[Exhibit 36]
ITT MSG INC.
ITT EDEN CORP.
0000 XXXXXX XX XXX XXXXXXXX
XXX XXXX, XXX XXXX 00000
March 6, 1997
Rainbow Garden Corp.
Garden L.P. Holding Corp.
c/o Cablevision Systems Corporation
Xxx Xxxxx Xxxxxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
This nonbinding letter of intent, including Schedule A hereto, sets
forth our preliminary agreement regarding a proposed transaction in which
(i) ITT MSG Inc., a Delaware corporation ("IMI"), would sell to Rainbow Garden
Corp. ("RGC") and Garden L.P. Holding Corp. ("GHC" and, together with RGC, the
"Rainbow Entities") and the Rainbow Entities would purchase, or, at their
option, cause Madison Square Garden, L.P., a Delaware limited partnership
("MSG"), to redeem, the 49.5% limited partnership interest in MSG held by IMI
(the "Partnership Interest") and (ii) ITT Eden Corp., a Delaware corporation
("IEC"), would sell to the Rainbow Entities and the Rainbow Entities would
purchase the 500 shares of the Class A Stock of MSG Eden Corporation, a Delaware
corporation, held by IEC (the "Shares") in accordance with the terms set forth
in Schedule A hereto. The proposed sale (or redemption) of the Partnership
Interest and the proposed sale of the Shares is herein referred to as the "MSG
Sale Transaction".
We each hereby confirm our agreement to enter into good faith
negotiations with respect to the MSG Sale Trans-action, with the goal of
negotiating and executing a mutually acceptable definitive agreement in respect
of the MSG Sale Transaction. The Rainbow Entities will seek to obtain a
commitment letter meeting the conditions described under "Financing Matters" in
Schedule A hereto with the goal of obtaining such a letter within 10 days after
the date hereof and the parties will seek to enter into a definitive agreement
with the goal of entering into such definitive agreement within 30 days after
the date hereof.
This nonbinding letter of intent is not, and your acceptance hereunder
does not constitute, an agreement to consummate the MSG Sale Transaction or any
agreement to
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enter into a formal contract with respect to such transaction. It is
understood that this letter is merely a nonbinding statement of intent with
respect to the MSG Sale Transaction and, while the parties agree in principle to
the contents hereof and in Schedule A hereto as they relate to the MSG Sale
Transaction, this nonbinding letter of intent shall not create any legal
obligations between the parties hereto or their affiliates with respect to the
MSG Sale Transaction. Accordingly, this letter of intent does not constitute a
binding agreement nor does it constitute an agreement to enter into an agreement
and the terms hereof are subject to the execution and delivery of a formal
definitive agreement and receipt of all corporate approvals. Such formal
definitive agreement shall be in form and content satisfactory to all parties.
Nothing in this nonbinding letter of intent shall have any effect whatsoever on
the rights and obligations of the parties hereto or their affiliates under any
agreement between them or any of their affiliates or be given any effect in the
interpretation of any such agreement. This nonbinding letter of intent shall be
governed in all respects by New York law (without regard to conflicts of laws
principles).
Very truly yours,
ITT MSG INC.
by
/s/XXXXXX X. XXXXXX
-------------------
Name: Xxxxxx X. Xxxxxx
Title: President
ITT EDEN CORP.
by
/s/ XXXXXX X. XXXXXX
--------------------
Name: Xxxxxx X. Xxxxxx
Title: President
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Accepted and agreed
as of the date first written above:
RAINBOW GARDEN CORP.
by
/s/ XXXX XXXXXXXXXX
-------------------
Name: Xxxx Xxxxxxxxxx
Title: Vice Chairman
GARDEN L.P. HOLDING CORP.
by
/s/ XXXX XXXXXXXXXX
-------------------
Name: Xxxx Xxxxxxxxxx
Title: Vice Chairman
SCHEDULE A
TERM SHEET
----------
Financing Matters: Rainbow Entities (as defined in the nonbinding letter of
intent) will deliver to ITT MSG Inc. and ITT Eden Corp.
