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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
____________________________________________
FORM 8-K
____________________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
August 27, 1994
CABLEVISION SYSTEMS CORPORATION
(Exact Name of Registrant as specified in its charter)
Delaware
(State of Incorporation)
1-9046 11-2776686
(Commission File Number) (IRS Employer Identification Number)
One Media Crossways, Woodbury, New York 11797
(Address of principal executive offices)
Registrant's telephone number, including area code:
(516) 364-8450
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ITEM 5. OTHER EVENTS.
On August 27, 1994, MSG Holdings, L.P. ("Holdings"), a partnership between
a subsidiary of Rainbow Programming Holdings, Inc. ("Rainbow"), a wholly-owned
subsidiary of Cablevision Systems Corporation ("Cablevision"), and a subsidiary
of ITT Corporation, a Delaware corporation ("ITT"), entered into an Agreement
and Plan of Merger with Viacom Inc., Paramount Communications Realty
Corporation, ITT and Rainbow Garden Corporation, a wholly-owned subsidiary of
Rainbow, pursuant to which Holdings will acquire Madison Square Garden
Corporation ("MSG") in a transaction in which MSG will be merged with and into
Holdings. The purchase price payable by Holdings for MSG will be approximately
$1.075 billion, payable in cash.
MSG owns the world famous 20,000 seat Madison Square Garden Arena and the
adjoining 5,600 seat Paramount Theater; the National Hockey League ("NHL")
Stanley Cup Champion New York Rangers; the National Basketball Association
("NBA") Championship finalist New York Knicks; and the Madison Square Garden
Network, with five million subscribers for Knicks basketball, Rangers hockey,
Yankees baseball, boxing, college basketball and other programming.
The acquisition is subject to customary terms and conditions including the
expiration of Hart-Scott_Rodino waiting periods and approvals by the NHL and
the NBA of the indirect transfers of the sports franchises, and its expected to
close by December 31, 1994.
ITT, Rainbow and Cablevision are parties to an Agreement, made as of
August 15, 1994 (the "Bid Agreement"), pursuant to which it has been agreed
that Holdings will fund the purchase price of the acquisition through
(i) borrowings of approximately $355 million from a third party or, if such
funding is not obtainable by the closing of the acquisition, from ITT, (ii) an
equity contribution from Rainbow of $110 million, and (iii) an equity
contribution from ITT of the balance. Within 12 months following the MSG
closing, Rainbow may elect to acquire interests in Holdings from ITT sufficient
to equalize the equity ownership of ITT and Rainbow in Holdings. The
consideration for this equalization interest will be cash because, on
September 16, 1994, ITT elected not to exercise a provision which would have
permitted Rainbow to make payment in Rainbow common stock. In light of ITT's
September 16, 1994 election, Rainbow has the option during the 12 months
following the MSG closing to (i) acquire all or a portion of the equalization
interest for cash (including interest on such equalization interest at the
rate of 11 1/2% per year calculated from the MSG closing date), (ii) maintain
its investment at the initial level, or (iii) require ITT to purchase one-half
of Rainbow's initial interest in Holdings at the price paid by Rainbow plus an
adjustment for
2
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Rainbow's share of Holdings' operating income after interest expense following
the MSG closing. Rainbow has until one year from the time of the MSG closing to
make its election and has not finally decided which alternative it will pursue.
It is expected that initially Holdings will be managed on a 50/50 basis by
Rainbow and ITT. If, as discussed above, Rainbow does not equalize its
ownership interest in Holdings, its management role will be effectively
eliminated. Rainbow also has the right to voluntarily relinquish any power to
direct the management and policies of Holdings.
Rainbow has, pursuant to its New Ventures Agreement with National
Broadcasting Company, Inc. ("NBC"), offered NBC the opportunity to participate
in one-half of Rainbow's investment in Holdings. NBC has 45 days from the date
of the offer in which to decide whether it will participate.
The following exhibits are filed as a part of this report on Form 8-K:
10.65 Agreement, dated as of August 15, 1994 among ITT Corporation,
the Registrant and Rainbow Programming Holdings, Inc.
10.66 Amendment Agreement, dated as of September 12, 1994 among
ITT Corporation, the Registrant and Rainbow Programming
Holdings, Inc.
10.67 Agreement and Plan of Merger, dated as of August 27, 1994 among
Viacom Inc., Paramount Communications Realty Corporation, ITT
Corporation, Rainbow Garden Corporation and MSG Holdings, L.P.
3
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
CABLEVISION SYSTEMS CORPORATION
By: /s/ William J. Bell
___________________________
William J. Bell
Vice Chairman
Dated: September 21, 1994
4
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Index to Exhibits
-----------------
Exhibit No.
- -----------
10.65 Agreement, dated as of August 15, 1994 among ITT
Corporation, the Registrant and Rainbow Programming
Holdings, Inc.
10.66 Amendment Agreement, dated as of September 12, 1994
among ITT Corporation, the Registrant and Rainbow
Programming Holdings, Inc.
10.67 Agreement and Plan of Merger, dated as of August 27, 1994
among Viacom Inc., Paramount Communications Realty
Corporation, ITT Corporation, Rainbow Garden Corporation
and MSG Holdings, L.P.
5
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[Execution Copy]
AGREEMENT
This Agreement (the "Agreement") is made as of the 15th day of August,
1994 by and among ITT Corporation, a Delaware corporation ("I"), Cablevision
Systems Corporation, a Delaware corporation ("C"), and Rainbow Programming
Holdings, Inc., a New York corporation and a wholly-owned subsidiary of C ("R").
A new limited partnership ("LP") will be formed under the laws of Delaware by I
and R and I plans to submit a bid on behalf of LP to have LP acquire, through a
transaction described below, the business of Madison Square Garden Corporation,
a Delaware corporation ("M"), from Paramount Communications Realty Corporation,
a Delaware corporation ("P"). This Agreement definitively sets forth the mutual
understandings between I and C and R concerning the Bid (as defined below) that
LP will submit and their rights and obligations with respect thereto and with
respect to the continuing business if the Bid is accepted, including the rights
and obligations with respect to the ownership and governance of the general
partner ("GP") of LP and certain related obligations of C.
1. THE BID. The bid (the "Bid") to be submitted is attached hereto
as Annex 1. As indicated therein, the proposed acquisition will be structured
as a merger of LP and M, with LP as the surviving entity in the merger. LP will
be formed promptly after the date hereof pursuant to a customary form of
certificate of limited partnership.
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2
Neither I nor R has authority to alter the Bid, or to make any commitments or
agreements with respect thereto without the prior written consent of the other
party.
2. FUNDING LP. Of the total proposed purchase price in the Bid, (i) LP
will borrow $355 million from a third party or, if such financing is not
obtainable by the closing (the "Closing") of LP's acquisition of M, from I on
terms appropriate for such a borrowing, taking into account the expected
maturity of such borrowing, (ii) R will contribute $100 million, and (iii) I
will contribute the balance. LP will endeavor to obtain financing to repay any
borrowing from I made pursuant to the prior sentence. Any debt of LP, M or any
entity controlled by either LP or M or both of them will be nonrecourse to the
partners of LP (other than GP) and shall be expressly nonrecourse to the
shareholders of GP.
Each of R and I agrees to provide the funding of LP and GP described
herein on the date of the Closing (the "Closing Date"), subject to the terms and
conditions set forth herein and as set forth in the letter with respect to the
Bid and the purchase agreement with P.
3. OWNERSHIP OF LP; SUBSEQUENT TRANSFERS. (a) The initial ownership
structure of LP shall be as follows:
<TABLE>
<CAPTION>
<S> <C>
GP.................... 1% of capital, profit
and loss, as general partner
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3
Subsidiary of I
("I Sub")............. capital account equal to 99% of the
I Sub Investment (defined below),
49.5% of loss and pro rata share of
99% of profit based on the I
Sub Investment, as a limited
partner Subsidiary of R
("R Sub") ............ capital account equal to 99% of the
Initial R Sub Investment (defined
below), 49.5% of loss and pro
rata share of 99% of profit
based on the Initial R
Sub Investment, as
a limited partner
</TABLE>
Subject to Section 4 hereof, a limited partnership interest equal to one-half of
the difference between the capital account and profit share of I Sub and the
capital account and profit share of R Sub following the Closing is referred to
herein as the "Share Differential." For example, if (i) the I Sub Investment is
$600 million, I Sub's share of profit is 84.86%, and (ii) the Initial R Sub
Investment is $100 million, R Sub's share of profit is 14.14%, then (iii) the
Share Differential is $247.5 million of capital and 35.36% of profit.
(b) The capital contributions in respect of the initial ownership
structure of LP shall be as follows:
<TABLE>
<CAPTION>
<S> <C>
GP.................. An amount equal to 1% of the
aggregate of the I Sub Investment
and the Initial R Sub Investment
(as those terms are defined below)
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4
I Sub............... 99% of a total amount (such total
amount, the "I Sub Investment")
equal to the purchase price of M
specified in the Bid plus all
transaction expenses (defined in
Section 9) (together, "M Cost"),
less debt incurred by LP to finance
a portion of the M Cost, less the
Initial R Sub Investment
R Sub............... 99% of a total amount that is $100
million (such total amount,
"Initial R Sub Investment")
</TABLE>
In addition, within twelve months following the Closing (the final date for
acquiring the Share Differential, the "Funding Date"), I shall cause I Sub to
sell to R Sub and R shall cause R Sub to purchase from I Sub (i) the Share
Differential with the result that the interests of R Sub and I Sub in capital,
profits and losses are equal and (ii) a number of shares of GP common stock so
that I and R own equal amounts thereof for a purchase price (the "Purchase
Price") equal to the sum of (x) one-half of the difference between the I Sub
Investment and the Initial R Sub Investment (the "Funding Balance") plus (y) a
return, at 11 1/2%, on the Funding Balance calculated for the actual number of
days in the period from the Closing through the date the related payment of the
Funding Balance is paid divided by 365. Interest shall accrue only on unpaid
portions of the Funding Balance.
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5
Subject to Section 15, if the entire Purchase Price has not been paid in
cash by the Funding Date, R shall pay the balance of the Purchase Price by
issuing to I on such date a number of newly issued shares of R common stock so
that I's aggregate economic percentage interest in R shall be as provided below:
Percent of R Funding Balance less any
to be owned = portion thereof paid in cash
----------------------------
by I $750 million plus [1/2 of
(I Sub Investment plus
Initial R Sub Investment)]
If (i) R is not obligated to purchase the Share Differential pursuant to
Section 15 otherwise than through a failure of a condition reasonably within the
control of R and (ii) for any reason R does not purchase the Share Differential
on or prior to the Funding Date, then the I Sub and R Sub respective shares of
losses shall be adjusted to be equal to the I Sub and R Sub respective shares of
profits. Unless R is obligated to purchase the Share Differential pursuant to
Section 15, if for any reason R does not purchase the Share Differential on or
prior to the Funding Date, R shall have the right to require I to purchase one-
half of R's initial interest in LP and GP for an amount equal to one-half of the
Initial R Sub Investment PLUS a portion of LP's operating income after interest
expense for the period from the Closing Date through the Funding Date equal to
one-half of R Sub's profit share percentage thereof. Thereafter R shall have no
further funding obligation hereunder.
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6
LP shall prohibit the admission of new partners without the consent of all
partners in LP (subject to Section 11 hereof). GP shall have complete control
over management of LP with the limited partners having narrow veto rights over
fundamental transactions.
4. CAPITALIZATION OF GP. GP shall have a single class of capital stock
(the "GP Common Stock") which will be owned by I and R at all times in the same
proportions that they participate in the profits of LP as limited partners. The
capital of GP shall comprise 1% of the capital of LP (plus amounts sufficient to
pay for the organization of GP), and GP shall contribute 1% of the capital of LP
as contemplated by Section 3 hereof. The purchase by R of the Share
Differential pursuant to Section 3 shall include the purchase by R of a number
of shares of GP Common Stock so that immediately thereafter I and R will each
own shares of GP Common Stock in the same proportions that they participate in
the profits of LP, and I shall transfer such number of shares of GP Common Stock
to R as is necessary to effect this ownership.
5. SHAREHOLDERS AGREEMENT OF GP. The shareholders of GP shall enter into
a shareholders agreement with respect to the ownership of GP Common Stock and
the governance of its affairs, including the voting of the shares of GP Common
Stock. Each share of GP Common Stock shall be entitled to one vote on all
matters submitted to the shareholders of GP. Subject to Section 14, until the
Funding Date and thereafter
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7
unless R shall not have purchased the Share Differential by the Funding Date as
provided in Section 3, I and R agree that they shall vote, or cause their
subsidiaries to vote, their shares of GP Common Stock at all times to cause (i)
the Board of Directors of GP (the "Board") to consist of six directors of whom
one-half shall be designated by I and one-half shall be designated by R and (ii)
Arthur Andersen & Co. to be designated as the independent accountants of GP and
LP. In the event R does not purchase the Share Differential by the Funding
Date, R shall have the rights set forth on Exhibit B.
6. CHIEF EXECUTIVE OFFICER. The Board, acting unanimously, shall elect
the Chief Executive Officer of GP who shall report to the Board. The Chief
Executive Officer shall have authority to manage the business and affairs of GP
and LP as delegated by the Board subject to receiving the prior approval of the
Board when such approval is required by law or this Agreement and in the case of
Extraordinary Decisions.
7. EXTRAORDINARY DECISIONS. Until the Funding Date and thereafter unless
R shall not have purchased the Share Differential by the Funding Date as
provided in Section 3, certain actions may only be taken with the prior approval
of 100% of GP's directors present at any meeting (which shall include at least
one director designated for election by I and one director designated for
election by R), including establishing policies and procedures as the Board
shall deem
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8
appropriate. These actions shall be the actions enumerated by the Board as
Extraordinary Decisions and shall initially include:
(i) GP incurring indebtedness or making any investment other than its
investment in LP.
(ii) LP incurring indebtedness other than indebtedness of $355 million
contemplated by Section 2 hereof and indebtedness to trade creditors
incurred in the ordinary course of its business.
(iii) GP issuing additional shares of capital stock.
(iv) LP issuing additional equity interests or admitting substitute or
additional partners (other than any admission as a result of an
Exempt Transfer pursuant to Section 11 hereof).
(v) GP requiring its shareholders or LP requiring its partners to provide
any additional capital by way of capital call, rights offering or
otherwise, except as required by GP's or LP's annual budget.
(vi) Changing GP's or LP's independent accountants.
(vii) Approving GP's or LP's annual budget or five year plan.
(viii) Selling, transferring, assigning or pledging all or substantially all
of the assets of GP or LP.
(ix) Entering into, amending or terminating any contract (including a
rights agreement) that is a material agreement of GP or LP.
(x) Committing to any material acquisition by GP or LP.
(xi) Entering into, amending or terminating an affiliate transaction
involving GP or LP.
(xii) Amending the Certificate of Incorporation or By-laws of GP or the
Agreement of Limited Partnership of LP.
(xiii) Payment by LP of any distribution to its partners.
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9
In the event that any affiliate of any partner and one or more parties
unrelated to such partner are actual or potential competitors with respect to
the provision of any product or service to LP or any affiliate of any partner is
an actual or potential competitor with respect to the provision of any product
or service by LP, such partner will not exercise its voting rights with respect
to any Extraordinary Decision in a manner inconsistent with the best interests
of LP, or otherwise exercise any right it may have pursuant to this Agreement in
a manner inconsistent with the best interests of LP or withhold its consent to
any arrangement for the provision of such product or service so as to prevent LP
from entering into such arrangement with a party unrelated to such partner.
If LP is competing for any rights, property or services that would be of
material importance to LP with any entity that is an affiliate of I or R (I or R
in such case being an "Interested Partner"), the negotiation and approval of the
contract for such rights, property or services on behalf of LP shall be the
responsibility of the directors designated for election by the partner that is
not the Interested Partner and the Interested Partner shall not be entitled to
vote on the Extraordinary Decision with respect to such contract. The directors
taking such action with respect to such rights, property or services shall do so
only if they determine by resolution that they reasonably believe that
<PAGE>
10
the LP's revenues from such rights, property or services will at least equal the
costs thereof and related thereto.
8. BUDGET AND FIVE YEAR PLAN. The Chief Executive Officer shall submit to
the Board by September 30 of each year an annual budget for GP and LP for the
succeeding year and a revision to the GP and LP Five Year Plan to reflect the
proposed budget and to add an additional fifth year. If an item in the budget
is not approved, the budget for such item for such year shall be the budget for
such item for the prior year adjusted to reflect certain increases or decreases
(to include an adjustment for the terms of existing and approved agreements as
well as an inflation factor and other matters approved by the Board).
9. TRANSACTION EXPENSES. For purposes of this Agreement, the term
"transaction expenses" shall include all governmental fees, sales, use and
transfer taxes and charges incurred by either party on behalf of GP or LP or by
GP or LP in connection with the preparation and submission of the Bid, the
organization of GP and LP, the Closing or the issuance of R shares to I and all
related fees and charges of counsel to LP and GP, but specifically does not
include the parties' internal expenses or fees and expenses of their respective
counsel. In the event the Closing does not occur, C and I shall each bear one-
half of the transaction expenses. Otherwise such expenses shall be paid by LP.
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11
10. GP CONSTITUENT DOCUMENTS. The Certificate of Incorporation and By-
laws of GP will contain the maximum indemnification and director exculpation
permitted by law.
11. RESTRICTIONS ON TRANSFER. Except with respect to Exempt Transfers or
as otherwise provided in this Section, there shall be no assignment, pledge or
other transfer of any interest in GP or LP without the consent of the Board as
an Extraordinary Decision (or in the case of an affiliate of I at a time when I
controls the Board, by a majority in number of limited partners that are not
affiliates of I). Exempt Transfers include transfers to an affiliate of the
shareholder/partner, transfers by R of up to a 50% interest in its ownership
interests to NBC pursuant to R's existing obligations with NBC and transfers by
R of limited partnership interests to one or more Regional Bell Operating
Companies and any of their affiliates, but any such affiliate, NBC or any
Regional Bell Operating Company may not be substituted as a partner without the
consent of the Board as an Extraordinary Decision (or in the case of an
affiliate of I at a time when I controls the Board, by a majority in number of
limited partners that are not affiliates of I). I shall cause its director
designees to consent to the admission of NBC and any Regional Bell Operating
Company as a partner and to the admission of R as a partner with respect to the
Share Differential. An Exempt Transfer by R to an affiliate of R shall be
limited to a transfer to an entity that at all times shall be a direct or
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12
indirect wholly-owned subsidiary of R. R shall be permitted to grant a security
interest in R Sub's interest in LP so long as the creditor is not entitled to
realize on the security without the consent of I. Any transferee must agree to
be bound by all agreements between parties with respect to GP and LP.
