EXHIBIT 10.7
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FORM OF
GENERAL PARTNERSHIP AGREEMENT
OF REGIONAL PROGRAMMING PARTNERS
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS
ARTICLE II FORMATION OF GENERAL PARTNERSHIP
2.1 Formation..................................................... 14
2.2 Name.......................................................... 15
2.3 Compliance with Partnership and Other Laws.................... 15
2.4 Principal Place of Business................................... 15
2.5 Purpose....................................................... 15
2.6 Term of Partnership........................................... 16
2.7 Qualification in other Jurisdictions.......................... 16
2.8 Ownership of Property......................................... 16
ARTICLE III PARTNERSHIP CAPITAL
3.1 Capital Contributions......................................... 17
3.2 Failure to Make Capital Contributions......................... 18
3.3 Capital Accounts.............................................. 24
3.4 Allocation of Items of Partnership Income,
Gain, Loss, Deduction and Credit............................ 26
3.5 Distributions................................................. 30
3.6 Partnership Funds............................................. 32
3.7 Borrowings.................................................... 33
ARTICLE IV MANAGEMENT OF THE PARTNERSHIP
4.1 Management of the Partnership's Business...................... 33
4.2 Partners' Committee........................................... 36
4.3 Budget and Business Plan...................................... 38
4.4 Limitation on Agency.......................................... 39
4.5 Managing Partner's Services and Expenses...................... 40
4.6 Liability of Partners' Committee and Managing Partner......... 41
4.7 Indemnification............................................... 42
4.8 Approved Agreements........................................... 43
4.9 Unanimous Actions by Partners................................. 44
4.10 Removal of Managing Partner................................... 48
ARTICLE V BOOKS AND RECORDS; REPORTS TO PARTNERS
5.1 Books and Records............................................. 49
5.2 Financial Reports............................................. 50
5.3 Tax Returns and Information................................... 53
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ARTICLE VI PLEDGES, TRANSFERS, ADMISSIONS, WITHDRAWALS
6.1 Transfer by Partners.......................................... 56
6.2 Buy-Out Procedure............................................. 61
6.3 Additional Provisions Relating to Transfer.................... 64
6.4 Effect of Attempted Transfer; Withdrawals and Admissions
Generally................................................... 67
6.5 Tax Allocation Adjustments; Distributions After Transfer...... 67
6.6 Certain Affiliate Transferee Transactions Not Deemed
Transfers................................................... 68
6.7 IPO-Call Procedure............................................ 69
ARTICLE VII EVENTS OF DEFAULT
7.1 Events of Default............................................. 72
7.2 Remedies of Non-Defaulting Partners........................... 73
ARTICLE VIII DURATION AND TERMINATION OF THE PARTNERSHIP
8.1 Events of Termination......................................... 75
8.2 Winding-Up.................................................... 76
8.3 Purchase Option Upon Bankruptcy of a Partner.................. 78
ARTICLE IX COVENANTS, REPRESENTATIONS AND WARRANTIES
9.1 Compliance with Applicable Law................................ 80
9.2 No Restrictive Covenants...................................... 81
9.3 Indemnification of Partners;Contribution...................... 81
9.4 Notice of Change in Control and Indirect Transfer............. 82
ARTICLE X MISCELLANEOUS
10.1 Waiver of Partition........................................... 83
10.2 Modification; Waivers......................................... 83
10.3 Entire Agreement.............................................. 84
10.4 Severability.................................................. 84
10.5 Notices....................................................... 84
10.6 Successors and Assigns........................................ 86
10.7 Counterparts.................................................. 86
10.8 Headings; Cross-references.................................... 86
10.9 Construction.................................................. 87
10.10 Property Rights; Confidentiality.............................. 87
10.11 Non-Recourse.................................................. 89
10.12 Further Actions............................................... 89
10.13 Survival...................................................... 89
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10.14 Governing Law................................................. 90
10.15 No Right of Set-Off........................................... 90
10.16 Expenses of the Parties....................................... 90
10.17 Unregistered Interests........................................ 90
ANNEXES
A Approved Agreements of the Partnership
B Budget and Business Plan
C Form of Subordinated Note
D Allocation Policy for Indirect Expenses
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THIS GENERAL PARTNERSHIP AGREEMENT (the "Agreement") of Regional
Programming Partners, a general partnership organized under the laws of the
State of New York (the "Partnership"), made as of [INSERT EFFECTIVE DATE], is
entered into by and between Rainbow Regional Holdings, L.L.C., a Delaware
limited liability company ("Rainbow Partner"), and Fox Sports RPP Holdings LLC,
a Delaware limited liability company ("Fox/Liberty Partner").
W I T N E S S E T H:
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WHEREAS, Rainbow Partner and Fox/Liberty Partner desire to form the
Partnership to, among other things, own interests in regional sports programming
networks, programming networks of local interest and Madison Square Garden and
pursue other interests described herein.
WHEREAS, pursuant to the Formation Agreement, dated as of June 22,
1997, between Rainbow Media Sports Holdings, Inc. and Fox/Liberty Networks, LLC
(the "Formation Agreement"), Rainbow Partner is contributing its interests in
certain regional sports programming networks, programming networks of local
interest and Madison Square Garden and Fox/Liberty Partner is contributing cash,
in each case, to the Partnership in exchange for an Interest in the Partnership.
WHEREAS, Rainbow Partner and Fox/Liberty Partner wish to set forth
their respective rights and obligations
with respect to the formation of the Partnership under the Partnership Law of
the State of New York.
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto intending to be legally bound hereby agree as follows:
ARTICLE I
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DEFINITIONS
As used herein, the following terms have the meanings assigned to them
in this Article (except as otherwise expressly provided) and include the plural
as well as the singular, and all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with GAAP, as in effect from
time to time and any capitalized term used herein and not defined in this
Article is defined in the provision of this Agreement where such term is first
used:
Adjusted Capital Account Deficit: With respect to any Partner, the
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deficit balance, if any, in such Partner's Capital Account as of the end of
the relevant taxable period, after giving effect to the following
adjustments: (i) credit to such Capital Account any amounts that such
Partner is obligated to restore or is deemed to be obligated to restore
pursuant to the next-to-last sentences of Treasury Regulations Section
1.704-2(g)(1) and Treasury Regulations Section 1.704-2(i)(5), and (ii)
debit to such Capital Account the
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items described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4),
(5) and (6).
Affiliate: As to any Person, any other Person that directly or
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indirectly through one or more intermediaries is Controlled by, Controls or
is under common Control with, such Person. For purposes of this
definition, (x) so long as Liberty owns, directly or indirectly, an
interest in Fox/Liberty Partner, any Affiliate of Fox/Liberty Partner shall
be deemed an Affiliate of Liberty, and Liberty shall be deemed an Affiliate
of Fox/Liberty Partner and any Affiliate of Liberty shall be deemed an
Affiliate of Fox/Liberty Partner, (y) so long as Fox owns, directly or
indirectly, an interest in Fox/Liberty Partner, any Affiliate of
Fox/Liberty Partner shall be deemed an Affiliate of Fox, and Fox shall be
deemed an Affiliate of Fox/Liberty Partner and any Affiliate of Fox shall
be deemed an Affiliate of Fox/Liberty Partner, and (z) Twentieth Holdings
Corporation and its Subsidiaries shall be deemed to be Affiliates of Fox.
Notwithstanding the foregoing, (i) neither the Partnership nor any Person
Controlled by the Partnership shall be deemed to be an "Affiliate" of any
Partner or of any Affiliate of any Partner, (ii) no Partner or any
Affiliate thereof shall be deemed to be an "Affiliate" of any other Partner
or any Affiliate thereof solely by virtue of its Interest in the
Partnership, and (iii) neither Liberty or its Affiliates (other than
Fox/Liberty Partner) on the one hand nor Fox or its Affiliates (other than
Fox/Liberty Partner) on the other hand shall be deemed to be an "Affiliate"
of the other solely by virtue of the ownership of Fox/Liberty Partner by
Fox and Liberty and their respective Affiliates.
Affiliate Transferee: As defined in Section 6.6(a).
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Agreement: This General Partnership Agreement, as the same may be
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amended from time to time in accordance with the provisions hereof.
Allocated Interest Offer Price: In the case of any proposed sale of
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an Offered Interest (as defined in Section 6.1(b)) in conjunction with
other property owned by a Partner or an Affiliate of a Partner, an amount
equal to the product of the aggregate consideration, including, without
limitation, the assumption of debt and any contractual payments to be
received for all such property and a fraction, the
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numerator of which is equal to the Fair Market Value of the Offered
Interest and the denominator of which is equal to the Fair Market Value of
all such property to be sold.
Appraiser: An independent investment banking firm appointed in
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accordance with the terms of this Agreement that (a) is not (i) an
Affiliate, or an officer, director, employee or holder of any voting
securities of the Partnership or any Partner or (ii) an officer, director,
employee or holder of more than 5% of the voting securities of any
Affiliate of any Partner, and (b) is engaged as a regular part of its
business in the valuation of business entities.
Approved Agreements: The agreements listed in Annex A to this
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Agreement as the same may be amended from time to time in accordance with
the provisions hereof and thereof.
Arm's-length basis: As to any transaction, agreement or other
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arrangement, being on terms that would be reached by unrelated parties not
under any compulsion to contract.
Bankruptcy: The "Bankruptcy" of a Partner shall be deemed to have
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occurred and a Partner shall be "Bankrupt" for purposes of this Agreement
upon the happening of any of the following:
(a) The valid appointment of a receiver or trustee to administer
all or a substantial portion of a Partner's assets or a Partner's
Interest in the Partnership;
(b) The filing by a Partner of a voluntary petition for relief
under the Bankruptcy Code or of a pleading in any court of record
admitting in writing its inability to pay its debts generally as they
become due;
(c) The making by a Partner of a general assignment for the
benefit of creditors;
(d) The filing by a Partner of an answer admitting the material
allegations of, or its consenting to or defaulting in answering, a
petition for relief filed against it in any proceeding under the
Bankruptcy Code; or
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(e) The entry of an order, judgment or decree by any court of
competent jurisdiction, granting relief against a Partner in a
proceeding under the Bankruptcy Code, and such order, judgment or
decree continuing unstayed and in effect for a period of thirty (30)
days after such entry.
Bankruptcy Code: The Bankruptcy Reform Act of 1978, as amended from
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time to time, any successor federal statute or any state law for the relief
of debtors.
Bona Fide Offer: As defined in Section 6.1(b).
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Budget: At any time, the then-effective annual operating and capital
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budget for the Partnership. The 1997 Budget is annexed hereto as Annex B.
Business Day: Each Monday, Tuesday, Wednesday, Thursday or Friday
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which is not a day on which banking institutions in New York City are
authorized or obligated by law to close.
Business Plan: The business plan for the Partnership for the period
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from January 1, 1997 through December 31, 2001, a copy of which is annexed
hereto as Annex B, or the then-effective five-year business plan for the
Partnership.
Buy-Out Closing Date: As defined in Section 6.2(d).
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Buy-Out Commencement Date: (i) The later of (a) the third anniversary
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of the Effective Date or (b) the date on which a Buy-Out Trigger occurs and
(ii) the date on which Fox/Liberty Partner gives a notice to remove the
Managing Partner pursuant to Section 4.10.
Buy-Out Price: As defined in Section 6.2(b).
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Buy-Out Procedure: As defined in Section 6.2.
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Buy-Out Trigger: The date on which Fox/Liberty Partner shall have
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voted against a second separate matter submitted by Rainbow Partner to
either the Partners' Committee pursuant to Section 4.2 or to all Partners
for unanimous consent pursuant to Section 4.9. Rainbow Partner agrees that
it shall not submit any matter to the Partners' Committee pursuant to
Section 4.2 or all Partners for unanimous consent
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pursuant to Section 4.9 with knowledge that no reasonable Partner would
approve such matter.
Call Price: As defined in Section 6.7(b).
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Capital Account: As defined in Section 3.3(a).
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Cash Flow Businesses: (i)Each business (other than those referred to
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in clause (ii))of the Partnership, or in which the Partnership has a direct
or indirect investment, that produces positive Free Cash Flow for the
relevant period and (ii) Madison Square Garden LP and each regional sports
programming business in which the Partnership has a direct or indirect
interest.
Change in Control: As to any Partner, a change, shift or transfer of
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Control with respect to such Partner (including any change in the Control
of any entity Controlling such Partner). Notwithstanding the foregoing, no
Change in Control shall be deemed to have occurred with respect to (i)
Rainbow Partner as a result of a change, shift or transfer of Control with
respect to RMH or any Person Controlling RMH; (ii) Fox/Liberty Partner as a
result of a change, shift or transfer of Control with respect to Liberty or
any Person Controlling Liberty; or (iii) Fox/Liberty Partner as a result
of a change, shift or transfer of Control with respect to Fox or any Person
Controlling Fox.
Code: The United States Internal Revenue Code of 1986, as amended
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from time to time, or any successor statute or statutes to the Internal
Revenue Code of 1986.
Complying Partner: As defined in Section 3.2(a).
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Contributing Partner: As defined in Section 3.2(a).
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Contribution Date: As defined in Section 3.1(a).
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Control: As to any Person, the possession, directly or indirectly, of
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the power to direct or cause the direction of the management and policies
of such Person, whether through ownership of voting securities or
partnership interests, by contract or otherwise.
Corporation: a Person succeeding to the business of the Partnership
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by merger or otherwise for the purpose of facilitating an Initial Public
Offering, the
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ownership of which immediately following such reorganization or
restructuring is in the same relative proportion to the Sharing Percentages
of the Partners immediately prior thereto; provided, that the securities
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issued to each Partner are of the same class of securities to be issued in
the Initial Public Offering.
CSC: Cablevision Systems Corporation, a Delaware corporation.
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Current Market Price: Shall mean, per share or unit of Marketable
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Securities on any date specified, the average of the daily market prices of
such Marketable Securities for the 20 consecutive Business Days ending on
the second Business Day prior to such date. The daily market price of
Marketable Securities on any Business Day will be (a) the last sale price
on such day on the principal stock exchange on which such share or unit of
Marketable Securities is then listed or admitted to trading (including the
Nasdaq National Market System if such Marketable Securities are admitted to
trading thereon), or (b) if no sale takes place on such date on any
exchange on which such share or unit of Marketable Securities is listed or
admitted to trading, the average of the reported closing bid and asked
prices on such day as officially noted on any exchange.
Damages: As defined in Section 7.2.
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Defaulting Partner: As defined in Section 7.1(a).
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Delinquent Partner: As defined in Section 3.2(c).
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Designee: An Affiliate of an Offeree designated by the Offeree to
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purchase an Interest.
Effective Date: [INSERT THE CLOSING DATE OF THE TRANSACTIONS
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CONTEMPLATED BY THE FORMATION AGREEMENT].
Event of Default: As defined in Section 7.1.
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Event of Termination: As defined in Section 8.1.
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Excess Contribution: As defined in Sec tion 3.2(a).
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Fair Market Value: As to any property, the price at which a willing
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seller would sell and a willing buyer would buy such property having full
knowledge of
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the facts, and assuming each party acts on an Arm's-length basis with the
expectation of concluding the purchase or sale within a reasonable time.
