Membership Interest Purchase Agreement

Execution Copy


EXHIBIT 10.1


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MEMBERSHIP INTEREST PURCHASE AGREEMENT


Dated as of February 23, 2001


Among


LIBERTY DIGITAL, INC.


LDIG GAMENET, INC.


LIBERTY MEDIA CORPORATION (Solely With Respect To Article II, Section 6.1 and Section 9.2(f) Hereof)


SONY PICTURES ENTERTAINMENT INC.


SONY PICTURES CABLE VENTURES I INC.


And


TGSC MANAGEMENT, INC.


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TABLE OF CONTENTS


Page ARTICLE I. DEFINITIONS AND CONSTRUCTION.................................................................... 1 ---------------------------------------
1.1 Certain Definitions.................................................................... 1
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1.2 Additional Definitions................................................................. 8
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1.3 Terms Generally........................................................................ 9
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ARTICLE II. THE PURCHASE................................................................................... 10 ------------------------
2.1 The Purchase........................................................................... 10
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2.2 Closing................................................................................ 11
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2.3 Allocation............................................................................. 13
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ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SPE, TGSC AND SPCV WITH RESPECT TO THE COMPANY.............. 14 ---------------------------------------------------------------------------------------------
3.1 Organization and Qualification......................................................... 14
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3.2 Subsidiaries........................................................................... 14
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3.3 Authorization and Validity of Agreement................................................ 15
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3.4 Capitalization......................................................................... 15
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3.5 Financial Statements; Additional Obligations........................................... 17
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3.6 Noncontravention....................................................................... 17
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3.7 Absence of Certain Changes or Events................................................... 18
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3.8 Legal Proceedings...................................................................... 18
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3.9 Compliance with Applicable Laws; Environmental......................................... 19
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3.10 Brokers................................................................................ 20
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3.11 Tax Matters............................................................................ 21
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3.12 Employee Matters....................................................................... 23
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3.13 Contracts; Debt Instruments............................................................ 26
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3.14 Title to Properties.................................................................... 28
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3.15 Patents, Trademarks & Copyrights and Similar Rights.................................... 28
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3.16 Dealings with Officers and Directors; Sony Services.................................... 30
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3.17 No Excise Tax Obligations.............................................................. 31
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3.18 Full Disclosure........................................................................ 31
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3.19 Cable Subscribers...................................................................... 31
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3.20 Company Territories.................................................................... 32
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3.21 Contribution of Indebtedness; Book Up of Assets........................................ 32
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3.22 Dissolution/Conversion of Subsidiaries................................................. 32
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SPE, TGSC AND SPCV........................................... 33 ----------------------------------------------------------------
4.1 Organization and Qualification......................................................... 33
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4.2 Authorization; Validity of Agreement; Sony Approval.................................... 33
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4.3 Conversion............................................................................. 33
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4.4 Noncontravention....................................................................... 34
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4.5 Legal Proceedings...................................................................... 35
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4.6 No Other Game Show Interests........................................................... 35
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i


4.7 Investment Purpose..................................................................... 35
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4.8 Brokers................................................................................ 36
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4.9 Ultimate Parent Entity................................................................. 37
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4.10 SPE Knowledge.......................................................................... 37
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ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PURCHASER SUB................................... 37 ------------------------------------------------------------------------
5.1 Organization and Qualification......................................................... 37
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5.2 Authorization and Validity of Agreement................................................ 38
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5.3 Capitalization......................................................................... 39
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5.4 Issuance of Shares..................................................................... 39
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5.5 Reports and Financial Statements....................................................... 40
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5.6 Absence of Certain Changes or Events................................................... 40
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5.7 Noncontravention....................................................................... 40
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5.8 Legal Proceedings...................................................................... 41
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5.9 Brokers................................................................................ 42
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5.10 Investment Purpose..................................................................... 42
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5.11 Full Disclosure........................................................................ 42
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5.12 Compliance with Applicable Laws........................................................ 43
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5.13 No Other Game Show Interests........................................................... 43
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ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF LMC AND PURCHASER SUB........................................ 43 -------------------------------------------------------------------


