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EQUITY PURCHASE AGREEMENT

Purchase and Sale Agreement

EQUITY PURCHASE AGREEMENT | Document Parties: MACROVISION SOLUTIONS CORP | LIONS GATE ENTERTAINMENT, INC | TV GUIDE ENTERTAINMENT GROUP, INC You are currently viewing:
This Purchase and Sale Agreement involves

MACROVISION SOLUTIONS CORP | LIONS GATE ENTERTAINMENT, INC | TV GUIDE ENTERTAINMENT GROUP, INC

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Title: EQUITY PURCHASE AGREEMENT
Governing Law: Delaware     Date: 1/9/2009
Industry: Software and Programming     Law Firm: Cooley Godward     Sector: Technology

EQUITY PURCHASE AGREEMENT, Parties: macrovision solutions corp , lions gate entertainment  inc , tv guide entertainment group  inc
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Exhibit 10.1

 

 

EQUITY PURCHASE AGREEMENT

BY AND AMONG

GEMSTAR-TV GUIDE INTERNATIONAL, INC.,

UV CORPORATION,

TV GUIDE ENTERTAINMENT GROUP, INC.,

LIONS GATE ENTERTAINMENT, INC.,

AND SOLELY WITH RESPECT TO SECTIONS 9.5, 9.7 AND 9.8 AND ARTICLES V(C), XII AND XIII

MACROVISION SOLUTIONS CORPORATION

JANUARY 5, 2009

 

 




TABLE OF CONTENTS

 

 

             

 

 

 

  

 

  

PAGE

ARTICLE I        CERTAIN DEFINITIONS

  

1

ARTICLE II       THE RESTRUCTURING

  

10

 

 

2.1

  

Restructuring

  

10

ARTICLE III      THE EQUITY PURCHASE

  

10

 

 

3.1

  

Agreement to Sell and Purchase

  

10

 

 

3.2

  

The Closing

  

11

 

 

3.3

  

Payment of Total Consideration at the Closing

  

11

 

 

3.4

  

Post-Closing Adjustments

  

11

 

 

3.5

  

Further Assurances

  

13

 

 

3.6

  

Tax Withholding

  

13

ARTICLE IV       REPRESENTATIONS AND WARRANTIES OF THE COMPANY

  

13

 

 

4.1

  

Organization and Good Standing

  

13

 

 

4.2

  

Subsidiaries

  

14

 

 

4.3

  

Capitalization of the Company

  

14

 

 

4.4

  

Corporate Authority Relative to This Agreement; No Violation

  

15

 

 

4.5

  

Litigation

  

15

 

 

4.6

  

Taxes

  

16

 

 

4.7

  

Financial Statements

  

17

 

 

4.8

  

Absence of Liabilities

  

17

 

 

4.9

  

Absence of Certain Changes or Events

  

18

 

 

4.10

  

Contracts

  

18

 

 

4.11

  

Intellectual Property

  

19

 

 

4.12

  

Compliance With Applicable Laws

  

21

 

 

4.13

  

Real Property

  

21

 

 

4.14

  

Employees; Labor Matters

  

21

 

 

4.15

  

Environmental Matters

  

23

 

 

4.16

  

Transactions with Affiliates

  

24

 

 

4.17

  

Title to, Sufficiency and Condition of Assets

  

24

 

 

4.18

  

Accounts Receivable

  

24

 

 

4.19

  

[intentionally left blank]

  

25



 

-i-




TABLE OF CONTENTS

(CONTINUED)

 

 

             
 

 

 

  

 

  

PAGE

 

 

4.20

  

No Brokers

  

25

 

 

4.21

  

No Additional Representations

  

25

ARTICLE V        REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER, SELLER AND PARENT

  

25

 

 

5.1

  

Organization and Good Standing

  

25

 

 

5.2

  

Corporate Authority Relative to This Agreement; No Violation

  

26

 

 

5.3

  

Title to Equity Interests

  

26

 

 

5.4

  

Organization and Good Standing

  

26

 

 

5.5

  

Corporate Authority Relative to This Agreement; No Violation

  

27

 

 

5.6

  

Organization and Good Standing

  

27

 

 

5.7

  

Corporate Authority Relative to This Agreement; No Violation

  

28

ARTICLE VI       REPRESENTATIONS AND WARRANTIES OF BUYER

  

28

 

 

6.1

  

Organization and Good Standing

  

28

 

 

6.2

  

Corporate Authority Relative to this Agreement; No Violation

  

28

 

 

6.3

  

Funding

  

29

ARTICLE VII      COVENANTS OF THE COMPANY OR SELLER

  

29

 

 

7.1

  

Access to Information

  

29

 

 

7.2

  

Maintenance of Network Business

  

29

 

 

7.3

  

Exclusivity

  

33

 

 

7.4

  

Non-Competition

  

33

ARTICLE VIII     BUYER COVENANTS

  

35

 

 

8.1

  

Indemnification and Insurance

  

35

 

 

8.2

  

Employee Matters

  

36

 

 

8.3

  

Nonsolicitation

  

38

 

 

8.4

  

Cooperation with Contractual Obligations

  

39

ARTICLE IX       OTHER COVENANTS

  

39

 

 

9.1

  

Notification of Certain Matters

  

39

 

 

9.2

  

Public Announcement

  

39

 

 

9.3

  

Confidentiality

  

39

 

 

9.4

  

Satisfaction of Conditions Precedent

  

40

 

 

9.5

  

Hart-Scott-Rodino

  

40

 

 

9.6

  

Settlement of Intercompany Accounts

  

41

 

 

9.7

  

Nonsolicitation

  

41

 

 

9.8

  

Insurance

  

41

ARTICLE X        CONDITIONS TO CLOSING OF THE PURCHASE

  

41

 

 

10.1

  

Conditions to the Parties’ Obligation to Effect the Purchase

  

41



 

-ii-




TABLE OF CONTENTS

(CONTINUED)

 

 

             

 

 

 

  

 

  

PAGE

 

 

10.2

  

Additional Conditions to Obligations of Buyer

  

42

 

 

10.3

  

Additional Conditions to Obligations of Stockholder

  

43

ARTICLE XI       TERMINATION OF AGREEMENT

  

44

 

 

11.1

  

Termination by Mutual Consent

  

44

 

 

11.2

  

Unilateral Termination

  

44

 

 

11.3

  

Effect of Termination

  

45

ARTICLE XII      SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION AND REMEDIES; CONTINUING

                              COVENANTS

  

46

 

 

12.1

  

Survival

  

46

 

 

12.2

  

Indemnification by Seller and Parent

  

46

 

 

12.3

  

Indemnification by Buyer

  

46

 

 

12.4

  

Third Party Claims

  

47

 

 

12.5

  

Limits on Indemnification

  

48

 

 

12.6

  

Escrow

  

48

 

 

12.7

  

Exclusive Remedy

  

49

 

 

12.8

  

Treatment of Indemnification Payments

  

49

 

 

12.9

  

Remedies Not Affected by Investigation, Disclosure or Knowledge

  

49

ARTICLE XIII     CERTAIN TAX MATTERS

  

49

 

 

13.1

  

Transfer Taxes

  

49

 

 

13.2

  

