<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____ to _____
Commission File Number 000-23883
PRIMESTAR, INC.
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(Exact name of Registrant as specified in its charter)
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State of Delaware 84-1441684
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
8085 South Chester, Suite 300
Englewood, Colorado 80112
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (303) 712-4600
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, par value $.01 per share
Class B Common Stock, par value $.01 per share
10 7/8% Senior Subordinated Notes Due 2007
12 1/4% Senior Subordinated Discount Notes Due 2007
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [_] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. X
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None of PRIMESTAR, Inc.'s shares of common stock were publicly traded as of
January 29, 1999. The number of shares outstanding of PRIMESTAR, Inc.'s common
stock as of January 29, 1999 was:
Class A Common Stock - 179,143,934 shares;
Class B Common Stock - 8,465,324 shares; and
Class C Common Stock - 13,332,365 shares.
<PAGE>
PRIMESTAR, INC.
1998 ANNUAL REPORT ON FORM 10-K
Table of Contents
Page
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PART I
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Item 1. Business........................................... I-1
Item 2. Properties......................................... I-24
Item 3. Legal Proceedings.................................. I-24
Item 4. Submission of Matters to a Vote of Security Holders I-24
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PART II
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Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters....................... II-1
Item 6. Selected Financial Data........................... II-1
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............... II-2
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk....................................... II-15
Item 8. Financial Statements and Supplementary Data....... II-15
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure............ II-15
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PART III
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Item 10. Directors and Executive Officers of the Registrant III-1
Item 11. Executive Compensation............................ III-5
Item 12. Security Ownership of Certain Beneficial Owners
and Management.................................... III-14
Item 13. Certain Relationships and Related Transactions.... III-16
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PART IV
Item 14. Exhibits, Financial Statements and Financial Statement
Schedules, and Reports on Form 8-K.................. IV-1
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Item 1. Business.
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(a) General Development of Business
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PRIMESTAR, Inc. ("PRIMESTAR" or the "Company") is a leading distributor of
digital satellite-based television services in the United States. The
PRIMESTAR(R) service is broadcast from GE-2 ("GE-2"), a medium power satellite
stationed at the 85 degrees West Longitude ("W.L.") orbital position.
PRIMESTAR was incorporated in August 1997 as a wholly-owned subsidiary of
TCI Satellite Entertainment, Inc. ("TSAT"). Effective April 1, 1998 (the
"Closing Date') and pursuant to (i) a Merger and Contribution Agreement dated as
of February 6, 1998 (the "Restructuring Agreement"), among the Company, TSAT,
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") and (ii) an Asset Transfer Agreement dated as of February 6,
1998 (the "TSAT Asset Transfer Agreement"), between the Company and TSAT, a
business combination (the "Restructuring") was consummated.
In connection with the Restructuring, the businesses of TSAT and PRIMESTAR
Partners L.P. (the "Partnership") and the PRIMESTAR(R) distribution businesses
of each of TWE, Newhouse, Comcast, Cox and affiliates of MediaOne (collectively,
the "Non-TSAT Parties") were consolidated into PRIMESTAR. The Restructuring
Agreement provided for, among other things, the contribution to PRIMESTAR (by
asset transfer or merger) of the respective interests in the Partnership of
TSAT, TWE, Newhouse, Cox, Comcast, MediaOne and GE Americom (the "Partnership
Interests") and the respective PRIMESTAR(R) subscribers and certain other
related assets and liabilities of TSAT, TWE, Newhouse, Cox, Comcast and MediaOne
(the "PRIMESTAR Assets and Liabilities"), in exchange for (i) cash or an
assumption of indebtedness by PRIMESTAR, (ii) shares of Class A Common Stock,
$.01 par value per share, of PRIMESTAR ("Class A Common Stock"), (iii) in the
case of TSAT only, shares of Class B Common Stock, $.01 par value per share, of
PRIMESTAR ("Class B Common Stock"), and (iv) except in the case of TSAT and GE
Americom, shares of Class C Common Stock, $.01 par value per share, of PRIMESTAR
("Class C Common Stock"), in each case in an amount determined pursuant to the
Restructuring Agreement. As a result of such transactions, the Partnership
became a wholly-owned subsidiary of the Company.
As a result of the Restructuring, the Company owns and operates the
PRIMESTAR(R) digital satellite business. The Company currently offers a direct
to home ("DTH") satellite service with over 160 channels of digital video and
audio programming throughout the continental United States.
As of December 31, 1998, the approximate ownership of PRIMESTAR's common
stock was as follows:
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Ownership
Name of Beneficial Owner Percentage
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TSAT 37.23%
TWE and Newhouse (collectively) 30.02%
Comcast 9.50%
MediaOne 9.69%
Cox 9.43%
GE Americom 4.13%
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I-1
<PAGE>
TSAT, through its wholly-owned subsidiary, Tempo Satellite, Inc.
("Tempo"), holds a construction permit (the "FCC Permit") issued by the Federal
Communications Commission ("FCC"), authorizing construction of a high power
direct broadcast satellite ("DBS") system consisting of two or more satellites
delivering DBS service in 11 frequencies at the 119 degrees W.L. orbital
position. Tempo is a party to a satellite construction agreement (the "Satellite
Construction Agreement") with Space Systems/Loral, Inc. ("Loral") pursuant to
which Tempo arranged for the construction of two high power direct broadcast
satellites (the "Tempo Satellites"). Construction of the Tempo Satellites has
been substantially completed. On March 8, 1997, one of the Tempo Satellites
("Tempo DBS-1") was launched into geosynchronous orbit, to be stationed in
Tempo's high power orbital position 119 degrees W.L. 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. The other Tempo Satellite ("Tempo DBS-2") presently
serves as a ground spare for Tempo DBS-1. Tempo DBS-1 is currently not
delivering programming to subscribers and is the subject of a contractual
dispute with Loral regarding potential warranty claims by Tempo. Through various
agreements with Tempo, the Company currently has rights to the capacity of the
DBS system being constructed by Tempo at the 119 degrees W.L. orbital location
(the "Tempo Rights").
On January 22, 1999, the Company announced that it had reached an
agreement (the "Hughes Medium Power Agreement") with Hughes Electronics
Corporation ("Hughes"), a subsidiary of General Motors Corporation, to sell its
DBS medium-power business and assets to Hughes for $1.1 billion in cash and
4.871 million shares of General Motors Class H common stock ("GMH Stock") valued
at approximately $225 million, based upon the closing price of GMH Stock on the
date of the purchase agreement (the "Hughes Medium Power Transaction"). The
foregoing purchase price is subject to adjustments for working capital at the
date of closing. In addition, the Company is responsible for the payment of
certain obligations not assumed by Hughes, satisfaction of its funded
indebtedness and the payment of costs, currently estimated to range from $270
million to $340 million, associated with the termination of its high power
business strategy and sale of its medium power assets. The consummation of the
Hughes Medium Power Transaction is subject to various consents from PRIMESTAR's
lenders; restructuring of certain of the Company's indebtedness, as described
below; and other customary conditions.
On February 1, 1999 and in connection with the Hughes Medium Power
Transaction, the Company commenced tender offers (the "Tender Offers") to
purchase 100% of the outstanding principal amount of the Company's 10 7/8%
Senior Subordinated Notes due 2007 (the "Senior Subordinated Notes") at a price
of $670 per $1,000 principal amount and 100% of the outstanding principal amount
of the Company's 12 1/4% Senior Subordinated Discount Notes due 2007 (the
"Senior Subordinated Discount Notes," and together with the Senior Subordinated
Notes, the "Notes") at a price of 67% of the accreted value of the Senior
Subordinated Discount Notes as of February 15, 1999. In addition, PRIMESTAR made
commenced a separate offer to lenders under the Company's Senior Subordinated
Credit Agreement, dated as of April 1, 1998 (the "Interim Loan Agreement"), to
purchase 100% of the outstanding principal amount due thereunder at a price of
$670 per $1,000 principal amount (the "Offer to Purchase"). Each of the Tender
Offers and the Offer to Purchase was subject to a minimum tender condition of
90% of the outstanding principal amount of such issue. In conjunction with the
Tender Offers, PRIMESTAR solicited consents to certain proposed amendments to
the indentures governing the Notes and the Interim Loan that would eliminate
substantially all of the restrictive covenants thereunder and would amend
certain other provisions. Consummation of both the Tender Offers and the Offer
to Purchase was conditioned upon the closing of the Hughes Medium Power
Transaction and other conditions.
Following several extensions, the Tender Offer and the Offer to Purchase
expired on March 25, 1999. The minimum tender conditions were not satisfied
under the Tender Offer and Offer to Purchase, and no securities or loans were
purchased thereunder.
I-2
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Since the announcement of the Hughes Medium Power Agreement and of the
proposed restructuring of the Company's senior subordinated indebtedness
relating thereto (the "Proposed Debt Restructuring"), the Company has been
engaged in negotiations with the representatives of an informal committee (the
"Bondholders' Committee") of holders of Notes and with representatives of an
informal committee (the "Bridge Lenders' Committee" and, together with the
Bondholders' Committee, the "Committees") of holders of loans under the Interim
Loan Agreement, with respect to the possible terms and conditions of the
Proposed Debt Restructuring. In that connection, the Company has entered into
confidentiality agreements with certain representatives of the Committees and
has agreed to pay certain expenses of the Committees, including certain fees and
expenses of their legal counsel and financial advisor. Based on the progress of
such negotiations to date, the Company believes that the Proposed Debt
Restructuring will be consummated on terms satisfactory to the Company and such
Committees, by means of privately negotiated transactions. However, the Company
has not entered into any agreements to date with respect to the terms and
conditions of any such restructuring, and there can be no assurance that the
Proposed Debt Restructuring will be consummated. In the event the Company is
unable to negotiate certain minimum tender conditions in connection with the
Proposed Debt Restructuring, the Company does not intend to consummate the
Hughes Medium Power Transaction.
If the Hughes Medium Power Transaction is not consummated for any
reason, PRIMESTAR currently intends to continue operating its medium power
business, which may require the restructuring or refinancing of certain of its
liabilities. There can be no assurance that such restructuring or refinancing,
if necessary, would be accomplished on terms acceptable to the Company.
In a separate transaction, the Company announced that TSAT and the
Company had reached an agreement (the "Hughes High Power Agreement") with Hughes
to sell the Tempo Satellites, Tempo's 119 degrees W.L. orbital location license
and the Tempo Rights to Hughes, for aggregate consideration valued at $500
million (the "Hughes High Power Transaction"). Due to the fact that regulatory
approval is required to transfer Tempo DBS-1 and Tempo's FCC authorization for
119 degrees W.L. to Hughes, the Hughes High Power Transaction will be completed
in two steps. Effective March 10, 1999, the first closing of the Hughes High
Power Transaction (the "First Closing") was consummated whereby Hughes acquired
Tempo DBS-2 and PRIMESTAR's option to acquire Tempo DBS-2 (the "Tempo DBS-2
Option") for aggregate consideration of $150 million. Such consideration was
comprised of the following: (i) $9,750,000 paid to PRIMESTAR for the Tempo DBS-2
Option (including any amounts allocable to the Partnership in consideration of
the termination and relinquishment of the Tempo Rights), (ii) $750,000 paid to
TSAT to exercise the Tempo DBS-2 Option and (iii) the assumption by Hughes of
$139,500,000 due to the Partnership from TSAT in exchange for Tempo DBS-2.
Simultaneously with the First Closing, Hughes repaid the liability to the
Partership that Hughes assumed.
With regard to the sale of the remaining assets contemplated by the
Hughes High Power Agreement (the "Second Closing"), Tempo has been notified that
Tempo DBS-I experienced power reductions which occurred on March 29, 1999 and
April 2, 1999. Although the Company does not believe the extent of such power
reductions is significant, a definitive assessment of the impact on Tempo DBS-I
is not yet complete. Notwithstanding the foregoing, the Second Closing, which is
subject to the receipt of appropriate regulatory approvals and other customary
closings conditions, is expected to be consummated in the second quarter of
1999.
Effective February 6, 1998, PRIMESTAR and TSAT entered into an Agreement
and Plan of Merger (the "TSAT Merger Agreement") providing for the merger of
TSAT with and into PRIMESTAR, with PRIMESTAR as the surviving corporation (the
"TSAT Merger"). In connection with the First Closing, the Company and TSAT
terminated the TSAT Merger Agreement.
In connection with the Restructuring, TSAT has been identified as the
acquiror for accounting purposes and the predecessor for financial reporting
purposes due to the fact that TSAT owns the largest interest in the Company
immediately following the consummation of the Restructuring. Accordingly,
references herein to the Company refer to TSAT and its subsidiaries for the
periods prior to the Restructuring and to PRIMESTAR and its subsidiaries for the
periods subsequent to the Restructuring.
I-3
<PAGE>
TSAT was incorporated in Delaware in November 1996. Prior to the
Distribution (as defined below), the Company was wholly owned by Tele-
Communications, Inc. ("TCI"), which, through various subsidiaries, was engaged
in the business of distributing PRIMESTAR(R) from December 1990 until the
consummation of the Distribution. 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 Distribution.
TSAT was formed to own and operate certain businesses of TCI
Communications, Inc. ("TCIC"), a subsidiary of TCI, constituting TCI's
collective interests in the digital satellite business. On December 4, 1996 (the
"Distribution Date") TCI distributed, (the "Distribution"), as a dividend, all
of the issued and outstanding TSAT common stock to the holders of record of
shares of Tele-Communications, Inc., Series A TCI Group Common Stock, $1.00 par
value per share (the "Series A TCI Group Stock"), and Tele-Communications, Inc.,
Series B TCI Group Common Stock, $1.00 par value per share (the "Series B TCI
Group Stock" and, together with the Series A TCI Group Stock, the "TCI Group
Stock"), on the basis of one share of TSAT Series A common stock for each ten
shares of Series A TCI Group Stock, and one share of TSAT Series B common stock
for each ten shares of Series B TCI Group Stock.
Certain statements in this Annual Report on Form 10-K 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 Company, 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 satellite delivered television programming;
uncertainties inherent in proposed business strategies and development plans,
including uncertainties regarding the Proposed Debt Restructuring; the Hughes
High Power and Medium Power Transactions; 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 the inability to comply with,
government regulation, including, without limitation, regulations of 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 Company'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 Company's existing medium power
satellite television business; reliance on software programs used by the Company
or its suppliers containing problems related to the Year 2000; and other factors
referenced in this Report. These forward-looking statements speak only as of the
date of this Report. The Company 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 Company's expectations
with regard thereto or any change in events, conditions or circumstances on
which any such statement is based.
(b) Financial Information about Industry Segments
---------------------------------------------
Not applicable.
(c) Narrative Description of Business
---------------------------------
I-4
<PAGE>
Industry Overview
General
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Digital satellite television services use communications satellites,
broadcasting at Ku-band or higher frequencies, to transmit multichannel video
programming directly to consumers, who receive such signals on home satellite
dishes ("HSDs"). Such satellites operate in geosynchronous orbit above the
equator, from orbital positions or ''slots'' allocated by international
agreement to the U.S. and other national governments and assigned by such
governments in accordance with local law. Orbital slots are designated by their
location east or west of the zero meridian, measured in degrees of longitude,
and comprise both a physical location and an assignment of broadcast spectrum in
the applicable frequency band. The assigned spectrum is divided into 32
frequency channels. Such frequency channels are sometimes referred to as
''transponders'' because each transponder on a satellite generally transmits on
one of such channels. At standard levels of digital compression technology
currently deployed, each frequency channel can be converted on average into
eight or more analog channels of video programming (depending on the video
density of the programming), thereby enabling the digital satellite service
operator to offer a broader variety of programming choices than analog satellite
systems. Advanced compression technologies currently being tested are expected
to result in substantially greater compression ratios. Digital technology
enables subscribers to receive laser disc-quality picture and compact disc-
quality sound from the satellite.
The operator of a digital satellite television service typically enters
into agreements with programmers, who deliver their programming content to the
digital satellite service operator via commercial satellite, fiber optics or
microwave transmissions. The digital satellite service operator generally
monitors such signals for quality, and may add promotional messages, public
service programming or other system-specific content. The signals are then
digitized, compressed, encrypted and combined with other programming sharing a
given transponder. Each transponder's signal is then uplinked, or transmitted,
to the transponder owned or leased by the service operator on the service's
satellite, which receives and retransmits the signal to HSDs configured and
authorized to receive it.
In order to receive programming, a subscriber requires (i) a properly
installed HSD, which includes a dish-shaped antenna, low noise block converter
(''LNB'') and related equipment, (ii) an integrated receiver/decoder (''IRD,''
sometimes referred to herein as the ''satellite receiver'' or ''set-top box''),
which receives the data stream from each broadcasting transponder, separates it
into separate digital programming signals, decrypts and decompresses those
signals that the subscriber is authorized to receive and converts such digital
signals into analog radio frequency signals, and (iii) a television set, to view
and listen to the programming contained in such analog signals. A subscriber's
IRD is generally connected to the digital satellite service operator's
authorization center by telephone, to report the purchase of pay-per-view
channels.
The FCC authorizes two types of satellite services for transmission of
television programming: Broadcast Satellite Service (''BSS''), which operates at
high power in the Ku-band, and Fixed Satellite Service (''FSS''), which includes
medium power services transmitting in the Ku-band, as well as low power analog
services transmitting in the C-band. Both high power BSS satellites and medium
power FSS satellites are used for digital satellite television services. High
power signals can generally be received by HSDs of approximately 14 to 18 inches
in diameter (depending on the geographical location of the HSD and wattage per
channel), while medium power signals require HSDs of 27 to 39 inches in diameter
(depending on the geographical location of the HSD and wattage per channel).
Low power signals, such as those used by C-band DTH satellite services, require
still larger HSDs.
I-5
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Generally, both high power and medium power digital satellite services provide
the same high video and audio quality. However, in certain situations medium
power services may be more susceptible to interference from adjacent satellites
than high power services. High power services have the benefit of certain
regulatory safeguards instituted by the FCC to protect BSS broadcast signals
from interference from other sources. Under the FCC's current policy, BSS
orbital locations are spaced at greater intervals than FSS orbital locations.
There are 9 degrees of longitude between adjacent BSS orbital slots, as compared
to 2 degrees between adjacent FSS locations. The smaller interval between FSS
orbital locations, together with their lower power, requires the use of a
relatively large HSD to prevent interference. Newly assigned FSS license holders
are required to coordinate their satellite designs with the satellites
previously existing at adjacent orbital locations. However, such coordination
efforts between FSS license holders may not be sufficient to resolve any
interference that may occur, and an FSS license holder may not have adequate
recourse if the FCC assigns an adjacent location to another user that results in
signal interference.
In 1982, the FCC allocated a spectrum within the Ku-band for BSS services.
Eight BSS orbital slots, each with 32 frequencies, have been reserved by the FCC
for use by domestic DBS providers. Three of those orbital slots (101 degrees
W.L., 110 degrees W.L. and 119 degrees W.L.) provide full CONUS visibility.
DirecTv, Inc., a Subsidiary of Hughes ("DirecTv"), and United States Satellite
Broadcasting Corporation ("USSB") are the only entities licensed for the 101
degrees W.L. orbital slot, with a total of 32 transponders. MCI
Telecommunications Corporation/WorldCom ("MCI/WorldCom"), in partnership with
The News Corporation Limited ("News Corp."), acquired FCC authorizations to
build and operate a DBS service at the 110 degrees W.L. orbital location, using
28 transponders. EchoStar Communications Corporation ("EchoStar") holds FCC
authorizations with respect to one of the remaining four transponders at 110
degrees W.L. and USSB holds FCC authorizations with respect to the other three
transponders at 110 degrees W.L. EchoStar's DBS service uses 21 transponders at
the 119 degrees W.L. orbital location and Tempo's FCC Permit authorizes it to
build a DBS service using the remaining 11 transponders at 119 degrees W.L.
Digital Satellite Services Business
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Digital satellite television has been one of the fastest selling consumer
electronics products in the U.S. history. As of December 31, 1998, the
installed base for digital satellite services consisted of approximately 8.7
million active subscribers nationwide, as compared to approximately 6.2 million,
4.4 million and 2.2 million subscribers at December 31, 1997, 1996 and 1995,
respectively.
The following table shows the approximate percentage of digital satellite
television subscribers served by PRIMESTAR, DirecTV (combined with USSB) and
EchoStar:
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As of December 31,
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1998 1997
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PRIMESTAR /1/ 26% 32%
DirecTV 52% 51%
EchoStar 22% 17%
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/1/ 1997 percentage reflects subscribers served by all distributors of
PRIMESTAR(R).
The Company believes that the following factors will contribute to the
growth of the digital satellite services business.
I-6
<PAGE>
Demand for More Choice in Television Programming, Reliable Service and Better
Quality Picture and Sound. Prior to the growth of cable television services,
television viewers were offered a relatively limited number of channels. As the
number of channels increased, consumer demand for more programming choices also
increased. As a result, the multichannel video industry has experienced
significant growth, both in terms of the number of content producers creating
programming and the number of channels available to viewers. The Company expects
that this trend will continue and consumers will desire even more programming
choices than are available through cable television. The Company believes
consumers are also demanding more reliable service and improved picture quality
compared to what has historically been offered by over-the-air VHF and UHF
broadcasters and by cable. The two most recent consumer surveys of cable and
satellite customers by J.D. Power and Associates found that digital satellite
television providers outranked cable providers in customer satisfaction. In the
surveys, PRIMESTAR(R) ranked number one in customer satisfaction, ahead of both
EchoStar and DirecTv.
Large Potential Customer Base. The Company believes that there is significant
unsatisfied demand for high quality, reasonably priced television programming.
According to industry sources, there are approximately 98 million television
households in the U.S., all of which are potential subscribers to satellite
programming services. Of the estimated 98 million television households in the
U.S., approximately 33 million do not currently subscribe to cable television
services, and the Company believes that many of the 65 million existing cable
television subscribers have a desire for greater variety of programming,
improved video and audio quality, better customer service and fewer transmission
interruptions. Moreover, the Company believes that cable subscribers, who
typically spend approximately $42 per month on multichannel programming, and,
more generally, cable subscribers who purchase premium or pay-per-view services,
represent a particularly lucrative potential customer base for providers of
satellite programming services.
Households Unserved or Underserved by Cable. The Company believes that
households not passed by cable and households served by cable systems with fewer
than 40 channels provide an opportunity for customer growth. Cable systems with
sufficient channel capacity (generally 54 or more channels) and good quality
cable plant will not require costly upgrades to add bandwidth or incur
significant maintenance costs in order to offer digital programming services.
The Company believes, however, that based on current compression technology, the
number of channels that a cable system would have to remove from its existing
service offerings in order to use them for digital services may, in the case of
cable systems with limited channel capacity, degrade the value of their analog
programming offering and alienate subscribers. Accordingly, pending the
availability of advances in digital compression technology now under
development, such smaller cable systems will be required to incur substantial
costs to upgrade their plant to expand channel capacity before they can
introduce digital services. Due to the substantial capital investment required
for wide scale deployment of fiber-based digital services, several cable
companies have delayed originally-announced deployment schedules.
Commercial Subscribers. The Company believes that digital satellite services
are well suited for hotels, motels, bars, multiple dwelling units ("MDUs"),
businesses, schools and other organizations with commercial applications, as
well as for non-residential buildings which are not easily accessible by cable.
The Company expects that some commercial organizations will in the future create
increased demand for educational, foreign language, and other niche video and
audio programming, as well as data services, in addition to the Company's wide
variety of entertainment, sports, news and other general programming.
I-7
<PAGE>
The PRIMESTAR(R) Service
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The Company is a leading provider of digital satellite services in the U.S.
The Company owns and operates the PRIMESTAR(R) digital satellite business, which
is the second largest digital satellite business and the eighth largest
multichannel video programming distribution business in the U.S., measured by
the number of subscribers as of December 31, 1998.
The Company currently offers a medium power satellite service with over 160
channels of digital video and audio programming throughout the continental
United States. The medium power service is transmitted via GE-2, which is owned
by GE Americom and located at the 85 degrees W.L. orbital position. The
PRIMESTAR(R) medium power service served approximately 2.3 million subscribers
as of December 31, 1998.
PRIMESTAR(R) 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. PRIMESTAR secures its rights to broadcast
such programming via satellite by entering into non-exclusive affiliation
agreements with programming vendors. In addition to video services, PRIMESTAR(R)
includes digital audio services and regional weather services covering ten
regions of the country.
Digital satellite television service requires that subscribers install HSDs
for a clear line of sight to the transmitting satellite. GE-2 provides coverage
to the entire continental U.S. with favorable ''look'' angles, meaning that the
satellite is viewable from the entire continental U.S. at angle elevations high
enough to facilitate installation of HSDs in most areas. Additionally, GE-2's
orbital location over the East coast of the U.S. is considered favorable because
the signal travels a shorter path through the relatively moist air of the
Eastern seaboard, minimizing potential interference from bad weather. The
overall PRIMESTAR(R) system is designed for high availability, and operates
consistently without any significant interference approximately 99.8% of the
time.
As currently in effect, an Amended and Restated Memorandum between GE Americom
and the Company (the "GE-2 Agreement") for the leasing of GE-2 provides for an
initial lease term extending through February 2003, with an option to extend the
term through the end-of-life of GE-2 (the "End-of-Life Option"). The End-of-
Life Option has expired without exercise. However, the Company remains in
discussions with GE Americom regarding alternatives for extension of the GE-2
Agreement, and the Company will continue to assess other alternatives if the
Hughes Medium Power Transaction is not consummated. No assurance can be given
that the parties will agree to an extension or that any other alternatives will
be confirmed.
Pursuant to the GE-2 Agreement, GE Americom provides the Company with service
on 24 transponders on GE-2. The Company is currently entitled to non-
preemptible service on 18 of the transponders on GE-2 and preemptible service on
six transponders. Preemptible transponders are transponders that may be
reassigned to restore service to protected customers if such protected customers
experience transponder or satellite failure. The Company does not believe that,
during the early stages of GE-2's operational life, the use of preemptible
transponders is likely to interfere in any material respect with the operation
of the PRIMESTAR(R) service. The Company currently receives "orbital location
protected service" on all 24 of its transponders, meaning that if there is a
failure of GE-2, the Company will be entitled to restore the lost service on
another GE Americom medium power satellite, GE-3, which was successfully
launched on September 4, 1997 into the same 85 degrees W.L. orbital position
used by GE-2. Even in those circumstances, the six preemptible transponders,
although protected, would remain preemptible. Upon the successful launch of
another GE Americom medium power satellite, GE-4 ("GE-4"), the Company's six
preemptible transponders will become non-preemptible.
I-8
<PAGE>
If PRIMESTAR extends the GE-2 Agreement and intends to use more than six of
its transponders for uses other than providing the PRIMESTAR(R) service, GE
Americom may reduce service from orbital location protected service to
nonpreemptible or preemptible service, as the case may be.
PRIMESTAR currently uses proprietary authorization, encryption and digital
compression technology developed by an affiliate of General Instruments
Corporation ("GI"). The Company believes that the compression technology it uses
produces picture and sound quality comparable to that of other digital satellite
television providers. Uplinking, encoding and compression services are provided
by National Digital Television Center, Inc., a subsidiary of TCI (''NDTC''),
under a Master Digital Transmission Agreement between NDTC and the Company.
Although the satellite receiver used by PRIMESTAR(R) customers is not currently
compatible with certain other compression systems, it can be upgraded to be
compatible through equipment provided by GI, the cost of which equipment is
projected to range from $150 to $200 at commercial volumes.
Programming. At December 31, 1998, the Company offered consumers programming
packages as described in the table below, which provide 76 to over 100 channels
of audio and video programming depending upon the package. Each of the packages
includes a monthly programming guide. Most of the Company's customers rent
their equipment and pay an additional $3 - $10 monthly charge for equipment
rental, which includes free maintenance and customer service.
<TABLE>
<CAPTION>
Programming Package Monthly price (1)
- ------------------- -----------------
<S> <C>
PRIME Value $22.99
PRIME Variety $27.99
PRIME Entertainment $34.99
PRIME Entertainment Plus $42.99
PRIME Hits $49.99
PRIME Hits Plus $55.99
</TABLE>
- ----------------------------------------
(1) Monthly price excludes lease fee.
As of December 31, 1998, PRIMESTAR(R) also offered 15 channels of pay-per-view
movies and events; a regional sports tier and other sports packages that provide
expanded coverage of regular-season, out-of-market sports events; and niche
services such as PBS and east and west coast feeds of ABC, NBC, CBS and FOX (to
those subscribers unable to receive such networks through local affiliates).
Such offerings were made on an a la carte basis.
The Company contracts with and bills its residential and commercial
subscribers directly for the PRIMESTAR(R) service. Most residential subscribers
may terminate their service at any time upon notice to the Company. Commercial
subscribers' service contracts automatically renew for successive terms unless
the commercial subscribers provide 90 days' prior written notice to the Company
of their intent to terminate their service at the end of the current term. In
addition, a commercial customer may terminate the contract prior to the
expiration of the contractual term by paying a cancellation fee. Satellite
reception equipment reclaimed from terminating subscribers is tested,
refurbished as necessary and placed back into service.
I-9
<PAGE>
Distribution. The Company distributes PRIMESTAR(R) services through multiple
distribution channels, including sales agents, full-service providers,
telemarketing agents and consumer retail outlets, such as RadioShack(R). The
Company has engaged sales agents, (the ''Sales Agents''), each of which has
extensive experience distributing C-band DTH satellite equipment. Sales Agents
generally do not sell directly to customers, but recruit, train and maintain a
network of sub-agents comprised generally of full-service independent satellite
retailers. The sub-agents sell PRIMESTAR(R) services on behalf of the Company
and install, service and maintain customer premises equipment for the Company's
subscribers. Authorization of new customers is provided by the Company's call
centers. Sales Agents are responsible for maintaining their sub-agents'
inventories of HSDs and other customer premises equipment, which are provided by
the Company on consignment.
The Company has also contracted with independent contractors who have
experience in distributing and servicing DTH satellite equipment ("full-service
providers" or "FSPs") to engage them to sell, install and service their own
accounts. The FSPs solicit potential subscribers by making door-to-door sales
calls, setting up booths at special events and otherwise marketing the
PRIMESTAR(R) service to customers in target markets in its authorized
distribution areas. FSPs also install and service customers obtained through
retail outlets and call centers.
The Company pays the Sales Agents and FSPs commissions on equipment leased or
sold, as well as an installation reimbursement to cover the cost of each new
installation. The Sales Agents and FSPs also receive a residual sales
commission for a contractually determined period of time (generally five years).
Sales Agents are responsible for compensating their sub-agents.
The Company also distributes its services through certain national consumer
electronics retailers, including Radio Shack. Pursuant to the Company's
national agreement with Radio Shack, Radio Shack is compensated based on the
number of installations generated. The Company's distribution network is
further supported by local market retailers, such as hardware stores and
convenience stores, which promote the Company's services and further assist the
Company in its distribution efforts.
The Company operates a call center, located in Englewood, Colorado to take
subscription orders and provide both sales support and customer service. In
addition, the Company obtains call center support services from TCI's Boise,
Idaho call center (the "Boise Call Center"), as well as call centers operated on
behalf of the Company by unaffiliated third parties. The call centers offer
customers around-the-clock telephone support for sales, installation,
authorization and billing, as well as for repair and customer service.
Equipment and Installation. Unlike other digital satellite television
services, PRIMESTAR(R) does not require consumers to purchase or finance the
equipment needed to receive its programming. The Company provides the HSD,
satellite receiver and remote control to subscribers for a monthly rental fee
($3 - $10 per month at December 31, 1998), which includes ongoing maintenance
and service at no additional charge. The monthly equipment rental fee is
included in a service package that includes various levels of basic and premium
programming. Satellite receivers are manufactured by GI, and packaged by GI
with remote controls, and HSDs are manufactured by multiple vendors.
In addition to monthly fees for programming and the purchase or lease of
equipment, the Company generally charges new subscribers an installation fee
ranging from $49 to $99. Certain other direct satellite service providers offer
consumers the option of self-installation of the HSD and other equipment for
their digital satellite systems, with an installation kit that retails for
approximately $70.
I-10
<PAGE>
Competition
- -----------
The business of providing video programming to consumers is highly
competitive. The Company faces competition from numerous other companies
offering video, audio and data products and services. The Company's existing and
potential competitors comprise a broad range of companies engaged in
communications and entertainment, including other digital satellite program
providers, cable operators, wireless cable operators, television networks and
local broadcasters and home video products companies, as well as companies
developing new technologies and other purveyors of news, information and
entertainment. Many of the Company's competitors have greater financial,
marketing and programming resources than the Company. The Company expects that
quality and variety of programming, quality of picture and service and cost will
be the key bases of competition.
Advances in communications technology, as well as changes in the marketplace
and the regulatory and legislative environment, are constantly occurring. As a
result, the Company cannot predict the effect that ongoing or future
developments might have on the video programming distribution industry generally
or the Company specifically.
Other Digital Satellite Service Providers. In addition to the Company,
several other companies offer digital satellite services and are positioned to
compete with the Company for home satellite subscribers.
DirecTv successfully launched its first satellite in December 1993, its second
satellite in August 1994 and a third satellite in June 1995 as an in-orbit
spare. The third satellite may also be operated by DirecTv to provide additional
capacity. DirecTv's satellites, which are high power satellites, are located at
101 degrees W.L. DirecTv operates 27 transponders on each of its existing
satellites, enabling it to offer over 175 channels of digital programming.
DirecTv currently has exclusive distribution rights for out-of-market National
Football League telecasts. As of December 31, 1998, according to trade
publications, DirecTv served approximately 4.5 million subscribers.
DirecTv has filed an application with the FCC to expand its existing satellite
system and, in connection therewith, 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 that are not currently allocated domestically for
DBS use, and DirecTv has also requested an FCC rulemaking to secure such
allocations. In addition, DirecTv recently entered into an agreement with
PanAmSat Corp., pursuant to which DirecTv acquired additional Ku-band
transponder capacity on PanAmSat's full CONUS Galaxy III-R satellite located at
95 degrees W. L. Initially, Galaxy III-R will be used to deliver six channels of
foreign-language programming. Under the agreement, DirecTv will initially lease
four Ku-band transponders and will have the ability to expand transponder
capacity to ultimately offer up to 120 channels dedicated for special interest
programming (such as programming services directed to foreign-language
communities), niche programs, future business-to-business applications and high
definition television transmissions. If DirecTV successfully implements this
business plan, it is expected that DirecTV subscribers could utilize one 30 to
36 inch satellite dish to receive both the DBS programming offered from its 101
degrees W.L. orbital location and the FSS programming which may be offered from
95 degrees W.L.
Hughes, DirecTv's parent corporation, also has received an FCC authorization
to construct, launch and operate a Ka-band system, including an authorization
for a Ka-band satellite at 101 degrees W.L., which may permit DirecTV to expand
its satellite services.
I-11
<PAGE>
USSB owns and operates five transponders on one of DirecTv's satellites and
offers a programming service separate from DirecTv's service, with over 25
channels of premium video programming not available from DirecTv. USSB's
selection of programming services (and its use of transponders on the same
satellite used by DirecTv, which enables subscribers to receive both DirecTv and
USSB signals with a single HSD) allows it to be marketed as complementary to
DirecTv, partially offsetting the competitive handicap caused by its relatively
limited channel capacity. As of December 31, 1998, approximately 51% of
DirecTv's 4.5 million subscribers also received USSB programming. In addition,
USSB has a construction permit from the FCC that would allow it to build and
launch a high power DBS system at 110 degrees W.L. (with three transponders).
The 110 degrees W.L. orbital location would enable USSB to provide a second high
power DBS service to the continental U.S., although with limited channel
capacity.
On December 14, 1998, Hughes announced that it had signed a definitive merger
agreement with USSB to acquire the business and assets of USSB. Hughes intends
to combine DirecTv's business with USSB's assets and business at 101 degrees
W.L. The proposed transaction also includes USSB's three frequencies at 110
degrees W.L., which, pending FCC approval, DirecTv intends to use to launch
Spanish-language programming services in 1999. The proposed merger is subject to
USSB shareholder approval and the receipt of appropriate regulatory and
antitrust approvals and is expected to close in mid-1999.
Bell Atlantic Corp. ("Bell Atlantic") and SBC Communications Inc. ("SBC") have
each entered into a multi-year marketing and distribution agreement with DirecTv
and USSB to sell DirecTv's and USSB's satellite-television services to their
telephone customers. GTE Corporation ("GTE") has entered into a similar
agreement with DirecTv, and is in negotiations with USSB to similarly market and
distribute USSB's programming service. The agreements enable Bell Atlantic, SBC
and GTE to offer the satellite equipment for sale, for lease or with a lease-to-
own option. These agreements provide a significant base of potential customers
for the DirecTv and USSB DBS services and allow Bell Atlantic, SBC, GTE, DirecTv
and USSB to offer customers a package of digital entertainment and
communications services. As a result, the Company is at a competitive
disadvantage marketing to these customers.
As of December 31, 1998, EchoStar and its subsidiaries had acquired 11
transponders at 61.5 degrees W.L., one transponder at 110 degrees W.L, 21
transponders at 119 degrees W.L., 24 transponders at 148 degrees W.L. and 22
transponders at 175 degrees W.L.; and had launched one satellite into the 148
degrees W.L. slot, two satellites into the 119 degrees W.L. slot and one
satellite into the 61.5 degrees slot. As of December 31, 1998, EchoStar
distributed approximately 150 channels of video and audio programming to the
entire continental United States from its satellite at 119 degrees W.L., and
served approximately 1.9 million subscribers. In addition, EchoStar has an
agreement with Dominion Video Satellite, Inc. ("Dominion") to use 3 of the 8
transponder frequencies assigned by the FCC to Dominion at 61.5 degrees W.L. The
satellite in the 61.5 degrees W.L. slot is equipped with 32 transponders
operating at 120 watts per channel, and includes programming complementary to
that offered by EchoStar's existing service on EchoStar's first two satellites,
such as educational and business programming, and retransmission of broadcast
television signals.
I-12
<PAGE>
On November 30, 1998, EchoStar and MCI/WorldCom announced an agreement for the
transfer to EchoStar of MCI/WorldCom's license to operate a high power DBS
business at 110 degrees W.L. consisting of 28 frequencies. The agreement also
includes the sale of MCI/WorldCom's two satellites currently under construction.
If consummated as currently contemplated, the transaction would enable EchoStar
to combine the capacity of its existing orbital slots at 119 degrees W.L. with
the capacity of the orbital slots at 110 degrees W.L. and allow EchoStar to
provide in excess of 500 channels of programming.
In addition, the International Bureau of the FCC (the "International Bureau")
has granted EchoStar a conditional authorization to construct, launch and
operate a Ku-band domestic fixed satellite into the orbital position at 83
degrees W.L., immediately adjacent to that occupied by GE-2. Contrary to
previous FCC policy which would have permitted operation of a satellite at the
83 degrees 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 degrees 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.
EchoStar has also been granted conditional authorization to construct, launch
and operate a Ku-band domestic fixed satellite at the 121 degrees W.L. orbital
position and two Ka-band domestic fixed satellites, including an authorization
for a Ka-band satellite at 121 degrees W.L.
Foreign satellite systems are also potential providers of digital satellite
services within the United States. Canada, Mexico and other countries have been
allocated various DBS orbital locations which are capable of providing service
to part or all of the continental U.S. In general, non-U.S. licensed satellites
are not allowed to provide domestic digital satellite services in the U.S.
However, in April 1996, the United States entered into a bilateral agreement
with Mexico which would allow, subject to certain conditions, the use of
satellites licensed in Mexico to provide digital satellite services to U.S.
consumers. Pursuant to such agreement, in August 1997, the FCC authorized
Televisa International, LLC ("Televisa") to operate one million receive-only
earth stations in the U.S., subject to certain conditions, to receive direct-to-
home FSS television services from Solidaridad II, a satellite licensed by the
Mexican Government. Televisa owns and operates television broadcast networks and
stations in Mexico, and exports Spanish language programming to broadcast
networks, broadcast stations and cable systems in the U.S. and other countries.
Televisa is presently engaged in the development of direct-to-home FSS
television and related services in Mexico, Latin America, North America and
Europe. Televisa intends to use the Solidaridad II satellite operating in the
Ku-band and located at 113 degrees W.L. to provide an FSS service of
entertainment, sports, news, educational and informational video programming,
primarily in the Spanish language, to customers in the U.S. All of the
transmissions to Solidaridad II would originate in Mexico.
The United States has indicated its willingness to enter into similar
agreements with other countries in North, Central and South America. If the
U.S. government moves forward with these initiatives, or if other countries
authorize digital satellite service providers to use their orbital slots to
serve the U.S. and the U.S. approves of such service, additional competition
could be created. At this time, the Company is unable to predict the effect of
such existing and future foreign satellite services upon its operations.
I-13
<PAGE>
In addition, as indicated above, the FCC has allocated certain U.S. licensed
DBS frequencies to DirecTv and other parties in addition to the frequencies used
to provide their existing DTH satellite services. These frequencies could
provide additional capacity for existing digital satellite operators thereby
enhancing their competitive position relative to the Company. Alternatively,
such presently unused frequencies could enable new competitors to enter the
digital satellite services business. Further, other potential competitors may
provide television programming at any time by leasing transponders from an
existing satellite operator. However, the number of transponders available for
lease on any one satellite is generally limited, making it difficult to provide
sufficient channels of programming for a viable system.
To date, the PRIMESTAR(R) medium power service has been competitively
disadvantaged vis-a-vis other satellite programming distributors due to its
relatively larger dish size. The Company has sought to mitigate this
competitive disadvantage through various programs including its equipment rental
program. PRIMESTAR(R) is marketed as a service, with programming, equipment
rental, maintenance and customer service included in the monthly price. In
addition, each of the PRIMESTAR(R) programming packages includes a monthly
programming guide at no additional charge. The up-front costs to new subscribers
of PRIMESTAR(R), who are charged only an installation fee and the first month's
programming and equipment rental fees, have historically been lower than the up-
front costs to new subscribers of other direct satellite service providers, who
typically must purchase and install an HSD, IRD and related equipment. Moreover,
since the Company generally owns, services and installs all home reception
equipment, the Company protects its subscribers from the inconvenience of
equipment failure, maintenance concerns, self-installation and expired
warranties. The Company believes that when the cost of equipment is factored in,
its service is priced competitively, compared to the respective prices of other
current digital satellite service providers.
C-band Satellite Program Distributors. The Company also competes with C-band
satellite program distributors. C-band systems have been popular (mostly in
rural and semi-rural areas) since the late 1970s, and in the aggregate serve
approximately 2 million subscribers as of December 31, 1998. However, digital
satellite television systems use Ku-band frequencies that can be received by
less expensive systems with significantly smaller dishes than those used with C-
band frequencies. As a result of the smaller dish size, digital satellite
television systems are more widely accepted by consumers than C-band systems,
particularly in urban and suburban areas.
Over the past few years, the C-band industry has been contracting. In an
effort to reverse this trend, several C-band companies are currently
contemplating uniting their resources to promote the C-band satellite technology
in a yet undetermined manner.
Cable Television. Cable television is currently available for purchase by
more than 97% of the approximate 98 million U.S. television households. The
cable television industry is an established provider of multichannel
programming, with approximately 65 million subscribers or approximately 66% of
total U.S. television households. Cable systems typically offer 30 to 80 analog
channels of programming at an average monthly subscription price of
approximately $42.
I-14
<PAGE>
The Company encounters a number of challenges in competing with cable
television providers. First, cable television providers benefit from a strong
position in the domestic consumer marketplace. Second, satellite television
systems generally have not yet found it efficient to provide any local broadcast
programming and, third the Satellite Home Viewer Act of 1994 (the "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 or that receive (or within the past 90 days had received) through a
cable system the signal of a television station affiliated with such network.
Accordingly, PRIMESTAR(R) subscribers who are subject to the foregoing SHVA
restrictions are unable to obtain such programming (which is among the most
popular and desirable video programming) from the Company. Such subscribers
must, instead, receive such programming either through use of a standard
television antenna (traditional rooftop or set-top antenna) or by purchasing
that level of cable service which includes such programming. Furthermore, since
reception of digital satellite signals requires clear line of sight to the
satellite, it may not be possible for some households served by cable to receive
PRIMESTAR(R) as a result of large adjacent structures or other obstacles. In
addition to households lacking a clear line of sight to the satellite,
PRIMESTAR(R) is not available to households in apartment complexes or other MDUs
that do not facilitate or allow the installation of satellite television
equipment. Lastly, because IRDs are currently significantly more expensive than
analog cable converters, existing cable operators are able to offer their
subscribers the ability to have fully functional cable on multiple television
sets in a household without significant additional cost to the customer.
While cable companies currently serve a majority of the U.S. television
market, the Company believes many may not be able to provide the quality and
variety of programming offered by digital satellite service providers until they
significantly upgrade their coaxial systems. Many cable television providers are
in the process of upgrading their systems and other cable operators have
announced intentions to make significant upgrades. Many proposed upgrades, such
as conversion to digital format, fiber optic cabling, advanced compression
technology and other technological improvements, when fully completed, will
permit cable companies to increase channel capacity, thereby increasing
programming alternatives, and to deliver a better quality signal. In addition,
the expanded capacity may be used to provide interactive and other services.
Many of the largest cable systems in the U.S. have announced plans to offer
access to telephony services through their existing cable equipment, and have
entered into agreements with major telephony providers to further these efforts.
In some cases, certain cable systems have actually commenced trial offerings of
such services. If such trials are successful, many consumers may find cable
service to be more attractive than digital satellite service for the reception
of programming. However, although cable systems with adequate available
bandwidth may offer digital service without major rebuilds, the Company believes
that, given the limits of current compression technology, other cable systems
with more limited bandwidth will require major physical plant upgrades to
provide digital service, and that such upgrades will require substantial
investments of capital and time to complete industry-wide. As a result, the
Company believes that there will be a substantial delay before cable systems can
offer programming services equivalent to digital satellite television providers
on a national basis and that some cable systems may never be upgraded, subject
to advances in compression technology.
I-15
<PAGE>
Wireless Cable Systems. The Company also competes with multi-channel multi-
point distribution systems, which deliver programming services over microwave
channels to subscribers with special antennas, and other so-called ''wireless
cable'' systems. Wireless cable systems operating in the U.S., currently serve
an estimated 1.0 million subscribers, mostly with limited channel, analog
service. Wireless cable systems typically offer 20 to 30 channels of programming
with inferior image and sound quality compared to digital satellite services.
However, wireless cable systems may provide their customers with local
programming, a potential advantage over digital satellite television systems,
and developments in compression technology are expected to significantly
increase the number of channels and video and audio quality of wireless cable
systems. Nevertheless, in order to upgrade their systems to implement digital
transmission of high quality video and audio signals, wireless cable operators
will be required to install new digital decoders in customers' homes and make
certain modifications to transmission facilities, at a potentially significant
cost. Wireless cable also generally requires direct line of sight from the
receiver to the transmitter tower, which creates the potential for substantial
interference from terrain, buildings and foliage.
Telephone Companies. In addition to Bell Atlantic's, SBC's and GTE's
agreements with DirecTv and USSB, certain regional telephone companies and long
distance telephone companies could become significant competitors in the future,
as they have expressed an interest in becoming subscription television and
information providers. Legislation enacted by Congress in 1996 removed barriers
to entry which previously inhibited telephone companies from competing, or made
it more difficult for telephone companies to compete, in the provision of video
programming and information services. Certain telephone companies have received
authorization to test market video and other services in certain geographic
areas using fiber optic cable and digital compression over existing telephone
lines. Estimates for the timing of wide-scale deployment of such multichannel
video service vary, as several telephone companies have delayed originally
announced deployment schedules. In addition, several large telephone companies
have announced plans to acquire or merge with existing cable and wireless cable
systems.
As more telephone companies begin to provide subscription television
programming and other information and communications services to their
customers, additional significant competition for subscribers will develop.
Among other things, telephone companies have an existing relationship with
substantially every household in their service area, substantial financial
resources, and an existing infrastructure and may be able to subsidize the
delivery of programming through their position as the sole source of telephone
service to the home.
VHF/UHF Broadcasters. Most areas of the U.S. are covered by traditional
territorial over-the-air VHF/UHF broadcasts, which typically include three to
ten channels in most markets. These stations provide local, network and
syndicated programming free of charge, but each major market is generally
limited in the number of available programming channels. However, the FCC has
recently allocated additional digital spectrum to licensed broadcasters. During
a transition period ending in 2006, each existing television station will be
able to transmit programming on a digital channel that may permit multiple
programming services per channel.
Private Cable. Private cable is a multi-channel subscription television
service where the programming is received by a satellite receiver and then
transmitted via coaxial cable through private property, often MDUs, without
crossing public rights of way. Private cable generally operates under an
agreement with a private landowner to service a specific MDU, commercial
establishment or hotel. These agreements are often exclusive arrangements with
lengthy (e.g., ten-year) terms, and private cable systems generally are not
subject to substantial federal, state or local regulations. The FCC recently
amended its rules to allow the provision of point-to-point delivery of video
programming by private cable operators and other video delivery systems in the
18 gigahertz band. Private cable operators compete with PRIMESTAR(R) for
customers within the general market of consumers of subscription television
services.
I-16
<PAGE>
Local Multi-Point Distribution Service. In March 1997, the FCC announced its
intention to offer two local multi-point distribution service ("LMDS") licenses,
one for a block of spectrum 1150 megahertz wide and the other for a 150
megahertz-wide block, in each of 493 Basic Trading Areas pursuant to an auction
in the case of mutually exclusive applications. Incumbent local exchange
carriers and cable operators will not be allowed to obtain in-region licenses
for the larger spectrum block for three years. The FCC recently completed its
auction of the LMDS licenses. While 122 licenses were not sold, the FCC stated
that 95% of the population will be covered by those licenses sold. The FCC
plans to re-auction those licenses not sold. The broadband 28 and 31 gigahertz
LMDS spectrum allocation may enable LMDS providers to offer subscribers a wide
variety of audio, video and interactive service options.
Utilities. In 1996, Congress enacted legislation authorizing utility holding
companies and their subsidiaries to provide video programming services,
notwithstanding the Public Utility Holding Company Act. Utilities must
establish separate subsidiaries and must apply to the FCC for operating
authority. Several such utilities have been granted broad authority by the FCC
to engage in activities which could include the provision of video programming.
Other Providers of News, Information and Entertainment. The Company also
competes broadly with other providers of news, information and entertainment to
consumers.
Regulatory Matters
- ------------------
General. Pursuant to the Communications Act of 1934, as amended (the
"Communications Act"), the FCC regulates the use of radio spectrum in the United
States. United States DBS licensees and permittees are subject to the
regulatory authority of the FCC. Although the non-technical aspects of DBS
operations are generally subject to less regulation than other communications
services, some regulations do apply. In addition, the FCC has proposed to adopt
regulations that will affect DBS licensees and permittees.
Currently, a DBS permittee must complete and file with the FCC a satellite
construction contract with respect to its authorized satellite station(s) within
one year of the grant of the construction permit. DBS permittees who received
their permits prior to January 19, 1996 have six years from the date of permit
grant to begin operating their DBS systems. New permits and permit extensions
granted after January 19, 1996 provide for a four year construction period.
Upon completion of construction, the FCC authorizes DBS permittees to launch and
operate their satellites. Those DBS providers which control the video
programming they distribute, and DBS licensees which offer broadcast service,
are subject to equal employment opportunity requirements. DBS providers
offering non-broadcast service from their DBS satellites are licensed to operate
for ten years, while those offering broadcast services (that is, services
available on a non-subscription basis) are licensed for five years. FCC
licenses must be renewed at the end of each license term. FCC licenses are
generally renewed in the ordinary course, absent misconduct by the licensee.
In 1995, the FCC adopted several new service rules for DBS permittees and
licensees. The FCC established a requirement that those entities acquiring DBS
permits or licenses after January 19, 1996, must provide service to Alaska and
Hawaii if such service is technically feasible. It also required that all
existing DBS permittees and licensees provide service to Alaska and Hawaii from
at least one of their currently assigned orbital positions or relinquish their
western orbital location. In addition, the FCC revised its rules with respect
to licensees' ability to use portions of their satellite capacity for non-DBS
services. The FCC provided that licensees must principally use their DBS
authorizations for DBS service, but that during their first five years in
operations, licensees may offer non-DBS services. After five years, licensees
may continue to provide non-DBS services so long as at least half of their total
satellite capacity at a given orbital location is used for DBS service.
I-17
<PAGE>
In December 1996, the International Bureau concluded that foreign ownership
restrictions do not apply to subscription DBS service. This decision, however,
is subject to a pending review by the FCC, and the current Administration
requested that the FCC reconsider its decision in a general rulemaking
proceeding. As described further below, the FCC has adopted a Notice of Proposed
Rulemaking and sought comments on the applicability of foreign ownership
restrictions to subscription DBS providers and FSS-DTH providers, such as the
Company. The Notice of Proposed Rulemaking is still pending as described below.
On February 26, 1998, the FCC released a Notice of Proposed Rulemaking to
consolidate the construction permit and licensing process for DBS providers, to
consolidate the DBS rules with the FCC's other satellite rules, and to update
the DBS technical rules. The FCC also requested comments on the application of
foreign ownership limitations to subscription DBS and FSS-DTH providers; whether
any limitations on cable/DBS cross-ownership are warranted and whether the FCC
should have a rule of general applicability restricting cable interests in DBS
licensees; whether there should be a ban on ownership of more than one DBS full
CONUS orbital position; and how the delivery of DBS service can be improved to
Alaska, Hawaii, and the U.S. territories and possessions.
In December 1998, the FCC adopted a requirement that DBS providers, including
medium power DTH providers, such as the Company, reserve four percent of their
channel capacity for noncommercial programming of an educational and
informational nature. In addition, the Commission imposed access requirements
for federal political candidates and limited the charges operators could demand
from such candidates for advertising time.
The Company cannot predict how application of the FCC's current or proposed
rules will affect its own operations or the operations of its competitors, or
the applications pending at the FCC as described below in "Required FCC
Approvals."
The satellite that PRIMESTAR currently uses and the satellites it proposes to
use in the future are geostationary satellites ("GSOs"). At present, no
satellite systems except other GSO systems have been authorized to use the
frequency bands in which the Company's satellites transmit and will transmit in
the future.
In 1997, an application was filed at the FCC by SkyBridge L.L.C. to construct
and operate a nongeostationary satellite system ("NGSO") that would share
frequencies used by the Company's satellites and other GSO satellites. In
addition, the FCC initiated a rulemaking proceeding to address potential
regulations for NGSO systems such as the one proposed by SkyBridge L.L.C. At
the World Radiocommunication Conference ("WRC") in late 1997, the International
Telecommunications Union ("ITU") adopted "provisional" technical rules that
would authorize frequency sharing between GSO and NGSO systems. These
provisional rules are subject to affirmation and/or modification at a WRC
meeting scheduled for 1999.
On November 19, 1998, the FCC released a Notice of Proposed Rulemaking whereby
it proposed to implement domestically the allocation made at WRC in late 1997,
to permit NGSO operations in the Ku-band. The Notice of Proposed Rulemaking
also requested comment on a Petition for Rulemaking filed by Northpoint
Technologies ("Northpoint") to permit the terrestrial retransmission of local
television signals and the provision of data services to DBS service subscribers
operating in the DBS services band. On January 11, 1999, an application was
filed with the FCC requesting authorizations so that parties could begin using
the Northpoint technology to provide terrestrial services to consumers using the
DBS services band.
I-18
<PAGE>
The Company and many other users and operators of GSO satellite systems have
expressed concerns regarding potential technical interference to GSO satellites
that could be caused by NGSO systems, including those that might operate
pursuant to the 1997 WRC provisional rules. The Company has participated and
other GSO users and operators are participating in FCC proceedings and in the
preparation process for the WRC meeting in 1999 in an attempt to assure that
any rules finally adopted by the ITU and the FCC for GSO/NGSO frequency sharing
would not result in unacceptable technical interference to GSO transmissions.
The Company cannot predict the outcome of these various proceedings or what
effect, if any, GSO/NGSO frequency sharing and GSO/terrestrial sharing would
have on its technical operations or business.
In addition, regulations promulgated by governmental entities other than the
FCC may affect the distribution of programming by DBS providers. The SHVA
provides that only "unserved households" are permitted to receive distant
network signals. In other words, the SHVA prohibits the retransmission by a
satellite carrier of the 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.
The Company, the National Association of Broadcasters, certain network-
affiliated television stations and their respective affiliate associations have
entered into a Settlement and Compliance Agreement, which provides for pre-
screening techniques for customers based on zip codes 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.
In response to a petition for rulemaking filed by EchoStar and the National
Rural Telecommunications Cooperative as well as two federal court rulings
regarding the delivery of distant network signals to consumers that were not
qualified to receive those signals pursuant to SHVA, the FCC released a Notice
of Proposed Rulemaking on November 17, 1998 seeking comments on the way it
defines, measures, and predicts the strength of television signals. Television
signal intensity is the key element in determining whether a household is
"unserved" by a broadcast network station and is, therefore, eligible to receive
a distant network signal using a home satellite dish pursuant to SHVA. As
described above, only those consumers that are "unserved", meaning unable to
receive an over-the-air signal of Grade B intensity of a particular local
network station using rooftop antennae, are eligible to receive that network's
distant signal from a satellite provider pursuant to SHVA.
On February 2, 1999, the FCC released a Report and Order addressing the way
it measures and predicts the strength of television signals for the purposes of
the SHVA. The FCC declined to adopt a definition for "Grade B signal" solely
for the purposes of the SHVA. However, the FCC adopted a methodology for
measuring signal strength at individual households. In addition, the FCC
recommended that satellite providers and broadcasters use a predictive model for
determining whether an individual household is "unserved". Finally, the FCC
encouraged Congress to modify the law and permit satellite providers to offer
local into local retransmissions of broadcast signals. The FCC's new rule for
measuring signal strength may impact the number of households who qualify as
"unserved households".
I-19
<PAGE>
The Copyright Office reviewed the SHVA and submitted a report to Congress on
August 1, 1997. Of particular note, the Copyright Office recommended the
adoption of a "red zone/green zone" plan under which satellite carriers
generally would be barred from retransmitting a network-affiliated station to
households located within the local market area (i.e., Area of Dominant
Influence) of another affiliate of the same network, but would be permitted to
retransmit (subject to payment of the applicable SHVA royalty fee) a network-
affiliated station to households located in any Area of Dominant Influence that
is not served by an affiliate of the same network. The Copyright Office further
proposed that a new royalty fee system be established that would permit
satellite carriers to retransmit a network-affiliated station to households
located in the local market of another affiliate upon the payment of a royalty
fee which would be distributed to network affiliates. The Copyright Office also
recommended that the Copyright Act be amended to expressly permit satellite
carriers to retransmit a network affiliated station to households located in
that station's own market. The Copyright Office took no position on whether
there should be a royalty fee payment imposed for such "local into local"
retransmissions. In response to a petition by EchoStar, the Copyright Office
has initiated a proceeding to consider whether the retransmission of a network's
affiliated station within a station's own market is permissible under the
Copyright Act as presently codified. That proceeding is still pending. Lastly,
the Copyright Office recommended that Congress indefinitely extend the satellite
carrier license, similar to the cable compulsory license. The recommendations
of the Copyright Office do not currently have legal force or effect, and will
not have legal force or effect unless and until they are adopted by Congress and
enacted as legislation. In 1998, Congress was unsuccessful in passing
legislation that would allow local into local retransmission of broadcast
signals; however, in January 1999, bills were introduced in the Senate (S. 247
and S. 303) and the House (H.R. 89) which, if enacted, would permit the
retransmission of local broadcast signals within their local broadcast areas.
A Copyright Arbitration Royalty Panel ("CARP"), convened pursuant to the terms
of the SHVA, recommended that the Librarian of Congress adopt an increase in the
royalty fees paid by satellite carriers for the distribution of superstations
and network affiliates directly to homes to a level commensurate with fair
market value. Specifically, the CARP recommended that the rates be increased
from $0.06 per subscriber per month for network signals and $0.175 ($0.14 for
certain "syndex proof" stations) per subscriber per month for superstations, to
a uniform rate of $0.27 per subscriber per month for all signals. The satellite
carriers filed petitions with the Librarian of Congress to set aside or modify
the report, arguing, inter alia, that the new rate is unfair because it is well
in excess of the effective royalty rates currently paid by cable television
systems, and because the increases were made effective retroactively to July 1,
1997. The Librarian of Congress released his report on October 27, 1997,
adopting CARP's recommendation. However the Librarian of Congress rejected
CARP's recommendation to make the new fees retroactive, and instead, made the
new fees effective as of January 1, 1998. The SBCA, representing the satellite
carriers, filed a petition with the Librarian of Congress requesting a stay of
the effectiveness of the rate increase, pending judicial review or congressional
action. The Librarian of Congress denied the petition. The SBCA filed an
unsuccessful petition seeking review of the rate increase with the U.S. Court of
Appeals for the District of Columbia. The satellite carriers also have requested
Congress to override the rate adjustment by legislation. The bills introduced
into Congress last year failed; however, S. 247 currently proposes to decrease
copyright rates by 30% for superstations and 45% for networks. No assurance can
be given that the carriers will be able to obtain relief from Congress. With the
rate increase, the Company (and all other direct broadcast satellite and DTH
satellite service providers) may be competitively disadvantaged against cable
operators.
I-20
<PAGE>
The Telecommunications Act of 1996. The Telecommunications Act of 1996 ("1996
Act") clarified that the FCC has exclusive jurisdiction over DTH satellite
services, and that criminal penalties may be imposed for piracy of DTH satellite
services. The 1996 Act also preempted local (but not state) governments from
imposing taxes or fees on DTH services, including DBS, and directed the FCC to
promulgate regulations prohibiting local (including state) governments from
maintaining zoning or other regulations that impair a viewer's ability to
receive video programming services through the use of DBS receive-only dishes in
residential areas. The FCC has adopted rules that it believes comply with the
statutory requirements. Finally, the 1996 Act requires that multichannel video
programming distributors such as DBS operators scramble or block channels
providing indecent or sexually explicit adult programming.
Existing FCC Permits and Licenses. The Company has exercised its option under
an option agreement between the Company and Tempo (the "Tempo Capacity Option
Agreement") to purchase or lease 100% of the capacity of the DBS system being
constructed by Tempo pursuant to the FCC Permit. As the holder of a DBS permit,
Tempo is subject to FCC jurisdiction and review primarily for: (i) authorization
of individual satellites (i.e. meeting minimum financial, legal, and technical
standards) and earth stations, (ii) avoiding interference with other radio
frequency transmitters, (iii) complying with the rules the FCC has established
specifically for holders of U.S. DBS authorizations and (iv) complying with
applicable provisions of the Communications Act.
Under the FCC Permit, the time by which the Tempo Satellites must be
operational was due to expire in May 1998. On April 3, 1998, Tempo filed a
request with the FCC for an extension of that deadline pending FCC review of (i)
TSAT's request for consent to the transfer of control of Tempo to PRIMESTAR (the
"Transfer Application") and (ii) PRIMESTAR's application for consent to the
assignment to PRIMESTAR of the high power DBS authorizations and certain assets
owned by MCI (the "Assignment Application").
On April 30, 1998, the FCC determined that Tempo's satellite at 119 degrees
W.L. was not operational. It did find, however, that an extension of time was
warranted for that orbital location and granted an extension to Tempo for 119
degrees W.L. Such extension was granted until six months after the FCC
determination on the Transfer Application and Assignment Application, with the
condition that Tempo not enter into a lease agreement with PRIMESTAR or any
similar lease arrangement prior to the FCC's decision on the Transfer
Application and the Assignment Application. In addition, Tempo voluntarily
surrendered its permit for 166 degrees W.L. Effective November 19, 1998, the
Company voluntarily withdrew the Assignment Application.
In an order released February 24, 1997, the International Bureau granted,
subject to certain conditions, Tempo's request to launch and operate the Tempo
DBS-1 satellite at 119 degrees W.L. and to test its satellite at 109.8 degrees
W.L. for eight weeks. In addition, the International Bureau required Tempo to
submit to the FCC information required to initiate advance publication and
notification of Tempo's operations in accordance with the Radio Regulations of
the International Telecommunications Union. The International Bureau also
granted Tempo authority to modify its satellite design, as requested in a July
1993 application, and denied oppositions which had been filed by numerous
existing and potential DBS competitors. Tempo DBS-1 was launched on March 8,
1997, and is now stationed in its authorized location at 119 degrees W.L. Tempo
may need to file an application with the FCC for a license to operate the
satellite in orbit. Tempo expects that the FCC would approve any such request,
but cannot assure the ultimate outcome.
There can be no assurance that Tempo will succeed in obtaining all requisite
regulatory approvals for its operations without the imposition of restrictions
on or other adverse consequences to Tempo, TSAT or PRIMESTAR.
I-21
<PAGE>
Required FCC Approvals. On July 18, 1997, TSAT and the Partnership filed the
Transfer Application. The FCC released a Public Notice of the Transfer
Application on July 23, 1997, establishing procedural dates for petitions to
deny and responsive pleadings. EchoStar, CAI Wireless Systems, Inc., the Small
Cable Business Association and Media Access Project filed petitions to deny the
Transfer Application, while DirecTv and the Wireless Cable Association
International filed comments on the Transfer Application. These petitions and
comments request that the FCC deny or dismiss the Transfer Application on a
variety of procedural and substantive grounds or that the FCC condition its
approval of the Transfer Application upon PRIMESTAR's compliance with
restrictions designed to ensure access to programming and protect against cross-
subsidization, among other requests. TSAT and the Partnership filed a joint
opposition to these petitions and comments, and the National Rural
Telecommunications Cooperative filed a reply comment in support of DirecTv's
comments. The petitioners and commenters filed replies to TSAT's and the
Partnership's opposition on September 9, 1997. There can be no assurance that
the FCC's review of these documents or the Transfer Application will be
favorable, or that the FCC will not impose conditions unacceptable to TSAT, the
Company, or the other Restructuring Parties in connection with its review.
In support of the Transfer Application, the Partnership filed two ex parte
--------
filings. The first filing was an economic study prepared by outside economic
consultants which demonstrated that (1) an analysis of the Partnership's
penetration in cabled areas served by a PRIMESTAR Partner and those areas served
by a non-affiliated cable operator does not indicate a systematic strategy by
the Partnership to compete selectively and (2) PRIMESTAR's incentives to compete
are comparable to those of a stand-alone DBS operator. The second filing was an
analysis of the Transfer Application proceedings using the framework established
in the FCC's Bell Atlantic/NYNEX decision, as well as a summary of the
--------------------
Partnership's responses to the arguments and requested conditions raised by
parties during the proceedings. The FCC requested responses to those filings
from interested parties. EchoStar and DirecTV argued that the Transfer
Application should be denied, while BellSouth and the Wireless Cable Association
requested conditions regarding the availability of programming affiliated with
PRIMESTAR's owners. EchoStar also filed a motion seeking access to the
underlying data used by the economic consultants or, in the alternative,
deletion of the economic filing from the records. The Partnership filed a
response to all of these filings on February 20, 1998, rejecting the arguments
raised by the parties, and the Partnership requested expedited approval of the
Transfer Application.
On March 2, 1998, the Chief of the International Bureau submitted to the
Company a letter request for the submission of certain documents previously
submitted to the Department of Justice as well as certain information regarding
the economic study described above and information regarding the programming
interests of the Company's cable owners. These documents have been submitted
pursuant to a suitable protective order. Several parties filed comments
regarding the Company's response, reiterating their objections to the Transfer
Application. The Company filed a reply denying their arguments.
I-22
<PAGE>
On November 25, 1998, Tempo and the Company requested expedited action by the
FCC on the application to transfer control of Tempo to the Company. Several
parties filed responses to that request, objecting to the proposed transfer.
The Company and Tempo filed a join reply to those objections. On January 27,
1999, Tempo filed a joint application with DIRECTV Enterprises, Inc. seeking FCC
approval to assign Tempo's DBS authorization to DIRECTV ("DIRECTV Application").
In addition, Tempo and the Company jointly filed a letter seeking to maintain
the status quo with respect to the Transfer Application until the FCC decides
the DIRECTV Application; therefore, Tempo and the Company requested that the
Transfer Application be held in abeyance and, subject to and contemporaneously
with approval of the DIRECTV Application, that the FCC dismiss the Transfer
Application. EchoStar filed a petition to deny the DIRECTV Application on March
5, 1999, on the basis that DirecTv should not be allowed to control high power
DBS spectrum at three full-CONUS orbital locations and that EchoStar has offered
to purchase the Tempo high power DBS assets. On the same date, the Small Cable
Business Association submitted a request that any grant of the DIRECTV
Application be conditioned on DirecTV providing a digital add-on service that
small cable systems can self-brand, and Media Access Project filed a petition to
deny the application to the extent the FCC did not apply and DirecTV did not
accept application of Section 310(b) of the Communications Act. DirecTV and
Tempo each filed oppositions to these petitions on March 19, 1999. Responses to
the DirecTV and Tempo submissions are due April 2, 1999.
Antitrust Decree. The Partnership and the parties named in the action
described below are subject to the jurisdiction of the U.S. District Court for
the Southern District of New York to ensure compliance with an antitrust consent
decree. In United States v. PRIMESTAR Partners L.P., et al., 93 Civ. 3919 (SDNY
1993) (the ''Federal Decree''), the Partnership and such parties agreed to
refrain from (i) enforcing any provisions of the PRIMESTAR Partnership Agreement
that affect the availability, price, terms or conditions of sale of programming
to any provider of multichannel subscription television, or (ii) entering into
certain other agreements restricting the availability of programming services.
The Federal Decree expires in April 1999 and continues to apply to the Company
since consummation of the Restructuring. The Company believes that it is
currently in compliance with the Federal Decree in all material respects and
that the Federal Decree does not currently have a material adverse effect on the
Company or its operations.
Other
- -----
Legislative, administrative and/or judicial action may change all or portions
of the foregoing statements relating to competition and regulation.
The Company has not expended material amounts during the last three fiscal
years on research and development activities.
There is no one customer or affiliated group of customers to whom sales are
made in an amount which exceeds 10% of the Company's revenue.
Compliance with federal, state and local provisions which have been enacted or
adopted regulating the discharge of material into the environment or otherwise
relating to the protection of the environment has had no material effect upon
the capital expenditures, results of operations or competitive position of the
Company.
The Company had approximately 1,100 employees as of December 31, 1998. None of
the Company's employees are represented by a union and the Company believes its
employee relations are good.
(d) Financial Information about Foreign and Domestic Operations and Export
-----------------------------------------------------------------------
Sales
-----
Not applicable.
I-23
<PAGE>
Item 2. Properties.
- ------ ----------
The Company owns no real estate. The Company has entered into noncancellable
operating leases for all of its facilities, including its corporate headquarters
and call center, both of which are located in Englewood, Colorado. All of such
operating leases expire at various times through 2008. The Company believes that
such facilities are in good condition and are suitable and adequate for its
business operations for the foreseeable future.
Item 3. Legal Proceedings.
- ------ -----------------
There are no material pending legal proceedings to which the Company is a
party or to which any of its property is subject, except as follows:
In a civil action entitled Jerry Wayne Self v. PRIMESTAR By TCI, el al., filed
in the Circuit Court of Jefferson County, Alabama, Civil Action No. 96-831, an
Order of Judgment was entered against PRIMESTAR by TCI on November 12, 1997, in
the amount of $4,257,242, consisting of medical expenses of $15,242, lost wages
of $52,000, future lost wages of $1,040,000, physical and mental pain and
suffering in an amount of $150,000 and punitive damages of $3,000,000. The
judgment arises out of a case in which the plaintiff alleges that on September
19, 1995, he was riding in the front seat of a car that was struck head-on by a
car driven by William Francis Hinton, causing the plaintiff to suffer injuries.
The plaintiff alleges that Hinton was intoxicated and was "acting within the
line and scope of his employment" for PRIMESTAR By TCI when the accident
occurred. "PRIMESTAR By TCI" is a trade name currently or formerly used in
certain jurisdictions by TSAT and/or its predecessors. On December 3, 1997,
TSAT filed an Answer and Affirmative Defenses and a Motion to Set Aside Entry of
Default and Default Judgment or in the Alternative for Relief from Judgment or
in the Alternative a Motion to Reconsider or for a New Trial. On December 12,
1997, the Court entered an order setting aside the Entry of Default and Default
Judgment. PRIMESTAR has agreed to indemnify TSAT for any potential liability
with respect to this matter, to the extent not covered by insurance or other
third party indemnification obligations. The parties settled this matter for a
nominal amount, and the Court dismissed the defendant with prejudice on October
29, 1998. Such settlement represents the final resolution of this mater, and
accordingly, it will not be reported in future filings.
Item 4. Submission of Matters to a Vote of Security Holders.
- ------
None
I-24
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
- ------ ---------------------------------------------------------------------
None of the Company's shares of common stock are currently publicly traded.
The Company has not paid cash dividends on its common stock and has no
present intention of so doing. Payment of cash dividends, if any, in the future
will be determined by the Company's Board of Directors in light of its earnings,
financial condition and other relevant considerations. In addition, the Company
is subject to loan and other agreements that prohibit or limit the ability of
the Company to pay dividends on its common equity. For further discussion of
such restrictions, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Item 6. Selected Financial Data.
- ------ -----------------------
Selected financial data related to the Company's financial condition and
results of operations for the five years ended December 31, 1998 are summarized
as follows (such information should be read in conjunction with the accompanying
consolidated financial statements of the Company):
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------------------
1998 (1) 1997 1996 1995 1994
------------- ---------- ---------- --------- --------
amounts in thousands,
except per share amounts
<S> <C> <C> <C> <C> <C>
Summary Statement of Operations Data:
- -------------------------------------
Revenue $ 1,289,666 561,990 417,461 208,903 30,279
Operating, selling, general and
administrative expenses $(1,133,420) (481,855) (410,836) (214,117) (25,106)
Impairment of long-lived assets (2) $ (950,289) -- -- -- --
Operating loss $(1,337,544) (171,599) (184,284) (60,702) (9,144)
Interest expense (3) $ (145,939) (47,992) (2,023) -- --
Net loss $(1,343,704) (238,341) (140,004) (47,507) (13,688)
Basic and diluted loss per common share (4) $(8.02) (3.58) (2.11) (.72)
</TABLE>
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------------------
1998 (1) 1997 1996 1995 1994
------------- ---------- ---------- --------- --------
amounts in thousands
<S> <C> <C> <C> <C> <C>
Summary Balance Sheet Data:
- ---------------------------
Property and equipment, net $ 1,148,590 1,121,937 1,107,654 889,220 397,798
Total assets $ 2,112,087 1,204,856 1,180,273 933,443 410,105
Due to the Partnership $ -- 463,133 457,685 382,900 278,772
Debt (3) $ 1,833,195 418,729 247,230 -- --
Equity (Deficit) $ (284,774) 136,269 372,358 483,584 120,526
</TABLE>
II-1
<PAGE>
- ----------------------
(1) In connection with the Restructuring, TSAT has been identified as the
acquiror for accounting purposes and the predecessor for financial
reporting purposes. Accordingly, the periods prior to the Closing Date
represent the financial condition and results of operations of TSAT, and
the periods subsequent to the Closing Date represent the financial
condition and results of operations of TSAT, the Partnership and the Non-
TSAT Parties.
(2) In 1998, the Company recognized an impairment loss which represents the
difference between the carrying amount and the estimated fair value of its
long-lived assets.
(3) Effective December 31, 1996, the Company entered into a bank credit
facility with initial commitments of $350,000,000. In addition, on
February 20, 1997, the Company issued the Notes with aggregate principal
amounts at maturity of $475,000,000.
(4) In connection with the December 4, 1996 consummation of the Distribution,
the Company issued 66,408,000 shares of Company Common Stock. The basic
and diluted loss per common share amounts for the years ended December 31,
1996 and 1995 assume that the shares issued pursuant to the Distribution
were issued and outstanding since January 1, 1995. Accordingly the
calculation of the net loss per share assumes weighted average shares
outstanding of 66,408,000 for each of the years ended December 31, 1996 and
1995.
Item 7. Management's Discussion and Analysis of Financial Condition
- ------ -----------------------------------------------------------
and Results of Operations
-------------------------
Summary of Operations
- ---------------------
Pursuant to the Restructuring Agreement and the TSAT Asset Transfer
Agreement, the Restructuring was consummated effective April 1, 1998. In
connection with the Restructuring, (a) TSAT contributed and transferred to
PRIMESTAR all of TSAT's assets and liabilities except (I) the capital stock of
Tempo, (II) the consideration received by TSAT in the Restructuring and (III)
the rights and obligations under certain agreements with PRIMESTAR and others
and (b) the business of the Partnership and the business of distributing the
PRIMESTAR(R) programming service of each of TWE, Newhouse, Comcast, Cox and
affiliates of MediaOne were consolidated into PRIMESTAR.
Prior to the Closing Date, the PRIMESTAR(R) service was owned and
operated by the Partnership and separately distributed and serviced by
affiliates of the partners of the Partnership (the "Distributors"). As a result
of the Restructuring, the Company owns and operates the PRIMESTAR(R) business.
The Company currently offers a direct to home satellite service with over 160
channels of digital video and audio programming throughout the continental
United States.
The TSAT Asset Transfer was recorded at TSAT's historical cost due to
the fact that, prior to the Restructuring, PRIMESTAR was a wholly-owned
subsidiary of TSAT. The remaining elements of the Restructuring, as set forth
above, were treated as the acquisition by PRIMESTAR of the Partnership Interests
and PRIMESTAR Assets and Liabilities, of the Non-TSAT Parties, and such
acquisition was accounted for using the purchase method of accounting. The fair
value of the consideration issued to the Non-TSAT Parties has been allocated to
the assets and liabilities acquired based upon the estimated fair values of such
assets and liabilities.
II-2
<PAGE>
TSAT has been identified as the acquiror for accounting purposes and
the predecessor for financial reporting purposes due to the fact that TSAT owns
the largest interest in the Company immediately following the consummation of
the Restructuring. Accordingly, the periods prior to the Restructuring
represent the results of operations of TSAT, and the periods subsequent to the
Restructuring include the results of operations of TSAT, the Partnership and the
Non-TSAT Parties. To the extent not otherwise described, increases in the
Company's revenue and operating, selling, general and administrative expenses in
1998, as detailed below, are primarily related to the Restructuring.
The Company reported net losses of $1,343,704,000, $238,341,000 and
$140,004,000 during the years ended December 31, 1998, 1997 and 1996,
respectively. Improvements in the Company's results of operations are largely
dependent upon its ability to increase its customer base while maintaining its
pricing structure, reducing subscriber churn and effectively managing its costs.
No assurance can be given that any such improvements will occur. In addition,
the Company incurs 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. The high cost of
obtaining new subscribers also magnifies the negative effects of subscriber
churn.
Primarily as a result of the Restructuring, the Company's number of
customers increased from 914,000 at March 31, 1998 to 2,296,000 at December 31,
1998. Exclusive of the effects of the Restructuring, the Company added 223,000
net customers during the period from April 1, 1998 to December 31, 1998,
including 130,000 net customers during the fourth quarter of 1998. During the
years ended December 31, 1998, 1997 and 1996, (i) the Company'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 33.2%, 30.1% and 38.5%, respectively and (ii) the average subscriber
life implied by such subscriber churn rate was 3.0 years, 3.3 years and 2.6
years, respectively. The Company believes that the churn rate in 1998 is due in
part to subscribers acquired in the Restructuring that did not meet the
Company's current credit standards or customer delinquency policies. In
addition, the Company has been subject to increased competitive pressures in
1998. Although the Company has initiated certain programs intended to reduce
the Company's churn rate, no assurance can be given that churn rates for future
periods will be lower than the current rate. If such programs are not
successful and the Company's churn rate fails to improve, the financial
condition and results of operations of the Company could be adversely affected.
II-3
<PAGE>
Certain financial information concerning the Company's operations is
presented below (dollar amounts in thousands):
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------------------------------------------------
1998 1997 1996
-------------------------- ------------------------ ------------------------
Percentage Percentage Percentage
of total of total of total
Amount revenue Amount revenue Amount revenue
------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Programming and equipment
rental $ 1,227,270 95% $ 512,894 91% $ 351,548 84%
Installation 62,396 5 49,096 9 65,913 16
----------- ----- --------- ---- --------- ----
Total revenue 1,289,666 100 561,990 100 417,461 100
----------- ----- --------- ---- --------- ----
Operating costs and expenses:
Charges from the Partnership (82,235) (6) (259,600) (46) (188,724) (45)
Operating (565,510) (44) (23,992) (4) (28,546) (7)
Selling and marketing (321,611) (25) (138,021) (25) (132,972) (32)
General and administrative (117,184) (9) (60,242) (11) (60,594) (14)
Transition (20,855) (2) -- -- -- --
Restructuring charges (26,025) (2) -- -- -- --
----------- ----- --------- ---- --------- ----
(1,133,420) (88) (481,855) (86) (410,836) (98)
----------- ----- --------- ---- --------- ----
Operating Cash Flow(1) 156,246 12 80,135 14 6,625 2
Impairment of long-lived assets (950,289) (74) -- -- -- --
Stock compensation (414) -- (8,092) (2) 446 --
Depreciation and amortization (543,087) (42) (243,642) (43) (191,355) (46)
----------- ----- --------- ---- --------- ----
Operating loss $(1,337,544) (104)% $(171,599) (31)% $(184,284) (44)%
=========== ===== ========= ==== ========= ====
</TABLE>
- -----------------------------------
(1) Operating Cash Flow, which represents operating income before depreciation,
amortization, stock compensation and impairment charges, is a commonly used
measure of value and borrowing capacity. Operating Cash Flow is not
intended to be a substitute for a measure of performance in accordance with
generally accepted accounting principles and should not be relied upon as
such. Furthermore, Operating Cash Flow may not be comparable to similarly
titled measures reported by other companies. Operating Cash Flow should be
viewed together with cash flows measured in accordance with generally
accepted accounting principles. For information concerning such cash
flows, see the statements of cash flows included in the accompanying
consolidated financial statements.
During 1998, in an effort to remain competitive, attract new customers and
retain existing customers, the Company implemented various new service offerings
and changed the pricing of certain of its existing offerings. For example, the
Company implemented a national pricing and programming package structure
effective July 1, 1998, whereby customers would receive the same programming
packages for the same price throughout the country. Such national pricing
structure had the effect of lowering certain rates for certain packages in
certain areas of the country. In addition, the Company initiated promotional
offers including installation rebates and packages with reduced rental fees.
Although there can be no assurance, the Company believes that such new service
offerings, pricing changes and promotional offers may attract new customers and
help retain existing customers, but will have a negative impact on the Company's
recurring revenue per customer and installation revenue per new customer
installed.
II-4
<PAGE>
Revenue increased $727,676,000 or 129% and $144,529,000 or 35% during 1998
and 1997, respectively, as compared to the corresponding prior year. The
Company's average monthly programming and equipment rental revenue per customer
increased from $55 during 1997 to $56 during 1998. The average installation
revenue from each customer installed decreased from $128 in 1997 to $70 in 1998.
Such decrease is primarily due to a $50 rebate offer that was initiated by the
Company in April 1998 and increased to $100 in September 1998.
The 1997 increase in revenue represents the net effect of a $161,346,000 or
46% increase in programming and equipment rental revenue and a $16,817,000 or
26% decrease in installation revenue. The increase in programming and equipment
rental revenue is primarily the result of an increase in the number of
customers. Additionally, the Company's average monthly programming and
equipment rental revenue per customer increased from $50 during 1996 to $55
during 1997. Such increase was primarily the result of rate increases
implemented in May 1997 in conjunction with the launch of approximately 55
additional channels. The decrease in installation revenue is primarily
attributable to a reduction in 1997 in the number of installations performed and
a decrease from $145 during 1996 to $128 during 1997 in the average installation
revenue derived from each customer installed.
Through the Closing Date, the Partnership provided programming services to
the Company and the other authorized Distributors in exchange for a fee based
upon the number of customers receiving programming services. The Partnership
also arranged for satellite capacity and uplink services, and provided national
marketing and administrative support services, in exchange for a separate
authorization fee from each Distributor, including the Company, based on each
such Distributor's total number of authorized satellite receivers.
Subsequent to the Closing Date, operating expenses are primarily comprised
of programming, satellite capacity and uplink costs (costs, which prior to the
Restructuring were included in charges from the Partnership) and amounts related
to customer fulfillment activities. Such expenses represented 50% of revenue
for the period from April 1, 1998 through December 31, 1998.
Operating expenses decreased $4,554,000 or 16% during 1997, as compared to
1996. Such decrease is primarily attributable to the fact that the Company's
other operating costs and expenses for the year ended December 31, 1996 included
$9,292,000 of installation fees paid to TCIC that were not capitalized. Other
operating costs and expenses for the year ended December 31, 1997 do not include
a similar amount since the Company capitalized the full amount of installation
fees paid to TCIC subsequent to the Distribution Date.
Through December 31, 1996, TCIC provided the Company with certain customer
fulfillment services. Charges for such services were allocated to the Company
by TCIC based on scheduled rates. Such services, which included installation,
maintenance, retrieval, inventory management and other customer fulfillment
services, were to be performed in accordance with specified performance
standards. Effective January 1, 1997, charges for customer fulfillment services
provided by TCI were made pursuant to a fulfillment agreement (the "Fulfillment
Agreement") entered into by the Company and TCIC in connection with the
Distribution. Pursuant to the Fulfillment Agreement, TCIC continued to provide
fulfillment services on an exclusive basis to the Company following the
Distribution with respect to customers of the PRIMESTAR(R) medium power service.
Such services were required to be performed in accordance with specified
performance standards. The Fulfillment Agreement terminated on December 31,
1997. In September and October 1997, TSAT entered into agreements with regional
fulfillment companies to perform the services no longer performed by TCIC.
II-5
<PAGE>
Installation charges from TCIC included direct and indirect costs of
performing installations. Through the Distribution Date, the Company
capitalized a portion of such charges as subscriber installation costs based
upon amounts charged by unaffiliated third parties to perform similar services.
Subsequent to the Distribution Date, the Company capitalized the full amount of
installation fees paid to TCIC. Additionally, the scheduled rates for the
services provided by TCIC under the Fulfillment Agreement exceeded the scheduled
rates upon which charges, historically, were allocated to the Company for such
services. In this regard, installation charges allocated to the Company by TCIC
aggregated $62,461,000 during the year ended December 31, 1996. If the
Fulfillment Agreement had been in effect during 1996, the estimated installation
fees incurred by the Company would have been $86,186,000.
Selling and marketing expenses, which represented 25% of revenue during the
year ended December 31, 1998, include sales salaries and commissions, marketing
and advertising expenses, and costs associated with the operation of customer
service call centers. General and administrative expenses represented 9% and
11% of revenue during the years ended December 31, 1998 and 1997, respectively.
The decrease in such percentage is primarily attributable to the relatively
fixed nature of certain components of the Company's general and administrative
expenses.
The Company's selling and marketing expenses and general and administrative
expenses decreased as a percentage of revenue in 1997 primarily due to (i) lower
sales commissions due to a 15% decrease in installations in 1997 as compared to
1996, and (ii) the relatively fixed nature of certain components of TSAT's
selling, general and administrative expenses.
During the second half of 1997, the Company began offering a marketing
program that allows subscribers to purchase the Company's proprietary satellite
reception equipment at a price that is less than the Company's cost. Losses
incurred by the Company on such sales of satellite reception equipment are
included in selling expense in the period such sales are consummated and
aggregated $16,057,000 and $3,538,000 during the years ended December 31, 1998
and 1997, respectively. As the Company stopped aggressively marketing this
program in the fourth quarter of 1998, primarily all of the 1998 loss was
recognized during the period from January 1, 1998 through September 30, 1998.
In connection with the Distribution, the Company and TCI also entered into
the "Transition Services Agreement", and certain other agreements. Pursuant to
the Transition Services Agreement, TCIC provided certain general and
administrative services to TSAT for a fee of $1.50 per subscriber per month.
Amounts charged by TCIC pursuant to the Transition Services Agreement aggregated
$3,174,000 and $11,579,000 during the years ended December 31, 1998 and 1997,
respectively. The Transition Services Agreement was terminated in connection
with the Restructuring. Through the Distribution Date, general and
administrative allocations from TCIC were based upon the estimated cost of such
services provided to TSAT. The amounts charged to TSAT pursuant to the
Transition Services Agreement were in excess of the amounts that would have been
allocated by TCIC to TSAT under the arrangement that was in effect through the
Distribution Date. If the Transition Services Agreement had been effective as of
January 1, 1996, selling, general and administrative expenses would have been
approximately $198,200,000 for the year ended December 31, 1996.
As part of the compensation paid to the Company's sales agents and FSPs,
the Company pays certain residual sales commissions during specified periods
following the initiation of service (generally five years). During the years
ended December 31, 1998, 1997, and 1996, residual payments aggregated
$25,639,000, $15,364,000 and $11,848,000, respectively, and were charged to
expense as incurred.
II-6
<PAGE>
Subsequent to the Restructuring, the Non-TSAT Parties continued to operate
certain non-strategic local offices (the "Transition Offices") for approximately
three months (the "Transition Period") while the responsibilities of such
offices were transferred to other PRIMESTAR offices. By the end of the
Transition Period, all of the Transition Offices had been closed. Transition
expenses include costs incurred through December 31, 1998 and charged to the
Company by the Non-TSAT Parties to operate the Transition Offices during the
Transition Period.
During 1998, the Company reorganized its operations. In connection therewith,
the Company closed certain of its local offices and reduced it corporate
workforce. As a result, the Company terminated approximately 700 employees. In
connection with such reorganization, the Company recognized restructuring
charges of $26,025,000. Such restructuring charges related to (i) severance
costs for terminated employees ($18,828,000), (ii) lease cancellation fees and
other office shutdown costs ($3,617,000) and (iii) the net book value of
abandoned equipment ($3,580,000). As of December 31, 1998, the Company had paid
approximately $6,388,000 of the restructuring charges and had a remaining
accrual of $16,057,000. The Company anticipates that the majority of such
accrual will be paid during the first six months of 1999 with the balance to be
paid by the end of 1999.
In connection with the Hughes Medium Power Transaction, the Company concluded
that it would be unable to recover the carrying value of its assets over their
expected remaining useful life. Accordingly, the Company recorded an impairment
loss (the "Impairment Loss") calculated as follows (amounts in thousands):
<TABLE>
<S> <C>
Cash proceeds and working capital adjustments $1,225,466
GMH Stock 225,000
----------
Total consideration 1,450,466
Carrying value of related long-lived assets 2,400,755
----------
Impairment loss $ (950,289)
==========
</TABLE>
The reduction in carrying amount of assets included in the Impairment
Loss is as follows (amount is thousands):
<TABLE>
<CAPTION>
<S> <C>
Property and equipment:
Satellite reception equipment $103,898
Subscriber installation costs 223,541
Intangible assets:
Excess purchase price over acquired net assets 401,475
Tradename 221,375
--------
$950,289
========
</TABLE>
Depreciation expense increased $202,269,000 or 83% and $52,287,000 or
27% during 1998 and 1997, respectively, as compared to the corresponding prior
year. The 1998 increase is due primarily to an increase in the Company's
depreciable assets due primarily to the Restructuring. The 1997 increase is
primarily the result of an increase in TSAT's depreciable assets due to capital
expenditures. Changes in the Company's depreciation policies also contributed
to the increase. Effective October 1, 1996, TSAT changed the method used to
depreciate its subscriber installation costs, and reduced the estimated useful
life of certain satellite reception equipment. The inception-to-date effect on
depreciation expense of the change in depreciation method aggregated
$55,304,000, and was recorded during the fourth quarter of 1996. The effect of
the reduction in estimated useful life was accounted for on a prospective basis.
The Company recognized amortization expense of $97,176,000 during 1998.
Such amortization expense relates to intangible assets recorded in connection
with the Restructuring.
II-7
<PAGE>
The Company incurred interest expense of $145,939,000 and $47,992,000
during the years ended December 31, 1998 and 1997, respectively. The increase
in interest expense is due to interest incurred on the Interim Loan and the
credit facility assumed from the Partnership (the "Partnership Credit Facility")
as well as additional borrowings under the Company's bank credit facility (the
"Bank Credit Facility"). The Company expects that it will continue to incur
significant levels of interest expense in future periods.
The Company's share of losses of the Partnership for 1998 represent three
months of losses. In connection with the Restructuring, the Partnership became
a wholly-owned subsidiary of the Company. The Company's share of the
Partnership's net losses increased $17,198,000 during 1997, as compared to the
corresponding prior year. The 1997 increase is primarily attributable to
increases in the Partnership's interest expense and operating loss. The
increase in interest expense is attributable to interest incurred on borrowings
under the Partnership Credit Facility that were used to fund the construction of
Tempo DBS-2. Prior to the January 1, 1997 determination that construction of
Tempo DBS-2 was substantially complete, interest incurred on the applicable
borrowings under the Partnership Credit Facility had been capitalized. The
increase in the Partnership's operating loss occurred primarily because the
increase in the Partnership's revenue did not fully offset increases in selling,
marketing and certain other expenses.
The Company recognized no income tax benefit during the year ended December
31, 1997 and an income tax benefit of $147,528,000 and $45,937,000 during 1998
and 1996, respectively. The income tax benefit recognized in 1998 relates to
the reversal of temporary differences established in connection with the
Restructuring.
Recent Accounting Pronouncements
- --------------------------------
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
-------------------------------------
and Hedging Activities" ("Statement No. 133"). Statement No. 133 is effective
- ----------------------
for fiscal quarters beginning after June 15, 1999. As the Company currently has
no derivative instruments and does not participate in hedging activities, the
Company does not anticipate that Statement No. 133 will have any effect on its
results of operations or financial position.
Liquidity and Capital Resources
- -------------------------------
In connection with the consummation of the Restructuring, the Company paid
cash to, or assumed debt of, the Non-TSAT Parties in the aggregate amount of
approximately $479 million. The Company financed such cash payments and debt
assumption with the proceeds from the Interim Loan and through borrowings under
the Bank Credit Facility. In addition, the Company assumed indebtedness of the
Partnership aggregating approximately $575 million, including $571 million
outstanding under the Partnership Credit Facility and $4 million of capital
lease obligations.
On the Closing Date, the Company entered into the Interim Loan Agreement
with certain financial institutions. The Interim Loan Agreement provided for
commitments of $350 million which were used to fund the cash payments and debt
assumption under the Restructuring. The commitments were fully funded to the
Company on the Closing Date. The obligations under the Interim Loan Agreement
were due in full one year from the Closing Date. However, the Company had the
option to convert any outstanding principal amount of the Interim Loan
on such date (the "Conversion Date") into a term loan maturing April 1, 2008.
The Company gave notice of such conversion on March 29, 1999, in accordance with
the term of the Interim Loan Agreement.
II-8
<PAGE>
In addition, on the Conversion Date, the Company became obligated to enter
into a stock warrant agreement with the Lenders providing for the issuance of
warrants to purchase common stock of the Company equal to 2% of the Company's
outstanding common stock on the Conversion Date. The warrants are to be
exercisable over a ten-year period at a nominal exercise price.
Interest was payable at variable rates monthly in arrears on the last day
of each month until the Conversion Date. Thereafter, interest is payable
quarterly in arrears, except for any term loan converted to a fixed rate loan,
in which event interest is payable on March 31 and September 30 of each year. If
interest payable by the Company exceeds 15%, the Company may elect to pay all or
a portion of the interest in excess of 15% by issuance of notes in an aggregate
principal amount equal to such excess amount.
Prior to the Conversion Date, the Company could prepay the Interim Loan
without penalty. After the Conversion Date, certain limited prepayments are
permitted until April 1, 2001 out of the proceeds of certain equity offerings.
Otherwise, prepayment is not permitted until on or after April 1, 2003.
Prepayment penalties apply to any prepayment prior to April 1, 2006, which
penalties are calculated with reference to the interest rate in effect at the
time of prepayment. The Interim Loan Agreement provides for mandatory
prepayments of the Interim Loan upon the occurrence of certain asset sales,
capital contributions, securities issuances and a change of control (as defined
in the Interim Loan Agreement) of the Company.
In connection with the Restructuring, the Company amended and restated the
Bank Credit Facility. As amended, the Bank Credit Facility provides for maximum
commitments of up to $700 million, comprising $550 million of revolving loan
commitments and $150 million of term commitments. As of December 31, 1998,
$513.2 million in loans were outstanding under the Bank Credit Facility, and an
additional $30 million of availability had been utilized to obtain two
outstanding letters of credit. The Company was in compliance with the
restrictive covenants contained in the Bank Credit Facility at December 31,
1998. Additional borrowings under the Bank Credit Facility are subject to the
Company's continuing compliance with such restrictive covenants, which relate
primarily to the maintenance of certain ratios of cash flow to debt and cash
flow to debt service, as defined.
Commencing March 31, 2001, the revolving loan commitments are to be reduced
quarterly, and outstanding borrowings under the term loan commitments will be
payable in quarterly installments, in each case in accordance with a schedule,
until final maturity at June 30, 2005.
The Bank Credit Facility contains covenants regarding debt service coverage
and leverage, as well as negative covenants restricting, among other things
indebtedness, liens and other encumbrances, mergers or consolidation
transactions, transactions with affiliates, investments, capital expenditures,
and payment of dividends and other distributions.
II-9
<PAGE>
The Partnership obtained the Partnership Credit Facility, which currently
allows for borrowings up to $585 million, to finance advances to Tempo for
payments due in respect of the construction and launch of two high power
communications satellites. Borrowings under the Partnership Credit Facility are
collateralized by letters of credit (the "Partnership Letters of Credit"), which
were arranged for by affiliates of the Partners (or, in the case of TSAT,
affiliates of TCI) other than GE Americom. In connection with the
Restructuring, the Partnership became an indirect, wholly-owned subsidiary of
the Company. In addition, the Partners and TCI agreed to maintain their
respective Partnership Letters of Credit through June 1999, and the Company
entered into Reimbursement Agreements with respect to such letters of credit,
whereby the Company agreed to indemnify the parties arranging for such letters
of credit from and against all obligations thereunder and under the existing
reimbursement agreements and/or other existing documentation relating thereto,
including all existing and future payment obligations. The obligations of the
Company under such Reimbursement Agreements are subordinated in right of
payment, in the manner set forth in the Reimbursement Agreement, to all
indebtedness of the Company under the Bank Credit Facility, the Interim Loan
Agreement and the Notes. At December 31, 1998, the balance due under the
Partnership Credit Facility was $575 million, including amounts borrowed to pay
interest charges.
The maturity date of the Partnership Credit Facility, as amended, is June
30, 1999. The Company currently anticipates that it will use the proceeds from
the Hughes High Power Transaction to repay the Partnership Credit Facility. To
the extent such proceeds are not sufficient to repay all amounts due under the
Partnership Credit Facility, the stockholders of the Company have committed to
make capital contributions in agreed-upon percentages to fund such deficiency.
At December 31, 1998, the Company had outstanding $200 million aggregate
principal amount of 10 7/8% Senior Subordinated Notes and $275 million aggregate
principal amount at maturity of 12 1/4% Senior Subordinated Discount Notes.
Cash interest on the Senior Subordinated Notes accrues at a rate of 10 7/8%
per annum and is payable semi-annually in arrears each February 15 and August
15. Cash interest will not accrue or be payable on the Senior Subordinated
Discount Notes prior to February 15, 2002. Thereafter, cash interest on the
Senior Subordinated Discount 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 Company may make a Cash Interest Election (as defined in
the applicable Indenture) on any interest payment date to commence the accrual
of cash interest from and after the Cash Interest Date (as defined in the
applicable Indenture), in which case the outstanding principal amount at
maturity of each Senior Subordinated Discount Note will on such interest payment
date be reduced to the Accreted Value (as defined in the applicable Indenture)
of such Senior Subordinated Discount 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. The Notes mature on
February 15, 2007.
II-10
<PAGE>
Pursuant to the Hughes Medium Power Agreement, it is contemplated that the
Company will sell its DBS medium-power business and assets to Hughes for $1.1
billion in cash and 4.871 million shares of GMH Stock valued at approximately
$225 million, based upon the closing price of GMH Stock on the date of the
purchase agreement. The foregoing purchase price is subject to adjustments for
working capital at the date of closing. The Company is responsible for the
payment of certain obligations not assumed by Hughes, satisfaction of its funded
indebtedness and the payment of costs, currently estimated to range from $270
million to $340 million, associated with the termination of certain vendor and
service contracts and lease agreements related to the Company's medium power
business and proposed high power business strategy (the "Shutdown Liabilities").
The consummation of the Hughes Medium Power Transaction is subject to various
consents from PRIMESTAR's lenders; restructuring of certain of the Company's
indebtedness, as described below; and other customary conditions.
On February 1, 1999 and in connection with the Hughes Medium Power
Transaction, the Company commenced the Tender Offers to purchase 100% of the
outstanding principal amount of the Company's 10 7/8% Senior Subordinated Notes
due 2007 at a price of $670 per $1,000 principal amount and 100% of the
outstanding principal amount of the Company's 12 1/4% Senior Subordinated
Discount Notes due 2007 at a price of 67% of the accreted value of the Senior
Subordinated Discount Notes as of February 15, 1999. In addition, PRIMESTAR made
a separate offer to lenders under the Interim Loan Agreement, to purchase 100%
of the outstanding principal amount due thereunder at a price of $670 per $1,000
principal amount. Each of the Tender Offers and the Offer to Purchase was
subject to a minimum tender condition of 90% of the outstanding principal amount
of such issue. In conjunction with the Tender Offers, PRIMESTAR solicited
consents to certain proposed amendments to the indentures governing the Notes
and the Interim Loan that would eliminate substantially all of the restrictive
covenants thereunder and would amend certain other provisions. Consummation of
both the Tender Offers and the Offer to Purchase was conditioned upon the
closing of the Hughes Medium Power Transaction and other conditions.
Following several extensions, the Tender Offer and Offer to Purchase
expired on March 25 1999. The minimum tender conditions were not satisfied
under the Tender Offer and Offer to Purchase, and no securities or loans were
purchased thereunder.
Since the announcement of the Hughes Medium Power Agreement and of the
proposed restructuring of the Company's senior subordinated indebtedness
relating thereto, the Company has been engaged in negotiations with the
Bondholders' Committee and the Bridge Lenders' Committee with respect to the
possible terms and conditions of the Proposed Debt Restructuring. In that
connection, the Company has entered into confidentiality agreements with certain
representatives of the Committees and has agreed to pay certain expenses of the
Committees, including certain fees and expenses of their legal counsel and
financial advisor. Based on the progress of such negotiations to date, the
Company believes that the Proposed Debt Restructuring will be consummated on
terms satisfactory to the Company and such Committees, by means of privately
negotiated transactions. However, the Company has not entered into any
agreements to date with respect to the terms and conditions of any such
restructuring, and there can be no assurance that the Proposed Debt
Restructuring will be consummated. In the event the Company is unable to
negotiate certain minimum tender conditions in connection with the Proposed Debt
Restructuring, the Company does not intend to consummate the Hughes Medium Power
Transaction.
The Hughes High Power Agreement provides for the sale to Hughes of the
Tempo Satellites, Tempo's 119 degrees W.L. orbital slot license and the Tempo
Rights for aggregate consideration valued at $500 million. Pursuant to the
Hughes High Power Agreement, Hughes would assume $465 million of TSAT's
liability to the Partnership, pay TSAT $2.5 million in cash, and pay PRIMESTAR
and the Partnership $32.5 million in cash in consideration for PRIMESTAR's
rights to acquire Tempo's assets and the termination and relinquishment by the
Partnership of the Tempo Rights. In addition, the Partnership has agreed to
forgive amounts due from TSAT in excess of the $465 million to be assumed by
Hughes ($4,498,000 at December 31, 1998).
II-11
<PAGE>
Effective March 10, 1999, the First Closing was consummated whereby Hughes
acquired Tempo DBS-2 and PRIMESTAR's option to acquire Tempo DBS-2 (the "Tempo
DBS-2 Option") for aggregate consideration of $150 million. Such consideration
was comprised of the following: (i) $9,750,000 paid to PRIMESTAR and the
Partnership for the Tempo DBS-2 Option and the termination of the Tempo Rights,
(ii) $750,000 paid to TSAT to exercise the Tempo DBS-2 Option and (iii) the
assumption by Hughes of $139,500,000 due to the Partnership from TSAT in
exchange for Tempo DBS-2. Simultaneously with the First Closing, Hughes repaid
the liability to the Partnership that Hughes assumed.
With regard to the sale of the remaining assets contemplated by the Hughes
High Power Agreement, Tempo has been notified that Tempo DBS-I experienced power
reductions which occurred on March 29, 1999 and April 2, 1999. Although the
Company does not believe the extent of such power reductions is significant, a
definitive assessment of the impact on Tempo DBS-I is not yet complete.
Notwithstanding the foregoing, the Second Closing, which is subject to the
receipt of appropriate regulatory approvals and other customary closing
conditions, is expected to be consummated in the second quarter of 1999. In the
event the Second Closing is not consummated and the Hughes High Power Agreement
is abandoned, there can be no assurance that the Company will be able to recover
the carrying amount of its satellite rights.
As noted above, the consideration to be received by the Company in the
Hughes High Power Transaction is to be comprised of $1.1 billion in cash and
4.871 million shares of GMH Stock. Pursuant to the terms of the Hughes Medium
Power Agreement, PRIMESTAR will not be able to dispose of the GMH Stock for a
period of one year from the closing of the Hughes Medium Power Transaction
except for certain transfers to affiliates. PRIMESTAR is considering its options
with respect to the GMH Stock, but has not yet made any decisions as to the
ultimate disposition of such stock.
Upon consummation of the Hughes Medium Power Transaction, the Company
anticipates that is would use the proceeds it receives to (i) repay amounts due
under the Bank Credit Facility ($513 million at December 31, 1998), (ii) fund
the retirement or purchase and cancellation of the Notes and borrowings under
the Interim Loan Agreement pursuant to the Proposed Debt Restructuring
(estimated at less than $656 million) and (iii) fund the Shutdown Liabilities.
The Company currently estimates the total Shutdown Liabilities to range from
$270 million to $340 million, comprised of employee severance, lease
cancellation fees and vendor purchase commitments. In addition, the stockholders
of PRIMESTAR have approved the payment to TSAT of consideration (the "PRIMESTAR
Payment") in the amount of $65 million, payable in shares of GMH Stock, valued
at $46.1875 (the closing price of such stock on the date of the purchase
agreements with Hughes), subject to the terms and conditions set forth in an
agreement dated as of January 22, 1999 (the "PRIMESTAR Payment Agreement"). In
consideration of the PRIMESTAR Payment, TSAT agreed to approve the Hughes Medium
Power Transaction and Hughes High Power Transaction as a stockholder of
PRIMESTAR, to modify certain agreements to facilitate the Hughes High Power
Transaction, and to issue the Company a share appreciation right with respect to
the shares of GMH Stock received as the PRIMESTAR 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. Pursuant
to the PRIMESTAR Payment Agreement, TSAT has also agreed to forego any
liquidating distribution or other payment that may be made in respect of the
outstanding shares of PRIMESTAR upon any dissolution and winding-up of
PRIMESTAR, or otherwise in respect of PRIMESTAR'S existing equity. Such payment
is conditioned upon the closing of the Hughes Medium Power Transaction.
The Company has a history of operating losses and reported an accumulated
deficit at December 31, 1998. In connection with the Hughes Medium Power
Transaction, affiliates of the stockholders of the Company, other than TSAT, and
an affiliate of TCI have 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. Management of the Company believes, but cannot assure, that when
such funds are combined with the proceeds from the Hughes Medium Power and High
Power Transactions and the Company's existing sources of liquidity, that the
Company will be able to meet its obligations as they become due and payable.
In the event the Hughes Medium Power Transaction is not consummated and is
abandoned, the Company currently intends to continue operating its medium power
business. Under such scenario, the Company anticipates that it would curtail
marketing and sales activities, reduce the number of new installations and
otherwise reduce expenditures to the extent possible. The Company believes, but
cannot assure, that in such event, the Company's cash flow from continuing
operations, commitments from the Company's stockholders to make certain funds
available to the Company and proceeds from the Hughes High Power Transaction
would provide the necessary funds for the Company to meet its obligations as
they become due and payable through December 31, 1999. In the event the Company
is unable to meet its obligations as they become due and payable, the Company
may be required to restructure or refinance certain of its liabilities. There
can be no assurance that such restructuring or refinancing, if necessary, would
be accomplished on terms acceptable to the Company.
II-12
<PAGE>
The Company is highly leveraged. The degree to which the Company is
leveraged may adversely affect the Company's ability to compete effectively
against better capitalized competitors and to withstand downturns in its
business or the economy generally, and could limit its ability to pursue
business opportunities that may be in the interests of the Company and its
stockholders. The Company's ability to repay or refinance its debt will require
the company to increase its operating cash flow or to obtain additional debt or
equity financing. There can be no assurance that the Company will be successful
in increasing its operating cash flow by a sufficient magnitude or in a timely
manner or in raising sufficient additional debt or equity financing to enable it
to repay or refinance its debt.
During the years ended December 31, 1998, 1997, and 1996, the Company's
operating activities provided cash of $137,175,000, $91,637,000 and
$115,201,000, respectively. For the foreseeable future, the Company believes
that its operating activities will represent a reliable source of liquidity.
During the years ended December 31, 1998, 1997, and 1996, the Company used
cash of $563,334,000, $227,327,000, and $326,621,000, respectively, to fund (i)
the acquisition and installation of satellite reception equipment, and (ii)
certain other capital expenditures. Based upon current business plans, assuming
the Hughes Medium Power Transaction is not consummated, the Company estimates
that its aggregate capital expenditures will be approximately $200 million
during the year ended December 31, 1999. The Company expects that the majority
of such estimated capital expenditures will be used to fund the acquisition and
installation of satellite reception equipment. The actual amount of capital to
be required will be primarily a function of (i) subscriber growth and churn
rates, and (ii) the actual cost of purchasing and installing satellite reception
equipment. Accordingly, no assurance can be given that the Company's actual
capital expenditures during the year ended December 31, 1999 will not exceed the
estimated capital expenditures set forth above.
At December 31, 1998, PRIMESTAR's future minimum commitments to purchase
satellite reception equipment aggregated approximately $44 million.
As part of the compensation paid to the Company's various sales agents, the
Company has agreed to pay certain residual sales commissions during specified
periods following the initiation of service (generally five years). During the
year ended December 31, 1998, residual sales commissions to such sales agents
aggregated $25,639,000.
The Company is in the process of identifying and addressing issues
surrounding the Year 2000 ("Y2K") and its impact on the Company's operations.
The issue surrounding the Year 2000 is whether the Company's operations and
financial systems, or the systems used by the companies with whom the Company
conducts business, will properly recognize and process date sensitive
information before and after January 1, 2000. The following discussion is based
on information currently available to the Company.
The Company completed an initial assessment in October of 1998 which
identified areas of risk associated with the Year 2000. The Year 2000 Program
Office was established in the fourth quarter of 1998 to oversee the Company's
Year 2000 project. Detailed inventories have been gathered and cost estimates
have been finalized. For each functional area of the project, detailed work
plans have been developed and put into place. Separate test environments
completed construction and testing was initiated in the first quarter of 1999.
II-13
<PAGE>
A detail assessment of applications has been performed which identified
applications requiring remediation. The assessment findings for applications
showed minimal remediation, and the effort is expected to be finalized by the
end of the second quarter of 1999. Testing efforts running parallel to
remediation are expected to be completed by the first part of the third quarter
of 1999. The exception to this is the area of network operations where the
detail assessment, remediation and testing is expected to be on-going through
the third quarter of 1999.
The Company has identified business partners that are critical to the
Company's ability to continue providing service to its customers - operations
and availability of IRDs and related software; ability to deliver programming to
customers; and ability to authorize, service and bill customers. The Company's
Y2K plan includes the continual review and possible integrated testing of
critical business functions supplied by these business partners. An event of
failure by a critical business partner could have a material adverse effect on
the Company's results of operations. The Company intends to monitor the Y2K
efforts of such business partners, and will devise contingency plans in the
event that Year 2000 failures occur.
The Company has identified vendors that supply products and services and
has established an on-going process to evaluate and track their Y2K readiness.
Based upon responses and research with these vendors, the Company will make
decisions whether to remain in the partnership or choose alternative sources.
For those vendors that supply a product or service to the Company which could
adversely impact daily operations in the event of a Year 2000 failure, the
research and subsequent decision will be made in the second quarter of 1999.
The Company has analyzed and continues to analyze its internal IT and non-
IT systems. The Company believes that most of such systems are currently
capable of functioning without substantial Y2K compliance problems, and that
those which are not currently Y2K compliant, will be Y2K capable in a time frame
that will avoid any material adverse effect on the Company. The Company intends
to initiate contingency planning in the first quarter of 1999 and expects to
continue to refine and test contingency plans through the fourth quarter of
1999.
Through December 1998, the Company has spent approximately $250,000 for Y2K
issues. The Company has completed a budget for Y2K costs, and currently
estimates the cost to remediate Y2K issues will be $11,800,000, comprised
primarily of $4.8 million for technical remediation and testing, $2.8 million
for project management, $1.5 million for software upgrades and $1.3 million for
replacement of personal computers. Additional costs could be identified during
the life of the project.
The Company does not currently believe that any of the foregoing will have
a material adverse effect on its financial condition or its results of
operations. However, the process of evaluating the Company's products and third
party products and systems is ongoing. Although not expected, failures of
critical suppliers and/or systems could have a material adverse effect on the
Company's financial condition or results of operations. As widely publicized,
Y2K compliance has many issues and aspects, not all of which the Company is able
to accurately forecast or predict. There is no way to assure that Y2K will not
have adverse effects on the Company, some of which could be material.
TCI and the Non-TSAT parties, other than GE Americom, have arranged for
letter of credit (the "GE-2 Letters of Credit") to support the Company's
obligations under the GE-2 Agreement. Pursuant to the Restructuring Agreement,
the Company reimburses TCI and the Non-TSAT Parties for fees related to the
Partnership Letters of Credit and the GE-2 Letters of Credit. Such
reimbursements aggregated $10,004,000 during the year ended December 31, 1998
and are included in interest expense in the accompanying consolidated statements
of operations.