ARTICLE VII. FURTHER AGREEMENTS............................................................................ 45 -------------------------------
7.1 Conveyance Taxes....................................................................... 45
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7.2 Subsidiaries' Board of Directors....................................................... 45
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7.3 Account Restructuring.................................................................. 45
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7.4 Book Up of Assets; Tax Election........................................................ 46
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ARTICLE VIII. INTENTIONALLY OMITTED........................................................................ 46 -----------------------------------


ARTICLE IX. SURVIVAL AND INDEMNIFICATION................................................................... 46 ----------------------------------------
9.1 Survival and No Waiver................................................................. 46
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9.2 Indemnification........................................................................ 46
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9.3 Third Party Claims..................................................................... 48
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ARTICLE X. MISCELLANEOUS................................................................................... 49 ------------------------
10.1 Notices................................................................................ 49
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10.2 Entire Agreement....................................................................... 50
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10.3 Assignment; Binding Effect; Benefit.................................................... 51
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10.4 Amendment.............................................................................. 51
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10.5 Waiver of Compliance; Consents......................................................... 51
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10.6 Headings............................................................................... 51
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10.7 Counterparts; Execution by Facsimile Signature......................................... 51
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10.8 Applicable Law......................................................................... 51
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10.9 Enforcement............................................................................ 52
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10.10 Severability........................................................................... 52
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ii


10.11 Transfer of Shares..................................................................... 52
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10.12 Further Assurances..................................................................... 53
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10.13 Expenses............................................................................... 53
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10.14 Arbitration............................................................................ 53
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iii


EXHIBITS


Exhibit A Distribution Agreement Exhibit B Employee Leasing Agreement Exhibit C Note Exhibit D Restated Operating Agreement Exhibit E Programming Agreement Exhibit F Registration Rights Agreement Exhibit G Services Agreement Exhibit H Sublease(s) Exhibit I Parents Agreement Exhibit J Opinion of Counsel to SPE Exhibit K Opinion of Counsel to Purchaser Exhibit L Business Plan Exhibit M Opinion of Sherman and Howard, Counsel to LMC Exhibit N Opinion of Potter, Anderson & Corroon LLP, Delaware Counsel
to SPE, SPCV and TGSC Exhibit O Opinion of Leah Weil, Deputy General Counsel to SPE Exhibit P Opinion of Richards, Layton & Finger, Delaware Counsel to
LMC


SCHEDULES


Schedule 1.3 Knowledge of SPE Schedule 3.1(a) Filings Schedule 3.2(a) Company Subsidiaries Schedule 3.2(b) Equity Interests in Other Persons Schedule 3.2(c) Transferred Rights Schedule 3.4(c) Payments Schedule 3.5 Financial Statements Schedule 3.6(a) Noncontravention Schedule 3.6(b) Governmental Consents Schedule 3.7 Absence of Certain Changes or Events Schedule 3.8 Legal Proceedings Schedule 3.9(c) Environmental Documents Schedule 3.10 Brokers Schedule 3.11 Tax Matters Schedule 3.12(a) Company Plans Schedule 3.12(b) Multiemployer Plans Schedule 3.12(c) Voluntary Employee's Beneficiary Association Schedule 3.12(e) Labor Disturbances Schedule 3.12(h) Welfare Benefits Schedule 3.12(i) Plan Claims and Proceedings Schedule 3.12(j) Employment Agreements Schedule 3.13 Contracts; Debt Instruments Schedule 3.13(n) Notice of Termination Schedule 3.15(a) Patents, Trademarks, Copyrights and Similar Rights Schedule 3.15(b) Restrictions


iv


Schedule 3.15(c) Filing and Maintenance Schedule 3.15(d) Infringements Schedule 3.16 Dealings with Officers and Directors; Sony Services Schedule 3.19(a) Cable Subscribers Schedule 3.20 Foreign Distribution Schedule 4.3 Conversion Schedule 4.8 SPE Brokers Schedule 5.3 Purchaser Capitalization Schedule 5.7 Governmental Consents Schedule 5.9 Purchaser Brokers Schedule 5.13 Liberty Game Show Interests Schedule 7.3 Account Restructuring Schedule 9.2(e) Exceptions to Representation Contained in Section 3.15(d)


