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): April 15, 2003
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
ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE
Pursuant to Regulation FD, the Registrant hereby files
questions and answers regarding the Registrant's rights with respect to Vivendi
Universal Entertainment LLLP ("VUE") as well as a copy of the letter agreement
referenced therein. Copies of the questions and answers and letter agreement
are attached as Exhibits 99.1 and 99.2 hereto, respectively, and are
incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(c) Exhibits.
99.1 Q&As Regarding USA's Rights with respect to VUE.
99.2 Letter Agreement, dated as of May 7, 2002, relating to the
clarification of certain matters in the Amended and Restated
Partnership Agreement of Vivendi Universal Entertainment LLLP.
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
Date: April 15, 2003
EXHIBIT INDEX
Exhibit No. Description
------ -- -----------
99.1 Q&As Regarding USA's Rights with respect to VUE.
99.2 Letter Agreement, dated as of May 7, 2002, relating to
the clarification of certain matters in the Amended and
Restated Partnership Agreement of Vivendi Universal
Entertainment LLLP.
Exhibit 99.1
USA INTERACTIVE
Q&As REGARDING USA'S RIGHTS WITH RESPECT TO VUE
AS FILED WITH THE SEC ON APRIL 15, 2003
In order to comply with Regulation FD, USA is filing with the Securities and
Exchange Commission this document, which addresses questions from the investment
community and others as to USA's rights with respect to Vivendi Universal
Entertainment LLLP ("VUE").
Q1: WHY IS USA TAKING LEGAL ACTION AGAINST VIVENDI UNIVERSAL, S.A.
- --- ("VIVENDI") AT THIS TIME?
A1: USA did not seek this tax dispute with Vivendi. Some five months ago
Vivendi informed USA that it disputed the tax distribution provisions
in the VUE Partnership Agreement. USA immediately responded that
Vivendi was incorrect. Thereafter, USA participated in good faith in
a dialogue with Vivendi to resolve the dispute. USA's objective
throughout was to reach an amicable and private resolution. Given the
instability of Vivendi, USA did not want to add in any way to their
burdens as Vivendi attempted to stem its liquidity crisis and achieve
a more stable footing. USA has shown great patience since the
management change and liquidity crisis at Vivendi, and many USA
executives have worked endless hours to help Vivendi in managing VUE,
in renegotiating its credit agreements and in helping Vivendi cope with
whatever problems arose during this most difficult period, including
accommodating their desire for various waivers or other changes to
agreements between us, all designed to enhance Vivendi's position - and
none of which inured to USA's direct benefit. USA hoped that Vivendi
would reciprocate this attitude of cooperation at least by dropping
their remarkable reinterpretation of our basic agreement. However,
Vivendi has recently made clear that it will not do so. Vivendi's
first tax distribution payment to USA on its preferred interest has
recently come due, and Vivendi has not made, and has made it clear that
it does not intend to make, that payment.
Now that Vivendi has dealt with all of its short term issues, and given
our inability to solve this dispute consensually, USA feels that it has
no choice but to seek resolution of the matter.
Q2: WHY IS USA FILING THESE Q&As?
- ---
A2: Over the last several months, we have received hundreds of inquiries
about USA's rights with respect to VUE, ranging from whether Vivendi
can sell VUE in its entirety, to whether Vivendi can sell VUE assets,
to the tax consequences of a sale, etc. Despite our best and most
careful efforts, we have not seen anything that clearly and correctly
answers all of the questions; instead, there has been a torrent of
conflicting and confusing information. While we have no interest in
adding to the coverage, and no desire to manipulate the process, we
think our
shareholders, the investment community and any interested party should
have access, without filter, to one document, hopefully plainly and
clearly articulated, that sets forth the facts on every important issue
that involves our contractual relationship with VUE and VU - which can
only be done by making full disclosure under SEC Regulation FD.
Q3: CAN VIVENDI SELL ITS INTERESTS IN VUE (IN ITS ENTIRETY) WITHOUT ANY
- --- CONSENT FROM USA?
A3: Yes, but any purchaser would take its ownership in VUE subject to
(a) USA's present ownership rights in VUE, including its common
interests and Class A and B preferred interests; and (b) all the
existing rights that USA presently possesses as described below.
Q4: DOES THIS MEAN THAT VIVENDI CAN'T SELL 100% OF VUE?