Section 338(h)(10) Election; Allocation of ADSP

  

49

 

 

13.3

  

Tax-Sharing Agreements

  

50

 

 

13.4

  

Indemnification for Post-Closing Transactions

  

50

 

 

13.5

  

Post-Closing Transactions not in Ordinary Course

  

50

 

 

13.6

  

Responsibility for Filing Tax Returns and Payment of Taxes for Periods through the Closing Date

  

50

 

 

13.7

  

Responsibility for Taxes for Periods after the Closing Date

  

51

 

 

13.8

  

Cooperation on Tax Matters

  

51

 

 

13.9

  

Tax Proceedings

  

51

ARTICLE XIV      MISCELLANEOUS

  

52

 

 

14.1

  

Governing Law; Exclusive Jurisdiction

  

52

 

 

14.2

  

Assignment; Binding Upon Successors and Assigns

  

52



 

-iii-




TABLE OF CONTENTS

(CONTINUED)

 

 

             

 

 

 

  

 

  

PAGE

 

 

14.3

  

Severability

  

52

 

 

14.4

  

Counterparts; Facsimile Signatures

  

52

 

 

14.5

  

Other Remedies

  

52

 

 

14.6

  

Amendments and Waivers

  

53

 

 

14.7

  

Expenses

  

53

 

 

14.8

  

Attorneys’ Fees

  

53

 

 

14.9

  

Notices

  

53

 

 

14.10

  

Interpretation; Rules of Construction

  

54

 

 

14.11

  

No Third Party Beneficiary Rights

  

55

 

 

14.12

  

Entire Agreement

  

55

 

 

14.13

  

Waiver Of Jury Trial

  

55



 

-iv-




LIST OF EXHIBITS

 

 

     

Exhibit A

 

Transition Services Agreement

Exhibit B-1

 

Network Patent License Agreement

Exhibit B-2

 

Online Patent License Agreement

Exhibit C-1

 

Network Data License Agreement

Exhibit C-2

 

Online Data License Agreement

Exhibit D-1

 

Seller Trademark Assignment and Assumption Agreement

Exhibit D-2

 

Gemstar Development Corporation Trademark Assignment and Assumption Agreement

Exhibit E

 

Trademark License Agreement

Exhibit F

 

Licensed Assets Agreement

Exhibit G

 

Restructuring



 

-v-




EQUITY PURCHASE AGREEMENT

THIS EQUITY PURCHASE AGREEMENT (this " Agreement ") is made and entered into as of January 5, 2009 (the " Agreement Date ") by and among Gemstar-TV Guide International, Inc., a Delaware corporation (" Seller "); UV Corporation, a Delaware corporation and an indirect wholly-owned subsidiary of Seller (" Stockholder "); the Company (as defined below); Lions Gate Entertainment, Inc., a Delaware corporation (" Buyer "); and solely with respect to Sections 9.5, 9.7 and 9.8 and Articles V(C), XII and XIII, Macrovision Solutions Corporation, a Delaware corporation (" Parent ").

RECITALS

A. The parties intend that, subject to the terms and conditions hereinafter set forth, at the Closing, Buyer shall purchase (the " Purchase ") from Stockholder and Stockholder shall sell to Buyer all of the issued and outstanding equity interests of the Company (the " Equity Interests ") on the terms and subject to the conditions set forth in this Agreement.

B. The Boards of Directors of each of Buyer, the Company, Stockholder and Parent have determined that the transactions contemplated by this Agreement are in the best interests of their respective stockholders, and have approved and declared advisable this Agreement and the transactions contemplated hereby.

C. Buyer, the Company and Stockholder desire to make certain representations, warranties, covenants and agreements in connection with the Purchase and to prescribe various conditions to the Purchase.

NOW, THEREFORE, in consideration of the foregoing and the mutual promises, covenants and conditions contained herein, the parties hereby agree as follows:

ARTICLE I

CERTAIN DEFINITIONS

As used in this Agreement, the following terms shall have the meanings set forth below. Unless indicated otherwise, all mathematical calculations contemplated hereby shall be made to the fifth decimal place.

" Action " means any claim, action, suit, inquiry, proceeding, audit or investigation by or before any Governmental Authority, or any other arbitration, mediation or similar proceeding.

" affiliate " means, with respect to any Person, any other Person which, directly or indirectly, controls, or is controlled by, or is under common control with, such Person.

" Affiliated Group " means each consolidated, combined or affiliated group of companies of which the Company and/or any of its Subsidiaries is, or was at any time, part.

" Applicable Law " means, collectively, all United States federal, state, local or municipal laws, foreign laws, statutes, ordinances, regulations, and rules, and all orders, writs, injunctions,

 

1




awards, requests, judgments and decrees of any Governmental Authority applicable to the assets, properties and business (and any regulations promulgated thereunder) of the applicable company or entity.

" Buyer Ancillary Agreements " means, collectively, each certificate to be delivered on behalf of Buyer by an officer or officers of Buyer at the Closing pursuant to Article X and each agreement or document (other than this Agreement) that Buyer is to enter into as a party thereto pursuant to this Agreement.

" Carriage Agreements " means those agreements set forth on Section 4.10(a)(ii) of the Disclosure Schedule.

" Cash " means cash and cash equivalents determined in accordance with GAAP.

" Closing " means the closing of the transactions contemplated by this Agreement.

" Closing Date " means the date on which the Closing shall occur, as specified by the parties, which shall be no later than the second business day after the satisfaction or waiver of the conditions set forth in Article X, or at such other time and date as the parties hereto agree in writing.

" Closing Date Balance Sheet " means the unaudited combined balance sheet of the Network Business, as of the Closing Date and immediately prior to the Effective Time that has been prepared in a manner consistent with the Balance Sheet except for the Closing Date Balance Sheet Exceptions.

" Closing Date Balance Sheet Exceptions " means the following: (A) no depreciation expense has been recognized during the period between the Balance Sheet Date and the Closing Date Balance Sheet for any Network Business, (B) no amortization expense has been recognized during the period between the Balance Sheet Date and the Closing Date Balance Sheet for any Network Business, and (C) during the period between the Balance Sheet Date and the Closing Date Balance Sheet, assets related to the business of syndicating TV listings and video search functionality to third parties will have been transferred out of TVGuide.com.

" Company " means TV Guide Entertainment Group, Inc., a Delaware corporation.

" Company Ancillary Agreements " means, collectively, each certificate to be delivered on behalf of the Company by an officer or officers of the Company at the Closing pursuant to Article X and each agreement or document (other than this Agreement) that the Company is to enter into as a party pursuant to this Agreement.

" Contract " means any written or oral legally binding contract, agreement, instrument, arrangement, commitment, understanding or undertaking (including leases, licenses, mortgages, notes, guarantees, sublicenses, subcontracts and purchase orders).

" control " (including, with its correlative meanings, " controlled by " and " under common control with ") means the possession, directly or indirectly, of the power to direct or cause the direction of management or policies of a Person, whether through the ownership of securities or partnership or other ownership interests, by contract or otherwise.

 

2




" Credit Agreement " means that certain Credit Agreement dated as of May 2, 2008 among Parent, Macrovision Corporation, the Guarantors Party thereto, the Lenders named therein and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent.