Except as provided herein, in any case where there is a dispute as to the
Fair Market Value of any property, such dispute shall be determined by an
Appraiser selected jointly by the applicable Partners or, if the applicable
Partners are not able to agree on an Appraiser, each applicable Partner
shall select an Appraiser and the Appraisers so selected shall select
another Appraiser, which shall determine the Fair Market Value of the
property in question. For purposes of valuing Partnership Interests under
Sections 6.2 and 6.7, an Appraiser shall assume that there shall remain in
place long term affiliation agreements between Cablevision Systems
Corporation and SportsChannel Chicago Associates, SportsChannel Ohio
Associates, SportsChannel New York Associates and Madison Square Garden
L.P.
Fiscal Year: As defined in Section 5.1(c).
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Forfeited Partner: As defined in Section 3.2(c).
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Fox: Fox Inc., a Colorado corporation, and any entity succeeding to
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all or substantially all of the assets of Fox Inc.
Fox/Liberty Partner: Fox Sports RPP Holdings LLC, a Delaware limited
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liability company.
Free Cash Flow: Earnings before interest expense, taxes, depreciation
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and amortization (adjusted to reflect cash payments in excess of book
expenses) plus capital expenditures for the relevant Person for such period
on an unconsolidated basis.
GAAP: Generally accepted accounting principles as in effect in the
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United States from time to time and consistently applied.
Indirect Transfer: With respect to an Interest, a transfer of Control
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of the Partner directly owning such Interest or of any Affiliate of a
Partner more than 50% of the Fair Market Value of which is attributable,
directly or indirectly, to such Interest; provided, that, any transaction
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which is not a Change in Control by virtue of the second sentence of the
definition of "Change in Control" shall similarly not be an Indirect
Transfer.
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Initial Capital Account Balance: The Initial Capital Account Balance
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of each Partner shall be as follows:
Rainbow Partner: $1,275,000,000
Fox/Liberty Partner: $ 850,000,000
Initial Public Offering: As to the Partnership or the Corporation, an
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initial public offering of the securities of the Partnership or the
Corporation pursuant to a registration statement filed pursuant to the
Securities Act of 1933 that results in a class of securities of the
Partnership or the Corporation being required to be registered pursuant to
Section 12 of the Securities Exchange Act of 1934.
Interest: As to each Partner, such Partner's rights to participate in
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the income, gains, losses, deductions and credits of the Partnership,
together with all other rights and obligations of such Partner under this
Agreement.
IPO-Call Closing Date: As defined in Section 6.7(d).
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IPO-Call Notice: As defined in Section 6.7(a).
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IPO-Call Notice Window: (i) the 30 days following the fifth
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anniversary of the Effective Date, (ii) the 30 days following each third
anniversary of the fifth anniversary of the Effective Date, (iii) the 30
days following receipt of notice of the initiation of any Buy-Out
Procedure; provided that in every case there shall not be an IPO-Call
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Notice Window if an Initial Public Offering of the Partnership or the
Corporation has occurred prior to such date.
IPO-Call Procedure: As defined in Section 6.7(a).
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Liberty: Liberty Media Corporation, a Delaware corporation, and any
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entity succeeding to all or substantially all of its assets.
Losses: As defined in Section 3.4(a).
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MSG: Madison Square Garden, L.P., a Delaware limited partnership.
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Make-up Amount: As defined in Section 3.2(c).
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Make-up Contribution: As defined in Section 3.2(c).
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Management Overhead: Expenses of Related Persons with respect to the
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Managing Partner, a portion of which are allocated to the Partnership and
any Related Persons with respect to the Managing Partner pursuant to
Section 4.5.
Managing Partner: The Managing Partner of the Partnership shall be
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Rainbow Partner, unless and until changed in accordance with the provisions
of this Agreement.
Marketable Securities: Shall mean securities of a Person that are
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freely tradeable without federal securities laws restrictions and that are
listed on a national securities exchange in the United States of America or
are authorized for inclusion in the Nasdaq National Market System, and
which represent less than 50% of the total securities of such class and
securities convertible or exchangeable into such class.
Material Asset: (i) any interest in a Regional (as defined in the
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Formation Agreement), (ii) any asset of the Partnership designated as a
"Material Asset" by the Partners' Committee, or (iii) any asset with a Fair
Market Value in excess of $25 million.
Minimum Gain Attributable to Partner Nonrecourse Debt: That amount
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determined in accordance with the principles of Treasury Regulations
Section 1.704-2(i)(3).
Minimum Interest: As to any Person, (i) 50% of the voting
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securities or (ii) 50% of each of (a) all of the general partnership or
membership interests in such Person and (b) all of the partnership or
membership interests in such Person.
Nonbankrupt Partner: As defined in Section 8.3.
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Non-Cash Flow Business: Each business of the Partnership or in which
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the Partnership has a direct or indirect investment that is (i) not
included in the definition of Cash Flow Business, and (ii) the acquisition
or formation of which was not in the initial Budget or approved by all the
Partners.
Non-Defaulting Partner: As defined in Section 7.2.
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Nonrecourse Deductions: Any and all items of loss or deduction or
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expenditure, including those described in Section 705(a)(2)(B) of the Code
that in accordance with the principles of Treasury Regulations Section
1.704-2(b)(1) are attributable to a Nonrecourse Liability.
Nonrecourse Liability: Has the meaning set forth in Treasury
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Regulations Section 1.704-2(b)(3).
Offered Interest: As defined in Section 6.1(b).
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Offeree: As defined in Section 6.1(b).
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Offer Notice: As defined in Section 6.1(b).
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Partner: Rainbow Partner, Fox/Liberty Partner or any other Person
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hereafter admitted to the Partnership in accordance with the terms hereof,
but excluding any Person that ceases to be a Partner in accordance with the
terms hereof.
Partner Nonrecourse Debt: Has the meaning set forth in Treasury
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Regulations Section 1.704-2(b)(4).
Partner Nonrecourse Deductions: Any and all items of loss or
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deduction or expenditure, including those described in Section 705(a)(2)(B)
of the Code that in accordance with the principles of Treasury Regulations
Section 1.704-2(i)(2), are attributable to Partner Nonrecourse Debt.
Partners' Committee: As defined in Section 4.2.
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Partner's Loan: A loan by a Partner or a Related Person of a Partner
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to the Partnership in respect of which repayment of principal and interest
shall be subordinated to the repayment of the principal of, and interest
on, the indebtedness of the Partnership to third party lenders. All
Partner's Loans shall bear interest, payable quarterly, at the Prime Rate
and shall be unsecured and recourse thereunder shall be limited to the
assets of the Partnership, and, except as otherwise provided in Section
6.3(b), the note evidencing the same shall be non-negotiable and non-
transferable (except to a Permitted Transferee of an Interest) and shall be
in substantially the form annexed hereto as Annex C.
Partnership: As defined in the Recitals.
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Partnership Minimum Gain: That amount determined in accordance with
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the principles of Treasury Regulations Section 1.704-2(d).
Partnership Property: As defined in Section 2.8.
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Permitted Investment: An investment of any of the following types:
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(a) United States Treasury bills and notes; (b) securities guaranteed by
the United States or an agency of the United States and backed by the full
faith and credit of the United States; (c) certificates of deposit,
banker's acceptances or time deposits issued by any commercial bank or
branch thereof chartered by the United States or any State thereof or by
the District of Columbia and having its long-term debt obligations rated A-
or better by Standard & Poor's Ratings Group ("Standard & Poor's"); (d)
commercial paper rated A-3 or better by Standard & Poor's; (e) repurchase
agreements with financial institutions the long-term debt obligations of
which are rated A- or better by Standard & Poor's; (f) Eurodollar deposits
with direct subsidiaries of any commercial bank chartered by the United
States or any State thereof or by the District of Columbia and having its
long-term debt obligations rated A- or better by Standard & Poor's; or (g)
other instruments and investments approved by the Partners' Committee.
Person: An individual or a corporation, partnership, limited
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liability company, trust, unincorporated association or other entity.
Prime Rate: A rate of interest equal to the rate per annum announced
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from time to time by The Chase Manhattan Bank, at its principal office as
its prime rate (which rate shall change when and as such announced prime
rate changes) but in no event more than the maximum rate of interest
permitted to be collected from time to time under applicable usury laws.
Profits: As defined in Section 3.4(a).
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Rainbow Partner: Rainbow Regional Holdings, L.L.C., a Delaware limited
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liability company.
Refusing Partner: As defined in Section 3.2(a).
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Related Party Transaction: As defined in Section 4.9(a).
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Related Person: As to each Partner, (i) such Partner, (ii) each
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Affiliate of such Partner, (iii) each director, officer or general partner
of, or any stockholder or limited partner known to the Partner to own an
equity interest greater than 10% in, such Partner or any Affiliate of such
Partner, or (iv) each Person other than the Partnership in which such
Partner or, to the knowledge of such Partner, any Affiliate of such Partner
has an equity interest greater than 10%, excluding any business in which
the Partnership has an interest, directly or indirectly.
Restricted Person: Each Person listed on a writing executed by the
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parties hereto on the date of the Formation Agreement.
Restrictive Covenants: As defined in Section 9.2.
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RMH: Rainbow Media Holdings, Inc., a Delaware corporation, and any
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entity succeeding to all or substantially all of its assets.
Selling Partner: As defined in Section 6.1(b).
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Senior Credit Agreement: Any instrument creating or otherwise
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evidencing indebtedness of the Partnership to a third party lender that is
(x) approved by the Partners' Committee or (y) incurred for one or more of
the purposes described in Section 4.9(ix).
Sharing Percentage: Subject to adjustment pursuant to Section 3.2
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hereof the Sharing Percentage of each Partner in the Partnership shall be
as follows:
Rainbow Partner: 60%
Fox/Liberty Partner: 40%
Tax Matters Partner: As defined in Section 5.3(a).
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TCI: Tele-Communications, Inc., a Delaware corporation.
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Term: As defined in Section 2.6.
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Timely Partner: As defined in Section 3.2(c).
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Transfer: To sell, assign, transfer, pledge or otherwise dispose of,
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or encumber (voluntarily, involuntarily or by operation of law); provided,
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that a "Transfer" shall not include any bona fide assignment,
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hypothecation, pledge or encumbrance to any unaffiliated third party
lender in a financing transaction.
Transfer Agreement: The Partnership Interest Transfer Agreement,
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dated as of April 15, 1997, by and among ITT Corporation, ITT Eden
Corporation, ITT MSG Inc., CSC, RMH, Rainbow Garden Corp., Garden L.P.
Holding Corp., MSG Eden Corporation and MSG.
Undistributed Cash: For any period, 25% of the excess of
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"attributable" positive Free Cash Flow of each Cash Flow Business, over the
"attributable" negative Free Cash Flow of each of the Non-Cash Flow
Businesses. "Attributable" for purposes of this definition means the
Partnership's percentage interest in the profits and income of the relevant
business.
ARTICLE II
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FORMATION OF GENERAL PARTNERSHIP
2.1 Formation.
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(a) Pursuant to the terms and conditions contained in this Agreement,
Rainbow Partner is hereby admitted to the Partnership as a Partner owning a
60% Sharing Percentage and Fox/Liberty Partner is hereby admitted to the
Partnership as a Partner owning a 40% Sharing Percentage.
(b) The name and mailing address of each Partner and the amount
credited to each Partner's Capital Account shall be listed on Schedule A
attached hereto. The Managing Partner shall update and distribute to the
other Partners Schedule A from time to time as necessary to accurately
reflect the information therein. Any amendment or revision to Schedule A
made in accordance with this Agreement shall not be deemed an
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amendment to this Agreement that requires the consent of the Partners. Any
reference in this Agreement to Schedule A shall be deemed to be a reference
to Schedule A as amended and in effect from time to time.
2.2 Name. The name of the Partnership shall be Regional Programming
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Partners or any other name designated by the Partners' Committee upon compliance
with all applicable laws.
2.3 Compliance with Partnership and Other Laws. The Partners will use
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their reasonable best efforts to take the actions required to cause the
Partnership to comply with all applicable partnership laws, assumed name acts,
fictitious name acts, and similar statutes in effect in each jurisdiction or
political subdivision in which the Partnership does business from time to
time, and the Partners agree to execute appropriate documents requested by the
Managing Partner with the advice of counsel to comply with such laws. All
actions to be taken pursuant to this Section 2.3 by the Partnership and by the
Partners shall be at Partnership expense.
2.4 Principal Place of Business. The principal place of business of
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the Partnership shall be a place in the United States designated by the Managing
Partner from time to time.
2.5 Purpose. The Partnership is formed for the object and purpose
-------
of, and the nature of the business to be
-15-
conducted and promoted by the Partnership is, engaging in any lawful act or
activity for which partnerships may be formed under the laws of the State of New
York and engaging in any and all activities necessary, convenient, desirable or
incidental to the foregoing, including, without limitation, acquiring, holding,
managing, operating and disposing of real and personal property.
2.6 Term of Partnership. The term of the Partnership (the "Term")
-------------------
shall continue for ninety-nine (99) years from the Effective Date, unless the
Partnership is sooner dissolved and terminated as provided in Article VIII.
2.7 Qualification in other Jurisdictions. The Partners shall cause
------------------------------------
the Partnership to be qualified, formed or registered under assumed or
fictitious name statutes or similar laws in any jurisdiction in which the
Partnership transacts business. The Managing Partner shall execute, deliver and
file any certificates (and any amendments and/or restatements thereof) necessary
for the Partnership to qualify to do business in a jurisdiction in which the
Partnership wishes to conduct business.
2.8 Ownership of Property. Except to the extent the Managing Partner
---------------------
deems it to be in the best interests of the Partnership to use nominees from
time to time, legal title to all assets, rights and property, whether real,
personal or mixed, owned by the Partnership (collectively,
-16-
the "Partnership Property") shall be acquired, held and conveyed only in the
name of the Partnership.
ARTICLE III
-----------
PARTNERSHIP CAPITAL
3.1 Capital Contributions.
---------------------
(a) Unless otherwise agreed by all Partners, all capital
contributions (other than any initial capital contribution) shall be in cash.
Except as provided in Sections 4.9 and 6.2(c), the Managing Partner shall from
time to time during the Term give notice to each Partner of any capital
contribution due in accordance with the Budget not less than 30 nor more than 90
days prior to the date on which such capital contribution is due. Such notice
shall set forth the amount to be contributed by each Partner, the date (the
"Contribution Date") on which the contribution is to be made, and the account of
the Partnership to which such funds are to be transmitted. There shall be no
more than one capital call in any calendar month.
(b) All capital contributions to be made by the Partners shall be in
proportion to their respective Sharing Percentages (determined, in each case, at
the time the notice contemplated by Section 3.1(a) is given).
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3.2 Failure to Make Capital Contributions.