- ---
A4: Yes, Vivendi cannot force USA to sell any of its interests in VUE,
including its common interests. However, USA does have "tag along
rights" with respect to any such sale that USA doesn't intend to
exercise if presented with such an opportunity.
Q5: IN ANY SUCH SALE, WHAT WOULD HAPPEN TO THE 56.6 MILLION USA SHARES THAT
- --- ARE RELATED TO USA'S CLASS B PREFERRED INTERESTS IN VUE?
A5: If Vivendi wanted to sell its 56.6 million USA shares, it would need
either USA's or Barry Diller's and Liberty Media Corporation's consent.
Without that, Vivendi is prohibited from selling its 56.6 million USA
shares and also can't sell the Vivendi subsidiaries that holds those
shares to a third party. So, in any such sale of Vivendi's common
interests in VUE, a purchaser would acquire its interest in VUE subject
to, among other things, the Class B preferred interests (these
interests, while more fully described in the Partnership Agreement,
cannot be eliminated prior to May 7, 2022 and are supported by
Vivendi's retention of the 56.6 million USA shares). Any understanding
between Vivendi and a purchaser that undermines the intended thrust of
the restrictions on the sale of the 56.6 million USA shares or the
corporate entities in which such shares are held would be vigorously
challenged by USA.
Q6: IN ANY SUCH SALE, WHO WOULD BE RESPONSIBLE FOR THE TAX REIMBURSEMENT
- --- PAYMENTS THAT ARE PRESENTLY SUBJECT TO A DISPUTE WITH VIVENDI?
A6: The purchaser of VUE would take its interest in VUE subject to such
liability since VUE is the contractual party that has such obligations.
This liability has an estimated present value of approximately $620
million, based on certain assumptions of taxable income from VUE and an
assumed tax rate. USA has filed a lawsuit today for a declaratory
judgment with respect to VUE's obligations in this regard. These
obligations are clear (as USA states in the lawsuit) and it's
-2-
bizarre that Vivendi would fight an issue that is subject to such
unequivocal language (except as a negotiating position).
Q7: IF CONTROL OF VUE IS ACQUIRED BY AN ENTERTAINMENT COMPANY THAT HAS
- --- COMPETING ASSETS WITH THOSE OF VUE, WILL USA BE AFFECTED IN ANY WAY?
A7: It is possible that such an acquisition could result in some
significant issues. For example, if such an entertainment company
combines in any way its own assets with those of VUE or substitutes
"services" to VUE in lieu of VUE having a full going-concern
infrastructure, such action may affect USA's ability to realize maximum
value for its VUE securities. USA would, under those circumstances,
assess the situation carefully to see if any such action potentially
can adversely affect USA's interests and act accordingly.
Q8: CAN VIVENDI SELL VUE'S ASSETS?
- ---
A8: Vivendi cannot sell virtually any of VUE's assets without either
getting USA's consent or having VUE put up an irrevocable letter of a
letter of credit that would secure USA's payment of the $750 million
Class A preferred interests at its accreted value at the end of 20
years (i.e. approximately $2 billion) and with an expiration date no
earlier than May 7, 2022. This is true because, under the applicable
agreement, VUE can't sell assets outside the ordinary course unless it
has a "consolidated tangible net worth" of $4 billion. USA believes
that VUE's "consolidated tangible net worth" is well below this figure,
primarily because the definition specifically excludes the value of
"intangibles" like copyrights, etc. Also, Vivendi cannot sell
virtually any of VUE's cable channels or other assets contributed by
USA without indemnifying USA for the acceleration of certain tax
liabilities.
Q9: THERE HAVE BEEN REPORTS THAT VIVENDI CAN SELL VUE ASSETS SO LONG AS 50%
- --- OF THE PROCEEDS ARE RETAINED INSIDE VUE. IS THIS TRUE?
A9: No, because VUE must also have a "consolidated tangible net worth" of
$4 billion to sell any assets, as discussed in Question 8 above. So,
for example, if VUE wanted to assign any of its interest in its theme
park group, it is prohibited from doing so without USA consent.
Q10: IF VUE PUTS UP A LETTER OF CREDIT SO AS TO PERMIT ASSET SALES AND
- ---- VIVENDI PROVIDES A TAX INDEMNITY TO USA, ARE THERE ANY OTHER
RESTRICTIONS THAT WOULD SURVIVE THAT COULD IMPOSE A BURDEN ON VIVENDI
OR A PURCHASER?