" Disclosure Schedule " means the disclosure schedule dated as of the Agreement Date and delivered by the Company to Buyer on the Agreement Date listing any disclosures to be made pursuant to the representations and warranties of the Company herein (each of which disclosures, in order to be effective, shall clearly indicate the section and, if applicable, the subsection of Article IV to which it relates (unless and only to the extent the relevance to other representations and warranties is clearly apparent from the actual text of the disclosures without reference to further documentation), and each of which disclosures shall also be deemed to be a representation and warranty made by the Company under Article IV hereof).

" Effective Time " means the time of the consummation of the Purchase or such later time as may be mutually agreed by Buyer, Parent and the Company.

" Encumbrance " means, with respect to any tangible or intangible asset, any mortgage, deed of trust, encumbrance, pledge, charge, security interest, title retention device, collateral assignment, adverse claim, restriction or other encumbrance of any kind in respect of such asset (including any restriction on the voting of any security, any restriction on the transfer of any security or other asset, any restriction on the receipt of any income derived from any asset, any restriction on the use of any asset and any restriction on the possession, exercise or transfer of any other attribute of ownership of any asset), including with respect to any security, any adverse claim or third party right or interest, right of first refusal, preemptive right or restriction of any nature, or other right of third parties, whether voluntarily incurred or arising by operation of law, and including, without limitation, any agreements to give any of the foregoing in the future, and any contingent sale or other title retention agreement in the nature thereof. For purposes of clarification only, an inability to sell a security without registering such security for sale under the Securities Act or other federal or state securities laws shall not represent an Encumbrance.

" Escrow Agreement " means that certain Escrow Agreement, in a customary and mutually agreed upon form, by and among Buyer, Seller and Wells Fargo Bank, N.A., as escrow agent.

" Exchange Act " means the Securities Exchange Act of 1934, as amended.

" Expiration Date " means 11:59 p.m. California time on the date that is the fifteenth (15 th ) month anniversary of the Closing Date.

" GAAP " means United States generally accepted accounting principles, applied on a consistent basis.

" GAAP Exceptions " means the following: (A) no accounting for income taxes; (B) no accounting for Parent’s Employee Stock Purchase Plan; and (C) not all purchase accounting entries related to Parent’s purchase of Seller have been pushed down to the Network Business.

 

3




" Governmental Authority " means any United States or foreign governmental or regulatory agency, commission, court, body, entity or authority.

" Immediate Family " with respect to any specified Person, means such Person’s spouse, parents, children and siblings, including adoptive relationships and relationships through marriage, or any other relative of such Person that shares such Person’s home.

" Indebtedness " means, without duplication, (A) obligations for borrowed money or obligations evidenced by notes, bonds, debentures or similar instruments (including all outstanding principal, prepayment premiums, if any, change of control premiums, and accrued interest, fees and expenses related thereto) other than intercompany borrowings from an affiliate, (B) obligations in respect of capitalized leases (including the obligation in respect to the capitalized satellite transponder lease) or to pay the deferred purchase price of property or services, (C) obligations to perform services in respect of which payment has been received (except deferred revenue), (D) obligations in respect of letters of credit, acceptances or similar obligations, (E) obligations in respect of interest rate cap agreements, interest rate swap agreements, foreign currency exchange contracts or other hedging contracts, (F) bank overdrafts (for the avoidance of doubt, any cash clearing account is not considered a bank overdraft or Indebtedness) and (G) any guarantee of the obligations of another Person with respect to any of the foregoing.

" Indemnity Escrow Fund " means the amount escrowed pursuant to Section 12.6 hereof and maintained in accordance with the Escrow Agreement.

" Intellectual Property " means all intellectual property rights arising under the laws of the United States or any other jurisdiction, including without limitation: (A) trade names, trademarks and service marks (registered and unregistered), domain names, logos, trade dress and similar rights, including all common law rights and all combinations thereof and all goodwill associated with the foregoing, and all registrations and applications to register any of the foregoing (collectively, " Marks "); (B) patents and patent applications (including all reissues, divisions, continuation, continuation-in-part, extensions and reexaminations), and rights in respect of utility models or industrial designs (collectively, " Patents "); (C) copyrights, whether registered or unregistered, statutory or common law (including copyrights in software programs) and copyrightable works and registrations and applications therefor in all nations throughout the world, including but not limited to all derivative works, moral rights, renewals, extensions, reversions or restorations of copyrights, now or hereafter provided by law (collectively, " Copyrights "); and (D) know-how, inventions, discoveries, methods, processes, technical data, specifications, research and development information, computer software, technology, data bases and other proprietary or confidential information, including customer lists, in each case that derives economic value (actual or potential) from not being generally known to other Persons who can obtain economic value from its disclosure, but excluding any Copyrights or Patents that cover or protect any of the foregoing (collectively, " Trade Secrets ").

" knowledge " means, with respect to any party to this Agreement, the actual knowledge (after due inquiry) of a particular fact, circumstance, event or other matter in question of the Chief Executive Officer, Chief Financial Officer and General Counsel (as applicable) of such party.

 

4




" Material Adverse Effect " when used with respect to an entity (which shall for this purpose mean the Network Business) means any change, event, circumstance, condition or effect that materially impairs the ability of such entity to perform its obligations under this Agreement or to consummate the transactions contemplated hereby, or that is or is reasonably likely to be, individually or in the aggregate, materially adverse to the condition (financial or otherwise), assets (including intangible assets), liabilities, business, operations or results of operations of such entity and its Subsidiaries, taken as a whole; provided , however , that in no event shall any of the following be taken into account in determining whether there has been or will be a Material Adverse Effect with respect to an entity: (A) any effect resulting directly from the entity taking an action expressly required to be taken by it pursuant to the terms and conditions of this Agreement, (B) with respect to the Company, any effect resulting from a change in the industry in which the Company operates or in the worldwide economy generally which does not effect the Company in a disproportionate manner relative to other participants in the industry, (C) any adverse effect resulting from any change in Applicable Law or in accounting requirements or principles required under GAAP, (D) any failure to meet internal revenue or earnings projections ( provided , that the facts or occurrences giving rise to or contributing to such failure that are not otherwise excluded from the definition of Material Adverse Effect may be taken into account in determining whether there has been, a Material Adverse Effect), (E) any effect resulting from any acts of terrorism, war or natural disaster, or (F) any effect resulting from or relating to the announcement, negotiation, execution or performance of this Agreement or the transactions contemplated hereby.

" Network Business " means the business of each of (A) TV Guide Network, (B) TV Guide Network Broadband, (C) TV Guide Network Mobile, (D) TVGuide.com; and (E) TV Guide Network Video on Demand; provided , that (i) when this term is used in connection with the Financial Statements, " Network Business " shall not include either TV Guide Network Mobile or TVGuide.com, and (ii) when this term is used in connection with the Interim Financial Statements " Network Business " shall not include TVGuide.com. For the avoidance of doubt, TV Guide Network Mobile was first included in the Network Business on May 2, 2008.