II-14
<PAGE>
The International Bureau has granted a subsidiary of EchoStar a conditional
authorization to construct, launch and operate a Ku-band domestic fixed
satellite into the orbital position at 83 degrees W.L., immediately adjacent to
that occupied by GE-2, the medium power satellite now used to provide the
PRIMESTAR(R) service. Contrary to previous FCC policy, which would have
permitted operation of a satellite at the 83 degrees W.L. orbital position at a
power level of only 60 to 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 degrees 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 PRIMESTAR have each requested reconsideration of the
International Bureau's authorization for EchoStar to operate at 83 degrees W.L.
These requests, which were opposed by EchoStar and others, currently are 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 PRIMESTAR have attempted to resolve potential coordination
problems directly with EchoStar, and the Company has advanced a
counter proposition to resolve this matter. This proposition is currently under
examination. It is uncertain whether any agreement in respect of such
coordination between the Partnership and EchoStar will be reached, or that if
such agreement is reached that coordination will resolve such interference.
Item 7A. Qualitative and Quantitative Disclosures About Market Risk
- -------- ----------------------------------------------------------
At December 31, 1998, the Company had $394,995,000 (or 22%) of fixed-rate
debt with a weighted average interest rate of 11.43% and $1,438,200,000 (or 78%)
of variable-rate debt with a weighted average interest rate of 7.3%.
Accordingly, the Company is sensitive to market rate risk. To date, the Company
has not entered into any derivative instruments to manage its interest rate
exposure. The table below provides principal cash flows and related weighted
average interest rates for the Company's debt obligations.
<TABLE>
<CAPTION>
Expected Maturity Date
----------------------
1999 2000 2001 2002 2003 Thereafter
---- ---- ---- ---- ---- ----------
dollar amounts in thousands
<S> <C> <C> <C> <C> <C> <C>
December 31, 1998
- -----------------
Long-term Debt
Fixed-rate $ 921 1,013 342 368 396 391,955
Average interest rate 7.50% 7.50% 7.50% 7.50% 7.50% 11.46%
Variable-rate $575,000 -- 15,000 30,000 153,200 665,000
Average interest rate 5.60% -- 6.68% 6.68% 6.68% 9.23%
</TABLE>
Item 8. Financial Statements and Supplementary Data.
- ------ -------------------------------------------
The financial statements of the Company are filed under this item
beginning on page II-16.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------ ---------------------------------------------------------------
Financial Disclosure.
--------------------
None.
II-15
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
PRIMESTAR, Inc.:
We have audited the accompanying consolidated balance sheets of PRIMESTAR,
Inc. and subsidiaries (as defined in note 1) as of December 31, 1998 and 1997
and the related consolidated statements of operations, equity (deficit), and
cash flows for each of the years in the three-year period ended December 31,
1998. In connection with our audit of the consolidated financial statements, we
have also audited the financial statement schedule listed in the index at Item
14(a). These consolidated financial statements and the financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and the
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of PRIMESTAR,
Inc. and subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1998, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG LLP
Denver, Colorado
April 15, 1999
II-16
<PAGE>
PRIMESTAR INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
------------------- -------------------
amounts in thousands
Assets
- ------
<S> <C> <C>
Cash and cash equivalents $ -- 6,084
Trade accounts receivable 117,655 40,386
Other receivables 29,387 --
---------- ---------
147,042 40,386
Less allowance for doubtful accounts 7,442 5,307
---------- ---------
139,600 35,079
---------- ---------
Prepaid expenses 3,967 1,262
Investment in PRIMESTAR Partners L.P. (the "Partnership")
(note 3) -- 11,093
Property and equipment, at cost:
Satellites -- 463,133
Satellite reception equipment 1,198,376 674,387
Subscriber installation costs 270,384 227,131
Support equipment 93,698 34,389
---------- ---------
1,562,458 1,399,040
Less accumulated depreciation 413,868 277,103
---------- ---------
1,148,590 1,121,937
---------- ---------
Intangible assets, net of accumulated amortization (note 6) 786,373 --
Deferred financing costs and other assets, net of accumulated
amortization 33,557 29,401
---------- ---------
$2,112,087 1,204,856
========== =========
</TABLE>
(continued)
II-17
<PAGE>
PRIMESTAR INC. AND SUBSIDIARIES
Consolidated Balance Sheets, continued
December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
--------------------- ---------------------
amounts in thousands
Liabilities and Stockholders' Equity (Deficit)
- ----------------------------------------------
<S> <C> <C>
Accounts payable $ 195,873 50,755
Accrued charges from related parties (note 12) 14,792 62,816
Accrued commissions 16,296 10,435
Accrued interest payable 16,142 8,658
Other accrued expenses 104,463 17,712
Deferred revenue 100,948 29,675
Due to the Partnership (note 13) -- 463,133
Debt (note 8) 1,833,195 418,729
Deferred income taxes (note 11) 75,057 --
Other liabilities 40,095 6,674
----------- ---------
Total liabilities 2,396,861 1,068,587
----------- ---------
Stockholders' Equity (Deficit) (note 9):
PRIMESTAR, Inc. ("PRIMESTAR") preferred stock, $.01 par
value; authorized 350,000,000 shares; none issue -- --
PRIMESTAR Class A common stock, $.01 par value;
authorized 850,000,000 shares; issued 179,143,934 in
1998 1,791 --
PRIMESTAR Class B common stock, $.01 par value;
authorized 50,000,000 shares; issued 8,465,324 in 1998 85 --
PRIMESTAR Class C common stock, $.01 par value;
authorized 30,000,000 shares; issued 13,332,365 in 1998 133 --
PRIMESTAR Class D common stock, $.01 par value;
authorized 150,000,000 shares; none issued -- --
TCI Satellite Entertainment, Inc. ("TSAT") preferred
stock, $.01 per value; authorized 5,000,000 shares;
none issued -- --
TSAT Series A common stock; $1 par value; authorized
185,000,000 shares; issued 58,239,136 shares in 1997 -- 58,239
TSAT Series B common stock, $1 par value; authorized
10,000,000 shares; issued 8,465,324 shares in 1997 -- 8,465
Additional paid-in capital 1,511,041 523,685
Accumulated deficit (1,797,824) (454,120)
----------- ---------
Total stockholders' equity (deficit) (284,774) 136,269
----------- ---------
Commitments and contingencies (note 13) $ 2,112,087 1,204,856
=========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
II-18
<PAGE>
PRIMESTAR INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------------- ------------------- -------------------
amounts in thousands,
except per share amounts
<S> <C> <C> <C>
Revenue:
Programming and equipment rental $ 1,227,270 512,894 351,548
Installation 62,396 49,096 65,913
----------- -------- --------
1,289,666 561,990 417,461
----------- -------- --------
Operating costs and expenses:
Charges from the Partnership
(note 12) 82,235 259,600 188,724
Operating (note 12) 565,510 23,992 28,546
Selling, general and administrative
(note 12) 438,795 198,263 193,566
Transition (note 12) 20,855 -- --
Restructuring charges (note 10) 26,025 -- --
Impairment of long-lived assets (note 2) 950,289 -- --
Stock compensation 414 8,092 (446)
Depreciation (note 5) 445,911 243,642 191,355
Amortization 97,176 -- --
----------- -------- --------
2,627,210 733,589 601,745
----------- -------- --------
Operating loss (1,337,544) (171,599) (184,284)
----------- -------- --------
Other income (expense):
Interest expense (145,939) (47,992) (2,023)
Share of losses of the Partnership (5,822) (20,473) (3,275)
Other, net (1,927) 1,723 3,641
----------- -------- --------
(153,688) (66,742) (1,657)
----------- -------- --------
Loss before income taxes (1,491,232) (238,341) (185,941)
Income tax benefit (note 11) 147,528 -- 45,937
----------- -------- --------
Net loss $(1,343,704) (238,341) (140,004)
=========== ======== ========
Basic and diluted loss per common share
(note 6) $ (8.02) (3.58) (2.11)
=========== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
II-19
<PAGE>
PRIMESTAR INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (Deficit)
Years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
PRIMESTAR Common Stock TSAT Common Stock
---------------------------------------------- -----------------------
Class A Class B Class C Series A Series B
------------------ ----------------- ------- ------------ ---------
amounts in thousands
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1996 $ -- -- -- -- --
Net loss -- -- -- -- --
TCIC intercompany allocations -- -- -- -- --
Net cash transfers from TCIC -- -- -- -- --
Recognition of deferred tax assets
upon transfer of PRIMESTAR
Partners investment in connection
with Distribution (note 4) -- -- -- -- --
Adjustment to reflect consummation
of Distribution (note 4) -- -- -- 57,941 8,467
Issuance of TSAT Series A Common
Stock upon conversion of notes of
Tele-Communications, Inc. -- -- -- 5 --
------------------ ----------------- ------- ------- --------
Balance at December 31, 1996 -- -- -- 57,946 8,467
Net loss -- -- -- -- --
Recognition of stock compensation
related to stock options and
restricted stock awards -- -- -- -- --
Issuance of TSAT Series A Common
Stock related to restricted stock awards -- -- -- 33 --
Issuance of TSAT Series A Common
Stock upon conversion of convertible
securities of Tele-Communications, Inc. -- -- -- 258 --
Conversion of TSAT Series B to TSAT
Series A -- -- -- 2 (2)
------------------ ----------------- ------- ------- --------
Balance at December 31, 1997 -- -- -- 58,239 8,465
Net loss -- -- -- -- --
Recognition of stock compensation
related to stock options and
restricted stock awards -- -- -- -- --
Issuance of TSAT Series A Common
Stock related to restricted stock awards -- -- -- 50 --
Issuance of TSAT Series A Common
Stock upon conversion of convertible
securities of Tele-Communications, Inc. -- -- -- 989 --
Issuance of PRIMESTAR common stock
in Restructuring (note 3) 1,791 85 133 (59,278) (8,465)
Reimbursement of TSAT expenses (note
12) -- -- -- -- --
------------------ ----------------- ------- ------- --------
Balance at December 31, 1998 $1,791 85 133 -- --
================== ================= ======= ======= ========
<CAPTION>
Due to TCI
Additional Communications, Total
paid-in Accumulated Inc. stockholders'
capital deficit ("TCIC") equity (deficit)
-------------- ----------- ---------------- ----------------
amounts in thousands
<C> <C> <C> <C>
Balance at January 1, 1996 -- (75,775) 559,359 483,584
Net loss -- (140,004) -- (140,004)
TCIC intercompany allocations -- -- 21,009 21,009
Net cash transfers from TCIC -- -- 228,622 228,622
Recognition of deferred tax assets
upon transfer of PRIMESTAR
Partners investment in connection
with Distribution (note 4) -- -- 29,142 29,142
Adjustment to reflect consummation
of Distribution (note 4) 521,724 -- (838,132) (250,000)
Issuance of TSAT Series A Common
Stock upon conversion of notes of
Tele-Communications, Inc. -- -- -- 5
-------------- ----------- ---------------- ----------------
Balance at December 31, 1996 521,724 (215,779) -- 372,358
Net loss -- (238,341) -- (238,341)
Recognition of stock compensation
related to stock options and
restricted stock awards 1,781 -- -- 1,781
Issuance of TSAT Series A Common
Stock related to restricted stock awards 180 -- -- 213
Issuance of TSAT Series A Common
Stock upon conversion of convertible
securities of Tele-Communications, Inc. -- -- -- 258
Conversion of TSAT Series B to TSAT
Series A -- -- -- --
-------------- ----------- ---------------- ----------------
Balance at December 31, 1997 523,685 (454,120) -- 136,269
Net loss -- (1,343,704) -- (1,343,704)
Recognition of stock compensation
related to stock options and
restricted stock awards 2,596 -- -- 2,596
Issuance of TSAT Series A Common
Stock related to restricted stock awards (50) -- -- --
Issuance of TSAT Series A Common
Stock upon conversion of convertible
securities of Tele-Communications, Inc. -- -- -- 989
Issuance of PRIMESTAR common stock
in Restructuring (note 3) 984,962 -- -- 919,228
Reimbursement of TSAT expenses (note
12) (152) -- -- (152)
-------------- ----------- ---------------- ----------------
Balance at December 31, 1998 1,511,041 (1,797,824) -- (284,774)
============== =========== ================ ================
</TABLE>
See accompanying notes to consolidated financial statements.
II-20
<PAGE>
PRIMESTAR INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------- --------- ---------
amounts in thousands
(see note 7)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(1,343,704) (238,341) (140,004)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 543,087 243,642 191,355
Share of losses of the Partnership 5,822 20,473 3,275
Accretion of debt discount 20,941 16,719 --
Restructuring charges 26,025 -- --
Payments related to restructuring charges (6,388) -- --
Impairment of long-lived assets 950,289 -- --
Stock compensation 414 8,092 (446)
Payments related to stock appreciation rights (2,479) -- --
Deferred income tax expense (benefit) (147,528) -- 24,708
Other non-cash charges (credits) 3,940 6,919 (311)
Changes in operating assets and liabilities, net of the
effect of the Restructuring:
Change in receivables (79,838) (15,014) 4,364
Change in prepaids 3,417 (335) (841)
Change in accruals, payables and other
liabilities 132,375 42,056 24,096
Change in deferred revenue 30,802 7,426 9,005
----------- -------- --------
Net cash provided by operating activities 137,175 91,637 115,201
----------- -------- --------
Cash flows from investing activities:
Cash paid in Restructuring (54,894) -- --
Capital expended for property and equipment (563,334) (227,327) (326,621)
Capital expended for construction of satellites -- (5,448) (74,785)
Additional investments in, and related advances to, the
Partnership (75) (7,073) (17,552)
Repayments of advances to the Partnership -- 7,815 --
Other investing activities (6,365) (1,581) (5,458)
----------- -------- --------
Net cash used in investing activities (624,668) (233,614) (424,416)
----------- -------- --------
Cash flows from financing activities:
Borrowings of debt 959,761 498,061 259,000
Repayments of debt (469,858) (344,699) (263,000)
Payment of deferred financing costs (9,483) (17,780) (7,000)
Proceeds from issuance of common stock 989 471 --
Increase in due to the Partnership -- 5,448 74,785
Increase in due to TCIC -- -- 250,189
----------- -------- --------
Net cash provided by financing activities 481,409 141,501 313,974
----------- -------- --------
Net increase (decrease) in cash and cash
equivalents (6,084) (476) 4,759
Cash and cash equivalents:
Beginning of year 6,084 6,560 1,801
----------- -------- --------
End of year $ -- 6,084 6,560
============ ======== ========
</TABLE>
See accompanying notes to financial statements.
II-21
<PAGE>
PRIMESTAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(1) Organization and Basis of Presentation
--------------------------------------
The accompanying consolidated financial statements of PRIMESTAR, Inc.
("PRIMESTAR" or the "Company") include the historical financial information
of (i) certain satellite television assets (collectively, "TCI SATCO") of
TCIC, a subsidiary of Tele-Communications, Inc. ("TCI") for periods prior
to the December 4, 1996 consummation of the distribution transaction
described in note 4, (ii) TSAT and its consolidated subsidiaries for the
period from December 5, 1996 through March 31, 1998 and (iii) PRIMESTAR and
its consolidated subsidiaries for the period subsequent to March 31, 1998.
PRIMESTAR was incorporated on August 27, 1997, and subsequently, ten shares
of the Company's common stock were issued to TSAT for a capital
contribution of $10. All significant inter-entity and intercompany
transactions have been eliminated.
The Company owns and operates the PRIMESTAR(R) direct to home satellite
service throughout the continental U.S. The PRIMESTAR(R) service is
transmitted via a satellite ("GE-2") owned and operated by GE American
Communications ("GE Americom") at the 85 West Longitude ("W.L.") orbital
position.
(2) The Hughes Transactions
-----------------------
On January 22, 1999, PRIMESTAR announced that it had reached an agreement
with Hughes Electronics Corporation ("Hughes"), a subsidiary of General
Motors Corporation, to sell its medium-power direct broadcast satellite
("DBS") business and assets to Hughes for $1.1 billion in cash and 4.871
million shares of General Motors Class H common stock ("GMH Stock") valued
at approximately $225 million, based on the closing price of GMH Stock on
the date of the purchase agreement (the "Hughes Medium Power Transaction").
The foregoing purchase price is subject to adjustments for working capital
at the date of closing. The Company is responsible for the payment of
certain obligations not assumed by Hughes, satisfaction of its funded
indebtedness and the payment of costs, currently estimated to range from
$270 million to $340 million, associated with the termination of certain
vendor and service contracts and lease agreements related to the Company's
medium power business and proposed high power business strategy. The
consummation of the Hughes Medium Power Transaction is subject to various
consents from PRIMESTAR's lenders; restructuring of certain of the
Company's indebtedness, as described below; and other customary conditions.
On February 1, 1999 and in connection with the Hughes Medium Power
Transaction, the Company commenced tender offers (the "Tender Offers") to
purchase 100% of the outstanding principal amount of the Company's 10 7/8%
Senior Subordinated Notes due 2007 (the "Senior Subordinated Notes") at a
price of $670 per $1,000 principal amount and 100% of the outstanding
principal amount of the Company's 12 1/4% Senior Subordinated Discount
Notes due 2007 (the "Senior Subordinated Discount Notes", and together with
the Senior Subordinated Notes, the "Notes") at a price of 67% of the
accreted value of the Senior Subordinated Discount Notes as of February 15,
1999.
(continued)
II-22
<PAGE>
PRIMESTAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In addition, PRIMESTAR made a separate offer to lenders under the
Company's Senior Subordinated Credit Agreement, dated as of April 1, 1998
(the "Interim Loan Agreement"), to purchase 100% of the outstanding
principal amount due thereunder at a price of $670 per $1,000 principal
amount (the "Offer to Purchase"). Each of the Tender Offers and the Offer
to Purchase was subject to a minimum tender condition of 90% of the
outstanding principal amount of such issue. In conjunction with the Tender
Offers, PRIMESTAR solicited consents to certain proposed amendments to the
indentures governing the Notes and the Interim Loan that would eliminate
substantially all of the restrictive covenants thereunder and would amend
certain other provisions. Consummation of both the Tender Offers and the
Offer to Purchase was conditioned upon the closing of the Hughes Medium
Power Transaction and other conditions.
Following several extensions, the Tender Offer and the Offer to Purchase
expired on March 25, 1999. The minimum tender conditions were not
satisfied under the Tender Offer and Offer to Purchase, and no securities
or loans were purchased thereunder.
Since the announcement of the Hughes Medium Power Agreement and of the
proposed restructuring of the Company's senior subordinated indebtedness
relating thereto (the "Proposed Debt Restructuring"), the Company has been
engaged in negotiations with the representatives of an informal committee
(the "Bondholders' Committee") of holders of Notes and with representatives
of an informal committee (the "Bridge Lenders' Committee" and, together
with the Bondholders' Committee, the "Committees") of holders of loans
under the Interim Loan Agreement, with respect to the possible terms and
conditions of the Proposed Debt Restructuring. In that connection, the
Company has entered into confidentiality agreements with certain
representatives of the Committees and has agreed to pay certain expenses of
the Committees, including certain fees and expenses of their legal counsel
and financial advisor. Based on the progress of such negotiations to date,
the Company believes that the Proposed Debt Restructuring will be
consummated on terms satisfactory to the Company and such Committees, by
means of privately negotiated transactions. However, the Company has not
entered into any agreements to date with respect to the terms and
conditions of any such restructuring, and there can be no assurance that
the Proposed Debt Restructuring will be consummated. In the event the
Company is unable to negotiate certain minimum tender conditions in
connection with the Proposed Debt Restructuring, the Company does not
intend to consummate the Hughes Medium Power Transaction.
In connection with their approval of the Hughes Medium Power Transaction,
the stockholders of PRIMESTAR also approved the payment to TSAT of
consideration (the "PRIMESTAR Payment") in the amount of $65 million,
payable in shares of GMH Stock, valued at $46.1875 (the closing price of
such stock on the date of the purchase agreements with Hughes), subject to
the terms and conditions set forth in an agreement dated as of January 22,
1999 (the "PRIMESTAR Payment Agreement"). In consideration of the PRIMESTAR
Payment, TSAT agreed to approve the Hughes Medium Power Transaction and
Hughes High Power Transaction as a stockholder of PRIMESTAR, to modify
certain agreements to facilitate the Hughes High Power Transaction, and to
issue the Company a share appreciation right with respect to the shares of
GMH Stock received as the PRIMESTAR 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. Pursuant to
the PRIMESTAR Payment Agreement, TSAT has also agreed to forego any
liquidating distribution or other payment that may be made in respect of
the outstanding shares of PRIMESTAR upon any dissolution and winding-up of
PRIMESTAR, or otherwise in respect of PRIMESTAR'S existing equity. Such
payment is conditioned upon the closing of the Hughes Medium Power
Transaction.
(continued)
II-23
<PAGE>
PRIMESTAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In connection with the Hughes Medium Power Transaction, the Company
concluded that it would be unable to recover the carrying value of its
assets over their expected remaining useful life. Accordingly, the Company
has recorded an impairment loss of $950,289,000 (the "Impairment Loss"),
which represents the difference between the carrying value of the Company's
assets and their estimated fair value. Such fair value was based upon the
estimated consideration to be received by the Company in the Hughes Medium
Power Transaction.
The reduction in carrying amount of assets included in the Impairment Loss
is as follows (amounts in thousands):
<TABLE>
<CAPTION>
<S> <C>
Property and equipment:
Satellite reception equipment $103,898
Subscriber installation costs 223,541
Intangible assets:
Excess purchase price over acquired net assets 401,475
Tradename 221,375
--------
$950,289
========
</TABLE>
In a separate transaction, the Company announced that TSAT and the Company
had reached an agreement with Hughes to sell (i) TSAT's authorizations
granted by the Federal Communications Commission (the "FCC") and other
assets and liabilities relating to a proposed DBS system being constructed
by Tempo Satellite, Inc. ("Tempo"), a subsidiary of TSAT, at 119 degrees
W.L. (collectively, the "Tempo DBS Assets") and (ii) PRIMESTAR's rights
relating to the Tempo DBS Assets (see note 13) to Hughes, for aggregate
consideration valued at $500 million (the "Hughes High Power Transaction").
Pursuant to the agreement, Hughes would assume $465 million of TSAT's
liability to the Partnership, pay TSAT $2.5 million in cash and pay
PRIMESTAR and the Partnership $32.5 million in cash. In addition, the
Partnership has agreed to forgive amounts due from TSAT in excess of the
$465 million to be assumed by Hughes ($4,498,000 at December 31, 1998). To
facilitate such transaction, the Partnership would terminate and relinquish
the Tempo Capacity Option, as defined in note 13.
Due to the fact that regulatory approval is required to transfer certain of
the Tempo DBS Assets to Hughes, the Hughes High Power Transaction will be
completed in two steps. Effective March 10, 1999, the first closing of the
Hughes High Power Transaction (the "First Closing") was consummated whereby
Hughes acquired one of Tempo's high power satellites ("Tempo DBS-2") and
PRIMESTAR's option to acquire Tempo DBS-2 (the "Tempo DBS-2 Option") for
aggregate consideration of $150 million. Such consideration was comprised of the
following: (i) $9,750,000 paid to PRIMESTAR and the Partnership for the Tempo
DBS-2 Option and the termination of the Partnership's rights under the Tempo
Capacity Option, (ii) $750,000 paid to TSAT to exercise the Tempo DBS-2 Option
and (iii) the assumption by Hughes of $139,500,000 due to the Partnership from
TSAT in exchange for Tempo DBS-2. Simultaneously with the First Closing, Hughes
repaid the liability to the Partnership that Hughes assumed.
With regard to the sale of the remaining assets contemplated by the Hughes High
Power Agreement (the "Second Closing"), Tempo has been notified that its
in-orbit satellite ("Tempo DBS-I") experienced power reductions which occurred
on March 29, 1999 and April 2, 1999. Although the Company does not believe the
extent of such power reductions is significant, a definitive assessment of the
impact on Tempo DBS-I is not yet complete. Notwithstanding the foregoing, the
Second Closing, which is subject to the receipt of appropriate regulatory
approvals and other customary closing conditions, is expected to be consummated
in the second quarter of 1999. In the event the Second Closing is not
consummated and the Hughes High Power Agreement is abandoned, there can be no
assurance that the Company will be able to recover the carrying amount of its
satellite rights.
In addition, consummation of the Hughes Medium Power Transaction is not
dependent on completion of the Hughes High Power Transaction, and completion of
the Hughes High Power Transaction is not dependent on consummation of the Hughes
Medium Power Transaction.
The Company has a history of operating losses and reported an accumulated
deficit at December 31, 1998. In connection with the Hughes Medium Power
Transaction, affiliates of the stockholders of the Company, other than TSAT, and
an affiliate of TCI have 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. Management of the Company believes, but cannot assure, that when
such funds are combined with the proceeds from the Hughes Medium Power and High
Power Transactions and the Company's existing sources of liquidity, that the
Company will be able to meet its obligations as they become due and payable.
In the event the Hughes Medium Power Transaction is not consummated and is
abandoned, the Company currently intends to continue operating its medium power
business. Under such scenario, the Company anticipates that it would curtail
marketing and sales activities, reduce the number of new installations and
otherwise reduce expenditures to the extent possible. The Company believes, but
cannot assure, that in such event, the Company's cash flow from continuing
operations, commitments from the Company's stockholders to make certain funds
available to the Company and proceeds from the Hughes High Power Transaction
would provide the necessary funds for the Company to meets its obligations as
they become due and payable through December 31, 1999. In the event the Company
is unable to meet its obligations as they become due and payable, the Company
may be required to restructure or refinance certain of its liabilities. There
can be no assurance that such restructuring or refinancing, if necessary, would
be accomplished on terms acceptable to the Company.
(continued)
II-24
<PAGE>
PRIMESTAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) The Restructuring and the TSAT Merger
-------------------------------------
The Restructuring
-----------------
Effective April 1, 1998 (the "Closing Date") and pursuant to (i) a Merger
and Contribution Agreement dated as of February 6, 1998 (the "Restructuring
Agreement"), among the Company, TSAT, 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 Americom, and (ii) an Asset Transfer
Agreement dated as of February 6, 1998 (the "TSAT Asset Transfer
Agreement"), between the Company and TSAT, a business combination (the
"Restructuring") was consummated. In connection with the Restructuring,
TSAT contributed and transferred to the Company (the "TSAT Asset Transfer")
all of TSAT's assets and liabilities except (i) the capital stock of Tempo,
(ii) the consideration received by TSAT in the Restructuring and (iii) the
rights and obligations of TSAT under agreements with the Company and
others. In addition, (i) the business of the Partnership, (ii) the
business of distributing the PRIMESTAR(R) programming service
("PRIMESTAR(R)"), including certain related assets and liabilities of each
of TWE, Newhouse, Comcast, Cox and affiliates of MediaOne, and (iii) the
interest in the Partnership of each of TWE, Newhouse, Comcast, Cox,
affiliates of MediaOne and GE Americom (collectively, the "Non-TSAT
Parties") were consolidated into the Company.
In connection with the Restructuring, each of TSAT, Comcast, Cox, MediaOne,
Newhouse, TWE and GE Americom received from the Company (i) cash or an
assumption of indebtedness, (ii) shares of Class A Common Stock, $.01 par
value per share, of the Company, ("Class A Common Stock"), (iii) in the
case of TSAT only, shares of Class B Common Stock, $.01 par value per
share, of the Company ("Class B Common Stock"), and (iv) except in the case
of TSAT and GE Americom, shares of Class C Common Stock, $.01 par value per
share, of the Company ("Class C Common Stock"), in each case in an amount
determined pursuant to the Restructuring Agreement. The total
consideration paid by PRIMESTAR to the Non-TSAT Parties (including assumed
liabilities) aggregated approximately $2.2 billion comprising $1.3 billion
of cash and assumed liabilities and $900 million of common stock.
As of December 31, 1998, the approximate ownership of PRIMESTAR's common
stock was as follows:
<TABLE>
<CAPTION>
Ownership
Name of Beneficial Owner Percentage
------------------------ ----------
<S> <C>
TSAT 37.23%
TWE and Newhouse (collectively) 30.02%
Comcast 9.50%
MediaOne 9.69%
Cox 9.43%
GE Americom 4.13%
</TABLE>
(continued)
II-25
<PAGE>
PRIMESTAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The TSAT Asset Transfer has been recorded at TSAT's historical cost, and
the remaining elements of the Restructuring, as set forth above, have been
accounted for using the purchase method of accounting. The fair value of
the consideration issued to the Non-TSAT Parties has been allocated to the
assets and liabilities acquired based upon the estimated fair values of
such assets and liabilities.
TSAT has been identified as the acquirer for accounting purposes and the
predecessor for financial reporting purposes due to the fact that TSAT owns
the largest interest in the Company immediately following consummation of
the Restructuring.
The following pro forma operating results for the Company assume the
Restructuring had been consummated on January 1, 1997. Such unaudited pro
forma financial information is based upon historical results of operations
adjusted for acquisition costs and, in the opinion of management, is not
necessarily indicative of the results had the Restructuring been
consummated on January 1, 1997.
<TABLE>
<CAPTION>
Year ended
December 31,
----------------------------------------------------
1998 1997
------------------------- -------------------------
<S> <C> <C>
Revenue $ 1,493,729 1,272,274
Net loss $(1,434,214) (509,620)
Loss per common share $ (7.14) (2.54)
</TABLE>
The TSAT Merger
---------------
Effective February 6, 1998, PRIMESTAR and TSAT entered into an Agreement
and Plan of Merger (the "TSAT Merger Agreement"), providing for the merger
of TSAT with and into PRIMESTAR, with PRIMESTAR as the surviving
corporation (the "TSAT Merger"). In connection with the First Closing, the
Company and TSAT terminated the TSAT Merger Agreement.
(4) Distribution Transaction
------------------------
On December 4, 1996 (the "Distribution Date"), TCI distributed (the
"Distribution") all the capital stock of the Company to the holders of
Tele-Communications, Inc. Series A TCI Group Common Stock (the "Series A
TCI Group Stock") and Tele-Communications, Inc. Series B TCI Group Common
Stock (the "Series B TCI Group Stock" and, together with the Series A TCI
Group Stock, the "TCI Group Stock"). Holders of TCI Group Stock received
one share of TSAT Series A Common Stock for each ten shares of Series A TCI
Group Stock owned and one share of TSAT Series B Common Stock for each ten
shares of Series B TCI Group Stock owned.
In connection with the Distribution, the Company and TCI entered into
various agreements, including the "Reorganization Agreement" (see below),
the "Fulfillment Agreement" and the "Transition Services Agreement" (see
note 12), and an amendment to TCI's existing "Tax Sharing Agreement" (see
note 11).
(continued)
II-26
<PAGE>
PRIMESTAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Pursuant to the Reorganization Agreement, on the Distribution Date, the
Company issued to TCIC a promissory note (the "Company Note"), in the
principal amount of $250,000,000, representing a portion of the Company's
intercompany balance owed to TCIC on such date. The remainder of the
Company's intercompany balance owed to TCIC on the Distribution Date (other
than certain advances made to the Company by TCIC in 1996 to fund certain
construction and related costs associated with the Tempo Satellites, as
described in note 13) was assumed by TCI in the form of a capital
contribution to the Company. On December 31, 1996, the Company entered
into a bank credit agreement (the "Bank Credit Facility") and used a
portion of the borrowing availability thereunder to repay in full all
principal and interest due to TCIC pursuant to the Company Note.
(5) Changes in Accounting
---------------------
During the fourth quarter of 1996, the Company changed its depreciation
policy for subscriber installation costs. Such change was adopted effective
October 1, 1996 and was treated as a change in accounting policy that was
inseparable from a change in estimate. Accordingly, the cumulative effect
of such change for periods prior to October 1, 1996, together with the
fourth quarter 1996 effect of such change, was included in the Company's
depreciation expense for the fourth quarter of 1996. Consequently, this
change in policy resulted in increases to the Company's depreciation
expense, net loss and net loss per share for the year ended December 31,
1996 of $55,304,000 ($8,754,000 of which relates to periods prior to
January 1, 1996), $41,478,000 ($6,566,000 of which relates to periods prior
to January 1, 1996) and $.62 ($.10 of which relates to periods prior to
January 1, 1996), respectively.
The Company also revised the estimated useful life of certain satellite
reception equipment on a prospective basis as of October 1, 1996. Such
change in estimate resulted in increases to the Company's depreciation
expense, net loss and net loss per share for the year ended December 31,
1996 of $7,796,000, $5,847,000 and $.09, respectively.
(6) Summary of Significant Accounting Policies
------------------------------------------
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less at the date of acquisition to be cash equivalents.
Investment in PRIMESTAR Partners L.P.
Prior to the Restructuring, the Company used the equity method to account
for its investment in the Partnership. Under this method, the investment,
originally recorded at cost, was adjusted to recognize the Company's share
of the net earnings or losses of the Partnership as they occurred, rather
than as dividends or other distributions were received, limited to the
extent of the Company's investment in, and advances and commitments to, the
Partnership. The Company's share of net earnings or losses of the
Partnership included the amortization of the difference between the
Company's investment and its share of the net assets of the Partnership.
As part of the Restructuring, the Partnership became a wholly-owned
subsidiary of the Company.
(continued)
II-27
<PAGE>
PRIMESTAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Property and Equipment
Property and equipment is stated at cost. Depreciation is computed on a
straight-line basis using estimated useful lives of 4 to 6 years (4 to 8
years through September 30, 1996) for satellite reception equipment and 3
to 10 years for support equipment. Subscriber installation costs are
depreciated over the estimated average life of a subscriber (4 years). Any
subscriber installation costs that have not been fully depreciated at the
time service to a subscriber is terminated are charged to depreciation
expense during the period in which such termination occurs.
Repairs and maintenance are charged to operations, and betterments and
additions are capitalized. At the time of ordinary retirements of satellite
reception equipment, sales or other dispositions of property, the original
cost and cost of removal of such property are charged to accumulated
depreciation, and salvage, if any, is credited thereto.
The Company periodically reviews the carrying amount of its long-lived
assets to determine whether current events or circumstances warrant
adjustments to such carrying amounts. The Company considers historical and
expected future net operating losses to be its primary indicators of
potential impairment. Assets are grouped and evaluated for impairment at
the lowest level for which there are identifiable cash flows that are
largely independent of the cash flows of other groups of assets ("Assets").
The Company deems Assets to be impaired if the Company is unable to recover
the carrying value of its Assets over their expected remaining useful life
through a forecast of undiscounted future operating cash flows directly
related to the Assets. If Assets are deemed to be impaired, the loss is
measured as the amount by which the carrying amount of the Assets exceeds
their fair values. PRIMESTAR generally measures fair value by considering
sales prices for similar assets or by discounting estimated future cash
flows. Considerable management judgment is necessary to estimate discounted
future cash flows. Accordingly, actual results could vary significantly
from such estimates.
Intangible Assets
Intangible assets at December 31, 1998 are comprised of the following
(amounts in thousands):
<TABLE>
<S> <C>
Customer relationships $390,000
Satellite rights 469,498
--------
859,498
Accumulated amortization (73,125)
--------
$786,373
========
</TABLE>
Customer relationships are amortized using the straight-line method over
their estimated useful life of 4 years. Satellite rights represent
PRIMESTAR's right to use Tempo's two high power communications satellites
(the "Tempo Satellites") as described in note 13. The Company is not
amortizing such rights as the Company has not launched a high power service
utilizing the Tempo Satellites.
(continued)
II-28
<PAGE>
PRIMESTAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In connection with the Restructuring, the Company recorded tradenames of
$230,000,000 and excess cost over acquired net assets of $416,901,000.
Such intangible assets were amortized using the straight-line method over
20 years. As of December 31, 1998, such intangible assets were written
down to their estimated fair value of zero. Such writedown has been
included in the Impairment Loss described in note 2.
Deferred Financing Costs
Deferred financing costs are amortized over the term of the related loan
facility.
Revenue Recognition
Programming and equipment rental revenue is recognized in the period that
services are delivered. Installation revenue is recognized in the period
the installation services are provided to the extent of direct selling
costs. To date, direct selling costs have exceeded installation revenue.
Payments received from customers at the time of installation to reduce
future monthly rental fees are deferred and recognized as revenue over the
average life of a customer.
Programming Carriage Fees
Payments received from programmers at the time of launch for which future
carriage by the Company is required are deferred and recognized as a
reduction of programming expense over the term of the programming contract.
Advertising Costs
Advertising costs are generally expensed as incurred. Amounts expensed for
advertising aggregated $51,859,000, $23,062,000 and $25,622,000 during
1998, 1997 and 1996, respectively.
Marketing and Direct Selling Costs
Marketing and direct selling costs are expensed as incurred. The excess
cost of customer premises equipment over proceeds received upon sale of
such equipment is recognized at the time of sale and is included in selling
expense.
Residual Sales Commissions
Residual sales commissions, which become payable upon the collection of
programming revenue from certain subscribers, are expensed during the
period in which such commissions become payable.
Stock Based Compensation
The Company accounts for stock-based employee compensation using the
intrinsic value method pursuant to Accounting Principles Board Opinion No.
25.
(continued)
II-29
<PAGE>
PRIMESTAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Income Taxes
The Company accounts for its income taxes using the asset and liability
method. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates in
effect for the year in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in the period that includes
the enactment date.
Loss Per Common Share
The loss per common share for the years ended December 31, 1998 and 1997 is
based on 167,615,000 and 66,658,000 weighted average shares outstanding
respectively. TSAT issued 66,408,000 shares of TSAT common stock pursuant
to the Distribution. The loss per share amounts set forth in the
accompanying consolidated statements of operations assume that the shares
issued pursuant to the Distribution were issued and outstanding since
January 1, 1996. Accordingly, the calculation of the loss per share
assumes weighted average shares outstanding of 66,408,000 for the year
ended December 31, 1996. Excluded from the computation of diluted EPS for
the years ended December 31, 1998, 1997 and 1996 are options to acquire
5,395,000, 7,894,000 and 591,000 weighted average shares of common stock,
respectively, because inclusion of such options would be anti-dilutive.
Comprehensive Income (Loss)
The Company's total comprehensive loss for all periods presented herein did
not differ from those amounts reported as net loss.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ from
those estimates.
(7) Supplemental Disclosures to Statements of Cash Flows
----------------------------------------------------
Cash paid for interest was $116,193,000, $20,224,000 and $1,946,000 during
the years ended December 31, 1998, 1997 and 1996, respectively. Cash paid
for income taxes was not material during the years ended December 31, 1998,
1997, and 1996.
(continued)
II-30
<PAGE>
PRIMESTAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Significant non-cash investing and financing activities for the year ended
December 31, 1998 are reflected in the following table (amounts in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Cash paid in Restructuring:
Property and equipment acquired $ 716,821
Intangible assets 1,500,034
Current liabilities assumed, net of
current assets (116,849)
Debt assumed (903,299)
Deferred tax liability (222,585)
Common stock issued (919,228)
----------
$ 54,894
==========
</TABLE>
Transactions effected through the intercompany account with TCIC for
periods prior to the Distribution have been considered to be constructive
cash receipts and payments for purposes of the accompanying statements of
cash flows.
The non-cash effects of the Distribution are set forth in the accompanying
statements of equity.
Accounts payable includes accrued capital expenditures of $26,593,000,
$35,645,000 and $7,713,000 at December 31, 1998, 1997 and 1996,
respectively, which have been excluded from the accompanying statements of
cash flows.
(8) Debt
----
The components of debt are as follows:
<TABLE>
<CAPTION>
December 31,
1998 1997
---- ----
amounts in thousands
<S> <C> <C>
Bank Credit Facility (a) $ 513,200 48,000
Interim Loan Agreement (b) 350,000 --
Partnership Credit Facility (c) 575,000 --
Senior Subordinated Notes (d) 200,000 200,000
Senior Subordinated Discount Notes (d) 189,722 168,781
Other 5,273 1,948
---------- -------
$1,833,195 418,729
========== =======
</TABLE>
(continued)
II-31
<PAGE>
PRIMESTAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(a) In connection with the Restructuring, the Company amended and restated the
Bank Credit Facility. As amended, the Bank Credit Facility provides for
maximum commitments of up to $700 million, comprising $550 million of
revolving loan commitments and $150 million of term commitments, subject to
the Company's compliance with operating and financial covenants and other
customary conditions. In addition to the outstanding borrowings at December
31, 1998, $30 million of availability under the Bank Credit Facility had
been utilized to obtain two outstanding letters of credit. Commencing
March 31, 2001, the revolving loan commitments will be reduced quarterly,
and outstanding borrowings under the term loan commitments will be payable
in quarterly installments, in each case in accordance with a schedule,
until final maturity at June 30, 2005.
Borrowings under the Bank Credit Facility bear interest at variable rates
(6.7% at December 31, 1998). In addition, the Company must pay a commitment
fee equal to 0.375% on the average daily unused portion of the available
commitments, payable quarterly in arrears and at maturity. Such commitment
fees were not significant during any of the years presented.
Borrowings under the Bank Credit Facility are guaranteed by all restricted
subsidiaries of the Company (defined under the Bank Credit Facility to mean
each of the Company's domestic subsidiaries of which the Company owns
directly or indirectly at least 80% of the outstanding capital stock), and
secured by collateral assignments or other security interests. The Bank
Credit Facility contains covenants regarding debt service coverage and
leverage, as well as negative covenants restricting, among other things
indebtedness, liens and other encumbrances, mergers or consolidation
transactions, transactions with affiliates, investments, capital
expenditures, and payment of dividends and other distributions.
At April 1, 1999, the Company was not in compliance with one of the
covenants in the Bank Credit Facility regarding the provision of audited
financial statements to the lenders under the Bank Credit Facility (the
"Banks") within 90 days of the Company's fiscal year-end. The Company will
remedy such event of noncompliance in accordance with the terms of the Bank
Credit Facility by providing its audited financial statements to the Banks
prior to April 30, 1999.
(b) On the Closing Date, the Company entered into the Interim Loan Agreement
with certain financial institutions (the "Lenders") with respect to a $350
million unsecured senior subordinated interim loan (the "Interim Loan").
The Interim Loan Agreement provided for commitments of $350 million. The
commitments were fully funded to the Company on the Closing Date.
The obligations under the Interim Loan Agreement were due in full one year
from the Closing Date. However, the Company had the option to convert any
outstanding principal amount of the Interim Loan on such date (the
"Conversion Date") into a term loan maturing on April 1, 2008. The
Company gave notice of such conversion on March 29, 1999, in accordance
with the terms of the Interim Loan Agreement.
In addition, on the Conversion Date, the Company became obligated to enter
into a stock warrant agreement with the Lenders providing for the issuance
of warrants to purchase common stock of the Company equal to 2% of the
Company's outstanding common stock on the Conversion Date. The warrants are
to be exercisable over a ten-year period at a nominal exercise price.
(continued)
II-32
<PAGE>
PRIMESTAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The outstanding principal under the Interim Loan Agreement bears
interest at a rate per annum equal to the greater of 10% or, at the
election of the Lenders, (i) a rate per annum that is equal to the
corporate base rate, as provided for in the Interim Loan Agreement,
(ii) the Federal Funds effective rate, plus 0.50%, or (iii) the London
interbank offered rate ("LIBOR") for such period, plus in each case
the Applicable Spread (as defined in the Interim Loan Agreement). The
interest rate on the Interim Loan in effect at December 31, 1998 was
11.5% which included the Applicable Spread of 650 basis points. The
Applicable Spread increases monthly thereafter, with a final increase
to 750 basis points from and after April 1, 1999.
At any time after the Conversion Date, the applicable spread is to be
850 basis points. In addition, at the request of any Lender, the
interest rate on all or any portion of the term loan owing to such
Lender will be converted to a fixed rate equal to the rate in effect
as of the date such Lender gave notice to the Company.
Interest was payable monthly in arrears on the last day of each month
until the Conversion Date. Thereafter, interest is payable quarterly
in arrears, except for any term loan converted to a fixed rate loan,
in which event interest is payable on March 31 and September 30 of
each year. If interest payable by the Company exceeds 15%, the
Company may elect to pay all or a portion of the interest in excess of
15% by issuance of notes in an aggregate principal amount equal to
such excess amount.
Prior to the Conversion Date, the Company could prepay the Interim
Loan without penalty. After the Conversion Date, certain limited
prepayments are permitted until April 1, 2001 out of the proceeds of
certain equity offerings. Otherwise, prepayment is not permitted until
on or after April 1, 2003. Prepayment penalties apply to any
prepayment prior to April 1, 2006, which penalties are calculated with
reference to the interest rate in effect at the time of prepayment.
The Interim Loan Agreement provides for mandatory prepayments of the
Interim Loan upon the occurrence of certain asset sales, capital
contributions, securities issuances and a change of control (as
defined in the Interim Loan Agreement) of the Company.
(continued)
II-33
<PAGE>
PRIMESTAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(c) The Partnership Credit Facility, as amended, allows for borrowings up to
$585 million, and borrowings thereunder are collateralized by letters of
credit (the "Partnership Letters of Credit"), which were arranged for by
affiliates of the partners of the Partnership (the "Partners") (or, in the
case of TSAT, affiliates of TCI) other than GE Americom. In connection
with the Restructuring, the Partnership became an indirect, wholly-owned
subsidiary of the Company. In addition, the Partners and TCI agreed to
maintain their respective Partnership Letters of Credit through June 1999,
and the Company entered into Reimbursement Agreements with respect to such
letters of credit, whereby the Company agreed to indemnify the parties
arranging for such letters of credit from and against all obligations
thereunder and/or other existing documentation relating thereto, including
all existing and future payment obligations. The obligations of the
Company under such Reimbursement Agreements are subordinated in right of
payment, in the manner set forth in the Reimbursement Agreement, to all
indebtedness of the Company under the Bank Credit Facility, the Interim
Loan Agreement and the Notes.
Borrowings under the Partnership Credit Facility bear interest at variable
rates (5.6% at December 31, 1998). In addition, the Company must pay
quarterly, in arrears, a commitment fee of 3/16% per annum on the daily
unused portion of the facility. Such commitment fees were not significant
during the year ended December 31, 1998.
The maturity date of the Partnership Credit Facility is June 30, 1999.
(d) On February 20, 1997, the Company issued the Senior Subordinated Notes
having an aggregate principal amount of $200,000,000 and the Senior
Subordinated Discount Notes having an aggregate principal amount at
maturity of $275,000,000.
Cash interest on the Senior Subordinated Notes is payable semi-annually in
arrears on February 15 and August 15. 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 February 15 and August 15,
commencing August 15, 2002, provided however, that at any time prior to
February 15, 2002, the Company may make a Cash Interest Election (as
defined) on any interest payment date to commence the accrual of cash
interest from and after the Cash Election Date (as defined). The Notes will
be redeemable at the option of the Company, in whole or in part, at any
time after February 15, 2002 at specified redemption prices. In addition,
prior to February 15, 2000, the Company may use the net cash proceeds from
certain specified equity transactions to redeem up to 35% of the Notes at
specified redemption prices.
(continued)
II-34
<PAGE>
PRIMESTAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The fair value of the Company's debt is estimated based upon the quoted
market prices for the same or similar issuances or on the current rates
offered to the Company for debt of the same remaining maturities. With the
exception of the Notes, which had an aggregate fair value of $158,090,000
at December 31, 1998, PRIMESTAR believes that the fair value and the
carrying value of its debt were approximately equal at December 31, 1998.
As of December 31, 1998, annual maturities of the Company's debt for each
of the next five years were as follows (amounts in thousands):
<TABLE>
<S> <C>
1999 $575,921
2000 1,013
2001 15,342
2002 30,368
2003 153,596
</TABLE>
(9) Stockholders' Equity
-------------------------
PRIMESTAR Preferred Stock
-------------------------
The Restated Certificate of Incorporation of the Company authorizes the
PRIMESTAR Board of Directors (the "Board") to provide for the issuance of
all or any shares of preferred stock of the Company in one or more series
and to fix for each series the number of shares constituting such series
and such voting powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional or other
special rights and such qualifications, limitations or restrictions thereof
as shall be stated and expressed in the resolution or resolutions adopted
by the Board providing for the issuance of such series. As of December 31,
1998, no series of preferred stock have been designated.
PRIMESTAR Common Stock
----------------------
Holders of Class A Common Stock are entitled to one vote for each share of
such stock held, holders of Class B Common Stock are entitled to ten votes
for each share of such stock held and holders of Class C Common Stock are
entitled to ten votes for each share of such stock held. Holders of Class
D Common Stock are not entitled to any voting rights with respect to such
shares, except as may be required by law.
Each share of Class B Common Stock is convertible, at the option of the
holder, into one share of Class A Common Stock. Each share of Class C
Common Stock is convertible, at the option of the holder, into one share of
Class B Common Stock, and will be mandatorily and automatically so
converted upon the tenth anniversary of the Closing Date.
TSAT Preferred Stock
--------------------
Prior to the Restructuring, TSAT was authorized to issue 5,000,000 shares
of Preferred Stock.
(continued)
II-35
<PAGE>
PRIMESTAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
TSAT Common Stock
-----------------
Prior to the Restructuring, the TSAT Series A Common Stock had one vote per
share and the TSAT Series B Common Stock had ten votes per share. Each
share of TSAT Series B Common Stock was convertible, at the option of the
holder, into one share of TSAT Series A Common Stock.
Employee Retirement Plan
------------------------
Prior to the Restructuring, TSAT maintained an employee stock purchase plan
(the "TSAT Plan") pursuant to which employees could contribute up to 10% of
their compensation. TSAT, by annual resolution of the TSAT Board of
Directors (the "TSAT Board"), could elect to contribute up to 100% of the
amount contributed by employees. In connection with the Restructuring and
effective June 30, 1998, the TSAT Plan was merged with and into the
Partnership's amended and restated retirement plan, which has been renamed
the PRIMESTAR, Inc. 401(k) Savings Plan.
Stock Options
-------------
In June 1996, the Board of Directors of TCI (the "TCI Board") authorized
TCI to permit certain of its executive officers to acquire equity interests
in certain of TCI's subsidiaries. In connection therewith, the TCI Board
approved the acquisition by each of two executive officers of TCI who were
not employees of TSAT (the "TCI Officers"), of 1.0% of the net equity of
TSAT. The TCI Board also approved the acquisition by the chief executive
officer and a director of TSAT (the "TSAT Officer"), of 1.0% of the net
equity of TSAT and the acquisition by an executive officer of certain TCI
subsidiaries who is also a director, but not an employee, of TSAT (the "TCI
Subsidiary Officer"), of 0.5% of the net equity of TSAT. The TCI Board
determined to structure such transactions as grants by TSAT to such persons
of options to purchase shares of TSAT Series A Common Stock representing
1.0% (in the case of each of the TCI Officers and the TSAT Officer) and
0.5% (in the case of the TCI Subsidiary Officer) of the shares of TSAT
Series A Common Stock and TSAT Series B Common Stock issued and outstanding
on the Distribution Date, determined immediately after giving effect to the
Distribution, but before giving effect to any exercise of such options (the
"Distribution Date Options").
Pursuant to the Reorganization Agreement, and (in the case of the TCI
Officers and the TCI Subsidiary Officer) in partial consideration for the
capital contribution made by TCI to TSAT in connection with the
Distribution, TSAT agreed, effective as of the Distribution Date, to bear
all obligations under such options and to enter into stock option
agreements with respect to such options with each of the TCI Officers, the
TSAT Officer and the TCI Subsidiary Officer
Distribution Date Options to purchase 2,324,266 shares of TSAT Series A
Common Stock at a per share price of $8.86 were granted on the Distribution
Date. The market price of the TSAT Series A Common Stock on such date was
$12.63. As originally granted, the Distribution Date Options vest in 20%
cumulative increments on each of the first five anniversaries of February
1, 1996, and will be exercisable for up to ten years following February 1,
1996. Compensation expense with respect to the Distribution Date Options
held by the TSAT Officer aggregated $1,026,000, $1,101,000 and $95,000
during the years ended December 31, 1998, 1997 and 1996, respectively.
(continued)
II-36
<PAGE>
PRIMESTAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
On the Distribution Date, the TSAT Board adopted, and TCI as the sole
stockholder of TSAT prior to the Distribution, approved, the TCI Satellite
Entertainment, Inc. 1996 Stock Incentive Plan (the "TSAT 1996 Plan"). The
TSAT 1996 Plan provides for awards to be made in respect of a maximum of
3,200,000 shares of TSAT Series A Common Stock (subject to certain anti-
dilution adjustments). Awards may be made as grants of stock options,
stock appreciation rights ("SARs"), restricted shares, stock units,
performance awards or any combination thereof. As originally granted,
options granted pursuant to the TSAT 1996 Plan vest evenly over five years
from the date of grant and expire 10 years from the date of grant.
In March 1998, stockholders of TSAT approved the TCI Satellite
Entertainment, Inc. 1997 Nonemployee Director Stock Option Plan (the "TSAT
DSOP") including the grant, effective as of February 3, 1997, to each
person that as of that date was a member of the TSAT Board and was not an
employee of TSAT or any of its subsidiaries, of options to purchase 50,000
shares of TSAT Series A Common Stock. Pursuant to the TSAT DSOP, options
to purchase 200,000 shares of TSAT Series A Common Stock were granted at an
exercise price of $8.00 per share. As originally granted, options issued
pursuant to the TSAT DSOP vest and become exercisable over a five-year
period from the date of grant and expire 10 years from the date of grant.
In November 1997, the TSAT Board voted to increase the number of directors
by one, and the director named to fill such newly created directorship
received options to purchase 50,000 shares of TSAT Series A Common Stock at
an exercise price of $6.50.
In February 1997, certain key employees of TSAT were granted, pursuant to
the TSAT 1996 Plan, an aggregate of 325,000 restricted shares of TSAT
Series A Common Stock. Such restricted shares had a grant-date fair value
of $8.00. As originally granted, such restricted shares vest as to 50% on
January 1, 2001 and as to the remaining 50% on January 1, 2002.
Compensation expense with respect to the restricted shares aggregated
$1,570,000 and $585,000 during the years ended December 31, 1998 and 1997,
respectively.
In November 1997, the TSAT Board and the compensation committee of the TSAT
Board approved modifications to the vesting provisions of all options and
restricted stock awards issued pursuant to the TSAT 1996 Plan, (i)
accelerating the vesting schedules under such options, to provide for
vesting in three equal annual installments, commencing February 1998, and
(ii) accelerating the vesting schedules under such restricted stock awards
to provide for vesting of 50% on each of the second and third anniversaries
of the date of granting. Options granted prior to the Distribution, which
were 40% vested in February 1998, will become two-thirds vested in February
1999 and fully vested in February 2000.
On April 2, 1998, the PRIMESTAR Board of Directors approved the PRIMESTAR,
Inc. 1998 Incentive Plan (the "1998 PRIMESTAR Plan"). The 1998 PRIMESTAR
Plan provides for awards to be made in respect of a maximum of 7,000,000
shares of Class A Common Stock. Awards may be made as grants of stock
options, SARs, restricted shares, stock units, performance awards or any
combination thereof. Options granted pursuant to the 1998 PRIMESTAR Plan
vest evenly over three years from the date of grant and expire 10 years
from the date of grant.
(continued)
II-37
<PAGE>
PRIMESTAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Company applies Accounting Principles Board Opinion No. 25 in
accounting for its stock options, and accordingly, compensation expense has
been recognized for its stock options in the accompanying financial
statements using the intrinsic value method. Had the Company determined
compensation expense based on the grant-date fair value method pursuant to
Statement of Financial Accounting Standards No. 123, the Company's net loss
and loss per share would have been $240,384,000 and $3.61 for 1997 and
would not have been significantly different than the amounts reported for
1998 or 1996.
The following table presents the number, weighted-average exercise price
and weighted-average grant-date fair value of options to buy TSAT Series A
Common Stock and Class A Common Stock.
<TABLE>
<CAPTION>
Number of options Weighted- Weighted-
--------------------------------------- average average
TSAT PRIMESTAR exercise grant-date
Series A Class A price fair value
------------------- ------------------ -------------- --------------
<S> <C> <C> <C> <C>
Granted in connection with ----------
Distribution 2,324,266 $8.86 $8.74
----------
Outstanding at December 31, 1996 2,324,266 8.86
Granted 1,070,000 7.93 4.77
----------
Outstanding at December 31, 1997 3,394,266 8.57
Options not assumed by
PRIMESTAR (1) (3,394,266)
Granted -- 4,934,993 7.69 5.95
Canceled -- (242,285) 7.69
---------- -----------------
Outstanding at December 31, 1998 -- 4,692,708 7.69
========== =================
Exercisable at December 31, 1996 --
==========
Exercisable at December 31, 1997 464,853 8.86
==========
Exercisable at December 31, 1998 --
=================
</TABLE>
________________
(1) At the time of the Restructuring, none of the outstanding options to
acquire TSAT common stock were converted into options to acquire
PRIMESTAR common stock. However, PRIMESTAR assumed TSAT's liability
with respect to any future cash payment to be made upon exercise by any
PRIMESTAR employee of an option or SAR issued by TSAT prior to the
Restructuring.
(continued)
II-38
<PAGE>
PRIMESTAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Options outstanding at December 31, 1998 have an exercise price of $7.69
and a weighted-average remaining contractual life of approximately nine
years.
The respective estimated grant-date fair values of the options noted above
are based on the Black-Scholes model and are stated in current annualized
dollars on a present value basis. The key assumptions used in the model for
purposes of these calculations include the following: (a) a discount rate
equal to the 10-year Treasury rate on the date of grant; (b) a 65%
volatility rate; (c) the 10-year option term; (d) the closing price of the
TSAT Series A Common Stock on the date of grant; and (e) an expected
dividend rate of zero.
Pursuant to the Reorganization Agreement, TSAT granted to TCI an option to
purchase up to 4,765,000 shares of TSAT Series A Common Stock, at an
exercise price of $1.00 per share, as required by TCI from time to time to
meet its obligations under the conversion features of certain convertible
securities of TCI as such conversion features were adjusted as a result of
the Distribution. During 1998, 1997 and 1996, TCI purchased 989,000 shares,
258,000 shares and 5,000 shares, respectively, of TSAT Series A Common
Stock pursuant to such option.
In connection with the Distribution, TCI and the Company also entered into
a "Share Purchase Agreement" to sell to each other from time to time, at
the then current market price, shares of Series A TCI Group Stock and TSAT
Series A Common Stock, respectively, as necessary to satisfy their
respective obligations after the Distribution Date under certain stock
options and SARs held by their respective employees and non-employee
directors.
Other
-----
At December 31, 1998, a total of 4,692,708 shares of Class A Common Stock
were reserved for issuance pursuant to the 1998 PRIMESTAR Plan. In
addition, one share of Class A Common Stock is reserved for each
outstanding share of Class B Common Stock and Class C Common Stock.
(10) Restructuring Charges
---------------------
During 1998, the Company reorganized its operations. In connection
therewith, the Company closed certain of its local offices and reduced its
corporate work force. As a result, the Company terminated approximately
700 employees. In connection with such reorganization, the Company
recognized restructuring charges of $26,025,000. Such restructuring
charges related to (i) severance costs for terminated employees
($18,828,000), (ii) lease cancellation fees and other office shutdown costs
($3,617,000) and (iii) the net book value of abandoned equipment
($3,580,000). As of December 31, 1998, the Company had paid approximately
$6,388,000 of the restructuring charges and has a remaining accrual of
$16,057,000.
(continued)
II-39
<PAGE>
PRIMESTAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(11) Income Taxes
------------
Through the Distribution Date, TSAT's results of operations were included
in TCI's consolidated U.S. Federal income tax returns, in accordance with
the existing tax sharing arrangements among TCI and its consolidated
subsidiaries. Effective July 1, 1995, TCI, TCIC and certain other
subsidiaries of TCI entered into a tax sharing agreement (the "Tax Sharing
Agreement"), which formalized such pre-existing tax sharing arrangements
and implemented additional provisions regarding the allocation of certain
consolidated income tax attributes and the settlement procedures with
respect to the intercompany allocation of current tax attributes. In
connection with the Distribution, the Tax Sharing Agreement was amended to
provide that TSAT be treated as if it had been a party to the Tax Sharing
Agreement, effective July 1, 1995. TSAT's intercompany income tax
allocation through the Distribution Date has been calculated in accordance
with the Tax Sharing Agreement. Subsequent to the Distribution Date, the
Company files separate U.S. Federal and state income tax returns.
Income tax benefit (expense) for the years ended December 31, 1998, 1997
and 1996 consists of:
<TABLE>
<CAPTION>
Current Deferred Total
---------------- ----------------- -----------------
amounts in thousands
<S> <C> <C> <C>
Year ended December 31, 1998:
Federal $ -- 128,243 128,243
State and local -- 19,285 19,285
---------------- ------- -------
$ -- 147,528 147,528
================ ======= =======
Year ended December 31, 1997:
Federal $ -- -- --
State and local -- -- --
---------------- ------- -------
$ -- -- --
================ ======= =======
Year ended December 31, 1996:
Intercompany allocation $70,645 -- 70,645
Federal -- (17,699) (17,699)
State and local -- (7,009) (7,009)
---------------- ------- -------
$70,645 (24,708) 45,937
================ ======= =======
</TABLE>
Income tax benefit (expense) differs from the amounts computed by applying
the Federal income tax rate of 35% as a result of the following:
<TABLE>
<CAPTION>
Years ended December 31
-------------------------------------------------------
1998 1997 1996
----------------- ----------------- -----------------
amounts in thousands
<S> <C> <C> <C>
Computed "expected" tax benefit $ 521,931 83,419 65,079
State and local income taxes, net
of Federal income tax benefit 12,535 13,009 (2,672)
Change in valuation allowance (238,739) (98,521) (16,371)
Amortization of goodwill (145,915) -- --
Other (2,284) 2,093 (99)
--------- ------- -------
$ 147,528 -- 45,937
========= ======= =======
</TABLE>
(continued)
II-40
<PAGE>
PRIMESTAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1998 and 1997 are presented below:
<TABLE>
<CAPTION>
December 31,
------------------------------------------
1998 1997
-------------------- --------------------
amounts in thousands
<S> <C> <C>
Deferred tax assets:
Net operating loss carry forwards $ 226,823 133,024
Investment in the Partnership:
Due to an increase in tax basis upon transfer from
TCIC to the Company 29,305 29,305
Due principally to losses recognized for financial
statement purposes in excess of losses recognized
for tax purposes 57 2,671
Property and equipment principally due to impairment
write-offs for financial statement purposes 11,801 --
Future deductible amounts principally due to accruals
deductible in later periods 12,310 5,028
--------- --------
Total deferred tax assets 280,296 170,028
Less-valuation allowance (238,739) (114,892)
--------- --------
Net deferred tax assets 41,557 55,136
Deferred tax liabilities:
Intangible assets recorded in purchase accounting for
financial statement purposes 116,614 --
Property and equipment, principally due to differences
in depreciation -- 55,136
--------- --------
Net deferred tax liability $ 75,057 --
========= ========
</TABLE>
The valuation allowance for deferred tax assets as of December 31, 1998 was
$238,739,000. Such balance increased $123,847,000 from December 31, 1997.
The valuation allowance at December 31, 1997 related to TSAT's net
operating loss carryforwards which were not contributed to PRIMESTAR in the
Restructuring.
The Company has analyzed the sources and expected reversal periods of its
deferred tax assets. The Company believes that the tax benefits
attributable to deductible temporary differences will be realized to the
extent of future reversals of existing taxable temporary differences.
At December 31, 1998, the Company had net operating loss carry forwards for
income tax purposes aggregating approximately $593,001,000 of which, if not
utilized to reduce taxable income in future periods, $900,000 expire in
2005, $1,200,000 expire in 2006, $2,170,000 expire in 2008, $2,003,000
expire in 2011, $6,200,000 expire in 2012 and $580,528,000 expire in 2018.
(continued)
II-41
<PAGE>
PRIMESTAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(12) Transactions with Related Parties
---------------------------------
Pursuant to the terms of the TSAT Merger Agreement, PRIMESTAR reimbursed
TSAT for all reasonable costs and expenses incurred by TSAT (i) to comply
with its tax and financial reporting obligations, (ii) to maintain certain
insurance coverage and (iii) to maintain its status as a publicly traded
company. During the year ended December 31, 1998, such reimbursements
aggregated $152,000, and have been reflected as a reduction of PRIMESTAR's
equity.
In addition, PRIMESTAR makes advances to TSAT for the payment of certain
costs related to the Tempo Satellites and the proposed high power strategy.
Such advances aggregated $6,365,000 during 1998 and have been included in
intangible assets in the accompanying consolidated balance sheet. PRIMESTAR
anticipates that it will recover the advances upon the sale of the Tempo
Satellites to Hughes.
The Company is a party to a satellite transponder service agreement, as
amended (the "GE-2 Agreement") with an affiliate of GE Americom for
satellite service on GE-2. As originally executed, the GE-2 Agreement had
an initial term extending through February 2003 at an annual rate of
$86,340,000, with an option to extend the term through the end-of-life of
GE-2. The option to extend has expired without exercise. However, the
Company remains in discussions with GE Americom regarding other
alternatives for extension of the GE-2 Agreement, and the Company will
continue to assess other alternatives if the Hughes Medium Power
Transaction is not consummated. No assurance can be given that the parties
will agree to any such extension, if necessary, or that any other
alternatives will be confirmed. Charges to the Company for the use of GE-2
and other services provided by GE Americom aggregated $64,755,000 for the
period from April 1, 1998 through December 31, 1998, and are included in
operating expenses in the accompanying consolidated statement of
operations.
Pursuant to the GE-2 Agreement, GE Americom provides the Company with
service on 24 transponders on GE-2. The Company is currently entitled to
non-preemptible service on 18 of the transponders on GE-2 and preemptible
service on six transponders. Preemptible transponders are transponders
that may be reassigned to restore service to protected customers if such
protected customers experience transponder or satellite failure. The
Company does not believe that, during the early stages of GE-2's
operational life, the use of preemptible transponders is likely to
interfere in any material respect with the operation of the PRIMESTAR(R)
service. The Company currently receives "orbital location protected
service" on all 24 of its transponders, meaning that if there is a failure
of GE-2, the Company will be entitled to restore the lost service on
another GE Americom medium power satellite, GE-3, which was successfully
launched on September 4, 1997, into the same 85 W.L. orbital position used
by GE-2. Even in those circumstances, the six preemptible transponders,
although protected, would remain preemptible. Upon the successful launch
of another GE Americom medium power satellite, GE-4, the Company's six
preemptible transponders will become non-preemptible.
(continued)
II-42
<PAGE>
PRIMESTAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
TCI and the Non-TSAT Parties, other than GE Americom, have arranged for
letters of credit (the "GE-2 Letters of Credit") to support the Company's
obligations under the GE-2 Agreement. Pursuant to the Restructuring
Agreement, the Company reimburses TCI and the Non-TSAT Parties for fees
related to the Partnership Letters of Credit and the GE-2 Letters of
Credit. Such reimbursements aggregated $10,004,000 during the year ended
December 31, 1998 and are included in interest expense in the accompanying
consolidated statements of operations.
Since April 1, 1998, a subsidiary of TCI has provided satellite uplink
services to the Company. Charges for such services aggregated $10,659,000
during 1998 and are included in operating expenses in the accompanying
consolidated statement of operations.
Since March 1997, TCI has provided the Company with customer support
services from TCI's Boise, Idaho call center. Amounts charged by TCI to
the Company for such services aggregated $24,938,000 and $12,173,000 during
the years ended December 31, 1998 and 1997, respectively, and are included
in selling, general and administrative expenses in the accompanying
consolidated statements of operations.
Subsequent to the Restructuring, the Non-TSAT Parties continued to operate
certain non-strategic local offices (the "Transition Offices") for
approximately three months (the "Transition Period") while the
responsibilities of such offices were transferred to other PRIMESTAR
offices. By the end of the Transition Period, all of the Transition
Offices had been closed. Transition expenses include costs incurred
through December 31, 1998 and charged to the Company by the Non-TSAT
Parties to operate the Transition Offices during the Transition Period.
Certain key employees of the Company hold stock options in tandem with
stock appreciation rights with respect to certain common stock of TCI.
Estimates of the compensation related to the options and/or stock
appreciation rights granted to employees of the Company have been recorded
in the accompanying consolidated financial statements, but are subject to
future adjustment based upon the market value of the underlying common
stock of TCI and, ultimately, on the final determination of market value
when the rights are exercised. Stock compensation recognized by the
Company related to such options aggregated ($2,182,000), $6,134,000 and
$(541,000) during the years ended December 31, 1998, 1997 and 1996,
respectively.
Prior to the Restructuring, the Partnership provided programming services
to TSAT and other authorized distributors in exchange for a fee based upon
the number of subscribers receiving programming services. In addition, the
Partnership arranged for satellite capacity and uplink services, and
provided national marketing and administrative support services in exchange
for a separate authorization fee.
(continued)
II-43
<PAGE>
PRIMESTAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
TCI also provided corporate administrative services to the Company pursuant
to a transition services agreement (the "Transition Services Agreement").
Pursuant to the Transition Services Agreement, the Company was required to
pay TCI a monthly fee of $1.50 per qualified subscriber up to a maximum of
$3,000,000 per month, and to reimburse TCI quarterly for direct, out-of-
pocket expenses incurred by TCI to third parties in providing the services.
Charges under the Transition Services Agreement aggregated $3,174,000 and
$11,579,000 during the years ended December 31, 1998 and 1997,
respectively, and are included in selling, general and administrative
expenses in the accompanying consolidated statements of operations. The
Transition Services Agreement was terminated in connection with the
consummation of the Restructuring.
Through the Distribution Date, the effects of all transactions between the
Company and TCI were reflected as adjustments to a non-interest bearing
intercompany account. As described in note 4, all but $250,000,000 of this
intercompany account was forgiven in connection with the Distribution.
Subsequent to the Distribution Date, the effects of all transactions (other
than those related to the TCIC Credit Facility) have been reflected in a
non-interest bearing account between the Company and TCIC and are settled
periodically in cash.
Through December 31, 1996, TCI provided certain installation, maintenance,
retrieval and other customer fulfillment services to the Company. The costs
associated with such services were allocated to the Company based upon a
standard charge for each of the various customer fulfillment activities
performed by TCI. During the year ended December 31, 1996, the Company's
capitalized installation costs included amounts allocated from TCI of
$53,169,000. Maintenance, retrieval and other operating expenses allocated
from TCI to the Company aggregated $20,365,000 during the year ended
December 31, 1996.
Effective January 1, 1997, charges for customer fulfillment services
provided by TCI were made pursuant to the Fulfillment Agreement entered
into by the Company and TCI in connection with the Distribution. Pursuant
to the Fulfillment Agreement, TCI continued to provide fulfillment services
on an exclusive basis to the Company following the Distribution with
respect to customers of the PRIMESTAR(R) medium power service. Such
services were performed in accordance with specified performance standards.
Charges to TSAT pursuant to the Fulfillment Agreement aggregated
$54,823,000 during 1997, of which $46,498,000 were capitalized installation
costs. The Fulfillment Agreement terminated on December 31, 1997.
(13) Commitments and Contingencies
-----------------------------
At December 31, 1998, the Company's future minimum commitments to purchase
satellite reception equipment aggregated approximately $44 million The
Company currently purchases all of its integrated receiver/decoders
("IRDs") from one supplier and all of its home satellite dishes ("HSDs")
from a different supplier. Each supplier has certain disaster recovery
plans. However, a break in production of either IRDs or HSDs could result
in a slow down in the addition of new customers and a corresponding
reduction in the Company's revenue.
(continued)
II-44
<PAGE>
PRIMESTAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
As part of the compensation paid to the Company's various sales agents, the
Company has agreed to pay certain residual sales commissions during
specified periods following the initiation of service (generally five
years). Residual payments to sales agents aggregated $25,639,000,
$15,364,000, and $11,848,000 during 1998, 1997 and 1996, respectively and
were charged to expense in the accompanying consolidated statements of
operations.
In addition to leasing transponder capacity on GE-2, the Company leases
business offices and uses certain equipment under lease arrangements.
Rental expense under such arrangements amounted to $9,847,000, $2,237,000,
and $2,095,000 in 1998, 1997 and 1996, respectively. Included in the 1998
amount is $2,013,000 related to lease cancellation fees. It is expected
that, in the normal course of business, expiring leases will be renewed or
replaced by leases on other properties; thus, it is anticipated that future
minimum lease commitments will not be less than the rental expense incurred
during 1998, exclusive of the amounts for lease cancellations.
In February 1990, Tempo entered into an option agreement with the
Partnership granting the Partnership the right and option (the "Tempo
Capacity Option"), upon exercise, to purchase or lease 100% of the capacity
of the DBS system to be built, launched and operated by Tempo with the
purchase price (or aggregate lease payments) being sufficient to cover the
costs of constructing, launching and operating such DBS system. In
connection with the Tempo Capacity Option and certain related matters,
Tempo and the Partnership subsequently entered into two letter agreements
(the "Tempo Letter Agreements") which provided for, among other things, the
funding by the Partnership of milestone and other payments due under a
satellite construction agreement, and certain related costs, through
advances by the Partnership to Tempo. The Tempo Letter Agreements permit
the Partnership to apply its advances to Tempo against any payments due
under the Tempo Capacity Option with respect to its purchase or lease of
satellite capacity. The aggregate funding provided to Tempo by the
Partnership ($469,498,000 at December 31, 1998) is reflected as satellite
rights in the accompanying consolidated balance sheet. On February 7, 1997,
the Partnership exercised the Tempo Capacity Option, but no capacity lease
or purchase agreement has been entered into in connection therewith. In
connection with the Hughes High Power Transaction, Hughes has agreed to
assume, and to satisfy and discharge, $465 million of Tempo's obligation to
the Partnership for such advances, and the Partnership has agreed to
forgive the remaining balance. In addition, the Partnership has agreed to
terminate and relinquish its rights under the Tempo Capacity Option.
Pursuant to the Restructuring Agreement, the Company has indemnified each
of the Non-TSAT Parties against (i) any and all losses and liabilities,
suffered or incurred by any such indemnified party resulting from any
liabilities of such party assumed by the Company in the Restructuring, (ii)
any and all losses and liabilities resulting from the operation by the
Company of the digital satellite business, whether before, on or after the
Closing Date and (iii) any and all losses and liabilities resulting from
the business, affairs, assets or liabilities of the Company whether arising
before, on or after the Closing Date.
(continued)
II-45
<PAGE>
PRIMESTAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In addition, the Company is required to indemnify each of the Non-TSAT
Parties against (i) all liability for taxes, other than transfer taxes,
incurred as a result of the Restructuring ("Covered Taxes") of PRIMESTAR
for the taxable period that begins after the Closing Date or the portion
that begins after the Closing Date of any taxable period that begins before
and ends after the Closing Date, (ii) all liability for Covered Taxes
failing to qualify under Section 368(a) of the Code if such failure is
attributable to any action taken after the Closing by the Company (other
than any such action expressly required or contemplated by the
Restructuring Agreement) and (iii) all liability for any reasonable legal,
accounting, appraisal, consulting or similar fees and expenses relating to
the foregoing.
The International Bureau of the FCC has granted a subsidiary of EchoStar
Communications Corporation ("EchoStar") a conditional authorization to
construct, launch and operate a Ku-band domestic fixed satellite into the
orbital position at 83 degrees W.L., immediately adjacent to that occupied
by GE-2, the medium power satellite now used to provide the PRIMESTAR(R)
service. Contrary to previous FCC policy, which would have permitted
operation of a satellite at the 83 degrees W.L. orbital position at a power
level of only 60 to 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 degrees
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 PRIMESTAR have each requested reconsideration of the
International Bureau's authorization for EchoStar to operate at 83 degrees
W.L. These requests, which were opposed by EchoStar and others, currently
are 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 PRIMESTAR have attempted to resolve potential coordination
problems directly with EchoStar, and EchoStar has advanced a proposition to
resolve this matter. PRIMESTAR is currently evaluating such proposition.
It is uncertain whether any agreement in respect of such coordination
between the Partnership and EchoStar will be reached, or that if such
agreement is reached that coordination will resolve such interference.
The Company has contingent liabilities related to legal proceedings and
other matters arising in the ordinary course of business. Although it is
reasonably possible the Company may incur losses upon conclusion of such
matters, an estimate of any loss or range of loss cannot be made. In the
opinion of management, it is expected that amounts, if any, which may be
required to satisfy such contingencies will not be material in relation to
the accompanying financial statements.
II-46
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
- -------- --------------------------------------------------
The following lists the directors and executive officers of the Company,
their birth dates, a description of their business experience and positions held
with the Company, as of February 1, 1999.
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Carl E. Vogel Has served as Chief Executive Officer of the Company since June
1998. Served as Chief Executive Officer of Star Choice Communications,
Inc. ("Star Choice") from October 1997 to June 1998. Prior to joining
Star Choice, Mr. Vogel served as President of EchoStar Communications
Corporation ("EchoStar") since September 1996 and Executive Vice
President and Chief Operating Officer of EchoStar from April 1994 to
September 1996. From 1983 to 1994, Mr. Vogel held various senior
executive positions with Jones Intercable, Inc., a major cable
television operator.
John C. Malone Has served as a director of the Company since the
Born March 7, 1941 Restructuring. Dr. Malone has served as Chief Executive
Officer of TCI since January 1994, and as Chairman of the Board
of TCI since November 1996 and as Chairman of the Board and a
director of TSAT since December 1996. Dr. Malone served as
President of TCI from January 1994 to March 1997, as Chief
Executive Officer of TCIC from March 1992 to October 1994 and
as President of TCIC from 1973 to October 1994. Dr. Malone has
also served as Chairman of the Board and as a director of
Tele-Communications International, Inc. since May 1995. Dr.
Malone is also a director of TCI, TCIC, TCI Pacific
Communications, Inc., The Bank of New York, At Home
Corporation, Lenfest Communications, Inc. and Cablevision
Systems Corporation.
Gary S. Howard Has served as a director of the Company since the
Born February 22, 1951 Restructuring. Mr. Howard has served as Chief Executive
Officer of TSAT since December 1996 and a director of TSAT
since November 1996. From February 1995 through August 1997,
Mr. Howard also served as President of TSAT. Mr. Howard is
also currently an executive officer of TCI and various
subsidiaries of TCI. Mr. Howard served as Senior Vice
President of TCIC from October 1994 to December 1996, and as
Vice President of TCIC from December 1991 through October 1994.
Mr. Howard is also a director of United Video Satellite Group,
Inc. and Telewest Communications plc.
</TABLE>
III-1
<PAGE>
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
John W. Goddard Has served as a director of the Company since the
Born May 4, 1941 Restructuring. Mr. Goddard has served as a director of TSAT
since December 1996. Mr. Goddard served as President and Chief
Executive Officer of the cable division of Viacom
International, Inc. from 1980 until his retirement in July
1996. Mr. Goddard is also a director of Diva Systems
Corporation.
Leo J. Hindery, Jr. Has served as a director of the Company since the
Born October 31, 1947 Restructuring. Mr. Hindery has served as a director of TSAT
since November 1997. Mr. Hindery has served a President and
Chief Operating Officer of TCI, and as President and a director
of TCIC, since March 1997. Prior to joining TCI, Mr. Hindery
was the founder, Managing General Partner and Chief Executive
Officer of InterMedia Partners and its affiliated entities
since 1988. Mr. Hindery is also a director of Cablevision
Systems Corporation and USA Networks.
Joseph J. Collins Has served as a director of the Company since the
Born July 27,1944 Restructuring. Mr. Collins has also served as Chairman of the
Board and Chief Executive Officer of Time Warner Cable, a
division of TWE, since September 1989.
Daniel P. Cavallo Has served as a director of the Company since November 6, 1998.
Born April 7, 1942 Mr. Cavallo has been an independent consultant in the cable
television and satellite industries since April 1995. Prior to
such time, Mr. Cavallo was Senior Vice President of New
Channels Corp., a subsidiary of Newhouse Broadcasting
Corporation.
Robert J. Miron Has served as a director of the Company since the
Born July 7, 1937 Restructuring. Mr. Miron has also served as the president of
Advance/Newhouse Communications since April 1, 1995. Mr. Miron
served as President of Newhouse Broadcasting from 1986 to April
1995.
Miles L. Davenport Has served as a director of the Company since December 23,
Born June 12, 1945 1998. Mr. Davenport has also served as Vice President of New
Business Development of MediaOne Group since July 1998. From
June 1996 to December 1998, Mr. Davenport served as President
and Chief Executive Officer of Russian Telecommunications
Development Corporation, a subsidiary of MediaOne Group that
invests in Russian telecommunications ventures. Prior to June
1996, Mr. Davenport held various positions and was responsible
for identifying, developing and managing international
opportunities and investments for US WEST International.
</TABLE>
III-2
<PAGE>
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Brian L. Roberts Has served as a director of the Company since December 23,
Born June 28, 1959 1998. Mr. Roberts has served as President of Comcast
Corporation since 1990. Mr. Roberts is also a director of At
Home Corporation.
Ajit M. Dalvi Has served as a director of the Company since the
Born May 27, 1942 Restructuring. Mr. Dalvi has also served as Senior Vice
President of Programming and Strategy for Cox since 1987.
John F. Connelly Has served as a director of the Company since the
Born July 3, 1943 Restructuring. Mr. Connelly has also served as Chairman of the
Board, President and Chief Executive Officer of GE Americom, a
subsidiary of GE, since 1991. Mr. Connelly is also a director
of Gilat Satellite Networks, Ltd.
Daniel J. O'Brien Has served as President and Chief Operating Officer of the
Born December 23, 1958 Company since the Restructuring. Mr. O'Brien served as
President of the Partnership from June 1997 to the
Restructuring and as President of Time Warner Programming Co.
d/b/a Time Warner Satellite Services Group from October 1993 to
June 1997.
Christopher Sophinos Has served as Senior Vice President, Sales and Distribution of
Born January 26, 1952 the Company since the Restructuring. Has served as President
of TSAT since September 1997, and was previously Senior Vice
President of TSAT from February 1996. Mr. Sophinos served
as the President of Boats Unlimited from November 1993 to
September 1998 and has served as a director of Sophinos &
Sons, Inc. since November 1993.
Kenneth G. Carroll Has served as Senior Vice President, Finance, and Chief
Born April 21, 1955 Financial Officer of the Company since the Restructuring. Has
served as Senior Vice President and Chief Financial Officer of
TSAT since February 1995. From December 1994 to May 1997, Mr.
Carroll served as Vice President of TCI K-1, Inc. and as Vice
President of United Artists K-1 Investments, Inc. From April
1994 through January 1995, Mr. Carroll served as Vice President
of Business Operations and Chief Financial Officer of Netlink
USA, a subsidiary of TCI; and from July 1992 to May 1994, Mr.
Carroll served as Senior Director of Finance and Business
Operations of Netlink.
Marcus O. Evans Has served as Senior Vice President, General Counsel, and
Born December 15, 1949 Secretary of the Company since the Restructuring. Mr. Evans
served as Senior Vice President and General Counsel of the
Partnership from November 1991 to the Restructuring.
Effective March 5, 1999, Mr. Evans terminated his
employment with the Company and is currently engaged as an
independent consultant.
</TABLE>
III-3
<PAGE>
The directors of the Company will hold office until their successors are
duly elected and qualified. The executive officers named above will be elected
to serve in such capacities until their respective successors have been duly
elected and have been qualified, or until their earlier death, resignation,
disqualification or removal from office.
The Charter and the Bylaws provide that, subject to any rights of the
holders of any series of preferred stock of the Company ("PRIMESTAR Preferred
Stock") outstanding at any time to elect additional directors to the PRIMESTAR
Board of Directors (the "Board,") the Board will consist of eleven members, and
will be comprised of Class B Directors, Class C Directors and Common Directors
(each as defined below) until the Class C Termination Date. The Bylaws provide
that, on and after the Class C termination Date, the Board will consist of not
less than three members, the exact number of which will from time to time be
determined by resolution of the Board.
Currently, of the eleven members of the Board, three (the "Class B
Directors") are elected by the holders of Class B Common Stock (all of which is
currently held by TSAT) and six (the "Class C Directors") are elected by the
holders of Class C Common Stock, in each case voting as a separate class.
Pursuant to the Stockholders Agreement, currently, of the six Class C Directors,
three are nominated by TWE (and TWE has agreed with Newhouse pursuant to the
TWE/Newhouse Voting Agreement that of such three, one is nominated by Newhouse)
and one is nominated by each of Cox, Comcast and MediaOne. The remaining two
members of the Board (the "Common Directors") are nominated by a super-majority
vote of the Class B Directors and Class C Directors and elected by the holders
of PRIMESTAR Voting Common Stock, voting together as a single class. The number
of Class B Directors will decrease as the number of shares of Class B Common
Stock outstanding decreases, and the number of Class C Directors will decrease
as the number of shares of Class C Common Stock outstanding decreases, in each
case in accordance with a schedule set forth in the Charter. The special class
rights of the holders of Class B Common Stock and the holders of Class C Common
Stock, each voting as a separate class, to elect the Class B Directors and Class
C Directors, respectively, will automatically terminate on the Class C
Termination Date, at which time the Board will consist exclusively of Common
Directors. At any time prior to the Class C Termination Date that the maximum
number of Class B Directors or Class Directors is decreased, the number of
Common Directors will be correspondingly increased, so that the total number of
directors constituting the entire Board remains at eleven. On and after the
Class C Termination Date, all members of the Board will be elected by the
holders of PRIMESTAR Voting Common Stock, voting together as a single class.
There are no family relations by blood, marriage or adoption, of first
cousin or closer, among the above named individuals.
During the past five years, none of the persons named above has had any
involvement in such legal proceedings as would be material to an evaluation of
his ability or integrity.
Section 16(a) of the Security Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Security and Exchange Commission
("SEC"). Officers, directors and greater-than-ten-percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
III-4
<PAGE>
Based solely on review of the copies of Forms 3, 4 and 5 and amendments
thereto furnished to the Company with respect to its most recent fiscal year, or
written representations that no Forms 5 were required, the Company believes
that, during the year ended December 31, 1998, its officers, directors and
greater-than-ten-percent beneficial owners complied with all Section 16(a)
filing requirements.
Item 11. Executive Compensation.
----------------------
(a) Summary Compensation Table. Certain directors, officers and employees
--------------------------
of TCI and its subsidiaries (including the Company, prior to the Distribution)
were granted options to purchase shares of Series A TCI Group Common Stock ("TCI
Options") and stock appreciation rights with respect to shares of Series A TCI
Group Common Stock ("TCI SARs") granted pursuant to various stock plans of TCI
(the "TCI Plans").
Immediately prior to the Distribution, each TCI Option was divided into two
separately exercisable options: (i) an option to purchase TSAT Series A Common
Stock (an "Add-on TSAT Option"), exercisable for the number of shares of TSAT
Series A Common Stock that would have been issued in the Distribution in respect
of the shares of Series A TCI Group Stock subject to the applicable TCI Option,
if such TCI Option had been exercised in full immediately prior to the
Distribution Date, and containing substantially equivalent terms as the existing
TCI Option, and (ii) an option to purchase Series A TCI Group Stock (an
"Adjusted TCI Option"), exercisable for the same number of shares of Series A
TCI Group Stock as the corresponding TCI Option had been. The aggregate
exercise price of each TCI Option was allocated between the Add-on TSAT Option
and the Adjusted TCI Option into which it was divided, and all other terms of
the Add-on TSAT Option and Adjusted TCI Option are in all material respects the
same as the terms of such TCI Option. Similar adjustments were made to the
outstanding TCI SARs, resulting in the holders thereof holding Adjusted TCI SARs
and Add-on TSAT SARs instead of TCI SARs, and to outstanding restricted share
awards, resulting in the holders thereof holding restricted shares of TSAT
Series A Common Stock in addition to restricted shares of Series A TCI Group
Stock, effective immediately prior to the Distribution.
As a result of the foregoing and as a result of the Restructuring, certain
persons who remained TCI employees or non-employee directors after the
Distribution and certain persons who were TCI employees prior to the
Distribution but became TSAT employees after the Distribution and PRIMESTAR
employees after the Restructuring hold both Adjusted TCI Options and separate
Add-on TSAT Options and/or hold both Adjusted TCI SARs and separate Add-on TSAT
SARs. The obligations with respect to the Adjusted TCI Options, Add-on TSAT
Options, Adjusted TCI SARs and Add-on TSAT SARs held by TCI employees and non-
employee directors are obligations solely of TCI. The obligations with respect
to the Adjusted TCI Options, Add-on TSAT Options, Adjusted TCI SARs and Add-on
TSAT SARs held by persons who were Company employees at the time of the
Distribution and PRIMESTAR employees after the Restructuring ("Company
Employees") are obligations solely of the Company. Prior to the Distribution,
TCI and the TSAT entered into an agreement to sell to each other from time to
time at the then current market price shares of Series A TCI Group Common Stock
and Series A Common Stock, respectively, as necessary to satisfy their
respective obligations under such securities.
III-5
<PAGE>
The following table is a summary of all forms of compensation paid by
PRIMESTAR (or by TSAT) to the officers named therein for services rendered in
all capacities to PRIMESTAR (and, prior to the Restructuring, TSAT) for the
fiscal years ended December 31, 1998, 1997 and 1996 (total of five persons).
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------------------- ----------------------------
Securities
Other Annual Restricted Underlying All Other
Name and Principal Position Compensation Stock Award Options/ Compensation
with the Company Year Salary ($) Bonus ($) ($)(5) ($) SARs ($)(9)
- --------------------------- ---- --------- ------------ ------ ------------ ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Carl E. Vogel (1) 1998 $242,308 $ 118,125 $4,393 $ -- 2,000,000 (7) $ 3,283
(Chief Executive
Officer)
Daniel J. O'Brien (2) 1998 $272,115 $ 310,217 $3,602 $ -- 400,000 (7) $ 4,474
(President)
Christopher Sophinos (3) 1998 $223,105 $ 82,885 $5,792 $ -- 152,146 (7) $ 6,954
(Senior Vice President) 1997 $174,538 $ 70,000 $ -- $400,000 (6) 100,000 (8) $ 10,240
1996 $ 96,865 $ 10,750 $ -- $ -- -- $ --
Kenneth G. Carroll 1998 $233,327 $ 85,619 $3,546 $ -- 160,923 (7) $ 6,994
(Senior Vice President 1997 $174,538 $ 78,846 $2,182 $400,000 (6) 100,000 (8) $ 9,934
and
Chief Financial Officer) 1996 $119,423 $ 33,150 $ -- $ -- -- $ 9,500
Marcus O. Evens (2) 1998 $164,711 $ 45,563 $4,271 $ -- 146,294 (7) $ 7,860
(Senior Vice President) $ 194,685(4)
</TABLE>
- -----------------------------------------
(1) Mr. Vogel commenced employment with PRIMESTAR on June 11, 1998.
Accordingly, the 1998 compensation information included in the table
reflects approximately seven months of employment.
(2) Messrs. O'Brien and Evans commenced employment with PRIMESTAR on April 1,
1998. Accordingly, the 1998 compensation information included in the table
reflects nine months of employment.
(3) Mr. Sophinos commenced employment with TSAT on February 27, 1996, and
accordingly, the 1996 compensation information included in the table
reflects ten months of employment.
(4) This amount reflects the payment of obligations under the Partnership's
Long-Term Management Incentive Plan, which obligations were assumed by
PRIMESTAR in connection with the Restructuring.
(5) Consists of amounts reimbursed during the year for the payment of taxes.
III-6
<PAGE>
(6) Pursuant to the TCI Satellite Entertainment, Inc. 1996 Stock Incentive Plan
(the "TSAT 1996 Plan"), Messrs. Sophinos and Carroll were each granted
50,000 restricted shares of TSAT Series A Common Stock in 1997. As
originally granted, such restricted shares vested as to 50% on each of
January 1, 2001 and January 1, 2002. On November 10, 1997, the TSAT Board
and the Compensation Committee of the TSAT Board approved modifications to
the terms of such awards, accelerating the vesting provisions to provide
for vesting of 50% on February 3, 1999 and as to the remaining 50% on
February 3, 2000. The value of each Messrs. Sophinos' and Carroll's
restricted shares at the end of 1998 was $71,900. TSAT has not paid cash
dividends on the TSAT Series A Common Stock and does not anticipate paying
cash dividends on the TSAT Series A Common Stock at any time in the
foreseeable future.
(7) Pursuant to the PRIMESTAR, Inc. 1998 Incentive Plan (the "PRIMESTAR 1998
Plan"), certain executive officers and key employees of the Company were
granted stock options with tandem SARS to purchase shares of Class A Common
Stock at a purchase price of $7.69. Each such grant of options vests
evenly over three years from the date of grant, with such vesting period
beginning April 2, 1998, first become exercisable on April 2, 1999 and
expire on April 1, 2008.
(8) Pursuant to the TSAT 1996 Plan, Messrs. Sophinos and Carroll were each
granted options with tandem SARs to purchase 100,000 shares of TSAT Series
A Common Stock at a purchase price of $8.00. As originally granted, each
such grant of options vested evenly over five years with such vesting
period beginning January 1, 1997, first became exercisable on January 1,
1998 and expired on December 31, 2006. On November 10, 1997, the TSAT
Board and the TSAT compensation committee approved modifications to the
vesting of all options issued pursuant to the TSAT 1996 Plan, accelerating
the vesting schedules under such options from five to three years,
commencing February 1998.
(9) Includes dollar value of annual employer contributions to the TCI Employee
Stock Purchase Plan (''TCI ESPP'') prior to the Distribution, TSAT
contributions to the TSAT Employee Stock Purchase Plan (the "TSAT ESPP")
from January 1, 1997 to March 31, 1998 and PRIMESTAR contributions to the
TSAT ESPP and the PRIMESTAR, Inc. 401(k) Savings Plan (the "PRIMESTAR
Savings Plan") beginning April 1, 1998. All named executives are fully
vested in such plans, except Mr. Vogel. Directors who are not employees of
TSAT are ineligible to participate in the TSAT ESPP, and directors who are
not employees of PRIMESTAR are ineligible to participate in the PRIMESTAR
Savings Plan. Also includes insurance premiums paid by (i) PRIMESTAR in
1998 for the benefit of Messrs. Vogel, O'Brien, Sophinos, Carroll and Evans
in the amount of $687, $772, $766, $479 and $731, respectively and (ii)
TSAT in 1997 for the benefit of Messrs. Sophinos and Carroll in the amount
of $740 and $434, respectively.
(b) Option and SARs Grants in Last Fiscal Year. Effective April 2, 1998,
-------------------------------------------
the Board approved and adopted the PRIMESTAR 1998 Plan. The PRIMESTAR 1998 Plan
provides for awards to be made in respect of a maximum of 7,000,000 shares of
Class A Common Stock (subject to certain anti-dilution adjustments). Awards may
be made as grants of stock options, SARs, restricted shares, stock units,
performance awards or any combination thereof (collectively, "Awards"). Awards
may be made to employees and to consultants and advisors to the Company who are
not employees.
III-7
<PAGE>
The following table discloses information regarding stock options granted
in tandem with SARs during the year ended December 31, 1998 to each of the named
executive officers of the Company in respect of shares of Class A Common Stock
under the PRIMESTAR 1998 Plan.
<TABLE>
<CAPTION>
No. of % of Total
Securities Options Exercise Market
Underlying Granted to or Price Grant Date
Options Employees in Base Price on Grant Expiration Present
Name Granted (1) 1998 ($/Sh) Date($/Sh) (2) Date Value $ (3)
- ---- ----------- ------------- ----------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Carl E. Vogel 2,000,000 44.6% $7.69 $7.69 April 2, 2008 $11,900,000
Daniel J. O'Brien 400,000 8.1% $7.69 $7.69 April 2, 2008 $ 2,380,000
Christopher Sophinos 152,146 3.1% $7.69 $7.69 April 2, 2008 $ 905,269
Kenneth G. Carroll 160,923 3.2% $7.69 $7.69 April 2, 2008 $ 957,492
Marcus O. Evans 146,294 3.0% $7.69 $7.69 April 2, 2008 $ 870,449
</TABLE>
(1) Effective April 2, 1998, certain key employees of PRIMESTAR were granted,
pursuant to the PRIMESTAR 1998 Plan, an aggregate of 4,934,993 options in
tandem with SARs to acquire shares of Class A Common Stock at a per share
exercise price of $7.69 per share. (the "1998 Grant"). Each such grant of
options with tandem SARs vests evenly over three years with such vesting
period beginning April 3, 1998, first becomes exercisable on April 3, 1999
and expires on April 2, 2008.
(2) Represents the closing market price per share of TSAT Series A Common Stock
on April 2, 1998, the date of grant. The TSAT Series A Common Stock price
has been used as an estimate of the market price of Class A Common Stock
due to the terms and conditions of the TSAT Merger Agreement.
(3) The value shown is based on the Black-Scholes model and is stated in
current annualized dollars on a present value basis. The key assumptions
used in the model for purposes of this calculation include the following:
(a) a 5.5% discount rate; (b) a 65% volatility factor; (c) the 10-year
option term; (d) the closing price of TSAT Series A Common Stock on April
2, 1998; and (e) a per share exercise price of $7.69. The actual value an
executive may realize will depend upon the extent to which the stock price
exceeds the exercise price on the date the option is exercised.
Accordingly, the value, if any, realized by an executive will not
necessarily be the value determined by the model.
III-8
<PAGE>
(c) Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Values.
---------------------------------------------------------------------
The following table provides, for the executives named in the Summary
Compensation Table, information on (i) the exercise during the year ended
December 31, 1998, of options to purchase Class A Common Stock, (ii) the number
of shares of Class A Common Stock, represented by unexercised options owned by
them at December 31, 1998, and (iii) the value of those options as of the same
date.
<TABLE>
<CAPTION>
Number of
Securities
Underlying
Unexercised Value of
Options/SARs Unexercised In-
at the-Money
December 31, Options/SARs at
Shares 1998 (#) December 31, 1998
Acquired on Value Realized Exercisable/ ($)Excercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
- ---- ----------- -------------- ------------- -----------------
<S> <C> <C> <C> <C>
Carl E. Vogel
Exercisable -- $ -- -- $ --
Unexercisable -- $ -- 2,000,000 $ --
Daniel J. O'Brien
Exercisable -- $ -- -- $ --
Unexercisable -- $ -- 400,000 $ --
Christopher Sophinos
Exercisable -- $ -- -- $ --
Unexercisable -- $ -- 152,146 $ --
Kenneth G. Carroll
PRIMESTAR Class A
Exercisable -- $ -- -- $ --
Unexercisable -- $ -- 160,923 $ --
TCI Common Stock (1)
TCI Group Stock
Exercisable -- $ -- 15,050 $ 613,589
Unexercisable -- $ -- -- $ --
Liberty Media Group Stock
Exercisable -- $ -- 2,250 $ 81,630
Unexercisable -- $ -- -- $ --
TCI Ventures Group Stock
Exercisable -- $ -- 12,900 $ 210,129
Unexercisable -- $ -- -- $ --
Marcus O. Evans
Exercisable -- $ -- -- $ --
Unexercisable -- $ -- 146,294 $ --
</TABLE>
- ----------------------------
(1) Certain employees of TCI who became employees of the Company in connection
with the Distribution had previously been granted options with tandem SARs
to acquire shares of TCI common stock. The Company assumed the obligation
for such options on the Distribution Date.
(d) Compensation of Directors. Members of the PRIMESTAR Board do not
--------------------------
receive any compensation for their services as directors. However, all members
of the PRIMESTAR Board who are not employees of a stockholder of the Company are
reimbursed for expenses incurred to attend any meetings of the PRIMESTAR Board
or any committee thereof.
During the year ended December 31, 1998, the Company paid Mr. John Goddard,
a director of the Company, $28,000 for consulting services.
III-9
<PAGE>
In consideration for Mr. Gary Howard's efforts to consummate the
Restructuring, the Company paid Mr. Howard, a director of the Company, a one-
time fee of $937,500.
(e) Employment Contracts and Termination of Employment and Change of
----------------------------------------------------------------
Control Arrangements
- --------------------
The Company has entered into an employment agreement with Carl Vogel to serve as
Chairman of the Board and Chief Executive Officer of the Company (the "CEO
Agreement"). The CEO Agreement commenced July 1, 1998 and ends June 30, 2001
unless terminated early in accordance with its provisions. The Company has
agreed to pay Mr. Vogel a base salary of not less than (i) $450,000 per annum
during the period from July 1, 1998 to June 30, 1999, (ii) $475,000 per annum
from July 1, 1999 to June 30, 2000 and (ii) $500,000 per annum from July 1,
2000 to June 30, 2001 (the "CEO Base Salary"). In addition, Mr. Vogel shall be
eligible to receive an annual cash bonus of between 75% and 150% of the CEO Base
Salary based of the performance of the Company and of Mr. Vogel (the "CEO
Bonus"). Payment of the CEO Bonus is at the sole discretion of the Company. The
CEO Agreement also provides for the Company to grant Mr. Vogel options to
purchase 2,000,000 shares of the Company's Class A Common Stock at a purchase
price of $7.69.
The Company and Mr. Vogel each have the right to terminate the CEO Agreement
early upon the happening of certain events. If the Company terminates the CEO
Agreement without cause or if Mr. Vogel terminates the Agreement for cause, the
Company shall make severance payments to Mr. Vogel ranging from $1,200,000 to
$1,750,000, depending on the circumstances and subject to Mr. Vogel executing a
waiver and release agreement pursuant to which Mr. Vogel would waive any and all
claims against the Company.
In the event that Mr. Vogel becomes disabled during the term of the CEO
Agreement, the Company has agreed to pay Mr. Vogel disability benefits for the
balance of the term of the CEO Agreement and until Mr. Vogel reaches age 65 in
an amount equal to 75% of the Base Salary that would have otherwise been paid
pursuant to the CEO Agreement had the disability not occurred.
The Company has agreed to obtain $1,000,000 of term life insurance payable upon
the death of Mr. Vogel to beneficiaries designated by Mr. Vogel. The Company's
obligation is contingent upon Mr. Vogel's satisfactory completion of any
applications and other documentation and any physical examination that may be
required and to the availability of such insurance. The Company is required to
purchase this life insurance for as long as Mr. Vogel remains an employee of the
Company. This insurance is in addition to any group plan generally applicable to
employees of the Company.
In consideration for the compensation set forth in the CEO Agreement, Mr. Vogel
has agreed that during the term of employment and for a period of one year
following the termination of employment, he will not, without the prior written
consent of the Board of Directors of the Company, render services to others in
the business of delivering multi-channel television programming in the United
States by direct broadcast satellite. Mr. Vogel also agrees that he will not
disclose Company confidential information during the term of employment and
thereafter.
III-10
<PAGE>
The Company has entered into an employment agreement with Daniel O'Brien to
serve as President and Chief Operating Officer of the Company (the "COO
Agreement") for the period from April 1, 1998 through December 31, 2000, unless
terminated early in accordance with its provisions. The Company has agreed to
pay Mr. O'Brien a base salary of not less than (i) $350,000 per annum during the
period from April 1, 1998 to June 30, 1998, (ii) $375,000 per annum from July 1,
1998 to June 30, 1999, (iii) $400,000 per annum from July 1, 1999 to June 30,
2000 and (iv) $425,000 per annum form July 1, 2000 to December 31, 2000 (the
"COO Base Salary"). In addition, Mr. O'Brien shall be eligible to receive an
annual cash bonus of between 75% and 150% of the COO Base Salary based of the
performance of the Company and of Mr. O'Brien (the "COO Bonus"). Payment of the
COO Bonus is at the sole discretion of the Company. The COO Agreement also
provides for the Company to grant Mr. O'Brien, effective April 1, 1998, stock
options with tandem stock appreciation rights to purchase 400,000 shares of the
Company's Class A Common Stock at a purchase price of $7.69 per share.
The Company and Mr. O'Brien each have the right to terminate the COO Agreement
early upon the happening of certain events. If the Company terminates the COO
Agreement without cause or if Mr. O'Brien terminates the Agreement for cause,
the Company shall make severance payments to Mr. O'Brien equal to two times Mr.
O'Brien's then COO Base Salary plus the COO Bonus. In addition, the Company
shall make severance payments equal to the value of certain unvested stock
options granted by Time Warner, Inc., Mr. O'Brien's former employer and current
shareholder of the Company. All such severance payments are subject to execution
by Mr. O'Brien of a waiver and release agreement pursuant to which Mr. O'Brien
would waive any and all claims against the Company.
In the event that Mr. O'Brien becomes disabled during the term of the COO
Agreement, the Company has agreed to pay Mr. O'Brien disability benefits for the
balance of the term of the COO Agreement and until Mr. O'Brien reaches age 65 in
an amount equal to 75% of the COO Base Salary that would have otherwise been
paid pursuant to the COO Agreement had the disability not occurred.
In consideration for the compensation set forth in the CEO Agreement, Mr.
O'Brien has agreed that during the term of employment and for a period of one
year following the termination of employment, he will not, without the prior
written consent of the Board of Directors of the Company, render services to
others in the business of delivering multi-channel television programming in the
United States by direct broadcast satellite. Mr. O'Brien also agrees that he
will not disclose Company confidential information during the term of employment
and thereafter.
The Company has also entered into an employment agreement with Kenneth Carroll
to serve as Senior Vice President, Finance and Chief Financial Officer for the
Company (the "CFO Agreement"). The CFO Agreement is effective as of April 1,
1998 for a period of three years and provides for an initial base salary of
$247,500 for the period of April 1, 1998 until December 31, 1998 and $264,825
thereafter with increases at the discretion of
III-11
<PAGE>
the Compensation Committee of the Board of Directors. In addition, Mr. Carroll
is eligible for a target cash bonus of 45% of his annual base salary (the
"Senior Vice President Bonus") based on his performance and the performance of
the Company. Payment of the Senior Vice President Bonus is at the sole
discretion of the Company. The CFO Agreement also provides for the Company to
grant Mr. Carroll options to purchase 160,923 shares of the Company's Class A
Common Stock at a purchase price of $7.69 per share.
The Company and Mr. Carroll each have the right to terminate the CFO Agreement
early upon the happening of certain events. If the Company terminates the CFO
Agreement without cause or if Mr. Carroll terminates the CFO Agreement for good
reason, the Company shall make severance payments over a period of time equal to
the annual base salary in effect at the time of termination multiplied by 2.90,
subject to execution by Mr. Carroll of a waiver and release agreement pursuant
to which Mr. Carroll would waive any and all claims against the Company.
In consideration for the compensation set forth in the CFO Agreement, Mr.
Carroll has agreed that during the term of employment and for a period of one
year following the termination of employment, he will not render services to
others in the business of delivering multi-channel television programming in the
United States by direct broadcast satellite. Mr. Carroll has also agreed that he
will not disclose Company confidential information during the term of employment
and thereafter.
The Company has also entered into an employment agreement with Christopher
Sophinos to serve as Senior Vice President, Sales and Distribution for the
Company (the "Sophinos Agreement"). The Sophinos Agreement is effective as of
April 1, 1998 for a period of three years and provides for an initial base
salary of $235,000 for the period of April 1, 1998 until December 31, 1998 and
$248,000 commencing January 1, 1999 and continuing thereafter with increases at
the discretion of the Compensation Committee. In addition, Mr. Sophinos is
eligible for the Senior Vice President Bonus based on Mr. Sophinos' performance
and the performance of the Company. Payment of the Senior Vice President Bonus
is at the sole discretion of the Company. The Sophinos Agreement also provides
for the Company to grant Mr. Sophinos options to purchase 152,146 shares of the
Company's Class A Common Stock at a purchase price of $7.69 per share.
The Company and Mr. Sophinos each have the right to terminate the Sophinos
Agreement early upon the happening of certain events. If the Company terminates
the Sophinos Agreement without cause or if Mr. Sophinos terminates the Sophinos
Agreement for good reason, the Company shall make severance payments over time
equal to the annual base salary in effect at the time of termination multiplied
by 2.90, subject to execution by Mr. Sophinos of a waiver and release agreement
pursuant to which Mr. Sophinos waives any and all claims against the Company.
In consideration for the compensation set forth in the Sophinos Agreement, Mr.
Sophinos has agreed that during the term of employment and for a period of one
year following the
III-12
<PAGE>
termination of employment, he will not render services to others in the business
of delivering multi-channel television programming in the United States by
direct broadcast satellite. Mr. Sophinos has also agreed that he will not
disclose Company confidential information during the term of employment and
thereafter.
The Company has entered into a Separation and Release Agreement with Marcus O.
Evans, the Company's General Counsel, effective as of March 5, 1999 (the "GC
Agreement"). The GC Agreement provides for Mr. Evans to receive an initial
severance payment of $207,691 and a subsequent payment of $101,250 on or before
January 30, 2000. In the event that Mr. Evans is not employed as of March 4,
2000, he will be eligible to receive bi-weekly payments of $8,654 (the "Bi-
weekly Payments") until the first to occur of (i) he becomes employed or (ii) he
has received a total of twenty-six such payments. If Mr. Evans has not become
employed at any time between March 4, 2000 and March 2, 2001 (the "Second
Year"), the Company has agreed to pay him an additional $101,250 on or before
March 30, 2001 (the "Second Year Bonus"). In the event that Mr. Evans becomes
an independent contractor at any time during the Second Year, the Company will
reduce the Bi-weekly Payments and the Second Year Bonus by the amount of Mr.
Evans' Second Year independent contractor income.
The GC Agreement provides for the acceleration of vesting of all options held by
Mr. Evans to purchase shares of PRIMESTAR, Inc. Class A Common Stock pursuant to
the PIRMESTAR, Inc. 1998 Incentive Plan and the Non-Qualified Stock Option and
Stock Appreciation Rights Agreement between Mr. Evans and the Company.
In exchange for the payments set forth, Mr. Evans has agreed to release the
Company from any and all claims that Mr. Evans may have against the Company.
The Company has separately entered into a Consulting Agreement with Mr. Evans
commencing as of March 6, 1999 pursuant to which Mr. Evans is to provide legal
and regulatory affairs services to the Company in exchange for payments by the
Company of $175 per hour. The Consulting Agreement terminates no later than
June 1, 1999 unless extended by the mutual consent of the Company and Mr. Evans.
III-13
<PAGE>
(f) Additional Information with respect to Compensation Committee
-------------------------------------------------------------
Interlocks and Insider Participation in Compensation Decisions. The members of
- ---------------------------------------------------------------
the Company's compensation committee are Messrs. John F. Connelly and John W.
Goddard, each a director of the Company. None of the members of the
compensation committee are or were officers of the Company or any of its
subsidiaries.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
- -------- --------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners. The following table
------------------------------------------------
lists stockholders believed by the Company to be the beneficial owners of more
than five percent of the outstanding Company Common Stock as of December 31,
1998. Voting power in the table is computed with respect to a general election
of directors. So far as is known to the Company, the persons indicated below
have sole voting and investment power with respect to the shares indicated as
believed to be owned by them except as otherwise stated in the notes to the
table.
<TABLE>
<CAPTION>
Number of
Shares
Name and Address Title Beneficially Percent Voting
of Beneficial Owner of Class Owned of Class (1) Power (2)
------------------- -------- -------------- ------------ ---------
<S> <C> <C> <C> <C>
TCI Satellite Entertainment, Inc. Class A 66,345,565 37.0% 38.0%
8085 S. Chester Street, Suite 300 Class B 8,465,324 100%
Englewood Colorado Class C -- --
Time Warner Entertainment Company, L.P. ("TWE")(3) Class A 53,499,980 (3) 29.9% 30.7%
290 Harbor Drive Class B -- --
Stamford, Connecticut Class C 6,826,299 (3) 51.2%
Comcast Primestar Holdings, Inc. Class A 16,919,448 9.5% 9.7%
1500 Market Street Class B -- --
Philadelphia, Pennsylvania Class C 2,158,827 16.2%
MediaOne of Delaware, Inc.(4) Class A 17,274,638 9.6% 9.9%
5613 DTC Parkway Class B -- --
Suite 700 Class C 2,204,147 16.5%
Englewood, Colorado
Cox Communications, Inc. Class A 16,796,125 9.4% 9.6%
1400 Lake Hearn Drive Class B -- --
Atlanta, Georgia Class C 2,143,092 16.1%
GE Capital Satellites International, Inc. Class A 8,308,178 4.6% 2.1%
Four Research Way Class B -- --
Princeton, New Jersey Class C -- --
</TABLE>
- -----------------------------
(1) Based on 179,143,934 shares of Class A Common Stock, 8,465,324 shares of
Class B Common Stock and 13,332,365 shares of Class C Common Stock
outstanding as of December 31, 1998.
III-14
<PAGE>
(2) Based on one vote per share for the shares of Class A Common Stock and ten
votes per share for the shares of Class B Common Stock and Class C Common
Stock.
(3) Includes 823,900 shares of Class A Common Stock and 105,125 shares of Class
C Common Stock held of record by Paragon Communications, Inc., an affiliate
of TWE, and 10,587,645 shares of Class A Common Stock and 1,350,925 shares
of Class C Common Stock held of record by Advance/Newhouse Partnership, for
which TWE has shared voting power pursuant to a voting agreement with a
term of 10 years.
(4) The shares indicated are owned of record by Continental Satellite Company,
Inc., etc., each of which is a wholly owned subsidiary of MediaOne of
Delaware, Inc.
(b) Security Ownership of Management. The following table lists the number
---------------------------------
of shares of Company Common Stock believed to be owned beneficially by each
director, each of the executive officers named in the above Summary Compensation
Table, and all directors and executive officers as a group as of December 31,
1998, according to data furnished by the persons named. Shares issuable upon
exercise of options and upon vesting of restricted shares are deemed to be
outstanding for the purpose of computing the percentage ownership and overall
voting power of persons believed to beneficially own such securities, but have
not been deemed to be outstanding for the purpose of computing the percentage
ownership or overall voting power of any other person. Voting power in the table
is computed with respect to a general election of directors. So far as is known
to the Company, the persons indicated below have sole voting and investment
power with respect to the shares indicated as believed to be owned by them.
<TABLE>
<CAPTION>
Number of Shares
Beneficially Owned
-------------------------------
Beneficially Owned Percent of Class
------------------------------- ----------------------------------------
PRIMESTAR PRIMESTAR PRIMESTAR PRIMESTAR PRIMESTAR PRIMESTAR Voting
--------- ---------
Class A Class B Class C Class A(1) Class B(1) Class C(1) Power(2)
--------- --------- --------- ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Directors:
John C. Malone -- -- -- -- -- -- --
Leo J. Hindery, Jr. -- -- -- -- -- -- --
Gary S. Howard -- -- -- -- -- -- --
Joseph J. Collins -- -- -- -- -- -- --
Dan Cavallo -- -- -- -- -- -- --
Robert J. Miron -- -- -- -- -- -- --
Miles L. Davenport -- -- -- -- -- -- --
Brian L. Roberts -- -- -- -- -- -- --
Ajit M. Dalvi -- -- -- -- -- -- --
John F. Connelly -- -- -- -- -- -- --
John W. Goddard -- -- -- -- -- -- --
Executive Officers:
Carl E. Vogel 2,000,000 -- -- 1.1% -- -- *
Daniel J. O'Brien 400,000 -- -- * -- -- *
Christopher Sophinos 152,146 -- -- * -- -- *
Kenneth G. Carroll 160,923 -- -- * -- -- *
Marcus O. Evans 146,294 -- -- * -- -- *
All such directors and
executive officers as a
group (17 persons) 2,859,363 -- -- 1.6% -- -- *
</TABLE>
- ----------------------------------------
* Less than one percent.