A10: Yes, in all instances in which there has been a sale of assets, Vivendi
or a purchaser would be obligated to keep sufficient assets within VUE
to fully service the cash and paid-in-kind distribution obligations
each year, as well as the obligation to distribute cash to USA with
respect to taxes on allocations of VUE's income.
-3-
Q11: WOULD ANY SUCH SALE - (I.E. A SALE OF A SPECIFIC ASSET) TRIGGER ANY TAX
- ---- FOR WHICH VIVENDI HAS AGREED TO INDEMNIFY USA?
A11: If Vivendi sells the cable channels or other assets that USA
contributed into the VUE partnership in excess of $5 million in the
aggregate, Vivendi is obligated to indemnify USA for the net present
value of any tax triggered by the excess sale, discounted from 2017 at
USA's borrowing rate and assuming that USA is a full-rate taxpayer.
Q12: IF VUE POSTS AN APPROPRIATE LETTER OF CREDIT AND VIVENDI INDEMNIFIES
- ---- USA AGAINST ANY TAX ACCELERATION, COULD A PURCHASER GET RID OF USA'S
INTERESTS AND ELIMINATE ALL RESTRICTIONS?
A12: No, there is no way to get rid of USA's interests without USA's consent
until 2007 with respect to 4.44% of the common interests held by USA
and 2022 with respect to the Class A and Class B preferred interests
and the remaining 1% common interest held by USA.
Q13: CAN VIVENDI OR A PURCHASER REPAY THE OUTSTANDING $1.6 BILLION IN DEBT
- ---- WITHOUT VIVENDI INDEMNIFYING USA FOR THE NET PRESENT VALUE OF USA'S
RESULTING TAX LIABILITY?
A13: No, except for certain repayments permitted after May 7, 2004.
Otherwise, Vivendi may only refinance the debt, on terms reasonably
satisfactory to USA.
Q14: WHAT IS VUE'S DEBT LIMIT?
- ----
A14: Under USA's agreements with Vivendi, other than the $1.6 billion debt
discussed above, VUE cannot incur more than $800 million in debt at any
one time. The $800 million cap does not increase even if VUE pays down
the $1.6 billion debt. Also, USA created exceptions to the $800
million cap that only apply to Vivendi. As a result, any purchaser
would not be able to operate VUE in the same manner as it's currently
being operated by Vivendi. For example, certain intercompany payables
that are currently excluded from the $800 million cap would have to be
settled in order to avoid a breach of the $800 million cap if VUE was
sold. We have included as a separate exhibit to the Form 8-K to which
this document is a part the letter agreement that addresses the
exceptions to the $800 million cap.
Q15: WHAT ARE USA'S PRESENT RIGHTS WITH RESPECT TO VUE?
- ----
A15: The following summarizes USA's existing rights (most of which have been
alluded to above):
o USA has a right to keep all of its common interests in VUE until
May 7, 2007 and a right to keep all of its Class A and B preferred
interests as well as 1% of its common interests in VUE until May
7, 2022.
-4-
o USA has the right to tag-along on any sale by Vivendi of its
common interests in VUE.
o Without USA's consent, VUE could not issue any equity interests
senior to or PARI PASSU with the preferred interests held by USA
(including any security exchangeable or convertible into such).
o Without USA's consent, unless VUE posts the letter of credit
described Question 8 above, VUE cannot do any of the following:
(1) transfer any assets other than in ordinary course of
business unless:
(a) at least 50% of the net proceeds are retained
or redeployed by VUE, and
(b) VUE has at least $4 billion in consolidated
tangible net worth at the time of the sale;
(2) incur debt in excess of its debt limit (see Question 14
above); or
(3) issue any other preferred equity interests in VUE that
are exchangeable for any equity security of VUE (other
than common interests) or issue any security
exhangeable for cash, cash equivalents or such
preferred equity interests.
o USA is entitled to be indemnified by Vivendi for breaches of any
on-going covenants by VUE or Universal Studios, Inc. (including a
breach by Universal Studios of (a) its obligations to satisfy
USA's put rights relating to its common and Class B preferred
interests), and (b) its obligations to ensure that VUE has
sufficient equity to satisfy certain of its obligations under the
Partnership Agreement).
