UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 7, 2002
USA INTERACTIVE
(Exact name of Registrant as specified in charter)
Delaware 0-20570 59-2712887
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
152 West 57th Street, New York, NY 10019
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(212) 314-7300
USA NETWORKS, INC.
(Former name or former address, if changed since last report)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 7, 2002, USA Interactive (formerly, USA Networks, Inc.,
the "Company") announced the completion of a transaction to contribute its
Entertainment Group to a joint venture with Vivendi Universal, S.A (the
"Transaction"). Filed herewith, and incorporated herein by reference, are
the Amended and Restated Transaction Agreement, Equity Warrant Agreement,
Amended and Restated Limited Liability Limited Partnership Agreement of
Vivendi Universal Entertainment LLLP and the Company's press release
announcing the completion of the Transaction.
The Company filed a definitive proxy statement dated March 25,
2002 (File No. 000-20570), relating to the Transaction (the "Proxy Statement").
The Proxy Statement, which contains additional information about the
Transaction, is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Not Applicable.
(b) The pro forma financial information relating to the Transaction is
included in the Proxy Statement, incorporated herein by reference.
(c) Exhibits.
Exhibit No. Description
2.1 Amended and Restated Transaction Agreement, dated as of
December 16, 2001, among Vivendi Universal, S.A., Universal
Studios, Inc., USA Networks, Inc., USANi LLC and Liberty
Media Corporation
4.1 Equity Warrant Agreement between USA Networks, Inc. and The
Bank of New York
99.1 Amended and Restated Limited Partnership Agreement of
Vivendi Universal Entertainment LLLP, dated as of May 7,
2002, by and among USI Entertainment Inc., USANi Holdings
XX, Inc., Universal Pictures International Holdings BV,
Universal Pictures International Holdings 2 BV, NYCSpirit
Corp. II, USA Networks, Inc., USANi Sub LLC, New-U Studios
Holdings, Inc. and Barry Diller
99.2 Press Release
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
USA INTERACTIVE
By: /s/ Julius Genachowski
--------------------------
Name: Julius Genachowski
Title: Executive Vice President and
General Counsel
Date: May 17, 2002
EXHIBIT INDEX
Exhibit No. Description
2.1 Amended and Restated Transaction Agreement, dated as of
December 16, 2001, among Vivendi Universal, S.A., Universal
Studios, Inc., USA Networks, Inc., USANi LLC and Liberty
Media Corporation
4.1 Equity Warrant Agreement between USA Networks, Inc. and The
Bank of New York
99.1 Amended and Restated Limited Partnership Agreement of
Vivendi Universal Entertainment LLLP, dated as of May 7,
2002, by and among USI Entertainment Inc., USANi Holdings
XX, Inc., Universal Pictures International Holdings BV,
Universal Pictures International Holdings 2 BV, NYCSpirit
Corp. II, USA Networks, Inc., USANi Sub LLC, New-U Studios
Holdings, Inc. and Barry Diller
99.2 Press Release
EXHIBIT 2.1
================================================================================
AMENDED AND RESTATED TRANSACTION AGREEMENT
Among
VIVENDI UNIVERSAL, S.A.,
UNIVERSAL STUDIOS, INC.,
USA NETWORKS, INC.,
USANi LLC
and
LIBERTY MEDIA CORPORATION
Dated as of December 16, 2001
================================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions and Usage
---------------------
ARTICLE II
Transactions and Closing
------------------------
SECTION 2.01. Exchange Rights...............................................2
SECTION 2.02. USANi Shares..................................................2
SECTION 2.03. Transfer and Acquisition......................................3
SECTION 2.04. Other Transactions............................................3
SECTION 2.05. Assignment of Contracts and Rights............................4
SECTION 2.06. Closing Date..................................................4
SECTION 2.07. Assignment of Rights by Diller................................4
ARTICLE III
Representations and Warranties of Parent Parties
------------------------------------------------
SECTION 3.01. Organization, Standing and Power..............................5
SECTION 3.02. Authority; Execution and Delivery; Enforceability.............5
SECTION 3.03. No Conflicts; Consents........................................6
SECTION 3.04. Capitalization of USAi; Warrants..............................7
SECTION 3.05. The Contributed Subsidiaries..................................8
SECTION 3.06. Financial Statements; No Undisclosed Liabilities..............9
SECTION 3.07. Contracts....................................................10
SECTION 3.08. Contributed Assets...........................................10
SECTION 3.09. Real Property................................................10
SECTION 3.10. Intangible Property..........................................11
SECTION 3.11. Licenses.....................................................11
SECTION 3.12. Absence of Changes or Events.................................11
SECTION 3.13. Compliance with Applicable Laws..............................11
SECTION 3.14. Litigation...................................................12
SECTION 3.15. Universal Contributed Interests..............................12
SECTION 3.16. Brokers or Finders...........................................12
SECTION 3.17. Investment Intent............................................13
SECTION 3.18. Tax Matters..................................................13
SECTION 3.19. Employee Matters.............................................13
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ARTICLE IV
Agreements and Covenants
------------------------
SECTION 4.01. Covenants Relating to Conduct of Business....................15
SECTION 4.02. Access to Information........................................17
SECTION 4.03. Confidentiality..............................................17
SECTION 4.04. Reasonable Best Efforts......................................17
SECTION 4.05. Expenses; Transfer Taxes.....................................17
SECTION 4.06. Distribution Agreements......................................18
SECTION 4.07. Publicity....................................................19
SECTION 4.08. Further Assurances...........................................19
SECTION 4.09. Board Recommendation.........................................19
SECTION 4.10. Preparation of Proxy Statement; Stockholders Meeting.........20
SECTION 4.11. Commercial Arrangements......................................21
SECTION 4.12. Tax Matters..................................................21
SECTION 4.13. Agreement Not To Compete.....................................22
SECTION 4.14. USAi Partnership Interests...................................23
SECTION 4.15. Officers of the Partnership..................................23
SECTION 4.16. Partnership Agreement Obligations............................23
SECTION 4.17. Committed LLC Shares; Committed Common Equity................23
SECTION 4.18. Partnership..................................................24
SECTION 4.19. Substitute Letters of Credit; Guarantees.....................24
SECTION 4.20. USANi Tax Distribution.......................................24
SECTION 4.21. Lease Arrangement............................................24
SECTION 4.22. USA Name.....................................................24
SECTION 4.23. Options and Restricted Stock.................................25
ARTICLE V
Conditions Precedent
--------------------
SECTION 5.01. Conditions to Each Party's Obligation........................25
SECTION 5.02. Additional Conditions to Obligation of each Parent Party.....26
SECTION 5.03. Frustration of Closing Conditions............................26
ARTICLE VI
Termination
-----------
SECTION 6.01. Termination..................................................27
SECTION 6.02. Effect of Termination........................................27
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ARTICLE VII
Indemnification
---------------
SECTION 7.01. Indemnification by Each Parent Party.........................28
SECTION 7.02. Tax Indemnification by Each Parent Party.....................29
SECTION 7.03. Refunds......................................................30
SECTION 7.04. Calculation of Losses........................................31
SECTION 7.05. Termination of Indemnification...............................31
SECTION 7.06. Procedures; Exclusivity......................................31
SECTION 7.07. Survival.....................................................33
ARTICLE VIII
Miscellaneous
-------------
SECTION 8.01. Approval of Transactions.....................................33
SECTION 8.02. Notices......................................................33
SECTION 8.03. No Third Party Beneficiaries.................................33
SECTION 8.04. Waiver.......................................................34
SECTION 8.05. Assignment...................................................34
SECTION 8.06. Integration..................................................34
SECTION 8.07. Headings.....................................................34
SECTION 8.08. Counterparts.................................................34
SECTION 8.09. Severability.................................................34
SECTION 8.10. Governing Law................................................34
SECTION 8.11. Jurisdiction.................................................34
SECTION 8.12. Specific Performance.........................................35
SECTION 8.13. Amendments...................................................35
SECTION 8.14. Interpretation...............................................35
ANNEX A
EXHIBITS
SCHEDULES
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AMENDED AND RESTATED TRANSACTION AGREEMENT (this
"Agreement") dated as of December 16, 2001, by and
among VIVENDI UNIVERSAL, S.A., a societe anonyme
organized under the laws of France ("Vivendi"),
UNIVERSAL STUDIOS, INC., a Delaware corporation
("Universal"), USA NETWORKS, INC., a Delaware
corporation ("USAi"), USANI LLC, a Delaware
limited liability company ("USANi"), LIBERTY MEDIA
CORPORATION, a Delaware corporation ("Liberty"),
and, for purposes of Sections 2.03(a)(iv),
2.03(a)(v), 2.03(a)(vii), 2.07, 4.10(d) and 8.01
only, BARRY DILLER ("Diller").
Preliminary Statement
---------------------
WHEREAS, the parties hereto entered into a Transaction Agreement
(the "Original Transaction Agreement") on December 16, 2001;
WHEREAS, the parties hereto desire to amend and restate the terms
and provisions of the Original Transaction Agreement as set forth herein;
WHEREAS, USANi desires to distribute to Universal and its Affiliates
(such term and such other terms used and not defined in this Preliminary
Statement, as defined in Annex A) the USANi Distributed Interests in return for
the cancellation of all the USANi Shares owned by Universal and its Affiliates;
WHEREAS, Affiliates of Universal and USAi desire to form the
Partnership with Universal Contributing (or causing to be Contributed) the
Universal Contributed Interests and the USANi Distributed Interests, USANi
Contributing (or causing to be Contributed) the USANi Contributed Interests and
USAi Contributing (or causing to be Contributed) all of the membership interests
in USA Films, and with the Partnership operating and conducting its business on
the terms set forth in the Partnership Agreement;
WHEREAS, Universal, USAi and USANi desire that the Partnership grant
to Diller a participating interest in the Partnership as compensation for
agreeing to serve as the Chairman and CEO of the Partnership and in
consideration for Diller agreeing to be bound by certain non-competition
provisions; and
WHEREAS, in connection with the foregoing, the parties hereto, as
applicable, desire to terminate the Exchange Agreement, effective as of the
Closing Date, but after the exchanges contemplated by Section 2.01 of the
Universal/Liberty Merger Agreement and to amend and restate, effective as of the
Closing, the Stockholders Agreement and the Governance Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
Definitions and Usage
---------------------
Unless the context shall otherwise require, terms used and not
defined herein shall have the meanings assigned thereto in Annex A. Inclusion
of, or reference to, any matter in any Schedule to this Agreement does not
constitute an admission of the materiality of any such matter.
ARTICLE II
Transactions and Closing
------------------------
Upon the terms and subject to the conditions set forth herein, the
parties shall consummate each of the following transactions.
SECTION 2.01. Exchange Rights. (a) Prior to effecting the
transactions contemplated by Section 2.02 of this Agreement, but immediately
after the exchanges contemplated by Section 2.01 of the Universal/Liberty Merger
Agreement, (i) the Exchange Agreement, except the representations and warranties
contained therein, and (ii) Section 6.01 of the Investment Agreement, shall be
terminated, whereby the USANi Shares will no longer be exchangeable for USAi
Common Equity. Each party hereto that is also a party to the Exchange Agreement
and/or the Investment Agreement shall execute and deliver, or shall cause to be
executed and delivered, all such documents and instruments and shall take, or
cause to be taken, all actions necessary to effect the terminations required
pursuant to this Section 2.01 at the time specified herein.
(b) During the period from the date of this Agreement to the time of
the termination of the exchange right referred to above, USAi shall not take any
action to require either Universal or Liberty to exchange their USANi Shares for
shares of USAi Common Stock pursuant to the Exchange Agreement and during the
period from the date of this Agreement to and including the Closing Date, USAi
shall not take any action to require Liberty to exchange the shares of Home
Shopping Network, Inc. for USAi Common Stock pursuant to the Liberty Exchange
Agreement.
SECTION 2.02. USANi Shares. On the Closing Date, immediately
prior to effecting the transactions contemplated by Section 2.03, (a) the USAi
Share Exchanges and the Mergers (each as defined in the Universal/Liberty Merger
Agreement) shall be consummated, then (b) USANi shall distribute to Universal
and/or its Affiliates (i) the USANi Universal Distributed Interests in return
for the cancellation of 282,161,530 USANi Shares owned by Universal and its
Affiliates and (ii) the USANi Liberty Distributed Interests in return for the
cancellation of 38,694,982 USANi Shares owned by Universal and its Affiliates
that were directly or indirectly acquired in connection with clause (a) above,
all of which USANi Shares shall be delivered by Universal and/or its Affiliates
free and clear of any Liens (the "Committed LLC Shares") and (c) Universal shall
deliver to USANi cancelled share certificates representing the cancellation of
all such Committed LLC Shares.
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SECTION 2.03. Transfer and Acquisition. (a) On the Closing Date,
immediately after effecting the transactions contemplated by Section 2.02, (i)
Universal shall Contribute (or cause to be Contributed) to the Partnership all
the right, title and interest of Universal and its Affiliates in, to and under
the Universal Contributed Interests and the USANi Distributed Interests;
(ii) USANi shall Contribute (or cause to be Contributed) to the
Partnership, directly or indirectly, all the right, title and interest of USANi
and its Affiliates in, to and under the USANi Contributed Interests;
(iii) USAi shall Contribute (or cause to be Contributed) to the
Partnership all the right, title and interest of USAi and its Affiliates in, to
and under the membership interests in USA Films;
(iv) Diller shall assume the roles of Chairman and CEO of the
Partnership;
(v) each Parent Party and Diller shall execute and deliver (or cause
its Affiliates to execute and deliver) (A) the Partnership Agreement and (B)
such appropriate bills of sale, assignment and assumption and other instruments
of transfer providing for the contributions set forth in this Section 2.03, and
the parties to the Partnership Agreement shall form the Partnership;
(vi) Universal shall cause the Partnership to assume the
Contributed Liabilities; and
(vii) each of Universal, USAi, USANi Sub and Diller (or
Affiliates thereof) shall receive interests in the Partnership as set forth in
the Partnership Agreement.
(b) Prior to Closing, the Parent Parties shall agree upon a schedule
that sets forth the agreed allocation of values of the interests being
Contributed pursuant to Section 2.03(a) for tax purposes.
SECTION 2.04. Other Transactions. On the Closing Date,
(i) (A) USAi and The Bank of New York shall execute and deliver the
Warrant Agreement and (B) USAi shall issue and deliver Warrants to the
Affiliate of Vivendi set forth in Schedule 2.04(b) in the amounts and with
the exercise prices as set forth in Schedule 2.04; provided, that if any
event shall have occurred after the close of business on November 30, 2001
(the "Reference Date") and on or prior to the Closing Date that would
result in an adjustment to the number of shares purchasable upon the
exercise of Warrants under Article IV of the Warrant Agreement if such
Warrants had been issued on the Reference Date, USAi shall issue and
deliver to the Affiliate of Vivendi set forth in Schedule 2.04(b) Warrants
to purchase the number of shares set forth on Schedule 2.04 as so
adjusted, with exercise prices adjusted accordingly;
(ii) Universal shall cause the Partnership to incur third party debt
(on terms reasonably satisfactory to USAi) in an amount sufficient to fund
the special distribution contemplated by Section 8.05 of the Partnership
Agreement, which will be payable to USANi Sub on the Closing Date out of
the proceeds of such debt.
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SECTION 2.05. Assignment of Contracts and Rights. Anything in this
Agreement to the contrary notwithstanding, except as set forth on Schedule 2.05,
this Agreement shall not constitute an agreement to assign any Contract or
License or any claim or right or any benefit arising thereunder or resulting
therefrom, or an assumption of liability thereunder, if an attempted assignment
thereof, without the approval of a party thereto, would be ineffective or would
constitute a breach or other contravention thereof or give rise to any right of
termination thereof, as a direct result of such assignment. Each Parent Party
shall use its reasonable best efforts (which shall not require any payment of
money) to obtain the approval of the other parties to any such Contract or
License, or any claim or right or any benefit arising thereunder, for the
assignment thereof to, and the assumption by, the Partnership. If as of the
Closing Date an attempted assignment and assumption thereof would be ineffective
or would give rise to any right of termination thereof, each Parent Party shall
cooperate in arranging a mutually agreeable alternative to enable the
Partnership to obtain the benefits and assume the obligations under such
Contract or License in accordance with this Agreement as of the Closing Date or
as soon as practicable thereafter (including through a sub-contracting,
sub-licensing, or sub-leasing arrangement, or an arrangement under which such
Parent Party or one of its Affiliates would enforce such Contract or License for
the benefit of the Partnership, with the Partnership assuming such Parent
Party's or its Affiliate's obligations and any and all rights of such Parent
Party or its Affiliate against the other party thereto). If the approval of the
other party is obtained, such approval shall constitute a confirmation
(automatically and without further action of the parties) that such Contract or
License is assigned to the Partnership as of the Closing Date, and
(automatically and without further action of the parties) that the liabilities
with respect to such Contract or License are assumed by the Partnership as of
the Closing Date. The agreements set forth on Schedule 2.05 will apply with
respect to the USAi Contracts described therein.
SECTION 2.06. Closing Date. The closing of the transactions set
forth in this Article II (the "Closing") shall take place at the offices of
Cravath, Swaine & Moore, 825 Eighth Avenue, New York, New York 10019, at 10:00
a.m. on the second Business Day following the satisfaction (or to the extent
permitted, the waiver) of all the conditions to the parties' obligations set
forth in Article V (other than those requiring the delivery of documents or the
taking of other action at the Closing), or at such other place, time and date as
the parties hereto shall agree (the "Closing Date").
SECTION 2.07. Assignment of Rights by Diller. Diller may assign
beneficial interests in the right to receive up to an aggregate of 10% of the
Common Interests (as defined in the Partnership Agreement) that Diller is
entitled to receive upon the Closing to one or more Persons designated by Diller
prior to Closing; provided that no more than four such Persons may be
designated. For any such assignment to be effective, such assignee shall have
agreed, pursuant to an instrument in a form reasonably satisfactory to
Universal, to be bound by the terms of Section 6.07 of the Partnership
Agreement.
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ARTICLE III
Representations and Warranties of Parent Parties
------------------------------------------------
Representations and warranties of USAi relating to (i) the portions
of its Existing Business contained in USA Cable, Studios USA or their respective
subsidiaries speak only as to the period between February 13, 1998, and the date
hereof and (ii) the portions of its Existing Business contained in USA Films and
its subsidiaries speak only as to the period between May 29, 1999, and the date
hereof (it being understood that matters existing prior to (x) February 13,
1998, in the case of clause (i) above, and (y) May 29, 1999, in the case of
clause (ii) above, shall not be deemed to be a breach of a representation or
warranty that speaks on and after such respective date). Subject to the
immediately preceding sentence, each Parent Party (unless otherwise specified),
with respect to itself and, as applicable, with respect to its Affiliates,
represents and warrants to the other Parent Party as follows:
SECTION 3.01. Organization, Standing and Power. Each of such
Parent Party and its Transaction Affiliate(s) (i) is duly organized or formed,
validly existing and in good standing (with respect to jurisdictions which
recognize such concept) under the laws of the jurisdiction in which it is so
organized or formed and (ii) has full corporate or limited liability company
power and authority to perform and comply with all the terms and conditions of
each Transaction Document to which it is, or is specified to be, a party. Each
of such Parent Party and its Transaction Affiliate(s) is duly qualified to do
business as a foreign corporation or limited liability company and is in good
standing (with respect to jurisdictions which recognize such concept) in each
jurisdiction in which the nature of the business transacted by it or the
character or location of the properties owned or leased by it requires such
qualification, except where failure to be so qualified would not have a Material
Adverse Effect.
SECTION 3.02. Authority; Execution and Delivery; Enforceability.
Each of such Parent Party and its Affiliates has full power and authority to
execute and deliver the Transaction Documents to which it is, or is specified to
be, a party and to consummate the Transactions to which it is, or is specified
to be, a party. The execution, delivery and performance by each of such Parent
Party and its Affiliates of the Transaction Documents to which it is, or is
specified to be, a party and the consummation by each of such Parent Party and
its Affiliates of the Transactions to which it is, or is specified to be, a
party have been (or, with respect to such Affiliates, prior to the Closing Date
will be) duly authorized by all necessary corporate or limited liability company
action subject, in the case of USAi, to receipt of the USAi Stockholder
Approvals, and no other corporate proceedings on the part of such Parent Party
or its Affiliates are necessary to authorize this Agreement or the consummation
of the Transactions. Each of such Parent Party and its Affiliates has duly
executed and delivered this Agreement (to the extent a party hereto) and prior
to the Effective Time will have duly executed and delivered each other
Transaction Document to which it is, or is specified to be, a party, and this
Agreement constitutes, and each other Transaction Document to which it is, or is
specified to be, a party will, after the Effective Time (assuming the execution
and delivery by each other party thereto), constitute its legal, valid and
binding obligations, enforceable against it in accordance with its terms. The
USAi Board formed a special committee of the USAi Board, composed of the four
disinterested directors on the USAi Board (the "Special Committee"), to consider
this Agreement, the other Transaction Documents to which USAi is a party and the
Transactions, and
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to make a recommendation with respect thereto to the entire USAi Board. The
Special Committee, at a meeting duly called and held at which all members of the
Special Committee were present either in person or by telephone, (x) received
the opinion of Bear, Stearns & Co. to the effect that the consideration to be
received by USAi in the Transactions is fair, from a financial point of view, to
the stockholders of USAi other than Universal, Liberty, Diller and their
Affiliates, and (y) duly and unanimously (and without any abstentions) adopted
resolutions (i) declaring advisable this Agreement, (ii) determining that the
terms of the Transactions are fair to and in the best interests of the public
stockholders of USAi, other than stockholders party to the Transactions, and
(iii) recommending that the USAi Board approve this Agreement, the other
Transaction Documents to which USAi is a party and the Transactions, and that
the USAi Board declare the advisability of this Agreement. After receiving and
considering such resolutions of the Special Committee, the USAi Board, at a
meeting duly called and held at which all directors of USAi were present either
in person or by telephone, duly adopted resolutions (i) approving and declaring
advisable this Agreement, (ii) determining that the terms of the Transactions
are fair to and in the best interests of the public stockholders of USAi other
than stockholders party to the Transactions, (iii) directing that this Agreement
and the Transactions be submitted to a vote at a meeting of USAi's stockholders
to be held as promptly as practicable following the date of this Agreement, (iv)
recommending that such stockholders adopt this Agreement and approve and
authorize the Transactions to the extent USAi is a party thereto and (v)
approving the other Transaction Documents to which USAi is a party and the
Transactions, which resolutions have not been subsequently rescinded, modified
or withdrawn in any way.
SECTION 3.03. No Conflicts; Consents. Except as set forth on
Schedule 3.03, the execution, delivery and performance by each of such Parent
Party and its Affiliates of this Agreement (to the extent a party hereto) does
not, the execution, delivery and performance by each of such Parent Party and
its Affiliates of each other Transaction Document to which it is, or is
specified to be, a party will not, and the consummation of the Transactions and
compliance with the terms of the Transaction Documents will not, conflict with
or result in any violation of or default (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 to
increased, additional or accelerated rights or entitlements of any Person under,
or result in the creation of any Lien upon any of the properties or assets of
such Parent Party or its Affiliates under, any provision of (i) the
Organizational Documents of such Parent Party or its Affiliates, (ii) any
Material Contract to which such Parent Party or its Affiliates is a party or by
which any of their respective properties or assets is bound or (iii) any
judgment, order or decree (collectively, "Judgment") or any statute, law,
ordinance, rule or regulation (collectively, "Applicable Law") applicable to
such Parent Party or its Affiliates or their respective properties or assets,
other than, in the case of clauses (ii) and (iii) above, any such items that,
individually or in the aggregate, would not have a Material Adverse Effect. No
consent, approval, license, permit, order or authorization (collectively,
"Consent") of, or registration, declaration or filing with, any Federal, state,
local or foreign government or any court of competent jurisdiction, regulatory
or administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (collectively, "Governmental Entity"), is
required to be obtained or made by or with respect to either such Parent Party
or any of its Affiliates in connection with the execution, delivery and
performance of the Transaction Documents to which it is, or is specified to be,
a party or the consummation of the Transactions, other than such Consents,
registrations, declarations or filings, the failure of which to obtain or make,
would not,
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individually or in the aggregate, have a Material Adverse Effect or those set
forth on Schedule 3.03.
SECTION 3.04. Capitalization of USAi; Warrants. USAi represents
and warrants to Universal that as of the close of business on the Reference Date
(a) the authorized capital stock of USAi consisted of (i) 1,600,000,000 shares
of USAi Common Stock, of which 314,347,113 shares were then issued and
outstanding and 6,379,547 shares were then held in treasury, (ii) 400,000,000
shares of Class B common stock of USAi, par value $.01 per share ("USAi Class B
Common Stock"), of which 63,033,452 shares were then issued and outstanding and
(iii) 100,000,000 shares of preferred stock of USAi, par value $.01 per share
("USAi Preferred Stock"), of which there were then no shares issued and
outstanding (the issued and outstanding shares in clauses (i) and (ii) above,
collectively, the "USAi Shares"). Except for the USAi Shares and the other
securities set forth in this Section 3.04, there are no shares of capital stock
or other equity securities of USAi issued, reserved for issuance or outstanding.
Except as set forth on Schedule 3.04 or, with respect to preemptive rights, as
set forth in the Investment Agreement, the USAi Shares are duly authorized,
validly issued, fully paid and nonassessable and not subject to or issued in
violation of any purchase option, call option, right of first refusal,
preemptive right, subscription right or any similar right under any provision of
the DGCL, the certificate of incorporation or by-laws of USAi or any Contract to
which USAi is a party or otherwise bound. Other than (i) options to purchase an
aggregate of 82,130,198 shares of USAi Common Stock issued pursuant to employee
benefit plans and agreements of USAi as of the date hereof, (ii) USANi Shares
entitling the holders thereof to acquire, in the aggregate, 181,366,238 shares
of USAi Common Stock and 146,570,000 shares of USAi Class B Common Stock, (iii)
31,620,064 shares of USAi Common Stock and 1,596,544 shares of USAi Class B
Common Stock issuable upon the exchange of shares of Home Shopping Network,
Inc., (iv) 1,137,498 shares of USAi Common Stock issuable upon conversion of
USAi's 7% Convertible Subordinated Debentures due July 1, 2003, (v) 167,994
shares of USAi Common Stock issuable upon the exercise of outstanding warrants,
(vi) 452,500 shares of USAi Common Stock issuable under various restricted stock
grants, (vii) up to 54,271,825 shares of USAi Common Stock issuable pursuant to
the Expedia Agreement (including 25,739,216 shares of USAi Common Stock issuable
upon the conversion of shares of USAi Preferred Stock issuable pursuant to the
Expedia Agreement), (viii) up to 13,125,000 shares of USAi Preferred Stock
issuable pursuant to the Expedia Agreement and (ix) up to 16,965,000 shares of
USAi Common Stock issuable upon the exercise of warrants issuable pursuant to
the Expedia Agreement, as of the date hereof, except in connection with this
Agreement and the Transactions contemplated hereby, or as set forth in the
Investment Agreement, the Governance Agreement, the Stockholders Agreement, the
Exchange Agreement and the USANi LLC Agreement, as of the Reference Date there
were not any options, warrants, rights, convertible or exchangeable securities,
"phantom" stock rights, stock appreciation rights, stock-based performance
units, commitments, Contracts or undertakings of any kind to which USAi is a
party or by which USAi is bound (i) obligating USAi to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of capital stock or
other equity interests in, or any security convertible or exercisable for or
exchangeable into any capital stock of or other equity interest in, USAi, (ii)
obligating USAi to issue, grant, extend or enter into any such option, warrant,
call, right, security, commitment, Contract, arrangement or undertaking or (iii)
that give any Person the right to receive any economic benefit or right similar
to or derived from the economic benefits and rights occurring to holders of USAi
Shares.
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(b) USAi has full power to execute and deliver the Warrants, and the
Warrants have been, or as of the Closing Date will be, duly authorized by USAi
and, when duly executed, issued and delivered, will be duly and validly issued
and outstanding and will constitute valid and legally binding obligations of
USAi, entitled to the benefits of the Warrant Agreement and enforceable against
USAi in accordance with their terms. As of the Closing Date, (i) 60,467,735
shares of USAi Common Stock, adjusted as set forth in Section 2.04 or pursuant
to Section 4.1(f) of the Warrant Agreement, shall be issuable upon the exercise
of the Warrants and (ii) such shares of USAi Common Stock have been or, prior to
the Closing Date, will be duly and validly authorized and reserved for issuance
upon exercise of the Warrants and, when issued upon such exercise, will be
validly issued, fully paid and nonassessable.
SECTION 3.05. The Contributed Subsidiaries. USAi represents and
warrants to Universal that, (a) Schedule 3.05(a) sets forth, for each
Contributed Subsidiary, the amount of its authorized capital stock or other
ownership interests, the amount of its outstanding capital stock or other
ownership interests and the record and beneficial owners of its outstanding
capital stock or other ownership interests. Except as set forth on Schedule
3.05(a), there are no shares of capital stock or other ownership interests in
any such Contributed Subsidiary issued, reserved for issuance or outstanding.
All the outstanding shares of capital stock or other ownership interests of each
such Contributed Subsidiary have been duly authorized and validly issued and are
fully paid and non-assessable and not subject to or issued in violation of any
purchase option, call option, right of first refusal, preemptive right,
subscription right or any similar right under any provision of the DGCL, if
applicable, the certificate of incorporation, by-laws or other organizational
documents of such Contributed Subsidiary or any Contract to which such
Contributed Subsidiary is a party or otherwise bound. There are not any bonds,
debentures, notes or other indebtedness of any such Contributed Subsidiary
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which holders of capital stock or
other ownership interests of such Contributed Subsidiary may vote ("Voting
Subsidiary Debt"). Except as set forth above, as of the date hereof, there are
not any options, warrants, rights, convertible or exchangeable securities,
"phantom" stock rights, stock appreciation rights, stock-based performance
units, commitments, Contracts or undertakings of any kind to which any such
Contributed Subsidiary is a party or by which any of them is bound (i)
obligating such Contributed Subsidiary to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other ownership
interests in, or any security convertible or exercisable for or exchangeable
into any capital stock of or other ownership interests in, any such Contributed
Subsidiary or Voting Subsidiary Debt, (ii) obligating such Contributed
Subsidiary to issue, grant, extend or enter into any such option, warrant, call,
right, security, commitment, Contract, arrangement or undertaking or (iii) that
give any Person the right to receive any economic benefit or right similar to or
derived from the economic benefits and rights occurring to holders of capital
stock or other ownership interests of such Contributed Subsidiary. As of the
date hereof, there are not any outstanding contractual obligations of any such
Contributed Subsidiary to repurchase, redeem or otherwise acquire any shares of
capital stock of such Contributed Subsidiary.
(b) (i) Except for ownership interests in its wholly owned
subsidiaries and the ownership interests set forth on Schedule 3.05(b), as of
the date hereof, no Contributed Subsidiary owns, directly or indirectly, any
capital stock, membership interest, partnership interest, joint venture interest
or other equity interest in any Person, other than any interest in
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special purpose subsidiaries formed in connection with motion picture or
television production projects, and (ii) the Contributed Subsidiaries do not own
(or will not own as of the Closing), directly or indirectly, any Excluded Assets
and are not (or will not be) liable (after giving effect to the indemnification
provisions of Article VII) in respect of any Excluded Liabilities.
SECTION 3.06. Financial Statements; No Undisclosed Liabilities.
(a) USAi represents and warrants to Universal that (i) the consolidated
financial statements of USAi included in the documents filed by USAi with the
SEC since January 1, 2000, through the date hereof (the "USAi SEC Documents")
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles in the United States ("U.S. GAAP") (except, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and present fairly, in all material respects, the consolidated financial
position of USAi and its consolidated subsidiaries as of the dates thereof and
the consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as set forth in the USAi SEC Documents, as of the date of
this Agreement, neither USAi nor any of its subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by U.S. GAAP to be set forth on a consolidated balance sheet or in the
notes thereto and that, individually or in the aggregate, would have a Material
Adverse Effect.
(ii) USAi has delivered to Universal a copy of the unaudited
interim balance sheet of USAi's Existing Business as of September 30, 2001 (the
"Balance Sheet"). The Balance Sheet has been prepared in accordance with U.S.
GAAP, from the books and records of USAi, and presents fairly, in all material
respects, the financial position of USAi's Existing Business as of the date
thereof, subject to normal year-end adjustments. Except as set forth in the
Balance Sheet, as of the date thereof, neither USAi nor any of its subsidiaries
had any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) arising primarily out of the conduct of USAi's Existing
Business and required by U.S. GAAP to be set forth on a consolidated balance
sheet or in the notes thereto and that, individually or in the aggregate, would
have a Material Adverse Effect.
(b) Universal represents and warrants to USAi that the consolidated
financial statements of Vivendi included in the documents filed by Vivendi with
the SEC since January 1, 2000, through the date hereof (the "Vivendi SEC
Documents") comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles in France ("French GAAP") applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and present fairly, in all material respects, the consolidated financial
position of Vivendi and its consolidated subsidiaries as of the dates thereof
and the consolidated results of their operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments). Except as set forth in the Vivendi SEC Documents, as of the
date of this Agreement, neither Vivendi nor any of its subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) required by French GAAP to be set forth on a consolidated balance
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sheet or in the notes thereto and that, individually or in the aggregate, would
have a Material Adverse Effect.
SECTION 3.07. Contracts. USAi's SEC Reports complied in all
material respects with the disclosure requirements of Item 601 of Regulation
S-K. Except as set forth on Schedule 3.07 and except as would not have a
Material Adverse Effect, all of the Material Contracts are in full force and
effect and are valid and binding agreements of USAi or its Affiliates and, to
the knowledge of USAi, the other parties thereto, enforceable in accordance with
their terms. Except as set forth on Schedule 3.07, to the knowledge of USAi, no
party is in default in any material respect under any of the Material Contracts,
nor does any condition exist that with notice or the lapse of time or both would
constitute such a default. Except for the need to obtain the Consents listed on
Schedule 3.03 and except as would not have a Material Adverse Effect, the
Transactions will not affect the validity or enforceability of any of the
Material Contracts. Except as set forth on Schedule 3.07 or as would not have a
Material Adverse Effect, as of the date of this Agreement, no party to any
Material Contract has informed USAi or, to USAi's knowledge, its Affiliates, of
its intention (x) to terminate such Material Contract or amend the material
terms thereof, (y) to refuse to renew such Material Contract upon expiration of
its term, or (z) to renew such Material Contract upon expiration only on terms
and conditions that are more onerous to its Existing Business, as the case may
be, than those now existing.
SECTION 3.08. Contributed Assets. (a) Such Parent Party owns,
directly or indirectly, and has good and valid title to all such Parent Party's
Contributed Assets, free and clear of all Liens, except Permitted Liens.
(b) Neither such Parent Party nor any of its Affiliates owns (or
will own as of the Closing) any asset, property or right, tangible or
intangible, that is primarily used in the business or operations of its Existing
Business, other than, in each case, such assets, properties and rights that are
being Contributed to the Partnership in accordance with this Agreement. Such
Parent Party's Contributed Assets are sufficient for the conduct of its business
by the Partnership immediately following the Closing in substantially the same
manner as currently conducted by such Parent Party.
SECTION 3.09. Real Property. No fee estates are included in the
Material Real Property. Except as set forth on Schedule 3.09, USAi or an
Affiliate thereof has good title to all the Material Real Property, free and
clear of all Liens or other restrictions on the Material Real Property, except
for Permitted Liens. Except for that portion of the Material Real Property
subject to leases where USAi is lessor or sublessor and except as would not have
a Material Adverse Effect, USAi is in possession of, and has full legal and
practical access to, the Material Real Property. As of the date hereof there are
no pending or, to the knowledge of USAi, threatened condemnation or
appropriation proceedings against any of the Material Real Property, except as
would not have a Material Adverse Effect. With respect to each leasehold or
subleasehold interest included in the Material Real Property, USAi or its
Affiliate has enforceable rights to nondisturbance and quiet enjoyment, and no
third party holds any interest in the leased premises with the right to
foreclose upon such leasehold or subleasehold interest, except as would not have
a Material Adverse Effect.
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SECTION 3.10. Intangible Property. Except (i) as set forth on
Schedule 3.10 or (ii) as has arisen in the ordinary course of business
consistent with past practice and without material diminution of the value
thereof, to the knowledge of USAi, no other person has any claim of ownership or
right of use with respect to its Intangible Property. The use of such Intangible
Property by USAi's Existing Business does not, and the use by the Partnership
immediately after the Closing will not, conflict with, infringe upon, violate,
or interfere with or constitute an appropriation of any right, title, interest,
or goodwill, including any intellectual property right, patent, trademark, trade
name, service mark, brand name, computer program, database, industrial design,
copyright, or any pending application therefor of any other Person (except for
such conflicts, infringements, violations or appropriations as would not have a
Material Adverse Effect), and, to the knowledge of USAi, there have been no
claims made, and USAi's Existing Business has not received any written notice,
that any such item of Intangible Property is invalid or conflicts with the
asserted rights of any Person (other than such invalidity or conflicts as would
not have a Material Adverse Effect).
SECTION 3.11. Licenses. Each material License of USAi's Existing
Business has been validly issued and is in full force and effect, and USAi, or
an Affiliate thereof, is the authorized legal holder thereof and has complied in
all material respects with all the terms and conditions thereof. As of the date
hereof, there is no Proceeding pending or, to USAi's knowledge, threatened,
seeking the revocation, modification (in a manner adverse to USAi's Existing
Business) or limitation of any material License of USAi's Existing Business, and
no such License will be subject to suspension, modification, revocation or
non-renewal as a result of the execution of this Agreement or the consummation
of the Transactions, except for such suspensions, modifications, revocations or
non-renewals as would not have a Material Adverse Effect. USAi possesses all
material Licenses to own or hold under lease and operate its Contributed Assets
that are necessary to enable it to conduct its Existing Business as currently
conducted.
