<PAGE>
UNITED STATES
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: July 1, 1997
Date of Earliest Event Reported: June 11, 1997
TCI SATELLITE ENTERTAINMENT, INC.
(Exact name of Registrant as specified in its Charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-21317 84-1299995
(Commission File Number) (I.R.S. Employer Identification No.)
8085 SOUTH CHESTER
SUITE 300
ENGLEWOOD, COLORADO 80112
(Address of principal executive offices)
Registrant's telephone number, including area code: (303) 712-4600
<PAGE>
ITEM 5. OTHER EVENTS.
------------
A. PRIMESTAR Partners Roll-up.
--------------------------
On June 11, 1997, TCI Satellite Entertainment, Inc. (the "Company") entered
into a binding letter agreement, including an attached summary of business terms
(collectively, the "Roll-up Agreement") with PRIMESTAR Partners L.P.
("Primestar"), affiliates of each of the other partners of Primestar, and a
stockholder of the Company. The Roll-up Agreement sets forth the principal terms
and conditions of a proposed transaction (the "Roll-Up Transaction"), through
which Primestar, the Company and the Primestar-related distribution businesses
of such affiliates will be consolidated into a newly-formed company. The other
parties to the Roll-up Agreement include Time Warner Cable ("TWC"),
Advance/Newhouse Partnership ("Newhouse," and, together with TWC,
"TWC/Newhouse"), Cox Communications, Inc. ("Cox"), Comcast Corporation
("Comcast"), MediaOne of Delaware Inc. ("MediaOne"), and GE American
Communications, Inc. ("GE"). Affiliates of the Company, TWC, Newhouse, Cox,
Comcast, MediaOne and GE are general and limited partners of Primestar, and the
Company, TWC/Newhouse, Cox, Comcast and MediaOne (or their affiliates) are also
distributors of Primestar's medium power satellite television service.
The Roll-up Agreement provides for the formation of a new corporation ("New
Primestar"), which will initially be a wholly-owned subsidiary of the Company.
New Primestar will acquire the Primestar partnership interests, subscribers and
related assets, as applicable, of the other parties to the Roll-up Transaction
in exchange for (i) cash (or the assumption of debt), (ii) shares of Series A
Common Stock of New Primestar and (iii) except for GE, shares of Series C Common
Stock of New Primestar, in each case in an amount determined pursuant to the
Roll-up Agreement. Concurrently, the Company would merge with a wholly-owned
subsidiary of New Primestar, with the Company surviving, and the outstanding
shares of Series A Common Stock and Series B Common Stock of the Company would
be converted into shares of Series A Common Stock and Series B Common Stock of
New Primestar, respectively. It is expected that upon consummation of the Roll-
up Transaction, shares of the Series A Common Stock and Series B Common Stock of
New Primestar will be publicly traded on the Nasdaq National Market tier of The
Nasdaq Stock Market. Each of New Primestar, TWC/Newhouse, Cox, Comcast and
MediaOne (or affiliates thereof) will continue to market and support the
Primestar programming services on an agency basis after consummation of the
Roll-up Transaction.
The Roll-up Agreement provides that the board of directors of New Primestar
will initially consist of eleven members, of which three (the "Class B
Directors") will be elected by holders of the Series B Common Stock of New
Primestar and six (the "Class C Directors") will be elected by holders of the
Series C Common Stock of New Primestar. Of the six Class C Directors, three will
be nominated by TWC/Newhouse and one will be nominated by each of Cox, Comcast
and MediaOne. The remaining two directors (the "Common Directors") will be
nominated by a super-
-1-
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majority vote of the Class B Directors and Class C Directors, and elected by the
holders of the Series A Common Stock, Series B Common Stock and Series C Common
Stock, voting together as a single class. The number of Class B Directors will
decrease as the number of shares of Series B Stock outstanding decreases, and
the number of Class C Directors will decrease as the number of shares of Series
C Stock outstanding decreases, in each case in accordance with a schedule set
forth in the Roll-Up Agreement. The special class rights of the holders of
Series B Stock and Series C Stock, each voting as a separate class, to elect the
Class B Directors and Class C Directors, respectively, will automatically
terminate at such time as the holders of the Series C Stock, voting as a class,
shall no longer be entitled to elect at least three Class C Directors. At any
time that the maximum number of Class B Directors or Class C Directors is
decreased, the number of Common Directors will be correspondingly increased, so
that the total number of directors constituting the whole board of directors of
New Primestar remains eleven.
The Series A Common Stock of New Primestar will be substantially identical
to the Series A Common Stock of the Company, and the Series B Common Stock and
Series C Common Stock of New Primestar will be substantially identical to the
Series A Common Stock of New Primestar, except in each case with respect to the
election of directors as provided above and except in each case as follows: (i)
holders of the Series B Common Stock and Series C Common Stock will be entitled
to ten votes per share, while holders of the Series A Common Stock will be
entitled to one vote per share, on all matters as to which such holders are
entitled to vote; (ii) each share of Series B Common Stock will be convertible
into one share of Series A Common Stock at the option of the holder, and each
share of Series C Common Stock will be convertible into one share of Series B
Common Stock or one share of Series A Common Stock at the option of the holder,
but the Series A Common Stock will not be convertible; and (iii) the affirmative
vote of the holders of a majority of the outstanding shares of Series B Common
Stock and 83% of the outstanding shares of Series C Common Stock, each voting as
a separate class, will be required to approve certain actions by New Primestar,
including substantive charter and by-law amendments, mergers and consolidations,
the sale of substantially all the assets of New Primestar, dissolution, certain
stock issuances, the filing of a voluntary bankruptcy petition, and, with
certain exceptions, engagement by New Primestar in any business outside the
Satellite Television Business (as defined in the Roll-up Agreement). On the
tenth anniversary of the first issue of Series C Stock, all Series C Stock will
be mandatorily converted into Series B Stock on a one-to-one basis.
Under the terms of the Roll-up Agreement, current stockholders of the
Company would hold approximately 37% common equity ownership of New Primestar at
the closing of the Roll-up Transaction, and TWC/Newhouse, Comcast, MediaOne, Cox
and GE would own approximately 30%, 10%, 10%, 9% and 4%, respectively, of New
Primestar common equity at closing, subject in each case to adjustments based on
closing subscriber counts, inventory amounts and other factors.
Although the parties contemplate the negotiation, execution and delivery of
definitive documentation with respect to the Roll-up Transaction, such
documentation is not a condition to the closing of the Roll-up Transaction, and
in the absence of such documentation the Roll-up Agreement will remain a binding
agreement among the parties. The consummation of the Roll-up Transaction is
however subject to certain closing conditions, including receipt of necessary
regulatory approvals, approval of the Company's stockholders and certain due
diligence matters. In connection with the execution of the Roll-up Agreement,
John C. Malone, a stockholder of the Company and the Chairman of its Board of
Directors, has agreed to vote all shares of common stock of the Company owned by
him in favor of the Roll-up Transaction, in any vote of the stockholders of the
Company to approve such transaction.
-2-
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B. Acquisition of Certain Satellite Assets.
---------------------------------------
On June 11, 1997, Primestar announced that it had entered into a binding
asset acquisition agreement (the "ASkyB Agreement") with The News Corporation
Limited ("News Corp"), MCI Telecommunications Corporation ("MCI"), American Sky
Broadcasting LLC, a joint venture between News Corp. and MCI ("ASkyB"),
Primestar, and, for certain purposes only, each of the general and limited
partners of Primestar. The ASkyB Agreement provides for the sale and transfer
to New Primestar of two high power communications satellites currently under
construction, certain authorizations granted to MCI by the Federal
Communications Commission ("FCC") to operate a direct broadcast satellite
business at the 110(degrees) West longitude orbital location using 28
transponder channels (the "110(degrees) License"), and certain related
contracts. In consideration, ASkyB will receive non-voting convertible
securities of New Primestar with a total liquidation value of approximately $1.1
billion, comprising approximately $600 million liquidation value of non-voting
convertible preferred stock (convertible into approximately 52 million shares of
non-voting common stock of New Primestar, subject to adjustment) and
approximately $500 million principal amount of convertible subordinated notes
(convertible into approximately 43 million shares of non-voting common stock of
New Primestar, subject to adjustment). The preferred stock will pay cumulative
dividends at the annual rate of 5% of the liquidation value of such shares and
the subordinated notes will have an interest rate of 5%. Dividends on the
preferred stock and interest on the subordinated notes will be payable in cash
or, at the option of New Primestar, in shares of non-voting common stock of New
Primestar, for a period of four years. Thereafter, all dividend and interest
payments will be made solely in cash. Shares of non-voting common stock issued
to ASkyB or any of its affiliates upon conversion of such convertible preferred
stock and subordinated notes, or in payment of dividend or interest obligations
thereunder, shall in turn automatically convert into shares of the Series A
Common Stock of New Primestar, on a one-to-one basis, upon transfer to any
person other than ASkyB, News Corp. or any of their respective affiliates.
It is contemplated that, in connection with the assignment of the
110(degrees) License to New Primestar, New Primestar will dispose of its rights,
and will cause its general or limited partners to dispose of their respective
rights, if any, under the FCC authorizations issued to Tempo Satellite, Inc., a
subsidiary of the Company ("Tempo"), with respect to 11 transponder channels at
the 119(degrees) West Longitude orbital location. Pursuant to an existing option
agreement between Tempo and Primestar, Tempo had previously agreed to sell or
lease to Primestar 100% of the capacity of any direct broadcast satellite system
constructed by Tempo under such FCC authorizations.
Consummation of the transactions contemplated by the ASkyB Agreement are
contingent on, among other things, receipt of all necessary government and
regulatory approvals.
-3-
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
------------------------------------------------------------------
The following exhibits are being filed with this Form 8-K:
2.1.1 - Letter agreement, dated June 11, 1997, by and among PRIMESTAR
Partners L.P., Time Warner Cable, Comcast Corporation, TCI Satellite
Entertainment, Inc., Cox Communications, Inc., MediaOne of Delaware Inc.,
Advance/Newhouse Partnership, GE American Communications, Inc. and John C.
Malone.
2.1.2 - Summary of Business Terms (including Exhibit A).
2.2 - Asset Acquisition Agreement, dated June 11, 1997, by and among
The News Corporation Limited, MCI Telecommunications Corporation, American Sky
Broadcasting LLC, PRIMESTAR Partners L.P., and, for certain purposes only, each
of the general and limited partners of PRIMESTAR Partners L.P.
-4-
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: July 1, 1997
TCI SATELLITE ENTERTAINMENT, INC.
(Registrant)
By: /s/ William D. Myers
------------------------------
Name: William D. Myers
Title: Vice President, Finance
-5-
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
2.1.1 Letter agreement, dated June 11, 1997, by and among
PRIMESTAR Partners L.P., Time Warner Cable, Comcast
Corporation, TCI Satellite Entertainment, Inc., Cox
Communications, Inc., MediaOne of Delaware Inc.,
Advance/Newhouse Partnership, GE American
Communications, Inc. and John C. Malone.
2.1.2 Summary of Business Terms (including Exhibit A).
2.2 Asset Acquisition Agreement, dated June 11, 1997, by
and among The News Corporation Limited, MCI
Telecommunications Corporation, American Sky
Broadcasting LLC, PRIMESTAR Partners L.P., and, for
certain purposes only, each of the general and limited
partners of PRIMESTAR Partners L.P.
<PAGE>
EXHIBIT 2.1.1
PRIMESTAR PARTNERS L.P.
3 Bala Plaza West
Bala Cynwyd, PA 19004
PRIMESTAR Partners Roll-Up
--------------------------
June 11, 1997
Gentlemen and Ladies:
This Letter and the attached Summary of Business Terms for the
PRIMESTAR Partners Roll-Up set forth the principal terms and conditions upon
which the undersigned parties (collectively, the "Parties" and each
individually, a "Party") agree to exchange their respective indirectly owned
partnership interests in PRIMESTAR Partners L.P. ("PRIMESTAR") and certain
related assets, as applicable, of each of Time Warner Cable, Advance/Newhouse
Partnership, Cox Communications, Inc., Comcast Corporation, MediaOne of
Delaware, Inc. and GE American Communications, Inc., in each case, for (i) an
amount of cash (or the assumption of debt by TCI Satellite Entertainment, Inc.
("TSAT") or a public company ("NewCo") that will be the ultimate parent entity
of or otherwise hold the assets of TSAT) and (ii) shares of NewCo Common Stock
and certain voting rights in connection therewith (the "Transaction").
The Parties hereby agree to enter into good faith negotiations and to
negotiate in good faith definitive agreements with respect to the Transaction.
The Parties agree that such definitive agreements shall contain terms and
conditions that are consistent with the attached Summary of Business Terms. The
Parties hereto intend to prepare, negotiate and execute such definitive
agreements by July 15, 1997. The Parties acknowledge and agree that this Letter
and attached Summary of Business Terms contain all the principal terms of the
Transaction and, upon the execution of this Letter by all Parties as provided
herein, shall be binding and shall remain in effect until the execution by the
Parties of the definitive agreements contemplated herein. In the event that the
Parties shall fail to enter into such definitive agreements, this Letter and
attached Summary of Terms shall continue to be binding and in effect, and the
Parties shall be obligated to consummate the Transaction on the basis of and as
contemplated in this Letter and attached Summary of Business Terms.
<PAGE>
2
Each Party hereby agrees, and agrees to cause its agents, to keep the
terms of and the transactions contemplated in this Letter and the attached
Summary of Business Terms strictly confidential; provided, however, that upon
-------- -------
the execution of this Letter, such Party may disclose any of such terms or
transactions only to those of its directors, officers, employees, agents or
advisors that need to know such information for the sole purpose of evaluating
the transactions described in the attached Summary of Business Terms. In
addition, upon prior notice to all other Parties and with the prior consent of
such other Parties, a Party shall have the right to disclose copies of this
Letter and attached Summary of Business Terms to The News Corporation Limited
("News Corp") or any officer or director thereof; provided that, prior to such
--------
disclosure, News Corp and PRIMESTAR shall have entered into a Confidentiality
Agreement reasonably acceptable to each Party, prohibiting the disclosure by
News Corp of any information contained in this Letter or attached Summary of
Business Terms or otherwise relating to the Transaction.
Notwithstanding anything to the contrary in the immediately preceding
paragraph, each Party may disclose any of the terms of or transactions
contemplated in this Letter or the attached Summary of Business Terms to
regulatory authorities upon a specific request thereof or, if required by
applicable law or securities exchange rules or regulations to undertake
disclosure of such information, to regulatory authorities or to the general
public; provided, however, that prior to any disclosure of such information to
-------- -------
the general public, each Party shall be consulted as to the contents of such
disclosure.
Each Party hereby covenants and agrees to use its best efforts to
complete the actions set forth in clauses (a) and (b) below by the respective
dates set forth therein, and TSAT hereby covenants and agrees to use its best
efforts to complete all actions set forth in clauses (c) through (e) below by
the respective dates set forth therein:
(a) a premerger notification and report form under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 (the "HSR Act") shall have been
filed on behalf of each Party with respect to the Transaction within 15
calendar days after the date hereof;
(b) definitive agreements with respect to the Transaction and
consistent with this Letter and attached Summary of Business Terms shall
have been
<PAGE>
3
executed by the applicable Parties within 45 calendar days after the date
hereof;
(c) TSAT shall have filed with the Securities and Exchange Commission
(the "SEC") on or before the later of (x) 90 calendar days after the date
hereof and (y) five business days after receipt by TSAT of the financial
statements and financial and other information provided for in clauses (i)
and (ii) of the first full paragraph below:
(i) a proxy statement relating to the approval by TSAT's
stockholders of the Transaction (the "Proxy Statement") which complies
as to form in all material respects with the requirements of the
Securities and Exchange Act of 1934, as amended, and the rules and
regulations thereunder (the "Exchange Act"); and
(ii) a registration statement on Form S-4 relating to the
issuance of NewCo common stock in the Transaction (the "Form S-4")
which complies as to form in all material respects with the
requirements of the Securities Act of 1933 (the "Securities Act"), in
which the Proxy Statement will be included as a prospectus (it being
understood that the requirements of this clause (ii) shall be
satisfied if the Form S-4 shall have been filed as part of the Proxy
Statement in accordance with the Exchange Act);
(d) TSAT shall have mailed the Proxy Statement to the TSAT
stockholders within 30 calendar days after the date the Form S-4 is
declared effective under the Securities Act; and
(e) the TSAT stockholders shall have voted upon the Transaction at a
meeting of the TSAT stockholders held within 30 days after the date the
Proxy Statement is mailed to such stockholders and the requisite approval
of the Transaction by such stockholders shall have been obtained at such
meeting.
Each Party agrees to cooperate in the preparation of the Proxy
Statement and the Form S-4 and all pre- and post-effective amendments thereto
and the filing thereof with the SEC. Such cooperation shall include, without
limitation, (i) preparation of historical and pro forma financial statements
relating to such Party required to be included in such filings, (ii) provision
of financial and other information relating to such Party required to be
<PAGE>
4
included in such filings, (iii) engagement of accountants to report on and
provide comfort letters in customary form in respect of financial information
provided by such Party for inclusion in such filings (which comfort letters will
be received by TSAT in accordance with customary practice) and (iv) responding
to comments relating to such Party received from the staff of the SEC in respect
of such filings promptly after receipt thereof. TSAT agrees, for itself and on
behalf of NewCo, to use its best efforts to have the Form S-4 declared effective
under the Securities Act as promptly as practicable after the filing thereof
with the SEC, and to take any commercially reasonable action (other than
qualifying to do business in any jurisdiction in which TSAT is not now so
qualified) required to be taken under any applicable state securities laws in
connection with the issuance of NewCo common stock in the Transaction.
Concurrently with the execution of this Letter, certain affiliates of
the Parties and PRIMESTAR are entering into an Asset Acquisition Agreement with
News Corp, MCI Telecommunications Corporation and American Sky Broadcasting LLC
to purchase certain assets (the "Asset Acquisition"). The Parties hereto
acknowledge and agree that the intent and desire of the Parties is to close both
the Transaction and the Asset Acquisition as promptly as possible and
simultaneously if feasible. The Parties hereto agree that the closing of the
Transaction is not contingent on the closing of the Asset Acquisition. The
Parties hereto agree that separate premerger notification and report forms under
the HSR Act shall be filed with respect to the Transaction and the Asset
Acquisition and that if all conditions to the closing of the Transaction are
satisfied (or otherwise waived) prior to the satisfaction (or waiver) of all
conditions to the closing of the Asset Acquisition, the Parties hereto agree
promptly to close the Transaction.
The Parties shall cooperate with each other in good faith to
consummate the Asset Acquisition. Subject to the preceding paragraph, the
Parties shall also use commercially reasonable efforts to prepare and file a
Notification and Report Form with respect to the Asset Acquisition under the HSR
Act and the rules and regulations promulgated thereunder; to respond to requests
for information from the Department of Justice, the Federal Trade Commission and
any other government agency relating to the Asset Acquisition; to prepare and
make such other filings as may be reasonably required to apply for any
governmental approvals, authorizations and consents regarding the Asset
Acquisition as may be required by
<PAGE>
5
applicable law or regulation; and to prepare and provide each other Party with
the financial information regarding such Party and its PRIMESTAR related
business and assets (subject to appropriate confidentiality safeguards) as may
be reasonably required to comply with the requirements of such laws and
regulations, including the requirements of the Federal securities laws relating
to any filings to be made by TSAT or NewCo in connection with the Asset
Acquisition; in each case on as prompt a basis as reasonably practicable.
This Letter and the attached Summary of Business Terms may be
terminated at any time prior to the closing of the Transaction by any Party if:
(i) any judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality or arbitrator
which prohibits, restricts or delays consummation of the Transaction shall
have been issued and shall have become final and nonappealable; or
(ii) if the waiting period under the HSR Act shall not have expired
or been terminated on or before August 31, 1998;
provided, however, that the Party seeking termination is not in breach in any
- -------- -------
material respect of any of its representations, warranties, covenants or
agreements contained herein, and upon such termination this Letter and the
attached Summary of Business Terms shall become null and void and of no further
force and effect.
This Letter and the attached Summary of Business Terms shall be
governed by the substantive laws of the State of New York without regard to any
applicable conflicts of law principles.
No Party may assign any of its rights or obligations pursuant to this
Letter or the attached Summary of Business Terms to any person.
This Letter may not be amended except by a written instrument signed
by an authorized representative of each Party.
This Letter may be executed in one or more original counterparts, each
of which shall be an original and all of which together shall constitute one and
the same instrument.
<PAGE>
6
If this Letter and the attached Summary of Business Terms are
acceptable, please sign at the appropriate space provided below.
Sincerely,
PRIMESTAR PARTNERS L.P., a
Delaware limited partnership,
by /s/ James L. Gray
----------------------------
Name: James L. Gray
Title: Chief Executive
Officer
ACCEPTED AND AGREED BY:
TIME WARNER CABLE, a division
of Time Warner Entertainment
Company, L.P., a Delaware
limited partnership,
by /s/ Kevin J. Leddy
----------------------------
Name: Kevin J. Leddy
Title: Senior Vice
President, Marketing
ACCEPTED AND AGREED BY:
COMCAST CORPORATION, a
Pennsylvania corporation,
by /s/ Julian A. Brodsky
----------------------------
Name: Julian A. Brodsky
Title: Vice Chairman
ACCEPTED AND AGREED BY:
TCI SATELLITE ENTERTAINMENT,
INC., a Delaware corporation,
by /s/ Gary S. Howard
----------------------------
Name: Gary S. Howard
Title: President
<PAGE>
7
ACCEPTED AND AGREED BY:
COX COMMUNICATIONS, INC.,
a Delaware corporation,
by /s/ Ajit M. Dalvi
----------------------------
Name: Ajit M. Dalvi
Title: Senior Vice
President
ACCEPTED AND AGREED BY:
MEDIAONE OF DELAWARE INC.,
a Delaware corporation,
by /s/ Doug Holmes
----------------------------
Name: Doug Holmes
Title: Executive Vice
President, Finance
and Strategy
ACCEPTED AND AGREED BY:
ADVANCE/NEWHOUSE PARTNERSHIP,
a New York general
partnership,
by ADVANCE COMMUNICATION
CORP., a New York
corporation and a
general partner,
by /s/ Robert Miron
----------------------------
Name: Robert Miron
Title: President
ACCEPTED AND AGREED BY:
GE AMERICAN COMMUNICATIONS,
INC., a Delaware corporation,
by /s/ John Connelly
----------------------------
Name: John Connelly
Title: Chairman and
Chief Executive
Officer
<PAGE>
8
ACCEPTED AND AGREED BY:
/s/ John C. Malone
----------------------------
JOHN C. MALONE
<PAGE>
EXHIBIT 2.1.2
PRIMESTAR PARTNERS ROLL-UP
SUMMARY OF BUSINESS TERMS
-------------------------
The purpose of this Summary of Business Terms is to outline the
transactions pursuant to which each of Time Warner Cable ("TWC"),
Advance/Newhouse Partnership ("Newhouse"),/1/Cox Communications, Inc.
("Cox"), Comcast Corporation ("Comcast"), MediaOne of Delaware, Inc.
("MediaOne") and GE American Communications, Inc. ("GE") will receive (i)
certain shares of Common Stock of a public company ("NewCo") that will be the
ultimate parent entity of or otherwise hold the assets of TCI Satellite
Entertainment, Inc. ("TSAT") and (ii) an amount of cash (or the assumption of
debt by NewCo) in exchange for, either in the form of an asset contribution or
via merger (collectively, the "Exchange"), the partnership interests
(collectively, the "Partnership Interests") of TWC/Newhouse, Cox, Comcast,
MediaOne and GE in PRIMESTAR Partners L.P. ("PRIMESTAR") and, except in the case
of GE, the respective PRIMESTAR customer accounts, subscribers, equipment and
inventory of TWC/Newhouse, Cox, Comcast and MediaOne and certain other related
assets (collectively, including the Partnership Interests, the "PRIMESTAR
Assets") and to describe the post-exchange governance structure of NewCo and
certain other related matters.
Unless the context otherwise requires, references herein to "TWC",
"Newhouse", "Cox", "Comcast", "MediaOne" and "GE" shall include each of such
entities together with their respective controlled affiliates that are Permitted
Transferees (as defined herein). "TWC/Newhouse" shall mean the collective
reference to TWC, Newhouse and their respective controlled affiliates that are
Permitted Transferees. Each of TWC/Newhouse, Cox, Comcast and MediaOne,
together with their respective Permitted Transferees, are referred to herein as
a "Series C Holder" and collectively as the "Series C Holders".