o Any sale, directly or indirectly, of the 56.6 million USA shares
by Vivendi would require either the consent of USA or the consent
of both Mr. Diller and Liberty.
o Without USA's consent, unless Vivendi indemnifies USA for
acceleration of taxes, VUE cannot take the following actions,
among others, until May 7, 2017:
(1) other than in the ordinary course of business, sell or
dispose of more than $5 million of the assets
contributed by USA to VUE (see Answer 11 above for the
relevant assets),
(2) pay down any part of the $1.6 billion debt, except for
certain refinancings and certain repayments after May
7, 2004, or
-5-
(3) cause any VUE partner or related person to bear the
"economic risk of loss" of the $1.6 billion debt.
Q16: IS USA OR VUE AFFECTED BY LIBERTY'S FRAUD ACTION AGAINST VIVENDI?
- ----
A16: As part of Liberty's fraud action against Vivendi, Liberty is seeking
to rescind the Merger Agreement between itself and Vivendi; neither USA
nor VUE is a party to that Agreement.
Q17: IS THIS FILING, AS WELL AS THE LITIGATION, INTENDED TO COMPROMISE OR
- ---- OTHERWISE EFFECT OR RESTRICT VIVENDI'S STATED CURRENT PROCESS OF
`EVALUATING OPTIONS' FOR ITS ENTERTAINMENT ASSETS?
A17: No. We did not ask for the dispute and our seeking resolution of the
dispute could not be postponed - we certainly did not want to take
action after Vivendi had taken concrete steps on its entertainment
assets, which may happen at any time and we did not want there to be
misunderstandings as to why we would take this action now or any other
action in the future.
We have no position on whether or not Vivendi keeps all its current
entertainment assets...we have said we are perfectly happy for the
current situation as outlined in all the agreements to go on
forever...and we have said we will continue to treat Vivendi in a
collegial and cooperative manner and help them to achieve whatever it
is they wish to, provided of course it is not adverse to USA's
interests as contained in the provisions of the agreements between us.
* * * * *
The description above of USA's rights with respect to Vivendi, VUE and related
matters is intended as a summary and is, of course, subject to the full terms of
the Transaction Agreement, Partnership Agreement and related agreements, which
agreements are on file as exhibits to USA's Form 10-K for the year ended
December 31, 2002 and available at www.sec.gov. While the above description
reflects USA's understanding of its rights, there can be no assurance that
others, including Vivendi or VUE, might not disagree on any and all of the
descriptions.
Further, this document may contain "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. These forward-
looking statements include statements relating to possible future actions or
events and/or statements preceded by, followed by or that include the words
"believes," "could," "expects," "anticipates," "estimates," "intends," "plans,"
"projects," "seeks," or similar expressions. These forward- looking statements
involve a number of risks and uncertainties that could cause actual actions or
events to differ materially from those suggested by the forward-looking
statements. These forward-looking statements are subject to risks,
uncertainties and assumptions that could have a material adverse effect on USA's
businesses, financial condition or results of operations. Investors should
consider the information contained in or incorporated by reference into USA's
filings with the U.S. Securities and Exchange
-6-
Commission (the "SEC"), including USA's Annual Reports on Form 10-K for the
fiscal year ended 2002, especially in the Risk Factors section and the
Management's Discussion and Analysis section and USA's Current Reports on Form
8-K. Other unknown or unpredictable factors also could have material adverse
effects on future events or actions. In light of these risks, uncertainties,
assumptions and factors, the forward-looking events and action s discussed in
this communication may not occur. You are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of the date stated, or
if no date is stated, as of the date of this communication. We are not under
any obligation and do not intend to make publicly available any update or other
revisions to any of the forward-looking statements contained in this
communication to reflect circumstances existing after the date of this
communication or to reflect the occurrence of future events or actions even if
experience or future events or actions make it clear that any expected future
events and actions expressed or implied by those forward-looking statements will
not be realized.
-7-
Exhibit 99.2
May 7, 2002
USI Entertainment, Inc.
USANI Holdings XX, Inc.