(collectively, "ITT") within ten days after the date hereof
a letter from one or more financial institutions, reasonably
acceptable to ITT, committing on a firm basis to provide
funds to the Rainbow Entities and/or MSG in an amount
sufficient to purchase or redeem, as applicable, ITT's
interest in MSG, as provided for below, on the first
closing. The terms of such commitment letter, which shall
be structured as a long form letter, shall be reasonably
acceptable to ITT.
First Closing; $500 million, payable in cash, for 77%
Tag-Along: of ITT's interest in MSG (i.e., 38.5% of MSG in the
aggregate), including all of ITT's interest in the stock of
MSG Eden Corporation. The parties will use all reasonable
efforts to cause the first closing to occur on or before
June 1, 1997. If the transaction does not close by
August 1, 1997, because of a failure to obtain NHL
approvals, NBA approvals or HSR clearance either ITT or the
Rainbow Entities will have the right to terminate the
agreement (unless the relevant failure results from a breach
by such party).
If any of the closings are structured as a redemption, the
percentages, but not the amounts paid, shall be
appropriately adjusted to give effect thereto to achieve the
contemplated economics.
ITT will have tag-along rights in respect of its remaining
interest in MSG held at any time after the first closing in
any private sale transaction of any "direct or indirect
interest" in MSG. (The meaning of "direct or indirect
interest" or similar terms as used
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herein shall be defined in the definitive agreement.) ITT
will have piggy back registration rights in the case of a
public offering which rights, in the case of a primary
offering, will be subject to customary cut-back provisions
(such that MSG primary offerings will take precedence)
exercisable at the direction of the lead underwriter.
Rainbow will have equivalent drag-along rights in the case
of a private sale, but only if above the relevant price
specified under "Second Closing" and "Third Closing" in the
case of a private sale occurring prior to the second
anniversary of the first closing. The tag-along rights and
drag-along rights will not apply to individual private sale
transactions (as opposed to any series of related private
sale transactions) of less than 25% of MSG.
Second Closing: At the option of ITT, Cablevision will be required to
purchase or, at Cablevision's election, to cause MSG to
redeem, one-half of ITT's remaining limited partnership
interest in MSG (i.e., 5.75% of MSG in the aggregate) on the
first anniversary of the first closing, for $75 million in
cash. Cablevision will have the option, in lieu of such
cash, to cause to be issued to ITT an amount of Cablevision
public common stock equal in value to the amount owing in
respect of the purchase or redemption and the further
obligation to make-whole ITT in the event the net cash
proceeds actually realized from the immediate underwritten
sale of such stock by ITT is less than the amount owing in
respect of the purchase or redemption. Cablevision will
register the Cablevision common stock on an effective
registration statement on the closing of the purchase or
redemption to allow such stock to be freely transferable.
Customary indemnities to ITT and its affiliates will be
provided by Cablevision.
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Third Closing: At the option of ITT, Cablevision will be required to
purchase or, at Cablevision's election, to cause MSG to
redeem, the balance of ITT's limited partnership interest in
MSG (i.e., 5.75% of MSG in the aggregate) on the second
anniversary of the first closing, for $75 million in cash,
or, if the option in respect of the second closing was not
exercised, all of ITT's limited partnership interest for
$150 million in cash. There will be provisions equivalent
to those set forth under "Second Closing" for Cablevision
public common stock for the "Third Closing".
ITT will not have the right to transfer, "directly or
indirectly", its remaining limited partnership interest in
MSG until after the third anniversary of the first closing.
If Cablevision defaults on its purchase obligation on the
second closing or third closing, the restriction on transfer
shall no longer apply although a right of first refusal for
ITT's "direct or indirect interest" in MSG will apply. ITT
will grant Rainbow a right of first refusal for any transfer
of a "direct or indirect interest" in MSG from the third
anniversary of the first closing.
Cablevision In the event of a "change of control" of
Call Right: ITT, Cablevision shall have the right to require ITT to sell
its interests in MSG specified under "Second Closing" and
"Third Closing" at a price determined as provided under
"Second Closing" and "Third Closing", which right will be
exercisable for 60 days after receipt of notice of the
change of control and thereafter shall terminate.