ROLL-UP: Initially, NewCo will be a Delaware corporation wholly owned by
- -------- TSAT. Pursuant to a Merger and Contribution Agreement, each of the
following actions will occur as part of the same reorganization plan
and in close time proximity to permit such actions to qualify as a
"Section 351" tax free transaction: (i) TSAT will merge with a
- ---------
/1/ There will be a voting agreement between TWC and Newhouse, governing
the voting of the shares of Series C Common Stock of NewCo (as defined herein)
held by Newhouse (the "Voting Agreement"). Attached as Exhibit D hereto is a
summary of the terms of these arrangements.
<PAGE>
2
wholly owned subsidiary of NewCo, with TSAT remaining the
surviving entity; (ii) TSAT public stockholders will exchange
their TSAT Common Stock for Common Stock of NewCo; and (iii) the
PRIMESTAR Assets of each Series C Holder and GE will be
contributed to NewCo, and each Series C Holder and GE shall
receive in exchange for such PRIMESTAR Assets (x) an assumption
of indebtedness and/or an amount in cash and (y) Common Stock of
NewCo.
SERIES C Each Series C Holder will receive in exchange for its PRIMESTAR
- -------- Assets a combination of (i) shares of Series A Common Stock of
HOLDERS NewCo ("Series A Stock") and Series C Stock and (ii) an amount of
- ------- cash (or the assumption of debt by NewCo). GE will receive in
AND GE: exchange for its Partnership Interest a combination of (i) shares
- ------- of Series A Stock and (ii) an assumption of indebtedness and/or
an amount in cash. The number of shares of Series A Stock and
Series C Stock and the amount of cash (or the assumption of debt
by NewCo) to be received by each Series C Holder and by GE shall
be determined as follows:
(a) Valuation Amount. Each Series C Holder and GE shall receive
-----------------
as of the date of Closing (i) the number of shares of Series A
Stock and Series C Stock and (ii) the amount of cash and/or
assumption of debt by NewCo as determined as of the date of
Closing in accordance with the methodology set forth on Exhibit A
hereto. The numbers set forth on Exhibit A hereto are for
illustrative purposes only and are not binding on the parties
hereto.
(b) Inventory Adjustment. There shall be an inventory adjustment
---------------------
with respect to each Series C Holder based on the ending
inventory of each such Series C Holder on the date of the
Closing. The manner in which such inventory adjustment is to be
determined is described in "Closing Adjustments" below. The
numbers set forth on Exhibit E hereto as an example of such
inventory adjustment mechanism are for illustrative purposes only
and are not binding on the parties hereto. The inventory
adjustment shall be subject to a post closing audit and
adjustment.
<PAGE>
3
AMENDMENTS NewCo shall adopt the TSAT Charter (the
- ---------- "Charter") with the following amendments:
TO THE
- ------ Increase in Authorized Stock. The Charter shall be amended to
CHARTER: -----------------------------
- -------- authorize shares of Series C Stock and increase the authorized
shares of Series A Stock in a sufficient number to satisfy the
Exchange (as well as sufficient additional shares to cover anti-
dilution adjustments). In addition, the Charter shall be amended
to (i) increase the authorized shares of Series B Common Stock of
NewCo ("Series B Stock") in a sufficient number to satisfy the
conversion rights of the Series C Stock (as well as sufficient
additional shares to cover anti-dilution adjustments) and (ii)
increase the authorized shares of Series A Stock by an additional
amount to satisfy the conversion rights of such additional shares
of Series B Stock (as well as sufficient additional shares to
cover anti-dilution adjustments). See "Voluntary Conversion" and
"Mandatory Conversion" below.
Votes per Share. The Charter currently provides that each share
----------------
of Series A Stock is entitled to one vote and each share of
Series B Stock is entitled to 10 votes. The Charter shall be
amended to provide that each share of Series C Stock is entitled
to 10 votes.
Stockholder Voting Rights. In addition to any voting rights that
--------------------------
stockholders may have under Delaware law, the Charter provides
that the following actions require the approval of at least 66-
2/3% of the total voting power of all outstanding voting
securities:
. the amendment, alteration or repeal of any provision of the
Charter;
. the amendment, alteration or repeal of any provision of the
By-laws (as defined below);
. the merger or consolidation of the corporation with or into
any other corporation, unless no stockholder vote is
required in connection with such
<PAGE>
4
merger or consolidation under Delaware law;
. the sale, lease or exchange of all or substantially all of
the property and assets of the corporation; and
. the dissolution of the corporation.
In addition, the Charter shall be amended to provide that each of
the following actions shall require the approval of (i) the
majority of the outstanding shares of Series B Stock and (ii) 83%
of the outstanding shares of Series C Stock; provided that so
--------
long as any of Cox, Comcast or MediaOne holds a smaller number of
shares of Series C Stock than the Cut-Off Amount,/2/ such
entity shall not by itself be able to veto any such specified
actions:
. the amendment, alteration or repeal of any provision of the
Charter;
. the amendment, alteration or repeal of any provision of the
By-laws;/3/
. the merger or consolidation of the corporation with or into
any other corporation;
. the sale, lease or exchange of all or substantially all of
the property and assets of the corporation;
. the dissolution of the corporation;
- -------------
/2/ The "Cut-Off Amount" shall mean 80% of the aggregate number of shares of
Series C Stock held by any two of Cox, Comcast and MediaOne,
respectively holding the highest and the lowest number of shares of
Series C Stock among such entities as of the Closing. Each number of
shares of a Series of NewCo Common Stock set forth herein shall be
adjusted from time to time to give effect to stock splits, stock
dividends and similar transactions with respect to such Series of NewCo
Common Stock.
/3/ In the definitive agreements contemplated herein, the parties hereto
intend to include a schedule specifying sections of the By-laws, the
amendment of which would require only a simple majority approval of the
board.
<PAGE>
5
. the authorization or issuance of any form of equity of
NewCo, other than (x) the authorization or issuance of any
new or existing series of single-vote common stock, (y) the
authorization or issuance of any preferred stock (other than
high vote preferred stock) or convertible securities,
provided that such convertible securities and preferred
--------
stock, if convertible, is only convertible into single vote
common stock and (z) the issuance of any common stock or
preferred stock (including high-vote stock) pursuant to any
stock split or pro rata stock dividend, provided that, in
-------- --------
connection with such stock split or stock dividend, (i) only
single vote common stock is distributed to holders of single
vote common stock or preferred stock, (ii) no Series B Stock
is distributed to stockholders other than stockholders of
Series B Stock and (iii) no Series C Stock is distributed to
stockholders other than stockholders of Series C Stock;
. the filing by NewCo of a voluntary bankruptcy petition; and
. the engagement by NewCo in any business other than the
"Satellite Television Business" (defined below), subject to
certain exceptions to be mutually agreed to by the parties
hereto.
For purposes of the Charter, "Satellite Television Business"
shall mean (i) any business activity that principally uses
communications satellites to provide video and audio programming,
information services, entertainment or other communications
services to the antennas or other reception equipment of
customers or subscribers of such business activity or to multiple
dwelling or commercial units comprising such customers or
subscribers, (ii) investments and activities related to video,
audio, information and other programming services, (iii)
investments and activities related to the development, design,
manufacture and/or sale of electronics equipment and components
related to activities and investments contemplated by
<PAGE>
6
clauses (i) and (ii) above and (iv) any other operations,
services or activities related or ancillary to any of the
foregoing.
Except for matters otherwise specified herein, all series of
Common Stock shall vote together as a single class on matters
requiring a stockholder vote, including the election of the
directors not voted on by the Series B Stock or the Series C
Stock, in each case, as a class.
Series B Stock Vote. In addition to the stockholder voting
--------------------
rights set forth above under the caption "Stockholder Voting
Rights", the following matters shall require the approval of a
majority vote of the outstanding shares of Series B Stock voting
as a class:
. election of B Directors (as defined below); and
. amendment to any provision of the terms of the Series B
Stock.
Series C Stock Vote. In addition to the stockholder voting
--------------------
rights set forth above under the caption "Stockholder Voting
Rights", the following matters shall require the approval of a
majority vote of the outstanding shares of Series C Stock voting
as a class:
. election of C Directors (as defined below); and
. amendment to any provision of the terms of the Series C
Stock.
Voluntary Conversion. Each share of Series B Stock is currently
---------------------
convertible, at the option of the holder thereof, into one share
of Series A Stock. Shares of Series A Stock are not convertible.
The Charter shall be amended to provide that the Series C Stock
will be convertible at any time at the option of the holder
thereof into Series B Stock at a 1:1 ratio (adjusted from time to
time to give effect to stock splits, stock dividends and similar
transactions with
<PAGE>
7
respect to Series B Stock and Series C Stock, as applicable).
In the Stockholders Agreement (as defined below), each Series C
Holder shall agree not to convert any of its Series C Stock into
Series B Stock, except upon Transfer of such Series C Stock to
any person (other than a Series C Holder) after complying with
the right of first refusal process described under "Rights of
First Refusal--Series C Stock" below.
Mandatory Conversion. The Charter shall be amended to provide
---------------------
that Series C Stock will be mandatorily converted into Series B
Stock at a 1:1 ratio (adjusted from time to time to give effect
to stock splits, stock dividends and similar transactions with
respect to Series B Stock and Series C Stock, as applicable) upon
Transfer (as defined below) of such Series C Stock by a Series C
Holder to any person other than (i) a person that is a controlled
affiliate (which will be defined to include the ultimate parent
entity of such Series C Holder and any entity controlled by such
ultimate parent entity) of such Series C Holder so long as such
person remains a controlled affiliate of such Series C Holder,
(ii) any other Series C Holder pursuant to the right of first
refusal process described under "Rights of First Refusal--Series
C Stock" below, (iii) an acquiror of all or substantially all of
such Series C Holder's cable assets, as provided under "Cable
Sale" below or (iv) a spin-off entity which acquires all or
substantially all of such Series C Holder's cable assets, as
provided under "Spin-Off" below.
On the tenth anniversary of the first issue of Series C Stock,
all Series C Stock will be mandatorily converted into Series B
Stock at a 1:1 ratio (adjusted from time to time to give effect
to stock splits, stock dividends and similar transactions with
respect to Series B Stock and Series C Stock, as applicable).
"Controlled affiliate" shall be defined, subject to certain
exceptions to be mutually agreed to, to include in the case of an
<PAGE>
8
individual, any entity in which such individual both as of the
Closing and at all times thereafter (x) controls 5% or more of
the voting power and (y) participates in the direction of the
management and control of such entity.
Board Composition. The Charter shall be amended to increase the
------------------
size of the Board of Directors to eleven members. The Charter
will provide that initially (i) three directors will be elected
by the Series B Stock voting as a class (the "B Directors"); (ii)
six directors will be elected by the Series C Stock voting as a
class (the "C Directors"); and (iii) two directors will be
elected by the shares of all Series of Common Stock voting
together as a single class (the "Common Directors"). Directors
will be elected at each annual meeting of NewCo's stockholders
and will hold office until the next annual meeting of NewCo's
stockholders.
The Charter will include a mechanism pursuant to which the number
of C Directors will decrease (i) as the total Series C Stock
initially outstanding decreases and (ii) as the Series C Holders'
individual holdings of Series C Stock decrease, in each case
consistent with the discussion below under "Stockholders
Agreement--Board Composition". The Charter will also include a
mechanism pursuant to which the number of B Directors will
decrease as the total Series B Stock initially outstanding
decreases, consistent with the discussion below under
"Stockholders Agreement--Board Composition". The number of
Common Directors will increase by a number equal to the decrease
in the aggregate number of B Directors and C Directors.
The Charter will be amended to provide that the special class
right of the Series C Stock voting as a class to elect a
specified number of directors will terminate at such time (the
"Series C Termination Date") as the Series C Stock voting as a
class shall no longer be entitled to elect at least three C
Directors. The Charter will be amended to provide that the
special class right of the Series B Stock voting as a class to
elect a specified number
<PAGE>
9
of directors will terminate at the earlier of (i) the Series C
Termination Date and (ii) the date on which the Series B Stock
voting as a class shall no longer be entitled to elect any B
Director pursuant to the applicable cap on the number of B
Directors set forth under "Stockholders Agreement--Board
Composition" below.
AMENDMENTS NewCo shall adopt the TSAT By-laws (the
- ---------- "By-laws") with the following amendments:
TO THE
- ------ Satellite Television Business. The By-laws shall be amended to
BY-LAWS: ------------------------------
- -------- provide that, for a period of five years from the Closing, the
vote of (i) a simple majority of the Investment Committee of
NewCo's board (which committee shall consist of all of the NewCo
directors) and (ii) a majority of the B Directors and a majority
of the C Directors shall be required to approve any Ancillary
Investment (as defined below) in excess of U.S. $50,000,000.
"Ancillary Investment" shall mean any investment or activity
described in clause (ii) or (iii) of the definition of "Satellite
Television Business" in the Charter.
Majority Board Vote. The By-laws shall also be amended to
--------------------
provide that (subject, in each case, to stockholder approval, if
necessary), all matters presented to the board may be approved by
a simple majority vote. In addition, the By-laws shall provide
that the board may from time to time, by resolution of a simple
majority, specify certain matters that shall require the simple
majority vote of the board or amend, supplement, substitute or
remove any such matters or add new matters requiring the simple
majority vote of the board. Except as otherwise specifically
provided herein, the board, by a simple majority vote of its
members, shall have the right from time to time to delegate to or
remove from any board committee the authority to approve or
specify, amend, supplement, substitute or remove any such matters
or add new matters requiring the approval of any number of such
board committee's members. See "Board Committees" below.
<PAGE>
10
The form of board resolution attached hereto as Exhibit B sets
forth certain matters that will require the approval of the
majority of the board. The parties hereto agree to use their
best efforts to cause such resolution to be adopted by the NewCo
board at the first board meeting immediately after the Closing.
Interested Directors. The By-laws shall be amended to provide
---------------------
that related party transactions shall require approval pursuant
to the Delaware sanitization statute (8 Del. C. (S) 144). In
general, Section 144 of the Delaware General Corporation Law
requires that related party transactions be approved, in each
case after full disclosure of all material facts, by (i) the
board, including the majority of the disinterested directors,
(ii) the stockholders in good faith or (iii) the board or the
stockholders, provided that the transaction is fair as to the
--------
corporation as of the time of such approval. The By-laws will
define certain relevant terms, including "related party
transaction" and "disinterested director".
Board Committees. The By-laws will address issues relating to
-----------------
the delegation of decision-making authority to board committees
and the limitations of the authority that may be so delegated;
provided that the authority to approve or specify, amend,
--------
supplement, substitute, remove or add new matters otherwise
requiring the simple majority vote of the board may be delegated
by a vote of a simple majority of the board to any board
committee, as provided under "Majority Board Vote" above.
STOCKHOLDERS General. Agreement among each of the
- ------------ --------
AGREEMENT: Series C Holders, John Malone ("Malone"), Kearns-Tribune, GE and
- ---------- NewCo to determine certain voting rights and other rights and
obligations of the Series C Holders, the Specified Series B
Holders (as defined below) and GE in connection with their
respective shares of NewCo Common Stock. Unless the context
otherwise requires, references herein to "Malone" and "Kearns-
Tribune" shall include each of such persons together with their
respective controlled affiliates that
<PAGE>
11
are Permitted Transferees. Each of Malone and Kearns-Tribune,
together with their respective Permitted Transferees, are
referred to herein as a "Specified Series B Holder" and
collectively as the "Specified Series B Holders".
Board Composition. Initially, the NewCo board will consist of
------------------
three B Directors, six C Directors and two Common Directors.
(a) Series B Stock. The Series B Stock voting as a class shall
---------------
be entitled to elect three B Directors so long as 80% or more of
the number of shares of Series B Stock outstanding as of the
Closing remain outstanding, however for purposes of such
calculation, shares of Series B Stock owned by any Series C
Holder (or controlled affiliate thereof) and converted into
Series A Stock shall not be counted. If the number of
outstanding shares of Series B Stock outstanding at any time (but
not counting any shares of Series B Stock owned by any Series C
Holder (or controlled affiliate thereof) and converted into
Series A Stock) is reduced below 80% of the amount of shares of
Series B Stock outstanding at the Closing, then the number of
directors entitled to be elected by the Series B Stock as a class
shall decrease proportionately as follows:/4/
<TABLE>
<CAPTION>
- --------------------------------------
PERCENTAGE OF NUMBER OF
SERIES B STOCK DIRECTORS ENTITLED
OUTSTANDING AT TO BE ELECTED BY
CLOSING* SERIES B STOCK
- --------------------------------------
<S> <C>
80.0% - 100% 3
- --------------------------------------
60.0% - 79.9% 2
- --------------------------------------
40.0% - 59.9% 1
- --------------------------------------
Less than 40.0% 0
- --------------------------------------
</TABLE>
- ------------
/4/ The numbers of shares of Series B Stock represented by the percentages
set forth in the table that follows shall be adjusted from time to time
to give effect to stock splits, stock dividends and similar transactions
with respect to Series B Stock.
<PAGE>
12
* Any shares of Series B Stock owned by any Series C Holder (or
controlled affiliate thereof) and converted into Series A Stock
shall not be included for purposes of the calculation of the
number of outstanding shares of Series B Stock on the above
table.
The special class right of the Series B Stock to elect B
Directors shall terminate on the earlier of (i) the Series C
Termination Date and (ii) the date on which the Series B Stock
shall not be entitled to elect any B Directors pursuant to the
table above.
(b) Series C Stock. Subject to the caps on the number of C
---------------
Directors based on individual shareholdings of Series C Stock set
forth below, the Series C Stock voting as a class shall be
entitled to elect six C Directors so long as 80% or more of the
aggregate shares of Series C Stock outstanding as of the Closing
remain outstanding. If the number of shares of Series C Stock
outstanding as of the Closing is reduced below 80% of such
initial amount, then, subject to the caps on the number of C
Directors based on individual shareholdings of Series C Stock,
the number of directors entitled to be elected by the Series C
Stock voting as a class (the "Aggregate C Holders Cap") shall
decrease proportionately as follows:/5/
<TABLE>
<CAPTION>
- -----------------------------------------
PERCENTAGE OF NUMBER OF
SERIES C STOCK DIRECTORS ENTITLED
OUTSTANDING AS OF TO BE ELECTED BY
THE CLOSING SERIES C STOCK
- -----------------------------------------
<S> <C>
80.0% - 100.0% 6
- -----------------------------------------
66.7% - 79.9% 5
- -----------------------------------------
53.4% - 66.6% 4
- -----------------------------------------
40.1% - 53.3% 3
- -----------------------------------------
Less than 40.1% 0
- -----------------------------------------
</TABLE>
- ------------
/5/ The numbers of shares of Series C Stock represented by the percentages
set forth in the table that follows shall be adjusted from time to time
to give effect to stock splits, stock dividends and similar transactions
with respect to Series C Stock.
<PAGE>
13
As the Series C Holders' holdings of Series C Stock change over
time as a result of sales and purchases of Series C Stock by the
Series C Holders, the number of C Directors to be elected by the
Series C Stock shall be apportioned in proportion to their
respective holdings of Series C Stock subject to the Aggregate C
Holders Cap set forth in the table above; provided that the
--------
number of C Directors to be elected by any individual Series C
Holder (the "Individual C Holder Cap") shall be limited as
follows:/5/
<TABLE>
<CAPTION>
- -------------------------------------------
MAXIMUM NUMBER OF
C DIRECTORS
ENTITLED TO BE
SHARES OF SERIES C ELECTED BY
STOCK OWNED BY APPLICABLE
SERIES C HOLDER SERIES C HOLDER
-------------------------------------------
<S> <C>
80% of the Series C
Stock holdings of 3
TWC/Newhouse
as of the Closing
- -------------------------------------------
160% of the Series C
Stock holdings of the 2
Lowest C*
as of the Closing
- -------------------------------------------
80% of the Series C
Stock holdings of the 1
Lowest C*
as of the Closing
- -------------------------------------------
Less than 80% of the
Series C Stock
holdings of the 0
Lowest C*
as of the Closing
- -------------------------------------------
</TABLE>
* The lowest holdings of Series C Stock as of the Closing of Cox,
Comcast and MediaOne.
If the maximum number of C Directors permitted to be elected
pursuant to the Aggregate C Holders Cap is smaller than the
aggregate number of C Directors entitled to be elected pursuant
to the Individual C Holder Caps or vice versa, the number of C
Directors shall decrease by the difference in such numbers and
the number of Common Directors shall increase by such difference.
The board will consist entirely of Common
<PAGE>
14
Directors upon the earlier of (i) the Series C Termination Date
and (ii) the tenth anniversary of the first issue of Series C
Stock.
C Directors Allocation Mechanism. If the aggregate number of C
---------------------------------
Directors permitted to be elected pursuant to the Aggregate C
Holders Cap is smaller than the aggregate number of C Directors
permitted to be elected pursuant to the Individual C Holder Caps,
then the Series C Holder that holds the number of shares of
Series C Stock that is closest (in number of shares) to the next
lower Individual C Holder Cap shall be treated as if the number
of shares of Series C Stock owned by such Series C Holder was
less than such next lower Individual C Holder Cap and therefore
will lose the right to elect one C Director, so that the
aggregate number of C Directors elected by the Series C Holders
equals the number of C Directors permitted to be elected pursuant
to the Aggregate C Holder Cap.
Directors Adjustment Mechanism. Each adjustment in the number of
-------------------------------
directors provided for under "Board Composition" and "C Directors
Allocation Mechanism" above shall become effective as of the
annual meeting of NewCo stockholders immediately following the
applicable event causing the need for such adjustment, provided
that such adjustment is still necessary at the time of such
annual stockholders' meeting.
Board Nominees. The nomination process for the B Directors and
---------------
the mechanics for the removal and replacement of any B Director
nominees prior to the election thereof to the board will be
determined by the Specified Series B Holders by separate
agreement among them./6/
- ---------------
/6/ Each Series C Holder shall have the right to obtain a copy, including
any amendments or supplements thereto, of any agreement to which a
Specified Series B Holder is a party and which governs the nomination
process, removal or replacement of any B Director nominees. The Series B
Holders will have a similar right with respect to the Series C Holders.
<PAGE>
15
The C Directors shall be nominated by the Series C Holders. Each
Series C Holder shall nominate as many directors as the number of
C Directors that such Series C Holder is entitled to elect
pursuant to "Board Composition" and "Allocation Mechanism" above.
Of the initial six C Directors, three will be nominated by
TWC/Newhouse and one by each of Cox, Comcast and MediaOne. Each
Series C Holder will have the right to remove and replace its C
Director nominees at any time prior to the election thereof to
the board.
The initial two Common Directors to be nominated will be John
Goddard and John Connelly. If for whatever reason either Common
Director is unable to serve, such Common Director shall be
replaced in a manner consistent with the procedure set forth
below for nominating Common Directors. The Charter shall provide
that (i) prior to the Series C Termination Date, each Common
Director (including Common Directors that are elected in the
place of B Directors or C Directors) will be nominated by an 83%
vote of the B Directors and the C Directors then in office,
collectively and (ii) after the Series C Termination Date, the
Common Directors will be nominated by a majority of the incumbent
board.
Agreement to Vote. Each Series C Holder will agree for the term
------------------
of the Stockholders Agreement to vote (or cause to be voted) all
shares of Series C Stock held by such Series C Holder at the time
of such vote, whenever acquired, in favor of the C Directors
nominated by the Series C Holders as provided under "Board
Nominees" above. In addition, each Series C Holder and each
Specified Series B Holder will agree for the term of the
Stockholders Agreement to vote all shares of NewCo Common Stock
held by such stockholders at the time of such vote, whenever
acquired, in favor of the Common Directors nominated as provided
under "Board Nominees" above. GE will agree for the term of the
Stockholders Agreement to vote (or
<PAGE>
16
cause to be voted) (i) all shares of Series B Stock acquired by
GE pursuant to the right of first refusal process described under
"Rights of First Refusal" below and held by GE at the time of
such vote in favor of the B Directors nominated as provided under
"Board Nominees" above and (ii) all shares of Series A Stock and
Series B Stock acquired by GE pursuant to the rights of first
refusal process described under "Rights of First Refusal" below
and held by GE at the time of such vote in favor of the Common
Directors nominated as provided under "Board Nominees" above. In
the event that any Series C Holder, any Specified Series B Holder
or GE fails or refuses so to vote (or cause to be voted) its or
his shares of Common Stock, each other Series C Holder, Specified
Series B Holder or GE (in the event GE does not fail or refuse so
to vote its shares of Common Stock), as applicable, shall have an
irrevocable proxy (which shall be coupled with an interest) to
vote such shares of Common Stock, as provided in this paragraph.
