EXHIBIT 10.8
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FORM OF
GENERAL PARTNERSHIP AGREEMENT
OF NATIONAL SPORTS PARTNERS
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS
ARTICLE II FORMATION OF GENERAL PARTNERSHIP
2.1 Formation............................................................. 14
2.2 Name.................................................................. 14
2.3 Compliance with Partnership and Other Laws............................ 14
2.4 Term.................................................................. 15
2.5 Principal Place of Business........................................... 15
2.6 Purpose............................................................... 15
2.7 Qualification in other Jurisdictions.................................. 16
2.8 Ownership of Property................................................. 16
ARTICLE III PARTNERSHIP CAPITAL
3.1 Capital Contributions................................................. 16
3.2 Failure to Make Capital Contributions................................. 17
3.3 Capital Accounts...................................................... 23
3.4 Allocation of Items of Partnership Income,
Gain, Loss, Deduction and Credit.................................... 26
3.5 Distributions......................................................... 30
3.6 Partnership Funds..................................................... 31
3.7 Borrowings.............................................................32
ARTICLE IV MANAGEMENT OF THE PARTNERSHIP
4.1 Management of the Partnership's Business.............................. 32
4.2 Partners' Committee................................................... 34
4.3 Extraordinary Decisions............................................... 37
4.4 Budget and Business Plan Approval..................................... 38
4.5 Limitation on Agency.................................................. 43
4.6 Managing Partner's Services and Expenses.............................. 44
4.7 Liability of Partners' Committee and Managing Partner................. 44
4.8 Indemnification....................................................... 45
4.9 Contracts with Related Persons and Partner Associates................. 47
4.10 Approved Agreements................................................... 51
4.11 Unanimous Actions by Partners......................................... 51
4.12 Removal of Managing Partner........................................... 53
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ARTICLE V BOOKS AND RECORDS; REPORTS TO PARTNERS
5.1 Books and Records..................................................... 54
5.2 Financial Reports..................................................... 55
5.3 Tax Returns and Information........................................... 57
ARTICLE VI PLEDGES, TRANSFERS, ADMISSIONS, WITHDRAWALS
6.1 Transfer by Partners.................................................. 61
6.2 Additional Provisions Relating to Transfer............................ 66
6.3 Effect of Attempted Transfer; Withdrawals and Admissions Generally.... 68
6.4 Tax Allocation Adjustments; Distributions After Transfer.............. 69
6.5 Certain Affiliate Transferee Transactions Not Deemed Transfers........ 69
6.6 IPO-Call Procedure.................................................... 70
ARTICLE VII EVENTS OF DEFAULT
7.1 Events of Default..................................................... 74
7.2 Remedies of Non-Defaulting Partners................................... 75
ARTICLE VIII DURATION AND TERMINATION OF THE PARTNERSHIP
8.1 Events of Termination................................................. 77
8.2 Winding-Up............................................................ 78
8.3 Purchase Option Upon Bankruptcy of a Partner.......................... 80
ARTICLE IX COVENANTS, REPRESENTATIONS AND WARRANTIES
9.1 Compliance with Applicable Law........................................ 82
9.2 No Restrictive Covenants.............................................. 82
9.3 Indemnification of Partners; Contribution............................. 83
9.4 Notice of Change in Control and Indirect
Transfer.............................................................. 84
ARTICLE X MISCELLANEOUS
10.1 Waiver of Partition................................................... 84
10.2 Modification; Waivers................................................. 84
10.3 Entire Agreement...................................................... 85
10.4 Severability.......................................................... 86
10.5 Notices............................................................... 86
10.6 Successors and Assigns................................................ 88
10.7 Counterparts.......................................................... 88
10.8 Headings; Cross-references............................................ 88
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10.9 Construction.......................................................... 89
10.10 Property Rights; Confidentiality...................................... 89
10.11 Non-Recourse.......................................................... 91
10.12 Further Actions....................................................... 92
10.13 Survival.............................................................. 92
10.14 Governing Law......................................................... 92
10.15 No Right of Set-Off................................................... 92
10.16 Expenses of the Parties............................................... 92
10.17 Unregistered Interests................................................ 93
ANNEXES
A Approved Agreements of the Partnership
B Budget and Business Plan
C Form of Subordinated Note
D Allocation Policy for Indirect Expenses
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THIS GENERAL PARTNERSHIP AGREEMENT (the "Agreement") of National
Sports Partners, a general partnership organized under the laws of the State of
New York (the "Partnership"), made as of [INSERT EFFECTIVE DATE], is entered
into by and between Rainbow National Sports Holdings, L.L.C., a Delaware limited
liability company ("Rainbow Partner"), and Fox Sports National Holdings LLC, a
Delaware limited liability company ("Fox/Liberty Partner").
W I T N E S S E T H:
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WHEREAS, Rainbow Partner and Fox/Liberty Partner desire to form the
Partnership, to, among other things, own and operate a national sports network
under the name "Fox Sports Net" ("Fox Sports").
WHEREAS, pursuant to the Formation Agreement, dated as of June 22,
1997, between Rainbow Media Sports Holdings, Inc. and Fox/Liberty Networks, LLC
(the "Formation Agreement"), Rainbow Partner and Fox/Liberty Partner are
contributing certain programming interests to the Partnership and to pursue the
other purposes described herein.
WHEREAS, Rainbow Partner and Fox/Liberty Partner wish to set forth
their respective rights and obligations with respect to the formation of the
Partnership under the Partnership Law of the State of New York.
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto intending to be legally bound hereby agree as follows:
ARTICLE I
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DEFINITIONS
As used herein, the following terms have the meanings assigned to them
in this Article (except as other wise expressly provided) and include the
plural as well as the singular, and all accounting terms not otherwise defined
herein have the meanings assigned to them in accordance with GAAP, as in effect
from time to time and any capitalized term used herein and not defined in this
Article is defined in the provision of this Agreement where such term is first
used:
Adjusted Capital Account Deficit: With respect to any Partner, the
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deficit balance, if any, in such Partner's Capital Account as of the end of
the relevant taxable period, after giving effect to the following
adjustments: (i) credit to such Capital Account any amounts that such
Partner is obligated to restore or is deemed to be obligated to restore
pursuant to the next-to-last sentences of Treasury Regulations Section
1.704-2(g)(1) and Treasury Regulations Section 1.704-2(i)(5), and (ii)
debit to such Capital Account the items described in Treasury Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
Affiliate: As to any Person, any other Person that directly or
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indirectly through one or more intermedi aries is Controlled by, Controls
or is under common Control with, such Person.
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For purposes of this definition, (x) so long as Liberty owns, directly or
indirectly, an interest in Fox/Liberty Partner, any Affiliate of
Fox/Liberty Partner shall be deemed an Affiliate of Liberty, and Liberty
shall be deemed an Affiliate of Fox/Liberty Partner and any Affiliate of
Liberty shall be deemed an Affiliate of Fox/Liberty Partner, (y) so long as
Fox owns, directly or indirectly, an interest in Fox/Liberty Partner, any
Affiliate of Fox/Liberty Partner shall be deemed an Affiliate of Fox, and
Fox shall be deemed an Affiliate of Fox/Liberty Partner and any Affiliate
of Fox shall be deemed an Affiliate of Fox/Liberty Partner and (z)
Twentieth Holdings Corporation and its Subsidiaries shall be deemed to be
Affiliates of Fox. Notwithstand ing the foregoing, (i) neither the
Partnership nor any Person Controlled by the Partnership shall be deemed to
be an "Affiliate" of any Partner or of any Affiliate of any Partner, (ii)
no Partner or any Affiliate thereof shall be deemed to be an "Affiliate" of
any other Partner or any Affiliate thereof solely by virtue of its Interest
in the Partnership, and (iii) neither Liberty or its Affiliates (other than
Fox/Liberty Partner) on the one hand nor Fox or its Affiliates (other than
Fox/Liberty Partner) on the other hand shall be deemed to be an "Affiliate"
of the other solely by virtue of the ownership of Fox/Liberty Partner by
Fox and Liberty and their respective Affiliates.
Affiliate Transferee: As defined in Section 6.5(a).
Agreement: This General Partnership Agreement, as the same may be
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amended from time to time in accordance with the provisions hereof.
Allocated Interest Offer Price: In the case of any proposed sale of
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an Offered Interest (as defined in Section 6.1(b)) in conjunction with
other property owned by a Partner or an Affiliate of a Partner, an amount
equal to the product of the aggregate considera tion, including, without
limitation, the assumption of debt and any contractual payments to be
received for all such property and a fraction, the numerator of which is
equal to the Fair Market Value of the Offered Interest and the denominator
of which is equal to the Fair Market Value of all such property to be sold.
Annual Maximum Amount: $250,000 (increased or decreased annually by a
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percentage equal to the
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percentage increase or decrease for the immediately preceding year in the
Consumer Price Index).
Appraiser: An independent investment banking firm appointed in
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accordance with the terms of this Agreement that (a) is not (i) an
Affiliate, or an officer, director, employee or holder of any voting
securities of the Partnership or any Partner or (ii) an officer, director,
employee or holder of more than 5% of the voting securities of any
Affiliate of any Partner, and (b) is engaged as a regular part of its
business in the valuation of business entities.
Approved Agreements: The agreements listed in Annex A to this
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Agreement as the same may be amended from time to time in accordance with
the provisions hereof and thereof.
Arm's-length basis: As to any transaction, agreement or other
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arrangement, being on terms that would be reached by unrelated parties not
under any compulsion to contract.
Bankruptcy: The "Bankruptcy" of a Partner shall be deemed to have
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occurred and a Partner shall be "Bankrupt" for purposes of this Agreement
upon the happening of any of the following:
(a) The valid appointment of a receiver or trustee to administer
all or a substantial portion of a Partner's assets or a Partner's
Interest in the Partnership;
(b) The filing by a Partner of a voluntary petition for relief
under the Bankruptcy Code or of a pleading in any court of record
admitting in writing its inability to pay its debts generally as they
become due;
(c) The making by a Partner of a general assignment for the
benefit of creditors;
(d) The filing by a Partner of an answer admitting the material
allegations of, or its consenting to or defaulting in answering, a
petition for relief filed against it in any proceeding under the
Bankruptcy Code; or
(e) The entry of an order, judgment or decree by any court of
competent jurisdiction, granting relief against a Partner in a
proceeding under the
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Bankruptcy Code, and such order, judgment or decree continuing
unstayed and in effect for a period of thirty (30) days after such
entry.
Bankruptcy Code: The Bankruptcy Reform Act of 1978, as amended from
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time to time, any successor federal statute or any state law for the relief
of debtors.
Bona Fide Offer: As defined in Section 6.1(b).
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Budget: At any time, the then-effective annual operating and capital
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budget for the Partnership, approved in the manner contemplated by Section
4.4.
Business Day: Each Monday, Tuesday, Wednesday, Thursday or Friday
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which is not a day on which banking institutions in New York City are
authorized or obli gated by law to close.
Business Plan: The business plan for the Partnership for the period
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from January 1, 1997 through December 31, 2001, a copy of which is annexed
hereto as Annex B, or the five-year business plan for the Partnership most
recently approved by the Partners' Committee pursuant to Section 4.4, as
the case may be.
Call Price: As defined in Section 6.6(b).
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Capital Account: As defined in Section 3.3(a).
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Change in Control: As to any Partner, a change, shift or transfer of
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Control with respect to such Partner (including any change in the Control
of any entity Controlling such Partner). Notwithstanding the foregoing, no
Change in Control shall be deemed to have occurred with respect to (i)
Rainbow Partner as a result of a change, shift or transfer of Control with
respect to RMH or any Person Controlling RMH; (ii) Fox/Liberty Partner as a
result of a change, shift or transfer of Control with respect to Liberty or
any Person Controlling Liberty; or (iii) Fox/Liberty Partner as a result of
a change, shift or transfer of Control with respect to Fox or any Person
Controlling Fox.
Code: The United States Internal Revenue Code of 1986, as amended
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from time to time, or any successor statute or statutes to the Internal
Revenue Code of 1986.
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Complying Partner: As defined in Section 3.2(a).
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Consolidated Entity: Any entity in which the Partnership has an
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equity interest and the accounts of which are, in accordance with GAAP,
consolidated with those of the Partnership for financial reporting
purposes.
Consumer Price Index: The Consumer Price Index -All Urban Consumers
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(All Items) published by the U.S. Bureau of Labor Statistics or, if such
index shall no longer be published, any comparable measure of changes in
consumer prices on a national basis that is prepared and published
periodically by an agency of the United States Government.
Contributing Partner: As defined in Section 3.2(a).
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Contribution Date: As defined in Section 3.1(a).
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Control: As to any Person, the possession, directly or indirectly, of
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the power to direct or cause the direction of the management and policies
of such Person, whether through ownership of voting securities or
partnership interests, by contract or otherwise.
Corporation: a Person succeeding to the business of the Partnership
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by merger or otherwise for the purpose of facilitating an Initial Public
Offering, the ownership of which immediately following such reorganization
or restructuring is in the same relative proportion to the Sharing
Percentages of the Partners immediately prior thereto; provided, that the
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securities issued to each Partner are of the same class of securities to
be issued in the Initial Public Offering.
CSC: Cablevision Systems Corporation, a Delaware corporation.
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Current Market Price: Shall mean, per share or unit of Marketable
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Securities on any date specified, the average of the daily market prices of
such Marketable Securities for the 20 consecutive Business Days ending on
the second Business Day prior to such date. The daily market price of
Marketable Securities on any Business Day will be (a) the last sale price
on such day on the principal stock exchange on which such share or unit of
Marketable Securities is then listed or admitted to trading (including the
Nasdaq National Market System if such Marketable Securities are
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admitted to trading thereon), or (b) if no sale takes place on such date on
any exchange on which such share or unit of Marketable Securities is listed
or admitted to trading, the average of the reported closing bid and asked
prices on such day as officially noted on any exchange.
Damages: As defined in Section 7.2.
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Defaulting Partner: As defined in Section 7.1(a).
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Deferred Budget Decision: A circumstance in which Management Overhead
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allocated to the Partnership pursuant to Section 4.6 is being disputed or
has otherwise not been definitively established and is the only remaining
disputed or unestablished item with respect to a Proposed Budget.
Delinquent Partner: As defined in Section 3.2(c).
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Designee: An Affiliate of an Offeree designated by the Offeree to
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purchase an Interest.
Disinterested Partner: A Partner or Partners who are not benefitted
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by, and none of whose Partner Associates is benefitted by, the terms of the
Related Affiliation Agreement in question or the actions in question which
may affect a Related Affiliation Agreement or a Partner or Partner
Associate.
Effective Date: [INSERT THE CLOSING DATE OF THE TRANSACTIONS
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CONTEMPLATED BY THE FORMATION AGREEMENT].
Event of Default: As defined in Section 7.1.
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Event of Termination: As defined in Section 8.1.
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Excess Contribution: As defined in Section 3.2(a).
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Extraordinary Decision: As defined in Section 4.3.
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Fair Market Value: As to any property, the price at which a willing
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seller would sell and a willing buyer would buy such property having full
knowledge of the facts, and assuming each party acts on an Arm's-length
basis with the expectation of concluding the purchase or sale within a
reasonable time. Except as provided herein, in any case where there is a
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dispute as to the Fair Market Value of any property, such dispute shall
bedetermined by an Appraiser selected jointly by the applicable Partners
or, if the applicable Partners are not able to agree on an Appraiser, each
applicable Partner shall select an Appraiser and the Appraisers so selected
shall select another Appraiser, which shall determine the Fair Market Value
of the property in question.
