EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
between
UNITED VIDEO SATELLITE GROUP, INC.
and
LIBERTY MEDIA CORPORATION
As of May 18, 1998
TABLE OF CONTENTS
Page
----
RECITALS.................................................................... 1
AGREEMENT................................................................... 2
ARTICLE I
PURCHASE AND SALE
1.1 Sale of Stock......................................................... 2
1.2 Purchase of Stock..................................................... 3
1.3 Tax Treatment......................................................... 3
1.4 The Closing........................................................... 3
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
2.1 Organization--Seller.................................................. 5
2.2 Corporate Power, Authorization and Validity of Agreement,
No Conflicts......................................................... 5
2.3 Shares................................................................ 5
2.4 Organization--Netlink Subsidiaries.................................... 6
2.5 Capitalization........................................................ 6
2.6 Subsidiaries.......................................................... 7
2.7 No Conflicts, Notices................................................. 7
2.8 Financial Statements.................................................. 8
2.9 Absence of Certain Changes............................................ 8
2.10 Liabilities........................................................... 10
2.11 Litigation............................................................ 10
2.12 Restrictions on Business Activities................................... 10
2.13 Tax Matters........................................................... 11
2.14 Contracts and Commitments............................................. 12
2.15 Adequacy of Assets; Intangible Property............................... 13
2.16 Licenses; Compliance with Regulatory Requirements..................... 14
2.17 Employee Benefit Plans................................................ 15
2.18 Employee Matters...................................................... 18
2.19 Interested Party Transactions......................................... 18
2.20 Insurance............................................................. 18
2.21 Major Customers....................................................... 19
2.22 Suppliers and Broadcast Stations...................................... 19
2.23 Minute Books.......................................................... 19
2.24 Brokers' and Finders' Fees............................................ 19
2.25 Disclosure............................................................ 19
2.26 Programming Supply and Affiliation Agreements......................... 19
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.1 Organization.......................................................... 20
3.2 Corporate Power, Authorization and Validity of Agreement.............. 20
3.3 Capitalization of Purchaser........................................... 21
3.4 Purchaser Reports and Financial Statements............................ 21
3.5 No Approvals or Notices Required; No Conflict with Instruments........ 22
3.6 Absence of Certain Changes or Events.................................. 23
3.7 Information........................................................... 23
3.8 Brokers' and Finders' Fees............................................ 23
3.9 Investment............................................................ 24
3.10 Litigation............................................................ 24
3.11 Disclosure............................................................ 24
3.12 Fairness Opinion...................................................... 24
3.13 Tax-Free Transaction.................................................. 24
3.14 Licenses; Compliance with Regulatory Requirements; Intangible
Property............................................................. 24
3.15 Tax Matters........................................................... 25
3.16 Management of SNG..................................................... 25
ARTICLE IV
CONDUCT PENDING THE CLOSING
4.1 Conduct of Business of the Netlink Subsidiaries....................... 26
4.2 No Solicitation; Acquisition Proposals................................ 29
4.3 Proxy Statement....................................................... 30
4.4 Notice of Breach...................................................... 30
4.5 Restructuring......................................................... 30
ARTICLE V
OTHER COVENANTS
5.1 Access to Information................................................. 30
5.2 Confidentiality....................................................... 31
5.3 Publicity............................................................. 31
5.4 Proxy Statement; Other Filings; Cooperation........................... 31
5.5 Employment Matters.................................................... 32
5.6 Tax-Free Transaction.................................................. 32
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ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Obligations of Each Party............................... 33
6.2 Additional Conditions to Obligations of Seller........................ 33
6.3 Additional Conditions to the Obligations of Purchaser................. 34
6.4 Primestar Transaction................................................. 35
6.5 Initial Closing....................................................... 35
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination........................................................... 35
7.2 Effect of Termination................................................. 36
7.3 Amendment............................................................. 36
7.4 Extension; Waiver..................................................... 36
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Seller............................................. 37
8.2 Indemnification by Purchaser.......................................... 38
8.3 Defense of Action..................................................... 39
8.4 Insurance Proceeds.................................................... 40
ARTICLE IX
TAX MATTERS
9.1 Tax Returns........................................................... 41
9.2 Termination of Prior Tax Settlement Agreements........................ 41
9.3 Pre-Closing Taxes..................................................... 41
9.4 Transfer Taxes........................................................ 42
9.5 Post-Closing Taxes.................................................... 42
9.6 Tax Cooperation....................................................... 42
9.7 Indemnification....................................................... 43
9.8 Notification of Proceedings, Control; Refunds......................... 44
9.9 Tax Effect of Payments................................................ 44
9.10 Withholding........................................................... 45
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ARTICLE X
GENERAL PROVISIONS
10.1 Survival............................................................. 45
10.2 Notices.............................................................. 45
10.3 Interpretation....................................................... 46
10.4 Counterparts......................................................... 46
10.5 Entire Agreement; Nonassignability; Parties in Interest.............. 47
10.6 Severability......................................................... 47
10.7 No Waiver............................................................ 47
10.8 Governing Law........................................................ 47
10.9 Rules of Construction................................................ 47
10.10 Expenses............................................................. 47
10.11 Attorneys Fees....................................................... 47
10.12 Further Assurances................................................... 48
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INDEX OF DEFINED TERMS
Terms Page
----- ----
1998 Capital Budget.................................................... 9
Addition to Taxable Income............................................. 44
Agreement.............................................................. 1
Annual Financial Statements............................................ 8
Bonus Plan............................................................. 17
Class A Common Stock................................................... 21
Class B Common Stock................................................... 3
Closing................................................................ 3
Closing Date........................................................... 3
COBRA.................................................................. 17
Code................................................................... 3
Commission............................................................. 12
Commission Filings..................................................... 22
Companies.............................................................. 43
Contract Consent....................................................... 5
Contract Notice........................................................ 8
CRTC................................................................... 27
Denver 6 Business...................................................... 1
Employee Plans......................................................... 16
Environmental and Health Laws.......................................... 15
Equity Affiliate....................................................... 20
ERISA.................................................................. 15
Estimated Tax Payment.................................................. 28
Exchange Act........................................................... 12
Excluded Assets and Liabilities........................................ 2
FCC.................................................................... 14
FCC Licenses........................................................... 14
GAAP................................................................... 8
GE Transponder Agreement............................................... 27
Governmental Entity.................................................... 7
Hazardous Substances................................................... 15
Indemnified Party...................................................... 39
Indemnifying Party..................................................... 39
Initial Closing........................................................ 4
Initial Closing Date................................................... 4
Intellectual Property.................................................. 14
Interim Financial Statements........................................... 8
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knowledge............................................................... 46
Licenses................................................................ 14
Lien.................................................................... 5
LMC Netlink............................................................. 1
LMC Netlink Shares...................................................... 2
Losses.................................................................. 38
Material Adverse Change................................................. 46
Material Adverse Effect................................................. 46
Minimum Amount.......................................................... 38
NASD.................................................................... 23
Netlink Businesses...................................................... 5
Netlink Interests....................................................... 7
Netlink International................................................... 7
Netlink Licenses........................................................ 14
Netlink Restructuring................................................... 2
Netlink Subsidiaries.................................................... 2
Netlink USA............................................................. 1
New Holdco.............................................................. 1
Non-Return Taxes........................................................ 41
Nondisclosure Agreement................................................. 31
Original Transaction.................................................... 1
Overpayment Rate........................................................ 43
Permits................................................................. 14
Permitted Encumbrances.................................................. 13
Post-Closing Returns.................................................... 42
Post-Closing Taxes...................................................... 42
Pre-Closing Companies Separate Tax Amounts.............................. 44
Pre-Closing Consolidated Returns........................................ 41
Pre-Closing Non-Consolidated Returns.................................... 41
Pre-Closing Tax Period.................................................. 42
Pre-Signing Period...................................................... 43
Preferred Stock......................................................... 21
Primestar............................................................... 1
Primestar Agreement..................................................... 1
Primestar Closing Date.................................................. 40
Primestar Shares........................................................ 1
Primestar Transaction................................................... 1
Proxy Statement......................................................... 23
Purchased Shares........................................................ 3
Purchaser............................................................... 1
Purchaser Licenses...................................................... 24
Purchaser Stock Option Plans............................................ 21
Purchaser Stockholders Meeting.......................................... 23
Refund.................................................................. 42
Requested Employee...................................................... 32
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Restrictions............................................................ 6
Revenue Sharing Agreement............................................... 13
Second Closing.......................................................... 4
Securities Act.......................................................... 6
Seller.................................................................. 1
Seller Disclosure Schedule.............................................. 5
Selling Affiliated Group................................................ 41
Settlement Agreements................................................... 41
SHVA.................................................................... 4
SHVA Agreement.......................................................... 4
SMATV Business.......................................................... 1
SNG..................................................................... 1
SNG Agreement........................................................... 1
SNG Corporations........................................................ 1
SNG Interest............................................................ 13
SNG Shares.............................................................. 2
SNG Subsidiaries........................................................ 2
SNG Subsidiary.......................................................... 2
SSI..................................................................... 19
Superstar Connection Agreement.......................................... 14
Tax Partnerships........................................................ 43
Tax Returns............................................................. 12
Taxes................................................................... 12
TCI..................................................................... 11
TCI Benefit Contributions............................................... 16
TCI Plans............................................................... 16
Telluride............................................................... 1
Telluride Shares........................................................ 2
Xxxxxx.................................................................. 1
UVSG Shares............................................................. 3
Westlink................................................................ 1
Westlink Shares......................................................... 2
WGN Agreements.......................................................... 14
WTCI.................................................................... 27
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") dated as of May 18,
1998, is between UNITED VIDEO SATELLITE GROUP, INC., a Delaware corporation
("Purchaser"), and LIBERTY MEDIA CORPORATION, a Delaware corporation ("Seller").
RECITALS
Seller owns all of the issued and outstanding shares of capital stock
of (i) Telluride Cablevision, Inc., a Delaware corporation ("Telluride"), (ii)
LMC Netlink Corporation, a Colorado corporation ("LMC Netlink") and (iii)
Westlink, Inc., a Colorado corporation ("Westlink"). LMC Netlink and Westlink
are referred to herein collectively as the "SNG Corporations", and Telluride and
the SNG Corporations are sometimes referred to herein collectively as the
"Netlink Corporations". Telluride, LMC Netlink and Westlink are each general
partners of Netlink USA, a Colorado general partnership ("Netlink USA"), with
20%, 40% and 40% partnership interests therein, respectively. Netlink USA owns
an approximate 40% membership interest in Superstar/Netlink Group LLC, a
Delaware limited liability company ("SNG") and owns and operates certain other
assets and businesses, including the business of providing certain programming
services to certain satellite master antenna television operations (the "SMATV
Business") and the business of distributing on a wholesale basis, the signals of
the broadcast stations known as the "Denver 6" (the "Denver 6 Business").
Purchaser owns an approximate 40% membership interest in SNG and, pursuant to
that agreement between Seller and Purchaser, dated March 11, 1996, as amended
and restated on August 9, 1996, relating to the formation of SNG (including any
amendments thereto, the "SNG Agreement"), has day-to-day management control of
SNG. The remaining approximately 20% membership interest in SNG is owned by
Xxxxxx Vision, Inc. ("Xxxxxx").
In February 1998, Seller and Purchaser announced their agreement in
principle with respect to the sale by Seller and the purchase by Purchaser, of
all the capital stock of the Netlink Corporations in consideration for the
issuance to Seller of 6,375,000 shares of Purchaser's common stock (the
"Original Transaction"). Subsequent thereto, Purchaser, Seller and Xxxxxx
commenced negotiations with PRIMESTAR, Inc. ("Primestar"), for the acquisition
by a new holding company to be formed by Primestar ("New Holdco") of beneficial
ownership of 100% of the membership interests in SNG, through a series of
reverse triangular mergers of the SNG Corporations, Xxxxxx and the subsidiary of
Purchaser that owns its interest in SNG (the "Primestar Transaction"). Upon
consummation of the Primestar Transaction, Seller's stock in the SNG
Corporations would be converted into and represent the right to receive a number
of shares of Series A Convertible Preferred Stock of New Holdco (the "Primestar
Shares") to be determined in accordance with the definitive documentation for
the Primestar Transaction to be entered into by Purchaser, Seller, Xxxxxx and
Primestar (as such definitive documentation, if entered into, may be amended
from time to time, the "Primestar Agreement").
In connection with the negotiations with Primestar, Purchaser and
Seller agreed that, if such negotiations were successful, the Original
Transaction would be restructured so that, on the terms
and conditions set forth herein, (i) Seller would cause Netlink USA to be
restructured such that following such restructuring, Telluride would own
directly all of the businesses, assets and liabilities of Netlink USA (other
than the Excluded Assets and Liabilities) and (z) Westlink and LMC Netlink would
own in the aggregate 100% of the partnership interests in Netlink USA (which
would own after such restructuring, only the Excluded Assets and Liabilities)
(the "Netlink Restructuring"), (ii) Seller would agree to sell, and Purchaser
would agree to buy, all of the capital stock of Telluride in consideration of
the issuance to Seller of 1,275,000 shares of Purchaser's common stock and (iii)
Seller would agree to sell, and Purchaser would agree to purchase, (x) if the
Primestar Transaction is consummated, the Primestar Shares, and (y) if the
Primestar Transaction is not consummated, all of the capital stock of each of
the SNG Corporations in consideration of the issuance to Seller of 5,100,000
shares of Purchaser's common stock. The "Excluded Assets and Liabilities" means
Netlink USA's interest in SNG and any assets and liabilities of Netlink USA, LMC
Netlink and Westlink that relate solely to SNG or such interest in SNG.
The SNG Corporations and Netlink USA are sometimes referred to herein
individually as an "SNG Subsidiary" and collectively as the "SNG Subsidiaries;"
and the SNG Subsidiaries and Telluride are sometimes referred to herein
collectively as the "Netlink Subsidiaries."
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 Sale of Stock. Upon the terms and subject to the conditions of
this Agreement and for the consideration set forth herein, Seller hereby agrees
to sell, transfer, assign and deliver to Purchaser (a) at the Closing or, if
applicable, at the Initial Closing (each as defined in Section 1.4) 100 shares
of common stock, par value, $1.00 per share of Telluride (the "Telluride
Shares"), and (b) at the Closing, (i) if the Primestar Transaction has been
consummated, the Primestar Shares or (ii) if the Primestar Transaction has not
been consummated (x) 1,000 shares of common stock, par value $1.00 per share, of
LMC Netlink ("LMC Netlink Shares") and (y) 1,000 shares of common stock, par
value $1.00 per share, of Westlink ("Westlink Shares" and, together with the LMC
Netlink Shares, the "SNG Shares"), in each case, together with the right to
receive all unpaid dividends or other distributions declared or otherwise
payable with respect to such Telluride Shares, Primestar Shares or SNG Shares
(and, with respect to the Primestar Shares, any dividends or distributions paid
with respect to such shares, together with, in the case of cash dividends, an
amount equal to interest thereon at a rate per annum equal to Seller's overnight
investment rate calculated for actual days elapsed in the period from, but not
including, the date the dividend is received by Seller to the date delivered to
Purchaser), as applicable, free and clear of all Liens and Restrictions (other
than Liens and Restrictions created pursuant to this Agreement or the Primestar
Agreement).
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1.2 Purchase of Stock. Upon the terms and subject to the conditions
of this Agreement, Purchaser hereby agrees to purchase at the Closing all, but
not less then all, of the Telluride Shares and all, but not less than all, of
the applicable of the Primestar Shares or the SNG Shares and to issue in
exchange therefor an aggregate of 6,375,000 newly issued, fully paid and
nonassessable shares of Class B Common Stock, par value $.01 per share of
Purchaser (the "Class B Common Stock") (the shares of Class B Common Stock to be
issued pursuant to this sentence being sometimes referred to herein collectively
as the "UVSG Shares"). The Telluride Shares and the applicable of the SNG
Shares or the Primestar Shares are sometimes referred to herein collectively as
the "Purchased Shares." The number and type of Telluride Shares, SNG Shares and
UVSG Shares shall be appropriately adjusted to reflect any stock split, reverse
split, stock dividend or other reclassification or reorganization affecting the
capital stock of the applicable issuer, the record date for which occurs after
the date hereof.
1.3 Tax Treatment. The parties intend that the transfer of the
Telluride Shares and the transfer of either the SNG Shares or the Primestar
Shares, as applicable, in exchange for the UVSG Shares as contemplated by this
Agreement will qualify as a tax-free transaction pursuant to Section 351 of the
Internal Revenue Code of 1986, as amended (the "Code").
1.4 The Closing.
(a) Subject to the terms and conditions of this Agreement, the
closing of the purchase by Purchaser of the Purchased Shares (the "Closing")
shall take place (i) at the offices of Holme Xxxxxxx & Xxxx LLP, 0000 Xxxxxxx
Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000, at 10:00 a.m., local time, on the
first business day following the day on which the conditions set forth in
Article VI shall be fulfilled or waived in accordance herewith or (ii) at such
other time, date or place as the parties hereto agree. The date on which the
Closing occurs is hereinafter referred to as the "Closing Date."
(b) At the Closing, (i) Seller shall deliver to Purchaser stock
certificates representing the Purchased Shares, duly endorsed in blank, or with
separate notarized stock transfer powers attached thereto and signed in blank,
together with all other instruments of transfer necessary or appropriate to
transfer the Purchased Shares to Purchaser and (ii) Purchaser in exchange
therefor shall deliver or cause to be delivered to Seller newly issued stock
certificates representing the UVSG Shares registered in the name of Seller.