12. RIGHT OF FIRST REFUSAL. In addition to the consent required by
Section 11 hereof, there will be a right of first refusal with respect to any
transfer of an interest in GP or LP, other than an Exempt Transfer. The non-
transferring party must be given 45 days to purchase the interest proposed to be
transferred on specified terms. If the non-transferring party declines to
purchase the interest and has consented to the transfer thereof, the
transferring party will have 90 days in which to sell the interest on terms that
are not less favorable to the transferring party than such specified terms.
13. BUY-SELL ARRANGEMENTS. A buy-sell mechanism (the "Buy-Sell") may be
instituted by either party on six months notice at any time after the third
anniversary of the Closing Date. At the end of the notice period, the
initiating party must specify a value for its GP and LP interests. The
responding party will have six months after the end of the notice period in
which to elect to purchase the initiating party's interests or to sell its own
interests to the initiating party at that price. The closing of the Buy-Sell
will take place 90 days thereafter.
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13
Notwithstanding the foregoing, in the event a state gaming authority formally
objects to I's continued participation in GP or LP because of a determination by
such authority that C, R or any of their subsidiaries, affiliates, directors or
officers is unsuitable and issues a final nonappealable order that I's continued
participation will cause I to lose a significant gaming license, then upon the
issuance of such order (or before any appeal if I's license would be otherwise
forfeited pending such appeal) I may initiate the Buy-Sell within 30 days
thereof by specifying a value for its GP and LP interests and R will have 30
days in which to elect to purchase I's interests or sell its own interest
payable at a price equal to that value. If R elects to purchase I's interests,
it may do so by paying the purchase price with a promissory note of R that is
secured by the purchased interest and provides for an 11 month maturity. If R
defaults under the note, I shall have the option for 30 days to purchase R's
interest at the Buy-Sell price.
14. SPECIAL ARRANGEMENTS. If prior to the Closing (a) a state gaming
authority formally objects to I's participation in GP or LP with R because of a
determination by such authority that C, R or any of their subsidiaries,
affiliates, directors or officers is unsuitable to be affiliated with I, (b) R
is unable to amend its rights agreements with the New York Mets and the New York
Islanders to prevent the incurrence of any rights fee payment obligation by an
affiliate of R with respect to the revenues
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14
of LP or any of its subsidiaries, (c) there shall be outstanding any injunction,
order or judgment preventing the consummation of the transactions contemplated
by the Bid, any pending lawsuit challenging such transactions, or any claim made
by any party challenging such transactions, if such lawsuit or claim is based
upon any alleged violation of any law, rule, regulation or order or upon the
failure to obtain any allegedly required consent or approval or to abide by any
contractual provision, and such lawsuit or claim would be material to either
party, or (d) the consummation of such transactions will create a material
adverse effect with respect to either party or M under any contract, franchise
or license, then in each case, the parties will take such reasonable actions as
are necessary to restructure the assets, properties and rights of M and the
respective rights of I and R therein to eliminate the effects of such situation,
while endeavoring to complete the transactions in a manner as close as possible
to that contemplated hereby.
In the event that, notwithstanding the efforts of the parties to
effect a restructuring to eliminate the effects of such situation as provided in
the prior paragraph, they are unable to do so by the date on which the Closing
must occur, LP shall proceed to consummate the Closing (and neither R nor I
shall withdraw from LP or GP or be relieved of any of their obligations
hereunder to provide funding and otherwise to participate in the transactions
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15
contemplated hereby); PROVIDED, THAT, nothing herein shall require LP to waive
any condition to LP's obligation to close pursuant to the definitive agreement
entered into pursuant to the Bid. If R in its sole discretion determines, as a
result of and in order to eliminate or mitigate the effects of any such
situation, to relinquish the power to direct or cause the direction of the
management and policies of LP or GP, R shall be permitted, in its sole
discretion, to reduce its rights hereunder, including, without limitation, its
rights under Sections 5, 6, 7 and 8 hereof; PROVIDED, HOWEVER, that R shall, in
its sole discretion upon the elimination of the effects of such situation
(whether the effects of such situation have in fact been eliminated shall be in
the sole discretion and determination of R), be permitted to restore such rights
to the full extent provided in this Agreement; and PROVIDED, FURTHER, the
parties hereto will take such reasonable actions as are necessary to restructure
the assets, properties and rights of M and the respective rights of I and R
therein to eliminate the effects of any such situation while endeavoring to
achieve the intent of this Agreement in a manner as close as possible to that
contemplated hereby. In the event that R determines to relinquish the power to
direct or cause the direction of the management and policies of LP or GP, R and
I shall negotiate in good faith to afford R protections customarily afforded to
non-controlling
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16
limited partners, including the rights set forth on Exhibit B.
15. R DUE DILIGENCE; STOCK PURCHASE. I shall have the right for a
period (the "Review Period") ending on September 16, 1994 to conduct a due
diligence investigation of the business and affairs of R and R shall provide I
access at reasonable times to all information reasonably requested by I to
facilitate its investigation. All such information shall be subject to a
confidentiality agreement to be entered into between R and I.
During the Review Period the parties shall negotiate in good faith to
conclude a definitive purchase agreement for the purchase of R common stock,
which shall include the covenants to be applicable from signing such agreement
to the Funding Date and conditions to closing set forth on Exhibit A.
In the event I notifies C in writing by the end of the Review Period
that I is unwilling to accept R common stock as contemplated by Section 3
hereof, I shall not be required to accept R common stock in payment of the
Purchase Price. In the event the parties enter into such a purchase agreement,
R shall be obligated to purchase the Share Differential and to pay the Purchase
Price in cash or common stock of R as provided by Section 3. For purposes of
this Section 15, R shall not be obligated if any condition to closing under such
purchase agreement that was not reasonably within the control of R is not
satisfied.
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17
Nothing in this Agreement shall prevent C from spinning (or require C
to spin) off R to the shareholders of C or reclassifying the common stock of R
to include stock with disproportionate voting rights in the same manner as the
common stock of C (I.E., Class A Common Stock with one vote per share and Class
B Common Stock with ten votes per share). For purposes of this Agreement, a
spinoff shall include any distribution of all or part of the stock of R to the
shareholders of C, including reorganization transactions preparatory to such a
distribution. Any stock received by I from R pursuant to this Agreement prior
to a reclassification may at R's election be exchanged by I for Class A Common
Stock in any reclassification.
16. ASSIGNMENT. Except as contemplated by Section 11, neither this
Agreement nor any rights or obligations hereunder may be assigned by any party
without the prior written consent of the other parties.
17. CONSTRUCTION. This Agreement shall be governed, construed and
enforced in accordance with the laws of the State of New York without regard to
principles of conflicts of laws.
18. BENEFIT. Nothing in this Agreement, express or implied, is
intended or shall be construed to confer upon or give to any person, firm or
corporation other than the parties hereto any remedy or claim under or by reason
of this Agreement or any term, covenant or condition
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18
hereof, all of which shall be for the sole and exclusive benefit of the parties
hereto.
19. PRESS RELEASES. All press releases or other public communication
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 the other party hereto, which approval shall not be unreasonably
withheld.
20. 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.
21. COUNTERPARTS. This Agreement may be signed in several
counterparts with the same effect as if the signatures to each were to the same
Agreement.
22. BINDING AGREEMENT. This Agreement is intended to be a binding
agreement among the parties. This Agreement represents the entire understanding
and agreement between the parties hereto with respect to the subject matter
hereof (except with respect to the matters covered by sections 4 and 6 of the
Letter Agreement entered into by C and I on June 28, 1994). 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,
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19
modification, supplement, extension, termination, discharge or change is sought.
The parties intend to enter into more extensive contracts consistent with the
terms hereof covering their agreements, including agreements relating to the
governance of GP and LP, which, when executed and delivered, will supersede this
Agreement. The parties hereto agree to negotiate in good faith to enter into
more extensive agreements governing the matters set forth in this Agreement and
will endeavor to enter into such agreements prior to the Closing Date. Until
such other agreements are entered into, this Agreement will govern the
relationship of the parties referred to herein.
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20
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.
ITT CORPORATION
By: /s/ Robert A. Bowman
------------------------------------
Title: Executive Vice President &
Chief Financial Officer
CABLEVISION SYSTEMS CORPORATION
By: /s/ Marc Lustgarten
------------------------------------
Title: Vice Chairman
RAINBOW PROGRAMMING HOLDINGS, INC.
By: /s/ Marc Lustgarten
------------------------------------
Title: Vice Chairman
<PAGE>
EXHIBIT A
Part A. Conditions of I's obligations to acquire the common stock of R on the
Funding Date:
1. R has continued to conduct its business and maintain its corporate
existence and good standing.
2. R has made no distributions in respect of its common stock without the
consent of I unless appropriate adjustments are made at the Funding
Date.
3. R has provided to I quarterly and annual financial statements of R.
4. No transfer of assets or assumption of liabilities by R in violation
of duty of directors.
5. Except with the prior written consent of I, which may not be
unreasonably withheld or delayed, R has not made any acquisition or
disposition of assets (other than pursuant to existing obligations) in
any transaction or series of related transactions valued at $10
million or more or incurred additional indebtedness (other than
pursuant to existing credit facilities) in aggregate amount exceeding
$10 million or authorized or issued any shares of capital stock
otherwise than as permitted by the Agreement.
6. No transfer of any of the common stock of R by C without the consent
of I, which consent shall not be unreasonably withheld or delayed;
PROVIDED, THAT C shall be permitted to transfer common stock of R
without the consent of I if (i) such transfer is (a) pursuant to a
spinoff, (b) in connection with a public offering of the common stock
of R, (c) with respect to the sale by C of an interest in R to one or
more Regional Bell Operating Companies or any affiliate thereof, or
(ii) any proceeds of the transfer of such common stock, net of
transaction expenses, are applied to pay R's Share Differential.
7. Unless there was previously a spinoff, public offering of common stock
of R or sale of a controlling interest in R to which paragraph B.5
below applies, C has not transferred its interest in R to any
affiliate of C.
Part B. Protective provisions if I becomes a greater than 10% shareholder of R
as a result of payment of Purchase Price:
1. I to have registration rights for R Common Stock after R Common Stock
is traded in the public market, including three demands (subject to
(i) I paying all
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2
registration expenses for the [second and] third registration[s],
(ii) prohibition on exercise of registration rights within nine months
of completion of any prior registration, (iii) the right of R to delay
registration for up to 135 days in the event of a material corporate
event at R that it is not in R's best interests to disclose, (iv)
customary volume and blackout limitations and (v) other customary
provisions) and unlimited piggy-back rights (with underwriter or agent
discretionary right to limit I's participation in preference to any
person exercising a demand registration, provided that I shall be
treated at least pro rata with other persons exercising piggyback
rights) until reduced below 5%.
2. Obligation to provide quarterly and annual financial statements of R.
3. No transfer of assets or assumption of liabilities in violation of
duty of directors.
4. Anti-dilution protection for I such that if R wishes to issue common
stock in a private transaction or sell treasury shares at less than
the value paid by I for its common stock in accordance herewith, R
shall first offer to sell such common stock to I at such price, and if
I does not agree to purchase such common stock within 30 days of
notice of such sale, R may sell such common stock at such price or any
higher price to any unrelated third party for 120 days after the
expiration of the 30 day notice period (this item applies until the
earlier of three years from the Closing Date or two years from the
Funding Date if I beneficially owns common stock of R as a result of
satisfaction of the funding obligation).
5. [I to have tag along rights and protection against sale of controlling
interest of Common Stock of R by C which would deprive I of tag along
rights or the rights meant to be preserved by A.7 above.]
6. In connection with a sale by C of its [entire] interest in R to an
unrelated third party in an arm's length transaction, a buyer shall
have the right upon 30 days written notice to purchase all [or part]
of I's interest in R for a cash purchase price that will give I a 35%
annual rate of return on its investment in R (this applies during the
period ending on the earlier of the third anniversary of the Closing
Date and the second anniversary of the Funding Date and I beneficially
owns common stock of R as a result of payment to I as a result of the
funding obligation), and, after the earlier of such anniversaries, if
C agrees to sell all of its interest in R to an
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3
unrelated third party in an arms length transaction, C may require I
to sell all of its interest in R to such third party at the same price
and on the same terms.
7. I to have right to designate a number of directors (but not fewer than
two) proportionate to its relative share of outstanding common stock
of R, except that after R common stock is traded in the public market,
R shall cause such designees of R (sufficient to permit the election
of a number of directors proportionate to its relative share of
outstanding common stock of R of the class held by I) to be named in
management's slate of directors proposed for election by holders of
the class of R common stock held by I.
8. No direct or indirect transfer by R of any interest in R Sub except to
another subsidiary of R.
<PAGE>
EXHIBIT B
1. I shall not amend the certificate of incorporation or by-laws of GP or the
Agreement of Limited Partnership of LP (including by merger, consolidation
or other business combination) in any manner adverse to the interest of R
Sub as a limited partner of LP or a stockholder of GP.
2. R shall have the right to designate one non-voting director of GP.
3. R shall have the right to receive quarterly and annual financial statements
of LP and GP.
4. No transfer of assets or assumption of liabilities by LP or GP in violation
of duty to limited partners or stockholders.
5. R shall have protections for R comparable to those granted I in Items 5
(with respect to tag along rights) and 6 of Part B of Exhibit A.
6. R shall receive an appropriate allocation of tickets to Madison Square
Garden events.
<PAGE>
AMENDMENT AGREEMENT
This Amendment Agreement (this "Amendment Agreement") is made as of
September 12, 1994 by and among ITT Corporation, a Delaware corporation ("I"),
Cablevision Systems Corporation, a Delaware corporation ("C"), and
Rainbow Programming Holdings, Inc., a New York corporation and a wholly-owned
subsidiary of C ("R") and amends the Agreement made as of August 15, 1994 by
and among I, C and R (the "Agreement"). Capitalized terms used herein which
are not defined herein shall have the meanings assigned thereto in the
Agreement.
1. Section 4 of the Agreement is amended in its entirety to read
as follows:
"4. Capitalization of GP. GP shall have two classes of capital
-------------------
stock: Class A Stock ("Class A Stock") and Class B Stock ("Class B
Stock" and, together with the Class A Stock, the "GP Common Stock"). The
Class A Stock and the Class B Stock shall each be entitled to one vote
per share on all matters on which the GP Common Stock is entitled to vote
and shall be identical in all respects, except that from and after the
Funding Date (i) unless the Purchase Price has been paid in full, the
Class B Stock shall cease to have any voting and dividend rights, except
as may be required by law, and payments in respect of the Class B Stock
on liquidation will be limited to the par value thereof, and (ii) shares
of Class B Stock shall become convertible into shares of Class A Stock
on the Funding Date to the extent provided in the next sentence. On the
Funding Date, the outstanding shares of Class B Stock shall become
convertible (at no cost) into shares of Class A Stock so that after such
conversion the percentage of the outstanding shares of Class A Stock
owned by R shall equal a fraction expressed as a percentage of which the
numerator is the sum of the Initial R Sub Investment and the portion of
<PAGE>
the Purchase Price paid by R on or prior to the Funding Date and the
denominator of which is the sum of the Initial R Sub Investment and the
I Sub Investment. At the Closing, I shall acquire 50 shares of Class A
Stock. At the Closing, R shall acquire a number of shares of Class A
Stock equal to 50 times a fraction, the numerator of which is the
Initial R Sub Investment and the denominator of which is the I Sub
Investment, and a number of shares of Class B Stock equal to 50 minus
the number of shares of Class A Stock issued to R at the Closing. The
capital of GP shall comprise 1% of the capital of LP (plus amounts
sufficient to pay for the organization of GP) (collectively, the
"GP Start-up Cost"), and GP shall contribute 1% of the capital of LP
as contemplated by Section 3 hereof. The purchase price per share for
the shares of Class A Stock issued at the Closing will be equal to the
GP Start-up Cost divided by the number of shares of Class A Stock
issued and the purchase price for the shares of Class B Stock issued
at the Closing shall be their par value, not to exceed $1 per share.
At any time following the Funding Date, if R has not paid the Purchase
Price in full, I shall have the right to require R to sell to I any
outstanding shares of Class B Stock that are not convertible into
shares of Class A Stock, at a purchase price equal to the par value
of those shares. To reflect the issuance to R of the Class B Stock for
nominal consideration, unless the parties agree in writing on an
alternative adjustment arrangement, the Purchase Price shall be paid
entirely in respect of the limited partnership interest included in
the Share Differential, with the effect that the amount of the
Purchase Price (exclusive of any interest included therein) will exceed
the capital contribution in respect of that limited partnership interest."
2. Section 5 of the Agreement is amended to delete the second sentence
thereof.
3. Except as provided in this Amendment Agreement, the Agreement shall
remain in full force and effect.
4. This Amendment Agreement and the Agreement as amended hereby shall
be governed, construed and enforced in accordance with the laws of the
state of New York without regard to principles of conflicts of laws.
-2-
<PAGE>
5. This Amendment Agreement may be signed in several counterparts
with the same effect as if the signatures to each were to the same
document.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment Agreement to be duly executed in its name and on its behalf,
all as of the date first above written.
ITT CORPORATION
By: /s/ Harlan W. Murray
----------------------------------
Title: Vice President
CABLEVISION SYSTEMS CORPORATION
By: /s/ Marc Lustgarten
----------------------------------
Title: Vice Chairman
RAINBOW PROGRAMMING HOLDINGS, INC.
