as if followed by the words "without limitation". The words "herein", "hereof"
and "hereunder" and words of similar import refer to this Agreement (including
the Exhibits and Schedules hereto) in its entirety and not to any part hereof,
unless the context otherwise requires. All references herein to Articles,
Sections, Exhibits and Schedules are references to Articles and Sections of, and
Exhibits and Schedules to, this Agreement unless the context otherwise requires.
Unless the context otherwise requires, any references to any agreement or other
instrument or statute or regulation are to such agreement, instrument, statute
or regulation as amended and supplemented from time to time (and, in the case of
a statute or regulation, to any successor provisions). Any reference in this
Agreement to a "day" or number of "days" (without the explicit qualification of
"business") shall mean a calendar day or number of calendar days. If any action
or notice is to be taken or given on or by a particular day, and such day is not
a Business Day, then such action or notice shall be deferred until, or may be
taken or given on, the next Business Day. Any reference in this Agreement to the
words "know" or "knowledge" with respect to: (i) SPE includes, without
limitation, the actual knowledge of (x) those persons occupying the positions
set forth on Schedule 1.3 and (y) the named persons listed on Schedule 1.3 and
(ii) Purchaser includes, without limitation, the actual knowledge of any member
of the Board of Directors of Purchaser and those officers of Purchaser and its
Controlled Affiliates occupying the position of senior vice president or higher.
9
ARTICLE II.
THE PURCHASE
2.1 The Purchase.
------------
Purchase and Sale. Upon the terms and subject to the conditions of
-----------------
this Agreement, at the Closing, SPCV and TGSC will sell, convey, transfer,
assign and deliver to Purchaser, and Purchaser will purchase from each of SPCV
and TGSC fifty percent (50%) of the Membership Interests then owned by it, which
Membership Interests (the "Purchased Interests") SPE represents and warrants to
-------------------
Purchaser and Purchaser Sub will constitute fifty percent (50%) of the
outstanding Membership Interests, on a fully diluted basis (assuming the
exercise in full of any Rights to acquire Membership Interests), immediately
following the Closing. At the Closing (or at the time otherwise specifically
stated herein):
(a) Purchaser will pay the Cash Consideration to SPCV and TGSC by
wire transfer of immediately available funds to an account designated for such
purpose by SPE in writing prior to Closing.
(b) LMC and Purchaser Sub will deliver the Note, duly executed in
favor of SPCV and TGSC, to SPCV and TGSC.
(c) In consideration of the delivery of the Note to it and at the
direction of LMC with respect to the Note and in consideration for the delivery
of the Cash Consideration to it, and at the direction of Purchaser with respect
to the Cash Consideration, SPCV and TGSC will deliver to Purchaser Sub a
certificate representing 40.91% of the Membership Interests registered in the
name of Purchaser Sub (or Purchaser Sub's assignee pursuant to Section 10.3).
(d) Purchaser Sub will, within five Business Days following the
Closing Date, deliver to SPCV and TGSC stock certificates representing the
Interest Consideration duly issued in the name of Purchaser Sub, with an
executed stock assignment separate from certificate.
(e) Purchaser Sub will, within five Business Days following the
Closing Date, deliver to SPCV and TGSC stock certificates representing the Stock
Consideration duly issued in the name of SPCV and TGSC.
(f) Upon receipt by it of the Stock Consideration, SPCV and TGSC will
deliver to Purchaser Sub a certificate representing 9.09% of the Membership
Interests registered in the name of Purchaser Sub (or Purchaser Sub's assignee
pursuant to Section 10.3).
10
(g) Purchaser Sub will deliver to LMC that certain Assignment
Agreement between LDI Sub and LMC dated as of the date hereof and that certain
Security Agreement between LDI Sub and LMC dated as of the date hereof.
2.2 Closing.
-------
(a) Closing Date and Location. The Closing shall take place at
-------------------------
10:00 a.m. (Los Angeles time) at the offices of Akin, Gump, Strauss, Xxxxx &
Xxxx, L.L.P., 0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx, Xxx Xxxxxxx, XX 00000, on
February 23, 2001 (the "Closing Date").
------------
(b) Obligations of SPE. At the Closing (or as otherwise indicated
------------------
below), SPE shall deliver and/or cause to be delivered the following to
Purchaser and Purchaser Sub:
(i) the certificate representing 40.91% of the
Membership Interests, duly registered on the books of the LLC in the name of
Purchaser Sub or a wholly-owned subsidiary of Purchaser to which Purchaser Sub
has assigned its right to purchase the Purchased Interests pursuant to Section
10.3;
(ii) within five Business Days following the Closing
Date, the certificates representing 9.09% of the Membership Interests, duly
registered on the books of the LLC in the name of Purchaser Sub or a wholly-
owned subsidiary of Purchaser to which Purchaser Sub has assigned its right to
purchase the Purchased Interests pursuant to Section 10.3;
(iii) the Distribution Agreement duly executed by SPE
and the LLC;
(iv) the Employee Leasing Agreement duly executed by
SPE and the LLC;
(v) the Restated Operating Agreement duly executed by
SPE, SPCV and TGSC;
(vi) the Programming Agreement duly executed by SPE and
the LLC;
(vii) the Registration Rights Agreement duly executed by
SPCV and TGSC;
(viii) the Services Agreement duly executed by SPE and
the LLC;
11
(ix) the Sublease(s) duly executed by the LLC and SPE;
(x) the Parents Agreement duly executed by SPE in
favor of Purchaser;
(xi) a certificate of existence and good standing for
the LLC in the State of Delaware, certified by the Delaware Secretary of State
as of a date that is not more than three Business Days prior to the Closing
Date;
(xii) an opinion of Akin, Gump, Strauss, Xxxxx & Xxxx,
L.L.P., as counsel for SPE, TGSC and SPCV, substantially in the form of Exhibit
J attached hereto and dated as of the Closing Date;
(xiii) an opinion of Potter, Xxxxxxxx & Xxxxxxx, LLP, as
Delaware counsel for SPE, TGSC and SPCV, substantially in the form of Exhibit N
attached hereto and dated as of the Closing Date;
(xiv) an opinion of Xxxx Xxxx, Deputy General Counsel to
SPE, substantially in the form of Exhibit O attached hereto and dated as of the
Closing Date;
(xv) evidence that all consents, approvals, waivers,
filings or notifications have been obtained and made and are in full force and
effect; and
(xvi) such other certificates of public officials,
documents or instruments of further assurance as may reasonably be requested by
Purchaser.
(c) Obligations of Purchaser and Purchaser Sub. At the Closing (or
------------------------------------------
as otherwise indicated below), Purchaser and Purchaser Sub shall deliver and/or
caused to be delivered the following to SPE, SPCV and TGSC:
(i) the Cash Consideration in immediately available
funds, in the manner set forth in Section 2.1;
(ii) the Restated Operating Agreement duly executed by
Purchaser and Purchaser Sub;
(iii) the Registration Rights Agreement duly executed by
Purchaser;
12
(iv) the Parents Agreement duly executed by Purchaser
in favor of SPE;
(v) a certificate of existence and good standing for
Purchaser and Purchaser Sub in the State of Delaware, certified by the Delaware
Secretary of State as of the date that is not more than three Business Days
prior to the Closing Date;
(vi) an opinion of Xxxxx Xxxxx L.L.P., as counsel for
Purchaser, substantially in the form of Exhibit K attached hereto and dated as
of the Closing Date;
(vii) an opinion of Xxxxxxx and Xxxxxx, as counsel for
LMC, substantially in the form of Exhibit M attached hereto and dated as of the
Closing Date;
(viii) an opinion of Xxxxxxxx, Xxxxxx & Finger, as
counsel for Purchaser, LMC and Purchaser Sub;
(ix) such other certificates of public officials and
documents or instruments of further assurance as may reasonably be requested by
SPE; and
(x) within five Business Days following the Closing
Date, Purchaser Sub will deliver to SPCV and TGSC, certificates representing the
shares of Purchaser Series A Common Stock issued to SPCV and TGSC as the Stock
Consideration and issued to Purchaser Sub with a stock assignment separate from
certificate as the Interest Consideration (collectively, the "Shares"), duly
------
registered on the stock books of Purchaser in the name of SPCV and TGSC.
(d) Obligations of LMC and Purchaser Sub. At the Closing, LMC and
------------------------------------
Purchaser Sub shall deliver the following to SPE, SPCV and TGSC:
(i) the Note duly executed by LMC and Purchaser Sub in
favor of SPCV and TGSC.
2.3 Allocation. The parties shall allocate the consideration (and
----------
all other capitalizable costs) among the assets of the LLC (the "Allocation") in
----------
accordance with Section 755 of the Code and the applicable Treasury Regulations
pursuant to an appraisal conducted by an independent appraiser (the "Appraiser")
---------
to be selected jointly by Purchaser and SPE (or if Purchaser and SPE are unable
to agree within ten (10) Business Days following the Closing, an Appraiser
proposed by Purchaser and reasonably acceptable to SPE). Each of Purchaser and
SPE shall direct the Appraiser to conduct the appraisal in a commercially
reasonable and fair fashion and shall not instruct the Appraiser to artificially
inflate the value of any asset. The fees and expenses of the Appraiser shall be
borne half by Purchaser and half by SPE. Each of the
13
Purchaser, SPCV, TGSC and the LLC shall (i) be bound by the Allocation for
purposes of determining any Taxes, (ii) prepare and file, and cause its
Affiliates to prepare and file, its Tax returns on a basis consistent with the
Allocation and (iii) take no position, and cause its Affiliates to take no
position, inconsistent with the Allocation on any applicable Tax return, report
or filing, in any proceeding before any taxing authority or otherwise. In the
event that the Allocation is disputed by any taxing authority, the party
receiving notice of the dispute shall promptly notify the other parties hereto
in accordance with Section 10.1 and each party shall be entitled to participate
in any actions or proceedings before such taxing authorities. The parties agree
to use their commercially reasonable efforts to defend the Allocation in any
such dispute or action relating thereto.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SPE, TGSC AND SPCV
WITH RESPECT TO THE COMPANY
Each of SPE, TGSC and SPCV hereby, jointly and severally, represents and
warrants to Purchaser and Purchaser Sub as follows:
3.1 Organization and Qualification. (a) The Company and each of
------------------------------
the Company Subsidiaries (i) is a corporation, partnership or limited liability
company, as applicable, duly organized, validly existing and is in good standing
under the laws of the jurisdiction of its incorporation or organization and (ii)
has all requisite corporate, partnership or limited liability company, as
applicable, power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted. Except as set forth on
Schedule 3.1, the Company and each of the Company Subsidiaries is duly qualified
or licensed to do business and in good standing in each jurisdiction in which
the ownership or lease of its properties or the conduct of its business makes
such qualification necessary, other than in such jurisdictions where the failure
to be so qualified (individually or in the aggregate) would not have a Company
Material Adverse Effect.
(b) SPE has delivered to Purchaser true and complete copies of (i)
the organizational documents of the LLC, as amended through and in effect on the
date hereof, (ii) the organizational documents of the LP, as such organizational
documents had been amended as of the time immediately prior to the Conversion,
(iii) the organizational documents of each of the Company Subsidiaries as
amended through and in effect on the date hereof and (iv) the documents and
instruments pursuant to which the Conversion was effected. The Partnership
Agreement was terminated as a result of the Conversion and no longer is of any
force or effect.
3.2 Subsidiaries. Schedule 3.2(a) sets forth a complete list of the
------------
Subsidiaries of the Company and those Subsidiaries of SPE which became
Subsidiaries of the Company in connection with the Conversion (the "Company
-------
Subsidiaries"). The Company owns, free and clear of any Restriction, one hundred
-------------
percent (100%) of the outstanding Equity Interests of each of the Company
Subsidiaries and there are no Rights issued or outstanding (or any agreements to
issue any such Right) with respect to such Equity Interests. All of the Equity
Interests of each
14
Company Subsidiary of the Company are validly issued, fully paid and
nonassessable. Other than its investment in the Company Subsidiaries, the
Company does not own any Equity Interest in any other Person or have any right
to acquire any such Equity Interest. Other than (i) as disclosed on Schedule
3.2(b) or (ii) Equity Interests consisting of publicly traded securities
constituting less than 10% of the outstanding Equity Interests of such Person,
no Company Subsidiary owns any Equity Interests in any other Person or any
Rights to acquire any such Equity Interests (such Equity Interests or Rights to
acquire any such Equity Interests, an "Investment"). Neither the Company nor
----------
any Company Subsidiaries is a party to any joint venture, partnership,
membership or similar arrangements. Schedule 3.2(c) sets forth a complete list
of all Intellectual Property rights (other than customary license arrangements
entered into in the ordinary course of business consistent with prior practice)
relating to music which have been assigned, transferred or otherwise disposed of
(the "Transferred Rights") by the Company or any of the Company Subsidiaries
------------------
to any Affiliate of SPE since the LOI Date. The revenues of the Company reported
in the Financial Statements do not reflect any amounts that were attributable
to, dependent upon or otherwise derived from the Transferred Rights. Other than
the Transferred Rights, none of the Company nor any Company Subsidiary has
assigned, transferred or otherwise disposed of any other significant assets or
properties to SPE or its Affiliates since the LOI Date other than in the
ordinary course of business consistent with past practice and which, in the
aggregate are not material to the operation of the business of the Company.
There are no Controlled Affiliates of the Company that are not Company
Subsidiaries.
3.3 Authorization and Validity of Agreement. The Company has all
---------------------------------------
requisite power and authority to execute the Related Agreements to which it is a
party and to carry out and perform its obligations under such Related Agreements
and to consummate the Transaction. The execution, delivery and performance by
the Company of the Related Agreements to which it is a party, and the
consummation of the Transaction, have been duly and validly authorized by all
necessary action of the Company and its Affiliates and no other action on the
part of the Company or its Affiliates is necessary for the authorization,
execution, delivery or performance by the Company of the Related Agreements to
which it is a party and the consummation of the Transaction. Each of the Related
Agreements to which it is a party will be duly executed and delivered by the LLC
and, assuming that such other Related Agreements are duly executed and delivered
by each of the other parties thereto which is not an Affiliate of SPE, each
Related Agreement to which it is a party when executed and delivered by the LLC
will constitute, the valid and binding obligation of the LLC enforceable in
accordance with its terms (except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, or by principles governing the
availability of equitable remedies).
3.4 Capitalization. (a) Prior to the Conversion, all of the
--------------
Partnership Interests were owned by SPCV and TGSC, each of which was immediately
prior to the Conversion an indirect wholly-owned Subsidiary of SPE. All such
Partnership Interests had been duly authorized and were validly issued, and were
not issued in violation of any preemptive rights of others. As of the date
hereof, SPCV and TGSC are the record and beneficial owners of all of the
authorized and outstanding Membership Interests. All of the outstanding
Membership Interests have been duly authorized, validly issued and fully paid,
and none of the Membership Interests
15
were issued in violation of any preemptive rights or any Restriction in favor of
any other Person. Upon the Closing, the Purchased Interests will represent 50%
of the Membership Interests outstanding. The sale of the Purchased Interests
will not be subject to any rights of first offer, first refusal, tag-along
rights or other similar rights or restrictions and, assuming the accuracy of
Section 5.10, the acquisition of the Purchased Interests by Purchaser will be
exempt from registration under the Securities Act or state securities laws. None
of the Membership Interests have been issued in violation of the Securities Act
or state securities laws. There are no voting trusts, voting agreements,
irrevocable proxies or other agreements with respect to any of the Membership
Interests.
