EXHIBIT 10.3

 

SERVICES AGREEMENT

 

This Services Agreement (this “AGREEMENT”) is made and entered into effective as
of the 21st day of July, 2005 (the “EFFECTIVE DATE”), by and between Discovery
Holding Company, a Delaware corporation (the “COMPANY”), and Liberty Media
Corporation, a Delaware corporation (“PROVIDER”). For purposes of this
Agreement, terms used in capitalized form will have the meanings set forth in
Appendix A.

 

RECITALS

 

A.    Prior to the Effective Date, the Company was a wholly owned subsidiary of
Provider. On the Effective Date, the Company became an independent, publicly
traded company through the distribution of the Company’s stock by Provider to
its stockholders on a pro rata basis (the “SPIN OFF”). Through its subsidiaries
and affiliates, the Company is engaged primarily in (1) the production,
acquisition and distribution of entertainment, educational and information
programming and software, (2) the retail sale and licensing of branded and other
specialty products and (3) the provision of creative, media management and
network services to the media and entertainment industries (the “COMPANY
BUSINESS”).

 

B.    The Company and Provider believe that it is in their mutual interests for
the Company to obtain services from Provider in connection with the Company
Business after the Spin Off and for the Company to compensate Provider for the
performance of such services.

 

C.    The parties desire to set forth in this Agreement the services to be
performed by Provider to the Company and the basis upon which Provider will be
compensated by the Company.

 

AGREEMENT

 

For good and valuable consideration, the receipt and sufficiency of which are
acknowledged, the parties, intending to be bound legally, agree as follows:

 

SECTION 1.  SERVICES TO BE PERFORMED

 

1.1   ENGAGEMENT. The Company engages Provider to provide to the Company the
services set forth in Section 1.2 in connection with the Company Business, and
Provider accepts such engagement, subject to and upon the terms and conditions
of this Agreement.

 

1.2   SERVICES PROVIDED BY PROVIDER. Provider will provide the following
services with respect to the Company Business, if and to the extent requested by
the Company (upon reasonable notice) during the Initial Term and any Renewal
Term of this Agreement:

 

(a)   sharing office space at 12300 Liberty Boulevard, Englewood, Colorado,
including furniture, furnishings, certain equipment and, if applicable, related
software, and utilities and certain services related to

 

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the foregoing, to the extent necessary or appropriate in order to facilitate the
provision of the Services hereunder; and

 

(b)   providing personnel to perform services typically performed by Provider’s
accounting, treasury, technical, legal, tax, and investor relations departments,
miscellaneous office and administrative services, including management
information systems, computer, network and telecommunications services,
insurance administration and risk management, and, as to any of the Company’s
officers that are employees of Provider, the services of such officers
(collectively, the “SERVICES”).

 

1.3   SERVICES NOT TO INTERFERE WITH PROVIDER’S BUSINESS. In providing the
Services set forth in Section 1.2, Provider will not be required to take any
action that would interfere with the orderly operations of Provider’s business
activities.

 

1.4   BOOKS AND RECORDS. Provider will maintain reasonably complete and detailed
books and records in accordance with Provider’s standard business practices with
respect to its provision of the Services to the Company pursuant to this
Agreement, including records supporting the allocation of costs and expenses to
the Company pursuant to Section 2. Provider will give the Company and its duly
authorized representatives, agents, and attorneys reasonable access to all such
books and records during Provider’s regular business hours after reasonable
advance notice.

 

1.5   SERVICES TO AFFILIATES. Provider acknowledges that the Company may request
that certain Services be provided by Provider to Affiliates of the Company,
including for this purpose Discovery Communications, Inc. (“DCI”). Provider
agrees to use commercially reasonable efforts to provide such Services to
Affiliates of the Company; provided, however, that Provider will have no
obligation to provide any Services to an Affiliate of the Company if Provider is
not permitted to do so under any agreement with a third-party. If the Company
notifies Provider that certain Services are being provided for any Affiliate of
the Company, including DCI, Provider will identify the costs and expenses
allocated to the Company pursuant to Section 2 that are properly attributable to
Services performed by Provider for each Affiliate of the Company separately.
Except to the extent required to separately identify costs and expenses properly
attributable to Services performed by Provider for any Affiliate of the Company,
all Services provided for any Affiliate of the Company will be deemed to be
Services performed for the Company for all purposes of this Agreement.