SECTION 3.12. Absence of Changes or Events. Except as set forth
on Schedule 3.12 and except as disclosed in such Parent Party's SEC Reports,
since December 31, 2000 through the date hereof, (i) such Parent Party has
caused its Existing Business to be conducted in the ordinary course and in
substantially the same manner as previously conducted and (ii) there has not
been any Material Adverse Effect.
SECTION 3.13. Compliance with Applicable Laws. Except as
disclosed in such Parent Party's SEC Reports, the Existing Business of such
Parent Party has been and is presently being conducted in compliance with all
Applicable Laws, including those relating to the environment, except for
instances of noncompliance that, individually or in the aggregate, would not
have a Material Adverse Effect. Except as set forth on Schedule 3.13, (i)
neither such Parent Party nor any of its Affiliates has received any written
communication during the past year from a Governmental Entity that alleges that
its Existing Business is not in compliance in any material respect with any
Applicable Laws and (ii) neither such Parent Party nor any of its Affiliates has
received any written notice that any investigation or review by any Governmental
Entity with respect to any of its Contributed Assets or its Existing Business is
pending or that any such investigation is contemplated.
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SECTION 3.14. Litigation. Except as set forth on Schedule 3.14
or as disclosed in such Parent Party's SEC Reports, there are not any (i)
outstanding Judgments against or affecting such Parent Party, its Affiliates or
its Contributed Assets or Contributed Subsidiaries, or (ii) claims, actions,
suits, proceedings, arbitrations, investigations, inquiries, or hearings or
notices of hearings (collectively, "Proceedings") pending or, to the knowledge
of such Parent Party, threatened against or affecting such Parent Party, its
Affiliates or its Contributed Assets or Contributed Subsidiaries, by or against
any Governmental Entity or any other Person, that in any manner challenges or
seeks to prevent, enjoin, materially alter or materially delay the Transactions
or that, individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect.
SECTION 3.15. Universal Contributed Interests. Universal
represents and warrants to USAi that, as of the Closing Date, all the
outstanding shares of capital stock or other ownership interests of each
Universal Contributed Interest will have been duly authorized and validly issued
and will have been fully paid and non-assessable and not subject to or issued in
violation of any purchase option, call option, right of first refusal,
preemptive right, subscription right or any similar right under any provision of
the DGCL, if applicable, the certificate of incorporation, by-laws or other
organizational documents of such Universal Contributed Interest or any Contract
to which such Universal Contributed Interest is a party or otherwise bound. As
of the Closing Date, there will not be any bonds, debentures, notes or other
indebtedness of any such Universal Contributed Interest having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote)
on any matters on which holders of capital stock or other ownership interests of
such Universal Contributed Interest may vote ("Voting Contributed Interest
Debt"). As of the Closing Date, there will not be any options, warrants, rights,
convertible or exchangeable securities, "phantom" stock rights, stock
appreciation rights, stock-based performance units, commitments, Contracts or
undertakings of any kind to which any such Universal Contributed Interest is a
party or by which any of them is bound (i) obligating such Universal Contributed
Interest to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or other ownership interests in, or any
security convertible or exercisable for or exchangeable into any capital stock
of or other ownership interests in, any such Universal Contributed Interest or
Voting Contributed Interest Debt, (ii) obligating such Universal Contributed
Interest to issue, grant, extend or enter into any such option, warrant, call,
right, security, commitment, Contract, arrangement or undertaking or (iii) that
give any Person the right to receive any economic benefit or right similar to or
derived from the economic benefits and rights occurring to holders of capital
stock or other ownership interests of such Universal Contributed Interest.
(b) As of the Closing Date, the Universal Contributed Interests will
not own, directly or indirectly, any Excluded Assets and will not be liable
(after giving effect to the indemnification provisions of Article VII) in
respect of any Excluded Liabilities.
SECTION 3.16. Brokers or Finders. No agent, broker, investment
banker or other firm or person is or will be entitled to receive from a Parent
Party or its Affiliates or the Partnership any broker's or finder's fee or any
other commission or similar fee in connection with any of the Transactions,
except (i) as to Universal and its Affiliates, Goldman, Sachs & Co., whose fees
and expenses will be paid by Universal, and (ii) as to USAi and its Affiliates,
Allen & Co. and Bear, Stearns & Co., whose fees and expenses will be paid by
USAi.
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SECTION 3.17. Investment Intent. Such Parent Party understands
that (i) the interests in the Partnership to be issued to it as contemplated by
the Partnership Agreement have not been, and will not be, registered under the
Securities Act of 1933, as amended, or under any state securities laws, and are
being offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering, and (ii) to the extent it or any
of its Affiliates acquires any of the interests in the Partnership as
contemplated by the Partnership Agreement, it or such Affiliate will be
acquiring such shares solely for its own account for investment purposes, and
not with a view to the distribution thereof.
SECTION 3.18. Tax Matters. (a) All material Returns required to
be filed by such Parent Party for taxable periods ending on or prior to the
Closing Date by, or with respect to, its Existing Business have been or will be
filed in accordance with all applicable laws, and all Taxes due have been or
will be paid, except where the failure to so file or so pay would not reasonably
be expected to have, in the aggregate, a Material Adverse Effect.
(b) USAi represents and warrants that, except as set forth on
Schedule 3.18(b), each entity to be Contributed to the Partnership by USAi or
USANi Sub pursuant to this Agreement and Section 3.01 of the Partnership
Agreement will be treated as a pass-through entity for U.S. federal income tax
purposes at the time of contribution.
SECTION 3.19. Employee Matters. For purposes hereof, "USAi
Benefit Arrangements" shall mean all material employee benefit plans or
arrangements that cover any employee of USAi's Existing Business (the "USAi
Business Employees") including any employment, severance, or other similar
contract, arrangement or policy and each plan or arrangement (written or oral)
providing for insurance coverage (including any self-insured arrangements),
workers' compensation, disability benefits, supplemental unemployment benefits,
vacation benefits, or retirement benefits or for deferred compensation,
profit-sharing, bonuses, stock options, stock appreciation rights, stock
purchases, or other forms of incentive compensation or post-retirement
insurance, compensation, or benefits.
(b) No USAi Benefit Arrangement is an "employee pension benefit
plan," as defined in Section 3(2) of ERISA (an "USAi Pension Plan"), that is
subject to Title IV of ERISA or Section 412 of the Code, and no USAi Benefit
Arrangement provides post-retirement welfare benefits, except as required by
law. Neither USAi nor any of its Affiliates has incurred or expects to incur any
liability or lien under Title IV of ERISA or Section 412 of the Code, which
liability or lien would be reasonably expected to have a Material Adverse
Effect.
(c) Without limiting the generality of Section 3.19(b), except as
set forth on Schedule 3.19(c) to be provided within 10 Business Days hereafter,
no USAi Benefit Arrangement or employee benefit plans of any of its Affiliates
or any entity required to be combined with USAi or any of its Affiliates under
Section 414(b), Section 414(c), Section 414(m), or Section 414(o) of the Code
(an "ERISA Affiliate") is a "multiemployer pension plan," as defined in Section
3(37) of ERISA, and neither USAi nor any of its Affiliates nor any of its ERISA
Affiliates has incurred or expects to incur any liability or lien with respect
to any multiemployer pension plan which liability or lien would be reasonably
expected to have a Material Adverse Effect.
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(d) Except as set forth on Schedule 3.19(d), none of USAi, any of
its Affiliates, or any of its ERISA Affiliates has incurred, or expects to incur
solely as a result of the consummation of the Transactions (including any
termination of employment in connection therewith), any cost, fee, expense,
liability, claim, suit, obligation, or other damage with respect to any USAi
Pension Plan, or any USAi Benefit Arrangement that could give rise to the
imposition of any liability, cost, fee, expense, or obligation on the
Partnership or any of its Affiliates, which would be reasonably expected to have
a Material Adverse Effect, and, to USAi's knowledge, no facts or circumstances
exist that could give rise to any such cost, fee, expense, liability, claim,
suit, obligation, or other damage, which would be reasonably expected to have a
Material Adverse Effect. Except as set forth on Schedule 3.19(d), neither the
execution and delivery of this Agreement nor the consummation of the
Transactions (including any terminations of employment in connection therewith)
will (i) increase any benefits otherwise payable under any USAi Benefit
Arrangement, which would be reasonably expected to have a Material Adverse
Effect or (ii) result in the acceleration of the time of payment or vesting of
any such payment, which would be reasonably expected to have a Material Adverse
Effect.
(e) USAi will deliver or make available to Universal within ten
business days hereafter true and complete copies of each of the following
documents:
(i) each USAi Benefit Arrangement (and, if applicable, related trust
agreements) and all amendments thereto, and (if applicable) each summary
plan description together with any summary of material modifications;
(ii) each written USAi Benefit Arrangement and written descriptions
thereof that has been distributed to the USAi Business Employees
(including descriptions of the number and level of employees covered
thereby); and
(iii) each employee handbook or similar document describing any USAi
Benefit Arrangement applicable to the USAi Business Employees.
(f) Except as set forth on Schedule 3.19(f) to be provided within 10
Business Days hereafter, no controversies, disputes or proceedings are pending
or, to USAi's knowledge, threatened, between USAi or any of its Affiliates, and
any of the USAi Business Employees, which would be reasonably expected to have a
Material Adverse Effect. Except as set forth on Schedule 3.19(f) to be provided
within 10 Business Days hereafter, no labor union or other collective bargaining
unit represents or, to USAi's knowledge, claims to represent any USAi Business
Employees and, to USAi's knowledge, there is no union campaign being conducted
to solicit cards from employees to authorize a union to request a National Labor
Relations Board Certification election with respect to any USAi Business
Employees.
(g) Except where any such failure would not be reasonably expected
to have a Material Adverse Effect, all USAi Benefit Arrangements (i) comply in
all material respects with Applicable Law, including but not limited to ERISA
and the Code, and (ii) have been administered in all material respects in
accordance with their terms, and all required contributions have been made to
such USAi Benefit Arrangements. Except as set forth on Schedule 3.19(g), all
USAi Pension Plans that are intended to be qualified under Section 401(a)
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of the Code have received a favorable determination letter from the Internal
Revenue Service, and USAi has no knowledge of any events that would cause such
letter to be revoked.
ARTICLE IV
Agreements and Covenants
------------------------
SECTION 4.01. Covenants Relating to Conduct of Business. (a)
Except for matters set forth in Schedule 4.01 or otherwise expressly permitted
by the terms of this Agreement, from the date hereof to the Closing, each Parent
Party shall cause its respective Existing Business to be conducted in the usual,
regular and ordinary course in substantially the same manner as previously
conducted (including with respect to advertising, promotions, capital
expenditures and inventory levels) and use all reasonable efforts to keep intact
the respective businesses of such Parent Party's Existing Business, keep
available the services of their current employees and preserve their
relationships with customers, suppliers, licensors, licensees, distributors and
others with whom they deal to the end that their respective businesses shall be
unimpaired at the Closing. Each Parent Party shall not, and shall not permit any
of its Affiliates to, take any action that would, or that could reasonably be
expected to, result in any of the conditions set forth in Article V not being
satisfied. In addition (and without limiting the generality of the foregoing),
except as set forth in Schedule 4.01 or otherwise expressly permitted or
required by the terms of this Agreement, each Parent Party shall not, and shall
not permit any of its Affiliates to, do any of the following in connection with
its Existing Business without the prior written consent of the other Parent
Party:
(i) with respect to any of its Contributed Subsidiaries, amend its
Organizational Documents, except as is necessary to consummate the
Transactions;
(ii) other than sweeping cash in the ordinary course of business
consistent with past practice, make any declaration or payment of any
dividend or any other distribution in respect of its equity interest in
any Contributed Subsidiary;
(iii) with respect to any of its Contributed Subsidiaries, redeem or
otherwise acquire any shares of its capital stock or issue any capital
stock (except upon the exercise of outstanding options) or any option,
warrant or right relating thereto or any securities convertible into or
exchangeable for any shares of such capital stock;
(iv) incur or assume any indebtedness for borrowed money or
guarantee any such indebtedness in connection with its Existing Business;
(v) permit, allow or suffer any Contributed Assets to become
subjected to any Lien of any nature whatsoever, except Permitted Liens;
(vi) cancel any material indebtedness (individually or in the
aggregate) or waive any claims or rights of substantial value relating to
its Existing Business;
(vii) except for intercompany loans among Contributed Subsidiaries
in the ordinary course of business or transactions in the ordinary course,
consistent with past practice and not material in amount, pay, loan or
advance any amount to, or sell, transfer
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or lease any of its assets to, or enter into any agreement or arrangement
with any of its Affiliates;
(viii)make any change in any method of financial accounting or
financial accounting practice or policy of its Existing Business other
than those required by generally accepted accounting principles;
(ix) make any change in the methods or timing of collecting
receivables or paying payables with respect to its Existing Business;
(x) other than in the ordinary course of business, make or incur any
capital expenditure in connection with its Existing Business that is not
currently approved in writing or budgeted;
(xi) sell, lease, license or otherwise dispose of any of the assets
of its Existing Business, except inventory, programming or other goods or
services sold in the ordinary course of business consistent with past
practice; or
(xii) authorize any of, or commit or agree to take, whether in
writing or otherwise, to do any of, the foregoing actions.
(b) Except as set forth in Schedule 4.01 or otherwise expressly
permitted by the terms of this Agreement or any ancillary agreements that may be
entered into in connection with the Transactions, USAi shall not, and shall not
permit any of its Affiliates to:
(i) adopt or amend any USAi Benefit Arrangement (or any plan or
arrangement that would be an USAi Benefit Arrangement if adopted) relating
primarily to its Existing Business or enter into, adopt, extend (beyond
the Closing Date), renew or amend any collective bargaining agreement or
other Contract relating to its Existing Business with any labor
organization, union or association, except in each case, in the ordinary
course of business and consistent with past practice or as required by
Applicable Law; or
(ii) (A) grant to any USAi Business Employee any increase in
compensation or benefits, except grants in the ordinary course of business
and consistent with past practice or as may be required under agreements
in existence on the date of this Agreement or (B) grant new options or
restricted stock to any USAi Business Employee except as may be required
under agreements in existence on the date of this Agreement.
(c) Each Parent Party shall promptly advise the other Parent Party
in writing of the occurrence of any matter or event that is material to the
business, assets, financial condition, or results of operations of its Existing
Business, taken as a whole.
(d) Notwithstanding any other provision of this Agreement, following
the date hereof, each Parent Party shall manage its cash (including any sweeps
thereof), payables and receivables relating to its Existing Business in each
case in the ordinary course of business and consistent with past practice.
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SECTION 4.02. Access to Information. Except as may be deemed
appropriate to ensure compliance with any Applicable Laws and subject to any
applicable privileges, from the date hereof to the Closing Date each Parent
Party (i) shall give the other Parent Party and its authorized representatives
reasonable access to the offices, properties, books and records of it relating
to its Existing Business during normal business hours and upon reasonable prior
notice, (ii) shall furnish to such other Parent Party and its authorized
representatives such financial and operating data and other information relating
to such Existing Business as such other Parent Party may reasonably request and
(iii) shall instruct its employees and representatives to cooperate with such
other Parent Party in its investigation of such Existing Business, all for the
purpose of enabling such other Parent Party and its authorized representatives
to conduct, at their own expense, business and financial reviews, investigations
and studies of such Existing Business. No investigation pursuant to this Section
4.02 shall affect or otherwise obviate or diminish any representations or
warranties of any Parent Party or conditions to the obligations of any Parent
Party.
SECTION 4.03. Confidentiality. Each Parent Party acknowledges
that the information being provided to it in connection with the consummation of
the Transactions, as well as the information relating to its Existing Business
that will be Contributed to the Partnership as of the Closing Date, is intended
to be kept confidential, and each Parent Party shall keep confidential, and
cause its Affiliates and instruct its and their officers, directors, employees
and advisors to keep confidential, all such information, except as required by
law or administrative process and except for information that is currently
available to the public, or thereafter becomes available to the public other
than as a result of a breach of this Section 4.03. The covenant set forth in
this Section 4.03 shall terminate five years after the date of this Agreement.
SECTION 4.04. Reasonable Best Efforts. (a) On the terms and
subject to the conditions of this Agreement, each Parent Party and its
Affiliates shall use its reasonable best efforts to cause the Closing to occur
as soon as practicable after the date hereof (but subject to the satisfaction of
the conditions set forth in Article V), including taking all reasonable actions
necessary to comply promptly with all legal requirements that may be imposed on
it or any of its Affiliates with respect to the Closing.
(b) Subject to Section 2.05, prior to the Closing each Parent Party
(at its own expense) shall use its reasonable best efforts to obtain, and shall
cause its Affiliates to cooperate in obtaining, all consents and approvals from
third parties necessary or appropriate to permit the contributions contemplated
by Section 2.03 and the consummation by such Parent Party and its Affiliates of
the Transactions.
(c) Following the date hereof, each Parent Party shall file promptly
any forms required under applicable law and take any other action reasonably
necessary in connection with obtaining the expiration or termination of the
waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, to the extent applicable to the Transactions.
SECTION 4.05. Expenses; Transfer Taxes. (a) Whether or not the
Closing takes place, and except as set forth in Section 6.02(b) or in Article
VII, all costs and expenses incurred in connection with the preparation of the
Transaction Documents and the consummation of the
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Transactions shall be paid by the party incurring such costs and expenses,
including all costs and expenses incurred pursuant to Section 4.04.
(b) Any liabilities, obligations or commitments for transfer,
documentary, sales, use, registration, value-added and other similar Taxes,
governmental fees or other like assessments or charges of any kind whatsoever
and related amounts (including any penalties, interest and additions thereto)
(each, a "Transfer Tax") shall be paid as follows: (i) USAi shall pay all
Transfer Taxes on the contribution to the Partnership of the USANi Contributed
Interests and the membership interests in USA Films pursuant to Section 2.03(a),
(ii) Universal shall pay all Transfer Taxes on the contribution of the Universal
Contributed Interests and the USANi Distributed Interests to the Partnership
pursuant to Section 2.03(a) and (iii) each Parent Party shall pay one half of
the Transfer Taxes on the distribution by USANi of the USANi Distributed
Interests pursuant to Section 2.02. The Parent Party responsible for paying a
Transfer Tax shall use (and cause its Affiliates to use) its reasonable efforts
to avail itself of any available exemptions from any such Transfer Taxes, and
the Parent Parties shall cooperate with one another in providing any information
and documentation that may be necessary to obtain such exemptions.
SECTION 4.06. Distribution Agreements. (a) On the earlier to
occur of (i) the Closing Date and (ii) the date on which this Agreement is
terminated in accordance with Section 6.01, the Distribution Agreements shall
terminate (and each Parent Party shall take all efforts necessary to effectuate
the foregoing), and the parties thereto shall have no further obligations or
liabilities thereunder (including under the provisions of each such agreement
relating to (x) distribution obligations after termination or (y) rights of
first negotiation and last refusal after termination), except with respect to
services rendered prior to the date of such termination.
(b) On the Closing Date, the Ancillary Distribution Agreements shall
terminate (and each Parent Party shall take all efforts necessary to effectuate
the foregoing), and the parties thereto shall have no further obligations or
liabilities thereunder, except with respect to services rendered prior to the
date of such termination.
(c) Each Parent Party agrees, on behalf of itself and its
Affiliates, that for a reasonable period of time and not less than one year
following the termination of the Distribution Agreements, it or its Affiliates
will make available to the other Parent Party and its Affiliates (for the
domestic and international distribution of television programming produced by
such Parent Party or its Affiliates), any excess capacity, under existing output
agreements or otherwise, with respect to the domestic and international
distribution of television programming that such Parent Party and its Affiliates
are unable to use for their own programming. In connection with the termination
of the agreements set forth in Section 4.06(a), Universal and USAi shall
cooperate and act in good faith (i) to continue to provide television
distribution, including access to output agreements, for a period of one-year
following the termination date under Section 4.06(a) on terms and conditions
(not including with respect to exclusivity, non-compete and the like) consistent
with past practice, and (ii) to provide for the orderly wind down of any
in-process commitments or obligations so as not to unreasonably disrupt the
Existing Businesses.
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SECTION 4.07. Publicity. From the date hereof through the
Closing Date, no public release or announcement concerning the Transactions
shall be issued by any party or any of its Affiliates without the prior consent
of the other parties (which consent shall not be unreasonably withheld), except
as such release or announcement may be required by law or the rules or
regulations of any United States or foreign securities exchange or commission
(in which case the party required to make the release or announcement shall
allow the other parties reasonable time to comment on such release or
announcement in advance of such issuance); provided, however, that a party may
make internal announcements to its and its Affiliates' employees that are
consistent with the parties' prior public disclosures regarding the
Transactions.
SECTION 4.08. Further Assurances. (a) From time to time prior to
and after the Closing, as and when reasonably requested by another party, each
party shall execute and deliver, or cause to be executed and delivered, all such
documents and instruments and shall take, or cause to be taken, all such further
or other actions (subject to Section 4.04), as such other party may reasonably
deem necessary or desirable to consummate the Transactions.
(b) Universal and its Affiliates and Liberty and its Affiliates
shall use their respective reasonable best efforts (subject to the terms of the
Universal/Liberty Merger Agreement) to cause the conditions to closing set forth
in Sections 6.01, 6.02 and 6.03 of the Universal/Liberty Merger Agreement to be
satisfied as promptly as practicable. Universal and its Affiliates shall not,
without USAi's written consent, terminate the Universal/Liberty Merger Agreement
(other than pursuant to Section 7.01(a)(iv) thereof) or amend the
Universal/Liberty Merger Agreement in any manner that would (i) delay the
consummation of the Transactions in any material respect, or (ii) increase the
consideration payable to Liberty and/or its Affiliates thereunder, other than in
connection with any amendments entered into pursuant to Section 5.01(d) of the
Universal/Liberty Merger Agreement.
(c) In the event that at any time or from time to time after the
Closing, any Parent Party (or its Affiliates) shall receive or otherwise possess
any Contributed Asset that was not assigned or otherwise transferred to the
Partnership at the Closing, such Parent Party shall promptly use its reasonable
best efforts to transfer, or cause to be transferred, such asset to the
Partnership. Prior to any such transfer, the Parent Party (or its Affiliates)
possessing such asset shall hold such asset (and all earnings generated by such
asset from and after the Closing) in trust for the Partnership.
SECTION 4.09. Board Recommendation. Neither the USAi Board nor
any committee thereof shall withdraw or modify in a manner adverse to Universal,
or propose to withdraw or modify, in a manner adverse to Universal, the approval
or recommendation by the USAi Board or any such committee of this Agreement, the
other Transaction Documents to which USAi is a party or the Transactions.
Notwithstanding the foregoing, if, prior to the USAi Stockholder Approvals, (a)
a majority of the Special Committee determines in good faith, following receipt
of the advice of outside counsel, that it is necessary to do so in order to
comply with its fiduciary obligations, the Special Committee may withdraw or
modify its recommendation of this Agreement, the other Transaction Documents to
which USAi is a party and the Transactions, and (b) a majority of the USAi Board
determines in good faith, following receipt of the advice of outside counsel,
that it is necessary to do so in order to comply with its
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fiduciary obligations, the USAi Board may withdraw or modify its recommendation
to USAi's stockholders of this Agreement, the other Transaction Documents to
which USAi is a party and the Transactions; provided that neither the Special
Committee nor the USAi Board may take any action that would result in USAi's
stockholders no longer being legally capable under the DGCL of approving or
authorizing this Agreement or the Transactions.
SECTION 4.10. Preparation of Proxy Statement; Stockholders
Meeting. (a) As soon as practicable after execution of this Agreement, USAi
shall prepare and file with the SEC a preliminary Proxy Statement, in form and
substance reasonably satisfactory to Universal, and shall use its reasonable
best efforts to respond, after consultation with Universal, as promptly as
practicable to any comments of the SEC with respect thereto. USAi shall notify
Universal promptly of the receipt of any comments from the SEC or its staff and
of any request by the SEC or its staff for amendments or supplements to the
Proxy Statement or for additional information. USAi shall supply Universal with
copies of all correspondence between it or its representatives, on the one hand,
and the SEC or its staff, on the other hand, with respect to the Proxy
Statement. Universal shall cooperate with USAi in providing any information or
responses to comments, or other assistance, reasonably requested in connection
with the foregoing. If at any time prior to receipt of the USAi Stockholder
Approvals there shall occur any event that should be set forth in an amendment
or supplement to the Proxy Statement, USAi shall promptly prepare and mail to
its stockholders such an amendment or supplement. USAi shall use its reasonable
best efforts to cause the Proxy Statement to be mailed to its stockholders as
promptly as practicable after filing with the SEC. The Proxy Statement shall
comply in all material respects with all applicable requirements of law. None of
the information supplied or to be supplied by Vivendi, USAi or their respective
Affiliates for inclusion or incorporation by reference in the proxy statement
will contain any untrue statement of material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading.
(b) USAi shall duly call, give notice of, convene and hold a meeting
of its stockholders (the "USAi Stockholders Meeting") for the purpose of seeking
the USAi Stockholder Approvals as soon as practicable after the filing of the
definitive Proxy Statement. USAi shall, through the USAi Board, recommend to its
stockholders that they give the USAi Stockholder Approvals, except to the extent
that the USAi Board shall have withdrawn or modified its recommendation to
USAi's stockholders of this Agreement and the Transactions as permitted by
Section 4.09. USAi agrees that its obligations pursuant to this Section 4.10
shall not be affected by the withdrawal or modification by the USAi Board or any
committee thereof of such Board's or such committee's recommendation to USAi's
stockholders of this Agreement or the Transactions.
(c) Subject to clause (b) of this Section 4.10, each Parent Party
shall use its reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other Parent Party in doing, all things necessary, proper or advisable to obtain
the USAi Stockholder Approvals.
(d) At any meeting of the stockholders of USAi called to seek the
USAi Stockholder Approvals or in any other circumstances upon which a vote,
consent or other approval (including by written consent) with respect to this
Agreement or the Transactions is sought, such Parent Party or Diller, as
applicable, shall vote (or cause to be voted) any USAi
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Common Stock over which such Parent Party or Diller, as applicable, has the
power to vote in favor of granting the USAi Stockholder Approvals.
SECTION 4.11. Commercial Arrangements. (a) Each of USAi and
Vivendi shall enter into (or cause their respective Affiliates to enter into) a
series of strategic and commercial alliances with one another covering the
transactional and internet businesses of each of USAi and Vivendi and their
respective Affiliates on the Closing Date; provided, that if such alliances are
not entered into on or prior to the Closing Date, the obligations under this
provision shall continue after the Closing Date. The commitment to enter into
such agreements is an integral part of the Transactions and each of USAi and
Vivendi and their respective Affiliates shall negotiate in good faith the terms
thereof, which shall be mutually beneficial and on mutually satisfactory terms
and designed to treat each of USAi and Vivendi and their respective Affiliates
as a "preferred partner" of the other.
(b) The Parent Parties shall negotiate in good faith to enter into
an agreement on the Closing Date pursuant to which the Partnership will provide
affiliate distribution of the Home Shopping Network, America's Store and other
transactional services (such as a travel network) on an arm's-length basis;
provided, that if such agreement is not entered into on or prior to the Closing
Date, the obligations to provide such affiliate distribution shall continue
after the Closing Date.
(c) The Parent Parties agree to the arrangements set forth on
Schedule 4.11(c).
(d) The failure to enter into any of the agreements set forth in
this Section 4.11 prior to the Closing Date will not constitute a failure of the
condition set forth in Section 5.02(b).
SECTION 4.12. Tax Matters. (a) The Parent Parties intend that
the Partnership be treated as a partnership for United States federal income tax
purposes and agree to take no actions inconsistent with such treatment. The
Parent Parties agree, except as otherwise required pursuant to a final
determination within the meaning of Section 1313(a)(1) of the Code, to treat the
transactions contemplated by Section 2.02 as a distribution by USANi to
Universal and/or its Affiliates governed by Section 731 of the Code and the
transactions contemplated by Sections 2.03 as a contribution of property to the
Partnership governed by Section 721(a) of the Code and a distribution by the
Partnership to USANi Sub, in each case that will not result in recognition of
gain or loss by any Parent Party or any of their respective Affiliates under any
provision of the Code or the Treasury Regulations thereunder.
(b) To the extent any entity to be Contributed to the Partnership by
Universal pursuant to this Agreement and Section 3.01 of the Partnership
Agreement is treated as other than a pass-through entity for U.S. federal income
tax purposes, Universal shall take all reasonable actions necessary to cause
such entity (or its successor) to be treated as a pass-through entity for U.S.
federal income tax purposes (a "Conversion"), provided that Universal has
determined in good faith that (i) neither Universal nor any of its Affiliates
shall suffer a material tax detriment or any other material cost as a result of
such Conversion and (ii) such Conversion is not prohibited by applicable
contract or law.
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(c) Subject to Universal delivering to USAi a schedule setting forth
Universal's (or any of its Affiliate's) adjusted tax basis in any assets that
were contributed to USANi or any of its subsidiaries by Universal (or any of its
Affiliates) in a transaction in which USANi or any of its subsidiaries took a
transferred basis, USAi will deliver to Universal no later than 30 days prior to
the Closing Date a schedule setting forth to USAi's best knowledge USANi Sub's
tax basis, immediately after the Effective Time, in its interest in the
Partnership.
(d) No later than 30 days prior to the Closing Date, USAi shall
deliver to Universal a schedule setting forth, to the best knowledge of USAi,
the adjusted tax basis of USAi or USANi Sub, as the case may be, in each of the
assets to be contributed by USAi or USANi Sub, as the case may be, to the
Partnership.
SECTION 4.13. Agreement Not To Compete. (a) USAi understands
that the Partnership shall be entitled to protect and preserve the going concern
value of USAi's Existing Business to the extent permitted by law and that
Universal would not have entered into this Agreement absent the provisions of
this Section 4.13 and, therefore, for a period from the Closing Date until the
date that is the later of (1) 18 months after the Closing Date and (2) six
calendar months after the date upon which Diller ceases to be the CEO of the
Partnership, USAi shall not, and shall cause each of its controlled Affiliates
not to, directly or indirectly:
(i) engage in the Business or acquire any interest in any Person
engaged in the Business; and
(ii) (A) solicit, recruit or hire any employees of any Existing
Business or the Partnership or Persons who have worked for any Existing
Business or the Partnership, in each case other than employees who perform
solely clerical functions for such Persons, (B) solicit or encourage any
employee of any Existing Business or the Partnership to leave the
employment of any Existing Business or the Partnership, in each case other
than employees who perform solely clerical functions for such Persons, and
(C) disclose or furnish to anyone any confidential information relating to
its Existing Business or the Partnership or otherwise use such
confidential information for its own benefit or the benefit of any other
Person; provided that the non-solicitation provisions of clauses (A) and
(B) shall be deemed not breached by any advertisement or general
solicitation that is not specifically targeted at the employees or Persons
referred to therein;
provided, further, that if at any time after 18 months after the Closing Date
(x) Diller shall cease to be the CEO or an officer of USAi or any of its
Affiliates but shall still be the CEO of the Partnership, or (y) Diller resigns
as CEO of the Partnership for Good Reason or is terminated without Cause (each,
as defined in the Partnership Agreement), then the restrictions set forth in
this Section 4.13(a) shall cease to apply. Notwithstanding the foregoing, USAi
agrees that it shall not restructure, reorganize or take any other action in an
effort to circumvent the terms or intent of this Section 4.13(a).
(b) Section 4.13(a) shall be deemed not breached as a result of the
ownership by USAi or any of its Affiliates of: (i) interests in the Partnership,
(ii) less than an aggregate of 5% of any class of stock of a Person engaged,
directly or indirectly, in the Business; provided, however, that such stock is
listed on a national securities exchange, (iii) Vivendi ordinary shares
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as the result of the exercise of a put or a call under Section 10.03 of the
Partnership Agreement, (iv) less than 10% in value of any instrument of
indebtedness of a Person engaged, directly or indirectly, in the Business, and
(v) the whole or any part of an acquired Person or business which carries on the
Business, where less than 30% of such Person's revenues are generated by the
Business, and USAi or its Affiliates will dispose of such Business within six
months of its acquisition, provided that such disposition may be delayed pending
receipt of required regulatory approvals.
(c) USAi agrees that this covenant is reasonable with respect to its
duration and scope. If, at the time of enforcement of this Section 4.13, a court
holds that the restrictions stated herein are unreasonable under the
circumstances then existing, the parties hereto agree that the period and scope
legally permissible under such circumstances will be substituted for the period
and scope stated herein.
SECTION 4.14. USAi Partnership Interests . USAi covenants and
agrees that at all times its interests in the Partnership shall be held directly
by USAi or by a wholly owned direct or indirect subsidiary of USAi, provided,
however, that this covenant shall not be deemed to be breached solely as a
result of the fact that Home Shopping Network, Inc. is not a wholly owned
subsidiary of USAi, so long as Liberty and USAi remain the only shareholders of
Home Shopping Network, Inc. and Liberty's ownership percentage of Home Shopping
Network, Inc. does not increase materially.
SECTION 4.15. Officers of the Partnership. Universal shall cause
Diller to be appointed as the CEO and Chairman of the Partnership, as
contemplated by the Partnership Agreement.
SECTION 4.16. Partnership Agreement Obligations. Vivendi shall
comply with the terms of Section 10.03 of the Partnership Agreement and
Universal shall comply with the terms of Sections 8.07 and 10.03 of the
Partnership Agreement, in each case, as if it were a party to such agreement.
Vivendi shall cause the general partner of the Partnership to perform all of its
obligations as the general partner under the Partnership Agreement.
SECTION 4.17. Committed LLC Shares; Committed Common Equity. (a)
Between the date hereof and the Closing, Universal shall not, and shall not
permit any of its Affiliates to, sell, transfer, pledge, encumber, assign or
otherwise dispose of, or enter into any contract, option or other arrangement or
understanding with respect to the sale, transfer, pledge, encumbrance,
assignment or other disposition of, the Committed LLC Shares. Any transfer of
Committed LLC Shares not permitted hereby shall be null and void.
(b) As of the Closing, V-USA Holding LLC, USI-USA Holding LLC,
USIE-USA Holding LLC, SUB I-USA Holding LLC (collectively, the "USA Holding
Entities"), Vivendi, Universal and USAi shall execute, deliver and consummate
the transactions contemplated by the Assignment Agreement. Following the Closing
and until such time that the obligations in Section 8.07 of the Partnership
Agreement are satisfied, Universal and its Affiliates shall at all times retain
at least 43,181,308 shares of USAi Common Stock and 13,430,000 shares of USAi
Class B Common Stock (as adjusted for stock splits and the like, together, the
"Committed Common Equity"), in each case, free of any Liens, except Permitted
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Liens. To the extent that some, but not all, of the Committed Common Equity is
required to satisfy the obligations of Universal and the USA Holding Entities
under the Partnership Agreement, Universal and the USA Holding Entities and
their respective Affiliates shall satisfy such obligations, first out of USAi
Class B Common Stock, and second out of USAi Common Stock.
SECTION 4.18. Partnership. (a) Universal shall ensure that the
Partnership, when formed, is formed as a Delaware limited liability limited
partnership, is formed for the purpose of engaging in the Transactions and for
the other purposes set forth in the Partnership Agreement, and, following its
formation through to the Closing, does not engage in any business activities or
incur any liabilities, other than as specifically contemplated by the
Transactions.
(b) Universal shall from time to time, directly or indirectly,
contribute sufficient equity to the Partnership to ensure the Partnership is
able to perform all of its obligations under Sections 8.01, 8.02 and 8.06 of the
Partnership Agreement.
SECTION 4.19. Substitute Letters of Credit; Guarantees. As
promptly as practicable following the date hereof, USAi shall provide to
Universal a list of letters of credit, guarantees and any similar obligations of
USAi and its Affiliates (other than the Contributed Subsidiaries) primarily
related to USAi's Existing Business and not constituting Excluded Liabilities.
Effective as of the Closing, Universal shall cause the Partnership or one of its
Affiliates to procure substitute letters of credit, and shall cause the
Partnership or one of its Affiliates to be substituted in all respects for any
of USAi or its Affiliates (other than the Contributed Subsidiaries) with respect
to any such matters.
SECTION 4.20. USANi Tax Distribution. A distribution (as
calculated pursuant to Section 8.2 of the USANi LLC Agreement) shall be made by
USANi to each Liberty Party that holds an interest in USANi prior to the
exchanges of USANi Shares for Shares of USAI Common Stock contemplated by
Section 2.01 of the Universal/Liberty Merger Agreement (the "Tax Distribution"),
and the proceeds of such Tax Distribution shall be distributed by such Liberty
Party to its shareholder, immediately prior to any Merger involving such Liberty
Party. The amount of such Tax Distribution shall be calculated in the good faith
judgment of USANi based on facts known as of the date of such Tax Distribution
and such Tax Distribution shall be made with respect to any taxable period (or
portion thereof) of USANi (up to and including the Closing Date) and such
determination shall be final and binding upon the parties. For purposes of this
Section 4.20, "Liberty Party" and "Merger" shall have the meanings assigned to
such terms by the Universal/Liberty Merger Agreement.
SECTION 4.21. Lease Arrangement. For a reasonable transition
period of up to two years following the Closing (but in no event later than the
date that executives of USAi's Existing Business as of the date hereof cease to
occupy such premises), the Partnership shall be entitled to occupy the premises
located at 8800 Sunset Boulevard, West Hollywood, California, on a rent-free
basis.
SECTION 4.22. USA Name. The Parent Parties acknowledge that the
USA Name shall be Contributed to the Partnership as of the Closing Date. Prior
to the Closing the Parent Parties shall negotiate in good faith to determine how
the ownership of the various logos
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and designs currently associated with the USA Name ("Associated IP") shall be
allocated, it being understood that (A) USAi shall be granted a perpetual,
non-exclusive royalty-free license to use the USA Name in connection with its
other businesses and (B) whichever Parent Party is allocated ownership of a
particular piece of Associated IP will grant to the other Parent Party the right
to use such Associated IP consistently with current practice and without any
significant economic cost to the grantee. The Parent Parties shall work
cooperatively to provide for an orderly transition and to minimize confusion
resulting from the use of the USA Name by the Partnership and USAi.