(1) Based on 179,143,934, 8,465,324 and 13,332,365 share of Class A Common
Stock, Class B Common Stock and Class C Common Stock, respectively,
outstanding as of December 31, 1998.
(2) Based on one vote per share for the shares of Class A Common Stock and ten
votes per share for the shares of Class B Common Stock and Class C Common
Stock outstanding.
III-15
<PAGE>
Item 13. Certain Relationships and Related Transactions.
- -------- ----------------------------------------------
In connection with the Roll-up Plan, the Company entered into the following
related agreements:
Stockholders Agreement. Pursuant to the Restructuring Agreement, each of
TWE, Newhouse, Comcast, Cox and MediaOne (collectively, the "Class C
Stockholders"), the Specified Class B Stockholders (as defined below), GE
Americom and PRIMESTAR entered into a Stockholders Agreement (the "Stockholders
Agreement") on the Closing Date, which provides for, among other things, certain
provisions relating to the nomination of directors to the PRIMESTAR Board of
Directors and certain voting agreements, transfer restrictions, conversion
restrictions, rights of first refusal and other rights and obligations of the
Class C Stockholders, the Specified Class B Stockholders and GE Americom in
connection with their respective shares of PRIMESTAR Common Stock. The term of
the Stockholders Agreement will be ten years. As used herein, the term
"Specified Class B Stockholders" means (i) prior to the TSAT Merger, TSAT (and
for certain purposes, John C. Malone), and (ii) after the TSAT Merger, John C.
Malone (and, under certain circumstances, certain other holders of Class B
Common Stock). Although Dr. Malone does not own directly any shares of Class B
Common Stock (all of which are owned by TSAT), he nevertheless executed the
Stockholders Agreement on the Closing Date as a Specified Class B Stockholder
and is entitled to exercise certain rights thereunder, including the rights of
first refusal.
Registration Rights Agreement. Pursuant to the Restructuring Agreement, at
the Closing, a registration rights agreement (the "Registration Rights
Agreement") was entered into among PRIMESTAR, TSAT, the Class C Stockholders, GE
Americom and John C. Malone. The registration Rights Agreement provides that
each of the Class C Stockholders, the Specified Class B Stockholders, GE
Americom, respectively, and their respective affiliates, have certain rights,
under specific circumstances and subject to certain conditions and exceptions,
to require PRIMESTAR to register under the Securities Act all or any portion of
their respective shares of Class A Common Stock and Class B Common Stock.
Reimbursement Agreements. Prior to entering into the Restructuring
Agreement, affiliates of each of the Partners (or, in the case of TSAT,
affiliates of TCI) other than GE Americom provided letters of credit
(collectively, the "PRIMESTAR Letters of Credit") to secure certain obligations
of the Partnership under (i) the GE-2 Agreement and (ii) the Partnership Credit
Facility. Pursuant to the TSAT Asset Transfer Agreement, PRIMESTAR assumed the
rights and obligations of TSAT under the Indemnification Agreements between TSAT
and the affiliates of TCI that issued PRIMESTAR Letters of Credit, which include
reimbursement obligations in favor of such TCI affiliates with respect to such
PRIMESTAR Letters of Credit on substantially the same terms as the Reimbursement
Agreements. Each of TWE, Comcast, Cox, MediaOne and TCI (or their respective
affiliates) are paid a fee in consideration of their agreement to maintain such
PRIMESTAR Letters of Credit outstanding for a period of time following the
Closing Date. Payments made by PRIMESTAR pursuant to the Reimbursement
Agreements aggregated $10,004,000 during 1998.
Letter Agreement. In connection with the execution and delivery of the
Restructuring Agreement by the parties thereto, John C. Malone entered into a
letter of agreement, dated February 6, 1998, for the benefit of such parties
(the "Letter Agreement"). The Letter Agreement provides for, among other
things, the agreement of Dr. Malone to enter into the Stockholders Agreement and
the Registration Rights Agreement at the Closing of the Restructuring
Transaction.
III-16
<PAGE>
TSAT Tempo Agreement. In connection with the execution and delivery of the
Restructuring Agreement, TSAT and PRIMESTAR entered into the TSAT Tempo
Agreement dated as of February 6, 1998, pursuant to which, among other things,
TSAT granted to PRIMESTAR the exclusive and irrevocable option, exercisable at
any time during the term of the TSAT Tempo Agreement, upon receipt of FCC
approval of the transfer of control of Tempo to 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 an asset purchase, 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. The Option Holder, in its sole discretion, is entitled to
assign the TSAT Tempo Agreement and 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.
TSAT Stockholders Agreement. In connection with the execution and delivery
of the Restructuring Agreement, TSAT, John C. Malone and PRIMESTAR entered into
a stockholders agreement dated as of February 6, 1998 (the "TSAT Stockholders
Agreement"), which provides, among other things, that until the termination of
the TSAT Merger Agreement, each TSAT Stockholder (as defined below) will vote or
act by written consent with respect to (or cause to be voted or acted upon by
written consent) all shares of TSAT Common Stock held of record or beneficially
owned by such TSAT Stockholder and all shares of TSAT Common Stock as to which
such TSAT Stockholder has voting control (1) in favor of the TSAT Merger
Agreement and the transactions contemplated thereby and (2) except for the
transactions contemplated by the TSAT Merger Agreement, against any merger
acquisition, consolidation or similar transaction that would adversely affect
the transactions contemplated by the TSAT Merger Agreement, or any amendment of
the TSAT Charter or the TSAT Bylaws, without the prior written consent of
PRIMESTAR.
In addition, until the termination of the TSAT Merger Agreement, each TSAT
Stockholder has agreed not to convert any of its shares of TSAT Series B Common
Stock into shares of TSAT Series A Common Stock or to transfer any of its shares
of TSAT Common Stock, except to a permitted transferee (as specified in the TSAT
Stockholders Agreement) of such TSAT Stockholder that becomes a party to the
TSAT Stockholders Agreement as a TSAT Stockholder and to the Stockholders
Agreement as a potential Specified Class B Stockholder. Each TSAT Stockholder
has also agreed, until the earliest to occur of (i) consummation of the TSAT
Merger, (ii) consummation of the transactions contemplated by the TSAT Tempo
Agreement and (iii) termination of the TSAT Tempo Agreement, to vote or act by
written consent with respect to (or cause to be voted or acted upon by written
consent) all shares of TSAT Common Stock held of record or beneficially owned by
such TSAT Stockholder and all shares of TSAT Common Stock as to which such TSAT
Stockholder has voting control, in favor of the TSAT Tempo Agreement and the
transactions contemplated thereby. "TSAT Stockholder" means (i) Dr. Malone for
so long as he holds of record or beneficially owns or has voting control of any
TSAT Common Stock (or has an affiliate holding TSAT Common Stock pursuant in
specified provisions of the TSAT Stockholders Agreement) and (ii) each permitted
transferee (as specified in the TSAT Stockholders Agreement) that acquires
record or beneficial ownership or voting control of any TSAT Common Stock from a
TSAT Stockholder, as long as such permitted transferee holds of record,
beneficially owns or has voting control of any TSAT Common Stock; provided that
such permitted transferee becomes a party to the TSAT Stockholders Agreement in
accordance therewith.
III-17
<PAGE>
TSAT Transition Services Agreement. In connection with the Restructuring,
the Company and TSAT entered into a transition services agreement (the "TSAT
Transition Services Agreement"). Pursuant to the TSAT Transition Services
Agreement, the Company is obligated to provide to TSAT certain services for the
administration and operation of TSAT's business and its subsidiaries and
affiliates as a public company. Such services include (i) tax reporting,
financial reporting, compliance with the requirements of applicable state
corporate laws, the Securities Act, the Exchange Act and other applicable laws,
compliance with NASDAQ/NM filing and other requirements, and similar services
typically performed by the Company's accounting, finance, corporate, legal,
investor relations and tax department personnel, (ii) administration of existing
stock options, restricted stock awards and similar obligations, and (iii) such
other services as TSAT and the Company may from time to time mutually determine
to be necessary or desirable.
As compensation for services rendered to TSAT pursuant to the TSAT
Transition Service Agreement, TSAT is required to reimburse the Company
quarterly for the actual direct costs and expenses incurred by the Company in
providing such services, provided that the incurrence of such expenses is
consistent with practices generally followed by the Company in managing or
operating its own business and the businesses of its subsidiaries and
affiliates. The TSAT Transition Services Agreement further provides, however,
that so long as the Company is obligated to reimburse TSAT for expenses pursuant
to the TSAT Merger Agreement, all obligations of TSAT to the Company pursuant to
the TSAT Transition Services Agreement will be offset against, and will for all
purposes be fully and irrevocably satisfied by, the obligations of the Company
to TSAT pursuant to the TSAT Merger Agreement. The TSAT Merger Agreement
provides that during the term thereof, the Company will reimburse TSAT for all
reasonable costs and expenses (including reasonable legal fees of outside
counsel and reasonable fees to TSAT's independent public accountants) incurred
by TSAT (i) in preparation of tax returns and other reports to governmental
entities, (ii) for payment of required taxes, franchise fees, NASDAQ/NM fees and
similar fees, (iii) in compliance with its reporting obligations under the
Securities Act and the Exchange Act and (iv) to maintain directors' and
officers' insurance on terms reasonably acceptable to the Company. During 1998,
the net amount of TSAT expenses reimbursed by the Company pursuant to the TSAT
Transition Services Agreement and the TSAT Merger Agreement aggregated $152,000.
The TSAT Transition Services Agreement continues in effect until the close
of business on December 31, 1999 and will be renewed automatically for
successive one-year periods thereafter, unless earlier terminated by (i) either
party at the end of the initial term or the then current renewal term, as
applicable, on not less than 120 days prior written notice to the other party,
(ii) TSAT upon written notice to the Company following certain changes in
control of the Company, and (iii) either party if the other party is the subject
of certain bankruptcy or insolvency-related events.
Additional Arrangements with TCI. John Malone is currently the Chairman of
the Board and a director of TCI and is also the Chairman of the Board and a
director of TSAT and is a director of the Company. Dr. Malone is also a
principal stockholder of both TCI and TSAT. The Company is party to a Master
Digital Transmission Agreement (the "NDTC Transmission Agreement") with NDTC, a
subsidiary of TCI. Pursuant to the NDTC Transmission Agreement, NDTC provides
compression, encryption and uplinking services to the Company, via Ku-band
transmission on domestic satellites designated by the Company, for DTH delivery
of programming signals by the Company as well as certain ancillary services.
NDTC facilitates the connection of satellite authorization facilities operated
by the Company to NDTC's compression encoders and provides advertising,
promotional and/or public service announcement insertion services at additional
rates which are negotiated on an ad hoc basis. Charges for such services
aggregated $10,659,000 during 1998.
III-18
<PAGE>
TCI also provides the Company with customer support services from TCI's
Boise, Idaho call center. Management believes that the rates charged by TCI to
the Company approximate fair market rates, as established by agreement between
the Company and TCI. Amounts charged by TCI to the Company aggregated
$24,938,000 during 1998.
Additional Arrangements with GE Americom. The Company is party to the GE-2
Agreement with GE Americom. Pursuant to the GE-2 Agreement, GE Americom is
obligated to provide the Company with transponder service for the PRIMESTAR(R)
programming service on certain GE Americom communications satellites.
Since March 1997, the PRIMESTAR(R) service has been transmitted from GE-2.
As originally executed, the GE-2 Agreement had an initial term extending through
February 2003 at an annual rate of $86,340,000, with an option to extend the
term through the end-of-life of GE-2. The option to extend has expired without
exercise. However, the Company remains in discussions with GE Americom
regarding other alternatives for extension of the GE-2 Agreement, and the
Company will continue to assess other medium and/or high power alternatives if
the Hughes Medium Power Transaction is not consummated.
The Company pays GE Americom (i) fixed minimum monthly service fees per
transponder based on the type of service received (e.g., non-preemptible or
preemptible, non-orbital location protected or orbital location protected) and
(ii) variable monthly fees, based upon the number of subscribers to the
PRIMESTAR(R) programming service up to a maximum of 2 million subscribers. The
Company is required to pay the fixed transponder fees for all 24 transponders,
whether or not all such transponders are actually used by the Company. The GE-2
Agreement provides for credits against the transponder fees for any transponders
which fail to meet the performance specifications set for in the GE-2 Agreement.
During the year ended December 31, 1998, the Company paid GE Americom
$64,755,000 pursuant to the GE-2 Agreement.
Programming Services. The Company purchases a portion of its programming
services from direct and indirect affiliates of certain of the Restructuring
Parties, including, among others, (i) HBO and Cinemax, which are owned by TWE,
(ii) STARZ!, Encore and DMX, which are owned by subsidiaries of TCI, (iii)
Speedvision and Outdoor Life, which are owned by MediaOne, Comcast and Cox or
their respective affiliates, and (iv) The Golf Channel and E! Entertainment,
which are also owned by Comcast or its affiliates. The Company believes that
the fees and other terms and conditions of its programming arrangements with
such affiliates are, in the aggregate, comparable to the fees, terms and
conditions on which it could obtain comparable programming (if available) from
third parties.
In connection with the Distribution, the Company and TCI entered into
various agreements, including the "Reorganization Agreement," the "Transition
Services Agreement," an amendment to TCI's existing "Tax Sharing Agreement," the
"Indemnification Agreements," the "Trade Name and Service Mark Agreement" and
the "Share Purchase Agreement," all of which are described below.
Reorganization Agreement. On the Distribution Date, TCI, TCIC and a
number of other TCI subsidiaries, including the Company, entered into the
Reorganization Agreement, which provided for, among other things, the principal
corporate transactions required to effect the Distribution, the conditions
thereto and certain provisions governing the relationship between the Company
and TCI with respect to and resulting from the Distribution.
III-19
<PAGE>
Pursuant to the Reorganization Agreement, TSAT, among other things, granted
an option to TCI to purchase up to 4,765,000 shares of TSAT Series A Common
Stock (as such number may be adjusted to reflect stock dividends, stock splits
and the like), for a purchase price equal to the par value of such shares, as
necessary to satisfy TCI's obligations to deliver shares of TSAT Series A Common
Stock upon conversion of certain convertible securities of TCI as a result of
the Distribution. During the year ended December 31, 1998, the Company issued
989,000 shares of TSAT Series A Common Stock to TCI for aggregate consideration
of $989,000 under this arrangement.
TCI Transition Services Agreement. During the first quarter of 1998 and
pursuant to the TCI Transition Services Agreement, TCI provided to the Company
certain general and administrative services. In addition, TCI has agreed to
provide the Company with certain most-favored-customer rights to programming
services that TCI may own in the future and access to any volume discounts that
may be available to TCI for purchases of HSDs, satellite receivers and other
equipment.
As compensation for services rendered to the Company and for the benefits
made available to the Company pursuant to the TCI Transition Services Agreement,
the Company was charged a fee of $1.50 per qualified subscribing household or
other residential or commercial unit (counted as one subscriber regardless of
the number of satellite receivers) per month, up to a maximum of $3 million per
month, and reimbursed TCI for direct, out-of-pocket expenses incurred by TCI to
third parties in providing the services. During the year ending on December 31,
1998, the Company was charged $3,174,000 pursuant to the TCI Transition Services
Agreement. Upon consummation of the Restructuring, TSAT and TCI agreed to
terminate the TCI Transition Services Agreement.
Other Arrangements. On the Distribution Date, TCI and TSAT entered into
the Share Purchase Agreement, which obligates TCI and TSAT to sell to each other
from time to time, at the then current market price, shares of Series A TCI
Group Common Stock and TSAT Series A Common Stock, respectively, as necessary to
satisfy their respective obligations under Adjusted TCI Options and Add-on TSAT
Options held after the Distribution Date by their respective employees and non-
employee directors. During the year ended December 31, 1998, the Company issued
no shares of TSAT Series A Common Stock to TCI under this arrangement.
Certain members of the Company's management and the PRIMESTAR Board have
certain interests in the Roll-up Plan, as described below:
Directors and Officers of PRIMESTAR. Certain of the current directors and
officers of TSAT became directors and officers of PRIMESTAR upon consummation of
the Restructuring and will serve as directors and officers of both TSAT and
PRIMESTAR until the TSAT Merger is consummated, at which time they will cease to
be officers and directors of TSAT and will continue as officers and directors of
PRIMESTAR (unless they have been earlier replaced in accordance with the
certificate of incorporation and bylaws of PRIMESTAR). These include Gary S.
Howard, the Chief Executive Officer and a director of TSAT, who serves as a
director of PRIMESTAR, and John C. Malone, Leo J. Hindery, Jr. and John W.
Goddard, all of whom are directors of TSAT and serve as directors of PRIMESTAR.
III-20
<PAGE>
Treatment of TSAT Options, Stock Appreciation Rights and Restricted Stock
Awards. As of December 31, 1998, executive officers and directors of TSAT held
options ("TSAT Options") under the TSAT 1996 Plan to purchase an aggregate of
1,580,164 shares of TSAT Series A Common Stock at various exercise prices and
subject to various vesting schedules. In the case of a tandem option or stock
appreciation right ("TSAT SAR"), the related stock appreciation right or option,
as the case may be, is considered to have been exercised to the extent of the
number of shares of TSAT Common Stock with respect to which such related tandem
option or stock appreciation right is exercised.
The TSAT Options and TSAT SARs remain outstanding following the
consummation of the Restructuring, as obligations of TSAT, but have been amended
to provide that service as an employee of, or consultant to, PRIMESTAR following
the closing date of the Restructuring is deemed to constitute service as an
employee of, or consultant to, TSAT, for all purposes of such awards and the
TSAT 1996 Plan.
At the effective time of the TSAT Merger, (x) all TSAT Options outstanding
immediately prior to the effective time of the TSAT Merger, whether vested or
unvested, (y) all obligations of TSAT under the TSAT 1996 Plan and the TSAT DSOP
(collectively, the "TSAT Plans") and (z) the agreements evidencing the grants of
such TSAT Options will be assumed by PRIMESTAR. Pursuant to the TSAT Merger
Agreement, at the effective time of the TSAT Merger, each TSAT Option
outstanding immediately prior to such effective time will be deemed to
constitute an option to acquire, on the same terms and conditions as were
applicable under such TSAT Option, the same number of shares of PRIMESTAR Class
A Common Stock as the holder of such TSAT Option would have been entitled to
receive pursuant to the TSAT Merger had such holder exercised such TSAT Option
in full immediately prior to the effective time of the TSAT Merger, at a price
per share equal to the exercise price for the shares of Series A Common Stock
otherwise purchasable pursuant to such TSAT Option; provided, however, that in
the case of any option to which Section 421 of the Internal Revenue Code of
1986, as amended (the "Code") applies by reason of its qualification under
either Section 422 or 424 of the Code ("qualified stock options"), the option
price, the number of shares purchasable pursuant to such option and the terms
and conditions of exercise of such option will be determined in order to comply
with Section 424(a) of the Code. The TSAT Merger Agreement provides that
PRIMESTAR will comply with the terms of the TSAT Plans and ensure, to the extent
required by, and subject to the provisions of, the TSAT Plans, that the TSAT
Options that qualified as qualified stock options prior to the effective time of
the TSAT Merger continue to qualify as qualified stock options after such
effective time. PRIMESTAR will be entitled to make any changes to the TSAT Plans
as will be necessary to give effect to the TSAT Merger. TSAT SARs issued in
tandem with TSAT Options will be similarly modified.
On November 10, 1997, the TSAT Board and the Compensation Committee of the
TSAT Board approved modifications to the vesting provisions of all TSAT Options
issued pursuant to the TSAT 1996 Plan and the TSAT DSOP, accelerating the
vesting schedules under such options from five to three years upon consummation
of the Restructuring. Accordingly, such TSAT Options will vest in three equal
annual installments, commencing February 1998. TSAT Options granted prior to
the Distribution, which were 40% vested in February 1998, will become two-thirds
vested in February 1999 and fully vested in February 2000.
III-21
<PAGE>
The following table indicates for each person who is an executive officer
or director of PRIMESTAR and who held TSAT Options (including TSAT Options
issued in tandem with TSAT SARs) at December 31, 1998, (a) the number of shares
of TSAT Series A Common Stock subject to such options and/or stock appreciation
rights that were vested at December 31, 1998, (b) the number of shares of TSAT
Series A Common Stock subject to such options and/or stock appreciation rights
that were not vested at such date, and (c) the exercise price per share of TSAT
Series A Common Stock of all such options and/or stock appreciation rights
(whether vested or unvested). The total number of shares of Class A Common
Stock that would be subject to such options and/or stock appreciation rights
immediately following the effective time of the TSAT Merger assuming that all
such options and/or stock appreciation rights continue to be outstanding
immediately prior to such effective time would be equal to the number of shares
of TSAT Series A Common Stock identified in the table. The exercise or base
price per share of Class A Common Stock of such options and/or stock
appreciation rights immediately following the effective time of the TSAT Merger
would be equal to the exercise price of the TSAT Options. The TSAT Options
listed opposite the name of each person in the table below (including TSAT
Options issued in tandem with TSAT SARs) include all TSAT Options and TSAT SARs
granted to such person under incentive plans of TSAT or otherwise.
<TABLE>
<CAPTION>
TSAT TSAT
Series A Common Series A Common Exercise Price
Option and Stock Subject to Stock Subject to of TSAT
- ---------- Vested Options Unvested Options Options and/or
SAR Holder and/or SARs and/or SARs SARs
- ---------- ---------------- ---------------- --------------
<S> <C> <C> <C>
Christopher Sophinos 33,333 66,667 $ 8.00
Kenneth G. Carroll 34,703 67,447 $8.00 - $23.76
John C. Malone 16,666 33,334 $ 8.00
Gary S. Howard 288,630 405,446 $8.86 - $23.76
John W. Goddard 16,666 33,334 $ 8.00
Leo J. Hindery, Jr. 16,666 33,334 $ 6.50
</TABLE>
As of December 31, 1998, executive officers and directors of PRIMESTAR
held restricted stock awards ("TSAT Restricted Stock Awards") under the TSAT
1996 Plan representing the right to receive, upon vesting as described below, an
aggregate of 275,000 shares of TSAT Series A Common Stock. As originally
granted, each TSAT Restricted Stock Award vested 50% on each of January 1, 2001
and January 1, 2002. On November 10, 1997, the TSAT Board and the Compensation
Committee of the TSAT Board approved modifications to the terms of such awards,
accelerating the vesting provisions to provide for vesting of 50% on each of the
second and third anniversaries of the date of grant. At the effective time of
the TSAT Merger, pursuant to the TSAT Merger Agreement, (x) all TSAT Restricted
Stock Awards outstanding immediately prior to such effective time, whether
vested or unvested, and the agreements evidencing the grants of such TSAT
Restricted Stock Awards, will be assumed by PRIMESTAR, and (y) each TSAT
Restricted Stock Award will be deemed to constitute a restricted stock award, on
the same terms, with respect to a number of shares of Class A Common Stock equal
to the number of shares of Series A Common Stock previously subject to such TSAT
Restricted Stock Award.
Indemnification. The TSAT Merger Agreement provides that all rights to
indemnification for acts or omissions occurring prior to the effective time of
the TSAT Merger existing in favor of the current or former directors or officers
of TSAT and its subsidiaries will survive the consummation of the TSAT Merger
and continue in full force and effect in accordance with their respective terms.
III-22
<PAGE>
Directors' and Officers' Liability Insurance. The TSAT Merger Agreement
provides that, for a period of not less than three years from the effective time
of the TSAT Merger, directors' and officers' liability insurance will be
maintained by PRIMESTAR covering current TSAT directors and officers on terms
and conditions no less advantageous than TSAT's existing insurance, to the
extent such coverage can be maintained or procured by the payment of an annual
premium not exceeding one and one-half times the current annual premium paid by
TSAT for its existing coverage.
III-23
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements and Financial Statement Schedules
- -------- ----------------------------------------------------------------
and Reports on Form 8-K
-----------------------
(a) (1) Financial Statements
--------------------
<TABLE>
<CAPTION>
Included in Part II of this Report: Page No.
---------------
<S> <C>
Independent Auditors' Report II-16
Consolidated Balance Sheets,
December 31, 1998 and 1997 II-17
Consolidated Statements of Operations,
Years ended December 31, 1998, 1997 and 1996 II-19
Consolidated Statements of Equity (Deficit),
Years ended December 31, 1998, 1997 and 1996 II-20
Consolidated Statements of Cash Flows,
Years ended December 31, 1998, 1997 and 1996 II-21
Notes to Consolidated Financial Statements,
December 31, 1998, 1997 and 1996 II-22
</TABLE>
(a) (2) Financial Statement Schedules
-----------------------------
<TABLE>
<CAPTION>
Included in Part IV of this Report:
<S> <C>
(i) Financial Statement Schedules required to be filed:
Schedule II - Valuation and Qualifying Accounts, IV-6
Years ended December 31, 1998, 1997 and 1996.
</TABLE>
IV-1
<PAGE>
(a) (3) Exhibits
--------
The following exhibits are filed herewith or are incorporated by reference
herein (according to the number assigned to them in Item 601 of Regulation S-K)
as noted:
2 - Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession:
<TABLE>
<C> <S>
2.1 Reorganization Agreement dated as of December 4, 1996, among Tele-Communications,
Inc. ("TCI"), TCI Communications, Inc. ("TCIC"), Tempo Enterprises, Inc., TCI Digital
Satellite Entertainment, Inc., TCI K-1, Inc. ("TCI K-1"), United Artists K-1
Investments, Inc. ("UA K-1"), TCI SE Partner 1, Inc. ("TCISE 1"), TCI SE Partner 2,
Inc. ("TCISE 2") and TCI Satellite Entertainment, Inc. ("TSAT"). (c)
2.2 Merger and Contribution Agreement dated as of February 6, 1998, among PRIMESTAR, Inc.
(the "Company"), TSAT, 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"). (b)
2.3 Asset Transfer Agreement dated as of February 6, 1998, between the Company and TSAT.
(b)
2.4 Agreement and Plan of Merger dated as of February 6, 1998, between the Company and
TSAT. (b)
2.5 Guarantee Agreement dated as of February 6, 1998, by US WEST Media Group, Inc. ("US
West"), in favor of each of the Company, TSAT, TWE, Newhouse, Comcast, Cox and GE
Americom. (b)
2.6 Letter Agreement dated as of February 6, 1998, between John C. Malone and the
Company, TSAT, TWE, Newhouse, Comcast, Cox , MediaOne and GE Americom, for the
benefit of the Company, TSAT, TWE, Newhouse, Comcast, Cox, MediaOne and GE Americom.
(b)
2.7 Form of Stockholders Agreement among he Company, 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. (b)
2.8 Form of Registration Rights Agreement among the Company, 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. (b)
</TABLE>
IV-2
<PAGE>
<TABLE>
<CAPTION>
2 - Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession (continued):
<C> <S>
2.9 Stockholders Agreement dated as of February 6, 1998, among the Company, TSAT and John
C. Malone. (b)
2.10 TSAT Tempo Agreement dated as of February 6, 1998, between the Company and TSAT. (b)
<CAPTION>
3 - Articles of Incorporation and Bylaws:
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of the Company. (b)
3.2 Amended and Restated Bylaws of the Company. (b)
<CAPTION>
4 - Instruments Defining the Rights of Security Holders:
<C> <S>
4.1 Specimen certificate representing shares of Class A Common Stock of the Company. (b)
4.2 Specimen certificate representing shares of Class B Common Stock of the Company. (b)
4.3 Indenture dated as of February 20, 1997 between TSAT and Bank of New York, as
Trustee, with respect to $200 million principal amount of 10-7/8% Senior Subordinated
Notes due 2007.(d)
4.4 Indenture dated as of February 20, 1997 between TSAT and Bank of New York, as
Trustee, with respect to $275 million principal amount of 12-1/4% Senior Subordinated
Discount Notes due 2007.(d)
4.5 Registration Rights Agreement - Senior Subordinated Notes, 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. (d)
4.6 Registration Rights Agreement - Senior Subordinated Discount Notes, 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. (d)
<CAPTION>
10 - Material Contracts
<C> <S>
10.1 Indemnification Agreement dated as of December 4, 1996, by and between the Company
and TCI UA 1, Inc. (d)
10.2 First Amendment to Indemnification Agreement dated as of December 31, 1997 between
the Company and TCI UA I, Inc. (c)
</TABLE>
IV-3
<PAGE>
<TABLE>
<CAPTION>
10 - Material Contracts (continued):
<C> <S>
10.3 Indemnification Agreement dated as of December 4, 1996, by and between the Company
and TCIC. (d)
10.4 First Amendment to Indemnification Agreement dated as of December 31, 1997 between
the Company and TCI Communications, Inc. (c)
10.5 Option Agreement dated February 8, 1990, between Tempo and K Prime Partners, L.P. (e)
10.6 Letter Agreement dated July 30, 1993, between Tempo and PRIMESTAR Partners, L.P.
relating to FSS. (e)
10.7 Letter Agreement dated July 30, 1993, between Tempo and PRIMESTAR Partners, L.P.
relating to BSS. (e)
10.8 Amended and Restated Reimbursement Agreement dated March 1, 1995, between TCI UA 1,
Inc., Chemical Bank and The Toronto Dominion Bank. (e)
10.9 Senior Subordinated Credit Agreement, dated as of April 1, 1998 among PRIMESTAR,
Inc., as Borrower, the Guarantors party hereto, the Lenders party hereto, Merrill
Lynch & Co., as Arranger and Syndication Agent, Morgan Stanley Senior Funding, Inc.,
as Administrative Agent, and Donaldson, Lufkin & Jenerette Securities Corporation, as
Documentation Agent. (a)
10.10 Credit Agreement, dated as of March 9, 1994, among PRIMESTAR Partners, L.P., the
Lenders party hereto, The Bank of New York, Chemical Bank and Citibank, N.A. as
Managing Agents, The Bank of New York, as Documentation Agent and Chemical Bank, as
Administrative Agent, as amended by Amendment No. 1 dated November 21, 1994, as
amended by Amendment No. 2 dated February 27, 1997, as amended by Amendment No. 3
dated June 2, 1997, as amended by Amendment No. 4 dated December 19, 1997 and as
amended by Amendment No. 5 dated September 29, 1998. (a)
10.11 U.S. $700,000,000 Credit Agreement, dated as of March 31, 1998 among PRIMESTAR, Inc.,
as Borrower, The Bank of Nova Scotia, as Administrative Agent, Nationsbank of Texas,
N.A., as Syndication Agent, Credit Lyonnais New York Branch, as Documentation Agent,
Various Financial Institutions, as Lenders and The Bank of Nova Scotia, Credit
Lyonnais New York Branch and Nationsbank of Texas, N.A., as Arranging Agents. (a)
10.12 Share Purchase Agreement dated as of December 4, 1996, between TCI and the Company.
(d)
10.13 Option Agreement dated as of December 4, 1996, between TCI and the Company.(d)
</TABLE>
IV-4
<PAGE>
<TABLE>
<CAPTION>
10 - Material Contracts (continued):
<C> <S>
Indemnification Agreement dated as of June 11, 1997 among News Corp., the Company,
10.14 the Partnership, Time Warner, Comcast, Cox, MediaOne, Newhouse, and GE Americom. (b)
10.15 Asset Purchase Agreement among the Company, PRIMESTAR Partners, L.P., PRIMESTAR MDU,
Inc., the Stockholders of PRIMESTAR, Inc. listed herein and Hughes Electronics
Corporation, dated as of January 22, 1999. (f)
10.16 Asset Purchase Agreement by and among Hughes Electronics Corporation, the Company,
PRIMESTAR Partners L.P., Tempo Satellite, Inc. and the Stockholders of PRIMESTAR
listed herein, dated as of January 22, 1999. (f)
21 Subsidiaries of the Registrant.(a)
27 Financial Data Schedule.(a)
</TABLE>
- -------------------------------
(a) Filed herewith.
(b) Incorporated by reference to the Company's Registration Statement on
Form S-4 filed with the SEC on February 9, 1998 (Registration No. 333-
45835).
(c) Incorporated by reference to TSAT's Annual Report on Form 10-K for the
year ended December 31, 1997 (Commission File No. 0-21317).
(d) Incorporated by reference to TSAT's Annual Report on Form 10-K for the
year ended December 31, 1996 (Commission File No. 0-21317).
(e) Incorporated by reference to TSAT's Registration Statement on Form 10
filed with the Securities and Exchange Commission ("SEC") on November
15, 1996 (Registration No. 0-21317).
(f) Incorporated by reference to the Company's Current Report on Form 8-K,
dated February 1, 1999.
(b) Reports on Form 8-K filed during the quarter ended December 31, 1998:
None.
IV-5
<PAGE>
Schedule II
-----------
PRIMESTAR, INC.
Valuation and Qualifying Accounts
Years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Additions Deductions
--------------- ------------------
Balance at Charged to Write-offs Balance
beginning profit net of at end
Description of year and loss recoveries of year
- ----------- --------------- --------------- ------------------ -------------
amounts in thousands
<S> <C> <C> <C> <C>
Year ended
December 31, 1998:
Allowance for doubtful
receivables - trade $5,307 43,460 (41,325) 7,442
=============== =============== ================= =============
Year ended
December 31, 1997:
Allowance for doubtful
receivables - trade $4,666 18,339 (17,698) 5,307
=============== =============== ================= =============
Year ended
December 31, 1996:
Allowance for doubtful
receivables - trade $4,819 19,235 (19,388) 4,666
=============== =============== ================= =============
</TABLE>
IV-6
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PRIMESTAR, INC.
By: /s/ Carl E. Vogel
-------------------------------
Name: Carl E. Vogel
Title: Chief Executive Officer
Dated April 15, 1999
Pursuant to the Securities Exchange Act of 1934, this report has been
signed by the following persons on behalf of the Registrant and in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Carl E. Vogel April 15, 1999
------------------------------------
Carl E. Vogel Chief Executive Officer
/s/ John C. Malone April 15, 1999
------------------------------------
John C. Malone Director
/s/ Leo J. Hindery, Jr. April 15, 1999
------------------------------------
Leo J. Hindery, Jr. Director
/s/ Garry S. Howard April 15, 1999
------------------------------------
Garry S. Howard Director
/s/ Joseph J. Collins April 15, 1999
------------------------------------
Joseph J. Collins Director
/s/ Daniel P. Cavallo April 15, 1999
------------------------------------
Daniel P. Cavallo Director
/s/ Robert J. Miron April 15, 1999
------------------------------------
Robert J. Miron Director
/s/ Miles L. Davenport April 15, 1999
------------------------------------
Miles L. Davenport Director
</TABLE>
IV-7
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Brian L. Roberts April 15, 1999
------------------------------------
Joseph J. Collins Director
/s/ Ajit M. Dalvi April 15, 1999
------------------------------------
Ajit M. Dalvi Director
/s/ John F. Connelly April 15, 1999
------------------------------------
John F. Connelly Director
/s/ John W. Goddard April 15, 1999
------------------------------------
John W. Goddard Director
/s/ Daniel J. O'Brien April 15, 1999
------------------------------------
Daniel J. O'Brien President and
Chief Operating Officer
/s/ Kenneth G. Carroll April 15, 1999
------------------------------------
Kenneth G. Carroll Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ Scott D. Macdonald April 15, 1999
------------------------------------
Scott D. Macdonald Vice President and Controller
(Principal Accounting Officer)
</TABLE>
IV-8
<PAGE>
Exhibit Index
-------------
The following exhibits are filed herewith or are incorporated by reference
herein (according to the number assigned to them in Item 601 of Regulation S-K)
as noted:
2 - Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession:
<TABLE>
<C> <S>
2.1 Reorganization Agreement dated as of December 4, 1996, among Tele-Communications,
Inc. ("TCI"), TCI Communications, Inc. ("TCIC"), Tempo Enterprises, Inc., TCI Digital
Satellite Entertainment, Inc., TCI K-1, Inc. ("TCI K-1"), United Artists K-1
Investments, Inc. ("UA K-1"), TCI SE Partner 1, Inc. ("TCISE 1"), TCI SE Partner 2,
Inc. ("TCISE 2") and TCI Satellite Entertainment, Inc. ("TSAT"). (c)
2.2 Merger and Contribution Agreement dated as of February 6, 1998, among PRIMESTAR, Inc.
(the "Company"), TSAT, 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"). (b)
2.3 Asset Transfer Agreement dated as of February 6, 1998, between the Company and TSAT.
(b)
2.4 Agreement and Plan of Merger dated as of February 6, 1998, between the Company and
TSAT. (b)
2.5 Guarantee Agreement dated as of February 6, 1998, by US WEST Media Group, Inc. ("US
West"), in favor of each of the Company, TSAT, TWE, Newhouse, Comcast, Cox and GE
Americom. (b)
2.6 Letter Agreement dated as of February 6, 1998, between John C. Malone and the
Company, TSAT, TWE, Newhouse, Comcast, Cox , MediaOne and GE Americom, for the
benefit of the Company, TSAT, TWE, Newhouse, Comcast, Cox, MediaOne and GE Americom.
(b)
2.7 Form of Stockholders Agreement among he Company, 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. (b)
2.8 Form of Registration Rights Agreement among the Company, 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. (b)
</TABLE>
<PAGE>
2 - Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
(continued):
<TABLE>
<C> <S>
2.9 Stockholders Agreement dated as of February 6, 1998, among the Company, TSAT and John
C. Malone. (b)
2.10 TSAT Tempo Agreement dated as of February 6, 1998, between the Company and TSAT. (b)
<CAPTION>
3 - Articles of Incorporation and Bylaws:
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of the Company. (b)
3.2 Amended and Restated Bylaws of the Company. (b)
<CAPTION>
4 - Instruments Defining the Rights of Security Holders:
<C> <S>
4.1 Specimen certificate representing shares of Class A Common Stock of the Company. (b)
4.2 Specimen certificate representing shares of Class B Common Stock of the Company. (b)
4.3 Indenture dated as of February 20, 1997 between TSAT and Bank of New York, as
Trustee, with respect to $200 million principal amount of 10-7/8% Senior Subordinated
Notes due 2007.(d)
4.4 Indenture dated as of February 20, 1997 between TSAT and Bank of New York, as
Trustee, with respect to $275 million principal amount of 12-1/4% Senior Subordinated
Discount Notes due 2007.(d)
4.5 Registration Rights Agreement - Senior Subordinated Notes, 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. (d)
4.6 Registration Rights Agreement - Senior Subordinated Discount Notes, 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. (d)
<CAPTION>
10 - Material Contracts
<C> <S>
10.1 Indemnification Agreement dated as of December 4, 1996, by and between the Company
and TCI UA 1, Inc. (d)
10.2 First Amendment to Indemnification Agreement dated as of December 31, 1997 between
the Company and TCI UA I, Inc. (c)
</TABLE>
<PAGE>
10 - Material Contracts (continued):
<TABLE>
<C> <S>
10.3 Indemnification Agreement dated as of December 4, 1996, by and between the Company
and TCIC. (d)
10.4 First Amendment to Indemnification Agreement dated as of December 31, 1997 between
the Company and TCI Communications, Inc. (c)
10.5 Option Agreement dated February 8, 1990, between Tempo and K Prime Partners, L.P. (e)
10.6 Letter Agreement dated July 30, 1993, between Tempo and PRIMESTAR Partners, L.P.
relating to FSS. (e)
10.7 Letter Agreement dated July 30, 1993, between Tempo and PRIMESTAR Partners, L.P.
relating to BSS. (e)
10.8 Amended and Restated Reimbursement Agreement dated March 1, 1995, between TCI UA 1,
Inc., Chemical Bank and The Toronto Dominion Bank. (e)
10.9 Senior Subordinated Credit Agreement, dated as of April 1, 1998 among PRIMESTAR,
Inc., as Borrower, the Guarantors party hereto, the Lenders party hereto, Merrill
Lynch & Co., as Arranger and Syndication Agent, Morgan Stanley Senior Funding, Inc.,
as Administrative Agent, and Donaldson, Lufkin & Jenerette Securities Corporation, as
Documentation Agent. (a)
10.10 Credit Agreement, dated as of March 9, 1994, among PRIMESTAR Partners, L.P., the
Lenders party hereto, The Bank of New York, Chemical Bank and Citibank, N.A. as
Managing Agents, The Bank of New York, as Documentation Agent and Chemical Bank, as
Administrative Agent, as amended by Amendment No. 1 dated November 21, 1994, as
amended by Amendment No. 2 dated February 27, 1997, as amended by Amendment No. 3
dated June 2, 1997, as amended by Amendment No. 4 dated December 19, 1997 and as
amended by Amendment No. 5 dated September 29, 1998. (a)
10.11 U.S. $700,000,000 Credit Agreement, dated as of March 31, 1998 among PRIMESTAR, Inc.,
as Borrower, The Bank of Nova Scotia, as Administrative Agent, Nationsbank of Texas,
N.A., as Syndication Agent, Credit Lyonnais New York Branch, as Documentation Agent,
Various Financial Institutions, as Lenders and The Bank of Nova Scotia, Credit
Lyonnais New York Branch and Nationsbank of Texas, N.A., as Arranging Agents. (a)
10.12 Share Purchase Agreement dated as of December 4, 1996, between TCI and the Company.
(d)
10.13 Option Agreement dated as of December 4, 1996, between TCI and the Company.(d)
</TABLE>
<PAGE>
10 - Material Contracts (continued):
<TABLE>
<C> <S>
10.14 Indemnification Agreement dated as of June 11, 1997 among News Corp., the Company,
the Partnership, Time Warner, Comcast, Cox, MediaOne, Newhouse, and GE Americom. (b)
10.15 Asset Purchase Agreement among the Company, PRIMESTAR Partners, L.P., PRIMESTAR MDU,
Inc., the Stockholders of PRIMESTAR, Inc. listed herein and Hughes Electronics
Corporation, dated as of January 22, 1999. (f)
10.16 Asset Purchase Agreement by and among Hughes Electronics Corporation, the Company,
PRIMESTAR Partners L.P., Tempo Satellite, Inc. and the Stockholders of PRIMESTAR
listed herein, dated as of January 22, 1999. (f)
21 Subsidiaries of the Registrant.(a)
27 Financial Data Schedule.(a)
</TABLE>
- ----------------------
(a) Filed herewith.
(b) Incorporated by reference to the Company's Registration Statement on
Form S-4 filed with the SEC on February 9, 1998 (Registration No. 333-
45835).
(c) Incorporated by reference to TSAT's Annual Report on Form 10-K for the
year ended December 31, 1997 (Commission File No. 0-21317).
(d) Incorporated by reference to TSAT's Annual Report on Form 10-K for the
year ended December 31, 1996 (Commission File No. 0-21317).
(e) Incorporated by reference to TSAT's Registration Statement on Form 10
filed with the Securities and Exchange Commission ("SEC") on November
15, 1996 (Registration No. 0-21317).
(f) Incorporated by reference to the Company's Current Report on Form 8-K,
dated February 1, 1999.
<PAGE>
EXHIBIT 10.9
================================================================================
SENIOR SUBORDINATED CREDIT AGREEMENT
dated as of
April 1, 1998
among
PRIMESTAR, INC.,
as Borrower,
THE GUARANTORS party hereto,
THE LENDERS party hereto,
MERRILL LYNCH & CO.,
as Arranger and Syndication Agent,
MORGAN STANLEY SENIOR FUNDING, INC.,
as Administrative Agent,
and
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION,
as Documentation Agent
================================================================================
<PAGE>
TABLE OF CONTENTS/a/
<TABLE>
<CAPTION>
Section Heading Page
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<S> <C> <C>
SECTION 1. DEFINITIONS................................................................................ 1
1.1 Certain Defined Terms...................................................................... 1
1.2 Accounting Terms........................................................................... 39
1.3 Rules of Construction...................................................................... 40
SECTION 2. AMOUNT AND TERMS OF LOAN COMMITMENT AND LOANS;
NOTES...................................................................................... 40
2.1 Initial Loan and Initial Note.............................................................. 40
A. Initial Loan Commitment........................................................... 40
B. Notice of Borrowing............................................................... 40
C. Disbursement of Funds............................................................. 41
D. Initial Notes..................................................................... 41
E. Scheduled Payment of Initial Loan................................................. 41
F. Termination of Initial Loan Commitments........................................... 41
G. Pro Rata Borrowings............................................................... 42
2.2 Term Loan and Term Note.................................................................... 42
A. Term Loan Commitment.............................................................. 42
B. Notice of Conversion/Borrowing.................................................... 42
C. Making of Term Loan............................................................... 42
D. Maturity Date of Term Loan........................................................ 42
E. Term Notes........................................................................ 42
2.3 Interest on the Loans...................................................................... 43
A. Rate of Interest.................................................................. 43
B. Interest Payments................................................................. 43
C. Post-Maturity Interest............................................................ 44
D. Computation of Interest........................................................... 44
2.4 Letter Agreements.......................................................................... 44
2.5 Prepayments; Mandatory Offers and Payments................................................. 44
A. Prepayments and Mandatory Offers.................................................. 44
B. Manner and Time of Payment........................................................ 48
C. Payments on Non-Business Days..................................................... 48
D. Notation of Payment............................................................... 48
2.6 Use of Proceeds............................................................................ 48
A. Initial Loan...................................................................... 48
B. Term Loan......................................................................... 48
C. Margin Regulations................................................................ 48
2.7 Breakage; Illegality....................................................................... 48
A. Breakage.......................................................................... 48
</TABLE>
_____________________
a This Table of Contents is not a part of the Agreement to which it is
attached but is inserted for convenience of reference only.
-i-
<PAGE>
<TABLE>
<CAPTION>
Section Heading Page
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<S> <C> <C>
B. Illegality........................................................................ 49
SECTION 3. CONDITIONS TO LOANS........................................................................ 49
3.1 Conditions to Initial Loan................................................................. 49
A. Corporate Proceedings, Documents, Resolutions, Etc................................ 49
B. New PRIMESTAR Senior Credit Facility.............................................. 51
C. Assumption Agreements............................................................. 51
D. Restructuring Agreements.......................................................... 51
E. No Other Debt..................................................................... 52
F. Consummation of Transactions...................................................... 52
G. Approvals......................................................................... 52
H. No Default Under This Agreement and Other Agreements.............................. 53
I. No Legal Bar...................................................................... 53
J. No Material Adverse Change........................................................ 53
K. No Dividends...................................................................... 53
L. No Violation of Law............................................................... 53
M. Fees and Expenses................................................................. 53
N. Accuracy of Representations and Warranties........................................ 53
O. Subordination Arrangements........................................................ 54
3.2 Conditions to Term Loan.................................................................... 54
A. Notice of Conversion.............................................................. 54
B. No Bankruptcy..................................................................... 54
C. No Payment Default................................................................ 54
D. No Acceleration of New PRIMESTAR Senior Credit Facility or Existing
Notes........................................................................... 54
E. Officers' Certificate............................................................. 54
F. Term Notes........................................................................ 54
G. Fees and Expenses................................................................. 54
H. Margin Rules...................................................................... 54
SECTION 4. REPRESENTATIONS AND WARRANTIES............................................................. 54
4.1 Organization, Etc.......................................................................... 54
4.2 Due Authorization, Non-Contravention, Etc.................................................. 55
A. General........................................................................... 55
B. Subordinated Debt................................................................. 55
4.3 Government Approval, Regulation, Etc....................................................... 55
4.4 Validity, Etc.............................................................................. 55
4.5 Financial Information...................................................................... 56
4.6 No Material Adverse Change................................................................. 56
4.7 Litigation, Labor Controversies, Etc....................................................... 56
4.8 Compliance with Laws....................................................................... 56
4.9 Subsidiaries............................................................................... 56
4.10 Ownership of Properties.................................................................... 56
4.11 Taxes...................................................................................... 57
4.12 Pension and Welfare Plans.................................................................. 57
4.13 Environmental Matters...................................................................... 57
4.14 Intellectual Property...................................................................... 58
4.15 Regulations T, U and X..................................................................... 58
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Section Heading Page
- ------- ------- ----
<S> <C> <C>
4.16 Accuracy of Information.................................................................... 58
SECTION 5. AFFIRMATIVE COVENANTS (INITIAL LOAN AND TERM LOAN)......................................... 59
5.1 Financial Information, Reports, Notices, Etc............................................... 59
5.2 Compliance with Laws, Etc.................................................................. 60
5.3 Maintenance of Properties.................................................................. 61
5.4 Insurance.................................................................................. 61
5.5 Books and Records.......................................................................... 61
5.6 Environmental Covenant..................................................................... 62
5.7 [Reserved]................................................................................. 62
5.8 Lenders Meeting............................................................................ 62
5.9 Use of Proceeds............................................................................ 62
5.10 Payments in U.S Dollars.................................................................... 62
5.11 Take-Out Financing......................................................................... 62
A. Refinancing of Loans, Initial Notes, Term Notes and Exchange Notes................ 62
B. Required Refinancing of Loans, Notes, Term Notes and Exchange
Notes......................................................................... 64
5.12 Exchange of Term Notes..................................................................... 64
5.13 Register................................................................................... 65
SECTION 6. NEGATIVE COVENANTS (INITIAL LOAN).......................................................... 65
6.1 Business Activities........................................................................ 65
6.2 Indebtedness............................................................................... 66
6.3 Liens...................................................................................... 67
6.4 Sale and Leaseback......................................................................... 68
6.5 Investments................................................................................ 68
6.6 Restricted Payments, Etc................................................................... 68
6.7 [Reserved]................................................................................. 69
6.8 Subsidiaries............................................................................... 69
6.9 Take or Pay Contracts...................................................................... 69
6.10 Consolidation, Merger, Etc................................................................. 69
6.11 Permitted Dispositions..................................................................... 69
6.12 Senior Subordinated Indebtedness........................................................... 70
6.13 Guarantees................................................................................. 70
6.14 Refinancing of Loans in Part............................................................... 70
6.15 Modification of Certain Agreements......................................................... 70
6.16 Transactions with Affiliates............................................................... 70
6.17 Negative Pledges, Restrictive Agreements, Etc.............................................. 71
6.18 Restrictions on Leases and ASkyB Transaction............................................... 71
6.19 Restrictions on TSAT Partners Holdings and Its Subsidiaries................................ 71
SECTION 6A. NEGATIVE COVENANTS (TERM LOAN)............................................................. 72
6A.1 Limitation on Restricted Payments.......................................................... 72
6A.2 Limitation on Indebtedness................................................................. 75
6A.3 Limitation on Transactions with Affiliates................................................. 78
6A.4 Limitation on Liens........................................................................ 79
6A.5 Limitation on Senior Subordinated Indebtedness............................................. 80
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Section Heading Page
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<S> <C> <C>
6A.6 Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries............................................................................. 80
6A.7 Guaranty of Notes by Subsidiaries.......................................................... 81
6A.8 Merger, Sale of Assets; Etc................................................................ 81
6A.9 Disposition of Proceeds of Asset Sales..................................................... 82
6A.10 Payments for Consent....................................................................... 84
6A.11 Tempo Satellites; Maintenance of Insurance................................................. 84
6A.12 Designation of Unrestricted Subsidiaries................................................... 85
6A.13 Refinancing of Loans in Part............................................................... 86
SECTION 7. EVENTS OF DEFAULT.......................................................................... 86
7.1 Failure To Make Payments When Due.......................................................... 86
7.2 Default in Other Agreements................................................................ 87
7.3 Change of Control; Breach of Certain Covenants............................................. 87
7.4 Breach of Warranty......................................................................... 87
7.5 Other Defaults Under Agreement or Loan Documents........................................... 87
7.6 Involuntary Bankruptcy; Appointment of Custodian, Etc...................................... 87
7.7 Voluntary Bankruptcy; Appointment of Custodian, Etc........................................ 88
7.8 Judgments and Attachments.................................................................. 88
7.9 Dissolution................................................................................ 88
7.10 Guarantee.................................................................................. 88
7.11 Foreclosure................................................................................ 88
SECTION 8. SUBORDINATION.............................................................................. 89
8.1 Loans and Notes Subordinated to Senior Indebtedness........................................ 89
8.2 No Payment on Loans and Notes in Certain Circumstances; Payments Held in
Trust.................................................................................... 89
A. No Payments in Certain Circumstances.............................................. 89
B. Payments Held in Trust............................................................ 90
8.3 Payment Over of Proceeds upon Dissolution, Etc............................................. 90
A. Payment Over...................................................................... 90
B. Payments Held in Trust............................................................ 91
8.4 Subrogation................................................................................ 91
8.5 Obligations of Borrower Unconditional...................................................... 92
8.6 Notice to Arranger......................................................................... 92
8.7 Reliance on Judicial Order or Certificate of Liquidating Agent............................. 93
8.8 Arranger's Relation to Senior Indebtedness................................................. 93
8.9 Subordination Rights not Impaired by Acts or Omissions of Borrower or Holders
of Senior Indebtedness................................................................... 93
8.10 Lenders Authorize Arranger To Effectuate Subordination of Loans and Notes.................. 94
8.11 This Section not To Prevent Events of Default.............................................. 94
8.12 Arranger's Compensation not Prejudiced..................................................... 94
8.13 No Waiver of Subordination Provisions...................................................... 94
8.14 Acceleration of Loans and Notes............................................................ 94
SECTION 9. THE AGENTS................................................................................. 94
9.1 General Provisions......................................................................... 94
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Section Heading Page
- ------- ------- ----
<S> <C> <C>
9.2 Indemnification............................................................................ 96
9.3 Consents Under Other Loan Documents........................................................ 97
SECTION 10. GUARANTEE.................................................................................. 97
10.1 Unconditional Guarantee.................................................................... 97
10.2 Severability............................................................................... 97
10.3 Release of a Guarantor..................................................................... 97
10.4 Limitation of Guarantor's Liability........................................................ 98
10.5 Contribution............................................................................... 98
10.6 Subordination of Subrogation and Other Rights.............................................. 98
SECTION 11. SUBORDINATION OF GUARANTEE OBLIGATIONS..................................................... 98
11.1 Guarantee Obligations Subordinated to Guarantor Senior Indebtedness........................ 98
11.2 No Payment on Guarantees in Certain Circumstances; Payments Held in Trusts................. 99
A. No Payments in Certain Circumstances.............................................. 99
B. Payments Held in Trust............................................................ 99
11.3 Payment Over of Proceeds upon Dissolution, Etc............................................. 100
A. Payment Over...................................................................... 100
B. Payments Held in Trust............................................................ 100
11.4 Subrogation................................................................................ 101
11.5 Obligations of Guarantors Unconditional................................................... 101
11.6 Notice to Arranger........................................................................ 101
11.7 Reliance on Judicial Order or Certificate of Liquidating Agent............................ 102
11.8 Arranger's Relation to Guarantor Senior Indebtedness...................................... 102
11.9 Subordination Rights not Impaired by Acts or Omissions of the Guarantors or
Lenders of Guarantor Senior Indebtedness................................................ 103
11.10 Lenders Authorize Arranger To Effectuate Subordination of Guarantee....................... 103
11.11 This Article not To Prevent Events of Default............................................. 103
11.12 Arranger's Compensation not Prejudiced.................................................... 103
11.13 No Waiver of Guarantee Subordination Provisions........................................... 103
11.14 Payments May Be Paid Prior to Dissolution................................................. 104
SECTION 12. MISCELLANEOUS............................................................................. 104
12.1 Participations in and Assignments of Loans and Notes...................................... 104
A. Assignments...................................................................... 104
B. Participations................................................................... 104
C. Certain Assignments Permitted.................................................... 105
D. Information...................................................................... 105
E. No Assignment to Borrower........................................................ 105
12.2 Expenses.................................................................................. 105
12.3 Indemnity................................................................................. 106
12.4 Setoff.................................................................................... 107
12.5 Amendments and Waivers.................................................................... 107
12.6 Independence of Representations, Warranties and Covenants................................. 108
12.7 Entirety.................................................................................. 108
12.8 Notices................................................................................... 108
12.9 Survival of Warranties and Certain Agreements............................................. 108
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Section Heading Page
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<S> <C> <C>
12.10 Failure or Indulgence not Waiver; Remedies Cumulative..................................... 109
12.11 Severability.............................................................................. 109
12.12 Headings.................................................................................. 109
12.13 Applicable Law............................................................................ 109
12.14 Successors and Assigns; Subsequent Holders of Notes....................................... 109
12.15 Counterparts; Effectiveness............................................................... 109
12.16 Consent to Jurisdiction; Venue; Waiver of Jury Trial...................................... 110
A. New York Jurisdiction............................................................ 110
B. Venue............................................................................ 110
C. Trial by Jury Waiver............................................................. 110
12.17 Payments Pro Rata......................................................................... 110
A. Pro Rata Payments................................................................ 110
B. Sharing of Payments.............................................................. 110
12.18 Taxes and Other Taxes..................................................................... 111
A. Covered Taxes.................................................................... 111
B. Other Taxes...................................................................... 113
C. Refunds.......................................................................... 113
D. Receipts......................................................................... 113
E. Survival......................................................................... 113
12.19 Waiver of Stay, Extension or Usury Laws................................................... 113
12.20 Additional Costs.......................................................................... 114
12.21 Confidentiality........................................................................... 115
12.22 Acknowledgments........................................................................... 115
Signatures............................................................................................... S-1
</TABLE>
-vi-
<PAGE>
SCHEDULES
SCHEDULE 3.1E Debt and Contingent Obligations at Closing Date
SCHEDULE 4.3 Approvals
SCHEDULE 4.7 Litigation
SCHEDULE 4.9 Subsidiaries
SCHEDULE 4.13 Environmental Matters
SCHEDULE 4.14 Intellectual Property
SCHEDULE 6.2 Ongoing Indebtedness
SCHEDULE 6.3 Ongoing Liens
SCHEDULE 6.5 Ongoing Investments
EXHIBITS
A FORM OF INITIAL NOTE
B FORM OF TERM NOTE
C [RESERVED]
D FORM OF NOTICE OF BORROWING
E FORM OF NOTICE OF CONVERSION
F [RESERVED]
G FORM OF REGISTRATION RIGHTS AGREEMENT
H FORM OF OPINION OF SHERMAN AND HOWARD
- SPECIAL COUNSEL FOR LOAN PARTIES
I FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
J FORM OF SECTION 12.18 CERTIFICATE
K FORM OF NOTATION OF GUARANTEE
-vii-
<PAGE>
This Senior Subordinated Credit Agreement is dated as of April 1,
1998, and entered into by and among PRIMESTAR, Inc., a Delaware corporation
("Borrower" or "New PRIMESTAR"), the Guarantors party hereto, the Lenders party
-------- -------------
hereto (the "Lenders"), Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
-------
Smith Incorporated, as Arranger and Syndication Agent ("Merrill Lynch" or the
-------------
"Arranger"), Morgan Stanley Senior Funding, Inc., as Administrative Agent (the
--------
"Administrative Agent"), and Donaldson, Lufkin & Jenrette Securities
--------------------
Corporation, as Documentation Agent (the "Documentation Agent").
-------------------
R E C I T A L S :
WHEREAS, Borrower desires that the Lenders extend a senior
subordinated credit facility to Borrower in connection with the Restructuring
Transaction (as defined herein);
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto hereby agree as
follows:
SECTION 1. DEFINITIONS
1.1 Certain Defined Terms
---------------------
The following terms used in this Agreement shall have the following
meanings:
"Acquired Indebtedness" shall mean 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 Borrower or any Restricted Subsidiary.
"Acquired Person" shall mean, with respect to any specified Person,
---------------
any other Person which merges with or into or becomes a Subsidiary of such
specified Person.
"Acquisition" shall mean (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 Borrower or any
Restricted Subsidiary to any other Person, or any acquisition or purchase of
Equity Interests of any other Person by Borrower or any Restricted Subsidiary,
in either case pursuant to which such Person shall become a Restricted
Subsidiary or shall be consolidated or merged with or into Borrower or any
Restricted Subsidiary or (ii) any acquisition by 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.
"Administrative Agent" see the introduction to this Agreement.
--------------------
"Affiliate" shall mean
---------
(x) prior to the Conversion Date, any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding with respect to Borrower any (i) trustee under, or any
committee with responsibility for administering, any Plan, (ii) Lender and
(iii) Agent); a Person shall be deemed to be "controlled by" another Person
if such other Person possesses, directly or indirectly, power: (a) to vote
10% or more of the securities having ordinary
<PAGE>
-2-
voting power for the election of directors or managing general partners; or
(b) to direct or cause the direction of the management and policies of such
Person whether by contract or otherwise, and
(y) on and after the Conversion Date, with respect to any specified
Person, 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; and (ii) no individual, other than a director of Borrower or an
officer of Borrower with a policymaking function, shall be deemed an
Affiliate of Borrower or any of its Subsidiaries, solely by reason of such
individual's employment, position or responsibilities by or with respect to
Borrower or any of its Subsidiaries; provided, however, that no Agent or
-------- -------
any of their respective Affiliates shall be treated as an Affiliate of
Borrower or of any Subsidiary of Borrower.
"Affiliate Transaction" see Section 6A.3.
---------------------
"Agents" shall mean the Arranger, the Administrative Agent and the
------
Documentation Agent.
"Agreement" shall mean this Senior Subordinated Credit Agreement dated
---------
as of April 1, 1998, as amended and in effect from time to time.
"Alternate Base Rate" shall mean for any day, a rate per annum that is
------------------- ---------
equal to the higher of (i) the Prime Rate, or (ii) the Federal Funds Rate, plus
----
0.50%.
"Annualized Cash Flow" shall mean, as of any date of determination,
--------------------
EBITDA for the Fiscal Quarter ending on or immediately prior to such date of
determination multiplied by four.
"Applicable Rate" shall mean for each Monthly Period and each Six
---------------
Month Period, at the election of the Agents, either (i) the Alternate Base Rate,
or (ii) the LIBOR Rate then in effect.
"Applicable Spread" shall mean (x) with respect to the Initial Loans,
-----------------
from the Closing Date up to and including June 30, 1998, 475 basis points, and
thereafter according to the following schedule:
From To Spread
---- -- ------
July 1, 1998 July 31, 1998 525 bps
August 1, 1998 August 31, 1998 550 bps
September 1, 1998 September 30, 1998 575 bps
October 1, 1998 October 31, 1998 600 bps
November 1, 1998 November 30, 1998 625 bps
December 1, 1998 December 31, 1998 650 bps
January 1, 1999 January 31, 1999 675 bps
February 1, 1999 February 28, 1999 700 bps
March 1, 1999 March 31, 1999 725 bps
April 1, 1999 April 30, 1999 750 bps
<PAGE>
-3-
and (y) with respect to the Term Loans, 8.50%. In addition, during the
continuance of any Event of Default, the Applicable Spread will increase by
2.00% over the Applicable Spread then in effect.
"Arranger" see the introduction to this Agreement.
--------
"ASkyB Satellite" shall mean either of the high power communications
---------------
satellites to be purchased by New PRIMESTAR in the ASkyB Transaction.
"ASkyB Transaction" shall mean the acquisition by New PRIMESTAR from
-----------------
MCI Telecommunications Corporation ("MCI"), The News Corporation Limited ("News
--- ----
Corp.") and American Sky Broadcasting LLC, a wholly owned Subsidiary of News
- ----
Corp. ("ASkyB"), of the ASkyB Satellites, certain authorizations granted to MCI
-----
by the FCC and certain related contracts, all pursuant to an asset acquisition
agreement dated as of June 11, 1997 among Primestar Partnership, News Corp.,
MCI, ASkyB and, for certain purposes only, each Partner.
"Asset Sale" shall mean 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 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 Borrower or any Restricted Subsidiary; (iii)
any assets of Borrower or any Restricted Subsidiary which constitute
substantially all of an operating unit or line of business of Borrower or any
Restricted Subsidiary; or (iv) any other property or asset of 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 (other than to the extent such proceeds are used to replace or repair such
assets or property) 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 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 Borrower or its Subsidiaries. The term "Asset Sale" shall not include (a)
any transaction consummated in compliance with Section 6A.8 and the creation of
any Lien not prohibited by Section 6A.4; provided, however, that any transaction
-------- --------
consummated in compliance with Section 6A.8 involving a sale, conveyance,
assignment, transfer, lease or other disposal of less than all of the properties
or assets of Borrower and the Restricted Subsidiaries shall be deemed to be an
Asset Sale with respect to the properties or assets of Borrower and the
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 Borrower or any Restricted
Subsidiary, as the case may be; (c) any transaction consummated in compliance
with Section 6A.1; and (d) sales of accounts receivable for cash at fair market
value. In addition, solely for purposes of Section 6A.9, 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.
"Asset Transfer Agreements" shall mean the MediaOne Asset Transfer
-------------------------
Agreement, the Newhouse Asset Transfer Agreement and the TWE Asset Transfer
Agreement.
"Assignment and Assumption Agreement" shall mean an agreement
-----------------------------------
substantially in the form of Exhibit I with respect to a proposed assignment.
---------
<PAGE>
-4-
"Assumption Agreements" shall mean the TWE Assumption Agreement, the
---------------------
Newhouse Assumption Agreement, the New PRIMESTAR/TWE Assumption Agreement and
the New PRIMESTAR/Newhouse Assumption Agreement.
"Authorized Officer" shall mean, with respect to Borrower and any
------------------
other Loan Party, those of its officers or managing members (in the case of a
limited liability company) whose signatures and incumbency shall have been
certified by Borrower to the Agents and the Lenders.
"Bankruptcy Law" shall mean Title 11 of the United States Code
--------------
entitled "Bankruptcy", as now and hereafter in effect, or any successor statute
or any other United States federal, state or local law or the law of any other
jurisdiction relating to bankruptcy, insolvency, winding up, liquidation,
reorganization or relief of debtors, whether in effect on the date hereof or
hereafter.
"Bankruptcy Order" shall mean any court order made in a proceeding
----------------
pursuant to or within the meaning of any Bankruptcy Law, containing an
adjudication of bankruptcy or insolvency, or providing for liquidation, winding
up, dissolution or reorganization, or appointing a custodian of a debtor or of
all or any substantial part of a debtor's property, or providing for the
staying, arrangement, adjustment or composition of indebtedness or other relief
of a debtor.
"Basic Documents" shall mean the Reorganization Agreement, the
---------------
Transition Services Agreement, the Tax Sharing Agreement, the Reimbursement
Agreements, the Trade Name and Service Mark License Agreement, the Share
Purchase Agreement, the Partnership Agreement, the Partnership Credit Agreement,
the Tempo Option, the Tag-Along Agreement and the Tempo Letter Agreements.
"Board of Directors" shall mean, with respect to any Person, the Board
------------------
of Directors of such Person, or any authorized committee of that Board of
Directors.
"Board Resolution" shall mean, with respect to any Person, a duly
----------------
adopted resolution of the Board of Directors of such Person.
"Borrower" see the introduction to this Agreement.
--------
"Business Day" shall mean any day excluding Saturday, Sunday and any
------------
day which is a legal holiday under the laws of New York, New York or is a day on
which banking institutions therein located are authorized or required by law or
other governmental action to close.
"Capitalized Lease Liabilities" shall mean, all monetary obligations
-----------------------------
of Borrower or any of its Restricted Subsidiaries under any leasing or similar
arrangement which, in accordance with GAAP, would be classified as capitalized
leases, and, for purposes of this Agreement and each other Loan Document, the
amount of such obligations shall be the capitalized amount thereof.
"Capital Lease Obligation" shall mean, 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 Equivalent Investment" shall mean, at any time:
--------------------------
<PAGE>
-5-
(a) any direct obligation of (or guaranteed by) the United States
Government (or any agency or instrumentality thereof) maturing not more
than one year after such time;
(b) commercial paper, maturing not more than nine months from the
date of issue, which is issued by
(i) a corporation (other than an Affiliate of any Obligor)
organized under the laws of any state of the United States or of the
District of Columbia and rated A-1 by S&P or P-1 by Moody's, or
(ii) any Lender (or its holding company);
(c) any certificate of deposit or bankers acceptance, maturing not
more than one year after such time, which is issued by either
(i) any bank organized under the laws of the United States (or
any State thereof) and which has (x) a credit rating of Aa or better
from Moody's or a comparable rating from S&P and (y) a combined
capital and surplus greater than $500,000,000 (or the Dollar
equivalent thereof), or
(ii) any Lender;
(d) any repurchase agreement entered into with any Lender or any
commercial banking institution of the stature referred to in clause (c)(i)
which
(i) is secured by a fully perfected security interest in any
obligation of the type described in clause (a), and
(ii) has a market value at the time such repurchase agreement is
entered into of not less than 100% of the repurchase obligation of
such commercial banking institution thereunder; or
(e) money market funds that invest substantially all of their assets
in the investments described in clauses (a) through (d) above.
"Cash Equivalents" shall mean (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; (e) commercial paper rated A-1 or
better by S&P or P-1 or better by Moody's maturing within six months after the
date of acquisition; and (f) money market funds that invest substantially all of
their assets in any of the investments described in clauses (a) through (e).
"C-Band Dividends" see Section 6A.1.
----------------
<PAGE>
-6-
"C-Band Entity" see Section 6A.1.
-------------
"C-Band Investment" see Section 6A.1.
-----------------
"CERCLA" shall mean the Comprehensive Environmental Response,
------
Compensation and Liability Act of 1980, as amended.
"CERCLIS" shall mean the Comprehensive Environmental Response
-------
Compensation Liability Information System List.
"Change of Control" shall mean the occurrence of one or more of the
-----------------
following events:
(i) prior to the Conversion Date, (a) any "person" or "group" (as
such terms are used in Rule 13d-5 under the Exchange Act, and Sections
13(d) and 14(d) of the Exchange Act) of persons (other than John Malone,
the legal heirs of John Malone or any Primestar Partner) becomes, directly
or indirectly, in a single transaction or in a related series of
transactions by way of merger, consolidation, or other business combination
or otherwise, the "beneficial owner" (as such term is used in Rule 13d-3 of
the Exchange Act) of 25% or more of the outstanding shares of Voting Equity
Interests of Borrower; or (b) during any consecutive two-year period
calculated in accordance with GAAP, individuals who at the beginning of
such period constituted the board of directors of Borrower (together with
any new directors whose election by such board of directors or whose
nomination for election by the stockholders of 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 Borrower then in office; and
(ii) on and after the Conversion Date, the occurrence of any of the
following events (whether or not approved by the Board of Directors of
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 Borrower; (b) Borrower consolidates with, or merges with or
into, another Person, or Borrower or the Restricted Subsidiaries sell,
assign, convey, transfer, lease or otherwise dispose of all or
substantially all of the assets of 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, Borrower, in any such event pursuant to a transaction in
which the outstanding Voting Equity Interests of Borrower are converted
into or exchanged for cash, notes or other property, other than any such
transaction where (i) the outstanding Voting Equity Interests of Borrower
are 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 Borrower as a Restricted Payment under
this Agreement 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
<PAGE>
-7-
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 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 Borrower (together with any new
directors whose election by the Board of Directors of Borrower or whose
nomination for election by the stockholders of 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 Borrower then in office; or (d) the liquidation
or dissolution of Borrower.
"Change of Control Date" see Section 2.5A(iv)(a)(1).
----------------------
"Closing Date" shall mean the date on which the Initial Loan is made
------------
and the conditions set forth in Section 3.1 are satisfied or waived in
accordance with Section 12.5.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
----
time to time, and the regulations promulgated and rulings issued thereunder.
Section references to the Code are to the Code as in effect at the date of this
Agreement and any subsequent provisions of the Code amendatory thereof,
supplemental thereto or substituted therefor.
"Comcast" shall mean Comcast Corporation, a Pennsylvania corporation.
-------
"Comcast DBS Merger Agreement" shall mean the agreement and plan of
----------------------------
merger dated as of February 6, 1998 between New PRIMESTAR and Comcast DBS, Inc.,
an affiliate of Comcast, pursuant to which Comcast DBS, Inc. will merge with and
into New PRIMESTAR.
"Comcast Satellite Merger Agreement" shall mean the agreement and plan
----------------------------------
of merger dated as of February 6, 1998 between New PRIMESTAR and Comcast
Satellite Communications, Inc., an affiliate of Comcast, pursuant to which
Comcast Satellite Communications, Inc. will merge with and into New PRIMESTAR.
"Commitment Letter" shall mean the Interim Loan Commitment Letter
-----------------
dated March 12, 1998 among New PRIMESTAR, TSAT, Merrill Lynch Capital
Corporation, Morgan Stanley Bridge Fund, L.L.C. and DLJ Bridge Finance, Inc.
"Common Stock" shall mean, of any Person, any and all shares,
------------
interests or other participations in, and other equivalents (however designated
and whether voting or non-voting) of, such Person's common stock, whether
outstanding on the Closing Date or issued after the Closing Date, and includes,
without limitation, all series and classes of such common stock.
"Consolidated Income Tax Expense" shall mean, with respect to Borrower
-------------------------------
for any period, the provision for federal, state, local and foreign income taxes
payable by Borrower and the Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP.
<PAGE>
-8-
"Consolidated Interest Expense" shall mean, with respect to Borrower
-----------------------------
for any period, without duplication, the sum of (i) the interest expense of
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 Capital Lease Obligations paid, accrued
and/or scheduled to be paid or accrued by 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 Borrower during such
period as determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" shall mean, with respect to any period, the
-----------------------
net income of 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 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 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 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" shall mean, with respect to any
--------------------------------
period, Consolidated Net Income for such period (i) 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 in computing
Consolidated Net Income for that period; (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 Borrower and the Restricted Subsidiaries, including, without limitation,
amortization of capitalized debt issuance costs for such period; and (e) solely
for purposes of determining the Debt to Operating Cash Flow Ratio, non-recurring
charges to the extent deducted in determining Consolidated Net Income, all of
the foregoing determined on a consolidated basis in accordance with GAAP, and
(ii) decreased by non-cash items (including non-recurring gains and non-
recurring items of income) 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 Borrower for any period
shall be calculated by subtracting therefrom any dividends received from 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 pursu-
<PAGE>
-9-
ant to clause (ix) of the second paragraph of Section 6A.1 with such dividends
or such Consolidated Operating Cash Flow.
"Contingent Liability" shall mean any agreement, undertaking or
--------------------
arrangement by which any Person guarantees, endorses or otherwise becomes or is
contingently liable upon (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to, or otherwise to
invest in, a debtor, or otherwise to assure a creditor against loss) the
Indebtedness of any other Person (other than by endorsements of instruments in
the course of collection), or guarantees the payment of dividends or other
distributions upon the shares of any other Person. The amount of any Person's
obligation under any Contingent Liability shall (subject to any limitation set
forth therein) be deemed to be the outstanding amount of the debt, obligation or
other liability guaranteed thereby.
"Contractual Obligation" shall mean, as applied to any Person, any
----------------------
provision of any Security issued by that Person or of any indenture, mortgage,
deed of trust, contract, undertaking, agreement or other instrument to which
that Person is a party or by which it or any of its properties is bound or to
which it or any of its properties is subject.
"Controlled Group" shall mean all members of a controlled group of
----------------
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with
Borrower, are treated as a single employer under Section 414(b) or 414(c) of the
Code or Section 4001 of ERISA.
"Conversion Date" shall mean the one year anniversary of the Closing
---------------
Date.
"Covered Taxes" see Section 12.18A.
-------------
"Cox" shall mean Cox Communications, Inc., a Delaware corporation.
---
"Cox Merger Agreement" shall mean the agreement and plan of merger
--------------------
dated as of February 6, 1998 between New PRIMESTAR and Cox Satellite, Inc., an
affiliate of Cox, pursuant to which Cox Satellite, Inc. will merge with and into
New PRIMESTAR.
"Credit Documents" shall mean this Agreement, the Notes, the Senior
----------------
Subordinated Indenture, the Exchange Notes and the Guarantees.
"Creditor" shall mean any Agent and any Lender.
--------
"Cumulative Operating Cash Flow" shall mean, as at any date of
------------------------------
determination, the positive cumulative Consolidated Operating Cash Flow realized
during the period commencing on the Closing 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 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.
"Custodian" shall mean any receiver, interim receiver, receiver and
---------
manager, trustee, assignee, liquidator, sequestrator or similar official charged
with maintaining possession or control over property for one or more creditors,
whether under any Bankruptcy Law or otherwise.
<PAGE>
-10-
"DBS" shall mean direct broadcast satellite.
---
"Debt to Operating Cash Flow Ratio" shall mean the ratio of (a) the
---------------------------------
Total Consolidated Indebtedness (including all Permitted Indebtedness then
outstanding) 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 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) 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 New PRIMESTAR Senior Credit Facility on such Determination
Date and all amounts that Borrower or any Restricted Subsidiary could borrow
under the New PRIMESTAR Senior Credit Facility on such Determination Date
(assuming the satisfaction of all conditions precedent under the New PRIMESTAR
Senior Credit Facility other than conditions relating solely to incremental
amounts being available under the New PRIMESTAR Senior Credit Facility) shall be
deemed to be outstanding and added to Total Consolidated Indebtedness on such
Determination Date (but without duplication).
"Designated Guarantor Senior Indebtedness" shall mean, with respect to
----------------------------------------
any Guarantor, (a) any Indebtedness of such Guarantor outstanding under the New
PRIMESTAR Senior Credit Facility and (b) any other Guarantor Senior Indebtedness
of such Guarantor which, at the time of determination, has an aggregate
outstanding principal amount outstanding, together with any commitments to lend
additional amounts, of at least $25.0 million if the instrument governing such
Guarantor Senior Indebtedness expressly states that such Indebtedness is
Guarantor Senior Indebtedness for purposes of this Agreement and a Board
Resolution setting forth such designation by the Company has been filed with the
Arranger.
"Designated Senior Indebtedness" shall mean (a) any Indebtedness
------------------------------
outstanding under the New PRIMESTAR Senior 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 this Agreement and a Board Resolution setting
forth such designation by Borrower has been filed with the Arranger.
<PAGE>
-11-
"Designation" see Section 6A.12A.
-----------
"Designation Amount" see Section 6A.12A.
------------------
"Determination Date" see the definition of "Debt to Operating Cash
------------------
Flow Ratio".
"Disposition" shall mean, 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" shall mean 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 (other than at the option of
Borrower) into Indebtedness on or prior to the earlier of the maturity date of
the Term Notes or the date on which no Term Notes remain outstanding.
"Distribution" shall mean 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 common stock
of the predecessor of TSAT.
"Documentation Agent" see the introduction to this Agreement.
-------------------
"EBITDA" shall mean, for Borrower and its Restricted Subsidiaries, for
------
any applicable period, the sum (without duplication) for such period of:
(a) Net Income,
plus
- ----
(b) the amount deducted in determining Net Income representing
amortization (including amortization with respect to goodwill, deferred
financing costs, other non-cash interest income and expense and all other
intangible assets),
plus
- ----
(c) the amount deducted in determining Net Income of all federal,
state and local income taxes (whether paid in cash or deferred),
plus
- ----
(d) Total Interest Expense plus, without duplication, any non-cash
interest expense,
plus
- ----
(e) the amount deducted in determining Net Income representing
depreciation of assets,
<PAGE>
-12-
plus
- ----
(f) the amount deducted in determining Net Income representing other
non-cash expenses.
"Eligible Assignee" shall mean (A) (i) a commercial bank organized
-----------------
under the laws of the United States of America or any state thereof; (ii) a
savings and loan association or savings bank organized under the laws of the
United States or any state thereof; (iii) a commercial bank organized under the
laws of any other country or a political subdivision thereof; provided, however,
-------- -------
that (x) such bank is acting through a branch or agency located in the United
States or (y) such bank is organized under the laws of a country that is a
member of the Organization for Economic Cooperation and Development or a
political subdivision of such country; and (iv) any other entity which is an
"accredited investor" (as defined in Regulation D under the Securities Act)
which extends credit or buys loans as one of its businesses including, but not
limited to, insurance companies, mutual funds and lease financing companies, in
each case (under clauses (i) through (iv) above) that is reasonably acceptable
to the Arranger; and (B) any Lender and any Affiliate of any Lender.
"Engagement Letter" shall mean the Interim Loan Engagement Letter
-----------------
dated March 12, 1998 among New PRIMESTAR, TSAT, Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated
and Donaldson, Lufkin & Jenrette Securities Corporation.
"Environmental Laws" shall mean all applicable federal, state or local
------------------
statutes, laws, ordinances, codes, rules, regulations and guidelines (including
consent decrees and administrative orders) relating to public health and safety
and protection of the environment.
"Equity Interests" in any Person shall mean 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.
"ERISA" shall mean the United States Employee Retirement Income
-----
Security Act of 1974, as amended, and any successor statute thereto of similar
import, together with the regulations thereunder, in each case as in effect from
time to time. References to Sections of ERISA also refer to any successor
sections thereto.
"ERISA Affiliate" shall mean, with respect to any Loan Party, any
---------------
trade or business (whether or not incorporated) that, together with such Loan
Party, is treated as a single employer under Section 414(b) or (c) of the Code
or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is
treated as a single employer under Section 414 of the Code.
"ERISA Entity" shall mean each Loan Party and each ERISA Affiliate of
------------
each Loan Party.
"Event of Default" see Section 7.
----------------
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended from time to time, and any successor statute, and all rules and
regulations of the SEC promulgated thereunder.
"exchange notes" see Section 5.11A(v)(a).
--------------
"Exchange Notes" see Section 5.12(ii).
--------------
<PAGE>
-13-
"Exchange Offer" see Section 5.11A(v)(a).
--------------
"Exchange Request" see Section 5.12.
----------------
"Excluded Taxes" see Section 12.18A.
--------------
"Existing Facility Repayment" shall mean the repayment of all
---------------------------
indebtedness and permanent termination of all commitments by Borrower in respect
of the Partnership Working Capital Facility.
"Existing Indebtedness" shall mean any Indebtedness of Borrower and
---------------------
its Subsidiaries in existence on the Closing Date until such amounts are repaid
(including, without limitation, obligations pursuant to each Reimbursement
Agreement and the Reorganization Agreement) and identified on Schedule 6.2.
------------
"Existing Indentures" shall mean the Existing Senior Subordinated
-------------------
Notes Indenture and the Existing Senior Subordinated Discount Notes Indenture.
"Existing Note Assumption" shall mean the assumption by New PRIMESTAR
------------------------
of all obligations of TSAT under the Existing Indentures and the Existing Notes
and the release of TSAT from all such obligations.
"Existing Note Assumption Agreement" shall mean the agreement dated as
----------------------------------
of March 31, 1998 between TSAT and New PRIMESTAR pursuant to which the Existing
Note Assumption was effected.
"Existing Notes" shall mean the Existing Senior Subordinated Notes and
--------------
the Existing Senior Subordinated Discount Notes.
"Existing Senior Subordinated Discount Notes" shall mean the 12-1/4%
-------------------------------------------
Senior Subordinated Discount Notes issued by TSAT under an indenture dated as of
February 20, 1997 between TSAT and The Bank of New York, as trustee.
"Existing Senior Subordinated Discount Notes Indenture" shall mean the
-----------------------------------------------------
Indenture dated as of February 20, 1997, by and between TSAT and The Bank of New
York as trustee, under which the Existing Senior Subordinated Discount Notes
were issued.
"Existing Senior Subordinated Notes" shall mean the 10-7/8% Senior
----------------------------------
Subordinated Notes issued by TSAT under an indenture dated as of February 20,
1997 between TSAT and The Bank of New York, as trustee.
"Existing Senior Subordinated Notes Indenture" shall mean the
--------------------------------------------
Indenture dated as of February 20, 1997, by and between TSAT and the Bank of New
York as trustee, under which the Existing Senior Subordinated Notes were issued.
"Expiration Date" see the definition of "Offer to Purchase" below.
---------------
"Fair Market Value" shall mean with respect to any asset, the price
-----------------
(after taking into account any liabilities relating to such asset) 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 de-
<PAGE>
-14-
termined conclusively by the Board of Directors of Borrower acting in good
faith, and shall be evidenced by resolutions of the Board of Directors of
Borrower delivered to the Arranger.
"FCC" shall mean the Federal Communications Commission.
---
"Federal Funds Rate" shall mean, for any period, a fluctuating
------------------
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Arranger from three Federal Funds brokers of
recognized standing selected by the Arranger.
"Fee Letter" shall mean the Interim Loan Fee Letter dated March 12,
----------
1998 among New PRIMESTAR, TSAT, Merrill Lynch Capital Corporation, Morgan
Stanley Bridge Fund, L.L.C. and DLJ Bridge Finance, Inc.
"Fiscal Quarter" shall mean a quarter ending on the last day of March,
--------------
June, September and December.
"Fiscal Year" shall mean any period of twelve consecutive calendar
-----------
months ending on December 31; references to a Fiscal Year with a number
corresponding to any calendar year (e.g., the "1997 Fiscal Year") refer to the
---
Fiscal Year ending on December 31 of such calendar year.
"F.R.S. Board" shall mean the Board of Governors of the Federal
------------
Reserve System or any successor thereto.
"Funding Guarantor" see Section 10.5.
-----------------
"GAAP" shall mean United States generally accepted accounting
----
principles as in effect from time to time, which are applicable to the
circumstances as of the date of determination.
"GE Americom" shall mean GE American Communications, Inc., a Delaware
-----------
corporation.
"GE Americom Merger Agreement" shall mean the agreements and plan of
----------------------------
merger dated as of February 6, 1998 between New PRIMESTAR and GE Americom
Services, Inc., an affiliate of GE Americom, pursuant to which GE Americom
Services, Inc. will merge with and into New PRIMESTAR.
"GE-2 Agreement" shall mean the Amended and Restated Memorandum of
--------------
Agreement, effective as of October 18, 1996, between Primestar Partnership and
GE Americom and, upon the execution of the Service Agreement (as defined in the
GE-2 Agreement) between Primestar Partnership and GE Americom contemplated
therein, shall include such Service Agreement, as amended and in effect from
time to time.
"Governmental Approval" shall mean any action, authorization, consent,
---------------------
approval, license, lease, ruling, permit, tariff, rate, certification,
exemption, filing, variance, claim, order, judgment, decree, publication,
notices to, declarations of or with or registration by or with any Governmental
Authority.
<PAGE>
-15-
"Governmental Authority" shall mean the government of the United
----------------------
States of America, any other nation or any political subdivision thereof,
whether state or local, and any agency, authority, instrumentality, regulatory
body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government, whether now or hereafter constituted and/or existing.
"Governmental Rule" shall mean any statute, law, regulation,
-----------------
ordinance, rule, judgment, order, decree, permit, concession, grant, franchise,
license, agreement, directive, guideline, policy, requirement, or other
governmental authorization including any conditions thereof, restriction or any
similar form of published or otherwise known decision of or determination by, or
any interpretation or administration of any of the foregoing by, any
Governmental Authority, whether now or hereafter in effect (including any
Environmental Law).
"Guarantees" shall mean, collectively, the guarantees delivered to the
----------
Lenders by the Guarantors pursuant to Section 10 which are evidenced by
notations of guarantee substantially in the form of Exhibit K.
---------
"Guarantors" shall mean each of the Subsidiaries of Borrower, if any,
----------
that guarantees Borrower's obligations under this Agreement pursuant to Section
6.13.
"Guarantor Blockage Period" see Section 11.2A.
-------------------------
"Guarantor Payment Blockage Notice" see Section 11.2A.
---------------------------------
"Guarantor Senior Indebtedness" shall mean, with respect to any
-----------------------------
Guarantor, at any date, (a) all Obligations of such Guarantor under the New
PRIMESTAR Senior Credit Facility; (b) all Interest Rate Protection Obligations
of such Guarantor; (c) all Obligations of such Guarantor under stand-by letters
of credit; and (d) all other Indebtedness of such Guarantor 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 such Guarantor for money borrowed is Incurred expressly provides
that such Indebtedness for money borrowed is not senior or superior in right of
payment to such Guarantor's Guaranty of the Loans, and all renewals, extensions,
modifications, amendments or refinancings thereof. Notwithstanding the
foregoing, Guarantor Senior Indebtedness shall not include (a) to the extent
that it may constitute Indebtedness, any Obligation for federal, state, local or
other taxes; (b) any Indebtedness between such Guarantor, Borrower or any
Subsidiary of Borrower; (c) 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; (d) that portion of any Indebtedness that is Incurred in violation of
this Agreement; provided, however, that such Indebtedness shall be deemed not to
-------- -------
have been Incurred in violation of this Agreement for purposes of this clause
(d) if (i) the holder(s) of such Indebtedness or their representative or the
Company shall have furnished to the Arranger an opinion of independent legal
counsel, unqualified in all material respects, addressed to the Arranger (which
legal counsel may, as to matters of fact, rely upon an Officers' Certificate of
Borrower) to the effect that the Incurrence of such Indebtedness does not
violate the provisions of this Agreement or (ii) in the case of any obligations
under the New PRIMESTAR Senior Credit Facility, the holder(s) of such
obligations or their agent or representative shall have received a
representation from the Company to the effect that the Incurrence of such
Indebtedness does not violate the provisions of this Agreement; (e) Indebtedness
evidenced by such Guarantor's Guaranty of the Loans; (f) Indebtedness of such
Guarantor that is expressly subordinate or junior in right of payment to any
other Indebtedness of such Guarantor; (g) to the extent that it may constitute
Indebtedness, any obligation owing under leases (other than
<PAGE>
-16-
Capital Lease Obligations) or management agreements; and (h) any obligation that
by operation of law is subordinated to any general unsecured obligations of such
Guarantor.
"Guaranty" see Section 6A.7.
--------
"Hazardous Materials" shall mean
-------------------
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource Conservation
and Recovery Act, as amended; or
(c) any pollutant or contaminant or hazardous, dangerous or toxic
chemical, material or substance (including any petroleum product) within
the meaning of any other applicable federal, state or local law,
regulation, ordinance or requirement (including consent decrees and
administrative orders) relating to or imposing liability or standards of
conduct concerning any hazardous, toxic or dangerous waste, substance or
material, all as amended.
"Hedging Obligations" shall mean, with respect to any Person, all
-------------------
liabilities of such Person under currency exchange agreements, interest rate
swap agreements, interest rate cap agreements and interest rate collar
agreements, and all other agreements or arrangements designed to protect such
Person against fluctuations in interest rates or currency exchange rates.
"High Power Satellite Transmission Business" shall mean 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 Borrower 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" shall mean a Wholly-
--------------------------------------------
Owned Restricted Subsidiary of Borrower which engages in, or acts as a
distributor for, the High Power Satellite Transmission Business.
"Impermissible Qualification" shall mean, relative to the opinion or
---------------------------
certification of any independent public accountant as to any financial statement
of Borrower, any qualification or exception to such opinion or certification:
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of matters
relevant to such financial statement; or
(c) which relates to the treatment or classification of any item in
such financial statement and which, as a condition to its removal, would
require an adjustment to such item the effect of which would be to cause
Borrower to be in default of any of its obligations under Section 6.4.
<PAGE>
-17-
"Incur" shall mean, with respect to any Indebtedness, to incur,
-----
create, issue, assume, guarantee or otherwise become liable for or with respect
to, or become responsible for the payment of, contingently or otherwise, such
Indebtedness; provided, however, that the term "Incur" shall not include
-------- -------
conversions or continuations of Loans.
"Indebtedness" shall mean
------------
(x) prior to the Conversion Date, (a) all obligations of such Person
for borrowed money and all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments; (b) all obligations,
contingent or otherwise, relative to the face amount of all letters of
credit, whether or not drawn, and banker's acceptances issued for the
account of such Person; (c) all obligations of such Person as lessee under
leases which have been or should be, in accordance with GAAP, recorded as
Capitalized Lease Liabilities; (d) net liabilities of such Person under all
Hedging Obligations; (e) whether or not so included as liabilities in
accordance with GAAP, all obligations of such Person to pay the deferred
purchase price of property or services, and indebtedness (excluding prepaid
interest thereon) secured by a Lien on property owned or being purchased by
such Person (including indebtedness arising under conditional sales or
other title retention agreements), whether or not such indebtedness shall
have been assumed by such Person or is limited in recourse; and (f) all
Contingent Liabilities of such Person in respect of any of the foregoing;
for all purposes of this Agreement, the Indebtedness of any Person shall
include the recourse Indebtedness of any partnership or joint venture in
which such Person is a general partner or a joint venturer; and
(y) on and after the Conversion Date, (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 (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
<PAGE>
-18-
determination; (d) shall include the liquidation preference and any
mandatory redemption payment obligations in respect of any Disqualified
Equity Interests of 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 under any such
agreement, to the extent relating to any obligation of an Unrestricted
Subsidiary).
"Indemnitee" see Section 12.3.
----------
"Independent Financial Advisor" shall mean a nationally recognized,
-----------------------------
accounting, appraisal, investment banking firm or consultant engaged in the
satellite business that is, in the judgment of the Board of Directors of
Borrower, qualified to perform the task for which it has been engaged (i) which
is not an Affiliate of, and whose directors, officers and employees are not
Affiliates of, Borrower and (ii) which, in the judgment of the Board of
Directors of Borrower, is independent and qualified to perform the task for
which it is to be engaged.
"Initial Loan Commitment" see Section 2.1A.
-----------------------
"Initial Loan" see Section 2.1A.
------------
"Initial Notes" see Section 2.1D.
-------------
"In-Orbit Insurance" shall mean, 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 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" shall mean, 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 Period" shall mean, with respect to the Initial Loans, 30
---------------
days, and with respect to the Term Loans, six months.
"Interest Rate Determination Date" shall mean (x) the second Business
--------------------------------
Day on which banks in New York and London are open prior to the Closing Date or
the Conversion Date, as the case may be, and (y) with respect to any Monthly
Period or Six Month Period, the second Business Day prior to the first Business
Day of such Monthly Period or Six Month Period, as the case may be, on which
banks in New York City and London are open.
"Interest Rate Protection Obligations" shall mean, with respect to any
------------------------------------
Person, the Senior Indebtedness Obligations of such Person under interest rate
swap agreements, interest rate cap agreements and interest rate collar
agreements, and other similar agreements or arrangements.
"Investment" shall mean, with respect to any Person,
----------
<PAGE>
-19-
(x) prior to the Conversion Date, (a) any loan or advance made by
such Person to any other Person (excluding commission, travel, petty cash
and similar advances to officers and employees made in the ordinary course
of business); (b) any Contingent Liability of such Person incurred in
connection with loans or advances described in clause (a); and (c) any
ownership or similar interest held by such Person in any other Person; the
amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon and shall, if made
by the transfer or exchange of property other than cash, be deemed to have
been made in an original principal or capital amount equal to the fair
market value of such property at the time of such Investment; and
(y) on and after the Conversion Date, 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.
"Lenders" see the introduction to this Agreement and shall include any
-------
assignee of any Loan, Note or Loan Commitment to the extent of such assignment.
"LIBOR Rate" shall mean, relative to any Interest Period, the rate of
----------
interest determined as follows:
(a) on the Interest Determination Date, the Arranger shall obtain the
offered quotation(s) that appear on the Reuter's Screen for Dollar deposits
for a period comparable to such Interest Period. If at least two such
offered quotations appear on the Reuter's Screen, the LIBOR Rate shall be
the arithmetic average (rounded upwards, if necessary, to the nearest
1/16th of 1%) of such offered quotations, as determined by the Arranger; or
(b) if the Reuter's Screen is not available or has been discontinued,
the LIBOR Rate shall be the rate per annum which the Arranger in good faith
determines to be the arithmetic average (rounded as aforesaid) of the
offered quotations for Dollar deposits in an amount comparable to the
Arranger's share of the relevant amount in respect of which the LIBOR Rate
is being determined for a period comparable to the relevant LIBOR Interest
Period that leading banks in New York City selected by the Arranger are
quoting at 11:00 A.M. on the Interest Determination Date in the New York
Interbank Market to major international banks.
"Lien" shall mean 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).
"Loan Commitment" shall mean the Initial Loan Commitment and the Term
---------------
Loan Commitment.
<PAGE>
-20-
"Loan Documents" shall mean this Agreement, the Initial Notes, the
--------------
Term Notes, the Guarantees, the Senior Subordinated Indenture, the Exchange
Notes and the Registration Rights Agreement.
"Loan Party" shall mean Borrower and any Guarantor.
----------
"Loans" shall mean, collectively, the Initial Loan and the Term Loan.
-----
"Loral" shall mean Space Systems/Loral, Inc., a New York corporation.
-----
"Losses" of any Person shall mean the losses, liabilities, claims
------
(including those based upon negligence, strict or absolute liability and
liability in tort), damages, expenses, obligations, penalties, actions,
judgments, encumbrances, liens, penalties, fines, suits, reasonable costs or
disbursements of any kind or nature whatsoever (including reasonable fees and
expenses of counsel in connection with any Proceeding commenced or threatened in
writing, whether or not such Person shall be designated a party thereto) at any
time (including following the payment of the Obligations) incurred by, imposed
on or asserted against such Person.
"Margin Stock" shall mean margin stock within the meaning of
------------
Regulations T, U and X of the F.R.S. Board.
"Material Adverse Change" shall mean a material adverse change or any
-----------------------
condition or event that could be expected to result in a material adverse change
in the business, assets, liabilities (contingent or otherwise), operations,
condition (financial or otherwise), prospects, solvency, properties, regulatory
environment, licenses, programming or material agreements of Borrower and its
Subsidiaries, taken as a whole (except that for purposes of Section 4, the words
"prospects", "properties", "regulatory environment", "licenses", and
"programming or material agreements" shall not apply).
"Material Adverse Effect" shall mean (a) a material adverse effect
-----------------------
upon the business, assets, liabilities (contingent or otherwise), operations,
condition (financial or otherwise), prospects, solvency, properties, regulatory
environment, licenses, programming or material agreements of Borrower and its
Subsidiaries, taken as a whole (except that for purposes of Section 4, the words
"prospects", "properties", "regulatory environment", "licenses", and
"programming or material agreements" shall not apply), or (b) the impairment in
any material respect of the ability of any Loan Party to perform, or the
impairment in any material respect of the ability of the Agents or Lenders to
enforce, any Loan Document or any of the Obligations.
"Material Subsidiary" shall mean, with respect to any accounting
-------------------
period, any Restricted Subsidiary of Borrower (i) whose revenues constitute
greater than 5% of the aggregate dollar value of the revenues of Borrower and
its Subsidiaries, taken as a whole, for such accounting period or (ii) the fair
market value of whose assets at any time during such accounting period is
greater than 5% of the fair market value of all of the assets of Borrower and
its Restricted Subsidiaries at such time.
"Maturity Date" see Section 2.2D.
-------------
"Maximum Cash Interest Rate" shall mean an interest rate of 15% per
-------------------------- ---
annum; provided, however, that (x) in computing such interest rate there shall
- ----- -------- -------
be excluded any additional interest payable pursuant to Section 2.3C, and (y) in
computing such interest rate, fees paid to the Lenders shall not be deemed an
interest payment.
<PAGE>
-21-
"Maximum Interest Rate" shall mean an interest rate of 16% per annum;
--------------------- --- -----
provided, however, that (x) in computing such interest rate there shall be
- -------- -------
excluded any additional interest payable pursuant to Section 2.3C, and (y) in
computing such interest rate, fees paid to the Lenders shall not be deemed an
interest payment.
"MDUs" shall mean hotels, motels, bars, restaurants, businesses,
----
schools and other multiple dwelling units.
"Measurement Period" see the definition of "Debt to Operating Cash
------------------
Flow Ratio" above.
"MediaOne" shall mean MediaOne of Delaware, Inc., a Delaware
--------
corporation.
"MediaOne Asset Transfer Agreement" shall mean the asset transfer
---------------------------------
agreement among MediaOne, certain of its affiliates and New PRIMESTAR, pursuant
to which MediaOne and such affiliates will contribute certain assets to New
PRIMESTAR, and New PRIMESTAR will assume certain liabilities of MediaOne and
such affiliates.
"Merger Agreements" shall mean the Comcast DBS Merger Agreement, the
-----------------
Comcast Satellite Merger Agreement, the Cox Merger Agreement and the GE Americom
Merger Agreement.
"Merger and Contribution Agreement" shall mean the agreement dated as
---------------------------------
of February 6, 1998 (as amended by the side letter dated as of March 30, 1998)
among New PRIMESTAR and each of the Partners.
"Merrill Lynch" see the introduction to the Agreement.
-------------
"Monthly Period" shall mean the period commencing on the last calendar
--------------
day of each month, if such day is a Business Day, or the first Business Day
succeeding the last calendar day of each month and ending on the day next
preceding the first Business Day of the following Monthly Period; provided,
--------
however, that the first Monthly Period shall commence on the Closing Date.
- -------
"Moody's" shall mean Moody's Investors Service, Inc.
-------
"Multiemployer Plan" shall mean a "multiemployer plan," as defined in
------------------
Section 4001(a)(3) of ERISA, (i) to which any ERISA Entity is contributing, or
at any time within the immediately preceding five calendar years has
contributed, (ii) to which any ERISA Entity has, or, at any time within the
immediately preceding five calendar years has had, an obligation to contribute
or (iii) with respect to which any ERISA Entity retains any liability.
"NAIC" shall mean the National Association of Insurance Commissioners.
----
"Net Cash Proceeds" shall mean the aggregate proceeds in the form of
-----------------
cash or Cash Equivalents received by 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
<PAGE>
-22-
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 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 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.
Net Cash Proceeds shall always be net of any actual application of any such
proceeds to the Loans.
"Net Income" shall mean, for any period, the aggregate of all amounts
----------
(exclusive of all amounts in respect of any non-cash extraordinary gains and any
non-cash extraordinary losses) which, in accordance with GAAP, would be included
as net income on the consolidated financial statements of Borrower and its
Restricted Subsidiaries for such period.
"New PRIMESTAR" see the introduction to this Agreement.
-------------
"New PRIMESTAR/Newhouse Assumption" shall mean the assumption by New
---------------------------------
PRIMESTAR of certain obligations of Newhouse under the Newhouse Assumption
Agreement, and the release of Newhouse from such obligations.
"New PRIMESTAR/Newhouse Assumption Agreement" shall mean the
-------------------------------------------
assumption agreement dated as of the date hereof by and among Newhouse, New
PRIMESTAR and each of the other parties to the Newhouse Assumption Agreement,
pursuant to which the New PRIMESTAR/Newhouse Assumption will be effected.
"New PRIMESTAR Senior Credit Facility" shall mean the senior credit
------------------------------------
agreement dated as of March 31, 1998 among New PRIMESTAR, the lenders party
thereto from time to time, and The Bank of Nova Scotia, NationsBank of Texas,
N.A. and Credit Lyonnais New York Branch, as Arranging Agents, including related
notes, guarantees, security agreements, pledge agreements, mortgages, other
collateral documents and note agreements and other instruments and agreements
executed in connection therewith, 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 New PRIMESTAR Senior Credit Facility)) and
note agreements and other instruments and agreements executed in connection
therewith.
"New PRIMESTAR/TWE Assumption" shall mean the assumption by New
----------------------------
PRIMESTAR of certain obligations of TWE under the TWE Senior Credit Agreement,
including without limitation those assumed pursuant to the TWE Assumption
Agreement, and the release of TWE from such obligations.
"New PRIMESTAR/TWE Assumption Agreement" shall mean the assumption
--------------------------------------
agreement dated as of the date hereof by and among TWE and New PRIMESTAR,
pursuant to which the New PRIMESTAR/TWE Assumption will be effected.
"Newhouse" shall mean Advance/Newhouse Partnership, a New York general
--------
partnership.
<PAGE>
-23-
"Newhouse Asset Transfer Agreement" shall mean the asset transfer
---------------------------------
agreement dated as of February 6, 1998, as amended, between Newhouse and New
PRIMESTAR.
"Newhouse Assumption" shall mean the assumption by Newhouse of certain
-------------------
obligations of TWE-A/N under the TWE-A/N Senior Credit Agreement and the release
of TWE-A/N from such obligations.
"Newhouse Assumption Agreement" shall mean the assumption agreement
-----------------------------
dated as of the date hereof by and among Newhouse and TWE-A/N, pursuant to which
the Newhouse Assumption was effected.
"Non-U.S. Lender" see Section 12.18A.
---------------
"Note Amount" see Section 2.5A(iv)(b).
-----------
"Note Portion of Unutilized Net Cash Proceeds" see Section
--------------------------------------------
2.5A(iv)(b).
"Notes" shall mean, collectively, the Initial Notes and the Term
-----
Notes.
"Notice of Borrowing" shall mean a notice substantially in the form of
-------------------
Exhibit D with respect to a proposed borrowing hereunder.
- ---------
"Notice of Conversion" shall mean a notice substantially in the form
--------------------
of Exhibit E with respect to a proposed conversion.
---------
"Notice Date" see Section 2.3A(ii).
-----------
"Obligations" shall mean all obligations of every nature of Borrower
-----------
and the Guarantors from time to time owed to the Lenders and the Agents under
the Loan Documents, whether for principal, reimbursements, interest, fees,
expenses, indemnities or otherwise, and whether primary, secondary, direct,
indirect, contingent, fixed or otherwise (including obligations of performance).
"Offering" see Section 5.11A(i).
--------
"Offer" see the definition of "Offer to Purchase" below.
-----
"Offer to Purchase" shall mean a written offer (the "Offer") sent by
----------------- -----
or on behalf of Borrower by first-class mail, postage prepaid, to each Lender at
his notice for address pursuant to Section 12.8 on the date of the Offer
offering to purchase up to the principal amount of Term Notes specified in such
Offer at the purchase price specified in such Offer. 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 Term Notes to occur no later than five Business
-------------
Days after the Expiration Date. Borrower shall notify the Arranger at least 15
Business Days (or such shorter period as is acceptable to the Arranger) prior to
the mailing of the Offer of Borrower's obligation to make an Offer to Purchase,
and the Offer shall be mailed by Borrower or, at Borrower's request, by the
Arranger in the name and at the expense of Borrower. The Offer shall contain
all the information required by applicable law to be included therein. The
Offer also shall contain information concerning the business of Borrower and its
Subsidiaries which Borrower in good faith believes will enable such Lenders to
make an informed decision with respect to the Offer to Purchase (which
<PAGE>
-24-
at a minimum will include (i) the most recent annual and quarterly consolidated
financial statements of Borrower and a financial analysis substantially similar
to a "Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained in a Form S-1 registration statement filed by an issuer on
its behalf with the SEC (which requirements may be satisfied by delivery of such
documents together with the Offer), (ii) a description of material developments
in 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 Borrower to make the Offer to Purchase), (iii) if applicable,
appropriate pro forma financial information concerning the Offer to Purchase and
the events requiring 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 Lenders to
tender Term Notes pursuant to the Offer to Purchase. The Offer shall also state:
(1) the Section of this Agreement 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 Term Notes
offered to be purchased by 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 this
Agreement requiring the Offer to Purchase) (the "Purchase
--------
Amount");
------
(4) the purchase price to be paid by Borrower for each $1,000
aggregate principal amount of Term Notes accepted for payment
(the "Purchase Price");
--------------
(5) the place or places where Term Notes are to be surrendered for
tender pursuant to the Offer to Purchase;
(6) that interest on any Term Note not tendered or tendered but not
purchased by Borrower pursuant to the Offer to Purchase will
continue to accrue;
(7) that on the Purchase Date the Purchase Price will become due and
payable upon each Term 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;
(3) that each holder electing to tender all or any portion of a Term
Note pursuant to the Offer to Purchase will be required to
surrender such Term Note at the place or places specified in the
Offer prior to the close of business on the Expiration Date (such
Term Note being, if Borrower or the Arranger so requires, duly
endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to Borrower and the Arranger duly executed
by, the holder thereof or his attorney duly authorized in
writing);
(9) that Lenders will be entitled to withdraw all or any portion of
Term Notes tendered if Borrower 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 Term Note the
<PAGE>
-25-
holder tendered, the certificate number of the Term Note the
holder tendered and a statement that such holder is withdrawing
all or a portion of his tender;
(10) that (a) if Term Notes in an aggregate principal amount at
maturity less than or equal to the Purchase Amount are duly
tendered and not withdrawn pursuant to the Offer to Purchase,
Borrower shall purchase all such Term Notes and (b) if Term Notes
in an aggregate principal amount in excess of the Purchase Amount
are tendered and not withdrawn pursuant to the Offer to Purchase,
Borrower shall purchase Term 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 Term
Notes in denominations of $1,000 principal amount at maturity or
integral multiples thereof shall be purchased); and
(11) that in the case of any holder whose Term Note is purchased only
in part, Borrower shall execute and the Arranger shall
authenticate and deliver to the holder of such Term Note without
service charge, a new Term Note or Term 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 Term 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, unless
the context otherwise requires.
"Officer" shall mean the Chairman of the Board of Directors, the
-------
President, any Vice President, the Chief Financial Officer, the Controller, the
Treasurer or the Secretary of any Person.
"Officers' Certificate" shall mean, as applied to any corporation, a
---------------------
certificate executed on behalf of such corporation by at least one Officer.
"Organic Document" shall mean, relative to any Person, as applicable,
----------------
its certificate of incorporation, by-laws, certificate of partnership,
partnership agreement, certificate of formation limited liability agreement.
"Original Term Notes" see Section 2.2D.
-------------------
"Other Indebtedness" see Section 2.5A(iv)(b).
------------------
"Other Taxes" see Section 12.18B.
-----------
"Participant" see Section 12.1B.
-----------
"Partner" shall mean any of TSAT, TWE, Newhouse, Comcast, Cox,
-------
MediaOne and GE Americom.
"Partner Business" see Section 3.1J.
----------------
<PAGE>
-26-
"Partner Entity" shall mean any Affiliate of any Partner that will
--------------
transfer assets to or merge with New PRIMESTAR pursuant to any Restructuring
Agreement.
"Partnership Agreement" shall mean the Limited Partnership Agreement
---------------------
of Primestar 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" shall mean the bank credit facility
----------------------------
obtained by Primestar 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 GE Americom Services, Inc.).
"Partnership Working Capital Facility" shall mean the existing $50.0
------------------------------------
million working capital facility of Primestar Partnership.
"Payment Blockage Notice" see Section 8.2A.
-----------------------
"Payment Blockage Period" see Section 8.2A.
-----------------------
"Payment Office" shall mean the office of the Arranger located at 250
--------------
Vesey Street, New York, New York 10281.
"Pension Plan" shall mean a "pension plan", as such term is defined in
------------
Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which
Borrower or any corporation, trade or business that is, along with Borrower, a
member of a Controlled Group, may have liability, including any liability by
reason of having been a substantial employer within the meaning of Section 4063
of ERISA at any time during the preceding five years, or by reason of being
deemed to be a contributing sponsor under Section 4069 of ERISA.
"Permitted Holder" shall mean any of (i) the estate or the heirs of
----------------
Bob Magness (a shareholder of TSAT), (ii) John C. Malone (a shareholder of TSAT,
the Chief Executive Officer of TCI, and a director of TCI and of TSAT) or the
estate or heirs of John C. Malone, (iii) any Restricted Subsidiary, (iv) Persons
who were partners of Primestar Partnership immediately prior to the
Restructuring Transaction and their respective controlled Affiliates, (v) TCI
and its Subsidiaries, (vi) any of the Permitted Transferees of the Persons
referred to in clauses (i) through (v), and (vii) any person or group controlled
by each or any of the Persons referred to in clauses (i) through (vi).
"Permitted Indebtedness" see Section 6A.2.
----------------------
"Permitted Investments" shall mean (a) Cash Equivalents; (b)
---------------------
Investments in prepaid expenses, negotiable 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 Section 6A.9 not to exceed 15% of the total consideration for such Asset
Sales; (f) transactions with officers, directors and employees of Borrower or
any Restricted Subsidiary entered into in the ordinary course of business
(including compensation or employee benefit arrangements with any such director
or employee); (g) Investments existing as of the Closing Date and any amendment,
extension, renewal or modification thereof to the extent that any
<PAGE>
-27-
such amendment, extension, renewal or modification does not require 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
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 Section 6A.2; (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; and (m) shares of the
common stock of ResNet acquired pursuant to any exercise of warrants at a de
--
minimis exercise price.
- -------
"Permitted Junior Securities" shall mean any securities of 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 Loans and Notes are subordinated as provided in this Agreement, 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 Loans and Notes on the date of this Agreement, (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 Loans
and Notes on the date of this Agreement 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 or readjustment pursuant to which such securities are issued).
"Permitted Liens" shall mean (a) Liens on property of a Person
---------------
existing at the time such Person is merged into or consolidated with 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 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 Closing Date; (d) Liens securing only this Agreement, the Loans and Notes;
(e) Liens in favor of Borrower or any Restricted Subsidiary so long as held by
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 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 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 Capital 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 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
<PAGE>
-28-
Indebtedness), (II) such Liens do not extend to any other assets of 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 Section 6A.2, 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 rights 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 Refinancing" shall mean, relative to any Indebtedness, any
---------------------
other Indebtedness which is incurred to repay and retire in full such refinanced
Indebtedness and all other monetary obligations in respect of such refinanced
Indebtedness; provided, however, that
-------- -------
(a) other than with respect to Subordinated Debt, such refinancing
Indebtedness shall not be incurred in an original principal amount which
exceeds the aggregate amount on the date of such refinancing of the
outstanding amount of such refinanced Indebtedness plus the then aggregate
amount of all such other monetary obligations in respect thereof;
(b) the weighted average life of such refinancing Indebtedness shall
not be less than the weighted average life on the date of such refinancing
of such refinanced Indebtedness;
(c) other than reasonable and customary fees, discounts and
commissions payable in connection with the refinancing Indebtedness, the
refinancing Indebtedness shall not impose on Borrower or any Restricted
Subsidiary rates of interest, prepayment changes or other fees or other
amounts that are more than 2% per annum higher that the highest respective
---------
amounts thereof payable in respect of such refinanced Indebtedness
excluding the effect of any equity security issued in connection with such
Indebtedness;
(d) the refinancing Indebtedness shall not contain terms and
conditions that, taken as a whole, make the refinancing Indebtedness
materially more burdensome to Borrower or the Restricted Subsidiaries, or,
except in the case of the refinancing of Indebtedness permitted under
clause (c) of Section 6.2, materially more beneficial to the holders of the
refinancing Indebtedness, than the terms in effect on the date of such
refinancing of the refinanced Indebtedness; and
(e) if such refinanced Indebtedness is Subordinated Debt, the
refinancing Indebtedness shall not contain rights and remedies that, taken
as a whole, are materially more detrimental to the Lenders or materially
more beneficial to the holders of the refinancing Indebtedness, than the
terms in effect on the date of such refinancing of the refinanced
Indebtedness.
