<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: June 18, 1999
Date of Earliest Event Reported: June 4, 1999
PHOENIXSTAR, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
000-23883 84-1441684
(Commission File Number) (I.R.S. Employer Identification No.)
8085 South Chester, Suite 300
Englewood, Colorado 80112
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (303) 712-4600
<PAGE>
Item 2. Disposition of Assets.
- ------- ----------------------
Effective June 4, 1999, the Registrant completed the sale of its high power
direct broadcast satellite ("DBS") assets to Hughes Electronics Corporation
("Hughes"), pursuant to an asset purchase agreement dated as of January 22, 1999
(the "Hughes High Power Agreement"), among Tempo Satellite, Inc., ("Tempo") a
wholly-owned subsidiary of TCI Satellite Entertainment, Inc. ("TSAT"), the
Registrant, Phoenixstar Partners L.P., a Delaware limited partnership and
wholly-owned subsidiary of the Registrant, formerly known as PRIMESTAR Partners
L.P. ("PLP"), and Hughes, an unaffiliated third party. The assets transferred by
Tempo pursuant to the Hughes High Power Agreement consist of Tempo's two high-
power DBS satellites, one of which was in orbit at 119 (degrees) West Longitude
(the "In-Orbit Satellite") and one of which was used as a ground spare (the
"Ground Satellite"), its FCC authorizations with respect to the 119 (degrees)
West Longitude orbital location (the "FCC License"), and certain related assets
(collectively, the "Tempo High Power Assets").
Tempo had previously granted the Registrant the right and option (the
"Tempo Purchase Option") to purchase 100% of the Tempo High Power Assets for
aggregate consideration of $2.5 million in cash and the assumption of all
liabilities. In addition, Tempo had previously granted to PLP the right to
purchase or lease 100% of the capacity of the DBS system being constructed by
Tempo (the "Tempo Capacity Rights), and PLP had made advances to Tempo to fund
the construction of Tempo's DBS system in the aggregate amount of $465 million
(the "Tempo Reimbursement Obligation").
Accordingly, the Hughes High Power Agreement provided for (i) the sale by
the Registrant to Hughes of the Tempo Purchase Option, (ii) the exercise of the
Tempo Purchase Option by Hughes, and (iii) the termination of the Tempo Capacity
Rights (collectively, the "Hughes High Power Transaction"). The aggregate
consideration payable by Hughes in the Hughes High Power Transaction was $500
million, payable as described below.
As regulatory approval was required to transfer the In-Orbit Satellite and
the FCC License, the Hughes High Power Agreement provided for the Hughes High
Power Transaction to be completed in two steps. To facilitate the transaction,
the Tempo Purchase Option was amended to provide for a two-stage exercise
process. The parties allocated 70% of the total consideration under the Hughes
High Power Agreement to the In-Orbit Satellite and related assets and 30% of the
total consideration thereunder to the Ground Satellite and related assets.
The first closing under the Hughes High Power Agreement was consummated
effective March 10, 1999. In the first closing, Hughes acquired the Ground
Satellite and related assets for aggregate consideration of $150 million,
payable as follows:
(1) Hughes paid an aggregate of $9,750,000 to the Registrant and PLP
for the transfer to Hughes of that portion of the Tempo Purchase Option
allocable to the Ground Satellite and the termination of that portion of
the Tempo Capacity Rights allocable to the Ground Satellite;
(2) Hughes paid Tempo $750,000 to exercise that portion of the Tempo
Purchase Option allocable to the Ground Satellite; and
2
<PAGE>
(3) Hughes assumed and immediately satisfied a portion of the Tempo
Reimbursement Obligation in the amount of $139,500,000.
In addition, as required by the Hughes High Power Agreement, the Registrant
and TSAT agreed to terminate the previously announced merger of TSAT with and
into the Registrant, effective as of such first closing.
The FCC approved the transfer of the FCC License to Hughes on May 28, 1999,
and the second closing under the Hughes High Power Agreement was consummated
effective June 4, 1999. In the second closing, Hughes acquired the In-Orbit
Satellite and related assets, including all rights of Tempo with respect to the
FCC License, for aggregate consideration for $350 million, payable as follows:
(1) Hughes paid an aggregate of $22,750,000 to the Registrant and PLP
for the transfer to Hughes of that portion of the Tempo Purchase Option
allocable to the In-Orbit Satellite and the termination of that portion of
the Tempo Capacity Rights allocable to the In-Orbit Satellite;
(2) Hughes paid Tempo $1,750,000 to exercise that portion of the
Tempo Purchase Option allocable to the In-Orbit Satellite; and
(3) Hughes assumed and immediately satisfied the remainder of the
Tempo Reimbursement Obligation, in the amount of $325,500,000.
In addition, the Registrant agreed to forgive amounts due from Tempo not
assumed by Hughes in the amount of $9,346,000.
Item 7. Financial Statements and Exhibits.
- ------- ----------------------------------
(b) Pro forma financial information.
Phoenixstar, Inc. Condensed Pro Forma Combined Financial Statements - Three
months ended March 31, 1999 and year ended December 31, 1998.
(c) Exhibits.
10.1 Hughes High Power Agreement, incorporated by reference to the
Company's Current Report on Form 8-K dated February 1, 1999
(Commission File No. 000-23883).
99.1 Press Release, dated June 7, 1999, filed herewith.
3
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Date: June 18, 1999
PHOENIXSTAR, INC.
(Registrant)
By: /s/ Kenneth G. Carroll
-----------------------------------
Name: Kenneth G. Carroll
Title: Senior Vice President and
Chief Financial Officer
4
<PAGE>
PHOENIXSTAR, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Financial Statements
-------------------------------------------------
March 31, 1999
(unaudited)
Effective June 4, 1999, Phoenixstar, Inc. (the "Company") completed the
sale of its high power direct broadcast satellite ("DBS") assets to Hughes
Electronics Corporation ("Hughes"), pursuant to an asset purchase agreement
dated as of January 22, 1999 (the "Hughes High Power Agreement"), among Tempo
Satellite, Inc., ("Tempo") a wholly-owned subsidiary of TCI Satellite
Entertainment, Inc. ("TSAT"), the Company, Phoenixstar Partners L.P., a Delaware
limited partnership and wholly-owned subsidiary of the Company, formerly known
as PRIMESTAR Partners L.P. ("PLP"), and Hughes, an unaffiliated third party. The
assets transferred by Tempo pursuant to the Hughes High Power Agreement consist
of Tempo's two high-power DBS satellites, one of which was in orbit at 119
(degrees) West Longitude (the "In-Orbit Satellite") and one of which was used as
a ground spare (the "Ground Satellite"), its FCC authorizations with respect to
the 119 (degrees) West Longitude orbital location (the "FCC License"), and
certain related assets (collectively, the "Tempo High Power Assets").
Tempo had previously granted the Company the right and option (the "Tempo
Purchase Option") to purchase 100% of the Tempo High Power Assets for aggregate
consideration of $2.5 million in cash and the assumption of all liabilities. In
addition, Tempo had previously granted to PLP the right to purchase or lease
100% of the capacity of the DBS system being constructed by Tempo (the "Tempo
Capacity Rights), and PLP had made advances to Tempo to fund the construction of
Tempo's DBS system in the aggregate amount of $465 million (the "Tempo
Reimbursement Obligation").
Accordingly, the Hughes High Power Agreement provided for (i) the sale by
the Company to Hughes of the Tempo Purchase Option, (ii) the exercise of the
Tempo Purchase Option by Hughes, and (iii) the termination of the Tempo Capacity
Rights (collectively, the "Hughes High Power Transaction"). The aggregate
consideration payable by Hughes in the Hughes High Power Transaction was $500
million, payable as described below.
As regulatory approval was required to transfer the In-Orbit Satellite and
the FCC License, the Hughes High Power Agreement provided for the Hughes High
Power Transaction to be completed in two steps. To facilitate the transaction,
the Tempo Purchase Option was amended to provide for a two-stage exercise
process. The parties allocated 70% of the total consideration under the Hughes
High Power Agreement to the In-Orbit Satellite and related assets and 30% of the
total consideration thereunder to the Ground Satellite and related assets.
The first closing under the Hughes High Power Agreement was consummated
effective March 10, 1999. In the first closing, Hughes acquired the Ground
Satellite and related assets for aggregate consideration of $150 million,
payable as follows:
(1) Hughes paid an aggregate of $9,750,000 to the Company and PLP for
the transfer to Hughes of that portion of the Tempo Purchase Option
allocable to the Ground Satellite and the termination of that portion of
the Tempo Capacity Rights allocable to the Ground Satellite;
<PAGE>
(2) Hughes paid Tempo $750,000 to exercise that portion of the Tempo
Purchase Option allocable to the Ground Satellite; and
(3) Hughes assumed and immediately satisfied a portion of the Tempo
Reimbursement Obligation in the amount of $139,500,000.
In addition, as required by the Hughes High Power Agreement, the Company
and TSAT agreed to terminate the previously announced merger of TSAT with and
into the Company, effective as of such first closing.
The FCC approved the transfer of the FCC License to Hughes on May 28, 1999,
and the second closing under the Hughes High Power Agreement was consummated
effective June 4, 1999. In the second closing, Hughes acquired the In-Orbit
Satellite and related assets, including all rights of Tempo with respect to the
FCC License, for aggregate consideration for $350 million, payable as follows:
(1) Hughes paid an aggregate of $22,750,000 to the Company and PLP
for the transfer to Hughes of that portion of the Tempo Purchase Option
allocable to the In-Orbit Satellite and the termination of that portion of
the Tempo Capacity Rights allocable to the In-Orbit Satellite;
(2) Hughes paid Tempo $1,750,000 to exercise that portion of the
Tempo Purchase Option allocable to the In-Orbit Satellite; and
(3) Hughes assumed and immediately satisfied the remainder of the
Tempo Reimbursement Obligation, in the amount of $325,500,000.
In addition, the Company agreed to forgive amounts due from Tempo not
assumed by Hughes in the amount of $9,346,000.
In a separate transaction consummated on April 28, 1999 (the "Hughes Medium
Power Closing Date") pursuant to an asset purchase agreement dated January 22,
1999 (the "Hughes Medium Power Agreement"), the Company sold its medium-power
direct broadcast satellite business to Hughes for aggregate consideration of
$1,358.2 million (the "Hughes Medium Power Transaction"). Such consideration was
comprised of $1,100 million in cash (before working capital adjustments and
closing costs) and 4.871 million shares of General Motors Class H common stock
("GMH Stock") valued at $258.2 million on the Hughes Medium Power Closing Date.
Concurrently with the Hughes Medium Power Transaction, the Company reached
an agreement (the "Lock-up Agreement") with holders of approximately 84% of the
aggregate principal amount of its 10-7/8% Senior Subordinated Notes due 2007
(the "Senior Subordinated Notes"), 12-1/4% Senior Subordinated Discount Notes
due 2007 (the "Senior Subordinated Discount Notes" and, together with the Senior
Subordinated Noted, the "Notes"), and notes issued under its Senior Subordinated
Credit Facility dated as of April 1, 1998 (the "Bridge Loans"). Holders
participating in the privately negotiated transaction agreed to, among other
things, sell their Notes and Bridge Loans to the Company for cash equal to 85.6%
of the aggregate principal amount thereof, plus stock appreciation rights
("SARs") on the shares of GMH Stock received by Phoenixstar in the Hughes
Medium Power Transaction. Each SAR issued in the transaction entitles the holder
to receive a payment from Phoenixstar at the end of one year from the date of
issuance in the amount, if any, by which the market price per share of GMH Stock
at such time exceeds $47.00 per share.
<PAGE>
In connection with the Hughes Medium Power Transaction, affiliates of the
stockholders of the Company, other than TSAT, and an affiliate of Tele-
Communications, Inc. (collectively, the "Stockholder Affiliates") committed to
make funds available to the Company, either in the form of capital contributions
or loans, up to an aggregate of $1,013 million (the "Stockholder Commitment").
On the Hughes Medium Power Closing Date, the Company used a portion of the cash
proceeds from the Hughes Medium Power Transaction and amounts contributed by the
Stockholder Affiliates on the Hughes Medium Power Closing Date (the "Initial
Funding Amount") to (i) repay principal, interest and fees due under the
Company's senior bank credit facility, (ii) fund amounts due pursuant to the
Lock-up Agreement and (iii) fund amounts due to holders of Bridge Loans who were
not party to the Lock-up Agreement pursuant to the terms of the credit agreement
governing the Bridge Loans.
In connection with their approval of the Hughes Medium Power Transaction,
the stockholders of the Company also approved the payment to TSAT of
consideration in the form of 1.407 million shares of GMH Stock (the "Phoenixstar
Payment"), subject to the terms and conditions set forth in an agreement dated
as of January 22, 1999. In consideration of the Phoenixstar Payment, TSAT agreed
to, among other matters, issue to the Company a share appreciation right (the
"TSAT GMH SAR") with respect to the shares of GMH Stock received as the
Phoenixstar Payment, granting the Company the right to any appreciation in such
GMH Stock over the one-year period following the date of issuance over an agreed
strike price of $47.00. On the Hughes Medium Power Closing Date, the Company
delivered to TSAT 1.407 million shares of GMH Stock in satisfaction of the
Phoenixstar Payment.
The following unaudited condensed pro forma combined balance sheet of the
Company, dated as of March 31, 1999, assumes that the Hughes High Power and
Medium Power Transactions had occurred as of such date. The following unaudited
condensed pro forma combined statements of operations of the Company for the
three months ended March 31, 1999 and the year ended December 31, 1998 assume
that the Hughes High Power and Medium Power Transactions had occurred as of
January 1, 1998.
The unaudited pro forma results do not purport to be indicative of the
results of operations that would have been obtained if the Hughes High Power and
Medium Power Transactions had occurred as of January 1, 1998.
<PAGE>
PHOENIXSTAR, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Balance Sheet
March 31, 1999
(unaudited)
<TABLE>
<CAPTION>
Hughes Hughes
Medium Power High Power
Transaction Transaction
Phoenixstar pro forma pro forma Phoenixstar
historical adjustments adjustments pro forma
------------ ---------------- -------------- ------------
amounts in thousands
<S> <C> <C> <C> <C>
Assets
- ------
Cash and cash equivalents $ 170,380 902,581 (1) 348,250 (8) 373,250
155,168 (2)
(1,203,129) (3)
Accounts receivable and prepaid
expenses 97,625 (97,625) (1) -- --
Investment in GMH stock -- 258,187 (1) -- 183,600
(74,587) (4)
Property and equipment, net 1,149,597 (1,149,597) (1) -- --
Intangible assets, net 615,568 (292,500) (1) (323,068) (8) --
Deferred financing costs and other
assets, net 32,307 (5,500) (1) -- --
(26,807) (3)
----------- ---------- -------- ----------
$ 2,065,477 (1,533,809) 25,182 556,850
=========== ========== ======== ==========
Liabilities and Stockholders' Deficit
- -------------------------------------
Accounts payable and accrued $ 351,546 (319,339) (1) -- 75,407
expenses 43,200 (1)
Accrued interest payable 10,161 (4,705) (3) -- 5,456
Deferred revenue 106,364 (106,364) (1) -- --
Phoenixstar GMH SAR liability -- 29,229 (3) -- 29,229
Debt 1,860,717 (1,223) (1) -- 578,928
(1,280,566) (3)
Deferred income taxes 66,786 (66,786) (1) -- --
Other liabilities 38,402 (14,166) (1) -- 24,236
----------- ---------- -------- ----------
Total liabilities 2,433,976 (1,720,720) -- 713,256
----------- ---------- -------- ----------
Stockholders' Deficit:
Common stock 2,009 -- -- 2,009
Additional paid-in capital 1,511,041 155,168 (2) -- 1,666,209
Accumulated deficit (1,881,549) 80,224 (1) 25,182 (1,816,180)
26,106 (3)
(66,143) (4)
TSAT GMH SAR receivable -- (8,444) (4) -- (8,444)
----------- ---------- -------- ----------
Total stockholders' deficit (368,499) 186,911 25,182 (156,406)
----------- ---------- -------- ----------
Commitments and contingencies
$ 2,065,477 (1,533,809) 25,182 556,850
=========== ========== ======== ==========
</TABLE>
See accompanying notes to condensed pro forma combined financial statements.
<PAGE>
PHOENIXSTAR, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Statement of Operations
Three months ended March 31, 1999
(unaudited)
<TABLE>
<CAPTION>
Hughes Hughes
Medium Power High Power
Transaction Transaction
Phoenixstar pro forma pro forma Phoenixstar
historical adjustments adjustments pro forma
------------ -------------- ----------- ------------
amounts in thousands,
except per share amounts
<S> <C> <C> <C> <C>
Revenue $393,864 (393,864) (5) -- --
-------- ---------- ----------- -----------
Operating costs and expenses:
Operating, selling, general and
administrative 304,869 (304,869) (5) -- --
Depreciation and amortization 138,836 (138,836) (5) -- --
-------- ---------- ----------- -----------
443,705 (443,705) -- --
-------- ---------- ----------- -----------
Operating loss (49,841) 49,841 -- --
Other income (expense):
Interest expense (42,428) 34,014 (6) -- (8,414)
Other, net 273 (273) (5) -- --
-------- ---------- ----------- -----------
(42,155) 33,741 -- (8,414)
-------- ---------- ----------- -----------
Loss before income taxes (91,996) 83,582 (8,414)
Income tax benefit 8,271 (8,271) (7) -- --
-------- ---------- ----------- -----------
Net loss $(83,725) 75,311 -- (8,414)
======== ========== =========== ===========
Basic and diluted loss per common
share $ (.42) .38 -- --
======== ========== =========== ===========
</TABLE>
<PAGE>
PHOENIXSTAR, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Statement of Operations
Year ended December 31, 1998
(unaudited)
<TABLE>
<CAPTION>
Hughes Hughes
Medium Power High Power
Transaction Transaction
Phoenixstar pro forma pro forma Phoenixstar
historical adjustments adjustments pro forma
------------- ---------------- ----------- ------------
amounts in thousands,
except per share amounts
<S> <C> <C> <C> <C>
Revenue $ 1,289,666 (1,289,666) (5) -- --
----------- ------------ ----------- -----------
Operating costs and expenses:
Operating, selling, general
and administrative 1,133,834 (1,133,834) (5) -- --
Impairment of long-lived assets 950,289 (950,289) (5) -- --
Depreciation and amortization 543,087 (543,087) (5) -- --
----------- ------------ ----------- -----------
2,627,210 (2,627,210) -- --
----------- ------------ ----------- -----------
Operating loss (1,337,544) 1,337,544 -- --
Other expense:
Interest expense (145,939) 119,117 (6) -- (26,822)
Other, net (7,749) 7,749 (5) -- --
----------- ------------ ----------- -----------
(153,688) 126,866 -- (26,822)
----------- ------------ ----------- -----------
Loss before income taxes (1,491,232) 1,464,410 -- (26,822)
Income tax benefit 147,528 (147,528) (7) -- --
----------- ------------ ----------- -----------
Net loss $(1,343,704) 1,316,882 -- (26,822)
=========== ============ =========== ===========
Basic and diluted loss per
common share $ (8.02) 7.86 -- (.16)
=========== ============ =========== ===========
</TABLE>
See accompanying notes to condensed pro forma combined financial statements.
<PAGE>
PHOENIXSTAR, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Financial Statements
March 31, 1999
(unaudited)
Hughes Medium Power Transaction
- -------------------------------
(1) Represents the sale of the Company's medium power DBS assets and
liabilities, exclusive of assets not acquired and liabilities not assumed
by Hughes, for $1,100 million in cash (before working capital adjustments
of $190.3 million and closing expenses of $7.1 million) and 4.871 million
shares of GMH Stock valued at $53.00 per share (the GMH Stock closing price
on the Hughes Closing Date). Also represents the recognition of
liabilities in the aggregate amount of $43.2 million related to employee
severance and the termination of certain leases and vendor contracts.
(2) Represents the Initial Funding Amount contributed by the Stockholder
Affiliates.
(3) Represents the repayment of principal and accrued interest and fees
pursuant to the Company's senior bank credit facility, the Notes and the
Bridge Loan and the elimination of related deferred loan costs. Repayment
of the Notes and Bridge Loan assumes 84% of the aggregate principal amount
was repaid at 85.6% of par, and the remaining 16% of the aggregate
principal amount was repaid at 101% of par. Also represents recognition of
the amount due to the former lenders pursuant to the Phoenixstar GMH SAR
calculated as follows:
<TABLE>
<S> <C>
Fair value of GMH Stock on April 28, 1999 $ 53
Phoenixstar GMH SAR exercise price (47)
-----------
Difference 6
Number of shares of GMH Stock subject to
Phoenixstar GMH SAR x 4,871,448
-----------
Phoenixstar GMH SAR liability $29,228,688
===========
</TABLE>
(4) Represents the payment of 1.407 million shares of GMH Stock (valued at $53
per share) to TSAT and the recognition of the amount due from TSAT pursuant
to the TSAT GMH SAR calculated as follows:
<TABLE>
<S> <C>
Fair value of GMH Stock on April 28, 1999 $ 53
TSAT GMH SAR exercise price (47)
-----------
Difference 6
Number of shares of GMH Stock subject to
TSAT GMH SAR x 1,407,307
-----------
TSAT GMH SAR receivable $ 8,443,842
===========
</TABLE>
<PAGE>
(5) Represents the elimination of the historical results of operations of the
Company's medium power DBS business.
(6) Represents the elimination of the historical interest expense related to
the Company's senior bank credit facility, the Notes and the Bridge Loans.
(7) Represents the assumed income tax effect of the pro forma adjustments.
Hughes High Power Transaction
- -----------------------------
(8) Represents the sale to Hughes of the Company's rights related to Tempo's
high power DBS system for cash.
<PAGE>
Exhibit Index
-------------
10.1 Hughes Medium Power Agreement, incorporated by reference to the Company's
Current Report on Form 8-K dated February 1, 1999 (Commission File No.
000-23883).
99.1 Press Release, dated June 7, 1999, filed herewith.
<PAGE>
[LOGO OF TSAT APPEARS HERE] PHOENIXSTAR, INC.
FOR IMMEDIATE RELEASE Contact:
--------
Phoenixstar, Inc. Investor Relations
Sean Clarke: (303) 712-4647
TCI SATELLITE ENTERTAINMENT, INC. AND PHOENIXSTAR, INC.
ANNOUNCE IN-ORBIT SATELLITE CLOSING
ENGLEWOOD, CO, June 7, 1999 - TCI Satellite Entertainment, Inc. ("TSAT")
and Phoenixstar, Inc., formerly known as PRIMESTAR, Inc. ("Phoenixstar"),
announced today the consummation of the sale of the high-power satellite, which
is currently in orbit at 119 degrees West Longitude (the "In-Orbit Satellite"),
of Tempo Satellite, Inc. ("Tempo"), a wholly owned subsidiary of TSAT, to Hughes
Electronics Corporation ("Hughes"), pursuant to an asset purchase agreement (the
"Hughes High Power Agreement"), dated as of January 22, 1999, among Phoenixstar,
Phoenixstar Partners L.P., a wholly owned subsidiary of Phoenixstar that was
formerly known as PRIMESTAR Partners L.P. ("PLP"), Tempo, Hughes and certain
stockholders (or affiliates of such stockholders) of Phoenixstar. Also pursuant
to the Hughes High Power Agreement, Tempo transferred to Hughes its FCC
authorizations with respect to the 119 degrees West Longitude orbital location
(the "FCC License").
In April 1998, in connection with a restructuring of Phoenixstar, TSAT
granted to Phoenixstar a transferable option (the "TSAT Tempo Option") which
permitted Phoenixstar to purchase all of the assets of Tempo, which included (i)
the In-Orbit Satellite and (ii) another satellite, that was used as a ground
spare (the "Ground Satellite"). In addition, Tempo had borrowed funds (the
"Reimbursement Obligation") from PLP in order to construct and maintain the
satellites. Tempo also had granted to PLP the right to lease capacity (the
"Capacity Option") on the satellites. On March 10, 1999, pursuant to the Hughes
High Power Agreement, Hughes acquired the Ground Satellite (and related assets)
for aggregate consideration of $150 million, which was comprised of the
following: (1) $9,750,000 paid to Phoenixstar and PLP for (a) Phoenixstar's
assignment of that portion of the TSAT Tempo Option applicable to the Ground
Satellite to Hughes and (b) PLP's partial termination and waiver of the Capacity
Option as it applied to the Ground Satellite, (2) $750,000 paid to TSAT upon
Hughes' exercise of the TSAT Tempo Option applicable to the Ground Satellite and
(3) the assumption and payment by Hughes of a portion of the Reimbursement
Obligation applicable to the Ground Satellite in the amount of $139,500,000.
-more-
<PAGE>
In-orbit Satellite Closing, page 2
Regulatory approval from the FCC was required to transfer the FCC License
to Hughes; the FCC approved such transfer on May 28, 1999.
The aggregate consideration for the sale of the In-Orbit Satellite (and
related assets) was $350 million, which was comprised of the following: (1)
$22,750,000 paid to Phoenixstar and PLP for (a) Phoenixstar's assignment of that
portion of the TSAT Tempo Option applicable to the In-Orbit Satellite to Hughes
and (b) PLP's partial termination and waiver of the Capacity Option as it
applied to the In-Orbit Satellite, (2) $1,750,000 paid to TSAT upon Hughes'
exercise of the TSAT Tempo Option applicable to the In-Orbit Satellite and (3)
the assumption and payment by Hughes of a portion of the Reimbursement
Obligation applicable to the In-Orbit Satellite in the amount of $325,500,000.
Phoenixstar and PLP intend to use the proceeds received from Hughes to
repay a portion of their indebtedness.
###