(b) There are not as of the date hereof any outstanding bonds,
debentures, notes or other indebtedness of the Company or any of the Company
Subsidiaries that have the right to vote (or that are or, after the passage of
time or the occurrence of any event may be, convertible into or exercisable or
exchangeable for other securities having the right to vote) on any matters on
which shareholders, partners or members may vote ("Voting Debt"). There are not
-----------
as of the date hereof any authorized or outstanding (i) securities convertible
into, or exercisable or exchangeable for, or evidencing the right to subscribe
for, any Equity Interest or Voting Debt of the Company or any Company
Subsidiary, (ii) phantom shares, phantom equity interests, stock or equity
appreciation rights (full or limited) or profit participation rights or
interests with respect to the Company or any Company Subsidiary, or (iii)
subscriptions, purchase rights, options, warrants, calls, preemptive rights,
rights of first refusal, participation rights or other rights, commitments or
any other agreements or undertakings of any character (the securities,
instruments or agreements referred to in clauses (i), (ii) and (iii) are
hereinafter referred to collectively as "Rights") to or by which the Company or
------
any of the Company Subsidiaries is a party or is bound which, directly or
indirectly, obligate the Company or any of the Company Subsidiaries to issue,
deliver or sell or cause to be issued, delivered or sold any Equity Interest or
Voting Debt or any Rights with respect thereto of the Company or any Company
Subsidiary or obligating the Company or any of the Company Subsidiaries to
grant, extend or enter into any of the foregoing. Neither the Company nor any
Company Subsidiary thereof is subject to any obligation (contingent or
otherwise) to repurchase, redeem or otherwise acquire or retire any Equity
Interest (or Rights to acquire any such Equity Interest) of the Company or any
of the Company Subsidiaries, or to make any investment (in the form of a loan,
capital contribution or otherwise) in any Company Subsidiary or any other
Person. Neither the Company nor any of the Company Subsidiaries has adopted,
authorized or assumed any plans, arrangements or practices for the benefit of
its Representatives which require or permit the issuance, sale, purchase or
grant of any Equity Interests or Voting Debt of the Company or any Company
Subsidiary or any Rights.
(c) Other than as contemplated by the Conversion, there are not as of
the date hereof any Rights that, directly or indirectly, (i) call for or relate
to the sale, pledge, transfer or other disposition by the Company or any Company
Subsidiary of any Equity Interest or Voting Debt of any Company Subsidiary or
any Investment owned directly or indirectly by the Company or any of the Company
Subsidiaries, or (ii) relate to the voting or control of any such Equity
Interest or Voting Debt. All Investments owned by the Company and the Company
Subsidiaries are free and clear of all Restrictions. There are not as of the
date hereof any
16
agreements, arrangements or commitments of any character (contingent or
otherwise) pursuant to which any Person is or may be entitled to receive any
payment based on the assets, revenues, earnings or financial performance of the
Company or any Company Subsidiaries or calculated in accordance therewith (other
than ordinary course payments or commissions to sales representatives of the
Company based upon revenues generated by them without augmentation as a result
of the Transaction or payments under Intellectual Property Licenses entered into
in the ordinary course of business), except as provided in Schedule 3.4(c).
3.5 Financial Statements; Additional Obligations. Attached hereto as
--------------------------------------------
Schedule 3.5 are true and correct copies of the unaudited combined balance
------------
sheets of the Company and the Company Subsidiaries as of March 31, 2000 and the
Company Balance Sheet Date, and the related unaudited combined statements of
operations for the fiscal year ended March 31, 2000 and the six-month period
ended on the Company Balance Sheet Date, in each case prepared by the Company
(such unaudited combined balance sheets and combined statements of operations
statements, collectively, the "Financial Statements"). The Financial Statements
--------------------
conform to the books and records of the Company and the Company Subsidiaries in
all material respects. Since the Company Balance Sheet Date, neither the Company
nor any of the Company Subsidiaries has incurred any liability or obligation of
any kind that alone or in the aggregate is material, except in the ordinary
course of business. Since the Company Balance Sheet Date, the Company has not
extended the payment dates of accounts payable of the Company (other than where
good faith disputes regarding such payment obligations then exist).
3.6 Noncontravention. (i) The consummation of the Conversion did not,
----------------
(ii) the execution and delivery of the Related Agreements to which the Company
is a party do not, and (iii) the consummation of the Transaction and compliance
with the provisions of the Related Agreements to which the Company is a party
will not, conflict with, or result in any violation of, default or breach (with
or without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, or result in the creation of any Restriction upon any of
the properties or assets of the Company or any of the Company Subsidiaries under
(any such conflict, violation, default, breach, right of termination,
cancellation or acceleration, loss or creation, a "Violation"), (a) the
---------
organizational documents of the Company or the organizational documents of any
of the Company Subsidiaries or (b) except as set forth on Schedule 3.6(a), (1)
any Company Material Contract or Company Plan (without duplication) to which the
Company or any of the Company Subsidiaries is a party or by which any of their
respective properties or assets are bound or affected, other than Violations
which are immaterial in nature or which would not materially affect the
Company's rights under any such Company Material Contract or Company Plan, (2)
any judgment, order, or decree of any Governmental Entity applicable to the
Company or any of the Company Subsidiaries or their respective properties and
assets or (3) any statute, law, ordinance, rule or regulation of any
Governmental Entity applicable to the Company or any of the Company Subsidiaries
or their respective properties or assets where such Violation under any such
statute, law, ordinance, rule or regulation would prevent or materially delay
the Company, the Company Subsidiaries, SPE or any of SPE's Controlled Affiliates
from performing their obligations under this Agreement or any Transaction
Agreements to which they are parties or result in a Company Material Adverse
Effect. Except as set forth on Schedule 3.6(b), no consent, approval, order or
17
authorization of, or registration, declaration or filing with, any Governmental
Entity (collectively, "Government Consents and Filings"), is required by or with
-------------------------------
respect to the Company or the Company Subsidiaries in connection with the
execution and delivery of this Agreement or the Company's execution and delivery
of any of the Related Agreements to which it is a party or the consummation by
the Company of the Transaction, other than where (A) the failure to obtain any
such authorization, consent or approval or (B) the failure to make any such
filing, would not, in the aggregate, have a Company Material Adverse Effect.
3.7 Absence of Certain Changes or Events. Except as set forth on
------------------------------------
Schedule 3.7, since the Company Balance Sheet Date the Company has conducted its
business only in the ordinary course consistent with past practice, and there
has not been (a) any Company Material Adverse Effect, (b) any declaration,
setting aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to any of the Company Interests or the Equity
Interests of any of the Company Subsidiaries, other than dividends or
distributions by any direct or indirect wholly-owned subsidiary of the Company
to the Company, (c) any split, combination or reclassification of any of the
Membership Interests or any issuance or the authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for any Membership
Interests, (d) any granting by the Company or any of the Company Subsidiaries to
any Representative of the Company or any of the Company Subsidiaries of (x) any
increase in compensation except in the ordinary course of business consistent
with prior practice or as was required under employment agreements as in effect
on the Company Balance Sheet Date or (y) any right to participate in (by way of
bonus or otherwise) the profits of the Company or any of the Company
Subsidiaries, (e) any granting by the Company or any of the Company Subsidiaries
to any Representative of the Company or any of the Company Subsidiaries of any
award of cash or other benefit (i) which is contingent upon consummation of the
Transaction or (ii) which is contingent upon the termination of such
representation, employment, consulting or other services as a result of or
relating to the consummation of the Transaction, (f) any increase or change in
severance or termination pay payable to any Representative of the Company or any
of the Company Subsidiaries in excess of that to which such Representative was
entitled under an employment, consulting, severance or termination agreement in
the form in which such agreement existed as of March 31, 2000, (g) any entry
into, assumption of or renewal or modification of, any employment, consulting,
severance or termination agreement with any Representative of the Company or any
of the Company Subsidiaries'(other than agreements entered into in the ordinary
course of business (i) for the provision of services which do not constitute
customary employee-type services or (ii) for the provision of game show related
production services or (iii) which constitute at-will employment relationships),
(h) any damage, destruction or loss, whether or not covered by insurance, other
than any such damages, destruction or losses which, in the aggregate, are not
material to the assets and operations of the Company or any of the Company
Subsidiaries, or (i) any change in accounting methods, principles or practices
by the Company, except insofar as may have been required by a change in GAAP.
3.8 Legal Proceedings. Except as set forth on Schedule 3.8, there is (i)
-----------------
no suit, action, proceeding or investigation pending or, to the knowledge of SPE
threatened, against, involving or affecting the Company or any Company
Subsidiary or any of its or their properties
18
or rights; (ii) no judgment, decree, injunction, ruling or order of any
Governmental Entity which is applicable to the Company or any of the Company
Subsidiaries or any of their respective properties or rights and which would
have a material adverse effect upon the operation of the business of the Company
as currently conducted; and (iii) no action, suit, proceeding or investigation
pending or, to the knowledge of SPE, threatened against the Company or its
Affiliates that seeks to restrain, enjoin or delay the consummation of the
Transaction or that seeks damages in connection therewith. No temporary
restraining order, preliminary or permanent injunction or other order has been
issued by any Governmental Entity of competent jurisdiction and no other legal
restraint or prohibition preventing the consummation of the Transaction as
herein provided is in effect.
3.9 Compliance with Applicable Laws; Environmental.
----------------------------------------------
(a) Each of the Company and the Company Subsidiaries has in effect
all federal, state, local and foreign governmental approvals, authorizations,
certificates, filings, franchises, licenses, notices, permits and rights
(including licenses from the U. S. Federal Communications Commission)
("Licenses", which term shall not include any of the foregoing with respect
--------
to Intellectual Property) necessary for it to own, lease or operate the
properties and assets which are material to its business and to carry on its
business as now conducted in all material respects. Neither SPE nor the Company
has any reason to believe any Governmental Entity is considering limiting,
suspending or revoking any of the Company's or the Company Subsidiaries'
Licenses. Other than with respect to defaults or violations which have been
cured prior to the date hereof without the payment of any consideration (other
than filing fees or late payment fees in amounts that are not material to the
Company) or the occurrence of adverse consequences to the Company or its
business, the Company and each of the Company Subsidiaries is in compliance
with, has not violated, is not in default under (with or without notice, lapse
of time or otherwise) and has conducted its business so as to comply with, (x)
the terms of those Licenses which are material to its business and (y) all
applicable statutes, laws, ordinances, rules, regulations, judgments, orders or
decrees of any Governmental Entity except, in the case of clause (y), where such
violation or the failure to so comply or to conduct business, individually or in
the aggregate, would not have a Company Material Adverse Effect.
(b) The Company and each of the Company Subsidiaries is and has been,
and each of the Company's former Subsidiaries, while Subsidiaries of the
Company, was in compliance with all applicable Environmental Laws and health and
safety laws, except where such failure to comply would not, individually or in
the aggregate, be reasonably expected to have a Company Material Adverse Effect.
The term "Environmental Laws" means any federal, state, local or foreign
------------------
statute, code, ordinance, rule, regulation, policy, guideline, permit, consent,
approval, license, judgment, order, writ, decree, injunction or other
authorization, including the requirement to register underground storage tanks,
relating to: (A) emissions, discharges, releases or threatened releases of
Hazardous Material into the environment, including, without limitation, into
ambient air, soil, land surface or subsurface, buildings or facilities, surface
water, groundwater, publicly owned treatment works, septic systems or land; or
(B) the generation, treatment, storage, disposal, use, handling, manufacturing,
transportation
19
or shipment of Hazardous Material, and includes, without limitation, the
following statutes and their implementing regulations: the Hazardous Materials
Transportation Act, 49 U.S.C. (S) 1801 et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. (S) 6901 et seq., the Comprehensive Environmental
Response, Compensation, and Liability Act, as amended by the Superfund
Amendments and Reauthorization Act, 42 U.S.C. (S) 9601 et seq., the Clean Water
Act, 33 U.S.C. (S) 1251 et seq. and the Clean Air Act, 42 U.S.C. (S) 7401 et
seq.
(c) During the current or previous period of use or occupation of any
property by the Company or the Company Subsidiaries (any such property used or
occupied by the Company, a "Company Property"), there have been no releases of
----------------
Hazardous Material by SPE, the Company or any of their respective Controlled
Affiliates or by any other Person occupying a Company Property pursuant to any
contractual relationship with any of SPE, the Company or their respective
Controlled Affiliates, or, to the knowledge of SPE, by any third party, in, on,
under or affecting such Company Property or any surrounding site, except for
those releases which, individually or in the aggregate, are not reasonably
expected to have a Company Material Adverse Effect. Schedule 3.9(c)(i) contains
a complete list of the material documents relating to releases or potential
releases of Hazardous Material known to SPE at any Company Property. To the
knowledge of SPE, prior to the period a property became a Company Property, (x)
no Hazardous Material was generated, treated, stored, disposed of, used, handled
or manufactured at, or transported, shipped or disposed of from, such Company
Property, and, (y) there were no releases of Hazardous Material in, on, under or
affecting any such Company Property or any surrounding site, except (1) as
referenced in the documents listed in Schedule 3.9(c)(i) and (2) for those
which, individually or in the aggregate, would not be reasonably expected to
have a Company Material Adverse Effect. Except as referenced in the document
listed in Schedule 3.9(c)(ii), neither the Company nor any Company Subsidiary
(i) generates, treats or manufactures Hazardous Material, or (ii) uses, stores
or disposes of Hazardous Material, other than Hazardous Material typically used,
stored or disposed of in comparable office environments. The term "Hazardous
---------
Material" means (A) hazardous materials, contaminants, pollutants, constituents,
--------
medical wastes, hazardous or infectious wastes and hazardous substances as those
terms are defined or regulated under any Environmental Law, (B) petroleum,
including crude oil and any fractions thereof, (C) natural gas, synthetic gas
and any mixtures thereof, (D) asbestos and/or asbestos-containing material and
(E) polychlorinated biphenyls ("PCBs") or materials or fluids containing PCBs in
----
excess of 50 ppm.
3.10 Brokers. Except as set forth on Schedule 3.10, no agent, broker,
-------
investment banker, financial advisor or other Person is or will be entitled, by
reason of any agreement, act or statement by the Company, its Affiliates, or
their respective Representatives, to any financial advisory, broker's, finder's
or similar fee or commission in connection with the Transaction, and SPE, TGSC
and SPCV, jointly and severally, agree to indemnify and hold the Company,
Purchaser and their respective Affiliates and Representatives, harmless from and
against any and all claims, liabilities or obligations with respect to any other
fees, commissions, expenses or claims for indemnification or contribution
asserted by any other Person on the basis of any act or statement made or
alleged to have been made by the Company, its Affiliates, or their respective
Representatives in connection with the Transaction. SPE, TGSC and SPCV, jointly
and severally, shall be solely responsible for any amounts set forth on Schedule
3.10.
20
3.11 Tax Matters. Except as set forth on Schedule 3.11:
-----------
(a) For U.S. federal income tax purposes, the Company has not elected, and
will not make any election, to be treated as a corporation.
(b) All federal, state, local and foreign tax returns required to be filed
by or on behalf of, or in which is required to be reported the income, gains,
losses, deductions, or credits of, the Company and the Company Subsidiaries (and
their respective predecessors, if any) under the Code or any other applicable
statute ("Returns") have been or will be filed within the time prescribed by law
-------
(including extensions of time approved by the appropriate Governmental Entity).