Transfer Restrictions. No Series C Holder shall have the right,
----------------------
directly or indirectly, to sell, transfer, assign or hypothecate
(collectively, "Transfer") any of its Series A Stock or Series C
Stock, except as provided under "Permitted Transfers" below. The
Specified Series B Holders shall not have the right to Transfer
any of their respective Series B Stock, except as provided under
"Permitted Transfers" below.
Permitted Transfers. (a) Series A Stock. Subject to any
-------------------- ---------------
restrictions on Transfers in connection with the Series C
Holders' registration rights set forth on Exhibit C hereto,/7/
a Series C Holder may at any time
- --------------
/7/ The registration rights provisions of Exhibit C hereto prohibit under
certain circumstances any sale of equity securities of NewCo by NewCo,
the Series C Holders, the Specified Series B Holders and GE and their
respective controlled affiliates during the ten (10) Business Days prior
to, and during the ninety-day period beginning on, the later of (i) the
effective date of a registration of Registrable Securities in connection
with an underwritten public offering or (ii) the commencement of a
public distribution of such Registrable Securities pursuant to such
registration.
<PAGE>
17
Transfer any or all of its Series A Stock pursuant to (x) a
registered public offering as provided in connection with the
registration rights set forth on Exhibit C hereto or (y) an
exemption to the registration requirements of the Securities Act
of 1933, as amended (the "Securities Act"), and the rules and
regulations promulgated thereunder.
(b) Series B Stock and Series C Stock. A Series C Holder may
----------------------------------
Transfer any or all of its Series C Stock without conversion to
(i) a person that is a controlled affiliate (which will be
defined to include the ultimate parent entity of such Series C
Holder and any entity controlled by such ultimate parent entity)
of such Series C Holder so long as such person remains a
controlled affiliate of such Series C Holder, (ii) an acquiror of
all or substantially all of such Series C Holder's cable assets
pursuant to a Cable Sale or (iii) a spin-off entity which
acquires all or substantially all of such Series C Holder's cable
assets pursuant to a Spin-Off. All other Transfers of Series C
Stock shall be subject to the right of first refusal process
described under "Rights of First Refusal" below. The Series C
Stock shall be converted into Series B Stock prior to a Transfer
to any person (other than a Series C Holder) pursuant to the
right of first refusal process. Each Series C Holder shall agree
not to convert its Series C Stock into Series B Stock other than
upon Transfer of such Series C Stock to any person (other than a
Series C Holder) pursuant to the right of first refusal process.
With respect to Newhouse, "controlled affiliate" shall include
any person that is a lineal descendant (including adoptees) of
Meyer and Rose Newhouse, any entity which is wholly owned
directly or indirectly by one or more of such lineal descendants
or any trust established for the sole benefit of one or
<PAGE>
18
more such lineal descendants or their spouses.
All Transfers of Series B Stock (or, at the option of the
Specified Series B Holder, the Series A Stock issued upon
conversion of such Series B Stock) by any Specified Series B
Holder shall be subject to the right of first refusal process
described under "Rights of First Refusal" below, except for
Transfers of Series B Stock by any Specified Series B Holder to
any person that is a controlled affiliate of such Specified
Series B Holder so long as such person remains a controlled
affiliate thereof.
Transfers of all Series of NewCo Common Stock shall be subject to
the claw back rights set forth under "Claw Back Rights" below.
(c) Obligations of Permitted Transferees. Each controlled
-------------------------------------
affiliate that acquires Series B Stock or Series C Stock pursuant
to a permitted Transfer and each person that acquires Series C
Stock pursuant to a Cable Sale or Spin-Off (each, a "Permitted
Transferee") shall be required as a condition to such Transfer to
become a party to the Stockholders Agreement and agree to be
bound by the terms and conditions of the Stockholders Agreement.
Thereupon, such Permitted Transferee will be deemed a Specified
Series B Holder or Series C Holder (as applicable) for purposes
of this Summary of Business Terms and the Stockholders Agreement.
Rights of First Refusal. (a) General. Except as provided under
------------------------ --------
"Permitted Transfers" above, if any Series C Holder or Specified
Series B Holder (each such holder, a "Transferor") proposes to
Transfer any of its shares of Series C Stock or Series B Stock
(any such shares proposed to be Transferred being the
"Transferred Interest"), such Transferor shall (unless the
proposed Transfer is pursuant to a Public Sale or a Tender Offer)
be free to negotiate with any transferee to obtain an offer to
buy the Transferred Interest. At any time that the Transferor
(i) receives from a transferee a bona fide, fully financed offer
that the
<PAGE>
19
Transferor is willing to accept or (ii) seeks to Transfer the
Transferred Interest pursuant to a Public Sale or a Tender Offer,
the Transferor shall provide written notice thereof (each, a
"Transfer Notice") to each other Series C Holder, Specified
Series B Holder and GE. The Transfer Notice shall include (A) in
the case of a Transfer other than pursuant to a Public Sale or
Tender Offer, the identity of the prospective buyer, the price
per share offered, the terms of the prospective buyer's financing
and the other material terms of the offer, (B) in the case of a
Transfer pursuant to a Public Sale, the Current Market Price as
of the date of the Transfer Notice and whether such Public Sale
constitutes a Fast-Track Sale and (C) in the case of a Transfer
pursuant to a Tender Offer, the tender offer price per share.
For purposes hereof:
"Current Market Price" shall mean, as to any share of Series B
Stock or Series C Stock as of any date, the average of the daily
closing prices for shares of Series B Stock for the 30
consecutive trading days immediately prior to such date.
"Fast-Track Sale" shall mean that as of the date of the
applicable Transfer Notice, the Transferor has a bona fide
intention to sell the Transferred Interest pursuant to a Public
Sale to be consummated within 90 days of the date of such notice.
"Public Sale" shall mean a sale of the Transferred Interest
pursuant to (A) a registered offering under either an already
effective registration statement under the Securities Act or a
registration statement to be filed pursuant to the exercise of a
demand or piggyback registration right by the Transferor or (B)
Rule 144 under the Securities Act, in each case, provided that
--------
such sale is not being undertaken as a result of an offer to buy,
a bid or a request, invitation or solicitation to sell made by
any person (other than an investment banker seeking to act as an
underwriter of a publicly distributed offering of the Transferred
Interest).
<PAGE>
20
"Tender Offer" shall mean a tender or exchange offer for shares
of any Series of NewCo Common Stock on Schedule 14d-1 under the
Securities and Exchange Act of 1934, as amended.
(b) Series C Stock./8/ Upon receipt of a Transfer Notice
---------------
relating to Series C Stock, each Series C Holder (other than the
Transferor) will have the right to acquire its pro rata portion
--- ----
(or a smaller amount) of the Transferred Interest, based on the
number of shares of Series C Stock owned by each such Series C
Holder that elects to acquire its pro rata portion (or a smaller
--- ----
amount) of the Transferred Interest (each, an "Acquiring Series C
Holder") at the time of the exercise of such Right of First
Refusal. Such Right of First Refusal must be exercised (by
written notice to the Transferor and each other Series C Holder,
Specified Series B Holder and GE) within 20 days (10 days in the
case of a Fast-Track Sale and 7 days in the
- ------------
/8/ For purposes of this section, Transfers of Series C Stock by Newhouse
shall be subject to the Right of First Refusal of all Series C Holders
(including TWC). Newhouse, however, except as provided in the next
sentence, shall not have the right individually to exercise the Right of
First Refusal on Transfers of Series C Stock by any other Series C
Holder, but shall have the right to acquire its pro rata share of any
--------
Series C Stock acquired by TWC/Newhouse pursuant to such Right of
First Refusal, based on the relative percentage ownerships of Series C
Stock of TWC and Newhouse at the time of such acquisition. The parties
hereto, however, acknowledge and agree that, if (x) TWC is Transferring
Series C Stock held pursuant to the right of first refusal set forth in
this section which would cause TWC, Newhouse and their respective
controlled affiliates collectively to lose the right under the
Stockholders Agreement to nominate at least one C Director and (y) as of
such time Newhouse shall not have Transferred (other than to a
controlled affiliate of Newhouse) any of the Series C Stock issued to
Newhouse at the Closing, then Newhouse shall have the right to acquire,
before any other Series C Holder, shares of Series C Stock intended to
be so Transferred by TWC up to such maximum number as shall be necessary
for Newhouse to become entitled pursuant to the Stockholders Agreement
to nominate one C Director. Any such remaining shares shall be
Transferred pursuant to the right of first refusal process set forth in
this section.
<PAGE>
21
case of a Tender Offer) from the date of the applicable Transfer
Notice, or such Right of First Refusal shall lapse.
In the event that any Acquiring Series C Holder elects to acquire
a smaller amount
than its pro rata portion of the Transferred Interest, each other
--- ----
Acquiring Series C Holder that stated a willingness to acquire
more than its pro rata portion of the Transferred Interest in its
--- ----
exercise notice will have the right to acquire its pro rata
--- ----
portion or, if available, up to the number of shares specified in
such other Acquiring Series C Holder's exercise notice (or a
smaller amount if a cap is specified in such other Acquiring
Series C Holder's exercise notice) of the amount of the
Transferred Interest that such Acquiring Series C Holder was
entitled but failed to elect to acquire based on the number of
shares of Series C Stock owned by each such other Acquiring
Series C Holder that elects to acquire a portion of such amount
of the Transferred Interest at the time of the exercise of such
Right of First Refusal.
If all or any portion of the Transferred Interest is not acquired
by the Series C Holders as provided above, the Specified Series B
Holders will have the right to acquire the remaining shares of
such Transferred Interest in proportions to be agreed to among
the Specified Series B Holders; provided, however, that any
-------- -------
shares of Series C Stock proposed to be acquired by any Specified
Series B Holder pursuant to the Right of First Refusal described
in this paragraph shall be converted into Series B Stock prior to
such acquisition. Such Right of First Refusal must be exercised
(by written notice to the Transferor, each Series C Holder, each
other Specified Series B Holder and GE) within 25 days (15 days
in the case of a Fast-Track Sale and 11 days in the case of a
Tender Offer) from the date of the applicable Transfer Notice, or
such Right of First Refusal shall lapse.
If all or any portion of the Transferred Interest is not acquired
by the Series C Holders or the Specified Series B Holders, GE
<PAGE>
22
will have the right to acquire all or any of the remaining shares
of such Transferred Interest; provided, however, that any shares
-------- -------
of Series C Stock proposed to be acquired by GE pursuant to the
Right of First Refusal described in this paragraph shall be
converted into Series B Stock prior to such acquisition. Such
Right of First Refusal must be exercised (by written notice to
the Transferor, each Series C Holder and each Specified Series B
Holder) within 30 days (20 days in the case of a Fast-Track Sale
and 15 days in the case of a Tender Offer) from the date of the
applicable Transfer Notice, or such Right of First Refusal shall
lapse.
Notwithstanding the above, in the event that the Series C
Holders, the Specified Series B Holders and GE do not
collectively agree to acquire all of the Transferred Interest,
then the Transferor shall be entitled to (i) Transfer all (but
not less than all, subject to certain exceptions to be determined
in connection with a Public Sale as a result of market
conditions) of the Transferred Interest on the terms and as set
forth in the Transfer Notice (such Transfer to be consummated
within 180 days following the date of the applicable Transfer
Notice or the Transferred Interest shall once again be subject to
the Rights of First Refusal set forth herein), (ii) Transfer to
the Series C Holders, the Specified Series B Holders and GE the
portion of the Transferred Interest that they collectively agreed
to acquire or (iii) retain the Transferred Interest; provided,
--------
however, that all such shares of Series C Stock to be Transferred
-------
pursuant to clause (i) above or to Specified Series B Holders or
GE pursuant to clause (ii) above shall be converted into Series B
Stock prior to such Transfer.
(c) Series B Stock. Upon receipt of a Transfer Notice relating
---------------
to Series B Stock, each Specified Series B Holder (other than the
Transferor) will have the right to acquire its pro rata portion
--- ----
(or a smaller amount) of the Transferred Interest, based on the
number of shares of Series B Stock owned by each such Specified
Series B Holder that elects to acquire its pro rata portion (or a
--- ----
<PAGE>
23
smaller amount) of the Transferred Interest (each, an "Acquiring
Specified Series B Holder") at the time of the exercise of such
Right of First Refusal. Such Right of First Refusal must be
exercised (by written notice to the Transferor and each other
Specified Series B Holder, Series C Holder and GE) within 20 days
(10 days in the case of a Fast-Track Sale and 7 days in the case
of a Tender Offer) from the date of the applicable Transfer
Notice, or such Right of First Refusal shall lapse.
In the event that any Acquiring Specified Series B Holder elects
to acquire a smaller amount than its pro rata portion of the
--- ----
Transferred Interest, each other Acquiring Specified Series B
Holder that stated a willingness to acquire more than its pro
---
rata portion of the Transferred Interest in its exercise notice
----
will have the right to acquire its pro rata portion (or a smaller
--- ----
amount if a cap is specified in such other Acquiring Specified
Series B Holder's exercise notice) of the amount of the
Transferred Interest that such Acquiring Specified Series B
Holder was entitled but failed to elect to acquire based on the
number of shares of Series B Stock owned by each such other
Acquiring Specified Series B Holder that elects to acquire a
portion of such amount of the Transferred Interest at the time of
the exercise of such Right of First Refusal.
If all or any portion of the Transferred Interest is not acquired
by the Specified Series B Holders as provided above, the Series C
Holders will have the right to acquire the remaining shares of
such Transferred Interest pro rata based on their respective
--- ----
holdings of Series C Stock at the time of the exercise of such
Right of First Refusal or, if available, up to the number of
shares specified in each Series C Holder's exercise notice. Such
Right of First Refusal must be exercised (by written notice to
the Transferor, each Specified Series B Holder, each other Series
C Holder and GE) within 25 days (15 days in the case of a Fast-
Track Sale and 11 days in the case of a Tender Offer) from the
date of the applicable
<PAGE>
24
Transfer Notice, or such Right of First Refusal shall lapse.
If all or any portion of the Transferred Interest is not acquired
by the Specified Series B Holders or the Series C Holders, GE
will have the right to acquire all or any of the remaining shares
of such Transferred Interest. Such Right of First Refusal must
be exercised (by written notice to the Transferor, each Series C
Holder and each Specified Series B Holder) within 30 days (20
days in the case of a Fast-Track Sale and 15 days in the case of
a Tender Offer) from the date of the applicable Transfer Notice,
or such Right of First Refusal shall lapse.
Notwithstanding the above, in the event that the Specified Series
B Holders, the Series C Holders and GE do not collectively agree
to acquire all of the Transferred Interest, then the Transferor
shall be entitled to (i) Transfer all (but not less than all,
subject to certain exceptions to be determined in connection with
a Public Sale as a result of market conditions) of the
Transferred Interest on the terms and as set forth in the
Transfer Notice (such Transfer to be consummated within 180 days
following the date of the applicable Transfer Notice or the
Transferred Interest shall once again be subject to the Rights of
First Refusal set forth herein), (ii) Transfer to the Specified
Series B Holders, the Series C Holders and GE the portion of the
Transferred Interest that they collectively agreed to acquire or
(iii) retain the Transferred Interest.
At each Transferor's option, any shares of Series B Stock
Transferred to Series C Holders or GE pursuant to the Right of
First Refusal described in this paragraph (c) may be converted
prior to Transfer into, and Transferred to Series C Holders and
GE as, Series A Stock; provided, however, that such Transferor
-------- -------
shall have indicated on the applicable Transfer Notice its
election to Transfer its Series B Stock as Series A Stock as
provided herein, and such election, when made, shall be
irrevocable. Specified Series B Holders may not avoid the Right
of
<PAGE>
25
First Refusal described above by converting their Series B
Stock to Series A Stock.
Terms. Each Series C Holder, Specified Series B Holder and GE
------
will be entitled to acquire the applicable amount of the
Transferred Interest pursuant to the Rights of First Refusal set
forth above on the same terms and conditions as set forth in the
applicable Transfer Notice.
Upon the Series C Termination Date, each Transferor shall be
entitled to accelerated time periods during which the right of
first refusal would apply to any Transferred Interest.
Cable Sale. In the event that any Series C Holder sells,
-----------
contributes or assigns to a single person all or substantially
all of such Series C Holder's cable systems (a "Cable Sale"),
then such Series C Holder may sell, contribute or assign to such
person all (but not less than all) of such Series C Holder's
Series C Stock, without such Transfer being subject to any rights
of first refusal or conversion requirements.
If a Series C Holder enters into a Cable Sale and does not sell,
contribute or assign all of such Series C Holder's Series C Stock
to the acquiror of such Series C Holder's cable assets, then all
other Series C Holders shall have, for a period of 90 days
beginning upon the consummation of the Cable Sale, a call right
(the "Cable Sale Call Right") to purchase their respective pro
---
rata portions of such Series C Holder's Series C Stock, based on
----
the respective percentages of Series C Stock held by such other
Series C Holders, as well as their respective pro rata portions
--- ----
of any amount of such Series C Stock not purchased by any such
other Series C Holder pursuant to such call right or, if
available, up to the number of shares of such Series C Stock
specified in the exercise notice of each such other Series C
Holder, based on the respective percentages of Series C Stock
held by the Series C Holders willing to purchase such Series C
Stock or any portion thereof; provided, however, that the Cable
-------- -------
Sale Call Right shall be
<PAGE>
26
exercisable only if the Series C Holders (or any number thereof,
in each case other than the Series C Holder that consummated the
applicable Cable Sale) agree collectively to acquire all (but not
less than all) of such Series C Holder's Series C Stock. Any
Series C Stock acquired pursuant to a Cable Sale Call Right shall
be acquired at the Current Market Price calculated as of the
trading day immediately preceding the date of the closing
pursuant to the Cable Sale Call Right.
In the event that the Series C Holders shall fail to purchase all
Series C Stock subject to a Cable Sale Call Right as provided
above, such Series C Stock shall in connection with any
subsequent Transfer thereof be subject to the rights of first
refusal described in paragraph (b) under "Rights of First
Refusal" above.
Spin-Off. In the event that a Series C Holder spins off all or
---------
substantially all of its cable assets to a single entity (a
"Spin-Off"), then such Series C Holder shall be required to sell,
contribute or assign to such entity all of such Series C Holder's
Series C Stock, without such Transfer being subject to any rights
of first refusal or conversion requirements.
Claw Back Rights. In the event that any Series C Holder or
-----------------
Specified Series B Holder at any time proposes to acquire the
direct or indirect beneficial ownership of, or the direct or
indirect right to vote, any shares of capital stock of NewCo
which as a result of such acquisition would result in such Series
C Holder or Specified Series B Holder, as applicable, together
with its controlled affiliates but without any other Permitted
Transferee, owning shares or having the power to vote shares of
capital stock in each case with aggregate voting power in excess
of 49% of the total outstanding voting power with respect to the
election of directors who are elected by all stockholders voting
as a single class (the "Common Director Voting Power"), then such
Series C Holder or Specified Series B
<PAGE>
27
Holder, as the case may be, shall be obligated to offer to all
other Series C Holders and Specified Series B Holders, pro rata
--- ----
based on their respective percentages of the total Common
Director Voting Power, such number of shares of Series B Stock or
Series C Stock as would be necessary to reduce the aggregate
Common Director Voting Power of such Series C Holder or Specified
Series B Holder to 49%, or less, as well as their pro rata
--- ----
portion of any amount of securities representing such
Voting Power not purchased by any such other Specified Series B
Holder or Series C Holder pursuant to such claw back rights,
within 10 days from the date when such Series C Holder or
Specified Series B Holder first owns shares or has the power to
vote shares of capital stock with aggregate voting power in
excess of 49% of the Common Director Voting Power. All other
Series C Holders and Specified Series B Holders shall have 20
days from such offer to exercise their right to purchase their
pro rata share of such number of shares as provided above,
--- ----
after which time such right shall terminate. Such Series C Holder
or Specified Series B Holder shall be entitled to keep any
capital stock that was subject to but not purchased pursuant to
the claw back rights set forth in this paragraph. Any capital
stock acquired pursuant to such claw back process shall be
acquired at the Current Market Price calculated as of the trading
day immediately preceding the date of such acquisition. The claw
back rights set forth in this paragraph shall terminate upon the
earlier to occur of (x) the tenth anniversary of the date of the
Stockholders Agreement and (y) the date when no Series C Holder,
Specified Series B Holder or GE owns any Common Stock of NewCo.
The Series C Holders and the Specified Series B Holders shall
also have similar claw back rights in the event of certain
transactions pursuant to which a Series C Holder or a Specified
Series B Holder becomes the owner of shares or the right to vote
shares of NewCo capital stock with aggregate voting power in
excess of 49% of the Common Director Voting Power other than
pursuant to the acquisition of shares or any beneficial or voting
interest with respect thereto.
<PAGE>
28
Representations and Warranties. Customary terms to be set forth
-------------------------------
in the Stockholders Agreement, including with respect to each
Series C Holder, each Specified Series B Holder, GE, NewCo, TSAT
and the capital stock of TSAT. In addition, TSAT represents and
warrants that:
. the capitalization of TSAT as of May 31, 1997 is as set
forth in Exhibit G hereto;
. the total outstanding indebtedness for borrowed money of
TSAT as of May 31, 1997 is $359,497,772; and
. as of the date hereof, neither TSAT nor any of its
subsidiaries had, has or will have any indebtedness,
obligation or liability, absolute or contingent, required
to be disclosed in accordance with GAAP and which is not
adequately provided for in the audited 1996 year end
balance sheet of TSAT, except for indebtedness, obligations
or liabilities incurred by TSAT or any of its subsidiaries
in the ordinary course of business since the date of such
balance sheet and consistent with past practice.
Events of Default. Breach by any party to the Stockholders
------------------
Agreement of any of its covenants, representations and warranties
or other obligations set forth therein or breach by such party of
any other material provision of the Stockholders Agreement,
including the director nomination and Transfer provisions set
forth therein.
Remedies. Upon the occurrence and continuance of an event of
---------
default with respect to a party to the Stockholders Agreement for
fifteen (15) days after notice thereof and failure to cure, each
other party to the Stockholders Agreement will be entitled to (x)
any remedies that may be available to such other party at law or
in equity, (y) cause the removal from the Board of Directors of
each director nominated by the defaulting party and cause the
temporary suspension of the defaulting party's right under the
Stockholders Agreement to nominate
<PAGE>
29
directors to the board or (z) cause the temporary suspension of
any other right of the defaulting party pursuant to the
Stockholders Agreement; provided, however, that a defaulting
-------- -------
party shall at all times continue to be bound by all applicable
obligations of such defaulting party under the Stockholders
Agreement.
Term. Ten years.
-----
Governing Law. New York.
--------------
Pre-Closing Matters. The parties hereto agree that the following
--------------------
matters shall be conditions precedent to the Closing:
. the five year strategic plan and budget for fiscal years
1998 and 1999 of NewCo shall be approved by a "Super-
majority Vote" (as defined in the PRIMESTAR partnership
agreement);
. satisfaction of due diligence matters relating to TSAT and
the other parties to the roll-up; and
. obtaining all necessary regulatory consents and approvals
PROXY TSAT will prepare proxy statement materials setting forth
- ----- material information concerning the transactions contemplated
STATEMENT: herein. The Series C Holders and the Specified Series B Holders
- --------- will have the right to review and comment on such materials, and
TSAT will incorporate into such materials any such comments so
that the proxy statement materials are reasonably acceptable to
each Series C Holder and each Specified Series B Holder. The
Series C Holders and the Specified Series B Holders will have the
right upon request to review such proxy statement materials at
any time and from time to time prior to distribution thereof to
TSAT stockholders in connection with the solicitation of such
stockholders' approval of the transactions contemplated herein.
<PAGE>
30
OTHER Voting Agreements. In connection with the TSAT stockholders'
- ----- ------------------
AGREEMENTS: vote or written consent to approve the transactions contemplated
- ---------- herein, Malone hereby agrees, concurrently with the execution of
the Letter or as soon thereafter as practicable, to (i) enter
into the Voting Agreement attached hereto as Exhibit F-3 and (ii)
enter and cause Tele-Communications, Inc. ("TCI") to enter into
the Voting Agreement attached hereto as Exhibit F-4. In addition,
each of Malone and TSAT hereby agrees to use his or its best
commercially reasonable efforts to cause (i) Kearns-Tribune,
concurrently with the execution of the Letter or as soon
thereafter as practicable, to enter into the Voting Agreement
attached hereto as Exhibit F-2 and (ii) the personal
representatives of the estate of Robert Magness, concurrently
with the execution of the Letter or as soon thereafter as
practicable, to enter into the Voting Agreement attached hereto
as Exhibit F-1.