Fiscal Year: As defined in Section 5.1(c).
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Forfeited Partner: As defined in Section 3.2(c).
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Fox: Fox Inc., a Colorado corporation, and any entity succeeding to
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all or substantially all of the assets of Fox Inc.
Fox/Liberty Partner: Fox Sports National Holdings LLC, a Delaware
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limited liability company.
GAAP: Generally accepted accounting principles as in effect in the
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United States from time to time and consistently applied.
Indirect Transfer: With respect to an Interest, a transfer of Control
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of the Partner directly owning such Interest or of any Affiliate of a
Partner more than 50% of the Fair Market Value of which is attributable,
directly or indirectly, to such Interest; provided, that, any transaction
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which is not a Change in Control by virtue of the second sentence of the
definition of "Change in Control" shall similarly not be an Indirect
Transfer.
Initial Capital Account Balance: The Initial Capital Account Balance
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of each Partner shall be as follows:
Rainbow Partner: $50,000,000
Fox/Liberty Partner: $50,000,000
Initial Public Offering: As to the Partnership or the Corporation, an
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initial public offering of the securities of the Partnership or the
Corporation pursuant to a registration statement filed pursuant to the
Securities Act of 1933 that results in a class of securities of the
Partnership or the Corporation being required to be registered pursuant to
Section 12 of the Securities Exchange Act of 1934.
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Interest: As to each Partner, such Partner's rights to participate in
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the income, gains, losses, deductions and credits of the Partnership,
together with all other rights and obligations of such Partner under this
Agreement.
IPO-Call Closing Date: As defined in Sec tion 6.6(d).
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IPO-Call Notice: As defined in Section 6.6(a).
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IPO-Call Notice Window: (i) the 30 days following the fifth
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anniversary of the Effective Date and (ii) the 30 days following each third
anniversary of the fifth anniversary of the Effective Date; provided that
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in every case there shall not be an IPO-Call Notice Window if an Initial
Public Offering of the Partnership or the Corporation has occurred prior to
such date.
IPO-Call Procedure: As defined in Section 6.6(a).
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Liberty: Liberty Media Corporation, a Delaware corporation, and any
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entity succeeding to all or substantially all of its assets.
Losses: As defined in Section 3.4(a).
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Make-up Amount: As defined in Section 3.2(c).
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Make-up Contribution: As defined in Sec tion 3.2(c).
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Management Overhead: Expenses of Related Persons with respect to the
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Managing Partner, a portion of which are allocated to the Partnership and
any Related Persons with respect to the Managing Partner pursuant to
Section 4.6.
Managing Partner: The Managing Partner of the Partnership shall be
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Fox/Liberty Partner, unless and until changed in accordance with the
provisions of this Agreement.
Marketable Securities: Shall mean securities of a Person that are
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freely tradeable without federal securities laws restrictions and that are
listed on a national securities exchange in the United States of America or
are authorized for inclusion in the Nasdaq National Market System, and
which represent less than
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50% of the total securities of such class and securities convertible or
exchangeable into such class.
Maximum Amount: $1,000,000 (increased or decreased annually by a
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percentage equal to the percentage increase or decrease for the immediately
preceding year in the Consumer Price Index).
Minimum Gain Attributable to Partner Nonrecourse Debt: That amount
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determined in accordance with the principles of Treasury Regulations Sec-
tion 1.704-2(i)(3).
Minimum Interest: As to any Person, (i) 50% of the voting securities
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or (ii) 50% of each of (a) all of the general partnership or membership
interests in such Person and (b) all of the partnership or membership
interests in such Person.
Nonbankrupt Partner: As defined in Section 8.3.
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Non-Defaulting Partner: As defined in Section 7.2.
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Nonrecourse Deductions: Any and all items of loss or deduction or
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expenditure, including those described in Section 705(a)(2)(B) of the Code
that in accordance with the principles of Treasury Regulations Section
1.704-2(b)(1) are attributable to a Nonrecourse Liability.
Nonrecourse Liability: Has the meaning set forth in Treasury
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Regulations Section 1.704-2(b)(3).
Offered Interest: As defined in Section 6.1(b).
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Offeree: As defined in Section 6.1(b).
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Offer Notice: As defined in Section 6.1(b).
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Operating Income (Loss): For any period, the consolidated net income
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(loss) of the Partnership and the Consolidated Entities for such period
attributable to continuing operations before income taxes, depreciation
of plant, property and equipment, interest expense, interest income,
amortization of goodwill and amortization of organization cost,
amortization of step-ups, extraordinary items, any prior year adjust
ments, losses or gains from the sale of plants, divisions or other major
items of property, adjustments arising from major changes in accounting
methods,
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losses or gains on foreign exchange, bonuses and other periodic incentive
compensation payments to officers and employees and other material and
nonrecurring expenses as determined in accordance with GAAP.
Partner: Rainbow Partner, Fox/Liberty Partner or any other Person
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hereafter admitted to the Partnership in accordance with the terms hereof,
but excluding any Person that ceases to be a Partner in accordance with the
terms hereof.
Partner Associate: As defined in Section 4.9(a).
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Partner Nonrecourse Debt: Has the meaning set forth in Treasury
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Regulations Section 1.704-2(b)(4).
Partner Nonrecourse Deductions: Any and all items of loss or
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deduction or expenditure, including those described in Section 705(a)(2)(B)
of the Code that in accordance with the principles of Treasury Regulations
Section 1.704-2(i)(2), are attributable to Partner Nonrecourse Debt.
Partners' Committee: As defined in Section 4.2.
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Partner's Loan: A loan by a Partner or a Related Person of a Partner
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to the Partnership in respect of which repayment of principal and interest
shall be sub ordinated to the repayment of the principal of, and interest
on, the indebtedness of the Partnership to third party lenders. All
Partner's Loans shall bear interest, payable quarterly, at the Prime Rate
and shall be unsecured and recourse thereunder shall be limited to the
assets of the Partnership, and, except as otherwise provided in Section
6.3(b), the note evidencing the same shall be non-negotiable and non-
transferable (except to a Permitted Transferee of an Interest) and shall be
in substantially the form annexed hereto as Annex C.
Partnership: As defined in the Recitals.
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Partnership Minimum Gain: That amount determined in accordance with
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the principles of Treasury Regulations Section 1.704-2(d).
Partnership Property: As defined in Section 2.8.
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Permitted Investment: An investment of any of the following types:
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(a) United States Treasury bills and notes; (b) securities guaranteed by
the United States
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or an agency of the United States and backed by the full faith and credit
of the United States; (c) certi ficates of deposit, banker's acceptances or
time deposits issued by any commercial bank or branch thereof chartered by
the United States or any State thereof or by the District of Columbia and
having its long-term debt obligations rated A-or better by Standard &
Poor's Ratings Group ("Standard & Poor's"); (d) commercial paper rated A-3
or better by Standard & Poor's; (e) repurchase agreements with financial
insti tutions the long-term debt obligations of which are rated A- or
better by Standard & Poor's; (f) Eurodollar deposits with direct
subsidiaries of any commercial bank chartered by the United States or any
State thereof or by the District of Columbia and having its long-term debt
obligations rated A- or better by Standard & Poor's; or (g) other
instruments and invest ments approved by the Partners' Committee.
Person: An individual or a corporation, partner ship, limited
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liability company, trust, unincorporated association or other entity.
Prime Rate: A rate of interest equal to the rate per annum announced
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from time to time by The Chase Manhattan Bank, at its principal office as
its prime rate (which rate shall change when and as such announced prime
rate changes) but in no event more than the maximum rate of interest
permitted to be collected from time to time under applicable usury laws.
Profits: As defined in Section 3.4(a).
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Proposed Budget: As defined in Section 4.4(a).
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Proposed Business Plan: As defined in Section 4.4(a).
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Rainbow Partner: Rainbow National Sports Holdings, L.L.C., a Delaware
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limited liability company.
Refusing Partner: As defined in Section 3.2(a).
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Related Affiliation Agreement: As defined in Section 4.9(a).
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Related Person: As to each Partner, (i) such Partner, (ii) each
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Affiliate of such Partner, (iii) each director, officer or general partner
of, or any stockholder or limited partner known to the Partner to own an
equity interest greater than 10% in, such
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Partner or any Affiliate of such Partner, or (iv) each Person other than
the Partnership in which such Partner or, to the knowledge of such Partner,
any Affiliate of such Partner has an equity interest greater than 10%,
excluding any business in which the Partnership has an interest, directly
or indirectly.
Restricted Person: Each Person listed on a writing executed by the
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parties hereto on the date of the Formation Agreement.
Restrictive Covenants: As defined in Section 9.2.
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RMH: Rainbow Media Holdings, Inc., a Delaware corporation, and any
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entity succeeding to all or substantially all of its assets.
Selling Partner: As defined in Section 6.1(b).
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Senior Credit Agreement: Any instrument creating or otherwise
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evidencing indebtedness of the Partnership to a third party lender approved
by the Partners' Committee.
Sharing Percentage: Subject to adjustment pursuant to Section 3.2
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hereof the Sharing Percentage of each Partner in the Partnership shall be
as follows:
Rainbow Partner: 50%
Fox/Liberty Partner: 50%
Tax Matters Partner: As defined in Section 5.3(a).
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TCI: Tele-Communications, Inc., a Delaware corporation.
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Term: As defined in Section 2.4.
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Timely Partner: As defined in Section 3.2(c).
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Transfer: To sell, assign, transfer, pledge or otherwise dispose of,
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or encumber (voluntarily, involuntarily or by operation of law); provided,
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that a "Transfer" shall not include any bona fide assignment,
hypothecation, pledge or encumbrance to any unaffili ated third party
lender in a financing transaction.
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ARTICLE II
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FORMATION OF GENERAL PARTNERSHIP
2.1 Formation.
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(a) Pursuant to the terms and conditions contained in this Agreement,
Rainbow Partner is hereby admitted to the Partnership as a Partner owning a
50% Sharing Percentage and Fox/Liberty Partner is hereby admitted as a
Partner owning a 50% Sharing Percentage.
(b) The name and mailing address of each Partner and the amount
credited to each Partner's Capital Account shall be listed on Schedule A
attached hereto. The Managing Partner shall update and distribute to the
other Partners Schedule A from time to time as neces sary to accurately
reflect the information therein. Any amendment or revision to Schedule A
made in accordance with this Agreement shall not be deemed an amendment to
this Agreement that requires the consent of the Partners. Any reference in
this Agreement to Schedule A shall be deemed to be a reference to Schedule
A as amended and in effect from time to time.
2.2 Name. The name of the Partnership shall be National Sports
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Partners or any other name designated by the Partners' Committee upon compliance
with all applicable laws.
2.3 Compliance with Partnership and Other Laws. The Partners will use
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their reasonable best efforts to take
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the actions required to cause the Partnership to comply with all applicable
partnership laws, assumed name acts, ficti tious name acts, and similar
statutes in effect in each jurisdiction or political subdivision in which the
Partner ship does business from time to time, and the Partners agree to execute
appropriate documents requested by the Managing Partner with the advice of
counsel to comply with such laws. All actions to be taken pursuant to this
Section 2.3 by the Partnership and by the Partners shall be at Partnership
expense.
2.4 Term. The term of the Partnership (the "Term") shall continue for
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ninety-nine (99) years from the Effective Date, unless the Partnership is sooner
dissolved and terminated as provided in Article VIII.
2.5 Principal Place of Business. The principal place of business of
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the Partnership shall be a place in the United States designated by the Managing
Partner from time to time.
2.6 Purpose. The Partnership is formed for the object and purpose
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of, and the nature of the business to be conducted and promoted by the
Partnership is, engaging in any lawful act or activity for which partnerships
may be formed under the laws of the State of New York and engaging in any and
all activities necessary, convenient, desirable or incidental to the foregoing,
including, without limita-
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tion, acquiring, holding, managing, operating and disposing of real and personal
property.
2.7 Qualification in other Jurisdictions. The Partners shall cause
------------------------------------
the Partnership to be qualified, formed or registered under assumed or
fictitious name statutes or similar laws in any jurisdiction in which the
Partnership transacts business. The Managing Partner shall execute, deliver and
file any certificates (and any amendments and/or restatements thereof) necessary
for the Partnership to qualify to do business in a jurisdiction in which the
Partnership wishes to conduct business.
2.8 Ownership of Property. Except to the extent the Managing Partner
---------------------
deems it to be in the best interests of the Partnership to use nominees from
time to time, legal title to all assets, rights and property, whether real,
personal or mixed, owned by the Partnership (collectively, the "Partnership
Property") shall be acquired, held and conveyed only in the name of the
Partnership.
ARTICLE III
-----------
PARTNERSHIP CAPITAL
3.1 Capital Contributions.
---------------------
(a) Unless otherwise agreed by all Partners, all capital
contributions (other than any initial capital contribution) shall be in cash
and, other than capital contributions due in accordance with the then-applicable
-16-
Budget, shall be approved by each Partner. Except as provided in Sections 4.3
and 4.11, the Managing Partner shall from time to time during the Term give
notice to each Partner of any capital contribution due in accordance with the
then-applicable Budget not less than 30 nor more than 90 days prior to the date
on which such capital contribution is due. Such notice shall set forth the
amount to be contributed by each Partner, the date (the "Contribution Date") on
which the contribution is to be made, and the account of the Partnership to
which such funds are to be transmitted. There shall be no more than one capital
call in any calendar month.
(b) All capital contributions to be made by the Partners shall be in
proportion to their respective Sharing Percentages (determined, in each case, at
the time the notice contemplated by Section 3.1(a) is given).
3.2 Failure to Make Capital Contributions.
-------------------------------------
(a) Upon the failure of any Partner (the "Refusing Partner") to make
all or a portion of a capital contribution required of it pursuant to this
Agreement on or before the 15th day after the Contribution Date therefor, any
other Partner (each a "Complying Partner") that is not a Refusing Partner or a
Forfeited Partner may, at its option exercised by giving notice to the other
Partners, make up the defaulted capital contribution or any portion thereof by
making a capital contribution to the Partnership in an
-17-
amount not exceeding the amount of the required capital contribution which the
Refusing Partner failed to make. If more than one Complying Partner wishes to
contribute all or any portion of the unpaid amount of the Refusing Partner's
required capital contribution, and the aggregate amount which such Complying
Partners wish to contribute exceeds the unpaid amount of the Refusing Partner's
required capital contribution, then the Complying Partners shall determine among
themselves the amount that each such Complying Partner shall contribute to the
Partnership, or, in the event the Complying Partners cannot agree, each
Complying Partner shall contribute to the Partnership an amount equal to its pro
rata share (based on the proportion that each Complying Partner's Sharing
Percentage bears to the aggregate Sharing Percentages on the relevant
Contribution Date of all the Complying Partners that wish to contribute) of the
Refusing Partner's required additional capital contribution. Each Complying
Partner that makes a capital contribution pursuant to this Section 3.2 shall be
referred to herein as a "Contributing Partner." Any contribution by a
Contributing Partner of such additional amount as a capital contribution
pursuant to this Section 3.2(a) shall be deemed an addi tional capital
contribution of such Contributing Partner (an "Excess Contribution").