(c) At the Closing, the parties shall deliver or cause to be
delivered the certificates and other documents required to be delivered pursuant
to Article VI hereof.
(d) Notwithstanding the foregoing, if the Closing has not occurred by
the tenth (10th) day following the approval of the issuance of the UVSG Shares
at the Purchaser's Stockholders Meeting, then so long as the other conditions
set forth in Article VI have been satisfied (other than (i) those conditions
which have been waived, (ii) the condition requiring consummation or termination
of the Primestar Transaction, and (iii) any conditions which may only be
satisfied at the Closing or which do not prevent or affect the parties' ability
to consummate the sale of the Telluride Shares), at Seller's election, by notice
to Purchaser at any time thereafter, the closing of the purchase and sale of the
Telluride Shares (the "Initial Closing") will be held at the place determined in
accordance with
3
Section 1.4(a), at 10:00 a.m., local time, on the date set forth in Seller's
notice to Purchaser of its election pursuant to this Section 1.4(d) (or at such
other time, date or place as the parties hereto may agree). The date on which
the Initial Closing occurs is hereinafter referred to as the "Initial Closing
Date". If such election is made, Seller and Purchaser shall make the deliveries
at the Initial Closing referred to in Section 1.4(b) and (c) as if the
references therein to the Purchased Shares referred to the Telluride Shares and
the references therein to the UVSG Shares referred to 1,275,000 shares of Class
B Common Stock (adjusted as contemplated by the last sentence of Section 1.2).
In such event, the transfer of the balance of the Purchased Shares will be
effected, subject to the terms and conditions of this Agreement, at a subsequent
closing (the "Second Closing") to be held on the date and at the time and place
determined in accordance with Section 1.4(a). At the Second Closing, Seller and
Purchaser shall make the deliveries referred to in Section 1.4(b) and (c) as if
the references therein to the Purchased Shares referred to the Primestar Shares
or the SNG Shares, as applicable, and the references therein to the UVSG Shares
referred to 5,100,000 shares of Class B Common Stock (adjusted as contemplated
by the last sentence of Section 1.2).
(e) At the Closing, or, if applicable, the Second Closing, Seller
shall be deemed to have assumed the obligations of Netlink USA under Section 10
of the Joint Venture Terms incorporated into the SNG Agreement, notwithstanding
the sale or transfer of the SNG Corporations, and Netlink USA shall thereupon be
released from such obligations.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
It is expressly understood and agreed by the parties that Seller is
not making any representation or warranty with respect to (i) SNG, including,
without limitation, its condition (financial or otherwise), assets, liabilities,
business, operations, results of operations, customers, management, employees or
prospects (other than Seller's representation in Section 2.15(b) as to Netlink
USA's ownership of its interest in SNG), (ii) compliance by Seller or the
Netlink Subsidiaries with the Satellite Home Viewer Act of 1994, as amended (the
"SHVA") or (iii) the effect on the Netlink Subsidiaries and their respective
condition (financial or otherwise), assets, liabilities, business, operations,
results of operations, customers, management, employees or prospects of entering
into (upon its becoming effective) or not entering into the Settlement and
Compliance Agreement, executed by Netlink USA and Telluride as of May 1, 1998,
between ABC, Inc., CBS Broadcasting Inc., Fox Broadcasting Company, National
Broadcasting Company, and Certain ABC, CBS, Fox, and NBC Network Stations; the
National Association of Broadcasters; the ABC Television Affiliates Association,
the CBS Television Affiliates Association, the Fox Television Affiliates
Association, and the NBC Television Affiliates Association and Primestar
Partners, L.P. and Netlink USA and Telluride (the "SHVA Agreement").
Except as disclosed in a document of even date herewith and delivered
by Seller to Purchaser prior to the execution and delivery of this Agreement and
referring to the representations and warranties in this Agreement (the "Seller
Disclosure Schedule"), Seller represents and warrants to Purchaser as follows:
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2.1 Organization--Seller. Seller (i) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of the State of Delaware, (ii) has all requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted and (iii) is duly qualified or licensed and in
good standing to do business in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification necessary, except in the case of each of clauses (i), (ii)
and (iii) where the failure to be in good standing, to have such power and
authority or to be so duly qualified or licensed and in good standing has not
had and is not reasonably likely to have a Material Adverse Effect on the
Netlink Subsidiaries or the Netlink Businesses, in either case taken as a whole.
As used herein, (x) the term "Netlink Businesses" means all of the businesses,
assets and liabilities of Netlink USA, including the SMATV Business, the Denver
6 Business, and Netlink USA's interest in the WGN Agreements (as defined
herein), but excluding the Excluded Assets and Liabilities (it being understood
that the Excluded Assets and Liabilities include any liability of Netlink USA
under the SNG Agreement).
2.2 Corporate Power, Authorization and Validity of Agreement, No
Conflicts. Seller has all requisite corporate power and authority to enter into
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. Subject to the satisfaction of the conditions
set forth in Article VI, the execution, delivery and performance by Seller of
this Agreement and the consummation by it of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on its part.
This Agreement has been duly executed and delivered by Seller and is a valid and
binding obligation of Seller, enforceable in accordance with its terms (except
insofar as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable remedies).
The execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby will not, (a) violate or conflict with any
permit, order, license, decree, judgment, statute, law, ordinance, rule or
regulation applicable to Seller or (b) result in any breach or violation of, or
constitute a default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, cancellation or acceleration of, or
result in the creation of any mortgage, pledge, lien, encumbrance, charge, or
other security interest (a "Lien") on any of the properties or assets of Seller
pursuant to, or require any consent by or approval or authorization of (a
"Contract Consent") any party to any mortgage, indenture, lease, contract or
other agreement or instrument, bond, note, concession or franchise applicable to
Seller or any of its properties or assets, except, in each case, where such
conflict, violation, default, termination, cancellation, acceleration, Lien or
lack of consent would not have and is not reasonably likely to have a Material
Adverse Effect on the Netlink Subsidiaries or the Netlink Businesses, in either
case taken as a whole, or to prevent the consummation of the transactions
contemplated hereby.
2.3 Shares. Seller has good title to the Telluride Shares and the
SNG Shares, which constitute all of the outstanding shares of capital stock of
the Netlink Corporations. Seller is the record and the beneficial owner of the
Telluride Shares and the SNG Shares, with the sole right to vote, dispose of,
and receive dividends or distributions with respect to such shares. All of the
Telluride Shares and the SNG Shares are duly authorized, validly issued, fully
paid and non-assessable and are free and clear of any Lien and are not subject
to any Restrictions (other than any
5
Liens or Restrictions created by this Agreement or that may arise out of the
negotiations with respect to the Primestar Transaction and other than any
restrictions on transfer arising under the Securities Act of 1933, as amended
(the "Securities Act") and state securities laws). In this Agreement, any
reference to "Restrictions", with respect to any capital stock, partnership
interest, membership interest in a limited liability company or other security,
shall mean any voting or other trust or agreement, option, warrant, preemptive
right, right of first offer, right of first refusal, escrow arrangement, proxy,
buy-sell agreement, power of attorney or other contract, any law, rule,
regulation, order, judgment or decree which, conditionally or unconditionally,
(i) grants to any Person the right to purchase or otherwise acquire, or
obligates any Person to sell or otherwise dispose of or issue, or otherwise
results or, whether upon the occurrence of any event or with notice or lapse of
time or both or otherwise, may result in any person acquiring, (A) any of such
capital stock or other security; (B) any of the proceeds of, or any
distributions paid or which are or may become payable with respect to, any of
such capital stock or other security; or (C) any interest in such capital stock
or other security or any such proceeds or distributions; (ii) restricts or,
whether upon the occurrence of any event or with notice or lapse of time or both
or otherwise, is reasonably likely to restrict the transfer or voting of, or the
exercise of any rights or the enjoyment of any benefits arising by reason of
ownership of, any such capital stock or other security or any such proceeds or
distributions; or (iii) creates or, whether upon the occurrence of any event or
with notice or lapse of time or both or otherwise, is reasonably likely to
create a Lien or purported Lien affecting such capital stock or other security,
proceeds or distributions.
2.4 Organization--Netlink Subsidiaries. Each of the Netlink
Corporations is a corporation duly organized and validly existing and in good
standing under the laws of its jurisdiction of organization, has all requisite
corporate power to own its properties and to carry on its business as now being
conducted and as proposed to be conducted and is duly qualified to do business
and is in good standing in each jurisdiction in which the failure to be so
qualified and in good standing would have a Material Adverse Effect on the
Netlink Subsidiaries taken as a whole. Netlink USA is a general partnership duly
organized and validly existing and in good standing under the laws of the State
of Colorado, has all requisite partnership power to own its properties and to
carry on its business as now being conducted and as proposed to be conducted and
is duly qualified to do business and is in good standing in each jurisdiction in
which the failure to be so qualified and in good standing would have a Material
Adverse Effect on the Netlink Subsidiaries taken as a whole. Seller has
delivered to Purchaser true and correct copies of the Certificate or Articles of
Incorporation and Bylaws of each of the Netlink Corporations and the Partnership
Agreement of Netlink USA, each as amended to date. No Netlink Subsidiary is in
violation of any of the provisions of its Certificate or Articles of
Incorporation or Bylaws or equivalent organizational documents.
2.5 Capitalization. The authorized capital stock of LMC Netlink
consists of 10,000 shares of common stock, par value $1.00 per share, of which
there are issued and outstanding 1,000 shares. The authorized capital stock of
Westlink consists of 10,000 shares of common stock, par value $1.00 per share,
of which there are issued and outstanding 1,000 shares. The authorized capital
stock of Telluride consists of 50,000 shares of common stock, par value $1.00
per share, of which there are issued and outstanding 100 shares. There are no
other outstanding shares of capital stock or other securities or other ownership
interests of any of the Netlink Corporations and no outstanding
6
subscriptions, options, warrants, puts, calls, rights, exchangeable or
convertible securities or other commitments or agreements of any nature relating
to the capital stock or other securities or ownership interests of any of the
Netlink Corporations, or otherwise obligating any of the Netlink Corporations to
issue, transfer, sell, purchase, redeem or otherwise acquire such stock,
securities or ownership interests.
2.6 Subsidiaries. None of the Netlink Corporations or Netlink USA
owns, directly or indirectly, any equity or similar interest in, or any interest
convertible or exchangeable or exercisable for, any equity or similar interest
in, any corporation, partnership, joint venture or other business association or
entity, other than the respective partnership interests of the Netlink
Corporations in Netlink USA and the membership interest of Netlink USA in SNG.
The record and beneficial ownership of the partnership interests in Netlink USA
(the "Netlink Interests"), is as set forth on Schedule 2.6 of the Seller
Disclosure Schedule. There are no outstanding partnership, ownership or other
interests or securities of Netlink USA other than the Netlink Interests, and no
outstanding subscriptions, options, warrants, puts, calls, rights, exchangeable
or convertible securities or other commitments or agreements of any nature
relating to the partnership, ownership or other interests or securities of
Netlink USA, or otherwise obligating Netlink USA to issue, transfer, sell,
purchase, redeem or otherwise acquire such interests or securities. All of the
Netlink Interests are duly authorized, validly issued, fully paid and non-
assessable and are free and clear of any Lien and are not subject to any
Restrictions, other than any Liens or Restrictions created by this Agreement or
that may arise out of the negotiations with respect to the Primestar Transaction
and other than any restrictions on transfers arising under the Securities Act or
state securities laws. Netlink International, Inc., a Colorado corporation
("Netlink International") was dissolved effective April 30, 1998, and did not
conduct any operations or have any employees since its inception.
2.7 No Conflicts, Notices. The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated hereby
will not, (a) conflict with or violate any provision of the Certificate or
Articles of Incorporation or Bylaws of any of the Netlink Corporations or the
partnership agreement of Netlink USA, (b) violate or conflict with any permit,
order, license, decree, judgment, statute, law, ordinance, rule or regulation
applicable to any of the Netlink Subsidiaries or the properties or assets of any
of the Netlink Subsidiaries, or (c) result in any breach or violation of, or
constitute a default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, cancellation or acceleration of, or
result in the creation of any Lien on any of the properties or assets of any of
the Netlink Subsidiaries pursuant to, or require any Contract Consent of any
party to any material mortgage, indenture, lease, contract or other agreement or
instrument, bond, note, concession or franchise applicable to any of the Netlink
Subsidiaries or any of their properties or assets, except in the case of clauses
(b) and (c), where such conflict, violation, breach, default, termination,
cancellation, acceleration, Lien or lack of consent would not have and is not
reasonably likely to have a Material Adverse Effect on either the Netlink
Subsidiaries or the Netlink Businesses, in either case taken as a whole. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any court, administrative agency or commission or other
governmental authority or instrumentality ("Governmental Entity") is required by
or with respect to Seller or the Netlink Subsidiaries in connection with the
execution and delivery of this Agreement by Seller or the consummation by Seller
and the Netlink Subsidiaries of the transactions contemplated hereby, except for
(i) any filings as may be required under applicable state or federal
7
securities laws and the securities laws of any foreign country and (ii) such
other consents, authorizations, filings, approvals, orders and registrations
which, if not obtained or made, would not have a Material Adverse Effect on
either the Netlink Subsidiaries or the Netlink Businesses, in either case taken
as a whole, and would not prevent or materially alter or delay any of the
transactions contemplated by this Agreement. None of Seller, the Netlink
Subsidiaries or any of their affiliates is or will be required to give any
notice (a "Contract Notice") to any party (other than Purchaser and its
subsidiaries) to any material mortgage, indenture, lease, contract or other
agreement or instrument, bond, note, concession or franchise applicable to any
of the Netlink Subsidiaries or any of their properties or assets in connection
with the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
2.8 Financial Statements. Seller has heretofore delivered to
Purchaser a true and complete copy of the Combined Financial Statement of the
Netlink Wholesale Division as of December 31, 1997 and for the calendar year
then ended (including the notes thereto, the "Annual Financial Statements") and
a true and complete copy of the Combined Financial Statement of the Netlink
Wholesale Division as of March 31, 1998 and for the quarterly period then ended
(including the notes thereto, the "Interim Financial Statements"). The Annual
Financial Statements and the Interim Financial Statements were each prepared in
accordance with generally accepted accounting principles (as accepted by the
accounting profession in the United States) as in effect as of the relevant time
("GAAP") consistently applied (except as indicated in the notes thereto) and on
that basis fairly present (subject in the case of the Interim Financial
Statements, to normal year end adjustments) the financial condition and
operating results of the Netlink Businesses at the dates and during the periods
indicated therein.
2.9 Absence of Certain Changes. Since December 31, 1997, other than
as contemplated or required by this Agreement (including the negotiations with
respect to the Primestar Transaction), each of the Netlink Subsidiaries has
conducted its business in the ordinary course consistent with past practice and
there has not occurred:
(a) any Material Adverse Change in the Netlink Businesses taken
as a whole (excluding changes, events or conditions generally
affecting the cable television industry or satellite television
industry in the United States or affecting general business or
economic conditions in the United States);
(b) any sale, lease or other transfer or disposition of any
material asset of any of the Netlink Subsidiaries;
(c) any change in accounting methods, practices or policies
(including any change in depreciation or amortization policies or
rates) by any of the Netlink Subsidiaries or any revaluation by any of
the Netlink Subsidiaries of any of its assets;
(d) any declaration, setting aside, or payment of any dividend
or other distribution to the Seller (other than dividends and
distributions consistent with past practice), or any direct or
indirect redemption, retirement, purchase or other acquisition by
8
any Netlink Subsidiary of any of its capital stock or other securities
or options, warrants or other rights to acquire capital stock;
(e) any material modification or change to any material contract
by any of the Netlink Subsidiaries, other than in the ordinary course
of business;
(f) any commitment or transaction (including any capital
expenditure or capital financing) by any of the Netlink Subsidiaries
for any amount that requires payments in excess of $100,000 with
respect to any individual contract or a series of related contracts
other than (x) any commitment or transaction in the ordinary course of
business consistent with past practice or (y) capital expenditures not
in excess of the amount provided for capital expenditures in the
Netlink International Fiscal 1998 Operating Income Budget -- Capital
Costs (the "1998 Capital Budget"), a complete and correct copy of
which has been provided to Purchaser;
(g) any written waiver or written release of any right or claim
of substantial value by any of the Netlink Subsidiaries;
(h) any payment, discharge or satisfaction of any material
claim, liability or obligation by any of the Netlink Subsidiaries,
other than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practice of liabilities
reflected or reserved against in its latest balance sheet included in
the Annual Financial Statements or incurred since the date of such
balance sheet in the ordinary course of business and consistent with
past practice and other than scheduled repayments of indebtedness
reflected on the latest balance sheet included in the Annual Financial
Statements;
(i) any issuance or sale of capital stock or other securities or
membership or other ownership interests, exchangeable or convertible
securities, options, warrants, puts, calls or other rights to acquire
capital stock or other securities or other ownership interests of any
of the Netlink Corporations or Netlink USA;
(j) any incurrence, assumption or guarantee by any Netlink
Subsidiary of any indebtedness for borrowed money;
(k) the making of any loan or advance by any Netlink Subsidiary
(other than in the ordinary course of business consistent with past
practice) to any director, officer or affiliate of any Netlink
Subsidiary (other than any other Netlink Subsidiary), other than as
contemplated or otherwise permitted by this Agreement and other than
as required by the terms of an existing contract described on the
Seller Disclosure Schedule;
(l) any increase in salary, wage, benefit or other remuneration
payable or to become payable to any current or former officer,
director, employee or agent of any of the Netlink Subsidiaries or any
increase in any bonus or severance payment or arrangement made to, for
or with any of its officers, directors, employees or agents or any
grant of a supplemental retirement plan or program or special
remuneration for any officer, director,
9
employee or agent of any of the Netlink Subsidiaries, in each case
other than in the ordinary course of business and consistent with past
practice (including regular annual salary and performance bonus
increases);
(m) any material change in the policies or practices of the
Netlink Subsidiaries with respect to the granting of credit or the
provision of services;
(n) any delay in the payment of any trade or other payables
other than in the ordinary course of business and consistent with past
practice; or
(o) any agreement by Seller or any of the Netlink Subsidiaries
to do any of the foregoing.