Universal Pictures International Holdings BV
Universal Pictures International Holdings 2 BV
NYCSpirit Corp. II
100 Universal City Plaza
Universal City, CA 91608
Attn: Frederick Huntsberry
Dear Frederick:
This letter sets forth our mutual understanding and clarification of
certain matters under the Amended and Restated Limited Liability Limited
Partnership Agreement (the "Partnership Agreement") of Vivendi Universal
Entertainment LLLP ("VUE"), dated as of May 7, 2002 and entered into prior to
this letter agreement. Capitalized terms used herein, but not otherwise defined
herein, shall have the same meaning as ascribed to such terms in the Partnership
Agreement. For good and valuable consideration, the receipt of which is
acknowledged, we have agreed as follows:
1.1 ITEMS OF INDEBTEDNESS. The definition of Indebtedness in the
Partnership Agreement is not intended to, and does not, treat the
following items as "Indebtedness" to the extent such items arise in the
ordinary course of business of VUE and its consolidated subsidiaries
(each a "Consolidated Subsidiary") as they may exist from time to time
(which determination shall be made pursuant to United States generally
accepted accounting principles) and are in a manner consistent with the
practices of the applicable "VUE Group Entity" (VUE and each of its
Consolidated Subsidiaries as they may exist from time to time are
referred to herein as a "VUE Group Entity," and collectively referred to
herein as the "VUE Group") in effect as of the date hereof; PROVIDED,
HOWEVER, such items shall be included (without duplication) in the
definition of Indebtedness to the extent any VUE Group Entity borrows
money, or incurs obligations evidenced by notes, bonds, debentures or
similar instruments, letters of credit, discounting arrangements or
similar instruments in order to satisfy the obligations of such items:
(a) deposits or advances;
(b) performance bonds, completion bonds, or surety bonds, in
each case to the extent outstanding and undrawn;
(c) normal trade accounts payable (unless more than 90 days
past due and not in dispute);
1
(d) obligations to pay talent participations, residuals,
royalties, or guild obligations attributable to "Product" (as
defined below) or employee compensation or benefits; and
(e) (i) obligations to acquire any motion picture, television
program, or video production produced for theatrical,
non-theatrical, or television release, or for release in any other
medium (collectively, "Product") pursuant to a "put" or customary
studio negative pick up agreement or (ii) obligations to talent
under a "pay or play" services agreement, but, in the case of both
Paragraphs 1.1(e)(i) and (ii) hereof, only to the extent that such
obligations do not create a Lien on any of the other assets or
properties of any VUE Group Entity (including, without limitation,
the VUE Group's entertainment library).
For purposes of clarity, the following shall not be deemed to be in the
ordinary course of business of the VUE Group and therefore shall not be
excluded from the definition of Indebtedness: (i) employee compensation
and benefits for persons not engaged in the business of a VUE Group
Entity; (ii) employee compensation and benefits for persons employed by
Vivendi Universal S.A. ("VU"), and (iii) obligations of any VUE Group
Entity in respect of "put" options held by VU employees entitling them to
put VU shares or stock options to VU.
1.2 INDEBTEDNESS OF THE VUE GROUP. In clarifying the limitations
on Indebtedness set forth in Section 5.05(a)(iv) of the Partnership
Agreement none of the following shall be "Indebtedness" for purposes of
Section 5.05(a)(iv) or included in the calculation of Indebtedness for
the purposes of clause (iv)(B) of Section 5.05(a) of the Partnership
Agreement. For purposes of this letter agreement, "Non-VUE Affiliate" is
(i) an entity not within the VUE Group but which is an Affiliate of VU
and/or (ii) VU, and references to VUE Affiliates and Non-VUE Affiliates
includes as the context requires such entities' predecessor entities.
(a) Indebtedness of any entity that is not a VUE Group
Entity provided such Indebtedness is non-recourse as to (i) each
and every VUE Group Entity and (ii) the assets and properties of
each and every VUE Group Entity. For the avoidance of doubt, the
Indebtedness of any entity that is not a VUE Group Entity shall be
included in the calculation of Indebtedness for the purposes of
clause (iv)(B) of Section 5.05(a) of the Partnership Agreement if
and to the extent that such Indebtedness is recourse to (i) any
VUE Group Entity or (ii) any assets or properties of any VUE Group
Entity.
