Twenty-First Century Fox 2013 Annual Report Download - page 39

The Separation and Distribution Agreement May Restrict Us From Acquiring or Owning Certain Types of Assets
in the U.S.
The FCC has promulgated certain rules and regulations that limit the ownership of radio and television
broadcast stations, television broadcast networks and newspapers (the “Broadcast Ownership Rules”). Under the
FCC’s rules for determining ownership of the media assets described above, the Murdoch Family Trust’s
ownership interest in both News Corp and the Company following the Separation would generally result in each
company’s businesses and assets being attributable to the Murdoch Family Trust for purposes of determining
compliance with the Broadcast Ownership Rules. Consequently, our future conduct, including the acquisition of
any broadcast networks, or stations or any newspapers, in the same local markets in which News Corp owns or
operates newspapers or has acquired television stations, may affect News Corp’s ability to own and operate its
newspapers or any television stations it acquires or otherwise comply with the Broadcast Ownership Rules.
Therefore, we and News Corp agreed in the Separation and Distribution Agreement that if the Company
acquires, after the Separation, newspapers, radio or television broadcast stations or television broadcast networks
in the U.S. and such acquisition would impede or be reasonably likely to impede News Corp’s business, then the
Company will be required to take certain actions, including divesting assets, in order to permit News Corp to
hold its media interests and to comply with such rules. This agreement will effectively limit the activities or
strategic business alternatives available to us if such activities or strategic business alternatives implicate the
Broadcast Ownership Rules and would impede or be reasonably likely to impede News Corp’s business.
The Indemnification Arrangements We Entered Into With News Corp in Connection With the Separation May
Require Us to Divert Cash to Satisfy Indemnification Obligations to News Corp.
Pursuant to the Separation and Distribution Agreement and certain other related agreements, the Company
agreed to indemnify News Corp for certain liabilities and News Corp agreed to indemnify the Company for
certain liabilities. As a result, we could be required, under certain circumstances, to indemnify News Corp
against certain liabilities to the extent such liabilities result from an action we or our affiliates take or from any
breach of our or our affiliates’ representations, covenants or obligations under the Separation and Distribution
Agreement, tax sharing and indemnification agreement or any other agreement entered into in connection with
the Separation.
After the Separation, Certain of Our Directors and Officers May Have Actual or Potential Conflicts of Interest
Because of Their Equity Ownership in News Corp, and Certain of Our Officers and Directors May Have Actual
or Potential Conflicts of Interest Because They Also Serve as Officers and/or on the Board of Directors of News
Corp.
Following the Separation, certain of our directors and executive officers own shares of News Corp’s
common stock, and the individual holdings may be significant for some of these individuals compared to their
total assets. In addition, following the Separation, certain of our officers and directors also serve as officers and/
or as directors of News Corp, including our Chairman and Chief Executive Officer K. Rupert Murdoch, who
serves as News Corp Executive Chairman, and our Group General Counsel Gerson Zweifach, who serves as
News Corp’s General Counsel. This ownership or service to both companies may create, or may create the
appearance of, conflicts of interest when these directors and officers are faced with decisions that could have
different implications for News Corp and us.
For example, potential conflicts of interest could arise in connection with the resolution of any dispute that
may arise between News Corp and us regarding the terms of the agreements governing the internal
reorganization, the distribution and the relationship thereafter between the companies, including with respect to
the indemnification of certain matters. In addition to any other arrangements that the Company and News Corp
may agree to implement, the Company and News Corp agreed that officers and directors who serve at both
companies will recuse themselves from decisions where conflicts arise due to their positions at both companies.
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