(b) Whenever pursuant to this Section 3.2 with respect to any capital
call, a Refusing Partner has not,
-18-
within 15 days after the related Contribution Date, made capital contributions
in an amount equal to the product of such Refusing Partner's Sharing Percentage
and the total amount of such capital call, then the Sharing Percentage of such
Refusing Partner in the Partnership shall be reduced, with effect from the
related Contribution Date, so that such Sharing Percentage equals the quotient
(expressed as a percentage) of (x) the sum of (i) the Initial Capital Account
Balance of such Refusing Partner and (ii) all capital contributions made by such
Refusing Partner less all distributions of capital to the Refusing Partner
following the Effective Date and prior to the related Contribution Date divided
by (y) the sum of (a) the Initial Capital Account Balances of all Partners and
(b) all the capital contributions of all Partners less all distributions of
capital to all Partners following the Effective Date and prior to the related
Contribution Date (including any capital contributions made in respect of such
capital call pursuant to Section 3.2(a), regardless of when made); and the
Sharing Percentage of each Complying Partner shall be increased, with effect
from the related Contribution Date, by an amount equal to the product of (I) the
amount by which the Sharing Percentage of such Refusing Partner has been reduced
pursuant to this sentence and (II) the quotient of (A) the sum of (X) the
Initial Capital Account Balance of such Complying Partner and (Y) all capital
contributions
-19-
made by such Complying Partner less all distributions of capital to such
Complying Partner following the Effective Date and prior to the related
Contribution Date (including any additional capital contribution made by such
Complying Partner pursuant to Section 3.2(a), regardless of when made) divided
by (B) the sum of (aa) the Initial Capital Account Balances of all of the
Complying Partners and (bb) all the capital contributions of all Complying
Partners less all distributions of capital to all Complying Partners following
the Effective Date and prior to the related Contribution Date (including any
additional capital contributions made in respect of such capital call pursuant
to Section 3.2(a), regardless of when made).
(c) If at any time any Partner's Sharing Percentage is less than two-
fifths of such Partner's Sharing Percentage as of the Effective Date
(appropriately adjusted to reflect any admissions of additional Partners) such
Partner shall forfeit (i) all voting rights (including the voting rights, if
any, of its representatives on the Partners' Committee), except as otherwise
required by law and except as provided in Section 4.11(b), and (ii) such
Partner's right to consent (or withhold consent) to Transfers under (and as
defined in) Section 6.1(a) and such Partner's right of first refusal pursuant to
Section 6.1(b) hereof. A Partner that has forfeited its voting and other rights
under this paragraph is referred to as a "Forfeited
-20-
Partner" for and during the period such rights are so forfeited. Except as
otherwise specifically provided in this Section 3.2(c), a Forfeited Partner
shall continue to be a Partner in all other respects and shall not, by virtue of
becoming a Forfeited Partner, be released from any of its obligations as a
general partner in the Partnership or under this Agreement (including its
obligations with respect to required additional capital contributions). The
forfeiture by any Partner of certain of its rights pursuant to this Section
3.2(c) shall not prejudice the right of such Partner to any claim that such
Partner may have at law against the Managing Partner in the case of a breach by
the Managing Partner of any provision of this Agreement or of the duties of care
and of loyalty owed by the Managing Partner to the Partnership.
In the event that any Partner (the "Delinquent Partner") fails to make
a capital contribution on or before the Contribution Date specified in the
notice of the Manag ing Partner, but does make its contribution within 15 days
after such Contribution Date, each Partner (each, a "Timely Partner") that made
its capital contribution on or before the Contribution Date shall be entitled to
receive interest at a rate per annum equal to the Prime Rate (calculated on the
basis of a year of 360 days) from the Delinquent Partner (and not from the
Partnership) from the date of payment of
-21-
its capital contribution to the date the Delinquent Partner made its capital
contribution.
Notwithstanding the foregoing provisions of this Section 3.2, if the
Sharing Percentage of any Partner other than the Managing Partner has been
reduced pursuant to Section 3.2(b) for failure to make a capital contribution,
such Partner may, at any time prior to the date that is 270 days after such
capital contribution was due, make a capital contribution to the Partnership or
a payment to each Contributing Partner, as provided below (each, a "Make-up
Contribution"), in an amount equal to the Make-up Amount (as hereinafter
defined). Upon the making of a Make-up Contrib ution by such Partner in the
full amount of the Make-up Amount, the Sharing Percentages of the Partners shall
be adjusted to give effect to such Make-up Contribution so as to restore to such
Refusing Partner and the Complying Partners the respective Sharing Percentages
they would have had but for and solely based on the default of the Refusing
Partner.
The "Make-up Amount" shall be the amount of the defaulted capital
contribution of the Refusing Partner, plus interest thereon at a rate per annum
equal to the Prime Rate plus 1% calculated on the basis of a year of 360 days
from the Contribution Date until the date of payment of the Make-up
Contribution. In the event that no Complying Partner has made up any portion of
the defaulted capital
-22-
contribution of the Refusing Partner pursuant to Section 3.2(a) and the Refusing
Partner elects to make a Make-Up Contribution, the full Make-up Amount shall be
paid by the Refusing Partner to the Partnership. In the event that a
Contributing Partner has, pursuant to Section 3.2(a), made up all or a portion
of the defaulted capital contribution of the Refusing Partner through additional
capital contribu tions and the Refusing Partner elects to make a Make-Up
Contribution, the Refusing Partner shall pay directly to each Contributing
Partner an amount equal to the Make-up Amount multiplied by the quotient of (x)
the portion of all Excess Contributions paid by such Contributing Partner,
divided by (y) the total amount of the relevant defaulted capital contribution,
and after such payment the Refusing Partner shall contribute the remainder (if
any) of the Make-up Amount to the Partnership.
3.3 Capital Accounts.
----------------
(a) A separate capital account (each a "Capital Account") shall be
maintained for each Partner. The Initial Capital Account Balance of each
Partner shall be as speci fied in Article I. Subject to the provisions of
paragraphs (b), (c) and (d) of this Section 3.3, the Capital Account of each
Partner shall be (i) increased by (A) the amount of cash and the Fair Market
Value of other property contributed to the Partnership by such Partner as a
capital contribution (net of liabilities of such Partner assumed by the Partner-
-23-
ship and liabilities to which such contributed property is subject) (including
any Excess Contributions made by such Partner whether or not the Partner was
reimbursed by a Refusing Partner) and (B) Profits and any other items of income
allocated to such Partner pursuant to Section 3.4 and (ii) decreased by (A) the
amount of cash and the Fair Market Value of any property distributed to such
Partner (net of liabilities of the Partnership assumed by such Partner and
liabilities to which such distributed property is subject), (B) any Excess
Contributions for which such Partner has been reimbursed by a Refusing Partner,
and (C) items of Loss and any other deductions allocated to such Partner
pursuant to Section 3.4. Capital Accounts otherwise shall be maintained in
accordance with Treasury Regulations in order for the allocation of Profits and
Losses pursuant to Section 3.4 hereof to have substantial economic effect within
the meaning of Section 704(b) of the Code.
(b) Immediately prior to the distribution of any property (other than
cash) to a Partner, the Capital Account of each Partner shall be increased or
decreased, as the case may be, in accordance with Treasury Regulations Section
1.704-1(b)(2)(iv)(e), to reflect the manner in which the unrealized income,
gain, loss and deduction inherent in such property that has not previously been
reflected in the Capital Accounts would be allocated among the Partners if
-24-
there were a taxable disposition of such property for its Fair Market Value on
the date of the distribution.
(c) Immediately prior to:
(i) a contribution of money or other property to the Partnership by a
new or existing Partner as consideration for an Interest, or
(ii) a distribution of money or other property by the Partnership to a
retiring or continuing Partner as consideration for an Interest,
the Capital Account of each Partner shall be increased or decreased, as the case
may be, to reflect the Fair Market Value of all the Partnership Property. Such
adjustment shall reflect the manner in which the unrealized income, gain, loss
or deduction inherent in such property that has not previously been reflected in
the Capital Accounts would be allocated among the Partners if there were a
taxable dis position of such property for its Fair Market Value on the date of
the contribution or distribution and shall otherwise be made in accordance with
Treasury Regulations Section 1.704-1(b)(2)(iv)(f).
(d) Except as set forth in Section 3.2, no Partner shall be entitled
to interest on its capital contributions or on the positive balance in its
Capital Account and no such interest shall accrue.
-25-
3.4 Allocation of Items of Partnership Income, Gain, Loss, Deduction
----------------------------------------------------------------
and Credit.
----------
(a) For purposes of this Agreement, the terms "Profits" and "Losses"
shall mean, respectively, the net profits and net losses of the Partnership
determined on an annual basis in accordance with the method of accounting used
by the Partnership for Federal income tax purposes, except that (i) the items
included in the calculation of Profits and Losses shall not include any items
specially allocated under Section 3.4(c), (ii) where property is reflected in
the Capital Accounts at a book basis different from the basis of such property
for Federal income tax purposes, all gain, loss, depreciation and amortization
on such property shall be determined for purposes of adjusting Capital Accounts
based on the book basis of such property in accordance with Treasury Regulations
Section 1.704-1(b)(2)(iv)(g), (iii) income received by the Partnership which is
exempt for Federal income tax purposes shall be included, and (iv) expenses of
the Partnership which are not capitalizable and not deductible or deemed not
capitalizable and not deductible for Federal income tax purposes (i.e., Section
705(a)(2)(B) expenditures) shall be taken into account.
(b) (i) Except as provided in paragraph (a) of this Section 3.4,
clause (ii) of this paragraph (b), and Section 5.3(d), and after giving effect
to the special
-26-
allocations required by paragraph (c) of this Section 3.4, all Partnership
Profits and Losses and other items of income, gain, loss, deduction and credit
shall be allocated to the Partners in accordance with their Sharing Percentages,
taking into account both the amount or amounts of such Sharing Percentages and
the portions of the year during which such Sharing Percentages were held.
(ii) If, at the end of any taxable period, any Partner's Capital
Account would have an Adjusted Capital Account Deficit (determined after taking
into account all other allocations and distributions with respect to such
period), then there shall be allocated to such Partner for such taxable period
items of gross income in an amount sufficient to eliminate such Adjusted Capital
Account Deficit.
(c) Notwithstanding any other provision of this Section 3.4, the
following special allocations shall be made for each taxable period in
descending order of priority:
(i) If there is a net decrease in Partnership Minimum Gain during any
Partnership taxable period, each Partner shall be specially allocated items
of income and gain of the Partnership for such period (and, if necessary,
subsequent periods) in an amount equal to such Partner's share of the net
decrease in Partnership Minimum Gain, determined in accordance with
Treasury Regulations Sections 1.704-2(f) and 1.704-2(g)(2). Allocations
pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant
thereto. The items to be so allocated shall be deter mined in accordance
with Treasury Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). The
Partnership may, however, (i) waive the chargeback of items of income
-27-
and gain required by this Section 3.4(c)(i) and (ii) apply to the
Commissioner of the Internal Revenue Service for approval of such waiver in
the event that (x) the Partners have made Capital Contributions or received
income allocations that have restored any previous Nonrecourse Deductions
claimed or any distrib utions attributable to the proceeds of a
Nonrecourse Liability, and (y) the Minimum Gain chargeback require ment
would distort the Partners' economic arrangement as reflected in this
Agreement and as evidenced over the term of the Partnership by the
Partnership's allocations and distributions and the Partners' Capital
Contributions and it is not expected that the Partnership will have
sufficient other income to correct that distortion. This Section 3.4(c)(i)
is intended to comply with the chargeback of items of income and gain
requirement in Treasury Regulations Section 1.704-2(f) and shall be
interpreted consistently therewith;
(ii) If there is a net decrease in Minimum Gain Attributable to
Partner Nonrecourse Debt during any Partnership taxable period, any Partner
with a share of Minimum Gain Attributable to Partner Nonrecourse Debt at
the beginning of such taxable period (determined in accordance with
Treasury Regulations Section 1.704-2(i)(5)) shall be allocated items of the
Partnership income and gain for such period (and, if necessary, subsequent
periods) in an amount equal to such Partner's share of the net decrease in
the Minimum Gain Attributable to Partner Nonrecourse Debt, determined in
accordance with Treasury Regulations Sections 1.704-2(g)(2) and 1.704-
2(i)(4). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each
Partner pursuant thereto. The items to be so allocated shall be determined
in accordance with Treasury Regulations Sections 1.704-2(f)(5), 1.704-
2(i)(4) and 1.704-2(j)(2)(ii) and (iii). This Section 3.4(c)(ii) is
intended to comply with the chargeback of items of income and gain
requirement in Treasury Regulations Section 1.704-2(i)(4) and shall be
interpreted consistently therewith. In addition, rules consistent with the
provisions of Treasury Regulations Sections 1.704-2(f)(2), (3), (4) and (5)
will apply to the special allocation required by this Section 3.4(c)(ii);
(iii) In the event that any Partner unexpectedly receives any
adjustments, allocations, or distributions described in Treasury
Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of
Partnership income and gain shall be specially allocated to such
-28-
Partner (in respect of its Capital Account) in an amount and manner
sufficient to eliminate, to the extent required by the Treasury
Regulations, the Adjusted Capital Account Deficit of such Partner as
quickly as possible, provided that an allocation pursuant to this Section
3.4(c)(iii) shall be made only if and to the extent that such Partner would
have an Adjusted Capital Account Deficit after all other allocations
provided for in this Article III have been tentatively made as if this
Section 3.4(c)(iii) were not in the Agreement;
(iv) Nonrecourse Deductions for any taxable period shall be specially
allocated among the Partners in accordance with their Sharing Percentages;
(v) Partner Nonrecourse Deductions for any taxable period shall be
specially allocated to the Partner that bears the economic risk of loss
with respect to the Partner Nonrecourse Debt to which such Partner
Nonrecourse Deductions are attributable in accordance with Treasury
Regulations Section 1.704-2(i). If more than one Partner bears the
economic risk of loss with respect to a Partner Nonrecourse Debt, such
Partner Nonrecourse Deductions attributable thereto shall be allocated
between or among such Partners in accordance with the ratios in which they
share such economic risk of loss; and
(vi) To the extent that any allocation is made in any taxable period
to any Partner pursuant to the provisions of clauses (i) through (v) of
this Section 3.4(c), such Partner shall thereafter be specially allocated
items of Partnership gross income or deduction in order to negate the
above-described allocations in the same taxable period if sufficient items
of gross income or deduction are available and, if not available, in each
succeeding taxable period until the aggregate amount of the above-described
allocations are fully negated.
(d) All items of income, gain, loss or deduction attributable to
property contributed to the Partnership shall be allocated for Federal income
tax purposes among the Partners in a manner that takes into account any
difference between the Fair Market Value of such property at the time
-29-
of its contribution (calculated for this purpose without regard to any
outstanding indebtedness secured by or relating to such property) and its
adjusted basis for Federal income tax purposes at that time, in accordance with
Section 704(c) of the Code and the Treasury Regulations thereunder. Each
Partner that contributes property to the Partnership shall at the time of such
contribution notify the Partnership of its adjusted basis in the contributed
property at such time. For purposes of allocations hereunder, the Partnership
shall elect to use the traditional method with curative allocations as set forth
in Treasury Regulations Section 1.704-3(c).
3.5 Distributions.
-------------
(a) Except as provided in Section 6.6, no Partner shall have the right
to withdraw any amount from its Capital Account. No Partner shall have the
right, except as otherwise provided in Section 3.5(b), to demand or receive any
distribution, without the approval of the Managing Partner. Except as otherwise
provided in Article VIII, no Partner shall have the right to receive a
distribution of property other than cash from the Partnership, unless otherwise
agreed by all the Partners.