"Permitted Transferee" shall mean, 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
<PAGE>
-29-
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" shall mean and include natural persons, corporations, limited
------
liability companies, limited partnerships, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
"PIK Interest Amount" see Section 2.3B.
-------------------
"Plan" shall mean any employee pension benefit plan (other than a
----
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and (i) which is maintained or
contributed to by any Loan Party or any of their respective ERISA Affiliates or
(ii) with respect to which any Loan Party retains any liability.
"Post-Petition Interest" shall mean, 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.
"Potential Event of Default" shall mean a condition or event which,
--------------------------
after notice or lapse of time or both, would constitute an Event of Default if
that condition or event were not cured or removed within any applicable grace or
cure period.
"Preferred Equity Interest" in any Person shall mean 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.
"Prime Rate" shall mean for any day, a rate per annum that is equal to
---------- ---------
the corporate base rate of interest established by Arranger from time to time,
changing when and as said corporate base rate changes. The corporate base rate
is not necessarily the lowest rate charged by the Arranger to its customers.
"PRIMESTAR Distribution Service" shall mean the distribution of the
------------------------------
PRIMESTAR Programming as described in the Proxy.
"Primestar Partners" shall mean, collectively, TSAT, Time Warner
------------------
Entertainment Company, L.P., Advance/Newhouse Partnership, Comcast Corporation,
Cox Communications, Inc., MediaOne of Delaware, Inc. and GE American
Communications, Inc.
"Primestar Partnership" shall mean PRIMESTAR Partners, L.P., a
---------------------
Delaware limited partnership.
<PAGE>
-30-
"Proceeding" shall mean any claim, counterclaim, action, judgment,
----------
suit, hearing, governmental investigation, arbitration or proceeding, including
by or before any Governmental Authority and whether judicial or administrative.
"Property" shall mean any right or interest in or to property or
--------
assets of any kind whatsoever, whether real, personal or mixed and whether
tangible or intangible and including Equity Interests or other ownership
interests of any Person.
"Proxy" shall mean the definitive proxy statement/prospectus of TSAT
-----
dated as of February 9, 1998 mailed to the shareholders of TSAT in connection
with the Restructuring Transaction.
"Public Equity Offering" shall mean an underwritten public offering of
----------------------
Qualified Equity Interests of Borrower pursuant to an effective registration
statement filed under the Securities Act (excluding registration statements
filed on Form S-8).
"Purchase Amount" see the definition of "Offer to Purchase" above.
---------------
"Purchase Date" see the definition of "Offer to Purchase" above.
-------------
"Purchase Money Indebtedness" shall mean Indebtedness of 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" see the definition of "Offer to Purchase" above.
--------------
"Qualified Equity Interest" in any Person shall mean any Equity
-------------------------
Interest in such Person other than any Disqualified Equity Interest.
"Quarterly Date" see Section 2.3B.
--------------
"Refinancing" shall mean the public offering or private placement and
-----------
sale by Borrower of the Refinancing Securities contemplated by Section 5.11, in
order to refinance, as applicable, the Loans, Notes, Term Notes, the Exchange
Notes and all Obligations owing in respect of this Agreement and the other Loan
Documents and all obligations under the Senior Subordinated Indenture.
"Refinancing Securities" shall mean the unsecured senior subordinated
----------------------
notes of Borrower or any of its Subsidiaries proposed to be sold in order to
consummate the Refinancing.
"Refinancing Securities Notice" see Section 5.11B.
-----------------------------
"Register" see Section 5.13.
--------
"Registration Rights Agreement" shall mean a registration rights
-----------------------------
agreement substantially in the form of Exhibit G (with such changes therein as
---------
the Agents and Borrower shall approve).
<PAGE>
-31-
"Regulatory Authority" shall mean any national, state or local
--------------------
government, any political subdivision or any governmental, quasi-governmental,
judicial, public or statutory instrumentality, authority, body or entity, other
regulatory bureau, authority, body or entity, foreign or domestic, including the
Federal Deposit Insurance Corporation, the Comptroller of the Currency, the
F.R.S. Board, any central bank or any comparable authority.
"Reimbursement Agreement" shall mean each reimbursement agreement
-----------------------
dated as of the Closing Date between New PRIMESTAR, on the one hand, and each
Partner (other than TSAT) and/or their respective affiliates and affiliates of
TCI, respectively, on the other hand; and "Reimbursement Agreements" shall mean
all of them.
"Related Acquisition" see Section 6A.2(j).
-------------------
"Related Parties" see Section 9.1.
---------------
"Release" shall mean a "release", as such term is defined in CERCLA.
-------
"Reorganization Agreement" shall mean the agreement entered into on
------------------------
December 4, 1996 by TCI, TCIC and a number of other TCI subsidiaries, including
Borrower (as Successor in interest to TSAT) 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 Borrower and TCI with respect to and resulting from the
Distribution, as amended and in effect from time to time.
"Required Lenders" shall mean Lenders holding in the aggregate more
----------------
than 50% of (a) prior to the Closing Date, the Loan Commitments, and (b) on and
after the Closing Date, the outstanding principal amount of the Notes.
"Required Refinancing Securities" see Section 5.11B.
-------------------------------
"Requirement of Law" shall mean as to any Person, the certificate of
------------------
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its Property or to which such Person or
any of its Property is subject.
"ResNet" shall mean ResNet Communications, Inc., a Delaware
------
corporation.
"ResNet Option" shall mean the Option Agreement between TSAT and
-------------
ResNet dated October 21, 1996, as amended and in effect from time to time.
"ResNet Subordinated Loan" shall mean the subordinated loan in the
------------------------
principal amount of $36,604,000 made by TSAT to ResNet, as amended and in effect
from time to time.
"Resource Conservation and Recovery Act" shall mean the Resource
--------------------------------------
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as amended.
-- ---
"Restricted C-Band Subsidiary" see Section 6A.1.
----------------------------
<PAGE>
-32-
"Restricted Junior Payment" shall mean (a) any dividend or
-------------------------
distribution, direct or indirect, on account of any Equity Interests in Borrower
or any of its Subsidiaries now or hereafter outstanding, except a dividend
payable solely in shares of that class of stock or in any junior class of stock
to the holders of that class, provided that the issuance of such stock or junior
class of stock is not an incurrence of Indebtedness, (b) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any Equity Interests in Borrower or any of its
Subsidiaries now or hereafter outstanding, (c) any payment or prepayment of
principal of, premium, if any, or interest, fees or other charges on or with
respect to, and any redemption, purchase, retirement, defeasance, sinking fund
or similar payment and any claim for rescission with respect to, any
Subordinated Debt of Borrower or any of its Subsidiaries other than a Permitted
Refinancing, or (d) any payment made to redeem, purchase, repurchase or retire,
or to obtain the surrender of, any outstanding warrants, options or other rights
to acquire Equity Interests in Borrower or any of its Subsidiaries now or
hereafter outstanding.
"Restricted Payments" see Section 6A.1.
-------------------
"Restricted Subsidiary" shall mean (a) prior to the Conversion Date,
---------------------
each U.S. Subsidiary of Borrower, other than an Unrestricted Subsidiary, of
which Borrower owns directly or indirectly at least 80% of the outstanding
Voting Equity Interests, and (b) on and after the Conversion Date, any
Subsidiary of Borrower that has not been designated by the Board of Directors of
Borrower, by a resolution of the Board of Directors of Borrower delivered to the
Arranger, as an Unrestricted Subsidiary pursuant to Section 6A.12; provided,
--------
however, that, for the purposes of this clause (b), each Subsidiary which as of
- -------
the Conversion Date has been and is designated as an Unrestricted Subsidiary
under the Existing Indentures is designated as an Unrestricted Subsidiary as of
the Conversion Date. Any such designation pursuant to clause (b) may be revoked
by a resolution of the Board of Directors of Borrower delivered to the Arranger,
subject to the provisions of Section 6A.12.
"Restructuring Agreements" shall mean each of the Asset Transfer
------------------------
Agreements, the Existing Note Assumption Agreement, the Merger Agreements, the
Merger and Contribution Agreement, the TSAT Merger Agreement, the TSAT Asset
Transfer Agreement, the Restructuring Registration Rights Agreement, the
Reimbursement Agreements, the Stockholders Agreement, the TWE-Newhouse Voting
Agreement, the TSAT Stockholders Agreement, the TSAT Tempo Agreement and the U S
West Guarantee Agreement.
"Restructuring Registration Rights Agreement" shall mean the
-------------------------------------------
registration rights agreement dated as of the Closing Date among New PRIMESTAR,
each of the Partners, Continental Satellite Company of Chicago, Inc.,
Continental Satellite of Minnesota, Inc., Continental Satellite Company of New
England, Inc., Continental Satellite Company of Ohio, Inc., Continental
Satellite Company of Michigan, Inc., Continental Satellite Company of Virginia,
Inc., MediaOne Satellite II, Inc., Paragon Communications and John C. Malone.
"Restructuring Transaction" shall mean, collectively, the business
-------------------------
combination transactions contemplated by the Asset Transfer Agreements, the
Existing Note Assumption Agreement, the Merger Agreements, the Merger and
Contribution Agreement (excluding, however, the transactions contemplated by the
TSAT Merger Agreement and the TSAT Tempo Agreement) and the TSAT Asset Transfer
Agreement.
"Reuter's Screen" shall mean the display designated at page "LIBO" on
---------------
the Reuter Monitor System or such other display on the Reuter Monitor System as
may replace such page displaying the London interbank offered rates as of 11:00
A.M., London time, on the day on which the relevant determination is made.
<PAGE>
-33-
"Revocation" see Section 6A.12B.
----------
"Roll-Up Documents" shall mean, collectively, the TSAT Asset Transfer
-----------------
Agreement, the Restructuring Agreement, the TSAT Merger Agreement, and all
contracts, agreements and documents delivered in connection with each of the
foregoing.
"S&P" shall mean Standard & Poor's Corporation.
---
"Satellite Construction Agreement" shall mean 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.
"SEC" shall mean the Securities and Exchange Commission.
---
"Section 12.18 Certificate" see Section 12.18A.
-------------------------
"Securities" shall mean any limited, general or other partnership
----------
interest, or any stock, shares, voting trust certificates, bonds, debentures,
notes or other Equity Interests or evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or any certificates of
interest, shares, or participations in temporary or interim certificates for the
purchase or acquisition of, or any right to subscribe to, purchase or acquire
any of the foregoing, but shall not include any evidence of the Obligations.
"Securities Act" shall mean the Securities Act of 1933, as amended
--------------
from time to time, and any successor statute, and all rules and regulations of
the SEC promulgated thereunder.
"Senior Indebtedness" shall mean, at any date, (a) all obligations of
-------------------
Borrower under the New PRIMESTAR Senior Credit Facility; (b) all Interest Rate
Protection Obligations of Borrower; (c) all obligations of Borrower under stand
by letters of credit; and (d) all other Indebtedness of 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 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) to the extent that it may constitute Indebtedness, any
obligation for federal, state, local or other taxes; (b) any Indebtedness among
or between Borrower and any Subsidiary of Borrower; (c) 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; (d) that portion of any Indebtedness that is
Incurred in violation of this Agreement; provided, however, that such
-------- -------
Indebtedness shall be deemed not to have been Incurred in violation of this
Agreement for purposes of this clause (d) if (I) the holder(s) of such
Indebtedness or their representative or Borrower shall have furnished to the
Arranger an opinion of independent legal counsel, unqualified in all material
respects, addressed to the Arranger (which legal counsel may, as to matters of
fact, rely upon an Officers' Certificate of Borrower) to the effect that the
Incurrence of such Indebtedness does not violate the provisions of this
Agreement or (II) in the case of any obligations under the New PRIMESTAR Senior
Credit Facility, the holder(s) of such obligations or their agent or
representative shall have received a representation from Borrower to the effect
that the Incurrence of such Indebtedness does not violate the provisions of this
Agreement; (e) Indebtedness evidenced by the Existing Notes or the Notes; (f)
Indebtedness of Borrower that is expressly subordinate or junior in right of
payment to any other Indebtedness of Borrower; (g) to the extent that it may
constitute Indebtedness, any obligation owing under leases (other than Capital
Lease Obligations) or manage-
<PAGE>
-34-
ment agreements; and (h) any obligation that by operation of law is subordinate
to any general unsecured obligations of Borrower.
"Senior Management" shall mean the chief executive officer, chief
-----------------
financial officer, chief operating officer, treasurer, controller and corporate
counsel of Borrower, or any of them, as in effect from time to time.
"Senior Subordinated Indenture" shall mean an indenture between
-----------------------------
Borrower and a trustee substantially in the form of Merrill Lynch's customary
high yield indenture (which shall include guarantees by Subsidiaries of the
Exchange Notes if and to the extent that the Existing Notes are guaranteed by
Subsidiaries of Borrower), modified as appropriate for the Exchange Notes and
having principal negative covenants substantially identical to Section 6A and
principal events of default substantially identical to Section 7 (with such
changes therein as the Required Lenders (which consent shall be conclusively
deemed given if a Lender does not object to the draft thereof within five
Business Days of receipt thereof) and Borrower shall approve, and, at such time
as notes issued thereunder are sold in a public offering, with other appropriate
changes to reflect such public offering), as the same may at any time be
amended, modified and supplemented and in effect.
"Share Purchase Agreement" shall mean the share purchase agreement
------------------------
entered into by TCI and TSAT on December 4, 1996, as amended and in effect from
time to time.
"Six Month Period" shall mean the period commencing on the Conversion
----------------
Date and ending on the date which is the last calendar day of the month six
months after the Conversion Date (or if such last calendar day is not a Business
Day, the next Business Day) and each interval thereafter which begins on the
next day after the end of the prior period and ends on the date which is the
last calendar day of the month which is six months thereafter (or the next
Business Day if such last calendar day is not a Business Day).
"Stockholders Agreement" shall mean the stockholders agreement dated
----------------------
as of the Closing Date among New PRIMESTAR, each of the Partners, Paragon
Communications, certain affiliates of MediaOne and John C. Malone, regarding
shares of capital stock of New PRIMESTAR.
"Strategic Equity Investor" shall mean 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
telecommunications, information systems, entertainment, cable television,
programming, electronics or similar or related industries.
"Subordinated Debt" shall mean (i) Indebtedness incurred under the
-----------------
Reimbursement Agreements, and (ii) other unsecured Indebtedness of Borrower
subordinated in right of payment to the Obligations pursuant to documentation
containing interest rates, maturities, amortization schedules, covenants,
defaults, remedies, subordination provisions and other material terms in form
and substance reasonably satisfactory to the Required Lenders.
"Subordinated Debt Document" shall mean, as the context may require,
--------------------------
each indenture, note, debenture or other agreement evidencing or relating to
Subordinated Debt, and each instrument, document or agreement prepared or
executed in connection therewith, in each case as the same may be amended,
supplemented, amended and restated or otherwise modified in accordance with
Section 6.15.
"Subordinated Indebtedness" shall mean any Indebtedness of Borrower
-------------------------
which is expressly subordinated in right of payment to the Loans.
<PAGE>
-35-
"Subordination Arrangement" shall mean any agreement between Borrower
-------------------------
and/or its Subsidiaries, as applicable, Primestar Partnership and the Partners
providing for the subordination to the Loans and to the obligations under the
New PRIMESTAR Senior Credit Facility of the reimbursement obligations of
Borrower and its Subsidiaries to any Partner relating to letters of credit
issued on behalf of Primestar Partnership for which the Partners provide credit
support.
"Subsequent Initial Note" see Section 2.1D.
-----------------------
"Subsequent Term Note" see Section 2.2E.
--------------------
"Subsidiary" shall mean, 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 of such
entity 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" shall mean 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.
"Take-Out Banks" shall mean Merrill Lynch, Pierce, Fenner & Smith
--------------
Incorporated, Morgan Stanley Senior Funding, Inc. and Donaldson, Lufkin &
Jenrette Securities Corporation.
"Tag-Along Agreement" shall mean 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" shall mean 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 Borrower (as successor
in interest to TSAT) 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.
"Tax Benefit" see Section 12.18C.
-----------
"Taxes" shall mean all taxes, assessments, fees, levies, imposts,
-----
duties, penalties, deductions, liabilities, withholdings or other charges of any
nature whatsoever, including interest penalties, from time to time or at any
time imposed by any law, rule or regulation or any Governmental Authority.
"TCI" shall mean Tele-Communications, Inc., a Delaware corporation.
---
"TCISE Partner 1" shall mean TCISE Partner 1, Inc., a Delaware
---------------
corporation.
"TCISE Partner 2" shall mean TCISE Partner 2, Inc., a Delaware
---------------
corporation.
"Tempo" shall mean Tempo Satellite, Inc., an Oklahoma corporation.
-----
"Tempo Option" shall mean Primestar Partnership's right and option,
------------
granted by Tempo under the option agreement entered into by Tempo and Primestar
Partnership in February 1991 to purchase or
<PAGE>
-36-
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.
"Tempo Letter Agreements" shall mean the two letter agreements, dated
-----------------------
as of July 1993, entered into by Tempo and Primestar in connection with the
Tempo Option and certain related matters and any refinancings thereof.
"Tempo Satellite" shall mean either of the two high power direct
---------------
broadcast satellites which Tempo has agreed to purchase from Loral pursuant to
the Satellite Construction Agreement.
"Term Loan Commitment" see Section 2.2A.
--------------------
"Term Loan" see Section 2.2A.
---------
"Term Notes" see Section 2.2E.
----------
"Total Consolidated Indebtedness" shall mean, as at any date of
-------------------------------
determination, an amount equal to the aggregate amount of all Indebtedness and
the aggregate liquidation preference of all Disqualified Equity Interests of
Borrower and the Restricted Subsidiaries outstanding as of such date of
determination (other than Indebtedness owing to and Disqualified Equity
Interests held by Borrower or any of its Restricted Subsidiaries not subject to
any lien in favor of any Person other than Borrower or any Restricted Subsidiary
of Borrower).
"Total Debt" shall mean, on any date of determination, with respect to
----------
Borrower and its Restricted Subsidiaries, an amount equal to the sum of (a) the
outstanding principal amount of all Indebtedness as of such date of the type
referred to in clause (x)(a) of the definition of "Indebtedness" (which, in the
case of the loans under the New PRIMESTAR Senior Credit Facility, shall be
deemed to equal the amount of loans under the New PRIMESTAR Senior Credit
Facility outstanding on the last day of the Fiscal Quarter ending on or
immediately preceding the date of determination), plus (b) the maximum aggregate
----
amount of Indebtedness as of such date of the type described in clause (x)(b) of
the definition of "Indebtedness" (which, in the case of Letter of Credit
Outstandings as defined in the New PRIMESTAR Senior Credit Facility, shall be
deemed to equal the amount of Letter of Credit Outstandings on the last day of
the Fiscal Quarter ending on or immediately preceding the date of
determination), plus (c) the aggregate amount as of such date of the
----
Indebtedness described in clause (x)(c) of the definition of "Indebtedness,"
plus (d) (without duplication) the aggregate amount on such date of the
- ----
Contingent Liabilities in respect of any of the foregoing (other than in
connection with the Reimbursement Agreements).
"Total Debt to Annualized Cash Flow Ratio" shall mean the ratio of (a)
----------------------------------------
Total Debt to (b) Annualized Cash Flow.
--
"Total Interest Expense" shall mean, for any period, the sum of (a)
----------------------
the aggregate cash interest expense (net of cash interest income) of Borrower
and its Restricted Subsidiaries (including, to the extent Borrower or any of its
Restricted Subsidiaries have any Contingent Liability in respect of such
interest expense, (i) in respect of any pro forma calculations, the interest
--- -----
expense of Unrestricted Subsidiaries, and (ii) in respect of any period which
does not include any pro forma calculation, the amount of such interest expense
--- -----
actually paid or payable by Borrower or any Restricted Subsidiary) for such
period, as determined in accordance with GAAP, including the portion of any
payments made in respect of Capitalized Lease Liabilities allocable to interest
expense plus (b) all commitment, letter of credit, guarantee, line of credit or
----
similar fees
<PAGE>
-37-
(no matter how designated) paid or scheduled or required to be paid by Borrower
and its Restricted Subsidiaries to any lender in exchange for such lender's
commitment to lend to Borrower and its Restricted Subsidiaries, including,
without limitation, the commitment fee in respect of the loans and letters of
credit under the New PRIMESTAR Senior Credit Facility.
"Trade Name and Service Mark License Agreement" shall mean the trade
---------------------------------------------
name and service mark license agreement between Borrower (as successor in
interest to TSAT) and TCI dated December 4, 1996, as amended and in effect from
time to time.
"Transaction Costs" shall mean the fees, costs and expenses payable by
-----------------
Borrower pursuant hereto and other fees, costs and expenses payable by Borrower
or a Subsidiary of Borrower in connection with the Transactions.
"Transaction Documents" shall mean the Roll-Up Documents, the
---------------------
Reimbursement Agreement, the Partnership Credit Agreement, the Primestar
Partnership Agreement and the TSAT Tempo Agreement.
"Transactions" shall mean, collectively, (i) the Restructuring
------------
Transaction, (ii) the extensions of credit under the New PRIMESTAR Senior Credit
Facility, (iii) the incurrence of the Interim Loan hereunder on the Closing
Date, (iv) the transactions contemplated by the Assumption Agreements, (v) the
Existing Note Assumption and (vi) any other transaction on the Closing Date
contemplated in relation to the foregoing.
"Transition Services Agreement" shall mean the agreement dated as of
-----------------------------
December 4, 1996 between TCI and Borrower (as successor in interest to TSAT),
pursuant to which TCI provides to Borrower certain services and other benefits,
including certain administrative and other services that were provided to TSAT
by TCI prior to the Distribution, as amended and in effect from time to time.
"Trigger Date" see Section 6A.9.
------------
"TSAT" shall mean TCI Satellite Entertainment, Inc., a Delaware
----
corporation.
"TSAT Asset Transfer Agreement" shall mean the asset transfer
-----------------------------
agreement dated as of February 6, 1998 between TSAT and New PRIMESTAR, pursuant
to which TSAT will contribute certain assets to New PRIMESTAR, and New PRIMESTAR
will assume certain liabilities of TSAT.
"TSAT Merger" shall mean the merger of TSAT with and into New
-----------
PRIMESTAR.
"TSAT Merger Agreement" shall mean the agreement dated as of February
---------------------
6, 1998 between New PRIMESTAR and TSAT, pursuant to which the TSAT Merger may be
effected.
"TSAT Partners Holdings" means TSAT Partners Holdings, Inc., a
----------------------
Delaware corporation.
"TSAT Stockholders Agreement" shall mean the agreement dated as of
---------------------------
February 6, 1998 among New PRIMESTAR, TSAT and John C. Malone, regarding shares
of capital stock of TSAT.
"TSAT Tempo Agreement" shall mean the agreement dated as of February
--------------------
6, 1998 between New PRIMESTAR and TSAT, which provides, among other things, that
on the terms and conditions set forth
<PAGE>
-38-
therein, upon receipt of FCC approval of the transfer of control of Tempo to
Borrower, TSAT will (at Borrower's election) either sell all the issued and
outstanding shares of Equity Interests of Tempo to Borrower or liquidate Tempo
and sell all of its rights, title and interests in, to and under Tempo's assets
to Borrower, as such agreement is amended, supplemented, amended and restated or
otherwise modified from time to time.
"TWE" shall mean Time Warner Entertainment Company, L.P., a Delaware
---
limited partnership.
"TWE Asset Transfer Agreement" shall mean the asset transfer agreement
----------------------------
dated as of February 6, 1998, as amended, among TWE, certain of its affiliates
and New PRIMESTAR, pursuant to which TWE and such affiliates contributed certain
assets to New PRIMESTAR, and New PRIMESTAR assumed certain liabilities of TWE
and such affiliates.
"TWE Assumption" shall mean the assumption by TWE of certain
--------------
obligations of TWE-A/N under the TWE-A/N Senior Credit Agreement and the release
of TWE-A/N from such obligations.
"TWE Assumption Agreement" shall mean the assumption agreement dated
------------------------
as of the date hereof by and among TWE, TWE-A/N and each of the other parties to
the TWE-A/N Senior Credit Agreement, pursuant to which the TWE Assumption was
effected.
"TWE Partner" shall mean each Person who shall from time to time be
-----------
admitted as a partner of TWE in accordance with the TWE Partnership Agreement.
"TWE Partnership Agreement" shall mean the agreement of limited
-------------------------
partnership of TWE dated as of October 29, 1991 by and among Time Warner Inc., U
S West, Inc. and certain of their respective subsidiaries.
"TWE Senior Credit Agreement" shall mean the senior credit agreement
---------------------------
dated as of April 1, 1998, by and among TWE, the lenders party thereto and the
agents party thereto.
"TWE-A/N" shall mean Time Warner Entertainment-Advance/Newhouse
-------
Partnership, a New York general partnership.
"TWE-A/N Partner" shall mean TWE, Newhouse and each other Person who
---------------
shall from time to time be admitted as a partner of TWE-A/N in accordance with
the TWE-A/N Partnership Agreement.
"TWE-A/N Partnership Agreement" shall mean the partnership agreement
-----------------------------
dated as of September 9, 1994 by and between TWE and Newhouse.
"TWE-A/N Senior Credit Agreement" shall mean the senior credit
-------------------------------
agreement dated as of April 1, 1998, by and among TWE-A/N, the lenders party
thereto and the agents party thereto.
"TWE-Newhouse Voting Agreement" shall mean the voting agreement dated
-----------------------------
as of February 6, 1998 between TWE and Newhouse regarding shares of capital
stock of New PRIMESTAR.
"Unrestricted Subsidiary" shall mean
-----------------------
<PAGE>
-39-
(a) prior to the Conversion Date, any U.S. Subsidiary formed or
acquired after the Closing Date and designated by Borrower as an
"Unrestricted Subsidiary" and accepted as such by the Required Lenders, and
(b) on and after the Conversion Date, any Subsidiary of Borrower
designated as such pursuant to Section 6A.12. Any such designation
pursuant to clause (b) may be revoked by a resolution of the Board of
Directors of Borrower delivered to the Arranger, subject to the provisions
of Section 6A.12.
"Unutilized Net Cash Proceeds" see Section 6A.9.
----------------------------
"U.S. Dollars" shall mean the lawful money of the United States of
------------
America.
"U.S. Subsidiary" shall mean any Subsidiary that is incorporated or
---------------
organized under the laws of the United States or a state thereof.
"U S West Guarantee Agreement" shall mean the guarantee agreement
----------------------------
dated as of February 6, 1998 by U S West Media Group, Inc. in favor of each of
TSAT, New PRIMESTAR, TWE, Newhouse, Comcast, Cox and GE Americom relating to the
Merger and Contribution Agreement.
"Voting Equity Interests" shall mean 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" shall mean, 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" shall mean any Restricted
----------------------------------
Subsidiary all of the outstanding Voting Equity Interests (other than directors'
qualifying shares) of which are owned, directly or indirectly, by Borrower.
"wholly owned Subsidiary" shall mean, with respect to any Person, any
-----------------------
corporation, association or other entity of which 100% (other than directors'
qualifying shares) of the total voting power of shares of stock or other equity
interest entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other wholly owned Subsidiaries of that Person or a combination thereof.
1.2 Accounting Terms
----------------
For the purposes of this Agreement, all accounting terms not otherwise
defined herein shall have the meanings assigned to them in conformity with GAAP.
<PAGE>
-40-
1.3 Rules of Construction
---------------------
In each Loan Document, unless the context clearly requires otherwise
(or such Loan Document clearly provides otherwise), references to (i) the plural
include the singular, the singular the plural and the part the whole; (ii)
Persons includes their respective permitted successors and assigns or, in the
case of governmental Persons, Persons succeeding to the relevant functions of
such Persons; (iii) statutes and related regulations include any amendments of
same and any successor statutes and regulations; and (iv) time shall be a
reference to New York City time.
In each Loan Document, unless the context clearly requires otherwise
(or such Loan Document clearly provides otherwise), (i) "amend" shall mean
-----
"amend, amend and restate, supplement or modify"; and "amended" and "amendment"
------- ---------
shall have meanings correlative to the foregoing; (ii) in the computation of
periods of time from a specified date to a later specified date, "from" shall
----
mean "from and including"; "to" and "until" shall mean "to but excluding"; and
-- -----
"through" shall mean "to and including"; (iii) "hereof," "herein" and
------- ------ ------
"hereunder" (and similar terms) in this Agreement or any other Loan Document
---------
refer to this Agreement or such other Loan Document, as the case may be, as a
whole and not to any particular provision of this Agreement or such other Loan
Document; (iv) "including" (and similar terms) shall mean "including without
---------
limitation" (and similarly for similar terms); (v) "or" has the inclusive
--
meaning represented by the phrase "and/or"; (vi) "satisfactory to" any Agent or
---------------
Lender shall mean in form, scope and substance and on terms and conditions
satisfactory to such Agent or Lender; and (vii) references to "the date hereof"
---------------
shall mean the date first set forth above.
A. In this Agreement unless the context clearly requires otherwise,
any reference to (i) an Annex, Exhibit or Schedule is to an Annex, Exhibit or
Schedule, as the case may be, attached to this Agreement and constituting a part
hereof, and (ii) a Section or other subdivision is to a Section or such other
subdivision of this Agreement.
B. No doctrine of construction of ambiguities in agreements or
instruments against the interests of the party controlling the drafting thereof
shall apply to any Loan Document.
SECTION 2. AMOUNT AND TERMS OF LOAN COMMITMENT AND LOANS; NOTES
2.1 Initial Loan and Initial Note
-----------------------------
A. Initial Loan Commitment. Subject to the terms and conditions of
-----------------------
this Agreement and in reliance upon the representations and warranties of
Borrower herein set forth, the Lenders hereby severally agree to lend to
Borrower on the Closing Date $115,186,966.90 in the aggregate (the "Initial
-------
Loan") (which Initial Loan shall, when taken together with the amounts assumed
- ----
by Borrower pursuant to the New PRIMESTAR/Newhouse Assumption Agreement and the
New PRIMESTAR/TWE Assumption Agreement equal an aggregate amount of
$350,000,000.00), each such Lender committing severally and not jointly to lend
the amount set forth next to such Lender's name on the signature pages hereto.
The Lenders' commitments to make the Initial Loan to Borrower pursuant to this
Section 2.1A are herein called individually, an "Initial Loan Commitment" and
-----------------------
collectively, the "Initial Loan Commitments".
------------------------
B. Notice of Borrowing. When Borrower desires to borrow under this
-------------------
Section 2.1, it shall deliver to the Arranger a Notice of Borrowing no later
than 11:00 A.M., at least one Business Day in advance of the Closing Date or
such later date as shall be agreed to by the Arranger. The Notice of Borrowing
shall
<PAGE>
-41-
specify the applicable date of borrowing (which shall be a Business Day). Upon
receipt of such Notice of Borrowing, the Arranger shall promptly notify each
Lender of its share of the Initial Loan and the other matters covered by the
Notice of Borrowing.
C. Disbursement of Funds. (i) No later than 12:00 Noon on the
---------------------
Closing Date, each Lender will make available its pro rata share of the Initial
--- ----
Loan requested to be made on such date in the manner provided below. All
amounts shall be made available to the Arranger in U.S. Dollars and immediately
available funds at the Payment Office and the Arranger promptly will make
available to Borrower by depositing to its account at the Payment Office (or to
such other account or accounts or Persons as Borrower may designate) the
aggregate of the amounts so made available in the type of funds received.
Unless the Arranger shall have been notified by any Lender prior to the Closing
Date that such Lender does not intend to make available to the Arranger its
portion of the Initial Loan to be made on such date, the Arranger may assume
that such Lender has made such amount available to the Arranger on such date,
and the Arranger, in reliance upon such assumption, may (in its sole discretion
and without any obligation to do so) make available to Borrower a corresponding
amount. If such corresponding amount is not in fact made available to the
Arranger by such Lender and the Arranger has made same available to Borrower,
the Arranger shall be entitled to recover such corresponding amount from such
Lender. If such Lender does not pay such corresponding amount forthwith upon
the Arranger's demand therefor, the Arranger shall promptly notify Borrower, and
Borrower shall immediately pay such corresponding amount to the Arranger. The
Arranger shall also be entitled to recover from such Lender or Borrower, as the
case may be, interest on such corresponding amount in respect of each day from
the date such corresponding amount was made available by the Arranger to
Borrower to the date such corresponding amount is recovered by the Arranger, at
a rate per annum equal to (x) if paid by such Lender, the overnight Federal
--- -----
Funds Rate or (y) if paid by Borrower, the then applicable rate of interest on
the Loans.
(ii) Nothing herein shall be deemed to relieve any Lender from its
obligation to fulfill its Initial Loan Commitment hereunder or to prejudice any
rights which Borrower may have against any Lender as a result of any default by
such Lender hereunder.
D. Initial Notes. Borrower shall execute and deliver to each Lender
-------------
on the Closing Date which requests an Initial Note an Initial Note dated the
Closing Date substantially in the form of Exhibit A to evidence the portion of
---------
the Initial Loan made on such date by such Lender and with appropriate
insertions ("Original Initial Notes"). On each interest payment date prior to
----------------------
the Conversion Date on which Borrower elects to pay a PIK Interest Amount
pursuant to Section 2.3B (if and to the extent Borrower is permitted to pay a
PIK Interest Amount in lieu of cash), Borrower shall execute and deliver to each
Lender on such interest payment date a note dated such interest payment date
substantially in the form of Exhibit A in a principal amount equal to such
---------
Lender's pro rata portion of such PIK Interest Amount and with other appropriate
insertions (each a "Subsequent Initial Note" and, together with the Original
-----------------------
Initial Notes, the "Initial Notes"). A Subsequent Initial Note shall bear
-------------
interest at a rate per annum from the date of its issuance at the same rate per
--------- ---
annum borne by all Initial Notes.
- -----
E. Scheduled Payment of Initial Loan. Subject to Section 2.2,
---------------------------------
Borrower shall pay in full the outstanding amount of the Initial Loan and all
other Obligations owing hereunder no later than the Conversion Date.
F. Termination of Initial Loan Commitments. The Initial Loan
---------------------------------------
Commitments hereunder shall terminate on the earliest of (i) the date on which
Borrower, TWE-A/N, or any Partner informs the Lenders that it has decided not to
proceed with the Restructuring Transaction, (ii) the date on which any
Restruc-
<PAGE>
-42-
turing Agreement is terminated in accordance with its terms or (iii) April 15,
1998 if the Initial Loan is not made by such date. Borrower shall have the
right, without premium or penalty, to reduce or terminate the Initial Loan
Commitments of the Lenders hereunder at any time. Any such reduction or
termination shall be made pro rata among the Lenders based on their respective
--- ----
Initial Loan Commitments. The Initial Loan Commitments shall automatically and
permanently terminate in their entirety on the Closing Date immediately after
the making of the Initial Loan on such date.
G. Pro Rata Borrowings. The Initial Loan shall be made by the
-------------------
Lenders pro rata on the basis of their respective Initial Loan Commitments. It
--- ----
is understood that no Lender shall be responsible for any default by any other
Lender of its obligation to make its portion of the Initial Loan hereunder and
that each Lender shall be obligated to make its portion of the Initial Loan
hereunder regardless of the failure of any other Lender to fulfill its
commitments hereunder.
2.2 Term Loan and Term Note
-----------------------
A. Term Loan Commitment. Subject to the terms and conditions of this
--------------------
Agreement and in reliance upon the representations and warranties of Borrower
herein set forth, the Lenders hereby severally agree, on the Conversion Date, if
the Initial Loans have not been repaid, to convert the then outstanding
principal amount of the Initial Notes into a term loan (the "Term Loan"), such
---------
Term Loan to be in the aggregate principal amount of the then outstanding
principal amount of the Initial Notes. The Lenders' commitments to make the
Term Loan to Borrower pursuant to this Section 2.2A are herein called
individually, the "Term Loan Commitment" and collectively, the "Term Loan
-------------------- ---------
Commitments".
- -----------
B. Notice of Conversion/Borrowing. If Borrower has not repaid the
------------------------------
Initial Loan in full on or prior to the Conversion Date, then Borrower shall
convert the then outstanding principal amount of the Initial Notes into a Term
Loan under this Section 2.2. Borrower shall deliver to the Lenders a Notice of
Conversion no later than 11:00 A.M., at least two Business Days in advance of
the Conversion Date. The Notice of Conversion shall specify the principal
amount of the Initial Notes outstanding on the Conversion Date to be converted
into a Term Loan.
C. Making of Term Loan. Upon satisfaction or waiver of the
-------------------
conditions precedent specified in Section 3.2 hereof, each Lender shall extend
to Borrower the Term Loan to be issued on the Conversion Date by such Lender by
cancelling on its records a corresponding principal amount of the Initial Notes
held by such Lender, which corresponding principal amount of the Initial Notes
shall be satisfied by the conversion into a Term Loan in accordance with this
Section 2.2.
D. Maturity Date of Term Loan. The Term Loan shall mature and
--------------------------
Borrower shall pay in full the outstanding principal amount thereof and accrued
interest thereon on April 1, 2008 (the "Maturity Date").
-------------
E. Term Notes. Borrower, as borrower, shall execute and deliver to
----------
each Lender on the Conversion Date which requests a Term Note, a Term Note dated
the Conversion Date substantially in the form of Exhibit B to evidence the Term
---------
Loan made on such date, in the principal amount of the Initial Notes held by
such Lender on such date and with other appropriate insertions (collectively,
the "Original Term Notes"). On or after the Conversion Date, on each interest
-------------------
payment date on which Borrower elects to pay a PIK Interest Amount pursuant to
Section 2.3B (if and to the extent Borrower is permitted to pay a PIK Interest
Amount in lieu of cash), Borrower shall execute and deliver to each Lender on
such interest payment date a note dated such interest payment date substantially
in the form of Exhibit B in a principal amount equal to such
---------
<PAGE>
-43-
Lender's pro rata portion of such PIK Interest Amount and with other appropriate
--- ----
insertions (each a "Subsequent Term Note" and, together with the Original Term
--------------------
Notes, the "Term Notes"). A Subsequent Term Note shall bear interest at the same
---- -----
rate borne by all Term Notes.
2.3 Interest on the Loans
---------------------
A. Rate of Interest. (i) The Initial Loan shall bear interest on
----------------
the unpaid principal amount thereof from the Closing Date through maturity
(whether by prepayment, acceleration or otherwise) for each Monthly Period (or
part thereof) at a rate per annum equal to the lesser of (x) the greater of (1)
--- -----
the Applicable Rate for such period plus the Applicable Spread; or (2) 10% or
----
(y) the Maximum Interest Rate.
(ii) The Term Loan shall bear interest on the unpaid principal amount
thereof from the date made through maturity (whether by prepayment, acceleration
or otherwise) for each Six Month Period (or part thereof) at a rate per annum
--- -----
equal to the lesser of (x) the greater of (1) the Applicable Rate plus the
----
Applicable Spread or (2) 10% or (y) the Maximum Interest Rate. At any time
after the Conversion Date, at the request of any Lender, all or any portion of
the Term Loan owing to such Lender shall bear interest at a fixed rate per annum
--- -----
equal to the rate in effect as of the Notice Date, effective for such portion so
elected by such Lender from and after the first interest payment date with
respect to such Term Loan after such notice; provided, however, that no such
-------- -------
conversion shall be permitted in respect of amounts to be voluntarily prepaid
following receipt of a notice of prepayment pursuant to Section 2.5A. In order
to request the conversion of such portion of the Term Loan to a fixed rate loan,
the Lender shall notify the Arranger in writing (the date of such notice, the
"Notice Date") of its intention to do so at least five Business Days and not
-----------
greater than 10 Business Days prior to the next succeeding interest payment date
indicating the amount of the Term Loan for which it is requesting conversion to
a fixed rate Term Loan, and the Arranger shall so notify Borrower at least two
Business Days prior to such next succeeding interest payment date. Upon the
conversion of a portion of a Term Loan to a fixed rate Term Loan an appropriate
notation will be made on the Term Note and, on and after the first interest
payment date following the receipt by Borrower of a notice hereunder, such
portion of the Term Loan which is converted to a fixed rate Term Loan (and any
Exchange Note issued in respect thereof) shall bear interest at the rate in
effect on the applicable Notice Date until repaid.
B. Interest Payments. Interest shall be payable (i) with respect to
-----------------
the Initial Loan, monthly in arrears on the last day of each month beginning
April 30, 1998, and ending on the Conversion Date, upon any prepayment of the
Initial Loan (to the extent accrued on the amount being prepaid) and at maturity
of the Initial Loan in respect of any amounts paid on such date and not
converted to Term Loans and (ii) with respect to the Term Loan, quarterly in
arrears on each March 31, June 30, September 30 and December 31 of each year
(each, a "Quarterly Date"), commencing on the first of such dates to follow the
--------------
Conversion Date, upon any prepayment of the Term Loan (to the extent accrued on
the amount being prepaid) and at maturity of the Term Loan. If any Term Loan is
converted to a fixed rate Term Loan pursuant to Section 2.3A(ii), the interest
payment dates with respect thereto shall be each March 31 and September 30 of
each year, beginning with the first of such dates to occur after the first
Quarterly Date after the applicable Notice Date, and upon prepayment (to the
extent of the amount being prepaid) and at the maturity thereof.
If, on any interest payment date, the interest accrued for the period
prior to such interest payment date exceeds the amount that would have accrued
at the Maximum Cash Interest Rate, Borrower may pay all or a portion of the
interest payable in excess of the amount of interest that would be payable on
such date at the Maximum Cash Interest Rate by issuance of Subsequent Initial
Notes or Subsequent Term Notes, as the case may be, in an aggregate principal
amount equal to the amount of such interest being so paid in Subsequent Initial
Notes or Subsequent Term Notes (the "PIK Interest Amount"); provided, however,
------------------- -------- -------
that any ac-
<PAGE>
-44-
crued interest unpaid on the due date of the payment of principal of any Loan
shall be paid solely in cash on the principal so due.
C. Post-Maturity Interest. Any principal payments on the Loans not
-----------------------
paid when due and, to the extent permitted by applicable law, any interest
payment on the Loans not paid when due, in each case whether at stated maturity,
by acceleration or otherwise, shall thereafter bear interest payable upon demand
at a rate which is 2.00% per annum in excess of the rate of interest otherwise
--- -----
payable under this Agreement for the Loans.
D. Computation of Interest. Interest on the Loans shall be computed
-----------------------
on the basis of a 360-day year and the actual number of days elapsed in the
period during which it accrues (and with respect to any Term Loan converted to a
fixed rate Term Loan pursuant to Section 2.3A(ii), 12 months, each consisting of
30 days). In computing interest on the Loans, the date of the making of the
Loans shall be included and the date of payment shall be excluded; provided,
--------
however, that if a Loan is repaid on the same day on which it is made, one day's
- -------
interest shall be paid on that Loan.
2.4 Letter Agreements
-----------------
Borrower agrees to pay to the Agents and certain of their respective
Affiliates the fees set forth in the Commitment Letter and Fee Letter.
2.5 Prepayments; Mandatory Offers and Payments
------------------------------------------
A. Prepayments and Mandatory Offers.
--------------------------------
(i) Voluntary Prepayments of Loans.
------------------------------
(a) Voluntary Prepayments of Initial Loan. Borrower may, upon not
-------------------------------------
less than three Business Days' prior written or telephonic notice confirmed
in writing to the Arranger, at any time and from time to time, prepay the
Initial Loan without penalty or premium and in whole or in part in an
aggregate minimum amount of $500,000 and integral multiples of $100,000 in
excess of that amount.
Amounts of the Initial Loan so prepaid may not be reborrowed.
(b) Voluntary Prepayments of Term Loan.
----------------------------------
(1) Voluntary Prepayment. Except as provided in this Section
--------------------
2.5A(i)(b), Borrower may not prepay the Term Loan prior to April 1, 2003.
Borrower may, upon not less than 20 Business Days' prior written or
telephonic notice confirmed in writing to the Arranger at any time and from
time to time, on and after April 1, 2003, prepay the Term Loan, in whole or
in part, in an aggregate minimum amount of $500,000 and integral multiples
of $100,000 in excess of such amount, at 100% of the principal amount
thereof, plus a premium equal to, for each Lender, the interest rate in
effect on such Lender's portion of the Term Loan on the date notice of
prepayment is given multiplied by the following factor plus accrued and
unpaid interest thereon, if any, to the date of prepayment if prepaid
during the twelve-month period commencing on April 1 of the year set forth
below:
<PAGE>
-45-
<TABLE>
<CAPTION>
YEAR PREMIUM FACTOR
<S> <C>
2003.................................................. 1/2
2004.................................................. 1/3
2005.................................................. 1/6
2006 and thereafter................................... 0
</TABLE>
(2) Voluntary Prepayment upon Public Equity Offering or ASkyB
---------------------------------------------------------
Transaction. Prior to April 1, 2001, Borrower may, other than in any
-----------
circumstance resulting in a Change of Control, prepay up to an aggregate
principal amount of the Term Loan equal to 35% of the aggregate principal
amount of the Term Loan outstanding on the Conversion Date at a prepayment
price equal to the principal amount of the Term Loan so prepaid, plus a
premium equal to, for each Lender, the rate of interest in effect on such
Lender's portion of the Term Loan on the date notice of prepayment is
given, plus accrued and unpaid interest thereon, if any, to the prepayment
date with the net cash proceeds of (a) one or more Public Equity Offerings
of common equity of Borrower and/or (b) a sale or series of related sales
of Qualified Equity Interests of Borrower to Strategic Equity Investors, in
any such case resulting in gross cash proceeds to Borrower of at least
$100.0 million in the aggregate; provided, however, that at least an
-------- -------
aggregate principal amount of the Term Loan equal to 65% of the aggregate
principal amount of the Term Loan outstanding on the Conversion Date would
remain outstanding immediately after giving effect to any such prepayment
(excluding any Term Loan owned by Borrower or any of its Affiliates).
Notice of any such prepayment must be given within 60 days after date of
the last Public Equity Offering or sale of Qualified Equity Interests of
Borrower to Strategic Equity Investors resulting in gross cash proceeds to
Borrower, when aggregated with all prior Public Equity Offerings and sales
of Qualified Equity Interests of Borrower to Strategic Equity Investors, of
at least $100.0 million.
In addition, prior to April 1, 2001, Borrower may prepay up to an
aggregate principal amount of the Term Loan equal to 25% of the aggregate
principal amount of the Term Loan outstanding on the Conversion Date at a
prepayment price equal to the principal amount of the Term Loan so prepaid,
plus a premium equal to, for each Lender, the rate of interest in effect on
such Lender's portion of the Term Loan on the date notice of prepayment is
given, plus accrued and unpaid interest thereon, if any, to the prepayment
date upon the consummation of the ASkyB Transaction; provided, however,
-------- -------
that at least an aggregate principal amount of the Term Loan equal to 65%
of the aggregate principal amount of the Term Loan outstanding on the
Conversion Date would remain outstanding immediately after giving effect to
any such prepayment (excluding any Term Loan owned by Borrower or any of
its Affiliates). Notice of prepayment must be given within 60 days after
the consummation of the ASkyB Transaction.
(3) Pro Rata Prepayment Under Senior Subordinated Indenture. If any
-------------------------------------------------------
Exchange Notes are outstanding, any prepayment pursuant to Section
2.5A(i)(b)(1), or (2) shall be made pro rata with an optional redemption of
--- ----
Exchange Notes under the Senior Subordinated Indenture.
(4) No Reborrowing. Amounts of the Term Loan so prepaid may not be
--------------
reborrowed.
(ii) Mandatory Prepayments of Initial Loan.
-------------------------------------
(a) Mandatory Prepayments of Initial Loan from Asset Sales and
----------------------------------------------------------
Dispositions of Tempo Satellites. To the extent permitted by all other
--------------------------------
agreements governing any Indebtedness (including the
<PAGE>
-46-
New PRIMESTAR Senior Credit Facility and the Partnership Credit Facility)
and after application required to such Indebtedness (or if no such
Indebtedness or any commitment in respect thereof is then outstanding),
Borrower shall, or shall cause its Subsidiaries to, prepay the Initial Loan
(without penalty or premium) with (1) the Net Cash Proceeds received from
any Asset Sale in excess of $5.0 million since the Closing Date, and (2)
the net amount of cash received by Borrower or any of its Subsidiaries
pursuant to any agreement or arrangement upon the sale or other disposition
by TSAT of any Tempo Satellite in excess of $5.0 million since the Closing
Date, in each case on a date not later than five (5) Business Days after
the date of the application to all other Indebtedness so required as a
result of the consummation of such Asset Sale or sale or disposition of a
Tempo Satellite.
(b) Mandatory Prepayments of Initial Loan from Capital Contributions
----------------------------------------------------------------
or Issuances of Securities. Concurrently with the receipt by Borrower or
--------------------------
any Subsidiary of proceeds from the issuance of Securities or from any
capital contribution (other than proceeds received from Securities issued
by Borrower or any Subsidiary to Borrower or any Subsidiary and other than
to the extent no cash proceeds are received (such as where the
consideration provided to the seller in an acquisition is Securities and
other than proceeds of any capital contribution by Borrower or any
Restricted Subsidiaries to Borrower or any Restricted Subsidiaries and
other than capital contributions or payments contemplated by the
Restructuring Agreements as in effect on the Closing Date)), Borrower shall
prepay the Initial Loan in a principal amount equal to the lesser of the
cash proceeds thereof (net of expenses payable by Borrower in connection
with the issuance thereof and net of accrued interest due pursuant to
Section 2.5A(iii) as a result of such prepayment) or the aggregate
principal amount of the Initial Notes then outstanding.
(c) Notice. Borrower shall notify the Arranger of any prepayment to
------
be made pursuant to this Section 2.5A(ii) at least two Business Days prior
to such prepayment date (unless shorter notice is satisfactory to the
Required Lenders).
(iii) Borrower's Mandatory Prepayment Obligation; Application of
----------------------------------------------------------
Prepayments. All prepayments shall include payment of accrued interest on
-----------
the principal amount so prepaid and shall be applied to payment of interest
before application to principal.
(iv) Mandatory Offer to Purchase Initial Notes and Term Notes.
--------------------------------------------------------
(a) Mandatory Offer to Purchase Term Notes on Change of Control. (1)
-----------------------------------------------------------
Following the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), Borrower shall notify the
----------------------
Arranger and the Lenders of such occurrence in the manner prescribed by
this Agreement and shall, within 20 days after the Change of Control Date,
make an Offer to Purchase all Term Notes then outstanding at a purchase
price in cash equal to 101% of the aggregate principal amount thereof, plus
accrued and unpaid interest thereon, if any, to the Purchase Date.
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 this Agreement applicable to an Offer to Purchase made by
Borrower and purchases all Term Notes validly tendered and not withdrawn
under such Offer to Purchase. Each Lender shall be entitled to tender all
or any portion of the Term Notes owned by such Lender pursuant to the Offer
to Purchase, subject to the requirement that any portion of a Term Note
tendered must be tendered in an integral multiple of $1,000 principal
amount.
(2) On or prior to the Purchase Date specified in the Offer to
Purchase, Borrower shall (i) accept for payment all Term Notes or portions
thereof validly tendered pursuant to the Offer, (ii)
<PAGE>
-47-
deposit with the Arranger money sufficient to pay the Purchase Price of all
Term Notes or portions thereof so accepted and (iii) deliver or cause to be
delivered to the Arranger for cancellation all Term Notes so accepted
together with an Officers' Certificate stating the Term Notes or portions
thereof accepted for payment by Borrower. The Arranger shall promptly mail
or deliver to Lenders whose Term Notes are so accepted payment in an amount
equal to the Purchase Price for such Term Notes, and the Arranger shall
promptly authenticate and mail or deliver to each Lender a new Term Note or
Term Notes equal in principal amount to any unpurchased portion of the Term
Note surrendered as requested by the Lender. Any Term Note not accepted for
payment shall be promptly mailed or delivered by Borrower to the Lender
thereof. Borrower shall publicly announce the results of the Offer on or as
soon as practicable after the Purchase Date.
(b) Mandatory Offer to Purchase Initial Notes and Term Notes on Asset
-----------------------------------------------------------------
Sale. Borrower shall, within 20 days after each Trigger Date, make an
----
Offer to Purchase all outstanding Notes up to a maximum principal amount
(expressed as a multiple of $1,000) of Notes equal to the Note Portion of
Unutilized Net Cash Proceeds. Such Offer to Purchase shall be made at a
purchase price in cash equal to 100% of the principal amount 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 Borrower which ranks pari
----
passu with the Securities (including the Senior Subordinated Discount
-----
Notes) (the "Other Indebtedness") requires that an offer to purchase to be
------------------
made to repurchase such Other Indebtedness upon the consummation of any
Asset Sale, 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 is not
less than the Note Portion of Unutilized Net Cash Proceeds. With respect
to any Unutilized Net Cash Proceeds, Borrower shall make the Offer to
Purchase in respect thereof at the same time as the analogous offer to
purchase is made under the Senior Subordinated Indenture and pursuant to
any Other Indebtedness and the Purchase Date in respect thereof shall be
the same as the purchase date in respect thereof pursuant to the Senior
Subordinated Indenture and pursuant to any Other Indebtedness.
For purposes of this Section 2.5A(iv)(b), "Note Portion of Unutilized
--------------------------
Net Cash Proceeds" means 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 of all Notes
tendered pursuant to the Offer to Purchase related to such Unutilized Net
Cash Proceeds (the "Note Amount") and the denominator of which is the sum
-----------
of the Note 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
Section 2.5A(iv)(b), as among the Term Notes, to the extent that the
principal amount of the Notes tendered pursuant to such Offer to Purchase
exceeds the Note Portion of Unutilized Net Cash Proceeds with respect
thereto, such Notes shall be purchased pro rata based on the principal
--- ----
amount of such Term Notes tendered by each Lender.
<PAGE>
-48-
Each Lender shall be entitled to tender all or any portion of the
Notes owned by such Lender 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 Lenders as described above.
B. Manner and Time of Payment. All payments of principal and
--------------------------
interest and fees hereunder and under the Notes by Borrower shall be made
without defense, set-off or counterclaim and in same-day funds and delivered to
the Arranger, unless otherwise specified, not later than 12:00 Noon (New York
time) on the date due at the Payment Office for the account of the Lenders;
funds received by the Arranger after that time shall be deemed to have been paid
by Borrower on the next succeeding Business Day. Borrower hereby authorizes the
Arranger to charge its account with the Arranger in order to cause timely
payment to be made of all principal, interest and fees due hereunder (subject to
sufficient funds being available in its account for that purpose).
C. Payments on Non-Business Days. Whenever any payment to be made
-----------------------------
hereunder or under the Notes shall be stated to be due on a day which is not a
Business Day, the payment shall be due on the next succeeding Business Day and
such extension of time shall be included in the computation of the payment of
interest hereunder or under the Notes or of the commitment and other fees
hereunder, as the case may be.
D. Notation of Payment. Each Lender agrees that before disposing of
-------------------
any Note held by it, or any part thereof (other than by granting participations
therein), such Lender will make a notation thereon of all principal payments
previously made thereon and of the date to which interest thereon has been paid
and will notify Borrower of the name and address of the transferee of that Note;
provided, however, that the failure to make (or any error in the making of) such
- -------- -------
a notation or to notify Borrower of the name and address of such transferee
shall not limit or otherwise affect the obligation of Borrower hereunder or
under such Notes with respect to the Loans and payments of principal or interest
on any such Note.
2.6 Use of Proceeds
---------------
A. Initial Loan. The proceeds of the Initial Loan shall be applied
------------
by Borrower, together with borrowings under the New PRIMESTAR Senior Credit
Facility, to pay Transaction Costs and to consummate the Restructuring
Transaction and the Existing Facility Repayment.
B. Term Loan. The proceeds of the Term Loan shall be used to cancel
---------
any outstanding amount of Initial Notes converted to Term Notes on such date.
C. Margin Regulations. No portion of the proceeds of any borrowing
------------------
under this Agreement shall be used by Borrower in any manner to purchase or
carry Margin Stock within the meaning of the applicable requirements of
Regulation T, U, or X or any other regulation of the F.R.S. Board or to violate
the Exchange Act, in each case as in effect on the date or dates of such
borrowing and such use of proceeds.
2.7 Breakage; Illegality
--------------------
A. Breakage. Upon (i) failure to make any Loan upon receipt of
--------
Notice of Borrowing, (ii) failure to make any Conversion upon receipt of Notice
of Conversion, or (iii) any prepayment of principal of any Loan under Section
2.5 or acceleration of maturity of the Loans or Notes pursuant to Section 7 or
for any other reason, other than on the last day of the applicable Interest
Period therefor, Borrower shall pay upon demand by any Lender the amount
required to compensate such Lender for any losses, costs or expenses
<PAGE>
-49-
which it may reasonably incur as a result of such failure, payment or
acceleration, including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund or
maintain any Loan.
B. Illegality. Notwithstanding any other provision of this
----------
Agreement, if the introduction of or any change in any law or regulation or in
the interpretation of any law or regulation shall make it unlawful, or any
central bank or other Governmental Authority shall assert that it is unlawful,
for any Lender or its lending office to perform its obligations hereunder to
make available LIBOR Loans or to continue to fund or maintain LIBOR Loans
hereunder, then, on notice thereof and demand therefor by such Lender to
Borrower through the Arranger, such Lender's Loans will automatically, upon such
demand, Convert into an Alternate Base Rate Loan until the Arranger shall notify
Borrower that such Lender has determined that the circumstances causing such
suspension no longer exist.
SECTION 3. CONDITIONS TO LOANS
3.1 Conditions to Initial Loan
--------------------------
The effectiveness of the Loan Documents and the obligations of the
Lenders to make the Initial Loan are subject to prior or concurrent satisfaction
of each of the following conditions:
A. Corporate Proceedings, Documents, Resolutions, Etc. On or before
--------------------------------------------------
the Closing Date, all corporate and other proceedings taken or to be taken by
each Loan Party, each Partner and each Affiliate of each Partner in connection
with the Transactions and all documents incidental thereto not previously found
acceptable by the Required Lenders and Agents shall be reasonably satisfactory
in form and substance to the Required Lenders and the Agents, and the Agents
shall have received on behalf of the Lenders the following items, each of which
shall be in form and substance reasonably satisfactory to the Required Lenders
and the Agents and, unless otherwise noted, dated the Closing Date:
1. Charter. A certified copy of each Loan Party's charter, together
-------
with a certificate of status, compliance, good standing or the like with
respect to each Loan Party issued by the appropriate government officials
of the jurisdiction of its organization, each to be dated a recent date
prior to the Closing Date;
2. Bylaws. A copy of each Loan Party's bylaws, certified as of the
------
Closing Date by its Secretary or one of its Assistant Secretaries;
3. Resolutions. Resolutions of the Board of Directors of each Loan
-----------
Party, approving and authorizing the execution, delivery and performance of
each Loan Document to which it is a party, and any other documents,
instruments and certificates required to be executed by such Loan Party in
connection herewith and with the Transactions and approving and authorizing
the execution, delivery and payment of the Notes, each such resolution
certified as of the Closing Date by its Secretary or one of its Assistant
Secretaries as being in full force and effect without modification or
amendment;
4. Incumbency Certificates. Signature and incumbency certificates of
-----------------------
each officer of any Loan Party executing any Loan Document;
<PAGE>
-50-
5. Executed Agreement and Notes. Executed copies of this Agreement
----------------------------
and, for each Lender that requests an Initial Note prior to the Closing
Date, the Initial Notes substantially in the form of Exhibit A executed in
---------
accordance with Section 2.1D, drawn to the order of the Lenders and with
appropriate insertions;
6. Notice of Borrowing. An originally executed Notice of Borrowing
-------------------
substantially in the form of Exhibit D, signed by the President or a Vice
---------
President of Borrower on behalf of Borrower;
7. Legal Opinions. Originally executed copies of one or more
--------------
favorable written opinions of Sherman and Howard, special counsel for the
Loan Parties, substantially in the form of Exhibit H and addressed to the
---------
Agents on behalf of the Lenders;
8. Restructuring Agreements and Closing Documents. (i) Executed or
----------------------------------------------
conformed copies of each Restructuring Agreement and any amendments thereto
made on or prior to the Closing Date, (ii) an Officers' Certificate from
Borrower stating that each Restructuring Agreement is on the Closing Date
in full force and effect with respect to Borrower and, to Borrower's
knowledge, with respect to each other party thereto and no material term or
condition thereof has been amended, modified or waived from the form most
recently provided to the Lenders and the Agents a reasonable time prior to
the Closing Date except with the prior written consent of the Required
Lenders and the Agents, (iii) an Officers' Certificate from Borrower
stating that Borrower and each of its Subsidiaries party thereto has
performed or complied with all agreements and conditions contained in each
Restructuring Agreement and any agreements or documents referred to therein
required to be performed or complied with by such party on or before the
Closing Date, and neither Borrower nor any of its Subsidiaries is in
default in the performance or compliance with any of the terms or
provisions thereof, and (iv) all closing documents relating to the
Restructuring Transaction and all such counterpart originals or certified
copies of such documents, instruments, certificates and opinions as the
Required Lenders or the Agents may reasonably request;
9. New PRIMESTAR Senior Credit Facility. (i) Executed or conformed
------------------------------------
copies of the New PRIMESTAR Senior Credit Facility and any amendments
thereto made on or prior to the Closing Date, (ii) an Officers' Certificate
from Borrower stating that the New PRIMESTAR Senior Credit Facility is in
full force and effect on the Closing Date and no material term or condition
thereof has been amended, modified or waived from the form most recently
provided to the Lenders and the Agents a reasonable time prior to the
Closing Date except with the prior written consent of the Required Lenders
and the Agents, (iii) an Officers' Certificate from Borrower stating that
Borrower and each of its Subsidiaries party thereto has performed or
complied with all agreements and conditions contained in the New PRIMESTAR
Senior Credit Facility and any agreements or documents referred to therein
required to be performed or complied with by such party on or before the
Closing Date, and neither Borrower nor any of its Subsidiaries is in
default in the performance or compliance with any of the terms or
provisions thereof and (iv) all closing documents relating to the New
PRIMESTAR Senior Credit Facility and all such counterpart originals or
certified copies of such documents, instruments, certificates and opinions
as the Required Lenders or the Agents may reasonably request;
10. Public Documents. Copies of all documents and materials filed
----------------
publicly by Borrower and TSAT in connection with the Restructuring
Transaction and the other Transactions;
<PAGE>
-51-
11. Pro Forma Balance Sheet. A primary condensed pro forma combined
-----------------------
balance sheet which meets the requirements of Regulation S-X under the
Securities Act of Borrower and its Subsidiaries dated as of September 30,
1997, immediately after giving effect to the Transactions and the
incurrence of all obligations contemplated herein, which pro forma combined
balance sheet shall be in form and substance satisfactory to the Agents and
the Required Lenders and consistent in all material respects with the
proposed legal and capital structure (both debt and equity) and the
forecast previously provided to the Lenders, which shall be satisfactory in
all respects to the Agents.
12. Solvency Certificate. An Officers' Certificate from the chief
--------------------
financial officer of Borrower, in form and substance satisfactory to the
Arranger, together with such other evidence reasonably requested by the
Agents or the Lenders with respect to the solvency of Borrower immediately
after giving effect to the Transactions and the other transactions
contemplated hereby;
13. Officers' Certificates. An Officers' Certificate from Borrower
----------------------
in form and substance satisfactory to the Arranger stating that (i) the
representations and warranties in Section 4 are true, correct and complete
on and as of the Closing Date to the same extent as though made on and as
of that date (or if such representation or warranty is expressly stated to
have been made as of a specific date, as of such specific date), (ii) all
conditions to the consummation of the Restructuring Transaction have been
satisfied (or provisions satisfactory to the Agents have been made for the
satisfaction thereof) substantially on the terms set forth in the
Restructuring Agreements and have not been waived or amended without the
prior written consent of the Required Lenders and the Agents, and (iii) all
conditions precedent set forth herein to the making of the Initial Loan
have been satisfied (to the best knowledge of Borrower with respect to
Section 3.1K to the extent relating to Persons other than Borrower and
TSAT);
14. Other Documents. Executed or conformed copies of all other
---------------
material agreements executed in connection with the Transactions including
all such other legal opinions, corporate documents and other documents
and/or certificates as the Lenders or the Agents may reasonably request.
B. New PRIMESTAR Senior Credit Facility. The New PRIMESTAR Senior
------------------------------------
Credit Facility shall have been entered into by each of the parties thereto and
shall be in full force and effect with commitments thereunder for not less than
$650.0 million, of which not less than $100 million shall be drawn on the
Closing Date to effect the Restructuring Transaction, and the Required Lenders
and the Agents shall be satisfied (i) with all terms and conditions of the New
PRIMESTAR Senior Credit Facility and all other agreements to be entered into in
connection therewith, and (ii) that no term thereof has been amended, modified
or waived since the draft most recently delivered to the Lenders a reasonable
period of time prior to the Closing Date. All conditions precedent to the
extensions of credit under the New PRIMESTAR Senior Credit Facility shall have
been satisfied (or provisions satisfactory to the Agents have been made for the
satisfaction thereof) (without waiver or amendment thereof) other than the
consummation of the Restructuring Transaction and delivery of opinion letters
(but which shall have been negotiated), and the Agents and the Lenders shall
have received satisfactory evidence of the same.
C. Assumption Agreements. The Assumption Agreements shall each have
---------------------
been duly authorized, executed and delivered by each of the parties thereto and
shall be in full force and effect. All conditions precedent to the assignments
and releases under each Assumption Agreement shall have been satisfied.
D. Restructuring Agreements. Each Restructuring Agreement and other
------------------------
agreement (including debt assumption agreements) to be entered into in
connection with the Transactions and the TSAT
<PAGE>
-52-
Merger shall have been entered into by each of the parties thereto and shall be
in full force and effect, and the Required Lenders and the Agents shall be
satisfied (a) with all the terms and conditions of each Restructuring Agreement
and all other agreements to be entered into in connection therewith, and (b)
that no term thereof has been amended, modified or waived since the draft most
recently delivered to and approved by the Lenders, a reasonable period of time
prior to the Closing Date. All conditions precedent to the consummation of the
Restructuring Transaction under each Restructuring Agreement shall have been
satisfied (or provisions satisfactory to the Agents have been made for the
satisfaction thereof) (without waiver or amendment thereof) and delivery of
opinion letters (but which shall have been negotiated) the Agents and the
Lenders shall have received satisfactory evidence of the same.
E. No Other Debt. After giving effect to the Transactions and the
-------------
other transactions contemplated hereby, Borrower and its Subsidiaries shall have
outstanding no Indebtedness or Preferred Stock (or guarantee or other contingent
obligation in respect thereof) other than (a) the loans and other obligations
under the New PRIMESTAR Senior Credit Facility and the Partnership Credit
Facility, (b) the Existing Notes, (c) the Initial Loan, and (d) such other
Indebtedness and contingent obligations (including the Reimbursement Agreements)
as are on terms and conditions and in amounts reasonably acceptable to the
Required Lenders, and are set forth in Schedule 3.1E, and in no event are
-------------
materially different from the Indebtedness and contingent obligations of New
PRIMESTAR to be in place upon consummation of the Transactions as described in
the pro forma financial statements included in the Proxy.
--- -----
F. Consummation of Transactions. Each of the Transactions (other
----------------------------
than extensions of credit under this Agreement) shall have been consummated
prior to, or shall be consummated contemporaneously with, the making of the
Initial Loans in all material respects in accordance with the terms hereof and
in accordance with terms of documentation (without the waiver of any material
condition unless consented to by the Required Lenders) that are in form and
substance reasonably satisfactory to the Lenders. The Existing Facility
Repayment shall have been consummated prior to, or shall be consummated
contemporaneously with the making of the Initial Loan in accordance with the
terms of documentation (without the waiver of any material condition unless
consented to by the Required Lenders) that is in form and substance reasonably
satisfactory to the Lenders. All security interests relating to the Partnership
Working Capital Facility shall have been released (with appropriate evidence
thereof provided to the Arranger).
G. Approvals. On or before the Closing Date all requisite
---------
Governmental Authorities and third parties shall have approved or consented to
the Transactions and the other transactions contemplated hereby and by the
Restructuring Agreements (other than the TSAT Merger and the TSAT Tempo
Agreement) and the New PRIMESTAR Senior Credit Facility to the extent required
without the imposition of any material adverse condition, and such approval or
consent shall be in full force and effect (and the Agents shall have received
satisfactory evidence of the same); there shall be no governmental or judicial
action, actual or threatened, that has or could reasonably be expected to have
the effect of restraining, preventing or imposing materially adverse conditions
on any of the Transactions or the other transactions contemplated hereby or by
any Restructuring Agreement or the New PRIMESTAR Senior Credit Facility and with
respect to any pending governmental or judicial action, all appeal periods have
expired. Each of the transactions contemplated by the Restructuring Agreements
that the shareholders of TSAT were solicited by the Proxy to approve shall have
been approved by holders of not less than 66-2/3% of the outstanding voting
power of the Voting Equity Interests of TSAT entitled to vote on the
Restructuring Transaction (and the Agents shall have received satisfactory
evidence of the same from TSAT).
H. No Default Under This Agreement and Other Agreements. No Event of
----------------------------------------------------
Default or Potential Event of Default shall have occurred and be continuing or
would result from the Initial Loan or the No-
<PAGE>
-53-
tice of Borrowing or the Transactions, or from the application of the proceeds
therefrom under this Agreement, the New PRIMESTAR Senior Credit Facility or the
Existing Notes or Existing Indebtedness; all conditions to borrowing under the
New PRIMESTAR Senior Credit Facility shall have been satisfied (or provisions
have been made for satisfaction thereof). No party to any Restructuring
Agreement shall be in breach or default of any material provision of such
Restructuring Agreement.
I. No Legal Bar. The Initial Loan and the use of proceeds thereof
------------
shall not contravene, violate or conflict with, nor involve any Lender in a
violation of, any law, rule, injunction, or regulation or determination of any
Governmental Authority.
J. No Material Adverse Change. There shall not have occurred or
--------------------------
become known in the judgment of the Lenders any condition or event that has
resulted in a Material Adverse Change or that could reasonably be expected to
result in any Material Adverse Change with respect to Borrower, TSAT, Primestar
Partnership or the business (or related properties, assets or affiliates) of any
Partner relating to the distribution of the PRIMESTAR(R) programming service
(each, a "Partner Business"), together with their respective subsidiaries taken
----------------
as a whole, as the case may be (both before and after giving effect to the
Transactions) since December 31, 1996.
K. No Dividends. There shall not have been any dividend or
------------
distribution of any kind declared or paid by Borrower, TSAT or any Partner
Business on its Equity Interests since the date of the latest financial
statements of such entity, respectively, included in the Proxy (other than any
assets (including cash) of any Partner Business not required to be contributed
pursuant to the Restructuring Agreements).
L. No Violation of Law. The Lenders and their counsel shall be
-------------------
satisfied that the consummation of the Transactions and the related financings,
including the funding of the Initial Loan hereunder and the transactions
contemplated by the New PRIMESTAR Senior Credit Facility, shall be in compliance
with all applicable laws, rules and regulations of all Governmental Authorities.
There shall not have been any statute, rule, regulation, injunction or order
applicable to the Transactions or the transactions contemplated by the New
PRIMESTAR Senior Credit Facility, promulgated, enacted, entered or enforced by
any Governmental Authority, nor shall there be pending any Proceeding involving
a substantial likelihood of an order, decree, ruling or finding that would
prohibit, restrict, delay, impose adverse or burdensome restrictions upon or
otherwise materially adversely affect terms and conditions of or the
consummation of the Restructuring Transaction or the transactions contemplated
by the New PRIMESTAR Senior Credit Facility.
M. Fees and Expenses. All accrued fees and expenses (including the
-----------------
reasonable fees and expenses of Cahill Gordon & Reindel, legal counsel to the
Arranger and Lenders) of the Agents and Lenders in connection herewith and with
the Engagement Letter, the Fee Letter and the Commitment Letter shall have been
paid or provisions have been made for payment thereof on the Closing Date.
N. Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties made by Borrower in Section 4, and by each Loan Party in each of
the other Loan Documents to which it is a party, shall be true, complete and
correct on and as of the Closing Date with the same force and effect as if made
on and as of such date (or, if any such representation or warranty is expressly
stated to have been made as of a specific date, as of such specific date).
O. Subordination Arrangements. The Required Lenders shall be
--------------------------
satisfied with all terms and conditions (and the documentation therefor) of the
Subordination Arrangements.
<PAGE>
-54-
3.2 Conditions to Term Loan
-----------------------
The obligation of the Lenders to make the Term Loan on the Conversion
Date is subject to the prior or concurrent satisfaction or waiver of the
following conditions precedent:
A. Notice of Conversion. The Agents shall have received in
--------------------
accordance with the provisions of Section 2.2B an originally executed Notice of
Conversion.
B. No Bankruptcy. None of Borrower or any of its Material
-------------
Subsidiaries shall be subject to a Bankruptcy Order or a bankruptcy or other
insolvency proceeding and no Event of Default or Potential Event of Default
shall have occurred under Section 7.6, 7.7 or 7.9.
C. No Payment Default. No Event of Default or Potential Event of
------------------
Default (whether matured or not) shall have occurred under Section 7.1.
D. No Acceleration of New PRIMESTAR Senior Credit Facility or
----------------------------------------------------------
Existing Notes. No Event of Default shall have occurred under Section 7.2 with
- --------------
respect to the New PRIMESTAR Senior Credit Facility or the Existing Notes.
E. Officers' Certificate. On the Conversion Date, the Agents shall
---------------------
have received an Officers' Certificate from Borrower dated the Conversion Date
and satisfactory in form and substance to the Agents, to the effect that the
conditions in this Section 3.2 are satisfied on and as of the Conversion Date.
F. Term Notes. Borrower shall have executed and delivered to the
----------
Agents on the Conversion Date for delivery to the Lenders Term Notes dated the
Conversion Date substantially in the form of Exhibit B to evidence the Term
---------
Loan, in the principal amount of (which principal amount shall be the aggregate
principal amount of the Initial Loan outstanding on the Conversion Date) the
Term Loan and with other appropriate insertions.
G. Fees and Expenses. All accrued fees and expenses owing to the
-----------------
Agents and the Lenders (including the reasonable fees and expenses of a law firm
serving as counsel to the Agents and Lenders) shall have been paid.
H. Margin Rules. The making of the Term Loan shall not violate
------------
Regulation T, U or X or any other regulation of the F.R.S. Board.
SECTION 4. REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to enter into this Agreement and to
make the Loans, Borrower represents and warrants to the Lenders that, at the
time of execution hereof and immediately after giving effect to the consummation
of the Transactions and on the Conversion Date, the following statements are
true, correct and complete:
4.1 Organization, Etc.
-----------------
Borrower and each of its Subsidiaries is a corporation validly
organized and existing and in good standing under the laws of the state or
jurisdiction of its incorporation, is duly qualified to do business
<PAGE>
-55-
and is in good standing as a foreign corporation in each jurisdiction where the
nature of its business requires such qualification, and has full power and
authority and holds all requisite governmental licenses, permits and other
approvals to enter into and perform its Obligations under this Agreement, the
Notes, each other Credit Document and each Restructuring Agreement to which it
is a party and to own and hold under lease its property and to conduct its
business substantially as currently conducted by it.
4.2 Due Authorization, Non-Contravention, Etc.
-----------------------------------------
A. General. The execution, delivery and performance by Borrower of
-------
this Agreement, the Notes, each other Credit Document and each Restructuring
Agreement executed or to be executed by it and the execution, delivery and
performance by each Guarantor of each Credit Document and Restructuring
Agreement executed or to be executed by it are in each case within each such
Person's corporate powers, have been duly authorized by all necessary corporate
action, and do not
(a) contravene any such Person's Organic Documents;
(b) contravene any Contractual Obligation binding on or affecting any
such Person;
(c) contravene any Governmental Approval or Governmental Rule binding
on or affecting any such Person; or
(d) result in, or require the creation or imposition of, any Lien on
any of such Person's Properties (except as expressly permitted by this
Agreement).
B. Subordinated Debt. The making of the Credit Extensions, and the
-----------------
acceptance thereof by Borrower, do not violate the provisions of any
Subordinated Debt Document or of the Existing Indentures.
4.3 Government Approval, Regulation, Etc.
------------------------------------
Except as disclosed in Schedule 4.3 ("Approvals"), no authorization or
------------
approval or other action by, and no notice to or filing with, any Governmental
Authority or other Person (other than those that have been, or on the Closing
Date will be, duly obtained or made and which are, or on the Closing Date will
be, in full force and effect) is required for the due execution, delivery or
performance by Borrower of this Agreement or the Notes or by Borrower or any
Guarantor of any other Credit Document or Restructuring Agreement to which it is
a party. Neither Borrower nor any of its Subsidiaries is an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
or a "holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or a "subsidiary company" of a "holding
company", within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
4.4 Validity, Etc.
-------------
This Agreement constitutes, and the Notes, each other Credit Document
and each Restructuring Agreement executed by Borrower or any of its Subsidiaries
will, on the due execution and delivery thereof, constitute, the legal, valid
and binding obligations of Borrower or such Subsidiary, enforceable against
Borrower or such Subsidiary in accordance with their respective terms; and each
Credit Document and Restructuring Agreement executed by each Guarantor will, on
the due execution and delivery thereof by such Guarantor, constitute the legal,
valid and binding obligation of such Guarantor enforceable against such
Guar-
<PAGE>
-56-
antor in accordance with its terms (except, in any case above, as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally and by
principles of equity).
4.5 Financial Information
---------------------
The financial statements of Borrower and its Subsidiaries heretofore
furnished to the Agents and each Lender have been prepared in accordance with
GAAP. All balance sheets, all statements of operations, shareholders' equity
and cash flows and all other financial information of each of Borrower and its
Subsidiaries furnished pursuant to Section 5.1 have been and will for periods
following the Closing Date be prepared in accordance with GAAP consistently
applied, and do or will present fairly the consolidated financial position of
the corporations covered thereby as at the date thereof and the results of their
operations for the periods then ended, except that quarterly financial
statements need not include footnote disclosure and may be subject to ordinary
year-end adjustment.
4.6 No Material Adverse Change
--------------------------
There has been no Material Adverse Change since December 31, 1996.
4.7 Litigation, Labor Controversies, Etc.
------------------------------------
Except as disclosed in Schedule 4.7 ("Litigation"), there is no
------------
pending or, to the knowledge of Borrower, threatened litigation, action,
proceeding, or labor controversy affecting Borrower or any of its Subsidiaries,
or any of their respective Properties, businesses, assets or revenues, which (a)
could have a Material Adverse Effect or (b) could adversely affect the legality,
validity or enforceability of this Agreement, the Notes, any other Credit
Document or any Restructuring Agreement.
4.8 Compliance with Laws
--------------------
Borrower and its Subsidiaries have complied in all material respects
with all applicable Governmental Approvals and Governmental Rules of any
Governmental Authority having jurisdiction over the conduct of its businesses or
the ownership of its properties.
4.9 Subsidiaries
------------
Borrower has no Subsidiaries, except those Subsidiaries
(a) which are identified in Schedule 4.9 ("Existing Subsidiaries") of
------------
the Disclosure Schedule; or
(b) which are permitted to have been organized or acquired in
accordance with Section 6.5 or Section 6.10.
4.10 Ownership of Properties
-----------------------
Except as permitted pursuant to Section 4.14 or Section 6.3, Borrower
and each of its Subsidiaries owns (a) in the case of owned real property, good
and marketable fee title to, and (b) in the case of owned personal property,
good and valid title to, or, in the case of leased real or personal property,
valid and
<PAGE>
-57-
enforceable leasehold interests (as the case may be) in, all of its properties
and assets, real and personal, tangible and intangible, of any nature
whatsoever, free and clear in each case of all Liens or claims, except for Liens
permitted pursuant to Section 6.3.
4.11 Taxes
-----
Borrower and each of its Subsidiaries has filed all tax returns and
reports required by law to have been filed by it and has paid all taxes and
governmental charges thereby shown to be due and owing, except any such taxes or
charges which are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall have
been set aside on its books.
4.12 Pension and Welfare Plans
-------------------------
During the twelve-consecutive-month period prior to the date of the
execution and delivery of this Agreement and prior to the date of any extension
of credit hereunder, no steps have been taken to terminate any Plan (other than
a standard termination under Section 4041(b) of ERISA), and no contribution
failure has occurred with respect to any Plan sufficient to give rise to a Lien
under Section 302(f) of ERISA. No condition exists or event or transaction has
occurred with respect to any Plan which might result in the incurrence by
Borrower or any member of the Controlled Group of any material liability, fine
or penalty.
4.13 Environmental Matters
---------------------
Except as set forth in Schedule 4.13 ("Environmental Matters")
-------------
(a) all facilities and property (including underlying groundwater)
owned or leased by Borrower or any of its Subsidiaries have been, and
continue to be, owned or leased by Borrower and its Subsidiaries in
material compliance with all Environmental Laws;
(b) there are no pending or threatened and, to the best of Borrower's
knowledge, there have been not past
(i) claims, complaints, notices or requests for information
received by Borrower or any of its Subsidiaries with respect to any
alleged violation of any Environmental Law, or
(ii) complaints, notices or inquiries to Borrower or any of its
Subsidiaries regarding potential liability under any Environmental
Law;
(c) there have been no Releases of Hazardous Materials at, on or
under any property now or previously owned or leased by Borrower or any of
its Subsidiaries that, singly or in the aggregate, have, or could
reasonably be expected to have, a Material Adverse Effect;
(d) Borrower and its Subsidiaries have been issued and are in
material compliance with all permits, certificates, approvals, licenses and
other authorizations relating to environmental matters and necessary or
desirable for their businesses;
(e) no property now or previously owned or leased by Borrower or any
of its Subsidiaries is listed or proposed for listing on the National
Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state
list of sites requiring investigation or clean-up;
<PAGE>
-58-
(f) there are no underground storage tanks, active or abandoned,
including petroleum storage tanks, on or under any property now or
previously owned or leased by Borrower or any of its Subsidiaries that,
singly or in the aggregate, have, or could reasonably be expected to have,
a Material Adverse Effect;
(g) neither Borrower nor any Subsidiary of Borrower has directly
transported or directly arranged for the transportation of any Hazardous
Material to any location which is listed or proposed for listing on the
National Priorities List pursuant to CERCLA, on the CERCLIS or on any
similar state list or which is the subject of federal, state or local
enforcement actions or other investigations which may lead to material
claims against Borrower or such Subsidiary thereof for any remedial work,
damage to natural resources or personal injury, including claims under
CERCLA;
(h) there are no polychlorinated biphenyls or friable asbestos
present at any property now or previously owned or leased by Borrower or
any Subsidiary of Borrower that, singly or in the aggregate, have, or could
reasonably be expected to have, a Material Adverse Effect; and
(i) no conditions exist at, on or under any property now or
previously owned or leased by Borrower which, with the passage of time, or
the giving of notice or both, would give rise to liability under any
Environmental Law.
4.14 Intellectual Property
---------------------
Each of Borrower and its Subsidiaries owns and possesses or licenses
(as the case may be) all such patents, patent rights, trademarks, trademark
rights, trade names, trade name rights, service marks, service mark rights and
copyrights necessary for the conduct of the businesses of Borrower and its
Subsidiaries as now conducted without, individually or in the aggregate, any
infringement upon rights of other Persons, in each case except as could not
reasonably be expected to result in a Material Adverse Effect, and there is no
individual patent, patent right, trademark, trademark right, trade name, trade
name right, service mark, service mark right or copyright the loss of which
could reasonably be expected to have a Material Adverse Effect, except as may be
disclosed in Schedule 4.14 ("Intellectual Property").
-------------
4.15 Regulations T, U and X
----------------------
Neither Borrower nor any of its Subsidiaries is engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock, and no proceeds of any Loan will be used to purchase or carry margin
stock or otherwise for a purpose which violates, or would be inconsistent with,
F.R.S. Board Regulation T, U or X. Terms for which meanings are provided in
F.R.S. Board Regulation T, U or X or any regulations substituted therefor, as
from time to time in effect, are used in this Section with such meanings.
4.16 Accuracy of Information
-----------------------
None of the factual information heretofore or contemporaneously
furnished by or on behalf of Borrower in writing to any Agent, or any Lender for
purposes of or in connection with this Agreement or any transaction contemplated
hereby (true and complete copies of which were furnished to the Agents and each
Lender in connection with its execution and delivery hereof), contains any
untrue statement of a material fact on the date as of which such information is
dated or certified, and none of the other factual information hereafter
furnished in connection with this Agreement or any other Credit Document or any
Restructuring Agreement by Borrower or any Guarantor to any Agent or any Lender
will contain any untrue statement of a mate-
<PAGE>
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rial fact on the date as of which such information is dated or certified and, as
of the date of the execution and delivery of this Agreement by the Agents and
each Lender, the information delivered prior to the date of execution and
delivery of this Agreement (unless such information specifically relates to a
prior date) does not, and the factual information hereafter furnished shall not
on the date as of which such information is dated or certified, omit to state
any material fact necessary to make any information not misleading under the
circumstances.
SECTION 5. AFFIRMATIVE COVENANTS (INITIAL LOAN AND TERM LOAN)
Borrower covenants and agrees that, until the Loans and the Notes and
all other amounts due under this Agreement have been indefeasibly paid in full
it shall, and shall cause each of its Subsidiaries to, fully and timely perform
all covenants in this Section 5 required to be performed by any of them.
5.1 Financial Information, Reports, Notices, Etc.
--------------------------------------------
Borrower will furnish, or will cause to be furnished, to each Lender
and each Agent copies of the following financial statements, reports, notices
and information:
A. as soon as available and in any event within 45 days (and 60 days,
in the case of Borrower and its Restricted Subsidiaries) after the end of each
of the first three Fiscal Quarters of each Fiscal Year of Borrower, a
consolidated balance sheet of Borrower and its Restricted Subsidiaries and a
consolidated balance sheet of Borrower and its Subsidiaries, in each case as of
the end of such Fiscal Quarter and consolidated statements of earnings and cash
flows of Borrower and its Restricted Subsidiaries and consolidated statements of
earnings and cash flows of Borrower and its Subsidiaries and consolidated
statements of earnings and cash flows of Borrower and its Subsidiaries, in each
case of the period commencing at the end of the previous Fiscal Year and ending
with the end of such Fiscal Quarter and a profit and loss statement for such
Fiscal Quarter, certified as complete and correct by the chief financial
Authorized Officer of Borrower;
B. as soon as available and in any event within 90 days (and 105
days, in the case of Borrower and its Restricted Subsidiaries) after the end of
each Fiscal Year of Borrower, a copy of the annual audited financial statements
for such Fiscal Year for Borrower and its consolidated Subsidiaries, including
therein a consolidated balance sheet of Borrower and its Restricted Subsidiaries
as of the end of such Fiscal Year and consolidated statements of earnings and
cash flows of Borrower and its Restricted Subsidiaries for such Fiscal Year, in
each case as audited (without any Impermissible Qualification) by KPMG Peat
Marwick or independent public accountants of national standing acceptable to the
Agents;
C. Borrower shall deliver to the Lenders within 45 days after the end
of each of the first three Fiscal Quarters of Borrower and within 90 days after
the close of each Fiscal Year a certificate signed by the principal executive
officer, principal financial officer or principal accounting officer stating
that a review of the activities of Borrower has been made under the supervision
of the signing officers with a view to determining whether a Potential Event of
Default or Event of Default has occurred and whether or not the signers know of
any Potential Event of Default or Event of Default by Borrower that occurred
during such Fiscal Quarter or Fiscal Year. If they do know of such a Potential
Event of Default or Event of Default, the certificate shall describe all such
Potential Events of Defaults or Events of Default, their status and the action
Borrower is taking or proposes to take with respect thereto. The first
certificate to be delivered by Borrower pursuant to this Section 5.1C shall be
for the Fiscal Quarter ending June 30, 1998.
<PAGE>
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D. as soon as possible and in any event within three Business Days
after Borrower or any of its Subsidiaries obtains knowledge of the occurrence of
a Potential Event of Default, a statement of the chief executive, financial or
accounting Authorized Officer of Borrower setting forth details of such
Potential Event of Default and the action which Borrower has taken and proposes
to take with respect thereto;
E. as soon as possible and in any event within three Business Days
after Borrower or any of its Subsidiaries obtains knowledge of (x) the
occurrence of any material adverse development with respect to any litigation,
action, proceeding or labor controversy of the type and materiality described in
Schedule 6.7 ("Litigation"), or (y) the commencement of any litigation, action,
proceeding or labor controversy of the type and materiality described in
Schedule 6.7 ("Litigation"), notice thereof and, to the extent the Agents
reasonably request, copies of all documentation relating thereto;
F. promptly after the sending or filing thereof, copies of all
reports and registration statements which Borrower or any of its Subsidiaries
files with the SEC or any national securities exchange;
G. immediately upon becoming aware of (i) the institution of any
steps by Borrower or any other Person to terminate any Pension Plan (other than
a standard termination under Section 4041(b) of ERISA), (ii) the failure to make
a required contribution to any Pension Plan if such failure is sufficient to
give rise to a Lien under Section 302(f) of ERISA, (iii) the taking of any
action with respect to a Pension Plan which would result in the requirement that
Borrower furnish a bond or other security to the PBGC or such Pension Plan, or
(iv) the occurrence of any event with respect to any Pension Plan which could
reasonably be expected to result in the incurrence by Borrower of any material
liability, fine or penalty, notice thereof and copies of all documentation
relating thereto;
H. promptly when available and in any event within 15 Business Days
after the last day of each Fiscal Year of Borrower (commencing after the Closing
Date), a budget for the then current Fiscal Year of Borrower, which budget shall
contain on a quarterly basis a projected statement of earnings and sources and
uses of funds of Borrower and its Restricted Subsidiaries, prepared in
reasonable detail by the chief accounting, financial or executive Authorized
Officer of Borrower; and
I. such other information respecting the condition or operations,
financial or otherwise, of Borrower or any of its Subsidiaries as any Lender may
from time to time reasonably request (including information and reports from the
chief accounting, financial or executive Authorized Officer of Borrower, in such
detail as any Agent or any Lender may reasonably request, with respect to the
terms of and information provided pursuant to Section 5.1C).
5.2 Compliance with Laws, Etc.
-------------------------
Borrower will, and will cause each of its Subsidiaries to, comply in
all material respects with all applicable Governmental Rules and Governmental
Approvals of all Regulatory Authorities, such compliance to include:
A. the maintenance and preservation of Borrower's and its
Subsidiaries' corporate existence; and
B. the payment, before the same become delinquent, of all taxes,
assessments and governmental charges imposed upon it or upon its property
except to the extent being diligently contested in
<PAGE>
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good faith by appropriate proceedings and for which adequate reserves, if
any, in accordance with GAAP shall have been set aside on its books.
5.3 Maintenance of Properties
-------------------------
Borrower will, and will cause each of its Subsidiaries to, maintain,
preserve, protect and keep its properties in good repair, working order and
condition (ordinary wear and tear excepted), and make necessary and proper
repairs, renewals and replacements so that its business carried on in connection
therewith may be properly conducted at all times unless Borrower determines in
good faith that the continued maintenance of any of its properties is no longer
economically desirable.
5.4 Insurance
---------
Borrower shall maintain, and shall cause each of its Subsidiaries to
maintain:
(i) physical damage insurance on all real and personal property on
an all-risk basis (including, loss in transit, flood and earthquake
insurance) and public liability insurance against claims for personal
injury, death or property damage suffered by others upon, in or about any
premises occupied by it or occurring as a result of its ownership,
maintenance or operation of any airplanes, automobiles, trucks or other
vehicles or other facilities (including any machinery used therein or
thereupon) or as the result of the use of products manufactured,
constructed or sold by it or services rendered by it in an amount as is
usually carried by Persons of comparable size engaged in the same or a
similar business and similarly situated;
(ii) such other types of insurance with respect to its business as is
usually carried by Persons of comparable size engaged in the same or a
similar business and similarly situated, and, in any event, all insurance
otherwise required under any Subordinated Debt Document; and
(iii) all worker's compensation or similar insurance as may be
required under the laws of any state or jurisdiction in which it may be
engaged in business.
All insurance shall be provided (1) by insurers authorized by Lloyds of London
to underwrite such risks, (2) by insurers having an A.M. Best policyholders
rating of not less than A- (except with respect to insurers providing insurance
of the type described in clause (iii), in which case such insurers shall have an
A.M. Best policyholders rating of not less than B+) or (3) by such other
insurers as the Agents may approve in writing; provided, however, that if the
-------- -------
rating of any of such insurers is downgraded, Borrower and each of its
Subsidiaries, as the case may be, shall only be required to obtain replacement
insurance with an insurer satisfying the requirements of this clause at the
stated expiration of the insurance policy maintained with the insurer whose
rating was so downgraded.
5.5 Books and Records
-----------------
Borrower will, and will cause each of its Subsidiaries to, keep books
and records which accurately reflect all of its business affairs and
transactions and permit the Agents and each Lender or any of their respective
representatives, at reasonable times and intervals, to visit all of its offices,
to discuss its financial matters with its officers and independent public
accountant (and Borrower hereby authorizes such independent public accountant to
discuss Borrower's financial matters with each Lender or any of their respective
representatives whether or not any representative of Borrower is present) and to
examine (and, at the expense
<PAGE>
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of Borrower, photocopy extracts from) any of its books or other corporate
records. Borrower shall pay any fees of such independent public accountant
incurred in connection with any Agent's or any Lender's exercise of its rights
pursuant to this Section 5.5.
5.6 Environmental Covenant
----------------------
Borrower will, and will cause each of its Subsidiaries to:
(i) use and operate all of its facilities and properties in material
compliance with all Environmental Laws, keep all necessary permits,
approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in material compliance
therewith, and handle all Hazardous Materials in material compliance with
all applicable Environmental Laws;
(ii) promptly notify the Agents and provide copies upon receipt of
all written claims, complaints, notices or inquiries relating to the
condition of its facilities and properties in respect of, or as to
compliance with, Environmental Laws, and shall promptly resolve any non-
compliance with Environmental Laws and keep its property free of any Lien
imposed by any Environmental Law; and
(iii) provide such information and certifications which the Arranging
Agents may reasonably request from time to time to evidence compliance with
this Section 5.6.
5.7 [Reserved]
----------
5.8 Lenders Meeting
---------------
Borrower will participate in a meeting with the Lenders once during
each fiscal year to be held at a location and a time selected by Borrower and
reasonably satisfactory to the Lenders.
5.9 Use of Proceeds
---------------
Borrower shall apply the proceeds of the Loans solely to finance the
Restructuring Transaction and the Existing Facility Repayment and to pay related
fees and expenses.
5.10 Payments in U.S. Dollars
------------------------
All payments of any Obligations to be made hereunder or under the
Notes by Borrower or any other obligor with respect thereto shall be made solely
in U.S. Dollars or such other currency as is then legal tender for public and
private debts in the United States of America.
5.11 Take-Out Financing
------------------
A. Refinancing of Loans, Initial Notes, Term Notes and Exchange
------------------------------------------------------------
Notes. As soon as practicable after the Closing Date, Borrower will use its
reasonable best efforts to effectuate an offering and sale of the Refinancing
Securities or other debt or equity securities to Persons other than Borrower or
any of its Subsidiaries or such other financing transactions, in each case
reasonably acceptable in form and substance to the Agents after consultation
with Borrower, for the purpose of refinancing the principal amount, as
applicable, of the Loans, Initial Notes, Term Notes and the Exchange Notes and
paying interest accrued thereon and all fees, expenses, commissions and other
amounts payable under the Loan Documents and in connection with the Refi-
<PAGE>
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nancing, which will yield an amount sufficient to refinance the principal
amount, as applicable, of the Loans, Initial Notes, Term Notes and the Exchange
Notes and pay interest accrued thereon and all fees, expenses, commissions and
all other amounts payable under the Loan Documents and in connection with the
Refinancing, including, but not limited to:
(i) preparing an offering memorandum for a private offering (the
"Offering") of the Refinancing Securities;
---------
(ii) in the event that the Offering is not consummated, in
connection with any other public offering or private placement of debt
securities, promptly preparing a registration statement or offering
memorandum containing such disclosures as may be appropriate and customary
for such documents, and using its best efforts to cause any such
registration statement to become effective under the Securities Act;
(iii) executing underwriting or placement agreements, to reflect
the terms of the refinancing, and containing covenants, representations and
warranties, indemnities and delivery of legal opinions, officers'
certificates and accountants' comfort letters, all in form and substance
satisfactory to the Agents in their reasonable judgment;
(iv) in connection with any public offering or private placement
of debt or equity securities (including the Refinancing Securities),
offering such securities on terms and conditions, including, but not
limited to, interest rates, yields, maturities, covenants and redemption
dates and prices, as the Agents consider appropriate, in consultation with
Borrower, in light of market conditions and Borrower's financial condition
and prospects at the time of sale, in an amount to be agreed upon by
Borrower and the Agents, but in no event less than an amount which will
provide to Borrower net proceeds sufficient to refinance the indebtedness
under this Agreement and the Senior Subordinated Indenture, and containing
such disclosures as may be appropriate and customary for such documents;
(v) (a) in connection with any private placement of debt
securities (including the Offering), filing and causing to become effective
a registration statement (within such periods of time as the Agents may
reasonably request prior to such private placement) with respect to a
registered offer to exchange (an "Exchange Offer") any such privately
--------------
placed debt securities for notes of Borrower with terms identical in all
material respects (the "exchange notes") to such privately placed debt
--------------
securities (except that the exchange notes will not contain terms with
respect to transfer restrictions or interest rate increases), and causing
such Exchange Offer to be consummated within such period of time as the
Agents may reasonably request prior to such period of time; and (b) in the
event any debt securities are sold in a private placement, causing the debt
or equity securities held by the purchasers (including the Agents or their
Affiliates) in such a private placement to be registered pursuant to such
number of registration statements over such period of time as the Agents
may reasonably request prior to such private placement;
(vi) paying all reasonable costs and expenses of engaging a
qualified independent underwriter in connection with any public offering
and, to the extent necessary, a private placement of debt or equity
securities;
(vii) assisting the Agents or their Affiliates in connection with
the marketing of any debt or equity securities to be offered publicly or
placed privately; and
<PAGE>
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(viii) providing such other cooperation and assistance as is
customarily provided by issuers in connection with the private placement
and/or public sale of securities.
B. Required Refinancing of Loans, Notes, Term Notes and Exchange
-------------------------------------------------------------
Notes. Following the Closing Date and upon notice (a "Refinancing Securities
- ----- ----------------------
Notice") by the Take-Out Banks, Borrower will issue and sell unsecured senior
- ------
subordinated debt securities (any such securities, the "Required Refinancing
--------------------
Securities") after a full marketing thereof in an amount of up to the lesser of
- ----------
(a) the aggregate outstanding principal amount, as applicable, of the Loans,
Notes, Term Notes and Exchange Notes (but in no event less than $75 million), or
(b) $500 million upon such terms and conditions as are specified by the Take-Out
Banks in the Refinancing Securities Notice; provided, however, that: (i) the
-------- -------
Take-Out Banks, in their reasonable discretion, shall determine whether the
Required Refinancing Securities issued to refinance the Loans, Notes, Term Notes
and Exchange Notes shall be issued through a registered public offering or a
private placement; (ii) such Required Refinancing Securities will contain such
terms (including registration rights, in the event of a private placement),
conditions and covenants as are customary for similar financings and are
reasonably satisfactory in all respects to the Take-Out Banks; and (iii) all
other arrangements with respect to such Required Refinancing Securities shall be
reasonably satisfactory in all respects to the Take-Out Banks in light of then
prevailing market conditions.
Subject to the foregoing, the Required Refinancing Securities will
have such terms, including interest rates, yields, and redemption prices, as the
Take-Out Banks consider appropriate, in consultation with Borrower, in light of
market conditions, and Borrower's financial condition and prospects at the time
of sale.
5.12 Exchange of Term Notes
----------------------
Borrower will, on the fifth Business Day following the written request
(the "Exchange Request") of the holder of any Term Note (or beneficial owner of
----------------
a portion thereof):
(i) Execute and deliver, cause each Guarantor to execute and
deliver, and cause a bank or trust company acting as trustee thereunder to
execute and deliver, the Senior Subordinated Indenture, if such Senior
Subordinated Indenture has not previously been executed and delivered;
(ii) Execute and deliver to such holder or beneficial owner in
accordance with the Senior Subordinated Indenture a note in the form
attached to the Senior Subordinated Indenture (the "Exchange Notes")
--------------
bearing interest as set forth therein in exchange for such Term Note dated
the date of the issuance of such Exchange Note, payable to the order of
such holder or owner, as the case may be, in the same principal amount as
such Term Note (or portion thereof) being exchanged, and cause each
Guarantor to endorse its guarantee thereon; and
(iii) Execute and deliver, and cause each Guarantor to execute and
deliver, to such holder or owner, as the case may be, a Registration Rights
Agreement in the form of Exhibit G, if such Registration Rights Agreement
---------
has not previously been executed and delivered or, if such Registration
Rights Agreement has previously been executed and delivered and such holder
or owner is not already a party thereto, permit such holder or owner to
become a party thereto.
The Exchange Request shall specify the principal amount of the Term
Notes to be exchanged pursuant to this Section 5.12 which shall be at least
$5,000,000 and integral multiples of $500,000 in excess thereof. Term Notes
delivered to Borrower under this Section 5.12 in exchange for Exchange Notes
shall be cancelled by Borrower and the corresponding amount of the Term Loan
shall be deemed repaid and the Ex-
<PAGE>
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change Notes shall be governed by and construed in accordance with the terms of
the Senior Subordinated Indenture.
The bank or trust company acting as trustee under the Senior
Subordinated Indenture shall at all times be a corporation organized and doing
business under the laws of the United States of America or the State of New
York, in good standing and having its principal offices in the Borough of
Manhattan, in The City of New York, which is authorized under such laws to
exercise corporate trust powers and is subject to supervision or examination by
Federal or State authority and which has a combined capital and surplus of not
less than $50,000,000.
5.13 Register
--------
Borrower hereby designates the Arranger to serve as Borrower's agent,
solely for purposes of this Section 5.13, to maintain a register (the
"Register") on which it will record the Loans made by each of the Lenders and
--------
each repayment in respect of the principal amount of the Loans of each Lender.
Failure to make any such recordation, or any error in such recordation shall not
affect Borrower's obligations in respect of such Loans. With respect to any
Lender, the transfer of the Loan Commitments of such Lender and the rights to
the principal of, and interest on, any Loan made pursuant to such Loan
Commitments shall not be effective until such transfer is recorded on the
Register maintained by the Arranger with respect to ownership of such Loan
Commitments and Loans and prior to such recordation all amounts owing to the
transferor with respect to such Loan Commitments and Loans shall remain owing to
the transferor. The registration of assignment or transfer of all or part of
any Loan Commitments and Loans shall be recorded by the Arranger on the Register
only upon the receipt by the Agents of a properly executed and delivered
Assignment and Assumption Agreement pursuant to Section 12.1A. Coincident with
the delivery of such an Assignment and Assumption Agreement to the Arranger for
acceptance and registration of assignment or transfer of all or part of a Loan,
or as soon thereafter as practicable, the assigning or transferor Lender shall
surrender the Note evidencing such Loan, and thereupon one or more new Notes of
the same type and in the same aggregate principal amount shall be issued to the
assigning or transferor Lender and/or the new Lender.
SECTION 6. NEGATIVE COVENANTS (INITIAL LOAN)
Borrower covenants and agrees that until the earlier of (x) the
satisfaction in full of the Initial Loans and the Initial Notes and all other
Obligations due under this Agreement or (y) the Conversion Date, it shall, and
shall cause each of its Subsidiaries to, fully and timely perform all covenants
in this Section 6 required to be performed by any of them.
6.1 Business Activities
-------------------
Borrower will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, engage in any business activity, except
the business of providing satellite broadcasting service to residential and
commercial customers and such activities as are reasonably incidental or
substantially similar thereto.
<PAGE>
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6.2 Indebtedness
------------
Borrower will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist or otherwise become or be liable in respect of any Indebtedness, other
than, without duplication, the following:
(a) Indebtedness under the New PRIMESTAR Senior Credit Facility in an
aggregate principal amount not to exceed $750 million and other obligations
(including Hedging Obligations in respect of credit extensions thereunder);
(b) Indebtedness identified in Schedule 6.2 ("Ongoing Indebtedness")
------------
of the Disclosure Schedule;
(c) Indebtedness of Borrower in respect of (i) Capitalized Lease
Liabilities, (ii) Indebtedness the proceeds of which are used to acquire an
asset by Borrower (or used to acquire such an asset within 60 days of the
incurrence thereof) and (iii) unsecured Indebtedness; provided, however,
-------- -------
that the aggregate amount of all Indebtedness outstanding pursuant to this
clause (c) at the time any of the same is created, assumed or incurred
(together with the principal amount of all other Indebtedness permitted
under this clause (c)) shall not at any time exceed $200,000,000 at such
time after giving effect thereto and any Permitted Refinancings thereof;
(d) Indebtedness of any Restricted Subsidiary owing to Borrower or
any other Restricted Subsidiary or of Borrower to any Restricted
Subsidiary, which Indebtedness shall not be forgiven or otherwise
discharged for any consideration other than payment in full or in part
(provided that only the amount repaid in part shall be discharged) in cash;
---------
(e) (i) Subordinated Debt of Borrower and (ii) any Permitted
Refinancing thereof; provided, however, that any Permitted Refinancing of
-------- -------
Subordinated Debt must be on terms substantially similar to those in the
Subordinated Debt Documents existing on the Effective Date; and
(f) the Loans, the Guarantees, the Exchange Notes and any Refinancing
Securities, and any guarantee of the Existing Notes by any Guarantor;
provided, however, that no Indebtedness otherwise permitted by clause (d) or (e)
- -------- -------
shall be permitted to be incurred if a Potential Event of Default or an Event of
Default has occurred and is continuing or would result therefrom; provided,
--------
further, however, that (1) no Indebtedness permitted under clauses (b) through
- ------- -------
(e) of this Section 6.2 shall be (i) permitted if such Indebtedness is incurred
in reliance upon a general exception for permitted Indebtedness under any
Subordinated Debt Document unless all other available exceptions for
Indebtedness of such type under such an agreement have been fully utilized by
Borrower or its Subsidiary, as applicable or (ii) designated as "Designated
Senior Indebtedness" (as defined in any Subordinated Debt Document) without the
prior written consent of the Required Lenders, and (2) no Indebtedness may be
incurred pursuant to clauses (a), (c), or (e) if after giving pro forma effect
thereto the Total Debt to Annualized Cash Flow Ratio would be greater than
7.25:1.0.
<PAGE>
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6.3 Liens
-----
Borrower will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien upon any of its property, revenues or assets, whether now owned
or hereafter acquired, except:
(a) Liens securing payment of Senior Indebtedness and Guarantor
Senior Indebtedness, granted pursuant to any document entered into in
connection therewith;
(b) until the Closing Date, Liens securing payment of Indebtedness of
the type permitted and described in Section 6.2(b);
(c) Liens securing Capitalized Lease Liability Indebtedness and
purchase money Indebtedness of the type permitted and described in Section
6.2(c) (and securing only the assets that are financed with the proceeds of
such Indebtedness);
(d) Liens existing as of the Closing Date and disclosed in Schedule
--------
6.3 ("Ongoing Liens");
---
(e) Liens for taxes, assessments or other governmental charges or
levies not at the time delinquent or thereafter payable without penalty or
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves, if any, in accordance with GAAP shall have been
set aside on its books;
(f) Liens of carriers, warehousemen, mechanics, materialmen and
landlords incurred in the ordinary course of business for sums not overdue
or being diligently contested in good faith by appropriate proceedings and
for which adequate reserves, if any, in accordance with GAAP shall have
been set aside on its books;
(g) Liens incurred or deposits made in the ordinary course of
business in connection with workmen's compensation, unemployment insurance
or other forms of governmental insurance or benefits, or to secure
performance of tenders, statutory and regulatory obligations, bids, leases
and contracts or other similar obligations (other than for borrowed money)
entered into in the ordinary course of business or to secure obligations on
surety or appeal bonds or performance or return-of-money bonds;
(h) judgment Liens in existence less than 45 days after the entry
thereof or with respect to which execution has been stayed or the payment
of which is covered in full (subject to a customary deductible) by
insurance maintained with responsible insurance companies or which do not
otherwise result in an Event of Default under Section 7.8; and
(i) easements, rights-of-way, municipal and zoning ordinances or
similar restrictions, minor defects or irregularities in title and other
similar charges or encumbrances not interfering in any material respect
with the ordinary conduct of the business of Borrower or its Subsidiaries
or the value or utility of the property to which such Lien is attached.
<PAGE>
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6.4 Sale and Leaseback
------------------
Borrower will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into any agreement or arrangement
with any other Person providing for the leasing by Borrower or any of its
Restricted Subsidiaries of real or personal property which has been or is to be
sold or transferred by Borrower or any of its Restricted Subsidiaries to such
other Person or to any other Person to whom funds have been or are to be
advanced by such Person on the security of such property or rental obligations
of Borrower or any of its Restricted Subsidiaries.
6.5 Investments
-----------
Borrower will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make, incur, assume or suffer to exist
any Investment in any other Person, except:
(a) Investments existing on the Effective Date and Investments to be
existing immediately after giving effect to the Restructuring Transaction,
each identified in Schedule 6.5 ("Ongoing Investments");
------------
(b) Cash Equivalent Investments;
(c) without duplication, Investments by Borrower to the extent
permitted as Indebtedness pursuant to Section 6.2;
(d) Investments constituting (i) accounts receivable arising, (ii)
trade debt granted, or (iii) deposits made in connection with the purchase
price of goods or services, in each case in the ordinary course of
business;
(e) other Investments by Borrower not to exceed $200,000,000 in the
aggregate; and
(f) Investments in Persons which are Restricted Subsidiaries so long
as, before and after giving effect to such Investment, no Potential Event
of Default has occurred and is continuing or is caused thereby;
provided, however, that
- --------- -------
(g) any Investment which when made complies with the requirements of
clause (a), (b) or (c) of the definition of the term "Cash Equivalent
Investment" may continue to be held notwithstanding that such Investment if
made thereafter would not comply with such requirements; and
(h) no Investment otherwise permitted by clause (c), (d), (e) or (f)
shall be permitted to be made if any Potential Event of Default or Event of
Default has occurred and is continuing or would result therefrom.
6.6 Restricted Payments, Etc.
------------------------
Borrower shall not, and shall not permit any Subsidiary to, make any
Restricted Junior Payment, except that:
<PAGE>
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(a) dividends or distributions to Borrower in respect of its Equity
Interests in any of its Subsidiaries;
(b) so long as no (x) Event of Default or (y) Potential Event of
Default of which Senior Management was aware or should have been aware has
occurred and is continuing (or would result therefrom), (i) payments by
Borrower of interest accrued on the Subordinated Debt when due and (ii) any
Restricted Junior Payment of the type set forth in clause (c) of the
definition thereof to the extent that such Restricted Junior Payment arises
from the issuance of common stock of Borrower and is otherwise on terms
satisfactory to the Agents; and
(c) Unrestricted Subsidiaries may refinance in whole or in part from
time to time any of its Indebtedness so long as any such refinancing is not
recourse in any manner to Borrower or any other Subsidiary and does not
require the imposition (contingently or otherwise) of any Lien on the
assets of Borrower or any Restricted Subsidiary.
6.7 [Reserved]
6.8 Subsidiaries
------------
Borrower will not have any Subsidiaries other than Restricted
Subsidiaries and Unrestricted Subsidiaries. Borrower will not permit any
Subsidiary to issue any Capital Stock (whether for value or otherwise) to any
Person other than Borrower.
6.9 Take or Pay Contracts
---------------------
Borrower will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or be a party to any
arrangement for the purchase of materials, supplies, other property or services
if such arrangement by its express terms requires that payment be made by
Borrower or such Restricted Subsidiary regardless of whether such materials,
supplies, other property or services are in fact or can be required to be
delivered or furnished to it.
6.10 Consolidation, Merger, Etc.
--------------------------
Borrower will not, and will not permit any of its Subsidiaries to,
directly or indirectly, liquidate or dissolve, consolidate with, or merge into
or with, any other corporation, or purchase or otherwise acquire all or
substantially all of the assets of any Person (or of any division thereof)
except that (i) TSAT may merge with and into Borrower pursuant to the TSAT
Merger and on terms and conditions satisfactory to a majority of Lenders, (ii)
the transactions contemplated by the Restructuring Transaction may be made in
accordance with the terms of the Restructuring Agreements and (iii) any
Restricted Subsidiary may liquidate or dissolve voluntarily into, and may merge
with and into, Borrower or any other Restricted Subsidiary; provided, however,
-------- -------
that, in the case of the merger of any Subsidiary into Borrower, Borrower shall
be the surviving corporation and continue to be incorporated under the laws of a
State of the United States.
6.11 Permitted Dispositions
----------------------
Borrower will not, and will not permit any of its Subsidiaries to,
directly or indirectly, sell, transfer, lease, contribute or otherwise convey
(including by way of merger), or grant options, warrants or other rights with
respect to, any of Borrower's or such Subsidiaries' assets (including accounts
receivable or
<PAGE>
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Equity Interests of Subsidiaries) to any Person unless such sale, transfer,
lease, contribution or conveyance of such assets is (i) in the ordinary course
of its business (and does not constitute a sale, transfer, lease, contribution
or other conveyance of all or a substantial part of Borrower's or such
Subsidiary's assets) or is of obsolete or worn out property, (ii) permitted by
Section 6.10, (iii) between Restricted Subsidiaries or from a Subsidiary to
Borrower or (iv) of other assets of Borrower having a value (determined based on
the higher of book and fair market value) not to exceed $30,000,000 for the term
of this Agreement.
6.12 Senior Subordinated Indebtedness
--------------------------------
Neither Borrower nor any of the Guarantors shall, directly or
indirectly, Incur any Indebtedness (other than the Notes, the Exchange Notes,
the Required Refinancing Securities and the Guarantees, as the case may be) that
by its terms (or by the terms of any agreement governing such Indebtedness)
would expressly rank senior in right of payment to the Loans, Notes and
Guarantees and expressly rank subordinate in right of payment to any Senior
Indebtedness.