v


MEMBERSHIP INTEREST PURCHASE AGREEMENT


THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT (this "Agreement," which
--------- term shall include all Exhibits and Schedules hereto) is made as of February 23, 2001, by and among Liberty Digital, Inc., a Delaware corporation (the "Purchaser"), LDIG Gamenet, Inc., a Delaware corporation ("Purchaser Sub"), Sony --------- ------------- Pictures Entertainment Inc., a Delaware corporation ("SPE"), Sony Pictures Cable
--- Ventures I Inc., a Delaware corporation ("SPCV"), TGSC Management, Inc., a
---- California corporation ("TGSC") and, solely for purposes of Article II and
---- Sections 6.1 and 9.2(f) hereof, Liberty Media Corporation ("LMC").
---


WHEREAS, TGSC and SPCV are each indirect wholly-owned subsidiaries of SPE, and TGSC and SPCV are the sole members of Game Show Network, LLC, a Delaware limited liability company ("LLC");
---


WHEREAS, TGSC was the sole general partner of The Game Show Network, L.P., a Delaware limited partnership ("LP") and SPCV was the sole limited
-- partner of LP;


WHEREAS, prior to the date hereof, TGSC, SPCV and SPE caused all of LP's right, title and interest in and to the assets, businesses, liabilities and other rights of LP to be transferred to and acquired by the LLC, by, among other things, merging LP with and into the LLC; and


WHEREAS, the Purchaser and its Affiliates desire to acquire, and SPE desires to cause SPCV and TGSC to, and SPCV and TGSC desire to, sell a fifty percent (50%) interest in the LLC, upon the terms and conditions set forth herein.


NOW, THEREFORE, in consideration of the premises and of the mutual covenants, representations, warranties and agreements contained herein, the parties hereto agree as follows:


ARTICLE I.
DEFINITIONS AND CONSTRUCTION


1.1 Certain Definitions. As used in this Agreement, the following
------------------- capitalized terms have the corresponding meanings:


"Affiliate" means, with respect to any Person, any other Person that,
--------- directly or indirectly, through one or more intermediaries Controls, is Controlled by, or is under common Control with, such Person.


"Affiliation Agreement" means any contract, agreement or other
--------------------- arrangement (including, but not limited to, arrangements regarding the continuation of performance following the expiration of any agreement) for or relating to the distribution of GSN Programming by a Covered System, whether or not for a fee or other consideration.


"Agreement" has the meaning set forth in the preamble to this
--------- Agreement.


1


"AT&T" means AT&T Corp., a New York corporation.
----


"AT&T Group" means AT&T, its Affiliates and Subsidiaries, other than
---------- the Liberty Media Group.


"Business Day" means any day other than a Saturday, Sunday or a day on
------------ which banking institutions in either the City of New York or the City of Los Angeles are not required to be open.


"Cash Consideration" means $125,000,000 in cash.
------------------


"Closing" means the consummation of the Transaction.
-------


"Closing Price" means, of any security for any day, the last reported
------------- sale price of such security regular way or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices regular way, in either case on the composite tape, or if such security is not quoted on the composite tape, on the principal United States securities exchange registered under the Exchange Act on which such security is listed or admitted to trading, or if such security is not listed or admitted to trading on any such exchange, the last reported sale price (or the average of the quoted closing bid and asked prices if there were no reported sales) on The Nasdaq Stock Market or any comparable quotation system, or if such security is not quoted on The Nasdaq Stock Market or any comparable system, the average of the closing bid and asked prices as furnished by any member of the National Association of Securities Dealers, Inc. selected from time to time by the mutual agreement of SPE and Purchaser for that purpose or, in the absence of such quotations, such other method of determining market value as SPE and Purchaser shall mutually agree.