Cablevision shall have the option to satisfy its payment
obligations by issuing debt obligations of either
Cablevision or one of the Rainbow Entities (with the terms
specified by Cablevision or one of the Rainbow Entities as
applicable) to ITT valued by an investment banking firm as
having a fair market value equal to the price specified
under "Second Closing"
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and "Third Closing". The investment banking firm shall be
selected as follows: Cablevision will select three
investment banking firms from a group of six, Lazard Freres,
Morgan Xxxxxxx, Xxxxxxx Xxxxx, Bear Xxxxxxx, Xxxxxxx
Brothers and Xxxxxxx Sachs, thereupon ITT will select one
such firm from the Cablevision list of three.
Cablevision will also have a right to purchase any of ITT's
remaining interest three years from the date of the first
closing at "fair market value", determined on a
proportionate basis to the entire value of MSG to a third
party (i.e., there would be no minority discount). "Fair
market value" will be determined based on the opinion of an
investment banking firm selected as provided above. In all
cases, "fair market value" shall be no less than the
relevant amount or amounts specified in "Second Closing" and
"Third Closing". In the event that Cablevision does not
exercise its rights to purchase ITT's remaining interest in
MSG on such third anniversary, then all interests in MSG
shall be freely transferable by ITT subject to the right of
first refusal discussed above.
Governance of MSG: There will be no change in the Board of Directors of MSG
Eden Corporation prior to the first closing (other than as
permitted by the existing governing documents).
Profit Sharing: In the event the Rainbow Entities sell or transfer any
"direct or indirect interest" in MSG (by way of private sale
or secondary public offering) or all or substantially all of
the assets of MSG, within one year of the first closing, ITT
will have the right to share in such proceeds to the extent
the value implied by such transaction is in excess of the
value for MSG contemplated by ITT's sale to the Rainbow
Entities; provided, however, there will be a 12% "cost of
carry buffer" provided to the Rainbow
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Entities so that ITT's profit sharing right will be reduced
by an amount equal to the proceeds from the relevant
transaction multiplied by 12% per annum calculated on the
basis of the actual number of days elapsed from the date of
the first closing. This provision will provide that any
partial sale or transfer will be treated as a resale of the
interest purchased or redeemed from ITT.
SportsChannel NY: Rainbow will have the right to contribute SportsChannel NY
to MSG from 30 days after the first closing. If
SportsChannel NY is contributed within one year after the
first closing, the deemed amount of such contribution will
be $170 million and, in this regard, the definitive
agreement will contain covenants applicable to SportsChannel
NY restricting sales, transfers or other dispositions of
assets and conduct of business. Thereafter, the deemed
amount of any contribution of SportsChannel NY shall be its
"fair market value" based on the opinion of an investment
banking firm selected as provided above. The dilution of
ITT's interest in MSG shall be determined on such "fair
market value" basis.
WBIS: See Schedule 1.
Closing Conditions;Each closing shall only be
Documentation; conditioned upon the expiration of any
Other: applicable Xxxx-Xxxxx-Xxxxxx waiting period, any required
approval of the NBA and NHL and the applicable closing
conditions set forth in the first sentence of the third
paragraph under this heading. ITT and Rainbow shall agree
to use all reasonable efforts to cause the conditions to be
satisfied. The closings shall not be conditioned upon the
receipt of financing. The parties will close the
transaction within five business days after receiving HSR
clearance and league approvals and other conditions to
closing are satisfied.
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ITT will have the right to assign its interest herein and in
any definitive agreements (along with related rights or
obligations) to any wholly owned subsidiary of ITT or any
"direct or indirect" parent of ITT so long as the transferee
agrees to be bound thereby.
The definitive agreement will include: customary
representations and warranties; customary closing conditions
regarding accuracy of representations and warranties;
customary closing conditions regarding delivery of customary
legal opinions and ordinary course officers' certificates;
customary closing conditions regarding litigation and
compliance with agreements; and a closing condition to the
effect that it shall be a condition to closing that the
financial institution issuing the commitment letter shall
not have exercised its "material adverse change" out (so
long as the material adverse change is not caused by any
action by SportsChannel NY or any action by Cablevision or
any of its affiliates under affiliation agreements with
MSG). Other documentary terms will also be mutually agreed
upon by ITT and Rainbow.