6.13 Guarantees
----------
Borrower will not permit any of its domestic Subsidiaries to, directly
or indirectly, incur any guarantee of any Senior Indebtedness of the Company
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, in each case unless such Subsidiary executes a Guarantee of the
Obligations of Borrower under this Agreement. Thereafter, such Subsidiary shall
be a Guarantor for all purposes of this Agreement.
6.14 Refinancing of Loans in Part
----------------------------
Borrower shall not, nor shall Borrower cause or permit any of its
Subsidiaries to, Incur any Indebtedness to Refinance the Loans in part other
than the Refinancing Securities, the Required Refinancing Securities or the
Exchange Notes, unless the terms, conditions, covenants, events of default and
other provisions in respect of the events of default and other provisions in
respect of the instruments evidencing the Indebtedness Incurred to Refinance the
Loans in part shall have been approved in writing by the Required Lenders (which
consent shall be conclusively deemed given if a Lender does not object to the
draft thereof within five Business Days of receipt thereof) (which approval
shall not be unreasonably withheld) prior to the Incurrence of any such
Indebtedness.
6.15 Modification of Certain Agreements
----------------------------------
Borrower will not, and will not permit any of its Subsidiaries to,
directly or indirectly, consent to any amendment, supplement, amendment and
restatement, waiver or other modification of any of, or enter into any
forbearance from exercising any rights with respect to, the terms or provisions
contained in, or applicable to, (i) any Transaction Document, if the effect of
such amendment, supplement, amendment and restatement, waiver or modification or
forbearance might individually or in the aggregate have a Material Adverse
Effect, or (ii) any Subordinated Debt Document.
6.16 Transactions with Affiliates
----------------------------
Borrower will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into, or cause, suffer or permit
to exist any arrangement or contract with any of its other Affiliates or any
Unrestricted Subsidiary, other than in connection with the Roll-up Plan unless
such arrangement or
<PAGE>
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contract is on fair and reasonable terms and is an arrangement or contract of
the kind which would be entered into by a prudent Person in the position of
Borrower or such Subsidiary with a Person which is not one of its Affiliates.
6.17 Negative Pledges, Restrictive Agreements, Etc.
---------------------------------------------
Borrower will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into any agreement (excluding the
New PRIMESTAR Senior Credit Facility (and any agreements or instruments defined
in the New PRIMESTAR Senior Credit Facility as "Loan Documents), this Agreement
and any other Loan Document or any document pursuant to which any Indebtedness
permitted by clause (c) of Section 6.2 is permitted but solely with respect to
any asset acquired solely with the proceeds of such Indebtedness and no other
asset of Borrower or any Subsidiary) prohibiting:
(a) the creation or assumption of any Lien upon its properties,
revenues or assets, whether now owned or hereafter acquired, to the extent
that any such negative pledge would prohibit the creation or first priority
perfection of any Liens of the type described in clause (a) of Section 6.3
(other than in the case of Capitalized Leases to the extent of Liens solely
in the assets subject to such Capitalized Lease);
(b) the ability of Borrower or any other Obligor to amend or
otherwise modify this Agreement or any other Loan Document; or
(c) the ability of any Restricted Subsidiary to make any payments,
directly or indirectly, to Borrower by way of dividends, advances,
repayments of loans or advances, reimbursements of management and other
intercompany charges, expenses and accruals or other returns on
Investments, or any other agreement or arrangement which restricts the
ability of any such Subsidiary to make any payment, directly or indirectly,
to Borrower.
6.18 Restrictions on Leases and ASkyB Transaction
--------------------------------------------
Borrower will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, (a) enter into any agreement or
arrangement with Tempo or any other Person providing for the leasing by Borrower
or any of its Restricted Subsidiaries of high power satellite transmission
capacity unless (i) such agreement or arrangement is on fair and reasonable
terms and is an agreement or arrangement of the kind which would be entered into
by a prudent Person in the position of Borrower or such Restricted Subsidiary
with such Person, and (ii) the Agents consent in writing (such consent not to be
unreasonably withheld or delayed), or (b) consummate the ASkyB Transaction (as
defined in the Proxy) without the consent of all Lenders.
6.19 Restrictions on TSAT Partners Holdings and Its Subsidiaries
-----------------------------------------------------------
Borrower shall not permit TSAT Partners Holdings, nor any of TSAT
Partners Holdings' Subsidiaries to, directly or indirectly, (i) engage in any
business activity other than, in the case of TSAT Partners Holdings, in
connection with the continuing ownership of the issued and outstanding shares of
Equity Interests of TCISE Partner 1 and TCISE Partner 2, and in the case of TSAT
Partners Holdings' Subsidiaries, in connection with the continuing ownership of
partnership interest in the Primestar Partnership; (ii) create, incur, assume,
suffer to exist or otherwise become liable in respect of any Indebtedness other
than in respect of the New Primestar Senior Credit Facility; (iii) create,
incur, assume or enter into any agreement which by its terms creates, incurs or
assumes any Lien upon any of its assets, whether now owned or hereafter acquired
<PAGE>
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other than in respect of the New Primestar Senior Credit Facility; (iv) make,
incur, assume or suffer to exist any Investment in any other Person other than,
in the case of TSAT Partners Holdings, in connection with the continuing
ownership of the issued and outstanding shares of Equity Interests of TCISE
Partner 1 and TCISE Partner 2, and in the case of TSAT Partners Holdings'
Subsidiaries in connection with the continuing ownership of partnership interest
in the Primestar Partnership; (v) make or commit to make any capital expenditure
or enter into any arrangement which would give rise to any Capitalized Lease
Liability; (vi) enter into any arrangement which involves the leasing by such
Person from any lessor of any real or personal property (or any interest
therein) other than the lease of office space incidental to its ordinary course
of business; (vii) wind-up, liquidate or dissolve, consolidate or amalgamate
with, or merge into or with any other corporation or purchase or otherwise
acquire all or any part of the assets of any Person (or division thereof); or
(viii) sell, transfer, lease or otherwise dispose of, or grant to any Person
options, warrants or other rights with respect to any of its assets, unless
otherwise permitted by this Agreement and except as set forth in the Primestar
Partnership Agreement.
SECTION 6A. NEGATIVE COVENANTS (TERM LOAN)
Borrower covenants and agrees that from and after issuance of the Term
Loan and the Term Notes until the satisfaction in full of the Term Loan and the
Term Notes and all other Obligations due under this Agreement it shall, and
shall cause each of its Restricted Subsidiaries to, fully and timely perform all
covenants in this Section 6A required to be performed by any of them.
6A.1 Limitation on Restricted Payments
---------------------------------
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 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 Borrower or any Restricted
Subsidiary (other than any dividends, distributions and payments made to
Borrower or any Restricted Subsidiary and dividends or distributions
payable to any Person solely in Qualified Equity Interests of Borrower or
in options, warrants or other rights to purchase Qualified Equity Interests
of Borrower);
(ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of Borrower or any Restricted Subsidiary (other than any
such Equity Interests owned by 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 Borrower, any Restricted Subsidiary or a Person that
becomes a Restricted Subsidiary, or is merged with or into or consolidated
with Borrower or a Restricted Subsidiary (provided Borrower or a Restricted
Subsidiary is the survivor) as a result of or in connection with such
Investment)
<PAGE>
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(such payments or any other actions (other than the exceptions thereto)
described in (i), (ii), (iii) and (iv) collectively, "Restricted Payments"),
-------------------
unless
(a) no Potential Event of 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,
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 Section 6A.2; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate amount of all Restricted Payments declared or made on or after
the Closing 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 Borrower determined for the period commencing on the
Closing Date and ending on the last day of the most recent fiscal quarter
immediately preceding the date of such Restricted Payment for which
consolidated financial information of Borrower is available, plus (2) the
----
aggregate net cash proceeds received by Borrower either (x) as capital
contributions to Borrower after the Closing Date or (y) from the issue and
sale (other than to a Restricted Subsidiary) of its Qualified Equity
Interests after the Closing Date (excluding the net proceeds from any
issuance and sale of Qualified Equity Interests (I) in connection with the
ASkyB Transaction (except that in calculating the ability to make a
Restricted Payment under clause (iv) of the previous paragraph, 25% thereof
may be included) or (II) to the extent financed, directly or indirectly,
using funds borrowed from 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 Borrower or any
Restricted Subsidiary Incurred after the Closing Date which has been
converted into or exchanged for Qualified Equity Interests of Borrower,
plus (4) in the case of the disposition or repayment of any Investment
----
constituting a Restricted Payment made after the Closing 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 Closing Date,
with respect to any Unrestricted Subsidiary that has been redesignated as a
Restricted Subsidiary after the Closing Date in accordance with Section
6A.12, 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
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 Closing 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 Borrower which has been
designated as an Unrestricted Subsidiary after the Closing Date in
accordance with Section 6A.12. For purposes of this clause (c), in the
event that any Person in whom an Investment was made on or after the
Closing Date that was included in the aggregate amount of Restricted
Payments made on or after the Closing Date becomes a Restricted Subsidiary,
so long as such Person remains a Restricted Subsidiary, the aggregate
amount of Restricted Payments declared or made on or after the Closing Date
shall be reduced by an amount equal to the lesser of (A) the amount of
Investments made in such Person that was treated as a Restricted Payment
and
<PAGE>
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(B) Borrower's proportionate interest in an amount equal to the excess of
(x) the total assets of such Subsidiary at the date it became a Restricted
Subsidiary, valued on such date on an aggregate basis at Fair Market Value,
over (y) the total liabilities on such date of such Subsidiary, determined
in accordance with GAAP.
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
this Agreement; (ii) the purchase, redemption, retirement or other acquisition
of any Equity Interests of 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 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
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 made within three years of the Closing
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 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 Closing Date shall not
exceed $90.0 million (any such Investment made pursuant to this clause (iv) a
"C-Band Investment"); (v) 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 Closing Date;
(vi) 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 Borrower; provided,
--------
however, that any such net cash proceeds are excluded from clause (c)(2) of the
- -------
preceding paragraph (and were not included therein at any time); (vii) the
purchase, redemption or other acquisition, cancellation or retirement for value
of Equity Interests of Borrower or any Restricted Subsidiary held by officers or
employees or former officers or employees of 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 Closing Date;
plus, in each case, the amount of net cash proceeds received by Borrower or a
- ----
Restricted Subsidiary on account of life insurance policies relating to the
officer or employee whose Equity Interest is being purchased, redeemed,
acquired, cancelled or retired; (viii) 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;
(ix) the payment of dividends in any period (I) on preferred stock of 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 Borrower from
----------------
such C-Band Entity in the same period (to the extent that such cash dividends
have not otherwise been expended by 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 Borrower from the Restricted C-Band Subsidiaries in the same period
(to the extent that
<PAGE>
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such cash dividends have not otherwise been expended by Borrower); provided,
--------
however, that no such dividends pursuant to this clause (ix) 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 (x) the repurchase of Equity Interests of
Borrower in an amount not to exceed $10.0 million in the aggregate since the
Closing Date; provided, however, that in the case of each of clauses (ii),
-------- --------
(iii), (iv), (v), (vi), (viii), (ix) and (x) no Potential Event of 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 (ix) 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 Borrower and the Restricted Subsidiaries shall be deemed
to refer to the Restricted C-Band Subsidiary and its Subsidiaries. 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 Consolidated Operating Cash Flow being greater than what it would have been
if such Restricted C-Band Subsidiary were an Affiliate of Borrower that was not
a Restricted Subsidiary.
In determining the amount of Restricted Payments permissible under
this Section 6A.1, amounts expended pursuant to clauses (i), (vii) and (x) of
the second preceding paragraph shall be included as Restricted Payments and
amounts expended pursuant to clauses (ii), (iii), (iv), (v), (vi), (viii) and
(ix) 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 Section 6A.1 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.
6A.2 Limitation on Indebtedness
--------------------------
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 Borrower may Incur Indebtedness
-------- -------
(including Acquired Indebtedness) and 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 Borrower
(or any Restricted Subsidiary with respect to clauses (b), (c), (d), (e), (g),
(h), (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 Term Notes, this Agreement, the Exchange
Notes and the Senior Subordinated Indenture;
<PAGE>
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(b) the Existing Notes and other Existing Indebtedness;
(c) Indebtedness under the New PRIMESTAR Senior Credit Facility in an
aggregate principal amount at any one time outstanding not to exceed the
sum of (A) $750.0 million, plus (B) any amounts outstanding under the New
----
PRIMESTAR Senior Credit Facility that utilize subparagraph (n) of this
paragraph of this Section 6A.2;
(d) (x) Indebtedness or Disqualified Equity Interests of any
Restricted Subsidiary owed or issued to and held by Borrower or any
Restricted Subsidiary and (y) Indebtedness or Disqualified Equity Interests
of Borrower owed or issued to and held by any Restricted Subsidiary which
is unsecured and subordinated in right of payment to the payment and
performance of Borrower's obligations under any Senior Indebtedness, the
Notes, this Agreement, the Senior Subordinated Indenture and the Exchange
Notes (or pledged to secure any Senior Indebtedness); provided, however,
-------- -------
that an Incurrence of Indebtedness or issuance of Disqualified Equity
Interests that is not permitted by this clause (d) shall be deemed to have
occurred upon (i) any sale or other disposition of any Indebtedness or
Disqualified Equity Interests of Borrower or any Restricted Subsidiary
referred to in this clause (d) to a Person (other than Borrower or any
Restricted Subsidiary), (ii) any sale or other disposition of Equity
Interests of any Restricted Subsidiary which holds Indebtedness or
Disqualified Equity Interests of 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 or Disqualified Equity Interests of Borrower or any other
Restricted Subsidiary as an Unrestricted Subsidiary;
(e) guarantees by any Restricted Subsidiary of Senior Indebtedness of
Borrower; provided, however, that if any such guarantee shall be Incurred
-------- -------
in respect of any Senior Indebtedness of 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 this Agreement;
(f) Interest Rate Protection Obligations of Borrower or any
Restricted Subsidiary relating to Indebtedness of Borrower or any
Restricted Subsidiary (which Indebtedness is otherwise permitted to be
Incurred under this Section 6A.2); 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 Capital 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 Section 6A.2 or clause (a), (b),
(i), (j), (k), (l) or (n) of this paragraph of this Section 6A.2; 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
<PAGE>
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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 Borrower (except that if the
Indebtedness being refinanced is guaranteed by a Restricted Subsidiary,
such Restricted Subsidiary may guarantee such refinanced Indebtedness) and
(v) with respect to any refinancing of Indebtedness Incurred pursuant to
clause (i), (j), (k), (l) or (n) of this paragraph, such refinancing
pursuant to this clause (h) shall also be deemed to be Incurred pursuant to
clause (i), (j), (k), (l) or (n), 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 to fund purchases of inventory of integrated
receiver decoders and other related subscriber equipment to be used in the
business of 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) $150.0 million;
(j) 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
Borrower or any Restricted Subsidiary of not less than 50% of the economic
Equity Interests and 50% of the 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 Related 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 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;
(k) Indebtedness under the Partnership Credit Agreement (or any
refinancing thereof) to the extent such obligation was Incurred by
Primestar Partnership to finance any Tempo Satellite or under any agreement
by Borrower or any Restricted Subsidiary to indemnify the Persons who were
partners of Primestar Partnership prior to the Closing Date or their
Affiliates for any obligation of any such Person or Affiliate under any
guarantee, letter of credit or other credit support with respect to any
obligations of Primestar Partnership under the Partnership Credit Agreement
or the GE-2 Agreement;
<PAGE>
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(l) Indebtedness Incurred in connection with the business objective
of migrating Borrower's (or any Restricted Subsidiary's) medium power
customers to Borrower's (or any Restricted Subsidiary's) high power
satellite transmission service in an aggregate amount not to exceed $150.0
million at any time outstanding;
(m) Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations
Incurred in connection with the disposition of any business, assets or
Restricted Subsidiary of Borrower in an amount not to exceed the gross
proceeds actually received by Borrower or any Restricted Subsidiary in
connection with such disposition; and
(n) in addition to the items referred to in clauses (a) through (m)
above, Indebtedness of Borrower (including any Indebtedness under the
Senior Credit Facility that utilizes this subparagraph (n)) in an aggregate
amount at any time outstanding not to exceed $75.00 per subscriber of
Borrower and the Restricted Subsidiaries at the date of Incurrence thereof.
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 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 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 Borrower or any Restricted Subsidiary.
If Borrower Incurs any Indebtedness pursuant to the Debt to Operating
Cash Flow Ratio of the first paragraph of this Section 6A.2 and includes in the
calculation thereof 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 Section 6A.2 (unless otherwise
incurrable at such time under any of subparagraphs (a) through (o) of the second
paragraph of this Section 6A.2) if Borrower or any Restricted Subsidiary
thereafter makes any Restricted Payment pursuant to clause (ix) of the second
paragraph of Section 6A.1 and such Indebtedness could not have been Incurred at
the time of its Incurrence if any such Restricted Payment were made immediately
prior to such Incurrence.
For purposes of determining any particular amount of Indebtedness
under this Section 6A.2, guarantees, Liens or obligations with respect to
letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included.
For purposes of determining compliance with this Section 6A.2, in the
event that an item of Indebtedness may be Incurred through the first paragraph
of this Section 6A.2 or by meeting the criteria of one or more of the types of
Indebtedness described in the second paragraph of this Section 6A.2 (or the
definitions of the terms used therein), Borrower, in its sole discretion, may,
at the time of such Incurrence, (i) classify such item of Indebtedness under and
comply with either of such paragraphs (or any of such definitions), as
applicable, (ii) classify and divide such item of Indebtedness into more than
one of such paragraphs (or definitions), as applicable, and (iii) elect to
comply with such paragraphs (or definitions), as applicable, in any order.
6A.3 Limitation on Transactions with Affiliates
------------------------------------------
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
<PAGE>
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benefit of any of their respective Affiliates or any beneficial holder of 10% or
more of the Equity Interests of Borrower or any officer or director of Borrower
or any Restricted Subsidiary (each an "Affiliate Transaction"), unless such
---------------------
Affiliate Transaction is on terms which are no less favorable to 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, 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 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 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 Borrower obtains a written opinion
from an Independent Financial Advisor stating that the terms of an Affiliate
Transaction are fair, from a financial point of view, to 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 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 Borrower or any Restricted Subsidiary 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 and the Restructuring Agreements, each as in effect on
the Closing Date, including any amendment or extension thereof that does not
otherwise violate any other covenant set forth in this Agreement, and any
transactions undertaken pursuant to any other contractual obligations in
existence on the Closing Date (as in effect on the Closing Date); (iv) the issue
and sale by Borrower to its stockholders of Qualified Equity Interests; (v) any
Restricted Payments made in compliance with Section 6A.1; (vi) loans and
advances to officers, directors and employees of 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 Section 6A.2; (viii) the
pledge of Equity Interests of Unrestricted Subsidiaries to support the
Indebtedness thereof; and (ix) the Restructuring Transactions.
6A.4 Limitation on Liens
-------------------
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 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 on securing any
Senior Indebtedness or any guarantee of Senior Indebtedness by any Restricted
Subsidiary and (ii) Permitted Liens.
<PAGE>
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6A.5 Limitation on Senior Subordinated Indebtedness
----------------------------------------------
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 junior in right of payment to any Senior Indebtedness.
6A.6 Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries
---------------------------------------------------------------
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 consensual encumbrance or consensual restriction
on the ability of any Restricted Subsidiary to (a) pay dividends or make any
other distributions to 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 Borrower or any other
Restricted Subsidiary, (b) make loans or advances to, or guarantee any
Indebtedness or other obligations of, Borrower or any other Restricted
Subsidiary or (c) transfer any of its properties or assets to Borrower or any
other Restricted Subsidiary, except for such encumbrances or restrictions
existing under or by reason of (i) the New PRIMESTAR Senior Credit Facility, the
Existing Indentures, any Basic Document, any Restructuring Agreement, the Senior
Subordinated Indenture or any other agreement of Borrower or the Restricted
Subsidiaries outstanding on the Closing Date, in each case as in effect on the
Closing 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 New
PRIMESTAR Senior Credit Facility as in effect on the Closing Date; (ii)
applicable law; (iii) any instrument governing Indebtedness or Equity Interests
of an Acquired Person acquired by 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 Borrower or any Restricted Subsidiary, or
the properties or assets of 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 imposes encumbrances and restrictions only 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 Section 6A.9 to the extent applicable
thereto; (vii) refinancing Indebtedness permitted under clause (h) of the second
paragraph of Section 6A.2; 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)
this Agreement or the Senior Subordinated Indenture; 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 New PRIMESTAR Senior Credit Facility as in effect on
the Closing Date. Anything contained herein to the contrary notwithstanding,
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 Borrower and the Restricted Subsidiaries under the New
PRIMESTAR Senior Credit Facility.
<PAGE>
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6A.7 Guaranty of Notes by Subsidiaries
---------------------------------
In the event that any Restricted Subsidiary (other than a Guarantor),
directly or indirectly, guarantees any Indebtedness of Borrower pursuant to
clause (e) of the second paragraph of Section 6A.2, Borrower shall cause such
Restricted Subsidiary to concurrently guarantee (a "Guaranty") Borrower's
--------
Obligations under this Agreement and the Loans and Notes to the same extent that
such Restricted Subsidiary guaranteed Borrower's Obligations under such other
Indebtedness (including waiver of subrogation, if any); provided, however, that
-------- -------
the Guaranty shall be subordinated in right of payment to all Guarantor Senior
Indebtedness (which shall include such guarantee of such other Indebtedness)
pursuant to the subordination provisions of Section 11, provided, further,
-------- -------
however, that each Subsidiary issuing a Guaranty will be automatically and
- -------
unconditionally released and discharged from its obligations under such Guaranty
upon the release or discharge of the guarantee of the Indebtedness that resulted
in the creation of such Guaranty, except a discharge or release by, or as a
result of, any payment under the guarantee of such Other Indebtedness by such
Guarantor. Borrower shall cause each Restricted Subsidiary issuing a Guaranty
to (i) execute and deliver to the Arranger a supplemental indenture in form
reasonably satisfactory to the Arranger pursuant to which such Restricted
Subsidiary shall become a party to this Agreement and thereby unconditionally
guarantee all of Borrower's Obligations under the Loans and Notes and this
Agreement on the terms set forth in Section 10 and Section 11 hereof and (ii)
deliver to the Arranger an opinion of counsel that such supplemental agreement
has been duly authorized, executed and delivered by such Restricted Subsidiary
and constitutes a legal, valid, binding and enforceable obligation of such
Restricted Subsidiary (which opinion may be subject to customary assumptions and
qualifications). Thereafter, such Restricted Subsidiary shall (unless released
in accordance with the terms of this Agreement) be a Guarantor for all purposes
of this Agreement.
6A.8 Merger, Sale of Assets; Etc.
---------------------------
A. Borrower shall not consolidate with or merge with or into (whether
or not Borrower is the Surviving Person) any other entity and 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
Borrower's properties and assets (determined on a consolidated basis for
Borrower and the Restricted Subsidiaries) to any entity in a single transaction
or series of related transactions, unless: (i) either (x) Borrower shall be the
Surviving Person or (y) the Surviving Person (if other than 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 an assumption agreement or a supplemental
indenture, as the case may be, the due and punctual payment of the principal of,
premium, if any, and interest on all the Term Notes and the performance and
observance of every covenant of the Loan Documents or to be performed or
observed on the part of Borrower; (ii) immediately thereafter, no Potential
Event of 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 Borrower or any Restricted Subsidiary, directly or indirectly, of
additional Indebtedness (and treating any Indebtedness not previously an
obligation of Borrower 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 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 Section 6A.2. Notwithstanding the foregoing, the TSAT Merger shall be
permitted so long as it is consummated pursuant to the terms and conditions
contained in the TSAT Merger Agreement as in effect on the Closing Date or as
amended thereafter, which amendment, if material, must be approved by the
Required Lenders.
<PAGE>
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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 Borrower shall be deemed to be the transfer of all
or substantially all the properties and assets of 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 Borrower is not the Surviving Person and the Surviving Person
is to assume all the Obligations of Borrower under the Loan Documents pursuant
to an agreement in form and substance satisfactory to the Arranger, such
Surviving Person shall succeed to, and be substituted for, and may exercise
every right and power of, Borrower and Borrower shall be discharged from its
Obligations under the Loan Documents.
B. Subject to the requirements of subparagraph A of this Section
6A.8, in the event of a sale of all or substantially all the assets of any
Guarantor or all of the Equity Interests of any Guarantor, by way of merger,
consolidation or otherwise, then the Surviving Person of any such merger
consolidation, or such Guarantor, if all of its Equity Interests are sold, shall
be released and relieved of any and all obligations under the Guarantee of such
Guarantor if (i) the Person or entity surviving such merger or consolidation or
acquiring the Equity Interests of such Guarantor is not a Restricted Subsidiary,
and (ii) the Net Cash Proceeds from such sale are used after such sale in a
manner that complies with the provisions of Section 6A.9. Except as provided in
the preceding sentence, no Guarantor shall consolidate with or merge with or
into another Person, whether or not such Person is affiliated with such
Guarantor and whether or not such Guarantor is the Surviving Person, unless (i)
the Surviving Person (if other than such Guarantor) is a corporation organized
and validly existing under the laws of the United States, any State thereof or
the District of Columbia, (ii) the Surviving Person (if other than such
Guarantor) expressly assumes all the obligations of such Guarantor under the
Guarantee and this Agreement pursuant to an assumption agreement or a
supplemental indenture in a form reasonably satisfactory to the Agents, (iii) at
the time of and immediately after such Disposition, no Default or Event of
Default shall have occurred and be continuing, and (iv) immediately after giving
effect to any such transaction involving the Incurrence by Borrower or any
Guarantor, directly or indirectly, of additional Indebtedness (and treating any
Indebtedness not previously an obligation of Borrower or any Guarantor 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 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 Section 6A.2; provided, however, that clause (iv) of
this paragraph shall not be a condition to a merger or consolidation of a
Guarantor if such merger or consolidation only involves Borrower and/or one or
more Wholly Owned Restricted Subsidiaries.
6A.9 Disposition of Proceeds of Asset Sales
--------------------------------------
A. Borrower shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, make any Asset Sale, unless (i) 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 or related lines of business being conducted by 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 or related lines of
business being conducted by Borrower or any Restricted Subsidiary at such time.
The amount of any (i) Indebtedness (other than any Subordinated Indebtedness) of
Borrower or any Restricted Sub-
<PAGE>
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sidiary that is actually assumed by the transferee in such Asset Sale and
from which 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 Borrower or the Restricted Subsidiaries and (ii) notes
or other similar obligations received by Borrower or the Restricted Subsidiaries
from such transferee that are converted, sold or exchanged within thirty days of
the related Asset Sale by 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 Borrower or the Restricted
Subsidiaries.
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 or related lines of business being conducted by 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 Section 6A.1.
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 (each such 375th day, a
"Trigger Date") as described in clause (i), (ii) or (iii) of the immediately
------------
preceding paragraph (such Net Cash Proceeds, the "Unutilized Net Cash
-------------------
Proceeds"), Borrower shall comply with Section 2.5A(iv)(b).
- --------
B. So long as 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) or has any obligation under any Permitted
Indebtedness under clause (k) of Section 6A.2 above, for purposes of the
foregoing covenant, the sale or lease of either or both Tempo Satellites
(whether or not the Person owning such Tempo Satellite is a Restricted
Subsidiary), or any transponder thereon or capacity thereof, to any Person
(other than Borrower or any Restricted Subsidiary) shall be considered an Asset
Sale (to the extent of the interest of Borrower and its Subsidiaries in such
Tempo Satellite, transponder thereon or capacity thereof) unless if such sale or
lease is to any other Person, the net proceeds thereof are applied to the
balance due under the Partnership Credit Agreement until the Partnership Credit
Agreement is permanently repaid in full and all commitments to extend credit
thereunder are permanently terminated. 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 Borrower and its Subsidiaries with
the foregoing sentence.
C. If Borrower or any Restricted Subsidiary is engaged in the High
Power Satellite Transmission Business, 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 (except for Permitted
Liens and except for Liens and other encumbrances permitted under the New
PRIMESTAR Senior Credit Facility) (i) any Tempo Satellite (or any contract
rights related to the construction, launch or insurance thereof), to the extent
of the interest of Borrower and its Subsidiaries in such Tempo Satellite, (ii)
any orbital slot owned by 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 the foregoing, unless in any such case
immediately after such a transaction Borrower or such High Power Satellite
Transmission Subsidiary has in place dedicated sat-
<PAGE>
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ellite capacity, or 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 Term Notes and files such agreement with
the Arranger together with an Officers' Certificate certifying that such
agreement meets the foregoing criteria; provided, however, that in no event
-------- -------
shall the covenant be construed to prevent Borrower from discontinuing its High
Power Satellite Transmission Business.
6A.10 Payments for Consent
--------------------
Neither 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 Lender for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of this Agreement
or the Notes unless such consideration is offered to be paid or agreed to be
paid to all Lenders that consent, waive or agree to amend in the time frame set
forth in the solicitation documents relating to such consent, waiver or
agreement.
6A.11 Tempo Satellites; Maintenance of Insurance
------------------------------------------
A. Prior to 180 days following the successful launch of any Tempo
Satellite launched on or before December 31, 1997, Borrower shall not terminate
the Satellite Construction Agreement or amend, modify or refrain from enforcing
any provision thereof in any manner adverse to Borrower or any of its
Subsidiaries or the holders of the Term Notes in any material respect, as
determined by the Board of Directors of Borrower, and shall not amend, modify or
refrain from enforcing any provision thereof regarding the rights of Borrower
under the Satellite Construction Agreement (if any) with respect to any failure
of any Tempo Satellite that may occur in connection with the launch thereof or
during the 180 day period immediately thereafter.
B. Upon the earliest to occur of (x) the TSAT Merger, (y) the
exercise by Borrower or one of its Restricted Subsidiaries of the Tempo Option
and (z) failure of either Loral or TSAT to comply with the terms of any
agreement with respect to maintenance of In-Orbit Insurance as such agreements
are in effect on the date hereof, with respect to the Tempo Satellite (or any
permanent replacement thereof), if Borrower or any Subsidiary is engaged in the
High Power Satellite Transmission Business, so long as (i) Borrower or such
Subsidiary engaged in the High Power Satellite Transmission Business does not
have in place other dedicated in-orbit satellite capacity or (ii) a ground spare
satellite of comparable or superior quality and capacity has not been completely
constructed and available to be launched (pursuant to a binding agreement, a
copy of which has been filed with the Arranger) in each case sufficient capacity
to permit 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 Borrower or any Subsidiary after completion of in-orbit testing by
the builder thereof, 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. Borrower or such Restricted
Subsidiary shall be named as the insured under such In-Orbit Insurance
(provided, however, that only a senior secured creditor of Borrower or a
-------- -------
Restricted Subsidiary may also be designated as a named insured under such In-
Orbit Insurance).
C. Immediately upon consummation of the ASkyB Transaction, so long as
(i) Borrower or such Subsidiary engaged in the High Power Satellite Transmission
Business does not have in place other dedicated in-orbit satellite capacity or
(ii) a ground spare satellite of comparable or superior quality and capacity has
not been completely constructed and available to be launched, in each case
sufficient capacity to permit Borrower or the Restricted Subsidiary engaged in
the High Power Satellite Transmission Business to conduct
<PAGE>
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such business on a competitive basis and service its subscribers, then within 30
days after the consummation of the ASkyB Transaction, Borrower shall, or shall
cause a Restricted Subsidiary to, obtain (to the extent commercially available
upon reasonable terms), and thereafter to maintain, In-Orbit Insurance with
respect to the ASkyB Satellite (or any permanent replacement thereof).
D. In the event that 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
Borrower shall apply such proceeds as required by the second and third full
paragraphs under Section 6A.9A, except as provided by Section 6A.9B.
6A.12 Designation of Unrestricted Subsidiaries
----------------------------------------
A. Each Subsidiary of Borrower that has been designated as of the
Closing Date under the Existing Indentures as an Unrestricted Subsidiary
pursuant to the terms thereof (and which designation as of the Closing Date has
not been revoked thereunder) is initially designated by Borrower as an
Unrestricted Subsidiary as of the Closing Date. Borrower may designate after
the Closing Date any other Subsidiary of Borrower as an "Unrestricted
Subsidiary" under this Agreement (a "Designation") so long as such Subsidiary is
-----------
also on the same date designated as an Unrestricted Subsidiary pursuant to the
Existing Indentures and the Senior Subordinated Indenture (if in effect) and
only if:
(i) no Potential Event of 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,
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 Section 6A.2; and
(iii) 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
Section 6A.1 in an amount (the "Designation Amount") equal to the Fair
------------------
Market Value of 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 Borrower shall be
designated an Unrestricted Subsidiary which (i) holds the partnership interest
in (or any debt or equity interest in) Primestar 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; (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 wholesale strategy is implemented, the business of distributing the
wholesale service to cable system operators), or has any interest in any such
business or the right to receive the income or profits therefrom; or (iii) holds
any right, title or interest in the assets transferred to Borrower pursuant to
the ASkyB Transaction.
Neither 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,
<PAGE>
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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, except, in the case of clause (x)
or (y), to the extent otherwise permitted under the terms of this Agreement,
including, without limitation, pursuant to Section 6A.1 and Section 6A.9, and
except for any non-recourse guarantee given solely to support the pledge by
Borrower or any Restricted Subsidiary of the Equity Interests of any
Unrestricted Subsidiary.
B. Borrower may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation") if:
----------
(i) no Potential Event of 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 this
Agreement.
All Designations and Revocations must be evidenced by resolutions of
the Board of Directors of Borrower delivered to the Arranger certifying
compliance with the foregoing provisions.
6A.13 Refinancing of Loans in Part.
----------------------------
Borrower shall not, nor shall Borrower cause or permit any of it
Subsidiaries to, Incur any Indebtedness to Refinance the Loans in part other
than the Refinancing Securities, the Required Refinancing Securities or the
Exchange Notes, unless the terms, conditions, covenants, events of default and
other provisions in respect of the events of default and other provisions in
respect of the instruments evidencing the Indebtedness Incurred to Refinance the
Loans in part shall have been approved in writing by the Agents (which approval
shall not be unreasonably withheld) prior to the Incurrence of any such
Indebtedness.
SECTION 7. EVENTS OF DEFAULT
If any of the following conditions or events (each, an "Event of
--------
Default") shall occur and be continuing:
- -------
7.1 Failure To Make Payments When Due
---------------------------------
Failure to pay any installment of principal of the Loans when due,
whether at stated maturity, by acceleration, by notice of prepayment or
otherwise (whether or not such payment is prohibited by Section 8); or failure
to pay any interest on the Loans or any other amount due under this Agreement
(i) prior to the Conversion Date, within five days or more after the date due,
or (ii) on and after the Conversion Date, within 30 days or more after the date
due (in any case whether or not such payment is prohibited by Section 8); or
<PAGE>
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7.2 Default in Other Agreements
---------------------------
Failure of Borrower or any of its Material Subsidiaries to pay at
final maturity any principal on one or more issues of Indebtedness of Borrower
or of any of its Subsidiaries (other than Indebtedness referred to in Section
7.1) or breach or default by Borrower or any of its Material Subsidiaries with
respect to any other term of any one or more issues of Indebtedness of Borrower
or of any of its Material Subsidiaries or any agreement or instrument evidencing
or securing such Indebtedness and such default or breach results in the
acceleration of that Indebtedness prior to its stated maturity and, in either
case, the principal amount of such Indebtedness and all other such Indebtedness
of Borrower and its Subsidiaries in respect of which there is a failure to pay
principal or interest or which has been so accelerated equals $15,000,000 or
more; or
7.3 Change of Control; Breach of Certain Covenants
----------------------------------------------
A. The occurrence of a Change of Control prior to the Conversion
Date.
B. Failure of Borrower to perform or comply with any covenant, term
or condition contained in Section 2.5A(iv); or
7.4 Breach of Warranty
------------------
Any representation, warranty or certification made by Borrower or any
other Loan Party in any Loan Document or in any statement or certificate at any
time given by Borrower in writing pursuant hereto or thereto or in connection
herewith or therewith shall be false or incorrect in any material respect on the
date as of which made or deemed made; or
7.5 Other Defaults Under Agreement or Loan Documents
------------------------------------------------
Borrower shall (x) default in the performance of or compliance with
any covenant, term or condition contained in Section 6 of this Agreement, or (y)
default in the performance of or compliance with any covenant, term or condition
contained in this Agreement or the other Loan Documents (other than those
covered by Sections 7.1, 7.3, 7.4, 7.5(x), or 7.10) and, with respect to this
Section 7.5(y), such default shall not have been remedied or waived in
accordance with this Agreement within 30 days after the date of written notice
from the holder or holders of not less than 25% in aggregate principal amount of
the Loans then outstanding of such default; or
7.6 Involuntary Bankruptcy; Appointment of Custodian, Etc.
------------------------------------------------------
A court of competent jurisdiction enters a Bankruptcy Order under any
Bankruptcy Law that:
(A) is for relief against Borrower or any Material Subsidiary in an
involuntary case or proceeding, or
(B) appoints a Custodian of Borrower or any Material Subsidiary for
all or substantially all of its properties, or
(C) orders the liquidation of Borrower or any Material Subsidiary,
and in each case the order or decree remains unstayed and in effect for 60 days;
or
<PAGE>
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7.7 Voluntary Bankruptcy; Appointment of Custodian, Etc.
----------------------------------------------------
Borrower or any Material Subsidiary pursuant to or within the meaning
of any Bankruptcy Law:
(A) commences a voluntary case or proceeding, or
(B) consents to the entry of a Bankruptcy Order for relief against it
in an involuntary case or proceeding, or
(C) consents to the appointment of a Custodian of it or for all or
substantially all of its property, or
(D) makes a general assignment for the benefit of its creditors or
files a proposal or scheme of arrangement involving the rescheduling or
composition of its indebtedness, or
(E) consents to the filing of a petition in bankruptcy against it, or
(F) shall generally not pay its debts when such debts become due or
shall admit in writing its inability to pay its debts generally; or
7.8 Judgments and Attachments
-------------------------
Any money judgment, writ or warrant of attachment, or similar process
involving in any individual case or in the aggregate at any time an amount in
excess of $15,000,000 (to the extent not covered by third-party insurance as to
which the insurance company has acknowledged responsibility) shall be entered or
filed against Borrower or any of its Material Subsidiaries or any of their
respective properties or assets and shall remain undischarged, unvacated,
unbonded or unstayed for a period of 60 days or in any event later than five
days prior to the date of any proposed sale thereunder; or
7.9 Dissolution
-----------
Any order, judgment or decree shall be entered against Borrower or any
Material Subsidiary decreeing the dissolution or split-up of Borrower or that
Material Subsidiary and such order shall remain undischarged or unstayed for a
period in excess of 30 days; or
7.10 Guarantee
---------
(i) Any Guarantee or any material provision thereof shall cease
to be in full force or effect (other than in accordance with its express terms),
or (ii) any Guarantor or any Person acting by or on behalf of such Guarantor
shall deny or disaffirm such Guarantor's obligations under its Guarantee, or
(iii) any Guarantor shall default in the due performance or observance of any
term, covenant or agreement on its part to be performed or observed, after
giving effect to any applicable grace periods, pursuant to its Guarantee; or
7.11 Foreclosure
-----------
The agent under the New PRIMESTAR Senior Credit Facility or any other
party entitled to act thereunder commences judicial proceedings to foreclose on
the collateral securing the Indebtedness or ex-
<PAGE>
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ercises any right under applicable law or any instrument evidencing a security
interest or other encumbrance in respect of such collateral to take ownership or
effect the transfer of such collateral in lieu of foreclosure;
THEN (i) upon the occurrence of any Event of Default described in the
foregoing Sections 7.6 or 7.7 with respect to Borrower, all of the unpaid
principal amount of and accrued interest on the Loans and all other outstanding
Obligations shall automatically become immediately due and payable, without
presentment, demand, protest or other requirements of any kind, all of which are
hereby expressly waived by Borrower, and the commitments of the Lenders
hereunder shall thereupon automatically terminate, and (ii) upon the occurrence
of any other Event of Default, the Agents shall, upon written notice of the
holder or holders of at least 25% in aggregate principal amount of the Loans
then outstanding, by written notice to Borrower, declare all of the unpaid
principal amount of and accrued interest on the Loans and all other outstanding
Obligations to be, and the same shall forthwith become, due and payable, and the
obligations of the Lenders hereunder shall thereupon terminate; provided,
--------
however, that so long as the New PRIMESTAR Senior 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 Borrower described in
Section 7.6 or Section 7.7), the Loans 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 Loans to the agent under the New PRIMESTAR
Senior Credit Facility and (y) the acceleration (ipso facto or otherwise) of any
---- -----
Indebtedness under the New PRIMESTAR Senior Credit Facility. Nevertheless, if
at any time after acceleration of the maturity of the Loans, Borrower shall pay
all arrears of interest and all payments on account of the principal thereof
which shall have become due otherwise than by acceleration (with interest on
principal and, to the extent permitted by law, on overdue interest, at the rates
specified in this Agreement or the Notes) and all Events of Default and
Potential Events of Default (other than non-payment of principal of and accrued
interest on the Loans and the Notes due and payable solely by virtue of
acceleration) shall be remedied or waived pursuant to Section 12.5, then the
Agents shall, upon written notice of the holders of a majority in aggregate
principal amount of the Loans then outstanding, by written notice to Borrower
rescind and annul the acceleration and its consequences; but such action shall
not affect any subsequent Event of Default or Potential Event of Default or
impair any right consequent thereon.
SECTION 8. SUBORDINATION
8.1 Loans and Notes Subordinated to Senior Indebtedness
---------------------------------------------------
Borrower covenants and agrees, and the Arranger and each Lender by its
acceptance thereof likewise covenant and agree, that all Loans and Notes shall
be issued subject to the provisions of this Section 8; and each person holding
any Loan or Note, whether upon original issue or upon transfer, assignment or
exchange thereof, accepts and agrees that all payments of the principal of and
interest on the Loans and Notes by Borrower shall, to the extent and in the
manner set forth in this Section 8, be subordinated and junior in right of
payment to the prior payment in full in cash of all amounts payable under Senior
Indebtedness.
8.2 No Payment on Loans and Notes in Certain Circumstances;
Payments Held in Trust
----------------------
A. No Payments in Certain Circumstances. No direct or indirect
------------------------------------
payment (excluding any payment or distribution of Permitted Junior Securities)
by or on behalf of Borrower of principal of or interest on the Loans and Notes,
whether pursuant to the terms of the Loans or Notes, upon acceleration, pursuant
to an Offer to Purchase or otherwise, shall be made if, at the time of such
payment, there exists a default in the
<PAGE>
-90-
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 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 Arranger of written notice (a "Payment
-------
Blockage Notice") from the holder or holders 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) shall be made by or on behalf of Borrower of principal of or
interest on the Loans or Notes, except from those funds held in trust for the
benefit of Holders of any Securities pursuant to the procedures set forth in
Article Nine hereof, to such Holders, during a period (a "Payment Blockage
Period") commencing on the date of receipt of such notice by the Arranger and
ending 179 days thereafter.
Notwithstanding anything herein or in the Securities to the contrary,
(x) in no event shall 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 Loans or 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.
B. Payments Held in Trust. In the event that, notwithstanding the
----------------------
foregoing, any payment shall be received by the Arranger or any Lender when such
payment is prohibited by Section 8.2A, such payment shall be held in trust for
the benefit of, and shall be paid over or delivered to, the holders of
Designated Senior Indebtedness or their respective representatives, or to the
trustee or trustees under any indenture pursuant to which any of such Designated
Senior Indebtedness may have been issued, as their respective interests may
appear, but only to the extent that, upon notice from the Arranger to the
holders of Designated Senior Indebtedness that such prohibited payment has been
made, the holders of the Designated Senior Indebtedness (or their representative
or representatives or a trustee) notify the Arranger in writing of the amounts
then due and owing on the Designated Senior Indebtedness, if any, and only the
amounts specified in such notice to the Arranger shall be paid to the holders of
Designated Senior Indebtedness.
8.3 Payment Over of Proceeds upon Dissolution, Etc.
----------------------------------------------
A. Payment Over. Upon any payment or distribution of assets or
------------
securities of 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 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 Lenders or the Arranger on behalf of such Lenders
<PAGE>
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shall be entitled to receive any payment by Borrower of the principal of or
interest on the Loans or Notes, or any payment by Borrower to acquire any of the
Loans or Notes for cash, property or securities, or any distribution with
respect to the Loans or 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, Borrower of the principal of or interest on the
Loans or Notes upon any such dissolution or winding-up or liquidation or
reorganization, any payment or distribution of assets or securities of Borrower
of any kind or character, whether in cash, property or securities (excluding any
payment or distribution of Permitted Junior Securities), to which the Lenders or
the Arranger on their behalf would be entitled, but for the subordination
provisions of this Agreement, shall be made by 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.
B. Payments Held in Trust. In the event that, notwithstanding the
----------------------
foregoing provision prohibiting such payment or distribution, any payment or
distribution of assets or securities of Borrower of any kind or character,
whether in cash, property or securities (excluding any payment or distribution
of Permitted Junior Securities), shall be received by the Arranger or any Lender
at a time when such payment or distribution is prohibited by Section 8.3A and
before all obligations in respect of Senior Indebtedness are paid in full in
cash, or payment provided for, such payment or distribution shall be received
and held in trust for the benefit of, and shall be paid over or delivered to,
the holders of Senior Indebtedness (pro rata to such holders on the basis of the
--------
respective amounts of Senior Indebtedness held by such holders) or their
respective representatives, or to the trustee or trustees or agent or agents
under any indenture pursuant to which any of such Senior Indebtedness may have
been issued, as their respective interests may appear, for application to the
payment of Senior Indebtedness remaining unpaid until all such Senior
Indebtedness has been paid 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.
The consolidation of Borrower with, or the merger of Borrower with or
into, another corporation or the liquidation or dissolution of Borrower
following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation upon the terms and
conditions provided in Section 6A.8 shall not be deemed a dissolution, winding-
up, liquidation or reorganization for the purposes of this Section 8.3 if such
other corporation shall, as a part of such consolidation, merger, conveyance or
transfer, comply with the conditions stated in Section 6A.8.
8.4 Subrogation
-----------
Upon the payment in full in cash of all Senior Indebtedness, or
provision for payment, the Lenders shall be subrogated to the rights of the
holders of Senior Indebtedness to receive payments or distributions of cash,
property or securities of Borrower made on such Senior Indebtedness until the
principal of and interest on the Loans and Notes shall be paid in full in cash;
and, for the purposes of such subrogation, no payments or distributions to the
holders of the Senior Indebtedness of any cash, property or securities to which
the Lenders or the Arranger on their behalf would be entitled except for the
provisions of this Section 8, and no payment over pursuant to the provisions of
this Section 8 to the holders of Senior Indebtedness by Lenders or the Arranger
on their behalf shall, as between Borrower, its creditors other than holders of
Senior Indebtedness, and the Lenders, be deemed to be a payment by Borrower to
or on account of the Senior Indebtedness.
<PAGE>
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It is understood that the provisions of this Section 8 are and are intended
solely for the purpose of defining the relative rights of the Lenders, on the
one hand, and the holders of the Senior Indebtedness, on the other hand.
If any payment or distribution to which the Lenders would otherwise
have been entitled but for the provisions of this Section 8 shall have been
applied, pursuant to the provisions of this Section 8, to the payment of all
amounts payable under Senior Indebtedness, then and in such case, the Lenders
shall be entitled to receive from the holders of such Senior Indebtedness any
payments or distributions received by such holders of Senior Indebtedness in
excess of the amount required to make payment in full, or provision for payment,
of such Senior Indebtedness.
8.5 Obligations of Borrower Unconditional
-------------------------------------
Nothing contained in this Section 8 or elsewhere in this Agreement or
in the Notes is intended to or shall impair, as among Borrower and the Lenders,
the obligation of Borrower, which is absolute and unconditional, to pay to the
Lenders the principal of and interest on the Loans and Notes as and when the
same shall become due and payable in accordance with their terms, or is intended
to or shall affect the relative rights of the Lenders and creditors of Borrower
other than the holders of the Senior Indebtedness, nor shall anything herein or
therein prevent the Lenders or the Arranger on their behalf from exercising all
remedies otherwise permitted by applicable law upon default under this
Agreement, subject to the rights, if any, under this Section 8 of the holders of
the Senior Indebtedness in respect of cash, property or securities of Borrower
received upon the exercise of any such remedy.
Without limiting the generality of the foregoing, nothing contained in
this Section 8 shall restrict the right of the Arranger or the Lenders to take
any action to declare the Securities to be due and payable prior to their stated
maturity pursuant to Section 7 or to pursue any rights or remedies hereunder;
provided, however, that all Senior Indebtedness then due and payable shall first
- -------- -------
be paid in full before the Lenders or the Arranger are entitled to receive any
direct or indirect payment from Borrower of principal of or interest on the
Loans and Notes.
8.6 Notice to Arranger
------------------
Borrower shall give prompt written notice to the Arranger of any fact
known to Borrower which would prohibit the making of any payment to or by the
Arranger in respect of the Loans or Notes pursuant to the provisions of this
Section 8. The Arranger shall not be charged with knowledge of the existence of
any event of default with respect to any Senior Indebtedness or of any other
facts which would prohibit the making of any payment to or by the Arranger
unless and until the Arranger shall have received notice in writing to that
effect signed by an Officer of Borrower, or by a holder of Senior Indebtedness
or trustee or agent therefor; and prior to the receipt of any such written
notice, the Arranger shall be entitled to assume that no such facts exist;
provided, however, that if the Arranger shall not have received the notice
- -------- -------
provided for in this Section 8.6 at least two Business Days prior to the date
upon which by the terms of this Agreement any moneys shall become payable for
any purpose (including, without limitation, the payment of the principal of or
interest on any Loan or Note), then, regardless of anything herein to the
contrary, the Arranger shall have full power and authority to receive any moneys
from Borrower and to apply the same to the purpose for which they were received,
and shall not be affected by any notice to the contrary which may be received by
it on or after such prior date. Nothing contained in this Section 8.6 shall
limit the right of the holders of Senior Indebtedness to recover payments as
contemplated by Section 8.3. The Arranger shall be entitled to rely on the
delivery to it of a written notice by a Person representing himself or itself to
be a holder of any Senior Indebt-
<PAGE>
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edness (or a trustee on behalf of, or other representative of, such holder) to
establish that such notice has been given by a holder of such Senior
Indebtedness or a trustee or representative on behalf of any such holder.
In the event that the Arranger determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Section 8, the Arranger may request such Person to furnish evidence to the
reasonable satisfaction of the Arranger as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Section 8, and if such evidence is not furnished, the
Arranger may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
8.7 Reliance on Judicial Order or Certificate of Liquidating Agent
--------------------------------------------------------------
Upon any payment or distribution of assets or securities referred to
in this Section 8, the Arranger and the Lenders shall be entitled to rely upon
any order or decree made by any court of competent jurisdiction in which
bankruptcy, dissolution, winding-up, liquidation or reorganization proceedings
are pending, or upon a certificate of the receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making such payment or distribution,
delivered to the Arranger or to the Lenders for the purpose of ascertaining the
persons entitled to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of Borrower, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Section 8.
8.8 Arranger's Relation to Senior Indebtedness
------------------------------------------
The Arranger shall be entitled to all the rights set forth in this
Section 8 with respect to any Senior Indebtedness which may at any time be held
by it in its individual or any other capacity to the same extent as any other
holder of Senior Indebtedness, and nothing in this Agreement shall deprive the
Arranger of any of its rights as such holder.
With respect to the holders of Senior Indebtedness, the Arranger
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Section 8, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Agreement or the Notes against the Arranger. The Arranger shall not
be deemed to owe any fiduciary duty to the holders of Senior Indebtedness
(except as provided in Section 8.3B). The Arranger shall not be liable to any
such holders if the Arranger shall in good faith mistakenly pay over or
distribute to Lenders or to Borrower or to any other person cash, property or
securities to which any holders of Senior Indebtedness shall be entitled by
virtue of this Section 8 or otherwise.
8.9 Subordination Rights not Impaired by Acts or Omissions of
Borrower or Holders of Senior Indebtedness
---------------------------------------------------------
No right of any present or future holders of any Senior Indebtedness
to enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of Borrower or
by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by Borrower with the terms of this Agreement, regardless of any
knowledge thereof which any such holder may have or otherwise be charged with.
The provisions of this Section 8 are intended to be for the benefit of, and
shall be enforceable directly by, the holders of Senior Indebtedness.
<PAGE>
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8.10 Lenders Authorize Arranger To Effectuate Subordination of Loans
and Notes
---------------------------------------------------------------
Each Lender by his acceptance of Loans and Notes authorizes and
expressly directs the Arranger on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Section 8, and appoints the Arranger his attorney-in-fact for such purposes,
including, in the event of any dissolution, winding-up, liquidation or
reorganization of Borrower (whether in bankruptcy, insolvency, receivership,
reorganization or similar proceedings or upon an assignment for the benefit of
creditors or otherwise) tending towards liquidation of the business and assets
of Borrower, the filing of a claim for the unpaid balance of its Loans and Notes
in the form required in those proceedings.
8.11 This Section not To Prevent Events of Default
---------------------------------------------
The failure to make a payment on account of principal of or interest
on the Loans or Notes by reason of any provision of this Section 8 shall not be
construed as preventing the occurrence of an Event of Default specified in
Section 7.1.
8.12 Arranger's Compensation not Prejudiced
--------------------------------------
Nothing in this Section 8 shall apply to amounts due to the Arranger
pursuant to other sections in this Agreement.
8.13 No Waiver of Subordination Provisions
-------------------------------------
Without in any way limiting the generality of Section 8.9, the holders
of Senior Indebtedness may, at any time and from time to time, without the
consent of or notice to the Arranger or the Lenders, without incurring
responsibility to the Lenders and without impairing or releasing the
subordination provided in this Section 8 or the obligations hereunder of the
Lenders to the holders of Senior Indebtedness, do any one or more of the
following: (a) change the manner, place or terms of payment or extend the time
of payment of, or renew or alter, Senior Indebtedness or any instrument
evidencing the same or any agreement under which Senior Indebtedness is
outstanding or secured; (b) sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing Senior Indebtedness; (c)
release any Person liable in any manner for the collection of Senior
Indebtedness; and (d) exercise or refrain from exercising any rights against
Borrower and any other Person.
8.14 Acceleration of Loans and Notes
-------------------------------
If payment of the Loans or Notes is accelerated because of an Event of
Default, Borrower shall promptly notify holders of the Senior Indebtedness of
the acceleration.
SECTION 9. THE AGENTS
9.1 General Provisions
------------------
Each of the Lenders hereby irrevocably appoints the Arranger as its
agent and authorizes the Arranger to take such actions on its behalf and to
exercise such powers as are delegated to the Arranger by the
<PAGE>
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terms hereof, together with such actions and powers as are reasonably incidental
thereto. Each Lender authorizes the Agents to enter into the Assumption
Agreements on behalf of itself and all of the Lenders.
The Lender or other financial institution serving as any Agent
hereunder shall have the same rights and powers in its capacity as a Lender as
any other Lender and may exercise the same as though it were not such Agent, and
such bank and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with Borrower or any Subsidiary or
other Affiliate thereof as if it were not such Agent hereunder.
No Agent shall have any duties or obligations except those expressly
set forth herein. Without limiting the generality of the foregoing, (a) no
Agent shall be subject to any fiduciary or other implied duties, regardless of
whether an Event of Default or Potential Event of Default has occurred and is
continuing, (b) no Agent shall have any duty to take any discretionary action or
exercise any discretionary powers, except discretionary rights and powers
expressly contemplated hereby that such Agent is required to exercise in writing
by the Required Lenders (or such other number or percentage of the Lenders as
shall be necessary under the circumstances as provided in Section 12.5), and (c)
except as expressly set forth herein, no Agent shall have any duty to disclose,
and shall not be liable for the failure to disclose, any information relating to
Borrower or any Subsidiary that is communicated to or obtained by the financial
institution serving as such Agent or any of its Affiliates in any capacity. No
Agent shall be liable for any action taken or not taken by it with the consent
or at the request of the Required Lenders (or such other number or percentage of
the Lenders as shall be necessary under the circumstances as provided in Section
12.5) or in the absence of its own gross negligence or willful misconduct. No
Agent shall be deemed to have knowledge of any Event of Default or Potential
Event of Default unless and until written notice thereof is given to the
Arranger and such Agent by Borrower or a Lender, and no Agent shall be
responsible for or have any duty to ascertain or inquire into (i) any statement,
warranty or representation made in or in connection with this Agreement or any
other Loan Document, (ii) the contents of any certificate, report or other
document delivered hereunder or under any other Loan Document or in connection
herewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth herein, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement or any other Loan
Document or any other agreement, instrument or document, or (v) the satisfaction
of any condition set forth in Section 3 or elsewhere herein, other than to
confirm receipt of items expressly required to be delivered to such Agent.
Each Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. Each Agent also may rely
upon any statement made to it orally or by telephone and believed by it to be
made by the proper Person, and shall not incur any liability for relying
thereon. Each Agent may consult with legal counsel (who may be counsel for
Borrower), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.
Each Agent may perform any and all its duties and exercise its rights
and powers by or through any one or more sub-agents appointed by such Agent.
Each Agent and any such sub-agent may perform any and all its duties and
exercise its rights and powers through their respective Affiliates, directors,
officers, employees, agents and advisors ("Related Parties"). The exculpatory
---------------
provisions of the preceding paragraphs shall apply to any such sub-agent and to
the Related Parties of each Agent and any such sub-agent, and shall apply to
their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as such Agent.
<PAGE>
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Any Agent may resign at any time by notifying the Lenders and
Borrower. Upon any such resignation, the Required Lenders shall have the right,
in consultation with Borrower, to appoint a successor. If no successor shall
have been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Agent gives notice of its
resignation, then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent which shall be a bank with an office in New York, New York, or
an Affiliate of any such bank. Upon the acceptance of its appointment as Agent
hereunder by a successor, such successor shall succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations hereunder.
The fees payable by Borrower to a successor Agent shall be the same as those
payable to its predecessor unless otherwise agreed between Borrower and such
successor. After the Agent's resignation hereunder, the provisions of this
Section 9 shall continue in effect for the benefit of such retiring Agent, its
sub-agents and their respective Related Parties in respect of any actions taken
or omitted to be taken by any of them while it was acting as such Agent.
Each Lender acknowledges that it has, independently and without
reliance upon any Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon any Agent or any other Lender and
based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement, any related agreement or any document
furnished hereunder or thereunder. No Agent shall be deemed a trustee or other
fiduciary on behalf of any party.
9.2 Indemnification
---------------
Each Lender agrees to indemnify and hold harmless each Agent (to the
extent not promptly reimbursed under Section 12.3, but without limiting the
obligations of Borrower under Section 12.3), ratably in accordance with the
aggregate principal amount of the Loans held by the Lenders (or, if no Loans are
at the time outstanding, ratably in accordance with their respective Loan
Commitments), for any and all liabilities (including pursuant to any
Environmental Law), obligations, losses, damages, penalties, actions, judgments,
deficiencies, suits, costs, expenses (including reasonable attorney's fees) or
disbursements of any kind and nature whatsoever that may be imposed on, incurred
by or asserted against such Agent (including by any Lender) arising out of or by
reason of any investigation in or in any way relating to or arising out of any
Loan Document or any other documents contemplated by or referred to therein for
any action taken or omitted to be taken by such Agent under or in respect of any
of the Loan Documents or other such documents or the transactions contemplated
thereby (including the costs and expenses that Borrower is obligated to pay
under Section 12.3, but excluding, unless a Potential Event of Default has
occurred and is continuing, normal administrative costs and expenses incident to
the performance of its agency duties hereunder) or the enforcement of any of the
terms hereof or thereof or of any such other documents; provided, however, that
-------- -------
no Lender shall be liable for any of the foregoing to the extent they are
determined by a court of competent jurisdiction in a final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of the
party to be indemnified. The agreements set forth in this Section 9.2 shall
survive the payment of all Loans and other obligations hereunder and shall be in
addition to and not in lieu of any other indemnification agreements contained in
any other Loan Document.
<PAGE>
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9.3 Consents Under Other Loan Documents
-----------------------------------
Except as otherwise provided in this Agreement and the other Loan
Documents, the Arranger may, with the prior consent of the Required Lenders (but
not otherwise), consent to any modification, supplement or waiver under any of
the other Loan Documents.
SECTION 10. GUARANTEE
10.1 Unconditional Guarantee
-----------------------
Each Guarantor hereby unconditionally, jointly and severally,
guarantees to each Lender and to the Arranger and its successors and assigns
that: the principal of and interest on the Loans and Notes will be promptly paid
in full when due, subject to any applicable grace period, whether at maturity,
by acceleration or otherwise, and interest on the overdue principal and interest
on any overdue interest on the Loans and Notes and all other obligations of
Borrower to the Lenders or the Arranger hereunder or under the Loans and Notes
will be promptly paid in full or performed, all in accordance with the terms
hereof and thereof; subject, however, to the limitations set forth in Section
10.4. Each Guarantor hereby agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Loans and Notes, the absence of any action to enforce the same, any waiver or
consent by any Lender with respect to any provisions hereof or thereof, the
recovery of any judgment against Borrower, any action to enforce the same or any
other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a Guarantor. Each Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of Borrower, any right to require a proceeding first
against Borrower, protest, notice and all demands whatsoever and covenants that
the Guarantee will not be discharged except by complete performance of the
obligations contained in the Loan Documents, and this Guarantee. If any Lender
or the Arranger is required by any court or otherwise to return to Borrower, any
Guarantor, or any custodian, trustee, liquidator or other similar official
acting in relation to Borrower or any Guarantor, any amount paid by Borrower or
any Guarantor to the Arranger or such Lender, this Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and effect. Each
Guarantor further agrees that, as between each Guarantor, on the one hand, and
the Lenders and the Arranger, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Section 7 for
the purpose of this Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any acceleration of such obligations
as provided in Section 7, such obligations (whether or not due and payable)
shall forth become due and payable by each Guarantor for the purpose of this
Guarantee.
10.2 Severability
------------
In case any provision of this Guarantee shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
10.3 Release of a Guarantor
----------------------
If Section 6A.8B is complied with, or if Section 6A.7 provides for any
Person who becomes a Guarantor after the Issue Date to be released from its
Guarantee then the applicable Guarantor shall be deemed released from all
obligations under this Section 10 without any further action required on the
part of the Arranger or any Lender. The Arranger shall, at the sole cost and
expense of Borrower and upon receipt at
<PAGE>
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the reasonable request of the Arranger of an opinion of counsel that the
provisions of this Section 10.3 have been complied with, deliver an appropriate
instrument evidencing such release upon receipt of a request by Borrower
accompanied by an Officers' Certificate certifying as to the compliance with
this Section 10.03. Any Guarantor not so released remains liable for the full
amount of principal of and interest on the Loans and Notes and the other
obligations of Borrower hereunder as provided in this Section 10.
10.4 Limitation of Guarantor's Liability
-----------------------------------
Each Guarantor, and by its acceptance hereof each Lender and the
Arranger, hereby confirms that it is the intention of all such parties that the
guarantee by such Guarantor pursuant to its Guarantee not constitute a
fraudulent transfer or conveyance for purposes of title 11 of the United States
Code, as amended, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar U.S. Federal or state or other applicable law. To
effectuate the foregoing intention, the Lenders and such Guarantor hereby
irrevocably agree that the obligations of such Guarantor under the Guarantee
shall be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Guarantor and after giving effect to
any collections from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under its Guarantee or
pursuant to Section 10.4, result in the obligations of such Guarantor under the
Guarantee not constituting such fraudulent transfer or conveyance.
10.5 Contribution
------------
In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, inter se, that in the event any payment or
distribution is made by any Guarantor (a "Funding Guarantor") under the
-----------------
Guaranty, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a pro rata amount, based on the net assets of each Guarantor
--- ----
(including the Funding Guarantor), determined in accordance with GAAP, subject
to Section 10.4, for all payments, damages and expenses incurred by that Funding
Guarantor in discharging Borrower's obligations with respect to the Loans or
Notes or any other Guarantor's obligations with respect to the Guarantee.
10.6 Subordination of Subrogation and Other Rights
---------------------------------------------
Each Guarantor hereby agrees that any claim against Borrower that
arises from the payment, performance or enforcement of such Guarantor's
obligations under its Guarantee or any Loan Document, including, without
limitation, any right of subrogation, shall be subject and subordinate to, and
no payment with respect to any such claim of such Guarantor shall be made
before, the payment in full in cash of all outstanding Loans and Notes in
accordance with the provisions provided therefor in this Agreement.
SECTION 11. SUBORDINATION OF GUARANTEE OBLIGATIONS
11.1 Guarantee Obligations Subordinated to Guarantor Senior
------------------------------------------------------
Indebtedness
------------
Each Guarantor covenants and agrees, and the Arranger and each Lender
by its acceptance thereof likewise covenant and agree, that the Guarantee shall
be issued subject to the provisions of this Section 11; and each Person holding
any Loan or Note, whether upon original issue or upon transfer, assignment or
exchange thereof, accepts and agrees that all payments of the principal of and
interest on the Loans or Notes pursuant to the Guarantee made by or on behalf of
any Guarantor shall, to the extent and in the manner set forth in this Section
11, be subordinated and junior in right of payment to the prior payment in full
in cash of all amounts payable under Guarantor Senior Indebtedness of such
Guarantor.
<PAGE>
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11.2 No Payment on Guarantees in Certain Circumstances; Payments Held
----------------------------------------------------------------
in Trusts
---------
A. No Payments in Certain Circumstances. No direct or indirect
------------------------------------
payment (excluding any payment or distribution of Permitted Junior Securities)
by or on behalf of any Guarantor of principal of or interest on the Loans or
Notes pursuant to such Guarantor's Guarantee, whether pursuant to the terms of
the Loans or Notes, upon acceleration or otherwise, shall be made if, at the
time of such payment, there exists a default in the payment of all or any
portion of the obligations on any Designated Guarantor Senior Indebtedness of
such Guarantor, whether at maturity, on account of mandatory redemption or
prepayment, acceleration or otherwise, and such default shall not have been
cured or waived or the benefits of this sentence waived by or on behalf of the
Lenders of such Designated Guarantor Senior Indebtedness. In addition, during
the continuance of any non-payment event of default with respect to any
Designated Guarantor Senior Indebtedness pursuant to which the maturity thereof
may be immediately accelerated, and upon receipt by the Arranger of written
notice (the "Guarantor Payment Blockage Notice") from the Lender or Lenders of
---------------------------------
such Designated Guarantor Senior Indebtedness or the Arranger or agent acting on
behalf of such Designated Guarantor Senior Indebtedness, then, unless and until
such event of default has been cured or waived or has ceased to exist or such
Designated Guarantor Senior Indebtedness has been discharged or paid in full in
cash or the benefits of these provisions have been waived by the Lenders of such
Designated Guarantor Senior Indebtedness, no direct or indirect payment
(excluding any payment or distribution of Permitted Junior Securities) shall be
made by or on behalf of such Guarantor of principal or interest on the during a
period (a "Guarantor Blockage Period") commencing on the date of receipt of such
-------------------------
notice by the Arranger and ending 179 days thereafter.
Notwithstanding anything herein or in the Loans or Notes to the
contrary, (x) in no event shall a Guarantor Blockage Period extend beyond 179
days from the date the Guarantor 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 Guarantor Blockage Period is in effect and (z) not more than
one Guarantor Blockage Period may be commenced with respect to any Guarantor
during any period of 360 consecutive days. No event of default that existed or
was continuing on the date of commencement of any other Guarantor Blockage
Period with respect to the Designated Guarantor Senior Indebtedness initiating
such Guarantor Blockage Period (to the extent the Lender of Designated Guarantor
Senior Indebtedness, or the trustee or agent acting on behalf of such Designated
Guarantor Senior Indebtedness, giving notice commencing such Guarantor 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 Guarantor Blockage Period
by the Lender or Lenders of such Designated Guarantor Senior Indebtedness or the
Arranger or agent acting on behalf of such Designated Guarantor 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.
B. Payments Held in Trust. In the event that, notwithstanding the
----------------------
foregoing, any payment shall be received by the Arranger or any Lender when such
payment is prohibited by Section 11.2A, such payment shall be held in trust for
the benefit of, and shall be paid over or delivered to, the Lenders of such
Designated Guarantor Senior Indebtedness or their respective representatives, or
to the trustee under any agreement pursuant to which any of such Designated
Guarantor Senior Indebtedness may have been issued, as their respective
interests may appear, but only to the extent that, upon notice from the Arranger
to the Lenders of such Designated Guarantor Senior Indebtedness that such
prohibited payment has been made, the Lenders of such Designated Guarantor
Senior Indebtedness (or their representative or representatives or a trustee)
notify the Arranger in writing of the amounts then due and owing on such
Designated Guarantor Senior Indebtedness, if any, and only the amounts specified
in such notice to the Arranger shall be paid to the Lenders of such Designated
Guarantor Senior Indebtedness.
<PAGE>
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11.3 Payment Over of Proceeds upon Dissolution, Etc.
----------------------------------------------
A. Payment Over. Upon any payment or distribution of assets or
------------
securities of any Guarantor 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 such Guarantor, whether voluntary or involuntary or in bankruptcy,
insolvency, receivership or other proceedings, all Guarantor Senior Indebtedness
of such Guarantor shall first be paid in full before the Lenders or the Arranger
on behalf of such Lenders shall be entitled to receive any payment by such
Guarantor of the principal of or interest on the Loans or Notes pursuant to such
Guarantor's Guarantee, or any payment to acquire any of the Loans or Notes for
cash, property or securities, or any distribution with respect to the Loans or
Notes of any cash, property or Loans or Notes (excluding any payment or
distribution of Permitted Junior Securities). Before any payment may be made
by, or on behalf of, any Guarantor of the principal of or interest on the Loans
and Notes upon any such dissolution or winding-up or liquidation or
reorganization, any payment or distribution of assets or securities of such
Guarantor of any kind or character, whether in cash, property or securities
(excluding any payment or distribution of Permitted Junior Securities), to which
the Lenders or the Arranger on their behalf would be entitled, but for the
subordination provisions of this Agreement, shall be made by such Guarantor or
by any receiver, trustee in bankruptcy, liquidating trustee, agent or other
Person making such payment or distribution, directly to the Lenders of the
Guarantor Senior Indebtedness of such Guarantor (pro rata to such Lenders on the
--------
basis of the respective amounts of such Guarantor Senior Indebtedness held by
such Lenders) or their representatives or to the trustee or agent or agents
under any agreement pursuant to which any of such Guarantor Senior Indebtedness
may have been issued, as their respective interests may appear, to the extent
necessary to pay all such Guarantor Senior Indebtedness in full in cash after
giving effect to any prior or concurrent payment, distribution or provision
therefor to or for the Lenders of such Guarantor Senior Indebtedness.
B. Payments Held in Trust. In the event that, notwithstanding the
----------------------
foregoing provision prohibiting such payment or distribution, any payment or
distribution of assets or securities of any Guarantor of any kind or character,
whether in cash, property or securities (excluding any payment or distribution
of Permitted Junior Securities), shall be received by the Arranger or any Lender
at a time when such payment or distribution is prohibited by Section 11.3A and
before all obligations in respect of the Guarantor Senior Indebtedness of such
Guarantor are paid in full in cash, or payment provided for, such payment or
distribution shall be received and held in trust for the benefit of, and shall
be paid over or delivered to, the Lenders of such Guarantor Senior Indebtedness
(pro rata to such Lenders on the basis of the respective amounts of such
--- ----
Guarantor Senior Indebtedness held by such Lenders) or their respective
representatives, or to the trustee or agent or agents under any agreement
pursuant to which any of such Guarantor Senior Indebtedness may have been
issued, as their respective interests may appear, for application to the payment
of such Guarantor Senior Indebtedness remaining unpaid until all such Guarantor
Senior Indebtedness has been paid in full in cash after giving effect to any
prior or concurrent payment, distribution or provision therefor to or for the
Lenders of such Guarantor Senior Indebtedness.
The consolidation of any Guarantor with, or the merger of any
Guarantor with or into, another corporation or the liquidation or dissolution of
any Guarantor following the conveyance or transfer of its property as an
entirety, or substantially as an entirety, to another corporation upon the terms
and conditions provided in Section 6A.8 shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this Section 11.3
if such other corporation shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions stated in Article Five.
<PAGE>
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11.4 Subrogation
-----------
Upon the payment in full in cash of all Guarantor Senior Indebtedness
of a Guarantor, or provision for payment, the Lenders shall be subrogated to the
rights of the Lenders of such Guarantor Senior Indebtedness to receive payments
or distributions of cash, property or securities of such Guarantor made on such
Guarantor Senior Indebtedness until the principal of and interest on the Loans
and Notes shall be paid in full in cash; and, for the purposes of such
subrogation, no payments or distributions to the Lenders of such Guarantor
Senior Indebtedness of any cash, property or securities to which the Lenders or
the Arranger on their behalf would be entitled except for the provisions of this
Section 11, and no payment over pursuant to the provisions of this Section 11 to
the Lenders of such Guarantor Senior Indebtedness by Lenders or the Arranger on
their behalf shall, as between such Guarantor, its creditors other than Lenders
of such Guarantor Senior Indebtedness, and the Lenders, be deemed to be a
payment by such Guarantor to or on account of such Guarantor Senior
Indebtedness. It is understood that the provisions of this Section 11 are and
are intended solely for the purpose of defining the relative rights of the
Lenders, on the one hand, and the Lenders of Guarantor Senior Indebtedness of
each Guarantor, on the other hand.
If any payment or distribution to which the Lenders would otherwise
have been entitled but for the provisions of this Section 11 shall have been
applied, pursuant to the provisions of this Section 11, to the payment of all
amounts payable under Guarantor Senior Indebtedness, then and in such case, the
Lenders shall be entitled to receive from the Lenders of such Guarantor Senior
Indebtedness any payments or distributions received by such Lenders of Guarantor
Senior Indebtedness in excess of the amount required to make payment in full, or
provision for payment, of such Guarantor Senior Indebtedness.
11.5 Obligations of Guarantors Unconditional
---------------------------------------
Nothing contained in this Section 11 or elsewhere in this Agreement or
in the Loans, Notes or the Guarantees is intended to or shall impair, as among
the Guarantors and the Lenders, the obligation of each Guarantor, which is
absolute and unconditional, to pay to the Lenders the principal of and interest
on the Loans and Notes as and when the same shall become due and payable in
accordance with the terms of the Guarantee of such Guarantor, or is intended to
or shall affect the relative rights of the Lenders and creditors of any
Guarantor other than the Lenders of Guarantor Senior Indebtedness of such
Guarantor, nor shall anything herein or therein prevent the Lender or the
Arranger on their behalf from exercising all remedies otherwise permitted by
applicable law upon default under this Agreement, subject to the rights, if any,
under this Section 11 of the Lenders of Guarantor Senior Indebtedness in respect
of cash, property or securities of any Guarantor received upon the exercise of
any such remedy.
Without limiting the generality of the foregoing, nothing contained in
this Section 11 shall restrict the right of the Lenders or the Arranger to take
any action to declare the Loans and Notes to be due and payable prior to their
stated maturity pursuant to Section 7 or to pursue any rights or remedies
hereunder; provided, however, that all Guarantor Senior Indebtedness of any
-------- -------
Guarantor then due and payable shall first be paid in full before the Lenders or
the Arranger are entitled to receive any direct or indirect payment from such
Guarantor of principal of or interest on the Loans and Notes pursuant to such
Guarantor's Guarantee.
11.6 Notice to Arranger
------------------
Borrower and each Guarantor shall give prompt written notice to the
Arranger of any fact known to Borrower or such Guarantor which would prohibit
the making of any payment to or by the Arranger in respect of the Securities
pursuant to the provisions of this Section 11. The Arranger shall not be charged
<PAGE>
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with knowledge of the existence of any event of default with respect to any
Guarantor Senior Indebtedness or of any other facts which would prohibit the
making of any payment to or by the Arranger unless and until the Arranger shall
have received notice in writing to that effect signed by an Officer of Borrower
or such Guarantor, or by a Lender of Guarantor Senior Indebtedness or the
trustee or agent therefor; and prior to the receipt of any such written notice,
the Arranger shall be entitled to assume that no such facts exist; provided,
--------
however, that if the Arranger shall not have received the notice provided for in
- -------
this Section 11.6 at least two Business Days prior to the date upon which by the
terms of this Agreement any moneys shall become payable for any purpose
(including, without limitation, the payment of the principal of or interest on
any Loan or Note), then, regardless of anything herein to the contrary, the
Arranger shall have full power and authority to receive any moneys from any
Guarantor and to apply the same to the purpose for which they were received, and
shall not be affected by any notice to the contrary which may be received by it
on or after such prior date. Nothing contained in this Section 11.6 shall limit
the right of the Lenders of Guarantor Senior Indebtedness to recover payments as
contemplated by Section 11.3. The Arranger shall be entitled to rely on the
delivery to it of a written notice by a Person representing himself or itself to
be a Lender of any Guarantor Senior Indebtedness (or a trustee on behalf of, or
other representative of, such Lender) to establish that such notice has been
given by a Lender of such Guarantor Senior Indebtedness or a trustee or
representative on behalf of any such Lender.
In the event that the Arranger determines in good faith that any
evidence is required with respect to the right of any Person as a Lender of
Guarantor Senior Indebtedness to participate in any payment or distribution
pursuant to this Section 11, the Arranger may request such Person to furnish
evidence to the reasonable satisfaction of the Arranger as to the amount of
Guarantor Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this Section 11, and if such
evidence is not furnished, the Arranger may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
11.7 Reliance on Judicial Order or Certificate of Liquidating Agent
--------------------------------------------------------------
Upon any payment or distribution of assets or securities of a
Guarantor referred to in this Section 11, the Arranger and the Lenders shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction in which bankruptcy, dissolution, winding-up, liquidation or
reorganization proceedings are pending, or upon a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, delivered to the Arranger or to the Lenders for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the Lenders of Guarantor Senior Indebtedness of such Guarantor and
other indebtedness of such Guarantor, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Section 11.
11.8 Arranger's Relation to Guarantor Senior Indebtedness
----------------------------------------------------
The Arranger shall be entitled to all the rights set forth in this
Section 11 with respect to any Guarantor Senior Indebtedness which may at any
time be held by it in its individual or any other capacity to the same extent as
any other Lender of Guarantor Senior Indebtedness, and nothing in this Agreement
shall deprive the Arranger of any of its rights as such Lender.
With respect to the Lenders of Guarantor Senior Indebtedness, the
Arranger undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Section 11, and no implied
covenants or obligations with respect to the Lenders of Guarantor Senior
Indebtedness shall be
<PAGE>
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read into this Agreement against the Arranger. The Arranger shall not be deemed
to owe any fiduciary duty to the Lenders of Guarantor Senior Indebtedness
(except as provided in Section 11.3B). The Arranger shall not be liable to any
such Lenders if the Arranger shall in good faith mistakenly pay over or
distribute to Lenders or to Borrower or to any other person cash, property or
securities to which any Lenders of Guarantor Senior Indebtedness shall be
entitled by virtue of this Section 11 or otherwise.
11.9 Subordination Rights not Impaired by Acts or Omissions of the
Guarantors or Lenders of Guarantor Senior Indebtedness
-------------------------------------------------------------
No right of any present or future Lenders of any Guarantor Senior
Indebtedness to enforce subordination as provided herein shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
any Guarantor or by any act or failure to act, in good faith, by any such
Lender, or by any noncompliance by any Guarantor with the terms of this
Agreement, regardless of any knowledge thereof which any such Lender may have or
otherwise be charged with. The provisions of this Section 11 are intended to be
for the benefit of, and shall be enforceable directly by, the Lenders of
Guarantor Senior Indebtedness.
11.10 Lenders Authorize Arranger To Effectuate Subordination of
---------------------------------------------------------
Guarantee
---------
Each Lender by its acceptance of Loans and Notes authorizes and
expressly directs the Arranger on its behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Section 11, and appoints the Arranger its attorney-in-fact for such purposes,
including, in the event of any dissolution, winding-up, liquidation or
reorganization of any Guarantor (whether in bankruptcy, insolvency,
receivership, reorganization or similar proceedings or upon an assignment for
the benefit of creditors or otherwise) tending towards liquidation of the
business and assets of such Guarantor, the filing of a claim for the unpaid
balance of its Loans and Notes in the form required in those proceedings.
11.11 This Article not To Prevent Events of Default
---------------------------------------------
The failure to make a payment on account of principal of or interest
on the Securities by reason of any provision of this Section 11 shall not be
construed as preventing the occurrence of an Event of Default specified in
Section 7.1.
11.12 Arranger's Compensation not Prejudiced
--------------------------------------
Nothing in this Section 11 shall apply to amounts due to the Arranger
pursuant to other sections in this Agreement.
11.13 No Waiver of Guarantee Subordination Provisions
-----------------------------------------------
Without in any way limiting the generality of Section 11.9, the
Lenders of Guarantor Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Arranger or the Lenders, without
incurring responsibility to the Lenders and without impairing or releasing the
subordination provided in this Section 11 or the obligations hereunder of the
Lenders to the Lenders of Guarantor Senior Indebtedness, do any one or more of
the following: (a) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, Guarantor Senior Indebtedness or any
instrument evidencing the same or any agreement under which Guarantor Senior
Indebtedness is outstanding or secured; (b) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Guarantor
<PAGE>
-104-
Senior Indebtedness; (c) release any Person liable in any manner for the
collection of Guarantor Senior Indebtedness; and (d) exercise or refrain from
exercising any rights against any Guarantor and any other Person.
11.14 Payments May Be Paid Prior to Dissolution
-----------------------------------------
Nothing contained in this Section 11 or elsewhere in this Agreement
shall prevent (i) a Guarantor, except under the conditions described in Section
11.2, from making payments of principal of and interest on the Loans or Notes,
or from depositing with the Arranger any moneys for such payments, or (ii) the
application by the Arranger of any moneys deposited with it for the purpose of
making such payments of principal of and interest on the Loans or Notes, to the
Lenders entitled thereto unless at least two Business Days prior to the date
upon which such payment becomes due and payable, the Arranger shall have
received the written notice provided for in Section 11.2B or in Section 11.6. A
Guarantor shall give prompt written notice to the Arranger of any dissolution,
winding-up, liquidation or reorganization of such Guarantor.
SECTION 12. MISCELLANEOUS
12.1 Participations in and Assignments of Loans and Notes
----------------------------------------------------
A. Assignments. Each Lender shall have the right at any time to
-----------
sell, assign, transfer or negotiate all or any portion of its Notes or its Loan
Commitment only to one or more Eligible Assignees; provided, however, that no
-------- -------
Lender shall be entitled at any time to sell, assign, transfer or negotiate all
or any portion of its Notes or its Loan Commitment to an Eligible Assignee
(other than any Lender or any Affiliate of any Lender) without the consent of
Borrower (not to be unreasonably withheld, delayed or conditioned). In the case
of any sale, transfer or negotiation of all or part of the Notes or any Loan
Commitment authorized under this Section 12.1A, the assignee, transferee or
recipient shall become a party to this Agreement as a Lender by execution of an
Assignment and Assumption Agreement substantially in the form of Exhibit I;
---------
provided, however, that (i) at such time Section 2.1A or 2.2A, as the case may
- -------- -------
be, shall be deemed modified to reflect the Loan Commitment of such new Lender
and of the existing Lenders, (ii) upon surrender of the Notes of the assigning
Lender, new Notes will be issued, at Borrower's expense, to such new Lender and
to the assigning Lender, such new Notes to be in conformity with the
requirements of Section 2.1D or 2.2E as the case may be (with appropriate
modifications) to the extent needed to reflect the revised Loan Commitment,
(iii) the Arranger shall receive at the time of each such assignment (other than
by Merrill Lynch Capital Corporation and other than any assignment to a Lender
or any Affiliate of a Lender), from the assigning or assignee Lender, the
payment of a non-refundable assignment fee of $3,500, and (iv) such transfer or
assignment will not be effective until recorded by the Arranger on the Register
pursuant to Section 5.14. To the extent of any assignment pursuant to this
Section 12.1A, the assigning Lender shall be relieved of its obligations
hereunder with respect to its assigned Loan Commitment, and the assignee,
transferee or recipient shall have, to the extent of such sale, assignment,
transfer or negotiation, the same rights, benefits and obligations as it would
if it were a Lender with respect to such Notes or Loan Commitment, including,
without limitation, the right to approve or disapprove actions which, in
accordance with the terms hereof, require the approval of a Lender.
B. Participations. A Lender may sell or agree to sell to one or more
--------------
other Eligible Assignees a participation in all or any part of its Loans held by
it, or in its Loan Commitment, in which event each purchaser of a participation
(a "Participant") shall be entitled to the rights and benefits of the provisions
-----------
of Section 12.18 and Section 12.20 (provided, however, that no Participant shall
-------- -------
be entitled to receive any greater amount pursuant to Section 12.18 and Section
12.20 than the transferor Lender would have been entitled to receive in respect
of the participation effected by such transferor Lender had no participation
occurred) with
<PAGE>
-105-
respect to its participation in such Loans and Loan Commitment as Loan if such
Participant were a "Lender" for purposes of said Section, but, except as
otherwise provided in Section 12.4, shall not have any other rights or benefits
under this Agreement or any Note or any other Loan Document (the Participant's
rights against such Lender in respect of such participation to be those set
forth in the agreements executed by such Lender in favor of the Participant).
All amounts payable by Borrower to any Lender under Section 12.18 and Section
12.20 in respect of Loans and its Loan Commitment shall be no greater than the
amount that would have applied if such Lender had not sold or agreed to sell any
participation in such Loans and Loan Commitment, and as if such Lender were
funding each of such Loan and Loan Commitment in the same way that it is funding
the portion of such Loan and Loan Commitment in which no participations have
been sold. In no event shall a Lender that sells a participation agree with the
Participant to take or refrain from taking any action hereunder or under any
other Loan Document, except that such Lender may agree with the Participant that
it will not, without the consent of the Participant, agree to any modification
or amendment set forth in subclauses (ii), (iii) or (iv) of the proviso to
Section 12.5.
C. Certain Assignments Permitted. In addition to the assignments and
-----------------------------
participations permitted under the foregoing provisions of this Section 12.1,
any Lender may assign and pledge all or any portion of its Loans and its Notes
to any Federal Reserve Bank as collateral security pursuant to Regulation A and
any Operating Circular issued by such Federal Reserve Bank and, in the case of a
Lender that is an investment fund, any such Lender may assign or pledge any
portion of its Loans and its Notes to its trustee in support of its obligations
to its trustee, without notice to or consent of Borrower and the Agents. No
such assignment shall release the assigning Lender from its obligations
hereunder.
D. Information. A Lender may furnish any information concerning
-----------
Borrower or any Subsidiary in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and participants)
subject, however, to the provisions of Section 12.21. In addition, each of the
Agents may furnish any information concerning Borrower or any of its Affiliates
in such Agent's possession to any Affiliate of such Agent subject to the
provisions of Section 12.21.
E. No Assignment to Borrower. Anything in this Section 12.1 to the
-------------------------
contrary notwithstanding, no Lender may assign or participate any interest in
any Loan held by it hereunder to Borrower or any of its Subsidiaries without the
prior written consent of each Lender.
12.2 Expenses
--------
Whether or not the transactions contemplated hereby shall be
consummated, Borrower agrees to promptly pay (i) all the actual and reasonable
out-of-pocket costs and expenses of preparation of the Loan Documents and all
the costs of furnishing all opinions by counsel for Borrower (including without
limitation any opinions requested by the Lender as to any legal matters arising
hereunder), and of Borrower's performance of and compliance with all agreements
and conditions contained herein on its part to be performed or complied with;
(ii) the fees, expenses and disbursements of one law firm serving as counsel to
the Lenders in connection with the negotiation, preparation, execution and
administration of the Loan Documents and the Loans hereunder, and any
amendments, modifications and waivers hereto or thereto and consents to
departures from the terms hereof and thereof (whether or not effective or
consummated); and (iii) after the occurrence of an Event of Default, all
reasonable out-of-pocket costs and expenses (including reasonable attorneys fees
and expenses, and costs of settlement) actually incurred by the Lenders or the
Agents in enforcing any Obligations of or in collecting any payments due from
Borrower hereunder or under the Notes by reason of such Event of Default or in
connection with any refinancing or restructuring of the credit arrangements
provided under this Agreement in the nature of a "work-out" or of any insolvency
or bankruptcy proceedings.
<PAGE>
-106-
Notwithstanding anything to the contrary in this Agreement or any
other Loan Document, Borrower and its Subsidiaries shall have no obligation to
pay, or to indemnify the Agents or Lenders in respect of, any amounts arising
from any disputes between or among Agents and/or Lenders not arising out of
action by Borrower or any other Loan Party.
12.3 Indemnity
---------
Borrower hereby agrees to indemnify each Creditor and their respective
Affiliates, directors, trustees, officers, employees and agents (each, an
"Indemnitee") from, and hold each of them harmless against, and that no
----------
Indemnitee will have any liability for, any and all Losses incurred by any of
them (including any and all Losses incurred by any Agent to any Lender, whether
or not any Creditor is a party thereto) directly or indirectly arising out of or
by reason of or relating to the negotiation, execution, delivery, performance,
administration or enforcement of any Loan Document, any of the transactions
contemplated by the Loan Documents, any breach by any Loan Party of any
representation, warranty, covenant or other agreement contained in any Loan
Document in connection with any of the Transactions, the use or proposed use of
any of the Loans or the use of any collateral security for the Loans (including
the exercise by any Creditor of the rights and remedies or any power of attorney
with respect thereto and any action or inaction in respect thereof), but
excluding any such Losses to the extent finally determined by a court of
competent jurisdiction in a final and nonappealable judgment to have arisen from
the gross negligence or bad faith of the Indemnitee.
Without limiting the generality of the foregoing, Borrower will
indemnify each Creditor and each other Indemnitee from, and hold each Creditor
and each other Indemnitee harmless against, any Losses described in the
preceding sentence arising under any Environmental Law as a result of (a) the
past, present or future operations of Borrower or any Subsidiary (or any
predecessor in interest to Borrower or any Subsidiary), (b) the past, present or
future condition of any site or facility owned, operated, leased or used at any
time by Borrower or any Subsidiary (or any such predecessor in interest), or (c)
any Release or threatened Release of any Hazardous Materials at, on, under or
from any such site or facility; provided, however, that the indemnity hereunder
-------- -------
shall be subject to the exclusions from indemnification set forth in the
preceding sentence.
To the extent that the undertaking to indemnify and hold harmless set
forth in this Section 12.3 or any other provision of any Loan Document providing
for indemnification is unenforceable because it is violative of any law or
public policy or otherwise, Borrower shall contribute the maximum portion that
it is permitted to pay and satisfy under applicable law to the payment and
satisfaction of all indemnified liabilities incurred by any of the Persons
indemnified hereunder.
Borrower also agrees that no Indemnitee shall have any liability
(whether direct or indirect, in contract or tort or otherwise) for any Losses to
any Loan Party or any Loan Party's security holders or creditors resulting from,
arising out of, in any way related to or by reason of any matter referred to in
any indemnification or expense reimbursement provisions set forth in this
Agreement or any other Loan Document, except to the extent that any Loss is
determined by a court of competent jurisdiction in a final nonappealable
judgment to have resulted from the gross negligence or bad faith of such
Indemnitee.
Borrower agrees that, without the prior written consent of the Agents,
which consent shall not be unreasonably withheld, no Loan Party will settle,
compromise or consent to the entry of any judgment in any pending or threatened
Proceeding in respect of which indemnification is reasonably likely to be sought
under the indemnification provisions of this Section 12.3 (whether or not any
Indemnitee is an actual or poten-
<PAGE>
-107-
tial party to such Proceeding), unless such settlement, compromise or consent
includes an unconditional written release of each Indemnitee from all liability
arising out of such Proceeding and does not include any statement as to an
admission of fault, culpability or failure to act by or on behalf of any
Indemnitee and does not involve any payment of money or other value by any
Indemnitee or any injunctive relief or factual findings or stipulations binding
on any Indemnitee.
12.4 Setoff
------
Subject to Section 8, in addition to any rights now or hereafter
granted under applicable law and not by way of limitation of any such rights,
upon the occurrence and during the continuance of any Event of Default, each
Lender, the Agents, each Participant and each subsequent holder of any Note is
hereby authorized by Borrower at any time or from time to time, without notice
to Borrower, or to any other Person, any such notice being hereby expressly
waived, to set off and to appropriate and to apply any and all deposits (general
or special, including, but not limited to, Indebtedness evidenced by
certificates of deposit, whether matured or unmatured but not including trust
accounts or any other accounts held for the benefit of another Person) and any
other Indebtedness at any time held or owing by such Person or that subsequent
holder to or for the credit or the account of Borrower against and on account of
the obligations and liabilities of Borrower to such Person or that subsequent
holder under this Agreement and the Notes, including, but not limited to, all
claims of any nature or description arising out of or connected with this
Agreement or the Notes, irrespective of whether or not (a) such Person or that
subsequent holder shall have made any demand hereunder or (b) such Person or
that subsequent holder shall have declared the principal of or the interest on
its portion of the Loans and its Notes and other amounts due hereunder to be due
and payable as permitted by Section 7 and although said obligations and
liabilities, or any of them, may be contingent or unmatured.
12.5 Amendments and Waivers
----------------------
No amendment, modification, termination or waiver of any term or
provision of this Agreement, of the Notes, any Guarantee or, prior to the
execution and delivery thereof, of the form of the Registration Rights Agreement
or consent to any departure by Borrower or any Guarantor therefrom, shall in any
event be effective without the prior written concurrence of Borrower or such
Guarantor, as the case may be, and the Required Lenders; provided, however,
-------- -------
that, (x) without the prior written consent of each Lender affected, an
amendment, modification, termination or waiver of this Agreement, any Notes, any
Guarantee, and, prior to the execution and delivery thereof, of the form of
Registration Rights Agreement or consent to departure from a term or provision
hereof or thereof may not: (i) reduce the principal amount of Notes whose
holders must consent to any such amendment, modification, termination, waiver or
consent; (ii) reduce the amount of or reduce the rate of or extend the time for
payment of principal or interest on any Note; (iii) reduce the principal amount
of any Note; (iv) make any Note payable in money other than that stated in the
Note; (v) make any change in Section 2.5A(iv) or in the definition of Change of
Control, in the last paragraph of Section 7 or in this Section 12.5; (vi) reduce
the rate or extend the time of payment of fees or other compensation payable to
the Lenders hereunder; (vii) modify the provisions of Sections 8 or 11 or any of
the defined terms related thereto in any manner adverse to the Lenders; (viii)
add conditions to Section 3.2 or 5.12; (ix) release any Guarantor that is a
Material Subsidiary from its Guarantee or (x) waive performance by Borrower of
its obligations under, or consent to any departure from any of the terms and
provisions of, Section 2.5A(iv), and (b) without the consent of the Agents, no
such amendment, modification, termination or waiver may amend, modify, terminate
or waive any provision of Section 9 as the same applies to the Agents or any
other provision of this Agreement as it relates to the rights of the Agents. No
amendment, modification or waiver of any provision of this Agreement, the Notes,
any Guarantee shall adversely affect the rights of the holders of Senior
Indebtedness or the holders of Guarantor Senior Indebtedness without their
consent. Any
<PAGE>
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waiver or consent shall be effective only in the specific instance and for the
specific purpose for which it was given. No notice to or demand on Borrower in
any case shall entitle Borrower to any further notice or demand in similar or
other circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this Section 12.5A shall be binding upon each holder
of the Notes at the time outstanding, each further holder of the Notes, and, if
signed by Borrower or a Guarantor, on Borrower and such Guarantor.
12.6 Independence of Representations, Warranties and Covenants
---------------------------------------------------------
The representations, warranties and covenants contained herein shall
be independent of each other and no exception to any representation, warranty or
covenant shall be deemed to be an exception to any other representation,
warranty or covenant contained herein unless expressly provided, nor shall any
such exception be deemed to permit any action or omission that would be in
contravention of applicable law.
12.7 Entirety
--------
The Loan Documents embody the entire agreement of the parties and
supersede all prior agreements and understandings, if any, relating to the
subject matter hereof and thereof, except that the syndication provisions of the
Commitment Letter shall survive.
12.8 Notices
-------
Unless otherwise provided herein, any notice or other communications
herein required or permitted to be given shall be in writing and may be
personally served, telecopied, telexed or sent by mail and shall be deemed to
have been given when delivered in person, upon receipt of telecopy or telex
against receipt of answer back or four Business Days after depositing it in the
mail, registered or certified, with postage prepaid and properly addressed;
provided, however, that notices shall not be effective until received. For the
- -------- -------
purposes hereof, the addresses of the parties hereto (until notice of a change
thereof is delivered as provided in this Section 12.8) shall be set forth under
each party's name on the signature pages hereto and any additional Guarantors
shall (until notice of a change thereof is delivered as provided in this Section
12.8) have the address set forth under Borrower's name on the signature page
hereto.
12.9 Survival of Warranties and Certain Agreements
---------------------------------------------
All agreements, representations and warranties made herein shall
survive the execution and delivery of this Agreement, the making of the Loans
hereunder and the execution and delivery of the Notes and, notwithstanding the
making of the Loans, the execution and delivery of the Notes or any
investigation made by or on behalf of any party, shall continue in full force
and effect. The closing of the transactions herein contemplated shall not
prejudice any right of one party against any other party in respect of anything
done or omitted hereunder or in respect of any right to damages or other
remedies.
Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of Borrower set forth in Sections 12.2, 12.3 and 12.20
and the agreements of the Lenders set forth in Section 12.20 shall survive the
payment of the Loans and the Notes and the termination of this Agreement.
<PAGE>
-109-
12.10 Failure or Indulgence not Waiver; Remedies Cumulative
-----------------------------------------------------
No failure or delay on the part of the Agents or any Lender or any
holder of any Note in the exercise of any power, right or privilege hereunder,
under a Guarantee or under the Notes shall impair such power, right or privilege
or be construed to be a waiver of any default or acquiescence therein, nor shall
any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege.
All rights and remedies existing under this Agreement, under a Guarantee or the
Notes are cumulative to and not exclusive of any rights or remedies otherwise
available.
12.11 Severability
------------
In case any provision in or obligation under this Agreement, under a
Guarantee or the Notes shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
12.12 Headings
--------
Sections and Section headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
12.13 Applicable Law
--------------
THIS AGREEMENT, EACH GUARANTEE AND THE NOTES SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW.
12.14 Successors and Assigns; Subsequent Holders of Notes
---------------------------------------------------
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of the Lenders. The terms and provisions
of this Agreement and each Guarantee shall inure to the benefit of any assignee
or transferee of the Notes pursuant to Section 12.1A, and in the event of such
transfer or assignment, the rights and privileges herein conferred upon the
Lenders shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions hereof. In determining
whether the holders of a sufficient aggregate principal amount of the Loans
shall have consented to any action under this Agreement, any amount of the Loans
owned or held by Borrower, any Guarantor or any of its Affiliates shall be
disregarded. Borrower's rights or any interest therein hereunder may not be
assigned without the prior express written consent of each of the Lenders.
12.15 Counterparts; Effectiveness
---------------------------
This Agreement and any amendments, waivers, consents or supplements
may be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same instrument. This Agreement shall become effective upon the
execution of a counterpart hereof
<PAGE>
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by each of the parties hereto, and delivery thereof to the Agents or, in the
case of the Lenders, written telex or facsimile notice or telephonic
notification (confirmed in writing) of such execution and delivery. The Agents
will give Borrower and each Lender prompt notice of the effectiveness of this
Agreement.
12.16 Consent to Jurisdiction; Venue; Waiver of Jury Trial
----------------------------------------------------
A. New York Jurisdiction. Any legal action or proceeding with
---------------------
respect to this Agreement, any Note or any Guarantee may be brought in the
Supreme Court of the State of New York sitting in New York County and the
appellate courts thereof, the courts of the United States for the Southern
District of New York and the appellate courts thereof, and, by execution and
delivery of this Agreement, each of the parties to this Agreement hereby
irrevocably accepts for itself and in respect of its respective property,
generally and unconditionally, the jurisdiction of the aforesaid courts. Each
of the parties to this Agreement hereby further irrevocably waives any claim
that any such courts lack jurisdiction over itself, and agrees not to plead or
claim, in any legal action or proceeding with respect to this Agreement, the
Notes or the Guarantees brought in any of the aforesaid courts, that any such
court lacks jurisdiction over such party. Each of the parties to this Agreement
irrevocably consents to the service of process in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to such party, at its respective address for notices pursuant to
Section 12.8, such service to become effective 30 days after such mailing. To
the extent permitted by law, each of the parties to this Agreement hereby
irrevocably waives any objection to such service of process and further
irrevocably waives and agrees not to plead or claim in any action or proceeding
commenced hereunder or under any Note or any Guarantee that service of process
was in any way invalid or ineffective. Nothing herein shall affect the right of
any party to this Agreement to serve process in any other manner permitted by
law or to commence legal proceedings or otherwise proceed against any party in
any other jurisdiction.
B. Venue. Each of the parties to this Agreement hereby irrevocably
-----
waives any objection which it may now or hereafter have to the laying of venue
of any of the aforesaid actions or proceedings arising out of or in connection
with this Agreement, the Notes or the Guarantees brought in the courts referred
to in clause A above and hereby further irrevocably waives and agrees not to
plead or claim in any such court that any such action or proceeding brought in
any such court has been brought in an inconvenient forum.
C. Trial by Jury Waiver. Each of the parties to this Agreement
--------------------
hereby irrevocably waives all right to a trial by jury in any action, proceeding
or counterclaim arising out of or relating to this Agreement, the Notes or the
Guarantees or the transactions contemplated hereby or thereby.
12.17 Payments Pro Rata
-----------------
A. Pro Rata Payments. The Arranger agrees that promptly after its
-----------------
receipt of each payment of any interest or premium on or principal of the Notes
from or on behalf of Borrower or any Guarantor, it shall, except as otherwise
provided in this Agreement, distribute such payment to the Lenders (other than
any Lender that has consented in writing to waive its pro rata share of such
--- ----
payment) pro rata based upon their respective pro rata shares, if any, of such
--- ---- --- ----
payment.
B. Sharing of Payments. Each of the Lenders agrees that, if it
-------------------
should receive any amount hereunder (whether by voluntary payment, by
realization upon security, by the exercise of the right of setoff or banker's
lien, by counterclaim or cross action, by the enforcement of any right under the
Loan Documents, or otherwise) which is applicable to the payment of the
principal of, or interest on, the Loans of a sum which with respect to the
related sum or sums received by other Lenders is in a greater proportion than
the total of
<PAGE>
-111-
such Obligation then owed and due to such Lender bears to the total of such
Obligation then owed and due to all of the Lenders immediately prior to such
receipt, then such Lender receiving such excess payment shall purchase for cash
without recourse or warranty from the other Lenders an interest in the
Obligations of Borrower to such Lenders in such amount as shall result in a
proportional participation by all of the Lenders in such amount; provided,
--------
however, that if all or any portion of such excess amount is thereafter
- -------
recovered from such Lender, such purchase shall be rescinded and the purchase
price restored to the extent of such recovery, but without interest. Borrower
consents to the foregoing.
12.18 Taxes and Other Taxes
---------------------
A. Covered Taxes. So long as such Lender has complied in all
-------------
material respects with this Section 12.18A, any and all payments by any Loan
Party hereunder or under any other Loan Document shall be made free and clear of
and without deduction or withholding for any and all present or future Taxes
(other than Excluded Taxes), unless such Taxes are required by law or the
administration thereof to be deducted or withheld (all such nonexcluded Taxes
being hereinafter referred to as "Covered Taxes"). If Borrower or any other
-------------
Loan Party shall be required by any applicable law or the administration thereof
to deduct or withhold any Covered Taxes from or in respect of any sum payable
hereunder or under any other Loan Document, (a) the sum payable shall be
increased as may be necessary so that after making all required deductions or
withholdings (including deductions or withholdings applicable to additional
amounts paid under this paragraph), the Lender receives an amount equal to the
sum it would have received if no such deduction or withholding had been made;
(b) Borrower or such Loan Party shall make such deductions or withholdings; and
(c) Borrower or such Loan Party forthwith shall pay the full amount deducted or
withheld to the relevant taxation or other authority in accordance with
applicable law. If any amounts are payable in respect of Covered Taxes pursuant
to the preceding sentence, Borrower and each other Loan Party agrees jointly and
severally to reimburse each Agent and Lender, upon the written request of such
Agent or Lender, for taxes imposed on or measured by the net income or net
profits of such Agent or Lender pursuant to the laws of the jurisdiction in
which such Agent or Lender is organized or in which the principal office lending
office or of such Agent or Lender is located or under the laws of any political
subdivision or taxing authority of any such jurisdiction by reason of the making
of payments in respect of Covered Taxes pursuant to this Section 12.18
(including pursuant to this sentence). Borrower will furnish to the Arranger
within 45 days after the date the payment of any Covered Taxes is due pursuant
to applicable law certified copies of tax receipts evidencing such payment by
Borrower or another Loan Party. Borrower and each other Loan Party jointly and
severally agrees to indemnify and hold harmless each Agent and Lender, and to
reimburse such Agent or Lender, upon its written request, for the amount of any
Covered Taxes so levied or imposed and paid by such Agent or Lender and any
liability (including penalties, additions to tax, interest and expenses) arising
therefrom or with respect thereto whether or not correctly or legally asserted.
Payment under this indemnification shall be made within 30 days from the date
the Agents or such Lender makes written demand therefor. A certificate as to
the amount of such Covered Taxes or Other Taxes and evidence of payment thereof
submitted to Borrower shall be prima facie evidence, absent manifest error, of
-----------
the amount due from Borrower to the Agents or such Lender.
"Excluded Taxes" shall mean, except as provided in the third sentence
--------------
of the immediately preceding paragraph, any tax imposed on or measured by the
net income or net profits of a Lender and all franchise taxes, taxes on doing
business or taxes measured by or in respect of capital or net worth imposed on
any Lender or its lending office, or any branch or affiliate thereof, in each
case, imposed, levied, collected, withheld or assessed (A) pursuant to the laws
of the jurisdiction in which it is organized or the jurisdiction in which the
principal office or lending office of such Lender is located or any subdivision
thereof or therein or (B) as a result of a present or former connection between
such Lender and the Governmental Authority imposing such net income or net
profits tax (other than any such connection arising solely from such Lender
<PAGE>
-112-
having executed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement, the Guarantees or any Note).
Each Lender that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) (a "Non-U.S. Lender") agrees to
---------------
deliver to Borrower and the Arranger on or prior to the Closing Date, or in the
case of a Lender that is an assignee or transferee of an interest under this
Agreement pursuant to Section 12.2 (unless the respective Lender was already a
Lender hereunder immediately prior to such assignment or transfer), on the date
of such assignment or transfer to such Lender, (i) two accurate and complete
original signed copies of Internal Revenue Service Form 4224 or 1001 (or
successor forms) certifying to such Lender's entitlement to a complete exemption
from, or reduction in rate of, United States withholding tax with respect to
payments to be made under this Agreement and under any Note (or, with respect to
any assignee Lender, at least as extensive as the assigning Lender), or (ii) if
the Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the
Code and cannot deliver either Internal Revenue Service Form 1001 or 4224
pursuant to clause (i) above, (x) a certificate substantially in the form of
Exhibit J (any such certificate, a "Section 12.18 Certificate") and (y) two
- --------- -------------------------
accurate and complete original signed copies of Internal Revenue Service Form W-
8 (or successor form) certifying to such Lender's entitlement to a complete
exemption from, or reduction in rate of, United States withholding tax with
respect to payments to be made under this Agreement and under any Note (or, with
respect to any assignee Lender, at least as extensive as the assigning Lender).
In addition, each Lender agrees that from time to time after the Closing Date,
when a lapse in time or change in circumstances renders the previous
certification obsolete or inaccurate in any material respect, it will deliver to
Borrower and the Arranger two new accurate and complete original signed copies
of Internal Revenue Service Form 4224 or 1001, or Form W-8 and a Section 12.18
Certificate, as the case may be, and such other forms as may be required in
order to confirm or establish the entitlement of such Lender to a continued
exemption from or reduction in United States withholding tax with respect to
payments under this Agreement and any Note, or it shall immediately notify
Borrower and the Arranger of its inability to deliver any such Form or
Certificate, in which case such Lender shall not be required to deliver any such
form or certificate pursuant to this Section 12.18. Notwithstanding the
foregoing, no Lender shall be required to deliver any such form or certificate
if a change in treaty, law or regulation has occurred prior to the date on which
such delivery would otherwise be required that renders any such form or
certificate inapplicable or would prevent the Lender from duly completing and
delivering any such form or certificate with respect to it and such Lender so
advises Borrower. Each Person that shall become a participant pursuant to
Section 12.1 shall, upon the effectiveness of the related transfer, be required
to provide all the forms and statements required pursuant to this Section 12.18;
provided, however, that in the case of a participant such participant shall
- -------- -------
furnish all such required forms and statements to the Lender from which the
related participation shall have been purchased. Borrower shall not be required
to indemnify any Non-U.S. Lender, or to pay any additional amounts to any Non-
U.S. Lender, in respect of U.S. Federal withholding tax pursuant to paragraph
(a) above to the extent that (i) the obligation to withhold amounts with respect
to U.S. Federal withholding tax existed on the date such Non-U.S. Lender became
a party to this Agreement (or, in the case of a Non-U.S. participant, on the
date such participant became a participant hereunder); provided, however, that
-------- -------
this clause (i) shall not apply to the extent that (x) the indemnity payments or
additional amounts any Lender (or participant) would be entitled to receive
(without regard to this clause (i)) do not exceed the indemnity payment or
additional amounts that the Person making the assignment, participation or
transfer to such Lender (or participant) would have been entitled to receive in
the absence of such assignment, participation or transfer, or (y) such
assignment, participation or transfer had been requested by Borrower, (ii) the
obligation to pay such additional amounts would not have arisen but for a
failure by such Non-U.S. Lender or Non-U.S. participant to comply with the
provisions of this Section 12.18 or (iii) any of the representations or
certifications made by a Non-U.S. Lender or Non-U.S. participant pursuant to
this Section 12.18 are incorrect at the time a payment hereunder is made, other
than by reason of any change in treaty, law or regulation having effect after
the date
<PAGE>
-113-
such representations or certifications were made. Notwithstanding anything to
the contrary contained in the preceding sentence or elsewhere in this Section
12.18, Borrower and each other Loan Party agrees jointly and severally to pay
additional amounts and to indemnify each Lender in the manner set forth in this
Section 12.18 (without regard to the identity of the jurisdiction requiring the
deduction or withholding) in respect of any amounts deducted or withheld by it
as described in the immediately preceding sentence as a result of any changes
after the Closing Date in any applicable law, treaty, governmental rule,
regulation, guideline or order, or in the interpretation thereof, relating to
the deducting or withholding of income or similar Covered Taxes.
B. Other Taxes. Borrower and each other Loan Party agrees jointly
-----------
and severally to pay forthwith any present or future stamp or documentary taxes
or any other excise or property taxes, charges or similar levies (all such
taxes, charges and levies being herein referred to as "Other Taxes") imposed by
-----------
any jurisdiction (or any political subdivision or taxing authority thereof or
therein) which arise from any payment made by Borrower or any other Loan Party
hereunder or under any of the other Loan Documents or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or any
of the other Loan Documents.
C. Refunds. If Borrower or any other Loan Party pays any additional
-------
amount under this Section 12.18 to a Lender and such Lender determines in its
sole discretion that it has actually received or realized in connection
therewith any refund or any reduction of, or credit against, its tax liabilities
in or with respect to the taxable year in which the additional amount is paid (a
"Tax Benefit"), such Lender shall pay to Borrower or such Loan Party an amount
-----------
that the Lender shall, in its sole discretion, determine is equal to the net
benefit, after tax, which was obtained by the Lender in such year as a
consequence of such Tax Benefit; provided, however, that (i) such Lender shall
-------- -------
not be required to make any payment under this paragraph of this Section 12.18
if an Event of Default shall have occurred and be continuing; (ii) any taxes
that are imposed on a Lender as a result of a disallowance or reduction
(including through the expiration of any tax credit carryover or carryback of
such Lender that otherwise would not have expired) of any Tax Benefit with
respect to which such Lender has made a payment to Borrower or such Loan Party
pursuant to this paragraph of this Section 12.18 shall be treated as a tax for
which Borrower and the other Loan Parties are obligated to indemnify such Lender
pursuant to this Section 12.18 without any exclusions or defenses; (iii) such
Lender shall not be required to make any payment under this paragraph of this
Section 12.18 in excess of such additional amounts received by such Lender; and
(iv) nothing in this paragraph of this Section 12.18 shall require the Lender to
disclose to Borrower or any other Loan Party any information determined by such
Lender in its sole discretion to be confidential (including its tax returns).
D. Receipts. Borrower and each other Loan Party shall furnish to the
--------
Agents and each of the Lenders the original or a certified copy of a receipt
evidencing any payment of Taxes or Other Taxes made by Borrower or such Loan
Party as soon as such receipt becomes available.
E. Survival. The provisions of this Section 12.18 shall survive the
--------
termination of the Agreement and repayment of all Obligations.
12.19 Waiver of Stay, Extension or Usury Laws
---------------------------------------
Borrower and the Guarantors covenant (to the extent that they may
lawfully do so) that they will not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law that would prohibit or forgive
Borrower or the Guarantors from paying all or any portion of the principal of or
interest on the Loans as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or the perform-
<PAGE>
-114-
ance of this Agreement; and (to the extent that they may lawfully do so)
Borrower and the Guarantors hereby expressly waive all benefit or advantage of
any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Agents, but will suffer and permit
the execution of every such power as though no such law had been enacted.