(b) The Partnership shall, subject to any restrictions contained in
Senior Credit Agreements, distribute cash to the Partners in amounts that the
Managing Partner determines are in excess of the amounts reasonably
-30-
necessary for the continued efficient operation of the business of the
Partnership, including reasonable reserves; provided, that subject to the
--------
Managing Partner's discretion to retain amounts necessary for the continued
efficient operation of the business of the Partnership in accordance with this
Section 3.5(b), such distributions shall be made not less often than quarterly.
Any such distributions shall be made in accordance with the Partners' Sharing
Percentages subject to the priorities set forth in Section 4.1. The Partnership
shall repay principal and accrued interest on Partner's Loans (in the order of
payment contemplated by subparagraph (c)(iii) of Section 8.2 hereof) prior to
making any cash distributions to the Partners.
(c) For purposes of Section 3.2(b), distributions shall be deemed made
first from profits and then from capital.
3.6 Partnership Funds. The funds of the Partner ship shall be
-----------------
deposited in such bank accounts or invested in such Permitted Investments as
shall be determined by the Managing Partner, or if there is no Managing Partner
the Partners' Committee. The Partnership's funds shall not be commingled with
funds not belonging to the Partnership, except to the extent the Partnership's
cash management plan permits such commingling, and shall be used only for the
affairs or business of the Partnership. The Partners'
-31-
Committee shall establish a cash management plan pursuant to which the funds of
the Partnership will be managed.
3.7 Borrowings. Subject to any applicable approval required by
----------
Section 4.3 or 4.11 hereof, if the Partnership uses reasonable efforts to obtain
third-party financing but is unable to do so, (i) the Partnership may borrow
funds from any Person that is not a Related Person with respect to any Partner
and may pledge on a non-recourse basis only the Partnership properties or the
income therefrom to secure the repayment of such loans and (ii) the Partnership
may borrow funds in the form of Partner's Loans from any Partner or any Related
Person with respect to a Partner.
ARTICLE IV
----------
MANAGEMENT OF THE PARTNERSHIP
4.1 Management of the Partnership's Business. Except for actions and
----------------------------------------
determinations which pursuant to this Agreement or applicable law can be taken
or made only with the consent of all of the Partners or the Partners' Committee,
the business and affairs of the Partnership shall be directed and controlled by
the Managing Partner. The Managing Partner shall manage the business of the
Partner ship with the objective of achieving the following actions in the
following order of priority: (i) the return to the Partners of their Capital
Contributions, (ii) the return to
-32-
the Partners of a 25% annual profit margin in respect of the Partnership's
national sports service carried by the Regionals (as defined in the Formation
Agreement), (iii) the distribution to the Regionals of all profits in excess
thereof in respect of the Partnership's national sports service carried by the
Regionals, in accordance with terms of the affiliation agreements with such
Regionals, and (iv) the distribution of all funds available for distribu tion
to the Partners in accordance with their Sharing Percentages, and in all cases
in a manner consistent with the development plans and policy decisions reflected
in the Business Plan and the Budget. Without limiting the generality of the
foregoing, the Managing Partner at the Partnership's expense, consistent with
the Budget, shall cause the Partnership to obtain and maintain in effect during
the Term comprehensive insurance insuring the Partnership against all risks and
perils customarily insured against in the businesses conducted by the
Partnership. Nothing contained in this Article IV shall impose any obligation on
any Person doing business or dealing with the Partnership to inquire as to
whether the Managing Partner has exceeded its authority in executing any
contract or other instrument on behalf of the Partnership, and any such Person
shall be fully protected in relying upon the authority of the Managing Partner.
The Managing Partner shall keep the Partners' Committee informed with respect to
-33-
all matters of material interest to the Partners and shall in any event report
to the Partners' Committee not less frequently than once each quarter with
respect to the busi ness and affairs of the Partnership. Except as otherwise
provided in Section 4.6, the Managing Partner shall serve without compensation
for its services. Subject to any applicable provisions of Section 4.3 hereof,
the Managing Partner may delegate such of its powers and authority to managers,
employees and agents of the Partnership as the Managing Partner shall deem
necessary or appropriate for the conduct of the Partnership's business. Except
insofar as such arrangements are embodied in Approved Agreements or are
otherwise approved pursuant to the provisions of Sections 4.3, 4.9 or 4.11, all
arrangements for the employment of managers, employees or agents on behalf of
the Partnership that are Related Persons with respect to any Partner shall be on
an Arm's-length basis.
4.2 Partners' Committee. Each of Fox/Liberty Partner and Rainbow
-------------------
Partner shall designate two individuals to serve on a committee (the "Partners'
Committee") which shall be responsible for taking all action required under this
Agreement to be taken by the Partners' Committee. Irrespective of the number of
representatives attending any meeting of the Partners' Committee, each of
Fox/Liberty Partner and Rainbow Partner shall have the right to one vote at such
meetings (except as otherwise provided below or in
-34-
Section 3.2 hereof with respect to a Forfeited Partner), such vote to be
exercised in such manner as such Partner shall direct. The Partners' Committee
shall formulate fundamental policy with respect to the Partnership's business.
The Partners' Committee shall meet by telephone or, at the request of any
Partner, in person, not less frequently than (i) quarterly to receive the report
of the Managing Partner contemplated by Section 4.1 and to review development
plans, the financial position of the Partnership, the status of negotiations
for the purchase and sale of programming rights, financial projections, and any
other material matters relating to the business of the Partnership, (ii)
annually to review the annual Budget and the Business Plan, and (iii) as often
as shall be necessary to make any Extraordinary Decision or take any other
action required to be taken or approved by the Partners' Committee. Any action
that may be taken at a meeting of the Partners' Committee may be taken without a
meeting by written consent of the number of Partners needed to authorize the
action; provided, that all Partners, regardless of whether all Partners are
--------
entitled to vote, are given notice of such written consent at least 15 Business
Days prior to its effective date.
Any Partner entitled to vote at a meeting of the Partners' Committee
shall have the right to call a meeting of the Partners' Committee by giving 10
Business Days' prior
-35-
notice of the time, date and location or means of conducting such meeting to
each other Partner. The presence or participation of one representative
designated hereunder by the number of Partners required to authorize the action
taken at such meeting shall constitute a quorum for the tak ing of any action;
provided, that all Partners, regardless of whether all Partners are entitled to
--------
vote, have received at least 10 Business Days' prior notice of such meeting or
have waived such notice. Except as otherwise provided herein, any action
required or permitted to be taken by the Partners' Committee must be by the
approving vote of Partners entitled to vote and having Sharing Percentages
aggregating at least 66 2/3% of the Sharing Percentages of all Partners entitled
to vote; provided, that, if the Managing Partner has been removed pursuant to
--------
Section 4.12, until a new Managing Partner shall have been appointed in
accordance with Section 4.12, any action required or permitted to be taken by
the Partners' Committee must be by the approving vote of each Partner entitled
to vote.
Any member of the Partners' Committee may be removed without cause
and replaced at any time by the Partner who designated such member. If at any
time a Partner removes one or both of its representatives on the Partners'
Committee or any representative of such Partner resigns from the Partners'
Committee or dies, such Partner shall give notice to the other Partners of such
removal, resignation or
-36-
death and of a successor representative. In the absence of notice to the
contrary, either representative of any Partner shall be conclusively presumed to
have the authority to take action by written consent or vote in the name and on
behalf of such Partner. Members of the Partners' Committee shall serve as such
without compensation.
4.3 Extraordinary Decisions. Subject to Section 4.11, except to the
-----------------------
extent any of the matters set forth below are specifically identified in the
then-applicable Budget or Business Plan, the Partnership and the Managing
Partner may take the following actions only with the prior approval of the
Partners' Committee:
(i) Make any loan or other advance of money to, or guarantee any
obligation of, any Person that is not a Partner or a Related Person with
respect to a Partner, other than employee loans and advances and other than
in the ordinary course of business.
(ii) Incur capital expenditures in any Fiscal Year (a) in connection
with any single transaction or series of related transactions exceeding by
more than $50,000 the amount authorized in the annual Budget approved by
the Partners' Committee or (b) in an aggregate amount that exceeds by more
than $250,000 the aggregate amount of capital expenditures authorized in
the Budget.
(iii) Commence, abandon or settle any litigation, arbitration or
other legal proceeding in the name of the Partnership or otherwise
involving the Partnership which is not in the ordinary course of business
or is likely to have a material impact on the Partnership or its business
or involves claims by or against any governmental entity.
(iv) Adopt or change any accounting principle which will have a
material effect on the Partnership's Operating Income or make any tax
election (except an election under Section 754 of the Code made by the Tax
Matters Partner) or adopt any position for purposes of
-37-
any tax return that will have a material adverse effect on any Partner.
(v) Enter into any contract or other transaction (or series of related
contracts or transactions) providing for payments by the Partnership (a)
that in any Fiscal Year exceed the Annual Maximum Amount or (b) with a
discounted present value (computed at an annual discount rate of 15%) equal
to or greater than the Maximum Amount.
(vi) Enter into any agreement that may be terminated or otherwise
avoided by the other party thereto if the Managing Partner ceases to act as
Managing Partner or ceases to be a Partner in, or to act as Managing
Partner of the Partnership.
Each of the actions set forth above is referred to as an "Extraordinary
Decision".
4.4 Budget and Business Plan Approval.
---------------------------------
(a) The Managing Partner shall submit annually to the Partners'
Committee at least 90 days prior to the start of each Fiscal Year, beginning
with the Fiscal Year commenc ing January 1, 1998, (i) a proposed budget (the
"Proposed Budget") for the forthcoming Fiscal Year including an income statement
prepared on an accrual basis which shall show in reasonable detail the projected
revenues and expenses and a cash flow statement and detailed schedule of
proposed capital expenditures which shall show in reasonable detail the
projected receipts and disbursements for the Partnership and the amount of any
expected cash deficiency or surplus, any required capital contributions, a
summary of the services included in Management Overhead allocated to the
Partnership in the Proposed Budget and any contemplated
-38-
borrowings of the Partnership, (ii) a proposed revised five-year business plan
(the "Proposed Business Plan") for the Fiscal Year covered by the Proposed
Budget and the succeeding four Fiscal Years containing substantially the same
categories of information in substantially the same detail as the Business Plan
attached hereto as Annex B. Such Proposed Budget and Proposed Business Plan
shall be prepared on a basis consistent with the Partnership's audited financial
statements and GAAP. Prior to or simultaneously with the submission of such
Proposed Budget and Proposed Business Plan, the Managing Partner shall disclose
to the Partners' Committee any additional informa tion (including financial
projections for years after the next Fiscal Year) in its possession or
reasonably available to it (with or without cost to the Partnership) which could
assist the Partners' Committee in evaluating such Proposed Budget and Proposed
Business Plan. In addition, the Managing Partner shall meet with the Partners'
Committee to discuss such Proposed Budget and Proposed Business Plan.
Within 30 days after the submission of such Proposed Budget and
Proposed Business Plan, the Partners' Committee shall advise the Managing
Partner in writing whether it approves or disapproves of such Proposed Budget
and Proposed Business Plan. Proposed Budgets and Proposed Business Plans that
are approved by the Partners' Committee shall supersede any previously approved
Budget or Business
-39-
Plan, as the case may be. The Partners hereby approve the Business Plan and
Budget for the 1997 Fiscal Year attached hereto as Annex B. Except in the case
of a Deferred Budget Decision, if a Proposed Budget or Proposed Business Plan,
as the case may be, is not approved by the Partners' Committee, then the
Managing Partner and the Partners' Committee shall attempt to agree on a
Proposed Budget or Proposed Business Plan, as the case may be. If any item in a
Proposed Budget or Proposed Business Plan requires expenditure of funds in
furtherance of any transaction or purpose referred to in Section 4.11, such
Proposed Budget or Proposed Business Plan shall not be approved as to such item
unless such item is approved by each Partner that would have been required to
approve such item under Section 4.11.
(b) Except in the case of a Deferred Budget Decision, if a Proposed
Budget has not been approved by the Partners' Committee by January 1 of any
Fiscal Year, then until the Partners' Committee approves a Budget, the Budget
for such Fiscal Year shall be derived from the applicable year of the Business
Plan; provided that if such Fiscal Year is not included in an approved Business
--------
Plan, then the Budget for such Fiscal Year shall be identical to the Budget for
the prior Fiscal Year, adjusted to reflect increases or decreases resulting
from:
(i) the operation of escalation or de-escalation provisions in
contracts in effect at the time of approval of the prior Fiscal Year's
Budget solely as a
-40-
result of the passage of time or the occurrence of events beyond the
control of the Partnership to the extent such contracts are still in
effect;
(ii) elections made in any prior Fiscal Year under contracts
contemplated by the Budget for the prior Fiscal Year regardless of which
party to such contracts makes such election;
(iii) increases or decreases in expenses attribut able to the
annualized effect of employee additions or reductions during the prior
Fiscal Year contemplated by the Budget for the prior Fiscal Year;
(iv) interest expense attributable to any loans made to the
Partnership (including Partner's Loans);
(v) increased overhead expense in an amount equal to the percentage
increase for the prior Fiscal Year in the Consumer Price Index multiplied
by the total of overhead expenses reflected in the Budget for the prior
Fiscal Year;
(vi) the effect of a decision made by the Partners' Committee in a
prior Fiscal Year and not reflected in the Budget for such prior Fiscal
Year;
(vii) reductions in affiliation revenues attribu table to changes in
ownership of networks, channels or systems subject to affiliation
agreements;
(viii) the anticipated costs during such Fiscal Year for any legal,
accounting and other professional fees or disbursements in connection with
events or changes not contemplated at the time of preparation of the Budget
for the prior Fiscal Year;
(ix) increases in expenses attributable to the effects of
Extraordinary Decisions made in the prior Fiscal Year and not otherwise
provided for above;
(x) decreases in expenses attributable to non recurring items
reflected in the prior Fiscal Year's Budget; and
(xi) decreases in revenues due, in whole or in part, to reductions in
affiliation fees and advertising income resulting from the failure to enter
into or renew any affiliation agreement because the Partners other than the
Managing Partner objected to the rates proposed by the Managing Partner and
the Managing
-41-
Partner was unable thereafter to enter into or renew an affiliation
agreement with the relevant affiliate at rates acceptable to such other
Partners.
Notwithstanding the foregoing, the aggregate amount of capital
expenditure items in any Budget estab lished pursuant to this Section 4.4(b)
for any Fiscal Year shall be the amount projected for such Fiscal Year in the
Business Plan.
(c) In the case of a Deferred Budget Decision, until the Partners'
Committee agrees on the allocation of Management Overhead, the Budget for the
Fiscal Year shall be determined by reference to the Proposed Budget as agreed to
by the Partners (other than with respect to the Management Overhead allocation)
and the Management Overhead allocation shall be as proposed by the Managing
Partner, subject to adjustments pursuant to Section 4.6 hereof.
(d) If a Proposed Business Plan is submitted for approval pursuant to
this Section 4.4 and is not approved by the Partners' Committee, the Business
Plan most recently approved by the Partners' Committee pursuant to this Section
shall remain in effect as the Business Plan. If a Proposed Budget is approved
pursuant to Section 4.4(a) but a corre sponding Proposed Business Plan is not
approved pursuant to Section 4.4(a), the Business Plan then in effect shall be
deemed to be amended so that the Fiscal Year corresponding to the Fiscal Year
for which such Budget has been approved shall be consistent with such Budget.
