SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): June 3,
1997
ASCENT ENTERTAINMENT GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-27192 52-1930707
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File No.) Identification No.)
One Tabor Center
1200 Seventeenth Street, Suite 2800
Denver, Colorado 80202
(Address of principal executive offices)
(303) 626-7000
(Registrant's telephone number, including area code)
<PAGE>
Item 5. Other Events
On June 13, 1997, Ascent Entertainment Group, Inc. ("Ascent") issued a press
release reporting on the announcement by COMSAT Corporation ("COMSAT") that
COMSAT would complete its distribution of its 80.67% ownership interest in
Ascent to COMSAT's shareholders through a tax-free dividend (the
"Distribution"). COMSAT further stated that it had declared the special dividend
to its shareholders on June 12, 1997 and had established June 19, 1997 as the
record date and June 27, 1997 as the distribution date for the dividend. A copy
of the Ascent release is attached hereto as Exhibit 20 and incorporated herein
by reference.
In connection with the Distribution, on June 3, 1997, Ascent and COMSAT entered
into a Distribution Agreement and a Tax Disaffiliation Agreement governing the
Distribution and certain relationships between the companies following the
Distribution. A copy of the Distribution Agreement is attached hereto as Exhibit
10(a) and a copy of the Tax Disaffiliation Agreement is attached hereto as
Exhibit 10(b) and each is incorporated herein by reference.
Item 7. Financial Statements and Exhibits
(c) Exhibits (listed according to the number assigned in Item 601
of Regulation S-K)
Exhibit No. Description
10(a) Distribution Agreement between
Ascent and COMSAT dated June 3, 1997
10(b) Tax Disaffiliation Agreement between
Ascent and COMSAT dated June 3, 1997
20 Press Release by Ascent dated
June 13, 1997
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Ascent Entertainment Group, Inc.
By:/s/ Arthur M. Aaron
Arthur M. Aaron
Vice President, Business and Legal Affairs
Date: June 19, 1997
<PAGE>
EXHIBIT 10(a)
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT (this "Agreement") is entered into as of this
3rd day of June, 1997, by and between COMSAT Corporation ("COMSAT"), a District
of Columbia corporation, and Ascent Entertainment Group, Inc. ("Ascent"), a
Delaware corporation.
RECITALS
A. The COMSAT Board of Directors has determined that it is appropriate and
desirable to distribute, subject to certain conditions, to the shareholders of
COMSAT on a pro rata basis all of COMSAT's interest in Ascent's common stock,
par value $0.01 per share ("Ascent Common Stock") on the Distribution Date, as
defined below (the "Distribution").
B. The Distribution is intended to qualify as a tax-free spin-off
under Section 355 of the Internal Revenue Code of 1986, as amended.
C. The parties hereto have determined that in order to accomplish the
objectives of the Distribution and to facilitate the consummation thereof, it is
necessary and desirable to restructure certain intercompany relationships,
allocate certain liabilities and provide indemnification, as set forth herein.
D. The Ascent Board of Directors, upon the recommendation of the
disinterested directors of its Board of Directors (within the meaning of Section
144 of the Delaware General Corporation Law), and the COMSAT Board of Directors
have approved this Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, COMSAT and Ascent, for themselves,
their successors and assigns, hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms will have
the following meanings, applicable both to the singular and the plural forms of
the terms described.
"Action" means any action, claim, suit, arbitration, inquiry, proceeding
or investigation by or before any court, any governmental, regulatory or other
administrative agency or commission or any arbitration tribunal.
"Actual Tax Payment" has the meaning set forth in Section 4.04(d) hereof.
"Affiliate" shall have the meaning ascribed to such term under Rule 12b-2
of the General Rules and Regulations of the SEC under the Exchange Act or any
successor rule thereto.
"After-Tax Tax-Related Losses" means an amount that, after (i) subtraction
of the aggregate additional taxes incurred or to be incurred by the party
indemnified pursuant to Section 4.04 hereof as a result of the receipt of such
payment and (ii) addition of the tax benefit to the party indemnified pursuant
to Section 4.04 hereof of any deductions taken by such party on account such
Tax-Related Losses, is equal to the amount of the correlative Tax-Related
Losses. The additional taxes and the tax benefit referred to in the preceding
sentence shall be determined using the highest statutory marginal tax rates
applicable to the party indemnified pursuant to Section 4.04 hereof.
"Agent" means the distribution agent for the Distribution selected by
COMSAT, such selection to be reasonably acceptable to Ascent.
"Aggregate Spin-off Tax Liabilities" means the sum of the Spin-off Tax
Liabilities with respect to each Taxing Jurisdiction.
"ANS" means Ascent Network Services, Inc., a wholly-owned subsidiary
of Ascent.
"Appraisal" means the appraisal of the assets of Ascent and its
Subsidiaries by American Appraisal Associates made as of the Effective Time.
"Ascent" means Ascent Entertainment Group, Inc.
"Ascent Books and Records" means the books and records (including
computerized records) of the Ascent Entities and all books and records owned by
COMSAT Entities which are necessary to operate the business of the Ascent
Entities including, without limitation, all such books and records relating to
Ascent Entity employees, original corporate minute books, stock ledgers and
certificates and corporate seals, and all licenses, leases, agreements, filings
relating to Ascent Entities or the business of Ascent Entities; provided that
COMSAT shall have access to, and have the right to obtain duplicate copies of,
the Ascent Books and Records in accordance with the provisions of Article 5.
"Ascent Business" means the businesses engaged in (i) prior to the IPO
Date by COMSAT which were (A) contributed to the Ascent Entities on or before
the IPO Date and (B) owned by the Ascent Entities as of the IPO Date, and (ii)
on and after the IPO Date by the Ascent Entities.
"Ascent Assets" means the assets used in the Ascent Business.
"Ascent Common Stock" has the meaning set forth in the recitals to
this Agreement.
"Ascent Covered Person" means any Ascent Entity and each individual who
served during the applicable policy period prior to the Effective Time as a
director, officer or other covered employee of such Ascent Entity, in each case
to the extent covered by a particular Insurance Policy.
"Ascent Entities" means Ascent and its Subsidiaries. "Ascent Entity" means
any of the Ascent Entities.
"Ascent Entity Employee" means any employee or former employee of an
Ascent Entity; provided, however, that any former employee of an Ascent Entity
who is employed by a COMSAT Entity as of the Distribution shall not be deemed to
be an Ascent Entity Employee.
"Best Efforts" means all reasonable efforts within the power of a party to
effect a given action, but shall not be construed so as to require any party to
take any action that would have a material adverse consequence to the party
responsible for performance of such action or make a material payment if neither
customarily nor proximately related to the performance of such action.
"Business Day" means any day other than a Saturday, a Sunday, or a day on
which banking institutions located in the State of Maryland are authorized or
obligated by law or executive order to close.
"Change of Control," as applied to COMSAT, means (i) the acquisition by
any person (other than COMSAT or an employee benefit plan sponsored by COMSAT)
of beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of 50%
of more of the outstanding voting securities of COMSAT; (ii) any change in the
composition of the COMSAT Board of Directors such that the Incumbent Directors
cease to constitute a majority of the Board; (iii) approval by the shareholders
of a merger, share exchange, swap, consolidation, recapitalization or other
business combination which, if consummated, would result in COMSAT's
shareholders holding less than 60% of the combined voting power of COMSAT, the
surviving entity or its parent (as applicable); or (iv) approval by the
shareholders of the sale of all or substantially all of COMSAT's assets, other
than to an entity 60% of the combined voting power of which would then be owned,
directly or indirectly, by COMSAT's shareholders.
"Code" means the Internal Revenue Code of 1986, as amended.
"Control" means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract, or otherwise.
"COMSAT" means COMSAT Corporation.
"COMSAT Assets" means the assets used in the COMSAT Business.
"COMSAT Books and Records" means the books and records (including
computerized records) of the COMSAT Entities and all books and records owned by
Ascent Entities which are necessary to operate the business of the COMSAT
Entities including, without limitation, all such books and records relating to
COMSAT Entity employees, original corporate minute books, stock ledgers and
certificates and corporate seals, and all licenses, leases, agreements, filings
relating to COMSAT Entities or the business of COMSAT Entities (but not
including the Ascent Books and Records).
"COMSAT Business" means the business engaged in by COMSAT other than the
Ascent Business.
"COMSAT Common Stock" means the common stock, no par value, of COMSAT.
"COMSAT Entities" means COMSAT and its Subsidiaries (other than
Subsidiaries that constitute Ascent Entities). "COMSAT Entity" shall mean any of
the COMSAT Entities.
"Consents" means consents, notices, waivers, regulatory approvals,
filings, amendments, permits, qualifications, transfers or other assignments of
any kind.
"Corporate Agreement" means the Corporate Agreement between COMSAT and
Ascent entered into as of December 18, 1995.
"Deemed Tax Payment" has the meaning set forth in Section 4.04(d) hereof.
"DGCL" means the General Corporation Law of the State of Delaware, as in
effect on the date hereof and as the same may hereafter be amended from time to
time.
"Distribution" has the meaning set forth in the recitals to
this Agreement.
"Distribution Date" means the date determined by the COMSAT Board of
Directors on which the Distribution will be effected in accordance with, and
subject to, the terms and conditions specified in this Agreement.
"Distribution Taxable Year" means COMSAT's taxable year in which the
Distribution occurs.
"Effective Time" means 5:00 p.m., local time in Bethesda, Maryland, on the
Distribution Date or such other time on the Distribution Date as COMSAT's Board
of Directors, in its discretion, may establish.
"Equity Securities" means any stock or other equity securities treated as
stock for tax purposes, or options, warrants, rights, convertible debt, or any
other instrument or security that affords any Person the right, whether
conditional or otherwise, to acquire stock.
"Fifty-Percent or Greater Interest" has the meaning provided in section
355(d)(4) of the Code, provided that the aggregation rules of section 355(d)(7)
of the Code shall apply for this purpose, and further provided that section
318(a)(2) of the Code shall apply but without regard to the phrase "50 percent
or more in value" in section 318(a)(2)(C). Notwithstanding the foregoing, if (i)
a Person acquires stock in Ascent by reason of holding stock in COMSAT, and (ii)
such Person did not acquire stock in COMSAT pursuant to a plan (or series of
related transactions) pursuant to which such Person acquired stock representing
a Fifty-Percent or Greater Interest in COMSAT, Ascent, or any successor to
either COMSAT or Ascent, the acquisition in clause (i) shall not be taken into
account for purposes of determining whether a Person acquired stock representing
a Fifty-Percent or Greater Interest in COMSAT, Ascent, or any successor to
either COMSAT or Ascent.
"Final Determination" means (i) a final resolution of liability for tax by
IRS Form 870 or 870-AD (or any successor forms thereto), on the date of
acceptance by or on behalf of the IRS, or by a comparable form under the laws of
other jurisdictions, except that a Form 870 or 870-AD or comparable form that
reserves (whether by its terms or by operation of law) the right of the taxpayer
to file a claim for refund and/or the right of the Taxing Authority to assert a
further deficiency shall not constitute a Final Determination; (ii) a decision,
judgment, decree, or other order by any court of competent jurisdiction with
respect to which the period of time for filing an appeal has lapsed without any
such appeal being taken on any issue pertaining to any Spin-off Tax Liabilities,
(iii) a closing agreement under section 7121 of the Code or a similar
enforceable agreement under state or local law, (iv) a decision by the Secretary
of the Treasury of the United States or similar official of a state or local
government or governmental unit to refund any Spin-off Tax Liabilities, which
decision may not be revoked, reversed, overturned or modified, or (v) a binding
settlement agreement entered into with the Taxing Authority.
"Incumbent Directors" means the directors of COMSAT as of the date of this
Agreement; provided, however, any individual whose nomination or election is
approved by a vote of three-fourths of the then Incumbent Directors, or any
person appointed by the President of the United States, shall be deemed to be an
Incumbent Director.
"Information" has the meaning ascribed in Section 5.02 of this Agreement.
"Insurance Policies" means, collectively, each insurance policy or other
form of insurance coverage maintained or provided by COMSAT for the benefit of
an Ascent Entity, director, officer or employee prior to the Effective Time,
together with all amendments, endorsements and waivers thereto or additional
policies or other forms of insurance maintained or provided by COMSAT pursuant
to the Intercompany Services Agreement.
"Intercompany Receivable Account" means the account for intercompany
receivables established pursuant to Section 5.5 of the Corporate Agreement.
"Intercompany Services Agreement" means the Intercompany Services
Agreement between COMSAT and Ascent entered into as of December 18, 1995.
"IPO" means the initial public offering of Ascent Common Stock.
"IRS" means the Internal Revenue Service.
"Losses" means any and all losses, liabilities, claims, damages,
obligations, payments, costs and expenses, matured or unmatured, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated, known or unknown
(including, without limitation, the costs and expenses of any and all Actions,
threatened Actions, demands, assessments, judgments, settlements and compromises
relating thereto and attorneys' fees and any and all expenses whatsoever
reasonably incurred in investigating, preparing or defending against any such
Actions or threatened Actions).
"Network Services Business" means the trade or business conducted by ANS
prior to its merger with and into Ascent, and thereafter conducted by Ascent,
providing satellite network distribution support services, including nationwide
installation, field service, and maintenance support.
"Notice Date" with respect to Subsequent Tax Legislation or Regulation
means the earliest of (i) the date such legislation or materially identical
legislation is introduced as a bill in the United States House of
Representatives or the United States Senate, (ii) the date any amendment to any
bill incorporating such legislation is approved by the congressional committee
having jurisdiction or by the United States House of Representatives or the
United States Senate, (iii) the date any written proposal incorporating such
legislation is transmitted by the President of the United States to Congress,
(iv) the date any written proposal either by the Chairman of the United States
House of Representatives Ways and Means Committee or the Chairman of the United
States Senate Finance Committee incorporating such legislation is published in
the Bureau of National Affairs' "Daily Tax Report," or any successor publication
or (v) the date such regulation is published in the Federal Register as
proposed, temporary or final Treasury Regulations.
"OCC" means On Command Corporation.
"Person" means an individual, partnership, joint venture, corporation,
limited liability company, trust, unincorporated association, any other entity,
or a government or any department or agency or other unit thereof.
"Privileges" means all privileges that may be asserted under applicable
law including, without limitation, privileges arising under or relating to the
attorney-client relationship (including but not limited to the attorney-client
and work product privileges), the accountant-client privilege, and privileges
relating to internal evaluation processes.
"Privileged Information" means all information as to which any COMSAT
Entity or Ascent Entity is entitled to assert the protection of a Privilege.
"Qualified Tax Counsel" means independent tax counsel of recognized
national standing which is reasonably acceptable to COMSAT and has not
previously been engaged by an Ascent Entity (other than in connection with the
transaction for which an Unqualified Tax Opinion is requested).
"Record Date" means the close of business on the date determined by the
COMSAT Board of Directors as the record date for the Distribution.
"Releases" has the meaning ascribed thereto in Section 2.02(d).
"Representation Date" means any date on which Ascent or COMSAT makes any
representation to the IRS, to COMSAT or Ascent, or to Qualified Tax Counsel for
the purpose of (i) obtaining a Subsequent Ruling, (ii) any determination
pursuant to Section 4.02(h)(ii), or (iii) obtaining an Unqualified Tax Opinion.
"Restriction Period" means the period beginning on the date hereof and
ending on the two-year anniversary of the Effective Time.
"Ruling" means the private letter ruling, dated May 12, 1997, received by
COMSAT from the IRS.
"Ruling Documents" means the request for a ruling under section 355 of the
Code, dated January 15, 1997, submitted on behalf of COMSAT to the IRS, the
exhibits thereto, and the additional materials, dated April 21, 1997 and May 5,
1997, submitted on behalf of COMSAT, and the Ruling.
"Ruling Request Exhibit A" means Exhibit A to the January 15, 1997, letter
referred to in the definition of Ruling Documents.
"SEC" means the United States Securities and Exchange Commission.
"SEC No-Action Letter" has the meaning set forth in Section 2.02.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute.
"Special Dividend" has the meaning set forth in Section 2.03(a) of this
Agreement.
"Spin-off Tax Liabilities," with respect to any Taxing Jurisdiction, means
the sum of (i) the product of (x) the additional corporate-level gain or income
recognized with respect to the failure of the Distribution to qualify for
Tax-Free Status under the income tax law of such Taxing Jurisdiction pursuant to
any settlement, final determination, judgment, assessment, proposed adjustment
or otherwise and (y) the Taxing Jurisdiction's highest marginal tax rate
applicable to the taxable income of corporations on income of the character
subject to tax and indemnified against under Section 4.04, (ii) interest on such
amount calculated pursuant to such Taxing Jurisdiction's laws regarding interest
on tax liabilities at the highest underpayment rate for corporations in such
Taxing Jurisdiction from the date such additional gain or income was recognized
until full payment with respect thereto is made pursuant to Section 4.04 hereof,
and (iii) any penalties actually paid to such Taxing Jurisdiction that would not
have been paid if such Taxing Jurisdiction agreed that the Distribution
qualified for Tax-Free Status.
"Subsequent Ruling" means a ruling from the IRS confirming that the
consummation of a transaction or existence of a condition subsequent to the
Distribution will not result in loss of Tax-Free Status.
"Subsequent Tax Legislation or Regulation" means any bill introduced in
the United States House of Representatives or the United States Senate that
amends the Internal Revenue Code, or any amendment to any such bill; any written
proposal to amend the Internal Revenue Code that is officially recommended by
the President of the United States; any written proposal to amend the Internal
Revenue Code that is made available to the general public either by the Chairman
of the United States House of Representatives Ways and Means Committee or the
Chairman of the United States Senate Finance Committee; or any proposed,
temporary or final Treasury Regulation; provided, however, that no such bill,
amendment, proposal, or regulation shall constitute Subsequent Tax Legislation
or Regulation unless the Notice Date of such bill, amendment, proposal or
regulation is subsequent to the date of this Agreement.
"Subsidiary" means, with respect to any specified Person, any corporation,
limited liability company, limited partnership, general partnership or other
legal entity of which such person or any of its Subsidiaries Controls or owns,
directly or indirectly, more than 50% (without regard to dilution) of the stock
or other equity interest entitled to vote on the election of members to the
board of directors or similar governing body, and with respect to Ascent, shall
include OCC.
"Tax Disaffiliation Agreement" means the Tax Disaffiliation Agreement as
set forth in Appendix B.
"Tax-Free Status" means the qualification of the Distribution (i) as a
transaction described in section 355(a)(1) of the Code, (ii) as a transaction in
which the stock distributed thereby is qualified property for purposes of
section 355(c)(2) of the Code, and (iii) as a transaction in which COMSAT
recognizes no income or gain other than intercompany items or excess loss
accounts taken into account pursuant to the Treasury Regulations promulgated
pursuant to section 1502 of the Code.
"Tax-Related Losses" means
(i) the Aggregate Spin-off Tax Liabilities,
(ii) all accounting, legal and other professional fees, and court
costs incurred in connection with any settlement, final
determination, judgment or other determination with respect to such
Aggregate Spin-off Tax Liabilities, and
(iii) all costs, expenses and damages associated with stockholder
litigation or controversies and any amount paid by COMSAT or Ascent
in respect of the liability of shareholders, whether paid to
shareholders or to the IRS or any other taxing authority payable by
COMSAT or Ascent or their respective affiliates, in each case
resulting from the absence of Tax-Free Status for the Distribution.
"Taxing Jurisdiction" means the United States and every other government
or governmental unit having jurisdiction to tax COMSAT or Ascent.
"Tax Sharing Agreement" means the Tax Sharing Agreement between COMSAT and
Ascent entered into as of December 18, 1995.
"Treasury Regulations" means the temporary and final regulations
promulgated under the Code in effect on the date of this Agreement and the
corresponding sections of any regulations subsequently issued that amend or
supersede such regulations.
"Unqualified Tax Opinion" means an unqualified "will" opinion of Qualified
Tax Counsel on which COMSAT may rely, in form and substance reasonably
acceptable to COMSAT (and in determining whether an opinion is reasonably
acceptable, COMSAT may consider, among other factors, the appropriateness of any
underlying assumptions and management's representations if used as a basis for
the opinion) to the effect that a transaction will not disqualify the
Distribution from Tax-Free Status, assuming that the Distribution would have
qualified for Tax-Free Status if such transaction did not occur. Such opinion
shall be obtained at the expense of Ascent.
1.2. Internal References. Unless the context indicates otherwise,
references to Articles, Sections and paragraphs shall refer to the corresponding
articles, sections and paragraphs in this Agreement and references to the
parties shall mean the parties to this Agreement.
ARTICLE II
THE DISTRIBUTION
2.01 The Distribution. Subject to Section 2.03 and 2.04 hereof, on or
prior to the Distribution Date, COMSAT will deliver to the Agent for the benefit
of the holders of record of COMSAT Common Stock on the Record Date, a single
stock certificate, endorsed by COMSAT in blank, representing all of the then
outstanding shares of Ascent Common Stock owned by COMSAT, and shall cause the
transfer agent for Ascent Common Stock to instruct the Agent to distribute on
the Distribution Date the appropriate number of such shares of Ascent to Common
Stock to each holder or designated transferee or transferees of such holder.
Subject to Section 2.05, each holder of COMSAT Common Stock as of the Record
Date shall receive a number of shares of Ascent Common Stock equal to the
product of the number of shares of COMSAT Common Stock held by such shareholder
on the Record Date multiplied by a fraction, the numerator of which is the
number of shares of Ascent Common Stock held by COMSAT and the denominator of
which is the number of shares of COMSAT Common Stock outstanding as of the
Record Date. The Distribution shall be effective as of the Effective Time.
Ascent and COMSAT, as the case may be, will provide to the Agent all share
certificates and any information required in order to complete the Distribution.
Section 2.02 Cooperation Prior to the Distribution. (a) COMSAT and Ascent
shall prepare, and COMSAT shall mail, prior to the Distribution Date, to the
holders of COMSAT Common Stock, an information statement (the "Information
Statement"), which shall set forth appropriate disclosure concerning Ascent, the
Distribution and other matters. COMSAT shall prepare and file, at its expense, a
request for no action advice from the SEC (the "SEC No-Action Letter") seeking
staff confirmation: (i) that registration of the Ascent Common Stock to be
issued in the Distribution is not required under the Securities Act, or (ii) in
the alternative, that the staff will not recommend any enforcement action to the
SEC in the event that the Ascent Common Stock to be issued in the Distribution
is not so registered. COMSAT shall use its Best Efforts to obtain all necessary
clearances from the SEC as soon as practicable.
(b) Ascent shall take all such action as shall be necessary or appropriate
to assure that the Ascent Common Stock to be issued in the Distribution has been
duly qualified, registered, or exempted therefrom under the securities or blue
sky laws of states, other political subdivisions of the United States or foreign
jurisdictions in which COMSAT shareholders reside as of the Record Date,
including making any necessary filings, notices or paying any applicable fees.
COMSAT shall cooperate with Ascent in such effort; provided that Ascent shall
pay all fees and expenses in connection with the foregoing. Ascent shall use its
Best Efforts to obtain all such clearances as soon as practicable.
(c) COMSAT and Ascent shall use their respective Best Efforts to cause the
conditions set forth in Section 2.03 and 2.04 to be satisfied and to effect the
Distribution on the Distribution Date.
(d) As soon as practical and, in any event, prior to the Distribution
Date, Ascent and COMSAT shall coordinate to determine the extent of any
obligations, guaranties, performance or surety bonds, letters of assurance or
comfort, or any other liability of any COMSAT Entity relating to Ascent Entity
or the assets of any Ascent Entity and vice versa. Ascent shall use its Best
Efforts to obtain the release of all COMSAT Entities from all such obligations,
guaranties, bonds, assurances or liabilities prior to the Distribution Date,
unless waived by COMSAT in its discretion (collectively, the "Releases").
(e) Each of the parties hereto agrees that it will use its Best Efforts to
obtain, prior to the Distribution Date, all Consents required, desirable or
appropriate to effect the Distribution. Schedule 2.02(e) sets forth a listing of
all material Consents which the parties hereto have determined as of the date of
this Agreement to be required, desirable or appropriate in connection with the
Distribution and which party shall have responsibility for obtaining each such
Consent prior to the Distribution Date.
(f) COMSAT and Ascent shall consult and cooperate with one another prior
to the Distribution Date with regard to publicity relating to the Distribution.
(g) Subject to Section 2.03 and 2.04, COMSAT and Ascent shall use their
respective Best Efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, all things necessary or desirable under applicable law, to
consummate the transactions contemplated under this Agreement; provided, that it
is expressly understood and agreed that COMSAT's Board of Directors reserves the
right in its sole discretion to determine not to proceed with the Distribution
at any time prior to the declaration of the Special Dividend.
2.03 Mutual Conditions to the Distribution. Each of the following
conditions shall have been satisfied or waived by mutual agreement of COMSAT and
Ascent (acting through its Board of Directors upon the recommendation of the
disinterested members of the Ascent Board of Directors) prior to the
Distribution:
(a) COMSAT's Board of Directors shall have given final approval for the
Distribution by declaring a special dividend (the "Special Dividend") and
establishment of the Record Date.
(b) No order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Distribution shall be in effect.
(c) The Ruling shall not have been revoked or adversely modified.
2.04 Conditions to the Distribution Waivable By COMSAT. Each of the
following conditions shall have been satisfied or waived by COMSAT in its
discretion prior to the Distribution:
(a) Ascent shall have delivered to COMSAT all Releases in accordance with
Section 2.02(d) of this Agreement.
(b) All Consents contemplated by Section 2.02(e) of this Agreement shall
have been received.
(c) The merger of ANS with and into Ascent, with Ascent being the
surviving corporation, shall have been consummated.
(d) All sums due and payable, including any applicable accrued interest
thereon, by either party under the Intercompany Receivable Account shall have
been satisfied and settled in accordance with Section 3.05 of this Agreement.
2.05 Fractional Shares. The parties agree that the Agent shall be directed
as soon as practical after the Distribution Date to determine the number of
whole shares and fractional shares of Ascent Common Stock allocable to each
holder of record of COMSAT Common Stock as of the Record Date, to aggregate all
such fractional shares and sell the whole shares obtained thereby at then
prevailing prices and to cause to be distributed to such holder to which a
fractional share shall be allocable such holder's ratable share of the proceeds
of such sale, after making appropriate deductions of the amount required to be
withheld for federal income purposes and after deducting an amount equal to all
brokerage charges, commissions and transfer taxes attributed to such sale.
COMSAT and the Agent shall use their respective Best Efforts to aggregate the
shares of Ascent Common Stock that may be held by any beneficial owner thereof
through more than one account in determining the number of fractional shares
allocable to such beneficial owner.
ARTICLE III
INTERCOMPANY MATTERS
3.01 Corporate Agreement; Intercompany Services Agreement and Tax Sharing
Agreement. The Corporate Agreement is hereby amended, effective as of the
Effective Time, to remove Articles II through IV, Sections 5.1 and 5.2 of
Article V thereof and all definitions contained in Article I which are exclusive
to those provisions. Appendix A to the Corporate Agreement is hereby amended,
effective as of the Effective Time, to read as set forth in Appendix A to this
Agreement. The remaining provisions of the Corporate Agreement shall remain in
full force and effect. The Intercompany Services Agreement shall terminate as of
the Effective Time of the Distribution. The Tax Sharing Agreement shall be
superseded as of the Effective Time by the Tax Disaffiliation Agreement as set
forth in Appendix B hereto.
3.02 Directors. Allen E. Flower, Vice President and Chief Financial
Officer of COMSAT, and Alan G. Korobov, Controller of COMSAT, shall resign as
directors of Ascent effective as of the Effective Time. Warren Y. Zeger, Vice
President, General Counsel and Secretary of COMSAT, shall resign as a director
of OCC effective as of the Effective Time. Vacancies on Ascent's and OCC's Board
of Directors which exist on or prior to the Distribution shall be filled in a
manner consistent with Ascent's and OCC's existing certificates of incorporation
and by-laws.
3.03 Employee Benefit Plans.
(a) Ascent Option Plans. Prior to the Distribution Date, Ascent shall use
its Best Efforts to cause a sufficient number of options to acquire Ascent
Common Stock to be canceled, such that the shares of Ascent Common Stock owned
by COMSAT shall constitute not less than 80.01% of the outstanding Common Stock
of Ascent immediately prior to the Distribution on a fully-diluted basis after
giving effect to the exercise of any remaining outstanding options, and
exchanged for stock appreciation rights on terms approved by Ascent's Board of
Directors.
(b) COMSAT Benefit Plans. Ascent Entity Employees participated in certain
of the employee benefit plans sponsored by COMSAT and administered by the COMSAT
Benefits Department prior to the IPO date and, in the case of certain plans
described in Section 4 of the Intercompany Services Agreement, subsequent to the
IPO Date. The vesting of options, restricted stock awards and restricted stock
units under the COMSAT Employee Stock Option Plan and Key Employee Stock Plans
shall continue as long as the employee holding such rights continues to be
employed by an Ascent Entity. With respect to COMSAT options held by an Ascent
Entity Employee that have not fully vested on or before the Distribution Date,
such options shall terminate 90 days after the date that such options become
fully vested. With respect to COMSAT options held by an Ascent Entity Employee
that have fully vested on or before the Distribution Date, subject to the
approval of the Compensation Committee of COMSAT's Board of Directors, such
options shall terminate 90 days after the date that all of any such employee's
options shall have become fully vested. Ascent shall reimburse COMSAT for the
costs associated with the continued vesting, exercise, or lapse of restrictions
related to the options, restricted stock awards and restricted stock units held
by any existing or former employee of any Ascent Entity on and after the
Distribution Date (the "Benefit Extension Costs"), unless such costs have been
previously reimbursed or paid to COMSAT by an Ascent Entity. Ascent agrees to
pay any Benefit Extension Costs within 10 business days after receipt of a
written invoice therefor. Any invoiced balances that remain unpaid after such
date shall bear interest until paid in full at the rate set forth in Section
5.5(c) of the Corporate Agreement. To the extent not previously paid, any unpaid
Benefit Extension Costs, together with any accrued interest thereon, may be
debited by COMSAT from any amounts owed to Ascent by COMSAT pursuant to the Tax
Disaffiliation Agreement. To the extent applicable, the eligibility of Ascent
Entity Employees to participate in the following plans shall terminate as of
Distribution Date, namely COMSAT's: Flexible Benefits Plan, Dependent Care
Spending Account Plan, Heath Care Spending Plan, Short-Term Disability Plan and
Long-Term Disability Plan. On or prior to the Distribution Date, Ascent shall
establish a deferred compensation plan, and all payment obligations to Ascent
Entity Employees for deferred compensation under COMSAT's existing deferred
compensation plan, none of which obligations shall be due and payable prior to
the Distribution Date, shall be assumed by Ascent on or prior to the
Distribution Date, and Ascent shall be credited for all such amounts previously
contributed by Ascent toward such balances in the Intercompany Receivable
Account at 100% of the amounts contributed in respect of Ascent Entity
Employees.
3.04 Insurance.
(a) Removal from Coverage Under Insurance Policies. COMSAT has
historically provided insurance coverage for Ascent through various Insurance
Policies maintained by COMSAT for the benefit of itself and its Subsidiaries for
general liability, directors and officers liability, automobile liability,
workers compensation, excess/umbrella liability, property and other types of
losses. From and after the Effective Time, Ascent will be responsible for
obtaining and maintaining such insurance coverages as it deems necessary or
appropriate separately from the COMSAT Insurance Policies. COMSAT shall
cooperate with Ascent in Ascent's efforts to obtaining replacement insurance
coverages from and after the Distribution Date.
(b) Claims. COMSAT and Ascent each agree that (i) COMSAT and Ascent shall
each have the right to present claims to COMSAT's insurers under the Insurance
Policies which include Ascent or the Ascent Covered Persons as an insured, and
(ii) COMSAT shall submit such claims to COMSAT's insurers on a timely basis
(assuming COMSAT is given all information required to prepare and submit the
claim sufficiently in advance the date required for submission to permit
submission on a timely basis) or, if possible under the relevant insurance
policy, COMSAT will cooperate with Ascent so as to permit Ascent to submit such
claims directly to the insurers. In either event, the submitting party shall
provide the other party with copies of all such written notices of insurance
claims for review and afford the other party an opportunity to comment in
advance of the provision of such written notices to such insurers. The
submitting party shall provide the other party with copies of all other written
communications between the submitting party and the insurers related to such
claims Ascent shall reimburse COMSAT for all reasonable costs which COMSAT
incurs in submitting or assisting with the submission of such claims (including,
but not limited to, allocated compensation, salary, overhead expense and legal
fees and expenses). To the extent that losses by Ascent are not covered such
insurers, COMSAT will not have any obligation or liability to reimburse Ascent
for such losses. The parties acknowledge and agree that certain policies are
written on an "occurrence" basis and may provide coverage to Ascent for
incidents occurring prior to the Distribution Date, even though the claim was
first made after the Distribution Date, and that other such policies are written
on a "claims made" basis and that such policies may not provide coverage to
Ascent for incidents occurring prior to the Distribution Date but which are
first reported after the Distribution Date.
(c) Insured Losses. With respect to any insured losses covered by the
Insurance Policies, COMSAT shall pay over to Ascent any insurance proceeds it
receives on account claims for losses made by or on behalf of any Ascent Covered
Person, net of the amount of any applicable premium adjustments,
retrospectively-rated premium adjustments or other such costs which are paid or
reasonably estimated by COMSAT to be paid by COMSAT in the ordinary course of
business and any costs incurred by COMSAT in collecting such proceeds
(including, but not limited to, allocated compensation, salary, overhead expense
and legal fees and expenses). If COMSAT's estimate of such adjustments or other
costs proves to be too small or too great, the difference between the estimate
and the actual adjustments and other costs shall be paid back to COMSAT or over
to Ascent, respectively, within one year after the initial payment of the
insurance proceeds is made.
(d) Deductibles. Responsibility for deductible or self-insured amounts
with respect to any insurance policy provided or maintained prior to the
Effective Time as it relates to Ascent or any Ascent Covered Person shall be
borne 100% by Ascent. Notwithstanding the foregoing, if COMSAT and Ascent are
involved in the same claim, COMSAT and Ascent shall negotiate in good faith the
fair allocation of any self-insurance retention or other deductible payable
under the insurance policy. Such allocation shall be based upon all relevant
factors, including, without limitation and as appropriate, the relative number
of persons affiliated with COMSAT and Ascent that are involved in such claim,
the relative claims and damages asserted against each party, each party or
persons relative contribution or fault, the benefits derived by each party or
person and the nature of the allegations with respect to each such party or
person.
(e) Adjustment of Premiums Paid. If COMSAT receives a refund or rebate of
any portion of the insurance premiums previously paid to COMSAT by Ascent in
respect of the Insurance Policies as a result of Ascent being removed from
coverage under any Insurance Policy pursuant to Section 3.04(a) of this
Agreement after the Effective Time, COMSAT shall pay such amount to Ascent;
provided that no adjustment shall be made for insurance coverage that has been
terminated for which the premium has been previously paid in full and is
nonrefundable; and provided, further, that in calculating any such adjustment,
any increased premium or other costs associated with a reduction in the total
policy amount, assets covered, persons insured or loss of volume-related
discounts ("Breakage Costs") shall be deducted from the amount that would
otherwise be refunded. If the Breakage Costs associated with termination of
Ascent's participation in all or any portion of the insurance by Ascent exceed
the amount of premiums that have been or would have been paid in respect of such
insurance over the remaining term of the affected policy or policies, Ascent
shall reimburse COMSAT for the amount of any such Breakage Costs, less the
amount of any premium reductions associated with the termination of Ascent's
participation in the insurance coverage. In the event that there are any
retroactive premium adjustments under the Insurance Policies relating to
coverage prior to the Distribution Date, in the case of an increase, Ascent
shall pay to COMSAT or, in the case of a decrease, COMSAT shall pay to Ascent,
Ascent's pro rata share (based on the prior relative premium payments made by
each party) of any such adjustment.
(f) Access to Insurance Information. Upon the reasonable request of Ascent
from time to time during the period in which claims are open or can be made
under any Insurance Policy, (i) COMSAT shall provide Ascent with a true and
complete copy of each Insurance Policy and (ii) subject to Section 5.06, COMSAT
shall provide Ascent with reasonable access to all applicable risk management
data for the purpose of obtaining information with respect to any insurance
claim relating to any Ascent Covered Person. COMSAT shall provide Ascent with
reasonable access to all litigation pleadings and other documents and
correspondence relating to any Ascent Covered Person, and copies thereof as
reasonably requested by Ascent. COMSAT shall cause to be delivered to Ascent all
updates of the Ascent claims histories as reasonably requested by Ascent until
all claims are closed, or until earlier notified by Ascent. Notwithstanding
Section 3.06, all reasonable out-of-pocket costs and expenses (including, but
not limited to, allocated compensation, salary, overhead expense and legal fees
and expenses) reasonably incurred by COMSAT in complying with this Section
3.04(f) shall be reimbursed by COMSAT promptly upon presentation of invoices
therefor.
3.05 Intercompany Receivables and Interest. All sums due and payable,
including any applicable accrued interest thereon, by either party under the
Intercompany Receivable Account shall be paid and settled prior to the Effective
Time.
3.06 Expenses.
(a) General. Except as otherwise provided in this Agreement, the Corporate
Agreement, Tax Disaffiliation Agreement or any written agreement between COMSAT
and Ascent, all costs and expenses of any party hereto in connection with the
Distribution shall be paid by the party that incurs such costs and expenses.
(b) The costs and expenses associated with the printing and distribution
of the Information Statement shall be borne by COMSAT.
(c) All costs of printing and engraving stock certificates and fees of any
transfer agent engaged by Ascent, and all fees relating to listing Ascent Common
Stock for quotation on the Nasdaq National Market System, shall be paid by
Ascent. The fees and expenses of the Agent, information agents or similar
consultants engaged by Ascent or COMSAT in connection with effecting the
Distribution shall be paid by Ascent. COMSAT shall pay Ascent $75,000 to be
applied against such costs on the Distribution Date.
(d) In the event that COMSAT does not consummate the Distribution after a
Change of Control of COMSAT has occurred, COMSAT shall reimburse Ascent for its
reasonable documented out-of-pocket expenses directly incurred in negotiating
this Agreement or in carrying out the actions specifically required to be
performed by Ascent hereunder.
3.07 Indemnification. Appendix C sets forth the indemnification
obligations of the parties as to certain matters and is incorporated herein by
reference.
3.08 Intellectual Property. The parties agree that issues related to
intellectual property shall be governed by Appendix D hereto.
3.09 Dispute Resolution Procedures. Except as otherwise provided herein,
the parties agree to the following dispute resolution procedures with respect to
any disputes that arise under this Agreement, the Tax Disaffiliation Agreement
or the Corporate Agreement. COMSAT or any COMSAT Entity, on the one hand, and
Ascent or any Ascent Entity, on the other hand, shall appoint up to three
members from their managerial staffs to serve on a joint committee (the "Dispute
Resolution Committee"). The Dispute Resolution Committee shall meet at either
COMSAT's or Ascent's principal executive offices, or such other location as they
may mutually agree, whichever is more appropriate in light of the issue to be
discussed, at such time as either may demand upon reasonable advance notice, for
the purpose of resolving any dispute arising under this Agreement, the Tax
Disaffiliation Agreement or the Corporate Agreement. No dispute under this
Agreement or the Tax Disaffiliation Agreement shall be the subject of any formal
legal proceeding between the parties hereto before being considered by the
Dispute Resolution Committee. If the Dispute Resolution Committee is unable to
resolve any dispute submitted to it by any party hereto within 15 days after
such submission, the Dispute Resolution Committee shall refer the issue to the
Chief Executive Officer of COMSAT and Ascent for resolution. If such officers
are unable to resolve such dispute within 10 days after referral, either party
may then proceed to take any legal action available to it. Notwithstanding the
foregoing, if any breach or threatened breach of this Agreement would cause
COMSAT or Ascent irreparable harm for which monetary damages either would not be
available or would be a insufficient remedy, such party may immediately seek
legal redress without first complying with the dispute resolution procedures
provided for in this Section 3.09.
3.10 Further Assurances. In addition to the actions specifically provided
for elsewhere in this Agreement, each party hereto shall cooperate with the
other, and execute and deliver, or use its reasonable Best Efforts to cause to
be executed and delivered, all instruments, including instruments of conveyance,
assignment and transfer, and to make all filings with, and to obtain all
consents, approvals or authorizations of, any governmental or regulatory
authority or any other person under any permit, license, agreement, indenture or
other instrument, and take all such other actions as such party may reasonably
be requested to take by any other party hereto from time to time, consistent
with the terms of this Agreement, in order to effectuate the provisions and
purposes of this Agreement and any transfers of assets and liabilities which may
be incident hereto.
ARTICLE IV
TAX MATTERS RELATED TO DISTRIBUTION
4.01 Representations Specific to Distribution Tax Matters.
(a) Ascent hereby represents and warrants that (i) it has examined the
Ruling Documents and (ii) to Ascent's best knowledge after due inquiry, to the
extent descriptive of Ascent and its Subsidiaries or the Ascent Business
(including, without limitation, the representations in the Ruling Documents to
the extent that they relate to the plans, proposals, intentions, and policies of
Ascent and its Subsidiaries), the facts presented and the representations made
therein are true and correct, except to the extent that any such facts or
representations:
(A) set forth facts about COMSAT and its Subsidiaries (other than
Ascent and its Subsidiaries), INTELSAT, or Inmarsat;
(B) by their terms, express the opinions of the management of COMSAT
regarding the management, operation or financial prospects or results of Ascent
and its Subsidiaries;
(C) describe or characterize the views of investors or analysts in
the investment community with respect to Ascent's financial prospects or
results;
(D) describe or characterize the purposes of COMSAT management for the
Distribution;
(E) describe or characterize events that occurred more than five
years before January 15, 1997;
(F) describe or analyze Federal Communications Commission
rules, regulations, orders, guidelines or policies;
(G) are inconsistent with statements made in Ascent's Annual Report
on Form 10-K for the year ended December 31, 1996 as filed with the SEC as of
March 31, 1997 and not including any subsequent amendments;
(H) set forth legal conclusions;
(I) are included in the request for the SEC No-Action Letter, but
this exception shall not apply to the same or similar facts or representations
that are set forth elsewhere in the Ruling Documents; or
(J) are specifically noted in Exhibit 4.01(a) hereto.
(b) Ascent hereby represents and warrants that it has no plan or intention
of taking any action, or failing or omitting to take any action, that would (i)
cause the Distribution not to have Tax-Free Status or (ii) cause any
representation or factual statement made in the Ruling Documents to be untrue in
a manner which would have an adverse effect on the Tax-Free Status of the
Distribution.
(c) Ascent hereby represents and warrants to COMSAT that, to the knowledge
of Ascent, the Distribution is not part of a plan (or series of related
transactions) pursuant to which a Person will acquire stock representing a
Fifty-Percent or Greater Interest in Ascent or any successor to Ascent.
4.02 Covenants Specific to Distribution Tax Matters.
(a) Ascent shall not take any action, nor fail or omit to take any action,
that would (i) cause the Distribution not to have Tax-Free Status or (ii) cause
any representation made in the Ruling Documents to be untrue in a manner which
would have an adverse effect on the Tax-Free Status of the Distribution;
provided, however, that Ascent shall not be considered to have breached the
covenants contained in this subsection (a) by virtue of a disposition or
discontinuation due to circumstances beyond Ascent's control as described in the
final sentence of Section 4.02(b).
(b) Until the first day after the Restriction Period, Ascent shall
continue the active conduct of the Network Services Business. Ascent shall not
liquidate, dispose of, or otherwise discontinue the conduct of any material
portion of the Network Services Business. Ascent shall continue the active
conduct of the Network Services Business primarily through officers and
employees of Ascent (and not through independent contractors). For purposes of
this subsection (b), asset retirements and discontinuances of product lines with
respect to the Network Services Business in the ordinary course of business and
dispositions and discontinuations due to circumstances beyond Ascent's control
shall not be treated as a disposition or discontinuation of a portion of the
Network Services Business.
(c) Until the first day after the one-year anniversary of the Effective
Time, Ascent shall not sell or otherwise issue to any Person, or redeem or
otherwise acquire from any Person, any Equity Securities of Ascent; provided,
however, that (i) the adoption by Ascent of a rights plan shall not constitute a
sale or issuance of Equity Securities and (ii) purchases meeting the
requirements of section 4.05(1)(b) of Rev. Proc. 96-30 shall not constitute a
redemption or acquisition of stock of Ascent for purposes of this Section
4.02(c).
(d) Ascent shall not (i) solicit any Person to make a tender offer for the
Equity Securities of Ascent, (ii) participate in or support any unsolicited
tender offer for the Equity Securities of Ascent, or (iii) approve any proposed
business combination or any transaction which results in any Person owning at
least 20% of the stock of Ascent involving (x) until the first day after the
Restriction Period, any Person with whom there have been negotiations pertaining
to the sale of Ascent as have been disclosed by COMSAT to Ascent previously in
writing or any Affiliate of such Person, or (y) for six months after the
Effective Time, any other Person. In addition, Ascent shall not at any time,
whether before or subsequent to the expiration of the Restriction Period, engage
in any action described in clauses (i), (ii), or (iii) of the preceding sentence
if it is pursuant to an arrangement negotiated (in whole or in part) prior to
the Distribution, even if at the time of the Distribution it is subject to
various conditions.
(e) Until the first day after the Restriction Period, Ascent shall not
sell, transfer, or otherwise dispose of or agree to dispose of assets
(including, for such purpose, any shares of capital stock of a Subsidiary) that,
in the aggregate, constitute more than 60% of the gross assets of Ascent, nor
shall Ascent and its Subsidiaries sell, transfer, or otherwise dispose of or
agree to dispose of assets (including, for such purpose, any shares of capital
stock of a Subsidiary) that, in the aggregate, constitute more than 60% of the
consolidated gross assets of Ascent and its Subsidiaries. The foregoing sentence
shall not apply to sales, transfers, or dispositions of assets in the ordinary
course of business. The percentages of gross assets or consolidated gross assets
of Ascent or Ascent and its Subsidiaries, as the case may be, sold, transferred,
or otherwise disposed of, shall be based on the fair market value of the gross
assets of Ascent and its Subsidiaries as of the Effective Time, and for this
purpose, the values set forth in the Appraisal shall be conclusive. Sales,
transfers or other dispositions by Ascent or any of its Subsidiaries to Ascent
or any of its Subsidiaries are not subject to this Section 4.02(e) to the extent
not inconsistent with the structure necessary for the Distribution to qualify
for Tax-Free Status.
(f) Until the first day after the Restriction Period, Ascent and its
Subsidiaries shall not voluntarily dissolve or liquidate or engage in any
merger, consolidation or other reorganization. The foregoing sentence shall not
apply to transactions in which Ascent acquires another corporation, limited
liability company, limited partnership, general partnership or joint venture
solely for cash or other consideration that is not Equity Securities of Ascent.
Reorganizations of Ascent with its Subsidiaries, and liquidations of Ascent's
Subsidiaries, are not subject to this Section 4.02(f) to the extent not
inconsistent with the structure necessary for the Distribution to qualify for
Tax-Free Status.
(g) Until the first day after the Restriction Period, Ascent shall not
contribute or otherwise transfer to a Subsidiary of Ascent any of the assets
formerly owned by ANS and transferred to Ascent pursuant to the liquidation of
ANS.
(h) Any of the provisions of Sections 4.02(b), (c), (d), (e), (f), and (g)
shall be waived with respect to any particular transaction or transactions if
(i) COMSAT or Ascent has obtained a ruling from the IRS, in form and substance
reasonably satisfactory to COMSAT, to the effect that such proposed transaction
will not adversely affect the Tax-Free Status of the Distribution, (ii) COMSAT
has determined, in its sole and absolute discretion, which discretion shall be
exercised in good faith solely to preserve the Tax-Free Status of the
Distribution, that it could not reasonably be expected that such proposed
transaction would have a material adverse effect on the Tax-Free Status of the
Distribution, or (iii) with respect to a transaction occurring at least one year
after the Effective Time, Ascent obtains an Unqualified Tax Opinion with respect
to such proposed transaction. Waiver with respect to one transaction or group of
transactions shall not constitute a waiver with respect to any other
transaction.
(i) COMSAT shall not take any action, nor fail or omit to take any action,
that would (i) cause the Distribution not to have Tax-Free Status or (ii) cause
any representation made in the Ruling Documents to be untrue in a manner which
would have an adverse effect on the Tax-Free Status of the Distribution.
4.03 Cooperation Related to Distribution Tax Matters.
(a) Until the first day after the Restriction Period, each of COMSAT and
Ascent shall furnish the other with a copy of any ruling request that Ascent or
COMSAT or any of their respective Subsidiaries may file with the IRS and any
opinion received that relates to or otherwise reasonably could be expected to
have an effect on the Tax-Free Status of the Distribution.
(b) Ascent shall cooperate with COMSAT in connection with (i) any
determination pursuant to Section 4.02(h)(ii) above or (ii) COMSAT's request for
a Subsequent Ruling. Such cooperation shall include, without limitation,
providing any information and/or representations reasonably requested by COMSAT
or its counsel to enable COMSAT or its counsel to obtain and maintain any
Subsequent Ruling, provided that Ascent's reasonable refusal to give a
representation will not be deemed a failure to cooperate. From and after any
Representation Date until the first day after the two-year anniversary of the
date that COMSAT makes the correlative determination or receives the correlative
Subsequent Ruling, Ascent shall not take (nor shall it refrain from taking) any
action that would have caused a representation given by Ascent in connection
with any such determination or COMSAT's request for a Subsequent Ruling to have
been untrue as of the relevant Representation Date, had Ascent intended to take
(or refrain from taking) such action on the relevant Representation Date.
(c) COMSAT shall cooperate with Ascent in connection with (i) any
determination pursuant to Section 4.02(h)(ii) above, (ii) a request by Ascent
that COMSAT seek a Subsequent Ruling, or (iii) a request for an Unqualified Tax
Opinion. Such cooperation shall include, without limitation, providing any
information and/or representations required to enable COMSAT or its counsel to
obtain and maintain any Subsequent Ruling or for Ascent to obtain an Unqualified
Tax Opinion, provided that COMSAT's reasonable refusal to give a representation
will not be deemed to be a failure to cooperate. From and after any
Representation Date until the first day after the two-year anniversary of the
date that COMSAT makes the correlative determination or the Subsequent Ruling or
Unqualified Tax Opinion is received, COMSAT shall not take (nor shall it refrain
from taking) any action that would have caused a representation given by COMSAT
in connection with any such determination, COMSAT's request for a Subsequent
Ruling, or Ascent's request for an Unqualified Tax Opinion to have been untrue
as of the relevant Representation Date, had COMSAT intended to take (or refrain
from taking) such action on the relevant Representation Date. COMSAT shall not
amend any Ruling Document without the prior consent of Ascent, which shall not
be unreasonably withheld or delayed.
(d) Until the first day after the Restriction Period, Ascent will provide
adequate notice to COMSAT of any action described in paragraphs (b) through (g)
of Section 4.02 above, without regard to the exceptions thereto, within a period
of time sufficient to enable COMSAT (i) to make the determination referred to in
Section 4.02(h)(ii), (ii) to prepare and seek any Subsequent Ruling in
connection with such proposed transaction, or (iii) to seek injunctive relief
pursuant to Section 4.05 hereof in a court of competent jurisdiction. Each such
notice shall set forth the terms and conditions of the proposed transaction,
including, without limitation, the nature of any related action proposed to be
taken by the board of directors of Ascent, the approximate number of shares of
Ascent stock (if any) proposed to be sold by Ascent or otherwise issued by
Ascent, the approximate value of Ascent's assets (or assets of any of the Ascent
Subsidiaries) proposed to be transferred, and the proposed timetable for such
transaction, all with sufficient particularity to enable COMSAT to make such
determination, to prepare and seek such Subsequent Ruling, or seek such
injunctive relief. Promptly, but in any event within 30 days, after COMSAT
receives such written notice from Ascent, COMSAT shall notify Ascent in writing
of such determination or of COMSAT's intent to seek a Subsequent Ruling and the
proposed date for the initial submission thereof, which date shall not be more
than 60 days after COMSAT so notifies Ascent of its intent to seek such
Subsequent Ruling, provided that such 30-day period or 60-day period, as the
case may be, shall be appropriately extended for any period of noncompliance by
Ascent with this Section 4.03.
4.04 Indemnification Specific to Distribution Tax Matters.
(a) Notwithstanding any provision of this Agreement to the contrary,
Ascent shall indemnify and hold harmless COMSAT (and any successor thereto)
against any After-Tax Tax-Related Losses incurred by COMSAT to the extent such
After-Tax Tax-Related Losses are caused by any breach by Ascent of any of its
representations, warranties, or covenants made pursuant to this Article IV.
(b) Notwithstanding any provision of this Agreement to the contrary,
COMSAT shall indemnify and hold harmless Ascent (and any successor thereto)
against any After-Tax Tax-Related Losses incurred by Ascent to the extent such
After-Tax Tax-Related Losses are caused by any breach by COMSAT of its covenant
made pursuant to Section 4.02(i) or solely by the inaccuracy of any facts or
representations about COMSAT and its Subsidiaries (other than Ascent and its
Subsidiaries), INTELSAT or Inmarsat contained in the Ruling Documents.
(c) To the extent After-Tax Tax-Related Losses are attributable to
Subsequent Tax Legislation or Regulation, such losses shall be borne equally by
COMSAT and Ascent. The party making actual payment of such losses shall be
indemnified by the other party to the extent of the other party's allocated
share of such losses.
(d) To the extent an indemnification obligation relates to Spin-off Tax
Liabilities, the indemnifying party shall make payment pursuant to such
indemnification obligation within 30 days after the earlier of (i) the date the
indemnified party makes a payment of taxes, interest, or penalties with respect
to a proposed adjustment of taxes or an assessment of tax deficiency asserted or
made by any Taxing Jurisdiction that is premised in whole or part on Spin-off
Tax Liabilities, including a payment made in settlement of an asserted tax
deficiency (each, an "Actual Tax Payment"), or (ii) the date the indemnified
party gives written notice to the indemnifying party that the indemnified party
has notified any Taxing Jurisdiction, or gives the indemnifying party written
notice of an acknowledgment by any Taxing Jurisdiction, that such proposed
adjustment of taxes or tax deficiency would not result in a net payment by the
indemnified party because of the carryover, carryback or carryforward of net
operating losses or credits, the crediting of previously paid taxes, the
utilization of deductions or credits not claimed on the indemnified party's tax
returns as originally filed, the exclusion of income reported on such returns,
or the utilization of any other tax attributes that offset the asserted taxes
(each, a "Deemed Tax Payment"). The amount payable pursuant to the preceding
sentence shall be the After-Tax Tax-Related Losses implied by such Actual Tax
Payments and Deemed Tax Payments.
(e) To the extent an indemnification obligation does not relate to
Spin-off Tax Liabilities, the indemnifying party shall make payment pursuant to
such indemnification obligation within 30 days after the indemnified party makes
a payment that is a Tax-Related Loss.
(f) In the event that the indemnified party is refunded any amounts
previously paid with respect to Spin-off Tax Liabilities prior to a Final
Determination with respect to such Spin-off Tax Liabilities, to the extent such
amounts previously paid by the indemnified party were paid to the indemnified
party by the indemnifying party pursuant to Sections 4.04(a), (b) or (c), the
indemnified party shall, within 30 days after the receipt thereof, deposit such
refunded amounts in an interest-bearing escrow account maintained by a
commercial bank or trust company chosen by the indemnified party in its sole
discretion. To the extent that, pursuant to a Final Determination, the
indemnified party is entitled to retain any amounts so deposited, the
indemnified party shall, within 30 days after the date of such Final
Determination, return such amounts, together with any interest thereon paid by
the Taxing Jurisdiction or paid by the commercial bank or trust company
maintaining the escrow account in which such amounts were deposited, but without
any other allowance for interest or any other charge for the use of money. In
the event that the indemnified party is refunded or receives credit for any
amounts previously paid with respect to Spin-off Tax Liabilities pursuant to a
Final Determination with respect to such Spin-off Tax Liabilities, to the extent
such amounts previously paid by the indemnified party were paid to the
indemnified party by the indemnifying party pursuant to Sections 4.04(a), (b) or
(c), the indemnified party shall, within 30 days after the receipt of such
refund or credit, return such amounts to the indemnifying party.
(g) (i) In connection with this indemnification obligation, the
indemnifying party shall, acting in good faith and at the indemnifying party's
own expense, conduct all proceedings, subject to clause (ii) of this subsection
(g), relating to the indemnified matter, but shall allow the indemnified party,
at the indemnified party's own expense, to participate fully in such
proceedings. The indemnifying party may not settle any such proceedings without
the consent of the indemnified party, which consent shall not be unreasonably
withheld. In the event that any procedure or forum that the indemnifying person
desires to utilize requires payment of all or any portion of Spin-off Tax
Liabilities, it shall be the responsibility of the indemnifying party to provide
to the indemnified party funds sufficient to make such payment. (ii) If a
liability indemnified hereunder is grouped with other unrelated asserted
liabilities or issues in a proceeding, the parties shall use their respective
Best Efforts to cause the indemnified liability to be the subject of a separate
proceeding. If such severance is not possible, the indemnifying party shall
assume and direct and be responsible only for the matters relating to the
indemnified liability, and the choice of forum for the proceeding shall be
determined by mutual agreement of the parities, which shall not be unreasonably
withheld or delayed. If the parties are unable to agree as to the choice of the
forum, the forum selection shall be determined through the dispute resolution
procedures set forth in Section 3.09.
(h) COMSAT shall be indemnified and held harmless pursuant to this Section
4.04 without regard to the fact that (i) COMSAT or Ascent may have received a
Subsequent Ruling pursuant to Section 4.02(h)(i), (ii) COMSAT may have made a
determination pursuant to Section 4.02(h)(ii), or (iii) Ascent may have obtained
an Unqualified Tax Opinion pursuant to Section 4.02(h)(iii). COMSAT shall be
indemnified and held harmless pursuant to this Section 4.04 without regard to
whether a transaction is subject to Sections 4.02(b), (c), (d), (e), (f), or
(g).
(i) Notwithstanding anything to the contrary contain in this Agreement, no
indemnification pursuant to this Section 4.04 shall be available to either party
for any Loss, unless the Tax-Free Status of the Distribution has been lost.
4.05 Enforcement. The parties hereto acknowledge that irreparable harm
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
The parties hereto agree that, in order to preserve the Tax-Free Status of the
Distribution, injunctive relief is appropriate to prevent any violation of the
foregoing covenants, provided, however, that injunctive relief shall not be the
exclusive legal or equitable remedy for any such violation.
ARTICLE V
ACCESS TO INFORMATION AND SERVICES
5.01 Provision of Corporate Records.
(a) COMSAT shall arrange as soon as practicable following the Distribution
Date, to the extent not previously delivered, for the transportation (at
Ascent's cost) to Ascent of the Ascent Books and Records in its possession,
except to the extent such items are already in the possession of Ascent or an
Ascent Entity. Such Ascent Books and Records shall be the property of Ascent,
but shall be available to COMSAT for review and duplication until COMSAT shall
notify Ascent in writing that such records are no longer of use to COMSAT.
(b) Ascent shall arrange as soon as practicable following the Distribution
Date, to the extent not previously delivered for the transportation (at COMSAT's
cost) to COMSAT of the COMSAT Books and Records in its possession, except to the
extent such items are already in the possession of COMSAT. The COMSAT Books and
Records shall be the property of COMSAT, but shall be available to Ascent for
review and duplication until Ascent shall notify COMSAT in writing that such
records are no longer of use to Ascent.
5.02 Access to Information. From and after the Distribution Date, COMSAT
shall afford to Ascent and its authorized accountants, counsel and other
designated representatives reasonable access (including using reasonable efforts
to give access to persons or firms possessing information) and duplicating
rights during normal business hours to all records, books, contracts,
instruments, computer data and other data and information relating to
pre-Distribution operations (collectively, "Information") within COMSAT's
possession insofar as such access is reasonably required by Ascent for the
conduct of its business, subject to appropriate restrictions for classified or
Privileged Information. Similarly, Ascent shall afford to COMSAT and its
authorized accountants, counsel and other designated representatives reasonable
access (including using reasonable efforts to give access to persons or firms
possessing information) and duplicating rights during normal business hours to
Information within Ascent's possession, insofar as such access is reasonably
required by COMSAT for the conduct of its business, subject to appropriate
restrictions for classified or Privileged Information. Information may be
requested under this Article V for the legitimate business purposes of either
party, including without limitation, audit, accounting, claims (including claims
for indemnification hereunder), litigation and tax purposes, as well as for
purposes of fulfilling disclosure and reporting obligations and for performing
this Agreement, the Corporate Agreement, the Tax Disaffiliation Agreement and
the transactions contemplated hereby and thereby.
5.03 Production of Witnesses. At all times from and after the Distribution
Date, each of Ascent and COMSAT shall use reasonable efforts to make available
to the other, upon written request, its and its Subsidiaries' officers,
directors, employees and agents as witnesses to the extent that such persons may
reasonably be required in connection with any Action.
5.04 Reimbursement. A party providing Information or witness services to
the other party under this Article V shall be entitled to receive from the
recipient, upon the presentation of invoices therefor, payments of such amounts,
relating to supplies, disbursements and other out-of-pocket expenses (at cost)
and direct and indirect expenses of employees who are witnesses or otherwise
furnish assistance (at cost), as may be reasonably incurred in providing such
Information or witness services.
5.05 Retention of Records. Except as otherwise required by law or
otherwise agreed in writing, each of COMSAT and Ascent may destroy or otherwise
dispose of any of the Information, which is material Information and is not
contained in other Information retained by COMSAT or Ascent, as the case may be,
at any time after the earlier of the tenth anniversary of this Agreement or the
time at which such information is at least ten years old, provided that, prior
to such destruction or disposal, (a) it shall provide no less than 90 or more
than 120 days prior written notice to the other, specifying in reasonable detail
the Information proposed to be destroyed or disposed of and (b) if a recipient
of such notice shall request in writing prior to the scheduled date for such
destruction or disposal that any of the Information proposed to be destroyed
disposed of be delivered to such requesting party, the party proposing the
destruction or disposal shall promptly arrange for the delivery of such of the
Information as was requested at the expense of the party requesting such
Information.
5.06 Confidentiality. Each of COMSAT and its Subsidiaries on the one hand,
and Ascent and its Subsidiaries on the other hand, shall hold, and shall cause
its consultants and advisors to hold, in strict confidence, all Information
concerning the other in its possession or furnished by the other or the other's
representatives pursuant to this Agreement (except to the extent that such
Information has been (i) in the public domain through no fault of such party or
(ii) later lawfully acquired from other sources by such party), and each party
shall not release or disclose such Information to any other person, except its
auditors, attorneys, financial advisors, rating agencies, bankers and other
consultants and advisors, unless compelled to disclose by judicial or
administrative process or, as reasonably advised by its counsel or by other
requirements of law, or unless such Information is reasonably required to be
disclosed in connection with (x) any litigation with any third-parties or
litigation between COMSAT Entities and the Ascent Entities, (y) any contractual
agreement to which the COMSAT Entities or the Ascent Entities are currently
parties, or (z) in exercise of either parties' rights hereunder.
5.07 Privileged Matters. COMSAT and Ascent recognize that legal and other
professional services that have been and will be provided prior to the
Distribution Date have been and will be rendered for the benefit of both the
COMSAT Entities and the Ascent Entities and that both the COMSAT Entities and
the Ascent Entities should be deemed to be the client for the purposes of
asserting all Privileges. To allocate the interests of each party in the
Privileged Information, the parties agree as follows:
(a) COMSAT shall be entitled, in perpetuity, to control the assertion or
waiver of all Privileges in connection with Privileged Information which relates
solely to the COMSAT Entities, whether or not the Privileged Information is in
the possession of or under the control of COMSAT or Ascent. COMSAT shall also be
entitled, in perpetuity, to control the assertion or waiver of all Privileges in
connection with Privileged Information that relates solely to the subject matter
of any claims constituting COMSAT Entity liabilities, now pending or which may
be asserted in the future, in any lawsuits or other proceedings initiated
against or by COMSAT, whether or not the Privileged Information is in the
possession of or under the control of COMSAT or Ascent.
(b) Ascent shall be entitled, in perpetuity, to control the assertion or
waiver of all Privileges in connection with Privileged Information which relates
solely to the Ascent Entities, whether or not the Privileged Information is in
the possession of or under the control of COMSAT or Ascent. Ascent shall also be
entitled, in perpetuity, to control the assertion or waiver of all Privileges in
connection with Privileged Information which relates solely to the subject
matter of any claims constituting Ascent liabilities, now pending or which may
be asserted in the future, in any lawsuits or other proceedings initiated
against or by Ascent, whether or not the Privileged Information is in the
possession of Ascent or under the control of COMSAT or Ascent.
(c) COMSAT and Ascent agree that they shall have a shared Privilege, with
equal right to assert or waive, subject to the restrictions in this Section
5.07, with respect to all Privileges not allocated pursuant to the terms of
Sections 5.07(a) and (b). (All Privileges relating to any claims, proceedings,
litigation, disputes, or other matters which involve both COMSAT and Ascent in
respect of which COMSAT and Ascent retain any responsibility or liability under
this Agreement, shall be subject to a shared Privilege.)
(d) No party shall intentionally waive any Privilege which could be
asserted under any applicable law, and in which the other party has a shared
Privilege, without the consent of the other party, except to the extent
reasonably required in connection with any litigation with third-parties or as
provided in subsection (e) below. Consent shall be in writing, or shall be
deemed to be granted unless written objection is made within twenty (20) days
after notice upon the other party requesting such consent.
(e) In the event of any litigation or dispute between a COMSAT Entity and
an Ascent Entity, either party may waive a Privilege in which the other party
has a shared Privilege, without obtaining the consent of the other party,
provided that such waiver of a shared Privilege shall be effective only as to
the use of Privileged Information with respect to the litigation or dispute
between the COMSAT Entity and the Ascent Entity, and shall not operate as a
waiver of the shared Privilege with respect to third-parties.
(f) Upon receipt by any party of any subpoena, discovery or other request
which arguably calls for the production or disclosure of Information subject to
a shared Privilege or as to which the other party has the sole right hereunder
to assert a Privilege, or if any party obtains knowledge that any of its current
or former directors, officers, agents or employees have received any subpoena,
discovery or other requests which arguably calls for the production or
disclosure of such Privileged Information, such party shall promptly notify the
other party of the existence of the request and shall provide the other party a
reasonable opportunity to review the Information and to assert any rights it may
have under this Section 5.07 or otherwise to prevent the production or
disclosure of such Privileged Information.
(g) The transfer of the Ascent Books and Records and the COMSAT Books and
Records and other Information between COMSAT and its Subsidiaries and Ascent and
its Subsidiaries, is made in reliance on the agreement of COMSAT and Ascent, as
set forth in Sections 5.04 and 5.05, to maintain the confidentiality of
Privileged Information and to assert and maintain all applicable Privileges. The
access to information being granted pursuant to Sections 5.01 and 5.02 hereof,
the agreement to provide witnesses and individuals pursuant to Section 5.03
hereof and the transfer of Privileged Information between COMSAT and its
Subsidiaries and Ascent and its Subsidiaries pursuant to this Agreement shall
not be deemed a waiver of any Privilege that has been or may be asserted under
this Agreement or otherwise.
ARTICLE VI
MISCELLANEOUS
6.01 Limitation of Liability. Neither COMSAT nor Ascent shall be liable to
the other for any special, punitive or consequential damages arising in
connection with this Agreement, the Corporate Agreement, the Tax Disaffiliation
Agreement, the Distribution or the other matters contemplated herein or therein.
6.02 Subsidiaries. COMSAT agrees and acknowledges that COMSAT shall be
responsible for the performance by each COMSAT Entity of the obligations
hereunder applicable to such COMSAT Entity. Ascent agrees and acknowledges that
Ascent shall be responsible for the performance by each Ascent Entity of the
obligations hereunder applicable to such Ascent Entity.
6.03 Amendments; Waivers; Remedies. This Agreement, the Corporate
Agreement and the Tax Disaffiliation Agreement may not be amended or terminated,
nor may any failure of performance or default be waived, orally, except by a
writing duly executed by or on behalf of the parties hereto (and, in the case of
Ascent, based upon the recommendations of the disinterested directors of the
Ascent Board of Directors). Any such amendment or waiver shall be validly and
sufficiently authorized for purposes of this Agreement if it is signed on behalf
of COMSAT or Ascent by any of their respective presidents or vice presidents. No
failure on the part of COMSAT, any transferee or Ascent to exercise, and no
delay in exercising, any right hereunder or thereunder shall operate as a waiver
thereof (except as expressly provided herein or therein); nor shall any single
or partial exercise thereof or the exercise of any other right preclude any
other or further exercise thereof or the exercise of any other right. The
remedies herein and therein provided are cumulative and not exclusive of any
remedies provided at law or in equity.
6.04 Severability. If any provision of this Agreement or the application
of any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction or fully authorized arbitration tribunal to be
invalid, illegal or unenforceable to any extent, the remainder of this Agreement
or such provision of the application of such provision to such party or
circumstances, other than those to which it is so determined to be invalid,
illegal or unenforceable, shall remain in full force and effect to the fullest
extent permitted by law and shall not be affected thereby, unless such a
construction would be unreasonable.
6.05 Notices. Any notice, instruction, direction or demand under the terms
of this Agreement required to be in writing will be duly given upon delivery, if
delivered by hand or facsimile transmission, or five (5) days after posting if
sent by certified mail, return receipt requested to the following addresses:
COMSAT:
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, Maryland 20815
Attention: Allen E. Flower
Vice President and Chief Financial Officer
Telecopy No.: 301/214-5131
With copy (which shall not constitute notice) to:
Warren Y. Zeger
Vice President, General Counsel and Secretary
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, Maryland 20815
Telecopy No.: 301/214-5128
and
Ascent:
Ascent Entertainment Group, Inc.
1200 Seventeenth Street
Denver, Colorado 80202
Attention: James A. Cronin III
Executive Vice President, Finance and
Chief Operating Officer
Telecopy No.: 303/595-0204
With copy (which shall not constitute notice) to:
Arthur M. Aaron
Vice President, Business and Legal Affairs
and Secretary
Ascent Entertainment Group, Inc.
1200 Seventeenth Street
Denver, Colorado 80202
Telecopy No.: 303/595-0127
or to such other address as either party may have furnished to the other in
writing in accordance with this Section 6.6.
6.06 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original instrument, but all of
which together shall constitute but one and the same agreement.
6.07 Governing Law. This Agreement and the transactions contemplated
hereby shall be construed in accordance with, and governed by, the laws of the
State of Maryland without giving effect to the conflicts of law principles
thereof. Each party hereby agrees that any legal action or proceedings with
respect to Agreement, the Corporate Agreement, the Tax Disaffiliation Agreement,
the Distribution or the other matters contemplated herein or therein shall be
brought in a federal or state court located in the State of Maryland, and each
of the parties hereby consents to the jurisdiction of such courts and hereby
waives any objections on the grounds of venue, forum non conveniens, situs of
the action, improper forum or any similar grounds. Each party hereby waives the
right to trial by jury in any such action.
6.08 Successors; Assignment. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective
successors and assigns. Neither party may assign or transfer any of its rights
or duties under this Agreement to any person or entity without the prior written
consent of the other party, except by operation of law.
6.09 Termination. This Agreement may be terminated (i) at any time prior
to the Effective Time by a resolution approved by COMSAT's Board of Directors in
its sole discretion; or (ii) at any time after September 1, 1997, but prior to
time at which COMSAT's Board of Directors declares the Special Dividend and sets
the Record Date pursuant to Section 2.03(a) of this Agreement, by a resolution
approved by Ascent's Board of Directors acting upon the recommendations of the
disinterested directors of the Ascent Board of Directors in its sole discretion.
6.10 No Third Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto and shall not be deemed to confer upon third
parties (including any employee of a COMSAT Entity or Ascent Entity) any remedy,
claim, reimbursement, cause of action or other right in excess of those existing
without reference to this Agreement.
6.11 Entire Agreement. This Agreement constitutes the
entire understanding of the parties hereto with respect to the subject matter
hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their duly authorized representatives.
COMSAT CORPORATION
By:/s/ Allen E. Flower
Allen E. Flower
Vice President and Chief
Financial Officer
ASCENT ENTERTAINMENT GROUP, INC.
By:/s/James A.Cronin, III
James A. Cronin III
Executive Vice President, Finance and
Chief Operating Officer
<PAGE>
Appendix A
to the
DISTRIBUTION AGREEMENT
between
COMSAT Corporation
and
Ascent Entertainment Group, Inc.
<PAGE>
CONTINGENT LIABILITIES AND CONTINGENT BENEFITS
Section 1 - Definitions
Capitalized terms that are used in this Appendix have the meaning ascribed
to such term in the Corporate Agreement or, to the extent not therein defined,
the meaning set forth below. Words importing only the singular include the
plural and vice versa where the context requires.
"Action" means any litigation or other judicial, regulatory or
administrative proceeding (including audits of taxes other than federal or state
income taxes, including state franchise taxes measured by income).
"Acts or Omissions" means significant active and direct participation by a
Party in the conduct that resulted in the Contingent Liability or Contingent
Benefit; provided, however, that approvals, non-approvals or rejections of
budgets, strategic business plans and other corporate plans shall not constitute
Acts or Omissions with respect to any particular conduct.
"Benefit" means a significant, identifiable financial benefit that
directly flows to a Party from the Acts or Omissions that resulted in the
Contingent Liability or Contingent Benefit; provided, however, that the payment
of dividends to COMSAT by one or more of its Subsidiaries shall not constitute a
Benefit to COMSAT or to any of COMSAT's other Subsidiaries with respect to any
particular Acts or Omissions of the Subsidiary paying such dividends.
"Contingent Benefit" means a Benefit of one or both of the Parties which
was not booked for financial reporting purposes prior to the Effective Date that
is attributable to either (a) an event which occurred prior to the Initial
Public Offering Date, (b) a condition which existed prior to the Initial Public
Offering Date, or (c) an event which occurred after the Initial Public Offering
Date but which was attributable to the Initial Public Offering; provided,
however, that in any case the Action that resulted in the Contingent Benefit
must have been filed or otherwise commenced within 5 years after the Initial
Public Offering Date.
"Contingent Liability" means a liability (to the extent not covered by
insurance) of one or both of the Parties which was not booked for financial
reporting purposes prior to the Effective Date that is attributable to either
(a) an event which occurred prior to the Initial Public Offering Date, (b) a
condition which existed prior to the Initial Public Offering Date, or (c) an
event which occurred after the Initial Public Offering Date but which was
attributable to the Initial Public Offering; provided, however, that in any case
the Action that resulted in uninsured liability must have been filed or
otherwise commenced within 5 years after the Initial Public Offering Date.
"Judgment" means any judgment or other determination of liability entered
by a court or regulatory or administrative authority, any settlement entered
into or consented to by both of the Parties, or any dismissal of a third party
claim; provided, however, that a stipulated judgment or order of dismissal (or
equivalent) by which a court approves a settlement of an Action entered into by
only one of the Parties, including class action settlements, shall not be deemed
to be a Judgment. For example, the assessment of a tax deficiency (other than a
federal or state income tax deficiency) after the conclusion of an audit and the
exhaustion of the taxpayer's administrative remedies is a Judgment.
"Named Party" means a Party which has one or more members that are named
as a defendant (or equivalent) in an Action. For example, if Ascent is the
taxpayer being audited by a taxing authority, Ascent would be a Named Party in
such Action.
"Party" means a party to this Agreement and each Subsidiary of such party,
other than the other party and its Subsidiaries.
Section 2 - Defense and Prosecution of Actions
2.1 The Parties will cooperate and consult with each other in connection
with the defense or prosecution of any Action in which both Parties are or
potentially may be involved (even if both Parties are not Named Parties in the
Action), including but not limited to Actions which might result in a Contingent
Liability or Contingent Benefit.
2.2 If only one of the Parties is a Named Party in an Action, such Named
Party shall be responsible for both the defense or prosecution of the Action (in
cooperation and consultation with the other Party) and all of the Benefits
and/or costs associated with such Action until such time as such Benefits or
costs may be subject to allocation as a Contingent Benefit or Contingent
Liability under this Agreement. Nothing in this Section 2.2, however, shall
preclude either Party from joining the other party as a Named Party to the
Action, in which case costs shall be allocated in accordance with Section 2.3.
2.3 If both Parties are Named Parties in an Action, they shall agree on
the responsibility for both the defense or prosecution of the Action and the
Benefits and costs associated with such Action until such time as such Benefits
and costs may be subject to allocation as a Contingent Benefit or Contingent
Liability under this Agreement. Such agreement shall take into consideration the
manner in which any Contingent Benefit or Contingent Liability resulting from
the Action would be allocated under Section 3.3. For example, if both COMSAT and
Ascent were Named Parties in an action which arose out of Ascent's hotel in-room
entertainment business, the Parties should agree that Ascent would be primarily
responsible for the defense of the Action and would bear all of the costs
associated with such defense until such time as such costs may be subject to
allocation as a Contingent Liability under this Agreement.
2.4 Each Party shall bear its own internal costs (such as the salaries of
in-house legal counsel and other personnel) incurred in connection with the
defense or prosecution of any Action.
Section 3 - Contingent Liabilities and Contingent Benefits
3.1 The allocation rules set forth in Section 3.3 shall apply to all
Contingent Liabilities and Contingent Benefits of the Parties which result from
Judgments, except for those Actions relating to federal and state income taxes,
including state franchise taxes measured by income, which shall be governed by
the Tax Disaffiliation Agreement. For example, Contingent Liabilities may be
based on contract, tort (including business torts such as alleged violations of
the antitrust laws), tax (other than federal and state income tax),
environmental, workers' compensation, ERISA, securities, regulatory and other
common law and statutory claims.
3.2 Except as the Parties may otherwise agree, any Contingent Liability or
Contingent Benefit which results from a settlement (as opposed to a Judgment)
entered into by only one of the Parties will not be subject to allocation under
this Agreement.
3.3 The Parties agree to allocate Contingent Benefits and pay the costs of
Contingent Liabilities which result from Judgments (and any settlements entered
into by only one of the Parties which the Parties may agree are subject to
allocation under this Agreement) in accordance with the following allocation
rules:
(a) Named Party Rule. Except as otherwise provided in paragraphs (b)
through (f) below, if only one of the Parties is a Named Party in an Action, the
Contingent Liability or Contingent Benefit shall be allocated solely to that
Party.
(b) COMSAT Rule. If the Contingent Liability or Contingent Benefit is
attributable solely to the Acts or Omissions of the COMSAT Entities and the
Ascent Entities did not, in the case of a Contingent Liability, receive any
Benefit from such Acts or Omissions or, in the case of a Contingent Benefit,
contribute to or participate in the Acts giving rise to such Contingent Benefit,
then the Contingent Liability or Contingent Benefit, as applicable, shall be
allocated solely to the COMSAT Entities.
(c) Ascent Rule. If the Contingent Liability or Contingent Benefit is
attributable solely to the Acts or Omissions of Ascent and the COMSAT Entities
did not, in the case of a Contingent Liability, receive any Benefit from such
Acts or Omissions or, in the case of a Contingent Benefit, contribute to or
participate in the Acts giving rise to such Contingent Benefit, then the
Contingent Liability or Contingent Benefit, as applicable, shall be allocated
solely to Ascent.
(d) Joint Rule. In the case of a Contingent Liability, if either (1) the
Contingent Liability is attributable to the Acts or Omissions of both the COMSAT
Entities and the Ascent Entities, or (2) the Party not responsible for the Acts
or Omissions resulting in the Contingent Liability received a Benefit from such
Acts or Omissions, the Parties will use their best efforts to attempt to agree
on an equitable means of sharing the Contingent Liability which reasonably
reflects both (a) the nature of each Party's Acts or Omissions, and (b) any
Benefit to each Party from the Acts or Omissions that resulted in such
Contingent Liability. In the case of a Contingent Benefit, if either (1) the
Contingent Benefit is attributable to the Acts or Omissions of both the COMSAT
Entities and the Ascent Entities, or (2) the Party not responsible for the Acts
or Omissions resulting in the Contingent Benefit contributed to or participated
in the Acts giving rise to such Contingent Benefit, the Parties will use their
best efforts to attempt to agree on an equitable means of sharing the Contingent
Benefit which reasonably reflects both (a) the nature of each Party's Acts or
Omissions, (b) the relative contribution of each Party that gave rise to the
Contingent Benefit, and (c) the Benefits or costs paid by each party in respect
of such Contingent Benefit.
(e) Employee Rule. Notwithstanding paragraphs (a) through (d) above and
except as may otherwise be provided for under any of the indemnification
provisions of this Agreement, the Tax Disaffiliation Agreement or the
Intercompany Services Agreement, if the Contingent Liability results from the
claim of an employee, or former employee of a member of the COMSAT Entities or
Ascent Entities and is related to such person's employment, the Contingent
Liability shall be allocated to the Party by whom such person was employed at
the time when the Acts or Omissions that resulted in the Contingent Liability
occurred. For example, if an employee of one of the Ascent Entities who was
injured while working for an Ascent Entity later transferred to COMSAT, any
Contingent Liability relating to such injury would be allocated solely to the
Ascent Entities.
(f) Express Provision Rule. Notwithstanding paragraphs (a) through (e),
where the parties have agreed to allocate a Contingent Liability or Contingent
Benefit or have provided for indemnification pursuant to an express provision of
this Agreement, the Corporate Agreement or the Tax Disaffiliation Agreement,
such provision shall control.
The applicable allocation rule set forth in paragraphs (b), (c), (d), (e)
and (f) above shall apply even if a Party to which all or part of the Contingent
Liability or Contingent Benefit is to be allocated is not a Named Party in the
Action and regardless of whether such Party may have been dismissed from the
Action by virtue of a motion, settlement or otherwise.
3.4 The amount of a Contingent Liability subject to allocation under this
Agreement shall include, and the amount of any Contingent Benefit available for
allocation shall be reduced by, the costs of any Judgment entered by a court or
judicial, regulatory or administrative authority in an Action (or the cost of
any settlement entered into by both of the Parties), the costs of defending or
prosecuting the Action (including court costs, sanctions imposed by a court,
attorneys' fees, experts' fees and all other external expenses, and the cost of
any interest or penalties with respect to any such Judgment.
3.5 Exhibit A-1 (Schedule of Actions) contains a list of all Actions
pending or threatened as of the date of this Agreement, in which the Parties
believe that a Judgment would be reasonably likely to result in a Contingent
Liability or Contingent Benefit and the manner in which such Contingent
Liability or Contingent Benefit shall be allocated under this Agreement,
notwithstanding the general allocation rules set forth in Section 3.3.
3.6 The Named Party in an Action in which an adverse Judgment would be
reasonably likely to result in a Contingent Liability or a favorable Judgment
would be reasonably likely to result in a Contingent Benefit to be allocated
under this Agreement shall use its best efforts to notify the other Party of the
Action (unless the other Party is also a Named Party in the same Action) within
30 days after the service of process on, or other initial written notice of the
Action to, such Named Party. The notice shall include the following information:
(a) caption of the Action, including the docket number and the name of the court
or other judicial, regulatory or administrative authority before which the
Action is pending; (b) names of the parties involved in the Action, if not
disclosed in the caption; (c) brief statement of the claims alleged; (d) amount
of the liability alleged or expected to be alleged, if known; and (e) which of
the allocation rules set forth in Section 3.3 such Party believes would be
applicable.
3.7 Notwithstanding the provisions of Section 3.6, no Party shall be
relieved of its obligations under this Agreement with respect to a Contingent
Liability unless such Party can demonstrate by a preponderance of the evidence
that it was substantially prejudiced by the failure of the other Party to either
(a) list the action in Exhibit A-1 (Schedule of Actions) pursuant to Section
3.5, or (b) give timely notice of the Action pursuant to Section 3.6.
3.8 Except as otherwise provided in Exhibit A-1 or as the Parties may
otherwise agree, any Contingent Liability or Contingent Benefit resulting from
the Actions either (a) listed in Exhibit A-1 (Schedule of Actions) or (b) for
which notice is given pursuant to Section 3.6 shall be allocated according to
the applicable rule set forth in Section 3.3.
(Exhibit A-1 follows)
<PAGE>
Exhibit A-1
Schedule of Pending or Threatened Actions
CONTINGENT LIABILITIES AND CONTINGENT BENEFITS ALLOCATED SOLELY TO ASCENT
1. The Anschutz claim described in the letter to Deloitte & Touche LLP
dated October 20, 1995 from Wilmer, Cutler & Pickering.
2. The Miramax litigation described in the letter dated October 3, 1995 to
Deloitte & Touche LLP from Williams & Connolly.
3. Certain individuals and corporations that were sellers under the Asset
Purchase Agreement (the "Beacon Purchase Agreement") dated as of October 27,
1994 among Beacon, COMSAT such sellers (the "Sellers") and others, have made
certain claims regarding the contingent payments due such Sellers pursuant to
the Purchase Agreement. All Contingent Liabilities and Contingent Benefits
arising out of the Beacon Purchase Agreement (including but not limited to those
matters described on Schedule 4.19 thereto), arising out of Ascent's ownership
interest in Beacon Communications Corp., or associated with any Action that may
be brought by the Sellers in respect of the Beacon Purchase Agreement or related
matters shall be allocated to Ascent.
4. The Hoskins litigation described in the letter dated October 5, 1995 to
Deloitte & Touche LLP from Akin, Gump, Strauss, Hauer & Feld, L.L.P.
5. All Contingent Liabilities and Contingent Benefits arising out of
Ascent's ownership interest in the Nuggets and the Avalanche shall be allocated
to Ascent.
6. Broadcast Music, Incorporated ("BMI"), the representative of many
composers and publishers of musical works for the licensing of the public
performance rights to such works under U.S. copyright law, has contacted Ascent
and OCC to negotiate a licensing agreement and royalty arrangement for the use
of music in the movies shown by OCC in its pay-per-view in-room entertainment
systems. BMI has requested a royalty rate of 0.40% of the gross revenues
generated from the purchase of films (applicable to both feature and adult
films) containing BMI-represented music, and an interim rate of 0.30% of gross
revenues. Ascent and OCC believe a substantially lower royalty rate should be
applicable and that such royalties are inapplicable to adult films. All
Contingent Liabilities and Contingent Benefits associated with the BMI claim or
BMI royalties shall be allocated to Ascent.
7. American Society of Composers, Authors and Publishers ("ASCAP"), the
representative of many composers and publishers of musical works for the
licensing of the public performance rights to such works under U.S. copyright
law, is currently requesting hotels to sign its new "Standard Agreement" that
obligates the hotel to pay for pay-per-view music royalties if the provider of
such services does not do so. Certain OCC contracts with hotels require OCC to
indemnify the hotels for any costs they incur for the payment of copyright
royalty obligations related to pay-per-view movies. The royalty rates in the
Standard Agreement vary depending on several factors, but they are in all cases
significantly higher than OCC believes it could negotiate from ASCAP directly.
Thus, negotiations are being initiated to acquire the lowest royalty rate
feasible. OCC believes that the royalty rates for ASCAP licensed music should be
no higher than for BMI licensed music, and that because ASCAP controls
considerably less motion picture music than does BMI, it is reasonable that
payments to ASCAP should be considerably less. All Contingent Liabilities and
Contingent Benefits associated with ASCAP royalties or claims shall be allocated
to Ascent.
8. Showtime Networks, Inc. ("Showtime") filed suit against CVE in New York
State Court claiming that CVE was in breach of the agreement under which
Showtime provides CVE with its "Showtime" and "The Movie Channel" services. The
Showtime suit alleged that CVE failed to use its best efforts to promote
"Showtime" and "The Movie Channel" and that CVE failed to pay certain license
fees. The Showtime suit subsequently was dismissed with prejudice as a result of
a settlement in which CVE agreed to pay a portion of the license fees in dispute
and enter into a new license agreement. All Contingent Liabilities and
Contingent Benefits associated with the settlement with Showtime or any
subsequent Actions which may have been brought by Showtime pertaining to CVE or
OCC shall be allocated to Ascent.
9. The Leask litigation described in the letter to Deloitte & Touche LLP
dated January 10, 1995 from Wilson, Sonsini, Goodrich & Rosati. COMSAT reached a
post-judgment settlement with Mr. Leask under which OCV will pay Mr. Leask $1.54
million in return of his release of all claims against OCV. All Contingent
Liabilities and Contingent Benefits associated with the settlement with Mr.
Leask or any subsequent Actions which may be brought by Mr. Leask, if any,
pertaining to OCV shall be allocated to Ascent.
10. On February 16, 1995, OCV filed a lawsuit against LodgeNet
Entertainment Corporation ("Lodgenet") alleging infringement of an OCV patent on
in-room entertainment systems. On November 28, 1995, Lodgenet was granted
summary judgment on the issues of limiting the period during which Lodgenet
might be liable for damages to begin on November 22, 1994, and OCV has sought
reconsideration of that decision. On March 22, 1996, LodgeNet filed suit against
On Command Corporation (OCC) in the U.S. District Court in South Dakota alleging
infringement of a patent acquired by LodgeNet on March 5, 1996 and seeking
injunctive relief and damages, which case is in the process of being transferred
to the Federal Court for the Northern District of California and is scheduled to
go to trial in late 1997. All Contingent Benefits and Contingent Liabilities
associated with the Lodgenet litigation or any subsequent litigation brought by
LodgeNet or any Ascent Entity related thereto shall be allocated to Ascent.
12. In response to concerns of Hilton Hotels Corporation ("Hilton"), a key
customer and shareholder of OCV, Ascent, CVE, OCV and COMSAT entered into a
letter agreement with Hilton dated December 8, 1995 (as amended, the "Hilton
Agreement"). The Hilton Agreement initially provided, among other terms, that:
(a) an independent investment banker would be engaged to review the contribution
by CVE of substantially all of its in-room entertainment assets to OCV in a
transaction reflected in the Contribution Agreement dated August 1, 1995 between
CVE and OCV (the "CVE Contribution") with respect to the value of the
consideration received by OCV and the value of the OCV shares issued in the
transaction, and the parties agreed to be bound by the recommendation of such
investment banker (the "Contribution Recommendation"), including, if necessary,
at CVE's option, paying cash to OCV or the minority stockholders of OCV (the
"CVE Cash Payment"), retiring shares of OCV owned by Ascent (the "OCV Share
Retirement") or reallocating shares of OCV owned by Ascent (the "OCV Share
Reallocation") to the minority stockholders of OCV. The Corporate Agreement (see
Section 19 of Exhibit A-1 to Appendix A thereto) provided that, if applicable,
COMSAT would either: (i) reimburse CVE or Ascent for the amount of the CVE Cash
Payment, or (ii) make a cash payment or transfer property to CVE or Ascent with
a valuation equal to the value of the OCV shares surrendered or retired at
COMSAT's option (the "CVE Contribution Indemnification Obligation"). The Hilton
Agreement was amended as of August 13, 1996 to provide, among other things, that
the number of shares issued to CVE, now known as ANS, in connection with the CVE
Contribution, would be reduced. In satisfaction of the CVE Contribution
Indemnification Obligation, COMSAT made a cash payment to Ascent of
$1,820,227.59 on November 5, 1996. Ascent and ANS hereby acknowledge receipt of
such funds and respectively, each on behalf of itself and its affiliates,
directors, officers successors and assigns, hereby fully release each of the
COMSAT Entities, and their respective affiliates, directors, officers,
employees, agents, and their respective successors and assigns, from and against
any and all claims, demands, obligations, actions, liabilities, causes of action
or damages of every kind or nature whatsoever, in law or in equity, arising out
of or related to the CVE Contribution, the Hilton Agreement and the CVE
Contribution Indemnification Obligation. All Contingent Liabilities arising out
of the CVE Contribution, the Hilton Agreement or associated with any Action, if
any, that may be brought by an OCV or On Command Corporation shareholder in
respect of the CVE Contribution shall be allocated to Ascent.
CONTINGENT LIABILITIES AND CONTINGENT BENEFITS ALLOCATED SOLELY TO COMSAT
13. On April 14, 1995, COMSAT filed a lawsuit against General Instrument
Corporation ("GI") and two San Francisco area cable television companies
alleging infringement of COMSAT's patent on conditional access technology for
the encrytion and decryption of television signals. On May 23, 1995, GI filed a
counterclaim against COMSAT asserting that COMSAT tortiously interfered with and
defamed GI's business in bringing the patent infringement suit and publicly
announcing it. GI and Scientific-Atlanta, Inc. entered into a settlement
agreement with COMSAT settling all claims with respect to the patent in question
(the "GI/SA Settlement Agreement"). All Contingent Benefits and Contingent
Liabilities associated with the GI/SA Settlement Agreement shall be allocated to
COMSAT.
14. The PanAmSat antitrust litigation contained in the letter dated
January 27, 1995 to Deloitte & Touche LLP from Howrey & Simon.
15. The Amplica chemical spill proceeding described in the letter dated
January 27, 1995 to Deloitte & Touche LLP from Howrey & Simon.
16. The Mendoza commercial litigation described in the letter dated
January 30, 1995 to Deloitte & Touche LLP from Patton, Boggs & Blow.
17. The Florida Department of Environmental Protection proceeding
described in the letter dated February 3, 1995 to Deloitte & Touche LLP from
Hearne, Graziano & Nader, P.A.
18. The Belcom pending and threatened litigation and related matters
described in the letter dated February 5, 1996 from Latham & Watkins.
19. On April 23, 1997, COMSAT filed suit against Bruce Crockett and others
alleging, among other things, that Mr. Crockett had breached certain terms of
his termination agreement with COMSAT. All Contingent Benefits and Contingent
Liabilities associated with the Crockett litigation shall be allocated to
COMSAT.
CONTINGENT LIABILITIES AND CONTINGENT BENEFITS ALLOCATED TO EITHER COMSAT
OR ASCENT OR BOTH, AS APPLICABLE
20. COMSAT has a number of federal and state tax contingencies, both
asserted and unasserted, which will be allocated in accordance with the Tax
Disaffiliation Agreement.
<PAGE>
Appendix C
to the
DISTRIBUTION AGREEMENT
between
COMSAT Corporation
and
Ascent Entertainment Group, Inc.
<PAGE>
Appendix C
Indemnification
3.07.01 Indemnification by COMSAT. Except with respect to (i) tax matters
which shall be governed by Section 4.04 of this Agreement and the Tax
Disaffiliation Agreement, (ii) matters related to the IPO which shall be
governed by Section 5.3 of the Corporate Agreement, (iii) claims for which
insurance proceeds or other amounts are received which shall be governed by
Section 3.04 of this Agreement, COMSAT shall indemnify, defend and hold
harmless, on an After Tax Basis, the Ascent Entities and each of their
respective directors, officers and employees and each of the heirs, executors,
successors and assigns of any of the foregoing (the "Ascent Indemnitees") from
and against any and all Losses of the Ascent Indemnitees arising out of or due
to the failure or alleged failure of any COMSAT Entity to pay, perform or
otherwise discharge any of the following items:
(a) All Losses arising (whether before, on or after the Distribution Date)
in connection with the COMSAT Assets or the COMSAT Business, whether such Losses
relate to events, occurrences or circumstances occurring or existing, or whether
such Losses are asserted, before, on or after the Distribution Date.
(b) All Losses arising out of or based upon any untrue statement or
alleged untrue statement of material fact or omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, with respect to all information contained in
the Information Statement; provided, however, that such indemnification shall
not apply to any Losses to the extent such Losses arise out of or are based upon
any statement or omission or alleged statement or omission relating to any
Ascent Entity which was supplied for inclusion by any Ascent Entity.
(c) All Losses resulting from a final adjudication of any litigation
initiated by persons acting in their capacity as a shareholder or creditor of
any COMSAT Entity and arising out of the transactions contemplated by this
Agreement, except for such Losses which have been expressly assumed by Ascent
hereunder.
(d) All Losses relating to any Contingent Liability allocated to any
COMSAT Entity pursuant to Section 3.01 and Appendix A of this Agreement.
(e) All Losses incurred by any Ascent Entity as a result of a material
breach of this Agreement by COMSAT.
Anything in this Section 3.07.01 to the contrary notwithstanding, no COMSAT
Entity shall have any liability to any Ascent Entity in respect of any Tax (as
such term is defined in the Tax Disaffiliation Agreement), except as otherwise
expressly provided in this Agreement or in the Tax Disaffiliation Agreement.
3.07.02 Indemnification by Ascent. Except with respect to (i) tax matters
which shall be governed by Section 4.04 of this Agreement and the Tax
Disaffiliation Agreement, (ii) matters related to the IPO which shall be
governed by Section 5.3 of the Corporate Agreement, (iii) claims for which
insurance proceeds or other amounts are received which shall be governed by
Section 3.04 of this Agreement, Ascent shall indemnify, defend and hold
harmless, on an After Tax Basis, the COMSAT Entities and each of their
respective directors, officers and employees and each of the heirs, executors,
successors and assigns of any of the foregoing (the "COMSAT Indemnitees") from
and against any and all Losses of the Ascent Indemnitees arising out of or due
to the failure or alleged failure of any COMSAT Entity to pay, perform or
otherwise discharge any of the following items:
(a) All Losses arising (whether before, on or after the Distribution Date)
in connection with the Ascent Assets or the Ascent Business, whether such Losses
relate to events, occurrences or circumstances occurring or existing, or whether
such Losses are asserted, before, on or after the Distribution Date.
(b) All Losses arising out of or based upon any untrue statement or
alleged untrue statement of material fact or omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, with respect to all information relating to
any Ascent Entity provided by an Ascent Entity which is contained in the
Information Statement or any report under the Exchange Act filed with the SEC by
COMSAT or any Ascent Entity; provided, however, that such indemnification shall
not apply to any Losses to the extent such Losses arise out of or are based upon
any statement or omission or alleged statement or omission relating to any
COMSAT Entity which was supplied for inclusion by any COMSAT Entity.
(c) All Losses resulting from a final adjudication of litigation initiated
by persons acting in their capacity as a shareholder or creditor of Ascent and
arising out of the transactions contemplated by this Agreement, except for such
Losses which have been expressly assumed by COMSAT hereunder; provided, that, it
is agreed and understood by the parties hereto that the foregoing is neither
intended, nor shall be construed to place with any Ascent Entity the burden of
any Loss of, or to provide from any Ascent Entity any indemnification to, any
COMSAT Entity arising from any claim of breach of fiduciary duty of COMSAT, as
the controlling shareholder of Ascent, in respect of such transactions.
(d) All Losses relating to any Contingent Liability allocated to Ascent
pursuant to Section 3.01 and Appendix A of this Agreement.
(e) All Losses incurred by any COMSAT Entity as a result of a material
breach of this Agreement by Ascent.
Anything in this Section 3.07.02 to the contrary notwithstanding, no Ascent
Entity shall have any liability to any COMSAT Entity in respect of any Tax (as
such term is defined in the Tax Disaffiliation Agreement), except as otherwise
expressly provided in this Agreement or in the Tax Disaffiliation Agreement.
3.07.03 Limitations on Indemnification Obligations. The amount which any
party (an "Indemnifying Party") is or may be required to pay to any other party
(an "Indemnitee") pursuant to Section 3.07.01 or 3.07.02 shall be reduced
(including, without limitation, retroactively) by any Insurance Proceeds or
other amounts actually recovered by or on behalf of such Indemnitee, in
reduction of the related Loss. If an Indemnitee shall have received payment (an
"Indemnity Payment") required by this Agreement from an Indemnifying Party in
respect of any Loss and shall subsequently actually receive Insurance Proceeds
or other amounts in respect of such Loss, then such Indemnitee shall pay to such
Indemnifying Party a sum equal to the amount of such Insurance Proceeds or other
amounts actually received (up to but not in excess of the amount of any
indemnity payment made hereunder). An insurer who would otherwise be obligated
to pay any claim shall not be relieved of the responsibility with respect
thereto, or, solely by virtue of the indemnification provisions hereof, have any
subrogation rights with respect thereto, it being expressly understood and
agreed no insurer or any other third party shall be entitled to a "windfall"
(i.e., a benefit they would not be entitled to receive in the absence of the
indemnification provisions) by virtue of the indemnification provisions hereof.
3.07.04 Procedures for Indemnification of Third Party Claims. Procedures
for Indemnification of Third Party Claims shall be as follows:
(a) If an Indemnitee shall receive notice or otherwise learn of the
assertion by a person (including, without limitation, any governmental entity)
who is not a party to this Agreement (or an Affiliate of either party) of a
claim or of the commencement by any such person of any Action (a "Third Party
Claim") with respect to which an Indemnifying Party may be obligated to provide
indemnification pursuant to Section 3.07.01, 3.07.02 or any other Section of
this Agreement, such Indemnitee shall give such Indemnifying Party written
notice thereof promptly after becoming aware of such Third Party Claim; provided
that the failure of any Indemnitee to give notice as provided in this Section
3.07.04(a) shall not relieve the Indemnifying Party of its obligations
hereunder, except to the extent that such Indemnifying Party is actually
prejudiced by such failure to give notice. Such notice shall describe the Third
Party Claim in reasonable detail.
(b) An Indemnifying Party may elect to defend or to seek to settle or
compromise, at such Indemnifying Party's own expense and such Indemnifying
Party's own counsel, any Third Party Claim, as provided hereafter. Within 30
days after receipt of notice from an Indemnitee in accordance with Section
3.07.04(a) (or sooner, if the nature of such Third Party Claim so requires), the
Indemnifying Party shall notify the Indemnitee of its election whether the
Indemnifying Party will assume responsibility for defending such Third Party
Claim. After notice from an Indemnifying Party to an Indemnitee of its election
to assume the defense of a Third Party Claim, such Indemnifying Party shall not
be liable to such Indemnitee under this Section 3.07 for any legal or other
expenses (except expenses approved in advance by the Indemnifying Party)
subsequently incurred by such Indemnitee in connection with the defense thereof;
provided that if the defendants with respect to any such Third Party Claim
include both the Indemnifying Party and one or more Indemnitees and in any
Indemnitee's reasonable judgment a conflict of interest between one or more of
such Indemnitees and such Indemnifying Party exists in respect of such claim,
such Indemnitees shall have the right to employ separate counsel to represent
such Indemnitees and in that event the reasonable fees and expenses of such
separate counsel (but not more than one separate counsel reasonably satisfactory
to the Indemnifying Party) shall be paid by such Indemnifying Party. If an
Indemnifying Party elects not to assume responsibility for defending a Third
Party Claim, or fails to notify an Indemnitee of its election as provided in
this Section 3.07.04(b), such Indemnitee may defend or, subject to the remainder
of this Section 3.07.04(b), seek to compromise or settle such Third Party Claim
without prejudice to such Indemnitee's rights, if any, to continue to seek
indemnification hereunder. Notwithstanding the foregoing, neither an
Indemnifying Party nor an Indemnitee may settle or compromise any claim over the
objection of the other; provided, however, that consent to settlement or
compromise shall not be unreasonably withheld or delayed. Neither an
Indemnifying Party nor an Indemnitee shall consent to entry of any judgment or
enter into any settlement of any Third Party Claim which does not include as an
unconditional term thereof the giving by a claimant or plaintiff to such
Indemnitee, in the case of a consent or settlement by an Indemnifying Party, or
to the Indemnifying Party, in the case of a consent or settlement by an
Indemnitee, of a written release from all liability in respect to such Third
Party Claim.
(c) If an Indemnifying Party chooses to defend or to seek to compromise or
settle any Third Party Claim, the related Indemnitee shall make reasonably
available to such Indemnifying Party any personnel or any books, records or
other documents within its control or which it otherwise has the ability to make
available that are necessary or appropriate for such defense, settlement or
compromise of such Third Party Claims, subject to the establishment of
reasonably appropriate confidentiality arrangements and arrangements to preserve
any applicable privilege (including, the attorney-client privilege) and shall
cooperate in such defense, compromise or settlement. If an Indemnifying Party
chooses to defend or to seek to compromise or settle any Third Party Claim, the
related Indemnitee shall be entitled to attend and participate in any such
proceeding, discussion or negotiation at its own expense.
(d) Notwithstanding anything else in this Section 3.07.04 to the contrary,
if an Indemnifying Party notifies the related Indemnitee in writing of such
Indemnifying Party's desire to settle or compromise a Third Party Claim on the
basis set forth in such notice (provided that such settlement or compromise
includes as an unconditional term thereof the giving by the claimant or
plaintiff of a written release of the Indemnitee from all liability in respect
thereof and does not include any non-monetary remedy) and provides the
Indemnitee a copy of a written proposal of the applicable claimant to settle on
such terms, and the Indemnitee shall notify the Indemnifying Party in writing
that such Indemnitee declines to accept any such settlement or compromise, such
Indemnitee may continue to contest such Third Party Claim, free of any
participation by such Indemnifying Party, at such Indemnitee's sole expense. In
such event, the obligation of such Indemnifying Party to such Indemnitee with
respect to such Third Party Claim shall be equal to (i) the costs and expenses
of such Indemnitee prior to the date such Indemnifying Party notifies such
Indemnitee of the offer to settle or compromise (to the extent such costs and
expenses are otherwise indemnifiable hereunder) plus (ii) the lesser of (A) the
amount of any offer of settlement or compromise which such Indemnitee declined
to accept and (B) the actual out-of-pocket amount such Indemnitee is obligated
to pay subsequent to such date as a result of such Indemnitee's continuing to
defend such Third Party Claim (including attorneys fees and expenses).
(e) Any claim on account of a Loss which does not result from a Third
Party Claim shall be asserted by written notice given by the Indemnitee to the
related Indemnifying Party. Such Indemnifying Party shall have a period of 30
days after the receipt of such notice within which to respond thereto. If such
Indemnifying Party does not respond within such 30-day period, such Indemnifying
Party shall be deemed to have refused to accept responsibility to make payment.
If such Indemnifying Party does not respond within such 30-day period or rejects
such claim in whole or in part, such Indemnitee shall follow the dispute
resolution procedures set forth in Section 3.10.
(f) In addition to any adjustments required pursuant to Section 3.07.03,
if the amount of any Loss shall, at any time subsequent to the payment required
by this Agreement, be reduced by recovery, settlement or otherwise, the amount
of such reduction, less any expenses incurred in connection therewith, shall
promptly be repaid by the Indemnitee to the Indemnifying Party.
(g) In the event of payment by an Indemnifying Party to any Indemnitee in
connection with any Third Party Claim, such Indemnifying Party shall be
subrogated to and shall stand in the place and the place of such Indemnitee as
to any events or circumstances in respect of which such Indemnitee may have any
right or claim relating to such Third Party Claim against any claimant or
plaintiff asserting such Third Party Claim or against any other person. Such
Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner,
and at the cost and expense of such Indemnifying Party, in prosecuting any
subrogated right or claim.
(h) If any indemnity payment required to be made hereunder is denominated
in a currency other than United States dollars, such payment shall be made in
United States dollars and the amount thereof shall be computed using the foreign
exchange rate for such currency determined as of the date that notice of the
claim with respect to which such indemnity payment is made or given by, or on
behalf of, the Indemnitee to the Indemnifying Party.
3.07.05 Remedies Cumulative. The remedies provided in this Section 3.07
shall be cumulative and shall not preclude assertion by any Indemnitee of any
other rights or the seeking of any and all other remedies against any
Indemnifying Party.
3.07.06 Survival of Indemnities. The obligations of each of COMSAT and
Ascent under this Section 3.07 shall survive the sale or other transfer by it of
any assets or businesses or the assignment by it of any liabilities, with
respect to any Loss of the other related to such assets, businesses or
liabilities.
<PAGE>
Appendix D
to the
DISTRIBUTION AGREEMENT
between
COMSAT Corporation
and
Ascent Entertainment Group, Inc.
<PAGE>
Appendix D
3.09.01 Trademarks and Service Marks of the Ascent Entities. After the
Distribution Date, the following Trademarks and Service Marks shall be the sole
property of the Ascent Entities.
1. "ASCENT" -- U.S. Trademark Application Serial No. 75/067,785
in the name of Ascent Entertainment Group, Inc.
2. "ASCENT and Design" -- U.S. Trademark Application Serial
No. 75/067,784 in the name of Ascent Entertainment Group, Inc.
3. "ASCENT ENTERTAINMENT" -- U.S. Trademark Application Serial
No. 75/027,908 in the name of Ascent Entertainment Group, Inc.
4. "SKY SPORTS" -- U.S. Trademark Application Serial No.
75/006,595
in the name of COMSAT Entertainment Group, Inc.
5. "A and Design" -- U.S. Trademark Application Serial No.
74/709,738
in the name of COMSAT Video Enterprises, Inc.
6. "A and Design" -- U.S. Trademark Application Serial No.
74/709,499 in the name of COMSAT Video Enterprises, Inc.
7. "COLORADO AVALANCHE" -- U.S. Trademark Application Serial
No.74/709,500 in the name of COMSAT Video Enterprises, Inc.
8. "COLORADO AVALANCHE and Design" -- U.S. Trademark
Application Serial No. 74/709,736 in the name of COMSAT Video
Enterprises, Inc.
9. "COLORADO AVALANCHE" -- U.S. Trademark Application Serial
No.74/709,496 in the name of COMSAT Video Enterprises, Inc.
10. "AVALANCHE" -- U.S. Trademark Application Serial No. 74/692,389
in the name of COMSAT Video Enterprises, Inc.
11. "AVALANCHE" -- U.S. Trademark Application Serial No. 74/691,969
in the name of COMSAT Video Enterprises, Inc.
12. "SATELLITE CINEMA" -- U.S. Trademark Application Serial
No. 74/181,597, Registration No. 1,684,682 issued on April 28,
1992 in the name of COMSAT Video Enterprises, Inc.
13. "SATELLITE CINEMA" -- U.S. Trademark Application Serial
No. 73/480,346, Registration No. 1,347,015 issued on July 2,
1985, now in the name of COMSAT Video Enterprises, Inc.
14. "VIDEONOW" -- U.S. Trademark Application Serial No. 75/061,905
in
the name of On Command Video Corporation.
15. "OCV and Design" -- U.S. Trademark Application Serial
No.75/060,999 in the name of On Command Video Corporation.
16. "OCV" -- U.S. Trademark Application Serial No. 75/060,997 in
the name of On Command Video Corporation.
17. "ON COMMAND VIDEO" -- U.S. Trademark Application Serial
No. 75/060,998 in the name of On Command Video Corporation.
18. "ON COMMAND VIDEO" -- U.S. Trademark Application Serial
No.73/827,699, Registration No. 1,597,838 issued on May 22, 1990
in the name of On Command Video Corporation.
19. "BEACON and Design" -- U.S. Trademark Application Serial
No.74/300,741, Registration No. 1,792,994 issued on September
14, 1993 in the name of Beacon Communication.
20. "BEACON and Design" -- U.S. Trademark Application Serial
No.74/294,962, Registration No. 1,856,194 issued on September
27, 1994 in the name of Beacon Communication.
21. "BEACON and Design" -- U.S. Trademark Application Serial
No.73/614,001, Registration No. 1,475,873 issued on February 9,
1988 in the name of Beacon Communication.
3.09.02 Trademarks and Service Marks of the Ascent Entities. After
the Distribution Date, the following Trademarks and Service Marks shall be
the sole property of the COMSAT Entities.
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MARK APPL. # FILING DATE REGIS. NO. REGIS. DATE STATUS
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ACCUSHAPE 324,550 08/20/81 1,218,974 12/07/82 Registered
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ACP 75/168,563 09/19/96 Pending
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Bringing You the 74/425,369 08/17/93 1,891,364 04/25/95 Registered
World and Beyond
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CAVP 75/183,177 10/11/96 Pending
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C-LINK 74/057,137 05/08/90 1,631,104 01/08/91 Registered
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COMSAT 242,564 04/04/66 828,366 05/02/67 Registered
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COMSAT 25,455 03/18/80 1,200,243 07/06/82 Registered
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COMSAT 74/684,901 06/06/95 1,974,971 05/21/96 Registered
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COMSAT 74/114,514 11/13/90 1,666,705 12/03/91 Registered
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COMSAT 74/514,234 04/19/94 1,964,981 04/02/96 Registered
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COMSAT & design 247,010 06/01/66 840,195 12/05/67 Registered
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COMSAT STAR 07/15/96 Pending
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COMSTAR 117,025 02/23/77 1,095,461 07/04/78 Registered
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COMTEX 74/114,513 11/13/90 1,666,107 11/26/97 Registered
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CRUISE CALLING 765,469 11/25/88 1,553,272 08/22/89 Registered
- --------------------------------------------------------------------------------
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CRUISE CALLING & 73/766,455 11/30/88 1,553,273 08/22/89 Registered
design
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CRUISEPHONE 73/765,484 11/25/88 1,603,461 06/26/90 Registered
- --------------------------------------------------------------------------------
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Design of Globe 244,803 05/03/66 833,818 08/15/67 Registered
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Design of Globe 74/118,787 11/28/90 1,670,224 12/31/91 Registered
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DIAL 1 FIRST 75/168,906 09/19/96 Pending
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DIAL COMSAT FIRST 75/230,583 01/24/97 Pending
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DIALAIR 74/056,655 05/07/90 1,676,403 02/18/92 Registered
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DIGISAT 75/182,654 10/11/96 Pending
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DIGISAT (Old) 81,318 03/24/76 1,049,215 09/28/76 Registered
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FLIGHTNEWS 74/097,509 09/17/90 1,732,239 11/10/92 Registered
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FUTURE IS NOW 07/15/96 Pending
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MARICOPY 74/115,082 11/13/90 1,661,962 10/22/91 Registered
- --------------------------------------------------------------------------------
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MARIFACTS 74/070,547 06/19/90 1,650,748 07/16/91 Registered
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MARIPRESS 74/070,549 06/19/90 1,648,362 06/18/91 Registered
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OFFICE IN THE SKY 74/005,881 11/29/89 1,644,106 05/07/91 Registered
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ONE PLANET. NO 75/204,007 11/18/96 Pending
BOUNDARIES.
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PLANET 1 74/736,381 09/25/95 Pending
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PLANET ONE 74/736,288 09/01/95 Pending
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PLANET 1 75/067,949 03/05/96 Pending
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RSi Design 871,199 06/17/69 Registered
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RSi w/Design 871,200 06/17/69 Registered
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SATCOM 370,017 06/16/82 1,369,833 11/12/85 Registered
TECHNOLOGIES
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SEAMAIL 765,483 11/25/88 1,555,117 09/05/89 Registered
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SEAPHONE 765,468 11/25/88 1,633,752 02/05/91 Registered
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SURE TRACK 74/187,032 07/22/91 Pending
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TEXTEL 74/114,510 11/13/90 1,666,106 11/26/91 Registered
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TERRASAT 75/134,989 07/16/96 Pending
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WE BRING YOU THE 74/316,521 09/23/92 1,885,506 03/21/95 Registered
WORLD
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WORLDWIDE COM. 74/607,574 12/06/94 1,985,120 07/09/96 Registered
NOW!
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WORLDWIDE COM. 74/607,553 12/06/94 1,972,470 05/07/96 Registered
NOW! CWS & Design
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<PAGE>
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17
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EXHIBIT 10(b)
TAX DISAFFILIATION AGREEMENT
THIS TAX DISAFFILIATION AGREEMENT, dated as of June 3, 1997, is made and
entered into by and between COMSAT Corporation, a District of Columbia
corporation ("COMSAT"), and Ascent Entertainment Group, Inc., a Delaware
corporation ("Ascent"), and supersedes the Tax Sharing Agreement dated as of
December 18, 1995 by and between COMSAT and Ascent (the "Tax Sharing
Agreement"), as of the date specified in and subject to the conditions of
Article XII hereof.
RECITALS
WHEREAS, COMSAT is the common parent corporation of an affiliated group of
corporations within the meaning of Section 1504(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), and Ascent is a member of such affiliated
group; and
WHEREAS, the affiliated group of which COMSAT is the common parent and
Ascent is a member files a consolidated Federal income tax return pursuant to
Code Section 1501; and
WHEREAS, the parties hereto contemplate that COMSAT will make a
distribution (the "Distribution") with respect to its common stock of all of the
common stock of Ascent held by COMSAT pursuant to the Distribution Agreement,
dated as of the date hereof, by and between COMSAT and Ascent (the "Distribution
Agreement"); and
WHEREAS, COMSAT and Ascent desire to provide for the allocation of
liabilities, procedures to be followed, and other matters with respect to
certain taxes in the event the Distribution takes place.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
1. "Adjustment" shall mean the deemed increase or decrease in a Tax,
determined on an issue-by-issue or transaction-by-transaction basis, as
appropriate, and using the assumptions set forth in the next sentence, resulting
from an adjustment made or proposed by a Taxing Authority with respect to any
amount reflected or required to be reflected on any Return relating to such Tax.
