Exhibit 99.2
May 7, 2002
USI Entertainment, Inc.
USANI Holdings XX, Inc.
Universal Pictures International Holdings BV
Universal Pictures International Holdings 2 BV
NYCSpirit Corp. II
000 Xxxxxxxxx Xxxx Xxxxx
Xxxxxxxxx Xxxx, XX 00000
Attn: Xxxxxxxxx Xxxxxxxxxx
Dear Xxxxxxxxx:
This letter sets forth our mutual understanding and clarification of
certain matters under the Amended and Restated Limited Liability Limited
Partnership Agreement (the "Partnership Agreement") of Vivendi Universal
Entertainment LLLP ("VUE"), dated as of May 7, 2002 and entered into prior to
this letter agreement. Capitalized terms used herein, but not otherwise defined
herein, shall have the same meaning as ascribed to such terms in the Partnership
Agreement. For good and valuable consideration, the receipt of which is
acknowledged, we have agreed as follows:
1.1 ITEMS OF INDEBTEDNESS. The definition of Indebtedness in the
Partnership Agreement is not intended to, and does not, treat the
following items as "Indebtedness" to the extent such items arise in the
ordinary course of business of VUE and its consolidated subsidiaries
(each a "Consolidated Subsidiary") as they may exist from time to time
(which determination shall be made pursuant to United States generally
accepted accounting principles) and are in a manner consistent with the
practices of the applicable "VUE Group Entity" (VUE and each of its
Consolidated Subsidiaries as they may exist from time to time are
referred to herein as a "VUE Group Entity," and collectively referred to
herein as the "VUE Group") in effect as of the date hereof; PROVIDED,
HOWEVER, such items shall be included (without duplication) in the
definition of Indebtedness to the extent any VUE Group Entity borrows
money, or incurs obligations evidenced by notes, bonds, debentures or
similar instruments, letters of credit, discounting arrangements or
similar instruments in order to satisfy the obligations of such items:
(a) deposits or advances;
(b) performance bonds, completion bonds, or surety bonds, in
each case to the extent outstanding and undrawn;
(c) normal trade accounts payable (unless more than 90 days
past due and not in dispute);
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(d) obligations to pay talent participations, residuals,
royalties, or guild obligations attributable to "Product" (as
defined below) or employee compensation or benefits; and
(e) (i) obligations to acquire any motion picture, television
program, or video production produced for theatrical,
non-theatrical, or television release, or for release in any other
medium (collectively, "Product") pursuant to a "put" or customary
studio negative pick up agreement or (ii) obligations to talent
under a "pay or play" services agreement, but, in the case of both
Paragraphs 1.1(e)(i) and (ii) hereof, only to the extent that such
obligations do not create a Lien on any of the other assets or
properties of any VUE Group Entity (including, without limitation,
the VUE Group's entertainment library).
For purposes of clarity, the following shall not be deemed to be in the
ordinary course of business of the VUE Group and therefore shall not be
excluded from the definition of Indebtedness: (i) employee compensation
and benefits for persons not engaged in the business of a VUE Group
Entity; (ii) employee compensation and benefits for persons employed by
Vivendi Universal S.A. ("VU"), and (iii) obligations of any VUE Group
Entity in respect of "put" options held by VU employees entitling them to
put VU shares or stock options to VU.
1.2 INDEBTEDNESS OF THE VUE GROUP. In clarifying the limitations
on Indebtedness set forth in Section 5.05(a)(iv) of the Partnership
Agreement none of the following shall be "Indebtedness" for purposes of
Section 5.05(a)(iv) or included in the calculation of Indebtedness for
the purposes of clause (iv)(B) of Section 5.05(a) of the Partnership
Agreement. For purposes of this letter agreement, "Non-VUE Affiliate" is
(i) an entity not within the VUE Group but which is an Affiliate of VU
and/or (ii) VU, and references to VUE Affiliates and Non-VUE Affiliates
includes as the context requires such entities' predecessor entities.
(a) Indebtedness of any entity that is not a VUE Group
Entity provided such Indebtedness is non-recourse as to (i) each
and every VUE Group Entity and (ii) the assets and properties of
each and every VUE Group Entity. For the avoidance of doubt, the
Indebtedness of any entity that is not a VUE Group Entity shall be
included in the calculation of Indebtedness for the purposes of
clause (iv)(B) of Section 5.05(a) of the Partnership Agreement if
and to the extent that such Indebtedness is recourse to (i) any
VUE Group Entity or (ii) any assets or properties of any VUE Group
Entity.