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4.5 Limitation on Agency. Except as expressly provided herein, the
--------------------
Managing Partner shall have exclusive authority to act for the Partnership. No
other Partner shall have any authority to act for, or to assume any obli gation
or responsibility on behalf of, another Partner or the Partnership (or to
authorize any other Person to do so) except (i) as otherwise expressly provided
herein or as expressly approved by written consent of all Partners, (ii) if the
Managing Partner is a Defaulting Partner, to the extent necessary to permit the
Non-Defaulting Partners to exercise on behalf of the Partnership any remedies
available to the Partnership against the Managing Partner, or (iii) if the
Managing Partner fails to perform its management duties hereunder (including its
duty to give the notices contem plated by Section 3.1(a) hereof), to the extent
necessary to permit the Non-Defaulting Partners to continue the business of the
Partnership. In addition to the other remedies specified in this Agreement,
each Partner agrees to indem nify and hold each other Partner harmless from and
against any claim, demand, loss, damage, liability or expense (including,
without limitation, amounts paid in settlement, reasonable costs of
investigation and reasonable legal expenses) incurred by or made against such
other Partner and arising out of or resulting from any action taken by the
indemnifying Partner in violation of this Section 4.5.
-43-
4.6 Managing Partner's Services and Expenses. (a) The Managing
----------------------------------------
Partner shall provide or cause to be provided to the Partnership such management
and other services as may be necessary or appropriate to the conduct of the
business of the Partnership from time to time as contemplated by the Business
Plan and the Budget. All reasonable and necessary direct and indirect expenses
(including, but not limited to, human resource expenses, out-of-pocket expenses,
overhead, salary, rent, utility costs and similar expenses) incurred by the
Managing Partner and by and from its Related Persons in furtherance of the
businesses of the Partnership shall be paid or reimbursed (but not in amounts
exceeding the amounts provided in the Business Plan and Budget) by the
Partnership; provided, that all indirect expenses incurred by the Managing
--------
Partner and by and from its Related Persons in the management of the Partnership
shall be allocated pursuant to the Allocation Policy for Management Overhead set
forth in Annex D hereto.
4.7 Liability of Partners' Committee and Managing Partner. Neither
-----------------------------------------------------
the individuals constituting the Partners' Committee nor the Managing Partner
shall be liable, in damages or otherwise, to the Partnership or any Partner for
any act or failure to act on behalf of the Partnership by such individuals or
Managing Partner, which act was within the scope of the authority conferred on
the Managing Partner or the individuals constituting the Partners' Committee, as
-44-
the case may be, by this Agreement, unless such act or omission constituted
fraudulent or willful misconduct, was performed or omitted in bad faith or
constituted gross negligence or a violation of law. The individuals compris
ing the Partners' Committee and the Managing Partner shall be indemnified by the
Partnership against liability for any claim, demand, loss, damage, liability or
expense (including, without limitation, amounts paid in settlement, reasonable
costs of investigation and reasonable legal ex penses) resulting from any
threatened, pending or completed action, suit or proceeding naming any of them
as a defendant by reason of acts or omissions by them within the scope of their
authority as set forth in this Agreement, provided their actions were in good
faith and did not constitute gross negligence, fraud or willful misconduct or a
violation of law.
4.8 Indemnification. Any Person asserting a right to indemnification
---------------
under Section 4.5, Section 4.7 or Section 9.3 shall give notice to the
Partnership or the indemnifying Partner(s). If the facts giving rise to such
indemnification involve any actual or threatened claim or demand by or against a
third party, the indemnifying Person shall be entitled to control the defense or
prosecution of such claim or demand in the name of the indemnified Person, with
counsel reasonably satisfactory to the indemnified Person, if the indemnifying
Person notifies the indemnified
-45-
Person in writing of its intention to do so within twenty (20) days after the
receipt of such notice by the indemnify ing Person, without prejudice, however,
to the right of the indemnified Person to participate therein through counsel of
the indemnified Person's own choosing, which participation shall be at the
indemnified Person's sole expense unless (i) the indemnified Person shall have
been advised by its counsel that use of the same counsel to represent both the
indemnifying Person and the indemnified Person would present a conflict of
interest (which shall be deemed to include any case where there may be a legal
defense or claim available to the indemnified Person which is different from or
addi tional to those available to the indemnifying Person), in which case the
indemnifying Person shall not have the right to direct the defense of such
action on behalf of the indemnified Person, or (ii) the indemnifying Person
shall fail diligently to defend or prosecute such claim or demand within a
reasonable time. Whether or not the indemnifying Person chooses to defend or
prosecute such claim, the parties hereto shall cooperate in the prosecution or
defense of such claim and shall furnish such records, information and testimony
and attend such conferences, discovery proceedings, hearings, trials and appeals
as may reasonably be requested in connection therewith. The indemnifying Person
shall not settle or permit the settlement of any such third party claim or
action without the prior written
-46-
consent of the indemnified Person, which consent shall not be unreasonably
withheld.
4.9 Contracts with Related Persons and Partner Associates. (a) The
-----------------------------------------------------
Managing Partner shall in all cases seek to enforce the rights of the
Partnership under any existing or future contract with a Related Person with
respect to a Partner or a Partner Associate (as defined below), including
without limitation any affiliation agreement (each a "Related Affiliation
Agreement") between the Partnership, on the one hand, and any Partner or an
Affiliate of any Partner or any Person managed by any of them or any Person in
which any of them, directly or indirectly, has an equity interest greater than
10% on a fully-diluted basis (each a "Partner Associate"), on the other hand,
with the same level of diligence and perseverance as a prudent manager would
apply to the enforcement of similar contracts in similar circumstances with
unrelated parties and shall not, without consent of all of the other Partners
(which consent shall not be unreasonably withheld), grant any material waiver of
performance under any such contract to or in favor of such Related Person or
Partner Associate, unless such waiver is in the best interests of the
Partnership. Without limiting any other right of such other Partners set forth
herein, upon any failure by the Managing Partner to comply with the provisions
of the foregoing sentence, any of the other
-47-
Partners, other than the Partner as to which the Related Person is a Related
Person or such Partner Associate is a Partner Associate, may, upon notice to the
Managing Partner, pursue in the name of the Partnership such remedies as may be
available against any such Related Person or Partner Associate with respect to
any such contract; provided, that such other Partners (jointly and severally, if
--------
there is more than one), indemnify the Managing Partner and the Partner ship
for any losses or damages (including attorneys' fees and disbursements) accruing
to the Partnership as a result of any judgment, decision, award or settlement
adverse to the Partnership or such other Partner in any action or proceeding
commenced in connection with the pursuit of such remedies.
(b) The Partnership shall not take any action, including entering into
or amending any affiliation agree ment, which would trigger a "most favored
nations" provision in any Related Affiliation Agreement unless either (i) such
Partner Associate has effectively waived in writing the benefit of such "most
favored nations" provision in connection with the action proposed to be taken by
the Partnership or (ii) each Disinterested Partner shall have approved such
agreement.
(c) From and after the time that under any Related Affiliation
Agreement a renewal rate is set pursuant to a formula based upon market rates
charged to other pro-
-48-
gramming networks or cable operators, the Managing Partner will consult with
each Disinterested Partner, or if there are none, each Partner that is not a
party to, and none of whose Partner Associates is a party to, such Related
Affiliation Agreement prior to agreeing to or amending the rates charged by or
other amounts payable to the Partnership under any affiliation agreement, other
than any affiliation agreement with any Partner Associate, that is or then would
affect the renewal of such affiliation agreement, and such Disinterested
Partner(s) or, if none, such other Partner(s) (which may, in each case, include
the Managing Partner), acting by majority of the Sharing Percentages owned by
all such Disinterested Partners or other Partners, shall have the right to
approve (which approval must be in a writing delivered prior to the entering
into or amendment of such agreement) the rates to be charged to, or other
amounts to be paid by, such affiliate to the Partnership, which approval shall
not be unreasonably withheld.
(d) Notwithstanding any contrary provision in Section 4.3, no
provision in any affiliation agreement between the Partnership and any Partner
Associate may be amended or waived without the prior written consent of the
Disinterested Partner(s) (which may include the Managing Partner), acting by
majority in the Sharing Percentages owned by all Disinterested Partners, which
consent shall not be unreasonably withheld.
-49-
(e) Without the prior written consent of each Partner, which shall not
unreasonably be withheld, the Partnership shall not file any notice, exercise
any election or take any other action which would directly (i) affect the per-
subscriber rate or any advertising make-up or similar compensation or
reimbursement amount to be paid to the Partnership by the applicable Partner
Associate under any Related Affiliation Agreement; (ii) entitle any Partner
Associate to exercise any right of termination as to any network subject to such
Related Affiliation Agreement or (iii) entitle any Partner Associate to more
than two minutes per hour of local advertising insertions in connection with any
major event, or any local advertising at any other time; or (iv) in the Managing
Partner's reasonable judgment, be reasonably likely, within a reasonable period
of time, to entitle any such Partner Associate to a payment from the Partnership
as a result of the distribution of the Partner ship's programming in the same
market area in which such Partner Associate operates, directly or indirectly,
through parties other than such Partner Associate; provided, that no such
--------
consent shall be required (a) from a Forfeited Partner in respect of any of the
matters described in clauses (i) through (iv) above or (b) from the Partner or
Partners whose Partner Associate is the other party to the Related Affiliation
Agreement in question in respect of the matters described in clause (iv) above
and provided, further, that
-------- -------
-50-
in the event any Partner fails to give its consent to any matter contemplated in
clause (iv) above, the Partnership may nevertheless give the notice, exercise
the election or take the action proposed to be given, exercised or taken by the
Partnership hereunder if the Partnership shall have received a written opinion
of nationally recognized outside counsel that the failure to give such notice or
exercise such election or take such action could result in a significant risk of
liability or adverse governmental action.
4.10 Approved Agreements. Notwithstanding any provision of this
-------------------
Agreement to the contrary, no action by the Partners' Committee or any Partner
shall be required in order to authorize the Partnership to enter into and
perform any of the Approved Agreements or to renew any Approved Agreement
pursuant to an automatic renewal provision of such Approved Agreement or on
terms no less favorable to the Partnership than those prevailing prior to such
renewal. Each Approved Agreement shall, for purposes of this Agree ment, be
deemed to be on an Arm's-length basis.
4.11 Unanimous Actions by Partners. (a) The Partners' Committee
-----------------------------
or the Managing Partner may make a recommendation, but shall have no power,
without the prior written consent of all Partners (other than a Forfeited
Partner):
-51-
(i) to amend this Agreement;
(ii) to admit any Person as a Partner in the Partnership except
as a result of a Transfer permitted by this Agreement;
(iii) to merge or consolidate the Partnership with any other
Person, other than in connection with an Initial Public Offering;
(iv) to lend or advance funds to any Partner or any Related
Person of a Partner other than pursuant to the Approved Agreements;
(v) to borrow funds except to the extent specifically
identified in the then-applicable Budget or Business Plan other than in the
form of a Partner's Loan;
(vi) except for the entering into of Approved Agreements, to
enter into or amend any agreement or arrangement or consummate any
transaction with a Partner or any Related Person of a Partner or any
agreement or arrangement with a third party that is related to an agreement
or arrangement between such third party and a Partner or any Related Person
of a Partner;
(vii) to dissolve and wind up the Partnership, other than in
connection with an Initial Public Offering except as otherwise provided in
Sections 8.1 and 8.2;
(viii) to Transfer all or substantially all of the assets of
the Partnership, other than in connection with an Initial Public Offering;
(ix) to acquire, directly or indirectly, any sub stantial
interest or participation in any other Person;
(x) to make any capital call other than in accordance with an
approved Budget;
(xi) to enter into, develop or acquire any new programming
service except to the extent specifically identified in the then-applicable
Budget or Business Plan; or
(xii) to effect a substantial change in the general theme of
the programming of the Partnership so that it
-52-
does not consist predominantly of national sports programming.
If the Partnership is presented with the opportunity to acquire an
interest in a National Sports Service under Section 8.5 of the Formation
Agreement, no Partner that is the party making such Offer or an Affiliate
thereof may exercise its rights under this Section 4.11 or 4.3 to block such
transaction.
(b) In addition to the approvals required under Section 4.11(a), the
prior written approval of any Forfeited Partner shall be required before any of
the actions referred to in Section 4.11(a)(iv), (v) or (vi) (unless in any such
case the actions in question are on an Arm's-length basis), Section 4.11(a)(vii)
or (viii), and before this Agreement may be amended in any respect that could
reasonably be expected to adversely affect such Forfeited Partner.
4.12 Removal of Managing Partner. If (a) any Restricted Person
---------------------------
shall Control Fox or (b) Fox and Twentieth Holdings Corporation shall directly
or indirectly hold less than a Minimum Interest in Fox/Liberty Partner, the
Managing Partner may be removed as Managing Partner at the request of any other
Partner (other than a Defaulting Partner) by written notice by the requesting
Partner to the Managing Partner within 60 days of such event.
Upon the removal of the Managing Partner, a new Managing Partner shall
be appointed from among the Partners
-53-
by the unanimous vote of the Partners excluding any Partner that is a Forfeited
Partner at the time of such decision. Until a successor Managing Partner has
been appointed, the Partnership shall be managed by the Partners' Committee in
accordance with Section 4.2.
The removal of the Managing Partner shall not, of itself, affect the
Managing Partner's Interest or Sharing Percentage in the Partnership or the
right of its representatives to vote (except as provided in the preceding
paragraph) on the Partners' Committee or its rights under Section 4.11.
ARTICLE V
---------
BOOKS AND RECORDS; REPORTS TO PARTNERS
5.1 Books and Records.
-----------------
(a) At all times during the Term, the Managing Partner, or in the
event there is no Managing Partner the Partners' Committee, shall keep or cause
to be kept full and complete books of account and business records in which
shall be entered fully and accurately each transaction of the Partnership.
(b) All such books of account and business records shall at all times
be maintained at the principal office of the Partnership or such other place the
Partners' Committee may determine. Each Partner or its duly authorized
representatives shall have the right, upon
-54-
reasonable notice, at its own expense, to examine, inspect and copy, during
normal business hours and for any lawful purpose related to the affairs of the
Partnership or the investment in the Partnership by such Partner, any of the
books of account, business records, properties and opera tions of the
Partnership. Such examination, inspection and copying may be conducted by the
Partner's employees, its independent certified public accountants, or its other
agents. Any information obtained by any Partner during such an inspection shall
be treated as confidential to the extent required by Section 10.10 hereof. The
Partnership's books of account and business records shall be preserved for a
period of at least five years or such longer period as is required by law.
(c) The Partnership's books of account shall be kept on an accrual
basis in accordance with GAAP. The fiscal year (the "Fiscal Year") of the
Partnership shall end on December 31, or on such other date as shall be
determined by the Partners' Committee.