For purpose of determining such deemed increase or decrease in a Tax, the
following assumptions will be used: (a) in the case of any Income Tax, the
highest marginal Tax rate or, in the case of any other Tax, the highest
applicable Tax rate, in each case in effect with respect to that Tax for the
Taxable period or any portion of the Taxable period to which the adjustment
relates; and (b) such determination shall be made without regard to whether any
actual increase or decrease in such Tax will in fact be realized with respect to
the Return to which such adjustment relates.
2. "Affiliate" shall mean, with respect to any Person, any partnership,
joint venture, corporation, limited liability company, trust, unincorporated
association, or other entity directly or indirectly controlling or controlled
by, or under direct or indirect common control with, such Person.
3. "After-Tax Basis" in reference to an Article VI Indemnity Payment shall
mean an amount that, after (i) subtraction of the aggregate additional Taxes
incurred or to be incurred by the party receiving the Article VI Indemnity
Payment as a result of the receipt of such payment and (ii) addition of the tax
benefit to the party receiving the Article VI Indemnity Payment on account of
the Adjustment to which such Article VI Indemnity Payment relates, is equal to
the amount of the correlative Adjustment. "After-Tax Basis" in reference to an
Article VI Benefit Payment shall mean an amount that, after (i) addition of the
aggregate additional Taxes incurred or to be incurred by the party making the
Article VI Benefit Payment on account of the Ascent Tax Benefit or the COMSAT
Tax Benefit to which such Article VI Benefit Payment relates and (ii)
subtraction of the tax benefit to the party making the Article VI Benefit
Payment as a result of the making of such payment, is equal to the amount of the
correlative Ascent Tax Benefit or COMSAT Tax Benefit. For purpose of determining
such additional taxes incurred or to be incurred and such tax benefit, the
following assumptions will be used: (a) in the case of any Income Tax, the
highest marginal Tax rate or, in the case of any other Tax, the highest
applicable Tax rate, in each case in effect with respect to that Tax for the
Taxable period or any portion of the Taxable period to which the Article VI
Indemnity Payment or Article VI Benefit Payment relates; and (b) such
determination shall be made without regard to whether any actual additional
taxes or tax benefit will in fact be realized with respect to the Return to
which such payment relates.
4. "Agreement" shall mean this Tax Disaffiliation Agreement, including
any schedules, exhibits and appendices attached hereto.
5. "Article VI Benefit Payment" shall mean a payment made under section 2
of Article VI hereof that is a payment with respect to an Ascent Tax Benefit or
a COMSAT Tax Benefit.
6. "Article VI Indemnity Payment" shall mean a payment made under section
2 of Article VI hereof that is an indemnity payment with respect to an Ascent
Tax Adjustment or a COMSAT Tax Adjustment.
7. "Ascent Consolidated Group" shall mean, for any taxable year prior to
the Distribution, the affiliated group of corporations of which Ascent would be
the common parent for consolidated Federal income tax return filing purposes if
it were not a subsidiary of COMSAT, and, as of the Distribution Date and
thereafter, the affiliated group of corporations of which Ascent will be the
common parent for consolidated Federal income tax return filing purposes, and
any other corporations that are or become members of such affiliated group. If,
subsequent to the Distribution, Ascent ceases to be the common parent of an
affiliated group, "Ascent Consolidated Group" shall refer to the affiliated
group of which Ascent or a successor is a member or, in the event that Ascent
ceases to be either the common parent or a member of any affiliated group, to
Ascent or a successor. To the extent required to carry out the intent of any
provision of this Agreement, "Ascent Consolidated Group" shall also refer to any
corporation that, subsequent to the Distribution, leaves the affiliated group of
which Ascent is the common parent or otherwise a member.
8. "Ascent Tax Adjustment" shall mean, with respect to any Taxable period
or portion of a Taxable period, and as computed separately with respect to each
Tax, the net increase in each such Tax equal to the sum of all Adjustments made
pursuant to a Final Determination with respect to each such Tax for each such
Taxable period or portion of a Taxable period that are attributable to the
Ascent Consolidated Group; provided, however, that any Adjustment comprising a
Restructuring Adjustment shall not be considered in determining the amount of
any Ascent Tax Adjustment.
9. "Ascent Tax Benefit" shall mean, with respect to any Taxable period or
portion of a Taxable period, and as computed separately with respect to each
Tax, the net decrease in each such Tax equal to the sum of all Adjustments made
pursuant to a Final Determination with respect to each such Tax for each such
Taxable period or portion of a Taxable period that are attributable to the
Ascent Consolidated Group; provided, however, that any Adjustment comprising a
Restructuring Adjustment shall not be considered in determining the amount of
any Ascent Tax Benefit.
10. "Base Rate," with respect to any Person, shall mean the highest
marginal interest rate paid by that Person on such Person's outstanding
indebtedness for borrowed money in effect from time to time, or, if the Person
does not have indebtedness for borrowed money, ten percent per annum.
11. "Code" shall have the meaning set forth in the Recitals to this
Agreement.
12. "Combined Consolidated Group" shall mean for any taxable year the
affiliated group of corporations comprised of the COMSAT Consolidated Group and
the Ascent Consolidated Group.
13. "Combined Consolidated Return" shall mean a consolidated Federal
income tax return filed for the Combined Consolidated Group.
14. "COMSAT Consolidated Group" shall mean for any taxable year the
affiliated group of corporations of which COMSAT is the common parent, and any
other corporations which become members of the affiliated group, but excluding
members of the Ascent Consolidated Group. If, subsequent to the Distribution,
COMSAT ceases to be the common parent of an affiliated group, "COMSAT
Consolidated Group" shall refer to the affiliated group of which COMSAT or a
successor is a member or, in the event that COMSAT ceases to be either the
common parent or a member of any consolidated group, to COMSAT or a successor.
15. "COMSAT Tax Adjustment" shall mean, with respect to any Taxable period
or portion of a Taxable period, and as computed separately with respect to each
Tax, the net increase in each such Tax equal to the sum of all Adjustments made
pursuant to a Final Determination with respect to each such Tax for each such
Taxable period or portion of a Taxable period that are attributable to the
COMSAT Consolidated Group; provided, however, that any Adjustment comprising a
Restructuring Adjustment shall not be considered in determining the amount of
any COMSAT Tax Adjustment.
16. "COMSAT Tax Benefit" shall mean, with respect to any Taxable period or
portion of a Taxable period, and as computed separately with respect to each
Tax, the net decrease in each such Tax equal to the sum of all Adjustments made
pursuant to a Final Determination with respect to each such Tax for each such
Taxable period or portion of a Taxable period that are attributable to the
COMSAT Consolidated Group; provided, however, that any Adjustment comprising a
Restructuring Adjustment shall not be considered in determining the amount of
any COMSAT Tax Benefit.
17. "Controlling Party" shall mean the member of the Combined Consolidated
Group, that filed, or, if a Return was not filed, was required pursuant to this
Agreement to file a Return that is the subject of any Tax Contest, or any
successor and/or assign of any of the foregoing.
18. "Distribution" shall have the meaning set forth in the Recitals to
this Agreement.
19. "Distribution Agreement" shall have the meaning set forth in the
Recitals to this Agreement.
20. "Distribution Date" shall mean the date the Distribution becomes
effective pursuant to the Distribution Agreement.
21. "Federal Income Taxes" and "Federal Income Tax Liability" shall mean
the taxes imposed by sections 11, 55, 59A, and 1201(a) of the Code, or any
successor provisions to such sections and any other income-based U.S. Federal
taxes which are hereinafter imposed upon corporations.
22. "Final Determination" shall mean the final resolution of liability for
any Tax for a Taxable period, (i) by IRS Form 870 or 870-AD (or any successor
forms thereto), on the date of acceptance by or on behalf of the Taxing
Authority, or by a comparable form under the laws of other jurisdictions; except
that a Form 870 or 870-AD or comparable form that reserves (whether by its terms
or by operation of law) the right of the taxpayer to file a claim for refund
and/or the right of the Taxing Authority to assert a further deficiency shall
not constitute a Final Determination: (ii) by a decision, judgment, decree, or
other order by a court of competent jurisdiction, which has become final and
unappealable; (iii) by a closing agreement or accepted offer in compromise under
Section 7121 or 7122 of the Code (or any successor provisions thereto), or
comparable agreements under the laws of other jurisdictions; (iv) by any
allowance of a refund or credit in respect of an overpayment of tax, but only
after the expiration of all periods during which such refund may be recovered
(including by way of offset) by the Taxing Authority; or (v) by any other final
disposition, including by reason of the expiration of the applicable statute of
limitations or by mutual agreement of the parties.
23. "Group" shall mean the COMSAT Consolidated Group or the Ascent
Consolidated Group.
24. "Income Taxes" shall mean Federal Income Taxes and other Taxes that
are imposed on or measured by net income and not gross receipts or sales.
25. "Indemnified Party" shall have the meaning set forth Article VIII,
section 1 of this Agreement.
26. "Indemnifying Party" shall have the meaning set forth in Article
VIII, section 1 of this Agreement.
27. "Interested Party" shall mean COMSAT or any other member of the COMSAT
Consolidated Group, or Ascent or any other member of the Ascent Consolidated
Group (including any successor and/or assign of any of each of the foregoing),
as the case may be, to the extent (a) such Person is not the Controlling Party
with respect to a Tax Contest; and (b) such Person (i) may be liable for, or
required to make, any indemnity payment, reimbursement or other payment pursuant
to the provisions of this Agreement with respect to such Tax Contest; or (ii)
may be entitled to receive any indemnity payment, reimbursement or other payment
pursuant to the provisions of this Agreement with respect to such Tax Contest;
provided, however, that in no event shall a member of either the COMSAT
Consolidated Group or the Ascent Consolidated Group, as the case may be, be an
Interested Party in a Tax Contest in which another member of its Group is the
Controlling Party with respect to the Tax Contest.
28. "IRS" shall mean the Internal Revenue Service.
29. "Person" shall mean an individual, partnership, joint venture,
corporation, limited liability company, trust, unincorporated association, any
other entity, or a government or any department or agency or other unit thereof.
30. "Post-Affiliation Year" shall have the meaning set forth in Article
III, section 3.
31. "Regulations" or "Treas. Reg." shall mean the final or temporary
U.S. Treasury regulations in effect from time to time.
32. "Restructuring Adjustment" shall mean, with respect to any Taxable
period or portion of a Taxable period, and as computed separately with respect
to each Tax, the net increase or decrease in each such Tax, as the case may be,
equal to the sum of all Adjustments made pursuant to a Final Determination with
respect to each such Tax for each Taxable period or portion of a Taxable period
that are attributable to, or as a result of, the Distribution.
33. "Return" shall mean any return, report, form or similar statement or
document (including, without limitation, any related or supporting information
or schedule attached thereto and any information return, claim for refund,
amended return and declaration of estimated tax) that has been or is required to
be filed with any Taxing Authority or that has been or is required to be
furnished to any Taxing Authority in connection with the determination,
assessment or collection of any Taxes or the administration of any laws,
regulations or administrative requirements relating to any Taxes.
34. "Straddle Period" shall mean any Taxable period of the Combined
Consolidated Group (or any member thereof) that includes but does not end on the
Distribution Date, other than a Taxable Period that begins on the Distribution
Date.
35. "Tax" (and, with correlative meanings, "Taxes" and "Taxable") shall
mean, without limitation, and as determined on a jurisdiction-by-jurisdiction
basis, each foreign or U.S. federal, state, local or municipal income,
alternative or add-on minimum, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property or any other tax, custom,
tariff, impost, levy, duty, government fee or other like assessment or charge of
any kind whatsoever, together with any interest or penalty, addition to tax or
additional amount related thereto, imposed by any Taxing Authority.
36. "Taxing Authority" shall mean any government or any subdivision,
agency, commission or authority thereof, or any quasi-governmental or private
body having jurisdiction over the assessment, determination, collection or other
imposition of Taxes.
37. "Tax Contest" shall mean, without limitation, any audit, examination,
claim, suit, action or other proceeding relating to Taxes in which an Adjustment
to Taxes may be proposed, collected or assessed and in respect of which an
indemnity payment, reimbursement, other payment, or entitlement to receive or
retain tax benefits may be sought under or arises pursuant to this Agreement.
38. "Tax Sharing Agreement" shall have the meaning set forth in the
Recitals to this Agreement.
ARTICLE II
RETURNS
1. COMSAT shall have the sole and exclusive responsibility for the
preparation and filing of the consolidated U.S. Federal income tax return of the
Combined Consolidated Group, including any amended returns and any other
returns, documents, or statements required to be filed with the IRS with respect
to the determination of the Federal Income Tax Liability of the Combined
Consolidated Group. All returns shall be filed by COMSAT on a timely basis,
taking into account extensions of the due date for the filing of such returns.
2. The Ascent Consolidated Group shall continue to join in filing a
consolidated Federal income tax return with the COMSAT Consolidated Group for
all such taxable years for which the Ascent Consolidated Group is eligible to do
so under the Code and the Regulations, unless COMSAT shall request and be
granted permission to discontinue filing on a consolidated basis or shall
otherwise properly elect not to file on a consolidated basis in any particular
case.
3. COMSAT shall make all Federal income tax payments, including estimated
payments, with respect to consolidated tax returns of the Combined Consolidated
Group, and COMSAT shall have the right to exercise all powers of a common parent
with respect to filing the consolidated Federal income tax returns as are
conferred on it by the Regulations.
4. COMSAT shall be the sole and exclusive agent of the Ascent Consolidated
Group and any member of such group in any and all matters relating to the U.S.
Federal Income Tax Liability of the Combined Consolidated Group for all
consolidated return years. After consultation with Ascent with respect to all
Returns in which Ascent joins, COMSAT shall, inter alia, have the right with
respect to any Federal consolidated returns which it files (a) to determine (i)
the manner in which such returns shall be prepared and filed, including, without
limitation, the manner in which any item of income, gain, loss, deduction or
credit shall be reported, (ii) whether any extensions of the due dates for
filing of such returns or of the applicable statutes of limitations may be
requested and (iii) the elections that will be made by any member of the
Combined Consolidated Group, (b) to file and prosecute any claim for refund and
(c) to determine whether any refunds, to which the Combined Consolidated Group
may be entitled, shall be paid by way of refund or credited against the tax
liability of the Combined Consolidated Group. Ascent hereby irrevocably appoints
COMSAT as its agent and attorney-in-fact to take such action (including the
execution of documents) as COMSAT may deem appropriate to effect the foregoing.
5. COMSAT shall, in its sole discretion, determine whether it is
appropriate to make any elections pursuant to Treas. Reg. ss.ss. 1.1502-76(b)(2)
(ii)or (iii). Ascent and each member of the Ascent Consolidated Group shall
file with their Returns all statements required to effectuate any such election.
6. (a) Subject to section 4 of this Article II, COMSAT shall, on behalf of
the Combined Consolidated Group (or any member thereof), prepare and file or
cause to be prepared and filed all Returns of the Combined Consolidated Group
(or any member thereof) (i) with respect to any Taxable period ending prior to
January 1, 1997, and (ii) with respect to Income Taxes for (x) any Taxable
period beginning after December 31, 1996, and ending on or before the
Distribution Date and (y) any Straddle Period. Subject to Article III, Article
V, and Article VI hereof, COMSAT shall pay or cause to be paid all Taxes shown
to be due and payable on such Returns.
(b) COMSAT shall prepare and file or cause to be prepared and filed
all Returns of the COMSAT Consolidated Group (or any member thereof) for any
Taxable period beginning on or after the Distribution Date and shall pay or
cause to be paid all Taxes shown to be due and payable by the COMSAT
Consolidated Group (or any member thereof) on such Returns. Ascent shall prepare
and file or cause to be prepared and filed all Returns of the Ascent
Consolidated Group (or any member thereof) (i) with respect to any Taxable
period beginning after December 31, 1996, other than Returns with respect to
Income Taxes for (x) any Taxable period beginning after December 31, 1996, and
ending on or before the Distribution Date and (y) any Straddle Period, and (ii)
for any Taxable period beginning on or after the Distribution Date, and shall
pay or cause to be paid all Taxes shown to be due and payable by the Ascent
Consolidated Group (or any member thereof) on such Returns.
(c) All Taxes other than the Taxes discussed in Article III and
Article V hereof shall be paid by the entity that incurs such Taxes. In the
event COMSAT has paid any such Taxes as agent for a member of the Ascent
Consolidated Group, such member shall reimburse COMSAT therefor.
ARTICLE III
CALCULATION AND PAYMENT OF TAX SHARING PAYMENTS
1. For each taxable year for which COMSAT files a Combined Consolidated
Return, Federal Income Tax Liability shall be allocated among the members of the
Combined Consolidated Group in the same manner as the applicable methods in
effect under Treas. Reg. ss. 1.1552-1 for such year, provided that the Combined
Consolidated Group shall in any event be treated as having elected the
percentage method under Treas. Reg. ss. 1.1502-33(d)(3), utilizing a fixed
percentage of 100 percent.
2. a. Prior to March 15 following each taxable year for which a Combined
Consolidated Return is filed, COMSAT may prepare a preliminary tax calculation
("Preliminary Tax Calculation") for such taxable year. Ascent shall pay to
COMSAT by such March 15 the amount, if any, of the Federal Income Tax Liability
(allocated as provided in Section 1 of this Article III) of the Ascent
Consolidated Group determined pursuant to the Preliminary Tax Calculation.
b. Within 10 days after the date on which a Combined Consolidated
Return for the taxable year is filed, Ascent shall make a payment to COMSAT in
an amount equal to the amount, if any, by which the Federal Income Taxes
actually paid by COMSAT with respect to such taxable year (which may be zero),
but not including any amount received by COMSAT from Ascent pursuant to
paragraph (a) of this Section 2, exceed the Federal Income Tax Liability
allocated to members of the COMSAT Consolidated Group under Section 1 of this
Article (which may be a negative amount). No interest shall be payable in
respect of any amount payable to COMSAT pursuant to the preceding sentence.
c. Within 10 days after the date on which a Combined Consolidated
Return for the taxable year is filed, COMSAT shall make a payment to Ascent in
an amount equal to the amount, if any, by which the amounts (which may be zero)
actually paid by Ascent to COMSAT pursuant to paragraph (a) of this Section 2
exceed the Federal Income Tax Liability allocated to members of the Ascent
Consolidated Group under Section 1 of this Article (which may be a negative
amount). No interest shall be payable in respect of any amount payable to Ascent
pursuant to the preceding sentence.
d. It is the intention of the parties hereto that the interpretation
of paragraphs (b) and (c) of this section 2 of Article III be consistent with
the results reflected in their previous computations made and course of dealing
under paragraphs (b) and (c) of section 2 of Article III of the Tax Sharing
Agreement as heretofore in effect.
e. COMSAT shall furnish to Ascent the Preliminary Tax Calculation
(if any) no later than 10 days prior to March 15 of the year following the
taxable year, and shall furnish to Ascent the allocation of tax liability under
Section 1 of this Article no later than 10 days before the Combined Consolidated
Return for the taxable year is filed.
f. The provisions of this section 2 shall not apply to Returns
governed by section 6(b) of Article II hereof.
3. If, for any taxable year beginning on or after the Distribution Date
("Post-Affiliation Year"), a member of the Ascent Consolidated Group (or a
successor to such member) incurs net operating losses that could be carried back
to a Combined Consolidated Return, the common parent of the affiliated group of
which such member of the Ascent Consolidated Group (or a successor to such
member) is a member for such Post-Affiliation Year shall timely make an
irrevocable election pursuant to Treas. Reg. ss. 1.1502-21T(b)(3)(i) (or
successor regulation) to relinquish the entire carryback period with respect to
such net operating losses. Regardless of whether the common parent of the
affiliated group of which such member (or its successor) is a member for such
Post-Affiliation Year timely makes such irrevocable election, COMSAT shall have
no payment obligation in respect of any such net operating losses incurred by
such member of the Ascent Consolidated Group in any Post-Affiliation Year.