SECTION 4.23. Options and Restricted Stock. Vivendi shall use
its reasonable best efforts to ensure that each USAi Business Employee, who
holds stock options to acquire USAi Common Stock, whether vested or unvested,
in-the-money or underwater (the "USAi Options") and/or USAi restricted Common
Stock awards (the "USAi Restricted Stock", collectively with the USAi Options,
the "USAi Equity Awards"), shall be awarded, as of the Closing Date (or, if the
date of forfeiture of the USAi Option is 90 days or more following the Closing
Date, as soon as reasonably practicable following the applicable forfeiture
date), subject to the forfeiture of any USAi Equity Award, stock options,
restricted stock or other equity-based compensation in respect of Vivendi
American Depositary Shares representing Vivendi ordinary shares par value 5.50
per share (the "ADSs") that have a "value" that is at least equal to the "value"
of the forfeited USAi Equity Awards (the "Vivendi Replacement Awards"). The
Vivendi Replacement Awards shall at a minimum (a) preserve the intrinsic value
(i.e., the "spread") of the USAi Options that are in-the-money (relative to the
fair market value of the ADSs underlying the Vivendi Replacement Awards) and the
fair market value of the USAi Restricted Stock and (b) with respect to USAi
Options that are underwater, have an exercise price such that the Vivendi
Replacement Awards are not underwater by a greater percentage of fair market
value than the underwater USAi Options, in all cases measured as of the date of
grant of the Vivendi Replacement Awards. USAi represents that the maximum number
of shares of USAi Restricted Stock held by USAi Business Employees that will be
required to be replaced with Vivendi Replacement Awards is 57,500 shares of USAi
Common Stock.
ARTICLE V
Conditions Precedent
--------------------
SECTION 5.01. Conditions to Each Party's Obligation. The
obligation of each party to consummate the Transactions is subject to the
satisfaction on the Closing Date of the following conditions, any one or more of
which conditions of each party may be waived by such party to the extent
permitted by law:
(a) Other than such Consents, registrations, declarations or filings
the failure of which to obtain would not have a Material Adverse Effect, all
Consents of, or registrations, declarations or filings with, or expirations of
waiting periods imposed by, any Governmental Entity necessary for the
consummation of the Transactions shall have been obtained or filed or shall have
occurred.
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(b) No Applicable Law or Judgment enacted, entered, promulgated,
enforced or issued by any Governmental Entity or other legal restraint or
prohibition preventing the consummation of the Transactions shall be in effect.
(c) USAi shall have received the USAi Stockholder Approvals at the
USAi Stockholder Meeting.
(d) The other parties shall have furnished such other documents
relating to the corporate existence and the authority to consummate the
Transactions of such other parties and their respective Affiliates, and such
other matters as counsel to such party may reasonably request.
(e) The Transaction Documents shall have been executed and delivered
by each other party thereto, and the USAi Share Exchanges and the Mergers (each
as defined in the Universal/Liberty Merger Agreement) shall have been
consummated; provided, that USAi and Universal shall not be entitled to waive
the satisfaction of the foregoing condition without the prior written approval
of Liberty.
SECTION 5.02. Additional Conditions to Obligation of each Parent
Party. The obligation of each Parent Party to consummate the Transactions is
further subject to the satisfaction on the Closing Date of the following
conditions, any one or more of which conditions of such Parent Party may be
waived by such party to the extent permitted by law:
(a) Except to the extent that the failure of such representations
and warranties to be true and correct, in the aggregate, would not (after giving
effect to the operation of Section 2.05) have a Material Adverse Effect: the
representations and warranties of the other Parent Party made in this Agreement,
without regard to any materiality or Material Adverse Effect qualification,
shall be true and correct as of the date hereof and, in the case of the
representations and warranties set forth in Sections 3.01, 3.02, 3.03 (only with
respect to the Organizational Documents of such Parent Party), 3.05, 3.08 and
3.15, as of the Effective Time, except to the extent such representations and
warranties expressly relate to an earlier date (in which case such
representations and warranties shall be true and correct as of such earlier
date), and such Parent Party shall have received a certificate signed by an
executive officer of the other Parent Party to such effect.
(b) The other Parent Party and its Affiliates shall have performed
or complied in all material respects with all obligations and covenants required
by this Agreement to be performed or complied with by such other Parent Party or
such Affiliates by the Effective Time, and such Parent Party shall have received
a certificate signed by an authorized officer of such other Parent Party to such
effect.
SECTION 5.03. Frustration of Closing Conditions. No Parent
Party may rely on the failure of any condition set forth in this Article V to be
satisfied if such failure was caused by (i) the action or willful inaction of
such party or its Affiliates, (ii) the failure of any representation or warranty
of such party qualified as to materiality to be true and correct or, those not
so qualified to be true and correct in all material respects, or (iii) failure
to use its reasonable best efforts to cause the Closing to occur as required by
Section 4.04.
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ARTICLE VI
Termination
-----------
SECTION 6.01. Termination. (a) Notwithstanding
anything to the contrary in this Agreement, this Agreement may be terminated and
the other Transactions abandoned at any time prior to the Effective Time,
whether before or after the USAi Stockholder Approvals are obtained:
(i) by mutual written consent of the parties hereto;
(ii) by either Parent Party if, upon a vote at a duly held
USAi Stockholder Meeting or any adjournment thereof, the USAi Stockholder
Approvals shall not have been obtained;
(iii) by either Parent Party if any of the conditions to such
Parent Party's obligations set forth in Article V shall have become
incapable of fulfillment, and shall not have been waived by such Parent
Party;
(iv) by Universal if the USAi Board or any committee thereof shall
have withdrawn or modified its approval or recommendation of this
Agreement or the Transactions; or
(v) by any party hereto, if the Closing does not occur on or prior
to September 30, 2002;
provided, however, that the party seeking termination pursuant to clause (ii),
(iii) or (v) is not in breach of any of its representations, warranties,
covenants or agreements contained in this Agreement in any material respect.
(b) In the event of termination by a party pursuant to this Section
6.01, written notice thereof shall forthwith be given to the other parties, and
the Transactions shall be terminated without further action by any party. If
this Agreement is terminated as provided herein, each party shall return all
documents and other material received from any other party relating to the
Transactions, whether so obtained before or after the execution hereof.
SECTION 6.02. Effect of Termination. (a) If this Agreement is
terminated and the Transactions are abandoned as described in Section 6.01, this
Agreement shall become null and void and of no further force and effect, except
for the provisions of (i) Section 3.16 relating to broker's and finder's fees,
(ii) Section 4.03 relating to the obligation of the Parent Parties to keep
confidential certain information and data obtained by it from the other parties,
(iii) Section 4.05 relating to certain expenses, (iv) Section 4.07 relating to
publicity, and (v) Section 6.01 and this Section 6.02 relating to termination.
Nothing in this Section 6.02 shall be deemed to release any party from any
liability for any breach by such party of the terms and provisions of this
Agreement.
(b) If this Agreement is terminated pursuant to Section 6.01(a)(iv),
then USAi shall promptly reimburse Universal and its Affiliates for all of their
documented, out of pocket
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expenses incurred in connection with this Agreement and the other Transaction
Documents, up to a limit of $15,000,000. Such reimbursement shall be paid upon
demand following such termination.
ARTICLE VII
Indemnification
---------------
SECTION 7.01. Indemnification by Each Parent Party. (a) Vivendi
shall indemnify and hold harmless (x) USAi and its Affiliates and their
respective officers, directors, shareholders, employees, representatives, agents
or trustees and (y) the Partnership and its Affiliates and their respective
officers, directors, partners, employees, representatives, agents or trustees
(clauses (x) and (y) together, the "USAi Indemnified Parties"), from and against
any Losses (other than any Losses relating to Taxes, the indemnification of
which is governed solely by Section 7.02), as incurred (payable promptly upon
written request), to the extent arising from, relating to or otherwise in
respect of:
(i) any breach of any representation or warranty of Universal or its
Affiliates contained in any Transaction Document or any certificate
delivered on behalf of Universal pursuant to Section 5.02(a) (in each
case, without regard to any materiality or Material Adverse Effect
qualifier contained therein);
(ii) any failure by Universal or its Affiliates (including for
purposes of this Section 7.01(a)(ii), the Partnership) to perform or
fulfill any of its covenants or agreements contained in any Transaction
Document (other than Sections 8.01, 8.02 and 8.06 of the Partnership
Agreement);
(iii) any fees, expenses or other payments incurred or owed by
Universal or its Affiliates to any brokers, financial advisors or
comparable other persons retained or employed by it in connection with the
Transactions;
(iv) any Excluded Liability of Universal or its Affiliates; and
(v) any dissolution or winding up of the Partnership or Bankruptcy
(as defined in the Partnership Agreement) of the general partner of the
Partnership, in each case at any time while the Preferred Interests (as
defined in the Partnership Agreement) are outstanding;
but only (with respect to items described in Section 7.01(a)(i)) to the extent
the aggregate amount of all such Losses of all such USAi Indemnified Parties
exceed $150 million (the "Basket"), provided, however, that the Basket shall not
apply to the representations contained in Section 3.18.
(b) USAi shall indemnify and hold harmless (x) Universal and its
Affiliates and their respective officers, directors, shareholders, employees,
representatives, agents or trustees and (y) the Partnership and its Affiliates
and their respective officers, directors, partners, employees, representatives,
agents or trustees (clauses (x) and (y) together, the "Universal Indemnified
Parties"), from and against any Losses (other than any Losses relating to Taxes,
the
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indemnification of which is governed solely by Section 7.02), as incurred
(payable promptly upon written request), to the extent arising from, relating to
or otherwise in respect of:
(i) any breach of any representation or warranty of USAi or its
Affiliates contained in any Transaction Document or any certificate
delivered on behalf of USAi pursuant to Section 5.02(a) (in each case,
without regard to any materiality or Material Adverse Effect qualifier
contained therein);
(ii) any failure by USAi or its Affiliates to perform or fulfill any
of its covenants or agreements contained in any Transaction Document;
(iii) any fees, expenses or other payments incurred or owed by USAi
or its Affiliates to any brokers, financial advisors or comparable other
persons retained or employed by it in connection with the Transactions;
and
(iv) any Excluded Liability of USAi or its Affiliates;
but only (with respect to items described in Section 7.01(b)(i)) to the extent
the aggregate amount of all such Losses of all such Universal Indemnified
Parties exceed the Basket, provided, however, that the Basket shall not apply to
the representation contained in Section 3.18.
SECTION 7.02. Tax Indemnification by Each Parent Party. (a)
Vivendi shall be liable for, and shall indemnify and hold harmless USAi, the
Partnership and their respective Affiliates from and against, the following
Taxes:
(i) any and all Taxes with respect to its Existing Business and any
Taxes attributable to its ownership of USANi Shares, in each case for any
taxable period ending (or deemed pursuant to Section 7.02(c) to end) on or
before the Closing Date; and
(ii) any several liability under Treasury Regulation Section
1.1502-6 or under any comparable or similar provision under state, local
or foreign laws or regulations for periods ending on or prior to the
Closing Date.
(b) In addition, Vivendi shall be liable for, and shall indemnify
and hold harmless USAi and its Affiliates from and against any Tax Detriment
incurred by USAi or any of its Affiliates solely as a result of (i) the breach
by Universal or any of its Affiliates of any of the covenants set forth in
Sections 2.07, 3.01(c), 5.05(a)(i), 5.05(a)(v) or 5.05(a)(vi) of the Partnership
Agreement or (ii) if Vivendi has elected that any covenant set forth in Section
5.05(b) of the Partnership Agreement shall not apply, any action or inaction
that would constitute a breach of such covenant.
(c) USAi shall be liable for, and shall indemnify and hold harmless
Universal, the Partnership and their respective Affiliates from and against, the
following Taxes:
(i) any and all Taxes with respect to its Existing Business (other
than Taxes attributable to the ownership of USANi Shares by Universal or
any of its Affiliates) for any taxable period beginning on or after
February 13, 1998 (in the case of Taxes relating to USA Cable, Studios USA
or their respective subsidiaries) and May 29, 1999 (in the
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case of Taxes relating to USA Films or its subsidiaries) and ending (or
deemed pursuant to Section 7.02(c) to end) on or before the Closing Date;
and
(ii) any several liability under Treasury Regulation Section
1.1502-6 or under any comparable or similar provision under state, local
or foreign laws or regulations for periods beginning on or after February
13, 1998 (in the case of Taxes relating to USA Cable, Studios USA or their
respective subsidiaries) and May 29, 1999 (in the case of Taxes relating
to USA Films or its subsidiaries) and ending on or prior to the Closing
Date.
(d) In addition, USAi shall be liable for, and shall indemnify and
hold harmless Universal and its Affiliates from and against any Tax Detriment
incurred by Universal or any of its Affiliates solely as a result of the breach
by USAi or any of its Affiliates of any covenant set forth in Section 2.07 or
3.01(c) of the Partnership Agreement.
(e) (i) The Parent Parties agree that if any entity transferred to
the Partnership is permitted but not required under applicable foreign, state or
local Income Tax laws to treat the day before the Closing Date or the Closing
Date as the last day of a taxable period, such day shall be treated as the last
day of a taxable period.
(ii) For purposes hereof, in the case of any Taxes that are imposed
on a periodic basis and are payable for a period that begins before the
Closing Date and ends after the Closing Date, the portion of such Tax that
shall be deemed to be payable for the portion of the period ending on the
Closing Date shall (i) in the case of any Taxes, other than Taxes based
upon or related to income or receipts, be deemed to be the amount of such
Taxes for the entire period (or, in the case of such Taxes determined on
an arrears basis, the amount of such Taxes for the immediately preceding
period), whether actually paid before, during, or after such period,
multiplied by a fraction the numerator of which is the number of calendar
days in the period ending on (and including) the Closing Date and the
denominator of which is the number of calendar days in the entire period,
and (ii) in the case of any Taxes based upon or related to income or
receipts (including but not limited to withholding Taxes), be deemed equal
to the amount which would be payable if the taxable year ended on the
close of business on the Closing Date. Any credits for such a period shall
be prorated, based upon the fraction employed in clause (i) of the
preceding sentence. Such clause (i) shall be applied with respect to Taxes
for such period relating to capital (including net worth or long-term
debt) or intangibles by reference to the level of such items on the
Closing Date. Principles similar to those of this Section 7.02(c)(ii)
shall be applied in determining whether a Tax is for a taxable period
beginning on or after February 13, 1998 or May 29, 1999, as applicable.
SECTION 7.03. Refunds. (a) Universal and its Affiliates shall be
entitled to any refunds or credits of Taxes attributable to or arising in
taxable periods ending (or deemed pursuant to Section 7.02(c) to end) on or
before the Closing Date with respect to its Existing Business or its ownership
of the USANi Shares, as the case may be.
(b) USAi and its Affiliates shall be entitled to any refunds or
credits of Taxes attributable to or arising in taxable periods ending (or deemed
pursuant to Section 7.02(c) to end)
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on or before the Closing Date with respect to its Existing Business (other than
with respect to the USANi Shares owned by Universal or any of its Affiliates).
SECTION 7.04. Calculation of Losses. The amount of any Loss,
Tax, or Tax Detriment for which indemnification is provided under this Article
VII shall be net of any amounts actually recovered by the indemnified party (as
defined in Section 7.06(a)) under insurance policies or indemnities from third
parties with respect to such Loss, Tax, or Tax Detriment and shall be (i)
increased to take account of any net Tax cost incurred by the indemnified party
arising from the receipt of indemnity payments hereunder (grossed up for such
increase) and (ii) reduced to take account of any net Tax benefit realized by
the indemnified party arising from the incurrence or payment of any such Loss,
Tax or Tax Detriment. In computing the amount of any such Tax cost or Tax
benefit, the indemnified party shall be deemed to fully utilize, at the highest
marginal Tax rate then in effect, all Tax items arising from the receipt of any
indemnity payment hereunder or the incurrence or payment of any indemnified
Loss, Tax or Tax Detriment.
SECTION 7.05. Termination of Indemnification. The obligations to
indemnify and hold harmless any party (i) pursuant to Section 7.01(a)(i) or
7.01(b)(i), as the case may be, shall terminate when the applicable
representation or warranty terminates pursuant to Section 7.07, (ii) pursuant to
Section 7.02, shall terminate when the applicable statute of limitations expires
(giving effect to any waiver, mitigation or extension thereof) and (iii)
pursuant to the other clauses of Sections 7.01, shall not terminate; provided,
however, that such obligations to indemnify and hold harmless shall not
terminate with respect to any item as to which the Person to be indemnified
shall have, before the expiration of the applicable period, previously made a
claim by delivering a notice of such claim (stating in reasonable detail the
basis of such claim) pursuant to Section 7.06 to the party to be providing the
indemnification.
SECTION 7.06. Procedures; Exclusivity. (a) In order for a party
(the "indemnified party") to be entitled to any indemnification provided for
under this Agreement in respect of, arising out of or involving a claim made by
any Person against the indemnified party (a "Third Party Claim"), such
indemnified party must notify the indemnifying party in writing (and in
reasonable detail) of the Third Party Claim promptly following receipt by such
indemnified party of written notice of the Third Party Claim; provided, however,
that failure to give such notification shall not affect the indemnification
provided hereunder except to the extent the indemnifying party shall have been
actually prejudiced as a result of such failure. Thereafter, the indemnified
party shall deliver to the indemnifying party, promptly after the indemnified
party's receipt thereof, copies of all notices and documents (including court
papers) received by the indemnified party relating to the Third Party Claim.
(b) If a Third Party Claim is made against an indemnified party, the
indemnifying party shall be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
indemnifying party; provided, however, that such counsel is not reasonably
objected to by the indemnified party. Should the indemnifying party so elect to
assume the defense of a Third Party Claim, the indemnifying party shall not be
liable to the indemnified party for any legal expenses incurred from and after
the date of such assumption by the indemnified party in connection with the
defense thereof. If the indemnifying party assumes such defense, the indemnified
party shall have the right to participate in the defense
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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. The indemnifying party shall be liable for the
fees and expenses of counsel employed by the indemnified party for any period
during which the indemnifying party has not assumed the defense thereof. If the
indemnifying party chooses to defend or prosecute a Third Party Claim, all the
indemnified parties shall cooperate in the defense or prosecution thereof. Such
cooperation shall include the retention and (upon the indemnifying party's
request and at its expense) the provision to the indemnifying party of records
and information which are reasonably relevant to such Third Party Claim, and
making employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. Whether or not
the indemnifying party assumes the defense of a Third Party Claim, the
indemnified party shall not admit any liability with respect to, or settle,
compromise or discharge, such Third Party Claim without the indemnifying party's
prior written consent (which consent shall not be unreasonably withheld). If the
indemnifying party assumes the defense of a Third Party Claim, the indemnified
party shall agree to any settlement, compromise or discharge of a Third Party
Claim that the indemnifying party may recommend and that by its terms obligates
the indemnifying party to pay the full amount of the liability in connection
with such Third Party Claim (or, in the case of any Third Party Claim with
respect to Taxes, as to which the indemnifying party acknowledges in writing its
obligation to make payment in full), that releases the indemnified party
completely in connection with such Third Party Claim (or, in the case of any
Third Party Claim with respect to Taxes, as to which the indemnifying party
acknowledges in writing its obligation to make payment in full) and that would
not otherwise materially and adversely affect the indemnified party.
Notwithstanding the foregoing, the indemnifying party shall not be entitled to
assume the defense of any Third Party Claim (and shall be liable for the
reasonable fees and expenses of counsel incurred by the indemnified party in
defending such Third Party Claim) if the Third Party Claim seeks an order,
injunction or other equitable relief or relief for other than money damages
against the indemnified party that the indemnified party reasonably determines,
after conferring with its outside counsel, cannot be separated from any related
claim for money damages.
(c) In the event any indemnified party should have a claim against
any indemnifying party under this Article VII that does not involve a Third
Party Claim being asserted against or sought to be collected from such
indemnified party, the indemnified party shall deliver notice of such claim with
reasonable promptness to the indemnifying party. So long as the indemnified
party provides notification to the indemnifying party prior to the termination
of the obligation to indemnify as set forth in Section 7.05, the failure by any
indemnified party so to notify the indemnifying party shall not relieve the
indemnifying party from any liability that it may have to such indemnified party
under this Article VII, except to the extent that the indemnifying party
demonstrates that it has been actually prejudiced by such failure. The
indemnifying party and the indemnified party shall proceed in good faith to
negotiate a resolution of any dispute with respect to such a claim and, if not
resolved through negotiations, such dispute shall be resolved by litigation in
an appropriate court of competent jurisdiction.
(d) After the Closing, Section 7.01 shall constitute the exclusive
remedy for any misrepresentation or breach of warranty contained in this
Agreement.
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SECTION 7.07. Survival. The representations, warranties,
covenants and agreements contained in the Transaction Documents or in any
certificates delivered pursuant to Section 5.02(a) shall survive the Closing and
shall terminate on March 31, 2003, except for those contained in Section 3.18,
which shall survive until the expiration of the applicable statute of
limitations (giving effect to any waiver, mitigation or extensions thereof).
Notwithstanding the foregoing, those covenants or agreements that contemplate or
may involve actions to be taken or obligations in effect after the Closing shall
survive in accordance with their terms.
ARTICLE VIII
Miscellaneous
-------------
SECTION 8.01. Approval of Transactions. By execution of this
Agreement, each of the parties hereto approves and consents, in each case on its
own behalf and on behalf of its Affiliates, to the Transactions (including in
respect of any transaction to be taken after the Closing in respect of USAi
Shares under Section 8.07 of the Partnership Agreement) and the actions
necessary to be taken by USAi, USANi and their respective Affiliates in
connection therewith, for all purposes under the Investment Agreement, the
Governance Agreement, the Stockholders Agreement and the USANi LLC Agreement and
all other agreements to which it or its Affiliates is a party that provides the
right to consent to USAi's entering into the Transactions. Each of Diller,
Universal and Liberty hereby waives any right of first refusal or tag along
right and any restriction on Transfer (as defined in the Stockholders Agreement)
relating to the Transactions; provided that (x) Liberty will be entitled to
exercise its preemptive rights in accordance with the Governance Agreement with
respect to the Warrants to be issued to the Affiliate of Vivendi set forth in
Schedule 2.04(b) pursuant to this Agreement and (y) nothing herein shall be
deemed to constitute a waiver or consent of Diller or Liberty of his or its
rights under the Stockholders Agreement or the Governance Agreement with respect
to transactions relating to Transfers of USAi Shares occurring after the Closing
Date (other than delivery by Universal or its Affiliates of USAi Shares in
accordance with Section 8.07 of the Partnership Agreement).
SECTION 8.02. Notices. All notices, requests and other
communications to any party under this Agreement shall be in writing (including
a facsimile or similar writing) and shall be given to a party hereto at the
address or facsimile number set forth for such party on Schedule 8.02 or as such
party shall at any time otherwise specify by notice to each of the other parties
to such agreement or instrument. Each such notice, request or other
communication shall be effective (i) if given by facsimile, at the time such
facsimile is transmitted and the appropriate confirmation is received (or, if
such time is not during a Business Day, at the beginning of the next such
Business Day), (ii) if given by mail, five Business Days (or, if to an address
outside the United States, ten calendar days) after such communication is
deposited in the United States mails with first-class postage prepaid, addressed
as aforesaid, or (iii) if given by any other means, when delivered at the
address specified pursuant hereto.
SECTION 8.03. No Third Party Beneficiaries. The terms of this
Agreement are not intended to confer any rights or remedies hereunder upon, and
shall not be enforceable by, any Person other than the parties hereto, other
than (i) with respect to the provisions of Article VII hereof, each indemnified
person and (ii) with respect to Section 4.13, the Partnership.
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SECTION 8.04. Waiver. No failure by any party to this Agreement
to insist upon the strict performance of any covenant, agreement, term or
condition hereof or to exercise any right or remedy consequent upon a breach of
such or any other covenant, agreement, term or condition shall operate as a
waiver of such or any other covenant, agreement, term or condition of this
Agreement. Any party to this Agreement, by notice given in accordance with
Section 8.02, may, but shall not be under any obligation to, waive any of its
rights or conditions to its obligations under this Agreement, or any duty,
obligation or covenant of any other party hereto. No waiver shall affect or
alter the remainder of this Agreement and each and every covenant, agreement,
term and condition hereof shall continue in full force and effect with respect
to any other then existing or subsequent breach. Subject to Section 7.06(d), the
rights and remedies provided by this Agreement are cumulative and the exercise
of any one right or remedy by any party shall not preclude or waive its right to
exercise any or all other rights or remedies.
SECTION 8.05. Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties. Subject
to the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
SECTION 8.06. Integration. This Agreement and the other
Transaction Documents (including the schedules and exhibits hereto and thereto)
constitute the entire agreement among the parties hereto pertaining to the
subject matter hereof and supersede all prior agreements and understandings of
the parties in connection herewith, and no covenant, representation or condition
not expressed in such Transaction Documents shall affect, or be effective to
interpret, change or restrict, the express provisions of this Agreement.
SECTION 8.07. Headings. The titles of Articles and Sections of
this Agreement are for convenience only and shall not be interpreted to limit or
otherwise affect the provisions of this Agreement.
SECTION 8.08. Counterparts. This Agreement may be executed by
the parties hereto in multiple counterparts, each of which shall be deemed an
original and all of which, taken together, shall constitute one and the same
instrument.
SECTION 8.09. Severability. Each provision of this Agreement
shall be considered separable and if for any reason any provision or provisions
hereof are determined to be invalid and contrary to any applicable law, such
invalidity shall not impair the operation of or affect those portions of this
Agreement which are valid.
SECTION 8.10. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware without
giving effect to the conflicts of law principles thereof.
SECTION 8.11. Jurisdiction. Each party to this Agreement
irrevocably submits to the jurisdiction of (i) the courts of the State of
Delaware, New Castle County, and (ii) the United States District Court for the
District of Delaware, for the purposes of any suit, action or
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other proceeding (other than suits, actions or other proceedings arising solely
out of the Universal/Liberty Merger Agreement) arising out of this Agreement or
the Transactions. Each party agrees to commence any such action, suit or
proceeding either in the courts of the State of Delaware, New Castle County or
if such suit, action or other proceeding may not be brought in such court for
jurisdictional reasons, in the District Court for the District of Delaware. Each
party further agrees that service of any process, summons, notice or document by
U.S. registered mail to such party's respective address in accordance with
Section 8.02 shall be effective service of process for any action, suit or
proceeding in Delaware with respect to any matters to which it has submitted to
jurisdiction in this Section 8.11. Each party irrevocably and unconditionally
waives any objection to the laying of venue of any action, suit or proceeding
arising out of this Agreement or the Transactions in (i) the courts of the State
of Delaware, New Castle, or (ii) the United States District Court for the
District of Delaware, and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient forum.
SECTION 8.12. Specific Performance. Each of the parties to this
Agreement agrees that the other parties hereto would be irreparably damaged if
any of the provisions of this Agreement are not performed in accordance with its
specific terms and that monetary damages would not provide an adequate remedy in
such event. Accordingly, in addition to any other remedy to which the
nonbreaching parties may be entitled, at law or in equity, the nonbreaching
parties (or the Partnership, in the case of Section 4.13) may be entitled to
injunctive relief to prevent breaches of this Agreement and to specifically
enforce the terms and provisions hereof.
SECTION 8.13. Amendments. This Agreement may be amended by an
instrument in writing signed on behalf of each of the parties hereto at any time
before or after receipt of the USAi Stockholder Approvals, provided, however,
that after any such approval, there shall be made no amendment that by law
requires further approval by such stockholders without the further approval of
such stockholders.
SECTION 8.14. Interpretation. References in this Agreement to
Articles, Sections, Annexes, Exhibits and Schedules shall be deemed to be
references to Articles and Sections of, and Annexes, Exhibits and Schedules to,
this Agreement unless the context shall otherwise require. References to
Schedules shall be deemed to be references to the respective Schedules of USAi
and Universal, as applicable. All Annexes, Exhibits and Schedules attached to
this Agreement shall be deemed incorporated therein as if set forth in full
therein. The words "include", "includes" and "including" shall be deemed to be
followed by the phrase "without limitation". The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of such
agreement or instrument.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties, and is effective as of the day and year first above written.
VIVENDI UNIVERSAL, S.A.,
By /s/ George E. Bushnell III
-----------------------------
Name: George E. Bushnell III
Title: Vice President
UNIVERSAL STUDIOS, INC.,
By /s/ Karen Randall
---------------------------
Name: Karen Randall
Title: Executive Vice President
and General Counsel
USA NETWORKS, INC.,
By /s/ Julius Genachowski
---------------------------
Name: Julius Genachowski
Title: Executive Vice President
USANi LLC,
By /s/ Julius Genachowski
---------------------------
Name: Julius Genachowski
Title: Executive Vice President
LIBERTY MEDIA CORPORATION,
By /s/ Charles Y. Tanabe
---------------------------
Name: Charles Y. Tanabe
Title: Senior Vice President
and General Counsel
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Only for purposes of
Sections 2.03(a)(iv), 2.03(a)(v),
2.03(a)(vii), 2.07, 4.10(d) and 8.01:
BARRY DILLER,
/s/ Barry Diller
-------------------------------------
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ANNEX A
The terms defined below have the meanings set forth below for all
purposes of this Agreement, and such meanings shall apply equally to both the
singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling, controlled by or under direct or indirect common
control with such specified Person. For purposes of the foregoing, (i) USANi and
its Affiliates shall be deemed to be Affiliates of USAi, (ii) none of USAi,
USANi or any of their respective Affiliates shall be deemed to be an Affiliate
of Universal, (iii) none of Diller, Universal, Liberty or any of their
respective Affiliates shall be deemed to be an Affiliate of USAi and (iv) none
of USAi or Universal or any of their respective Affiliates shall be deemed to be
an Affiliate of the Partnership.
"Ancillary Distribution Agreements" shall mean the Home Video
Distribution Agreement, the Other Business Rights Agreement and the Music
Administration Agreement.
"Applicable Law" shall have the meaning set forth in Section 3.03.
"Assignment Agreement" means the Assignment Agreement dated as of
the Closing Date, by and among Vivendi, Universal, the USA Holding Entities and
USAi.
"Balance Sheet" shall have the meaning set forth in Section 3.06(b).
"Basket" shall have the meaning set forth in Section 7.01(a).
"Business" means the operation, programming or delivery of any
general or genre-based entertainment television channel (irrespective of how
such channel is delivered to the customer, including delivery by cable,
satellite, the internet or other technologies), the production and distribution
of entertainment television programming and feature films and any other business
to be Contributed to the Partnership as of the Closing Date, including any
reasonably foreseeable entertainment-focused extensions of such businesses after
such date that are programming or film-oriented, other than in a transactional
context. The term "Business" shall not include (i) television channels
(irrespective of how such channel is delivered to the customer, including
delivery by cable, satellite, the internet or other technologies) which are
consumer transaction-oriented, such as Home Shopping Network, America's Store
and USAi's planned travel network or which provide informational services which
lend themselves to commerce (such as Travel Channel, Home & Garden Television,
the Food Network, and Do It Yourself) or which otherwise serve as a means of
introducing, starting or promoting transactional services, including
transaction-oriented television channels whose primary focus is the provision of
electronic retailing, auction services or gaming/gambling services or (ii)
electronic commerce and retailing, information and services.
"Business Day" means any day other than a Saturday, a Sunday or a
United States Federal holiday.
"CEO" means chief executive officer.
"Closing" and "Closing Date" shall have the meanings set forth in
Section 2.06.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committed LLC Shares" shall have the meaning set forth in Section
2.02.
"Consent" shall have the meaning set forth in Section 3.03.
"Contracts" means all contracts, agreements, commitments and other
legally binding arrangements, whether oral or written.
"Contribute" means to contribute, assign, transfer, convey and
deliver, and "Contributing" and "Contributed" shall have correlative meanings.
"Contributed Assets" means, with respect to any Parent Party, all
the business, properties, assets, goodwill and rights of such Parent Party and
its Affiliates of whatever kind and nature, real or personal, tangible or
intangible, that are owned, leased or licensed by such Parent Party or its
Affiliates immediately prior to the Effective Time and used, held for use or
intended to be used primarily in the operation or conduct of its Existing
Business, other than Excluded Assets, including (i) Real Property, (ii) tangible
personal property and interests therein, including machinery, equipment,
furniture and vehicles, (iii) Inventory, (iv) Licenses, (v) Investments, (vi)
accounts receivable on the Closing Date arising out of the operation or conduct
of its Existing Business, (vii) Intangible Property, (viii) Contracts, (ix)
credits, prepaid expenses, deferred charges, advance payments, security deposits
and other prepaid items, (x) rights, claims and credits to the extent relating
to any other Contributed Asset or Contributed Liability, including such items
arising under insurance policies and all guarantees, warranties, indemnities and
similar rights in favor of such Parent Party or its Affiliates in respect of any
other Contributed Asset or Contributed Liability, (xi) Records, (xii) goodwill
generated by or associated with its Existing Business and (xiii) in the case of
USAi, the USA Name.
"Contributed Liabilities" means with respect to any Parent Party,
(i) the liabilities, obligations and commitments contained in the Contracts
primarily relating to such Parent Party's Existing Business, (ii) all accounts
payable of such Parent Party and its Affiliates arising primarily out of the
operation or conduct of its Existing Business prior to the Closing and (iii) all
other liabilities, obligations and commitments of such Parent Party or its
Affiliates of any nature whether known or unknown, absolute, accrued, contingent
or otherwise and whether due or to become due, arising primarily out of the
operation or conduct of its Existing Business before, on or after the Closing
Date.
"Contributed Subsidiaries" means, with respect to USAi only, (i)
New-U Studios Inc., (ii) Studios USA, (iii) Tier One Subsidiary, Inc., (iv) USA
Cable, (v) USA Films, (vi) USA Networks Partner LLC and (vii) USA Television
Production Group LLC.
"Diller" shall have the meaning set forth in the Preamble.
"Distribution Agreements" means the Domestic Television Distribution
Agreement and the International Television Distribution Agreement.
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"DGCL" means the Delaware General Corporation Law, as amended from
time to time.
"Domestic Television Distribution Agreement" means the Domestic
Television Distribution Agreement, dated as of February 12, 1998, by and between
USAi and Universal.
"Effective Time" means the time at which the Closing shall have
occurred.
"Exchange Agreement" means the Exchange Agreement dated as of
October 19, 1997, by and among USAi, Universal, for itself and on behalf of
certain of its subsidiaries and Liberty, for itself and on behalf of certain of
its subsidiaries.
"Excluded Assets" means, with respect to any Parent Party, (i) all
rights of such Parent Party under the Transaction Documents, (ii) all Records
prepared for the purpose of the Transactions, (iii) all financial and tax
records relating to such Parent Party's Existing Business that form part of its
general ledger and (iv) all rights, claims and credits of such Parent Party and
its Affiliates to the extent relating to any Excluded Asset or Excluded
Liability, including such items arising under insurance policies and all
guarantees, warranties, indemnities and similar rights in favor of such Parent
Party or its Affiliates in respect of any other Excluded Asset or Excluded
Liability. For the avoidance of doubt, with respect to USAi, the Excluded Assets
shall include any and all outstanding obligations to USAi pursuant to the
Non-Negotiable Promissory Note, dated May 28, 1999, between Universal Studios
Holding I Corp., as borrower and USAi, as lender, in the principal amount of
$200 million.
"Excluded Liability" means, with respect to any Parent Party, any
(i) liability, obligation or commitment of such Parent Party that is not a
Contributed Liability, (ii) any liability, commitment or obligation of an entity
this is being Contributed to the Partnership to guarantee, indemnify or
otherwise be liable for any obligation of USAi, Universal or any of their
respective Affiliates that are not being Contributed to the Partnership or (iii)
any liability, obligation or commitment under (A) the Warrant Agreements dated
as of March 2, 1992 between Savoy Pictures and Allen & Co. or (B) the Warrant
Agreement dated as of April 20, 1994, by and between Savoy Pictures
Entertainment Inc., GkH Partners, L.P. and GkH Private Limited.
"Existing Business" means, (i) with respect to Universal, the filmed
entertainment, television and recreation businesses of Universal Studios, Inc.,
Centenary Holding N.V., and Universal Pictures International B.V. (excluding,
for the avoidance of doubt all Universal Music Group and VU-Net businesses) in
each case as conducted by such entities immediately prior to the Effective Time,
and (ii) with respect to USAi, the programming, television distribution, cable
networks and film businesses as conducted by USAi and its Affiliates immediately
prior to the Effective Time (including, for the avoidance of doubt, USA Cable,
USA Films and Studios USA), other than the business described in the second
sentence of the definition of "Business".
"Expedia Agreement" means the Amended and Restated Agreement and
Plan of Recapitalization and Merger by and among USAi, Expedia, Inc., Taipei,
Inc., Microsoft Corporation and Microsoft E-Holdings, Inc., dated as of
July 15, 2001.
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"Governance Agreement" means (i) with respect to periods prior to
the Closing Date, the Governance Agreement among Universal, USAi, Liberty and
Diller dated as of October 19, 1997 and (ii) with respect to periods on or after
the Closing Date, the Amended and Restated Governance Agreement dated as of
December 16, 2001, among USAi, Universal, Liberty, Diller and Vivendi.
"Governmental Entity" shall have the meaning set forth in Section
3.03.
"Home Video Distribution Agreement" means the Home Video
Distribution Agreement, dated as of February 12, 1998, between USAi and
Universal Studies Home Video, Inc.
"Income Tax" means all Taxes based on or measured by net income.
"indemnified party" shall have the meaning set forth in
Section 7.06(a).
"Intangible Property" means, with respect to an Existing Business,
(i) any intellectual property asset of such Existing Business (other than such
property licensed to such Existing Business), with a value, as reflected on such
party's balance sheet, of $10 million or more and (ii) all material patents,
trademarks, trade names, service marks, brand marks, brand names, proprietary
computer programs, proprietary databases, industrial design, copyrights or any
pending application therefor.
"International Television Distribution Agreement" means the
International Television Distribution Agreement, dated as of February 12, 1998,
by and between USAi and Universal.
"Inventory" means raw materials, work-in-process, finished goods,
supplies, parts, spare parts and other inventories.