 

1.6   PARTICIPATION IN PROVIDER’S MASTER VENDOR PROGRAMS. Provider will use
commercially reasonable efforts to permit the Company and its Affiliates (which
for this purpose does not include DCI) to participate in any master agreements
with third-party vendors to Provider, if requested by the Company, including
equipment purchasing and software licensing programs. Provider and the Company
will negotiate in good faith to enter into any sublicenses for software,
containing customary terms and conditions, if appropriate to implement the
provisions of this Section 1.6.

 

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SECTION 2.  COMPENSATION FOR PROVIDING SERVICES

 

2.1   ALLOCATED PERSONNEL EXPENSES.

 

(a)   The Company will pay Provider for the Services based on an allocated
portion of the personnel costs and related expenses that are incurred by
Provider in connection with the Services performed by it under this Agreement
(collectively, the “ALLOCATED EMPLOYEE EXPENSES”). The Allocated Employee
Expenses will be set forth in, or determined from time to time in the manner set
forth in, Schedule 2.1 attached hereto, as such Schedule 2.1 may be periodically
amended and revised by the parties.

 

(b)   ADJUSTMENT TO ALLOCATED EMPLOYEE EXPENSES. The Allocated Employee Expenses
will be estimated at the beginning of each calendar year based on the
anticipated Services to be provided to the Company during the upcoming calendar
year. Provider and the Company will review and evaluate the Allocated Employee
Expenses for reasonableness semiannually and will negotiate in good faith to
reach agreement on any appropriate adjustment to the Allocated Employee Expenses
based on such review and evaluation, including updating the aggregate salaries
and benefits of Provider Employees (and any other costs or expenses included in
Allocated Employee Expenses), revising the allocated percentages of time spent
providing Services to the Company and agreeing on the appropriate effective date
(which may be retroactive) of any such adjustment to the Allocated Employee
Expenses. The initial review of and adjustment to the Allocated Employee
Expenses will be effective as of January 1, 2006.

 

2.2   COST REIMBURSEMENT. In addition to the Allocated Employee Expenses payable
pursuant to Section 2.1, the Company also will reimburse Provider for all direct
out-of-pocket costs (with no markup) incurred by Provider, unless such costs are
paid directly by the Company, for postage and out-of-town courier service
charges, for any applicable software license fees attributable to desktop or
laptop computers utilized by employees of the Company, and for expenses incurred
by Provider Employees related to Services performed on behalf of the Company,
including travel and meals and entertainment related to such Services, and for
any other miscellaneous expenses that may be incurred by Provider on behalf of
the Company.

 

2.3   PAYMENT PROCEDURES.

 

(a)   The Company will pay Provider, by wire or intrabank transfer of funds or
in such other manner specified by Provider to the Company, in arrears on or
before the last day of each calendar month beginning August 2005, the Allocated
Employee Expenses then in effect, in equal monthly installments if the amount of
any such payment is determined on a basis other than a monthly amount.

 

(b)   Any reimbursement to be made by the Company to Provider pursuant to
Section 2.2 will be paid by the Company to Provider within 15 days after receipt
by the Company of any invoice therefor, by wire or intrabank transfer of funds
or in such other manner as specified by Provider to the Company. Provider will
invoice the Company monthly for reimbursable expenses incurred by Provider on
behalf of the Company during the preceding calendar month; PROVIDED, HOWEVER,
that Provider may separately invoice the Company at any time for any single
reimbursable expense incurred by Provider on behalf of the Company in an amount
equal to or greater than $5,000. Any invoice or statement pursuant to this
Section 2.3(b) will be accompanied by supporting documentation in reasonable
detail with respect to the actual costs or expenses incurred by Provider for
which Provider is entitled to reimbursement.

 

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(c)   Any payments not made when due under this Section 2.3 will bear interest
at the rate of 1.5% per month on the outstanding amount from and including the
due date to but excluding the date paid.

 

2.4   ALLOCATION BY AGREEMENT. Notwithstanding the preceding provisions of
Section 2, Provider and the Company may agree that the Company’s payment to
Provider of a fixed amount will be full reimbursement as to any item for which
Provider may be entitled to reimbursement under this Agreement. As to any item
that is the subject of such agreement, the amount of the reimbursement fixed by
such agreement will control, it being agreed, however, that as to any item that
is not the subject of an agreement, the preceding provisions of Section 2 will
apply.