4. If, in any Post-Affiliation Year, a net capital loss, excess tax credit
or any other tax attribute of a member of the Ascent Consolidated Group is
carried back and actually utilized in a Combined Consolidated Return, COMSAT
shall pay such member an amount equal to the actual reduction in tax resulting
from the utilization of such tax attribute; provided however, that if such
utilization is subsequently displaced by other tax attributes, a recomputation
shall be made and such member shall repay to COMSAT any amount necessary to
reflect the actual utilization of such tax attribute following such
displacement. Any payments made under this Section 4 shall reflect interest
under Article IV to the extent that interest is actually paid to or received
from the Internal Revenue Service with respect to the utilization of such
attribute.
5. Subsequent to the Distribution, a payment shall be made between COMSAT
and Ascent to reflect the difference, if any, between the amount of alternative
minimum tax credit allocated to any member of the Ascent Consolidated Group
under Prop. Treas. Reg. ss. 1.1502-55(h)(6) or successor provisions and the
allocable amount of alternative minimum tax paid by such member (and not
subsequently credited against regular tax) as reflected in the prior sections of
this Article III. Such payment shall be made no later than 10 days after the
filing of the Combined Consolidated Return for the taxable year that includes
the Distribution Date.
ARTICLE IV
INTEREST
1. Interest required to be paid by or to Ascent pursuant to this Agreement
shall, unless otherwise specified, be computed at the rate and in the manner
provided in the Code for interest on underpayments (including large corporate
underpayments, if applicable) and overpayments, respectively, of Federal income
tax for the relevant period.
2. Any interest charge required to be paid by or to Ascent pursuant to
this Agreement with respect to any state or local income tax or franchise tax
return shall be computed at the rate and in the manner as provided under the
applicable state or local statute for interest on underpayments and overpayments
of such tax for the relevant period.
ARTICLE V
STATE & LOCAL TAXES
The principles expressed with respect to the Combined Consolidated Group
Federal income tax matters throughout this Agreement (including Article II,
Article VI, and Article X) shall apply with equal force and effect to state and
local income and franchise Tax matters to the extent such Taxes are determined
on a combined or consolidated basis, including the preparation and filing of
state and local income tax and franchise tax Returns required to be filed by the
Combined Consolidated Group.
ARTICLE VI
INDEMNIFICATION
1. (a) COMSAT hereby agrees to indemnify and hold each member of the
Ascent Consolidated Group harmless with respect to any Federal Income Tax
Liability of the Combined Consolidated Group where such liability arises solely
by reason of the member being severally liable for any taxes of the COMSAT
Consolidated Group pursuant to Treas. Reg. ss. 1.1502-6.
(b) Ascent hereby agrees to indemnify and hold each member of the
COMSAT Consolidated Group harmless with respect to any Federal Income Tax
Liability of the Combined Consolidated Group where such liability arises solely
by reason of the member being severally liable for any taxes of the Ascent
Consolidated Group pursuant to Treas. Reg. ss. 1.1502-6.
(c) Ascent hereby agrees to indemnify and hold each member of the
COMSAT Consolidated Group harmless from and against any and all liabilities,
claims and expenses resulting from any action or failure to act on the part of
Ascent or any member of the Ascent Consolidated Group that is in contravention
of the provisions of this Agreement.
(d) COMSAT hereby agrees to indemnify and hold each member of the
Ascent Consolidated Group harmless from and against any and all liabilities,
claims and expenses resulting from any action or failure to act on the part of
COMSAT or any member of the COMSAT Consolidated Group that is in contravention
of the provisions of this Agreement.
2. (a) (i) Except as provided in paragraph (ii) of this section 2(a) of
Article VI, Ascent shall be liable for, and shall indemnify and hold harmless,
as appropriate, any member of the COMSAT Consolidated Group on an After-Tax
Basis against any and all Ascent Tax Adjustments for any Taxable period or
portion of a Taxable period ending or deemed to end on or before the
Distribution Date, in each case with respect to any Return of the Ascent
Consolidated Group (or any member thereof), the COMSAT Consolidated Group (or
any member thereof) or the Combined Consolidated Group (or any member thereof).
Except as provided in section 3 of Article III, Ascent shall be entitled to
receive on an After-Tax Basis the amount of any Ascent Tax Benefits for any
Taxable period or portion of a Taxable period ending or deemed to end on or
before the Distribution Date with respect to any Return of the Ascent
Consolidated Group (or any member thereof), the COMSAT Consolidated Group (or
any member thereof) or the Combined Consolidated Group (or any member thereof).
(ii) Ascent shall not be required to indemnify COMSAT for any
penalty or addition to tax in the nature of a penalty (but shall nevertheless
indemnify COMSAT for tax and interest as otherwise provided herein) imposed with
respect to an item in a return that was prepared by COMSAT, unless Ascent (x)
provided COMSAT with erroneous or incomplete information that resulted in the
imposition of such penalty, or (y) was consulted with respect to, or allowed to
review prior to filing, the treatment of such item in the return and did not
expressly request COMSAT to alter the treatment of the item giving rise to the
penalty in a manner that would have caused such penalty not to be imposed.
(b) (i) COMSAT shall be liable for, and shall indemnify and hold
harmless, as appropriate, any member of the Ascent Consolidated Group on an
After-Tax Basis against any and all COMSAT Tax Adjustments for any Taxable
period or portion of a Taxable period ending or deemed to end on or before the
Distribution Date, in each case with respect to any Return of the Ascent
Consolidated Group (or any member thereof), the COMSAT Consolidated Group (or
any member thereof) or the Combined Consolidated Group (or any member thereof).
COMSAT shall be entitled to receive on an After-Tax Basis the amount of any
COMSAT Tax Benefits for any Taxable period or portion of a Taxable period ending
or deemed to end on or before the Distribution Date with respect to any Return
of the Ascent Consolidated Group (or any member thereof), the COMSAT
Consolidated Group (or any member thereof) or the Combined Consolidated Group
(or any member thereof).
(ii) COMSAT shall be liable for, and shall indemnify and hold
harmless, as appropriate, any member of the Ascent Consolidated Group on an
After-Tax Basis against any penalty or addition to tax in the nature of a
penalty imposed with respect to an item in a return that was prepared by COMSAT,
unless Ascent (x) provided COMSAT with erroneous or incomplete information that
resulted in the imposition of such penalty, or (y) was consulted with respect
to, or allowed to review prior to filing, the treatment of such item in the
return and did not expressly request COMSAT to alter the treatment of the item
giving rise to the penalty in a manner that would have caused such penalty not
to be imposed.
3. (a) The indemnification provisions of this Agreement shall
supplement the indemnification provisions of the Distribution Agreement. In
particular, the Distribution Agreement provides for indemnification with respect
to any Restructuring Adjustment.
(b) To the extent there is any conflict between the indemnification
provisions of this Agreement and the indemnification provisions of the
Distribution Agreement, the indemnification provisions of the Distribution
Agreement shall control.
ARTICLE VII
TAX CONTESTS
1. The Controlling Party shall promptly notify all Interested Parties of
(a) the commencement of any Tax Contest pursuant to which such Interested
Parties may be required to make or entitled to receive an indemnity payment,
reimbursement or other payment under this Agreement; and (b) any Final
Determination made with respect to any Tax Contest pursuant to which such
Interested Parties may be required to make or entitled to receive any indemnity
payment, reimbursement or other payment under this Agreement. The failure of a
Controlling Party to promptly notify any Interested Party as specified in the
preceding sentence shall not relieve any such Interested Party of any liability
and/or obligation which it may have to the Controlling Party under this
Agreement.
2. The Controlling Party shall have the right to contest, litigate,
compromise and settle any Adjustment that is made or proposed in a Tax Contest;
provided, however, that the prior written consent of each Interested Party shall
be required, which consent may not be unreasonably withheld. The Controlling
Party shall permit each Interested Party and the counsel of its choice to
participate in any such contest, litigation, compromise or settlement of any
Adjustment in a Tax Contest. All costs, including legal and accounting expenses,
of any Tax Contest are to be borne by the party incurring such costs.
ARTICLE VIII
PROCEDURE AND PAYMENT
1. Any Person entitled to any indemnification, reimbursement or other
payment under this Agreement with respect to the amount of any Adjustment that
has become immediately due and payable (the "Indemnified Party") shall notify in
writing the Person against whom such indemnification, reimbursement or other
payment is sought (the "Indemnifying Party") of its right to and the amount of
such indemnification, reimbursement or other payment; provided, however, that
the failure to notify the Indemnifying Party shall not relieve the Indemnifying
Party from any liability and/or obligation which it may have to an Indemnified
Party on account of the provisions contained in this Agreement, and in no event
shall such failure relieve the Indemnifying Party from any other liability or
obligation which it may have to such Indemnified Party. Except as otherwise
provided in this Agreement, the Indemnifying Party shall make such indemnity
payment, reimbursement or other payment to the Indemnified Party within [ten]
days of the receipt of the written notice specified in the preceding sentence.
2. Any indemnity payment, reimbursement or other payment required to be
made pursuant to this Agreement by an Indemnifying Party to an Indemnified Party
shall be made by wire transfer of immediately available funds to such bank
and/or other account of the Indemnified Party as from time to time the
Indemnified Party shall have directed the Indemnifying Party in writing, or in
such other manner as the Indemnified Party may direct in writing.
3. Any indemnity payment, reimbursement or other payment required to be
made by an Indemnifying Party pursuant to this Agreement shall bear interest,
from the date such payment is due under this Agreement until payment in full is
received by the Indemnified Party, at [a rate per annum equal at all times to 4%
per annum above the Base Rate then in effect of the Person obligated to make
such payment]. In the event that the rate provided for in the preceding sentence
exceeds the maximum rate allowed by applicable law, the maximum legal interest
rate shall apply.
ARTICLE IX
COOPERATION
1. COMSAT and Ascent shall provide each other with such assistance and
documents, without charge and in a timely fashion, as may be reasonably
requested by such person in connection with (i) the preparation of any Return,
(ii) the conduct of any Tax Contest, (iii) any matter relating to Taxes of any
shareholder of COMSAT, or (iv) any other matter that is the subject of this
Agreement. Such assistance shall include, without limitation: (i) the prompt
provision of books, records, Returns, documentation or other information
relating to any relevant Return; (ii) the execution of any document that may be
necessary or reasonably helpful in connection with the filing of any Return, or
in connection with any Tax Contest, including, without limitation, the execution
of powers of attorney and extensions of applicable statutes of limitations; and
(iii) the use of reasonable efforts to obtain any documentation from a
governmental authority or a third party that may be necessary or reasonably
helpful in connection with the foregoing. Each party shall make its employees
and facilities available on a mutually convenient basis to facilitate such
cooperation.
2. COMSAT and each other member of the COMSAT Consolidated Group, and
Ascent and each other member of the Ascent Consolidated Group, shall retain or
cause to be retained all Returns, schedules and workpapers, and all material
records or other documents relating thereto, until the expiration of the statute
of limitations (including any waivers or extensions thereof) with respect to the
Taxable periods to which such Returns and other documents relate or until the
expiration of any additional period that either COMSAT or Ascent, as the case
may be, may reasonably request in writing with respect to specifically
designated material records or documents. If COMSAT or Ascent intends to destroy
any material and relevant records or documents, it shall provide the other party
with advance notice and the opportunity to copy or take possession of such
records or documents. The parties hereto will notify each other in writing of
any waivers or extensions of the applicable statute of limitations that may
affect the period for which the foregoing records or documents must be retained.
ARTICLE X
PARTNERSHIPS, ETC.
In the case of any partnership, limited liability company, or other Person
that is not treated as a corporation under the Code and for that reason is not a
member of the COMSAT Consolidated Group or the Ascent Consolidated Group:
1. Responsibility for filing the Returns and payment of Taxes of such
Person under Articles II, III, and V of this Agreement shall be determined as if
such Person were a corporation.
2. Such Person shall, for other purposes of this Agreement, be treated as
a member of the Combined Consolidated Group, the COMSAT Consolidated Group, or
the Ascent Consolidated Group, as appropriate, if it would be so treated if it
were a corporation.
ARTICLE XI
MISCELLANEOUS PROVISIONS
1. COMSAT and Ascent agree that any information furnished one another
pursuant to this Agreement is confidential and, except as, and to the extent,
required during the course of an audit or litigation or otherwise required by
law, shall not be disclosed to another person or entity.
2. This Agreement shall be binding upon and inure to the benefit of any
successor to any of the parties, by merger, acquisition of assets or otherwise,
to the same extent as if the successor had been an original party to this
Agreement.
3. This Agreement shall be governed by and construed in accordance with
the laws of the State of Maryland without giving effect to conflicts of law
principles thereof.
4. Each of the parties hereto shall cause to be performed, and hereby
guarantees the performance of, all actions, agreements and obligations set forth
herein to be performed by any Affiliate of such party; provided, however, that
for purposes of the foregoing, no Person shall be considered an Affiliate of a
party if such Person is a member of another party's Group.
5. This Agreement may be amended from time to time by agreement in writing
executed by all the parties hereto or all of the parties then bound thereby.
This Agreement constitutes the entire agreement with respect to the subject
matter hereof and supersedes all prior written and oral understandings with
respect thereto.
6. Any notice, request or other communication required or permitted under
this Agreement shall be in writing and shall be sufficiently given if personally
delivered or if sent by facsimile or by registered or certified mail, postage
prepaid, addressed as follows:
COMSAT:
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, Maryland 20817
Attention: Allen E. Flower
Vice President and Chief Financial Officer
Telecopy No.: (301) 214-7131
With a copy (which shall not constitute notice) to:
Warren Y. Zeger
Vice President, General Counsel and Secretary
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, Maryland 20817
Telecopy No.: (301) 214-7128
and
Ascent:
Ascent Entertainment Group, Inc.
One Tabor Center, Suite 2800
1200 17th Street
Denver, Colorado 80202
Attention: James A. Cronin, III
Chief Operating Officer
and Executive Vice President, Finance
Telecopy No.: (303) 595-0823
With a copy (which shall not constitute notice) to:
Arthur M. Aaron
Vice President, Business and Legal Affairs and Secretary
Ascent Entertainment Group, Inc.
One Tabor Center, Suite 2800
1200 17th Street
Denver, Colorado 80202
Telecopy No.: (303) 595-0127
or to such other address as either party may have furnished to the other in
writing in accordance with this Section 7.
7. In case any one or more of the provisions contained in this Agreement
should be invalid, illegal or unenforceable, the enforceability of the remaining
provisions hereof shall not in any way be affected or impaired thereby. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions
hereof without including any terms, provisions, covenants and restrictions that
may hereafter be declared invalid, void or unenforceable. In the event that any
such term, provision, covenant or restriction is hereafter held to be invalid,
void or unenforceable, the parties hereto agree to use their best efforts to
find and employ an alternate means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or restriction.
8. Neither the failure nor any delay on the part of any party hereto to
exercise any right under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any right preclude any other or further
exercise of the same or any other right, nor shall any waiver of any right with
respect to any occurrence be construed as a waiver of such right with respect to
any other occurrence.
9. This Agreement is solely for the benefit of the parties to this
Agreement and their respective Affiliates and should not be deemed to confer
upon third parties any remedy, claim, liability, reimbursement, claim of action
or other right in excess of those existing without this Agreement.
10. This Agreement may be executed in any number of counterparts, each
such counterpart being deemed to be an original instrument, and all of such
counterparts shall together constitute one and the same instrument. The section
numbers and captions herein are for convenience of reference only, do not
constitute part of this Agreement and shall not be deemed to limit or otherwise
affect any of the provisions hereof.
11. Nothing in this Agreement is intended to change or otherwise affect
any previous tax election made by or on behalf of the Combined Consolidated
Group (including the election with respect to the calculation of earnings and
profits under Code Section 1552 and the regulations thereunder).
12. Subject to the provisions hereof, the parties hereto shall make,
execute, acknowledge and deliver such other instruments and documents, and take
all such other actions, as may be reasonably required in order to effectuate the
purposes of this Agreement and to consummate the transactions contemplated
hereby. Subject to the provisions hereof, each party shall, in connection with
entering into this Agreement, performing its obligations hereunder and taking
any and all actions relating hereto, comply with all applicable laws,
regulations, orders and decrees, obtain all required consents and approvals and
make all required filings with any governmental agency, other regulatory or
administrative agency, commission or similar authority and promptly provide the
other party with all such information as it may reasonably request in order to
be able to comply with the provisions of this sentence.
13. Any ambiguities shall be resolved without regard to which party
drafted the Agreement.
ARTICLE XII
EFFECTIVE DATE
1. This Agreement shall become effective as of the Distribution Date, and
shall not become effective if the Distribution does not take place. In the event
the Distribution does not take place, the Tax Sharing Agreement shall continue
with the same force and effect it would have had if this Agreement had not been
entered into.
2. If the Distribution takes place, this Agreement shall supersede the Tax
Sharing Agreement. This Agreement shall terminate and be of no further force or
effect only upon the expiration of all applicable statutes of limitations
relating to Taxes that are the subject of a reimbursement, indemnification, or
other payment obligation hereunder; provided, however, that the confidentiality
provisions of Article XI, section 1 shall survive indefinitely.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their authorized representatives.
COMSAT CORPORATION
By: /s/ Allen E. Flower
Allen E. Flower
Vice President and Chief Financial Officer
ASCENT ENTERTAINMENT GROUP, INC.
By: /s/ James A. Cronin, III
James A. Cronin, III
Chief Operating Officer
and Executive Vice President, Finance
1388397
<PAGE>
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EXHIBIT 20
ASCENT
ASCENT SPIN-OFF SET FOR JUNE 27
For Immediate Release:
Friday, June 13, 1997
Contact: Paul Jacobson
Ascent Entertainment
(303) 626-7060
Denver, Co. - Ascent Entertainment Group, Inc. (NASDAQ:GOAL) President and CEO
Charlie Lyons said today Ascent wholeheartedly supports the announcement by
COMSAT Corporation (NYSE:CQ) that it will complete the spin-off of its 80.67
percent ownership interest in Ascent to COMSAT shareholders on June 27, 1997.
"We strongly endorse this action," said Lyons. "The spin-off will allow Ascent
to operate as a separate Colorado-based media and entertainment company pursuing
a strategy of distribution, content creation and exclusive franchise management
that is a time-tested formula for building shareholder value in the
entertainment industry. As a management team, we will now work hard to see that
the spin-off is executed properly. There's no doubt that Ascent and COMSAT are
different companies in different industries, It's better for both if they each
go their separate ways."
COMSAT's Board of Directors yesterday declared a special dividend to COMSAT
shareholders and established June 19, 1997 as the record date for the
distribution. The distribution of Ascent stock will be made on a pro-rata basis
with COMSAT shareholders receiving approximately one-half share of Ascent stock
for each share of COMSAT stock held on the record date. COMSAT owns 24 million
of Ascent's 29.8 million shares.
Ascent Entertainment Group's principal business is providing video entertainment
and information through its majority-owned On Command Corporation (NASDAQ:ONCO).
Ascent owns and operates additional entertainment-related businesses, including
the NHL Colorado Avalanche, NBA Denver Nuggets and Beacon Communications, a
motion picture and television production company.
# # #
For a menu of Ascent Entertainment Group's news releases available by fax 24
hours (no charge) or to retrieve a specific release, please call 1-800-758-5804,
ext. 152850, or access the address http://www.prnewswire.com on the internet.