2.10 Liabilities. Except as reflected in the Interim Financial
Statements and except for liabilities or obligations that are not in the
aggregate material to the business, assets, results of operations or financial
condition of the Netlink Subsidiaries or the Netlink Businesses, in either case
taken as a whole, or that arise in the ordinary course of business after the
date of the Interim Financial Statements or that arise from changes or events
affecting the satellite television industry generally or that arise out of the
SNG Agreement or Netlink USA's interest in SNG, (a) no Netlink Subsidiary has
any actual or potential liability or obligation of any nature, whether due or to
become due, whether absolute, accrued, fixed or contingent or otherwise; and (b)
neither Seller nor any of the Netlink Subsidiaries has knowledge of any existing
fact or circumstances that will or are reasonably likely to give rise in the
future to any liability or obligation of any Netlink Subsidiary.
2.11 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending or, to the knowledge of
Seller or any of the Netlink Subsidiaries, threatened before any agency, court
or tribunal, foreign or domestic, against Seller or any of the Netlink
Subsidiaries or any of their assets and properties or any of their officers or
directors (in their capacities as such) that, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect on the Netlink
Subsidiaries or the Netlink Businesses, in either case taken as a whole. There
is no judgment, decree or order outstanding against Seller or any Netlink
Subsidiary or any director or officer of any Netlink Subsidiary (in their
capacities as such), that is reasonably likely to prevent consummation of the
transactions contemplated by this Agreement or that is reasonably likely to have
a Material Adverse Effect on the Netlink Subsidiaries or the Netlink Businesses,
in either case taken as a whole.
2.12 Restrictions on Business Activities. There is no material
agreement, judgment, injunction, order or decree binding upon any Netlink
Subsidiary which has or could have the effect of prohibiting or materially
impairing any current business practice of any of the Netlink Subsidiaries or
the conduct of business by any Netlink Subsidiary as currently conducted.
10
2.13 Tax Matters. For purposes of this Section 2.13, any tax item
shown on a return or report furnished by SNG to any Netlink Subsidiary shall be
presumed correct.
(a) Since January 1, 1993, each of the Netlink Subsidiaries and any
predecessors of any of them has duly and timely filed all returns and reports
with respect to Taxes required to be filed by it for all taxable years or
portions thereof through the date of this Agreement. Such Tax Returns and
reports have been prepared in accordance with all applicable government
regulations and are accurate and complete in all material respects. Each of the
Netlink Subsidiaries and their respective predecessors, as applicable, have each
timely paid or adequately provided for all Taxes due and payable in respect of
any transaction for which Taxes are due or any Taxes chargeable against its or
their revenue, assets or income through the date of this Agreement (whether or
not shown on any Tax Returns).
(b) There are no recorded tax liens upon any of the assets of the Netlink
Subsidiaries except Liens for current Taxes not yet due or Liens that are being
contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside on the books of the
applicable Netlink Subsidiary.
(c) Since its formation Netlink USA has qualified as a partnership for
Federal income tax purposes.
(d) No proposed Taxes or Tax deficiencies have been asserted and no
proceedings with respect to Taxes have been commenced against, in each case, the
Netlink Subsidiaries and their respective predecessors. None of the Netlink
Subsidiaries has waived any statute of limitation in respect of any Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency.
(e) None of the Netlink Subsidiaries has filed a consent under Section
341(f) of the Code.
(f) None of the Netlink Subsidiaries has made any payments, nor are any of
them obligated to make any payments, and none of them is a party to any
agreement that under certain circumstances could obligate it to make any
payments as a result of the transactions contemplated by this Agreement to any
employee, member, officer or director of, or any independent contractor or other
person who performs personal services for, any of the Netlink Subsidiaries or
any of their respective affiliates who is a "disqualified individual" (as such
term is defined in proposed Treasury Regulation Section 1.280G-1) under any
employment, severance or termination agreement, other compensation arrangement
or employee benefit plan currently in effect which would be characterized as an
"excess parachute payment" (as such term is defined in Section 280G(b)(1) of the
Code).
(g) Since September 1, 1994, none of the Netlink Subsidiaries is or has
been a member of an affiliated group filing a consolidated federal income Tax
Return other than a group of which Tele-Communications, Inc. ("TCI") is the
common parent.
11
(h) None of the Netlink Corporations has agreed to, nor is any Netlink
Corporation required to make, any adjustment under Section 481(a) of the Code by
reason of a change in accounting method made in contemplation of this
transaction which would have a Material Adverse Effect on such Netlink
Corporation after the closing (for this purpose any accounting method change
made by SNG itself shall not be taken into account).
(i) In this Agreement, any reference to
(i) the term "Taxes" shall mean all taxes, however, denominated,
including any interest, penalties or other additions to tax that may become
payable in respect thereof, imposed by any federal, territorial, state,
local or foreign government or any agency or political subdivision of any
such government, which taxes shall include, without limiting the generality
of the foregoing, all income or profits taxes, payroll and employee
withholding taxes, unemployment insurance, social security taxes, sales and
use taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts
taxes, business license taxes, occupation taxes, real and personal property
taxes, stamp taxes, environmental taxes, transfer taxes, workers'
compensation, Pension Benefit Guaranty Corporation premiums and other
governmental charges, and other obligations of the same or of a similar
nature to any of the foregoing, which any of the Netlink Subsidiaries is
required to pay, withhold or collect; and
(ii) the term "Tax Returns" shall mean all reports, estimates,
declarations of estimated tax, information statements and returns relating
to, or required to be filed in connection with, any Taxes, including
information returns or reports with respect to backup withholding and other
payments to third parties.
2.14 Contracts and Commitments. Seller has provided Purchaser with a true
and complete list of all of the affiliation agreements between each of the
Netlink Subsidiaries and its customers (other than Purchaser and its
subsidiaries). Other than such affiliation agreements and other than any
agreements with Purchaser or its subsidiaries, Schedule 2.14 of the Seller
Disclosure Schedule lists all material contracts to which a Netlink Subsidiary
is a party that are to be performed in whole or in part after the date hereof
and that would be required to be filed with the Securities and Exchange
Commission (the "Commission") as "material contracts" pursuant to Item 601 of
Regulation S-K of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") if the Netlink Businesses were a single registrant registered under
Section 12(g) of the Exchange Act. Schedule 2.14 of the Seller Disclosure
Schedule also lists (a) all agreements, bonds, notes, debentures or similar
instruments evidencing (i) indebtedness of any Netlink Subsidiary for borrowed
money or for the deferred purchase price of any material property or service
(other than trade accounts arising in the ordinary course of business), (ii)
obligations of any Netlink Subsidiary under capital leases, (iii) guaranties by
any Netlink Subsidiary of liabilities or obligations of others (other than any
other Netlink Subsidiary), and (iv) any Liens on the assets of any Netlink
Subsidiary securing the indebtedness of others (other than any other Netlink
Subsidiary), (b) agreements that limit the right of any Netlink Subsidiary to
compete in any line of business; or (c) agreements which, after giving effect to
the transactions contemplated hereby, purport to restrict or bind Purchaser or
any of its subsidiaries, other than the Netlink Subsidiaries, in each case,
other than any of the foregoing with Purchaser or its subsidiaries. True and
complete copies of all agreements listed in Schedule 2.14 of
12
the Seller Disclosure Schedule have been made available to Purchaser. Each of
the Netlink Subsidiaries has fulfilled in all material respects, or taken all
actions necessary to enable it to fulfill in all material respects when due, its
obligations under each of such agreements to which it is a party. To the
knowledge of Seller, all parties thereto other than the Netlink Subsidiaries
have complied in all material respects with the provisions thereof and no party
is in breach or violation of, or in default (with or without notice or lapse of
time, or both) under such agreements which breach, violation or default would
reasonably be expected to have a Material Adverse Effect on the Netlink
Subsidiaries or the Netlink Businesses, in either case taken as a whole. No
Netlink Subsidiary has received any notice of termination, cancellation or
acceleration of any such agreement.
2.15 Adequacy of Assets; Intangible Property.
(a) The assets owned or leased by the Netlink Subsidiaries are suitable
and adequate for the conduct of their respective businesses and the Netlink
Subsidiaries have good and, with respect to real property owned in fee,
marketable title to or valid leasehold or other contractual interests in all
such assets that are material to the Netlink Businesses as a whole, free and
clear of all Liens other than Permitted Encumbrances. For purposes of this
Agreement, "Permitted Encumbrances" means the following Liens: (i) Liens for
Taxes, assessments or other governmental charges or levies not at the time
delinquent or thereafter payable without penalty or being contested in good
faith by appropriate proceedings and for which adequate reserves shall have been
set aside on the books of the applicable Netlink Subsidiary in accordance with
GAAP; (ii) Liens of carriers, warehousemen, mechanics, materialmen and landlords
incurred in the ordinary course of business for sums not overdue or being
contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside on the books of the
applicable Netlink Subsidiary; (iii) Liens incurred in the ordinary course of
business in connection with workmen's compensation, unemployment insurance or
other forms of governmental insurance or benefits, or to secure performance of
tenders, statutory obligations, leases and contracts (other than for borrowed
money) entered into in the ordinary course of business or to secure obligations
on surety or appeal bonds; (iv) purchase money security interests or Liens on
property acquired or held by a Netlink Subsidiary in the ordinary course of
business to secure the purchase price of such property or to secure indebtedness
incurred solely for the purpose of financing the acquisition of such property;
and (v) easements, restrictions and other minor defects of title which are not,
in the aggregate, material or which do not, individually or in the aggregate,
materially and adversely affect the value of the property affected thereby.
(b) Netlink USA owns an approximate 39.805% record and beneficial
membership interest (the "SNG Interest") in SNG. The SNG Interest is owned by
Netlink USA free and clear of any Liens and is not subject to any Restrictions,
in each case, created by Seller or any of the Netlink Subsidiaries, except for
Liens or Restrictions created by this Agreement or the SNG Agreement or that may
arise out of the negotiations with respect to the Primestar Transaction and
other than any restrictions on transfers under the Securities Act and state
securities laws. After giving effect to the Netlink Restructuring, Telluride
will hold the interest now held by Netlink USA in that certain Revenue Sharing
Agreement dated as of September 1, 1991, between Purchaser (formerly known as
United Video, Inc.) and Netlink USA (the "Revenue Sharing Agreement"), and that
certain Agreement for Acquisition of Wholesale Business dated as of September 1,
1991, between Superstar
13
Connection, a Delaware general partnership, and Netlink USA (the "Superstar
Connection Agreement" and, together with the Revenue Sharing Agreement, the "WGN
Agreements"), free and clear of any Lien, except for Liens created by the WGN
Agreements.
(c) One or more of the Netlink Subsidiaries owns, or is licensed or
otherwise possesses legally enforceable rights to use, all patents, trademarks,
trade names, service marks, copyrights, and trade secrets (collectively,
"Intellectual Property") that are used in the Netlink Businesses as currently
conducted, except to the extent that the failure to have such rights has not had
and is not reasonably likely to have a Material Adverse Effect on the Netlink
Businesses taken as a whole. Neither Seller nor the Netlink Subsidiaries has
received notice of any claim of infringement of the rights of others with
respect to any patents, trademarks, service marks, trade names or copyrights
used or owned by the Netlink Subsidiaries, the loss of which is reasonably
likely to have a Material Adverse Effect on the Netlink Businesses taken as a
whole. Neither Seller nor the Netlink Subsidiaries has any knowledge that any
of the Netlink Subsidiaries is infringing upon or otherwise violating, or has
since January 1, 1995 infringed upon or otherwise violated, the rights of any
third party with respect to any patent, trademark, trade name, service xxxx or
copyright. To the best knowledge of Seller, no current or former employee of
any Netlink Subsidiary is or was a party to any confidentiality agreement and/or
agreement not to compete which restricts or forbids or restricted or forbade at
any time during such employee's employment by such Netlink Subsidiary, such
employee's performance of any activity that such employee was hired to perform.
To the best knowledge of Seller, no Netlink Subsidiary is currently using or has
in the past used without appropriate authorization, any confidential information
or trade secrets of any third party. Since January 1, 1995, Seller has not
received any notice alleging such conduct.
2.16 Licenses; Compliance with Regulatory Requirements.
(a) The Netlink Subsidiaries hold all licenses, franchises, ordinances,
authorizations, permits, certificates, variances, exemptions, concessions,
leases, rights of way, easements, instruments, orders and approvals, domestic or
foreign ("Licenses") which are material to the ownership of the assets that are
material to the Netlink Businesses, taken as a whole (collectively, the "Netlink
Licenses"). Each Netlink Subsidiary is in compliance with, and has conducted
its business so as to comply with, the terms of their respective Netlink
Licenses and with all applicable laws, rules, regulations, ordinances and codes,
domestic or foreign, except where the failure so to comply has not had and,
insofar as reasonably can be foreseen, in the future will not have, either
individually or in the aggregate, a Material Adverse Effect on the Netlink
Businesses taken as a whole. Without limiting the generality of the foregoing,
the Netlink Subsidiaries, (i) have all Licenses (the "FCC Licenses") issued by
the Federal Communications Commission (the "FCC") and all other Licenses of
foreign, federal, state and local governmental authorities (the "Permits")
required for the operation of the facilities being operated by the Netlink
Subsidiaries in the conduct of the Netlink Businesses, and all such FCC Licenses
and Permits are identified on Schedule 2.16 on the Seller Disclosure Schedule,
(ii) have duly and currently filed all reports and other information required to
be filed by the FCC or any other Governmental Entity in connection with such FCC
Licenses and Permits, and (iii) are not in violation of any of such FCC Licenses
or Permits, other than the lack of FCC Licenses or Permits, delays in filing
reports or possible violations which have not had and, insofar as can reasonably
be foreseen, in the future will not have a Material Adverse
14
Effect on the Netlink Businesses taken as a whole. Notwithstanding the
foregoing, Seller makes no representation as to whether or not the Netlink
Subsidiaries are transmitting the signals of broadcast network stations to
households which are not "unserved households" under SHVA.
(b) The Netlink Subsidiaries have duly complied with, and the
operation of its business, equipment and other assets and the facilities owned
or leased by any Netlink Subsidiary are in compliance with, the provisions of
all applicable Environmental and Health Laws, except for non-compliance which
would not reasonably be expected to have a Material Adverse Effect on any of the
Netlink Businesses taken as a whole. For purposes of this Agreement, the term
"Environmental and Health Laws" means any federal, state or local law, statute,
rule or regulation or the common law relating to the environment or occupational
health and safety, including any statute, regulation or order pertaining to (i)
treatment, storage, disposal, generation and transportation of pollutants,
contaminants, chemicals, industrial, toxic or hazardous substances, oil or
petroleum products or solid or hazardous waste (collectively referred to
hereinafter as "Hazardous Substances"); (ii) air, water and noise pollution;
(iii) groundwater and surface water contamination; (iv) the release into the
environment of Hazardous Substances, including without limitation emissions,
discharges, injections, spills, escapes or dumping of pollutants, contaminants
or chemicals; (v) the protection of wild life, marine sanctuaries and wetlands,
including without limitation all endangered and threatened species; (vi) storage
tanks, vessels and containers containing Hazardous Substances; (vii) underground
storage tanks, abandoned, disposed or discarded barrels and other closed
receptacles containing Hazardous Substances; (viii) health and safety of
employees; and (ix) manufacture, processing, use, distribution, treatment,
storage, disposal, transportation or handling of Hazardous Substances. As used
herein, the terms "release" and "environment" have the meanings set forth in the
federal Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended. To the knowledge of Seller, there are no investigations,
administrative proceedings, judicial actions, orders, claims or notices that are
pending, anticipated or threatened against any Netlink Subsidiary relating to
any Environmental and Health Laws. Neither Seller nor any Netlink Subsidiary has
received a notice of or knows any facts which constitute a violation by any
Netlink Subsidiary of or give rise to liability of any Netlink Subsidiary under
any Environmental and Health Laws that in either case would or would be
reasonably likely to have a Material Adverse Effect on the Netlink Businesses
taken as a whole.
