EXHIBIT 10.1
EXECUTION COPY
--------------
News America Incorporated
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
June 10, 1998
United Video Satellite Group, Inc.
0000 X. Xxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxx III
President and Chief Operating Officer
Gentlemen:
This letter agreement (the "Agreement", which term includes the Annexes and
Schedules hereto) confirms the terms and conditions upon which News America
Incorporated ("NAI"), a subsidiary of The News Corporation Limited ("News
Corp."), will (A) sell to United Video Satellite Group, Inc. ("UVSG" or "United
Video"), a subsidiary of Tele-Communications Inc. ("TCI"), (i) all of the
outstanding stock of News America Publications Inc. ("Publications") (which
owns and publishes TV Guide and to which, prior to the closing hereunder (the
"Closing"), NAI will cause the transfer, as a contribution to capital, of the
assets of NAI's entertainment web site known as TVGEN (which includes an
electronic program guide) together with rights to such intellectual property
owned by NAI or any of its controlled affiliates as is used in the conduct of
the TVGEN business (such assets and rights, "TVGEN")) and (ii) all of the
outstanding stock of TVSM, Inc. ("TVSM" and, together with Publications, the
"NAI Contributed Entities") (which owns and publishes print cable television
programming guides and which NAI expects to acquire shortly) and (B) assign to
UVSG any unexpired rights NAI or any of its affiliates may have (e.g.,
indemnification, post-closing tax covenants, access rights, further assurances,
etc.) under agreements pursuant to which it acquired or (in the case of TVSM)
expects to acquire any NAI Contributed Entity or any material portion of any NAI
Contributed Entity's business or assets (collectively, the "Transaction"), all
upon the terms and subject to the conditions set forth herein and in the Annexes
hereto and such additional terms and conditions as may be agreed upon by the
parties hereto. Provided that the effect thereof would not be adverse to TCI or
UVSG in any material respect (determined without regard to any other materiality
provision hereof), NAI may transfer the NAI Contributed Entities to a direct or
indirect subsidiary of News Corp. incorporated in the United States prior to the
Closing. In the event of such transfer, such entity shall make the same
representations, warranties and covenants to TCI and UVSG as made by NAI in this
Agreement (modified as appropriate to reference such entity) and notwithstanding
such transfer, NAI shall remain bound hereby for all purposes, including
indemnification. Unless the context indicates otherwise, the terms
"Publications", "TVSM", "NAI Contributed Entities" and "NAI Contributed Entity"
as used herein include the subsidiaries and, where applicable, controlled
affiliates of Publications, TVSM, and the applicable NAI Contributed Entity,
respectively, and the terms "TCI", "News Corp.", "NAI" and "UVSG" include their
respective subsidiaries and, where applicable, controlled affiliates. Further,
the term "Publications"
United Video Satellite Group Inc.
June 10, 1998
as used herein, unless the context otherwise requires, includes TVGEN as if the
contribution of TVGEN to its capital had been consummated prior to the date
hereof. As used herein, a "controlled affiliate" of a person is any other
person that the first person directly or indirectly controls and the term
"control" means the ability to direct or cause the direction (whether through
the ownership of voting securities, by contract or otherwise) of the management
and policies of such person or to control (whether affirmatively or negatively
and whether through the ownership of voting securities, by contract or
otherwise) the decision of such person to engage in the particular conduct at
issue.
1. Definitive Agreements. As soon as practicable after the date hereof,
---------------------
our respective legal counsel will prepare and negotiate definitive agreements
with respect to the Transaction containing the principal terms and conditions
set forth herein as well as such additional terms and conditions as may be
customary or appropriate under the circumstances (the "Definitive Agreements").
The parties hereto will cooperate with each other to the fullest extent
reasonably practicable in the preparation of the Definitive Agreements and all
related documents, in the obtaining of all necessary consents and in complying
with all regulatory requirements. Although the parties intend to diligently
negotiate and promptly enter into the Definitive Agreements, the parties
acknowledge and agree that this Agreement is a binding agreement, subject in any
event to the terms and conditions hereof.
2. Investigation; Confidentiality. The parties hereto will permit each
------------------------------
other and their financial advisors and accounting and legal representatives to
conduct an investigation and evaluation of the businesses included in the
Transaction, will provide such assistance as is reasonably requested and will
give access at reasonable times to information related to the assets and
operations of the businesses included in the Transaction. As promptly as
practicable after the execution of this Agreement, NAI shall deliver to UVSG
audited consolidated financial statements of each of Publications and TVSM as of
the end of the most recently completed fiscal year of each such entity and the
end of the preceding fiscal year and for each of the years in the three-year
period ended as of the end of the most recently completed fiscal year of each
such entity in the form required to be included by UVSG in the proxy statement
for its stockholders meeting to approve the Transaction in accordance with
federal securities laws and regulations (the "Audited NAI Contributed Entity
Financial Statements").
Except to the extent that information provided is in the public domain or
is or becomes readily ascertainable from public sources, such information shall
be kept in strict confidence. If this Agreement is terminated for any reason,
such information and all such documentation with respect thereto and all copies
thereof shall be destroyed or returned and all notes, memoranda or other similar
documents shall be destroyed or returned.
3. Conduct of Business. During the period from the date hereof to the
-------------------
Closing or the earlier termination of this Agreement, except as set forth on
Schedule 1 hereto, NAI shall cause the NAI Contributed Entities (including TVSM
and its subsidiaries only following the date of the acquisition thereof by NAI)
to, and UVSG will (a) carry on their respective businesses in accordance with
past custom and practice, (b) not enter into any contract, agreement or
transaction other than in the ordinary course of business and in accordance with
past custom and practice and (c) not
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United Video Satellite Group Inc.
June 10, 1998
remove any of their assets by way of dividend, distribution, withdrawal
or any other means without prior written consent of the other party. Nothing
contained in the foregoing shall preclude UVSG or the NAI Contributed Entities
from disposing of immaterial assets in the ordinary course of business
consistent with past practice in transactions with nonaffiliates.
4. Closing Conditions. The obligations of the parties to consummate the
------------------
Transaction will be subject to the fulfillment at or prior to the Closing of the
conditions set forth in this Agreement, including Annex A hereto (the "Term
Sheet") and such other customary conditions as the parties may agree.
5. Tax Treatment. The parties intend that the Transaction and the
-------------
transaction between UVSG and Liberty Media Corporation ("Liberty"), a subsidiary
of TCI, described in paragraph A6 of Schedule 1 (the "Netlink Transaction") will
be treated in the manner set forth in Section 8 of the Covenants set forth in
Item D of Annex A.
6. Public Disclosure. Except as required by law or regulation or the
-----------------
requirements of the NASD or the New York Stock Exchange, no public disclosure or
publicity concerning the subject matter hereof or the Transaction will be made
without the approval of each of the parties hereto. The parties hereto will
cooperate to prepare a joint press release to be issued promptly following the
execution and delivery of this Agreement.
7. Expenses. Each party hereto shall pay its own expenses (including
--------
fees and expenses of legal counsel, investment bankers, brokers or other
representatives or consultants) in connection with the Transaction (whether or
not consummated).
8. Termination. If the Transaction has not been consummated by March 31,
-----------
1999, either party may terminate this Agreement, provided that the failure of
the Transaction to be consummated is not due to any breach of this Agreement by
the terminating party.
9. Representations and Warranties. Each party hereto hereby represents
------------------------------
and warrants to the other that, subject to obtaining the consents and approvals
and complying with the governmental and regulatory requirements referred to in
the Annexes and Disclosure Schedules to this Agreement, (i) it is duly
organized, validly existing and in good standing under the jurisdiction in which
it was formed, (ii) it has the full right, power and authority to execute this
Agreement and to consummate the Transaction, (iii) the execution, delivery and
performance hereof will not conflict with nor result in any breach of provisions
of, or constitute a default under, any charter or bylaw or any material
agreement or other instrument to which it is a party or by which it is bound,
and (iv) this Agreement is a valid and binding obligation of such party,
enforceable in accordance with its terms, subject only to (a) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to creditors' rights generally, and (b) the availability of injunctive
relief and other equitable remedies. NAI further represents and warrants to UVSG
that it has no plan or intention to sell, exchange or otherwise dispose of any
of the UVSG Shares received in the Transaction. TCI represents and warrants to
NAI that it has no plan or intention to sell, exchange or otherwise dispose of
any of its shares of UVSG. Each party hereto also hereby makes the
representations and warranties
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United Video Satellite Group Inc.
June 10, 1998
to the other set forth in Annex B (in the case of NAI) and Annex C (in the case
of UVSG) and agrees to comply with the covenants set forth in Annex A hereto and
Annex D hereto (Tax Covenants) unless and until this Agreement is terminated in
accordance with its terms. UVSG acknowledges that NAI does not at the date
hereof own any interest in TVSM.
10. Investments. Until the Closing (when the Stockholders Agreement
-----------
described in Annex A will become effective) or the earlier termination of this
Agreement, UVSG (in the case of TCI) and the NAI Contributed Entities (in the
case of News Corp.) will be the exclusive vehicles through which TCI and News
Corp. directly or indirectly through their subsidiaries or controlled affiliates
conduct guide businesses (print, electronic or otherwise), whether within or
outside the United States, other than the provision by News Digital Systems plc
and its subsidiaries of technology relating to electronic program guides solely
in conjunction with the development and sale of encryption and conditional
access services for television and data broadcasting (the "NDS Business").
Except (a) as contemplated by Schedule 1, (b) for the acquisition of TVSM by NAI
(c) for additional investments by UVSG in the existing businesses of entities
currently controlled by UVSG, and by NAI in the NAI Contributed Entities and (d)
for the NDS Business, neither of TCI or News Corp. shall, directly or indirectly
through subsidiaries or controlled affiliates, invest in or acquire any guide
business prior to the Closing of the Transaction or the earlier termination of
this Agreement.
11. Further Assurances. Each party hereto shall negotiate, execute and
------------------
deliver all reasonably required documents and do all other acts which may be
reasonably requested by the other party hereto to implement and carry out the
terms and conditions of the Transaction. Each party shall use its commercially
reasonably efforts not to take any action or fail to take any action which would
reasonably be expected to frustrate the intent and purposes of this Agreement.
12. Notices. All notices and other communications hereunder shall be in
-------
writing and shall be delivered personally, telecopied (if receipt of which is
confirmed by the person to whom sent) or mailed by registered or certified mail
(if return receipt is requested) to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice) (notice
shall be deemed given upon receipt, if delivered personally or by telecopy, or
on the third business day following mailing, if mailed):
(a) If to UVSG, to:
United Video Satellite Group, Inc.
0000 X. Xxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000-0000
Attention: President
(with a copy similarly addressed to the Legal Department)
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
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United Video Satellite Group Inc.
June 10, 1998
with copies to:
Xxxxx & Xxxxx, L.L.P.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxx X. Xxxxxxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
and to:
Tele-Communications, Inc.
0000 XXX Xxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxx
General Counsel
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
(b) If to NAI, to:
News America Incorporated
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Senior Executive Vice President
and Group General Counsel of
The News Corporation Limited
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to:
Squadron, Ellenoff, Plesent & Xxxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
13. Governing Law. This Agreement shall be governed by the laws of the
-------------
State of New York applied to contracts made and wholly performed in such State.
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United Video Satellite Group Inc.
June 10, 1998
If the foregoing accurately reflects our agreement, please sign the
enclosed duplicate of this Agreement in the space provided below and return the
same to the undersigned.
Very truly yours,
NEWS AMERICA INCORPORATED
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Senior Executive Vice President
and General Counsel
Accepted and Agreed:
UNITED VIDEO SATELLITE GROUP INC.
By: /s/ Xxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President and COO
Accepted and Agreed (solely relating to the
investments covenant contained in Section 10 hereof;
the covenants set forth in Annex A hereto to the
extent applicable to TCI or News Corp., respectively;
the entry into the Stockholders' Agreement and the nego-
tiation of the Ancillary Agreements referred to in Annex A
hereto):
TELE-COMMUNICATIONS, INC.
By: /s/ Xxxx X. Xxxxxx
--------------------------------------
Name: Xxxx X. Xxxxxx
Title: Executive Vice President
THE NEWS CORPORATION LIMITED
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Senior Executive Vice President
and General Counsel
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ANNEX A - TERM SHEET
---------------------------------------------
A. Transaction Combine the businesses of TV Guide, TVSM,
----------- TVGEN and UVSG, with UVSG as the surviving
public company. The parties intend that the
Transaction and the Netlink Transaction be
treated in the manner set forth in Section 8
of the Covenants set forth in Item D below.
B. Structure UVSG acquires 100% of the shares of
--------- Publications, the assets of TVGEN (which will
have been transferred to Publications prior
to the Closing) and 100% of the shares of
TVSM from NAI for $800,000,000 in cash
(payable by wire transfer of same day funds)
and 30,000,000 shares of UVSG common stock
(the "UVSG Shares"), upon the terms and
subject to the conditions set forth in this
Agreement and such additional terms and
conditions as may be agreed upon by the
parties hereto. In the event of any reduction
in the aggregate price payable by NAI to
acquire TVSM, there shall be a corresponding
reduction in the cash portion of the purchase
price payable by UVSG in the Transaction.
When the shares of the NAI Contributed
Entities are delivered to UVSG, the NAI
Contributed Entities shall have no
indebtedness for borrowed money, no
outstanding debt securities or obligation to
issue debt securities and no liability or
obligation (as guarantor or otherwise) with
respect to the indebtedness of others (other
than any other NAI Contributed Entity and
other than the Limited Recourse Guaranty from
Publications to Provident Bank referred to on
Schedule 15 of the NAI Disclosure Schedule)
and shall have aggregate positive working
capital/1/ (before deduction of net deferred
subscription income but after giving effect
to the cash
-----------------
/1/ Calculated as current assets minus current liabilities (exclusive of
liabilities to be retained or assumed hereunder by NAI or an affiliate thereof
other than the NAI Contributed Entities) determined on a basis consistent with
the March 29, 1998 balance sheet.
-7-
distributions referred to below) of not less
than $45,000,000 (or $48,000,000 in the event
NAI has acquired TVSM prior to the Closing
hereunder). On or prior to the Closing, any
intercompany amount owed by Publications or
any other NAI Contributed Entity (other than
to another NAI Contributed Entity) (net of
amounts due to any NAI Contributed Entity by
NAI or any affiliate of NAI which is not an
NAI Contributed Entity) shall be contributed
to the capital of the applicable NAI
Contributed Entity and/or canceled. Subject
to compliance with the foregoing,
Publications may from time to time prior to
or at the Closing distribute (by dividend or
otherwise) all cash (other than cash
necessary to cover outstanding checks at the
date on which the Closing occurs (such date,
the "Closing Date")) of the NAI Contributed
Entities. Following its acquisition of TVSM
and prior to the Closing, NAI will contribute
to TVSM any funds deposited in escrow
pursuant to the TVSM Merger Agreement (as
hereinafter defined) that are released to NAI
or any of its affiliates prior to the Closing
and immediately prior to the Closing will
assign to TVSM all of its and its affiliates'
rights to any balance of such escrowed funds.
