EXECUTION COPY
EXHIBIT 10.6
FORMATION AGREEMENT
among
Rainbow Media Sports Holdings, Inc.
and
FOX SPORTS NET, LLC
Dated as of June 22, 1997
TABLE OF CONTENTS
Page
1. Definitions...................................................................7
2. Formation....................................................................15
2.1 Contributions and Partnership Formation...............................15
2.2 Closing and Method of Payment.........................................16
3. Representations and Warranties of Rainbow....................................17
3.1.1 Organization and Standing......................................17
3.1.2 Authorization and Enforceability...............................18
3.1.3 Absence of Restrictions........................................19
3.1.4 Arrangements Concerning Interests
Transferred...............................................22
3.1.5 Ownership and Title............................................23
3.1.6 Financial Statements...........................................23
3.1.7 Ownership of and Title to Assets of
the Contributed Businesses................................24
3.1.8 Compliance with Applicable Laws and
Material Contracts........................................25
3.1.9 Taxes and Reports..............................................28
3.1.10 Benefit Plans..................................................29
3.1.11 Absence of Insolvency Proceedings..............................31
3.1.12 [Reserved].....................................................32
3.1.13 Litigation.....................................................32
3.1.14 No Material Adverse Change.....................................33
3.1.15 Purchase for Own Account, Etc..................................33
3.2 Survival of Representations and Warranties............................34
3.3 Florida Partnership Matters...........................................35
4. Representations and Warranties of Fox/Liberty................................35
4.1.1 Organization and Standing......................................35
4.1.2 Authorization and Enforceability...............................36
4.1.3 Absence of Restrictions........................................36
4.1.4 Arrangements Concerning Assets
Transferred...............................................40
4.1.5 Ownership and Title............................................41
4.1.6 [Reserved].....................................................42
4.1.7 Ownership and Title............................................42
4.1.8 Compliance with Applicable Laws and
Material Contracts........................................43
4.1.9 Taxes and Reports..............................................47
4.1.10 Benefit Plans..................................................48
4.1.11 Absence of Insolvency Proceedings..............................51
4.1.12 [Reserved].....................................................51
4.1.13 Litigation.....................................................51
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Page
4.1.14 No Material Adverse Change.....................................52
4.1.15 Purchase for Own Account, Etc..................................52
4.2 Survival of Representations and Warranties............................53
5. Agreements of the Parties....................................................54
5.1 Access to Information...................................................54
5.2 Conduct of Business Pending the Closing.................................56
5.3 Other Action............................................................58
5.4 Advertising Assets Schedules............................................58
5.5 Fox Sports Net Asset Schedule.........................................59
5.6 Fox Sports Americas...................................................59
5.7 HSR Filings...........................................................60
5.8 Advertising Budget and Business Plan..................................60
5.9 Allocation Policies and Approved Agreements...........................61
6. Conditions Precedent; Covenant as to Transaction
Documents....................................................................61
6.1 Conditions Precedent To Both Parties'
Obligations.........................................................61
6.2 Obligation to Execute Transaction Documents.............................65
6.3 Frustration of Closing Conditions.......................................65
7. Documents to Be Delivered at the Closing.....................................65
7.1 By Rainbow..............................................................65
7.1.1 To Fox/Liberty.................................................65
7.1.2 To the Partnership.............................................66
7.1.3 To the National Sports Partnership.............................67
7.1.4 To the National Advertising
Partnership...............................................67
7.2 By Fox/Liberty..........................................................67
7.2.1 To Rainbow.....................................................67
7.2.2 To the Partnership.............................................68
7.2.3 To the National Sports Partnership.............................68
7.2.4 To the National Advertising
Partnership..................................................69
8. Actions to Be Taken and Agreements to Be Performed
After the Closing............................................................69
8.1 Further Documentation...................................................69
8.2 Actions to Protect the National
Sports Service......................................................70
8.3 Development of New Regional Sports
Interests...........................................................70
8.4 Development of New Regional
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Page
Nonsports Interests.
75
8.5 Network Interests.....................................................77
8.6 Excepted Transactions.................................................77
8.7 Unrestricted Regionals, Etc. ........................................81
8.8 Employees and Employee Benefits.......................................81
8.9 "Fox" Branding; Trademarks............................................83
8.10 Use of Investment Proceeds. .........................................83
8.11 Right of First Refusal. .............................................83
9. Indemnification..............................................................84
10. Termination.....................................................................90
10.1 Termination Rights. ..................................................90
10.2 No Liabilities in Event of Termination. ..............................90
11. Brokerage....................................................................91
12. Non-Recourse.................................................................91
13. Expenses.....................................................................92
14. Assignment and Binding Effect................................................93
15. Construction.................................................................93
16. Notices......................................................................94
17. Benefit......................................................................96
18. Press Releases...............................................................96
19. Headings.....................................................................96
20. Schedules....................................................................97
21. Counterparts.................................................................97
22. Entire Agreement.............................................................97
23. Confidentiality..............................................................97
Signatures...........................................................................99
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Page
Annex A - Partnership Agreement of Regional Programming
Partners......................................................A-1
Annex B - Partnership of National
Sports Partnership Agreement..................................B-1
Annex C - Form of National Advertising Agreement
including National Advertising
Partnership Agreement.........................................C-1
Annex D - Form of Trademark/Tradename License
Agreement between Fox and the
Partnership having attached the Form
of Trademark/Tradename Sublicense
Agreement between the Partnership and
Certain Regionals.............................................D-1
Annex E - Amendments to Existing Partnership
Agreements....................................................E-1
Annex F - Form of National Sports Affiliation Agreement.............................F-1
Annex G - Form of Regional Affiliation Agreement....................................G-1
Annex H - Reimbursement and Guarantee Agreement.....................................H-1
Annex I - Form of Advertising Representation
Agreement.....................................................I-1
Annex J - Options Reimbursement Agreement...........................................J-1
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FORMATION AGREEMENT
-------------------
FORMATION AGREEMENT, dated as of June 22, 1997, among Rainbow Media Sports
Holdings, Inc., a Delaware corporation ("Rainbow"), and Fox Sports Net, LLC, a
Delaware limited liability company ("Fox/Liberty").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the parties hereto wish to organize Regional Programming Partners
as a general partnership under the laws of the State of New York (the
"Partnership") pursuant to a Partnership Agreement substantially in the form of
Annex A hereto.
WHEREAS, at the Closing, Rainbow will contribute or cause to be contributed
to the Partnership a 50% general partnership interest in SportsChannel Chicago
Associates, a general partnership organized under the laws of the State of New
York ("Chicago Partnership").
WHEREAS, at the Closing, Rainbow will contribute or cause to be contributed
to the Partnership a 50% general partnership interest in SportsChannel Bay Area
Associates, a general partnership organized under the laws of the State of New
York ("Pacific Partnership").
WHEREAS, at the Closing, Rainbow will contribute or cause to be contributed
to the Partnership all of the
partnership interests in SportsChannel New England Limited Partnership, a
limited partnership organized under the laws of the State of Connecticut ("New
England Partnership").
WHEREAS, at the Closing, Rainbow will contribute or cause to be contributed
to the Partnership a 66% general partnership interest in SportsChannel Prism
Associates, a general partnership organized under the laws of the State of New
York ("Prism Partnership").
WHEREAS, at the Closing, Rainbow will contribute or cause to be contributed
to the Partnership a 30% general partnership interest in SportsChannel Florida
Associates, a general partnership organized under the laws of the State of New
York ("Florida Partnership").
WHEREAS, at the Closing, Rainbow will contribute or cause to be contributed
to the Partnership all of the general partnership interests in SportsChannel
Ohio Associates, a general partnership organized under the laws of the State of
New York ("Ohio Partnership").
WHEREAS, at the Closing, Rainbow will contribute or cause to be contributed
to the Partnership all of the partnership interests in SportsChannel Cincinnati
Associates, a general partnership organized under the laws of the State of New
York ("Cincinnati Partnership").
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WHEREAS, at the Closing, Rainbow will contribute or cause to be contributed
to the Partnership all of the outstanding capital stock of Rainbow Garden Corp.,
a Delaware corporation ("RGC"), and an 89.4% limited partnership interest in
Madison Square Garden, L.P., a limited partnership organized under the laws of
the State of Delaware ("MSG"), which interest may be reduced to an 87.1%
interest if a previously agreed contribution is made to MSG by another partner.
WHEREAS, RGC owns a .4% general partnership in MSG.
WHEREAS, at the Closing, Rainbow will contribute or cause to be contributed
to the Partnership all of the limited liability company interests in Metro
Channel LLC, a limited liability company organized under the laws of the State
of Delaware ("Metro Channel").
WHEREAS, the Transferred Entity Interests (hereinafter defined) constitute
all of the interests of Rainbow and its Affiliates in the Contributed Businesses
as of the Closing Date.
WHEREAS, at the Closing, Fox/Liberty will contribute or cause to be
contributed to the Partnership $850,000,000 (the "Fox/Liberty Partnership
Contribution") which represents a valuation of each of the Transferred
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Entity Interests (hereinafter defined) as set forth in Schedule 1.1.
WHEREAS, Rainbow desires to acquire and own a 60% general partnership
interest in the Partnership and Fox/Liberty desires to acquire and own a 40%
general partnership interest in the Partnership.
WHEREAS, Rainbow and Fox/Liberty wish to organize National Sports Partners
as a general partnership under the laws of the State of New York (the "National
Sports Partnership") pursuant to a National Sports Partnership Agreement
substantially in the form of Annex B hereto.
WHEREAS, the National Sports Partnership is being created to develop and
operate a back-drop service, whose success and profitability will depend upon
stable and extensive distribution through, and sales of advertising in
conjunction with, the regional sports programming services owned by the parties.
WHEREAS, at the Closing, Rainbow will contribute or cause to be contributed
(the "Rainbow National Contribution") to the National Sports Partnership (i) all
of the limited liability company interests in American Sports Classics LLC, a
limited liability company organized under the laws of the State of Delaware
("American Sports LLC"), (ii) a 50% general partnership interest in Prime
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SportsChannel Networks Associates, a general partnership organized under the
laws of the State of New York ("PSA Partnership"), and (iii) all of the capital
stock of SportsChannel Ventures, Inc., a corporation organized under the laws of
the State of Delaware ("SportsChannel Ventures"), all in exchange for a 50%
general partnership interest in the National Sports Partnership.
WHEREAS, at the Closing, Fox/Liberty will contribute or cause to be
contributed to the National Sports Partnership a 50% general partnership
interest in PSA Partnership and the Transferred Assets (as hereinafter defined)
and, if and to the extent provided in Section 5.6, all of the partnership
interests in Fox Sports Americas -U.S. L.P. (the "Fox/Liberty National
Contribution") in exchange for a 50% general partnership interest in the
National Sports Partnership.
WHEREAS, Rainbow and Fox/Liberty desire to organize National Advertising
Partners as a general partnership under the laws of the State of New York (the
"National Advertising Partnership") pursuant to a National Advertising
Partnership Agreement substantially in the form of Annex C hereto.
WHEREAS, Rainbow will contribute or cause to be contributed to the National
Advertising Partnership certain
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assets of its subsidiary, Rainbow Advertising Sales Corporation ("Rainbow
Advertising") and of PSA Partnership, relating to the national advertising of
the regional sports programming services in which Rainbow has an ownership
interest on the date hereof (other than Unrestricted Regionals as hereinafter
defined), which assets will be set forth in Schedule 1.2 hereto as provided in
---
Section 5.4 (the "Rainbow Advertising Assets"), all in exchange for a 50%
general partnership interest in the National Advertising Partnership.
WHEREAS, Fox/Liberty will contribute or cause to be contributed to the
National Advertising Partnership certain assets of its subsidiaries Liberty/Fox
Central Services, LLC and Liberty/Fox Network Programming, LLC and of PSA
Partnership relating to the national advertising of the regional sports
programming services in which Fox/Liberty have an ownership interest on the date
hereof and of Fox Sports Net ("Fox/Liberty Advertising"), which assets will be
set forth in Schedule 1.3 hereto as provided in Section 5.4 (the "Fox/Liberty
---
Advertising Assets") all in exchange for a 50% general partnership interest in
National Advertising Partnership.
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WHEREAS, the parties hereto desire to enter into certain other agreements
and arrangements on the terms set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and undertakings hereinafter set forth, the parties, intending to be
legally bound, hereby agree as follows:
1. Definitions.
-----------
"Advertising Accepted Liabilities" shall mean the liabilities expressly
--------------------------------
noted as such on Schedule 1.1 and Schedule 1.2."
"Affiliate" shall have the meaning assigned thereto in the Partnership
---------
Agreement.
"Contributed Business" shall mean each of Chicago Partnership, Pacific
--------------------
Partnership, New England Partnership, Prism Partnership, Florida Partnership,
Ohio Partnership, Cincinnati Partnership, MSG, American Sports LLC,
SportsChannel Ventures and Metro Channel.
"Control" shall have the meaning assigned thereto in the Partnership
-------
Agreement.
"Covered Region" shall mean each Fox/Liberty Region, each Rainbow Region,
--------------
each New Development Region as to which Section 8.3 has been fully complied with
(whether or not the Option referred to therein has been exercised)
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and each other Region which after the date hereof is added to Schedule 1.4 with
the consent of all of the parties hereto.
"CSC" shall mean Cablevision Systems Corporation, a Delaware corporation.
---
"Daypart" means the periods 11:01 p.m. to 6:00 a.m., 6:01 a.m. to 4:00
-------
p.m.; 4:01 p.m. to 8:00 p.m.; and 8:01 p.m. to 11:00 p.m. in each time zone in
the continental United States (i.e., excluding Alaska).