Tax Sharing Agreement. Concurrently with the execution of the
----------------------
Letter, each of TCI and TSAT shall enter into the Tax Sharing
Agreement attached hereto as Exhibit H.
PRIMESTAR "PRIMESTAR Customer" will be defined, wit respect to the
- --------- PRIMESTAR medium power business, relative to current delinquency
CUSTOMERS: of the customer at the Closing as follows:
- ---------
Delinquency/9/ Value of Customer
----------- -----------------
60 days or less full PRIMESTAR
Customer
61 days to 90 days .5 PRIMESTAR
Customer
over 90 days no credit
In addition, the definitive documents will contain restrictions
on TSAT, TWC, Cox, Comcast and MediaOne from engaging in unusual
selling practices prior to the Closing that
- ----------
/9/ Calculated from the day the relevant bill is issued.
<PAGE>
31
are designed to inflate PRIMESTAR Customer additions beyond
normal levels and increase the percentage of high risk customers.
CLOSING Certain adjustments on the economics of the transaction will
- ------- occur at or after the Closing, including:
ADJUSTMENTS:
- -----------
. adjustment on the number of new PRIMESTAR Customers added
within 90 days prior to the Closing to be effected pursuant
to an audit 90 days after the Closing;
. adjustment on inventory contributed to NewCo conducted
pursuant to an audit within 90 days from Closing;
. the PRIMESTAR Partners will be reimbursed in cash for 100%
of any capital contributions made to PRIMESTAR after March
31, 1997; it is the intent of the parties hereto that
PRIMESTAR's obligations will be assumed by NewCo and any
credit support provided individually by any such party in
connection with PRIMESTAR operations be removed or replaced
and that all satellite financing be refinanced by NewCo in
connection with the Closing, subject to the existing terms
of such financing; and
. GE's percentage ownership of Series A Stock may be adjusted
based on a formula that will permit GE to receive additional
shares of Series A Stock up to a number necessary for GE to
maintain its 4.9% ownership of the total number of shares of
NewCo Common Stock outstanding at the Closing by causing a
pro rata decrease in the number of shares of Series A Stock
--- ----
and corresponding increase in the amount of cash that each
of TWC/Newhouse, Cox, Comcast and MediaOne shall receive at
Closing; provided, however, that the aggregate value of such
-------- -------
adjustment shall not exceed $14,025,000 or 1,753,125 shares
of Series A Stock. GE shall give written notice to each
Series C Holder
<PAGE>
32
of its intent to cause such adjustment by the later of (i)
August 1, 1997 and (ii) 30 days after the execution date of
the Letter to which this Summary of Business Terms is
attached. If no such notice is timely received, such
adjustment shall not be made.
Inventory Adjustment Mechanism. The inventory adjustment to be
-------------------------------
conducted as of the Closing shall be as follows: The ratio (the
"Ratio") of the total number of customers as of the Closing to
the total units of inventory as of the Closing for each Series C
Holder will be adjusted to equal the Ratio for TSAT. In the event
that a Series C Holder has fewer inventory units at Closing than
is necessary to equal TSAT's Ratio, such Series C Holder shall
pay an amount to NewCo in cash equal to the number of additional
inventory units necessary to equal TSAT's Ratio multiplied by the
equipment unit cost. Any such adjustment shall be netted against
cash owed to such Series C Holder at Closing for additional
subscribers. In the event that a Series C Holder has more
inventory units at Closing than is necessary to equal TSAT's
Ratio, such Series C Holder shall be paid in cash at Closing by
TSAT an additional amount equal to the number of excess inventory
units above TSAT's Ratio multiplied by the equipment unit cost.
Attached hereto as Exhibit E is an example of such inventory
adjustment mechanism using (i) an equipment unit cost of $489,
based on a per IRD cost of $385 and a per LNB/dish cost of $115
and assuming that the closing inventory consists of IRDs and
LNBs/dishes that equal in number 90% of such IRDs, (ii) ending
inventory for each Series C Holder as of April 27, 1997 and (iii)
a total number of subscribers for each Series C Holder as of
March 31, 1997. The numbers set forth on Exhibit E as an example
of such inventory adjustment mechanism are for illustrative
purposes only and are not binding on the parties hereto.
GE For the avoidance of doubt, as of the Closing, NewCo shall
- -- succeed to and assume the rights and obligations of PRIMESTAR to
OBLIGATIONS: GE under the existing agreements between
- -----------
<PAGE>
33
PRIMESTAR and GE or its affiliates, including, without
limitation, that certain Ku-1 User Agreement between PRIMESTAR
and GE, dated February 8, 1990, and under that certain Amended
and Restated Memorandum of Agreement, dated October 18, 1996,
with GE.
AGREEMENT Each party hereto acknowledges that the
- --------- ground equipment and "system" technology to
REGARDING be used in the PRIMESTAR business will be
- --------- General Instrument's DigiCipher II technology.
EQUIPMENT:
- ---------
INTEGRATION: The definitive agreements contemplated in this Summary of
- ----------- Business Terms constitute an exhaustive list of all agreements
and other documents governing the rights and obligations of the
parties hereto in connection with the transactions contemplated
herein. No other agreement or document shall affect any such
rights or obligations of the parties hereto.
FOUNDERS' Medium Power Subscribers. Each of TWC/Newhouse, Cox,
- --------- -------------------------
DISTRIBUTION Comcast, MediaOne and Tele-Communications, Inc., together with
- ------------ their respective controlled affiliates (each, a "Founder" and
RIGHTS: collectively, the "Founders"), shall enter into an agency
- ------ agreement with NewCo with a term of ten years, which will
designate such Founder as a sales and servicing agent for NewCo
with respect to the medium power PRIMESTAR subscribers (each, an
"Agency Agreement"). At the end of such ten year term, at the
request of each Founder, NewCo shall enter into good faith
negotiations with such Founder for the purpose of extending the
term of such Agency Agreement and determining the terms and
conditions thereof. The Agency Agreements will provide for
specific non-exclusive territories with respect to servicing
agent arrangements and for non-exclusive sales agent territories.
Among other material terms, the Agency Agreements will provide
for performance criteria in the service area (such as
requirements for telephone call handling responsiveness and
quality, installation response time, installation quality,
service call rate and service call response time). In the event
<PAGE>
34
any Founder fails materially to satisfy the service performance
criteria to be set forth in the applicable Agency Agreement, such
Founder may lose its right to provide service under the Agency
Agreement, but in no event (subject to the following) shall a
Founder lose its right to act as a sales agent of NewCo or to
receive any agreed upon fees to be paid in connection with the
performance of such Founder's obligations as a sales agent of
NewCo. The Agency Agreement shall contain customary provisions
restricting actions of the sales agent that are detrimental to
NewCo's business, including provisions restricting sales outside
specified territories and requiring compliance with certain
reasonable and customary information reporting requirements,
equipment specifications and pricing policies; wilful, continued
material violations of such provisions after a reasonable cure
period may result in agency termination in accordance with
provisions to be mutually agreed to in the definitive agreements
contemplated herein. Each Founder's right to act as a sales agent
of NewCo as provided in this paragraph shall be assignable to a
spin-off entity that acquires all or substantially all of such
Founder's cable assets pursuant to a Spin-Off or to any other
Founder that acquires such Founder's cable assets pursuant to a
Cable Sale.
The fees payable to the Founders under the Agency Agreements and
other economic terms related thereto shall be determined in the
definitive documents contemplated herein and shall be acceptable
to each of the Founders and NewCo.
High Power Subscribers. Each Founder will enter into a
-----------------------
distributor agreement with NewCo pursuant to which NewCo will
grant such Founder the right to act as a non-exclusive
distributor of CablePlus for NewCo in such Founder's cable
franchise territories (each, a "Distributor Agreement"). Each
Distributor Agreement shall have a ten year term. At the end of
such ten year term, at the request of any Founder, NewCo shall
enter into good faith negotiations with such Founder for the
purpose of extending the term of such
<PAGE>
35
Distributor Agreement and determining the terms and conditions
thereof. The Distributor Agreements will not contain sales
performance criteria in connection with retail sales, but will
contain customary provisions restricting actions of the
distributor that are detrimental to NewCo's business, including
provisions restricting sales outside specified territories and
requiring compliance with certain information reporting
requirements and equipment specifications. Each Founder's right
to act as a non-exclusive distributor of CablePlus for NewCo in
such Founder's cable franchise territories shall be assignable to
a spin-off entity that acquires all or substantially all of such
Founder's cable assets pursuant to a Spin-Off or to any other
Founder that acquires such Founder's cable assets pursuant to a
Cable Sale.
In addition, each Founder will have the right to enter into an
agency agreement with NewCo pursuant to which such Founder shall
act as a non-exclusive retail sales and servicing agent of any
stand-alone retail high power PRIMESTAR programming service
(each, an "HP Agency Agreement"). Each HP Agency Agreement shall
have a ten year term. At the end of such ten year term, at the
request of any Founder, NewCo shall enter into good faith
negotiations with such Founder for the purpose of extending the
term of such HP Agency Agreement and determining the terms and
conditions thereof. Among other material terms, the HP Agency
Agreements will provide for performance criteria in the service
area (such as requirements for telephone call handling
responsiveness and quality, installation response time,
installation quality, service call rate and service call response
time). In the event any Founder fails materially to satisfy the
service performance criteria to be set forth in the applicable HP
Agency Agreement, such Founder may lose its right to provide
service under the HP Agency Agreement, but in no event (subject
to the following) shall a Founder lose its right to act as a
sales agent of NewCo or to receive any agreed upon fees to be
paid in connection with the performance of such Founder's
obligations as a sales agent
<PAGE>
36
of NewCo. The HP Agency Agreements shall contain customary
provisions restricting actions of the sales agent that are
detrimental to NewCo's business, including provisions restricting
sales outside specified territories and requiring compliance with
certain reasonable and customary information reporting
requirements, equipment specifications and pricing policies;
wilful, continued material violations of such provisions after a
reasonable cure period may result in agency termination in
accordance with provisions to be mutually agreed to in the
definitive agreements contemplated herein.
MFN Provisions. With respect to Agency Agreements, Distributor
---------------
Agreements and HP Agency Agreements between NewCo and any
Founder, (i) in the case of any Founder that has an agreement
pursuant to which such Founder provides only sales, if the sales
fee or any other provision in such agreement is more favorable to
such Founder than the comparable provision in the same agreement
of any other such Founder, then such other Founder shall upon
request be entitled to elect to enter into an agreement with
NewCo that is identical in all respects (other than with respect
to volume and as required to reflect the different parties) as
the agreement with such other Founder containing such more
favorable term and (ii) in the case of any Founder that has an
agreement pursuant to which such Founder provides both sales and
service, if the sales and servicing fees or any other provision
in such agreement are more favorable to such Founder than the
comparable provision in the same agreement of any other such
Founder providing both sales and service, then such other Founder
shall upon request be entitled to elect to enter into an
agreement with NewCo that is identical in all respects (other
than with respect to volume and as required to reflect the
different parties) as the agreement with such other Founder
containing such more favorable term.
For purposes of enforcing the MFN provisions set forth above,
NewCo shall be obligated to provide each Founder with written
notice of
<PAGE>
37
any Agency Agreement, Distributor Agreement or HP Agency
Agreement entered into by any other Founder or of any amendment
to such agreement, and upon such Founder's request NewCo shall be
obligated to provide to such Founder a copy of such agreement or
amendment thereto, as applicable.
CONDUCT OF From the period beginning on the date hereof until the Closing,
- ---------- TSAT and each Series C Holder hereby agrees to conduct (a) in the
BUSINESS: case of TSAT, its business and operations and (b) in the case of
- -------- each Series C Holder, such Series C Holder's PRIMESTAR business
and related operations, according to its ordinary course of
business consistent with past practice; agrees to use its
commercially reasonable efforts to preserve intact (i) in the
case of TSAT, its business organization and (ii) in the case of
each Series C Holder, the organization of its PRIMESTAR business;
agrees to keep available the services of (x) in the case of TSAT,
its officers and employees and (y) in the case of each Series C
Holder, the officers and employees of such Series C Holder's
PRIMESTAR business; and agrees to take no action that would
reasonably be expected to cause:
. the failure of any such party to perform and comply in all
material respects with all agreements, obligations and
conditions required by this Summary of Business Terms to be
performed or complied with by such party on or prior to the
Closing;
. the failure of any such party to obtain all necessary or
appropriate consents or approvals of any United States
Federal or state governmental entity or any other third
party in connection with the consummation of the
transactions contemplated herein, including under the HSR
Act and applicable FCC rules and regulations;
. the institution of any suit, action or proceeding
challenging, seeking to restrain, prohibiting or adversely
affecting in any material respect the
<PAGE>
38
. consummation of the transactions contemplated herein; and
. any material adverse effect (i) in the case of TSAT, to its
business or operations and (ii) in the case of each Series C
Holder, to such Series C Holder's PRIMESTAR business.
In addition, for the period beginning on the date hereof until
the Closing, except as otherwise contemplated hereby, TSAT hereby
agrees not to:
. amend its Charter or By-laws;
. authorize for issuance, issue, sell, deliver, grant options
or warrants for or rights relating to or otherwise agree or
commit to issue, sell or deliver any shares of any class of
its capital stock or any securities convertible into or
exchangeable for shares of any class of its capital stock
other than (i) any such options, warrants, rights or
commitments outstanding as of the date hereof or, in the
case of employee benefit plans existing as of the date of
Closing, authorized under such existing plans and (ii) stock
options issued to officers or other employees of TSAT in the
ordinary course of business and consistent with past
practice;
. split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other
distribution (whether in stock or property or a combination
thereof) in respect of its capital stock or purchase, redeem
or otherwise acquire any shares of or options or warrants on
or rights relating to its own capital stock or any of its
subsidiaries;
. create, incur, assume, maintain or permit to exist any long
term debt or any short term debt for borrowed money (other
than under existing lines of credit not to exceed
$450,000,000 (assuming a Closing on or about December 31,
1997)) or other indebtedness which
<PAGE>
39
will be repaid at or prior to the Closing; assume,
guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the
obligations of any other person except its wholly owned
subsidiaries; or make any loans, advances or capital
contributions to or investments in any other person other
than in the ordinary course of business and consistent with
past practice;
. make any change in any method of accounting or accounting
practice or policy other than those required by U.S.
generally acceptable accounting principles;
. make any payment in respect of indebtedness for borrowed
money (other than scheduled payments of principal or
interest in accordance with the terms of such indebtedness);
. sell or transfer any property or assets to, or purchase or
acquire any property or assets from, or otherwise engage in
any transactions with, any person that is affiliated with
(i) TSAT, (ii) any Series B Holder or (iii) TCI, other than
in the ordinary course of business and consistent with past
practice and on terms and conditions not less favorable to
TSAT than could be obtained on an arm's length basis from
unrelated third parties; or
. agree to do any of the foregoing.
FURTHER Subject to the terms and conditions herein and subject to
- ------- applicable law, each party hereto agrees to use its commercially
ASSURANCES: reasonable efforts promptly to take or cause to be taken all
- ---------- other actions, and do or cause to be done all other things,
necessary or appropriate under applicable laws and regulations to
consummate and make effective the transactions contemplated
herein, including, without limitation, (i) filing Notification
and Report Forms under the HSR Act with the FTC and the Antitrust
Division
<PAGE>
40
of the Department of Justice and using its commercially
reasonable efforts to respond as promptly as practicable to all
inquiries received from the FTC or the Antitrust Division for
additional information and documentation and (ii) obtaining all
necessary consents, approvals or waivers under applicable laws,
rules and regulations, including FCC rules and regulations, or
pursuant to its material contracts.
Notwithstanding anything in this paragraph to the contrary, no
party hereto shall be required to agree to any prohibition,
limitation or other requirements that would (i) prohibit or limit
such party or any of its subsidiaries from owning or operating,
or compel such party or any of its subsidiaries to dispose of or
hold separate, any portion of its business or assets, (ii) impose
limitations on the ability of such party to acquire or hold or
exercise full rights of ownership of any shares of NewCo Common
Stock that shall be issued to such party hereunder, including the
right to vote such shares on all matters provided herein or (iii)
prohibit such party from effectively controlling its business or
operations or the business or operations of any of its
subsidiaries.
DEFINITIVE General. The definitive agreements contemplated in this
- ---------- --------
AGREEMENTS: Summary of Business Terms shall be binding on each Series C
- ---------- Holder, each Specified Series B Holder, GE and TSAT and the
following parent entities (each, a "Parent Entity") thereof: in
the case of TWC, Time Warner Entertainment Company, L.P.; in the
case of Newhouse, Advance/Newhouse Partnership; in the case of
Cox, Cox Communications, Inc.; in the case of Comcast, Comcast
Corporation; in the case of MediaOne, U.S. West Media Group,
Inc.; in the case of GE, GE American Communications, Inc.; and in
the case of TSAT, NewCo. Each such entity's Parent Entity shall
be liable for any breach of or default under the definitive
agreements by such entity.
<PAGE>
42
EXHIBIT A
VALUATION METHODOLOGY
<TABLE>
<CAPTION>
ASSUMPTIONS
<S> <C> <C> <C>
Value Per Sub $ 1,100 Series A 68,060,000
Shares
- ---------------------------------------------------------------------------------
Cash Per Sub 458 Series B 8,466,000
Shares
- ---------------------------------------------------------------------------------
TSAT Equity/Increm. Sub 350 Fully 76,526,000
Diluted
TSAT
Shares
Outstanding
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
3/31/97 VALUATION
- ---------------------------------------------------------------------------------------------------------------------------
VALUE VALUE OF GROSSED-UP VALUE
SUBS OF SUBS PARTNERSHIP PARTNERSHIP AGGREGATE OF CASH EQUITY
3/31/97(1) $1,100(2) 2/14/97(3) VALUE VALUE $458(5) VALUE(6)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
($000s) ($000s) ($000s) ($000s) ($000s) ($000s)
TSAT 716,158 $ 787,774 $ 70,750 $ 70,750 $ 858,523 $327,821 $ 530,702
TWC 515,719 567,291 106,124 106,124 673,415 236,070 437,345
Cox 143,707 158,078 35,375 35,375 193,453 65,782 127,671
Comcast 134,408 147,849 35,375 35,375 183,224 61,525 121,698
MediaOne 152,087 167,296 35,375 35,375 202,671 69,618 133,053
GE 0 0 56,183 84,232(4) 84,232 14,025 70,207
--------- ---------- -------- -------- ---------- ---------- ----------
1,662,079 $1,828,287 $339,181 $367,231 $2,195,518 $774,841 $1,420,676
</TABLE>
<TABLE>
<CAPTION>
12/31/97 VALUATION ADJUSTMENTS - INCREMENTAL ADJUSTMENT AMOUNTS(6)
- ---------------------------------------------------------------------------------------------------------------------------
ESTIMATED ADJUSTED
SUBS INCREMENTAL CASH EQUITY CASH EQUITY AGGREGATE
12/31/97 SUBS $458 $642 $750 $350 VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
($000s) ($000s) ($000s) ($000s) ($000s)
TSAT 879,042 162,884 -- -- $122,163 $57,009 $1,037,695
TWC 570,793 55,074 25,210 35,371 -- -- 733,997
Cox 177,351 33,644 15,400 21,608 -- -- 230,460
Comcast 197,171 62,763 28,730 40,310 -- -- 252,263
MediaOne 186,089 34,002 15,564 21,838 -- -- 240,073
GE 0 0 0 0 -- -- 84,232
--------- ------- ------- -------- --------- ------- ----------
2,010,445 348,366 $84,905 $119,126 $122,163 $57,009 $2,578,720
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------
ADJUSTED ADJUSTED
TOTAL TOTAL
CASH(7) EQUITY
- ---------------------------------------------------
<S> <C> <C>
($000s) ($000s)
TSAT $449,984 $ 587,711
TWC 261,280 472,716
Cox 81,182 149,278
Comcast 90,255 162,008
MediaOne 85,182 154,891
GE 14,025 70,207
-------- ----------
$981,909 $1,596,812
</TABLE>
OWNERSHIP CALCULATIONS - SHARES(8)
<TABLE>
<CAPTION>
TOTAL ECONOMIC VOTING
EQUITY(9) OWNERSHIP TOTAL SERIES A SERIES B SERIES C VOTES POWER
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
($000s)
TSAT $ 587,711 36.81% 76,526,000 68,060,000 8,466,000 -- 152,720,000 37.63%
TWC 472,716 29.60% 61,552,473 54,742,981 -- 6,809,493 122,837,908 30.27%
Cox 149,278 9.35% 19,437,542 17,287,185 -- 2,150,357 38,790,756 9.56%
Comcast 162,008 10.15% 21,095,080 18,761,351 -- 2,333,729 42,098,642 10.37%
MediaOne 154,891 9.70% 20,168,320 17,937,118 -- 2,231,202 40,249,143 9.92%
GE 70,207 4.40% 9,141,707 9,141,707 -- -- 9,141,707 2.25%
---------- ------ ----------- ----------- --------- ---------- ----------- ------
$1,596,812 100.00% 207,921,123 185,930,341 8,466,000 13,524,781 405,838,155 100.00%
</TABLE>
<PAGE>
42
EXPLANATORY NOTES ON VALUATION METHODOLOGY
- ------------------------------------------
(1) Number of PRIMESTAR subscribers of each of the PRIMESTAR partners as of
March 31, 1997.
(2) Number of PRIMESTAR subscribers at March 31, 1997 multiplied by $1,100/sub.
(3) Value of partnership interest based on cost.
(4) GE receives a notional value of $84.2 million for its partnership interest
of which $14.0 million will be paid in cash/debt in the rolled-up PRIMESTAR,
subject to adjustment if GE exercises its option to acquire additional
shares of Series A Common Stock.
(5) This column reflects debt per sub of TSAT as of March 31, 1997 of $458.
(6) The Equity Value to be received by each PRIMESTAR partner shall be equal to
the "Aggregate Value" as of the Closing less the Value of Cash (i.e.,
---- ----
average debt per sub of TSAT (as calculated in Note 7 below)).
(7) The cash payment to each PRIMESTAR partner (other than TSAT) at Closing
shall be equal to the debt per sub amount which is calculated by taking (x)
the debt of TSAT as of Closing (y) subtracting $750 multiplied by the number
of net TSAT subscribers added between March 31, 1997 and Closing and (z)
dividing such amount by the number of TSAT subscribers as of March 31, 1997.
(8) Assuming a Closing date of December 31, 1997 and debt per sub of TSAT (as
calculated in accordance with Note 7 above) of $458.
(9) Based on the equity values calculated using the assumptions above, the non-
TSAT shareholders receive in the transaction that number of Series A and
Series C shares required to give the calculated equity ownership (based on
TSAT's fully diluted shares calculated at Closing). The proportion of Series
C to Series A shares received by the non-TSAT partners (except for GE) is
based on the same proportion as TSAT's Series B to Series A shares at
Closing.
<PAGE>
OMITTED SCHEDULES OR ATTACHMENTS
The following schedules or similar attachments to this exhibit have been omitted
pursuant to Item 601(b)(2) of Regulation S-K of the Securities and Exchange
Commission ("Commission"). The Registrant agrees to furnish supplementally a
copy of any such schedule or attachment to the Commission upon request.
Exhibits
--------
Exhibit B: Form of Board Resolution of Newco
Exhibit C: Registration Rights
Exhibit D: Form of TWC/Newhouse Voting Agreement
Exhibit E: Closing Inventory Adjustment Analysis
Exhibit F-1: Form of Magness Voting Agreement
Exhibit F-2: Form of Kearns-Tribune Voting Agreement
Exhibit F-3: Form of Malone Voting Agreement
Exhibit F-4: Form of TCI Voting Agreement
Exhibit G: Capitalization of TSAT as of May 31, 1997
Exhibit H: Form of TCI/TSAT Tax Sharing Agreement
<PAGE>
EXHIBIT 2.2
ASSET ACQUISITION AGREEMENT
AGREEMENT dated as of June 11, 1997 (this "Agreement"), by and among The
News Corporation Limited, a South Australia corporation ("News"), MCI
Telecommunications Corporation, a Delaware corporation ("MCI"), American Sky
Broadcasting LLC, a Delaware limited liability company and wholly-owned,
indirect subsidiary of News ("ASkyB" and, with News and MCI, collectively, the
"Transferors"), and PRIMESTAR Partners L.P., a Delaware limited partnership
("Primestar"), and, for purposes of Section 5, Section 8.4 and Section 8.12
only, each of the general partners and limited partners of Primestar.