12.20 Additional Costs
----------------
If the adoption of, or any change in, any Requirement of Law or in the
interpretation or application thereof or compliance by any Lender with any
request or directive (whether or not having the force of law) from any central
bank or other Governmental Authority or the NAIC made subsequent to the date
hereof:
(i) shall subject any Lender to any tax of any kind whatsoever
with respect to this Agreement, any Note or any Loan made by it or change
the basis of taxation of payments to such Lender in respect thereof by any
Governmental Authority (except for Covered Taxes and Other Taxes and
changes in the rate of tax on the overall net income of such Lender or its
applicable lending office, or any affiliate thereof or franchise tax by any
Governmental Authority);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds by, any
office of such Lender which is not otherwise included in the determination
of the LIBOR Rate hereunder; or
(iii) shall impose on such Lender any other condition (excluding
Taxes);
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making or maintaining
Loans or to reduce any amount receivable hereunder in respect thereof then, in
any such case, Borrower shall promptly pay such Lender, upon its demand, any
additional amounts necessary to compensate such Lender for such increased cost
or reduced amount receivable. If any Lender becomes entitled to claim any
additional amounts pursuant to this subsection, it shall promptly notify
Borrower, through the Arranger, of the event by reason of which it has become so
entitled.
In the event that any Lender shall have determined that the adoption
of any law, rule, regulation or guideline regarding capital adequacy (or any
change therein or in the interpretation or application thereof) or compliance by
any Lender or any corporation controlling such Lender with any request or
directive regarding capital adequacy (whether or not having the force of law)
from any central bank or Governmental Authority or the NAIC, in each case, made
subsequent to the date hereof including, without limitation, the issuance of any
final rule, regulation or guideline, does or shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder to a level below that which such Lender
or such corporation could have achieved but for such adoption, change or
compliance (taking into consideration such Lender's or such corporation's
policies with respect to capital adequacy) by an amount deemed by such Lender to
be material, then from time to time, after submission by such Lender to Borrower
(with a copy to the Arranger) of a written request therefor, Borrower shall
promptly pay to such Lender such additional amount or amounts as will compensate
such Lender for such reduction.
A certificate as to any additional amounts setting forth the
calculation of such additional amounts pursuant to this Section 12.20 submitted
by such Lender, through the Arranger, to Borrower shall be conclusive in the
absence of clearly demonstrable error. Without limiting the survival of any
other covenant
<PAGE>
-115-
hereunder, this Section 12.20 shall survive the termination of this Agreement
and the payment of the Notes and all other amounts payable hereunder.
12.21 Confidentiality
---------------
Each Lender shall hold all non-public information obtained pursuant to
the requirements of or in connection with this Agreement in accordance with such
Lender's customary procedures (which shall be reasonably prudent for purposes of
maintaining confidentiality) for handling confidential information of this
nature and in accordance with safe and sound banking practices; provided,
--------
however, that (x) unless specifically prohibited by applicable law or court
- -------
order, each Lender shall notify Borrower of any request by any governmental
agency or representative thereof (other than any such request in connection with
any examination of the financial condition of such Lender by such governmental
agency) for disclosure of any such non-public information prior to disclosure of
such information; and (y) in no event shall any Lender be obligated or required
to return any materials furnished by Borrower or any of its Subsidiaries.
12.22 Acknowledgments
---------------
Borrower hereby acknowledges that: (a) it has been advised by counsel
in connection with the negotiation, execution and delivery of the Loan
Documents; (b) no Agent or Lender has any fiduciary or similar relationships to
Borrower and the relationship between the Agents and Lenders on the one hand,
and Borrower, on the other hand, is solely that of debtor and creditor; and (c)
no joint venture exists among the Agents and Lenders or among Borrower and the
Agents and Lenders.
[Signature Pages Follow]
<PAGE>
S-1
WITNESS the due execution hereof by the respective duly authorized
officers of the undersigned as of the date first written above.
BORROWER:
PRIMESTAR, INC.
By:________________________________________________
Name:
Title:
Notice Address:
c/o TCI Satellite Entertainment, Inc.
8085 South Chester, Suite 300
Englewood, Colorado 80112
Telephone: (303)712-4600
Telecopy: (303)
Attention: Chief Financial Officer
<PAGE>
S-2
AGENTS:
MERRILL LYNCH & CO., MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED,
as Arranger and Syndication Agent
By:__________________________________________________
Name:
Title:
Notice Address:
World Financial Center
250 Vesey Street, North Tower
New York, New York 10281
Attention: Robert W.M. Stevens
Telephone: (212)449-8221
Telecopy: (212)449-8230
<PAGE>
S-3
MORGAN STANLEY SENIOR FUNDING, INC.,
as Administrative Agent
By:_____________________________________________
Name:
Title:
Notice Address:
1585 Broadway
30th Floor
New York, New York 10036
Attention: Joel Feldmann
Telephone: (212)761-1288
Telecopy: (212)761-0587
<PAGE>
S-4
DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION, as Documentation Agent
By:___________________________________________
Name:
Title:
Notice Address:
277 Park Avenue
New York, New York 10172
Attention: Paul Thompson, III
Telephone: (212)892-3661
Telecopy: (212)892-7539
<PAGE>
S-5
LENDERS:
Commitment: $ MERRILL LYNCH CAPITAL CORPORATION
By:__________________________________________
Name:
Title:
Notice Address:
World Financial Center
250 Vesey Street, North Tower
New York, New York 10281
Attention: Robert W.M. Stevens
Telephone: (212)449-8221
Telecopy: (212)449-8230
<PAGE>
S-6
Commitment: $ MORGAN STANLEY SENIOR FUNDING, INC.
By:______________________________________
Name:
Title:
Notice Address:
1585 Broadway
30th Floor
New York, New York 10036
Attention: Joel Feldmann
Telephone: (212)761-1288
Telecopy: (212)761-0587
<PAGE>
S-7
Commitment: $ DLJ BRIDGE FINANCE, INC.
By:_________________________________
Name:
Title:
Notice Address:
277 Park Avenue
New York, New York 10172
Attention: Paul Thompson, III
Telephone: (212)892-3661
Telecopy: (212)892-7539
<PAGE>
EXHIBIT 10.10
EXECUTION COPY
$565,000,000
CREDIT AGREEMENT
Dated as of March 9, 1994
Among
PRIMESTAR PARTNERS, L.P.,
THE BANKS LISTED ON THE SIGNATURE PAGES HEREOF,
THE BANK OF NEW YORK,
CHEMICAL BANK and
CITIBANK, N.A.,
as Managing Agents,
THE BANK OF NEW YORK,
as Documentation Agent
and
CHEMICAL BANK,
as Administrative Agent
<PAGE>
TABLE OF CONTENTS
Page
----
1 CREDIT FACILITY............................................... 1
1.01. Commitment to Lend........................................ 1
1.02. Letters of Credit......................................... 1
1.03. Manner of Borrowing....................................... 2
1.04. Interest.................................................. 4
(a) Rates............................................... 4
(b) Payment............................................. 4
(c) Conversion and Continuation......................... 4
(d) Maximum Interest Rate............................... 5
1.05. Repayment................................................. 6
1.06. Prepayments............................................... 6
(a) Optional Prepayments................................ 6
(b) Mandatory Prepayments............................... 6
1.07. Limitation on Types of Loans.............................. 7
1.08. Reduction and Termination of Commitments.................. 7
(a) Optional Reduction of Commitments................... 7
(b) Termination of Commitments.......................... 7
1.09. Commitment Fees........................................... 8
1.10. Computation of Interest and Commitment Fee................ 8
1.11. Evidence of Indebtedness.................................. 8
1.12. Payments by the Borrower.................................. 8
(a) Time, Place and Manner.............................. 8
(b) No Reductions....................................... 9
(c) Authorization to Charge Accounts.................... 9
(d) Extension of Payment Dates.......................... 9
1.13. Distribution of Payments by the Administrative Agent...... 9
1.14. Taxes..................................................... 10
(a) Taxes Payable by the Borrower....................... 10
(b) Taxes Payable by the Administrative Agent or any
Bank............................................... 11
(c) Credits and Deductions.............................. 11
(d) Exemption from U.S. Withholding and Backup
Withholding Taxes.................................. 11
1.15. Pro Rata Treatment........................................ 12
1.16. Cash Collateral Account................................... 13
1.17. Liability of Partners..................................... 14
<PAGE>
2 CONDITIONS TO LOANS........................................ 14
2.01. Conditions to Initial Loans............................ 14
2.02. Conditions to Each Loan................................ 15
3 CERTAIN REPRESENTATIONS AND WARRANTIES..................... 16
3.01. Organization; Power; Qualification..................... 16
3.02. Authorization; Enforceability; Required Consents;
Absence of Conflicts.................................. 17
3.03. Litigation............................................. 17
3.04. Compliance With Law.................................... 17
3.05. Project Documents...................................... 17
(a) Delivery......................................... 17
(b) Absence of Defaults.............................. 18
3.06. Investment Company Act................................. 18
4 CERTAIN COVENANTS.......................................... 18
A
4.01 Preservation of Existence, Scope of Business,
Compliance with Law, Preservation of Enforceability... 18
4.02. Use of Proceeds........................................ 18
B
4.03. Merger or Consolidation................................ 19
5 INFORMATION................................................ 19
5.01. Information to Be Furnished............................ 19
(a) Quarterly Financial Statements................... 19
(b) Year End Financial Statements; Accountants'
Certificate...................................... 19
(c) Officer's Certificate as to Financial
Statements and Defaults.......................... 20
(d) Requested Information............................. 20
(e) Notice of Defaults, Material Adverse Changes
and Other Matters................................ 20
(f) Opinions of Counsel for Issuing Banks............. 21
5.02. Accuracy of Financial Statements and Information....... 21
(a) Historical Financial Statements................... 21
(b) Future Financial Statements....................... 21
(c) Historical Information............................ 21
(d) Future Information................................ 22
<PAGE>
5.03. Additional Covenants Relating to Disclosure.......... 22
(a) Accounting Methods and Financial Records........ 22
(b) Visits, Inspections and Discussions............. 22
5.04. Authorization of Third Parties to Deliver
Information......................................... 22
6 DEFAULT.................................................. 23
6.01. Events of Default.................................... 23
6.02. Remedies upon Event of Default....................... 25
7 ADDITIONAL CREDIT FACILITY PROVISIONS.................... 26
7.01 Mandatory Suspension and Conversion of Fixed
Rate Loans.......................................... 26
7.02. Regulatory Changes................................... 27
7.03. Funding Losses....................................... 28
7.04. Certain Determinations............................... 28
7.05. Change of Lending Office............................. 29
7.06. Replacement of Banks................................. 29
8 THE AGENTS............................................... 30
8.01. Appointment and Powers............................... 30
8.02. Limitation on Agents' Liability...................... 30
8.03. Defaults............................................. 31
8.04. Rights as a Bank..................................... 31
8.05. Indemnification...................................... 31
8.06. Non Reliance on Agents and Other Banks............... 32
8.07. Resignation of the Administrative Agent.............. 32
9 MISCELLANEOUS............................................ 33
9.01. Notices and Deliveries............................... 33
(a) Manner of Delivery.............................. 33
(b) Addresses....................................... 33
(c) Effectiveness................................... 35
(d) Reasonable Notice............................... 36
9.02. Expenses; Indemnification............................ 36
9.03. Amounts Payable Due upon Request for Payment......... 37
9.04. Remedies of the Essence.............................. 37
9.05. Rights Cumulative.................................... 37
9.06. Disclosures.......................................... 37
9.07. Amendments; Waivers.................................. 38
<PAGE>
9.08. Set-Off; Suspension of Payment and Performance....... 38
9.09. Sharing of Recoveries................................ 39
9.10. Assignments and Participations....................... 40
(a) Assignments..................................... 40
(b) Participations.................................. 40
9.11. Governing Law........................................ 41
9.12. Judicial Proceedings; Waiver of Jury Trial........... 41
9.13. Reference Banks...................................... 42
9.14. Severability of Provisions........................... 42
9.15. Counterparts......................................... 42
9.16. Survival of Obligations.............................. 42
9.17. Entire Agreement..................................... 42
9.18. Successors and Assigns............................... 43
10 INTERPRETATION.......................................... 43
10.01. Defined Terms........................................ 43
10.02. Other Interpretive Provisions........................ 54
10.03. Accounting Matters................................... 55
10.04. Representations and Warranties....................... 55
10.05. Captions............................................. 55
10.06. Interpretation of Related Documents.................. 56
ANNEX A Banks, Lending Offices, Notice
Addresses and Commitments
Schedule 1.03 NOTICE OF BORROWING
Schedule 1.04(c)(iv) NOTICE OF CONVERSION OR CONTINUATION
Schedule 1.06(a) NOTICE OF PREPAYMENT
Schedule 2.01(a) CERTIFICATE AS TO RESOLUTIONS, ETC.
Annex A RESOLUTIONS OF PARTNERS COMMITTEE
Schedule 2.01(d) FORM OF OPINION OF BORROWERS' COUNSEL
Schedule 2.01(e) FORM OF OPINION OF ISSUING BANK'S
COUNSEL
Schedule 2.01(f) FORM OF OPINION OF MANAGING AGENTS'
COUNSEL
Schedule 3.02 SCHEDULE OF REQUIRED CONSENTS AND
GOVERNMENTAL APPROVALS
Schedule 5.01(c) CERTIFICATE AS TO FINANCIAL STATEMENTS
AND DEFAULTS
Schedule 5.02(a) SCHEDULE OF HISTORICAL FINANCIAL
INFORMATION
Schedule 9.10(a) NOTICE OF ASSIGNMENT
Schedule 10.01-(1) SCHEDULE OF PARTICIPATING PARTNERS
AND PARENT COMPANIES
Schedule 10.01-(2) SCHEDULE OF REQUIRED LC AMOUNTS
<PAGE>
EXHIBIT A FORM OF NOTE
EXHIBIT B FORM OF LETTER OF CREDIT
EXHIBIT C FORM OF COLLATERAL ACCOUNT AGREEMENT
<PAGE>
CREDIT AGREEMENT
Dated as of March 9, 1994
PRIMESTAR PARTNERS, L.P., a Delaware limited partnership, the BANKS
listed on the signature pages hereof, THE BANK OF NEW YORK, CHEMICAL BANK and
CITIBANK, N.A., as Managing Agents, THE BANK OF NEW YORK, as Documentation Agent
and CHEMICAL BANK, as Administrative Agent, agree as follows (with certain terms
used herein being defined in Article 10):
ARTICLE 1 CREDIT FACILITY
---------------
Section 1.01. Commitment to Lend. Upon the terms and subject to the
------------------
conditions of this Agreement, each Bank agrees to make, from time to time during
the period from the Agreement Date through the Termination Date, one or more
Loans to the Borrower in an aggregate unpaid principal amount not exceeding at
any time such Bank's Commitment at such time; provided, however, that no Loan
-------- -------
shall be made if and to the extent that the amount thereof, together with the
amount of all other Loans to be made at such time and the aggregate unpaid
principal amount of all other Loans then outstanding, would exceed the
Availability Amount. Within such limits, and upon such terms and subject to
such conditions, amounts may be borrowed, repaid and reborrowed. Subject to
Section 1.07 and the other terms and conditions of this Agreement, the Loans
may, at the option of the Borrower, be made as, and from time to time continued
as or converted into, Base Rate, CD Rate or Eurodollar Rate Loans of any
permitted Type, or any combination thereof. The aggregate amount of the
Commitments on the Agreement Date is $565,000,000.
Section 1.02. Letters of Credit. (a) The Borrower shall provide or
-----------------
cause to be provided on the Agreement Date, and shall maintain or cause to be
maintained in full force and effect at all times thereafter through the
Repayment Date, one or more Letters of Credit in an aggregate undrawn face
amount not less than the Required LC Amount from time to time in effect.
(b) The obligation of the Borrower to so maintain Letters of Credit
may be satisfied by (i) a renewal and/or an increase in the face amount of the
applicable Letter or Letters of Credit, which renewal and increase shall be
advised to the beneficiary of such Letter or Letters of Credit pursuant to
<PAGE>
documentation satisfactory in form and substance to the Managing Agents, (ii)
the issuance of one or more replacement Letters of Credit in the appropriate
face amount or amounts, (iii) the issuance of one or more additional Letters of
Credit in the appropriate face amount or amounts, or (iv) any combination
thereof.
(c) In the event that existing Letters of Credit are required to be
renewed and/or increased, or replacement or additional Letters of Credit are
required to be issued, in order for the Borrower to be in compliance with
Section 1.02(a) on any Letter of Credit Event Date, binding, unconditional
commitments, satisfactory in form and substance to the Managing Agents, for such
renewals and/or increases of Letters of Credit or such replacement or additional
Letters of Credit shall be delivered to the Administrative Agent no later than
the 45th day preceding such Letter of Credit Event Date, and the Borrower shall
promptly on such 45th day notify the Administrative Agent of any failure to do
so.
(d) The Letters of Credit shall be drawable (i) at any time and from
time to time in the aggregate amount due and payable under this Agreement and
the Notes at such time, whether for principal, interest, fees or other amounts
payable, and whether such amounts have become due and payable at maturity, by
reason of mandatory prepayment or acceleration or otherwise and (ii) as provided
in Section 1.16 hereof. Drawings under the Letters of Credit (other than
drawings made pursuant to Section 1.16), together with applications of cash
collateral, if any, held pursuant to Section 1.16, shall be made under each
Participating Partner's Attributable Letter of Credit pro rata in accordance
with the percentage set forth on Schedule 10.01-(1) opposite the name of such
Participating Partner. Subject to the provisions of the next sentence, in any
case where the Attributable Letter of Credit of a Participating Partner consists
of more than one Letter of Credit, drawings shall be made thereunder pro rata in
accordance with the relative amounts thereof. In the event that an Attributable
Letter of Credit of a Participating Partner is such by virtue of the second
sentence of the definition of Attributable Letter of Credit, no drawing shall be
made thereunder unless all other Attributable Letters of Credit of such
Participating Partner shall have been drawn in full and all cash collateral, if
any, held pursuant to Section 1.16 hereof and attributable to such Participating
Partner shall have been fully applied as provided in Section 1.16, and pending
such drawing or application in full, such drawing and such application shall be
made pro rata in accordance with the relative amounts of such Letters of Credit
and cash collateral.
2
<PAGE>
Section 1.03. Manner of Borrowing. (a) The Borrower shall give the
-------------------
Administrative Agent notice (which shall be irrevocable) no later than 11:00
a.m. (New York time) on, in the case of Base Rate Loans, the Business Day, in
the case of CD Rate Loans, two Business Days, and, in the case of Eurodollar
Rate Loans, the third Eurodollar Business Day, before the requested date for the
making of such Loans. Each such notice shall be in the form of Schedule 1.03
-------------
and shall specify (i) the requested date for the making of the requested Loans,
which shall be, in the case of Domestic Rate Loans, a Business Day and, in the
case of Eurodollar Rate Loans, a Eurodollar Business Day, (ii) the Type or Types
of Loans requested and (iii) the amount of each such Type of Loan, the aggregate
of which amounts for all Types of Loans requested shall be (A) in the case of CD
Rate or Eurodollar Rate Loans, $5,000,000 or any greater integral multiple of
$1,000,000, (B) in the case of Base Rate Loans, $1,000,000 or any greater
integral multiple of $1,000,000 or (C) if less, the aggregate amount of the
unused Commitments. Upon receipt of any such notice, the Administrative Agent
shall promptly notify each Bank of the contents thereof and of the amount and
Type of each Loan to be made by such Bank on the requested date specified
therein.
(b) Not later than 1:00 p.m. (New York time) on each requested date
for the making of Loans, each Bank shall make available to the Administrative
Agent, in Dollars in funds immediately available to the Administrative Agent at
the Administrative Agent's Office, the Loans to be made by such Bank on such
date. Any Bank's failure to make any Loan to be made by it on the requested
date therefor shall not relieve any other Bank of its obligation to make any
Loan to be made by such other Bank on such date, but such other Bank shall not
be liable for such failure.
(c) Unless the Administrative Agent shall have received notice from a
Bank prior to 12:00 noon (New York time) on the requested date for the making of
any Loans that such Bank will not make available to the Administrative Agent the
Loans requested to be made by such Bank on such date, the Administrative Agent
may assume that such Bank has made such Loans available to the Administrative
Agent on such date in accordance with Section 1.03(b) and the Administrative
Agent in its sole discretion may, in reliance upon such assumption, make
available to the Borrower on such date a corresponding amount on behalf of such
Bank. If and to the extent such Bank shall not have so made available to the
Administrative Agent the Loans requested to be made by such Bank on such date
and the Administrative Agent shall have so made available to the Borrower a
corresponding amount on behalf of such Bank, such Bank shall,
3
<PAGE>
on demand, pay to the Administrative Agent such corresponding amount together
with interest thereon, for each day from the date such amount shall have been so
made available by the Administrative Agent to the Borrower until the date such
amount shall have been repaid to the Administrative Agent, at the Federal Funds
Rate until (and including) the third Business Day after demand is made and
thereafter at the Alternate Base Rate. If such Bank does not pay such
corresponding amount promptly upon the Administrative Agent's demand therefor,
the Administrative Agent shall promptly notify the Borrower and the Borrower
shall immediately repay such corresponding amount to the Administrative Agent
together with accrued interest thereon at the applicable rate or rates provided
in Section 1.04(a), provided that the Administrative Agent shall not draw under
the Letters of Credit or apply cash collateral to satisfy such payment
obligation prior to the third Business Day after the day on which such notice to
the Borrower shall have been given.
(d) All Loans made available to the Administrative Agent in
accordance with Section 1.03(b) shall be disbursed by the Administrative Agent
not later than 2:00 p.m. (New York time) on the requested date therefor in
Dollars in funds immediately available to the Borrower by credit to an account
of the Borrower at the Administrative Agent's Office or in such other manner as
may have been specified in the applicable notice and as shall be acceptable to
the Administrative Agent.
Section 1.04. Interest. (a) Rates. Each Loan shall bear interest
-------- -----
on the outstanding principal amount thereof until due at a rate per annum equal
to, (i) so long as it is a Base Rate Loan, the Alternate Base Rate as in effect
from time to time, (ii) so long as it is a CD Rate Loan, the applicable Adjusted
CD Rate plus 9/16% and (iii) so long as it is a Eurodollar Rate Loan, the
applicable Adjusted Eurodollar Rate plus 7/16%. If all or any part of a Loan or
any other amount due and payable under the Loan Documents is not paid when due
(whether at maturity, by reason of mandatory prepayment or acceleration or
otherwise), such unpaid amount shall, to the maximum extent permitted by
Applicable Law, bear interest for each day during the period from the date such
amount became so due until it shall be paid in full (whether before or after
judgment) at a rate per annum equal to the applicable Post-Default Rate.
(b) Payment. Interest shall be payable, (i) in the case of Base Rate
-------
Loans, on each Interest Payment Date, (ii) in the case of CD and Eurodollar Rate
Loans, on the last day of each applicable Interest Period (and, in the case of a
CD or Eurodollar Rate Loan having an Interest Period longer than 90
4
<PAGE>
days or three months, respectively, at intervals of 90 days and three months,
respectively, after the first day of such Interest Period), (iii) in the case of
any Loan, when such Loan shall be due (whether at maturity, by reason of notice
of prepayment or acceleration or otherwise) or converted, but only to the extent
then accrued on the amount then so due or converted. Interest at the Post-
Default Rate shall be payable on demand.
(c) Conversion and Continuation. (i) All or any part of the
---------------------------
principal amount of Loans of any Type may, on any Business Day, be converted
into any other Type or Types of Loans, except that (A) Fixed Rate Loans may be
converted only on the last day of an applicable Interest Period and (B) Domestic
Rate Loans may be converted into Eurodollar Rate Loans only on a Eurodollar
Business Day.
(ii) Base Rate Loans shall continue as Base Rate Loans unless
and until such Loans are converted into Loans of another Type. Fixed Rate Loans
of any Type shall continue as Loans of such Type until the end of the then
current Interest Period therefor, at which time they shall be automatically
converted into Base Rate Loans unless the Borrower shall have given the
Administrative Agent notice in accordance with Section 1.04(c)(iv) requesting
either that such Loans continue as Loans of such Type for another Interest
Period or that such Loans be converted into Loans of another Type at the end of
such Interest Period.
(iii) Notwithstanding anything to the contrary contained in
Section 1.04(c)(i) or (ii), during a Default, the Administrative Agent may
notify the Borrower that Loans may only be converted into or continued as Loans
of certain specified Types and, thereafter, until no Default shall continue to
exist, Loans may not be converted into or continued as Loans of any Type other
than one or more of such specified Types.
(iv) The Borrower shall give the Administrative Agent notice
(which shall be irrevocable) of each conversion of Loans or continuation of
Fixed Rate Loans no later than 12:00 noon (New York time) on, in the case of a
conversion into or a continuation of Base Rate Loans, the Business Day, in the
case of a conversion into or continuation of CD Rate Loans, two Business Days,
and, in the case of a conversion into or continuation of Eurodollar Rate Loans,
the third Eurodollar Business Day, before the requested date of such conversion
or continuation. Each notice of conversion or continuation shall be in the form
of Schedule 1.04(c)(iv) and shall specify (A) the requested date of such
--------------------
conversion or continuation, (B) the amount and Type and, in the case of Fixed
Rate Loans, the last day of the applicable
5
<PAGE>
Interest Period of the Loans to be converted or continued and (C) the amount and
Type or Types of Loans into which such Loans are to be converted or as which
such Loans are to be continued. Upon receipt of any such notice, the
Administrative Agent shall promptly notify each Bank of (x) the contents
thereof, (y) the amount and Type and, in the case of Fixed Rate Loans, the last
day of the applicable Interest Period of each Loan to be converted or continued
by such Bank and (z) the amount and Type or Types of Loans into which such Loans
are to be converted or as which such Loans are to be continued.
(d) Maximum Interest Rate. Nothing contained in the Loan Documents
---------------------
shall require the Borrower at any time to pay interest at a rate exceeding the
Maximum Permissible Rate. If interest payable by the Borrower on any date would
exceed the maximum amount permitted by the Maximum Permissible Rate, such
interest payment shall automatically be reduced to such maximum permitted
amount, and, to the extent permitted under Applicable Law, interest for any
subsequent period, to the extent less than the maximum amount permitted for such
period by the Maximum Permissible Rate, shall be increased by the unpaid amount
of such reduction. To the extent permitted under Applicable Law, any interest
actually received for any period in excess of such maximum amount permitted for
such period shall be deemed to have been applied as a prepayment of the Loans.
Section 1.05. Repayment. The Loans shall mature and become due and
---------
payable, and shall be repaid by the Borrower, in full on the Termination Date.
Section 1.06. Prepayments. (a) Optional Prepayments. The Borrower
----------- --------------------
may, at any time and from time to time, prepay the Loans in whole or in part,
without premium or penalty (but subject to Section 7.03), except that any
partial prepayment shall be in an aggregate principal amount of $5,000,000 in
the case of a prepayment of CD Rate or Eurodollar Rate Loans, and $1,000,000 in
the case of a prepayment of Base Rate Loans, or, in each case, any greater
integral multiple of $1,000,000. The Borrower shall give the Administrative
Agent notice of each prepayment pursuant to this Section 1.06(a) no later than
11:00 a.m. (New York time) on, in the case of a prepayment of Base Rate Loans,
the Business Day, in the case of a prepayment of CD Rate Loans, two Business
Days, and, in the case of a prepayment of Eurodollar Rate Loans, the third
Eurodollar Business Day, before the date of such prepayment. Each such notice
of prepayment shall be in the form of Schedule 1.06(a) and shall specify (i) the
----------------
date such prepayment is to be made and (ii) the amount and Type and, in the case
of Fixed Rate Loans, the last day of the applicable Interest Period of the Loans
to be prepaid. Upon
6
<PAGE>
receipt of any such notice, the Administrative Agent shall promptly notify each
Bank of the contents thereof and the amount and Type and, in the case of Fixed
Rate Loans, the last day of the applicable Interest Period of each Loan of such
Bank to be prepaid. Amounts to be prepaid pursuant to this Section 1.06(a) shall
be paid together with interest thereon as provided in Section 1.04(b) and shall,
as of the Administrative Agent's close of business at the Administrative Agent's
Office on the day preceding the date specified in the applicable notice of
prepayment, irrevocably be due and payable on such specified date.
(b) Mandatory Prepayments.
---------------------
(i) In the event that the Borrower shall have failed to comply
with the requirements of Section 1.02(a) as of any Letter of Credit Event
Date and such failure shall continue for 90 days thereafter, the Borrower
shall, on such 90th day, prepay the principal of and interest on the Loans
and the Notes, together with the amount, if any, due with respect thereto
under Section 7.03, and all other amounts owing under the Loan Documents.
This subsection (b)(i) is subject, without limitation, to the second
sentence of Section 5.01(f).
(ii) In the event that, at any time, the sum of (A) the
aggregate principal amount of Loans outstanding at such time, (B) the
aggregate amount of accrued and unpaid interest thereon and accrued and
unpaid fees payable under the Loan Documents and (C) the aggregate amount
of interest and fees that would accrue for the three month period
commencing on the date of determination (or, if less, the period from the
date of determination through the date that is 30 days after the next
Increase Date), assuming such Loans remained outstanding during such period
and bore interest throughout such period at the weighted average rate
applicable to such Loans on the date of determination, exceeds the sum of
the Available Letter of Credit Amount and the Available Cash Collateral
Amount, the Borrower shall, within five Business Days, prepay the Loans in
an amount such that, after giving effect thereto, no such excess shall
continue to exist. This subsection (b)(ii) is subject, without limitation,
to the second sentence of Section 5.01(f).
Section 1.07. Limitation on Types of Loans. Notwithstanding anything
----------------------------
to the contrary contained in this Agreement, the Borrower shall borrow, prepay,
convert and continue Loans in a manner such that (a) the aggregate principal
7
<PAGE>
amount of Fixed Rate Loans of the same Type and having the same Interest Period
shall at all times be not less than $5,000,000, (b) there shall not be, at any
one time, more than ten Interest Periods in effect with respect to Fixed Rate
Loans of all Types and (c) no Interest Period shall extend beyond the
Termination Date.
Section 1.08. Reduction and Termination of Commitments. (a)
----------------------------------------
Optional Reduction of Commitments. The Borrower may permanently reduce the
- ---------------------------------
Commitments by giving the Administrative Agent notice (which shall be
irrevocable) thereof no later than 11:00 a.m. (New York time) on the third
Business Day before the requested date of such reduction, except that (i) any
partial reduction of the Commitments shall be in an aggregate amount of
$5,000,000 or any greater integral multiple of $1,000,000 and (ii) no reduction
may reduce the Commitments to an amount less than the aggregate amount of the
outstanding Loans. Upon receipt of any such notice, the Administrative Agent
shall promptly notify each Bank of the contents thereof and the amount to which
such Bank's Commitment is to be reduced. In connection with each such
reduction, the Required LC Amount for the then current period specified on
Schedule 10.01-(2) and for each subsequent period specified thereon shall
- ------------------
automatically be reduced by the amount of such reduction of Commitments, and
such reduction in the Required LC Amount shall be applied to each of the amounts
set forth on such Schedule for each such period opposite the name of each
Participating Partner on a pro rata basis.
(b) Termination of Commitments. The Commitments shall terminate on
--------------------------
the day that the Borrower shall be required to make the prepayment provided for
in Section 1.06(b)(i).
Section 1.09. Commitment Fees. The Borrower shall pay to the
---------------
Administrative Agent for the account of each Bank a commitment fee on the daily
unused amount of such Bank's Commitment for each day from the Agreement Date
through the Termination Date at a rate per annum of 3/16%, payable on successive
Interest Payment Dates, on the Termination Date and on the date of any reduction
of such Commitment (to the extent accrued and unpaid on the amount of the
reduction). None of the fees payable under any of the Loan Documents shall be
refundable in whole or in part.
Section 1.10. Computation of Interest and Commitment Fee. Interest
------------------------------------------
calculated on the basis of the Adjusted CD Rate or the Adjusted Eurodollar Rate,
the Federal Funds Rate or the Base CD Rate (as defined in the definition of
Alternate Base Rate) and the commitment fee shall be computed on the basis of a
year of
8
<PAGE>
360 days and paid for the actual number of days elapsed. Interest calculated on
the basis of the Prime Rate shall be computed on the basis of a year of 365 or
366 days, as applicable, and paid for the actual number of days elapsed.
Interest for any period shall be calculated from and including the first day
thereof to but excluding the last day thereof.
Section 1.11. Evidence of Indebtedness. Each Bank's Loans and the
------------------------
Borrower's obligation to repay such Loans with interest in accordance with the
terms of this Agreement shall be evidenced by this Agreement, the records of
such Bank and a single Note payable to the order of such Bank. The records of
each Bank shall be prima facie evidence of such Bank's Loans and accrued
interest thereon and of all payments made in respect thereof.
Section 1.12. Payments by the Borrower. (a) Time, Place and Manner.
------------------------ -----------------------
All payments due to the Administrative Agent under the Loan Documents shall be
made to the Administrative Agent at the Administrative Agent's Office or at such
other address as the Administrative Agent may designate by notice to the
Borrower. All payments due to any Bank under the Loan Documents shall, in the
case of payments on account of principal of or interest on the Loans or fees, be
made to the Administrative Agent at the Administrative Agent's Office and, in
the case of all other payments, be made directly to such Bank at its Domestic
Lending Office or at such other address as such Bank may designate by notice to
the Borrower. All payments due to any Bank under the Loan Documents, whether
made to the Administrative Agent or directly to such Bank, shall be made for the
account of, in the case of payments in respect of Eurodollar Rate Loans, such
Bank's Eurodollar Lending Office and, in the case of all other payments, such
Bank's Domestic Lending Office. A payment shall not be deemed to have been made
on any day unless such payment has been received by the required Person, at the
required place of payment, in Dollars in funds immediately available to such
Person at such place, no later than 12:00 noon (New York time) on such day;
provided, however, that the failure of the Borrower to make any such payment by
- -------- -------
such time shall not constitute a Default hereunder so long as such payment is
received no later than 3:00 p.m. (New York time) on such day, but any such
payment received later than 12:00 noon (New York time) on such day shall be
deemed to have been made on the next Business Day for the purpose of calculating
interest on the amount paid, which interest, in the case of any such payment
received later than 3:00 p.m. (New York time), shall be calculated for such one-
day period on the basis of the applicable Post-Default Rate.
9
<PAGE>
(b) No Reductions. All payments due to the Administrative Agent or
-------------
any Bank under the Loan Documents, and all other terms, conditions, covenants
and agreements to be observed and performed by the Borrower thereunder, shall be
made, observed or performed by the Borrower without any reduction or deduction
whatsoever, including any reduction or deduction for any set-off, recoupment,
counterclaim (whether sounding in tort, contract or otherwise) or Tax, except
for any withholding or deduction for Taxes required to be withheld or deducted
under Applicable Law.
(c) Authorization to Charge Accounts. The Borrower hereby authorizes
--------------------------------
the Administrative Agent and each Bank, if and to the extent any amount payable
by the Borrower under the Loan Documents (whether payable to such Person or to
any other Person that is the Administrative Agent or a Bank) is not otherwise
paid when due, to charge such amount against any or all of the accounts of the
Borrower with such Person or any of its Affiliates (whether maintained at a
branch or office located within or without the United States), with the Borrower
remaining liable for any deficiency. The Person so charging any such amount
shall give notice thereof to the Borrower, either before or after such charge,
but the failure to give such notice shall not affect such Person's rights
hereunder.
(d) Extension of Payment Dates. Whenever any payment to the
--------------------------
Administrative Agent or any Bank under the Loan Documents would otherwise be due
(except by reason of acceleration) on a day that is not a Business Day, or, in
the case of payments of the principal of Eurodollar Rate Loans, a Eurodollar
Business Day, such payment shall instead be due on the next succeeding Business
or Eurodollar Business Day, as the case may be, unless, in the case of a payment
of the principal of Eurodollar Rate Loans, such extension would cause payment to
be due in the next succeeding calendar month, in which case such due date shall
be advanced to the next preceding Eurodollar Business Day. If the date any
payment under the Loan Documents is due is extended (whether by operation of any
Loan Document, Applicable Law or otherwise), such payment shall bear interest
for such extended time at the rate of interest applicable hereunder.
Section 1.13. Distribution of Payments by the Administrative Agent.
----------------------------------------------------
(a) The Administrative Agent shall promptly distribute to each Bank its ratable
share of each payment received by the Administrative Agent under the Loan
Documents for the account of the Banks by credit to an account of such Bank at
the Administrative Agent's Office or by wire transfer to an account of such Bank
at an office of any other commercial bank located in the United States.
10
<PAGE>
(b) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Banks under
the Loan Documents that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent in its
sole discretion may, in reliance upon such assumption, cause to be distributed
to each Bank on such due date a corresponding amount with respect to the amount
then due such Bank. If and to the extent the Borrower shall not have so made
such payment in full to the Administrative Agent and the Administrative Agent
shall have so distributed to any Bank a corresponding amount, such Bank shall,
on demand, repay to the Administrative Agent the amount so distributed together
with interest thereon, for each day from the date such amount is distributed to
such Bank until the date such Bank repays such amount to the Administrative
Agent, at the Federal Funds Rate until (and including) the third Business Day
after demand is made and thereafter at the Alternate Base Rate.
Section 1.14. Taxes. (a) Taxes Payable by the Borrower. If any Tax
----- -----------------------------
(other than Bank Taxes) is required to be withheld or deducted from, or is
otherwise payable by the Borrower in connection with, any payment to the
Administrative Agent or any Bank under the Loan Documents, the Borrower (i)
shall, if required, withhold or deduct the amount of such Tax from such payment
and, in any case, pay such Tax to the appropriate taxing authority in accordance
with Applicable Law and (ii) shall pay to the Administrative Agent or such Bank,
as applicable, such additional amounts as may be necessary so that the net
amount received by the Administrative Agent or such Bank with respect to such
payment, after withholding or deducting all such Taxes required to be withheld
or deducted, is equal to the full amount payable under the Loan Documents. If
any such Tax is withheld or deducted from, or is otherwise payable by the
Borrower in connection with, any payment payable to the Administrative Agent or
any Bank under the Loan Documents, the Borrower shall, as soon as possible after
the date of such payment, furnish to the Administrative Agent or such Bank, as
applicable, the original or a certified copy of a receipt for such Tax from the
applicable taxing authority. If any payment due to the Administrative Agent or
any Bank under the Loan Documents is or is expected to be made without
withholding or deducting therefrom, or otherwise paying in connection therewith,
any such Tax payable to any taxing authority, the Borrower shall, within 30 days
after any request from the Administrative Agent or such Bank, as applicable,
furnish to the Administrative Agent or such Bank a certificate from such taxing
authority, or an opinion
11
<PAGE>
of counsel acceptable to the Administrative Agent or such Bank, in either case
stating that no Tax payable to such taxing authority was or is, as the case may
be, required to be withheld or deducted from, or otherwise paid by the Borrower
in connection with, such payment.
(b) Taxes Payable by the Administrative Agent or any Bank. The
-----------------------------------------------------
Borrower shall, promptly upon request by the Administrative Agent or any Bank
for the payment thereof, pay to the Administrative Agent or such Bank, as the
case may be, (i) all Taxes (other than Bank Taxes) payable by the Administrative
Agent or such Bank, as the case may be, with respect to any payment due to the
Administrative Agent or such Bank under the Loan Documents and (ii) all Taxes
(other than Bank Taxes) payable by the Administrative Agent or such Bank as a
result of payments made by the Borrower (whether made to a taxing authority or
to the Administrative Agent or such Bank) pursuant to Section 1.14(a) or (b).
(c) Credits and Deductions. If the Administrative Agent or any Bank
----------------------
is, in its sole opinion, able to apply for any credit, deduction or other
reduction in Bank Taxes by reason of any payment made by the Borrower under
Section 1.14(a) or (b), the Administrative Agent or such Bank, as the case may
be, shall use reasonable efforts to obtain such credit, deduction or other
reduction and, upon receipt thereof, will pay to the Borrower such amount, not
exceeding the increased amount paid by the Borrower, as is equal to the net
after-tax value to the Administrative Agent or such Bank, in its sole opinion,
of such part of such credit, deduction or other reduction as it considers to be
allocable to such payment by the Borrower, having regard to all of the
Administrative Agent's or such Bank's dealings giving rise to similar credits,
deductions or other reductions in relation to the same tax period and to the
cost of obtaining the same; provided, however, that (i) the Administrative Agent
-------- -------
or such Bank, as the case may be, shall not be obligated to disclose to the
Borrower any information regarding its tax affairs or computations and (ii)
nothing in this Section 1.14(c) shall interfere with the right of the
Administrative Agent or such Bank to arrange its tax affairs as it deems
appropriate.
(d) Exemption from U.S. Withholding and Backup Withholding Taxes.
------------------------------------------------------------
(i) Each Bank that is not a "United States person" (as such term is defined in
Section 7701(a)(30) of the Code) shall submit to the Borrower and the
Administrative Agent (A) on or before the fifth day prior to the first date that
interest or fees are payable to it under the Loan Documents, (1) two duly
completed and signed copies of Internal Revenue Service Form 1001 or 4224 or any
successor form, in each case entitling
12
<PAGE>
such Bank to a complete exemption from withholding of any United States federal
income taxes on all amounts to be received by such Bank under the Loan
Documents, and (2) a duly completed and signed copy of Internal Revenue Service
Form W-8 or W-9 or any successor form, in each case entitling such Bank to a
complete exemption from United States backup withholding tax on all amounts to
be received by such Bank under the Loan Documents, and (B) from time to time
thereafter, prior to the expiration or obsolescence of any previously delivered
form or upon any previously delivered form becoming inaccurate or inapplicable,
such further duly completed and signed copies of such forms or such other forms
or certificates, in each case entitling such Bank to exemption from withholding
of United States federal income taxes and from United States backup withholding
tax to the maximum extent to which such Bank is then entitled under Applicable
Law. Each Bank shall promptly notify the Borrower and the Administrative Agent
if (A) it is required to withdraw or cancel any form or certificate previously
submitted by it or any such form or certificate has otherwise become ineffective
or inaccurate or (B) payments to it are or will be subject to withholding of
United States federal income taxes or United States backup withholding tax to a
greater extent than the extent to which payments to it were previously subject.
Upon the request of the Borrower or the Administrative Agent, each Bank that is
a United States person (as defined above) shall from time to time submit to the
Borrower and the Administrative Agent a certificate to the effect that it is
such a United States person.
(ii) Notwithstanding anything to the contrary contained herein, the
Borrower shall not be required to pay any additional amount in respect of
withholding of United States income taxes or United States backup withholding
tax pursuant to Section 1.14 or Section 7.02 to any Bank that (A) is not, on the
date this Agreement is executed by such Bank (or, in the case of a Person that
became a Bank by assignment, on the date of such assignment), either (x)
entitled to submit Form 1001 entitling such Bank to a complete exemption from
withholding on all amounts to be received by such Bank pursuant to this
Agreement and the Loans or Form 4224 relating to all amounts to be received by
such Bank pursuant to this Agreement and the Loans or (y) a United States
person, or (B) is no longer entitled to submit Form 1001 or Form 4224 (or any
successor form as shall be adopted from time to time by the relevant United
States taxing authorities) as a result of any change in circumstances or other
event other than a Regulatory Change.
Section 1.15. Pro Rata Treatment. Except to the extent otherwise
------------------
provided herein, (a) Loans of each Type to be made on any day shall be made by
the Banks pro rata in accordance
13
<PAGE>
with their respective Commitments, (b) Loans of the Banks shall be converted and
continued pro rata in accordance with their respective amounts of Loans of the
Type and, in the case of Fixed Rate Loans, having the Interest Period being so
converted or continued, (c) each reduction in the Commitments shall be made pro
rata in accordance with the respective amounts thereof and (d) each payment of
the principal of or interest on the Loans or of fees shall be made for the
account of the Banks pro rata in accordance with the respective amounts thereof
then due and payable.
Section 1.16. Cash Collateral Account. In the event that, (a) as of
-----------------------
the tenth Business Day preceding a Letter of Credit Event Date, any Letter of
Credit scheduled to expire on such Letter of Credit Event Date shall not have
been renewed or replaced in the manner and to the extent necessary in order for
(i) the Borrower to be in compliance with Section 1.02(a) on such Letter of
Credit Event Date or (ii) the sum of (x) the aggregate principal amount of Loans
outstanding at such time, (y) the aggregate amount of accrued and unpaid
interest thereon and accrued and unpaid fees payable under the Loan Documents
and (z) the aggregate amount of interest and fees that would accrue for the
three month period (or, if less, the period from the date of determination
through the date that is 30 days after the next Increase Date) commencing on the
date of determination, assuming such Loans remained outstanding during such
period and bore interest throughout such period at the weighted average rate
applicable to such Loans on the date of determination, to be no greater than the
sum of the Available Letter of Credit Amount and the Available Cash Collateral
Amount (assuming such Letter of Credit were to so expire) on such Letter of
Credit Event Date or (b) as of the ninetieth day after the first day on which an
Issuing Bank shall have failed to maintain the Required LC Rating (without the
Letter or Letters of Credit issued by such Issuing Bank being replaced by a
Letter or Letters of Credit), the Administrative Agent shall be entitled to draw
in full on such expiring Letter or Letters of Credit or on such Letter or
Letters of Credit issued by such Issuing Bank, as the case may be, and, as
provided in the Collateral Account Agreement, hold the proceeds of such drawing
in a cash collateral account maintained at the Administrative Agent's Office as
collateral securing the prompt payment when due (whether at maturity, by reason
of mandatory prepayment or acceleration or otherwise) of the principal and
interest on the Loans and the Notes and all other amounts payable to the
Administrative Agent and the Banks under the Loan Documents. Such cash
collateral, together with drawings under Letters of Credit, shall be applied to
such amounts on a pro rata basis as provided in Section 1.02(d). In the event
that, at any time, the sum of the Available Letter of Credit
14
<PAGE>
Amount and the Available Cash Collateral Amount are in excess of the amount
necessary for the Borrower to be in compliance with Section 1.02(a) at such
time, and so long as no mandatory prepayment pursuant to Section 1.06(b) shall
then be due and payable, the Administrative Agent shall, upon the Borrower's
request, release its lien on such cash collateral to the extent of such excess
and return such excess funds deposited therein to the Borrower or its designee.
The Borrower hereby agrees to execute and deliver to the Administrative Agent
from time to time as required by the Administrative Agent such statements,
instruments or other documents as shall reasonably be necessary or desirable in
order to further effectuate the purposes of this Section 1.16. This Section 1.16
is subject, without limitation, to the second sentence of Section 5.01(f).
Section 1.17. Liability of Partners. No Partner and no Affiliate of
---------------------
any Partner shall be liable for the payment or performance of the obligations of
the Borrower under the Loan Documents (and no recourse shall be had, whether by
levy, execution or otherwise, for the payment or performance of any such
obligation against any Partner or any such Affiliate or against any assets of
any thereof), by reason of the status of such Partner as a Partner or for any
other reason; except that the provisions of this Section 1.17 shall not limit or
otherwise affect the Agents' and the Banks' rights under the Loan Documents with
respect to the Letters of Credit or the proceeds of draws thereunder.
ARTICLE 2 CONDITIONS TO LOANS
-------------------
Section 2.01. Conditions to Initial Loans. The obligation of each
---------------------------
Bank to make its initial Loan is subject to the fulfillment of the conditions
that (1) during the period from December 31, 1992 through the date of such Loan,
there has been no material adverse change with respect to the business,
operations or prospects of the Borrower, except for the operating losses of the
Borrower incurred during such period and changes affecting the cable television
or DBS industries generally and (2) the Managing Agents shall have received each
of the following, in form and substance and, in the case of the materials
referred to in clauses (a), (b), (c), (g) and (j), certified in a manner
satisfactory to the Managing Agents:
(a) a certificate of the Secretary or an Assistant Secretary of
the Borrower, dated the requested date for the making of such Loan,
substantially in the form of Schedule 2.01(a), to which shall be attached
----------------
copies of the resolutions referred to in such certificate;
15
<PAGE>
(b) a copy of the Limited Partnership Agreement of the Borrower;
(c) a good standing certificate with respect to the Borrower,
issued as of a recent date by the Secretary of State or other appropriate
official of the Borrower's jurisdiction of formation;
(d) an opinion of counsel for the Borrower, dated the requested
date for the making of such Loan, in the form of Schedule 2.01(d), with
----------------
such changes as the Managing Agents shall approve;
(e) an opinion of counsel for each Issuing Bank, dated not later
than the requested date for the making of such Loan, substantially in the
form of Schedule 2.01(e), with such changes as the Managing Agents shall
----------------
approve (which approval shall not be unreasonably withheld);
(f) an opinion of Winthrop, Stimson, Putnam & Roberts, special
counsel for the Managing Agents, dated the requested date for the making of
such Loan, in the form of Schedule 2.01(f);
----------------
(g) a copy of each Governmental Approval and other consent or
approval listed on Schedule 3.02;
-------------
(h) a duly executed Note for each Bank and a duly executed
Collateral Account Agreement;
(i) one or more Letters of Credit in an aggregate face amount
equal to the initial Required LC Amount;
(j) a copy of each of the Project Documents as in effect on the
date of such delivery; and
(k) evidence of the payment or arrangements to make the payment
of all amounts payable at such time pursuant to Section 9.02.
Section 2.02. Conditions to Each Loan. The obligation of each Bank
-----------------------
to make each Loan requested to be made by it, including its initial Loan, is
subject to the fulfillment of each of the following conditions:
(a) the Administrative Agent shall have received a notice of
borrowing with respect to such Loan complying with the requirements of Section
1.03;
16
<PAGE>
(b) each Representation and Warranty shall be true and correct at and
as of the time such Loan is to be made, both with and without giving effect to
such Loan and all other Loans to be made at such time and to the application of
the proceeds thereof;
(c) no Default shall have occurred and be continuing at the time such
Loan is to be made or would result from the making of such Loan and all other
Loans to be made at such time or from the application of the proceeds thereof;
(d) in the event that such Loan is to be made on a day that is within
the period of ten Business Days preceding a Letter of Credit Event Date, the
Administrative Agent shall have received such renewals and increases of existing
Letters of Credit, or such replacement or additional Letters of Credit, or such
combination thereof, as shall be necessary to enable the Borrower to be in
compliance with Section 1.02(a) on such Letter of Credit Event Date, after
giving effect to the second sentence of Section 5.01(f);
(e) in the event that such Loan is to be made on a day that is within
the 90 day period following a Letter of Credit Event Date on which the Borrower
shall not have been in compliance with Section 1.02(a), the Administrative Agent
shall have received such renewals and increases of existing Letters of Credit,
or such replacement or additional Letters of Credit, or such combination
thereof, as shall be necessary to enable the Borrower to be in compliance with
Section 1.02(a) on the date of such Loan, after giving effect to the second
sentence of Section 5.01(f); and
(f) such Loan will not contravene any Applicable Law applicable to
such Bank.
Except to the extent that the Borrower shall have disclosed in the
notice of borrowing, or in a subsequent notice given to the Banks prior to 5:00
p.m. (New York time) on the Business Day before the requested date for the
making of the requested Loans, that a condition specified in clause (b) or (c)
above will not be fulfilled as of the requested time for the making of such
Loans, the Borrower shall be deemed to have made a Representation and Warranty
as of the time of the making of such Loans that the conditions specified in such
clauses have been fulfilled as of such time. No such disclosure by the Borrower
that a condition specified in clause (b) or (c) above will not be fulfilled as
of the requested time for the making of the requested Loans shall affect the
right of each Bank to not make the Loans requested to be made by it if, in such
Bank's
17
<PAGE>
determination, such condition has not been fulfilled at such time.
ARTICLE 3 CERTAIN REPRESENTATIONS AND WARRANTIES
--------------------------------------
In order to induce each Bank to enter into this Agreement and to make
each Loan requested to be made by it, the Borrower represents and warrants as
follows:
Section 3.01. Organization; Power; Qualification. The Borrower is a
----------------------------------
limited partnership duly organized, validly existing and in good standing under
the laws of its jurisdiction of formation, has the power and authority to own
its property and to carry on its business as now being and hereafter proposed to
be conducted and is duly qualified and in good standing, and is authorized to do
business, in all jurisdictions in which the character of its properties or the
nature of its business requires such qualification or authorization, except for
qualifications and authorizations the lack of which, singly or in the aggregate,
has not had and will not have a Materially Adverse Effect on any Loan Document.
Section 3.02. Authorization; Enforceability; Required Consents;
-------------------------------------------------
Absence of Conflicts. The Borrower has the power, and has taken all necessary
- --------------------
action (including, any necessary action by its partners or any committee of
representatives of its partners) to authorize it, to execute, deliver and
perform in accordance with their respective terms the Loan Documents and to
borrow hereunder in the unused amount of the Commitments. This Agreement has
been, and each of the other Loan Documents when delivered to the Administrative
Agent will have been, duly executed and delivered by the Borrower and is, or
when so delivered will be, a legal, valid and binding obligation of the
Borrower, enforceable against the Borrower in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by equitable principles. The execution,
delivery and performance in accordance with their respective terms by the
Borrower of the Loan Documents, and each borrowing hereunder, including a
borrowing in the amount of the unused Commitments, do not and (absent any change
in any Applicable Law or applicable Contract to which the Borrower is a party or
by which the Borrower or any of its properties may be bound) will not (a)
require any Governmental Approval or any other consent or approval, including
any consent or approval of the partners of the Borrower, other than Governmental
Approvals and other consents and approvals that have been obtained, are final
and not subject to review on appeal
18
<PAGE>
or to collateral attack, are in full force and effect and, in the case of any
such required under any Applicable Law or under any Contract to which the
Borrower is a party or by which the Borrower or any of its properties may be
bound, in each case as in effect on the Agreement Date, are listed on Schedule
--------
3.02, or (b) violate, conflict with, result in a breach of, constitute a default
- ----
under, or result in or require the creation of any lien or other encumbrance
upon any assets of the Borrower under, (i) any Contract to which the Borrower is
a party or by which the Borrower or any of its properties may be bound or (ii)
any Applicable Law.
Section 3.03. Litigation. There are not, in any court or before any
----------
arbitrator of any kind or before or by any governmental or non-governmental
body, any actions, suits or proceedings pending against or in any other way
relating to or affecting the Borrower or any Loan Document, except actions,
suits or proceedings that, if adversely determined, would not, singly or in the
aggregate, have a Materially Adverse Effect on any Loan Document.
Section 3.04. Compliance With Law. The Borrower is in compliance
-------------------
with Applicable Law, except for such noncompliance as would not have a
Materially Adverse Effect on any Loan Document.
Section 3.05. Project Documents. (a) Delivery. The Borrower has
----------------- --------
delivered to the Administrative Agent a copy of each of the Project Documents
and all material amendments, modifications and supplements thereof or thereto,
in each case as in effect on the date of such delivery.
(b) Absence of Defaults. No default on the part of the Borrower or,
-------------------
to the knowledge of the Borrower, on the part of any other party thereto exists
under or with respect to any of the Project Documents, except for such defaults
as would not have a Materially Adverse Effect on any Loan Document.
Section 3.06. Investment Company Act. The Borrower is not an
----------------------
"investment company" or a Person "controlled" by an "investment company", within
the meaning of the Investment Company Act of 1940.
ARTICLE 4 CERTAIN COVENANTS
-----------------
From the Agreement Date and until the Repayment Date,
A. The Borrower shall:
------------------
19
<PAGE>
Section 4.01. Preservation of Existence, Scope of Business,
---------------------------------------------
Compliance with Law, Preservation of Enforceability. (a) Preserve and maintain
- ---------------------------------------------------
its partnership existence and all of its other franchises, licenses, rights and
privileges, (b) engage only in business in substantially the same field as the
business conducted on the Agreement Date, (c) comply with Applicable Law (d)
take all action and obtain all consents and Governmental Approvals required so
that its obligations under the Loan Documents will at all times be legal, valid
and binding and enforceable in accordance with their respective terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by equitable principles), except that this
Section 4.01 (other than clause (a), insofar as it requires the Borrower to
preserve its partnership existence) shall not apply in any circumstance where
noncompliance, together with all other noncompliances with this Section 4.01,
will not have a Materially Adverse Effect on any Loan Document.
Section 4.02. Use of Proceeds. Use the proceeds of the Loans only
---------------
to:
(a) refinance any interim financing provided by Loral, the
Participating Partners or any other entity to commence or continue
construction of the Satellites;
(b) finance payments under the Satellite Construction Contract;
(c) fund the payment of interest and fees and other amounts due
hereunder and the cost of interest rate hedging arrangements; and
(d) fund expenses for construction monitoring (including the
refinancing of any interim financing thereof) and for working capital
relating to the Project.
None of the proceeds of any of the Loans shall be used to purchase or carry, or
to reduce or retire or refinance any credit incurred to purchase or carry, any
margin stock (within the meaning of Regulations U and X of the Board of
Governors of the Federal Reserve System) or to extend credit to others for the
purpose of purchasing or carrying any margin stock. If requested by any Bank,
the Borrower shall complete and sign Part I of a copy of Federal Reserve
Form U-1 referred to in Regulation U and deliver such copy to such Bank.
B. The Borrower shall not:
----------------------
20
<PAGE>
Section 4.03. Merger or Consolidation. Merge or consolidate with any
-----------------------
Person, except that, if after giving effect thereto no Default would exist, this
Section 4.03 shall not apply to any merger or consolidation of the Borrower with
any one or more Persons, provided that the Borrower shall be the continuing
Person.
ARTICLE 5 INFORMATION
-----------
Section 5.01. Information to Be Furnished. From the Agreement Date
---------------------------
and until the Repayment Date, the Borrower shall furnish to the Administrative
Agent, with sufficient copies for each of the Banks:
(a) Quarterly Financial Statements. As soon as available and in any
------------------------------
event within 60 days after the close of each of the first three quarterly
accounting periods in each fiscal year of the Borrower, commencing with the
quarterly period ended March 31, 1994, a balance sheet of the Borrower as at
the end of such quarterly period and the related statements of income and
changes in cash balance of the Borrower for such quarterly period and for the
elapsed portion of the fiscal year ended with the last day of such quarterly
period, setting forth in each case in comparative form the figures for the
corresponding periods of the previous fiscal year.
(b) Year-End Financial Statements; Accountants' Certificate. As soon
-------------------------------------------------------
as available and in any event within 120 days after the end of each fiscal year
of the Borrower, commencing with the fiscal year ended December 31, 1993 or, in
the case of clause (iii) below, 1994:
(i) a balance sheet of the Borrower as at the end of such fiscal
year and the related statements of operations, partners' capital (deficit)
and cash flows of the Borrower for such fiscal year, setting forth in
comparative form the figures as at the end of and for the previous fiscal
year;
(ii) an audit report of Price Waterhouse, or other independent
certified public accountants of recognized national standing, on such
financial statements, which report shall not contain any exception as to
scope that is not satisfactory to the Managing Agents; and
(iii) a certificate of such accountants addressed to the Banks
and in form and substance satisfactory to the
21
<PAGE>
Managing Agents stating that they have caused this Agreement to be reviewed
in making the examination necessary for their report on such consolidated
financial statements and that nothing came to their attention that caused
them to believe that, as of the date of such financial statements, any
Default existed or, if such is not the case, specifying such Default and
its nature, when it occurred and whether it is continuing.
(c) Officer's Certificate as to Financial Statements and Defaults.
-------------------------------------------------------------
At the time that financial statements are furnished pursuant to Section 5.01(a)
or (b), a certificate of the president or chief financial officer of the
Borrower in the form of Schedule 5.01(c).
----------------
(d) Requested Information. From time to time and promptly upon
---------------------
written request of any Bank, such Information regarding the Loan Documents, the
Loans or the business, assets, Liabilities, financial condition or results of
operations of the Borrower as such Bank may reasonably request, in each case in
form and substance satisfactory to the requesting Bank.
(e) Notice of Defaults, Material Adverse Changes and Other Matters.
--------------------------------------------------------------
Promptly upon obtaining knowledge thereof, notice of:
(i) any Default,
(ii) the commencement of, or the occurrence or nonoccurrence of
any change or event relating to, any action, suit or proceeding that would
cause the Representation and Warranty contained in Section 3.03 to be
incorrect if made at such time, and
(iii) any material amendment or modification of, or supplement
to, the Limited Partnership Agreement of the Borrower or any of the Project
Documents.
(f) Opinions of Counsel for Issuing Banks. On the day that any
-------------------------------------
Letter of Credit is issued, renewed or increased, an opinion of counsel for the
applicable Issuing Bank with respect to such Letter of Credit or the renewal or
increase thereof, substantially in the form of Schedule 2.01(e), with such
----------------
changes as the Managing Agents shall approve (which approval shall not be
unreasonably withheld). In the event that such opinion is not delivered at the
time of the issuance of a Letter of Credit or the renewal or increase thereof,
such Letter of Credit shall be deemed not to have been issued, or such renewal
or increase thereof shall be deemed not to have taken place, as the case may
22
<PAGE>
be, for the purposes of Sections 1.06(b), 1.16 and 2.02(d) and (e) until such
time as such opinion is delivered.
Section 5.02. Accuracy of Financial Statements and Information.
------------------------------------------------
(a) Historical Financial Statements. The Borrower hereby represents
-------------------------------
and warrants that (i) Schedule 5.02(a) sets forth a complete and correct list of
----------------
the financial statements submitted by the Borrower to the Banks in order to
induce them to execute and deliver this Agreement, (ii) such financial
statements are complete and correct and present fairly, in accordance with
Generally Accepted Accounting Principles (other than, in the case of unaudited
financial statements, the statement of changes in cash balance and except that
unaudited financial statements are subject to normal year-end adjustments and do
not contain all of the footnote disclosures required by Generally Accepted
Accounting Principles), the financial position of the Borrower as at their
respective dates, results of operations, partners' capital (deficit) and cash
flows of the Borrower for the respective periods to which such statements
relate.
(b) Future Financial Statements. The financial statements delivered
---------------------------
pursuant to Section 5.01(a) or (b) shall be complete and correct and present
fairly, in accordance with Generally Accepted Accounting Principles (other than,
in the case of unaudited financial statements, the statement of changes in cash
balance and except that unaudited financial statements are subject to normal
year-end adjustments and do not contain all of the footnote disclosures required
by Generally Accepted Accounting Principles), the financial position of the
Borrower and the results of operations, partners' capital (deficit) and cash
flows of the Borrower for the respective periods to which such statements
relate, and the furnishing of the same to the Banks shall constitute a
representation and warranty by the Borrower made on the date the same are
furnished to the Banks to that effect.
(c) Historical Information. The Borrower hereby represents and
----------------------
warrants that all Information (other than any projections or any financial
forecasts contained therein) furnished to the Managing Agents or the Banks in
writing by or on behalf of the Borrower prior to the Agreement Date in
connection with or pursuant to the Loan Documents and the relationships
established thereunder, at the time the same was so furnished, but in the case
of Information dated as of a prior date, as of such date, was complete and
correct in the light of the purpose for which it was prepared.
23
<PAGE>
(d) Future Information. All Information (other than any projections
------------------
or any financial forecasts contained therein) furnished to the Administrative
Agent, the Managing Agents or the Banks in writing by or on behalf of the
Borrower on or after the Agreement Date in connection with or pursuant to the
Loan Documents or in connection with or pursuant to any amendment or
modification of, or waiver of rights under, the Loan Documents, shall, at the
time the same is so furnished, but in the case of Information dated as of a
prior date, as of such date, (i) be complete and correct in the light of the
purpose for which it was prepared, (ii) not contain any untrue statement of a
material fact, and (iii) not omit to state a material fact necessary in order to
make the statements contained therein not misleading in the light of the
circumstances under which they were made, and the furnishing of the same to the
Administrative Agent, the Managing Agents or any Bank shall constitute a
representation and warranty by the Borrower made on the date the same are so
furnished to the effect specified in clauses (i), (ii) and (iii).
Section 5.03. Additional Covenants Relating to Disclosure. From the
-------------------------------------------
Agreement Date and until the Repayment Date, the Borrower shall:
(a) Accounting Methods and Financial Records. Maintain a system of
----------------------------------------
accounting, and keep such books, records and accounts (which shall be true and
complete), as may be required or necessary to permit the preparation of
financial statements required to be delivered pursuant to Section 5.01(a) and
(b).
(b) Visits, Inspections and Discussions. Permit representatives
-----------------------------------
(whether or not officers or employees) of any Bank, from time to time, as often
as may be reasonably requested, to (i) visit any of its premises or property,
(ii) inspect, and verify the amount, character and condition of, any of its
property, (iii) review and make extracts from its books and records, including
management letters prepared by its independent certified public accountants, and
(iv) discuss with its officers, employees and independent certified public
accountants its business, assets, liabilities, financial condition, results of
operation and business prospects (and by this provision the Borrower authorizes
said officers, employees and accountants to discuss such matters).
Section 5.04. Authorization of Third Parties to Deliver Information.
-----------------------------------------------------
The Borrower hereby agrees that any opinion, report or other Information
delivered to the Administrative Agent, the Managing Agents or the Banks pursuant
to the Loan Documents (including under Article 2 or this Article
24
<PAGE>
5) is hereby deemed to have been authorized and directed by the Borrower to be
delivered for the benefit of the Administrative Agent, the Managing Agents and
the Banks. The Borrower agrees to promptly execute and deliver from time to time
such further authorizations to effect the purposes of this Section 5.04 as the
Administrative Agent, the Managing Agents or any Bank may reasonably request.
ARTICLE 6 DEFAULT
-------
Section 6.01. Events of Default. Each of the following shall
-----------------
constitute an Event of Default, whatever the reason for such event and whether
it shall be voluntary or involuntary, or within or without the control of the
Borrower, or be effected by operation of law or pursuant to any judgment or
order of any court or any order, rule or regulation of any governmental or
nongovernmental body:
(a) Any payment of principal of or interest on any of the Loans or
the Notes or of fees shall not be made when and as due (whether at maturity, by
reason of mandatory prepayment or acceleration or otherwise) and in accordance
with the terms of this Agreement and the Notes and, except in the case of
payments of principal, such failure shall continue for three Business Days or,
in the case of the obligation (including as such obligation relates to
principal) provided for in the last sentence of Section 1.03(c), two Business
Days;
(b) Any Representation and Warranty made or deemed to be made by the
Borrower shall at any time prove to have been incorrect or misleading in any
material respect when made;
(c) The Borrower shall default in the performance or observance of:
(i) any covenant or agreement contained in Section 4.01(a)
(insofar as such Section requires the preservation of the partnership
existence of the Borrower), 4.01(d), 4.03 or 5.01(e)(i); or
(ii) any term, covenant, condition or agreement contained in
any Loan Document (other than the covenants contained in Section 1.02(a)
and (c) and Section 5.01(f) or any term, covenant, condition or agreement a
default in the performance or observance of which is elsewhere in this
Section specifically dealt with) and, if capable of being remedied, such
default shall continue unremedied for a period of, in the case of Section
5.03(b), 10 days and, in all other cases, 30 days from the earlier of the
date on which the Administrative Agent shall have given
25
<PAGE>
notice of such default to the Borrower and the date on which the Borrower
either obtained knowledge thereof or reasonably should have obtained
knowledge thereof;
(d) (i) The Borrower shall (A) commence a voluntary case under the
Federal bankruptcy laws (as now or hereafter in effect), (B) file a petition
seeking to take advantage of any other laws, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, winding up or composition or adjustment
of debts, (C) consent to or fail to contest in a timely and appropriate manner
any petition filed against it in an involuntary case under such bankruptcy laws
or other laws, (D) apply for, or consent to, or fail to contest in a timely and
appropriate manner, the appointment of, or the taking of possession by, a
receiver, custodian, trustee, liquidator or the like of itself or of a
substantial part of its assets, domestic or foreign, (E) admit in writing its
inability to pay, or generally not be paying, its debts (other than those that
are the subject of bona fide disputes) as they become due, (F) make a general
assignment for the benefit of creditors, or (G) take any partnership action for
the purpose of effecting any of the foregoing;
(ii) (A) A case or other proceeding shall be commenced against the
Borrower seeking (1) relief under the Federal bankruptcy laws (as now or
hereafter in effect) or under any other laws, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, winding up or composition or adjustment
of debts, or (2) the appointment of a trustee, receiver, custodian, liquidator
or the like of the Borrower, or of all or any substantial part of the assets,
domestic or foreign, of the Borrower, and such case or proceeding shall continue
undismissed and unstayed for a period of 60 consecutive days, or (B) an order
granting the relief requested in such case or proceeding against the Borrower
(including an order for relief under such Federal bankruptcy laws) shall be
entered;
(e) A judgment or order for the payment of money shall be entered
against the Borrower by any court, and such judgment or order shall continue
undischarged and unstayed for a period of 60 consecutive days in which the
aggregate amount of all such judgments and orders exceeds $1,000,000;
(f) Any Participating Partner, any of its Affiliates or the Borrower
asserts in writing addressed to the Administrative Agent or any Bank (or
institutes any proceeding seeking to establish) that (i) any Loan Document is
invalid, not binding or unenforceable in its entirety, (ii) any obligation of
the Borrower to pay the principal of or interest on the Loans (or
26
<PAGE>
any other material payment obligation of the Borrower) pursuant to any Loan
Document or any right of the Administrative Agent under the Loan Documents to
draw on any Letter of Credit is invalid, not binding or unenforceable or (iii)
any other provision of any Loan Document is invalid, not binding or
unenforceable if the Required Banks shall have determined in good faith that the
assertion or proceeding under this clause (iii), if determined adversely to the
Banks, would have a materially adverse effect on the obligations of the Borrower
or the rights of the Banks under the Loan Documents taken as a whole;
(g) Participating Partners, or Affiliates thereof, 51% of the
outstanding capital securities or other equity interests having ordinary voting
power of which is owned, directly or indirectly, by Parent Companies, shall at
any time cease to own at least 51% of the partnership interests in the Borrower;
(h) The Borrower or Tempo shall give notice to the Banks, Loral or,
in the case of any such notice by the Borrower, Tempo, of the determination by
the Borrower or Tempo, as the case may be, to terminate construction of the
Satellites, and such notice shall not be revoked or rescinded for 15 Business
Days after the date on which such notice shall have been given; or
(i) Any Letter of Credit shall be or become invalid, not binding or
unenforceable in any respect, and such invalidity, lack of binding effect or
unenforceability shall continue for three Business Days.
Section 6.02. Remedies upon Event of Default. During the continuance
------------------------------
of any Event of Default (other than one specified in Section 6.01(d)) and in
every such event, the Administrative Agent, upon notice to the Borrower, may do
either or both of the following: (a) declare, in whole or, from time to time,
in part, the principal of and interest on the Loans and the Notes and all other
amounts owing under the Loan Documents to be, and the Loans and the Notes and
all such other amounts shall thereupon and to that extent become, due and
payable and the Administrative Agent shall thereupon be entitled immediately
(subject to the pro rata requirements of Sections 1.02(d) and 1.16) to draw on
the Letters of Credit and apply the proceeds thereof and the cash collateral, if
any, held pursuant to Section 1.16 to the payment of such amounts, and (b)
terminate, in whole or, from time to time, in part, the Commitments. Upon the
occurrence of an Event of Default specified in Section 6.01(d), automatically
and without any notice to the Borrower, (a) the principal of and interest on the
Loans and the Notes and all other amounts owing under the Loan Documents shall
be due and payable and the Administrative Agent shall thereupon be entitled
immediately (subject to the pro
27
<PAGE>
rata requirements of Sections 1.02(d) and 1.16) to draw on the Letters of Credit
and apply the proceeds thereof and the cash collateral, if any, held pursuant to
Section 1.16 to the payment of such amounts, and (b) the Commitments shall
terminate. Presentment, demand, protest or notice of any kind (other than the
notice provided for in the first sentence of this Section 6.02) are hereby
expressly waived.
ARTICLE 7 ADDITIONAL CREDIT FACILITY PROVISIONS
-------------------------------------
Section 7.01. Mandatory Suspension and Conversion of Fixed Rate
-------------------------------------------------
Loans. A Bank's obligations to make, continue or convert into Fixed Rate Loans
of any Type shall be suspended, all such Bank's outstanding Loans of that Type
shall be converted on the last day of their applicable Interest Periods (or, if
earlier, in the case of clause (c) below, on the last day such Bank may lawfully
continue to maintain Loans of that Type or, in the case of clause (d) below, on
the day determined by such Bank to be the last Business Day before the effective
date of the applicable restriction) into, and all pending requests for the
making or continuation of or conversion into Loans of such Type by such Bank
shall be deemed requests for, Base Rate Loans, if:
(a) on or prior to the determination of an interest rate for a
Fixed Rate Loan of that Type for any Interest Period, the Administrative
Agent determines that for any reason appropriate information is not
available to it for purposes of determining the Adjusted CD Rate or the
Adjusted Eurodollar Rate, as the case may be, for such Interest Period;
(b) on or prior to the first day of any Interest Period for a
Fixed Rate Loan of that Type, such Bank determines that the Adjusted CD
Rate or the Adjusted Eurodollar Rate, as the case may be, as determined by
the Agent for such Interest Period would not accurately reflect the cost to
such Bank of making, continuing or converting into a Fixed Rate Loan of
such Type for such Interest Period;
(c) at any time such Bank determines that any Regulatory Change
makes it unlawful or impracticable for such Bank or its applicable Lending
Office to make, continue or convert into any Fixed Rate Loan of that Type,
or to comply with its obligations hereunder in respect thereof; or
(d) such Bank determines that, by reason of any Regulatory
Change, such Bank or its applicable Lending Office is restricted, directly
or indirectly, in the amount
28
<PAGE>
that it may hold of (i) a category of liabilities that includes deposits by
reference to which, or on the basis of which, the interest rate applicable
to Fixed Rate Loans of that Type is directly or indirectly determined or
(ii) the category of assets that includes Fixed Rate Loans of that Type.
If, as a result of this Section 7.01, any Loan of any Bank that would otherwise
be made or maintained as or converted into a Fixed Rate Loan of any Type for any
Interest Period is instead made or maintained as or converted into a Base Rate
Loan, then, unless the corresponding Loan of each of the other Banks is also to
be made or maintained as or converted into a Base Rate Loan, such Loan shall be
treated as being a Fixed Rate Loan of such Type for such Interest Period for all
purposes of this Agreement (including the timing, application and proration
among the Banks of interest payments, conversions and prepayments) except for
the calculation of the interest rate borne by such Loan. The Administrative
Agent shall promptly notify the Borrower and each Bank of the existence or
occurrence of any condition or circumstance specified in clause (a) above, and
each Bank shall promptly notify the Borrower and the Administrative Agent of the
existence or occurrence of any condition or circumstance specified in clause
(b), (c) or (d) above applicable to such Bank's Loans, but the failure by the
Administrative Agent or such Bank to give any such notice shall not affect such
Bank's rights hereunder.
Section 7.02. Regulatory Changes. If in the determination of any
------------------
Bank (a) any Regulatory Change shall directly or indirectly (i) reduce the
amount of any sum received or receivable by such Bank with respect to any Loan
or the return to be earned by such Bank on any Loan, (ii) impose a cost on such
Bank or any Affiliate of such Bank that is attributable to the making or
maintaining of, or such Bank's commitment to make, any Loan, (iii) require such
Bank or any Affiliate of such Bank to make any payment on or calculated by
reference to the gross amount of any amount received by such Bank under any Loan
Document or (iv) reduce, or have the effect of reducing, the rate of return on
any capital of such Bank or any Affiliate of such Bank that such Bank or such
Affiliate is required to maintain on account of any Loan or such Bank's
commitment to make any Loan and (b) such reduction, increased cost or payment
shall not be fully compensated for by an adjustment in the applicable rates of
interest payable under the Loan Documents, then the Borrower shall pay to such
Bank such additional amounts as such Bank determines will, together with any
adjustment in the applicable rates of interest payable hereunder, fully
compensate for such reduction, increased cost or payment. Such additional
amounts
29
<PAGE>
shall be payable, in the case of those applicable to prior periods, within 15
days after request by such Bank for such payment and, in the case of those
applicable to future periods, on the dates specified, or determined in
accordance with a method specified, by such Bank. Each Bank will promptly notify
the Borrower of any determination made by it referred to in clauses (a) and (b)
above, but the failure to give such notice shall not affect such Bank's right to
compensation. Notwithstanding the foregoing, the Borrower will not be required
to reimburse any Bank for any reductions, increased costs or payments under this
Section 7.02 arising prior to 90 days preceding the date of such notice, unless
the applicable Regulatory Change is imposed retroactively. In the case of a
Regulatory Change which is retroactive in effect, such notice shall be provided
to the Borrower not later than 90 days from the date that such Bank reasonably
should have learned of such Regulatory Change, and the Borrower's obligation to
compensate such Bank for such reduction, increased cost or payment is contingent
upon the provision of such timely notice (but any failure by such Bank to
provide such timely notice shall not affect the Borrower's reimbursement
obligations with respect to (x) reductions, increased costs or payments incurred
or made from the date as of which the Regulatory Change became effective to the
date that is 90 days after such Bank reasonably should have learned of such
Regulatory Change and (y) reductions, increased costs or payments incurred or
made following the provision of such notice).
Section 7.03. Funding Losses. The Borrower shall pay to each Bank,
--------------
upon request, such amount or amounts as such Bank determines are necessary to
compensate it for any loss, cost or expense (excluding loss of applicable
margin) incurred by it as a result of (a) any payment, prepayment or conversion
of a Fixed Rate Loan on a date other than the last day of an Interest Period for
such Fixed Rate Loan or (b) a Fixed Rate Loan for any reason attributable to the
Borrower (including a failure, in the determination of the Banks, to meet
conditions) not being made or converted, or any payment of principal thereof or
interest thereon not being made (whether or not, in the case of an optional
prepayment, such prepayment was revocable or had become irrevocable as provided
in Section 1.06(a)), on the date therefor determined in accordance with the
applicable provisions of this Agreement. At the election of such Bank, and
without limiting the generality of the foregoing, but without duplication, such
compensation on account of losses may include an amount equal to the excess of
(i) the interest that would have been received from the Borrower under this
Agreement (excluding applicable margin) on any amounts to be reemployed during
an Interest Period or its remaining portion over (ii) the interest component of
the return that such Bank determines it could have obtained had it placed
30
<PAGE>
such amount on deposit in the interbank Dollar market selected by it for a
period equal to such Interest Period or its remaining portion.
Section 7.04. Certain Determinations. In making the determinations
----------------------
contemplated by Sections 7.01, 7.02 and 7.03, each Bank may make such estimates,
assumptions, allocations and the like that such Bank in good faith determines to
be appropriate, and such Bank's selection thereof in accordance with this
Section 7.04, and the determinations made by such Bank on the basis thereof,
shall be final, binding and conclusive upon the Borrower, except, in the case of
such determinations, for manifest errors in computation or transmission. Each
Bank shall furnish to the Borrower upon request a certificate outlining in
reasonable detail the computation of any amounts claimed by it under Sections
7.02 and 7.03 or, to the extent not confidential, the determinations made by it
under Sections 7.01(b) and (d) and the assumptions underlying such computations
or determinations.
Section 7.05. Change of Lending Office. If an event occurs with
------------------------
respect to a Lending Office of any Bank that obligates the Borrower to pay any
amount under Section 1.14, makes operable the provisions of clause (b), (c) or
(d) of Section 7.01 or entitles such Bank to make a claim under Section 7.02,
such Bank shall, if requested by the Borrower, use reasonable efforts to
designate another Lending Office or Offices the designation of which will reduce
the amount the Borrower is so obligated to pay, eliminate such operability or
reduce the amount such Bank is so entitled to claim, provided that such
designation would not, in the sole and absolute discretion of such Bank, be
disadvantageous to such Bank in any manner or contrary to such Bank's policies.
Each Bank may at any time and from time to time change any Lending Office and
shall give notice of any such change to the Administrative Agent and the
Borrower. Except in the case of a change in Lending Offices made at the request
of the Borrower, the designation of a new Lending Office by any Bank shall not
obligate the Borrower to pay any amount to such Bank under Section 1.14, make
operable the provisions of clause (b), (c) or (d) of Section 7.01 or entitle
such Bank to make a claim under Section 7.02 if such obligation, the operability
of such clause or such claim results solely from such designation and not from a
subsequent Regulatory Change.
Section 7.06. Replacement of Banks. If any Bank requests
--------------------
compensation pursuant to Section 1.14 or 7.02 hereof, or such Bank's obligation
to make or continue, or to convert Loans of any other Type into, any Type of
Fixed Rate Loan shall be suspended pursuant to Section 7.01 hereof, the
Borrower, upon three Business Days' notice, may require that such Bank transfer
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all of its right, title and interest under this Agreement and such Bank's Note
to any bank or other financial institution identified by the Borrower (i) if
such proposed transferee agrees to assume all of the obligations of such Bank
hereunder for consideration equal to the outstanding principal amount of such
Bank's Loans, together with the interest thereon to the date of such transfer,
and satisfactory arrangements are made for payment to such Bank of all other
amounts payable hereunder to such Bank on or prior to the date of such transfer
(including any fees accrued hereunder and any amounts which would be payable
under Section 7.03 hereof as if all of such Bank's Loans were prepaid in full on
such date) and (ii) if such Bank being replaced has requested compensation
pursuant to Section 1.14 or 7.02 hereof, such proposed transferee's aggregate
requested compensation, if any, pursuant to said Section 1.14 or 7.02 with
respect to such replaced Bank's Loans would be, under Applicable Law in effect
at the time of the transfer, lower than that of the Bank replaced. Without
prejudice to the survival of any other agreement of the Borrower hereunder, the
agreements of the Borrower contained in Sections 1.14, 7.02, 7.03 and 9.02
(without duplication of any payments made to such Bank by the Borrower or the
proposed transferee) shall survive for the benefit of any Bank replaced under
this Section 7.06 with respect to the time prior to such replacement.
ARTICLE 8 THE AGENTS
----------
Section 8.01. Appointment and Powers. Each Bank hereby irrevocably
----------------------
appoints and authorizes the Agents, individually and in their respective
capacities as Agents, and the Agents hereby agree, to act as the agents for such
Bank under the Loan Documents with such powers as are delegated to the
respective Agents by the terms thereof, together with such other powers as are
reasonably incidental thereto. The Agents' duties shall be purely ministerial
and they shall have no duties or responsibilities except those expressly set
forth in the Loan Documents. None of the Agents shall be required under any
circumstances to take any action that, in its judgment, (a) is contrary to any
provision of the Loan Documents or Applicable Law or (b) would expose it to any
Liability or expense against which it has not been indemnified to its
satisfaction. None of the Agents shall, by reason of its serving as an Agent,
be a trustee or other fiduciary for any Bank.
Section 8.02. Limitation on Agents' Liability. None of the Agents
-------------------------------
nor any of their respective directors, officers, employees or agents shall be
liable or responsible for any action taken or omitted to be taken by it or them
under or in connection with the Loan Documents, except for its or their own
gross
32
<PAGE>
negligence or willful misconduct. None of the Agents shall be responsible
to any Bank for (a) any recitals, statements, representations or warranties
contained in the Loan Documents or in any certificate or other document referred
to or provided for in, or received by any of the Banks under, the Loan
Documents, (b) the validity, effectiveness or enforceability of the Loan
Documents or any such certificate or other document or (c) any failure by the
Borrower to perform any of its obligations under the Loan Documents. Each of
the Agents may employ agents and attorneys-in-fact and shall not be responsible
for the negligence or misconduct of any such agents or attorneys-in-fact so long
as such Agent was not grossly negligent in selecting or directing such agents or
attorneys-in-fact. Each of the Agents shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telex, telecopier, telegram or cable) believed by it to be genuine
and correct and to have been signed or given by or on behalf of the proper
Person or Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by such Agent. As to any matters not
expressly provided for by the Loan Documents, each of the Agents shall in all
cases be fully protected in acting, or in refraining from acting, under the Loan
Documents in accordance with instructions signed by the Required Banks, and such
instructions of the Required Banks and any action taken or failure to act
pursuant thereto shall be binding on all of the Banks.
Section 8.03. Defaults. The Administrative Agent shall not be deemed
--------
to have knowledge of the occurrence of a Default (other than the non-payment to
it of principal of or interest on Loans or fees) unless the Administrative Agent
has received notice from a Bank or the Borrower specifying such Default and
stating that such notice is a "Notice of Default". In the event that the
Administrative Agent has knowledge of such a non-payment or receives such a
notice of the occurrence of a Default, the Administrative Agent shall give
prompt notice thereof to the Banks. In the event of any Default, the
Administrative Agent shall (a) in the case of a Default that constitutes an
Event of Default, take either or both of the actions referred to in clauses (a)
and (b) of the first sentence of Section 6.02 if so directed by the Required
Banks and (b) in the case of any Default, take such other action with respect to
such Default as shall be reasonably directed by the Required Banks. Unless and
until the Administrative Agent shall have received such directions, in the event
of any Default, the Administrative Agent may (but, subject to Section 8.02,
shall not be obligated to) take such action, or refrain from taking such action,
with respect to such Default as it shall deem advisable in the best interests of
the Banks. In the event that the
33
<PAGE>
Administrative Agent shall be entitled to make a drawing under the Letters of
Credit, the Administrative Agent shall do so if and as directed by the Required
Banks and, absent such directions, may (but shall not be obligated to) do so if
it shall deem such action advisable in the best interests of the Banks;
provided, however, that notwithstanding the foregoing, the Administrative Agent
- -------- -------
shall exercise its right to draw in full under any Letter of Credit the
expiration of which would result in the aggregate unpaid principal amount of all
Loans outstanding to exceed the Availability Amount unless it shall have been
directed not to so draw by all of the Banks.
Section 8.04. Rights as a Bank. Each Person acting as an Agent that
----------------
is also a Bank shall, in its capacity as a Bank, have the same rights and powers
under the Loan Documents as any other Bank and may exercise the same as though
it were not acting as an Agent, and the term "Bank" or "Banks" shall include
such Person in its individual capacity. Each Person acting as an Agent (whether
or not such Person is a Bank) and its Affiliates may (without having to account
therefor to any Bank) accept deposits from, lend money to and generally engage
in any kind of banking, trust or other business with the Borrower and its
Affiliates, including acting as an Issuing Bank, as if it were not acting as an
Agent, and such Person and its Affiliates may accept fees and other
consideration from the Borrower and its Affiliates for services in connection
with the Loan Documents or otherwise without having to account for the same to
the Banks.
Section 8.05. Indemnification. The Banks agree to indemnify each of
---------------
the Agents (to the extent not reimbursed by the Borrower hereunder), ratably on
the basis of the respective principal amounts of the Loans outstanding made by
the Banks (or, if no Loans are at the time outstanding, ratably on the basis of
their respective Commitments), for any and all Liabilities, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind and nature whatsoever that may be imposed on, incurred by or asserted
against such Agent (including the costs and expenses that the Borrower is
obligated to pay hereunder) in any way relating to or arising out of the Loan
Documents or any other documents contemplated thereby or referred to therein or
the transactions contemplated thereby or the enforcement of any of the terms
thereof or of any such other documents, provided that no Bank shall be liable
for any of the foregoing to the extent they arise from gross negligence or
willful misconduct by such Agent.
Section 8.06. Non-Reliance on Agents and Other Banks. Each Bank
--------------------------------------
agrees that it has made and will continue to make,
34
<PAGE>
independently and without reliance on any of the Agents or any other Bank, and
based on such documents and information as it deems appropriate, its own credit
analysis of the Borrower and its own decision to enter into the Loan Documents
and to take or refrain from taking any action in connection therewith. None of
the Agents shall be required to keep itself informed as to the performance or
observance by the Borrower of the Loan Documents or any other document referred
to or provided for therein or to inspect the properties or books of the
Borrower. Except for notices, reports and other documents and information
expressly required to be furnished to the Banks by the Administrative Agent
under the Loan Documents, none of the Agents shall have any obligation to
provide any Bank with any information concerning the business, status or
condition of the Borrower or the Loan Documents that may come into the
possession of such Agent or any of its Affiliates.
Section 8.07. Resignation of the Administrative Agent. The
---------------------------------------
Administrative Agent or any other Agent may at any time give notice of its
resignation to the Banks and the Borrower. Upon receipt of any such notice of
resignation, the Required Banks may, after consultation with the Borrower,
appoint a successor Agent, which shall be a bank, trust company or other
financial institution with combined capital and surplus, as determined on the
basis of its most recent published statement or report of financial condition,
of not less than $500,000,000. If no successor Agent shall have been so
appointed by the Required Banks and shall have accepted such appointment within
30 days after the retiring Agent's giving of notice of resignation, then the
retiring Agent may, on behalf of the Banks and after consultation with the
Borrower, appoint a successor Agent, which shall be a bank, trust company or
other financial institution with combined capital and surplus, as determined on
the basis of its most recent published statement or report of financial
condition, of not less than $500,000,000. Upon the acceptance by any Person of
its appointment as a successor Agent, such Person shall thereupon succeed to and
become vested with all the rights, powers, privileges, duties and obligations of
the retiring Agent and the retiring Agent shall be discharged from its duties
and obligations as Agent under the Loan Documents, provided, that no Person's
--------
appointment as a successor Administrative Agent shall be effective until all
collateral, if any, held by the retiring Administrative Agent pursuant to the
Collateral Account Agreement shall have been transferred to such Person. After
any retiring Agent's resignation as Agent, the provisions of this Article 8
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as an Agent.
35
<PAGE>
ARTICLE 9 MISCELLANEOUS
-------------
Section 9.01. Notices and Deliveries. (a) Manner of Delivery. All
---------------------- ------------------
notices, communications and, unless the Borrower shall have been otherwise
instructed by an Agent or by the Bank to which materials are to be furnished,
materials (including all Information) to be given or delivered pursuant to the
Loan Documents shall, except in those cases where giving notice by telephone is
expressly permitted, be given or delivered in writing (which shall include telex
and telecopy transmissions). Notices under Sections 1.03, 1.04(c), 1.06, 1.08
and 6.02 may be by telephone, promptly confirmed in writing. In the event of a
discrepancy between any telephonic notice and any written confirmation thereof,
such written confirmation shall be deemed the effective notice except to the
extent that the Administrative Agent has acted in reliance on such telephonic
notice.
(b) Addresses. All notices, communications and, unless the Borrower
---------
shall have been otherwise instructed by an Agent or by the Bank to which
materials are to be furnished, materials to be given or delivered pursuant to
the Loan Documents shall be given or delivered at the following respective
addresses and telecopier and telephone numbers and to the attention of the
following individuals or departments:
(i) if to the Borrower, to it at:
100 North Presidential Boulevard
Bala Cynwyd, PA 19004
Telecopier No.: (215) 660-6112
Telephone No.: (215) 660-6100
Attention: Lawrence L. Epstein
Marcus O. Evans, Esq.
with a copy to:
Reed Smith Shaw & McClay
435 Sixth Avenue
Pittsburgh, PA 15219
Telecopier No.: (412) 288-3064
Telephone No.: (412) 288-3131
Attention: Bruce D. Evans, Esq.
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<PAGE>
(ii) if to the Administrative Agent, to it at:
270 Park Avenue
New York, NY 10017
Telecopier No.: (212) 270-2056 and
(212) 270-3942
Telephone No.: (212) 270-4683 and
(212) 270-4145
Attention: M. Elizabeth Mason
J. Cheryl Boucher
Margaret Harvey
with a copy to:
140 East 45th Street
New York, New York 10017
Telecopier No.: (212) 622-0002
Telephone No.: (212) 622-0011
Attention: Janet Belden
(iii) if to any Bank, to it at the address or telecopier or
telephone number and to the attention of the individual
or department, set forth below such Bank's name under
the heading "Notice Address" on Annex A or, in the case
-------
of a Bank that becomes a Bank pursuant to an assignment,
set forth under the heading "Notice Address" in the
Notice of Assignment given to the Borrower and the
Administrative Agent with respect to such assignment;
or at such other address or telecopier or telephone number or to the attention
of such other individual or department as the party to which such information
pertains may hereafter specify for the purpose in a notice specifically
providing such information for use in connection with the Loan Documents given
to (x) if the party to which such information pertains is the Borrower, the
37
<PAGE>
Administrative Agent and each Bank, (y) if the party to which such information
pertains is the Administrative Agent, the Borrower and each Bank and (z) if the
party to which such information pertains is a Bank, the Borrower and the
Administrative Agent.
(c) Effectiveness. Each notice and communication and any material to
-------------
be given or delivered pursuant to the Loan Documents shall be deemed so given or
delivered (i) if sent by registered or certified mail, postage prepaid, return
receipt requested, on the third Business Day after such notice, communication or
material, addressed as above provided, is delivered to a United States post
office and a receipt therefor is issued thereby, (ii) if sent by any other means
of physical delivery, when such notice, communication or material is delivered
to the appropriate address as above provided, (iii) if sent by telex, when such
notice, communication or material is transmitted to the appropriate number
determined as above provided in this Section 9.01 and the appropriate answer-
back is received, (iv) if sent by telecopier, when such notice, communication or
material is transmitted to the appropriate telecopier number as above provided
and is received at such number and (v) if given by telephone, when communicated
to the individual or any member of the department specified as the individual or
department to whose attention notices, communications and materials are to be
given or delivered, or, in the case of notice by the Administrative Agent to the
Borrower under Section 6.02 given by telephone as above provided, if any
individual or any member of the department to whose attention notices,
communications and materials are to be given or delivered is unavailable at the
time, to any other officer or employee of the Borrower, except that (x) notices
of a change of address, telex, telecopier or telephone number or individual or
department to whose attention notices, communications and materials are to be
given or delivered shall not be deemed given until received, (y) notices,
communications and materials to be given or delivered to the Administrative
Agent or any Bank pursuant to Sections 1.03, 1.04(c), 1.06, 1.08, 1.13(b) and
5.01(e) shall not be deemed given or delivered until received by the
Administrative Agent or such Bank and (z) in the event that materials to be
given or delivered pursuant to Article 5 are not in fact received by the Agent
or Bank to which they are required to be furnished such Agent or Bank shall be
entitled to request that the Borrower again attempt to effect delivery of such
materials. Notwithstanding the foregoing, Letters of Credit, amendments,
modifications or supplements thereof or thereto, commitments with respect
thereto and other notices or communications with respect thereto shall not be
deemed given or delivered until received by the Administrative Agent.
38
<PAGE>
(d) Reasonable Notice. To the extent permitted by Applicable Law, it
-----------------
is agreed that any requirement under Applicable Law of reasonable notice by the
Administrative Agent or the Banks to the Borrower of any event in connection
with, or in any way related to, the Loan Documents or the exercise by the
Administrative Agent or the Banks of any of their rights thereunder shall be met
if notice of such event is given to the Borrower in the manner prescribed above
at least 10 days before (i) the date of such event or (ii) the date after which
such event will occur.
Section 9.02. Expenses; Indemnification. Whether or not any Loans
-------------------------
are made hereunder, the Borrower shall:
(a) pay or reimburse the Administrative Agent and each Bank for all
transfer, documentary, stamp and similar taxes, and all recording and filing
fees and taxes, payable in connection with, arising out of, or in any way
related to, the execution, delivery and performance of the Loan Documents or the
making of the Loans;
(b) pay or reimburse the Managing Agents and the Administrative Agent
for all reasonable out-of-pocket costs and expenses (including reasonable fees
and disbursements of legal counsel, appraisers, accountants and other experts
reasonably employed or retained by the Managing Agents or the Administrative
Agent) incurred by the Managing Agents and the Administrative Agent in
connection with, arising out of, or in any way related to (i) the negotiation,
preparation, execution and delivery of (A) the Loan Documents and (B) whether or
not executed, any waiver, amendment or consent thereunder or thereto (unless
such waiver, amendment or consent was not executed by the Borrower and not
proposed or requested by the Borrower and was objected to by the Borrower in a
written notice delivered to the Managing Agents), (ii) the administration of and
any operations under the Loan Documents or the Letters of Credit or (iii)
protecting, preserving, exercising or enforcing any of the rights of the
Administrative Agent or the Banks under or related to the Loan Documents or the
Letters of Credit;
(c) pay or reimburse each Bank for all reasonable out-of-pocket costs
and expenses (including reasonable fees and disbursements of legal counsel and
other experts reasonably employed or retained by such Bank) incurred by such
Bank in connection with, arising out of, or in any way related to protecting,
preserving, exercising or enforcing during a Default any of its rights under or
related to the Loan Documents or the Letters of Credit; and
39
<PAGE>
(d) indemnify and hold each Indemnified Person harmless from and
against all losses (including judgments, penalties and fines) suffered, and pay
or reimburse each Indemnified Person for all reasonable out-of-pocket costs and
expenses (including reasonable fees and disbursements of legal counsel and other
experts reasonably employed or retained by such Indemnified Person) incurred, by
such Indemnified Person in connection with, arising out of, or in any way
related to (i) any Loan Document Related Claim (whether asserted by such
Indemnified Person or the Borrower or any other Person), including the
prosecution or defense thereof and any litigation or proceeding with respect
thereto (whether or not, in the case of any such litigation or proceeding, such
Indemnified Person is a party thereto), or (ii) any investigation, governmental
or otherwise, arising out of, related to, or in any way connected with, the Loan
Documents or the relationships established thereunder, except that the foregoing
indemnity shall not be applicable to any loss suffered by any Indemnified Person
to the extent such loss is determined by a judgment of a court that is binding
on the Borrower and such Indemnified Person, final and not subject to review on
appeal, to be the result of acts or omissions on the part of such Indemnified
Person constituting (x) gross negligence or (y) willful misconduct.
Section 9.03. Amounts Payable Due upon Request for Payment. All
--------------------------------------------
amounts payable by the Borrower under Section 9.02 and under the other
provisions of the Loan Documents shall, except as otherwise expressly provided,
be due 20 days following written request for the payment thereof.
Section 9.04. Remedies of the Essence. The various rights and
-----------------------
remedies of the Administrative Agent and the Banks under the Loan Documents are
of the essence of those agreements, and the Administrative Agent and the Banks
shall be entitled to obtain a decree requiring specific performance of each such
right and remedy.
Section 9.05. Rights Cumulative. Each of the rights and remedies of
-----------------
the Administrative Agent and the Banks under the Loan Documents shall be in
addition to all of their other rights and remedies under the Loan Documents and
Applicable Law, and nothing in the Loan Documents shall be construed as limiting
any such rights or remedies.
Section 9.06. Disclosures. The Administrative Agent and each Bank
-----------
agrees to exercise all reasonable efforts to keep any information delivered or
made available by the Borrower
40
<PAGE>
confidential from anyone other than Persons employed or retained by the
Administrative Agent or such Bank who are or are expected to become engaged in
evaluating, approving, structuring or administering the Loans, provided, that
--------
the Administrative Agent and the Banks may disclose to, and exchange and discuss
with, any other Person (the Administrative Agent, the Banks and each such other
Person being hereby authorized to do so) any information concerning the Borrower
(whether received by the Administrative Agent, the Banks or such other Person in
connection with or pursuant to the Loan Documents or otherwise) for the purpose
of (a) complying with Applicable Law, (b) protecting, preserving, exercising or
enforcing any of their rights under or related to the Loan Documents, (c)
performing any of their obligations under or related to the Loan Documents or
(d) consulting with respect to any of the foregoing matters.
Section 9.07. Amendments; Waivers. Any term, covenant, agreement or
-------------------
condition of the Loan Documents may be amended, and any right under the Loan
Documents may be waived, if, but only if, such amendment or waiver is in writing
and is signed by the Required Banks and, if the rights and duties of the
Administrative Agent are affected thereby, by the Administrative Agent and, in
the case of an amendment or a waiver of a right of the Borrower, by the
Borrower; provided, however, that no amendment or waiver shall be effective,
-------- -------
unless in writing and signed by each Bank, to the extent it (a) increases the
amount or extends the term of any Bank's Commitment, (b) reduces the principal
of or the rate of interest on any Bank's Loans or Note or the fees payable to
such Bank hereunder, (c) postpones any date fixed for any payment of principal
of or interest on any Bank's Loans or Note or the fees payable to such Bank
hereunder, (d) releases or otherwise acquiesces in the termination of any Letter
of Credit or the release of any cash collateral held pursuant to Section 1.16 if
such release or termination would result in the aggregate unpaid principal
amount of all Loans to exceed the Availability Amount, (e) amends the
definitions of Availability Amount, Letter of Credit or Required LC Rating or
amends the form of Letter of Credit or the annexes thereto set forth on Exhibit
-------
B or, in each case, waives the applicability thereof, (f) waives any Event of
- -
Default arising under Section 6.01(g) or (g) amends Section 1.15, this Section
9.07 or any other provision of this Agreement (or, in each case, the related
definitions) requiring the consent or other action of all of the Banks. Unless
otherwise specified in such waiver, a waiver of any right under the Loan
Documents shall be effective only in the specific instance and for the specific
purpose for which given. No election not to exercise, failure to exercise or
delay in exercising any right, nor any course of dealing or performance, shall
operate as a waiver of any right of any party under the
41
<PAGE>
Loan Documents or Applicable Law, nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise of
any other right of any party under the Loan Documents or Applicable Law.
Section 9.08. Set-Off; Suspension of Payment and Performance. The
----------------------------------------------
Administrative Agent and each Bank is hereby authorized by the Borrower, at any
time and from time to time, without notice, (a) during any Event of Default, to
set off against, and to appropriate and apply to the payment of, the Liabilities
of the Borrower under the Loan Documents (whether owing to such Person or to any
other Person that is the Administrative Agent or a Bank and whether matured or
unmatured, fixed or contingent or liquidated or unliquidated) any and all
Liabilities owing by the Administrative Agent or such Bank or any of its
Affiliates to the Borrower (whether payable in Dollars or any other currency,
whether matured or unmatured and, in the case of Liabilities that are deposits,
whether general or special, time or demand and however evidenced and whether
maintained at a branch or office located within or without the United States)
and (b) during any Default, to suspend the payment and performance of such
Liabilities owing by such Person or its Affiliates and, in the case of
Liabilities that are deposits, to return as unpaid for insufficient funds any
and all checks and other items drawn against such deposits.
Section 9.09. Sharing of Recoveries. (a) Each Bank agrees that, if,
---------------------
for any reason, including as a result of (i) the exercise of any right of
counterclaim, set-off, banker's lien or similar right, (ii) its claim in any
applicable bankruptcy, insolvency or other similar law being deemed secured by a
Debt owed by it to the Borrower, including a claim deemed secured under Section
506 of the Bankruptcy Code, or (iii) the allocation of payments by the
Administrative Agent or the Borrower in a manner contrary to the provisions of
Section 1.15, such Bank shall receive payment of a proportion of the aggregate
amount due and payable to it hereunder as principal of or interest on the Loans
or fees that is greater than the proportion received by any other Bank in
respect of the aggregate of such amounts due and payable to such other Bank
hereunder, then the Bank receiving such proportionately greater payment shall
purchase participations (which it shall be deemed to have done simultaneously
upon the receipt of such payment) in the rights of the other Banks hereunder so
that all such recoveries with respect to such amounts due and payable hereunder
(net of costs of collection) shall be pro rata; provided that if all or part of
such proportionately greater payment received by the purchasing Bank is
thereafter recovered by or on behalf of the Borrower from such Bank, such
purchases shall be rescinded and the purchase
42
<PAGE>
prices paid for such participations shall be returned to such Bank to the extent
of such recovery, but without interest (unless the purchasing Bank is required
to pay interest on the amount recovered to the Person recovering such amount, in
which case the selling Bank shall be required to pay interest at a like rate).
The Borrower expressly consents to the foregoing arrangements and agrees that
any holder of a participation in any rights hereunder so purchased or acquired
pursuant to this Section 9.09(a) shall, with respect to such participation, be
entitled to all of the rights of a Bank under Sections 7.02, 9.02 and 9.08
(subject to any condition imposed on a Bank hereunder with respect thereto) and
may exercise any and all rights of set-off with respect to such participation as
fully as though the Borrower were directly indebted to the holder of such
participation for Loans in the amount of such participation.
(b) Each Bank agrees to exercise any right of counterclaim, set-off,
banker's lien or similar right that it may have in respect of the Borrower in a
manner so as to apportion the amount subject to such exercise, on a pro rata
basis, between (i) obligations of the Borrower for amounts subject to the
sharing provisions of Section 9.09(a) and (ii) other Liabilities of the
Borrower.
Section 9.10. Assignments and Participations. (a) Assignments. (i)
------------------------------ -----------
The Borrower may not assign any of its rights or obligations under this
Agreement or the Notes without the prior written consent of each Bank, and no
assignment of any such obligation shall release the Borrower therefrom unless
each Bank shall have consented to such release in writing specifically referring
to the obligation from which the Borrower is to be released.
(ii) Each Bank may from time to time assign any or all of its rights
and obligations under the Loan Documents to one or more Persons; provided that,
--------
except in the case of the grant of a security interest to a Federal Reserve Bank
(which may be made without condition or restriction) or an assignment by a Bank
to any of its Affiliates (which also may be made without condition or
restriction other than as set forth in clause (D) below), no such assignment
shall be effective unless (A) the assignment is consented to by the Borrower
(unless an Event of Default specified in Section 6.01(d) with respect to the
Borrower exists) and the Managing Agents (such consents not to be unreasonably
withheld), (B) in the case of a partial assignment, after giving effect thereto,
the Commitment of the assignor Bank shall be not less than $15,000,000, (C) any
assignment other than to a Bank shall involve the assignment of not less than
$10,000,000 of the assignor Bank's Commitment, (D) a Notice of
43
<PAGE>
Assignment with respect to the assignment, duly executed by the assignor and the
assignee, shall have been given to the Borrower and the Administrative Agent and
(E) except in the case of an assignment by the Bank that is the Administrative
Agent or by a Bank to any of its Affiliates, the Administrative Agent shall have
been paid an assignment fee of $2,500 by the assignor or assignee. Upon any
effective assignment, the assignor shall be released from the obligations so
assigned and, in the case of an assignment of all of its Loans and Commitment,
shall cease to be a Bank. In the event of any effective assignment by a Bank,
the Borrower shall, against receipt of the existing Note of the assignor Bank,
issue a new Note to the assignee Bank and, in the case of a partial assignment,
to the assignor Bank, appropriately reflecting such assignment.
(b) Participations. Each Bank may from time to time sell or
--------------
otherwise grant participations in any or all of its rights and obligations under
the Loan Documents without the consent of the Borrower, the Managing Agents or
any other Bank. In the event of any such grant by a Bank of a participation,
such Bank's obligations under the Loan Documents to the other parties thereto
shall remain unchanged, such Bank shall remain solely responsible for the
performance thereof, and the Borrower, the Administrative Agent and the other
Banks may continue to deal solely and directly with such Bank in connection with
such Bank's rights and obligations thereunder. A Bank may not grant to any
holder of a participation the right to require such Bank to take or omit to take
any action under the Loan Documents, except that a Bank may grant to any such
holder the right to require such holder's consent to any amendment or waiver for
which the consent of each Bank affected thereby is required under Section 9.02.
Each holder of a participation in any rights under the Loan Documents, if and to
the extent the applicable participation agreement so provides, shall, with
respect to such participation, be entitled to all of the rights of a Bank as
fully as though it were a Bank under Sections 1.14, 7.02, 7.03 and 9.02(d) and
may exercise any and all rights of set-off with respect to such participation as
fully as though the Borrower were directly indebted to the holder of such
participation for Loans in the amount of such participation; provided, however,
-------- -------
that no holder of a participation shall be entitled to any amounts that would
otherwise be payable to it with respect to its participation under Section 1.14
or 7.02 unless such amounts would have been payable to the Bank that granted
such participation if such participation had not been granted.
Section 9.11. Governing Law. This Agreement and the Notes (including
-------------
matters relating to the Maximum Permissible Rate) shall be construed in
accordance with and governed by the
44
<PAGE>
law of the State of New York (without giving effect to its choice of law
principles).
Section 9.12. Judicial Proceedings; Waiver of Jury Trial. Any
------------------------------------------
judicial proceeding brought against the Borrower with respect to any Loan
Document Related Claim may be brought in any court of competent jurisdiction in
the City of New York, and, by execution and delivery of this Agreement, the
Borrower, to the extent permitted by Applicable Law, (a) accepts, generally and
unconditionally, the nonexclusive jurisdiction of such courts and any related
appellate court and irrevocably agrees to be bound by any judgment rendered
thereby in connection with any Loan Document Related Claim and (b) irrevocably
waives any objection it may now or hereafter have as to the venue of any such
proceeding brought in such a court or that such a court is an inconvenient
forum. To the extent permitted by Applicable Law, the Borrower hereby waives
personal service of process and consents that service of process upon it may be
made by certified or registered mail, return receipt requested, at its address
specified or determined in accordance with the provisions of Section 9.01(b),
and service so made shall be deemed completed on the third Business Day after
such service is deposited in the mail. Nothing herein shall affect the right of
the Administrative Agent, any Bank or any other Indemnified Person to serve
process in any other manner permitted by law or shall limit the right of the
Administrative Agent, any Bank or any other Indemnified Person to bring
proceedings against the Borrower in the courts of any other jurisdiction. To
the extent permitted in accordance with Applicable Law (including Applicable Law
relating to jurisdiction and venue), any judicial proceeding by the Borrower
against the Administrative Agent or any Bank involving any Loan Document Related
Claim shall be brought only in a court located in the City and State of New
York. THE BORROWER, EACH AGENT AND EACH BANK HEREBY WAIVE TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING INVOLVING ANY LOAN DOCUMENT RELATED CLAIM.
Section 9.13. Reference Banks. Each Reference Bank shall furnish to
---------------
the Administrative Agent timely information for the purpose of determining the
CD Rate and the Eurodollar Rate. If any Reference Bank shall notify the
Administrative Agent that thenceforth it shall not be able to furnish such
information in a timely manner or shall assign all of its Loans or Commitment to
a Person that is not an Affiliate of such Reference Bank, the Administrative
Agent shall, with the consent of the Required Banks and after consultation with
the Borrower, appoint another Bank (which Bank, or, in the event that the long-
term deposits and debt securities of such Bank shall not be rated by a
nationally-recognized credit rating agency, the parent holding company in the
corporate group of which such Bank is a member,
45
<PAGE>
shall have a credit rating with respect to long-term deposits, or, if its long-
term deposits are not rated, its long-term debt securities from a nationally-
recognized credit rating agency substantially equivalent to the Bank, or the
parent holding company in the corporate group of which such Bank is a member,
being replaced) as a Reference Bank in place of such Reference Bank.
Section 9.14. Severability of Provisions. Any provision of the Loan
--------------------------
Documents that is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions thereof or
affecting the validity or enforceability of such provision in any other
jurisdiction. To the extent permitted by Applicable Law, the Borrower hereby
waives any provision of Applicable Law that renders any provision of the Loan
Documents prohibited or unenforceable in any respect.
Section 9.15. Counterparts. This Agreement may be signed in any
------------
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto were upon the same instrument.
Section 9.16. Survival of Obligations. Except as otherwise expressly
-----------------------
provided therein, the rights and obligations of the Borrower, the Administrative
Agent, the Banks and the other Indemnified Persons under Sections 1.14, 7.02,
7.03, 7.04, 8.05 and 9.02 shall survive the Repayment Date.
Section 9.17. Entire Agreement. This Agreement and the Notes embody
----------------
the entire agreement among the Borrower, the Administrative Agent and the Banks
relating to the subject matter hereof and supersede all prior agreements,
representations and understandings, if any, relating to the subject matter
hereof.
Section 9.18. Successors and Assigns. All of the provisions of this
----------------------
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
ARTICLE 10 INTERPRETATION
--------------
Section 10.01. Defined Terms. For the purposes of this Agreement:
-------------
"Adjusted CD Rate" means, for any Interest Period, a rate per annum
----------------
equal to the sum (rounded upward, if necessary, to
46
<PAGE>
the next higher 1/100 of 1%) of (a) the rate obtained by dividing (i) the CD
Rate for such Interest Period by (ii) a percentage equal to 1 minus the Reserve
Requirement in effect from time to time during such Interest Period plus (b) the
----
Assessment Rate in effect from time to time during such Interest Period.
"Adjusted Eurodollar Rate" means, for any Interest Period, a rate per
------------------------
annum (rounded upward, if necessary, to the next higher 1/16 of 1%) equal to the
rate obtained by dividing (a) the Eurodollar Rate for such Interest Period by
(b) a percentage equal to 1 minus the Reserve Requirement in effect from time to
time during such Interest Period.
"Administrative Agent" means Chemical Bank, as administrative agent
--------------------
for the Banks under the Loan Documents, and any successor Administrative Agent
appointed pursuant to Section 8.07.
"Administrative Agent's Office" means the address of the
-----------------------------
Administrative Agent specified in or determined in accordance with the
provisions of Section 9.01(b).
"Affiliate" means, with respect to a Person, any other Person that,
---------
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such first Person; unless
otherwise specified, "Affiliate" means an Affiliate of the Borrower.
"Agent" means the Administrative Agent, the Documentation Agent or any
-----
of the Managing Agents.
"Agreement" means this Agreement, including all schedules, annexes and
---------
exhibits hereto.
"Agreement Date" means the date set forth as such on the last
--------------
signature page hereof, being the date on which the Agreement shall have been
executed and delivered by the parties hereto and thereby become effective.
"Alternate Base Rate" means, for any day, a rate per annum equal to
-------------------
the highest of (a) the Prime Rate in effect on such day, (b) the Federal Funds
Rate for such day plus 0.5%, and (c) the Base CD Rate on such day plus 1%. For
purposes hereof: "Base CD Rate" shall mean the sum of (a) the product of (i)
------------
the Three-Month Secondary CD Rate and (ii) a fraction, the numerator of which is
one and the denominator of which is one minus the Reserve Requirement in effect
on such day and (b) the Assessment Rate in effect on such day; and "Three-Month
-----------
Secondary CD Rate" shall mean, for any day, the secondary market rate for three-
- -----------------
47
<PAGE>
month certificates of deposit reported as being in effect on such day (or, if
such day shall not be a Business Day, the next preceding Business Day) by the
Board of Governors of the Federal Reserve System (the "Board") through the
-----
public information telephone line of the Federal Reserve Bank of New York (which
rate will, under the current practices of the Board, be published in Federal
Reserve Statistical Release H.15(519) during the week following such day), or,
if such rate shall not be so reported on such day or such next preceding
Business Day, the average of the secondary market quotations for three-month
certificates of deposit of major money center banks in New York City received at
approximately 10:00 A.M., New York City time, on such day (or, if such day shall
not be a Business Day, on the next preceding Business Day) by the Administrative
Agent from three New York City negotiable certificate of deposit dealers of
recognized standing selected by it. Any change in the Alternate Base Rate due
to a change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal
Funds Rate shall be effective as of the opening of business on the effective day
of such change in the Prime Rate, the Three-Month Secondary CD Rate or the
Federal Funds Rate, respectively.