- -
"Excluded Liabilities" shall mean all liabilities, actual or contingent, of
--------------------
PSA Partnership, American Sports LLC, SportsChannel Ventures, Inc., Fox Sports
Americas and Fox Sports Net and of Fox/Liberty or any of its Affiliates relating
to Fox Sports Net, which relate to the business of each such entity prior to the
Closing. Such term shall also mean any liabilities associated with the Rainbow
Advertising Assets and the Fox/Liberty Advertising Assets which relate to the
conduct of business in the period prior to the Closing other than the
Advertising Accepted Liabilities.
"Fox" and "Fox Inc." means Fox, Inc., a Colorado corporation.
--- -------
"Fox/Liberty Region" shall mean the geographic regions within the United
------------------
States that are listed in Schedule 1.5.
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"Fox Sports Net" shall mean the business of Fox/Liberty heretofore
--------------
conducted under the name "Fox Sports Net" and to be contributed to the National
Sports Partnership as part of the Fox/Liberty National Contribution.
"GAAP" shall mean generally accepted accounting principles in the United
----
States as in effect from time to time and as consistently applied.
"Governmental Entity" shall mean any federal, state or local governmental
-------------------
authority, agency, commission, board or court.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
-------
1976, as amended.
"Measurement Period" means the periods January 1 through June 30 and July 1
------------------
through December 31 in each calendar year, or portion thereof following the
Closing Date.
"National Advertising Partnership Agreement" shall mean the Agreement of
------------------------------------------
General Partnership of the National Advertising Partnership, dated as of the
date of the Closing Date, in the form attached as Annex C hereto.
"National Sports Affiliation Agreements" shall mean the Affiliation
--------------------------------------
Agreements executed and delivered pursuant to Section 6.1(vii) hereof.
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"National Sports Partnership Agreement" shall mean the Agreement of General
-------------------------------------
Partnership of the National Sports Partnership, to be dated as of the Closing
Date, in the form attached hereto as Annex B.
"National Sports Service" shall mean a national Pay Television programming
-----------------------
service whose programming in any Daypart in a Measurement Period exceeds 25%
sporting events, shows relating to sporting events and other television
programming relating to sports, including, without limitation, sports news and
sports interviews; provided that a programming service shall not be deemed to be
a National Sports Service if it exceeds the foregoing 25% test solely by virtue
of the telecast of up to two (but not more than two) professional sports events
per week in a Daypart so long as there is no other sports or sports related
programming carried in that Daypart.
"New Development Regions" shall mean the following DMAs: Minneapolis,
-----------------------
Minn.; Detroit and Grand Rapids, Michigan; and Green Bay, Appleton and
Milwaukee, Wisconsin.
"Partnership Agreement" shall mean the Agreement of General Partnership of
---------------------
Regional Programming Partners, to be dated as of the Closing Date, in the form
attached hereto as Annex A.
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"Pay Television" shall mean any method, whether presently existing or
--------------
hereafter developed, of distribution or dissemination (whether microwave,
satellite, over-the-air, fiber-optics or otherwise) of video, audio and/or
similar signals other than by means of conventional over-the-air broadcast
television, and shall be deemed to include without limitation cable television,
any other form of wire delivery, over-the-air pay television, multipoint
distribution system television, direct to home satellite television, TVRO, DBS,
subscription television, computer distribution (e.g., Internet), pay-per-view
television, low power television and closed circuit television, whether
positioned on a premium, basic or other basis.
"Person" shall mean an individual, corporation, limited liability company,
------
partnership, trust, unincor porated association or other entity.
"Rainbow" shall mean Rainbow Media Sports Holdings, Inc., a Delaware
-------
corporation.
"Rainbow Region" shall mean the geographic regions listed on Schedule 1.6
--------------
hereto.
"Region" shall mean a Fox/Liberty Region, a New Development Region or a
------
Rainbow Region.
"Regional" shall mean a Pay Television sports programming service featuring
--------
sporting events and other
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sports programming on a local or regional basis in regions in the United States,
and in which Fox/Liberty or Rainbow (or their respective Affiliates), or both,
has an ownership interest on the date hereof, or acquires an ownership interest
after the date hereof in full compliance with Section 8.3 (whether or not the
Option referred to therein has been exercised).
"Regional Affiliation Agreements" shall mean the Affiliation Agreements
-------------------------------
executed and delivered pursuant to Section 6.1(viii).
"Restriction Date" of a partnership is the day on which Rainbow or
----------------
Fox/Liberty (or their respective Affiliates) ceases to be a partner in that
partnership.
"Transaction Documents" shall mean this Agreement and each other agreement
---------------------
and document listed on Schedule 1.7 hereto.
"Transferred Assets" shall mean all of the assets pertaining to or used in
------------------
the business of Fox Sports Net or owned by Fox Sports Net, which assets will
include each of the agreements set forth in Schedule 1.8A hereto and all of the
assets to be included in Schedule 1.8B as provided in Section 5.5 and, if and to
the extent provided in Section 5.6, the assets of Fox Sports Americas.
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"Transferred Entity Interests" shall mean the direct or indirect ownership
----------------------------
interests in each of the Contributed Businesses, other than American Sports LLC
and SportsChannel Ventures, being transferred to the Partnership by Rainbow
hereunder.
"Unrestricted Date" in respect of any Regional which is an Unrestricted
-----------------
Regional on the date of this Agreement is the date on which such Regional ceases
to be an Unrestricted Regional.
"Unrestricted Regional" shall mean MSG, Florida Partnership, New England
---------------------
Partnership, the Sunshine Network, Fox Sports South and Home Team Sports, in
each case, for so long as one or more current partners, stockholders or members
(or persons currently holding an option or right to become a partner,
stockholder or member) that are not Affiliates of Rainbow or Fox/Liberty remain
as partners, stockholders or members (or become a partner, stockholder or
member).
The following terms, which are defined elsewhere in this Agreement, shall
have the meanings assigned to such terms in the Sections noted below:
Term Section
---- -------
"American Sports LLC" Preamble
"Acquiror" 8.6
"Basket" 9(a)
"Chicago Partnership" Preamble
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Term Section
---- -------
"Cincinnati Partnership" Preamble
"Closing" 2.2
"Closing Date" 2.2
"Code" 3.1.10
"Covered Interest" 8.2
"Current MSG Agreement" 8.10(c)
"Designee" 8.3(e)
"Employing Partnership" 8.8(a)
"Employment Period" 8.8(a)
"ERISA" 3.1.10
"ERISA Affiliate" 3.1.10
"Financial Statements" 3.1.6
"Florida Partnership" Preamble
"Fox/Liberty" Preamble
"Fox/Liberty Advertising" Preamble
"Fox/Liberty Advertising Assets" Preamble
"Fox/Liberty Basket" 9(b)
"Fox/Liberty ERISA Affiliate" 4.1.10
"Fox/Liberty Indemnified Liability" 9(a)
"Fox/Liberty Interests" 2.1
"Fox/Liberty Material Contracts" 4.1.8
"Fox/Liberty National Advertising Interest" 2.1
"Fox/Liberty National Contribution" Preamble
"Fox/Liberty National Sports Interest" 2.1
"Fox/Liberty Partnership Contribution" Preamble
"Fox/Liberty Partnership Interest" 2.1
"Fox/Liberty Pension Plan" 4.1.10
"Fox/Liberty Plans" 4.1.10
"Fox Sports Americas" 5.6
"Fox Sports Net ERISA Affiliate" 4.1.10
"Indemnified Liability" 9(a)
"Indemnified Parties" 9(a)/9(b)
"Indemnifying Party" 9(c)
"Interests" 2.1
"Liability Limit" 9(a)
"Material Contract" 3.1.8
"Metro Channel" Preamble
"MSG" Preamble
"National Advertising Partnership" Preamble
"National Sports Partnership" Preamble
"New Development Entity" 8.3(b)
"New Development Interest" 8.3(a)
"New Development Party" 8.3(a)
"New England Partnership" Preamble
"Offeree" 8.3(a)
"Ohio Partnership" Preamble
"Option" 8.3(b)
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Term Section
---- -------
"Option Closing" 8.3(c)
"Option Exercise Notice" 8.3(b)
"Option Period" 8.3(b)
"Pacific Partnership" Preamble
"Partnership" Preamble
"Pension Plan" 3.1.10
"Plans" 3.1.10
"Prism Partnership" Preamble
"Programming Rights" 8.2
"Prohibitory Action" 8.3(c)
"PSA Partnership" Preamble
"Rainbow" Preamble
"Rainbow Advertising" Preamble
"Rainbow Advertising Assets" Preamble
"Rainbow Indemnified Liability" 9(b)
"Rainbow Interests" 2.1
"Rainbow National Advertising Interest" 2.1
"Rainbow National Contribution" Preamble
"Rainbow National Sports Interest" 2.1
"Rainbow Partnership Interest" 2.1
"Regional Nonsports Interest" 8.4
"Regional Nonsports Programming" 8.4
"RGC" Preamble
"SCNY" 8.10(d)
"Securities Act" 3.1.15
"Seller" 8.13
"SportsChannel Ventures" Preamble
"Third Party" 8.3(b)
"Transferred Employees" 8.8(a)
"Transferring Party" 14
2. Formation.
---------
2.1 Contributions and Partnership Formation. On the terms and subject
---------------------------------------
to the conditions hereinafter set forth, at the Closing, (a) in exchange for the
contribution of the Transferred Entity Interests, Rainbow shall receive a 60%
general partnership interest in the Partnership (the "Rainbow Partnership
Interest"); (b) in exchange for the Rainbow National Contribution, Rainbow shall
receive a 50%
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general partnership interest in the National Sports Partnership (the "Rainbow
National Sports Interest"), (c) in exchange for the Rainbow Advertising Assets,
Rainbow shall receive a 50% general partnership interest in the National
Advertising Partnership (the "Rainbow National Advertising Interest" and,
together with the Rainbow Partnership Interest and the Rainbow National Sports
Interest, the "Rainbow Interests") (d) in exchange for the Fox/Liberty
Partnership Contribution, Fox/Liberty shall receive a 40% general partnership
interest in the Partnership (the "Fox/Liberty Partnership Interest"), (e) in
exchange for the Fox/Liberty National Contribution, Fox/Liberty shall receive a
50% general partnership interest in the National Sports Partnership (the
"Fox/Liberty National Sports Interest") and (f) in exchange for the Fox/Liberty
Advertising Assets, Fox/Liberty shall receive a 50% general partnership interest
in the National Advertising Partnership (the "Fox/Liberty National Advertising
Interest" and, together with the Fox/Liberty Partnership Interest and the
Fox/Liberty National Sports Interest, the "Fox/Liberty Interests").
2.2 Closing and Method of Payment. The closing ("Closing") of the
-----------------------------
formation of the Partnership, the National Sports Partnership and the National
Advertising Partnership, the issuance of the Interests, and the
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execution and delivery of the Transaction Documents (other than this Agreement)
shall take place on the later of (a) the fifth business day following the
satisfaction of the conditions in Sections 6 and 7 (other than those which can
only be satisfied at the Closing) or (b) the 60th day after the date of this
Agreement (the "Closing Date"), at the offices of Xxxxxxxx & Xxxxxxxx at 000
Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx. At the Closing, Rainbow shall deliver or cause
to be delivered the documents provided in Section 7.1 hereof, and Fox/Liberty
shall deliver or cause to be delivered the documents and the payment provided in
Section 7.2 hereof.
3. Representations and Warranties of Rainbow.
-----------------------------------------
Rainbow represents and warrants to Fox/Liberty as follows:
3.1.1 Organization and Standing. Each of Rainbow, SportsChannel
-------------------------
Ventures and RGC is each a corporation duly organized and validly existing
in good standing under the laws of its state of incorporation, and each has
full corporate power and authority to carry on its business as it is now
being conducted and to own and operate its assets and properties and, in the
case of Rainbow, to execute, deliver and perform its obligations under this
Agreement and the other
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Transaction Documents to which it is a party. Each Contributed Business
that is a general or limited partnership is a partnership duly organized and
existing under the laws of the state under which it is organized and has
full partnership power and authority to carry on its business as it is now
being conducted and to own and operate its assets and properties. Each
Contributed Business that is a limited liability company is a limited
liability company duly organized and validly existing as a limited liability
company under the laws of the state of its organization and has full limited
liability company power and authority to carry on its business as it is now
being conducted and to maintain and operate assets and properties.
3.1.2 Authorization and Enforceability. The execution, delivery and
--------------------------------
performance by Rainbow of this Agreement and the execution, delivery and
performance by Rainbow and each of its Affiliates of the Transaction
Documents to which each of them is a party, the sale, conveyance, transfer
and contribution by Rainbow to the Partnership of the Transferred Entity
Interests, the sale, conveyance, transfer and contribution by Rainbow to
the National Sports Partnership of the Rainbow National Contribution and
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the sale, conveyance, transfer and contribution by Rainbow to the National
Advertising Partnership of the Rainbow Advertising Assets, have been duly
authorized and approved by all necessary action as required by applicable
law and its Certificate of Incorporation and By-Laws. This Agreement
constitutes, and when executed and delivered, the Transaction Documents will
constitute, valid and binding agreements of Rainbow and each of its
Affiliates that is a party thereto, enforceable against it in accordance
with its terms.