C. Resulting Capital Structure 1. Existing UVSG 11,732,946 Class A Common
--------------------------- Public Shareholders
(including issued (15.6% of total equity)
and pending
options)
2. TCI 14,518,760 Class A Common
/2/18,748,294 Class B Common
(44.4% of total equity)
3. News Corp 11,251,706 Class A Common
18,748,294 Class B Common
(40.0% of total equity)
_________________________
Total: 75,000,000 shares
(including issued and
pending options)
----------------
/2/ Assumes acquisition by Liberty of 6,375,000 shares of Class B Common
Stock of UVSG in the Netlink Transaction. In the event such transaction is not
consummated, the number of shares of Class B Common Stock to be issued to NAI
will be reduced on a share for share basis (with a corresponding increase in the
number of shares of Class A Common Stock).
-8-
TCI or News Corp.
(directly or through
their respective
subsidiaries), as the
case may be, shall
acquire, either through
open market purchases or
purchases of newly issued
shares of UVSG (which
UVSG hereby agrees to
sell at the same price
per share as the price
upon which the
consideration for the NAI
Contributed Entities is
based at any time prior
to the 90th day following
the Closing and
thereafter at the current
market price (based on
the average of the
closing prices on the ten
consecutive trading days
ending on the trading
date immediately prior to
the date of the issuance
and sale of such
shares)), such additional
shares of Class A Common
Stock as shall be
necessary to equalize the
number of shares held by
each of them if UVSG and
Liberty, in their
discretion, abandon the
Netlink Transaction or
the transaction described
in paragraph A7 of
Schedule 1 has not been
consummated prior to the
Closing and is thereafter
abandoned or if as a
result of any other
circumstances the shares
of Class A Common Stock
held by them are not
equal as of the later of
(i) the 90th day
following the Closing and
(ii) if as of such 90th
day the transaction
described in paragraph A7
of Schedule 1 is pending
but not yet closed, the
date such transaction is
consummated or earlier
abandoned. All references
in this Agreement to any
number of UVSG shares
shall be appropriately
adjusted in the event of
stock splits, stock
dividends, combinations,
any recapitalization,
reclassification or
similar transaction
involving UVSG.
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D. Principal Terms Relating
------------------------
to the Stock Purchase
---------------------
Representations and NAI hereby makes the representations and
------------------- warranties set forth in Annex B, and shall
Warranties of NAI: make such other customary representations and
----------------- warranties in the Definitive Agreements as
NAI and UVSG may agree.
Representations and UVSG hereby makes the representations and
------------------- warranties set forth in Annex C, and shall
Warranties of UVSG: make such other customary representations and
------------------ warranties in the Definitive Agreements as
NAI and UVSG may agree.
Tax Matters: The parties hereby make the covenants and
----------- indemnification undertakings set forth in
Annex D, and will make such other customary
covenants as they may agree.
Covenants: In addition to the covenants set forth
--------- elsewhere in this Agreement (including,
without limitation, the covenants set forth
in Section B of this Annex A), the parties
will make certain covenants customarily
provided for in similar transactions as they
may agree, including, without limitation, the
following (which the parties hereby make):
1. Except as set forth in Schedule 1 hereto,
the businesses of UVSG, Publications,
TVGEN and, subsequent to its purchase by
NAI, TVSM, will be operated in the
ordinary course of business consistent
with past practice prior to Closing;
2. UVSG will enter into a xxxx xxxxxxxx
rights agreement with NAI and TCI
providing for NAI and TCI to have certain
demand registration rights (subject to
customary holdbacks, blackout periods and
indemnification provisions) with respect
to shares of Class A Common Stock
(subject to first offer and first refusal
rights and mandatory conversion described
herein with respect to shares of Common
Stock proposed to be sold); in addition,
UVSG will agree to apply to list such
shares on UVSG's principal trading
markets, and will use commercially
reasonable efforts to cause any such
registration statement and listing
applications to become effective as
promptly as practicable following NAI's
or TCI's instructions so to do;
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3. UVSG, TCI, News Corp. and NAI, as
applicable, shall use all reasonable
efforts to obtain consents, approvals and
to satisfy all conditions required to
close the Transaction; provided, however,
that a party shall not be obligated to
take any action pursuant to the foregoing
if the taking of such action or the
obtaining of any consent or approval is
reasonably likely to be materially
burdensome to such party and its
subsidiaries taken as a whole or to
impact in a materially adverse manner the
economic or business benefit of the
transactions contemplated by this
Agreement;
4. TCI, News Corp. and NAI shall provide
UVSG with all information required of it
for the preparation of the proxy
statement in connection with the UVSG
stockholders meeting at which the
Transaction will be submitted for
approval (the "Stockholders Meeting");
5. Except as herein provided, News Corp.
will not negotiate to sell, sell or
solicit or entertain any offers to
purchase the NAI Contributed Entities or
their respective businesses;
6. TCI shall vote all of its UVSG shares in
favor of the Transaction and any other
matters required to effect the
transactions contemplated hereby at the
Stockholders Meeting or otherwise;
7. No 338(h)(10) election under the Internal
Revenue Code of 1986 as amended (the
"Code") shall be made with respect to the
Transaction;
-11-
8. Unless UVSG and Liberty in their
discretion have abandoned the Netlink
Transaction, each of the parties agrees
that (except as otherwise required by
law) (i) it shall use all reasonable
efforts to cause the Transaction and the
Netlink Transaction to constitute a tax-
free exchange under Section 351 of the
Code and to cause all transfers and
exchanges pursuant to such transactions
to occur on the same date, (ii) it will
not take any action, and will not permit
any of its subsidiaries or affiliates to
take any action, that such party knows
would cause the Transaction or Netlink
Transaction not to qualify as a tax-free
exchange pursuant to Section 351 of the
Code and (iii) it will report the
Transaction on all tax returns and other
tax filings as a tax-free exchange under
Section 351 of the Code; provided,
however, that if all conditions to
Closing other than the ability to close
the Netlink Transaction have been or can
be satisfied on or before November 1,
1998, the Closing hereunder shall occur
on November 2, 1998;
9. Following the Closing, UVSG will have the
right to continue to use News Corp.
services with respect to the NAI
Contributed Entities and their respective
businesses, including bulk paper
procurement and the benefits of NAI's
existing Software License and Services
Agreement with Oracle Corporation (to the
extent permitted thereunder), consistent
with past practice but in any event on
terms no less favorable to UVSG than MFN
terms; provided that its right to use
services (other than bulk paper
procurement) that require the involvement
of executives of News Corp. will be
subject to agreement upon an appropriate
payment structure based upon allocation
of costs (including services of senior
management);
10. Publications and, after the acquisition
of TVSM, TVSM shall conduct their
subscriber acquisition and renewal
promotional activities in the ordinary
course of business (according, in the
case of Publications, to the fiscal 1999
budget) and shall not accelerate or
increase subscriber promotional
activities for the purpose of maximizing
the cash balances of the NAI Contributed
Entities in contemplation of the Closing;
-12-
11. Except as provided in Schedule 1, prior
to the Closing or the earlier termination
of the Agreement, UVSG shall not, without
the prior written consent of NAI which
shall not be unreasonably withheld,
effect or authorize any stock split,
stock dividend, combination,
recapitalization, reclassification or
similar transaction involving UVSG;
12. NAI shall furnish UVSG with a copy of the
final Merger Agreement between NAI and
TVSM pursuant to which NAI shall acquire
TVSM, together with the schedules and
exhibits thereto (such Merger Agreement,
in the form executed by the parties
thereto, and as may be amended, together
with the schedules and exhibits thereto,
the "TVSM Merger Agreement") and copies
of any amendments thereof, and notice of
any material waivers thereunder; and
13. On the Closing Date or as soon
thereafter as may be practicable, News
Corp. shall cause all license agreements
granting News Corp. or its controlled
affiliates the right to use the "TV
Guide" trade name or trademark (other
than those agreements set forth in Items
2, 3, 7, 8 and 12 of Schedule 19 of the
NAI Disclosure Schedule) to be terminated
without liability to UVSG or its
controlled affiliates. The use of marks
pursuant to Items 2, 3, 7 and 8 shall be
on arms' length terms to be negotiated by
NAI and UVSG.
ERISA Covenants: 1. Prior to or as of the Closing Date, NAI
shall cause the News America Publishing
Incorporated Employees Pension and
Retirement Plan (the "Retirement Plan")
and Supplemental Executive Retirement
Plan to cease accruing benefits with
respect to employees of the NAI
Contributed Entities and Publications
shall cease to be a participating
employer under such plans;
-13-
2. Prior to the Closing Date, Publications
will cause NAI to become the plan sponsor
of the News America Savings Plan (the
"Savings Plan"). On the Closing Date or
as soon as practicable thereafter, NAI
shall cause the Trustee of the Savings
Plan to segregate, in accordance with the
spin-off provisions set forth under
Section 414(l) of the Code, the assets
allocable to accrued benefits of present
and former employees of Publications, and
shall make any and all filings and
submissions to the appropriate
governmental agencies arising in
connection with such segregation of
assets and all necessary amendments to
the Savings Plan and related trust
agreement to provide for the segregation
of the assets and transfer of such assets
to a newly created plan containing
substantially identical provisions. The
plan sponsor of the newly created plan
will be Publications and the plan sponsor
of the Savings Plan will be a non-NAI
Contributed Entity;
3. On or before the Closing Date, NAI will
cause the welfare plans (as such term is
defined in Section 3(1) of ERISA) of
Publications to be amended, to provide
benefits solely to employees of
Publications or, alternatively, to
establish welfare plans which are
substantially similar to existing welfare
plans for the benefit of employees of
Publications which provide benefits
solely to employees of Publications.
Alternatively, if so elected by UVSG,
which election UVSG may make in its sole
discretion with respect to any such
welfare plan, UVSG may cause NAI to amend
such welfare plans to no longer provide
benefits to employees of Publications as
of the Closing Date;
4. At no cost to the NAI Contributed
Entities, NAI or the applicable affiliate
thereof shall cause all stock options
held by employees of Publications if not
theretofore exercised to remain
outstanding for their full original terms
subject to compliance with the conditions
thereof, such as continued employment by
Publications; and
-14-
5. NAI shall be solely responsible for and
shall indemnify, defend and hold UVSG and
the NAI Contributed Entities harmless
from and against (i) any liability to
employees or former employees or
independent contractors of NAI or any of
its affiliates other than any NAI
Contributed Entity, (ii) any liability to
any employee or former employee or
independent contractor of any NAI
Contributed Entity whose employment or
services have been terminated at any time
prior to or effective as of the Closing
and (iii) any liability to any employee
or former employee or independent
contractor of any NAI Contributed Entity
or NAI or its affiliates with respect to
any welfare or pension plan benefit
provided by welfare and pension plans
sponsored by any of the NAI Contributed
Entities, NAI or its affiliates
attributable to periods prior to the
Closing.
Conditions Precedent to the The obligation of each party to effect the
--------------------------- Closing of the Transaction is conditioned
Obligations of the Parties to upon:
-----------------------------
Close:
-----
(i) all necessary shareholder approvals (in
the case of UVSG only) and all necessary
consents to the Transaction having been
obtained;
(ii) the obtaining of all necessary
governmental and third party consents and
approvals including termination or
expiration of all applicable waiting
periods under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as
amended and the rules and regulations
thereunder (the "HSR Act") without any
action taken by the Department of Justice
or the Federal Trade Commission remaining
unresolved, and any necessary NASDAQ
approvals;
(iii) no provision of any applicable law or
regulation and no judgment, injunction,
order or decree prohibiting the
consummation of the Transaction or
imposing on any party as a result of the
Transaction any obligation which is
reasonably likely to be materially
burdensome to such party and its
subsidiaries taken as a whole or to
impact in a materially adverse manner the
economic or business benefit of the
transactions contemplated by this
Agreement;
(iv) the execution and delivery of all
documents contemplated hereby by the
other applicable parties, including the
Stockholders Agreement referred to in
paragraph (E) of Annex A;
-15-
(v) all components of the Transaction (and
except as provided in Covenant 8 of
paragraph (D) of Annex A, the Netlink
Transaction (unless theretofore
abandoned)) being consummated
substantially simultaneously, provided
that if NAI's acquisition of TVSM has not
been consummated prior to the time that
the other conditions to closing have been
satisfied, the cash portion of the
purchase price will be reduced by the
aggregate purchase price payable by NAI
to acquire TVSM (including payments to
employees), and the Transaction (other
than UVSG's acquisition of TVSM) will be
consummated, and if NAI's acquisition of
TVSM is subsequently consummated, UVSG
will then acquire TVSM for such purchase
price in cash (but only if the
acquisition by NAI is consummated within
360 days after the date hereof);
(vi) the respective representations and
warranties of the other parties hereto
set forth herein shall be true on and as
of the date hereof and shall be true on
and as of the Closing Date with the same
effect as though such representations and
warranties were made on and as of the
Closing Date;
(vii) the other parties hereto shall have
performed and complied in all material
respects with all agreements and
covenants contained in this Agreement
that are required to be performed or
complied with by them prior to or at the
Closing;
(viii) such party shall have received a
certificate dated the Closing Date and
signed by the Chairman, President or a
Vice-President of the other party,
certifying that the conditions specified
in (vi) and (vii) above have been
fulfilled;
(ix) such party shall have received a legal
opinion from outside counsel to the other
party dated the Closing Date, in form and
substance reasonably satisfactory to such
party, with respect to the Transaction;
-16-
(x) such party shall have been furnished with
certificates dated the Closing Date and
signed by the Secretary or an Assistant
Secretary of the other party setting
forth (i) the names, signatures and
positions of the officers of the other
party who have executed this Agreement or
any other document executed by the other
party in connection with the Transaction,
and (ii) a copy of the resolutions
adopted by the Board of Directors and, to
the extent applicable, the shareholders
of the other party authorizing the
execution, delivery and performance of
this Agreement and the other documents
executed in connection with the
Transaction;
(xi) in the case of UVSG, NAI shall have
delivered to UVSG duly executed
resignations of such of the members of
the Board of Directors of the NAI
Contributed Entities as UVSG shall have
requested;
(xii) neither the NAI Contributed Entities (in
the case of UVSG) or UVSG (in the case of
NAI), in each case taken as a whole, nor
Publications (in the case of UVSG) shall
have had any material adverse change to
their businesses, assets, properties,
operations or condition (financial or
otherwise) since March 31, 1998; and
(xiii) four designees of NAI (who shall
constitute 4 of the ten members of the
Board following the Closing) shall become
members of the Board of Directors of UVSG
on the Closing Date immediately following
the Closing. Two of the members of the
Board immediately following the Closing
shall be independent directors.
-17-
Survival of Representations The representations and warranties of the
--------------------------- parties shall survive for a period ending 24
and Warranties; months following the Closing, except for (i)
--------------- representations and warranties relating to
Indemnification the shares of Publications and TVSM and the
--------------- UVSG Shares, which shall survive
indefinitely, (ii) the tax representation
with respect to the NAI Contributed Entities
set forth in Section 13(h) of Annex B and the
tax representations with respect to UVSG and
its subsidiaries set forth in Section 12 of
Annex C (other than Section 12(g) of Annex C)
which will survive for the applicable statute
of limitations period and (iii) the remaining
tax representations with respect to the NAI
Contributed Entities (other than Section
13(g) of Annex B) which shall not survive the
Closing. Covenants of the parties will
survive the Closing in accordance with their
terms and each party making a covenant will
indemnify the other for losses resulting from
a breach thereof. Such indemnification
obligation will not be subject to any basket
or deductible.