 

SECTION 3.  TERM

 

3.1   TERM GENERALLY. The term of this Agreement will commence on the Effective
Date and will continue until December 31, 2005 (the “INITIAL TERM”) and shall be
renewed automatically for successive one-year periods thereafter (each a
“RENEWAL TERM”), unless earlier terminated in accordance with Section 3.3.

 

3.2   CERTAIN SERVICES DISCONTINUED. At any time during the Initial Term or any
Renewal Term, upon at least 180 days’ prior notice by Provider to the Company or
30 days’ prior notice by the Company to Provider, either Provider or the Company
may elect to discontinue providing to the Company or obtaining from Provider
some or all of the Services described in Section 1.2. In such event, Provider’s
obligation to provide any Services that have been discontinued pursuant to this
Section 3.2, and the Company’s obligation to compensate Provider for any such
Services, will cease as of the end of such 180-day period or 30-day period, as
the case may be, or such later date as may be specified in the notice, and this
Agreement will remain in effect with respect to any Services that have not been
so discontinued. Each party will remain liable to the other for any required
payment or performance accrued prior to the effective date of discontinuance of
any Service or termination of this Agreement in its entirety.

 

3.3   TERMINATION. This Agreement will be terminated in the following events:

 

(a)   at any time upon at least 30 days’ prior notice by the Company to
Provider;

 

(b)   at any time upon at least 180 days’ prior notice by Provider to the
Company;

 

(c)   immediately upon notice (or at any time specified in such notice) by
Provider to the Company if a Change in Control or Bankruptcy Event occurs with
respect to the Company; or

 

(d)   immediately upon notice (or at any time specified in such notice) by the
Company to Provider if a Change in Control or Bankruptcy Event occurs with
respect to Provider.

 

For purposes of this Section 3.3, a “Change in Control” will be deemed to have
occurred, with respect to the Company or Provider, as the case

 

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may be, if a merger, consolidation, binding share exchange, acquisition, or
similar transaction (each, a “TRANSACTION”), or series of related Transactions,
involving the Company or Provider (as applicable) occurs as a result of which
the voting power of all voting securities of the Company or Provider (as
applicable) outstanding immediately prior thereto represent (either by remaining
outstanding or being converted into voting securities of the surviving entity)
less than 50% of the voting power of the Company or Provider (as applicable) or
the surviving entity outstanding immediately after such Transaction (or if the
Company or Provider (as applicable) or the surviving entity after giving effect
to such Transaction is a subsidiary of the issuer of securities in such
Transaction, then the voting power of all voting securities of the Company or
Provider (as applicable) outstanding immediately prior to such Transaction
represent (by being converted into voting securities of such issuer) less than
50% of the voting power of the issuer outstanding immediately after such
Transaction.

 

For purposes of this Section 3.3, a “Bankruptcy Event” will be deemed to have
occurred with respect to the Company or Provider, as the case may be, upon the
Company’s or Provider’s (as applicable) insolvency, general assignment for the
benefit of creditors, the voluntary commencement by the Company or Provider (as
applicable) of any case, proceeding, or other action seeking reorganization,
arrangement, adjustment, liquidation, dissolution, or consolidation of the
Company’s or Provider’s (as applicable) debts under any law relating to
bankruptcy, insolvency, or reorganization, or relief of debtors, or seeking
appointment of a receiver, trustee, custodian, or other similar official for the
Company or Provider (as applicable) or for all or any substantial part of the
Company’s or Provider’s (as applicable) assets (each, a “BANKRUPTCY
PROCEEDING”), or the involuntary filing against the Company or Provider (as
applicable) of any Bankruptcy Proceeding that is not stayed within 60 days after
such filing.

 

Upon any termination of this Agreement in accordance with this Section 3.3, the
Initial Term or Renewal Term then in effect will also terminate.

 

SECTION 4.  SERVICES AND EMPLOYEES

 

4.1   PERSONNEL TO PROVIDE SERVICES. Provider will make available to the Company
on a non-exclusive basis, the appropriate personnel to perform the duties
required in connection with the Services, as may be reasonably requested by the
Company to be performed by Provider and as necessary and appropriate for the
proper and efficient administration and operation of the Company Business, to
the same extent and in the same manner as performed immediately prior to the
Effective Date. Provider will be responsible for hiring, supervising,
instructing, discharging, and otherwise managing such employees, and
administering any employee benefit plans applicable to such employees. The
Company acknowledges that the employees of Provider performing the Services for
the Company (“PROVIDER EMPLOYEES”) also will be performing services for Provider
and may be performing services for certain Affiliates of Provider. The Company
also acknowledges that Provider may elect, in its discretion, to utilize
independent contractors rather than employees of Provider to perform the
Services from time to time, and such independent contractors will be included
within the definition of Provider Employees under this Agreement, where
applicable.