5.2 Financial Reports. The Managing Partner, or in the event there
-----------------
is no Managing Partner the Partners' Committee, shall deliver to each Partner,
no later than 30 days after the end of each calendar month, a statement of
income (loss), balance sheet, statement of capital expendi tures and subscriber
data for the Partnership for such month prepared, in the case of financial
information, in accor-
-55-
dance with GAAP. The Managing Partner, or in the event
there is no Managing Partner the Partners' Committee, shall deliver to each
Partner, no later than 45 days after the close of each of the first three
quarters of the Partner ship's Fiscal Year, and 60 days after the end of each
such Fiscal Year, a financial report of the business and opera tions of the
Partnership prepared in accordance with GAAP (and, if required by any Partner
for purposes of reporting under the Securities Exchange Act of 1934, in
accordance with Regulation S-X or any successor regulation), relating to such
period, which report shall include a balance sheet as of the end of such period,
a statement of income (loss) and partners' capital (deficiency) and cash flows
(including sources and uses of funds) for the period then ended, and in each
case a comparison of the period then ended with the corresponding period in the
Fiscal Year immediately preced ing such period, which, in the case of the
report furnished after the close of the Fiscal Year, shall be audited by the
Partnership's independent certified public accountants. The monthly and
quarterly financial statements shall be accompanied by an analysis, in
reasonable detail, of the variance between the Partnership's operating results
and the corresponding amounts in the then-current Budget. The monthly and
quarterly financial reports may in each case be subject to normal year-end
adjustments. In addition to the foregoing financial statements, the financial
report
-56-
furnished after the close of each Fiscal Year shall also include a statement of
cash flows, and allocations to the Partners of the Partnership's taxable income,
gains, losses, deductions and credits. The financial report required to be
furnished after the close of the Fiscal Year may be deliv ered in preliminary
form, without footnotes; provided, that the final form of the required financial
--------
statements, audited by the Partnership's independent certified public accoun
tants, must be delivered within 75 days after such year-end. Additionally, the
Partnership shall provide an estimate of annual net income (loss) to each
Partner no later than 21 days after the close of each Fiscal Year and shall,
within 10 days after the end of each month provide any other available financial
information which any Partner reasonably requests. The Partnership will
initially engage Xxxxxx Xxxxxxxx LLP as its independent certified public accoun
tants. The Partnership shall bear the cost of each annual audit and, except as
otherwise provided in Section 4.6, the cost of any other services furnished to
the Partnership by its independent certified public accountants as provided
herein.
5.3 Tax Returns and Information.
---------------------------
(a) Until further action by the Partners' Committee, the Managing
Partner is designated as Tax Matters Partner under (S)6231(a)(7) of the Code.
The Tax Matters Partner will take no action which is reasonably expected to
-57-
have a material adverse effect on one or more of the Part ners unless such
action is approved by each such Partner. The Tax Matters Partner shall have the
rights and obligations set forth under the Code and regulations thereunder;
provided, that in no event shall the Tax Matters Partner extend the statute of
--------
limitations with respect to any Partner pursuant to Section 6229(b) of the Code
without the prior written consent of such Partner or litigate any adjustment to
any Partnership tax item in any forum other than the United States Tax Court
without the prior written approval of all Partners. The Tax Matters Partner
will be responsible for notifying all Partners of ongoing proceedings, both
administrative and judicial, and will represent the Partnership throughout any
such proceeding. The Partners will furnish the Tax Matters Partner with such
information as it may reasonably request to provide the Internal Revenue Service
with sufficient information to allow proper notice to the Partners. If an
administrative proceeding with respect to a partnership item under the Code has
begun, and the Tax Matters Partner so requests, each Partner will give notice to
the Tax Matters Partner of its treatment of any partnership item on its federal
income tax return, if any, which is inconsistent with the treatment of that item
on the partnership return for the Partnership. Any settlement agreement with the
Internal Revenue Service will be binding upon the Partners only as provided in
the
-58-
Code. The Tax Matters Partner will not bind any other Partner to any extension
of the statute of limitations or to a settlement agreement without such
Partner's written consent. Any Partner who enters into a settlement agreement
with respect to any partnership item will give notice to the other Partners of
such settlement agreement and its terms within 30 days after the date of
settlement. If the Tax Matters Partner does not file a petition for
readjustment of the partnership items in the Tax Court, federal District Court
or Claims Court within the 90-day period following a notice of a final
partnership administrative adjustment, any notice partner or 5-percent group (as
such terms are defined in the Code) may institute such action within the
following 60 days. The Tax Matters Partner will timely give notice to the other
Partners in writing of its decision. Any notice partner or 5-percent group will
give notice to the other Partners of its filing of any petition for
readjustment.
(b) The Tax Matters Partner shall cause income and other required
Federal, state and local tax returns for the Partnership to be prepared and sent
(together with related work papers) to each Partner for review at least 15
business days prior to filing, and will cause such returns to be timely filed
with the appropriate authorities. The Tax Matters Partner shall make or maintain
in effect an election under Section 754 of the Code to adjust the basis of the
Partnership Property under Sections 734 and 743 of
-59-
the Code for taxable years after the Effective Date if it deems such election to
be in the best interests of the Partnership or of any Partner. Subject to
Section 4.3, the Tax Matters Partner shall make such other elections as it shall
deem to be in the best interests of the Partnership and the Partners. The cost
of preparation of such returns by outside preparers, if any, shall be borne by
the Partnership.
(c) The Tax Matters Partner shall cause to be provided to each
Partner no later than July 1 of each year information concerning the
Partnership's projected taxable income or loss and each class of income, gain,
loss, deduc tion or credit which is relevant to reporting a Partner's share of
the Partnership income, gain, loss, deduction or credit for purposes of Federal
or state income tax. Infor mation required for the preparation of a Partner's
income tax returns shall be furnished to the Partners as soon as possible after
the close of the Partnership's Fiscal Year.
(d) For Federal income tax purposes, all gain, loss, depreciation or
amortization with respect to property which is reflected in the Capital Accounts
of the Partners at a basis different from the tax basis of such property shall
be allocated pursuant to the principles of Section 704(c) of the Code and the
Treasury Regulations promulgated thereunder. All other items of income or
deduction shall be allocated for Federal income tax purposes in the same way
-60-
such items are allocated to the Capital Accounts of the Partners. All tax
credits shall be allocated to the Part ners based upon the Sharing Percentage
of the Partners as of the time the expenditure giving rise to the credit was
incurred.
(e) The Tax Matters Partner shall from time to time upon request of
any other Partner cause the Partner ship's attorneys and accountants to confer
with attorneys and accountants for such other Partner on any matters relating to
any Partnership tax return or tax election.
ARTICLE VI
----------
PLEDGES, TRANSFERS, ADMISSIONS, WITHDRAWALS
6.1 Transfer by Partners.
--------------------
(a) Except for Transfers made pursuant to Section 6.1(b), 6.5, 6.6 or
8.3, without the prior written consent of all of the Partners (other than a
Forfeited Partner), no Partner shall have the right to Transfer all or any part
of its Interest, or to suffer to occur a Change in Control of such Partner or an
Indirect Transfer as to such Partner, and any such Transfer shall be void and of
no force or effect.
(b) Other than in connection with Transfers pursuant to Section 6.5,
6.6 and 8.3, no Partner (a "Selling Partner") shall have the right to Transfer
all or any part of its Interest or to suffer to occur a Change in Control of
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such Partner or an Indirect Transfer as to such Partner, without first offering
to the remaining Partners (other than a Forfeited Partner) (each an "Offeree"
and collectively the "Offerees") a right of first refusal to purchase the
portion of such Selling Partner's Interest that is proposed to be so Transferred
or, in the case of a Change in Control or an Indirect Transfer, all of such
Partner's Interest (the "Offered Interest"), all on the terms hereinafter set
forth. The Offered Interest must be offered by means of a notice (an "Offer
Notice") given by the Selling Partner to each Offeree at a price and upon terms
no less favorable to the Offerees than those which the Selling Partner is
willing to accept from a bona fide third party purchaser pursuant to an offer
---- ----
from such third party purchaser (or, in the case of a Change in Control or an
Indirect Transfer, the value of the Offered Interest, as determined by
multiplying the Fair Market Value of the Partnership by the Sharing Percentage
represented by the Offered Interest) (a "Bona Fide Offer"); provided, that
--------
regardless of the terms of the Bona Fide Offer, the Offered Interest shall be
offered to the Offerees on terms that permit the Offerees 90 days within which
to complete the purchase. The Offer Notice shall state the identity of, and the
price and other terms offered by, such third party for the purchase of the
Offered Interest (or, in the case of a Change in Control or an Indirect
Transfer, the identity of the Person that will acquire Control of the
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Partner or the Interest as a result of the proposed trans action). In any case
where a Bona Fide Offer has been made in respect of an Offered Interest in
conjunction with other property, the price in respect of the Offered Interest
shall be the Allocated Interest Offer Price. Within 15 days after receipt of
such Offer Notice, each Offeree shall accept, in whole or in part, or reject
such offer for the Offered Interest by delivering a notice to each of the other
Partners and, if any Partner rejects such offer, it shall state in writing
whether it consents to the proposed Transfer under Section 6.1(a). If pursuant
to this Section 6.1(b) the Partners have agreed to purchase, in the aggregate,
the entire Offered Interest, then the entire Offered Interest shall be purchased
by the Partners that accepted all or a portion of the Offered Interest in
accordance with the terms offered by the Selling Partner and no consent to such
Transfer shall be required under Section 6.1(a); provided that if Rainbow
--------
Partner is purchasing any or all of the Offered Interest, the purchase price
shall be payable at the option of Rainbow Partner either (i) by wire transfer of
funds or by certified or cashier's check drawn to the order of the Selling
Partner or (ii) in the form of a promissory note of Rainbow Partner secured,
pursuant to a pledge or collateral assignment agreement in form reasonably
acceptable to the Selling Partner, by the Interest purchased, maturing on the
third anniversary of the
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date of such Transfer and bearing interest, payable semi-annually, at a rate per
annum equal to the Prime Rate plus one-half of one percent (1/2%). If all of
the Offered Interest has not been accepted and no Partner has delivered a
writing in which it refused to consent to the proposed Transfer, then the
Selling Partner may, within 90 days after the Offer Notice is given, Transfer
the entire Offered Interest but not a portion thereof to such third party at a
price not less than the price at which, and on other terms no more favorable to
the third party than those contained in the Bona Fide Offer (or, in the case of
a Change in Control or an Indirect Transfer, suffer the completion of such
Change in Control or Indirect Transfer). If the Offered Interest is not so
disposed of within such 90-day period, then the Selling Partner shall, before
Transferring all or any portion of its Interest (or suffering the completion of
a subsequent Change in Control or Indirect Transfer), again be obligated to
offer the right of first refusal contained in this Section 6.1(b) to the other
Partners. The sale of an Interest pursuant to a Bona Fide Offer in accordance
with this Section 6.1(b) shall not be effective without the prior written
consent (which shall not be unreasonably withheld) of the Partners (other than a
Forfeited Partner) and any such purported sale shall be void and of no force or
effect.
(c) After any Transfer of an Interest permitted hereby, the
Transferee shall be admitted as a Partner, with
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appropriate amendments being made to this Agreement, the Transferred Interest
shall continue to be subject to all the provisions of this Agreement including,
without limitation, the provisions of this Article VI.
(d) Except as otherwise provided in Section 6.5, a Transfer will be
deemed to occur for the purpose of this Article VI in respect of the Interest of
a Partner in the event of a Change in Control of such Partner or an Indirect
Transfer with respect to such Partner. In the event of any such deemed Transfer
of an Interest, (i) if such Transfer is made in compliance with the first
sentence of Sec tion 6.1(a), the Interest deemed Transferred shall continue to
be subject to all the provisions of this Agreement and, upon request by any
other Partner, the deemed Transferring Partner shall cause each deemed
Transferee to assume and agree to perform in writing all of such deemed
Transferring Partner's duties and obligations as a Partner under this Agreement,
including, without limitation, the obligations imposed by this Article VI; and
(ii) if such deemed Transfer is not made in compliance with Section 6.1(a), then
the other Partners shall be entitled to make the elections and exercise the
remedies available to Non-Defaulting Partners under Section 7.2 of this
Agreement against the deemed Transferring Partner and its deemed Transferee.
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6.2 Additional Provisions Relating to Transfer.
------------------------------------------
(a) In the case of any Transfer under Sec tion 6.1, 6.5, 6.6 or 8.3:
(i) Except as provided therein, the Transfer of an Interest shall not
affect the Approved Agreements; provided, however, that if the Transferring
-------- -------
Partner is the Managing Partner, then, with respect to any agreements
between the Partnership and the Transferring Managing Partner or any
Related Person with respect to the Transferring Managing Partner for the
provision of management and other services of the type described in Annex D
to this Agreement (whether or not such agree ments are Approved
Agreements), the other Partners (acting by a majority of such Partners'
Sharing Percentages) shall have the option, by giving 30 days' notice to
the Transferring Managing Partner or such Related Person, as the case may
be, to (A) elect to terminate any or all of such agreements or (B) elect to
cause any or all of such agreements to be assigned to the Transferee or its
Designee or, if there is more than one Transferee, to any Person jointly
designated by such Transferees. Upon the written request of the non-
Transferring Partners, the Managing Partner and its Affiliates shall
continue to provide to the Partnership for a period of 90 days following
the date of Transfer any management and other services of the type
described in Annex D that were being provided by them immediately prior to
the Transfer, and the Managing Partner and its Affiliates shall continue to
be compensated for such services and reimbursed for their costs in
accordance with the provisions of Sections 4.1 and 4.6 hereof, or in
accordance with the provisions of any applicable agreement, as the case may
be. Upon any such termina tion, the Transferring Managing Partner shall
cooperate and shall cause its Affiliates to cooperate with the Transferee
or Transferees, as the case may be, in order to effect an orderly
transition of management services; and
(ii) The Transferee or Transferees of an Interest, as the case may be,
shall be required to pay any and all filing and recording fees, fees of
counsel and accountants and other costs and expenses reasonably incurred by
the Partnership as a result of such Transfer.
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(b) In connection with the Transfer of any Interest pursuant to Section
6.1, 6.6 or 8.3, the Transferor and its Affiliates will be obligated to sell to
the Transferee, and the Transferee will be obligated to buy from the Transferor
and its Affiliates, all (or in the case of a partial Transfer, an appropriate
portion of) evidences of indebtedness (including Partner's Loans) of the
Partnership held directly or indirectly by the Transferor and its Affiliates for
an amount, payable in cash, equal to the outstanding principal amount thereof at
the time of Transfer plus interest thereon then accrued and unpaid; provided,
--------
that in connection with a Transfer pursuant to a Bona Fide Offer the terms of
the Bona Fide Offer will govern the disposition of such evidences of
indebtedness.
(c) The Transferee of an Interest hereunder shall assume in writing in
form and substance reasonably satis factory to the non-Transferring Partners
the obligations of the Transferring Partner under this Agreement arising from
and after the effective date of the Transfer in respect of the Transferred
Interest and the Transferring Partner shall be released therefrom except for
those obligations or liabilities of the Transferring Partner based on events
occurring, arising or maturing prior to the date of Transfer and except those
obligations arising out of a breach of this Agreement by the Transferring
Partner or pursuant to Section 4.5, 4.7 or 9.3.
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(d) If required by any non-Transferring Partner, the Transferee shall
deliver to the Partnership an opinion, satisfactory in form and substance to the
non-Transferring Partners, of counsel reasonably satisfactory to such non-
Transferring Partners to the effect that the Transfer of the Interest in
question is in compliance with applicable state and federal securities laws.
(e) No Transfer shall be recognized for any pur pose as between a
Transferring Partner and the Partnership or as between a Transferring Partner
and the other Partners until the Transferee shall have executed written
instruments satisfactory to the Partners' Committee to become a party to this
Agreement and assume the rights and obligations of the Transferring Partner
hereunder.