-18-
Each party shall indemnify the other for
losses resulting from breaches of its
representations and warranties; provided that
no indemnification shall be due and payable
(a) with respect to any individual claim
unless such claim equals or exceeds $100,000
and (b) unless the aggregate amount of such
claims equal to or in excess of $100,000
exceeds a "basket" of $20 million (provided
that if the aggregate amount of claims by the
other party exceed such "basket" limitation
such indemnification obligation shall apply
with respect only to the amount of such
excess). In determining whether the basket
has been met (and only for such purpose), the
representations and warranties of such party
shall be deemed to have been made free of all
materiality qualifiers. Notwithstanding the
foregoing, such indemnification obligation
will not be subject to any basket with
respect to losses arising out of breach of
any of the following representations or
warranties: Item 23 of Annex B and Item 18 of
Annex C ("Brokers' and Finders' Fees"); the
representation and warranty in Item 2 of
Annex B that upon consummation of the
Transaction, UVSG will hold (directly or
indirectly) of record and beneficially all of
the outstanding shares of capital stock of
each of the NAI Contributed Entities free and
clear of any Liens and Restrictions; the
representation and warranty in Item 2(b) of
Annex C that the UVSG shares to be issued to
NAI or its affiliate at the Closing will be
duly authorized, validly issued and fully
paid and nonassessable; and the
representations and warranties set forth in
Items 13(g) and 13(h) of Annex B.
Notwithstanding any other provision of this
Agreement, the indemnity of losses resulting
from breaches of UVSG's tax representations
and warranties in Section 12 of Annex C shall
be limited to the diminution in the value of
NAI's (or its affiliate's) investment in the
UVSG Common Stock to be issued pursuant
hereto based upon the UVSG stock price.
NAI will also indemnify and defend and hold
UVSG and the NAI Contributed Entities
harmless from and against (i) any liabilities
of NAI or any of its affiliates to former
stockholders or employees of TVSM arising
solely out of the obligations to make
payments at closing to such stockholders and
employees under Section 2.1 of the TVSM
Merger Agreement ("Merger Consideration
Amount"), Section 9.9 of the TVSM Merger
Agreement ("Payment") or Section 10.4 of the
TVSM Merger Agreement ("Payment of Employee
Bonuses"); provided that (a) NAI shall have
no liability as a result of the exercise of
statutory appraisal rights by TVSM
stockholders to the extent that the amount
required to be paid pursuant to the exercise
of statutory appraisal rights exceeds the
Merger Consideration Amount that would have
been paid to the dissenting TVSM stockholders
pursuant to the TVSM Merger Agreement and (b)
provided the payments in Section 10.4 of the
TVSM Merger Agreement are made, NAI shall be
entitled to the indemnification set forth in
Section 11.2(c) of the TVSM Merger Agreement
to the extent it incurs any liability
indemnified against pursuant thereto
(references herein to specific sections of
the TVSM Merger Agreement refer to the
sections in the draft thereof dated June 7,
1998 and shall be deemed to refer to any
corresponding section (whether or not
numbered in the same manner) in the final
TVSM Merger Agreement), (ii) any liabilities
of NAI or any of its affiliates or
predecessors under any Environmental and
Health Laws (as defined in the Annex B
hereto), including, without limitation, all
matters referred to in Schedule 17(b) of the
NAI Disclosure Schedule and liabilities
arising out of the ownership, operation
(including, without limitation, storage,
treatment, transportation or disposal of
hazardous materials whether onsite or
offsite), leasing or occupancy of any
printing facilities or storage of any
materials used in the printing process and
(iii) all severance obligations relating to
the termination of the persons identified on
Schedule 2 hereof in respect of certain
fulfillment operations.
-19-
Governing Law: The stock purchase agreement will be governed
------------- by the laws of the State of New York.
E. Stockholders Agreement 1. Board of Directors From and after the
---------------------- Closing Date (unless
among UVSG, NAI, News the number of
--------------------- directors is adjusted
Corp. and TCI pursuant hereto), News
------------- Corp. and TCI will
each designate four
board members
(representing 40% of
the number of
directors constituting
the entire Board of
Directors). The
members of the Board
shall select or
nominate two
Directors, who must
qualify as independent
directors. Subject to
the foregoing
requirement with
respect to independent
directors, the number
of directors that may
be designated by each
of News Corp. and TCI
shall be adjusted on a
pro rata basis to
reflect sales or
conversions of Class B
Common Stock, such
that each of News
Corp. and TCI (and any
transferee of such
parties that acquires
10% or more of the
Class B Common Stock
in accordance with the
Stockholders
Agreement) shall be
entitled to elect one
director for each 10%
of the outstanding
Class B Common Stock
owned by such party
(rounded to the
nearest 10%, with more
than 5% rounded up and
5% or less rounded
down, unless the
transferor and
transferee shall
otherwise agree).
-20-
2. Non-Compete UVSG will be the
exclusive vehicle
through which News
Corp. and TCI directly
or indirectly through
their respective
subsidiaries and
controlled affiliates
conduct guide
businesses (print,
electronic or
otherwise), whether
within or outside the
United States (other
than for the NDS
Business), so long as
TCI, on the one hand,
and News Corp., on the
other, is entitled to
designate at least one
director (i.e., owns
in excess of 5% of the
Class B Common Stock).
In the event of a
disposition by TCI or
News Corp. (each, a
"Parent") to its
stockholders of a
subsidiary through
which immediately
prior to such
disposition it owned
its investment in the
Class B Common Stock
of UVSG, such Parent
shall cause the
corporation, limited
liability company or
partnership that is
the "ultimate parent
entity" (as such term
is defined in the HSR
Act), or if the
ultimate parent entity
is an individual, the
entity or entities
controlled (as such
term is defined in the
HSR Act) directly by
the ultimate parent
entity through which
such person is the
ultimate parent
entity, of such
subsidiary immediately
following such
distribution to become
a party to the
Stockholders
Agreement.
-21-
3. Transfer Except for a
Restrictions disposition in
compliance with the
last sentence of Item
2 above, so long as a
party is entitled to
designate at least one
director, the other
party may not directly
or indirectly transfer
any shares of any
class of Common Stock
to an unaffiliated
third party or convert
into shares of Class A
Common Stock any
shares of Class B
Common Stock unless
(A) in the case of
proposed sales in the
market (whether as a
registered offering or
in a transaction with
a broker or market
maker) it first offers
to sell such shares to
the first party at a
price per share equal
to the average closing
price per share of
Class A Common Stock
for the five (5)
consecutive trading
days ending on the
trading date
immediately preceding
the date of such
offer; or (B) in the
case of receipt of a
bona fide offer from a
third party (which
such party desires to
accept) to purchase
any Common Stock, it
first offers to sell
such shares to the
first party at the
applicable per share
offered price (in
cash), and otherwise
on the terms and
conditions of such
offer. If the non-
transferring party
does not accept such
offer (and it shall
only be entitled to
accept such offer as
to all and not less
than all of the shares
proposed to be sold
unless otherwise
provided in the
Stockholders
Agreement), the
transferring party
shall convert all
shares of Class B
Common Stock subject
to such transaction to
shares of Class A
Common Stock in
connection with any
transfer, except in
the case of a transfer
pursuant to a bona
fide third party offer
of a number of shares
of Class B Common
Stock equal to 10% or
more of the Class B
Common Stock
outstanding. The
non-transferring party
will have pro rata tag
along rights (in
proportion to the
number of shares of
Class B Common Stock
held by each party) in
connection with any
sale by a party of
more than 50% of the
shares of Class B
Common Stock held by
such party. Any offer
from another party
hereto arising by
reason of a proposed
transaction with a
broker or market maker
must be accepted
within three (3)
business days
following the date a
party receives the
offer from the other
party hereto, and a
closing shall occur
within two (2)
business days
thereafter. Any offer
relating to Common
Stock pursuant to a
bona fide offer from a
third party (except
for a transaction
which will require
notification under the
HSR Act, which
transaction, unless
the bona fide offer
shall provide for a
longer period, shall
be treated in
accordance with the
following sentence)
must be accepted
within five (5)
business days after a
party hereto has
received the offer
from the other party
hereto and closed
within the period set
forth in the bona fide
offer. Any offer under
any other
circumstances
(including a bona fide
offer which does not
by its terms set forth
a period in which to
close) must be
accepted within five
(5) business days
after a party hereto
has received the offer
from the other party
hereto and closed
within twenty (20)
business days
thereafter, or such
longer period as may
be agreed, subject to
an extension for an
additional period of
up to ninety (90) days
in order to obtain
such governmental or
regulatory approvals
as may be required
(including, but
without limitation,
expiration or early
termination of all
applicable waiting
periods under the HSR
Act).
-22-
4. Change of Control None
Provisions
5. Stockholders Vote Unless otherwise
provided in the
Stockholders
Agreement, each of
News Corp. and TCI
will be obligated to
mutually agree on any
vote of their shares
in UVSG or failing
agreement shall be
obligated to vote
against any proposal
so long as such party
continues to own a
sufficient number of
shares of Class B
Common Stock such that
it is entitled to
designate at least one
director.
6. Board of Directors The approval of any
Vote action by the Board
will require the
affirmative vote of at
least seven of the ten
directors, except for
the removal of the
CEO, which will
require approval of
six of the ten
directors. The Board
of Directors will
create an Executive
Committee, consisting
of the CEO and the
President of UVSG and
one representative of
each of TCI and NAI,
which committee shall
have such duties and
powers as shall be
delegated to such
committee from time to
time by the vote of
the entire Board of
Directors. All action
by the Executive
Committee shall
require unanimous vote
or consent of all the
members of the
Executive Committee.
7. Existing Will be terminated.
Stockholders
Agreement
-23-
F. Ancillary Agreements The following shall be on mutually agreeable
-------------------- terms negotiated in good faith, but shall not
be a condition to the closing of the
Transaction. The obligations of News Corp.
and TCI with respect to entities they control
shall be subject to existing commitments; the
obligations with respect to entities they do
not control shall be based on reasonable
efforts, subject to existing commitments.
1. Affiliation Agreements with TCI and News
Corp. for both Prevue Channel and Prevue
Interactive.
2. Carriage/Marketing Agreements for monthly
and/or weekly cable and DTH guide
magazines (TV Guide branded).
3. Agreement by UVSG to convert its existing
Prevue channel, Prevue Online and Prevue
Interactive products to the "TV Guide"
brand as mutually agreed upon; provided,
however, Prevue International will only
use TV Guide brand where appropriate.
ANNEX B - REPRESENTATIONS AND WARRANTIES OF NAI
As used in this Agreement, (i) the term "NAI Contributed Entities" means
Publications and TVSM, together with each of their respective subsidiaries (and
TVGEN, which shall be deemed to be owned by Publications) and (ii) the term "NAI
Contributed Businesses" means the businesses conducted by the NAI Contributed
Entities (which constitute all businesses conducted by NAI and its controlled
affiliates engaged in the print or electronic program guide business other than
the NDS Business). All references to NAI and its affiliates or controlled
affiliates shall be deemed to include a reference to the NAI Contributed
Entities.
Notwithstanding the foregoing and the following representations and
warranties, no representation or warranty is made by NAI hereunder with respect
to TVSM unless and until NAI's proposed acquisition of TVSM is consummated,
except that NAI has furnished to UVSG a true and complete copy of the most
recent draft Merger Agreement dated June 7, 1998, together with the draft
schedules thereto, in the most recent form delivered to NAI by TVSM.
Representations and warranties of NAI with respect to TVSM following the
consummation of NAI's proposed acquisition of TVSM shall relate solely to facts
and circumstances which arise after the consummation of NAI's proposed
acquisition of TVSM.
The representations and warranties set forth in this Annex B are made
subject to
Schedule 1.
-24-
1. Organization. Each of NAI and the NAI Contributed Entities is a
------------
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has all requisite corporate power and
authority and all necessary licenses and permits to carry on its business as it
has been and is now being conducted and to own or lease and to operate the
properties used in connection therewith. Each of NAI and the NAI Contributed
Entities is duly qualified or licensed and in good standing to do business in
each of the jurisdictions where the conduct of its business or the ownership,
leasing or operation of its properties requires such qualification or licensing,
except where the failure to be so duly qualified or licensed and in good
standing, individually or in the aggregate, would not have a material adverse
effect on the business, operations, properties or condition (financial or
otherwise) of any of the NAI Contributed Entities or any of the NAI Contributed
Businesses or the ability of NAI to consummate the transactions contemplated
herein (collectively, a "Publications Material Adverse Effect").
2. Capitalization; Options and Other Rights. The total authorized
----------------------------------------
shares of the NAI Contributed Entities and the number of such shares that are
issued and outstanding are set forth in the NAI Disclosure Schedule. All of
the issued and outstanding shares of capital stock of the NAI Contributed
Entities have been duly and validly authorized and issued and are fully paid and
nonassessable, and are held of record and beneficially by NAI or by a direct or
indirect wholly owned U.S. subsidiary of NAI (or, subject to compliance with the
terms and conditions of this Agreement, a U.S. direct or indirect subsidiary of
News Corp.) free and clear of any Liens (as hereinafter defined)
-25-
and Restrictions (as hereinafter defined), with the sole right to vote, dispose
of, and receive dividends or distributions with respect to such shares. There
are no existing agreements, subscriptions, options, warrants, calls,
commitments, trusts (voting or otherwise), or rights of any kind whatsoever
granting to any Person (as hereinafter defined) any interest in or the right to
purchase or otherwise acquire, at any time, or upon the happening of any stated
event, any capital stock of the NAI Contributed Entities, whether or not
presently issued or outstanding, nor are there any outstanding securities of the
NAI Contributed Entities or any other entity which are convertible into or
exchangeable for shares of capital stock of the NAI Contributed Entities, nor
are there any agreements, subscriptions, options, warrants, calls, commitments
or rights of any kind whatsoever granting to any person any interest in or the
right to purchase or otherwise acquire from NAI or any of its affiliates or any
other entity any securities so exercisable convertible or exchangeable, nor are
there any proxies, agreements or understandings with respect to the voting of
such shares. Upon consummation of the Transaction, UVSG will hold, directly or
indirectly, of record and beneficially all of the outstanding shares of capital
stock of each of the NAI Contributed Entities free and clear of any Liens and
Restrictions, with the sole right to vote, dispose of, and receive dividends or
distributions with respect to such shares. In this Agreement, any reference to
"Restrictions," with respect to any capital stock, partnership interest,
membership interest in a limited liability company or other security, shall mean
any voting or other trust or agreement, option, warrant, preemptive right,
right of first offer, right of first refusal, escrow arrangement, proxy, buy-
sell agreement, power of attorney or other contract, any law, rule, regulation,
order, judgment or decree which, conditionally or unconditionally, (i) grants to
any Person the right to purchase or otherwise acquire, or obligates any Person
to sell or otherwise dispose of or issue, or otherwise results or, whether upon
the occurrence of any event or with notice or lapse of time or both or
otherwise, may result in any person acquiring, (A) any of such capital stock or
other security; (B) any of the proceeds of, or any distributions paid or which
are or may become payable with respect to, any of such capital stock or other
security; or (C) any interest in such capital stock or other security or any
such proceeds or distributions; (ii) restricts or, whether upon the occurrence
of any event or with notice or lapse of time or both or otherwise, is reasonably
likely to restrict the transfer or voting of, or the exercise of any rights or
the enjoyment of any benefits arising by reason of ownership of, any such
capital stock or other security or any such proceeds or distributions; or (iii)
creates or, whether upon the occurrence of any event or with notice or lapse of
time or both or otherwise, is reasonably likely to create a Lien or purported
Lien affecting such capital stock or other security, proceeds or distributions.