W I T N E S S E T H :
-------------------
WHEREAS, the Transferors own certain assets relating to the direct
broadcast satellite business (the "DBS Assets"); and
WHEREAS, heretofore ASkyB decided to abandon its plan to individually
conduct a U.S. Satellite Business and desires to dispose of certain of its DBS
Assets; and
WHEREAS, the partners of Primestar are currently contemplating a
transaction (the "Roll-up") whereby they, along with certain affiliated
entities, will contribute certain assets to a new company ("Newco"), which will
be a publicly traded company following the Roll-up, in exchange for common stock
of Newco, and Primestar and/or its assets will become wholly-owned by Newco all
as more fully set forth in the letter dated as of June 11, 1997, including the
<PAGE>
Summary of Business Terms and other exhibits attached thereto (the "Roll-up
MOU"), a copy of which, as executed, is attached hereto as Exhibit I; and
WHEREAS, Newco desires to acquire such DBS Assets; and
WHEREAS, the partners of Primestar intend for the Roll-up to qualify as a
tax-free exchange pursuant to Section 351 of the Internal Revenue Code of 1986,
as amended (the "Code"); and
WHEREAS, upon the terms and conditions set forth herein, the Transferors
desire to transfer the DBS Assets, subject to certain liabilities related
thereto (the "Asset Transfer"), to Newco or, if the Roll-up has not been
consummated within 270 days of the date hereof, to Primestar, and Newco or
Primestar, as the case may be, desires to take ownership of the Transferred
Assets (as hereinafter defined); and
WHEREAS, Primestar and the Transferors intend for the Asset Transfer to
qualify as a tax-free exchange pursuant to Section 351 of the Code (or with
respect to the transfer of the DBS Assets if the DBS Assets are transferred to
Primestar, as a tax-free exchange pursuant to Section 721 of the Code);
NOW, THEREFORE, in consideration of the respective promises, covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto do
hereby agree as follows:
1. Definitions.
-----------
1.1 "Acceptable Alternative Arrangement" means any arrangement
satisfactory to Newco and its counsel and to the Transferors and their
respective counsel to ensure Newco's continuous, irrevocable (subject to renewal
by the FCC) and exclusive right to
2
<PAGE>
use and, subject to Regulatory Provisions, to direct the use of the capacity of
the 110 Slot (including, without limitation, all rights with respect to any
successor satellites), at no further cost to Newco, in excess of the costs that
Newco would have incurred if Newco held the authorizations for the 110 Slot
directly, to the same effect as if Newco were the FCC licensee of (or owner of
the FCC licensee of) the 110 Slot.
1.2 "Adjusted Primestar Valuation" shall have the meaning set forth
in Section 3.3 hereof.
1.3 "Affiliate" shall mean any person or entity controlling,
controlled by, or under common control with, an entity. "Control" of any entity
shall mean 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.
1.4 "ASkyB Valuation" means the amount equal to (a) the aggregate
amount expended by News, MCI and ASkyB under and in connection with the
Contracts up to and including the business day immediately preceding the earlier
of the Closing Date and September 30, 1997, plus (b) the costs incurred in
connection with the 110 Slot, which costs include $682.5 million, which was the
price paid for the rights to the 110 Slot at an auction conducted by the FCC
(the "Auction Price"), plus (c) interest, at the rate of six percent (6%) per
annum, on the amounts set forth in (a) and (b) from the respective payment dates
of such amounts up to and including the business day immediately preceding the
earlier of the Closing Date and September 30, 1997; provided, however, that (i)
in no event shall the amount set forth in (a) with respect to any Contract
exceed the sum of the aggregate amounts designated on Schedule A, with regard to
such Contract, as "Paid to Date" and "Remaining Commitment,"
3
<PAGE>
minus any remaining obligation of the Transferors (or Newco, following the
Closing) under such Contract as of the business day immediately preceding the
earlier of the Closing Date and September 30, 1997, and (ii) in no event shall
the costs set forth in (b) above exceed $683.6 million.
1.5 "Assumed Liabilities" shall have the meaning set forth in Section
2.4 hereof.
1.6 "Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could reasonably form the
basis for any specified consequence.
1.7 "Certificate of Designation" shall have the meaning set forth in
Section 3.1 hereof.
1.8 "Claims Notice" shall have the meaning set forth in Section 10.5
hereof.
1.9 "Closing" shall have the meaning set forth in Section 4.1 hereof.
1.10 "Closing Date" shall have the meaning set forth in Section 4.1
hereof.
1.11 "Code" means the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
1.12 "Communications Act" means the Communications Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
1.13 "Consideration Shares" shall have the meaning set forth in
Section 3.1 hereof.
1.14 "Contracts" shall have the meaning set forth in Section 2.1
hereof.
1.15 "Conversion Price" shall have the meaning set forth in Section
3.2 hereof.
4
<PAGE>
1.16 "Conversion Shares" shall have the meaning set forth in Section
3.1 hereof.
1.17 "Convertible Note" shall have the meaning set forth in Section
3.1 hereof.
1.18 "DBS" shall have the meaning set forth in Section 2.2 hereof.
1.19 "Dispositions" has the meaning set forth in Section 8.5 hereof.
1.20 "ECC Indemnification Agreement" shall have the meaning set forth
in Section 10.1 hereof.
1.21 "Employee Benefit Plan" means any (a) Employee Pension Benefit
Plan, including, without limitation, qualified and non-qualified plans and
defined benefit and defined contribution plans; (b) Employee Welfare Benefit
Plan; and (c) material fringe benefit plan or program.
1.22 "Employee Pension Benefit Plan" has the meaning set forth in
ERISA (Section) 3(2).
1.23 "Employee Welfare Benefit Plan" has the meaning set forth in
ERISA (Section) 3(1).
1.24 "Environmental Laws" means all federal, state and local laws,
statutes, ordinances, rules and regulations, now or hereafter in effect, and in
each case as amended or supplemented from time to time, relating to the
regulation and protection of human health, safety, the environment and natural
resources (including, without limitation, ambient air, surface water,
groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic
species and vegetation), including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended
(U.S.C. (Section) 9601 et seq.) ("CERCLA"); the
5
<PAGE>
Hazardous Material Transportation Act, as amended (49 U.S.C. (Section) 180 et
seq.); the Federal Insecticide, Fungicide, and Rodenticide Act, as amended (7
U.S.C. (S) 136 et seq.); the Resource Conservation and Recovery Act, as amended
(42 U.S.C. (Section) 6901 et seq.) ("RCRA"); the Toxic Substance Control Act, as
amended (42 U.S.C. (Section) 7401 et seq.); the Clean Air Act, as amended (42
U.S.C. (Section) 740 et seq.); the Federal Water Pollution Control Act, as
amended (33 U.S.C. (Section) 1251 et seq.); the Occupational Safety and Health
Act, as amended (29 U.S.C. (Section) 651 et seq.); and the Safe Drinking Water
Act, as amended (42 U.S.C. (Section) 300f et seq.), and similar state and local
laws, rules and regulations.
1.25 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
1.26 "FCC" means the Federal Communications Commission.
1.27 "FCC Approval" shall mean an order adopted by the full FCC and
which has not been reversed, reconsidered, stayed, enjoined, set aside, annulled
or suspended, and the thirty (30) day period for any such action on the FCC's
own motion has expired.
1.28 "Fiduciary" has the meaning set forth in ERISA (Section) 3(21).
1.29 "Financial Statements" shall have the meaning set forth in
Section 6.9 hereof.
1.30 "GAAP" means United States generally accepted accounting
principles as in effect from time to time.
1.31 "Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder.
6
<PAGE>
1.32 "Indemnified Party" shall have the meaning set forth in Section
10.5 hereof.
1.33 "Indemnitor" shall have the meaning set forth in Section 10.5
hereof.
1.34 "Intellectual Property" means all (a) patents, patent
applications, patent disclosures, and improvements thereto, (b) trademarks,
service marks, trade dress, logos, trade names, and corporate names and
registrations and applications for registration thereof, (c) copyrights and
registrations and applications for registration thereof, (d) mask works and
registrations and applications for registration thereof, (e) computer software,
data, and documentation, (f) trade secrets and confidential business information
(including ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing
and production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial, marketing, and business data, pricing and cost
information, business and marketing plans, and customer and supplier lists and
information), (g) other proprietary rights, and (h) copies and tangible
embodiments thereof (in whatever form or medium).
1.35 "Knowledge" means actual knowledge after reasonable inquiry and
investigation.
1.36 "Liability" means any liability or obligation of any nature
(whether known or unknown, whether absolute or contingent, whether disputed or
undisputed, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
1.37 "Losses" shall have the meaning set forth in Section 10.1
hereof.
7
<PAGE>
1.38 "MCI FCC Licenses" shall have the meaning set forth in Section
2.2 hereof.
1.39 "Newco Common Stock" means the Series A Common Stock of Newco as
more fully described in the Roll-up MOU.
1.40 "Newco Indemnified Parties" shall have the meaning set forth in
Section 10.1 hereof.
1.41 "Newco Preferred Stock" shall have the meaning set forth in
Section 3.1 hereof.
1.42 "110 Slot" shall have the meaning set forth in Section 2.2
hereof.
1.43 "119 Capacity" shall have the meaning set forth in Section 8.5
hereof.
1.44 "Per Share Price" shall have the meaning set forth in Section
3.2 hereof.
1.45 "Person" means a human being or a corporation, partnership,
limited liability company, trust, unincorporated organization, association or
other entity.
1.46 "Primestar DBS Service" means any U.S. Satellite Business
operated by Primestar and its Affiliates or (following the Roll-up) Newco and
its Affiliates.
1.47 "Primestar Disclosure Schedule" shall have the meaning set forth
in Section 6.1 hereof.
1.48 "Primestar FCC Licenses" shall have the meaning set forth in
Section 6.18 hereof.
1.49 "Primestar Material Adverse Effect" means a material adverse
effect on the business, assets, operations, prospects (as such exist for
Primestar as of the date hereof without giving effect to the Roll-up) or
condition (financial or otherwise) of Primestar.
8
<PAGE>
1.50 "Primestar Plans" shall have the meaning set forth in Section
6.15 hereof.
1.51 "Primestar Subscriber," as of any date, means a subscriber to
the Primestar DBS Service as of such date who (except as otherwise provided in
the first sentence of Section 3.3) (a) is no more than 60 days past due in
payment (measured from the date the relevant bill is issued), (b) has received
and paid for in full the Primestar DBS Service for at least one month following
the later of the date of activation and the conclusion of one or two promotional
"free" months, if any, and (c) became a subscriber as a result of ordinary
marketing practices in the normal course of business. Any subscriber who meets
the requirements of (b) and (c) but is more than 60 days but less than 91 days
past due in payment (measured from the date the relevant bill is issued) shall
be deemed one-half of a Primestar Subscriber for the purpose of calculating the
Primestar Valuation.
1.52 "Primestar Valuation" means the amount equal to (x) the product
of the aggregate number of Primestar Subscribers as of the Closing Date, not to
exceed 1,950,000, multiplied by $1,500, minus (y) indebtedness of Newco for
-----
borrowed money at the Closing Date (including any such indebtedness incurred in
connection with the Roll-up, but excluding (i) any indebtedness incurred to
finance the construction and/or launch of any satellite or the lease of any
satellite capacity (including indebtedness in respect of letters of credit
relating to any such construction, launch or lease, capitalized interest and any
refinancing of any such indebtedness), (ii) any indebtedness under, or any
indebtedness incurred to finance any obligation of Newco under, any Contract and
(iii) an amount equal to the product of the aggregate number of Primestar
Subscribers as of the Closing Date in excess of 1,950,000 multiplied by actual
direct costs incurred in connection with the acquisition of each such subscriber
in excess of 1,950,000,
9
<PAGE>
which shall include materials, labor and acquisition marketing costs but shall
not include overhead, national advertising and incremental programming fees),
plus (z) to the extent not greater than (y) above, cash and cash equivalents of
Newco on hand at the Closing Date.
1.53 "Recent Primestar Subscribers" shall have the meaning set forth
in Section 3.3 hereof.
1.54 "Regulatory Provisions" shall have the meaning set forth in
Section 6.18 hereof.
1.55 "Retained Liabilities" shall have the meaning set forth in
Section 2.4 hereof.
1.56 "Rights" shall have the meaning set forth in Section 3.2 hereof.
1.57 "Roll-up" shall have the meaning set forth in the preamble
hereto.
1.58 "Roll-up MOU" shall have the meaning set forth in the preamble
hereto.
1.59 "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
1.60 "Securities Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
1.61 "Security Interest" means any mortgage, pledge, security
interest, encumbrance, charge, or other lien, other than (a) liens arising under
worker's compensation, unemployment insurance, social security, retirement, and
similar legislation, (b) liens on goods in transit incurred pursuant to
documentary letters of credit, and (c) other liens arising in the ordinary
course of business and not incurred in connection with the borrowing of money,
the extension of credit or default or potential default of money owed.
10
<PAGE>
1.62 "Substitute Consideration" shall have the meaning set forth in
Section 5 hereof.
1.63 "Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code (Section)
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, however denominated,
including any interest, penalty, or addition thereto, whether disputed or not.
1.64 "Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to any Tax, including any
schedule or attachment thereto, and including any amendment thereof.
1.65 "Total Consideration" shall have the meaning set forth in
Section 3.1 hereof.
1.66 "Transferor Indemnified Parties" shall have the meaning set
forth in Section 10.3 hereof.
1.67 "Transferred Asset Material Adverse Effect" shall have the
meaning set forth in Section 7.6 hereof.
1.68 "Transferred Assets" shall have the meaning set forth in Section
2.3 hereof.
1.69 "U.S. Satellite Business" means any business activity that
principally uses communications satellites to provide direct-to-home (including
hotels, motels, bars, restaurants,
11
<PAGE>
multiple dwelling units and other similar uses) video and associated audio
programming services using FSS, BSS and/or higher frequencies directly to the
antennas or other reception equipment of customers or subscribers of such
business activity in the United States, or to multiple dwelling units comprising
such customers or subscribers, or that markets, distributes, sells, services
and/or supports any such service.
2. Transfer of Assets and Assumption of Liabilities. Upon the terms and
------------------------------------------------
subject to the conditions set forth in this Agreement, at the Closing of the
transactions contemplated hereby:
2.1 Transfer of Contracts. ASkyB, and each of News and MCI, on its
---------------------
own behalf and on ASkyB's behalf, shall transfer and assign to Newco all of its
rights, title and interests in and to the contracts, commitments, agreements,
arrangements, leases, licenses, purchase orders, memoranda of understanding and
obligations set forth on Schedule A, attached hereto (collectively, the
"Contracts"), including, without limitation, all of News', MCI's and ASkyB's
rights to work in process under such Contracts and any tangible and intangible
deliverables thereunder; provided, however, that, with respect to the Contracts
set forth on Schedule A and marked with an asterisk, to the extent any Affiliate
of a Transferor is listed for any Contract under the heading "Name of Other
Party" (or a similar heading), Newco is acquiring only the rights of such
Transferor thereunder and the rights of the party listed under the heading "Name
of Other Party" with respect to such Contract shall not be transferred to Newco
hereunder.
2.2 Transfer of DBS Authorizations. Subject to Section 8.2 hereof,
------------------------------
on its own behalf and on ASkyB's behalf, MCI shall transfer and assign to Newco
all of MCI's rights, title
12
<PAGE>
and interests in, to and under all licenses, permits and other authorizations
granted to MCI by the FCC with respect to U.S. Satellite Business (the "MCI FCC
Licenses"), including, without limitation, the authorization to construct,
launch and operate satellites in the Direct Broadcast Satellite Service ("DBS")
at 110 (Degrees) West Longitude providing 28 transponder channels of service
(the "110 Slot") together with all other rights of MCI and its Affiliates with
respect thereto.
2.3 Transfer of Intellectual Property. To the extent that the
---------------------------------
Contracts, the MCI FCC Licenses or the 110 Slot subsume any Intellectual
Property rights, such rights shall be conveyed, transferred and assigned to
Newco by each Transferor holding any such rights, on its own behalf and on
behalf of ASkyB (the Contracts, the MCI FCC Licenses, the 110 Slot and such
Intellectual Property rights are collectively referred to as the "Transferred
Assets").
2.4 Assumption of Liabilities. In addition to the consideration set
-------------------------
forth in Section 3 hereof, in consideration for the transfer of the Transferred
Assets contemplated hereby, at the Closing, Newco shall assume the respective
obligations of the Transferors under the Contracts in accordance with their
terms to the extent that the Transferors are not in default under such
obligations at the Closing Date (and would not be in default on the Closing,
assuming the giving of any applicable notices and the lapse of any applicable
waiting periods under such Contracts); provided, however, that to the extent any
Affiliate of a Transferor is listed for any Contract under the heading "Name of
Other Party" (or a similar heading), Newco is assuming only the obligations of
such Transferor thereunder, and the obligations of the party listed under the
heading "Name of Other Party" with respect to such Contract shall not be assumed
by Newco hereunder (the "Assumed Liabilities"). Any Liabilities relating to (i)
the Transferred Assets or the operations of ASkyB or any other Transferor prior
to the Closing other than the Assumed
13
<PAGE>
Liabilities or (ii) Taxes in respect of the sale of the Transferred Assets
hereunder, except as provided in Section 8.7 hereof, shall be retained by ASkyB,
News or MCI, as the case may be (the "Retained Liabilities").
3. Consideration.
-------------
3.1 Aggregate Consideration. In addition to assumption of the
-----------------------
Assumed Liabilities, as consideration for the transfer and assignment of the
Transferred Assets, Newco shall pay to ASkyB, for its benefit and the benefit of
each of the other Transferors, as their respective interests shall appear, by
delivery of a combination of Newco Preferred Stock and, at Newco's option, cash
and/or a Convertible Note as set forth below, an amount equal to the ASkyB
Valuation (the "Total Consideration"). Such payment shall be made as follows:
At the Closing, Newco shall issue to ASkyB that number of shares (the
"Consideration Shares") of Convertible Preferred Stock, par value $.01 per
share, of Newco (the "Newco Preferred Stock") which, upon conversion, will give
ASkyB no more than 20% of the issued and outstanding capital stock of Newco,
immediately after giving effect to such conversion if converted on the Closing
Date; provided, that in no event shall the aggregate stated liquidation value of
the Consideration Shares exceed the Total Consideration; and provided, further,
that, if ASkyB is permitted to receive a larger proportion of the Total
Consideration in shares of Newco Preferred Stock (without delaying the receipt
of any FCC Approval required hereunder), Newco shall have the option of
delivering such larger number of shares as part of the Consideration Shares.
The number of shares of Newco Common Stock issuable upon conversion (the
"Conversion Shares") of the Consideration Shares shall be determined in
accordance with Section 3.2 hereof. If the aggregate stated liquidation value
of the Consideration Shares is less than the Total
14
<PAGE>
Consideration, the remainder of the Total Consideration in excess of the
aggregate stated liquidation value of the Consideration Shares (the "Payment
Balance") shall be paid, at Newco's option, by the payment to ASkyB, at the
Closing, by wire transfer of immediately available funds, of cash or the
issuance of a subordinated convertible note (the "Convertible Note") to ASkyB,
containing the terms set forth in Exhibit II, having an original principal
amount equal to the Payment Balance, or by a combination of the payment of cash
and the issuance of a Convertible Note. The relative powers, preferences and
rights, and qualifications, limitations and restrictions of the Newco Preferred
Stock shall be set forth on a Certificate of Designation (the "Certificate of
Designation"), which shall be substantially in the form attached hereto as
Exhibit III. In addition, if the Closing has not occurred by September 30,
1997, at the Closing, Newco shall reimburse ASkyB in cash for (a) any amounts
expended by News, MCI and ASkyB under and in connection with the Contracts
between September 30, 1997 and the Closing Date, subject to the limitation set
forth in the proviso to the "ASkyB Valuation" definition set forth in Section
1.4 hereof (which for this purpose shall be construed as if all references to
the earlier of September 30, 1997 and the Closing Date referred instead to the
Closing Date), plus (b) interest, at the rate of six percent (6%) per annum, on
the amount set forth in (a) from the respective dates such amounts were expended
by the applicable Transferor to the business day immediately preceding the
Closing Date. ASkyB shall accept MCI's proportionate share of the Consideration
Shares and the Total Consideration on MCI's behalf, as its agent.
3.2 Calculation of Number of Conversion Shares. At the Closing Date,
------------------------------------------
the aggregate number of Conversion Shares issuable upon the conversion of the
Consideration Shares and the Convertible Notes, without giving effect to any
adjustment provisions in the
15
<PAGE>
Certificate of Designation or Convertible Note but giving effect to the Roll-up
on a pro forma basis, shall be determined by dividing (a) the ASkyB Valuation
minus the portion of the Total Consideration paid in cash, if any, by (b) the
- -----
Conversion Price (as defined below). For purposes of this section, "Conversion
Price" shall equal 120% of the Per Share Price (as defined below); and "Per
Share Price" shall equal the quotient of (x) the Primestar Valuation plus all
----
proceeds payable to Newco upon the exercise, conversion or exchange of
outstanding Rights, divided by (y) the number of shares of Series A, Series B
and Series C common stock of Newco issuable upon consummation of the Roll-up,
determined without giving effect to the Conversion Shares issuable upon
conversion of the Consideration Shares and Convertible Note, plus the number of
----
shares of Series A, Series B and Series C common stock of Newco issuable upon
exercise of all outstanding options, warrants and other rights to acquire such
common stock, and upon the conversion or exchange of all outstanding securities
convertible into or exchangeable for such common stock, in each case to the
extent then exercisable and "in-the-money" (collectively, "Rights"). The
Certificate of Designation and the Convertible Note shall each contain
appropriate provisions regarding the conversion rate per share of Newco
Preferred Stock and for the conversion price under the Convertible Note, as the
case may be.
3.3 Post-Closing Adjustment. At the Closing, the Primestar Valuation
-----------------------
used to determine the number of Consideration Shares issuable to ASkyB shall be
based on all Primestar Subscribers at the Closing Date, including, without
limitation, those Primestar Subscribers who become subscribers 90 days or less
prior to the Closing Date, or, in the case of those subscribers receiving one
(or two) initial "free" month(s) for promotional purposes, 120 days or less (or
150 Days or less, as applicable) prior to the Closing Date (such subscribers
being referred to herein as
16
<PAGE>
the "Recent Primestar Subscribers"); provided that, for Recent Primestar
Subscribers, the requirements of clauses (a), (b) and (c) of the definition of
Primestar Subscriber shall not be taken into account. On the 151st day
following the Closing Date, the number of Primestar Subscribers as of the
Closing Date shall be adjusted to take into account which Recent Primestar
Subscribers shall be given full credit, one-half credit or no credit (based on
the definition of Primestar Subscriber, including clauses (a), (b) and (c), and
based on whether or not, and when, the Recent Primestar Subscribers have made
payment for their subscriptions, and the Primestar Valuation shall be recomputed
accordingly (the "Adjusted Primestar Valuation")), in accordance with Section
1.52 above. Following such recomputation, to the extent that the Adjusted
Primestar Valuation is less than the original Primestar Valuation then, on such
151st day following the Closing Date, the conversion price on the Newco
Preferred Stock, and the conversion price under the Convertible Notes (if any)
shall be appropriately adjusted, so that (i) the aggregate number of Conversion
Shares issuable under the Newco Preferred Stock and the Convertible Notes is
equal to the number required pursuant to Section 3.2, determined using the
Adjusted Primestar Valuation for the Primestar Valuation, and (ii) the aggregate
number of Conversion Shares issuable under the Newco Preferred Stock does not
exceed 20% of the issued and outstanding capital stock of Newco.
4. Closing.
-------
4.1 General. Upon the terms and conditions set forth herein, the
-------
closing of the transactions contemplated hereby (the "Closing") shall take place
at the offices of Squadron, Ellenoff, Plesent & Sheinfeld, LLP, 551 Fifth
Avenue, New York, New York 10176, at 10:00 a.m. local time on the day (the
"Closing Date") which is the later of (a) the closing of the
17
<PAGE>
Roll-up or (b) five days following the date on which the conditions set forth in
Sections 9.1 and 9.2 hereof have been satisfied or waived, or on such other date
and/or at such other place as Primestar and the Transferors mutually determine,
subject to ASkyB's rights set forth in Section 5 hereof.