"Code" means the Internal Revenue Code of 1986, as amended.
----


"Commission" means the Securities and Exchange Commission.
----------


"Company" means prior to the Conversion, the LP, and following the
------- Conversion, the LLC.


"Company Balance Sheet Date" means September 30, 2000.
--------------------------


"Company Interests" means prior to the Conversion, the Partnership
----------------- Interests of the Company, and after the Conversion, the Membership Interests of the Company including, in each case, any Rights to acquire such interests.


"Company Material Adverse Effect" means any event, occurrence, fact,
------------------------------- condition, change, or effect that is materially adverse to the business, operations, results of operations, prospects, condition (financial or otherwise), assets (including intangible assets) or liabilities of the Company and the Company Subsidiaries, taken as a whole.


"Contract" means and includes any note, bond, indenture, mortgage,
-------- deed of trust, contract, instrument, or other agreement.


2


"Control" means the possession, direct or indirect, of the affirmative
------- power to direct or cause the direction of the management and policies of a Person (whether through ownership of securities, partnership interests or other ownership interests, by contract, by membership or involvement in the board of directors, management committee or management structure of such Person, or otherwise).


"Controlled Affiliate" of any Person means any other Person which is
-------------------- Controlled by such first Person.


"Covered Systems" means any cable television system, satellite
--------------- television system, or other distribution system capable of distributing linear video programming (which may include data delivered in connection with the provision of interactive functionality).


"Delaware LLC Act" means the Delaware Limited Liability Company Act,
---------------- as amended from time to time.


"Delaware LP Act" means the Delaware Revised Uniform Limited
--------------- Partnership Act, as amended from time to time.


"Distribution Agreement" means the distribution agreement between SPE
---------------------- and the LLC substantially in the form of Exhibit A hereto.


"Employee Leasing Agreement" means the employee leasing agreement
-------------------------- between SPE and the LLC substantially in the form of Exhibit B hereto.


"Equity Interest" means any capital stock, partnership interest,
--------------- membership interest, limited liability company interest or other equity interest in any Person.


"Exchange Act" means the Securities Exchange Act of 1934, and the
------------ rules and regulations thereunder, in each case as amended from time to time.


"Existing Operating Agreement" means the Operating Agreement of the
---------------------------- LLC, dated as of December 5, 2000, between SPCV and TGSC.


"GAAP" means generally accepted accounting principles in the United
---- States as in effect from time to time.


"GSN Programming" means the linear video television programming
--------------- (interactive or non-interactive) created, acquired, licensed, produced or distributed by the Company or any Company Subsidiary for distribution over Covered Systems.


"Governmental Entity" means and includes any court, arbitrator,
------------------- administrative or other governmental department, agency, commission, authority or instrumentality, domestic (including federal, state or local) or foreign.


"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
------- 1976, as amended.


3


"Indebtedness" means with respect to any Person, without duplication,
------------ (i) indebtedness for borrowed money, (ii) obligations evidenced by bonds, debentures, notes or other similar instruments, (iii) obligations or liabilities of such Person under or in connection with letters of credit or bankers' acceptances or similar items, (iv) obligations to pay the deferred purchase price of property or services other than current trade payables incurred in the ordinary course of business, (v) obligations as lessee under leases which shall have been or should be, in accordance with GAAP, recorded as capital leases, and (vi) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kind referred to in clauses (i) through (v) above.


"Intellectual Property," is limited to the United States and Canada
--------------------- and shall mean: (a) inventions (whether patentable or unpatentable and whether or not reduced to practice), including but not limited to and only to the extent protectable under the criteria of 35 U.S.C. (S) 101 (or the Canadian equivalent) but without necessarily satisfying 35 U.S.C. (S)(S) 102 and 103 (or the Canadian equivalent), ideas, research and techniques, technical designs, discoveries and specifications, improvements, modifications, adaptations, and derivations thereto, and patents, patent applications, inventor's certificates, and patent disclosures, together with reissuances, continuations, continuations-in-part, revisions, extensions and reexaminations thereof; (b) trademarks, service marks, logos, trade dress, brand names and trade names, together with the goodwill associated therewith, assumed names, corporate names an ...