Notwithstanding anything to the contrary contained in these representations and
warranties, the parties acknowledge that the existing stockholders of TVSM as of
the date hereof may have statutory rights of appraisal as a result of NAI's
acquisition of TVSM.
3. Authorization; Freedom to Contract.
----------------------------------
(a) NAI and each of its applicable affiliates has all requisite
corporate power, authority and legal capacity to execute and deliver this
Agreement and each other agreement, document, instrument or certificate
contemplated by this Agreement or to be executed by NAI or its affiliates in
connection with the consummation of the Transaction (together with this
Agreement, the "NAI Transaction Documents"), and to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. The execution and delivery by NAI and each of its applicable
affiliates of this Agreement and the other NAI Transaction Documents, the
consummation by NAI and its applicable affiliates of the transactions
contemplated hereby and thereby, and the performance by it of its obligations
hereunder and thereunder, have been duly authorized by the Board of Directors of
NAI and each of its applicable affiliates, and no further
-26-
corporate action is or will be necessary on the part of NAI or its affiliates to
authorize the execution and delivery of this Agreement or the other NAI
Transaction Documents, the consummation of the transactions contemplated hereby
and thereby and the performance of NAI's or its affiliates' obligations
hereunder and thereunder. This Agreement has been, and each of the other NAI
Transaction Documents will be at or prior to the Closing, duly and validly
executed and delivered by NAI and each of its applicable affiliates. This
Agreement constitutes, and each of the NAI Transaction Documents when so
executed and delivered will constitute, legal, valid and (assuming the due
execution of such agreements by the other parties hereto that are not affiliates
of NAI) binding obligations of NAI and/or its applicable affiliates, enforceable
against NAI and/or its applicable affiliates in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally, and
subject, as to enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity).
(b) The execution and delivery of this Agreement and the other NAI
Transaction Documents by NAI and/or its applicable affiliates do not, and the
performance by NAI and/or its applicable affiliates of its obligations hereunder
and thereunder and the consummation of the transactions contemplated hereby and
thereby will not, (i) violate or conflict with any provision of the certificate
or articles of incorporation or by-laws of NAI and/or its affiliates or any
amendments thereto or restatements thereof, (ii) violate any of the terms,
conditions or provisions of any law, rule or regulation applicable to NAI or its
affiliates or any order, writ, injunction, judgment or decree of any
Governmental Authority (as hereinafter defined) to which any of NAI or its
affiliates is subject or by which any of the foregoing or their respective
assets are bound, or (iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration) under, or result in the
creation of any mortgage, pledge, lien, encumbrance, charge, or other security
interest (a "Lien") on any of the properties or assets of NAI or its affiliates
pursuant to, or require any consent by or approval or authorization of (a
"Contract Consent") any party under, any of the terms, conditions or provisions
of any note, bond, indenture, debenture, security agreement, trust agreement,
lien, mortgage, lease, agreement, license, franchise, permit, guaranty, joint
venture agreement, or other agreement, instrument or obligation, oral or
written, to which NAI or any of its affiliates is a party (whether as an
original party or as an assignee or successor) or by which NAI or any of its
affiliates or any of their respective properties is bound, except for such
breaches or defaults as are not reasonably likely to have a Publications
Material Adverse Effect.
(c) No governmental authorization, approval, order, license,
franchise, consent or permit (collectively, "Permits"), and no registration,
declaration or filing (collectively, "Filings") with any court, governmental
department, commission, authority, board, bureau, agency or other
instrumentality (collectively, "Governmental Authorities"), is required in
connection with the execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby by the
Company, except the requirements under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 0000 (xxx "XXX Xxx"), and except where the failure to obtain
such Permits or to make such Filings is not reasonably likely to have a
Publications Material Adverse Effect.
(d) There are no consents, authorizations or other approvals from or
notices to any Person other than a Governmental Authority (including, without
limitation, any Person that has entered into any contract, agreement,
arrangement or understanding with the NAI Contributed
-27-
Entities) required to permit the consummation of the transactions contemplated
by this Agreement, except where the failure to obtain such consents,
authorizations or approvals is not reasonably likely to have a Publications
Material Adverse Effect.
4. Subsidiaries. Except as set forth in the disclosure schedules
------------
delivered herewith by NAI (collectively, the "NAI Disclosure Schedule"), the
NAI Contributed Entities do not, directly or indirectly, have any ownership or
other interest in, or any equity or similar interest or other right convertible
into or exercisable or exchangeable for or control of, any individual,
corporation, limited liability company, partnership, joint venture, business
association or other entity (each, a "Person"). The NAI Contributed Entities
beneficially own all rights, title and interest that NAI or its affiliates have
or had in the EPG joint venture (a/k/a "TV Guide On-Screen") with an affiliate
of TCI. Except as set forth in the NAI Disclosure Schedule, each interest in
any other Person owned by an NAI Contributed Entity is owned by the applicable
entity free and clear of any Liens and Restrictions, and each such Person is
duly organized, validly existing and in good standing in its respective
jurisdiction of organization and has all requisite power and authority to carry
on its business and to own or lease its assets and to operate the properties
used in connection therewith.
5. Charter and Organizational Documents. NAI has furnished UVSG with
------------------------------------
true and complete copies of the certificate of incorporation and by-laws of each
of the NAI Contributed Entities and accurate and complete records of all
material corporate proceedings of each of the NAI Contributed Entities.
6. Financial Statements. NAI has furnished to UVSG true and complete
--------------------
copies of the following unaudited (except in the case of TVSM, the financial
statements of which that are set forth in subparagraph (f) below are audited)
financial statements (the "Unaudited Contributed Business Financial
Statements"):
(a) profit and loss statements of Publications (excluding TVGEN) for
the fiscal years ended June 30, 1995, 1996 and 1997 and the nine months
period ended March 31, 1998;
(b) balance sheets of Publications (excluding TVGEN) as of March 31,
1998;
(c) statements of cash flows of Publications (excluding TVGEN) for the
fiscal year ended June 30, 1997 and the nine month period ended March 31,
1998;
(d) profit and loss statements of TVSM for the three months period
ended March 31, 1998;
(e) balance sheets of TVSM as of March 31, 1998; and
(f) financial statements (which include balance sheets, statements of
cash flows and profit and loss statements) of TVSM for the twelve
month period ended December 31, 1997.
The Unaudited Contributed Businesses Financial Statements were prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with that of preceding accounting periods (except as may be indicated
therein or in the notes thereto) ("GAAP"), except that the financial statements
of Publications (excluding TVGEN) do not contain any provision for taxes,
interest or amortization of goodwill (none of which will represent any actual or
contingent liability or commitment of the NAI Contributed Entities at Closing).
Each of the financial statements contained in the Unaudited Contributed
Businesses Financial Statements was prepared, and the audited financial
statements of the NAI Contributed Businesses that will be included in the proxy
-28-
statement of UVSG relating to the approval of the Transaction by the UVSG
stockholders (the "UVSG Proxy Statement") will be prepared, in accordance with
GAAP, and each of the financial statements contained in the Unaudited
Contributed Businesses Financial Statements fairly present, and the audited
financial statements of the NAI Contributed Businesses that will be included in
the UVSG Proxy Statement will fairly present (except as may be indicated therein
or in the notes thereto), the financial position of the NAI Contributed
Businesses and the NAI Contributed Entities as of the dates thereof and the
results of operations and changes in financial position of the NAI Contributed
Businesses and the NAI Contributed Entities for each of the periods then ended.
7. Absence of Default. Except as set forth in the NAI Disclosure
------------------
Schedule, each of the NAI Contributed Entities has complied with and performed
all of its obligations required to be performed under all contracts, agreements
and leases to which it is a party (whether as an original party or as an
assignee or successor) as of the date hereof, and it is not in default in any
respect under any contract, agreement, lease, undertaking, commitment or other
obligation, except for such breaches or defaults that are not reasonably likely
to have a Publications Material Adverse Effect. NAI has no knowledge that any
party has failed to comply in any material respect with or perform all of its
obligations required to be performed under any contract, agreement or lease to
which any of the NAI Contributed Entities is a party or by which any of the NAI
Contributed Entities or the NAI Contributed Businesses is bound or to which any
of their respective assets is subject (whether as an original party or an
assignee or successor) as of the date hereof.
8. Absence of Certain Developments. Since the date of the latest
-------------------------------
balance sheet included in the Unaudited Contributed Businesses Financial
Statements, the NAI Contributed Businesses have been conducted in the ordinary
course of business consistent with past practice, and, except to the extent
reflected or otherwise disclosed in the NAI Disclosure Schedule, there has not
been:
(a) any material adverse change in the business, assets, results of
operation or condition (financial or otherwise) of the NAI Contributed
Businesses (without regard to changes resulting from macroeconomic or general
industry conditions) (a "Publications Material Adverse Change"), and there has
not occurred any event which is reasonably likely to result in a Publications
Material Adverse Change;
(b) any declaration, setting aside, or payment of any dividend or
distribution (other than of cash) to NAI or any of its affiliates, or any
direct or indirect redemption, retirement, purchase or other acquisition by any
NAI Contributed Entity of any of its capital stock or other securities or
options, warrants or other rights to acquire capital stock;
(c) any increase in salary, wage, benefit or other remuneration
payable or to become payable to any current or former officer, director,
employee or agent of any of the NAI Contributed Businesses or any increase in
any bonus or severance payment or arrangement made to, for or with any of its
officers, directors, employees or agents or any grant of a supplemental
retirement plan or program or special remuneration for any officer, director,
employee or agent of any of the NAI Contributed Businesses, in each case other
than in the ordinary course of business and consistent with past practice
(including regular annual salary and performance bonus increases);
(d) any sale, lease or other transfer or disposition of any material
asset of any of the NAI Contributed Businesses;
-29-
(e) any change in accounting methods, practices or policies (including
any change in depreciation or amortization policies or rates) by any of the NAI
Contributed Businesses or any revaluation by any of the NAI Contributed
Businesses of any of its assets;
(f) any material modification or change to any material contract by
any of the NAI Contributed Businesses, other than in the ordinary course of
business;
(g) any written waiver or written release of any right or claim of
substantial value by any of the NAI Contributed Businesses;
(h) any payment, discharge or satisfaction of any material claim,
liability or obligation by any of the NAI Contributed Businesses, other than the
payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities reflected or reserved against in
its balance sheet as of March 31, 1998 referred to in Section 6(b) or 6(e) above
(the "Latest Balance Sheet") or incurred since the date of such balance sheet in
the ordinary course of business and consistent with past practice and other than
scheduled repayments of indebtedness reflected on the Latest Balance Sheet;
(i) any issuance or sale of capital stock or other securities or
membership or other ownership interests, exchangeable or convertible securities,
options, warrants, puts, calls or other rights to acquire capital stock or other
securities or other ownership interests of any of the NAI Contributed Entity;
(j) any guarantee by any NAI Contributed Entity of any indebtedness
for borrowed money, except for guarantees of public indebtedness, which will
terminate as of the Closing;
(k) any delay in the payment of any trade or other payables other than
in the ordinary course of business and consistent with past practice; or
(l) any agreement by NAI or any of its affiliates or any of the NAI
Contributed Businesses to do any of the foregoing.
9. Liabilities. Except as reflected in the Unaudited Contributed
-----------
Businesses Financial Statements and except for liabilities or obligations that
fall within any of the exceptions contained in any of the other representations
or warranties contained in this Annex B (e.g., knowledge, materiality and
disclosed liabilities) or that arose in the ordinary course of business after
March 31, 1998 (and which have not resulted and are not reasonably likely to
result in a Publications Material Adverse Change), no NAI Contributed Entity has
any actual or potential liability or obligation of any kind or nature, whether
due or to become due, whether absolute, accrued, fixed or contingent or
otherwise. TVGEN has no liabilities or other obligations of any nature (other
than current liabilities incurred in the ordinary course of business and
obligations under executory contracts which have been made available to UVSG).
10. Litigation.
----------
-30-
(a) Except as set forth in the NAI Disclosure Schedule: (i) there are
no private or governmental actions, suits, arbitrations, claims, legal or
administrative proceedings or investigations ("Legal Proceedings") pending or,
to NAI's knowledge, threatened against any of the NAI Contributed Entities or
the NAI Contributed Businesses; and (ii) none of the NAI Contributed Entities or
the NAI Contributed Businesses, nor any of their respective assets, properties
or business, is subject to any judgment, writ, injunction or decree of any
Governmental Authority; except in either case for such Legal Proceedings as are
not reasonably likely, individually or in the aggregate, to have a Publications
Material Adverse Effect.
(b) None of NAI or any of its affiliates is a party to any Legal
Proceedings pending or, to its knowledge, threatened which, if adversely
determined, would adversely affect or restrict the ability of NAI or its
affiliates to consummate the transactions contemplated by this Agreement or to
perform its obligations hereunder.
(c) There is no judgment, order, injunction or decree of any
Governmental Authority to which NAI or any of its affiliates is subject which
might adversely affect or restrict the ability of NAI or any of its affiliates
to consummate the transactions contemplated by this Agreement or to perform its
obligations hereunder.
11. Restrictions on Business Activities. There is no material agreement,
-----------------------------------
nor is there any judgment, injunction, order or decree, binding upon NAI or any
of its affiliates which has or could have the effect of prohibiting or
materially impairing any current business practice of any of the NAI Contributed
Businesses or the conduct of business by any NAI Contributed Entity as currently
conducted (including following the consummation of the transactions contemplated
by this Agreement).
12. Compliance with Law. NAI and its affiliates (i) are in compliance
-------------------
with all federal, state, local or foreign laws (including common law), statutes,
codes, ordinances, rules, regulations or other requirements applicable to the
NAI Contributed Businesses or the NAI Contributed Entities or to the conduct of
the business or operations of the NAI Contributed Businesses or the NAI
Contributed Entities or the use of their respective properties (including any
leased properties) and assets and (ii) have all governmental permits and
approvals from Governmental Authorities which are required by the NAI
Contributed Businesses or the NAI Contributed Entities to operate their
respective businesses, except in such cases where the failure to comply or
obtain is not reasonably likely to have a Publications Material Adverse Effect.
13. Taxes. Except as otherwise set forth in the NAI Disclosure Schedule:
-----
(a) Each of the NAI Contributed Entities has filed all material Tax
Returns that it was required to file. All such Tax Returns are correct and
complete in all material respects. All material Taxes owed by any of the NAI
Contributed Entities (whether or not shown on any Tax Return) have been paid.
There are no liens for material Taxes (other than for current Taxes not yet due
and payable or for items being contested in good faith and for which there are
adequate reserves in accordance with GAAP on the books of the applicable entity)
on any of the assets of any of the NAI Contributed Entities.
-31-
(b) Each of the NAI Contributed Entities has withheld and paid all
material Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor or other third
party.
(c) No material deficiencies for any Taxes have been proposed,
asserted or assessed against the NAI Contributed Entities that are not
adequately reserved for in accordance with GAAP in all cases applied in a
consistent basis with the NAI Latest Balance Sheet. The NAI Disclosure Schedule
indicates the Tax Returns of the NAI Contributed Entities that currently are the
subject of an audit.