Such Returns accurately and completely set forth or will accurately and
completely set forth in all material respects all liabilities for Taxes and any
other items (including, but not limited to, items of income, gain, loss,
deduction and credit) required to be reflected or included in such Returns.
(c) The Company has paid or will pay (or will cause to be paid), on a
timely basis, all Taxes of the Company and the Company Subsidiaries that are due
on or before the Closing Date (including, but not limited to, Taxes shown to be
due on the Returns described in the preceding paragraph), except those Taxes
that are being disputed in good faith.
(d) Adequate provision has been made in the Financial Statements for the
payment of Taxes payable by the Company and the Company Subsidiaries and due on
or after the Company Balance Sheet Date.
(e) No deficiencies or assessments have been asserted in writing by the
Internal Revenue Service ("IRS") or any other Governmental Entity with respect
---
to the Returns.
(f) There are no Liens for Taxes (other than for current Taxes not yet due
and payable) on the Company Interests or on any of the assets of the Company or
any of its Subsidiaries.
(g) There are no unsatisfied actual or proposed adjustments or assessments
for Taxes against the Company or any of the Company Subsidiaries or, to the
knowledge of SPE, any basis for any such assessment or adjustment.
(h) (i) There are no pending audits, actions, proceedings, disputes or
claims with respect to any Taxes payable by or asserted against the Company or
any of the Company Subsidiaries, (ii) to the knowledge of SPE, there is no basis
on which any claim for material Taxes can be asserted against the Company or any
of the Company Subsidiaries and (iii) the Company has not received notice from
any Governmental Entity of its intent to examine or audit any Returns of the
Company or any of the Company Subsidiaries.
21
(i) There are no outstanding agreements or waivers that would extend the
statutory period in which a taxing authority may assess or collect a Tax against
the Company or any of the Company Subsidiaries or for which the Company or any
of the Company Subsidiaries may be liable.
(j) (i) There are no tax sharing, allocation, indemnification, liability,
or similar agreements or arrangements in effect as between the Company, any of
the Company Subsidiaries, or any predecessor of any of them, and any other
Person and (ii) neither the Company nor any of the Company Subsidiaries (A) has
been a member of any affiliated group filing a consolidated federal income Tax
Return or (B) has any liability for Taxes of any Person under Treas. Reg. (S)
1.1502-6 (or any similar provision of state, local or foreign tax law), as
transferee or successor, by contract or otherwise.
(k) No closing agreement pursuant to section 7121 of the Code or any
similar provision of any foreign, state or local law has been entered into by
the Company or any of the Company Subsidiaries.
(l) No taxing authority has notified the Company, SPE or any of their
Subsidiaries that it will investigate or make further inquiries with respect to
any material liability of the Company or any of the Company Subsidiaries or any
Affiliate thereof for any Tax that could reasonably be expected to result in the
issuance by any taxing authority of a notice of deficiency or similar notice for
Taxes against the Company or any of the Company Subsidiaries.
(m) There are no requests for rulings, outstanding subpoenas or requests
for information with respect to Taxes of the Company or any of the Company
Subsidiaries, proposed reassessments of any assets or any property owned or
leased by the Company or any of the Company Subsidiaries, or similar matters
pending with respect to any taxing authority.
(n) Except for the United States, the State of Texas, the State of New
York, the State of Delaware and the State of California, there are no other
jurisdictions in which income or franchise tax returns and reports, and returns
and reports relating to the payment of Tax based upon the ownership or use of
property therein or the derivation of income therefrom or measured by premiums
or investments in tangible or intangible property, were, or were required to be,
filed by the Company or any of the Company Subsidiaries or in which the Company
or any of the Company Subsidiaries was required to be included and to which the
Company or any of the Company Subsidiaries would have a material tax liability.
(o) All Taxes required to be withheld or collected by the Company or any
of the Company Subsidiaries (including, but not limited to, Taxes required to be
withheld with respect to amounts paid or owing to any Representative or other
Person) have been timely withheld or collected and, to the extent required, have
been timely paid, remitted or deposited to or with the relevant Governmental
Entity.
22
(p) None of the Company Subsidiaries has filed a consent under Code (S)
341(f) concerning collapsible corporations.
For the purpose of this Agreement, the term "Tax" (including, with correlative
---
meaning, the terms "Taxes" and "taxable") shall include all federal, state,
local and foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise and other taxes, duties or
assessments of any nature whatsoever, together with all interest, penalties and
additions imposed with respect to such amounts.
3.12 Employee Matters. For purposes of this Section 3.12 any reference to
----------------
the Company shall include any Company Subsidiary.
(a) Schedule 3.12(a) contains a true and complete list of each "Employee
--------
Benefit Plan," within the meaning of section 3(3) of the Employee Retirement
------------
Income Security Act of 1974, as amended ("ERISA"), and each bonus, deferred
-----
compensation, incentive compensation, equity compensation, equity purchase,
equity option, equity appreciation rights, restricted equity, severance or
termination pay, fringe benefit, vacation, hospitalization, medical, life or
other insurance, supplemental unemployment benefits, profit-sharing, savings,
pension, retirement, or supplemental retirement plan, program, agreement or
arrangement which is not an Employee Benefit Plan, and each other employee
benefit plan, program, agreement or arrangement, sponsored, maintained or
contributed to or required to be contributed to at any time by the Company or by
any trade or business, whether or not incorporated, that is under common control
or that together with the Company would be deemed a "single employer" within the
meaning of Section 4001 of ERISA or Section 414(b), (c), (m) or (o) of the Code
("ERISA Affiliate"), for the benefit of any current or former employee, officer,
---------------
consultant, independent contractor or director of the Company, including any
such type of plan, program, agreement or arrangement established, maintained or
contributed to under the laws of any foreign country (collectively, the "Company
-------
Plans"). Schedule 3.12(a) identifies each Company Plan that is an Employee
-----
Benefit Plan. Except as set forth in Schedule 3.12(a), the Company has
previously delivered to Purchaser true and complete copies of (i) each Company
Plan and, if a Company Plan is funded through a trust or any third party funding
vehicle, a true copy of such trust or other funding document, (ii) the most
recent determination letter issued by the IRS with respect to each Company Plan
for which such a letter has been obtained, (iii) annual reports on IRS Form
5500, with all schedules, required to be filed with any Governmental Entity for
each Company Plan that is an Employee Benefit Plan for the three most recent
plan years, (iv) all actuarial reports and financial statements for the last two
plan years of each Company Plan and (v) the summary plan descriptions and other
materials and reports provided to participants, beneficiaries or any
Governmental Entity as required to comply with the Code, ERISA or other laws and
regulations with respect to the Company Plans. Neither the Company nor any ERISA
Affiliate has an announced plan or legally binding commitment to adopt,
establish or create any new or additional Company Plans or to materially modify
or change the benefits or other aspects of the Company Plans except as required
by law. Except as otherwise set forth in Schedule 3.12(a), each Company Plan can
be terminated or amended unilaterally by SPE on not more than 90 days' notice.
Notwithstanding the foregoing or any other provision of this Agreement to the
contrary, nothing in this Agreement shall limit SPE's right to amend, modify or
terminate any
23
Company Plan in whole or in part for any reason and at any time, subject to
subsection (l) of this Section 3.12. Since the LOI Date, there have been no
amendments to any Company Plan that materially increased the cost of
contributions to be made by the Company thereunder.
(b) No Company Plan that is a "single-employer plan" as defined in Section
3(41) of ERISA ("Single Employer Plan") is subject to Title IV of ERISA or
--------------------
Section 412 of the Code, and neither the Company nor any ERISA Affiliate made,
or was required to make, contributions for the benefit of any current or former
employee, officer, consultant, independent contractor or director of the Company
to any Employee Benefit Plan that is a Single Employer Plan subject to Title IV
of ERISA during the six-year period ending on the Closing Date. Except as set
forth in Schedule 3.12(b), none of the Company Plans is a "multiemployer plan,"
as defined in Section 3(37) of ERISA ("Multiemployer Plan") or a "multiple
------------------
employer pension plan" described in Section 4063 of ERISA. Neither the Company
nor any ERISA Affiliate has completely or partially withdrawn from any
Multiemployer Plan with respect to which the Company or any ERISA Affiliate has
any unsatisfied withdrawal liability, nor has any of them incurred any
unsatisfied liability due to the termination or reorganization of a
Multiemployer Plan and the withdrawal from any Multiemployer Plan will not
result in withdrawal liability to the Company or any ERISA Affiliate.
(c) All contributions and premiums required of the Company by any legal
requirement or by the terms of any Company Plan or any contract relating thereto
have been timely made (without regard to any waivers granted with respect
thereto) or accrued. All obligations of the Company with respect to each Company
Plan have been paid or performed. All such amounts properly accrued through the
Closing Date with respect to the current plan year thereof will be paid by the
Company on or prior to the Closing Date or will be properly recorded in the
Company's financial records. Each Company Plan that is a Single-Employer Plan
that utilizes a funding vehicle described in Section 501(c)(9) of the Code or is
subject to the provisions of Section 505 of the Code has been the subject of a
notification by the IRS that such funding vehicle qualifies for tax-exempt
status under Section 501(c)(9) of the Code and/or such Company Plan complies
with Section 505 of the Code, unless the IRS does not as a matter of policy
issue such notification with respect to that particular type of plan. Each such
Company Plan satisfies, where appropriate, the requirements of Sections
501(c)(9) and 505 of the Code. Except as set forth in Schedule 3.12(c), no
Company Plan is a voluntary employee's beneficiary association within the
meaning of Section 501(c)(9) of the Code.
(d) There has been no "reportable event," as that term is defined in
Section 4043 of ERISA and the regulations thereunder, with respect to any
Employee Benefit Plan subject to Title IV of ERISA that would require the giving
of notice or any material event requiring disclosure under Section 4041(c)(3)(C)
or 4063(a) of ERISA. There has been no event or circumstance that has resulted
in any actual or potential liability being asserted by any Company Plan, the
Pension Benefit Guaranty Corporation or any other Person or entity under Title
IV of ERISA against the Company or any ERISA Affiliate nor, to the knowledge of
SPE, after due inquiry is there or has there been any event or circumstance that
could reasonably be expected to result in such liability.
24
(e) The Company is in compliance in all material respects with all
applicable statutes, laws, ordinances, rules, regulations, judgments, orders or
decrees respecting the employment and employment practices (including, without
limitation, those relating to health and safety (other than the Environmental
Laws), hiring, promotion or pay of employees), terms and conditions of
employment and wage and hours of its employees and is not engaged in any unfair
labor practice. Except as set forth on Schedule 3.12(e), there is no labor
strike or labor disturbance pending or, to the knowledge of SPE, threatened
against the Company, and during the past five years the Company has not
experienced a work stoppage.
(f) No non-exempt "prohibited transaction" within the meaning of Code
Section 4975 or ERISA Section 406 has occurred with respect to any Company Plan
to which either of those sections may apply.
(g) Each Company Plan is currently and has been for the three years
preceding the Closing Date operated and administered in accordance with its
terms and applicable law, including, but not limited to, ERISA and the Code, and
to the knowledge of SPE, each Employee Benefit Plan intended to be "qualified"
within the meaning of section 401(a) of the Code is so qualified and the trust
or trusts maintained thereunder are exempt from taxation under section 501(a) of
the Code. To the knowledge of SPE, nothing has occurred with respect to the
operation of the Plans that could be expected to cause the loss of such
qualification or exemption or the imposition of any material liability, penalty
or tax under ERISA or the Code. All required reports and descriptions of each
Plan have been timely filed and distributed as required by ERISA and the Code.
(h) Except as set forth in Schedule 3.12(h), neither the Company nor any
Company Plan provides or previously provided welfare benefits, including death,
life, medical or health benefits (whether insured or uninsured), with respect to
current or former employees, officers, directors, or consultants beyond their
retirement or other termination of employment (other than continuation coverage
mandated by Section 4980B of the Code and Part 6 of Title I of ERISA).
(i) Except as set forth in Schedule 3.12(i), there are no pending,
threatened or anticipated material claims or proceedings (whether civil or
criminal) against any Company Plan, the assets of any Company Plan or the
Company, the plan administrator or fiduciary of any Company Plan or any officer,
director, employee or agent of the Company with respect to the operation of any
such plan, including, but not limited to, liability for a breach of fiduciary
duty under Section 409 of ERISA, conduct that would result in penalties under
Section 502(i) of ERISA, and any liability for premium payments for any
accumulated fiduciary deficiency as defined in Section 302 of ERISA or any
minimum funding contribution under Section 302 of ERISA (other than routine
benefit claims), and to the knowledge of SPE, there are no facts or
circumstances that could form the basis for any such claim or proceeding. No
lien imposed under Section 412(n) of the Code exists in favor of any Employee
Benefit Plan upon any property of the Company or an ERISA Affiliate.
25
(j) Schedule 3.12(j) sets forth a true and complete list as of the date
hereof of each of the following agreements, arrangements and commitments to
which the Company is a party or by which any of them may be bound (true and
complete copies of which previously have been made available to Purchaser): (i)
each collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization; (ii) each agreement with
any executive officer or other key employee of the Company, the benefits of
which are contingent, or the terms of which are materially altered, upon the
consummation of the Transaction; and (iii) each other material agreement or
Company Plan any of the benefits of which are contingent on or will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the Transactions or the value of any of the benefits of
which will be calculated on the basis of any of the Transaction. Except as set
forth in Schedule 3.12(j), the Company is not a party to any agreement,
arrangement, commitment or understanding that has resulted or would result, upon
the consummation of the Transaction or otherwise, separately or in the
aggregate, in the payment of any "excess parachute payment" within the meaning
of Section 280G of the Code.
(k) No consent, approval or other action by any participant in any Company
Plan is necessary in order to effect the Purchase.
(l) None of the Purchaser or its Affiliates shall have or acquire any
interest in or right with respect to any of the Company Plans. SPE and its
Affiliates and ERISA Affiliates will remain solely responsible for, and none of
the Purchaser or its Affiliates will have any liability under, relating to or
arising out of the Company Plans maintained by SPE or any
ERISA Affiliate; provided, however, if assets are transferred from any SPE
-------- -------
tax-qualified plan to any tax-qualified plan(s) sponsored by the Company (which
plans of the Company shall include any plans that may be adopted and maintained
by the Company subsequent to the date of this Agreement), the benefits, rights
and features of the SPE plan shall be preserved under the Company plan(s) to the
extent required by law. SPE expressly reserves the right to amend, modify or
terminate any employee benefit, benefit plan or program that it maintains in
accordance with the terms thereof and applicable law, including without
limitation, the terms of any Company Plan or any plan or program that covers SPE
employees who may be leased to the Company pursuant to the terms of any separate
agreement (regardless of whether or not such separate agreement is contemplated
under the terms of this Agreement or any Related Agreement); provided, however,
-------- -------
that SPE shall provide the Purchaser and the Company with prompt written notice
of any amendment, modification or termination of any such employee benefit,
benefit plan or program that will affect one or more SPE employees who are
leased to the Company.