(f) Upon completion of any Transfer pursuant to Section 6.1, 6.6 or 8.3 or
a change of ownership in compliance with Section 6.5(a), the Transferee of an
Interest (if not already a Partner) shall be admitted as a Partner without any
further action upon compliance with the provisions of this Section 6.2.
6.3 Effect of Attempted Transfer; Withdrawals and Admissions
--------------------------------------------- ----------
Generally. An attempted Transfer of any Interest or any portion thereof in
---------
violation of any provision of this Agreement shall be void. No Partner shall
withdraw from the Partnership, except by a Transfer of an Interest permitted
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by this Agreement or with the written consent of the other Partners.
6.4 Tax Allocation Adjustments; Distributions After Transfer. In
----------------------------------------- --------------
the event of a Transfer of any Interest, regardless of whether the Transferee
becomes a substitute Partner, all items of income, gain, loss, deduction and
credit for the fiscal period in which the Transfer occurs shall be allocated for
Federal income tax purposes between the Transferor and the Transferee on the
basis of the owner ship of the Interest at the time the particular item is
taken into account by the Partnership for Federal income tax purposes, except to
the extent otherwise required by Sec tion 706(d) of the Code. Distributions
made on or after the effective date of Transfer shall be made to the Transferee,
regardless of when such distributions accrued on the books of the Partnership.
6.5 Certain Affiliate Transferee Transactions Not Deemed Transfers.
--------------------------------------------------------------
(a) Notwithstanding anything in this Agreement to the contrary, a transaction
shall not be deemed to constitute a direct or indirect Transfer of an Interest,
a Change in Control or an Indirect Transfer, if the transferee and the
transferor are Affiliate Transferees. A transferor and a transferee shall be
deemed to be "Affiliate Transferees" if (i) the same Person directly or
indirectly owns more than a Minimum Interest in both the transferor and the
transferee immediately prior to the transaction in
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question or (ii) Fox, Twentieth Holdings Corporation or Liberty collectively own
all of the direct and indirect interests in the transferor and the transferee
immediately prior to the transaction in question. Fox/Liberty Partner hereby
agrees to consult in good faith with Rainbow Partner prior to engaging in any
transaction which has the effect of reallocating between Fox and Liberty their
direct or indirect ownership interests in the Partnership.
(b) Notwithstanding anything in this Agreement to the contrary, none of the
following transactions shall be deemed to constitute a direct or indirect
Transfer of an Interest, a Change in Control or an Indirect Transfer: (i) a
change, shift or transfer of Control that shall be deemed not to be a Change in
Control pursuant to the second sentence of the definition thereof; or (ii) the
Transfer directly or indirectly of all or any portion of the equity interests
in, or assets of, Rainbow Partner to the stockholders of RMH as a class (it
being understood that such transfer may include the transfer to different
classes of stockholders of RMH of different classes of equity interests
reflecting the same relative rights and privileges as the different classes of
stock of RMH) or to any group of public equity holders (including, without
limitation, a transfer by means of a registered public offering).
6.6 IPO-Call Procedure. (a) The procedure set forth in this Section
------------------
6.6 (the "IPO-Call Procedure") may be
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initiated by Rainbow Partner during any IPO-Call Notice Window. Such IPO-Call
Procedure shall be initiated by written notice (the "IPO-Call Notice") from
Rainbow Partner to Fox/Liberty Partner in accordance herewith. Except as
provided below, upon the giving of the IPO-Call Notice, Fox/Liberty Partner
shall be obligated to purchase, and Rainbow Partner shall be obligated to sell,
all (but not less than all) of the Interests of Rainbow Partner at the Call
Price (as defined below) in accordance with the terms hereof.
(b) For 45 days after receipt of an IPO-Call Notice, Rainbow Partner, on
the one hand, and Fox/Liberty Partner, on the other hand, shall negotiate in
good faith to determine the Fair Market Value of all of the Interests. If such
Partners are not able to agree on such Fair Market Value, prior to such 45th
day, each shall select an Appraiser. Within 15 days after the selection of the
Appraisers, the Appraisers so selected shall jointly select a third Appraiser.
Within 30 days after its selection, the third Appraiser shall determine the
value of the Interests held by Rainbow Partner by determining the Fair Market
Value of all of the Interests and multiplying such Fair Market Value by the
Sharing Percentage of Rainbow Partner (the "Call Price"). Within 30 days after
determination of the Call Price, Fox/Liberty Partner shall give written notice
to Rainbow Partner of its election either (i) to purchase the
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Interests of Rainbow Partner for, at the election of Fox/Liberty Partner, any of
(A) a number of Marketable Securities of TCI, The News Corporation Limited or a
person that holds all of the Fox and Liberty interests in sports programming (or
a combination thereof) calculated by dividing the Call Price by the Current
Market Price of such Marketable Securities, or (B) a promissory note of
Fox/Liberty Partner secured, pursuant to a pledge or collateral assignment
agreement in form reasonably acceptable to Rainbow Partner, by the Interest
purchased, maturing on the third anniversary of the IPO-Call Closing Date and
bearing interest, payable semi-annually, at a rate per annum equal to the Prime
Rate plus one-half of one percent (1/2%) in aggregate principal amount equal to
the Call Price or (ii) to consummate an Initial Public Offering of the
Partnership or the Corporation within 180 days of the IPO Call Notice. If a
purchase of Interests is to be effected pursuant to this Section, at Fox/Liberty
Partner's request, the parties shall negotiate in good faith to structure the
transaction as a tax-free transaction, provided, that (i) Rainbow Partner will
--------
not be required to accept, in exchange for its Interests, securities which are
not Marketable Securities, (ii) structuring the transaction in such a manner
shall not cause any adverse consequences to Fox/Liberty Partner or the issuer of
such Marketable Securities and (iii) Fox/Liberty Partner shall not be
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required to change its election with respect to the Marketable Securities being
issued. Securities issued in such transaction may be voting, nonvoting or
convertible into voting securities at the election of the issuer.
(c) Fox/Liberty Partner may elect to have its purchase effected by a
Designee and, if Rainbow Partner so elects, Fox/Liberty Partner shall guarantee
the performance of its Designee. The business affairs of the Partnership shall
continue to be conducted in the ordinary course as provided in this Agreement
during the pendency of and unaffected by the IPO-Call Procedure.
(d) In the event that an Initial Public Offering of the Partnership or the
Corporation is not consummated within 180 days after the date of the IPO-Call
Notice, the closing of any purchase and sale of an Interest under this Section
6.6 shall be held at a mutually acceptable place on a mutually acceptable date
(the "IPO-Call Closing Date") not more than 180 days after the date of
determination of the Call Price; provided, that if any governmental approvals
--------
are required to consummate such purchase and sale, the IPO-Call Closing Date
shall be the date on which the last such approval is obtained but in any event
not more than 240 days after the determination of the Call Price. At such
closing, Rainbow Partner shall assign to Fox/Liberty Partner the Interests to be
sold, free and clear of all liens, claims
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and encumbrances, and shall execute such documents as may be necessary to
effectuate the sale.
(e) In order to effectuate an Initial Public Offering, notwithstanding
Section 4.9, Fox/Liberty Partner shall be permitted to effect a reorganization
or restructuring of the Partnership into the Corporation, without any consent of
any other Partner.
ARTICLE VII
------------
EVENTS OF DEFAULT
7.1 Events of Default.
-----------------
(a) An "Event of Default" shall be considered to have occurred with
respect to a Partner (the "Defaulting Partner") if:
(i) Such Partner Transfers all or any part of its Interest, or suffers
to occur a Change in Control of such Partner or an Indirect Transfer as to
such Partner, except as permitted in this Agreement; provided, that no
--------
Event of Default shall be considered to have occurred for 30 days following
the involuntary encumbrance of all or any part of such Interest if during
such 30-day period such Partner acts diligently to, and does, remove any
such encumbrance, including, but not limited to posting a bond to prevent
foreclosure; or
(ii) Such Partner or any Affiliate of such Partner fails to perform or
violates any other material term or condition of this Agreement (including,
without limitation, a failure to pay any amounts due under Section 6.1 or
6.2 but excluding any failure to meet any capital call) or a material term
or condition of any Approved Agreement (or Section 8.2, 8.3, 8.4 or 8.5 of
the Formation Agreement) and such failure or violation continues for 45
days after such Partner has been given notice thereof by any other Partner;
provided, however, that (other than in the case of a breach of Section 8.2,
-------- -------
8.3, 8.4 or 8.5 of the Formation
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Agreement) if the failure or violation is not a failure to pay money and is
of such a nature that it cannot reasonably be cured within such 45-day
period, but if it is curable and such Partner in good faith begins efforts
to cure it within such 45-day period and con tinues diligently to do so,
it shall have a reasonable additional period thereafter to effect the cure.
7.2 Remedies of Non-Defaulting Partners.
-----------------------------------
Upon the occurrence and during the continuance of an Event of
Default, the remedies that may be elected by the Non-Defaulting Partners
are:
(i) to seek to enjoin such default or to obtain specific performance
of a Defaulting Partner's obliga tions or xxx for Damages (as hereinafter
defined) in respect of such Event of Default; or
(ii) to dissolve the Partnership as provided in Section 8.1(e), in which
event the affairs of the Partnership shall be wound up as provided in Sec
tion 8.2.
The election of a remedy specified in clause (i) above may be made by any
Partner that is not a Defaulting Partner (a "Non-Defaulting Partner") or a
Forfeited Partner, and the remedy specified in clause (ii) above may be made by
unanimous vote of the Non-Defaulting Partners that are not Forfeited Partners,
by giving notice to the Defaulting Partner within 60 days (one year in the case
of an action to recover Damages) after obtaining actual knowledge of the
occurrence of such Event of Default; provided, that if an election pursuant to
--------
clause (i) above is made to seek an injunction, specific performance or other
equitable relief and a final judgment in such action is rendered denying such
equitable remedy, then, by notice given within ten days
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thereafter the Non-Defaulting Partners may elect to pursue any or all of the
remedies specified in clause (i) or (ii) of this Section 7.2 unless, prior to
the giving of such notice, the Defaulting Partner has cured the Event of Default
in question in full and no other Event of Default with respect to such Partner
has occurred and is continuing or the final judgment denying equitable relief
specifically held that there was no Event of Default.
The foregoing remedies shall not be deemed mutually exclusive, and
selection or resort to any thereof shall not preclude selection or resort to the
others.
The resort to any remedy pursuant to clauses (i) or (ii) of this Section
7.2 shall not for any purpose be deemed to be a waiver of any other remedy
available here under or under applicable law; provided, that the failure to
--------
elect a remedy within the time period provided shall be conclusively presumed to
be a waiver of such Event of Default.
Unless any Event of Default has been waived as set forth in the immediately
preceding paragraph, the Defaulting Partner shall be liable to the Partnership
and to the Non-Defaulting Partners for any and all damages, losses and expenses
(including attorneys' fees and disbursements) (collectively, "Damages") suffered
or incurred by the Partnership or the Non-Defaulting Partners as a result of
such Event of Default; provided, that neither the
--------
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Partnership nor the Non-Defaulting Partners shall have or assert any claim
against the Defaulting Partner for lost profits, exemplary, punitive, indirect,
special or conse quential Damages suffered or incurred by the Partnership or
the Non-Defaulting Partners as a result of an Event of Default.
ARTICLE VIII
-------------
DURATION AND TERMINATION OF THE PARTNERSHIP
8.1 Events of Termination. The Partnership shall be dissolved and
---------------------
its affairs wound up pursuant to Section 8.2 upon the first to occur of any of
the following events (each an "Event of Termination"):
(a) the expiration of the Term (provided, that the Partners may
--------
at any time prior to such expiration amend this Agreement to extend
the Term);
(b) the execution by all of the Partners of a unanimous written
consent to dissolution;
(c) the sale or other disposition of substantially all of the
assets of the Partnership;
(d) the Bankruptcy of a Partner, unless such Partner's Interest
is purchased pursuant to Section 8.3 or the other Partners consent to
a continuation of the Partnership with the successor of such Bankrupt
Partner admitted as a new Partner; or
(e) the election of the Non-Defaulting Partners pursuant to
Section 7.2(ii) to terminate the Partnership upon the occurrence and
during the continuance of an Event of Default.
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8.2 Winding-Up. Upon the occurrence of an Event of Termination, if
----------
the Partnership is not continued as provided herein, the Partnership's affairs
shall be wound up as follows:
(a) The Managing Partner, or in the event there is no Managing
Partner the Partners' Committee, shall cause to be prepared a statement of
the assets and liabilities of the Partnership as of the date of
dissolution.
(b) The assets and properties of the Partnership shall be liquidated
as promptly as possible, and receivables collected, all in an orderly and
business like manner so as not to involve undue sacrifice. Notwithstanding
the foregoing, the Partners' Committee may determine not to sell, or
authorize the sale of, all or any portion of the assets and properties of
the Partnership, in which event such assets and properties shall be
distributed in kind pursuant to Section 8.2(c).
(c) The proceeds of liquidation under Sec tion 8.2(b) and all other
assets and properties of the Partnership shall be applied and distributed
as follows in the following order of priority:
(i) to the payment of the debts and liabilities of the
Partnership (excluding any amounts which may be owed to any Partner or
any Affiliate of a Partner in respect of Partner's Loans, but
including all other amounts owed to any Partner or any Affiliate of a
Partner) and the expenses of liquidation;
(ii) to establish any reserves that the Managing Partner, or in
the event there is no Managing Partner the Partners' Committee, in
accordance with sound business judgment, deems reasonably necessary
for any contingent or unforeseen liabilities or obligations of the
Partnership, which reserves may be paid over by the Managing Partner
or the Partners' Committee, as applicable, to an escrow agent selected
by it to be held by such agent for the purpose of (x) distributing
such reserves in payment of the aforementioned contingencies and (y)
upon the
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expiration of such period as the Managing Partner or the Partners'
Committee, as applicable, may deem advisable, distributing the balance
thereof in the manner provided in this Section 8.2(c);
(iii) to pay the accrued and unpaid interest and unpaid
principal amount of Partner's Loans in the proportion that the
aggregate outstanding amount of such Partner's Loans of each Partner
and its Affiliates, including accrued and unpaid interest, bears to
the total of all such outstanding Partner's Loans, including accrued
and unpaid interest, of all the Partners and their Affiliates;
(iv) to the Partners in proportion to the positive balance of
each Partner's Capital Account; provided, that if any assets are to be
--------
distributed in kind, they will be valued at their Fair Market Value
before the distribution. This adjustment to Fair Market Value will be
reflected in an adjustment to the Partners' Capital Accounts in
accordance with the principles of Section 3.4 immediately prior to any
liquidating distribution. No Partner shall have any obligation to make
any contribution or payment in respect of a negative balance in its
Capital Account. Distributions pursuant to this paragraph may be
distributed to a trust established for the benefit of the Partners for
the purposes of liquidating the Partnership assets, collecting amounts
owed to the Partnership and paying any contingent or unforeseen
liabilities or obligations of the Partnership or of any Partner
arising out of or in connection with the Partnership. The assets of
any such trust shall be distributed to the Partners from time to time,
in the reasonable discretion of the Partners' Committee, in the same
proportions as the amount distributed to such trust by the Partnership
would otherwise have been distributed to the Partners pursuant to this
Agreement.
(d) The Partners and former Partners shall look solely to the
Partnership's assets for the return of their Capital Contributions, and if
the assets of the Partnership remaining after payment of or due provision
for all debts, lia bilities and obligations of the Partnership are
insufficient to return such Capital Contributions, the Partners and former
Partners shall have no
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recourse against the Partnership or any other Partner.