By: /s/ Hank Ratner
----------------------------------
Title: Executive Vice President
-3-
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
----------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
----------------------------------------------------------
dated as of August 27, 1994
among
VIACOM INC.,
PARAMOUNT COMMUNICATIONS REALTY CORPORATION,
ITT CORPORATION,
RAINBOW GARDEN CORPORATION
and
MSG HOLDINGS, L.P.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
THE MERGER
2.01. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.02. Effective Time of the Merger . . . . . . . . . . . . . . . . . . 5
2.03. The Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.04. Conversion of Shares; Payment of Merger Consideration. . . . . . 6
2.05. Post-Closing Adjustment. . . . . . . . . . . . . . . . . . . . . 6
2.06. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.07. Merger of Subsidiaries . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF VIACOM AND THE SELLER
3.01. Incorporation and Authority of Viacom and the Seller . . . . . . 8
3.02. Incorporation and Qualification of MSG . . . . . . . . . . . . . 9
3.03. Capital Stock of MSG . . . . . . . . . . . . . . . . . . . . . . 9
3.04. Subsidiaries and Equity Interests. . . . . . . . . . . . . . . . 9
3.05. No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.06. Consents and Approvals . . . . . . . . . . . . . . . . . . . . . 10
3.07. Financial Information. . . . . . . . . . . . . . . . . . . . . . 11
3.08. Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . 11
3.09. Absence of Certain Changes or Events . . . . . . . . . . . . . . 11
3.10. Absence of Litigation. . . . . . . . . . . . . . . . . . . . . . 13
3.11. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . 14
3.12. Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . 14
3.13. Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.14. Employee Benefit Matters . . . . . . . . . . . . . . . . . . . . 15
3.15. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.16. Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.17. Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.18. Material Contracts and Assets. . . . . . . . . . . . . . . . . . 18
3.19. Intellectual Property. . . . . . . . . . . . . . . . . . . . . . 18
<PAGE>
(ii)
PAGE
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
AND EACH PARENT
4.01. Incorporation and Authority of the Purchaser . . . . . . . . . . 19
4.02. Incorporation and Authority of Each Parent . . . . . . . . . . . 19
4.03. No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.04. Consents and Approvals . . . . . . . . . . . . . . . . . . . . . 20
4.05. Absence of Litigation. . . . . . . . . . . . . . . . . . . . . . 20
4.06. Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.07. Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE V
ADDITIONAL AGREEMENTS
5.01. Conduct of Business Prior to the Closing . . . . . . . . . . . . 21
5.02. Access to Information. . . . . . . . . . . . . . . . . . . . . . 23
5.03. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . 23
5.04. Regulatory and Other Authorizations; Consent; Yankee Guaranty. . 24
5.05. Investigation. . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.06. Asset Transfer . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.07. Intercompany Accounts. . . . . . . . . . . . . . . . . . . . . . 26
5.08. Provision of Tickets . . . . . . . . . . . . . . . . . . . . . . 26
5.09. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.10. Rights to the Use of Certain Intellectual Property . . . . . . . 27
5.11. Post-Closing Services. . . . . . . . . . . . . . . . . . . . . . 27
5.12. Christmas Show . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.13. Further Action . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE VI
EMPLOYEE MATTERS
6.01. Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.02. Employment Related Matters . . . . . . . . . . . . . . . . . . . 29
6.03. Multiemployer Plans. . . . . . . . . . . . . . . . . . . . . . . 30
6.04. Paramount Communications Inc. Retirement Plan. . . . . . . . . . 30
6.05. Paramount Communications Inc. Savings Plan . . . . . . . . . . . 31
6.06. MSG Union Sponsored Pension Plans. . . . . . . . . . . . . . . . 32
<PAGE>
(iii)
PAGE
6.07. Retiree Medical and Retiree Life Insurance . . . . . . . . . . . 32
6.08. Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VII
TAX MATTERS
7.01. Tax Indemnities. . . . . . . . . . . . . . . . . . . . . . . . . 33
7.02. Refunds and Tax Benefits . . . . . . . . . . . . . . . . . . . . 34
7.03. Contests . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.04. Preparation of Tax Returns . . . . . . . . . . . . . . . . . . . 36
7.05. Allocation of Merger Consideration . . . . . . . . . . . . . . . 36
7.06. Cooperation and Exchange of Information. . . . . . . . . . . . . 37
7.07. Conveyance and Sales Taxes . . . . . . . . . . . . . . . . . . . 37
7.08. Tax Treatment of Merger. . . . . . . . . . . . . . . . . . . . . 38
7.09. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE VIII
CONDITIONS TO CLOSING
8.01. Conditions to Obligations of Viacom and the Seller . . . . . . . 38
8.02. Conditions to Obligations of the Purchaser and Each Parent . . . 39
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.01. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.02. Effect of Termination. . . . . . . . . . . . . . . . . . . . . . 41
9.03. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE X
GENERAL PROVISIONS
10.01. Survival of Representations and Warranties. . . . . . . . . . . 41
10.02. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.03. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.04. Public Announcements. . . . . . . . . . . . . . . . . . . . . . 43
10.05. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.06. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . 43
<PAGE>
(iv)
PAGE
10.07. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . 43
10.08. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.09. No Third-Party Beneficiaries. . . . . . . . . . . . . . . . . . 44
10.10. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.11. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.12. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 44
EXHIBITS
3.07 Reference Balance Sheet
8.01(d) STB Opinion
8.02(f) S&S Opinion
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of August 27, 1994, among
VIACOM INC., a Delaware corporation ("VIACOM"), PARAMOUNT COMMUNICATIONS REALTY
CORPORATION, a Delaware corporation and an indirect wholly owned subsidiary of
Viacom (the "SELLER"), ITT CORPORATION, a Delaware corporation ("ITT"), RAINBOW
GARDEN CORPORATION, a Delaware corporation ("RAINBOW", and together with ITT,
each a "PARENT" and collectively, the "PARENTS"), and MSG HOLDINGS, L.P., a
Delaware limited partnership (the "PURCHASER").
W I T N E S S E T H :
WHEREAS, the Seller owns all the issued and outstanding shares of
common stock, no par value (the "SHARES"), of Madison Square Garden Corporation,
a Delaware corporation ("MSG");
WHEREAS, the Parents indirectly own all of the partnership interests
in the Purchaser; and
WHEREAS, subject to the terms and conditions of this Agreement, the
Board of Directors of each of the Seller and Viacom, and the Board of Directors
of each Parent and the general partner of the Purchaser, have adopted
resolutions approving this Agreement pursuant to which, among other things, MSG
shall be merged with and into the Purchaser (the "MERGER");
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants hereinafter set forth, each Parent, the Purchaser,
Viacom and the Seller hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings:
"AGREEMENT" means this Agreement and Plan of Merger, dated as of
August 27, 1994, among Viacom, the Seller, each Parent and the Purchaser
(including the Disclosure Schedule and all exhibits attached hereto) and all
amendments hereto made in accordance with Section 10.10.
"BUSINESS" means the business of MSG and the Subsidiaries as conducted
as of the date of this Agreement.
"BUSINESS DAY" means any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by law to be closed in the City of
New York.
<PAGE>
2
"CERTIFICATE OF MERGER" has the meaning specified in Section 2.02.
"CLOSING" has the meaning specified in Section 2.03(a).
"CLOSING DATE" has the meaning specified in Section 2.03(a).
"CONFIDENTIALITY AGREEMENT" has the meaning specified in Section 5.03.
"CONTEST" has the meaning specified in Section 7.03(b).
"CONTINUATION PERIOD" has the meaning specified in Section 6.01(a).
"COVERED AFFILIATE" means any affiliate which has revenues or assets
(in the case of such assets, valued at fair market value) in excess of $100
million or, in the case of Rainbow, (i) Rainbow Programming Holdings, Inc. or
any programming affiliate of Rainbow Programming Holdings, Inc. that serves in
excess of 1,200,000 subscribers, (ii) Cablevision Systems Corporation or any
cable television affiliate of Cablevision Systems Corporation which serves more
than 50,000 subscribers, (iii) Rainbow Advertising Sales Corporation, and (iv)
the entity which controls News 12 Long Island.
"DELAWARE LAW" has the meaning specified in Section 2.01.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule dated as of the
date of this Agreement delivered to the Purchaser by the Seller and Viacom.
"EFFECTIVE TIME" has the meaning specified in Section 2.02.
"ENVIRONMENTAL LAWS" means all applicable federal, state and local
statutes, rules, regulations and ordinances relating in any manner to
contamination, pollution or protection of the environment.
"EQUITY INTEREST" means any interest in the voting stock or other
equity securities of any corporation, partnership, joint venture, association or
other entity which is held by MSG directly or indirectly through one or more
intermediaries.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXTRAORDINARY MATERIAL ADVERSE EFFECT" means any extraordinary change
in, or an event which has an extraordinary effect on, the Business arising or
occurring after the date of this Agreement that is or is reasonably likely to be
materially adverse to the results of operations or the financial condition of
the Business, taken as a whole, except any such change or effect resulting from,
without limitation, (i) reasonably foreseeable business risks in the operation
or ownership of the businesses and assets of the nature included in the
<PAGE>
3
Business, (ii) changes in general economic, regulatory or political conditions
or changes that affect in general the business in which MSG is engaged,
(iii) this Agreement or the transactions contemplated hereby or the announcement
hereof or (iv) the occurrence of any one or more of the matters listed or
described in Section 8.02(d) of the Disclosure Schedule.
"FINAL NET WORTH" means the sum of (i) total stockholders' equity as
shown in the adjusted balance sheet column of the Post-Closing Balance Sheet and
(ii) one-half of the depreciation and amortization for buildings, furniture and
equipment since June 30, 1994.
"GOVERNMENTAL ANTITRUST AUTHORITY" has the meaning specified in
Section 5.04(b).
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder.
"INTELLECTUAL PROPERTY ASSETS" has the meaning specified in
Section 3.19.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended.
"IRS" has the meaning specified in Section 3.14(a).
"KNICKS LEASE" has the meaning specified in Section 3.13(b).
"KNOWLEDGE OF THE SELLER" or "SELLER'S KNOWLEDGE" means the actual
knowledge of any of the persons set forth in Section 1.01(a) of the Disclosure
Schedule.
"LEASES" has the meaning specified in Section 3.13(b).
"MATERIAL ADVERSE EFFECT" means any change in, or effect on, the
Business that is or is reasonably likely to (i) be materially adverse to the
results of operations or the financial condition of the Business, taken as a
whole, or (ii) prevent Viacom or the Seller from consummating the Merger.
"MERGER" has the meaning specified in the recitals to this Agreement.
"MERGER CONSIDERATION" has the meaning specified in Section 2.04(a).
"MSG" has the meaning specified in the recitals to this Agreement.
"MULTIEMPLOYER PLAN" has the meaning specified in Section 3.14(b).
"MULTIPLE EMPLOYER PLAN" has the meaning specified in Section 3.14(b).
<PAGE>
4
"NBA" means the National Basketball Association.
"NHL" means the National Hockey League.
"PARENT" and "PARENTS" have the meanings specified in the preamble to
this Agreement.
"PCI" means Paramount Communications Inc., a Delaware corporation and
a wholly owned subsidiary of Viacom.
"PLANS" has the meaning specified in Section 3.14(a).
"POST-CLOSING BALANCE SHEET" has the meaning specified in
Section 2.05(a).
"POST-CLOSING DATE TAX BENEFIT" has the meaning specified in
Section 7.02(b).
"PURCHASER" has the meaning specified in the preamble to this
Agreement.
"PURCHASER'S ACCOUNTANTS" means Arthur Andersen & Co., KPMG Peat
Marwick or the internal accountants of the Purchaser.
"RANGERS LEASE" has the meaning specified in Section 3.13(b).
"REFERENCE BALANCE SHEET" has the meaning specified in Section 3.07.
"RETIREMENT PLAN" has the meaning specified in Section 3.14(e).
"SAVINGS PLAN" has the meaning specified in Section 3.14(e).
"SELLER" has the meaning specified in the preamble to this Agreement.
"SELLER'S ACCOUNTANTS" means either Price Waterhouse or the internal
accountants of the Seller.
"SHARES" has the meaning specified in the recitals to this Agreement.
"SUBSIDIARY" or "SUBSIDIARIES" means any and all corporations,
partnerships, joint ventures, associations, and other entities in which the
majority of voting common stock or other equity interest is held by MSG directly
or indirectly through one or more intermediaries.
"SURVIVING LIMITED PARTNERSHIP" has the meaning specified in
Section 2.01.
<PAGE>
5
"TAX" or "TAXES" means all income, gross receipts, sales, use,
employment, franchise, profits, property, transfer or other taxes, fees, stamp
taxes and duties, assessments or charges of any kind whatsoever (whether payable
directly or by withholding), together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority with
respect thereto.
"TRANSFERRED EMPLOYEES" has the meaning specified in Section 6.01(a).
"TRANSFERRED FORMER EMPLOYEES" has the meaning specified in
Section 6.01(a).
"VIACOM" has the meaning specified in the preamble to this Agreement.
"WARN" means the Worker Adjustment and Retraining Notification Act
of 1988.
"YANKEE GUARANTY" has the meaning specified in Section 5.04(e).
ARTICLE II
THE MERGER
SECTION 2.01. THE MERGER. Upon the terms and subject to the
conditions set forth in this Agreement, at the Effective Time, MSG shall be
merged with and into the Purchaser in accordance with the General Corporation
Law of the State of Delaware and the Revised Uniform Limited Partnership Act of
the State of Delaware (collectively, "DELAWARE LAW"). The Purchaser shall
continue its existence as a limited partnership under the laws of the State of
Delaware and as the entity surviving the Merger (the "SURVIVING LIMITED
PARTNERSHIP") and the separate corporate existence of MSG shall cease. The
Merger shall have the effects set forth in Delaware Law.
SECTION 2.02. EFFECTIVE TIME OF THE MERGER. The Merger shall become
effective when a properly executed certificate of merger (the "CERTIFICATE OF
MERGER") is duly filed with the Secretary of State of the State of Delaware in
accordance with Delaware Law. When used in this Agreement, the term "EFFECTIVE
TIME" shall mean the date and time at which the Certificate of Merger is so
filed.
SECTION 2.03. THE CLOSING. (a) Subject to the terms and conditions
of this Agreement, the closing (the "CLOSING") of the transactions contemplated
by this Agreement shall take place at 10:00 a.m., New York City time, on the
later to occur of (i) the third Business Day following the satisfaction or
waiver of all conditions to the obligations of the parties set forth in Article
VIII and (ii) the fifth Business Day following the earlier to occur of (A) an
overt threat of an action and (B) the commencement of an action, in each case by
any United States or state governmental authority or other agency or commission,
seeking to
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6
enjoin the Closing, at the offices of Shearman & Sterling, 599 Lexington Avenue,
New York, New York, or at such other time or on such other date or at such other
place as the Seller and the Purchaser may mutually agree upon in writing (the
day on which the Closing takes place being the "CLOSING DATE").
(b) On the Closing Date the Certificate of Merger with respect to the
Merger shall be filed with the Secretary of State of the State of Delaware.
SECTION 2.04. CONVERSION OF SHARES; PAYMENT OF MERGER CONSIDERATION.
(a) At the Effective Time, by virtue of the Merger and without any action on
the part of Viacom, the Seller, MSG, either Parent or the Purchaser, all of the
Shares shall be cancelled and converted automatically into the right to receive
an aggregate of $1,075,000,000 in immediately available funds (the "MERGER
CONSIDERATION"), subject to later adjustment as set forth in Section 2.05 of
this Agreement. At the Closing, the Purchaser shall deliver to the Seller the
Merger Consideration by wire transfer of immediately available funds to an
account or accounts designated at least two Business Days prior to the Closing
Date by the Seller in a written notice to the Purchaser.
(b) Each general and limited partnership interest in the Purchaser
issued and outstanding immediately prior to the Effective Time shall remain
issued and outstanding and shall not be altered or changed by the Merger.
SECTION 2.05. POST-CLOSING ADJUSTMENT. The Merger Consideration
shall be subject to adjustment after the Closing as specified in this Section
2.05:
(a) As promptly as practicable, but in any event within 60 calendar
days following the Closing Date, the Seller shall deliver to the Purchaser a
balance sheet as of the Closing Date (the "POST-CLOSING BALANCE SHEET") prepared
in the same format as, and in accordance with the accounting principles and
procedures used in connection with the preparation of, the Reference Balance
Sheet, together with the calculation of the Final Net Worth.
(b) (i) Subject to clause (ii) of this Section 2.05(b), the Post-
Closing Balance Sheet delivered by the Seller to the Purchaser shall be deemed
to be and shall be final, binding and conclusive on the parties hereto.
(ii) The Purchaser may dispute any amounts reflected on the Post-
Closing Balance Sheet to the extent that the amounts thereon were not arrived at
in accordance with the accounting principles and procedures used in connection
with the preparation of the Reference Balance Sheet; PROVIDED, HOWEVER, that the
Purchaser shall have notified the Seller and the Seller's Accountants in writing
of each disputed item, specifying the amount thereof in dispute and setting
forth, in reasonable detail, the basis for such dispute, within 40 Business Days
after the Seller's delivery of the Post-Closing Balance Sheet to the Purchaser.
In the event of such a dispute, the Purchaser's Accountants and the Seller's
Accountants shall
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7
attempt to reconcile their differences, and any resolution by them as to any
disputed amounts shall be final, binding and conclusive on the parties hereto.
If any such resolution by the Seller's Accountants and the Purchaser's
Accountants leaves in dispute amounts which in the aggregate would not be
greater than $1,000,000, all such amounts remaining in dispute shall then be
deemed to have been resolved in favor of the Post-Closing Balance Sheet
delivered by the Seller to the Purchaser. If the Purchaser's Accountants and
the Seller's Accountants are unable to reach a resolution with such effect
within 20 Business Days after receipt by the Seller and the Seller's Accountants
of the Purchaser's written notice of dispute, the Purchaser's Accountants and
the Seller's Accountants shall submit the items remaining in dispute for
resolution to Deloitte & Touche (or, if such firm shall decline or is unable to
act or is not, at the time of such submission, independent of the Purchaser and
the Seller, to another independent accounting firm of international reputation
mutually acceptable to the Seller and the Purchaser) (either Deloitte & Touche
or such other accounting firm being referred to herein as the "INDEPENDENT
ACCOUNTING FIRM"), which shall, within 30 Business Days after such submission,
determine and report to the Seller and the Purchaser upon such remaining
disputed items, and such report shall be final, binding and conclusive on the
Purchaser and the Seller. The fees and disbursements of the Independent
Accounting Firm shall be allocated between the Purchaser and the Seller in the
same proportion that the aggregate amount of such remaining disputed items so
submitted to the Independent Accounting Firm that is unsuccessfully disputed by
each such party (as finally determined by the Independent Accounting Firm) bears
to the total amount of such remaining disputed items so submitted.
(iii) In acting under this Agreement, the Seller's Accountants,
the Purchaser's Accountants and the Independent Accounting Firm shall be
entitled to the privileges and immunities of arbitrators.
(iv) No adjustment to the Merger Consideration pursuant to Section
2.05(c) shall be made with respect to amounts disputed by the Purchaser pursuant
to this Section 2.05(b), unless the amount successfully disputed by the
Purchaser in the aggregate is greater than $1,000,000.
(c) The Post-Closing Balance Sheet shall be deemed final for the
purposes of this Section 2.05 upon the earliest of (A) the failure of the
Purchaser to notify the Seller of a dispute within 40 Business Days of the
Seller's delivery of the Post-Closing Balance Sheet to the Purchaser, (B) the
resolution of all disputes, pursuant to Section 2.05(b)(ii), by the Seller's and
the Purchaser's Accountants and (C) the resolution of all disputes, pursuant to
Section 2.05(b)(ii), by the Independent Accounting Firm. Subject to the
limitation set forth in Section 2.05(b)(iv), within three Business Days of the
Post-Closing Balance Sheet being deemed final, the Merger Consideration shall be
adjusted as follows:
(i) in the event that the Final Net Worth exceeds $414,411,000, then
the Merger Consideration shall be adjusted upward in an amount equal to
such excess and the Purchaser shall pay to the Seller by wire transfer in
immediately available funds,
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8
the amount of such excess, together with interest thereon from the Closing
Date to the date of payment at the rate of interest publicly announced from
time to time by Citibank as its "Base Rate"; or
(ii) in the event that the Final Net Worth is less than
$414,411,000, then the Merger Consideration shall be adjusted downward in
an amount equal to such shortfall and the Seller shall pay to the Purchaser
by wire transfer in immediately available funds, the amount of such
shortfall, together with interest thereon from the Closing Date to the date
of payment at the rate of interest publicly announced from time to time by
Citibank as its "Base Rate".
SECTION 2.06. ORGANIZATION. (a) PARTNERSHIP AGREEMENT; CERTIFICATE
OF INCORPORATION. The partnership agreement and certificate of limited
partnership of the Purchaser as in effect immediately prior to the Effective
Time shall be the partnership agreement and certificate of limited partnership
of the Surviving Limited Partnership after the Effective Time unless and until
amended in accordance with its terms or, in the case of the certificate of
limited partnership, as provided by law. The certificate of incorporation of
MSG as in effect at the Effective Time shall be of no further force and effect
following the Effective Time.
(b) BY-LAWS OF MSG. The by-laws of MSG as in effect at the Effective
Time shall be of no further force and effect following the Effective Time.
SECTION 2.07. MERGER OF SUBSIDIARIES. Upon the terms and subject to
the conditions set forth herein, immediately prior to the Effective Time, the
Seller shall cause those Subsidiaries designated in writing by the Purchaser to
be merged with and into MSG in accordance with Delaware Law and the laws of the
jurisdictions in which such Subsidiaries are organized. Subject to Section 2.01
of this Agreement, the Seller shall cause MSG to continue its existence as a
corporation under Delaware Law and as the surviving corporation following such
mergers and the separate existence of each of such Subsidiaries shall cease.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF VIACOM AND THE SELLER
Viacom and the Seller represent and warrant, jointly and severally, to
the Purchaser and each Parent as follows:
SECTION 3.01. INCORPORATION AND AUTHORITY OF VIACOM AND THE SELLER.
Viacom and the Seller are corporations duly incorporated, validly existing and
in good standing under the laws of the State of Delaware and have all necessary
corporate power and authority to enter into this Agreement, to carry out their
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this
<PAGE>
9
Agreement by Viacom and the Seller, the performance by Viacom and the Seller of
their obligations hereunder and the consummation by Viacom and the Seller of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action on the part of Viacom and the Seller. This Agreement has been
duly executed and delivered by Viacom and the Seller, and (assuming due
authorization, execution and delivery by the Purchaser and each Parent) this
Agreement constitutes a legal, valid and binding obligation of Viacom and the
Seller enforceable against Viacom and the Seller in accordance with its terms,
subject to the effect of any applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors' rights generally and subject, as
to enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
SECTION 3.02. INCORPORATION AND QUALIFICATION OF MSG. MSG is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has the corporate power and authority to own,
operate or lease the properties and assets now owned, operated or leased by MSG.
MSG is duly qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned,
operated or leased or the nature of its activities makes such qualification
necessary, except for such failures which, when taken together with all other
such failures, would not have a Material Adverse Effect.
SECTION 3.03. CAPITAL STOCK OF MSG. The Shares constitute all the
authorized, issued and outstanding shares of capital stock of MSG. The Shares
have been duly authorized and validly issued and are fully paid and
nonassessable and were not issued in violation of any pre-emptive rights. There
are no options, warrants or rights of conversion or other rights, agreements,
arrangements or commitments relating to the capital stock of MSG obligating MSG
to issue or sell any of its shares of capital stock. The Seller owns the
Shares, free and clear of all pledges, security interests and all other liens,
encumbrances and adverse claims. There are no voting trusts, stockholder
agreements, proxies or other agreements in effect with respect to the voting or
transfer of the Shares.
SECTION 3.04. SUBSIDIARIES AND EQUITY INTERESTS. Section 3.04 of the
Disclosure Schedule sets forth a true and complete list, as of the date of this
Agreement, of all Subsidiaries and all Equity Interests, listing for each
Subsidiary and Equity Interest its name, type of entity, the jurisdiction of its
incorporation or organization, its authorized capital stock, partnership capital
or equivalent, the number and type of its issued and outstanding shares of
capital stock, partnership interests or similar ownership interests and MSG's
current percentage ownership of such shares, partnership interests or similar
ownership interests. Each Subsidiary listed in Section 3.04 of the Disclosure
Schedule is duly organized and validly existing under the laws of its respective
jurisdiction of organization and has the requisite power and authority to own,
operate or lease the properties and assets now owned, operated or leased by such
Subsidiary and to carry on its business in all material respects as currently
conducted by such Subsidiary, except for such failures which, when taken
together with all other such failures, would not have a Material Adverse
<PAGE>
10
Effect and subject to any mergers effected pursuant to Section 2.07 of this
Agreement. There are no options, warrants or rights of conversion or other
rights, agreements, arrangements or commitments relating to the capital stock or
other equity interests of the Subsidiaries obligating MSG or any of the
Subsidiaries to issue or sell any shares of capital stock, partnership interests
or similar ownership interests in the Subsidiaries. MSG owns, directly or
indirectly, the capital stock, partnership interests and similar ownership
interests in the Subsidiaries and the Equity Interests free and clear of all
pledges, security interests, liens, encumbrances or adverse claims. There are
no voting trusts, stockholder agreements, proxies or other agreements in effect
to which MSG is a party with respect to the voting of the capital stock,
partnership interests or similar ownership interests in the Subsidiaries or the
Equity Interests.
SECTION 3.05. NO CONFLICT. Assuming all consents, approvals,
authorizations and other actions described in Section 3.06 of this Agreement
have been obtained and all filings and notifications listed in Section 3.06 of
the Disclosure Schedule have been made, and except as may result from any facts
or circumstances relating solely to the Purchaser or either Parent or as
described in Section 3.05 of the Disclosure Schedule, the execution, delivery
and performance of this Agreement by Viacom and the Seller do not and will not
(a) violate or conflict with the certificate of incorporation or by-laws of
Viacom or the Seller, (b) conflict with or violate any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award applicable to
Viacom, the Seller, MSG, the Business or any Subsidiary, except as would not,
individually or in the aggregate, have a Material Adverse Effect or (c) result
in any breach of, or constitute a default (or event which with the giving of
notice or lapse of time, or both, would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of any lien or other encumbrance on the Shares or on any
of the assets or properties of MSG, any Subsidiary or any Equity Interest
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument relating to such assets or
properties to which Viacom, the Seller, MSG or any Subsidiary is a party or by
which any of such assets or properties is bound or affected, except as would
not, individually or in the aggregate, have a Material Adverse Effect.
SECTION 3.06. CONSENTS AND APPROVALS. The execution and delivery of
this Agreement by Viacom and the Seller do not, and the performance of this
Agreement by Viacom and the Seller will not, require any consent, approval,
authorization or other action by, or filing with or notification to, any
governmental or regulatory authority, except (a) as described in Section 3.06 of
the Disclosure Schedule, (b) the notification requirements of the HSR Act, (c)
those required from the New York State Liquor Authority, (d) where failure to
obtain such consent, approval, authorization or action, or to make such filing
or notification, would not prevent Viacom or the Seller from performing any of
its material obligations under this Agreement and would not have a Material
Adverse Effect and (e) as may be necessary as a result of any facts or
circumstances relating solely to the Purchaser or either Parent.
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11
SECTION 3.07. FINANCIAL INFORMATION. The unaudited consolidated
balance sheet of MSG and the Subsidiaries as of July 2, 1994 (the "REFERENCE
BALANCE SHEET"), the unaudited consolidated balance sheet of MSG and the
Subsidiaries as of December 25, 1993, the related unaudited consolidated
statements of income of MSG and the Subsidiaries for the four- and eight-month
periods ended July 2, 1994 and December 25, 1993, respectively, and the related
unaudited consolidated statements of cash flows of MSG and the Subsidiaries for
the six- and twelve-month periods ended July 2, 1994 and December 25, 1993,
respectively, (copies of each of which are attached as Exhibit 3.07 to this
Agreement) fairly present in all material respects the consolidated financial
condition and consolidated results of operations of MSG and the Subsidiaries as
of such dates or for the periods covered thereby and were prepared in accordance
with generally accepted accounting principles, except as set forth in
Section 3.07 of the Disclosure Schedule, applied on a basis consistent with the
past practices of MSG.
SECTION 3.08. ABSENCE OF UNDISCLOSED LIABILITIES. As of the Closing,
there will be no liability of MSG or any Subsidiary except liabilities
(absolute, contingent or otherwise) (i) disclosed in the Disclosure Schedule,
(ii) addressed by any of the representations, warranties, covenants or
agreements made by Viacom and the Seller in this Agreement and (A) not required
to be disclosed in the Disclosure Schedule by the terms of such representation
or warranty or (B) permitted to be incurred by the terms of such covenant or
agreement, as the case may be, (iii) as, and to the extent, reflected in the
Reference Balance Sheet, (iv) recoverable under insurance, indemnification,
contribution or comparable arrangements (including funded workers compensation
programs), (v) with respect to Taxes (which shall be governed solely by the
terms of Section 3.15 and Article VII), (vi) incurred in the ordinary course of
business after the date of this Agreement and prior to the Closing and which do
not have a Material Adverse Effect and (vii) incurred after the date of this
Agreement, other than in the ordinary course of business, which do not have a
Material Adverse Effect.
SECTION 3.09. ABSENCE OF CERTAIN CHANGES OR EVENTS. (a) Since the
date of the Reference Balance Sheet to the date of this Agreement, except as
disclosed in Section 3.09 of the Disclosure Schedule, the Business has been
conducted in the ordinary course and consistent with past practice.
(b) From the date of the Reference Balance Sheet to the date of this
Agreement and except as set forth in Section 3.09 of the Disclosure Schedule or
as contemplated by this Agreement, there has not been:
(i) any material damage, destruction or loss to any of the assets or
properties of MSG or any Subsidiary;
(ii) except for carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other similar liens arising in the ordinary course of
business, any pledge, lien, security interest, mortgage, charge, adverse
claim of ownership or use,
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12
or other encumbrance of any kind created on any properties or assets
(whether tangible or intangible) of MSG or any Subsidiary;
(iii) any establishment or increase in any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing,
stock option (including, without limitation, any grant of any stock
options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plans, or other increase
in the compensation payable or to become payable to any officer or key
employee of MSG or any Subsidiary, except, in any case described above, as
may be required by law or applicable collective bargaining agreement;
(iv) any employment or severance agreement entered into with any of
the employees of MSG or any Subsidiary;
(v) any dividend declared (whether in cash, stock or other property)
by MSG or any other distribution or contribution made in respect of the
capital stock or otherwise of MSG;
(vi) any execution, amendment or termination of a material contract,
arrangement or commitment, including, without limitation, any affiliation
agreement relating to Madison Square Garden Network or collective
bargaining agreement, by MSG or any Subsidiary;
(vii) any new line of business entered into by MSG or any
Subsidiary;
(viii) any incurrence of, or commitment to incur, any capital
expenditures in excess of $1,000,000 in the aggregate by MSG or any
Subsidiary;
(ix) other than with respect to the provision of intercompany services
in the ordinary course of business consistent with past practices, any
transaction or the execution of any agreement, including, without
limitation, any purchase, sale, lease or exchange of property or the
rendering of any service, with Viacom or any affiliate of Viacom;
(x) the commencement of any action or proceeding;
(xi) (A) any sale, assignment, transfer, lease or other disposition or
agreement to sell, assign, transfer, lease or otherwise dispose of any of
the fixed assets of MSG or any Subsidiary having an aggregate value
exceeding $1,000,000 or (B) in the case of any fixed assets of MSG or any
Subsidiary having an aggregate value less than or equal to $1,000,000, any
sale, assignment, transfer, lease or other disposition or agreement to
sell, assign, transfer, lease or otherwise dispose of such fixed assets,
other than in exchange for consideration believed in good faith to
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13
represent fair consideration or (C) an amendment of any Lease in any
material respect;
(xii) (A) any acquisition by MSG or any Subsidiary (by merger,
consolidation, or acquisition of stock or assets) of any corporation,
partnership or other business organization or division thereof or (B) any
incurrence of any indebtedness for borrowed money (other than intercompany
indebtedness owed to PCI) or issuance of any debt securities or assumption,
grant, guarantee or endorsement of, or other accommodation or arrangement
making MSG or any Subsidiary responsible for, the obligations of any
person, or any loans or advances (other than by MSG to PCI or the
Subsidiaries);
(xiii) any material change in any method of accounting or
accounting practice used by MSG or the Subsidiaries;
(xiv) any issuance or sale of additional shares of the capital
stock of, or other equity interests in, MSG or any Subsidiary, or
securities convertible into or exchangeable for such shares or equity
interests, or issuance or granting of any options, warrants, calls,
subscription rights or other rights of any kind to acquire additional
shares of such capital stock, such other equity interests, or such
securities;
(xv) any amendment to the charter or by-laws of MSG or any Subsidiary;
(xvi) any Material Adverse Effect; or
(xvii) any agreement to take any actions specified in this Section
3.09, except for this Agreement.
(c) Neither MSG nor any Subsidiary is a party to any cable
affiliation agreement with any entity identified in Section 3.09(c) of the
Disclosure Schedule, nor is there any outstanding offer to any such entity
which, if accepted, would create such an agreement.
SECTION 3.10. ABSENCE OF LITIGATION. Except as set forth in Section
3.10 of the Disclosure Schedule, there are no claims, actions, proceedings or
investigations pending or, to the knowledge of the Seller, threatened (in
writing), against Viacom, the Seller, MSG, any Subsidiary or any of the assets
or properties of MSG or any Subsidiary, before any court, arbitrator or
administrative, governmental or regulatory authority or body that, individually
or in the aggregate, are reasonably likely to have a Material Adverse Effect.
Except as set forth in Section 3.10 of the Disclosure Schedule, MSG, the
Subsidiaries and their respective assets and properties are not subject to any
order, writ, judgment, injunction, decree, determination or award having a
Material Adverse Effect.
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14
SECTION 3.11. COMPLIANCE WITH LAWS. Neither MSG nor any Subsidiary
is in violation of any law, rule, permit, regulation, order, judgment or decree
applicable to MSG or any Subsidiary or by which any of the properties of MSG or
any Subsidiary is bound or affected (including, without limitation,
Environmental Laws), except (i) as set forth in Section 3.11 of the Disclosure
Schedule and (ii) for violations the existence of which and cost of remedying
would not have a Material Adverse Effect.
SECTION 3.12. LICENSES AND PERMITS. Except as set forth in Section
3.12 of the Disclosure Schedule, MSG and the Subsidiaries have all governmental
licenses, permits and authorizations necessary to conduct the Business, except
for such governmental licenses, permits and authorizations the absence of which
and cost of obtaining would not have a Material Adverse Effect.
SECTION 3.13. REAL PROPERTY. (a) Section 3.13(a) of the Disclosure
Schedule sets forth all of the real properties owned by MSG and all of its
Subsidiaries. Section 3.13(b) of the Disclosure Schedule sets forth all of the
leasehold, subleasehold, licensed and other similar interests in real estate
held by MSG and the Subsidiaries as of the date of this Agreement. Except as
set forth in Section 3.13(b) of the Disclosure Schedule, the transactions
contemplated by this Agreement may be consummated without resulting in a
violation of any instrument or agreement governing such leaseholds,
subleaseholds or licenses, except for any such violation which would not have a
Material Adverse Effect. Each parcel of real property owned by MSG or any
Subsidiary is owned in fee simple, free and clear of all title defects, liens,
security interests, claims, tenancies (and other possessory interests),
easements, rights of way, covenants, restrictions, encroachments, conditional
sale or other title retention agreements, and other charges and encumbrances of
any kind, except: (i) as disclosed in Section 3.13(a) or in Section 3.13(b) of
the Disclosure Schedule; (ii) liens for Taxes and assessments not yet payable;
(iii) liens for Taxes, assessments and charges and other claims in an amount not
to exceed $250,000 in the aggregate, the validity of which are being contested
in good faith; (iv) imperfections of title, liens, security interests, claims,
easements, rights or way, covenants, restrictions, encroachments, conditional
sale or other title retention agreements and other charges and encumbrances the
existence of which, individually and in the aggregate, do not materially
adversely affect the value of such property or impair the use of such property
in the usual conduct of business by MSG or the Subsidiaries; and (v) inchoate
mechanic's and materialmen's liens for construction in progress.
(b) MSG and the Subsidiaries have delivered to the Purchaser a true
and complete copy of each lease covering the leased property set forth on
Section 3.13(b) of the Disclosure Schedule (the "LEASES"), together with all
amendments thereto. To the knowledge of the Seller, as of the date of this
Agreement, neither MSG nor any Subsidiary is in material default under (i) the
New York Rangers Practice Facility Lease, dated February 22, 1984, between the
County of Westchester and the New York Rangers Hockey Club (the "RANGERS LEASE")
or (ii) the Restated Agreement, dated May 5, 1993, between the State University
of New York and Madison Square Garden Center, Inc. (the "KNICKS LEASE").
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15
(c) As of the date of this Agreement, neither MSG nor any Subsidiary
has received any notice of nor to the Seller's knowledge is there any pending or
threatened (in writing) condemnation proceeding or similar taking affecting any
real property owned by MSG or any Subsidiary or the real property subject to the
Rangers Lease or the Knicks Lease (or any part thereof) or of any sale or other
disposition of such real property or any part thereof in lieu of condemnation or
similar taking.
(d) There is no proceeding pending of which Seller has received
written notice or, to the knowledge of the Seller, threatened (in writing) in
which any taxing authority having jurisdiction over any of the real property
owned by MSG or any of the Subsidiaries is seeking to increase the assessed
value thereof over the assessed value thereof in the current tax year. During
the period from July 15, 1982 through the date of this Agreement, no real
property taxes have been assessed with respect to Madison Square Garden and
neither the Seller nor Viacom has received written notice of any action or
proceeding intended to eliminate or reduce the tax exemption applicable to
Madison Square Garden.
SECTION 3.14. EMPLOYEE BENEFIT MATTERS. (a) Section 3.14 of the
Disclosure Schedule contains a true and complete list of all employee benefit
plans (within the meaning of Section 3(3) of ERISA) and all bonus, stock option,
stock purchase, restricted stock, incentive, deferred compensation, retiree
medical or life insurance, supplemental retirement, severance or other benefit
plans, programs or arrangements, and all employment, termination, severance or
other contracts or agreements with respect to which MSG or any Subsidiary has
any obligation or which are maintained, contributed to or sponsored by MSG or
any Subsidiary for the benefit of any current employee, officer or director of
MSG or any Subsidiary or any former employee of MSG or any Subsidiary who was
previously employed in the Business, other than plans, programs, arrangements,
contracts or agreements for which no benefits are payable after the Closing (the
"PLANS"). Except as disclosed in Section 3.14 of the Disclosure Schedule, each
Plan is in writing and the Seller has previously made available to the Purchaser
a true and complete copy of each Plan and a true and complete copy of each of
the following documents, to the extent applicable, prepared in connection with
each such Plan: (i) a copy of each trust or other funding arrangement, (ii) the
most recently filed Internal Revenue Service ("IRS") Form 5500, (iii) the most
recently received IRS determination letter and (iv) the most recently prepared
actuarial report and financial statement. Except as otherwise disclosed in
Section 3.14 of the Disclosure Schedule, Viacom, the Seller, MSG and the
Subsidiaries have no express or implied commitment to modify, change or
terminate any Plan, other than with respect to a modification, change or
termination required by ERISA or the Internal Revenue Code.
(b) Except as otherwise disclosed in Section 3.14 of the Disclosure
Schedule, none of the Plans (i) is a multiemployer plan, within the meaning of
Section 3(37) or 4001(a)(3) of ERISA (a "MULTIEMPLOYER PLAN"), or a single
employer pension plan, within the meaning of Section 4001(a)(15) of ERISA, for
which MSG or any Subsidiary could incur
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16
liability under Section 4063 or 4064 of ERISA (a "MULTIPLE EMPLOYER PLAN"), or
(ii) provides or promises to provide retiree medical or life insurance benefits.
(c) Viacom, the Seller, MSG and the Subsidiaries are not liable for
any tax arising under Section 4971, 4972, 4975, 4979, 4980 or 4980B of the
Internal Revenue Code. Viacom, the Seller, MSG and the Subsidiaries have not
incurred any material liability under, arising out of or by operation of Title
IV of ERISA (other than liability for premiums to the Pension Benefit Guaranty
Corporation arising in the ordinary course), including, without limitation, any
liability in connection with (i) the termination or reorganization of any
employee pension benefit plan subject to Title IV of ERISA or (ii) the
withdrawal from any Multiemployer Plan or Multiple Employer Plan. None of the
assets of MSG or any Subsidiary is the subject of any lien arising under Section
302(f) of ERISA or Section 412(n) of the Internal Revenue Code and Viacom, the
Seller, MSG and the Subsidiaries have not been required to post any security
under Section 307 of ERISA or Section 401(a)(29) of the Internal Revenue Code
with respect to any Plan.
(d) Each Plan other than a Multiemployer Plan (and to the knowledge
of the Seller, each Multiemployer Plan) is now and has been operated in all
material respects in accordance with its terms, the requirements of all
applicable laws, including, without limitation, ERISA and the Internal Revenue
Code. All prior contributions, premiums or payments made with respect to any
Plan have been deducted for income tax purposes and no such deduction previously
claimed has been challenged by any government entity. All employer
contributions and premiums (including Pension Benefit Guaranty Corporation
premiums) with respect to the Plans due and owing prior to the Closing have been
or will be paid prior to the Closing. With respect to any Plan, no material
actions, suits or claims (other than routine claims for benefits in the ordinary
course) are pending, or to the knowledge of the Seller, threatened (in writing),
there are no facts or circumstances which exist that could be reasonably likely
to give rise to any such actions, suits or claims, and MSG and the Subsidiaries
will promptly notify the Purchaser in writing of any such actions, suits or
claims pending or threatened (in writing) arising after the date of this
Agreement and prior to the Closing.
(e) The Paramount Communications Inc. Retirement Plan (the
"RETIREMENT PLAN") and the Paramount Communications Inc. Savings Plan
(the"SAVINGS PLAN") which are intended to be qualified under Section 401(a) of
the Internal Revenue Code have received favorable determination letters from the
IRS that such plans are so qualified, and the related trusts which are intended
to be exempt from federal income tax pursuant to Section 501(a) of the Internal
Revenue Code have received determination letters from the IRS that such trusts
are so exempt.
SECTION 3.15. TAXES. (a) Except as set forth in Section 3.15 of the
Disclosure Schedule, each of MSG and the Subsidiaries has paid and discharged
all Taxes currently due for any period ending on or before the Closing Date and
MSG and each Subsidiary have filed all Tax returns required to be filed, and all
such Tax returns were
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17
complete in all material respects. Except as set forth in Section 3.15 of the
Disclosure Schedule, neither MSG nor any Subsidiary has executed or filed with
the Internal Revenue Service or any other taxing authority, domestic or foreign,
any extension or agreement extending the period for the assessment or collection
of any Taxes, except for permitted statutory extensions. Except as set forth in
Section 3.15 of the Disclosure Schedule, neither MSG nor any Subsidiary is a
party to any pending action or proceeding and, to the knowledge of the Seller,
no action or proceeding is threatened by any taxing authority for the assessment
or collection of any Taxes, and neither MSG nor any Subsidiary has received
written notice of any audit or review of any Tax return or report which could
result in the imposition of any Tax upon MSG or any Subsidiary.
(b) All material income Taxes owed by any affiliated group (within
the meaning of Section 1504 of the Internal Revenue Code) of which PCI or any
predecessor is the common parent have been paid or reserved in accordance with
generally accepted accounting principles in the financial statements of PCI for
each taxable period during which any of the Seller, the Subsidiaries or MSG were
a member of such group.
SECTION 3.16. BROKERS. Except for Allen & Company Incorporated
("ALLEN & COMPANY"), no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Viacom or the Seller. Viacom is solely responsible for the fees
and expenses of Allen & Company.
SECTION 3.17. LABOR MATTERS. Except as set forth in Section 3.17 of
the Disclosure Schedule, as of the date of this Agreement, (a) MSG and the
Subsidiaries are not a party to any collective bargaining agreement or other
contract or agreement with any labor organization or other representative of any
of the employees of MSG or the Subsidiaries, nor is any such contract or
agreement being negotiated; (b) there is no material unfair labor practice
charge or complaint pending or, to the knowledge of the Seller, threatened (in
writing) against MSG or the Subsidiaries; (c) there is no labor strike,
slowdown, work stoppage, material dispute, lockout or other material labor
controversy in effect or threatened (in writing) against MSG or the
Subsidiaries; (d) to the Seller's knowledge, no representation question exists
respecting any of the employees of MSG or the Subsidiaries, nor to the knowledge
of the Seller are there any campaigns being conducted to solicit cards from
employees of MSG and the Subsidiaries to authorize representation by any labor
organization; (e) no grievance is pending or, to the knowledge of the Seller,
threatened (in writing) which, if adversely decided, could have a Material
Adverse Effect; (f) neither MSG nor any Subsidiary is a party to, or otherwise
bound by, any consent decree with any government agency relating to employees or
employment practices; and (g) MSG and the Subsidiaries are in compliance with
all notification and bargaining obligations arising under any collective
bargaining agreement or statute, except as would not have a Material Adverse
Effect. MSG and the Subsidiaries are in compliance with WARN. Each of the
contracts and agreements described in clause (a) above are in full force and
effect as of the date of this Agreement unless otherwise noted in Section 3.17
of the Disclosure Schedule.
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18
SECTION 3.18. MATERIAL CONTRACTS AND ASSETS. (a) Section 3.18 of the
Disclosure Schedule, together with all other Sections of the Disclosure
Schedule, contains a list of all contracts to which MSG or any Subsidiary is a
party as of the date of this Agreement, other than contracts the termination or
violation of which would not be reasonably likely to have a Material Adverse
Effect. Except as disclosed on Section 3.18 of the Disclosure Schedule, neither
MSG nor any Subsidiary is a party to any written agreement with the Seller,
Viacom or any affiliate of Viacom. Except as disclosed on Section 3.18 of the
Disclosure Schedule, neither MSG nor any Subsidiary is party to any agreement
relating to any extension of credit or loan to MSG, the Subsidiaries or any
affiliate of MSG or the Subsidiaries. Except as disclosed on Section 3.18 of
the Disclosure Schedule, neither MSG nor any Subsidiary is in default (and, to
the knowledge of the Seller, there has not occurred any event that with the
lapse of time or the giving of notice or both would constitute such a default)
under any contract, agreement, indenture, mortgage, lease, insurance policy or
other instrument to which it is a party or by which its respective properties or
assets may be bound or subject or under which it or its respective business,
properties or assets receive benefits, except for any such defaults which would
not have a Material Adverse Effect.
(b) MSG and the Subsidiaries are in compliance in all material
respects with the Constitution, by-laws and resolutions of the Board of
Governors, as currently in effect, of each of the National Basketball
Association and the National Hockey League.
(c) PCI has performed all of its obligations required to be performed
under the Guaranty made as of November 22, 1988 by PCI (then known as Gulf +
Western Inc.) to the New York Yankees Limited Partnership.
SECTION 3.19. INTELLECTUAL PROPERTY. MSG and the Subsidiaries own
all of the Intellectual Property Assets (as defined below) purported to be owned
by MSG or any of the Subsidiaries and have the right to use all other
Intellectual Property Assets used by the Business, except as would not have a
Material Adverse Effect. "INTELLECTUAL PROPERTY ASSETS" means: (i) all
trademarks and service marks (including, without limitation, all logos, symbols
and other devices), trade dress, company and trade names (as well as their
initials, abbreviations and contractions), and other proprietary identifications
and associated good will with respect to each of the foregoing; (ii) all
invention disclosures and patents; (iii) all copyrights, software (including
source code, object code and data), trade secrets, inventions designs,
processes, formulas and mask works; (iv) all technical information and know-how;
and (v) all agreements (including, without limitation, license agreements,
pertaining to such intellectual property). As of the date of this Agreement,
none of the Intellectual Property Assets is subject to any outstanding order,
decree, judgment, stipulation or the like limiting the scope of the use thereof
by MSG, nor have any of such Intellectual Property Assets been knowingly
misappropriated from any third party. To the knowledge of the Seller and except
as would not have a Material Adverse Effect, none of the activities, products or
services the Business engages in, makes, uses, sells or offers infringes upon or
otherwise violates any trademarks, service marks, company or trade names, other
proprietary identifications, copyrights, software, trade secrets, patents,
patent applications, inventions, technical
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19
information and know-how, or other intellectual property rights owned or
exercised by any other person, firm or corporation, and, as of the date of this
Agreement, there is no claim or action or proceeding by any such person, firm or
corporation pending or threatened (in writing) with respect thereto. Except as
set forth in Section 3.19 of the Disclosure Schedule, as of the date of this
Agreement, there is no action or proceeding instituted by or on behalf of MSG or
any of the Subsidiaries in which an act constituting an infringement or other
violation of any of the rights to the Intellectual Property Assets is alleged to
have been committed by a third party.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
AND EACH PARENT
The Purchaser and each Parent represent and warrant, jointly and
severally, to Viacom and the Seller as follows:
SECTION 4.01. INCORPORATION AND AUTHORITY OF THE PURCHASER. The
Purchaser is a limited partnership duly formed, validly existing and in good
standing under the laws of the State of Delaware and has all necessary
partnership power and authority to enter into this Agreement, to carry out its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Purchaser, the performance
by the Purchaser of its obligations hereunder and the consummation by the
Purchaser of the transactions contemplated hereby have been duly authorized by
all requisite action on the part of the Purchaser. This Agreement has been duly
executed and delivered by the Purchaser, and (assuming due authorization,
execution and delivery by Viacom and the Seller) constitutes a legal, valid and
binding obligation of the Purchaser enforceable against the Purchaser in
accordance with its terms, subject to the effect of any applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors'
rights generally and subject, as to enforceability, to the effect of general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
SECTION 4.02. INCORPORATION AND AUTHORITY OF EACH PARENT. Each
Parent is a corporation duly incorporated, validly existing and in good standing
under the laws of the State of Delaware and has all necessary corporate power
and authority to enter into this Agreement, to carry out its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by each Parent, the performance by each Parent of
its obligations hereunder and the consummation by each Parent of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action on the part of each Parent. This Agreement has been duly
executed and delivered by each Parent, and (assuming due authorization,
execution and delivery by Viacom and the Seller) this Agreement constitutes a
legal, valid and binding obligation of
<PAGE>
20
each Parent enforceable against each Parent in accordance with its terms,
subject to the effect of any applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors' rights generally and subject, as
to enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
SECTION 4.03. NO CONFLICT. Assuming all consents, approvals,
authorizations and other actions described in Section 4.04 of this Agreement
have been obtained and all filings and notifications listed in Section 4.04 of
the Disclosure Schedule have been made, except as may result from any facts or
circumstances relating solely to Viacom or the Seller, the execution, delivery
and performance of this Agreement by the Purchaser and each Parent do not and
will not (a) violate or conflict with the partnership agreement or certificate
of limited partnership of the Purchaser or the certificate of incorporation or
by-laws of either Parent, (b) conflict with or violate any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award
applicable to the Purchaser or either Parent, including, without limitation, the
Modification of Final Judgment entered by the United States District Court for
the District of Columbia on August 24, 1982, or (c) result in any breach of, or
constitute a default (or event which with the giving of notice or lapse of time,
or both, would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of any lien or other encumbrance on any of the assets or properties of
the Purchaser or either Parent pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument
relating to such assets or properties to which the Purchaser, either Parent or
any of their subsidiaries is a party or by which any of such assets or
properties is bound or affected, except as would not, individually or in the
aggregate, have a material adverse effect on the ability of the Purchaser or
either Parent to consummate the transactions contemplated by this Agreement.
SECTION 4.04. CONSENTS AND APPROVALS. The execution and delivery of
this Agreement by the Purchaser and each Parent do not, and the performance of
this Agreement by the Purchaser and each Parent will not, require any consent,
approval, authorization or other action by, or filing with or notification to,
any governmental or regulatory authority, except (a) the notification
requirements of the HSR Act, (b) those required from the New York State Liquor
Authority, the NHL and the NBA, (c) where failure to obtain such consent,
approval, authorization or action, or to make such filing or notification, would
not prevent the Purchaser or either Parent from performing any of its material
obligations under this Agreement and (d) as may be necessary as a result of any
facts or circumstances relating solely to Viacom or the Seller.
SECTION 4.05. ABSENCE OF LITIGATION. No claim, action, proceeding or
investigation is pending or, to the knowledge of the Purchaser or either Parent,
threatened (in writing), before any court, arbitrator or administrative,
governmental or regulatory authority or body which seeks to delay or prevent the
consummation of the transactions contemplated
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21
hereby or which would be reasonably likely to materially and adversely affect or
restrict the Purchaser's or either Parent's ability to consummate the Merger.
SECTION 4.06. FINANCING. The Purchaser has all funds necessary to
consummate the transactions contemplated by this Agreement.
SECTION 4.07. BROKERS. Except for Bear, Stearns & Co. Inc. ("BEAR
STEARNS"), no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Purchaser or either Parent. The Purchaser is solely responsible for the
fees and expenses of Bear Stearns.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. CONDUCT OF BUSINESS PRIOR TO THE CLOSING. (a) Unless
the Purchaser otherwise agrees in writing and except as otherwise set forth
herein or in the Disclosure Schedule (including Section 5.01 thereof), between
the date of this Agreement and the Closing Date, MSG will, and will cause the
Subsidiaries to, (i) conduct the Business only in the ordinary course, (ii) use
best efforts to preserve substantially intact the structure of the business
organization of the Business, (iii) use reasonable efforts to keep available to
the Purchaser the services of the present officers and key employees of MSG and
the Subsidiaries, (iv) use reasonable efforts to preserve the current
relationships of MSG and the Subsidiaries with their respective customers,
suppliers, distributors and other persons with which MSG and the Subsidiaries
have significant business relationships, and (v) use reasonable efforts to
comply in all material respects with all applicable laws.
(b) Except as expressly provided in this Agreement or the Disclosure
Schedule (including Section 5.01 thereof), between the date of this Agreement
and the Closing Date, MSG will not, and will cause the Subsidiaries not to, do
any of the following without the prior written consent of the Purchaser (which
consent shall not be unreasonably withheld):
(i) except for carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other similar liens arising in the ordinary course of
business, grant any pledge, lien, security interest, mortgage, charge,
adverse claim of ownership or use, or other encumbrance of any kind on any
properties or assets (whether tangible or intangible) of MSG or any
Subsidiary;
(ii) establish or increase any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option (including,
without limitation, the granting of stock options, stock appreciation
rights, performance
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22
awards or restricted stock awards), stock purchase or other employee
benefit plan, or otherwise increase the compensation payable to or to
become payable to any officers or key employees of MSG or any Subsidiary,
except in any case described above in the ordinary course of business or as
may be required by law or applicable collective bargaining agreement;
(iii) enter into any employment or severance agreement with any of
the employees of MSG or any Subsidiary except in the ordinary course of
business consistent with past practice and providing for compensation not
in excess of $250,000 per year and not for a term in excess of two years;
(iv) declare or pay any dividend (whether in cash, stock or other
property) or make any other distribution or contribution in respect of its
capital stock or otherwise, except that any Subsidiary may declare and pay
cash dividends, without restriction, to MSG or any of the other
Subsidiaries;
(v) except in the ordinary course of business consistent with past
practice, enter into, amend or terminate any material contract,
arrangement, or commitment, including, without limitation, any affiliation
agreement relating to Madison Square Garden Network or collective
bargaining agreement; PROVIDED, HOWEVER, that MSG will not, and will cause
the Subsidiaries not to, enter into or execute any affiliation agreement
(including any affiliation agreement set forth on the Disclosure Schedule)
other than an extension of an existing affiliation agreement for a period
not to exceed six months;
(vi) enter into any new line of business;
(vii) incur, or commit to incur, any capital expenditures in
excess of $1,000,000 in the aggregate for all such expenditures from the
date of this Agreement through and including the Closing Date, or any
obligations or liabilities in connection therewith, other than capital
expenditures listed on Section 5.01 of the Disclosure Schedule;
(viii) other than with respect to the provision of intercompany
services in the ordinary course of business consistent with past practice,
enter into any transaction or agreement, including, without limitation, any
purchase, sale, lease or exchange of property or the rendering of any
service, with any affiliate of Viacom;
(ix) (A) sell, assign, transfer, lease or otherwise dispose of any
fixed assets of MSG or any Subsidiary having an aggregate value exceeding
$1,000,000 or (B) amend the Rangers Lease or the Knicks Lease in any
material respect;
(x) (A) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof or
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23
(B) incur any indebtedness for borrowed money (other than intercompany
indebtedness owed to PCI) or issue any debt securities or assume, grant,
guarantee or endorse, or otherwise as an accommodation become responsible
for, the obligations of any person, or make loans or advances (other than
by MSG to PCI or the Subsidiaries), the aggregate value of any matter set
forth in this Section 5.01(b)(x)(B) which exceeds $1,000,000;
(xi) materially change any method of accounting or accounting practice
used by MSG or the Subsidiaries, other than such changes as are required by
generally accepted accounting principles;
(xii) issue or sell any additional shares of the capital stock of,
or other equity interests in, MSG or any Subsidiary, or securities
convertible into or exchangeable for such shares or equity interests, or
issue or grant any options, warrants, calls, subscription rights or other
rights of any kind to acquire additional shares of such capital stock, such
other equity interests, or such securities;
(xiii) amend the charter or by-laws of MSG or any Subsidiary; or
(xiv) enter into an agreement to do any of the foregoing.
SECTION 5.02. ACCESS TO INFORMATION. From the date of this Agreement
until the Closing, upon reasonable notice, Viacom and the Seller shall, and
shall cause the officers, directors, employees, auditors and agents of Viacom,
the Seller, MSG and the Subsidiaries to, (i) afford the officers, employees and
authorized agents and representatives of the Purchaser and the Parents
reasonable access, during normal business hours, to the offices, properties,
books and records of MSG and the Subsidiaries and (ii) furnish to the officers,
employees and authorized agents and representatives of the Purchaser and the
Parents such additional financial and operating data and other information
regarding the assets, properties, goodwill and business of MSG and the
Subsidiaries as the Purchaser and the Parents may from time to time reasonably
request; PROVIDED, HOWEVER, that such investigation shall not unreasonably
interfere with any of the businesses or operations of Viacom, the Seller or MSG
or any of their respective affiliates, including the Subsidiaries.
SECTION 5.03. CONFIDENTIALITY. The terms of the letter agreement
dated May 18, 1994 between PCI and ITT and the letter agreement dated May 18,
1994 between PCI and Cablevision Systems Corporation (collectively, the
"CONFIDENTIALITY AGREEMENT") shall both apply to the Purchaser, and are hereby
incorporated herein by reference and shall continue in full force and effect
until the Closing, at which time such Confidentiality Agreement and the
obligations of the Purchaser under this Section 5.03 shall terminate; PROVIDED,
HOWEVER, that the Confidentiality Agreement shall terminate only in respect of
that portion of the Evaluation Material (as defined in the Confidentiality
Agreement) relating solely to MSG, the Subsidiaries and the Equity Interests.
If this Agreement is, for any
<PAGE>
24
reason, terminated prior to the Closing, the Confidentiality Agreement shall
continue in full force and effect.
SECTION 5.04. REGULATORY AND OTHER AUTHORIZATIONS; CONSENT; YANKEE
GUARANTY. (a) Subject to Section 5.04(c) of this Agreement, each party hereto
shall use its best efforts to obtain all authorizations, consents, orders and
approvals of (i) all Federal, state and local regulatory bodies and officials,
(ii) the NBA and (iii) the NHL, in each case, that may be or become necessary
for its execution and delivery of, and the performance of its obligations
pursuant to, this Agreement and will cooperate fully with the other parties in
promptly seeking to obtain all such authorizations, consents, orders and
approvals. Each party hereto agrees to make an appropriate filing of a
Notification and Report Form pursuant to the HSR Act with respect to the
transactions contemplated herein as promptly as practicable and, in any event,
within ten Business Days of the date of this Agreement, and to supply promptly
any additional information and documentary material that may be requested
pursuant to the HSR Act. The Seller shall promptly after the date of this
Agreement make a request of each of the NBA and NHL for all necessary approvals
for a transfer of the franchises of the New York Knickerbockers Basketball Club
and the New York Rangers Hockey Club, respectively, and the parties shall
cooperate with any investigation of the NBA and NHL in connection therewith.
The parties hereto will not take any action for the purpose of delaying,
impairing or impeding the receipt of any required approvals.
(b) Subject to Section 5.04(c) of this Agreement, without limiting
the generality of the Purchaser's and each Parent's undertakings pursuant to
Section 5.04(a) of this Agreement, the Purchaser and each Parent shall:
(i) use its best efforts to prevent the entry in a judicial or
administrative proceeding brought under any antitrust law by any
governmental authority with jurisdiction over the enforcement of any
applicable antitrust laws ("GOVERNMENTAL ANTITRUST AUTHORITY") or any other
party of any permanent or preliminary injunction or other order that would
make consummation of the Merger unlawful or would prevent or delay it;
(ii) take promptly, in the event that such an injunction or order has
been issued in such a proceeding, any and all steps, including, without
limitation, appeal thereof or the posting of a bond of up to $2,000,000,
necessary to vacate, modify or suspend such injunction or order so as to
permit the consummation of the Merger on a schedule as close as possible to
that contemplated by this Agreement; and
(iii) use its best efforts to take promptly all other action and
do all other things necessary and proper to obtain all necessary approvals
and consents of the NBA and NHL and to avoid or eliminate each and every
impediment under any antitrust law or rule, by-law, regulation or agreement
of the NBA or NHL that may be asserted by any Governmental Antitrust
Authority, the NBA, the NHL or any other party to the consummation of the
Merger.
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25
(c) Notwithstanding anything to the contrary in Sections 5.04(a) and
(b) or elsewhere in this Agreement, the Purchaser, the Parents and their
respective affiliates shall not be required to take, and may refrain from
taking, any action (including any action to amend or enter into any agreement or
business arrangement), in either case if the Purchaser determines in good faith
and with a reasonable basis that such action is reasonably likely to (i) have a
material adverse affect on the results of operations or financial condition of
the Purchaser, either Parent or any of their respective Covered Affiliates or
(ii) be materially inconsistent with the principal business purposes of the
partners of the Purchaser in choosing to jointly acquire and operate the
Business or (iii) require any significant change in the operations or activities
of the business (or any material assets employed therein) of the Purchaser,
either Parent or any of their respective Covered Affiliates which the Purchaser
or either Parent reasonably determines is adverse to the operations or
activities of the business (or any material assets employed therein) of the
Purchaser, either Parent or any of their respective Covered Affiliates.
(d) Each party hereto agrees to cooperate in obtaining any other
consents and approvals which may be required in connection with the transactions
contemplated by this Agreement.
(e) Effective as of the Closing, each Parent and the Purchaser hereby
jointly and severally guarantee the obligations of PCI arising after the Closing
Date under the Guaranty made as of November 22, 1988 by PCI (then known as Gulf
+ Western Inc.) to the New York Yankees Limited Partnership (the "YANKEE
GUARANTY"). Each Parent and the Purchaser shall use their reasonable efforts to
cause the Yankee Guaranty to be released without cost or obligation on behalf of
PCI or any of its affiliates and each Parent and the Purchaser jointly and
severally agree to indemnify PCI and its affiliates for any and all liabilities,
losses, damages, claims, costs, expenses, interest, awards, judgments and
penalties (including, without limitation, attorneys' and consultants' fees and
expenses) incurred by PCI and any of its affiliates arising after the Closing
Date from the Yankee Guaranty.
SECTION 5.05. INVESTIGATION. In connection with the Purchaser's and
each Parent's investigation of MSG, the Subsidiaries and the Business, the
Purchaser and each Parent have received from the Seller certain projections and
other forecasts for MSG and the Subsidiaries, including, without limitation,
projected income statement information for the fiscal year ending December 31,
1994 and certain plan and budget information. The Purchaser and each Parent
acknowledge that there are uncertainties inherent in attempting to make such
projections, forecasts, plans and budgets, and that the Purchaser and each
Parent are familiar with such uncertainties. Viacom and the Seller make no
representation or warranty with respect to any estimates, projections,
forecasts, plans or budgets referred to in this Section 5.05, or any other
representation or warranty with respect to the business, operations, assets,
liabilities or financial condition of MSG or any Subsidiary other than as
specifically set forth in this Agreement.
<PAGE>
26
SECTION 5.06. ASSET TRANSFER. Viacom and the Seller covenant and
agree that, simultaneously with the Closing, (i) they will cause the ownership
of the assets (including, without limitation, the C-4 transponder and any
affiliation agreements relating to Madison Square Garden Network) sold and
assigned on March 11, 1994 to Paramount Distribution Inc., a Delaware
corporation ("PDI"), by Madison Square Garden Productions, Inc., a Delaware
corporation and a wholly owned Subsidiary of MSG ("MSGP"), set forth in Section
5.06 of the Disclosure Schedule, to be transferred to MSG free and clear of all
security interests, liens and encumbrances of any kind and (ii) in exchange
therefor, the 733.33 shares of preferred stock of PDI held by MSGP will be
cancelled. In connection with such transfer, (A) Viacom and the Seller will
cause all agreements relating to such assets with Viacom or any of its
affiliates to be terminated or amended to remove MSGP as a party and (B) the two
employees of MSGP who were transferred with such assets to PDI shall again
become employees of MSGP and shall be considered Transferred Employees for
purposes of Article VI below.
SECTION 5.07. INTERCOMPANY ACCOUNTS. Immediately prior to the
Closing, PCI shall contribute to the capital of MSG all amounts then owing from
MSG & Affiliates to PCI & Affiliates, less all amounts then owing from PCI &
Affiliates to MSG & Affiliates, and such debts shall be cancelled. Such
contribution and cancellation shall be accomplished without incurrence of any
liability for Taxes by MSG (other than Taxes with respect to which Viacom and
the Seller have agreed to indemnify the Purchaser).
SECTION 5.08. PROVISION OF TICKETS. For a period of 20 years
following the Closing Date, the Purchaser will sell, or make available to
Viacom, and Viacom shall purchase, or have the right to purchase, tickets to
events held at Madison Square Garden and The Paramount Theater (the "TICKETS")
as described in Section 5.08 of the Disclosure Schedule.
SECTION 5.09. INSURANCE. (a) Up to 12:01 a.m. on the day after the
Closing Date, Viacom and the Seller will maintain insurance generally comparable
to the insurance in place on the date of this Agreement. Effective 12:01 a.m.
on the day after the Closing Date, MSG and the Subsidiaries shall cease to be
insured by Viacom's or its affiliates' insurance policies, such that (i) with
respect to insurance coverage written on an "occurrence basis," Viacom and its
affiliates will have no liability for occurrences which take place on and after
12:01 a.m. on the day after the Closing Date and (ii) with respect to insurance
coverage written on a "claims made basis," Viacom and its affiliates will have
no liability for claims made after 12:01 a.m. on the day after the Closing Date.
The Purchaser agrees to indemnify and hold harmless Viacom and its affiliates in
respect to any liability, claim, damage or expense of any kind whatsoever, which
Viacom and its affiliates might incur arising out of or relating to any such
occurrences, losses or claims under this Section 5.09 other than any such
liability, claim, damage or expense due to Viacom's breach of this Section
5.09(a).
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(b) From and after the Closing Date, neither Viacom nor any of its
affiliates shall have any liability for self insured workers' compensation
claims with respect to MSG and the Subsidiaries in existence on the Closing Date
or arising from any event or circumstance taking place or existing prior to, on
or subsequent to the Closing Date. The Purchaser shall (and each Parent shall
cause the Purchaser to) take all steps necessary under any applicable law to
assume the liability for self insured workers' compensation pursuant to this
Section 5.09 and the Purchaser and each Parent, jointly and severally, shall
fully indemnify Viacom and its affiliates with respect to any liability, claim,
damage or expense of any kind whatsoever arising out of or relating to any
workers' compensation claim assumed by the Purchaser hereunder. The Purchaser
shall (and each Parent shall cause the Purchaser to) cooperate with Viacom and
its affiliates in order to obtain the return or release of bonds or securities
or indemnifications given by Viacom or any of its affiliates to any state in
connection with workers' compensation self-insurance with respect to MSG and the
Subsidiaries; and, in order to effectuate such return or release, the Purchaser
shall (and each Parent shall cause the Purchaser to), to the extent required by
any state, post its own bonds, letters of credit, indemnifications or other
securities in substitution therefor.
SECTION 5.10. RIGHTS TO THE USE OF CERTAIN INTELLECTUAL PROPERTY.
(a) Except as set forth in Section 5.10 of the Disclosure Schedule, the Seller,
Viacom and their respective affiliates agree that they will retain no rights of
ownership or use in or to the Intellectual Property Assets used primarily in the
Business, including, without limitation, any such rights in or to "Madison
Square Garden," "Madison Square" and "MSG" and any logos, symbols or other
devices associated primarily with Madison Square Garden; PROVIDED, HOWEVER, that
the joint venture among American Telephone & Telegraph Company ("AT&T"),
Paramount Technology Group and PCI set forth in the Joint Development Agreement
dated as of February 1, 1994 shall be entitled to use the name "MSG"; PROVIDED,
FURTHER, that Viacom shall use all reasonable efforts to cause such joint
venture to cease using such name as promptly as reasonably practicable and that,
in any event, Viacom shall cause such name to cease to be used by the joint
venture not later than one year following the Closing Date.
(b) The Purchaser shall be entitled to continue to use the name
"Paramount Theatre" for a period of one year following the Closing, after which
time the Purchaser agrees that it shall no longer include the word "Paramount"
in the operation of the Business.
SECTION 5.11. POST-CLOSING SERVICES. (a) For a period of six months
after the Closing, at the Purchaser's option, Viacom and the Seller shall
provide, or cause PCI to provide, to the Purchaser such administrative
(including MIS), legal and management functions as were previously provided by
PCI and its affiliates to MSG and the Subsidiaries prior to the Closing Date, as
set forth in Section 5.11 (paragraphs 2, 3, 5 and 7 only) of the Disclosure
Schedule. The Purchaser hereby agrees to reimburse Viacom, the Seller and their
affiliates from time to time for the reasonable costs and expenses of providing
such administrative, legal and management functions.
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(b) Except as provided in Section 5.11(a) of this Agreement and
except for the agreements and arrangements listed in Section 3.18(a)(i)
(paragraphs 1, 2 and 3 only) of the Disclosure Schedule, all intercompany
agreements between (i) MSG and the Subsidiaries, on the one hand, and
(ii) Viacom and any of its other affiliates, on the other hand, shall be
terminated as of the Closing Date.
SECTION 5.12. CHRISTMAS SHOW. Prior to the Closing Date, Viacom, the
Seller and the Purchaser shall in good faith negotiate a definitive joint
venture agreement (the "CHRISTMAS SHOW AGREEMENT") between Antics, Inc.
("ANTICS") and the Purchaser relating to the production, promotion and
exploitation of a musical adaptation of Charles Dickens' "A Christmas Carol"
(the "SHOW"). The Christmas Show Agreement shall provide, among other things,
that (i) Antics and the Purchaser shall form an equal joint venture for the
purpose of promoting and exploiting the Show on a worldwide basis, (ii) such
joint venture will own (or enjoy the benefits of) all right, title and interest
currently owned by Antics and MSG in and to the Show, including, without
limitation, all lyrics, arrangements, musical scores, talent agreements,
artistic renderings, set and costume designs and choreography arrangements
relating to the Show, and (iii) Antics will have control over all creative
aspects of the production of the Show, provided that the Purchaser shall have
meaningful consultation rights in connection with such creative aspects of the
Show. Upon execution of the Christmas Show Agreement, the letter agreement
dated August 15, 1994 between Antics and MSG relating to the Show shall be
terminated and of no further force and effect.
SECTION 5.13. FURTHER ACTION. Each of the parties hereto shall
execute and deliver such documents and other papers and take such further
actions as may be reasonably required to carry out the provisions hereof and
give effect to the transactions contemplated hereby.
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.01. EMPLOYEES. (a) For the one-year period commencing on
the Closing Date (the "CONTINUATION PERIOD"), the Purchaser agrees to provide
those persons employed by MSG or any Subsidiary immediately prior to the
Closing, including those employees on vacation, leave of absence, disability or
sick leave or layoff (whether or not such employees return to active employment
with the Purchaser) (the "TRANSFERRED EMPLOYEES"), other than those Transferred
Employees whose employment is governed by the terms of a collective bargaining
agreement, with employee benefits that in the aggregate are substantially
equivalent in value to, and no less favorable in value than, those provided to
such Transferred Employees immediately prior to the Closing and, with respect to
those Transferred Employees whose employment is governed by the terms of a
collective bargaining agreement, with such employee benefits as are required by
the terms of such collective bargaining agreement for the duration thereof.
During the Continuation Period,
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the Purchaser further agrees to continue to provide those former employees of
MSG or the Subsidiaries (the "TRANSFERRED FORMER EMPLOYEES"), other than those
Transferred Former Employees whose employment was governed by the terms of a
collective bargaining agreement, with employee benefits that in the aggregate
are substantially equivalent in value to, and not less favorable in value than,
the benefits to which such Transferred Former Employees were entitled under the
Plans immediately prior to the Closing and, with respect to those Transferred
Former Employees whose employment was governed by the terms of a collective
bargaining agreement, with such employee benefits as are required by the terms
of such applicable collective bargaining agreements for the duration thereof.
Nothing contained in this Agreement shall restrict or otherwise inhibit the
Purchaser's rights to terminate the employment of any Transferred Employees on
or after the Closing Date. Notwithstanding anything to the contrary herein, the
Purchaser shall not have any obligation to provide any equity or equity-based
compensation or benefit to any Transferred Employee with respect to the equity
of the Purchaser, either Parent or MSG and no equity or equity-based
compensation or benefits provided to Transferred Employees immediately prior to
the Closing shall be taken into account for purposes of this Section 6.01(a) in
determining substantial equivalence.
(b) To the extent that service is relevant for purposes of
eligibility, vesting, benefit accrual, benefit contributions, benefit
calculations or allowances (including, without limitation, entitlements to
vacation and sick days) under any employee benefit plan, program or arrangement
established or maintained by the Purchaser, MSG or the Subsidiaries for the
benefit of Transferred Employees or Transferred Former Employees, such plan,
program or arrangement shall credit such employees or former employees for
service on or prior to the Closing with the Seller or any affiliate thereof;
PROVIDED that the Purchaser shall not be obligated to give credit for such
service to the extent it (i) would result in duplication of any benefits to
which a Transferred Employee or Transferred Former Employee is entitled to under
any comparable plans, programs or arrangements maintained by Viacom, the Seller
or PCI on or prior to the Closing Date or by the Purchaser after the Closing
Date, or (ii) was not service which was recognized for purposes of such
comparable plans, programs or arrangements. In addition, the Purchaser shall
waive any pre-existing conditions and recognize, for purposes of annual
deductible and out-of-pocket limits under its medical and dental plans, claims
of Transferred Employees and Transferred Former Employees incurred during the
year in which the Closing Date occurs and prior to the Closing Date.
SECTION 6.02. EMPLOYMENT RELATED MATTERS. The Purchaser agrees
(i) subject to the rights of the affected Transferred Employees regarding
representation to recognize the unions listed in Section 6.02 of the Disclosure
Schedule as the sole and exclusive collective bargaining agents for the affected
Transferred Employees and Transferred Former Employees and (ii) to be bound by,
and to comply in all respects with, the terms and conditions of the collective
bargaining agreements listed in Section 6.02 of the Disclosure Schedule
applicable to Transferred Employees and Transferred Former Employees.
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SECTION 6.03. MULTIEMPLOYER PLANS. With respect to the Multiemployer
Plans listed in Section 3.14 of the Disclosure Schedule, the Purchaser agrees to
continue on and after the Closing Date to contribute to such plans for
substantially the same number of base units as MSG and the Subsidiaries were
obligated to contribute with respect to Transferred Employees and Transferred
Former Employees immediately prior to the Closing. The Purchaser further
covenants and agrees to take all actions that shall be necessary to avoid the
acquisition of MSG and the Subsidiaries, as contemplated by this Agreement, from
resulting in the assessment of withdrawal liability by such plans against Viacom
or the Seller.
SECTION 6.04. PARAMOUNT COMMUNICATIONS INC. RETIREMENT PLAN.
(a) Effective as of the Closing Date, Transferred Employees who were
immediately prior to the Closing Date participants (the "TRANSFERRED EMPLOYEE
PARTICIPANTS") in the Retirement Plan shall accrue no further benefits under the
Retirement Plan with respect to service after the Closing Date and Viacom and
the Seller shall have taken all such action prior to the Closing Date as may be
required to achieve this result. Effective as of the Closing Date, the
Purchaser shall establish a replacement defined benefit pension plan (the "NEW
DEFINED BENEFIT PLAN") intended to be qualified under Section 401(a) of the
Internal Revenue Code, and a related trust intended to be exempt form taxation
under Section 501(a) of the Internal Revenue Code, for the benefit of the
Transferred Employee Participants and the Transferred Former Employees who were
immediately prior to the Closing Date participants in the Retirement Plan (the
"TRANSFERRED FORMER EMPLOYEE PARTICIPANTS"), the terms of which plan and trust
shall be substantially identical to the terms of the Retirement Plan. The
Purchaser agrees to apply for, and to take all actions necessary to secure, as
soon as practicable after the Closing Date, a determination letter from the IRS
to the effect that the New Defined Benefit Plan is qualified under the
applicable provisions of the Internal Revenue Code. The Purchaser shall
recognize the service of the Transferred Employee Participants with the Seller
or any affiliate thereof prior to the Closing Date for all purposes under the
New Defined Benefit Plan.
(b) As soon as practicable following the date of this Agreement,
Viacom shall cause its actuaries to determine effective as of the Closing Date
and in accordance with the requirements of ERISA and Section 414(l) of the
Internal Revenue Code, an amount of assets of the Retirement Plan (the "PLAN
ASSETS AMOUNT") equal to the present value of benefits accrued to the Closing
Date for all Transferred Employee Participants and Transferred Former Employee
Participants, determined as if the Transferred Employee Participants terminated
employment with MSG or any of the Subsidiaries as of the Closing Date and with
regard to only those benefits to which the Transferred Employee Participants and
Transferred Former Employee Participants would be eligible based on their age
and service as of the Closing Date. Such present value shall be determined
using (to the extent applicable) the assumptions underlying the determination of
disclosure values as of March 31, 1994 for purposes of compliance with Financial
Accounting Standards Board Statement No. 87 (FASB 87).
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(c) As soon as practicable after Viacom's actuaries determine the
Plan Assets Amount, Viacom and the Seller shall cause the transfer of an amount
equal to the Plan Assets Amount from the Retirement Plan to the New Defined
Benefit Plan, together with interest on such Plan Assets Amount at the rate
announced by Morgan Guaranty Trust Company of New York as its prime rate from
time to time from the Closing Date to the date of transfer.
(d) The Purchaser shall indemnify Viacom and the Seller and hold
Viacom and the Seller harmless from, any and all liability, claims, costs and
expenses (including reasonable attorneys' fees) incurred by Viacom and the
Seller by reason of the Purchaser's failure to qualify the New Defined Benefit
Plan and related trust pursuant to the relevant provisions of the Internal
Revenue Code. Viacom and the Seller shall indemnify the Purchaser and the
Subsidiaries and hold the Purchaser and the Subsidiaries harmless from, any and
all liability, claims, costs and expenses (including, without limitation,
reasonable attorneys' fees) incurred by the Purchaser, MSG or the Subsidiaries
for all liabilities and obligations: (i) arising out of or relating to: (A)
Viacom's or the Seller's failure to cause assets to be transferred from the
Retirement Plan to the New Defined Benefit Plan in accordance with this Section
6.04, or (B) the Retirement Plan, other than liabilities for accrued benefits
properly transferred to the New Defined Benefit Plan, or (ii) with respect to
the New Defined Benefit Plan arising out of or relating to actions taken by
Viacom, the Seller or PCI prior to the Closing Date.
SECTION 6.05. PARAMOUNT COMMUNICATIONS INC. SAVINGS PLAN.
(a) Effective as of the Closing Date, the Transferred Employees and the
Transferred Former Employees who were immediately prior to the Closing Date
participants (the "SAVINGS PLAN PARTICIPANTS") in the Savings Plan, shall no
longer accrue benefits under the Savings Plan and Viacom and the Seller shall
have taken all such action prior to the Closing Date as may be required to
achieve this result. As of the Closing Date, Viacom and the Seller shall cause
each Transferred Employee to be 100% vested in his or her account balance. As
soon as practicable after the Closing Date, Viacom and the Seller shall cause
the transfer of an amount representing the entire account balances of the
Savings Plan Participants determined as of the plan valuation date coinciding
with or next following the Closing Date, adjusted for the actual return thereon
from such valuation date to the date of account balance transfer, to the
trustee, designated by the Purchaser, of the qualified trust established or
maintained by the Purchaser in accordance with the following sentence. After
the Closing Date, the Purchaser shall establish or provide the Savings Plan
Participants with a new savings plan (the "NEW SAVINGS PLAN") intended to be
qualified under Section 401(a) and 401(k) of the Internal Revenue Code, which
shall provide (i) for immediate eligibility for participation for each Savings
Plan Participant, (ii) each such Savings Plan Participant with an initial
account balance equal to the amount transferred to the New Savings Plan in
respect of such Savings Plan Participants interest in the Savings Plan and (iii)
vesting, eligibility, contribution levels, matching levels, investment
alternatives, participant loan and withdrawal provisions that are no less
favorable than those of the Savings Plan as in effect immediately prior to the
Closing Date, applied by aggregating service with the Seller, MSG, the
Subsidiaries and their
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affiliates prior to the Closing Date with service with the Purchaser and its
affiliates on and after the Closing Date. New Savings Plan shall accept the
transfer of outstanding loans from the Savings Plan and shall provide for the
continued administration of such transferred loans for the remainder of their
terms in accordance with the provisions thereof. Viacom, the Seller and the
Purchaser agree to cooperate fully with respect to the actions necessary to
effect the transactions contemplated in this Section 6.05(a), including, without
limitation, the provision of records and information as each may reasonably
request from the other.
(b) The Purchaser shall indemnify Viacom and the Seller and hold
Viacom and the Seller harmless from any and all liability, claims, costs and
expenses (including reasonable attorneys' fees) incurred by Viacom and the
Seller by reason of the Purchaser's failure to qualify the New Savings Plan and
related trust pursuant to the relevant provisions of the Internal Revenue Code.
Viacom and the Seller shall indemnify the Purchaser and the Subsidiaries and
hold the Purchaser and the Subsidiaries harmless from any and all liability,
claims, costs and expenses (including, without limitation, reasonable attorneys'
fees) incurred by the Purchaser or the Subsidiaries for all liabilities and
obligations: (i) arising out of or relating to: (A) Viacom's or the Seller's
failure to cause assets to be transferred from the Savings Plan to the New
Savings Plan in accordance with this Section 6.05, or (B) the Savings Plan,
other than liabilities for accrued benefits properly transferred to the New
Savings Plan, or (ii) with respect to the New Savings Plan arising out of or
relating to actions taken by Viacom, the Seller or PCI prior to the Closing
Date.
SECTION 6.06. MSG UNION SPONSORED PENSION PLANS. Effective as of the
Closing Date, the Purchaser shall continue as the employer under the MSG Network
Retirement Plan for Bargaining Employees, the MSG Retirement Plan for Licensed
Ushers and Ticket Takers Local Union No. 176, the 401(k) Plan and the Trust for
Madison Square Garden Network Local 1212 and the Madison Square Garden 401(k)
Plan for Collective Bargaining Unit Employees.
SECTION 6.07. RETIREE MEDICAL AND RETIREE LIFE INSURANCE. The
Purchaser agrees to assume the liability of the Seller, if any, for the
provision of retiree medical and retiree life insurance liabilities for
Transferred Employees and Transferred Former Employees as of the Closing Date,
with respect to claims for covered services rendered after the Closing Date.
SECTION 6.08. INDEMNITY. Anything in this Agreement to the contrary
notwithstanding (including, without limitation, Section 10.01) (except Section
6.04(d) and Section 6.05(b), the Purchaser hereby agrees to indemnify Viacom and
the Seller against and hold Viacom and the Seller harmless from any and all
claims, losses, damages, expenses, obligations and liabilities (including costs
of collection, reasonable attorneys' fees and other costs of defense) arising
out of or otherwise in respect of (i) any failure of the Purchaser or the
Subsidiaries to comply with their obligations under any collective bargaining
agreement applicable to Transferred Employees or Transferred Former Employees,
(ii) any withdrawal liability assessed against Viacom or the Seller in respect
of any Multiemployer Plan listed in
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33
Section 3.14 of the Disclosure Schedule, (iii) any claim made by any Transferred
Employee against Viacom or the Seller for any severance or termination benefits
pursuant to the provisions of any MSG or Subsidiary plan, program or arrangement
which was disclosed in Section 3.14 of the Disclosure Schedule, (iv) any suit or
claim of violation brought against Viacom or the Seller under WARN for any
actions taken by the Purchaser or the Subsidiaries on or after the Closing Date
with respect to any facility, site of employment, operating unit or Transferred
Employee, (v) any action taken on or after the Closing Date by the Purchaser or
the Subsidiaries with respect to any Plan and (vi) any claim for payments or
benefits by Transferred Employees, Transferred Former Employees or their
respective beneficiaries under any Plan which the Purchaser continues to
maintain after the Effective Time.
ARTICLE VII
TAX MATTERS
SECTION 7.01. TAX INDEMNITIES. (a) From and after the Closing
Date, Viacom and the Seller agree to indemnify the Purchaser and the Parents
against liabilities for all Taxes (i) imposed on any person (other than MSG and
its Subsidiaries) for which MSG or any Subsidiary would be liable under Treasury
Regulations Section 1.1502-6 (or equivalent provision of state, local or foreign
law), as transferee, or as successor of any contract or otherwise, in each case
with respect to any taxable period that ends on or before the Closing Date or
includes the Closing Date and (ii) imposed on MSG or any of its Subsidiaries
with respect to any taxable period or portion thereof that ends on or before the
Closing Date, in excess of the amount reflected as current Taxes payable in the
Post-Closing Balance Sheet.
(b) From and after the Closing Date, the Purchaser and the Parents
shall indemnify Viacom, the Seller and their affiliates against liabilities for
all Taxes imposed on or with respect to the business of MSG or any of its
Subsidiaries that are not subject to indemnification pursuant to paragraph (a)
of this Section 7.01.
(c) Payment by the indemnitor of any amount due under this Section
7.01 shall be made within ten days following written notice by the indemnitee
that payment of such amounts to the appropriate tax authority is due, provided
that the indemnitor shall not be required to make any payment earlier than two
days before it is due to the appropriate tax authority. If Viacom or the Seller
receives an assessment or other notice of Tax due with respect to MSG or any of
its Subsidiaries for any period ending on or before the Closing Date for which
Viacom or the Seller is not responsible, in whole or in part, pursuant to
paragraph (a) of this Section 7.01 because all or a part of such Tax does not
exceed the amount reflected as current Taxes payable in the Post-Closing Balance
Sheet, and Viacom or the Seller pays such Tax, then the Purchaser or the Parents
shall pay to Viacom or the Seller, in accordance with the first sentence of this
Section 7.01(c), the amount of such Tax for which Viacom or the Seller is not
responsible. In the case of a Tax that is contested in accordance with the
provisions of Section 7.03, payment of the Tax to the appropriate tax
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authority will not be considered to be due earlier than the date a final
determination to such effect is made by the appropriate taxing authority or a
court.
(d) For purposes of this Agreement, in the case of any Tax that is
imposed on a periodic basis and is payable for a period that begins before the
Closing Date and ends after the Closing Date, the portion of such Taxes payable
for the period ending on the Closing Date shall be (i) in the case of any Tax
other than a Tax based upon or measured by income or sales, the amount of such
Tax for the entire period multiplied by a fraction, the numerator of which is
the number of days in the period ending on the Closing Date and the denominator
of which is the number of days in the entire period and (ii) in the case of any
Tax based upon or measured by income or sales, the amount which would be payable
if the taxable year ended on the Closing Date. Any credit shall be prorated
based upon the fraction employed in clause (i) of the next preceding sentence.
In the case of any Tax based upon or measured by capital (including net worth or
long-term debt) or intangibles, any amount thereof required to be allocated
under this Section 7.01(d) shall be computed by reference to the level of such
items on the Closing Date.
SECTION 7.02. REFUNDS AND TAX BENEFITS. (a) The Purchaser or the
Parents shall promptly pay to the Seller any refund or credit (including any
interest paid or credited with respect thereto) received by the Purchaser or a
partner of the Purchaser of Taxes (i) relating to taxable periods or portions
thereof ending on or before the Closing Date or (ii) attributable to an amount
paid by Viacom or the Seller under Section 7.01 of this Agreement. The
Purchaser or the Parents shall, if the Seller so requests and at the Seller's
expense, cause the relevant entity to file for and obtain any refund to which
the Seller is entitled under this Section 7.02. The Purchaser or the Parents
shall permit the Seller to control (at the Seller's expense) the prosecution of
any such refund claimed, and shall cause the relevant entity to authorize by
appropriate power of attorney such persons as the Seller shall designate to
represent such entity with respect to such refund claimed. In the event that
any refund or credit of Taxes for which a payment has been made pursuant to this
Section 7.02(a) is subsequently reduced or disallowed, Viacom and the Seller
shall indemnify and hold harmless the payor for any Tax liability, including
interest and penalties, assessed against such payor by reason of the reduction
or disallowance.
(b) Any amount otherwise payable by an indemnitor under Section 7.01
shall be reduced by any Tax benefit to the indemnitee or a partner of the
indemnitee for a period or portion thereof beginning after the Closing Date (a
"POST-CLOSING DATE TAX BENEFIT") that arose in connection with any underlying
adjustment resulting in the obligation of the indemnitee to pay Taxes for which
the indemnitor is responsible under Section 7.01 (such as a timing adjustment
resulting in a Tax deduction for the indemnitee for a period after the Closing
Date) or the payment of such Taxes. If a payment is made by the indemnitor in
accordance with Section 7.01, and if in a subsequent taxable year a Post-Closing
Date Tax Benefit is realized by the indemnitee or a partner of the indemnitee
(that was not previously taken into account pursuant to the preceding sentence
to reduce an amount otherwise payable by the indemnitor under Section 7.01), the
indemnitee shall pay to the
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indemnitor at the time of such realization the amount of such Post-Closing Date
Tax Benefit to the extent that the Post-Closing Date Tax Benefit would have
resulted in a reduction in the amount paid by the indemnitor under Section 7.01
if the Post-Closing Date Tax Benefit had been obtained in the year of such
payment. A Post-Closing Date Tax Benefit will be considered to be realized for
purposes of this Section 7.02 in the taxable period for which such reduction in
income, deduction or credit results in a reduction (and shall equal the amount
of such reduction) in the Taxes paid or results in an increase in any refund of
Taxes received (and shall equal the amount of such increase) for such period as
compared to the Taxes that would have been paid or the refund that would have
been received for such period in the absence of such reduction in income,
deduction or credit. Any reduction in income, deduction or credit not resulting
in a Tax benefit for the taxable period to which it relates shall be carried
forward to succeeding taxable years until used to the extent permitted by law.
In the event that a reduction in income, deduction or credit giving rise to a
payment to the indemnitor under this Section 7.02 is subsequently disallowed,
the tax liability resulting from such disallowance shall be treated for all
purposes as an indemnifiable liability under Section 7.01. The determination of
whether the Purchaser realizes a Post-Closing Date Tax Benefit will be made at
the partner level of the Purchaser.
SECTION 7.03. CONTESTS. (a) After the Closing, the Purchaser or
the Parents shall promptly notify Viacom and the Seller in writing of the
commencement of any Tax audit or administrative or judicial proceeding or of any
demand or claim on the Purchaser or the Parents which, if determined adversely
to the taxpayer or after the lapse of time would be grounds for indemnification
under Section 7.01. Such notice shall contain factual information (to the
extent known to the Purchaser and the Parents) describing the asserted Tax
liability in reasonable detail and shall include copies of any notice or other
document received from any taxing authority in respect of any such asserted Tax
liability. If the Purchaser or the Parents fail to give Viacom and the Seller
prompt notice of an asserted Tax liability as required by this Section 7.03, and
the failure to give prompt notice results in a detriment to Viacom or the
Seller, then any amount which Viacom or the Seller is otherwise required to pay
the Purchaser and the Parents pursuant to Section 7.01 with respect to such
liability shall be reduced by the amount of such detriment.
(b) Viacom or the Seller may elect to direct, through counsel of its
own choosing and at its own expense, any audit, claim for refund and
administrative or judicial proceeding involving any asserted liability with
respect to which indemnity may be sought under Section 7.01 (any such audit,
claim for refund or proceeding relating to an asserted Tax liability is referred
to herein as a "CONTEST"). If Viacom or the Seller elects to direct a Contest,
it shall within 30 calendar days of receipt of the notice of asserted Tax
liability notify the Purchaser of its intent to do so, and the Purchaser and the
Parents shall cooperate, at the expense of Viacom or the Seller, in each phase
of such Contest. If Viacom or the Seller elects not to direct the Contest,
fails to notify the Purchaser of its election as herein provided or contests its
obligation to indemnify under Section 7.01, the Purchaser or the Parents may
pay, compromise or contest, at its own expense, such asserted liability.
However, in such case, the Purchaser or the Parents may not settle or compromise
any
<PAGE>
36
asserted liability over the objection of Viacom or the Seller; PROVIDED,
HOWEVER, that consent to settlement or compromise shall not be unreasonably
withheld. In any event, Viacom or the Seller may participate, at its own
expense, in the Contest. If Viacom or the Seller chooses to direct the Contest,
the Purchaser shall promptly empower (by power of attorney and such other
documentation as may be appropriate) such representatives of Viacom or the
Seller as it may designate to represent the Purchaser in the Contest insofar as
the Contest involves an asserted Tax liability for which Viacom or the Seller
would be liable under Section 7.01.
SECTION 7.04. PREPARATION OF TAX RETURNS. The Seller shall prepare
and file United States federal, state and local income and franchise tax returns
and schedules relating to MSG and its Subsidiaries for any Tax period ending on
or prior to the Closing Date and which are required to be filed after the
Closing Date. With respect to any returns for which the Seller has filing
responsibility pursuant to the preceding sentence, MSG and its Subsidiaries will
be included in the consolidated, combined or unitary tax returns of the Seller
or an affiliate of the Seller on a basis consistent with prior tax years unless
a different treatment is required by an intervening change in law. The parties
agree that if MSG or any of its Subsidiaries is permitted, but not required,
under applicable state or local income or franchise tax laws to treat the
Closing Date as the last day of a Tax period, they will treat the Tax period as
ending on the Closing Date. The Seller shall prepare and file all other returns
of Taxes for any period ending on or prior to the Closing Date to the extent the
Seller or an affiliate of the Seller (other than MSG or any of its Subsidiaries)
previously was responsible for the preparation and filing of such returns for
the immediately preceding Tax period. The Purchaser shall prepare and timely
file all returns of Taxes for which the Seller is not responsible pursuant to
this Section 7.04 and, where appropriate, prepare such returns in the name of
MSG or its Subsidiaries and submit such returns to the Seller for filing. The
Purchaser will deliver to the Seller a complete and accurate copy of each return
required to be filed by the Purchaser under this Section 7.04 for Tax periods
that include the Closing Date, and any amendment to such return, within 10 days
of the date such return is filed with the appropriate tax agency; PROVIDED,
HOWEVER, in the case of any returns prepared in the name of MSG or any of its
Subsidiaries, the Purchaser will deliver such returns to the Seller for review
and filing at least five Business Days before the due date of such return.
SECTION 7.05. ALLOCATION OF MERGER CONSIDERATION. The Purchaser and
the Seller agree to allocate the Merger Consideration in accordance with the
rules under Section 1060 of the Internal Revenue Code and the Treasury
Regulations promulgated thereunder. Such allocation shall be prepared in
accordance with an appraisal conducted by an independent appraiser selected by
Purchaser and reasonably acceptable to Viacom and the Seller. The Seller,
Viacom and the Purchaser agree to act in accordance with the computations and
allocations contained in such allocation (including any modifications thereto
reflecting any post-closing adjustments) in any relevant Tax returns or filings
filed by them (including any forms or reports required to be filed pursuant to
Section 1060 of the Internal Revenue Code, the Treasury Regulations promulgated
thereunder or any provisions of state, local and foreign law) ("1060 FORMS"),
and to cooperate in the preparation of any 1060
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37
Forms and to file such 1060 Forms in the manner required by applicable law. The
Purchaser shall make available to the Seller and Viacom copies of all appraisals
of the assets of the Business, or any portion thereof, obtained by the Purchaser
promptly upon receipt of such appraisals by the Purchaser, but in no event later
than 90 days prior to the due date of any 1060 Forms, and the Seller and Viacom
shall have 30 days to review and consent to such appraisal, which consent shall
not be unreasonably withheld.
SECTION 7.06. COOPERATION AND EXCHANGE OF INFORMATION. Viacom, the
Seller, the Purchaser and the Parents will provide each other with such
cooperation and information as any of them reasonably may request of another in
filing any Tax return, amended return or claim for refund, determining a
liability for Taxes or a right to a refund of Taxes or participating in or
conducting any audit or other proceeding in respect of Taxes. Such cooperation
and information shall include providing copies of relevant Tax returns or
portions thereof, together with accompanying schedules and related work papers
and documents relating to rulings or other determinations by taxing authorities.
Each party shall make its employees available on a mutually convenient basis to
provide explanations of any documents or information provided hereunder. Each
party will retain all returns, schedules and work papers and all material
records or other documents relating to Tax matters of MSG for its taxable period
first ending after the Closing Date and for all prior taxable periods until the
later of (i) the expiration of the statute of limitations of the taxable periods
to which such returns and other documents relate, without regard to extensions
except to the extent notified by another party in writing of such extensions for
the respective Tax periods, or (ii) eight years following the due date (without
extension) for such returns. Any information obtained under this Section 7.06
shall be kept confidential, except as may be otherwise necessary in connection
with the filing of returns or claims for refund or in conducting an audit or
other proceeding.
SECTION 7.07. CONVEYANCE AND SALES TAXES. The Purchaser and the
Parents agree to assume liability for and to pay all sales taxes incurred as a
result of the Merger. The Seller and Viacom agree to assume liability for and
to pay all transfer, stamp, real property transfer or gains and similar Taxes
incurred as a result of the Merger, other than the New York City Real Property
Transfer Tax, the liability for which shall be paid one-half by the Purchaser
and the Parents and one-half by Viacom and the
<PAGE>
38
Seller. Viacom and the Seller agree to indemnify the Purchaser, the Parents and
their affiliates for any and all liabilities, losses, damages, claims, costs,
expenses, interest, awards, judgments and penalties (including, without
limitation, attorneys' and consultants' fees and expenses) incurred by the
Purchaser, the Parents and their affiliates arising out of the Seller's or
Viacom's failure to make timely or full payments of the Taxes for which it is
liable pursuant to this Section 7.07. The Purchaser and the Parents agree to
indemnify Viacom, the Seller and their affiliates for any and all liabilities,
losses, damages, claims, costs, expenses, interest, awards, judgments and
penalties (including, without limitation, attorneys' and consultants' fees and
expenses) incurred by Viacom, the Seller and their affiliates arising out of the
Purchaser's or the Parents' failure to make timely or full payments of the Taxes
for which it is liable pursuant to this Section 7.07. The Purchaser, the
Parents, Viacom and the Seller agree to cooperate and provide each other with
such information as any of them may reasonably request of another in preparing
and filing any Tax return relating to Taxes covered by this Section 7.07 and
shall provide such other party or parties an opportunity to review such returns
prior to filing.
SECTION 7.08. TAX TREATMENT OF MERGER. The Seller, Viacom, the
Purchaser and the Parents hereby agree that the Merger will be treated for tax
purposes as a sale of the assets of MSG to the Purchaser followed by a
liquidation of MSG. The Seller, Viacom, the Purchaser and the Parents hereby
further agree that any income or franchise tax liability resulting from the sale
of the assets of MSG shall be the responsibility of the Seller.
SECTION 7.09. MISCELLANEOUS. (a) The parties agree to treat all
indemnity payments made under this Agreement as adjustments to the purchase
price for Tax purposes.
(b) Except as expressly provided otherwise and except for the
representations contained in Section 3.15 of this Agreement, this Article VII
shall be the sole provision governing Tax matters and indemnities therefor under
this Agreement.
(c) For purposes of this Article VII, all references to the
Purchaser, the Parents, Viacom, the Seller, MSG and the Subsidiaries include
successors thereto.
(d) On or prior to the Closing Date, any tax-indemnity, tax-sharing
or tax-allocation agreement to which MSG or any Subsidiary is a party to or
bound by shall be terminated.
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.01. CONDITIONS TO OBLIGATIONS OF VIACOM AND THE SELLER.
The obligations of Viacom and the Seller to consummate the transactions
contemplated by this Agreement and to effect the Merger shall be subject to the
fulfillment or waiver, at or prior to the Closing, of each of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS. (i) The
representations and warranties of the Purchaser and each Parent contained
in this Agreement shall be true and correct in all material respects as of
the Closing, with the same force and effect as if made as of the Closing,
other than such representations and warranties as are expressly made as of
another date, (ii) the covenants contained in this Agreement to be complied
with by the Purchaser and each Parent on or before the Closing shall have
been complied with in all material respects and (iii) Viacom and the Seller
shall have received a certificate of the Purchaser as to the matters set
forth in clauses (i) and (ii) signed by a duly authorized officer thereof;
<PAGE>
39
(b) HSR ACT. Any waiting period (and any extension thereof) under
the HSR Act applicable to the Merger shall have expired or shall have been
terminated;
(c) NO ORDER. No United States or state governmental authority or
other agency or commission or United States or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, injunction or other order which is in effect
and has the effect of (i) making the transactions contemplated by this
Agreement illegal or (ii) otherwise restraining or prohibiting consummation
of such transactions; and
(d) OPINION OF COUNSEL. The Seller and Viacom shall have received
the opinion of Simpson Thacher & Bartlett, counsel to the Purchaser,
substantially in the form of Exhibit 8.01(d) hereto, dated the Closing
Date.
SECTION 8.02. CONDITIONS TO OBLIGATIONS OF THE PURCHASER AND EACH
PARENT. The obligations of the Purchaser and each Parent to consummate the
transactions contemplated by this Agreement and to effect the Merger shall be
subject to the fulfillment or waiver, at or prior to the Closing, of each of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS. (i) The
representations and warranties of Viacom and the Seller contained in this
Agreement shall be true and correct in all material respects as of the
Closing, with the same force and effect as if made as of the Closing, other
than such representations and warranties as are expressly made as of
another date, except where the failure to be so true and correct would not
have a Material Adverse Effect, (ii) the covenants contained in this
Agreement to be complied with by Viacom or the Seller on or before the
Closing shall have been complied with in all material respects, except
where the failure to so comply would not have a Material Adverse Effect and
(iii) the Purchaser shall have received a certificate of each of Viacom and
the Seller as to the matters set forth in clauses (i) and (ii) signed by a
duly authorized officer thereof;
(b) HSR ACT. Any waiting period (and any extension thereof) under
the HSR Act applicable to the Merger shall have expired or shall have been
terminated;
(c) NO ORDER. No United States or state governmental authority or
other agency or commission or United States or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, injunction or other order which is in effect
and has the effect of (i) making the transactions contemplated by this
Agreement illegal or (ii) otherwise restraining or prohibiting consummation
of such transactions;
(d) EXTRAORDINARY MATERIAL ADVERSE EFFECT. There shall not have been
an Extraordinary Material Adverse Effect;
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40
(e) NHL AND NBA APPROVALS. The Purchaser and the Parents shall have
received all approvals from the NBA and the NHL necessary to enable the
Parents and the Purchaser to obtain control of the New York Knickerbockers
basketball team and the New York Rangers hockey team; and
(f) OPINION OF COUNSEL. The Purchaser and each Parent shall have
received the opinion of Shearman & Sterling, counsel to Viacom and the
Seller, substantially in the form of Exhibit 8.02(f) hereto, dated the
Closing Date.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01. TERMINATION. This Agreement may be terminated at any
time prior to the Closing:
(a) by the mutual written consent of Viacom and the Purchaser; or
(b) by either Viacom or the Purchaser, if the Closing shall not have
occurred prior to December 31, 1994; PROVIDED, HOWEVER, that Viacom or the
Purchaser shall have the right to extend such date to March 31, 1995, by
giving notice to the other party prior to December 31, 1994, in the event
that on or before December 31, 1994, (A) (i) the conditions set forth in
Sections 8.01(b) and 8.02(b) of this Agreement have not been satisfied or
(ii) the conditions set forth in Sections 8.01(c) and 8.02(c) of this
Agreement have not been satisfied due to an injunction or other order
resulting from action taken by a Governmental Antitrust Authority and
(B) with respect to the Purchaser's right to cause such extension, the
Purchaser and each Parent are in compliance with Section 5.04 of this
Agreement; PROVIDED, FURTHER, that the right to terminate this Agreement
under this Section 9.01(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement shall have been the
cause of, or shall have resulted in, the failure of the Closing to occur
prior to such date; or
(c) by the Purchaser, if there has been a breach by Viacom or the
Seller of any of their representations, warranties, covenants or agreements
contained in the Agreement, such that the provisions of Section 8.02(a) of
this Agreement will be incapable of being satisfied by December 31, 1994
(or March 31, 1995, if applicable); or
(d) by Viacom, if there has been a breach by the Purchaser or either
Parent, of any of their respective representations, warranties, covenants
or agreements contained in this Agreement, such that the provisions of
Section 8.01(a) of this
<PAGE>
41
Agreement will be incapable of being satisfied by December 31, 1994 (or
March 31, 1995, if applicable).
Time shall be of the essence in this Agreement.
SECTION 9.02. EFFECT OF TERMINATION. In the event of termination of
this Agreement as provided in Section 9.01, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto
except (i) as set forth in Sections 5.03, 10.01 and 10.02 of this Agreement and
(ii) nothing herein shall relieve either party from liability for any willful
breach hereof.
SECTION 9.03. WAIVER. At any time prior to the Closing, any party
may (a) extend the time for the performance of any of the obligations or other
acts of any other party hereto, (b) waive any inaccuracies in the
representations and warranties contained in this Agreement, in the Disclosure
Schedule or in any document delivered pursuant hereto or (c) waive compliance
with any of the agreements or conditions contained herein. Any such extension
or waiver shall be valid only if set forth in an instrument in writing signed by
the party to be bound thereby.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(a) Subject to the limitations and other provisions of this Agreement, the
representations and warranties of the parties hereto contained herein shall
survive the Closing and shall remain in full force and effect, regardless of any
investigation made by or on behalf of any party hereto, for a period of six
months after the Closing Date; PROVIDED, HOWEVER, that the representations
contained in Section 3.15 hereof shall expire with, and be terminated and
extinguished by, the consummation of the Merger or the termination of this
Agreement pursuant to Article IX of this Agreement; PROVIDED FURTHER, HOWEVER,
that the indemnities contained in Article VII of this Agreement shall survive
until 60 days after the expiration of the applicable statute of limitations.
(b) (i) Viacom and the Seller shall not be liable to the Purchaser or
either Parent and (ii) the Purchaser and the Parents shall not be liable to
Viacom or the Seller, for any losses, liabilities, damages, claims, awards,
judgments, costs and expenses (including, without limitation, reasonable
attorneys' fees and consultants' fees) ("LOSSES") resulting from the breach of
any representations or warranties contained in this Agreement until the
aggregate amount of such Losses incurred by Viacom and the Seller, on the one
hand, or the Purchaser and the Parents, on the other hand, exceeds $15,000,000
(the "THRESHOLD AMOUNT") and then only to the extent such aggregate amount
exceeds the Threshold Amount.
<PAGE>
42
SECTION 10.02. EXPENSES. All costs and expenses, including, without
limitation, fees and disbursements of counsel, investment bankers, financial
advisors and accountants, incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such costs
and expenses, whether or not the Closing shall have occurred.
SECTION 10.03. NOTICES. All notices, request, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by courier service, by telecopy, by telegram or by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 10.03):
(a) if to the Seller or Viacom:
Viacom Inc.
1515 Broadway
New York, New York 10036
Attention: General Counsel
Telecopier: (212) 258-6134
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: Creighton O'M. Condon, Esq.
Telecopier: (212) 848-7179
(b) if to the Purchaser or either Parent:
ITT Corporation
1330 Avenue of the Americas
New York, New York 10019
Attention: Secretary
Telecopier: (212) 258-1463
<PAGE>
43
and
Rainbow Programming Holdings, Inc.
150 Crossways Parkway West
Woodbury, New York 11797
Attention: Hank Ratner
Telecopier: (516) 364-4085
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Gary L. Sellers, Esq.
Telecopier: (212) 455-2502
SECTION 10.04. PUBLIC ANNOUNCEMENTS. No party to this Agreement
shall make any public announcements in respect of this Agreement or the
transactions contemplated hereby or otherwise communicate with any news media
without prior notification to the other parties, and the parties shall cooperate
as to the timing and contents of any such announcement.
SECTION 10.05. HEADINGS. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 10.06. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated hereby be consummated as originally
contemplated to the greatest extent possible.
SECTION 10.07. ENTIRE AGREEMENT. This Agreement (including the
Disclosure Schedule and the exhibits hereto) constitutes the entire agreement of
the parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and undertakings, both written and oral, other than the
Confidentiality Agreement, among Viacom, the Seller and the Purchaser with
respect to the subject matter hereof.
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44
SECTION 10.08. ASSIGNMENT. This Agreement shall not be assigned by
operation of law or otherwise.
SECTION 10.09. NO THIRD-PARTY BENEFICIARIES. Except as provided in
Article VII, this Agreement is for the sole benefit of the parties hereto and
their permitted assigns and nothing herein, express or implied, is intended to
or shall confer upon any other person or entity any legal or equitable right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 10.10. AMENDMENT. This Agreement may not be amended or
modified except by an instrument in writing signed by Viacom, the Seller, the
Purchaser and each Parent.
SECTION 10.11. GOVERNING LAW. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York applicable
to contracts executed in and to be performed in that State. All actions and
proceedings arising out of or relating to this Agreement shall be heard and
determined in a New York state or federal court sitting in the City of New York,
and the parties hereto hereby irrevocably submit to the exclusive jurisdiction
of such courts in any such action or proceeding and irrevocably waive the
defense of an inconvenient forum to the maintenance of any such action or
proceeding.
SECTION 10.12. COUNTERPARTS. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
<PAGE>
45
IN WITNESS WHEREOF, Viacom, the Seller, the Purchaser and each Parent
have caused this Agreement to be executed as of the date first written above by
their respective officers thereunto duly authorized.
VIACOM INC.
By /s/ Frank J. Biondi Jr.
--------------------------------------------
Name: Frank J. Biondi Jr.
Title: President & CEO
PARAMOUNT COMMUNICATIONS REALTY CORPORATION
By /s/ David H. Williamson
--------------------------------------------
Name: David H. Williamson
Title: President
ITT CORPORATION
By /s/ Robert A. Bowman
-------------------------------------------
Name: Robert A. Bowman
Title: Executive Vice President &
Chief Financial Officer
MSG HOLDINGS, L.P., by MSG Eden Corp.,
as general partner
By /s/ Harlan W. Murray
-------------------------------------------
Name: Harlan W. Murray
Title: Vice President
RAINBOW GARDEN CORPORATION
By /s/ Marc Lustgarten
--------------------------------------------
Name: Marc Lustgarten
Title: Vice Chairman