-------------------------------------
(a) Upon the failure of any Partner (the "Refusing Partner") to make
all or a portion of a capital contribution required of it pursuant to this
Agreement on or before any Contribution Date, any other Partner (each a
"Complying Partner") may, at its option exercised by giving notice to the other
Partners, make up the defaulted capital contribution or any portion thereof by
making a capital contribution to the Partnership in an amount not exceeding the
amount of the required capital contribution which the Refusing Partner failed to
make. If more than one Complying Partner wishes to contribute all or any
portion of the unpaid amount of the Refusing Partner's required capital
contribution, and the aggregate amount which such Complying Partners wish to
contribute exceeds the unpaid amount of the Refusing Partner's required capital
contribution, then the Complying Partners shall determine among themselves the
amount that each such Complying Partner shall contribute to the Partnership, or,
in the event the Complying Partners cannot agree, each Complying Partner shall
contribute to the Partnership an amount equal to its pro rata share (based on
the proportion that each Complying Partner's Sharing Percentage bears to the
aggregate Sharing Percentages on the relevant Contribution Date of all the
Complying Partners that wish to contribute) of the Refusing Partner's required
additional capital contribution. Each Complying Partner
-18-
that makes a capital contribution pursuant to this Section 3.2 shall be referred
to herein as a "Contributing Partner." Any contribution by a Contributing
Partner of such additional amount as a capital contribution pursuant to this
Section 3.2(a) shall be deemed an additional capital contribution of such
Contributing Partner (an "Excess Contribution").
(b) Whenever pursuant to this Section 3.2 with respect to any capital
call, a Refusing Partner has not, within 15 days after the related Contribution
Date, made capital contributions in an amount equal to the product of such
Refusing Partner's Sharing Percentage and the total amount of such capital call,
then the Sharing Percentage of such Refusing Partner in the Partnership shall be
reduced, with effect from the related Contribution Date, so that such Sharing
Percentage equals the quotient (expressed as a percentage) of (x) the sum of (i)
the Initial Capital Account Balance of such Refusing Partner and (ii) all
capital contributions made by such Refusing Partner less all distributions of
capital to the Refusing Partner following the Effective Date and prior to the
related Contribution Date divided by (y) the sum of (a) the Initial Capital
Account Balances of all Partners and (b) all the capital contributions of all
Partners less all distributions of capital to all Partners following the
Effective Date and prior to the related Contribution Date (including any
-19-
capital contributions made in respect of such capital call pursuant to Section
3.2(a), regardless of when made); and the Sharing Percentage of each Complying
Partner shall be increased, with effect from the related Contribution Date, by
an amount equal to the product of (I) the amount by which the Sharing Percentage
of such Refusing Partner has been reduced pursuant to this sentence and (II) the
quotient of (A) the sum of (X) the Initial Capital Account Balance of such
Complying Partner and (Y) all capital contributions made by such Complying
Partner less all distributions of capital to such Complying Partner following
the Effective Date and prior to the related Contribution Date (including any
additional capital contribution made by such Complying Partner pursuant to
Section 3.2(a), regardless of when made) divided by (B) the sum of (aa) the
Initial Capital Account Balances of all of the Complying Partners and (bb) all
the capital contributions of all Complying Partners less all distributions of
capital to all Complying Partners following the Effective Date and prior to the
related Contribution Date (including any additional capital contributions made
in respect of such capital call pursuant to Section 3.2(a), regardless of when
made).
(c) If at any time any Partner's Sharing Percentage is less than two-
fifths of such Partner's Sharing Percentage as of the Effective Date
(appropriately adjusted to reflect any admissions of additional Partners) such
-20-
Partner shall forfeit (i) all voting rights (including the voting rights, if
any, of its representatives on the Partners' Committee), except as otherwise
required by law and except as provided in Section 4.9(b) and (ii) such Partner's
right to consent (or withhold consent) to Transfers under (and as defined in)
Section 6.1(a) and such Partner's right of first refusal pursuant to Section
6.1(b) hereof. A Partner that has forfeited its voting and other rights under
this paragraph is referred to as a "Forfeited Partner" for and during the period
such rights are so forfeited. Except as otherwise specifically provided in this
Section 3.2(c), a Forfeited Partner shall continue to be a Partner in all other
respects and shall not, by virtue of becoming a Forfeited Partner, be released
from any of its obligations as a general partner in the Partnership or under
this Agreement (including its obligations with respect to required additional
capital contributions). The forfeiture by any Partner of certain of its rights
pursuant to this Section 3.2(c) shall not prejudice the right of such Partner to
any claim that such Partner may have at law against the Managing Partner in the
case of a breach by the Managing Partner of any provision of this Agreement or
of the duties of care and of loyalty owed by the Managing Partner to the
Partnership.
In the event that any Partner (the "Delinquent Partner") fails to make
a capital contribution on or before
-21-
the Contribution Date specified in the notice of the Managing Partner, but does
make its contribution within 15 days after such Contribution Date, each Partner
(each, a "Timely Partner") that made its capital contribution on or before the
Contribution Date shall be entitled to receive interest at a rate per annum
equal to the Prime Rate (calculated on the basis of a year of 360 days) from the
Delinquent Partner (and not from the Partnership) from the date of payment of
its capital contribution to the date the Delinquent Partner made its capital
contribution.
Notwithstanding the foregoing provisions of this Section 3.2, if the
Sharing Percentage of any Partner other than the Managing Partner has been
reduced pursuant to Section 3.2(b) for failure to make a capital contribution
such Partner may, at any time prior to the date that is 270 days after such
capital contribution was due, make a capital contribution to the Partnership or
a payment to each Contributing Partner, as provided below (each, a "Make-up
Contribution"), in an amount equal to the Make-up Amount (as hereinafter
defined). Upon the making of a Make-up Contribution by such Partner in the
full amount of the Make-up Amount, the Sharing Percentages of the Partners shall
be adjusted to give effect to such Make-up Contribution so as to restore to such
Refusing Partner and the Complying Partners the respective Sharing Percentages
they would have
-22-
had but for and solely based on the default of the Refusing Partner.
The "Make-up Amount" shall be the amount of the defaulted capital
contribution of the Refusing Partner, plus interest thereon at a rate per annum
equal to the Prime Rate plus 1% calculated on the basis of a year of 360 days
from the Contribution Date until the date of payment of the Make-up
Contribution. In the event that no Complying Partner has made up any portion of
the defaulted capital contribution of such Refusing Partner pursuant to Sec-
tion 3.2(a), and the Refusing Partner elects to make a Make-up Contribution, the
full Make-up Amount shall be paid by the Refusing Partner to the Partnership.
In the event that a Contributing Partner has, pursuant to Section 3.2(a), made
up all or a portion of the defaulted capital contribution of such Refusing
Partner through additional capital contributions, and the Refusing Partner
elects to make a Make-up Contribution, such Refusing Partner shall pay directly
to each Contributing Partner an amount equal to the Make-up Amount multiplied by
the quotient of (x) the portion of all Excess Contributions paid by such
Contributing Partner, divided by (y) the total amount of the relevant defaulted
capital contribution, and after such payment the Refusing Partner shall
contribute the remainder (if any) of the Make-up Amount to the Partnership.
-23-
3.3 Capital Accounts.
----------------
(a) A separate capital account (each a "Capital Account") shall be
maintained for each Partner. The Initial Capital Account Balance of each
Partner shall be as specified in Article I. Subject to the provisions of
paragraphs (b), (c) and (d) of this Section 3.3, the Capital Account of each
Partner shall be (i) increased by (A) the amount of cash and the Fair Market
Value of other property contributed to the Partnership by such Partner as a
capital contribution (net of liabilities of such Partner assumed by the Partner-
ship and liabilities to which such contributed property is subject) (including
any Excess Contributions made by such Partner whether or not the Partner was
reimbursed by a Refusing Partner) and (B) Profits and any other items of income
allocated to such Partner pursuant to Section 3.4 and (ii) decreased by (A) the
amount of cash and the Fair Market Value of any property distributed to such
Partner (net of liabilities of the Partnership assumed by such Partner and
liabilities to which such distributed property is subject), (B) any Excess
Contributions for which such Partner has been reimbursed by a Refusing Partner,
and (C) items of Loss and any other deductions allocated to such Partner
pursuant to Section 3.4. Capital Accounts otherwise shall be maintained in
accordance with Treasury Regulations in order for the allocation of Profits and
Losses pursuant to Section 3.4
-24-
hereof to have substantial economic effect within the meaning of Section 704(b)
of the Code.
(b) Immediately prior to the distribution of any property (other than
cash) to a Partner, the Capital Account of each Partner shall be increased or
decreased, as the case may be, in accordance with Treasury Regulations Sec tion
1.704-1(b)(2)(iv)(e), to reflect the manner in which the unrealized income,
gain, loss and deduction inherent in such property that has not previously been
reflected in the Capital Accounts would be allocated among the Partners if there
were a taxable disposition of such property for its Fair Market Value on the
date of the distribution.
(c) Immediately prior to:
(i) a contribution of money or other property to the Partnership by a
new or existing Partner as consideration for an Interest, or
(ii) a distribution of money or other property by the Partnership to a
retiring or continuing Partner as consideration for an Interest,
the Capital Account of each Partner shall be increased or decreased, as the case
may be, to reflect the Fair Market Value of all the Partnership Property. Such
adjustment shall reflect the manner in which the unrealized income, gain, loss
or deduction inherent in such property that has not previously been reflected in
the Capital Accounts would be allocated among the Partners if there were a
taxable disposition of such property for its Fair Market Value on the
-25-
date of the contribution or distribution and shall otherwise be made in
accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(f).
(d) Except as set forth in Section 3.2, no Partner shall be entitled
to interest on its capital contributions or on the positive balance in its
Capital Account and no such interest shall accrue.
3.4 Allocation of Items of Partnership Income, Gain, Loss, Deduction
----------------------------------------------------------------
and Credit.
----------
(a) For purposes of this Agreement, the terms "Profits" and "Losses"
shall mean, respectively, the net profits and net losses of the Partnership
determined on an annual basis in accordance with the method of accounting used
by the Partnership for Federal income tax purposes, except that (i) the items
included in the calculation of Profits and Losses shall not include any items
specially allocated under Section 3.4(c), (ii) where property is reflected in
the Capital Accounts at a book basis different from the basis of such property
for Federal income tax purposes, all gain, loss, depreciation and amortization
on such property shall be determined for purposes of adjusting Capital Accounts
based on the book basis of such property in accordance with Treasury Regulations
Section 1.704-1(b)(2)(iv)(g), (iii) income received by the Partnership which is
exempt for Federal income tax purposes shall be included, and (iv) expenses of
the Partnership which are not
-26-
capitalizable and not deductible or deemed not capitalizable and not deductible
for Federal income tax purposes (i.e., Section 705(a)(2)(B) expenditures) shall
- -
be taken into account.
(b) (i) Except as provided in paragraph (a) of this Section 3.4,
clause (ii) of this paragraph (b), and Section 5.3(d), and after giving effect
to the special allocations required by paragraph (c) of this Section 3.4, all
Partnership Profits and Losses and other items of income, gain, loss, deduction
and credit shall be allocated to the Partners in accordance with their Sharing
Percentages, taking into account both the amount or amounts of such Sharing
Percentages and the portions of the year during which such Sharing Percentages
were held.
(ii) If, at the end of any taxable period, any Partner's Capital
Account would have an Adjusted Capital Account Deficit (determined after taking
into account all other allocations and distributions with respect to such
period), then there shall be allocated to such Partner for such taxable period
items of gross income in an amount sufficient to eliminate such Adjusted Capital
Account Deficit.
(c) Notwithstanding any other provision of this Section 3.4, the
following special allocations shall be made for each taxable period in
descending order of priority:
-27-
(i) If there is a net decrease in Partnership Minimum Gain during any
Partnership taxable period, each Partner shall be specially allocated items
of income and gain of the Partnership for such period (and, if necessary,
subsequent periods) in an amount equal to such Partner's share of the net
decrease in Partnership Minimum Gain, determined in accordance with
Treasury Regulations Sections 1.704-2(f) and 1.704-2(g)(2). Allocations
pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant
thereto. The items to be so allocated shall be determined in accordance
with Treasury Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). The
Partnership may, however, (i) waive the chargeback of items of income and
gain required by this Section 3.4(c)(i) and (ii) apply to the Commissioner
of the Internal Revenue Service for approval of such waiver in the event
that (x) the Partners have made Capital Contributions or received income
allocations that have restored any previous Nonrecourse Deductions claimed
or any distributions attributable to the proceeds of a Nonrecourse
Liability, and (y) the Minimum Gain chargeback requirement would distort
the Partners' economic arrangement as reflected in this Agreement and as
evidenced over the term of the Partnership by the Partnership's allocations
and distributions and the Partners' Capital Contributions and it is not
expected that the Partnership will have sufficient other income to
correct that distortion. This Section 3.4(c)(i) is intended to comply with
the chargeback of items of income and gain requirement in Treasury
Regulations Section 1.704-2(f) and shall be interpreted consistently
therewith;
(ii) If there is a net decrease in Minimum Gain Attributable to
Partner Nonrecourse Debt during any Partnership taxable period, any Partner
with a share of Minimum Gain Attributable to Partner Nonrecourse Debt at
the beginning of such taxable period (determined in accordance with
Treasury Regulations Section 1.704-2(i)(5)) shall be allocated items of the
Partnership income and gain for such period (and, if necessary, subsequent
periods) in an amount equal to such Partner's share of the net decrease in
the Minimum Gain Attributable to Partner Nonrecourse Debt, determined in
accordance with Treasury Regulations Sections 1.704-2(g)(2) and 1.704-
2(i)(4). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each
Partner pursuant thereto. The items to be so allocated shall be determined
in accordance with Treasury
-28-
Regulations Sections 1.704-2(f)(5), 1.704-2(i)(4) and 1.704-2(j)(2)(ii) and
(iii). This Section 3.4(c)(ii) is intended to comply with the chargeback
of items of income and gain requirement in Treasury Regulations Section
1.704-2(i)(4) and shall be interpreted consistently therewith. In
addition, rules consistent with the provisions of Treasury Regulations
Sections 1.704-2(f)(2), (3), (4) and (5) will apply to the special
allocation required by this Section 3.4(c)(ii);
(iii) In the event that any Partner unexpectedly receives any
adjustments, allocations, or distributions described in Treasury
Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of
Partnership income and gain shall be specially allocated to such Partner
(in respect of its Capital Account) in an amount and manner sufficient to
eliminate, to the extent required by the Treasury Regulations, the Adjusted
Capital Account Deficit of such Partner as quickly as possible, provided
that an allocation pursuant to this Section 3.4(c)(iii) shall be made only
if and to the extent that such Partner would have an Adjusted Capital
Account Deficit after all other allocations provided for in this Article
III have been tentatively made as if this Section 3.4(c)(iii) were not in
the Agreement;
(iv) Nonrecourse Deductions for any taxable period shall be specially
allocated among the Partners in accordance with their Sharing Percentages;
(v) Partner Nonrecourse Deductions for any taxable period shall be
specially allocated to the Partner that bears the economic risk of loss
with respect to the Partner Nonrecourse Debt to which such Partner
Nonrecourse Deductions are attributable in accordance with Treasury
Regulations Section 1.704-2(i). If more than one Partner bears the
economic risk of loss with respect to a Partner Nonrecourse Debt, such
Partner Nonrecourse Deductions attributable thereto shall be allocated
between or among such Partners in accordance with the ratios in which they
share such economic risk of loss; and
(vi) To the extent that any allocation is made in any taxable period
to any Partner pursuant to the provisions of clauses (i) through (v) of
this Section 3.4(c), such Partner shall thereafter be specially allocated
items of Partnership gross income or deduction in order to negate the
above-described allocations in the same taxable period if sufficient items
of gross
-29-
income or deduction are available and, if not available, in each succeeding
taxable period until the aggregate amount of the above-described
allocations are fully negated.