"Investment Agreement" means the Investment Agreement dated as of
October 19, 1997, as amended and restated as of December 18, 1997, among,
Universal, for itself and on behalf of certain of its subsidiaries, USAi, HSN,
Inc. and Liberty, for itself and on behalf of certain of its subsidiaries.
"Investments" means partnership interests and any other equity
interest in any corporation, company, limited liability company, partnership,
joint venture, trust or other business association, including the Contributed
Subsidiaries.
"Judgment" shall have the meaning set forth in Section 3.03.
"Liberty" shall have the meaning set forth in the Preamble.
"Liberty Exchange Agreement" means the Exchange Agreement dated
as of December 20, 1996 by and between Silver King Communications, Inc. and
Liberty HSN, Inc.
"Licenses" means all licenses, permits, construction permits,
registrations, and other authorizations issued by any Governmental Entity for
use in connection with the conduct of
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the business or operations of the relevant business, and all applications
therefor, together with any renewals, extensions, modifications, or additions
thereto between the date of this Agreement and the Closing Date.
"Lien" means any pledge, encumbrance, security interest, purchase
option, call or similar right.
"Loss" means any loss, liability, claim, damage or expense
(including reasonable legal fees and expenses).
"Material Adverse Effect" means, with respect to any applicable
representation or warranty of a Parent Party, a material adverse effect on (x)
the business, assets, financial condition or results of operations of such
Parent Party's Existing Business or (y) such Parent Party's and its Affiliates'
ability to perform their obligations under any Transaction Document to which it
is, or is specified to be, a party as of the date hereof, other than any such
effect arising our of or resulting from general economic conditions, or from
changes in or generally affecting the industries in which such Parent Party's
Existing Business operates, or as a result of the September 11, 2001 terrorist
attacks, their aftermath or any similar events.
"Material Contracts" means Contracts of USAi's Existing Business as
of the date hereof which (i) at the time entered into, were outside the ordinary
course of business as then conducted by such Existing Business, or (ii) are (A)
cable television system affiliation agreements covering one million or more
subscribers (in any individual case) providing for payments to and from cable
television system operators in excess of $1 million in any twelve-month period,
(B) Contracts (other than with writer producers) with respect to the production,
development, broadcast or distribution, of television programs with respect to
which such Existing Business has a commitment to pay in excess of $10 million,
(C) agreements with writer producers with respect to which such Existing
Business has a commitment to pay in excess of $2 million per year, or (D)
agreements to buy or sell advertising where the required payments to or from
such Existing Business are in excess of $10 million.
"Material Real Property" means all of the Real Property attributed
to USAi's Existing Business, providing individually for annual lease payments in
excess of $3 million.
"Music Administration Agreement" means the Music Administration
Agreement, dated as of February 12, 1998, between USAi and MCA Music Publishing.
"Organizational Documents" means, with respect to any Person at any
time, such Person's certificate or articles of incorporation, corporate
statutes, by-laws, memorandum and articles of association, certificate of
formation of limited liability company, limited liability company agreement, and
other similar organizational or constituent documents, as applicable, in effect
at such time.
"Original Transaction Agreement" shall have the meaning set forth in
the Preamble.
"Other Business Rights Agreement" means the Other Business Rights
Agreement, dated as of February 12, 1998, between USAi and Universal.
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"Parent Party" means each or any of Universal and USAi.
"Partnership" means the Delaware limited liability limited
partnership to be formed pursuant to the Partnership Agreement.
"Partnership Agreement" means the Partnership Agreement, dated as of
the Closing Date, by and between USAi, USAi Sub, Universal and Diller in
substantially the form of Exhibit A hereto.
"Permitted Liens" shall mean, collectively, (i) all statutory or
other liens for taxes or assessments which are not yet due or the validity of
which is being contested in good faith by appropriate proceedings, (ii) all
mechanics', material men's, carriers', workers' and repairers' liens, and other
similar liens imposed by law, incurred in the ordinary course of business, which
allege unpaid amounts that are less than 30 days delinquent or which are being
contested in good faith by appropriate proceedings, and (iii) all other Liens
which do not materially detract from or materially interfere with the
marketability, value or present use of the asset subject thereto or affected
thereby.
"Person" means any individual, firm, corporation, partnership,
limited liability company, trust, joint venture, governmental authority or other
entity.
"Proceedings" shall have the meaning set forth in Section 3.14.
"Proxy Statement" means the proxy or information statement relating
to the approval and authorization of the Transactions by the stockholders of
USAi.
"Real Property" means real estate and buildings and other
improvements thereon and leases and leasehold interests, leasehold improvements,
fixtures and trade fixtures.
"Records" means books of account, ledgers, general financial,
accounting, tax and personnel records, files, invoices, customers' and
suppliers' lists, other distribution lists, billing records, sales and
promotional literature, manuals, and customer and supplier correspondence (in
all cases, in any form or medium).
"Reference Date" is defined in Section 2.04(i)(B).
"Returns" means returns, reports and forms required to be filed with
any domestic or foreign taxing authority.
"SEC" means the United States Securities and Exchange Commission.
"SEC Reports" means, (i) with respect to USAi, the annual report of
USAi on Form 10-K and (ii) with respect to Universal, the annual report of
Vivendi on Form 20-F, in each case, in respect of the fiscal year ended December
31, 2000, and each report, schedule, proxy, information statement or
registration statement (including all exhibits and schedules thereto and
documents incorporated by reference therein) filed by USAi or Vivendi, as
applicable, with the SEC following December 31, 2000, and on or before the date
of this Agreement.
-A6-
"Special Committee" shall have the meaning set forth in Section
3.02.
"Stockholders Agreement" means (i) with respect to periods prior to
the Closing Date, the Stockholders Agreement among Universal, Liberty, Diller,
USAi and The Seagram Company Limited dated as of October 19, 1997 and (ii) with
respect to periods on or after the Closing Date, the Amended and Restated
Stockholders Agreement dated as of December 16, 2001 among Universal, Liberty,
Diller, USAi and Vivendi.
"Studios USA" means Studios USA LLC.
"Tax Detriment" means, with respect to any Taxes incurred as a
result of the recognition of income or gain by an indemnified party in a taxable
period(s) earlier than the taxable period(s) in which such income or gain would
otherwise have been recognized by such party solely as a result of an action or
inaction by an indemnifying party, the excess, if any, of (i) the net present
value of such Taxes incurred by the indemnified party in such earlier taxable
period(s) over (ii) the net present value of the Taxes that would otherwise have
been incurred in such later taxable period, assuming (i) a discount rate equal
to USAi's borrowing rate in effect as of the time such net present values are
calculated and (ii) that for all taxable years, the indemnified party is fully
taxable at the highest applicable marginal U.S. federal income tax rate and the
highest applicable marginal income and franchise tax rates of the state, local
and foreign jurisdictions in which the Partnership or any of its subsidiaries
conducts business (assuming full deductibility of state and local taxes, and
full credit ability and deductibility of foreign taxes, for U.S. federal (and if
applicable state and local) income tax purposes).
"Taxes" means (i) all taxes (whether federal, state, local or
foreign) based upon or measured by income and any other tax whatsoever,
including gross receipts, profits, sales, use, occupation, value added, ad
valorem, transfer, franchise, withholding, payroll, employment, excise, or
property taxes, together with any interest or penalties imposed with respect
thereto and (ii) any obligations under any agreements or arrangements with
respect to any Taxes described in clause (i) above.
"Taxing Authority" means any government authority having
jurisdiction over the assessment, determination, collection or other imposition
of Tax.
"Third Party Claim" shall have the meaning set forth in Section
7.06(a).
"Transaction Affiliates" means, (i) with respect to USAi, the
Contributed Subsidiaries, USANi and USANi Sub, and (ii) with respect to
Universal, Vivendi.
"Transaction Documents" means this Agreement, the Partnership
Agreement, the Warrant Agreement, the Universal/Liberty Merger Agreement, the
Stockholders Agreement and the Governance Agreement, collectively.
"Transactions" means the transactions contemplated by the
Transaction Documents.
"Transfer Tax" shall have the meaning set forth in Section 4.05(b).
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"Universal" shall have the meaning set forth in the Preamble.
"Universal Contributed Interests" means such entity or entities
that, as of the Effective Time, will own all of Universal's Contributed Assets.
"Universal/Liberty Merger Agreement" means the Agreement and Plan of
Merger and Exchange, among Vivendi, Universal, Light France Acquisition 1,
S.A.S., the merger subsidiaries listed on the signature page thereto, Liberty
Media Corporation, Liberty Programming Company LLC, Liberty Programming France,
Inc. and the Liberty holding entities listed on the signature page thereto,
dated as of December 16, 2001.
"USA Cable" means the cable network business of USAi and its
Affiliates, including the USA Cable Network, the S-F Cable Network, Trio,
Newsworld International and Crime Channel.
"USA Films" means USA Films LLC.
"USA Holding Entities" shall have the meaning set forth in Section
4.17(b).
"USA Name" means "USA Networks", including the presentation of words
on the cable network and promotional materials.
"USAi" shall have the meaning set forth in the Preamble.
"USAi Benefit Arrangements" shall have the meaning set forth in
Section 3.19(a).
"USAi Board" means the board of directors of USAi.
"USAi Business Employees" shall have the meaning set forth in
Section 3.19(a).
"USAi Class B Common Stock" shall have the meaning set forth in
Section 3.04(a).
"USAi Common Equity" means USAi Common Stock and USAi Class B Common
Stock.
"USAi Common Stock" means the common stock, par value $.01 per
share, of USAi.
"USAi Pension Plans" shall have the meaning set forth in Section
3.19(b).
"USAi Preferred Stock" shall have the meaning set forth in Section
3.04(a).
"USAi SEC Documents" shall have the meaning set forth in Section
3.06(a).
"USAi Shares" shall have the meaning set forth in Section 3.04(a).
"USAi Stockholder Approvals" means (i) the authorization of the
Transactions at an annual or special meeting by the affirmative vote of at least
66 2/3% of the outstanding voting
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stock, by voting power and by number of shares, which is not owned by Universal,
Liberty or Diller or their respective Affiliates and (ii) the approval of the
Transactions at an annual or special meeting by a majority of the votes cast by
the shareholders of USAi pursuant to Rule 4350 of the National Association of
Securities Dealers, Inc.
"USAi Stockholders Meeting" shall have the meaning set forth in
Section 4.10(b).
"USANi" shall have the meaning set forth in the Preamble.
"USANi Contributed Interests" means (i) an 83.48% membership
interest in USA Networks Partner LLC held by USANi Sub, (ii) 100% of the stock
of Tier One Subsidiary, Inc., which is held by New-U Studios Holdings, Inc.,
(iii) 100% of the capital stock of New-U Studios Inc., which is held by New-U
Studios Holdings, Inc., (iv) a 42.48% membership interest in Studios USA held by
USANi Sub, (v) a 0.3% membership interest in Studios USA held by New-U Studios
Inc., (vi) a 1% membership interest in USA Networks Partner LLC held by Tier One
Subsidiary, Inc. and (vii) a 100% membership interest in USA Television
Production Group LLC held by USANi Sub.
"USANi Distributed Interests" means the USANi Universal Distributed
Interests and the USANi Liberty Distributed Interests.
"USANi Liberty Distributed Interests" means a 15.52% membership
interest in USA Networks Partner LLC held by USANi Sub.
"USANi Universal Distributed Interests" means (i) USANi Sub's 50%
partnership interest in USA Cable, and (ii) a 57.22% membership interest in
Studios USA held by USANi Sub.
"USANi Shares" means the shares representing a proportionate
interest in the capital and profits and losses of USANi.
"USANi Sub" means USANi Sub LLC, a Delaware limited liability
company.
"USANi LLC Agreement" means the Amended and Restated Limited
Liability Company Agreement of USANi LLC dated as of February 12, 1998.
"Vivendi" shall have the meaning set forth in the Preamble.
"Warrant Agreement" means the Equity Warrant Agreement between USAi
and The Bank of New York substantially in the form of Exhibit B hereto.
"Warrants" means the warrants to purchase USAi Common Stock on the
terms set forth in the Warrant Agreement.
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EXHIBIT 4.1
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR UNDER ANY
STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED EXCEPT AS EXPRESSLY
PERMITTED UNDER THE STOCKHOLDERS AGREEMENT, DATED AS OF DECEMBER 16, 2002, BY
AND AMONG USA NETWORKS, INC. AND THE OTHER PARTIES SET FORTH ON THE SIGNATURE
PAGES THERETO, AS THE SAME MAY BE AMENDED FROM TIME TO TIME, AND OTHERWISE IN
COMPLIANCE WITH FEDERAL AND APPLICABLE STATE SECURITIES LAWS.
EQUITY WARRANT AGREEMENT
dated as of May 7, 2002
for
Warrants to Purchase
UP TO 60,467,735 SHARES OF COMMON STOCK
EXPIRING MAY 7, 2012
between
USA NETWORKS, INC.
and
THE BANK OF NEW YORK, as
Equity Warrant Agent
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1. Definitions................................................. 1
ARTICLE 2. Issuance of Equity Warrants and Execution and Delivery of
Equity Warrant Certificates................................. 3
2.1. Issuance of Equity Warrants................................. 3
2.2. Form and Execution of Equity Warrant Certificates........... 3
2.3. Issuance and Delivery of Equity Warrant Certificates........ 4
2.4. Temporary Equity Warrant Certificates....................... 4
2.5. Payment of Taxes............................................ 4
ARTICLE 3. Duration and Exercise of Equity Warrants.................... 5
3.1. Exercise Price.............................................. 5
3.2. Duration of Equity Warrants................................. 5
3.3. Exercise of Equity Warrants................................. 5
ARTICLE 4. Adjustments of Number of Shares............................. 6
4.1. Adjustments................................................. 6
4.2. Statement on Warrants....................................... 9
4.3. Cash Payments in Lieu of Fractional Shares.................. 9
4.4. Notices to Warrantholders................................... 9
ARTICLE 5. Other Provisions Relating to Rights of Holders of Equity
Warrants.................................................... 9
5.1. No Rights as Holder of Common Stock Conferred by Equity
Warrants or Equity Warrant Certificates..................... 9
5.2. Lost, Stolen, Destroyed or Mutilated Equity Warrant
Certificates................................................ 9
5.3. Holders of Equity Warrants May Enforce Rights............... 10
5.4. Consolidation or Merger or Sale of Assets................... 10
ARTICLE 6. Exchange and Transfer of Equity Warrants.................... 11
6.1. Equity Warrant Register; Exchange and Transfer of Equity
Warrants.................................................... 11
6.2. Treatment of Holders of Equity Warrants..................... 12
6.3. Cancellation of Equity Warrant Certificates................. 12
ARTICLE 7. Concerning the Equity Warrant Agent......................... 12
7.1. Equity Warrant Agent........................................ 12
7.2. Conditions of Equity Warrant Agent's Obligations............ 12
7.3. Compliance with Applicable Laws............................. 14
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7.4. Resignation and Appointment of Successor.................... 15
ARTICLE 8. Miscellaneous............................................... 16
8.1. Amendment................................................... 16
8.2. Notices and Demands to the Company and Equity Warrant Agent. 16
8.3. Addresses for Notices....................................... 16
8.4. Governing Law............................................... 17
8.5. Governmental Approvals...................................... 17
8.6. Reservation of Shares of Common Stock....................... 17
8.7. Covenant Regarding Shares of Common Stock................... 17
8.8. Persons Having Rights Under Agreement....................... 17
8.9 Limitation of Liability..................................... 18
8.10 Restrictions on Transfer/Registration Rights................ 18
8.11. Headings.................................................... 18
8.12. Counterparts................................................ 18
8.13. Inspection of Agreement..................................... 18
-ii-
THIS EQUITY WARRANT AGREEMENT (the "Agreement"), dated as of May
7, 2002, between USA Networks, Inc., a Delaware corporation (the "Company"),
and Bank of New York, a New York corporation, as warrant agent (the "Equity
Warrant Agent").
WHEREAS, pursuant to the Transaction Agreement, by and among the
Company, Vivendi Universal, S.A., Universal Studios, Inc., Liberty Media
Corporation, Mr. Barry Diller and USANi LLC, dated as of December 16, 2001,
the Company has agreed to issue to Canal+ Benelux BV (the "Initial Holder")
an aggregate of 60,467,735 warrants, subject to adjustment pursuant to
Section 4.1 hereof (collectively, the "Equity Warrants" or, individually, an
"Equity Warrant"), each Equity Warrant representing the right to purchase one
share of common stock, par value $.01 per share, of the Company (the "Common
Stock") and being evidenced by certificates herein called the "Equity Warrant
Certificates";
WHEREAS, the Company desires the Equity Warrant Agent to assist
the Company in connection with the issuance, exchange, cancellation,
replacement and exercise of the Equity Warrants, and in this Agreement wishes
to set forth, among other things, the terms and conditions on which the
Equity Warrants may be issued, exchanged, cancelled, replaced and exercised;
and
WHEREAS, the Company has duly authorized the execution and
delivery of this Agreement to provide for the issuance of Equity Warrants to
be exercisable at such times and for such prices, and to have such other
provisions, as shall be fixed as hereinafter provided.
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements herein contained, the parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
"Agreement" shall have the meaning set forth in the preamble.
"Cashless Exercise" shall have the meaning set forth in Section 3.3.
"Cashless Exercise Ratio" means a fraction, the numerator of
which is the excess of the Closing Price per share of Common Stock on the
Exercise Date over the Exercise Price per share as of the Exercise Date and
the denominator of which is the Closing Price per share of the Common Stock
on the Exercise Date.
"Closing Price" for each Trading Day shall be the last reported
sales price regular way, during regular trading hours, or, in case no such
reported sales takes place on such day, the average of the closing bid and
asked prices regular way, during regular trading hours, for such day, in each
case on The Nasdaq Stock Market or, if not listed or quoted on such market,
on the principal national securities exchange on which the shares of Common
Stock are listed or admitted to trading or, if not listed or admitted to
trading on a national securities exchange, the last sale price regular way
for the Common Stock as published by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ"), or if such last sale price is
not so published by NASDAQ or if no such sale takes place on such day, the
mean between the closing
bid and asked prices for the Common Stock as published by NASDAQ. If the Common
Stock is not publicly held or so listed or publicly traded, "Closing Price"
shall mean the Fair Market Value per share as determined in good faith by the
Board of Directors of the Company or, if such determination cannot be made, by a
nationally recognized independent investment banking firm selected in good faith
by the Board of Directors of the Company.
"Common Stock" shall have the meaning set forth in the recitals.
"Company" shall have the meaning set forth in the preamble.
"Current Market Price" shall have the meaning set forth in
Section 4.1(d).
"Equity Warrant" and "Equity Warrants" shall have the meaning set
forth in the recitals.
"Equity Warrant Agent" shall have the meaning set forth in the
preamble.
"Equity Warrant Certificates" shall have the meaning set forth in
the recitals.
"Equity Warrant Register" shall have the meaning set forth in
Section 6.1.
"Exercise Date" shall have the meaning set forth in 3.3(a).
"Exercise Price" shall have the meaning set forth in the
applicable Equity Warrant Certificate.
"Expiration Date" means 5:00 p.m. New York City time on May 7,
2012.
"Fair Market Value" means the amount that a willing buyer would
pay a willing seller in an arm's length transaction.
"Formed, Surviving or Acquiring Corporation" shall have the
meaning set forth in Section 5.4.
"Governance Agreement" shall have the meaning set forth in
Section 8.10.
"Holder" means the person or persons in whose name such Equity
Warrant Certificate shall then be registered as set forth in the Equity
Warrant Register to be maintained by the Equity Warrant Agent pursuant to
Section 6.1 for that purpose.
"Initial Holder" shall have the meaning set forth in the recitals.
"Non-Electing Share" shall have the meaning set forth in Section
5.4.
"Officer's Certificate" shall have the meaning set forth in Section
7.2(e).
"Prospectus" shall have the meaning set forth in Section 8.9.
"Sale Transaction" shall have the meaning set forth in Section 5.4.
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"Stockholders Agreement" shall have the meaning set forth in
Section 8.10.
"Time of Determination" shall have the meaning set forth in
Section 4.1(d).
"Trading Day" shall mean a day on which the securities exchange
utilized for the purpose of calculating the Closing Price shall be open for
business or, if the shares of Common Stock shall not be listed on such
exchange for such period, a day on which The Nasdaq Stock Market is open for
business.
ARTICLE 2.
ISSUANCE OF EQUITY WARRANTS AND EXECUTION AND
DELIVERY OF EQUITY WARRANT CERTIFICATES
2.1. Issuance of Equity Warrants. Equity Warrants may be issued by
the Company from time to time.
2.2. Form and Execution of Equity Warrant Certificates.
(a) The Equity Warrants shall be evidenced by the Equity Warrant
Certificates, which shall be in registered form and substantially in the form
set forth as Exhibit A attached hereto. Each Equity Warrant Certificate shall be
dated the date it is countersigned by the Equity Warrant Agent and may have such
letters, numbers or other marks of identification and such legends or
endorsements printed, lithographed or engraved thereon as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
law or with any rule or regulation made pursuant thereto or with any rule or
regulation of any securities exchange on which the Equity Warrants may be
listed, or to conform to usage, as the officer of the Company executing the same
may approve (his execution thereof to be conclusive evidence of such approval).
Each Equity Warrant Certificate shall evidence one or more Equity Warrants.
(b) The Equity Warrant Certificates shall be signed in the name
and on behalf of the Company by its Chairman, its Vice Chairman, its Chief
Executive Officer, President or a Vice President (any reference to a Vice
President of the Company herein shall be deemed to include any Vice President of
the Company whether or not designated by a number or a word or words added
before or after the title "Vice President") under its corporate seal, and
attested by its Secretary or an Assistant Secretary. Such signatures may be
manual or facsimile signatures of the present or any future holder of any such
office and may be imprinted or otherwise reproduced on the Equity Warrant
Certificates. The seal of the Company may be in the form of a facsimile thereof
and may be impressed, affixed, imprinted or otherwise reproduced on the Equity
Warrant Certificates.
(c) No Equity Warrant Certificate shall be valid for any purpose,
and no Equity Warrant evidenced thereby shall be deemed issued or exercisable,
until such Equity Warrant Certificate has been countersigned by the manual or
facsimile signature of the Equity Warrant Agent. Such signature by the Equity
Warrant Agent upon any Equity Warrant Certificate executed by the Company shall
be conclusive evidence that the Equity Warrant Certificate so countersigned has
been duly issued hereunder.
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(d) In case any officer of the Company who shall have signed any
Equity Warrant Certificate either manually or by facsimile signature shall cease
to be such officer before the Equity Warrant Certificate so signed shall have
been countersigned and delivered by the Equity Warrant Agent, such Equity
Warrant Certificate nevertheless may be countersigned and delivered as though
the person who signed such Equity Warrant Certificate had not ceased to be such
officer of the Company; and any Equity Warrant Certificate may be signed on
behalf of the Company by such person as, at the actual date of the execution of
such Equity Warrant Certificate, shall be the proper officer of the Company,
although at the date of the execution of this Agreement such person was not such
an officer.
2.3. Issuance and Delivery of Equity Warrant Certificates. At any
time and from time to time after the execution and delivery of this
Agreement, the Company may deliver Equity Warrant Certificates executed by
the Company to the Equity Warrant Agent for countersignature. Except as
provided in the following sentence, the Equity Warrant Agent shall thereupon
countersign and deliver such Equity Warrant Certificates to or upon the
written request of the Company. Subsequent to the original issuance of an
Equity Warrant Certificate evidencing Equity Warrants, the Equity Warrant
Agent shall countersign a new Equity Warrant Certificate evidencing such
Equity Warrants only if such Equity Warrant Certificate is issued in exchange
or substitution for one or more previously countersigned Equity Warrant
Certificates evidencing such Equity Warrants or in connection with their
transfer, as hereinafter provided.
2.4. Temporary Equity Warrant Certificates. Pending the preparation
of a definitive Equity Warrant Certificate, the Company may execute, and upon
the order of the Company the Equity Warrant Agent shall countersign and
deliver, temporary Equity Warrant Certificates that are printed,
lithographed, typewritten, mimeographed or otherwise produced, substantially
of the tenor of the definitive Equity Warrant Certificates in lieu of which
they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officer executing such Equity
Warrant Certificates may determine, as evidenced by his execution of such
Equity Warrant Certificates.
If temporary Equity Warrant Certificates are issued, the Company
will cause definitive Equity Warrant Certificates to be prepared without
unreasonable delay. After the preparation of definitive Equity Warrant
Certificates, the temporary Equity Warrant Certificates shall be exchangeable
for definitive Equity Warrant Certificates upon surrender of the temporary
Equity Warrant Certificates at the corporate trust office of the Equity
Warrant Agent. Upon surrender for cancellation of any one or more temporary
Equity Warrant Certificates, the Company shall execute and the Equity Warrant
Agent shall countersign and deliver in exchange therefor definitive Equity
Warrant Certificates representing the same aggregate number of Equity
Warrants. Until so exchanged, the temporary Equity Warrant Certificates
shall in all respects be entitled to the same benefits under this Agreement
as definitive Equity Warrant Certificates.
2.5. Payment of Taxes. The Company will pay all stamp and other
duties, if any, to which this Agreement or the original issuance, or
exercise, of the Equity Warrants or Equity Warrant Certificates may be
subject under the laws of the United States of America or any state or
locality; provided, however, that the Holder, and not the Company, shall be
required to pay any stamp or other tax or other governmental charge that may
be imposed in connection with any transfer involved in the issuance of the
Common Stock where the Holder designates the shares to
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be issued in a name other than the name of the Holder; and in the event that any
such transfer is involved, the Company shall not be required to issue any Common
Stock (and the purchase of the shares of Common Stock issued upon the exercise
of such Holder's Equity Warrant shall not be deemed to have been consummated)
until such tax or other charge shall have been paid or it has been established
to the Company's satisfaction that no such tax or other charge is due.
ARTICLE 3.
DURATION AND EXERCISE OF EQUITY WARRANTS
3.1. Exercise Price. Each Holder shall have the right to purchase the
number of fully paid and nonassessable shares of Common Stock which the
Holder may at the time be entitled to receive on exercise of such Equity
Warrant and payment of the Exercise Price, subject to the terms herein. The
number of shares of Common Stock which shall be purchasable upon the payment
of the Exercise Price and to the extent provided therein, the Exercise Price,
shall be subject to adjustment pursuant to Article 4 hereof.
3.2. Duration of Equity Warrants. Each Equity Warrant is exercisable
at any time commencing on November 8, 2002* up to the Expiration Date. Each
Equity Warrant not exercised at or before the Expiration Date shall become
void, and all rights of the Holder of such Equity Warrant thereunder and
under this Agreement shall cease.
3.3. Exercise of Equity Warrants.
(a) The Holder of an Equity Warrant shall have the right, at its
option, to exercise such Equity Warrant and purchase one share of Common Stock
during the period referred to in Section 3.2, subject to adjustment pursuant to
Article 4 hereof. Except as may be provided in an Equity Warrant Certificate, an
Equity Warrant may be exercised by completing the form of election to purchase
set forth on the reverse side of the Equity Warrant Certificate, by duly
executing the same, and by delivering the same, together with payment in full of
the Exercise Price, in lawful money of the United States of America, in cash or
by certified or official bank check or by bank wire transfer, to the Equity
Warrant Agent. In lieu of the foregoing, the Holder of an Equity Warrant shall
have the right, at its option, without payment of cash, to reduce the number of
shares of Common Stock otherwise obtainable upon the exercise of an Equity
Warrant for payment of the Exercise Price in cash, so as to yield a number of
shares of Common Stock upon the exercise of such Equity Warrant equal to the
product of (x) the number of shares of Common Stock issuable as of the Exercise
Date upon the exercise of such Equity Warrant (if payment of the Exercise Price
were being made in cash) and (y) the Cashless Exercise Ratio. An exercise of an
Equity Warrant in accordance with the immediately preceding sentence is herein
called a "Cashless Exercise". Except as may be provided in an Equity Warrant
Certificate, the date on which such Equity Warrant Certificate and payment are
received by the Equity Warrant Agent as aforesaid shall be deemed to be the date
on which the Equity Warrant is exercised and the relevant shares of Common Stock
are issued (the "Exercise Date").
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* Date following the six-month anniversary of the Closing.
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(b) Upon the exercise of an Equity Warrant, the Company shall, as
soon as practicable, issue, to or upon the order of the Holder of such Equity
Warrant, the shares of Common Stock to which such Holder is entitled, registered
in such name or names as may be directed by such Holder.
(c) Unless the Equity Warrant Agent and the Company agree
otherwise, the Equity Warrant Agent shall deposit all funds received by it in
payment of the Equity Warrant Price for Equity Warrants in the account of the
Company maintained with it for such purpose and shall advise the Company by
telephone by 5:00 P.M., New York City time, of each day on which a payment of
the Exercise Price for Equity Warrants is received of the amount so deposited in
its account. The Equity Warrant Agent shall promptly confirm such telephone
advice in writing to the Company.
(d) The Equity Warrant Agent shall, from time to time, as promptly
as practicable, advise the Company of (i) the number of Equity Warrants
exercised for cash or otherwise, as provided herein, (ii) the instructions of
each Holder of such Equity Warrants with respect to delivery of the Common Stock
issued upon exercise of such Equity Warrants to which such Holder is entitled
upon such exercise, and (iii) such other information as the Company shall
reasonably require. Such advice may be given by telephone to be confirmed in
writing.
ARTICLE 4.
ADJUSTMENTS OF NUMBER OF SHARES
4.1. Adjustments. The number of shares of Common Stock purchasable
upon the exercise of the Equity Warrants shall be subject to adjustment as
follows:
(a) In case the Company shall (A) pay a dividend or make a
distribution on its Common Stock in shares of Common Stock, (B) subdivide its
outstanding shares of Common Stock into a greater number of shares, (C) combine
its outstanding shares of Common Stock into a smaller number of shares, or (D)
issue by reclassification, recapitalization or reorganization of its Common
Stock any shares of capital stock of the Company, then in each such case the
number of shares of Common Stock issuable upon exercise of an Equity Warrant
shall be equitably adjusted so that the Holder of any Equity Warrant thereafter
surrendered for conversion shall be entitled to receive the number of shares of
Common Stock or other capital stock of the Company which such Holder would have
owned or been entitled to receive immediately following such action had such
Equity Warrant been exercised immediately prior to the occurrence of such event.
An adjustment made pursuant to this subsection 4.1(a) shall become effective
immediately after the record date, in the case of a dividend or distribution, or
immediately after the effective date, in the case of a subdivision, combination
or reclassification. If, as a result of an adjustment made pursuant to this
subsection 4.1(a), the Holder of any Equity Warrant thereafter exercised shall
become entitled to receive shares of two or more classes of capital stock or
shares of Common Stock and other capital stock of the Company, the Board of
Directors (whose determination shall be in its good faith judgment and shall be
described in a statement filed by the Company with the Equity Warrant Agent)
shall determine the allocation of the Exercise Price between or among shares of
such classes of capital stock or shares of
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Common Stock and other capital stock. Such adjustment shall be made successively
whenever any event listed above shall occur.
(b) In case the Company shall issue options, rights or warrants to
holders of its outstanding shares of Common Stock entitling them (for a period
expiring within 45 days after the record date mentioned below) to subscribe for
or purchase shares of Common Stock or other securities convertible or
exchangeable for shares of Common Stock at a price per share of Common Stock
less than the Current Market Price (as determined pursuant to subsection (d) of
this Section 4.1) (other than pursuant to any stock option, restricted stock or
other incentive or benefit plan or stock ownership or purchase plan for the
benefit of employees, directors or officers or any dividend reinvestment plan of
the Company in effect at the time hereof or any other similar plan adopted or
implemented hereafter, it being agreed that none of the adjustments set forth in
this Section 4.1 shall apply to the issuance of stock, rights, warrants or other
property pursuant to such benefit plans), then the number of shares of Common
Stock issuable upon exercise of an Equity Warrant shall be adjusted so that it
shall equal the product obtained by multiplying the number of shares of Common
Stock issuable upon exercise of an Equity Warrant immediately prior to the date
of issuance of such rights or warrants by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding on the date of
issuance of such rights or warrants (immediately prior to such issuance) plus
the number of additional shares of Common Stock offered for subscription or
purchase and of which the denominator shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights or warrants
(immediately prior to such issuance) plus the number of shares which the
aggregate offering price of the total number of shares so offered would purchase
at such Current Market Price. Such adjustment shall be made successively
whenever any rights or warrants are issued, and shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such rights or warrants; provided, however, in the event that all the
shares of Common Stock offered for subscription or purchase are not delivered
upon the exercise of such rights or warrants, upon the expiration of such rights
or warrants the number of shares of Common Stock issuable upon exercise of an
Equity Warrant shall be readjusted to the number of shares of Common Stock
issuable upon exercise of an Equity Warrant which would have been in effect had
the numerator and the denominator of the foregoing fraction and the resulting
adjustment been made based upon the number of shares of Common Stock actually
delivered upon the exercise of such rights or warrants rather than upon the
number of shares of Common Stock offered for subscription or purchase. In
determining whether any security covered by this Section 4.1(b) entitles the
holders to subscribe for or purchase shares of Common Stock at less than such
Current Market Price, and in determining the aggregate offering price of such
shares of Common Stock, there shall be taken into account any consideration
received by the Company for the issuance of such options, rights, warrants or
convertible or exchangeable securities, plus the aggregate amount of additional
consideration (as set forth in the instruments relating thereto) to be received
by the Company upon the exercise, conversion or exchange of such securities, the
value of such consideration, if other than cash, to be determined by the Board
of Directors in its good faith judgment (whose determination shall be described
in a statement filed by the Company with the Equity Warrant Agent).
(c) In case the Company shall, by dividend or otherwise,
distribute to all holders of its outstanding Common Stock, evidences of its
indebtedness or assets (including securities and cash, but excluding any regular
periodic cash dividend of the Company and
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dividends or distributions payable in stock for which adjustment is made
pursuant to subsection (a) of this Section 4.1) or rights or warrants to
subscribe for or purchase securities of the Company (excluding those referred to
in subsection (b) of this Section 4.1), then in each such case the number of
shares of Common Stock issuable upon exercise of an Equity Warrant shall be
adjusted so that the same shall equal the product determined by multiplying the
number of shares of Common Stock issuable upon exercise of an Equity Warrant
immediately prior to the record date of such distribution by a fraction of which
the numerator shall be the Current Market Price as of the Time of Determination,
and of which the denominator shall be such Current Market Price less the Fair
Market Value on such record date (as determined by the Board of Directors in its
good faith judgment, whose determination shall be described in a statement filed
by the Company with the stock transfer or conversion agent, as appropriate) of
the portion of the capital stock or assets or the evidences of indebtedness or
assets so distributed to the holder of one share of Common Stock or of such
subscription rights or warrants applicable to one share of Common Stock. Such
adjustment shall be made successively whenever any such distributions referred
to in the first sentence of this Section 4.01(c) are made and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such distribution.
(d) For the purpose of any computation under subsections (b) and
(c) of this Section 4.1, the "Current Market Price" per share of Common Stock on
any date shall be deemed to be the average of the daily Closing Prices for the
shorter of (A) 10 consecutive Trading Days ending on the day immediately
preceding the applicable Time of Determination or (B) the period commencing on
the date next succeeding the first public announcement of the issuance of such
rights or warrants or such distribution through such last day prior to the
applicable Time of Determination. For purposes of the foregoing, the term "Time
of Determination" shall mean the time and date of the record date for
determining stockholders entitled to receive the rights, warrants or
distributions referred to in Section 4.1(b) and (c).
(e) In any case in which this Section 4.1 shall require that an
adjustment in the amount of Common Stock or other property to be received by a
Holder upon exercise of an Equity Warrant be made effective as of a record date
for a specified event, the Company may elect to defer until the occurrence of
such event the issuance to the Holder of any Equity Warrant exercised after such
record date the Common Stock or other property issuable upon such exercise over
and above the shares of Common Stock issuable upon such exercise prior to such
adjustment, provided, however, that the Company shall deliver to such Holder a
due bill or other appropriate instrument evidencing such Holde's right to
receive such additional shares of Common Stock or other property, if any, upon
the occurrence of the event requiring such adjustment.
(f) [Intentionally Omitted]
(g) No adjustment in the number of shares of Common Stock issuable
upon exercise of an Equity Warrant shall be required to be made pursuant to this
Section 4.1 unless such adjustment would require an increase or decrease of at
least 1% of such number; provided, however, that any adjustments which by reason
of this subsection (g) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
subsection 4.1(g) shall be made to the nearest cent or to the nearest 1/1000th
of a
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share, as the case may be. Except as set forth in subsections 4.1(a), (b), and
(c) above, the number of shares of Common Stock issuable upon exercise of an
Equity Warrant shall not be adjusted as a result of the issuance of Common
Stock, or any securities convertible into or exchangeable for Common Stock or
carrying the right to purchase any of the foregoing, in exchange for cash,
property or services.
4.2. Statement on Warrants. Irrespective of any adjustment in the
amount of Common Stock issued upon exercise of an Equity Warrant, Equity
Warrants theretofore or thereafter issued may continue to express the same
number and kind of shares as are stated in the Equity Warrants initially
issuable pursuant to this Agreement.
4.3. Cash Payments in Lieu of Fractional Shares No fractional shares
or scrip representing fractions of shares of Common Stock shall be issued
upon exercise of the Equity Warrants. If more than one share of Equity
Warrants shall be exercised at one time by the same Holder, the number of
full shares of Common Stock issuable upon exercise thereof shall be computed
on the basis of the aggregate number of shares of Common Stock purchasable on
exercise of the Equity Warrants so requested to be exercised. In lieu of any
fractional interest in a share of Common Stock which would otherwise be
deliverable upon the exercise of such Equity Warrants, the Company shall pay
to the Holder of such Equity Warrants an amount in cash (computed to the
nearest cent) equal to the Closing Price on the Exercise Date (or the next
Trading Day if such date is not a Trading Day) multiplied by the fractional
interest that otherwise would have been deliverable upon exercise of such
Equity Warrants.