3.1.3 Absence of Restrictions. As of the Closing, the execution and
-----------------------
delivery by Rainbow of this Agreement and the execution, delivery and
performance by Rainbow and each of its Affiliates of the other Transaction
Documents to which it or any such Affiliate is a party do not, and the
consummation by it or any such Affiliate of the transactions contemplated
hereby and thereby and the performance by it or any such Affiliate of its or
such Affiliate's obligations hereunder and thereunder will not, violate any
provision of its or such Affiliate's certificate of incorporation and by-
laws, or comparable instruments in the case of noncorporate entities, or,
except as set forth in Schedule 3.1.3, conflict with or result in a
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violation of or default (with or without notice or lapse of time or both)
under any loan or credit agreement, note, bond, mortgage, indenture, lease
or other agreement or any instrument, permit, concession, franchise or
license to which it or any of its Affiliates is a party or otherwise bound,
or any judg ment, order or decree binding upon it or any such Affiliate,
other than any such conflicts, violations or defaults which individually or
in the aggregate will not have a material adverse effect on the financial
condition of the Partnership and the Contributed Businesses, taken as a
whole, of the National Sports Partnership or of the National Advertising
Partnership, or on the ability of Rainbow and its Affiliates to perform
their respective obligations hereunder or thereunder or that have been
waived; will not result (upon notice, with the lapse of time or otherwise)
in the creation, imposition or right to exercise or foreclosure of a lien,
charge, security interest, option, equity, claim or other encumbrance of any
nature whatsoever upon the assets of the Partnership or any Contributed
Businesses, of the National Sports Partnership or of the National
Advertising Partnership, which will have a material adverse effect upon the
-20-
financial condition of the Partnership and the Contributed Businesses, taken
as a whole, of the National Sports Partnership or of the National
Advertising Partnership, and will not conflict with, or result in any
material violation of, any ordinance, statute, law, rule or regulation
applicable to any of Rainbow or any of its Affiliates, any of the
Contributed Businesses, the National Sports Partnership or the National
Advertising Partnership, or by which any of them or their respective
properties, assets or business may be bound or affected, which violation
will have a material adverse effect upon the financial condition of the
Partnership and the Contributed Businesses, taken as a whole, of National
Sports Partnership or of the National Advertising Partnership. Except as
provided in Schedule 3.1.3 no consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity, is
necessary for the execution, delivery and performance by Rainbow of this
Agreement or by Rainbow or any of its Affiliates of the Transaction
Documents to which any of them is a party or the consummation by any of them
of the transactions contemplated hereby or thereby. Rainbow, its Affiliates
and the Contributed
-21-
Businesses are each in compliance with all applicable laws, regulations,
rules and orders of Governmental Entities, non-compliance with which would
have a material adverse effect on the financial condition of the Partnership
and the Contributed Businesses, taken as a whole, of the National Sports
Partnership or of the National Advertising Partnership, or on the ability of
each of Rainbow and its Affiliates to perform its obligations hereunder or
under the Transaction Documents to which it is a party.
3.1.4 Arrangements Concerning Interests Transferred. Except as
---------------------------------------------
expressly provided herein, in Schedule 3.1.4 and in the partnership
agreement or limited liability company agreement of any Contributed
Business, there are no outstanding or authorized options, warrants, calls,
subscriptions, or other rights, commitments, contracts, arrangements, or
understandings (whether oral or written) to grant, sell, issue or deliver
any interest of Rainbow's or its Affiliates' in the Partnership, any
Contributed Business, PSA Partnership, the National Sports Partnership or
the National Advertising Partnership or any portion thereof, nor are there
voting trusts or other written arrangements, agreements or
-22-
understandings with respect to the ownership, transfer or voting of the
interests in the Partnership, any Contributed Business, PSA Partnership, the
National Sports Partnership or the National Advertising Partnership, or any
portion thereof.
3.1.5 Ownership and Title. Except as provided in Schedule 3.1.5, as
-------------------
of the Closing (i) the Partnership will own the Transferred Entity
Interests, (ii) the National Sports Partnership will own the Rainbow
National Contribution, and (iii) the National Advertising Partnership will
own the Rainbow Advertising Assets in each case subject to no lien, charge,
pledge or other encumbrance whatsoever other than any created by Fox/Liberty
or its Affiliates. Schedule 1.2, when delivered pursuant to Section 5.4,
shall set forth a list of all of the material assets of Rainbow Advertising
relating exclusively to the national advertising of the regional sports
programming services in which Rainbow has an interest on the date hereof.
Schedule 1.2B sets forth a list of all of the material assets of American
Sports LLC as of the date hereof.
3.1.6 Financial Statements. Except as otherwise may be disclosed in
--------------------
the notes thereto, the
-23-
financial statements of the Contributed Businesses (other than MSG and
Florida Partnership) included in Schedule 3.1.6 (the "Financial Statements")
have been prepared in accordance with GAAP applied on a consistent basis for
the periods presented therein, and fairly present in all material respects
the financial position, results of operations, cash flows and changes in
partners' capital or members' equity of the Contributed Businesses as of the
dates and for the periods presented therein (subject, in the case of interim
financial statements, to normal year-end adjustments). The Contributed
Businesses do not have any off balance sheet financing.
3.1.7 Ownership of and Title to Assets of the Contributed
---------------------------------------------------
Businesses. Except as set forth in Schedule 3.1.7 hereto and excluding any
----------
contract granting a counterparty a security interest in any license
agreement or physical materials that are the subject of such contract, the
assets of the Contributed Businesses, the Rainbow National Contribution and
the Rainbow Advertising Assets are not subject to any lien, charge, pledge
or other encumbrance, except liens, charges, pledges or other encumbrances
which do not have a material adverse effect on the financial
-24-
condition of the Partnership and the Contributed Businesses, taken as a
whole, of the National Sports Partnership and of the National Advertising
Partnership.
3.1.8 Compliance with Applicable Laws and Material Contracts. Each
------------------------------------------------------
of Rainbow, its Affiliates and each Contributed Business is in conformity
with all applicable governmental or judicial laws, ordinances, regulations,
rules and orders except where the failure to be in such conformity would not
have a material adverse effect upon the financial condition of the
Partnership and the Contributed Businesses, taken as a whole, of the
National Sports Partnership or of the National Advertising Partnership, or
upon the assets, liabilities or businesses of the Partnership and the
Contributed Businesses, taken as a whole, of the National Sports Partnership
or of the National Advertising Partnership. Each of Rainbow, its Affiliates
and Contributed Business has all requisite authority and other power and all
governmental or judicial permits, certificates, licenses, approvals and
other authorizations required to carry on and conduct its businesses and to
own, lease, use and operate its properties at the places and in the manner
in which its
-25-
businesses are now conducted except where the failure to have such
authority, power, licenses, approvals and authorizations does not have a
material adverse effect on the financial condition of the Partnership and
the Contributed Businesses, taken as a whole, of the National Sports
Partnership and of the National Advertising Partnership. Except as set
forth in Schedule 3.1.8 hereto, none of Rainbow, its Affiliates or the
Contributed Businesses is bound by any order, injunction or decree of any
court, governmental department, commission, board, agency or instrumentality
which would prevent any of the Contributed Businesses or Rainbow Advertising
from conducting its business in substantially the same manner as such
business has heretofore been conducted, or from operating and leasing its
assets, properties, structures and facilities and/or its buildings and
improvements substantially as heretofore operated and leased, except for
such orders, injunctions or decrees which do not have a material adverse
effect on the financial condition of the Partnership and the Contributed
Businesses, taken as a whole, of the National Sports Partnership or of the
National Advertising Partnership. Any and all reports and forms
-26-
required to be filed with any Governmental Entity by Rainbow, its Affiliates
or any Contributed Business have been duly filed, except for such reports
and forms, the failure of which to be filed will not have a material adverse
effect on the Partnership and the Contributed Businesses, taken as a whole,
on the National Sports Partnership or on the National Advertising
Partnership.
Schedule 3.1.8 lists each contract to which any of Rainbow, its
Affiliates, Rainbow Advertising (insofar as the Rainbow Advertising Assets
are concerned) or any Contributed Business is a party and which (a)
currently obligates any Contributed Business or Rainbow Advertising (insofar
as the Rainbow Advertising Assets are concerned) to pay an amount in excess
of $1 million in the aggregate over a 12 month period; or (b) limits or
restricts the right of any Contributed Business or Rainbow Advertising
(insofar as the Rainbow Advertising Assets are concerned) to compete in any
geographical area in any material manner (each of which shall be deemed to
be a "Material Contract"). Each Material Contract is a valid and binding
agreement; the relevant Contributed Business or Rainbow Advertising has duly
performed in all material
-27-
respects its obligations thereunder to the extent that such obligations to
perform have accrued; and except as set forth on Schedule 3.1.8 no material
breach or default or event that would (with the passage of time, notice or
both) constitute a material breach or default thereunder by the relevant
Contributed Business or Rainbow Advertising or, to the best knowledge of
Rainbow, any other party or obligor with respect thereto, has occurred or as
a result of the execution of this Agreement or consummation of the
transactions contemplated hereby will occur. The transactions contemplated
by this Agreement and the Transaction Documents will not terminate or give
any Person the right to terminate any of the Material Contracts.
3.1.9 Taxes and Reports. Each Contributed Business and Rainbow
-----------------
Advertising has filed in a proper and timely (including permitted
extensions) manner all Federal tax returns and all state and local tax
returns which are required to be filed by it or on its behalf and has paid
all taxes, interest, penalties, assess ments and deficiencies attributable
to it which have become due. Except as provided for in the Financial
Statements or as otherwise disclosed in Schedule 3.1.9 hereto, there are no
pending, or to the best knowledge
-28-
of Rainbow, threatened, investigations, audits, deficiencies or assessments
attributable to or relating to the assessment or collection of taxes of a
Contributed Business or Rainbow Advertising. To the best knowledge of
Rainbow, there are no outstanding agreements or waivers extending the
statutory period of limitations applicable to any Federal, state or local
tax return of any Contributed Business or Rainbow Advertising for any
period. Except as set forth on Schedule 3.1.9, no Contributed Business or
Rainbow Advertising is a party to any action or proceeding by any
Governmental Entity for the assessment or collection of taxes which have
been asserted against it. Each Contributed Business and Rainbow Advertising
has properly and timely (including permitted extensions) filed all other
reports and returns required by any Governmental Entity where the failure to
have filed any such report or return could adversely affect the ability of
the Partnership, any Contributed Businesses, the National Sports Partnership
or the National Advertising Partnership to conduct its business in the usual
and ordinary course.
3.1.10 Benefit Plans. All "employee benefit plans", within the
-------------
meaning of Section 3(3) of the
-29-
Employment Retirement Income Security Act of 1974, as amended ("ERISA"),
covering employees or former employees of any Contributed Business or
Rainbow Advertising (the "Plans"), to the extent subject to ERISA, are in
substantial compliance with ERISA. Each Plan which is an "employee pension
benefit plan", within the meaning of Section 3(2) of ERISA ("Pension Plan")
and which is intended to be qualified under Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), has received a favorable
determination letter from the Internal Revenue Service.
No liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by any Contributed Business or Rainbow Advertising
with respect to any "single-employer plan", within the meaning of Section
4001(a)(15) of ERISA, currently or formerly maintained by it or the single-
employer plan of any entity which is considered one employer with such
Contributed Entity or Rainbow Advertising under Section 4001 of ERISA (an
"ERISA Affiliate"). No Contributed Business or Rainbow Advertising has
incurred and none expects to incur any withdrawal liability with respect to
a multiemployer plan under Subtitle E of Title IV of ERISA (regardless
-30-
of whether based on contributions of an ERISA Affiliate). No notice of a
"reportable event", within the meaning of Section 4043 of ERISA for which
the 30-day reporting requirement has not been waived, has been required to
be filed for any Pension Plan.
No Pension Plan has an "accumulated funding deficiency" (whether or
not waived) within the meaning of Section 412 of the Code or Section 302 of
ERISA.
Under each Pension Plan as of the last day of the most recent plan
year ended prior to the date hereof, the actuarially determined present
value of all "benefit liabilities", within the meaning of Sec tion
4001(a)(16) of ERISA (as determined on the basis of the actuarial
assumptions contained in the Plan's most recent actuarial valuation), did
not exceed the then current value of the assets of such Plan, and there has
been no material adverse change in the financial condition of such Plan
since the last day of the most recent year.
3.1.11 Absence of Insolvency Proceedings. As of the date hereof
---------------------------------
there is no bankruptcy, reorganization or insolvency proceeding of any
character, voluntary or involuntary, relating to Rainbow, any of its
Affiliates, any Contributed
-31-
Business or Rainbow Advertising or, to the best knowledge of Rainbow,
affecting any partner in a Contributed Business which is pending or, to the
best knowledge of Rainbow, threatened. None of Rainbow, any of its
Affiliates, any Contributed Business or Rainbow Advertising has made any
assignment for the benefit of creditors or taken any action with a view to,
or which would constitute a basis for, the institution of a bankruptcy,
reorganization or insolvency proceeding.
3.1.12 [Reserved]
3.1.13 Litigation. Except as set forth in Schedule 3.1.13, there is
----------
no action, suit, litigation, proceeding or investigation by or before any
Govern mental Entity pending or, to the best knowledge of Rainbow,
threatened, against or relating to Rainbow, any of its Affiliates or any
Contributed Business which, in each case, is reasonably likely to have a
material adverse effect on the financial condition of the Partnership and
the Contributed Businesses, taken as a whole, of the National Sports
Partnership or of the National Advertising Partnership, or which in any
manner challenges or seeks injunctive or other non-monetary relief or seeks
to prevent, enjoin, alter or
-32-
delay any transaction contemplated hereby or by any of the Transaction
Documents.
3.1.14 No Material Adverse Change. Except as provided in Schedule
--------------------------
3.1.14, there has been no material adverse change in the business or
financial condition of any of the Contributed Businesses or Rainbow
Advertising (insofar as the Rainbow Advertising Assets are concerned) since
the latest dates for which information is set forth in Financial Statements
and on or prior to the date of this Agreement.
3.1.15 Purchase for Own Account, Etc. Rainbow acknowledges that the
------------------------------
Rainbow Interests acquired pursuant to this Agreement are being acquired
without registration under the Securities Act of 1933, as amended
("Securities Act"), or under similar provisions of state law and represents
and warrants to Fox/Liberty, the Partnership, the National Sports
Partnership and the National Advertising Partnership that it is acquiring
the Rainbow Interests for its own account, for investment and with no view
to the distribution thereof, and agrees not to transfer or attempt to
transfer any of the Rainbow Interests in the absence of registration under
the Securities Act and
-33-
any applicable state securities laws or an available exemption from such
registration.