2.17 Employee Benefit Plans.
(a) Schedule 2.17 of the Seller Disclosure Schedule lists, with
respect to the Netlink Subsidiaries, (i) all material employee benefit plans (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), (ii) any stock option, stock purchase, phantom stock,
stock appreciation right, supplemental retirement, severance, sabbatical,
medical, dental, vision care, disability, employee relocation, cafeteria benefit
(Section 125 of the Code) or dependent care (Section 129 of the Code), life
insurance or accident insurance plans, programs or arrangements, (iii) all
bonus, pension, profit sharing, savings, deferred compensation or incentive
plans, programs or arrangements, (iv) other fringe or employee benefit plans,
programs or arrangements that apply to senior management of the Netlink
Subsidiaries and that do not generally apply to all employees of the Netlink
Subsidiaries, in each case, that are currently maintained or directly
contributed to by the Netlink Subsidiaries or have been maintained or
15
contributed to by the Netlink Subsidiaries since January 1, 1995 (collectively,
the "Employee Plans"). The parties agree that the term "Employee Plans" shall
not include any of the foregoing which are contributed to or maintained by TCI
or Seller and which cover any present or former employee, consultant or director
of the Netlink Subsidiaries in addition to other employees of TCI, Seller or
their respective subsidiaries (the "TCI Plans"). Except as set forth in the
following sentence, Seller is making no representation or warranty in this
Agreement regarding the TCI Plans. Other than (i) an annual payment not in
excess of $2,000 per employee by the Netlink Subsidiaries to TCI for each
employee of the Netlink Subsidiaries covered by the TCI Plans, (ii)
reimbursements for matching contributions to 401(k) plans made with respect to
employees of the Netlink Subsidiaries and (iii) reimbursements for amounts paid
with respect to employees of the Netlink Subsidiaries under TCI's education
assistance program (collectively the "TCI Benefit Contributions"), the Netlink
Subsidiaries have no liability to TCI or any other party with respect to the TCI
Plans.
(b) Seller has furnished to Purchaser a copy of each of the Employee
Plans and related plan documents (including trust documents, insurance policies
or contracts, employee booklets, summary plan descriptions and other authorizing
documents, and, to the extent still in its possession, any material employee
communications relating thereto) and has, with respect to each Employee Plan
that is subject to ERISA reporting requirements, provided copies of the Form
5500, including all schedules attached thereto and actuarial reports, if any,
filed for the last three plan years. Any Employee Plan intended to be qualified
under Sections 401(a) or 501(c)(9) of the Code has either obtained from the
Internal Revenue Service a favorable determination letter as to its qualified
status under the Tax Reform Act of 1986 and subsequent legislation, or the time
for applying to the Internal Revenue Service for such a determination letter has
not expired under applicable Treasury Regulations. Seller has also furnished
Purchaser with the most recent Internal Revenue Service determination letter
issued with respect to each such Employee Plan (and nothing has occurred since
the issuance of each such letter which could reasonably be expected to cause the
loss of the tax-qualified status of any Employee Plan subject to Section 401(a)
of the Code), and all prohibited transaction exemptions (or requests for such
exemptions), private letter rulings, opinions, information letters or compliance
statements issued with respect to any Employee Plan by the Internal Revenue
Service, the Department of Labor or the Pension Benefit Guaranty Corporation.
(c) (i) None of the Employee Plans promises or provides retiree
medical or other retiree welfare benefits to any person; (ii) there has been no
"prohibited transaction," as such term is defined in Section 406 of ERISA and
Section 4975 of the Code, with respect to any Employee Plan, which could
reasonably be expected to have, in the aggregate, a Material Adverse Effect on
the Netlink Businesses taken as a whole; (iii) each Employee Plan has been
administered in accordance with its terms and in compliance with the
requirements prescribed by any and all statutes, rules and regulations
(including ERISA and the Code), except as would not have a Material Adverse
Effect on the Netlink Subsidiaries taken as a whole, and the Netlink
Subsidiaries have performed all obligations required to be performed by them
under, are not in any respect in default under or violation of, and have no
knowledge of any default or violation by any other party to, any of the Employee
Plans, which failure to perform, default or violation could reasonably be
expected to have a Material Adverse Effect on the Netlink Businesses taken as a
whole; (iv) no Netlink Subsidiary is subject to any liability or penalty under
Sections 4976 through 4980 of the Code or Title I of
16
ERISA with respect to any of the Employee Plans that has had a Material Adverse
Effect on any such parties; (v) all material contributions required to be made
by the Netlink Subsidiaries to any Employee Plan have been made on or before
their due dates and a reasonable amount has been accrued for contributions to
each Employee Plan for the current plan years; (vi) with respect to each
Employee Plan, no "reportable event" within the meaning of Section 4043 of ERISA
(excluding any such event for which the 30-day notice requirement has been
waived under the regulations to Section 4043 of ERISA) nor any event described
in Section 4062, 4063 or 4041 of ERISA has occurred; and (vii) no Employee Plan
is covered by, and no Netlink Subsidiary has incurred or expects to incur any
liability under Title IV of ERISA or Section 412 of the Code. With respect to
each Employee Plan subject to ERISA as either an employee pension plan within
the meaning of Section 3(2) of ERISA or an employee welfare benefit plan within
the meaning of Section 3(1) of ERISA, each Netlink Subsidiary has prepared in
good faith and timely filed all requisite governmental reports (which were true
and correct as of the date filed) and has properly and timely filed and
distributed or posted all notices and reports to employees required to be filed,
distributed or posted with respect to each such Employee Plan except where the
failure to timely file, distribute or post such documents would not, in the
aggregate, have a Material Adverse Effect on the Netlink Businesses taken as a
whole. No suit, administrative proceeding, action or other litigation has been
brought, or to the knowledge of Seller, is threatened, against or with respect
to any such Employee Plan, including any audit or inquiry by the Internal
Revenue Service or United States Department of Labor. No Netlink Subsidiary is
a party to, or has made any contribution to or otherwise incurred any obligation
under, any "multiemployer plan" as defined in Section 3(37) of ERISA.
(d) With respect to each Employee Plan, each Netlink Subsidiary has
complied with (i) the applicable health care continuation and notice provisions
of the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the
regulations thereunder and (ii) the applicable requirements of the Family and
Medical Leave Act of 1993 and the regulations thereunder, except to the extent
that such failure to comply would not, in the aggregate, have a Material Adverse
Effect on the Netlink Subsidiaries taken as a whole.
(e) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not (i) entitle any current or
former employee or other service provider or any director of any Netlink
Subsidiary to severance benefits or any other similar payment (including
unemployment compensation, golden parachute, bonus or otherwise), (ii) increase
any benefits otherwise payable or (iii) accelerate the time of payment or
vesting, or increase the amount of compensation due any such employee, service
provider or director, except for the severance payments and "sticking bonuses"
that Seller has agreed to pay and be solely responsible for as contemplated by
Section 5.5.
(f) There has been no amendment to, written interpretation or
announcement (whether or not written) by any Netlink Subsidiary relating to, or
change in participation or coverage under, any Employee Plan which would
materially increase the expense of maintaining such Employee Plan above the
level of expense incurred with respect to that Employee Plan for the most recent
fiscal year included in the Annual Financial Statements, except as a result of
the adoption and amendment of the 1998 Bonus Award Program described on Schedule
2.17 of the Seller Disclosure Schedule (the "Bonus Plan").
17
2.18 Employee Matters. Schedule 2.18 of the Seller Disclosure
Schedule lists each employment, consulting, agency or commission agreement to
which any of the Netlink Subsidiaries is a party which is not terminable without
liability to the Netlink Subsidiaries upon 60 days' or less prior notice to the
employee, consultant or agent and involves compensation or remuneration of more
than $50,000 per annum. True and complete copies of such agreements have been
made available to Purchaser. All of such contracts and arrangements are in
full force and effect, and neither the Netlink Subsidiaries nor, to the
knowledge of Seller, any other party is in default under them. To the knowledge
of Seller, (i) there have been no claims of defaults and (ii) there are no facts
or conditions which if continued, or on notice, will result in a default under
these contracts or arrangements. There is no pending or, to the knowledge of
Seller, threatened labor dispute, strike, or work stoppage that would have a
Material Adverse Effect on the Netlink Businesses taken as a whole. Each
Netlink Subsidiary is in compliance in all material respects with all current
applicable laws and regulations respecting employment, discrimination in
employment, terms and conditions of employment, wages, hours and occupational
safety and health and employment practices, and are not engaged in any unfair
labor practice. There are no pending claims against any Netlink Subsidiary under
any workers compensation plan or policy or for long term disability.
2.19 Interested Party Transactions. Schedule 2.19 of the Seller
Disclosure Schedule lists all transactions between any Netlink Subsidiary on the
one hand and TCI, Seller, any of their respective subsidiaries (other than any
other Netlink Subsidiary and other than Purchaser and its subsidiaries) or any
director or executive officer of any of the Netlink Subsidiaries on the other
hand in which the amount involved exceeds $60,000 that would be required to be
disclosed pursuant to Item 404 of Regulation S-K under the Securities Act or the
Exchange Act if the Netlink Businesses were a single registrant registered under
Section 12(g) of the Exchange Act, other than transactions pursuant to the
contracts listed on the Seller Disclosure Schedule in accordance with their
respective terms. No Netlink Subsidiary is indebted to TCI, Seller, any of
their respective subsidiaries (other than Purchaser and its subsidiaries), or
any director, officer, employee or agent of any of the Netlink Subsidiaries for
borrowed money.
2.20 Insurance. The Netlink Subsidiaries, through one or more
affiliates, have the benefit (through TCI, Seller or otherwise) of policies of
fire and casualty, liability and other forms of insurance (including self
insurance) in such amounts, with such deductibles and against such risks and
losses as are, in Seller's judgment, reasonable for the operation of the
businesses of the Netlink Subsidiaries under the circumstances in which they are
being conducted. All such policies are in full force and effect, all premiums
due and payable thereon as of the date hereof, have been paid (other than
retroactive or retrospective premium adjustments that may be required to be paid
with respect to any period ending prior to the date hereof under comprehensive
general liability and workmen's compensation insurance policies), and no notice
of cancellation or termination has been received with respect to any such policy
which policy has not been replaced prior to the date of such cancellation. To
the knowledge of Seller, the activities and operations of the Netlink
Subsidiaries have been conducted in a manner so as to conform in all material
respects to all applicable provisions of such insurance policies, except for any
failures so to conform that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Netlink
Businesses taken as a whole. The coverage of such policies will cease upon the
applicable Closing, but the
18
Netlink Subsidiaries will continue to be entitled to the benefit of such
policies with respect to any covered event that occurs prior to the Closing.
2.21 Major Customers. Schedule 2.21 of the Seller Disclosure Schedule
lists each customer of the Netlink Subsidiaries that individually accounted for
more than ten percent of the total dollar amount of revenues of the Netlink
Businesses on a combined basis in either of the two most recent fiscal years,
showing the total dollar amount of revenues for each such customer during each
such year. Seller has not received written notice from any customer listed in
such Schedule 2.21 of such customer's intent not to remain a customer of the
Netlink Subsidiaries after the Closing.
2.22 Suppliers and Broadcast Stations. Netlink USA either has the
valid consent of each broadcast station that is included within the "Denver 6"
or such consent is not required for retransmission of such station's signals.
As of the date hereof, except as contemplated by the SHVA Agreement no broadcast
station included within the "Denver 6" with which any Netlink Subsidiary has an
agreement or consent for retransmission has given notice to Seller or any
Netlink Subsidiary of such station's intent to change the terms upon which it
consents to the retransmission of its signal or to cease permitting the Netlink
Subsidiaries to retransmit such signal.
2.23 Minute Books. Seller has made available to Purchaser true and
complete copies of the minute books of the Netlink Corporations. Such minute
books contain summaries of all meetings of directors and shareholders or actions
by written consent since the later of (i) April 1, 1996 and (ii) the time of the
applicable entity's date of incorporation, and such summaries are true and
complete in all material respects and reflect all transactions referred to in
such minutes accurately in all material respects.
2.24 Brokers' and Finders' Fees. Neither Seller nor any Netlink
Subsidiary has incurred, or will incur, directly or indirectly, any liability
for brokerage or finders' fees or agents' commissions or investment bankers'
fees or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
2.25 Disclosure. None of the representations or warranties made by
Seller herein or in the Seller Disclosure Schedule, when read together in their
entirety, contain any untrue statement of a material fact, or omit to state any
material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which made, not misleading.
Seller has provided or made available to Purchaser all written information and
materials in Seller's possession requested by Purchaser or its counsel regarding
the negotiations for the SHVA Agreement, other than superseded drafts of
agreements.
2.26 Programming Supply and Affiliation Agreements. Telluride and
Satellite Services, Inc. ("SSI") have entered into programming supply and
affiliation agreements setting forth the basis upon which the satellite master
antenna television services business operated by the Netlink Subsidiaries will
be provided programming by SSI following the Closing and of the basis upon which
SSI purchases the "Denver 6" service from the Netlink Subsidiaries, such basis,
in each case, being on the same terms as those on which such services were,
during the first quarter of 1998,
19
provided by SSI to the Netlink Subsidiaries or provided by the Netlink
Subsidiaries to SSI, as applicable (except, in each case, that either party had
the right to terminate the provision or use of such services at any time). True
and complete copies of such agreements have been provided to Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Except as disclosed in the Commission Filings (as defined herein)
filed and publicly available prior to April 1, 1998, Purchaser represents and
warrants to Seller as follows:
3.1 Organization. Each of Purchaser and Purchaser's "significant
subsidiaries" (as defined in Rule 1-02 of Regulation S-X of the Rules and
Regulations of the Commission) (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, (ii) has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted and (iii) is duly qualified or licensed and in good standing to do
business in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed and in good standing is not reasonably likely to have a
material adverse effect on the business, assets, results of operations or
financial condition of Purchaser and its subsidiaries taken as a whole.
Purchaser has no investment accounted for by the equity method that is material
to the business, assets, results of operations or financial condition of
Purchaser and its subsidiaries taken as a whole. Each entity in which
Purchaser, directly or through one or more of its subsidiaries, has an
investment accounted for by the equity method (an "Equity Affiliate") (A) is a
corporation or partnership duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization, (B) has
all requisite corporate or partnership power and authority to own, lease and
operate its properties and to carry on its business as it is now being conducted
and (C) is duly qualified to do business and is in good standing in each
jurisdiction in which the properties owned, leased or operated by it, or the
nature of its activities, makes such qualification necessary, except in each
case where such failure to be so existing and in good standing or to have such
power and authority or to be so qualified to do business and be in good standing
has not had and is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Purchaser and its subsidiaries taken as
a whole.
3.2 Corporate Power, Authorization and Validity of Agreement. This
Agreement has been duly executed and delivered by Purchaser. Purchaser has all
requisite corporate power and authority to enter into this Agreement and has all
requisite corporate power and authority to perform its obligations hereunder and
to consummate the transactions contemplated hereby. Subject to the satisfaction
of the conditions set forth in Article VI, the execution, delivery and
performance by Purchaser of this Agreement and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on its part; and this Agreement is a valid and binding
obligation of Purchaser, enforceable in accordance with its terms (except
insofar as
20
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable remedies).
3.3 Capitalization of Purchaser. The authorized capital stock of
Purchaser consists of 60,000,000 shares of Class A Common Stock, par value $.01
per share ("Class A Common Stock"), 30,000,000 shares of Class B Common Stock,
and two million shares of Preferred Stock, par value $.01 per share ("Preferred
Stock"), of which there were issued and outstanding as of the close of business
on December 31, 1997, 24,420,120 shares of Class A Common Stock and 12,373,294
shares of Class B Common Stock and no shares of Preferred Stock. There are no
other outstanding shares of capital stock or other securities or ownership
interests of Purchaser other than shares of Class A Common Stock issued after
December 31, 1997, upon the exercise of options issued under Purchaser's Equity
Incentive Plan and its Stock Option Plan for Non-Employee Directors
(collectively, the "Purchaser Stock Option Plans"). All outstanding shares of
Purchaser have been duly authorized, validly issued, fully paid and are non-
assessable and free and clear of any Lien or Restriction, except Liens or
Restrictions created by or imposed upon the holders thereof. As of December 31,
1997, Purchaser has reserved (i) 1,176,444 shares of Class A Common Stock for
issuance upon exercise of outstanding options issued pursuant to the Purchaser
Stock Option Plans and (ii) 2,031,671 shares of Class A Common Stock for
issuance upon exercise of stock options available for grant under the Purchaser
Stock Option Plans. Other than stock appreciation rights related to
subsidiaries or divisions of Purchaser that Purchaser has the option to satisfy
in shares of Class A Common Stock, the adoption of any employee incentive or
stock option plan subsequent to December 31, 1997 that is approved by the
stockholders of Purchaser, the grant subsequent to December 31, 1997 of options
pursuant to such plans or pursuant to the Purchaser Stock Option Plans and other
than this Agreement or shares of Class B Common Stock that may be converted to
shares of Class A Common Stock, there are no other subscriptions, options,
warrants, puts, calls, rights, exchangeable or convertible securities or other
commitments or agreements of any nature relating to the capital stock or other
securities or ownership interests of Purchaser, or otherwise obligating
Purchaser to issue, transfer, deliver, sell, repurchase, redeem or otherwise
acquire, or cause to be issued, transferred, delivered, sold, repurchased,
redeemed or otherwise acquired, any shares of the capital stock or any phantom
shares, phantom equity interests or stock or equity appreciation rights, or
other ownership interests of Purchaser or obligating Purchaser to grant, extend
or enter into any such option, warrant, call, right, commitment or agreement.
The UVSG Shares to be issued pursuant to this Agreement will, when issued, be
duly authorized, validly issued, fully paid, and non-assessable and free and
clear of any Liens and not subject to any Restrictions (other than any
restrictions on transfer arising under the Securities Act or state securities
laws).