(d) All items of income, gain, loss or deduction attributable to
property contributed to the Partnership shall be allocated for Federal income
tax purposes among the Partners in a manner that takes into account any
difference between the Fair Market Value of such property at the time of its
contribution (calculated for this purpose without regard to any outstanding
indebtedness secured by or relating to such property) and its adjusted basis for
Federal income tax purposes at that time, in accordance with Section 704(c) of
the Code and the Treasury Regulations thereunder. Each Partner that contributes
property to the Partnership shall at the time of such contribution notify the
Partnership of its adjusted basis in the contributed property at such time. For
purposes of allocations hereunder, the Partnership shall elect to use the
traditional method with curative allocations as set forth in Treasury
Regulations Section 1.704-3(c).
3.5 Distributions.
-------------
(a) Except as provided in Sections 6.2 or 6.7, no Partner shall have
the right to withdraw any amount from its Capital Account. No Partner shall
have the right, except as otherwise provided in Section 3.5(b), to demand or
receive any distribution, without the approval of the Managing
-30-
Partner. Except as otherwise provided in Article VIII, no Partner shall have
the right to receive a distribution of property other than cash from the
Partnership, unless otherwise agreed by all the Partners.
(b) The Partnership shall, subject to any restrictions contained in
Senior Credit Agreements, distribute cash to the Partners in amounts that the
Managing Partner determines are in excess of the amounts reasonably necessary
for the continued efficient operation of the business of the Partnership,
including reasonable reserves; provided, that (i) subject to the Managing
--------
Partner's discretion to retain amounts necessary for the continued efficient
operation of the business of the Partnership in accordance with this Section
3.5(b), such distributions shall be made not less often than quarterly and (ii)
the Managing Partner shall be permitted in its sole discretion to retain
Undistributed Cash and the Managing Partner shall be permitted to use in any
fiscal year all Undistributed Cash for such fiscal year that the Managing
Partner reasonably believes will be available for such fiscal year, for purposes
that are unrelated to the Partnership's business (as it shall determine, such
determination to be made in accordance with Section 4.1 hereof), so long as such
use is generally related to the media or entertainment business, subject only to
Section 2.5. To the extent that Undistributed Cash is not used in any fiscal
year, such
-31-
unused amount shall not be carried forward for use in any subsequent year. To
the extent that the Managing Partner expends Undistributed Cash in excess of
that available for a fiscal year, such amount will be deducted from
Undistributed Cash for the next fiscal year. Any such distributions shall be
made in accordance with the Partners' Sharing Percentages. The Partnership
shall repay principal and accrued interest on Partner's Loans (in the order of
payment contemplated by subparagraph (c)(iii) of Section 8.2 hereof) prior to
making any cash distributions to the Partners. The Managing Partner shall also
act to cause distributions of cash from the businesses in which the Partnership
has a Controlling interest, on a basis similar to the foregoing policy, subject
to applicable legal, contractual and fiduciary constraints.
(c) For purposes of Sections 3.2(b) and 6.2(b), distributions shall be
deemed made first from profits and then from capital.
3.6 Partnership Funds. The funds of the Partnership shall be
-----------------
deposited in such bank accounts or invested in such Permitted Investments as
shall be determined by the Managing Partner, or if there is no Managing Partner
the Partners' Committee. The Partnership's funds shall not be commingled with
funds not belonging to the Partnership, except to the extent the Partnership's
cash management plan permits such commingling, and shall be used only for the
-32-
affairs or business of the Partnership. The Managing Partner shall establish a
cash management plan pursuant to which the funds of the Partnership will be
managed.
3.7 Borrowings. Subject to any applicable approval required by
----------
Section 4.9 hereof, if the Partnership uses reasonable efforts to obtain third-
party financing but is unable to do so, (i) the Partnership may borrow funds
from any Person that is not a Related Person with respect to any Partner and may
pledge on a non-recourse basis only the Partnership properties or the income
therefrom to secure the repayment of such loans and (ii) the Partnership may
borrow funds in the form of Partner's Loans from any Partner or any Related
Person with respect to a Partner.
ARTICLE IV
----------
MANAGEMENT OF THE PARTNERSHIP
4.1 Management of the Partnership's Business. Except for actions and
----------------------------------------
determinations which pursuant to this Agreement or applicable law can be taken
or made only with the consent of all of the Partners or the Partners' Committee,
the business and affairs of the Partnership shall be directed and controlled by
the Managing Partner. The Managing Partner shall manage the business of the
Partnership so as to maximize the Partnership's profitability or asset value
in a manner consistent with the development plans and policy decisions reflected
in the then-applicable
-33-
Business Plan and the then-applicable Budget. Without limiting the generality
of the foregoing, the Managing Partner at the Partnership's expense, consistent
with the Budget shall cause the Partnership to obtain and maintain in effect
during the Term comprehensive insurance insuring the Partnership against all
risks and perils customarily insured against in the businesses conducted by the
Partnership. Nothing contained in this Article IV shall impose any obligation on
any Person doing business or dealing with the Partnership to inquire as to
whether the Managing Partner has exceeded its authority in executing any
contract or other instrument on behalf of the Partnership, and any such Person
shall be fully protected in relying upon the authority of the Managing Partner.
The Managing Partner shall keep the Partners' Committee informed with respect to
all matters of material interest to the Partners and shall in any event report
to the Partners' Committee not less frequently than once each quarter with
respect to the business and affairs of the Partnership. Except as otherwise
provided in Section 4.5, the Managing Partner shall serve without compensation
for its services. The Managing Partner may delegate such of its powers and
authority to managers, employees and agents of the Partnership as the Managing
Partner shall deem necessary or appropriate for the conduct of the Partnership's
business. Except insofar as such arrangements are embodied in Approved
Agreements or are
-34-
otherwise approved pursuant to the provisions of Section 4.9, all arrangements
for the employment of managers, employees or agents on behalf of the Partnership
that are Related Persons with respect to any Partner shall be on an Arm's-length
basis.
Nothing in this Agreement shall (i) limit any action or require any
action which is inconsistent with the terms of any partnership agreement,
limited liability company agreement (or similar document) relating to a
Contributed Business (as defined in the Formation Agreement) that includes one
or more outside partners or investors (other than Affiliates of Rainbow Partner
and Fox/Liberty Partner) or is inconsistent with the fiduciary or other
obligations of any partner therein and a Partner shall not be in breach of this
Agreement if acting or failing to act in reliance on this sentence, (ii) prevent
the Managing Partner from determining the manner in which the programming
services held directly or indirectly by the Partnership shall be offered,
including, without limitation, whether they are offered on basic, premium, tier,
pay-per-view, exclusive or other licensing terms; provided, that the Partnership
--------
receives reasonable value in connection with any service that exhibits solely
sports programming offered on an exclusive basis, or (iii) permit any Partner
other than the Managing Partner to exercise any management or voting rights
(including any veto rights) with respect to
-35-
SportsChannel Florida Associates, MSG, the New York Rangers professional hockey
team and the New York Knickerbockers professional basketball team.
4.2 Partners' Committee. Each of Fox/Liberty Partner and Rainbow
-------------------
Partner shall designate two individuals to serve on a committee (the "Partners'
Committee") which shall be responsible for taking all action required under this
Agreement to be taken by the Partners' Committee. Irrespective of the number of
representatives attending any meeting of the Partners' Committee, each of
Fox/Liberty Partner and Rainbow Partner shall have the right to one vote at such
meetings (except as otherwise provided below and in Section 3.2 hereof with
respect to a Forfeited Partner), such vote to be exercised in such manner as
such Partner shall direct. The Partners' Committee shall meet by telephone or,
at the request of any Partner, in person, not less frequently than (i) quarterly
to receive the report of the Managing Partner contemplated by Section 4.1 and to
review development plans, the financial position of the Partnership, the status
of negotiations for the purchase and sale of programming rights, financial
projections, and any other material matters relating to the business of the
Partnership, (ii) annually to review the annual Budget and the Business Plan,
and (iii) as often as shall be necessary to take any other action required to be
taken or approved by the Partners' Committee. Any action that may be taken at a
-36-
meeting of the Partners' Committee may be taken without a meeting by written
consent of the number of Partners needed to authorize the action; provided, that
--------
all Partners, regardless of whether all Partners are entitled to vote, are given
notice of such written consent at least 15 Business Days prior to its effective
date.
Except as otherwise provided herein, any action required or permitted
to be taken by the Partners' Committee must be by the approving vote of Partners
entitled to vote and having Sharing Percentages aggregating at least 66 2/3% of
the Sharing Percentages of all Partners entitled to vote; provided, that, if the
--------
Managing Partner has been removed pursuant to Section 4.10, until a new Managing
Partner shall have been appointed in accordance with Section 4.10, any action
required or permitted to be taken by the Partners' Committee must be by the
approving vote of each Partner entitled to vote.
Any member of the Partners' Committee may be removed without cause
and replaced at any time by the Partner who designated such member. If at any
time a Partner removes one or both of its representatives on the Partners'
Committee or any representative of such Partner resigns from the Partners'
Committee or dies, such Partner shall give notice to the other Partners of such
removal, resignation or death and of a successor representative. In the absence
of notice to the contrary, either representative of any Partner
-37-
shall be conclusively presumed to have the authority to take action by written
consent or vote in the name and on behalf of such Partner. Members of the
Partners' Committee shall serve as such without compensation.
4.3 Budget and Business Plan. The Managing Partner shall submit
------------------------
annually to the Partners' Committee at least 30 days prior to the start of each
Fiscal Year, beginning with the Fiscal Year commencing January 1, 1998, (i) a
budget (a "Budget") for the forthcoming Fiscal Year including an income
statement prepared on an accrual basis which shall show in reasonable detail the
projected revenues and expenses and a cash flow statement and detailed schedule
of proposed capital expenditures which shall show in reasonable detail the
projected receipts and disbursements and the amount of any expected cash
deficiency or surplus, any required capital contributions, a summary of the
services included in Management Overhead allocated to the Partnership in the
Budget and any contemplated borrowings of the Partnership, and (ii) a revised
five-year business plan (a "Business Plan") for the Fiscal Year covered by the
Budget and the succeeding four Fiscal Years containing substantially the same
categories of information in substantially the same detail as the Business Plan
attached hereto as Annex B. Such Budget and Business Plan shall be prepared on
a basis consistent with the Partnership's audited financial statements and GAAP
and may be amended
-38-
during a Fiscal Year by submitting to the Partners' Committee a revised Budget
and Business Plan in accordance with this Section 4.3. Prior to or
simultaneously with the submission of such Budget and Business Plan, the
Managing Partner shall disclose to the Partners' Committee any additional
information (including financial projections for years after the next Fiscal
Year) in its possession or reasonably available to it (with or without cost to
the Partnership) which could assist the Partners' Committee in evaluating such
Budget and Business Plan, subject to any confidentiality and fiduciary
restrictions to which such additional information may be subject, including,
without limitation, confidentiality and fiduciary restrictions with respect to
SportsChannel Florida Associates, MSG, the New York Rangers professional hockey
team and the New York Knickerbockers professional basketball team. In addition,
the Managing Partner shall meet with the Partners' Committee to discuss such
Budget and Business Plan. Budgets and Business Plans submitted to the Partners'
Committee shall supersede any previous Budget or Business Plan, as the case may
be.
4.4 Limitation on Agency. Except as expressly provided herein, the
--------------------
Managing Partner shall have exclusive authority to act for the Partnership. No
other Partner shall have any authority to act for, or to assume any obligation
or responsibility on behalf of, another Partner or
-39-
the Partnership (or to authorize any other Person to do so) except (i) as
otherwise expressly provided herein or as expressly approved by written consent
of all Partners, (ii) if the Managing Partner is a Defaulting Partner, to the
extent necessary to permit the Non-Defaulting Partners to exercise on behalf of
the Partnership any remedies available to the Partnership against the Managing
Partner, or (iii) if the Managing Partner fails to perform its management duties
hereunder (including its duty to give the notices contem plated by Section
3.1(a) hereof), to the extent necessary to permit the Non-Defaulting Partners to
continue the business of the Partnership. In addition to the other remedies
specified in this Agreement, each Partner agrees to indemnify and hold each
other Partner harmless from and against any claim, demand, loss, damage,
liability or expense (including, without limitation, amounts paid in settlement,
reasonable costs of investigation and reasonable legal expenses) incurred by or
made against such other Partner and arising out of or resulting from any action
taken by the indemnifying Partner in violation of this Section 4.5.
4.5 Managing Partner's Services and Expenses. The Managing Partner
----------------------------------------
shall provide or cause to be provided to the Partnership such management and
other services as may be necessary or appropriate to the conduct of the business
of the Partnership from time to time as contemplated by the Business Plan and
the Budget. All reasonable and necessary
-40-
direct and indirect expenses (including, but not limited to, human resource
expenses, out-of-pocket expenses, overhead, salary, rent, utility costs and
similar expenses) incurred by the Managing Partner and by and from its Related
Persons in furtherance of the businesses of the Partnership shall be paid or
reimbursed (but not in amounts exceeding the amounts provided in the Business
Plan and Budget) by the Partnership; provided, that all indirect expenses
--------
incurred by the Managing Partner and by and from its Related Persons in the
management of the Partnership shall be allocated pursuant to the Allocation
Policy for Management Overhead set forth in Annex D hereto.
4.6 Liability of Partners' Committee and Managing Partner. Neither
-----------------------------------------------------
the individuals constituting the Partners' Committee nor the Managing Partner
shall be liable, in damages or otherwise, to the Partnership or any Partner for
any act or failure to act on behalf of the Partnership by such individuals or
Managing Partner, which act was within the scope of the authority conferred on
the Managing Partner or the individuals constituting the Partners' Committee, as
the case may be, by this Agreement, unless such act or omission constituted
fraudulent or willful misconduct, was performed or omitted in bad faith or
constituted gross negligence or a violation of law. The individuals compris-
ing the Partners' Committee and the Managing Partner shall be indemnified by the
Partnership against liability for any
-41-
claim, demand, loss, damage, liability or expense (including, without
limitation, amounts paid in settlement, reasonable costs of investigation and
reasonable legal expenses) resulting from any threatened, pending or completed
action, suit or proceeding naming any of them as a defendant by reason of acts
or omissions by them within the scope of their authority as set forth in this
Agreement, provided their actions were in good faith and did not constitute
gross negligence, fraud or willful misconduct or a violation of law.