"Applicable Law" means, anything in Section 9.11 to the contrary
--------------
notwithstanding, (a) all applicable common law and principles of equity and (b)
all applicable provisions of all (i) constitutions, statutes, rules, regulations
and orders of governmental bodies, (ii) Governmental Approvals and (iii) orders,
decisions, judgments and decrees of all courts (whether at law or in equity or
admiralty) and arbitrators.
"Assessment Rate" means, at any time, the rate determined by the
---------------
Administrative Agent to be the average of the annual rate (rounded upwards, if
necessary, to the next higher 1/100th of 1%) then estimated by each of the
Reference Banks as the net annual assessment rate that will be employed in
determining the annual assessment payable by such bank to the Federal Deposit
Insurance Corporation (or any successor) for insuring domestic Dollar deposits
at such bank.
"Attributable Letter of Credit" means, with respect to any
-----------------------------
Participating Partner, a Letter of Credit issued on behalf of or otherwise
attributable to such Participating Partner, as indicated in such Letter of
Credit or otherwise communicated by the Borrower to or determined by the
Administrative Agent. For purposes solely of the second sentence of Section
1.02(d), a Letter of Credit shall constitute an Attributable Letter of Credit of
a particular Participating Partner (the "Non-Increasing Partner")
notwithstanding that such Letter of Credit may have been issued on behalf of or
be otherwise attributable to another
48
<PAGE>
Participating Partner if such Letter of Credit was issued in lieu of an
Attributable Letter of Credit of the Non-Increasing Partner that would have had
to have been issued, renewed or increased to enable the Borrower to be in
compliance with Section 1.02(a) on any Letter of Credit Event Date but was in
fact not so issued, renewed or increased in compliance with this Agreement. In
the event that, at any time, more than one Letter of Credit shall have been
issued on behalf of or be otherwise attributable to a Participating Partner
(including as provided in the preceding sentence), such Letters of Credit, taken
as a whole, shall constitute the Attributable Letter of Credit of such
Participating Partner.
"Availability Amount" means, at any time, the sum of the Available
-------------------
Letter of Credit Amount and the Available Cash Collateral Amount minus the sum
-----
of (a) the aggregate amount of accrued and unpaid interest on the outstanding
Loans at such time and accrued and unpaid fees payable under the Loan Documents
and (b) the aggregate amount of interest and fees that would accrue for the
three month period (or, if less, the period from the date of determination
through the date that is 30 days after the next Increase Date) commencing on the
date of determination, assuming such Loans remained outstanding during such
period and bore interest throughout such period at the weighted average rate
applicable to such Loans on the date of determination.
"Available Cash Collateral Amount" means, at any time, the amount of
--------------------------------
cash collateral, if any, held pursuant to Section 1.16 hereof less such portion
thereof, if any, that would not be available to be applied at such time as a
result of the requirement set forth in Section 1.16 that applications of cash
collateral be made on a pro rata basis.
"Available Letter of Credit Amount" means, at any time, the aggregate
---------------------------------
undrawn face amount of all Letters of Credit at such time less such portion
thereof, if any, that would not be available to be drawn at such time as a
result of the requirement set forth in Section 1.02(d) that drawings under
Letters of Credit be made on a pro rata basis.
"Bank" means (a) any Person listed on the signature pages hereof
----
following the Borrower and (b) any Person that has been assigned any or all of
the rights or obligations of a Bank pursuant to Section 9.10(a).
"Bank Tax" means any Tax based on or measured by net income, any
--------
franchise Tax and any doing business Tax imposed upon any Bank or any Agent by
any jurisdiction (or any political
49
<PAGE>
subdivision thereof) in which such Bank, such Agent or any Lending Office is
located.
"Base Rate Loan" means any Loan the interest on which is, or is to be,
--------------
as the context may require, computed on the basis of the Alternate Base Rate.
"Borrower" means PrimeStar Partners, L.P., a Delaware limited
--------
partnership.
"Business Day" means any day other than a Saturday, Sunday or other
------------
day on which banks in New York City are authorized to close.
"CD Rate" means, for any Interest Period, the rate per annum
-------
determined by the Administrative Agent to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the rates per annum determined,
respectively, by each Reference Bank to be the prevailing rate per annum
(similarly rounded) bid at approximately 10:00 a.m. (New York time) (or as soon
thereafter as is practicable) on the first day of such Interest Period by two or
more New York certificate of deposit dealers of recognized standing selected by
such Reference Bank for the purchase at face value of certificates of deposit of
such Reference Bank in the secondary market in an amount comparable to the
principal amount of the CD Rate Loan of such Reference Bank to which such
Interest Period applies and with a maturity comparable to such Interest Period.
If any Reference Bank is unable or otherwise fails to furnish the Administrative
Agent with appropriate rate information in a timely manner, the Administrative
Agent shall determine the CD Rate based on the rate information furnished by the
remaining Reference Banks.
"CD Rate Loan" means any Loan the interest on which is, or is to be,
------------
as the context may require, computed on the basis of the Adjusted CD Rate.
"Code" means the Internal Revenue Code of 1986.
----
"Collateral Account Agreement" means the Collateral Account Agreement
----------------------------
in the form of Exhibit C.
---------
"Commitment" of any Bank means (a) the amount set forth opposite such
----------
Bank's name under the heading "Commitment" on Annex A or, in the case of a Bank
-------
that becomes a Bank pursuant to an assignment, the amount of the assignor's
Commitment assigned to such Bank, in either case, as the same may be reduced
from time to time pursuant to Section 1.08 or increased or reduced from time to
time pursuant to assignments in accordance with Section
50
<PAGE>
9.10(a), or (b) as the context may require, the obligation of such Bank to make
Loans in an aggregate unpaid principal amount not exceeding such amount.
"Contract" means (a) any agreement (whether bi-lateral or uni-lateral
--------
or executory or non-executory, including an indenture, lease or license, (b) any
deed or other instrument of conveyance, (c) any certificate of incorporation or
charter and (d) any by-law.
"Debt" means any Liability that constitutes "debt" or "Debt" under
----
section 101(11) of the Bankruptcy Code or under the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act or any analogous Applicable
Law.
"Default" means any condition or event that constitutes an Event of
-------
Default or that with the giving of notice or lapse of time or both would, unless
cured or waived, become an Event of Default, provided that any failure of the
--------
Borrower to satisfy the payment obligation in the last sentence of Section
1.03(c) shall not constitute a Default prior to the third Business Day after the
day on which notice to the Borrower shall have been given as provided therein.
"Documentation Agent" means The Bank of New York.
-------------------
"Dollars" and the sign "$" mean lawful money of the United States of
------- -
America.
"Domestic Lending Office" of any Bank means (a) the branch or office
-----------------------
of such Bank set forth below such Bank's name under the heading "Domestic
Lending Office" on Annex A or, in the case of a Bank that becomes a Bank
-------
pursuant to an assignment, the branch or office of such Bank set forth under the
heading "Domestic Lending Office" in the Notice of Assignment given to the
Borrower and the Administrative Agent with respect to such assignment or (b)
such other branch or office of such Bank designated by such Bank from time to
time as the branch or office at which its Domestic Rate Loans are to be made or
maintained. Each Bank may from time to time designate separate Domestic Lending
Offices for its Base Rate Loans and CD Rate Loans, in which case all references
to the Domestic Lending Office of such Bank shall be deemed to refer to either
or both of such Offices, as the context may require.
"Domestic Rate Loan" means any CD Rate Loan or Base Rate Loan.
------------------
51
<PAGE>
"Eurodollar Business Day" means any Business Day on which dealings in
-----------------------
Dollar deposits are carried on in the London interbank market and on which
commercial banks are open for domestic and international business (including
dealings in Dollar deposits) in London, England.
"Eurodollar Lending Office" of any Bank means (a) the branch or office
-------------------------
of such Bank set forth below such Bank's name under the heading "Eurodollar
Lending Office" on Annex A or, in the case of a Bank that becomes a Bank
-------
pursuant to an assignment, the branch or office of such Bank set forth under the
heading "Eurodollar Lending Office" in the Notice of Assignment given to the
Borrower and the Administrative Agent with respect to such assignment or (b)
such other branch or office of such Bank designated by such Bank from time to
time as the branch or office at which its Eurodollar Rate Loans are to be made
or maintained.
"Eurodollar Rate" means, for any Interest Period, the rate per annum
---------------
determined by the Administrative Agent to be the average (rounded upward, if
necessary, to the next higher 1/16 of 1%) of the rates per annum determined,
respectively, by each Reference Bank to be the rate at which such Reference Bank
offered or would have offered to place with first-class banks in the London
interbank market deposits in Dollars in amounts comparable to the Eurodollar
Rate Loan of such Reference Bank to which such Interest Period applies, for a
period equal to such Interest Period, at 11:00 a.m. (London time) on the second
Eurodollar Business Day before the first day of such Interest Period. If any
Reference Bank is unable or otherwise fails to furnish the Administrative Agent
with appropriate rate information in a timely manner, the Administrative Agent
shall determine the Eurodollar Rate based on the rate information furnished by
the remaining Reference Banks.
"Eurodollar Rate Loan" means any Loan the interest on which is, or is
--------------------
to be, as the context may require, computed on the basis of the Adjusted
Eurodollar Rate.
"Event of Default" means any of the events specified in Section 6.01.
----------------
"Federal Funds Rate" means, for any day, the weighted average of the
------------------
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York or, if such rate is not so published for any
day that is a Business Day, the average of quotations for such day on such
transactions received by Chemical Bank from
52
<PAGE>
three Federal funds brokers of recognized standing selected by such bank.
"Fixed Rate Loan" means any CD Rate Loan or Eurodollar Rate Loan.
---------------
"Generally Accepted Accounting Principles" means, at any time,
----------------------------------------
generally accepted accounting principles in effect in the United States at such
time.
"Governmental Approval" means any authorization, consent, approval,
---------------------
license or exemption of, registration or filing with, or report or notice to,
any governmental unit.
"Increase Date" means any date on which the Required LC Amount is
-------------
scheduled to increase in accordance with Schedule 10.01-(2).
------------------
"Indemnified Person" means any Person that is, or at any time was, an
------------------
Agent, a Bank, an Affiliate of an Agent or a Bank or a director, officer,
employee or agent of any such Person.
"Information" means data, certificates, reports, statements (excluding
-----------
financial statements), documents and other information.
"Interest Payment Date" means the last day of March, June, September
---------------------
and December of each year.
"Interest Period" means a period commencing, in the case of the first
---------------
Interest Period applicable to a Fixed Rate Loan, on the date of the making of,
or conversion into, such Loan, and, in the case of each subsequent, successive
Interest Period applicable thereto, on the last day of the immediately preceding
Interest Period, and ending, depending on the Type of Loan, in the case of
Eurodollar Interest Periods, on the same day in the first, second, third, sixth
or, if made available by each of the Banks, twelfth calendar month thereafter,
and, in the case of CD Interest Periods, on the day 30, 60, 90 or 180 days
thereafter, except that (a) any Interest Period that would otherwise end on a
day that is not a Business Day or, in the case of a Eurodollar Interest Period
or a CD Interest Period for CD Rate Loans being converted into Eurodollar Rate
Loans, a Eurodollar Business Day shall be extended to the next succeeding
Business Day or Eurodollar Business Day, as the case may be, unless, in the case
of a Eurodollar Interest Period, such Eurodollar Business Day falls in another
calendar month, in which case such Interest Period shall end on the next
preceding
53
<PAGE>
Eurodollar Business Day and (b) any Eurodollar Interest Period that begins on
the last Eurodollar Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month in which such
Interest Period ends) shall end on the last Eurodollar Business Day of a
calendar month. "CD Interest Period" and "Eurodollar Interest Period" mean,
------------------ --------------------------
respectively, an Interest Period applicable to CD Rate Loans and Eurodollar Rate
Loans.
"Issuing Bank" means, with respect to any Letter of Credit, the
------------
financial institution that is the issuer of such Letter of Credit.
"Lending Office" of any Bank means the Domestic Lending Office or the
--------------
Eurodollar Lending Office of such Bank.
"Letter of Credit" means a letter of credit substantially in the form
----------------
of Exhibit B with such changes as the Managing Agents shall approve (which
---------
approval shall not be unreasonably withheld) (i) issued by an Issuing Bank that
has the Required LC Rating on the date of issuance of such Letter of Credit and
the date on which any commitment with respect thereto is delivered to the
Administrative Agent, and, if applicable, on each date on which such Letter of
Credit is renewed or increased and the date on which any commitment with respect
thereto is delivered to the Administrative Agent, (ii) issued for the account of
a Participating Partner or any entity that owns, directly or indirectly, 100% of
the capital stock or other equity interests of such Participating Partner (or
otherwise not referencing the account party), (iii) issued for the benefit of
the Administrative Agent on behalf of the Banks and (iv) having a term of not
less than one year (or such shorter period as may exist between the date of
issuance or renewal of such Letter of Credit and the next Increase Date or, if
applicable, the Termination Date).
"Letter of Credit Event Date" means any date on which, whether as a
---------------------------
result of the expiration of one or more Letters of Credit, the occurrence of an
Increase Date, or otherwise, the Letters of Credit will no longer, unless
existing Letters of Credit are renewed and/or increased, or replacement or
additional Letters of Credit are issued, as provided in Section 1.02(b), be in
an aggregate undrawn face amount equal to or greater than the greater of (a) the
Required LC Amount in effect on such date, and (b) the sum of (i) the aggregate
principal amount of outstanding Loans on such date, (ii) the aggregate amount of
accrued and unpaid interest thereon and accrued and unpaid fees payable under
the Loan Documents and (iii) the aggregate amount of interest and fees that
would accrue for the three month period (or, if less,
54
<PAGE>
the period from the date of determination through the date that is 30 days after
the next Increase Date) commencing on the date of determination, assuming such
Loans remained outstanding during such period and bore interest throughout such
period at the weighted average rate applicable to such Loans on the date of
determination.
"Liability" of any Person means any indebtedness, liability,
---------
obligation, covenant or duty of or binding upon such Person or any of its
assets, of any kind, nature or description, direct or indirect, absolute or
contingent, due or not due, contractual or tortious, or liquidated or
unliquidated.
"Loan" means any amount advanced by a Bank pursuant to Section 1.01.
----
"Loan Document Related Claim" means any claim or dispute (whether
---------------------------
arising under Applicable Law, including any "environmental" or similar law,
under Contract or otherwise and, in the case of any proceeding relating to any
such claim or dispute, whether civil, criminal, administrative or otherwise) in
any way arising out of, related to, or connected with, the Loan Documents, the
relationships established thereunder or any actions or conduct thereunder or
with respect thereto, whether such claim or dispute arises or is asserted before
or after the Agreement Date or before or after the Repayment Date.
"Loan Documents" means (a) this Agreement, the Notes and the
--------------
Collateral Account Agreement and (b) all other agreements, documents and
instruments hereafter executed and delivered or otherwise provided pursuant to
which the obligations under any agreement, document or instrument referred to in
clause (a) are guaranteed or secured or, in the case of such security, evidenced
or perfected. "Loan Document" shall not include any Letter of Credit.
"Loral" means Space Systems/Loral, Inc., a Delaware corporation.
-----
"Managing Agents" means The Bank of New York, Chemical Bank and
---------------
Citibank, N.A.
"Materially Adverse Effect" means, with respect to any Loan Document,
-------------------------
any adverse effect on the binding nature, validity or enforceability thereof as
an obligation of the Borrower.
"Maximum Permissible Rate" means, with respect to interest payable on
------------------------
any amount, the rate of interest on such amount that, if exceeded, could, under
Applicable Law, result in
55
<PAGE>
(a) civil or criminal penalties being imposed on the payee or (b) the payee's
being unable to enforce payment of (or, if collected, to retain) all or any part
of such amount or the interest payable thereon.
"Note" means any promissory note in the form of Exhibit A.
---- ---------
"Notice of Assignment" means any notice to the Borrower and the
--------------------
Administrative Agent with respect to an assignment pursuant to Section 9.10(a)
in the form of Schedule 9.10(a).
----------------
"Parent Company" means the Persons so designated on Schedule 10.01-
-------------- --------------
(1).
"Participating Partners" means the Persons so designated on Schedule
---------------------- --------
10.01-(1).
- ---------
"Partner" means all limited and general partners of the Borrower.
-------
"Person" means any individual, sole proprietorship, corporation,
------
partnership, trust, unincorporated organization, mutual company, joint stock
company, estate, union, employee organization, government or any agency or
political subdivision thereof.
"Post-Default Rate" means, with respect to principal of Loans, the
-----------------
rate otherwise applicable under Section 1.04(a) plus 2% and, with respect to any
other amounts payable under the Loan Documents, the Alternate Base Rate as in
effect for each day plus 2%.
"Prime Rate" means the prime commercial lending rate of Chemical Bank,
----------
as publicly announced to be in effect from time to time. The Prime Rate shall
be adjusted automatically, without notice, on the effective date of any change
in such prime commercial lending rate. The Prime Rate is not necessarily
Chemical Bank's lowest rate of interest.
"Project" means the project to construct and launch up to two
-------
Satellites pursuant to the Satellite Construction Contract and the other Project
Documents.
"Project Documents" means the Satellite Construction Contract and all
-----------------
related agreements, instruments and documents (i) to which the Borrower or Tempo
is a party or (ii) which are known to the Borrower and in which the Borrower,
directly or indirectly, has rights (excluding rights which the Borrower has,
56
<PAGE>
directly or indirectly, through Loral) and which are, in each such case,
material to the completion of the Project and the Borrower's interest therein
(including, but not limited to, the letter agreements dated July 30, 1993
between Tempo and the Borrower relating to the DBSS and FSS satellite systems).
"Project Documents" shall not include the Loan Documents or the Letters of
Credit.
"Reference Banks" means The Bank of New York, Chemical Bank and
---------------
Citibank, N.A., and any replacement Reference Bank appointed pursuant to Section
9.13.
"Regulation D" means Regulation D of the Board of Governors of the
------------
Federal Reserve System.
"Regulation U" means Regulation U of the Board of Governors of the
------------
Federal Reserve System.
"Regulatory Change" means any Applicable Law, interpretation,
-----------------
directive, request or guideline (whether or not having the force of law), or any
change therein or in the administration or enforcement thereof, that becomes
effective or is implemented or first required or expected to be complied with
after the Agreement Date, whether the same is (a) the result of an enactment by
a government or any agency or political subdivision thereof, a determination of
a court or regulatory authority, or otherwise or (b) enacted, adopted, issued or
proposed before or after the Agreement Date, including any such that imposes,
increases or modifies any Tax, reserve requirement, insurance charge, special
deposit requirement, assessment or capital adequacy requirement, but excluding
any such that imposes, increases or modifies any Bank Tax.
"Repayment Date" means the later of (a) the termination of the
--------------
Commitments (whether as a result of the occurrence of the Termination Date,
reduction to zero pursuant to Section 1.08 or termination pursuant to Section
1.08 or 6.02) and (b) the payment in full of the Loans and all other amounts
payable or accrued hereunder.
"Representation and Warranty" means any representation or warranty
---------------------------
made or deemed to be made by the Borrower pursuant to or under Section 2.02,
Article 3, Section 5.02 or any other provision of this Agreement or the
Collateral Account Agreement, WHETHER OR NOT (EXCEPT TO THE EXTENT OTHERWISE
EXPRESSLY PROVIDED) THE INFORMATION THAT IS THE SUBJECT MATTER THEREOF IS WITHIN
THE KNOWLEDGE OF THE BORROWER.
57
<PAGE>
"Required Banks" means, at any time, Banks having not less than 51% of
--------------
the Loans outstanding or, if there are no Loans outstanding, not less than 51%
of the aggregate amount of the Commitments.
"Required LC Amount" means, at any time during any period specified in
------------------
Schedule 10.01-(2), the total Letter of Credit amount set forth for such period
- ------------------
on Schedule 10.01-(2) (as the same may be reduced from time to time as provided
------------------
in Section 1.08(a)), minus, in each case, the Available Cash Collateral Amount.
Without limiting the foregoing, the increased Required LC Amount scheduled to
take effect on an Increase Date shall take effect at the Administrative Agent's
opening of business in the Administrative Agent's Office on such Increase Date.
"Required LC Rating" means, with respect to an Issuing Bank, a minimum
------------------
rating with respect to long-term deposits (or, if such Issuing Bank has no such
rating, long-term senior unsecured debt) of such Issuing Bank of A (or an
equivalent rating) by two nationally recognized statistical rating
organizations.
"Reserve Requirement" means, at any time, the then current maximum
-------------------
rate for which reserves (including any marginal, supplemental or emergency
reserve) are required to be maintained under Regulation D by member banks of the
Federal Reserve System in New York City with deposits exceeding five billion
Dollars against (a) in the case of a Base Rate or CD Rate Loan, negotiable
certificates of deposit in an amount of $100,000 or more with an overnight term
in the case of Base Rate Loans or a term comparable to the Interest Period
applicable to such Loan in the case of CD Rate Loans and (b) in the case of a
Eurodollar Rate Loan, "Eurocurrency liabilities", as that term is used in
Regulation D. The Adjusted CD and Adjusted Eurodollar Rates shall be adjusted
automatically on and as of the effective date of any change in the applicable
Reserve Requirement.
"Satellites" means the satellites to be constructed and launched
----------
pursuant to the Satellite Construction Contract and the other Project Documents,
with either (i) thirty-two 107-watt Ku-band transponders on board or (ii) if
Tempo or the Borrower shall so elect, sixteen 200-watt Ku-band transponders on
board.
"Satellite Construction Contract" means (i) until the date upon which
-------------------------------
the Borrower or Tempo elects to proceed to construct the Satellites for the
benefit of the Borrower under either (a) Contract No. TPO-1-290 by and between
Tempo and Loral for Tempo Direct Broadcast Satellite System (the "DBSS
Contract") or (b) Contract No. TPO-1-693 by and between Tempo and Loral for
Tempo Fixed Satellite Systems (the "FSS Contract"), the DBSS
58
<PAGE>
Contract and the FSS Contract, and (ii) on and after such date, the DBSS
Contract or the FSS Contract, as the case may be, under which the Satellites are
being constructed for the benefit of the Borrower pursuant to such election.
"Tax" means any Federal, State or foreign tax, assessment or other
---
governmental charge or levy (including any withholding tax) upon a Person or
upon its assets, revenues, income or profits.
"Tempo" means Tempo Satellite, Inc., an Oklahoma corporation.
-----
"Termination Date" means June 30, 1997.
----------------
"Type" means, with respect to Loans, any of the following, each of
----
which shall be deemed to be a different "Type" of Loan: Base Rate Loans, CD
Rate Loans having a 30-day Interest Period, CD Rate Loans having a 60-day
Interest Period, CD Rate Loans having a 90-day Interest Period, CD Rate Loans
having a 180-day Interest Period, Eurodollar Rate Loans having a one-month
Interest Period, Eurodollar Rate Loans having a two-month Interest Period,
Eurodollar Rate Loans having a three-month Interest Period, Eurodollar Rate
Loans having a six-month Interest Period and Eurodollar Rate Loans having a
twelve-month Interest Period. Any CD Rate Loan or Eurodollar Rate Loan having
an Interest Period with a duration that differs from the duration specified for
a Type of CD Rate Loan or Eurodollar Rate Loan, as the case may be, listed above
solely as a result of the operation of clauses (a) and (b) of the definition of
"Interest Period" shall be deemed to be a Loan of such above-listed Type
notwithstanding such difference in duration of Interest Periods.
Section 10.02. Other Interpretive Provisions. (a) Except as
-----------------------------
otherwise specified herein, all references herein (i) to any Person shall be
deemed to include such Person's successors and assigns, (ii) to any Applicable
Law defined or referred to herein shall be deemed references to such Applicable
Law or any successor Applicable Law as the same may have been or may be amended
or supplemented from time to time and (iii) to any Loan Document or Contract
defined or referred to herein shall be deemed references to such Loan Document
or Contract (and, in the case of any Note or any other instrument, any
instrument issued in substitution therefor) as the terms thereof may have been
or may be amended, supplemented, waived or otherwise modified from time to time.
(b) When used in this Agreement, the words "herein", "hereof" and
"hereunder" and words of similar import shall refer
59
<PAGE>
to this Agreement as a whole and not to any provision of this Agreement, and the
words "Article", "Section", "Annex", "Schedule" and "Exhibit" shall refer to
Articles and Sections of, and Annexes, Schedules and Exhibits to, this Agreement
unless otherwise specified.
(c) Whenever the context so requires, the neuter gender includes the
masculine or feminine, the masculine gender includes the feminine, and the
singular number includes the plural, and vice versa.
(d) Any item or list of items set forth following the word
"including", "include" or "includes" is set forth only for the purpose of
indicating that, regardless of whatever other items are in the category in which
such item or items are "included", such item or items are in such category, and
shall not be construed as indicating that the items in the category in which
such item or items are "included" are limited to such items or to items similar
to such items.
(e) Each authorization in favor of any Agent, the Banks or any other
Person granted by or pursuant to this Agreement shall be deemed to be
irrevocable and coupled with an interest.
Section 10.03. Accounting Matters. Unless otherwise specified
------------------
herein, all accounting determinations hereunder and all computations utilized by
the Borrower in complying with the covenants contained herein shall be made, all
accounting terms used herein shall be interpreted, and all financial statements
required to be delivered hereunder shall be prepared, in accordance with
Generally Accepted Accounting Principles.
Section 10.04. Representations and Warranties. All Representations
------------------------------
and Warranties shall be deemed made (a) in the case of any Representation and
Warranty contained in this Agreement at the time of its initial execution and
delivery, at and as of the Agreement Date, (b) in the case of any Representation
and Warranty contained in this Agreement or any other document at the time any
Loan is made, at and as of such time and (c) in the case of any particular
Representation and Warranty, wherever contained, at such other time or times as
such Representation and Warranty is made or deemed made in accordance with the
provisions of this Agreement or the document pursuant to, under or in connection
with which such Representation and Warranty is made or deemed made.
Section 10.05. Captions. Captions to Articles, Sections and
--------
subsections of, and Annexes, Schedules and Exhibits
60
<PAGE>
to, this Agreement are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or in any way affect
the meaning or construction of any provision of this Agreement.
Section 10.06. Interpretation of Related Documents. Except as
-----------------------------------
otherwise specified therein, terms that are defined herein that are used in
Notes or the Collateral Account Agreement or certificates, opinions and other
documents in the forms of the Schedules attached hereto delivered in connection
herewith shall have the meanings ascribed to them herein and such documents
shall be otherwise interpreted in accordance with the provisions of this Article
10.
61
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers all as of the Agreement Date.
PRIMESTAR PARTNERS, L.P.
By _____________________________
Name:
Title:
CHEMICAL BANK,
as Administrative Agent, as a
Managing Agent and as a Bank
By _____________________________
Name:
Title:
THE BANK OF NEW YORK, as Documentation Agent, as a
Managing Agent and as a Bank
By _____________________________
Name:
Title:
CITIBANK, N.A.,
as a Managing Agent and
as a Bank
By _____________________________
Name:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By _____________________________
Name:
Title:
62
<PAGE>
THE FIRST NATIONAL BANK OF BOSTON
By _____________________________
Name:
Title:
BANK OF HAWAII
By _____________________________
Name:
Title:
BANK OF MONTREAL
By _____________________________
Name:
Title:
THE BANK OF NOVA SCOTIA
By _____________________________
Name:
Title:
THE BANK OF TOKYO TRUST COMPANY
By _____________________________
Name:
Title:
BANQUE NATIONALE DE PARIS
63
<PAGE>
By _____________________________
Name:
Title:
CANADIAN IMPERIAL BANK OF COMMERCE
By _____________________________
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By _____________________________
Name:
Title:
CRESTAR BANK
By _____________________________
Name:
Title:
DEUTSCHE BANK AG NEW YORK AND/OR
CAYMAN ISLANDS BRANCH
By _____________________________
Name:
Title:
By _____________________________
Name:
Title:
THE FUJI BANK, LIMITED, LOS ANGELES
AGENCY
By _____________________________
Name:
Title:
64
<PAGE>
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
By _____________________________
Name:
Title:
LTCB TRUST COMPANY
By _____________________________
Name:
Title:
MELLON BANK, N.A.
By _____________________________
Name:
Title:
NATIONSBANK OF TEXAS, N.A.
By _____________________________
Name:
Title:
THE NIPPON CREDIT BANK, LTD.
By _____________________________
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION
By _____________________________
Name:
Title:
65
<PAGE>
ROYAL BANK OF CANADA
By _____________________________
Name:
Title:
SHAWMUT BANK, N.A.
By _____________________________
Name:
Title:
SOCIETE GENERALE
By _____________________________
Name:
Title:
THE SUMITOMO BANK, LIMITED,
NEW YORK BRANCH
By _____________________________
Name:
Title:
Agreement Date: ________ __, 1994
66
<PAGE>
ANNEX A
Banks, Lending Offices
and Notice Addresses Commitment
- ---------------------- ----------
THE BANK OF NEW YORK $33,000,000.00
Domestic Lending Office:
The Bank of New York
One Wall Street
New York, NY 10286
Eurodollar Lending Office:
The Bank of New York
One Wall Street
New York, NY 10286
Notice Address:
The Bank of New York
One Wall Street
New York, NY 10286
Telecopy No.: (212) 635-8595/8593
Telephone No.: (212) 635-8843
Attention: Jim Whitaker
<PAGE>
Banks, Lending Offices
and Notice Addresses Commitment
- ---------------------- ----------
CHEMICAL BANK $33,000,000.00
Domestic Lending Office:
Chemical Bank
270 Park Avenue
New York, NY 10017
Eurodollar Lending Office:
Chemical Bank
270 Park Avenue
New York, NY 10017
Notice Address:
Chemical Bank
270 Park Avenue
New York, NY 10017
Telecopy No.: (212) 270-2056/3942
Telephone No.: (212) 270-4683/4145
Attention: M. Elizabeth Mason
J. Cheryl Boucher
Margaret Harvey
2
<PAGE>
Banks, Lending Offices
and Notice Addresses Commitment
- ---------------------- ----------
CITIBANK, N.A. $33,000,000.00
Domestic Lending Office:
Citibank, N.A.
399 Park Avenue
New York, NY 10043
Eurodollar Lending Office:
Citibank, N.A.
399 Park Avenue
New York, NY 10043
Notice Address:
Citibank, N.A.
399 Park Avenue
New York, NY 10043
Telecopy No.: (212) 793-6873
Telephone No.: (212) 559-8564
Attention: Eric Huttner
3
<PAGE>
Banks, Lending Offices
and Notice Addresses Commitment
- ---------------------- ----------
BANK OF AMERICA NATIONAL TRUST $24,000,000
AND SAVINGS ASSOCIATION
Domestic Lending Office:
Bank of America National Trust
and Savings Association
1850 Gateway Boulevard
Concord, CA 94520
Attention: Account Administrator
Eurodollar Lending Office:
Bank of America National Trust
and Savings Association
1850 Gateway Boulevard
Concord, CA 94520
Attention: Account Administrator
Notice Address:
Bank of America National Trust
and Savings Association
Entertainment/Media Group
335 Madison Avenue, 5th Floor
New York, NY 10017
Telecopy No.: (212) 503-7173
Telephone No.: (212) 503-8352
Attention: Barry Dunn
4
<PAGE>
Banks, Lending Offices
and Notice Addresses Commitment
- ---------------------- ----------
THE FIRST NATIONAL BANK OF BOSTON $24,000,000
Domestic Lending Office:
The First National Bank of Boston
Media and Entertainment Department
100 Federal Street
MSN 01-04-01
Boston, MA 02110
Eurodollar Lending Office:
The First National Bank of Boston
Media and Entertainment Department
100 Federal Street
MSN 01-04-01
Boston, MA 02110
Notice Address:
The First National Bank of Boston
Media and Entertainment Department
100 Federal Street
MSN 01-04-01
Boston, MA 02110
Telecopy No.: (617) 434-3401
Telephone No.: (617) 434-5335
Attention: Maureen Forrester
5
<PAGE>
Banks, Lending Offices
and Notice Addresses Commitment
- ---------------------- ----------
BANK OF HAWAII $13,750,000
Domestic Lending Office:
Bank of Hawaii
130 Merchant Street
Honolulu, HI 96813
Eurodollar Lending Office:
Bank of Hawaii
130 Merchant Street
Honolulu, HI 96813
Notice Address:
Bank of Hawaii
130 Merchant Street
Honolulu, HI 96813
Telecopy No.: (808) 537-8301
Telephone No.: (808) 537-8433
Attention: Curtis Chin
6
<PAGE>
Banks, Lending Offices
and Notice Addresses Commitment
- ---------------------- ----------
BANK OF MONTREAL $13,750,000
Domestic Lending Office:
Harris Trust & Savings Association
Chicago, IL 60603
ABA# 07100 288
Eurodollar Lending Office:
Harris Trust & Savings Association
Chicago, IL 60603
ABA# 07100 288
Notice Address:
Bank of Montreal
430 Park Avenue, 16th Floor
New York, NY 10022
Telecopy No.: (212) 605-1648
Telephone No.: (212) 605-1615
Attention: Gretchen Shugart/Toshie Y. Davis
7
<PAGE>
Banks, Lending Offices
and Notice Addresses Commitment
- ---------------------- ----------
THE BANK OF NOVA SCOTIA $28,000,000
Domestic Lending Office:
The Bank of Nova Scotia
1 Liberty Plaza, 26th Floor
New York, NY 10006
Eurodollar Lending Office:
The Bank of Nova Scotia
1 Liberty Plaza, 26th Floor
New York, NY 10006
Notice Address:
The Bank of Nova Scotia
1 Liberty Plaza, 26th Floor
New York, NY 10006
Telecopy No.: (212) 225-5090/5091
Telephone No.: (212) 225-5079
Attention: Roy Pottle
8
<PAGE>
Banks, Lending Offices
and Notice Addresses Commitment
- ---------------------- ----------
THE BANK OF TOKYO TRUST COMPANY $28,000,000
Domestic Lending Office:
The Bank of Tokyo Trust Company
National Banking Department
1251 Avenue of the Americas
New York, NY 10116-3138
Eurodollar Lending Office:
The Bank of Tokyo Trust Company
National Banking Department
1251 Avenue of the Americas
New York, NY 10116-3138
Notice Address:
The Bank of Tokyo Trust Company
National Banking Department
1251 Avenue of the Americas
New York, NY 10116-3138
Telecopy No.: (212) 782-6440
Telephone No.: (212) 782-4324
Attention: Charles Poer
9
<PAGE>
Banks, Lending Offices
and Notice Addresses Commitment
- ---------------------- ----------
BANQUE NATIONALE DE PARIS $13,750,000
Domestic Lending Office:
Banque Nationale de Paris
Corporate Banking
725 South Figueroa Street
Los Angeles, CA 90017
Eurodollar Lending Office:
Banque Nationale de Paris
Corporate Banking
725 South Figueroa Street
Los Angeles, CA 90017
Notice Address:
Banque Nationale de Paris
Corporate Banking
725 South Figueroa Street
Los Angeles, CA 90017
Telecopy No.: (213) 488-9602
Telephone No.: (213) 488-9120
Attention: Janice Ho
10
<PAGE>
Banks, Lending Offices
and Notice Addresses Commitment
- ---------------------- ----------
CANADIAN IMPERIAL BANK OF COMMERCE $24,000,000
Domestic Lending Office:
Canadian Imperial Bank of Commerce
2727 Paces Ferry Road
Suite 1200
Atlanta, GA 30339
Eurodollar Lending Office:
Canadian Imperial Bank of Commerce
2727 Paces Ferry Road
Suite 1200
Atlanta, GA 30339
Telecopy No.: (404) 319-4950
Telephone No.: (404) 319-4840
Attention: Layne Carson
Notice Address:
Canadian Imperial Bank of Commerce
425 Lexington Avenue
New York, NY 10017
Telecopy No.: (212) 856-3558
Telephone No.: (212) 856-3862
Attention: Lelia Kelly
11
<PAGE>
Banks, Lending Offices
and Notice Addresses Commitment
- ---------------------- ----------
CREDIT LYONNAIS NEW YORK BRANCH $28,000,000
Domestic Lending Office:
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, NY 10019
Eurodollar Lending Office:
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, NY 10019
Notice Address:
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, NY 10019
Telecopy No.: (212) 459-3179
Telephone No.: (212) 261-7343
Attention: Silvana Burdick
12
<PAGE>
Banks, Lending Offices
and Notice Addresses Commitment
- ---------------------- ----------
CRESTAR BANK $13,750,000
Domestic Lending Office:
Crestar Bank
919 East Main Street
Richmond, VA 23219-6665
Eurodollar Lending Office:
Crestar Bank
919 East Main Street
Richmond, VA 23219-6665
Notice Address:
Crestar Bank
919 East Main Street
Richmond, VA 23219-6665
Telecopy No.: (804) 782-5413
Telephone No.: (804) 782-5833
Attention: Thomas C. Palmer
13
<PAGE>
Banks, Lending Offices
and Notice Addresses Commitment
- ---------------------- ----------
DEUTSCHE BANK AG NEW YORK AND/OR $24,000,000
CAYMAN ISLANDS BRANCH
Domestic Lending Office:
Deutsche Bank AG New York
Branch
31 West 52nd Street
New York, NY 10019
Eurodollar Lending Office:
Deutsche Bank AG Cayman Islands
Branch
31 West 52nd Street
New York, NY 10019
Notice Address:
Deutsche Bank AG New York and/or
Cayman Islands Branch
31 West 52nd Street
New York, NY 10019
Telecopy No.: (212) 474-8236
Telephone No.: (212) 474-8212
Attention: Carolynn Longworth/Solveigh Marcks
14
<PAGE>
Banks, Lending Offices
and Notice Addresses Commitment
- ---------------------- ----------
THE FUJI BANK, LIMITED, $24,000,000
LOS ANGELES AGENCY
Domestic Lending Office:
The Fuji Bank, Limited,
Los Angeles Agency
333 South Grand Avenue
Los Angeles, CA 90071
Eurodollar Lending Office:
The Fuji Bank, Limited,
Los Angeles Agency
333 South Grand Avenue
Los Angeles, CA 90071
Notice Address:
The Fuji Bank, Limited,
Los Angeles Agency
333 South Grand Avenue
Los Angeles, CA 90071
Telecopy No.: (213) 253-4198
Telephone No.: (213) 253-4186
Attention: Elly Whalen
15
<PAGE>
Banks, Lending Offices
and Notice Addresses Commitment
- ---------------------- ----------
THE INDUSTRIAL BANK OF JAPAN, LIMITED $24,000,000
Domestic Lending Office:
The Industrial Bank of Japan, Limited
245 Park Avenue
New York, NY 10167
Eurodollar Lending Office:
The Industrial Bank of Japan, Limited
245 Park Avenue
New York, NY 10167
Notice Address:
The Industrial Bank of Japan, Limited
245 Park Avenue
New York, NY 10167
Telecopy No.: (212) 682-2870
Telephone No.: (212) 309-6498
Attention: Jeff Cole
16
<PAGE>
Banks, Lending Offices
and Notice Addresses Commitment
- ---------------------- ----------
LTCB TRUST COMPANY $28,000,000
Domestic Lending Office:
LTCB Trust Company
165 Broadway, 49th Floor
New York, NY 10006
Eurodollar Lending Office:
LTCB Trust Company
165 Broadway, 49th Floor
New York, NY 10006
Notice Address:
LTCB Trust Company
165 Broadway, 49th Floor
New York, NY 10006
Telecopy No.: (212) 608-2371
Telephone No.: (212) 335-4561
Attention: Ryan Tyler
17
<PAGE>
Banks, Lending Offices
and Notice Addresses Commitment
- ---------------------- ----------
MELLON BANK, N.A. $13,750,000
Domestic Lending Office:
Mellon Bank, N.A.
One Mellon Bank Center
500 Grant Street
Pittsburgh, PA 15258
Eurodollar Lending Office:
Mellon Bank, N.A.
One Mellon Bank Center
500 Grant Street
Pittsburgh, PA 15258
Notice Address:
Mellon Bank, N.A.
One Mellon Bank Center
500 Grant Street
Pittsburgh, PA 15258
Telecopy No.: (412) 236-6375
Telephone No.: (412) 234-2472
Attention: Maribeth Donnelly
18
<PAGE>
Banks, Lending Offices
and Notice Addresses Commitment
- ---------------------- ----------
NATIONSBANK OF TEXAS, N.A. $13,750,000
Domestic Lending Office:
Nationsbank of Texas, N.A.
901 Main Street, 67th Floor
Dallas, TX 75202
Eurodollar Lending Office:
Nationsbank of Texas, N.A.
901 Main Street, 67th Floor
Dallas, TX 75202
Notice Address:
Nationsbank of Texas, N.A.
901 Main Street, 67th Floor
Dallas, TX 75202
Telecopy No.: (214) 508-0980
Telephone No.: (214) 508-0921
Attention: Brian Corum
19
<PAGE>
Banks, Lending Offices
and Notice Addresses Commitment
- ---------------------- ----------
PNC BANK, NATIONAL ASSOCIATION $24,000,000
Domestic Lending Office:
PNC Bank, National Association
Broad & Chestnut Street
Philadelphia, PA 19101
Eurodollar Lending Office:
PNC Bank, National Association
Broad & Chestnut Street
Philadelphia, PA 19101
Notice Address:
PNC Bank, National Association
Broad & Chestnut Street
Philadelphia, PA 19101
Telecopy No.: (215) 585-6880
Telephone No.: (215) 585-6468
Attention: Marlene Dooner
20
<PAGE>
Banks, Lending Offices
and Notice Addresses Commitment
- ---------------------- ----------
ROYAL BANK OF CANADA $13,750,000
Domestic Lending Office:
Royal Bank of Canada
Financial Square
New York, NY 10005-3531
Eurodollar Lending Office:
Royal Bank of Canada
Financial Square
New York, NY 10005-3531
Notice Address:
Royal Bank of Canada
Financial Square
New York, NY 10005-3531
Telecopy No.: (212) 428-6460
Telephone No.: (212) 428-6288
Attention: Barbara Meijer
21
<PAGE>
Banks, Lending Offices
and Notice Addresses Commitment
- ---------------------- ----------
SHAWMUT BANK, N.A. $24,000,000
Domestic Lending Office:
Shawmut Bank, N.A.
777 Main Street, MSN 397
Hartford, CT 06115
Eurodollar Lending Office:
Shawmut Bank, N.A.
777 Main Street, MSN 397
Hartford, CT 06115
Notice Address:
Shawmut Bank, N.A.
777 Main Street, MSN 397
Hartford, CT 06115
Telecopy No.: (203) 986-5367
Telephone No.: (203) 986-5612
Attention: Barbara Hillmeyer
22
<PAGE>
Banks, Lending Offices
and Notice Addresses Commitment
- ---------------------- ----------
SOCIETE GENERALE $24,000,000
Domestic Lending Office:
Societe Generale
50 Rockefeller Plaza
New York, NY 10020
Eurodollar Lending Office:
Societe Generale
50 Rockefeller Plaza
New York, NY 10020
Notice Address:
Credit Contact:
Societe Generale
50 Rockefeller Plaza
New York, NY 10020
Telecopy No.: (212) 830-6240
Telephone No.: (212) 830-6148
Attention: Bryan Peterman
Operations Contact:
Societe Generale
50 Rockefeller Plaza
New York, NY 10020
Telecopy No.: (212) 830-6240
Telephone No.: (212) 830-6482
Attention: Kris Schiavone
23
<PAGE>
Banks, Lending Offices
and Notice Addresses Commitment
- ---------------------- ----------
THE SUMITOMO BANK, LIMITED, $28,000,000
NEW YORK BRANCH
Domestic Lending Office:
The Sumitomo Bank, Limited,
New York Branch
One World Trade Center
Suite 9651
New York, NY 10048
Eurodollar Lending Office:
The Sumitomo Bank, Limited,
New York Branch
One World Trade Center
Suite 9651
New York, NY 10048
Notice Address:
The Sumitomo Bank, Limited,
New York Branch
One World Trade Center
Suite 9651
New York, NY 10048
Telecopy No.: (212) 524-0612
Telephone No.: (212) 553-1832
Attention: Leo Pagarigan
24
<PAGE>
Banks, Lending Offices
and Notice Addresses Commitment
- ---------------------- ----------
THE NIPPON CREDIT BANK, LTD. $13,750,000*/
-
Domestic Lending Office:
The Nippon Credit Bank, Ltd.
245 Park Avenue, 30th Floor
New York, NY 10167
Eurodollar Lending Office:
The Nippon Credit Bank, Ltd.
245 Park Avenue, 30th Floor
New York, NY 10167
Notice Address:
The Nippon Credit Bank, Ltd.
245 Park Avenue, 30th Floor
New York, NY 10167
Telecopy No.: (212) 490-2867
Telephone No.: (212) 984-1343
Attention: Peter Griffith
20066381.10
- -------------------
*. Pursuant to an assignment by the Managing Agents dated as of March 10, 1994.
25
<PAGE>
EXECUTION COPY
AMENDMENT NO. 1
dated as of November 21, 1994
to
CREDIT AGREEMENT
dated as of March 9, 1994
THIS AMENDMENT NO. 1 (this "Amendment"), dated as of November 21,
1994, among PRIMESTAR PARTNERS, L.P., a Delaware limited partnership (the
"Borrower"), the banks listed on the signature pages hereof (the "Banks") and
CHEMICAL BANK, as Administrative Agent (the "Agent") (with capitalized terms
used herein and not otherwise defined having the meaning ascribed thereto in the
Credit Agreement hereinafter referred to),
W I T N E S S E T H:
-------------------
WHEREAS, the Borrower, the Banks, The Bank of New York, Chemical Bank
and Citibank, N.A., as Managing Agents, The Bank of New York, as Documentation
Agent and the Agent have entered into a Credit Agreement dated as of March 9,
1994 (the "Credit Agreement"); and
WHEREAS, the Borrower has requested, and the Banks and the Agent have
agreed to, the amendment to the Credit Agreement more fully set forth in this
Amendment; and
WHEREAS, such amendment shall be of benefit, either directly or
indirectly, to the Borrower,
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Borrower, the Banks and the Agent agree as follows:
1. Amendment. Upon and after the Amendment Effective Date (as
---------
defined in Section 3 below), the existing Schedule 10.01-(2) shall be replaced
in its entirety with a new Schedule 10.01-(2) in the form of Annex A attached
hereto.
2. Representations and Warranties. In order to
------------------------------
<PAGE>
induce the Banks toagree to amend the Credit Agreement, the Borrower makes the
following representations and warranties which shall survive the execution and
delivery of this Amendment:
(a) No Default has occurred and is continuing; and
(b) Each of the representations and warranties set forth in Article 3
of the Credit Agreement are true and correct as though such representations
and warranties were made at and as of the Amendment Effective Date (as
defined in Section 3 below) except to the extent that any such
representations or warranties are made as of a specified date or with
respect to a specified period of time, in which case such representations
and warranties shall be made as of such specified date or with respect to
such specified period. Each of the representations and warranties made
under the Credit Agreement (including those made herein) shall survive to
the extent provided therein and not be waived by the execution and delivery
of this Amendment.
3. Amendment Effective Date. This Amendment shall become effective
------------------------
as of the date first referenced above on the date on which all of the following
conditions precedent shall have been satisfied (the "Amendment Effective Date"):
(a) The Agent shall have received this Amendment, executed by the
Borrower and the Required Banks.
(b) The Borrower shall have paid all expenses payable under Section 4
of this Amendment to the extent invoices therefor have been given to the
Borrower on or prior to the date that this Amendment has been executed as
provided in clause (a) above.
4. Payment of Expenses. The Borrower hereby agrees to pay all
-------------------
reasonable costs and expenses incurred by the Agent in connection with the
preparation, execution and delivery of this Amendment and any other documents or
instruments which may be delivered in connection herewith, including, without
limitation, the reasonable fees and expenses of Winthrop, Stimson, Putnam &
Roberts, which fees of counsel shall be payable on the date hereof.
5. Counterparts. This Amendment may be executed in counterparts and
------------
by different parties hereto in separate counterparts each of which, when so
executed and delivered, shall be deemed to be an original and all of which, when
taken together, shall constitute one and the same instrument.
6. Ratification. The Credit Agreement, as amended by this Amendment,
------------
is and shall continue to be in full force and effect and is hereby in all
respects confirmed, approved and
-2-
<PAGE>
ratified.
7. Governing Law. This Amendment and the rights and obligations of
-------------
the parties hereunder shall be construed in accordance with and governed by the
laws of the State of New York (without giving effect to its choice of law
principles).
8. Reference to Agreement. From and after the Amendment Effective
----------------------
Date, each reference in the Credit Agreement to "this Agreement," "hereof,"
"hereunder" or words of like import, and all references to the Credit Agreement
in any and all agreements, instruments, documents, notes, certificates and other
writings of every kind and nature, shall be deemed to mean the Credit Agreement
as modified and amended by this Amendment.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective authorized officers as of the
date first above written.
PRIMESTAR PARTNERS, L.P.
By:_____________________________
Name:
Title:
CHEMICAL BANK, as Agent
and as a Bank
By:_____________________________
Name:
Title:
THE BANK OF NEW YORK
By:_____________________________
Name:
Title:
CITIBANK, N.A.,
By:_____________________________
Name:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
<PAGE>
By:_____________________________
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON
By:_____________________________
Name:
Title:
-5-
<PAGE>
BANK OF HAWAII
By:_____________________________
Name:
Title:
BANK OF MONTREAL
By:_____________________________
Name:
Title:
THE BANK OF NOVA SCOTIA
By:_____________________________
Name:
Title:
THE BANK OF TOKYO TRUST COMPANY
By:_____________________________
Name:
Title:
BANQUE NATIONALE DE PARIS
By:_____________________________
Name:
Title:
CANADIAN IMPERIAL BANK OF COMMERCE
<PAGE>
By:_____________________________
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By:_____________________________
Name:
Title:
-7-
<PAGE>
CRESTAR BANK
By:_____________________________
Name:
Title:
DEUTSCHE BANK AG NEW YORK AND/OR
CAYMAN ISLANDS BRANCH
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
THE FUJI BANK, LIMITED,
LOS ANGELES AGENCY
By:_____________________________
Name:
Title:
THE INDUSTRIAL BANK OF
JAPAN, LIMITED
By:_____________________________
Name:
Title:
LTCB TRUST COMPANY
By:
<PAGE>
_____________________________
Name:
Title:
MELLON BANK, N.A.
By:_____________________________
Name:
Title:
-9-
<PAGE>
NATIONSBANK OF TEXAS, N.A.
By:_____________________________
Name:
Title:
THE NIPPON CREDIT BANK, LTD.
By:_____________________________
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION
By:_____________________________
Name:
Title:
ROYAL BANK OF CANADA
By:_____________________________
Name:
Title:
SHAWMUT BANK, N.A.
By:_____________________________
Name:
Title:
SOCIETE GENERALE
-10-
<PAGE>
By:_____________________________
Name:
Title:
THE SUMITOMO BANK, LIMITED,
NEW YORK BRANCH
By:_____________________________
Name:
Title:
-11-
<PAGE>
EXECUTION COPY
AMENDMENT NO. 2
dated as of February 27, 1997
to
CREDIT AGREEMENT
dated as of March 9, 1994
THIS AMENDMENT NO. 2 (this "Amendment"), dated as of February 27, 1997,
among PRIMESTAR PARTNERS, L.P., a Delaware limited partnership (the "Borrower"),
the banks listed on the signature pages hereof (the "Banks"), and THE CHASE
MANHATTAN BANK (formerly known as Chemical Bank), as Administrative Agent (with
capitalized terms used herein and not otherwise defined having the meanings
ascribed thereto in the Credit Agreement hereinafter referred to),
W I T N E S S E T H:
WHEREAS, the Borrower, the Banks, The Bank of New York, The Chase Manhattan
Bank (formerly known as Chemical Bank) and Citibank, N.A., as Managing Agents,
The Bank of New York, as Documentation Agent, and The Chase Manhattan Bank
(formerly known as Chemical Bank), as Administrative Agent, have entered into a
Credit Agreement dated as of March 9, 1994, as amended by Amendment No. 1
thereto, dated as of November 21, 1994 (as so amended, the "Credit Agreement");
and
WHEREAS, the Borrower has requested, and the Banks and the Administrative
Agent have agreed to, the amendments to the Credit Agreement more fully set
forth in this Amendment; and
WHEREAS, such amendments shall be of benefit, either directly or
indirectly, to the Borrower,
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Borrower, the Banks and the Administrative Agent agree as
follows:
<PAGE>
1. Amendments. Effective as of February 27, 1997, but subject to
----------
the fulfillment of the conditions set forth in Section 3 below, the Credit
Agreement shall be amended as follows:
(a) Section 1.02(c) shall be amended by substituting the number "20th" for
the number "45th" each time such number appears therein;
(b) Annex A shall be amended to provide that the amount of the Commitments
for each of The Bank of New York Company, Inc., The Chase Manhattan Bank and
Citibank, N.A. shall be $39,666,666.67, $39,666,666.67 and $21,666,666.66,
respectively; and
(c) Schedule 10.01-(2) shall be amended to read in its entirety as set
forth on Schedule 10.01-(2) hereto.
2. Representations and Warranties. In order to induce the Banks to
------------------------------
agree to amend the Credit Agreement, the Borrower makes the following
representations and warranties which shall survive the execution and delivery of
this Amendment:
(a) No Default has occurred and is continuing; and
(b) Each of the representations and warranties set forth in Article 3
of the Credit Agreement are true and correct as though such representations
and warranties were made at and as of the Amendment Effective Date (as
defined in Section 3 below) except to the extent that any such
representations or warranties are made as of a specified date or with
respect to a specified period of time, in which case such representations
and warranties shall be made as of such specified date or with respect to
such specified period. Each of the representations and warranties made
under the Credit Agreement (including those made herein) shall survive to
the extent provided therein and not be waived by the execution and delivery
of this Amendment.
3. Amendment Effective Date. The amendments to the Credit Agreement
------------------------
effected pursuant to Section 1 hereof shall become effective as of February 27,
1997 (the "Amendment Effective Date"), so long as on or prior to such date all
of the following conditions precedent shall have been satisfied:
(a) The Administrative Agent shall have received each of the
following, in form and substance satisfactory to the Administrative Agent:
(i) this Amendment, duly executed by the Borrower and each of the Banks;
(ii) the Master Assignment and Assumption Agreement, substantially in
the form attached hereto as Exhibit A, duly executed by the Agents,
the Assignors and Assignees listed therein and acknowledged and agreed
to by the Borrower;
2
<PAGE>
(iii) a certified copy of such resolutions of the Partners Committee
of the Borrower as the Administrative Agent shall reasonably request;
and
(iv) such opinions of counsel for the Borrower as the Administrative Agent
shall reasonably request.
(b) The Borrower shall have paid all expenses payable under Section 4
of this Amendment to the extent invoices therefor have been given to the
Borrower, with a reasonable opportunity for the Borrower to review such
invoices, prior to the Amendment Effective Date.
4. Payment of Expenses; Replacement Notes. The Borrower hereby
--------------------------------------
agrees to pay all reasonable costs and expenses incurred by the Managing Agents
in connection with the preparation, execution and delivery of this Amendment and
any other documents or instruments which may be delivered in connection
herewith, including, without limitation, the reasonable fees and expenses of
Winthrop, Stimson, Putnam & Roberts. The Borrower hereby agrees, promptly
following the Amendment Effective Date, to provide a duly executed replacement
Note to each of The Bank of New York Company, Inc., The Chase Manhattan Bank and
Citibank, N.A. against receipt of its existing Note in order to reflect the
increase of the Commitments of each such Bank effected hereby.
5. References to Certain Agents. (a) Chemical Bank has merged with
----------------------------
Chase Manhattan Bank, N.A., with the surviving entity having the name "The Chase
Manhattan Bank". Therefore, any and all references in the Credit Agreement to
Chemical Bank shall be deemed to refer to The Chase Manhattan Bank, the
surviving entity.
(b) In addition to its capacities as a Managing Agent and as a Bank,
Citibank, N.A. shall also serve under the Credit Agreement in the capacity of
Syndication Agent.
6. Counterparts. This Amendment may be executed in counterparts and
------------
by different parties hereto in separate counterparts each of which, when so
executed and delivered, shall be deemed to be an original and all of which, when
taken together, shall constitute one and the same instrument.
7. Ratification. The Credit Agreement, as amended by this
------------
Amendment, is and shall continue to be in full force and effect and is hereby in
all respects confirmed, approved and ratified.
8. Governing Law. The rights and duties of the parties under this
-------------
Amendment shall, pursuant to New York General Obligations Law Section 5-1401, be
governed by the law of the State of New York.
9. Reference to Agreement. From and after the Amendment Effective
----------------------
Date, each reference in the Credit Agreement to "this Agreement," "hereof,"
"hereunder" or words of like import, and all references to the Credit Agreement
in any and all agreements, instruments, documents, notes, certificates and other
writings of every kind and nature, shall be deemed to mean the Credit Agreement
as modified and amended by this Amendment.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective authorized officers as of the
date first above written.
PRIMESTAR PARTNERS, L.P.
By:______________________________
Name:
Title:
THE CHASE MANHATTAN BANK (formerly known
as Chemical Bank), as Administrative Agent
and as a Bank
By:______________________________
Name:
Title:
THE BANK OF NEW YORK COMPANY, INC.
By:______________________________
Name:
Title:
CITIBANK, N.A.
By: _____________________________
Name:
Title:
<PAGE>
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: _____________________________
Name:
Title:
BANK OF HAWAII
By: _____________________________
Name:
Title:
BANK OF MONTREAL
By: _____________________________
Name:
Title:
THE BANK OF NOVA SCOTIA
By: _____________________________
Name:
Title:
BANK OF TOKYO - MITSUBISHI TRUST COMPANY
(formerly known as The Bank of Tokyo Trust
Company)
By: _____________________________
Name:
Title:
5
<PAGE>
BANQUE NATIONALE DE PARIS
By: _____________________________
Name:
Title:
CANADIAN IMPERIAL BANK OF COMMERCE
By: _____________________________
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By: _____________________________
Name:
Title:
CRESTAR BANK
By: _____________________________
Name:
Title:
DEUTSCHE BANK AG NEW YORK AND/OR
CAYMAN ISLANDS BRANCH
By: _____________________________
Name:
Title:
By: _____________________________
6
<PAGE>
Name:
Title:
FLEET NATIONAL BANK (formerly known as
Shawmut Bank, N.A.)
By: _____________________________
Name:
Title:
THE FUJI BANK, LIMITED, LOS ANGELES AGENCY
By: _____________________________
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: _____________________________
Name:
Title:
LTCB TRUST COMPANY
By: _____________________________
Name:
Title:
MELLON BANK, N.A.
7
<PAGE>
By: _____________________________
Name:
Title:
NATIONSBANK OF TEXAS, N.A.
By: _____________________________
Name:
Title:
THE NIPPON CREDIT BANK, LTD.
By: _____________________________
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION
By: _____________________________
Name:
Title:
ROYAL BANK OF CANADA
By: _____________________________
Name:
Title:
SOCIETE GENERALE
By: _____________________________
Name:
8
<PAGE>
Title:
THE SUMITOMO BANK, LIMITED,
NEW YORK BRANCH
By: _____________________________
Name:
Title:
9
<PAGE>
EXECUTION COPY
AMENDMENT NO. 3
dated as of June 2, 1997
to
CREDIT AGREEMENT
dated as of March 9, 1994
THIS AMENDMENT NO. 3 (this "Amendment"), dated as of June 2, 1997, among
PRIMESTAR PARTNERS, L.P., a Delaware limited partnership (the "Borrower"), the
banks listed on the signature pages hereof (the "Banks"), and THE CHASE
MANHATTAN BANK (formerly known as Chemical Bank), as Administrative Agent (with
capitalized terms used herein and not otherwise defined having the meanings
ascribed thereto in the Credit Agreement hereinafter referred to),
W I T N E S S E T H:
WHEREAS, the Borrower, the Banks, The Bank of New York, The Chase Manhattan
Bank (formerly known as Chemical Bank) and Citibank, N.A., as Managing Agents,
The Bank of New York, as Documentation Agent, and The Chase Manhattan Bank
(formerly known as Chemical Bank), as Administrative Agent, have entered into a
Credit Agreement dated as of March 9, 1994, as amended by Amendment No. 1
thereto, dated as of November 21, 1994 and Amendment No. 2 thereto, dated as of
February 27, 1997 (as so amended, the "Credit Agreement"); and
WHEREAS, the Borrower has requested, and the Banks and the Administrative
Agent have agreed to, the amendment to the Credit Agreement more fully set forth
in this Amendment; and
WHEREAS, such amendment shall be of benefit, either directly or indirectly,
to the Borrower,
<PAGE>
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Borrower, the Banks and the Administrative Agent agree as
follows:
1. Amendment. Upon and after the Amendment Effective Date (as
---------
defined in Section 3 hereof), the Credit Agreement shall be amended by replacing
the definition of "Termination Date" set forth in Section 10.01 in its entirety
as follows:
"'Termination Date' means December 31, 1997."
----------------
2. Representations and Warranties. In order to induce the Banks to
------------------------------
agree to amend the Credit Agreement, the Borrower makes the following
representations and warranties which shall survive the execution and delivery of
this Amendment:
(a) No Default has occurred and is continuing; and
(b) Each of the representations and warranties set forth in Article 3
of the Credit Agreement are true and correct as though such representations
and warranties were made at and as of the Amendment Effective Date (as
defined in Section 3 hereof) except to the extent that any such
representations or warranties are made as of a specified date or with
respect to a specified period of time, in which case such representations
and warranties shall be made as of such specified date or with respect to
such specified period. Each of the representations and warranties made
under the Credit Agreement (including those made herein) shall survive to
the extent provided therein and not be waived by the execution and delivery
of this Amendment.
3. Amendment Effective Date. The amendment to the Credit Agreement
------------------------
effected pursuant to Section 1 hereof shall become effective as of the date
first referenced above on the date on which all of the following conditions
precedent shall have been satisfied (the "Amendment Effective Date"):
(a) The Administrative Agent shall have received this Amendment, duly
executed by the Borrower and each of the Banks;
(b) The Administrative Agent shall have received evidence satisfactory
to it that the Letters of Credit required to be maintained by the Borrower
pursuant to Section 1.02(a) of the Credit Agreement shall have been renewed
and/or replaced such that no Letter of Credit shall cease, in accordance
with its terms, to be in full force and effect prior to December 31, 1997;
and
(c) The Borrower shall have paid all expenses payable under Section 4
of this Amendment to the extent invoices therefor have been given to the
Borrower, with a reasonable opportunity for the Borrower to review such
invoices, prior to the Amendment Effective Date.
4. Payment of Expenses. The Borrower hereby agrees to pay all
-------------------
reasonable costs and expenses incurred by the Managing Agents in connection with
the preparation,
2
<PAGE>
execution and delivery of this Amendment and any other documents or instruments
which may be delivered in connection herewith, including, without limitation,
the reasonable fees and expenses of Winthrop, Stimson, Putnam & Roberts.
5. Counterparts. This Amendment may be executed in counterparts and
------------
by different parties hereto in separate counterparts each of which, when so
executed and delivered, shall be deemed to be an original and all of which, when
taken together, shall constitute one and the same instrument.
6. Ratification. The Credit Agreement, as amended by this
------------
Amendment, is and shall continue to be in full force and effect and is hereby in
all respects confirmed, approved and ratified.
7. Governing Law. The rights and duties of the parties under this
-------------
Amendment shall, pursuant to New York General Obligations Law Section 5-1401, be
governed by the law of the State of New York.
8. Reference to Agreement. From and after the Amendment Effective
----------------------
Date, each reference in the Credit Agreement to "this Agreement," "hereof,"
"hereunder" or words of like import, and all references to the Credit Agreement
in any and all agreements, instruments, documents, notes, certificates and other
writings of every kind and nature, shall be deemed to mean the Credit Agreement
as modified and amended by this Amendment.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective authorized officers as of the
date first above written.
PRIMESTAR PARTNERS, L.P.
By:______________________________
Name:
Title:
THE CHASE MANHATTAN BANK (formerly known
as Chemical Bank), as Administrative Agent
and as a Bank
By:______________________________
Name:
Title:
THE BANK OF NEW YORK COMPANY, INC.
By:______________________________
Name:
Title:
CITIBANK, N.A.
By:_____________________________
Name:
Title:
<PAGE>
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: _____________________________
Name:
Title:
BANK OF HAWAII
By: _____________________________
Name:
Title:
BANK OF MONTREAL
By: _____________________________
Name:
Title:
THE BANK OF NOVA SCOTIA
By: _____________________________
Name:
Title:
BANK OF TOKYO - MITSUBISHI TRUST COMPANY
(formerly known as The Bank of Tokyo Trust
Company)
By: _____________________________
Name:
Title:
5
<PAGE>
BANQUE NATIONALE DE PARIS
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
CANADIAN IMPERIAL BANK OF COMMERCE
By:_____________________________
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By:_____________________________
Name:
Title:
CRESTAR BANK
By:_____________________________
Name:
Title:
DEUTSCHE BANK AG NEW YORK AND/OR
CAYMAN ISLANDS BRANCH
By:_____________________________
6
<PAGE>
Name:
Title:
By:_____________________________
Name:
Title:
FLEET NATIONAL BANK (formerly known
as Shawmut Bank, N.A.)
By:_____________________________
Name:
Title:
THE FUJI BANK, LIMITED, LOS ANGELES
AGENCY
By:_____________________________
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By:_____________________________
Name:
Title:
LTCB TRUST COMPANY
By:_____________________________
Name:
Title:
7
<PAGE>
MELLON BANK, N.A.
By:_____________________________
Name:
Title:
NATIONSBANK OF TEXAS, N.A.
By:_____________________________
Name:
Title:
BANK OF IRELAND
By:_____________________________
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION
By:_____________________________
Name:
Title:
ROYAL BANK OF CANADA
By:_____________________________
Name:
Title:
SOCIETE GENERALE
8
<PAGE>
By:_____________________________
Name:
Title:
THE SUMITOMO BANK, LIMITED,
NEW YORK BRANCH
By:_____________________________
Name:
Title:
9
<PAGE>
EXECUTION COPY
AMENDMENT NO. 4
dated as of December 19, 1997
to
CREDIT AGREEMENT
dated as of March 9, 1994
THIS AMENDMENT NO. 4 (this "Amendment"), dated as of December 19, 1997,
among PRIMESTAR PARTNERS, L.P., a Delaware limited partnership (the "Borrower"),
the banks listed on the signature pages hereof (the "Banks"), and THE CHASE
MANHATTAN BANK (formerly known as Chemical Bank), as Administrative Agent (with
capitalized terms used herein and not otherwise defined having the meanings
ascribed thereto in the Credit Agreement hereinafter referred to),
W I T N E S S E T H:
WHEREAS, the Borrower, the Banks, The Bank of New York, The Chase Manhattan
Bank (formerly known as Chemical Bank) and Citibank, N.A., as Managing Agents,
The Bank of New York, as Documentation Agent, Citibank, N.A., as Syndication
Agent, and The Chase Manhattan Bank (formerly known as Chemical Bank), as
Administrative Agent, have entered into a Credit Agreement dated as of March 9,
1994, as amended by Amendment No. 1 thereto, dated as of November 21, 1994,
Amendment No. 2 thereto, dated as of February 27, 1997 and Amendment No. 3
thereto, dated as of June 2, 1997 (as so amended, the "Credit Agreement"); and
WHEREAS, the Borrower has requested, and the Banks and the Administrative
Agent have agreed to, the amendment to the Credit Agreement more fully set forth
in this Amendment; and
<PAGE>
WHEREAS, such amendment shall be of benefit, either directly or indirectly,
to the Borrower,
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Borrower, the Banks and the Administrative Agent agree as
follows:
1. Amendment. Upon and after the Amendment Effective Date (as
---------
defined in Section 3 hereof), the Credit Agreement shall be amended by replacing
the definition of "Termination Date" set forth in Section 10.01 in its entirety
as follows:
"'Termination Date' means September 30, 1998."
----------------
2. Representations and Warranties. In order to induce the Banks to
------------------------------
agree to amend the Credit Agreement, the Borrower makes the following
representations and warranties which shall survive the execution and delivery of
this Amendment:
(a) No Default has occurred and is continuing; and
(b) Each of the representations and warranties set forth in Article 3
of the Credit Agreement are true and correct as though such representations
and warranties were made at and as of the Amendment Effective Date (as
defined in Section 3 hereof) except to the extent that any such
representations or warranties are made as of a specified date or with
respect to a specified period of time, in which case such representations
and warranties shall be made as of such specified date or with respect to
such specified period. Each of the representations and warranties made
under the Credit Agreement (including those made herein) shall survive to
the extent provided therein and not be waived by the execution and delivery
of this Amendment.
3. Amendment Effective Date. The amendment to the Credit Agreement
------------------------
effected pursuant to Section 1 hereof shall become effective as of the date
first referenced above on the date on which all of the following conditions
precedent shall have been satisfied (the "Amendment Effective Date"):
(a) The Administrative Agent shall have received this Amendment, duly
executed by the Borrower and each of the Banks;
(b) The Administrative Agent shall have received evidence satisfactory
to it that the Letters of Credit required to be maintained by the Borrower
pursuant to Section 1.02(a) of the Credit Agreement shall have been renewed
and/or replaced such that no Letter of Credit shall cease, in accordance
with its terms, to be in full force and effect prior to September 30, 1998;
and
(c) The Borrower shall have paid all expenses payable under Section 4
of this Amendment to the extent invoices therefor have been given to the
Borrower, with a reasonable opportunity for the Borrower to review such
invoices, prior to the Amendment Effective Date.
2
<PAGE>
4. Payment of Expenses. The Borrower hereby agrees to pay all
-------------------
reasonable costs and expenses incurred by the Managing Agents in connection with
the preparation, execution and delivery of this Amendment and any other
documents or instruments which may be delivered in connection herewith,
including, without limitation, the reasonable fees and expenses of Winthrop,
Stimson, Putnam & Roberts.
5. Counterparts. This Amendment may be executed in counterparts and
------------
by different parties hereto in separate counterparts each of which, when so
executed and delivered, shall be deemed to be an original and all of which, when
taken together, shall constitute one and the same instrument.
6. Ratification. The Credit Agreement, as amended by this
------------
Amendment, is and shall continue to be in full force and effect and is hereby in
all respects confirmed, approved and ratified.
7. Governing Law. The rights and duties of the parties under this
-------------
Amendment shall, pursuant to New York General Obligations Law Section 5-1401, be
governed by the law of the State of New York.
8. Reference to Agreement. From and after the Amendment Effective
----------------------
Date, each reference in the Credit Agreement to "this Agreement," "hereof,"
"hereunder" or words of like import, and all references to the Credit Agreement
in any and all agreements, instruments, documents, notes, certificates and other
writings of every kind and nature, shall be deemed to mean the Credit Agreement
as modified and amended by this Amendment.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective authorized officers as of the
date first above written.
PRIMESTAR PARTNERS, L.P.
By:___________________________________________________
Name:
Title:
THE CHASE MANHATTAN BANK, as Administrative Agent and
as a Bank
By:___________________________________________________
Name:
Title:
THE BANK OF NEW YORK, as Documentation Agent
By:___________________________________________________
Name:
Title:
THE BANK OF NEW YORK COMPANY, INC.
By:___________________________________________________
Name:
Title:
<PAGE>
CITIBANK, N.A., as Syndication Agent and as a Bank
By:___________________________________________________
Name:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:___________________________________________________
Name:
Title:
BANK OF HAWAII
By:___________________________________________________
Name:
Title:
BANK OF MONTREAL
By:___________________________________________________
Name:
Title:
<PAGE>
THE BANK OF NOVA SCOTIA
By:___________________________________________________
Name:
Title:
BANK OF TOKYO - MITSUBISHI TRUST COMPANY
By:___________________________________________________
Name:
Title:
BANQUE NATIONALE DE PARIS
By:___________________________________________________
Name:
Title:
By:___________________________________________________
Name:
Title:
CANADIAN IMPERIAL BANK OF COMMERCE
By:___________________________________________________
Name:
Title:
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH
By:___________________________________________________
Name:
Title:
CRESTAR BANK
By:___________________________________________________
Name:
Title:
DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCH
By:___________________________________________________
Name:
Title:
By:___________________________________________________
Name:
Title:
FLEET NATIONAL BANK
By:___________________________________________________
Name:
Title:
<PAGE>
THE FUJI BANK, LIMITED, LOS ANGELES AGENCY
By:___________________________________________________
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By:___________________________________________________
Name:
Title:
LTCB TRUST COMPANY
By:___________________________________________________
Name:
Title:
MELLON BANK, N.A.
By:___________________________________________________
Name:
Title:
<PAGE>
NATIONSBANK OF TEXAS, N.A.
By:___________________________________________________
Name:
Title:
BANK OF IRELAND
By:___________________________________________________
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION
By:___________________________________________________
Name:
Title:
ROYAL BANK OF CANADA
By:___________________________________________________
Name:
Title:
<PAGE>
SOCIETE GENERALE
By:___________________________________________________
Name:
Title:
THE SUMITOMO BANK, LIMITED,
NEW YORK BRANCH
By:___________________________________________________
Name:
Title:
<PAGE>
EXECUTION COPY
AMENDMENT NO. 5
dated as of September 29, 1998
to
CREDIT AGREEMENT
dated as of March 9, 1994
THIS AMENDMENT NO. 5 (this "Amendment"), dated as of September 29, 1998,
among PRIMESTAR PARTNERS, L.P., a Delaware limited partnership (the "Borrower"),
the banks listed on the signature pages hereof (the "Banks"), and THE CHASE
MANHATTAN BANK, as Administrative Agent (with capitalized terms used herein and
not otherwise defined having the meanings ascribed thereto in the Credit
Agreement hereinafter referred to),
W I T N E S S E T H:
WHEREAS, the Borrower, the Banks, The Bank of New York, The Chase Manhattan
Bank and Citibank, N.A., as Managing Agents, The Bank of New York, as
Documentation Agent, Citibank, N.A., as Syndication Agent, and The Chase
Manhattan Bank, as Administrative Agent, have entered into a Credit Agreement
dated as of March 9, 1994, as amended by Amendment No. 1 thereto, dated as of
November 21, 1994, Amendment No. 2 thereto, dated as of February 27, 1997,
Amendment No. 3 thereto, dated as of June 2, 1997 and Amendment No. 4 thereto,
dated as of December 19, 1997 (as so amended, the "Credit Agreement"); and
WHEREAS, the Borrower has requested, and the Banks and the Administrative
Agent have agreed to, the amendments to the Credit Agreement more fully set
forth in this Amendment; and
WHEREAS, such amendments shall be of benefit, either directly or
indirectly, to the Borrower,
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Borrower, the Banks and the Administrative Agent agree as
follows:
<PAGE>
1. Amendments. Upon and after the Amendment Effective Date (as
----------
defined in Section 4 hereof), the Credit Agreement shall be amended as follows:
(a) Section 1.04(a)(iii) shall be amended by deleting the percentage
"7/16%" appearing therein and inserting in place thereof the percentage "3/5%".
(b) Section 5.01(a) shall be amended as follows:
(i) by inserting immediately following the heading "Quarterly
---------
Financial Statements." the symbol "(i)";
---------------------
(ii) by deleting the "." appearing at the end of new clause (i)
and inserting in place thereof a ";"; and
(iii) by inserting a new clause (ii) to read in its entirety as
follows:
"(ii) As soon as available and in any event within 60 days after the
close of each of the first three quarterly accounting periods in each
fiscal year of Primestar, commencing with the quarterly period ended
September 30, 1998, a balance sheet of Primestar as at the end of such
quarterly period and the related statements of operations and stockholder's
equity of Primestar for such quarterly period and statements of operations,
stockholder's equity and cash flows for the elapsed portion of the fiscal
year ended with the last day of such quarterly period, setting forth in
each case in comparative form the figures for the corresponding periods of
the previous fiscal year."
(c) Section 5.01(b) shall be amended to read in its entirety as
follows:
"(b) Year-End Financial Statements; Accountants' Certificate. (i)
--------------------------------------------------------
As soon as available and in any event within 120 days after the end of each
fiscal year of the Borrower, a balance sheet of the Borrower as at the end
of such fiscal year and the related statements of operations, partners'
capital (deficit) and cash flows of the Borrower for such fiscal year,
setting forth in comparative form the figures as at the end of and for the
previous fiscal year;
(ii) (A) As soon as available and in any event within 120 days after
the end of each fiscal year of Primestar, commencing with the fiscal year
ended December 31, 1998, a balance sheet of Primestar as at the end of such
fiscal year and the related statements of operations, stockholder's equity
and cash flows of Primestar for such fiscal year, setting forth in
comparative form the figures as at the end of and for the previous fiscal
year; and
(B) an audit report of independent certified public accountants
of recognized national standing, on such financial statements of Primestar,
which report shall not contain any exception as to scope that is not
satisfactory to the Managing Agents."
(d) Section 5.01(c) shall be amended by inserting immediately
following the words "the Borrower" the words "or Primestar, as applicable".
<PAGE>
(e) Section 10.01 shall be amended as follows:
(i) by replacing the definition of "Termination Date" with the
following:
""Termination Date" means June 30, 1999."
----------------
(ii) by inserting the following new definition in alphabetical
order:
""Primestar" means Primestar Inc., a Delaware corporation."
---------
(f) Schedule 5.01(c) shall be replaced in its entirety with new
Schedule 5.01(c) attached hereto as Annex A.
-------
(g) Annex A shall be amended to provide that the amount of the
Commitment and, if applicable, the Lending Offices and Notice Address
information for each of the Banks listed on Annex B hereto shall be as set forth
-------
on such Annex B with respect to each such Bank.
2. Representations and Warranties. In order to induce the Banks to
------------------------------
agree to amend the Credit Agreement, the Borrower makes the following
representations and warranties which shall survive the execution and delivery of
this Amendment:
(a) No Default has occurred and is continuing; and
(b) Each of the representations and warranties set forth in Article 3
of the Credit Agreement are true and correct as though such representations
and warranties were made at and as of the Amendment Effective Date except
to the extent that any such representations or warranties are made as of a
specified date or with respect to a specified period of time, in which case
such representations and warranties shall be made as of such specified date
or with respect to such specified period. Each of the representations and
warranties made under the Credit Agreement (including those made herein)
shall survive to the extent provided therein and not be waived by the
execution and delivery of this Amendment.
3. Termination of CD Rate Loan Option. The Borrower hereby
----------------------------------
acknowledges and agrees that, notwithstanding anything to the contrary contained
in the Credit Agreement, from and after the Amendment Effective Date, no Loan
shall be made, converted or continued as a CD Rate Loan and the Borrower shall
not have the right to request the making, conversion or continuation of Loans as
CD Rate Loans.
4. Amendment Effective Date. The amendments to the Credit Agreement
------------------------
effected pursuant to Section 1 and Section 3 hereof shall become effective as of
the date first referenced above on the date on which all of the following
conditions precedent shall have been satisfied (the "Amendment Effective Date"):
(a) the Administrative Agent shall have received this Amendment, duly
executed by the Borrower and each of the Banks;
<PAGE>
(b) the Administrative Agent shall have received evidence satisfactory
to it that the Letters of Credit required to be maintained by the Borrower
pursuant to Section 1.02(a) of the Credit Agreement shall have been renewed
and/or replaced such that no Letter of Credit shall cease, in accordance
with its terms, to be in full force and effect prior to June 30, 1999;
(c) the Administrative Agent shall have received (i) the Master
Assignment and Assumption Agreement, substantially in the form attached
hereto as Exhibit A, duly executed by the Agents, the Assignors and
---------
Assignees listed therein and acknowledged and agreed to by the Borrower
(the "Assignment Agreement") and (ii) payment of each Purchase Price (as
defined in the Assignment Agreement) as required in Section 1 of the
Assignment Agreement;
(d) the Borrower shall have paid to the Administrative Agent the fees
payable pursuant to the letter agreement executed in connection with this
Amendment by the Borrower and the Managing Agents; and
(e) the Borrower shall have paid all expenses payable under Section
5(a) of this Amendment to the extent invoices therefor have been given to
the Borrower, with a reasonable opportunity for the Borrower to review such
invoices, prior to the Amendment Effective Date.
5. Payment of Expenses; Delivery of Notes. (a) The Borrower hereby
--------------------------------------
agrees to pay all reasonable costs and expenses incurred by the Managing Agents
in connection with the preparation, execution and delivery of this Amendment and
any other documents or instruments which may be delivered in connection
herewith, including, without limitation, the reasonable fees and expenses of
Winthrop, Stimson, Putnam & Roberts.
(b) The Borrower hereby agrees, promptly following the Amendment
Effective Date, to provide a duly executed Note to each Bank reflecting its
Commitment after giving effect to the Master Assignment and Assumption
Agreement, against, in the case of Banks that were parties to the Credit
Agreement prior to the Amendment Effective Date, receipt of each such Bank's
existing Note.
6. Counterparts. This Amendment may be executed in counterparts and
------------
by different parties hereto in separate counterparts each of which, when so
executed and delivered, shall be deemed to be an original and all of which, when
taken together, shall constitute one and the same instrument.
7. Ratification. The Credit Agreement, as amended by this
------------
Amendment, is and shall continue to be in full force and effect and is hereby in
all respects confirmed, approved and ratified.
8. Governing Law. The rights and duties of the parties under this
-------------
Amendment shall, pursuant to New York General Obligations Law Section 5-1401, be
governed by the law of the State of New York.
<PAGE>
9. Reference to Agreement. From and after the Amendment Effective
----------------------
Date, each reference in the Credit Agreement to "this Agreement," "hereof,"
"hereunder" or words of like import, and all references to the Credit Agreement
in any and all agreements, instruments, documents, notes, certificates and other
writings of every kind and nature, shall be deemed to mean the Credit Agreement
as modified and amended by this Amendment.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective authorized officers as of the
date first above written.
PRIMESTAR PARTNERS, L.P.
By:___________________________________________________
Name:
Title:
THE CHASE MANHATTAN BANK, as Administrative Agent and
as a Bank
By:___________________________________________________
Name:
Title:
THE BANK OF NEW YORK, as Documentation Agent
By:___________________________________________________
Name:
Title:
THE BANK OF NEW YORK COMPANY, INC.
By:___________________________________________________
Name:
Title:
<PAGE>
CITIBANK, N.A., as Syndication Agent and as a Bank
By:___________________________________________________
Name:
Title:
ABN AMRO BANK N.V.
By:___________________________________________________
Name:
Title:
By:___________________________________________________
Name:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:___________________________________________________
Name:
Title:
<PAGE>
BANK OF MONTREAL
By:___________________________________________________
Name:
Title:
THE BANK OF NOVA SCOTIA
By:___________________________________________________
Name:
Title:
BANK OF TOKYO - MITSUBISHI TRUST COMPANY
By:___________________________________________________
Name:
Title:
<PAGE>
BANQUE NATIONALE DE PARIS
By:___________________________________________________
Name:
Title:
By:___________________________________________________
Name:
Title:
CANADIAN IMPERIAL BANK OF COMMERCE
By:___________________________________________________
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By:___________________________________________________
Name:
Title:
<PAGE>
CRESTAR BANK
By:___________________________________________________
Name:
Title:
DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCH
By:___________________________________________________
Name:
Title:
By:___________________________________________________
Name:
Title:
DRESDNER BANK AG, NEW YORK & GRAND CAYMAN BRANCHES
By:___________________________________________________
Name:
Title:
By:___________________________________________________
Name:
Title:
<PAGE>
FIRST UNION NATIONAL BANK
By:___________________________________________________
Name:
Title:
FLEET NATIONAL BANK
By:___________________________________________________
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By:___________________________________________________
Name:
Title:
MELLON BANK, N.A.
By:___________________________________________________
Name:
Title:
<PAGE>
NATIONSBANK, N.A. (as successor by merger to
NationsBank of Texas, N.A.)
By:___________________________________________________
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION
By:___________________________________________________
Name:
Title:
ROYAL BANK OF CANADA
By:___________________________________________________
Name:
Title:
SOCIETE GENERALE
By:___________________________________________________
Name:
Title:
<PAGE>
THE SUMITOMO BANK, LIMITED,
NEW YORK BRANCH
By:___________________________________________________
Name:
Title:
TORONTO DOMINION (TEXAS) INC.
By:___________________________________________________
Name:
Title:
U.S. BANK NATIONAL ASSOCIATION
By:___________________________________________________
Name:
Title:
<PAGE>
EXHIBIT 10.11
[EXECUTION COPY]
================================================================================
U.S. $700,000,000
CREDIT AGREEMENT,
dated as of
March 31, 1998,
among
PRIMESTAR, INC.,
as the Borrower,
THE BANK OF NOVA SCOTIA,
as the Administrative Agent,
NATIONSBANK OF TEXAS, N.A.,
as the Syndication Agent,
CREDIT LYONNAIS NEW YORK BRANCH,
as the Documentation Agent,
VARIOUS FINANCIAL INSTITUTIONS,
as the Lenders,
and
THE BANK OF NOVA SCOTIA,
CREDIT LYONNAIS NEW YORK BRANCH
and
NATIONSBANK OF TEXAS, N.A.,
as the Arranging Agents.
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Section Page
- ------- ----
ARTICLE IDEFINITIONS AND ACCOUNTING TERMS
<S> <C> <C>
1.1. Defined Terms...................................................... 3
1.2. Use of Defined Terms............................................... 36
1.3. Cross-References................................................... 36
1.4. Accounting and Financial Determinations............................ 36
</TABLE>
<TABLE>
<CAPTION>
ARTICLE II COMMITMENTS, BORROWING AND ISSUANCEPROCEDURES, NOTES AND
LETTERS OF CREDIT
<S> <C> <C>
2.1. Commitments........................................................ 37
2.1.1. Revolving Loan Commitment and Swing Line Loan Commitment........... 37
2.1.2. Letter of Credit Commitment........................................ 38
2.1.3. Term Loan Commitment............................................... 38
2.1.4. Lenders Not Permitted or Required to Make Loans.................... 38
2.1.5. Issuer Not Permitted or Required to Issue Letters of Credit........ 39
2.2. Reduction of the Commitment Amounts................................ 39
2.2.1. Optional........................................................... 39
2.2.2. Mandatory.......................................................... 40
2.3. Borrowing Procedures............................................... 40
2.3.1. Borrowing Procedure................................................ 40
2.3.2. Swing Line Loans................................................... 41
2.4. Continuation and Conversion Elections.............................. 42
2.5. Funding............................................................ 42
2.6. Issuance Procedures................................................ 43
2.6.1. Other Lenders' Participation....................................... 43
2.6.2. Disbursements...................................................... 43
2.6.3. Reimbursement...................................................... 44
2.6.4. Deemed Disbursements............................................... 44
2.6.5. Nature of Reimbursement Obligations................................ 45
2.7. Register; Notes.................................................... 45
</TABLE>
i
<PAGE>
ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
<TABLE>
<C> <S> <C>
3.1. Repayments and Prepayments; Application............................. 47
3.1.1. Repayments and Prepayments.......................................... 47
3.1.2. Application......................................................... 49
3.2. Interest Provisions................................................. 50
3.2.1. Rates............................................................... 50
3.2.2. Post-Maturity Rates................................................. 50
3.2.3. Payment Dates....................................................... 51
3.3. Fees................................................................ 51
3.3.1. Commitment Fee...................................................... 51
3.3.2. Agency Fees......................................................... 52
3.3.3. Letter of Credit Fee................................................ 52
</TABLE>
ARTICLE IV CERTAIN FIXED RATE AND OTHER PROVISIONS
<TABLE>
<C> <S> <C>
4.1. Fixed Rate Lending Unlawful......................................... 52
4.2. Deposits Unavailable................................................ 52
4.3. Increased Fixed Rate Loan Costs, etc................................ 53
4.4. Funding Losses...................................................... 53
4.5. Increased Capital Costs............................................. 54
4.6. Taxes............................................................... 54
4.7. Payments, Computations, etc......................................... 57
4.8. Sharing of Payments................................................. 57
4.9. Setoff.............................................................. 58
4.10. Lender's Duty to Mitigate........................................... 58
4.11. Replacement of Lenders.............................................. 59
</TABLE>
ARTICLE V CONDITIONS TO CREDIT EXTENSIONS
<TABLE>
<C> <S> <C>
5.1. Initial Credit Extension............................................ 60
5.1.1. Subsidiary Guaranties............................................... 60
5.1.2. Pledge Agreements................................................... 60
5.1.3. Contract Assignment Agreement and each Consent and Agreement........ 60
5.1.4. Financial Information, etc.......................................... 60
5.1.5. Closing Date Certificate............................................ 61
5.1.6. Compliance Certificate.............................................. 61
5.1.7. Solvency, etc....................................................... 61
5.1.8. Consummation of Restructuring Transaction........................... 61
</TABLE>
ii
<PAGE>
<TABLE>
<C> <S> <C>
5.1.9. Senior Subordinated Credit Agreement............................... 61
5.1.10. Delivery of Transaction Documents.................................. 61
5.1.11. Insurance.......................................................... 62
5.1.12. Opinion of Counsel................................................. 62
5.1.13. Closing Fees, Expenses, etc........................................ 62
5.2. All Credit Extensions.............................................. 62
5.2.1. Compliance with Warranties, No Default, etc........................ 62
5.2.2. Credit Extension Request, etc...................................... 63
5.2.3. Satisfactory Legal Form............................................ 63
</TABLE>
ARTICLE VI REPRESENTATIONS AND WARRANTIES
<TABLE>
<S> <C> <C>
6.1. Organization, etc.................................................. 63
6.2. Due Authorization, Non-Contravention, etc.......................... 63
6.3. Government Approval, Regulation, etc............................... 64
6.4. Validity, etc...................................................... 64
6.5. Financial Information.............................................. 64
6.6. No Material Adverse Effect......................................... 65
6.7. Litigation, Labor Controversies, etc............................... 65
6.8. Compliance with Laws............................................... 65
6.9. Subsidiaries....................................................... 65
6.10. Ownership of Properties............................................ 65
6.11. Taxes.............................................................. 65
6.12. Pension and Welfare Plans.......................................... 65
6.13. Environmental Warranties........................................... 66
6.14. Intellectual Property.............................................. 67
6.15. Regulations U and X................................................ 67
6.16. Accuracy of Information............................................ 67
6.17. Subordinated Debt.................................................. 68
</TABLE>
ARTICLE VII COVENANTS
<TABLE>
<C> <S> <C>
7.1. Affirmative Covenants.............................................. 68
7.1.1. Financial Information, Reports, Notices, etc....................... 68
7.1.2. Compliance with Laws, etc.......................................... 70
7.1.3. Maintenance of Properties.......................................... 70
7.1.4. Insurance.......................................................... 70
7.1.5. Books and Records.................................................. 71
7.1.6. Environmental Covenant............................................. 71
7.1.7. Future Subsidiaries................................................ 72
</TABLE>
iii
<PAGE>
<TABLE>
<C> <S> <C>
7.1.8. Additional Collateral.............................................. 73
7.1.9. Rate Protection Agreements......................................... 73
7.1.10. Future Leased Property............................................. 74
7.1.11. Use of Proceeds.................................................... 74
7.2. Negative Covenants................................................. 74
7.2.1. Business Activities................................................ 74
7.2.2. Indebtedness....................................................... 74
7.2.3. Liens.............................................................. 76
7.2.4. Financial Condition and Operations................................. 77
7.2.5. Investments........................................................ 78
7.2.6. Restricted Payments, etc........................................... 79
7.2.7. Capital Expenditures, etc.......................................... 79
7.2.8. Subsidiaries....................................................... 80
7.2.9. Take or Pay Contracts.............................................. 80
7.2.10. Consolidation, Merger, etc......................................... 80
7.2.11. Permitted Dispositions............................................. 81
7.2.12. Modification of Certain Agreements................................. 81
7.2.13. Transactions with Affiliates....................................... 81
7.2.14. Negative Pledges, Restrictive Agreements, etc...................... 81
7.2.15. Sale and Leaseback................................................. 82
7.2.16. Restrictions on Leases and ASkyB Transaction....................... 82
7.2.17. Restrictions on TSAT Partners Holdings and Its Subsidiaries........ 82
</TABLE>
ARTICLE VIII EVENTS OF DEFAULT
<TABLE>
<C> <S> <C>
8.1. Listing of Events of Default....................................... 83
8.1.1. Non-Payment of Obligations......................................... 83
8.1.2. Breach of Warranty................................................. 83
8.1.3. Non-Performance of Certain Covenants and Obligations............... 83
8.1.4. Non-Performance of Other Covenants and Obligations................. 83
8.1.5. Default on Other Indebtedness...................................... 84
8.1.6. Judgments.......................................................... 84
8.1.7. Pension Plans...................................................... 84
8.1.8. Control of the Borrower............................................ 84
8.1.9. Bankruptcy, Insolvency, etc........................................ 84
8.1.10. Impairment of Security, etc........................................ 85
8.1.11. Material Adverse Change............................................ 85
8.2. Action if Bankruptcy............................................... 85
8.3. Action if Other Event of Default................................... 86
</TABLE>
ARTICLE IX THE AGENTS
iv
<PAGE>
<TABLE>
<C> <S> <C>
9.1. Actions............................................................ 86
9.2. Funding Reliance, etc.............................................. 87
9.3. Exculpation........................................................ 87
9.4. Successor.......................................................... 87
9.5. Loans by Agents.................................................... 88
9.6. Credit Decisions................................................... 88
9.7. Copies, etc........................................................ 88
9.8. The Agents......................................................... 89
</TABLE>
ARTICLE X MISCELLANEOUS PROVISIONS
<TABLE>
<C> <S> <C>
10.1. Waivers, Amendments, etc........................................... 89
10.2. Notices............................................................ 90
10.3. Payment of Costs and Expenses...................................... 90
10.4. Indemnification.................................................... 91
10.5. Survival........................................................... 92
10.6. Severability....................................................... 93
10.7. Headings........................................................... 93
10.8. Execution in Counterparts, Effectiveness, etc...................... 93
10.9. Governing Law; Entire Agreement.................................... 93
10.10. Successors and Assigns............................................. 93
10.11. Sale and Transfer of Loans and Notes; Participations in
Loans and Notes.................................................... 94
10.11.1. Assignments........................................................ 94
10.11.2. Participations..................................................... 95
10.12. Other Transactions................................................. 96
10.13. Execution on Behalf of Corporation................................. 96
10.14. Forum Selection and Consent to Jurisdiction........................ 97
10.15. Waiver of Jury Trial............................................... 98
</TABLE>
v
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of March 31, 1998 (amending and restating
the Existing Credit Agreement, as defined below), is among PRIMESTAR, INC., a
Delaware corporation (the "Borrower"), the various financial institutions as are
--------
or may become parties hereto (collectively, the "Lenders"), NATIONSBANK OF
-------
TEXAS, N.A. ("NationsBank"), as syndication agent for the Lenders (in such
-----------
capacity, the "Syndication Agent"), CREDIT LYONNAIS NEW YORK BRANCH ("Credit
----------------- ------
Lyonnais"), as documentation agent for the Lenders (in such capacity, the
- --------
"Documentation Agent"), each of Credit Lyonnais, NationsBank and THE BANK OF
- --------------------
NOVA SCOTIA ("Scotiabank") as arranging agents for the Lenders (in such
----------
capacity, the "Arranging Agents"), and Scotiabank, as administrative agent for
----------------
the Lenders and such Agents (in such capacity, the "Administrative Agent";
--------------------
together with the Arranging Agents, the Syndication Agent and the Documentation
Agent, the "Agents" and each an "Agent").
------ -----
W I T N E S S E T H:
-------------------
WHEREAS, the Borrower and its various Restricted Subsidiaries (such
capitalized term, and other capitalized terms used herein, to have the meanings
provided in Section 1.1) are engaged in the business of providing satellite
-----------
broadcasting service to residential and commercial subscribers, and businesses
and activities directly related thereto;
WHEREAS, pursuant to the Credit Agreement, dated as of December 31, 1996
(the "Original Credit Agreement"), among TCI Satellite Entertainment, Inc., a
-------------------------
Delaware corporation ("TSAT"), certain financial institutions from time to time
----
party thereto (the "Original Lenders"), NationsBank, as syndication agent,
----------------
Credit Lyonnais, as documentation agent, each of Credit Lyonnais, NationsBank
and Scotiabank, as arranging agents, and Scotiabank, as administrative agent,
the Original Lenders made extensions of credit to TSAT on terms set forth
therein;
WHEREAS, pursuant to the Amended and Restated Credit Agreement, dated as of
June 26, 1997 (as amended, supplemented, amended and restated or otherwise
modified prior to the date hereof, the "Existing Credit Agreement"), among TSAT,
-------------------------
certain financial institutions from time to time party thereto (the "Existing
--------
Lenders"), NationsBank, as syndication agent, Credit Lyonnais, as documentation
- -------
agent, each of Credit Lyonnais, NationsBank and Scotiabank, as arranging agents,
and Scotiabank, as administrative agent, the Existing Lenders made extensions of
credit to TSAT on terms set forth therein;
WHEREAS, (i) pursuant to the Asset Transfer Agreement, dated as of February
6, 1998 (the "TSAT Asset Transfer Agreement"), between TSAT and the Borrower,
-----------------------------
TSAT has agreed to transfer all of its assets and liabilities related to its
medium power business to the Borrower in consideration for stock of the Borrower
(the "TSAT Asset Transfer"), (ii) pursuant to the Merger
-------------------
<PAGE>
and Contribution Agreement (and the other agreements referenced therein),
dated as of February 6,
1998 (the "Restructuring Agreement"), among the Borrower, TSAT and the other
-----------------------
Partners, the businesses of TSAT and the Primestar Partnership, and the
PRIMESTAR Distribution Service, will be consolidated into the Borrower (the
"Restructuring Transaction"), and (iii) pursuant to the Agreement and Plan of
- --------------------------
Merger Agreement, dated as of February 6, 1998 (the "TSAT Merger Agreement"),
---------------------
between TSAT and the Borrower, and subject to the satisfaction of certain
conditions, TSAT has agreed to merge with and into the Borrower, with the
Borrower as the surviving corporation (the "TSAT Merger", and collectively with
-----------
the TSAT Asset Transfer and the Restructuring, the "Roll-up Plan", all as more
------------
fully described in the Proxy);
WHEREAS, pursuant to the Assumption and Amendment Agreement, the Borrower
has assumed TSAT's obligations under the Existing Credit Agreement and has
requested that the Existing Credit Agreement be amended and restated in its
entirety to become effective and binding on the Borrower pursuant to the terms
of this Agreement, and the Lenders (including the Existing Lenders) have agreed
(subject to the terms of the Assumption and Amendment Agreement) to amend and
restate the Existing Credit Agreement in its entirety to read as set forth in
this Agreement, and it has been agreed by the parties to the Existing Credit
Agreement that the commitments which the Existing Lenders have agreed to extend
to TSAT under the Existing Credit Agreement shall be extended or advanced to the
Borrower upon the amended and restated terms and conditions contained in this
Agreement with the intent that the terms of this Agreement shall supersede the
terms of the Existing Credit Agreement (which shall hereafter have no further
effect upon the parties thereto, other than for accrued fees and expenses, and
indemnification provisions, accrued and owing under the terms of the Existing
Credit Agreement on or prior to the date hereof or arising (in the case of an
indemnification) under the terms of the Existing Credit Agreement); provided,
--------
that any Rate Protection Agreements with any one or more Existing Lenders (or
their respective s) shall continue unamended (other than their assumption by the
Borrower) and in full force and effect;
WHEREAS, in connection with amending and restating the Existing Credit
Agreement, the Borrower desires to obtain from the Lenders (and the Issuer, as
the case may be):
(a) a Term Loan Commitment, pursuant to which Borrowings of Term
Loans, in a maximum aggregate principal amount not to exceed $150,000,000,
will be made to the Borrower in a single Borrowing occurring on the Closing
Date;
(b) a Revolving Loan Commitment (to include availability for
Revolving Loans, Swing Line Loans and Letters of Credit), pursuant to which
Borrowings of Revolving Loans, in a maximum aggregate principal amount
(together with all Swing Line Loans and Letter of Credit Outstandings) not
to exceed $550,000,000, will be made to the Borrower from time to time
prior to the Revolving Loan Commitment Termination Date;
(c) a Letter of Credit Commitment, pursuant to which the Issuer will
issue Letters of Credit, in a maximum aggregate Stated Amount at any one
time outstanding not to exceed $100,000,000, for the account of the
Borrower from time to time prior to the
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<PAGE>
Revolving Loan Commitment Termination Date (provided that the aggregate
--------
amount of Letter of Credit Outstandings, together with the outstanding
principal amount of Revolving Loans and Swing Line Loans, at any time shall
not exceed the then existing Revolving Loan Commitment Amount); and
(d) a Swing Line Loan Commitment, pursuant to which Borrowings of
Swing Line Loans, in a maximum aggregate principal amount not to exceed
$15,000,000, will be made to the Borrower from time to time prior to the
Revolving Loan Commitment Termination Date (provided, that the aggregate
--------
outstanding principal amount of such Swing Line Loans, together with
Revolving Loans and Letter of Credit Outstandings, at any time shall not
exceed the then existing Revolving Loan Commitment Amount);
with all the proceeds of the Credit Extensions to be used for the purposes
specified in Section 7.1.11; and
--------------
WHEREAS, the Existing Lenders, the Lenders and the Issuer are willing, on
the terms and subject to the conditions hereinafter set forth (including Article
-------
V), to amend and restate the Existing Credit Agreement in its entirety pursuant
- -
to the terms of this Agreement, and the Lenders and the Issuer are willing to
extend such Commitment and make such Loans to the Borrower and issue (or
participate in) Letters of Credit for the account of the Borrower;
NOW, THEREFORE, the parties hereto agree as set forth above and as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION I.1. Defined Terms. The following capitalized terms (whether or
-------------
not underscored) when used in this Agreement, including its preamble and
recitals, shall, except where the context otherwise requires, have the following
meanings (such meanings to be equally applicable to the singular and plural
forms thereof):
"Administrative Agent" is defined in the preamble and includes each other
-------------------- --------
Person as shall have subsequently been appointed as the successor Administrative
Agent pursuant to Section 9.4.
-----------
"Affiliate" of any Person means any other Person which, directly or
---------
indirectly, controls, is controlled by or is under common control with such
Person (excluding with respect to the Borrower any (i) trustee under, or any
committee with responsibility for administering, any Plan, (ii) Lender and (iii)
Agent). A Person shall be deemed to be "controlled by" another Person if such
other Person possesses, directly or indirectly, power:
-3-
<PAGE>
(a) to vote 10% or more of the securities having ordinary voting
power for the election of directors or managing general partners; or
(b) to direct or cause the direction of the management and policies
of such Person whether by contract or otherwise.
"Agent" and "Agents" are defined in the preamble and include each other
----- ------ --------
Person as shall have subsequently been appointed as a successor Agent pursuant
to Section 9.4.
-----------
"Agreement" means, on any date, this Credit Agreement as originally in
---------
effect on the Effective Date and as thereafter from time to time amended,
supplemented, amended and restated, or otherwise modified and in effect on such
date.
"Alternate Base Rate" means, on any date and with respect to all Base Rate
-------------------
Loans, a fluctuating rate of interest per annum equal to the higher of:
(a) the Base Rate in effect on such day; and
(b) the Federal Funds Rate in effect on such day plus 1/2 of 1%.
Changes in the rate of interest on that portion of any Loans maintained as Base
Rate Loans will take effect simultaneously with each change in the Alternate
Base Rate. The Administrative Agent will give notice promptly to the Borrower
and the Lenders of changes in the Alternate Base Rate.
"Annualized Cash Flow" means, as of any date of determination, EBITDA for
--------------------
the Fiscal Quarter ending on or immediately prior to such date of determination
multiplied by four.
"Annualized Cash Flow to Pro Forma Debt Service Ratio" means the ratio of
----------------------------------------------------
(a) Annualized Cash Flow to (b) Pro Forma Debt Service.
--
"Annualized Cash Flow to Total Interest Expense Ratio" means, as of the
----------------------------------------------------
last day of any Fiscal Quarter, the ratio of (a) Annualized Cash Flow to (b)
--
Total Interest Expense for such Fiscal Quarter and the three immediately
preceding Fiscal Quarters.
"Annual Pro-Forma Interest Expense" means, as of any date of determination,
---------------------------------
Pro-Forma Interest Expense for the four complete Fiscal Quarters immediately
succeeding such date of determination.
"Applicable Margin" means:
-----------------
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<PAGE>
(a) with respect to the unpaid principal amount of each Term Loan
maintained as (i) a Base Rate Loan, 1.25%, (ii) a LIBO Rate Loan, 2.25%,
and (iii) a CD Rate Loan, 2.375%; and
(b) with respect to the unpaid principal amount of each Revolving
Loan, the applicable percentage set forth under the applicable column
below:
<TABLE>
<CAPTION>
Total Debt Base Rate LIBOR CD
to Annualized Cash Margin Margin Margin
Flow Ratio --------- -------- ------
------------------
<S> <C> <C> <C>
Greater than or equal 1.250% 2.250% 2.375%
to 7.0:1
Greater than or equal 1.000% 2.000% 2.125%
to 6.5:1 and less
than 7.0:1
Greater than or equal 0.750% 1.750% 1.875%
to 6.0:1 and less
than 6.5:1
Greater than or equal 0.500% 1.500% 1.625%
to 5.5:1 and less
than 6.0:1
Greater than or equal 0.250% 1.250% 1.375%
to 5.0:1 and less
than 5.5:1
Less than 5.0:1 0.000% 0.875% 1.000%
</TABLE>
The Total Debt to Annualized Cash Flow Ratio used to compute the Applicable
Margin shall be the Total Debt to Annualized Cash Flow Ratio set forth in the
Compliance Certificate most recently delivered by the Borrower to the
Administrative Agent; changes in the Applicable Margin resulting from a change
in the Total Debt to Annualized Cash Flow Ratio shall become effective upon
delivery by the Borrower to the Administrative Agent of a new Compliance
Certificate pursuant to clause (c) of Section 7.1.1. If the Borrower shall fail
---------- -------------
to deliver a Compliance Certificate within 60 days after the end of any Fiscal
Quarter (or within 105 days, in the case of the last Fiscal Quarter of the
Fiscal Year) as required pursuant to clause (c) of Section 7.1.1, the Applicable
---------- -------------
Margin from and including the 61st (or 106th, as the case may be) day after the
end of such Fiscal Quarter to but not including the date the Borrower delivers
to the Administrative Agent a Compliance Certificate shall conclusively equal
the highest Applicable Margin set forth above for such type of Loans.
-5-
<PAGE>
"Arranging Agents" is defined in the preamble and includes each other
---------------- --------
Person as shall have subsequently been appointed as a successor Arranging Agent
pursuant to Section 9.4.
-----------
"ASkyB Satellite" means either of the high power communications satellites
---------------
to be purchased by the Borrower in the ASkyB Transaction.
"ASkyB Transaction" means the acquisition by the Borrower from MCI
-----------------
Telecommunications Corporation ("MCI"), the News Corporation Limited ("News
--- ----
Corp.") and American Sky Broadcasting LLC, a wholly-owned Subsidiary of News
- -----
Corp. ("ASkyB"), of the ASkyB Satellites, certain authorizations granted to MCI
-----
by the Federal Communications Commission and certain related contracts, all
pursuant to an asset acquisition agreement, dated as of June 11, 1997, among the
Primestar Partnership, News Corp., MCI, ASkyB and, for certain purposes only,
the Partners.
"Assessment Rate" means, for any Interest Period for CD Rate Loans, the net
---------------
annual assessment rate (rounded upwards, if necessary, to the next higher 1/100
of 1%) estimated by the Administrative Agent to be the then current annual
assessment payable by the Administrative Agent to the Federal Deposit Insurance
Corporation (or any successor) for insuring time deposits at offices of the
Administrative Agent in the United States.
"Assignee Lender" is defined in Section 10.11.1.
--------------- ---------------
"Assumption and Amendment Agreement" means the Assumption and Amendment
----------------------------------
Agreement, dated as of the date hereof, among TSAT, the Borrower, the Existing
Lenders, the Lenders and the Agents.
"Authorized Officer" means, relative to the Borrower and any other Obligor,
------------------
those of its officers or managing members (in the case of a limited liability
company) whose signatures and incumbency shall have been certified by the
Borrower to the Arranging Agents and the Lenders.
"Base Rate" means, at any time, the rate of interest then most recently
---------
established by Scotiabank in New York, New York as its base rate for Dollars
loaned in the United States. The Base Rate is not necessarily intended to be
the lowest rate of interest determined by Scotiabank in connection with
extensions of credit.
"Base Rate Loan" means a Loan bearing interest at a fluctuating rate
--------------
determined by reference to the Alternate Base Rate.
"Borrower" is defined in the preamble.
-------- --------
"Borrower Closing Date Certificate" means the closing date certificate,
---------------------------------
dated as of the Closing Date, executed and delivered by the Borrower pursuant to
Section 5.1.5, substantially in the form of Exhibit K hereto.
- ------------- ---------
-6-
<PAGE>
"Borrower Pledge Agreement" means the Pledge Agreement, dated as of the
-------------------------
Effective Date, executed and delivered by the Borrower, substantially in the
form of Exhibit F-1 hereto, as amended, supplemented, amended and restated or
-----------
otherwise modified from time to time.
"Borrower Security Agreement" means the Security Agreement, dated as of the
---------------------------
Effective Date, executed and delivered by the Borrower, substantially in the
form of Exhibit G-1 hereto, as amended, supplemented, amended and restated or
-----------
otherwise modified from time to time.
"Borrowing" means the Loans of the same type and, in the case of Fixed Rate
---------
Loans, having the same Interest Period made by all Lenders required to make such
Loans on the same Business Day and pursuant to the same Borrowing Request in
accordance with Section 2.1.
-----------
"Borrowing Request" means a Loan request and certificate duly executed by
-----------------
an Authorized Officer of the Borrower, substantially in the form of Exhibit B
---------
hereto.
"Business Day" means
------------
(a) any day which is neither a Saturday or Sunday nor a legal holiday
on which banks are authorized or required to be closed in New York, New
York; and
(b) relative to the making, continuing, prepaying or repaying of any
LIBO Rate Loans, any day which is a Business Day described in clause (a)
----------
above and which is also a day on which dealings in Dollars are carried on
in the interbank eurodollar market of the Administrative Agent's LIBOR
Office.
"Capital Expenditures" means, for any period, the aggregate amount of all
--------------------
expenditures of the Borrower and its Restricted Subsidiaries for fixed or
capital assets made during such period which, in accordance with GAAP, would be
classified as capital expenditures.
"Capital Stock" means, with respect to any Person, any and all shares,
-------------
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's capital, whether now outstanding or
issued after the Effective Date.
"Capitalized Lease Liabilities" means all monetary obligations of the
-----------------------------
Borrower or any of its Restricted Subsidiaries under any leasing or similar
arrangement which, in accordance with GAAP, would be classified as capitalized
leases, and, for purposes of this Agreement and each other Loan Document, the
amount of such obligations shall be the capitalized amount thereof.
"Cash Equivalent Investment" means, at any time:
--------------------------
(a) any direct obligation of (or guaranteed by) the United States
Government (or any agency or instrumentality thereof) maturing not more
than one year after such time;
-7-
<PAGE>
(b) commercial paper, maturing not more than nine months from the
date of issue, which is issued by
(i) a corporation (other than an Affiliate of any Obligor)
organized under the laws of any state of the United States or of the
District of Columbia and rated A-1 by S&P or P-1 by Moody's, or
(ii) any Lender (or its holding company);
(c) any certificate of deposit or bankers acceptance, maturing not
more than one year after such time, which is issued by either
(i) any bank organized under the laws of the United States (or
any State thereof) and which has (x) a credit rating of Aa or better
from Moody's or a comparable rating from S&P and (y) a combined
capital and surplus greater than $500,000,000 (or the Dollar
equivalent thereof); or
(ii) any Lender;
(d) any repurchase agreement entered into with any Lender or any
commercial banking institution of the stature referred to in clause (c)(i)
-------------
which
(i) is secured by a fully perfected security interest in any
obligation of the type described in clause (a), and
----------
(ii) has a market value at the time such repurchase agreement is
entered into of not less than 100% of the repurchase obligation of
such commercial banking institution thereunder; or
(e) money market funds that invest substantially all of their assets
in the investments described in clauses (a) through (d) above.
----------- ---
"CD Rate" means, relative to any Interest Period for CD Rate Loans, the
-------
rate of interest determined by the Administrative Agent to be the arithmetic
average (rounded upwards, if necessary, to the nearest 1/16 of 1%) of the
prevailing rates per annum bid at 12:00 noon, New York City time (or as soon
thereafter as practicable), on the first day of such Interest Period by two or
more certificate of deposit dealers of recognized standing located in New York,
New York for the purchase at face value from the Administrative Agent of its
certificates of deposit in an amount approximately equal to the CD Rate Loan
being made or maintained by the Administrative Agent to which such Interest
Period applies and having a maturity approximately equal to such Interest
Period.
-8-
<PAGE>
"CD Rate Loan" means a Loan bearing interest, at all times during an
------------
Interest Period applicable to such Loan, at a fixed rate determined by reference
to the CD Rate (Reserve Adjusted).
"CD Rate (Reserve Adjusted)" means, relative to any Loan to be made,
--------------------------
continued or maintained as, or converted into, a CD Rate Loan for any Interest
Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/16 of
1%) determined pursuant to the following formula:
CDR(RA) = CDR + AR
------------------
(1.00 - CDRR)
where:
CDR(RA) = CD Rate (Reserve Adjusted)
CDR = CD Rate
CDRR = CD Reserve Requirement
AR = Assessment Rate
The CD Rate (Reserve Adjusted) for any Interest Period for CD Rate Loans will be
determined by the Administrative Agent on the basis of the CD Reserve
Requirement and Assessment Rate in effect on, and the applicable rates furnished
to and received by the Administrative Agent on, the first day of such Interest
Period.
"CD Reserve Requirement" means, relative to any Interest Period for CD Rate
----------------------
Loans, a percentage (expressed as a decimal) equal to the maximum aggregate
reserve requirements (including all basic, supplemental, marginal and other
reserves and taking into account any transitional adjustments or other scheduled
changes in reserve requirements), specified under regulations issued from time
to time by the F.R.S. Board and then applicable to the class of banks of which
the Administrative Agent is a member, on deposits of the type used as a
reference in determining the CD Rate and having a maturity approximately equal
to such Interest Period.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
------
Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
-------
Liability Information System List.