If the Rainbow Entities or their affiliates do not
consummate the first closing, notwithstanding that all
conditions to closing have been satisfied, ITT will have the
right to cause the contribution to MSG of SportsChannel NY
at a valuation of $170 million and the restriction on
transfer and right of first refusal in existing agreements
shall become immediately null and void and of no effect,
provided that, if ITT exercises its right in respect of
SportsChannel NY, Cablevision shall have a right of first
refusal in respect of ITT's "direct or indirect interest" in
MSG.
Cooperation: The parties will cooperate and cause MSG
to cooperate with each other in providing information as is
reasonably
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needed in respect of financing of the transaction and, in
the case of ITT Corporation, delivery of investment banking
fairness opinions.
Schedule 1
On or before the first closing, SportsChannel NY and WBIS shall enter
into an agreement pursuant to which SportsChannel NY will sublicense to WBIS (i)
up to 15 (5 in the case of the 1996-1997 seasons) regular season games of each
of the Nets, Devils and Islanders during each of the 1996-1997, 1997-1998 and
1998-1999 NBA and NHL seasons and (ii) if SportsChannel NY acquires broadcast
rights to the games of the Mets beginning in the 1999 MLB season, up to 5
pre-season and 50 regular season games of the Mets during the 1999-2011 MLB
seasons (subject to any early termination discussed by the parties). The terms
of such sublicense agreement shall be reasonably acceptable to both
SportsChannel NY and WBIS and shall provide for the payment by WBIS of the
following per game fees (in the case of the Devils, Islanders and Nets):
Team 1996-1997 1997-1998 1998-1999
---- --------- --------- ---------
Devils $80,800 $80,800 $83,400
Islanders $80,800 $80,800 $83,400
Nets $73,100 $77,000 $83,400
and a fee for the Mets equal to $268,300 per regular season game in the 1999
season and a per game fee for each season thereafter equal to the per game fee
for the prior season adjusted upward by the CPI (subject to a 3.5% minimum
annual upward adjustment and a 5.0% maximum annual upward adjustment).
On or before the first closing, MSG and WBIS shall enter into an
agreement pursuant to which (i) MSG shall grant WBIS the right to broadcast up
to 15 (5 in the case of the 1996-1997 NHL season for the Rangers and 4 in the
case of the 1996-1997 NBA season for the Knicks) regular season games of each of
the Knicks and the Rangers during each of the 1996-1997, 1997-1998 and 1998-1999
NBA and NHL seasons, for an arm's length rights fee and (ii) subject to mutually
satisfactory resolution of any issues under MSG's agreement with the Yankees,
MSG shall sublicense to WBIS up to 50 regular season games of the Yankees during
the 1997, 1998 and 1999 MLB seasons for an arm's length rights fee. The terms
of such agreement shall be reasonably acceptable to both MSG and WBIS.
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With respect to each of the licenses or grants described above, such
licenses and grants are for broadcast exhibition by and on WBIS within each of
the respective team's home territory. In the event that the WBIS signal is
retransmitted pursuant to federal copyright law, the WBIS signal must be carried
in its entirety and the parties will agree upon appropriate compensation. To
the extent the home territory of any of the teams extends beyond the reach of
the WBIS broadcast signal, in such excess territory WBIS must be carried in its
entirety. SportsChannel NY and MSG shall not license to any other party games
licensed or granted to WBIS or exhibit such games in any manner during the
24-hour period following the live exhibition of such games by WBIS. WBIS'
exhibition rights, however, shall include the right to replay such games during
that 24-hour period.
The agreements between WBIS, SportsChannel NY and MSG shall survive
any direct or indirect sale or transfer by ITT of its interest in WBIS. A right
of first refusal will be granted to Cablevision (or its designee) in respect of
WBIS, subject to any existing agreement with Dow Xxxxx. Such right of first
refusal shall not apply to any transfer of 10% or less of WBIS to any entity
which would provide content for WBIS.