(b) The liquidation preference of certain preferred equity
interests previously issued by Universal Home Video LLLP (together
with its successors, "UHV") to the extent (i) the aggregate
liquidation preference for such preferred equity interests does
not exceed $200 million (the "Preference Amount"), and the
preferred equity interests remain as described in that certain
letter agreement dated as of the date hereof and entered into
concurrently herewith, regarding the USI Receivable and certain
related matters, and (ii) UHV holds a receivable (the
2
"USI Receivable") (other than the Existing Receivables and the
Qualifying Cash Management Receivables, as each is defined below)
relating to such transaction from Universal Studios, Inc. in an
amount not less than the Preference Amount, which Preference
Amount may be offset against the USI Receivable, and (iii) the USI
Receivable bears interest at the same rate as the dividend rate
(regular and special) on the preferred equity interest.
(c) Loans in the approximate amount of $1,115.2 million,
outstanding on the Closing Date and arising prior to the Closing
Date in the ordinary course of business made to VUE Group Entities
by Non-VUE Affiliates and bearing interest at an arms'-length rate
(the "Existing Debt"), provided, however that if at any time
Existing Debt exceeds unencumbered receivables held by VUE Group
Entities from Non-VUE Affiliates and arising prior to the Closing
Date in the ordinary course of business (excluding the USI
Receivable and the Qualifying Cash Management Receivables) and
bearing interest at an arms'-length rate ("Existing Receivables"),
the excess shall be included in the calculation of Indebtedness
for purposes of clause (iv)(B) of Section 5.05(a) of the
Partnership Agreement. For purposes of this Paragraph 1.2(c), an
interest rate shall be conclusively presumed to be at an
arms'-length rate if it is within the range specified in Treasury
Regulation Section 1.482-2(a)(2)(iii)(B)(1).
(d) Cash Management Loans, but only to the extent that (i)
the aggregate principal balance of the Cash Management Loans do
not exceed the aggregate principal balance of the Qualifying Cash
Management Receivables, and (ii) Cash Management Loans and
Qualifying Cash Management Receivables bear interest at an
arms'-length rate. For the avoidance of doubt, (A) Cash Management
Loans shall be included in the calculation of Indebtedness for the
purposes of clause (iv)(B) of Section 5.05(a) of the Partnership
Agreement if and to the extent that the aggregate amount of Cash
Management Loans exceeds the aggregate amount of Qualifying Cash
Management Receivables, (B) a Cash Management Loan shall be
included in the calculation of Indebtedness for the purpose of
clause (iv)(B) of Section 5.05(a) if it does not bear interest at
an arms'-length rate, and (C) nothing herein shall preclude or
restrict the operation of VU's existing cash management system
(provided that Cash Management Loans to the extent in excess of
Qualifying Cash Management Receivables shall be Indebtedness for
the purposes of clause (iv) of Section 5.05(a) of the Partnership
Agreement). For purposes of this Paragraph 1.2(d), an interest
rate shall be conclusively presumed to be at an arms'-length rate
if it is within the range specified in Treasury Regulation Section
1.482-2(a)(2)(iii)(B)(1).
A "Cash Management Loan" is a loan or advance made after the
Closing Date in the ordinary course of business as part of VU's
cash management system to a VUE Group Entity either by the Funding
Entity (as defined below) (directly or as assignee of a Cash
Management Loan) or a Non-VUE Affiliate. Loans made by or assigned
to the Funding Entity shall be evidenced by a promissory note
issued to the Funding Entity (each such note, a "Funding Entity
Note"). Each Funding
3
Entity Note shall be properly annotated to reflect each Cash
Management Loan by the Funding Entity to a VUE Group Entity
issuing that Funding Entity Note. The Funding Entity shall have
the right to surrender a single Funding Entity Note in exchange
for multiple Funding Entity Notes (provided the aggregate
principal amount of such re-issued Funding Entity Notes shall not
exceed the principal amount outstanding under the Funding Entity
Note exchanged).