(d) None of the NAI Contributed Entities has any current non-
contingent liability for the Taxes of any Person (other than any of the NAI
Contributed Entities) under Treasury Regulations Section 1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(e) If the income of the NAI Contributed Entities is required under
federal, state, local or foreign tax rules, to be included on a consolidated,
unitary, combined or other such Tax Return which includes NAI or any of its
affiliates filed by an entity other than any of the NAI Contributed Entities,
each such group has filed all Tax Returns that it was required to file with
respect to NAI Contributed Entities for each period during which NAI Contributed
Entities was a member of such Group. All such Tax Returns were correct and
complete in all material respects in so far as they relate to NAI Contributed
Entities. All material Taxes owed by such group with respect to NAI Contributed
Entities (whether or not shown on a Tax Return) have been paid for each taxable
period during which any of the NAI Contributed Entities was a member of its
respective group.
(f) The normal period within which to examine and/or assess Taxes on
the income of NAI Contributed Entities has not been extended with respect to
any such entity by waiver of, or agreement to extend, the applicable statute of
limitations or otherwise.
(g) None of the NAI Contributed Entities has made or is required to
make any payments, or is a party to any agreement that under certain
circumstances could obligate it to make any payment that will not be deductible
under Code Section 280G.
(h) The NAI Contributed Entities are not a party to any tax sharing or
allocation agreement.
Definitions
-----------
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Tax" means any income, corporation, gross receipts, profits, gains,
capital stock, capital duty, franchise, business, license, payroll, withholding,
social security, unemployment, disability, property, wealth, welfare, stamp,
environmental, transfer, excise, occupation, sales, use, value added,
alternative minimum, estimated or other similar tax (including any fee,
assessment or other charge in the nature of any tax) imposed by any governmental
authority (whether national, federal, state, local, municipal, foreign or
otherwise) or political subdivision thereof, and any interest, penalties,
additions to tax or additional amounts in respect of the foregoing.
-32-
"Tax Returns" shall mean all reports, declarations of estimated tax,
information statements and returns relating to, or required to be filed in
connection with, any Taxes, including information returns or reports with
respect to backup withholding and other payments to third parties.
14. Employee Benefit Plans.
----------------------
(a) Except as set forth on the NAI Disclosure Schedule, the NAI
Contributed Entities do not maintain, contribute to, or have any liability to or
in connection with, nor, have the NAI Contributed Entities maintained,
contributed to, or had any liability to or in connection with any employee
pension benefit plan, fund or program (exclusive of benefits contained in
contracts disclosed pursuant to Section 18 hereof), as such term is defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), specifically including any multiemployer plan, as defined in Section
3(37) of ERISA, regardless of whether such pension plan, fund or program (i) is
or is intended to be covered or qualified under the Code, ERISA or any other
applicable law, (ii) is or is intended to be funded or unfunded, or (iii) covers
any current or former employee of or independent contractor to the NAI
Contributed Entities (the "Pension Plans"). The NAI Contributed Entities have
not, within the past six years, contributed to, maintained or been obligated to
contribute to such a multiemployer plan.
(b) The NAI Disclosure Schedule contains a list (exclusive of benefits
contained in contracts disclosed pursuant to Section 18 hereof) of all other
employee benefit plans, funds or programs as such term is defined in Section
3(3) of ERISA which it has maintained, contributed to, or in connection with
which it has or has had any liability, specifically including any multiemployer
plan, as defined in Section 3(37) of ERISA, regardless of whether such employee
benefit plan, fund or program (i) is or is intended to be covered or qualified
under the Code, ERISA or any other applicable law, (ii) is or is intended to be
funded or unfunded, or (iii) covers any current or former employee of or
independent contractor to the NAI Contributed Entities ("Benefit Plans").
(c) The NAI Disclosure Schedule lists (exclusive of benefits contained
in contracts disclosed pursuant to Section 18 hereof), with respect to
Publications, (i) any stock option, stock purchase, phantom stock, stock
appreciation right, supplemental retirement, severance, sabbatical, employee
relocation, cafeteria benefit (Section 125 of the Code) or dependent care
(Section 129 of the Code), life insurance or accident insurance plans, programs
or arrangements, (ii) all deferred compensation, bonus, pension, profit sharing,
savings or incentive plans, programs or arrangements, (iii) other fringe or
employee benefit plans, programs or arrangements that apply to employees of the
NAI Contributed Entities, in each case, that are currently maintained or
directly contributed to by the NAI Contributed Entities or have been maintained
or contributed to by the NAI Contributed Entities since January 1, 1993
(collectively, with the plans, funds and programs referred to in (a) and (b)
above the "Employee Plans").
(d) NAI has furnished to UVSG a copy of each of the Employee Plans and
related plan documents (including trust documents, insurance policies or
contracts, employee booklets, summary plan descriptions and other authorizing
documents, and, to the extent still in its possession, any material employee
communications relating thereto) and has, with respect to each Employee Plan
that is subject to ERISA reporting requirements, provided copies of the Form
5500, including all schedules attached thereto and actuarial reports, if any,
filed for the last three plan years. Any Employee Plan intended to be qualified
under Sections 401(a) or 501(c)(9) of the Code is in fact so qualified and
either there has been obtained from the Internal Revenue Service a favorable
-33-
determination letter as to its qualified status under applicable Code provisions
and subsequent legislation, or the time for applying to the Internal Revenue
Service for such a determination letter has not expired under applicable
Treasury Regulations. NAI has also furnished UVSG with the most recent Internal
Revenue Service determination letter issued with respect to each such Employee
Plan (and nothing has occurred since the issuance of each such letter which
could reasonably be expected to cause the loss of the tax-qualified status of
any Employee Plan subject to Section 401(a) of the Code), and all prohibited
transaction exemptions (or requests for such exemptions), private letter
rulings, opinions, information letters or compliance statements issued with
respect to any Employee Plan by the Internal Revenue Service, the Department of
Labor or the Pension Benefit Guaranty Corporation.
(e) In the case of any policies or binders of insurance that
constitute or are otherwise maintained in connection with an Employee Plan, to
NAI's knowledge (i) such policies and binders are valid and enforceable in
accordance with their terms in all respects, and are in full force and effect;
(ii) Publications is not in default in any respect with respect to any material
provisions contained in any such policy or binder and has not failed to give any
notice or present any claim under any such policy or binder in a due and timely
fashion; and (iii) Publications has not received any notice of cancellation or
non-renewal of any such policy or binder; except to the extent that a failure
with respect to any of the foregoing is not reasonably likely to have, in the
aggregate, a Publications Material Adverse Effect.
(f) Except as set forth in the NAI Disclosure Schedule, and except to
the extent that any failure with respect to the following is not reasonably
likely to have, in the aggregate, a Publications Material Adverse Effect, no
Employee Plan exists which will result in the payment of money or any other
property or rights, or accelerate or provide any other rights or benefits, to
any current or former employee of NAI (or other current or former service
provider thereto) that would not have been required but for the transactions
provided for herein and Publications is not party to any plan, program,
arrangement or understanding that would result, separately or in the aggregate,
in the payment of any "excess parachute payment" within the meaning of Section
280G of the Code, and except as disclosed in the NAI Disclosure Schedule,
Publications does not maintain any Employee Plan or Pension Plan which provides
severance benefits to current or former employees or other services providers of
NAI . Except as disclosed in the NAI Disclosure Schedule, no medical or life
insurance benefits are provided by any Employee Plan to any former employee or
independent contractor, except to the extent required by the Consolidated
Omnibus Reconciliation Act of 1985, as amended "COBRA"). Except as set forth in
the NAI Disclosure Schedule, the NAI Contributed Entities have no obligation to
contribute to retiree life, health and other benefits. Except as set forth in
the NAI Disclosure Schedule, the NAI Contributed Entities do not and have not
been a party to any collective bargaining (or other similar) agreement with
respect to any employee of the NAI Contributed Entities, nor is any such
agreement presently being negotiated.
(g) (i) None of the Employee Plans promises or provides retiree
medical or other retiree welfare benefits to any Person other than liabilities
which have been assumed by NAI and with respect to which none of the NAI
Contributed Entities will have any liability after the Closing Date; (ii) there
has been no "prohibited transaction," as such term is defined in Section 406 of
ERISA and Section 4975 of the Code, with respect to any Employee Plan; (iii)
each Employee Plan has been administered in accordance with its terms and in
compliance with the requirements prescribed by any and all statutes, rules and
regulations (including ERISA and the Code), and the NAI Contributed Entities
have performed all obligations required to be performed by them under, are not
in any
-34-
respect in default under or violation of, and have no knowledge of any default
or violation by any other party; (iv) no NAI Contributed Entity is subject to
any liability or penalty under Sections 4976 through 4980 of the Code or Title I
of ERISA with respect to any of the Employee Plans; (v) all material
contributions required to be made by the NAI Contributed Entities to any
Employee Plan have been made on or before their due dates; (vi) with respect to
each Employee Plan, no "reportable event" within the meaning of Section 4043 of
ERISA (excluding any such event for which the 30-day notice requirement has been
waived under the regulations to Section 4043 of ERISA) nor any event described
in Section 4062, 4063 or 4041 of ERISA has occurred; and (vii) no Employee Plan
is covered by, and no NAI Contributed Entity has incurred or expects to incur
any liability under Title IV of ERISA or Section 412 of the Code, except, in the
case of any failure to comply with clauses (ii), (iii), (iv), (v), (vi) and/or
(vii) above, for such failures which are not reasonably likely to have, in the
aggregate, a Publications Material Adverse Effect. With respect to each
Employee Plan subject to ERISA as either an employee pension plan within the
meaning of Section 3(2) of ERISA or an employee welfare benefit plan within the
meaning of Section 3(1) of ERISA, each NAI Contributed Entity has prepared in
good faith and timely filed all requisite governmental reports (which were true
and correct as of the date filed) and has properly and timely filed and
distributed or posted all notices and reports to employees required to be filed,
distributed or posted with respect to each such Employee Plan except where the
failure to timely file, distribute or post such documents would not, in the
aggregate, have a Publications Material Adverse Effect. No suit, administrative
proceeding, action or other litigation has been brought, or to the knowledge of
NAI, is threatened, against or with respect to any such Employee Plan, including
any audit or inquiry by the Internal Revenue Service or United States Department
of Labor which is reasonably likely to have, in the aggregate, a Publications
Material Adverse Effect. No NAI Contributed Entity is a party to, or has made
any contribution to or otherwise incurred any obligation under, any
"multiemployer plan" as defined in Section 3(37) of ERISA.
(h) With respect to each Employee Plan, each NAI Contributed Entity
has complied with (i) the applicable health care continuation and notice
provisions of COBRA and the regulations thereunder and (ii) the applicable
requirements of the Family and Medical Leave Act of 1993 and the regulations
thereunder, except to the extent that such failure to comply is not reasonably
likely to have in the aggregate, a Publications Material Adverse Effect.
(i) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not (i) entitle any current or
former employee or other service provider or any director of any NAI Contributed
Entity to severance benefits or any other similar payment (including
unemployment compensation, golden parachute, bonus or otherwise), (ii) increase
any benefits otherwise payable or (iii) accelerate the time of payment or
vesting, or increase the amount of compensation due any such employee, service
provider or director except to the extent that any of the foregoing are not
reasonably likely to have, in the aggregate, a Publications Material Adverse
Effect.
(j) There has been no amendment to, written interpretation or
announcement (whether or not written) by any NAI Contributed Entity relating to,
or change in participation or coverage under, any Employee Plan which would
materially increase the expense of maintaining such Employee Plan above the
level of expense incurred with respect to that Employee Plan for the most recent
fiscal year included in the NAI Contributed Businesses Financial Statements.
-35-
15. Contracts and Commitments. The NAI Disclosure Schedule lists all
-------------------------
contracts to which any NAI Contributed Entity is a party or by which it or the
NAI Contributed Businesses or their respective assets are bound that are to be
performed in whole or in part after the date hereof and that would be required
to be filed with the Securities and Exchange Commission (the "Commission") as
"material contracts" pursuant to Item 601 of Regulation S-K under the Securities
Act of 1933, as amended (the "Securities Act") if such NAI Contributed Entity
was a registrant registered under Section 12(g) of the Exchange Act of 1934, as
amended (the "Exchange Act"). The NAI Disclosure Schedule also lists (a) all
agreements, bonds, notes, debentures or similar instruments evidencing (i)
indebtedness of any NAI Contributed Entity for borrowed money or for the
deferred purchase price of any material property or service (other than trade
accounts arising in the ordinary course of business), (ii) obligations of any
NAI Contributed Entity under capital leases, (iii) guaranties by any NAI
Contributed Entity of liabilities or obligations of others, and (iv) any Liens
on the assets of any NAI Contributed Entity, (b) agreements that limit the right
of any NAI Contributed Entity to compete in any line of business; (c) agreements
which, after giving effect to the transactions contemplated hereby, purport to
restrict or bind NAI or any of its subsidiaries, other than the NAI Contributed
Entities; (d) all agreements not in the ordinary course of business pursuant to
which there is any continuing liability or obligation, including without
limitation any indemnification obligation; (e) merger, acquisition and similar
agreements that have any surviving obligations not performed in full, including
without limitation, any indemnity obligation; (f) agreements with any affiliate
of such NAI Contributed Entity; (g) any agreements not terminable on less than
75 days notice without penalty and involving amounts in excess of $6,000,000
during the 1997 fiscal year, reasonably expected during 1998, or as projected
over the remainder of the stated fixed term of the applicable agreement; and (h)
any collective bargaining or similar agreements. True and complete copies of
all agreements listed in the NAI Disclosure Schedule have been made available to
UVSG. Each of the NAI Contributed Entities has fulfilled in all material
respects, or taken all actions necessary to enable it to fulfill in all material
respects when due, its obligations under each of such agreements to which it is
a party. To the knowledge of NAI, all parties thereto other than the NAI
Contributed Entities have complied in all material respects with the provisions
thereof and no party is in breach or violation of, or in default (with or
without notice or lapse of time, or both) under such agreements which breach,
violation or default is reasonably likely to have a Publications Material
Adverse Effect. No NAI Contributed Entity has received any notice of
termination, cancellation or acceleration of any such agreement.
16. Adequacy of Assets; Intangible Property.
---------------------------------------
(a) The businesses conducted by the NAI Contributed Entities include
all businesses engaged in by NAI and its affiliates relating to the print or
electronic program guide business whether within or outside the United States
other than the NDS Business (the "Program Guide Businesses"). The assets and
rights held by the NAI Contributed Entities include all of the assets and other
rights used or usable by NAI and its affiliates in the Program Guide Business
and the business of TVGEN and no other assets, rights, liabilities, claims or
other obligations. The assets owned or leased by the NAI Contributed Entities
are suitable and adequate for the conduct of their respective businesses and the
NAI Contributed Businesses have good and, with respect to real property owned in
fee, marketable title to or valid leasehold or other contractual interests in
all such assets that are material to the NAI Contributed Businesses as a whole,
free and clear of all Liens other than Permitted Encumbrances. For purposes of
this Agreement, "Permitted Encumbrances" means the following Liens: (i) Liens
for Taxes, assessments or other governmental charges or levies not at the time
delinquent or thereafter payable without penalty or being contested in good
faith by
-36-
appropriate proceedings and for which adequate reserves shall have been set
aside on the Unaudited NAI Contributed Businesses Financial Statements in
accordance with GAAP; and (ii) Liens of carriers, warehousemen, mechanics,
materialmen and landlords incurred in the ordinary course of business for sums
not overdue or being contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set aside on the
Unaudited NAI Contributed Businesses Financial Statements.