 

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4.2   PROVIDER AS EMPLOYER. Notwithstanding the Services provided by Provider
Employees to the Company, the parties acknowledge that Provider is and will
remain the employer of all Provider Employees and will be responsible for the
employment and training of all Provider Employees and for the payment of
salaries, wages, benefits (including health insurance, retirement, and other
similar benefits, if any) and other compensation applicable to all Provider
Employees, subject to payment by the Company of the Allocated Employee Expenses
in accordance with Section 2.1 (and except as expressly provided in
Section 4.3). All Provider Employees will be subject to the personnel policies
of Provider and will be entitled to participate in Provider’s employee benefit
plans to the same extent as similarly situated employees of Provider performing
services in connection with Provider’s business. Provider will be responsible
for the payment of all federal, state, and local withholding taxes on the
compensation of all Provider Employees and other such employment related taxes
as are required by law. The Company will cooperate with Provider to facilitate
Provider’s compliance with applicable federal, state, and local laws, rules,
regulations, and ordinances applicable to the employment of all Provider
Employees by Provider and their provision of Services to the Company under this
Agreement.

 

4.3   ADDITIONAL EMPLOYEE PROVISIONS. Provider will have the right to terminate
the employment of any Provider Employee at any time. A portion of any severance
payments payable to any Provider Employee spending 50% or more of such person’s
time over the Look-Back Period (as defined below) in connection with providing
Services to the Company at the Company’s request who separates from employment
with Provider during the Initial Term or any Renewal Term will be allocated to
the Company based on the percentage determined by dividing the total number of
months that such person was a Provider Employee providing Services to the
Company on a 50% or greater basis by the total number of months that such person
was employed by Provider or its predecessors, in each case to the extent taken
into account for purposes of determining any severance payments payable to such
person, or such other basis upon which the amount of the severance payments
payable to such person may be determined, multiplied by the percentage of such
person’s time devoted to providing Services to the Company, in each case with
the percentage of such person’s time devoted to providing Services to the
Company determined for the one-year period (or such applicable shorter period of
time if such Provider Employee was a Provider Employee for less than one year)
immediately preceding the date of separation of employment (the “Look-Back
Period”). The Company will not solicit any Provider Employee to become an
employee of the Company without the prior consent of Provider, unless and until
Provider terminates the employment of such Provider Employee.

 

SECTION 5.  REPRESENTATIONS AND WARRANTIES

 

5.1   REPRESENTATIONS AND WARRANTIES OF PROVIDER. Provider represents and
warrants to the Company as follows:

 

(a)   Provider is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware.

 

(b)   Provider has the power and authority to enter into this Agreement and to
perform its obligations under this Agreement.

 

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(c)   Provider is not subject to any contractual or other legal obligation that
materially interferes with its full, prompt, and complete performance under this
Agreement.

 

(d)   The individual executing this Agreement on behalf of Provider has the
authority to do so.

 

5.2   REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to Provider as follows:

 

(a)   The Company is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware.

 

(b)   The Company has the power and authority to enter into this Agreement and
to perform its obligations under this Agreement.

 

(c)   The Company is not subject to any contractual or other legal obligation
that materially interferes with its full, prompt, and complete performance under
this Agreement.

 

(d)   The individual executing this Agreement on behalf of the Company has the
authority to do so.

 

SECTION 6.  INDEMNIFICATION

 

6.1   INDEMNIFICATION BY PROVIDER. Provider will indemnify, defend, and hold
harmless the Company, its Affiliates, and each of their respective officers,
directors, employees and agents, and the successors and assigns of any of them
(collectively, the “COMPANY INDEMNITEES”), from and against any and all claims,
judgments, liabilities, losses, costs, damages, or expenses, including
reasonable counsel fees, disbursements, and court costs (“LOSSES”), that any
Company Indemnitee may suffer arising from or out of, or relating to, (a) any
breach by Provider of its obligations under this Agreement or (b) the
negligence, willful misconduct, fraud, or bad faith of Provider in performing
its obligations under this Agreement.