4.4. Notices to Warrantholders. Upon any adjustment of the amount of
Common Stock issuable upon exercise of an Equity Warrant pursuant to Section
4.1 (but not for any fractional cumulation as described in Section 4.1(f)),
the Company within 30 days thereafter shall (i) cause to be filed with the
Equity Warrant Agent an Officer's Certificate (as defined hereinafter)
setting forth the amount of Common Stock issuable upon exercise of an Equity
Warrant after such adjustment and setting forth in reasonable detail the
method of calculation and the facts upon which such calculations are based,
which certificate, absent manifest error and any failure to comply with
Section 4.1 (other than failures that are de minimus in nature), shall be
conclusive evidence of the correctness of the matters set forth therein, and
(ii) cause to be given to each of the registered Holders at his address
appearing on the Equity Warrant Register (as defined hereinafter) written
notice of such adjustments by first-class mail, postage prepaid.
ARTICLE 5.
OTHER PROVISIONS RELATING TO RIGHTS OF HOLDERS
OF EQUITY WARRANTS
5.1. No Rights as Holder of Common Stock Conferred by Equity Warrants
or Equity Warrant Certificates. No Equity Warrant or Equity Warrant
Certificate shall entitle the Holder to any of the rights of a holder of
Common Stock, including, without limitation, voting, dividend or liquidation
rights.
5.2. Lost, Stolen, Destroyed or Mutilated Equity Warrant
Certificates. Upon receipt by the Company and the Equity Warrant Agent of
evidence reasonably satisfactory to them of
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the ownership of and the loss, theft, destruction or mutilation of any Equity
Warrant Certificate and of indemnity (other than in connection with any
mutilated Equity Warrant certificates surrendered to the Equity Warrant Agent
for cancellation) reasonably satisfactory to them, the Company shall execute,
and the Equity Warrant Agent shall countersign and deliver, in exchange for or
in lieu of each lost, stolen, destroyed or mutilated Equity Warrant Certificate,
a new Equity Warrant Certificate evidencing a like number of Equity Warrants of
the same title. Upon the issuance of a new Equity Warrant Certificate under this
Section, the Company may require the payment of a sum sufficient to cover any
stamp or other tax or other governmental charge that may be imposed in
connection therewith and any other expenses (including the fees and expenses of
the Equity Warrant Agent) in connection therewith. Every substitute Equity
Warrant Certificate executed and delivered pursuant to this Section in lieu of
any lost, stolen or destroyed Equity Warrant Certificate shall represent a
contractual obligation of the Company, whether or not such lost, stolen or
destroyed Equity Warrant Certificate shall be at any time enforceable by anyone,
and shall be entitled to the benefits of this Agreement equally and
proportionately with any and all other Equity Warrant Certificates, duly
executed and delivered hereunder, evidencing Equity Warrants of the same title.
The provisions of this Section are exclusive and shall preclude (to the extent
lawful) all other rights and remedies with respect to the replacement of lost,
stolen, destroyed or mutilated Equity Warrant Certificates.
5.3. Holders of Equity Warrants May Enforce Rights. Notwithstanding
any of the provisions of this Agreement, any Holder may, without the consent
of the Equity Warrant Agent, enforce and may institute and maintain any suit,
action or proceeding against the Company suitable to enforce, or otherwise in
respect of his right to exercise his Equity Warrants as provided in the
Equity Warrants and in this Agreement.
5.4. Consolidation or Merger or Sale of Assets. For purposes of this
Section 5.4, a "Sale Transaction" means any transaction or event, including
any merger, consolidation, sale of assets, tender or exchange offer,
reclassification, compulsory share exchange or liquidation, in which all or
substantially all outstanding shares of the Compan's Common Stock are
converted into or exchanged for stock, other securities, cash or assets or
following which any remaining outstanding shares of Common Stock fail to meet
the listing standards imposed by each of the New York Stock Exchange, the
American Stock Exchange and the Nasdaq National Market at the time of such
transaction, but shall not include any transaction the primary purpose of
which is the reincorporation of the Company in another U.S. jurisdiction so
long as in such transaction each Equity Warrant shall convert into an equity
security of the successor to the Company having identical rights as the
Equity Warrant. If a Sale Transaction occurs, then lawful provision shall be
made by the corporation formed by such Sale Transaction or the corporation
whose securities, cash or other property will immediately after the Sale
Transaction be owned, by virtue of such Sale Transaction, by the holders of
Common Stock immediately prior to the Sale Transaction, or the corporation
which shall have acquired such securities of the Company (collectively the
"Formed, Surviving or Acquiring Corporation"), as the case may be, providing
that each Equity Warrant then outstanding shall thereafter be exercisable for
the kind and amount of securities, cash or other property receivable upon
such Sale Transaction by a holder of the number of shares of Common Stock
that would have been received upon exercise of such Equity Warrant
immediately prior to such Sale Transaction assuming such holder of Common
Stock did not exercise his rights of election, if any, as to the kind or
amount of securities, cash or other property receivable upon such Sale
Transaction (provided that, if the kind or amount of
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securities, cash or other property receivable upon such Sale Transaction is not
the same for each share of Common Stock in respect of which such rights of
election shall not have been exercised ("Non-Electing Share"), then for the
purposes of this Section 5.4 the kind and amount of securities, cash or other
property receivable upon such Sale Transaction for each Non-Electing Share shall
be deemed to be the kind and amount so receivable per share by a plurality of
the Non-Electing Shares). At the option of the Company, in lieu of the
foregoing, the Company may require that in a Sale Transaction each Holder of an
Equity Warrant shall receive in exchange for each such Equity Warrant a security
of the Formed, Surviving or Acquiring Corporation having substantially
equivalent rights, other than as set forth in this Section 5.4, as the Equity
Warrant. Concurrently with the consummation of such transaction, the Formed,
Surviving or Acquiring Corporation shall enter into a supplemental Equity
Warrant Agreement so providing and further providing for adjustments which shall
be as nearly equivalent as may be practical to the adjustments provided for in
Section 4.1. The Formed, Surviving or Acquiring Corporation shall mail to
Holders a notice describing the supplemental Equity Warrant Agreement. If the
issuer of securities deliverable upon exercise of Equity Warrants under the
supplemental Equity Warrant Agreement is an affiliate of the formed or surviving
corporation, that issuer shall join in the supplemental Equity Warrant
Agreement. Notwithstanding anything to the contrary herein, there will be no
adjustments pursuant to Article 4 hereof in case of the issuance of any shares
of the Company's stock in a Sale Transaction except as provided in this Section
5.4. The provisions of this Section 5.4 shall similarly apply to successive Sale
Transactions; provided, however, that in no event shall a Holder of an Equity
Warrant be entitled to more than one adjustment pursuant to this Section 5.4 in
respect of a series of related transactions.
ARTICLE 6.
EXCHANGE AND TRANSFER OF EQUITY WARRANTS
6.1. Equity Warrant Register; Exchange and Transfer of Equity
Warrants. The Equity Warrant Agent shall maintain, at its corporate trust
office or at 385 Rifle Camp Road, Reorganization Services Department, 5th
Floor, West Paterson, New Jersey 07424, a register (the "Equity Warrant
Register") in which, upon the issuance of Equity Warrants, and, subject to
such reasonable regulations as the Equity Warrant Agent may prescribe, it
shall register Equity Warrant Certificates and exchanges and transfers
thereof. The Equity Warrant Register shall be in written form or in any
other form capable of being converted into written form within a reasonable
time.
Except as provided in the following sentence, upon surrender at
the corporate trust office of the Equity Warrant Agent or at 385 Rifle Camp
Road, Reorganization Services Department, 5th Floor, West Paterson, New
Jersey 07424, Equity Warrant Certificates may be exchanged for one or more
other Equity Warrant Certificates evidencing the same aggregate number of
Equity Warrants of the same title, or may be transferred in whole or in
part. A transfer shall be registered and an appropriate entry made in the
Equity Warrant Register upon surrender of an Equity Warrant Certificate to
the Equity Warrant Agent at its corporate trust office or at 385 Rifle Camp
Road, Reorganization Services Department, 5th Floor, West Paterson, New
Jersey 07424 for transfer, properly endorsed or accompanied by appropriate
instruments of transfer and written instructions for transfer, all in form
satisfactory to the Company and the Equity Warrant Agent. Whenever an Equity
Warrant Certificate is
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surrendered for exchange or transfer, the Equity Warrant Agent shall countersign
and deliver to the person or person entitled thereto one or more Equity Warrant
Certificates duly executed by the Company, as so requested. The Equity Warrant
Agent shall not be required to effect any exchange or transfer which will result
in the issuance of an Equity Warrant Certificate evidencing a fraction of an
Equity Warrant. All Equity Warrant Certificates issued upon any exchange or
transfer of an Equity Warrant Certificate shall be the valid obligations of the
Company, evidencing the same obligations, and entitled to the same benefits
under this Agreement, as the Equity Warrant Certificate surrendered for such
exchange or transfer.
No service charge shall be made for any exchange or transfer of
Equity Warrants, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any such exchange or transfer, in accordance with Section 2.5 hereof.
6.2. Treatment of Holders of Equity Warrants. Every Holder of an
Equity Warrant, by accepting the Equity Warrant Certificate evidencing the
same, consents and agrees with the Company, the Equity Warrant Agent and with
every other Holder of Equity Warrants that the Company and the Equity Warrant
Agent may treat the record holder of an Equity Warrant Certificate as the
absolute owner of such Equity Warrant for all purposes and as the person
entitled to exercise the rights represented by such Equity Warrant.
6.3. Cancellation of Equity Warrant Certificates. In the event that
the Company shall purchase, redeem or otherwise acquire any Equity Warrants
after the issuance thereof, the Equity Warrant Certificate shall thereupon be
delivered to the Equity Warrant Agent and be canceled by it. The Equity
Warrant Agent shall also cancel any Equity Warrant Certificate (including any
mutilated Equity Warrant Certificate) delivered to it for exercise, in whole
or in part, or for exchange or transfer. Equity Warrant Certificates so
canceled shall be delivered by the Equity Warrant Agent to the Company from
time to time, or disposed of in accordance with the instructions of the
Company.
ARTICLE 7.
CONCERNING THE EQUITY WARRANT AGENT
7.1. Equity Warrant Agent. The Company hereby appoints The Bank of
New York as Equity Warrant Agent of the Company in respect of the Equity
Warrants upon the terms and subject to the conditions set forth herein; and
The Bank of New York hereby accepts such appointment. The Equity Warrant
Agent shall have the powers and authority granted to and conferred upon it in
the Equity Warrant Certificates and hereby and such further powers and
authority acceptable to it to act on behalf of the Company as the Company may
hereafter grant to or confer upon it. All of the terms and provisions with
respect to such powers and authority contained in the Equity Warrant
Certificates are subject to and governed by the terms and provisions hereof.
7.2. Conditions of Equity Warrant Agent's Obligations. The Equity
Warrant Agent accepts its obligations set forth herein upon the terms and
conditions hereof, including the
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following, to all of which the Company agrees and to all of which the rights
hereunder of the Holders shall be subject:
(a) Compensation and Indemnification. The Company agrees to pay
the Equity Warrant Agent from time to time such compensation for its services as
the Company and the Equity Warrant shall agree in writing and to reimburse the
Equity Warrant Agent for reasonable out-of-pocket expenses (including reasonable
counsel fees) incurred by the Equity Warrant Agent in connection with the
services rendered hereunder by the Equity Warrant Agent. The Company also agrees
to indemnify the Equity Warrant Agent for, and to hold it harmless against, any
loss, liability or expenses (including the reasonable costs and expense of
defending against any claim of liability) incurred without negligence or bad
faith on the part of the Equity Warrant Agent arising out of or in connection
with its appointment as Equity Warrant Agent hereunder.
(b) Agent for the Company. In acting under this Agreement and in
connection with any Equity Warrant Certificate, the Equity Warrant Agent is
acting solely as agent of the Company and does not assume any obligation or
relationship of agency or trust for or with any Holder.
(c) Counsel. The Equity Warrant Agent may consult with counsel
reasonably satisfactory to it, and the advice of such counsel shall be full and
complete authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in accordance with the advice of
such counsel.
(d) Documents. The Equity Warrant Agent shall be protected and
shall incur no liability for or in respect of any action taken, suffered or
omitted by it in reliance upon any notice, direction, consent, certification,
affidavit, statement or other paper or document reasonably believed by it to be
genuine and to have been presented or signed by the proper parties.
(e) Officer's Certificate. Whenever in the performance of its
duties hereunder the Equity Warrant Agent shall reasonably deem it necessary
that any fact or matter be proved or established by the Company prior to taking,
suffering or omitting any action hereunder, the Equity Warrant Agent may (unless
other evidence in respect thereof be herein specifically prescribed), in the
absence of bad faith on its part, rely upon a certificate signed by the
Chairman, the Vice Chairman, the Chief Executive Officer, the President, a Vice
President, the Treasurer, and Assistant Treasurer, the Secretary or an Assistant
Secretary of the Company (an "Office's Certificate") delivered by the Company
to the Equity Warrant Agent.
(f) Actions Through Agents. The Equity Warrant Agent may execute
and exercise any of the rights or powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys or agents, provided,
however, that reasonable care shall be exercised in the selection and continued
employment of such attorneys and agents.
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(g) Certain Transactions. The Equity Warrant Agent, and any
officer, director or employee thereof, may become the owner of, or acquire
interest in, any Equity Warrant, with the same rights that he, she or it would
have if it were not the Equity Warrant Agent, and, to the extent permitted by
applicable law, he, she or it may engage or be interested in any financial or
other transaction with the Company and may serve on, or as depositary, trustee
or agent for, any committee or body of holders of any obligations of the Company
as if it were not the Equity Warrant Agent.
(h) No Liability for Interest. The Equity Warrant Agent shall not
be liable for interest on any monies at any time received by it pursuant to any
of the provisions of this Agreement or of the Equity Warrant Certificates,
except as otherwise agreed with the Company.
(i) No Liability for Invalidity. The Equity Warrant Agent shall
incur no liability with respect to the validity of this Agreement (except as to
the due execution hereof by the Equity Warrant Agent) or any Equity Warrant
Certificate (except as to the countersignature thereof by the Equity Warrant
Agent).
(j) No Responsibility for Company Representations. The Equity
Warrant Agent shall not be responsible for any of the recitals or
representations contained herein (except as to such statements or recitals as
describe the Equity Warrant Agent or action taken or to be taken by it) or in
any Equity Warrant Certificate (except as to the Equity Warrant Agent's
countersignature on such Equity Warrant Certificate), all of which recitals and
representations are made solely by the Company.
(k) No Implied Obligations. The Equity Warrant Agent shall be
obligated to perform only such duties as are specifically set forth herein, and
no other duties or obligations shall be implied. The Equity Warrant Agent shall
not be under any obligation to take any action hereunder that may subject it to
any expense or liability, the payment of which within a reasonable time is not,
in its reasonable opinion, assured to it. The Equity Warrant Agent shall not be
accountable or under any duty or responsibility for the use by the Company of
any Equity Warrant Certificate countersigned by the Equity Warrant Agent and
delivered by it to the Company pursuant to this Agreement or for the application
by the Company of the proceeds of the issuance or exercise of Equity Warrants.
The Equity Warrant Agent shall have no duty or responsibility in case of any
default by the Company in the performance of its covenants or agreements
contained herein or in any Equity Warrant Certificate or in case of the receipt
of any written demand from a Holder with respect to such default, including,
without limiting the generality of the foregoing, any duty or responsibility to
initiate or attempt to initiate any proceedings at law or otherwise or, except
as provided in Section 8.2 hereof, to make any demand upon the Company.
7.3. Compliance with Applicable Laws. The Equity Warrant Agent agrees
to comply with all applicable federal and state laws imposing obligations on
it in respect of the services rendered by it under this Agreement and in
connection with the Equity Warrants, including (but not limited to) the
provisions of United States federal income tax laws regarding information
reporting and backup withholding. The Equity Warrant Agent expressly assumes
all liability for
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its failure to comply with any such laws imposing obligations on it, including
(but not limited to) any liability for failure to comply with any applicable
provisions of United States federal income tax laws regarding information
reporting and backup withholding.
7.4. Resignation and Appointment of Successor.
(a) The Company agrees, for the benefit of the Holders of the
Equity Warrants, that there shall at all times be an Equity Warrant Agent
hereunder until all the Equity Warrants are no longer exercisable.
(b) The Equity Warrant Agent may at any time resign as such agent
by giving written notice to the Company of such intention on its part,
specifying the date on which its desired resignation shall become effective,
subject to the appointment of a successor Equity Warrant Agent and acceptance of
such appointment by such successor Equity Warrant Agent, as hereinafter
provided. The Equity Warrant Agent hereunder may be removed at any time by the
filing with it of an instrument in writing signed by or on behalf of the Company
and specifying such removal and the date when it shall become effective. Such
resignation or removal shall take effect upon the appointment by the Company, as
hereinafter provided, of a successor Equity Warrant Agent (which shall be a
banking institution organized under the laws of the United States of America, or
one of the states thereof and having an office or an agent's office in the
Borough of Manhattan, the City of New York) and the acceptance of such
appointment by such successor Equity Warrant Agent. In the event a successor
Equity Warrant Agent has not been appointed and has not accepted its duties
within 90 days of the Equity Warrant Agen's notice of resignation, the Equity
Warrant Agent may apply to any court of competent jurisdiction for the
designation of a successor Equity Warrant Agent.
(c) In case at any time the Equity Warrant Agent shall resign, or
shall be removed, or shall become incapable of acting, or shall be adjudged
bankrupt or insolvent, or make an assignment for the benefit of its creditors or
consent to the appointment of a receiver or custodian of all or any substantial
part of its property, or shall admit in writing its inability to pay or meet its
debts as they mature, or if a receiver or custodian of it or all or any
substantial part of its property shall be appointed, or if any public officer
shall have taken charge or control of the Equity Warrant Agent or of its
property or affairs, for the purpose of rehabilitation, conservation or
liquidation, a successor Equity Warrant Agent, qualified as aforesaid, shall be
appointed by the Company by an instrument in writing, filed with the successor
Equity Warrant Agent. Upon the appointment as aforesaid of a successor Equity
Warrant Agent and acceptance by the latter of such appointment, the Equity
Warrant Agent so superseded shall cease to be the Equity Warrant Agent
hereunder.
(d) Any successor Equity Warrant Agent appointed hereunder shall
execute, acknowledge and deliver to its predecessor and to the Company an
instrument accepting such appointment hereunder, and thereupon such successor
Equity Warrant Agent, without any further act, deed or conveyance, shall become
vested with all the authority, rights, powers, trusts, immunities, duties and
obligations of such predecessor with like effect as if originally named as
Equity Warrant Agent hereunder, and such predecessor, upon payment of its
charges and disbursements then unpaid, shall thereupon become obligated to
transfer, deliver and pay over,
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and such successor Equity Warrant Agent shall be entitled to receive all moneys,
securities and other property on deposit with or held by such predecessor, as
Equity Warrant Agent hereunder.
(e) Any corporation into which the Equity Warrant Agent hereunder
may be merged or converted or any corporation with which the Equity Warrant
Agent may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Equity Warrant Agent shall be a party,
or any corporation to which the Equity Warrant Agent shall sell or otherwise
transfer all or substantially all of the assets and business of the Equity
Warrant Agent, provided that it shall be qualified as aforesaid, shall be the
successor Equity Warrant Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto.
ARTICLE 8.
MISCELLANEOUS
8.1. Amendment.
(a) This Agreement and the Equity Warrants may be amended by the
Company and the Equity Warrant Agent, without the consent of the Holders of
Equity Warrants, for the purpose of curing any ambiguity, or of curing,
correcting or supplementing any defective or inconsistent provision contained
herein or therein or in any other manner which the Company may deem to be
necessary or desirable and which will not (i) materially and adversely affect
the rights of the Equity Warrants and (ii) adversely affect the rights of the
Initial Holder under this Agreement to the extent the Initial Holder is a Holder
at the time of such amendment.
(b) The Company and the Equity Warrant Agent may modify or amend
this Agreement and the Equity Warrant Certificates with the consent of the
Holders of not fewer than a majority in number of the then outstanding
unexercised Equity Warrants affected by such modification or amendment, for any
purpose; provided, however, (i) that no such modification or amendment that
shortens the period of time during which the Equity Warrants may be exercised,
or increases the Exercise Price, or otherwise materially and adversely affects
the exercise rights of the holders or reduces the percentage of holders of
outstanding Equity Warrants the consent of which is required for modification or
amendment of this Agreement or the Equity Warrants, may be made without the
consent of each Holder affected thereby, and (ii) that no such modification or
amendment that adversely affects the exercise rights of the holders may be made
without the consent of the Initial Holder of the Equity Warrants to the extent
the Initial Holder is a Holder at the time of such modification and/or
amendment.
8.2. Notices and Demands to the Company and Equity Warrant Agent.
If the Equity Warrant Agent shall receive any notice or demand addressed to the
Company by any Holder pursuant to the provisions of the Equity Warrant
Certificate, the Equity Warrant Agent shall promptly forward such notice or
demand to the Company.
8.3. Addresses for Notices. Any communications from the Company to
the Equity Warrant Agent with respect to this Agreement shall be addressed to
The Bank of New York, 385 Rifle Camp Road, Reorganization Services Department,
5th Floor, West Paterson, New Jersey
-16-
07424; any communications from the Equity Warrant Agent to the Company with
respect to this Agreement shall be addressed to USA Networks, Inc., 152 West
57th Street, New York, NY 10019, Attention: General Counsel; or such other
addresses as shall be specified in writing by the Equity Warrant Agent or by the
Company.
8.4. Governing Law. This Agreement and the Equity Warrants shall be
governed by the laws of the State of New York applicable to contracts made
and to be performed entirely within such state.
8.5. Governmental Approvals. The Company will from time to time use
all reasonable efforts to obtain and keep effective any and all permits,
consents and approvals of governmental agencies and authorities and the
national securities exchange on which the Equity Warrants may be listed or
authorized for trading from time to time and filings under the United States
federal and state laws, which may be or become requisite in connection with
the issuance, sale, trading, transfer or delivery of the Equity Warrants, and
the exercise of the Equity Warrants.
8.6. Reservation of Shares of Common Stock. The Company covenants
that it will at all times reserve and keep available, free from preemptive
rights (other than such rights as do not affect the ownership of shares
issued to a Holder), out of the aggregate of its authorized but unissued
shares of Common Stock or its issued shares of Common Stock held in its
treasury, or both, for the purpose of effecting exercises of Equity Warrants,
the full number of shares of Common Stock deliverable upon the exercise of
all outstanding Equity Warrants not theretofore exercised and on or before
taking any action that would cause an adjustment resulting in an increase in
the number of shares of Common Stock deliverable upon exercise above the
number thereof previously reserved and available therefor, the Company shall
take all such action so required. For purposes of this Section 8.6, the
number of shares of Common Stock which shall be deliverable upon the exercise
of all outstanding Equity Warrants shall be computed as if at the time of
computation all outstanding Equity Warrants were held by a single holder.
Before taking any action which would cause an adjustment reducing the price
per share of Common Stock issued upon exercise of the Equity Warrants below
the then par value (if any) of such shares of Common Stock, the Company shall
take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid
and non-assessable shares of Common Stock at such Exercise Price.
8.7. Covenant Regarding Shares of Common Stock. All shares of Common
Stock which may be delivered upon exercise of the Equity Warrants will upon
delivery be duly and validly issued and fully paid and non-assessable, free
of all liens and charges and not subject to any preemptive rights (other than
rights which do not affect the Holder's right to own the shares of Common
Stock to be issued), and prior to the Exercise Date the Company shall take
any corporate action necessary therefor. The issuance of all such shares of
Common Stock shall, to the extent permitted by law, be registered under the
Securities Act of 1933, as amended.
8.8. Persons Having Rights Under Agreement. Nothing in this Agreement
expressed or implied and nothing that may be inferred from any of the
provisions hereof is intended, or shall be construed, to confer upon, or give
to, any person or corporation other than the Company, the Equity Warrant
Agent and the Holders any right, remedy or claim under or by reason of this
-17-
Agreement or of any covenant, condition, stipulation, promise or agreement
hereof; and all covenants, conditions, stipulations, promises and agreements in
this Agreement contained shall be for the sole and exclusive benefit of the
Company and the Equity Warrant Agent and their successors and of the Holders of
Equity Warrant Certificates.
8.9. Limitation of Liability. No provision hereof, in the absence of
affirmative action by the Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of the Holder hereof, shall
give rise to any liability of such Holder to pay the Exercise Price for any
shares of Common Stock other than pursuant to an exercise of the Equity
Warrant or any liability as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
8.10. Restrictions on Transfer/Registration Rights. For any transfer
of Equity Warrants and/or the Common Stock purchasable upon exercise of the
Equity Warrants to be effective, the Holders of the Equity Warrants must
comply with the transfer restrictions set forth in the Amended and Restated
Stockholders Agreement, dated as of December 16, 2001, among the Company and
the other parties on the signature pages thereto, as the same may be amended
from time to time (the "Stockholders Agreement"). On delivery of the Equity
Warrants by the Company to the Initial Holder, such Initial Holder (and to
the extent provided for in the Amended and Restated Governance Agreement,
dated as of December 16, 2001, among the Company and the other parties set
forth on the signature pages thereto, as the same may be amended from time to
time (the "Governance Agreement"), certain transferees of the Initial Holder)
shall have registration rights with respect to the Equity Warrants to the
extent provided in the Governance Agreement.
8.11. Headings. The descriptive headings of the several Articles and
Sections and the Table of Contents of this Agreement are for convenience only
and shall not control or affect the meaning or construction of any of the
provisions hereof.
8.12. Counterparts. This Agreement may be executed by the parties
hereto in any number of counterparts, each of which when so executed and
delivered shall be deemed to be an original; but all such counterparts shall
together constitute but one and the same instrument.
8.13. Inspection of Agreement. A copy of this Agreement shall be
available at all reasonable times at the principal corporate trust office of
the Equity Warrant Agent, for inspection by the Holders of Equity Warrants.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed, all as of the day and year first above written.
USA NETWORKS, INC.
By /s/ Julius Genachowski
----------------------------------
Name: Julius Genachowski
Title: Executive Vice President
Attest:
/s/ Joanne Hawkins
- ---------------------------------
Name: Joanne Hawkins
Title: Assistant Secretary
THE BANK OF NEW YORK
By /s/ Ralph Chianese
----------------------------------
Name: Ralph Chianese
Title: Vice President
Attest:
/s/ Nadine Murden
- ---------------------------------
Name: Nadine Murden
Title: Assistant Treasurer
-19-
EXHIBIT 99.1
================================================================================
AMENDED AND RESTATED LIMITED LIABILITY LIMITED PARTNERSHIP
AGREEMENT
of
VIVENDI UNIVERSAL ENTERTAINMENT LLLP
dated as of May 7, 2002,
by and among
USI ENTERTAINMENT INC.,
USANI HOLDING XX, INC.,
UNIVERSAL PICTURES INTERNATIONAL HOLDINGS BV,
UNIVERSAL PICTURES INTERNATIONAL HOLDINGS 2 BV,
NYCSPIRIT CORP. II,
USA NETWORKS, INC.,
USANi SUB LLC,
NEW-U STUDIOS HOLDINGS, INC.
and
BARRY DILLER
================================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions and Usage
SECTION 1.01 Definitions.................................................2
SECTION 1.02 Terms and Usage Generally..................................10
ARTICLE II
The Partnership
SECTION 2.01 Effectiveness of this Agreement............................10
SECTION 2.02 Continuation...............................................10
SECTION 2.03 Name.......................................................10
SECTION 2.04 Term.......................................................11
SECTION 2.05 Registered Agent and Registered Office.....................11
SECTION 2.06 Purposes...................................................11
SECTION 2.07 Treatment as Partnership...................................11
ARTICLE III
Capital Contributions; Partners
SECTION 3.01 Initial Capital Contributions..............................11
SECTION 3.02 Admission of Partners......................................12
SECTION 3.03 Substitute Partners and Additional Partners................12
SECTION 3.04 Withdrawal of Initial Limited Partner......................13
ARTICLE IV
Reports
SECTION 4.01 Reports to Partners........................................13
SECTION 4.02 Tax Information............................................13
SECTION 4.03 Other Information..........................................14
ARTICLE V
Preferred Interests
SECTION 5.01 General....................................................14
SECTION 5.02 Ranking....................................................14
SECTION 5.03 PIK Accretion..............................................14
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SECTION 5.04 Consent Right..............................................15
SECTION 5.05 Negative Covenants.........................................15
SECTION 5.06 No Other Consent Rights....................................17
ARTICLE VI
Common Interests
SECTION 6.01 General....................................................17
SECTION 6.02 Issuances of Common Interests After the Closing Date.......18
SECTION 6.03 Preemptive Rights..........................................18
SECTION 6.04 Other Issuances of Common Interests........................19
SECTION 6.05 Contribution of Assets or Capital Stock by Universal
Sub.....................................................20
SECTION 6.06 Consent Right..............................................20
SECTION 6.07 Assignees of Diller Common Interests.......................21
ARTICLE VII
Capital Accounts, Allocations of
Profit and Loss and Tax Matters
SECTION 7.01 Capital Accounts...........................................21
SECTION 7.02 Allocations of Net Income and Net Loss.....................22
SECTION 7.03 Allocations of Net Income and Net Loss for Federal
Income Tax Purposes.....................................24
SECTION 7.04 Allocation of the Partnership Debt.........................25
SECTION 7.05 Elections..................................................25
SECTION 7.06 Fiscal Year................................................25
SECTION 7.07 Withholding Requirements...................................25
SECTION 7.08 Tax Matters Partner........................................25
ARTICLE VIII
Distributions
SECTION 8.01 Distributions..............................................26
SECTION 8.02 Tax Distributions..........................................26
SECTION 8.03 General Limitations........................................26
SECTION 8.04 Distributions in Kind......................................27
SECTION 8.05 Closing Date Distribution..................................27
SECTION 8.06 Distribution upon Maturity of Class A Preferred
Interests...............................................27
SECTION 8.07 Put/Call Rights with Respect to Class B Preferred
Interests...............................................27
ARTICLE IX
Management of the Partnership
SECTION 9.01 General Partner............................................28
SECTION 9.02 Board; Representatives; Chairman...........................29
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SECTION 9.03 Expenses...................................................29
SECTION 9.04 Agreement Not To Compete...................................30
ARTICLE X
Transfers of Interests
SECTION 10.01 Restrictions on Transfers..................................31
SECTION 10.02 Transfers Permitted at any Time............................31
SECTION 10.03 Put/Call Rights...........................................32
SECTION 10.04 Tag-Along for USAi Limited Partners for Transfers by
Universal...............................................35
ARTICLE XI
Limitation on Liability, Exculpation
SECTION 11.01 Limitation on Liability....................................36
SECTION 11.02 Exculpation of Covered Persons............................37
SECTION 11.03 Partnership Opportunities..................................37
SECTION 11.04 Indemnification............................................38
ARTICLE XII
Events of Withdrawal; Bankruptcy of a General Partner
SECTION 12.01 Events of Withdrawal.......................................39
SECTION 12.02 Bankruptcy of a General Partner............................39
ARTICLE XIII
Dissolution and Termination
SECTION 13.01 Dissolution................................................39
SECTION 13.02 Winding Up of the Partnership..............................40
SECTION 13.03 Distribution of Property...................................41
SECTION 13.04 Claims of Partners.........................................41
SECTION 13.05 Termination................................................41
ARTICLE XIV
Miscellaneous
SECTION 14.01 Notices....................................................42
SECTION 14.02 No Third Party Beneficiaries...............................42
SECTION 14.03 Waiver.....................................................42
SECTION 14.04 Integration................................................42
SECTION 14.05 Headings...................................................43
SECTION 14.06 Counterparts...............................................43
-iv-
SECTION 14.07 Severability...............................................43
SECTION 14.08 Applicable Law.............................................43
SECTION 14.09 Jurisdiction...............................................43
SECTION 14.10 Attorney-in-Fact...........................................43
SECTION 14.11 Limited Partner Voting Rights..............................43
Schedules
Schedule A - Partners
Schedule B - Initial Capital Contributions
-v-
AMENDED AND RESTATED LIMITED LIABILITY LIMITED
PARTNERSHIP AGREEMENT of VIVENDI UNIVERSAL ENTERTAINMENT
LLLP (the "Partnership") dated as of May 7, 2002, by and
among USI ENTERTAINMENT INC., a Delaware corporation
("Universal Sub"), as general partner, USANI HOLDINGS
XX, INC., a Delaware corporation ("USANI XX"), UNIVERSAL
PICTURES INTERNATIONAL HOLDINGS BV, a corporation
organized under the laws of The Netherlands ("UPI
Holdings"), UNIVERSAL PICTURES INTERNATIONAL HOLDINGS 2
BV, a corporation organized under the laws of The
Netherlands ("UPI Holdings 2"), NYCSPIRIT CORP. II, a
Delaware corporation ("NYCSpirit"), USA NETWORKS, INC.,
a Delaware corporation ("USAi"), USANi SUB LLC, a
Delaware limited liability company ("USANi Sub"), NEW-U
STUDIOS HOLDINGS, INC., a Delaware corporation ("New-U
Studios"), and Barry Diller ("Diller"), as limited
partners , for purposes of Sections 10.03(f) and
10.04(d) only, VIVENDI UNIVERSAL, S.A., a societe
anonyme organized under the laws of France ("Vivendi"),
for purposes of Sections 8.07 and 10.03 only, UNIVERSAL
STUDIOS, INC., a Delaware corporation ("Universal"),
and, for purposes of Section 8.07 only, SUB I - USA
Holding LLC, a Delaware limited liability company ("SUB
I-USA"), USI - USA Holding LLC, a Delaware limited
liability company ("USI-USA"), USIE - USA Holding LLC, a
Delaware limited liability company ("USIE-USA"), and V -
USA Holding LLC, a Delaware limited liability company
("V-USA").
Preliminary Statement
---------------------
WHEREAS, the parties hereto (or Affiliates thereof) are parties to
the Amended and Restated Transaction Agreement (the "Transaction Agreement")
dated as of December 16, 2001, by and among Vivendi, Universal, USAi, USANi LLC,
a Delaware limited liability company, Liberty and Diller;
WHEREAS, Universal Sub and USI Interim LP Inc. (the "Initial Limited
Partner") are parties to the Agreement of Limited Liability Limited Partnership
of the Partnership (the "Original Partnership Agreement") dated as of April 15,
2002;
WHEREAS, Universal Sub, as general partner of the Partnership, has
duly executed and filed with the Secretary of State of the State of Delaware (i)
a statement of qualification as a limited liability limited partnership and (ii)
a certificate of limited partnership;
WHEREAS, the parties hereto desire to continue the Partnership and
to amend and restate the terms and provisions of the Original Partnership
Agreement in the form hereof; and
WHEREAS, immediately upon the admission of at least one additional
Limited Partner as a limited partner of the Partnership, the Initial Limited
Partner shall withdraw from the Partnership.
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
Definitions and Usage
---------------------
SECTION 1.01 Definitions. The terms shall have the following
meanings for purposes of this Agreement:
"Additional Partner" means any Person admitted as a Partner of the
Partnership pursuant to Section 3.03 in connection with the new issuance of a
Common Interest to such Person.
"Affiliate" of any specified Person means any other Person directly
or indirectly Controlling, Controlled by or under direct or indirect common
Control with such specified Person. For purposes of the foregoing, (i) USANi Sub
and its Affiliates shall be deemed to be Affiliates of USAi, (ii) none of USAi,
Universal or Diller, or any of their respective Affiliates, shall be deemed to
be Affiliates of one another, and (iii) none of USAi, Universal or Diller, or
any of their respective Affiliates, shall be deemed to be an Affiliate of the
Partnership.
"Agreement" means this Amended and Restated Limited Liability
Limited Partnership Agreement, as the same may be amended or restated from time
to time.
"Appraised Value" of a Common Interest means (x) the Participation
Percentage of such Common Interest multiplied by (y) the private market value of
the Partnership taken as a whole; provided, however, that such valuation shall
not assume the value of the Partnership in an "auction" proceeding, and any
valuation methodology shall exclude any acquisition of similar assets or
businesses at a uniquely high valuation due to a purchaser's strategic need to
acquire such assets or businesses.
"Assignment Agreement" means the Assignment Agreement dated as of
the Closing Date, by and among Vivendi, Universal, SUB I-USA, USI-USA, USIE-USA,
V-USA and USAi.
"Bankrupt Partner" is defined in Section 12.02(a).
"Bankruptcy" of a Person means (i) the filing by such Person of a
voluntary petition seeking liquidation, reorganization, arrangement or
readjustment, in any form, of its debts under Title 11 of the United States Code
(or corresponding provisions of future laws) or any other bankruptcy or
insolvency law, whether foreign or domestic, or such Person's filing an answer
consenting to or acquiescing in any such petition, (ii) the making by such
Person of any assignment for the benefit of its creditors or the admission by
such Partner in writing of its inability to pay its debts as they mature or
(iii) the expiration of 60 days after the filing of an involuntary petition
under Title 11 of the United States Code (or corresponding provisions of
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future laws), an application for the appointment of a receiver for the assets of
such Person, or an involuntary petition seeking liquidation, reorganization,
arrangements, composition, dissolution or readjustment of its debts or similar
relief under any bankruptcy or insolvency law, provided that the same shall not
have been vacated, set aside or stayed within such 60-day period. This
definition of "Bankruptcy" is intended to replace the bankruptcy related events
set forth in Sections 17-402(a)(4) and (a)(5) of the Delaware Act.
"Bankruptcy Code" means the United States Bankruptcy Code of 1978,
as amended.
"Beneficial Owner" and "Beneficial Ownership" have the meanings set
forth in Rule 13d-3 and Rule 13d-5 under the Securities Exchange Act of 1934, as
amended, except that a Person shall be deemed to have Beneficial Ownership of
all securities that such Person has the right to acquire, whether such right is
currently exercisable or is exercisable only upon the occurrence of a subsequent
event.
"Board" is defined in Section 9.02(b).
"Business" means any of the programming, television distribution,
cable network, film and theme park businesses.
"Business Day" means any day other than a Saturday, a Sunday or a
U.S. Federal holiday.