3.2 Survival of Representations and Warranties. The representations
------------------------------------------
of Rainbow set forth in this Agreement shall survive the Closing for a period of
six months, except that the representations and warranties in the first sentence
of Section 3.1.5 shall survive indefinitely; the representations and warranties
in Section 3.1.9 shall survive until the expiration of the relevant statute of
limitations; and the representations and warranties in Section 3.1.6 shall
survive until one year after the date of this Agreement. The certifications
required by Section 7.1.1 shall not survive the Closing except to the extent
such certifications relate to representations and warranties that expressly
survive the Closing pursuant to the first sentence of this Section 3.2 and as to
such certifications, the same shall survive the Closing for so long as the
related representation and warranty survives the Closing. Each representation
and warranty of Rainbow in this Article 3 is made on the assumption that there
are no facts or circumstances particularly applicable to Fox/Liberty or any of
its Affiliates that is not an Affiliate of Rainbow and that no action (other
than actions contemplated by the Agreement) has been taken by Fox/Liberty
-34-
or any of its Affiliates that is not an Affiliate of Rainbow that would make
such representation or warranty untrue.
3.3 Florida Partnership Matters. The parties recognize and acknowledge
---------------------------
that neither Rainbow nor any of its Affiliates is the managing partner of
Florida Partnership and to the extent that any of the representations or
warranties in Section 3.1 related to Florida Partnership Rainbow is making such
representation and warranty solely on the basis of its knowledge without
investigation or inquiry.
4. Representations and Warranties of Fox/Liberty.
---------------------------------------------
Fox/Liberty represents and warrants to Rainbow as follows:
4.1.1 Organization and Standing. Each of Fox/Liberty and Fox Sports
-------------------------
Americas is duly organized and validly existing in good standing under the
laws of its jurisdiction of organization and has full limited liability
company or limited partnership power and authority to carry on its business
as it is now being conducted and to own and operate its assets and
properties and, in the case of Fox/Liberty to execute, deliver and perform
its obligations under this Agreement and the other Transaction Documents to
which it is a party.
-35-
4.1.2 Authorization and Enforceability. The execution, delivery and
--------------------------------
performance of this Agreement and the Transaction Documents to which it is a
party by Fox/Liberty and each of its Affiliates, the sale, conveyance,
transfer and contribution to the Partnership of the Fox/Liberty Partnership
Contribution, the sale, conveyance and transfer by Fox/Liberty to the
National Sports Partnership of the Fox/Liberty National Contribution and the
sale, conveyance, transfer and contribution by Fox/Liberty to National
Advertising Partnership of the Fox/Liberty Advertising Assets, have been
duly authorized and approved by all necessary action as required by
applicable law and the respective certificates of incorporation and by-laws
(or comparable organization documents of noncorporate entities) of
Fox/Liberty and such Affiliates. This Agreement constitutes, and when
executed and delivered the Transaction Documents will constitute valid and
binding agreements of Fox/Liberty and each of its Affiliates that is a party
thereto, enforceable against it, in accordance with its terms.
4.1.3 Absence of Restrictions. As of the Closing, the execution and
-----------------------
delivery by Fox/Liberty of this Agreement and the execution, delivery and
-36-
performance by Fox/Liberty and each of its Affiliates of the other
Transaction Documents to which it is a party do not, and the consummation by
it or any such Affiliate of the transactions contemplated hereby and thereby
and the performance by it or any such Affiliate of its or such Affiliates'
obligations hereunder and thereunder will not, violate any provision of its
certificate of incorporation or by-laws (or comparable instruments in the
case of noncorporate entities), or conflict with or result in a violation of
or default (with or without notice or lapse of time or both) under any
material loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement or any instrument, permit, concession, franchise or license
to which it or any of such Affiliates is a party or otherwise bound, or any
judgment, order or decree binding upon it or any such Affiliate, other than
any such conflicts, violations or defaults which individually or in the
aggregate will not have a material adverse effect on the assets or
businesses included in the Fox/Liberty National Contribution, or on the
financial condition of the Partnership and the Contributed Businesses, taken
as a whole, of Fox Sports Net, of the National Sports Partnership or of the
-37-
National Advertising Partnership or on the ability of Fox/Liberty and its
Affiliates to perform their respective obligations hereunder or thereunder
or that have been waived; will not result (upon notice, with the lapse of
time or otherwise) in the creation, imposition or right to exercise or
foreclosure of a lien, charge, security interest, option, equity, claim or
other encumbrance of any nature whatsoever upon the assets included in the
Fox/Liberty National Contribution, or the assets of the Partnership or any
Contributed Businesses, of Fox Sports Net, of the National Sports
Partnership or of the National Advertising Partnership, which will have a
material adverse effect upon the assets or businesses included in the
Fox/Liberty National Contribution or the financial condition of the
Partnership and the Contributed Businesses, taken as a whole, of the
National Sports Partnership or of the National Advertising Partnership and
will not conflict with, or result in any material violation of, any
ordinance, statute, law, rule or regulation applicable to Fox/Liberty, or
any of its Affiliates, Fox Sports Net, the National Sports Partnership or
the National Advertising Partnership or by which any of them or
-38-
their respective properties, assets or businesses may be bound or affected,
which violation will have a material adverse effect upon the assets or
businesses included in the Fox/Liberty National Contribution or on the
financial condition of the Partnership and the Contributed Businesses, taken
as a whole, of Fox Sports Net, of the National Sports Partnership or of the
National Advertising Partnership. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Entity is necessary for the execution, delivery and performance
by Fox/Liberty or any of its Affiliates of this Agreement or the Transaction
Documents to which any of them is a party or the consummation by any of them
of the transactions contemplated hereby and thereby. Each of Fox/Liberty,
its Affiliates and Fox Sports Net are in compliance with all applicable
laws, regulations, rules and orders of Governmental Entities, non-compliance
with which would have a material adverse effect on the Fox/Liberty National
Contribution or the financial condition of the Partnership and the
Contributed Businesses, taken as a whole, of Fox Sports Net, of the National
Sports Partnership, or of the National Advertising Partnership or on the
ability of
-39-
each of Fox/Liberty and each of its Affiliates to perform its obligations
hereunder or under the Transaction Documents to which it is a party.
4.1.4 Arrangements Concerning Assets Transferred. Except as
------------------------------------------
expressly provided herein or in Schedule 4.1.4, there are no outstanding or
authorized options, warrants, calls, subscriptions, or other rights,
commitments, contracts, arrangements, or understandings (whether oral or
written) to grant, sell, issue or deliver any interest of Fox/Liberty's or
its Affiliates' in the Partnership, any Contributed Business, PSA
Partnership, the National Sports Partnership, the National Advertising
Partnership, Fox Sports Net or the Fox/Liberty National Contribution or any
portion thereof, nor are there voting trusts or other written arrangements,
agreements or understandings with respect to Fox/Liberty's or its
Affiliates' ownership, transfer or voting of the interests in the
Partnership, any Contributed Business, PSA Partnership, the National Sports
Partnership, the National Advertising Partnership, the Fox/Liberty National
Contribution or Fox Sports Net or any portion thereof.
-40-
4.1.5 Ownership and Title. Except as provided in Schedule 4.1.5, as
-------------------
of the Closing (i) the National Sports Partnership will own the Fox/Liberty
National Contribution and (ii) the National Advertising Partnership will own
the Fox/Liberty Advertising Assets, in each case subject to no lien, charge,
pledge, or other encumbrance whatsoever other than any created by Rainbow or
any of its Affiliates. Schedule 1.3, when delivered pursuant to Section
5.4, shall set forth a list of all of the material assets of Fox/Liberty
Advertising relating to the national advertising of each of the regional
sports programming services in which any of Fox/Liberty and its Affiliates
has an ownership interest on the date hereof and of Fox Sports Net.
Schedule 1.8A sets forth a list of all of the programming contracts and all
material nonprogramming contracts pertaining to or used in the business of
Fox Sports Net or owned by Fox Sports Net on the date hereof included in the
Transferred Assets and each of which is included in the Transferred Assets.
The maximum annual rights fees payable under each of the programming
contracts listed on Schedule 1.8A do not exceed the amounts specified in
Schedule 1.8A. Schedule 1.8B, when delivered as provided in
-41-
Section 5.5 will include all of the other assets used in the business of Fox
Sports Net. The assets listed on Schedule 1.8A and Schedule 1.8B are
sufficient to run the business of Fox Sports Net as it has been operated in
the past and as it is now being operated and the Business Plan attached as
Annex B to the National Sports Partnership Agreement reflects such assets.
Schedule 1.8B will not include any assets not heretofore used in the
business of Fox Sports Net.
4.1.6 [Reserved]
4.1.7 Ownership and Title. Except as set forth in Schedule 4.1.7
-------------------
hereto and excluding any contract granting a counterparty a security
interest in any license agreement or physical materials that are the subject
of such contract, the assets included in the Fox/Liberty National
Contribution and the Fox/Liberty Advertising Assets are not subject to any
lien, charge, pledge or other encumbrance, except liens, charges, pledges or
other encumbrances which do not have a material adverse effect on the assets
or businesses included in the Fox/Liberty National Contribution or on the
financial condition of the National Sports Partnership or the National
Advertising Partnership.
-42-
4.1.8 Compliance with Applicable Laws and Material Contracts. Each
------------------------------------------------------
of Fox/Liberty, its Affiliates and Fox Sports Net is in conformity in all
material respects with all applicable governmental or judicial laws,
ordinances, regulations, rules and orders except where the failure to be in
such conformity would not have a material adverse effect upon the assets or
businesses included in the Fox/Liberty National Contribution or on the
financial condition of the Partnership and the Contributed Businesses, taken
as a whole, Fox Sports Net, the National Sports Partnership or the National
Advertising Partnership or upon the assets, liabilities or busi nesses of
the Partnership and the Contributed Businesses, taken as a whole, Fox Sports
Net, the Fox/Liberty National Contribution, the National Sports Partnership
or the National Advertising Partnership. Each of Fox/Liberty and its
Affiliates and Fox Sports Net has all requisite authority and other power
and all governmental or judicial permits, certificates, licenses, approvals
and other authorizations required to carry on and conduct its businesses and
to own, lease, use and operate its properties at the places and in the
manner in which its businesses are now conducted
-43-
except where the failure to have such authority, power, licenses, approvals
and authorizations does not have a material adverse effect on the assets or
businesses included in the Fox/Liberty National Contribution, or on the
financial condition of the Partnership and the Contributed Businesses, taken
as a whole, of Fox Sports Net, of the National Sports Partnership or of the
National Advertising Partnership. Except as set forth in Schedule 4.1.8
hereto none of Fox/Liberty, its Affiliates and Fox Sports Net is bound by
any order, injunction or decree of any court, governmental department,
commission, board, agency or instrumentality which would prevent Fox Sports
Net, any of the Contributed Businesses, the National Sports Partnership or
Fox/Liberty Advertising from conducting its business in substantially the
same manner as such business has heretofore been conducted, or from
operating and leasing its material assets, properties, structures and
facilities and/or its buildings and improvements substantially as heretofore
operated and leased, except for such orders, injunctions or decrees which do
not have a material adverse effect on the assets or businesses included in
the Fox/Liberty National Contribution or on the financial condition of
-44-
the Partnership and the Contributed Businesses, taken as a whole, of Fox
Sports Net, of the National Sports Partnership or of the National
Advertising Partnership. Any and all reports and forms required to be filed
with any Governmental Entity by Fox/Liberty and its Affiliates or Fox Sports
Net have been duly filed, except for such reports and forms, the failure of
which to be filed will not have a material adverse effect on the assets or
businesses included in the Fox/Liberty National Contribution or on the
Partnership and the Contributed Businesses, taken as a whole, Fox Sports
Net, the National Sports Partnership or the National Advertising
Partnership.
Schedule 4.1.8 lists each contract to which Fox/Liberty or any of its
Affiliates, Fox/Liberty Advertising (insofar as the Fox/Liberty Advertising
Assets are concerned), or Fox Sports Net, is a party and which (a) currently
obligates Fox/Liberty (insofar as the assets and businesses included in the
Fox/Liberty National Sports Contribution are concerned), Fox Sports Net or
Fox/Liberty Advertising (insofar as the Fox/Liberty Advertising Assets are
concerned) to pay an amount in excess of $1 million in the aggregate over a
12 month period or (b) limits or
-45-
restricts the right of Fox/Liberty (insofar as the assets and businesses
included in the Fox/Liberty National Sports Contribution are concerned), Fox
Sports Net or Fox/Liberty Advertising (insofar as the Fox/Liberty
Advertising Assets are concerned) to compete in any geographical area in any
material manner (each of which shall be deemed to be a "Fox/Liberty Material
Contract"). Each Fox/Liberty Material Contract is a valid and binding
agreement; each of Fox/Liberty, Fox Sports Net or Fox/Liberty Advertising
has duly performed in all material respects its obligations thereunder to
the extent that such obligations to perform have accrued; and except as set
forth on Schedule 4.1.8 no material breach or default or event that would
(with the passage of time, notice or both) constitute a material breach or
default thereunder by Fox/Liberty, Fox Sports Net, Fox/Liberty Advertising
or, to the best knowledge of Fox/Liberty, any other party or obligor with
respect thereto, has occurred or as a result of the execution of this
Agreement or consummation of the transactions contemplated hereby will
occur. The transactions contemplated by this Agreement and the Transaction
Documents will not terminate or give any Person the
-46-
right to terminate any of the Fox/Liberty Material Contracts.
4.1.9 Taxes and Reports. Fox/Liberty, (insofar as the assets and
-----------------
businesses included in the Fox/Liberty National Contribution are concerned)
Fox Sports Net and Fox/Liberty Advertising have filed in a proper and timely
(including permitted extensions) manner all Federal tax returns and all
state and local tax returns which are required to be filed by it or on its
behalf and has paid all taxes, interest, penalties, assessments and
deficiencies attributable to it which have become due. Except as disclosed
in Schedule 4.1.9 hereto, there are no pending, or to the best knowledge of
Fox/Liberty, threatened, investigations, audits, deficiencies or assessments
attributable to or relating to the assessment or collection of taxes of
Fox/Liberty (insofar as the assets and businesses included in the
Fox/Liberty National Contribution are concerned), Fox Sports Net or
Fox/Liberty Advertising. To the best knowledge of Fox/Liberty, there are no
outstanding agreements or waivers extending the statutory period of
limitations applicable to any Federal, state or local tax return of
Fox/Liberty (insofar as the assets and businesses included in the
Fox/Liberty National
-47-
Contribution are concerned), Fox Sports Net or Fox/Liberty Advertising for
any period. Except as set forth on Schedule 4.1.9, none of Fox/Liberty
(insofar as the assets and businesses included in the Fox/Liberty National
Contribution are concerned), Fox Sports Net or Fox/Liberty Advertising is a
party to any action or proceeding by any Governmental Entity for the
assessment or collection of taxes which have been asserted against it.
Fox/Liberty, (insofar as the assets and businesses included in the
Fox/Liberty National Contribution are concerned), Fox Sports Net and
Fox/Liberty Advertising has each properly and timely (including permitted
extensions) filed all other reports and returns required by any Governmental
Entity where the failure to have filed any such report or return could
adversely affect the ability of the Partnership, any Contributed Business,
Fox Sports Net, the National Sports Partnership or the National Advertising
Partnership to conduct its business in the usual and ordinary course.
4.1.10 Benefit Plans. All "employee benefit plans", within the
-------------
meaning of Section 3(3) of ERISA, covering employees or former employees of
Fox/Liberty (insofar as the assets and businesses included in the
-48-
Fox/Liberty National Contribution are concerned), Fox Sports Net or
Fox/Liberty Advertising (the "Fox/Liberty Plans"), to the extent subject to
ERISA, are in substantial compliance with ERISA. Each Fox/Liberty Plan
which is an "employee pension benefit plan", within the meaning of Section
3(2) of ERISA ("Fox/Liberty Pension Plan") and which is intended to be
qualified under Section 401(a) of the Code, has received a favorable
determination letter from the Internal Revenue Service.
No liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by Fox/Liberty or Fox/Liberty Advertising with
respect to any "single-employer plan", within the meaning of Section
4001(a)(15) of ERISA, currently or formerly maintained by it or the single-
employer plan of any entity which is considered one employer with Fox Sports
Net or Fox/Liberty Advertising under Section 4001 of ERISA (a "Fox Sports
Net ERISA Affiliate"). Neither Fox/Liberty (insofar as the assets and
businesses included in the Fox/Liberty National Sports Contribution are
concerned), Fox Sports Net nor Fox/Liberty Advertising has incurred and
neither expects to incur any withdrawal liability with respect
-49-
to a multiemployer plan under Subtitle E of Title IV of ERISA (regardless of
whether based on contributions of a Fox Sports Net ERISA Affiliate). No
notice of a "reportable event", within the meaning of Section 4043 of ERISA
for which the 30-day reporting requirement has not been waived, has been
required to be filed for any Fox/Liberty Pension Plan.
No Fox/Liberty Pension Plan has an "accumulated funding deficiency"
(whether or not waived) within the meaning of Section 412 of the Code or
Section 302 of ERISA.
Under each Fox/Liberty Pension Plan as of the last day of the most
recent plan year ended prior to the date hereof, the actuarially determined
present value of all "benefit liabilities", within the meaning of Section
4001(a)(16) of ERISA (as determined on the basis of the actuarial
assumptions contained in the Fox/Liberty Plan's most recent actuarial
valuation), did not exceed the then current value of the assets of such
Fox/Liberty Plan, and there has been no material adverse change in the
financial condition of such Fox/Liberty Plan since the last day of the most
recent year.
-50-
4.1.11 Absence of Insolvency Proceedings. As of the date hereof
---------------------------------
there is no bankruptcy, reorganization or insolvency proceeding of any
character, voluntary or involuntary, relating to Fox/Liberty, any of its
Affiliates, Fox Sports Net or Fox/Liberty Advertising or, to the best
knowledge of Fox/Liberty, affecting any partner in Fox Sports Net which is
pending or, to the best knowledge of Fox/Liberty, threatened. None of
Fox/Liberty, any of its Affiliates, Fox Sports Net or Fox/Liberty
Advertising has made any assignment for the benefit of creditors or taken
any action with a view to, or which would constitute a basis for, the
institution of a bankruptcy, reorganization or insolvency proceeding.
4.1.12 [Reserved]
4.1.13 Litigation. Except as set forth in Schedule 4.1.13, there is
----------
no action, suit, litigation, proceeding or investigation by or before any
Govern mental Entity pending or, to the best knowledge of Fox/Liberty,
threatened, against or relating to Fox/Liberty, any of its Affiliates or Fox
Sports Net, which, in each case, is reasonably likely to have a material
adverse effect on the Fox/Liberty National Contribution or on the financial
condition of Fox
-51-
Sports Net or the Partnership and the Contributed Businesses, taken as a
whole, of the National Sports Partnership or of the National Advertising
Partnership, or which in any manner challenges or seeks injunctive or other
non-monetary relief or seeks to prevent, enjoin, alter or delay any
transaction contemplated hereby or by any of the Transaction Documents.
4.1.14 No Material Adverse Change Except as provided in Schedule
--------------------------
4.1.14, there has been no material adverse change in the business or
financial condition of Fox Sports Net or Fox/Liberty Advertising (insofar as
the Fox/Liberty Advertising Assets are concerned) since January 1, 1997 and
on or prior to the date of this Agreement.
4.1.15 Purchase for Own Account, Etc. Fox/Liberty acknowledges that
------------------------------
the Fox/Liberty Interests acquired pursuant to this Agreement are being
acquired without registration under the Securities Act or under similar
provisions of state law and represents and warrants to Rainbow, the
Partnership, the National Sports Partnership and the National Advertising
Partnership that they are acquiring the Fox/Liberty Interests for their own
account, for investment and with no view to the distribution thereof, and
agree not
-52-
to transfer or attempt to transfer any of the Fox/Liberty Interests in the
absence of registration under the Securities Act and any applicable state
securities laws or an available exemption from such registration.
4.2 Survival of Representations and Warranties. The representations
------------------------------------------
of Fox/Liberty set forth in this Agreement shall not survive the Closing for a
period of six months except that the representatives and warranties in the first
sentence of Section 4.1.5 shall survive indefinitely; the representations and
warranties in Section 4.1.9 shall survive until the expiration of the relevant
statute of limitations; and the representations and warranties in Section 4.1.6
shall survive until one year after the date of this Agreement. The
certifications required by Section 7.2.2 shall not survive the Closing except to
the extent such certifications relate to representations and warranties that
expressly survive the Closing pursuant to the first sentence of this Section 4.2
and as to such certifications, shall survive the Closing for so long as the
related representation and warranty survives the Closing. Each representation
and warranty made in this Article 4 is made on the assumption that there are no
facts or circumstances particularly applicable to Rainbow or any of its
Affiliates
-53-
that is not an Affiliate of Fox/Liberty and that no action (other than actions
contemplated by this Agreement) has been taken by Rainbow or its Affiliates that
is not an Affiliate of Fox/Liberty that would make such representation or
warranty untrue.
5. Agreements of the Parties.
-------------------------
5.1 Access to Information. (a) Subject to any confidentiality
---------------------
obligations in existence on the date of this Agreement, prior to the Closing,
Fox/Liberty may make such reasonable investigation of the Contributed Businesses
(other than MSG) and the Rainbow Advertising Assets as Fox/Liberty may
reasonably request. Rainbow shall cause the Contributed Businesses (other than
MSG) and Rainbow Advertising to give to Fox/Liberty and their counsel, financial
advisors, accountants and other representatives reasonable access, on reasonable
notice during normal business hours throughout the period prior to the Closing
to the offices, property, books, agreements, records and files of the
Contributed Businesses (other than MSG) and of Rainbow Advertising (insofar as
they relate to the Rainbow Advertising Assets), to their key management
personnel and agents and to all documents and copies of documents and
information concerning the businesses that are the subject of this Agreement as
Fox/Liberty may reasonably request.
-54-
Rainbow will cause the Contributed Businesses (other than MSG) and Rainbow
Advertising to instruct their respective employees, counsel, financial advisors
and accountants to cooperate with Fox/Liberty in their investigation of the
Contributed Businesses (other than MSG) and the Rainbow Advertising Assets.
Fox/Liberty shall hold, and cause its representatives to hold, all information
and documents received pursuant to this Section 5.1(a) confidential and, if the
transactions contemplated by this Agreement are not consummated for any reason,
shall return to the Contributed Businesses all such information and documents
and any copies as soon as practicable.
(b) Subject to any confidentiality obligations in existence on the date of
this Agreement, prior to the Closing, Rainbow may make such reasonable
investigation of the assets and businesses included in the Fox/Liberty National
Contribution, Fox Sports Net and the Fox/Liberty Advertising Assets as Rainbow
may reasonably request. Fox/Liberty shall, and shall cause Fox Sports Net, Fox
Sports Americas and Fox/Liberty Advertising to give Rainbow and its counsel,
financial advisors, accountants and other representatives reasonable access, on
reasonable notice during normal business hours throughout the period prior to
the Closing to the offices, property, books, agreements,
-55-
records and files of Fox/Liberty, Fox Sports Net, Fox Sports Americas and of
Fox/Liberty Advertising (insofar as they relate to the Fox/Liberty Advertising
Assets), to its key management personnel and agents and to all documents and
copies of documents and information concerning their businesses that are the
subject of this Agreement as Rainbow may reasonably request. Fox/Liberty will,
and will cause Fox Sports Net, Fox Sports Americas and Fox/Liberty Advertising
to instruct their employees, counsel, financial advisors and accountants to
cooperate with Rainbow in its investigation of the assets and businesses
included in the Fox/Liberty National Contribution, Fox Sports Net and the
Fox/Liberty Advertising Assets. Rainbow shall hold, and cause its
representatives to hold, all information and documents received pursuant to this
Section 5.1(b) confidential and, if the transactions contemplated by this
Agreement are not consummated for any reason, shall return to Fox/Liberty all
such information and documents and any copies as soon as practicable.
5.2 Conduct of Business Pending the Closing. From and after the date
---------------------------------------
hereof, until the Closing, Rainbow shall cause the Contributed Businesses, PSA
Partnership and Rainbow Advertising (insofar as the Rainbow Advertising Assets
are concerned) to operate, and Fox/Liberty shall
-56-
cause Fox Sports Net, Fox Sports Americas and Fox/Liberty Advertising (insofar
as the Fox/Liberty Advertising Assets are concerned) to operate their respective
businesses, and Fox/Liberty will operate its business (to the extent included in
the Fox/Liberty National Contribution), in the ordinary course in a manner
consistent with past practice. None of the Contributed Businesses, PSA
Partnership, Rainbow Advertising (insofar as the Rainbow Advertising Assets are
concerned) or Fox/Liberty (insofar as the assets included in the Fox/Liberty
National Contribution on concerned), Fox Sports Net or Fox/Liberty Advertising
(insofar as the Fox/Liberty Advertising Assets are concerned) may take any
action set forth in Sections 4.9(iii), (iv), (v), (vii) and (viii) of the form
of Partnership Agreement of the Partnership (as if such entity were the
Partnership). Nothing in this Section 5.2 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 that includes one or more outside partners or investors
(other than Affiliates of Rainbow and Fox/Liberty) or is inconsistent with the
fiduciary or other obligations of any partner therein (ii) restrict any
Contributed Business, PSA Partnership, Rainbow Advertising, Fox Sports
-57-
Net or Fox/Liberty Advertising from distributing to its partners, members, or
stockholders at any time, or from time to time, prior to the Closing cash on a
basis generally consistent with past practice (although the timing of such
distributions may vary from past practice), and a party to this Agreement will
not be in breach of this Section 5.2 if acting or failing to act in reliance on
clauses (i) or (ii). Rainbow will not permit the Contributed Businesses to incur
additional indebtedness for borrowed money unless (i) as a result, the aggregate
indebtedness for borrowed money of the Contributed Businesses outstanding on the
Closing Date would not exceed $925 million plus any debt the incurrence of which
is agreed to by Fox/Liberty and (ii) the proceeds from the incurrence of such
indebtedness are used for repayment of debt or other business purposes but not
distribution to the partners.
5.3 Other Action. Each of the parties hereto shall use its reasonable
------------
best efforts to cause the fulfillment at the earliest practicable date of all of
the conditions to its obligations to consummate the transactions contemplated by
this Agreement.
5.4 Advertising Assets Schedules. Within 10 days following the date of
----------------------------
this Agreement, Rainbow will deliver to Fox/Liberty Schedule 1.2 listing the
Rainbow Advertising
-58-
Assets and any related Advertising Accepted Liabilities. Fox/Liberty may
reasonably object within five days to any assets or liabilities included or
excluded from such schedule and such schedule shall be amended to accommodate
any such reasonable objections. Within 10 days following the date of this
Agreement, Fox/Liberty will deliver to Rainbow Schedule 1.3 listing the
Fox/Liberty Advertising Assets and any related Advertising Accepted Liabilities.
Rainbow may reasonably object within five days to any assets or liabilities
included or excluded from such schedules and such schedules shall be amended to
accommodate any such reasonable objection.
5.5 Fox Sports Net Asset Schedule. Within ten days after the date
-----------------------------
of this Agreement Fox/Liberty will deliver to Rainbow Schedule 1.8B. Rainbow
may reasonably object within five days to any assets included or excluded from
such schedule and such schedule shall be amended to accommodate any such
reasonable objections.
5.6 Fox Sports Americas. Fox/Liberty will make available to Rainbow
-------------------
all relevant information concerning the business and operations of Fox Sports
Americas - U.S. L.P., a Delaware limited partnership ("Fox Sports Americas"),
within 10 days following the date of this Agreement and Rainbow shall have 30
days in which to decide whether the
-59-
assets of Fox Sports Americas, or all of the LLC membership interests in Fox
Sports Americas, should be included in the Fox/Liberty National Contribution.
Rainbow shall furnish Fox/Liberty written notice of its election. The
contribution will be structured in the most tax efficient manner.
5.7 HSR Filings. If a filing under the HSR Act is required,
-----------
promptly after the execution of this Agreement, Rainbow and its Affiliate and
Fox/Liberty and their Affiliates will use their reasonable best efforts to
complete, execute and file all notifications and reports required to be filed
under the HSR Act, and will use their reasonable best efforts to provide all
information requested by any Governmental Entity from time to time in connection
with such notifications and filings.
5.8 Advertising Budget and Business Plan. The Budget and Business
------------------------------------
Plan which is Annex B to the National Advertising Partnership Agreement shall be
delivered in draft form by Fox/Liberty to Rainbow within 10 business days
following the delivery of Schedules 1.2 and 1.3 as provided in Section 5.4 and
Rainbow shall have 10 days to review and comment on such draft Budget and
Business Plan and the parties shall work together to develop a final version of
such Business Plan which is mutually agreeable to both
-60-
parties. Only the mutually agreed version shall constitute the Budget and
Business Plan for purposes of the National Advertising Partnership Agreement.
5.9 Allocation Policies and Approved Agreements. The Allocation
-------------------------------------------
Policies for Indirect Expenses which are Annexes D to the National Sports
Partnership Agreement and the National Advertising Agreement and the Approved
Agreements schedules which are Annexes A to the National Sports Partnership
Agreement and the National Advertising Agreement, shall be delivered in draft
form by Fox/Liberty to Rainbow within 10 business days following the date of
this Agreement and the parties hereto shall work in good faith to mutually agree
upon the final form of such annexes. Only the mutually agreed versions shall
constitute the Allocation Policies and Approved Agreements schedules for
purposes of the National Advertising Partnership Agreement and the National
Sports Partnership Agreement.
6. Conditions Precedent; Covenant as to Transaction Documents.
----------------------------------------------------------
6.1 Conditions Precedent To Both Parties' Obligations. The performance
-------------------------------------------------
of the obligations of both of the parties hereto at the Closing is subject to
the
-61-
conditions that, prior to or simultaneously with the Closing:
(i) the Partnership Agreement relating to the Partnership
substantially in the form of Annex A shall have been executed and delivered
by the parties thereto.
(ii) the National Sports Partnership Agreement in substantially the
form of Annex B shall have been executed and delivered by the parties
hereto.
(iii) the National Advertising Partnership Agreement in substantially
the form of Annex C shall have been executed and delivered by the parties
thereto.
(iv) the Partnership and Fox shall have executed and delivered a
Trademark/Tradename License Agreement relating to the use of the name "Fox"
that is in form and substance mutually agreeable to the parties hereto.
(v) each of the Regionals in which Rainbow or Fox/Liberty has an
interest (other than an Unrestricted Regional) and Fox shall have executed
and delivered a Trademark/Tradename Sublicense Agreement relating to the
use of the name "Fox" that is in form and substance mutually agreeable to
the parties hereto.
-62-
(vi) the parties hereto or their appropriate Affiliates shall have
delivered or caused to be delivered, the amendments to the partnership
agreements of Chicago Partnership, Pacific Partnership, PSA Partnership and
Prism Partnership in substantially the forms of Annexes E-1 through E-4.
(vii) the National Sports Affiliation Agreements referred to in Annex F
shall have been executed and delivered.
(viii) the Regional Affiliation Agreements referred to in Annex G shall
have been executed and delivered.
(ix) the Reimbursement and Guarantee Agreement set forth as Annex H
shall have been executed and delivered.
(x) the Advertising Representation Agreements referred to in Annex I
shall have been executed and delivered.
(xi) the Options Reimbursement Agreement in substantially the form of
Annex J shall have been executed and delivered by the parties thereto.
(xi) the Transaction Documents (in addition to those listed above)
shall have been executed and delivered by the parties thereto and such
parties shall have performed all obligations required to be performed
-63-
by this Agreement and under the Transaction Documents as of the Closing.
(xii) the parties hereto shall have received all required regulatory
and other third party consents, including approvals of the National Hockey
League and the National Basketball Association, and any required waiting
periods under the HSR Act shall have terminated.
(xiii) There shall not be pending or threatened by any Governmental
Entity any action, suit or proceeding (or by any other person any action,
suit or proceeding which has a reasonable likelihood of success),
challenging or seeking to restrain or prohibit consummation of the
transactions contemplated to occur at the Closing or seeking to obtain in
connection with such transactions any damages that are material in relation
to the size of all the transactions to occur at the Closing.
(xiv) the representations and warranties made by the other party
hereto shall be true and correct in all material respects at and as of the
Closing (except to the extent that any such representation and warranty
expressly relates to an earlier date, in which case such representation and
warranty shall be true and
-64-
correct on and as of such earlier date) and such party shall have performed
or complied in all material respects with all obligations and covenants
required to be performed or complied with by such party.
6.2 Obligation to Execute Transaction Documents. Upon the satisfaction of
-------------------------------------------
all applicable conditions, each party hereto will execute and deliver the
Transaction Documents to which it is to be a party and each party will cause
each of its Affiliates that is to be a party to a Transaction Document to
execute and deliver each such Transaction Document.
6.3 Frustration of Closing Conditions. Neither Rainbow nor Fox/Liberty
---------------------------------
may rely on the failure of any condition set forth in Article 6 or 7 to be
satisfied if such failure was caused by its or its Affiliate's failure to act in
good faith or to cooperate and use all reasonable efforts to cause the
applicable Closing to occur as required by Section 5.3.
7. Documents to Be Delivered at the Closing.
----------------------------------------
7.1 By Rainbow.
----------
7.1.1 To Fox/Liberty At Closing, Rainbow shall deliver, or shall cause
--------------
to be delivered, to Fox/Liberty:
-65-
(a) Certificate. A certificate executed by an executive officer of
-----------
Rainbow stating that the representations and warranties made by Rainbow in
this Agreement are true and correct in all material respects at and as of
the Closing (except to the extent that any such representation and warranty
expressly relates to an earlier date, in which case such representation and
warranty shall be true and correct on and as of such earlier date) and that
all of the covenants and other obligations required by this Agreement and
the Transaction Documents to be performed by Rainbow and its Affiliates on
or prior to the Closing have been performed in all material respects.
(b) Other Documents. Such other instruments, documents, certificates and
---------------
opinions as may be reasonably requested by Fox/Liberty to confirm the
satisfaction of the Closing conditions and to consummate this Agreement and
the transactions contemplated hereby.
7.1.2 To the Partnership. At the Closing, Rainbow shall deliver to the
------------------
Partnership valid and effective instruments of transfer conveying to the
Partnership title to each of the Transferred Entity Interests.
-66-
7.1.3 To the National Sports Partnership. At the Closing Rainbow shall
----------------------------------
deliver to the National Sports Partnership valid and effective instruments
of transfer conveying to the National Sports Partnership (i) all of the
membership interests in American Sports LLC, (ii) a 50% general partnership
interest in PSA Partnership and (iii) all of the outstanding capital stock
of SportsChannel Ventures, Inc.
7.1.4 To the National Advertising Partnership. At the Closing Rainbow
---------------------------------------
shall cause to be delivered to the National Advertising Partnership valid
and effective instruments of transfer conveying to the National Advertising
Partnership title to each of the Rainbow Advertising Assets.
7.2 By Fox/Liberty.
--------------
7.2.1 To Rainbow. At the Closing Fox/Liberty shall deliver to Rainbow:
----------
(a) Certificates. Certificates executed by executive officers of
------------
Fox/Liberty stating that the representations and warranties made by
Fox/Liberty in this Agreement are true and correct in all material respects
at and as of the Closing (except to the extent that any such representation
and warranty expressly relates to an earlier date, in which case such
-67-
representation and warranty shall be true and correct on and as of such
earlier date) and that all of the covenants and obligations required by
this Agreement to be performed by Fox/Liberty at or prior to the Closing
have been performed in all material respects.
(b) Other Documents. Such other instruments, documents, certificates and
---------------
opinions as may be reasonably requested by Rainbow to confirm the
satisfaction of the Closing conditions or to consummate this Agreement and
the transactions contemplated hereby.
7.2.2 To the Partnership. At the Closing, Fox/Liberty shall deliver to
------------------
the Partnership an official bank check or checks or wire transfer payable
in immediately available funds to the Partnership in the amount of
$850,000,000.
7.2.3 To the National Sports Partnership. At the Closing, Fox/Liberty
----------------------------------
shall cause to be delivered to the National Sports Partnership valid and
effective instruments of transfer conveying to the National Sports
Partnership (i) a 50% general partnership interest in PSA Partnership, (ii)
title to all of the Transferred Assets, and (iii) if elected by Rainbow
-68-
pursuant to Section 5.6, all of the partnership interests in Fox Sports
Americas.
7.2.4 To the National Advertising Partnership. At the Closing,
---------------------------------------
Fox/Liberty shall cause to be delivered to the National Advertising
Partnership title to each of the Fox/Liberty Advertising Assets.
8. Actions to Be Taken and Agreements to Be Performed After the Closing.
---------------------------------------------------------------------
8.1 Further Documentation. As promptly as practicable after the Closing,
---------------------
Rainbow and Fox/Liberty shall cooperate to prepare and cause to be filed and/or
published in accordance with partnership law and other applicable laws, all such
certificates, notices and other instruments as may be necessary or appropriate
to reflect the changed interests in each of the Contributed Businesses and PSA
Partnership resulting from the transactions contemplated hereby. From time to
time each party shall execute and deliver, and cause its Affiliates to execute
and deliver, such additional instruments of conveyance and transfer and shall,
and shall cause its Affiliates, to fully cooperate and take such other actions
as may be reasonably necessary to effect the transfers to the Partnership, the
National Sports Partnership and the National Advertising Partnership
contemplated hereby.
-69-
8.2 Actions to Protect the National Sports Service. (a) Except as
----------------------------------------------
provided in Section 8.6, each of Rainbow and Fox/Liberty on behalf of itself and
each of its Affiliates, agrees that from and after the Closing neither it nor
any of its Affiliates (other than any Unrestricted Regional as provided in
Section 8.7) will, directly or indirectly, bid for or acquire Pay Television
programming rights to transmit professional sports events (other than the right
to air brief highlights of such events) of professional sports teams whose
"home" arena or stadium is located in a Covered Region ("Programming Rights"),
or own any interest including, without limitation, an equity or profits interest
in any other Person (but excluding any interest as a creditor of such Person
under any loan or other agreement on an arm's-length basis)(a "Covered
Interest"), that owns or bids for or acquires Programming Rights (including
through ownership of an interest in a professional sports team).
(b) The provisions of this Section 8.2 shall apply from and after the
Closing and until the 731st day after the Restriction Date as to the National
Sports Partnership.
8.3 Development of New Regional Sports Interests. In the event that
--------------------------------------------
Rainbow or any of its Affiliates or
-70-
Fox/Liberty or any of its Affiliates (other than an Unrestricted Regional as
provided in Section 8.7) (a "New Development Party"), proposes to negotiate or
bid for an interest in Programming Rights relating to, or a Covered Interest of
an entity owning or bidding for Programming Rights relating to, all or any part
of the New Development Region (a "New Development Interest") at any time, such
New Development Party shall provide Rainbow or Fox/Liberty, as the case may be
(the "Offeree"), with written notice of its intention to enter into such
negotiations or bidding process.
(b) Upon the acquisition of a New Development Interest, the New Development
Party shall provide the Offeree with written notice of such acquisition. The
Offeree shall have an option exercisable by notice to the New Development Party
(the "Option Exercise Notice") within 90 days after it is given notice of the
acquisition (the "Option Period") to acquire a 50% interest in the New
Development Entity, as defined below (an "Option"), on the same terms and
conditions as those on which the New Development Party acquired its interest in
the New Development Entity. The purchase price for the interests to be
purchased pursuant to the Option shall be an amount equal to the product of 50%
of the total capital contributions
-71-
(less distributions) made by any New Development Party in (or from) the New
Development Entity prior to the purchase of such interests by the Offeree. The
New Development Party shall take no actions that are designed to have the Option
contain terms or conditions which it knows the Offeree cannot accept. The
Offeree may exercise such Option by providing such New Development Party with
the Option Exercise Notice. If there is a party in the New Development Entity
other than the New Development Party that is not an Affiliate of the New
Development Party (a "Third Party"), the legal entity through which the New
Development Interest will be owned and exploited (the "New Development Entity")
will be as agreed between the New Development Party and such Third Party, with
the Offeree having the right to participate therein on the same terms as the New
Development Party. If there is no Third Party at the commencement of the Option
Period, and if the Offeree exercises such Option, the New Development Entity
shall be a partnership or limited liability company, organized under the laws of
the State of New York or Delaware pursuant to a partnership agreement or limited
liability company operating agreement substantially in the form of the Second
Amended and Restated General Partnership Agreement of SportsChannel Chicago
Associates, dated as of July 1, 1991, as amended through the date
-72-
hereof, with the New Development Party acting as the managing general partner
or manager thereof.
If the Offeree does not exercise such Option within such Option Period,
such Option will lapse. The lapse of any Option under this Section 8.3 shall
not impair the Offeree's right under this Section 8.3 to receive or exercise
subsequent Options which arise as a result of the subsequent acquisition by any
New Development Party of any New Development Interest.
(c) The closing of the Option (the "Option Closing") shall take place at a
mutually agreed location, on the later of (i) the twentieth business day
following the receipt by such New Development Party of the Option Exercise
Notice or (ii) the third business day following the date of receipt of all
necessary consents and approvals of Governmental Entities and the expiration of
any waiting period under the Xxxx-Xxxxx-Xxxxxx Act. The purchase price for the
interest in the New Development Entity will be paid to an entity designated by
the New Development Entity at the Option Closing in immediately available funds.