4.7 Indemnification. Any Person asserting a right to indemnification
---------------
under Section 4.4, Section 4.6 or Section 9.3 shall give notice to the
Partnership or the indemnifying Partner(s). If the facts giving rise to such
indemnification involve any actual or threatened claim or demand by or against a
third party, the indemnifying Person shall be entitled to control the defense or
prosecution of such claim or demand in the name of the indemnified Person, with
counsel reasonably satisfactory to the indemnified Person, if the indemnifying
Person notifies the indemnified Person in writing of its intention to do so
within twenty (20) days after the receipt of such notice by the indemnifying
Person, without prejudice, however, to the right of the indemnified Person to
participate therein through counsel of the indemnified Person's own choosing,
which participation shall be at the indemnified Person's
-42-
sole expense unless (i) the indemnified Person shall have been advised by its
counsel that use of the same counsel to represent both the indemnifying Person
and the indemnified Person would present a conflict of interest (which shall be
deemed to include any case where there may be a legal defense or claim available
to the indemnified Person which is different from or additional to those
available to the indemnifying Person), in which case the indemnifying Person
shall not have the right to direct the defense of such action on behalf of the
indemnified Person, or (ii) the indemnifying Person shall fail diligently to
defend or prosecute such claim or demand within a reasonable time. Whether or
not the indemnifying Person chooses to defend or prosecute such claim, the
parties hereto shall cooperate in the prosecution or defense of such claim and
shall furnish such records, information and testimony and attend such
conferences, discovery proceedings, hearings, trials and appeals as may
reasonably be requested in connection therewith. The indemnifying Person shall
not settle or permit the settlement of any such third party claim or action
without the prior written consent of the indemnified Person, which consent shall
not be unreasonably withheld.
4.8 Approved Agreements. Notwithstanding any provision of this
-------------------
Agreement to the contrary, no action by the Partners' Committee or any Partner
shall be required in order to authorize the Partnership to enter into and
perform
-43-
any of the Approved Agreements or to renew any Approved Agreement pursuant to an
automatic renewal provision of such Approved Agreement or on terms no less
favorable to the Partnership than those prevailing prior to such renewal. Each
Approved Agreement shall, for purposes of this Agreement, be deemed to be on
an Arm's-length basis.
4.9 Unanimous Actions by Partners. (a) The Partners' Committee or
-----------------------------
the Managing Partner may make a recommendation, but shall have no power, without
the prior written consent of all Partners (other than a Forfeited Partner):
(i) to amend this Agreement;
(ii) to admit any Person as a Partner in the Partnership except
as a result of a Transfer permitted by this Agreement;
(iii) to merge or consolidate the Partnership with any other
Person, other than in connection with an Initial Public Offering;
(iv) to dissolve and wind up the Partnership other than in
connection with an Initial Public Offering, except as otherwise provided in
Sections 8.1 and 8.2;
(v) to Transfer all or substantially all of the assets of the
Partnership other than in connection with an Initial Public Offering; or
(vi) to make any capital calls other than the capital calls
relating to (a) the exercise of the rights or satisfaction of obligations
to purchase, or cause MSG to redeem, limited partnership interests in MSG
pursuant to the Transfer Agreement, (b) the exercise of the rights or
satisfaction of obligations to purchase interests in SportsChannel Chicago
Associates or SportsChannel Pacific Associates from the other partners in
such partnerships or (c) any other investments or disbursements
referenced in a writing between
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the parties hereto dated the date of the Formation Agreement referring to
this Section;
(vii) to purchase or sell any Material Asset of the
Partnership other than (a) transactions related to the sale of a direct or
indirect interest in a Region in connection with the acquisition of major
professional sports programming rights or (b) any other purchase or sale of
a Material Asset referenced in a writing between the parties dated the date
of the Formation Agreement referring to this Section; provided, that
--------
nothing in this clause (vii) shall limit the Managing Partner's ability to
purchase any Material Asset with the Partnership's Undistributed Cash;
(viii) to directly acquire any substantial interest or
participation in any other Person other than (a) a reorganization or
restructuring transaction relating to one or more of the Contributed
Businesses or (b) any acquisition of an interest referenced in a writing
between the parties hereto dated the date of the Formation Agreement
referring to this Section; provided, that nothing in this clause (viii)
--------
shall limit the Managing Partner's ability to acquire any substantial
interest or participation in any other Person with the Partnership's
Undistributed Cash; or
(ix) to incur indebtedness other than indebtedness for borrowed
money of the Partnership relating to (a) the exercise of the rights or
satisfaction of obligations to purchase, or cause MSG to redeem, limited
partnership interests in MSG pursuant to the Transfer Agreement, (b) the
exercise of rights or satisfaction of obligations to purchase interests in
SportsChannel Chicago Associates or SportsChannel Pacific Associates from
the other partners in such partnerships, (c) the direct or indirect
acquisition of programming rights relating to professional sports, (d) any
other investments or disbursements referenced in writing between the
parties hereto dated the date of the Formation Agreement referring to this
Section, or (e) a Partner's Loan.
Except as otherwise provided in this Agreement and except for Approved
Agreements and any renewals or extensions thereof, the Partnership shall not
be permitted to enter into a material transaction with a Related Person of
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any Partner (a "Related Party Transaction") unless such Related Party
Transaction is approved by each Partner or is on an Arm's-length basis when
compared to similar types of transactions. The Managing Partner shall notify
each other Partner at least 10 Business Days prior to the Partnership entering
into a Related Party Transaction and shall provide therewith a reasonable
summary of such Related Party Transaction. If any Partner notifies the Managing
Partner within 5 Business Days of receiving such notice that such Partner
reasonably determines that a Related Party Transaction is not on an Arm's-
length basis when compared to similar types of transactions (furnishing the
Managing Partner with the reasons for making its determination that such
transaction is not an Arm's-length basis when compared to similar types of
transactions) and such Partner does not approve such Related Party Transaction,
the Managing Partner shall be permitted to restructure such Related Party
Transaction on an Arm's-length basis.
If the Partnership is presented with an Option with respect to a New
Development Interest under Section 8.3 of the Formation Agreement or the
opportunity to acquire Regional Nonsports Programming or a Regional Nonsports
Interest under Section 8.4 of the Formation Agreement, and if the Managing
Partner recommends that the Partnership exercise such Option or pursue such
opportunity, no other Partner that is the party making such Offer or an
Affiliate
-46-
thereof may exercise its rights under this Section 4.9 to block such
transaction.
(b) In addition to the approvals required under Section 4.9(a), the
prior written approval of any Forfeited Partner shall be required before any of
the actions referred to in Section 4.9(a)(v) or 4.9(a)(vi), and before this
Agreement may be amended in any respect that could reasonably be expected to
materially adversely affect such Forfeited Partner.
(c) The Managing Partner shall not take any actions, or permit the
taking of any actions at SportsChannel Chicago, SportsChannel Pacific and
SportsChannel Prism Associates (so long as the Partnership does not own all of
the partnership interests therein) which would have required a unanimous
decision under this Section 4.9 if taken by the Partnership, except that the
Partnership shall not be deemed to be a Related Person of such other partnership
for purposes of the penultimate paragraph of Section 4.9(a). Subject to
fiduciary and contractual obligations to third party partners, stockholders and
investors in partnerships and other businesses in which the Partnership has an
interest, the Managing Partner, to the extent it Controls such partnerships and
other businesses, shall not permit such partnerships or other businesses to
enter into instruments creating or evidencing indebtedness of such partnership
or other business which restrict or
-47-
eliminate the right of such partnerships or other businesses to make
distributions to the Partnership; provided that this sentence shall not apply to
such instruments or agreements which evidence indebtedness incurred by such
partnership or other business solely for one or more of the purposes described
in Section 4.9(ix).
4.10 Removal of Managing Partner. If any Restricted Person shall
---------------------------
Control RMH, Rainbow Partner may be removed as Managing Partner at the request
of any other Partner (other than a Defaulting Partner) by written notice by the
requesting Partner to the Managing Partner within 60 days of such Change in
Control; provided, that there shall be no such right of removal of Rainbow
--------
Partner as the Managing Partner if Rainbow Partner is the Managing Partner and
Rainbow Partner has initiated the Buy-Out Procedure within 30 days of the
receipt of the request referred to in this Section 4.10, unless the Buy-Out
Procedure is abandoned by mutual agreement of the parties.
Upon the removal of the Managing Partner, a new Managing Partner shall
be appointed from among the Partners by the unanimous vote of the Partners
excluding any Partner that is a Forfeited Partner at the time of such decision.
Until a successor Managing Partner has been appointed, the Partnership shall be
managed by the Partners' Committee in accordance with Section 4.2.
-48-
The removal of the Managing Partner shall not, of itself, affect the
Managing Partner's Interest or Sharing Percentage in the Partnership or the
right of its representatives to vote (except as provided in the preceding
paragraph) on the Partners' Committee or its rights under Section 4.9.
ARTICLE V
---------
BOOKS AND RECORDS; REPORTS TO PARTNERS
5.1 Books and Records.
-----------------
(a) At all times during the Term, the Managing Partner, or in the
event there is no Managing Partner the Partners' Committee, shall keep or cause
to be kept full and complete books of account and business records in which
shall be entered fully and accurately each transaction of the Partnership.
(b) All such books of account and business records shall at all times
be maintained at the principal office of the Partnership or such other place the
Partners' Committee may determine. Each Partner or its duly authorized
representatives shall have the right, upon reasonable notice, at its own
expense, to examine, inspect and copy, during normal business hours and for any
lawful purpose related to the affairs of the Partnership or the investment in
the Partnership by such Partner, any of the books of account, business records,
properties and opera-
-49-
tions of the Partnership; provided, that Fox/Liberty Partner shall not have the
--------
right to examine, inspect or copy any records relating to SportsChannel Florida
Associates, the New York Rangers professional hockey team or the New York
Knickerbockers professional basketball team or which is subject to a
confidentiality or fiduciary obligation. Such examination, inspection and
copying may be conducted by the Partner's employees, its independent certified
public accountants, or its other agents. Any information obtained by any Partner
during such an inspection shall be treated as confidential to the extent
required by Section 10.11 hereof. The Partnership's books of account and
business records shall be preserved for a period of at least five years or such
longer period as is required by law.
(c) The Partnership's books of account shall be kept on an accrual
basis in accordance with GAAP. The fiscal year (the "Fiscal Year") of the
Partnership shall end on December 31, or on such other date as shall be
determined by the Partners' Committee.
5.2 Financial Reports. The Managing Partner, or in the event there
-----------------
is no Managing Partner the Partners' Committee, shall deliver to each Partner,
no later than 30 days after the end of each calendar month, a statement of
income (loss), balance sheet, statement of capital expenditures and subscriber
data for the Partnership for such month prepared, in the case of financial
information, in accor-
-50-
dance with GAAP. The Managing Partner, or in the event there is no Managing
Partner the Partners' Committee, shall deliver to each Partner, no later than 45
days after the close of each of the first three quarters of the Partnership's
Fiscal Year, and 75 days after the end of each such Fiscal Year, a financial
report of the business and operations of the Partnership prepared in accordance
with GAAP (and, if required by any Partner for purposes of reporting under the
Securities Exchange Act of 1934, in accordance with Regulation S-X or any
successor regulation), relating to such period, which report shall include a
balance sheet as of the end of such period, a statement of income (loss) and
partners' capital (deficiency) and cash flows (including sources and uses of
funds) for the period then ended, and in each case a comparison of the period
then ended with the corresponding period in the Fiscal Year immediately preced-
ing such period, which, in the case of the report furnished after the close of
the Fiscal Year, shall be audited by the Partnership's independent certified
public accountants. The monthly and quarterly financial statements shall be
accompanied by an analysis, in reasonable detail, of the variance between the
Partnership's operating results and the corresponding amounts in the then-
current Budget. The monthly and quarterly financial reports may in each case be
subject to normal year-end adjustments. In addition to the foregoing financial
statements, the financial report
-51-
furnished after the close of each Fiscal Year shall also include a statement of
cash flows, and allocations to the Partners of the Partnership's taxable income,
gains, losses, deductions and credits. The financial report required to be
furnished after the close of the Fiscal Year may be delivered in preliminary
form, without footnotes; provided, that the final form of the required financial
--------
statements, audited by the Partnership's independent certified public accoun-
tants, must be delivered within 90 days after such year-end. Additionally, the
Partnership shall provide an estimate of annual net income (loss) to each
Partner no later than 21 days after the close of each Fiscal Year and shall
provide any other available financial information which any Partner reasonably
requests; provided, that no Partner other than the Managing Partner shall have
--------
any right to receive any financial information (i) that is subject to a
confidentiality or fiduciary obligation or (ii) with respect to SportsChannel
Florida Associates, the New York Rangers professional hockey team or the New
York Knickerbockers professional basketball team other than a statement of the
aggregate net income (loss) of the New York Knickerbockers or the New York
Rangers. The Partnership will initially engage KPMG Peat Marwick LLP as its
independent certified public accountants. The Partnership shall bear the cost
of each annual audit and, except as otherwise provided in Section 4.6, the cost
of any other services furnished to the
-52-
Partnership by its independent certified public accountants as provided herein.
5.3 Tax Returns and Information.
---------------------------
(a) Until further action by the Partners' Committee, the Managing
Partner is designated as Tax Matters Partner under (S)6231(a)(7) of the Code.
The Tax Matters Partner will take no action which is reasonably expected to have
a material adverse effect on one or more of the Partners unless such action is
approved by each such Partner. The Tax Matters Partner shall have the rights and
obligations set forth under the Code and regulations thereunder; provided, that
--------
in no event shall the Tax Matters Partner extend the statute of limitations with
respect to any Partner pursuant to Section 6229(b) of the Code without the prior
written consent of such Partner or litigate any adjustment to any Partnership
tax item in any forum other than the United States Tax Court without the prior
written approval of all Partners. The Tax Matters Partner will be responsible
for notifying all Partners of ongoing proceedings, both administrative and
judicial, and will represent the Partnership throughout any such proceeding. The
Partners will furnish the Tax Matters Partner with such information as it may
reasonably request to provide the Internal Revenue Service with sufficient
information to allow proper notice to the Partners. If an administrative
proceeding with respect to a partnership item under the Code
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has begun, and the Tax Matters Partner so requests, each Partner will give
notice to the Tax Matters Partner of its treatment of any partnership item on
its federal income tax return, if any, which is inconsistent with the treatment
of that item on the partnership return for the Partnership. Any settlement
agreement with the Internal Revenue Service will be binding upon the Partners
only as provided in the Code. The Tax Matters Partner will not bind any other
Partner to any extension of the statute of limitations or to a settlement
agreement without such Partner's written consent. Any Partner who enters into a
settlement agreement with respect to any partnership item will give notice to
the other Partners of such settlement agreement and its terms within 30 days
after the date of settlement. If the Tax Matters Partner does not file a
petition for readjustment of the partnership items in the Tax Court, federal
District Court or Claims Court within the 90-day period following a notice of a
final partnership administrative adjustment, any notice partner or 5-percent
group (as such terms are defined in the Code) may institute such action within
the following 60 days. The Tax Matters Partner will timely give notice to the
other Partners in writing of its decision. Any notice partner or 5-percent
group will give notice to the other Partners of its filing of any petition for
readjustment.
(b) The Tax Matters Partner shall cause income and other required
Federal, state and local tax returns for
-54-
the Partnership to be prepared and sent (together with related work papers) to
each Partner for review at least 15 business days prior to filing, and will
cause such returns to be timely filed with the appropriate authorities. The Tax
Matters Partner shall make or maintain in effect an election under Section 754
of the Code to adjust the basis of the Partnership Property under Sections 734
and 743 of the Code for taxable years after the Effective Date if it deems such
election to be in the best interests of the Partnership or of any Partner.