" Net Working Capital " means (A) the Network Business’ combined total current assets, excluding (i) cash, (ii) any intercompany payables or receivables and (iii) deferred tax assets as of the Closing Date, less (B) the Network Business’ combined total current liabilities, excluding (i) any cash clearing accounts, (ii) any intercompany payables or receivables and (iii) deferred Tax liabilities as of the Closing Date; each of (A) and (B) as calculated in accordance with GAAP, subject to the GAAP Exceptions. For the avoidance of doubt, in calculating Net Working Capital, the term Network Business shall include each of (A) TV Guide Network, (B) TV Guide Network Broadband, (C) TV Guide Network Mobile, (D) TVGuide.com; and (E) TV Guide Network Video on Demand.

" Net Working Capital Decrease " means the amount by which the Net Working Capital is less than $6,000,000.

" Net Working Capital Increase " means the amount by which the Net Working Capital is greater than $6,000,000.

 

5




" Permitted Encumbrances " means (A) statutory Encumbrances for taxes that are not yet due and payable; (B) statutory Encumbrances to secure obligations to landlords, lessors or renters under leases or rental agreements (including, without limitation, the Encumbrances related to the satellite transponder lease); (C) deposits or pledges made in connection with, or to secure payment of, workers’ compensation, unemployment insurance or other social security or similar programs mandated by Applicable Law; (D) statutory Encumbrances in favor of carriers, repairers, servicers, bailees, warehousemen, mechanics and materialmen, to secure claims for labor, materials or supplies and other like Encumbrances; or (E) any minor imperfection of title or similar Encumbrances, charges or encumbrances which individually or in the aggregate with other such Encumbrances, charges and encumbrances does not impair the value of the property subject to such Encumbrance, charge or encumbrance or the use of such property by the Company or its Subsidiaries. Prior to the Closing, " Permitted Encumbrances " shall also mean any security interest in the Equity Interests and the assets of the Company and its Subsidiaries securing the guarantees by Stockholder, the Company and the Company’s Subsidiaries of the obligations under the Credit Agreement.

" Person " means any individual, corporation, company, limited liability company, partnership, limited liability partnership, trust, estate, proprietorship, joint venture, association, organization, entity or Governmental Authority.

" Related Party " with respect to any specified Person means: (A) any affiliate of such specified Person, or any director, executive officer, general partner or managing member of such affiliate; (B) any Person who serves or within the past five years has served as a director, executive officer, partner, member or in a similar capacity of such specified Person; (C) any Immediate Family member of a Person described in clause (B); or (D) any other Person who holds, individually or together with any affiliate of such other Person and any member(s) of such Person’s Immediate Family, more than 5% of the outstanding equity or ownership interests of such specified Person.

" Representatives " means officers, directors, principals, employees, advisors, auditors, agents, bankers and other representatives.

" Restructuring " means the restructuring of the various Subsidiaries of Parent prior to the Closing Date, in accordance with the plan set forth at Exhibit G .

" Securities Act " means the Securities Act of 1933, as amended.

" Seller Parties " means Seller, Stockholder, the Company and Parent.

" Subsidiary " means, with respect to any other party, any corporation or other entity, whether incorporated or unincorporated, of which (A) such party or any other Subsidiary of such party is a general partner (excluding partnerships, the general partnership interests of which held by such party or any Subsidiary of such party do not have a majority of the voting interest in such partnership) or (B) at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the Board of Directors or others performing similar functions with respect to such corporation or other organization or a majority of the profit interests in such other organization is directly or indirectly owned or controlled by such party or by any one or more of its Subsidiaries, or by such party and one or more of its Subsidiaries.

 

6




" Tax " (and, with correlative meaning, " Taxes ") means (A) any net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, value-added, ad valorem, transfer, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, environmental or windfall profit tax, custom duty and import and export taxes, provincial health insurance plan premiums, employer health tax, United States or other government pension plan contributions, employment insurance premiums, workman’s compensation and other payroll taxes, deductions at source, non-resident withholding, social service provincial sales and goods and services taxes, including estimated taxes, countervail and anti-dumping fees and taxes, all licenses and registration fees, escheat, any related penalties, or other tax, governmental fee or other like assessment, reassessment or charge, duties, impositions and liabilities of any kind whatsoever, together with any interest or any penalty, addition to tax or additional amount imposed by any Governmental Authority responsible for the imposition of any such tax, (B) any liability for the payment of any amounts of the type described in clause (A) of this sentence as a result of being a member of an affiliated, consolidated, combined, unitary or aggregate group for any taxable period, and (C) any liability for the payment of any amounts of the type described in clause (A) or (B) of this sentence as a result of being a transferee of or successor to any Person or as a result of any express or implied obligation to indemnify any other Person.

" Tax Return " means any return, report or similar filing (including the attached schedules) required to be filed with respect to Taxes, including any information return, claim for refund, amended return or declaration of estimated Taxes.

" Total Consideration " means (A) $255,000,000 minus (B) any Indebtedness of the Company or its Subsidiaries outstanding as of the Closing plus (C) any Cash of the Company and its Subsidiaries as of the Closing, plus (D) the Net Working Capital Increase, if any, estimated in accordance with Section 3.4(a), minus (E) the Net Working Capital Decrease, if any, estimated in accordance with Section 3.4(a).

" TVGuide.com " means the public web business currently located at www.tvguide.com, www.jumptheshark.com, www.tvshowsondvd.com, www.fansofrealitytv.com, www.m.tvguide.com and www.tv-now.com and which as of the Agreement Date contains TV listings with entertainment and TV-related content and products; provided , however , that TVGuide.com shall not include the business of syndicating TV listings, IPGs or video search functionality to third parties. For purposes of this definition, " syndicating " shall mean (a) any relationship whereby data, IPGs or video search functionality is delivered by (or at the request of) Licensee’s web sites to or on behalf of a third party web site, application or service for display to others, regardless of whether or not by web affiliate, in-line linking, RSS, redirects, framing or co-branding relationships, or other relationships in which content is served into a third party’s web page, service, product or application; or (b) serving an IPG into, or using an IPG to control, a television, set top box, recorder, wireless device or other consumer electronics device for the express purpose of tuning, or otherwise controlling, that television, set top box, recorder, wireless device or other consumer electronics device. For the avoidance of doubt, " syndicating " shall not include the distribution of any isolated per program references or other

 

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isolated pieces of information, or links to video content (with or without sound) which appear within an article. For the further avoidance of doubt, TVGuide.com shall not include the listing grid technology, IPGs, listings containers or online video guide search technology, all of which are licensed to Buyer in the Licensed Asset agreement. TVGuide.com shall also not include listings applications such as the iGoogle gadget.

" TV Guide Network " means the linear broadcast cable television network that provides entertainment and television guidance related programming to multi-channel video system operators, which is currently known as TV Guide Network.

" TV Guide Network Broadband " means an advertiser supported, video-on-demand service featuring short-form and originally-produced and edited entertainment programs which is distributed on major video portals.

" TV Guide Network Mobile " means the business of repurposing TV Guide Network television programming for mobile devices, which is currently solely comprised of the Verizon V CAST deal in 2008.

" TV Guide Network Video on Demand " means an advertiser supported, video-on-demand television programming services featuring short-form, originally-produced entertainment programs."