Each party's obligation to consummate an Option Closing shall be condi tioned
upon (x) no action or proceeding having been insti tuted and remaining in
effect at the time such consummation would otherwise have occurred against the
New Development
-73-
Entity or any of the owners of or investors in the New Development Entity or
their parent entities, partners, directors or officers by or before any
Governmental Entity to restrain, enjoin, prohibit or otherwise challenge, or to
obtain substantial damages or other relief in respect of, the formation of such
New Development Entity or the acqui sition by it of the New Development
Interest and which in the good faith opinion of such party would make it inadvis
able to consummate such transactions; and (y) any waiting period imposed by any
statute or regulation of a Govern mental Agency which must expire, or any
approval or consent of any Governmental Agency which must be obtained, prior to
consummation of the formation of such New Development Entity shall not have
expired or been obtained within 270 days following the receipt by such New
Development Party of the Option Exercise Notice despite the reasonable best
efforts of the parties responsible therefor (each of the events described in
this sentence is referred to as a "Prohibitory Action"). If it is determined
that filings under the HSR Act are required in connection with the exercise of
an Option, the parties will coordinate and cooperate with one another in
exchanging such information and assistance as the others may reasonably request,
and in responding to any subsequent inquiries that may be made.
-74-
(d) Except as provided in the next sentence, each of Rainbow and
Fox/Liberty covenant and agree that if it is a New Development Party it will,
until the expiration of the Option Period or if an Option Exercise Notice has
been given, until the Option Closing or the termination or sur render of the
Option, keep the interests in any New Development Entity subject to an Option
available for transfer pursuant to such Option, and free from any lien, charge,
pledge or other encumbrance that would not be released upon transfer of such
interest pursuant to this Section 8.3. Nothing in this Section 8.3 shall
restrict a New Development Party from transferring all or a portion of its
interest in any New Development Entity in one or more transactions during the
Option Period and prior to the Option Closing; provided, that if a New
--------
Development Party transfers any of its interest in any New Development Entity,
then, as a condition to such transfer, the transferee shall agree, in a writing
reasonably satisfactory to the Offeree to be bound by the provisions of this
Section 8.3.
(e) The provisions of this Section 8.3 shall apply from and after the
Closing and until the Restriction Date as to the National Sports Partnership.
8.4 Development of New Regional Nonsports Interests. In the event that
-----------------------------------------------
Rainbow or any of its
-75-
Affiliates or Fox/Liberty or any of its Affiliates (other than an Unrestricted
Regional as provided in Section 8.7) acquire or develop a new Pay Television
network, featuring programming other than sports or sports related programming,
having a particular appeal to one region or local area and closely related to
any business of the Partnership and operating in a Covered Region in which the
Partnership owns an interest in a Regional ("Regional Nonsports Programming") or
a Covered Interest in any other Person that owns or bids for or acquires
Regional Nonsports Programming (a "Regional Nonsports Interest"), such party or
its Affiliate, as the case may be, shall immediately offer the Partnership the
right to acquire such Regional Nonsports Programming or such Covered Interest on
the same terms on which such party or its Affiliate acquired such Regional
Nonsports Programming. The Partnership shall have 30 days to accept or reject
such offer and an additional 60 days (or longer if required to obtain all
necessary approvals and consents but in any event not more than 270 days from
the date of acceptance of the offer) to consummate such purchase. The
provisions of the third and fourth sentences of Section 8.4(c) shall apply to a
transaction under this Section 8.4. This Section 8.4 shall apply from and after
the Closing and until the Restriction Date as to the Partnership.
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8.5 Network Interests. From and after the Closing and until the
-----------------
Restriction Date as to the National Sports Partnership, if any of the parties
hereto or any of their Affiliates starts or acquires a National Sports Service
or any network distributed in the United States that is Controlled by such party
or any of its Affiliates at any time is a National Sports Service, then the
other party hereto or any of its Affiliates designated by such party will have
an option to acquire one-half (1/2) of the interest owned by such entities at
its Fair Market Value (as such term is defined in the Partnership Agreement) on
the terms and conditions and in accordance with the procedures set forth in
Section 8.3 hereof.
8.6 Excepted Transactions. The provisions of Section 8.2, 8.3, 8.4 and
---------------------
8.5 shall not prohibit or restrict the following, except as provided in this
Section 8.6: (a) a party or its Affiliates from owning or acquiring a Covered
Interest in any Person that directly or through one or more subsidiaries or
other entities owns a professional sports franchise or the Programming Rights to
the sports events of a professional sports franchise, so long as (i) such
franchise or Programming Rights are not a principal business of such Person and
(ii) the professional sports franchises and Programming Rights to sports events
of professional
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sports franchises owned by such Person (directly or through one or more
subsidiaries) were owned on the date of initial acquisition of the Covered
Interest therein by the party or its Affiliates and (iii) if as a result of such
ownership or acquisition the party and its Affiliates Control such Person, the
acquisition of the Covered Interest is treated as a New Development Interest
(whether or not the Covered Interest would otherwise meet the definition of New
Development Interest) and, in any event, all actions by such Person while it is
Controlled by such party and its Affiliates shall be subject to Sections 8.2,
8.3, 8.4 and 8.5; or (b) a party or its Affiliates from owning or acquiring a
Covered Interest in a professional sports franchise but no Programming Rights
with respect to the events of that professional sports franchise may be owned by
any entity in which such party or such Affiliate, or any of its Affiliates, has
a direct or indirect ownership interest other than a Regional in which
Fox/Liberty and Rainbow both have a direct or indirect ownership interest, or
(c) a Regional from bidding for or acquiring Programming Rights including
through ownership of an interest in a sports franchise in its own Covered Region
or owning or acquiring a Covered Interest in any Person that directly or through
one or more subsidiaries or other entities owns Programming
-78-
Rights in that Regional's own Expanded Covered Region; or (d) prohibit or
restrict any party or its Affiliates from acquiring, solely as an investment and
through private and market purchases, or owning securities of any corporation
which are registered under Section 12(b) or 12(g) of the Securities Exchange Act
of 1934, as amended, and which are publicly traded, so long as such party and
its Affiliates are not a part of any Control group of such corporation and such
securities constitute (after conversion, exchange or exercise, in the case of
any such securities that are convertible into, or exercisable or exchangeable
for, voting securities) less than 15 percent of the outstanding voting power of
that public company or prohibit or restrict such corporation from bidding for or
acquiring Programming Rights; or (e) any party or its Affiliates from owning or
acquiring any Covered Interest in the National Sports Partnership or any other
"national" sports programming network so long as the National Sports Partnership
or such successor or other network, as the case may be, is operating as a
"national" sports programming network and is not acquiring Programming Rights
for the sole or primary purpose of distributing such programming through Pay
Television to a Covered Region; or (f) any Person (an "Acquiror") from acquiring
an interest in a party or any of its Affiliates
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after the date of this Agreement and continuing to own such interest and conduct
its existing businesses and activities and its Affiliates' conducting their
existing business and activities notwithstanding that such ownership or conduct
of business and activities would violate the restrictions on Affiliates
contained in Sections 8.2, 8.3, 8.4 or 8.5; provided that (i) this clause (f)
--------
shall not authorize any actions, ownership or activities by Rainbow Media, Fox,
Inc. or Liberty Media Corporation or any entities Controlled by any of them or
by their successors and (ii) this clause (f) shall not authorize an Acquiror or
its Affiliates to engage in new activities or enter into, acquire or develop new
businesses in violation of Sections 8.2, 8.3, 8.4 and 8.5; or (g) any Person
that is a cable television operator or an Affiliate thereof from developing and
distributing Regional Nonsports Programming to cable systems provided that no
license fee is paid by such cable systems for such programming. Section 8.2
shall not apply to Programming Rights relating to professional sports teams that
are not (i) Major League Baseball teams, (ii) National Football League teams,
(iii) National Hockey League teams, (iv) Major League Soccer teams or (v)
National Basketball Association teams, in each case in a Covered Region and
whose games are currently carried on a Regional other than the Regional in
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whose Covered Region such team has its "home" arena or stadium.
8.7 Unrestricted Regionals, Etc. The provisions of Sections 8.2, 8.3,
---------------------------
8.4 and 8.5 shall not apply to any Unrestricted Regional, however, each party
-------
agrees that it and its Affiliates will not cause an Unrestricted Regional to
engage in conduct that is contrary to such sections so long as not causing the
Unrestricted Regional to do so would be consistent with such party's or
Affiliate's fiduciary and other obligations to the partners, stockholders or
other outside equity investors in such Unrestricted Regional. Subject to Section
8.6 and subject to each party's and its Affiliate's fiduciary and other
obligations, when Sections 8.2, 8.3, 8.4 and 8.5 apply to Affiliates of a party,
such party shall be required to cause each such Affiliate to act in accordance
with such provision and shall be fully responsible to the other party for any
failure by its Affiliates to so act, whether or not such party in fact had the
power to cause such Affiliate to so act.
8.8 Employees and Employee Benefits.
-------------------------------
(a) Subject to the right to terminate employees for cause, the National
Sports Partnership and the National Advertising Partnership, as the case may be
(the "Employing Partnership"), shall, for a period of one year after the
-81-
Closing Date (the "Employment Period"), continue the employment of the employees
of Rainbow Advertising, PSA Partnership and American Sports LLC (the
"Transferred Employees"), in all cases at substantially the same rate of
compensation (including bonuses and commissions), position and place of
employment held by the Transferred Employees immediately prior to the Closing
Date.
(b) The Employing Partnership shall maintain during the Employment Period,
without interruption, employee compensation and benefit plans, programs and
policies and fringe benefits (including bonuses, commissions, vacations and
severance arrangements) that provide benefits to the Transferred Employees that
are no less favorable than those provided by the Employing Partnership to
comparable employees of the Employing Partnership.
(c) Transferred Employees shall be given credit for all service with
Rainbow Advertising, PSA Partnership, American Sports LLC and their Affiliates,
in each case under all employee benefit plans, programs and policies (including
vacation and severance arrangements) and fringe benefits in which they become
participants as provided in Section 8.8(b) for purposes of eligibility, vesting
and benefit accrual and no Transferred Employee will be subjected to any waiting
periods or limitations on benefits for pre-existing
-82-
conditions. Each Transferred Employee will be credited with the amount of
vacation time accrued by such Transferred Employee through 12:01 a.m. on the
Closing Date.
(d) Subject to applicable law, during the Employment Period, the Employing
Partnership shall only have the right to terminate the employment of any
Transferred Employee if such termination is for cause.
8.9 "Fox" Branding; Trademarks. Rainbow and Fox/Liberty agree that from
--------------------------
and after the Closing they shall cooperate to cause all Regionals in which they
have an interest (other than MSG and SportsChannel New York and any Unrestricted
Regional) to operate under the name "Fox Sports [insert region]" not later than
a reasonable period of time after each Regional begins carrying the national
programming service of the National Sports Partnership. Fox shall license each
such Regional to use the "Fox" name under a Trademark/Tradename License
Agreement that is in form and substance mutually agreeable to the parties
hereto.
8.10 Use of Investment Proceeds. The net proceeds to the Partnership
--------------------------
from the Fox/Liberty Partnership Contribution shall be used as described in a
letter from Fox/Liberty to Rainbow dated the date hereof.
8.11 Right of First Refusal. If any party hereto or any of its
----------------------
Affiliates shall wish to transfer, directly or
-83-
indirectly, any interest in any Regional (other than a Regional in which the
Partnership has an interest), the party (or its Affiliates, as the case may be
(the "Seller") shall first consult with the other party to this Agreement to
determine whether it is possible to reach agreement on selling that interest to
such party or its Affiliates but with no obligation on the part of either entity
to reach such agreement.
9. Indemnification.
---------------
(a) Indemnification by Rainbow. Rainbow will indemnify Fox/Liberty and its
--------------------------
officers, directors and Affiliates (the "Fox/Liberty Indemnified Parties" and,
together with the Rainbow Indemnified Parties, as hereinafter defined, the
"Indemnified Parties") against any loss or damage suffered by any of them as a
result of (i) a breach of any representation and warranty of Rainbow hereunder
of which no Fox/Liberty Indemnified Party has knowledge of as of Closing, (ii)
any Excluded Liability of American Sports LLC or SportsChannel Ventures, Inc.
and (iii) any taxes imposed with respect to any taxable period ending on or
before the Closing pursuant to Treasury Regulations Section 1.1502-6 (or any
similar provision of any state or local law imposing several liability upon the
members of a consolidated, combined, affiliated or unitary
-84-
group) on the National Sports Partnership or Liberty/Fox as a result of
SportsChannel Ventures, or any other corporation which is part of a Contributed
Business, having joined with Cablevision Systems Corporation (or its Affiliates)
in the filing of a consolidated, combined or unitary tax return during any
taxable period ending on or prior to the Closing. (each such loss or liability
being hereinafter referred to as an "Fox/Liberty Indemnified Liability").
Rainbow's obligation to indemnify the Fox/Liberty Indemnified Parties as
provided in this Section 9 shall be subject to the following limitations: (I)
Rainbow shall not, in any case, be obligated to indemnify against any loss or
damage from Fox/Liberty Indemnified Liabilities to the extent the amount
thereof, excluding any claims under, or for breach of, Section 11, does not
exceed in the aggregate $10,000,000 (the "Basket") and shall only be liable for
amounts in excess of the Basket; (II) the claims under this Section 9(a) shall
not, in any event, exceed $510 million (the "Liability Limit"); (III)
Fox/Liberty must assert any claim for indemnification against Rainbow within six
months following the Closing except that if such claim is in respect of a breach
of any representation or warranty, such claim may be asserted until the date on
which such representation and warranty ceases to survive as provided in
-85-
Section 3.2; and (IV) the Fox/Liberty Indemnified Liabilities shall not include
any loss or damage that any Fox/Liberty Indemnified Party would have suffered
had this Agreement not been executed and delivered, including as a direct or
indirect partner in any Contributed Business. Subject to the immediately
preceding sentence, loss or damage suffered by Fox/Liberty with respect to any
loss in a Contributed Business shall be equal to, without limitation, the
incremental indirect interest in any Fox/Liberty Indemnified Loss obtained as a
result of the incremental ownership interest acquired hereunder by Fox/Liberty,
but shall not include any diminution in the value of any asset other than as a
result of the assertion of a Fox/Liberty Indemnified Liability that directly
reduces the value of an asset by offset or otherwise.