Subject to Section 4.3, the Tax Matters Partner shall make such other elections
as it shall deem to be in the best interests of the Partnership and the
Partners. The cost of preparation of such returns by outside preparers, if any,
shall be borne by the Partnership.
(c) The Tax Matters Partner shall cause to be provided to each
Partner no later than July 1 of each year information concerning the
Partnership's projected taxable income or loss and each class of income, gain,
loss, deduction or credit which is relevant to reporting a Partner's share of
the Partnership income, gain, loss, deduction or credit for purposes of Federal
or state income tax. Information required for the preparation of a Partner's
income tax returns shall be furnished to the Partners as soon as possible after
the close of the Partnership's Fiscal Year.
-55-
(d) For Federal income tax purposes, all gain, loss, depreciation or
amortization with respect to property which is reflected in the Capital Accounts
of the Partners at a basis different from the tax basis of such property shall
be allocated pursuant to the principles of Section 704(c) of the Code and the
Treasury Regulations promulgated thereunder. All other items of income or
deduction shall be allocated for Federal income tax purposes in the same way
such items are allocated to the Capital Accounts of the Partners. All tax
credits shall be allocated to the Partners based upon the Sharing Percentage of
the Partners as of the time the expenditure giving rise to the credit was
incurred.
(e) The Tax Matters Partner shall from time to time upon request of
any other Partner cause the Partnership's attorneys and accountants to confer
with attorneys and accountants for such other Partner on any matters relating to
any Partnership tax return or tax election.
ARTICLE VI
----------
PLEDGES, TRANSFERS, ADMISSIONS, WITHDRAWALS
6.1 Transfer by Partners.
--------------------
(a) Except for Transfers made pursuant to Section 6.1(b), 6.2, 6.6,
6.7 or 8.3, without the prior written consent of all of the Partners (other than
a Forfeited Partner), no Partner shall have the right to
-56-
Transfer all or any part of its Interest, or to suffer to occur a Change in
Control of such Partner or an Indirect Transfer as to such Partner, and any such
Transfer shall be void and of no force or effect.
(b) Other than in connection with Transfers pursuant to Section 6.2,
6.6, 6.7 and 8.3, no Partner (a "Selling Partner") shall have the right to
Transfer all or any part of its Interest or to suffer to occur a Change in
Control of such Partner or an Indirect Transfer as to such Partner, without
first offering to the remaining Partners (other than a Forfeited Partner) (each
an "Offeree" and collectively the "Offerees") a right of first refusal to
purchase the portion of such Selling Partner's Interest that is proposed to be
so Transferred or, in the case of a Change in Control or an Indirect Transfer,
all of such Partner's Interest (the "Offered Interest"), all on the terms
hereinafter set forth. The Offered Interest must be offered by means of a
notice (an "Offer Notice") given by the Selling Partner to each Offeree at a
price and upon terms no less favorable to the Offerees than those which the
Selling Partner is willing to accept from a bona fide third party purchaser
---- ----
pursuant to an offer from such third party purchaser (or, in the case of a
Change in Control or an Indirect Transfer, the value of the Offered Interest, as
determined by multiplying the Fair Market Value of the Partnership by the
Sharing Percentage represented by the
-57-
Offered Interest) (a "Bona Fide Offer"); provided, that regardless of the terms
--------
of the Bona Fide Offer, the Offered Interest shall be offered to the Offerees on
terms that permit the Offerees 90 days within which to complete the purchase.
The Offer Notice shall state the identity of, and the price and other terms
offered by, such third party for the purchase of the Offered Interest (or, in
the case of a Change in Control or an Indirect Transfer, the identity of the
Person that will acquire Control of the Partner or the Interest as a result of
the proposed transaction). In any case where a Bona Fide Offer has been made in
respect of an Offered Interest in conjunction with other property, the price in
respect of the Offered Interest shall be the Allocated Interest Offer Price.
Within 15 days after receipt of such Offer Notice, each Offeree shall accept, in
whole or in part, or reject such offer for the Offered Interest by delivering a
notice to each of the other Partners and, if any Partner rejects such offer, it
shall state in writing whether it consents to the proposed Transfer under
Section 6.1(a). If pursuant to this Section 6.1(b) the Partners have agreed to
purchase, in the aggregate, the entire Offered Interest, then the entire Offered
Interest shall be purchased by the Partners that accepted all or a portion of
the Offered Interest in accordance with the terms offered by the Selling Partner
and no consent to such Transfer shall be required under Sec-
-58-
tion 6.1(a). If Rainbow Partner is the Offeree purchasing an Offered Interest
pursuant to this Section 6.1(b), the purchase price shall be payable at the
option of Rainbow Partner either (i) by wire transfer of funds or by certified
or cashier's check drawn to the order of Fox/Liberty Partner or (ii) in the form
of a promissory note of Rainbow Partner secured, pursuant to a pledge or
collateral assignment agreement in form reasonably acceptable to Fox/Liberty
Partner, by the Interest purchased, maturing on the third anniversary of the
date of the closing of the purchase of the Offered Interest and bearing
interest, payable semi-annually, at a rate per annum equal to the Prime Rate
plus one-half of one percent (1/2%). If all of the Offered Interest has not
been accepted and no Partner has delivered a writing in which it refused to
consent to the proposed Transfer, then the Selling Partner may, within 90 days
after the Offer Notice is given, Transfer the entire Offered Interest but not a
portion thereof to such third party at a price not less than the price at which,
and on other terms no more favorable to the third party than those contained in
the Bona Fide Offer (or, in the case of a Change in Control or an Indirect
Transfer, suffer the completion of such Change in Control or Indirect Transfer).
If the Offered Interest is not so disposed of within such 90-day period, then
the Selling Partner shall, before Transferring all or any portion of its
Interest (or suffering the completion of
-59-
a subsequent Change in Control or Indirect Transfer), again be obligated to
offer the right of first refusal contained in this Section 6.1(b) to the other
Partners. The sale of an Interest pursuant to a Bona Fide Offer in accordance
with this Section 6.1(b) shall not be effective without the prior written
consent (which shall not be unreasonably withheld) of the Partners (other than a
Forfeited Partner) and any such purported sale shall be void and of no force or
effect.
(c) After any Transfer of an Interest permitted hereby, the
Transferee shall be admitted as a Partner, with appropriate amendments being
made to this Agreement, the Transferred Interest shall continue to be subject to
all the provisions of this Agreement including, without limitation, the
provisions of this Article VI.
(d) Except as otherwise provided in Section 6.6, a Transfer will be
deemed to occur for the purpose of this Article VI in respect of the Interest of
a Partner in the event of a Change in Control of such Partner or an Indirect
Transfer with respect to such Partner. In the event of any such deemed Transfer
of an Interest, (i) if such Transfer is made in compliance with the first
sentence of Section 6.1(a), the Interest deemed Transferred shall continue to
be subject to all the provisions of this Agreement and, upon request by any
other Partner, the deemed Transferring Partner shall cause each deemed
Transferee to assume and agree to perform in writing all of such deemed
Transferring
-60-
Partner's duties and obligations as a Partner under this Agreement, including,
without limitation, the obligations imposed by this Article VI; and (ii) if such
deemed Transfer is not made in compliance with Section 6.1(a), then the other
Partners shall be entitled to make the elections and exercise the remedies
available to Non-Defaulting Partners under Section 7.2 of this Agreement against
the deemed Transferring Partner and its deemed Transferee.
6.2 Buy-Out Procedure.
-----------------
(a) The procedure set forth in this Section 6.2 (the "Buy-Out
Procedure") may be initiated by Rainbow Partner from and after the Buy-Out
Commencement Date at the Buy-Out Price. The Buy-Out Procedure shall be
initiated by notice from Rainbow Partner to each other Partner.
(b) For 45 days after receipt of the notice of Rainbow Partner given
pursuant to Section 6.2(a), Rainbow Partner, on the one hand, and Fox/Liberty
Partner, on the other hand, shall negotiate in good faith to determine the Fair
Market Value of all of the Interests. If such Partners are not able to agree on
the Fair Market Value prior to such 45th day, each shall select an Appraiser.
Within 15 days after the selection of the Appraisers, the Appraisers so selected
shall jointly select a third Appraiser. Within 30 days after its selection, the
third Appraiser shall determine the value of the Interests held by Fox/Liberty
Partner by determining the Fair Market Value of all of the
-61-
Interests and multiplying such Fair Market Value by the Sharing Percentage of
Fox/Liberty Partner. Within 60 days of the determination of the Fair Market
Value of all of the Interests, Rainbow Partner shall be obligated to purchase,
and Fox/Liberty Partner shall be obligated to sell, all of the Interests in the
Partnership owned by Fox/Liberty Partner for a purchase price (the "Buy-Out
Price") equal to the greater of (i)(A) $2,125,000,000 (increased by all capital
contributions and reduced by all distributions of capital) times the Sharing
Percentage of Fox/Liberty Partner as in effect at the commencement of the Buy-
Out Procedure plus (B) a rate of return on the amount in clause (A) at a per
annum rate equal to 8% calculated on the basis of a year of 360 days; or (ii)
the Fair Market Value of such Interests (as calculated in accordance with the
preceding sentence).
(c) Rainbow Partner may elect to have its purchase effected by a
Designee and, if Fox/Liberty Partner so elects, Rainbow Partner shall guarantee
the performance of its Designee. The business affairs of the Partnership shall
continue to be conducted in the ordinary course as provided in this Agreement
during the pendency of and unaffected by the Buy-Out Procedure; provided, that
--------
no calls for capital contributions shall be made after the receipt by
Fox/Liberty Partner of a notice from Rainbow Partner pursuant to Section 6.2(a)
and prior to the Buy-Out Closing Date whether or not such capital contribution
would otherwise be
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required pursuant to any provision hereof, including Section 3.1. If, at any
time following the receipt of Rainbow Partner's notice pursuant to Section
6.2(a), the Managing Partner or the Partners' Committee determines in its
reasonable discretion that, but for the provisions of the immediately preceding
sentence, a capital contribution would be required to be made pursuant to any
provision hereof including Section 3.1, the Managing Partner may require Rainbow
Partner to grant to the Partnership a Partner's Loan having a principal amount
equal to the amount of Rainbow Partner's pro rata share of the capital
contribution that would otherwise be required and bearing interest at the Prime
Rate plus 1%. The purchase price to be paid by Rainbow Partner shall not be
reduced by the amount of such Partner's Loan.
(d) The closing of any purchase and sale of an Interest under this
Section 6.2 shall be held at a mutually acceptable place on a mutually
acceptable date (the "Buy-Out Closing Date") not more than 60 days after the
date of determination of the Fair Market Value of Fox/Liberty Partner's
Interest; provided, that if any governmental approvals are required to
--------
consummate such purchase and sale, the Buy-Out Closing Date shall be the date on
which the last such approval is obtained but in any event not more than 180 days
after the election or deemed election pursuant to Section 6.2(a). At such
closing, Fox/Liberty Partner shall
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assign to Rainbow Partner the Interests to be sold, free and clear of all liens,
claims and encumbrances, and shall execute such documents as may be necessary to
effectuate the sale. Unless otherwise agreed by Rainbow Partner and Fox/Liberty
Partner, the purchase price shall be payable at the option of Rainbow Partner
either (i) by wire transfer of funds or by certified or cashier's check drawn to
the order of Fox/Liberty Partner or (ii) in the form of a promissory note of
Rainbow Partner secured, pursuant to a pledge or collateral assignment agreement
in form reasonably acceptable to Fox/Liberty Partner, by the Interest purchased,
maturing on the third anniversary of the Buy-Out Closing Date and bearing
interest, payable semi-annually, at a rate per annum equal to the Prime Rate
plus one-half of one percent (1/2%).
6.3 Additional Provisions Relating to Transfer.
------------------------------------------
(a) In the case of any Transfer under Sec tion 6.1, 6.2, 6.6, 6.7 or
8.3:
(i) Except as provided therein, the Transfer of an Interest shall not
affect the Approved Agreements; provided, however, that if the Transferring
-------- -------
Partner is the Managing Partner, then, with respect to any agreements
between the Partnership and the Transferring Managing Partner or any
Related Person with respect to the Transferring Managing Partner for the
provision of management and other services of the type described in Annex D
to this Agreement (whether or not such agreements are Approved Agreements),
the other Partners (acting by a majority of such Partners' Sharing
Percentages) shall have the option, by giving 30 days' notice to the
Transferring Managing Partner or such Related Person, as the case may be,
to (A) elect to terminate any or all of such agreements or (B) elect to
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cause any or all of such agreements to be assigned to the Transferee or its
Designee or, if there is more than one Transferee, to any Person jointly
designated by such Transferees. Upon the written request of the non-
Transferring Partners, the Managing Partner and its Affiliates shall
continue to provide to the Partnership for a period of 90 days following
the date of Transfer any management and other services of the type
described in Annex D that were being provided by them immediately prior to
the Transfer, and the Managing Partner and its Affiliates shall continue to
be compensated for such services and reimbursed for their costs in
accordance with the provisions of Sections 4.1 and 4.5 hereof, or in
accordance with the provisions of any applicable agreement, as the case may
be. Upon any such termina tion, the Transferring Managing Partner shall
cooperate and shall cause its Affiliates to cooperate with the Transferee
or Transferees, as the case may be, in order to effect an orderly
transition of management services; and
(ii) The Transferee or Transferees of an Interest, as the case may be,
shall be required to pay any and all filing and recording fees, fees of
counsel and accountants and other costs and expenses reasonably incurred by
the Partnership as a result of such Transfer.
(b) In connection with the Transfer of any Interest pursuant to
Section 6.1, 6.2, 6.7 or 8.3, the Transferor and its Affiliates will be
obligated to sell to the Transferee, and the Transferee will be obligated to buy
from the Transferor and its Affiliates, all (or in the case of a partial
Transfer, an appropriate portion of) evidences of indebtedness (including
Partner's Loans) of the Partnership held directly or indirectly by the
Transferor and its Affiliates for an amount, payable in cash, equal to the
outstanding principal amount thereof at the time of Transfer plus interest
thereon then accrued and unpaid; provided, that in connection with a Transfer
--------
pursuant to a Bona Fide
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Offer the terms of the Bona Fide Offer will govern the disposition of such
evidences of indebtedness.
(c) The Transferee of an Interest hereunder shall assume in writing
in form and substance reasonably satisfactory to the non-Transferring Partners
the obligations of the Transferring Partner under this Agreement arising from
and after the effective date of the Transfer in respect of the Transferred
Interest and the Transferring Partner shall be released therefrom except for
those obligations or liabilities of the Transferring Partner based on events
occurring, arising or maturing prior to the date of Transfer and except those
obligations arising out of a breach of this Agreement by the Transferring
Partner or pursuant to Section 4.4, 4.6 or 9.3.
(d) If required by any non-Transferring Partner, the Transferee shall
deliver to the Partnership an opinion, satisfactory in form and substance to the
non-Transferring Partners, of counsel reasonably satisfactory to such non-
Transferring Partners to the effect that the Transfer of the Interest in
question is in compliance with applicable state and federal securities laws.