4.2 Delivery of Shares. At the Closing, Newco shall deliver to ASkyB
------------------
duly executed and authenticated stock certificates representing the
Consideration Shares. The certificates representing the Consideration Shares
and the Convertible Notes shall bear the following legend:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR
ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR
UNLESS THE TRANSACTION IS EXEMPT FROM OR NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
5. Consummation of Roll-up. Subject to the provisions of Section 8.12
-----------------------
and the third sentence of Section 8.6, Primestar and each general and limited
partner of Primestar, severally and not jointly, hereby undertakes to use its
commercially reasonable efforts to cause the Roll-up to be consummated as soon
as reasonably practicable, including the undertaking, severally and not jointly,
to use its commercially reasonable efforts to cause the conditions to such
consummation contained in the Roll-up MOU to be satisfied. In the event that
(a) the closing of
18
<PAGE>
the Roll-up has not occurred within 270 days following the date hereof and (b)
the conditions set forth in Sections 9.1 and 9.2 have otherwise been satisfied,
the Transferors shall have the right to cause the Transferred Assets to be
transferred to Primestar and the transactions otherwise contemplated hereby to
close. In such event, the Transferors and Primestar shall mutually agree to
substitute consideration (the "Substitute Consideration") for the Newco
Preferred Stock and the Convertible Note which shall, in the aggregate, give the
Transferors the same market value they would have received had the Transferred
Assets been transferred to Newco, and which Substitute Consideration shall
contain appropriate terms and conditions for adjustment or further substitution
in the event that a roll-up or similar restructuring subsequently occurs and all
references to "Newco" herein shall be deemed to be references to "Primestar"
unless the context shall otherwise require. If Primestar is the transferee of
the Transferred Assets, it shall receive the benefits of and shall be
responsible for all obligations of Newco as set forth herein.
6. Representations and Warranties of Primestar. The representations and
-------------------------------------------
warranties made in this Section 6 are only made by Primestar. To the extent
references are made to general or limited partners of Primestar in this Section
6, Primestar is the sole party making such representations.
6.1 Representations and Warranties True, Correct and Complete.
---------------------------------------------------------
Primestar represents and warrants to each of News, MCI and ASkyB that the
statements contained in this Section 6 are true, correct and complete as of the
date of this Agreement, except as disclosed in a document referring specifically
to the representations and warranties in this Section 6 which has been delivered
by Primestar to each of News, MCI and ASkyB on or prior to the date hereof (the
"Primestar Disclosure Schedule"). Nothing in the Primestar Disclosure Schedule
shall be
19
<PAGE>
deemed adequate to disclose an exception to a representation or warranty made
herein unless the Primestar Disclosure Schedule identifies the exception with
reasonable particularity and describes the relevant facts in reasonable detail.
Without limiting the generality of the foregoing, the mere listing (or inclusion
of a copy) of a document or other item in one section as an exception to a
representation or warranty shall not be deemed adequate to disclose an exception
to a representation or warranty made in another section unless so specifically
stated in such second section. The Primestar Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section.
6.2 Organization of Primestar. Primestar is a limited partnership
-------------------------
duly formed, validly existing, and in good standing under the laws of the State
of Delaware.
6.3 Power and Authority of Primestar. Primestar has all requisite
--------------------------------
partnership power and authority and all governmental licenses, authorizations,
consents and approvals required to conduct its business as currently conducted
and to own, lease and operate its properties in all material respects as now
conducted, and to execute and deliver this Agreement, including any additional
documents contemplated by this Agreement, and to perform its obligations
hereunder.
6.4 Organizational Documents. Primestar has delivered to the
------------------------
Transferors true and complete copies of its certificate of limited partnership
and its partnership agreement as currently in effect.
6.5 Partnership Authorization. The execution, delivery and
-------------------------
performance by each of Primestar, the general partners and limited partners of
Primestar of this Agreement and the consummation by Primestar of the
transactions contemplated hereby have been duly
20
<PAGE>
authorized by all necessary partnership action of each of Primestar, and, to the
extent they are parties hereto, the general partners and limited partners of
Primestar. This Agreement, including any additional documents contemplated by
this Agreement to be executed by Primestar, constitutes (or when executed, will
constitute) the valid and legally binding obligation of each of Primestar, the
general partners and limited partners of Primestar, enforceable against each of
Primestar, the general partners and limited partners of Primestar in accordance
with each such document's respective terms and conditions, except to the extent
that such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally or by general equitable principles.
6.6 Governmental Authorization. The execution, delivery and
--------------------------
performance by each of Primestar, the general partners and limited partners of
Primestar of this Agreement and the consummation by each of Primestar, the
general partners and limited partners of Primestar of the transactions
contemplated hereby do not require any consent, approval, authorization or
permit of, or filing with or notification to any governmental or regulatory
authority, except for (a) compliance with any applicable requirements of the
Hart-Scott-Rodino Act , (b) approval by the FCC of the transactions contemplated
hereby, (c) compliance with the Primestar Consent Decree, which compliance is
described in Section 6.6 of the Primestar Disclosure Schedule, and (d) where
failure to obtain such consents, approvals, authorizations and permits, or to
make such filings or notifications, would not prevent or delay in any material
respect the consummation of the transactions contemplated hereby or otherwise
prevent Primestar from performing its obligations under this Agreement in all
material respects, and would not, individually or in the aggregate, have a
Primestar Material Adverse Effect.
21
<PAGE>
6.7 Noncontravention. Except as set forth in Section 6.7 of the
----------------
Primestar Disclosure Schedule, the execution, delivery and performance of this
Agreement by Primestar and the general partners and limited partners of
Primestar do not, and the consummation by Primestar of the transactions
contemplated hereby will not, (a) contravene or conflict with the certificate of
limited partnership or the partnership agreement or other organizational
documents of Primestar and the general partners and limited partners of
Primestar; (b) assuming compliance with the matters referred to in Section 6.6
above, contravene, conflict with or constitute a violation of any provision of
any statute, regulation, rule, judgment, order, decree, stipulation, injunction,
charge, or other restriction of any government, governmental agency, or court
binding upon or applicable to Primestar and the general partners and limited
partners of Primestar, or any of their properties or assets, which
contravention, conflict or violation could reasonably be expected to have a
Primestar Material Adverse Effect; or (c) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, require any notice or
give rise to a loss of any benefit under, any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, or Security Interest to which
Primestar and the general partners and limited partners of Primestar is a party
or by which it is bound or to which any of its assets is subject or result in
the creation or imposition of any Security Interests on any assets of Primestar,
which contravention, violation, conflict, breach, default, acceleration,
termination, modification, cancellation, or loss of benefit would have a
Primestar Material Adverse Effect.
22
<PAGE>
6.8 Capitalization of Newco. Set forth on Exhibit A to the Roll-up
-----------------------
MOU is the methodology by which the equity capitalization of Newco will be
determined for purposes of the Roll-up.
6.9 Financial Statements. The financial statements included in
--------------------
Section 6.9 of the Primestar Disclosure Schedule (collectively, the "Financial
Statements") constitute: (a) audited financial statements of Primestar for the
fiscal years ended December 31, 1994, December 31, 1995, and December 31, 1996,
and (b) the unaudited financial statements of Primestar for the quarter ended
March 31, 1997. The Financial Statements and all other financial statements
prepared by Primestar after the date of this Agreement but prior to the Closing
Date have been, and will be, prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, and will fairly
present, in all material respects, the consolidated financial position and
results of operations of Primestar at the dates thereof and for the periods then
ended; provided, however, that the interim Financial Statements are subject to
normal year-end adjustments (which Primestar believes will not be material) and
that the interim Financial Statements in general may lack all or a portion of
the necessary footnotes and other presentation items. Since January 1, 1994,
there has been no change in Primestar's accounting policies, except as described
in the notes to the Financial Statements.
6.10 Absence of Certain Changes. Since March 31, 1997 Primestar has
--------------------------
conducted its business only in the ordinary course of business consistent with
applicable past practice and there has not been any event, occurrence or
development of a state of circumstances or facts which has had or reasonably
could be expected to have a Primestar Material Adverse Effect.
23
<PAGE>
6.11 Undisclosed Liabilities. Except as set forth in Section 6.11 of
-----------------------
the Primestar Disclosure Schedule, Primestar has no Liability except for (a)
Liabilities set forth in the Financial Statements for the year ended December
31, 1996 or not required by GAAP to be set forth thereon, and (b) Liabilities
which have arisen after December 31, 1996 in the ordinary course of business
(none of which relates to any breach of contract, breach of warranty, tort,
infringement or violation of law, or arose out of any charge, complaint, action,
suit, proceeding, hearing, investigation, claim or demand, that individually or
in the aggregate have had or could reasonably be expected to have a Primestar
Material Adverse Effect).
6.12 Tax Matters.
-----------
(a) Primestar has timely filed all material Tax Returns
required to be filed by it with the appropriate tax authorities, including,
without limitation, all federal, foreign, state and local Tax Returns for all
years and periods (and portions thereof) for which any such Tax Returns were due
(taking into account any extensions). All such Tax Returns were correct and
complete in all material respects. All Taxes owed by Primestar shown to be due
on any Tax Return have been paid and discharged. There are no Security Interests
on any of the assets of Primestar that arose in connection with any failure (or
alleged failure) to pay any Tax when due.
(b) Primestar has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
creditor, independent contractor or other third party and complied in all
material respects with all information reporting and backup withholding
requirements.
(c) Primestar is not a party to any tax allocation or tax
sharing agreement.
24
<PAGE>
(d) The unpaid Taxes of Primestar (i) do not exceed the reserve
for Tax Liability (rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) contained in the
Financial Statements for the fiscal year ended December 31, 1996 (other than the
notes thereto) and (ii) do not exceed that reserve as adjusted for the passage
of time through the Closing Date in accordance with the past custom and practice
of Primestar in filing its Tax Returns.
6.13 Intellectual Property. Primestar owns or has the right to use
---------------------
pursuant to license, sublicense, agreement, or permission all Intellectual
Property currently used in connection with, or otherwise necessary for, the
operation of the businesses of Primestar as presently conducted and as presently
proposed to be conducted by Newco, except where the failure to so own or to have
the right to use would not have a Primestar Material Adverse Effect. Except as
set forth in Section 6.13 of the Primestar Disclosure Schedule, to the Knowledge
of Primestar, Primestar has not infringed upon or misappropriated any
Intellectual Property rights of third parties, and neither Primestar nor its
general partner or partners has received any written charge, complaint, claim,
or notice alleging any such infringement or misappropriation which remains
unresolved. To the Knowledge of Primestar no third party has infringed upon or
misappropriated any Intellectual Property rights of Primestar.
6.14 Primestar Contracts. Section 6.14 of the Primestar Disclosure
-------------------
Schedule lists the following contracts, agreements and other written
arrangements to which Primestar is a party (unless the disclosure of the
existence of such contract, agreement or written arrangement is prohibited by
the terms thereof without prior consent) (collectively, the "Primestar
Contracts"):
(a) any written agreement between Primestar and any of its
Affiliates;
25
<PAGE>
(b) any written agreement under which the consequences of a
default or termination are reasonably likely to have a Primestar Material
Adverse Effect; and
(c) any other written agreement (or group of related written
arrangements) currently in effect or under which Primestar is currently
obligated and involving more than $5,000,000 or not entered into in the ordinary
course of business.
Primestar has made available to the Transferors a correct and complete
copy (or a fair summary on an aggregate basis) of each Primestar Contract. With
respect to each Primestar Contract: (i) the agreement is a legal, valid,
binding, enforceable, obligation of Primestar, and, to Primestar's Knowledge,
the other parties thereto, and in full force and effect subject to (a)
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or similar laws affecting creditors' rights generally, and (b)
general principles of equity (regardless of whether such enforceability is
considered in a proceeding at law or in equity); (ii) the agreement will
continue to be legal, valid, binding and enforceable and in full force and
effect on substantially identical terms following the Closing subject to (a)
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or similar laws affecting creditors' rights generally, (b) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding at law or in equity) and (c) any termination provisions relating to
such Primestar Contract other than termination provisions triggered by the
consummation of the transactions contemplated hereby; (iii) Primestar is not
and, to the Knowledge of Primestar, no other party is, in breach or default, and
no event has occurred which with notice or lapse of time would constitute a
breach or default or permit termination, modification or acceleration under, the
agreement, and which could reasonably be expected to result in a Primestar
Material Adverse
26
<PAGE>
Effect; and (iv) Primestar has not received any currently effective notice in
writing to the effect that any party has canceled, terminated or repudiated any
provision of the agreement. Primestar has no Knowledge that the validity of any
Primestar Contract is being contested by any third person.
6.15 Litigation. To the Knowledge of Primestar, Section 6.15 of the
----------
Primestar Disclosure Schedule sets forth each instance in which Primestar is the
subject of an investigation of any federal, state, local, or foreign
jurisdiction or any agency thereof. None of the investigations set forth in
Section 6.15 of the Primestar Disclosure Schedule could reasonably be expected
to result in a Primestar Material Adverse Effect. Except as set forth in Section
6.15 of the Primestar Disclosure Schedule, there are no claims, legal actions,
counterclaims, suits, arbitrations or other legal, administrative or tax
proceedings, nor any order, decree or judgment, in progress or pending, or, to
the Knowledge of Primestar, threatened against Primestar or the business or
operations of Primestar, which seek to enjoin or prohibit any action taken or to
be taken by Primestar or as contemplated to be taken by Newco pursuant to or in
connection with this Agreement or which would be reasonably expected to have a
Primestar Material Adverse Effect. Except as set forth in Section 6.15 of the
Primestar Disclosure Schedule, Primestar is not subject to any judgment, writ,
order, injunction, award or decree by any court, arbitrator or governmental
authority, including any administrative agency.
6.16 Employee Benefits. All Employee Benefit Plans that Primestar
-----------------
maintains or to which it contributes for the benefit of any current or former
employee of Primestar ("Primestar Plans") comply in form and operation in all
material respects with the applicable requirements of ERISA and the Code and
neither Primestar nor the Primestar Plans are liable for
27
<PAGE>
any material penalties or excise taxes with respect to such plans. The market
value of assets under each Primestar Plan which is an Employee Pension Plan
equals or exceeds the present value of liabilities thereunder (determined on a
plan termination basis). To the Knowledge of Primestar, no Fiduciary has any
Liability for breach of a fiduciary duty or for any act or any failure to act or
comply in connection with the administration or investment of the assets of any
Primestar Plan. No charge, complaint, action, suit, proceeding, hearing, and,
to the Knowledge of Primestar, no investigation, claim, or demand with respect
to the administration or the investment of the assets of any Primestar Plan
(other than routine claims for benefits) is pending.
6.17 Legal Compliance. Except as set forth in Section 6.17 of the
----------------
Primestar Disclosure Schedule, Primestar has complied in all material respects
with all laws (including, without limitation, Environmental Laws) , including
any rules and regulations thereunder, of federal, state, local and foreign
governments (and all agencies thereof) except for failures which could not,
individually or in the aggregate, have a Primestar Material Adverse Effect or a
material adverse effect on the consummation of the transactions contemplated by
this Agreement, and no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, demand, or notice has been filed or commenced against
Primestar alleging any failure to comply with any such law or regulation, which
could reasonably be expected to result in a Primestar Material Adverse Effect.
6.18 FCC Matters
-----------
(a) Section 6.18 of the Primestar Disclosure Schedule sets
forth (i) a listing and brief description of all authorizations (including,
without limitation, each permit, license, and special temporary authority
("STA")) from the FCC granted to or held by Primestar
28
<PAGE>
and the authorization from the FCC held by third parties covering the satellites
and the programming uplink earth station facilities used or currently planned to
be used by Primestar in connection with the U.S. Satellite Business operated by
Primestar (the "Primestar FCC Licenses"), including the principal terms and
conditions thereof and the expiration date and the deadline for any required
application or other request for renewal or extension thereof; (ii) a
description of all applications and petitions filed by or on behalf of Primestar
with the FCC or the International Telecommunications Union ("ITU") since January
1, 1993, and of the current status thereof; (iii) a description of any failure
by the FCC to renew any material permit or license granted to or held by
Primestar or used in connection with the U.S. Satellite Business operated by
Primestar; (iv) all material correspondence to Primestar from the FCC pertaining
to the access by Primestar to C-, Ka- or Ku-band satellite capacity or
facilities currently used or intended to be used in the operation of Primestar's
business, whether or not such capacity or facilities are used pursuant to any
permit, license or other authorization issued by the FCC; and (v) all satellite-
related proceedings before the FCC (other than those affecting the DBS industry
generally) in which Primestar is or has been a party since January 1, 1993. The
Primestar FCC Licenses constitute the material licenses, permits and
authorizations from the FCC that are required to be held by Primestar or any of
its general or limited partners or others for the business and operations of
Primestar as currently conducted. The rights under such Primestar FCC Licenses
currently held or enjoyed by Primestar shall be made available to Newco in
connection with the U.S. Satellite Business to be conducted by Newco following
the Roll-up, subject to obtaining Regulatory Approvals and Primestar's
obligation to complete the Dispositions. The Primestar FCC Licenses are in full
force and effect through the dates set forth in Section 6.18 of the
29
<PAGE>
Primestar Disclosure Schedule and are unimpaired by any materially adverse
condition. Except as set forth in Section 6.18 of the Primestar Disclosure
Schedule, no application, action or proceeding is pending for the renewal or
modification of any of the Primestar FCC Licenses, and no application,
complaint, action or proceeding is pending or, to the Knowledge of Primestar,
threatened, that may result in the revocation, modification, non-renewal or
suspension of any of the Primestar FCC Licenses or the imposition of any
administrative or judicial sanction with respect to Primestar. Primestar has no
Knowledge of any failure (whether or not known by or disclosed to the FCC or any
other Person or entity) by Primestar or any of its general or limited partners
to comply in all material respects with all applicable requirements of the
Communications Act, and the published policies, rules, and regulations of the
FCC (collectively, the "Regulatory Provisions") applicable to the U.S. Satellite
Business of Primestar, and with the terms and conditions of all applicable
Primestar FCC Licenses, including, but not limited to, any due diligence
obligations or reporting requirements associated with any Primestar FCC License.
(b) Except as set forth in Section 6.18(b) of the Primestar
Disclosure Schedule, each satellite currently used or currently planned to be
used by Primestar has been fully tested and determined to operate within all
design specifications, and at all times since such launch has operated, and is
operating, within such specifications and, except as set forth in Section
6.18(b) of the Primestar Disclosure Schedule, Primestar has not experienced any
material operating problems with such satellite which have had, or could have, a
material adverse effect on the service or life of such satellite. Except as set
forth in Section 6.18(b) of the Primestar Disclosure Schedule, each satellite
used by Primestar is operating in conformance with all applicable ITU Radio
Regulations (including but not limited to Appendices 30 and 30A thereof)
30
<PAGE>
or, if not operating in conformance with such regulations, Primestar or the
satellite licensee has taken or is in the process of taking all steps necessary
to request modification of appropriate ITU regulations to conform to satellite
operations, which steps are described in Section 6.18(b) of the Primestar
Disclosure Schedule. To the extent modifications to ITU rules and regulations
have been requested by or on behalf of Primestar, Primestar has no Knowledge
that any such request is not likely to be granted in its current form.
(c) Section 6.18 of the Primestar Disclosure Schedule sets forth a
listing of all insurance policies in force associated with any satellite, earth
station, microwave or other ancillary facility related to a Primestar FCC
License. Each such insurance policy is in full force and effect, and the rights
of the parties thereunder will not be affected in any material respect by the
transactions contemplated by this Agreement.
(d) Section 6.18 of the Primestar Disclosure Schedule sets forth a
description of all non-FCC applications filed by Primestar with the United
States government since January 1, 1993, relating to applications for technical
data exchange licenses and satellite export licenses, and of the current status
thereof. Primestar has no Knowledge that any such application is not likely to
be granted in its current form. Primestar possesses adequate authorizations,
which are in full force and effect, issued by other appropriate governmental
agencies or bodies necessary for Primestar to possess in order to conduct the
U.S. Satellite Business now operated by it.
(e) Except as set forth on Section 6.18 of the Primestar Disclosure
Schedule, no consent, approval, authorization, order or waiver of, or filing
with, the FCC is required under the Regulatory Provisions to be obtained or made
by Primestar in connection with
31
<PAGE>
the transactions contemplated by this Agreement, except such as may already have
been obtained and made under the Regulatory Provisions and, except with respect
to the transfer of the 110 Slot and the MCI FCC Licenses (as defined below).
Except as set forth on Section 6.18 of the Primestar Disclosure Schedule, the
consummation of the transactions contemplated by this Agreement and the
agreements referred to herein in accordance with the provisions hereof and
thereof do not and will not result in (i) the termination or revocation of any
Primestar FCC License; (ii) any other material impairment of the rights of the
holder of any Primestar FCC License; or (iii) the violation of any of the
Regulatory Provisions.
6.19 Brokers' Fees. Primestar has no Liability or obligation to pay
-------------
any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement, other than Morgan Stanley & Co.
Incorporated.
6.20 Disclosure. The representations and warranties contained in
----------
this Section 6 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 6, in light of the circumstances in which
made, not misleading.
7. Representations and Warranties of News, MCI and ASkyB. Each of News
-----------------------------------------------------
and ASkyB, jointly and severally (with respect to representations and warranties
relating to News and ASkyB), and MCI, severally and not jointly (with respect to
representations and warranties relating to MCI), represents as follows:
7.1 Representations and Warranties True, Correct and Complete. Each
---------------------------------------------------------
of News, MCI and ASkyB represents and warrants to Primestar that the statements
contained in this Section 7 are true, correct and complete as of the date of
this Agreement, except as disclosed in a
32
<PAGE>
document referring specifically to the representations and warranties in this
Section 7 which has been delivered by ASkyB to Primestar on or prior to the date
hereof (the "ASkyB Disclosure Schedule"). Nothing in the ASkyB Disclosure
Schedule shall be deemed adequate to disclose an exception to a representation
or warranty made herein unless the ASkyB Disclosure Schedule identifies the
exception with reasonable particularity and describes the relevant facts in
reasonable detail. Without limiting the generality of the foregoing, the mere
listing (or inclusion of a copy) of a document or other item in one section as
an exception to a representation or warranty shall not be deemed to disclose an
exception to a representation or warranty made in another section unless so
specifically stated in such second section. The ASkyB Disclosure Schedule will
be arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section.
7.2 Organization of News, MCI and ASkyB. News is a corporation duly
-----------------------------------
organized under the laws of the State of South Australia, Australia. MCI is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. ASkyB is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Delaware.
7.3 Power and Authority of News, MCI and ASkyB. Each of the
------------------------------------------
Transferors has all requisite power and authority (including all requisite
corporate power and authority) and all governmental licenses, authorizations,
consents and approvals required to conduct its business as currently conducted,
to own, lease and operate its properties as now conducted, and to execute and
deliver this Agreement, including any additional documents contemplated by this
Agreement, and to perform its obligations hereunder.
33
<PAGE>
7.4 Organizational Documents. ASkyB has delivered to Primestar true
------------------------
and complete copies of the certificate of incorporation and bylaws, or
equivalent organizational documents, of ASkyB as currently in effect. ASkyB is
not in violation of any provision of its certificate of incorporation, by-laws
or equivalent organizational documents.
7.5 Corporate Authorization. The execution, delivery and performance
-----------------------
by each of News, MCI and ASkyB of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
action of each of News, MCI and ASkyB. This Agreement, including any additional
documents contemplated by this Agreement, constitutes (or, when executed, will
constitute) the valid and legally binding obligation of each of News, MCI and
ASkyB, enforceable against each of News, MCI and ASkyB in accordance with each
document's respective terms and conditions, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally or by general equitable principles.
7.6 Governmental Authorization. The execution, delivery and
--------------------------
performance by each of News, MCI and ASkyB of this Agreement and the
consummation of the transactions contemplated hereby do not require any consent,
approval, authorization or permit of, or filing with or notification to any
governmental or regulatory authority, except for (a) compliance with any
applicable requirements of the Hart-Scott-Rodino Act, (b) approval by the FCC of
the transactions contemplated hereby and (c) where failure to obtain such
consents, approvals, authorizations and permits, or to make such filings or
notifications, would not prevent or delay in any material respect the
consummation of the transactions contemplated hereby or otherwise
34
<PAGE>
prevent News, MCI or ASkyB from performing their respective obligations under
this Agreement in all material respects, and would not, individually or in the
aggregate, have a material adverse effect on the use by or benefit to Newco of
any of the Transferred Assets (a "Transferred Asset Material Adverse Effect").
7.7 Noncontravention. The execution, delivery and performance of
----------------
this Agreement by the Transferors do not, and the consummation of the
transactions contemplated hereby will not, (a) contravene or conflict with the
certificate of incorporation, by-laws or other organizational or charter
documents of News, MCI or ASkyB, (b) assuming compliance with the matters
referred to in Section 7.6 above, contravene, conflict with or constitute a
violation of any provision of any statute, regulation, rule, judgment, order,
decree, stipulation, injunction, charge, or other restriction of any government,
governmental agency, or court binding upon or applicable to News, MCI or ASkyB,
or any of their respective properties or assets; or (c) subject to receipt of
the consents set forth on Section 7.7 of the ASkyB Disclosure Schedule, conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, require any notice or give rise to a loss of any benefit under, any
of the Transferred Assets or any contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, Security Interest or other arrangement to which
News, MCI or ASkyB is a party or by which any of them is bound or to which any
of their respective assets is subject or result in the creation or imposition of
any Security Interest on any assets of News, MCI or ASkyB (including any of the
Transferred Assets).
35
<PAGE>
7.8 Contracts. ASkyB has delivered to Primestar correct and complete
---------
copies of each of the Contracts. The amounts designated on Schedule A as "Paid
to Date" are the amounts expended under the Contracts up to April 30, 1997 (and
such amounts have been paid by the Transferors), respectively, and the amounts
designated in Schedule A as "Remaining Commitments" are the remaining
commitments under the Contracts, respectively, on a cumulative basis from April
30, 1997, through the Closing Date, and, on the Closing Date, the remaining
commitments under each Contract shall not exceed the remainder of (a) the amount
shown on Schedule A as the Remaining Commitment with respect to such Contract,
minus (b) the aggregate amount expended in respect of such Contract on a
cumulative basis from April 30, 1997 through the Closing Date. The aggregate
amount to be expended in respect of all of the Contracts as a whole between
September 30, 1997 and the Closing Date shall not exceed the aggregate amount
indicated on Section 7.8-A of the ASkyB Disclosure Schedule as the scheduled
amounts remaining to be paid under such Contracts for such period based upon the
assumptions set forth therein. Each of News, MCI and ASkyB has complied with
and performed in all material respects all of its obligations required to be
performed under each of the Contracts to which it is a party. Except as set
forth in Section 7.8 of the ASkyB Disclosure Schedule, each Contract is in full
force and effect and constitutes the legal, valid, binding and enforceable
obligation of the applicable Transferor, and, to such Transferor's Knowledge,
each of the other parties thereto, enforceable against such parties in
accordance with the terms thereof and, subject to receipt of the consents set
forth in Section 7.7 of the ASkyB Disclosure Schedule, will be enforceable by
Newco after the Closing, subject to (x) bankruptcy, insolvency, reorganization,
fraudulent conveyance or transfer, moratorium or similar laws affecting
creditors' rights
36
<PAGE>
generally, and (y) general principles of equity (regardless of whether such
enforceability is considered in a proceeding at law or in equity). Subject to
receipt of the consents set forth in Section 7.7 of the ASkyB Disclosure
Schedule, the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have not resulted and will not result in a
breach or default under, or permit any party to modify any obligation under, or
cause or permit any termination, cancellation or loss of benefits under, any of
the Contracts. None of News, MCI or ASkyB is in breach or default in any
material respect under any Contract to which it is a party and no event has
occurred which, with or without the giving of notice, lapse of time or both,
would constitute a breach or default under any Contract in any material respect
or permit termination, modification or acceleration under any Contract. None of
News, MCI or ASkyB has received written notice canceling, terminating or
repudiating or exercising any option under any of the Contracts to which it is a
party and none of News, MCI or ASkyB has any Knowledge that any party has failed
to comply with or perform all of its obligations required to be performed under
any of the Contracts or that an event has occurred which, with or without the
giving of notice, lapse of time or both, would constitute a breach or default by
such party thereunder. None of News, MCI or ASkyB has any Knowledge that the
validity of any of the Contracts to which it is a party is being contested by a
third party.
7.9 Intellectual Property. Each of News, MCI and ASkyB owns or has
---------------------
the right to use pursuant to license, sublicense, agreement, or permission all
Intellectual Property currently used in connection with the operation of the
Transferred Assets, as currently proposed to be operated by Newco following the
Closing, all of which is identified in Section 7.9 of the ASkyB Disclosure
Schedule and included in the Transferred Assets.
37
<PAGE>
7.10 Litigation. To the Knowledge of News, MCI and ASkyB, Section
----------
7.10 of the ASkyB Disclosure Schedule sets forth each instance in which any of
News, MCI or ASkyB is the subject of an investigation of any federal, state,
local or foreign jurisdiction or any agency thereof, which could reasonably be
expected to affect the Transferred Assets. None of the investigations set forth
in Section 7.10 of the ASkyB Disclosure Schedule could reasonably be expected to
have a Transferred Asset Material Adverse Effect. Except as set forth in
Section 7.10 of the ASkyB Disclosure Schedule, there are no claims, legal
actions, counterclaims, suits, arbitration or other legal, administrative or tax
proceedings, nor any order, decree or judgment, in progress or pending, or to
the Knowledge of any of News, MCI or ASkyB, threatened, against any of News, MCI
or ASkyB, the Transferred Assets or the business or operations of ASkyB, which
seeks to enjoin or prohibit any action taken or to be taken by News, MCI or
ASkyB pursuant to or in connection with this Agreement or which could be
reasonably expected to have a Transferred Asset Material Adverse Effect. Except
as set forth in Section 7.10 of the ASkyB Disclosure Schedule, none of News, MCI
or ASkyB or any of the Transferred Assets is subject to any judgment, writ,
order, injunction, award or decree by any court, arbitrator or governmental
authority, including any administrative agency.
7.11 Legal Compliance. Each of News, MCI and ASkyB has complied in
----------------
all material respects, and the Transferred Assets, including the operations
thereof, are in compliance in all material respects with all laws (including,
without limitation, Environmental Laws), including any rules and regulations
thereunder, of federal, state, local and foreign governments (and all agencies
thereof) except for failures which could not, individually or in the aggregate,
with or without notice or lapse of time, have a Transferred Asset Material
Adverse Effect or a
38
<PAGE>
material adverse effect on the consummation of the transactions contemplated by
this Agreement, and no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, demand, or notice has been filed or commenced against any
of News, MCI or ASkyB alleging any failure to comply with any such law or
regulation.
7.12 FCC Matters. MCI hereby represents and warrants that:
-----------
(a) MCI has delivered to Primestar true and complete copies of
all of the MCI FCC Licenses. The MCI FCC Licenses are in full force and effect
and are unimpaired by any materially adverse condition. To MCI's Knowledge, no
Transferor other than MCI holds any FCC Licenses with respect to the U.S.
Satellite Business contemplated to be operated by MCI, News and ASkyB. MCI has
delivered to Primestar true and complete copies of all material correspondence
from the FCC or the Executive Branch of the federal government to MCI relating
to the MCI FCC Licenses, received by MCI subsequent to the auction of the 110
Slot. Except as set forth in Section 7.12(a) of the ASkyB Disclosure Schedule,
no application, action or proceeding is pending for the renewal or modification
of any of such MCI FCC Licenses, and no application, complaint, action or
proceeding is pending or, to the Knowledge of MCI, threatened, that may result
in the revocation, modification, non-renewal or suspension of any of such
licenses or the imposition of any administrative or judicial sanction with
respect to MCI. MCI has no Knowledge of any failure of MCI to comply (whether or
not known by or disclosed to the FCC or any other Person or entity) in all
material respects with all applicable Regulatory Provisions, and with the terms
and conditions of all applicable MCI FCC Licenses, including but not limited to,
any due diligence obligations or reporting requirements associated with any MCI
39
<PAGE>
FCC License. Neither ASkyB nor News holds any FCC License in connection with
the U.S. Satellite Business.
(b) Section 7.12(b) of the ASkyB Disclosure Schedule sets forth
a listing of all insurance policies in force associated with any satellite or
other facility related to the U.S. Satellite Business contemplated to be
operated by News, MCI and ASkyB. Each such insurance policy is in full force and
effect, and the rights of the parties thereunder will not be affected in any
material respect by the transactions contemplated by this Agreement.
(c) MCI has delivered to Primestar true and complete copies of
all non-FCC applications filed by MCI with the United States government since
January 1, 1993 relating to the U.S. Satellite Business, including, without
limitation, all applications for technical data exchange licenses and satellite
export licenses, and of the current status thereof. Neither MCI nor any of its
directors or officers has any Knowledge that any such application is not likely
to be granted in its current form.
(d) Except as contemplated by Section 8.2 hereof, no consent,
approval, authorization, order or waiver of, or filing with, the FCC is required
under the Regulatory Provisions to be obtained or made by MCI in connection with
the transactions contemplated by this Agreement, except such as may already have
been obtained and made under the Regulatory Provisions. The consummation of the
transactions contemplated by this Agreement and by the agreements referred to
herein in accordance with the provisions hereof and thereof do not and will not
result in (i) the termination or revocation of any FCC authorization currently
held by MCI for use in connection with the U.S. Satellite Business; (ii) any
other
40
<PAGE>
material impairment of the rights of the holder of any such authorization; or
(iii) the violation of any of the Regulatory Provisions.
(e) MCI has made aggregate payments to the United States in the
amount of $682,500,000 with respect to the 110 Slot, which is the entire auction
price payable to the United States or any department or instrumentality thereof
with respect to the 110 Slot.
7.13 Transferred Assets. No Person other than the Transferors and
------------------
their respective Affiliates has any right, title or interest in, or with respect
to, the 110 Slot and the rights being transferred by MCI hereunder with regard
to the 110 Slot constitute all of the rights, including contractual rights, held
by the Transferors and their respective Affiliates with regard to the 110 Slot.
Any rights of News or ASkyB or any of their Affiliates relating to the 110 Slot
are either included in the Transferred Assets or will be terminated prior to the
Closing. The Contracts include all of the contracts, agreements,
understandings, rights and arrangements of any of the Transferors with respect
to the satellites referred to in the Contract described in part A.1. of Schedule
A (i.e., the Loral Satellites).
7.14 Brokers' Fees. None of News, MCI or ASkyB has any Liability or
-------------
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement.
7.15 Disclosure. The representations and warranties contained in
----------
this Section 7 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 7, in light of the circumstances in which
made, not misleading.
41
<PAGE>
8. Further Agreements of the Parties.
---------------------------------
8.1 Bundling. Newco and MCI hereby agree that, following the
--------
Closing, MCI shall have the non-exclusive right to bundle the Primestar DBS
Service with MCI's telephony service offerings, on mutually agreeable terms.
8.2 Assignment of 110 Slot. Upon execution of this Agreement, MCI
----------------------
and Primestar shall expeditiously seek FCC Approval of the assignment of the 110
Slot to Newco or its designee. Each of the Transferors, Primestar and Newco
shall take all steps necessary, including the implementation of an Acceptable
Alternative Arrangement, to obtain such FCC Approval; provided, however, that
nothing contained in this Agreement shall create any obligation on the part of
Newco or Primestar to accept (as a condition to receipt of such FCC Approval or
otherwise): (i) any restriction on the right of Newco or Primestar to operate
the 110 Slot, including, without limitation, the right to use all 28 transponder
frequencies authorized thereunder to provide high-powered DBS services, other
than any such restrictions generally imposed on operators of high-powered DBS
services by applicable Regulatory Provisions and restrictions of the types
generally and customarily imposed by the FCC on operators of high-powered DBS
services and such other restrictions which, individually or in the aggregate,
are not material; (ii) any change in the management or ownership (other than by
the Transferors) of Newco or Primestar, or in any voting or other rights of, or
arrangements among, its equity holders from that set forth in the Roll-up MOU,
other than such changes which, individually or in the aggregate, do not
materially affect the management or ownership rights of any equity holder or
partner of Newco or Primestar or any Affiliate thereof (other than the
Transferors); or (iii) a requirement that Newco or Primestar dispose of the
medium-powered DBS business
42
<PAGE>
currently operated by Primestar or any restriction on the right of Newco or
Primestar to operate the medium-powered DBS business currently operated by
Primestar, other than such restrictions generally imposed on operators of
medium-powered DBS services by applicable Regulatory Provisions and restrictions
of the types generally and customarily imposed by the FCC on operators of
medium-powered DBS services and such other restrictions which, individually or
in the aggregate, are not material. Anything contained herein to the contrary
notwithstanding, to the maximum extent allowable under the Communications Act
and Regulatory Provisions, even if the parties implement an Acceptable
Alternative Arrangement in lieu of transferring the 110 Slot to Newco or its
designee, Newco shall have the continuing right and option, exercisable in its
sole discretion and at no further cost to Newco, to require the Transferors to
immediately assign (or cause the owner thereof to assign) the 110 Slot to Newco
or any designee of Newco, upon receipt of FCC Approval with respect to such
assignment, in which case the Acceptable Alternative Arrangement shall be
canceled concurrently with the effectiveness of such assignment.
8.3 Non-Competition. For the period beginning on the Closing Date
---------------
and ending on the tenth anniversary of the Closing Date, none of News, ASkyB or
any of their respective Affiliates shall (i) engage directly or indirectly in
any U.S. Satellite Business, (ii) directly and actively participate or assist in
the conduct of any U.S. Satellite Business by any other Person or group of
Persons (other than Newco) by means of any management, advisory, operating or
similar agreement or arrangement or joint venture, or (iii) have any direct, or,
through an Affiliate, any indirect ownership interest or other investment in any
Person or group of Persons (other than Newco) engaged in any U.S. Satellite
Business, as a securityholder,
43
<PAGE>
partner, joint venturer or otherwise; provided, however, that the foregoing
shall not prohibit News or ASkyB or their respective Affiliates from (x)
acquiring or holding for investment purposes less than 5% of any class or series
of equity or debt securities of any entity, which class or series is registered
under Section 12 of the Securities Exchange Act and listed for trading on the
New York Stock Exchange, the American Stock Exchange or The Nasdaq Stock Market,
even if such entity is engaged in the U.S. Satellite Business, (y) owning a non-
Controlling interest in ECC for a period of five years following the Closing
Date, or (z) engaging in a U.S. Satellite Business which is directed to a non-
English speaking audience and containing programming, 90% of which is conducted
90% of the time via a language other than English; and provided, further, that
the foregoing shall in no way restrict (xx) News or any of its Affiliates from
providing programming of any kind to any U.S. Satellite Business or (yy) the
operations of the business of News Digital Systems plc and its subsidiaries as
conducted on the date hereof.
News hereby represents and warrants that the business of News Digital
Systems plc and its subsidiaries as conducted on the date hereof is as follows:
News Digital Systems plc ("News Digital Systems"), together with its three
principal operating subsidiaries, NDS Limited ("NDS Ltd"), News Datacom Limited
("News Datacom") and DigiMedia Vision Limited ("DMV" and, together with News
Digital Systems, NDS Ltd and News Datacom, the "News Digital Systems Group")
provides end-to-end digital broadcasting system design and integration services,
conditional access systems, digital compression systems and subscription
management systems. Each of NDS Ltd, News Datacom and DMV has operating control
over specific product lines and service activities. NDS Ltd provides systems
integration and support services for broadcasters. News Datacom designs,
manufactures and supports analog and digital
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conditional access systems and encryption technologies for use primarily in pay
television services which use "smart cards" as the replaceable security device
(a smart card is a plastic card carrying an embedded computer chip that
implements the secure management and delivery of decryption keys necessary to
descramble pay television channels and thereby enable and disable viewing
according to whether the subscriber is authorized to receive a particular
service). DMV designs, manufactures and supports digital video compression,
transmission and receiving products for broadcasters which engage in digital
distribution and transmission of video, audio and data services via cable,
satellite and terrestrial means.
Each of News and ASkyB acknowledges that a breach of the provisions of
this Section 8.3 would cause irreparable harm to Newco and that money damages
would not provide an adequate remedy to Newco. Each of News and ASkyB agrees
that Newco shall have the right to have the provisions of this Section 8.3
specifically enforced in a court of competent jurisdiction. Each of News and
ASkyB acknowledges and agrees that the provisions of this Section 8.3 are
reasonable and valid in geographical and temporal scope and in all other
respects. It is the intention of the parties that if any of the restrictions
contained herein are held to cover a geographic area or to be for a length of
time which is not permitted by applicable law, such provision shall not be
construed to be null and void, but rather shall be interpreted or reformed to
provide for the maximum enforceable geographic area or time period (not greater
than those set forth herein) as shall be enforceable under such applicable law,
and the remainder of the provisions hereof shall not thereby be affected and
shall be given full force and effect.
8.4 110 Slot Litigation. Each of Primestar and its general and
-------------------
limited partners and Newco agrees to discontinue, and, in the case of Newco, to
cause its shareholders, to
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discontinue, with prejudice, as of the Closing Date, any actions brought by any
of them, to the extent that any such action directly relates to the 110 Slot.
In connection with the application to the FCC to transfer of the 110 Slot,
Primestar will advise the FCC in writing that the concerns raised in its
application for review and petition to deny would be rendered moot by the FCC's
approval of the assignment of the license for the 110 Slot to Primestar.
8.5 Conduct of Business. During the period between the execution
-------------------
hereof and the Closing Date, except to the extent necessary to effect the Roll-
up, or any other transaction contemplated hereby: (a) Primestar shall conduct
its business in a regular manner and use commercially reasonable efforts, in the
ordinary course of business, (i) to preserve its business and the goodwill and
business of the customers, advertisers, suppliers and others having business
relations with Primestar, (ii) to keep available the services and goodwill of
its present employees, and (iii) to perform and observe all the terms, covenants
and conditions required to be performed and observed by it under its contracts
in each case except to the extent that a failure to do so would not result in a
Primestar Material Adverse Effect; provided, however, that Primestar shall cause
the disposition of all rights of Primestar and any of its general or limited
partners under the FCC authorizations issued to Tempo Satellite, Inc. with
respect to 11 DBS transponder channels at the 119 (Degrees) West Longitude
orbital slot (the "Tempo FCC License"), including the rights of Primestar to use
the capacity thereof (the "119 Capacity"); (b) each of the Transferors shall
conduct its business with respect to the Transferred Assets in a regular manner
and use commercially reasonable efforts, in the ordinary course of business, (i)
to preserve the goodwill of its suppliers and others having business relations
with such Transferor with respect to any Transferred Assets, and (ii) to perform
and observe all the terms, covenants and conditions
46
<PAGE>
required to be performed and observed by it under its Contracts and all FCC and
other governmental permits, licenses and authorizations with respect to the
Transferred Assets, in each case except to the extent that a failure to do so
would not result in a Transferred Asset Material Adverse Effect; and (c)
Primestar shall cause the disposition (the "Dispositions") of all rights of
Primestar and any of its general or limited partners under the FCC
authorizations issued to Tempo Satellite, Inc. with respect to 11 DBS
transponder channels at the 119 (Degrees) West Longitude orbital slot (the
"Tempo FCC License"), including the rights of Primestar to use the capacity
thereof (the "119 Capacity") on or prior to the date which is 18 months
following the Closing Date or such earlier date on or after the Closing Date as
is required by the FCC. As soon as practicable following the date of this
Agreement, the parties shall endeavor to determine whether and when the
Dispositions shall be required as a condition to obtaining any Regulatory
Approval. In the event that any Regulatory Approval is conditioned upon the
consummation of the Dispositions concurrently with the assignment of the MCI FCC
Licenses hereunder, then Primestar will use commercially reasonable efforts to
ensure that the Dispositions shall occur not later than four months after the
date on which the conditions set forth in Section 9.1 are satisfied (it being
agreed that if consummation of the Dispositions is the only condition precedent
to satisfaction of Section 9.1(f), then Section 9.1(f) will be deemed to have
been satisfied for purposes of determining such date). Notwithstanding any other
provision of this Agreement (including Sections 8.2 and 8.6), so long as
Primestar complies with its obligation to consummate the Dispositions as set
forth above, the manner in which Primestar effects such Dispositions, including
the terms of any such transfer and the identity of any transferee shall be
determined in the sole discretion of Primestar. If it comes to ASkyB's attention
that any events
47
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or circumstances regarding the Transferred Assets require the taking of any
action to preserve the value and utility of the Transferred Assets, ASkyB will
(i) promptly notify Primestar of such events or circumstances and of any
potential responses to such events and circumstances of which ASkyB is aware and
(ii) take such actions as shall be mutually agreed by Primestar and ASkyB as
being reasonably required to preserve such value and utility; provided, that if
Primestar and ASkyB shall not so agree but Primestar shall nonetheless request
that ASkyB take a specified action in respect of the foregoing, then, subject to
applicable requirements of law, ASkyB shall take such action, all at the sole
risk and expense of Primestar (but without limitation or qualification of any
representations and warranties of the Transferors herein, except that if the
taking of an action pursuant to the foregoing proviso would violate a
representation or warranty herein, such violation shall be deemed waived).
8.6 Consents; Hart-Scott-Rodino. Each of News, MCI, ASkyB and
---------------------------
Primestar shall use its respective commercially reasonable efforts to obtain at
the earliest practicable date the respective consents set forth in Section 6.14
of the Primestar Disclosure Schedule and Section 7.7 of the ASkyB Disclosure
Schedule, and each of News, MCI, ASkyB and Primestar, with the cooperation of
one another, shall use commercially reasonable efforts to obtain all approvals
from regulatory authorities (collectively, "Regulatory Approvals"), including,
without limitation, the FCC, the Department of Justice ("DOJ") and the Federal
Trade Commission (the "FTC"), necessary to consummate the transactions
contemplated hereby. In the event that all or any of the Regulatory Approvals
are not received, each of News, MCI, ASkyB and Primestar shall cooperate in good
faith and take all commercially reasonable steps to restructure the transactions
contemplated hereby in such a way so that Regulatory Approvals are received;
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provided, that the economic costs and risks of any such restructuring shall be
borne 100% by the Transferors. Nothing contained in this Agreement shall create
any obligation on the part of Newco or Primestar to accept (as a condition to
receipt of Regulatory Approvals or otherwise): (i) any restriction on the right
of Newco or Primestar to operate the 110 Slot, including, without limitation,
the right to use all 28 transponder frequencies authorized thereunder to provide
high-powered DBS services, other than any such restrictions generally imposed on
operators of high-powered DBS services by applicable Regulatory Provisions and
restrictions of the types generally and customarily imposed by the FCC on
operators of high-powered DBS services and such other restrictions which,
individually or in the aggregate, are not material; (ii) any change in the
management or ownership (other than by the Transferors) of Newco or Primestar,
or in any voting or other rights of, or arrangements among, its equity holders
from that set forth in the Roll-up MOU, other than such changes which,
individually or in the aggregate, do not materially affect the management or
ownership rights of any equity holder or partner of Newco or Primestar or any
Affiliate thereof (other than the Transferors); or (iii) a requirement that
Newco or Primestar dispose of the medium-powered DBS business currently operated
by Primestar or any restriction on the right of Newco or Primestar to operate
the medium-powered DBS business currently operated by Primestar, other than such
restrictions generally imposed on operators of medium-powered DBS services by
applicable Regulatory Provisions and restrictions of the types generally and
customarily imposed by the FCC on operators of medium-powered DBS services and
such other restrictions which, individually or in the aggregate, are not
material. Notwithstanding the foregoing, this Agreement shall not constitute an
agreement by the Transferors to assign any Contract if the assignment or
attempted assignment thereof would
49
<PAGE>
constitute a breach or default thereof or would in any way adversely affect the
rights of the Transferors thereunder or the rights of Newco to enjoy the
benefits thereof, unless and until such consent is obtained. If any such
consent shall not have been obtained by the Closing Date, the Transferors shall
cooperate with Newco in any reasonable arrangement designed to provide Newco
with the benefits under such Contract to the same extent as if Newco were the
contracting party. Newco shall assume the burdens of any such Contract to the
extent that any such benefits thereunder are so provided to Newco.
8.7 Transfer Taxes. Any sales or other transfer taxes resulting from
--------------
the transfer of the Transferred Assets shall be borne equally by ASkyB, on the
one hand, and Newco, on the other hand.
8.8 Assumption Agreement. Upon the formation of Newco, Primestar
--------------------
will cause Newco to enter into an assumption agreement among the parties hereto
and Newco (the "Newco Assumption Agreement") whereby Newco shall assume the
rights and obligations of Primestar under this Agreement. Primestar shall cause
the execution of such assumption agreement concurrently with the consummation of
the Roll-up. Such assumption agreement shall contain representations and
warranties of Newco substantially similar to the representations and warranties
made by Primestar in Section 6 hereof, including, without limitation,
representations with regard to capitalization (which shall be consistent with
the capitalization of Newco and Primestar as contemplated upon consummation of
the Roll-up as set forth in the Roll-up MOU), financial statements and
liabilities.