(b) One or more of the NAI Contributed Entities owns, or is licensed
or otherwise possesses legally enforceable rights to use, all patents,
trademarks, trade names, service marks, copyrights, and trade secrets
(collectively, "Intellectual Property") that are used in the NAI Contributed
Businesses as currently conducted, except to the extent that the failure to have
such rights has not had and is not reasonably likely to have a Publications
Material Adverse Effect. The Intellectual Property includes (i) all right,
title and interest to the name "TV Guide" in the United States, (ii) all right,
title and interest to the name "TV Guide" outside the United States, if any,
held by NAI and its affiliates, (iii) all related trademarks, service marks,
trade names or copyrights used in the conduct of the NAI Contributed Businesses
and (iv) all right, title and interest that NAI or any of its affiliates has in
any Intellectual Property of or arising out of the former EPG joint venture
formerly known as TV Guide On Screen with an affiliate of TCI. Neither NAI nor
any of its affiliates has received notice of any claim of infringement of the
rights of others with respect to any patents, trademarks, service marks, trade
names or copyrights used or owned by the NAI Contributed Entities, the loss of
which is reasonably likely to have a Publications Material Adverse Effect.
Neither NAI nor any of its affiliates has any knowledge that any of the NAI
Contributed Entities is infringing upon or otherwise violating, or has infringed
upon or otherwise violated, the rights of any third party with respect to any
patent, trademark, trade name, service xxxx or copyright, except to the extent
that the foregoing is not reasonably likely to have a Publications Material
Adverse Effect. No current or former employee of any NAI Contributed Entity is
or was a party to any confidentiality agreement and/or agreement not to compete
which restricts or forbids such employee's performance of any activity that such
employee was hired to perform, except to the extent that the foregoing is not
reasonably likely to have a Publications Material Adverse Effect. No NAI
Contributed Entity is currently using or has in the past used without
appropriate authorization, any confidential information or trade secrets of any
third party, except to the extent that any of the foregoing is not reasonably
likely to have a Publications Material Adverse Effect. Since January 1, 1995,
NAI has not received any notice alleging such conduct.
17. Licenses; Compliance with Regulatory Requirements.
-------------------------------------------------
(a) The NAI Contributed Entities hold all licenses, franchises,
ordinances, authorizations, permits, certificates, variances, exemptions,
concessions, leases, rights of way, easements, instruments, orders and
approvals, domestic or foreign ("Licenses") which are material to the ownership
of the assets that are material to the NAI Contributed Businesses (collectively,
the "Publications Licenses"). Each NAI Contributed Entity is in compliance
with, and has conducted its business so as to comply with, the terms of their
respective Publications Licenses and with all applicable laws, rules,
regulations, ordinances and codes, domestic or foreign, except where the failure
so to comply has not had and, insofar as reasonably can be foreseen, in the
future will not have, either individually or in the aggregate, a Publications
Material Adverse Effect. Without limiting the generality of the foregoing, the
NAI Contributed Entities, (i) have all Permits of Governmental Authorities
required for the operation of the facilities being operated by the NAI
Contributed Entities or required in the conduct of the NAI Contributed
Businesses, and all such
-37-
Permits are identified on the NAI Disclosure Schedule, (ii) have duly and
currently filed all reports and other information required to be filed by any
Governmental Authority in connection with such Permits, and (iii) are not in
violation of any of such Permits, other than the lack of Permits, delays in
filing reports or possible violations which, in the aggregate, have not had and
are not reasonably likely to have a Publications Material Adverse Effect.
(b) Except as set forth in the NAI Disclosure Schedule, the NAI
Contributed Entities have duly complied with, and the operation of its business,
equipment and other assets and the facilities owned or leased by any NAI
Contributed Entities are in compliance with, the provisions of all applicable
Environmental and Health Laws, except for non-compliance which is not reasonably
likely to have a Publications Material Adverse Effect. For purposes of this
Agreement, the term "Environmental and Health Laws" means any federal, state or
local law, statute, rule or regulation or the common law relating to the
environment or occupational health and safety, including any statute, regulation
or order pertaining to (i) treatment, storage, disposal, generation and
transportation of pollutants, contaminants, chemicals, industrial, toxic or
hazardous substances, oil or petroleum products or solid or hazardous waste
(collectively, "Hazardous Substances"); (ii) air, water and noise pollution;
(iii) groundwater and surface water contamination; (iv) the release into the
environment of Hazardous Substances, including without limitation emissions,
discharges, injections, spills, escapes or dumping of pollutants, contaminants
or chemicals; (v) the protection of wild life, marine sanctuaries and wetlands,
including without limitation all endangered and threatened species; (vi) storage
tanks, vessels and containers containing Hazardous Substances; (vii) underground
storage tanks, abandoned, disposed or discarded barrels and other closed
receptacles containing Hazardous Substances; (viii) health and safety of
employees; and (ix) manufacture, processing, use, distribution, treatment,
storage, disposal, transportation or handling of Hazardous Substances. As used
herein, the terms "release" and "environment" have the meanings set forth in the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended. There are no investigations, administrative proceedings, judicial
actions, orders, claims or notices that are pending, anticipated or threatened
against any NAI Contributed Entities relating to any Environmental and Health
Laws. Neither NAI nor any of its affiliates has received a notice of or knows
any facts which constitute a violation by any NAI Contributed Entities of or
give rise to liability of any NAI Contributed Entities under any Environmental
and Health Laws that in either case would or would be reasonably likely to have
a Publications Material Adverse Effect.
(c) The NAI Contributed Businesses and the NAI Contributed Entities do
not own, lease or operate any printing facilities or otherwise conduct any
printing activities (other than printing services provided by Persons other than
the NAI Contributed Entities using facilities and materials that are owned and
operated by Persons other than the NAI Contributed Entities).
18. Employee Matters. The NAI Disclosure Schedule lists each employment,
----------------
consulting, agency or commission agreement to which any of the NAI Contributed
Entities is a party which is not terminable without liability to the NAI
Contributed Entities upon 60 days' or less prior notice to the employee,
consultant or agent and involves compensation or remuneration of more than
$50,000 per annum. True and complete copies of such agreements have been made
available to UVSG. All of such contracts and arrangements are in full force and
effect, and neither the NAI Contributed Entities nor, to the knowledge of NAI,
any other party is in default under any of such contracts and agreements. To
the knowledge of NAI, (i) there have been no claims of defaults and (ii) there
are no facts or conditions which if continued, or on notice, will result in a
default under these contracts or arrangements. There is no pending or, to the
knowledge of NAI , threatened labor dispute, strike,
-38-
or work stoppage that could be expected to have a Publications Material Adverse
Effect. Each of the NAI Contributed Entities is in compliance in all material
respects with all current applicable laws and regulations respecting employment,
discrimination in employment, terms and conditions of employment, wages, hours
and occupational safety and health and employment practices, and are not engaged
in any unfair labor practice. There are no pending claims against any NAI
Contributed Entities under any workers compensation plan or policy or for long
term disability. To the knowledge of NAI, none of the employees of the NAI
Contributed Businesses are members of a labor union or similar labor
organization.
19. Interested Party Transactions. The NAI Disclosure Schedule lists all
-----------------------------
transactions between any of the NAI Contributed Entities, on the one hand, and
NAI, News Corp., any of their respective subsidiaries or any director or
executive officer of any of the foregoing, on the other hand, in which the
amount involved exceeds $60,000 that would be required to be disclosed pursuant
to Item 404 of Regulation S-K under the Securities Act or the Exchange Act if
such NAI Contributed Entity was a registrant registered under Section 12(g) of
the Exchange Act. No NAI Contributed Entity is indebted to NAI, News Corp., any
of their respective subsidiaries, or any director, officer, employee or agent of
any of the foregoing for borrowed money.
20. Insurance. The NAI Contributed Entities, through one or more
---------
affiliates, have the benefit of policies of fire and casualty, liability and
other forms of insurance (including self insurance) in such amounts, with such
deductibles and against such risks and losses as are reasonable for the
operation of the businesses of the NAI Contributed Entities under the
circumstances in which they are being conducted. All such policies are in full
force and effect, all premiums due and payable thereon as of the date hereof,
have been paid (other than retroactive or retrospective premium adjustments that
may be required to be paid with respect to any events or circumstances arising
prior to the Closing under any of such insurance policies, which, unless accrued
for in the Latest Balance Sheet, shall accrue to or be paid by NAI), and no
notice of cancellation or termination has been received with respect to any such
policy which policy has not been replaced prior to the date of such
cancellation. To the knowledge of NAI, the activities and operations of the NAI
Contributed Entities have been conducted in a manner so as to conform in all
material respects to all applicable provisions of such insurance policies,
except for any failures so to conform that, individually or in the aggregate,
are not reasonably likely to have a Publications Material Adverse Effect. The
coverage of such policies will cease upon the applicable Closing, but the NAI
Contributed Entities will continue to be entitled to the benefit of such
policies with respect to any covered event that occurs prior to the Closing
(including during any extended reporting period under "claims made" policies or
the like).
21. Major Advertisers and Suppliers. The NAI Disclosure Schedule lists
-------------------------------
each advertiser of the NAI Contributed Entities that individually accounted for
more than one percent (1%) of the total dollar amount of revenues of the NAI
Contributed Businesses on a combined basis in 1997, showing the total dollar
amount of revenues for each such customer during each such year. None of the
NAI Contributed Entities has received written notice from any customer in the
NAI Disclosure Schedule of such customer's intent not to remain a customer of
the NAI Contributed Entities after the Closing. The NAI Disclosure Schedule
also lists each of the ten largest vendors to the NAI Contributed Businesses (by
dollar volume) during the most recently completed fiscal year.
22. Minute Books. Except as set forth in the NAI Disclosure Schedule, NAI
------------
has made available to UVSG true and complete copies of the minute books of the
NAI Contributed Entities. Except as set forth in the NAI Disclosure Schedule,
such minute books contain summaries of all meetings of
-39-
directors and shareholders or actions by written consent since the later of (i)
January 1, 1995 and (ii) the time of the applicable entity's date of
incorporation, and such summaries are true and complete in all material respects
and reflect all transactions referred to in such minutes accurately in all
material respects.
23. Brokers' and Finders' Fees. Neither NAI nor any of its controlled
--------------------------
affiliates has incurred, or will incur, directly or indirectly, any liability
for brokerage or finders' fees or agents' commissions or investment bankers'
fees or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
24. Year 2000 Compliance. NAI has conducted a preliminary assessment of
--------------------
the possible impact of Year 2000 Issues (as hereinafter defined) on the business
and operations of Publications. NAI does not believe that the costs of required
modifications to existing programs of Publications and conversions to new
programs required in order to remediate any Year 2000 Issue are reasonably
likely to result in a Publications Material Adverse Effect. For purposes of
this section, the term "Year 2000 Issues" means issues arising from the failure
or inability of any hardware, software or systems to correctly process, provide
and receive data within and between the years 1999 and 2000 and account for all
required leap year calculations for the year 2000.
-40-
ANNEX C - REPRESENTATIONS AND WARRANTIES OF UVSG
The representations and warranties set forth in this Annex C are made
subject to Schedule 1. Notwithstanding anything to the contrary contained in
this Agreement, references to UVSG in this Annex C shall not be deemed to
include the subsidiaries of USVG.
1. Organization. Each of UVSG and its subsidiaries is a corporation duly
------------
organized, validly existing and in good standing under the laws of the
jurisdiction of incorporation and has all requisite corporate power and
authority and all necessary licenses and permits to carry on its business as it
has been and is now being conducted and to own or lease and to operate the
properties used in connection therewith. Each of UVSG and its subsidiaries is
duly qualified or licensed and in good standing to do business in each of the
jurisdictions where the conduct of its business or the ownership, leasing or
operation of its properties requires such qualification or licensing, except
where the failure to be so duly qualified or licensed and in good standing,
individually or in the aggregate, would not have a material adverse effect on
the business, operations, properties or condition (financial or otherwise) of
UVSG and its subsidiaries taken as a whole or the ability of UVSG to consummate
the transactions contemplated herein (a "UVSG Material Adverse Effect").
2. Capitalization; Options and Other Rights.
----------------------------------------
(a) As of June 4, 1998, the total authorized shares of UVSG consists
of 60,000,000 shares of Class A Common Stock, $.01 par value and 30,000,000
shares of Class B Common Stock, $.01 par value (the Class A Common Stock and the
Class B Common Stock, together, the "Common Stock"), and 2,000,000 shares of
Preferred Stock, par value $.01 per share, of which 24,303,874 shares of Class A
Common Stock, 12,373,294 shares of Class B Common Stock and no shares of
Preferred Stock were issued and outstanding as of June 4, 1998. All of the
issued and outstanding shares of Common Stock have been duly and validly
authorized and issued and are fully paid and nonassessable. As of such date,
there were no other outstanding shares of capital stock or other securities or
ownership interests of UVSG other than shares of Class A Common Stock issuable
upon the exercise of options issued under UVSG's Equity Incentive Plan and its
Stock Option Plan for Non-Employee Directors (collectively, the "UVSG Stock
Option Plans") and options issued under such plans. As of December 31, 1997,
UVSG had reserved (i) 1,176,444 shares of Class A Common Stock for issuance upon
exercise of outstanding options issued pursuant to the UVSG Stock Option Plans
and (ii) 2,031,671 shares of Class A Common Stock for issuance upon exercise of
stock options available for grant under the UVSG Stock Option Plans. Other than
stock appreciation rights related to subsidiaries or divisions of UVSG that UVSG
has the option to satisfy in shares of Class A Common Stock, options outstanding
at December 31, 1997, the adoption of any employee incentive or stock option
plan subsequent to December 31, 1997 that is approved by the stockholders of
UVSG, the grant subsequent to December 31, 1997 of options pursuant to such
plans or pursuant to the UVSG Stock Option Plans, and other than this Agreement
or shares of Class B Common Stock that may be converted to shares of Class A
Common Stock, as of the date hereof there are no existing agreements,
subscriptions, options, warrants, calls, commitments, trusts (voting or
otherwise), or rights of any kind whatsoever to which UVSG is a party or by
which it is bound granting to any person any interest in or the right to
purchase or otherwise acquire from UVSG, at any time, or upon the happening of
any stated event, any capital stock of UVSG, whether or not presently issued or
outstanding, nor are there any outstanding securities of UVSG or any other
entity which are convertible into or exchangeable for shares of capital stock of
UVSG, nor are there any agreements, subscriptions, options, warrants, calls,
-41-
commitments or rights of any kind whatsoever to which UVSG is party or by which
it is bound granting to any Person any interest in or the right to purchase or
otherwise acquire from UVSG any securities so convertible or exchangeable.
(b) Upon consummation of the Transaction, the shares of Common Stock
of UVSG to be issued to NAI or its affiliate will have been duly and validly
authorized and issued and fully paid and nonassessable.