(e) No Transfer shall be recognized for any purpose as between a
Transferring Partner and the Partnership or as between a Transferring Partner
and the other Partners until the Transferee shall have executed written
instruments satisfactory to the Partners' Committee
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to become a party to this Agreement and assume the rights and obligations of the
Transferring Partner hereunder.
(f) Upon completion of any Transfer pursuant to Section 6.1, 6.2, 6.7
or 8.3 or a change of ownership in compliance with Section 6.6(a), the
Transferee of an Interest (if not already a Partner) shall be admitted as a
Partner without any further action upon compliance with the provisions of this
Section 6.3.
6.4 Effect of Attempted Transfer; Withdrawals and Admissions
--------------------------------------------------------
Generally. An attempted Transfer of any Interest or any portion thereof in
---------
violation of any provision of this Agreement shall be void. No Partner shall
withdraw from the Partnership, except by a Transfer of an Interest permitted by
this Agreement or with the written consent of the other Partners.
6.5 Tax Allocation Adjustments; Distributions After Transfer. In the
----------------------------------------- --------------
event of a Transfer of any Interest, regardless of whether the Transferee
becomes a substitute Partner, all items of income, gain, loss, deduction and
credit for the fiscal period in which the Transfer occurs shall be allocated for
Federal income tax purposes between the Transferor and the Transferee on the
basis of the ownership of the Interest at the time the particular item is
taken into account by the Partnership for Federal income tax purposes, except to
the extent otherwise required by Section 706(d) of the Code. Distributions
made on or after the
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effective date of Transfer shall be made to the Transferee, regardless of when
such distributions accrued on the books of the Partnership.
6.6 Certain Affiliate Transferee Transactions Not Deemed Transfers.
--------------------------------------------------------------
(a) Notwithstanding anything in this Agreement to the contrary, a transaction
shall not be deemed to constitute a direct or indirect Transfer of an Interest,
a Change in Control or an Indirect Transfer, if the transferee and the
transferor are Affiliate Transferees. A transferor and a transferee shall be
deemed to be "Affiliate Transferees" if (i) the same Person directly or
indirectly owns more than a Minimum Interest in both the transferor and the
transferee immediately prior to the transaction in question or (ii) Fox,
Twentieth Holdings Corporation or Liberty collectively own all of the direct or
indirect interests in both the transferor and the transferee immediately prior
to the transaction in question. Fox/ Liberty Partner hereby agrees to consult
in good faith with Rainbow Partner prior to engaging in any transaction which
has the effect of reallocating between Fox and Liberty their direct or indirect
ownership interests in the Partnership.
(b) Notwithstanding anything in this Agreement to the contrary, none
of the following transactions shall be deemed to constitute a direct or indirect
Transfer of an Interest, a Change in Control or an Indirect Transfer: (i) a
change, shift or Transfer of Control that shall be deemed
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not to be a Change in Control pursuant to the second sentence of the definition
thereof; or (ii) the Transfer directly or indirectly of all or any portion of
the equity interests in, or assets of, Rainbow Partner to the stockholders of
RMH as a class (it being understood that such transfer may include the transfer
to different classes of stockholders of RMH of different classes of equity
interests reflecting the same relative rights and privileges as the different
classes of stock of RMH) or to any group of public equity holders (including,
without limitation, a transfer by means of a registered public offering).
6.7 IPO-Call Procedure. (a) The procedure set forth in this Section
------------------
6.7 (the "IPO-Call Procedure") may be initiated by Fox/Liberty Partner during
any IPO-Call Notice Window. Such IPO-Call Procedure shall be initiated by
written notice (the "IPO-Call Notice") from Fox/Liberty Partner to Rainbow
Partner in accordance herewith. Except as provided below, upon the giving of
the IPO-Call Notice, Rainbow Partner shall be obligated to purchase, and Fox/
Liberty Partner shall be obligated to sell, all (but not less than all) of the
Interests of Fox/Liberty Partner at the Call Price (as defined below) in
accordance with the terms hereof.
(b) For 45 days after receipt of an IPO-Call Notice, Rainbow Partner,
on the one hand, and Fox/Liberty Partner, on the other hand, shall negotiate in
good faith to
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determine the Fair Market Value of all of the Interests. If such Partners are
not able to agree on such Fair Market Value, prior to such 45th day, each shall
select an Appraiser. Within 15 days after the selection of the Appraisers, the
Appraisers so selected shall jointly select a third Appraiser. Within 30 days
after its selection, the third Appraiser shall determine the value of the
Interests held by Fox/Liberty Partner by determining the Fair Market Value of
all of the Interests and multiplying such Fair Market Value by the Sharing
Percentage of Fox/Liberty Partner (the "Call Price"). Within 30 days after
determination of the Call Price, Rainbow Partner shall give written notice to
Fox/Liberty Partner of its election either (i) to purchase the Interests of
Fox/Liberty Partner for, at the election of Rainbow Partner, either (A) a number
of Marketable Securities of CSC or RMH (or any combination thereof) calculated
by dividing the Call Price by the Current Market Price of such Marketable
Securities, or (B) a promissory note of Rainbow Partner secured, pursuant to a
pledge or collateral assignment agreement in form reasonably acceptable to
Fox/Liberty Partner, by the Interest purchased, maturing on the third
anniversary of the IPO-Call Closing Date and bearing interest, payable semi-
annually, at a rate per annum equal to the Prime Rate plus one-half of one
percent (1/2%) in aggregate principal amount equal to the Call Price or (ii) to
consummate an Initial Public
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Offering of the Partnership or the Corporation within 180 days of the IPO Call
Notice. If a purchase of Interests is to be effected pursuant to this Section,
at Fox/Liberty Partner's request, the parties shall negotiate in good faith to
structure the transaction as a tax-free transaction, provided, that (i)
--------
Fox/Liberty Partner will not be required to accept, in exchange for its
Interests, securities which are not Marketable Securities, (ii) structuring the
transaction in such a manner as shall not cause any adverse consequences to
Rainbow Partner or the issuer of such Marketable Securities, and (iii) Rainbow
Partner shall not be required to change its election with respect to the
Marketable Securities being issued. Securities issued in such transaction may
be voting, nonvoting or convertible into voting securities at the election of
the issuer.
(c) Rainbow Partner may elect to have its purchase effected by a
Designee and, if Fox/Liberty Partner so elects, Rainbow Partner shall guarantee
the performance of its Designee. The business affairs of the Partnership shall
continue to be conducted in the ordinary course as provided in this Agreement
during the pendency of and unaffected by the IPO-Call Procedure.
(d) In the event that an Initial Public Offering of the Partnership
or the Corporation is not consummated within 180 days after the date of the IPO-
Call Notice, the closing of any purchase and sale of an Interest under this
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Section 6.7 shall be held at a mutually acceptable place on a mutually
acceptable date (the "IPO-Call Closing Date") not more than 180 days after the
date of determination of the Call Price; provided, that if any governmental
--------
approvals are required to consummate such purchase and sale, the IPO-Call
Closing Date shall be the date on which the last such approval is obtained but
in any event not more than 240 days after the determination of the Call Price.
At such closing, Fox/Liberty Partner shall assign to Rainbow Partner the
Interests to be sold, free and clear of all liens, claims and encumbrances, and
shall execute such documents as may be necessary to effectuate the sale.
(e) In order to effectuate an Initial Public Offering,
notwithstanding Section 4.9, Rainbow Partner shall be permitted to effect a
reorganization or restructuring of the Partnership into the Corporation, without
any consent of any other Partner.
ARTICLE VII
------------
EVENTS OF DEFAULT
7.1 Events of Default.
-----------------
(a) An "Event of Default" shall be considered to have occurred with
respect to a Partner (the "Defaulting Partner") if:
(i) Such Partner Transfers all or any part of its Interest, or suffers
to occur a Change in Control of such Partner or an Indirect Transfer as to
such
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Partner, except as permitted in this Agreement; provided, that no Event of
--------
Default shall be considered to have occurred for 30 days following the
involuntary encumbrance of all or any part of such Interest if during such
30-day period such Partner acts diligently to, and does, remove any such
encumbrance, including, but not limited to posting a bond to prevent
foreclosure; or
(ii) Such Partner or any Affiliate of such Partner fails to perform or
violates any other material term or condition of this Agreement (including,
without limitation, a failure to pay any amounts due under Sections 6.1,
6.2 or 6.3 but excluding any failure to meet any capital call) or a
material term or condition of any Approved Agreement (or Section 8.2, 8.3,
8.4 or 8.5 of the Formation Agreement) and such failure or violation
continues for 45 days after such Partner has been given notice thereof by
any other Partner; provided, however, that (other than in the case of a
-------- -------
breach of Section 8.2, 8.3, 8.4 or 8.5 of the Formation Agreement) if the
failure or violation is not a failure to pay money and is of such a nature
that it cannot reasonably be cured within such 45-day period, but if it is
curable and such Partner in good faith begins efforts to cure it within
such 45-day period and continues diligently to do so, it shall have a
reasonable additional period thereafter to effect the cure.
7.2 Remedies of Non-Defaulting Partners.
-----------------------------------
Upon the occurrence and during the continuance of an Event of Default,
the remedies that may be elected by the Non-Defaulting Partners are:
(i) to seek to enjoin such default or to obtain specific performance
of a Defaulting Partner's obligations or xxx for Damages (as hereinafter
defined) in respect of such Event of Default; or
(ii) to dissolve the Partnership as provided in Section 8.1(e), in
which event the affairs of the Partnership shall be wound up as provided in
Section 8.2.
The election of a remedy specified in clause (i) above may be made by
any Partner that is not a Defaulting
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Partner (a "Non-Defaulting Partner") or a Forfeited Partner and the remedy
specified in clause (ii) above may be made by unanimous vote of the Non-
Defaulting Partners that are not Forfeited Partners, by giving notice to the
Defaulting Partner within 60 days (one year in the case of an action to recover
Damages) after obtaining actual knowledge of the occurrence of such Event of
Default; provided, that if an election pursuant to clause (i) above is made to
--------
seek an injunction, specific performance or other equitable relief and a final
judgment in such action is rendered denying such equitable remedy, then, by
notice given within ten days thereafter the Non-Defaulting Partners may elect to
pursue any or all of the remedies specified in clause (i) or (ii) of this
Section 7.2 unless, prior to the giving of such notice, the Defaulting Partner
has cured the Event of Default in question in full and no other Event of Default
with respect to such Partner has occurred and is continuing or the final
judgment denying equitable relief specifically held that there was no Event of
Default.
The foregoing remedies shall not be deemed mutually exclusive, and
selection or resort to any thereof shall not preclude selection or resort to the
others.
The resort to any remedy pursuant to clauses (i) or (ii) of this
Section 7.2 shall not for any purpose be deemed to be a waiver of any other
remedy available hereunder or under applicable law; provided, that the failure
--------
to
-74-
elect a remedy within the time period provided shall be conclusively presumed to
be a waiver of such Event of Default.
Unless any Event of Default has been waived as set forth in the
immediately preceding paragraph, the Defaulting Partner shall be liable to the
Partnership and to the Non-Defaulting Partners for any and all damages, losses
and expenses (including attorneys' fees and disbursements) (collectively,
"Damages") suffered or incurred by the Partnership or the Non-Defaulting
Partners as a result of such Event of Default; provided, that neither the
--------
Partner ship nor the Non-Defaulting Partners shall have or assert any claim
against the Defaulting Partner for lost profits, exemplary, punitive, indirect,
special or consequential Damages suffered or incurred by the Partnership or the
Non-Defaulting Partners as a result of an Event of Default.
ARTICLE VIII
-------------
DURATION AND TERMINATION OF THE PARTNERSHIP
8.1 Events of Termination. The Partnership shall be dissolved and
---------------------
its affairs wound up pursuant to Section 8.2 upon the first to occur of any of
the following events (each an "Event of Termination"):
(a) the expiration of the Term (provided, that the Partners may
--------
at any time prior to such expiration amend this Agreement to extend the
Term);
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(b) the execution by all of the Partners of a unanimous written
consent to dissolution;
(c) the sale or other disposition of substantially all of the
assets of the Partnership;
(d) the Bankruptcy of a Partner, unless such Partner's Interest
is purchased pursuant to Section 8.3 or the other Partners consent to a
continuation of the Partnership with the successor of such Bankrupt Partner
admitted as a new Partner; or
(e) the election of the Non-Defaulting Partners pursuant to
Section 7.2(ii) to terminate the Partnership upon the occurrence and during
the continuance of an Event of Default.
8.2 Winding-Up. Upon the occurrence of an Event of Termination, if
----------
the Partnership is not continued as provided herein, the Partnership's affairs
shall be wound up as follows:
(a) The Managing Partner, or in the event there is no Managing
Partner the Partners' Committee, shall cause to be prepared a statement of
the assets and liabilities of the Partnership as of the date of
dissolution.
(b) The assets and properties of the Partnership shall be
liquidated as promptly as possible, and receivables collected, all in an
orderly and business like manner so as not to involve undue sacrifice.
Notwithstanding the foregoing, the Partners' Committee may determine not to
sell, or authorize the sale of, all or any portion of the assets and
properties of the Partnership, in which event such assets and properties
shall be distributed in kind pursuant to Section 8.2(c).
(c) The proceeds of liquidation under Section 8.2(b) and all
other assets and properties of the Partnership shall be applied and
distributed as follows in the following order of priority:
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(i) to the payment of the debts and liabilities of the Partnership
(excluding any amounts which may be owed to any Partner or any
Affiliate of a Partner in respect of Partner's Loans, but including
all other amounts owed to any Partner or any Affiliate of a Partner)
and the expenses of liquidation;
(ii) to establish any reserves that the Managing Partner, or in the
event there is no Managing Partner the Partners' Committee, in
accordance with sound business judgment, deems reasonably necessary
for any contingent or unforeseen liabilities or obligations of the
Partnership, which reserves may be paid over by the Managing Partner
or the Partners' Committee, as applicable, to an escrow agent selected
by it to be held by such agent for the purpose of (x) distributing
such reserves in payment of the aforementioned contingencies and (y)
upon the expiration of such period as the Managing Partner or the
Partners' Committee, as applicable, may deem advisable, distributing
the balance thereof in the manner provided in this Section 8.2(c);
(iii) to pay the accrued and unpaid interest and unpaid principal
amount of Partner's Loans in the proportion that the aggregate
outstanding amount of such Partner's Loans of each Partner and its
Affiliates, including accrued and unpaid interest, bears to the total
of all such outstanding Partner's Loans, including accrued and unpaid
interest, of all the Partners and their Affiliates;
(iv) to the Partners in proportion to the positive balance of each
Partner's Capital Account; provided, that if any assets are to be
--------
distributed in kind, they will be valued at their Fair Market Value
before the distribution. This adjustment to Fair Market Value will be
reflected in an adjustment to the Partners' Capital Accounts in
accordance with the principles of Section 3.4 immediately prior to any
liquidating distribution. No Partner shall have any obligation to make
any contribution or payment in respect of a negative balance in its
Capital Account. Distributions pursuant to this paragraph may be
distributed to a trust established for the benefit of the Partners for
the purposes of liquidating the Partnership
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assets, collecting amounts owed to the Partnership and paying any
contingent or unforeseen liabilities or obligations of the Partnership
or of any Partner arising out of or in connection with the
Partnership. The assets of any such trust shall be distributed to the
Partners from time to time, in the reasonable discretion of the
Partners' Committee, in the same proportions as the amount distributed
to such trust by the Partnership would otherwise have been distributed
to the Partners pursuant to this Agreement.