"Call" means the USAi Call or the Diller Call.
"Capital Account" is defined in Section 7.01(a).
"Capital Contribution" means, with respect to any Partner, any
capital contribution made by such Partner to the Partnership pursuant to Section
3.01 or 6.02.
"Cause" means (i) the conviction of, or pleading guilty to, any
felony, or (ii) the willful, continued and complete failure to attend to
managing the business affairs of the Partnership, after written notice of such
failure from the General Partner and reasonable opportunity to cure.
"Chairman" is defined in Section 9.02(b).
"Class A Preferred Interests" is defined in Section 5.01(a).
"Class B Preferred Consideration" is defined in Section 8.07.
"Class B Preferred Interests" is defined in Section 5.01(b).
"Closing" means the closing of the transactions contemplated by the
Transaction Agreement.
"Closing Date" means the date of the Closing.
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"Code" means the Internal Revenue Code of 1986, as amended.
"Common Interest" means a partnership interest in the Partnership
that is not a Preferred Interest.
"Consolidated Tangible Net Worth" means total assets of the
Partnership and its consolidated subsidiaries, determined in accordance with
U.S. generally accepted accounting principles, giving effect to purchase
accounting, and deducting therefrom consolidated current liabilities and, to the
extent otherwise included, goodwill, patents, trademarks, service marks, trade
names, copyrights, licenses and other intangible items.
"Control", with reference to any Person, means the Beneficial
Ownership of a majority of the outstanding voting power (or equivalent) of such
Person and the terms "Controlling" and "Controlled" have meanings correlative to
the foregoing.
"Covered Person" means (i) each Partner, (ii) each Affiliate of a
Partner, (iii) each Representative and each officer, director, shareholder,
partner, employee, member, manager, representative, agent or trustee of a
Partner or of an Affiliate of a Partner and (iv) each officer of USAi serving as
an employee of the Partnership.
"Delaware Act" means the Delaware Revised Uniform Limited
Partnership Act, 6 Del. C.ss.ss.17-101 et seq., as amended from time to time or
any successor statute.
"Diller" is defined in the Preamble.
"Diller Call" is defined in Section 10.03(b).
"Diller Put" is defined in Section 10.03(b).
"Disabled" means the disability of Diller after the expiration of
more than 180 consecutive days after its commencement which is determined to be
total and permanent by a physician selected by the Partnership and reasonably
acceptable to Diller; provided that Diller shall be deemed to be disabled only
following the expiration of 90 days following receipt of a written notice from
the Partnership and such physician specifying that a disability has occurred if
within such 90-day period he fails to return to managing the business affairs of
the Partnership. A total disability shall mean mental or physical incapacity
that prevents Diller from managing the business affairs of the Partnership.
"DRUPA" is defined in Section 2.02.
"Effective Time" means the Closing.
"Face Value" of a Preferred Interest, as of any time, means the
amount equal to the initial Capital Contribution attributable to such Preferred
Interest as adjusted from time to time pursuant to Section 5.03.
"Fiscal Year" is defined in Section 7.06.
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"General Partner" means Universal Sub, any Substitute Partner that
is admitted as the general partner of the Partnership or any Person appointed as
such pursuant to Section 12.02(a), in each case, for so long as such Person
continues to be the general partner of the Partnership.
"Good Reason" means the assignment to Diller of any duties
inconsistent in any respect with his position as Chairman and chief executive
officer of the Partnership, authority, duties or responsibilities (including
status, offices, title and direct reporting relationship to the chief executive
officer of Vivendi), or any diminution in such positions (or removal from such
positions), authority, duties or responsibilities or requiring him to be based
at any location other than his current locations; it being understood that the
chief executive officer of the Partnership shall have the same authority and
duties as a corresponding officer of a Delaware corporation would have to act
for a Delaware corporation.
"Indebtedness" of any Person means, without duplication, (i) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (iii) all obligations of such Person
upon which interest charges are customarily paid, (iv) all obligations of such
Person in respect of the deferred purchase price of property or services
(excluding current accounts payable incurred in the ordinary course of
business), and (v) all capital lease obligations of such Person; provided that
the Indebtedness of any Persons shall include (A) the Indebtedness of any other
entity (including any partnership in which such Person is a general partner) to
the extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor, (B)
all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property owned or acquired by such Person, whether or not the
Indebtedness secured thereby has been assumed and (C) all guarantees by such
Person of Indebtedness of others; and provided, further, that Indebtedness shall
not include any Permitted Liens.
"Initial Limited Partner" is defined in the Preamble.
"Interests" means the entire partnership interest of a Partner in
the Partnership, including its Common Interests and its Preferred Interests.
"Investment Bank" means an independent, nationally recognized
investment bank.
"Liberty" means Liberty Media Corporation, a Delaware corporation.
"Lien" means any pledge, encumbrance, security interest, purchase
option, call or similar right.
"Limited Partner" means USAi, USANi Sub, New-U Studios, Diller,
USANI XX, UPI Holdings, UPI Holdings 2, NYCSpirit and any Additional Partner or
Substitute Partner that is admitted as a limited partner of the Partnership, in
each case for so long as such Person continues to be a limited partner of the
Partnership.
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"Market Value" of a stock means the amount equal to the average of
the daily volume weighted averages of such stock on the primary exchange on
which it trades, as reported by Bloomberg, for the 15 consecutive trading days
ending on the day immediately preceding the date of determination. For the
avoidance of doubt, the Market Value of USAi Common Shares shall be determined
based on the price of USAi Common Stock.
"Maturity Date" is defined in Section 8.06.
"Net Income" or "Net Losses", as appropriate, means, for any period,
the taxable income or tax loss of the Partnership for such period for Federal
income tax purposes, taking into account any separately stated tax items and
increased by the amount of any tax-exempt income of the Partnership during such
period and decreased by the amount of any Section 705(a)(2)(B) expenditures
(within the meaning of Treasury Regulation Section 1.704-1(b)(2)(iv)(i)) of the
Partnership; provided, however, that Net Income or Net Losses of the Partnership
shall be computed without regard to the amount of any items of gross income,
gain, loss or deduction that are specially allocated pursuant to Section
7.02(c), (d) or (e). With respect to any property contributed to the Partnership
at a time when its adjusted tax basis differs from its fair market value, and
with respect to all Partnership property after any adjustment to the Capital
Accounts pursuant to Section 7.01(c), the Net Income or Net Losses of the
Partnership (and the constituent items of income, gain, loss and deduction)
shall be computed in accordance with the principles of Treasury Regulation
Section 1.704-1(b)(2)(iv)(g).
"New-U Studios" is defined in the Preamble.
"Non-U.S. Participation Percentage" is defined in Section 6.01(a).
"Non-U.S. Source Items" means, for any period, each item of gross
income, gain, loss or deduction of the Partnership attributable to the
Non-U.S. Subsidiaries.
"Non-U.S. Subsidiaries" means any subsidiaries of the Partnership
organized outside of the United States.
"NYCSpirit" is defined in the Preamble.
"Original Partnership Agreement" is defined in the Preamble.
"Participation Percentage" is defined in Section 6.01(a).
"Partner" means the General Partner or a Limited Partner.
"Partnership" is defined in the Preamble.
"Partnership Debt" means the debt incurred by the Partnership to
fund the distribution under Section 8.05, pursuant to Section 2.04(ii) of the
Transaction Agreement.
"Permitted Liens" means, collectively, (i) all statutory or other
liens for taxes or assessments which are not yet due or the validity of which is
being contested in good faith by appropriate proceedings, (ii) all mechanics',
materialmen's, carriers', workers' and repairers'
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liens, and other similar liens imposed by law, incurred in the ordinary course
of business, which allege unpaid amounts that are less than 30 days delinquent
or which are being contested in good faith by appropriate proceedings, and (iii)
all other Liens which do not materially detract from or materially interfere
with the marketability, value or present use of the asset subject thereto or
affected thereby.
"Person" means any individual, firm, corporation, partnership,
limited liability company, trust, joint venture, governmental authority or other
entity.
"Preferred Interests" means the Class A Preferred Interests and the
Class B Preferred Interests, collectively.
"Purchasing Party" means the party purchasing Common Interests
pursuant to the exercise of a Put or a Call.
"Put" means the USAi Put or the Diller Put.
"Representative" is defined in Section 9.02(b).
"Restricted Business" has the same meaning as the term "Business" in
the Transaction Agreement.
"Sale Transaction" means any merger, consolidation, tender or
exchange offer, reclassification, compulsory share exchange, liquidation or
similar transaction, in which all or substantially all of the assets or the
outstanding equity securities of the ultimate parent of a Partner are
transferred, converted into or exchanged for stock, other securities, cash or
assets of another entity.
"Section 704(c) Property" means "Section 704(c) property" as defined
in Treasury Regulation Section 1.704-3(a)(3) and property that is revalued
pursuant to Section 7.01(c) hereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Selected Appraisal" is defined in Section 10.03(d).
"Selling Party" means the party selling Common Interests pursuant to
the exercise of a Put or a Call.
"Substitute Partner" means any Person admitted as a Partner of the
Partnership pursuant to Section 3.03 in connection with the Transfer of a
then-existing Interest of a Partner to such Person.
"SUB I-USA" is defined in the Preamble.
"Tag-Along Interests" is defined in Section 10.04(a).
"Tag-Along Notice" is defined in Section 10.04(a).
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"Tag-Along Offeree" is defined in Section 10.04(a).
"Tax Detriment" means, with respect to any taxes incurred as a
result of the recognition of income or gain by an indemnified party in taxable
period(s) earlier than the taxable period(s) in which such income or gain would
otherwise have been recognized by such party solely as a result of an action or
inaction by an indemnifying party, the excess, if any, of (i) the net present
value of such taxes incurred by the indemnified party in such earlier taxable
period(s) over (ii) the net present value of the taxes that would otherwise have
been incurred in such later taxable period, assuming (i) a discount rate equal
to USAi's borrowing rate in effect as of the time such net present values are
calculated and (ii) that for all taxable years, the indemnified party is fully
taxable at the highest applicable marginal Federal income tax rate and the
highest applicable marginal income and franchise tax rates of the state, local
and foreign jurisdictions in which the Partnership or any of its subsidiaries
conducts business (assuming full deductibility of state and local taxes, and
full creditability and deductibility of foreign taxes, for Federal (and if
applicable state and local) income tax purposes).
"Tax Matters Partner" is defined in Section 7.08.
"Transaction Agreement" is defined in the Preamble.
"Transfer" means any sale, assignment, transfer, exchange, gift,
bequest, pledge, hypothecation, distribution, spin-off, split-off, disposition,
encumbrance or other cessation of interest, direct or indirect, in whole or in
part, by operation of law or otherwise, and shall include all matters deemed to
constitute a Transfer under Section 10.01(a); provided, however, that a Transfer
shall not include a Sale Transaction. The terms "Transferred", "Transferring",
"Transferor" and "Transferee" have meanings correlative to the foregoing.
"Universal" is defined in the Preamble.
"Universal Limited Partners" means USANI XX, UPI Holdings, UPI
Holdings 2, NYCSpirit and their permitted transferees, in each case for so long
as such Person continues to be a limited partner of the Partnership.
"Universal Partners" initially means the Universal Limited
Partners and the General Partner.
"Universal Sub" is defined in the Preamble.
"UPI Holdings" is defined in the Preamble.
"UPI Holdings 2" is defined in the Preamble.
"U.S. Participation Percentage" is defined in Section 6.01(a).
"U.S. Source Items" means, for any period, each item of gross
income, gain, loss or deduction of the Partnership other than Non-U.S. Source
Items.
"USAi" is defined in the Preamble.
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"USAi Call" is defined in Section 10.03(a).
"USAi Class B Common Stock" means shares of Class B common stock of
USAi, par value $.01 per share.
"USAi Common Shares" means shares of USAi Common Stock and USAi
Class B Common Stock, collectively.
"USAi Common Stock" means shares of common stock of USAi, par value
$.01 per share.
"USAi Limited Partners" means USAi, USANi Sub, New-U Studios, Diller
and their permitted transferees, in each case for so long as such Person
continues to be a limited partner of the Partnership.
"USAi Preferred Call" is defined in Section 8.07.
"USAi Preferred Put" is defined in Section 8.07.
"USAi Put" is defined in Section 10.03(a).
"USANi Sub" is defined in the Preamble.
"USANI XX" is defined in the Preamble.
"USI-USA" is defined in the Preamble.
"USIE-USA" is defined in the Preamble.
"V-USA" is defined in the Preamble.
"Vivendi" is defined in the Preamble.
"Vivendi Ordinary Shares" means ordinary shares of Vivendi, par
value(U) 5.5 per share, or, in the event that all or substantially all of the
shares of Vivendi are exchanged for or converted into equity securities of
another Person after the Effective Time, such other equity securities as such
shares may be exchanged for or converted into after the Effective Time, so long
as such equity securities are listed or quoted on the New York Stock Exchange,
the Nasdaq Stock Market, the London Stock Exchange, the Paris Bourse or the
Frankfurt Stock Exchange and the average monthly trading volume of such equity
securities on any such exchange immediately after such share exchange or
conversion (and after giving effect to all of the transactions contemplated in
connection with such exchange or conversion) is substantially equivalent to or
greater than that of the Vivendi Ordinary Shares on its primary exchange
immediately prior to such share exchange or conversion.
SECTION 1.02 Terms and Usage Generally. (a) The definitions in
Section 1.01 shall apply equally to both the singular and plural forms of the
terms defined. Whenever the context may require, any pronoun shall include the
corresponding masculine,
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feminine and neuter forms. All references herein to Articles, Sections, Annexes,
Exhibits and Schedules shall be deemed to be references to Articles and Sections
of, and Annexes, Exhibits and Schedules to, this Agreement unless the context
shall otherwise require. All Annexes, Exhibits and Schedules attached hereto
shall be deemed incorporated herein as if set forth in full herein. The words
"include", "includes" and "including" shall be deemed to be followed by the
phrase "without limitation". The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
References to a Person are also to its permitted successors and permitted
assigns. Unless otherwise expressly provided herein, any agreement, instrument
or statute defined or referred to herein or in any agreement or instrument that
is referred to herein means such agreement, instrument or statute as from time
to time amended, modified or supplemented, including (in the case of agreements
or instruments) by waiver or consent and (in the case of statutes) by succession
of comparable successor statutes and references to all attachments thereto and
instruments incorporated therein.
(b) As used in this Agreement, unless otherwise expressly specified
herein, any allocation or distribution to be made among Interests or Partners
"on a pro rata basis" or "ratably" shall be made in proportion to the relative
Participation Percentages or Face Values of, or Capital Contributions
attributable to, such Interests, or of such Interests owned by such Partners, in
each case determined immediately prior to the transaction with respect to which
such allocation is being made.
ARTICLE II
The Partnership
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SECTION 2.01 Effectiveness of this Agreement. This Agreement
constitutes the partnership agreement (as defined in the Delaware Act) of the
parties hereto. This Agreement shall become effective at the Effective Time.
SECTION 2.02 Continuation. The parties hereto agree to continue
the Partnership as a limited partnership qualified as a limited liability
limited partnership under and pursuant to Section 17-214 of the Delaware Act and
Section 15-1001 of the Delaware Revised Uniform Partnership Act (6 Del. C.
ss.ss. 15-101 et seq.), as amended from time to time or any successor statute
("DRUPA"). The General Partner shall, on request, provide any Partner with
copies of each document filed with the Secretary of State of the State of
Delaware.
SECTION 2.03 Name. The name of the Partnership is Vivendi
Universal Entertainment LLLP. The General Partner may change the name of the
Partnership or adopt such trade or fictitious names as it may determine, in each
case consistent with the requirements of the Delaware Act, including Sections
17-102 and 17-214 thereof, and all other applicable law (e.g., fictitious name
statutes). The General Partner will give all Partners prompt written notice of
any such name change (or adoption of any such trade or fictitious name).
SECTION 2.04 Term. The term of the Partnership began on the
date the certificate of limited partnership of the Partnership became effective,
and the Partnership shall have perpetual existence unless sooner dissolved as
provided in Article XIII.
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SECTION 2.05 Registered Agent and Registered Office. The name
of the registered agent for service of process is The Corporation Trust Company,
and the address of the registered agent and the address of the registered office
in the State of Delaware is 1209 Orange Street, Wilmington, Delaware 19801. Such
office and such agent may be changed from time to time by the General Partner
consistent with the requirements of the Delaware Act, including Sections 17-104
and 17-202 thereof.
SECTION 2.06 Purposes. The Partnership was formed for the
object and purpose of, and the nature of the business to be conducted and
promoted by the Partnership is, engaging in the filmed entertainment,
television, recreation, programming, distribution and cable businesses and any
other lawful act or activity that the General Partner may from time to time
determine for which limited partnerships may be formed under the Delaware Act,
including engaging in the Business, and engaging in any and all activities
necessary or incidental to the foregoing.
SECTION 2.07 Treatment as Partnership. Except as otherwise
required pursuant to a determination within the meaning of Section 1313(a)(1) of
the Code, the parties shall treat the Partnership as a partnership for United
States federal income tax purposes and agree not to take any action or fail to
take any action which action or inaction would be inconsistent with such
treatment.
ARTICLE III
Capital Contributions; Partners
-------------------------------
SECTION 3.01 Initial Capital Contributions. (a) On the Closing
Date, USAi, USANi Sub, New-U Studios, Universal Sub, USANI XX, UPI Holdings, UPI
Holdings 2 and NYCSpirit shall make their respective initial Capital
Contributions, in property, in accordance with Section 2.03 of the Transaction
Agreement.
(b) In return for such initial Capital Contributions, Common
Interests and/or Preferred Interests shall be issued to the Partners as provided
in Articles V and VI hereof. Schedule B indicates the amount of Capital
Contributions attributable to Common Interests and Preferred Interests,
respectively, for each Partner.
(c) The parties shall treat the Capital Contributions described in
this Section 3.01 as contributions pursuant to Section 721 of the Code in which
no gain or loss is recognized to any extent, except as otherwise required
pursuant to a determination within the meaning of Section 1313(a)(1) of the
Code.
SECTION 3.02 Admission of Partners. At the Effective Time,
without the need for any further action of any Person, (i) Universal Sub shall
continue to be a general partner of the Partnership, and (ii) the other Persons
set forth on Schedule A attached hereto who have executed this Agreement shall
be admitted as Partners, and each such Person shall be shown as such in the
books and records of the Partnership. Following the Effective Time, no Person
shall be admitted as a Partner and no additional Common Interests or Preferred
Interests shall be issued except as expressly provided herein.
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SECTION 3.03 Substitute Partners and Additional Partners. (a)
No Transferee of an Interest or Person to whom an Interest is issued after the
Effective Time pursuant to this Agreement shall be admitted as a Partner
hereunder or acquire any rights hereunder, including any voting rights or the
right to receive distributions and allocations in respect of the Transferred or
issued Interest, as applicable, unless (i) such Interest is Transferred or
issued in compliance with the provisions of this Agreement and (ii) such
Transferee or recipient shall have executed and delivered to the Partnership
such customary instruments as the General Partner may reasonably require, to
effectuate the admission of such Transferee or recipient as a Partner and to
confirm the agreement of such Transferee or recipient to be bound by all the
terms and provisions of this Agreement (including Section 10.03). Upon complying
with clauses (i) and (ii) above, without the need for any further action of any
Person, a Transferee or recipient shall be deemed admitted to the Partnership as
a Partner. A Substitute Partner shall enjoy the same rights, and be subject to
the same obligations, as the Transferor; provided that, unless expressly
provided otherwise herein, such Transferor shall not be relieved of any
obligation or liability hereunder arising prior to the consummation of such
Transfer. As promptly as practicable after the admission of any Person as a
Partner, the books and records of the Partnership shall be changed to reflect
such admission. In the event of any admission of a Substitute Partner or
Additional Partner pursuant to this Section 3.03(a), this Agreement shall be
deemed amended to reflect such admission, and any formal amendment of this
Agreement (including Schedules A and B hereto) in connection therewith shall
only require execution by the General Partner and such Substitute Partner or
Additional Partner, as applicable, to be effective.
(b) If a Partner shall Transfer all (but not less than all) its
Interests, the Partner shall thereupon cease to be a Partner of the Partnership;
provided, however, that any such Partner shall not cease to be a Partner until a
Transferee of such Partner's Interests is admitted to the Partnership as a
Substitute Partner pursuant to Section 3.03(a).
SECTION 3.04 Withdrawal of Initial Limited Partner.
Immediately upon the admission of at least one additional Limited Partner as a
limited partner of the Partnership, the Initial Limited Partner shall be deemed
to have withdrawn from the Partnership as a limited partner of the Partnership,
and, upon such withdrawal, the Initial Limited Partner shall have no further
interest in the Partnership.
ARTICLE IV
Reports
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SECTION 4.01 Reports to Partners. (a) Within 30 days after the
end of each of the first three fiscal quarters of a Fiscal Year, the Partnership
shall deliver to each Partner (i) unaudited consolidated balance sheets of the
Partnership and its consolidated subsidiaries as at the end of such quarter and
the related consolidated statements of income, statements of cash flow and
changes in financial position of the Partnership for the period from the
beginning of such quarter to the end of such quarter, prepared on a basis
consistent with the audited financial statements of the Partnership and its
consolidated subsidiaries, subject to changes resulting from audit and normal
year-end adjustments and (ii) a certificate executed by the chief financial
officer and Tax Matters Partner of the Partnership certifying compliance by the
Partnership with the provisions set forth in Section 5.05.
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(b) Within 80 days after the end of each Fiscal Year, the
Partnership shall deliver to each Partner audited consolidated balance sheets of
the Partnership and its consolidated subsidiaries as at the end of such Fiscal
Year and the related consolidated statements of income, statements of cash flow
and changes in financial position of the Partnership for such Fiscal Year, all
in reasonable detail and accompanied by a report thereon of the Partnership's
independent auditors as to such consolidated financial statements presenting
fairly the financial position of the Partnership and its consolidated
subsidiaries as at the dates indicated, and as to such audit having been made in
accordance with generally accepted auditing standards. Concurrently with the
delivery of such annual financial statements, the General Partner shall deliver
(i) a statement to each Partner of the balance of each Partner's Capital Account
and (ii) a certificate executed by the chief financial officer and Tax Matters
Partner of the Partnership certifying compliance by the Partnership with the
provisions set forth in Section 5.05.
SECTION 4.02 Tax Information. The General Partner shall timely
cause to be prepared, at the expense of the Partnership, all Federal, state,
local and foreign tax returns (including information returns) of the Partnership
and its subsidiaries, which may be required by a jurisdiction in which the
Partnership or its subsidiaries operate or conduct business for each year or
period for which such returns are required to be filed, and the General Partner
shall cause such returns to be timely filed. As soon as practicable after the
end of each Fiscal Year, the General Partner shall furnish to each Partner (and
each Person to whom Diller has assigned a beneficial interest pursuant to
Section 2.07 of the Transaction Agreement) an Internal Revenue Service Schedule
K-1 and such other information in the possession of the General Partner as is
reasonably requested by such Partner to file any required Federal, state, local
and foreign tax returns.
SECTION 4.03 Other Information. The Partnership shall make
available, on a reasonable basis, the chief financial officer of the Partnership
and other officers of the Partnership, as appropriate, to respond to questions
of the Limited Partners relating to the financial condition of the Partnership.
ARTICLE V
Preferred Interests
-------------------
SECTION 5.01 General. As of the Effective Time, USANi Sub
shall receive the following Preferred Interests:
(a) a preferred partnership interest in the Partnership with an
initial Face Value of $750,000,000, having special rights as set forth in
this Article V and a preference with respect to distributions (as set
forth in Section 8.06) and liquidation (as set forth in Section 13.02)
(the "Class A Preferred Interests"), and
(b) a perpetual (subject to Section 8.07) preferred partnership
interest in the Partnership with an initial Face Value of $1,750,000,000,
having special rights as set forth in this Article V and a preference with
respect to distributions (as set forth in Sec-
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tion 8.01(a)) and liquidation (as set forth in Section 13.02) (the "Class
B Preferred Interests").
SECTION 5.02 Ranking. (a) Except as otherwise provided herein,
with respect to periodic distribution rights and rights upon liquidation,
dissolution or winding up, the Preferred Interests shall rank (i) junior to the
Partnership Debt and any other of the Partnership's future indebtedness and
other obligations not incurred in violation of this Agreement, (ii) on parity
with one another and (iii) senior to the Common Interests.
(b) Other than the Class A Preferred Interests and the Class B
Preferred Interests issued pursuant to this Agreement on the Effective Date, no
Class A Preferred Interests or Class B Preferred Interests shall be issued.
(c) Subject to Section 5.05(a)(i), the Preferred Interests shall be
the most senior preferred equity interests in the Partnership. The Preferred
Interests shall have no Participation Percentage, and shall not be entitled to
participate in distributions made pursuant to Section 8.01(b).
SECTION 5.03 PIK Accretion. (a) The Face Value of the Class A
Preferred Interests shall accrete at a rate of 5.0% per annum and (b) the Face
Value of the Class B Preferred Interests shall accrete at a rate of 1.4% per
annum, in each case beginning on the Closing Date, and the Face Value of each
such Preferred Interest shall increase accordingly on the last day of each
calendar quarter.
SECTION 5.04 Consent Right. The consent of the Partners who
hold the majority of the aggregate amount of a class of Preferred Interests,
determined based on the Face Value thereof, voting as a separate class, shall be
required for any amendment, alteration or repeal of the provisions of this
Agreement (including by merger, consolidation or otherwise) that would have an
adverse effect on the rights of such class or that would be materially adverse
to the rights of such Partners under this Agreement.
SECTION 5.05 Negative Covenants. (a) For so long as the Class
A Preferred Interests are outstanding, the Partnership shall not, and shall not
permit any subsidiary of the Partnership, without the prior consent of the
Partners holding the Class A Preferred Interests to:
(i) issue any equity interests in the Partnership that rank
senior to, or pari passu with, the Preferred Interests, or issue any
security that is exchangeable for or convertible into any such equity
interest;
(ii) issue any other preferred equity interests in the
Partnership redeemable or exchangeable for or convertible into any equity
security of the Partnership or any subsidiary thereof (other than Common
Interests), or issue any security that is exchangeable for or convertible
into cash, cash equivalents or any such preferred equity interest
described in this clause (ii);
(iii) Transfer any assets other than in the ordinary course of
business of the Partnership unless, (x) at least 50% of the net proceeds
of such sale, transfer or
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disposition are retained or otherwise redeployed by the Partnership or its
subsidiaries and (y) at the time of such Transfer the Partnership has a
Consolidated Tangible Net Worth of at least $4,000,000,000;
(iv) create, incur, assume, guarantee or permit to exist any
Indebtedness other than (A) the Partnership Debt, and any extension,
renewal, refinancing or replacement of all or any part of the Partnership
Debt (whether or not incurred in accordance with Section 5.05(b)(iii))
that does not increase the outstanding principal amount thereof and (B)
Indebtedness in an aggregate outstanding principal amount not to exceed
$800,000,000 at any time;
(v) merge with or into or consolidate with (in each case within the
meaning of Treasury Regulation Section 1.708-1(c)), or convert into or
otherwise become, by any statutory mechanism, any other Person (other than
a wholly owned subsidiary of the Partnership), if immediately after giving
effect to such merger, consolidation or conversion, the Partnership would
be in violation of clause (i) or, unless such covenants shall be
inapplicable as provided below, clause (ii), (iii) or (iv) above, or any
other provision of this Agreement relating to the Class A Preferred
Interests;
(vi) liquidate, dissolve or wind up the Partnership; or
(vii) become an "investment company" as defined in the Investment
Company Act of 1940, as amended.
The covenants set forth in this Section 5.05(a), other than those set forth in
clause (i), (v), (vi) and (vii) shall not be applicable at a particular time, if
at such time the Partnership shall have posted an irrevocable letter of credit
in a form that is reasonably acceptable to the Partner holding the Class A
Preferred Interests in favor of such Partner (1) in an amount equal to the
expected Face Value of the Class A Preferred Interests at maturity and (2) with
an expiration date falling no earlier than the maturity date of the Class A
Preferred Interests.
(b) Unless Vivendi shall have made the election described in Section
7.02(b)(ii) of the Transaction Agreement, for a period of 15 years following the
Effective Time, or if a shorter period is set forth in this Section 5.05(b),
then for such shorter period, without the consent of USAi, the Partnership shall
not:
(i) sell or otherwise dispose of all or any part of the assets set
forth on Schedule 5.05(b) other than in the ordinary course of business
and other than sales or other dispositions of assets the fair market
values of which, as of the Effective Time, do not, individually or in the
aggregate, exceed $5,000,000;
(ii) notwithstanding anything in Sections 8.04 and 13.03 to the
contrary, for a period of seven years following the Effective Time,
distribute any assets in kind to USAi or USANi Sub, or distribute any of
the assets set forth on Schedule 5.05(b);
(iii) pay (whether voluntarily or involuntarily) all or any part of
the principal amount of the Partnership Debt; provided, however, that from
time to time the Partnership may discharge all, or any part of, the
Partnership Debt using the proceeds of
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third party debt (on terms reasonably satisfactory to USAi, and so long as
no more than three such third party debts may be in existence at any time)
(each, a "Refinancing Debt") if the proceeds of such Refinancing Debt are
allocable under the rules of Treasury Regulation Section 1.163-8T (or any
successor section) to the payment discharging the Partnership Debt, and
from and after the date of such discharge references to the Partnership
Debt in this Agreement (other than in Section 5.05(a)(iv)) shall, to the
extent that the Partnership Debt is discharged with the proceeds of a
Refinancing Debt, be deemed to include such Refinancing Debt; provided,
further, however, that beginning 2 years after the Effective Time, the
Partnership may, from time to time, pay a part of the principal amount of
the Partnership Debt; provided that no such payment shall be permitted to
the extent such payment would exceed USANi Sub's tax basis in its interest
in the Partnership; and, provided, further, that, notwithstanding the
foregoing, any payment of the principal amount of the Partnership Debt or
any acceleration of payment thereof shall be preceded by written notice by
the Partnership to USAi of such payment or acceleration, which notice
shall indicate the amount and anticipated date of such payment or
acceleration and the event giving rise to such payment or acceleration;
(iv) for a period of two years following the Effective Time, make
any distributions to USAi or USANi Sub other than distributions permitted
under Section 8.01(a) or Section 8.02 or which constitute operating cash
flow distributions within the meaning of Treasury Regulation Section
1.707-4(b) (unless the facts and circumstances would clearly establish
that any such distribution is part of a sale);
(v) change the organizational structure with respect to any Person
set forth on Schedule 5.05(b), including, for the avoidance of doubt,
taking any action or failing to take any action which action or inaction
would cause USA Cable or Studios USA (each as defined in the Transaction
Agreement) to be treated as other than a partnership for U.S. federal
income tax purposes;
(vi) cause or permit any Partner or any Person related to a Partner
(within the meaning of Treasury Regulation Section 1.752-4(b)) to bear the
"economic risk of loss" (within the meaning of Treasury Regulation Section
1.752-2(b)) with respect to the Partnership Debt; or
(vii) take any action, or fail to take any action, which action or
inaction would cause the Partnership to cease to be qualified as a limited
liability limited partnership under and pursuant to the Delaware Act and
DRUPA (including any failure to make the annual filings provided under
Section 17-214(a)(1) of the Delaware Act and Section 15-1003 of DRUPA).
Nothing in this Section 5.05 shall prohibit the pledge of interests in
subsidiaries of the Partnership by the Partnership or by any subsidiary of the
Partnership that is properly treated as an entity disregarded from the
Partnership for U.S. Federal income tax purposes if such pledge is required by
the terms of the Partnership Debt.
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SECTION 5.06 No Other Consent Rights. Except as provided in
Sections 5.04 and 5.05, holders of Preferred Interests shall have no voting,
approval or consent rights, including with respect to any merger, conversion or
consolidation of the Partnership.
ARTICLE VI
Common Interests
----------------
SECTION 6.01 General. (a) As of the Effective Time, the
participation percentage (the "Participation Percentage") of each Partner's
Common Interest and the non-U.S. participation percentage (the "Non-U.S.
Participation Percentage") and the U.S. participation percentage (the "U.S.
Participation Percentage") of each Universal Partner's Common Interest shall be
as set forth below:
U.S. Non-U.S.
Participation Participation Participation
Partner Percentage Percentage Percentage
------- ---------- ---------- ----------
Universal Sub 74.77% 86.16% 53.36%
USANI XX 5.46% 7.14% --
UPI Holdings 6.52% -- 39.46%
UPI Holdings 2 1.18% -- 7.18%
NYCSpirit 5.13% 6.70% --
USAi 0.54% -- --
USANi Sub 4.59% -- --
New-U Studios 0.31% -- --
Diller 1.50% -- --
(b) Such initial Participation Percentages, Non-U.S. Participation
Percentages and U.S. Participation Percentages, as applicable, shall be subject
to adjustment as provided in this Article VI. The aggregate outstanding
Participation Percentages, the aggregate outstanding Non-U.S. Participation
Percentages and the aggregate outstanding U.S. Participation Percentages,
respectively, at all times shall equal 100%, and Participation Percentages,
Non-U.S. Participation Percentages and U.S. Participation Percentages, as
applicable, shall be adjusted from time to time, pro rata, as necessary to
maintain the foregoing.
SECTION 6.02 Issuances of Common Interests After the Closing
Date. (a) After the Closing Date the Partnership, at the discretion of the Board
(or, if no Board shall then be constituted, the General Partner), may issue
additional Common Interests in return for additional Capital Contributions.
(b) In connection with the issuance of a Common Interest after the
Closing Date, the Board shall designate the Participation Percentage and, if
applicable, the Non-U.S. Participation Percentage and the U.S. Participation
Percentage associated with such issuance and any other material terms thereof.
Upon such issuance, the Participation Percentages and, if applicable, the
Non-U.S. Participation Percentages and the U.S. Participation Percentages,
respectively, of all Common Interests outstanding immediately before such
issuance shall be
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reduced in the aggregate by an amount equal to the Participation Percentage and,
if applicable, the Non-U.S. Participation Percentage and the U.S. Participation
Percentage, respectively, so designated, in proportion to their relative
Participation Percentages and, if applicable, their relative Non-U.S.
Participation Percentages and their relative U.S. Participation Percentages,
respectively, immediately before such issuance.
SECTION 6.03 Preemptive Rights. (a) For so long as USAi and
its Affiliates shall have an aggregate Participation Percentage of greater than
1% (or at least 1% in the event that USAi and its Affiliates shall have an
aggregate Participation Percentage of no less than 1% due to any reason other
than a failure by USAi to exercise its right under this Section 6.03), in
connection with any issuance of additional Common Interests by the Partnership
to Universal Sub or an Affiliate thereof under Section 6.02(a) prior to the
exercise of an USAi Put or an USAi Call, USAi (or USANi Sub) shall have the
right to purchase, at the same time, on the same terms and at the same purchase
price per Participation Percentage point (or in the event Common Interests are
being issued in exchange for property, an amount of cash equal to the fair
market value of the property being contributed), an amount of Common Interests
(x) equal to a portion of the Common Interests being issued by the Partnership
that is in proportion to the relative Participation Percentages of USAi and its
Affiliates and Universal Sub and its Affiliates, in each case immediately prior
to the issuance giving rise to USAi's rights under this Section 6.03, or (y)
such that, after giving effect to such issuance, USAi and its Affiliates would
have an aggregate Participation Percentage equal to 1%.
(b) In connection with any issuance of additional Common Interests
by the Partnership to Universal Sub or an Affiliate thereof under Section
6.02(a) after the exercise of an USAi Put or an USAi Call, if USAi and its
Affiliates shall have an aggregate Participation Percentage of at least 1%, USAi
(or USANi Sub) shall have the right to purchase, at the same time, on the same
terms of such issuance and at the same price per Participation Percentage point
(or in the event Common Interests are being issued in exchange for property, an
amount of cash equal to the fair market value of the property being
contributed), an amount of Common Interests such that, after giving effect to
such issuance, USAi and its Affiliates would have an aggregate Participation
Percentage equal to 1%.
(c) The Partnership shall deliver written notice to USAi of any
proposed issuance of Common Interests by the Partnership to Universal Sub and
its Affiliates, including the applicable purchase price, the amount offered, the
proposed closing date, the place and time for the issuance thereof (which shall
be no less than 20 days from the date of such notice) and any other material
terms and conditions of the issuance. Within 15 days from the date of receipt of
such notice, USAi shall deliver written notice to the Partnership if it intends
to exercise its right under Section 6.03(a) or (b). Upon exercising such right,
USAi shall be entitled and obligated to purchase the amount of Common Interests
determined in accordance with Section 6.03(a) on the terms and conditions of
such issuance, and Universal Sub shall be entitled and obligated to purchase (or
cause its Affiliates to purchase) the remaining amount of Common Interests in
such issuance. Thereafter, the Participation Percentages of all the Partners and
the Non-U.S. Participation Percentages and U.S. Participation Percentages of the
Universal Partners shall be adjusted in accordance with Section 6.02(b).
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SECTION 6.04 Other Issuances of Common Interests. (a) For so
long as USAi and its Affiliates shall have an aggregate Participation Percentage
of at least 1%, in the event that any issuance under Section 6.02(a) to a Person
other than Universal Sub or an Affiliate thereof would result in USAi and its
Affiliates having an aggregate Participation Percentage of less than 1%, USAi
(or USANi Sub) shall have the right to purchase, on the same terms of such
issuance and at the same price per Participation Percentage point (or in the
event Common Interests are being issued in exchange for property, an amount of
cash equal to the fair market value of the property being contributed), an
amount of Common Interests such that, after giving effect to such issuance to
such Person and to USAi, USAi and its Affiliates would have an aggregate
Participation Percentage equal to 1%.
(b) The Partnership shall deliver written notice to USAi of such
proposed issuance, including the applicable purchase price, the amount offered,
the proposed closing date, the place and time for the issuance thereof (which
shall be no less than 20 days from the date of such notice) and any other
material terms and conditions of the issuance. Within 15 days from the date of
receipt of such notice, USAi shall deliver written notice to the Partnership if
it intends to exercise its right under Section 6.04(a). Upon exercising such
right, USAi shall be entitled and obligated to purchase the amount of Common
Interests determined in accordance with Section 6.04(a) on the terms and
conditions of such issuance and the third party shall be entitled and obligated
to purchase the remaining amount of Common Interests in such issuance.