Index of Other Defined Terms

 

 

     

Defined Terms

  

Section Reference

ADSP

  

13.2(b)

Agreement

  

Preamble

Agreement Date

  

Preamble

Allocation

  

13.2(b)

Antitrust Laws

  

9.5(b)

Assets

  

4.17

Balance Sheet

  

4.7

Balance Sheet Date

  

4.7

Balance Sheet Dispute Notice

  

3.4(c)

Bankruptcy and Equity Exception

  

4.4(a)

Business Transaction

  

7.3

Buyer

  

Preamble

Buyer Indemnitee

  

12.2

Claim Notice

  

12.4(a)

Code

  

3.6(a)

Company Benefit Plans

  

4.14(c)

Company Employees

  

8.2(b)

Company Foreign Plans

  

4.14(c)

Company Group Employees

  

7.4(c)

Company Intellectual Property

  

4.11(a)

Company Registered Copyrights

  

4.11(b)



 

8




 

     

Company Registered IP

  

4.11(b)

Company Registered Marks

  

4.11(b)

Company Specified Approvals

  

4.4(b)

Confidentiality Agreement

  

7.1

Confirmation Certificate

  

3.4(c)

Copyrights

  

Article I – definition of "Intellectual Property"

Core Representations

  

12.1

DOJ

  

9.5(a)

Employees

  

4.14(a)

End Date

  

11.2(b)

environment

  

4.15(c)

Environmental Law

  

4.15(c)

Equity Interests

  

Recitals

ERISA

  

4.14(c)

ERISA Affiliate

  

4.14(d)

Financial Statements

  

4.7

FTC

  

9.5(a)

HSR

  

4.4(b)

Indemnifiable Claim

  

12.4(a)

Indemnified Party

  

8.1(b)

Indemnitee

  

12.4(a)

Indemnitor

  

12.4(a)

Independent Accountant

  

3.4(e)

Independent Contractors

  

4.14(b)

Interim Financial Statements

  

4.7

IRS

  

13.2(b)

Licensed Assets Agreement

  

3.1(e)

Losses

  

12.2

Marks

  

Article I – definition of "Intellectual Property"

Material Contract

  

4.10(a)

Materials of Environmental Concern

  

4.15(c)

Network Data License

  

10.2(i)

Network Patent License

  

10.2(g)

New Plans

  

8.2(c)

Nonsolicitation Period

  

8.3

Online Data License

  

10.2(i)

Online Patent License

  

10.2(g)

Parent

  

Preamble

Patents

  

Article I – definition of "Intellectual Property"

Permits

  

4.12(b)

Post-Closing Balance Sheet

  

3.4(b)

Purchase

  

Recitals

release

  

4.15(c)

Retained Employee(s)

  

8.2(a)

Section 338(h)(10) Election

  

13.2(a)

Seller

  

Preamble



 

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Start Date

  

8.2(a)

Stockholder

  

Preamble

Stockholder Indemnitee

  

12.3

Tax Proceeding

  

13.9

Threshold Amount

  

12.5(a)

Trade Secrets

  

Article I – definition of "Intellectual Property"

Trademark Assignment Agreements

  

3.1(c)

Trademark License Agreement

  

3.1(d)

Transfer Taxes

  

13.1

Transition Services Agreement

  

10.2(f)

TVGuide.com Financial Statements

  

4.7



ARTICLE II

THE RESTRUCTURING

2.1 Restructuring . Prior to the Closing, each of the Company and its Subsidiaries shall effect the Restructuring.

ARTICLE III

THE EQUITY PURCHASE

3.1 Agreement to Sell and Purchase . At the Closing,

(a) Stockholder shall sell, transfer and deliver to Buyer, and Buyer shall purchase and accept from Stockholder, free and clear of any Encumbrance and with the benefits of all rights whatsoever attaching or accruing to such Equity Interests on or after the Closing Date, the Equity Interests held by Stockholder;

(b) Seller shall sell, convey, assign, transfer and deliver to Buyer, and Buyer shall purchase and accept from Seller all of the Seller’s right, title and interest (including all liabilities, costs, expenses and obligations arising subsequent to the Closing) in the real property and other leases identified on Section 3.1(b) of the Disclosure Schedule;

(c) Seller and Gemstar Development Corporation shall assign to Buyer all of such entities’ right, title and interest in and to the Marks listed in Section 3.1(c) of the Disclosure Schedule pursuant to the trademark assignment and assumption agreements substantially in the form attached hereto as Exhibit D-1 and Exhibit D-2 (together, the " Trademark Assignment Agreements "); and

(d) Buyer shall grant to Seller a trademark license to use the Marks listed in Section 3.1(d) of the Disclosure Schedule pursuant to a trademark license agreement substantially in the form attached hereto as Exhibit E (the " Trademark License Agreement ").

(e) Seller or its affiliates shall grant to Buyer a license to use the Licensed Assets (as such term is defined in the Licensed Assets Agreement in the form attached hereto as Exhibit F (the " Licensed Assets Agreement ")).

 

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3.2 The Closing . Unless otherwise mutually agreed in writing by the Company and Buyer, the Closing shall take place at the offices of Cooley Godward Kronish LLP, 3175 Hanover Street, Palo Alto, CA 94304, at 9:00 a.m. (California time) on the business day following the day on which the last to be satisfied or waived of the conditions set forth in Article X (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the fulfillment or waiver of those conditions) shall be satisfied or waived in accordance with this Agreement.

3.3 Payment of Total Consideration at the Closing . At the Closing, Buyer shall cause the Total Consideration (less the amount delivered to the Indemnity Escrow Fund pursuant to Section 12.6) to be delivered to Stockholder by wire transfer of immediately available funds to such accounts as such Stockholder specifies in written instructions to Buyer prior to the Closing.

3.4 Post-Closing Adjustments .

(a) Not less than five (5) business days prior to the scheduled Closing Date, the Company shall deliver to Buyer an estimated Closing Date Balance Sheet. The Closing Date Balance Sheet shall present fairly, on a good faith basis, the estimated financial position of the Network Business as of the Closing Date, subject to the GAAP Exceptions and the Closing Date Balance Sheet Exceptions. Such Closing Date Balance Sheet shall serve as the basis for the estimate of the Net Working Capital as of Closing for purposes of calculating the Total Consideration on the Closing Date.

(b) Within ninety (90) days of the Closing Date, Buyer shall cause to be prepared and delivered to Stockholder an updated unaudited combined balance sheet of the Network Business as of the Closing Date (the " Post-Closing Balance Sheet ") prepared in a manner consistent with the Balance Sheet, subject to the Closing Date Balance Sheet Exceptions, together with Buyer’s calculation of the Net Working Capital as of the Closing Date.

(c) Stockholder shall have thirty (30) days following the date of delivery by Buyer to Stockholder of the Post-Closing Balance Sheet to provide Buyer with a written certificate confirming that the Net Working Capital as set forth in the Post-Closing Balance Sheet is correct (the " Confirmation Certificate ") or notifying Buyer in writing of any good faith reasonable objections to the calculation of the Net Working Capital as set forth on the Post-Closing Balance Sheet (a " Balance Sheet Dispute Notice "), setting forth a reasonably specific and detailed description of such objections. If a Confirmation Certificate is delivered by Stockholder pursuant to this Section 3.4(c), then the Net Working Capital calculated by Buyer in connection with the preparation of the Post-Closing Balance Sheet shall be deemed to be final and binding on the parties to this Agreement. During the 30-day period immediately following Stockholder’s receipt of the Post-Closing Balance Sheet, Stockholder shall be permitted to review Buyer’s working papers related to the preparation of the Post-Closing Balance Sheet and determination of the Net Working Capital.