(b) The liquidation preference of certain preferred equity
interests previously issued by Universal Home Video LLLP (together
with its successors, "UHV") to the extent (i) the aggregate
liquidation preference for such preferred equity interests does
not exceed $200 million (the "Preference Amount"), and the
preferred equity interests remain as described in that certain
letter agreement dated as of the date hereof and entered into
concurrently herewith, regarding the USI Receivable and certain
related matters, and (ii) UHV holds a receivable (the
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"USI Receivable") (other than the Existing Receivables and the
Qualifying Cash Management Receivables, as each is defined below)
relating to such transaction from Universal Studios, Inc. in an
amount not less than the Preference Amount, which Preference
Amount may be offset against the USI Receivable, and (iii) the USI
Receivable bears interest at the same rate as the dividend rate
(regular and special) on the preferred equity interest.
(c) Loans in the approximate amount of $1,115.2 million,
outstanding on the Closing Date and arising prior to the Closing
Date in the ordinary course of business made to VUE Group Entities
by Non-VUE Affiliates and bearing interest at an arms'-length rate
(the "Existing Debt"), provided, however that if at any time
Existing Debt exceeds unencumbered receivables held by VUE Group
Entities from Non-VUE Affiliates and arising prior to the Closing
Date in the ordinary course of business (excluding the USI
Receivable and the Qualifying Cash Management Receivables) and
bearing interest at an arms'-length rate ("Existing Receivables"),
the excess shall be included in the calculation of Indebtedness
for purposes of clause (iv)(B) of Section 5.05(a) of the
Partnership Agreement. For purposes of this Paragraph 1.2(c), an
interest rate shall be conclusively presumed to be at an
arms'-length rate if it is within the range specified in Treasury
Regulation Section 1.482-2(a)(2)(iii)(B)(1).
(d) Cash Management Loans, but only to the extent that (i)
the aggregate principal balance of the Cash Management Loans do
not exceed the aggregate principal balance of the Qualifying Cash
Management Receivables, and (ii) Cash Management Loans and
Qualifying Cash Management Receivables bear interest at an
arms'-length rate. For the avoidance of doubt, (A) Cash Management
Loans shall be included in the calculation of Indebtedness for the
purposes of clause (iv)(B) of Section 5.05(a) of the Partnership
Agreement if and to the extent that the aggregate amount of Cash
Management Loans exceeds the aggregate amount of Qualifying Cash
Management Receivables, (B) a Cash Management Loan shall be
included in the calculation of Indebtedness for the purpose of
clause (iv)(B) of Section 5.05(a) if it does not bear interest at
an arms'-length rate, and (C) nothing herein shall preclude or
restrict the operation of VU's existing cash management system
(provided that Cash Management Loans to the extent in excess of
Qualifying Cash Management Receivables shall be Indebtedness for
the purposes of clause (iv) of Section 5.05(a) of the Partnership
Agreement). For purposes of this Paragraph 1.2(d), an interest
rate shall be conclusively presumed to be at an arms'-length rate
if it is within the range specified in Treasury Regulation Section
1.482-2(a)(2)(iii)(B)(1).
A "Cash Management Loan" is a loan or advance made after the
Closing Date in the ordinary course of business as part of VU's
cash management system to a VUE Group Entity either by the Funding
Entity (as defined below) (directly or as assignee of a Cash
Management Loan) or a Non-VUE Affiliate. Loans made by or assigned
to the Funding Entity shall be evidenced by a promissory note
issued to the Funding Entity (each such note, a "Funding Entity
Note"). Each Funding
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Entity Note shall be properly annotated to reflect each Cash
Management Loan by the Funding Entity to a VUE Group Entity
issuing that Funding Entity Note. The Funding Entity shall have
the right to surrender a single Funding Entity Note in exchange
for multiple Funding Entity Notes (provided the aggregate
principal amount of such re-issued Funding Entity Notes shall not
exceed the principal amount outstanding under the Funding Entity
Note exchanged).