Thereafter, the Participation Percentages of all the Partners and the Non-U.S.
Participation Percentages and U.S. Participation Percentages of the Universal
Partners shall be adjusted in accordance with Section 6.02(b).
SECTION 6.05 Contribution of Assets or Capital Stock by
Universal Sub. In connection with an acquisition by Universal Sub or an
Affiliate thereof of equity securities or assets of one or more third parties
engaged in the Business or any related business in which Universal Sub or its
Affiliate issued shares of capital stock or paid cash or other consideration to
such third party, Universal Sub or its Affiliate may, in its sole discretion and
upon the approval of the Board (or, if no Board shall then be constituted, the
General Partner), either (i) contribute such acquired equity securities or
assets to the Partnership in return for cash or, to the extent permitted under
Section 5.05, a promissory note with a principal amount equal to the aggregate
value (determined as set forth below) of the consideration paid by Universal Sub
or its Affiliate for such equity securities or assets or (ii) contribute such
acquired equity securities or assets to the Partnership in return for Common
Interests in the Partnership in accordance with Section 6.02(a), subject to the
provisions of Section 6.03. The "purchase price" for any such Common Interests
shall be deemed to be (i) in the case of a contribution of equity securities or
assets to the Partnership on or prior to the first anniversary of the
acquisition by Universal Sub or an Affiliate of such equity securities or
assets, the value of the consideration paid by Universal Sub or its Affiliate
for such equity securities or assets, which consideration shall be valued at the
same time it was valued under the terms of the agreement with the applicable
third party, and (ii) in the case of a contribution of equity securities or
assets to the Partnership following the first anniversary of the acquisition by
Universal Sub or an Affiliate of such equity securities or assets, the fair
market value of such contributed equity securities or assets.
SECTION 6.06 Consent Right. Except for the General Partner, no
holder of Common Interests shall have any voting, approval or consent rights,
including with respect to
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any merger, conversion or consolidation of the Partnership; provided, however,
that (i) at all times a USAi Limited Partner holding Common Interests shall have
the right to consent to any amendment, alteration or repeal of this Agreement
that would have an adverse effect on the rights of such USAi Limited Partner
hereunder and (ii) for so long as an USAi Put or an USAi Call has not been
exercised and USAi has not exercised its rights under Section 6.03(a)(y), the
consent of USAi shall be required prior to: (x) the entering into, terminating,
modifying or extending of any agreement, transaction or relationship between the
Partnership and any Affiliate of Vivendi that is not on an arm's-length basis,
and (y) the making of distributions in respect of, redeeming, repurchasing or
otherwise acquiring any Common Interests of Universal Sub or any of its
Affiliates, other than pro rata distributions, redemptions, repurchases and
acquisitions.
SECTION 6.07 Assignees of Diller Common Interests. Any holder
of a beneficial interest in Common Interests that shall have received such
interest as an assignee of Diller pursuant to Section 2.07 of the Transaction
Agreement hereby irrevocably appoints Diller (or his executor, administrator or
trustee, as the case may be) as its or his designated representative for all
purposes under this Agreement and agrees (except to the extent otherwise
provided in Section 4.02) that (a) any action taken or waived by, or binding
upon, Diller (or his executor, administrator or trustee, as the case may be)
with respect to Diller's Common Interests (including the provisions set forth in
Section 10.03) shall be deemed taken or waived by, and binding upon, such
assignee with respect to such assignee's beneficial interest in Diller's Common
Interests, (b) such assignee shall have no right to deal directly with the
Partnership or its Partners and the Partnership and its Partners shall deal
solely with Diller in respect of all matters relating to such assignee's
interest in the Partnership, as if such assignment had never occurred, including
in respect of the provision of information, the giving of notices and the
payment of money, (c) such assignee shall have no right to attend Partnership
meetings, (d) all rights of a holder of Common Interests under this Agreement or
otherwise in connection with the Partnership shall be exercisable only by Diller
(or his executor, administrator or trustee, as the case may be) and (e) such
assignee shall in all respects be subject to the same terms under this Agreement
(other than Section 9.04) as Diller is subject to hereunder. The General Partner
shall treat any holder of a beneficial interest in Common Interests who received
such interest as an assignee of Diller pursuant to Section 2.07 of the
Transaction Agreement as a Partner in the Partnership for income tax purposes
with an interest in the Partnership corresponding to such beneficial interest.
ARTICLE VII
Capital Accounts, Allocations of
Profit and Loss and Tax Matters
-------------------------------
SECTION 7.01 Capital Accounts. (a) The Partnership shall
establish a separate capital account (a "Capital Account") in respect of each
Common Interest and Preferred Interest held by each Partner on the books of the
Partnership. The Capital Account of a Partner shall be increased by (i) the
amount of money contributed by that Partner to the Partnership, (ii) the fair
market value of property contributed by that Partner to the Partnership (net of
liabilities related to such contributed property that the Partnership is
considered to assume or take subject to under Section 752 of the Code) and (iii)
allocations to that Partner pursuant to Section 7.02 of profit, income and gain
(or items thereof). The Capital Account of a Partner
-20-
shall be decreased by (i) the amount of money distributed to that Partner by the
Partnership, (ii) the fair market value of property distributed to that Partner
by the Partnership (net of liabilities related to such distributed property that
such Partner is considered to assume or take subject to under Section 752 of the
Code) and (iii) allocations to that Partner pursuant to Section 7.02 of loss,
expense and deduction (or items thereof).
(b) In the event that a Partner Transfers its Interest in accordance
with the provisions of this Agreement, the Transferee of such Interest shall
succeed to the Capital Account of the Transferor attributable to such Interest.
(c) Upon the occurrence of any event specified in Treasury
Regulation Section 1.704-1(b)(2)(iv)(f), the Capital Accounts of the Partners
shall be adjusted to reflect the fair market value of the Partnership's property
at such time and in such manner as provided in such Regulation.
(d) No Partner shall be entitled to withdraw capital or receive
distributions except as specifically provided herein. No Partner shall have any
obligation to the Partnership, to any other Partner or to any creditor of the
Partnership to restore any negative balance in the Capital Account of such
Partner.
(e) The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with the Treasury Regulations promulgated under Section 704(b) of the Code and
shall be interpreted and applied in a manner consistent with such Treasury
Regulations.
SECTION 7.02 Allocations of Net Income and Net Loss. (a)
General. (i) Except as otherwise provided in this Section 7.02, Net Income shall
be allocated to the extent thereof:
(A) first, if any Net Loss has been allocated to the
holders of Preferred Interests under Section 7.02 (a)(ii)(B), to the
holders of Preferred Interests pro rata in proportion to the amount of Net
Loss so allocated until the aggregate Net Income allocated under this
paragraph (A) shall equal the aggregate amount of such Net Loss;
(B) second, to the holders of Preferred Interests pro
rata until the aggregate amount allocated under this paragraph (B) equals
a return of 5% per annum on the Face Value of their Preferred Interests;
(C) third, if any Net Loss has been allocated to the
holders of Common Interests under Section 7.02(a)(ii)(A) or (C), to the
holders of Common Interests pro rata in proportion to the amount of Net
Loss so allocated until the aggregate Net Income allocated under this
paragraph (C) shall equal the aggregate amount of such Net Loss; and
(D) fourth, to the Partners in accordance with their
Participation Percentages.
(ii) Net Loss shall be allocated to the extent thereof:
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(A) first, to the holders of Common Interests pro rata
to the extent of their respective Capital Accounts;
(B) second, to the holders of Preferred Interests pro
rata to the extent of their respective Capital Accounts; and
(C) third, to the Partners in accordance with their
Participation Percentages.
(b) Allocations among Universal Partners. (i) If any Net Income or
Net Loss, or any items thereof, allocable to the Universal Partners pursuant to
Section 7.02(a) is attributable to Non-U.S. Source Items, such Non-U.S. Source
Items shall be allocated to the Universal Partners in accordance with their
Non-U.S. Participation Percentages, and if any Net Income or Net Loss, or any
items thereof, allocable to the Universal Partners pursuant to Section 7.02(a)
is attributable to U.S. Source Items, such U.S. Source Items shall be allocated
to the Universal Partners in accordance with their U.S. Participation
Percentages; provided, however, that to the extent an allocation of Non-U.S.
Source Items, on the one hand, or U.S. Source Items, on the other hand, consists
of deduction or loss and that would cause the Capital Account balance of any
Universal Partner to be reduced below zero, such Non-U.S. Source Items or U.S.
Source Items, as the case may be, shall instead be allocated to the other
Universal Partners, pro rata, based upon their relative positive Capital Account
balances (determined after allocation of all other items for such taxable
period); and provided, further, if any items are specially allocated to a
Universal Partner pursuant to the immediately preceding proviso, such Universal
Partner will be specially allocated Non-U.S. Source Items or U.S. Source Items,
as the case may be, consisting of income or gain allocable to the Universal
Partners pursuant to Section 7.02(a) in subsequent taxable periods in an amount
sufficient to reverse, to the extent practicable and as quickly as possible, the
special allocation of deduction or loss items to such Universal Partner pursuant
to the immediately preceding proviso; and
(ii) notwithstanding anything to the contrary in Section
7.02(b)(i), any items of interest expense allocable to the Universal
Partners pursuant to Section 7.02(a) shall be allocated among the
Universal Partners consistent with the allocation of deduction or loss
pursuant to this Section 7.02(b); provided, however, that to the extent an
allocation of any interest expense items pursuant to this clause (ii)
would cause or increase a deficit in the Capital Account balance of any
Universal Partner, such interest expense items shall instead be allocated
to the other Universal Partners, pro rata, based upon the relative
allocations of deduction or loss to such other Universal Partners pursuant
to this Section 7.02(b); provided, further, if any items of interest
expense are specially allocated to a Universal Partner pursuant to the
immediately preceding proviso, the other Universal Partners will be
specially allocated items of deduction or loss allocable to the Universal
Partners pursuant to Section 7.02(a) in subsequent taxable periods in an
amount sufficient to reverse, to the extent practicable and as quickly as
possible, the special allocation of interest expense items to such
Universal Partner pursuant to the immediately preceding proviso.
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(c) Minimum Gain Charge Back. The Partnership shall allocate items
of profit among the Partners at such times and in such amounts as necessary to
satisfy the minimum gain charge back requirements of Treasury Regulation
Sections 1.704-2(f) and 1.704-2(i)(4).
(d) Allocation of Deductions Attributable to Partner Nonrecourse
Liabilities. Any nonrecourse deductions attributable to a "partner nonrecourse
liability" (as defined in Treasury Regulation Section 1.704-2(b)(4)) shall be
allocated among the Partners that bear the economic risk of loss for such
Partner's nonrecourse liability under Treasury Regulation Section 1.752-2 in
accordance with the ratios in which such Partners share such economic risk of
loss and in a manner consistent with the requirements of Treasury Regulation
Sections 1.704-2(c), 1.704-2(i)(2) and 1.704-2(j)(1).
(e) Qualified Income Offset. The Partnership shall specially
allocate items of profit and loss when and to the extent required to satisfy the
"qualified income offset" requirement within the meaning of Treasury Regulation
Section 1.704-1(b)(2)(ii)(d).
(f) Curative Allocations. The allocations set forth in Sections
7.02(b), (c) and (d) (the "Regulatory Allocations") are intended to comply with
certain requirements of the Treasury Regulations. It is the intent of the
Partners that, to the extent possible, the Partnership shall make such special
allocations of Partnership income, gain, loss or deduction so that, after such
allocations are made, each Partner's Capital Account balance is, to the greatest
extent possible, equal to the Capital Account balance such Partner would have
had if the Regulatory Allocations were not part of the Agreement and all
Partnership items were allocated pursuant to Section 7.02(a) and (f) hereof.
(g) Allocations in Liquidation and upon Maturity of Class A
Preferred Interests. Upon a dissolution of the Partnership in accordance with
Article XIII, the Net Income or Net Loss (or items of profit, income, gain,
loss, deduction and expense) of the Partnership shall be allocated to the
Partners so that the balance in each Partner's Capital Account as of the date of
dissolution shall equal the amount distributable to such Partner pursuant to
Section 13.02(b)(ii) through (iv) (determined without regard to the provisos
thereto); provided, however, that for these purposes the Universal Partners,
collectively, shall be treated as a single Partner. In the case of any
distribution made at the maturity of a Class A Preferred Interest in accordance
with Section 8.06, Net Income or Net Loss (or items of profit, income, gain,
loss, deduction and expense) for the taxable period of the Partnership in which
such distribution is made shall be allocated so that the Capital Account of each
holder of such Class A Preferred Interest shall, as of the date of distribution,
equal the amount to be distributed to such holder pursuant to Section 8.06.
SECTION 7.03 Allocations of Net Income and Net Loss for
Federal Income Tax Purposes. Except as provided in the following sentence,
profit, income, gain, loss, deduction and expense as determined for Federal
income tax purposes shall be allocated among the Partners in the same
proportions as the corresponding items of "book" profit, income, gain, loss,
deduction and expense are allocated among such Partners pursuant to Section
7.02. Notwithstanding the foregoing sentence, Federal income tax items relating
to any Section 704(c) Property shall be allocated among the Partners in
accordance with Section 704(c) of the Code and Treasury Regulation Section
1.704-3(c) to take into account the difference between the fair
-23-
market value and the tax basis of such Section 704(c) Property as of the date of
its contribution to the Partnership or its revaluation pursuant to Section
7.01(c) using the "traditional method" as described in Treasury Regulation
Section 1.704-3(b). Items described in this Section 7.03 shall neither be
credited nor charged to the Partners' Capital Accounts.
SECTION 7.04 Allocation of the Partnership Debt. The Partners
acknowledge that, for purposes of Section 752 of the Code and in accordance with
Treasury Regulation 1.752-3(a)(3), and consistent with allocations of other
significant items of Partnership income or gain, 100% of the Partnership Debt
shall be allocated pro rata among the Partners holding the Preferred Interests.
SECTION 7.05 Elections. Except as otherwise expressly provided
herein, all elections required or permitted to be made by the Partnership under
the Code or other applicable tax law (including any election under Section 754
of the Code), and all material decisions with respect to the calculation of its
taxable income or tax loss for tax purposes under the Code or other applicable
tax law, shall be made in such manner as may be determined by the General
Partner.
SECTION 7.06 Fiscal Year. The fiscal year of the Partnership
for tax and accounting purposes ("Fiscal Year") shall be the 12-month (or
shorter) period ending on December 31 of each year, unless otherwise determined
by the Board.
SECTION 7.07 Withholding Requirements. Notwithstanding any
provision herein to the contrary, the General Partner is authorized to take any
and all actions that are necessary or appropriate to ensure that the Partnership
satisfies any and all withholding and tax payment obligations under Section
1441, 1445, 1446 or any other provision of the Code or other applicable law.
Without limiting the generality of the foregoing, the General Partner may
withhold any amount that it determines is required to be withheld from amounts
otherwise distributable to any Partner pursuant to this Agreement; provided,
however, that such amount shall be deemed to have been distributed to such
Partner for purposes of applying this Agreement. Each Partner will timely
provide any certification or file any agreement that is required by any taxing
authority in order to avoid any withholding obligation that would otherwise be
imposed on the Partnership.
SECTION 7.08 Tax Matters Partner. The General Partner shall
act as the "Tax Matters Partner" of the Partnership within the meaning of
Section 6231(a)(7) of the Code and in any similar capacity under applicable
state or local tax law. The Tax Matters Partner shall not be liable in its
capacity as such to the Partnership or the Partners for any losses, claims or
damages. All reasonable out-of-pocket expenses incurred by the Tax Matters
Partner while acting in such capacity shall be paid or reimbursed by the
Partnership.
ARTICLE VIII
Distributions
-------------
SECTION 8.01 Distributions. (a) The Partnership shall make
cumulative preferential distributions to holders of the Class B Preferred
Interests at a rate of 3.6% per annum
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of the Face Value of such holder's Preferred Interests (without taking into
account any adjustments thereto made on the date of such distribution), which
distributions shall begin to accrue on the Closing Date. Distributions shall be
payable in cash in quarterly installments on the last Business Day of each
calendar quarter. Any delay or deferral of distributions required by this
Section 8.01 or Section 8.02, including upon a breach of this Section 8.01(a),
shall accrue interest commencing on the applicable due date and continuing
through to the date of payment at an annual rate equal to USAi's effective cost
of borrowing, expressed as a percentage, as of the applicable due date.
(b) At the times and in the amounts determined by the General
Partner, subject to Section 5.05(b), the Partnership may make distributions to
holders of Common Interests pro rata in accordance with the respective
Participation Percentages of such Common Interests; provided that no
distributions may be made with respect to the Common Interests unless all past
due distributions on the Preferred Interests have been made as of the date of
payment.
(c) To the extent any distribution to a Partner provided herein in
respect of a Common Interest or a Preferred Interest would exceed the balance of
such Partner's Capital Account relating to such Common Interest or Preferred
Interest, the distribution of such excess shall be deferred and shall be made
(prior to any other distribution pursuant to this Section 8.01) when and to the
extent that the balance of such Capital Account is increased.
SECTION 8.02 Tax Distributions. The Partnership shall, as soon
as practicable after the close of each taxable year, make cash distributions to
each Partner in an amount equal to the product of (a) the amount of taxable
income allocated to such Partner for such taxable year pursuant to Section 7.02,
reduced by the amount of taxable loss allocated to such Partner for all prior
taxable years (except to the extent such taxable losses have previously been
taken into account under this sentence) and (b) the highest aggregate marginal
statutory Federal, state, local and foreign income tax rate (determined taking
into account the deductibility of state and local income taxes for Federal
income tax purposes and the creditability or deductibility of foreign income
taxes for Federal income tax purposes) applicable to any Partner.
SECTION 8.03 General Limitations. (a) Notwithstanding anything
in this Agreement to the contrary, the Partnership, and the General Partner on
behalf of the Partnership, is not required to make any distributions except to
the extent permitted under the Delaware Act.
(b) Holders of Preferred Interests shall not be entitled to any
distributions in excess of the distributions set forth in this Article VIII and
Article XIII.
SECTION 8.04 Distributions in Kind. The Partnership shall not
distribute any assets in kind, except as provided in Section 13.03.
SECTION 8.05 Closing Date Distribution. At the Effective Time,
the Partnership shall use the net proceeds of the Partnership Debt to make a
cash distribution to USANi Sub in the amount of $1,618,710,396.
SECTION 8.06 Distribution upon Maturity of Class A Preferred
Interests. On the twentieth anniversary of the Closing Date (the "Maturity
Date"), the Class A Preferred
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Interests shall be redeemed by the Partnership by payment to the holder thereof
of a distribution in cash equal to the Face Value thereof as of such date (after
taking into account any accretion in the Face Value pursuant to Section 5.03
through and including the date of redemption). Following such payment, the Class
A Preferred Interests shall cease to be outstanding and all the rights of the
holders thereof shall cease.
SECTION 8.07 Put/Call Rights with Respect to Class B Preferred
Interests. (a) Beginning on the twentieth anniversary of the Closing Date, (i)
subject to Section 160 of the Delaware General Corporation Law, Vivendi,
Universal, USI-USA, USIE-USA, V-USA and/or SUB I-USA shall have the right to
purchase all (but not less than all) of the Class B Preferred Interests of USAi
and its Affiliates (the "USAi Preferred Call"), and (ii) USAi shall have the
right to require Universal, USI-USA, USIE-USA, V-USA and/or SUB I-USA to
purchase all (but not less than all) of its and its Affiliates' Class B
Preferred Interests (the "USAi Preferred Put"), in each case at a purchase price
equal to (A) a number of shares of USAi Common Shares equal to the lesser of (x)
the number of shares (rounded up to the nearest whole share) of USAi Common
Shares having a Market Value equal to the Face Value as of such date (after
taking into account any accretion in the Face Value pursuant to Section 5.03
through and including such date) of the Class B Preferred Interests or (y)
56,611,308 USAi Common Shares (as adjusted for any stock splits, stock dividends
or other similar transactions after the Effective Time), and (B) cash equal to
any accrued and unpaid distributions pursuant to Section 8.01(a) (collectively,
the "Class B Preferred Consideration"). The terms and provisions of Section 4.17
of the Transaction Agreement are hereby expressly incorporated herein by
reference. Universal, USI-USA, USIE-USA, V-USA and/or SUB I-USA shall have the
right to substitute cash for the portion of the USAi Common Shares deliverable
in the form of USAi Common Stock as set forth in Section 4.17 of the Transaction
Agreement, based on the Market Value of such USAi Common Stock. To the extent
two or more entities purchase the Class B Preferred Interests under this
Section 8.07, the Face Value thereof shall be allocated among such entities pro
rata based on the purchase price.
Each of Universal, USI-USA, USIE-USA, V-USA and SUB I-USA hereby
agrees that it is jointly and severally liable for the full and prompt payment
and performance of the obligations with respect to the USAi Preferred Put, and
that such obligations are continuing obligations of payment and performance and
not of collection, and that its obligations under this Section 8.07 shall not be
discharged until payment and performance, in full, of such obligations has
occurred, and that its obligations under this Section 8.07 shall be absolute and
unconditional, irrespective of, and unaffected by, (1) the genuineness,
validity, regularity, enforceability or any future amendment of, or change in,
this Agreement or the Transaction Agreement, (2) the absence of any action to
enforce this Agreement (including this Section 8.07) or the Transaction
Agreement, (3) the insolvency of any party to this Agreement or the Transaction
Agreement, or (4) any other action or circumstances that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor.
Notwithstanding the forgoing, the obligations of USI-USA, USIE-USA, V-USA and
SUB I-USA shall be limited to such portion of the purchase price that may be
satisfied by the transfer to USAi (or USAi's designee) of the Committed Common
Equity (as defined in the Transaction Agreement) received by it pursuant to the
Assignment Agreement.
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(b) In the event that USAi Common Shares cease to be outstanding
following the Effective Time, references to each USAi Common Share in this
Section 8.07 shall refer instead to the cash (plus interest accruing at an
annual rate equal to USAi's effective cost of borrowing, expressed as a
percentage, as of the applicable date on which such cash is delivered in such
exchange or conversion) or other securities or property into which each such
USAi Common Share was exchanged for or converted into after the Effective Time,
including any successive exchange or conversion.
(c) Upon consummation of the USAi Preferred Put or the USAi
Preferred Call, the maturity of the Class B Preferred Interests shall be
immediately accelerated, and the Class B Preferred Interests shall be redeemed
by the Partnership by payment to the holder (or holders) thereof of a
distribution in cash equal to the Face Value thereof as of such date (after
taking into account any accretion in the Face Value pursuant to Section 5.03
through and including the date of redemption). Following such payment, the Class
B Preferred Interests shall cease to be outstanding and all the rights of the
holders thereof (or holders thereof on a pro rata basis) shall cease.
ARTICLE IX
Management of the Partnership
-----------------------------
SECTION 9.01 General Partner. (a) The business and affairs of
the Partnership shall be managed exclusively by the General Partner in a manner
consistent with this Agreement, without the need for, except as set forth in
Section 5.04, 5.05 or 6.06, any consent or approval of any other Partner.
Subject to Section 9.02 and the terms of this Agreement, the General Partner
shall have the exclusive power and authority, on behalf of the Partnership, to
collect and distribute funds in accordance with Article VIII to make allocations
and adjustments in accordance with Article VII and to take any action of any
kind not inconsistent with this Agreement and to do anything and everything it
deems necessary or appropriate to carry on the business and purposes of the
Partnership in a manner consistent with this Agreement. No other Partner shall
participate in the management and control of the business of the Partnership,
and in no event shall any Partner other than the General Partner have any
authority to bind the Partnership for any purpose. Persons dealing with the
Partnership are entitled to rely conclusively upon the power and authority of
the General Partner.
(b) The General Partner is, to the extent of its rights and powers
set forth in this Agreement, an agent of the Partnership for the purpose of the
Partnership's business, and the actions of the General Partner taken in
accordance with such rights and powers shall bind the Partnership.
SECTION 9.02 Board; Representatives; Chairman. (a) The General
Partner shall be responsible for the establishment of policy and operating
procedures with respect to the business and affairs of the Partnership and shall
appoint agents or employees, with such titles as the General Partner may select,
including a chief executive officer, as officers of the Partnership to act on
behalf of the Partnership, with such power and authority as the General Partner
may designate from time to time to any such Person. The initial chief executive
officer shall serve at his will and at the pleasure of the General Partner,
shall report directly to the chief
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executive officer of the General Partner who shall be the chief executive
officer of Vivendi and shall have the same authority to act for the Partnership
as a corresponding officer of a Delaware corporation would have to act for a
Delaware corporation. Diller shall be the initial chief executive officer of the
Partnership. The other officers of the Partnership shall report to the General
Partner or the chief executive officer, as determined by the General Partner;
provided that, as of the Effective Date and for so long as Diller is the chief
executive officer, officers of the Partnership shall report to the chief
executive officer.
(b) The General Partner may, at its election, appoint a Board of
Directors or other governing body (a "Board") to oversee the policy and
operating procedures with respect to the business and affairs of the
Partnership, provided, however, that the appointment of a Board shall not alter
in any respect the reporting obligations of the chief executive officer. In the
event that the General Partner appoints a Board, it shall appoint all of the
members of the Board (the "Representatives"), which shall include Diller as a
Representative for so long as he remains an officer of the Partnership and
otherwise, one Person designated by USAi and reasonably satisfactory to the
General Partner as a Representative for so long as USAi and its Affiliates shall
have a Participation Percentage in excess of 1%, provided that an USAi Put or an
USAi Call has not been exercised and USAi has not exercised its rights under
Section 6.03(a)(y). For so long as Diller is chief executive officer of the
Partnership, Diller shall also be Chairman of the Board ("Chairman"). The
General Partner, in consultation, with the chief executive officer, shall
establish whatever procedures it deems necessary and appropriate for operating
and governing the business of the Partnership.
(c) No Representative shall be entitled to any fee, remuneration,
compensation or expense reimbursement in connection with their service at Board
meetings.
SECTION 9.03 Expenses. (a) The Partnership shall pay or
reimburse the General Partner for all out-of-pocket expenses reasonably incurred
by the General Partner in performing its duties as the General Partner. Except
as provided in Section 7.08 and this Section 9.03, the General Partner shall not
be entitled to any salary or other compensation for its services to the
Partnership as General Partner.
(b) The Partnership shall pay or reimburse Diller and any other USAi
employee who is an officer of the Partnership for all out-of-pocket expenses
directly related to the performance by Diller or such other Person of his duties
as an officer of the Partnership.
SECTION 9.04 Agreement Not To Compete. (a) Diller understands
that the Partnership shall be entitled to protect and preserve the going concern
value of USAi's Existing Business (as "Existing Business" is defined in the
Transaction Agreement) and the Partnership to the extent permitted by law and
that Universal would not have entered into this Agreement absent the provisions
of this Section 9.04 and, therefore, for a period from the Closing Date until
the date that is the earlier of (A) the later of (1) 18 months after the Closing
Date and (2) six calendar months after the date upon which Diller ceases to be
the chief executive officer of the Partnership and (B) three years after the
Closing Date, Diller shall not, and shall cause each of its Affiliates not to,
directly or indirectly:
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(i) engage in the Restricted Business or acquire any interest in any
Person engaged in the Restricted Business; and
(ii) (A) solicit, recruit or hire any employees of USAi's Existing
Business or the Partnership or Persons who have worked for USAi's Existing
Business or the Partnership, in each case other than employees who perform
solely clerical functions for such Persons, (B) solicit or encourage any
employee of USAi's Existing Business or the Partnership to leave the
employment of USAi's Existing Business or the Partnership, in each case
other than employees who perform solely clerical functions for such
Persons, and (C) disclose or furnish to anyone any confidential
information relating to USAi's Existing Business or the Partnership or
otherwise use such confidential information for its own benefit or the
benefit of any other Person; provided that the non-solicitation provisions
of clauses (A) and (B) shall be deemed not breached by any advertisement
or general solicitation that is not specifically targeted at the employees
or Persons referred to therein;
provided that, if at any time after 18 months after the Closing Date,
Diller resigns as chief executive officer of the Partnership for Good
Reason or Diller's employment is terminated without Cause, then the
restrictions set forth in this Section 9.04(a) shall cease to apply on and
from the effective date of such resignation or termination.
(b) This Section 9.04 shall be deemed not breached as a result of
(i) the ownership by Diller or any of his Affiliates of interests in the
Partnership, or of investments in any class of stock of any entity, public or
private, engaged, directly or indirectly, in the Restricted Business so long as
Diller does not serve as a director, an officer, a consultant or as an employee
of such entity and is not otherwise engaged in the management or operations of
such entity, (ii) Diller's engagement in not-for-profit or charitable activities
related to the Business, whether on boards or otherwise, (iii) ownership of
Vivendi Ordinary Shares as the result of the exercise of a Put or a Call or (iv)
Diller's position as a member of any board of directors (including on any
committees thereof) on which he is a board member on the date hereof.
(c) Diller agrees that the covenant in Section 9.04(a) is reasonable
with respect to its duration and scope. If, at the time of enforcement of this
Section 9.04, a court holds that the restrictions stated herein are unreasonable
under the circumstances then existing, the parties hereto agree that the period
and scope legally permissible under such circumstances will be substituted for
the period and scope stated herein.
ARTICLE X
Transfers of Interests
----------------------
SECTION 10.01 Restrictions on Transfers. (a) Except as
permitted in this Article X, without the prior written consent of the General
Partner, neither USAi or any of its Affiliates nor Diller shall directly or
indirectly Transfer all or any part of their respective Interests, or any rights
to receive capital, profits or distributions of the Partnership pursuant
thereto. To the fullest extent permitted by law, any such Transfer in violation
of this Agreement shall be null and void.
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(b) It shall be a condition to any Transfer not prohibited by this
Article X that such Transfer shall comply with the provisions of the Securities
Act and applicable state securities laws. Until any Interest has been registered
under the Securities Act, such Interest may not be offered or sold except
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and applicable state securities
laws.
(c) It shall also be a condition to any Transfer not prohibited by
this Article X that no applicable law or judgment issued by any governmental
entity shall be in effect, and all consents of, or declarations or filings with,
or expirations of waiting periods imposed by, any governmental entity necessary
for the consummation of such Transfer shall have been obtained or filed or shall
have occurred, and each Partner agrees to cooperate with the other Partners to
provide such information and make such filings as shall be necessary to satisfy
as promptly as practicable the foregoing conditions in connection with a
proposed Transfer.
SECTION 10.02 Transfers Permitted at any Time. (a) At any time
and from time to time, so long as such Transfer would not reasonably be expected
to result in any materially adverse tax consequences to any other Partners, (i)
USAi or any of its Affiliates may Transfer all, but not less than all, of its
Interest to USAi or a direct or indirect wholly owned subsidiary of USAi
(including any subsidiary that is not wholly owned solely as a result of the
fact that Home Shopping Network, Inc. is not a wholly owned subsidiary of USAi,
so long as Liberty and USAi remain the only shareholders of Home Shopping
Network, Inc. and Light's ownership percentage of Home Shopping Network, Inc.
does not increase materially from its interest as of the Closing Date) and (ii)
USAi or any of its Affiliates may pledge or grant a security interest in, or
place in trust, its Preferred Interests in connection with a bona fide
indebtedness or hedging transactions; provided, however, that the terms of such
indebtedness or hedge shall not permit or enable under any circumstance,
including in the event of a default thereunder, the pledgee of such indebtedness
or party to such hedge to foreclose upon or otherwise acquire any Preferred
Interests, it being understood that USAi, USANi Sub and/or one of their wholly
owned subsidiaries shall in all cases be the only holder(s) of the Preferred
Interests.
(b) In respect of holders of Interests that are individuals, a
Transfer may be made upon or subsequent to the death of such holder to the
executors, administrators, legatees or beneficiaries of such deceased holder,
provided that such transferees shall (i) in aggregate be treated as a single
Partner for all purposes under this Agreement and (ii) upon such Transfer, sign
a counterpart to this Agreement or other similar document of accession, in each
case in a customary form, agreeing to be bound by the terms of this Agreement
(other than Section 9.04) to the same extent that the transferor was so bound.
SECTION 10.03 Put/Call Rights. (a) (i) At any time, and from
time to time, after the fifth anniversary of the Closing Date, Universal shall
have the right to purchase all (but not less than all) the Common Interests of
USAi and its Affiliates (the "USAi Call"), and (ii) at any time, and from time
to time, after the eighth anniversary of the Closing Date, USANi Sub shall have
the right to require Universal to purchase all (but not less than all) its and
its Affiliates' Common Interests (the "USAi Put"), in each case at a purchase
price equal to the Appraised Value thereof. Notwithstanding the foregoing, for
so long as USAi or its Affiliates shall be the holder of any Preferred
Interests, at the election of USANi Sub, any Call or Put
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under this Section 10.03(a) shall only be applicable to a portion of the Common
Interests of USANi Sub and its Affiliates such that upon the consummation of the
applicable purchase and sale USAi and its Affiliates would retain a
Participation Percentage of 1%, and in such event the determination of Appraised
Value shall only apply to the portion of the Common Interests of USAi and its
Affiliates subject to such Call or Put.
(b) (i) At any time after the first anniversary of the Closing Date,
Diller (or his executor, administrator or trustee, as the case may be) shall
have the right to sell all (but not less than all) its Common Interests to
Universal (the "Diller Put"), and (ii) at any time after the later of (A) the
second anniversary of the Closing Date and (B) such time that Diller is no
longer chief executive officer of the Partnership, Universal shall have the
right to purchase all (but not less than all) the Common Interests of Diller
(the "Diller Call"), in each case at a purchase price equal to the greater of
(x) the Appraised Value thereof and (y) $275,000,000. In the event that Diller's
employment is terminated without Cause or as a result of his death, Diller
terminates his employment for Good Reason or Diller becomes Disabled, the Diller
Put shall become thereafter exercisable (by Diller, or his executor,
administrator, or trustee, as the case may be) immediately upon such termination
or upon becoming Disabled.
(c) A Call or a Put may be exercised by the applicable party by
providing notice to Universal in the case of a Put, USA in the case of a USAi
Call, or Diller in the case of a Diller Call, in each case in accordance with
Section 14.01. The purchase and sale of the Selling Party's Common Interests
shall be consummated at a closing the date and time of which shall be selected
by the Purchasing Party and provided in writing at least seven days prior
thereto; provided that such date shall not be later than the 20th Business Day
following the date of the determination of the Appraised Value. Except as set
forth in Section 10.03(e), at such closing, the Purchasing Party shall cause to
be paid to the Selling Party the applicable purchase price, by wire transfer of
immediately available funds, against delivery by the Selling Party of one or
more duly executed assignments and bills of sale (in form and substance
reasonably satisfactory to the Purchasing Party, but in any event which shall
not include any provision for indemnification) assigning its Common Interests to
the Purchasing Party, free and clear of any Liens.
(d) The Appraised Value shall be determined as follows:
(i) subject to clause (iii) below, within 15 days from the
date of notice given pursuant to Section 10.03(c), the Selling Party and
the Purchasing Party shall each notify the other and the Partnership in
writing of their respective selection of an Investment Bank; provided that
if either such party fails to notify the other of its selection within
such period, the determination of the Appraised Value of such Common
Interests shall be rendered by the single Investment Bank already
selected, within 45 days from the date of its selection, by notice to all
the foregoing parties, and such determination shall be deemed to be the
Appraised Value of such Common Interests and shall be final for purposes
hereof;
(ii) within 45 days from the date of their selection, the
Selling Party's Investment Bank and the Purchasing Party's Investment Bank
shall jointly notify the Selling Party and the Purchasing Party in writing
of their determination of the Appraised Value of such Common Interests
(determined as set forth in the definition thereof), or, if
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such Investment Banks are unable to agree on such a value (unless the
lower individual valuation is within 10% of the higher individual
valuation, in which case the two valuations shall be averaged), of their
selection of a third Investment Bank, in which case such Investment Banks
shall notify such third Investment Bank in writing of their respective
determinations of the Appraised Value concurrently with the delivery of
the notice described above, following which such third Investment Bank
shall, within 30 days, notify all of the foregoing parties of its
selection of one of the two original determinations of the Appraised
Value, (the "Selected Appraisal"), which Selected Appraisal shall be
chosen by such third Investment Bank based on its determination that the
Selected Appraisal more closely reflected the Appraised Value of such
Common Interests (determined as set forth in the definition thereof) than
the other original determination. The Selected Appraisal shall be deemed
to be the Appraised Value of such Common Interests and shall be final for
purposes hereof. The costs of such determination process shall be borne
equally by the Purchasing Party and the Selling Party; and
(iii) if at any time prior to the second anniversary of the
Closing Date Diller ceases to serve as the chief executive officer of the
Partnership, Universal and Diller shall promptly initiate the process set
forth in clauses (i) and (ii) above to determine the Appraised Value of
the Partnership as of the time of such cessation, and such Appraised Value
shall be deemed to be the Appraised Value of the Partnership with respect
to the subsequent exercise of a Diller Put or a Diller Call.
(e) At the election of the Purchasing Party, payment of the purchase
price upon the exercise of a Call or a Put may be made in Vivendi Ordinary
Shares having a Market Value at the time of closing equal to the applicable
purchase price set forth in Section 10.03(a) or Section 10.03(b), in which case
the Selling Party shall be entitled to the rights set forth in Section 10.03(f)
and 10.03(g). At the closing of any Put or Call pursuant to this Section
10.03(e), Universal shall deliver to USAi or its Affiliates or Diller, as the
case may be, validly issued Vivendi Ordinary Shares (or, if Diller requests,
other common equity securities of Vivendi listed on an exchange other than that
on which the Vivendi Ordinary Shares are listed and representing an equivalent
number of Vivendi Ordinary Shares) free and clear of all Liens (other than
Permitted Liens). The ability of any successor or new parent entity to Vivendi
to issue shares hereunder shall be subject to (i) satisfaction of the trading
volume provisions of the definition of Vivendi Ordinary Shares and (ii) the
Selling Party receiving less than 5% of the outstanding common stock or ordinary
shares of such successor or new parent entity in such issuance.