(d) If Stockholder shall object to the Post-Closing Balance Sheet or Buyer’s calculation of the Net Working Capital as reflected in the Balance Sheet Dispute Notice, a representative of Buyer, on the one hand, and Stockholder, on the other, shall attempt in good faith to resolve any such objections within ten (10) business days of the receipt by Buyer of the Balance Sheet Dispute Notice.

 

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(e) If Stockholder and Buyer shall be unable to resolve any such dispute within the ten (10) business day period, Stockholder and Buyer (either together or separately) shall be entitled to submit the dispute to a mutually agreed upon independent accounting firm (the " Independent Accountant ") for review and resolution of all matters (but only such matters) which remain in dispute, and the Independent Accountant shall make a final determination of the Net Working Capital to the extent such amount is in dispute, in accordance with the guidelines and procedures set forth in this Agreement. Each of Stockholder, on the one hand, and Buyer, on the other hand, shall, and shall cause their respective Representatives to provide full cooperation to the Independent Accountant. The Independent Accountant shall (i) act in its capacity as an expert and not as an arbitrator, (ii) limit its review to such items and calculations as were addressed in the Balance Sheet Dispute Notice that have not been resolved by the parties and any factual or mathematical errors contained in the information provided to or by Buyer and (iii) be instructed to reach its conclusions regarding any such dispute within thirty (30) days after its appointment and provide a written explanation of its decision. In resolving any matters in dispute, the Independent Accountant may not assign a value to any item in dispute greater than the greatest value for such item assigned by Buyer, on the one hand, or Stockholder, on the other hand, or less than the smallest value for such item assigned by Buyer, on the one hand, or Stockholder, on the other hand. The Independent Accountant’s determination will be based solely on presentations by Buyer and Stockholder which are in accordance with the guidelines and procedures set forth in this Agreement (i.e., not on the basis of an independent review). The Post-Closing Balance Sheet and the determination of the Net Working Capital shall become final and binding on the parties on the date the Independent Accountant delivers its final resolution in writing to the parties. The fees and expenses of the Independent Accountant shall be paid by the party determined by the Independent Accountant to be the non-prevailing party in connection with the dispute; provided , however , that if the Independent Accountant shall determine in its reasonable discretion that neither party shall be the non-prevailing party, then such fees and expenses shall be borne 50% by Stockholder and 50% by Buyer.

(f) If Stockholder does not deliver a Balance Sheet Dispute Notice in accordance with Section 3.4(c) above (i.e., within the 30-day period specified therein), the Post-Closing Balance Sheet (together with Buyer’s calculation of the Net Working Capital set forth on the Post-Closing Balance Sheet) shall be deemed to have been accepted by all of the parties to this Agreement. In the event that Stockholder delivers a Balance Sheet Dispute Notice in accordance with the provisions above and Stockholder and Buyer are able to resolve such dispute by mutual agreement, the Post-Closing Balance Sheet, together with the calculation of the Net Working Capital, to the extent modified by the mutual agreement of such parties, shall be deemed to have been accepted by all of the parties to this Agreement. In the event that Stockholder delivers a Balance Sheet Dispute Notice in accordance with the provisions set forth above and Stockholder and Buyer are unable to resolve such dispute by mutual agreement, the determination of the Independent Accountant shall be final and binding on the parties, and the Post-Closing Balance Sheet, together with the calculation of the Net Working Capital, to the extent modified by the Independent Accountant, shall be deemed to have been accepted by all of the parties to this Agreement.

 

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(g) In the event that it is determined that the Net Working Capital shall have been overstated in the calculation of the Total Consideration for purposes of the Closing, Stockholder shall deliver to Buyer such overstated amount by wire transfer of immediately available funds to such accounts as Buyer specifies in written instructions to Stockholder within three (3) business days following the final determination of such amounts pursuant to this Section 3.4.

(h) In the event that it is determined that the Net Working Capital shall have been understated in the calculation of the Total Consideration for purposes of the Closing, Buyer shall deliver to Stockholder such understated amount by wire transfer of immediately available funds to such accounts as Stockholder specifies in written instructions to Buyer within three (3) business days following the final determination of such amounts pursuant to this Section 3.4.

3.5 Further Assurances . If, at any time before or after the Closing, any of the parties hereto reasonably believes or is advised by their attorneys that any further instruments, deeds, assignments or assurances are reasonably necessary to consummate the transactions contemplated hereby or to carry out the purposes and intent of this Agreement at or after the Closing, then Stockholder, the Company, Buyer and their respective officers and directors shall execute and deliver all such proper deeds, assignments, instruments and assurances and do all other things reasonably necessary to consummate the transactions contemplated hereby and to carry out the purposes and intent of this Agreement.

3.6 Tax Withholding .

(a) Buyer or any agent of Buyer shall be entitled to deduct and withhold from the Total Consideration or other payment otherwise payable pursuant to this Agreement the amounts required to be deducted and withheld under the Internal Revenue Code of 1986, as amended (the " Code "), or any provision of state, local or foreign tax law, with respect to the making of such payment. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of whom such deduction and withholding was made.

(b) Stockholder agrees to furnish Buyer with a non-foreign certification (in form and substance reasonably satisfactory to Buyer) that satisfies the requirements of Treasury Regulation section 1.1445-2(b)(2).

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Subject to the disclosures set forth in the Disclosure Schedule, the Company represents and warrants to Buyer that the statements contained in this Article IV are true and correct, on and as of the Agreement Date (except to the extent expressly made as of an earlier date, in which case such statements are true and correct as of such date), except for those representations and warranties that may be directly or indirectly affected by the consummation of the Restructuring, in which case such statements are true and correct on and as of the effective date of the Restructuring and would be true as of the Agreement Date if the Restructuring were effected immediately prior to the Agreement Date, as applicable:

4.1 Organization and Good Standing . The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. The Company has all requisite power and authority to own, operate and lease its properties and to carry on the Network Business. The Company is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except where failure to be so qualified or licensed could not reasonably be expected to result in a Material Adverse Effect on the Company. The Company is not in violation of its organizational documents as amended to date.

 

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4.2 Subsidiaries . Each Subsidiary of the Company is identified on Section 4.2 of the Disclosure Schedule, together with a listing of the jurisdiction in which each such Subsidiary is organized. Each such Subsidiary is an entity duly formed or organized, validly existing and in good standing under the laws of the jurisdiction in which it was formed or organized. Each such Subsidiary has all requisite power and authority to own, operate and lease its properties and to carry on its business as now being conducted and is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except where failure to be so qualified or licensed could not reasonably be expected to result in a Material Adverse Effect on such Subsidiary. No Subsidiary is in violation of its organizational documents as amended to date.