3.13 Contracts; Debt Instruments. Schedule 3.13 sets forth a true and
---------------------------
complete list of each Contract (other than the Transaction Agreements and the
Related Agreements) to which the Company or any Company Subsidiary is a party or
by which it or they may be bound (directly or indirectly) (a) that contains a
covenant (i) by another party thereto not to compete with the Company or the
Company Subsidiaries or (ii) by the Company or any of the Company Subsidiaries
not to compete with others (other than Affiliation Agreements); (b) that is with
an
26
Affiliate of the Company or an "associate" (as such term is defined in Rule 12b-
2 under the Exchange Act) of the Company or any of the Company Subsidiaries,
other than agreements or arrangements that either individually or in the
aggregate are not material to the business and operations of the Company; (c)
with respect to Indebtedness for money borrowed (other than (i) trade payables
in the ordinary course of business or (ii) intercompany Indebtedness or loans
from Affiliates where the liability of the Company or the Company Subsidiaries
thereunder was terminated prior to the Closing without the payment by the
Company or the Company Subsidiaries of any consideration) or (iii) loans or
advances to employees for business expenses in the ordinary course of business
(consistent with past practice); (d) which constitutes an Intellectual Property
License; (e) which constitutes an employment, customary consulting, agency or
commission agreement (including material agreements with advertising agencies)
to which the Company or any of the Company Subsidiaries is a party or bound and
which (i) provides for severance payments, termination payments, change-in-
control payments or other similar payments in excess of $50,000, or (ii) is not
terminable upon 60 days' or less prior notice to the employee, consultant or
agent without penalty or payment (other than payment for prior work performed)
by the Company or the Company Subsidiaries or (iii) individually involves
unsatisfied or potential obligations of $50,000 or more as of January 1, 2001
except, in the case of clauses (ii) and (iii), for agreements with television
producers, third party talent and other third party vendors relating to
television production (which shall not include agreements with vendors
developing television programming included in Schedule 3.15(a)) (each such
agreement, a "Talent Agreement"); (f) which is an Affiliation Agreement,
----------------
including any amendments or modifications thereto or waivers of rights
thereunder (including those Affiliation Agreements required to be included in
Schedule 3.13(a)(ii), and other than Affiliation Agreements with cable
television or satellite television providers pursuant to which GSN Programming
is being distributed by such cable television or satellite television providers
to less than 50,000 subscribers); (g) for the acquisition, lease or servicing of
satellite transponders and other uplink arrangements (including maintenance);
(h) that is a collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization; (i) the benefits of
which are contingent, or the terms of which are materially altered, upon the
occurrence of the Transaction; (j) which is with any Governmental Entity; (k)
which individually is reasonably likely to involve the payment of consideration
of more than $200,000 over the remaining term of such Contract (except for
Talent Agreements) and which is not otherwise set forth on Schedule 3.13; (l)
which is a Talent Agreement and which individually is reasonably likely to
involve the payment of consideration of more than $500,000 over the remaining
term of such Contract; or (m) which constitutes a guarantee, make-well
agreement, surety contract, letter of credit, indemnity agreement (other than
the standard indemnification provisions of any Contract) or arrangement or
similar instrument, obligation or transaction which is material to the Company
and the Company Subsidiaries taken as a whole (the items referred to in clauses
(a) through (m) of this sentence being referred to herein as "Company Material
----------------
Contracts"). A true and complete copy of each Company Material Contract has been
---------
made available to Purchaser. Each Company Material Contract is a valid and
legally binding obligation of the Company or the Company Subsidiaries, whichever
is applicable, and is in full force and effect; all material obligations
required to be performed thereunder as of the date hereof by the Company or the
Company Subsidiaries, whichever is applicable, have been performed, and to the
knowledge of SPE, no other party to any Company Material Contract is in default
in any material respect under the terms thereof. Except as set forth in Schedule
3.13(n), neither the Company nor any Company
27
Subsidiary has received any notice of termination or of intent to terminate any
Company Material Contract.
3.14 Title to Properties. The properties and assets (other than
-------------------
intangible properties and assets) owned or leased by the Company and the Company
Subsidiaries are suitable and adequate for the conduct of their respective
businesses and operations. The Company and the Company Subsidiaries have good
and marketable title to, or valid leasehold interests in, all such material
properties and assets except for such as are no longer used or useful in the
conduct of their businesses or as have been disposed of in the ordinary course
of business and except for defects in title, easements, restrictive covenants
and similar encumbrances or impediments that, individually or in the aggregate,
are not material to the ownership or use of such properties. All such material
properties and assets, other than properties and assets in which the Company or
any of the Company Subsidiaries have leasehold interests, are free and clear of
all Restrictions, other than Permitted Restrictions.
3.15 Patents, Trademarks & Copyrights and Similar Rights. For
----------------------------------------------------
purposes of this Section 3.15 any reference to the Company shall include any
Company Subsidiary.
(a) Schedule 3.15(a) sets forth a complete and accurate list of (i) all
registrations and issued patents, or if a registration or patent has not been
issued, applications for patents and applications to register trademarks, trade
names, service marks, copyrights and domain names, and all extensions, renewals,
restorations and resuscitations thereof, filed by or on behalf of the Company,
(ii) all television programming, all games and, to the extent not listed by
their respective titles, all titles to each (for purposes of this Section 3.15,
all references to television programming and/or games includes the titles
thereof) that are (x) owned by, or (y) licensed to the Company; (iii) all
television programming and all games that are currently in development for or in
any medium to the extent such television programming or such games are being
developed (x) pursuant to a written development agreement or other instrument
sufficient to evidence the Company's ownership interest therein, or (y) by a
third party to whom the Company, or any Company Subsidiary is providing
consideration for such development; it being understood that this clause (iii)
does not include any television programming or game being developed internally
by the Company without a material development expense in excess of normal
employee compensation, (iv) all agreements relating to material computer
software and applications (and all computer software where no agreements exist
with respect to such computer software) that are (x) owned by or (y) licensed to
the Company (other than retail or generally available computer software and
applications licensed by the Company pursuant to ordinary commercial terms
generally referred to as click-wrapped or shrink-wrapped software) that are
included in the Intellectual Property and (v) (A) all agreements under which any
Intellectual Property is licensed to the Company in the case of Intellectual
Property not owned by the Company, and (B) all agreements under which any
Intellectual Property is licensed by the Company to any Person other than
agreements under which any Intellectual Property is licensed by the Company only
in connection with marketing or promotional efforts which are not primarily for
compensation (collectively, the "Intellectual Property Licenses"), indicating
------------------------------
the parties to such agreement.
28
(b) Except (x) as set forth on Schedule 3.15(b) and (y) for monies which
are payable to collecting societies, performing rights societies, music
publishers, collective bargaining organizations, trusts established under
collective bargaining agreements, or by performing rights societies, and
Restrictions held by or for the benefit of the foregoing or the beneficiaries
thereof, with regard to the Intellectual Property set forth on Schedule 3.15(a)
that is (i) owned by the Company, the Company has good and valid title thereto
free and clear of all Restrictions or (ii) held by the Company under license,
use by the Company of such Intellectual Property is free from any Restriction or
obligation except to the extent provided for in the relevant Intellectual
Property License or as may be caused by a default by the licensor under the
relevant Intellectual Property License or any third party licensor in any
license to a licensor under an intellectual property license for intellectual
property subject to an Intellectual Property License. Neither SPE nor the
Company is in material default under any Intellectual Property License, and to
the knowledge of SPE, no third party licensor is in material default under such
license to SPE or the Company which is the subject of the Intellectual Property
licensed under an Intellectual Property License.
(c) The Company has, or SPE on behalf of the Company has, filed
applications for all inventions that the Company owns or controls that satisfy
the provisions of 35 U.S.C. (S)(S) 101, 102 and 103 (or the Canadian equivalent)
and all trademarks that the Company owns or controls that are material to the
Company's current business with the U.S. Patent and Trademark Office, and all
original works of authorship fixed in a tangible medium of expression that the
Company owns or has produced that are material to the Company's current
business, with the U.S. Copyright Office, where, in the exercise of the
Company's or SPE's reasonable business judgment exercised at the time of
creation or acquisition of such invention, trademark or original work of
authorship, as applicable, the Company, or SPE, on behalf of the Company,
determined it was appropriate to do so. Except as set forth in Schedule
3.15(c), with respect to registered copyrights, trademarks and service marks
owned by the Company or SPE or any of SPE's Controlled Affiliates and licensed
to the Company, and issued patents which are owned by the Company or owned by
SPE or any of SPE's Controlled Affiliates and licensed to the Company, the
Company, SPE or SPE's Controlled Affiliates have taken such efforts as are
commercially reasonable to maintain the registrations and issued patents under
applicable laws or regulations, and such registrations and issued patents remain
in full force and effect. Except as set forth on Schedule 3.15(c), to the
knowledge of SPE, none of the television programs or games (excluding the titles
thereto) included in the Intellectual Property and owned or produced by the
Company that are material to the Company's current business have fallen into the
public domain and none of the Company's trademark rights in and to the titles of
such television programs and such games have been abandoned (except as may occur
solely by the Company's failure to continue broadcasting, distributing or
otherwise publicly exploiting such television programs and games), nor has the
term of protection of any of the copyrights owned or with respect to television
programming and games owned or produced by the Company and included in
Intellectual Property and material to the Company's business expired under the
laws of the United States or Canada. For purposes of clarification of the
foregoing, the description `owned or produced by the Company' does not include
any television program or game licensed to the Company. Except as set forth in
Schedule 3.15(c), to the knowledge of SPE, with respect to the Intellectual
Property rights owned by the Company or owned by SPE or any of SPE's Controlled
Affiliates and licensed to the Company which have been applied for or filed with
the relevant Governmental Entities and which have not been registered or issued
by such relevant
29
Governmental Entities, there have not been (i) any allegation by a third party
or relevant Governmental Entity, or (ii) any facts to indicate, that such
Intellectual Property rights are not entitled to the registration or issuance by
the relevant Governmental Entities and SPE has taken reasonable steps to
prosecute such applications for such registrations. The Company, in the ordinary
course of business, has taken reasonable steps to secure from all consultants
and contractors who contribute, have contributed or shall contribute to the
creation or the development of any material Intellectual Property of the Company
valid written assignments to the Company of such Person's rights to any
contribution which the Company does not own by operation of law, it being
understood that no representation is made that the Company has been successful
in obtaining such written assignment from all consultants and independent
contractors. It is the Company's policy to enforce such an assignment to the
extent such an assignment is contained in any written agreement. SPE has a
written policy regarding the treatment of confidential information of the
Company that was previously provided to the Purchaser. To the knowledge of SPE,
there are no unauthorized uses, disclosures or infringements of any part of any
Intellectual Property of the Company that is material to the Company's business.
The Company has received no claim that the Company has misappropriated the trade
secrets of any third party.
(d) Except as disclosed in Schedule 3.15(d): (i) to the knowledge of SPE,
the Company's activities, products and services (including the Company's
Intellectual Property), as presently conducted, do not infringe upon or
otherwise violate the Intellectual Property rights of any other Person; (ii) (x)
there are no claims or suits pending, (y) there has not been notice provided or,
(z) to the knowledge of SPE, any claims threatened, alleging that the Company or
any of its activities, products or services infringe upon or constitute the
unauthorized use of any other Person's intellectual property, or challenging the
Company's ownership of, right to use, or the validity or enforceability or
effectiveness of any license relating to any Intellectual Property of the
Company; (iii) to the knowledge of SPE, none of the Intellectual Property of the
Company is (x) being infringed or violated by any Person or (y) (i) being used
or (ii) available for use by any other Person (except in the case of clauses (i)
or (ii) of this subsection (y), pursuant to the Intellectual Property Licenses,
or as allowed under applicable law); (iv) none of the Company, SPE or SPE's
Controlled Affiliates have filed a claim against, provided notice to or taken
any other action against any Person claiming the infringement, violation, or
unauthorized use by any Person of any Intellectual Property owned by the Company
or licensed to the Company; and (v) (w) the consummation of the Conversion did
not, (x) the execution and delivery of this Agreement by the Company, SPE, SPCV
and TGSC does not, (y) the execution and delivery of the Transaction Agreements
to which any of them is to be a party will not, and (z) the consummation of the
Transaction and compliance with the provisions of this Agreement and the
Transaction Agreements to which it is a party will not, result in the loss of
any rights in any Intellectual Property of the Company.
3.16 Dealings with Officers and Directors; Sony Services. No director
---------------------------------------------------
or officer (at the level of senior vice president or above) of SPE, the Company
or any of their respective Controlled Affiliates (each such director or officer,
a "Covered Person") has any material interest in any material assets or
--------------
properties (whether real or personal, tangible or intangible) of or used in the
business of the Company or any Company Subsidiary except as set
30
forth in Schedule 3.16. Except (x) as set forth in Schedule 3.16(a), (y) for
those employment agreements listed on Schedule 3.13(f)(i) and (z) loans to
employees pursuant to the SPE Savings and Profit Sharing Plan set forth on
Schedule 3.12(a), there exist no Contracts or other liabilities or obligations
between the Company or any of the Company Subsidiaries, on the one hand, and any
Covered Person, on the other hand, except for Contracts or other liabilities or
obligations entered into in the ordinary course consistent with past practice as
part of the employment or director relationship between the Company or any of
the Company Subsidiaries, on the one hand, and the Covered Person on the other
hand. Except as set forth in Schedule 3.16, neither the Company nor any of the
Company Subsidiaries provides or causes to be provided goods or services to any
Covered Person (other than the provision of goods and services as part of the
Company's ordinary course of business). There are no (x) losses, claims,
damages, costs, expenses, liabilities or judgments currently outstanding or (y)
claims or actions currently pending which would reasonably be expected to result
in any losses, claims, damages, costs, expenses, liabilities or judgments in
each case which would entitle any Covered Person to indemnification by the
Company or the Company Subsidiaries under applicable law, the organizational
documents of the Company or any of the Company Subsidiaries or pursuant to any
(i) insurance policy maintained by or on behalf of the Company or any of the
Company Subsidiaries or (ii) Contracts to which the Company or any of the
Company Subsidiaries is a party or by which it or their properties are bound. To
the knowledge of SPE, other than as reflected on Schedule 3.16, no spouse or
minor child of a Covered Person has any (x) employment, consulting, independent
contractor or similar arrangement or Contract with the Company or any of the
Company Subsidiaries or (y) interest in any assets or property (whether real or
personal, tangible or intangible) of or used in the business of the Company or
the Company Subsidiaries, in each case, which was not entered into (i) in the
ordinary course of the Company's business and (ii) based upon market terms.
3.17 No Excise Tax Obligations. The Company does not have any
-------------------------
obligation to make payments to any past or present employees of the Company or
the Company Subsidiaries or Affiliates as a result of the imposition of any
excise taxes pursuant to Section 4999 of the Code or the imposition of any
excise or similar taxes pursuant to any similar provision of state or local law.
3.18 Full Disclosure. The representations and warranties of SPE, TGSC
---------------
and SPCV in this Agreement and the statements contained in the schedules to be
furnished by or on behalf of the Company, SPE, TGSC and SPCV to the Purchaser
pursuant to this Agreement, when considered as a whole do not and will not
contain any untrue statement of a material fact and do not and will not omit to
state any material fact necessary to make the statements herein or therein not
misleading, in light of the circumstances in which they were made.