(f) (i) Vivendi shall provide the Selling Party with, and the
Selling Party shall be entitled to, customary registration rights relating to
any Vivendi Ordinary Shares received pursuant to Section 10.03(e) (including the
ability to transfer registration rights (but not to exceed in the aggregate the
total number of registration rights to which the Selling Party is entitled under
Section 10.3(f)(ii) in connection with the sale or other disposition of all or a
portion of its Vivendi Ordinary Shares). In the event Vivendi Ordinary Shares
are listed or quoted on more than one national securities exchange (or Nasdaq),
whether in the form of shares, depositary shares or receipts therefor, the
Selling Party may elect the type of security (or combination of securities) to
be issued to it (such securities sometimes being referred to in
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paragraph (g) or this paragraph (f) of Section 10.03 as "Vivendi Ordinary
Shares") and such securities shall be issued in an aggregate amount representing
the amount of the Vivendi Ordinary Shares that would otherwise have been issued.
Vivendi, each of the Partners and the Partnership each hereby agrees to
cooperate and use its reasonable best efforts to provide for the prompt
marketability of the Vivendi Ordinary Shares to be received hereunder,
including, if requested by USAi or Diller, as applicable, through the advance
preparation and filing by Vivendi of (x) a registration statement in order that
such registration statement may become effective simultaneously with the closing
of the Put or Call giving rise to the registration rights under this paragraph
(f), and (y) any other regulatory filings or notices.
(ii) If requested by a Selling Party, Vivendi shall be
required promptly to cause the Vivendi Ordinary Shares owned by such
Selling Party or its Affiliates to be registered under the Securities Act
and/or any applicable securities laws of any foreign jurisdiction in order
to permit such Selling Party or such Affiliate to sell such shares in one
or more (but not more than, in the case of USAi, three, and in the case of
Diller, two) registered public offerings (each, a "Demand Registration").
Each Selling Party shall also be entitled to customary piggyback
registration rights and, except pursuant to agreements in effect on the
date hereof, no other Person shall be entitled to piggyback registration
rights with respect to a Selling Party's Demand Registration, without such
Selling Party's consent. If the amount of shares sought to be registered
by a Selling Party and its Affiliates pursuant to any Demand Registration
is reduced by more than 25% pursuant to any underwriters' cutback, then
such Selling Party may elect to request Vivendi to withdraw such
registration, in which case, such registration shall not count as one of
such Selling Party's Demand Registrations. If a Selling Party requests
that any Demand Registration be an underwritten offering, then such
Selling Party shall select the underwriter(s) to administer the offering,
provided that such underwriter(s) shall be reasonably satisfactory to
Vivendi. If a Demand Registration is an underwritten offering and the
managing underwriter advises the Selling Party initiating the Demand
Registration in writing that in its opinion the total number or dollar
amount of securities proposed to be sold in such offering is such as to
materially and adversely affect the success of such offering, then Vivendi
will include in such registration, first, the securities of the initiating
Selling Party, and, thereafter, any securities to be sold for the account
of others who are participating in such registration (as determined on a
fair and equitable basis by Vivendi). In connection with any Demand
Registration or inclusion of a Selling Party's or its Affiliate's shares
in a piggyback registration, Vivendi, such Selling Party and/or its
Affiliates shall enter into an agreement containing terms (including
representations, covenants and indemnities by Vivendi and such Selling
Party), and shall be subject to limitations, conditions, and blackout
periods, customary for a secondary offering by a selling stockholder. The
costs of the registration (other than underwriting discounts, fees and
commissions, except as provided herein) shall be paid by Vivendi. Vivendi
shall pay up to 1% of gross proceeds in the aggregate of any underwriting
discounts, fees and commissions related to the registration of shares on
the behalf of Diller.
(iii) If Vivendi and a Selling Party cannot agree as to what
constitutes customary terms within 10 days of such Selling Party's request
for registration (whether in a Demand Registration or a piggyback
registration), then such determination shall be
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made by a law firm of national reputation mutually acceptable to Vivendi
and such Selling Party. In no event shall the inability of the parties to
come to agreement on customary terms delay in any way the registration of
a Selling Party's Vivendi Ordinary Shares hereunder.
SECTION 10.04 Tag-Along for USAi Limited Partners for Transfers
by Universal. (a) If Universal Sub, any Universal Limited Partner or any of
their respective Affiliates (each, a "Transferring Entity") shall desire to
Transfer in one transaction or a series of related transactions Common Interests
beneficially owned by such entity, other than to (w) Vivendi, (x) Universal
Studios Holding I Corp., (y) Centenary Holding N.V. or (z) Universal Pictures
International B.V., or to a direct or indirect wholly owned subsidiary of any of
the foregoing (such Transfer being referred to as a "Tag-Along Event"), such
Transferring Entity shall give not less than 10 Business Days' prior written
notice to each of the USAi Limited Partners (each, a "Tag-Along Offeree") of
such intended Tag-Along Event. Such notice (the "Tag-Along Notice") shall set
forth the terms and conditions of such proposed Tag-Along Event, including the
name of the proposed transferee or resulting holder of such Common Interests
(the "Resulting Holder"), the amount of Common Interests (and the aggregate
Participation Percentage represented thereby) proposed to be Transferred in the
Tag-Along Event (including the number of securities previously or proposed to be
Transferred to the Resulting Holder or its Affiliates in a related transaction)
(the "Tag-Along Interests"), the purchase price or consideration per Common
Interest on an equivalent basis proposed to be paid and received therefor (or if
part of a larger transaction, the fair value allocable portion of the total
purchase price or consideration) and the payment terms and type of Tag-Along
Event to be effectuated.
(b) Within 10 Business Days after delivery of the Tag-Along Notice
by the Transferring Entity to the Tag-Along Offerees, each Tag-Along Offeree
shall, by written notice to such Transferring Entity, have the opportunity and
right to sell to the Resulting Holder in such proposed Tag-Along Event (upon the
same terms and conditions as the Transferring Entity and/or its Affiliates,
including the same representations and warranties, covenants, indemnities,
holdback and escrow provisions, if any) up to that number of Common Interests
beneficially owned by such Tag-Along Offeree as shall represent a Participation
Percentage equal to the product of (x) a fraction, (A) the numerator of which is
the aggregate Participation Percentage represented by the Tag-Along Interests
and (B) the denominator of which is the aggregate Participation Percentage
represented by the Common Interests beneficially owned as of the date of the
Tag-Along Notice by Universal Sub, the Universal Limited Partners and their
respective Affiliates, multiplied by (y) the aggregate Participation Percentage
represented by the Common Interests beneficially owned by such Tag-Along Offeree
and its Affiliates as of the date of the Tag-Along Notice (the "Tag-Along
Amount"). In the event that the proposed transferee is unwilling to purchase all
of the Common Interests that the Transferring Entity and the USAi Limited
Partners propose to Transfer hereunder, the amount of Common Interests to be
Transferred by the Transferring Entity and/or its Affiliates and each of the
USAi Limited Partners shall be reduced proportionately. The right of the
Tag-Along Offerees shall terminate with respect to that proposed Tag-Along Event
if not exercised within the period specified in the first sentence of this
clause (b).
(c) At the closing of any proposed Tag-Along Event in respect of
which a Tag-Along Notice has been delivered, each Tag-Along Offeree shall
deliver to the proposed
-34-
Resulting Entity the Common Interests to be sold hereby duly endorsed, or
accompanied by written instruments of transfer in form satisfactory to the
proposed Resulting Entity, free and clear of all Liens (other than Permitted
Liens), and shall receive in exchange therefor the consideration to be paid by
the proposed Resulting Entity in respect of such Common Interests.
(d) If, for any reason, the rights of a Tag-Along Offeree, as set
forth in this Section 10.04, are unenforceable or otherwise unavailable to such
Tag-Along Offeree upon the occurrence of a Tag-Along Event, such Tag-Along
Offeree shall have the right to require Vivendi to purchase an amount of Common
Interests equal to the Tag-Along Amount from such Tag-Along Offeree upon the
same terms and conditions as would have applied had the Tag-Along Offeree's
rights under this Section 10.04 been fully enforceable and available.
ARTICLE XI
Limitation on Liability, Exculpation
------------------------------------
SECTION 11.01 Limitation on Liability. Except as expressly
provided herein or in the other Transaction Documents, the debts, obligations
and liabilities of the Partnership, whether arising in contract, tort or
otherwise, shall be solely the debts, obligations and liabilities of the
Partnership, and no Covered Person shall be obligated personally for any such
debt, obligation or liability of the Partnership; provided, however, that the
foregoing shall not alter each Partner's obligation under the Delaware Act to
return funds wrongfully distributed to it.
SECTION 11.02 Exculpation of Covered Persons. (a) Except as
expressly provided herein or in the Transaction Agreement, no Covered Person
shall be liable, including under any legal or equitable theory of fiduciary duty
or other theory of liability, to the Partnership or to any other Covered Person
for any losses, claims, damages or liabilities incurred by reason of any act or
omission performed or omitted by such Covered Person except for any loss,
claims, damages or liabilities arising from such Covered Person's fraud.
Whenever in this Agreement a Covered Person is permitted or required to make
decisions such Covered Person shall make such decisions in good faith having
regard to the best interests of the Partnership and shall not be subject to any
other or different standard (including any legal or equitable standard of
fiduciary or other duty) imposed by this Agreement or any relevant provisions of
law or in equity or otherwise.
(b) A Covered Person shall be fully protected in relying in good
faith upon the records of the Partnership and upon such information, opinions,
reports or statements presented to the Partnership, Board or management by any
Person as to matters the Covered Person reasonably believes are within such
Person's professional or expert competence.
SECTION 11.03 Partnership Opportunities. (a) If any of
Universal Sub, USAi, Diller or any officer, director, agent, stockholder,
member, manager, partner or Affiliate of any of the foregoing acquires knowledge
of a potential transaction or matter which may be a Partnership Opportunity (as
defined below) or otherwise is then exploiting any Partnership Opportunity, the
Partnership shall have no interest in such Partnership Opportunity and no
expectancy that such Partnership Opportunity be offered to the Partnership, any
such interest or
-35-
expectancy being hereby renounced, so that, as a result of such renunciation,
and for the avoidance of doubt, such Person (i) shall have no duty to
communicate or present such Partnership Opportunity to the Partnership, (ii)
subject to Section 9.04, shall have the right to hold any such Partnership
Opportunity for its (and/or its officers', directors', agents', stockholders',
members', managers', partners' or Affiliates') own account or to recommend,
sell, assign or transfer such Partnership Opportunity to Persons other than the
Partnership or any subsidiary of the Partnership and (iii) subject to Section
9.04, shall not breach any fiduciary or other duty to the Partnership, in such
Person's capacity as a Partner or otherwise, by reason of the fact that such
Person pursues or acquires such Partnership Opportunity for itself, directs,
sells, assigns or transfers such Partnership Opportunity to another Person, or
does not communicate information regarding such Partnership Opportunity to the
Partnership.
(b) Notwithstanding the provisions of this Section 11.03, the
Partnership does not renounce any interest or expectancy it may have in any
Partnership Opportunity that is offered to an officer of the Partnership and who
is also a director or officer of Universal Sub, USAi or the respective
Affiliates of Vivendi or USAi if such opportunity is expressly offered to such
person in his or her capacity as an officer of the Partnership.
(c) For purposes of this Section 11.03 only, the terms (i)
"Partnership" shall mean the Partnership and, except where the context requires
otherwise, shall also include all corporations, partnerships, joint ventures,
associations and other entities in which the Partnership beneficially owns
(directly or indirectly) 50% or more of the outstanding voting stock, voting
power, partnership or membership interests or similar voting interests, and (ii)
"Partnership Opportunity" shall mean an investment or business opportunity or
prospective economic advantage in which the Partnership could, but for the
provisions of this Section 11.03, have an interest or expectancy.
(d) Except as otherwise expressly provided in Section 9.04, in
Section 4.13 of the Transaction Agreement or in any other agreement to which the
Partners may be a party, (i) the Partners and their officers, directors, agents,
stockholders, members, managers, partners and Affiliates may engage or invest
in, independently or with others, any business activity of any type or
description, including those that might be the same as or similar to the
Partnership's business or the business of any subsidiary of the Partnership,
(ii) none of the Partnership, any subsidiary of the Partnership or any Person
beneficially owning Common Interests shall have any right in or to such business
activities or ventures or to receive or share in any income or proceeds derived
therefrom and (iii) to the extent required by applicable law in order to
effectuate the purpose of this Section 11.03, the Partnership shall have no
interest or expectancy, and specifically renounces any interest or expectancy,
in any such business activities or ventures.
SECTION 11.04 Indemnification. (a) The Partnership shall, to
the fullest extent authorized under the Delaware Act as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Partnership to provide broader indemnification
rights than said law permitted the Partnership to provide prior to such
amendment), indemnify and hold harmless any Covered Person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit, investigation or proceeding, whether civil, criminal or
administrative by reason of the fact that he or a Covered Person of whom he is
the legal representative is or was a Representative or officer
-36-
of the Partnership, or is or was a Representative or officer of the Partnership
serving at the request of the Partnership as a Representative, officer or
employee of another partnership, corporation, joint venture, trust or other
enterprise (whether the basis of such proceeding is alleged action in an
official capacity as a Representative or officer or in any other capacity while
serving as a Representative or officer) against all expenses, liability and loss
(including attorneys' fees, judgments, fines or penalties and amounts paid or to
be paid in settlement) reasonably incurred or suffered by him in connection
therewith, except in a case where such expenses, liabilities or losses resulted
from the fraud of such indemnified Person. The right to indemnification
conferred in this Agreement shall be a contract right and shall include the
right to be paid by the Partnership the expenses incurred in defending any such
proceeding in advance of its final disposition, such advances to be paid by the
Partnership within 20 days after the receipt by the Partnership of a statement
or statements from the claimant requesting such advance or advances from time to
time.
(b) At all times from and after the Effective Time, the Partnership
shall either maintain directors' and officers' liability insurance covering the
officers and Representatives entitled to indemnification under this Section
11.04 or ensure that such officers and Representatives are covered in policies
maintained by Vivendi, Universal Sub or their Affiliates, in each case providing
coverage for reasonable amounts and on customary terms.
ARTICLE XII
Events of Withdrawal; Bankruptcy of a General Partner
-----------------------------------------------------
SECTION 12.01 Events of Withdrawal. Except as otherwise
provided in this Agreement, no Partner shall withdraw from the Partnership.
SECTION 12.02 Bankruptcy of a General Partner. (a) In the event
of the Bankruptcy of the General Partner (the "Bankrupt Partner"), then the
Partnership shall be dissolved unless it is continued without dissolution in
accordance with Section 13.01(c)(iii).
(b) In the event a new General Partner is appointed, the Bankrupt
Partner shall become a Limited Partner and shall have (x) no right to
participate in the management of the Partnership or the business and affairs of
the Partnership, and (y) the same interest in all items of income, gain, loss,
deduction or credit of the Partnership to the same extent as if such Bankruptcy
had not occurred. Upon the occurrence of the Bankruptcy of any General Partner,
(i) the Bankrupt Partner and the other Partners shall execute such documents as
may be necessary or appropriate to carry out the provisions of this Article XII,
and (ii) the USAi Limited Partners are, without necessity of any further action
or documentation, hereby appointed attorneys-in-fact of the Bankrupt Partner and
the Universal Limited Partners for the purpose of carrying out the provisions of
this Article XII and taking any action and executing any documents which such
Partners may deem necessary or advisable to accomplish the purposes hereof, such
appointment being irrevocable and coupled with an interest.
(c) In the event that the General Partner shall become a "debtor" as
defined in the Bankruptcy Code in any case commenced thereunder and at any time
during the pendency of such case there shall be appointed (i) a trustee with
respect to the Bankrupt Partner under
-37-
Section 701, 702 or 1104 of the Bankruptcy Code (or any successor provisions
thereto), or (ii) an examiner having expanded powers beyond those specifically
enumerated in Section 1104(b) of the Bankruptcy Code, then the USAi Limited
Partners may, at any time thereafter, so long as such condition exists,
unanimously elect to dissolve the Partnership, in which event the affairs of the
Partnership shall be wound up as provided in Article XIII.
ARTICLE XIII
Dissolution and Termination
---------------------------
SECTION 13.01 Dissolution. (a) The Partnership shall not be
dissolved by the admission of Additional Partners or Substitute Partners
pursuant to Section 3.03.
(b) Subject to Section 12.01, no Partner shall withdraw from the
Partnership and, to the fullest extent permitted by applicable law, no Partner
shall take any action to dissolve, terminate or liquidate the Partnership or to
require apportionment, appraisal or partition of the Partnership or any of its
assets, or to file a bill for an accounting, except as specifically provided in
this Agreement, and each Partner, to the fullest extent permitted by applicable
law, hereby waives any rights to take any such actions (or have such actions
taken on its behalf) under applicable law, including any right to petition a
court for judicial dissolution under Section 17-802 of the Delaware Act.
(c) The Partnership shall be dissolved and its business wound up
upon the earliest to occur of any one of the following events:
(i) at the time there are no Limited Partners unless the
Partnership is continued without dissolution in accordance with the
Delaware Act;
(ii) the written agreement of all the Partners;
(iii) the occurrence of any event that causes the General
Partner to cease to be a general partner of the Partnership, unless (i)
there is a remaining General Partner who is hereby authorized to and shall
continue the business of the Partnership without dissolution or (ii) the
USAi Limited Partners agree in writing, within 90 days after such event
occurs, to continue the business of the Partnership without dissolution
and to appoint, effective as of the date of such event, a new General
Partner;
(iv) a decision to dissolve the Partnership in accordance with
Section 12.02(c); and
(v) the entry of a decree of judicial dissolution under
Section 17-802 of the Delaware Act, in contravention of this Agreement.
(d) Except as provided herein, the resignation, Bankruptcy,
insolvency or dissolution of a Partner or the occurrence of any other event that
terminates the continued membership of a Partner of the Partnership shall not in
and of itself cause a dissolution of the Partnership.
-38-
SECTION 13.02 Winding Up of the Partnership. (a) Upon
dissolution, the Partnership's business shall be liquidated in an orderly
manner. The General Partner shall be the liquidator to wind up the affairs of
the Partnership pursuant to this Agreement. If there shall be no General
Partner, the remaining Partners may approve one or more liquidators to act as
the liquidator in carrying out such liquidation. In performing its duties, the
liquidator is authorized to sell, distribute, exchange or otherwise dispose of
the assets of the Partnership in accordance with the Delaware Act and in any
reasonable manner that the liquidator shall determine to be in the best interest
of the Partners.
(b) The proceeds of the liquidation of the Partnership shall be
distributed in the following order and priority:
(i) first, to the creditors (including any Partners or their
respective Affiliates that are creditors) of the Partnership in
satisfaction of all of the Partnership's liabilities (whether by payment
or by making reasonable provision for payment thereof, including the
setting up of any reserves which are, in the judgment of the liquidator,
reasonably necessary therefor);
(ii) second, to the Partners holding Preferred Interests pro
rata up to the amount of the Face Value of such Preferred Interests;
(iii) third, to the Partners holding Common Interests pro rata
based on the amount of Capital Contributions attributable thereto, up to
the amount of such Capital Contributions; and
(iv) fourth, to the Partners holding Common Interests pro rata
in accordance with their respective Participation Percentages;
provided, however, that in the event that distributions pursuant to
clauses (ii) through (iv) above would not otherwise be identical to
distribution in accordance with the positive balances in the Partners'
Capital Accounts, such distributions shall instead be made in accordance
with such positive balances and; provided, further, that the aggregate
amount distributable to the Universal Partners, collectively, pursuant to
clauses (ii) through (iv) above or the preceding proviso shall be further
distributed among the Universal Partners pro rata based on their relative
positive Capital Account balances (determined taking into account any
allocations incident to liquidation pursuant to Section 7.02(g)).
SECTION 13.03 Distribution of Property. In the event it becomes
necessary in connection with the liquidation of the Partnership to make a
distribution of property in kind, subject to the priority set forth in Section
13.02, the liquidator shall have the right to compel each Partner to accept a
distribution of any asset in kind, so long as the portion of such asset to be
distributed is determined based upon the amount of cash that would be
distributed to such Partners if such property were sold for an amount of cash
equal to the fair market value of such property, as determined by the liquidator
in good faith.
SECTION 13.04 Claims of Partners. The Partners shall look
solely to the Partnership's assets for the return of their Capital
Contributions, and if the assets of the Partnership remaining after payment of
or reasonable provision for the payment of all liabilities
-39-
of the Partnership are insufficient to return such Capital Contributions, the
Partners shall have no recourse against the Partnership or any Partner.
SECTION 13.05 Termination. The Partnership shall terminate when
all of the assets of the Partnership, after payment of or reasonable provision
for the payment of all debts and liabilities of the Partnership, shall have been
distributed to the Partners in the manner provided for in this Article XIII and
when permitted by this Agreement, and the certificate of limited partnership of
the Partnership shall have been canceled in the manner required by the Delaware
Act.
ARTICLE XIV
Miscellaneous
-------------
SECTION 14.01 Notices. Except as otherwise expressly provided
in this Agreement, all notices, requests and other communications to any party
hereunder shall be in writing (including a facsimile or similar writing) and
shall be given to such party at the address or facsimile number set forth for
such party in Schedule A hereto or as such party shall hereafter specify for the
purpose by notice to the other parties. Each such notice, request or other
communication shall be effective (i) if given by facsimile, at the time such
facsimile is transmitted and the appropriate confirmation is received (or, if
such time is not during a Business Day, at the beginning of the next such
Business Day), (ii) if given by mail, five Business Days (or, (x) if by
overnight courier, one Business Day, or (y) if to an address outside the United
States, seven Business Days) after such communication is deposited in the mails
with first-class postage prepaid, addressed as aforesaid, or (iii) if given by
any other means, when delivered at the address specified pursuant to this
Section 14.01.
SECTION 14.02 No Third Party Beneficiaries. Except as provided
in Sections 10.02(b), 10.03 and 11.04, this Agreement is not intended to confer
any rights or remedies hereunder upon, and shall not be enforceable by, any
Person other than the parties hereto.
SECTION 14.03 Waiver. No failure by any party to insist upon
the strict performance of any covenant, agreement, term or condition of this
Agreement or to exercise any right or remedy consequent upon a breach of such or
any other covenant, agreement, term or condition shall operate as a waiver of
such or any other covenant, agreement, term or condition of this Agreement. Any
Partner by notice given in accordance with Section 14.01 may, but shall not be
under any obligation to, waive any of its rights or conditions to its
obligations hereunder, or any duty, obligation or covenant of any other Partner.
No waiver shall affect or alter the remainder of this Agreement but each and
every covenant, agreement, term and condition hereof shall continue in full
force and effect with respect to any other then existing or subsequent breach.
The rights and remedies provided by this Agreement are cumulative and the
exercise of any one right or remedy by any party shall not preclude or waive its
right to exercise any or all other rights or remedies.
SECTION 14.04 Integration. This Agreement and the Transaction
Documents constitute the entire agreement among the parties hereto pertaining to
the subject
-40-
matter hereof and supersede all prior agreements and understandings of the
parties in connection herewith, and no covenant, representation or condition not
expressed in this Agreement or in any Transaction Document shall affect, or be
effective to interpret, change or restrict, the express provisions of this
Agreement. Notwithstanding the foregoing, the parties hereto agree to be bound
by the terms and provisions of the Letter Agreement (the "Letter Agreement")
dated as of the Closing Date, by and among the Universal Partners and the USAi
Limited Partners relating to the clarification of certain matters in this
Agreement, and the terms and provisions of the Letter Agreement are hereby
expressly incorporated herein by reference.
SECTION 14.05 Headings. The titles of Articles and Sections of
this Agreement are for convenience only and shall not be interpreted to limit or
amplify the provisions of this Agreement.
SECTION 14.06 Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original and all of
which, taken together, shall constitute one and the same instrument.
SECTION 14.07 Severability. Each provision of this Agreement
shall be considered separable and if for any reason any provision or provisions
hereof are determined to be invalid and contrary to any existing or future law,
such invalidity shall not impair the operation of or affect those portions of
this Agreement which are valid.
SECTION 14.08 Applicable Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware without
giving effect to the conflicts of law principles thereof.
SECTION 14.09 Jurisdiction. Each of the Partners (i) consents
to and submits itself and its property to the personal jurisdiction of any
Federal or state court located in the State of Delaware in the event of any
dispute arising out of or relating to this Agreement, (ii) agrees that it will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, (iii) agrees that it will not bring any
action relating to this Agreement in any court other than a Federal or state
court sitting in the State of Delaware and (iv) hereby waives any rights such
Partner may have to personal service of summons, complaint or other process in
connection therewith, and agrees that service may be made by registered or
certified mail addressed to such Partner and sent in accordance with the
provisions of Article XIV hereof.
SECTION 14.10 Attorney-in-Fact. Each Universal Limited Partner
hereby appoints Universal Sub as its attorney-in-fact, with full power and
authority, for the purpose of taking any action and executing any instrument
necessary for carrying out the respective voting, approval and consent rights of
such Person pursuant to this Agreement.
SECTION 14.11 Limited Partner Voting Rights. The Partners
hereby agree that (i) no Limited Partner other than the USAi Limited Partners
shall have any voting or consent rights under this Agreement or the Delaware Act
and (ii) when any vote or consent of the Limited Partners is to be given under
this Agreement or, subject to Section 6.06 hereof, the Delaware Act, the vote or
consent of the USAi Limited Partners shall control; provided,
-41-
however, that in the event that the General Partner becomes a Limited Partner
pursuant to Section 12.02, then such Limited Partner shall have the right
bestowed upon the USAi Limited Partners in Section 6.06(i).
-42-
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties as of the day and year first above written.
USI ENTERTAINMENT, INC.,
by /s/ Karen Randall
------------------------------
Name: Karen Randall
Title: Executive Vice President
and General Counsel
USANI HOLDING XX, INC.,
by /s/ Karen Randall
------------------------------
Name: Karen Randall
Title: Executive Vice President
and General Counsel
UNIVERSAL PICTURES INTERNATIONAL
HOLDINGS BV,
by /s/ Ad Heskes
------------------------------
Name: Ad Heskes
Title: Director
UNIVERSAL PICTURES INTERNATIONAL
HOLDINGS 2 BV,
by /s/ J.R. Van der Eijnden
------------------------------
Name: J.R. Van der Eijnden
Title: Director
NYCSPIRIT CORP. II,
by /s/ George E. Bushnell III
------------------------------
Name: George E. Bushnell III
Title: Vice President and Secretary
-43-
USA NETWORKS, INC.,
by /s/ Julius Genachowski
------------------------------
Name: Julius Genachowski
Title: Executive Vice President
USANi SUB LLC,
by /s/ Eric DeGraw
------------------------------
Name: Eric DeGraw
Title: Vice President
NEW-U STUDIOS HOLDINGS, INC.,
by /s/ Julius Genachowski
------------------------------
Name: Julius Genachowski
Title: Vice President
BARRY DILLER,
/s/ Barry Diller
------------------------------
Initial Limited Partner,
solely to reflect its withdrawal
from the Partnership
USI INTERIM LP INC.,
by /s/ Karen Randall
----------------------
Name: Karen Randall
Title: Executive Vice President
General Counsel
-44-
Only for purposes of Sections
8.07 and 10.03:
UNIVERSAL STUDIOS, INC.
by /s/ Kevin Conway
----------------------
Name: Kevin Conway
Title: Vice President
Only for purposes of Sections
10.03(f) and 10.04(d):
VIVENDI UNIVERSAL, S.A.,
by /s/ Kevin Conway
----------------------
Name: Kevin Conway
Title: Senior Vice President
Only for purposes of Section 8.07:
USI - USA HOLDING LLC
by /s/ Kevin Conway
----------------------
Name: Kevin Conway
Title: Authorized Person
USIE - USA HOLDING LLC
by /s/ Kevin Conway
----------------------
Name: Kevin Conway
Title: Authorized Person
-45-
V - USA HOLDING LLC
by /s/ Kevin Conway
----------------------
Name: Kevin Conway
Title: Authorized Person
SUB I - USA HOLDING LLC
by /s/ Kevin Conway
----------------------
Name: Kevin Conway
Title: Authorized Person
-46-
EXHIBIT 99.2
[USA INTERACTIVE LOGO]
USA NETWORKS, INC. COMPLETES TRANSACTION WITH
VIVENDI UNIVERSAL; COMPANY RENAMED USA INTERACTIVE
USA TO FOCUS ON INTERACTIVE COMMERCE
NEW YORK, NY - May 7, 2002 - USA Networks, Inc. (Nasdaq: USAI) announced
today that it has been renamed USA Interactive following the completion of
the transaction with Vivendi Universal, S.A. ("Vivendi") to create a joint
venture called Vivendi Universal Entertainment ("VUE"). USA Interactive will
continue to trade as "USAI" on Nasdaq.
With the closing of this transaction, USA will become a pure interactive
commerce company. USA owns or controls interactive businesses in multiple,
interrelated areas, such as electronic retailing, travel services, ticketing
services, personals services, local information services and teleservices.
Comprised of HSN; Expedia, Inc. (Nasdaq: EXPE); Hotels.com (Nasdaq: ROOM); TV
Travel Group; Ticketmaster (Nasdaq: TMCS), which operates Match.com and
Citysearch; Precision Response Corporation; Electronic Commerce Solutions;
and Styleclick (OTC: IBUYA), USA is well positioned to benefit from the
migration of consumers from traditional bricks-and-mortar companies to
transactions conducted via the Internet, the television and the telephone.
The transaction, which was announced on December 17, 2001, involves the
contribution to VUE of USA Cable, which includes USA Network, SCI FI Channel,
TRIO and Newsworld International; Studios USA, which produces and distributes
television programming; and USA Films, which produces and distributes films.
Vivendi will contribute the film, television and theme park businesses of its
subsidiary, Universal Studios, Inc.
In connection with this transaction, USA has retired approximately 321
million shares previously owned by Vivendi, thereby reducing USA's fully
diluted shares to 477 million shares. In addition, USA has received $1.6
billion in cash, $2.5 billion in preferred interests in VUE, and a 5.4%
common interest in VUE. USA also issued to Vivendi warrants to purchase 60.5
million USA common shares.
USA's businesses collectively process approximately $8 billion worth of
transactions, 1 billion minutes of inbound customer calls, 83 million orders,
68 million credit card transactions, and ship 47 million items annually.
USA's Internet commerce properties - which include HSN.com, ticketmaster.com,
Expedia (R), Hotels.com, and Match.com - are all profitable and the Company's
flagship properties are number one or number two in their respective
categories.
The businesses comprising USA Interactive are as follows:
HSN (HSN.COM, ABCSHOWSTORE.COM, HSE24.DE, IMPROVEMENTSCATALOG.COM,
SHOPCHANNEL.CO.JP, USOPENSTORE.COM)
HSN celebrates its 25th anniversary this year. The idea materialized on a
small AM radio station in Florida and has since grown into a global
multichannel retailer with a thriving TV, catalog and Web business on
hsn.com. HSN's programming now reaches more than 180 million households
worldwide. HSN sells 22,000 different items annually, mostly on an exclusive
basis, including such popular brands as Wolfgang Puck, Sony, Christopher
Lowell, Randolph Duke and the NFL.
EXPEDIA (EXPEDIA.COM, EXPEDIA.CA, EXPEDIA.CO.UK, EXPEDIA.DE, EXPEDIA.IT,
EXPEDIA.NL, EXPEDIA.VOYAGES-SNCF.COM, VACATIONSPOT.COM)
Expedia, Inc., a majority-owned subsidiary of USA Interactive, is the world's
leading online travel service and the seventh largest travel agency in the
United States. It operates Expedia.com in the United States and localized
versions throughout Europe and Canada.
HOTELS.COM (HOTELS.COM, 180096HOTEL.COM, HOTELDISCOUNT.COM, CONDOSAVER.COM,
ALLLUXURYHOTELS.COM, TRAVELNOW.COM, ACENETHOTELS.COM)
Hotels.com, a majority-owned subsidiary of USA Interactive, is the largest
specialized provider of discount hotel accommodations worldwide, providing
service through its own websites (including www.hotels.com and others), more
than 25,000 affiliated websites, and three toll-free call centers
(1-800-2-HOTELS). Hotels.com provides accommodations to travelers at over
6,000 properties in 218 markets in North America, Europe, the Caribbean and
Asia.
TV TRAVEL GROUP (TVTRAVELSHOP.COM, TVTRAVELSHOP.DE)
TV Travel Group pioneered the world's first transactional TV travel business.
It operates two channels in the United Kingdom, TV Travel Shop(TM) and TV Travel
Shop 2; and one in Germany, TV Travel Shop Germany. TV Travel Shop(TM) is
distributed in all of the U.K.'s 11 million multi-channel homes. TV Travel
Shop 2 is available in seven million homes in the U.K. TV Travel Shop
Germany is a joint venture between TV Travel Group and Preussag's TUI
Deutschland, and is currently available to 12 million German-speaking
multi-channel households in Germany, Switzerland and Austria.
TICKETMASTER (TICKETMASTER.COM, LIVEDAILY.COM, ADMISSION.COM)
Ticketmaster, a majority-owned subsidiary of USA Interactive, is the world's
leading ticketing and access company, serving more than 7,000 clients
worldwide and acting as the exclusive ticketing service for hundreds of
leading arenas, stadiums, performing arts venues, and theaters.
TICKETWEB (TICKETWEB.COM), RESERVEAMERICA (RESERVEAMERICA.COM), THE ACTIVE
NETWORK (ACTIVE.COM)
The Ticketmaster Access Group provides ticketing and access solutions
worldwide. TicketWeb provides ticketing solutions for small and medium size
venues. ReserveAmerica is a camping reservation and campground management
solutions
provider. The Active Network, Inc. is a leading provider of technology and
marketing solutions for the participatory sports and recreation industry.
TicketWeb and ReserveAmerica are wholly owned subsidiaries of Ticketmaster and
Ticketmaster holds an equity investment in The Active Network, Inc.
MATCH (MATCH.COM)
Match.com is a leading subscription-based online dating site, with more than
527,000 paying subscribers. Match.com powers paid online dating on The
Microsoft Network; The Excite Network's Relationship Channels; Talk City; BET
Interactive; and is the premier provider of personals for Love@AOL, offering
the Match.com service across AOL, AOL.com, CompuServe and Netscape.com.
EVITE (EVITE.COM)
Evite is an event communication network designed to give people all the tools
they need to plan, host or attend any type of group gathering. Evite helps
individuals manage event communication and access all the resources necessary
for successful activity planning.
CITYSEARCH (CITYSEARCH.COM)
Citysearch is a leading local network providing local information for every
city in the country. Citysearch currently covers approximately 12 million
listings in more than 300 categories including local events, organizations
and businesses.
PRECISION RESPONSE CORPORATION (PRCNET.COM)
Precision Response Corporation (PRC) has been managing customer relationships
for some of the world's leading corporation for over 20 years. PRC is a
trusted outsourced provider of solutions such as Inbound/Outbound
Teleservices, Email Management, IVR, Web Services, and Fulfillment, each
fully integrated with PRC's proprietary CRM technology to maximize service
and quality.
ELECTRONIC COMMERCE SOLUTIONS (SPORTSLINE.COM/MVP, STORE.NBA.COM,
STORE.NASCAR.COM, PGATOURSTOP.COM, SHOP.NHL.COM)
USA Electronic Commerce Solutions (ECS) provides end-to-end e-commerce
solutions for its partners, including online store design and development,
merchandising, marketing and customer care, and fulfillment, by utilizing
other USA Interactive businesses including Precision Response Corporation and
HSN.
STYLECLICK (STYLECLICK.COM)
Styleclick, Inc.'s technology integrates its online storefront application,
merchandising, inventory management and reporting systems with fulfillment
and customer care. Styleclick's technology platform leverages a central
CRM-driven database for consumer profiling and direct marketing
capabilities. Styleclick is a majority-owned subsidiary of USA Interactive.
ABOUT USA INTERACTIVE
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USA Interactive (Nasdaq: USAI), via the Internet, the television and the
telephone, engages worldwide in the business of interactivity across
electronic retailing, travel services, ticketing services, personals
services, local information services and
teleservices. USA is comprised of HSN; Expedia, Inc. (Nasdaq: EXPE); Hotels.com
(Nasdaq: ROOM); TV Travel Group; Ticketmaster (Nasdaq: TMCS), which operates
Match.com and Citysearch; Precision Response Corporation; Electronic Commerce
Solutions; and Styleclick (OTC: IBUYA).
IMPORTANT DISCLOSURES
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This press release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Forward-looking
statements include the information relating to possible or assumed future
results of operations of USA and its subsidiaries, including those preceded
by, followed by or that include the words "believes," "could," "projects,"
"estimates," "intends," "expects," "anticipates" or similar expressions.
These statements reflect the current views of USA with respect to future
events, and are based on information currently available to USA. These
forward-looking statements are subject to risks, uncertainties and
assumptions that may affect the operations, performance, development and
results of USA's and its subsidiaries' business. The following important
factors, in addition to those described in USA's and its subsidiaries'
filings with the Securities and Exchange Commission, could affect the future
results of USA and the other subsidiaries of USA described in this press
release, and could cause those results to differ materially from those
expressed in the forward-looking statements: material adverse changes
generally or in economic conditions in the markets served by our businesses;
future regulatory actions and conditions in our businesses' operating areas;
competition from others; successful integration of our divisions, including
recently acquired businesses; product demand and market acceptance; the
ability to protect proprietary information and technology or to obtain
necessary licenses on commercially reasonable terms; the ability to expand
into and successfully operate in foreign markets; and obtaining and retaining
key executives and employees. You are cautioned not to place undue reliance
on these forward-looking statements, which are made as of the date of this
press release. USA undertake no obligation to update or revise the
forward-looking statements contained in this press release, whether as a
result of new information, future events or any other reason.
# # #
Contacts: Ron Sato, USA Corporate Communications, 212/314-7254
Roger Clark/Lauren Rosenfield, USA Investor Relations, 212/314-7400