3. Authorization; Freedom to Contract.
----------------------------------
(a) UVSG has all requisite corporate power, authority and legal
capacity to execute and deliver this Agreement and each other agreement,
document, instrument or certificate con templated by this Agreement or to be
executed by UVSG, as the case may be, in connection with the consummation of the
Transaction (together with this Agreement, the "UVSG Transaction Documents"),
and to consummate the transactions contemplated hereby and thereby and to
perform its obligations hereunder and thereunder. The execution and delivery by
UVSG of this Agreement and the other UVSG Transaction Documents, the
consummation of the transactions contemplated hereby and thereby and the
performance by it of its obligations hereunder and thereunder have been duly
authorized by the Board of Directors of UVSG, and, except for the approval of
the stockholders of UVSG, no further corporate action will be necessary on the
part of UVSG to authorize the execution and delivery of this Agreement the
consummation of the transactions contemplated hereby and thereby and the
performance of UVSG's obligations hereunder and thereunder. This Agreement has
been, and each of the other UVSG Transaction Documents will be at or prior to
the Closing, duly and validly executed and delivered by UVSG. This Agreement
constitutes, and each of the UVSG Transaction Documents when so executed and
delivered will constitute, legal, valid and (assuming the due authorization,
execution and delivery by the other parties hereto and thereto) binding
obligations of UVSG, enforceable against it in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally, and
subject, as to enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity).
(b) Except as set forth on the UVSG Disclosure Schedule, the execution
and delivery of this Agreement and the other UVSG Transaction Documents by UVSG
do not, and the performance by UVSG of its obligations hereunder and thereunder
will not, (i) violate or conflict with any provision of the Certificate of
Incorporation or By-Laws of UVSG or any of its subsidiaries or any amendments
thereto or restatements thereof, (ii) violate any of the terms, conditions or
provisions of any law, rule or regulation applicable to UVSG or any of its
subsidiaries, or any order, writ, injunction, judgment or decree of any court,
governmental authority, or regulatory agency to which UVSG or any of its
subsidiaries is subject or by which any of them or their respective assets are
bound, or (iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, indenture, debenture, security
agreement, trust agreement, lien, mortgage, lease, agreement, license,
franchise, permit, guaranty, joint venture agreement, or other agreement,
instrument or obligation, oral or written, to which UVSG or any of its
subsidiaries is a party (whether as an original party or as an assignee or
successor) or by which UVSG or any of its subsidiaries or any of their
respective properties is bound, except for such breaches or defaults as are not
reasonably likely to have a UVSG Material Adverse Effect.
-42-
(c) Except as set forth in the disclosure schedules delivered herewith
by UVSG (collectively, the "UVSG Disclosure Schedule") and approval of the NASD,
no Permits and no Filings with any Governmental Authority are required in
connection with the execution, delivery and performance of this Agreement by
UVSG and the consummation of the transactions contemplated hereby by UVSG,
except the requirements under the HSR Act, and except where the failure to
obtain such Permits or to make such Filings is not reasonably likely to have a
UVSG Material Adverse Effect.
(d) There are no consents, authorizations or other approvals from any
Person (including, without limitation, any Person that has entered into any
contract, agreement, arrangement or understanding with UVSG or any of its
subsidiaries) required to permit the consummation of the transactions
contemplated by this Agreement, except where the failure to obtain such
consents, authorizations or approvals are not reasonably likely to have a UVSG
Material Adverse Effect.
4. Subsidiaries. Except as set forth in the UVSG Disclosure Schedule or
------------
in the UVSG Commission Filings (as hereinafter defined), UVSG does not, directly
or indirectly, have any ownership or other interest in, or control of, any
Person.
5. Charter and Organizational Documents. UVSG has previously furnished
------------------------------------
NAI with true and complete copies of the Certificate of Incorporation and By-
Laws of UVSG.
6. Absence of Default. Except as set forth in the UVSG Disclosure
------------------
Schedule or in the UVSG Commission Filings, each of UVSG and its subsidiaries
has complied with and performed all of its obligations required to be performed
under all contracts, agreements and leases to which it is a party (whether as an
original party or as an assignee or successor) as of the date hereof, and it is
not in default in any respect under any contract, agreement, lease, undertaking,
commitment or other obligation, except for such breaches or defaults that are
not reasonably likely to have a UVSG Material Adverse Effect. UVSG has no
knowledge that any party has failed to comply in any material respect with or
perform all of its obligations required to be performed under any contract,
agreement or lease to which UVSG or any of its subsidiaries is a party or by
which any of them is bound or any of their respective assets is subject (whether
as an original party or an assignee or successor) as of the date hereof.
7. Absence of Certain Developments. Since the date of the latest balance
-------------------------------
sheet (the "UVSG Latest Balance Sheet") included in the UVSG Commission Filings,
the business of UVSG and its subsidiaries has been conducted in the ordinary
course of business consistent with past practice, and, except to the extent
reflected or otherwise disclosed in the UVSG Disclosure Schedule, there has not
been:
(a) any material adverse change in the business, assets, results of
operation or condition (financial or otherwise) of UVSG and its subsidiaries
(without regard to changes resulting from macroeconomic or general industry
conditions) (a "UVSG Material Adverse Change"), and there has not occurred any
event which is reasonably likely to result in a UVSG Material Adverse Change;
(b) any sale, lease or other transfer or disposition of any material
asset of UVSG or its subsidiaries;
-43-
(c) any declaration, setting aside, or payment of any stock dividend
or distribution (other than of cash) to TCI or any of its affiliates, or any
direct or indirect redemption, retirement, purchase or other acquisition by UVSG
of any of its capital stock or other securities or options, warrants or other
rights to acquire capital stock;
(d) any change in accounting methods, practices or policies (including
any change in depreciation or amortization policies or rates) by any of UVSG and
its subsidiaries or any revaluation by UVSG or any of its subsidiaries of any of
their respective assets;
(e) any material modification or change to any material contract by
UVSG or any of its subsidiaries, other than in the ordinary course of business;
(f) any written waiver or written release of any right or claim of
substantial value by UVSG or any of its subsidiaries;
(g) any payment, discharge or satisfaction of any material claim,
liability or obligation by UVSG or any of its subsidiaries, other than the
payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities reflected or reserved against in
its Latest Balance Sheet or incurred since the date of such balance sheet in the
ordinary course of business and consistent with past practice and other than
scheduled repayments of indebtedness reflected on the Latest Balance Sheet;
(h) any issuance or sale of capital stock or other securities or
membership or other ownership interests, exchangeable or convertible securities,
options, warrants, puts, calls or other rights to acquire capital stock or other
securities or other ownership interests of UVSG;
(i) any delay in the payment of any trade or other payables other than
in the ordinary course of business and consistent with past practice; or
(j) any agreement by UVSG or any of its affiliates to do any of the
foregoing.
8. Liabilities. Except as reflected in the UVSG Commission Filings or
-----------
the UVSG Disclosure Schedule and except for liabilities or obligations that fall
within any of the exceptions contained in any of the other representations or
warranties contained in this Annex C (e.g., knowledge, materiality and disclosed
liabilities) or that arose in the ordinary course of business after March 31,
1998 (and which have not resulted in a UVSG Material Adverse Change), neither
UVSG nor any of its subsidiaries has actual or potential liability or obligation
of any kind or nature, whether due or to become due, whether absolute, accrued,
fixed or contingent or otherwise.
9. Litigation.
----------
(a) Except as set forth in the UVSG Commission Filings or the UVSG
Disclosure Schedule: (i) there are no private or governmental Legal Proceedings
pending or, to UVSG's knowledge, threatened against UVSG or any of its
subsidiaries; and (ii) none of UVSG or any of its subsidiaries or any of their
respective assets, properties or business, is subject to any judgment, writ,
injunction or decree of any Governmental Authority or arbitration tribunal;
except in either case for such Legal Proceedings as are not reasonably likely to
have a UVSG Material Adverse Effect.
-44-
(b) Neither UVSG nor any o f its subsidiaries is a party to any Legal
Proceedings pending or, to its knowledge, threatened which, if adversely
determined, would adversely affect or restrict the ability of UVSG to consummate
the transactions contemplated by this Agreement or to perform its obligations
hereunder.
(c) There is no judgment, order, injunction or decree of any
governmental authority or regulatory agency to which UVSG or any of its
affiliates is subject which might adversely affect or restrict the ability of
UVSG or any of its affiliates to consummate the transactions contemplated by
this Agreement or to perform its obligations hereunder.
10. Restrictions on Business Activities. Except as set forth in the UVSG
-----------------------------------
Commission Filings or the UVSG Disclosure Schedule, there is no material
agreement, nor is there any judgment, injunction, order or decree, binding upon
UVSG or any of its affiliates which has or could have the effect of prohibiting
or materially impairing any current business practice of UVSG as currently
conducted (including following the consummation of the transactions contemplated
by this Agreement).
11. Compliance with Law. Except as set forth in the UVSG Commission
-------------------
Filings or the UVSG Disclosure Schedule, UVSG and its affiliates (i) are in
compliance with all federal, state, local or foreign laws (including common
law), statutes, codes, ordinances, rules, regulations or other requirements
applicable to UVSG or to the conduct of its business or operations or the use of
its properties (including any leased properties) and assets and (ii) have all
governmental permits and approvals from Governmental Authorities which are
required by UVSG to operate its business, except in such cases where the failure
to comply or obtain is not reasonably likely to have a UVSG Material Adverse
Effect.
12. Taxes. Except as otherwise set forth in the UVSG Disclosure Schedule:
-----
(a) Each of UVSG and its subsidiaries has filed all material Tax
Returns that it was required to file. All such Tax Returns are correct and
complete in all material respects. All material Taxes owed by UVSG and its
subsidiaries (whether or not shown on any Tax Return) have been paid. There are
no liens for material Taxes (other than for current Taxes not yet due and
payable or for items being contested in good faith and for which there are
adequate reserves in accordance with GAAP on the books of the applicable entity)
on any of the assets of UVSG and its subsidiaries.
(b) Each of UVSG and its subsidiaries has withheld and paid all
material Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor or other third
party.
(c) No material deficiencies for any Taxes have been proposed,
asserted or assessed against UVSG or any of its subsidiaries that are not
adequately reserved for in accordance with GAAP in all cases applied in a
consistent basis with the UVSG Latest Balance Sheet. The UVSG Disclosure
Schedule indicates the Tax Returns of UVSG or its subsidiaries that currently
are the subject of an audit.
-45-
(d) None of UVSG and its subsidiaries has any current non-contingent
liability for the Taxes of any Person (other than UVSG and its subsidiaries)
under Treasury Regulations Section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or otherwise.
(e) If the income of UVSG or any of its subsidiaries was required
under federal, state, local, or foreign tax rules, to be included on a
consolidated, unitary, combined or other such Tax Return filed by an entity
other than any of UVSG or its subsidiaries, each such group has filed all Tax
Returns that it was required to file with respect to UVSG or its subsidiaries
for each period during which UVSG or any of its subsidiaries was a member of
such Group. All such Tax Returns were correct and complete in all material
respects in so far as they relate to UVSG and its subsidiaries. All material
Taxes owed by such group with respect to UVSG and its subsidiaries (whether or
not shown on a Tax Return) have been paid for each taxable period during which
UVSG and any of its subsidiaries was a member of its respective group.
(f) The normal period within which to examine and/or assess Taxes on
the income of UVSG or its subsidiaries has not been extended with respect to any
such entity by waiver of, or agreement to extend, the applicable statute of
limitations or otherwise with the exception of the extensions of the statute of
limitations agreed to with the State of New York for UVSG's 1993 and 1994 income
Tax Returns through December 31, 1998.
(g) None of UVSG and its subsidiaries has made or is required to make
any payments, or is a party to any agreement that under certain circumstances
could obligate it to make any payment that will not be deductible under Code
Section 280G.
(h) UVSG and its subsidiaries are not a party to any tax sharing or
allocation agreement with any third party.
13. Contracts and Commitments. The UVSG Commission Filings and the UVSG
-------------------------
Disclosure Schedule list all contracts to which UVSG or any of its subsidiaries
is a party or by which any of them or their respective businesses or assets are
bound that are to be performed in whole or in part after the date hereof and
that would be required to be filed with the Commission as "material contracts"
pursuant to Item 601 of Regulation S-K of the Securities Act if UVSG was a
registrant registered under Section 12(g) of the Exchange Act. The UVSG
Commission Filings and/or the UVSG Disclosure Schedule also list agreements that
limit the right of UVSG or any of its subsidiaries to compete in any line of
business. True and complete copies of all agreements listed in the UVSG
Commission Filings and the UVSG Disclosure Schedule have been made available to
NAI. Each of UVSG and its subsidiaries has fulfilled in all material respects,
or taken all actions necessary to enable it to fulfill in all material respects
when due, its obligations under each of such agreements to which it is a party.
To the knowledge of UVSG, except as set forth in the UVSG Disclosure Schedule,
all parties thereto other than UVSG or its subsidiaries have complied in all
material respects with the provisions thereof and no party is in breach or
violation of, or in default (with or without notice or lapse of time, or both)
under such agreements which breach, violation or default is reasonably likely to
have a UVSG Material Adverse Effect. None of UVSG and its subsidiaries has
received any notice of termination, cancellation or acceleration of any such
agreement.
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14. Intangible Property. Except as set forth in the UVSG Commission
-------------------
Filings or the UVSG Disclosure Schedule, and except for the TV Guide On-Screen
Intellectual Property, one or more of UVSG and its subsidiaries owns, or is
licensed or otherwise possesses legally enforceable rights to use, all
Intellectual Property that is used in the business of UVSG and its subsidiaries
as currently conducted, except to the extent that the failure to have such
rights has not had and is not reasonably likely to have a UVSG Material Adverse
Effect. Except as set forth in the UVSG Commission Filings or the UVSG
Disclosure Schedule, (i) neither UVSG nor any of its controlled affiliates has
received notice of any claim of infringement of the rights of others with
respect to any patents, trademarks, service marks, trade names or copyrights
used or owned by UVSG; (ii) neither UVSG nor any of its controlled affiliates
has any knowledge that UVSG or any of its controlled affiliates is infringing
upon or otherwise violating, or has infringed upon or otherwise violated, the
rights of any third party with respect to any patent, trademark, trade name,
service xxxx or copyright; no current or former employee of UVSG or any of its
controlled affiliates is or was a party to any confidentiality agreement and/or
agreement not to compete which restricts or forbids such employee's performance
of any activity that such employee was hired to perform; and (iv) none of UVSG
and its controlled affiliates is currently using or has in the past used without
appropriate authorization, any confidential information or trade secrets of any
third party; except to the extent that any of the foregoing is not reasonably
likely to have a UVSG Material Adverse Effect. Since January 1, 1995, neither
UVSG nor any of its controlled affiliates has received any notice alleging such
conduct.
15. Licenses; Compliance with Regulatory Requirements.
-------------------------------------------------
(a) Except as set forth in the UVSG Commission Filings or the UVSG
Disclosure Schedule, UVSG and its subsidiaries hold all Licenses which are
material to the ownership of the assets that are material to UVSG and its
subsidiaries (collectively, the "UVSG Licenses"). Except as set forth in the
UVSG Commission Filings or the UVSG Disclosure Schedule, each of UVSG and its
subsidiaries is in compliance with, and has conducted its respective business so
as to comply with, the terms of the UVSG Licenses and with all applicable laws,
rules, regulations, ordinances and codes, domestic or foreign, except where the
failure so to comply has not had and, is not reasonably likely to have, either
individually or in the aggregate, a UVSG Material Adverse Effect. Without
limiting the generality of the foregoing, UVSG and its subsidiaries (i) have all
Permits of Governmental Authorities required for the operation of the facilities
being operated by UVSG in the conduct of its business, and all such Permits are
identified on the UVSG Commission Filings or the UVSG Disclosure Schedule, (ii)
have duly and currently filed all reports and other information required to be
filed by any Governmental Authority in connection with such Permits, and (iii)
are not in violation of any of such Permits, other than the lack of Permits,
delays in filing reports or possible violations which, in the aggregate, have
not had and are not reasonably likely to have a UVSG Material Adverse Effect.