3.19 Cable Subscribers. Schedule 3.19(a) sets forth a complete list
-----------------
of the sixteen largest individual MSOs, ranked by number of subscribers to which
GSN Programming is distributed as of the date set forth in such Schedule (each
such MSO, a "Material MSO"), listing opposite such MSO's name the date of such
------------
MSO's most current subscriber report delivered to the Company, SPE or any
Controlled Affiliate of SPE (each such report, an "MSO
---
31
Report"), and the period covered by each such MSO Report. The Company has
------
provided true and complete copies of such MSO Reports to Purchaser. The Company
has been fully paid in accordance with such MSO Reports, subject to minor
adjustments made, from time to time, in the ordinary course of business which
adjustments, individually or in the aggregate, will not have a material adverse
effect upon the reported revenues of the Company. To the knowledge of SPE, the
MSO Reports do not contain any errors or misstatements, other than adjustments
which, individually or in the aggregate, will not have a material adverse effect
upon the reported revenues of the Company. To SPE's knowledge, since the date of
each MSO Report listed on Schedule 3.19(a), the aggregate number of subscribers
covered by the MSO Reports listed on Schedule 3.19(a) has not materially
decreased.
3.20 Company Territories. Other than in the United States, Canada and
-------------------
those locations listed on Schedule 3.20 (the "Company Territories"), there are
-------------------
no other locations in which GSN Programming is distributed over a Covered
System.
3.21 Contribution of Indebtedness; Book Up of Assets. Prior to the
-----------------------------------------------
Closing, neither the Company nor any Company Subsidiary was obligated with
respect to any Indebtedness in favor of Persons other than SPE and its
Affiliates. Prior to the Closing, SPE and its Affiliates contributed to the
capital of the Company the then-existing balance (both principal and interest)
of any and all outstanding Indebtedness of the Company or the Company
Subsidiaries owed to any of them, and any instrument or other evidence of such
indebtedness was terminated and SPE and its Affiliates released the Company and
the Company Subsidiaries from any and all obligations or liabilities related
thereto. Accordingly, as of the date hereof, neither the Company nor any Company
Subsidiary has any outstanding third party Indebtedness. In connection with the
capital contribution of such Indebtedness by SPE and its Affiliates, and in
accordance with Section 1.704-1(b)(2)(iv)(f) of the Treasury Regulations, the
Company adjusted the capital accounts of TGSC and SPCV to reflect a revaluation
of the assets of the Company as shown on the Company's books to the fair market
values of such assets as of the date of such contribution.
3.22 Dissolution/Conversion of Subsidiaries. SPE, TGSC, SPCV and the
--------------------------------------
Company have taken all action necessary in accordance with applicable law to
cause each of the Company Subsidiaries that was a corporation for U.S. federal
income tax purposes to be liquidated or converted into a single member limited
liability company which is disregarded as an entity separate from its owner
within the meaning of Section 301.7701-3(b)(1)(ii) of the Treasury Regulations.
As of the date hereof, no Company Subsidiary is classified as a corporation for
U.S. federal income tax purposes, and the Company has not made any election to
cause any Company Subsidiaries to be treated as a corporation for U.S. federal
income tax purposes on or after the Closing Date.
32
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SPE, TGSC AND SPCV
Each of SPE, TGSC and SPCV hereby, jointly and severally, represents
and warrants to Purchaser and Purchaser Sub as follows:
4.1 Organization and Qualification. (a) Each of SPE and SPCV is a
------------------------------
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware. TGSC is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of California. Each of
SPE, TGSC and SPCV (i) has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted and (ii) is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the ownership or lease of its properties
or the conduct of its business makes such qualification necessary, other than in
such jurisdictions where the failure to be so duly qualified (individually or in
the aggregate) would not have a SPE Material Adverse Effect. Each of TGSC and
SPCV is an indirect wholly owned Subsidiary of SPE.
(b) Each of TGSC and SPCV has made available to Purchaser true and
complete copies of such parties' Articles or Certificates of Incorporation and
By-Laws, as amended through and in effect on the date hereof.
4.2 Authorization; Validity of Agreement; Sony Approval. Each of SPE,
---------------------------------------------------
TGSC and SPCV has all requisite power and authority to execute this Agreement
and the other Related Agreements to which it is a party, to sell, assign and
transfer the Purchased Interests to Purchaser as provided herein, and to carry
out and perform its obligations under this Agreement and such Related Agreements
and to consummate the Transaction. The execution, delivery and performance by
each of SPE, TGSC and SPCV of this Agreement and the other Related Agreements to
which it is a party, and the consummation of the Transaction (including the sale
and delivery of the Purchased Interests) by each of SPE, TGSC and SPCV have been
duly and validly authorized by all necessary corporate action. No other action
is necessary for the authorization, execution, delivery or performance by each
of SPE, TGSC and SPCV of this Agreement, the Related Agreements to which it is a
party and the consummation of the Transaction. This Agreement and the Related
Agreements to which it is a party have been duly executed and delivered by each
of SPE, TGSC and SPCV, and, assuming that this Agreement and such other Related
Agreements are duly executed and delivered by each of the other parties thereto
that is not an Affiliate of SCA, this Agreement and each Related Agreement to
which it is a party constitutes the valid and binding obligations of each of
SPE, TGSC and SPCV, enforceable against each of SPE, TGSC and SPCV in accordance
with its terms (except insofar as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally, or by principles governing the availability of
equitable remedies).
4.3 Conversion. Each of SPE, TGSC and SPCV has taken such actions as
----------
are necessary to cause (a) all of LP's assets, businesses, liabilities and other
rights, benefits and
33
obligations to be transferred to LLC and (b) those entities referred to in
Schedule 4.3 to be contributed to the LLC (in the manner described in Schedule
4.3) (collectively, the "Conversion"). The Persons listed on Schedule 4.3 are
----------
referred to herein collectively as Company Subsidiaries and no Company
Subsidiary will be deemed a Controlled Affiliate of SPE for purposes of this
Agreement. As a result of the Conversion, the LLC on a consolidated basis with
the Company Subsidiaries has succeeded to all of the assets, businesses,
liabilities and other rights, benefits and obligations of LP and the entities
referred to in Schedule 4.3 immediately prior to the Conversion.
4.4 Noncontravention. (i) The execution and delivery of this
----------------
Agreement by each of SPE, TGSC and SPCV does not, (ii) the execution and
delivery of each Related Agreement to which any of SPE, TGSC or SPCV is a party
do not, and (iii) the consummation of the Transaction and compliance with the
provisions of this Agreement and the Related Agreements to which any of SPE,
TGSC or SPCV is a party will not, conflict with, or result in any violation of,
default or breach (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation or acceleration of any
obligation or to loss of a material benefit under, or result in the creation of
any Restriction upon any of the properties or assets of SPE or any of its
Subsidiaries (excluding the Company) under (any such conflict, violation,
default, breach, right of termination, cancellation or acceleration, loss or
creation, a "SPE Violation"), (w) the organizational documents of SPE or the
-------------
organizational documents of any of its Subsidiaries (other than the Company),
(x) any Material Contract or Company Plan to which SPE or any of its
Subsidiaries is a party or by which any of their respective properties or assets
utilized in connection with the business of the Company and the Company
Subsidiaries are bound or affected, other than SPE Violations which are
immaterial in nature or which would not materially affect SPE's rights
thereunder, where such SPE Violation would, individually or in the aggregate,
(1) prevent or materially delay consummation of the Transaction, (2) otherwise
prevent or materially delay SPE or any of its Subsidiaries (other than the
Company) from performing their material obligations under such Contracts or
Company Plans or the Related Agreements to which any of them is a party or (3)
have, either individually or in the aggregate, an effect upon SPE, its
Subsidiaries (other than the Company) or the Company which would constitute a
Company Material Adverse Effect, (y) any judgment, order or decree of any
Governmental Entity applicable to SPE or any of its Subsidiaries (other than the
Company) or any of their respective properties or assets utilized in connection
with the business of the Company and the Company Subsidiaries or (z) any
statute, law, ordinance, rule or regulation of any Governmental Entity
applicable to SPE or any of its Subsidiaries or their respective properties or
assets utilized in connection with the business of the Company and the Company
Subsidiaries where such SPE Violation under any such statute, law, ordinance,
rule or regulation would, individually or in the aggregate, prevent or
materially delay any of SPE, its Subsidiaries or the Company from performing
their material obligations under this Agreement or any Related Agreements to
which they are to be parties or have an effect upon SPE or the Company which
would constitute a Company Material Adverse Effect. Assuming the accuracy of the
last two sentences of Section 5.7, no Governmental Consents and Filings are
required by or with respect to SPE or any of its Subsidiaries (other than the
Company) in connection with the execution and delivery of this Agreement or the
Transaction Agreements to which it is a party or the consummation of the
Transaction, other than (i) the filing with the Federal Communications
Commission set forth on Schedule 3.6(b) or (ii) where (x) the failure to obtain
any such
34
authorization, consent or approval or (y) the failure to make any such filing,
would not, individually or in the aggregate, have an effect upon SPE, its
Subsidiaries or the Company which would constitute a Company Material Adverse
Effect. Without limiting the foregoing, assuming the accuracy of the last
sentence of Section 5.4, neither the sale of the Purchased Interests by SPCV and
TGSC to Purchaser nor the acquisition by SPCV and TGSC of the Shares will
require any filing by the "ultimate parent entity" (as such term is defined in
16 C.F.R. (S)801.1(a)(3)) of SPE or the Company pursuant to the HSR Act and the
rules and regulations thereunder.
4.5 Legal Proceedings. There is no suit, action, proceeding or
-----------------
investigation pending or, to the knowledge of SPE threatened, against, involving
or affecting SPE or any Subsidiary (other than the Company) of SPE or any of its
or their properties or rights, which, if adversely determined, is reasonably
likely to have, either individually or in the aggregate, an effect upon SPE or
the Company which would constitute a Company Material Adverse Effect. There is
no judgment, decree, injunction, ruling or order of any Governmental Entity
applicable to SPE or any of its Subsidiaries (other than the Company) or any of
their respective properties or rights that relates to this Agreement, the
Transaction Agreements to which any of them is a party or the Transaction that
would, individually or in the aggregate, prevent or materially delay
consummation of the Transaction or otherwise prevent or materially delay the
Company, SPE and its Subsidiaries from performing their obligations under the
Transaction Agreements or has, or is reasonably likely to have, either
individually or in the aggregate, an effect upon SPE or the Company which would
constitute a Company Material Adverse Effect. There is no action, suit,
proceeding or investigation pending or, to the knowledge of SPE, threatened
against SPE, SPCV, the Company or their Affiliates that seeks to restrain,
enjoin or delay the consummation of the Transaction or that seeks damages in
connection therewith and no temporary restraining order, preliminary or
permanent injunction or other order issued by any Governmental Entity of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Transaction as herein provided is in effect.
4.6 No Other Game Show Interests. Other than its interests in the
----------------------------
Company, neither SPE nor any of its Controlled Affiliates (other than the
Company) are engaged in or have any direct Investment in any Person (other than
an Investment in the publicly traded securities of any Person constituting less
than 5% of the outstanding securities of such class of securities) that is
engaged in a business substantially similar to the business of the Company as
currently being conducted (a "Similar Business").
----------------
4.7 Investment Purpose. SPCV and TGSC are each acquiring the Shares
------------------
solely for the purpose of investment and not with a view to, or for offer or
sale in connection with, any distribution thereof in any transaction which would
be in violation of the securities laws of the United States or any state
thereof. Each of TGSC and SPCV understands that the Shares have not been
registered under the Securities Act or applicable state and other securities
laws by reason of a specific exemption from the registration provisions of the
Securities Act and applicable state and other securities laws, the availability
of which depends upon, among other things, the bona fide nature of the
investment interest and the accuracy of this representation. Each of SPCV and
TGSC is an "accredited investor" within the meaning of Rule 501 of
35
Regulation D promulgated under the Securities Act. SPCV and TGSC understand that
the certificate representing the Shares will contain legends stating in
substance:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR UNDER ANY STATE SECURITIES LAW, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND PURSUANT TO THE
PROVISIONS OF ANY APPLICABLE STATE SECURITIES LAWS COVERING
SUCH SECURITIES OR UNLESS THE CORPORATION RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES,
REASONABLY SATISFACTORY TO THE CORPORATION, STATING THAT
SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS
OF THE ACT AND THE PROVISIONS OF ANY APPLICABLE STATE
SECURITIES LAWS.
THE SALE, TRANSFER OR OTHER DISPOSITION OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF THE MEMBERSHIP INTEREST PURCHASE AGREEMENT,
DATED FEBRUARY 23, 2001, COPIES OF SUCH AGREEMENT MAY BE
OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE
CORPORATION."
SPCV and TGSC each understands and acknowledges that Purchaser will
deliver unlegended certificates in exchange for the certificate bearing such
legend only in the event that such transfer is done in compliance with the terms
of this Agreement and that (i) such transferring party transfers shares
represented by such certificate pursuant to and in the manner provided for in an
effective registration statement covering the transfer or sale of such shares or
(ii) SPCV or TGSC, as applicable, shall have delivered to Purchaser a letter
from the staff of the Commission, or an opinion of counsel in form and substance
satisfactory to Purchaser, to the effect that such legend is not required for
the purposes of the Securities Act.
4.8 Brokers. Except as set forth on Schedule 4.8, no agent, broker,
-------
investment banker, financial advisor or other Person is or will be entitled, by
reason of any agreement, act or statement by SPE, TGSC, SPCV, their respective
Affiliates or any of their respective Representatives, to any financial
advisory, broker's, finder's or similar fee or commission in connection with the
Transaction, and SPE, TGSC and SPCV, jointly and severally, agree to indemnify
and hold the Company, Purchaser and their respective Subsidiaries and Affiliates
and the Representatives of each harmless from and against any and all claims,
liabilities or obligations with respect to any fees, commissions, expenses or
claims for indemnification or
36
contribution asserted by any other Person on the basis of any act or statement
made or alleged to have been made by SPE or any of its Subsidiaries or
Affiliates or any of their Representatives, in connection with the Transaction.
SPE, TGSC and SPCV, jointly and severally, shall be solely responsible for any
amounts set forth on Schedule 4.8 and shall indemnify the Company, Purchaser and
Purchaser Sub for any such amounts.
4.9 Ultimate Parent Entity. Sony is the "ultimate parent entity" of
----------------------
SPCV and TGSC, as that term is defined in 16 C.F.R. (S)801.1(a)(3). The
acquisition of the Shares by SPCV and TGSC is being made solely for the purpose
of investment (as the phrase "solely for the purpose of investment" is defined
in 16 C.F.R. (S)801.1(i)(1)). Assuming the accuracy of the last sentence of
Section 5.4, as a result of such acquisition, Sony, together with all entities
that it controls (as the term "control" is defined in 16 C.F.R. (S)801.1(b)),
will hold ten percent or less of the outstanding voting securities of Purchaser
(as determined pursuant to 16 C.F.R. (S)801.12).
4.10 SPE Knowledge. Other than the Persons listed on Schedule 1.3
-------------
(each a "Knowledge Employee"), there are no Persons who are directors, officers
------------------
or employees of SPE, the Company or any of their respective Controlled
Affiliates, who by virtue of their duties and responsibilities, are reasonably
likely to have actual knowledge with respect to those matters reflected in the
representations of SPE which are qualified by SPE's knowledge in Articles III
and IV hereof which knowledge is not also possessed by any of the Knowledge
Employees.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND PURCHASER SUB
Purchaser and Purchaser Sub hereby represents and warrants to SPE, SPCV and
TGSC as follows:
5.1 Organization and Qualification. (a) Each of Purchaser and
------------------------------
Purchaser Sub is a corporation duly incorporated, validly existing and is in
good standing under the laws of the State of Delaware. Each of Purchaser and
Purchaser Sub (i) has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted
and (ii) is duly qualified or licensed to do business and is in good standing in
each jurisdiction in which the ownership or lease of its properties or the
conduct of its business makes such qualification necessary, other than in such
jurisdictions where the failure to be so duly qualified (individually or in the
aggregate) would not have a Purchaser Material Adverse Effect. Purchaser Sub is
a wholly owned Subsidiary of Purchaser.