 

6.2   INDEMNIFICATION BY THE COMPANY. The Company will indemnify, defend, and
hold harmless Provider, its Affiliates, and each of their respective officers,
directors, employees and agents, and the successors and assigns of any of them
(collectively, the “PROVIDER INDEMNITEES”), from and against any and all Losses
that any Provider Indemnitee may suffer arising from or out of, or relating to
(a) any breach by the Company of its obligations under this Agreement or (b) any
acts or omissions of Provider in providing the employees and Services to be
provided by Provider pursuant to this Agreement (except to the extent such
Losses (i) arise from or relate to any breach by Provider of its obligations
under this Agreement, (ii) are attributable to the negligence, willful
misconduct, fraud, or bad faith of Provider or such other Provider Indemnitee
seeking indemnification under this Section 6.2, (iii) are covered by insurance
maintained by Provider or such other Provider Indemnitee, or (iv) are payable by
Provider pursuant to Section 7.12 or Section 7.15).

 

6.3   INDEMNIFICATION PROCEDURES.

 

(a)   In connection with any indemnification provided for in this Section 6, the
party seeking indemnification (the “INDEMNITEE”) will give the

 

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party from which indemnification is sought (the “INDEMNITOR”) prompt notice
whenever it comes to the Indemnitee’s attention that the Indemnitee has suffered
or incurred, or may suffer or incur, any Losses for which it is entitled to
indemnification under this Section 6, and, when known, the facts constituting
the basis for such claim (in reasonable detail). Failure by the Indemnitee to so
notify the Indemnitor will not relieve the Indemnitor of any liability under
this Agreement except to the extent that such failure prejudices the Indemnitor
in any material respect.

 

(b)   After receipt of a notice pursuant to Section 6.3(a), the Indemnitor will
be entitled, if it so elects, to take control of the defense and investigation
with respect to such claim and to employ and engage attorneys reasonably
satisfactory to the Indemnitee to handle and defend such claim, at the
Indemnitor’s cost, risk, and expense, upon written notice to the Indemnitee of
such election, which notice acknowledges the Indemnitor’s obligation to provide
indemnification under this Agreement. The Indemnitor will not settle any
third-party claim that is the subject of indemnification without the written
consent of the Indemnitee, which consent will not be unreasonably withheld,
delayed or conditioned; PROVIDED, HOWEVER, that, after reasonable notice, the
Indemnitor may settle a claim without the Indemnitee’s consent if such
settlement (i) makes no admission or acknowledgment of liability or culpability
with respect to the Indemnitee, (ii) includes a complete release of the
Indemnitee and its Affiliates and their respective officers, directors,
employees and agents, and (iii) does not require the Indemnitee to make any
payment not covered by indemnification by the Indemnitor hereunder or to forego
or take any action. The Indemnitee will cooperate in all reasonable respects
with the Indemnitor and its attorneys in the investigation, trial, and defense
of any lawsuit or action with respect to such claim and any appeal arising
therefrom (including the filing in the Indemnitee’s name of appropriate cross
claims and counterclaims). The Indemnitee may, at its own cost, participate in
any investigation, trial, and defense of such lawsuit or action controlled by
the Indemnitor and any appeal arising therefrom. If there are one or more legal
defenses available to the Indemnitee that conflict with those available to, or
that are not available to, the Indemnitor, the Indemnitee will have the right,
at the expense of the Indemnitor, to engage separate counsel reasonably
acceptable to the Indemnitor and to participate in the defense of the lawsuit or
action.

 

(c)   If, after receipt of a notice pursuant to Section 6.3(a), the Indemnitor
does not undertake to defend any such claim, the Indemnitee may, but will have
no obligation to, contest any lawsuit or action with respect to such claim, and
the Indemnitor will be bound by the result obtained with respect thereto by the
Indemnitee. The Indemnitee may not settle any lawsuit or action with respect to
which the Indemnitee is entitled to indemnification hereunder without the
consent of the Indemnitor, which consent will not be unreasonably withheld,
delayed, or conditioned.

 

(d)   At any time after the commencement of defense of any lawsuit or action,
the Indemnitor may request the Indemnitee to agree in writing to the abandonment
of such contest or to the payment or compromise by the Indemnitor of such claim,
whereupon such action will be taken unless the Indemnitee determines that the
contest should be continued and so notifies the Indemnitor in writing within 15
days of such request from the Indemnitor. Any request from the Indemnitor that
any contest be abandoned will specify the amount that the other party or parties
to the contested claim have agreed to accept in payment or compromise of the
claim. If the Indemnitee determines

 

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that the contest should be continued, the Indemnitor will be liable under this
Agreement only to the extent of the lesser of (i) the amount that the other
party or parties to the contested claim had agreed to accept in payment or
compromise as of the time the Indemnitor made its request therefor to the
Indemnitee, as specified in the Indemnitor’s request, or (ii) the amount for
which the Indemnitor may be liable with respect to such claim by reason of the
provisions of this Agreement.

 

6.4   LIMITATION ON LIABILITY. In no event will any Indemnitor be liable to any
Indemnitee for any indirect, special, incidental, or consequential damages with
respect to any matter relating to this Agreement.

 

6.5   SURVIVAL. The terms and conditions of this Section 6 will survive the
expiration or termination of this Agreement, regardless of the reason for such
expiration or termination.

 

6.6   NO DUPLICATION WITH TAX SHARING AGREEMENT. For the avoidance of doubt, as
used in this Section 6, the term “Losses” does not include any Losses that would
properly be the subject of indemnification under, or that are otherwise
allocated under, the Tax Sharing Agreement, dated July 20, 2005, between the
Company and Provider.

 

SECTION 7.  MISCELLANEOUS

 

7.1   ENTIRE AGREEMENT; SEVERABILITY. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersedes all prior written and oral and all contemporaneous oral
agreements and understandings with respect to the subject matter of this
Agreement. Each provision of this Agreement will be considered severable. If for
any reason any provision of this Agreement is determined to be invalid or
unenforceable, such invalidity or unenforceability will not impair the operation
of or affect the enforceability of the other provisions of this Agreement, and
the remainder of this Agreement will continue in full force and effect.

 

7.2   NOTICES. All notices, consents, approvals, or other communications under
this Agreement will be made in writing and will be deemed to have been duly
given when delivered in person, by telecopy, or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties as
follows:

 

 

If to Provider:

 

Liberty Media Corporation

 

 

12300 Liberty Boulevard

 

 

Englewood, CO 80112

 

 

Attention: Charles Y. Tanabe, Esq.

 

 

Telecopy: XXX-XXX-XXXX

 

 

 

 

If to the Company:

 

Discovery Holding Company

 

 

12300 Liberty Boulevard

 

 

Englewood, CO 80112

 

 

Attention: Charles Y. Tanabe, Esq.

 

 

Telecopy: XXX-XXX-XXXX

 

or to such other address as the party to whom notice is given may have
previously furnished to the other party in writing in the manner set forth
above. Any notice or communication delivered in person will be deemed effective
on delivery. Any notice or communication sent by telecopy will be

 

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deemed effective when receipt is confirmed. Any notice or communication sent by
registered or certified mail, return receipt requested, will be deemed effective
when received, as evidenced by the return receipt.

 

7.3   GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO REGARDLESS OF THE LAWS THAT
MIGHT OTHERWISE GOVERN UNDER PRINCIPLES OF CONFLICTS OF LAWS APPLICABLE THERETO.

 

7.4   RULES OF CONSTRUCTION. The descriptive headings in this Agreement are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement. Words used in this
Agreement, regardless of the gender and number specifically used, will be deemed
and construed to include any other gender, masculine, feminine, or neuter, and
any other number, singular or plural, as the context requires. As used in this
Agreement, the word “including” or any variation thereof is not limiting, and
the word “or” is not exclusive. The word day means a calendar day. If the last
day for giving any notice or taking any other action is a Saturday, Sunday, or a
day on which banks in Denver, Colorado are closed, the time for giving such
notice or taking such action will be extended to the next day that is not such a
day.

 

7.5   PARTIES IN INTEREST. This Agreement will be binding on and inure solely to
the benefit of each party to this Agreement, and its successors and permitted
assigns, and nothing in this Agreement, express or implied, is intended to
confer upon any other Person any rights or remedies of any nature whatsoever
under or by reason of this Agreement.

 

7.6   COUNTERPARTS. This Agreement may be executed in counterparts, each of
which will be deemed to be an original, but all of which will constitute one and
the same agreement.

 

7.7   PAYMENT OF EXPENSES. Except as otherwise expressly provided in this
Agreement, each of the parties to this Agreement will bear its own expenses,
including the fees of any attorneys and accountants engaged by such party, in
connection with this Agreement.

 

7.8   NO PERSONAL LIABILITY. This Agreement will not create or be deemed to
create or permit any personal liability or obligation on the part of any direct
or indirect member, manager, or shareholder of either party to this Agreement or
any officer, director, employee, agent, representative, or investor of either
party, or of any member, manager, or shareholder of either party to this
Agreement.

 

7.9   BINDING EFFECT; ASSIGNMENT. This Agreement will inure to the benefit of
and be binding on the parties to this Agreement and their respective legal
representatives, successors and permitted assigns. This Agreement may not be
assigned by either party to this Agreement, except that Provider may assign its
rights and delegate its obligations under this Agreement to any Person that
acquires substantially all the assets of Provider (by merger, operation of law,
or otherwise) or to any Affiliate of Provider.

 

7.10  AMENDMENT. This Agreement may not be amended except by an instrument in
writing signed on behalf of both parties.

 

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7.11  EXTENSION; WAIVER. Either party to this Agreement may (a) extend the time
for the performance of any of the obligations or other acts of the other party
to this Agreement, or (b) waive compliance by the other party with any of the
agreements or conditions contained herein or any breach thereof. Any agreement
on the part of either party to any such extension or waiver will be valid only
if set forth in an instrument in writing signed on behalf of such party. No
consent or waiver, express or implied, by a party of any breach or default by
the other party in the performance of its obligations under this Agreement will
be deemed to be a consent to or waiver of any further or other breach or default
by such other party. Failure on the part of a party to complain of an act, or
failure to act, of the other party or to declare the other party to be in
default, irrespective of how long such failure continues, will not constitute a
waiver by such party of its rights under this Agreement.

 

7.12  LEGAL FEES; COSTS. If either party to this Agreement institutes any action
or proceeding, whether before a court or arbitrator, to enforce any provision of
this Agreement, the prevailing party will be entitled to receive from the other
party reasonable attorneys’ fees and costs incurred in such action or
proceeding, whether or not such action or proceeding is prosecuted to judgment,
except as otherwise provided in Section 7.15.

 

7.13  FORCE MAJEURE. Neither party will be liable to the other party with
respect to any nonperformance or delay in performance of its obligations under
this Agreement to the extent such failure or delay is due to any action or
claims by any third party, labor dispute, labor strike, weather conditions or
any cause beyond a party’s reasonable control. Each party agrees that it will
use all commercially reasonable efforts to continue to perform its obligations
under this Agreement, to resume performance of its obligations under this
Agreement, and to minimize any delay in performance of its obligations under
this Agreement notwithstanding the occurrence of any such event beyond such
party’s reasonable control.

 

7.14  SPECIFIC PERFORMANCE. If either party threatens to take any action in
violation of the terms of this Agreement, the other party may apply to any court
of competent jurisdiction for an injunctive order prohibiting such proposed
action. Either party may institute and maintain any action or proceeding against
the other party to compel the specific performance of this Agreement. The party
against which such action or proceeding is brought hereby waives the claim or
defense that an adequate remedy at law exists, and such party will not urge in
any such action or proceeding the claim or defense that such remedy at law
exists.

 

7.15  ARBITRATION. Except as provided in Section 7.14, all disputes arising
under this Agreement that are not settled by the parties will be submitted to
binding arbitration under the then existing Commercial Arbitration Rules of the
American Arbitration Association. Arbitration proceedings will be held in
Denver, Colorado, or such other location agreed to by the parties. The parties
to the arbitration may agree on an arbitrator; otherwise, there will be a panel
of three arbitrators, one named in writing by each party within 20 days after
any party serves a notice of arbitration and the third arbitrator named by the
two arbitrators named by the parties. No person financially interested in this
Agreement or any party may serve as an arbitrator. The costs of the arbitration
and the fees of the arbitrator or arbitrators will be borne by the
non-prevailing party, unless the arbitrator provides otherwise in its decision.
The decision of the arbitrator or

 

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arbitrators will be final and conclusive and binding on all the parties, and
judgment thereon may be entered in any Colorado court of competent jurisdiction.

 

7.16  FURTHER ACTIONS. The parties will execute and deliver all documents,
provide all information, and take or forbear from all actions that may be
necessary or appropriate to achieve the purposes of this Agreement.