(b) Except as set forth in the UVSG Commission Filings or the UVSG
Disclosure Schedule, each of UVSG and its subsidiaries has duly complied with,
and the operation of its business, equipment and other assets and the facilities
owned or leased by it are in compliance with, the provisions of all applicable
Environmental and Health Laws, except for non-compliance which is not reasonably
likely to have a UVSG Material Adverse Effect. Except as set forth in the UVSG
Commission Filings or the UVSG Disclosure Schedule, there are no investigations,
administrative proceedings, judicial actions, orders, claims or notices that are
pending, anticipated or threatened
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against UVSG or its subsidiaries relating to any Environmental and Health Laws.
Except as set forth in the UVSG Commission Filings or the UVSG Disclosure
Schedule, neither UVSG nor any of its subsidiaries has received a notice of or
knows any facts which constitute a violation by UVSG of or gives rise to
liability of UVSG under any Environmental and Health Laws that in either case
would or would be reasonably likely to have a UVSG Material Adverse Effect.
16. Interested Party Transactions. Except to the extent reflected in the
-----------------------------
UVSG Commission Filings, the UVSG Disclosure Schedule lists or describes all
transactions between UVSG or any of its subsidiaries, on the one hand, and TCI
or any of its subsidiaries or any director or executive officer of any of the
foregoing, on the other hand, in which the amount involved exceeds $60,000 that
would be required to be disclosed pursuant to Item 404 of Regulation S-K under
the Securities Act or the Exchange Act if UVSG was a registrant registered under
Section 12(g) of the Exchange Act. Neither UVSG nor any of its subsidiaries is
indebted to TCI, any of its subsidiaries, or any director, officer, employee or
agent of any of the foregoing for borrowed money.
17. Minute Books. Except as set forth in the UVSG Disclosure Schedule,
------------
UVSG has made available to NAI true and complete copies of the minute books of
UVSG and its subsidiaries. Except as set forth in the UVSG Disclosure Schedule,
such minute books contain summaries of all meetings of directors and
shareholders or actions by written consent since the later of (i) January 1,
1995 and (ii) the time of the applicable entity's date of incorporation, and
such summaries are true and complete in all material respects and reflect all
transactions referred to in such minutes accurately in all material respects.
18. Brokers' and Finders' Fees. Other than with respect to Xxxxxxx Xxxxx
--------------------------
& Co. (the fees of which shall be paid by UVSG), neither UVSG nor any of its
controlled affiliates has incurred, or will incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or investment
bankers' fees or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
19. SEC Filings; Financial Statements.
---------------------------------
(a) UVSG has filed all forms, reports and documents required to be
filed by it with the Commission since January 1, 1994, and has heretofore made
available to NAI, in the form filed with the Commission (i) its Annual Reports
on Form 10-K for the fiscal years ended December 31, 1995, 1996 and 1997 (the
"1997 Form 10-K"), respectively, and the Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1998 (the "March 31, 1998 Form 10-Q"), (ii) all
proxy and information statements relating to meetings of UVSG's stockholders
since January 1, 1995, (iii) all other reports and registration statements filed
with the Commission since January 1, 1997 (the "1997 Additional Filings"and
together with the 1997 Form 10-K, the March 31, 1998 Form 10-Q and all proxy and
information statements relating to meetings of UVSG's stockholders since January
1, 1997, the "UVSG Commission Filings"). The UVSG Commission Filings and all
other forms, reports and other documents filed by UVSG with the Commission after
the date hereof but prior to the Closing Date (x) were prepared, or will be
prepared, in accordance with the Securities Act, or the Exchange Act, as the
case may be, and (y) did not at the time they were filed, and will not at the
time they are filed, with the Commission contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements made therein, in the light of the circumstances in which they were
made, not misleading.
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(b) Each of the consolidated financial statements (including the notes
thereto) contained in the UVSG Commission Filings was prepared in accordance
with GAAP and Regulation S-X and fairly presents the consolidated financial
position, results of operations and cash flows of UVSG and its consolidated
subsidiaries as at the respective dates thereof and for the respective periods
indicated therein subject in the case of unaudited interim financial statements
to normal recurring year-end audit adjustments.
-49-
ANNEX D - TAX MATTERS
For purposes of this Annex D - Tax Matters the term "NAI Contributed
Entities" shall not include TVSM except with respect to periods TVSM was owned
by NAI or its affiliates.
1. Tax Returns. To the extent requested by UVSG, NAI has made available
-----------
or will make available (or, in the case of Tax Returns filed after the Closing
Date, will make available) to UVSG all portions of Tax Returns, and any
amendments thereto, filed by or on behalf of the NAI Contributed Entities (or
with respect to their assets or businesses) for all taxable years or applicable
periods ending on or prior to the Closing Date, in each case, to the extent such
Tax Returns are reasonably relevant in the preparation by or on behalf of the
NAI Contributed Entities of Tax Returns subsequent to the Closing Date.
2. Termination of Prior Tax Settlement Agreements. Except as otherwise
----------------------------------------------
provided in this letter agreement, all tax settlement and tax-sharing
agreements, arrangements, policies and guidelines, formal or informal, express
or implied, that may exist between the NAI Contributed Entities and any
affiliate ("Settlement Agreements") and all obligations thereunder shall
terminate prior to the Closing, and after the Closing Date, none of the NAI
Contributed Entities shall be bound by such Settlement Agreements or have any
liability thereunder.
3. Pre-Closing Taxes.
-----------------
(a) Each of the NAI Contributed Entities shall continue to be included
for all taxable periods (or portions thereof) ending on or before the Closing
Date in the consolidated Federal income Tax Return and any required state or
local consolidated or combined income or franchise Tax Returns of any affiliated
group of which any of them is a member (each of which is herein referred to as a
"Selling Affiliated Group") which Tax Returns include any of the NAI Contributed
Entities (all such Tax Returns including taxable periods (or portions thereof)
of the NAI Contributed Entities ending on or before the Closing Date are
hereinafter referred to, collectively, as "Pre-Closing Consolidated Returns").
NAI shall cause its Selling Affiliated Groups to timely prepare and file (or
cause to be prepared and filed) all Pre-Closing Consolidated Returns and shall
timely pay all Taxes shown as due and payable on Pre-Closing Consolidated
Returns (including any Taxes with respect to any deferred income triggered into
income by Treasury Regulations (S) 1.1502-13 and Treasury Regulations (S)
1.1502-14 and any excess loss accounts taken into income under Treasury
Regulations (S) 1.1502-19).
(b) NAI shall timely prepare (or cause to be so prepared) all other
Tax Returns of the NAI Contributed Entities which it formerly owned or
controlled, that are required by law for all taxable periods ending on or before
the Closing Date ("Pre-Closing Non-Consolidated Returns"). All Pre-Closing Non-
Consolidated Returns shall be prepared in a manner consistent with prior
practice and shall properly include and reflect the income, activities,
operations and transactions of the NAI Contributed Entities, as applicable. NAI
shall timely file (or cause to be so filed) all Pre-Closing Non-Consolidated
Returns which are due on or before the Closing Date and shall pay (or cause the
NAI Contributed Entities to pay as each may be liable) all Taxes due thereon.
NAI shall also pay (or cause the NAI Contributed Entities to pay as each may be
liable) the full amount of any Tax which is payable by the NAI Contributed
Entities without the filing of a Tax Return ("Non-
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Return Taxes"), payment of which is due on or before the Closing Date. With
respect to each Pre-Closing Non-Consolidated Return due after the Closing Date,
NAI shall deliver (or cause to be so delivered) each such Pre-Closing Non-
Consolidated Return to UVSG at least 15 days prior to the due date of such Tax
Return, together with a payment in an amount equal to the amount of Tax shown as
due and payable on such Pre-Closing Non-Consolidated Return (after giving effect
to any credits for the amount of Tax, if any, paid on or prior to the Closing
Date as shown on such Tax Return). Subject to the foregoing, UVSG shall cause
the NAI Contributed Entities to file all such Pre-Closing Non-Consolidated
Returns that are due after the Closing Date and to pay the amount of Tax shown
as due and payable thereon (after giving effect to any credits for the amount of
Tax, if any, previously paid as shown on such Tax Return).
4. Transfer Taxes. All sales, use, transfer, stamp, value added, duty,
--------------
excise, stock transfer, real property transfer, recording, gains and other
similar taxes and fees arising out of or in connection with the transactions
contemplated by this Agreement shall be paid 50% by UVSG and 50% by NAI .
5. Post-Closing Taxes. UVSG shall timely prepare and file (or cause to
------------------
be so prepared and filed) all Tax Returns required by law for all Taxes,
covering solely the NAI Contributed Entities, for taxable periods ending after
the Closing Date ("Post-Closing Returns"). UVSG shall timely pay or cause to be
paid all Taxes relating to Post-Closing Returns ("Post-Closing Taxes"). NAI
shall reimburse UVSG for (i) the amount of Post-Closing Taxes reported as
payable on each Post-Closing Return that is attributable to the portion of the
period covered by such Tax Return ending on the close of business on the Closing
Date (the "Pre-Closing Tax Period"), determined by treating the close of
business on the Closing Date as the last date of the taxable period, and (ii)
the amount of any Non-Return Tax payable after the Closing Date that is
attributable to the portion of the period covered by such payment which ends on
or before the close of business on the Closing Date (pro rata based upon the
number of days covered by such payment or if relevant as determined under clause
(i)), in each case after giving effect to any credits for the amount of such
Post-Closing Tax or such Non-Return Tax, if any, paid on or prior to the Closing
Date by NAI, the NAI Contributed Entities or any of their predecessors or
affiliates. Such reimbursements shall be made on or before the later of the
date on which such return is filed or 15 days after receipt of a copy of such
return or evidence of such payment and UVSG shall provide NAI with copies of
workpapers which will permit NAI to review and substantiate the accuracy of such
return or such payment.
6. Tax Cooperation. After the Closing Date, NAI shall submit (or cause
---------------
to be submitted) to UVSG blank Tax Return workpaper packages. UVSG shall cause
the NAI Contributed Entities to prepare completely and accurately all
information that NAI shall reasonably request in such workpaper packages and
shall submit to NAI such packages within the later of 90 calendar days after
UVSG's receipt thereof or 90 calendar days after the close of the taxable period
to which a workpaper package relates. The parties shall cooperate with each
other in connection with any Tax investigation, audit or other proceeding. UVSG
shall preserve all information, returns, books, records and documents relating
to any liabilities for Taxes with respect to a taxable period until the later of
the expiration of all applicable statutes of limitation and extensions thereof,
or a final determination with respect to Taxes for such period.
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7. Notification of Proceedings, Control; Refunds.
---------------------------------------------
(a) In the event that UVSG or any of the NAI Contributed Entities
receive notice, whether orally or in writing, of any pending or threatened
United States Federal, state, local, municipal or foreign tax examinations,
claims, settlements, proposed adjustments, assessments or reassessments or
related matters with respect to Taxes that could affect NAI or its Subsidiaries
(or the NAI Contributed Entities with respect to taxable periods or portions
thereof ending on or before the Closing Date), or if NAI or any of its
Subsidiaries receive notice of any such tax matter that could affect UVSG (or
any of the NAI Contributed Entities), the party receiving notice shall notify in
writing the potentially affected party within 10 calendar days thereof. The
failure of any party to give the notice required by this Section 7.7(a) shall
not impair that party's rights under this Agreement except to the extent that
the other party demonstrates that it has been damaged thereby.
(b) Each of NAI and UVSG shall have the right to control any audit or
examination by any taxing authority, initiate any claim for refund, file any
amended return, contest, resolve and defend against any assessment, notice of
deficiency or other adjustment or proposed adjustment relating or with respect
to any Taxes, the ultimate liability for which is the responsibility of that
party or its affiliates under this Agreement, and each of NAI and UVSG shall be
entitled to, and to the extent received by the other shall be promptly paid by
the other, all refunds with respect to any such Taxes. NAI and UVSG shall
jointly control, defend and resolve any tax matter as to which they are both
liable (in whole or in part).
8. Indemnification.
---------------
(a) After the Closing Date, NAI shall indemnify and hold harmless
UVSG, the NAI Contributed Entities and each of their respective successors and
assigns from and against any Tax liability of the NAI Contributed Entities with
respect to the period ending on or before the Closing Date on any Pre-Closing
Non-Consolidated Return or on a Post-Closing Return (determined by treating the
Closing Date as the last date of the taxable period) and with respect to any
Non-Return Taxes attributable to the portion of the period covered by any
payment of such Taxes which ends on or before the Closing Date, in each case, to
the extent such amount exceeds (i) any amount previously paid to UVSG with
respect to such Tax pursuant to Section 1.3 or 1.5, as applicable, and (ii) the
$3,500,000 of reserves for such taxes on the Latest Balance Sheet. NAI shall
pay such amounts as it is obligated to pay to UVSG within 10 calendar days after
payment of any applicable Tax liability by UVSG and to the extent not paid by
NAI within such 10-day period, the amount due shall thereafter include interest
thereon at a rate per annum equal to the prime rate as publicly announced from
time to time by The Bank of New York (the "Overpayment Rate"), adjusted as and
when changes to such Overpayment Rate shall occur, compounded semi-annually.
NAI shall indemnify and hold harmless UVSG, the NAI Contributed Entities and
each of their respective affiliates, successors and assigns, from and against
(i) any Tax liability for periods prior to and including the Closing Date
resulting from the NAI Contributed Entities being severally liable for any Taxes
of any consolidated group of which the NAI Contributed Entities are or were a
member pursuant to Treasury Regulations (S) 1.1502-6 or any analogous state or
local tax provision (including, without limitation, any Tax liability with
respect to any Pre-Closing Consolidated Return), and (ii) any Tax liability
resulting from the NAI Contributed Entities ceasing to be a member of any
Selling Affiliated Group filing consolidated or combined Tax Returns.
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(b) After the Closing Date, UVSG and each of the NAI Contributed
Entities, jointly and severally shall indemnify and hold harmless NAI and its
affiliates, successors and assigns from and against any Tax liability with
respect to the taxable period or portion thereof beginning after the Closing
Date. UVSG shall hold NAI harmless and be liable and pay for any and all Taxes
not incurred in the ordinary course of business attributable to the acts or
omissions of UVSG, its affiliates or the NAI Contributed Entities occurring
after the Closing but on the Closing Date other than acts specifically
contemplated by this document. UVSG shall cause the appropriate NAI Contributed
Entity or Subsidiary of an NAI Contributed Entity to pay such amounts within 10
calendar days after payment of any such Tax liability by NAI and, to the extent
not paid by such NAI Contributed Entity or Subsidiary within such 10-day period,
the amount due shall thereafter include interest thereon at the Overpayment
Rate, compounded semi-annually.
(c) To the extent permitted by law, the parties agree to treat
indemnity payments under this letter agreement as adjustments to the
consideration paid for the NAI Contributed Entities.
9. UVSG shall take any reasonable actions and cause Publications to take
any reasonable actions requested by NAI to permit NAI to elect to reattribute
losses of Publications pursuant to Treasury Regulations (S) 1.1502-20(g).
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