(b) Purchaser Sub has not engaged, directly or indirectly, in any
business or activity of any type or kind, or entered into any agreement or
arrangement with any person or entity, and is not subject or bound by any
obligation or undertaking, other than any of the foregoing entered into or
engaged in by Purchaser Sub (i) in connection with its formation or (ii)
37
in connection with, pursuant to or as contemplated by this Agreement and the
Transaction Agreements.
(c) Each of Purchaser and Purchaser Sub has made available to SPE
true and complete copies of such parties' Certificate of Incorporation and By-
Laws, as amended through and in effect on the date hereof.
5.2 Authorization and Validity of Agreement. (a) Purchaser has all
---------------------------------------
requisite power and authority to execute this Agreement and the other Related
Agreements to which it is a party, to issue and deliver the Shares to SPCV and
TGSC as provided herein and to carry out and perform its obligations under this
Agreement and such other Related Agreements to which it is a party and to
consummate the Transaction. The execution, delivery and performance by Purchaser
of this Agreement and the other Related Agreements to which it is a party, and
the consummation of the Transaction (including the delivery of the Cash
Consideration to SPCV and TGSC and the issuance and delivery of the Shares to
SPCV and TGSC) have been duly and validly authorized by all necessary corporate
action and no other action is necessary for the authorization, execution,
delivery or performance by Purchaser of this Agreement, the other Related
Agreements to which it is a party and the consummation of the Transaction. This
Agreement has been, and each of the other Related Agreements to which it is a
party will be, duly executed and delivered by Purchaser, and, assuming that this
Agreement and such other Related Agreements are duly executed and delivered by
each of the other parties thereto that is not an Affiliate of Purchaser, this
Agreement constitutes, and each other Related Agreement to which it is a party,
when executed and delivered by Purchaser will constitute, the valid and binding
obligation of Purchaser enforceable against Purchaser in accordance with its
terms (except insofar as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally, or by principles governing the availability of equitable
remedies).
(b) Purchaser Sub has all requisite power and authority to execute
this Agreement and the other Related Agreements to which it is a party and to
perform its obligations under such Related Agreements and to consummate the
Transaction. The execution, delivery and performance by Purchaser Sub of this
Agreement, the Related Agreements to which it is a party, and the consummation
of the Transaction have been duly and validly authorized by all necessary
corporate action and no other action is necessary for the authorization,
execution, delivery or performance by Purchaser Sub of this Agreement and the
Related Agreements to which it is a party and the consummation of the
Transaction. Each of this Agreement and the other Related Agreements to which it
is a party will be duly executed and delivered by Purchaser Sub, and, assuming
that such other Related Agreements are duly executed and delivered by each of
the other parties thereto that is not an Affiliate of Purchaser, this Agreement
and each other Related Agreement to which it is a party when executed and
delivered by Purchaser Sub will constitute, the valid and binding obligation of
Purchaser Sub enforceable against Purchaser Sub in accordance with its terms
(except insofar as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally, or by principles governing the availability of equitable
remedies).
38
5.3 Capitalization. At the date hereof, the authorized capital stock
--------------
of Purchaser consists of (a) 1,000,000,000 shares of Series A CommonStock , (b)
750,000,000 shares of the Series B Common Stock, par value $.01 per share (the
"Series B Common Stock", and together with the Series A Common Stock, the
---------------------
"Purchaser Common Stock") and (c) 5,000,000 shares of Preferred Stock, par value
----------------------
$.01 per share (the "Purchaser Preferred Stock"). As of the close of business on
-------------------------
December 31, 2000: (i) 31,004,944 shares of Series A Common Stock and
171,950,167 shares of Series B Common Stock were issued and outstanding,
2,642,202 shares of Series A Common Stock and no shares of Series B Common Stock
were reserved for issuance upon exercise of outstanding stock options, warrants
and other common stock-based equity compensation plans, and no shares of
Purchaser Common Stock were held (x) by Purchaser in its treasury or (y) by any
Subsidiary of Purchaser; (ii) (x) 150,000 shares of Purchaser Preferred Stock
have been designated as "Convertible Preferred Stock, Series C" (the "Series C
--------
Preferred Stock"), of which 150,000 shares were issued and outstanding and held
---------------
by LMC and (y) an indeterminate number of shares of Purchaser Preferred Stock
have been designated as "Preferred Stock, Series D" (the "Series D Preferred
------------------
Stock"), of which 10,223.859 shares were issued and outstanding and held by LMC,
-----
and (z) no other shares of Purchaser Preferred Stock were issued or outstanding
or held by Purchaser in its treasury or by any Subsidiary of Purchaser; and
(iii) 25,751,073 shares of Series B Common Stock were reserved for issuance upon
conversion of shares of Series C Preferred Stock. All issued and outstanding
shares of Purchaser Common Stock, Series C Preferred Stock and Series D
Preferred Stock have been validly issued and are fully paid and nonassessable,
are not subject to and have not been issued in violation of any preemptive
rights and have not been issued in violation of any Federal or state securities
laws. Except as set forth in the Purchaser Commission Filings (as defined below)
or on Schedule 5.3, there are not as of the date hereof, any outstanding or
authorized Rights to or by which Purchaser or any of its Subsidiaries is a party
or is bound which, directly or indirectly, obligate Purchaser or any of its
Subsidiaries to issue, deliver or sell or cause to be issued, delivered or sold
any shares of Purchaser Common Stock or Purchaser Preferred Stock or any other
capital stock or equity interest of Purchaser or any securities convertible
into, or exercisable or exchangeable for, or evidencing the right to subscribe
for, any such shares or interests, or obligating Purchaser or any of its
Subsidiaries to grant, extend or enter into any of the foregoing. Except as set
forth in the Purchaser Commission Filings or on Schedule 5.3, neither Purchaser
nor any of its Subsidiaries has adopted, authorized or assumed any plans,
arrangements or practices for the benefit of its officers, employees or
directors which require or permit the issuance, sale, purchase or grant of any
capital stock or other equity interests of Purchaser or any other securities
convertible into, or exercisable or exchangeable for, any such stock or
interests or any phantom shares, phantom equity interests or stock or equity
appreciation rights. All of the shares of capital stock of each corporate
Subsidiary of Purchaser are validly issued, fully paid and nonassessable.
5.4 Issuance of Shares. The Shares have been duly authorized, and,
------------------
upon issuance and delivery against payment therefor in accordance with the terms
and conditions of this Agreement, will be validly issued, fully paid and non-
assessable, will be free of any Restrictions of any kind whatsoever (except (i)
as provided in this Agreement and the Transaction Agreements and (ii) to the
extent created by SPE or its Affiliates) and will not be issued in violation of
any Rights or, assuming the accuracy of Section 4.7, in violation of any federal
or state securities laws. The issuance and delivery of the Shares to SPCV and
TGSC will
39
not be subject to any rights of first offer, first refusal, tag-along rights or
other similar rights or restrictions. Assuming that the aggregate number of
Shares to be issued as Stock Consideration does not exceed 3,000,000 shares, the
Shares will represent ten percent or less of the outstanding voting securities
of Purchaser (as determined pursuant to 16 C.F.R. (S) 801.12).
5.5 Reports and Financial Statements. Purchaser has heretofore made
--------------------------------
available to SPE true and complete copies of all reports, registration
statements, definitive proxy statements and other documents (in each case
together with all amendments and supplements thereto) filed by Purchaser with
the Commission since January 1, 2000 (such reports, registration statements,
definitive proxy statements and other documents, together with any amendments
and supplements thereto, are collectively referred to as the "Purchaser
---------
Commission Filings"). The Purchaser Commission Filings constitute all of the
------------------
documents (other than preliminary material) that Purchaser (or its predecessor)
was required to file with the Commission since such date. As of their respective
dates, each of the Purchaser Commission Filings complied in all material
respects with the applicable requirements of the Securities Act or the Exchange
Act, as applicable, and the rules and regulations thereunder, and none of the
Purchaser Commission Filings contained as of such date any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. When filed with the Commission, the
financial statements included in the Purchaser Commission Filings complied as to
form in all material respects with the applicable rules and regulations of the
Commission and were prepared in accordance with generally accepted accounting
principles (as in effect from time to time) applied on a consistent basis
(except as may be indicated therein or in the notes or schedules thereto), and
such financial statements fairly present the consolidated financial position of
Purchaser and its consolidated Subsidiaries as at the dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended, subject, in the case of the unaudited interim financial
statements, to year-end audit adjustments, none of which are expected to be
material in nature or amount. Except as disclosed in the Purchaser Commission
Filings filed with the Commission prior to the date hereof, since January 1,
2000 neither Purchaser nor any Subsidiary of Purchaser has incurred any
liability or obligation of any kind which, in any case or in the aggregate, is
material to the business, assets, results of operations or financial condition
of Purchaser and its Subsidiaries, taken as a whole.
5.6 Absence of Certain Changes or Events. Except as otherwise
------------------------------------
disclosed in the Purchaser Commission Filings filed with the Commission prior to
the date hereof, since January 1, 2000, no event has occurred and no condition
exists which, individually or together with other events or conditions, has had
a Purchaser Material Adverse Effect.
5.7 Noncontravention. (i) The execution and delivery of this
----------------
Agreement does not, (ii) the execution and delivery of the Related Agreements to
which Purchaser or Purchaser Sub is a party does not, and (iii) the consummation
of the Transaction and compliance with the provisions of this Agreement and the
Related Agreements to which Purchaser or Purchaser Sub is a party will not,
conflict with, or result in any violation of, default or breach (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or
40
acceleration of any obligation or to loss of a material benefit under, or result
in the creation of any Restriction upon any of the properties or assets of
Purchaser or any of its Subsidiaries under (any such conflict, violation,
default, breach, right of termination, cancellation or acceleration, loss or
creation, a "Purchaser Violation"), (w) the organizational documents of
-------------------
Purchaser or the organizational documents of any of its Subsidiaries, (x) any
material Contract to which Purchaser or any of its Subsidiaries is a party or by
which any of their properties or assets are bound or affected, where any such
Purchaser Violation would, either individually or in the aggregate, (1) prevent
or materially delay consummation of the Transaction, (2) otherwise prevent or
materially delay Purchaser or any of its Subsidiaries from performing their
material obligations under such Contracts or the Transaction Agreements to which
any of them is a party or (3) have, either individually or in the aggregate, a
Purchaser Material Adverse Effect, (y) any judgment, order or decree of any
Governmental Entity applicable to Purchaser, its Subsidiaries or their
properties or assets or (z) any statute, law, ordinance, rule or regulation
applicable to Purchaser, its Subsidiaries or their properties or assets where
such Purchaser Violation under any such statute, law, ordinance, rule or
regulation of any Governmental Entity would, individually or in the aggregate,
prevent or materially delay Purchaser or any of its Subsidiaries from performing
their material obligations under this Agreement or any Related Agreements to
which they are parties or have an effect upon Purchaser which would constitute a
Purchaser Material Adverse Effect. Assuming the accuracy of the last two
sentences of Section 4.4, except as set forth on Schedule 5.7, no Governmental
Consents and Filings are required by or with respect to Purchaser or Purchaser
Sub in connection with the execution and delivery of this Agreement or the
Related Agreements to which it is a party or the consummation of the Transaction
other than where (x) the failure to obtain any such authorization, consent or
approval or (y) the failure to make any such filing, would not, individually or
in the aggregate, have a Purchaser Material Adverse Effect. Without limiting
the foregoing, neither the issuance of the Shares by Purchaser to SPCV and TGSC
nor the acquisition of the Purchased Interests by Purchaser from SPCV and TGSC
will require any filing by the "ultimate parent entity" (as such term is defined
in 16 C.F.R. (S) 801.1(a)(3)) of Purchaser pursuant to the HSR Act and the rules
and regulations thereunder.
5.8 Legal Proceedings. Except as set forth in the Purchaser
-----------------
Commission Filings, there is no suit, action, proceeding or investigation
pending or, to the knowledge of Purchaser, threatened against, or involving
Purchaser or any Subsidiary of Purchaser or any of its or their properties or
rights which, if adversely determined, is reasonably likely to have, either
individually or in the aggregate, an effect upon Purchaser or the Company which
would constitute, a Purchaser Material Adverse Effect. There is no judgment,
decree, injunction, rule or order of any Governmental Entity which is applicable
to Purchaser or any of its Subsidiaries or any of their respective properties or
rights that relates to this Agreement, the Transaction Agreements to which any
of them is to be a party or the Transaction that would, individually or in the
aggregate, prevent or materially delay Purchaser's consummation of the
Transaction or otherwise prevent or materially delay Purchaser or its
Subsidiaries from performing their obligations under the Transaction Agreements
or has, or is reasonably likely to have, either individually or in the
aggregate, an effect upon Purchaser which would constitute a Purchaser Material
Adverse Effect. There is no action, suit, proceeding or investigation pending,
or to the knowledge of Purchaser, threatened against Purchaser or its Affiliates
that seeks to restrain, enjoin or delay the consummation of the Transaction or
that seeks damages in connection therewith and no temporary restraining order,
preliminary or permanent injunction or other order
41
issued by any Governmental Entity of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Transaction as
herein provided is in effect.
5.9 Brokers. Except as set forth on Schedule 5.9, no agent, broker,
-------
investment banker, financial advisor or other Person is or will be entitled, by
reason of any agreement, act or statement by the Purchaser or any of its
Subsidiaries, Affiliates or any of their respective Representatives, to any
financial advisory, broker's, finder's or similar fee or commission in
connection with the Transaction, and Purchaser agrees to indemnify and hold the
Company, SPE and their respective Subsidiaries and Affiliates and the
Representatives of each harmless from and against any and all claims,
liabilities or obligations with respect to any fees, commissions, expenses or
claims for indemnification or contribution asserted by any other Person on the
basis of any act or statement made or alleged to have been made by Purchaser or
any of its Subsidiaries or Affiliates or any of their Representatives, in
connection with the Transaction. Purchaser shall be solely responsible for any
amounts set forth on Schedule 5.9 and shall indemnify the Company and SPE for
any such amounts.
5.10 Investment Purpose. Purchaser Sub is acquiring the Purchased
------------------
Interests solely for the purpose of investment and not with a view to, or for
offer or sale in connection with, any distribution thereof in any transaction
which would be in violation of the securities laws of the United States or any
state thereof. Purchaser Sub understands that the Purchased Interests have not
been registered under the Securities Act or applicable state and other
securities laws by reason of a specific exemption from the registration
provisions of the Securities Act and applicable state and other securities laws,
the availability of which depends upon, among other things, the bona fide nature
of the investment interest and the accuracy of this representation. Purchaser
Sub is an "accredited investor" within the meaning of Rule 501 of Regulation D
promulgated under the Securities Act. Purchaser Sub understands that the
certificate representing the Purchased Interests will contain a legend stating
in substance:
"The membership interests represented by this certificate
have not been registered under the Securities Act of 1933
and such membership interests may not be sold or transferred
unless such sale or transfer will be effected in accordance
with the registration requirements of the Securities Act of
1933, as at that time amended, or in accordance with any
exemption from the registration requirements of such Act,
which may then be available thereto.