A "Qualifying Cash Management Receivable" is (i) an unencumbered
receivable (excluding the USI Receivable and the Existing
Receivables) held by a VUE Group Entity from the Funding Entity
which shall be evidenced by a promissory note" issued by the
Funding Entity to and held by such VUE Group Entity (and which
note shall be properly annotated to reflect each receivable owing
from the Funding Entity and payable to the VUE Group Entity) and
which receivable is, at the option of the VUE Group Entity,
payable in cash or by the surrender of a like amount of Cash
Management Loans held by the Funding Entity, and provided that the
Funding Entity has delivered to the VUE Group Entity holding such
unencumbered receivable a Funding Entity Note in a principal
amount not less than such receivable, or (ii) an unencumbered
receivable (excluding the USI Receivable and the Existing
Receivables) held by a VUE Group Entity and secured by a Cash
Management Loan Pledged (evidenced by a Lender Note) to such VUE
Group Entity as security for such receivable, which receivable in
the case of either (i) or (ii), arises in the ordinary course of
business as part of VU's cash management system.
The Funding Entity is a single Non-VUE Affiliate which is a VU
Subsidiary that (a) has no business other than the business of
making loans to VUE Group Entities and borrowing money from VUE
Group Entities, or assuming from any Non-VUE Affiliate receivables
payable to VUE Group Entities provided that the Funding Entity
simultaneously acquires all rights as lender to Cash Management
Loans in at least an equal amount, (b) has no assets or
liabilities other than the assets and liabilities associated with
such business, and (c) otherwise has terms and conditions
substantially similar to those relating to V-USA Holding LLC,
including the non-economic membership interest being held by USA:
provided that nothing herein shall require that the Funding Entity
be organized under the laws of any state of the United States.
If and when VUE intends to have Qualifying Cash Management
Receivables pursuant to this Paragraph 1.2(d) of this Letter
Agreement, then VUE shall give USA prior written notice of such
intention and the method it intends to use (i.e., clause (i) or
(ii) of the definition of Qualifying Cash Management Receivable).
Such method shall not be changed without the prior written notice
by VUE to USA. To the extent that the utilization of the method
described in clause (ii) of Qualifying Cash Management Receivable
does not violate any third party financing agreement to which VU
or any Affiliate of VU is a party, or create, or potentially
create any adverse (but greater than de minimus) financial impact
on VU or any Affiliate of VU, VUE shall utilize the method
described in clause (ii) of the definition of Qualifying Cash
Management Receivable. VUE shall provide
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to USA in advance for its consent: (a) the form of any
documentation VUE proposes to effect a Pledge and/or the
organizational, loan and receivable documents VUE proposes to use
for the Funding Entity, and (b) if a Funding Entity is used, the
proposed jurisdiction's laws under which such Funding Entity is to
be formed and the proposed form of the Funding Entity, provided
that VUE shall not be entitled to exclude from Indebtedness any
Cash Management Loans until the requisite consent has been
obtained, and provided further that USA may not fail or refuse to
give such consent unless such documents, jurisdiction or form are
inconsistent with the intent and purpose of this Paragraph 1.2(d),
and any non-approval shall provide in reasonable detail
information about the inconsistency. VUE shall keep books and
records reflecting all transactions that constitute Qualifying
Cash Management Receivables and, upon request of USA, VUE shall
make available to USA such books and records for inspection.
A "Pledge" is a security interest, and first priority perfected
lien, in a Cash Management Loan granted by a Non-VUE Affiliate in
favor of a VUE Group Entity which holds a receivable from such
Non-VUE Affiliate.
(e) Indebtedness owing from one VUE Group Entity to another
VUE Group Entity.
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This letter, together with the terms of the Partnership Agreement, sets
forth the entire understanding among the Partners to the Partnership Agreement
with respect to the subject matter hereof. Other than as expressly set forth
herein, the Partnership Agreement speaks for itself and no covenant,
representation, or condition not expressed therein or in this letter shall
affect, or be effective to interpret, change or restrict the express provisions
of the Partnership Agreement.
USA Networks, Inc.
By: /s/
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Its:
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USANi Sub LLC
By: /s/
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Its:
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New-U Studios Holdings, Inc.
By: /s/
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Its:
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Acknowledged and Agreed:
Vivendi Universal Entertainment LLLP
by its General Partner USI Entertainment, Inc.
USI Entertainment, Inc.
USANI Holdings XX, Inc.
NYCSpirit Corp. II
/s/
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In Each Case By: Xxxxx Xxxxxxx
Executive Vice President or Authorized Person
Universal Pictures International Holdings BV
/s/
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By:
Universal Pictures International Holdings 2 BV
/s/
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By:
