<PAGE>
As filed with the Securities and Exchange Commission on February 13, 1998
Registration Statement No. 333-25001
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
-----------------
TCI SATELLITE ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
4841
(Primary Standard Industrial Classification Code Number)
84-1299995
(I.R.S. Employer Identification No.)
8085 South Chester, Suite 300
Englewood, Colorado 80112
(303) 712-4600
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
-----------------
Kenneth G. Carroll
Senior Vice President and Chief Financial Officer
TCI Satellite Entertainment, Inc.
8085 South Chester, Suite 300
Englewood, Colorado 80112
(303) 712-4600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-----------------
Copy to:
Marc A. Leaf, Esq.
Baker & Botts, L.L.P.
599 Lexington Avenue
New York, New York 10022
(212) 705-5000
-----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this registration statement becomes
effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding Company and there is compliance with
General Instruction G, check the following box: [_]
-----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE>
TCI SATELLITE ENTERTAINMENT, INC.
Cross-Reference Sheet Between Items in Form S-4 and Prospectus
Pursuant to Item 501(b) of Regulation S-K
<TABLE>
<CAPTION>
ITEM FORM S-4 CAPTION HEADING IN PROSPECTUS
<S> <C> <C>
A. INFORMATION ABOUT THE TRANSACTION
Item 1. Forepart of Registration Statement and Outside Front Cover Page of
Prospectus............................................................ Facing Page; Cross-Reference Sheet; Outside
Front Cover Page
Item 2. Inside Front and Outside Back Cover Pages of Prospectus............... Inside Front and Outside Back Cover Pages;
Incorporation of Certain Documents by Reference;
Available Information
Item 3. Risk Factors, Ratio of Earnings to Fixed Charges and Other
Information........................................................... Summary; Risk Factors; Summary Financial and
Other Data-Historical; Summary Financial and
Other Data-Pro Forma; The Borrower
Item 4. Terms of the Transaction.............................................. Summary; Risk Factors; The Exchange Offer;
Description of the Exchange Notes; Certain
Federal Income Tax Considerations; Plan of
Distribution
Item 5. Pro Forma Financial Information....................................... Incorporation of Certain Documents by Reference
Item 6. Material Contracts with the Company Being Acquired.................... *
Item 7. Additional Information Required for Reoffering by Persons and Parties
Deemed to be Underwriters............................................. *
Item 8. Interests of Named Experts and Counsel................................ Validity of Exchange Notes; Experts
Item 9. Disclosure of Commission Position on Indemnification of Securities Act
Liabilities........................................................... *
B. INFORMATION ABOUT THE REGISTRANT
Item 10. Information with Respect to S-3 Registrants........................... Incorporation of Certain Documents by Reference
Item 11. Incorporation of Certain Information by Reference..................... Incorporation of Certain Documents by Reference
Item 12. Information with Respect to S-2 or S-3 Registrants.................... *
Item 13. Incorporation of Certain Information by Reference..................... *
Item 14. Information with Respect to Registrants Other than S-3 or S-2
Registrants........................................................... *
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
Item 15. Information with Respect to S-3 Companies............................. *
Item 16. Information with Respect to S-2 or S-3 Companies...................... *
Item 17. Information with Respect to Companies Other than S-3 or S-2
Companies............................................................. *
D. VOTING AND MANAGEMENT INFORMATION
Item 18. Information if Proxies, Consents or Authorizations are to be Solicited *
Item 19. Information if Proxies, Consents of Authorizations are not to be
Solicited or in an Exchange Offer..................................... *
</TABLE>
- ---------------------------
* Omitted because inapplicable or answer is in the negative.
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 13, 1998
PROSPECTUS
LOGO
OFFER BY TCI SATELLITE ENTERTAINMENT, INC. TO EXCHANGE (i) $1,000 PRINCIPAL
AMOUNT OF 10/7//8% SENIOR SUBORDINATED NOTES DUE 2007 FOR EACH $1,000 PRINCIPAL
AMOUNT OF ITS OUTSTANDING 10 7/8% SENIOR SUBORDINATED NOTES DUE 2007, AND (ii)
$1,000 PRINCIPAL AMOUNT AT MATURITY OF 12 1/4% SENIOR SUBORDINATED DISCOUNT
NOTES DUE 2007 FOR EACH $1,000 PRINCIPAL AMOUNT AT MATURITY OF ITS OUTSTANDING
12 1/4% SENIOR SUBORDINATED DISCOUNT NOTES DUE 2007
The Exchange Offer will expire at 5:00 p.m., New York City time, on ,
1998, unless extended.
TCI Satellite Entertainment, Inc., a Delaware corporation ("TSAT"), hereby
offers (the "Exchange Offer"), upon the terms and subject to the conditions set
forth in this Prospectus and the accompanying Letter of Transmittal (the "Letter
of Transmittal"), (i) to exchange up to an aggregate principal amount of
$200,000,000 of its 10 7/8% Senior Subordinated Notes due February 15, 2007
(the "Senior Subordinated Exchange Notes") for an equal principal amount of its
outstanding 10 7/8% Senior Subordinated Notes due February 15, 2007 (the
"Senior Subordinated Notes"), in integral multiples of $1,000, and (ii) to
exchange up to an aggregate principal amount at maturity of $275,000,000 of its
12 1/4% Senior Subordinated Discount Notes due February 15, 2007 (the "Senior
Subordinated Discount Exchange Notes," and, together with the Senior
Subordinated Exchange Notes, the "Exchange Notes") for an equal principal amount
at maturity of its outstanding 12 1/4% Senior Subordinated Discount Notes due
February 15, 2007 (the "Senior Subordinated Discount Notes," and, together with
the Senior Subordinated Notes, the "Notes"), in integral multiples of $1,000.
The Exchange Notes will be unsecured obligations of TSAT and will rank junior
to, and be subordinated in right of payment to, all existing and future Senior
Indebtedness (as defined) of TSAT. As of December 31, 1997, TSAT had
approximately $79,949,000 of Senior Indebtedness outstanding. The forms and
terms of the Exchange Notes (including principal amount, interest rate, maturity
and redemption rights) are substantially identical to those of the Notes for
which they may be exchanged pursuant to the Exchange Offer, except that (i) the
offering and sale of the Exchange Notes has been registered under the
Securities Act of 1933, as amended (the "Securities Act") and, therefore, the
Exchange Notes shall not bear certain legends restricting the transfer thereof,
and (ii) holders of the Exchange Notes will not be entitled to certain rights of
holders of the Notes under Registration Rights Agreements of TSAT dated as of
February 20, 1997 (the "Registration Rights Agreements"). The Notes have been
issued under Indentures dated as of February 20, 1997 (each, an "Indenture,"
and, together, the "Indentures"), between TSAT and The Bank of New York, as
trustee (the "Trustee"), which Indentures have been qualified under the Trust
Indenture Act of 1939 ("TIA"). Each tranche of the Exchange Notes will be issued
as a separate series of notes pursuant to the same Indenture governing the
corresponding tranche of Notes for which such tranche of Exchange Notes will be
exchanged. Holders of the Exchange Notes shall be entitled to substantially
identical benefits under the Indentures as are holders of the Notes (other than
such changes as are necessary to comply with any requirements of the SEC to
effect or maintain the qualification of each Indenture under the TIA). See
"Description of the Exchange Notes." TSAT will receive no proceeds from the
Exchange Offer; however, pursuant to the Registration Rights Agreements, TSAT
will bear certain expenses of the Exchange Offer.
ii
<PAGE>
-----------------
See "Risk Factors," commencing on page __, for a discussion of certain
factors that should be considered by holders who tender Notes in the Exchange
Offer.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-----------------
The date of this Prospectus is February , 1998.
iii
<PAGE>
The Restructuring Transaction. The Notes are currently obligations of TSAT,
and the Exchange Notes, when issued, will initially be obligations of TSAT.
However, on February 6, 1998, TSAT and certain other parties entered into
definitive agreements with respect to a proposed business combination, pursuant
to which, among other things, (i) TSAT shall transfer and contribute
substantially all of its assets and liabilities to PRIMESTAR, Inc. ("New
PRIMESTAR"), a newly formed corporation and wholly owned subsidiary of TSAT, and
(ii) TSAT's existing partners in PRIMESTAR Partners, L.P. (the "Partnership")
shall concurrently transfer and contribute to New PRIMESTAR their respective
interests in the PRIMESTAR/(R)/ digital satellite business (collectively, the
"Restructuring Transaction"). Accordingly, in connection with the Restructuring
Transaction, the obligations of TSAT under all Notes and/or Exchange Notes
outstanding at the consummation of the Restructuring Transaction shall be
assumed by New PRIMESTAR, which assumption shall be evidenced by New PRIMESTAR's
execution of supplemental indentures governing such notes. As used herein, the
term "Borrower" means (i) TSAT, at any time prior to the consummation of the
Restructuring Transaction and the effective assumption by New PRIMESTAR of all
obligations of TSAT under the Notes and the Indentures (the "Assumption") and
(ii) New PRIMESTAR, from and after the consummation of the Restructuring
Transaction and the effectiveness of the Assumption.
The Indentures provide that TSAT shall not consolidate with or merge with or
into any other entity, and TSAT shall not sell, transfer or otherwise dispose of
all or substantially all of its properties and assets to any entity in a single
transaction or series of related transactions, unless certain conditions set
forth in the Indentures are satisfied, including the requirement that the
surviving entity in any such merger or the transferee with respect to any such
asset transfer (in either case, the "Surviving Person") must expressly assume,
by execution of supplemental indentures, the obligations to make due and
punctual payment of the principal of, premium, if any, and interest on all the
Notes (and/or the Exchange Notes, as applicable) and to perform and observe
every covenant of the Indentures and the Registration Rights Agreements to be
performed or observed on the part of TSAT. Furthermore, the Indentures provide
that upon the satisfaction of such conditions, the Surviving Person shall
succeed to, and be substituted for, and may exercise every right and power of,
TSAT and TSAT shall be discharged from its obligations under the Indentures and
the Notes. The terms of the proposed Restructuring Transaction satisfy the
conditions set forth in the Indentures, and accordingly, upon consummation of
the Restructuring Transaction and the execution and delivery by New PRIMESTAR of
supplemental indentures expressly assuming all of TSAT's obligations under the
Indentures, New PRIMESTAR shall succeed to, and be substituted for, and may
exercise every right and power of, TSAT and TSAT shall be discharged from its
obligations under the Indentures and the Notes.
As a result of the Restructuring Transaction, New PRIMESTAR will own the
entire PRIMESTAR/(R)/ digital satellite business and TSAT and its former
partners in that business (or their respective affiliates) will, in the
aggregate, own all the outstanding capital stock of New PRIMESTAR. The
Restructuring Transaction comprises the first step in TSAT's proposed two-step
plan (the "Roll-up Plan"). The Roll-up Plan provides that, subsequent to the
consummation of the Restructuring Transaction, TSAT shall merge with and into
New PRIMESTAR, with New PRIMESTAR as the surviving entity (the "TSAT Merger"),
pursuant to an Agreement and Plan of Merger (the "TSAT Merger Agreement") dated
as of February 6, 1998 between TSAT and New PRIMESTAR. The TSAT Merger is
subject to regulatory approval and other closing conditions set forth in the
TSAT Merger Agreement; accordingly, although, the Roll-up Plan envisions that
the TSAT Merger will be consummated after the Restructuring Transaction, there
can be no assurance that the TSAT Merger will be consummated, even if the
Restructuring Transaction is consummated.
This Prospectus includes or otherwise incorporates by reference certain
financial and other information, including historical and pro forma financial
information, relating to the proposed Roll-up Plan. Holders of the Notes are
urged to carefully review such historical and pro forma financial information,
along with all other financial and other information, contained in or otherwise
incorporated by reference into this Prospectus, prior to tendering their Notes
in the Exchange Offer.
iv
<PAGE>
The Exchange Offer. The Notes were originally offered and sold by TSAT (the
"Notes Offering") on February 20, 1997, in transactions not registered under
the Securities Act in reliance upon the exemption provided in Section 4(2) of
the Securities Act. The Notes were subsequently placed with qualified
institutional buyers, as defined in Rule 144A under the Securities Act, and
institutional "accredited investors," as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act, in reliance upon Rule 144A under the Securities
Act. Accordingly, the Notes may not be reoffered, resold or otherwise
transferred in the United States unless so registered or unless an applicable
exemption from the registration requirements of the Securities Act is available.
The Exchange Notes are being offered under the Exchange Offer in order to
satisfy certain obligations of TSAT under the Registration Rights Agreements.
See "The Exchange Offer."
TSAT will accept for exchange pursuant to the Exchange Offer any and all
validly tendered Notes on or prior to 5:00 p.m., New York City time, on March
___, 1998, unless extended (the "Expiration Date"). Tenders of Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date; otherwise such tenders are irrevocable. The Bank of New York will act as
exchange agent (in such capacity, the "Exchange Agent") in connection with the
Exchange Offer. The Exchange Offer is not conditioned upon any minimum
principal amount of Notes being tendered for exchange, but is otherwise subject
to certain customary conditions.
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "SEC") set forth in no-action letters issued to third parties,
TSAT believes that Exchange Notes issued pursuant to the Exchange Offer may be
offered for resale, resold and otherwise transferred by a holder who is not an
affiliate of TSAT without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that the holder is acquiring
the Exchange Notes in its ordinary course of business and has no arrangement or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Notes. Accordingly, offerees
hereunder must not be broker-dealers who have acquired Notes directly from TSAT.
Persons wishing to exchange Notes in the Exchange Offer must represent to TSAT
that such conditions have been met.
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of Exchange Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of Exchange
Notes received in exchange for Notes where such Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. TSAT has agreed that, for a period of 180 days after the date of
this Prospectus, it will use its commercially reasonably best efforts to make
this Prospectus, as so amended or supplemented, available to any broker-dealer
for use in connection with any such resale.
TSAT does not intend to list the Exchange Notes on any national securities
exchange or to seek the admission thereof to trading in the National Association
of Securities Dealers Automated Quotation System. As a result, TSAT cannot
determine whether an active public market will develop for the Exchange Notes.
TSAT has common stock listed on the Nasdaq National Market tier of the Nasdaq
Stock Market (the "Nasdaq National Market") under the symbols "TSATA" and
"TSATB." It is expected that, if the TSAT Merger is consummated, shares of New
PRIMESTAR Class A Common Stock and New PRIMESTAR Class B Common Stock will be
authorized for listing, subject to official notice of issuance, on the Nasdaq
National Market.
Any Notes not tendered and accepted in the Exchange Offer will remain
outstanding. To the extent that any Notes are tendered and accepted in the
Exchange Offer, a holder's ability to sell untendered Notes could be adversely
affected. Following consummation of the Exchange Offer, the holders of Notes
will continue to be subject to the existing restrictions upon transfer thereof
and the Borrower will have no further obligation to such holders to provide for
the registration under the Securities Act of the Notes held by them. See "The
Exchange Offer--Consequences of Failure to Exchange."
v
<PAGE>
TSAT expects that the Exchange Notes issued pursuant to the Exchange Offer
generally will be issued in the form of Global Exchange Notes (as defined
herein), which will be deposited with, or on behalf of, The Depository Trust
Company (the "Depository") and registered in its name or in the name of Cede &
Co., its nominee. Beneficial interests in the Global Exchange Notes representing
the Exchange Notes will be shown on, and transfers thereof will be effected
through, records maintained by the Depository and its participants.
Notwithstanding the foregoing, Notes held in certificated form will be exchanged
solely for Exchange Notes in certificated form. After the initial issuance of
the Global Exchange Notes, Exchange Notes in certificated form will be issued in
exchange for the Global Exchange Notes on the terms set forth in the Indentures.
See "Description of the Exchange Notes--Form, Denomination and Book-Entry
Procedures."
----------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE BORROWER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE NOTES IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATIONS THAT THERE HAS
BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF
TSAT SINCE THE DATE HEREOF.
Until 1998 (90 days after commencement of the Exchange
Offer), all dealers effecting transactions in the Exchange Notes, whether or not
participating in the Exchange Offer, may be required to deliver a Prospectus.
FORWARD LOOKING STATEMENTS
Certain statements in this Prospectus under the captions "PROSPECTUS SUMMARY,"
"RISK FACTORS," and elsewhere, including those statements that are incorporated
herein by reference, constitute "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other important
factors that could cause the actual results, performance or achievements of the
Borrower, or industry results, to differ materially from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such risks, uncertainties and other factors include, among others:
general economic and business conditions and industry trends; the continued
strength of the multichannel video programming distribution industry and the
satellite services industry and the growth of the market for satellite delivered
television programming; uncertainties inherent in proposed business strategies,
new product launches and development plans; future financial performance,
including availability, terms and deployment of capital; the ability of vendors
to deliver required equipment, software and services; availability of qualified
personnel; changes in, or the failure or inability to comply with, government
regulations, including, without limitation, regulations of the Federal
Communications Commission (the "FCC"), and adverse outcomes from regulatory
proceedings; changes in the nature of key strategic relationships with partners
and joint venturers; competitor responses to the Borrower's products and
services, and the overall market acceptance of such products and services,
including acceptance of the pricing of such products and services; possible
interference by satellites in adjacent orbital positions with the satellite
currently being used for the Borrower's existing medium power satellite
television business; and other factors referenced in this Prospectus. See "Risk
Factors." These
vi
<PAGE>
forward-looking statements (and such risks, uncertainties and other factors)
speak only as of the date of this Prospectus. The Borrower expressly disclaims
any obligation or undertaking to disseminate any updates or revisions to any
forward-looking statement contained herein to reflect any change in the
Borrower's expectations with regard thereto or any change in events, conditions
or circumstances on which any such statement is based.
AVAILABLE INFORMATION
TSAT is subject to the information requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith, files
reports and other information with the SEC. Such reports and other information
filed by TSAT can be inspected and copied at the public reference facilities
maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the SEC located at 7
World Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials can also
be obtained by mail at prescribed rates by writing to the Public Reference
Section of the SEC, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The SEC maintains a Web site on the Internet that
contains reports and other information regarding registrants (including TSAT)
that file electronically with the SEC. The address of the SEC's Web site is
http://www.sec.gov. In addition, materials filed by TSAT should be available
for inspection at the offices of the National Association of Securities Dealers,
Inc., Reports Section, 1735 K Street, N.W., Washington, D.C. 20006.
TSAT has filed with the SEC a Registration Statement on Form S-4 (together
with all amendments, exhibits and schedules, referred to as the "Registration
Statement") under the Securities Act for the registration of the Exchange Notes
offered hereby. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement, certain items of which are contained in exhibits and schedules to the
Registration Statement as permitted by the rules and regulations of the SEC. For
further information with respect to TSAT or the Exchange Notes offered hereby,
reference is made to the Registration Statement, including any amendments,
schedules and exhibits filed as a part thereof, which is available for public
inspection as indicated above. Statements made in this Prospectus concerning the
contents of any document referred to herein are not necessarily complete. With
respect to each such document filed with the SEC as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference.
So long as TSAT is subject to the periodic reporting requirements of the
Exchange Act, TSAT is required to furnish the information required to be filed
with the SEC to the Trustee and the holders of the Notes and the Exchange Notes.
TSAT has agreed (and, in connection with the consummation of the Restructuring
Transaction and the effectiveness of the Assumption, New PRIMESTAR will agree)
that, even if it is entitled under the Exchange Act not to furnish such
information to the SEC, it will nonetheless continue to furnish information that
would be required to be furnished by TSAT by Section 13 of the Exchange Act to
the Trustee and the holders of the Notes and Exchange Notes as if it were
subject to such periodic reporting requirements.
In addition, the Borrower has agreed that, for so long as any of the Notes
remain outstanding, the Borrower will make available to any prospective
purchaser of the Notes or beneficial owner of the Notes in connection with any
sale thereof the information required by Rule 144A(d)(4) under the Securities
Act, until such time as the Borrower has either exchanged the Notes for the
Exchange Notes or until such time as the holders thereof have disposed of such
Notes pursuant to an effective registration statement filed by the Borrower.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
TSAT hereby incorporates in this Prospectus by reference: (i) TSAT's Annual
Report of Form 10-K for
vii
<PAGE>
the year ended December 31, 1996, (ii) TSAT's Quarterly Reports on Form 10-Q for
the quarters ended March 31, 1997, June 30, 1997 and September 30, 1997 and
(iii) TSAT's Current Reports on Form 8-K dated July 1, 1997 and February 11,
1998 (filed with the SEC on February 12, 1998). All documents filed by TSAT with
the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date hereof and prior to the termination of the offering made hereby shall
be deemed to be incorporated herein by reference and to be a part hereof from
the respective dates of the filing of such documents. Any statement contained in
a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN CERTAIN EXHIBITS TO
SUCH DOCUMENTS) ARE AVAILABLE FROM TSAT, WITHOUT CHARGE, UPON REQUEST ADDRESSED
TO TCI SATELLITE ENTERTAINMENT, INC., 8085 SOUTH CHESTER, SUITE 300, ENGLEWOOD,
COLORADO 80122, TELEPHONE NUMBER (303) 712-4600. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE AT LEAST FIVE BUSINESS
DAYS PRIOR TO THE EXPIRATION DATE.
viii
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
Page
<S> <C>
accredited investors.......................................................... 5
Accreted Value................................................................68
Acquired Person...............................................................69
Acquisition...................................................................69
Additional Interest...........................................................69
adjusted issue price..........................................................90
affiliate..................................................................... 6
Affiliate Transaction.........................................................64
Applicable Period.............................................................86
ASkyB.........................................................................
ASkyB Indemnification Agreement...............................................
ASkyB Indemnitees.............................................................
Asset Sale....................................................................69
Asset Transfers...............................................................
Asset Transfer Agreement......................................................
Assignment Application........................................................iv
Assumption....................................................................
Bank Credit Facility..........................................................70
Bankruptcy Code...............................................................26
Basic Documents...............................................................70
beneficial owner..............................................................71
beneficial ownership..........................................................71
beneficially own..............................................................71
beneficially owned............................................................71
Book-Entry Transfer Facility..................................................43
Borrower......................................................................iv
C-Band Dividend...............................................................70
C-Band Dividends..............................................................55
C-Band Entity.................................................................54
C-Band Investment.............................................................54
Capital Lease Obligation......................................................70
CARP..........................................................................
Cash Equivalents..............................................................70
Cash Interest Election........................................................49
Cash Interest Election Date...................................................49
Certificated Notes............................................................84
change of control.............................................................26
Change of Control Date........................................................52
Code..........................................................................26
Comcast....................................................................... 3
Comcast Satellite.............................................................
Comcast DBS................................................................... 3
Comcast SCI................................................................... 4
Consolidated Income Tax Expense...............................................71
Consolidated Interest Expense.................................................60
Consolidated Net Income.......................................................72
Consolidated Operating Cash Flow..............................................55
Continental...................................................................
control.......................................................................69
Cox........................................................................... 3
Cox Satellite.................................................................12
Cox SI........................................................................ 3
Cumulative Operating Cash Flow................................................72
DBS...........................................................................11
Debt to Operating Cash Flow Ratio.............................................72
</TABLE>
ix
<PAGE>
<TABLE>
<S> <C>
Default...................................................................... 73
Depositor.................................................................... 44
Depository................................................................... vi
Depository's Indirect Participants........................................... 84
Depository's Participants.................................................... 84
Designated Senior Indebtedness............................................... 73
Designation.................................................................. 59
Designation Amount........................................................... 59
Determination Date........................................................... 72
DGCL......................................................................... 98
Digital Satellite Business................................................... 1
DirectSat....................................................................
DirecTv......................................................................
dishes.......................................................................
Disposition.................................................................. 73
Disqualified Equity Interest................................................. 73
Distribution................................................................. 73
Distributors................................................................. 3
EchoStar.....................................................................
Effectiveness Period......................................................... 86
eligible guarantor institution............................................... 43
Eligible Institution......................................................... 43
Equity Interest.............................................................. 73
Events of Default............................................................ 65
Exchange Act.................................................................vii
Exchange Agent............................................................... v
Exchange Notes............................................................... ii
Exchange Offer............................................................... ii
Exchange Securities.......................................................... 85
Existing Indebtedness........................................................ 74
Expiration Date.............................................................. v
Fair Market Value............................................................ 74
FCC.......................................................................... vi
FCC Permit................................................................... 2
forward-looking statements................................................... vi
Fulfillment Agreement........................................................ 74
GAAP......................................................................... 74
GE........................................................................... 2
GE Americom.................................................................. 3
GE-2......................................................................... 74
GE-2 Agreement............................................................... 74
GEAS......................................................................... 2
Global Notes................................................................. 84
Global Notes Holder.......................................................... 84
Government Securities........................................................ 74
group........................................................................ 71
guarantee.................................................................... 74
High Power Satellite Transmission Business................................... 74
HSDs.........................................................................
Incur........................................................................ 75
Incurred..................................................................... 75
Incurring.................................................................... 75
Indebtedness................................................................. 75
Indemnification Agreements................................................... 75
Indenture.................................................................... ii
</TABLE>
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Indentures................................................................... ii
Independent Financial Advisor................................................ 75
Indirect Participants........................................................ 84
Initial Shelf Registration Statement......................................... 86
Insolvency or Liquidation Proceeding......................................... 76
interest..................................................................... 76
Interest Rate Protection Obligations......................................... 76
International Bureau.........................................................
Investment................................................................... 76
Investment Act............................................................... 67
investment Company........................................................... 67
Investment Grade............................................................. 76
IRS.......................................................................... 93
IRDS.........................................................................
Issue Date................................................................... 76
issue price.................................................................. 26
Letter of Transmittal........................................................ ii
Lien......................................................................... 76
Marketable Securities........................................................ 76
Maturity Date................................................................ 76
MCI..........................................................................
MDUs......................................................................... 2
Measurement Period........................................................... 72
MediaOne..................................................................... 3
MediaOne Sateilite...........................................................
Nasdaq National Market....................................................... v
Net Cash Proceeds............................................................ 76
New PRIMESTAR Bylaws.........................................................
New PRIMESTAR Charter........................................................
New PRIMESTAR Class A Commmon Stock..........................................
New PRIMESTAR Class B Commmon Stock..........................................
New PRIMESTAR Class C Commmon Stock..........................................
New PRIMESTAR Class D Commmon Stock..........................................
New PRIMESTAR Convertible Preferred Stock....................................
New PRIMESTAR Convertible Subordinated Notes.................................
News Corp. ..................................................................
Newhouse..................................................................... 3
Notes........................................................................ ii
Notes Offering............................................................... iv
Obligations.................................................................. 77
Offer........................................................................ 77
Offer to Purchase............................................................ 74
OID.......................................................................... 26
110 Slot.....................................................................
Other Indebtedness........................................................... 61
Participants................................................................. 84
Partners..................................................................... 3
Partnership.................................................................. iv
Partnership Credit Agreement................................................. 78
Partnership Interests........................................................
Payment Blockage Notice...................................................... 51
Payment Blockage Period...................................................... 52
Permitted Holder............................................................. 78
Permitted Indebtedness....................................................... 56
Permitted Investments........................................................ 58
Permitted Junior Securities.................................................. 79
Permitted Liens.............................................................. 79
Permitted Transferee......................................................... 80
person....................................................................... 71
pooling of interests......................................................... 72
Post-Petition Interest....................................................... 80
Preferred Equity Interest.................................................... 80
PRIMESTAR(R).................................................................
PRIMESTAR Assets.............................................................
PRIMESTAR Liabilities........................................................
principal.................................................................... 80
principal amount at maturity................................................. 80
Public Equity Offering....................................................... 80
</TABLE>
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Purchase Amount.............................................................. 77
Purchase Date................................................................ 77
Purchase Money Indebtedness.................................................. 81
Purchase Price............................................................... 77
Qualified Equity Interest.................................................... 81
refinancing.................................................................. 57
Registration Rights.......................................................... 41
Registration Rights Agreements............................................... ii
Related Acquisition.......................................................... 57
Reorganization Agreement..................................................... 81
Required Designation......................................................... 60
Required Filing Dates........................................................ 64
ResNet....................................................................... 81
ResNet Option................................................................ 81
ResNet Subordinated Loan..................................................... 81
Restricted C-Band Subsidiary................................................. 55
Restricted Investment........................................................ 81
Restricted Payments.......................................................... 53
Restricted Subsidiary........................................................ 81
Restructuring Agreement......................................................
Restructuring Transaction....................................................
Revocation................................................................... 60
Roll-up Plan.................................................................
Satellite Construction Agreement............................................. 2
Satellite Subsidiary......................................................... 60
SBCA.........................................................................
SEC.......................................................................... v
Securities Act............................................................... ii
Securities Amount............................................................ 61
Securities Portion of Unutilized Net Cash Proceeds........................... 61
Semi-Annual Accrual Date..................................................... 68
Senior Indebtedness.......................................................... 82
Senior Subordinated Aggregate Principal Amount............................... 49
Senior Subordinated Discount Aggregate Principal Amount...................... 49
Senior Subordinated Discount Exchange Notes.................................. ii
Senior Subordinated Discount Notes........................................... ii
Senior Subordinated Exchange Notes........................................... ii
Senior Subordinated Notes.................................................... ii
Share Purchase Agreement..................................................... 82
Shelf Notice................................................................. 86
Shelf Registration Event..................................................... 86
Shelf Registration Statement................................................. 87
SHVA.........................................................................
Significant Restricted Subsidiary............................................ 82
Specified Date.............................................................1, 68
Stated Maturity.............................................................. 82
stated redemption price at maturity.......................................... 26
Strategic Equity Investor.................................................... 82
Subordinated Indebtedness.................................................... 82
Subsequent Shelf Registration Statement...................................... 86
Subsidiary................................................................... 82
Surviving Person............................................................. iv
Tag-Along Agreement.......................................................... 83
Tax Sharing Agreement........................................................ 83
TCI.......................................................................... 1
</TABLE>
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TCI SATCO.................................................................... 1
TCIC......................................................................... 1
TCIC Credit Facility......................................................... 83
Tempo........................................................................ 1
Tempo DBS-1..................................................................
Tempo DBS-2..................................................................
Tempo Option Agreement.......................................................
Tempo Sale...................................................................
Tempo Sale Option............................................................
Tempo Satellites............................................................. 2
TIA.......................................................................... ii
Time Warner.................................................................. 3
TIN.......................................................................... 93
Total Consolidated Indebtedness.............................................. 83
Trade Name and Service Mark License Agreement................................ 83
Transfer Application.........................................................
Transition Services Agreement................................................ 83
Trustee...................................................................... ii
TSAT......................................................................... ii
TSAT Asset Transfer..........................................................
TSAT Asset Transfer Agreement................................................
TSAT Business................................................................
TSAT Merger..................................................................
TSAT Merger Agreement........................................................
TSAT Spin-off................................................................
TSAT Tempo Agreement.........................................................
TWE.......................................................................... 3
TWEAN........................................................................ 12
TWSSI........................................................................ 12
under common control with.................................................... 69
underwriter.................................................................. v
unmatured interest........................................................... 26
Unrestricted Subsidiary...................................................... 59
USSB.........................................................................
Unutilized Net Cash Proceeds................................................. 61
Voting Equity Interests...................................................... 83
Weighted Average Life to Maturity............................................ 84
Wholly Owned Restricted Subsidiary........................................... 84
W.L. ........................................................................
</TABLE>
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TABLE OF CONTENTS
<TABLE>
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FORWARD LOOKING STATEMENTS................................................... vi
AVAILABLE INFORMATION........................................................vii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..............................vii
INDEX OF DEFINED TERMS....................................................... ix
PROSPECTUS SUMMARY........................................................... 1
THE BORROWER............................................................ 1
TSAT.................................................................... 1
Other Restructuring Parties............................................. 2
The Roll-up Plan........................................................ 4
Risk Factors............................................................ 5
The Notes Offering...................................................... 5
The Notes....................................................... 5
Registration Rights
Agreements.............................................. 5
The Exchange Offer...................................................... 5
Securities Offered.............................................. 6
The Exchange Offer...................................... 6
Expiration Date......................................... 6
Conditions to the Exchange Offer........................ 7
Procedures for Tendering Notes.......................... 7
Special Procedures for Beneficial Owners................ 7
Guaranteed Delivery Procedures.......................... 7
Withdrawal Rights....................................... 7
Acceptance of Notes and Delivery of Exchange Notes...... 7
Federal Income Tax Consequences......................... 8
Effect on Holders of Notes.............................. 8
Exchange Agent.......................................... 8
Summary of Terms of Exchange Notes...................................... 8
Securities Offered...................................... 8
Issuer.................................................. 8
Maturity........................................................ 8
Interest Payment Dates.......................................... 9
Optional Redemption..................................... 9
Mandatory Sinking Fund.................................. 10
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Form and Denomination.................................................. 10
Change of Control...................................................... 10
Asset Sale Proceeds.................................................... 10
Certain Covenants...................................................... 10
Ranking................................................................ 11
Security............................................................... 11
Recent Transactions---The ASkyB Transaction.................................... 11
Summary Financial and Other Data--Historical................................... 12
Summary Financial and Other Data--Pro Forma.................................... 16
CORPORATE ORGANIZATION.............................................................. 19
Ownership and Organization Before the Roll-up Plan............................. 19
Ownership and Organization After the Restructuring Transaction................. 20
Ownership and Organization After the TSAT Merger............................... 21
RISK FACTORS........................................................................ 22
History of Losses of TSAT and Other Restructuring Parties...................... 22
Lack of Operating History of New PRIMESTAR..................................... 22
Substantial Leverage........................................................... 23
Subordination of the Exchange Notes............................................ 24
Ability to Service Debt; Restrictive Covenants; Refinancing Risks.............. 25
Repurchase of the Exchange Notes upon a Change of Control...................... 25
Original Issue Discount Consequences of Senior Subordinated Discount Notes..... 26
Risk of Inability to Receive Postbankruptcy Interest........................... 26
Risks of Satellite Failure..................................................... 27
Ability to Manage Growth; Subscriber Churn..................................... 27
Uncertainties of Operations Following the Restructuring Transaction............ 28
Competitive Nature of Industry................................................. 28
Uncertainty Regarding High Power Strategies.................................... 29
Risks of Adverse Government Regulations and Adjudications...................... 29
Potential Interference with Satellite Signal................................... 33
Potential Conflicts of Interest................................................ 33
Risks Associated with the ASkyB Transaction.................................... 34
Dependence on Third Party Programmers.......................................... 35
Risk of Signal Piracy.......................................................... 35
Risk of Technological Changes.................................................. 35
Absence of Public Market for the Exchange Notes................................ 36
Exchange Offer Procedures...................................................... 36
THE BORROWER........................................................................ 36
TSAT........................................................................... 36
Other Restructuring Parties.................................................... 38
The Roll-up Plan............................................................... 39
THE EXCHANGE OFFER.................................................................. 40
Purpose and Effect of the Exchange Offer....................................... 40
Terms of the Exchange Offer.................................................... 41
Expiration Date; Extensions; Amendments........................................ 41
Interest on Exchange Notes..................................................... 42
Procedures for Tendering....................................................... 42
</TABLE>
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Guaranteed Delivery Procedures................................................. 44
Withdrawals of Tenders......................................................... 44
Conditions..................................................................... 45
Exchange Agent................................................................. 45
Fees and Expenses.............................................................. 46
Accounting Treatment........................................................... 46
Resale of Exchange Notes....................................................... 46
Consequences of Failure to Exchange............................................ 47
Other.......................................................................... 47
DESCRIPTION OF THE EXCHANGE NOTES................................................... 47
General........................................................................ 48
Ranking........................................................................ 48
Maturity, Interest and Principal of the Senior Subordinated Notes.............. 49
Maturity, Interest and Principal of the Senior Subordinated Discount Notes..... 49
Optional Redemption............................................................ 49
Selection and Notice of Redemption............................................. 50
Subordination of the Notes..................................................... 51
Offer to Purchase upon Change of Control....................................... 52
Certain Covenants.............................................................. 53
Events of Default.............................................................. 65
No Personal Liability of Directors, Officers, Employees, Incorporator and
Stockholders.................................................................. 66
Satisfaction and Discharge of Notes Indentures; Defeasance..................... 66
Governing Law.................................................................. 67
Modification and Waiver................................................. 67
The Trustees................................................................... 68
Certain Definitions............................................................ 68
Book-Entry, Delivery and Form.................................................. 84
Registration Rights............................................................ 85
RECENT TRANSACTIONS---THE ASKYB TRANSACTION......................................... 88
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS........................................... 89
Senior Subordinated Discount Notes............................................. 90
Senior Subordinated Notes...................................................... 92
Exchange of Notes for Exchange Notes Pursuant to the Exchange Offer............ 93
Backup Withholding and Information Reporting................................... 93
Other Tax Consequences......................................................... 93
PLAN OF DISTRIBUTION................................................................ 93
VALIDITY OF EXCHANGE NOTES.......................................................... 94
EXPERTS............................................................................. 94
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, financial statements and pro forma financial information,
including the notes thereto, appearing elsewhere in this Prospectus or
incorporated by reference herein. Prior to December 4, 1996 (the "Spin-off
Date"), TSAT was a wholly owned subsidiary of Tele-Communications, Inc. ("TCI").
Unless the context otherwise requires, references in this Prospectus to "TSAT"
refer to (i) certain businesses of TCI Communications, Inc. ("TCIC"), a
subsidiary of TCI, constituting TCI's collective interests ("TCI SATCO") in the
Digital Satellite Business before the Spin-off Date and (ii) TSAT and its
consolidated subsidiaries on and after the Spin-off Date. As used herein,
"Digital Satellite Business" means the business of distributing multichannel
programming services directly to consumers in the United States via digital
medium power or high power satellite, including the rental and sale of customer
premises equipment relating thereto. Additionally, references in this Prospectus
to "TCI" and "TCIC" are to TCI and TCIC, respectively, and each of their
respective consolidated subsidiaries unless the context indicates otherwise.
References to TCI prior to August 4, 1994, refer to TCI's predecessor. For
definitions of certain capitalized terms used in this Prospectus and not
otherwise defined, see "Index of Defined Terms." Holders of Notes, before
tendering their Notes in the Exchange Offer, should carefully consider the
matters described under the heading "Risk Factors."
THE BORROWER
TSAT
General. TSAT is a leading distributor of digital satellite-based television
services in the United States. TSAT markets and distributes the PRIMESTAR(R)
programming service ("PRIMESTAR(R)"), a medium power digital satellite service,
under the brand names "PRIMESTAR By TCI" and "PRIMESTAR By TSAT" and owns an
aggregate 20.86% interest in the Partnership, which owns and operates the
PRIMESTAR(R) service. As of September 30, 1997, TSAT was the largest distributor
of PRIMESTAR(R), with an installed base of approximately 769,000 subscribers,
which represented approximately 42.7% of the Partnership's estimated 1.8 million
subscribers as of such date. As of September 30, 1997, TSAT's subscribers
comprised approximately 888,000 Authorized Units. As used herein, the term
"Authorized Units" refers to the number of active authorized satellite receivers
or integrated receiver/decoders ("IRDs"), more than one of which may be
installed in a subscribing household. PRIMESTAR(R) offers over 160 channels of
digital video and audio programming throughout the continental U.S., via medium
power satellite, to home satellite dishes ("dishes" or "HSDs") approximately 27
to 36 inches in diameter for most subscribers.
TSAT was incorporated in Delaware in November 1996. Prior to the Spin-off
Date, TSAT was a wholly-owned subsidiary of TCI, which, through various
subsidiaries, was engaged in the business of distributing PRIMESTAR(R) since
December 1990. TSAT was formed to own and operate TCI's interests in the digital
satellite business, in connection with the distribution (the "TSAT Spin-off") by
TCI to certain of its stockholders on the Spin-off Date of all the issued and
outstanding shares of TSAT Common Stock, to own and operate certain businesses
of TCI, constituting all of TCI's interests in the digital satellite business.
TSAT's predecessor was incorporated in February 1995 to consolidate TCI's
PRIMESTAR(R) distribution business into one subsidiary, and was merged into TSAT
in connection with the TSAT Spin-off. TCI is one of the two largest operators of
cable systems in the U.S.
TSAT Series A Common Stock and TSAT Series B Common Stock trade on the
Nasdaq National Market under the symbols "TSATA" and "TSATB," respectively. The
mailing address and telephone number of TSAT's principal executive offices are
8085 South Chester, Suite 300, Englewood, Colorado 80112, (303) 712-4600.
Tempo. Tempo Satellite, Inc. ("Tempo"), a wholly-owned subsidiary of TSAT,
holds a construction permit
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issued by the FCC, authorizing construction of a high power DBS system
consisting of two or more satellites delivering DBS service in 11 frequencies at
the 119(degrees) West Longitude ("W.L.") orbital position and 11 frequencies at
the 166(degrees) W.L. orbital position (the "FCC Permit"). The 119(degrees) W.L.
orbital position is one of three such orbital positions available for DBS
service to the U.S. which are "full CONUS," meaning that they have a view of the
entire continental U.S.
Tempo is also a party to a satellite construction agreement with Space
Systems/Loral, Inc. ("Loral"), dated as of February 22, 1990 (the "Satellite
Construction Agreement"), pursuant to which Tempo has arranged for the
construction of two high power direct broadcast satellites (together, the "Tempo
Satellites") and has an option to purchase up to three additional satellites.
Construction of the Tempo Satellites has been completed. One of the Tempo
Satellites ("Tempo DBS-1") was launched into TSAT's high power slot at
119(degrees) W.L. on March 8, 1997. The other Tempo Satellite ("Tempo DBS-2")
presently serves as a ground spare for Tempo DBS-1.
Tempo DBS-1 is currently undergoing extended in-orbit testing under the
Satellite Construction Agreement. Assuming that such in-orbit testing results in
acceptance of the satellite by Tempo under the Satellite Construction Agreement,
Tempo DBS-1 would be available for commercial operations in the first quarter of
1998. At current levels of digital compression, Tempo believes that Tempo DBS-1
would be able to deliver approximately 100 channels of digital video and 20
channels of digital audio programming, as operated under the FCC Permit. Tempo
expects to use 18 inch dishes for the proposed high power service, the same
diameter currently used by other high power DBS providers, in most areas. Tempo
currently intends to operate Tempo DBS-1 as a platform to provide high power
digital video and audio programming services to residential customers, as well
as multiple dwelling units ("MDUs"), commercial customers and resellers.
The availability and utility of Tempo DBS-1, including the power levels
provided by Tempo DBS-1, are subject to risks of satellite defect, loss or
reduced performance. Since the launch of Tempo DBS-1, Loral has notified Tempo
of at least five separate occurrences of power reductions on Tempo DBS-1. No
assurance can be given that further power reductions will not occur in the
future. TSAT does not currently know the extent of such power reductions, and
cannot confirm the precise causes thereof; however, such reductions could
eventually affect the proposed operation of Tempo DBS-1, either alone or
together with other events that may arise during the expected life of the
satellite. See "Risk Factors--Risks of Satellite Failure."
Pursuant to an option agreement dated February 8, 1990 between Tempo and the
Partnership (the "Tempo Option Agreement"), Tempo has agreed to sell or lease to
the Partnership 100% of the capacity of any DBS system constructed by Tempo
under the FCC Permit. The capital stock of Tempo is excluded from the assets
that TSAT will be transferring to New PRIMESTAR pursuant to the Restructuring
Transaction, and accordingly, upon consummation of the Restructuring
Transaction, Tempo shall remain a wholly owned subsidiary of TSAT. Tempo is not
a Restricted Subsidiary under the Indentures (as such term is defined therein).
If the TSAT Merger or the Tempo Sale (as defined herein) is consummated, then
New PRIMESTAR shall acquire the capital stock or the assets of Tempo and New
PRIMESTAR will operate Tempo's high power DBS system. Otherwise, TSAT expects
that such system will be utilized by the Partnership (which, after the
Restructuring Transaction, will be a wholly owned subsidiary of New PRIMESTAR)
pursuant to the Tempo Option Agreement. See "Risk Factors--Uncertainty Regarding
High Power Strategies"; "The Roll-up Plan."
Other Restructuring Parties
The Partnership. The Partnership owns and operates PRIMESTAR(R), which is
the oldest Ku-band satellite television service in the U.S. and has the second
largest subscriber base of any U.S. digital satellite television service. In
1990, direct or indirect subsidiaries of TCI and several other large cable
operators and GE Americom Services, Inc. ("GEAS"), an indirect subsidiary of
General Electric ("GE"), formed the Partnership to acquire, originate and/or
provide television programming services for delivery by satellite to subscribers
in the continental
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U.S. Initially, PRIMESTAR(R) was an analog service limited to seven broadcast
television superstations, TV Japan and three pay-per-view stations. In 1994,
PRIMESTAR(R) was among the first satellite television services to use digital
transmission and compression technology to offer laser-disc-quality image and
compact-disc-quality sound. The Partnership has consistently taken advantage of
technological improvements and additional available transponder capacity to
improve the PRIMESTAR(R) service, which today offers over 160 channels of
digital video and audio programming.
In addition to TSAT, the partners (the "Partners") in the Partnership include
(i) Cox Satellite, Inc. ("Cox SI"), a subsidiary of Cox Communications, Inc.
("Cox"), (ii) Comcast DBS, Inc. ("Comcast DBS"), a subsidiary of Comcast
Corporation ("Comcast"), (iii) Continental Satellite Company, Inc.
("Continental"), a subsidiary of US WEST, Inc., the parent of MediaOne of
Delaware, Inc. ("MediaOne"), (iv) New Vision Satellite, a partnership controlled
by Advance/Newhouse Parntership ("Newhouse"), which is a subsidiary of Newhouse
Broadcasting Corporation ("Newhouse Broadcasting"), (v) TW Programming Co., a
partnership controlled by Time Warner Entertainment Company, L.P. ("TWE"), which
is a subsidiary of Time Warner Inc. ("Time Warner"), and (vi) GEAS, a subsidiary
of GE, the parent of GE American Communications, Inc. ("GE Americom"). Each of
TSAT (through its subsidiaries) and TW Programming Co. holds a 20.86%
Partnership Interest (as defined), each of Cox SI, Comcast DBS, Continental and
New Vision Satellite holds a 10.43% Partnership Interest, and GEAS holds a
16.56% Partnership Interest. Time Warner has substantial interests, through its
subsidiaries and controlled partnerships, in video programming and distribution,
and is one of the two largest operators of cable systems in the U.S. Cox,
Comcast and MediaOne are also among the five largest cable system
operators.
The PRIMESTAR(R) programming service includes a variety of advertiser-
supported networks (sometimes referred to as "basic cable" channels), a broad
selection of movie services, national and regional sports packages and other
premium services, and multiplexed pay-per-view programming. The Partnership
secures its rights to transmit such programming via satellite by entering into
non-exclusive affiliation agreements with programming vendors. In addition to
video services, PRIMESTAR(R) includes digital audio and data services,
including Ingenius, which provides access to news, business news, stock quotes,
sports, weather and entertainment information to subscribers through their
personal computers.
The Partnership currently plans to participate in the high power segment of
the digital satellite industry. In that connection, the Partnership has agreed
to purchase or lease from Tempo 100% of the capacity of any DBS system
constructed by Tempo under the FCC Permit. In addition, the Partnership has
entered into the ASkyB Agreement, which provides for the sale and transfer to
New PRIMESTAR of the MCI Satellites (as defined herein), certain authorizations
granted to MCI by the FCC to operate a DBS business at the 110(degrees) W.L.
orbital location using 28 transponder channels, and certain related contracts.
The ASkyB Agreement requires New PRIMESTAR to bear certain risks in connection
with the process of obtaining the regulatory approval related to such transfers,
including the divestiture of all rights of the Partnership and any of the
Partners under Tempo's FCC authorizations with respect to the 11 transponder
channels at 119(degrees) W.L., if required as a condition to such approval.
Consummation of the ASkyB Transaction is contingent on, among other things,
receipt of all necessary government and regulatory approvals, and accordingly,
no assurance can be given that the ASkyB Transaction will be consummated. See
"Recent Transactions---The ASkyB Transaction."
The mailing address and telephone number of the Partnership's principal
executive offices are 3 Bala Plaza West, Suite 700, Bala Cynwyd, Pennsylvania
19004, (610) 617-5300.
Other PRIMESTAR(R) Distributors. PRIMESTAR(R) is distributed through TSAT and
the other distributors of PRIMESTAR(R) (the "Distributors"), each of which is
currently affiliated with one or more of the Partners. The Distributors market
the PRIMESTAR(R) service and contract with subscribers, in non-exclusive
territories assigned by the Partnership. The Distributors set their own retail
pricing and are responsible in their respective territories for authorization of
subscribers, installation, maintenance and retrieval of customer premises
3
<PAGE>
equipment, and billing and collection of monthly and other fees, and the
Distributors bear all risks of loss relating thereto. The Partnership performs
certain administrative functions for the Distributors, including program
acquisition, national marketing, transponder leasing and certain technical
functions, and passes along the costs relating thereto to the Distributors.
New PRIMESTAR. New PRIMESTAR, a newly formed Delaware corporation, is
currently a wholly-owned subsidiary of TSAT that has not conducted any
significant activities other than those incident to its formation, the execution
of the agreements relating to the Restructuring Transaction to which it is a
party and financing activities relating to the Restructuring Transaction. As a
result of the Restructuring Transaction, PRIMESTAR will acquire the all the
assets and liabilities of TSAT other than the capital stock of Tempo and certain
agreements, the interests in the Partnership ("Partnership Interests") of the
other Partners and the PRIMESTAR(R) subscribers and related assets and
liabilities of the other Distributors. It is expected that, measured by the
number of subscribers, New PRIMESTAR will be the second largest provider of
satellite television services in the United States. The mailing address and the
telephone number of New PRIMESTAR's principal executive offices are 8085 South
Chester, Suite 300, Englewood Colorado 80122, (303) 712-4600.
Roll-up Plan
Restructuring Transaction. On February 6, 1998, TSAT entered into (i) a Merger
and Contribution Agreement dated as of February 6, 1998 (together with exhibits
and schedules thereto, the "Restructuring Agreement"), among TSAT, New
PRIMESTAR, TWE, Newhouse, Comcast, Cox, MediaOne (together with TWE, Newhouse,
Comcast and Cox, collectively, hereinafter referred to as the "Series C
Stockholders") and GE Americom, and (ii) an Asset Transfer Agreement dated as of
February 6, 1998 (together with the exhibits and schedules thereto, the "TSAT
Asset Transfer Agreement"), between TSAT and New PRIMESTAR. In addition, on
February 6, 1998, TSAT entered into the TSAT Merger Agreement, between TSAT and
New PRIMESTAR, pursuant to which TSAT shall merge with and into New PRIMESTAR,
with New PRIMESTAR as the surviving corporation. The TSAT Merger Agreement is
subject to regulatory approval and other closing conditions set forth in the
TSAT Merger Agreement. The transactions contemplated under the Restructuring
Agreement and the TSAT Asset Transfer Agreement comprise the Restructuring
Transaction, which, if consummated, shall result in New PRIMESTAR's owning the
entire PRIMESTAR(R) digital satellite business. Upon consummation of the
Restructuring Transaction, TSAT and its former Partners (or their respective
affiliates) will, in the aggregate, own all the outstanding capital stock of New
PRIMESTAR.
Pursuant to the Restructuring Agreement and the TSAT Asset Transfer Agreement,
upon the terms and subject to the conditions set forth therein, TSAT will
contribute and transfer to New PRIMESTAR all of TSAT's assets and liabilities
(the "TSAT Business"), except (i) the capital stock of Tempo, a wholly-owned
subsidiary of TSAT that holds certain authorizations granted by the FCC and
other assets and liabilities relating to a proposed direct broadcast system
being constructed by Tempo, (ii) the consideration to be received by TSAT in the
Restructuring Transaction and (iii) the rights and obligations of TSAT under
certain agreements. Accordingly, upon consummation of the Restructuring
Transaction and the effectiveness of the Assumption, TSAT's obligations under
the Notes and the Exchange Notes shall be assumed by New PRIMESTAR.
In addition, upon the terms and subject to the conditions set forth in the
Restructuring Agreement, each of Comcast DBS, Comcast Satellite Communications,
Inc. ("Comcast SCI" and, together with Comcast DBS, "Comcast Satellite"), Cox SI
and GEAS, respectively, will merge with and into New PRIMESTAR, in accordance
with the terms and subject to the conditions of its respective Merger Agreement,
and New PRIMESTAR will be the surviving corporation of each such Merger.
Pursuant to asset transfer agreements, each of TWE, Newhouse and MediaOne (and
its subsidiaries) will assign and transfer to New PRIMESTAR all of such party's
rights, title and interests in, to and under such party's Partnership Interest
and PRIMESTAR Assets, and New PRIMESTAR will assume all of such party's
PRIMESTAR Liabilities (as defined herein).
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Under the terms of the Restructuring Agreement, TSAT will own approximately
36% of the outstanding shares of common equity of New PRIMESTAR at the closing
of the Restructuring Transaction, and TWE and Newhouse (collectively), Comcast,
MediaOne, Cox and GE Americom will own approximately 31%, 10%, 9%, 9% and 5%,
respectively, of the outstanding shares of common equity of New PRIMESTAR at
closing, subject in each case to adjustments based on closing subscriber
counts.
The TSAT Merger. The Restructuring Transaction comprises the first step in
TSAT's proposed two-step Roll-up Plan. The second step of the Roll-up Plan
consists of the TSAT Merger, pursuant to which TSAT shall merge with and into
New PRIMESTAR, with New PRIMESTAR as the surviving corporation, in accordance
with the TSAT Merger Agreement. It is expected that the TSAT Merger shall be
consummated after the consummation of the Restructuring Transaction. The TSAT
Merger is subject to regulatory approval and other closing conditions set forth
in the TSAT Merger Agreement; accordingly, although the Roll-up Plan envisions
that the TSAT Merger will be consummated upon consummation of the Restructuring
Transaction, there can be no assurance that the TSAT Merger will be consummated,
even if the Restructuring Transaction is consummated.
In connection with the TSAT Merger (i) each outstanding share of TSAT Series A
Common Stock will be converted into the right to receive one share of Class A
Common Stock of New PRIMESTAR, par value of $.01 per share ("New PRIMESTAR Class
A Common Stock") and (ii) each outstanding share of TSAT Series B Common Stock
will be converted into the right to receive one share of Class B Common Stock of
New PRIMESTAR, par value of $.01 per share ("New PRIMESTAR Class B Common
Stock"). Each share of New PRIMESTAR's common stock then held by TSAT will be
canceled. As a result of the TSAT Merger, stockholders of TSAT, at closing, will
own approximately 34% of the outstanding shares of New PRIMESTAR Common
Stock.
Risk Factors
In reviewing this Prospectus, holders of the Notes should carefully consider
the matters described under the heading "Risk Factors" beginning on page
__.
The Notes Offering
The Notes The Notes were sold by the Borrower on February 20, 1997,
Notes pursuant to the Offering and were subsequently resold
to qualified institutional buyers (as defined in Rule 144A
under the Securities Act) and institutional "accredited
investors" (as defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act), pursuant to Rule 144A under the
Securities Act. As of the date hereof, there are
$200,000,000 aggregate principal amount of Senior
Subordinated Notes and $275,000,000 aggregate principal
amount at maturity of Senior Subordinated Discount Notes
outstanding.
The Senior Subordinated Notes were issued at par. The Senior
Subordinated Discount Notes were issued at a discount to
their aggregate principal amount at maturity, with a yield
to maturity calculated from the issuance date of 12 1/4%
(computed on a semi-annual bond equivalent basis).
Registration Rights
Agreements In connection with the Notes Offering, the Borrower entered
into the
5
<PAGE>
Registration
Rights Agreements, which grant the holders of the Notes
certain exchange and registration rights. The Exchange
Offer is intended to satisfy such exchange and
registration rights, which terminate upon the
consummation of the Exchange Offer.
The Exchange Offer
Securities Offered $200,000,000 aggregate principal amount of 10 7/8%
Senior Subordinated Notes due February 15, 2007 and
$275,000,000 aggregate principal amount at maturity of
12 1/4% Senior Subordinated Discount Notes due February
15, 2007.
The Exchange Offer $1,000 principal amount of the Senior Subordinated
Exchange Notes in exchange for each $1,000 principal
amount of Senior Subordinated Notes, and $1,000
principal amount at maturity of the Senior Subordinated
Discount Exchange Notes in exchange for each $1,000
principal amount at maturity of Senior Subordinated
Discount Notes. The Borrower will issue the Exchange
Notes to holders on or promptly after the Expiration
Date.
Based on an interpretation by the staff of the SEC set
forth in no-action letters issued to third parties, the
Borrower believes that Exchange Notes issued pursuant to
the Exchange Offer in exchange for Notes may be offered
for resale, resold and otherwise transferred by any
holder thereof (other than any such holder which is an
"affiliate" of the Borrower within the meaning of Rule
405 under the Securities Act) without compliance with
the registration and prospectus delivery provisions of
the Securities Act, provided that such Exchange Notes
are acquired in the ordinary course of such holder's
business and that such holder does not intend to
participate and has no arrangement or understanding with
any person to participate in the distribution of such
Exchange Notes.
Each broker-dealer that receives Exchange Notes for its
own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The
Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not
be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may
be used by a broker-dealer in connection with resales of
Exchange Notes received in exchange for Notes where such
Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities.
The Borrower has agreed that, for a period of 180 days
after the Expiration Date, the Borrower will make this
Prospectus available to any broker-dealer for use in
connection with any such resale.
Any holder who tenders in the Exchange Offer with the
intention to participate, or for the purpose of
participating, in a distribution of the Exchange Notes
could not rely on the position of the staff of the SEC
enunciated in Exxon Capital Holdings Corporation
(available April 13, 1989), Morgan Stanley & Co., Inc.
(available June 5, 1991) or similar no-action letters
and, in the absence of an exemption therefrom, must
comply with the registration and prospectus delivery
6
<PAGE>
requirements of the Securities Act in connection with
the resale transaction. Failure to comply with such
requirements in such instance may result in such holder
incurring liability under the Securities Act for which
the holder is not indemnified by the Borrower.
Expiration Date 5:00 p.m., New York City time, on 1998,
unless the Exchange Offer is extended, in which case the
term "Expiration Date" means the latest date and time to
which the Exchange Offer is extended.
Conditions to the
Exchange Offer The Exchange Offer is subject to certain customary
conditions, which may be waived by the Borrower. See
"The Exchange Offer--Conditions."
Procedures for
Tendering Notes Each holder of Notes wishing to accept the Exchange
Offer must complete, sign and date the accompanying
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein and
therein, and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with the Notes
and any other required documentation to the Exchange
Agent at the address set forth herein. By executing the
Letter of Transmittal, each holder will represent to the
Borrower that, among other things, the holder or the
person receiving such Exchange Notes, whether or not
such person is the holder, is acquiring the Exchange
Notes in the ordinary course of business and that
neither the holder nor any such other person has any
arrangement or understanding with any person to
participate in the distribution of such Exchange Notes.
In lieu of physical delivery of the certificates
representing Notes, tendering holders may transfer Notes
pursuant to the procedure for book-entry transfer as set
forth under "The Exchange Offer--Procedures for
Tendering."
Special Procedures for
Beneficial Owners Any beneficial owner whose Notes are registered in the
name of a broker, dealer, commercial bank, trust company
or other nominee and who wishes to tender should contact
such registered holder promptly and instruct such
registered holder to tender on such beneficial owner's
behalf. If such beneficial owner wishes to tender on
such owner's own behalf, such owner must, prior to
completing and executing the Letter of Transmittal and
delivering its Notes, either make appropriate
arrangements to register ownership of the Notes in such
owner's name or obtain a properly completed bond power
from the registered holder. The transfer of registered
ownership may take considerable time.
Guaranteed Delivery
Procedures Holders of Notes who wish to tender their Notes and
whose Notes are not immediately available or who cannot
deliver their Notes, the Letter of Transmittal or any
other documents required by the Letter of Transmittal to
the Exchange Agent (or comply with the procedures for
book-entry transfer) prior to the Expiration Date must
tender their Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer--Guaranteed
Delivery Procedures."
Withdrawal Rights Tenders may be withdrawn at any time prior to 5:00 p.m.,
New York City time,
7
<PAGE>
on the Expiration Date pursuant to the procedures
described under "The Exchange Offer--Withdrawal of
Tenders."
Acceptance of Notes and
Delivery of Exchange The Borrower will accept for exchange any and all Notes
Notes tendered that are properly in the Exchange Offer
prior to 5:00 p.m., New York City time, on
the Expiration Date. The Exchange Notes
issued pursuant to the Exchange Offer will
be delivered on or prior to five days
following the Expiration Date. See "The
Exchange Offer--Terms of the Exchange
Offer."
Federal Income Tax
Consequences The exchange pursuant to the Exchange Offer should not
be a taxable event for federal income tax purposes. See
"Certain Federal Income Tax Considerations."
Effect on Holders of As a result of the making of the Exchange Offer, the
Notes fulfilled Borrower will have certain of its obligations
under the Registration Rights Agreements, and
holders of Notes who do not tender their Notes
will not have any further registration rights
under the Registration Rights Agreements or
otherwise. Such holders will continue to hold
the untendered Notes and will be entitled to all
the rights and subject to all the limitations
applicable thereto under the Indentures, except
to the extent such rights or limitations, by
their terms, terminate or cease to be in effect
as a result of the Exchange Offer. All
untendered Notes will continue to be subject to
certain restrictions on transfer. Accordingly,
if any Notes are tendered and accepted in the
Exchange Offer, the trading market, if any, for
the untendered Notes could be adversely
affected.
Exchange Agent The Bank of New York.
Summary of Terms of Exchange Notes
The Exchange Notes are substantially identical with respect to their form and
the terms contained therein (including principal amounts, interest rate,
maturity and redemption rights) to the Notes for which they may be exchanged
pursuant to the Exchange Offer, except that (i) the offering and sale of the
Exchange Notes has been registered under the Securities Act and, therefore, the
Exchange Notes will not bear certain legends restricting the transfer thereof
and (ii) the holders of Exchange Notes will not be entitled to further
registration rights under the Registration Rights Agreements, which rights will
be satisfied when the Exchange Offer is consummated. Each tranche of the
Exchange Notes will be issued as a separate series of notes pursuant to the same
Indenture governing the corresponding tranche of Notes for which such tranche of
Exchange Notes will be exchanged, which Indentures will be qualified under the
TIA. Holders of the Exchange Notes will be entitled to substantially identical
benefits under the Indentures (other than such changes as are necessary to
comply with any requirements of the SEC to effect or maintain the qualification
of such trust indenture under the TIA). See "Description of the Exchange
Notes."
Securities Offered $200,000,000 aggregate principal amount of 10 7/8%
Senior Subordinated Notes
8
<PAGE>
due February 15, 2007 and $275,000,000 aggregate
principal amount at maturity of 12 1/4% Senior
Subordinated Discount Notes due February 15, 2007.
Issuer TCI Satellite Entertainment, Inc.
Maturity
Senior Subordinated
Exchange Notes February 15, 2007
Senior Subordinated
Discount Exchange
Notes February 15, 2007
Interest Payment Dates
Senior Subordinated
Exchange Notes Cash interest on the Senior Subordinated Exchange
Notes will accrue from February 20, 1997 at a rate
of 10 7/8% per annum and will be payable semi-
annually in arrears on each February 15 and August
15, commencing August 15, 1998. See "Description of
the Exchange Notes--Maturity, Interest and
Principal of the Senior Subordinated Notes."
Senior Subordinated
Discount Exchange Notes Cash interest will not accrue or be payable on the
Senior Subordinated Discount Exchange Notes prior
to February 15, 2002. Thereafter, cash interest on
the Senior Subordinated Discount Exchange Notes
will accrue at a rate of 12 1/4% per annum and
will be payable semi-annually in arrears on each
February 15 and August 15, commencing August 15,
2002; provided, however, that at any time prior to
February 15, 2002, the Borrower may make a Cash
Interest Election on any interest payment date to
commence the accrual of cash interest from and
after the Cash Interest Election Date, in which
case the outstanding principal amount at maturity
of each Senior Subordinated Discount Exchange Note
will on such interest payment date be reduced to
the Accreted Value of such Senior Subordinated
Discount Exchange Note as of such interest payment
date, and cash interest (accruing at a rate of
12 1/4% per annum from the Cash Interest Election
Date) shall be payable with respect to such Senior
Subordinated Discount Exchange Note on each
interest payment date thereafter. See "Description
of the Exchange Notes--Maturity, Interest and
Principal of the Senior Subordinated Discount
Notes."
Optional Redemption The Exchange Notes will be redeemable at the option of
the Borrower, in whole or in part, at any time on or
after February 15, 2002 at the redemption prices set
forth under "Description of the Exchange Notes--Optional
Redemption," plus accrued and unpaid interest thereon,
if any, to the date of redemption. In addition, prior to
February 15, 2000, the Borrower, other than in any
circumstance resulting in a Change of Control, may
redeem the Senior
9
<PAGE>
Subordinated Exchange Notes and the Senior Subordinated
Notes in an aggregate amount of up to 35% of the
principal amount of Senior Subordinated Notes originally
issued at a redemption price equal to 110.875% of the
principal amount so redeemed, plus accrued and unpaid
interest thereon, if any, to the redemption date and may
redeem the Senior Subordinated Discount Exchange Notes
and the Senior Subordinated Discount Notes in an
aggregate amount of up to 35% of the principal amount at
maturity of Senior Subordinated Discount Notes
originally issued at a redemption price equal to
112.250% of the Accreted Value thereof on the redemption
date (or, if a Cash Interest Election has been made,
112.250% of the principal amount at maturity so
redeemed, plus accrued and unpaid interest thereon, if
any, to the date of redemption), in each case with the
net cash proceeds of (a) one or more Public Equity
Offerings of common equity of the Borrower or (b) a sale
or series of related sales of Qualified Equity Interests
of the Borrower to Strategic Equity Investors, in any
such case resulting in gross cash proceeds to the
Borrower of at least $100.0 million in the aggregate;
provided, however, that (i) immediately after giving
effect to the redemption, the sum of the outstanding
principal amount of the Senior Subordinated Notes plus
the outstanding principal amount of the Senior
Subordinated Exchange Notes equals at least 65% of the
originally issued principal amount of Senior
Subordinated Notes and (ii) immediately after giving
effect to the redemption, the sum of the outstanding
principal amount at maturity of the Senior Subordinated
Discount Notes plus the outstanding principal amount at
maturity of the Senior Subordinated Discount Exchange
Notes equals at least 65% of the originally issued
principal amount at maturity of Senior Subordinated
Discount Notes. See "Description of the Exchange Notes--
Optional Redemption."
Mandatory Sinking Fund None.
Form and Denomination The Exchange Notes will be fully registered as to
principal and interest in minimum denominations of
$1,000 and integral multiples thereof. The Exchange
Notes will be initially issued in the form of one or
more global notes and deposited with a custodian for and
registered in the name of the nominee of The Depository
Trust Company. The Exchange Notes will not be issued in
certificated, fully registered form, except in the
circumstances provided for in the Indentures. See
"Description of the Exchange Notes--Form, Denomination
and Book-Entry Procedures."
Change of Control Following the occurrence of a Change of Control, the
Borrower will be required to make an offer to purchase
all outstanding Notes and Exchange Notes of each tranche
at a purchase price in cash equal to (x) with respect to
the Senior Subordinated Exchange Notes and Senior
Subordinated Notes, 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest
thereon, if any, to the date of purchase and (y) with
respect to the Senior Subordinated Discount Exchange
Notes and Senior Subordinated Discount Notes, 101% of
the Accreted Value on the date of purchase (unless the
date of purchase is on or after the earlier to occur of
February 15, 2002 and the Cash Interest Election Date,
in which case such purchase price shall be equal to 101%
of the aggregate principal amount at maturity thereof,
plus accrued and unpaid interest thereon, if any, to the
date of purchase). See "Description of the Exchange
Notes--Offer to Purchase upon Change of Control."
10
<PAGE>
ASSET SALE PROCEEDS The Borrower will, under certain circumstances, be
required to make an offer to purchase Exchange Notes and
Notes with the net cash proceeds of certain asset sales
or other dispositions of assets at a purchase price in
cash equal to (x) with respect to the Senior
Subordinated Exchange Notes and the Senior Subordinated
Notes, 100% of the aggregate principal amount thereof,
plus accrued and unpaid interest thereon, if any, to the
date of purchase and (y) with respect to the Senior
Subordinated Discount Exchange Notes and the Senior
Subordinated Discount Notes, 100% of the Accreted Value
on the date of purchase (unless the date of purchase is
on or after the earlier to occur of February 15, 2002
and the Cash Interest Election Date, in which case such
purchase price shall be equal to 101% of the aggregate
principal amount at maturity thereof, plus accrued and
unpaid interest thereon, if any, to the date of
purchase). See "Description of the Exchange Notes--
Certain Covenants--Disposition of Proceeds of Asset
Sales."
CERTAIN COVENANTS The Indentures contain certain covenants that, among
other things, limit the ability of the Borrower and its
Restricted Subsidiaries (as defined) to incur additional
Indebtedness (as defined), create certain Liens (as
defined), make certain Restricted Payments (as defined),
permit dividend and other payment restrictions to apply
to such Restricted Subsidiaries, enter into certain
transactions with Affiliates (as defined) and certain
other related persons or consummate certain merger,
consolidation or similar transactions. These covenants
are subject to a number of significant exceptions and
qualifications. See "Description of the Exchange Notes--
Certain Covenants."
RANKING The Exchange Notes will rank junior to, and be
subordinated in right of payment to, all existing and
future Senior Indebtedness (as defined) of the Borrower,
pari passu in right of payment with all senior
subordinated Indebtedness of the Borrower and senior in
right of payment to all Subordinated Indebtedness (as
defined) of the Borrower. As of December 31, 1997, the
Borrower had approximately $79,949,000 of Senior
Indebtedness outstanding, of which $48,000,000
represented borrowings under the Bank Credit Facility.
the Borrower will not be permitted to incur any debt
that is subordinated in right of payment to any Senior
Indebtedness of the Borrower and senior in right of
payment to the Exchange Notes and Notes. See "Risk
Factors--Subordination of the Exchange Notes" and
"Description of the Exchange Notes--Subordination of the
Exchange Notes." All borrowings under the Bank Credit
Facility are guaranteed on a senior basis by all direct
and indirect subsidiaries of the Borrower other than
Tempo. The Exchange Notes will not be entitled to the
benefit of any guarantees, except under the
circumstances described under "Description of the
Exchange Notes--Certain Covenants--Limitation on
Indebtedness."
SECURITY The Notes are not, and the Exchange Notes will not be,
entitled to any security.
RECENT TRANSACTIONS---THE ASKYB TRANSACTION.
In a separate proposed transaction (the "ASkyB Transaction"), pursuant to
an asset acquisition agreement, dated as of June 11, 1997 (together with the
exhibits and schedules thereto, and as amended from
11
<PAGE>
time to time, the "ASkyB Agreement") among the Partnership, The News Corporation
Limited ("News Corp."), MCI Telecommunications Corporation, the principal
domestic operating subsidiary of MCI Communications Corporation ("MCI"),
American Sky Broadcasting LLC, a wholly-owned subsidiary of News Corp.
("ASkyB"), and for certain purposes only, each of the partners of the
Partnership (collectively, the "Partners"), New PRIMESTAR will acquire from MCI,
News Corp. and ASkyB, as applicable, two high power communications satellites
currently under construction (the "MCI Satellites"), certain authorizations
granted to MCI by the FCC to operate a direct broadcast satellite ("DBS")
business at the 110 W.L. orbital location using 28 transponder channels, and
certain related contracts. In consideration, ASkyB will receive non-voting
convertible securities of New PRIMESTAR, comprising, subject to closing
adjustments, approximately $600 million liquidation value of non-voting
convertible preferred stock, $.01 par value per share, of New PRIMESTAR (the
"New PRIMESTAR Convertible Preferred Stock") (convertible into approximately 52
million shares of non-voting Class D Common Stock, $.01 par value per share, of
New PRIMESTAR ( "New PRIMESTAR Class D Common Stock"), subject to adjustment)
and approximately $516 million principal amount of convertible subordinated
notes of New PRIMESTAR ("New PRIMESTAR Convertible Subordinated Notes")
(convertible into approximately 45 million shares of New PRIMESTAR Class D
Common Stock).
The New PRIMESTAR Convertible Subordinated Notes will be due and payable, and
the New PRIMESTAR Convertible Preferred Stock will be mandatorily redeemable, on
the tenth anniversary of the date of issuance. The New PRIMESTAR Convertible
Preferred Stock will accrue cumulative dividends at the annual rate of 5% of the
liquidation value of such shares and the New PRIMESTAR Convertible Subordinated
Notes will have an interest rate of 5%. Dividends on the New PRIMESTAR
Convertible Preferred Stock and interest on the New PRIMESTAR Convertible
Subordinated Notes will be payable in cash or, at the option of New PRIMESTAR,
in shares of the non-voting New PRIMESTAR Class D Common Stock, for a period of
four years. Thereafter, all dividend and interest payments will be made solely
in cash. Shares of New PRIMESTAR Class D Common Stock issued to ASkyB or any of
its affiliates upon conversion of such New PRIMESTAR Convertible Preferred Stock
and New PRIMESTAR Convertible Subordinated Notes, or in payment of dividend or
interest obligations thereunder, will in turn automatically convert into shares
of New PRIMESTAR Class A Common Stock, on a one-to-one basis, upon transfer to
any person other than ASkyB, News Corp. or any of their respective affiliates.
Assuming such a transfer and conversion, and based on the number of shares of
New PRIMESTAR Common Stock (as defined below) expected to be issued in the
Restructuring Transaction (subject to adjustment as provided in the
Restructuring Agreement, the New PRIMESTAR Class D Common Stock into which the
New PRIMESTAR Convertible Subordinated Notes and the New PRIMESTAR Convertible
Preferred Stock are convertible, would be converted into New PRIMESTAR Class A
Common Stock representing approximately 33% of the number of shares of New
PRIMESTAR Common Stock and approximately 20% of the combined voting power of the
New PRIMESTAR Common Stock outstanding after giving effect to such a transfer
and conversion.
Consummation of the ASkyB Transaction is contingent on, among other things,
receipt of all necessary government and regulatory approvals, and accordingly,
no assurance can be given that the ASkyB Transaction will be consummated. In
addition, it is a condition precedent to the closing of the ASkyB Transaction by
New PRIMESTAR that the ASkyB Transaction be approved by the holders of New
PRIMESTAR Voting Common Stock, including the former holders of TSAT Common Stock
if the TSAT Merger shall have been consummated, at an annual or special meeting
of New PRIMESTAR. The ASkyB Agreement provides that if the Restructuring
Transaction has not closed by March 8, 1998, and the closing conditions set
forth in the ASkyB Agreement have all been satisfied, then News Corp., MCI and
ASkyB (collectively, the "ASkyB Transferors") will have the right to transfer to
the Partnership the assets contemplated to be transferred to New PRIMESTAR under
the ASkyB Transaction, in exchange for such consideration, having an aggregate
fair market value equal to the aggregate consideration that would have been
received by the ASkyB Transferors pursuant to the ASkyB Transaction had the
Restructuring Transaction closed by such date, as the Partnership and the ASkyB
Transferors shall mutually agree.
12
<PAGE>
Summary Financial and Other Data--Historical
The following table presents summary financial data relating to (a) the
historical financial position as of September 30, 1997, of (i) TSAT, (ii) the
PRIMESTAR(R) distribution businesses of the other Distributors (Time Warner
Satellite Services Group, a combination of the DBS operations conducted by TWE
and the Time Warner Entertainment-Advance/Newhouse Partnership ("TWEAN"), a
joint venture between TWE and Newhouse ("TWSSI"), Cox Communications, Inc.--
Direct Broadcast Satellite Business ("Cox Satellite"), Comcast Satellite and
MediaOne, Inc.--Direct Broadcast Satellite Business ("MediaOne Satellite")) and
(iii) the Partnership, and (b) the historical results of operations of TSAT,
TWSSI, Cox Satellite, Comcast Satellite, MediaOne Satellite' and the Partnership
for the nine months ended September 30, 1997 and the year ended December 31,
1996. The historical financial data for the year ended December 31, 1996 has
been derived from the respective audited financial statements of TSAT, TWSSI,
Cox Satellite, Comcast Satellite, MediaOne Satellite and the Partnership. The
historical data as of, and for the nine months ended, September 30, 1997 has
been derived from unaudited information. The following information should be
read in conjunction with the "SELECTED FINANCIAL DATA" and "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," which
are set forth in the respective historical financial statements and notes
thereto of TSAT, TWSSI, Cox Satellite, Comcast Satellite, MediaOne Satellite and
the Partnership, which are incorporated herein by reference to TSAT's Current
Report on Form 8-K dated February 11, 1998, and is qualified in its entirety by
reference to the Primary and Supplemental Condensed Pro Forma Combined Financial
Statements and notes thereto of New PRIMESTAR, which are incorporated by
reference into this Prospectus, and such historical financial statements and
notes thereto of TSAT, TWSSI, Cox Satellite, Comcast Satellite, MediaOne
Satellite and the Partnership. Such historical financial statements present
historical financial information with respect to TSAT, the Partnership and the
PRIMESTAR Assets and Partnership Interests of each of TWE/Newhouse, Comcast, Cox
and MediaOne, which assets, together with the Partnership Interest indirectly
held by GE, will be consolidated into New PRIMESTAR pursuant to the
Restructuring Transaction.
13
<PAGE>
<TABLE>
<CAPTION>
Nine months ended September 30, 1997
-----------------------------------------------------------------------------
Comcast MediaOne
TSAT TWSSI Cox Satellite Satellite Satellite Partnership
---------- ---------- ------------- ----------- ---------- -----------
amounts in thousands
<S> <C> <C> <C> <C> <C> <C>
Summary Operating Data
Revenue (1)............................ $ 406,072 276,158 78,773 81,057 77,955 450,973
Operating, selling, general and
administrative....................... (351,405) (226,894) (70,732) (71,826) (65,591) (480,302)
Depreciation and amortization.......... (177,415) (48,724) (31,041) (21,248) (18,875) (2,856)
---------- ---------- ------------- ----------- ---------- -----------
Operating income (loss).............. (122,748) 540 (23,000) (12,017) (6,511) (32,185)
Interest expense....................... (33,965) (20,637) (8,034) (11,481) (4,591) (13,130)
Share of losses of the Partnership..... (11,610) (11,424) (4,259) (4,352) (4,886) --
Other, net............................. 1,779 (1,097) (388) 232 (123) 1,453
---------- ---------- ------------- ----------- ---------- -----------
Loss before income taxes............. (166,544) (32,618) (35,681) (27,618) (16,111) (43,862)
Income tax benefit..................... -- -- 12,621 -- 6,047 --
---------- ---------- ------------- ----------- ---------- -----------
Net loss............................. (166,544) (32,618) (23,060) (27,618) (10,064) (43,862)
========== ========== ============= =========== ========== ===========
Other Data
Operating Cash Flow (deficit) (2)...... $ 59,274 49,264 8,041 9,231 12,364 (29,329)
Capital expenditures................... $ 156,510 100,348 47,042 57,916 39,647 19,309
</TABLE>
(continued)
<TABLE>
<CAPTION>
Year ended December 31, 1996
-----------------------------------------------------------------------------
Comcast MediaOne
TSAT TWSSI Cox Satellite Satellite Satellite Partnership
---------- ---------- ------------- ----------- ---------- -----------
amounts in thousands
<S> <C> <C> <C> <C> <C> <C>
Summary Operating Data
Revenue (1)............................ $ 417,461 277,083 68,291 65,574 68,879 412,999
Operating, selling, general and
administrative....................... (410,390) (241,566) (66,146) (62,021) (60,107) (426,561)
Depreciation and amortization.......... (191,355) (45,449) (21,704) (17,956) (14,740) (3,261)
---------- ---------- ------------- ----------- ---------- -----------
Operating loss....................... (184,284) (9,932) (19,559) (14,403) (5,968) (16,823)
Interest expense....................... (2,023) (20,921) (6,898) (8,442) (11,914) (737)
Share of losses of the Partnership..... (3,275) (5,314) (1,397) (1,647) (1,830) --
Other, net............................. 3,641 (1,054) (151) 126 (87) 1,858
---------- ---------- ------------- ----------- ---------- -----------
Loss before income taxes............. (185,941) (37,221) (28,005) (24,366) (19,799) (15,702)
Income tax benefit..................... 45,937 -- 9,791 -- 7,842 --
---------- ---------- ------------- ----------- ---------- -----------
Net loss............................. $ (140,004) (37,221) (18,214) (24,366) (11,957) (15,702)
========== ========== ============= =========== ========== ===========
Other Data
Operating Cash Flow (deficit) (2)...... $ 6,625 35,517 2,145 3,553 8,772 (13,562)
Capital expenditures................... $ 401,406 169,793 70,522 68,008 73,602 116,345
</TABLE>
(continued)
14
<PAGE>
<TABLE>
<CAPTION>
September 30, 1997
-----------------------------------------------------------------------------
Comcast MediaOne
TSAT TWSSI Cox Satellite Satellite Satellite Partnership
---------- ---------- ------------- ----------- ---------- -----------
amounts in thousands
<S> <C> <C> <C> <C> <C> <C>
Summary Balance Sheet Data
Cash, receivables and prepaids......... $ 41,257 17,715 9,078 6,824 38,574 160,013
Investment in, and related
advances to the Partnership.......... 19,952 28,494 10,214 9,122 31,984 --
Property and equipment, net of
accumulated depreciation:
Satellites........................... 463,133 -- -- -- -- 543,070
Other................................ 636,225 447,898 114,823 107,929 154,398 17,073
---------- ---------- ------------- ----------- ---------- -----------
1,099,358 447,898 114,823 107,929 154,398 560,143
Intangible assets...................... -- -- -- -- 31,932 --
Other assets........................... 28,479 93 8,572 25,145 349 96
---------- ---------- ------------- ----------- ---------- -----------
Total assets......................... $1,189,046 494,200 142,687 149,020 257,237 720,252
========== ========== ============= =========== ========== ===========
Payables, accruals and other
operating liabilities................ $ 152,479 74,313 17,554 41,891 46,202 81,540
Due to the Partnership................. 463,133 -- -- -- -- --
Debt................................... 365,760 513,104 199,348 174,436 209,882 555,000
Deferred income taxes.................. -- -- (1,956) -- 13,417 --
---------- ---------- ------------- ----------- ---------- -----------
Total liabilities.................... 981,372 587,417 214,946 216,327 269,501 636,540
Equity (deficit)....................... 207,674 (93,217) (72,259) (67,307) (12,264) 83,712
---------- ---------- ------------- ----------- ---------- -----------
Total liabilities and equity......... $1,189,046 494,200 142,687 149,020 257,237 720,252
========== ========== ============= =========== ========== ===========
</TABLE>
- -----------------
(1) Revenue of TSAT, TWSSI, Cox Satellite, Comcast Satellite and MediaOne
Satellite is primarily comprised of installation and monthly service
revenue received from subscribers to the PRIMESTAR(R) service. The
Partnership derives its revenue by providing satellite capacity and
programming, national marketing and distribution services to the
Distributors.
(2) Operating Cash Flow (deficit), which represents operating income (loss)
before depreciation, amortization and stock compensation, is a commonly
used measure of value and borrowing capacity within the direct broadcast
satellite industry, and is not intended to be a measure of performance in
accordance with generally accepted accounting principles and should not be
relied on as such. Furthermore, Operating Cash Flow (deficit) may not be
comparable to similarly titled measures reported by other companies.
Operating Cash Flow (deficit) should be viewed in conjunction with cash
flows measured in accordance with generally accepted accounting principles.
For information concerning such cash flows, see "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Liquidity
and Capital Resources" of TSAT, TWSSI, Cox Satellite, Comcast Satellite,
MediaOne Satellite and the Partnership, and the statements of cash flows
included in the historical financial statements of TSAT, TWSSI, Cox
Satellite, Comcast Satellite, MediaOne Satellite and the Partnership, which
are incorporated by reference in this Prospectus.
15
<PAGE>
SUMMARY FINANCIAL AND OTHER DATA--PRO FORMA
The following table presents summary financial data relating to TSAT's and
New PRIMESTAR's unaudited pro forma combined financial position as of September
30, 1997 and TSAT's and New PRIMESTAR's unaudited pro forma combined results of
operations for the nine months ended September 30, 1997 and the year ended
December 31, 1996. The unaudited pro forma summary operating data gives effect
to the indicated transactions as of January 1, 1996. The unaudited pro forma
balance sheet data gives effect to the indicated transactions as of September
30, 1997. The unaudited pro forma combined data does not purport to be
indicative of the results of operations or financial position that may be
obtained in the future or that actually would have been obtained had such
transactions occurred on such dates. The following information should be read in
conjunction with the "SELECTED FINANCIAL DATA" and "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," which are set forth
in the respective historical financial statements and notes thereto of TSAT,
TWSSI, Cox Satellite, Comcast Satellite, MediaOne Satellite and the Partnership,
which are incorporated herein by reference to TSAT's Current Report on Form 8-K
dated February 11, 1998, and is qualified in its entirety by reference to the
Primary and Supplemental Condensed Pro Forma Combined Financial Statements and
notes thereto of New PRIMESTAR, which are incorporated by reference into this
Prospectus, and such historical financial statements and notes thereto of TSAT,
TWSSI, Cox Satellite, Comcast Satellite, MediaOne Satellite and the Partnership.
Such historical financial statements present historical financial information
with respect to TSAT, the Partnership and the PRIMESTAR Assets and Partnership
Interests of each of TWE, Newhouse, Comcast, Cox and MediaOne, which assets,
together with the Partnership Interest indirectly held by GE, will be
consolidated into New PRIMESTAR pursuant to the Restructuring Transaction.
<TABLE>
<CAPTION>
Nine months ended September 30, 1997
-----------------------------------------------------------------------------------
Roll-up Plan
--------------------------------------------------------------
New PRIMESTAR
New PRIMESTAR pro forma for
New PRIMESTAR pro forma for Restructuring
TSAT pro forma pro forma for Restructuring Transaction, TSAT
for Restructuring Restructuring Transaction and TSAT Merger and ASkyB
Transaction (1) Transaction (2) Merger (3) Transaction (3)
----------------- --------------- -------------------- -----------------
amounts in thousands, except per share amounts'
<S> <C> <C> <C> <C>
Summary Operating Data
Revenue................................ $ -- 920,015 920,015 920,015
Operating, selling, general and
administrative....................... -- (809,289) (809,289) (809,289)
Depreciation and amortization.......... -- (442,179) (442,179) (442,179)
----------------- --------------- -------------------- -----------------
Operating loss......................... -- (331,453) (331,453) (331,453)
Interest expense....................... -- (83,375) (83,375) (102,736)
Shares of losses of New PRIMESTAR...... (129,958) -- -- --
Other, net............................. -- 1,856 1,856 1,856
----------------- --------------- -------------------- -----------------
Loss before income taxes............. (129,958) (412,972) (412,972) (432,333)
Income tax benefit..................... -- 51,977 51,977 59,721
----------------- --------------- -------------------- -----------------
Net loss............................... (129,958) (360,995) (360,995) (372,612)
Dividend requirement on preferred
stock................................ -- -- -- (22,500)
----------------- --------------- -------------------- -----------------
Net loss attributable to common
stockholders......................... $ (129,958) (360,995) (360,995) (395,112)
================= =============== ==================== =================
Pro forma net loss per share........... $ (1.95) (1.83) (2.00)
================= ==================== =================
</TABLE>
(continued)
16
<PAGE>
<TABLE>
<CAPTION>
Year ended December 31, 1996
-----------------------------------------------------------------------------------
Roll-up Plan
--------------------------------------------------------------
New PRIMESTAR
New PRIMESTAR pro forma for
New PRIMESTAR pro forma for Restructuring
TSAT pro forma pro forma for Restructuring Transaction, TSAT
for Restructuring Restructuring Transaction and TSAT Merger and ASkyB
Transaction (1) Transaction (2) Merger (3) Transaction (3)
----------------- --------------- -------------------- -----------------
amounts in thousands, except per share amounts'
<S> <C> <C> <C> <C>
Summary Operating Data
Revenue................................ $ -- 897,288 897,288 897,288
Operating, selling, general and
administrative....................... -- (847,885) (847,885) (847,885)
Depreciation and amortization.......... -- (520,212) (520,212) (520,212)
----------------- --------------- -------------------- -----------------
Operating loss....................... -- (470,809) (470,809) (470,809)
Interest expense....................... -- (51,134) (51,134) (76,949)
Share of losses of New PRIMESTAR....... (134,170) -- -- --
Other, net............................. -- 4,333 4,333 4,333
----------------- --------------- -------------------- -----------------
Loss before income taxes............. (134,170) (517,610) (517,610) (543,425)
Income tax benefit..................... -- 144,915 144,915 155,241
----------------- --------------- -------------------- -----------------
Net loss............................... (134,170) (372,695) (372,695) (388,184)
Dividend requirement on preferred
stock................................ -- -- -- (30,000)
----------------- --------------- -------------------- -----------------
Net loss attributable to common
stockholders......................... $ (134,170) (372,695) (372,695) (418,184)
================= =============== ==================== =================
Pro forma net loss per share........... $ (2.02) (1.89) (2.12)
================= ==================== =================
</TABLE>
(continued)
17
<PAGE>
<TABLE>
<CAPTION>
September 30, 1997
-----------------------------------------------------------------------------------
Roll-up Plan
--------------------------------------------------------------
New PRIMESTAR
New PRIMESTAR pro forma for
New PRIMESTAR pro forma for Restructuring
TSAT pro forma pro forma for Restructuring Transaction, TSAT
for Restructuring Restructuring Transaction and TSAT Merger and ASkyB
Transaction (1) Transaction (2) Merger (3) Transaction (3)
----------------- --------------- -------------------- -----------------
amounts in thousands
<S> <C> <C> <C> <C>
Summary Balance Sheet Data
Cash, receivables and prepaids.......... $ -- 133,062 133,062 133,062
Investment in, and related
advances to the Partnership........... -- -- -- --
Investment in New PRIMESTAR............. 432,086 -- -- --
Property and equipment, net of
accumulated depreciation:
Satellites............................ 463,133 543,070 543,070 975,770
Other................................. -- 1,220,061 1,220,061 1,220,061
----------------- --------------- -------------------- -----------------
463,133 1,763,131 1,763,131 2,195,831
Intangible assets....................... -- 1,196,338 1,196,338 1,879,938
Other assets............................ -- 29,760 29,760 29,760
----------------- --------------- -------------------- -----------------
Total assets.......................... $ 895,219 3,122,291 3,122,291 4,238,591
================= =============== ==================== =================
Payables, accruals and other operating
liabilities........................... $ -- 287,198 287,198 287,198
Due to the Partnership.................. 463,133 -- -- --
Debt.................................... -- 1,404,496 1,404,496 1,920,796
Deferred income taxes................... -- 230,360 230,360 230,360
----------------- --------------- -------------------- -----------------
Total liabilities..................... 463,133 1,922,054 1,922,054 2,438,354
Mandatorily redeemable preferred stock.. -- -- -- 600,000
Equity.................................. $ 432,086 1,200,237 1,200,237 1,200,237
----------------- --------------- -------------------- -----------------
Total liabilities and equity.......... $ 895,219 3,122,291 3,122,291 4,238,591
================= =============== ==================== =================
</TABLE>
- --------------
(1) Represents the pro forma financial condition and results of operations of
TSAT after giving effect to the TSAT Asset Transfer and other elements of
the Restructuring Transaction on the dates indicated in the headnote to
this table. For additional information concerning the pro forma
adjustments, see the Primary Condensed Pro Forma Combined Financial
Statements of New PRIMESTAR, incorporated by reference herein.
(2) Represents a combination of the financial information of TSAT, TWSSI, Cox
Satellite, Comast Satellite, MediaOne, the Partnership, and the
Partnership Interest held by GE (after eliminating all significant inter-
entity transactions) as affected by the assumed consummation of the
Restructuring Transaction on the dates indicated in the headnote to this
table. For additional information concerning the pro forma adjustments,
see the Supplemental Condensed Pro Forma Combined Financial Statements of
New PRIMESTAR, incorporated by reference herein.
(3) Represents the pro forma financial condition and results of operations of
New PRIMESTAR after giving effect to the indicated transactions on the
dates indicated in the headnote to this table. For additional information
concerning the pro forma adjustments, see the Primary Condensed Pro Forma
Combined Financial Statements of New PRIMESTAR, inorcorporated by
reference herein.
18
<PAGE>
CORPORATE ORGANIZATION
The diagrams set forth below illustrate the ownership and organization of
New PRIMESTAR and TSAT both prior to the Roll-up Plan and following consummation
of the Restructuring Transaction, and the ownership and organization of New
PRIMESTAR following consummation of the TSAT Merger.
Ownership and Organization Before the Roll-up Plan
[FLOWCHART APPEARS HERE]
19
<PAGE>
Ownership and Organization After the Restructuring Transaction
[FLOWCHART APPEARS HERE]
20
<PAGE>
Ownership and Organization After the TSAT Merger
[FLOWCHART APPEARS HERE]
21
<PAGE>
RISK FACTORS
Prospective holders of the Exchange Notes should pay careful attention to the
following factors in addition to considerations bearing on their individual
situations and the other information contained or incorporated by reference
herein. The following factors should be read in conjunction with, and are
qualified in their entirety by, the financial, business and other information
set forth in the financial statements and other documents incorporated by
reference in this Prospectus, including, among other things, the information
relating to the Roll-up Plan included in TSAT's Current Report of Form 8-K dated
February 11, 1998. See "Available Information" and "Incorporation of Certain
Documents By Reference" for information concerning such documents incorporated
by reference herein or to obtain copies of such documents.
History of Losses of TSAT and Other Restructuring Parties
TSAT has had a limited history as a separate operating entity. From 1990 to
1995, TCI's business of distributing PRIMESTAR(R) was operated by TCIC, the
subsidiary of TCI that owns and operates cable systems in the U.S., and during
this period of time, such business sustained significant operating losses. TSAT
has similarly sustained significant losses in recent periods. TSAT's operating
losses were $122,748,000, $81,266,000, $184,284,000, $60,702,000 and $9,144,000
for the nine months ended September 30, 1997 and 1996, and the years ended
December 31, 1996, 1995 and 1994, respectively, and TSAT's net losses in such
periods were $166,544,000, $56,594,000, $140,004,000, $47,507,000 and
$13,688,000, respectively. Each of the other parties to the Restructuring
Transaction have also sustained losses in their PRIMESTAR(R) -related
businesses. On a pro forma basis, after giving effect to the Restructuring
Transaction, the TSAT Merger and the ASkyB Transaction, New PRIMESTAR would have
had operating losses of $331,453,000 and $470,809,000, for the nine months ended
September 30, 1997 and the year ended December 31, 1996, respectively, and net
losses attributable to common stockholders in such periods of $395,112,000 and
$414,184,000, respectively. See the Primary and Supplemental Condensed Pro
Forma Combined Financial Statements and notes thereto of New PRIMESTAR,
incorporated by reference herein. Improvements in results of operations of the
Borrower are largely dependent upon its ability to increase its customer base
while maintaining its price structure, reducing the rate at which subscribers
terminate their PRIMESTAR(R) service ("churn") and effectively managing its
costs. No assurance can be given that any such improvements will occur. In
addition, TSAT incurs, and New PRIMESTAR will incur, significant sales
commission and installation costs when its customers initially subscribe to the
service. Management expects that the costs of acquiring subscribers will
continue to be significant so long as a rapid growth rate is maintained. The
high cost of obtaining new subscribers also magnifies the negative effects of
subscriber churn. See "--Ability to Manage Growth; Subscriber Churn."
Upon consummation of the Restructuring Transaction, the TSAT Business will be
consolidated into New PRIMESTAR. New PRIMESTAR will be a significantly larger
entity than TSAT, and it is anticipated that New PRIMESTAR will initially incur
significantly greater losses than TSAT due primarily to disproportionately
higher levels of depreciation, amortization and interest expense. In addition,
New PRIMESTAR intends to develop a high power DBS service, and New PRIMESTAR may
determine to migrate some or all of the existing PRIMESTAR(R) medium power
customers to such high power service. Under such circumstances, New PRIMESTAR
would necessarily be operating under a different cost structure than that of the
TSAT Business.
Lack of Operating History of New PRIMESTAR
New PRIMESTAR has had no operating history as a combined operating entity.
Since 1990, the business of operating the PRIMESTAR(R) satellite television
service has been owned and operated by the Partnership, and the businesses of
distributing PRIMESTAR(R) in various territories have been separately operated
by the Distributors. Following the Restructuring Transaction, the management of
New PRIMESTAR will have to integrate such separate businesses and to develop and
implement new business plans, policies, strategies and procedures to operate the
PRIMESTAR(R) business on a consolidated basis. Certain of such plans,
policies, strategies and procedures may be different from, or additional to, the
plans, policies, strategies and procedures utilized by the Partnership and the
Distributors separately prior to consummation of the Restructuring Transaction.
Any material delay in developing and implementing such plans, policies,
strategies or procedures, or any other material difficulties that may be
experienced in connection with the integration of the PRIMESTAR(R)
22
<PAGE>
businesses, could have a material adverse effect on the operations and results
of operations of New PRIMESTAR.
Substantial Leverage; Additional Indebtedness Likely
TSAT is highly leveraged and, following consummation of the Restructuring
Transaction, New PRIMESTAR will be highly leveraged. As of September 30, 1997,
TSAT had approximately $366 million of debt (approximately $476 of debt per
subscriber), and on a pro forma basis, after giving effect to the Restructuring
Transaction, the TSAT Merger and the ASkyB Transaction, New PRIMESTAR would have
had approximately $1.9 billion of debt (approximately $1,056 of debt per
subscriber), including (i) an aggregate of $921 million of debt of TSAT and the
Partnership that would have been assumed by New PRIMESTAR if the Restructuring
Transaction had occurred on September 30, 1997, (ii) an aggregate of $136
million of debt that would have been incurred by New PRIMESTAR to fund the
estimated cash that would have been paid to certain of the Partners if the
Restructuring Transaction had occurred on September 30, 1997, (iii) an aggregate
of $328 million of debt that would have been incurred by New PRIMESTAR to repay
the estimated debt that would have been assumed from certain of the Partners if
the Restructuring Transaction had occurred on September 30, 1997, and (iv) $516
million estimated principal amount of the New PRIMESTAR Convertible Subordinated
Notes that would have been issued by New PRIMESTAR if the ASkyB Transaction had
occurred on September 30, 1997. See the historical financial statements and
notes thereto of TSAT and the Primary and Supplemental Condensed Pro Forma
Combined Financial Statements and notes thereto of New PRIMESTAR, incorporated
by reference into this Prospectus.
New PRIMESTAR will be a significantly larger entity than TSAT and will have
significant financial obligations. As described above, New PRIMESTAR will incur
or assume a significant amount of debt in connection with the Restructuring
Transaction (including the Notes and/or the Exchange Notes). Upon consummation
of the ASkyB Transaction, New PRIMESTAR will issue, subject to closing
adjustments, approximately $600 million liquidation value of New PRIMESTAR
Convertible Preferred Stock and $516 million aggregate principal amount of New
PRIMESTAR Convertible Subordinated Notes in connection with the ASkyB
Transaction. The New PRIMESTAR Convertible Subordinated Notes will be due and
payable, and the New PRIMESTAR Convertible Preferred Stock will be mandatorily
redeemable, on the tenth anniversary of the date of issuance. In addition to the
debt to be incurred and assumed in connection with the Restructuring Transaction
and the ASkyB Transaction, it is anticipated that New PRIMESTAR will be required
to seek significant additional debt financing to fund the capital requirements
of its business strategies, including the proposed development of a high power
DBS service and any possible migration of some or all of the existing
PRIMESTAR(R) medium power customers to such high power service. No assurance can
be given that New PRIMESTAR will be able to obtain sufficient financial
resources in order to satisfy short-term and long-term liquidity requirements.
The debt to be assumed by New PRIMESTAR in connection with the Restructuring
Transaction will include (i) the PRIMESTAR Credit Facility, which was obtained
by the Partnership to finance advances to Tempo for payments due in respect of
the construction of the Tempo Satellites, and which is in turn supported by
letters of credit arranged for by affiliates of all but one of the Partners,
(ii) the Notes and/or the Exchange Notes and (iii) any amounts outstanding under
the Bank Credit Facility. In addition, New PRIMESTAR will be responsible for
payments due under (i) the GE-2 Agreement, which provides for the Partnership's
use of transponders on GE-2, (ii) certain specified contracts and other
obligations that will be assumed by New PRIMESTAR in connection with the ASkyB
Transaction, and (iii) various other commitments and contingent liabilities
associated with the businesses and assets that will comprise New PRIMESTAR
following consummation of the Restructuring Transaction and the ASkyB
Transaction. It is anticipated that New PRIMESTAR will also be required to amend
and/or refinance the Bank Credit Facility and the PRIMESTAR Credit Facility to
the extent they are not earlier refinanced by TSAT and/or the Partnership. As of
September 30, 1997, the Partnership's advances to Tempo to finance construction
of the Tempo Satellites aggregated $463,133,000, and the Partnership's
indebtedness under the PRIMESTAR Credit Facility aggregated $555,000,000,
including amounts borrowed to pay interest charges. The maturity date of the
PRIMESTAR Credit Facility has been extended to September 30, 1998. Long-term
financing alternatives with respect to the Tempo Satellites are currently being
evaluated. No assurance can be given that any such long-term financing will be
available on acceptable terms.
The degree to which the Borrower is leveraged may adversely affect the
Borrower's ability to compete effectively against better capitalized competitors
and to withstand downturns in its business or the economy generally,
23
<PAGE>
and could limit its ability to pursue business opportunities that may be in the
interests of the Borrower and its stockholders. The Borrower's ability to repay
or refinance its debt will be dependent upon the Borrower's ability to generate
substantial cash flow from operations or to obtain additional debt or equity
financing. There can be no assurance that the Borrower will be successful in
generating sufficient cash flow from operations or in a timely manner or in
raising sufficient additional debt or equity financing to enable it to repay or
refinance its debt. In addition, the failure of the Borrower to have adequate
access to capital may adversely affect the Borrower's ability, or choice, to
launch proposed products and services in the time frames discussed herein.
Further, the failure to comply with the covenants and other provisions of the
Borrower's debt instruments could result in events of default under such
instruments. Such events of default could permit acceleration of the debt under
such instruments and, in some cases, acceleration of debt under other
instruments that contain cross-default or cross-acceleration provisions. See
"--Ability to Service Debt; Restrictive Covenants; Refinancing Risks."
In the event that the Restructuring Transaction is not consummated, TSAT
believes that its cash and cash equivalents, together with borrowing
availability pursuant to the Bank Credit Facility and any funds generated by
TSAT's operating activities will be sufficient through December 31, 1998, to
fund TSAT's working capital, debt service and currently projected capital
expenditure requirements associated with its medium power satellite distribution
business . However, to the extent that the Restructuring Transaction is not
consummated and TSAT (i) funds all or any significant portion of the cost of the
Tempo Satellites, (ii) pursues a strategy with respect to the high power segment
of the digital satellite industry that requires significant capital
expenditures, (iii) completes any significant acquisitions, (iv) enters into any
other business activities that require significant capital investments, (v) is
unable (and/or the Partnership is unable) to refinance the Tempo Satellites (to
the extent not sold to a person other than the Partnership) without a letter of
credit and is unable to post (or arrange for the posting of) such letter of
credit, or is required to meet other significant future liquidity requirements
in addition to those described above, TSAT anticipates that it would be
required to obtain additional debt or equity financing. No assurance can be
given, however, that TSAT would be able to obtain additional financing on terms
acceptable to it, or at all.
Subordination of the Exchange Notes
The Exchange Notes will be junior and subordinated in right of payment to all
existing and future Senior Indebtedness of the Borrower, including borrowings
under the Bank Credit Facility. By reason of such subordination, in the event of
a bankruptcy, insolvency, liquidation or other reorganization of the Borrower,
the assets of the Borrower will be available to pay obligations on the Exchange
Notes only after all Senior Indebtedness has been paid in full, and there may
not be sufficient assets remaining to pay amounts due on all or any of the
Exchange Notes then outstanding. The Borrower will not make any payment with
respect to the principal of, or interest on, the Exchange Notes if (i) an event
of default exists in the payment of principal or interest with respect to any
Senior Indebtedness or (ii) the holders of Designated Senior Indebtedness (as
defined) shall have issued a Payment Blockage Notice (as defined). See
"Description of the Exchange Notes--Subordination of the Exchange Notes." In
addition, under certain circumstances, the payments of principal of, or interest
on, the Exchange Notes during the continuation of a default or an event of
default under the Bank Credit Facility will constitute an event of default under
the Bank Credit Facility.
As of December 31, 1997, total Senior Indebtedness was $79,949,000, of which
$48,000,000 represented borrowings under the Bank Credit Facility at December
31, 1997. All borrowings under the Bank Credit Facility are guaranteed on a
senior basis by the Borrower's restricted subsidiaries (currently all of
TSAT's subsidiaries except Tempo). Additional Senior Indebtedness may be
incurred by the Borrower and guaranteed by its subsidiaries on a senior basis
from time to time, subject to certain restrictions.
The Exchange Notes will not be secured by any of the Borrower's assets. Under
the Bank Credit Facility, the obligations of the Borrower and all its domestic
subsidiaries (except Tempo) that are at least 80% owned, directly or indirectly,
by the Borrower, on a fully diluted basis, will be secured by substantially all
the assets of the Borrower and such subsidiaries. If the Borrower becomes
insolvent or is liquidated, or if payment under the Bank Credit Facility is
accelerated, the lenders under the Bank Credit Facility would be entitled to
exercise the remedies available to a secured lender under applicable law and
pursuant to the terms of the Bank Credit Facility. Accordingly, any claims of
such lenders with respect to such assets will be prior to any claim of the
holders of the Exchange Notes with respect to such assets. There can be no
assurance that the Borrower's assets could be sold quickly enough, or for
sufficient amounts, to enable the Borrower to meet its obligations (including
its obligations with respect to the
24
<PAGE>
Exchange Notes and any outstanding Notes). The Borrower anticipates that New
PRIMESTAR will be required to refinance and/or amend the Bank Credit Facility
after consummation of the Restructuring Transaction to the extent it is not
earlier amended and/or refinanced prior to such consummation, given that certain
terms and conditions thereof would be violated upon consummation of the
Restructuring Transaction. No assurance can be given that any such refinancing
and/or amendment will be completed on terms acceptable to the Borrower.
The Exchange Notes will not be guaranteed by any of the Borrower's
subsidiaries. All of the Borrower's subsidiaries other than Tempo have
unconditionally guaranteed the Bank Credit Facility and, accordingly, claims of
holders of Exchange Notes will be structurally subordinated to the claims of
such subsidiaries' creditors, including the lenders under the Bank Credit
Facility and trade creditors of such subsidiaries. See "Description of the
Exchange Notes--Certain Covenants."
Ability to Service Debt; Restrictive Covenants; Refinancing Risks
TSAT has incurred substantial indebtedness, all of which will be assumed by
New PRIMESTAR in connection with the Restructuring Transaction, and it is
expected that New PRIMESTAR will incur substantial indebtedness. See "--
Substantial Leverage; Additional Indebtedness Likely." The agreements pursuant
to which the Borrower's existing indebtedness was incurred contain, and any
additional financing agreements may contain, certain restrictive covenants. The
restrictions contained in the existing financing agreements affect, and in some
cases limit, among other things, the ability of the Borrower to incur additional
indebtedness, redeem or purchase subordinated indebtedness (including the
Exchange Notes and any outstanding Notes), create certain liens, make certain
restricted payments, permit dividend and other payment restrictions to apply to
certain subsidiaries, enter into certain transactions with affiliates and
certain other related persons or consummate certain merger, consolidation or
similar transactions. In addition to the restrictive covenants described above,
such financing agreements require the Borrower to maintain certain financial
ratios and to comply with other operating performance tests or other covenants.
The failure of the Borrower to maintain such ratios or comply with such other
tests or covenants would constitute events of default under such agreements
(allowing the creditors to accelerate the maturity of the indebtedness
thereunder and may limit the availability of funds under such agreements to
amounts less than the stated maximum committed amounts thereunder),
notwithstanding the ability of the Borrower to meet its debt service
obligations. Although these covenants are subject to a number of significant
exceptions and qualifications, these restrictions may inhibit the Borrower
ability to manage its business and to react to changing market conditions.
The Borrower's ability to meet its debt service obligations will be dependent
upon the Borrower's future performance, which is subject to numerous factors,
many of which are beyond its control. See "--Risks of Satellite Failure" and "-
- -Uncertainty Regarding High Power Strategies." There can be no assurance that
the Borrower will generate sufficient cash flow from operating activities to
meet debt service, capital expenditure and working capital requirements. It is
anticipated that after consummation of the Restructuring Transaction New
PRIMESTAR will be required to amend and/or refinance the Bank Credit Facility
and the PRIMESTAR Credit Facility to the extent they are not earlier amended
and/or refinanced by TSAT and/or the Partnership. the Borrower expects that the
Borrower's other outstanding indebtedness will need to be refinanced at
maturity. The Borrower's ability to refinance such indebtedness will depend
on, among other things, its financial condition at the time, the restrictions in
the instruments governing its indebtedness and other factors, including market
conditions, beyond the control of the Borrower. In addition, in the event the
Borrower does not generate sufficient cash flow from operating activities to
meet debt service requirements, the Borrower may need to seek additional debt or
equity financing. There can be no assurance that the Borrower will be
successful in generating sufficient cash flow from operating activities or in a
timely manner or in raising sufficient additional debt or equity financing on
terms that are acceptable to the Borrower, if at all, to enable it to repay or
refinance its debt. In the absence of such financing or refinancing, the
Borrower could be forced to dispose of assets in order to cover any shortfall in
the payments due on its indebtedness and such disposition may occur under
circumstances that might not be favorable to realizing the highest price for
such assets. In addition, the failure of the Borrower to have adequate access
to capital may adversely affect the Borrower's ability, or choice, to
commercially launch proposed products and services in the time frames planned by
the Borrower. See "--Substantial Leverage; Additional Indebtedness Likely" and
"--History of Losses of TSAT and Other Restructuring Parties."
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Deficiency of Earnings to Fixed Charges
The ratio of earnings to fixed charges of TSAT was less than 1.00 for the nine
months ended September 30, 1997, and for the years ended December 31, 1996, 1995
and 1994. Thus, earnings available for fixed charges were inadequate to cover
fixed charges for such periods. The amounts of coverage deficiencies were
$166,544,000, $185,941,000, $69,365,000 and $20,560,000 for the nine months
ended September 30, 1997 and for the years ended December 31, 1996, 1995 and
1994, respectively. TSAT has agreed to reimburse TCI UA 1, Inc., which supports
the PRIMESTAR Credit Facility. Fixed Charges relating to such agreement of
$6,489,000, $8,475,000, $9,888,000 and $3,374,000 for the nine months ended
September 30, 1997, and the years ended December 31, 1996, 1995 and 1994,
respectively, are included in fixed charges.
Repurchase of the Exchange Notes upon a Change of Control
Upon the occurrence of a Change of Control, the Borrower will be obligated to
make an offer to purchase all Exchange Notes and any remaining Notes outstanding
at a purchase price in cash equal to (i) with respect to the Senior Subordinated
Notes and Senior Subordinated Exchange Notes, 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the date of
purchase and (ii) with respect to the Senior Subordinated Discount Notes and the
Senior Subordinated Discount Exchange Notes, 101% of the Accreted Value on the
date of purchase (unless the date of purchase is on or after the earlier to
occur of February 15, 2002 and the Cash Interest Election Date, in which case
such purchase price shall be equal to 101% of the aggregate principal amount at
maturity thereof, plus accrued and unpaid interest thereon, if any, to the date
of purchase). See "Description of the Exchange Notes--Offer to Purchase upon
Change of Control." There can be no assurance that the Borrower will have
sufficient funds available at the time of any Change of Control to pay for all
of the Exchange Notes and the Notes that might be tendered by holders of
Exchange Notes and Notes seeking to accept such offer to purchase. In addition,
the Bank Credit Facility contains a covenant prohibiting the Borrower from
repurchasing any subordinated indebtedness of the Borrower, including the
Exchange Notes and the Notes, the violation of which constitutes an event of
default thereunder.
A "change of control" will constitute an event of default under the Bank
Credit Facility, permitting the lenders thereunder to accelerate the repayment
of indebtedness thereunder, in which case the subordination provisions of the
Exchange Notes and the Notes would require the payment in full of the Bank
Credit Facility and any other Senior Indebtedness before the Borrower could
distribute cash to purchase the Exchange Notes and the Notes. See "Description
of the Exchange Notes--Subordination of the Exchange Notes."
The pending Restructuring Transaction, if consummated as presently
contemplated, will not constitute a Change of Control.
Original Issue Discount Consequences of Senior Subordinated Discount Notes and
Senior Subordinated Discount Notes
The Senior Subordinated Discount Notes were issued at a discount from their
principal amount at maturity. Upon exchange, holders of Senior Subordinated
Discount Notes shall receive Senior Subordinated Exchange Notes having an
aggregate principal amount at maturity equal to the aggregate principal amount
at maturity of the Senior Subordinated Discount Notes exchanged. Although cash
interest is not expected to accrue on the Senior Subordinated Discount Notes (or
the Senior Subordinated Discount Exchange Notes exchanged therefor) prior to
February 15, 2002, and there are not expected to be any periodic payments of
interest on such Notes or such Exchange Notes prior to August 15, 2002 (unless a
Cash Interest Election shall have been made), original issue discount (the
difference between the "stated redemption price at maturity" and the "issue
price," as such terms are defined in the Internal Revenue Code of 1986, as
amended to the date hereof (the "Code"), and Treasury Regulations thereunder)
("OID") of the Senior Subordinated Discount Exchange Notes and Senior
Subordinated Discount Notes will accrete from the issue date of such Exchange
Notes and such Notes up to February 15, 2002. Consequently, purchasers of Senior
Subordinated Discount Exchange Notes, along with the holders of Senior
Subordinated Discount Notes not tendered for Exchange Notes, generally will be
required to include amounts in gross income for United States federal income tax
purposes in advance of their receipt of the cash payments to which the income is
attributable. Such amounts in the aggregate will be equal to the difference
between the "stated redemption price at maturity" and the "issue price"
(inclusive of stated interest). See "Certain Federal Income Tax Considerations"
for a more detailed discussion of the federal income tax consequences of the
purchase, ownership and disposition of the Senior Subordinated Discount Exchange
Notes.
In the event a bankruptcy case is commenced by or against the Borrower under
the United States Bankruptcy Code (the "Bankruptcy Code") after the issuance of
the Senior Subordinated Discount Exchange Notes, the claim of a holder of Senior
Subordinated Discount Exchange Notes and the claim of a holder of Senior
Subordinated Discount Notes may be limited to an amount equal to the sum of (i)
the initial offering price and (ii) that portion of the OID which is not deemed
to constitute "unmatured interest" for purposes of the Bankruptcy Code. Any OID
that was not amortized as of the date of any such bankruptcy filing would
constitute "unmatured interest." To the extent that the Bankruptcy Code differs
from the Code in determining the method of amortization of OID, any such holder
may realize taxable gain or loss on payment of such holder's claim in
bankruptcy.
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Risk of Inability to Receive Postbankruptcy Interest
Under the Bankruptcy Code, interest accruing after the date of the
commencement of bankruptcy proceedings on unsecured or undersecured debt does
not give rise to an allowable claim. Accordingly, in the event that the Borrower
becomes the subject of proceedings under the Bankruptcy Code, it is expected
that interest on the Exchange Notes and any remaining Notes outstanding accruing
after the date of commencement of bankruptcy proceedings will not be allowable
as a claim, and that no payment or distribution will be made with respect to
such postbankruptcy interest.
Risks of Satellite Failure
Limited Life of Satellites. All satellites have limited useful lives, which
vary as a result of their construction, the durability of their components, the
capability of their solar arrays and batteries, the amount of stationkeeping
fuel remaining once in orbit, the launch vehicle used and the accuracy of the
launch. Since March 10, 1997, the PRIMESTAR(R) service has been transmitted
from GE-2, a medium power satellite that was launched into the 85 W.L. orbital
position on January 30, 1997, and was declared commercially operational March 6,
1997. The minimum design life of GE-2 is 15 years. There can be no assurance,
however, that such satellite will achieve its minimum design life, and the
contract with GE Americom does not guarantee the minimum useful life of GE-2.
The Borrower could be adversely affected if GE-2 or any other satellite used in
connection with its business failed prior to its minimum design life.
The minimum design life of each of the Tempo Satellites is 12 years. There
can be no assurance, however, that either Tempo Satellite will achieve its
minimum design life, and the contract with Loral does not guarantee the minimum
useful life of the Tempo Satellites.
Risks of Satellite Defect, Loss or Reduced Performance. Satellites are
subject to significant risks, including: manufacturing defects affecting the
satellite or its components; launch failure resulting in damage to, or
destruction of, the satellite or incorrect orbital placement; and damage in
orbit caused by asteroids, space debris or electrostatic storms. Such factors
may prevent or limit commercial operation or reduce the satellite's useful life.
Neither TSAT nor the Partnership is entitled to the benefit of any insurance
relating to the operation of GE-2.
Tempo DBS-1 was outfitted with an antenna suitable for operation at the
119(degrees) W.L. orbital location and was launched into geosynchronous orbit on
March 8, 1997, on an Atlas rocket from Cape Canaveral by International Launch
Services on behalf of Lockheed Martin Corporation. Tempo DBS-1 is currently
undergoing extended in-orbit testing under the Satellite Construction Agreement.
Since the launch of Tempo DBS-1, Loral has notified Tempo of at least five
separate occurrences of power reductions on Tempo DBS-1. No assurance can be
given that further power reductions will not occur in the future. The Borrower
does not currently know the extent of such power reductions, and cannot confirm
the precise causes thereof; however, such reductions could eventually affect the
proposed operation of Tempo DBS-1, either alone or together with other events
that may arise during the expected life of the satellite. The Borrower believes
that Tempo DBS-1 may not fully comply with specifications, but has not yet
determined the extent of any such non-compliance. Tempo and Loral are currently
engaged in discussions regarding this matter, including the timing, extent and
methodology of any further tests to be conducted and the terms of any monetary
settlement with respect to the satellite to which Tempo may be entitled under
the Satellite Construction Agreement. A defect or damage affecting Tempo DBS-1
could cause a substantial monetary loss to the Borrower.
The Borrower is entitled to the benefit of certain limited warranties and
insurance coverage relating to the Tempo Satellites pursuant to the Satellite
Construction Agreement with Loral. However, such warranties and insurance
coverage might not be sufficient to compensate it for all of its losses in the
event of a partial or total satellite failure or casualty, even if such failure
or casualty were a covered loss.
Ability to Manage Growth; Subscriber Churn
TSAT'S business and the businesses of the Partnership and the other
Distributors have grown rapidly since 1994, when the Partnership completed its
adoption of digital technology. The Borrower believes that such rapid growth has
been a factor in the increases it has experienced in both subscriber churn and
bad-debt write-offs. The ability of the Borrower to continue its expansion and
increase its customer base while
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maintaining its price structure, reducing its churn rate and managing costs will
depend upon, among other things, the Borrower's ability to manage its growth
effectively. To manage growth effectively, the Borrower must continue to develop
its internal and external sales force, installation capability, customer service
team and information systems, maintain its relationships with third party
vendors and implement efficient procedures to mitigate subscriber credit risk.
The Borrower will also need to continue to grow, train and manage its employee
base, and its management will be required to assume greater levels of
responsibility. If the Borrower is unable to manage its growth effectively, the
Borrower's business and results of operations could be materially adversely
effected.
During the nine months ended September 30, 1997 and 1996, and the years ended
December 31, 1996, 1995 and 1994, (i) the Borrower's annualized subscriber churn
rate (which represents the annualized number of subscriber terminations divided
by the weighted average number of subscribers during the period) was 32.2%,
38.9%, 38.5%, 24.7% and 16.1%, respectively, and (ii) the average subscriber
life implied by such subscriber churn rate was 3.1 years, 2.6 years, 2.6 years,
4.1 years and 6.2 years, respectively. The Borrower's experienced a higher rate
of subscriber churn in 1996, as compared to the first nine months of 1997 and
prior periods. The Borrower believes that the higher 1996 churn rate is
primarily attributable to the fact that subscribers were allowed to initiate
service with no credit approval during the fourth quarter of 1995 and the first
six months of 1996. Although no assurance can be given, the Borrower expects
that churn rates for future periods will be lower than the levels experienced in
1996. If the Borrower's churn rates were to return to, or increase from, such
1996 levels, the Borrower believes that its financial condition and results of
operations would be adversely affected.
TSAT is currently unable to determine New PRIMESTAR'S annualized subscriber
churn rate on a pro forma basis for past periods. If, following the closing of
the Restructuring Transaction, New PRIMESTAR's churn rates exceed TSAT's churn
rate for the nine months ended September 30, 1997, or fail to improve from such
levels in subsequent periods, TSAT believes that the financial condition and
results of operations of New PRIMESTAR would be adversely affected.
Uncertainties of Operations Following the Restructuring Transaction
The success of the Restructuring Transaction and the related transactions will
depend in part on the ability of New PRIMESTAR to integrate effectively the
businesses of TSAT and the Partnership and the PRIMESTAR/(R)/ distribution
businesses of the other Distributors, each of which currently operates
separately. There can be no assurance that successful integration of such
businesses or that the benefits expected to result from such integration will be
realized. The process of integrating such businesses may also require a
disproportionate amount of time and attention of New PRIMESTAR's management and
financial and other resources of New PRIMESTAR. In addition, the integration of
the businesses of TSAT and the Partnership and the PRIMESTAR/(R)/ distribution
businesses of the other Distributors may be made more difficult initially by the
necessity of coordinating geographically separated organizations and integrating
personnel with disparate business backgrounds and corporate cultures. If New
PRIMESTAR is not successful in integrating the strategies and operations of such
businesses or if such integrated operations fail to achieve consumer acceptance,
the combined business could be adversely affected. Further, any delays or
unexpected costs that arise in connection with such integration could have a
material adverse effect on the business, results of operations or financial
condition of New PRIMESTAR, as well as the market value of New PRIMESTAR
securities.
Competitive Nature of Industry
The business of providing video programming to consumers is highly
competitive. The Borrower faces competition from numerous other companies
offering video, audio and data products and services. The existing and potential
competitors of the Borrower comprise a broad range of companies engaged in
communications and entertainment, including other digital satellite programming
distributors, cable operators, wireless cable operators, television networks and
home video products companies, as well as companies developing new technologies
and other purveyors of news, information and entertainment. the Borrower
competes, among others, with companies offering programming through various
other satellite broadcasting systems, including DirecTv, Inc. ("DirecTv"), a
unit of Hughes Electronics Corp., which is a division of the General Motors
Corporation, United States Satellite Broadcasting Corporation ("USSB") and
EchoStar, which transmit from high power
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satellites and generally use smaller dishes to receive their signals. There can
be no assurance that the Borrower will be able to compete successfully against
current and prospective providers of digital satellite programming services,
some of which will have access to greater resources and/or have secured the
rights to broadcast from a greater number of satellite transponder
frequencies.
Many of the Borrower's cable competitors have greater financial, marketing and
programming resources than the Borrower. Cable operators generally have large
installed customer bases, and many cable operators have significant investments
in, and access to, programming. According to industry sources, cable television
service is currently available to more than 95% of the approximately 97 million
U.S. television households, and approximately 67% of total U.S. television
households currently subscribe to cable. In order to substantially increase its
subscriber base, the Borrower will be required to attract customers who
currently subscribe to cable and to expand commercial accounts, including
hotels, motels, bars and restaurants as well as MDUs. There can be no assurance
that the Borrower will be able to substantially increase its subscriber base or
successfully attract customers in competition with cable operators.
UNCERTAINTY REGARDING HIGH POWER STRATEGIES
TSAT currently intends to operate Tempo DBS-1 as a platform to provide high
power digital video and audio programming services to residential customers,
MDUs, commercial customers and resellers. If the TSAT Merger or the Tempo Sale
is consummated, such high power DBS services will be provided by New PRIMESTAR.
Otherwise, TSAT expects that such services will be provided through the
Partnership, which has exercised its option under the Tempo Option Agreement to
purchase or lease 100% of the capacity of Tempo DBS-1. Following consummation of
the Restructuring Transaction, the Partnership will be an indirect wholly owned
subsidiary of New PRIMESTAR.
In addition to the possibility of satellite impairment or failure as described
above under the heading "--Risk of Satellite Failure--Risks of Satellite Defect,
Loss or Reduced Performance," there are numerous uncertainties regarding the
high power DBS business proposed to be operated by the Borrower:
(i) The proposed high power DBS business is currently in the development
stage. Programming content, pricing and other important decisions have not
been finalized. There can be no assurance that desired programming content
will be available on favorable terms.
(ii) The FCC Permit authorizes the use of only 11 transponders on Tempo DBS-
1, as compared to the 32 transponders operated in the aggregate by DirecTv and
USSB on DirecTv's full CONUS DBS satellite and the 21 transponders operated by
EchoStar on its full CONUS DBS satellite. Although Tempo intends to utilize
advanced digital compression technologies, including statistical multiplexing,
to provide up to 100 video and 20 audio programming channels over such 11
transponders, there can be no assurance that the relatively limited capacity
of Tempo DBS-1 will not have an adverse effect on the Borrower's proposed high
power DBS business.
(iii) If the ASkyB Transaction is consummated, the Partnership or New
PRIMESTAR will use the 28 transponders currently authorized to MCI in the 110
W.L. orbital location to provide high power DBS services to residential
customers, commercial customers and MDUs. It can be expected that consummation
of the ASkyB Transaction will have a material impact on the Borrower's
strategy relating to the Tempo Satellites and FCC Permit, although the full
nature of such impact cannot presently be determined. The ASkyB Transaction is
subject to various regulatory approvals, and there can be no assurance that
such approvals will be obtained, or if obtained, that such approvals will not
be conditioned upon modifications to the high power strategies of the
Partnership and/or the Borrower, as currently proposed. The ASkyB Agreement
requires the Partnership to cause the divestiture of all rights of the
Partnership and any of the Partners under Tempo's FCC Permit with respect to
the 11 transponder channels at 119 W.L., including divestiture of the
Partnership's right to purchase or lease 100% of the capacity thereunder
pursuant to the Tempo Option Agreement, if required as a condition to
regulatory approval of the ASkyB Transaction.
No assurance can be given as to the effect that the implementation of any high
power strategy will have on
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the Borrower's existing medium power customer base.
No assurance can be given that the Borrower will not significantly change the
direction of its high power strategy or that any high power strategy will be
successful.
In light of the pendency of the Restructuring Transaction, the TSAT Merger,
the Tempo Sale and the ASkyB Transaction, the Borrower and the Partnership are
evaluating alternative future plans with respect to Tempo DBS-2, including its
use or disposition. Tempo DBS-2 presently serves as a ground spare for Tempo
DBS-1.
Risks of Adverse Government Regulations and Adjudications
General. The construction and launch of DBS satellites and the operation of
DBS systems are subject to substantial regulation by the FCC. FCC rules are
subject to change in response to industry developments, new technology and
political considerations. The Borrower's business and business prospects could
be adversely affected by the adoption of new laws, policies, and regulations.
There can be no assurance that the Borrower will succeed in obtaining all
requisite regulatory approvals for its operations without the imposition of
restrictions on, or adverse consequences to, the Borrower. There also can be
no assurance that material adverse changes in regulations affecting the digital
satellite television industry or the Borrower will not occur in the future.
See "--Potential Interference with Satellite Signal."
FCC Permit. Tempo holds the FCC Permit, which authorizes construction of a
DBS system with 11 frequency channels at 119(degrees) W.L. that view the entire
continental U.S. and 11 frequency channels at 166(degrees) W.L. that view only
the western half of the continental U.S. and Alaska and Hawaii. The FCC's DBS
construction permits are conditioned on the satisfaction of ongoing construction
and related obligations. Under the FCC Permit, the time by which the Tempo
Satellites must be operational expires in May 1998. The Borrower believes that
it has complied with the obligations for Tempo DBS-1 to become operational by
that date, but there can be no assurance that the FCC would agree that such
satellite is operational, and if an application for extension of the FCC Permit
were required, there can be no assurance that such an extension would be granted
by the FCC. See "--Risks of Satellite Failure."
At present, Tempo must continue to demonstrate that it is exercising due
diligence in progressing toward the completion of its DBS system at 166(degrees)
W.L. and has in place the Satellite Construction Agreement with Loral to fulfill
this due diligence requirement. There can be no assurance that Tempo will be
able to comply with the FCC's due diligence obligations for 166(degrees) W.L. or
that the FCC will determine that Tempo has complied with such due diligence
obligations. If Tempo is unable to meet the terms of the FCC Permit, it would be
required to apply to the FCC for an extension of time to complete its DBS system
at 166(degrees) W.L. Tempo cannot be certain that an extension would be
granted.
Tempo also may be required to file an application for a license to operate
its satellites in orbit. Tempo expects that the FCC would approve any such
request but cannot assure the ultimate outcome. FCC licenses must be renewed at
the end of each license term. Generally, FCC licenses are renewed in the
ordinary course, absent misconduct by the licensee.
On July 18, 1997, TSAT and the Partnership filed an application with the FCC
for consent to the transfer of control of Tempo, as the holder of the FCC
Permit, to New PRIMESTAR (the "Transfer Application"). The Transfer Application
must be approved by the FCC before consummation of the TSAT Merger or any Tempo
Sale. Petitions to deny and comments were filed against the Transfer
Application. The comments and petitions urge the FCC to either deny the
Partnership and those Restructuring Parties affiliated with large cable
operators the opportunity to provide high power DBS service or to condition any
such provision. TSAT and the Partnership filed a joint opposition to these
petitions and comments. Before approving the Transfer Application, the FCC must
review the petitions filed and responsive pleadings and find that there are no
material issues of fact that should prevent approval of the TSAT Merger or any
Tempo Sale and that approval would serve the public interest. There can be no
assurance that the FCC's review of the Transfer Application and the petitions
will be favorable, or that the FCC will not impose conditions unacceptable to
TSAT, the Partnership, or the other Restructuring Parties in connection with its
review. Approval of the Transfer Application is a prerequisite of the TSAT
Merger (so long as TSAT controls Tempo) or any Tempo Sale, but is not required
to complete the Restructuring Transaction.
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In addition, on August 15, 1997, the Partnership and MCI filed an application
with the FCC for consent to the assignment to New PRIMESTAR of the high power
DBS authorizations and certain other assets owned by MCI (the "Assignment
Application"). The Assignment Application must be approved by the FCC before
the consummation of the ASkyB Transaction. The FCC placed the Assignment
Application on Public Notice for comments. While MCI has a contractual
obligation to maintain its due diligence at the FCC with respect to its DBS
authorizations that are subject to the Assignment Application, there can be no
assurance that MCI will do so.
Numerous parties have filed comments and petitions to deny with regard to the
Assignment Application. The petitions and comments urge the FCC to either deny
the Assignment Application or to condition its approval. The issues raised in
these petitions and comments include the following: (1) opposition to the
Partnership or New PRIMESTAR holding the 110(degrees) W.L. authorization; (2)
opposition to the Partnership or New PRIMESTAR simultaneously holding
authorizations for both the 110 W.L. orbital position (28 transponders) and the
119 W.L. orbital position (11 transponders), which together represent about 40%
of the total transponder capacity in the three orbital positions allocated to
the U.S. for DBS service that provide full CONUS visibility; (3) requests for
extension of the FCC's rules governing access to satellite delivered programming
to News Corp. and expansion of those rules to programming not delivered by
satellite (such as broadcast television stations), and (4) issues relating to
the possible applicability of the foreign ownership restrictions of Section
310(b) of the Communications Act of 1934, as amended (together with the rules
and regulations promulgated thereunder, the "Communications Act"). There can be
no assurance that the FCC's review of these and other documents or the
Assignment Application will be favorable, or that the FCC will not impose
conditions unacceptable to New PRIMESTAR, MCI, ASkyB or News Corp. in connection
with its review.
MCI's authorization from the FCC to construct, launch and operate satellites
in the DBS service at 110(degrees) W.L. providing 28 transponder channels of
service (the "110 Slot"), one of MCI's DBS authorizations at issue in the
Assignment Application, was purchased by MCI at an FCC auction in January 1996.
The other DBS authorization is a waiver of Section 319(d) of the Communications
Act, granting MCI authority to construct a DBS satellite without an FCC
construction permit at its own risk. Before the auction of the 110 Slot, the FCC
imposed a one-time auction rule which required the entity who bought the 110
Slot to divest any voting interest of five percent or greater held in DBS
permittees or licensees that hold FCC authorizations for the two other DBS slots
that view the entire continental U.S. (the "Divestiture Requirement"). These two
slots include 101(degrees) W.L. and 119(degrees) W.L. While the Divestiture
Requirement was promulgated as a one-time rule, the FCC may decide to impose
this rule as a condition to approving the Assignment Application and to require
New PRIMESTAR to divest its interest in 119(degrees) W.L.
Should the FCC determine that foreign ownership restrictions apply to
subscription DBS service providers, then, as a condition to the consummation of
the ASkyB Transaction, New PRIMESTAR would have to seek a waiver of such
restrictions. There can be no assurance that the FCC would grant such a
waiver.
SHVA. The Satellite Home Viewer Act of 1994 ("SHVA") prohibits the
retransmission by a satellite carrier of a television broadcast signal of a
network television station to households that receive a Grade B intensity over-
the-air signal of a television broadcast station affiliated with such network
and to households that receive (or within the past 90 days had received) through
a cable system the signal of a television station affiliated with such network.
In complying with the SHVA, the Partnership is required to discontinue network
service to certain of its subscribers who are able to receive network services
over the air. The Partnership has received numerous challenges to its network
subscribers from certain network affiliates and in some instances has
discontinued network service to certain subscribers. The networks and their
affiliates have commenced infringement actions against certain other satellite
carriers for violation of the network service restrictions. However, while the
networks and affiliates have from time to time threatened litigation, none of
the networks or affiliates has yet asserted any claim for damages under
applicable law against the Partnership or any of the other parties to the Roll-
up Plan. Negotiations are continuing among representatives of the Partnership,
the National Association of Broadcasters, certain network-affiliated television
stations, and their respective affiliate associations, regarding a proposed
Settlement and Compliance Agreement, which agreement is expected to provide for
pre-screening techniques for customers based on zip codes and maps to ensure
compliance with SHVA procedures, the timing for disconnecting any existing non-
compliant network subscribers, and provisions for mutual release for any past or
future liability. Although a final agreement with respect to such matters has
not yet been executed, the Partnership currently expects to enter into such an
agreement during the first quarter of 1998. However, if an
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agreement is not reached, it is likely that litigation will be initiated against
the Partnership. The SHVA provides for remedies which can include actual
damages, injunctions, and statutory damages. Statutory damages per individual
claim are limited to $5.00 per subscriber, per month, and statutory damages for
a pattern or practice of violations are limited to $250,000 in a six month
period. At present, the Partnership is unable to determine the basis upon which
any damages might be calculated or what their amount might be. Therefore, it is
not possible to assess the impact, if any, of such unasserted claims on the
Partnership's results of operations or cash flow. Management is also currently
unable to determine the extent to which the restriction on the delivery of
network service to subscribers, as contemplated by the proposed Settlement and
Compliance Agreement, would have on the marketing of its services
generally.
Increase in Compulsory License Fees. A Copyright Arbitration Royalty Panel
("CARP"), convened pursuant to the terms of the SHVA, recommended to the
Librarian of Congress that the royalty fees paid by satellite carriers for the
distribution of superstations and network affiliates directly to homes should
be increased to a level commensurate with fair market value, which is far in
excess of the rate currently paid by cable operators. The Librarian of Congress
accepted CARP's recommendation to increase the royalty fees and determined that
the new fees should become effective as of January 1, 1998. The Satellite
Broadcasting and Communications Association ("SBCA"), representing the satellite
carriers, filed a petition with the Librarian of Congress requesting a stay of
the effectiveness of the decision, pending judicial review or congressional
action. The Librarian of Congress denied the petition, and as of January 1,
1998, the rate increase went into effect. The SBCA also filed a petition
seeking review of the rate increase with the U.S. Court of Appeals for the
District of Columbia. In addition, the satellite carriers have requested
Congress to override the rate adjustment by legislation. A bill has been
introduced in the Senate (S. 1422) which would delay an increase in the royalty
fees until January 1, 1999 and would require the FCC to report to Congress
within 180 days of enactment of the legislation on the effect of the increase of
the royalty fees on the satellite carriers' abilities to compete in the market
for delivery of multichannel video programming. A bill also has been introduced
in the House of Representatives (H.R. 2291) which is similar to the Senate bill
and requires a stay of the royalty increase until the FCC reviews the effects on
the market and reports to Congress; however, the stay would be in effect no
later than 210 days after enactment. No assurance can be given that the
satellite carriers will be able to obtain relief from the U.S. Court of Appeals
or Congress. Should the decision of the Librarian of Congress stand, Tempo or
New PRIMESTAR (and all other direct satellite service providers) may be
competitively disadvantaged vis-a-vis cable operators.
State Taxes. In addition to being subject to FCC regulation, operators of
DBS systems in the U.S. may be affected by imposition of state sales taxes on
satellite-delivered programming. According to the SBCA, several states,
including Maryland, Missouri, North Dakota, New York and Washington have either
adopted or proposed such taxes. Other states are in various stages of
considering proposals that would tax providers of satellite-delivered
programming and other communications providers. The provision of state imposed
sales taxes could have adverse consequences to the Borrower's business.
There can be no assurance that additional government regulations affecting DBS
permittees and licensees will not occur in the future.
Issues Affecting Competitors. On July 18, 1997, EchoStar and DirectSat
Corporation, a subsidiary of EchoStar ("DirectSat"), filed a consolidated
application for special temporary authority ("STA Application") to provide DBS
service over the 11 channels at 119(degrees) W.L. currently held by Tempo.
EchoStar and DirectSat hold the authorization to use the remaining 21 channels
at the 119(degrees) W.L. orbital location and currently are offering service
from that location as the DISH Network.
EchoStar temporarily used certain of Tempo's channels prior to Tempo's March
1997 satellite launch. However, in June 1996, the FCC denied both EchoStar's and
DirectSat's requests to extend the STA Application for use of the Tempo
channels. The FCC was concerned that when Tempo eventually launched its
satellite and commenced its own service, the resultant reduction in service by
EchoStar and DirectSat would confuse customers. While EchoStar and DirectSat
claimed that customers would not miss their proposed pay-per-view services to be
offered over Tempo's channels, the FCC disagreed and denied their requests.
In their STA Application, EchoStar and DirectSat argued that Tempo was either
wasting its allocated channels by not using them or warehousing the channels for
use by another party. Furthermore, EchoStar and
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DirectSat stated that New PRIMESTAR, which is set to acquire Tempo or Tempo's
assets pursuant to the TSAT Merger or any Tempo Sale, indicated its willingness
to return Tempo's 11 channels at 119(degrees) W.L., if required, as a condition
for FCC approval of the Assignment Application. Tempo has filed a petition to
deny the STA Application, but the outcome of the proceeding cannot be
guaranteed.
DirecTv recently filed an application with the FCC to expand its existing
satellite system, currently located at 101(degrees) W.L. In its June 5, 1997
application, DirecTv requested orbital slots located at 96.5(degrees) W.L. and
105.5(degrees) W.L. To implement this expansion, DirecTv must secure additional
frequencies in order to transmit and receive signals at these additional orbital
locations. Thus, in a related petition for rulemaking (also filed June 5, 1997),
DirecTv requested that the FCC reallocate certain frequencies for DBS use.
DirecTv also requested that the standard 9 spacing policy be abandoned in favor
of a 4.5 spacing policy. The public was invited to comment on DirecTv's
petition, and comments were filed by interested parties on July 31, 1997.
Commenters generally complained that interference with other satellite
transmissions might result from DirecTv's expansion plan. The FCC to date has
not issued a Notice of Proposed Rulemaking in this matter, which is a
prerequisite to the frequency reallocation requested by DirecTv. In addition,
even if the reallocation is eventually granted, there can be no guarantee that
DirecTv will be assigned the frequency authorizations and orbital locations it
has requested. These authorizations would be available to competing applicants
as well.
Should the FCC adopt a 4.5 spacing policy for DBS providers, it is possible
that the FCC would grant authorizations for satellites at locations adjacent to
Tempo's and the Partnership's satellites which may cause interference.
Moreover, if the FCC adopts a 4.5 spacing policy, it is possible that a
competitor would control more full CONUS DBS transmission capacity than New
PRIMESTAR and therefore, potentially would be able to offer more services than
New PRIMESTAR. In any event, it is uncertain whether DirecTv's requests will be
granted.
Potential Interference with Satellite Signal
The International Bureau of the FCC (the "International Bureau") has granted
EchoStar Satellite Corporation, a subsidiary of EchoStar Communications
Corporation (together with its consolidated subsidiaries, "EchoStar") a
conditional authorization to construct, launch and operate a Ku-band domestic
fixed satellite into the orbital position at 83 W.L., immediately adjacent to
that occupied by GE-2, the medium power satellite currently used to provide the
PRIMESTAR(R) service. Contrary to previous FCC policy, which would have
permitted operation of a satellite at the 83 W.L. orbital position at a power
level of only 60-90 watts (subject to coordination requirements), EchoStar has
been authorized to operate at a power level of 130 watts. If EchoStar were to
launch its high power satellite authorized to 83 W.L. and commence operations at
that location at a power level of 130 watts, it would likely cause harmful
interference to the reception of the PRIMESTAR(R) signal from GE-2 by
subscribers to the PRIMESTAR(R) medium power service.
GE Americom and the Partnership have each requested reconsideration of the
International Bureau's authorization for EchoStar to operate at 83 W.L. These
requests, which were opposed by EchoStar and others, are currently pending at
the International Bureau. There can be no assurance that the International
Bureau will change slot assignments, or power levels, in a fashion that
eliminates the potential for harmful interference. Accordingly, the ultimate
outcome of this matter cannot presently be predicted.
GE Americom and the Partnership have attempted to resolve potential
coordination problems directly with EchoStar. However, it is uncertain whether
any agreement in respect of such coordination between the Partnership and
EchoStar will be reached, or that even if such agreement is reached, that
coordination will resolve such interference.
Potential Conflicts of Interest
Following consummation of the Restructuring Transaction, TSAT will own
approximately 36% of the shares of New PRIMESTAR Common Stock outstanding (and
approximately 37% of the total voting power of the shares of New PRIMESTAR
Common Stock outstanding), and TWE and Newhouse (collectively), Comcast,
MediaOne, Cox and GE Americom will own approximately 31%, 10%, 9%, 9% and 5%,
respectively, of the shares of New PRIMESTAR Common Stock outstanding and
approximately 32%, 10%,10%, 9% and 2%, respectively, of the total voting power
of the shares of New PRIMESTAR Common Stock outstanding, in each case subject to
adjustments based on closing subscriber counts and other factors. Following
consummation of the TSAT Merger, John C. Malone, the Chairman of the Board and a
director of TCI (and also
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Chairman of the Board and a director of TSAT) will own approximately 2.0% of the
shares of New PRIMESTAR Common Stock outstanding and approximately 8.8%, of the
total voting power of the shares of New PRIMESTAR Common Stock outstanding at
the Closing of the Restructuring Transaction.
Affiliates of each of the Class C Stockholders and TCI and GE Americom,
individually and in joint ventures with each other and others, have substantial
other interests in the communications and entertainment industries, some of
which may compete with the business of, or provide programming to, New
PRIMESTAR. All of the Class C Stockholders and TCI, through their respective
subsidiaries and affiliates, own or have controlling interests in cable systems
throughout the United States, and because New PRIMESTAR will be competing with
such cable systems in the provision of multi-channel video programming services,
there is the potential for conflicts of interest. The restated certificate of
incorporation of New PRIMESTAR (the "New PRIMESTAR Charter") provides for two
independent directors, and Section 144 of the DGCL, in general, provides that no
related party transaction is void or voidable solely for this reason, if: (i)
the material facts as to the related party transaction are disclosed or are
known to the board of directors or the committee which authorizes the
transaction, and the board or committee in good faith authorizes the transaction
by the affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; or (ii) the material
facts as to the related party transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the transaction is specifically
approved in good faith by vote of the stockholders; or (iii) the related party
transaction is fair as to the corporation as of the time it is authorized,
approved or ratified, by the board of directors, a committee or the
stockholders.
Pursuant to the Restructuring Agreement, at the Closing, New PRIMESTAR will
enter into a Transition Period Agency Agreement with each Class C Stockholder
(or their respective affiliates), pursuant to which each such party will be
designated as a servicing agent in assigned non-exclusive territories with
respect to New PRIMESTAR's medium power PRIMESTAR(R) subscribers, for a period
of up to six months following the Closing. In addition, each Class C Stockholder
and TCI (or their respective affiliates) will have the right to enter into an HP
Agency Agreement with New PRIMESTAR, pursuant to which such party will act as a
non-exclusive retail sales and servicing agent of any stand-alone retail high
power PRIMESTAR(R) programming service. Pursuant to the Restructuring Agreement,
each Class C Stockholder and TCI (or their respective affiliates) will also have
a right to enter into a Sales Agency Agreement, pursuant to which such party
will act as a non-exclusive retail sales agent of (i) the PRIMESTAR(R) medium
power programming service, or (ii) at any time that such party is not a party to
an HP Agency Agreement, any stand-alone retail high power PRIMESTAR(R)
programming service. Such agreements could give rise to potential conflicts of
interest since in those territories served by cable television, New PRIMESTAR
will be competing for subscribers with the cable systems owned and operated by
the Class C Stockholders and TCI, and the respective ownership interests of the
Class C Stockholders and TCI in the applicable cable systems may be greater than
their respective ownership interests in New PRIMESTAR. In order to offset this
potential for conflicts of interest, the HP Agency Agreements and the Sales
Agency Agreements will contain performance standards designed to ensure that New
PRIMESTAR's customers receive appropriate service from the applicable Class C
Stockholder or TCI with respect to installation, maintenance and other service
functions. In the event a Class C Stockholder or TCI fails materially to satisfy
the service performance standards, such party may lose its right to provide
service, but will not lose its right to act as a sales agent or to receive the
fees associated with performance of its sales agent obligations.
Risks Associated with the ASkyB Transaction
Increased Financial Obligations. Consummation of the ASkyB Transaction will
impose additional financial obligations on New PRIMESTAR. The consideration to
be paid by New PRIMESTAR in connection with the ASkyB Transaction will include,
subject to closing adjustments, $600 million liquidation value of New PRIMESTAR
Convertible Preferred Stock and $516 million principal amount of New PRIMESTAR
Convertible Subordinated Notes. New PRIMESTAR will also assume certain
obligations under certain specified contracts and other arrangements binding
upon ASkyB, News Corp. and/or MCI, which will require New PRIMESTAR to make
payments, subject to the terms and conditions of such contracts and
arrangements. At September 30, 1997, the remaining commitments under such
obligations to be assumed aggregated approximately $187 million. Consummation of
the ASkyB Transaction will make New PRIMESTAR's future operations more heavily
dependent than they otherwise would be on the success of the proposed high power
DBS business, which is subject to numerous uncertainties. See "--Uncertainty
Regarding High Power Strategies." New PRIMESTAR will incur additional costs if
it converts all or some of its existing medium power customers to the high power
satellite
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service expected to be provided with the assets acquired through the
ASkyB Transaction.
New PRIMESTAR's ability to meet the dividend payment and debt service
obligations it will incur as a result of the ASkyB Transaction, to fulfill the
contractual obligations it will assume and to fund the costs associated with
operating the proposed high power DBS business will depend upon New PRIMESTAR's
future performance, particularly the performance of the proposed high power DBS
business, which is subject to numerous factors, many of which are beyond New
PRIMESTAR's control. See "--Risks of Satellite Failure" and "--Uncertainty
Regarding High Power Strategies." There can be no assurance that the high power
DBS business will be successful or that New PRIMESTAR will generate sufficient
cash flow from operating activities to meet these obligations. If New PRIMESTAR
does not generate sufficient cash flow from operating activities to meet these
obligations New PRIMESTAR may need to seek additional debt or equity financing,
which may not be available on terms acceptable to New PRIMESTAR. See "--Ability
to Service Debt; Restrictive Covenants; Refinancing Risks," "--Substantial
Leverage; Additional Indebtedness Likely" and "--History of Losses of TSAT and
Other Restructuring Parties."
FAILURE TO CONSUMMATE THE ASKYB TRANSACTION. The ASkyB Transaction is subject
to regulatory and other conditions. If the ASkyB Transaction is not
consummated, then New PRIMESTAR may not be able to secure access to the capacity
of the 110(degrees) W.L. orbital slot on terms favorable to New PRIMESTAR or on
any terms. Although New PRIMESTAR intends in such event to pursue the proposed
high power DBS business using the transponder capacity of Tempo DBS-1, failure
of New PRIMESTAR to secure the availability of a full CONUS DBS slot with
greater capacity could have an adverse effect on its proposed high power DBS
business. See "--Uncertainty Regarding High Power Strategies."
EchoStar-News Corp. Litigation. In May 1997, EchoStar filed suit against News
Corp. with respect to their previously announced and then aborted business
combination. EchoStar seeks specific performance and damages against News
Corp., including lost profits alleged by EchoStar to exceed $10 billion over a
ten-year period. In June 1997, News Corp. filed an answer and counterclaims
against EchoStar seeking unspecified damages. News Corp.'s answer denies all
material allegations in EchoStar's amended complaint and asserts numerous
defenses, including bad faith, misconduct and failure to disclose material
information on the part of EchoStar. The parties are now in discovery. The
case has been set for trial commencing June 15, 1998, but that date may be
postponed.
None of TSAT, the Partnership, New PRIMESTAR or any of the other parties to
the Roll-up Plan have been named as defendants in the EchoStar-News Corp.
litigation. However, EchoStar has from time to time threatened to name some or
all of such parties as defendants in such action. Moreover, if EchoStar is
awarded specific performance, News Corp. may be prevented from consummating the
ASkyB Transaction.
In connection with the ASkyB Transaction, News Corp., TSAT, the Partnership,
Time Warner, Comcast, Cox, MediaOne, Newhouse and GE Americom entered into the
ASkyB Indemnification Agreement, which agreement provides for News Corp. to
indemnify the PRIMESTAR Indemnitees (as defined therein) against, and hold them
harmless from, losses, liabilities, claims, damages, costs and expenses relating
to the foregoing claims by EchoStar and/or certain related matters.
DEPENDENCE ON THIRD PARTY PROGRAMMERS
The Borrower will be dependent on third parties to provide The Borrower with
programming. The Partnership's existing programming agreements, of which
approximately 8% expire in 1998, 43% expire in 1999, 24% expire in 2000 and 25%
expire at various times between 2001 and 2008, contain various renewal and
cancellation provisions. There can be no assurance that any of these agreements
will be renewed or will not be canceled prior to expiration of their original
term. In the event that any such agreements are not renewed or are canceled,
there can be no assurance that New PRIMESTAR would be able to obtain or develop
substitute programming, or that such substitute programming would be comparable
in quality or cost to the Partnership's existing programming. The Partnership's
competitors currently offer substantially the same programming as the
Partnership. The ability of New PRIMESTAR to compete successfully will depend
on New PRIMESTAR's ability to continue to obtain desirable programming and
attractively package it to its customers at competitive prices.
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Risk of Signal Piracy
In common with all providers of subscription television programming, the
Borrower faces the risk that the PRIMESTAR(R) programming signal will be
obtained by unauthorized users. If signal piracy became widespread, the
Borrower's revenue and cash flow from operations could be adversely affected,
and New PRIMESTAR's ability to contract for video and audio services provided by
programmers could be adversely affected. Historically, signal piracy in the C-
band, cable television and European digital satellite industries has been widely
reported and, more recently, published reports indicate that the DirecTv and
USSB encryption systems have been compromised. While the Borrower management
believes that the encryption method utilized by the Partnership, which was
developed by an affiliate of General Instrument Corporation ("GI"), has been
effective in minimizing signal piracy, and there have been no published reports
of breaches in PRIMESTAR(R) security, there can be no assurance that changes
in technology will not render less effective the anti-piracy efforts associated
with PRIMESTAR(R).
Risk of Technological Changes
Technology in the digital satellite television industry is subject to rapid
change, and new technologies are continuously being developed. Some competitors
of the Borrower may have or may obtain access to proprietary technologies that
are perceived by the satellite services industry or customers as superior to,
or more desirable than, the technology of the Borrower and/or the technology
used in the PRIMESTAR(R) system. There can be no assurance that the Borrower
could obtain access to any such technology or that the lack of any such
technology would not adversely affect the ability of the Borrower to compete
with such competitors.
In addition, in order to implement successfully its high power business
plan, the Borrower will need access to statistical multiplexing technology or
other advances in digital compression technology that are currently under
development or being tested by several third parties. Such technology would
enable the Borrower to increase the number of digital program signals that could
be transmitted simultaneously over a single satellite transponder, thus
effectively increasing the digital compression ratio. Although the Borrower
does not currently have any agreement with respect to the use of any such
technology, the Borrower believes that the Borrower would be able to obtain the
rights to use such technology. However, in the event that the Borrower were
unable to obtain such rights, its high power business plan could be adversely
affected.
Absence of Public Market for the Exchange Notes
The Exchange Notes will have been registered under the Securities Act.
However, the Exchange Notes will constitute a new issue of securities with no
established trading market. If a trading market does not develop or is not
maintained, holders of the Exchange Notes may experience difficulty in reselling
the Exchange Notes or may be unable to sell them at all. If a market for the
Exchange Notes develops, any such market may be discontinued at any time.
Although the Initial Purchasers (Donaldson, Lufkin & Jenrette Securities
Corporation, Merrill Lynch, Pierce Fenner & Smith Incorporated, NationsBanc
Capital Markets, Inc. and Scotia Capital Markets (USA) Inc.) have advised the
Borrower that they currently intend to make a market in the Exchange Notes, they
are not obligated to do so and may discontinue such market making activity at
any time without notice. In addition, such market making activity will be
subject to the limits imposed by the Securities Act and the Exchange Act and may
be limited during the Exchange Offer and the pendency of any Registration
Statement with respect to resale of the Notes. Accordingly, there can be no
assurance as to the development or liquidity of any market for the Exchange
Notes. The liquidity of any market for the Exchange Notes will depend upon the
number of holders of such Exchange Notes, the interest of securities dealers in
making a market in the Exchange Notes and other factors. The liquidity of, and
trading markets for, the Exchange Notes may also be negatively affected by
general declines in the market for noninvestment grade debt independent of the
financial performance of, or prospects for, the Borrower. The Borrower does
not intend, and the Borrower does not anticipate that the Borrower will, list
the Exchange Notes on any national securities exchange or to seek the admission
thereof to trading in the National Association of Securities Dealers Automated
Quotation System. The Notes currently may be sold pursuant to the restrictions
set forth in Rule 144A or Regulation S, or pursuant to another available
exemption under the Securities Act, without registration under the Securities
Act. See "--Restrictions on Transfer."
Exchange Offer Procedures
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Issuance of the Exchange Notes in exchange for Notes pursuant to the Exchange
Offer will be made only after the timely receipt by the Borrower of such Notes,
a properly completed and duly executed Letter of Transmittal and all other
required documents. Therefore, holders of the Notes desiring to tender such
Notes in exchange for Exchange Notes should allow sufficient time to ensure
timely delivery. The Borrower is under no duty to give notification of defects
or irregularities with respect to the tenders of Notes for exchange. Notes that
are not tendered or are tendered but not accepted will, following the
consummation of the Exchange Offer, continue to be subject to the existing
restrictions upon transfer thereof and, upon consummation of the Exchange Offer,
the registration rights under the Registration Rights Agreements generally will
terminate. In addition, any holder of Notes who tenders in the Exchange Offer
for the purpose of participating in a distribution of the Exchange Notes may be
deemed to have received restricted securities and, if so, will be required to
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Each broker-dealer
that receives Exchange Notes for its own account in exchange for Notes, where
such Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. To the extent
that Notes are tendered and accepted in the Exchange Offer, the trading market
for untendered and tendered but unaccepted Notes could be adversely affected.
See "The Exchange Offer."
THE BORROWER
TSAT
Generally. TSAT is a leading distributor of digital satellite-based
television services in the United States. TSAT markets and distributes
PRIMESTAR(R), a medium power digital satellite service, under the brand names
"PRIMESTAR By TCI" and "PRIMESTAR By TSAT" and owns an aggregate 20.86% interest
in the Partnership, which owns and operates the PRIMESTAR(R) service. As of
September 30, 1997, TSAT was the largest distributor of PRIMESTAR(R), with an
installed base of approximately 769,000 subscribers, which represented
approximately 42.7% of the Partnership's estimated 1.8 million subscribers as of
such date. As of September 30, 1997, TSAT's subscribers comprised approximately
888,000 Authorized Units. As used herein, the term "Authorized Units" refers to
the number of active authorized satellite receivers or integrated
receiver/decoders ("IRDs"), more than one of which may be installed in a
subscribing household. PRIMESTAR(R) offers over 160 channels of digital video
and audio programming throughout the continental U.S., via medium power
satellite, to home satellite dishes approximately 27 to 36 inches in diameter
for most subscribers.
TSAT was incorporated in Delaware in November 1996. Prior to the Spin-off
Date, TSAT was a wholly-owned subsidiary of TCI, which, through various
subsidiaries, was engaged in the business of distributing PRIMESTAR(R) since
December 1990. TSAT was formed to own and operate TCI's interests in the
digital satellite business, in connection with the TSAT Spin-off. TSAT's
predecessor was incorporated in February 1995 to consolidate TCI's
PRIMESTAR(R) distribution business into one subsidiary, and was merged into
TSAT in connection with the TSAT Spin-off. TCI is one of the two largest
operators of cable systems in the U.S.
TSAT Series A Common Stock and TSAT Series B Common Stock trade on the Nasdaq
National Market under the symbols "TSATA" and "TSATB," respectively. The
mailing address and telephone number of TSAT's principal executive offices are
8085 South Chester, Suite 300, Englewood, Colorado 80112, (303) 712-4600.
Tempo. Tempo, a wholly-owned subsidiary of TSAT, holds the FCC Permit,
authorizing construction of a high power DBS system consisting of two or more
satellites delivering DBS service in 11 frequencies at the 119(degrees) W.L.
orbital position and 11 frequencies at the 166(degrees) W.L. orbital position.
The 119(degrees) W.L. orbital position is one of three such orbital positions
available for DBS service to the U.S. which are "full CONUS," meaning that they
have a view of the entire continental U.S.
Tempo is also a party to the Satellite Construction Agreement with Loral,
pursuant to which Tempo has arranged for the construction of the two Tempo
Satellites and has an option to purchase up to three additional satellites.
Construction of the Tempo Satellites has been completed. Tempo DBS-1 was
launched into TSAT's
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high power slot at 119(degrees) W.L. on March 8, 1997. The other Tempo
Satellite, Tempo DBS-2, presently serves as a ground spare for Tempo DBS-1.
Tempo DBS-1 is currently undergoing extended in-orbit testing under the
Satellite Construction Agreement. Assuming that such in-orbit testing results in
acceptance of the satellite by Tempo under the Satellite Construction Agreement,
Tempo DBS-1 would be available for commercial operations in the first quarter of
1998. At current levels of digital compression, Tempo believes that Tempo DBS-1
would be able to deliver approximately 100 channels of digital video and 20
channels of digital audio programming, as operated under the FCC Permit. Tempo
expects to use 18 inch dishes for the proposed high power service, the same
diameter currently used by other high power DBS providers, in most areas. Tempo
currently intends to operate Tempo DBS-1 as a platform to provide high power
digital video and audio programming services to residential customers, as well
as MDUs, commercial customers and resellers.
The availability and utility of Tempo DBS-1, including the power levels
provided by Tempo DBS-1, are subject to risks of satellite defect, loss or
reduced performance. Since the launch of Tempo DBS-1, Loral has notified Tempo
of at least five separate occurrences of power reductions on Tempo DBS-1. No
assurance can be given that further power reductions will not occur in the
future. TSAT does not currently know the extent of such power reductions, and
cannot confirm the precise causes thereof; however, such reductions could
eventually affect the proposed operation of Tempo DBS-1, either alone or
together with other events that may arise during the expected life of the
satellite. See "Risk Factors--Risks of Satellite Failure."
Pursuant to the Tempo Option Agreement, Tempo has agreed to sell or lease to
the Partnership 100% of the capacity of any DBS system constructed by Tempo
under the FCC Permit. In connection with the execution and delivery of the
Restructuring Agreement, TSAT and New PRIMESTAR entered into the TSAT Tempo
Agreement dated as of February 6, 1998 (the "TSAT Tempo Agreement"), pursuant to
which, among other things, TSAT granted to New PRIMESTAR (together with its
successors and assigns, the "Option Holder") the exclusive and irrevocable
option (the "Tempo Sale Option"), exercisable at any time during the term of the
TSAT Tempo Agreement, on the terms and subject to the conditions set forth in
the TSAT Tempo Agreement, upon receipt of FCC approval of the transfer of
control of Tempo to New PRIMESTAR (including approval of a transfer in
anticipation of a subsequent sale), to purchase from TSAT (at the Option
Holder's election) either (x) all the issued and outstanding shares of capital
stock of Tempo or (y) all the rights, title and interests of TSAT in, to and
under the Tempo Assets (as defined below), in either case for an aggregate
purchase price equal to $2.5 million plus, in the case of (y), the assumption by
the Option Holder of all obligations and liabilities of Tempo in respect of the
Tempo Assets, other than those incurred in violation of the TSAT Tempo Agreement
(either such transaction being referred to herein as the "Tempo Sale"). If the
Option Holder exercises the Tempo Sale Option and elects to consummate the Tempo
Sale via clause (y) above, then TSAT will liquidate Tempo immediately prior to
the closing of the Tempo Sale. The Option Holder, in its sole discretion, is
entitled to assign the TSAT Tempo Agreement and New PRIMESTAR's rights,
interests and obligations thereunder at any time. "Tempo Assets" means (i) the
FCC Permit, (ii) the Tempo Satellites, (iii) the Satellite Construction
Agreement, and (iv) all rights, claims and causes of action under the Satellite
Construction Agreement, all insurance claims in respect of the Tempo Satellites,
and Tempo's rights under the Tempo Option Agreement. If the TSAT Merger or the
Tempo Sale is consummated, New PRIMESTAR will operate Tempo's high power DBS
system. Otherwise, TSAT expects that such system will be utilized by the
Partnership pursuant to the Tempo Option Agreement. See "Risk Factors--
Uncertainty Regarding High Power Strategies."
Other Restructuring Parties
The Partnership. The Partnership owns and operates PRIMESTAR(R), which is
the oldest Ku-band satellite television service in the U.S. and has the second
largest subscriber base of any U.S. digital satellite television service. In
1990, direct or indirect subsidiaries of TCI and several other large cable
operators and GEAS, an indirect subsidiary of GE, formed the Partnership to
acquire, originate and/or provide television programming services for delivery
by satellite to subscribers in the continental U.S. Initially, PRIMESTAR(R)
was an analog service limited to seven broadcast television superstations, TV
Japan and three pay-per-view stations. In 1994, PRIMESTAR(R) was among the
first satellite television services to use digital transmission and compression
technology to offer laser-disc-quality image and compact-disc-quality sound.
The Partnership has consistently taken advantage of technological improvements
and additional available transponder capacity to improve the PRIMESTAR(R)
service, which today offers over 160 channels of digital video and audio
programming.
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In addition to TSAT, the Partners include (i) Cox SI, a subsidiary of Cox,
(ii) Comcast DBS, a subsidiary of Comcast, (iii) Continental, a subsidiary of US
WEST, Inc., the parent of MediaOne, (iv) New Vision Satellite, a partnership
controlled by Newhouse, which is a subsidiary of Newhouse Broadcasting, (v) TW
Programming Co., a partnership controlled by TWE, which is a subsidiary of Time
Warner, and (vi) GEAS, a subsidiary of GE, the parent of GE Americom. Each of
TSAT (through its subsidiaries) and TW Programming Co. holds a 20.86%
Partnership Interest, each of Cox SI, Comcast DBS, Continental and New Vision
Satellite holds a 10.43% Partnership Interest, and GEAS holds a 16.56%
Partnership Interest. Time Warner has substantial interests, through its
subsidiaries and controlled partnerships, in video programming and distribution,
and is one of the two largest operators of cable systems in the U.S. Cox,
Comcast and MediaOne are also among the five largest cable system operators.
Pursuant to the Partnership Agreement, the business and affairs of the
Partnership are managed and controlled by the Partners Committee, which is
composed of representatives of each of the Partners and two independent members.
TSAT has two voting representatives on the Partners Committee, Time Warner has
two voting representatives, and Cox, Comcast, MediaOne, Newhouse and GE each
have one voting representative.
The PRIMESTAR(R) programming service includes a variety of advertiser-
supported networks (sometimes referred to as "basic cable" channels), a broad
selection of movie services, national and regional sports packages and other
premium services, and multiplexed pay-per-view programming. The Partnership
secures its rights to transmit such programming via satellite by entering into
non-exclusive affiliation agreements with programming vendors. In addition to
video services, PRIMESTAR(R) includes digital audio and data services,
including Ingenius, which provides access to news, business news, stock quotes,
sports, weather and entertainment information to subscribers through their
personal computers.
The Partnership currently plans to participate in the high power segment of
the digital satellite industry. In that connection, the Partnership has agreed
to purchase or lease from Tempo 100% of the capacity of any DBS system
constructed by Tempo under the FCC Permit pursuant to the Tempo Option
Agreement. In addition, the Partnership has entered into the ASkyB Agreement,
which provides for the sale and transfer to New PRIMESTAR of the MCI
Satellites), certain authorizations granted to MCI by the FCC to operate a DBS
business at the 110(degrees) W.L. orbital location using 28 transponder
channels, and certain related contracts. The ASkyB Agreement requires New
PRIMESTAR to bear certain risks in connection with the process of obtaining the
regulatory approval related to such transfers, including the divestiture of all
rights of the Partnership and any of the Partners under Tempo's FCC
authorizations with respect to the 11 transponder channels at 119(degrees) W.L.,
if required as a condition to such approval. Consummation of the ASkyB
Transaction is contingent on, among other things, receipt of all necessary
government and regulatory approvals, and accordingly, no assurance can be given
that the ASkyB Transaction will be consummated.
The mailing address and telephone number of the Partnership's principal
executive offices are 3 Bala Plaza West, Suite 700, Bala Cynwyd, Pennsylvania
19004, (610) 617-5300.
Other PRIMESTAR(R) Distributors. PRIMESTAR(R) is distributed through TSAT
and the other Distributors, each of which is currently affiliated with one or
more of the Partners. The Distributors market the PRIMESTAR(R) service and
contract with subscribers, in non-exclusive territories assigned by the
Partnership. The Distributors set their own retail pricing and are responsible
in their respective territories for authorization of subscribers, installation,
maintenance and retrieval of customer premises equipment, and billing and
collection of monthly and other fees, and the Distributors bear all risks of
loss relating thereto. The Partnership performs certain administrative
functions for the Distributors, including program acquisition, national
marketing, transponder leasing and certain technical functions, and passes along
the costs relating thereto to the Distributors.
New PRIMESTAR. New PRIMESTAR, a newly formed Delaware corporation, is a
wholly-owned subsidiary of TSAT that has not conducted any significant
activities other than those incident to its formation, the execution of the
Restructuring Agreement, the TSAT Merger Agreement and Asset Transfer
Agreements, and related financing activities relating to the Restructuring
Transaction. As a result of the pending Restructuring Transaction and pursuant
to the Restructuring Agreement, the Merger Agreements and the Asset Transfer
Agreements, New PRIMESTAR will acquire the TSAT Business, the Partnership
Interests of the other Partners and the PRIMESTAR Assets of the other
Distributors. It is expected that, measured by the number of subscribers, New
PRIMESTAR will be the second largest provider of satellite television services
in the United
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States. The mailing address and the telephone number of New PRIMESTAR's
principal executive offices are 8085 South Chester, Suite 300, Englewood
Colorado 80122, (303) 712-4600.
The Roll-up Plan
Restructuring Transaction. On February 6, 1998, TSAT entered into (i) the
Restructuring Agreement, (ii) the TSAT Asset Transfer Agreement and (iii) the
TSAT Merger Agreement. The transactions contemplated under the Restructuring
Agreement and the TSAT Asset Transfer Agreement comprise the Restructuring
Transaction, which, if consummated, shall result in New PRIMESTAR's owning the
entire PRIMESTAR(R) digital satellite business. Upon consummation of the
Restructuring Transaction, TSAT and its former partners in that business (or
their respective affiliates) will, in the aggregate, own all the outstanding
capital stock of New PRIMESTAR.
The proposed Restructuring Transaction provides for, among other things, the
following transactions to occur on the closing date of the Restructuring
Transaction:
(x) the contribution and transfer by TSAT to New PRIMESTAR pursuant to the
TSAT Asset Transfer Agreement (the "TSAT Asset Transfer") of all of the assets
and liabilities of TSAT (including, among other things, the Notes and the
Exchange Notes), except (i) the capital stock of Tempo, (ii) the consideration
to be received by TSAT in the Restructuring Transaction and (iii) the rights and
obligations of TSAT under certain agreements with New PRIMESTAR. Concurrently
with the consummation of the TSAT Asset Transfer, New PRIMESTAR will adopt a
restated certificate of incorporation (the "New PRIMESTAR Charter") and bylaws
("New PRIMESTAR Bylaws");
(y) the merger (each a "Merger" and, collectively, the "Mergers") of each of
(I) Comcast DBS, a subsidiary of Comcast whose sole asset is Comcast's 10.43%
interest in the Partnership, (II) Comcast SCI, a subsidiary of Comcast that
holds Comcast's PRIMESTAR(R) distribution business, (III) Cox SI, a subsidiary
of Cox that holds Cox's 10.43% interest in the Partnership and Cox's
PRIMESTAR(R) distribution business, and (IV) GEAS, a subsidiary of GE
Americom that holds GE Americom's 16.56% interest in the Partnership, with and
into New PRIMESTAR, in each case in accordance with the terms of a merger
agreement with New PRIMESTAR dated as of February 6, 1998 (each, a "Merger
Agreement" and, collectively, the "Merger Agreements"); and
(z) the contribution and transfer to New PRIMESTAR by each of TWE, Newhouse
and MediaOne (or, in the case of MediaOne, certain subsidiaries of MediaOne) of
its respective Partnership Interest, and its PRIMESTAR(R) subscribers and
certain other related assets (collectively, and together with all such assets to
be acquired by New PRIMESTAR in the Restructuring Transaction, the "PRIMESTAR
Assets") and related liabilities (collectively the "PRIMESTAR Liabilities"), in
each case in accordance with the terms of an asset transfer agreement with New
PRIMESTAR dated as of February 6, 1998. The TSAT Asset Transfer and the
contribution and transfer of assets by each of TWE, Newhouse and MediaOne are
each sometimes referred to herein as an "Asset Transfer" and collectively as the
"Asset Transfers," and the TSAT Asset Transfer Agreement and the asset transfer
agreements between New PRIMESTAR and each of TWE, Newhouse and MediaOne (and
certain of its subsidiaries) are each sometimes referred to herein as an "Asset
Transfer Agreement" and collectively as the "Asset Transfer Agreements." In
addition, references herein to "MediaOne" include the subsidiaries of MediaOne
that are parties to MediaOne's Asset Transfer Agreement with New PRIMESTAR,
unless the context otherwise requires.
In connection with the Mergers and the Asset Transfers, each of TSAT, Comcast,
Cox, MediaOne, Newhouse, TWE and GE Americom will, directly or indirectly,
receive from New PRIMESTAR (i) in the case of Cox and MediaOne, an amount of
cash, and in the case of TSAT, Newhouse, TWE, Comcast and GE Americom, an
assumption of indebtedness by New PRIMESTAR, (ii) shares of New PRIMESTAR Class
A Common Stock, (iii) in the case of TSAT only, shares of New PRIMESTAR Class B
Common Stock, and (iv) except in the case of TSAT and GE Americom, shares of New
PRIMESTAR Class C Common Stock, in each case in an amount determined pursuant to
the Restructuring Agreement.
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Under the terms of the Restructuring Agreement, TSAT will own approximately
36% of the outstanding shares of common equity of New PRIMESTAR at the closing
of the Restructuring Transaction, and TWE and Newhouse (collectively), Comcast,
MediaOne, Cox and GE Americom will own approximately 31%, 10%, 9%, 9% and 5%,
respectively, of the outstanding shares of common equity of New PRIMESTAR at
closing, subject in each case to adjustments based on closing subscriber counts.
TSAT Merger. The Restructuring Transaction comprises the first step in
TSAT's proposed two-step Roll-up Plan. The second step of the Roll-up Plan
consists of the TSAT Merger, pursuant to which TSAT shall merge with and into
New PRIMESTAR, with New PRIMESTAR as the surviving corporation, in accordance
with the TSAT Merger Agreement. It is expected that the TSAT Merger shall be
consummated after the consummation of the Restructuring Transaction. The TSAT
Merger is subject to regulatory approval and other closing conditions set forth
in the TSAT Merger Agreement; accordingly, although the Roll-up Plan envisions
that the TSAT Merger will be consummated upon the consummation of the
Restructuring Transaction, there can be no assurance that the TSAT Merger will
be consummated, even if the Restructuring Transaction is consummated.
In connection with the TSAT Merger (i) each outstanding share of TSAT Series A
Common Stock will be converted into the right to receive one share of New
PRIMESTAR Class A Common Stock and (ii) each outstanding share of TSAT Series B
Common Stock will be converted into the right to receive one share of New
PRIMESTAR Class B Common Stock. Each share of New PRIMESTAR's common stock then
held by TSAT will be canceled. As a result of the TSAT Merger, stockholders of
TSAT, at closing, will own approximately 34% of the outstanding shares of New
PRIMESTAR Common Stock.
THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
The Notes were sold by the Borrower on February 20, 1997, and were
subsequently placed with qualified institutional buyers in reliance on Rule 144A
under the Securities Act. In connection with the Notes Offering, the Borrower
entered into the Registration Rights Agreements, which require, among other
things, that promptly following the sale of the Notes, the Borrower would (i)
file with the SEC a registration statement under the Securities Act with respect
to corresponding new notes of the Borrower identical in all material respects to
the Notes, (ii) use its best efforts to cause such registration statement to
become effective under the Securities Act and (iii) upon the effectiveness of
such registration statement, offer to the holders of the Notes the opportunity
to exchange their Notes for a like principal amount of Exchange Notes, which
would be issued without a restrictive legend and may be reoffered and resold by
the holder without restrictions or limitations under the Securities Act (other
than in the case of any such holder that is an "affiliate" of the Borrower
within the meaning of Rule 405 under the Securities Act). Copies of the
Registration Rights Agreements have been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
The Exchange Offer is for any and all Notes, and thus, the number of Notes
tendered and exchanged in the Exchange Offer will reduce the principal amount of
Notes outstanding. Following the consummation of the Exchange Offer, holders of
the Notes who did not tender their Notes will not have any further registration
rights under the Registration Rights Agreements, and such Notes will continue to
be subject to certain restrictions on transfer. Accordingly, the liquidity of
the market for such Notes could be adversely affected. The Notes are currently
eligible for sale pursuant to Rule 144A through the PORTAL System of the
National Association of Securities Dealers, Inc. In light of the absence of
resale restrictions on the Exchange Notes under the Securities Act, the
Borrower anticipates that most holders of Notes will elect to exchange such
Notes for Exchange Notes, and accordingly, the Borrower anticipates that the
liquidity of the market for any Notes remaining after the consummation of the
Exchange Offer may be substantially limited.
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this Prospectus and
in the Letter of Transmittal, the Borrower will accept any and all Notes
validly tendered and not withdrawn prior to 5:00 p.m. New York City time
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on the Expiration Date. The Borrower will issue $1,000 principal amount of
Exchange Notes in exchange for $1,000 principal amount of outstanding Notes
accepted in the Exchange Offer. Holders may tender some or all of their Notes
pursuant to the Exchange Offer. However, Notes may be tendered only in integral
multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and terms of
the Notes except that (i) the Exchange Notes have been registered under the
Securities Act and hence will not bear legends restricting the transfer thereof
thereunder and (ii) the holders of the Exchange Notes will not be entitled to
certain rights under the Registration Rights Agreements (such rights are
hereafter referred to as "Registration Rights"). Holders of Notes currently have
Registration Rights under the Registration Rights Agreement, but such
Registration Rights will generally terminate upon consummation of the Exchange
Offer. The Exchange Notes will evidence the same debt as the Notes and will be
entitled to the benefits set forth in the Indentures, except such benefits that,
by their terms, terminate or cease to have any effectiveness as a result of the
Exchange Offer.
As of the date of this Prospectus, (i) $200,000,000 aggregate principal amount
of the Senior Subordinated Notes was outstanding, all of which was registered in
the name of Cede & Co., as nominee for the Depository, and (ii) $275,000,000
aggregate principal amount at maturity of the Senior Subordinated Discount Notes
was outstanding, all of which was registered in the name of Cede & Co., as
nominee for the Depository. The Borrower has fixed the close of business on
, 1998 as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus and the Letter of Transmittal
will be mailed initially.
Holders of Notes do not have any appraisal or dissenters' rights under the
General Corporation Law of Delaware or the Indentures in connection with the
Exchange Offer. The Borrower intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations of the SEC thereunder, including Rule 14e-1 thereunder.
The Borrower shall be deemed to have accepted validly tendered Notes when, as
and if the Borrower has given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering holders for the
purpose of receiving the Exchange Notes from the Borrower.
If any tendered Notes are not accepted for exchange because of an invalid
tender, the occurrence of certain other events set forth herein or otherwise,
the certificates for any such unaccepted Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
Holders who tender Notes in the Exchange Offer will not be required to pay
brokerage commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of Notes pursuant to
the Exchange Offer. The Borrower will pay all charges and expenses, other than
transfer taxes in certain circumstances, in connection with the Exchange Offer.
See "--Fees and Expenses."
Expiration Date; Extensions; Amendments
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless the Borrower, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
To extend the Exchange Offer, the Borrower will notify the Exchange Agent of
any extension by oral or written notice and will mail to the registered holders
an announcement thereof, each prior to 9:00 a.m., New York City time, on the
next business day after the previously scheduled expiration date.
The Borrower reserves the right, in its reasonable judgment, (i) to delay
accepting any Notes, to extend the Exchange Offer or to terminate the Exchange
Offer if any of the conditions set forth below under "--Conditions" shall not
have been satisfied, by giving oral or written notice of such delay, extension
or termination to the Exchange Agent and (ii) to amend the terms of the Exchange
Offer in any manner. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or written notice
thereof to the registered holders. If the Exchange Offer is amended in a manner
determined by the Borrower to constitute a material change, the Borrower will
promptly disclose such amendment by means of a prospectus supplement that will
be distributed to the registered holders, and, depending upon the significance
of the amendment and the manner
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of disclosure to the registered holders, the Borrower will extend the Exchange
Offer for a period of five to ten business days if the Exchange Offer would
otherwise expire during such five to ten business day period.
If the Borrower does not consummate the Exchange Offer, or, in lieu thereof,
the Borrower does not file and cause to become effective a resale shelf
registration for the Notes within the time periods set forth herein, special
interest will accrue and be payable on the Notes either temporarily or
permanently. See "Description of Exchange Notes--Registration Covenant; Exchange
Offer."
Without limiting the manner in which the Borrower may choose to make public
announcement of any delay, extension, amendment or termination of the Exchange
Offer, the Borrower shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
Interest on Exchange Notes
Cash interest on the Senior Subordinated Exchange Notes will accrue at a rate
of 10 7/8% per annum, commencing February 20, 1997, the date of issuance of the
Notes, and will be payable semi-annually in arrears on each February 15 and
August 15, commencing August 15, 1998. See "Description of the Exchange Notes-
- -Maturity, Interest and Principal of the Senior Subordinated Notes."
Accordingly, holders of Senior Subordinated Notes that are accepted for exchange
will not receive interest that is accrued but unpaid on such Notes at the time
of tender.
Cash interest will not accrue or be payable on the Senior Subordinated
Discount Exchange Notes prior to February 15, 2002. Thereafter, cash interest on
the Senior Subordinated Discount Exchange Notes will accrue at a rate of
12 1/4% per annum and will be payable semi-annually in arrears on each February
15 and August 15, commencing August 15, 2002; provided, however, that at any
time prior to February 15, 2002, the Borrower may make a Cash Interest Election
on any interest payment date to commence the accrual of cash interest from and
after the Cash Interest Election Date, in which case the outstanding principal
amount at maturity of each Senior Subordinated Discount Exchange Note will on
such interest payment date be reduced to the Accreted Value of such Senior
Subordinated Discount Exchange Note as of such interest payment date, and cash
interest (accruing at a rate of 12 1/4% per annum from the Cash Interest
Election Date) shall be payable with respect to such Senior Subordinated
Discount Exchange Note on each interest payment date thereafter. See
"Description of the Exchange Notes --Maturity, Interest and Principal of the
Senior Subordinated Discount Notes."
The Senior Subordinated Notes were issued at par. The Senior Subordinated
Discount Notes were issued at a discount to their aggregate principal amount at
maturity, with a yield to maturity calculated from the issuance date of 12 1/4%
(computed on a semi-annual bond equivalent basis). In the Exchange Offer,
properly tendering holders will receive Senior Subordinated Discount Exchange
Notes having an aggregate principal amount at maturity equal to the aggregate
principal amount at maturity of the Senior Subordinated Discount Notes so
tendered. Accordingly, holders of Senior Subordinated Discount Notes that are
accepted for exchange will not receive payment for any increase in Accreted
Value on such Notes at the time of tender.
Procedures for Tendering
Only a holder of Notes may tender such Notes in the Exchange Offer. To tender
in the Exchange Offer, a holder must complete, sign and date the Letter of
Transmittal, or a facsimile thereof, have the signatures thereon guaranteed if
required by the Letter of Transmittal and mail or otherwise deliver such Letter
of Transmittal or such facsimile, together with the Notes and any other required
documents, to the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date. To be tendered effectively, the Notes, Letter of Transmittal
and other required documents must be received by the Exchange Agent at the
address set forth below under "Exchange Agent" prior to 5:00 p.m., New York City
time, on the Expiration Date. Delivery of the Notes may be made by book-entry
transfer in accordance with the procedures described below. Confirmation of such
book-entry transfer must be received by the Exchange Agent prior to the
Expiration Date.
By executing the Letter of Transmittal, each holder will make to the Borrower
the representation set forth below in the second paragraph under the heading
"Resale of Exchange Notes."
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The tender by a holder and the acceptance thereof by the Borrower will
constitute an agreement between such holder and the Borrower in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE
HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR NOTES SHOULD BE SENT TO THE BORROWER. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR
NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact the registered holder promptly and instruct such registered
holder to tender on such beneficial owner's behalf.
Signatures on the Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below) unless
the Notes tendered pursuant thereto are tendered (i) by a registered holder who
has not completed the box entitled "Special Registration Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Notes listed therein, such Notes must be endorsed or accompanied
by a properly completed bond power, signed by such registered holder as such
registered holder's name appears on such Notes with the signature thereon
guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Borrower,
evidence satisfactory to the Borrower of their authority to so act must be
submitted with the Letter of Transmittal.
The Borrower understands that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish accounts with respect to the
Notes at the Depository (the "Book-Entry Transfer Facility") for the purpose of
facilitating the Exchange Offer, and subject to the establishment thereof, any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of the Notes by causing the Book-
Entry Transfer Facility to transfer such Notes into the Exchange Agent's
account with respect to the Notes in accordance with the Book-Entry Transfer
Facility's procedures for such transfer. Although delivery of the Notes may be
effected through book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility, an appropriate Letter of Transmittal properly
completed and duly executed with any required signature guarantee and all other
required documents must in each case be transmitted to and received or confirmed
by the Exchange Agent at its address set forth below on or prior to the
Expiration Date, or, if the guaranteed delivery procedures described below are
complied with, within the time period provided under such procedures. Delivery
of documents to the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Notes and withdrawal of tendered Notes will be
determined by the Borrower in its sole discretion, which determination will be
final and binding. The Borrower reserves the absolute right to reject any and
all Notes not properly tendered or any Notes the Borrower's acceptance of which
would, in the opinion of counsel for the Borrower, be unlawful. The Borrower
also reserves the right to waive any defects, irregularities or conditions of
tender as to particular Notes. The Borrower's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or
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irregularities in connection with tenders of Notes must be cured within such
time as the Borrower shall determine. Although the Borrower intends to notify
holders of defects or irregularities with respect to tenders of Notes, neither
the Borrower, the Exchange Agent nor any other person shall incur any liability
for failure to give such notification. Tenders of Notes will not be deemed to
have been made until such defects or irregularities have been cured or waived.
Any Notes received by the Exchange Agent that are not properly tendered and as
to which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
Guaranteed Delivery Procedures
Holders who wish to tender their Notes and (i) whose Notes are not immediately
available, (ii) who cannot deliver their Notes, the Letter of Transmittal or any
other required documents to the Exchange Agent or (iii) who cannot complete the
procedures for book-entry transfer, prior to the Expiration Date, may effect a
tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by facsimile transmission, mail or hand delivery) setting forth the
name and address of the holder, the certificate number(s) of such Notes and the
principal amount of Notes tendered, stating that the tender is being made
thereby and guaranteeing that, within three New York Stock Exchange trading days
after the Expiration Date, the Letter of Transmittal (or facsimile thereof),
together with the certificates(s) representing the Notes (or a confirmation of
book-entry transfer of such Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility) and any other documents required by the Letter of
Transmittal, will be deposited by the Eligible Institution with the Exchange
Agent; and
(c) such properly completed and executed Letter of Transmittal (or facsimile
thereof), as well as the certificate(s) representing all tendered Notes in
proper form for transfer (or a confirmation of book-entry transfer of such Notes
into the Exchange Agent's account at the Book-Entry Transfer Facility) and all
other documents required by the Letter of Transmittal, are received by the
Exchange Agent within three New York Stock Exchange trading days after the
Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Notes according to the guaranteed
delivery procedures set forth above.
Withdrawals of Tenders
Except as otherwise provided herein, tenders of Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Notes in the Exchange Offer, a written or facsimile
transmission notice of withdrawal must be received by the Exchange Agent at its
address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having deposited the Notes to be withdrawn (the "Depositor"), (ii)
identify the Notes to be withdrawn (including the certificate number(s) and
principal amount of such Notes, or, in the case of Notes transferred by book-
entry transfer, the name and number of the account at the Book-Entry Transfer
Facility to be credited), (iii) be signed by the holder in the same manner as
the original signature on the Letter of Transmittal by which such Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee with respect to the Notes
register the transfer of such Notes into the name of the person withdrawing the
tender and (iv) specify the name in which any such Notes are to be registered,
if different from that of the Depositor. All questions as to the validity, form
and eligibility (including time of receipt) of such notices will be determined
by the Borrower, whose determination shall be final and binding on all parties.
Any Notes so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer and no Exchange Notes will be issued with respect
thereto unless the Notes so withdrawn are validly retendered. Any Notes which
have been tendered but which are not accepted for exchange will be returned to
the holder thereof without cost to such holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Notes may be retendered by following one of the procedures described
above under "--Procedures for Tendering" at any time prior to the Expiration
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Date.
Conditions
Notwithstanding any other term of the Exchange Offer, the Borrower shall not
be required to accept for exchange, or to exchange Exchange Notes for, any
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Notes, if:
(a) any law, statute, rule, regulation or interpretation by the staff of the
SEC is proposed, adopted or enacted, which, in the sole judgment of the
Borrower, might materially impair the ability of the Borrower to proceed with
the Exchange Offer or materially impair the contemplated benefits of the
Exchange Offer to the Borrower; or
(b) any governmental approval has not been obtained, which approval the
Borrower shall, in its sole discretion, deem necessary for the consummation of
the Exchange Offer as contemplated hereby.
If the Borrower determines in its reasonable judgment that any of the
conditions are not satisfied, the Borrower may (i) refuse to accept any Notes
and return all tendered Notes to the tendering holders, (ii) extend the Exchange
Offer and retain all Notes tendered prior to the expiration of the Exchange
Offer, subject, however, to the rights of holders to withdraw such Notes (see
"--Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with
respect to the Exchange Offer and accept all properly tendered Notes which have
not been withdrawn. If such waiver constitutes a material change to the Exchange
Offer, the Borrower will promptly disclose such waiver by means of a prospectus
supplement that will be distributed to the registered holders, and, depending
upon the significance of the waiver and the manner of disclosure to the
registered holders, the Borrower will extend the Exchange Offer for a period of
five to ten business days if the Exchange Offer would otherwise expire during
such five to ten business-day period.
Exchange Agent
The Bank of New York will act as Exchange Agent for the Exchange Offer.
Questions and requests for assistance, requests for additional copies of this
Prospectus or of the Letter of Transmittal and requests for Notice of Guaranteed
Delivery should be directed to the Exchange Agent, addressed as follows:
By Registered or Certified Mail:
The Bank of New York
101 Barclay Street, 7E
New York, New York 10286
By Overnight Mail or Courier Service:
The Bank of New York
101 Barclay Street
Corporate Trust Services Window
Ground Level
Attention: Reorganization Section
New York, New York 10286
In Person by Hand:
The Bank of New York
101 Barclay Street
Corporate Trust Services Window
Ground Level
Attention: Reorganization Section
46
<PAGE>
New York, New York 10286
By Facsimile (Eligible Institutions Only):
The Bank of New York
(212) 815-5915
Confirm: (212) 815-5375
Fees and Expenses
The expenses of soliciting tenders will be borne by the Borrower. The
principal solicitation is being made by mail; however, additional solicitations
may be made by telegraph, telephone or in person by officers and regular
employees of the Borrower and its affiliates.
The Borrower has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers or other persons
soliciting acceptances of the Exchange Offer. The Borrower, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection therewith
and pay other registration expenses, including fees and expenses of the Trustee,
filing fees, blue sky fees and printing and distribution expenses.
The Borrower will pay all transfer taxes, if any, applicable to the exchange
of the Notes pursuant to the Exchange Offer. If, however, certificates
representing the Exchange Notes or the Notes for principal amounts not tendered
or accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered holder of the Notes tendered, or if
tendered Notes are registered in the name of any person other than the person
signing the Letter of Transmittal, or if a transfer tax is imposed for any
reason other than the exchange of the Notes pursuant to the Exchange Offer, then
the amount of any such transfer taxes (whether imposed on the registered holder
or any other person) will be payable by the tendering holder.
Accounting Treatment
The Exchange Notes will be recorded at the same carrying value as the Notes,
as reflected in the Borrower's accounting records on the date of exchange.
Accordingly, no gain or loss for accounting purposes will be recognized.
Resale of Exchange Notes
Based on an interpretation by the staff of the SEC set forth in no-action
letters issued to third parties, the Borrower believes that Exchange Notes
issued pursuant to the Exchange Offer in exchange for Notes may be offered for
resale, resold and otherwise transferred by any holder of such Exchange Notes
(other than any such holder which is an "affiliate" of the Borrower within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary course of such holder's
business and such holder does not intend to participate, and has no arrangement
or understanding with any person to participate, in the distribution of such
Exchange Notes. Any holder who tenders in the Exchange Offer with the intention
to participate, or for the purpose of participating, in a distribution of the
Exchange Notes may not rely on the position of the staff of the SEC enunciated
in Exxon Capital Holdings Corporation (available April 13, 1989) and Morgan
Stanley & Co., Incorporated (available June 5, 1991), or similar no-action
letters, but rather must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction. In
addition, any such resale transaction should be covered by an effective
registration statement containing the selling security holders information
required by Item 507 of Regulation S-K of the Securities Act. Each broker-dealer
that receives Exchange Notes for its own account in exchange for Notes, where
such Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, may be a statutory underwriter and must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes.
By tendering in the Exchange Offer, each holder will represent to the Borrower
that, among other things, (i) any Exchange Notes to be received by the holder
are being acquired in the ordinary course of its business, (ii) the holder has
no arrangement or understanding with any person to participate in a distribution
(within the meaning
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<PAGE>
of the Securities Act) of Exchange Notes to be received in the Exchange Offer,
and (iii) if the holder is not a broker-dealer, the holder is not engaged in,
and does not intend to engage in, a distribution (within the meaning of the
Securities Act) of such Exchange Securities. By tendering Notes pursuant to the
Exchange Offer and executing the Letter of Transmittal, a holder of Notes which
is a broker-dealer represents and agrees, consistent with certain interpretive
letters issued by the staff of the Division of Corporation Finance of the
Securities and Exchange Commission to third parties, that (a) such Notes held by
the broker-dealer are held only as a nominee or (b) such Notes were acquired by
such broker-dealer for its own account as a result of market-making activities
or other trading activities and it will deliver a copy of this prospectus in
connection with any resale of Exchange Securities (provided that, by so
acknowledging and by delivering a prospectus, such broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act). Further, by tendering in the Exchange Offer, each holder that may be
deemed an "affiliate" (as defined under Rule 405 of the Securities Act) of the
Borrower will represent to the Borrower that such holder understands and
acknowledges that the Exchange Notes may not be offered for resale, resold or
otherwise transferred by that holder without registration under the Securities
Act or an exemption therefrom.
Consequences of Failure to Exchange
As a result of the making of the Exchange Offer, the Borrower will have
fulfilled one of its obligations under the Registration Rights Agreements, and
holders of Notes who do not tender their Notes will not have any further
registration rights under the Registration Rights Agreements or otherwise.
Accordingly, any holder of Notes that does not exchange that holder's Notes for
Exchange Notes will continue to hold the untendered Notes and will be entitled
to all the rights and limitations applicable thereto under the applicable
Indenture, except to the extent such rights or limitations that, by their terms,
terminate or cease to have further effectiveness as a result of the Exchange
Offer.
The Notes that are not exchanged for Exchange Notes pursuant to the Exchange
Offer will remain restricted securities. Accordingly, such Notes may be resold
only (i) to the Borrower (upon redemption thereof or otherwise), (ii) pursuant
to an effective registration statement under the Securities Act, (iii) so long
as the Notes are eligible for resale pursuant to Rule 144A, to a qualified
institutional buyer within the meaning of Rule 144A under the Securities Act in
a transaction meeting the requirements of Rule 144A, (iv) outside the United
States to a foreign person pursuant to the exemption from the registration
requirements of the Securities Act provided by Regulation S thereunder, (v) to
an institutional accredited investor that, prior to such transfer, furnishes to
the Bank of New York, as Trustee, a signed letter containing certain
representations and agreements relating to the restrictions on transfer of the
Notes evidenced thereby (the form of which letter can be obtained from such
Trustee) or (vi) pursuant to another available exemption from the registration
requirements of the Securities Act, in each case in accordance with any
applicable securities laws of any state of the United States.
Accordingly, if any Notes are tendered and accepted in the Exchange Offer, the
trading market for the untendered Notes could be adversely affected.
Other
Participation in the Exchange Offer is voluntary and holders should carefully
consider whether to accept. Holders of the Notes are urged to consult their
financial and tax advisors in making their own decision on what action to take.
The Borrower may in the future seek to acquire untendered Notes in open market
or privately negotiated transactions, through subsequent exchange offers or
otherwise. However, the Borrower has no present plans to acquire any Notes that
are not tendered in the Exchange Offer or to file a registration statement to
permit resales of any untendered Notes.
DESCRIPTION OF THE EXCHANGE NOTES
Each tranche of the Exchange Notes will be issued as a
separate series of notes pursuant to the same Indenture governing the
corresponding tranche of Notes for which each such tranche of Exchange Notes was
exchanged. The form and the terms of the Exchange Notes and the Notes will be
substantially identical to each other (including with respect to principal
amount, interest rate, maturity and redemption rights),
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<PAGE>
except that (i) the offering and sale of the Exchange Notes has been registered
under the Securities Act and, therefore, the Exchange Notes shall not bear
certain legends restricting the transfer thereof and (ii) the holders of
Exchange Notes will not be entitled to further registration rights under the
Registration Rights Agreements, which rights will be satisfied when the Exchange
Offer is consummated. Under the terms of the Indentures, the covenants and
events of default will apply equally to the Exchange Notes and the Notes, and
the Exchange Notes and the Notes will be treated as one class for all actions to
be taken by the holders thereof and for determining their respective rights
under the Indentures, including, without limitation, amendments, waivers and
redemptions. For purposes of this "Description of Exchange Notes" section all
references herein to "Notes" shall be deemed to refer collectively to Notes and
Exchange Notes, all references to "Senior Subordinated Notes" shall be deemed to
refer collectively to Senior Subordinated Notes and Senior Subordinated Exchange
Notes, and all references herein to "Senior Subordinated Discount Notes" shall
be deemed to refer collectively to Senior Subordinated Discount Notes and Senior
Subordinated Discount Exchange Notes, unless in any such case the context
otherwise requires. The terms of the Notes include those set forth in the
Indentures and those made a part of the Indentures by reference to the TIA.
The following summary of certain provisions of the Indentures and the
Registration Rights Agreements does not purport to be complete and is subject
to, and is qualified in its entirety by reference to, the TIA, and to all of the
provisions of the Indentures and the Registration Rights Agreements, including
the definitions of certain terms therein and those terms made a part of the
Indentures by reference to the TIA, as in effect on the date of the Indentures.
The Notes are subject to all such terms, and holders of the Notes are referred
to the Indentures, a copy of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part and is available in
the manner described under "Available Information." Certain defined terms used
primarily in this section are set forth below under "--Certain Definitions."
Unless otherwise indicated, references under this caption to sections, "(S)" or
articles are references to sections and articles of the Indentures. References
in this "Description of the Exchange Notes" section to the "Borrower" mean
only TCI Satellite Entertainment, Inc. or PRIMESTAR, Inc., as the case may be,
and not any of their respective Subsidiaries.
Upon any exchange of Notes for Exchange Notes pursuant to the Exchange Offer,
the Notes so exchanged shall be canceled and shall no longer be deemed
outstanding for any purpose. In no event shall the aggregate principal amount of
all Senior Subordinated Notes and Senior Subordinated Exchange Notes outstanding
exceed $200,000,000, and in no event shall the aggregate principal amount at
maturity of all Senior Subordinated Discount Notes and Senior Subordinated
Discount Exchange Notes outstanding exceed $275,000,000.
If the Borrower does not consummate the Exchange Offer, or, in lieu thereof,
the Borrower does not file and cause to become effective a resale shelf
registration for the Notes within the time periods set forth herein, additional
interest will continue to accrue and be payable on the Notes either temporarily
or permanently. See "--Registration Rights; Exchange Offer."
Transfers of Notes may be made only by presentation of the Notes, duly
endorsed, to the Trustee for registration of transfer on the Security Register
maintained by the Trustee for such purposes. Unless and until a Note is duly
presented to the Trustee for registration of transfer, the Borrower and the
Trustee may treat the Person in whose name such Note is registered on the
Security Register as the sole owner thereof for all purposes under the
applicable Indenture, notwithstanding any notice to the contrary.
General
The Notes will be issued only in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000.the Borrower will
appoint The Bank of New York to serve as registrar and paying agent under the
Indentures at its offices at 101 Barclay Street, New York, New York 10286. No
service charge will be made for any registration of transfer or exchange of the
Notes, except for any tax or other governmental charge that may be imposed in
connection therewith.
Ranking
The Notes will rank junior to, and be subordinated in right of payment to, all
existing and future Senior Indebtedness of the Borrower, pari passu in right of
payment with all senior subordinated Indebtedness of the
49
<PAGE>
Borrower and senior in right of payment to all Subordinated Indebtedness of the
Borrower. As of December 31, 1997, the Borrower had approximately $48,000,000 of
Senior Indebtedness outstanding, which consisted of borrowings outstanding
under the Bank Credit Facility. The Bank Credit Facility is guaranteed by all
the direct and indirect Subsidiaries of the Borrower, other than Tempo, and,
therefore, the Notes are structurally subordinated to all obligations under the
Bank Credit Facility. the Borrower will not be permitted to incur any debt that
is subordinated in right of payment to any Senior Indebtedness of the Borrower
and senior in right of payment to the Notes.
The Notes will not be entitled to any security and will not be entitled to the
benefit of any guarantees, except under the circumstances described under "--
Certain Covenants; Limitation on Indebtedness."
Maturity, Interest and Principal of the Senior Subordinated Notes
The Senior Subordinated Notes will be limited to $200,000,000 aggregate
principal amount (the "Senior Subordinated Aggregate Principal Amount") and
will mature on February 15, 2007. Cash interest on the Senior Subordinated Notes
accrues at a rate of 10 7/8% per annum and is payable semi-annually in arrears
on each February 15 and August 15, to the holders of record at the close of
business on February 1 and August 1, respectively, immediately preceding such
interest payment date. Cash interest on the Senior Subordinated Exchange Notes
will be payable semi-annually in arrears commencing August 15, 1998 and each
February 15 and August 15 thereafter until maturity, to the holders of record at
the close of business on February 1 and August 1, respectively immediately
preceding such interest payment date. Cash interest will accrue from the most
recent interest payment date to which interest has been paid or, if no interest
has been paid, from February 20, 1997. Interest will be computed on the basis of
a 360-day year of twelve 30-day months.
Maturity, Interest and Principal of the Senior Subordinated Discount
Notes
The Senior Subordinated Discount Notes will be limited to $275,000,000
aggregate principal amount at maturity (the "Senior Subordinated Discount
Aggregate Principal Amount") and will mature on February 15, 2007. The Senior
Subordinated Discount Notes were issued at a discount to their aggregate
principal amount at maturity and generated gross proceeds to the Borrower of
approximately $152,061,250. Based on the issue price thereof, the yield to
maturity of the Senior Subordinated Discount Notes and all Senior Subordinated
Discount Exchange Notes issued in exchange therefor is 12 1/4% (computed on a
semi-annual bond equivalent basis), calculated from February 20, 1997. See
"Certain Federal Income Tax Considerations."
Cash interest will not accrue or be payable on the Senior Subordinated
Discount Notes prior to February 15, 2002. Thereafter, cash interest will accrue
at a rate of 12/1//4% per annum and will be payable semi-annually in arrears on
each February 15 and August 15, commencing on August 15, 2002, to the holders of
record at the close of business on the February 1 and August 1, respectively,
immediately preceding such interest payment date; provided, however, that at any
time prior to February 15, 2002, the Borrower may elect (the "Cash Interest
Election") on any interest payment date (the date of such Cash Interest
Election, the "Cash Interest Election Date") to commence the accrual of cash
interest from and after the Cash Interest Election Date, in which case the
principal amount at maturity of each Senior Subordinated Discount Note will on
such interest payment date be reduced to the Accreted Value of such note as of
such interest payment date, and cash interest (accruing at a rate of 12 1/4%
per annum from the Cash Interest Election Date) shall be payable with respect to
such Senior Subordinated Discount Note on each interest payment date thereafter.
Cash interest will accrue from the most recent interest payment date to which
interest has been paid or, if no interest has been paid, from February 15, 2002
or the Cash Interest Election Date, if earlier. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
Optional Redemption
Optional Redemption of Senior Subordinated Notes. The Senior Subordinated
Notes will be redeemable at the option of the Borrower, in whole or in part, at
any time on or after February 15, 2002, at the redemption prices (expressed as a
percentage of principal amount) set forth below, plus accrued and unpaid
interest thereon, if any, to the redemption date, if redeemed during the 12-
month period beginning on February 15 of the years indicated below:
50
<PAGE>
<TABLE>
<CAPTION>
Redemption
-----------
Price
Year -----
----
<S> <C>
2002 .................. 105.438%
2003 .................. 103.625%
2004 .................. 101.813%
2005 and thereafter..... 100.000%
</TABLE>
In addition, prior to February 15, 2000, the Borrower may, other than in any
circumstance resulting in a Change of Control, redeem up to 35% of the Senior
Subordinated Aggregate Principal Amount at a redemption price equal to 110.875%
of the principal amount of the Senior Subordinated Notes so redeemed, plus
accrued and unpaid interest thereon, if any, to the redemption date with the net
cash proceeds of (a) one or more Public Equity Offerings of common equity of the
Borrower or (b) a sale or series of related sales of Qualified Equity Interests
of the Borrower to Strategic Equity Investors, in any such case resulting in
gross cash proceeds to the Borrower of at least $100.0 million in the
aggregate; provided, however, that Senior Subordinated Notes in an aggregate
principal amount not less than the 65% of the Senior Subordinated Aggregate
Principal Amount would remain outstanding immediately after giving effect to any
such redemption (excluding any Senior Subordinated Notes owned by the Borrower
or any of its Affiliates). Notice of any such redemption must be given within 60
days after the date of the last Public Equity Offering or sale of Qualified
Equity Interests of the Borrower to Strategic Equity Investors resulting in
gross cash proceeds to the Borrower, when aggregated with all prior Public
Equity Offerings and sales of Qualified Equity Interests of the Borrower to
Strategic Equity Investors, of at least $100.0 million.
Optional Redemption of Senior Subordinated Discount Notes. The Senior
Subordinated Discount Notes will be redeemable at the option of the Borrower,
in whole or in part, at any time on or after February 15, 2002, at the
redemption prices (expressed as a percentage of principal amount at maturity)
set forth below, plus accrued and unpaid interest thereon, if any, to the
redemption date, if redeemed during the 12-month period beginning on February 15
of the years indicated below:
<TABLE>
<CAPTION>
Redemption
----------
Year Price
---- -----
<S> <C>
2002 ................ 106.125%
2003 ................ 104.083%
2004 ................ 102.042%
2005 and thereafter... 100.000%
</TABLE>
In addition, prior to February 15, 2000, the Borrower may, other than in any
circumstance resulting in a Change of Control, redeem up to 35% of the
originally issued principal amount at maturity of the Senior Subordinated
Discount Notes at a redemption price equal to 112.250% of the Accreted Value of
the Senior Subordinated Discount Notes so redeemed at the redemption date or, if
a Cash Interest Election has been made, 112.250% of the principal amount at
maturity of the Senior Subordinated Discount Notes so redeemed, plus accrued and
unpaid interest thereon, if any, to the redemption date, with the net cash
proceeds of (a) one or more Public Equity Offerings of common equity of the
Borrower or (b) a sale or series of related sales of Qualified Equity Interests
of the Borrower to Strategic Equity Investors, in any such case resulting in
gross cash proceeds to the Borrower of at least $100.0 million in the
aggregate; provided, however, that at least 65% of the originally issued
principal amount at maturity of the Senior Subordinated Discount Notes would
remain outstanding immediately after giving effect to any such redemption
(excluding any Senior Subordinated Discount Notes owned by the Borrower or any
of its Affiliates). Notice of any such redemption must be given within 60 days
after the date of the last Public Equity Offering or sale of Qualified Equity
Interests of the Borrower to Strategic Equity Investors resulting in gross cash
proceeds to the Borrower, when aggregated with all prior Public Equity
Offerings and sales of Qualified Equity Interests of the Borrower to Strategic
Equity Investors, of at least $100.0 million.
Selection and Notice of Redemption
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<PAGE>
In the event that less than all of either tranche of the Notes are to be
redeemed at any time pursuant to an optional redemption, selection of such Notes
for redemption will be made by the applicable Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
such Notes are listed or, if such Notes are not then listed on a national
securities exchange, on a pro rata basis, by lot or by such method as the
applicable Trustee shall deem fair and appropriate; provided, however, that no
Notes of a principal amount or principal amount at maturity, as the case may be,
of $1,000 or less shall be redeemed in part; provided, further, however, that if
a partial redemption is made with the proceeds of a Public Equity Offering or
sale or series of related sales of Qualified Equity Interests of the Borrower
to Strategic Equity Investors, selection of the Notes of either tranche or
portions thereof for redemption shall be made by the applicable Trustee only on
a pro rata basis or on as nearly a pro rata basis as is practicable (subject to
the procedures of The Depository Trust Company), unless such method is otherwise
prohibited. Notice of redemption shall be mailed by first-class mail at least 30
but not more than 60 days before the redemption date to each holder of Notes of
the tranche to be redeemed at its registered address. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount or principal amount at maturity, as
the case may be, thereof to be redeemed. A new Note of the applicable tranche in
a principal amount or principal amount at maturity, as the case may be, equal to
the unredeemed portion thereof will be issued in the name of the holder thereof
upon cancellation of the original Note. On and after the redemption date,
interest will cease to accrue on Notes or portions thereof called for redemption
as long as the Borrower has deposited with the applicable paying agent for the
Notes funds in satisfaction of the applicable redemption price pursuant to the
applicable Indenture.
Subordination of the Notes
The payment of the principal of, premium, if any, and interest on the Notes is
subordinated in right of payment, to the extent and in the manner provided in
each Indenture, to the prior payment in full in cash of all Senior Indebtedness.
Upon any payment or distribution of assets or securities of the Borrower of
any kind or character, whether in cash, property or securities (excluding any
payment or distribution of Permitted Junior Securities), upon any dissolution or
winding-up or liquidation or reorganization of the Borrower, whether voluntary
or involuntary or in bankruptcy, insolvency, receivership or other proceedings,
all Senior Indebtedness shall first be paid in full in cash before the holders
of the Notes or the applicable Trustee on behalf of such holders shall be
entitled to receive any payment by the Borrower of the principal of, premium,
if any, or interest on the Notes, or any payment by the Borrower to acquire any
of the Notes for cash, property or securities, or any distribution by the
Borrower with respect to the Notes of any cash, property or securities
(excluding any payment or distribution of Permitted Junior Securities). Before
any payment may be made by, or on behalf of, the Borrower of the principal of,
premium, if any, or interest on the Notes upon any such dissolution or winding-
up or total liquidation or reorganization, any payment or distribution of assets
or securities of the Borrower of any kind or character, whether in cash,
property or securities (excluding any payment or distribution of Permitted
Junior Securities), to which the holders of the Notes or the applicable Trustee
on their behalf would be entitled, but for the subordination provisions of the
applicable Indenture, shall be made by the Borrower or by any receiver, trustee
in bankruptcy, liquidation trustee, agent or other Person making such payment or
distribution, directly to the holders of the Senior Indebtedness (pro rata to
such holders on the basis of the respective amounts of Senior Indebtedness held
by such holders) or their representatives or to the trustee or trustees or agent
or agents under any agreement or indenture pursuant to which any of such Senior
Indebtedness may have been issued, as their respective interests may appear, to
the extent necessary to pay all such Senior Indebtedness in full in cash after
giving effect to any prior or concurrent payment, distribution or provision
therefor to or for the holders of such Senior Indebtedness.
No direct or indirect payment (excluding any payment or distribution of
Permitted Junior Securities) by or on behalf of the Borrower of principal of,
premium, if any, or interest on the Notes, whether pursuant to the terms of the
Notes, upon acceleration or otherwise, will be made if, at the time of such
payment, there exists an event of default in the payment of all or any portion
of the obligations on any Designated Senior Indebtedness, whether at maturity,
on account of mandatory redemption or prepayment, acceleration or otherwise, and
such event of default shall not have been cured or waived or the benefits of
this sentence waived by or on behalf of the holders of such Designated Senior
Indebtedness. In addition, during the continuance of any non-payment event of
default with respect to any Designated Senior Indebtedness pursuant to which the
maturity thereof may be immediately accelerated, and upon receipt by the
applicable Trustee of written notice (a "Payment Blockage Notice") from the
holder or holders
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<PAGE>
of such Designated Senior Indebtedness or the trustee or agent acting on behalf
of such Designated Senior Indebtedness, then, unless and until such event of
default has been cured or waived or has ceased to exist or such Designated
Senior Indebtedness has been discharged or repaid in full in cash or the
benefits of these provisions have been waived by the holders of such Designated
Senior Indebtedness, no direct or indirect payment (excluding any payment or
distribution of Permitted Junior Securities) will be made by or on behalf of the
Borrower of principal of, premium, if any, or interest on the Notes, except from
those funds held in trust for the benefit of holders of any Notes pursuant to
the procedures set forth under "--Satisfaction and Discharge of Indentures;
Defeasance" below, to such holders, during a period (a "Payment Blockage
Period") commencing on the date of receipt of such notice by the applicable
Trustee and ending 179 days thereafter. Notwithstanding anything in the
subordination provisions of the Indentures or the Notes to the contrary, (x) in
no event will a Payment Blockage Period extend beyond 179 days from the date the
Payment Blockage Notice in respect thereof was given, (y) there shall be a
period of at least 181 consecutive days in each 360-day period when no Payment
Blockage Period is in effect and (z) not more than one Payment Blockage Period
may be commenced with respect to the Notes during any period of 360 consecutive
days. No event of default that existed or was continuing on the date of
commencement of any Payment Blockage Period with respect to the Designated
Senior Indebtedness initiating such Payment Blockage Period (to the extent the
holder of Designated Senior Indebtedness, or trustee or agent, giving notice
commencing such Payment Blockage Period had knowledge of such existing or
continuing event of default) may be, or be made, the basis for the commencement
of any other Payment Blockage Period by the holder or holders of such Designated
Senior Indebtedness or the trustee or agent acting on behalf of such Designated
Senior Indebtedness, whether or not within a period of 360 consecutive days,
unless such event of default has been cured or waived for a period of not less
than 90 consecutive days.
The failure to make any payment or distribution for or on account of the Notes
by reason of the provisions of the Indentures described under this
"Subordination of the Notes" heading will not be construed as preventing the
occurrence of any Event of Default in respect of either tranche of the Notes.
See "--Events of Default" below.
By reason of the subordination provisions described above, in the event of
insolvency of the Borrower, funds which would otherwise be payable to holders
of the Notes will be paid to the holders of Senior Indebtedness to the extent
necessary to pay the Senior Indebtedness in full in cash, and the Borrower may
be unable to fully meet its obligations with respect to the Notes.
As of December 31, 1997, the Borrower had approximately $79,949,000 of
Senior Indebtedness outstanding, of which $48,000 represented borrowings
under the Bank Credit Facility. Subject to the restrictions set forth in the
Indentures, in the future, TSAT may issue additional Senior Indebtedness to
refinance existing Indebtedness or for other corporate purposes.
Offer to Purchase upon Change of Control
Following the occurrence of a Change of Control as defined in the Indentures
(the date of such occurrence being the "Change of Control Date"), the Borrower
shall notify the holders of the Notes of such occurrence in the manner
prescribed by the Indentures and shall, within 20 days after the Change of
Control Date, make an Offer to Purchase all Notes of each tranche then
outstanding at a purchase price in cash equal to (x) with respect to the Senior
Subordinated Notes, 101% of the aggregate principal amount thereof, plus accrued
and unpaid interest thereon, if any, to the Purchase Date and (y) with respect
to the Senior Subordinated Discount Notes, 101% of the Accreted Value on the
Purchase Date, unless the Purchase Date is on or after the earlier to occur of
February 15, 2002 and the Cash Interest Election Date, in which case such
purchase price shall be equal to 101% of the aggregate principal amount at
maturity thereof, plus accrued and unpaid interest thereon, if any, to the
Purchase Date. The Borrower's obligations may be satisfied if a third party
makes the Offer to Purchase in the manner, at the times and otherwise in
compliance with the requirements of the Indentures applicable to an Offer to
Purchase made by the Borrower and purchases all Notes validly tendered and not
withdrawn under such Offer to Purchase.
If a Change of Control occurs which also constitutes an event of default under
the Bank Credit Facility, the lenders under the Bank Credit Facility would be
entitled to exercise the remedies available to a secured lender under applicable
law and pursuant to the terms of the Bank Credit Facility. Accordingly, any
claims of such lenders with respect to the assets of the Borrower will be prior
to any claim of the holders of the Notes with respect to such assets.
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If an Offer to Purchase is made, there can be no assurance that the Borrower
will have available funds sufficient to pay for all of the Notes that might be
tendered by holders of Notes seeking to accept the Offer to Purchase. If the
Borrower fails to repurchase all of the Notes tendered for purchase upon the
occurrence of a Change of Control, such failure will constitute an Event of
Default under the applicable Indenture. See "--Events of Default" below.
If the Borrower makes an Offer to Purchase, the Borrower will comply with all
applicable tender offer laws and regulations, including, to the extent
applicable, Section 14(e) and Rule 14e-1 under the Exchange Act, and any other
applicable Federal or state securities laws and regulations and any applicable
requirements of any securities exchange on which the Notes are listed, and any
violation of the provisions of the Indentures relating to such Offer to Purchase
occurring as a result of such compliance shall not be deemed an Event of Default
or an event that, with the passing of time or giving of notice, or both, would
constitute an Event of Default.
Except as described above with respect to a Change of Control, the Indentures
do not contain provisions that permit the holders of the Notes to require that
the Borrower repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
The Restructuring Transaction, as currently contemplated, would not constitute
a Change of Control.
Certain Covenants
Limitation on Restricted Payments. Under the terms of the Indentures, the
Borrower shall not, and shall not cause or permit any Restricted Subsidiary to,
directly or indirectly,
(i) declare or pay any dividend or any other distribution on any Equity
Interests of the Borrower or any Restricted Subsidiary or make any payment or
distribution to the direct or indirect holders (in their capacities as such) of
Equity Interests of the Borrower or any Restricted Subsidiary (other than any
dividends, distributions and payments made to the Borrower or any Restricted
Subsidiary and dividends or distributions payable to any Person solely in
Qualified Equity Interests of the Borrower or in options, warrants or other
rights to purchase Qualified Equity Interests of the Borrower);
(ii) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of the Borrower or any Restricted Subsidiary (other than any such
Equity Interests owned by the Borrower or any Restricted Subsidiary);
(iii) purchase, redeem, defease or retire for value, or make any principal
payment on, prior to any scheduled maturity, scheduled repayment or scheduled
sinking fund payment, any Subordinated Indebtedness (other than any Subordinated
Indebtedness held by any Restricted Subsidiary); or
(iv) make any Investment (other than Permitted Investments) in any Person
(other than in the Borrower, any Restricted Subsidiary or a Person that becomes
a Restricted Subsidiary, or is merged with or into or consolidated with the
Borrower or a Restricted Subsidiary (provided the Borrower or a Restricted
Subsidiary is the survivor) as a result of or in connection with such
Investment) (such payments or any other actions (other than the exceptions
thereto) described in (i), (ii), (iii) and (iv) collectively, "Restricted
Payments"), unless
(a) no Default or Event of Default shall have occurred and be continuing at
the time or after giving effect to such Restricted Payment;
(b) immediately after giving effect to such Restricted Payment, the Borrower
would be able to Incur $1.00 of Indebtedness (other than Permitted Indebtedness)
under the Debt to Operating Cash Flow Ratio of the first paragraph of "--
Limitation on Indebtedness" below; and
(c) immediately after giving effect to such Restricted Payment, the aggregate
amount of all Restricted Payments declared or made on or after the Issue Date
does not exceed an amount equal to the sum of (1) the difference between (x) the
Cumulative Operating Cash Flow determined at the time of such Restricted
Payment and (y) 150% of cumulative Consolidated Interest Expense of the Borrower
determined for the period commencing on the Issue Date and ending on the last
day of the most recent fiscal quarter immediately preceding the date of such
Restricted Payment
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for which consolidated financial information of the Borrower is available, plus
(2) the aggregate net cash proceeds received by the Borrower either (x) as
capital contributions to the Borrower after the Issue Date or (y) from the issue
and sale (other than to a Restricted Subsidiary) of its Qualified Equity
Interests after the Issue Date (excluding the net proceeds from any issuance and
sale of Qualified Equity Interests financed, directly or indirectly, using funds
borrowed from the Borrower or any Restricted Subsidiary until and to the extent
such borrowing is repaid), plus (3) the principal amount (or accrued or accreted
amount, if less) of any Indebtedness of the Borrower or any Restricted
Subsidiary Incurred after the Issue Date which has been converted into or
exchanged for Qualified Equity Interests of the Borrower, plus (4) in the case
of the disposition or repayment of any Investment constituting a Restricted
Payment made after the Issue Date, an amount (to the extent not included in the
computation of Cumulative Operating Cash Flow) equal to the lesser of: (i) the
return of capital with respect to such Investment and (ii) the amount of such
Investment which was treated as a Restricted Payment, in either case, less the
cost of the disposition of such Investment and net of taxes, plus (5) so long as
the Designation thereof was treated as a Restricted Payment made after the Issue
Date, with respect to any Unrestricted Subsidiary that has been redesignated as
a Restricted Subsidiary after the Issue Date in accordance with "--Designation
of Unrestricted Subsidiaries; Designation of Tempo as a Restricted Subsidiary"
below, the Borrower's proportionate interest in an amount equal to the excess of
(x) the total assets of such Subsidiary, valued on an aggregate basis at the
lesser of book value and Fair Market Value, over (y) the total liabilities of
such Subsidiary, determined in accordance with GAAP (and provided that such
amount shall not in any case exceed the Designation Amount with respect to such
Restricted Subsidiary upon its Designation), plus (6) (to the extent not
included in the computation of Cumulative Operating Cash Flow) the amount of
cash dividends or cash distributions (other than to pay taxes) received from any
Unrestricted Subsidiary since the Issue Date, minus (7) the greater of (i) $0
and (ii) the Designation Amount (measured as of the date of Designation) with
respect to any Subsidiary of the Borrower which has been designated as an
Unrestricted Subsidiary after the Issue Date in accordance with "--Designation
of Unrestricted Subsidiaries; Designation of Tempo as a Restricted Subsidiary"
below. As presently contemplated, the Restructuring Transaction, pursuant to
which the Borrower shall transfer substantially all of its assets to New
PRIMESTAR and New PRIMESTAR shall assume, among other liabilities, the Exchange
Notes (and any Notes outstanding), which assumption of such notes shall be
evidenced by the execution by New PRIMESTAR of supplemental indentures governing
the notes, would not constitute a default under the Indentures with respect to
the foregoing provisions.
The foregoing provisions will not prevent (i) the payment of any dividend or
distribution on, or redemption of, Equity Interests within 60 days after the
date of declaration of such dividend or distribution or the giving of formal
notice of such redemption, if at the date of such declaration or giving of
formal notice such payment or redemption would comply with the provisions of the
Indentures; (ii) the purchase, redemption, retirement or other acquisition of
any Equity Interests of the Borrower in exchange for, or out of the net cash
proceeds of the substantially concurrent issue and sale (other than to a
Restricted Subsidiary) of, Qualified Equity Interests of the Borrower;
provided, however, that any such net cash proceeds and the value of any Equity
Interests issued in exchange for such retired Equity Interests are excluded from
clause (c)(2) of the preceding paragraph (and were not included therein at any
time); (iii) the purchase, redemption, retirement, defeasance or other
acquisition of Subordinated Indebtedness, or any other payment thereon, made in
exchange for, or out of the net cash proceeds of, a substantially concurrent
issue and sale (other than to a Restricted Subsidiary) of (x) Qualified Equity
Interests of the Borrower; provided, however, that any such net cash proceeds
and the value of any Equity Interests issued in exchange for Subordinated
Indebtedness are excluded from clauses (c)(2) and (c)(3) of the preceding
paragraph (and were not included therein at any time) or (y) other Subordinated
Indebtedness having no stated maturity for the payment of principal thereof
prior to the final stated maturity of the Notes; (iv) Investments in the
Partnership required pursuant to a vote of the partners of the Partnership, not
to exceed $60.0 million in the aggregate since the Issue Date; (v) Investments
made within three years of the Issue Date in Persons engaged in the provision of
C-band direct-to-home television programming services (any such Person, a "C-
Band Entity"); provided, however, that (x) immediately after giving effect to
such Investment the Borrower or a Restricted Subsidiary owns not less than
50.0% of the voting power of the outstanding Voting Equity Interests in such C-
Band Entity and not less than 50.0% of the outstanding economic Equity Interests
in such C-Band Entity and (y) the aggregate amount of such Investments made
since the Issue Date shall not exceed $90.0 million (any such Investment made
pursuant to this clause (v) a "C-Band Investment"); (vi) Investments in ResNet
so long as ResNet is engaged in whole or in substantial part in the business of
providing entertainment, data, information and/or telecommunications services to
MDUs and other commercial markets, not to exceed $45.0 million in the aggregate
since the Issue Date; (vii) any Investment to the extent that the consideration
therefor consists of the net cash proceeds of the substantially concurrent issue
and sale (other than to a Restricted Subsidiary) of Qualified Equity Interests
of the Borrower; provided, however, that any such net cash proceeds are
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excluded from clause (c)(2) of the preceding paragraph (and were not included
therein at any time); (viii) the purchase, redemption or other acquisition,
cancellation or retirement for value of Equity Interests, or options, warrants,
equity appreciation rights or other rights to purchase or acquire Equity
Interests, of the Borrower or any Restricted Subsidiary, or similar securities,
held by officers or employees or former officers or employees of the Borrower
or any Restricted Subsidiary (or their estates or beneficiaries under their
estates), upon death, disability, retirement or termination of employment, not
to exceed $3.0 million in any calendar year and $15.0 million in the aggregate
since the Issue Date; (ix) the acquisition of any general or limited partnership
interest in the Partnership with the net proceeds of any Indebtedness Incurred
pursuant to clause (i) of the second paragraph of "--Limitation on
Indebtedness" below; (x) Investments in any Unrestricted Subsidiary that holds
any high power satellite or the governmental authorizations relating thereto to
be used solely to pay the operating and financing expenses of such Unrestricted
Subsidiary in an amount not to exceed the product of (x) the Borrower's
percentage equity interest in such Unrestricted Subsidiary, times (y) such
Unrestricted Subsidiary's share of satellite construction and financing costs;
provided, however, that the funds used for such Investments shall be derived
solely from Consolidated Operating Cash Flow since the Issue Date of the High
Power Satellite Transmission Subsidiary (so long as such Consolidated Operating
Cash Flow of the High Power Satellite Transmission Subsidiary shall not have
been otherwise expended); provided, however, that no such Investment pursuant to
this clause (x) shall be permitted to the extent that the Consolidated Operating
Cash Flow of the High Power Satellite Transmission Subsidiary to be utilized to
effect such Investment was included in the calculation of the Cumulative
Operating Cash Flow at any time prior to the making of such Investment; (xi)
Investments in any other Person engaged in the satellite, telecommunications,
entertainment, electronics or any related industry, not to exceed $50.0 million
in the aggregate outstanding at any time; provided, however, that so long as no
Default or Event of Default shall have occurred and be continuing, such amount
shall be increased to a maximum of (I) $75.0 million in the aggregate
outstanding at any time if, as of the end of the most recently completed fiscal
quarter of the Borrower after the Issue Date, the Borrower shall have provided
an Officers' Certificate to the Trustees that the Borrower and the Restricted
Subsidiaries had as of such date in excess of 1.2 million subscribers or (II)
$90.0 million in the aggregate outstanding at any time if, as of the end of the
most recently completed fiscal quarter of the Borrower after the Issue Date,
the Borrower shall have provided an Officers' Certificate to the Trustees that
the Borrower and the Restricted Subsidiaries had as of such date in excess of
1.6 million subscribers; (xii) the payment of dividends in any period (I) on
preferred stock of the Borrower issued in connection with any C-Band Investment
in a C-Band Entity, but only up to the amount of cash dividends ("C-Band
Dividends") received by the Borrower from such C-Band Entity in the same period
(to the extent that such cash dividends have not otherwise been expended by the
Borrower) or (II) issued in connection with any C-Band Investment which results
in any C-Band Entity becoming a Restricted Subsidiary (such Restricted
Subsidiary, a "Restricted C-Band Subsidiary"), but only up to the amount of
Consolidated Operating Cash Flow received as cash dividends by the Borrower
from the Restricted C-Band Subsidiaries in the same period (to the extent that
such cash dividends have not otherwise been expended by the Borrower);
provided, however, that no such dividends pursuant to this clause (xii) shall be
permitted to the extent that C-Band Dividends or the Consolidated Operating Cash
Flow of any Restricted C-Band Subsidiary to be utilized to effect any such
dividends was included in the calculation of Cumulative Operating Cash Flow at
any time prior to the payment of such dividends; or (xiii) the repurchase of
Equity Interests of the Borrower in an amount not to exceed $10.0 million in
the aggregate since the Issue Date; provided, however, that in the case of each
of clauses (ii), (iii), (iv), (v), (vi), (vii), (x), (xi), (xii) and (xiii) no
Default or Event of Default shall have occurred and be continuing or would arise
therefrom. For purposes of this paragraph, any Investment made in any Person
that subsequently becomes a Restricted Subsidiary shall be deemed not to be
outstanding so long as such Person is a Restricted Subsidiary.
For purposes of clause (x) of the preceding paragraph, in determining
Consolidated Operating Cash Flow of the High Power Satellite Transmission
Subsidiary, the definition of "Consolidated Operating Cash Flow" shall be used,
but references in such definition to the Borrower and the Restricted
Subsidiaries shall be deemed to refer to the High Power Satellite Transmission
Subsidiary and its Subsidiaries. The Borrower shall not calculate such
Consolidated Operating Cash Flow of the High Power Satellite Transmission
Subsidiary in any manner, or take any other action, that would result in such
Consolidated Operating Cash Flow being greater than what it would have been if
the High Power Satellite Transmission Subsidiary were an Affiliate of the
Borrower that was not a Restricted Subsidiary. For purposes of clause (xii) of
the preceding paragraph, in determining Consolidated Operating Cash Flow of any
Restricted C-Band Subsidiary, the definition of "Consolidated Operating Cash
Flow" shall be used, but references in such definition to the Borrower and the
Restricted Subsidiaries shall be deemed to refer to the Restricted C-Band
Subsidiary and its Subsidiaries. The Borrower shall not calculate such
Consolidated Operating Cash Flow of any Restricted C-Band Subsidiary in any
manner, or take any other action, that would result in such
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Consolidated Operating Cash Flow being greater than what it would have been if
such Restricted C-Band Subsidiary were an Affiliate of the Borrower that was not
a Restricted Subsidiary.
In determining the amount of Restricted Payments permissible under this
covenant, amounts expended pursuant to clauses (i), (viii), (x), and (xiii) of
the second preceding paragraph shall be included as Restricted Payments and
amounts expended pursuant to clauses (ii), (iii), (iv), (v), (vi), (vii), (ix),
(xi), and (xii) shall be excluded. The amount of any non-cash Restricted Payment
shall be deemed to be equal to the Fair Market Value thereof at the date of the
making of such Restricted Payment. If after the date of making any Investment
made in compliance with this covenant which is a guarantee, letter of credit or
other credit support any payments are made in respect of such Investment, such
payment shall not be deemed an additional Restricted Payment to the extent the
amount thereof, when added together with all other payments made in respect of
such Investment since the date such Investment was made, is not in excess of the
amount of the Investment.
Limitation on Indebtedness. The Borrower shall not, and shall not cause or
permit any Restricted Subsidiary to, directly or indirectly, Incur any
Indebtedness (including Acquired Indebtedness) or issue any Disqualified Equity
Interests except for Permitted Indebtedness; provided, however, that the
Borrower may Incur Indebtedness and the Borrower may issue Disqualified Equity
Interests if, at the time of and immediately after giving pro forma effect to
such Incurrence of Indebtedness or issuance of Disqualified Equity Interests and
the application of the proceeds therefrom, the Debt to Operating Cash Flow Ratio
would be less than or equal to (i) 7.25 to 1.0 if the date of such Incurrence is
on or before December 31, 1999, (ii) 6.50 to 1.0 if the date of such Incurrence
is after December 31, 1999 and on or prior to December 31, 2001 and (iii) 5.75
to 1.0 if the date of such Incurrence is after December 31, 2001.
The foregoing limitations will not apply to the Incurrence by the Borrower
(or any Restricted Subsidiary with respect to clauses (b), (d), (e), (g), (i),
(j), (l) and (m) below of this paragraph) of any of the following (collectively,
"Permitted Indebtedness"), each of which shall be given independent effect:
(a) Indebtedness under the Senior Subordinated Notes and the Senior
Subordinated Discount Notes and the Indentures;
(b) Existing Indebtedness;
(c) Indebtedness under the Bank Credit Facility in an aggregate principal
amount at any one time outstanding not to exceed the sum of (A) $750.0 million,
which amount shall be reduced by (x) any permanent reduction of commitments
thereunder and (y) any other repayment accompanied by a permanent reduction of
commitments thereunder (other than in connection with any refinancing thereof
where the aggregate principal amount outstanding and commitments thereunder
immediately prior thereto are not greater than such amounts immediately
thereafter) and increased by any increase in the aggregate commitments under the
Bank Credit Facility agreed to in connection with the occurrence of a
Replacement Satellite Event (as defined in the Bank Credit Facility as in effect
on the Issue Date) thereunder (provided that such increase shall not be
effective for purposes of this paragraph (a) until (x) the successful launch and
commencement of operations of a permanent substitute satellite to GE-2 pursuant
to a procedure of acceptance substantially similar to the procedure regarding
acceptance of GE-2 or (y) the successful implementation, as certified by the
Borrower to the Trustees, of a plan of continued operation of the PRIMESTAR(R)
business agreed to in writing by the Borrower and the arranging agents under
the Bank Credit Facility, plus (B) any amounts outstanding under the Bank Credit
Facility that utilize subparagraph (o) of this paragraph of this covenant;
(d) (x) Indebtedness of any Restricted Subsidiary owed to and held by the
Borrower or any Restricted Subsidiary and (y) Indebtedness of the Borrower owed
to and held by any Restricted Subsidiary which is unsecured and subordinated in
right of payment to the payment and performance of the Borrower's obligations
under any Senior Indebtedness, the Indentures and the Notes (or pledged to
secure any Senior Indebtedness); provided, however, that an Incurrence of
Indebtedness that is not permitted by this clause (d) shall be deemed to have
occurred upon (i) any sale or other disposition of any Indebtedness of the
Borrower or any Restricted Subsidiary referred to in this clause (d) to a Person
(other than the Borrower or any Restricted Subsidiary); (ii) any sale or other
disposition of Equity Interests of any Restricted Subsidiary which holds
Indebtedness of the Borrower or another Restricted Subsidiary such that such
Restricted Subsidiary ceases to be a Restricted Subsidiary or (iii) the
designation of a Restricted Subsidiary which holds Indebtedness of the Borrower
or any other Restricted Subsidiary as an
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Unrestricted Subsidiary;
(e) guarantees by any Restricted Subsidiary of Senior Indebtedness of the
Borrower; provided, however, that if any such guarantee shall be Incurred in
respect of any Senior Indebtedness of the Borrower which has registration
rights (including the requirement to effect an exchange offer registered under
the Securities Act) or which is registered under the Securities Act, such
Restricted Subsidiary shall guarantee the Notes on a senior subordinated basis
as provided in the Indentures;
(f) Interest Rate Protection Obligations of the Borrower relating to
Indebtedness of the Borrower (which Indebtedness (i) bears interest at
fluctuating interest rates and (ii) is otherwise permitted to be Incurred under
this covenant); provided, however, that the notional principal amount of such
Interest Rate Protection Obligations does not exceed the principal amount of the
Indebtedness to which such Interest Rate Protection Obligations relate;
(g) Purchase Money Indebtedness and Capitalized Lease Obligations which do not
exceed $35.0 million in the aggregate at any one time outstanding;
(h) Indebtedness or Disqualified Equity Interests to the extent representing a
replacement, renewal, refinancing or extension (collectively, a "refinancing")
of outstanding Indebtedness or Disqualified Equity Interests Incurred in
compliance with the Debt to Operating Cash Flow Ratio of the first paragraph of
this covenant or clause (a), (b), (i), (j), (k), (l) or (m) of this paragraph of
this covenant; provided, however, that (i) any such refinancing shall not exceed
the sum of the principal amount (or, if such Indebtedness or Disqualified Equity
Interests provide for a lesser amount to be due and payable upon a declaration
of acceleration thereof at the time of such refinancing, an amount no greater
than such lesser amount) of the Indebtedness or Disqualified Equity Interests
being refinanced, plus the amount of accrued interest or dividends thereon, plus
the amount of any reasonably determined prepayment premium necessary to
accomplish such refinancing and such reasonable fees and expenses incurred in
connection therewith, (ii) Indebtedness representing a refinancing of
Indebtedness other than Senior Indebtedness shall have a Weighted Average Life
to Maturity equal to or greater than the Weighted Average Life to Maturity of
the Indebtedness being refinanced, (iii) Indebtedness that is pari passu with
the Notes may only be refinanced with Indebtedness that is made pari passu with
or subordinate in right of payment to the Notes and Subordinated Indebtedness or
Disqualified Equity Interests may only be refinanced with Subordinated
Indebtedness or Disqualified Equity Interests; (iv) no Restricted Subsidiary may
Incur Indebtedness to refinance Indebtedness of the Borrower; and (v) with
respect to any refinancing of Indebtedness Incurred pursuant to clauses (i),
(j), (k) or (l) of this paragraph, such refinancing pursuant to this clause (h)
also shall be deemed to be Incurred pursuant to clause (i), (j), (k) or (l), as
the case may be, of this paragraph (for the avoidance of doubt, the result of
which is that a refinancing does not create new debt Incurrence capacity under
such clauses);
(i) Indebtedness (including Acquired Indebtedness) not to exceed $180.0
million in aggregate principal amount at any time outstanding, Incurred in
connection with the acquisition by the Borrower or any Restricted Subsidiary of
partnership interests in the Partnership not owned by the Borrower or any
Restricted Subsidiary (including, without limitation, the acquisition of a
Person (other than the Borrower or any Restricted Subsidiary) that owns
partnership interests in the Partnership); provided, however, that (i) after
giving effect to such purchase the Borrower or a Restricted Subsidiary owns
such partnership interests and all right and title with respect thereto
(including the income and profits therefrom); and (ii) any such Indebtedness
Incurred by any Restricted Subsidiary shall only be permitted to be Incurred if
it is Acquired Indebtedness and shall not be Incurred if such Acquired
Indebtedness was Incurred in connection with, in contemplation of or with a view
to such transaction;
(j) Indebtedness (including Acquired Indebtedness) Incurred in connection with
the acquisition of any Person distributing PRIMESTAR(R) television programming
or the acquisition of any subscribers of any distributor of PRIMESTAR(R)
television programming and the right to distribute PRIMESTAR(R) television
programming to such subscribers (and related assets and rights); provided,
however, that (i) the aggregate amount of any such Indebtedness Incurred in
connection with any such acquisition shall not exceed $750.00 per subscriber
acquired in such acquisition; (ii) such acquisition is effected through the
Borrower or any Restricted Subsidiary or a Person that becomes a Restricted
Subsidiary; and (iii) any such Indebtedness Incurred by any Restricted
Subsidiary shall only be permitted to be Incurred if it is Acquired Indebtedness
and shall not be Incurred if such Acquired Indebtedness was Incurred in
connection with, in contemplation of or with a view to such transaction;
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(k) Indebtedness to fund purchases of inventory of integrated receiver
decoders and other related subscriber equipment to be used in the business of
the Borrower and the Restricted Subsidiaries not to exceed in the aggregate at
any time outstanding the lesser of (x) 50% of the aggregate cost of such
decoders and equipment and (y) $50.0 million;
(l) Indebtedness (including Acquired Indebtedness) Incurred to effect the
acquisition of other satellite communications businesses (or Persons engaged in
such business) (a "Related Acquisition") or to make C-Band Investments (so long
as such C-Band Investment results in the ownership by the Borrower or any
Restricted Subsidiary of not less than 50% of the economic and Voting Equity
Interests in the subject Person or is made to fund the acquisition of other
satellite communications businesses by such Person in whom the C-Band Investment
is being made (so long as such acquisition is effected by such Person or one of
its subsidiaries)); provided, however, that (i) the aggregate amount of any such
Indebtedness Incurred to effect any such Related Acquisition shall not exceed
(x) $750.00 per subscriber acquired in such acquisition if such Related
Acquisition is in the medium or high power segment of the satellite
communications industry or (y) $500.00 per subscriber acquired in such Related
Acquisition if such Related Acquisition is in the C-band segment of the
satellite communications industry; (ii) such Related Acquisition is effected
through the Borrower or any Restricted Subsidiary or a Person that becomes a
Restricted Subsidiary; (iii) the aggregate amount of any such indebtedness
Incurred to effect any C-Band Investments shall not exceed (x) if such C-Band
Investment is the initial Investment in the Person in whom the C-Band Investment
is being made, $250.00 per subscriber existing at the time thereof of such
Person in whom such C-Band Investment is being made and (y) $250.00 per
subscriber acquired if such C-Band Investment is made to fund the acquisition by
the Person in whom such C-Band Investment is being made of other satellite
communications businesses; and (iv) any such Indebtedness Incurred by any
Restricted Subsidiary shall only be permitted to be Incurred if it is Acquired
Indebtedness and shall not be Incurred if such Acquired Indebtedness was
Incurred in connection with, in contemplation of or with a view to such
transaction;
(m) Indebtedness under any guarantee, letter of credit or other credit support
with respect to (x) any obligations of the Partnership under the Partnership
Credit Agreement (or any refinancing thereof) to the extent such obligation was
Incurred by the Partnership to finance any Tempo Satellite or (y) any
obligations of the Partnership under the GE-2 Agreement, in each case, to the
extent the provision thereof is a Permitted Investment under clause (n) of the
definition of "Permitted Investments"; and
(n) in addition to the items referred to in clauses (a) through (m) above,
Indebtedness of the Borrower (including any Indebtedness under the Bank Credit
Facility that utilizes this subparagraph (n)) having an aggregate principal
amount not to exceed $50.0 million at any time outstanding; provided, however,
that so long as no Default or Event of Default shall have occurred and be
continuing, such amount shall be increased to a maximum of $100.0 million if, as
of the end of the most recently completed fiscal quarter of the Borrower after
the Issue Date, the Borrower shall have provided an Officers' Certificate to
the Trustees that the Borrower and the Restricted Subsidiaries had as of such
date in excess of 1.2 million subscribers.
Indebtedness of any Person or any of its Subsidiaries existing at the time
such Person becomes a Restricted Subsidiary (or is merged into or consolidated
with the Borrower or any Restricted Subsidiary), whether or not such
Indebtedness was incurred in connection with, or in contemplation of, such
Person becoming a Restricted Subsidiary (or being merged into or consolidated
with the Borrower or any Restricted Subsidiary), shall be deemed Incurred at
the time any such Person becomes a Restricted Subsidiary or merges into or
consolidates with the Borrower or any Restricted Subsidiary; provided, however,
that any Indebtedness of any Unrestricted Subsidiary existing at the time of its
designation as a Restricted Subsidiary pursuant to the Required Designation
shall not be deemed Incurred at such time for purposes of the covenant.
If the Borrower Incurs any Indebtedness pursuant to the Debt to Operating
Cash Flow Ratio of the first paragraph of this covenant and included in the
calculation thereof the Consolidated Operating Cash Flow of the High Power
Satellite Transmission Subsidiary, C-Band Dividends or the Consolidated
Operating Cash Flow of any Restricted C-Band Subsidiary, then such Indebtedness
will be deemed to not have been Incurred in compliance with this covenant
(unless otherwise incurrable at such time under any of subparagraphs (a)-(o) of
the second paragraph of this covenant) if the Borrower or any Restricted
Subsidiary thereafter makes any Restricted Payment pursuant to clause (x) or
(xii) of the second paragraph of "--Limitation on Restricted Payments" above
and such Indebtedness could not have been Incurred at the time of its Incurrence
if any such Investment were made immediately
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prior to such Incurrence.
Limitation on Senior Subordinated Indebtedness. The Borrower shall not,
directly or indirectly, Incur any Indebtedness that by its terms would expressly
rank senior in right of payment to the Notes and expressly rank subordinated in
right of payment to any Senior Indebtedness.
Limitations on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Borrower shall not, and shall not cause or permit any
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (a) pay dividends or make any other
distributions to the Borrower or any other Restricted Subsidiary on its Equity
Interests or with respect to any other interest or participation in, or measured
by, its profits, or pay any Indebtedness owed to the Borrower or any other
Restricted Subsidiary, (b) make loans or advances to, or guarantee any
Indebtedness or other obligations of, the Borrower or any other Restricted
Subsidiary or (c) transfer any of its properties or assets to the Borrower or
any other Restricted Subsidiary, except for such encumbrances or restrictions
existing under or by reason of (i) the Bank Credit Facility, any Basic Document
or any other agreement of the Borrower or the Restricted Subsidiaries
outstanding on the Issue Date, in each case as in effect on the Issue Date, and
any amendments, restatements, renewals, replacements or refinancings thereof;
provided, however, that any such amendment, restatement, renewal, replacement or
refinancing is no more restrictive in the aggregate with respect to such
encumbrances or restrictions than those contained in the Bank Credit Facility on
the Issue Date; (ii) applicable law; (iii) any instrument governing Indebtedness
or Equity Interests of an Acquired Person acquired by the Borrower or any
Restricted Subsidiary as in effect at the time of such acquisition (except to
the extent such Indebtedness was incurred by such Acquired Person in connection
with, as a result of or in contemplation of such acquisition); provided,
however, that such encumbrances and restrictions are not applicable to the
Borrower or any Restricted Subsidiary, or the properties or assets of the
Borrower or any Restricted Subsidiary, other than the Acquired Person; (iv)
customary non-assignment provisions in leases entered into in the ordinary
course of business and consistent with past practices; (v) Purchase Money
Indebtedness for property acquired in the ordinary course of business that only
imposes encumbrances and restrictions on the property so acquired; (vi) any
agreement for the sale or disposition of the Equity Interests or assets of any
Restricted Subsidiary; provided, however, that such encumbrances and
restrictions described in this clause (vi) are only applicable to such
Restricted Subsidiary or assets, as applicable, and any such sale or disposition
is made in compliance with "--Disposition of Proceeds of Asset Sales" below to
the extent applicable thereto; (vii) refinancing Indebtedness permitted under
clause (h) of the second paragraph of "--Limitation on Indebtedness" above;
provided, however, that the encumbrances and restrictions contained in the
agreements governing such Indebtedness are no more restrictive in the aggregate
than those contained in the agreements governing the Indebtedness being
refinanced immediately prior to such refinancing; (viii) the Notes Indentures;
or (ix) any such customary encumbrance or restriction existing under any other
security agreement, instrument or document hereafter in effect; provided,
however, that the terms and conditions of any such encumbrance or restriction
are not more restrictive than those contained in the Bank Credit Facility as in
effect on the Issue Date. Anything contained herein to the contrary
notwithstanding, the Borrower and its Subsidiaries shall in no event be
prohibited or restrained from granting, and causing to be effective, any lien or
security interest securing the obligations of the Borrower and the Restricted
Subsidiaries under the Bank Credit Facility.
Designation of Unrestricted Subsidiaries; Designation of Tempo as a Restricted
Subsidiary. (a) Tempo and its Subsidiaries are initially designated by TSAT
as Unrestricted Subsidiaries as of the Issue Date. The Borrower may
designate after the Issue Date any other Subsidiary of the Borrower as an
"Unrestricted Subsidiary" under the Indentures (a "Designation") only if:
(i) no Default or Event of Default shall have occurred and be continuing at
the time of or after giving effect to such Designation;
(ii) at the time of and after giving effect to such Designation, the Borrower
could Incur $1.00 of additional Indebtedness (other than Permitted Indebtedness)
under the Debt to Operating Cash Flow Ratio of the first paragraph of "--
Limitation on Indebtedness" above; and
(iii) The Borrower would be permitted to make an Investment (other than a
Permitted Investment) at the time of Designation (assuming the effectiveness of
such Designation) pursuant to the first paragraph of "--Limitation on Restricted
Payments" above in an amount (the "Designation Amount") equal to the Fair Market
Value of the
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Borrower's proportionate interest in the net worth of such Subsidiary on such
date calculated in accordance with GAAP.
Notwithstanding the above, no Subsidiary of the Borrower shall be designated
an Unrestricted Subsidiary which (i) holds the partnership interest in (or any
debt or equity interest in) the Partnership or distributes, directly or
indirectly, PRIMESTAR(R) television programming service or has any right, title
or interest in the revenue or profits in, or holds any Lien in respect of, such
partnership interests or such distribution or (ii) conducts, directly or
indirectly, the High Power Satellite Transmission Business or the business of
distributing high power DBS services to subscribers (or, if the proposed Cable
Plus strategy is implemented, the business of distributing the Cable Plus
service to cable system operators), or has any interest in any such business or
the right to receive the income or profits therefrom.
Neither the Borrower nor any Restricted Subsidiary shall at any time (x)
provide credit support for, subject any of its property or assets (other than
the Equity Interests of any Unrestricted Subsidiary) to the satisfaction of, or
guarantee, any Indebtedness of any Unrestricted Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness), (y) be
directly or indirectly liable for any Indebtedness of any Unrestricted
Subsidiary or (z) be directly or indirectly liable for any Indebtedness which
provides that the holder thereof may (upon notice, lapse of time or both)
declare a default thereon or cause the payment thereof to be accelerated or
payable prior to its final scheduled maturity upon the occurrence of a default
with respect to any Indebtedness of any Unrestricted Subsidiary (other than
Tempo pursuant to the Bank Credit Facility), except, in the case of clause (x)
or (y), to the extent otherwise permitted under the terms of the Indentures,
including, without limitation, pursuant to "--Limitation on Restricted Payments"
above and "--Disposition of Proceeds of Asset Sales" below, and except for any
non-recourse guarantee given solely to support the pledge by the Borrower or any
Restricted Subsidiary of the Equity Interests of any Unrestricted
Subsidiary.
(b) The Borrower shall designate (the "Required Designation") Tempo (or any
other Unrestricted Subsidiary which owns any Tempo Satellite or any right or
interest therein or holds a Lien in respect thereof or the right to receive
income or profits therefrom (Tempo or any such Unrestricted Subsidiary, the
"Satellite Subsidiary")) as a Restricted Subsidiary and revoke its designation
as an Unrestricted Subsidiary if as of the end of any complete fiscal quarter of
such Satellite Subsidiary after the Issue Date, the remainder of (x)
Consolidated Operating Cash Flow of such Satellite Subsidiary for the
immediately preceding complete fiscal quarter, minus (y) Consolidated Interest
Expense of such Satellite Subsidiary for such immediately preceding complete
fiscal quarter, minus (z) any scheduled principal payments in respect of
Indebtedness of such Satellite Subsidiary made during such immediately preceding
complete fiscal quarter is greater than $1.0 million. For purposes of
determining Consolidated Operating Cash Flow and Consolidated Interest Expense
of any Satellite Subsidiary pursuant to the immediately preceding sentence, the
definitions "Consolidated Operating Cash Flow" and "Consolidated Interest
Expense" shall be used, but references to the Borrower and the Restricted
Subsidiaries in such definitions shall be deemed to refer to the relevant
Satellite Subsidiary and its Subsidiaries.
(c) The Borrower may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a "Revocation") if:
(i) no Default or Event of Default shall have occurred and be continuing at
the time of and after giving effect to such Revocation; and
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding
immediately following such Revocation would, if Incurred at such time, have been
permitted to be Incurred for all purposes of the Indentures; provided, however,
that the foregoing shall not apply to the Required Designation.
All Designations and Revocations must be evidenced by resolutions of the Board
of Directors of the Borrower, delivered to the Trustees certifying compliance
with the foregoing provisions.
Limitation on Liens. The Borrower shall not, and shall not cause or permit any
Restricted Subsidiary to, directly or indirectly, Incur any Liens of any kind
against or upon any of their respective properties or assets now owned or
hereafter acquired, or any proceeds therefrom or any income or profits
therefrom, to secure any Indebtedness unless contemporaneously therewith
effective provision is made to secure the Notes equally and ratably
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with such Indebtedness with a Lien on the same properties and assets securing
Indebtedness for so long as such Indebtedness is secured by such Lien, except
for (i) Liens securing any Senior Indebtedness or any guarantee of Senior
Indebtedness by any Restricted Subsidiary and (ii) Permitted Liens.
Disposition of Proceeds of Asset Sales. (a) the Borrower shall not, and
shall not cause or permit any Restricted Subsidiary to, directly or indirectly,
make any Asset Sale, unless (i) the Borrower or such Restricted Subsidiary, as
the case may be, receives consideration at the time of such Asset Sale at least
equal to the Fair Market Value of the assets sold or otherwise disposed of and
(ii) at least 85% of such consideration consists of (A) cash or Cash
Equivalents, (B) properties and capital assets to be used in the same lines of
business being conducted by the Borrower or any Restricted Subsidiary at such
time or (C) Equity Interests in one or more Persons which thereby become
Restricted Subsidiaries whose assets consist primarily of properties and capital
assets used in the same line of business being conducted by the Borrower or any
Restricted Subsidiary at such time. The amount of any (i) Indebtedness (other
than any Subordinated Indebtedness) of the Borrower or any Restricted
Subsidiary that is actually assumed by the transferee in such Asset Sale and
from which the Borrower and the Restricted Subsidiaries are fully released
shall be deemed to be cash for purposes of determining the percentage of cash
consideration received by the Borrower or the Restricted Subsidiaries and (ii)
notes or other similar obligations received by the Borrower or the Restricted
Subsidiaries from such transferee that are immediately converted, sold or
exchanged (or are converted, sold or exchanged within thirty days of the related
Asset Sale) by the Borrower or the Restricted Subsidiaries into cash shall be
deemed to be cash, in an amount equal to the net cash proceeds realized upon
such conversion, sale or exchange for purposes of determining the percentage of
cash consideration received by the Borrower or the Restricted Subsidiaries.
The Borrower or such Restricted Subsidiary, as the case may be, may (i) apply
the Net Cash Proceeds of any Asset Sale within 375 days of receipt thereof to
repay Senior Indebtedness and permanently reduce any related commitment, (ii)
commit in writing to acquire, construct or improve properties and capital assets
to be used in the same line of business being conducted by the Borrower or any
Restricted Subsidiary at such time and so apply such Net Cash Proceeds within
375 days after the receipt thereof, or (iii) apply the Net Cash proceeds of any
Asset Sale within 375 days after receipt thereof to the making of any Investment
which is permitted to be made under "--Limitation on Restricted Payments"
above.
To the extent all or part of the Net Cash Proceeds of any Asset Sale are not
applied within 375 days of such Asset Sale as described in clause (i), (ii) or
(iii) of the immediately preceding paragraph (such Net Cash Proceeds, the
"Unutilized Net Cash Proceeds"), the Borrower shall, within 20 days after such
375th day, make an Offer to Purchase all outstanding Notes of each tranche up to
a maximum principal amount (in the case of the Senior Subordinated Notes) or
Accreted Value (in the case of the Senior Subordinated Discount Notes)
(expressed as a multiple of $1,000) of Notes equal to the Securities Portion of
Unutilized Net Cash Proceeds, at a purchase price in cash equal to (x) with
respect to the Senior Subordinated Notes, 100% of the principal amount thereof,
plus accrued and unpaid interest thereon, if any, to the Purchase Date, and (y)
with respect to the Senior Subordinated Discount Notes, 100% of the Accreted
Value on the Purchase Date, unless the Purchase Date is on or after the earlier
to occur of February 15, 2002 and the Cash Interest Election Date, in which case
such purchase price shall be equal to 100% of the principal amount at maturity
thereof, plus accrued and unpaid interest thereon, if any, to the Purchase Date;
provided, however, that the Offer to Purchase may be deferred until there are
aggregate Unutilized Net Cash Proceeds equal to or in excess of $15.0 million,
at which time the entire amount of such Unutilized Net Cash Proceeds, and not
just the amount in excess of $15.0 million, shall be applied as required
pursuant to this paragraph.
In the event that any other Indebtedness of the Borrower which ranks pari
passu with either tranche of the Notes (including the other tranche of the
Notes) (the "Other Indebtedness") requires that an offer to repurchase such
Indebtedness be made upon the consummation of any Asset Sale, the Borrower may
apply the Unutilized Net Cash Proceeds otherwise required to be applied to an
Offer to Purchase to offer to purchase such Other Indebtedness and to an Offer
to Purchase so long as the amount of such Unutilized Net Cash Proceeds applied
to repurchase the Notes of such tranche is not less than the Securities Portion
of Unutilized Net Cash Proceeds. With respect to any Unutilized Net Cash
Proceeds, the Borrower shall make the Offer to Purchase in respect thereof at
the same time under each Indenture and at the same time as the analogous offer
to purchase is made under any Other Indebtedness and the Purchase Date in
respect thereof shall be the same under each Indenture and the same as the
purchase date in respect thereof pursuant to any Other Indebtedness.
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For purposes of this covenant, "Securities Portion of Unutilized Net Cash
Proceeds" means, with respect to either tranche of the Notes, the amount of the
Unutilized Net Cash Proceeds equal to the product of (x) the Unutilized Net Cash
Proceeds and (y) a fraction the numerator of which is the principal amount or
Accreted Value of all Notes of such tranche tendered pursuant to the Offer to
Purchase related to such Unutilized Net Cash Proceeds (the "Securities Amount")
and the denominator of which is the sum of the Securities Amount and the lesser
of the aggregate principal face amount or accreted value as of the relevant
purchase date of all Other Indebtedness tendered pursuant to a concurrent offer
to purchase such Other Indebtedness made at the time of such Offer to Purchase.
With respect to any Offer to Purchase effected pursuant to this covenant,
among the Senior Subordinated Notes, to the extent the aggregate principal face
amount of Senior Subordinated Notes tendered pursuant to such Offer to Purchase
exceeds the Securities Portion of Unutilized Net Cash Proceeds to be applied to
the repurchase thereof, such Notes shall be purchased pro rata based on the
aggregate principal face amount of such Senior Subordinated Notes tendered by
each holder, and, as among the Senior Subordinated Discount Notes, to the extent
that the Accreted Value as of the Purchase Date (or principal amount at maturity
after February 15, 2002 or, if a Cash Interest Election shall have been made,
the Cash Interest Election Date) of the Senior Subordinated Discount Notes
tendered pursuant to such Offer to Purchase exceeds the Securities Portion of
Unutilized Net Cash Proceeds with respect thereto, such Notes shall be purchased
pro rata based on the Accreted Value as of the Purchase Date (or principal
amount at maturity after February 15, 2002 or, if a Cash Interest Election shall
have been made, the Cash Interest Election Date) of such Senior Subordinated
Discount Notes tendered by each holder.
In the event that the Borrower makes an Offer to Purchase the Notes, the
Borrower shall comply with any applicable securities laws and regulations,
including any applicable requirements of Section 14(e) of, and Rule 14e-1 under,
the Exchange Act, and any violation of the provisions of the Indentures relating
to such Offer to Purchase occurring as a result of such compliance shall not be
deemed an Event of Default or an event that with the passing of time or giving
of notice, or both, would constitute an Event of Default.
(b) Each holder shall be entitled to tender all or any portion of the Notes
owned by such holder pursuant to the Offer to Purchase, subject to the
requirement that any portion of a Note tendered must be tendered in an integral
multiple of $1,000 principal amount and subject to any proration among tendering
holders as described above.
(c) So long as there are any amounts owed or due by the Borrower or any
Subsidiary to the Partnership under the Tempo Letter Agreements, or the
Borrower or any Restricted Subsidiary is directly or indirectly obligated,
contingently or otherwise, for any obligations under the Partnership Credit
Agreement (pursuant to any letter of credit, guarantee or other credit support
or otherwise), for purposes of the foregoing covenant, the sale or lease of
either or both of the Tempo Satellites (whether or not the Subsidiary owning
such Tempo Satellite is a Restricted Subsidiary), or any transponder thereon or
capacity thereof, to the Partnership or any other Person shall be considered an
Asset Sale unless (i) if such sale or lease is to the Partnership of both
Tempo Satellites, any balance due by the Borrower or any Subsidiary to the
Partnership under the Tempo Letter Agreements shall be permanently extinguished
and if such sale or lease is to the Partnership of only one Tempo Satellite,
then 100% of the net proceeds thereof are applied to the balance due by the
Borrower or any Subsidiary to the Partnership under the Tempo Letter Agreements
and (ii) if such sale or lease is to any other Person, 100% of the net proceeds
thereof are applied to the balance due under the Partnership Credit Agreement to
the extent that the Borrower or any Restricted Subsidiary has any letter of
credit, guarantee or other credit support outstanding in respect thereof and
thereafter to the balance due by the Borrower or any Subsidiary to the
Partnership under the Tempo Letter Agreements. The Borrower shall not and shall
not cause or permit any Subsidiary to enter into or suffer to exist any
agreement, instrument, encumbrance or restriction which would, directly or
indirectly, limit, prohibit or restrict the compliance by the Borrower and its
Subsidiaries with the foregoing sentence.
(d) If the Borrower or any Restricted Subsidiary is engaged in the High Power
Satellite Transmission Business, the Borrower shall not and shall not cause or
permit any such High Power Satellite Transmission Subsidiary to sell, convey,
transfer, lease, assign, or otherwise encumber (i) any Tempo Satellite (or any
contract rights related to the construction, launch or insurance thereof), (ii)
any orbital slot owned by the Borrower or any Subsidiary, (iii) the Equity
Interests of any Subsidiary which owns any Tempo Satellite or any orbital slot
or any right, license, authorization or permit with respect to any such orbital
slot owned by such Subsidiary, or any other interest in an orbital slot which
may be sold or otherwise disposed of in compliance with all applicable law
(including the Communications Act and the rules and regulations promulgated
thereunder) or (iv) the income or profits of any of
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the foregoing, unless in any such case, immediately after such a transaction the
Borrower or such High Power Satellite Transmission Subsidiary has in place a
binding agreement providing for dedicated satellite capacity sufficient to serve
its High Power Satellite Transmission Business at least until the stated
maturity of the Notes and files such agreement with the Trustee together with an
Officers' Certificate certifying that such agreement meets the foregoing
criteria.
Amendments to Certain Agreements. The Borrower shall not, and shall not
cause or permit any Restricted Subsidiary to, amend, modify or waive, or refrain
from enforcing, any provision of the Basic Documents in any manner adverse to
the Borrower or any of its Subsidiaries or the holders of the Notes in any
material respect as determined by the Board of Directors of the Borrower. This
covenant shall not be construed to prohibit the Borrower or any Restricted
Subsidiary from terminating any of the Basic Documents, if a majority of the
disinterested members of the Board of Directors of the Borrower shall determine
that it is in the best interests of the Borrower to do so.
Tempo Satellites; Maintenance of Insurance. (a) Prior to 180 days
following the successful launch of any Tempo Satellite (which, in the case of
Tempo DBS-1, occurred on March 8, 1997), the Borrower shall not terminate the
Satellite Construction Agreement or amend, modify or refrain from enforcing any
provision thereof in any manner adverse to the Borrower or any of its
Subsidiaries or the holders of the Notes in any material respect, as determined
by the Board of Directors of the Borrower, and shall not amend, modify or
refrain from enforcing any provision thereof regarding the rights of the
Borrower under the Satellite Construction Agreement (if any) with respect to any
failure of any Tempo Satellite that may occur during the 180 day period
immediately thereafter.
(b) If the Borrower or any Subsidiary is engaged in the High Power Satellite
Transmission Business, so long as a ground spare satellite of comparable quality
and capacity has not been completely constructed and available to be launched
and to provide (pursuant to a binding agreement, a copy of which has been filed
with the Trustees) sufficient capacity to the Borrower or the Subsidiary
conducting the High Power Satellite Transmission Business to conduct such
business on a competitive basis and service its subscribers, then within 30 days
after the acceptance of any Tempo Satellite by the Borrower or any Subsidiary
after completion of in-orbit testing by the builder thereof the Borrower shall,
or shall cause a Restricted Subsidiary to, obtain (to the extent commercially
available upon reasonable terms), and thereafter maintain, In-Orbit Insurance
with respect to the Tempo Satellite (or any permanent replacement thereof)
providing the servicing capacity with respect to such High Power Satellite
Transmission Business. The Borrower or such Restricted Subsidiary shall be
named as the insured under such In-Orbit Insurance (provided that only a senior
secured creditor of the Borrower or a Restricted Subsidiary may also be
designated as a named insured under such In-Orbit Insurance).
(c) In the event that the Borrower or any of its Subsidiaries receives any
damages or other amounts due under the Satellite Construction Agreement
(including, without limitation, the refund of the full purchase price of any
Tempo Satellite which has not been delivered pursuant to the terms thereof) all
such amounts shall be deemed to be Net Cash Proceeds from an Asset Sale and the
Borrower shall apply such proceeds as required by the second and third full
paragraphs under subparagraph (a) of "--Disposition of Proceeds of Asset Sales"
above, except as provided by subparagraph (c) thereof.
Merger, Sale of Assets, etc. The Borrower shall not consolidate with or merge
with or into (whether or not the Borrower is the Surviving Person) any other
entity and the Borrower shall not and shall not cause or permit any Restricted
Subsidiary to, sell, convey, assign, transfer, lease or otherwise dispose of all
or substantially all of the Borrower's properties and assets (determined on a
consolidated basis for the Borrower and the Restricted Subsidiaries) to any
entity in a single transaction or series of related transactions, unless: (i)
either (x) the Borrower shall be the Surviving Person or (y) the Surviving
Person (if other than the Borrower) shall be a corporation organized and validly
existing under the laws of the United States of America or any State thereof or
the District of Columbia, and shall, in any such case, expressly assume by a
supplemental indenture, the due and punctual payment of the principal of,
premium, if any, and interest on all the Notes and the performance and
observance of every covenant of the Indentures and the Registration Rights
Agreements to be performed or observed on the part of the Borrower; (ii)
immediately thereafter, no Default or Event of Default shall have occurred and
be continuing; and (iii) immediately after giving effect to any such transaction
involving the Incurrence by the Borrower or any Restricted Subsidiary, directly
or indirectly, of additional Indebtedness (and treating any Indebtedness not
previously an obligation of the Borrower or any Restricted Subsidiary in
connection with or as a result of such transaction as
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having been Incurred at the time of such transaction), the Surviving Person
could Incur, on a pro forma basis after giving effect to such transaction as if
it had occurred at the beginning of the latest fiscal quarter for which
consolidated financial statements of the Borrower are available, at least $1.00
of additional Indebtedness (other than Permitted Indebtedness) under the Debt to
Operating Cash Flow Ratio of the first paragraph of "--Limitation on
Indebtedness" above; provided, however, that the condition set forth in this
clause (iii) need not be satisfied in connection with the merger or
consolidation with or into the Borrower or any Restricted Subsidiary of any
Person holding partnership interests in the Partnership if (x) such merger or
consolidation is effected for the purpose of acquiring the partnership interests
in the Partnership held by such Person (provided that the amount of partnership
interests in the Partnership held by such Person on the date of such merger or
consolidation is not less than the amount held by such Person on the Issue Date
otherwise than pursuant to the transfer of partnership interests in the
Partnership to another Person who has been or simultaneously therewith will be
merged or consolidated with or into the Borrower or any Restricted Subsidiary or
the dilution of such Person's partnership interests in the Partnership solely
due to its failure to pay capital contributions required by the Partnership
Agreement) and (y) in connection with such acquisition of such partnership
interests the Borrower or a Restricted Subsidiary acquires all rights of such
Person (and its Affiliates) to distribute PRIMESTAR(R) programming services.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all the properties and assets of one or more Restricted
Subsidiaries the Equity Interest of which constitutes all or substantially all
the properties and assets of the Borrower shall be deemed to be the transfer of
all or substantially all the properties and assets of the Borrower.
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the second immediately preceding
paragraph in which the Borrower is not the Surviving Person and the Surviving
Person is to assume all the Obligations of the Borrower under the Notes, the
Notes Indentures and the Registration Rights Agreements pursuant to a
supplemental indenture, such Surviving Person shall succeed to, and be
substituted for, and may exercise every right and power of, the Borrower and
the Borrower shall be discharged from its Obligations under the Notes
Indentures and the Notes.
Transactions with Affiliates. The Borrower shall not, and shall not cause or
permit any Restricted Subsidiary to, directly or indirectly, conduct any
business or enter into any transaction (or series of related transactions) with
or for the benefit of any of their respective Affiliates or any beneficial
holder of 10% or more of the Equity Interests of the Borrower or any officer,
director or employee of the Borrower or any Restricted Subsidiary (each an
"Affiliate Transaction"), unless such Affiliate Transaction is on terms which
are no less favorable to the Borrower or such Restricted Subsidiary, as the case
may be, than would be available in a comparable transaction with an unaffiliated
third party. If such Affiliate Transaction (or series of related Affiliate
Transactions) involves aggregate payments or other consideration having a Fair
Market Value in excess of $15.0 million, the Borrower shall not, and shall not
cause or permit any Restricted Subsidiary to, enter into such Affiliate
Transaction, unless a majority of the disinterested members of the Board of
Directors of the Borrower shall have approved such Affiliate Transaction and
determined that such Affiliate Transaction complies with the foregoing
provisions; provided, however, that if such Affiliate Transaction is in the
ordinary course of business consistent with the past practice of any business of
the Borrower or a Restricted Subsidiary, including the High Power Satellite
Transmission Business, then there shall be no need to comply with this sentence.
In the event that the Borrower obtains a written opinion from an Independent
Financial Advisor (and files the same with the Trustees) stating that the terms
of an Affiliate Transaction are fair, from a financial point of view, to the
Borrower or the Restricted Subsidiary involved in such Affiliate Transaction, as
the case may be, such opinion will conclusively meet the requirements of the
first sentence of this paragraph and there shall be no need to comply with the
second sentence of this paragraph.
Notwithstanding the foregoing, the restrictions set forth in this covenant
shall not apply to (i) transactions with or among the Borrower and any
Restricted Subsidiary or between or among Restricted Subsidiaries; (ii)
customary directors' fees, indemnification and similar arrangements, consulting
fees, employee salaries, bonuses or employment agreements, compensation or
employee benefit arrangements and incentive arrangements with any officer,
director or employee of the Borrower entered into in the ordinary course of
business (including customary benefits thereunder) and payments under any
indemnification arrangements permitted by applicable law; (iii) the Basic
Documents, each as in effect on the Issue Date, including any amendment or
extension thereof that does not otherwise violate any other covenant set forth
in the Indentures, and any transactions undertaken pursuant to any other
contractual obligations in existence on the Issue Date (as in effect on the
Issue Date); (iv) the issue and sale by the
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Borrower to its stockholders of Qualified Equity Interests; (v) any Restricted
Payments made in compliance with "--Limitation on Restricted Payments" above;
(vi) loans and advances to officers, directors and employees of the Borrower and
the Restricted Subsidiaries for travel, entertainment, moving and other
relocation expenses, in each case made in the ordinary course of business and
consistent with past business practices; (vii) the Incurrence of intercompany
Indebtedness permitted pursuant to clause (d) of the second paragraph of "--
Limitation on Indebtedness" above; and (viii) the pledge of Equity Interests of
Unrestricted Subsidiaries to support the Indebtedness thereof.
Provision of Financial Information. Whether or not the Borrower is subject
to Section 13(a) or 15(d) of the Exchange Act, or any successor provision
thereto, the Borrower shall file with the SEC (if permitted by SEC practice and
applicable law and regulations) the annual reports, quarterly reports and other
documents which the Borrower would have been required to file with the SEC
pursuant to such Section 13(a) or 15(d) or any successor provision thereto if
the Borrower were so subject, such documents to be filed with the SEC on or
prior to the respective dates (the "Required Filing Dates") by which the
Borrower would have been required so to file such documents if the Borrower
were so subject. the Borrower shall also in any event (a) within 15 days of
each Required Filing Date (whether or not permitted or required to be filed with
the SEC) (i) transmit (or cause to be transmitted) by mail to all holders, as
their names and addresses appear in the Note Register, without cost to such
holders, and (ii) file with the Trustees, copies of the annual reports,
quarterly reports and other documents which the Borrower is required to file
with the SEC pursuant to the preceding sentence, or, if such filing is not so
permitted, information and data of a similar nature, and (b) if, notwithstanding
the preceding sentence, filing such documents by the Borrower with the SEC is
not permitted by SEC practice or applicable law or regulations, promptly upon
written request supply copies of such documents to any holder. In addition, for
so long as any Notes remain outstanding, the Borrower will furnish to the
holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act, and, to any beneficial holder of Notes, if not
obtainable from the SEC, information of the type that would be filed with the
SEC pursuant to the foregoing provisions, upon the request of any such holder.
Payments for Consent. Neither the Borrower nor any of its Subsidiaries may,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any holder of a Note for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indentures or the Notes unless such consideration is offered to be paid
or agreed to be paid to all holders of the Notes that consent, waive or agree to
amend in the time frame set forth in the solicitation documents relating to such
consent, waiver or agreement.
Events of Default
The occurrence of any of the following will be defined as an "Events of
Default" under each Indenture: (a) failure to pay principal of (or premium, if
any, on) any Note when due (whether or not prohibited by the provisions of the
Indentures described under "--Subordination of the Notes" above); (b) failure
to pay any interest on any Note when due, continued for 30 days or more (whether
or not prohibited by the provisions of the Indentures described under "--
Subordination of the Notes" above); (c) default in the payment of principal of
or interest on Notes required to be purchased pursuant to any Offer to Purchase
required by the Indentures when due and payable or failure to pay on the
Purchase Date the Purchase Price for any Note validly tendered pursuant to any
Offer to Purchase (whether or not prohibited by the provisions of the Indentures
described under "--Subordination of the Notes" above); (d) failure to perform
or comply with any of the provisions described under "--Certain Covenants--
Merger, Sale of Assets, etc." above; (e) failure to perform any other covenant,
warranty or agreement of the Borrower or the Guarantors under the Indentures,
or in the Notes continued for 30 days or more after written notice to the
Borrower by the applicable Trustee or holders of at least 25% in aggregate
principal face amount of the outstanding Senior Subordinated Notes or holders of
at least 25% of the aggregate principal amount at maturity of the Senior
Subordinated Discount Notes, as the case may be, under the applicable Indenture;
(f) default or defaults under the terms of one or more instruments evidencing or
securing Indebtedness of the Borrower or any of its Significant Restricted
Subsidiaries or, so long as the Borrower or any Significant Restricted
Subsidiary is a general partner thereof or is (directly or indirectly) obligated
in any way (contingently or otherwise) with respect
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to its Indebtedness, the Partnership having an outstanding principal amount of
$15.0 million or more individually or in the aggregate that has resulted in the
acceleration of the payment of such Indebtedness or failure by the Borrower or
any of its Significant Restricted Subsidiaries or, so long as the Borrower or
any Significant Restricted Subsidiary is a general partner thereof or is
(directly or indirectly) obligated in any way (contingently or otherwise) with
respect to its Indebtedness, the Partnership to pay principal when due at the
stated maturity of any such Indebtedness; provided, however, that it shall not
be an Event of Default if such Indebtedness shall have been repaid in full or
such acceleration shall have been rescinded within 20 days; (g) the rendering of
a final judgment or judgments (not subject to appeal) against the Borrower or
any of its Significant Restricted Subsidiaries in an amount of $15.0 million or
more (net of any amounts covered by reputable and creditworthy insurance
companies) which remains undischarged or unstayed for a period of 60 days after
the date on which the right to appeal has expired; or (h) certain events of
bankruptcy, insolvency or reorganization affecting the Borrower or any of its
Significant Restricted Subsidiaries or, so long as the Borrower or any
Significant Restricted Subsidiary is a general partner thereof or is (directly
or indirectly) obligated in any way (contingently or otherwise) with respect to
its Indebtedness, the Partnership. Subject to the provisions of the Indentures
relating to the duties of the Trustees, in case an Event of Default shall occur
and be continuing, each Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture to which it is a party at the request
or direction of any of the holders of Notes issued thereunder, unless such
holders shall have offered to such Trustee reasonable indemnity. Subject to such
provisions for the indemnification of the applicable Trustee, the holders of a
majority in aggregate principal face amount of the outstanding Senior
Subordinated Notes or the holders of a majority in aggregate principal amount at
maturity of the Senior Subordinated Discount Notes, as the case may be, will
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the applicable Trustee, as the case may be, or
exercising any trust or power conferred on such Trustee.
If an Event of Default with respect to the Notes (other than an Event of
Default with respect to the Borrower described in clause (h) of the preceding
paragraph) occurs and is continuing, the applicable Trustee or the holders of at
least 25% in aggregate principal face amount of the outstanding Senior
Subordinated Notes or the holders of at least 25% in aggregate principal amount
at maturity of the outstanding Senior Subordinated Discount Notes, as the case
may be, by notice in writing to the Borrower may declare the unpaid principal
of (and premium, if any) and accrued interest to the date of acceleration on all
the outstanding Senior Subordinated Notes and Senior Subordinated Discount
Notes, as the case may be, to be due and payable immediately and, upon any such
declaration, such principal amount (and premium, if any) and accrued interest,
notwithstanding anything contained in the applicable Indenture or the Senior
Subordinated Notes and Senior Subordinated Discount Notes, as the case may be,
to the contrary, but subject to the provisions limiting payment described above
under "--Subordination of the Notes," will become immediately due and payable;
provided, however, that so long as the Bank Credit Facility shall be in full
force and effect, if an Event of Default shall have occurred and be continuing
(other than an Event of Default with respect to the Borrower described in
clause (h) of the preceding paragraph), the Notes shall not become due and
payable until the earlier to occur of (x) five Business Days following delivery
of written notice of such acceleration of the Notes to the agent under the Bank
Credit Facility and (y) the acceleration (ipso facto or otherwise) of any
Indebtedness under the Bank Credit Facility. If an Event or Default specified in
clause (h) of the preceding paragraph with respect to the Borrower occurs under
an Indenture, the Notes outstanding thereunder will ipso facto become
immediately due and payable without any declaration or other act on the part of
the Trustee thereunder or any holder of such Notes.
Any such declaration with respect to the Notes may be annulled and past Events
of Default and Defaults (except, unless theretofore cured, an Event of Default
or a Default in payment of principal of (and premium, if any) or interest on the
Notes) may be waived by the holders of a majority of the principal amount of the
outstanding Senior Subordinated Notes or a majority of the principal amount of
maturity of the outstanding Senior Subordinated Discount Notes, as the case may
be, upon the conditions provided in the applicable Indenture. For information as
to waiver of defaults, see "--Modification and Waiver" above.
Each Indenture provides that the Trustee thereunder shall, within 30 days
after the occurrence of any Default or Event of Default with respect to the
Notes outstanding thereunder, give the holders of such Notes thereof notice of
all uncured Defaults or Events of Default thereunder known to it; provided,
however, that, except in the case of an Event of Default in payment with respect
to such Notes or a Default or Event of Default in complying with "--Certain
Covenants--Merger, Sale of Assets, etc." above, the applicable Trustee shall be
protected in withholding such notice if and so long as a committee of its trust
officers in good faith determines that the withholding of such notice is in the
interest of the holders of the applicable Notes.
No holder of any Note will have any right to institute any proceeding with
respect to the relevant Indenture or for any remedy thereunder, unless such
holder shall have previously given to the applicable Trustee written notice of a
continuing Event of Default thereunder and unless the holders of at least 25% of
the aggregate principal face amount
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of the outstanding Senior Subordinated Notes or the holders of at least 25% of
the aggregate principal amount of maturity of the outstanding Senior
Subordinated Discount Notes, as the case may be, under such Indenture shall have
made written request, and offered reasonable indemnity, to the relevant Trustee
to institute such proceeding as Trustee, and such Trustee shall have not have
received from the holders of a majority in aggregate principal face amount of
such outstanding Senior Subordinated Notes or the holders of a majority in
aggregate principal amount at maturity of such outstanding Senior Subordinated
Discount Notes, as the case may be, a direction inconsistent with such request
and shall have failed to institute such proceeding within 60 days. However, such
limitations do not apply to a suit instituted by a holder of such a Note for
enforcement of payment of the principal of and premium, if any, or interest on
such Note on or after the respective due dates expressed in such Note.
The Borrower will be required to furnish to each Trustee annually a statement
as to the performance by it of certain of its obligations under the applicable
Indenture and as to any default in such performance.
No Personal Liability of Directors, Officers, Employees, Incorporator and
Stockholders
No director, officer, employee, incorporator or stockholder of the Borrower
or any of its Affiliates, as such, shall have any liability for any obligations
of the Borrower or any of its Affiliates under the Notes or the Notes
Indentures or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes.
Satisfaction and Discharge of Notes Indentures; Defeasance
The Borrower may terminate its substantive obligations in respect of either
tranche of the Notes by delivering all outstanding Notes of such tranche to the
applicable Trustee for cancellation and paying all sums payable by it on account
of principal of, premium, if any, and interest on all Notes of such tranche or
otherwise. In addition to the foregoing, the Borrower may, provided that no
Default or Event of Default has occurred and is continuing or would arise
therefrom (or, with respect to a Default or Event of Default specified in clause
(i) of "--Events of Default" above, occurs at any time on or prior to the 91st
calendar day after the date of such deposit (it being understood that this
condition shall not be deemed satisfied until after such 91st day)) under the
applicable Indenture and provided that no default under any Senior Indebtedness
would result therefrom, terminate its substantive obligations in respect of the
Notes issued under such Indenture (except for its obligations to pay the
principal of (and premium, if any, on) and the interest on such Notes) by (i)
depositing with the relevant Trustee, under the terms of an irrevocable trust
agreement, money or United States Government Obligations sufficient (without
reinvestment) to pay all remaining indebtedness on such Notes; (ii) delivering
to the relevant Trustee either an Opinion of Counsel or a ruling directed to
such Trustee from the Internal Revenue Service to the effect that the holders of
the relevant Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such deposit and termination of obligations; (iii)
delivering to the relevant Trustee an Opinion of Counsel to the effect that the
Borrower's exercise of its option under this paragraph will not result in any of
the Borrower, the relevant Trustee or the relevant trust created by the
Borrower's deposit of funds pursuant to this provision becoming or being deemed
to be an "investment Company" under the Investment Company Act of 1940, as
amended (the "Investment Act"); and (iv) complying with certain other
requirements set forth in such Indenture. In addition, the Borrower may,
provided that no Default or Event of Default has occurred and is continuing or
would arise therefrom (or, with respect to a Default or Event of Default
specified in clause (i) of "--Events of Default" above, occurs at any time on
or prior to the 91st calendar day after the date of such deposit (it being
understood that this condition shall not be deemed satisfied until after such
91st day)) under the applicable Indenture and provided that no default under any
Senior Indebtedness would result therefrom, terminate all of its substantive
obligations in respect of the Notes issued under such Notes Indenture (including
its obligations to pay the principal of (and premium, if any, on) and interest
on such Notes) by (i) depositing with the relevant Trustee, under the terms of
an irrevocable trust agreement, money or United States Government Obligations
sufficient (without reinvestment) to pay all remaining Indebtedness on such
Notes; (ii) delivering to the relevant Trustee either a ruling directed to such
Trustee from the Internal Revenue Service to the effect that the holders of such
Notes will not recognize income, gain or loss for federal income tax purposes as
a result of such deposit and termination of obligations or an Opinion of Counsel
addressed to the relevant Trustee based upon such a ruling or based on a change
in the applicable federal tax law since the date of such Indenture, to such
effect; (iii) delivering to the relevant Trustee an Opinion of Counsel to the
effect that the Borrower's exercise of its option under this paragraph will not
result in any of the Borrower, such Trustee or the relevant trust created by
the
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Borrower's deposit of funds pursuant to this provision becoming or being deemed
to be an "investment company" under the Investment Act; and (iv) complying with
certain other requirements set forth in such Indenture.
The Borrower may make an irrevocable deposit pursuant to this provision
pursuant to either Indenture only if at such time it is not prohibited from
doing so under the subordination provisions of such Indenture or certain
covenants in the Senior Indebtedness and the Borrower has delivered to the
applicable Trustee and any Paying Agent an Officers' Certificate to that
effect.
Governing Law
The Indentures and the Notes will be governed by the laws of the State of New
York without regard to principles of conflicts of laws.
Modification and Waiver
Modifications and amendments of either Indenture may be made by the Borrower
and the Trustee thereunder with the consent of the holders of a majority in
aggregate principal face amount of the Senior Subordinated Notes outstanding
thereunder or of the holders of a majority in aggregate principal amount at
maturity of the Senior Subordinated Discount Notes outstanding thereunder, as
the case may be (including consents obtained in connection with a tender offer
or exchange offer for such Notes); provided, however, that no such modification
or amendment to the applicable Indenture may, without the consent of the holder
of each Note affected thereby, (a) change the maturity of the principal of or
any installment of interest on any such Note or alter the optional redemption or
repurchase provisions of any such Note or such Indenture in a manner adverse to
the holders of such Notes; (b) reduce the principal amount of (or the premium)
of any such Note (except pursuant to the Cash Election); (c) reduce the rate of
or extend the time for payment of interest on any such Note or make any change
to the definition of Accreted Value; (d) change the place or currency of payment
of principal of (or premium) or interest on any such Note; (e) modify any
provisions of such Indenture relating to the waiver of past defaults (other than
to add sections of such Indenture or such Notes subject thereto) or the right of
the holders of Notes outstanding thereunder to institute suit for the
enforcement of any payment on or with respect to any such Note in respect
thereof or the modification and amendment provisions of such Indenture and such
Notes (other than to add sections of such Indenture or such Notes which may not
be amended, supplemented or waived without the consent of each holder herein
affected); (f) reduce the percentage of the principal amount of outstanding
Notes necessary for amendment to or waiver of compliance with any provision of
the applicable Indenture or the Notes outstanding thereunder or for waiver of
any Default in respect thereof; (g) waive a default in the payment of principal
of, interest on, or redemption payment with respect to, such Note (except a
rescission of acceleration of the relevant Notes by the holders thereof as
provided in such Indenture and a waiver of the payment default that resulted
from such acceleration); (h) modify the ranking or priority of any Note or
modify the definition of Senior Indebtedness or Guarantor Senior Indebtedness or
amend or modify the subordination provisions of the applicable Indenture in any
manner adverse to the holders of the applicable Notes; or (i) modify the
provisions of any covenant (or the related definitions) in the applicable
Indenture requiring the Borrower to make an Offer to Purchase in a manner
materially adverse to the holders of Notes thereunder affected thereby.
The holders of a majority in aggregate principal face amount of the
outstanding Senior Subordinated Notes and the holders of a majority in aggregate
principal amount at maturity of the outstanding Senior Subordinated Discount
Notes, on behalf of all holders of Notes of such tranche, may waive compliance
by the Borrower with certain restrictive provisions of the applicable
Indenture. Subject to certain rights of the relevant Trustee, as provided in the
applicable Indenture, the holders of a majority in aggregate principal amount of
the Senior Subordinated Notes and the holders of a majority in aggregate
principal amount at maturity of the Senior Subordinated Discount Notes, on
behalf of all holders of Notes of such tranche outstanding thereunder, may waive
any past default under such Indenture (including any such waiver obtained in
connection with a tender offer or exchange offer for such Notes), except a
default in the payment of principal, premium or interest or a default arising
from failure to purchase any Notes of such tranche tendered pursuant to an Offer
to Purchase pursuant thereto, or a default in respect of a provision that under
such Indenture cannot be modified or amended without the consent of the holder
of each Note outstanding thereunder that is affected.
The Trustees
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Except during the continuance of a Default, each Trustee will perform only
such duties as are specifically set forth in the Indenture to which it is a
party. During the existence of a Default under an Indenture, the applicable
Trustee will exercise such rights and powers vested in it under such Indenture
and use the same degree of care and skill in their exercise as a prudent person
would exercise under the circumstances in the conduct of such person's own
affairs.
The Indentures and provisions of the TIA incorporated by reference therein
contain limitations on the rights of the Trustees, should they become a creditor
of the Borrower or any other obligor upon the Notes, to obtain payment of
claims in certain cases or to realize on certain property received by it in
respect of any such claim as Note or otherwise. Each Trustee is permitted to
engage in other transactions with the Borrower or an Affiliate of the
Borrower; provided, however, that if it acquires any conflicting interest (as
defined in each Indenture or in the TIA), it must eliminate such conflict or
resign.
Certain Definitions
Set forth below are certain defined terms used in the Indentures. Reference is
made to the Indentures for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Accreted Value" means (a) as of any date prior to the Cash Interest Election
Date, if any (the "Specified Date") with respect to each $1,000 principal face
amount at maturity of Senior Subordinated Discount Notes:
(i) if the Specified Date is one of the following dates (each a "Semi-Annual
Accrual Date"), the amount set forth opposite such date below:
<TABLE>
<CAPTION>
Semi-Annual Accreted
----------- --------
Accrual Date Value
------------ -----
<S> <C>
Issue Date.......... $ 552.95
August 15, 1997..... 585.66
February 15, 1998... 621.52
August 15, 1998..... 659.59
February 15, 1999... 700.00
August 15, 1999..... 742.87
February 15, 2000... 788.37
August 15, 2000..... 836.66
February 15, 2001... 887.90
August 15, 2001..... 942.29
February 15, 2002... $1,000.00
</TABLE>
(ii) if the Specified Date occurs between two Semi-Annual Accrual Dates, the
sum of (a) the Accreted Value for the Semi-Annual Accrual Date immediately
preceding the Specified Date and (b) an amount equal to the product of (x) the
Accreted Value for the Semi-Annual Accrual Date immediately following the
Specified Date less the Accreted Value for the Semi-Annual Accrual Date
immediately preceding the Specified Date and (y) a fraction, the numerator of
which is the number of days actually elapsed from the immediately preceding
Semi-Annual Accrual Date to the Specified Date, using a 360-day year of twelve
30-day months, and the denominator of which is 180; and
(iii) if the Specified Date is after February 15, 2002, $1,000; and
(b) on and after the Cash Interest Election Date, with respect to each $1,000
principal face amount of Securities, the Accreted Value determined in accordance
with the foregoing as of such Cash Interest Election Date (without any further
accretion).
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed in
connection with an Acquisition from such Person or (b) existing at the time such
Person becomes a Restricted Subsidiary or is merged or consolidated with or into
the Borrower or any Restricted Subsidiary.
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"Acquired Person" means, with respect to any specified Person, any other
Person which merges with or into or becomes a Subsidiary of such specified
Person.
"Acquisition" means (i) any capital contribution (by means of transfers of
cash or other property to others or payments for property or services for the
account or use of others, or otherwise) by the Borrower or any Restricted
Subsidiary to any other Person, or any acquisition or purchase of Equity
Interests of any other Person by the Borrower or any Restricted Subsidiary, in
either case pursuant to which such Person shall become a Restricted Subsidiary
or shall be consolidated, merged with or into the Borrower or any Restricted
Subsidiary or (ii) any acquisition by the Borrower or any Restricted Subsidiary
of the assets of any Person which constitute substantially all of an operating
unit or line of business of such Person or which is otherwise outside of the
ordinary course of business.
"Additional Interest" has the meaning provided in Section 4(a) of each
Registration Rights Agreement.
"Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any person, shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such person, whether through the
ownership of voting securities, by agreement or otherwise; provided, however,
that (i) beneficial ownership of 10.0% or more of the voting power of the then
outstanding voting securities of a person shall be deemed to be control; (ii) so
long as the Borrower or any Subsidiary of the Borrower owns a partnership
interest in the Partnership, the Partnership shall be deemed an Affiliate of
the Borrower; (iii) so long as any of the Permitted Holders is an Affiliate of
TCI and the Borrower, TCI shall be deemed an Affiliate of the Borrower and its
Subsidiaries; and (iv) no individual, other than a director of the Borrower or
an officer of the Borrower with a policy making function, shall be deemed an
Affiliate of the Borrower or any of its Subsidiaries, solely by reason of such
individual's employment, position or responsibilities by or with respect to the
Borrower or any of its Subsidiaries.
"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease
(that has the effect of a disposition) or other disposition (including, without
limitation, any merger, consolidation or sale-leaseback transaction) to any
Person other than the Borrower or a Wholly Owned Restricted Subsidiary, in one
transaction or a series of related transactions, of (i) any Equity Interest of
any Restricted Subsidiary; (ii) any material license, franchise or other
authorization of the Borrower or any Restricted Subsidiary; (iii) any assets of
the Borrower or any Restricted Subsidiary which constitute substantially all of
an operating unit or line of business of the Borrower or any Restricted
Subsidiary; or (iv) any other property or asset of the Borrower or any
Restricted Subsidiary outside of the ordinary course of business (including the
receipt of proceeds paid on account of the loss of or damage to any property or
asset and awards of compensation for any asset taken by condemnation, eminent
domain or similar proceedings). The term "Asset Sale" shall also include the
receipt of any damages or other amounts due under the Satellite Construction
Agreement to the Borrower or any Subsidiary (including, without limitation, the
refund of the full purchase price of any Tempo Satellite which has not been
delivered pursuant to the terms thereof) from a Person other than the Borrower
or its Subsidiaries. The term "Asset Sale" shall not include (a) any transaction
consummated in compliance with "--Certain Covenants--Merger, Sale of Assets,
etc." above and the creation of any Lien not prohibited by "--Certain Covenants-
- -Limitation on Liens" above; provided, however, that any transaction
consummated in compliance with "--Certain Covenants--Merger, Sale of Assets,
etc.," above involving a sale, conveyance, assignment, transfer, lease or other
disposal of less than all of the properties or assets of the Borrower and the
Restricted Subsidiaries shall be deemed to be an Asset Sale with respect to the
properties or assets of the Borrower and Restricted Subsidiaries that are not
so sold, conveyed, assigned, transferred, leased or otherwise disposed of in
such transaction; (b) sales of property or equipment that has become worn out,
obsolete or damaged or otherwise unsuitable for use in connection with the
business of the Borrower or any Restricted Subsidiary, as the case may be; (c)
any transaction consummated in compliance with "--Certain Covenants--Limitation
on Restricted Payments" above; and (d) sales of accounts receivable for cash at
fair market value. In addition, solely for purposes of "--Certain Covenants--
Disposition of Proceeds of Asset Sales" above, any sale, conveyance, transfer,
lease or other disposition of any property or asset, whether in one transaction
or a series of related transactions, involving assets with a Fair Market Value
not in excess of $10.0 million in any fiscal year shall be deemed not to be an
Asset Sale.
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"Bank Credit Facility" means the Credit Agreement, dated as of December 31,
1996, between the Borrower, the lenders named therein, and The Bank of Nova
Scotia, as Agent, including any deferrals, renewals, waivers, extensions,
replacements, refinancings or refundings thereof, or amendments, modifications
or supplements thereto and any agreement providing therefor, whether by or with
the same or any other lender, creditor, group of lenders or group of creditors,
and including related notes, guarantees, security agreements, pledge agreements,
mortgages, other collateral documents (including all Loan Documents (as defined
in the Credit Agreement)) and note agreements and other instruments and
agreements executed in connection therewith.
"Basic Documents" means the Reorganization Agreement, the Transition Services
Agreement, the Tax Sharing Agreement, the Indemnification Agreements, the Trade
Name and Service Mark License Agreement, the Fulfillment Agreement, the TCIC
Credit Facility, the Share Purchase Agreement, the Partnership Agreement, the
Partnership Credit Agreement, the Tempo Option, the Tag-Along Agreement and the
Tempo Letter Agreements.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be so required to be capitalized on the balance sheet in accordance
with GAAP.
"Cash Equivalents" means: (a) U.S. dollars; (b) securities issued or directly
and fully guaranteed or insured by the U.S. government or any agency or
instrumentality thereof having maturities of not more than six months from the
date of acquisition; (c) certificates of deposit and eurodollar time deposits
with maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500 million; (d) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clauses
(b) and (c) entered into with any financial institution meeting the
qualifications specified in clause (c) above; and (e) commercial paper rated P-
1, A-1 or the equivalent thereof by Moody's Investors Service, Inc. or Standard
& Poor's Corporation, respectively, and in each case maturing within six months
after the date of acquisition.
"Cash Interest Election" has the meaning set forth under "--Maturity,
Interest and Principal of the Senior Subordinated Discount Notes" above.
"Cash Interest Election Date" has the meaning set forth under "--Maturity,
Interest and Principal of the Senior Subordinated Discount Notes" above.
"C-Band Dividend" has the meaning set forth under "--Certain Covenants--
Limitation on Restricted Payments" above.
"C-Band Entity" has the meaning set forth under "--Certain Covenants--
Limitation on Restricted Payments" above.
"C-Band Investment" has the meaning set forth under "--Certain Covenants--
Limitation on Restricted Payments" above.
"Change of Control" shall mean the occurrence of any of the following events
(whether or not approved by the Board of Directors of the Borrower): (a) any
"person" or "group" (as such terms are used in Section 13(d) and 14(d) of the
Exchange Act or any successor provision to either of the foregoing, including
any group acting for the purpose of acquiring, holding or disposing of
securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act),
excluding Permitted Holders, is or becomes the "beneficial owner" (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be
deemed to have "beneficial ownership" of all securities that such Person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time upon the happening of an event or otherwise), directly or
indirectly, of more than 35% of the total voting power of the then outstanding
Voting Equity Interests of the Borrower; (b) the Borrower consolidates with,
or merges with or into, another Person or the Borrower or one of the Restricted
Subsidiaries sells, assigns, conveys, transfers, leases or otherwise disposes of
all or substantially all of the assets of the Borrower and the Restricted
Subsidiaries (determined on a consolidated basis) to any Person (other than a
Wholly Owned Restricted Subsidiary), or any Person consolidates with, or merges
with or into, the Borrower, in any such event pursuant to a transaction in
which the outstanding Voting Equity Interests of the Borrower is converted into
or exchanged for cash, Notes or other
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property, other than any such transaction where (i) the outstanding Voting
Equity Interests of the Borrower is converted into or exchanged for (1)
Qualified Equity Interests of the surviving or transferee corporation or (2)
cash, notes or other property in an amount which could be paid by the Borrower
as a Restricted Payment under the Indentures and (ii) immediately after such
transaction the Person or Persons that "beneficially owned" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to
have "beneficial ownership" of all securities that such person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time) immediately prior to such transaction, directly or indirectly, a
majority of the total voting power of the then outstanding Voting Equity
Interests of the Borrower "beneficially own" (as so determined) a majority of
the total voting power of the then outstanding Voting Equity Interests of the
surviving or transferee Person; (c) during any consecutive two-year period,
individuals who at the beginning of such period constituted the Board of
Directors of the Borrower (together with any new directors whose election by the
Board of Directors of the Borrower or whose nomination for election by the
stockholders of the Borrower was approved by a vote of at least a majority of
the directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason (other than by action of the Permitted Holders)
to constitute a majority of the Board of Directors of the Borrower then in
office; (d) the liquidation or dissolution of the Borrower. Anything contained
herein to the contrary notwithstanding, the issuance of voting Equity Interests
of the Borrower to Permitted Holders in connection with the acquisition of all
the partnership interests in the Partnership held by such Permitted Holder
(provided that the amount of partnership interests held by such Permitted Holder
on the date of such acquisition is not less than the amount held by such
Permitted Holder on the Issue Date otherwise than pursuant to the transfer of
partnership interests in the Partnership to another Permitted Holder whose
partnership interests have been or simultaneously therewith will be acquired by
the Borrower or any Restricted Subsidiary or the dilution of such Permitted
Holder's partnership interests in the Partnership solely due to its failure to
pay capital contributions required by the Partnership Agreement), so long as in
connection with such acquisition of such partnership interests the Borrower or a
Restricted Subsidiary acquires all rights of such Permitted Holder (and its
Affiliates) to distribute the PRIMESTAR(R) programming services, shall not
constitute a Change of Control for purposes of the Indentures or the Notes.
"Change of Control Date" has the meaning set forth under "--Offer to
Purchase upon Change of Control" above.
"Consolidated Income Tax Expense" means, with respect to the Borrower for
any period, the provision for federal, state, local and foreign income taxes
payable by the Borrower and the Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to the Borrower for any
period, without duplication, the sum of (i) the interest expense of the
Borrower and the Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP, including, without limitation, (a)
any amortization of debt discount; (b) the net cost under Interest Rate
Protection Obligations (including any amortization of discounts); (c) the
interest portion of any deferred payment obligation; (d) all commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing; and (e) all capitalized interest and all accrued
interest; (ii) the interest component of Capitalized Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by the Borrower and the
Restricted Subsidiaries during such period as determined on a consolidated basis
in accordance with GAAP; and (iii) dividends and distributions in respect of
Disqualified Equity Interests actually paid in cash by the Borrower during such
period as determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any period, the net income
of the Borrower and the Restricted Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, adjusted, to the extent included in
calculating such net income, by excluding, without duplication, (a) all
extraordinary gains or losses and all gains and losses from the sales or other
dispositions of assets out of the ordinary course of business (net of taxes,
fees and expenses relating to the transaction giving rise thereto) for such
period; (b) that portion of such net income derived from or in respect of
investments in Persons other than Restricted Subsidiaries, except to the extent
actually received in cash by the Borrower or any Restricted Subsidiary
(subject, in the case of any Restricted Subsidiary, to the provisions of clause
(e) of this definition); (c) the portion of such net income (or loss) allocable
to minority interests in any Person (other than a Restricted Subsidiary) for
such period, except to the extent actually received in cash by the Borrower or
any Restricted Subsidiary (subject, in the case of any Restricted Subsidiary, to
the provisions of clause (e) of this definition); (d) net income (or loss) of
any other Person combined with the
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Borrower or any Restricted Subsidiary on a "pooling of interests" basis
attributable to any period prior to the date of combination; and (e) the net
income of any Restricted Subsidiary to the extent that the declaration of
dividends or similar distributions by that Restricted Subsidiary of that income
is not at the time (regardless of any waiver) permitted, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulations applicable to that
Restricted Subsidiary or its Equity Interest holders.
"Consolidated Operating Cash Flow" means, with respect to any period,
Consolidated Net Income for such period increased (without duplication) by the
sum of (a) Consolidated Income Tax Expense for such period to the extent
deducted in determining Consolidated Net Income for such period; (b)
Consolidated Interest Expense for such period to the extent deducted in
determining Consolidated Net Income for such period; (c) all dividends on
Preferred Equity Interests to the extent not taken into account for computing
Consolidated Net Income for that period; and (d) depreciation, amortization and
any other non cash items for such period to the extent deducted in determining
Consolidated Net Income for such period (other than any non cash item which
requires the accrual of, or a reserve for, cash charges for any future period)
of the Borrower and the Restricted Subsidiaries, including, without limitation,
amortization of capitalized debt issuance costs for such period, all of the
foregoing determined on a consolidated basis in accordance with GAAP minus non
cash items to the extent they increase Consolidated Net Income (including the
partial or entire reversal of reserves taken in prior periods) for such period.
Consolidated Operating Cash Flow for the Borrower for any period shall be
calculated by subtracting therefrom (1) the Consolidated Operating Cash Flow for
such period of the High Power Satellite Transmission Subsidiary to the extent
that Investments have been made pursuant to clause (x) of the second paragraph
of "--Certain Covenants--Limitation on Restricted Payments" above with such
Consolidated Operating Cash Flow and (2) any dividends received for any C-Band
Entity in such period and the Consolidated Operating Cash Flow for such period
of each Restricted C-Band Subsidiary in each case to the extent that Restricted
Payments have been made pursuant to clause (xii) of the second paragraph of "--
Certain Covenants--Limitation on Restricted Payments" above with such dividends
or such Consolidated Operating Cash Flow.
"Cumulative Operating Cash Flow" means, as at any date of determination, the
positive cumulative Consolidated Operating Cash Flow realized during the period
commencing on the Issue Date and ending on the last day of the most recent
fiscal quarter immediately preceding the date of determination for which
consolidated financial information of the Borrower is available or, if such
cumulative Consolidated Operating Cash Flow for such period is negative, the
negative amount by which cumulative Consolidated Operating Cash Flow is less
than zero.
"DBS" means direct broadcast satellite.
"Debt to Operating Cash Flow Ratio" means the ratio of (a) the Total
Consolidated Indebtedness as of the date of calculation (the "Determination
Date") to (b) four times the Consolidated Operating Cash Flow for the latest
fiscal quarter for which financial information is available immediately
preceding such Determination Date (the "Measurement Period"). For purposes of
calculating Consolidated Operating Cash Flow for the Measurement Period
immediately prior to the relevant Determination Date, (I) any Person that is a
Restricted Subsidiary on the Determination Date (or would become a Restricted
Subsidiary on such Determination Date in connection with the transaction that
requires the determination of such Consolidated Operating Cash Flow) will be
deemed to have been a Restricted Subsidiary at all times during such Measurement
Period, (II) any Person that is not a Restricted Subsidiary on such
Determination Date (or would cease to be a Restricted Subsidiary on such
Determination Date in connection with the transaction that requires the
determination of such Consolidated Operating Cash Flow) will be deemed not to
have been a Restricted Subsidiary at any time during such Measurement Period,
and (III) if the Borrower or any Restricted Subsidiary shall have in any manner
(x) acquired (including through an Acquisition or the commencement of activities
constituting such operating business) or (y) disposed of (including by way of an
Asset Sale or the termination or discontinuance of activities constituting such
operating business) any operating business during such Measurement Period or
after the end of such period and on or prior to such Determination Date, such
calculation will be made on a pro forma basis in accordance with GAAP as if, in
the case of an Acquisition or the commencement of activities constituting such
operating business, all such transactions had been consummated on the first day
of such Measurement Period and, in the case of an Asset Sale or termination or
discontinuance of activities constituting such operating business, all such
transactions had been consummated prior to the first day of such Measurement
Period; provided, however, that such pro forma adjustment shall not give effect
to the Operating Cash Flow of any Acquired Person to the extent that such
Person's net income would be excluded pursuant to clause (e)
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of the definition of Consolidated Net Income. For purposes of determining Total
Consolidated Indebtedness as of any Determination Date, the sum of all
Indebtedness outstanding under the Bank Credit Facility on such Determination
Date and all amounts that the Borrower or any Restricted Subsidiary could borrow
under the Bank Credit Facility on such Determination Date (assuming the
satisfaction of all conditions precedent under the Bank Credit Facility other
than conditions relating solely to incremental amounts being available under the
Bank Credit Facility) shall be deemed to be outstanding and added to Total
Consolidated Indebtedness on such Determination Date (but without duplication).
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Indebtedness" means (a) any Indebtedness outstanding
under the Bank Credit Facility and (b) any other Senior Indebtedness which, at
the time of determination, has an aggregate principal amount outstanding,
together with any commitments to lend additional amounts, of at least $25.0
million, if the instrument governing such Senior Indebtedness expressly states
that such Indebtedness is "Designated Senior Indebtedness" for purposes of the
Indentures and a Board Resolution setting forth such designation by the
Borrower has been filed with the Trustees.
"Designation" has the meaning set forth in "--Certain Covenants--Designation
of Unrestricted Subsidiaries; Designation of Tempo as a Restricted Subsidiary"
above.
"Designation Amount" has the meaning set forth in "--Certain Covenants--
Designation of Unrestricted Subsidiaries; Designation of Tempo as a Restricted
Subsidiary" above.
"Disposition" means, with respect to any Person, any merger, consolidation or
other business combination involving such Person (whether or not such Person is
the Surviving Person) or the sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of such Person's assets.
"Disqualified Equity Interest" means any Equity Interest which, by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable, at the option of the holder thereof, in
whole or in part, or exchangeable into Indebtedness on or prior to the earlier
of the maturity date of the Notes or the date on which no Notes remain
outstanding.
"Distribution" means the distribution by TCI on December 4, 1996, in the form
of a dividend, to the holders of record of Tele-Communications, Inc. Series A
TCI Group Common Stock and Tele-Communications, Inc. Series B TCI Group Common
Stock on November 12, 1996 (other than certain subsidiaries of TCI that waived
such dividend) of all the issued and outstanding shares of the Borrower's
common stock.
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500 million or its equivalent in
foreign currency, whose debt is rated Investment Grade at the time as of which
any investment or rollover therein is made.
"Equity Interest" in any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, in
such Person, including any Preferred Equity Interests.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated by the SEC thereunder.
"Existing Indebtedness" means any Indebtedness of the Borrower and its
Subsidiaries in existence on the Issue Date until such amounts are repaid
(including, without limitation, obligations pursuant to the Indemnification
Agreements and the Reorganization Agreement).
"Expiration Date" has the meaning set forth in the definition of "Offer to
Purchase" below.
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"Fair Market Value" means, with respect to any asset, the price (after taking
into account any liabilities relating to such assets) which could be negotiated
in an arm's-length free market transaction, for cash, between a willing seller
and a willing and able buyer, neither of which is under any compulsion to
complete the transaction; provided, however, that the Fair Market Value of any
such asset or assets shall be determined conclusively by the Board of Directors
of the Borrower acting in good faith, and shall be evidenced by resolutions of
the Board of Directors of the Borrower delivered to the applicable Trustee.
"FCC Permit" means the construction permit held by Tempo and issued by the
FCC to build, launch and operate a DBS system.
"Fulfillment Agreement" means the agreement dated as of August 30, 1996
between TCIC and the Borrower, pursuant to which TCIC provides fulfillment
services to the Borrower with respect to certain customers of the PRIMESTAR(R)
medium power service, as amended and in effect from time to time.
"GAAP" means, at any date of determination, generally accepted accounting
principles in effect in the United States which are applicable at the date of
determination and which are consistently applied for all applicable
periods.
"GE Americom" means GE American Communications, Inc., a Delaware corporation,
and its successors.
"GEAS" means GE Americom Services, Inc., a Delaware corporation and a partner
of the Partnership, and its successors.
"GE-2 Agreement" means the Amended and Restated Memorandum of Agreement,
effective as of October 18, 1996, between the Partnership and GE Americom and,
upon the execution of the Service Agreement (as defined in the GE-2 Agreement)
between the Partnership and GE Americom contemplated therein, shall include such
Service Agreement, as amended and in effect from time to time.
"GE-2" means the GE Americom medium power satellite currently being used by
the Partnership.
"Government Securities" means direct obligations of, or obligations guaranteed
by, the United States of America for the payment of which guarantee or
obligations the full faith and credit of the United States is pledged.
"guarantee" means, as applied to any obligation, (i) a guarantee (other than
by endorsement of negotiable instruments for collection in the ordinary course
of business), direct or indirect, in any manner, of any part or all of such
obligation and (ii) an agreement, direct or indirect, contingent or otherwise,
the practical effect of which is to assure in any way the payment or performance
(or payment of damages in the event of non-performance) of all or any part of
such obligation, including, without limiting the foregoing, the payment of
amounts drawn down by letters of credit. A guarantee shall include, without
limitation, any agreement to maintain or preserve any other person's financial
condition or to cause any other Person to achieve certain levels of operating
results.
"High Power Satellite Transmission Business" means the business of the
acquisition, transmission and sale of programming in the high power direct
broadcast satellite business utilizing broadcast satellite service operating in
the Ku-band (including any provision of such services to cable operators or
other media providers) which may utilize all or part of satellites owned or
leased by the Partnership or a Subsidiary and all other activities relating
thereto or arising therefrom other than the construction, sale or financing of
broadcast satellites.
"High Power Satellite Transmission Subsidiary" means a direct, wholly-owned
Restricted Subsidiary of the Borrower which engages in, or acts as a distributor
for, the High Power Satellite Transmission Business.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "Incurrence," "Incurred" and
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"Incurring" shall have meanings correlative to the foregoing).
"Indebtedness" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and whether
or not contingent, (a) every obligation of such Person for money borrowed; (b)
every obligation of such Person evidenced by bonds, debentures, notes or other
similar instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses; (c) every reimbursement
obligation of such Person with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such Person; (d)
every obligation of such Person issued or assumed as the deferred purchase price
of property or services (but excluding trade accounts payable incurred in the
ordinary course of business and payable in accordance with industry practices,
or other accrued liabilities arising in the ordinary course of business which
are not overdue or which are being contested in good faith); (e) every Capital
Lease Obligation of such Person; (f) every net obligation under interest rate
swap or similar agreements or foreign currency hedge, exchange or similar
agreements of such Person; (g) every obligation of the type referred to in
clauses (a) through (f) of another Person and all dividends of another Person
the payment of which, in either case, such Person has guaranteed or is
responsible or liable for, directly or indirectly, as obligor, guarantor or
otherwise; and (h) any and all deferrals, renewals, extensions and refundings
of, or amendments, modifications or supplements to, any liability of the kind
described in any of the preceding clauses (a) through (g) above. Indebtedness
(a) shall never be calculated taking into account any cash and cash equivalents
held by such Person; (b) shall not include obligations of any Person (x) arising
from the honoring by a bank or other financial institution of a check, draft or
similar instrument inadvertently drawn against insufficient funds in the
ordinary course of business, provided that such obligations are extinguished
within two Business Days of their incurrence unless covered by an overdraft
line, (y) resulting from the endorsement of negotiable instruments for
collection in the ordinary course of business and consistent with past business
practices and (z) under stand-by letters of credit to the extent collateralized
by cash or Cash Equivalents; (c) which provides that an amount less than the
principal amount thereof shall be due upon any declaration of acceleration
thereof shall be deemed to be incurred or outstanding in an amount equal to the
accreted value thereof at the date of determination; (d) shall include the
liquidation preference and any mandatory redemption payment obligations in
respect of any Disqualified Equity Interests of the Borrower or any Restricted
Subsidiary; and (e) shall not include obligations under performance bonds,
performance guarantees, surety bonds and appeal bonds, letters of credit or
similar obligations, incurred in the ordinary course of business (other than
obligations under or in respect of any direct or indirect credit support for
obligations of the Partnership or any Unrestricted Subsidiary). For avoidance of
doubt, Indebtedness of the Borrower or any Restricted Subsidiary shall not
include Indebtedness of the Partnership (so long as the Partnership is not
insolvent) solely by virtue of the Borrower or such Restricted Subsidiary being
a general partner of the Partnership to the extent that there does not exist any
judgment or other adjudication of liability against the Borrower or any
Restricted Subsidiary that is a general partner of the Partnership or any of its
properties.
"Indemnification Agreements" means the indemnification agreements between (i)
the Borrower and TCI UA 1, dated as of December 4, 1996, which supports the
PRIMESTAR Credit Facility and (ii) the Borrower and TCIC, dated as of December
4, 1996, relating to a letter of credit issued for the account of two
subsidiaries of TCI to support the Borrower's share of the Partnership's
obligations under the GE-2 Agreement, with respect to the Partnership's use of
transponders on GE-2, as amended and in effect from time to time.
"Independent Financial Advisor" means a nationally recognized, accounting,
appraisal, investment banking firm or consultant engaged in the satellite
business that is, in the judgment of the Borrower's Board of Directors,
qualified to perform the task for which it has been engaged (i) which does not,
and whose directors, officers and employees or Affiliates do not, have a direct
or indirect financial interest in the Borrower and (ii) which, in the judgment
of the Board of Directors of the Borrower, is otherwise independent and
qualified to perform the task for which it is to be engaged.
"In-Orbit Insurance" means, with respect to a Tempo Satellite (or any
replacement thereof), In-Orbit insurance providing coverage beginning not
earlier than 180 days after the launch of such Tempo Satellite (or any
replacement thereof) in an amount which is equal to or greater than the cost of
construction, launch and insurance of such Tempo Satellite (or any replacement
thereof), which insurance shall provide pro rata benefits to the insured
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upon a loss of more than 20% of the capacity of such Tempo Satellite (or any
replacement thereof) and shall compensate the insured for a total loss upon a
loss of more than 50% of the capacity of such Tempo Satellite (or any
replacement thereof).
"Insolvency or Liquidation Proceeding" means, with respect to any Person, any
liquidation, dissolution or winding up of such Person, or any bankruptcy,
reorganization, insolvency, receivership or similar proceeding with respect to
such Person, whether voluntary or involuntary.
"interest" means, with respect to the Notes, the sum of any cash interest and
any Additional Interest on the Notes.
"Interest Rate Protection Obligations" means, with respect to any Person, the
Obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Investment" means, with respect to any Person, any direct or indirect loan,
advance, guarantee or other extension of credit or capital contribution to (by
means of transfers of cash or other property or assets to others or payments for
property or services for the account or use of others, or otherwise), or
purchase or acquisition of capital stock, bonds, notes, debentures or other
securities or evidences of Indebtedness issued by, any other Person. The amount
of any Investment shall be the original cost of such Investment, plus the cost
of all additions thereto, and minus the amount of any portion of such Investment
repaid to such Person in cash as a repayment of principal or a return of
capital, as the case may be, but without any other adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment. In determining the amount of any investment involving a transfer of
any property or asset other than cash, such property shall be valued at its fair
market value at the time of such transfer, as determined in good faith by the
board of directors (or comparable body) of the Person making such transfer.
"Investment Grade" means with respect to a security, that such security is
rated, by at least two nationally recognized statistical rating organizations,
in one of each such organization's four highest generic rating categories.
"Issue Date" means the original issue date of the Notes.
"Lien" means any lien, mortgage, charge, security interest, hypothecation,
assignment for security or encumbrance of any kind (including any conditional
sale or capital lease or other title retention agreement, any lease in the
nature thereof, and any agreement to give any security interest).
"Marketable Securities" means Government Securities maturing not later than 30
days after the date of acquisition.
"Maturity Date" means the date, which is set forth on the face of the Notes,
on which the Notes will mature.
"MDUs" means hotels, motels, bars, restaurants, businesses, schools and other
multiple dwelling units.
"Net Cash Proceeds" means the aggregate proceeds in the form of cash or Cash
Equivalents received by the Borrower or any Restricted Subsidiary in respect of
any Asset Sale, including all cash or Cash Equivalents received upon any sale,
liquidation or other exchange of proceeds of Asset Sales received in a form
other than cash or Cash Equivalents, net of (a) the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting and investment
banking fees, and sales commissions) and any relocation expenses incurred as a
result thereof; (b) taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements); (c) amounts required to be applied to the repayment of
Indebtedness secured by a Lien on the asset or assets that were the subject of
such Asset Sale; (d) amounts deemed, in good faith, appropriate by the Board of
Directors of the Borrower to be provided as a reserve, in accordance with GAAP,
against any liabilities associated with such assets which are the subject of
such Asset Sale (provided that the amount of any such reserves shall be
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deemed to constitute Net Cash Proceeds at the time such reserves shall have been
released or are not otherwise required to be retained as a reserve); and (e)
with respect to Asset Sales by Subsidiaries, the portion of such cash payments
attributable to Persons holding a minority interest in such Subsidiary.
"Obligations" means any principal, interest (including, without limitation,
Post-Petition Interest), penalties, fees, indemnifications, reimbursement
obligations, damages and other liabilities payable under the documentation
governing any Indebtedness.
"Offer" has the meaning set forth in the definition of "Offer to Purchase"
below.
"Offer to Purchase" means a written offer (the "Offer") sent by or on behalf
of the Borrower by first-class mail, postage prepaid, to each holder at his
address appearing in the register for the Notes on the date of the Offer
offering to purchase up to the principal amount of Notes specified in such Offer
at the purchase price specified in such Offer (as determined pursuant to the
applicable Indenture). Unless otherwise required by applicable law, the Offer
shall specify an expiration date (the "Expiration Date") of the Offer to
Purchase, which shall be not less than 20 Business Days nor more than 60 days
after the date of such Offer, and a settlement date (the "Purchase Date") for
purchase of Notes to occur no later than five Business Days after the Expiration
Date. The Borrower shall notify the Trustee at least 15 Business Days (or such
shorter period as is acceptable to the Trustee) prior to the mailing of the
Offer of the Borrower's obligation to make an Offer to Purchase, and the Offer
shall be mailed by the Borrower or, at the Borrower's request, by the Trustee in
the name and at the expense of the Borrower. The Offer shall contain all the
information required by applicable law to be included therein. The Offer shall
also contain information concerning the business of the Borrower and its
Subsidiaries which the Borrower in good faith believes will enable such holders
to make an informed decision with respect to the Offer to Purchase (which at a
minimum will include (i) the most recent annual and quarterly financial
statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained in the document required to be filed with the
trustee pursuant to the Indenture (which requirements may be satisfied by
delivery of such documents together with the Offer), (ii) a description of
material developments in the Borrower's business subsequent to the date of the
latest of such financial statements referred to in clause (i) (including a
description of the events requiring the Borrower to make the Offer to Purchase),
(iii) if applicable, appropriate pro forma financial information concerning the
Offer to Purchase and the events requiring the Borrower to make the Offer to
Purchase and (iv) any other information required by applicable law to be
included therein). The Offer shall contain all instructions and materials
necessary to enable such holders to tender Notes pursuant to the Offer to
Purchase. The Offer shall also state:
(1) the Section of the Indenture pursuant to which the Offer to Purchase is
being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the outstanding Notes offered to be
purchased by the Borrower pursuant to the Offer to Purchase (including, if less
than 100%, the manner by which such amount has been determined pursuant to the
Section of the Indenture requiring the Offer to Purchase) (the "Purchase
Amount");
(4) (a) in the case of the Senior Subordinated Notes, the purchase price to be
paid by the Borrower for each $1,000 aggregate principal amount of Notes
accepted for payment (as specified pursuant to the Senior Subordinated Notes
Indenture) (the "Purchase Price" with respect to the Senior Subordinated Notes)
and (b) in the case of the Senior Subordinated Discount Notes, the purchase
price to be paid by the Borrower for each $1,000 of Accreted Value (if the
Purchase Date is prior to the earlier of February 15, 2002 and the Cash Interest
Election Date) or $1,000 aggregate principal amount at maturity (if the Purchase
Date is on or after such earlier date) of Notes accepted for payment (as
specified pursuant to the Senior Subordinated Discount Notes Indenture) (the
"Purchase Price" with respect to the Senior Subordinated Discount Notes);
(5) that the holder may tender all or any portion of the Notes registered in
the name of such holder and that any portion of a Note tendered must be tendered
in an integral multiple of $1,000 principal face amount;
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(6) the place or places where Notes are to be surrendered for tender pursuant
to the Offer to Purchase;
(7) that interest on any Note not tendered or tendered but not purchased by
the Borrower pursuant to the Offer to Purchase will continue to accrue;
(8) that on the Purchase Date the Purchase Price will become due and payable
upon each Note being accepted for payment pursuant to the Offer to Purchase and
that interest thereon shall cease to accrue on and after the Purchase Date;
(9) that each holder electing to tender all or any portion of a Note pursuant
to the Offer to Purchase will be required to surrender such Note at the place or
places specified in the Offer prior to the close of business on the Expiration
Date (such Note being, if the Borrower or the Trustee so requires, duly endorsed
by, or accompanied by a written instrument of transfer in form satisfactory to
the Borrower and the Trustee duly executed by, the holder thereof or his
attorney duly authorized in writing);
(10) that holders will be entitled to withdraw all or any portion of Notes
tendered if the Borrower (or its Paying Agent) receives, not later than the
close of business on the fifth Business Day next preceding the Expiration Date,
a telegram, telex, facsimile transmission or letter setting forth the name of
the holder, the principal amount of the Note the holder tendered, the
certificate number of the Note the holder tendered and a statement that such
holder is withdrawing all or a portion of his tender;
(11) that (a) if Notes in an aggregate principal amount less than or equal to
the Purchase Amount are duly tendered and not withdrawn pursuant to the Offer to
Purchase, the Borrower shall purchase all such Notes and (b) if Notes in an
aggregate principal amount in excess of the Purchase Amount are tendered and not
withdrawn pursuant to the Offer to Purchase, the Borrower shall purchase Notes
having an aggregate principal amount equal to the Purchase Amount on a pro rata
basis (with such adjustments as may be deemed appropriate so that only Notes in
denominations of $1,000 principal amount at maturity or integral multiples
thereof shall be purchased); and
(12) that in the case of any holder whose Note is purchased only in part, the
Borrower shall execute and the Trustee shall authenticate and deliver to the
holder of such Note without service charge, a new Note or Notes, of any
authorized denomination as requested by such holder, in an aggregate principal
amount equal to and in exchange for the unpurchased portion of the Note so
tendered.
An Offer to Purchase shall be governed by and effected in accordance with the
provisions above pertaining to any Offer. References above to principal amount
shall mean and refer to principal amount at maturity with respect to the Senior
Subordinated Discount Notes, unless the context otherwise requires.
"Partnership Agreement" means the Limited Partnership Agreement of the
Partnership (then known as K Prime Partners, L.P.), dated as of February 8,
1990, as amended and in effect from time to time.
"Partnership Credit Agreement" means the bank credit facility obtained by the
Partnership to finance advances to Tempo for payments due in respect of the
Tempo Satellites under the Satellite Construction Agreement, and supported by
letters of credit arranged for by affiliates of the partners of the Partnership
(other than GEAS).
"Permitted Holder" means any of (i) the estate or the heirs of Bob Magness (a
shareholder of the Borrower), (ii) John C. Malone (a shareholder of the
Borrower, the Chairman of the Board of TCI, and a director of TCI and of the
Borrower), (iii) the Kearns-Tribune Corporation (a Utah corporation and a
shareholder of the Borrower), (iv) the Partnership (so long as all the then
other partners in the Partnership were partners in the Partnership on the Issue
Date), (v) Persons who were partners of the Partnership on the Issue Date, (vi)
TCI, (vii) any of the Permitted Transferees of the persons referred to in
clauses (i) through (vi), and (viii) any person or group controlled by each or
any of the Persons referred to in clauses (i) through (vii).
"Permitted Investments" means (a) Cash Equivalents; (b) Investments in prepaid
expenses, negotiable
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instruments held for collection and lease, utility and workers' compensation,
performance and other similar deposits; (c) loans and advances to employees made
in the ordinary course of business not to exceed $1.0 million in the aggregate
at any one time outstanding; (d) Interest Rate Protection Obligations; (e)
bonds, notes, debentures or other securities received as a result of Asset Sales
permitted under "--Certain Covenants--Disposition of Proceeds of Asset Sales"
above not to exceed 15% of the total consideration for such Asset Sales; (f)
transactions with officers, directors and employees of the Borrower, or any
Restricted Subsidiary entered into in ordinary course of business (including
compensation or employee benefit arrangements with any such director or
employee) and consistent with past business practices; (g) Investments existing
as of the Issue Date and any amendment, extension, renewal or modification
thereof to the extent that any such amendment, extension, renewal or
modification does not require the Borrower or any Restricted Subsidiary to make
any additional cash or non-cash payments or provide additional services in
connection therewith; (h) any Investment to the extent that the consideration
therefor consists of Qualified Equity Interests of the Borrower; (i) any
Investment consisting of a guarantee by a Restricted Subsidiary of Senior
Indebtedness or any guarantee permitted under clause (e) of the second paragraph
of "--Limitation on Indebtedness" above; (j) shares of Equity Interests of TCI
purchased pursuant to the Share Purchase Agreement; (k) shares of the common
stock of ResNet acquired pursuant to the conversion of the ResNet Subordinated
Loan; (l) warrants of ResNet acquired pursuant to the conversion of the ResNet
Subordinated Loan or the exercise of the ResNet Option; (m) shares of the common
stock of ResNet acquired pursuant to any exercise of warrants at a de minimis
exercise price; and (n) so long as the Borrower or any Restricted Subsidiary
holds partnership interests in the Partnership, the provision of any guarantee,
letter of credit or other credit support with respect to (x) an obligation of
the Partnership incurred under the Partnership Credit Agreement (or any
refinancing thereof) to the extent such obligation was incurred by the
Partnership to finance any Tempo Satellite or (y) any obligation of the
Partnership under the GE-2 Agreement, in each case in an amount not to exceed
the product of (I) a fraction, the numerator of which is the Borrower's equity
interest in the Partnership, and the denominator of which is all partners'
equity interest in the Partnership except GE Americom Services, Inc., and (II)
such obligation of the Partnership incurred to finance such Tempo Satellite or
such obligation of the Partnership under the GE-2 Agreement, as the case may be;
provided, however that in no event shall the amount of such Permitted Investment
exceed $75.0 million in the case of the GE-2 Agreement and $146.0 million in the
case of such obligation under the Partnership Credit Agreement (or any
refinancing thereof).
"Permitted Junior Securities" means any securities of the Borrower or any
other Person that are (i) equity securities without special covenants or (ii)
subordinated in right of payment to all Senior Indebtedness that may at the time
be outstanding, to substantially the same extent as, or to a greater extent
than, the Notes are subordinated as provided in this Indenture, in any event
pursuant to a court order so providing and as to which (a) the rate of interest
on such securities shall not exceed the effective rate of interest on the Notes
on the date of the Indentures, (b) such securities shall not be entitled to the
benefits of covenants or defaults materially more beneficial to the holders of
such securities than those in effect with respect to the Notes on the date of
this Indenture and (c) such securities shall not provide for amortization
(including sinking fund and mandatory prepayment provisions) commencing prior to
the date six months following the final scheduled maturity date of the Senior
Indebtedness (as modified by the plan of reorganization of readjustment pursuant
to which such securities are issued).
"Permitted Liens" means (a) Liens on property of a Person existing at the time
such Person is merged into or consolidated with the Borrower or any Restricted
Subsidiary; provided, however, that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not secure any property or
assets of the Borrower or any Restricted Subsidiary other than the property or
assets subject to the Liens prior to such merger or consolidation; (b) Liens
imposed by law such as carriers', warehousemen's and mechanics' Liens and other
similar Liens arising in the ordinary course of business which secure payment of
obligations not more than 60 days past due or which are being contested in good
faith and by appropriate proceedings; (c) Liens existing on the Issue Date; (d)
Liens securing only the Notes; (e) Liens in favor of the Borrower or any
Restricted Subsidiary so long as held by the Borrower or any Restricted
Subsidiary; (f) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted; provided,
however, that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (g) easements, reservation
of rights of way, restrictions and other similar easements, licenses,
restrictions on the use of properties, or minor imperfections of title
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that in the aggregate are not material in amount and do not in any case
materially detract from the properties subject thereto or interfere with the
ordinary conduct of the business of the Borrower and the Restricted
Subsidiaries; (h) Liens resulting from the deposit of cash or Notes in
connection with contracts, tenders or expropriation proceedings, or to secure
workers' compensation, surety or appeal bonds, costs of litigation when required
by law and public and statutory obligations or obligations under franchise
arrangements entered into in the ordinary course of business; (i) Liens securing
Indebtedness consisting of Capitalized Lease Obligations, Purchase Money
Indebtedness, mortgage financings, industrial revenue bonds or other monetary
obligations, in each case incurred solely for the purpose of financing all or
any part of the purchase price or cost of construction or installation of assets
used in the business of the Borrower or the Restricted Subsidiaries, or repairs,
additions or improvements to such assets; provided, however, that (I) such Liens
secure Indebtedness in an amount not in excess of the original purchase price or
the original cost of any such assets or repair, addition or improvement thereto
(plus an amount equal to the reasonable fees and expenses in connection with the
incurrence of such Indebtedness), (II) such Liens do not extend to any other
assets of the Borrower or the Restricted Subsidiaries (and, in the case of
repair, addition or improvements to any such assets, such Lien extends only to
the assets (and improvements thereto or thereon) repaired, added to or
improved), (III) the Incurrence of such Indebtedness is permitted by "--Certain
Covenants--Limitation on Indebtedness" above, and (IV) such Liens attach within
90 days of such purchase, construction, installation, repair, addition or
improvement; (j) Liens to secure any refinancings, renewals, extensions,
modifications or replacements (collectively, "refinancing") (or successive
refinancings), in whole or in part, of any Indebtedness secured by Liens
referred to in the clauses above so long as such Lien does not extend to any
other property (other than improvements thereto); (k) Liens securing letters of
credit entered into in the ordinary course of business and consistent with past
business practice; (l) Liens on and pledges of the Equity Interests of any
Unrestricted Subsidiary securing any Indebtedness of such Unrestricted
Subsidiary; and (m) any calls or rights of first refusal with respect to any
partnership interests, and any right of the Partnership to remove a partner's
representative from the partners committee of the Partnership, under the
Partnership Agreement as in effect on the Issue Date.
"Permitted Transferee" means, with respect to any Person: (a) in the case of
any Person who is a natural person, such individual's spouse or children, any
trust for such individual's benefit or the benefit of such individual's spouse
or children, or any corporation or partnership in which the direct and
beneficial owner of all of the equity interest is such Person or such
individual's spouse or children or any trust for the benefit of such persons;
(b) in the case of any Person who is a natural person, the heirs, executors,
administrators or personal representatives upon the death of such Person or upon
the incompetency or disability of such Person for purposes of the protection and
management of such individual's assets; and (c) in the case of any Person who is
not a natural person, any Affiliate of such Person.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock Company, limited liability Company, limited liability
limited partnership, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"Post-Petition Interest" means, with respect to any Senior Indebtedness of any
Person, all interest accrued or accruing on such Indebtedness after the
commencement of any Insolvency or Liquidation Proceeding against such Person in
accordance with and at the contract rate (including, without limitation, any
rate applicable upon default) specified in the agreement or instrument creating,
evidencing or governing such Indebtedness, whether or not, pursuant to
applicable law or otherwise, the claim for such interest is allowed as a claim
in such Insolvency or Liquidation Proceeding.
"Preferred Equity Interest," in any Person, means an Equity Interest of any
class or classes (however designated) which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over Equity
Interests of any other class in such Person.
"principal" of a debt security means the principal of the security, which in
the case of the Senior Subordinated Discount Notes as of any given date, is the
Accreted Value of the Senior Subordinated Discount Notes as of such date, plus,
when appropriate, the premium, if any, on the security.
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"principal amount at maturity" means, with respect to the Senior Subordinated
Discount Notes, $1,000 per $1,000 face amount of Senior Subordinated Discount
Notes; provided, however, that if the Borrower shall have made a Cash Interest
Election, the principal amount at maturity with respect to each Senior
Subordinated Discount Note shall be the Accreted Value of such Senior
Subordinated Discount Note as of the Cash Interest Election Date.
"Public Equity Offering" means an underwritten public offering of Qualified
Equity Interests of the Borrower pursuant to an effective registration statement
filed under the Securities Act (excluding registration statements filed on Form
S-8).
"Purchase Amount" has the meaning set forth in the definition of "Offer to
Purchase" above.
"Purchase Date" has the meaning set forth in the definition of "Offer to
Purchase" above.
"Purchase Money Indebtedness" means Indebtedness of the Borrower or any
Restricted Subsidiary Incurred for the purpose of financing all or any part of
the purchase price or the cost of construction or improvement of any property
(other than integrated receiver/decoders or related equipment); provided,
however, that the aggregate principal amount of such Indebtedness does not
exceed the lesser of the Fair Market Value of such property or such purchase
price or cost, including any refinancing of such indebtedness that does not
increase the aggregate principal amount (or accreted amount, if less) thereof as
of the date of refinancing.
"Purchase Price" has the meaning set forth in the definition of "Offer to
Purchase" above.
"Qualified Equity Interest" in any Person means any Equity Interest in such
Person other than any Disqualified Equity Interest.
"Reorganization Agreement" means the agreement entered into on December 4,
1996 by TCI, TCIC and a number of other TCI subsidiaries, including the Borrower
and its subsidiaries, which provided for, among other things, the principal
corporate transactions to effect the Distribution, the conditions thereto and
certain provisions governing the relationship between the Borrower and TCI with
respect to and resulting from the Distribution, as amended and in effect from
time to time.
"Required Designation" has the meaning set forth in "--Certain Covenants--
Designation of Unrestricted Subsidiaries; Designation of Tempo as a Restricted
Subsidiary" above.
"ResNet" means ResNet Communications, Inc., a Delaware corporation, and its
successors.
"ResNet Option" means the Option Agreement between the Borrower and ResNet
dated October 21, 1996, as amended and in effect from time to time.
"ResNet Subordinated Loan" means the subordinated loan in the principal amount
of $36,604,000 made by the Borrower to ResNet, as amended and in effect from
time to time.
"Restricted C-Band Subsidiary" has the meaning set forth under "--Certain
Covenants--Limitation on Restricted Payments" above.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Subsidiary" means any Subsidiary of the Borrower that has not been
designated by the Board of Directors of the Borrower, by a resolution of the
Board of Directors of the Borrower delivered to the Trustee, as an Unrestricted
Subsidiary pursuant to "--Certain Covenants--Designation of Unrestricted
Subsidiaries; Designation of Tempo as a Restricted Subsidiary" above; provided,
however, that Tempo is designated as an Unrestricted Subsidiary as of the Issue
Date. Any such designation may be revoked by a resolution of the Board of
Directors of the Borrower delivered to the Trustees, subject to the provisions
of such covenant.
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"Satellite Construction Agreement" means the fixed price satellite
construction agreement between Loral and Tempo dated as of February 22, 1990, as
amended and in effect from time to time.
"Satellite Subsidiary" has the meaning set forth in "--Certain Covenants--
Designation of Restricted Subsidiaries; Designation of Tempo as a Restricted
Subsidiary" above.
"SEC" means the Securities and Exchange Commission.
"Senior Indebtedness" means, at any date, (a) all Obligations of the Borrower
under the Bank Credit Facility; (b) all Interest Rate Protection Obligations of
the Borrower; (c) all Obligations of the Borrower under stand-by letters of
credit; and (d) all other Indebtedness of the Borrower for borrowed money,
including principal, premium, if any, and interest (including Post-Petition
Interest) on such Indebtedness, unless the instrument under which such
Indebtedness of the Borrower for money borrowed is Incurred expressly provides
that such Indebtedness for money borrowed is not senior or superior in right of
payment to the Notes, and all renewals, extensions, modifications, amendments or
refinancings thereof. Notwithstanding the foregoing, Senior Indebtedness shall
not include (a) any obligation of the Borrower under the TCIC Credit Facility;
(b) to the extent that it may constitute Indebtedness, any Obligation for
federal, state, local or other taxes; (c) any Indebtedness among or between the
Borrower and any Subsidiary of the Borrower; (d) to the extent that it may
constitute Indebtedness, any Obligation in respect of any trade payable Incurred
for the purchase of goods or materials, or for services obtained, in the
ordinary course of business; (e) that portion of any Indebtedness that is
Incurred in violation of the Indentures; provided, however, that such
Indebtedness shall be deemed not to have been Incurred in violation of the
Indentures for purposes of this clause (e) if (I) the holder(s) of such
Indebtedness or their representative or the Borrower shall have furnished to the
Trustees an opinion of independent legal counsel, unqualified in all material
respects, addressed to the Trustees (which legal counsel may, as to matters of
fact, rely upon an Officers' Certificate of the Borrower) to the effect that the
Incurrence of such Indebtedness does not violate the provisions of the
Indentures or (II) in the case of any Obligations under the Bank Credit
Facility, the holder(s) of such Obligations or their agent or representative
shall have received a representation from the Borrower to the effect that the
Incurrence of such Indebtedness does not violate the provisions of the
Indentures; (f) Indebtedness evidenced by the Notes; (g) Indebtedness of the
Borrower that is expressly subordinate or junior in right of payment to any
other Indebtedness of the Borrower; (h) to the extent that it may constitute
Indebtedness, any obligation owing under leases (other than Capitalized Lease
Obligations) or management agreements; and (i) any obligation that by operation
of law is subordinate to any general unsecured obligations of the Borrower.
"Share Purchase Agreement" means the share purchase agreement entered into by
TCI and the Borrower on December 4, 1996, as amended and in effect from time to
time.
"Significant Restricted Subsidiary" means, at any date of determination, (a)
any Restricted Subsidiary that, together with its Subsidiaries that constitute
Restricted Subsidiaries (i) for the most recent fiscal year of the Borrower
accounted for more than 5.0% of the consolidated revenues of the Borrower and
the Restricted Subsidiaries or (ii) as of the end of such fiscal year, owned
more than 5.0% of the consolidated assets of the Borrower and the Restricted
Subsidiaries, all as set forth on the consolidated financial statements of the
Borrower and the Restricted Subsidiaries for such year prepared in conformity
with GAAP, and (b) any Restricted Subsidiary which, when aggregated with all
other Restricted Subsidiaries that are not otherwise Significant Restricted
Subsidiaries and as to which any event described in clause (f), (g) or (h) of
"--Events of Default" above has occurred, would constitute a Significant
Restricted Subsidiary under clause (a) of this definition.
"Stated Maturity", when used with respect to any Note or any installment of
interest thereon, means the date specified in such Note as the fixed date on
which the principal of such Note or such installment of interest is due and
payable.
"Strategic Equity Investor" means a corporation or entity with an equity
market capitalization, a net asset value or annual revenues of at least $1.5
billion that primarily owns and operates businesses in the
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telecommunications, information systems, entertainment, cable television,
programming, electronics or similar or related industries.
"Subordinated Indebtedness" means any Indebtedness of the Borrower which is
expressly subordinated in right of payment to the Notes.
"Subsidiary" means, with respect to any Person, (a) any corporation of which
the outstanding Voting Equity Interests having at least a majority of the votes
entitled to be cast in the election of directors shall at the time be owned,
directly or indirectly, by such Person, or (b) any other Person of which at
least a majority of Voting Equity Interests are at the time, directly or
indirectly, owned by such first named Person.
"Surviving Person" means, with respect to any Person involved in or that makes
any Disposition, the Person formed by or surviving such Disposition or the
Person to which such Disposition is made.
"Tag-Along Agreement" means the agreement dated as of February 8, 1990,
originally entered into by and among Cox Enterprises, Inc., Comcast,
Continental, Newhouse, Tempo, TCIC and TCI Development Corporation, a subsidiary
of TCI, as amended and in effect from time to time.
"Tax Sharing Agreement" means the tax sharing agreement effective as of July
1, 1995 among TCI, TCIC and certain other consolidated subsidiaries of TCI, as
amended. In connection with the Distribution, the Tax Sharing Agreement was
amended on December 3, 1996 to provide that the Borrower be treated as if it had
been a party to the Tax Sharing Agreement effective July 1, 1995, as amended and
in effect from time to time.
"TCI" means Tele-Communications, Inc., a Delaware corporation, and its
successors.
"TCIC Credit Facility" means the credit facility, dated as of December 4,
1996, that provided for the TCIC Revolving Loans and the Borrower's obligations
with respect to the TCIC Revolving Loans and the TSAT Note. As a result of GE-2
Acceptance, availability under the TCIC Credit Facility has been
terminated.
"Tempo Letter Agreements" means the two letter agreements dated as of July 30,
1993 entered into by Tempo and the Partnership in connection with the Tempo
Option and certain related matters and any refinancings thereof, as amended and
in effect from time to time.
"Tempo Satellite" means either of the two high power direct broadcast
satellites which Tempo has agreed to purchase from Loral pursuant to the
Satellite Construction Agreement.
"Tempo Option" means the Partnership's right and option, granted by Tempo
under the option agreement entered into by Tempo and the Partnership in
February 1991, to purchase or lease 100% of the capacity of a DBS system to be
built, launched, and operated by Tempo pursuant to the FCC Permit, as amended
and in effect from time to time.
"Total Consolidated Indebtedness" means, as at any date of determination, an
amount equal to the aggregate amount of all Indebtedness and Disqualified Equity
Interests of the Borrower and the Restricted Subsidiaries outstanding as of such
date of determination.
"Trade Name and Service Mark License Agreement" means the trade name and
service mark license agreement between the Borrower and TCI dated December 4,
1996, as amended and in effect from time to time.
"Transition Services Agreement" means the agreement dated as of December 4,
1996 between TCI and the Borrower, pursuant to which TCI provides to the
Borrower certain services and other benefits, including certain administrative
and other services that were provided to the Borrower by TCI prior to the
Distribution, as amended and in effect from time to time.
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"Unrestricted Subsidiary" means any Subsidiary of the Borrower designated as
such pursuant to "--Certain Covenants--Designation of Unrestricted Subsidiaries;
Designation of Tempo as a Restricted Subsidiary" above. Any such designation
may be revoked by a resolution of the Board of Directors of the Borrower
delivered to the Trustee, subject to the provisions of "--Certain Covenants--
Designation of Unrestricted Subsidiaries; Designation of Tempo as a Restricted
Subsidiary" above.
"Voting Equity Interests" means Equity Interests in a corporation or other
Person with voting power under ordinary circumstances entitling the holders
thereof to elect the Board of Directors or other governing body of such
corporation or Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the sum of the
products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment of final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
aggregate principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary all of
the outstanding Voting Equity Interests (other than directors' qualifying
shares) of which are owned, directly or indirectly, by the Borrower.
Book-Entry, Delivery and Form
Except as set forth in the next paragraph, the Senior Subordinated Exchange
Notes and the Senior Subordinated Discount Exchange Notes to be issued pursuant
to the Exchange Offer initially will be issued in the form of one or more senior
subordinated global exchange notes and senior subordinated discount global
exchange notes, as the case may be (the "Global Notes"). The Global Notes will
be deposited on the Expiration Date of the Exchange Offer with, or on behalf of,
the Depository and registered in the name of Cede & Co., as nominee of the
Depository (such nominee being referred to herein the "Global Notes
Holder").
Notes that are issued as described below under "--Certificated Notes" will be
issued in the form of registered definitive certificates (the "Certificated
Notes"). Such Certificated Notes may, unless the applicable Global Note has
previously been exchanged for Certificated Notes, be exchanged for an interest
in the applicable Global Note representing the principal amount of Senior
Subordinated Exchange Notes or Senior Subordinated Discount Exchange Notes, as
the case may be, being transferred.
The Depository is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depository's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in the accounts of such Participants. The
Depository's Participants include securities brokers and dealers, banks and
trust companies, clearing corporations and certain other organizations. Access
to the Depository's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively, the "Indirect Participants"
or the "Depository's Indirect Participants") that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly.
Persons who are not Participants may beneficially own securities held by or on
behalf of the Depository only through the Depository's Participants or the
Depository's Indirect Participants.
The Borrower expects that, pursuant to procedures established by the
Depository, ownership of the Senior Subordinated Notes or Senior Subordinated
Discount Notes, as the case may be, evidenced by the Global Notes, will be shown
on, and the transfer of ownership thereof will be effected only through, records
maintained by the Depository (with respect to the interests of the Depository's
Participants), the Depository's Participants and the Depository's Indirect
Participants. Prospective purchasers are advised that the laws of some states
require that certain persons take physical delivery in definitive form of
securities that they own. Consequently, the ability to transfer Senior
Subordinated Notes or Senior Subordinated Discount Notes, as the case may be,
evidenced by the Global Notes, will be limited to such extent.
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So long as the Global Notes Holder is the registered owner of any Notes, the
Global Notes Holder will be considered the sole holder under the applicable
Indenture of any Senior Subordinated Notes or Senior Subordinated Discount
Notes, as the case may be, evidenced by the Global Notes. Beneficial owners of
Notes evidenced by the Global Notes will not be considered the owners or holders
thereof under the applicable Indenture for any purpose, including with respect
to the giving of any directions, instructions or approvals to the applicable
agent or trustee thereunder. As a result, the ability of a person having a
beneficial interest in Notes represented by any Global Note to pledge such
interest to persons or entities that do not participate in the Depository's
system or to otherwise take actions in respect of such interest may be affected
by the lack of a physical certificate evidencing such interest. Neither the
Borrower nor the Trustees will have any responsibility or liability for any
aspect of the records relating to or payments made on account of the Notes by
the Depository, or for maintaining, supervising or reviewing any records of the
Depository relating to the Notes.
Payments in respect of the principal of, premium, if any, and interest on any
Notes registered in the name of the Global Notes Holder on the applicable record
date will be payable by the applicable Trustee to or at the direction of the
Global Notes Holder in its capacity as the registered holder of such Notes.
Under the terms of the Notes Indentures, the Borrower and the Trustees may
treat the persons in whose names Notes, including the Global Notes, are
registered as the owners thereof for the purpose of receiving such payments.
Consequently, neither the Borrower nor the Trustees have or will have any
responsibility or liability for the payment of such amounts to beneficial owners
of Notes. The Borrower believes, however, that it is currently the policy of
the Depository to immediately credit the accounts of the relevant Participants
with such payments, in amounts proportionate to their respective holders of
beneficial interests in the relevant security as shown on the records of the
Depository. Payments by the Depository's Participants and the Depository's
Indirect Participants to the beneficial owners of Notes will be governed by
standing instructions and customary practice and will be the responsibility of
the Depository's Participants or the Depository's Indirect Participants.
Certificated Notes
Subject to certain conditions, any person having a beneficial interest in a
Global Note may, upon request to the applicable Trustee, exchange such
beneficial interest for Senior Subordinated Notes or Senior Subordinated
Discount Notes, as the case may be, in the form of Certificated Notes. Upon any
such issuance, the applicable Trustee is required to register such Certificated
Notes in the name of, and cause the same to be delivered to, such person or
persons (or the nominee of any thereof). If: (i) the Borrower notifies the
applicable Trustee in writing that the Depository is no longer willing or able
to act as a depository and the Borrower is unable to locate a qualified
successor within 90 days; or (ii) an Event of Default has occurred and is
continuing and the Depository requests that Certificated Notes be issued under
the applicable Indenture, then, upon surrender by the Global Notes Holder of the
applicable Global Notes, Senior Subordinated Notes and Senior Subordinated
Discount Notes, as the case may be, in such form will be issued to each person
that the Global Notes Holder and the Depository identify as being the
beneficial owner of the related Senior Subordinated Notes or Senior Subordinated
Discount Notes, as the case may be.
Neither the Borrower nor the applicable Trustee will be liable for any delay
by the Global Notes Holder or the Depository in identifying the beneficial
owners of the Senior Subordinated Notes or Senior Subordinated Discount Notes,
as the case may be, and the Borrower and the applicable Trustee may
conclusively rely on, and will be protected in relying on, instructions from the
Global Notes Holder or the Depository for all purposes.
Registration Rights
Exchange Offer
(a) Pursuant to the Registration Rights Agreements executed in connection with
the Notes Offering, the Borrower has agreed to file with the SEC on or before
the Filing Date, an offer to exchange any and all of the Notes that constitute
Registrable Securities (as defined below) for a like aggregate principal amount
of senior subordinated debt securities of the Borrower which are identical to
the Notes, and which are entitled to the benefits of a trust
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indenture which is identical to the applicable Indenture (other than such
changes as are necessary to comply with any requirements of the SEC to effect or
maintain the qualification of such trust indenture under the TIA) and which has
been qualified under the TIA (the "Exchange Securities"), except that the
Exchange Securities shall have been registered pursuant to an effective
registration statement under the Securities Act and shall contain no restrictive
legend thereon. The Exchange Notes are intended to constitute Exchange
Securities under the Registration Rights Agreement. The Borrower has agreed to
use its commercially reasonable best efforts to (i) cause such registration
statement to become effective and commence such exchange offer on or prior to
the Effectiveness Date, (ii) keep such exchange offer open for 20 business days
(or longer if required by applicable law) (the last day of such period, the
"Expiration Date") and (iii) exchange Exchange Notes for all Notes validly
tendered and not withdrawn pursuant to such exchange offer on or prior to the
fifth day following the Expiration Date.
The Borrower has agreed to use its commercially reasonable best efforts to
keep such registration statement effective and to amend and supplement the
prospectus forming a part thereof in order to permit such prospectus to be
lawfully delivered by all persons subject to the prospectus delivery
requirements of the Securities Act for at least 180 days (or such shorter time
as such persons must comply with such requirements in order to resell the
Exchange Securities) (the "Applicable Period").
The Exchange Offer and the Registration Statement (of which this Prospectus
constitutes a part) filed in connection with the Exchange Offer are intended to
satisfy the Borrower's obligations under the Registration Rights Agreements. If
the Borrower does not consummate the Exchange Offer, or, in lieu thereof, the
Borrower does not file and cause to become effective a resale shelf registration
for the Notes within the time periods set forth herein, special interest will
accrue and be payable on the Notes either temporarily or permanently.
(b) Although the Borrower has filed the Registration Statement in
satisfaction of its obligations under the Registration Rights Agreements, as
previously described, there can be no assurance that the Registration Statement
will become effective. If, (i) because of any change in law or in currently
prevailing interpretations of the Staff of the SEC, the Borrower reasonably
determines in good faith, after consultation with counsel, that it is not
permitted to effect the Exchange Offer, (ii) the Exchange Offer is not commenced
on or prior to the Effectiveness Date, (iii) the Exchange Offer is not, for any
reason, consummated on or prior to the 165th day after the Issue Date, (iv) any
holder of Private Exchange Securities (as defined in the Registration Rights
Agreement) so requests, or (v) in the case of any holder that participates in
the Exchange Offer, such holder does not receive Exchange Securities on the date
of the exchange that may be sold without restriction under state and federal
securities laws (the occurrence of any such event, a "Shelf Registration
Event"), then, in the case of each of clauses (i) to and including (v) of this
sentence, the Borrower shall promptly deliver to the holders and the Trustee
notice thereof (the "Shelf Notice") and shall thereafter file an Initial Shelf
Registration Statement pursuant to the terms of the Registration Rights
Agreements.
Shelf Registration
If a Shelf Registration Event has occurred (and whether or not this
Registration Statement has become effective, or the Exchange Offer has been
consummated), then:
(a) Initial Shelf Registration Statement. The Borrower shall promptly
prepare and file with the SEC a Registration Statement for an offering to be
made on a continuous basis pursuant to Rule 415 covering all of the Registrable
Securities (the "Initial Shelf Registration Statement"). The Borrower shall
file with the SEC the Initial Shelf Registration Statement on or prior to the
Filing Date. The Initial Shelf Registration Statement shall be on Form S-1 or
another appropriate form if available, permitting registration of such
Registrable Securities for resale by such holders in the manner designated by
them (including, without limitation, in one or more underwritten offerings). The
Borrower shall not permit any securities other than the Registrable Securities
to be included in the Initial Shelf Registration Statement or any Subsequent
Shelf Registration Statement. The Borrower shall use its commercially
reasonable best efforts to cause the Initial Shelf Registration Statement to be
declared effective under the Securities Act on or prior to the Effectiveness
Date, and to keep the Initial Shelf Registration Statement continuously
effective under the Securities Act until the date which is 36 months from the
Issue Date, or such shorter period ending when
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(i) all Registrable Securities covered by the Initial Shelf Registration
Statement have been sold in the manner set forth and as contemplated in the
Initial Shelf Registration Statement or (ii) a Subsequent Shelf Registration
Statement covering all of the Registrable Securities has been declared effective
under the Securities Act (such 36 month or shorter period, the "Effectiveness
Period").
(b) Subsequent Shelf Registration Statements. If the Initial Shelf
Registration Statement or any Subsequent Shelf Registration Statement ceases to
be effective for any reason at any time during the Effectiveness Period (other
than because of the sale of all of the securities registered thereunder), the
Borrower shall use its best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and in any event the Borrower shall
within 45 days of such cessation of effectiveness amend the Shelf Registration
Statement in a manner reasonably expected to obtain the withdrawal of the order
suspending the effectiveness thereof, or file an additional "shelf" Registration
Statement pursuant to Rule 415 covering all of the Registrable Securities (a
"Subsequent Shelf Registration Statement"). If a Subsequent Shelf Registration
Statement is filed, the Borrower shall use its commercially reasonable best
efforts to cause the Subsequent Shelf Registration Statement to be declared
effective as soon as reasonably practicable after such filing and to keep such
Registration Statement continuously effective until the end of the Effectiveness
Period. As used herein the term "Shelf Registration Statement" means the
Initial Shelf Registration Statement and any Subsequent Shelf Registration
Statement.
(c) Supplements and Amendments. The Borrower shall promptly supplement and
amend the Shelf Registration Statement if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration Statement, if required by the Securities Act, or if reasonably
requested by the holders of a majority in aggregate principal amount of the
Registrable Securities covered by such Registration Statement or by any
underwriter of such Registrable Securities.
Additional Interest
The Borrower has agreed to pay, as liquidated damages, additional interest on
the Notes ("Additional Interest") under the circumstances and to the extent set
forth below (each of which shall be given independent effect):
(i) if either the Registration Statement or the Initial Shelf Registration
Statement has not been filed on or prior to the Filing Date (unless, with
respect to the Registration Statement, a Shelf Event described in clause (i) of
paragraph (b) of "--Exchange Offer" above shall have occurred prior to the
Filing Date), Additional Interest shall accrue on the Notes over and above the
stated interest in an amount equal to $0.05 per week (or any part thereof), per
$1,000 principal amount of the Senior Subordinated Notes or $1,000 of Accreted
Value (as of the first day of each such week) with respect to the Senior
Subordinated Discount Notes for the first 90 days immediately following such
date, such Additional Interest increasing by an additional $0.05 per week (or
any part thereof) per $1,000 principal amount of the Senior Subordinated Notes
or $1,000 of Accreted Value (as of the first day of each such week) with respect
to the Senior Subordinated Discount Notes for each subsequent 90-day period;
(ii) if either the Registration Statement or the Initial Shelf Registration
Statement is not declared effective by the SEC on or prior to the Effectiveness
Date (unless, with respect to the Registration Statement, a Shelf Event
described in clause (i) of paragraph (b) of "--Exchange Offer" above shall have
occurred), Additional Interest shall accrue on the Notes included or which
should have been included in such Registration Statement over and above the
stated interest in an amount equal to $0.05 per week (or any part thereof) per
$1,000 principal amount of Senior Subordinated Notes or $1,000 of Accreted Value
(as of the first day of each such week) with respect to the Senior Subordinated
Discount Notes for the first 90 days immediately following the day after such
date, such Additional Interest increasing by an additional $0.05 per week (or
any part thereof) per $1,000 principal amount of the Senior Subordinated Notes
or $1,000 of Accreted Value (as of the first day of each such week) with respect
to the Senior Subordinated Discount Notes for each subsequent 90-day period; and
(iii) if (A) The Borrower has not exchanged Exchange Securities for all Notes
validly tendered and not withdrawn in accordance with the terms of the Exchange
Offer on or prior to the fifth day after the Expiration Date, or (B) the
Registration Statement ceases to be effective at any time prior to the
Expiration Date, or (C) if applicable,
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any Shelf Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time during the
Effectiveness Period, then Additional Interest shall accrue on the Notes (over
and above any interest otherwise payable on the Notes) in an amount equal to
$0.05 per week (or any part thereof) per $1,000 principal amount of the Senior
Subordinated Notes or $1,000 of Accreted Value (as of the first day of each such
week) with respect to the Senior Subordinated Discount Notes for the first 90
days commencing on the (x) sixth day after the Expiration Date, in the case of
(A) above, or (y) the day the Registration Statement ceases to be effective in
the case of (B) above, or (z) the day such Shelf Registration Statement ceases
to be effective in the case of (C) above, such Additional Interest increasing by
an additional $0.05 per week (or any part thereof) per $1,000 principal amount
of the Senior Subordinated Notes or $1,000 of Accreted Value (as of the first
day of each such week) with respect to the Senior Subordinated Discount Notes at
the beginning of each such subsequent 90-day period; provided, however, that the
Additional Interest rate on the Notes may not exceed at any one time in the
aggregate $0.50 per week per $1,000 principal amount of the Senior Subordinated
Notes or $1,000 of Accreted Value (as of the first day of each such week) with
respect to the Senior Subordinated Discount Notes; provided, further, that (1)
upon the filing of the Registration Statement or a Shelf Registration Statement
as required hereunder (in the case of clause (i) of this paragraph), (2) upon
the effectiveness of the Registration Statement or the Shelf Registration
Statement as required hereunder (in the case of clause (ii) of this paragraph)
or (3) upon the exchange of Exchange Securities for all Notes validly tendered
and not withdrawn (in the case of clause (iii)(A) of this paragraph), or upon
the effectiveness of the Registration Statement which had ceased to remain
effective (in the case of (iii)(B) of this paragraph), or upon the effectiveness
of the Shelf Registration Statement which had ceased to remain effective (in the
case of (iii)(C) of paragraph), Additional Interest on the Notes as a result of
such clause (or the relevant subclause thereof), as the case may be, shall cease
to accrue (but any accrued amount shall be payable).
Although the Borrower initially filed a registration statement in connection
with the Exchange Offer with the SEC on April 11, 1997, in light of the proposed
Roll-up Plan and the consequent necessity of preparing and providing to holders
of the Notes certain pro forma financial information which gives effect to the
Roll-up Plan, the Borrower did not cause such registration statement to be
declared effective. As a result, effective July 5, 1997, the Borrower began to
incur Additional Interest on the Notes, in accordance with the Registration
Rights Agreements, as described above. During the 90-day periods ended October
3, 1997 and January 3, 1998, the Borrower incurred approximately $252,000 and
$476,000, respectively, of Additional Interest, and will continue to incur
Additional Interest for each subsequent 90-day period, in accordance with the
Registration Rights Agreements, until the Registration Statement of which this
Prospectus is a part is declared effective by the SEC and the Exchange Offer is
consummated.
Definitions
As used in this section, the following terms shall have the following
meanings:
Effectiveness Date: The 135th day after the Closing Date; provided, however,
that, with respect to the Initial Shelf Registration Statement, (i) if the
Filing Date in respect thereof is fewer than 60 days prior to the 135th day
after the Closing Date, then the Effectiveness Date in respect thereof shall be
the 60th day after such Filing Date and (ii) if the Filing Date is after the
filing of the Registration Statement with the SEC, then the Effectiveness Date
in respect thereof shall be the 60th day after such Filing Date.
Closing Date: the closing date of the Notes Offering.
Filing Date: The 45th day after the Closing Date; provided, however, that,
with respect to the Initial Shelf Registration Statement, (i) if a Shelf
Registration Event shall have occurred fewer than 30 days prior to the 45th day
after the Closing Date, then the Filing Date in respect thereof shall be the
30th day after such Shelf Registration Event and (ii) if a Shelf Registration
Event shall have occurred after the filing of the Registration Statement with
the SEC, then the Filing Date in respect thereof shall be the 45th day after
such Shelf Registration Event.
Registrable Securities: The Notes upon original issuance thereof and at all
times subsequent thereto, each Exchange Security as to which clause (v) of
paragraph (b) of "--Exchange Offer" above is applicable upon original
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issuance and at all times subsequent thereto and, if issued, the Private
Exchange Securities, until in the case of any such Notes, Exchange Securities or
Private Exchange Securities, as the case may be, (i) a Registration Statement
(other than, with respect to any Exchange Security as to which clause (v) of
paragraph (b) of "--Exchange Offer" above is applicable, the Registration
Statement) covering such Notes, Exchange Securities or Private Exchange
Securities has been declared effective by the SEC and such Notes, Exchange
Securities or Private Exchange Securities, as the case may be, have been
disposed of in accordance with such effective Registration Statement, (ii) such
Notes, Exchange Securities or Private Exchange Securities, as the case may be,
are sold in compliance with Rule 144 under the Securities Act, (iii) such Note
has been exchanged for an Exchange Note pursuant to the Exchange Offer and
clause (v) of paragraph (b) of "--Exchange Offer" above is not applicable
thereto, or (iv) such Notes, Exchange Securities or Private Exchange Securities,
as the case may be, cease to be outstanding.
RECENT TRANSACTIONS---THE ASKYB TRANSACTION
In the proposed ASkyB Transaction, pursuant to the ASkyB Agreement among the
Partnership, News Corp., MCI, ASkyB, and for certain purposes only, each of the
Partners, New PRIMESTAR will acquire from MCI, News Corp. and ASkyB, as
applicable, two MCI Satellites, certain authorizations granted to MCI by the FCC
to operate a DBS business at the 110 W.L. orbital location using 28 transponder
channels, and certain related contracts.
In consideration, ASkyB will receive non-voting convertible securities of New
PRIMESTAR, comprising, subject to closing adjustments, approximately $600
million liquidation value of New PRIMESTAR Convertible Preferred Stock
(convertible into approximately 52 million shares of non-voting New PRIMESTAR
Class D Common Stock, subject to adjustment) and approximately $516 million
principal amount of New PRIMESTAR Convertible Subordinated Notes (convertible
into approximately 45 million shares of New PRIMESTAR Class D Common Stock).
The New PRIMESTAR Convertible Subordinated Notes will be due and payable, and
the New PRIMESTAR Convertible Preferred Stock will be mandatorily redeemable, on
the tenth anniversary of the date of issuance. The New PRIMESTAR Convertible
Preferred Stock will accrue cumulative dividends at the annual rate of 5% of the
liquidation value of such shares and the New PRIMESTAR Convertible Subordinated
Notes will have an interest rate of 5%. Dividends on the New PRIMESTAR
Convertible Preferred Stock and interest on the New PRIMESTAR Convertible
Subordinated Notes will be payable in cash or, at the option of New PRIMESTAR,
in shares of the non-voting New PRIMESTAR Class D Common Stock, for a period of
four years. Thereafter, all dividend and interest payments will be made solely
in cash. Shares of New PRIMESTAR Class D Common Stock issued to ASkyB or any of
its affiliates upon conversion of such New PRIMESTAR Convertible Preferred Stock
and New PRIMESTAR Convertible Subordinated Notes, or in payment of dividend or
interest obligations thereunder, will in turn automatically convert into shares
of New PRIMESTAR Class A Common Stock, on a one-to-one basis, upon transfer to
any person other than ASkyB, News Corp. or any of their respective affiliates.
Assuming such a transfer and conversion, and based on the number of shares of
New PRIMESTAR Common Stock expected to be issued in the Restructuring
Transaction (subject to adjustment as provided in the Restructuring Agreement,
the New PRIMESTAR Class D Common Stock into which the New PRIMESTAR Convertible
Subordinated Notes and the New PRIMESTAR Convertible Preferred Stock are
convertible, would be converted into New PRIMESTAR Class A Common Stock
representing approximately 33% of the number of shares of New PRIMESTAR Common
Stock and approximately 20% of the combined voting power of the New PRIMESTAR
Common Stock outstanding after giving effect to such a transfer and conversion.
Consummation of the ASkyB Transaction is contingent on, among other things,
receipt of all necessary government and regulatory approvals, and accordingly,
no assurance can be given that the ASkyB Transaction will be consummated. In
addition, it is a condition precedent to the closing of the ASkyB Transaction by
New PRIMESTAR that the ASkyB Transaction be approved by the holders of New
PRIMESTAR Voting Common Stock, including the former holders of TSAT Common Stock
if the TSAT Merger shall have been consummated, at an annual or special meeting
of New PRIMESTAR. The ASkyB Agreement provides that if the Restructuring
Transaction has not closed by March 8, 1998, and the closing conditions set
forth in the ASkyB Agreement have
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all been satisfied, then News Corp., MCI and ASkyB (collectively, the "ASkyB
Transferors") will have the right to transfer to the Partnership the assets
contemplated to be transferred to New PRIMESTAR under the ASkyB Transaction, in
exchange for such consideration, having an aggregate fair market value equal to
the aggregate consideration that would have been received by the ASkyB
Transferors pursuant to the ASkyB Transaction had the Restructuring Transaction
closed by such date, as the Partnership and the ASkyB Transferors shall mutually
agree.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes the principal United States federal income tax
consequences of the ownership and disposition of the Notes and the Exchange
Notes. This summary is based on the Code, administrative pronouncements,
judicial decisions and existing and proposed Treasury Regulations, changes to
any of which subsequent to the date hereof may affect the tax consequences
described below. This summary addresses only initial holders of the Notes who
acquired such Notes at their "issue price," as defined below, and initial
holders of Notes who, upon tendering their Notes in connection with the Exchange
Offer, are issued Exchange Notes in exchange for such Notes, and discusses only
Notes and Exchange Notes held as capital assets within the meaning of Section
1221 of the Code. It does not discuss all of the tax consequences that may be
relevant to a holder in light of such holder's particular circumstances or to
holders subject to special rules, such as certain financial institutions,
insurance companies, dealers in securities or persons holding the Notes as part
of a straddle or a hedging arrangement.
THE FOLLOWING DISCUSSION IS FOR GENERAL INFORMATION AND IS NOT TAX ADVICE.
ACCORDINGLY, HOLDERS OF NOTES SHOULD CONSULT THEIR TAX ADVISORS WITH REGARD TO
THE APPLICATION OF THE UNITED STATED FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR
SITUATIONS, AS WELL AS WITH REGARD TO ANY TAX CONSEQUENCES ARISING UNDER THE
LAWS OF ANY STATE, LOCAL OR FOREIGN JURISDICTION AND ANY RECENT OR PROSPECTIVE
CHANGES IN APPLICABLE TAX LAWS.
Senior Subordinated Discount Notes
Original Issue Discount. The Senior Subordinated Discount Notes were issued
with OID equal to the difference between their "stated redemption price at
maturity" and their "issue price," as such terms are defined in the Code and
Treasury Regulations. The "issue price" of a Senior Subordinated Discount Note,
or a Senior Subordinated Exchange Note issued in exchange therefor pursuant to
the Exchange Offer, is the first price at which a substantial amount of the
Senior Subordinated Discount Notes was sold to the public. For this purpose, the
public does not include bond houses, brokers or similar persons or organizations
acting in the capacity of underwriters, placement agents or wholesalers.
The "stated redemption price at maturity" of a Senior Subordinated Discount
Note, or of a Senior Subordinated Discount Exchange Note issued in exchange
therefor, is equal to the sum of all payments required under the Senior
Subordinated Discount Note or Senior Subordinated Discount Exchange Note, as the
case may be, other than payments of "qualified stated interest" within the
meaning of the Treasury Regulations. To have "qualified stated interest," an
instrument must, among other requirements, pay interest at least annually during
the entire term of such instrument. Because neither the Senior Subordinated
Discount Notes nor the Senior Subordinated Discount Exchange Notes will pay
interest until September 1, 2002, none of the interest on the Senior
Subordinated Discount Notes or the Senior Subordinated Discount Exchange Notes
will be qualified stated interest. As a result, all payments made under the
Senior Subordinated Discount Notes and the Senior Subordinated Discount Exchange
Notes will be treated as part of the stated redemption price at maturity, and
interest paid on the Senior Subordinated Discount Notes and the Senior
Subordinated Discount Exchange Notes will not be taxable upon receipt, but the
OID rules described below will apply. The total OID on a Senior Subordinated
Discount Note or a Senior Subordinated Discount Exchange Note, as the case may
be, will be equal to the difference between the sum of all payments required
under such Senior Subordinated Discount Note or Senior Subordinated Discount
Exchange Note and the issue price of the Senior Subordinated Discount Note owned
by the holder (or, in the case of a Senior Subordinated Discount Exchange Note,
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the issue price of the Senior Subordinated Discount Note that was exchanged by
such holder for a Senior Subordinated Discount Exchange Note pursuant to the
Exchange Offer).
A holder of Senior Subordinated Discount Notes and a holder of Senior
Subordinated Discount Exchange Notes each will be required to include OID in
income for U.S. federal income tax purposes as it accrues, whether or not such
holder uses the accrual method of accounting. OID will accrue in accordance with
a constant yield method based on a compounding of interest. Under this method,
holders of Senior Subordinated Discount Notes and holders of Senior Subordinated
Discount Exchange Notes will be required to include in income increasingly
greater amounts of OID in successive accrual periods. OID allocable to any
accrual period will equal the product of the "adjusted issue price" of the
Senior Subordinated Discount Notes or the Senior Subordinated Discount Exchange
Notes, as the case may be, as of the beginning of such period, multiplied by the
Senior Subordinated Discount Notes' or the Senior Subordinated Discount
Exchange Notes' respective yield to maturity. The "adjusted issue price" of
the Senior Subordinated Discount Notes, or the Senior Subordinated Discount
Exchange Notes issued in exchange for Senior Subordinated Discount Notes, as of
the beginning of any accrual period, will, with respect to Senior Subordinated
Discount Notes, equal the issue price of the Senior Subordinated Discount Notes
or, with respect to the Senior Subordinated Discount Exchange Notes, equal the
issue price of the Senior Subordinated Discount Note that was exchanged pursuant
to the Exchange Offer, increased, in each case, by OID previously includible in
income and decreased by any payments under such Notes or Exchange Notes, as the
case may be. Because OID will accrue and be includible in income at least
annually and no payments will be made under the Senior Subordinated Discount
Notes and the Senior Subordinated Discount Exchange Notes until August 15, 2002,
the adjusted issue price of the Senior Subordinated Discount Notes and the
Senior Subordinated Discount Exchange Notes will increase until February 15,
2002. OID includible in income will therefore increase during each accrual
period until February 15, 2002. Thereafter, OID includible in income for each
six-month accrual period will approximate the amount of cash interest due at the
end of such period.
The Borrower may make a Cash Interest Election at any time prior to February
15, 2002, in which case cash interest is payable on each interest payment date
thereafter. Under the OID rules, solely for purposes of determining the amount
of OID that is includible in income by a holder of a note, it is presumed that
the issuer will exercise an option to pay cash interest early if such exercise
will lower the yield-to-maturity of the note. The Borrower has determined that
the exercise of its option to pay interest early would not lower the yield-to-
maturity of the Senior Subordinated Discount Notes or the yield-to-maturity of
the Senior Subordinated Discount Exchange Notes. On these facts, the Borrower
would not be presumed to exercise its option to pay interest early. However, if,
contrary to such presumption, the Borrower exercises such option, then solely
for purposes of the accrual of OID, the yield to maturity of the Senior
Subordinated Discount Notes and the Senior Subordinated Discount Exchange Notes
will be redetermined by treating each of the Senior Subordinated Discount Notes
and the Senior Subordinated Discount Exchange Notes as reissued on such date for
an amount equal to the adjusted issue price on such date.
Effect of Mandatory and Optional Redemption on OID. The Borrower may redeem
the Senior Subordinated Discount Notes and the Senior Subordinated Discount
Exchange Notes, in whole or in part, at any time on or after February 15, 2002,
at redemption prices specified elsewhere herein, plus accrued and unpaid
interest thereon, if any, to the date of redemption. Treasury Regulations
contain rules for determining the "maturity date" and the stated redemption
price at maturity of an instrument that may be redeemed prior to its stated
maturity date at the option of the issuer. Under the OID rules, solely for
purposes of the accrual of OID, it is assumed that the issuer will exercise any
option to redeem a debt instrument if such exercise will lower the yield-to-
maturity of the debt instrument. The Borrower has determined that the exercise
of its right to redeem the Senior Subordinated Discount Notes and Senior
Subordinated Discount Exchange Notes prior to their stated maturity under these
rules would not lower the yield-to-maturity of the Senior Subordinated Discount
Notes and the Senior Subordinated Discount Exchange Notes. On these facts, the
Borrower would not be presumed to exercise its right to redeem the Senior
Subordinated Discount Notes and Senior Subordinated Discount Exchange Notes
prior to their stated maturity under these rules.
In addition, prior to February 15, 2000, the Borrower, other than in any
circumstance resulting in a Change of Control, may redeem an aggregate principal
amount of Senior Subordinated Discount Notes and Senior Subordinated Discount
Exchange Notes equal to up to 35% of the originally issued principal amount at
maturity of
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Senior Subordinated Discount Notes at a redemption price equal to 112.25 % of
the Accreted Value thereof at the redemption date (or, if a Cash Interest
Election has been made, 112.25 % of the principal amount at maturity thereof,
plus accrued and unpaid interest thereon, if any, to the redemption date) with
the net cash proceeds of (i) one or more Public Equity Offerings of common
equity of the Borrower or (ii) a sale or series of related sales of Qualified
Equity Interests of the Borrower to Strategic Equity Investors, in any such case
resulting in gross cash proceeds to the Borrower of at least $100.0 million in
the aggregate, provided, however, that at an aggregate principal amount of
Senior Subordinated Discount Notes and Senior Subordinated Discount Exchange
Notes equal to at least 65% of the originally issued principal amount at
maturity of Senior Subordinated Discount Notes would remain outstanding
immediately after giving effect to any such redemption (excluding any Senior
Subordinated Discount Notes and Senior Subordinated Discount Exchange Notes
owned by the Borrower or any of it Affiliates). Such redemption rights and
obligations will be treated by the Borrower as not affecting the determination
of the yield or maturity of the Senior Subordinated Discount Notes or the Senior
Subordinated Discount Exchange Notes. The Treasury Regulations contain rules for
determining the "maturity date" and the stated redemption price at maturity of
an instrument that may be redeemed prior to its stated maturity date upon the
occurrence of one or more contingencies. Under such Treasury Regulations, if the
timing and amounts of the payments that comprise each payment schedule are known
as of the issue date, the "maturity date" and stated redemption price at
maturity of such an instrument are determined by assuming that payments will be
made according to the instrument's stated payment schedule, unless, based upon
all the facts and circumstances as of the issue date, it is more likely than not
that the instrument's stated payment schedule will not occur. The Borrower has
determined that the stated maturity date and stated payment schedule of the
Senior Subordinated Discount Notes is more likely than not to occur based on the
facts and circumstances known as of the issue date. On these facts, under these
regulations, the "maturity date" and stated redemption price at maturity of the
Senior Subordinated Discount Notes and the Senior Subordinated Discount Exchange
Notes would be determined on the basis of the stated maturity and stated payment
schedule.
If, notwithstanding the foregoing, it is presumed that the Borrower will
exercise its option to redeem, then the maturity date of the Senior Subordinated
Discount Notes and the Senior Subordinated Discount Exchange Notes for the
purpose of calculating yield to maturity would be the exercise date of such call
option and the stated redemption price at maturity for each Senior Subordinated
Discount Note and each Senior Subordinated Discount Exchange Note would equal
the amount payable upon such exercise. If subsequently the call option is not
exercised, then for purposes of the OID rules, the issuer would be treated as
having issued on the presumed exercise date of the call option a new debt
instrument in exchange for the existing instrument. The new debt instrument
deemed issued would have an issue price equal to the call price. As a result,
another OID computation would have to be made with respect to the constructively
issued new debt instrument.
Sale, Exchange or Retirement. Upon the sale, exchange or retirement of a
Senior Subordinated Discount Note or of a Senior Subordinated Discount Exchange
Note, a holder will recognize taxable gain or loss equal to the difference
between the amount realized on the sale, exchange or retirement and such
holder's adjusted tax basis in such Senior Subordinated Discount Note or Senior
Subordinated Discount Exchange Note, as the case may be. A holder's adjusted
tax basis in a Senior Subordinated Discount Note or Senior Subordinated Discount
Exchange Note will equal the initial tax basis of the Senior Subordinated
Discount Note or Senior Subordinated Discount Exchange Note, respectively,
increased by the amounts of any OID previously included in income by the holder
with respect to such Senior Subordinated Discount Note or Senior Subordinated
Discount Exchange Note, and reduced by the amounts of any payments on such
Senior Subordinated Discount Note or Senior Subordinated Discount Exchange Note,
respectively, received by such holder.
Gain or loss realized on the sale, exchange or retirement of a Senior
Subordinated Discount Note or Senior Subordinated Discount Exchange Note will be
capital gain or loss if such Senior Subordinated Discount Note or Senior
Subordinated Discount Exchange Note, as the case may be, is held as a capital
asset, and will be long-term capital gain or loss if the Senior Subordinated
Discount Note or Senior Subordinated Discount Exchange Note has been held by the
holder for more than one year as of the date of the sale, exchange or
retirement. Under current law, the excess of net long-term capital gains over
net short-term capital losses is taxed at a lower rate than ordinary income for
certain noncorporate taxpayers. The distinction between capital gain or loss and
ordinary income or loss is also relevant for purposes of, among other things,
any limitation on the deductibility of capital losses.
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Senior Subordinated Notes
The Senior Subordinated Notes were not issued with (and thus do not bear) OID,
and consequently, any Senior Subordinated Exchange Notes issued in exchange for
Senior Subordinated Notes pursuant to the Exchange Offer will not bear OID. For
purposes of this discussion, it is assumed that all the initial holders of
Senior Subordinated Notes purchased their Senior Subordinated Notes at a price
equal to the stated principal amount.
Holders of Senior Subordinated Notes or Senior Subordinated Exchange Notes
will be required to include stated interest on the Senior Subordinated Notes or
Senior Subordinated Exchange Notes in gross income for federal income tax
purposes in accordance with the holder's method of accounting for tax purposes.
Sale, Exchange or Retirement Upon the sale, exchange or retirement of a Senior
Subordinated Note or a Senior Subordinated Exchange Note, a holder will
recognize taxable gain or loss equal to the difference between the amount
received in the sale, exchange or retirement (except to the extent the
consideration received is attributable to stated interest not previously taken
into account, which consideration is treated as interest income) and such
holder's adjusted tax basis in the Senior Subordinated Note or Senior
Subordinated Exchange Note, as the case may be. Any gain or loss recognized on
the sale, exchange or retirement of a Senior Subordinated Note or Senior
Subordinated Exchange Note would be capital gain or loss if such Note or
Exchange Note is held as a capital asset and will be long-term capital gain or
loss if the Senior Subordinated Note or Senior Subordinated Exchange Note were
held by the holder for more than one year. For purposes of the foregoing
calculation of capital gain or loss, the applicable holding period for Senior
Subordinated Exchange Notes would begin on the date that such holder was issued
the Senior Subordinated Notes that were subsequently exchanged for such Senior
Subordinated Exchange Notes pursuant to the Exchange Offer.
In certain circumstances, notes issued in connection with the same transaction
or related transactions may be treated as a single note for purposes of the OID
rules. The Borrower has determined that a substantial portion of each of the
Senior Subordinated Notes and the Subordinated Senior Discount Notes were issued
to purchasers not related to the Borrower or to other purchasers and who did
not purchase both Senior Subordinated Notes and Senior Subordinated Discount
Notes in connection with the same transaction or related transactions. Assuming
this is the case, the aggregation rules would not apply with respect to the
Notes or the Exchange Notes.
Exchange of Notes for Exchange Notes Pursuant to the Exchange Offer
An exchange of the Notes for the Exchange Notes pursuant to the Exchange Offer
will not be treated as a taxable exchange for federal income tax purposes
because, other than the fact that the Exchange Notes will be registered under
the Securities Act, upon consummation of the Exchange Offer, the terms of the
Exchange Notes will be identical to the terms of the Notes.
Backup Withholding and Information Reporting
Certain noncorporate holders may be subject to backup withholding at a rate of
31% on payments of principal and interest (including OID) and premium on, and
the proceeds of disposition of, a Note. Backup withholding will apply only if
the holder: (i) fails to furnish its Taxpayer Identification Number ("TIN")
which, for an individual, would be his or her Social Security number; (ii)
furnishes an incorrect TIN; (iii) is notified by the Internal Revenue Service
(the "IRS") that it has failed properly to report payments of interest and
dividends; or (iv) under certain circumstances, fails to certify, under penalty
of perjury, that it has furnished a correct TIN and has not been notified by the
IRS that it is subject to backup withholding for failure to report interest and
dividend payments. Holders of the Notes should consult their tax advisors
regarding their qualification for exemption from backup withholding and the
procedure for obtaining such an exemption, if applicable.
The amount of any backup withholding from a payment to a holder of a Note will
be allowed as a credit against the holder's United States federal income tax
liability and may entitle the holder to a refund, provided that the required
information is furnished to the IRS.
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Other Tax Consequences
In addition to the federal income tax considerations described above, holders
of Notes should consider potential state, local, income, franchise, personal
property and other taxation in any state, locality or foreign jurisdiction and
the tax effect of ownership, sale, exchange, or retirement of Notes or Exchange
Notes, or their exchange of Notes for Exchange Notes pursuant to the Exchange
Offer, in any state, locality or foreign jurisdiction. Prospective purchasers of
Notes are advised to consult their own tax advisors with respect to any state,
local or foreign income, franchise, personal property or other tax consequences
arising out of their ownership of Notes or Exchange Notes.
PLAN OF DISTRIBUTION
The Exchange Notes are being offered in exchange for Notes pursuant to the
Exchange Offer.
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a Prospectus in
connection with any resale of such Exchange Notes. The Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Exchange Notes received in exchange for Notes where
such Notes were acquired as a result of market-making activities or other
trading activities. The Borrower has agreed that, for a period of 180 days
after the Expiration Date, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale.
The Borrower will not receive any proceeds from any sales of the Exchange
Notes by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchaser or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any broker-
dealer that resells the Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that, by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Borrower will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. the Borrower has agreed to pay certain expenses
incident to the Exchange Offer, other than commission or concessions of any
brokers or dealers, and will indemnify the holders of the Exchange Notes
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
By acceptance of the Exchange Offer, each broker-dealer that receives
Exchange Notes for its own account pursuant to the Exchange Offer agrees that,
upon receipt of notice from the Borrower of the happening of any event which
makes any statement in the Prospectus untrue in any material respect or which
requires the making of any changes in the Prospectus in order to make the
statements therein not misleading (which notice the Borrower agree to deliver
promptly to such broker-dealer), such broker-dealer will suspend use of the
Prospectus until the Borrower has amended or supplemented the Prospectus to
correct such misstatement or omission and has furnished copies of the amended or
supplemental Prospectus to such broker-dealer.
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VALIDITY OF EXCHANGE NOTES
The validity of the Exchange Notes will be passed upon for TSAT by Baker &
Botts, L.L.P., New York, N.Y.
EXPERTS
The balance sheets of TCI Satellite Entertainment, Inc. (as defined in note
1 of the financial statements referred to in this paragraph) as of December 31,
1996 and 1995, and the related statements of operations, stockholders' equity,
and cash flows for each of the years in the three-year period ended December 31,
1996, which appear in TCI Satellite Entertainment, Inc.'s Annual Report on Form
10-K for the year ended December 31, 1996, have been incorporated by reference
herein in reliance upon the report, dated March 25, 1997, of KPMG Peat Marwick
LLP, independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
The combined financial statements of Time Warner Satellite Services Group
as of December 31, 1996 and 1995, and for each of the three years in the
period ended December 31, 1996, appearing in TCI Satellite, Inc.'s Current
Report on Form 8-K dated February 11, 1998, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon,
which is based in part on the report of Price Waterhouse LLP, independent
accountants, included therein and incorporated by reference herein. Such
combined financial statements are incorporated herein by reference in reliance
upon such reports given upon the authority of such firms as experts in
accounting and auditing.
The financial statements of Cox Communications, Inc. Direct Broadcast
Satellite Business as of December 31, 1995 and 1996, and for each of the three
years in the period ended December 31, 1996, which appear in TCI Satellite
Entertainment, Inc.'s Current Report on Form 8-K, dated February 11, 1998, have
been incorporated by reference herein in reliance upon the report, dated July
10, 1997, Deloitte & Touche, LLP, independent auditors, which contains
explanatory language stating that other auditors audited the financial
statements of PRIMESTAR Partners L.P., an investment of Cox Communications, Inc.
Direct Broadcast Satellite Business, incorporated by reference herein and upon
the authority of such firm as experts in auditing and accounting.
The combined financial statements of Comcast Satellite Communications, Inc.
and Comcast DBS, Inc. as of December 31, 1996 and 1995 and for each of the three
years in the period ended December 31, 1996 , which appear in TCI Satellite
Entertainment, Inc.'s Current Report on Form 8-K, dated February 11, 1998, have
been incorporated by reference herein in reliance upon the report, dated August
22, 1997, of Deloitte & Touche, LLP, independent auditors, which contains
explanatory language stating that other auditors audited the financial
statements of PRIMESTAR Partners L.P., an investment of Comcast DBS, Inc.,
incorporated by reference herein and upon the authority of such firm as experts
in auditing and accounting.
The combined financial statements of MediaOne, Inc.--Direct Broadcast
Satellite Business as of December 31, 1996 and the related combined statements
of operations, changes in group equity (deficiency), and cash flows for the
period November 15, 1996 through December 31, 1996, and the combined financial
statements of the Direct Broadcast Satellite Business of Continental
Cablevision, Inc. as of December 31, 1995 and the related combined statements of
operations, changes in group equity (deficiency) and cash flows for the twelve
months ended December 31, 1994 and 1995, and the period January 1, 1996 through
November 14, 1996, which appear in TCI Satellite Entertainment, Inc.'s Current
Report on Form 8-K, dated February 11, 1998, have been incorporated by reference
herein in reliance upon the report, dated August 8, 1997, of Deloitte & Touche,
LLP, independent auditors, which contains explanatory language stating that
other auditors audited the financial statements of PRIMESTAR Partners L.P., an
investment of MediaOne, Inc.--Direct Broadcast Satellite Business, incorporated
by reference herein and upon the authority of such firm as experts in auditing
and accounting.
The consolidated balance sheet of PRIMESTAR, Inc. as of September 30, 1997,
which appears in TCI Satellite Entertainment, Inc.'s Current Report on Form 8-K,
dated February 11, 1998, has been incorporated by reference herein in reliance
upon the report, dated February 6, 1998, of KPMG Peat Marwick, LLP, independent
certified public accountants, incorporated by reference herein and upon the
authority of such firm as experts in auditing and
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accounting.
The financial statements of PRIMESTAR Partners L.P. as of December 31, 1996
and 1995 and for each of the three years in the period ended December 31, 1996,
which appear in TCI Satellite Entertainment, Inc.'s Current Report on Form 8-K,
dated February 11, 1998, have been incorporated by reference herein in reliance
upon the report (which contains an explanatory paragraph relating to PRIMESTAR
Partners L.P.'s ability to continue as a going concern as described in note 2 to
the financial statements) of Price Waterhouse LLP, independent accountants,
dated February 14, 1997, except as to Note 13, which is as of March 9, 1997,
incorporated by reference herein and upon the authority of such firm as experts
in auditing and accounting.
No person has been authorized in connection with the offering made hereby
to give any information or to make any representations other than those
contained in this Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any securities other than the securities to which it relates or an offer to
sell or the solicitation of an offer to buy such securities in any circumstances
in which such offer or solicitation is unlawful. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that the information contained herein is correct as of any date
subsequent to the date hereof.
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[LOGO OF TCI SATELLITE ENTERTAINMENT APPEARS HERE]
10 7/8% Senior Subordinated Notes
due February 15, 2007
and
12 1/4% Senior Subordinated
Discount Notes
due February 15, 2007
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 102(b)(7) of the General Corporation Law of the State of Delaware (the
"DGCL"), provides that a corporation (in its original certificate of
incorporation or an amendment thereto) may eliminate or limit the personal
liability of a director (or certain persons who, pursuant to the provisions of
the certificate of incorporation, exercise or perform duties conferred or
imposed upon directors by the DGCL) to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that such
provisions shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL (providing for liability of directors for unlawful payment of dividends
or unlawful stock purchases or redemptions) or (iv) for any transaction from
which the director derived an improper personal benefit. TSAT's Certificate of
Incorporation limits the liability of directors thereof to the extent permitted
by Section 102(b)(7) of the DGCL. In addition, the New PRIMESTAR Charter limits
the liability of directors thereof to the extent permitted by Section 102(b)(7)
of the DGCL.
Under Section 145 of the DGCL, in general, a corporation may indemnify its
directors, officers, employees or agents against expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by them in connection with any action, suit or proceeding brought by
third parties to which they may be made parties by reason of their being or
having been directors, officers, employees or agents and shall so indemnify such
persons if they acted in good faith and in a manner they reasonably believed to
be in or not opposed to the best interests of the corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe their
conduct was unlawful. TSAT's Certificate of Incorporation and its By-Laws
provide that TSAT shall have the power to indemnify its officers, directors,
employees and agents to the full extent permitted by Delaware law. The New
PRIMESTAR Charter also provides that New PRIMESTAR shall have the power to the
fullest extent permitted by Delaware law to indemnify its officers, directors,
employees and agents.
In addition, pursuant to an Indemnification Agreement dated December 4, 1996,
TCI has agreed to indemnify Gary S. Howard, President and Chief Executive
Officer of TSAT, in accordance with the terms and conditions set forth
therein. TSAT has agreed to indemnify John W. Goddard, a director of TSAT,
pursuant to the terms set forth in an Indemnification Agreement dated May 15,
1997, and has agreed to indemnity William E. Johnson, a director of TSAT,
pursuant to the terms of an Indemnification Agreement dated March 21, 1997.
Item 21. Exhibits and Financial Statement Schedules.
( a ) ,
Exhibits.
Exhibit
Number Description
2.1. Merger and Contribution Agreement dated as of February 6, 1998, among
TCI Satellite Entertainment, Inc. ("TSAT"), PRIMESTAR, Inc., Time
Warner Entertainment Company, L.P. ("TWE"), Advance/Newhouse
Partnership ("Newhouse"), Comcast Corporation ("Comcast"), Cox
Communications, Inc. ("Cox"), MediaOne of Delaware, Inc. ("MediaOne")
and GE American Communications, Inc. ("GE Americom") (Incorporated by
reference to Exhibit 2.1 to PRIMESTAR, Inc.'s Registration Statement
on Form S-4 dated February 9, 1998 (Registration No.
333-45835)).
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Exhibit
Number Description
2.2. Asset Transfer Agreement dated as of February 6, 1998, between TSAT
and PRIMESTAR, Inc. (Incorporated by reference to Exhibit 2.2 to
PRIMESTAR, Inc.'s Registration Statement on Form S-4 dated February 9,
1998 (Registration No. 333-45835)).
2.3. Asset Acquisition Agreement dated as of June 11, 1998, by and among
The News Corporation Limited ("News Corp."), MCI Telecommunications
Corporation ("MCI"), American Sky Broadcasting LLC ("ASkyB"),
PRIMESTAR Partners L.P. (the "Partnership") for certain purposes only,
each of the general and limited partners of the Partnership
(Incorporated by reference to Exhibit 2.2 of TSAT's Current Report on
Form 8-K dated July 1, 1997 (Commission File No. 0-21317)).
2.4. Agreement and Plan of Merger dated as of February 6, 1998, between
TSAT and PRIMESTAR, Inc. (Incorporated by reference to Exhibit 2.4 to
PRIMESTAR, Inc.'s Registration Statement on Form S-4 dated February 9,
1998 (Registration No. 333-45835)).
2.5./*/ Agreement and Plan of Merger dated as of February 6, 1998, between
PRIMESTAR, Inc. and Comcast DBS, Inc (Incorporated by reference to
Exhibit 2.5 to PRIMESTAR, Inc.'s Registration Statement on Form S-4
dated February 9, 1998 (Registration No. 333-45835)).
2.6./*/ Asset Transfer Agreement dated as of February 6, 1998, between
PRIMESTAR, Inc. and Newhouse (Incorporated by reference to Exhibit 2.6
to PRIMESTAR, Inc.'s Registration Statement on Form S-4 dated February
9, 1998 (Registration No. 333-45835)).
2.7./*/ Form of Reimbursement Agreements between PRIMESTAR, Inc. and each of
(i) TWE, (ii) Comcast, (iii) Cox and (iv) MediaOne, each to be entered
into at the closing of the Restructuring Transaction (Incorporated by
reference to Exhibit 2.7 to PRIMESTAR, Inc.'s Registration Statement
on Form S-4 dated February 9, 1998 (Registration No. 333-45835)).
2.8. Guarantee Agreement dated as of February 6, 1998, by US West Media
Group, Inc. ("US West"), in favor of each of TSAT, PRIMESTAR, Inc.,
TWE, Newhouse, Comcast, Cox and GE Americom (Incorporated by reference
to Exhibit 2.8 to PRIMESTAR, Inc.'s Registration Statement on Form S-4
dated February 9, 1998 (Registration No. 333-45835)).
2.9. Letter Agreement dated as of February 6, 1998, between John C. Malone
and TSAT, PRIMESTAR, Inc., TWE, Newhouse, Comcast, Cox, MediaOne and
GE Americom, for the benefit of TSAT, PRIMESTAR, Inc., TWE, Newhouse,
Comcast, Cox, MediaOne and GE Americom (Incorporated by reference to
Exhibit 2.9 to PRIMESTAR, Inc.'s Registration Statement on Form S-4
dated February 9, 1998 (Registration No. 333-45835)).
2.10. Voting Agreement dated as of June 12, 1997, among John C. Malone, Time
Warner Cable, a division of TWE, Comcast, TSAT, Cox, MediaOne,
Newhouse and GE Americom (Incorporated by reference to Exhibit 2.10 to
PRIMESTAR, Inc.'s Registration Statement on Form S-4 dated February 9,
1998 (Registration No. 333-45835)).
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* Attached to this exhibit is a schedule of agreements that are
substantially identical to this exhibit, in accordance with Instruction 2 to
Item 601 of Regulation S-K.
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Exhibit
Number Description
2.11. Voting Agreement dated as of June 12, 1997, among Donne F. Fisher, as
Co-Personal Representative of the Estate of Bob Magness, Time Warner
Cable, a division of TWE, Comcast, TSAT, Cox, MediaOne, Newhouse and
GE Americom (Incorporated by reference to Exhibit 2.11 to PRIMESTAR,
Inc.'s Registration Statement on Form S-4 dated February 9, 1998
(Registration No. 333-45835)).
2.12. Voting Agreement dated as of June 12, 1997, among TCI, John C. Malone,
Time Warner Cable, a division of TWE, Comcast, TSAT, Cox, MediaOne,
Newhouse and GE Americom (Incorporated by reference to Exhibit 2.12 to
PRIMESTAR, Inc.'s Registration Statement on Form S-4 filed with the
SEC February 9, 1998 (Registration No. 333-45835)).
2.13. Form of Stockholders Agreement among PRIMESTAR, Inc., TSAT, TWE,
Newhouse, Comcast, Cox, MediaOne, Continental Satellite Company, Inc.,
Continental Satellite Company of Chicago, Inc., Continental Satellite
Company of Minnesota, Inc., Continental Satellite Company of New
England, Inc., Continental Satellite Company of Michigan, Inc.,
Continental Satellite Company of Ohio, Inc., Continental Satellite
Company of Virginia, Inc., MediaOne Satellite II, Inc., GE Americom
and John C. Malone, to be entered into at the closing of the
Restructuring Transaction (Incorporated by reference to Exhibit 2.13
to PRIMESTAR, Inc.'s Registration Statement on Form S-4 filed with the
SEC February 9, 1998 (Registration No. 333-45835)).
2.14. Form of Registration Rights Agreement among PRIMESTAR, Inc., TWE,
Newhouse, Comcast, Cox, MediaOne, Continental Satellite Company, Inc.,
Continental Satellite Company of Chicago, Inc., Continental Satellite
Company of Minnesota, Inc., Continental Satellite Company of New
England, Inc., Continental Satellite Company of Michigan, Inc.,
Continental Satellite Company of Ohio, Inc., Continental Satellite
Company of Virginia, Inc., MediaOne Satellite II, Inc., GE Americom
and John C. Malone, to be entered into at the closing of the
Restructuring Transaction (Incorporated by reference to Exhibit 2.14
to PRIMESTAR, Inc.'s Registration Statement on Form S-4 filed with the
SEC February 9, 1998 (Registration No. 333-45835)).
2.15. Form of Voting Agreement between TWE and Newhouse, to be entered into
at the closing of the Restructuring Transaction (Incorporated by
reference to Exhibit 2.15 to PRIMESTAR, Inc.'s Registration Statement
on Form S-4 filed with the SEC February 9, 1998 (Registration No.
333-45835)).
2.16. Stockholders Agreement dated as of February 6, 1998, among PRIMESTAR,
Inc., TSAT and John C. Malone (Incorporated by reference to Exhibit
2.16 to PRIMESTAR, Inc.'s Registration Statement on Form S-4 filed
with the SEC February 9, 1998 (Registration No. 333-45835)).
2.17. TSAT Tempo Agreement dated as of February 6, 1998, between PRIMESTAR,
Inc. and TSAT (Incorporated by reference to Exhibit 2.17 to PRIMESTAR,
Inc.'s Registration Statement on Form S-4 filed with the SEC February
9, 1998 (Registration No. 333-45835)).
3.1. Form of Restated Certificate of Incorporation of PRIMESTAR, Inc.
(Incorporated by reference to Exhibit 3.1 to PRIMESTAR, Inc.'s
Registration Statement on Form S-4 filed with the SEC February 9, 1998
(Registration No.333-45835)).
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Exhibit
Number Description
3.2. Form of Bylaws of PRIMESTAR, Inc. (Incorporated by reference to
Exhibit 3.2 to PRIMESTAR, Inc.'s Registration Statement on Form S-4
filed with the SEC February 9, 1998 (Registration No. 333-45835)).
4.1. Article VI of the Form of Restated Certificate of Incorporation of
PRIMESTAR, Inc. (Included in Exhibit 3.1).
4.2. Article II, Section 3 of Article III and Article VI of the Form of
By-laws of PRIMESTAR, Inc. (Included in Exhibit 3.2).
4.3. Indenture, dated as of February 20, 1997 between TSAT and The Bank of
New York, as Trustee, with respect to $200 million aggregate principal
amount of 10 7/8% Senior Subordinated Notes due 2007 (Incorporated by
reference to Exhibit 4.3 of TSAT's Annual Report on Form 10-K for the
year ended December 31, 1996 (Commission File No. 0-21317)).
4.4. Indenture, dated as of February 20, 1997 between TSAT and The Bank of
New York, as Trustee, with respect to $275 million aggregate principal
amount at maturity of 12 1/4% Senior Subordinated Discount Notes due
2007 (Incorporated by reference to Exhibit 4.4 of TSAT's Annual Report
on Form 10-K for the year ended December 31, 1996 (Commission File No.
0-21317)).
4.5. Registration Rights Agreement dated as of February 20, 1997 among TSAT
and Donaldson, Lufkin and Jenrette Securities Corporation; Merrill
Lynch, Pierce, Fenner and Smith Incorporated; Nationsbanc Capital
Markets, Inc.; and Scotia Capital Markets (USA) Inc., relating to the
10 7/8% Senior Subordinated Notes due 2007 (Incorporated by reference
to Exhibit 4.5 of TSAT's Annual Report on Form 10-K for the year ended
December 31, 1996 (Commission File No. 0-21317)).
4.6. Registration Rights Agreement dated as of February 20, 1997 among TSAT
and Donaldson, Lufkin and Jenrette Securities Corporation; Merrill
Lynch, Pierce, Fenner and Smith Incorporated; Nationsbanc Capital
Markets, Inc.; and Scotia Capital Markets (USA) Inc., relating to the
12 1/4% Senior Subordinated Discount Notes due 2007 (Incorporated by
reference to Exhibit 4.6 of TSAT's Annual Report on Form 10-K for the
year ended December 31, 1996 (Commission File No. 0-21317)).
103
<PAGE>
Exhibit
Number Description
4.7. Specimen certificate representing shares of Series A Common Stock of
TSAT (Incorporated by reference to TSAT's Registration Statement on
Form 10 filed with the SEC on November 15, 1996 (Commission File No.
0-21317).
4.8 Specimen certificate representing shares of Series B Common Stock of
TSAT (Incorporated by reference to TSAT's Registration Statement on
Form 10 filed with the SEC on November 15, 1996 (Commission File No. 0-
21317).
4.9 Form of Supplemental Indenture between New PRIMESTAR and The Bank of
New York, as Trustee, with respect to $200 million aggregate principal
amount of 10 7/8% Senior Subordinated Notes due 2007, to be executed
upon consummation of the Restructuring Transaction.
4.10. Form of Supplemental Indenture between New PRIMESTAR and The Bank of
New York, as Trustee, with respect to $275 million aggregate principal
amount of 12 1/4% Senior Subordinated Discount Notes due 2007, to be
executed upon consummation of the
4.11 Restructuring Transaction.
4.12 Form of 10 7/8% Senior Subordinated Note (included as Exhibit B to
Exhibit 4.3).
5. Form of 12 1/4% Senior Subordinated Discount Note (included as Exhibit
B to Exhibit 4.4).
Opinion of Baker & Botts, L.L.P., regarding validity of securities
being registered (Previously filed).
12. Statement Re: Computation of ratios.
23.1. Consent of KPMG Peat Marwick LLP with respect to TSAT.
23.2. Consent of Ernst & Young LLP with respect to Time Warner Satellite
Services Group.
23.3. Consent of Deloitte & Touche, LLP with respect to Cox Communications,
Inc.--Direct Broadcast Satellite Business (to be filed by subsequent
Amendment).
23.4. Consent of Deloitte & Touche, LLP with respect to Comcast Satellite
Communications, Inc. and Comcast DBS, Inc. (to be filed by subsequent
Amendment).
23.5. Consent of Deloitte & Touche, LLP with respect to MediaOne,
Inc.--Direct Broadcast Satellite Business (to be filed by subsequent
Amendment).
23.6. Consent of KPMG Peat Marwick LLP with respect to PRIMESTAR, Inc.
23.7. Consent of Price Waterhouse LLP with respect to PRIMESTAR Partners
L.P.
23.8. Consent of Baker & Botts, L.L.P. (Included in Exhibit 5).
104
<PAGE>
Exhibit
Number Description
24. Powers of Attorney (Previously filed).
25. Statement re: eligibility of trustee (Previously filed).
99.1 Form of Transmittal Letter to Holders in connection with the Exchange
Offer.
99.2 Form of Notice Of Guaranteed Delivery.
(b) Financial Statement Schedules. All schedules have been omitted because
they are either not applicable or the required information is set forth in the
applicable financial statements or notes thereto.
Item 22. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(4) The undersigned hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
105
<PAGE>
(b) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(c) The undersigned Registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Englewood, State of
Colorado, on February 13, 1998.
TCI SATELLITE ENTERTAINMENT, INC.
By: /s/ KENNETH G. CARROLL
------------------
Name: Kenneth G. Carroll
Title: Senior Vice President and
Chief Financial Officer
Dated: February 13, 1998
Pursuant to the Securities Exchange Act of 1933, this report has been signed
by the following persons in the capacities and on the dates indicated:
/s/ Gary S. Howard
---------------------------------------
(Gary S. Howard)
President and Chief Executive Officer (Principal
Executive Officer); Director
February 13, 1998
/s/ John C. Malone
---------------------------------------
(John C. Malone)
Director
February 13, 1998
106
<PAGE>
/s/ David P. Beddow
-----------------------------------------
(David P. Beddow)
Director
February 13, 1998
/s/ Kenneth G. Carroll
------------------------------------------
(Kenneth G. Carroll)
Senior Vice President and Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
February 13, 1998
107
<PAGE>
EXHIBIT INDEX
2.1. Merger and Contribution Agreement dated as of February 6, 1998, among TCI
Satellite Entertainment, Inc. ("TSAT"), PRIMESTAR, Inc., Time Warner
Entertainment Company, L.P. ("TWE"), Advance/Newhouse Partnership
("Newhouse"), Comcast Corporation ("Comcast"), Cox Communications,
Inc.("Cox"), MediaOne of Delaware, Inc. ("MediaOne") and GE American
Communications, Inc. ("GE Americom") (Incorporated by reference to
Exhibit 2.1 to PRIMESTAR, Inc.'s Registration Statement on Form S-4 filed
with the SEC on February 9, 1998 (Registration No. 333-45835).
2.2. Asset Transfer Agreement dated as of February 6, 1998, between TSAT and
PRIMESTAR, Inc. (Incorporated by reference to Exhibit 2.2 to PRIMESTAR,
Inc.'s Registration Statement on Form S-4 filed with the SEC on February
9, 1998 (Registration No.333-45835)).
2.3. Asset Acquisition Agreement dated as of June 11, 1998, by and among The
News Corporation Limited ("News Corp."), MCI Telecommunications
Corporation ("MCI"), American Sky Broadcasting LLC ("ASkyB"), PRIMESTAR
Partners L.P. (the "Partnership") for certain purposes only, each of the
general and limited partners of the Partnership (Incorporated by
reference to Exhibit 2.2 of TSAT's Current Report on Form 8-K dated July
1, 1997 (Commission File No. 0-21317)).
2.4. Agreement and Plan of Merger dated as of February 6, 1998, between TSAT
and PRIMESTAR, Inc. (Incorporated by reference to Exhibit 2.4 to
PRIMESTAR, Inc.'s Registration Statement on Form S-4 filed with the SEC
on February 9, 1998 (Registration No.333-45835)).
2.5.* Agreement and Plan of Merger dated as of February 6, 1998, between
PRIMESTAR, Inc. and Comcast DBS, Inc (Incorporated by reference to
Exhibit 2.5 to PRIMESTAR, Inc.'s Registration Statement on Form S-4 filed
with the SEC on February 9, 1998 (Registration No.333-45835)).
2.6.* Asset Transfer Agreement dated as of February 6, 1998, between PRIMESTAR,
Inc. and Newhouse (Incorporated by reference to Exhibit 2.6 to PRIMESTAR,
Inc.'s Registration Statement on Form S-4 filed with the SEC on February
9, 1998 (Registration No. 333-45835)).
2.7. Form of Reimbursement Agreements between PRIMESTAR, Inc. and each of (i)
TWE, (ii) Comcast, (iii) Cox and (iv) MediaOne, each to be entered into
at the closing of the Restructuring Transaction (Incorporated by
reference to Exhibit 2.7 to PRIMESTAR, Inc.'s Registration Statement on
Form S-4 filed with the SEC on February 9, 1998 (Registration No. 333-
45835)).
2.8. Guarantee Agreement dated as of February 6, 1998, by US West Media Group,
Inc. ("US West"), in favor of each of TSAT, PRIMESTAR, Inc., TWE,
Newhouse, Comcast, Cox and GE Americom (Incorporated by reference to
Exhibit 2.8 to PRIMESTAR, Inc.'s Registration Statement on Form S-4 filed
with the SEC on February 9, 1998 (Registration No. 333-45835)).
2.9. Letter Agreement dated as of February 6, 1998, between John C. Malone and
TSAT, PRIMESTAR, Inc., TWE, Newhouse, Comcast, Cox, MediaOne and GE
Americom, for the benefit of TSAT, PRIMESTAR, Inc., TWE, Newhouse,
Comcast, Cox, MediaOne and GE Americom (Incorporated by reference to
Exhibit 2.9 to PRIMESTAR, Inc.'s Registration Statement on Form S-4 filed
with the SEC on February 9, 1998 (Registration No. 333-45835)).
108
<PAGE>
2.10. Voting Agreement dated as of June 12, 1997, among John C. Malone, Time
Warner Cable, a division of TWE, Comcast, TSAT, Cox, MediaOne, Newhouse
and GE Americom (Incorporated by reference to Exhibit 2.10 to PRIMESTAR,
Inc.'s Registration Statement on Form S-4 filed with the SEC on February
9, 1998 (Registration No. 333-45835)).
2.11. Voting Agreement dated as of June 12, 1997, among Donne F. Fisher, as Co-
Personal Representative of the Estate of Bob Magness, Time Warner Cable,
a division of TWE, Comcast, TSAT, Cox, MediaOne, Newhouse and GE Americom
(Incorporated by reference to Exhibit 2.11 to PRIMESTAR, Inc.'s
Registration Statement on Form S-4 filed with the SEC on February 9, 1998
(Registration No. 333-45835)).
2.12. Voting Agreement dated as of June 12, 1997, among TCI, John C. Malone,
Time Warner Cable, a division of TWE, Comcast, TSAT, Cox, MediaOne,
Newhouse and GE Americom (Incorporated by reference to Exhibit 2.12 to
PRIMESTAR, Inc.'s Registration Statement on Form S-4 filed with the SEC
on February 9, 1998 (Registration No. 333-45835)).
2.13. Form of Stockholders Agreement among PRIMESTAR, Inc., TSAT, TWE,
Newhouse, Comcast, Cox, MediaOne, Continental Satellite Company, Inc.,
Continental Satellite Company of Chicago, Inc., Continental Satellite
Company of Minnesota, Inc., Continental Satellite Company of New England,
Inc., Continental Satellite Company of Michigan, Inc., Continental
Satellite Company of Ohio, Inc., Continental Satellite Company of
Virginia, Inc., MediaOne Satellite II, Inc., GE Americom and John C.
Malone, to be entered into at the closing of the Restructuring
Transaction (Incorporated by reference to Exhibit 2.13 to PRIMESTAR,
Inc.'s Registration Statement on Form S-4 filed with the SEC on February
9, 1998 (Registration No. 333-45835)).
2.14. Form of Registration Rights Agreement among PRIMESTAR, Inc., TWE,
Newhouse, Comcast, Cox, MediaOne, Continental Satellite Company, Inc.,
Continental Satellite Company of Chicago, Inc., Continental Satellite
Company of Minnesota, Inc., Continental Satellite Company of New England,
Inc., Continental Satellite Company of Michigan, Inc., Continental
Satellite Company of Ohio, Inc., Continental Satellite Company of
Virginia, Inc., MediaOne Satellite II, Inc., GE Americom and John C.
Malone, to be entered into at the closing of the Restructuring
Transaction (Incorporated by reference to Exhibit 2.14 to PRIMESTAR,
Inc.'s Registration Statement on Form S-4 filed with the SEC on February
9, 1998 (Registration No.333-45835)).
2.15. Form of Voting Agreement between TWE and Newhouse, to be entered into at
the closing of the Restructuring Transaction (Incorporated by reference
to Exhibit 2.15 to PRIMESTAR, Inc.'s Registration Statement on Form S-4
filed with the SEC on February 9, 1998 (Registration No. 333-45835)).
2.16. Stockholders Agreement dated as of February 6, 1998, among PRIMESTAR,
Inc., TSAT and John C. Malone (Incorporated by reference to Exhibit 2.16
to PRIMESTAR, Inc.'s Registration Statement on Form S-4 filed with the
SEC on February 9, 1998 (Registration No. 333-45835)).
2.17. The TSAT Tempo Agreement dated as of February 6, 1998, between PRIMESTAR,
Inc. and TSAT (Incorporated by reference to Exhibit 2.17 to PRIMESTAR,
Inc.'s Registration Statement on Form S-4 filed with the SEC on February
9, 1998 (Registration No. 333-45835)).
3.1. Form of Restated Certificate of Incorporation of PRIMESTAR, Inc.
(Incorporated by reference to Exhibit 3.1 to PRIMESTAR, Inc.'s
Registration Statement on Form S-4 filed with the SEC on February 9, 1998
(Registration No. 333-45835)).
109
<PAGE>
3.2. Form of Bylaws of PRIMESTAR, Inc. (Incorporated by reference to Exhibit
3.2 to PRIMESTAR, Inc.'s Registration Statement on Form S-4 filed with
the SEC on February 9, 1998 (Registration No. 333-45835)).
4.1. Article VI of the Form of Restated Certificate of Incorporation of
PRIMESTAR, Inc. (Included in Exhibit 3.1).
4.2. Article II, Section 3 of Article III and Article VI of the Form of By-
laws of PRIMESTAR, Inc. (Included in Exhibit 3.2).
4.3. Indenture, dated as of February 20, 1997 between TSAT and The Bank of New
York, as Trustee, with respect to $200 million aggregate principal amount
of 10 7/8% Senior Subordinated Notes due 2007 (Incorporated by reference
to Exhibit 4.3 of TSAT's Annual Report on Form 10-K for the year ended
December 31, 1996 (Commission File No. 0-21317)).
4.4. Indenture, dated as of February 20, 1997 between TSAT and The Bank of New
York, as Trustee, with respect to $275 million aggregate principal amount
at maturity of 12 1/4% Senior Subordinated Discount Notes due 2007
(Incorporated by reference to Exhibit 4.4 of TSAT's Annual Report on Form
10-K for the year ended December 31, 1996 (Commission File No. 0-21317)).
4.5. Registration Rights Agreement dated as of February 20, 1997 among TSAT
and Donaldson, Lufkin and Jenrette Securities Corporation; Merrill Lynch,
Pierce, Fenner and Smith Incorporated; Nationsbanc Capital Markets, Inc.;
and Scotia Capital Markets (USA) Inc., relating to the 10% Senior
Subordinated Notes due 2007 (Incorporated by reference to Exhibit 4.5 of
TSAT's Annual Report on Form 10-K for the year ended December 31, 1996
(Commission File No. 0-21317)).
4.6. Registration Rights Agreement dated as of February 20, 1997 among TSAT
and Donaldson, Lufkin and Jenrette Securities Corporation; Merrill Lynch,
Pierce, Fenner and Smith Incorporated; Nationsbanc Capital Markets, Inc.;
and Scotia Capital Markets (USA) Inc., relating to the 12 1/4% Senior
Subordinated Discount Notes due 2007 (Incorporated by reference to
Exhibit 4.6 of TSAT's Annual Report on Form 10-K for the year ended
December 31, 1996 (Commission File No. 0-21317)).
4.7. Specimen certificate representing shares of Series A Common Stock of TSAT
(Incorporated by reference to TSAT's Registration Statement on Form 10
filed with the SEC on November 15, 1996 (Commission No. 0-21317).
4.8. Specimen certificate representing shares of Series B Common Stock of TSAT
(Incorporated by reference to TSAT's Registration Statement on Form 10
filed with the SEC on November 15, 1996 (Commission No. 0-21317).
4.9. Form of Supplemental Indenture between New PRIMESTAR and The Bank of New
York, as Trustee, with respect to $200 million aggregate principal amount
of 10% Senior Subordinated Notes due 2007, to be executed upon
consummation of the Restructuring Transaction.
4.10. Form of Supplemental Indenture between New PRIMESTAR and The Bank of New
York, as Trustee, with respect to $275 million aggregate principal amount
of 12 1/4% Senior Subordinated Discount Notes due 2007, to be executed
upon consummation of the Restructuring Transaction.
4.11. Form of 10% Senior Subordinated Note (included as Exhibit B to Exhibit
4.3).
4.12. Form of 12 1/4% Senior Subordinated Discount Note (included as Exhibit B
to Exhibit 4.4).
110
<PAGE>
5. Opinion of Baker & Botts, L.L.P., regarding validity of securities being
registered (Previously filed).
12. Statement Re: Computation of ratios.
23.1. Consent of KPMG Peat Marwick LLP with respect to TSAT.
23.2. Consent of Ernst & Young LLP with respect to Time Warner Satellite
Services Group.
23.3. Consent of Deloitte & Touche, LLP with respect to Cox Communications,
Inc.--Direct Broadcast Satellite Business (to be filed by subsequent
Amendment).
23.4. Consent of Deloitte & Touche, LLP with respect to Comcast Satellite
Communications, Inc. and Comcast DBS, Inc (to be filed by subsequent
Amendment).
23.5. Consent of Deloitte & Touche, LLP with respect to MediaOne, Inc.--Direct
Broadcast Satellite Business (to be filed by subsequent Amendment).
23.6. Consent of KPMG Peat Marwick LLP with respect to PRIMESTAR, Inc.
23.7. Consent of Price Waterhouse LLP with respect to PRIMESTAR Partners L.P.
23.8. Consent of Baker & Botts, L.L.P. (Included in Exhibit 5).
24. Powers of Attorney (Previously filed).
25. Statement re: eligibility of trustee (Previously filed).
99.1. Form of Transmittal Letter to Holders in connection with the Exchange
Offer.
99.2. Form of Notice Of Guaranteed Delivery.
111
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================================================================================
- --------------------------------------------------------------------------------
PRIMESTAR, INC.
Issuer
$200,000,000
10 7/8% Senior Subordinated Notes
due February 15, 2007
FIRST SUPPLEMENTAL INDENTURE
Dated as of March __, 1998
THE BANK OF NEW YORK,
Trustee
================================================================================
- --------------------------------------------------------------------------------
<PAGE>
FIRST SUPPLEMENTAL INDENTURE
----------------------------
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of March __, 1998, between
PRIMESTAR, Inc., a Delaware corporation ("New PRIMESTAR"), and THE BANK OF NEW
YORK, a New York banking corporation, as trustee (the "Trustee").
Intending to be legally bound hereby, each of the parties agrees as
follows for the benefit of the other parties and for the equal and ratable
benefit of Holders of TCI Satellite's 10% Senior Subordinated Notes due
February 15, 2007 (the "Securities"):
WHEREAS, TCI Satellite, Inc., a Delaware corporation ("TCI
Satellite"), and the Trustee are parties to that certain Indenture, dated as of
February 20, 1997 (the "Indenture"), pursuant to which the Securities were
issued; and
WHEREAS, TCI Satellite and New PRIMESTAR have entered into an Asset
Transfer Agreement, dated as of February 6, 1998, pursuant to which, among other
things, the TCI Satellite shall transfer substantially all of its assets to New
PRIMESTAR (the "Asset Transfer"); and
WHEREAS, New PRIMESTAR now elects to assume all of the obligations of
TCI Satellite arising under the Indenture and the Securities, including, without
limitation, the due and punctual payment of all principal of, premium, if any,
interest on, and the performance and observance of every covenant of the
Indenture; and
WHEREAS, Section 5.01 of the Indenture provides that TCI Satellite
shall not consolidate with, merge with or into or sell, convey, assign,
transfer, lease or otherwise dispose of all or substantially all of its assets
to any entity in a single transaction or series of related
<PAGE>
transactions, unless (i) the Surviving Company (if other than TCI Satellite) is
a corporation organized and validly existing under the laws of the United States
of America or any State thereof or the District of Columbia, (ii) the Surviving
Company expressly assumes, by a supplemental indenture, executed and delivered
to the Trustee, in a form satisfactory to the Trustee, the due and punctual
payment of the principal of, premium, if any, and interest on all the Securities
and the performance and observance of every covenant of the Indenture to be
performed or observed on the part of TCI Satellite, (iii) immediately after
giving effect to such transaction, no Default or no Event of Default shall have
occurred and be continuing and (iv) immediately after giving effect to any such
transaction involving the Incurrence by TCI Satellite or any Restricted
Subsidiary, directly or indirectly, of additional Indebtedness (and treating any
Indebtedness not previously an obligation of TCI Satellite or any Restricted
Subsidiary in connection with or as a result of such transaction as having been
Incurred at the time of such transaction), the Surviving Person could Incur, on
a pro forma basis after giving effect to such transaction as if it had occurred
at the beginning of the latest fiscal quarter for which consolidated financial
statements of TCI Satellite are available, at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under the Debt to Operating
Cash Flow Ratio of the first paragraph of Section 4.04 of the Indenture; and
WHEREAS, Section 5.02 of the Indenture provides that upon any
consolidation or merger, or any sale, lease or transfer of all or substantially
all of the assets of TCI Satellite, the successor person formed by such
consolidation or into which TCI Satellite is merged or the person to which such
sale, lease or transfer is made shall succeed to, and be substituted for, and
may exercise every right and power of TCI Satellite under the Indenture with the
same effect as if such
-2-
<PAGE>
successor had been named as an Issuer under the Indenture, and TCI Satellite
shall be discharged from its Obligations under the Indenture; and
WHEREAS, in accordance with the requirements of Section 5.01, New
PRIMESTAR is a corporation organized and existing under the laws of the State of
Delaware, immediately after giving effect to the transaction, no Default and no
Event of Default has occurred and is continuing and all of the other conditions
precedent set forth in Section 5.01 have been satisfied with respect to the
Asset Transfer; and
WHEREAS, capitalized terms used herein and not otherwise defined
herein shall have the definitions ascribed to such terms in the Indenture;
NOW, THEREFORE, in consideration of these premises and for other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, New PRIMESTAR agrees as follows for the benefit of the Trustee and
the Holders of the Securities, and hereby amends and supplements the Indenture
as follows:
1. In accordance with the provisions of Article Five of the
Indenture, New PRIMESTAR hereby assumes all of the Obligations of TCI Satellite
as an Issuer under the Indenture and under the Securities, including, without
limitation, TCI Satellite's obligation to make the due and punctual payment of
all principal of, premium, if any, interest on, and fees with respect to, the
Securities, and the term "Issuer" in the Indenture shall mean New PRIMESTAR.
2. Upon the execution and delivery of this First Supplemental
Indenture, the Indenture shall be modified to reflect the substitution of New
PRIMESTAR for TCI Satellite as the Issuer under the Indenture in accordance
herewith, and this First Supplemental Indenture shall
-3-
<PAGE>
form a part of the Indenture for all purposes, and every Holder of Securities
heretofore or hereinafter authenticated and delivered hereunder shall be bound
by the Indenture, as so modified.
3. Except to the extent amended by or inconsistent with this First
Supplemental Indenture, New PRIMESTAR, as the Issuer, and the Trustee hereby
ratify and reconfirm the Indenture in its entirety.
4. This First Supplemental Indenture may be executed in any number
of counterparts, each of which so executed shall be an original, but all such
counterparts shall together constitute but one and the same instrument.
5. The Trustee shall be authorized to place on the face or reverse
side of each certificate representing the Securities the following legend, which
legend may be imprinted on the certificates or set forth thereon by sticker,
stamp or otherwise:
"Effective March ___, 1998, PRIMESTAR, Inc., a Delaware corporation,
assumed all obligations of TCI Satellite, Inc. under the 10 % Senior
Subordinated Notes due February 15, 1998 of TCI Satellite, Inc."
6. The laws of the State of New York shall govern the construction
and interpretation of this First Supplemental Indenture, without regard to any
otherwise applicable principles of conflicts of laws.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto executed this First
Supplemental Indenture as of the date first above written.
PRIMESTAR, INC.
Attest:
By:
- ----------------------------- -------------------------------
Name: Name:
Title: Secretary Title:
THE BANK OF NEW YORK, as Trustee
Attest:
By:
- ----------------------------- -------------------------------
Name: Name:
Title: Title:
-5-
<PAGE>
================================================================================
PRIMESTAR, INC.
Issuer
$275,000,000
12 1/4% Senior Subordinated Discount Notes
due February 15, 2007
FIRST SUPPLEMENTAL INDENTURE
Dated as of March __, 1998
THE BANK OF NEW YORK,
Trustee
================================================================================
<PAGE>
FIRST SUPPLEMENTAL INDENTURE
----------------------------
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of March __, 1998, between
PRIMESTAR, Inc., a Delaware corporation ("New PRIMESTAR"), and THE BANK OF NEW
YORK, a New York banking corporation, as trustee (the "Trustee").
Intending to be legally bound hereby, each of the parties agrees as
follows for the benefit of the other parties and for the equal and ratable
benefit of Holders of TCI Satellite's 12 1/4% Senior Subordinated Discount Notes
due February 15, 2007 (the "Securities"):
WHEREAS, TCI Satellite, Inc., a Delaware corporation ("TCI
Satellite"), and the Trustee are parties to that certain Indenture, dated as of
February 20, 1997 (the "Indenture"), pursuant to which the Securities were
issued; and
WHEREAS, TCI Satellite and New PRIMESTAR have entered into an Asset
Transfer Agreement, dated as of February 6, 1998, pursuant to which, among other
things, the TCI Satellite shall transfer substantially all of its assets to New
PRIMESTAR (the "Asset Transfer"); and
WHEREAS, New PRIMESTAR now elects to assume all of the obligations of
TCI Satellite arising under the Indenture and the Securities, including, without
limitation, the due and punctual payment of all principal of, premium, if any,
interest on, and the performance and observance of every covenant of the
Indenture; and
WHEREAS, Section 5.01 of the Indenture provides that TCI Satellite
shall not consolidate with, merge with or into or sell, convey, assign,
transfer, lease or otherwise dispose of all or substantially all of its assets
to any entity in a single transaction or series of related
<PAGE>
transactions, unless (i) the Surviving Company (if other than TCI Satellite) is
a corporation organized and validly existing under the laws of the United States
of America or any State thereof or the District of Columbia, (ii) the Surviving
Company expressly assumes, by a supplemental indenture, executed and delivered
to the Trustee, in a form satisfactory to the Trustee, the due and punctual
payment of the principal of, premium, if any, and interest on all the Securities
and the performance and observance of every covenant of the Indenture to be
performed or observed on the part of TCI Satellite, (iii) immediately after
giving effect to such transaction, no Default or no Event of Default shall have
occurred and be continuing and (iv) immediately after giving effect to any such
transaction involving the Incurrence by TCI Satellite or any Restricted
Subsidiary, directly or indirectly, of additional Indebtedness (and treating any
Indebtedness not previously an obligation of TCI Satellite or any Restricted
Subsidiary in connection with or as a result of such transaction as having been
Incurred at the time of such transaction), the Surviving Person could Incur, on
a pro forma basis after giving effect to such transaction as if it had occurred
at the beginning of the latest fiscal quarter for which consolidated financial
statements of TCI Satellite are available, at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under the Debt to Operating
Cash Flow Ratio of the first paragraph of Section 4.04 of the Indenture; and
WHEREAS, Section 5.02 of the Indenture provides that upon any
consolidation or merger, or any sale, lease or transfer of all or substantially
all of the assets of TCI Satellite, the successor person formed by such
consolidation or into which TCI Satellite is merged or the person to which such
sale, lease or transfer is made shall succeed to, and be substituted for, and
may exercise every right and power of TCI Satellite under the Indenture with the
same effect as if such
-2-
<PAGE>
successor had been named as an Issuer under the Indenture, and TCI Satellite
shall be discharged from its Obligations under the Indenture; and
WHEREAS, in accordance with the requirements of Section 5.01, New
PRIMESTAR is a corporation organized and existing under the laws of the State of
Delaware, immediately after giving effect to the transaction, no Default and no
Event of Default has occurred and is continuing and all of the other conditions
precedent set forth in Section 5.01 have been satisfied with respect to the
Asset Transfer; and
WHEREAS, capitalized terms used herein and not otherwise defined
herein shall have the definitions ascribed to such terms in the Indenture;
NOW, THEREFORE, in consideration of these premises and for other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, New PRIMESTAR agrees as follows for the benefit of the Trustee and
the Holders of the Securities, and hereby amends and supplements the Indenture
as follows:
1. In accordance with the provisions of Article Five of the
Indenture, New PRIMESTAR hereby assumes all of the Obligations of TCI Satellite
as an Issuer under the Indenture and under the Securities, including, without
limitation, TCI Satellite's obligation to make the due and punctual payment of
all principal of, premium, if any, interest on, and fees with respect to, the
Securities, and the term "Issuer" in the Indenture shall mean New PRIMESTAR.
2. Upon the execution and delivery of this First Supplemental
Indenture, the Indenture shall be modified to reflect the substitution of New
PRIMESTAR for TCI Satellite as the Issuer under the Indenture in accordance
herewith, and this First Supplemental Indenture shall
-3-
<PAGE>
form a part of the Indenture for all purposes, and every Holder of Securities
heretofore or hereinafter authenticated and delivered hereunder shall be bound
by the Indenture, as so modified.
3. Except to the extent amended by or inconsistent with this First
Supplemental Indenture, New PRIMESTAR, as the Issuer, and the Trustee hereby
ratify and reconfirm the Indenture in its entirety.
4. This First Supplemental Indenture may be executed in any number
of counterparts, each of which so executed shall be an original, but all such
counterparts shall together constitute but one and the same instrument.
5. The Trustee shall be authorized to place on the face or reverse
side of each certificate representing the Securities the following legend, which
legend may be imprinted on the certificates or set forth thereon by sticker,
stamp or otherwise:
"Effective March ___, 1998, PRIMESTAR, Inc., a Delaware corporation,
assumed all obligations of TCI Satellite, Inc. under the 12 1/4%
Senior Subordinated Notes due February 15, 1998 of TCI Satellite,
Inc."
6. The laws of the State of New York shall govern the construction
and interpretation of this First Supplemental Indenture, without regard to any
otherwise applicable principles of conflicts of laws.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto executed this First
Supplemental Indenture as of the date first above written.
PRIMESTAR, INC.
Attest:
By:
- ---------------------------- ----------------------------------
Name: Name:
Title: Secretary Title:
THE BANK OF NEW YORK, as Trustee
Attest:
By:
- ---------------------------- ----------------------------------
Name: Name:
Title: Title:
-5-
<PAGE>
Exhibit 12
TCI SATELLITE ENTERTAINMENT, INC.
Calculation of Ratios of Earnings to Fixed Charges
(amounts in thousands, except for ratios)
(unaudited)
<TABLE>
<CAPTION>
Years ended December 31,
Nine Months Ended ------------------------------------------------
September 30, 1997 1996 1995 1994 1993 1992
-------------------- ---------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Loss before income taxes. $ (166,544) (185,941) (69,365) (20,560) (7,339) (4,818)
Add:
Interest on debt. 40,454 10,498 9,888 3,374 -- --
Interest portion of rentals. 572 698 419 8 -- --
--------------------- ---------- -------- -------- ------- -------
Loss before deducting fixed (174,745) (59,058) (17,178) (7,339) (4,818)
charges. $ (125,518)
===================== ========== ======== ======== ======= =======
Fixed charges:
Interest on debt. $ 33,965 77
Interest expense from TCI -- 1,946 -- -- -- --
Communications, Inc.
Less than 50%-owned affiliates
with debt for which TCI
Satellite Entertainment, Inc. is
contingently obligated (1). 6,489 8,475 9,888 3,374 -- --
--------------------- ---------- -------- --------
40,454
10,498 9,888 3,374 -- --
Interest portion of rentals. 572 698 419 8 -- --
Total fixed charges. $ 41,026 11,196 10,307 3,382 -- --
===================== ========== ======== ========
Ratio of earnings to fixed charges. -- -- -- -- -- --
===================== ========== ======== ======== ======= =======
Deficiency. $ (166,544) $(185,941) (69,365) (20,560) (7,339) (4,818)
===================== ========== ======== ======== ======= =======
</TABLE>
(1) TCI Satellite Entertainment, Inc. has agreed to reimburse TCI UA 1, Inc.,
an indirect consolidated subsidiary of TCI Communications, Inc., for any amounts
drawn under an irrevocable transferrable letter of credit issued for the account
of TCI UA 1, Inc., which supports a credit facility of a less than 50%-owned
affiliate of TCI Satellite Entertainment, Inc. Fixed charges related to such
agreement of $8,475,000, $9,888,000 and $3,374,000 for the years ended December
31, 1996, 1995 and 1994, respectively, have been included in fixed charges.
<PAGE>
Consent of Independent Auditors
The Board of Directors
PRIMESTAR, Inc.:
We consent to the use of our report dated February 6, 1998 incorporated herein
by reference and to the reference to our firm under the heading "Experts" in the
prospectus.
KPMG Peat Marwick LLP
Denver, Colorado
February 11, 1998
<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in Amendment
No. 1 to Registration Statement No. 333-25001 on Form S-4 and related Prospectus
of TCI Satellite Entertainment, Inc. ("TSAT"), and to the incorporation by
reference therein of our report dated August 25, 1997, with respect to the
financial statements of Time Warner Satellite Services Group from TSAT's Current
Report on Form 8-K dated February 11, 1998, filed with the Securities and
Exchange Commission.
ERNST & YOUNG LLP
New York, New York
February 12, 1998
<PAGE>
Consent of Independent Auditors
The Board of Directors
TCI Satellite Entertainment, Inc.:
We consent to the use of our report dated March 25, 1997 incorporated herein by
reference and to the reference to our firm under the heading "Experts" in the
prospectus.
KPMG Peat Marwick LLP
Denver, Colorado
February 11, 1998
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Amendment 1 to Form S-4 to
TCI Satellite Entertainment, Inc. of our report dated February 14, 1997, except
as to the subsequent events described in Note 13 which are as of March 9, 1997,
relating to the financial statements of PRIMESTAR Partners, L.P., which appears
in Form 8-K. We also consent to the reference to us under the heading "Experts"
in such Prospectus.
PRICE WATERHOUSE LLP
Philadelphia, Pennsylvania
February 12, 1998
<PAGE>
FORM OF
LETTER OF TRANSMITTAL
TCI SATELLITE, INC.
Offer to Exchange (i) the 10 7/8% Senior Subordinated Notes Due February 15,
2005 for any and all of the outstanding
10 7/8% Senior Subordinated Notes due February 15, 2007
and
(ii) the 12 1/4% Senior Subordinated Discount Notes Due February 15, 2007
for any and all of the outstanding
12 1/4% Senior Subordinated Discount Notes Due February 15, 2007
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON MARCH __, 1998
UNLESS THE OFFER IS EXTENDED
- --------------------------------------------------------------------------------
To The Bank of New York
(the "Exchange Agent")
By Registered or Certified Mail: By Overnight Mail or Courier Service:
The Bank of New York The Bank of New York
101 Barclay Street, 7E 101 Barclay Street
New York, N.Y. 10286 Corporate Trust Services Window
Ground Level
Attention: Reorganization Section
New York, N.Y. 10286
In Person By Hand: By Facsimile Transmission
The Bank of New York (For Eligible Institutions Only):
101 Barclay Street The Bank of New York
Corporate Trust Services Window (212) 815-5915
Ground Level Confirm: (212) 815-5375
Attention: Reorganization Window
New York, N.Y.
Delivery of this instrument to an address other than as set forth
above or transmission of instructions via a facsimile number other than the ones
listed above will not constitute a valid delivery. The instructions
accompanying this Letter of Transmittal should be read carefully before this
Letter of Transmittal is completed.
The undersigned hereby acknowledges receipt of the Prospectus dated
February __, 1998 (the "Prospectus") of TCI Satellite, Inc.(the "Issuer") and
this Letter of Transmittal, which together constitute the Issuer's offer (the
"Exchange Offer") to exchange (i) $1,000 principal
<PAGE>
amount of its 10 7/8% Senior Subordinated Notes due February 15, 2007 (the
"Senior Subordinated Exchange Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement (the "Registration Statement") of which the Prospectus is
a part, for each $1,000 principal amount of its outstanding 10 7/8% Senior
Subordinated Notes due February 15, 2007 (the "Senior Subordinated Notes"), and
(ii) $1,000 principal amount of its 12 1/4% Senior Subordinated Discount Notes
due February 15, 2007 (the "Senior Subordinated Discount Exchange Notes" and
together with the Senior Subordinated Exchange Notes, the "Exchange Notes"),
which have been registered under the Securities Act, pursuant to the
Registration Statement, for each $1,000 principal amount of its outstanding
12 1/4% Senior Subordinated Discount Notes due February 15, 2007 (the "Senior
Subordinated Discount Notes" and together with the Senior Subordinated Notes,
the "Notes"). The term "Expiration Date" shall mean 5:00 p.m., New York City
time, on March __, 1998, unless the Issuer, in its reasonable judgment, extend
the Exchange Offer, in which case the term shall mean the latest date and time
to which the Exchange Offer is extended. Capitalized terms used but not defined
herein have the meaning given to them in the Prospectus.
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE
INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the notes to which this Letter of Transmittal relates. If
the space indicated below is inadequate, the Certificate or Registration Numbers
and Principal Amounts should be listed on a separately signed schedule affixed
hereto.
================================================================================
DESCRIPTION OF NOTES TENDERED HEREBY
- --------------------------------------------------------------------------------
Certificate
Name(s) and Address(es) of or Aggregate Principal Principal
Registered Holder(s) Registration Amount Amount
(Please fill in) Numbers* Represented by Notes Tendered**
- --------------------------------------------------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
Total
================================================================================
* Need not be completed by book-entry Holders.
** Unless otherwise indicated, the Holder will be deemed to have tendered the
full aggregate principal amount represented by such Notes. All tenders must
be in integral multiples of $1,000.
-2-
<PAGE>
This Letter of Transmittal is to be used (i) if certificates of Notes
are to be forwarded herewith, (ii) if delivery of Notes is to be made by book-
entry transfer to an account maintained by the Exchange Agent at The Depository
Trust Company, pursuant to the procedures set forth in "The Exchange Offer--
Procedures for Tendering" in the Prospectus or (iii) tender of the Notes is to
be made according to the guaranteed delivery procedures described in the
Prospectus under the caption "The Exchange Offer--Guaranteed Delivery
Procedures." See Instruction 2. Delivery of documents to a book-entry transfer
facility does not constitute delivery to the Exchange Agent.
The term "Holder" with respect to the Exchange Offer means any person
in whose name Notes are registered on the books of the Issuer or any other
person who has obtained a properly completed bond power from the registered
holder. The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Notes must complete
this letter in its entirely.
[_] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
--------------------------------------------------
[_] The Depository Trust Company
Account Number
-----------------------------------------------------------------
Transaction Code Number
--------------------------------------------------------
Holders whose Notes are not immediately available or who cannot
deliver their Notes and all other documents required hereby to the Exchange
Agent on or prior to the Expiration Date must tender their Notes according to
the guaranteed delivery procedure set forth in the Prospectus under the caption
"The Exchange Offer--Guaranteed Delivery Procedures." See Instruction 2.
[_] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)
---------------------------------------------------
Name of Eligible Institution that Guaranteed Delivery
--------------------------
If delivered by book-entry transfer:
Account Number
------------------------------------------------------------
Transaction Code Number
---------------------------------------------------
-3-
<PAGE>
[_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name
---------------------------------------------------------------------------
Address
------------------------------------------------------------------------
-4-
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer,
the undersigned hereby tenders to the Issuers the principal amount of the Notes
indicated above. Subject to, and effective upon, the acceptance for exchange of
such Notes tendered hereby, the undersigned hereby exchanges, assigns and
transfers to, or upon the order of, the Issuer all right, title and interest in
and to such Notes as are being tendered hereby, including all rights to accrued
and unpaid interest thereon as of the Expiration Date. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent the true and lawful
agent and attorney-in-fact of the undersigned (with full knowledge that said
Exchange Agent acts as the agent of the Issuer in connection with the Exchange
Offer) to cause the Notes to be assigned, transferred and exchanged. The
undersigned represents and warrants that it has full power and authority to
tender, exchange, assign and transfer the Notes and to acquire Exchange Notes
issuable upon the exchange of such tendered Notes, and that when the same are
accepted for exchange, the Issuer will acquire good and unencumbered title to
the tendered Notes, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim.
The undersigned represents to the Issuer that (i) the Exchange Notes
acquired pursuant to the Exchange Offer are being obtained in the ordinary
course of business of the person receiving such Exchange Notes, whether or not
such person is the undersigned, and (ii) neither the undersigned nor any such
other person has an arrangement or understanding with any person to participate
in the distribution of such Exchange Notes. If the undersigned or the person
receiving the Exchange Notes covered hereby is a broker-dealer that is receiving
the Exchange Notes for its own account in exchange for Notes that were acquired
as a result of market-making activities or other trading activities, the
undersigned acknowledges that it or such other person will deliver a prospectus
in connection with any resale of such Exchange Notes; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The undersigned and any such other person acknowledge that, if they are
participating in the Exchange Offer for the purpose of distributing the Exchange
Notes, (i) they cannot rely on the position of the staff of the Securities and
Exchange Commission enunciated in Exxon Capital Holdings Corporation (available
April 13, 1989), Morgan Stanley & Co., Inc. (available June 5, 1991) or similar
no-action letters and, in the absence of an exemption therefrom, must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with the resale transaction and (ii) failure to comply with such
requirements in such instance could result in the undersigned or any such other
person incurring liability under the Securities Act for which such persons are
not indemnified by the Issuer. If the undersigned or the person receiving the
Exchange Notes covered by this letter is an affiliate (as defined under Rule 405
of the Securities Act) of the Issuer, the undersigned represents to the Issuer
that the undersigned understands and acknowledges that such Exchange Notes may
not be offered for resale, resold or otherwise transferred by the undersigned or
such other person without registration under the Securities Act or an exemption
therefrom.
-5-
<PAGE>
The undersigned also warrants that it will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Issuer to
be necessary or desirable to complete the exchange, assignment and transfer of
tendered Notes or transfer ownership of such Notes on the account books
maintained by a book-entry transfer facility. The undersigned further agrees
that acceptance of any tendered Notes by the Issuer and the issuance of Exchange
Notes in exchange therefor shall constitute performance in full by the Issuer of
its obligations under the Registration Rights Agreement and that the Issuer
shall have no further obligations or liabilities thereunder for the registration
of the Notes or the Exchange Notes.
The Exchange Offer is subject to certain conditions set forth in the
Prospectus under the caption "The Exchange Offer--Conditions." The undersigned
recognizes that as a result of these conditions (which may be waived, in whole
or in part, by the Issuer), as more particularly set forth in the Prospectus,
the Issuer may not be required to exchange any of the Notes tendered hereby and,
in such event, the Notes not exchanged will be returned to the undersigned at
the address shown below the signature of the undersigned.
All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned. Tendered Notes may be withdrawn at
any time prior to the Expiration Date.
Unless otherwise indicated in the box entitled "Special Registration
Instructions" or the box entitled "Special Delivery Instruction" in this Letter
of Transmittal, certificates for all Exchange Notes delivered in exchange for
tendered Notes, and any Notes delivered herewith but not exchanged, will be
registered in the name of the undersigned and shall be delivered to the
undersigned at the address shown below the signature of the undersigned. If an
Exchange Note is to be issued to a person other than the person(s) signing this
Letter of Transmittal, or if the Exchange Note is to be mailed to someone other
than the person(s) signing this Letter of Transmittal or to the person(s)
signing this Letter of Transmittal at an address different from the address
shown on this Letter of Transmittal, the appropriate boxes of this Letter of
Transmittal should be completed. If Notes are surrendered by Holder(s) that
have completed either the box entitled "Special Registration Instructions" or
the box entitled "Special Delivery Instructions" in this Letter of Transmittal,
signature(s) on this Letter of Transmittal must be guaranteed by an Eligible
Institution (defined in Instruction 4).
-6-
<PAGE>
================================================================================
Special Registration Instructions
To be completed ONLY if the Exchange Notes are to be issued in the name of
someone other than the undersigned. Issue Exchange Note to:
Name:
-----------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Book-Entry Transfer Facility Account:
------------------------------------------
Employer Identification or Social Security No.:
---------------------------------
(Please print or type)
================================================================================
Special Delivery Instructions
To be completed ONLY if the Exchange Notes are to be sent to someone other
than the undersigned, or to the undersigned at an address other than that shown
under "Description of Notes Tendered Hereby." Mail Exchange Note to:
Name:
-----------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
(Please print or type)
================================================================================
Registered Holder(s) of Notes Sign Here
(In addition, complete Substitute Form W-9 Below)
X
------------------------------------------------------------------------------
X
------------------------------------------------------------------------------
(Signature(s) of Registered Holder(s))
Must be signed by registered holder(s) exactly as name(s) appear(s) on the
Notes or on a security position listing as the owner of the Notes or by
person(s) authorized to become registered holder(s) by properly completed bond
powers transmitted herewith. If signature is by attorney-in-fact, trustee,
executor, administrator, guardian, officer of a corporation or other person
acting in a fiduciary capacity, please provide the following information.
(Please print or type):
Name and Capacity (full title):
------------------------------------------------
Address (including zip code):
------------------------------------------------
------------------------------------------------
Area Code and Telephone Number:
------------------------------------------------
Taxpayer Identification or Social Security No.:
--------------------------------
Dated:
--------------------
Signature Guarantee (If required - See Instruction 4)
Authorized Signature:
-----------------------------------------------------------
(Signature of Representative of Signature Guarantor)
Name and Title:
-----------------------------------------------------------------
Name of Firm:
-------------------------------------------------------------------
Area Code and Telephone Number:
------------------------------------------------
(Please print or type)
Dated:
--------------------
================================================================================
-7-
<PAGE>
Payor's Name: TCI SATELLITE, INC.
This Substitute Form W-9 Must Be Completed and Signed
Please provide your social security number or other taxpayer identification
number on the following Substitute Form W-9 and certify therein that you are
subject to backup withholding.
<TABLE>
==============================================================================================================
<S> <C> <C>
Substitute Part 1 - Please provide your TIN in the box at
Form W-9 right and certify by signing and dating below.
Department of the Treasury ---------------
Internal Revenue Service SOCIAL SECURITY
Part 2 - Check the box if you are not subject to NUMBER OR
backup withholding under the provisions of section EMPLOYER
3406(a)(1)(C) of the Internal Revenue Code because IDENTIFICATION
(1) you are exempt from backup withholding, (2) NUMBER
you have not been notified that you are subject to
backup withholding as a result of failure to
report all interest or dividends or (3) the
Internal Revenue Service has notified you that you
are no longer subject to backup withholding. [_]
---------------------------------------------------------------------------------
Certification: Under the penalties of perjury, I
certify that the information provided on this form
is true, correct and complete.
Signature:
Payor's Request for ---------------------- PART 3
Taxpayer Identification Dated: AWAITING TIN [_]
Number ("TIN") --------------------------------- ----------
- --------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY CASH
PAYMENTS IN EXCESS OF $10.00 MADE TO YOU.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAX IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has not been issued to me,
and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the
appropriate Internal Revenue Service Center or Social Security Administration Office, or (b) I intend to
mail or deliver an application in the near future. I understand that if I do not provide a taxpayer
identification number within 60 days, 31% of all reportable payments made to me thereafter will be withheld
until I provide a number.
- ------------------------------------------------ ------------------------------------------
Signature Date
==============================================================================================================
</TABLE>
-8-
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Certificates.
All physically delivered Notes or confirmation of any book-entry
transfer to the Exchange Agent's account at a book-entry transfer facility of
Notes tendered by book-entry transfer, as well as a properly completed and duly
executed copy of this Letter of Transmittal or facsimile thereof, and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at any of its addresses set forth herein on or prior to the
Expiration Date (as defined in the Prospectus). The method of delivery of this
Letter of Transmittal, the Notes and any other required documents is at the
election and risk of the Holder, and except as otherwise provided below, the
delivery will be deemed made only when actually received by the Exchange Agent.
Instead of Delivery by mail, it is recommended that Holders use an overnight or
hand delivery service. In all cases, sufficient time should be allowed to
assure delivery to the Exchange Agent before the Expiration Date.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Notes for exchange.
Delivery to an address other than as set forth herein, or instructions via a
facsimile number other than the ones set forth herein, will not constitute a
valid delivery.
2. Guaranteed Delivery Procedures.
Holders who wish to tender their Notes, but whose Notes are not
immediately available and thus cannot deliver their Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent (or comply
with the procedures for book-entry transfer) prior to the Expiration Date, may
effect a tender if:
(a) the tender is made through a member firm of a registered national
securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Exchange Act
(an "Eligible Institution");
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder, the registration
number(s) of such Notes and the principal
-9-
<PAGE>
amount of Notes tendered, stating that the tender is being made
thereby and guaranteeing that, within three New York Stock Exchange
trading days after the Expiration Date, the Letter of Transmittal (or
facsimile thereof), together with the Notes (or a confirmation of
book-entry transfer of such Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility) and any other documents required by
the Letter of Transmittal, will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as all tendered Notes in proper form for
transfer (or a confirmation of book-entry transfer of such Notes into
the Exchange Agent's account at the Book-Entry Transfer Facility) and
all other documents required by the Letter of Transmittal, are
received by the Exchange Agent within three New York Stock Exchange
trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery
will be sent to Holders who wish to tender their Notes according to the
guaranteed delivery procedures set forth above. Any Holder who wishes to tender
Notes pursuant to the guaranteed delivery procedures described above must ensure
that the Exchange Agent receives the Notice of Guaranteed Delivery relating to
such Notes prior to the Expiration Date. Failure to complete the guaranteed
delivery procedures outlined above will not, of itself, affect the validity or
effect a revocation of any Letter of Transmittal form properly completed and
executed by a Holder who attempted to use the guaranteed delivery procedures.
3. Partial Tenders; Withdrawals.
If less than the entire principal amount of Notes evidenced by a
submitted certificate is tendered, the tendering Holder should fill in the
principal amount tendered in the column entitled "Principal Amount Tendered" of
the box entitled "Description of Notes Tendered Hereby". A newly issued Note
for the principal amount of Notes submitted but not tendered will be sent to
such Holder as soon as practicable after the Expiration Date. All Notes
delivered to the Exchange Agent will be deemed to have been tendered in full
unless otherwise indicated.
Notes tendered pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date, after which tenders of Notes are irrevocable.
To be effective, a written, telegraphic or facsimile transmission notice of
withdrawal must be timely received by the Exchange Agent. Any such notice of
withdrawal must (i) specify the name of the person having deposited the Notes to
be withdrawn (the "Depositor"), (ii) identify the Notes to be withdrawn
(including the registration number(s) and principal amount of such Notes, or, in
the case of Notes transferred by book-entry transfer, the name and number of the
account at the Book-Entry Transfer Facility to be credited), (iii) be signed by
the Holder in the same manner as the original signature on this Letter of
Transmittal (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee with respect to the Notes
-10-
<PAGE>
register the transfer of such Notes into the name of the person withdrawing the
tender and (iv) specify the name in which any such Notes are to be registered,
if different from that of the Depositor. All questions as to the validity, form
and eligibility (including time of receipt) of such notices will be determined
by the Issuer, whose determination shall be final and binding on all parties.
Any Notes so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer and no Exchange Notes will be issued with respect
thereto unless the Notes so withdrawn are validly retendered. Any Notes which
have been tendered but which are not accepted for exchange, will be returned to
the Holder thereof without cost to such Holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer.
4. Signature on This Letter of Transmittal; Written Instruments and
Endorsements; Guarantee of Signatures.
If this Letter of Transmittal is signed by the registered Holder(s) of
the Notes tendered hereby, the signature must correspond with the name(s) as
written on the face of the certificates without alteration or enlargement or any
change whatsoever. If this Letter of Transmittal is signed by a participant in
the Book-Entry Transfer Facility, the signature must correspond with the name as
it appears on the security position listing as the owner of the Notes.
If any of the Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If a number of Notes registered in different names are tendered, it
will be necessary to complete, sign and submit as many separate copies of this
Letter of Transmittal as there are different registrations of Notes.
Signatures of this Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed by an Eligible Institution unless the Notes
tendered hereby are tendered (i) by a registered Holder who has not completed
the box entitled "Special Registration Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution.
If this Letter of Transmittal is signed by the registered Holder or
Holders of Notes (which term, for the purposes described herein, shall include a
participant in the Book-Entry Transfer Facility whose name appears on a security
listing as the owner of the Notes) listed and tendered hereby, no endorsements
of the tendered Notes or separate written instruments of transfer or exchange
are required. In any other case, the registered Holder (or acting Holder) must
either properly endorse the Notes or transmit properly completed bond powers
with this Letter of Transmittal (in either case, executed exactly as the name(s)
of the registered Holder(s) appear(s) on the Notes, and, with respect to a
participant in the Book-Entry Transfer Facility whose name appears on a security
position listing as the owner of Notes, exactly as the name of the participant
appears on such security position listing), with the signature on the Notes or
bond
-11-
<PAGE>
power guaranteed by an Eligible Institution (except where the Notes are tendered
for the account of an Eligible Institution).
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Issuer, proper evidence
satisfactory to the Issuer of its authority so to act must be submitted.
5. Special Registration and Delivery Instructions.
Tendering Holders should indicate, in the applicable box, the name and
address (or account at the Book-Entry Transfer Facility) in which the Exchange
Notes or substitute Notes for principal amounts not tendered or not accepted for
exchange are to be issued (or deposited), if different from the names and
addresses or accounts of the person signing this Letter of Transmittal. In the
case of issuance in a different name, the employer identification number or
social security number of the person named must also be indicated and the
tendering Holder should complete the applicable box.
If no instructions are given, the Exchange Notes (and any Notes not
tendered or not accepted) will be issued in the name of and sent to the acting
Holder of the Notes or deposited at such Holder's account at the Book-Entry
Transfer Facility.
6. Transfer Taxes
The Issuer shall pay all transfer taxes, if any, applicable to the
transfer and exchange of Notes to the Issuer or its order pursuant to the
Exchange Offer. If a transfer tax is imposed for any other reason other than
the transfer and exchange of Notes to the Issuer or its order pursuant to the
Exchange Offer, the amount of any such transfer taxes (whether imposed on the
registered Holder or any other person) will be payable by the tendering Holder.
If satisfactory evidence of payment of such taxes or exception therefrom is not
submitted herewith, the amount of such transfer taxes will be collected from the
tendering Holder by the Exchange Agent.
Except as provided in this Instruction 6, it will not be necessary for
transfer stamps to be affixed to the Notes listed in this Letter of Transmittal.
7. Waiver of Conditions.
The Issuer reserves the right, in its reasonable judgment, to waive,
in whole or in part, any of the conditions to the Exchange Offer set forth in
the Prospectus.
-12-
<PAGE>
8. Mutilated, Lost, Stolen or Destroyed Notes.
Any Holder whose Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above for further
instructions.
9. Requests for Assistance or Additional Copies.
Questions relating to the procedure for tendering as well as requests
for additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number(s) set forth
above. In addition, all questions relating to the Exchange Offer, as well as
requests for assistance or additional copies of the Prospectus and this Letter
of Transmittal, may be directed to TCI Satellite, Inc., 8085 South Chester,
Suite 300, Englewood, Colorado 80122, Attention: General Counsel, telephone
number: (303) 712-4600.
10. Validity and Form.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Notes and withdrawal of tendered Notes will be
determined by the Issuer in its sole discretion, which determination will be
final and binding. The Issuer reserves the absolute right to reject any and all
Notes not properly tendered or any Notes the Issuer's acceptance of which would,
in the opinion of counsel for the Issuer, be unlawful. The Issuer also reserves
the right, in its reasonable judgment, to waive any defects, irregularities or
conditions of tender as to particular Notes. The Issuer's interpretation of the
terms and conditions of the Exchange Offer (including the instructions in this
Letter of Transmittal) will be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Notes must be cured
within such time as the Issuer shall determine. Although the Issuer intends to
notify Holders of defects or irregularities with respect to tenders of Notes,
neither the Issuer, the Exchange Agent nor any other person shall incur any
liability for failure to give such notification. Tenders of Notes will not be
deemed to have been made until such defects or irregularities have been cured or
waived. Any Notes received by the Exchange Agent that are not properly tendered
and as to which the defects or irregularities have not been cured or waived will
be returned by the Exchange Agent to the tendering Holders as soon as
practicable following the Expiration Date.
IMPORTANT TAX INFORMATION
Under federal income tax law, a Holder tendering Notes is required to
provide the Exchange Agent with such Holder's correct TIN on Substitute Form W-9
below. If such Holder is an individual, the TIN is the Holder's social security
number. The Certificate of Awaiting Taxpayer Identification Number should be
completed if the tendering Holder has not been issued a TIN and has applied for
a number or intends to apply for a number in the near future. If the Exchange
Agent is not provided with the correct TIN, the Holder may be subject to a $50
penalty imposed by the Internal Revenue Service. In addition, payments that are
made to such Holder with respect to tendered Notes may be subject to backup
withholding.
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<PAGE>
Certain Holders (including, among others, all domestic corporations
and certain foreign individuals and foreign entities) are not subject to these
backup withholding and reporting requirements. Such a Holder, who satisfies one
or more of the conditions set forth in Part 2 of the Substitute Form W-9 should
execute the certification following such Part 2. In order for a foreign Holder
to qualify as an exempt recipient, that Holder must submit to the Exchange Agent
a properly completed Internal Revenue Service Form W-8, signed under penalties
of perjury, attesting to that Holder's exempt status. Such forms can be
obtained from the Exchange Agent.
If backup withholding applies, the Exchange Agent is required to
withhold 31% of any amounts otherwise payable to the Holder. Backup withholding
is not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
Purpose of Substitute Form W-9
To prevent backup withholding on payments that are made to a Holder
with respect to Notes tendered for exchange, the Holder is required to notify
the Exchange Agent of his or her correct TIN by completing the form herein
certifying that the TIN provided on Substitute Form W-9 is correct (or that such
Holder is awaiting a TIN) and that (i) each Holder is exempt, (ii) such Holder
has not been notified by the Internal Revenue Service that he or she is subject
to backup withholding as a result of failure to report all interest or dividends
or (iii) the Internal Revenue Service has notified such Holder that he or she is
no longer subject to backup withholding.
What Number to Give the Exchange Agent
Each Holder is required to give the Exchange Agent the social security
number or employer identification number of the record Holder(s) of the Notes.
If Notes are in more than one name or are not in the name of the actual Holder,
consult the instructions on Internal Revenue Service Form W-9, which may be
obtained from the Exchange Agent, for additional guidance on which number to
report.
Certificate of Awaiting Taxpayer Identification Number
If the tendering Holder has not been issued a TIN and has applied for
a number or intends to apply for a number in the near future, write "Applied
For" in the space for the TIN on Substitute Form W-9, sign and date the form and
the Certificate of Awaiting Taxpayer Identification Number and return them to
the Exchange Agent. If such certificate is completed and the Exchange Agent is
not provided with the TIN within 60 days, the Exchange Agent will withhold 31%
of all payments made thereafter until a TIN is provided to the Exchange Agent.
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<PAGE>
IMPORTANT: This Letter of Transmittal or a facsimile thereof
(together with Notes or confirmation of book-entry transfer and all other
required documents) or a Notice of Guaranteed Delivery must be received by the
Exchange Agent on or prior to the Expiration Date.
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<PAGE>
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
10 7/8% SENIOR SUBORDINATED NOTES DUE 2007
AND
12 7/8% SENIOR SUBORDINATED DISCOUNT NOTES DUE 2007
OF
TCI SATELLITE, INC.
Pursuant to the Prospectus Dated February __, 1998
This form must be used by a holder of 10 7/8% Senior Subordinated Notes due
2007 (the "Old Senior Subordinated Notes") or 12 7/8% Senior Subordinated
Discount Notes ("Old Senior Subordinated Discount Notes" and together with the
"Old Senior Subordinated Notes," the "Old Notes") of TCI Satellite, Inc., a
Delaware corporation (the "Company"), who wishes to tender Old Notes to the
Exchange Agent pursuant to the guaranteed delivery procedures described in "The
Exchange Offer - Guaranteed Delivery Procedures" of the Company's Prospectus,
dated February __, 1998 (the "Prospectus") and in Instruction 2 to the related
Letter of Transmittal. Any holder who wishes to tender Old Notes pursuant to
such guaranteed delivery procedures must ensure that the Exchange Agent receives
this Notice of Guaranteed Delivery prior to the Expiration Date of the Exchange
Offer. Capitalized terms used but not defined herein have the meanings ascribed
to them in the Prospectus or the Letter of Transmittal.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
TIME, ON MARCH __, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
The Bank of New York
(the "Exchange Agent")
<TABLE>
<S> <C> <C>
By Overnight Mail or By Registered or
Courier Service: In Person By Hand: Certified Mail:
The Bank of New York The Bank of New York The Bank of New York
101 Barclay Street 101 Barclay Street 101 Barclay Street, 7E
Corporate Trust Services Window Corporate Trust Services Window New York, N.Y. 10286
Ground Level Ground Level
Attention: Reorganization Section Attention: Reorganization Section
New York, N.Y. 10286 New York, N.Y. 10286
By Facsimile Transmission (For
Eligible Institutions Only):
The Bank of New York
(212) 815-5915
Confirm: (212) 815-5375
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Old Notes set forth below pursuant to the guaranteed delivery procedures set
forth in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Old Notes listed below:
CERTIFICATE NUMBER(S) (IF KNOWN) AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
OF OLD SENIOR SUBORDINATED NOTES AMOUNT REPRESENTED AMOUNT TENDERED
OR ACCOUNT NUMBER AT THE BOOK-
ENTRY FACILITY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CERTIFICATE NUMBER(S) (IF KNOWN) AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
OF OLD SENIOR SUBORDINATED AMOUNT REPRESENTED AMOUNT TENDERED
DISCOUNT NOTES OR ACCOUNT NUMBER
AT THE BOOK-ENTRY FACILITY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEASE SIGN AND COMPLETE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Signature of Registered Holder(s)
or Authorized Signatory:
Date: , 1998
- ------------------------------------------------ -----------------
Address:
- ------------------------------------------------ ------------------------------
Names(s) of Registered Holder(s):
--------------- --------------------------------------
Area Code and Telephone No.
- ------------------------------------------------ -----------
- ------------------------------------------------
</TABLE>
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly as
their name(s) appear on certificates for Old Notes or on a security position
listing as the owner of Old Notes, or by person(s) authorized to become
Holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
2
<PAGE>
Please print name(s) and address(es)
Name(s):
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Capacity:
-----------------------------------------------------------------------
Address(es):
--------------------------------------------------------------------
- --------------------------------------------------------------------------------
3
<PAGE>
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., or is a
commercial bank or trust company having an office or correspondent in the United
States, or is otherwise an "eligible guarantor institution" within the meaning
of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended,
guarantees deposit with the Exchange Agent of the Letter of Transmittal (or
facsimile thereof), together with the Old Notes tendered hereby in proper form
for transfer (or confirmation of the book-entry transfer of such Old Notes into
the Exchange Agent's account at the Book-Entry Transfer Facility described in
the prospectus under the caption "The Exchange Offer - Guaranteed Delivery
Procedures" and in the Letter of Transmittal) and any other required documents,
all by 5:00 p.m., New York time, on the third New York Stock Exchange trading
day following the Expiration Date.
Name of Firm
----------------------------- ------------------------------------
(Authorized Signature)
Address:
---------------------------------
Name
--------------------------------- --------------------------------
(Include Zip Code) (Please Print)
Area Code and Tel. No. Title
------------------- -------------------------------
Dated________________, 1998
DO NOT SEND SECURITIES WITH THIS FORM. ACTUAL SURRENDER OF SECURITIES MUST BE
MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed
----------------------------------------------
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at its address set forth herein prior to the Expiration Date.
The method of delivery of this Notice of Guaranteed Delivery and any other
required documents to the Exchange Agent is at the election and sole risk of the
holder, and the delivery will be deemed made only when actually received by the
Exchange Agent. If delivery is by mail, registered mail with return receipt
requested, properly insured, is recommended. As an alternative to delivery by
mail, the holders may wish to consider using an overnight or hand delivery
service. In all cases, sufficient time should be allowed to assure timely
delivery. For a description of the guaranteed delivery procedures, see
Instruction 2 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
------------------------------------------------
Guaranteed Delivery is signed by the registered holder(s) of the Old Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Old Notes without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant of
the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of the Old Notes, the signature must correspond with the
name shown on the security position listing as the owner of the Old Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Old Notes listed or a participant of the Book-Entry
Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by
appropriate bond powers, signed as the name of the registered holder(s) appears
on the Old Notes or signed as the name of the participant shown on the Book-
Entry Transfer Facility's security position listing.
4
<PAGE>
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and requests
--------------------------------------------
for assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
5