4.3 Capitalization of the Company .

(a) Company Capitalization . The authorized capital stock of the Company consists of 1,000 shares of Company Common Stock, of which 100 shares are issued and outstanding, all of which outstanding shares are held by Stockholder. The Equity Interests have been duly authorized and validly issued, are fully paid and nonassessable, were not issued in violation of and are not subject to any right of rescission, right of first refusal or preemptive right, have been offered, issued, sold and delivered by the Company in compliance with all requirements of Applicable Law and all requirements set forth in applicable Contracts and the Company has received all consideration due to it in connection with the sale and issuance of such Equity Interests.

(b) No Other Rights . There are no appreciation rights, options, warrants, calls, rights, commitments, conversion privileges or preemptive or other rights or Contracts outstanding to purchase or otherwise acquire any interests of the Company or any securities or debt convertible into or exchangeable for interests of the Company or obligating the Company to grant, extend or enter into any such option, warrant, call, right, commitment, conversion privilege or preemptive or other right or Contract. There are no voting agreements, rights of first refusal, preemptive rights, co-sale rights or other restrictions applicable to the Equity Interests.

(c) Subsidiary Capitalization . Section 4.3(c) of the Disclosure Schedule sets forth a list of the number and type of equity securities held by the Company in each of the Subsidiaries identified in Section 4.2 of the Disclosure Schedule, the percentage of all outstanding equity interests for such Subsidiary represented by the securities held by the Company and a summary of all outstanding options or similar arrangements to acquire equity securities of such Subsidiaries. The Company owns 100% of the outstanding equity interests of

 

14




each of the Subsidiaries. There are no appreciation rights, options, warrants, calls, rights, commitments, conversion privileges or preemptive or other rights or Contracts outstanding to purchase or otherwise acquire any interest of any Subsidiary or any securities or debt convertible into or exchangeable for interest of any Subsidiary or obligating any Subsidiary to grant, extend or enter into any such option, warrant, call, right, commitment, conversion privilege or preemptive or other right or Contract. There are no voting agreements, rights of first refusal, preemptive rights, co-sale rights or other restrictions applicable to the equity interests of any such Subsidiary.

4.4 Corporate Authority Relative to This Agreement; No Violation .

(a) The Company has all requisite corporate power and corporate authority to enter into, execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated under this Agreement to which it is a party. The execution, delivery and performance by the Company of this Agreement and the Company Ancillary Agreements, have been duly and validly approved and authorized by the Company and constitutes, or when executed and delivered will constitute, the valid and binding agreements of the Company, enforceable against the Company in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles (the " Bankruptcy and Equity Exception ").

(b) The execution, delivery and performance by the Company of this Agreement and the Company Ancillary Agreements and the consummation of the transactions contemplated under this Agreement to which it is a party by the Company does not and will not require any consent, approval, authorization or permit of, action by, filing with or notification to any Governmental Authority other than (i) compliance with the applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (" HSR "), and (ii) the other consents and/or notices set forth on Section 4.4(b) of the Disclosure Schedule (collectively, clauses (i) and (ii), the " Company Specified Approvals ").

(c) Assuming receipt of or compliance with the Company Specified Approvals, the execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the Purchase and the other transactions contemplated hereby do not and will not (i) contravene or conflict with the organizational or governing documents of the Company or any of its Subsidiaries, (ii) contravene or conflict with or constitute a violation in any material way of any provision of any Applicable Law binding upon or applicable to the Company or any of its Subsidiaries or any of their respective properties or assets, or (iii) result in any material violation of, or material default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any material obligation or to the loss of a material benefit under, any Material Contract or result in the creation of any material Encumbrance (other than Permitted Encumbrances) upon any of the properties or assets of the Company or any of its Subsidiaries.

4.5 Litigation . Except as otherwise disclosed on Section 4.5 of the Disclosure Schedule (which disclosed items shall be the sole responsibility of Seller), there is no Action (except for any Actions commenced by Persons other than Governmental Authorities that could not reasonably be

 

15




expected to result in a liability or loss to the Company or its Subsidiaries of more than $300,000 individually) pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries, or any material property or asset of the Company or any of its Subsidiaries, or any of the officers or directors of the Company or any of its Subsidiaries in regards to their actions as such, nor is there, to the knowledge of the Company, any basis for any such Action. There is no (a) outstanding judgment, order, decree, award, stipulation or injunction of any Governmental Authority against the Company or any of its Subsidiaries which seeks to or is reasonably likely to have the effect of preventing the Company or any of its Subsidiaries from consummating the Purchase, or (b) any Action which, if resolved adversely to the Company or any of its Subsidiaries would be reasonably likely to impair the ability of the Company or any of its Subsidiaries to consummate the transactions contemplated under this Agreement.

4.6 Taxes . The Company and each of its Subsidiaries and each Affiliated Group (i) have prepared and timely filed (taking into account any extension of time within which to file) all material Tax Returns required to be filed by any of them and all such filed Tax Returns are complete and accurate in all material respects; (ii) the Company and each of its Subsidiaries and each Affiliated Group have paid all Taxes shown as due on such Tax Returns; (iii) the Company and each of its Subsidiaries has withheld and paid all material Taxes required to have been withheld and paid in connections with amounts owing to any employee, independent contractor, creditor, stockholder or other third party and all Forms 1042, W-2 and 1099 required with respect thereto have been properly completed and timely filed; (iv) neither the Company nor any of its Subsidiaries has any liability for Taxes of any Person (other than the Company or such Subsidiaries) pursuant to any Tax allocation or sharing agreement, under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, or otherwise; (v) there are not pending or, to the knowledge of the Company, threatened in writing, any audits, examinations, investigations or other proceedings in respect of Taxes of the Company, any of its Subsidiaries, or any of the Company’s or such Subsidiaries’ assets, and neither the Company nor any of its Subsidiaries has given any currently effective waiver or extension of any statute of limitations in respect of Taxes nor are there any currently effective waivers of or extension of any statutes of limitations of Taxes in respect of any of the Company’s or such Subsidiaries’ assets; (vi) neither the Company nor any of its Subsidiaries has entered into any " listed transaction " within the meaning of Treasury Regulation Section 1.6011-4(b)(2); (vii) none of the Company or its Subsidiaries has been a " controlled corporation " or a " distributing corporation " in any distribution occurring during the two-year period ending on the Agreement Date that was purported or intended to be governed by Section 355 of the Code; (viii) the unpaid Taxes of the Company and each of its Subsidiaries do not exceed the reserves for Tax liability shown on the Balance Sheet, or similar reserves for Tax liability shown on the consolidated financial statements of Parent to the extent such reserves apply to Company’s or its Subsidiaries’ Tax Returns not yet filed; (ix) each of the Company and its Subsidiaries has disclosed on its federal income Tax Returns filed for its 2005 taxable year and thereafter all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of IRC section 6662; (x) there are no Encumbrances for Taxes except Permitted Encumbrances for which reserves have been established on the Balance Sheet, and (xi) Stockholder and the Company are, and at the time of the Closing will be, members of Parent’s federal consolidated Tax group and included in Parent’s federal consolidated income tax return.