The transfer of securities represented by this certificate
is restricted by the terms of the Amended and Restated
Operating Agreement, dated as of February 23, 2001, as
amended, a copy of which is on file at the office of the
Company."
5.11 Full Disclosure. The representations and warranties of Purchaser
---------------
and Purchaser Sub in this Agreement and the statements contained in the
schedules to be furnished by or on behalf of the Purchaser and Purchaser Sub to
SPE, SPCV and TGSC pursuant to this
42
Agreement, when considered as a whole do not and will not contain any untrue
statement of a material fact and do not and will not omit to state any material
fact necessary to make the statements herein or therein not misleading, in light
of the circumstances in which they were made.
5.12 Compliance with Applicable Laws. Each of Purchaser and its
-------------------------------
Subsidiaries has in effect all federal, state, local and foreign governmental
approvals, authorizations, certificates, filings, franchises, licenses, notices,
permits and rights (including licenses from the U.S. Federal Communications
Commission) ("Purchaser Licenses") necessary for it to own, lease or operate the
------------------
properties and assets which are material to its business and to carry on its
business as now conducted in all material respects. Purchaser has no reason to
believe any Governmental Entity is considering limiting, suspending or revoking
any of the Purchaser Licenses. Other than with respect to defaults or violations
which have been cured prior to the date hereof without the payment of any
consideration (other than filing fees) or the occurrence of adverse consequences
to the Purchaser or its business, Purchaser and each of its Subsidiaries is in
compliance with, has not violated, is not in default under (with or without
notice, lapse of time or otherwise) and has conducted its business so as to
comply with, (i) the terms of those Purchaser Licenses which are material to its
business and (ii) all applicable statutes, laws, ordinances, rules, regulations,
judgments, orders or decrees (including, without limitation, those relating to
health and safety, hiring, promotion or pay of employees) of any Governmental
Entity except, in the case of clause (ii), where such violation or the failure
to so comply or to conduct business, individually or in the aggregate, would not
have a Purchaser Material Adverse Effect.
5.13 No Other Game Show Interests. Except as set forth on Schedule
----------------------------
5.13, neither Purchaser nor any of its Controlled Affiliates are engaged in or
have any direct Investment in any Person (other than an Investment in the
publicly traded securities of any Person constituting less than 5% of the
outstanding securities of such class of securities) that is engaged in a Similar
Business.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF LMC AND PURCHASER SUB
6.1 LMC hereby represents and warrants to SPE, SPCV and TGSC as
follows:
(a) Organization, Qualification, Authorization and Validity. That it
-------------------------------------------------------
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware; that it has all requisite power and authority
to execute this Agreement, to issue the Note, and to carry out and perform its
obligations under this Agreement and the Note; that the execution, delivery and
performance by it of this Agreement and the Note have been duly and validly
authorized by all necessary corporate action and no other action is necessary
for the authorization, execution, delivery or performance by it of this
Agreement and the Note; and that this Agreement and the Note have been duly
executed and delivered by it, and, assuming that this Agreement is duly executed
and delivered by the other parties thereto, this Agreement and the Note
constitute the valid and binding obligation of LMC enforceable against it in
accordance
43
with their respective terms (except insofar as enforceability may be limited to
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, or by principles governing the
availability of equitable remedies.)
(b) Noncontravention. (i) The execution and delivery of this
----------------
Agreement does not, (ii) the issuance of the Note does not, and (iii) the
consummation of the Transaction and compliance with the provisions of this
Agreement and the Note will not, conflict with, or result in any violation of,
default or breach (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation or acceleration of any
obligation or to loss of a material benefit under, or result in the creation of
any Restriction upon any of the properties or assets of LMC under (any such
conflict, violation, default, breach, right of termination, cancellation or
acceleration, loss or creation, an "LMC Violation"), (w) the organizational
documents of LMC, (x) any material Contract to which LMC is a party or by which
any of its properties or assets are bound or affected, where any such LMC
Violation would, either individually or in the aggregate, (1) prevent or
materially delay consummation of the Transaction, or (2) otherwise prevent or
materially delay LMC from performing its material obligations under this
Agreement or the Note, (y) any judgment, order or decree of any Governmental
Entity applicable to LMC or (z) any statute, law, ordinance, rule or regulation
applicable to LMC where such LMC Violation under any such statute, law,
ordinance, rule or regulation of any Governmental Entity would, individually or
in the aggregate, prevent or materially delay LMC from performing its material
obligations under this Agreement or the Note.
(c) Authorization and Validity of the Note. LMC has all requisite
--------------------------------------
power and authority to carry out and perform its obligations under the Note;
that the execution, delivery and performance by it of the Note have been duly
and validly authorized by all necessary corporate action and no other action is
necessary for the authorization, execution, delivery or performance by it of the
Note; and that the Note has been duly executed and delivered by it and the Note
constitutes the valid and binding obligation of LMC enforceable against it in
accordance with its terms (except insofar as enforceability may be limited to
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, or by principles governing the
availability of equitable remedies.)
6.2 Purchaser Sub hereby represents and warrants to SPE, SPCV and
TGSC as follows:
(a) Noncontravention. (i) The execution and delivery of this
----------------
Agreement does not, (ii) the issuance of the Note does not, and (iii) the
consummation of the Transaction and compliance with the provisions of this
Agreement and the Note will not, conflict with, or result in any violation of,
default or breach (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation or acceleration of any
obligation or to loss of a material benefit under, or result in the creation of
any Restriction upon any of the properties or assets of Purchaser Sub under (any
such conflict, violation, default, breach, right of termination, cancellation or
acceleration, loss or creation, a "Purchaser Sub Violation"), (w) the
44
organizational documents of Purchaser Sub, (x) any material Contract to which
Purchaser Sub is a party or by which any of its properties or assets are bound
or affected, where any such Purchaser Sub Violation would, either individually
or in the aggregate, (1) prevent or materially delay consummation of the
Transaction, or (2) otherwise prevent or materially delay Purchaser Sub from
performing its material obligations under such material Contracts or this
Agreement or the Note, (y) any judgment, order or decree of any Governmental
Entity applicable to Purchaser Sub or (z) any statute, law, ordinance, rule or
regulation applicable to Purchaser Sub where such Purchaser Sub Violation under
any such statute, law, ordinance, rule or regulation of any Governmental Entity
would, individually or in the aggregate, prevent or materially delay Purchaser
Sub or Purchaser Sub from performing its material obligations under this
Agreement or the Note.
(b) Authorization and Validity of the Note. Purchaser Sub has all
--------------------------------------
requisite power and authority to carry out and perform its obligations under the
Note; that the execution, delivery and performance by it of the Note have been
duly and validly authorized by all necessary corporate action and no other
action is necessary for the authorization, execution, delivery or performance by
it of the Note; and that the Note has been duly executed and delivered by it and
the Note constitutes the valid and binding obligation of Purchaser Sub
enforceable against it in accordance with its terms (except insofar as
enforceability may be limited to applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable remedies.)
ARTICLE VII.
FURTHER AGREEMENTS
7.1 Conveyance Taxes. SPE, TGSC, SPCV, Purchaser and Purchaser Sub
----------------
shall cooperate in the preparation, execution and filing of all returns,
questionnaires, applications, or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and stamp
taxes, any transfer, recording, registration and other fees, and any similar
taxes which become payable in connection with the Transaction.
7.2 Subsidiaries' Board of Directors. Immediately after the Closing,
--------------------------------
the parties shall cause each Company Subsidiary to take all action necessary in
accordance with applicable law, to amend each Company Subsidiary's
organizational documents to (i) set the total number of Persons constituting
each such Company Subsidiary's governing body at six (6) and (ii) remove such
current Persons and appoint designees of Purchaser to serve as members of each
Company Subsidiary's governing body so that after such removal and appointments
the governing body of such Company Subsidiary is comprised of three (3) Persons
designated by SPE and three (3) Persons designated by Purchaser.
7.3 Account Restructuring. The parties acknowledge that for periods
---------------------
prior to the Closing, SPE has (i) caused all revenues of the Company to be
deposited into bank accounts owned by SPE and (ii) caused all expenses of the
Company to be paid from accounts owned by
45
SPE. SPE shall cause the actions outlined in Schedule 7.3 to be taken such
------------
that, at and after the Closing, all revenue attributable to the Company will be
deposited into Company accounts and all expenses attributable to the Company
will be paid from Company accounts.
7.4 Book Up of Assets; Tax Election. In connection with the capital
-------------------------------
contribution to the Company of Indebtedness by SPE and its Affiliates, and the
resulting adjustment to the capital accounts of TGSC and SPCV in accordance with
Section 1.704-1(b)(2)(iv)(f) of the Treasury Regulations, referred to Section
3.21, the parties agree that, except as otherwise provided under the Code or the
Treasury Regulations, the aggregate net fair market value of the Company's
assets shall be five hundred fifty million dollars ($550,000,000), and that such
aggregate value shall be allocated among the Company's assets in accordance with
the procedures set forth in Section 2.3. The parties further agree to take such
actions as are reasonably necessary to cause the Company to make an election
under Section 754 of the Code on its federal income Tax Return for the period
that includes the Closing Date.
ARTICLE VIII.
INTENTIONALLY OMITTED
ARTICLE IX.
SURVIVAL AND INDEMNIFICATION
9.1 Survival and No Waiver. (a) Subject to the limitations and other
-----------------------
provisions of this Agreement, all representations and warranties of the parties
contained in this Agreement, or in any Schedule hereto, or any certificate,
document or other instrument delivered in connection herewith, shall survive the
Closing for a period of two (2) years following the Closing; provided, however,
-------- -------
that the representations and warranties set forth in Sections 3.9(b) and (c)
shall survive the Closing for a period of four (4) years following the Closing;
provided, further, that the representations and warranties set forth in Sections
--------
3.11 and 3.12 shall survive until 30 days after the expiration of the applicable
statute of limitations (giving effect to any extension, waivers or modification
thereof); provided, further, that the representations and warranties, set forth
-------- -------
in Sections 3.1, 3.2, 3.3, 3.4(a), 4.1, 4.2, 5.1, 5.2, 5.4, 6.1(a) and (c) and
6.2(b) shall survive indefinitely. Notwithstanding the foregoing, any
indemnification claim made hereunder prior to the expiration of the applicable
survival period with respect to the related representation or warranty shall
survive notwithstanding such expiration until the resolution of such claim.
(b) The respective representations and warranties of Purchaser,
Purchaser Sub, SPE, TGSC and SPCV contained herein or in any certificate,
document or other instrument delivered pursuant hereto prior to or at the
Closing shall not be deemed waived or otherwise affected by any investigation
made by any party hereto.
9.2 Indemnification. (a) SPE, TGSC and SPCV, jointly and severally,
---------------
shall defend, indemnify and hold harmless Purchaser, Purchaser Sub, LMC, each of
their respective
46
Representatives, and each of the heirs, executors, successors and assigns of any
of the foregoing (collectively, the "Purchaser 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 any insurance proceeds actually received
(collectively, "Losses and Expenses"), suffered, directly or indirectly by any
-------------------
Purchaser Indemnified Party by reason of, or arising out of, (x) any breach of a
representation or warranty made by SPE, TGSC or SPCV in or pursuant to this
Agreement, or (y) any failure by SPE, TGSC, SPCV or the Company to perform or
fulfill any of its covenants set forth in this Agreement.
(b) Purchaser and Purchaser Sub, jointly and severally, shall defend,
indemnify and hold harmless SCA, SPE, TGSC, SPCV, each of their respective
Representatives, and each of the heirs, executors, successors and assigns of any
of the foregoing (collectively, the "SPE Indemnified Parties") from and against
--- -------------------
any and all Losses and Expenses suffered, directly or indirectly by any SPE
Indemnified Party, by reason of, or arising out of, (x) any breach of a
representation or warranty made by Purchaser or Purchaser Sub in or pursuant to
this Agreement, or (y) any failure by Purchaser or Purchaser Sub to perform or
fulfill any of its covenants set forth in this Agreement.
(c) SPE, TGSC and SPCV, jointly and severally, shall defend,
indemnify and hold harmless the Company, the Member Representatives (as defined
in the Restated Operating Agreement), Purchaser, Purchaser Sub and each of their
respective Representatives and each of the heirs, executors, successors and
assigns of any of the foregoing (collectively, the "Company Indemnified
-------------------
Parties") from and against any and all Losses and Expenses suffered, directly or
-------
indirectly by any Company Indemnified Parties, by reason of, or arising out of,
the Transferred Assets infringing upon or otherwise violating the Intellectual
Property rights of any Person.
(d) SPE, TGSC and SPCV, jointly and severally, shall defend,
indemnify and hold harmless the Company, the Member Representatives (as defined
in the Restated Operating Agreement) Purchaser, Purchaser Sub and each of their
respective Representatives and each of the heirs, executors, successors and
assigns of any of the foregoing (collectively, the "Fairfax Indemnified
-------------------
Parties") from and against any and all Losses and Expenses suffered, directly or
-------
indirectly by any Fairfax Indemnified Parties, by reason of, or arising out of,
the lease by the Company (except for Losses and Expenses arising out of a breach
of the sublease by the Company) of 0000 Xxxxx Xxxxxxx Xxxxxx, Xxx Xxxxxxx,
Xxxxxxxxxx (the "South Fairfax Property"), including the release of any
----------------------
Hazardous Material at the South Fairfax Property; provided, however, that this
indemnity shall be void in its entirety if the Company is still occupying the
South Fairfax Property after May 31, 2001. SPE agrees to terminate the sublease
with the Company for the South Fairfax Property at any time upon the Company's
request prior to May 31, 2001, without charging the Company any early
termination fees or penalties that would otherwise be due under the terms of the
sublease; provided, however, that during the period from the Closing Date
through the date that the Company vacates the South Fairfax Property, the
Company shall be obligated to comply with all of the terms of the sublease.
47
Notwithstanding anything in here to the contrary, SPE does not waive any of the
remedies it may have for a breach of the sublease between the Closing Date and
the date the Company vacates the South Fairfax Property.
(e) SPE, TGSC and SPCV, jointly and severally, hereby (i) represent
and warrant to Purchaser and Purchaser Sub, except as set forth on Schedule
9.2(e), the matters set forth in Section 3.15(d) of this Agreement as if said
section were restated herein in its entirety except that references therein to
"Intellectual Property" shall be deemed to include the matters set forth in the
definition thereof with respect only to Jamaica, West Indies; British Virgin
Islands; Commonwealth of Dominica, West Indies; Commonwealth of the Bahamas;
Trinidad, West Indies; and Sint Maarten; and shall exclude therefrom the United
States and Canada and any other jurisdiction. SPE, TGSC and SPCV, jointly and
severally, shall defend, indemnify and hold harmless the Company, the Member
Representatives (as defined in the Restated Operating Agreement), Purchaser,
Purchaser Sub and each of their respective Representatives and each of the
heirs, executors, successors and assigns of any of the foregoing (collectively,
the "IP Indemnified Parties"), from and against the actual damages, and actual
----------------------
out-of-pocket costs and expenses incurred in connection with the legal defense
(including reasonable attorney's fees and expenses (including, but not limited
to, attorney and expert fees and expenses incurred to enforce the terms of this
Agreement)) of any third party claim against the IP Indemnified Parties by
reason of, or arising out of, a breach of the representation and warranty set
forth in the first sentence of this Section 9.2(e) ("Caribbean Damages");
-----------------
provided, however, that notwithstanding anything to the contrary contained in
this Section 9.2(e), the representation and warranty included in this Section
9.2(e) shall only survive the Closing for a period of one year from the date of
the Closing and written notice of all third party claims under this Section
9.2(e) must be delivered to SPE no later than the date that is one (1) year from
the Closing (or the next Business Day if such date is not a Business Day); and
provided further that under no circumstances shall any of SPE, TGSC or SPCV be
liable for any other Losses and Expenses, including without limitation, lost
profits, consequential, punitive or incidental damages, even if an IP
Indemnified Party is aware of the possibility of such damages. This Section
9.2(e) is the sole and exclusive remedy for any third party claim under this
Section 9.2(e) and for any Claim by any IP Indemnified Party for a breach of the
representation and warranty included in this Section 9.2(e).