(d) The Partners and former Partners shall look solely to the
Partnership's assets for the return of their Capital Contributions, and if
the assets of the Partnership remaining after payment of or due provision
for all debts, liabilities and obligations of the Partnership are
insufficient to return such Capital Contributions, the Partners and former
Partners shall have no recourse against the Partnership or any other
Partner.
(e) If the value of the Partnership assets, including profits
from any sale thereof, is insufficient to pay the liabilities of the
Partnership (other than any Partner's Loans and Capital Contributions),
then such additional liabilities and reserve needs shall be funded by the
Partners in accordance with their respective Sharing Percentages without
giving effect to any reduction or increase in the Sharing Percentage of any
Partner pursuant to Section 3.2(b) resulting from one or more defaults
under Section 3.1.
(f) The Partners shall comply with all requirements of
applicable law pertaining to the winding-up of the Partnership.
(g) The Partners acknowledge that this Section 8.2 may establish
distribution priorities different from those set forth under applicable law
and agree that they intend, to the extent legally permissible, to vary
those provisions by this Agreement.
8.3 Purchase Option Upon Bankruptcy of a Partner. Upon the Bankruptcy
--------------------------------------------
of a Partner, any other Partner that is not a Defaulting Partner or Bankrupt (a
"Nonbankrupt
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Partner") shall have the right, but not the obligation, by notice given to all
the Partners within 45 days after such Nonbankrupt Partner obtains actual
knowledge of the occurrence of such Bankruptcy, to elect to purchase or cause
its Designee to purchase all or a portion of its pro rata share (based on the
relative Sharing Percentages of the Nonbankrupt Partners) of the Bankrupt
Partner's Interest. If any Nonbankrupt Partner elects not to purchase its pro
rata portion, the remaining Nonbankrupt Partners, if any, will have the right to
elect to purchase the portion declined. Unless the entire Interest of the
Bankrupt Partner is purchased pursuant to this Section 8.3, no portion of its
Interest shall be purchased. If the Nonbankrupt Partners purchase the entire
Interest of the Bankrupt Partner, the business of the Partnership shall be
continued as a successor business entity without liquidation of the
Partnership's affairs. The purchase price payable for the Bankrupt Partner's
Interest pursuant to this Section 8.3 shall be 100% of the product of the Fair
Market Value of the Partnership times such Bankrupt Partner's Sharing
Percentage. To the extent there is any disagreement among the Partners as to
the value of the Bankrupt Partner's Interest, such dispute shall be determined
by an Appraiser selected jointly by the Nonbankrupt Partners, on the one hand,
and the Bankrupt Partner, on the other hand. If the Partners are not able to
agree on an Appraiser, the Nonbankrupt Partners
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shall jointly select an Appraiser and the Bankrupt Partner shall select an
Appraiser and the Appraisers so selected shall jointly select a third Appraiser,
and the Appraiser so selected shall be the Appraiser for purposes of determining
the value of such Interest; provided, that if the Bankrupt Partner shall fail to
--------
select an Appraiser, the Appraiser selected by the Nonbankrupt Partners shall be
the Appraiser for purposes of determining the value of such Interest. If more
than one eligible Partner elects to purchase a Bankrupt Partner's Interest
pursuant to this Section but any Partner fails to tender its share of the
purchase price therefor at the closing, then the tendering Partner(s) may elect
to purchase the Interest that was to be purchased by such nontendering Partner
and shall have an additional 15 days in which to tender payment for the share of
the Bankrupt Partner's Interest that was to be purchased by the nontendering
Partner(s). Any such election by the tendering Partner(s) shall not excuse the
default by the nontendering party.
ARTICLE IX
-----------
COVENANTS, REPRESENTATIONS AND WARRANTIES
9.1 Compliance with Applicable Law. Each Partner shall comply with
------------------------------
all applicable laws, regulations, rules and orders of governmental authorities
the non-compliance with which would have a material adverse effect on the
business affairs or financial condition of the Partnership.
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9.2 No Restrictive Covenants. No Partner shall enter into or become
------------------------
subject to any contract, agreement, restriction or covenant (other than an
Approved Agreement) which would impair or inhibit the Partnership's ability to
obtain financing without recourse to the Partners (collectively, "Restrictive
Covenants"), and each Partner represents and warrants to the other Partners
that, on the Effective Date, it is not subject to any Restrictive Covenants.
9.3 Indemnification of Partners; Contribution. The Partnership shall
-----------------------------------------
indemnify and hold each Partner harmless from and against any claim, demand,
loss, damage, liability or expense (including, without limitation, amounts paid
in settlement, reasonable costs of investigation and reasonable legal expenses)
incurred by or against such Partner and arising out of or resulting from any
act or omission of the Partnership. As among the Partners, no Partner shall be
liable or bear responsibility for more than its proportionate share (based on
its Sharing Percentage) of the liabilities and obligations of the Partnership.
For the purposes of the preceding sentence, a Partner's Sharing Percentage shall
be determined on the date the relevant liability or obligation is incurred,
without giving effect to any reduction or increase in such Partner's Sharing
Percentage pursuant to Section 3.2(b) resulting from one or more defaults under
Section 3.1. In the event that (whether
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before or following any dissolution of the Partnership) any Partner shall be
required to pay, discharge or otherwise bear responsibility for any liability or
obligation of the Partnership in excess of such Partner's proportionate share
thereof, each other Partner hereby agrees to indemnify, hold harmless and
reimburse (directly or through the Partnership) such Partner against and for
such other Partner's respective proportionate share of such excess. It is the
intention of the Partners that, following the operation of this clause, each
Partner will have borne exactly its proportionate share of the liability or
obligation of the Partnership at issue determined with reference to such
Partner's Sharing Percentage, determined in accordance with the third sentence
of this Section 9.3.
9.4 Notice of Change in Control and Indirect Transfer. In addition
-------------------------------------------------
to any other notification requirements under this Agreement, each Partner
agrees that promptly following the occurrence of an event which constitutes a
Change in Control or an Indirect Transfer it will give notice to the other
Partners of the Change in Control or Indirect Transfer.
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ARTICLE X
---------
MISCELLANEOUS
10.1 Waiver of Partition. Except as may be otherwise provided by law
-------------------
in connection with the winding-up, liquidation and dissolution of the
Partnership, each Partner hereby irrevocably waives any and all rights that it
may have to maintain an action for partition of any of the Partnership Property.
10.2 Modification; Waivers. This Agreement may be modified or
---------------------
amended only with the written consent of each Partner. Except as otherwise
specifically provided herein, no Partner shall be released from its obligations
hereunder without the written consent of the other Partners. The observance of
any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) by the party or parties
entitled to enforce such term, but any such waiver shall be effective only if in
a writing signed by the party or parties against which such waiver is to be
asserted. Except as otherwise specifically provided herein, no delay on the
part of any party hereto in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party
hereto of any right, power or privilege hereunder operate as a waiver of any
other right, power or privilege hereunder nor shall any single or partial
exercise of any right, power or privilege
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hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder.
10.3 Entire Agreement. This Agreement and the documents expressly
----------------
referred to herein constitute the entire agreement among the Partners with
respect to the subject matter hereof and supersede any prior agreement or under-
standing between or among the Partners with respect to such subject matter.
10.4 Severability. If any provision of this Agreement, or the
------------
application of such provision to any Person or circumstance, shall be held
invalid, the remainder of this Agreement or the application of such provision to
other Persons or circumstances shall not be affected thereby; provided, that the
--------
parties shall negotiate in good faith with respect to an equitable modification
of the provision or application thereof held to be invalid.
10.5 Notices. All notices, requests, demands, consents and other
-------
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given on the date delivered by hand, on
the date transmission by telecopy is confirmed by machine answer-back or on the
third business day after such notice is mailed by registered or certified mail,
postage prepaid, and, pending the designation by notice of another address,
addressed as follows:
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If to Fox/Liberty Partner:
Fox Sports Net, LLC
0000 Xxxxx Xxxxxxxxx Xxxx.
Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attention: Xxxx Xxxx
Telecopy: (000) 000-0000
With copies to:
Liberty Media Corporation
0000 X. Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: President
Telecopy: (000) 000-0000
and:
Tele-Communications, Inc.
0000 XXX Xxxxxxx
Xxxxxxxxx, XX 00000
Attention: Legal Department
Telecopy: (000) 000-0000
and:
Xxxxxxx & Xxxxxx L.L.C.
0000 Xxxxx Xxxxxxxxxx Xxxxx Xxxxx
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telecopy: (000) 000-0000
and:
The News Corporation Limited
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Senior Executive Vice President
and Group General Counsel
Telecopy: (000) 000-0000
and:
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Fox Television
00000 Xxxx Xxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxx Xxxxxxxxx, Esq.
Senior Vice President
Legal Affairs
Telecopy: (000) 000-0000
and:
Squadron, Ellenoff, Plesent & Xxxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxxx, Esq.
Telecopy: (000) 000-0000
If to Rainbow Partner:
c/o Rainbow Media Holdings, Inc.
000 Xxxxxxxxx Xxxx Xxxx
Xxxxxxxx, X.X. 00000
Attention: President
With a copy to Attention: Executive Vice President
Legal and Business Affairs
cc: Cablevision Systems Corporation
Xxx Xxxxx Xxxxxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Executive Vice President and
General Counsel
10.6 Successors and Assigns. Except as otherwise specifically
----------------------
provided herein, this Agreement shall be binding upon and inure to the benefit
of the Partners and their legal representatives, successors and permitted
assigns.
10.7 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which together shall constitute one and the same
instrument.
10.8 Headings; Cross-references. The Article and Section headings in
--------------------------
this Agreement are for convenience of
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reference only, and shall not be deemed to alter or affect the meaning or
interpretation of any provisions hereof.
10.9 Construction. None of the provisions of this Agreement shall be
------------
for the benefit of or enforceable by any creditors of the Partnership. No one,
including but not limited to the Partners or any creditor of the Partnership or
any of its Partners, shall have any rights under this Agreement against any
Affiliate of any Partners.
10.10 Property Rights; Confidentiality. All books, records and
--------------------------------
accounts maintained exclusively for the Partnership (including, without
limitation, marketing reports and all other data whether stored on paper or in
electronic or other form), and any contracts or agreements (including, without
limitation, agreements for the purchase, lease or license of programming)
entered into by or exclusively on behalf of the Partnership, shall at all
times be the exclusive property of the Partnership. All property (real,
personal or mixed) purchased with Partnership funds, and all moneys held or
collected for or on behalf of the Partnership shall at all times be the
exclusive property of the Partnership. No Partner shall, during the period such
Partner is a Partner and for a period ending on the later of two (2) years after
such Partner has ceased to be a Partner, disclose any confidential or
proprietary information with respect to the Partnership or any Partner, except
(i) with the prior written consent of the other Partners; (ii) to the
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extent necessary to comply with law or the valid order of a court of competent
jurisdiction, in which event the party making such disclosure shall so give
notice to the other Partners as promptly as practicable (and, if possible, prior
to making such disclosure) and shall seek confidential treatment of such
information; (iii) as part of its normal reporting or review procedure to its
parent companies, its auditors and its attorneys and the securities exchange on
which any such parent's securities are traded from time to time; provided, that
--------
such Partner shall be liable for any breach by such parent companies, auditors
or attorneys of any provision of this Section; (iv) in connection with the
enforcement of such Partner's rights hereunder; (v) disclosures to an
Affiliate of, or professional advisor to, such Partner in connection with the
performance by such Partner of its obligations hereunder; provided, that such
--------
Partner shall be liable for any breach by such Affiliate or professional
advisor of any provision of this Section; and (vi) to a prospective purchaser of
all or a portion of such Partner's Interest in connection with a sale in
accordance with the terms of this Agreement; provided, that such Partner shall
--------
be liable for any breach by such prospective purchaser of any provision of this
Section. Except as provided in the preceding sentence, no Partner, nor any of
its Affiliates, shall, during the periods referred to in such sentence, use any
confidential or proprietary informa-
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tion with respect to the Partnership other than for the benefit of the
Partnership.
10.11 Non-Recourse. The obligations of the Partners under this
------------
Agreement are solely corporate obligations of such entities and no
representation, undertaking or agreement made in this Agreement on the part of
any Partner was made or intended to be made as a personal or individual
representation, undertaking or agreement on the part of any partner, member,
incorporator, stockholder, director, officer or agent (past, present or future)
of any Partner, and no personal or individual liability or responsibility is
assumed by, nor shall any recourse at any time be asserted or enforced against,
any such partner, member, incorporator, stockholder, director, officer or agent,
all of which recourse (whether in common law, in equity, by statute or
otherwise) is hereby forever irrevocably waived and released.
10.12 Further Actions. Each Partner shall execute and deliver such
---------------
other certificates, agreements and documents, and take such other actions, as
may reasonably be required in connection with the formation and continuation of
the Partnership and the achievement of its purposes.
10.13 Survival. Section 10.10 shall survive the termination of this
--------
Agreement, the dissolution of the Partnership, the withdrawal of any Partner and
the Transfer of the Interest of any Partner. Sections 4.4, 4.6 and 9.3
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shall survive the termination of this Agreement and the dissolution of the
Partnership.
10.14 Governing Law. The Partnership has been formed and is
-------------
continued under the laws of the State of New York. This Agreement shall be
governed, construed and enforced in accordance with the laws of the State of New
York without regard to principles of conflict of laws.
10.15 No Right of Set-Off. No Partner shall be entitled to offset
-------------------
against any of its financial obligations to the Partnership under this Agreement
any obligation owed to it or any of its Affiliates by any other Partner or any
of such other Partner's Affiliates.
10.16 Expenses of the Parties. All expenses incurred by or on behalf
-----------------------
of the parties hereto in connection with the authorization, preparation and
consummation of this Agreement, including, without limitation, all fees and
expenses of agents, representatives, counsel and accountants employed by the
parties hereto in connection with the authorization, preparation, execution and
consummation of this Agreement, shall be borne solely by the party who shall
have incurred the same.
10.17 Unregistered Interests. Each Partner (i) acknowledges that the
----------------------
Interests are being acquired without registration under the Securities Act of
1933, as amended, or under similar provisions of state law, (ii) represents and
warrants to the Partnership and the
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other Partners that it is acquiring the Interest for its own account, for
investment and with no view to the distribution of the Interest, and (iii)
agrees not to Transfer or attempt to Transfer such Interest in the absence of
registration under that Act and any applicable state securities laws or an
available exemption from such registration.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers or partners thereunto duly authorized as of the
date first written above.
FOX SPORTS RPP HOLDINGS LLC
By
---------------------------------
Name: Xxx Xxxxxxx
Title: Senior Vice President
RAINBOW REGIONAL HOLDINGS LLC
By: RAINBOW MEDIA SPORTS
HOLDINGS, INC.,
a member
By
_________________________________
Name: Xxxx Xxxxxx
Title: Executive Vice President
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