 

7.17  CONFIDENTIALITY.

 

(a)   DEFINITION. “CONFIDENTIAL INFORMATION” means any information marked,
noticed, or treated as confidential by a party which such party holds in
confidence, including all trade secret, technical, business, or other
information, including customer or client information, however communicated or
disclosed, relating to past, present and future research, development and
business activities.

 

(b)   OBLIGATIONS. Except with the prior consent of the disclosing party, each
party will:

 

(i)   limit access to the Confidential Information of the other party disclosed
to such party hereunder to its employees, agents, representatives, and
consultants who have a need-to-know;

 

(ii)  advise its employees, agents, representatives, and consultants having
access to such Confidential Information of the proprietary nature thereof and of
the obligations set forth in this Agreement; and

 

(iii) safeguard such Confidential Information by using a reasonable degree of
care to prevent disclosure of the Confidential Information to third parties, but
not less than that degree of care used by that party in safeguarding its own
similar information or material.

 

(c)   EXCEPTIONS TO CONFIDENTIALITY. A party’s obligations respecting
confidentiality under Section 7.17 will not apply to any of the Confidential
Information of the other party that a party can demonstrate: (i) was, at the
time of disclosure to it, in the public domain; (ii) after disclosure to it, is
published or otherwise becomes part of the public domain through no fault of the
recipient; (iii) was in the possession of the recipient at the time of
disclosure to it without being subject to any obligation of confidentiality;
(iv) was received after disclosure to it from a third party who, to its
knowledge, had a lawful right to disclose such information to it; (v) was
independently developed by the recipient without reference to the Confidential
Information; (vi) was required to be disclosed to any regulatory body having
jurisdiction over a party or any of their respective clients; or (vii) was
required to be disclosed by reason of legal, accounting, or regulatory
requirements beyond the reasonable control of the recipient. In the case of any
disclosure pursuant to clauses (vi) or (vii) of this paragraph (c), to the
extent practical, the recipient will give prior notice to the disclosing party
of the required disclosure and will use commercially reasonable efforts to
obtain a protective order covering such disclosure.

 

(d)   SURVIVAL. The provisions of this Section 7.17 will survive the expiration
or termination of this Agreement, regardless of the reason for such expiration
or termination.

 

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This Agreement is signed by the parties as of the Effective Date.

 

 

 

COMPANY:

 

 

 

DISCOVERY HOLDING COMPANY, A

 

DELAWARE CORPORATION

 

 

 

By:

/s/

 

Name:

 

Title:

 

 

 

 

 

PROVIDER:

 

 

 

LIBERTY MEDIA CORPORATION, A

 

DELAWARE CORPORATION

 

 

 

 

 

By:

/s/

 

Name:

 

Title:

 

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APPENDIX A

 

DEFINITIONS

 

A.1   DEFINED TERMS. The following terms will have the following meanings for
all purposes of this Agreement:

 

“AFFILIATE” means, with respect to any Person, any other Person controlling,
controlled by, or under common control with such Person, with “control” for such
purpose meaning the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities or voting interests, by contract, or
otherwise. In addition, DCI will be considered an Affiliate of the Company for
purposes of Section 1.5 only. For the avoidance of doubt, after the Spin Off,
the Company and its subsidiaries will not be deemed to be Affiliates of LMC, and
LMC and its subsidiaries will not be deemed to be Affiliates of the Company, for
any purposes of this Agreement.

 

“PERSON” means any natural person, corporation, limited liability company,
partnership, trust, unincorporated organization, association, governmental
authority, or other entity.

 

A.2   OTHER DEFINITIONS. The following terms will have the meanings for all
purposes of this Agreement set forth in the Section reference provided next to
such term:

 

DEFINITION

 

SECTION REFERENCE

 

 

 

Agreement

 

Preamble

Allocated Employee Expenses

 

2.1(a)

Bankruptcy Event

 

3.3

Bankruptcy Proceeding

 

3.3

Change in Control

 

3.3

Company

 

Preamble

Company Business

 

Recitals

Company Indemnitees

 

6.1

Confidential Information

 

7.17

DCI

 

1.5

Effective Date

 

Preamble

Indemnitee

 

6.3(a)

Indemnitor

 

6.3(a)

Initial Term

 

3.1

Look-Back Period

 

4.3

Losses

 

6.1

Provider

 

Preamble

Provider Employees

 

4.1

Provider Indemnitees

 

6.2

Renewal Term

 

3.1

Services

 

1.2(b)

Spin Off

 

Recitals

Transaction

 

3.3

 

Schedule 2.1

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