(e) If the value of the Partnership assets, including profits
from any sale thereof, is insufficient to pay the liabilities of the
Partnership (other than any Partner's Loans and Capital Contributions),
then such additional liabilities and reserve needs shall be funded by the
Partners in accordance with their respective Sharing Percentages without
giving effect to any reduction or increase in the Sharing Percentage of any
Partner pursuant to Section 3.2(b) resulting from one or more defaults
under Section 3.1.
(f) The Partners shall comply with all requirements of
applicable law pertaining to the winding-up of the Partnership.
(g) The Partners acknowledge that this Section 8.2 may establish
distribution priorities different from those set forth under applicable law
and agree that they intend, to the extent legally permissible, to vary
those provisions by this Agreement.
8.3 Purchase Option Upon Bankruptcy of a Partner. Upon the Bankruptcy
--------------------------------------------
of a Partner, any other Partner that is not a Defaulting Partner or Bankrupt (a
"Nonbankrupt Partner") shall have the right, but not the obligation, by notice
given to all the Partners within 45 days after such Nonbankrupt Partner obtains
actual knowledge of the occur rence of such Bankruptcy, to elect to purchase or
cause its Designee to purchase all or a portion of its pro rata share (based on
the relative Sharing Percentages of the Nonbank rupt Partners) of the Bankrupt
Partner's Interest. If any Nonbankrupt Partner elects not to purchase its pro
rata portion, the remaining Nonbankrupt Partners, if any, will have the right to
elect to purchase the portion declined.
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Unless the entire Interest of the Bankrupt Partner is purchased pursuant to this
Section 8.3, no portion of its Interest shall be purchased. If the Nonbankrupt
Partners purchase the entire Interest of the Bankrupt Partner, the business of
the Partnership shall be continued as a succes sor business entity without
liquidation of the Partnership's affairs. The purchase price payable for the
Bankrupt Partner's Interest pursuant to this Section 8.3 shall be 100% of the
product of the Fair Market Value of the Partner ship times such Bankrupt
Partner's Sharing Percentage. To the extent there is any disagreement among the
Partners as to the value of the Bankrupt Partner's Interest, such dispute shall
be determined by an Appraiser selected jointly by the Nonbankrupt Partners, on
the one hand, and the Bankrupt Partner, on the other hand. If the Partners are
not able to agree on an Appraiser, the Nonbankrupt Partners shall jointly select
an Appraiser and the Bankrupt Partner shall select an Appraiser and the
Appraisers so selected shall jointly select a third Appraiser, and the Appraiser
so selected shall be the Appraiser for purposes of determining the value of such
Interest; provided, that if the Bankrupt Partner shall fail to select an
--------
Appraiser, the Appraiser selected by the Nonbankrupt Partners shall be the
Appraiser for purposes of determining the value of such Interest. If more than
one eligible Partner elects to purchase a Bankrupt Partner's Interest pursuant
to this Section but any Partner
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fails to tender its share of the purchase price therefor at the closing, then
the tendering Partner(s) may elect to purchase the Interest that was to be
purchased by such nontendering Partner and shall have an additional 15 days in
which to tender payment for the share of the Bankrupt Part ner's Interest that
was to be purchased by the nontendering Partner(s). Any such election by the
tendering Partner(s) shall not excuse the default by the nontendering party.
ARTICLE IX
-----------
COVENANTS, REPRESENTATIONS AND WARRANTIES
9.1 Compliance with Applicable Law. Each Partner shall comply with
------------------------------
all applicable laws, regulations, rules and orders of governmental authorities
the non-compliance with which would have a material adverse effect on the
business affairs or financial condition of the Partnership.
9.2 No Restrictive Covenants. No Partner shall enter into or become
------------------------
subject to any contract, agreement, restriction or covenant (other than an
Approved Agreement) which would impair or inhibit the Partnership's ability to
obtain financing without recourse to the Partners (collec tively, "Restrictive
Covenants"), and each Partner represents and warrants to the other Partners
that, on the Effective Date, it is not subject to any Restrictive Covenants.
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9.3 Indemnification of Partners; Contribution. The Partnership shall
-----------------------------------------
indemnify and hold each Partner harmless from and against any claim, demand,
loss, damage, liability or expense (including, without limitation, amounts paid
in settlement, reasonable costs of investigation and reasonable legal expenses)
incurred by or against such Part ner and arising out of or resulting from any
act or omission of the Partnership. As among the Partners, no Partner shall be
liable or bear responsibility for more than its propor tionate share (based on
its Sharing Percentage) of the liabilities and obligations of the Partnership.
For the purposes of the preceding sentence, a Partner's Sharing Percentage shall
be determined on the date the relevant liability or obligation is incurred,
without giving effect to any reduction or increase in such Partner's Sharing
Percentage pursuant to Section 3.2(b) resulting from one or more defaults under
Section 3.1. In the event that (whether before or following any dissolution of
the Partnership) any Partner shall be required to pay, discharge or otherwise
bear responsibility for any liability or obligation of the Partnership in excess
of such Partner's proportionate share thereof, each other Partner hereby agrees
to indemnify, hold harmless and reimburse (directly or through the Partnership)
such Partner against and for such other Partner's respective proportionate share
of such excess. It is the intention of the Partners that, following the
operation of this clause,
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each Partner will have borne exactly its proportionate share of the liability or
obligation of the Partnership at issue determined with reference to such
Partner's Sharing Percentage, determined in accordance with the third sentence
of this Section 9.3.
9.4 Notice of Change in Control and Indirect Transfer. In addition
-------------------------------------------------
to any other notification require ments under this Agreement, each Partner
agrees that promptly following the occurrence of an event which consti tutes a
Change in Control or an Indirect Transfer it will give notice to the other
Partners of the Change in Control or Indirect Transfer. In addition,
Liberty/Fox Partner agrees that it shall promptly notify each other Partner if
Fox and Twentieth Holdings Corporation no longer directly or indirectly hold a
Minimum Interest in Fox/Liberty Partner.
ARTICLE X
---------
MISCELLANEOUS
10.1 Waiver of Partition. Except as may be otherwise provided by
-------------------
law in connection with the winding-up, liquidation and dissolution of the
Partnership, each Partner hereby irrevocably waives any and all rights that it
may have to maintain an action for partition of any of the Partnership Property.
10.2 Modification; Waivers. This Agreement may be modified or
---------------------
amended only with the written consent of each
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Partner. Except as otherwise specifically provided herein, no Partner shall be
released from its obligations hereunder without the written consent of the other
Partners. The observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively)
by the party or parties entitled to enforce such term, but any such waiver shall
be effective only if in a writing signed by the party or parties against which
such waiver is to be asserted. Except as otherwise specifically provided
herein, no delay on the part of any party hereto in exercising any right, power
or privilege hereunder shall operate as a waiver thereof, nor shall any waiver
on the part of any party hereto of any right, power or privilege hereunder
operate as a waiver of any other right, power or privilege hereunder nor shall
any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder.
10.3 Entire Agreement. This Agreement and the documents
----------------
expressly referred to herein constitute the entire agreement among the Partners
with respect to the subject matter hereof and supersede any prior agreement or
under standing between or among the Partners with respect to such subject
matter.
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10.4 Severability. If any provision of this Agreement, or the
------------
application of such provision to any Person or circumstance, shall be held
invalid, the remainder of this Agreement or the application of such provision to
other Persons or circumstances shall not be affected thereby; provided, that the
--------
parties shall negotiate in good faith with respect to an equitable modification
of the provision or application thereof held to be invalid.
10.5 Notices. All notices, requests, demands, consents and other
-------
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given on the date delivered by hand, on
the date transmission by telecopy is confirmed by machine answer-back or on the
third business day after such notice is mailed by registered or certified mail,
postage prepaid, and, pending the designation by notice of another address,
addressed as follows:
If to Fox/Liberty Partner:
Fox Sports Net, LLC
0000 Xxxxx Xxxxxxxxx Xxxx.
Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attention: Xxxx Xxxx
Telecopy: (000) 000-0000
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With copies to:
Liberty Media Corporation
0000 X. Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: President
Telecopy: (000) 000-0000
and:
Tele-Communications, Inc.
0000 XXX Xxxxxxx
Xxxxxxxxx, XX 00000
Attention: Legal Department
Telecopy: (000) 000-0000
and:
Xxxxxxx & Xxxxxx L.L.C.
0000 Xxxxx Xxxxxxxxxx Xxxxx Xxxxx
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telecopy: (000) 000-0000
and:
The News Corporation Limited
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Senior Executive Vice President
and Group General Counsel
Telecopy: (000) 000-0000
and:
Fox Television
00000 Xxxx Xxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxx Xxxxxxxxx, Esq.
Senior Vice President
Legal Affairs
Telecopy: (000) 000-0000
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and:
Squadron, Ellenoff, Plesent & Xxxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxxx, Esq.
Telecopy: (000) 000-0000
If to Rainbow Partner:
c/o Rainbow Media Holdings, Inc.
000 Xxxxxxxxx Xxxx Xxxx
Xxxxxxxx, X.X. 00000
Attention: President
With a copy to Attention: Executive Vice President
Legal and Business Affairs
cc: Cablevision Systems Corporation
Xxx Xxxxx Xxxxxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Executive Vice President and
General Counsel
10.6 Successors and Assigns. Except as otherwise specifically
----------------------
provided herein, this Agreement shall be bind ing upon and inure to the benefit
of the Partners and their legal representatives, successors and permitted
assigns.
10.7 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which together shall constitute one and the same
instrument.
10.8 Headings; Cross-references. The Article and Section
--------------------------
headings in this Agreement are for convenience of reference only, and shall not
be deemed to alter or affect the meaning or interpretation of any provisions
hereof.
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10.9 Construction. None of the provisions of this Agreement shall be
------------
for the benefit of or enforceable by any creditors of the Partnership. No one,
including but not limited to the Partners or any creditor of the Partnership or
any of its Partners, shall have any rights under this Agreement against any
Affiliate of any Partners.
10.10 Property Rights; Confidentiality. All books, records and
--------------------------------
accounts maintained exclusively for the Partnership (including, without
limitation, marketing reports and all other data whether stored on paper or in
electronic or other form), and any contracts or agreements (including, without
limitation, agreements for the purchase, lease or license of programming)
entered into by or exclu sively on behalf of the Partnership, shall at all
times be the exclusive property of the Partnership. All property (real,
personal or mixed) purchased with Partnership funds, and all moneys held or
collected for or on behalf of the Partnership shall at all times be the
exclusive property of the Partnership. No Partner shall, during the period such
Partner is a Partner and for a period ending on the later of two (2) years after
such Partner has ceased to be a Partner, disclose any confidential or
proprietary information with respect to the Partnership or any Partner, except
(i) with the prior written consent of the other Partners; (ii) to the extent
necessary to comply with law or the valid order of a court of competent
jurisdiction, in which event the party
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making such disclosure shall so give notice to the other Partners as promptly as
practicable (and, if possible, prior to making such disclosure) and shall seek
confidential treatment of such information; (iii) as part of its normal
reporting or review procedure to its parent companies, its auditors and its
attorneys and the securities exchange on which any such parent's securities are
traded from time to time; provided, that such Partner shall be liable for any
--------
breach by such parent companies, auditors or attorneys of any provision of this
Section; (iv) in connection with the enforcement of such Partner's rights
hereunder; (v) disclo sures to an Affiliate of, or professional advisor to,
such Partner in connection with the performance by such Partner of its
obligations hereunder; provided, that such Partner shall be liable for any
--------
breach by such Affiliate or profes sional advisor of any provision of this
Section; (vi) to a prospective purchaser of all or a portion of such Partner's
Interest in connection with a sale in accordance with the terms of this
Agreement; provided, that such Partner shall be liable for any breach by such
--------
prospective purchaser of any provision of this Section; and (vii) after the
expiration of Section 8.2 of the Formation Agreement as to such Partner, in
connection with decisions to bid, or the formulation of a bid, for television
programming rights, such Partner may disclose confidential or proprietary
information with respect to the Partnership to any co-
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investors it may have in connection with such bid or, if the bid is to be made
through a corporate entity, to the board of directors or executive officers of
such entity; provided, that such party shall be liable for any breach by such
--------
partner, director or executive officer of any provision of this Section,
it being understood that use of such information in connection with such bid
shall not constitute a breach hereunder. Except as provided in the preceding
sentence, no Partner, nor any of its Affiliates, shall, during the periods
referred to in such sentence, use any confidential or proprietary information
with respect to the Partnership other than for the benefit of the Partnership.
10.11 Non-Recourse. The obligations of the Part ners under this
------------
Agreement are solely corporate obligations of such entities and no
representation, undertaking or agreement made in this Agreement on the part of
any Partner was made or intended to be made as a personal or individual
representation, undertaking or agreement on the part of any partner, member,
incorporator, stockholder, director, officer or agent (past, present or future)
of any Partner, and no personal or individual liability or responsibility is
assumed by, nor shall any recourse at any time be asserted or enforced against,
any such partner, member, incorporator, stockholder, director, officer or agent,
all of which recourse (whether in common law, in equity, by statute or
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otherwise) is hereby forever irrevocably waived and released.
10.12 Further Actions. Each Partner shall execute and deliver
---------------
such other certificates, agreements and documents, and take such other actions,
as may reasonably be required in connection with the formation and continuation
of the Partnership and the achievement of its purposes.
10.13 Survival. Section 10.10 shall survive the termination of
--------
this Agreement, the dissolution of the Partnership, the withdrawal of any
Partner and the Transfer of the Interest of any Partner. Sections 4.5, 4.7 and
9.3 shall survive the termination of this Agreement and the dissolution of the
Partnership.
10.14 Governing Law. The Partnership has been formed and is
-------------
continued under the laws of the State of New York. This Agreement shall be
governed, construed and enforced in accordance with the laws of the State of New
York without regard to principles of conflict of laws.
10.15 No Right of Set-Off. No Partner shall be entitled to offset
-------------------
against any of its financial obligations to the Partnership under this Agreement
any obligation owed to it or any of its Affiliates by any other Partner or any
of such other Partner's Affiliates.
10.16 Expenses of the Parties. All expenses incurred by or on
-----------------------
behalf of the parties hereto in connection with the authorization, preparation
and consummation of this
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Agreement, including, without limitation, all fees and expenses of agents,
representatives, counsel and accountants employed by the parties hereto in
connection with the authorization, preparation, execution and consummation of
this Agreement, shall be borne solely by the party who shall have incurred the
same.
10.17 Unregistered Interests. Each Partner (i) acknowledges that
----------------------
the Interests are being acquired without registration under the Securities Act
of 1933, as amended, or under similar provisions of state law, (ii) represents
and warrants to the Partnership and the other Partners that it is acquiring the
Interest for its own account, for investment and with no view to the
distribution of the Interest, and (iii) agrees not to Transfer or attempt to
Transfer such Interest in the absence of registration under that Act and any
applicable state securities laws or an available exemption from such
registration.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers or partners thereunto duly authorized as of the
date first written above.
FOX SPORTS NATIONAL HOLDINGS, LLC
By
-----------------------------------
Name: Xxx Xxxxxxx
Title: Senior Vice President
RAINBOW NATIONAL SPORTS HOLDINGS LLC
By: RAINBOW MEDIA SPORTS
HOLDINGS, INC.,
sole member
By_____________________________________
Name: Xxxx Xxxxxx
Title: Executive Vice President
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