3.4 Purchaser Reports and Financial Statements. Purchaser has
heretofore made available to Seller true and complete copies of all reports,
registration statements, definitive proxy statements and other documents (in
each case together with all amendments thereto) filed by Purchaser with the
Commission since December 31, 1996 and Purchaser agrees to make available to
Seller true and complete copies of all reports, registration statements,
definitive proxy statements and other documents (in each case together with all
amendments thereto) filed by Purchaser with the Commission after the date hereof
and prior to the Closing Date (such reports, registration statements, definitive
proxy statements and other documents, together with any amendments thereto, are
21
sometimes collectively referred to as the "Commission Filings"). The
Commission Filings constitute all of the documents (other than preliminary
material) that Purchaser was required to file with the Commission since December
31, 1996. As of their respective dates, each of the Commission Filings complied
and, in the case of filings after the date hereof will comply, in all material
respects with the applicable requirements of the Securities Act, the Exchange
Act and the rules and regulations under each such Act, and none of the
Commission Filings contained as of such date any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. When filed with the Commission, the
financial statements included in the Commission Filings complied as to form in
all material respects with the applicable rules and regulations of the
Commission and were prepared in accordance with GAAP consistently applied
(except as may be indicated therein or in the notes or schedules thereto), and
such financial statements fairly present the consolidated financial position of
Purchaser and its consolidated subsidiaries as at the dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended, subject, in the case of the unaudited interim financial
statements, to normal, recurring year-end audit adjustments. Except as and to
the extent reflected or reserved against in the financial statements included in
Purchaser's Annual Report on Form 10-K for the year ended December 31, 1997,
none of Purchaser or any of its subsidiaries or, to the knowledge of Purchaser,
any Equity Affiliate had as of such date any liability or obligation of any kind
required to be reflected on a balance sheet of Purchaser and its consolidated
subsidiaries prepared in accordance with the applicable rules and regulations of
the Commission which was material to the business, assets, results of operations
or financial condition of Purchaser and its subsidiaries taken as a whole.
Except as disclosed in the Commission Filings filed with the Commission prior to
the date hereof, none of Purchaser, Purchaser's subsidiaries or, to Purchaser's
knowledge, any Equity Affiliate has any actual or potential liability or
obligation of any kind (whether due or to become due, whether absolute, accrued,
fixed or contingent or otherwise) which, in any case or in the aggregate, is or
may be material to the business, assets, results of operations or financial
condition of Purchaser and its subsidiaries taken as a whole, except liabilities
and obligations that arose since December 31, 1997 in the ordinary course of
business.
3.5 No Approvals or Notices Required; No Conflict with Instruments.
The execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby will not, (a) conflict with or violate any
provision of the Certificate of Incorporation or Bylaws of Purchaser, or
equivalent charter documents of any of its subsidiaries or, to Purchaser's
knowledge, any Equity Affiliate, (b) violate or conflict with any permit, order,
license, decree, judgment, statute, law, ordinance, rule or regulation
applicable to Purchaser or any of its subsidiaries or, to Purchaser's knowledge,
any Equity Affiliate or the properties or assets of Purchaser or any of its
subsidiaries or to Purchaser's knowledge, any Equity Affiliate, or (c) result in
any breach or violation of, or constitute a default (with or without notice or
lapse of time, or both) under, or give rise to any right of termination,
cancellation or acceleration of, or result in the creation of any Lien on any of
the properties or assets of Purchaser or any of its subsidiaries or, to
Purchaser's knowledge, any Equity Affiliate pursuant to, or require any Contract
Consent of any party to, any mortgage, indenture, lease, contract or other
agreement or instrument, bond, note, concession or franchise applicable to
Purchaser or any of its subsidiaries or to Purchaser's knowledge, any Equity
Affiliate or their properties or assets, except, in the case of clauses (b) and
(c) only, where such conflict, violation,
22
default, termination, cancellation, acceleration, Lien or lack of consent would
not have and is not reasonably likely to have a Material Adverse Effect on
Purchaser and its subsidiaries taken as a whole or to prevent consummation of
the transactions contemplated hereby. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Purchaser or any of its subsidiaries or
to Purchaser's knowledge, any Equity Affiliate in connection with the execution
and delivery of this Agreement by Purchaser or the consummation by Purchaser of
the transactions contemplated hereby, except for (i) the filing with the
Commission and the National Association of Securities Dealers, Inc. ("NASD") of
the proxy statement to be sent to the stockholders of Purchaser in connection
with the meeting of Purchaser's stockholders (the "Purchaser Stockholders
Meeting") to consider the transactions contemplated hereby (such proxy statement
as amended or supplemented is referred to herein as the "Proxy Statement"), (ii)
the filing of a Form 8-K as required under the Exchange Act, (iii) any filings
as may be required under applicable state securities laws and the securities
laws of any foreign country, and (iv) such other consents, authorizations,
filings, approvals and registrations which, if not obtained or made, would not
have a Material Adverse Effect on Purchaser and its subsidiaries taken as a
whole and would not prevent or materially alter or delay any of the transactions
contemplated by this Agreement. None of Purchaser or its subsidiaries is or
will be required to give any Contract Notice to any party to any material
mortgage, indenture, lease, contract or other agreement or instrument, bond,
note, concession or franchise applicable to any of Purchaser's or its
subsidiaries' properties or assets in connection with the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby.
3.6 Absence of Certain Changes or Events. Since December 31, 1997, there
has not been any material adverse change in, and no event has occurred and no
condition exists which, individually or together with other events or
conditions, has had or, insofar as Purchaser can reasonably foresee, is
reasonably likely to have, a Material Adverse Effect on Purchaser (excluding
events or conditions generally affecting the cable television industry or
satellite television industry in the United States or affecting general business
or economic conditions in the United States).
3.7 Information. Purchaser has been afforded the opportunity to review
prior to the date hereof written materials that Seller has made available to
Purchaser pursuant to this Agreement on or prior to the date hereof. Purchaser
acknowledges that Seller has afforded Purchaser the opportunity to make
inquiries and obtain additional information from Seller and its representatives
and advisors. Based upon its own investigation and upon information provided by
Seller, Purchaser has analyzed the potential effects that could result from an
SHVA Agreement and has relied on its own tax, legal, financial and regulatory
advisers with regard to all matters relating to the SHVA Agreement and not on
any advice or recommendation of Seller.
3.8 Brokers' and Finders' Fees. Except for the engagement of Xxxxx Xxxxxx
Incorporated as contemplated by Section 3.12, the fees and expenses of which
shall be borne by Purchaser, Purchaser has not incurred, and will not incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or investment bankers' fees or any similar charges in connection
with this Agreement or any transaction contemplated hereby.
23
3.9 Investment. Purchaser or its advisors have such knowledge and
experience in financial and business matters to be capable of evaluating the
merits of the purchase of the Purchased Shares. Purchaser is purchasing the
Purchased Shares for investment for its own account, and not with a view to the
distribution, transfer or resale thereof in violation of the Securities Act, or
any applicable state securities law and Purchaser does not have any contract,
understanding, agreement or arrangement to dispose of the Purchased Shares.
3.10 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Purchaser, threatened
against Purchaser or any of its subsidiaries or Equity Affiliates or any of
their assets and properties or any of their officers or directors (in their
capacities as such) that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on Purchaser and its subsidiaries
taken as a whole. There is no judgment, decree or order against Purchaser or
any of its subsidiaries or any of their respective directors or officers (in
their capacities as such), that could prevent consummation of the transactions
contemplated by this Agreement, or that could have a Material Adverse Effect on
Purchaser and its subsidiaries taken as a whole.
3.11 Disclosure. None of the representations or warranties made by
Purchaser herein contain any untrue statement of a material fact, or omit to
state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading.
3.12 Fairness Opinion. Purchaser has received a written opinion of
Xxxxx Xxxxxx Incorporated satisfactory in form, scope and substance to Purchaser
to the effect that the 6,375,000 shares of Class B Common Stock to be issued by
Purchaser to Seller in exchange for 100% of the capital stock of each of LMC
Netlink, Westlink and Telluride (giving effect to the Netlink Restructuring) are
fair from a financial point of view to the holders of the capital stock of
Purchaser other than TCI and its subsidiaries.
3.13 Tax-Free Transaction. Purchaser has not taken any action and has
no present plan or intention to take any action which would cause the exchange
of the Purchased Shares for UVSG Shares not to qualify as a tax-free transaction
pursuant to Section 351 of the Code.
3.14 Licenses; Compliance with Regulatory Requirements; Intangible
Property. Purchaser, its subsidiaries and, to the knowledge of Purchaser, its
Equity Affiliates hold all Licenses which are material to the operation of the
businesses of Purchaser and its subsidiaries taken as a whole ("Purchaser
Licenses"). Each of Purchaser, its subsidiaries and, to the knowledge of
Purchaser, its Equity Affiliates is in compliance with, and has conducted its
business so as to comply with, the terms of the respective Purchaser Licenses
and with all applicable laws, rules, regulations, ordinances and codes, domestic
or foreign, including Environmental and Health Laws, except where the failure so
to comply has not had and, insofar as reasonably can be foreseen, in the future
will not have, either individually or in the aggregate, a Material Adverse
Effect on Purchaser and its subsidiaries taken as a whole. Without limiting the
generality of the foregoing, Purchaser, its subsidiaries and, to the knowledge
of Purchaser, its Equity Affiliates (i) have all FCC Licenses and
24
permits required for the operation of the facilities being operated on the date
hereof by Purchaser, any of its subsidiaries or, to the knowledge of Purchaser,
its Equity Affiliates, (ii) have duly and currently filed all reports and other
information required to be filed by the FCC or any other Governmental Entity in
connection with such FCC Licenses and Permits and (iii) are not in violation of
any of such FCC Licenses or Permits, other than the lack of FCC Licenses or
Permits, delays in filing reports or possible violations which have not had and,
insofar as can reasonably been foreseen, in the future will not have a Material
Adverse Effect on Purchaser and its subsidiaries taken as a whole. Purchaser
and its subsidiaries own or have adequate rights to use all patents, trademarks,
trade names, service marks, trade secrets, copyrights and other proprietary
intellectual property rights as are material in connection with the businesses
of Purchaser and its subsidiaries taken as a whole.
3.15 Tax Matters.
(a) Each of Purchaser and its subsidiaries has duly and timely filed
all returns and reports with respect to Taxes required to be filed by it for all
taxable years or portions thereof. Such Tax Returns and reports have been
prepared in accordance with all applicable government regulations and are
accurate and complete in all material respects. Each of Purchaser and its
subsidiaries, as applicable, have each timely paid or adequately provided for
all Taxes due and payable in respect to any transaction for which Taxes are due
or any Taxes chargeable against its or their revenue, assets or income (whether
or not shown on any Tax Returns), and each of Purchaser and its subsidiaries
have adequately provided for all Taxes which would be due if the current taxable
year ended at the close of business on the Closing Date.
(b) There are no recorded Liens for Taxes upon any of the material
assets of Purchaser or its subsidiaries except Liens for current Taxes not due
or Liens that are being contested in good faith by appropriate proceedings and
for which adequate reserves in accordance with GAAP shall have been set aside on
the books of Purchaser or the applicable subsidiary.
(c) No material proposed Taxes or Tax deficiencies have been asserted,
and no proceedings with respect to Taxes have been commenced, against Purchaser
or any of its subsidiaries. None of Purchaser or its subsidiaries has waived any
statute of limitation in respect of any Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency, except for an extension with
respect to New York State through December 31, 1998 for tax periods from 1993
through 1996.
(d) None of Purchaser or its subsidiaries has filed, and none will
file, at any time prior to the Closing, a consent under Section 341(f) of the
Code.
3.16 Management of SNG. Prior to the date hereof, Purchaser has been
managing SNG in the ordinary course of business consistent with past practice
and has caused SNG to make cash distributions to its members on a regular basis
consistent with past practice.
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ARTICLE IV
CONDUCT PENDING THE CLOSING
It is expressly understood and agreed by the parties that Seller is not
making any covenants or agreements in this Article IV or in any other part of
this Agreement with respect to matters relating to SNG, including, without
limitation, its condition (financial or otherwise), assets, liabilities,
business, operations, results of operations, customers, management, employees or
prospects.
4.1 Conduct of Business of the Netlink Subsidiaries. Except as
otherwise provided in this Agreement, Seller acknowledges that upon Closing
Purchaser will be entitled to the benefits of the operation of the Netlink
Businesses and cash distributions from SNG with respect to the period from April
1, 1998 through the Closing Date. Except as otherwise provided in this
Agreement, Purchaser acknowledges that upon Closing Purchaser will be subject to
all the risks and burdens of the operations of the Netlink Businesses with
respect to the same period. Seller will cause the Netlink Businesses to be
operated in the ordinary course consistent with past practice, except that,
effective April 1, 1998, instead of the customary practice of distributing to
Seller all cash generated by such businesses and not used in the payment of
expenses, Seller shall cause the Netlink Subsidiaries to retain such cash for
their own use pending the Closing. Nothing contained herein shall be construed
to prevent the Netlink Subsidiaries (a) from paying amounts due to Seller and
its affiliates in the ordinary course of business that do not constitute
dividends, distributions or advances (other than as provided in clause (ii)
below and as permitted by Section 4.1(b)(xv)), which permitted payments shall
include (i) payment of the TCI Benefit Contributions and (ii) payment of an
allocable portion of Seller's overhead expenses consistent with past practice or
(b) from making distributions with respect to tax liabilities as contemplated by
Section 4.1(b)(vii). During the period prior to the Closing Date, Seller shall
cause the management and employees of the Netlink Subsidiaries to comply with
all reasonable requests of Purchaser or its designated representatives with
respect to the operation of the Netlink Businesses; provided, that neither
Seller nor the Netlink Subsidiaries shall be required to take any action
that would impair its ability to perform any of its covenants made in this
Agreement (unless such performance is expressly waived by Purchaser) or to
obtain any consents, authorizations or approvals required in connection with the
transactions contemplated hereby.
(a) Affirmative Covenants. In addition, after the date hereof and prior
to the Closing, except for the Netlink Restructuring, the Primestar Transaction
and as otherwise expressly contemplated by this Agreement or with the consent of
Purchaser (which consent will not be unreasonably withheld), Seller will cause
each of the Netlink Subsidiaries to:
(i) use commercially reasonable efforts in the ordinary and usual
course of business and consistent with past practice to preserve intact its
present business organizations, keep available the services of its present
officers and key employees and preserve its relationships with customers,
suppliers, distributors, licensors, licensees, and others having business
dealings with it, to the end that its goodwill and ongoing businesses shall
be unimpaired at
26
the Closing, except that nothing contained herein shall obligate Seller to
take or cause any Netlink Subsidiary to take any action inconsistent with
its covenants in Section 4.1(b);
(ii) notify Purchaser of the occurrence of any event that is not in
the ordinary course of business or that is reasonably likely to have a
Material Adverse Effect on the Netlink Businesses taken as a whole;
(iii) use commercially reasonable efforts to actively and diligently
pursue the Application to the Canadian Radio-television and
Telecommunications Commission (the "CRTC") by the Battlefords Community
Cablevision Cooperative dated September 15, 1997, requesting that the CRTC
allow certain Canadian broadcasting licensees to distribute, at their
option, as part of their basic service, five of the programming services
received via satellite from the Netlink Businesses; and
(iv) if requested by Purchaser in writing prior to June 1, 1998,
use commercially reasonable efforts to extend to December 31, 2000 the
SATCOM F1R/C-1 Satellite Transponder Service Agreement, dated as of
November 29, 1989 (the "GE Transponder Agreement"), between GE American
Communications, Inc. and Western Tele-Communications, Inc. ("WTCI"), which
has been assigned to Netlink USA pursuant to an Assignment and Assumption
Agreement, dated October 1, 1991 (and will be assigned to Telluride in the
Netlink Restructuring), pursuant to the terms of the GE Transponder
Agreement.