A "Qualifying Cash Management Receivable" is (i) an unencumbered
receivable (excluding the USI Receivable and the Existing
Receivables) held by a VUE Group Entity from the Funding Entity
which shall be evidenced by a promissory note" issued by the
Funding Entity to and held by such VUE Group Entity (and which
note shall be properly annotated to reflect each receivable owing
from the Funding Entity and payable to the VUE Group Entity) and
which receivable is, at the option of the VUE Group Entity,
payable in cash or by the surrender of a like amount of Cash
Management Loans held by the Funding Entity, and provided that the
Funding Entity has delivered to the VUE Group Entity holding such
unencumbered receivable a Funding Entity Note in a principal
amount not less than such receivable, or (ii) an unencumbered
receivable (excluding the USI Receivable and the Existing
Receivables) held by a VUE Group Entity and secured by a Cash
Management Loan Pledged (evidenced by a Lender Note) to such VUE
Group Entity as security for such receivable, which receivable in
the case of either (i) or (ii), arises in the ordinary course of
business as part of VU's cash management system.
The Funding Entity is a single Non-VUE Affiliate which is a VU
Subsidiary that (a) has no business other than the business of
making loans to VUE Group Entities and borrowing money from VUE
Group Entities, or assuming from any Non-VUE Affiliate receivables
payable to VUE Group Entities provided that the Funding Entity
simultaneously acquires all rights as lender to Cash Management
Loans in at least an equal amount, (b) has no assets or
liabilities other than the assets and liabilities associated with
such business, and (c) otherwise has terms and conditions
substantially similar to those relating to V-USA Holding LLC,
including the non-economic membership interest being held by USA:
provided that nothing herein shall require that the Funding Entity
be organized under the laws of any state of the United States.
If and when VUE intends to have Qualifying Cash Management
Receivables pursuant to this Paragraph 1.2(d) of this Letter
Agreement, then VUE shall give USA prior written notice of such
intention and the method it intends to use (i.e., clause (i) or
(ii) of the definition of Qualifying Cash Management Receivable).
Such method shall not be changed without the prior written notice
by VUE to USA. To the extent that the utilization of the method
described in clause (ii) of Qualifying Cash Management Receivable
does not violate any third party financing agreement to which VU
or any Affiliate of VU is a party, or create, or potentially
create any adverse (but greater than de minimus) financial impact
on VU or any Affiliate of VU, VUE shall utilize the method
described in clause (ii) of the definition of Qualifying Cash
Management Receivable. VUE shall provide
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to USA in advance for its consent: (a) the form of any
documentation VUE proposes to effect a Pledge and/or the
organizational, loan and receivable documents VUE proposes to use
for the Funding Entity, and (b) if a Funding Entity is used, the
proposed jurisdiction's laws under which such Funding Entity is to
be formed and the proposed form of the Funding Entity, provided
that VUE shall not be entitled to exclude from Indebtedness any
Cash Management Loans until the requisite consent has been
obtained, and provided further that USA may not fail or refuse to
give such consent unless such documents, jurisdiction or form are
inconsistent with the intent and purpose of this Paragraph 1.2(d),
and any non-approval shall provide in reasonable detail
information about the inconsistency. VUE shall keep books and
records reflecting all transactions that constitute Qualifying
Cash Management Receivables and, upon request of USA, VUE shall
make available to USA such books and records for inspection.
A "Pledge" is a security interest, and first priority perfected
lien, in a Cash Management Loan granted by a Non-VUE Affiliate in
favor of a VUE Group Entity which holds a receivable from such
Non-VUE Affiliate.
(e) Indebtedness owing from one VUE Group Entity to another
VUE Group Entity.
5
This letter, together with the terms of the Partnership Agreement, sets
forth the entire understanding among the Partners to the Partnership Agreement
with respect to the subject matter hereof. Other than as expressly set forth
herein, the Partnership Agreement speaks for itself and no covenant,
representation, or condition not expressed therein or in this letter shall
affect, or be effective to interpret, change or restrict the express provisions
of the Partnership Agreement.
USA Networks, Inc.
By: /s/
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Its:
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USANi Sub LLC
By: /s/
------------------------------------
Its:
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New-U Studios Holdings, Inc.
By: /s/
------------------------------------
Its:
-----------------------------------
6
Acknowledged and Agreed:
Vivendi Universal Entertainment LLLP
by its General Partner USI Entertainment, Inc.
USI Entertainment, Inc.
USANI Holdings XX, Inc.
NYCSpirit Corp. II
/s/
- -------------------------------------
In Each Case By: Karen Randall
Executive Vice President or Authorized Person
Universal Pictures International Holdings BV
/s/
- -------------------------------------
By:
Universal Pictures International Holdings 2 BV
/s/
- -------------------------------------
By: