SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: August 9, 1996
UNITED VIDEO SATELLITE GROUP, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-22662 73-1290412
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
7140 South Lewis Avenue, Tulsa, Oklahoma 74136-5422
(Address of Principal Executive Office)
(918) 488-4000
(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On August 9, 1996, United Video Satellite Group, Inc. ("UVSG") and
Liberty Media Corporation ("Liberty"), a wholly-owned subsidiary of
Tele-Communications, Inc. ("TCI"), executed an amended and restated
agreement (the "Agreement") under which UVSG's Superstar Satellite
Entertainment division ("Superstar") and Liberty's Netlink division
will contribute their retail C-band home satellite dish business'
assets, obligations and operations, effective April 1, 1996, to a new
entity owned 50% each by UVSG and Liberty. TCI owns approximately 40%
of the issued and outstanding common stock of UVSG representing
approximately 86% of the total voting power of UVSG common stock.
Accordingly, this is a combination of businesses which are under the
common control of TCI.
The Agreement amends and restates a letter of intent between the
parties to include necessary elements of the basis upon which Superstar
and Netlink are being combined. While documentation for the
combination was still being finalized, the new venture commenced
operating Superstar's and Netlink's retail C-band home satellite dish
businesses on a combined basis beginning April 1, 1996 in anticipation
of the final agreement being documented as now reflected in the
Agreement. The terms of the Agreement are binding to both UVSG and
Liberty; however, both parties currently anticipate that the Agreement
will be superseded by a definitive agreement which will incorporate and
expand upon the provisions set forth in the Agreement. In the event a
definitive agreement is not executed, the Agreement will constitute the
entire agreement between UVSG and Liberty. No asset transfers have been
effected to date.
The transaction will be accounted for as a merger of entities
under common control. Accordingly, the assets and obligations of
Netlink will be recorded at their historical cost as of April 1, 1996.
The above discussion of the transaction is qualified in its
entirety by reference to the Agreement.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
Financial statements of Liberty's Netlink retail operations
required to be included in this Form 8-K are not currently
available. UVSG intends to file such financial statements in an
amendment to this Form 8-K as soon as practicable, but in any
event prior to September 30, 1996.
(b) Pro Forma Financial Information
Pro forma financial information required to be included in this
Form 8-K will be filed in an amendment to this Form 8-K at the
same time financial statements of Liberty's Netlink retail
operations are filed.
(c) Exhibits
1. Agreement between United Video Satellite Group, Inc. and
Liberty Media Corporation dated as of August 9, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
UNITED VIDEO SATELLITE GROUP, INC.
DATE: August 9, 1996 By: /s/ Peter C. Boylan, III
-----------------------------
Peter C. Boylan, III
Executive Vice President and
Chief Financial Officer
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LIBERTY MEDIA CORPORATION
8101 East Prentice Avenue, Suite 500
Englewood, Colorado 80111
August 9, 1996
United Video Satellite Group, Inc.
7140 S. Lewis Avenue
Tulsa, Oklahoma 74136-5422
Attention: Lawrence Flinn, Jr.
Gentlemen:
Reference is made to the agreement between Liberty Media
Corporation ("Liberty") and United Video Satellite Group, Inc. ("UV"),
dated March 11, 1996 (including the related term sheet included
therein, the "Prior Agreement"), pursuant to which Liberty and UV have
agreed to cause their respective subsidiaries to form a joint venture
for the purpose of combining and operating as one entity their
respective businesses of selling C-band distributed video programming
and miscellaneous ancillary services to retail customers in the United
States. By their execution hereunder, each of Liberty and UV agree
that the Prior Agreement shall be amended and restated in its entirety
to read as set forth in this letter and the attached Term Sheet (which
is incorporated by reference herein and which, together with this
letter, is collectively referred to herein as the "Agreement").
Each of Liberty and UV presently anticipate that this
Agreement will be superseded by a definitive Limited Liability Company
Agreement and other related agreements and instruments (collectively,
"Definitive Agreements") which shall contain provisions incorporating
and expanding upon the agreements set forth in this Agreement, together
with other provisions customary in the case of transactions of this
type. Notwithstanding the foregoing, each of Liberty and UV expressly
acknowledge that this Agreement will constitute a binding agreement
between them, subject to the terms and provisions set forth herein,
until Definitive Agreements are executed and delivered, and if
Definitive Agreements are not executed and delivered, then this
Agreement shall constitute the entire agreement between them concerning
the subject matter contained herein.
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Each of Liberty and UV further agree that this Agreement
shall be governed by and construed in accordance with the internal laws
of the State of Delaware (without regard to the principles governing
conflicts of law) and that this Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original
Agreement, but all counterparts together shall constitute one
Agreement.
If the foregoing is acceptable to you, please execute the
copy of this letter in the space below and initial each page of the
Term Sheet, at which time this Agreement will constitute a binding
agreement between us.
Very truly yours,
LIBERTY MEDIA CORPORATION
By: /s/ Robert R. Bennett
----------------------------
Name: Robert R. Bennett
Title: Executive Vice President
ACCEPTED AND AGREED
this 9th day of August, 1996
UNITED VIDEO SATELLITE GROUP, INC.
By: /s/ Peter C. Boylan, III
-------------------------------
Name: Peter C. Boylan, III
Title: Executive Vice President
and Chief Financial Officer
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JOINT VENTURE TERMS
1. Liberty Media Corporation ("Liberty") is currently engaged, through
its subsidiary Netlink USA, in the businesses of selling C-band
distributed video programming and miscellaneous ancillary services
to retail customers in the United States (the "Retail C-Band
Business") and to wholesale customers in the United States (the
"Wholesale C-Band Business"). United Video Satellite Group, Inc.
("UV") is also currently engaged, through its wholly owned
subsidiary, UV Corp., in the operation of SuperStar Satellite
Entertainment division, in the Retail C-Band Business and the
Wholesale C-Band Business. Liberty and UV, through their
respective subsidiaries ("Liberty Sub" and "UV Sub", respectively),
will form a joint venture (the "Venture") for the purpose of
engaging solely in the Retail C-Band Business.
2. The Venture will be organized as a limited liability company under
the laws of the State of Delaware, with each of Liberty Sub and UV
Sub (each a "Member") constituting the members. The term of the
Venture shall be for the period of time commencing as of April 1,
1996 and continuing until December 31, 2096, unless terminated at
an earlier date in accordance with the terms of the definitive
agreement between the parties for the formation of the Venture (the
"Agreement") or as required by applicable law.
3. In connection with the formation of the Venture, each of UV Sub and
Liberty Sub will make an initial capital contribution to the
Venture consisting of all assets currently used in the Retail C-
Band Businesses of SuperStar Satellite Entertainment and of Netlink
USA, respectively, other than cash and except that the contribution
of property, plant and equipment will be subject to agreement by
the Members as provided below. After giving effect to these
contributions, the initial profits/loss and capital interest in the
Venture of Liberty will be 50.0% and of UV will be 50.0%. Each
Member will prepare a schedule of current assets (other than cash)
and current liabilities of the Retail C-Band Business being
contributed by it as of the last business day immediately preceding
the date of contribution of such assets to the Venture. Asset
contributions will be subject to the liabilities scheduled by each
Member, and the Venture will assume and agree to pay, perform and
discharge such liabilities, to the extent that such liabilities
have been incurred in the ordinary course of business or the
assumption thereof has been agreed to by the other Member. Prior
to making their respective asset contributions, the Members shall
agree on a method for valuing the accounts receivables being
contributed. UV Sub and Liberty Sub will also agree upon a
schedule of property, plant and equipment currently used in the
Retail C-Band Business of SuperStar Satellite Entertainment and of
Netlink USA that the respective Members will contribute to the
Venture and the aggregate value of the property, plant and
equipment so contributed by each Member.
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4. The Venture will be managed by a management team (with fiduciary
duties to the Venture and its Members) reporting to a committee of
representatives of the Members (the "Committee"). The Committee
will consist of six members (individually, a "Representative" and
collectively, the "Representatives") four of whom will be
designated by UV Sub (each, a "UV Representative") and two of whom
will be designated by Liberty Sub (the "Liberty Representatives").
Each Representative will serve on the Committee for a term of four
years. A Member may remove a Representative designated by it at any
time and designate a successor Representative. If a Representative
resigns before the end of his or her term, the Member who
designated such Representative will designate a successor
Representative. Notwithstanding the foregoing, if UV Sub transfers
its interest in the Venture to any person other than UV or a person
of which UV is a consolidated subsidiary or a consolidated
subsidiary of UV, then all Representatives on the Committee at the
time of such transfer shall thereupon resign from the Committee and
the members of the Committee shall thereupon be designated by
Liberty Sub and the transferee of UV Sub's interest, with each such
Member being entitled to designate three representatives. For so
long as the UV Representatives are a majority of the Committee, UV
Sub will have the right to appoint the Chairman of the Committee.
The Committee will meet no less frequently than quarterly. UV Sub
will have the right to nominate the first chief operating officer
("COO") and other members of senior management of the Venture.
Liberty and UV acknowledge and agree that the COO and other members
of senior management may have other responsibilities, including the
management of UV's Wholesale C-Band and Business Services
Businesses. The Members agree that the COO shall devote at least
50% of his or her time to the management of the Venture. Any three
Representatives acting together shall have the right to terminate
the COO upon 30 days' notice if, in their reasonable judgment, the
COO is not adequately or fairly serving the Venture. Subject to
the following sentences of this paragraph 4, the Venture's
management team will report on a day-to-day basis to the Chairman
of the Committee and will be responsible for the day-to-day
management and operations of the Venture, which shall include
staffing, accounting, operations, systems, marketing, advertising,
etc. Subject to the following two sentences, a majority vote of
the Committee will be required for the following items: approval of
annual budgets and material deviations from approved budgets;
acquisitions and dispositions of assets outside of the ordinary
course of business (unless expressly authorized in an approved
budget); appointment of any successor to the initial COO;
appointment of any successor to any other member of senior
management who is terminated by the Committee; selection of
auditors; incurrence of debt by the Venture that, taken together
with all other then outstanding debt of the Venture, on a pro forma
basis, would not exceed three times the EBITDA of the Venture for
the most recently completed fiscal year; the institution or
settlement by the Venture of any legal action or other proceeding
before any court or other governmental or administrative authority
which is reasonably likely to have a material adverse effect on a
Member or any affiliate of such Member (other than as a result of
the diminution of the value of the interest of such Member in the
Venture where such diminution affects all Members and their
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respective affiliates proportionately), provided, that such
majority vote of the Committee shall include the affirmative vote
of the Representatives of any Member so affected; the declaration
and payment of any distribution to the Members by the Venture; and
significant marketing plans or changes in current
marketing/pricing/packaging and branding plans and strategies. A
unanimous vote of the Committee will be required for the following
items: admission of new members; providing subscriber information
to parties outside of the Venture; the incurrence of any debt by
the Venture that is recourse to any or all of the Members or their
respective affiliates, or any debt that, taken together with all
other then outstanding debt of the Venture, would on a pro forma
basis, exceed three times the EBITDA of the Venture for the most
recently completed fiscal year; the requiring of additional capital
contributions from the Members (except pursuant to an annual budget
that has been approved by a unanimous vote of the Committee); the
making of any capital contribution in property rather than cash
(except as contemplated by this Agreement); the making of any non-
pro rata cash or any in-kind distributions to a Member; the taking
of any action that would result in a voluntary bankruptcy of the
Venture; all affiliate transactions; the Venture's acting other
than in accordance with the purpose of the Venture as specified in
paragraph 1 above; the approval of any amendments, modifications or
supplements to this Agreement; the loan or advancement by the
Venture of funds to, or the guarantee of any obligations of, a
Member or affiliate of a Member; the taking of any action that
would make it impossible for the Venture to carry on its ordinary
business or that is in contravention of this Agreement or that
would constitute a breach of or default under any credit agreement
of the Venture; any merger, consolidation or other business
combination involving the Venture (other than acquisitions
permitted below); the dissolution or liquidation of the Venture and
decisions with respect to the winding up of the Venture, including,
without limitation, the making of liquidating distributions; any
decision with respect to the conversion of the Venture to non-
limited liability company form; the acquisition of assets by the
Venture (including stock or other equity interests), in a
transaction or series of transactions, that have an aggregate
purchase price in excess of 75% of the fair value of the Venture's
assets; the disposition of any assets by the Venture (including
stock or other equity interests), in a transaction or series of
transactions, that have an aggregate fair value in excess of 75% of
the value of the assets of the Venture; and the withdrawal of a
Member from the Venture (except in the case of a transfer of its
entire interest made in compliance with this Agreement). The funds
of the Venture shall not be commingled with those of any other
person.
5. The Venture will be managed to maximize the cash flow and value of
the business (including residual value attributable to the
Venture's subscribers). Subject to reasonable reserves for
anticipated working capital and capital expenditure requirements,
it is the intention of the Members to make quarterly distributions
of all excess cash.
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6. It is anticipated that UV (while UV Sub is a Member and thereafter
at Liberty Sub's request) will provide certain administrative
services, personnel and physical and technical facilities to the
Venture. The scope of such services, personnel and facilities and
the terms on which they will be provided will be agreed by the
Members in advance and will be reviewed no less often than
annually. Such services, personnel and facilities will be provided
at UV's cost, subject to reasonable allocation of fixed and
indirect costs. In no event will such costs exceed the cost at
which such services, personnel and facilities could be provided by
the Venture itself or obtained from independent third parties in an
arms-length transaction. Unless otherwise agreed by the Members,
UV will have the right to terminate providing such services,
personnel and/or facilities to the Venture at any time following
notice to such effect and a reasonable transition period.
7. To the extent that the amount of the "net current assets" of the
Retail C-Band Business contributed by one Member exceeds that of
the other Member by more than $100,000, the Member with the smaller
amount of "net current assets" will contribute cash to the Venture
in an amount equal to the difference. "Net current assets" for
this purpose means the current assets of the Retail C-Band Business
contributed by the applicable Member, minus the current liabilities
(including liability for prepaid income associated with customers
of the applicable Retail C-Band Business) of such business assumed
by the Venture, in each case as provided in the schedule of current
assets and current liabilities prepared by such Member as
contemplated by paragraph 3 above. To the extent that the
aggregate value of the property, plant and equipment contributed by
one Member exceeds that of the property, plant and equipment
contributed by the other Member, the Member whose contributed
property, plant and equipment has the higher aggregate value will
be entitled to receive preferential distributions of available cash
from the Venture in an aggregate amount equal to the difference
with interest on such amount at the prime rate, from the
contribution date.
8. To the extent contractual arrangements do not already exist, the
Venture will negotiate arms-length affiliation contracts with the
controlled affiliates of Liberty and UV that conduct their
respective Wholesale C-Band Businesses for continued distribution
of services offered to wholesale customers by such controlled
affiliates that were offered to retail customers of the Retail C-
Band Businesses of Netlink USA and SuperStar Satellite
Entertainment, respectively, at the time of contribution of such
businesses to the Venture. All such contracts will contain "MFN"
provisions.
9. Reasonable costs of both Members associated with completion of the
transaction will be paid or reimbursed by the Venture. Such costs,
which shall be approved by the Members in advance, will include:
legal and audit fees, employee costs for sticking, severance and
relocation, costs associated with technical conversions and capital
expenditures deemed necessary or beneficial to the smooth formation
and operation of the Venture. Both parties agree to use
commercially reasonable efforts to minimize the severance costs.
The Members will immediately prepare a mutually satisfactory budget
of expected expenditures.
10. The Members will each indemnify the Venture for liabilities not
listed on the schedule contemplated by paragraph 3 above that
exceed $100,000 in the aggregate and arise or are paid subsequent
to April 1, 1996, but pertain to matters arising prior to such
date, to the extent that the party responsible can be reasonably
identified.
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11. In the event a majority of the Representatives of the Committee are
not able to agree on a budget for any fiscal year of the Venture,
until otherwise agreed, the Venture will be permitted to increase
expenditures as required by existing contractual arrangements and
at the CPI for other expenditures.
12. Neither Member will be permitted to transfer its interest in the
Venture for the first year other than to affiliates; provided,
however, that Liberty Sub, and any permitted transferee of Liberty
Sub, may transfer its interest in the Venture to Tele-
Communications, Inc. ("TCI"), or any of TCI's affiliates regardless
of whether Liberty Sub (or such permitted transferee) is an
affiliate of TCI at the time of such transfer. Affiliates are
entities controlling, controlled by or under common control with
the Member. After the first year, either Member may sell all, but
not less than all, of its interest in the Venture to a non-
affiliate, pursuant to a bona fide written offer for a
consideration consisting of cash or, if the transaction can be
structured on a tax-free basis to the selling Member or its tax
affiliates, a publicly traded equity security of the offeror or one
of its affiliates, subject to a right of first refusal by the other
Member. If the transaction is structured as a tax-free transaction,
then to exercise its right of first refusal, the non-selling Member
either must likewise offer a tax-free transaction in which the
consideration consists of publicly traded equity securities of such
Member or one of its affiliates with an aggregate market value
equivalent to that of the consideration proposed to be delivered by
the offeror or may purchase the interest for cash, provided that in
the case of a cash purchase the purchase price shall be increased
by an amount equal to 50% of the tax benefit foregone by the
selling Member and its tax affiliates. If the non-selling Member
does not exercise its right of first refusal, then the non-selling
Member may elect to sell its interest, and the selling Member may
elect to require the non-selling Member to sell its interest, to
the purchaser of the selling Member's interest on terms and
conditions no less favorable to the non-selling Member than those
the purchaser has offered to the selling Member. After five years,
either Member may initiate a buy-sell procedure. Under this
procedure, the initiating Member names a price (the "stated price")
at which it is willing to purchase 100% of the assets of the
Venture, subject to all liabilities of the Venture. The other
Member may then elect to sell its interest to the initiating Member
or buy the interest of the initiating Member, in either case at a
price equal to the same percentage of the stated price as the
percentage interest in the Venture of the Member whose interest is
to be sold. The Members agree to use their commercially reasonable
efforts in any of the above transactions to make a purchase or sale
as tax-efficient as possible to the tax affiliates of the Members;
provided that the selling Member shall have the right to require
the purchasing Member to acquire its interest in a tax-free
transaction using publicly traded equity securities of the non-
selling Member or one of its affiliates, if such securities exist,
rather than in a taxable transaction for cash and, if such non-
selling Member consummates such tax-free transaction at the
election of the selling Member, the amount payable for the selling
Member's interest will be reduced by 50% of the tax savings to the
selling Member. All sales or transfers will be structured, to the
extent possible, to avoid tax termination of the Venture.
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13. The Committee shall cause to be delivered to each Member the
following financial statements prepared, in each case, in
accordance with GAAP consistently applied, and such other reports
as any Member may reasonably request from time to time: (i) within
75 days of the end of each fiscal year of the Venture, audited
balance sheets of the Venture as of the end of such fiscal year and
as of the end of the preceding fiscal year (if the Venture was then
in existence), and the related statements of operations, Members'
capital (deficiency) and cash flows for such fiscal year and the
two immediately preceding fiscal years (or such shorter period as
the Venture has been in existence), together with appropriate notes
and supporting schedules, all of which shall be certified by the
Venture's auditors; (ii) within 30 days after the end of each
fiscal quarter of the Venture, a balance sheet of the Venture as of
the end of such quarter and the related statements of operations,
Member's capital (deficiency) and cash flows for such fiscal
quarter and for the interim period from the beginning of the fiscal
year through such fiscal quarter, in each case setting forth in
comparative form the figures for the corresponding fiscal quarter
and interim period of the prior fiscal year; and (iii) within 15
days after the end of each calendar month, a balance sheet of the
Venture as of the end of such month and the related statement of
operations for the month then ended.
14. UV Sub will act as "tax matters member" of the Venture. The tax
matters member will take reasonable action to cause each other
Member to be treated as a "notice member". All expenses incurred
by UV Sub while acting in its capacity as tax matters member shall
be paid or reimbursed by the Venture. The Committee shall cause
all federal, state, local and other tax returns and reports
(including amended returns) required to be filed by the Venture to
be prepared and sent to each Member for review at least 15 business
days prior to filing, and to be timely filed with the appropriate
authorities. Such returns will be prepared by the Venture's
auditors or other outside preparers. The Committee shall cause to
be provided to each Member (i) quarterly, with the delivery of the
quarterly financial statements, an estimate of such Member's share
of all items of income, gain, loss, deduction and credit of the
Venture for the fiscal quarter just completed and fiscal year to
date for federal income tax purposes and (ii) annually, as soon as
practicable (and, in any event, no later than May 15), a schedule
setting forth such Member's distributive share of the Venture's
income, gain, loss, deduction and credit as determined for federal
income tax purposes and any other information relating to the
Venture that is reasonably required by such Member to prepare its
own tax returns.
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