(b) Negative Covenants. Further, after the date hereof and prior to the
Closing, except for the Netlink Restructuring, the Primestar Transaction and as
otherwise expressly contemplated by this Agreement or with the consent of
Purchaser (which consent will not be unreasonably withheld), Seller will cause
each of the Netlink Subsidiaries not to:
(i) cause or permit any amendments to its Certificate or Articles
of Incorporation or Bylaws or equivalent charter documents;
(ii) adopt any employee benefit, stock purchase or option plan for
the benefit of the employees of the Netlink Subsidiaries or amend any
Employee Plan or accelerate, amend or change the period of exercisability
or vesting of options or other rights granted under its Employee Plans or
authorize cash payments in exchange for any options or other rights granted
under any of such plans, except, in each case, to the extent required by
any applicable law or the existing terms of such Employee Plan or by the
provisions of this Agreement; provided, that nothing in this paragraph
shall restrict TCI, Seller or any of their respective subsidiaries other
than the Netlink Subsidiaries from taking any of the above actions other
than with respect to a plan which covers only employees of the Netlink
Subsidiaries;
(iii) make any capital expenditures that individually or in the
aggregate exceed the amount provided therefor in the 1998 Capital Budget;
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(iv) other than acquisitions in existing or related lines of
business of the entity making such acquisition not exceeding $100,000 in
the aggregate, acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or
agree to acquire any assets that are material, individually or in the
aggregate, to the Netlink Businesses taken as a whole (it being understood
that any acquisition that would constitute a capital expenditure within the
meaning of the 1998 Capital Budget shall be subject to the provisions of
clause (v) of this Section and not to this clause (vi));
(v) commence a lawsuit other than (A) for the routine collection of
bills or (B) in such cases where it in good faith determines that failure
to commence suit would result in the material impairment of a valuable
aspect of its business, provided that it consults with Purchaser prior to
the filing of such a suit;
(vi) sell, lease or otherwise transfer or dispose of any of its
assets of substantial value;
(vii) declare, set aside, or pay any dividend or other distribution
to Seller, or directly or indirectly redeem, retire, purchase or otherwise
acquire any of its capital stock or other securities or options, warrants
or other rights to acquire its capital stock, provided that, immediately
prior to the Closing (or, if applicable, the Initial Closing and the Second
Closing), the Netlink Subsidiaries shall pay to Seller an amount in cash
equal to the estimated amount of taxes accrued on the earnings of the
Netlink Subsidiaries during the period beginning on April 1, 1998 through
and including the Closing Date (or, if applicable, in the case of the
Initial Closing, for the period from April 1, 1998 through and including
the Initial Closing Date and, in the case of the Second Closing, for the
period from the Initial Closing Date through and including the Second
Closing Date) based on an effective combined federal, state and local tax
rate of (x) 20% to the extent that such taxable earnings of the Netlink
Subsidiaries reduce the amount of the excess loss accounts that Seller
would otherwise be responsible for under Section 9.3(a) or clause (ii) of
Section 9.7(a) and (y) 40% of any additional taxable earnings (the
"Estimated Tax Payment");
(viii) modify or change in any material respect any material contract,
other than in the ordinary course of business;
(ix) revalue any of its assets, including without limitation writing
down the value of any assets or writing off notes or accounts receivable,
except as required by GAAP;
(x) create any Lien on any of its asset other than Permitted
Encumbrances;
(xi) waive in writing or release in writing any right or claim of
substantial value;
(xii) pay, discharge or satisfy claims, liabilities or obligations,
other than in the ordinary course of business consistent with past
practice;
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(xiii) issue or sell any of its capital stock or other securities or
membership or other ownership interests, exchangeable or convertible
securities, options, warrants, puts, calls or other rights to acquire
capital stock or other securities or other ownership interests of any of
the Netlink Corporations or Netlink USA;
(xiv) incur any indebtedness for borrowed money or assume or
guarantee any such indebtedness other than in the ordinary course of
business and consistent with past practice;
(xv) other than as contemplated or otherwise permitted by this
Agreement and other than in accordance with its normal cash management
practices conducted in the ordinary and usual course of its business and
consistent with past practice, make any advance or loan to or engage in any
transaction with any director, officer, or affiliate (other than any other
Netlink Subsidiary and other than Purchaser or any of its subsidiaries) of
such Netlink Subsidiary not required by the terms of an existing contract
described on the Seller Disclosure Schedule;
(xvi) enter into any new employment, consulting, agency or commission
agreement, make any amendment or modification to any existing such
agreement or grant any increases in salary, wage, benefit or other
remuneration payable or to become payable to any of its current or former
officers, directors, employees or agents or grant any increases in any
bonus or severance payment or arrangement made to, for or with any of its
officers, directors, employees or agents or grant any supplemental
retirement plan or program or special remuneration for any of its officers,
directors, employees or agents, in each case, (x) other than in the
ordinary course of business and consistent with past practice (including
regular salary and performance bonus increases) or (y) which do not, in the
aggregate, materially increase the compensation or benefit expense of the
Netlink Subsidiaries taken as a whole; and the parties agree that nothing
in this paragraph or elsewhere in this Agreement shall prevent the Netlink
Subsidiaries from entering into agreements for temporary employment of
personnel substantially in the form previously provided to Purchaser by
Seller; or
(xvii) enter into an agreement to do any of the foregoing.
4.2 No Solicitation; Acquisition Proposals. Seller will not, and Seller
will cause each of the Netlink Subsidiaries not to, directly or indirectly,
through any officer, director, employee, representative, agent, financial
advisor or otherwise, solicit, initiate or encourage inquiries or submission of
proposals or offers from any person (other than Primestar) relating to any sale
of all or any portion of the assets, business, properties of (other than
immaterial or insubstantial assets or inventory in the ordinary course of
business), or any equity interest in, any Netlink Subsidiary or any business
combination with any of the Netlink Subsidiaries whether by merger, purchase of
assets, tender offer or otherwise or participate in any negotiation regarding,
or furnishing to any other person (other than Primestar) any information with
respect to, or otherwise cooperate in any way with, or assist in, facilitate or
encourage, any effort or attempt by any other person to do or seek to do any of
the foregoing. Seller will vote all shares of voting stock in the Netlink
Corporations held by Seller against any transaction of the nature described in
this Section 4.2 that is presented to it. Seller will notify Purchaser
immediately if any inquiries or proposals are received by, any
29
information is requested from, or any negotiations or discussions are sought to
be initiated or continued with Seller or any Netlink Subsidiary, in each case in
connection with any of the foregoing. Seller shall use its best efforts to
cause all confidential materials previously furnished to any third parties in
connection with any of the foregoing to be promptly returned to Seller and shall
cease, or cause the Netlink Subsidiaries to cease, any negotiations conducted in
connection therewith.
4.3 Proxy Statement. To the extent information regarding Seller or the
Netlink Subsidiaries is required to be included in the Proxy Statement, Seller
hereby agrees to promptly supply such information to Purchaser upon request.
Seller further agrees that the information so supplied shall not contain any
statement which, at the time of delivery, is false or misleading with respect to
any material fact, or omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they are
made, not false or misleading. Seller further agrees promptly to supply such
additional information to Purchaser as may be necessary to correct any statement
or omission regarding the Netlink Subsidiaries included in the Proxy Statement
that becomes false or misleading with respect to any material fact prior to the
Closing Date.
4.4 Notice of Breach. Each party hereto shall promptly give written
notice to the other upon becoming aware of the occurrence or, to its knowledge,
impending or threatened occurrence, of any event that is reasonably likely to
cause or constitute a breach of any of its representations, warranties or
covenants hereunder.
4.5 Restructuring. Promptly following the execution and delivery of the
Primestar Agreement, Seller shall use its commercially reasonable efforts to
cause the Netlink Restructuring to be effected. After giving effect to the
Netlink Restructuring, Telluride will own all of the assets and liabilities of
the Netlink Corporations and Netlink USA other than the Excluded Assets and
Liabilities and any ownership interest in Netlink USA.
ARTICLE V
OTHER COVENANTS
5.1 Access to Information. Upon reasonable notice, and subject to the
terms and conditions hereof, Seller will, and will cause each of the Netlink
Subsidiaries to, subject to the waiver of confidentiality obligations of TCI,
Seller or the Netlink Subsidiaries to third parties, afford Purchaser and its
accountants, counsel and other representatives full access during normal
business hours (and at such other times as the parties hereto agree) during the
period prior to the Closing to (a) all of Seller's properties, books, contracts,
commitments and records relating to the Netlink Subsidiaries, (b) all
properties, books, contracts, commitments and records of the Netlink
Subsidiaries, and (c) all other information in the possession of Seller or the
Netlink Subsidiaries concerning the business, properties and personnel of the
Netlink Subsidiaries as Purchaser may reasonably request. Seller will provide,
and will cause each of the Netlink Subsidiaries to provide, to Purchaser and its
accountants, counsel and other representatives copies of any interim quarterly
30
financial statements for the Netlink Wholesale Division prepared prior to the
Closing Date promptly upon request. Purchaser shall cooperate with Seller in
Seller's due diligence review of Purchaser to the extent necessary to confirm
the accuracy of Purchaser's representations and warranties. No information or
knowledge obtained in any investigation pursuant to this Section 5.1 shall
affect or be deemed to modify any representation or warranty contained herein or
the conditions to the obligations of the parties hereto to consummate the
transactions contemplated hereby.
5.2 Confidentiality. Purchaser agrees to treat as confidential and hold
in confidence all information provided by Seller or the Netlink Subsidiaries in
connection with the transactions contemplated by this Agreement concerning the
businesses and affairs of the Netlink Subsidiaries or Seller, and Seller agrees
to treat as confidential and hold in confidence all information provided by
Purchaser in connection with the transactions contemplated by this Agreement
concerning the businesses and affairs of Purchaser, in each case, in accordance
with the Nondisclosure Agreement, effective as of January 28, 1998, between
Purchaser and Seller (the "Nondisclosure Agreement").
5.3 Publicity. Each of Purchaser and Seller agrees not to, and to cause
each of its respective subsidiaries not to, issue, or cause or permit to be
issued, any press release regarding this Agreement and the transactions
contemplated hereby without consulting with the other party prior to making such
release.
5.4 Proxy Statement; Other Filings; Cooperation.
(a) As promptly as practicable after the date of this Agreement, Purchaser
shall prepare and file with the Commission a preliminary Proxy Statement in form
and substance reasonably satisfactory to each of Purchaser and Seller.
Purchaser shall use reasonable efforts to respond to any comments of the
Commission and to cause the definitive Proxy Statement to be filed with the
Commission and mailed to its stockholders at the earliest practicable time.
Whenever any event occurs which is required to be set forth in an amendment or
supplement to the Proxy Statement, Purchaser shall promptly inform Seller of
such occurrence and shall file such amendment or supplement with the Commission
or its staff or any other applicable Government Entity, and shall use reasonable
efforts to mail such amendment or supplement to the stockholders of Purchaser at
the earliest practicable date. The Proxy Statement shall include the
recommendation of the Board of Directors of Purchaser in favor of the issuance
of the UVSG Shares. Purchaser shall call the Purchaser Stockholders Meeting to
be held as promptly as practicable for the purpose of voting upon the issuance
of the UVSG Shares.
(b) The parties hereto shall (i) in the case of Seller, timely give the
Contract Notices identified on the Seller Disclosure Schedule, (ii) make, and
cause their affiliates (other than each other) to make, all other necessary
filings with respect to the transactions contemplated hereby including
registrations and filings with all applicable Governmental Entities and filings
required under the Securities Act and the Exchange Act and the rules and
regulations thereunder, and under applicable Blue Sky or similar securities
laws, and shall use all reasonable efforts to obtain required approvals and
clearances with respect thereto and to (A) comply as promptly as practicable
with all governmental requirements applicable to the transaction and (B) obtain
promptly all necessary permits, orders and other consents of Governmental
Entities necessary for the consummation of the
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transactions contemplated hereby and (iii) use all commercially reasonable
efforts to obtain all Contract Consents identified on the Seller Disclosure
Schedule or otherwise necessary for the consummation of the transaction
contemplated hereby, and to take, or cause to be taken, all actions and to do,
or cause to be done, all other things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including using all commercially
reasonable efforts to lift any injunction or other legal bar to the transactions
contemplated hereby (and, in such case, to proceed with such transactions as
expeditiously as possible).
5.5 Employment Matters. Seller has assumed and shall be responsible for
(and Purchaser shall have no liability for) all obligations for severance
benefits (other than as provided below) and for the sticking bonuses described
in Item (1) of Schedule 2.17 of the Seller Disclosure Schedule, in each case
payable to the employees of the Netlink Subsidiaries. Immediately prior to the
Closing, all persons then employed by the Netlink Subsidiaries shall become
employees of Seller, so that immediately following the Closing the Netlink
Subsidiaries will have no employees. All liability for that portion of the
performance bonuses that have accrued pursuant to the Bonus Plan during the
period from and including January 1, 1998 through and including the Closing Date
with respect to employees of the Netlink Subsidiaries who are entitled to such
bonuses pursuant to the Bonus Plan shall be the liability of the Netlink
Subsidiaries and not Seller following the Closing (it being understood and
agreed that such performance bonuses will accrue on a nine-month (not twelve-
month) basis). Following the Closing through and until September 30, 1998,
Seller will, at Purchaser's request and subject to Purchaser's reimbursing
Seller for the costs thereof, make available to Purchaser the services of such
of the persons who prior to the Closing had been providing services exclusively
to the Netlink Subsidiaries and their businesses and who continue to be employed
by Seller thereafter as Purchaser may request (each, a "Requested Employee").
Purchaser shall reimburse Seller for all costs associated with the Requested
Employees during such period (including any accruals under the Bonus Plan with
respect to a Requested Employee during the period following the Closing through
and including September 30, 1998 or, if earlier, the date that Purchaser
notifies Seller that it no longer wants Seller to employ such Requested Employee
on behalf of Purchaser or the Netlink Subsidiaries); provided that Purchaser
shall not be required to reimburse Seller for severance benefits (other than the
accrued performance bonuses referred to above) or the sticking bonuses described
in Item (1) of Schedule 2.17 of the Seller Disclosure Schedule paid to such
employees. Reimbursement pursuant to this Section 5.5 shall be paid within 10
days of receipt of an invoice from Seller itemizing such reimbursable costs.
5.6 Tax-Free Transaction. Purchaser agrees not to take any action which
would cause the exchange of the Purchased Shares for the UVSG Shares not to
qualify as a tax-free transaction pursuant to Section 351 of the Code, including
if the Primestar Transaction is not consummated prior to the Closing (or the
Second Closing, if applicable), any direct or indirect transfer of the SNG
Shares or SNG Interest to Primestar after the Closing (or the Second Closing, if
applicable) if such transfer could have such effect.
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ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Obligations of Each Party. The respective obligations
of each party hereto to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing Date of each of the following conditions, any of which may
be waived, in writing, by agreement of Purchaser and Seller:
(a) Stockholder Approvals. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the requisite
vote of the stockholders of Purchaser.
(b) No Injunction. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory prohibition preventing the
consummation of the transactions contemplated hereby shall be in effect.
6.2 Additional Conditions to Obligations of Seller. Subject to Section
6.5, the obligations of Seller to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing of each of the following conditions, any of which may be
waived, in writing, by Seller:
(a) Accuracy of Representations and Warranties; Performance of
Agreements. Purchaser shall have performed and complied in all material
respects with all of its covenants in this Agreement required to be
performed and complied with by it on or prior to the Closing and the
representations and warranties of Purchaser in this Agreement shall be true
and correct in all material respects (or in all respects in the case of any
representation or warranty that is qualified by its terms by a reference to
Material Adverse Effect or other concept of materiality) when made and on
and as of the Closing Date as though such representations and warranties
were made on and as of such date.
(b) Officers' Certificate. Seller shall have received a certificate
executed on behalf of Purchaser by its Chief Financial Officer certifying
that the conditions specified in Section 6.2(a) have been fulfilled.
(c) Contract Consents and Notices. All Contract Consents and
Contract Notices which are referred to in the Seller Disclosure Schedule or
otherwise required in connection with the consummation of the transactions
contemplated hereby and which, if not obtained or given, would have,
individually or in the aggregate, a Material Adverse Effect after the
Closing Date on Seller and its subsidiaries taken as a whole shall have
been obtained and given.
33
(d) No Material Adverse Change. Since the date hereof no event
shall have occurred that, individually or in the aggregate, has had or is
reasonably likely to have, a Material Adverse Effect, as of or after the
Closing Date, on Purchaser and its subsidiaries taken as a whole,
excluding, in all cases, events or conditions generally affecting the cable
television or satellite television industries or affecting general business
or economic conditions.
(e) Receipt of Licenses, Permits and Consents. The parties hereto
shall have obtained from each Governmental Entity all approvals, waivers
and consents identified on the Seller Disclosure Schedule or otherwise
required in connection with the consummation of the transactions
contemplated hereby, and such approvals, waivers and consents, as
applicable, shall be in full force and effect, and all filings with
Governmental Entities, if any, as are required in connection with the
consummation of such transactions shall have been made, other than those
which, if not obtained, in force or effect or made (as the case may be),
would not, either individually or in the aggregate, have a Material Adverse
Effect, as of or after the Closing Date, on Seller and its subsidiaries
taken as a whole.
6.3 Additional Conditions to the Obligations of Purchaser. Subject to
Sections 6.4(b) and 6.5, the obligations of Purchaser to consummate and effect
this Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions, any
of which may be waived, in writing, by Purchaser:
(a) Accuracy of Representations and Warranties; Performance of
Agreements. Seller shall have performed and complied in all material
respects with all of its covenants in this Agreement required to be
performed and complied with by it on or prior to the Closing Date. The
representations and warranties of Seller in this Agreement shall have been
true and correct in all material respects (or in all respects in the case
of any representation or warranty that is qualified by its terms by a
reference to Material Adverse Effect or other concept of materiality) when
made.
(b) Officers' Certificate. Purchaser shall have received a
certificate, dated as of the Closing Date, from Seller by its President
certifying that the conditions specified in Section 6.3(a) have been
fulfilled.
(c) Receipt of Licenses, Permits and Consents. The parties hereto
shall have obtained from each Governmental Entity all approvals, waivers
and consents, identified on the Seller Disclosure Schedule or otherwise
required in connection with the consummation of the transactions
contemplated hereby, and such approvals, waivers and consents, as
applicable, shall be in full force and effect, and all filings with
Governmental Entities, if any, as are required in connection with the
consummation of such transactions shall have been made, other than those
which, if not obtained, in force or effect or made (as the case may be),
would not, either individually or in the aggregate, have a Material Adverse
Effect, as of or after the Closing Date, on Purchaser and its subsidiaries
taken as a whole.
34
(d) Contract Consents and Notices. All Contract Consents and
Contract Notices which are referred to in the Seller Disclosure Schedule or
otherwise required in connection with the consummation of the transactions
contemplated hereby and which, if not obtained or given, would have,
individually or in the aggregate, a Material Adverse Effect after the
Closing Date on Purchaser and its subsidiaries taken as a whole shall have
been obtained and given.