(f) LMC shall defend, indemnify and hold harmless the SPE Indemnified
Parties from and against any and all Losses and Expenses suffered, directly or
indirectly by any SPE Indemnified Party, by reason of, or arising out of, (x)
any breach of a representation or warranty made by LMC in or pursuant to this
Agreement, or (y) any failure by LMC to perform or fulfill any of its covenants
set forth in this Agreement. LMC's liability under this Section 9.2(f) for all
amounts of Losses and Expenses shall not exceed or duplicate the aggregate
amount of unpaid principal and accrued and unpaid interest under the Note.
9.3 Third Party Claims. If a claim by a third party is made against
-----------------
an indemnified party (i.e., a Purchaser Indemnified Party, SPE Indemnified
Party, Company Indemnified Party, Fairfax Indemnified Party or IP Indemnified
Party), and if such indemnified party intends to seek indemnity with respect
thereto under this Article IX, such indemnified party shall promptly
48
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 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 and the indemnifying party shall not assume the defense
of such action or proceeding on such indemnified party's behalf. 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, subject to
attorney-client privilege. 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. Without the prior written consent of the indemnified party, which
consent shall not be unreasonably withheld, the indemnifying party shall not
settle any claim with respect to the indemnified party unless such settlement
contains an unconditional release of the indemnified party from any and all
liability with respect to such third party claim. 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.
ARTICLE X.
MISCELLANEOUS
10.1 Notices. All notices, requests, demands, waivers and other
-------
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally
or mailed, certified or registered mail with postage prepaid, or sent by
facsimile (which is confirmed) or sent by reputable courier (providing proof of
delivery) to the parties at the following addresses:
49
(a) If to LMC, Purchaser or Purchaser Sub:
Liberty Digital, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
with a copy to:
Xxxxx Xxxxx L.L.P.
000 Xxxxxxxxx Xxx.
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxxxx X. XxXxxxx, Esq.
Facsimile: (000) 000-0000
(b) If to SPE, TGSC or SPCV:
Sony Pictures Entertainment Inc.
Xxxxxx Xxxxxxx, Xxxxxxxx X
Xxxxx 000
Xxxxxx Xxxx, XX 00000-0000
Attention: Xxx Xxxxxx
Facsimile: (000) 000-0000
with a copy to:
Sony Pictures Entertainment Inc.
00000 Xxxx Xxxxxxxxxx Xxxx.
Xxxxxx Xxxx, XX 00000
Attention: General Counsel
Facsimile: (000) 000-0000
or to such other Person or address as any party shall specify by notice in
writing to the other party. All such notices, requests, demands, waivers and
communications shall be deemed to have been received on the date of delivery or
on the third business day after the mailing thereof, except that any notice of a
change of address shall be effective only upon actual receipt thereof.
10.2 Entire Agreement. This Agreement and the Transaction Agreements
----------------
(including the Schedules, Exhibits and other documents referred to herein and
therein), together with the Related Agreements, constitute the entire agreement
between the parties and supersede all prior agreements (including the Letter of
Intent and Memorandum of Terms, dated August 18, 2000, between SPE and Purchaser
and the Non-Disclosure Agreement dated March 15, 2000) and understandings, oral
and written, between the parties with respect to the subject matter hereof and
thereof.
50
10.3 Assignment; Binding Effect; Benefit. Neither this Agreement nor
-----------------------------------
any of the rights, benefits or obligations hereunder may be assigned or
delegated by any party (whether by operation of law or otherwise) without the
prior written consent of each other party; provided, that Purchaser Sub may
--------
assign its right to purchase the Purchased Interests to one or more wholly-owned
subsidiaries of Purchaser without the consent of any other party; provided,
--------
further, that no such assignment shall relieve Purchaser or Purchaser Sub of any
-------
liability or its obligations hereunder. Subject to the immediately preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns. Nothing
in this Agreement, expressed or implied, is intended to confer on any Person
other than (i) the parties and their respective successors and assigns, (ii) the
Company with respect to Sections 3.10, 4.8, 5.10 and 9.2(c), (d) and (e), and
(iii) the Purchaser Indemnified Parties, the SPE Indemnified Parties, the
Company Indemnified Parties, the Fairfax Indemnified Parties and the IP
Indemnified Parties, any rights, remedies, obligations or liabilities under or
by reason of this Agreement.
10.4 Amendment. This Agreement may not be amended, modified or
---------
supplemented except by an instrument in writing signed on behalf of each of the
parties.
10.5 Waiver of Compliance; Consents. Except as otherwise provided in
------------------------------
this Agreement, the failure of any party to comply with any of its obligations,
covenants, agreements or conditions herein may be waived by the party or parties
entitled to the benefits thereof only by a written instrument signed by the
party or parties granting such waiver, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement or condition shall
not operate as a waiver of or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
a party, such consent shall be given in writing in a manner consistent with the
requirements for a waiver of compliance as set forth is this Section 10.5.
10.6 Headings. The table of contents and headings contained in this
--------
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
10.7 Counterparts; Execution by Facsimile Signature. This Agreement
----------------------------------------------
may be executed in counterparts, each of which shall be deemed to be an
original, and all of which together shall constitute one and the same agreement.
The parties acknowledge and agree that the parties' execution of this Agreement
may be by facsimile copies of originally executed signature pages.
10.8 Applicable Law. This Agreement and the legal relations between
--------------
the parties shall be governed by and construed in accordance with the laws of
the State of Delaware (regardless of the laws that might otherwise govern under
applicable principles of conflicts of law) as to all matters, including, but not
limited to, matters of validity, construction, effect, performance and remedies.
51
10.9 Enforcement. Solely for the purposes of (i) the issuance and
-----------
delivery of the stock certificates representing the Stock Consideration and the
Interest Consideration, (ii) the delivery of the certificates representing the
Purchased Interests not required to be delivered at Closing, and (iii)
enforcement of SPE Sub's and TGSC's obligations under Section 10.11, the parties
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement pertaining to clauses (i), (ii) and (iii) above,
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to seek an
injunction or injunctions to prevent breaches of the provisions of this
Agreement pertaining to clauses (i), (ii) and (iii) above and to enforce
specifically the terms and provisions of this Agreement pertaining to clauses
(i), (ii) and (iii) above in the Superior Court, or any federal court, in the
County of Los Angeles, State of California in addition to any other remedy to
which they are entitled at law or in equity with respect to clauses (i), (ii)
and (iii). In addition, for purposes of this Section 10.9, each of the parties
hereto (a) consents to submit itself to the exclusive jurisdiction of any
federal court located in County of Los Angeles, State of California, and (b)
agrees that it will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court.
10.10 Severability. Any provision of this Agreement which, after the
------------
Closing, is held by a court of competent jurisdiction to be invalid, illegal or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity, illegality or enforceability, without
affecting in any way the remaining provisions hereof in such jurisdiction or
rendering that or any other provisions of this Agreement invalid, illegal or
unenforceable in any other jurisdiction; provided, that if any provision hereof
--------
or the application thereof shall be, after the Closing, so held to be invalid,
void or unenforceable by a court of competent jurisdiction, then such court may
substitute therefor a suitable and equitable provision in order to carry out, so
far as may be valid and enforceable, the intent and purpose of the invalid, void
or unenforceable provision and, if such court shall fail to decline to do so,
the parties shall negotiate in good faith in an effort to agree upon such a
suitable and equitable provision. If for any reason any term or provision
containing a restriction set forth herein is held to cover an area or to be for
a length of time which is unreasonable, or in any other way is construed to be
too broad or to any extent invalid, such term or provision shall not be
determined to be null, void and of no effect, but to the extent the same is or
would be valid or enforceable under applicable law, any court of competent
jurisdiction shall construe and interpret or reform this Agreement to provide
for a restriction having the maximum enforceable area, time period and other
provisions (not greater than those contained herein) as shall be valid and
enforceable under applicable law.
10.11 Transfer of Shares. Prior to the first anniversary of the
------------------
Closing, each of SPE Sub and TGSC agrees not to offer, sell, contract to sell,
transfer, assign, pledge, grant an option to purchase, issue a security which is
convertible into or exchangeable for, make a short sale or otherwise dispose of
any Shares (other than to Affiliates of SPE which agree to be bound by the
restrictions set forth in this Section 10.11) or enter into any swap, derivative
or other transaction seeking to transfer the economic benefits relating to the
Shares to any Person (other than to Affiliates of SPE which agree to be bound).
52
10.12 Further Assurances. From time to time including following the
------------------
Closing Date, without further consideration, each of the parties hereto will, at
its own expense, take any further action that is necessary or desirable to carry
out the purposes of this Agreement and the proper officers and directors of each
party to this Agreement shall use their commercially reasonable efforts to take
all such actions, including, without limitation, executing and delivering such
documents and instruments as such other party may reasonably request in order
effectively to consummate the Transaction.
10.13 Expenses. Except as otherwise provided herein, all costs and
--------
expenses, including, without limitation, fees and disbursements of counsel,
financial advisors and accountants, incurred in connection with this Agreement
and the Transactions shall be paid by the party incurring such costs and
expenses, whether or not the Closing shall occur.
10.14 Arbitration. Except as provided in Section 10.9, (a) any
-----------
dispute or controversy, including any action for indemnification under this
Agreement, will be resolved through binding arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association ("AAA")
before a single neutral arbitrator ("Arbitrator") located in the County of Los
Angeles, State of California. Discovery in the arbitration will be pursuant to
the provisions of the Federal Rules of Civil Procedure. The Arbitrator will be a
retired judge mutually selected from a panel of persons provided by the AAA
having significant and demonstrable experience with the resolution of the types
of business disputes and issues to be resolved in the arbitration. If the
parties are unable to agree on an Arbitrator within 30 days, a single neutral
Arbitrator shall be appointed by the AAA. There will be a record of the
proceedings at the arbitration hearing and the Arbitrator will issue a Statement
of Decision setting forth the factual and legal basis for the Arbitrator's
decision. In addition to the power to award money damages, the Arbitrator shall
be permitted to award equitable relief, including, but not limited to,
injunctive relief, solely to the extent provided in Section 10.9. The Arbitrator
shall be required to follow the applicable law as set forth in Section 10.8 of
this Agreement; provided, however, that California law shall govern with respect
to the enforceability of this arbitration provision. The parties hereto consent
to the personal jurisdiction of the Superior Court, or the Federal District
Court, in the County of Los Angeles, State of California, for the enforcement of
this agreement to arbitrate and any award granted pursuant to said arbitration,
including, but not limited to, any award of equitable relief.
(a) If neither party gives written notice requesting an appeal within
ten (10) Business Days after the issuance of the Statement of Decision, the
Arbitrator's decision will be final and binding as to all matters of substance
and procedure, and may be enforced by a petition to the Superior Court, or the
Federal District Court, in the County of Los Angeles, State of California, for
the enforcement of this agreement to arbitrate or for confirmation and
enforcement of any award granted pursuant to said arbitration, including, but
not limited to, any award for equitable relief.
(b) If either party gives written notice requesting an appeal within
ten (10) Business Days after the issuance of the Statement of Decision, the
award of the Arbitrator will be
53
appealed to three (3) neutral arbitrators (the "Appellate Arbitrators"), each of
whom will have the same qualifications and be selected through the same
procedure as the Arbitrator. The appealing party must file its appellate brief
within thirty (30) days after its written notice requesting the appeal and the
other party must file its brief within thirty (30) days thereafter. The
Appellate Arbitrators will thereupon review the Statement of Decision of the
Arbitrator applying the same standards of review (and all of the same
presumptions) as if the Appellate Arbitrators were a California Court of Appeal
reviewing a judgment of the Superior Court, except that the Appellate
Arbitrators will in all cases issue a final award and may not remand the matter
to the Arbitrator. All arbitration proceedings will be closed to the public and
confidential and all records relating thereto will be permanently sealed, except
as necessary to obtain court confirmation of the arbitration award and except as
necessary to give effect to mutual and non-mutual collateral estoppel and res
judicata. The decision of the Appellate Arbitrators will be final and binding as
to all matters of substance and procedure, and may be enforced by a petition to
the Superior Court, or the Federal District Court, in the County of Los Angeles,
State of California, for confirmation and enforcement of the award.
(c) The Arbitrator shall award reasonable outside attorneys' fees and
costs of arbitration to the prevailing party in any arbitration provided for by
this Section 10.14, which costs shall include the costs of arbitration, subject
to reversal in whole or in part by the Appellate Arbitrators. A party appealing
the decision of the Arbitrator will pay all costs and expenses of the appeal,
including the reasonable outside attorneys' fees of the opposing party, unless
the decision of the Arbitrator is reversed in which case the party that does not
prevail ultimately in the appellate arbitration proceeding shall pay all
reasonable outside attorneys' fees and costs of the opposing party, which costs
shall include the costs of arbitration and appeal. In the event that the
decision of the Arbitrator is affirmed in part, and reversed in part, the
Appellate Arbitrators shall determine which party is the prevailing party for
the overall proceedings and award reasonable outside attorneys' fees and costs
and expenses (including, but not limited to, attorney and expert fees and
expenses incurred to enforce the terms of this Agreement), including the costs
of arbitration and appeal, to the prevailing party. A decision of the Arbitrator
or Appellate Arbitrators shall have the same force and effect of both mutual and
non-mutual collateral estoppel and res judicata to the extent such matters would
have been entitled to such treatment if litigated in a court of law
54
IN WITNESS WHEREOF, the parties hereto have executed this Membership
Interest Purchase Agreement as of the date first above written.
LIBERTY DIGITAL, INC.
By: /s/ Xxxxx Enestein
------------------
Xxxxx Xxxxxxxxx
Senior Vice President
LDIG GAMENET, INC.
By: /s/ Xxxxx Xxxxxxxxx
-------------------
Xxxxx Xxxxxxxxx
Senior Vice President
SONY PICTURES ENTERTAINMENT INC.
By: /s/ Xxxx Xxxxx
--------------
Xxxx Xxxxx
Senior Vice President - Corporate Development
SONY PICTURES CABLE VENTURES I INC.
By: /s/ Xxxx Xxxx
-------------
Xxxx Xxxx
Senior Vice President and Assistant Secretary
TGSC MANAGEMENT, INC.
By: /s/ Xxxx Xxxx
-------------
Xxxx Xxxx
Senior Vice President and Assistant Secretary
55
ACCEPTED AND AGREED
SOLELY WITH RESPECT TO ITS
OBLIGATIONS UNDER ARTICLE
II, SECTION 6.1 AND SECTION
9.2(f).
LIBERTY MEDIA CORPORATION
By: /s/ Xxxxxxxxx X. Xxxxxxxxx
--------------------------
Name: Xxxxxxxxx X. Xxxxxxxxx
Title: Senior Vice President
56