8.9 Further Assurances. Each of News, MCI, ASkyB and Primestar shall
------------------
cooperate and use commercially reasonable efforts to cause all conditions to the
Closing
50
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hereunder to be satisfied as promptly as practicable. From and after the
Closing, the Transferors, on the one hand, and Newco, on the other hand, agree
to execute and deliver such further documents and instruments and to do such
other acts and things as Newco or the Transferors, as the case may be, may
reasonably request in order to effectuate the transactions contemplated by this
Agreement. In the event any such party shall be involved in litigation,
threatened litigation or government inquiries with respect to a matter involving
any of the Transferors, or Newco or their respective shareholders or members,
relating to the transactions contemplated by this Agreement, the other such
parties shall also make available to such first party, at reasonable times and
subject to the reasonable requirements of its or his own business, such
information relevant to such matters as is in its or his possession; provided
such first party shall reimburse the providing party for its or his reasonable
costs for employee time incurred in connection therewith if more than one
business day is required; and provided, further, that such information is not
privileged or otherwise legally protected from disclosure.
8.10 Access to Records and Properties. From the date of this
--------------------------------
Agreement through the Closing, each of the Transferors, on the one hand, and
Primestar, on the other hand, shall afford to the other party and its
representatives free and full access at all reasonable times to the properties,
personnel, books and records of such first party (such access not to
unreasonably interfere with the business of such party) in order that the other
party may have full opportunity to make such investigations as it may reasonably
desire to make of all matters relating to the transactions contemplated
hereunder. Notwithstanding the foregoing, Primestar shall not be obligated to
disclose any information that is competitively or strategically sensitive, and
if Primestar shall determine to withhold any information on such grounds, a
reasonable summary
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of the portions thereof that are not competitively or strategically sensitive
shall be provided to the party requesting such information pursuant to this
Section 8.10. Any information provided pursuant to this Section 8.10 shall be
kept confidential by the Transferors and Primestar, as applicable, and shall not
be revealed to any person or entity other than the respective officers,
directors, employees, agents and representatives of such parties (it being
agreed that the Transferors on the one hand, and Primestar on the other hand,
shall be liable for any breach of this Section 8.10 by any of their respective
officers, directors, employees, agents and representatives), except to the
extent such information (i) is or becomes generally available to the public
(other than as a result of a breach of this Section 8.10 by the recipient of
such information) or (ii) is required to be disclosed under any applicable law
or under subpoena or other legal process. No such investigation shall diminish
in any respect any of the representations or warranties of the parties
hereunder.
8.11 Contribution of 110 Slot License. At the Closing, but prior to
--------------------------------
the issuance of Newco Preferred Stock to ASkyB hereunder, Newco shall transfer
its rights to all licenses relating to the 110 Slot to a subsidiary of Newco
upon obtaining FCC Approval for such transfer.
8.12 Cooperation of Parties. Each general and limited partner of
----------------------
Primestar, severally and not jointly, hereby agrees to cooperate with Primestar
and Newco in connection with Primestar's efforts to make filings and obtain
consents pursuant to this Agreement. Notwithstanding anything to the contrary
contained in this Agreement, no general or limited partner of Primestar shall be
obligated to agree to any restriction, limitation, condition or other obligation
or requirement relating to the business or assets of such partner or any
Affiliate of such partner (other than the business or assets of Primestar, to
the extent expressly provided for
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herein), or relating to the ownership or management of such partner or Affiliate
or the rights of any equity holders of such partner or Affiliate or any
arrangement between them, nor shall any Regulatory Approval hereunder be
conditioned upon any such agreement.
8.13 MCI Licenses. MCI shall take all actions necessary to keep the
------------
MCI FCC Licenses in full force and effect until the Closing Date.
8.14 Carriage Agreement. During the period from the date hereof
------------------
until the Closing Date, Primestar and News shall negotiate in good faith to
endeavor to reach agreement on terms of a carriage agreement between Newco and
FX Networks, LLC, Fox News Network, LLC, Fox Sports Direct, LLC and the Family
Channel, a division of International Family Entertainment, Inc. relating to
carriage of such networks on the Primestar DBS Service, which agreement shall
include the terms set forth in the term sheet attached as Exhibit IV hereto.
9. Conditions to Closing.
---------------------
9.1 Conditions Precedent to Obligations of Newco. The obligations of
--------------------------------------------
Newco to consummate the transactions contemplated hereby are subject to the
fulfillment, prior to or at the Closing, of each of the following conditions
(any or all of which may be waived by Newco):
(a) all representations and warranties of the Transferors made
herein shall, in each case, if specifically qualified by materiality, be true
and correct and, if not so qualified, be true and correct in all material
respects, in each case, at and as of the date of this Agreement and on the
Closing Date, with the same effect as though those representations and
warranties had been made at and as of the Closing Date;
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<PAGE>
(b) the Transferors shall not have breached or failed to perform
any material obligations and covenants required by this Agreement to be
performed or complied with by any such party prior to or at the Closing;
(c) Newco shall have been furnished with a certificate from each
Transferor, dated the Closing Date and in form and substance reasonably
satisfactory to Newco, executed by an executive officer of each Transferor,
certifying to the fulfillment of the conditions specified in Sections 9.1(a) and
9.1(b) hereof;
(d) there shall be no statute, law, judgment, decree, injunction,
rule or order of any federal, state, local or foreign government, governmental
authority, governmental department, commission, administrative or regulatory
agency, instrumentality, court or arbitrator ("Governmental Entities")
outstanding that prohibits, restricts or delays consummation of the transactions
contemplated by this Agreement and there shall not be pending any suit, action
or proceeding by any Governmental Entity in which the relief sought would (i)
have any such effect or (ii) have any of the effects described in the third
sentence of Section 8.6.
(e) all authorizations, consents, orders or approvals of, or
declarations or filings with, or expiration of waiting periods imposed by, any
court, administrative agency or commission or other governmental authority or
instrumentality, whether domestic or foreign, necessary for the consummation of
the transactions contemplated hereby shall have been filed, occurred or been
obtained;
(f) either (i) FCC Approval with respect to the grant of the
license for the 110 Slot to MCI and assignment of such license to Newco or its
designee shall have been obtained or (ii) an Acceptable Alternative Arrangement
shall have been implemented;
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(g) the Transferors shall have obtained all necessary third party
consents for the assignment of the Contracts or, in the absence of any required
consent, Newco shall have been provided with the benefits of each such Contract
to the same extent as if Newco were the contracting party;
(h) Newco shall have received a copy of resolutions adopted by
the Board of Directors of each Transferor authorizing the execution, delivery
and performance of this Agreement by each such Transferor, and a certificate of
the Secretary or an Assistant Secretary of each Transferor, dated the Closing
Date, stating that such resolutions were duly adopted and are in full force and
effect, without amendment or modification, at such date and setting forth the
incumbency of each person executing this Agreement or any other document
delivered pursuant to this Agreement on behalf of each Transferor;
(i) Newco shall have received from counsel to ASkyB and News and
counsel to MCI opinions (including of FCC counsel), dated the Closing Date, in
form and substance reasonably satisfactory to Newco;
(j) each Transferor shall have executed and delivered to Newco an
Assignment of Contracts in form and substance reasonably satisfactory to Newco;
and
(k) subject to Section 5 hereof, all conditions with regard to
the consummation of the Roll-up shall have been satisfied or waived by the
beneficiary of such conditions.
9.2 Conditions Precedent to Obligations of Transferors. The
--------------------------------------------------
obligations of the Transferors to consummate the transactions contemplated by
this Agreement are subject to the
55
<PAGE>
fulfillment, prior to or at the Closing, of each of the following conditions
(any or all of which may be waived by the Transferors):
(a) all representations and warranties of Primestar to the
Transferors and all representations and warranties of Newco contained in the
Newco Assumption Agreement shall, in each case, if specifically qualified by
materiality, be true and correct and, if not so qualified, be true and correct
in all material respects, in each case, at and as of the date of this Agreement
and on the Closing Date with the same effect as though those representations and
warranties had been made at and as of the Closing Date;
(b) none of Primestar, its general or limited partners or Newco
shall have breached or failed to perform any material obligations or covenants
required by this Agreement to be performed or complied with by such party, prior
to or at the Closing;
(c) the Transferors shall have been furnished with certificates,
dated the Closing Date and in form and substance reasonably satisfactory to the
Transferors, executed by a duly authorized officer or representative of
Primestar or an executive officer of Newco, certifying to the fulfillment of the
conditions specified in Sections 9.2(a) and 9.2(b) hereof;
(d) there shall be no statute, law, judgment, decree,
injunction, rule or order of any Governmental Entity which prohibits, restricts
or delays consummation of the transactions contemplated by this Agreement;
(e) all authorizations, consents, orders or approvals of, or
declarations or filings with, or expiration or waiting periods imposed by, any
court, administrative agency or commission or other governmental authority or
instrumentality, whether domestic or foreign,
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necessary for the consummation of the transactions contemplated hereby shall
have been filed, occurred or been obtained;
(f) the Transferors shall have received a copy of resolutions
adopted by (i) the Partners Committee of Primestar authorizing the execution,
delivery and performance of this Agreement and the Newco Assumption Agreement by
Primestar, and (ii) the Board of Directors of Newco authorizing the execution,
delivery and performance of the Newco Assumption Agreement by Newco, and
certificates of the Secretary or an Assistant Secretary of each of Primestar and
Newco, and dated the Closing Date, stating that such resolutions were duly
adopted and are in full force and effect at such date, and setting forth the
incumbency of each person executing this Agreement and the Newco Assumption
Agreement, or any other documents delivered pursuant to this Agreement on behalf
of Primestar or Newco, as the case may be;
(g) the Newco Assumption Agreement shall have been executed and
delivered to the Transferors;
(h) the Transferors shall have received from counsel to
Primestar and Newco opinions, dated the Closing Date, in form reasonably
satisfactory to the Transferors;
(i) Newco shall have entered into a Registration Rights
Agreement with ASkyB, on the terms set forth in Exhibit V;
(j) Newco shall have executed and delivered to the Transferors
an instrument whereby it assumes the Assumed Liabilities in form and substance
reasonably acceptable to the Transferors; and
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(k) subject to Section 5 hereof, all conditions with regard to
the consummation of the Roll-up shall have been satisfied or waived.
10. Indemnification.
---------------
10.1 Indemnification by News, ASkyB and MCI. News and ASkyB, jointly
--------------------------------------
and severally, and MCI, severally and not jointly, shall indemnify Newco,
Primestar and their respective partners, shareholders, officers, directors,
employees, agents and affiliates (the "Newco Indemnified Parties") and hold each
of them harmless at all times from and after the Closing Date against and in
respect of any and all judgments, costs, damages, losses, liabilities, taxes and
deficiencies and penalties and interest thereon, including reasonable attorneys'
fees (collectively, "Losses") incurred by the Newco Indemnified Parties as a
result of (a) any breach of a representation, warranty, covenant or agreement of
the Transferors made hereunder and (b) the Retained Liabilities; provided, that
"Losses" shall not include any amounts which are indemnifiable under the
Indemnification Agreement dated the date of this Agreement between News and the
entities defined herein as the Primestar Parties (the "ECC Indemnification
Agreement").
10.2 Indemnification by Primestar and Newco. Newco (or, if the Roll-
--------------------------------------
up is not consummated, but Primestar acquires the Transferred Assets in
accordance with Section 5 hereof, Primestar) shall indemnify News, MCI and ASkyB
and their respective shareholders, officers, directors, employees, agents and
affiliates (the "Transferor Indemnified Parties") and hold each of them harmless
at all times from and after the Closing Date against and in respect of any
Losses incurred by the Transferor Indemnified Parties as a result of (a) any
breach of a
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representation, warranty, covenant or agreement of Primestar or Newco made
hereunder, or (b) nonfulfillment by Newco of its obligations with respect to the
Assumed Liabilities.
10.3 Survival Periods. All representations and warranties of the
----------------
parties contained in this Agreement shall survive for a period of one year
following the Closing Date.
10.4 Notice to the Indemnitor. Promptly after the occurrence of any
------------------------
event which may give rise to a claim for indemnification under this Section 10,
the party entitled to indemnification (the "Indemnified Party") shall notify the
indemnifying party (the "Indemnitor") in writing of such claim (the "Claims
Notice"). The Claims Notice shall describe the asserted liability in reasonable
detail, and shall indicate the amount (estimated, if necessary and to the extent
feasible) of the Loss that has been or may be suffered by the Indemnified Party.
Failure by the Indemnified Party to give a Claims Notice to the Indemnitor in
accordance with the provisions of this Section 10.4 shall not relieve the
Indemnitor of its obligations hereunder except to the extent that the Indemnitor
has been actually prejudiced by such failure.
10.5 Rights of Parties to Settle or Defend. The Indemnitor may elect
-------------------------------------
to compromise or defend, at its own expense, by its own counsel and to the
extent an election with respect to such compromise or defense is available to
the Indemnified Party, any asserted liability. If the Indemnitor elects to
compromise or defend such asserted liability, it shall within 30 calendar days
(or sooner, if the nature of the asserted liability so requires) notify the
Indemnified Party of its intent to do so, and the Indemnified Party shall
cooperate, at the expense of the Indemnitor, in the compromise of, or defense
against, such asserted liability. If the Indemnitor elects to defend any claim,
the Indemnified Party shall make available to the Indemnitor any books, records
or other documents within its control that are necessary or
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appropriate for such defense. If the Indemnitor elects not to compromise or
defend the asserted liability, fails to notify the Indemnified Party of its
election as herein provided or contests its obligation to indemnify under this
Agreement (or if counsel to the Indemnified Party advises such party that there
may be a potential conflict of interest between the Indemnitor and the
Indemnified Party, or between the Indemnified Party and any other indemnified
party, or that different or additional defenses from those available to the
Indemnified Party may be available to any other indemnified party), the
Indemnified Party may pay, compromise or defend (at the expense of the
Indemnitor) such asserted liability as the Indemnified Party considers
appropriate. The parties agree to cooperate fully with one another in the
defense, settlement or compromise of any asserted liability. Notwithstanding
the foregoing, neither the Indemnitor nor the Indemnified Party may settle or
compromise any claim over the objection of the other; provided that consent to
settlement or compromise shall not be unreasonably withheld. In any event, the
Indemnified Party and the Indemnitor may participate, at their own expense, in
the defense of such asserted liability.
10.6 Exclusive Remedies. The parties hereto acknowledge that the
------------------
indemnity rights set forth in Article 10 and in the ECC Indemnification
Agreement are intended to be their exclusive monetary remedies in connection
with this Agreement and the transactions contemplated hereby; provided that
nothing in this Section 10.6 shall limit in any way the availability of specific
performance, injunctive relief or other equitable remedies to which a party may
otherwise be entitled.
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10.7 Limitations. Any indemnity amounts payable by an Indemnitor
-----------
hereunder shall be net of any tax benefit received by the Indemnified Party as a
result of the claim or event giving rise to indemnification.
11. Termination.
-----------
11.1 Termination. This Agreement may be terminated at any time prior
-----------
to the Closing Date:
(a) by mutual written consent of the parties hereto; or
(b) by either Primestar (prior to consummation of the Roll-up)
or Newco (after consummation of the Roll-up) on the one hand or the Transferors
on the other hand: (i) if any judgment, decree, injunction, rule or order of any
court, governmental department, commission, agency, instrumentality or
arbitrator which prohibits or materially restricts consummation of the
transactions contemplated by this Agreement shall have been issued and shall
have become final and nonappealable; or (ii) if the waiting period under the
Hart-Scott-Rodino Act shall not have expired or been terminated on or before
June 30, 1998; or
(c) by either Primestar (prior to consummation of the Roll-up)
or Newco (after consummation of the Roll-up), at any time after June 30, 1998,
if any of the conditions set forth in Section 9.1 shall have become incapable of
fulfillment, and shall not have been waived by Primestar or Newco, as
applicable; or
(d) by the Transferors, at any time after June 30, 1998, if any
of the conditions set forth in Section 9.2 shall have become incapable of
fulfillment, and shall not have been waived by the Transferors;
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provided, however, that the party seeking termination pursuant to clause (b),
(c) or (d) is not in breach in any material respect of any of its
representations, warranties, covenants or agreements contained in this
Agreement.
11.2 Effect of Termination. If this Agreement is terminated as
---------------------
provided in Section 11.1, this Agreement shall become null and void and of no
further force and effect, except for the provisions of the third sentence of
Section 8.10, this Section 11 and Section 12, which shall survive such
termination.
12. Miscellaneous.
-------------
12.1 Entire Agreement. This Agreement (together with the Schedules
----------------
and Exhibits hereto), the ECC Indemnification Agreement and any other document
delivered concurrently herewith contain, and are intended as, a complete
statement of all of the terms of the arrangements between the parties with
respect to the matters provided for, and supersede any previous agreements and
understandings between the parties with respect to those matters.
12.2 Governing Law. This Agreement shall be governed by, and
-------------
construed and enforced in accordance with the laws of the State of New York,
without regard to its principles of conflicts of law.
12.3 Headings. The section headings of this Agreement are for
--------
reference purposes only and are to be given no effect in the construction or
interpretation of this Agreement.
12.4 Notices. All notices and other communications under this
-------
Agreement shall be in writing and shall be deemed given when delivered
personally, mailed by registered mail, return receipt requested, sent by
recognized overnight delivery service or, to the extent
62
<PAGE>
receipt is confirmed, by telecopy, telefax, or other electronic transmission
service to the parties at the following addresses (or to such other address as a
party may have specified by notice given to the other party pursuant to this
provision):
If to News or ASkyB, to:
American Sky Broadcasting, LLC and
The News Corporation Limited
c/o News America Publishing Incorporated
1211 Avenue of the Americas
New York, New York 10036
Attention: Arthur M. Siskind
Senior Executive Vice President and
Group General Counsel of
The News Corporation Limited
with a copy to:
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attention: Joel I. Papernik, Esq.
If to MCI, to:
MCI Telecommunications Corporation
1801 Pennsylvania Avenue, NW
Washington, DC 20006
Attention: Douglas L. Maine
Executive Vice President and
Chief Financial Officer
If to Primestar, to:
PRIMESTAR Partners, L.P.
Bala Plaza West
Suite 700
Bala Cynwyd, PA 19004
Attention: General Counsel
63
<PAGE>
12.5 Separability. If at any time any of the covenants or the
------------
provisions contained herein shall be deemed invalid or unenforceable by the laws
of the jurisdiction wherein it is to be enforced, by reason of being vague or
unreasonable as to duration, geographic scope, scope of activities restricted or
for any other reason, such covenants or provisions shall be considered divisible
as to such portion and such covenants or provisions shall become and be
immediately amended and reformed to include only such covenants or provisions as
are enforceable by the court or other body having jurisdiction of this
Agreement; and the parties agree that such covenants or provisions, as so
amended and reformed, shall be valid and binding as though the invalid or
unenforceable portion had not been included herein.
12.6 Amendment; Waiver. No provision of this Agreement may be
-----------------
amended or modified except by an instrument or instruments in writing signed by
the parties hereto. Any party may waive compliance by another with any of the
provisions of this Agreement. No waiver of any provision hereof shall be
construed as a waiver of any other provision. Any waiver must be in writing.
12.7 Assignment and Binding Effect. Except as provided in Section
-----------------------------
8.8, none of the parties hereto may assign any of its or his rights or delegate
any of its or his duties under this Agreement without the prior written consent
of the others. All of the terms and provisions of this Agreement shall be
binding on, and shall inure to the benefit of, the respective successors and
permitted assigns of the parties.
12.8 No Benefit to Others. Except as otherwise expressly set forth
--------------------
in Section 10 hereof, the representations, warranties, covenants and agreements
contained in this Agreement are for the sole benefit of the parties hereto and
their respective successors and assigns and they
64
<PAGE>
shall not be construed as conferring and are not intended to confer any rights
on any other persons.
12.9 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, and each party thereto
may become a party hereto by executing a counterpart hereof. This Agreement and
any counterpart so executed shall be deemed to be one and the same instrument.
12.10 Consent to Jurisdiction and Service of Process. Subject to
-----------------------------------------------
the provisions of the ECC Indemnification Agreement, all judicial proceedings
arising out of or relating to this Agreement may be brought in any state or
federal court of competent jurisdiction in the State of New York and by
execution and delivery of this Agreement, the parties hereto accept the
nonexclusive jurisdiction of the aforesaid courts and waive any defense of forum
non conveniens, and irrevocably agree to be bound by any judgement rendered
thereby in connection with this Agreement. The Transferors designate and
appoint Arthur M. Siskind, Esq. and such other persons as hereafter may be
selected by them and notified to Primestar irrevocably agreeing in writing to so
serve, as their respective agent to receive on their behalf service of all
process in any such proceedings in any such court, such service being hereby
acknowledged by the parties to be effective and binding service in every
respect. A copy of any such process so served shall be mailed to the
appropriate party by registered mail to the address indicated in Section 12.4
hereof, except that unless otherwise provided by applicable law, any failure to
mail such copy shall not affect the validity of service of process. If any
agent appointed refuses to accept service, the parties hereby agree that service
by mail shall constitute sufficient notice. Nothing herein shall effect the
right to serve process in any other manner permitted by law.
65
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Asset Acquisition
Agreement as of the date first above written.
THE NEWS CORPORATION LIMITED
By: /s/ Arthur M. Siskind
------------------------------
Name: Arthur M. Siskind
Title: Director
AMERICAN SKY BROADCASTING, LLC
By: /s/ Lawrence A. Jacobs
------------------------------
Name: Lawrence A. Jacobs
Title:
MCI TELECOMMUNICATIONS
CORPORATION
By: /s/ Douglas L. Maine
------------------------------
Name: Douglas L. Maine
Title: Executive Vice President and Chief
Financial Officer
PRIMESTAR PARTNERS, LP
By: /s/ James L. Gray,
------------------------------
its general partner
By:
------------------------------
Name:
Title:
<PAGE>
For purposes of Section 5, Section 8.4
and Section 8.12:
TW PROGRAMMING CO.
By: /s/ Daniel O'Brien
------------------------------
Name: Daniel O'Brien
Title: President
COMCAST DBS, INC.
By: /s/ Julian A. Brodsky
------------------------------
Name: Julian A. Brodsky
Title: Vice Chairman
TCI SE PARTNER 1, INC.
By: /s/ Gary S. Howard
------------------------------
Name: Gary S. Howard
Title: President and Chief Executive
Officer
TCI SE PARTNER 2, INC.
By: /s/ Gary S. Howard
------------------------------
Name: Gary S. Howard
Title: President and Chief Executive
Officer
COX SATELLITE, INC.
By: /s/ Ajit M. Dalvi
------------------------------
Name: Ajit M. Dalvi
Title: Vice President
CONTINENTAL SATELLITE COMPANY, INC.
By: /s/ Doug Holmes
------------------------------
Name: Doug Holmes
Title: Executive Vice President, Finance
and Strategy
<PAGE>
For purposes of Section 5, Section 8.4
and Section 8.12:
NEW VISION SATELLITE, BY ADVANCE
COMMUNICATION CORP., A GENERAL PARTNER
By: /s/ Robert Miron
------------------------------
Name: Robert Miron
Title: President
G.E. AMERICOM SERVICES, INC.
By: /s/ John Connelly
------------------------------
Name: John Connelly
Title: Chairman and Chief Executive
Officer
<PAGE>
OMITTED SCHEDULES OR ATTACHMENTS
The following schedules or similar attachments to this exhibit have been omitted
pursuant to Item 601(b)(2) of Regulation S-K of the Securities and Exchange
Commission ("Commission"). The Registrant agrees to furnish supplementally a
copy of any such schedule or attachment to the Commission upon request.
Exhibits
--------
Exhibit I: Binding Memorandum of Understanding (Roll-Up), filed as
Exhibit 2.1 to the Registrant's Current Report on Form 8-K
filed July 1, 1997)
Exhibit II: Convertible Note Term Sheet
Exhibit III: Certificate of Designation
Exhibit IV: Carriage Agreement Term Sheet
Exhibit V: Registration Rights Agreement Term Sheet
Schedules
---------
Primestar Disclosure Schedule: Exceptions to representations and
warranties of Primestar
ASkyB Disclosure Schedule: Exceptions to representations and warranties
of ASkyB