(e) Resignations. Purchaser shall have received letters of
resignation, effective as of the Closing Date, executed and tendered by
each of the then incumbent directors of the Netlink Corporations.
6.4 Primestar Transaction.
(a) If the Primestar Agreement is entered into prior to July 31,
1998, it shall be a condition to the respective obligations of each party
hereto to consummate the transactions to be effected at the Second Closing
(and if Seller does not elect to require an Initial Closing, the Closing),
that either the Primestar Transaction has been consummated or the Primestar
Agreement has been terminated in accordance with its terms.
(b) Notwithstanding Section 6.3, if the Primestar Transaction has
been consummated, Purchaser's obligations to purchase the Primestar Shares
shall not be subject to any conditions other than the conditions set forth
in Section 6.1.
6.5 Initial Closing. Notwithstanding Sections 6.2 and 6.3, if the Initial
Closing occurs, the respective obligations of Purchaser and Seller to consummate
the Second Closing shall not be subject to any conditions other than the
conditions set forth in Section 6.1 and Section 6.4(a) and, in the case of
Seller only, the condition that the representation and warranty of Purchaser in
Section 3.13 shall be true and correct on and as of the Second Closing as though
such representation and warranty were then being made and that Purchaser shall
have performed and complied with and not be in breach of its covenant in Section
5.6.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated, whether before or
after approval of the matters presented in connection with this Agreement by the
stockholders of Purchaser:
(a) at any time prior to the Closing Date, by mutual consent of
Purchaser and Seller;
(b) at any time prior to the Initial Closing (or if Seller has not
elected to require the Initial Closing, the Closing) by Purchaser, if
Seller shall have breached in any material respect any of its covenants in
Article IV or V or if Seller was in breach in any material
35
respect (or in any respect in the case of any representation or warranty
that is qualified by its terms by a reference to Material Adverse Effect)
of any of its representations and warranties in Article II when made and,
in either case, such breach continues for a period of 30 days after notice
of the breach is given to Seller by Purchaser (provided that any such
breach of a representation or warranty in Article II shall be deemed cured
if as of the end of such 30 day period such representation or warranty
would be true if then made); provided, however, that if the Primestar
Transaction has been consummated, Purchaser may only exercise its right of
termination pursuant to this Section 7.1(b) with respect to its obligation
to purchase the Telluride Shares and this Agreement shall continue in full
force and effect with respect to the Primestar Shares;
(c) at any time prior to the Initial Closing (or if Seller has not
elected to require the Initial Closing, the Closing), by Seller, if
Purchaser shall have breached in any material respect any of its
representations, warranties or covenants in Article III, IV or V and such
breach continues for a period of 30 days after notice of the breach is
given to Purchaser by Seller; and
(d) at any time after September 30, 1998, by Seller, if without any
fault by it, the Initial Closing (or, if Seller shall not have elected to
require the Initial Closing, the Closing) shall not have occurred on or
before such date.
7.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 7.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of the parties hereto, except to
the extent that such termination results from the breach by a party hereto of
any of its representations, warranties or covenants set forth in this Agreement;
provided that, the provisions of this Section 7.2 and Article X shall remain in
full force and effect and survive any termination of this Agreement.
Notwithstanding the foregoing, if prior to termination of this Agreement
pursuant to Section 7.1 the Initial Closing has occurred, then the preceding
sentence shall not apply and the effect of such termination shall be as follows:
there shall be no liability or obligation on the part of the parties hereto
pursuant to this Agreement with respect to the SNG Shares or the Primestar
Shares, except to the extent that such termination results from the breach by a
party hereto of any of its representations, warranties or covenants set forth in
this Agreement; provided that, the provisions of this Section 7.2 and Article X
shall remain in full force and effect and survive any termination of this
Agreement.
7.3 Amendment. This Agreement may be amended at any time before or after
approval hereof by the stockholders of Purchaser; provided, however, that after
such stockholder approval there shall not be made any amendment that by law
requires further approval by the stockholders of Purchaser without the further
approval of such stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
7.4 Extension; Waiver. The parties may (a) extend the time for the
performance of any of the obligations or other acts of the other party, (b)
waive any inaccuracies in the representations and warranties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) subject
to the proviso of Section 7.3, waive compliance with any of the agreements or
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conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing, signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Seller.
(a) Subject to written notice of such claim for indemnification being
given to Seller within the appropriate survival period referred to in Section
10.1, Seller covenants and agrees, on the terms and subject to the limitations
set forth in this Agreement, to indemnify, defend and hold Purchaser harmless
from and against:
(i) all losses, damages, liabilities, deficiencies, obligations,
costs and expenses resulting from or arising out of (A) any representation
or warranty of Seller in Article II not being true and correct when made,
(B) any nonperformance or breach of any covenant or agreement of Seller
contained in this Agreement, (C) any violation of SHVA resulting from the
conduct of the Denver 6 Business prior to Xxxxx 0, 0000, (X) the failure
to obtain the consent described in Item (1) on Schedule 2.7 of the Seller
Disclosure Schedule, if applicable, (E) Item (2) on Schedule 2.10 of the
Seller Disclosure Schedule or (F) to the extent arising out of the conduct
of the SMATV Business prior to April 1, 1998, Items (2) and (4) on Schedule
2.11 of the Seller Disclosure Schedule; and
(ii) all claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including
settlement costs and reasonable legal, accounting, experts, and other fees,
costs and expenses) incident or relating to or resulting from any of the
foregoing.
(b) From and after the Closing (or, if applicable, the Second Closing),
Seller shall assume and be liable to Purchaser for the obligations of Netlink
USA under Section 10 of the Joint Venture Terms incorporated and included in the
SNG Agreement, on the same terms and subject to the same conditions as were
applicable to Netlink USA thereunder.
(c) Notwithstanding the foregoing provisions of this Section 8.1, no claim
shall be made by Purchaser (i) under this Section 8.1 with respect to Taxes for
which Seller's obligations are governed by Article IX, (ii) for lost profits,
lost revenues or other indirect or consequential damages or (iii) with respect
to actions taken or required to be taken after April 1, 1998 pursuant to the
SHVA Agreement. In addition, notwithstanding the foregoing provisions of this
Section 8.1, no claim shall be made by Purchaser for any losses, damages,
liabilities, deficiencies, obligations, costs and expenses (and amounts incident
or relating to or resulting from any or all of the foregoing) (collectively,
"Losses") referred to in Section 8.1(a) unless and until any or all of such
Losses exceed
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(A) in the case of any such Losses resulting from or arising out of the Netlink
Businesses or Telluride, $375,000 or (B) in the case of all other of such
Losses, $1,350,000 (as applicable, the "Minimum Amount"); provided, however,
that (x) at such time as the aggregate amount of such Losses exceeds the
applicable Minimum Amount, Purchaser may assert a claim for the full amount of
the applicable of such Losses and (y) the foregoing limitation shall not apply
to Losses arising out of any breach of the representations and warranties or
covenants of Seller set forth in Sections 2.24 and 5.5.
(d) Purchaser acknowledges and agrees that following the Closing, its sole
and exclusive remedy with respect to any and all claims relating to this
Agreement and the transactions contemplated hereby (other than claims of, or
causes of action arising from, fraud) shall be pursuant to the indemnification
provisions set forth in this Article VIII or, with respect to Tax matters, the
indemnification provisions set forth in Article IX. In furtherance of the
foregoing, Purchaser hereby waives, from and after the Closing Date, to the
fullest extent permitted under applicable law, any and all rights, claims and
causes of action (other than claims of, or causes of action arising from, fraud)
it or any of its affiliates may have against Seller and its affiliates arising
under or based upon any Federal, state, local or foreign statute, law,
ordinance, rule or regulation or otherwise (except pursuant to the
indemnification provisions set forth in this Article VIII or Article IX).
8.2 Indemnification by Purchaser.
(a) Subject to written notice of such claim for indemnification being
given to Purchaser within the appropriate survival period set forth in Section
10.1, Purchaser covenants and agrees, on the terms and subject to the
limitations set forth in this Agreement, to indemnify, defend and hold harmless
Seller from and against:
(i) all losses, damages, liabilities, deficiencies, obligations,
costs and expenses resulting from or arising out of (A) any
misrepresentation or breach of warranty of Purchaser in Article III, (B)
any nonperformance or breach of any covenant or agreement of Purchaser
contained in this Agreement, (C) any guarantee or obligation to assure
performance given or made by Seller or an affiliate of Seller with respect
to any obligation of the Netlink Subsidiaries set forth in clause (D)
below; (D) all obligations and liabilities of whatever kind and nature,
primary or secondary, direct or indirect, absolute or contingent, known or
unknown, whether arising before, on or after the Closing Date, of the
Netlink Subsidiaries, in each case other than items which Seller has
expressly agreed to pay or perform after the Closing Date pursuant to this
Agreement and other than to the extent such obligation or liability arises
out of a breach of a representation or warranty of Seller contained in this
Agreement; and (E) any indemnification obligations of Seller under or
pursuant to or arising out of the Primestar Transaction or the Primestar
Agreement other than any of such obligations for which (and to the extent
that) Seller would be obligated to indemnify Purchaser pursuant to Section
8.1(a) of this Agreement or Section 10 of the Joint Venture Terms
incorporated into the SNG Agreement if Seller had transferred the SNG
Shares to Purchaser at the Closing.
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(ii) all claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including
settlement costs and reasonable legal, accounting, experts, and other fees,
costs and expenses) incident or relating to or resulting from any of the
foregoing.
(b) Notwithstanding the foregoing provisions of this Section 8.2, no
claims shall be made by Seller (i) for any Losses referred to in clause (A) or
(B) of Section 8.2(a) unless and until any or all of such Losses exceed
$1,725,000 (or in the event that only the Initial Closing occurs, $375,000);
provided, however, that (x) at such time as the aggregate amount of such Losses
exceeds the applicable of the foregoing amounts, Seller may assert a claim for
the full amount of the applicable of such Losses and (y) the foregoing
limitation shall not apply to Losses arising out of any breach of the
representations and warranties or covenants of Purchaser set forth in Sections
3.8 and 5.5; (ii) for lost profits, lost revenues or other indirect or
consequential damages.
(c) Seller acknowledges and agrees that following the Closing, its sole
and exclusive remedy with respect to any and all claims relating to this
Agreement and the transactions contemplated hereby (other than claims of, or
causes of action arising from, fraud) shall be pursuant to the indemnification
provisions set forth in this Article VIII or, with respect to Tax matters, the
indemnification provisions set forth in Article IX. In furtherance of the
foregoing, Seller hereby waives, from and after the Closing Date, to the fullest
extent permitted under applicable law, any and all rights, claims and causes of
action (other than claims of, or causes of action arising from, fraud) it or any
of its affiliates may have against Purchaser and its affiliates arising under or
based upon any federal, state, local or foreign statute, law, ordinance, rule or
regulation or otherwise (except pursuant to the indemnification provisions set
forth in this Article VIII or Article IX).
8.3 Defense of Action.
(a) Any party seeking indemnification under Section 8.1 or 8.2 hereof will
give the party from whom such indemnification is sought prompt notice of any
third party claim, investigation, action, suit or proceeding with respect to
which such indemnification is sought. In the case of any such third party
claim, such party (the "Indemnified Party") shall be entitled, at the sole
expense and liability of the party from whom indemnification is sought (the
"Indemnifying Party"), to exercise full control of the defense, compromise or
settlement of any third party claim, investigation, action, suit or proceeding
unless the Indemnifying Party within a reasonable time after the giving of such
notice by the Indemnified Party shall: (a) deliver a written confirmation to
such Indemnified Party that the indemnification provisions of Section 8.1 or 8.2
(as the case may be) are applicable to such claim, investigation, action, suit
or proceeding and that the Indemnifying Party will indemnify such Indemnified
Party in respect of such claim, action or proceeding pursuant to the terms of
Section 8.1 or 8.2 (as the case may be), (b) notify such Indemnified Party in
writing of the Indemnifying Party's intention to assume the defense thereof, and
(c) retain legal counsel reasonably satisfactory to such Indemnified Party to
conduct the defense of such claim, investigation, action, suit or proceeding.
(b) If the Indemnifying Party so assumes the defense of any such claim,
investigation, action, suit or proceeding in accordance herewith, then such
Indemnified Party shall cooperate with the Indemnifying Party in any manner that
the Indemnifying Party reasonably may request in
39
connection with the defense, compromise or settlement thereof. If the
Indemnifying Party so assumes the defense of any such claim, investigation,
action, suit or proceeding, the Indemnified Party shall have the right to employ
separate counsel and to participate in (but not control) the defense,
compromise, or settlement thereof, but the fees and expenses of such counsel
shall be the expense of such Indemnified Party unless (i) the Indemnifying Party
has agreed to pay such fees and expenses, (ii) any relief other than the payment
of money damages is sought against the Indemnified Party or (iii) such
Indemnified Party shall have been advised by its counsel that there may be one
or more legal defenses available to it which are different from or additional to
those available to the Indemnifying Party, and in any such case the reasonable
fees and expenses of such separate counsel shall be borne by the Indemnifying
Party. The Indemnifying Party shall not, without the written consent of such
Indemnified Party, settle or compromise or consent to entry of any judgment with
respect to any such claim, investigation, action, suit or proceeding (x) in
which any relief other than the payment of money damages is or may be sought
against such Indemnified Party, (y) in which the amount of money damages
contemplated to be paid in connection with such settlement, compromise or
judgment, exceeds any dollar limitations on the Indemnifying Party's obligations
hereunder pursuant to Section 8.1 or 8.2 or (z) which does not include as an
unconditional term thereof the giving by the claimant, party conducting such
investigation, plaintiff or petitioner to such Indemnified Party of a release
from all liability with respect to such claim, action, suit or proceeding.
(c) In the event that the indemnification provisions contained in this
Article VIII and the indemnification provisions contained in Section 9.7 are
both applicable or otherwise conflict with respect to any particular matter,
then the indemnification provisions contained in Section 9.7 shall be
controlling and shall apply for all purposes as to such matters.
8.4 Insurance Proceeds. The amount which each of Seller and Purchaser
may be required to pay to the other party pursuant to this Article VIII shall be
reduced (retroactively, if necessary) by any insurance proceeds or refunds
actually recovered by or on behalf of the applicable Indemnified Party in
reduction of the related Losses. If an Indemnified Party shall have received
the payment required by this Agreement from the Indemnifying Party in respect of
Losses and shall subsequently receive insurance proceeds or refunds in respect
of such Losses, then the Indemnified Party shall promptly repay to the
Indemnifying Party a sum equal to the amount of such insurance proceeds or
refunds actually received, net of costs and expenses, but not exceeding the
amount paid by the Indemnifying Party in respect of such Losses.
ARTICLE IX
TAX MATTERS
The parties agree that for purposes of this Article IX, in the event the
Primestar Transaction is consummated, Seller shall have no obligations with
respect to any tax liability incurred by the SNG Subsidiaries after the date on
which the Primestar Transaction is consummated (the "Primestar Closing Date")
and in such case, all references to the Closing Date or the Closing in this
Article IX and in Section 4.1(b)(vii) shall, with respect to all of the SNG
Subsidiaries, be deemed to refer to the Primestar Closing Date.
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9.1 Tax Returns. Seller has made available (or, in the case of Tax
Returns filed after the Closing Date, will make available) to Purchaser (i)
complete and accurate copies of the portions applicable to the Netlink
Corporations of all Federal or state consolidated or combined income Tax
Returns, and amendments thereto and (ii) all other Tax Returns, and any
amendments thereto, filed by or on behalf of the Netlink Corporations (or with
respect to its assets or businesses) for all taxable years or applicable periods
ending on or prior to the Closing Date, in each case, to the extent such Tax
Returns are relevant in the preparation by or on behalf of the Netlink
Corporations of Tax Returns subsequent to the Closing Date.
9.2 Termination of Prior Tax Settlement Agreements. All tax
settlement and tax-sharing agreements, arrangements, policies and guidelines,
formal or informal, express or implied, that may exist between the Netlink
Corporations and any affiliate ("Settlement Agreements") and all obligations
thereunder shall terminate prior to April 1, 1998. After April 1, 1998, none of
the Netlink Corporations shall be bound by such Settlement Agreements or have
any liability thereunder.
9.3 Pre-Closing Taxes.
(a) Each of the Netlink Corporations shall continue to be included
for all taxable periods (or portions thereof) ending on or before the Closing
Date in the consolidated Federal income Tax Return and any required state or
local consolidated or combined income or franchise Tax Returns of any affiliated
group of which any of them is or was a member (each of which is herein referred
to as a "Selling Affiliated Group") which Tax Returns include any of the Netlink
Corporations (all such Tax Returns including taxable periods (or portions
thereof) of the Netlink Corporations ending on or before the Closing Date are
hereinafter referred to, collectively, as "Pre-Closing Consolidated Returns").
Seller shall cause each Selling Affiliated Group to timely prepare and file (or
cause to be prepared and filed) all Pre-Closing Consolidated Returns and shall
timely pay all Taxes shown as due and payable on Pre-Closing Consolidated
Returns (including any Taxes with respect to any deferred income triggered into
income by Treasury Regulation (S) 1.1502-13 and Treasury Regulation (S) 1.1502-
14 and any excess loss accounts taken into income under Treasury Regulations (S)
1.1502-19).