(b) Indemnification by Fox/Liberty. Fox/Liberty will indemnify Rainbow and
------------------------------
its officers, directors and Affiliates (the "Rainbow Indemnified Parties" and
together with the Fox/Liberty Indemnified Parties, the "Indemnified Parties")
against any loss or damage suffered by any of them as a result of (i) a breach
of any representation and warranty of Fox/Liberty hereunder of which no
Indemnified Party has knowledge of as of Closing and (ii) any Excluded Liability
of or relating to Fox Sports Americas or Fox
-86-
Sports Net (each such loss or liability being hereinafter referred to as a "
Rainbow Indemnified Liability"). The obligation of Fox/Liberty to indemnify the
Rainbow Indemnified Parties as provided in this Section 9 shall be subject to
the following limitations: (I) Fox/Liberty shall not, in any case, be obligated
to indemnify against any loss or damage from Rainbow Indemnified Liabilities to
the extent the amount thereof does not exceed in the aggregate $1,000,000 (the
"Fox/Liberty Basket" and, together with the Rainbow Basket, the "Basket") and
shall only be liable for amounts in excess of the Fox/Liberty Basket; (II) the
claims under this Section 9(b) shall not, in any event, exceed $50 million (the
"Fox/Liberty Liability Limit" and, together with the Rainbow Liability Limit,
the "Liability Limit"); (III) Rainbow must assert any claim for indemnification
against Fox/Liberty within six months following the Closing except that if such
claim is in respect of a breach of any representation or warranty, such claim
may be asserted until the date or which such representation and warranty ceases
to survive as provided in Section 4.2; and (IV) the Rainbow Indemnified
Liabilities shall not include any loss or damage that any Rainbow Indemnified
Party would have suffered had this Agreement not been executed and delivered.
-87-
(c) Indemnification Procedures. The Indemnified Party shall notify the
--------------------------
party such claim is being made against (the "Indemnifying Party") in writing
within 45 days after the Indemnified Party actually becomes aware of any event,
or discovers any facts, which in its opinion entitle or may entitle it to
indemnification hereunder from the Indemnifying Party. The Indemnified Party's
failure to do so shall not (except as stated in the above section) pre clude it
from seeking indemnification hereunder except to the extent such failure
materially prejudices the Indemnifying Party's ability to defend as provided
herein. With respect to any threatened or asserted claims of third parties, the
defense of such claims shall be managed as follows: (i) for claims against the
Indemnified Party falling wholly within the Basket and as to which the Indem
nified Party will not seek indemnity, in whole or in part, the Indemnified Party
may, if it chooses, defend such claim by counsel of its own choosing reasonably
satisfactory to the Indemnifying Party and the Indemnifying Party shall
cooperate with the Indemnified Party in the defense of such claim and the
Indemnifying Party may at its own expense participate in the defense of such
claim by counsel of its own choosing; (ii) for all other claims, the
Indemnifying Party shall promptly defend such claim by counsel of its own
-88-
choosing reasonably satisfactory to the Indemnified Party and the Indemnified
Party shall cooperate with the Indemnifying Party in the defense of such claim
and the Indemnified Party may participate at its own expense in the defense of
such claim by counsel of its own choosing; provided, however, that with regard
-------- -------
to claims seeking a remedy other than monetary damages, or if the Indemnified
Party has defenses available to it that are not available to the Indemnifying
Party, the Indemnified Party may, without waiving any rights, participate in the
defense of such claim and any such participation shall be at the Indemnified
Party's expense. The Indemnified Party shall be entitled to direct or control
the defense of such claim under clause (ii) above if the Indemnified Party
waives all right to indemnification it may have in respect of such claim under
this Section 9. Unless the Indemnified Party has assumed the defense of a claim
as provided in the preceding sentence, the Indemnified Party shall concur in the
settlement of any matter on the basis stipulated by the Indemnifying Party (with
the Indemnifying Party being responsible for all costs and expenses of such
settlement).
If the Indemnifying Party fails to defend the Indemnified Party within a
reasonable time after it is given notice of a third-party claim, the Indemnified
Party shall
-89-
be entitled to undertake the defense, compromise or settlement of such claim at
the expense of and for the account and risk of the Indemnifying Party with
counsel of the Indemnified Party's choosing. If the Indemnified Party has
undertaken the defense of a claim pursuant to the preceding sentence, the
Indemnifying Party may assume the defense of such claim at any time prior to the
settlement, compromise or final determination thereof as provided in and subject
to the provisions of the immediately preceding paragraph.
Any payment under this Section 9 shall be treated by the parties hereto and
thereto as an adjustment to the contributed capital for the Partnership
Interest.
10. Termination.
-----------
10.1 Termination Rights. This Agreement may be terminated and the
------------------
transactions contemplated herein may be abandoned, (a) by mutual consent of the
parties hereto, or (b) by any party by notice to the other party if the Closing
Date shall not have occurred on or before March 31, 1998.
10.2 No Liabilities in Event of Termination. In the event of any
--------------------------------------
termination of this Agreement as provided in Section 10.1, this Agreement shall
forthwith become wholly void and of no further force and effect and there shall
be no liability on the part of any of the parties
-90-
hereto or their respective officers or directors, except that termination shall
not preclude any party from bringing an action against another party for breach
of any covenant or agreement contained herein that occurs prior to termination,
including for breach of any of the confidentiality obligations herein.
11. Brokerage. Each of Fox/Liberty and Rainbow represents to and agrees
---------
with each other that it has not retained any broker or finder in the negotiation
and execution of this Agreement or the consummation of the transactions
contemplated hereby, other than the retention of Bear, Xxxxxxx & Co. Inc. by
Rainbow (whose fees and expenses shall be paid by the Partnership at the
Closing). Each of Fox/Liberty and Rainbow shall indemnify and save harmless the
other from and against any and all claims, liabilities or obligations (including
legal fees) with respect to brokerage or finders' fees or commissions in
connection with this transaction asserted by any Person on the basis of any
communication alleged to have occurred between or on behalf of such party and
such Person, other than with respect to Bear, Xxxxxxx & Co. Inc.
12. Non-Recourse. Notwithstanding anything con tained in this Agreement
------------
to the contrary, it is expressly understood and agreed by the parties hereto
that no repre-
-91-
sentation, undertaking or agreement made in this Agreement on the part of
Rainbow or Fox/Liberty was made or intended to be made as a personal or
individual representation, undertaking or agreement on the part of any
incorporator, stockholder, director, officer, agent, or partner (past, present
or future), of Rainbow or Fox/Liberty, 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 incorporator, stockholder, director, officer,
agent, or partner, all of which recourse (whether in common law, in equity, by
statute or otherwise) is hereby forever waived and released.
13. Expenses. Each of the parties hereto shall bear all expenses
--------
incurred by it in connection with this Agreement and the consummation of the
transactions contem plated hereby and the preparation therefor. Without
limiting the foregoing, no expenses incurred by any party hereto shall be borne
directly or indirectly by the Partnership, any Contributed Business, the
National Sports Partnership, PSA Partnership or Fox Sports Net, except as
provided in Section 11. Any real property transfer taxes shall be borne by the
transferee of the assets or interests giving rise to such tax.
-92-
14. Assignment and Binding Effect. Except as otherwise provided herein,
-----------------------------
this Agreement shall not be assignable by any party without the prior written
consent of the other parties hereto; provided, that the rights and obligations
--------
of a party (the "Transferring Party") under this Agreement (including without
limitation the provisions of Section 9) may be transferred to the transferee in
connec tion with a merger with, or sale of all or substantially all the assets
of such Transferring Party to an entity under direct or indirect common Control
with such Transferring Party prior to the Closing as a part of a reorganization
or restructuring involving the Transferring Party; provided, that the beneficial
--------
ownership of Rainbow or Fox/Liberty, as the case may be, in the affiliated
entity after such transaction will not be less than the direct and indirect
beneficial ownership of Rainbow or Fox/Liberty, as the case may be, in such
Transferring Party; provided, further, that the assignee shall expressly assume
-------- -------
the obligations of the Transferring Party hereunder in a writing delivered to
the other party hereto. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
15. Construction. This Agreement shall be governed, construed and
------------
enforced in accordance with the laws
-93-
of the State of New York without regard to principles of conflicts of laws.
16. Notices. All notices, demands, requests and other communications
-------
required or permitted to be given hereunder shall be given in writing and shall
be deemed duly given on the date sent by facsimile transmission with machine
answerback mailed by registered mail, postage pre paid and, pending the
designation of another address, addressed as follows:
If to Rainbow:
Rainbow Media Holdings, Inc.
000 Xxxxxxxxx Xxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: President
cc: Executive Vice President,
Legal and Business Affairs
Rainbow Program Enterprises
000 Xxxxxxxxx Xxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
cc: Cablevision Systems Corporation
Xxx Xxxxx Xxxxxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Executive Vice President
and General Counsel
If to Fox/Liberty:
Fox Sports Net, LLC
0000 Xxxxx Xxxxxxxxx Xxxx.
Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attention: Xxxx Xxxx
Telecopy: (000) 000-0000
-94-
With copies to:
Liberty Media Corporation
0000 X. Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: President
Telecopy: (000) 000-0000
and:
Tele-Communications, Inc.
0000 XXX Xxxxxxx
Xxxxxxxxx, XX 00000
Attention: Legal Department
Telecopy: (000) 000-0000
and:
Xxxxxxx & Xxxxxx L.L.C.
0000 Xxxxx Xxxxxxxxxx Xxxxx Xxxxx
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telecopy: (000) 000-0000
and:
The News Corporation Limited
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Senior Executive Vice President
and Group General Counsel
Telecopy: (000) 000-0000
and:
Fox Television
00000 Xxxx Xxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxx Xxxxxxxxx, Esq.
Senior Vice President
Legal Affairs
Telecopy: (000) 000-0000
-95-
and:
Squadron, Ellenoff, Plesent & Xxxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxxx, Esq.
Telecopy: (000) 000-0000
17. Benefit. Nothing in this Agreement, express or implied, is intended
-------
or shall be construed to confer upon or give to any Person other than the
parties hereto any remedy or claim under or by reason of this Agreement or any
term, covenant or condition hereof (other than pursuant to Sections 3.1.15,
4.1.15, 9 and 12 hereof), all of which shall be for the sole and exclusive
benefit of the parties hereto.
18. Press Releases. All press releases or other public communications of
--------------
any sort relating to the subject matter of this Agreement and the method of the
release shall be subject, except as otherwise required by law, to the prior
approval of Rainbow and Fox/Liberty which approval shall not be unreasonably
withheld.
19. Headings. The headings of the Sections of this Agreement are
--------
inserted as a matter of convenience and for reference purposes only, are of no
binding effect, and in no respect define, limit or describe the scope of this
Agreement or the intent of any Section.
-96-
20. Schedules. All schedules and annexes delivered pursuant to this
---------
Agreement shall be deemed part of this Agreement and incorporated herein, where
applicable, as if fully set forth herein.
21. Counterparts. This Agreement may be signed in any number of
------------
counterparts with the same effect as if the signatures to each were to the same
Agreement.
22. Entire Agreement. This Agreement, including the schedules and
----------------
annexes hereto, represents the entire understanding and agreement among the
parties hereto with respect to the subject matter hereof (except with respect to
the matters covered by the other Transaction Documents and except for any
contemporaneous writing signed by both parties which specifically refers to this
Agreement), and supersedes all prior negotiations among the parties hereto with
respect to such subject matter. This Agreement can be amended, modified,
supplemented, extended, terminated, discharged or changed only by an agreement
in writing which makes specific reference to this Agreement and which is signed
by the party against whom enforcement of any such amendment, modification,
supplement, extension, termination, discharge or change is sought.
23. Confidentiality. No party to this Agreement shall, during the period
---------------
when any provision of this
-97-
Agreement is in effect and for a period of two years after the date of this
Agreement, disclose any information (that is not publicly available or generally
known other than by breach of the provisions of this Section) obtained by such
party pursuant to or in connection with the negotiation, operation, delivery and
performance of this Agreement to any person, except (i) with the prior written
consent of the other party; (ii) to the 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 notify the other 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 company, its auditors and its attorneys and any stock
exchange upon which its parent's securities are listed; provided, that such
--------
party shall be liable for any breach by such parent company, auditors or
attorneys of any provision of this Section 23; (iv) in connection with the
enforcement of such party's rights hereunder; (v) disclosures to an Affiliate
of, or to a professional advisor to, such party in connection with the
performance by such party of its obligations hereunder; provided, that such
--------
party shall be liable for any breach by such Affiliate or professional advisor
of any provision of
-98-
this Section 23; and (vi) to a prospective purchaser of such party or of all or
a portion of such party's interest in one or more of the entities that are the
subject of this Agree ment; provided, that such party shall be liable for any
--------
breach by such prospective purchaser of any provision of this Section 23.
-99-
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed in its name and on its behalf, all as of the date first above
written.
RAINBOW MEDIA SPORTS HOLDINGS, INC.
By: /s/ Xxxx Xxxxxxxxxx
--------------------------------
Xxxx Xxxxxxxxxx
FOX SPORTS NET, LLC
By: /s/ Xxx Xxxxxxxxx
--------------------------------
Xxx Xxxxxxxxx
-100-