 

16




4.7 Financial Statements . Copies of (i) the audited combined balance sheet of the Network Business as of December 31, 2007 and 2006, and the related audited combined statements of income, parents’ net investment and cash flows of the Network Business for each of the three years in the period ended December 31, 2007, together with all related notes and schedules thereto, accompanied by the report thereon of the Network Business’ independent auditors (collectively referred to as the " Financial Statements "), (ii) the unaudited combined balance sheet of the Network Business as of September 30, 2008, and the related unaudited combined statement of income of the Network Business (collectively referred to as the " Interim Financial Statements "), (iii) the unaudited combined balance sheet of TVGuide.com as of September 30, 2008, June 30, 2008, March 31, 2008, December 31, 2007 and December 31, 2006 and the related unaudited combined statement of income of TVGuide.com (collectively referred to as the " TVGuide.com Financial Statements "), and (iv) a schedule combining the unaudited combined balance sheet of the Network Business and the unaudited combined balance sheet of TVGuide.com as of September 30, 2008 (the " Balance Sheet, " and such date the " Balance Sheet Date ") are attached as Section 4.7 of the Disclosure Schedule. The Financial Statements (a) have been prepared based on the books and records of the Network Business (except as may be indicated in the notes thereto), (b) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto), and (c) fairly presents, in all material respects, the combined financial position, results of operations and cash flows of the Network Business as of the respective dates thereof and for the respective periods indicated therein, except as otherwise noted therein. The Interim Financial Statements (i) have been prepared based on the books and records of the Network Business; (ii) have been prepared in a manner consistent with prior quarter-end unaudited combined balance sheets and statements of income, which is in accordance with GAAP, subject to the GAAP Exceptions; and (iii) fairly presents, in all material respects, the combined financial position and results of operations of the Network Business as of the respective date thereof and for the respective period indicated therein, subject to the GAAP Exceptions; and (iv) subject to normal and recurring year-end adjustments that will not, individually or in the aggregate, be material. The TVGuide.com Financial Statements (a) have been prepared based on the books and records of TVGuide.com except as may be indicated in the notes thereto; (b) have been prepared in a manner consistent with prior quarter-end unaudited combined balance sheets and statements of income, which is in accordance with GAAP, subject to the GAAP Exceptions, except as may be indicated in the notes thereto; (c) fairly presents, in all material respects, the combined financial position and results of operations of TVGuide.com as of the respective date thereof and for the respective period indicated therein, except as otherwise noted therein; and (d) subject to normal and recurring year-end adjustments that will not, individually or in the aggregate, be material. The Balance Sheet (a) has been prepared based on the balance sheet contained in the Interim Financial Statements and the balance sheet as of September 30, 2008, contained in the TVGuide.com Financial Statements, except as may be indicated in the notes thereto; and (b) fairly presents, in all material respects, the combined financial position of the Network Business as of the Balance Sheet Date, except as otherwise noted therein.

4.8 Absence of Liabilities . Except (a) to the extent reflected or reserved against in the Balance Sheet, (b) for liabilities or obligations permitted by this Agreement, or (c) for liabilities and obligations incurred in the ordinary course of business consistent with past practices since the Balance Sheet Date, the Network Business does not have any liabilities or

 

17




obligations of any nature, whether or not accrued, contingent or otherwise, that would be required by GAAP, subject to the GAAP Exceptions, to be reflected on a combined balance sheet of the Network Business. For the avoidance of doubt, for purposes of this Section 4.8, the Network Business includes TVGuide.com.

4.9 Absence of Certain Changes or Events . Since the Balance Sheet Date, except as otherwise contemplated, required or permitted by this Agreement, including, without limitation, the Restructuring, (i) the Network Business has been conducted, in all material respects, in the ordinary course of business consistent with past practices and (ii) neither the Company nor any of its Subsidiaries has taken any action which, if taken after the Agreement Date without the prior consent of Buyer, would constitute a breach of any of the covenants set forth in Section 7.2 of this Agreement. As of the Agreement Date (and, for the avoidance of doubt, solely as of such date for all purposes of this Agreement): Between September 30, 2008 and the Agreement Date, there has not been any event or effect that has had a Material Adverse Effect on the Network Business.

4.10 Contracts .

(a) For purposes of this Agreement, " Material Contract " shall mean (i) any " material contract " (within the meaning of Item 601(b)(10) of Regulation S-K under the Securities Act, and the Exchange Act) with respect to Parent that is solely applicable to the Network Business; (ii) the Carriage Agreements; (iii) any Contract, except for insertion orders or carriage agreements, pursuant to which the Company or any of its Subsidiaries received more than $500,000 over the past 12 months; (iv) any Contract which obligates, or in the Company’s reasonable discretion is reasonably likely to obligate, the Company or any of its Subsidiaries to pay more than $500,000 over any future 12 month period in the next five years; (v) any indemnification, employment, "change of control," retention, severance, consulting or other Contract with any executive officer of the Network Business other than those Contracts terminable by the Company or any of its Subsidiaries on no more than thirty (30) days’ notice without liability or financial obligation to the Company or any such Subsidiary; and (vi) any mortgages, indentures, guarantees, loans or credit agreements, security agreements or promissory notes relating to the borrowing of money, extension of credit or other indebtedness for borrowed money by the Network Business.

(b) Section 4.10(b) of the Disclosure Schedule sets forth a list of all the Material Contracts as of the Agreement Date.

(c) (i) neither the Company nor any Subsidiary of the Company is in material breach of or material default under the terms of any Material Contract; (ii) to the knowledge of the Company, no other party to any Material Contract is in material breach of or material default under the terms of any Material Contract; and (iii) each Material Contract is a valid and binding obligation of the Company or the Subsidiary of the Company which is party thereto and, to the knowledge of the Company, of each other party thereto, and except for the Bankruptcy and Equity Exception, is in full force and effect.

 

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4.11 Intellectual Property .

(a) The Intellectual Property that is used in or necessary for, and (in either event) is material to the operation of the Network Business as currently conducted (collectively, the " Company Intellectual Property "); (i) is owned by the Company or a Subsidiary of the Company, (ii) the Company or one of its Subsidiaries holds a license to or otherwise possesses legally enforceable rights to use all such Company Intellectual Property, or (iii) to the extent held by an affiliate, will be licensed to the Company or a Subsidiary of the Company prior to the Closing. All such Company Intellectual Property is free and clear of any Encumbrances (excluding any rights granted under any license or distribution agreements entered into in the ordinary course of business consistent with past practice). None of the Company Intellectual Property owned by the Company or its Subsidiaries is, and to the knowledge of the Company, no other Company Intellectual Property is subject to any outstanding order, judgment or stipulation restricting the use thereof by the Company or any of its Subsidiaries. The Company Intellectual Property is sufficient for the conduct of the Network Business as currently conducted.

(b) Section 4.11(b)(i) of the Disclosure Schedule sets forth an accurate and complete list of all registered Marks and applications for registration of Marks used in the Network Business and owned by the Company or one of its affiliates (collectively, the " Company Registered Marks "), and Section 4.11(b)(ii) of the Disclosure Schedule sets forth an accurate and complete list of all registered Copyrights and all pending applications for registration of Copyrights used in the Network Business and owned by the Company or one of its affiliates (collectively, the " Company Registered Copyrights " and, together with the Company Registered Marks, the " Company Registered IP "). The Company and its Subsidiaries own no Patents that are used in the Network Business. As to all Company Registered IP, the


 
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