(b) Seller shall timely prepare (or cause to be so prepared) all
other Tax Returns of the Netlink Corporations required by law for all taxable
periods ending on or before the Closing Date ("Pre-Closing Non-Consolidated
Returns"). All Pre-Closing Non-Consolidated Returns shall be prepared in a
manner consistent with prior practice and shall properly include and reflect the
income, activities, operations and transactions of the Netlink Corporations, as
applicable. Seller shall timely file (or cause to be so filed) all Pre-Closing
Non-Consolidated Returns which are due on or before the Closing Date and shall
pay (or cause the Netlink Corporations to pay as each may be liable) all Taxes
due thereon. Seller shall also pay (or cause the Netlink Corporations to pay as
each may be liable) the full amount of any Tax which is payable by the Netlink
Corporations without the filing of a Tax Return ("Non-Return Taxes"), payment of
which is due on or before the Closing Date. With respect to each Pre-Closing
Non-Consolidated Return due after the Closing Date, Seller shall deliver (or
cause to be so delivered) each such Pre-Closing Non-Consolidated Return to
Purchaser at least 15 days prior to the due date of such Tax Return, together
with a payment in an amount equal to the amount of Tax shown as due and payable
on such Pre-Closing Non-
41
Consolidated Return (after giving effect to any credits for the amount of Tax,
if any, paid on or prior to the Closing Date as shown on such Tax Return).
Subject to the foregoing, Purchaser shall cause the Netlink Corporations to file
all such Pre-Closing Non-Consolidated Returns that are due after the Closing
Date and to pay the amount of Tax shown as due and payable thereon to the extent
each is liable for such payment (after giving effect to any credits for the
amount of Tax, if any, previously paid as shown on such Tax Return).
9.4 Transfer Taxes. Each of Purchaser and Seller agrees to share
equally in the costs of, all sales, use, transfer, stamp, value added, duty,
excise, stock transfer, real property transfer, recording, gains and other
similar taxes and fees arising out of or in connection with the transactions
contemplated by this Agreement.
9.5 Post-Closing Taxes.
(a) Purchaser shall timely prepare and file (or cause to be so
prepared and filed) all Tax Returns required by law for all Taxes, covering
solely the Netlink Corporations, for taxable periods ending after the Closing
Date ("Post-Closing Returns"). Purchaser shall timely pay or cause to be paid
all Taxes relating to Post-Closing Returns ("Post-Closing Taxes"). Seller shall
reimburse Purchaser for (i) the amount of Post-Closing Taxes reported as payable
on each Post-Closing Return that is attributable to the portion of the period
covered by such Tax Return ending on the close of business on the Closing Date
(the "Pre-Closing Tax Period"), determined by treating the close of business on
the Closing Date as the last date of the taxable period, and (ii) the amount of
any Non-Return Tax payable after the Closing Date that is attributable to the
portion of the period covered by such payment which ends on or before the close
of business on the Closing Date (pro rata based upon the number of days covered
by such payment), in each case after giving effect to any credits for the amount
of such Post-Closing Tax or such Non-Return Tax, if any, paid on or prior to the
Closing Date by Seller, the Netlink Corporations or any of their predecessors or
affiliates. Such reimbursements shall be made on or before the later of the
date on which such return is filed or 15 days after receipt of a copy of such
return or evidence of such payment and Purchaser shall provide Seller with
copies of workpapers which will permit Seller to review and substantiate the
accuracy of such return or such payment.
(b) To the extent any determination of Taxes with respect to the
Netlink Subsidiaries, whether as the result of an audit or examination, a claim
for refund, the filing of an amended return, the application of an overpayment
as an offset, or otherwise, results in a refund of Taxes paid (a "Refund"),
Seller shall be entitled to any part of such Refund attributable to any period
ending on or before April 1, 1998, and the applicable Netlink Subsidiary shall
be entitled to the balance of such Refund. The party receiving a Refund shall,
within 10 days after receipt, pay over to the other party the portion of the
Refund to which the other party is entitled under this paragraph (along with a
proportionate share of any interest amounts received with the Refund).
9.6 Tax Cooperation. After the Closing Date, Seller shall submit (or
cause to be submitted) to Purchaser blank Tax Return workpaper packages.
Purchaser shall cause the Netlink Corporations to prepare completely and
accurately all information that Seller shall reasonably request in such
workpaper packages and shall submit to Seller such packages within the later
of 90
42
calendar days after Purchaser's receipt thereof or 90 calendar days after the
close of the taxable period to which a workpaper package relates. The parties
shall cooperate with each other in connection with any Tax investigation, audit
or other proceeding. Purchaser shall preserve all information, returns, books,
records and documents relating to any liabilities for Taxes with respect to a
taxable period until the later of the expiration of all applicable statutes of
limitation and extensions thereof, or a final determination with respect to
Taxes for such period.
9.7 Indemnification.
(a) After the Closing Date, Seller shall indemnify and hold harmless
Purchaser and its subsidiaries, successors and assigns from and against all
Taxes of the Netlink Corporations (the "Companies") allocable to any period
ending on or prior to April 1, 1998 (referred to as a "Pre-Signing Period")
whether such Taxes are due before or after Closing. The Taxes allocable to a
Pre-Signing Period shall be determined on the basis of a closing of the books of
the Companies at the end of the day on April 1, 1998. The Taxes attributable to
the Companies' direct and indirect interest in the Tax Partnerships shall be
determined by a closing of the books of each Tax Partnership as of the end of
the day on April 1, 1998, and all Taxes attributable to the operations and
activities of a Tax Partnership through the end of the day on April 1, 1998
shall be considered Taxes of the Companies allocable to a Pre-Signing Period.
In this Agreement, any reference to "Tax Partnerships" means Netlink USA, SNG,
UVI Network WGN, Superstar Entertainment Netlink WGN and any other entity
treated as a partnership for federal income tax purposes in which the Companies
have a direct or indirect interest. Non-Return Taxes shall be apportioned based
upon the number of days covered by such payment which are on or before April 1,
1998 and the total number of days covered by such payment, in each case, to the
extent such amount exceeds any amount previously paid to Purchaser with respect
to such Tax pursuant to Section 9.3 or 9.5, as applicable. Seller shall pay such
amounts as it is obligated to pay to Purchaser within 10 calendar days after
payment of any applicable Tax liability by Purchaser or any subsidiary of
Purchaser and to the extent not paid by Seller within such 10-day period, the
amount due shall thereafter include interest thereon at a rate per annum equal
to the "overpayment rate" under Section 6621(a) of the Code (the "Overpayment
Rate"), adjusted as and when changes to such Overpayment Rate shall occur,
compounded semi-annually. Seller shall indemnify and hold harmless Purchaser or
any subsidiary of Purchaser, successors and assigns, from and against (i) any
Tax liability for periods prior to and including the Closing Date resulting
solely from the Netlink Subsidiaries being severally liable for any Taxes of any
consolidated group of which the Netlink Corporations is or was a member pursuant
to Treasury Regulations (S) 1.1502-6 or any analogous state or local tax
provision (including, without limitation, any Tax liability with respect to any
Pre-Closing Consolidated Return), and (ii) any Tax liability resulting from the
Netlink Corporations ceasing to be a member of any Selling Affiliated Group
filing consolidated or combined Tax Returns (including, without limitation, Tax
liability for excess loss accounts and deferred intercompany gains).
(b) After the Closing Date, Purchaser and each of its subsidiaries,
jointly and severally shall indemnify and hold harmless Seller and its
affiliates, successors and assigns from and against (i) any Tax liability
resulting from any addition to the taxable income of the Netlink Corporations
that is attributable to the period ending after April 1, 1998 and on or before
the Closing Date, using for this purpose the taxable income as reflected on the
Federal consolidated income tax return filed
43
by TCI, other than Tax liability described in clause (ii) of Section 9.7(a)
("Addition to Taxable Income"), provided, that such Tax liability shall be
reduced by the amount of any payment made to Seller with respect to the
Estimated Tax Payment pursuant to Section 4.1(b)(vii), (ii) any Tax liability
with respect to any Non-Return Taxes, that are attributable to the portion of
the period covered by any payment of such Taxes which begins after April 1, 1998
and ends on or before the Closing Date (determined on a pro rata basis based
upon the number of days covered by such payment which are both after April 1,
1998 and on or before the Closing Date and the total number of days covered by
such payment) and (iii) any Tax liability with respect to the period beginning
after the Closing Date on a Post-Closing Return and with respect to any Non-
Return Taxes attributable to the portion of the period covered by any payment of
such Taxes which begins after the Closing Date (determined on a pro rata basis
based upon the number of days covered by such payment which are after the
Closing Date and the total number of days covered by such payment). For purposes
of clause (i) of the previous sentence, the amount of the Tax liability shall be
deemed to equal: (x) 20% of such Addition to Taxable Income to the extent that
the income resulting in the Addition to Taxable Income reduces the amount of the
excess loss accounts that Seller would otherwise be responsible for under
Section 9.3(a) or clause (ii) of Section 9.7(a); and (y) 40% of any remaining
Addition to Taxable Income not described in clause (x). Purchaser shall pay or
cause the appropriate Netlink Subsidiary to pay such amounts within 10 calendar
days after payment of any such Tax liability by Seller and, to the extent not
paid within such 10-day period, the amount due shall thereafter include interest
thereon at the Overpayment Rate, compounded semi-annually.
9.8 Notification of Proceedings, Control; Refunds.
(a) In the event that Purchaser or any of the Netlink Subsidiaries receive
notice, whether orally or in writing, of any pending or threatened United States
Federal, state, local, municipal or foreign tax examinations, claims
settlements, proposed adjustments, assessments or reassessments or related
matters with respect to Taxes that could affect TCI, Seller or their
subsidiaries, or if TCI, Seller or any of their subsidiaries receive notice of
any matter that could affect Purchaser or any of the Netlink Subsidiaries, the
party receiving notice shall notify in writing the potentially affected party
within 10 calendar days thereof. The failure of any party to give the notice
required by this Section 9.8(a) shall not impair that party's rights under this
Agreement except to the extent that the other party demonstrates that it has
been damaged thereby.
(b) Subject to Section 9.9, each of Seller and Purchaser shall have the
right to control any audit or examination by any taxing authority, initiate any
claim for refund, file any amended return, contest, resolve and defend against
any assessment, notice of deficiency or other adjustment or proposed adjustment
relating or with respect to any Taxes, the ultimate liability for which is the
responsibility of that party or its affiliates under Section 9.7(a) or 9.7(b),
and each of Seller and Purchaser shall be entitled to, and to the extent
received by the other shall be promptly paid by the other, all refunds with
respect to any such Taxes.
9.9 Tax Effect of Payments. The amount of any payments required to be made
under this Article IX shall be reduced by the amount of any tax benefit actually
received by (including by refund or by reduction of or offset against Taxes
otherwise payable) the recipient by reason of the
44
payment or incurrence by such recipient of the item for which the indemnity is
being sought. Each party shall notify the other of such receipt of any such tax
benefits.
9.10 Withholding. For purposes of withholding under Section 1445 of the
Code, Seller represents that Seller is not a "foreign person" as defined in
Section 1445(f)(3) of the Code. Seller shall provide to Purchaser prior to the
Closing Date a certificate, substantially in the form of Exhibit 9.10 hereto, or
an affidavit necessary to substantiate exemption from such withholding.
ARTICLE X
GENERAL PROVISIONS
10.1 Survival. The representations and warranties of Purchaser and
Seller contained herein and the covenants of the parties contained in Sections
5.2, 5.3, 5.4, and 5.5 shall survive the Closing and continue in full force and
effect for one year after the Closing Date; provided that the representations
and warranties of Purchaser contained in Sections 3.3 and 3.13 and of Seller
contained in Sections 2.3 and 2.13 shall survive the Closing until the
expiration of the statute of limitations applicable to claims that may be
asserted in respect of the matters covered thereby. The obligations of the
parties in Section 5.6, Articles VIII, IX and X, shall survive the Closing
without limitation (subject to any applicable statute of limitations), except
pursuant to their terms. No covenant in any section not specified in the
previous sentence shall survive the Closing.
10.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail, return receipt
requested, or sent via facsimile, with confirmation of receipt, to the parties
at the following address or at such other address for a party as shall be
specified by notice hereunder:
(a) if to Purchaser, to:
United Video Satellite Group, Inc.
0000 Xxxxx Xxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Holme Xxxxxxx & Xxxx LLP
0000 Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
45
Facsimile No.: (000) 000-0000
(b) if to Seller, to:
Liberty Media Corporation
0000 Xxxx Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxx & Xxxxx, L.L.P.
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxxxx Xxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile No.: (000) 000-0000
10.3 Interpretation. When a reference is made in this Agreement to
Exhibits, Articles or Sections, such reference shall be to an Exhibit, Article
or Section to this Agreement unless otherwise indicated. The words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party hereto to whom such information is to be made available.
The table of contents and Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. In this Agreement, except as
otherwise specifically provided, any reference to any event, change, condition
or effect being "material" with respect to any entity or group of entities means
any material event, change, condition or effect related to the condition
(financial or otherwise), properties, assets (including intangible assets),
liabilities, business, operations or results of operations of such entity or
group of entities. In this Agreement, any reference to a "Material Adverse
Change" or "Material Adverse Effect" with respect to any entity or group of
entities means any event, change or effect that is materially adverse to the
condition (financial or otherwise), properties, assets, liabilities, business,
operations or results of operations of such entity and its subsidiaries, taken
as a whole. In this Agreement, any reference to a party's "knowledge" means
such party's actual knowledge after due and diligent inquiry of officers,
directors and other employees of such party reasonably believed to have
knowledge of such matters. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms.
10.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more
46
counterparts have been signed by each of the parties hereto and delivered to the
other parties hereto, it being understood that all parties hereto need not sign
the same counterpart.
10.5 Entire Agreement; Nonassignability; Parties in Interest. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, the
Seller Disclosure Schedule, the Nondisclosure Agreement and the SNG Agreement
(a) constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties hereto with respect to the subject
matter hereof; (b) are not intended to confer upon any other person any rights
or remedies hereunder; and (c) shall not be assigned by operation of law or
otherwise except as otherwise specifically provided.
10.6 Severability. In the event that any provision of this
Agreement, or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties hereto
further agree to replace such void or unenforceable provision of this Agreement
with a valid and enforceable provision that will achieve, to the extent
possible, the economic, business and other purposes of such void or
unenforceable provision.
10.7 No Waiver. No failure or delay on the part of any party hereto
in the exercise of any right hereunder shall impair such right or be construed
to be a waiver of, or acquiescence in, any breach of any representation,
warranty or agreement herein, nor shall any single or partial exercise of any
such right preclude other or further exercise thereof or of any other right.
10.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado (without regard
to the principles of conflicts of law thereof).
10.9 Rules of Construction. The parties hereto agree that they have
been represented by counsel during the negotiation, preparation and execution of
this Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement or
other document will be construed against the party drafting such agreement or
document.
10.10 Expenses. Whether or not the transactions contemplated hereby
are consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of its advisers, accountants and legal
counsel) shall be paid by the party incurring such expense.
10.11 Attorneys Fees. In the event of any proceeding to enforce this
Agreement, the prevailing party shall be entitled to receive from the losing
party all reasonable costs and expenses, including the reasonable fees of
attorneys, accountants and other experts, incurred by the prevailing party in
investigating and prosecuting (or defending) such action at trial or upon any
appeal.
47
10.12 Further Assurances. In case at any time after the Closing or
applicable Closing, as the case may be, any further action is necessary or
desirable to carry out the purposes of this Agreement with respect to the
transactions consummated at such Closing and vest Purchaser and Seller with full
title to the Purchased Shares and UVSG Shares, respectively, delivered at such
Closing, each party shall, at the request and expense of the other party, and
without further consideration, execute and deliver such other instruments of
conveyance and transfer, fully cooperate with the requesting party and take such
other actions as the requesting party reasonably may request.
IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase
Agreement to be executed and delivered by their respective officers thereunto
duly authorized, all as of the date first written above.
UNITED VIDEO SATELLITE GROUP, INC., a Delaware
corporation
By: /s/ Xxxxx X. Xxxxxx
_______________________________
Name: Xxxxx X. Xxxxxx
Title: President
LIBERTY MEDIA CORPORATION, a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxx
________________________________
Name: Xxxxxx X. Xxxxxxx
Title: President
48
EXHIBIT 9.10
FORM OF
CERTIFICATE OF NON-FOREIGN STATUS
Section 1445 of the Internal Revenue Code of 1986, as amended (the
"Code") provides that a transferee of a U.S. real property interest must
withhold tax if the transferor is a foreign person. To inform the transferee
that withholding of tax is not required upon the disposition of a U.S. real
property interest by Liberty Media Corporation ("Seller"), the undersigned
hereby certifies the following on behalf of Seller;
ARTICLE XI Seller is not a foreign corporation, foreign partnership,
foreign trust, or foreign estate (as those terms are defined in the Code and
Income Tax Regulations);
ARTICLE XII Seller's U.S. employer identification number is 00-0000000,
and
ARTICLE XIII Seller's office address is 0000 X. Xxxxxxxx Xxx., Xxxxx 000,
Xxxxxxxxx, XX 00000.
Seller understands that this certification may be disclosed to the
Internal Revenue Service by transferee and that any false statement contained
herein could be punished by fine, imprisonment, or both.
Under penalties of perjury I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct and
complete, and I further declare that I have authority to sign this document on
behalf of Seller.
Executed on _____, 1998.
By:____________________
Name:_______________
Title:______________
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