"Change in Control" means
-----------------
(a) any "person" or "group" (as such terms are used in Rule 13d-5
under the Exchange Act, and Sections 13(d) and 14(d) of the Exchange Act)
of persons (other than John Malone, the legal heirs of John Malone or any
Primestar Partner) becomes, directly or indirectly, in a single transaction
or in a related series of transactions by way of merger, consolidation, or
other business combination or otherwise, the "beneficial owner" (as
-9-
<PAGE>
such term is used in Rule 13d-3 of the Exchange Act) of 25% or more of the
outstanding shares of Voting Stock of the Borrower; or
(b) during any consecutive two-year period calculated in accordance
with GAAP, individuals who at the beginning of such period constituted the
board of directors of the Borrower (together with any new directors whose
election by such board of directors 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.
"Closing Date" means the date of the initial Credit Extension, not to be
------------
later than April 30, 1998.
"Code" means the Internal Revenue Code of 1986, and the regulations
----
thereunder, in each case as amended, reformed or otherwise modified from time to
time.
"Collateral Subsidiary" is defined in clause (b) of Section 7.1.8.
--------------------- ---------- -------------
"Commitment" means, as the context may require, the Revolving Loan
----------
Commitment, the Term Loan Commitment, the Letter of Credit Commitment or the
Swing Line Loan Commitment.
"Commitment Amount" means, as the context may require, the Revolving Loan
-----------------
Commitment Amount, the Term Loan Commitment Amount, the Letter of Credit
Commitment Amount or the Swing Line Loan Commitment Amount.
"Commitment Termination Date" means, as the context may require, the
---------------------------
Revolving Loan Commitment Termination Date or the Term Loan Commitment
Termination Date.
"Commitment Termination Event" means
----------------------------
(a) the occurrence of any Event of Default described in clauses (a)
-----------
through (d) of Section 8.1.9; or
--- -------------
(b) the occurrence and continuance of any other Event of Default and
either
(i) the declaration of all or any portion of the Loans to be
due and payable pursuant to Section 8.3, or
-----------
-10-
<PAGE>
(ii) the giving of notice by the Administrative Agent, acting at
the direction of the Required Lenders, to the Borrower that the
Commitments have been terminated.
"Compliance Certificate" means a certificate duly completed and executed by
----------------------
an Authorized Officer of the Borrower, substantially in the form of Exhibit L
---------
hereto, as amended, supplemented, amended and restated or otherwise modified
from time to time, together with such changes thereto as the Administrative
Agent may from time to time reasonably request for the purpose of monitoring the
Borrower's compliance with the financial covenants contained herein.
"Concentration Account Agreement" means any concentration account agreement
-------------------------------
executed and delivered by a concentration account bank, in each case
substantially in the form of Exhibit E to a Security Agreement, as amended,
supplemented, amended and restated or otherwise modified from time to time.
"Consent and Agreement" means any consent and agreement executed and
---------------------
delivered in connection with the Contract Assignment Agreement, each
substantially in the form of Exhibit J hereto, as amended, supplemented, amended
---------
and restated or otherwise modified from time to time.
"Contingent Liability" means any agreement, undertaking or arrangement by
--------------------
which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to, or otherwise to invest in, a
debtor, or otherwise to assure a creditor against loss) the Indebtedness of any
other Person (other than by endorsements of instruments in the course of
collection), or guarantees the payment of dividends or other distributions upon
the shares of any other Person. The amount of any Person's obligation under any
Contingent Liability shall (subject to any limitation set forth therein) be
deemed to be the outstanding amount of the debt, obligation or other liability
guaranteed thereby.
"Continuation/Conversion Notice" means a notice of continuation or
------------------------------
conversion and certificate duly executed by an Authorized Officer of the
Borrower, substantially in the form of Exhibit D hereto.
---------
"Contract Assignment Agreement" means a contract assignment agreement,
-----------------------------
executed and delivered by the Borrower, substantially in the form of Exhibit I
---------
hereto, as amended, supplemented, amended and restated or otherwise modified
from time to time.
"Contractual Obligation", as applied to any Person, means any provision of
----------------------
any Securities issued by that Person or any indenture, mortgage, deed of trust,
security agreement, pledge agreement, guaranty, contract, undertaking, agreement
or instrument to which that Person is a party or by which it or any of its
properties is bound, or to which it or any of its properties is subject.
-11-
<PAGE>
"Controlled Group" means all members of a controlled group of corporations
----------------
and all members of a controlled group of trades or businesses (whether or not
incorporated) under common control which, together with the Borrower, are
treated as a single employer under Section 414(b) or 414(c) of the Code or
Section 4001 of ERISA.
"Copyright Security Agreement" means any copyright security agreement
----------------------------
executed and delivered by the Borrower or a Restricted Subsidiary, as the case
may be, in each case substantially in the form of Exhibit C to a Security
Agreement, as amended, supplemented, amended and restated or otherwise modified
from time to time.
"Covered Taxes" means any Taxes other than Taxes imposed with respect to
-------------
any Agent or any Lender by reason of a connection between such Agent or such
Lender and the relevant taxing jurisdiction, including a connection arising from
such Person being or having been a citizen or resident of such jurisdiction, or
having or having had a permanent establishment or fixed place of business or
being or having been engaged in business therein, but excluding a connection
arising solely from such Person having executed, delivered, performed its
obligations or received any payment under, or enforced, this Agreement or any
other Loan Document. Taxes shall be considered Covered Taxes if such Taxes are
imposed on (i) the Agent solely by reason of a connection between a Lender (but
not the Agent) and the relevant taxing jurisdiction or (ii) a Lender solely by
reason of a connection between the Agent or any other Lender (but not such
Lender) and the relevant taxing jurisdiction.
"Credit Extension" means, as the context may require,
----------------
(a) the making of a Loan by a Lender; or
(b) the issuance of any Letter of Credit, or the extension of any
Stated Expiry Date of any existing Letter of Credit, by the Issuer and
participation in such Letter of Credit by the Lenders pursuant to the terms
of this Agreement.
The conversion or continuation of any Loan shall not constitute a new Credit
Extension.
"Credit Extension Request" means, as the context may require, any Borrowing
------------------------
Request or Issuance Request.
"Default" means any Event of Default or any condition, occurrence or event
-------
which, after notice or lapse of time or both, would constitute an Event of
Default.
"Disbursement" is defined in Section 2.6.2.
------------ -------------
"Disbursement Date" is defined in Section 2.6.2.
----------------- -------------
-12-
<PAGE>
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
-------------------
Schedule I, as it may be amended, supplemented, amended and restated or
- ----------
otherwise modified from time to time by the Borrower with the written consent of
the Administrative Agent and the Required Lenders.
"Documentation Agent" is defined in the preamble and includes each other
------------------- --------
Person as shall have subsequently been appointed as the successor Documentation
Agent pursuant to Section 9.4.
-----------
"Dollar" and the sign "$" mean lawful money of the United States.
------ -
"Domestic Office" means, relative to any Lender, the office of such Lender
---------------
designated as such Lender's "Domestic Office" opposite its name on Schedule II
-----------
hereto or in a Lender Assignment Agreement, or such other office of a Lender (or
any successor or assign of such Lender) within the United States as may be
designated from time to time by notice from such Lender, as the case may be, to
each other Person party hereto.
"EBITDA" means, for the Borrower and its Restricted Subsidiaries, for any
------
applicable period, the sum (without duplication) for such period of:
(a) Net Income,
plus
- ----
(b) the amount deducted in determining Net Income representing
amortization (including amortization with respect to goodwill, deferred
financing costs, other non-cash interest income and expense and all other
intangible assets),
plus
- ----
(c) the amount deducted in determining Net Income of all federal,
state and local income taxes (whether paid in cash or deferred),
plus
- ----
(d) Total Interest Expense plus, without duplication, any non-cash
interest expense,
plus
- ----
(e) the amount deducted in determining Net Income representing
depreciation of assets,
plus
- ----
-13-
<PAGE>
(f) the amount deducted in determining Net Income representing other
non-cash expenses.
"Effective Date" means the date this Agreement becomes effective pursuant
--------------
to Section 10.8.
------------
"Environmental Laws" means all applicable federal, state or local statutes,
------------------
laws, ordinances, codes, rules, regulations and guidelines (including consent
decrees and administrative orders) relating to public health and safety and
protection of the environment.
"Equity Interests", with respect to any Person, means any Capital Stock
----------------
issued by such Person, regardless of class or designation, or any limited or
general partnership interest in such Person, regardless of designation, and all
warrants, options, purchase rights, conversion or exchange rights, voting
rights, calls or claims of any character with respect thereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended, and any successor statute thereto of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA also refer to any successor sections thereto.
"Event of Default" is defined in Section 8.1.
---------------- -----------
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Exemption Certificate" is defined in clause (b)(ii) of Section 4.6.
--------------------- -------------- -----------
"Existing Credit Agreement" is defined in the third recital.
------------------------- ----- -------
"Existing Lenders" is defined in the third recital.
---------------- ----- -------
"Federal Funds Rate" means, for any period, a fluctuating rate of interest
------------------
per annum equal for each day during such period to:
(a) the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank of
New York; or
(b) if such rate is not so published for any day which is a Business
Day, the average of the quotations for such day on such transactions
received by the Administrative Agent from three federal funds brokers of
recognized standing selected by it.
-14-
<PAGE>
"Fiscal Quarter" means a quarter ending on the last day of March, June,
--------------
September and December.
"Fiscal Year" means any period of twelve consecutive calendar months ending
-----------
on December 31; references to a Fiscal Year with a number corresponding to any
calendar year (e.g., the "1997 Fiscal Year") refer to the Fiscal Year ending on
----
December 31 of such calendar year.
"Fixed Rate Loan" means any CD Rate Loan or any LIBO Rate Loan.
---------------
"F.R.S. Board" means the Board of Governors of the Federal Reserve System
------------
or any successor thereto.
"GAAP" is defined in Section 1.4.
---- -----------
"Governmental Approval" means any action, authorization, consent, approval,
---------------------
license, lease, ruling, permit, tariff, rate, certification, exemption, filing,
variance, claim, order, judgment, decree, publication, notices to, declarations
of or with or registration by or with any Regulatory Authority.
"Governmental Rule" means any statute, law, regulation, ordinance, rule,
-----------------
judgment, order, decree, permit, concession, grant, franchise, license,
agreement, directive, guideline, policy, requirement, or other governmental
authorization including any conditions thereof, restriction or any similar form
of published or otherwise known decision of or determination by, or any
interpretation or administration of any of the foregoing by, any Regulatory
Authority, whether now or hereafter in effect (including any Environmental Law).
"Hazardous Material" means:
------------------
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource Conservation
and Recovery Act, as amended; or
(c) any pollutant or contaminant or hazardous, dangerous or toxic
chemical, material or substance (including any petroleum product) within
the meaning of any other applicable federal, state or local law,
regulation, ordinance or requirement (including consent decrees and
administrative orders) relating to or imposing liability or standards of
conduct concerning any hazardous, toxic or dangerous waste, substance or
material, all as amended.
"Hedging Obligations" means, with respect to any Person, all liabilities of
-------------------
such Person under currency exchange agreements, interest rate swap agreements,
interest rate cap agreements
-15-
<PAGE>
and interest rate collar agreements, and all other agreements or arrangements
designed to protect such Person against fluctuations in interest rates or
currency exchange rates.
"herein", "hereof", "hereto", "hereunder" and similar terms contained in
------ ------ ------ ---------
this Agreement or any other Loan Document refer to this Agreement or such other
Loan Document, as the case may be, as a whole and not to any particular Section,
paragraph or provision of this Agreement or such other Loan Document.
"Impermissible Qualification" means, relative to the opinion or
---------------------------
certification of any independent public accountant as to any financial statement
of the Borrower, any qualification or exception to such opinion or
certification:
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of matters
relevant to such financial statement; or
(c) which relates to the treatment or classification of any item in
such financial statement and which, as a condition to its removal, would
require an adjustment to such item the effect of which would be to cause
the Borrower to be in default of any of its obligations under Section
-------
7.2.4.
-----
"including" and "include" mean including without limiting the generality of
--------- -------
any description preceding such term, and, for purposes of this Agreement and
each other Loan Document, the parties hereto agree that the rule of ejusdem
-------
generis shall not be applicable to limit a general statement, which is followed
- -------
by or referable to an enumeration of specific matters, to matters similar to the
matters specifically mentioned.
"Indebtedness" of any Person means, without duplication:
------------
(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments;
(b) all obligations, contingent or otherwise, relative to the face
amount of all letters of credit, whether or not drawn, and banker's
acceptances issued for the account of such Person;
(c) all obligations of such Person as lessee under leases which have
been or should be, in accordance with GAAP, recorded as Capitalized Lease
Liabilities;
(d) net liabilities of such Person under all Hedging Obligations;
-16-
<PAGE>
(e) whether or not so included as liabilities in accordance with
GAAP, all obligations of such Person to pay the deferred purchase price of
property or services, and indebtedness (excluding prepaid interest thereon)
secured by a Lien on property owned or being purchased by such Person
(including indebtedness arising under conditional sales or other title
retention agreements), whether or not such indebtedness shall have been
assumed by such Person or is limited in recourse; and
(f) all Contingent Liabilities of such Person in respect of any of
the foregoing.
For all purposes of this Agreement, the Indebtedness of any Person shall include
the recourse Indebtedness of any partnership or joint venture in which such
Person is a general partner or a joint venturer.
"Indemnified Liabilities" is defined in Section 10.4.
----------------------- ------------
"Indemnified Parties" is defined in Section 10.4.
------------------- ------------
"Interest Period" means, relative to any Fixed Rate Loan, the period
---------------
beginning on (and including) the date on which such Fixed Rate Loan is made or
continued as, or converted into, a Fixed Rate Loan pursuant to Section 2.3 or
-----------
2.4 and shall end on (but exclude) the day which is, in the case of a CD Rate
- ---
Loan, 30, 60 or 90 (or if available to all relevant Lenders and at the
discretion of the Administrative Agent, 180) days thereafter, or which, in the
case of a LIBO Rate Loan, numerically corresponds to such date one, two, three
or six (or if available to all relevant Lenders and at the discretion of the
Administrative Agent, twelve) months thereafter (or, if such month has no
numerically corresponding day, on the last Business Day of such month), as the
Borrower may select in its relevant notice pursuant to Section 2.3 or 2.4;
----------- ---
provided, however, that:
- -------- -------
(a) the Borrower shall not be permitted to select Interest Periods to
be in effect at any one time which have expiration dates occurring on more
than fifteen different dates;
(b) if such Interest Period would otherwise end on a day which is not
a Business Day, such Interest Period shall end on the next following
Business Day (unless such next following Business Day is the first Business
Day of a calendar month, in which case such Interest Period shall end on
the Business Day next preceding such numerically corresponding day); and
(c) no Interest Period for any Loan (i) may be selected for any Loan
made prior to a date following the Effective Date agreed to in writing by
the Borrower and the Administrative Agent which would end after such date
and (ii) may end later than the Stated Maturity Date.
-17-
<PAGE>
"Investment" means, relative to any Person:
----------
(a) any loan or advance made by such Person to any other Person
(excluding commission, travel, petty cash and similar advances to officers
and employees made in the ordinary course of business);
(b) any Contingent Liability of such Person incurred in connection
with loans or advances described in clause (a); and
----------
(c) any ownership or similar interest held by such Person in any
other Person.
The amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon and shall, if made by
the transfer or exchange of property other than cash, be deemed to have been
made in an original principal or capital amount equal to the fair market value
of such property at the time of such Investment.
"Issuance Request" means a Letter of Credit request and certificate duly
----------------
executed by an Authorized Officer of the Borrower, substantially in the form of
Exhibit C hereto.
- ---------
"Issuer" means Scotiabank in its capacity as issuer of the Letters of
------
Credit. Scotiabank may act or decline to act as the Issuer in its sole
discretion. At the request of Scotiabank, another Lender or an Affiliate of
Scotiabank may issue one or more Letters of Credit hereunder.
"Law Change" is defined in clause (b) of Section 4.6.
---------- ---------- -----------
"Lender Assignment Agreement" means a lender assignment agreement,
---------------------------
substantially in the form of Exhibit E hereto.
---------
"Lenders" is defined in the preamble and, in addition, shall include any
------- --------
commercial bank or other financial institution that becomes a Lender pursuant to
Section 10.11.1.
- ---------------
"Lender's Environmental Liability" means any and all losses, liabilities,
--------------------------------
obligations, penalties, claims, litigation, demands, defenses, costs, judgments,
suits, proceedings, damages (including consequential damages), disbursements or
expenses of any kind or nature whatsoever (including reasonable attorneys' fees
at trial and appellate levels and experts' fees and disbursements and expenses
incurred in investigating, defending against or prosecuting any litigation,
claim or proceeding) which may at any time be imposed upon, incurred by or
asserted or awarded against any Lender or any of such Lender's parent and
subsidiary corporations, and their Affiliates, shareholders, directors,
officers, employees, and agents in connection with or arising from:
(a) any Hazardous Material on, in, under or affecting all or any
portion of any property of the Borrower or any of its Subsidiaries, the
groundwater thereunder, or any
-18-
<PAGE>
surrounding areas thereof to the extent caused by Releases from the
Borrower's or any of the Borrower's Subsidiaries' or any of their
respective predecessors' properties;
(b) any misrepresentation, inaccuracy or breach of any warranty,
contained or referred to in Section 6.13;
------------
(c) any violation or claim of violation by the Borrower or any of its
Subsidiaries of any Environmental Laws; or
(d) the imposition of any lien for damages caused by or the recovery
of any costs for the cleanup, release or threatened release of Hazardous
Material by the Borrower or any of its Subsidiaries, or in connection with
any property owned or formerly owned by the Borrower or any of its
Subsidiaries.
"Letter of Credit" is defined in Section 2.1.2.
---------------- -------------
"Letter of Credit Commitment" means, with respect to the Issuer, the
---------------------------
Issuer's obligation to issue Letters of Credit pursuant to Section 2.1.2 and,
-------------
with respect to each of the other Lenders, the obligations of each such Lender
to participate in such Letters of Credit pursuant to Section 2.6.1.
-------------
"Letter of Credit Commitment Amount" means, on any date, $100,000,000, as
----------------------------------
such amount may be permanently reduced from time to time pursuant to Section
-------
2.2.
- ---
"Letter of Credit Outstandings" means, on any date, an amount equal to the
-----------------------------
sum of:
(a) the then aggregate amount which is undrawn and available under
all issued and outstanding Letters of Credit,
plus
- ----
(b) the then aggregate amount of all unpaid and outstanding
Reimbursement Obligations.
"LIBO Rate" means, relative to any Interest Period for LIBO Rate Loans, the
---------
rate of interest determined as follows:
(a) on the date two Business Days prior to the first day of such
Interest Period, the Administrative Agent shall obtain the offered
quotation(s) that appear on the Reuter's Screen for Dollar deposits for a
period comparable to such Interest Period. If at least two such offered
quotations appear on the Reuter's Screen, the LIBO Rate shall be the
arithmetic average (rounded upwards, if necessary, to the nearest 1/16th of
1%) of such offered quotations, as determined by the Administrative Agent;
or
-19-
<PAGE>
(b) if the Reuter's Screen is not available or has been discontinued,
the LIBO Rate shall be the rate per annum which the Administrative Agent in
good faith determines to be the arithmetic average (rounded as aforesaid)
of the offered quotations for Dollar deposits in an amount comparable to
the Administrative Agent's share of the relevant amount in respect of which
the LIBO Rate is being determined for a period comparable to the relevant
LIBO Interest Period that leading banks in New York City selected by the
Administrative Agent are quoting at 11:00 a.m. on the date two Business
Days prior to the first day of such Interest Period in the New York
Interbank Market to major international banks.
"LIBO Rate Loan" means a Loan bearing interest, at all times during an
--------------
Interest Period applicable to such Loan, at a fixed rate of interest determined
by reference to the LIBO Rate (Reserve Adjusted).
"LIBO Rate (Reserve Adjusted)" means, relative to any Loan to be made,
----------------------------
continued or maintained as, or converted into, a LIBO Rate Loan for any Interest
Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/16th
of 1%) determined pursuant to the following formula:
LIBO Rate = LIBO Rate
-------------------------------------
(Reserve Adjusted) 1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate
Loans will be determined by the Administrative Agent on the basis of the LIBOR
Reserve Percentage in effect, and the applicable rates furnished to and received
by the Administrative Agent from Scotiabank two Business Days before, the first
day of such Interest Period.
"LIBOR Office" means, relative to any Lender, the office of such Lender
------------
designated as such Lender's "LIBOR Office" opposite its name on Schedule II
-----------
hereto or in a Lender Assignment Agreement, or such other office of a Lender as
designated from time to time by notice from such Lender to the Borrower and the
Administrative Agent, whether or not outside the United States, which shall be
making or maintaining LIBO Rate Loans of such Lender hereunder.
"LIBOR Reserve Percentage" means, relative to any Interest Period for LIBO
------------------------
Rate Loans, the reserve percentage (expressed as a decimal) equal to the maximum
aggregate reserve requirements (including all basic, emergency, supplemental,
marginal and other reserves and taking into account any transitional adjustments
or other scheduled changes in reserve requirements) specified under regulations
issued from time to time by the F.R.S. Board and then applicable to assets or
liabilities consisting of or including "Eurocurrency Liabilities", as currently
defined in Regulation D of the F.R.S. Board, and applicable to all Lenders,
having a term approximately equal or comparable to such Interest Period.
-20-
<PAGE>
"Lien" means any security interest, mortgage, pledge, hypothecation,
----
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property, or other priority or preferential
arrangement of any kind or nature whatsoever, to secure payment of a debt or
performance of an obligation.
"Loan" means, as the context may require, a Revolving Loan, a Term Loan or
----
a Swing Line Loan.
"Loan Documents" collectively means this Agreement, the Notes, the Letters
--------------
of Credit, each Rate Protection Agreement relating to Hedging Obligations of the
Borrower or any of its Subsidiaries, each Borrowing Request, each Issuance
Request, the Borrower Pledge Agreement, the Subsidiary Pledge Agreement, the
Borrower Security Agreement, the Subsidiary Security Agreement, each Patent
Security Agreement, each Trademark Security Agreement, each Copyright Security
Agreement, the Contract Assignment Agreement, each Consent and Agreement, the
Concentration Account Agreement, each Subsidiary Guaranty, the Assumption and
Amendment Agreement and each other agreement, certificate, document or
instrument delivered in connection with this Agreement and such other
agreements, whether or not specifically mentioned herein or therein.
"Loral" means Space Systems/Loral, Inc., a New York corporation.
-----
"Material Adverse Effect" means a material adverse effect on (a) the
-----------------------
financial condition, operations, assets, business or properties of (i) the
Borrower, (ii) the Borrower and its Subsidiaries, taken as a whole, or (iii) the
Borrower and its Restricted Subsidiaries, taken as a whole, (b) the rights and
remedies of the Administrative Agent or any Secured Party under any Loan
Document, (c) the ability of the Borrower or any other Obligor to perform its
Obligations under any Loan Document or Transaction Document to which it is or
becomes a party or (d) the perfection or priority of the Secured Parties' Liens
upon the collateral described in any Loan Document.
"Monthly Payment Date" means the twentieth day of each calendar month, or,
--------------------
if any such day is not a Business Day, the next succeeding Business Day.
"Moody's" means Moody's Investors Service, Inc.
-------
"Net Disposition Proceeds" means, with respect to a Permitted Disposition
------------------------
or any other disposition of the assets of the Borrower or any of its
Subsidiaries, the excess of
(a) the gross cash proceeds received by the Borrower or any of its
Subsidiaries from any Permitted Disposition (including the receipt of (i)
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 and (ii), after payment in full of all
obligations under the Primestar Partnership Credit Agreement, damages or
-21-
<PAGE>
other amounts due under the Satellite Construction Agreement (including the
refund of the full purchase price of any Tempo Satellite which has not been
delivered pursuant to the terms thereof)) and any cash payments received in
respect of promissory notes or other non-cash consideration delivered to
the Borrower or such Subsidiary in respect of any Permitted Disposition or
other disposition,
less
- ----
(b) the sum of
(i) all reasonable and customary fees and expenses with respect
to legal, investment banking, brokerage and accounting and other
professional fees, sales commissions and disbursements and all other
reasonable fees, expenses and charges, in each case actually incurred
in connection with such Permitted Disposition other than such amounts
which have been paid to Affiliates of the Borrower in violation of
Section 7.2.13,
--------------
(ii) all taxes and other governmental costs and expenses
actually paid or estimated by the Borrower (in good faith) to be
payable in cash in connection with such Permitted Disposition;
provided, however, that if, after the payment of all taxes with
-------- -------
respect to such Permitted Disposition, the amount of estimated taxes,
if any, exceeded the tax amount actually paid in cash in respect of
such Permitted Disposition, the Commitment Amount shall be
automatically reduced by the aggregate amount of such excess, pursuant
to clause (b) of Section 2.2.2,
---------- -------------
(iii) payments made by the Borrower or any of its Subsidiaries
to retire Indebtedness secured by a Lien on the assets subject to such
disposition (other than the Loans) of the Borrower or any of its
Subsidiaries where payment of such Indebtedness is required in
connection with such Permitted Disposition, and
(iv) an amount of such proceeds, which, at the option of the
Borrower and so long as no Default shall have occurred and be
continuing, the Borrower uses or causes the applicable Subsidiary to
use such proceeds to purchase substantially similar assets useful in
the business of the Borrower or such Subsidiary (with such assets or
interests collectively referred to as "Qualified Assets") within 345
----------------
days after the consummation (and with the proceeds) of such sale,
conveyance or disposition, and in the event the Borrower or such
Subsidiary elects to exercise its right to purchase Qualified Assets
with the Net Disposition Proceeds pursuant to this clause, the
Borrower shall deliver a certificate of an Authorized Officer to the
Administrative Agent within 30 days following the receipt of Net
Disposition Proceeds setting forth the amount of the Net Disposition
Proceeds which the Borrower or such Subsidiary expects to use to
purchase Qualified Assets during such 345-day period.
-22-
<PAGE>
If and to the extent that the Borrower or such Subsidiary has elected to
reinvest Net Disposition Proceeds as permitted above, then on the date which is
345 days after the relevant sale, conveyance or disposition, the Borrower shall
deliver a certificate of an Authorized Officer to the Administrative Agent
certifying as to the amount and use of such Net Disposition Proceeds actually
used to purchase Qualified Assets. To the extent such Net Disposition Proceeds
are not so used to purchase Qualified Assets then the Commitment Amount shall be
automatically reduced by an amount equal to the aggregate amount of such
proceeds not so used to purchase Qualified Assets.
"Net Income" means, for any period, the aggregate of all amounts (exclusive
----------
of all amounts in respect of any non-cash extraordinary gains and any non-cash
extraordinary losses) which, in accordance with GAAP, would be included as net
income on the consolidated financial statements of the Borrower and its
Restricted Subsidiaries for such period.
"Non-U.S. Lender" means any Lender that is not a U.S. Person.
---------------
"Note" means, as the context may require, a Revolving Note, a Term Note or
----
a Swing Line Note.
"Obligations" means all obligations (monetary or otherwise, whether
-----------
absolute or contingent, matured or unmatured, direct or indirect, choate or
inchoate, sole, joint, several or joint and several, due or to become due,
heretofore or hereafter contracted or acquired) of the Borrower and each other
Obligor arising under or in connection with this Agreement and each other Loan
Document.
"Obligor" means, as the context may require, the Borrower, each Restricted
-------
Subsidiary and any other Person (other than a Secured Party) to the extent such
Person is obligated under this Agreement or any other Loan Document.
"Organic Document" means, relative to any Obligor, as applicable, its
----------------
certificate of incorporation, by-laws, certificate of partnership, partnership
agreement, certificate of formation, limited liability agreement and all
shareholder agreements, voting trusts and similar arrangements applicable to any
of such Obligor's partnership interests, limited liability company interests or
authorized shares of Capital Stock.
"Original Credit Agreement" is defined in the second recital.
------------------------- ------ -------
"Original Lenders" is defined in the second recital.
---------------- ------ -------
"Participant" is defined in Section 10.11.2.
----------- ---------------
-23-
<PAGE>
"Partners" means, collectively, TSAT, Time Warner Entertainment Company,
--------
L.P., Advance/Newhouse Partnership, Comcast Corporation, Cox Communications,
Inc., MediaOne of Delaware, Inc. and GE American Communications, Inc.
"Patent Security Agreement" means any patent security agreement executed
-------------------------
and delivered by the Borrower or a Restricted Subsidiary, as the case may be, in
each case substantially in the form of Exhibit A to a Security Agreement, as
amended, supplemented, amended and restated or otherwise modified from time to
time.
"Payment Date" means (a) until such time as there is no requirement in any
------------
Subordinated Debt Document that interest thereunder be paid other than semi-
annually, a Monthly Payment Date, and (b) thereafter, a Quarterly Payment Date.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
----
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is defined in Section
------------
3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer
plan as defined in Section 4001(a)(3) of ERISA), and to which the Borrower or
any corporation, trade or business that is, along with the Borrower, a member of
a Controlled Group, may have liability, including any liability by reason of
having been a substantial employer within the meaning of Section 4063 of ERISA
at any time during the preceding five years, or by reason of being deemed to be
a contributing sponsor under Section 4069 of ERISA.
"Percentage" means, relative to any Lender, the applicable percentage
----------
relating to Revolving Loans or Term Loans, as the case may be, as set forth
opposite its name on Schedule II hereto under the applicable column heading or
-----------
set forth in a Lender Assignment Agreement, as such percentage may be adjusted
from time to time pursuant to Lender Assignment Agreement(s) executed by such
Lender and its Assignee Lender(s) and delivered pursuant to Section 10.11.1.
---------------
"Permitted Disposition" means a sale, disposition or other conveyance of
---------------------
assets by the Borrower or any of its Subsidiaries in accordance with the terms
of clause (iv) of Section 7.2.11 or as otherwise agreed to by the Required
----------- --------------
Lenders.
"Permitted Holder" shall have the meaning set forth in the Senior
----------------
Subordinated Notes Indenture and the Senior Subordinated Discount Notes
Indenture.
"Permitted Refinancing" means, relative to any Indebtedness, any other
---------------------
Indebtedness which is incurred to repay and retire in full such refinanced
Indebtedness and all other monetary obligations in respect of such refinanced
Indebtedness; provided, however, that
-------- -------
(a) other than with respect to Subordinated Debt, such refinancing
Indebtedness shall not be incurred in an original principal amount which
exceeds the aggregate amount
-24-
<PAGE>
on the date of such refinancing of the outstanding amount of such
refinanced Indebtedness plus the then aggregate amount of all such other
monetary obligations in respect thereof;
(b) the weighted average life of such refinancing Indebtedness shall
not be less than the weighted average life on the date of such refinancing
of such refinanced Indebtedness;
(c) other than reasonable and customary fees, discounts and
commissions payable in connection with the refinancing Indebtedness, the
refinancing Indebtedness shall not impose on the Borrower or any Restricted
Subsidiary rates of interest, prepayment charges or other fees or amounts
that are more than 2% per annum higher that the highest respective amounts
thereof payable in respect of such refinanced Indebtedness excluding the
effect of any equity security issued in connection with such Indebtedness;
(d) the refinancing Indebtedness shall not contain terms and
conditions that, taken as a whole, make the refinancing Indebtedness
materially more burdensome to the Borrower or Restricted Subsidiaries, or,
except in the case of the refinancing of Indebtedness permitted under
clause (c) of Section 7.2.2, materially more beneficial to the holders of
---------- -------------
the refinancing Indebtedness, than the terms in effect on the date of such
refinancing of the refinanced Indebtedness (provided that the Lenders
--------
acknowledge and agree that if the covenants contained in any refinancing
Indebtedness in respect of the Senior Subordinated Credit Agreement are
substantially similar to the covenants contained in Article 6A of the
Senior Subordinated Credit Agreement, such covenants shall be acceptable to
the Lenders); and
(e) if such refinanced Indebtedness is Subordinated Debt, the
refinancing Indebtedness shall not contain rights and remedies that, taken
as a whole, are materially more detrimental to the Lenders or materially
more beneficial to the holders of the refinancing Indebtedness, than the
terms in effect on the date of such refinancing of the refinanced
Indebtedness.
"Person" means any natural person, corporation, limited liability company,
------
partnership, joint venture, joint stock company, firm, association, trust or
unincorporated organization, government, governmental agency, court or any other
legal entity, whether acting in an individual, fiduciary or other capacity.
"Plan" means any Pension Plan or Welfare Plan.
----
"Pledge Agreement" means, as the context may require, the Borrower Pledge
----------------
Agreement and/or the Subsidiary Pledge Agreement.
-25-
<PAGE>
"Pledged Subsidiary" means, at any time, each Subsidiary in respect of
------------------
which the Administrative Agent has been granted, at such time, a security
interest in and to, or a pledge of, (i) any of the issued and outstanding shares
of Capital Stock of such Subsidiary, or (ii) any intercompany notes of such
Subsidiary owing to the Borrower or another Subsidiary of the Borrower.
"PRIMESTAR Distribution Service" means the distribution of the PRIMESTAR
------------------------------
Programing as described in the Proxy.
"Primestar Partnership" means PRIMESTAR Partners, L.P., a Delaware limited
---------------------
partnership.
"Primestar Partnership Agreement" means the Limited Partnership Agreement
-------------------------------
of the Primestar Partnership (then known as K Prime Partners, L.P.), dated as of
February 8, 1990, as amended.
"Primestar Partnership Credit Agreement" means the bank credit facility
--------------------------------------
obtained by the Primestar Partnership to finance advances to Tempo for payments
due in respect of the Tempo Satellite under the Satellite Construction
Agreement, and supported by letters of credit arranged for by Affiliates of the
Partners.
"Pro-Forma Balance Sheet" means the primary condensed pro forma combined
----------------------- --- -----
balance sheet of the Borrower and its Subsidiaries, as of September 30, 1997,
delivered pursuant to Section 5.1.4, certified by the chief financial or
-------------
accounting Authorized Officer of the Borrower, giving effect to the consummation
of all the transactions contemplated by this Agreement and reflecting the
resulting capital structure (debt and equity) of the Borrower.
"Pro-Forma Debt Service" means, on any date of determination, in respect of
----------------------
the Borrower and its Restricted Subsidiaries, the sum of (a) all Annual Pro-
Forma Interest Expense, plus (b) scheduled principal payments including the
----
current maturities thereof, due on Total Debt for the four Fiscal Quarters
immediately succeeding such date of determination thereof plus (c) an amount
----
equal to the excess of the (i) sum of (x) the aggregate principal amount of all
Loans and (y) the Letters of Credit Outstanding on such date over (ii) the
Commitment Amount as such Commitment Amount is scheduled to be reduced pursuant
to clause (a) of Section 2.2.2 during the four Fiscal Quarters immediately
---------- -------------
succeeding such date of determination.
"Pro-Forma Interest Expense" means, for any period for which a
--------------------------
determination thereof is to be made, the sum of (a) the amount of all interest
which is payable in cash during such period on Total Debt of the Borrower and
its Restricted Subsidiaries on a consolidated basis which, without duplication,
is scheduled to be paid or will accrue during such period, including, without
limitation, in respect of the Loans and Subordinated Debt plus (b) all
----
commitment, line of credit, letter of credit, guarantee and similar fees (no
matter how designated) scheduled or required to be paid by the Borrower and its
Restricted Subsidiaries to any lender in exchange for such lender's
-26-
<PAGE>
commitment to lend to the Borrower and its Restricted Subsidiaries, including,
without limitation, the commitment fee in respect of the Loans and Letters of
Credit, which is scheduled or required to be paid by the Borrower and its
Restricted Subsidiaries during such period. For purposes of calculating Pro-
Forma Interest Expense (i) where any item of interest on any Total Debt varies
or depends upon a variable rate of interest, such rate shall be assumed to equal
the rate in effect on the date of calculation thereof and (ii) the principal
amount outstanding under any revolving or line of credit facility shall be
assumed to be the outstanding principal balance thereunder on the last day of
the Fiscal Quarter immediately preceding the period in respect of which the
calculation of Pro-Forma Interest Expense is being determined as adjusted for
any scheduled principal payments during such period.
"Proxy" means the proxy statement filed by TSAT on January 26, 1998.
-----
"Qualified Assets" is defined in clause (b)(iv) of the definition of Net
---------------- --------------
Disposition Proceeds.
"Quarterly Payment Date" means the last day of March, June, September and
----------------------
December, or, if any such day is not a Business Day, the next succeeding
Business Day.
"Rate Protection Agreement" means, collectively, any interest rate swap,
-------------------------
cap, collar or similar agreement entered into or assumed by the Borrower
pursuant to the terms of this Agreement or the Existing Credit Agreement under
which the counterparty to such agreement is (or at the time such Rate Protection
Agreement was entered into, was) a Lender or an Affiliate of a Lender.
"Register" is defined in clause (b) of Section 2.7.
-------- ---------- -----------
"Regulatory Authority" means any national, state or local government, any
--------------------
political subdivision or any governmental, quasi-governmental, judicial, public
or statutory instrumentality, authority, body or entity, other regulatory
bureau, authority, body or entity, foreign or domestic, including the Federal
Deposit Insurance Corporation, the Comptroller of the Currency, the F.R.S.
Board, any central bank or any comparable authority.
"Refunded Swing Line Loans" is defined in clause (b) of Section 2.3.2.
------------------------- ---------- -------------
"Reimbursement Agreement" means each Reimbursement Agreement, dated as of
-----------------------
the Closing Date, between the Borrower, on the one hand, and each of the
Partners (other than TSAT) and/or their respective affiliates and affiliates of
Tele-Communications, Inc., respectively, on the other hand.
"Reimbursement Obligation" is defined in Section 2.6.3.
------------------------ -------------
"Release" means a "release", as such term is defined in CERCLA.
------- -------
-27-
<PAGE>
"Required Lenders" means, at any time:
----------------
(a) prior to the date that no Lender has a Percentage in excess of
20% of the then aggregate outstanding principal amount of the Loans and the
Commitments, Lenders holding 100% of the then aggregate outstanding
principal amount of the Loans and the Commitments; and
(b) on and after such date, Lenders holding at least 51% of the then
aggregate outstanding principal amount of the Loans and the Commitments.
"Resource Conservation and Recovery Act" means the Resource Conservation
--------------------------------------
and Recovery Act, 42 U.S.C. Section 6901, et seq., as amended.
-- ---
"Restricted Junior Payment" means (a) any dividend or distribution, direct
-------------------------
or indirect, on account of any Equity Interests in the Borrower or any of its
Subsidiaries now or hereafter outstanding, except a dividend payable solely in
shares of that class of stock or in any junior class of stock to the holders of
that class, provided that the issuance of such stock or junior class of stock is
not an incurrence of Indebtedness, (b) any redemption, retirement, sinking fund
or similar payment, purchase or other acquisition for value, direct or indirect,
of any Equity Interests in the Borrower or any of its Subsidiaries now or
hereafter outstanding, (c) any payment or prepayment of principal of, premium,
if any, or interest, fees or other charges on or with respect to, and any
redemption, purchase, retirement, defeasance, sinking fund or similar payment
and any claim for rescission with respect to, any Subordinated Debt of the
Borrower or any of its Subsidiaries other than a Permitted Refinancing or (d)
any payment made to redeem, purchase, repurchase or retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
Equity Interests in the Borrower or any of its Subsidiaries now or hereafter
outstanding.
"Restricted Subsidiary" means each U.S. Subsidiary of the Borrower other
---------------------
than an Unrestricted Subsidiary of which the Borrower owns directly or
indirectly at least 80% of the outstanding Capital Stock.
"Restructuring Agreement" is defined in the fourth recital.
----------------------- ------ -------
"Restructuring Transaction" is defined in the fourth recital.
------------------------- ------ -------
"Revolving Loan" is defined in clause (a) of Section 2.1.1.
-------------- ---------- -------------
"Revolving Loan Commitment" means, relative to any Lender, such Lender's
-------------------------
obligation (if any) to make Revolving Loans pursuant to clause (a) of Section
---------- -------
2.1.1.
- -----
-28-
<PAGE>
"Revolving Loan Commitment Amount" means, (i) prior to the consummation of
--------------------------------
the Restructuring Transaction, $135,000,000 and (ii) thereafter, $550,000,000,
as such amount may be reduced from time to time pursuant to Section 2.2.
-----------
"Revolving Loan Commitment Termination Date" means the earliest of
------------------------------------------
(a) April 30, 1998 (if the Closing Date has not occurred on or prior
to such date);
(b) June 30, 2005;
(c) the date on which the Revolving Loan Commitment Amount is
terminated in full or reduced to zero pursuant to Section 2.2; and
-----------
(d) the date on which any Commitment Termination Event occurs.
Upon the occurrence of any event described in the preceding clauses (c) or (d),
----------- ---
the Revolving Loan Commitments shall terminate automatically and without any
further action.
"Revolving Loan Lender" is defined in clause (a) of Section 2.1.1.
--------------------- ---------- -------------
"Revolving Note" means a promissory note of the Borrower payable to any
--------------
Revolving Loan Lender, in the form of Exhibit A-1 hereto (as such promissory
-----------
note may be amended, endorsed or otherwise modified from time to time),
evidencing the aggregate Indebtedness of the Borrower to such Revolving Loan
Lender resulting from outstanding Revolving Loans, and also means all other
promissory notes accepted from time to time in substitution therefor or renewal
thereof.
"Reuter's Screen" shall mean the display designated at page "LIBO" on the
---------------
Reuter Monitor System or such other display on the Reuter Monitor System as may
replace such page displaying the London interbank offered rates as of 11:00
a.m., London time, on the day on which the relevant determination is made.
"Roll-up Plan" is defined in the fourth recital.
------------ ------ -------
"Roll-Up Documents" means, collectively, the TSAT Asset Transfer Agreement,
-----------------
the Restructuring Agreement, the TSAT Merger Agreement, and all contracts,
agreements and documents delivered in connection with each of the foregoing.
"S&P" means Standard & Poor's Rating Services.
---
"Satellite Construction Agreement" means the fixed price satellite
--------------------------------
construction agreement between Loral and Tempo, dated as of February 22, 1990.
-29-
<PAGE>
"Scotiabank" is defined in the preamble.
---------- --------
"SEC" means the Securities and Exchange Commission.
---
"Secured Parties" means, collectively, the Lenders, the Issuer, each Agent,
---------------
each counterparty to a Rate Protection Agreement that is (or at the time such
Rate Protection Agreement was entered into, was) a Lender or an Affiliate
thereof and (in each case), each of their respective successors, transferees and
assigns.
"Securities" means any limited, general or other partnership interest, or
----------
any stock, shares, voting trust certificates, bonds, debentures, notes or other
Equity Interests or evidences of indebtedness, secured or unsecured,
convertible, subordinated or otherwise, or any certificates of interest, shares,
or participations in temporary or interim certificates for the purchase or
acquisition of, or any right to subscribe to, purchase or acquire any of the
foregoing, but shall not include any evidence of the Obligations.
"Security Agreement" means, as the context may require, the Borrower
------------------
Security Agreement and/or the Subsidiary Security Agreement.
"Senior Debt" means, at any time, all outstanding Total Debt which is not
-----------
Subordinated Debt.
"Senior Debt to Annualized Cash Flow Ratio" means, as of any date of
-----------------------------------------
determination, the ratio of (a) Senior Debt to (b) Annualized Cash Flow.
--
"Senior Management" means the chief executive officer, chief financial
-----------------
officer, chief operating officer, treasurer, controller and corporate counsel of
the Borrower, or any of them, as in effect from time to time.
"Senior Subordinated Credit Agreement" means the Senior Subordinated Credit
------------------------------------
Agreement, dated as of April 1, 1998, among the Borrower, the Guarantors party
thereto from time to time, the Lenders party thereto from time to time, Merrill
Lynch & Co., as Arranger and Syndication Agent, Morgan Stanley Dean Witter, as
Administrative Agent, and Donaldson, Lufkin & Jenrette Securities Corporation,
as Documentation Agent, including related notes, guarantees, other collateral
documents and note agreements and other instruments and agreements executed in
connection therewith, including any permitted deferrals, renewals, waivers,
extensions, replacements, refinancings or refundings thereof, or permitted
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, other
collateral documents (including all Loan Documents (as defined in the Senior
Subordinated Credit Agreement)) and note agreements and other instruments and
agreements executed in connection therewith.
-30-
<PAGE>
"Senior Subordinated Discount Notes" means the $275,000,000 aggregate
----------------------------------
principal amount at maturity of 12 1/4% senior subordinated discount notes due
2007 of the Borrower issued under the Senior Subordinated Discount Notes
Indenture.
"Senior Subordinated Discount Notes Indenture" means the Indenture, dated
--------------------------------------------
as of February 20, 1997, by and between The Bank of New York, as trustee, and
the Borrower, as Issuer.
"Senior Subordinated Notes" means the $200,000,000 original principal
-------------------------
amount of 10 7/8% senior subordinated notes due 2007 of the Borrower issued
under the Senior Subordinated Notes Indenture.
"Senior Subordinated Notes Indenture" means the Indenture, dated as of
-----------------------------------
February 20, 1997, by and between The Bank of New York, as trustee, and the
Borrower, as Issuer.
"Solvency Certificate" means the certificate executed and delivered by the
--------------------
chief financial or accounting Authorized Officer of the Borrower pursuant to
Section 5.1.7, substantially in the form of Exhibit M hereto.
- ------------- ---------
"Stated Amount" of each Letter of Credit means the total amount available
-------------
to be drawn under such Letter of Credit upon the issuance thereof.
"Stated Expiry Date" is defined in Section 2.6.
------------------ -----------
"Stated Maturity Date" means June 30, 2005.
--------------------
"Subject Debt" is defined in Section 8.1.5.
------------ -------------
"Subject Lender" is defined in Section 4.11.
-------------- ------------
"Subordinated Debt" means (i) the Senior Subordinated Notes and the Senior
-----------------
Subordinated Discount Notes, (ii) Indebtedness incurred under the Senior
Subordinated Credit Agreement, including the Exchange Notes, the Term Notes and
any PIK Notes, each as defined in and pursuant to the terms of the Senior
Subordinated Credit Agreement, (iii) Indebtedness incurred under the
Reimbursement Agreements and (iv) other unsecured Indebtedness of the Borrower
subordinated in right of payment to the Obligations pursuant to documentation
containing interest rates, maturities, amortization schedules, covenants,
defaults, remedies, subordination provisions and other material terms in form
and substance reasonably satisfactory to the Required Lenders.
"Subordinated Debt Document" means, as the context may require, each
--------------------------
indenture, note, debenture or other agreement evidencing or relating to
Subordinated Debt, and each instrument, document or agreement prepared or
executed in connection therewith, in each case as the same
-31-
<PAGE>
may be amended, supplemented, amended and restated or otherwise modified in
accordance with Section 7.2.12
--------------
"Subsidiary" means, with respect to any Person, any corporation,
----------
partnership or other business entity of which more than 50% of the outstanding
Capital Stock (or other ownership interest) having ordinary voting power to
elect a majority of the board of directors, managers or other voting members of
the governing body of such entity (irrespective of whether at the time Capital
Stock (or other ownership interest) of any other class or classes of such entity
shall or might have voting power upon the occurrence of any contingency) is at
the time directly or indirectly owned by such Person, by such Person and one or
more other Subsidiaries of such Person, or by one or more other Subsidiaries of
such Person. Unless the context otherwise specifically requires, the term
"Subsidiary" shall be a reference to a Subsidiary of the Borrower.
"Subsidiary Guarantor" means each Restricted Subsidiary party to a
--------------------
Subsidiary Guaranty.
"Subsidiary Guaranty" means, as the context may require, any guaranty
-------------------
executed and delivered by a Subsidiary Guarantor pursuant to the Original Credit
Agreement, Section 5.1.1 or clause (a) of Section 7.1.7, in each case
------------- ---------- -------------
substantially in the form of Exhibit H hereto, as amended, supplemented, amended
---------
and restated or otherwise modified from time to time.
"Subsidiary Pledge Agreement" means the pledge agreement executed and
---------------------------
delivered by a Restricted Subsidiary pursuant to Section 5.1.2, 7.1.7 or 7.1.8,
------------- ----- -----
substantially in the form of Exhibit F-2 hereto, as amended, supplemented,
-----------
amended and restated or otherwise modified from time to time.
"Subsidiary Security Agreement" means a security agreement executed and
-----------------------------
delivered by a Restricted Subsidiary pursuant to Section 7.1.7 or 7.1.8,
------------- -----
substantially in the form of Exhibit G-2 hereto, as amended, supplemented,
-----------
amended and restated or otherwise modified from time to time.
"Syndication Agent" is defined in the preamble and includes each other
----------------- --------
Person as shall have subsequently been appointed as a successor Syndication
Agent pursuant to Section 9.4.
-----------
"Swing Line Lender" means, subject to the terms of this Agreement,
-----------------
Scotiabank.
"Swing Line Loan" is defined in clause (b) of Section 2.1.1.
--------------- ---------- -------------
"Swing Line Loan Commitment" is defined in clause (b) of Section 2.1.1.
-------------------------- ---------- -------------
"Swing Line Loan Commitment Amount" means, on any date, $15,000,000, as
---------------------------------
such amount may be reduced from time to time pursuant to Section 2.2.
-----------
-32-
<PAGE>
"Swing Line Note" means a promissory note of the Borrower payable to the
---------------
Swing Line Lender, in the form of Exhibit A-3 hereto (as such promissory note
-----------
may be amended, endorsed or otherwise modified from time to time), evidencing
the aggregate Indebtedness of the Borrower to the Swing Line Lender resulting
from outstanding Swing Line Loans, and also means all other promissory notes
accepted from time to time in substitution therefor or renewal thereof.
"Taxes" means any present or future income, excise, stamp or franchise
-----
taxes and other taxes, fees, duties, withholdings or other charges of any nature
whatsoever imposed by (i) the United States or any taxing authority or political
subdivision thereof or (ii) any other jurisdiction as a result of a connection
between the Borrower and such taxing jurisdiction, and in each case any
interest, additions to tax, penalties or additional amounts payable with respect
thereto.
"TCISE Partner 1" means TCISE Partner 1, Inc., a Delaware corporation.
---------------
"TCISE Partner 2" means TCISE Partner 2, Inc., a Delaware corporation.
---------------
"Tempo" means Tempo Satellite, Inc., an Oklahoma corporation.
-----
"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.
"Term Loan" is defined in Section 2.1.3.
--------- -------------
"Term Loan Commitment" means, relative to any Lender, such Lender's
--------------------
obligation (if any) to make Term Loans pursuant to Section 2.1.3.
-------------
"Term Loan Commitment Amount" means, after the consummation of the
---------------------------
Restructuring Transaction, $150,000,000.
"Term Loan Commitment Termination Date" means the earliest of:
-------------------------------------
(a) April 30, 1998 (if the Term Loans have not been made on or prior
to such date);
(b) the Closing Date (immediately after the making of the Term Loans
on such date); and
(c) the date on which any Commitment Termination Event occurs.
Upon the occurrence of any event described in clauses (b) or (c), the Term Loan
----------- ---
Commitments shall terminate automatically and without any further action.
"Term Note" means a promissory note of the Borrower payable to any Lender,
---------
in the form of Exhibit A-2 hereto (as such promissory note may be amended,
-----------
endorsed or otherwise
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<PAGE>
modified from time to time), evidencing the aggregate Indebtedness of the
Borrower to such Lender resulting from outstanding Term Loans, and also means
all other promissory notes accepted from time to time in substitution therefor
or renewal thereof.
"Total Debt" means, on any date of determination, with respect to the
----------
Borrower and its Restricted Subsidiaries, an amount equal to the sum of (a) the
outstanding principal amount of all Indebtedness as of such date of the type
referred to in clause (a) of the definition of "Indebtedness" (which, in the
----------
case of the Loans, shall be deemed to equal the amount of Loans outstanding on
the last day of the Fiscal Quarter ending on or immediately preceding the date
of determination), plus (b) the maximum aggregate amount of Indebtedness as of
----
such date of the type described in clause (b) of the definition of
----------
"Indebtedness" (which, in the case of Letter of Credit Outstandings, shall be
deemed to equal the amount of Letter of Credit Outstandings on the last day of
the Fiscal Quarter ending on or immediately preceding the date of
determination), plus (c) the aggregate amount as of such date of the
----
Indebtedness described in clause (c) of the definition of "Indebtedness", plus
---------- ----
(d) (without duplication) the aggregate amount on such date of the Contingent
Liabilities in respect of any of the foregoing (other than in connection with
the Reimbursement Agreements).
"Total Debt to Annualized Cash Flow Ratio" means the ratio of (a) Total
----------------------------------------
Debt to (b) Annualized Cash Flow.
--
"Total Interest Expense" means, for any period, the sum of (a) the
----------------------
aggregate cash interest expense (net of cash interest income) of the Borrower
and its Restricted Subsidiaries (including, to the extent the Borrower or any of
its Restricted Subsidiaries have any Contingent Liability in respect of such
interest expense, (i) in respect of any pro forma calculations, the interest
--- -----
expense of Unrestricted Subsidiaries and (ii) in respect of any period which
does not include any pro forma calculation, the amount of such interest expense
--- -----
actually paid or payable by the Borrower or any Restricted Subsidiary) for such
period, as determined in accordance with GAAP, including the portion of any
payments made in respect of Capitalized Lease Liabilities allocable to interest
expense plus (b) all commitment, letter of credit, guarantee, line of credit or
----
similar fees (no matter how designated) paid or scheduled or required to be paid
by the Borrower and its Restricted Subsidiaries to any lender in exchange for
such lender's commitment to lend to the Borrower and its Restricted
Subsidiaries, including, without limitation, the commitment fee in respect of
the Loans and Letters of Credit.
"Trademark Security Agreement" means any trademark security agreement
----------------------------
executed and delivered by the Borrower or a Restricted Subsidiary, as the case
may be, in each case substantially in the form of Exhibit B to a Security
Agreement, as amended, supplemented, amended and restated or otherwise modified
from time to time.
"Transaction Documents" collectively means the Roll-Up Documents, the
---------------------
Reimbursement Agreements, the Primestar Partnership Credit Agreement, the
Primestar Partnership Agreement and the TSAT Tempo Agreement.
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<PAGE>
"TSAT" is defined in the second recital.
---- ------ -------
"TSAT Asset Transfer" is defined in the fourth recital.
------------------- ------ -------
"TSAT Asset Transfer Agreement" is defined in the fourth recital.
----------------------------- ------ -------
"TSAT Merger" is defined in the fourth recital.
----------- ------ -------
"TSAT Merger Agreement" is defined in the fourth recital.
--------------------- ------ -------
"TSAT Partners Holdings" means TSAT Partners Holding, Inc., a Delaware
----------------------
corporation.
"TSAT Tempo Agreement" means the TSAT Tempo Agreement, dated as of February
--------------------
6, 1998, between TSAT and the Borrower, which provides, among other things, that
on the terms and conditions set forth therein, upon receipt of Federal
Communications Commission approval of the transfer of control of Tempo to the
Borrower, TSAT will (at the Borrower's election) either sell all the issued and
outstanding shares of Capital Stock of Tempo to the Borrower or liquidate Tempo
and sell all of its rights, title and interests in, to and under Tempo's assets
to the Borrower, as such agreement is amended, supplemented, amended and
restated or otherwise modified from time to time.
"type" means, relative to any Loan, the portion thereof, if any, being
----
maintained as a Base Rate Loan or a LIBO Rate Loan.
"U.C.C." means the Uniform Commercial Code as from time to time in effect
------
in the State of New York.
"United States" or "U.S." means the United States of America, its fifty
------------- ----
states and the District of Columbia.
"Unrestricted Subsidiary" means any U.S. Subsidiary formed or acquired
-----------------------
after the Effective Date and designated by the Borrower as an "Unrestricted
Subsidiary" and accepted as such by the Required Lenders.
"U.S. Person" means any Person that is a "United States person" within the
-----------
meaning of Section 7701(a)(30) of the Code (or any applicable successor
provision).
"U.S. Subsidiary" means any Subsidiary that is incorporated or organized
---------------
under the laws of the United States or a state thereof.
-35-
<PAGE>
"Voting Stock" means, with respect to any Person, Capital Stock of any
------------
class or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.
"Welfare Plan" means a "welfare plan", as such term is defined in section
------------
3(1) of ERISA.
"wholly-owned" means, with respect to any direct or indirect Subsidiary,
------------
any Subsidiary all of the outstanding common stock (or similar equity interest)
of which (other than any director's qualifying shares or investments by foreign
nationals mandated by applicable laws) is owned directly or indirectly by the
Borrower.
SECTION I.2. Use of Defined Terms. Unless otherwise defined or the
--------------------
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in each other Loan Document, the
Disclosure Schedule, or any Borrowing Request, Issuance Request,
Continuation/Conversion Notice, Compliance Certificate, notice or other
communications delivered from time to time in connection with this Agreement or
any other Loan Document.
SECTION I.3. Cross-References. Unless otherwise specified, references in
----------------
this Agreement and in each other Loan Document to any Article or Section are
references to such Article or Section of this Agreement or such other Loan
Document, as the case may be, and, unless otherwise specified, references in any
Article, Section or definition to any clause are references to such clause of
such Article, Section or definition.
SECTION I.4. Accounting and Financial Determinations. Unless otherwise
---------------------------------------
specified, all accounting terms used herein or in any other Loan Document shall
be interpreted, and all accounting determinations and computations hereunder or
thereunder (including under Section 7.2.4) shall be made in accordance with
-------------
those generally accepted accounting principles ("GAAP") applied in the
----
preparation of the financial statements referred to in clause (a) of Section
5.1.11 of the Original Credit Agreement. Unless otherwise expressly provided,
all financial covenants and defined financial terms shall be computed on a
consolidated basis for the Borrower and its Restricted Subsidiaries, in each
case without duplication. If any preparation in the financial statements
referred to in Section 7.1.1 hereafter occasioned by the promulgation of rules,
-------------
regulations, pronouncements and opinions by or required by the Financial
Accounting Standards Board or the American Institute of Certified Public
Accountants (or successors thereto or agencies with similar functions) result in
a change in any results, amounts, calculations, ratios, standards or terms found
in this Agreement or any Loan Document from those which would be derived or be
applicable absent such changes, the Borrower may reflect such changes in the
financial statements and certificates required to be delivered pursuant to
Section 7.1.1, but calculations of financial covenants shall be made without
- -------------
giving effect to any such changes. Upon the request of the Borrower or any
Lender the parties hereto agree to enter into negotiations in order to amend the
financial covenants and other terms of this Agreement if there occur any changes
in GAAP that have a material effect on the financial statements of the Borrower
and its
-36-
<PAGE>
Subsidiaries, so as to equitably reflect such changes with the desired
result that the criteria for evaluating the Borrower's and its Subsidiaries'
financial condition and such other terms shall be the same in all material
respects after such changes as if the changes had not been made.
ARTICLE II
COMMITMENTS, BORROWING AND ISSUANCE
PROCEDURES, NOTES AND LETTERS OF CREDIT
SECTION II.1. Commitments. On the terms and subject to the conditions of
-----------
this Agreement (including Sections 2.1.4, 2.1.5 and Article V),
-------------- ----- ---------
(a each Lender severally agrees to make Loans (other than Swing Line
Loans) pursuant to the Commitments and the Swing Line Lender agrees to make
Swing Line Loans pursuant to the Swing Line Loan Commitment, in each case
as described in this Section 2.1; and
-----------
(b the Issuer severally agrees that it will issue Letters of Credit
pursuant to Section 2.1.2, and each Revolving Loan Lender severally agrees
-------------
that it will purchase participation interests in such Letters of Credit
pursuant to Section 2.6.1.
-------------
SECTION II.1.1. Revolving Loan Commitment and Swing Line Loan Commitment.
--------------------------------------------------------
(a From time to time on any Business Day occurring prior to the
Revolving Loan Commitment Termination Date, each Lender that has a
Revolving Loan Commitment (referred to as a "Revolving Loan Lender") will
---------------------
make loans (relative to such Revolving Loan Lender, its "Revolving Loans")
---------------
to the Borrower equal to such Lender's Percentage of the aggregate amount
of each Borrowing of Revolving Loans requested by the Borrower to be made
on such day. On the terms and subject to the conditions hereof, the
Borrower may from time to time borrow, prepay and reborrow the Revolving
Loans.
(b From time to time on any Business Day occurring prior to the
Revolving Loan Commitment Termination Date, the Swing Line Lender will make
loans (relative to the Swing Line Lender, its "Swing Line Loans") to the
----------------
Borrower equal to the principal amount of the Swing Line Loans requested by
the Borrower to be made on such day. The Commitment of the Swing Line
Lender described in this clause (b) is herein referred to as its "Swing
---------- -----
Line Loan Commitment". On the terms and subject to the conditions hereof,
--------------------
the Borrower may from time to time borrow, prepay and reborrow Swing Line
Loans.
SECTION II.1.2. Letter of Credit Commitment. From time to time on any
---------------------------
Business Day occurring prior to the Revolving Loan Commitment Termination Date,
the Issuer will:
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<PAGE>
(a issue one or more standby letters of credit (relative to the
Issuer, its "Letter of Credit") for the account of the Borrower in the
----------------
Stated Amount requested by the Borrower on such day; or
(b extend the Stated Expiry Date of an existing Letter of Credit
previously issued hereunder to a date not later than the earlier of (x) the
Revolving Loan Commitment Termination Date and (y) one year from the date
of such extension.
SECTION II.1.3. Term Loan Commitment. In a single Borrowing (which shall
--------------------
be a Business Day) occurring on the Closing Date, each Lender that has a Term
Loan Commitment will make loans (relative to such Lender, its "Term Loans") to
----------
the Borrower equal to such Lender's Percentage of the aggregate amount of the
Borrowing of Term Loans requested by the Borrower to be made on such day. No
amounts paid or prepaid with respect to Term Loans may be reborrowed.
SECTION II.1.4. Lenders Not Permitted or Required to Make Loans. No
-----------------------------------------------
Lender shall be permitted or required to:
(a) make any Revolving Loans if, after giving effect thereto, the
aggregate outstanding principal amount of all Revolving Loans (i) of all
Revolving Loan Lenders, together with the aggregate amount of all Letter of
Credit Outstandings and the outstanding principal amount of all Swing Line
Loans, would exceed the then existing Revolving Loan Commitment Amount; or
(ii) of such Revolving Loan Lender, together with such Revolving Loan
Lender's Percentage of the aggregate amount of all Letter of Credit
Outstandings and such Revolving Loan Lender's Percentage of the outstanding
principal amount of all Swing Line Loans, would exceed such Revolving Loan
Lender's Percentage of the then existing Revolving Loan Commitment Amount;
(b) make any Term Loans, if after giving effect thereto, the
aggregate outstanding principal amount of all Term Loans (i) of all Lenders
with Term Loan Commitments would exceed the Term Loan Commitment Amount; or
(ii) of such Lender with a Term Loan Commitment would exceed such Lender's
Percentage of the Term Loan Commitment Amount;
(c) participate in any Letter of Credit if, after giving effect
thereto, (i) all Letter of Credit Outstandings, together with the aggregate
outstanding principal amount of all Revolving Loans of all Revolving Loan
Lenders and the outstanding principal amount of all Swing Line Loans, would
exceed the Revolving Loan Commitment Amount; or (ii) such Lender's
Percentage of all Letter of Credit Outstandings, together with the
aggregate outstanding principal amount of all Revolving Loans of such
Lender and the outstanding principal amount of all Swing Line Loans of such
Lender, would exceed such Lender's Percentage of the then existing
Revolving Loan Commitment Amount; or
-38-
<PAGE>
(d) make any Swing Line Loans if, after giving effect thereto, (i)
the aggregate outstanding principal amount of all Swing Line Loans would
exceed the then existing Swing Line Loan Commitment Amount; or (ii) unless
otherwise agreed to by the Swing Line Lender, in its sole discretion, the
sum of all Swing Line Loans and Revolving Loans made by the Swing Line
Lender plus the Swing Line Lender's Percentage multiplied by the aggregate
amount of Letter of Credit Outstandings would exceed the amount determined
by multiplying the Swing Line Lender's Percentage by the then existing
Revolving Loan Commitment Amount.
SECTION II.1.5. Issuer Not Permitted or Required to Issue Letters of
----------------------------------------------------
Credit. No Issuer shall be permitted or required to issue, extend or renew any
- ------
Letter of Credit if, after giving effect thereto, (a) the aggregate amount of
all Letter of Credit Outstandings would exceed the Letter of Credit Commitment
Amount; or (b) the sum of the aggregate amount of all Letter of Credit
Outstandings plus the aggregate principal amount of all Revolving Loans and
Swing Line Loans then outstanding would exceed the Revolving Loan Commitment
Amount.
SECTION II.2. Reduction of the Commitment Amounts. The Commitment Amounts
-----------------------------------
are subject to reduction from time to time pursuant to this Section 2.2.
-----------
SECTION II.2.1. Optional. The Borrower may, from time to time on any
--------
Business Day occurring after the Effective Date, voluntarily reduce the amount
of the Revolving Loan Commitment Amount, the Swing Line Loan Commitment Amount
or the Letter of Credit Commitment Amount on the Business Day so specified by
the Borrower; provided, however, that all such reductions shall require at least
-------- -------
three Business Day's prior notice to the Administrative Agent and be permanent,
and any partial reduction of any Commitment Amount shall be in a minimum amount
of $5,000,000 and in an integral multiple of $1,000,000. Any reduction of the
Revolving Loan Commitment Amount which reduces the Revolving Loan Commitment
Amount below the then current amount of the Swing Line Loan Commitment Amount
shall result in an automatic and corresponding reduction of the Swing Line Loan
Commitment Amount to the amount of the Revolving Loan Commitment Amount, as so
reduced, without any further action on the part of the Swing Line Lender or
otherwise.
SECTION II.2.2. Mandatory. On each date set forth below, the Revolving
---------
Loan Commitment Amount shall, without any further action, automatically and
permanently be reduced by the percentage of the Revolving Loan Commitment Amount
as in effect on March 31, 2001 set forth opposite the corresponding date below:
Date Percentage
---- Reduction
----------
03/31/01 2.5%
06/30/01 2.5%
09/30/01 2.5%
-39-
<PAGE>
Date Percentage
---- Reduction
---------
12/31/01 2.5%
03/31/02 5.0%
06/30/02 5.0%
09/30/02 5.0%
12/31/02 5.0%
03/31/03 6.25%
06/30/03 6.25%
09/30/03 6.25%
12/31/03 6.25%
03/31/04 8.5%
06/30/04 8.5%
09/30/04 8.5%
12/31/04 8.5%
03/31/05 5.5%
06/30/05 5.5%;
provided, however, that on the Revolving Loan Commitment Termination Date, the
- -------- -------
Revolving Loan Commitment Amount shall be zero. Voluntary reductions of the
Revolving Loan Commitment Amount made pursuant to Section 2.2.1 shall be applied
-------------
pro rata to diminish the amount of scheduled reductions to the Revolving Loan
- --- ----
Commitment Amount thereafter becoming effective pursuant to this Section.
SECTION II.3. Borrowing Procedures. Loans (other than Swing Line Loans)
--------------------
shall be made by the Lenders in accordance with Section 2.3.1, and Swing Line
-------------
Loans shall be made by Scotiabank in accordance with Section 2.3.2.
-------------
SECTION II.3.1. Borrowing Procedure. In the case of other than Swing Line
-------------------
Loans, by delivering a Borrowing Request to the Administrative Agent on or
before 12:00 noon, New York time, on a Business Day, the Borrower may from time
to time irrevocably request, on not less than one Business Day's notice in the
case of Base Rate Loans, or not less than three Business Days' notice in the
case of Fixed Rate Loans, and in either case not more than five Business Days'
notice, that a Borrowing be made in a minimum amount of $1,000,000 and an
integral multiple of $500,000, or in the unused amount of the applicable
Commitment; provided, however, that all initial Loans shall be made as Base Rate
-------- -------
Loans. On the terms and subject to the conditions of this Agreement, each
Borrowing shall be comprised of the type of Loans, and shall be made on the
Business Day, specified in such Borrowing Request. In the case of other than
Swing Line Loans, on or before 11:00 a.m., New York time, on such Business Day
each Lender that has a Commitment to make the Loans being requested shall
deposit with the Administrative Agent same day funds in an amount equal to such
Lender's Percentage of the requested
-40-
<PAGE>
Borrowing. Such deposit will be made to an account which the Administrative
Agent shall specify from time to time by notice to the Lenders. To the extent
funds are received from the Lenders, the Administrative Agent shall make such
funds available to the Borrower by wire transfer to the accounts the Borrower
shall have specified in its Borrowing Request. No Lender's obligation to make
any Loan shall be affected by any other Lender's failure to make any Loan.
SECTION II.3.2. Swing Line Loans.
----------------
(a By telephonic notice, promptly followed (within one Business Day)
by the delivery of a confirming Borrowing Request, to the Swing Line Lender
on or before 12:00 noon, New York time, on the Business Day the proposed
Swing Line Loan is to be made, the Borrower may from time to time
irrevocably request that Swing Line Loans be made by the Swing Line Lender
in an aggregate minimum principal amount of $500,000 and an integral
multiple of $100,000. All Swing Line Loans shall be made as Base Rate
Loans and shall not be entitled to be converted into Fixed Rate Loans. The
proceeds of each Swing Line Loan shall be made available by the Swing Line
Lender, by its close of business on the Business Day telephonic notice is
received by it as provided in this clause to the Borrower by wire transfer
to the account the Borrower shall have specified in its notice therefor.
(b If (i) any Swing Line Loan shall be outstanding for more than
four Business Days; (ii) any Swing Line Loan is or will be outstanding on a
date when the Borrower requests that a Revolving Loan be made; or (iii) any
Default shall occur and be continuing, each Revolving Loan Lender (other
than the Swing Line Lender) irrevocably agrees that it will, at the request
of the Swing Line Lender, make a Revolving Loan (which shall initially be
funded as a Base Rate Loan) in an amount equal to such Lender's Percentage
of the aggregate principal amount of all such Swing Line Loans then
outstanding (such outstanding Swing Line Loans hereinafter referred to as
the "Refunded Swing Line Loans"). On or before 12:00 noon, New York time,
-------------------------
on the first Business Day following receipt by each Lender of a request to
make Revolving Loans as provided in the preceding sentence, each Revolving
Loan Lender shall deposit in an account specified by the Swing Line Lender
the amount so requested in same day funds and such funds shall be applied
by the Swing Line Lender to repay the Refunded Swing Line Loans. At the
time the aforementioned Lenders make the above referenced Revolving Loans,
the Swing Line Lender shall be deemed to have made, in consideration of the
making of the Refunded Swing Line Loans, Revolving Loans in an amount equal
to the Swing Line Lender's Percentage of the aggregate principal amount of
the Refunded Swing Line Loans. Upon the making (or deemed making, in the
case of the Swing Line Lender) of any Revolving Loans pursuant to this
clause, the amount so funded shall become outstanding as a Revolving Loan
of such Revolving Loan Lender and shall no longer be owed as a the Swing
Line Loan. All interest payable with respect to any Revolving Loans made
(or deemed made, in the case of the Swing Line Lender) pursuant to this
clause shall be appropriately adjusted to reflect the period of time during
which the Swing Line
-41-
<PAGE>
Lender had outstanding Swing Line Loans in respect of which such Revolving
Loans were made. Each Revolving Loan Lender's obligation to make the
Revolving Loans referred to in this clause shall be absolute and
unconditional and shall not be affected by any circumstance, including (i)
any set-off, counterclaim, recoupment, defense or other right which such
Lender may have against the Swing Line Lender, any Obligor or any Person
for any reason whatsoever; (ii) the occurrence or continuance of any
Default; (iii) any adverse change in the condition (financial or otherwise)
of any Obligor; (iv) the acceleration or maturity of any Obligations or the
termination of any Commitment after the making of any Swing Line Loan; (v)
any breach of this Agreement or any other Loan Document by any Person; or
(vi) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing.
SECTION II.4. Continuation and Conversion Elections. By delivering a
-------------------------------------
Continuation/Conversion Notice to the Administrative Agent on or before 12:00
noon, New York time, on a Business Day, the Borrower may from time to time
irrevocably elect, on not less than three Business Days' notice nor more than
five Business Days' notice, that all, or any portion in an aggregate minimum
amount of $1,000,000 and an integral multiple of $500,000, Loans be, in the case
of Base Rate Loans, converted into Fixed Rate Loans of either type or in the
case of Fixed Rate Loans of either type, be converted into a Base Rate Loan or a
Fixed Rate Loan of the other type or continued as a Fixed Rate Loan of such type
(in the absence of delivery of a Continuation/Conversion Notice with respect to
any Fixed Rate Loan at least three Business Days before the last day of the then
current Interest Period with respect thereto, such Fixed Rate Loan shall, on
such last day, automatically convert to a Base Rate Loan); provided, however,
-------- -------
that (i) each such conversion or continuation shall be pro rated among the
applicable outstanding Loans of all Lenders that have made such Loans, and (ii)
no portion of the outstanding principal amount of any Loans may be continued as,
or be converted into, Fixed Rate Loans when any Default has occurred and is
continuing.
SECTION II.5. Funding. Each Lender may, if it so elects, fulfill its
-------
obligation to make, continue or convert LIBO Rate Loans hereunder by causing one
of its foreign branches or Affiliates (or an international banking facility
created by such Lender) to make or maintain such LIBO Rate Loan; provided,
--------
however, that such Fixed Rate Loan shall nonetheless be deemed to have been made
- -------
and to be held by such Lender, and the obligation of the Borrower to repay such
Fixed Rate Loan shall nevertheless be to such Lender for the account of such
foreign branch, Affiliate or international banking facility. In addition, the
Borrower hereby consents and agrees that, for purposes of any determination to
be made for purposes of Section 4.1, 4.2, 4.3 or 4.4, it shall be conclusively
----------- --- --- ---
assumed that each Lender elected to fund all LIBO Rate Loans by purchasing
Dollar deposits in its LIBOR Office's interbank eurodollar market.
SECTION II.6. Issuance Procedures. By delivering to the Administrative
-------------------
Agent an Issuance Request on or before 12:00 noon, New York time, on a Business
Day, the Borrower may, from time to time irrevocably request, on not less than
three nor more than ten Business Days' notice, in the case of an initial
issuance of a Letter of Credit for the account of the
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<PAGE>
Borrower, and not less than three Business Days' prior notice, in the case of a
request for the extension of the Stated Expiry Date of a Letter of Credit, that
the Issuer issue, or extend the Stated Expiry Date of, as the case may be, an
irrevocable Letter of Credit in such form as may be requested by the Borrower
and approved by the Issuer, solely for the purposes described in Section 7.1.11.
--------------
Each Letter of Credit shall by its terms be stated to expire on a date (its
"Stated Expiry Date") no later than the earlier to occur of (i) the Revolving
------------------
Loan Commitment Termination Date or (ii) one year from the date of its issuance.
The Issuer will make available to the beneficiary thereof the original of each
Letter of Credit which it issues hereunder. The Issuer shall give prompt written
notice to the Administrative Agent of the Stated Amount of any such Letter of
Credit so issued.
SECTION II.6.1. Other Lenders' Participation'. Upon the issuance of each
-----------------------------
Letter of Credit issued by the Issuer pursuant hereto, and without further
action, each Lender (other than the Issuer) that has a Commitment shall be
deemed to have irrevocably purchased, to the extent of its Percentage to make
Revolving Loans, a participation interest in such Letter of Credit (including
the Contingent Liability and any Reimbursement Obligation with respect thereto),
and such Revolving Loan Lender shall, to the extent of its Percentage to make
Revolving Loans, be responsible for reimbursing promptly (and in any event
within one Business Day) the Issuer for Reimbursement Obligations which have not
been reimbursed by the Borrower in accordance with Section 2.6.3. In addition,
-------------
such Revolving Loan Lender shall, to the extent of its Percentage to make
Revolving Loans, be entitled to receive a ratable portion of the Letter of
Credit fees payable pursuant to Section 3.3.3 with respect to each Letter of
-------------
Credit (other than the issuance fees payable to the Issuer of such Letter of
Credit pursuant to the last sentence of Section 3.3.3) and of interest payable
-------------
pursuant to Section 3.2 with respect to any Reimbursement Obligation. To the
-----------
extent that any Revolving Loan Lender has reimbursed the Issuer for a
Disbursement as required by this Section, such Lender shall be entitled to
receive its ratable portion of any amounts subsequently received (from the
Borrower or otherwise) in respect of such Disbursement.
SECTION II.6.2. Disbursements. The Issuer will notify the Borrower and
-------------
the Administrative Agent promptly of the presentment for payment of any Letter
of Credit issued by the Issuer, together with notice of the date (the
"Disbursement Date") such payment shall be made (each such payment, a
- ------------------
"Disbursement"). Subject to the terms and provisions of such Letter of Credit
- -------------
and this Agreement, the Issuer shall make such payment to the beneficiary (or
its designee) of such Letter of Credit. Prior to 12:00 noon, New York time, on
the first Business Day following the Disbursement Date, the Borrower will
reimburse the Administrative Agent, for the account of the Issuer, for all
amounts which the Issuer has disbursed under such Letter of Credit, together
with interest thereon at a rate per annum equal to the rate per annum then in
effect for Base Rate Loans (with the then Applicable Margin accruing on such
amount) pursuant to Section 3.2 for the period from the Disbursement Date
-----------
through the date of such reimbursement. Without limiting in any way the
foregoing and notwithstanding anything to the contrary contained herein or in
any separate application for any Letter of Credit, the Borrower hereby
acknowledges and agrees that it shall be obligated to reimburse the Issuer upon
each
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<PAGE>
Disbursement of a Letter of Credit, and it shall be deemed to be the obligor for
purposes of each such Letter of Credit issued hereunder.
SECTION II.6.3. Reimbursement. The obligation (a "Reimbursement
------------- -------------
Obligation") of the Borrower under Section 2.6.2 to reimburse the Issuer with
- ---------- -------------
respect to each Disbursement (including interest thereon), and, upon the failure
of the Borrower to reimburse the Issuer, each Lender's obligation under Section
-------
2.6.1 to reimburse the Issuer, shall be absolute and unconditional under any and
- -----
all circumstances and irrespective of any setoff, counterclaim or defense to
payment which the Borrower or such Lender, as the case may be, may have or have
had against the Issuer or any such Lender, including any defense based upon the
failure of any Disbursement to conform to the terms of the applicable Letter of
Credit (if, in the Issuer's good faith opinion, such Disbursement is determined
to be appropriate) or any non-application or misapplication by the beneficiary
of the proceeds of such Letter of Credit; provided, however, that after paying
-------- -------
in full its Reimbursement Obligation hereunder, nothing herein shall adversely
affect the right of the Borrower or such Lender, as the case may be, to commence
any proceeding against the Issuer for any wrongful Disbursement made by the
Issuer under a Letter of Credit as a result of acts or omissions constituting
gross negligence or willful misconduct on the part of the Issuer.
SECTION II.6.4. Deemed Disbursements. Upon the occurrence and during the
--------------------
continuation of any Default of the type described in Section 8.1.9 or, with
-------------
notice from the Administrative Agent, upon the occurrence and during the
continuation of any other Event of Default,
(a an amount equal to that portion of all Letter of Credit
Outstandings attributable to the then aggregate amount which is undrawn and
available under all Letters of Credit issued and outstanding hereunder
shall, without demand upon or notice to the Borrower, be deemed to have
been paid or disbursed by the Issuer under such Letters of Credit
(notwithstanding that such amount may not in fact have been so paid or
disbursed); and
(b upon notification by the Administrative Agent to the Borrower of
its obligations under this Section, the Borrower shall be immediately
obligated to reimburse the Issuer for the amount deemed to have been so
paid or disbursed by the Issuer.
Any amounts so payable by the Borrower pursuant to this Section shall be
deposited in cash with the Administrative Agent and held as collateral security
for the Obligations in connection with the Letters of Credit issued by the
Issuer. At such time when the Defaults or Events of Default giving rise to the
deemed disbursements hereunder shall have been cured or waived, the
Administrative Agent shall return to the Borrower all amounts then on deposit
with the Administrative Agent pursuant to this Section which have not been
applied to the partial satisfaction of such Obligations.
SECTION II.6.5. Nature of Reimbursement Obligations. The Borrower and, to
-----------------------------------
the extent set forth in Section 2.6.1, each Revolving Loan Lender shall assume
-------------
all risks of the acts,
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<PAGE>
omissions or misuse of any Letter of Credit by the beneficiary thereof. The
Issuer (except to the extent of its own gross negligence or wilful misconduct)
shall not be responsible for:
(a the form, validity, sufficiency, accuracy, genuineness or legal
effect of any Letter of Credit or any document submitted by any party in
connection with the application for and issuance of a Letter of Credit,
even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged;
(b the form, validity, sufficiency, accuracy, genuineness or legal
effect of any instrument transferring or assigning or purporting to
transfer or assign a Letter of Credit or the rights or benefits thereunder
or the proceeds thereof in whole or in part, which may prove to be invalid
or ineffective for any reason;
(c failure of the beneficiary to comply fully with conditions
required in order to demand payment under a Letter of Credit;
(d errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise; or
(e any loss or delay in the transmission or otherwise of any
document or draft required in order to make a Disbursement under a Letter
of Credit.
None of the foregoing shall affect, impair or prevent the vesting of any of the
rights or powers granted to the Issuer or any Revolving Loan Lender hereunder.
In furtherance and not in limitation or derogation of any of the foregoing, any
action taken or omitted to be taken by the Issuer in good faith (and not
constituting gross negligence or willful misconduct) shall be binding upon the
Borrower and each such Lender, and shall not put the Issuer under any resulting
liability to the Borrower or any such Lender, as the case may be.
SECTION II.7. Register; Notes.
---------------
(a Each Lender may maintain in accordance with its usual practice an
account or accounts evidencing the Indebtedness of the Borrower to such
Lender resulting from each Loan made by such Lender, including the amounts
of principal and interest payable and paid to such Lender from time to time
hereunder. In the case of a Lender that does not request, pursuant to
clause (b)(ii) below, execution and delivery of a Note evidencing the Loans
--------------
made by such Lender to the Borrower, such account or accounts shall, to the
extent not inconsistent with the notations made by the Administrative Agent
in the Register, be conclusive and binding on the Borrower absent manifest
error; provided, however, that the failure of any Lender to maintain such
-------- -------
account or accounts shall not limit or otherwise affect any Obligations of
the Borrower or any other Obligor.
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<PAGE>
(b (i) The Borrower hereby designates the Administrative Agent to
serve as the Borrower's agent, solely for the purpose of this clause (b),
----------
to maintain a register (the "Register") on which the Administrative Agent
--------
will record each Lender's Commitment, the Loans made by each Lender and
each repayment in respect of the principal amount of the Loans of each
Lender and annexed to which the Administrative Agent shall retain a copy of
each Lender Assignment Agreement delivered to the Administrative Agent
pursuant to Section 10.11.1. Failure to make any recordation, or any error
---------------
in such recordation, shall not affect the Borrower's obligation in respect
of such Loans. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrower, the Administrative Agent and
the Lenders shall treat each Person in whose name a Loan (and, as provided
in clause (ii), the Note evidencing such Loan, if any) is registered as the
-----------
owner thereof for all purposes of this Agreement, notwithstanding notice or
any provision herein to the contrary. A Lender's Commitment and the Loans
made pursuant thereto may be assigned or otherwise transferred in whole or
in part only by registration of such assignment or transfer in the
Register. Any assignment or transfer of a Lender's Commitment or the Loans
made pursuant thereto shall be registered in the Register only upon
delivery to the Administrative Agent of a Lender Assignment Agreement duly
executed by the assignor thereof and the compliance by the parties thereto
with the other requirements of Section 10.11.1. No assignment or transfer
---------------
of a Lender's Commitment or the Loans made pursuant thereto shall be
effective unless such assignment or transfer shall have been recorded in
the Register by the Administrative Agent as provided in this Section.
(ii) The Borrower hereby agrees that, upon the request to the
Administrative Agent by any Lender, the Borrower will execute and deliver
to such Lender, as applicable, a Revolving Note, Swing Line Note or a Term
Note evidencing the Loans made by such Lender. The Borrower hereby
irrevocably authorizes each Lender to make (or cause to be made)
appropriate notations on the grid attached to such Lender's Notes (or on
any continuation of such grid), which notations, if made, shall evidence,
inter alia, the date of, the outstanding principal amount of, and the
----- ----
interest rate and Interest Period applicable to the Loans evidenced
thereby. Such notations shall, to the extent not inconsistent with the
notations made by the Administrative Agent in the Register, be conclusive
and binding on the Borrower absent manifest error; provided, however, that
-------- -------
the failure of any Lender to make any such notations shall not limit or
otherwise affect any Obligations of the Borrower or any other Obligor. The
Loans evidenced by any Note and interest thereon shall at all times
(including after assignment pursuant to Section 10.11.1) be payable to the
---------------
order of the payee named therein and its registered assigns.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
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<PAGE>
SECTION III.1. Repayments and Prepayments; Application.
---------------------------------------
SECTION III.1.1. Repayments and Prepayments. The Borrower shall repay in
--------------------------
full the unpaid principal amount of each Loan upon the applicable Stated
Maturity Date therefor. Prior thereto, payments and prepayments of Loans shall
or may be made as set forth below.
(a From time to time on any Business Day, the Borrower may make a
voluntary prepayment, in whole or in part, of the outstanding principal
amount of any
(i) Loans (other than Swing Line Loans), provided, however, that
-------- -------
(A) any such prepayment of Loans shall be made pro rata
--- ----
among Loans of the same type and, if applicable, having the same
Interest Period of all Lenders;
(B) no such prepayment of any Fixed Rate Loan may be made
on any day other than the last day of the Interest Period for
such Loan unless the Borrower complies with Section 4.4 in
-----------
respect thereof;
(C) all such voluntary prepayments shall require, in the
case of Fixed Rate Loans, at least three Business Days' prior
written notice and, in the case of Base Rate Loans, at least one
Business Day's prior written notice, and in either case not more
than five Business Days' prior written notice to the
Administrative Agent; and
(D) all such voluntary partial prepayments shall be in an
aggregate minimum amount of $1,000,000 and integral multiples of
$500,000;
(ii) Swing Line Loans, provided, however, that
-------- -------
(A) all such voluntary prepayments shall require prior
telephonic notice to the Swing Line Lender on or before 1:00
p.m., New York time, on the day of such prepayment (such notice
to be confirmed in writing within 24 hours thereafter); and
(B) all such voluntary partial prepayments shall be in an
aggregate minimum amount of $500,000 and an integral multiple of
$100,000.
(b On each date when the sum of (i) the aggregate outstanding
principal amount of all Revolving Loans and Swing Line Loans and (ii) the
aggregate amount of all Letter of Credit Outstandings exceeds the Revolving
Loan Commitment Amount (as it may be reduced from time to time, including
pursuant to Section 2.2 and Section 3.1.2), the
----------- -------------
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<PAGE>
Borrower shall make a mandatory prepayment of Revolving Loans or Swing Line
Loans (or both) and, if necessary, give cash collateral to the
Administrative Agent pursuant to an agreement satisfactory to the
Administrative Agent to collateralize Letter of Credit Outstandings, in an
aggregate amount equal to such excess.
(c On the Stated Maturity Date and on each Quarterly Payment Date
set forth below, the Borrower shall make a scheduled repayment of the
aggregate outstanding principal amount, if any, of all Term Loans in an
amount equal to the percentage of the aggregate outstanding principal
amount of Term Loans on March 31, 2001 set forth opposite such date:
Date Percentage
---- Reduction
---------
03/31/01 2.5%
06/30/01 2.5%
09/30/01 2.5%
12/31/01 2.5%
03/31/02 5.0%
06/30/02 5.0%
09/30/02 5.0%
12/31/02 5.0%
03/31/03 6.25%
06/30/03 6.25%
09/30/03 6.25%
12/31/03 6.25%
03/31/04 8.5%
06/30/04 8.5%
09/30/04 8.5%
12/31/04 8.5%
03/31/05 5.5%
06/30/05 5.5%.
(d Concurrently with the receipt by the Borrower of any Net
Disposition Proceeds, the Borrower shall make a mandatory prepayment of the
Loans in an amount equal to 100% of such Net Disposition Proceeds to be
applied as set forth in Section 3.1.2 unless the Borrower, within 345 days
-------------
after receipt by the Borrower of such proceeds, reinvests such Net
Disposition Proceeds in like assets. To the extent such Net Disposition
Proceeds are not so applied during such 345-day period, the Borrower shall
make a mandatory prepayment of the Loans (and shall reduce the Revolving
Loan Commitment) to be applied as set forth in Section 3.1.2.
-------------
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<PAGE>
(e shall, immediately upon any acceleration of the Stated Maturity
Date of any Loans pursuant to Section 8.2 or Section 8.3, the Borrower
----------- -----------
shall repay all the Loans, unless, pursuant to Section 8.3, only a portion
-----------
of all Loans is so accelerated (in which case the portion so accelerated
shall be so paid).
Each prepayment of any Loans made pursuant to this Section shall be without
premium or penalty, except as may be required by Section 4.4. No prepayment of
-----------
principal of any Revolving Loans or Swing Line Loans pursuant to clauses (a) or
-----------
(b) shall cause a reduction in the Revolving Loan Commitment Amount or the Swing
- ---
Line Loan Commitment, as the case may be.
SECTION III.1.2. Application. Amounts prepaid shall be applied as set
-----------
forth in this Section.
(a Subject to clause (b), each prepayment or repayment of the
----------
principal of the Loans shall be applied, to the extent of such prepayment
or repayment, first, to the principal amount thereof being maintained as
-----
Base Rate Loans, second, to the principal amount thereof being maintained
------
as LIBO Rate Loans, and third, to the principal amount thereof being
-----
maintained as CD Rate Loans.
(b Each prepayment of Loans made pursuant to clause (d) of Section
---------- -------
3.1.1 shall be applied (i) first, pro rata to a mandatory prepayment of the
----- --- ----
outstanding principal amount of all Term Loans (with the amount of such
prepayment of the Term Loans being applied to the remaining Term Loan
amortization payments pro rata in accordance with the amount of each such
--- ----
remaining Term Loan amortization payment) until all Term Loans have been
repaid in full, and (ii) second, once all Term Loans have been repaid in
full, pro rata to the repayment of any outstanding Revolving Loans and a
--- ----
corresponding reduction of the Revolving Loan Commitment Amount (applied
pro rata to the amount of scheduled reductions of the Revolving Loan
--- ----
Commitment Amount set forth in Section 2.2.2).
-------------
SECTION III.2. Interest Provisions. Interest on the outstanding principal
-------------------
amount of Loans shall accrue and be payable in accordance with this Section 3.2.
-----------
SECTION III.2.1. Rates. Pursuant to an appropriately delivered Borrowing
-----
Request or Continuation/Conversion Notice, the Borrower may elect that Loans
comprising a Borrowing accrue interest at a rate per annum:
(a on that portion maintained from time to time as a Base Rate Loan,
equal to the sum of the Alternate Base Rate from time to time in effect
plus the Applicable Margin; provided that all Swing Line Loans shall always
accrue interest at the then effective Applicable Margin for Revolving Loans
maintained as Base Rate Loans;
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<PAGE>
(b on that portion maintained as a CD Rate Loan, during each
Interest Period applicable thereto, equal to the sum of the CD Rate
(Reserve Adjusted) for such Interest Period plus the Applicable Margin; and
(c on that portion maintained as a LIBO Rate Loan, during each
Interest Period applicable thereto, equal to the sum of the LIBO Rate
(Reserve Adjusted) for such Interest Period plus the Applicable Margin.
All Fixed Rate Loans shall bear interest from and including the first day
of the applicable Interest Period to (but not including) the last day of such
Interest Period at the interest rate determined as applicable to such Fixed Rate
Loan.
SECTION III.2.2. Post-Maturity Rates. After the date any principal amount
-------------------
of any Loan or Reimbursement Obligation is due and payable (whether on the
Stated Maturity Date, upon acceleration or otherwise), or after any other
monetary Obligation of the Borrower shall have become due and payable, the
Borrower shall pay, but only to the extent permitted by law, interest (after as
well as before judgment) on such amounts at a rate per annum equal to the rate
(including any Applicable Margin) applicable to such Loan from time to time in
effect plus an additional margin of 2%.
----
SECTION III.2.3. Payment Dates. Interest accrued on each Loan shall be
-------------
payable, without duplication:
(a on the Stated Maturity Date therefor;
(b on the date of any payment or prepayment, in whole or in part, of
principal outstanding on such Loan on the principal amount so paid or
prepaid;
(c with respect to Base Rate Loans, on each Payment Date occurring
after the Effective Date;
(d with respect to Fixed Rate Loans, on the last Business Day of
each applicable Interest Period (and, (i) until such time as there is no
requirement in any Subordinated Debt Document that interest thereunder be
paid other than semi-annually, if such Interest Period shall exceed 30 days
or one month, as the case may be, on the 30th day or one month anniversary
of such Interest Period, as the case may be, and (ii) thereafter, if such
Interest Period shall exceed 90 days or three months, as the case may be,
on the 90th day or third-month anniversary of such Interest Period, as the
case may be);
(e with respect to any Base Rate Loans converted into Fixed Rate
Loans on a day when interest would not otherwise have been payable pursuant
to clause (c), on the date of such conversion; and
----------
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<PAGE>
(f on that portion of any Loans the Stated Maturity Date of which is
accelerated pursuant to Section 8.2 or Section 8.3, immediately upon such
----------- -----------
acceleration.
Interest accrued on Loans or other monetary Obligations arising under this
Agreement or any other Loan Document after the date such amount is due and
payable (whether on the Stated Maturity Date, upon acceleration or otherwise)
shall be payable upon demand.
SECTION III.3. Fees. The Borrower agrees to pay the fees set forth in
----
this Section 3.3. All such fees shall be non-refundable.
-----------
SECTION III.3.1. Commitment Fee. The Borrower agrees to pay to the
--------------
Administrative Agent for the account of each Lender, for the period (including
any portion thereof when any of its Commitments are suspended by reason of the
Borrower's inability to satisfy any condition of Article V) commencing on the
---------
Effective Date and continuing through the Revolving Loan Commitment Termination
Date, a commitment fee in an amount equal to 0.375% per annum of such Lender's
Percentage of the sum of the average daily unused portion of the Revolving Loan
Commitment Amount (net of Letter of Credit Outstandings). All commitment fees
payable pursuant to this Section shall be calculated on a year comprised of 365
days and payable by the Borrower in arrears on the Closing Date and thereafter
on each Payment Date (commencing with the first Payment Date following the
Effective Date) and on the Revolving Loan Commitment Termination Date. The
making of Swing Line Loans shall not constitute usage of the Revolving Loan
Commitment with respect to the calculation of commitment fees to be paid by the
Borrower to the Lenders.
SECTION III.3.2. Agency Fees. The Borrower agrees to pay to the Arranging
-----------
Agents and the Administrative Agent, for their own account, such fees in such
amounts and on such dates as agreed to in writing by the Borrower and the
applicable Agent.
SECTION III.3.3. Letter of Credit Fee. The Borrower agrees to pay to the
--------------------
Administrative Agent, for the pro rata account of the Issuer and each Revolving
--- ----
Loan Lender, a Letter of Credit fee in an amount equal to the then Applicable
Margin for Revolving Loans maintained as LIBO Rate Loans, multiplied by the
Stated Amount of each such Letter of Credit, such fees being payable on the date
of issuance of each Letter of Credit (for the period from the date of issuance
to the earlier of the expiration date of the applicable Letter of Credit and the
immediately succeeding Quarterly Payment Date) and thereafter quarterly in
advance on each Quarterly Payment Date. The Borrower further agrees to pay to
the Issuer such fees and other amounts in such amounts and at such times as may
be agreed to by the Borrower and the Issuer in writing.
ARTICLE IV
CERTAIN FIXED RATE AND OTHER PROVISIONS
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<PAGE>
SECTION IV.1. Fixed Rate Lending Unlawful. If any Lender shall determine
---------------------------
(which determination shall, upon notice thereof to the Borrower and the Lenders,
be conclusive and binding on the Borrower) that the introduction of or any
change in or in the interpretation of any law makes it unlawful, or any
Regulatory Authority asserts that it is unlawful, for such Lender to make,
continue or maintain any Loan as, or to convert any Loan into, a Fixed Rate
Loan, the obligations of such Lender to make, continue, maintain or convert any
such Fixed Rate Loan shall, upon such determination, forthwith be suspended
until such Lender shall notify the Administrative Agent that the circumstances
causing such suspension no longer exist, and all outstanding Fixed Rate Loans of
that type shall automatically convert into Base Rate Loans at the end of the
then current Interest Periods with respect thereto or sooner, if required by
such law or assertion.
SECTION IV.2. Deposits Unavailable. If the Administrative Agent shall
--------------------
have determined that
(a Dollar deposits in the relevant amount and for the relevant
Interest Period are not available to the Administrative Agent in its
relevant market; or
(b by reason of circumstances affecting the Administrative Agent's
relevant market, adequate means do not exist for ascertaining the interest
rate applicable hereunder to Fixed Rate Loans,
then, upon notice from the Administrative Agent to the Borrower and the Lenders,
the obligations of all Lenders under Section 2.3 and Section 2.4 to make or
----------- -----------
continue any Loans as, or to convert any Loans into, Fixed Rate Loans shall
forthwith be suspended until the Administrative Agent shall notify the Borrower
and the Lenders that the circumstances causing such suspension no longer exist.
SECTION IV.3. Increased Fixed Rate Loan Costs, etc. The Borrower agrees
------------------------------------
to reimburse each Lender for any increase in the cost to such Lender of, or any
reduction in the amount of any sum receivable by such Lender in respect of,
making, continuing or maintaining (or of its obligation to make, continue or
maintain) any Loans as, or of converting (or of its obligation to convert) any
Loans into, Fixed Rate Loans that arise in connection with (i) any change in, or
the introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in after the date hereof of, any law or regulation, directive, guideline,
decision or request (whether or not having the force of law) of any court or
Regulatory Authority except for such changes with respect to increased capital
costs and taxes which are governed by Sections 4.5 and 4.6, respectively, or
------------ ---
(ii) any changes in reserve requirements for "Eurocurrency Liabilities" as
defined in Regulation D of the F.R.S. Board which are not included in the
calculation of "LIBOR Reserve Percentage". Such Lender shall promptly notify
the Administrative Agent and the Borrower in writing of the occurrence of any
such event, such notice to state, in reasonable detail, the reasons therefor and
the additional amount required fully to compensate such Lender for such
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<PAGE>
increased cost or reduced amount. Such additional amounts shall be payable by
the Borrower directly to such Lender within five days of its receipt of such
notice, and such notice shall, in the absence of manifest error, be conclusive
and binding on the Borrower.
SECTION IV.4. Funding Losses. In the event any Lender shall incur any
--------------
loss or expense (including any loss (other than loss of profit) or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such Lender to make, continue or maintain any portion of the
principal amount of any Loan as, or to convert any portion of the principal
amount of any Loan into, a Fixed Rate Loan) as a result of
(a) any conversion or repayment or prepayment of the principal amount
of any Fixed Rate Loans on a date other than the scheduled last day of the
Interest Period applicable thereto, whether pursuant to Section 3.1 or
-----------
otherwise;
(b) any Loans not being made as Fixed Rate Loans in accordance with
the Borrowing Request therefor; or
(c) any Loans not being continued as, or converted into, Fixed Rate
Loans in accordance with the Continuation/Conversion Notice therefor,
then, upon the written notice of such Lender to the Borrower (with a copy to the
Administrative Agent), the Borrower shall, within five days of its receipt
thereof, pay directly to such Lender such amount as will (in the reasonable
determination of such Lender) reimburse such Lender for such loss or expense;
provided, however, that such loss or expense shall not include loss of the
- -------- -------
Applicable Margin with respect to any Loan accruing after the date of such
payment. Such written notice (which shall include calculations in reasonable
detail) shall, in the absence of manifest error, be conclusive and binding on
the Borrower.
SECTION IV.5. Increased Capital Costs. If any change in, or the
-----------------------
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court or Regulatory Authority,
affects or would affect the amount of capital required or expected to be
maintained by any Lender or any Person controlling such Lender, and such Lender
determines (in good faith but in its sole and absolute discretion) that the rate
of return on its or such controlling Person's capital as a consequence of the
Commitments or the Loans made, or the Letters of Credit issued or participated
in, by such Lender is reduced to a level below that which such Lender or such
controlling Person could have achieved but for the occurrence of any such
circumstance, then, in any such case upon notice from time to time by such
Lender to the Borrower, the Borrower shall immediately pay directly to such
Lender additional amounts sufficient to compensate such Lender or such
controlling Person for such reduction in rate of return. A statement of such
Lender as to any such additional amount or amounts (including calculations
thereof in reasonable detail) shall, in the absence of manifest error, be
conclusive and binding on the Borrower. In
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<PAGE>
determining such amount, such Lender may use any method of averaging and
attribution that it (in its sole and absolute discretion) shall deem applicable.
SECTION IV.6. Taxes.
-----
(a) All payments by the Borrower of principal of, and interest on, or
other amounts in respect of, the Loans and all other amounts payable
hereunder (including fees) and the Notes shall be made free and clear of
and without deduction for any Taxes, except to the extent that any such
withholdings or deductions are required by applicable law, rule or
regulations. In that event, the Borrower will
(i) pay directly to the relevant authority the full amount of
Taxes required to be so withheld or deducted;
(ii) promptly forward to the Administrative Agent an official
receipt or other documentation satisfactory to the Administrative
Agent evidencing such payment to such authority; and
(iii) if such Taxes are Covered Taxes, pay to the Administrative
Agent for the account of the Lenders such additional amount or amounts
as is necessary to ensure that the net amount actually received by
each Lender will equal the full amount such Lender would have received
had no such withholding or deduction been required.
In addition, if the Borrower, any Lender, or any Agent is required by law
at any time to pay any Covered Tax on, or calculated by reference to, any
sum received or receivable by or on behalf of any Lender or any Agent under
this Agreement or any Notes, then (i) with respect solely to any such
requirement with respect to a Lender or an Agent, any applicable Lender or
Agent shall, as promptly as practicable following such Person having notice
of such requirement, give notice to the Borrower of such requirement and
(ii) the Borrower shall, promptly after having received such notice, pay or
procure the payment of such Covered Tax. If the Borrower pays any such
Covered Taxes as required by the immediately preceding sentence, then the
Borrower will promptly forward to the Administrative Agent an official
receipt or other documentation satisfactory to the Administrative Agent
evidencing such payment of Covered Taxes to the relevant taxing authority.
Without prejudice to the preceding provisions, if any Agent or any Lender
is required by law to make any payment on account of Covered Taxes on or in
relation to any sum received under this Agreement or any Note, or any
liability for Covered Taxes in respect of any such sum is imposed, levied
or assessed against any Lender or any Agent, the Borrower will indemnify
each such Lender and Agent for the full amount of Covered Taxes paid by
such Lender or Agent (as the case may be), whether or not such Covered
Taxes were correctly or legally asserted. Such indemnification shall be
made within 30 days of the demand of the Lender or Agent therefor. In
addition, if the Borrower fails to
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remit to the Administrative Agent, for the account of the respective
Lenders, the required receipts or other required documentary evidence of
its payment of any Taxes, the Borrower shall indemnify the Lenders for any
incremental Taxes, interest or penalties that may become payable by any
Lender as a result of any such failure. For purposes of this Section 4.6,
-----------
the transfer by the Administrative Agent or any Lender to or for the
account of any Lender of any sum received from the Borrower on account of
amounts required to be paid by the Borrower hereunder in respect of Covered
Taxes imposed with respect to the recipient shall be deemed a payment by
the Borrower of such amounts.
(b) Each Lender that is an original signatory to this Agreement and
each Agent hereby severally (but not jointly) represent that, under
applicable law and treaties in effect as of the Effective Date, no United
States federal income taxes will be required to be withheld by the
Administrative Agent or the Borrower with respect to any payments to be
made to such Person in respect of this Agreement. Each Lender that is an
original signatory hereto (and each Person which becomes a Lender by
assignment, transfer or participation pursuant to Section 10.11 hereof) and
-------------
each Agent (and each Person that becomes an Agent by appointment pursuant
to Section 9.4 hereof), agrees severally (but not jointly) that, on or
-----------
prior to the Effective Date (or such assignment, transfer or appointment,
as the case may be) it will in each case deliver to the Borrower and the
Administrative Agent the following:
(i) in the case of a Person other than a Non-U.S. Lender, two
copies of a statement certifying that such Person is a U.S. Person,
which statement shall contain the address, if any, of such Person's
office or place of business in the United States, and shall be signed
by an authorized officer of such Person, together with two duly
completed copies of United States Internal Revenue Service Form W-9
(or applicable successor form) (unless it establishes to the
reasonable satisfaction of the Borrower that it is otherwise eligible
for an exemption from backup withholding tax or other applicable
withholding tax), or
(ii) in the case of a Non-U.S. Lender, either (A) two duly
completed copies of United States Internal Revenue Service Form 1001
or 4224 (or applicable successor form) certifying in each case that
such Person is entitled to receive payments under this Agreement and
the Notes payable to it without deduction or withholding of any United
States federal income taxes and two duly completed copies of United
States Internal Revenue Service Form W-8 or Form W-9 (or applicable
successor form) or (B) in the case of an assignee Lender that is not a
"bank" within the meaning of Section 881(c)(3)(A) of the Code and that
does not comply with the requirements of clause (i) hereof, then a
statement in substantially the form of Exhibit N hereto (an "Exemption
--------- ---------
Certificate") to the effect that such assignee Lender is eligible for
-----------
a complete exemption from withholding of United States withholding tax
under Section 871(h) or Section
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<PAGE>
881(c) of the Code and two duly completed and signed original copies
of Internal Revenue Service Form W-8.
Each Person who delivers to the Borrower and the Administrative Agent a
Form W-8, W-9, 1001 or 4224, or applicable successor form, pursuant to this
clause, further undertakes to deliver to the Borrower and the
Administrative Agent two further copies of said Form W-8, W-9, 1001, 4224,
or applicable successor form, or other manner of certification, as the case
may be, on or before the date that any such form expires or becomes
obsolete or after the occurrence of any event requiring a change in the
most recent form previously delivered by it to the Borrower, and such
extensions or renewals thereof as may reasonably be requested by the
Borrower, certifying that such Person is entitled to receive payments under
this Agreement without deduction or withholding of any United States
federal income taxes, unless in any such case any change in law, rule,
regulation, treaty or directive, or in the interpretation or application
thereof (a "Law Change"), has occurred prior to the date on which any such
----------
delivery would otherwise be required, which Law Change renders any such
form inapplicable or which would prevent such Person from duly completing
and delivering any such form with respect to it.
(c) The agreements in this Section shall survive the termination of
this Agreement and the payment of the Notes and all other amounts payable
hereunder.
(d) No Lender shall be given the benefit of the provisions of clause
------
(a) above during such time that such Lender has failed to comply with
---
clause (b) above.
----------
SECTION IV.7. Payments, Computations, etc. Unless otherwise expressly
---------------------------
provided, all payments by the Borrower pursuant to this Agreement or any other
Loan Document shall be made by the Borrower to the Administrative Agent for the
pro rata account of the Lenders entitled to receive such payment. All such
- --- ----
payments required to be made to the Administrative Agent shall be made, without
setoff, deduction or counterclaim, not later than 12:00 noon, New York time, on
the date due, in same day or immediately available funds, to such account as the
Administrative Agent shall specify from time to time by notice to the Borrower.
The failure of the Borrower to make any such payment by such time shall not
constitute a Default hereunder, provided that such payment is received by the
Administrative Agent in immediately available funds by 4:00 p.m. on such due
date, but any such payment made after 1:00 p.m. on such due date shall be deemed
to have been made on the next Business Day for the purpose of calculating
interest on amounts outstanding on the Obligations unless the Administrative
Agent in fact was able to remit to each Lender its pro-rata share of such
payment by 4:00 p.m. on such due date. Funds received after that time shall be
deemed to have been received by the Administrative Agent on the next succeeding
Business Day. The Administrative Agent shall promptly remit in same day funds
to each Lender its share, if any, of such payments received by the
Administrative Agent for the account of such Lender. All interest (including
interest on LIBO Rate Loans) shall be computed on the basis of the actual number
of days (including the first day but excluding the last day) occurring during
the period for which such interest or fee is payable over a year
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<PAGE>
comprised of 360 days (or, in the case of interest on a Base Rate Loan
(calculated at other than the Federal Funds Rate) and fees, 365 days or, if
appropriate, 366 days). Whenever any payment to be made shall otherwise be due
on a day which is not a Business Day, such payment shall (except as otherwise
required by clause (c) of the definition of the term "Interest Period") be made
----------
on the next succeeding Business Day and such extension of time shall be included
in computing interest and fees, if any, in connection with such payment.
SECTION IV.8. Sharing of Payments. If any Lender shall obtain any payment
-------------------
or other recovery (whether voluntary, involuntary, by application of setoff or
otherwise) on account of any Loan or Reimbursement Obligation (other than
pursuant to the terms of Section 4.3, 4.4, 4.5 or 4.6) in excess of its pro rata
----------- --- --- --- --- ----
share of payments then or therewith obtained by all Lenders, such Lender shall
purchase from the other Lenders such participations in Credit Extensions made by
them as shall be necessary to cause such purchasing Lender to share the excess
payment or other recovery ratably with each of them; provided, however, that if
-------- -------
all or any portion of the excess payment or other recovery is thereafter
recovered from such purchasing Lender, the purchase shall be rescinded and each
Lender which has sold a participation to the purchasing Lender shall repay to
the purchasing Lender the purchase price to the ratable extent of such recovery
together with an amount equal to such selling Lender's ratable share (according
to the proportion of (a) the amount of such selling Lender's required repayment
to the purchasing Lender to (b) total amount so recovered from the purchasing
--
Lender) of any interest or other amount paid or payable by the purchasing Lender
in respect of the total amount so recovered. The Borrower agrees that any
Lender so purchasing a participation from another Lender pursuant to this
Section may, to the fullest extent permitted by law, exercise all its rights of
payment (including pursuant to Section 4.9) with respect to such participation
-----------
as fully as if such Lender were the direct creditor of the Borrower in the
amount of such participation. If under any applicable bankruptcy, insolvency or
other similar law, any Lender receives a secured claim in lieu of a setoff to
which this Section applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of the Lenders entitled under this Section to share in the benefits
of any recovery on such secured claim.
SECTION IV.9. Setoff. Each Lender shall, upon the occurrence and during
------
the continuance of any Default described in clauses (a) through (d) of Section
----------- --- -------
8.1.9 or, with the consent of the Required Lenders, upon the occurrence and
- -----
during the continuance of any other Event of Default, have the right to
appropriate and apply to the payment of the Obligations owing to it (whether or
not then due), and (as security for such Obligations) the Borrower hereby grants
to each Lender a continuing security interest in, any and all balances, credits,
deposits, accounts or moneys of the Borrower then or thereafter maintained with
such Lender; provided, however, that any such appropriation and application
-------- -------
shall be subject to the provisions of Section 4.8. Each Lender agrees promptly
-----------
to notify the Borrower and the Administrative Agent after any such setoff and
application made by such Lender; provided, however, that the failure to give
-------- -------
such notice shall not affect the validity of such setoff and application. The
rights of each Lender under this Section are in addition to other rights and
remedies (including other rights of setoff under applicable law or otherwise)
which such Lender may have.
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SECTION IV.10. Lender's Duty to Mitigate'. Each Lender, as promptly as
--------------------------
practicable after it becomes aware of the occurrence of an event or the
existence of a condition that would cause it to be affected under Section 4.1,
-----------
4.2, 4.3, 4.5 or 4.6 or that would entitle such Lender to receive payments under
- --- --- --- ---
Section 4.3, will give notice thereof to the Borrower and the Administrative
- -----------
Agent and, to the extent not inconsistent with such Lender's internal policies,
such Lender shall use commercially reasonable efforts to make, fund or maintain
its affected LIBO Rate Loans through another lending office of such Lender if,
as a result thereof, the additional moneys which would otherwise be required to
be paid to such Lender pursuant to Section 4.2, 4.3, 4.5 or 4.6, as the case may
----------- --- --- ---
be, would be materially reduced, or the illegality or other adverse
circumstances which would otherwise require a conversion of such Loans pursuant
to Section 4.1 would cease to exist, and if, as determined by such Lender in its
-----------
reasonable discretion, the making, funding or maintaining of such Loans through
such other lending office would not otherwise adversely affect such Loans or
such Lender.
SECTION IV.11. Replacement of Lenders. Each Lender hereby severally
----------------------
agrees as set forth in this Section:
(a) If any Lender (a "Subject Lender") makes demand upon the Borrower
--------------
for (or if the Borrower is otherwise required to pay) amounts pursuant to
Section 4.2, 4.3, 4.5 or 4.6, or gives notice pursuant to Section 4.1
----------- --- --- --- -----------
requiring a conversion of such Subject Lender's LIBO Rate Loans to Base
Rate Loans, the Borrower may, within 90 days of receipt by the Borrower of
such demand or notice (or the occurrence of such other event causing the
Borrower to be required to pay such compensation), as the case may be, give
notice (a "Replacement Notice") in writing to the Administrative Agent and
------------------
such Subject Lender of its intention to replace such Subject Lender with a
financial institution designated in such Replacement Notice. If the
Administrative Agent shall, in the exercise of its reasonable discretion
and within 30 days of its receipt of such Replacement Notice, notify the
Borrower and such Subject Lender in writing that the designated financial
institution is satisfactory to the Administrative Agent, then such Subject
Lender shall, so long as no Default shall have occurred and be continuing
(and subject to the payment of any amounts due pursuant to Section 4.4),
-----------
assign, in accordance with Section 10.11.1, all of its Commitments, Loans,
---------------
Notes and other rights and obligations under this Agreement and all other
Loan Documents (including, without limitation, Reimbursement Obligations)
to such designated financial institution; provided, however, that (i) such
-------- -------
assignment shall be without recourse, representation or warranty (other
than that such Lender owns the Commitments, Loans and Notes being assigned,
free and clear of any Liens) and shall be on terms and conditions
reasonably satisfactory to such Subject Lender and such designated
financial institution and (ii) the purchase price paid by such designated
financial institution shall be in the amount of such Subject Lender's Loans
and its Percentage of outstanding Reimbursement Obligations, together with
all accrued and unpaid interest and fees in respect thereof, plus all other
amounts (other than the amounts demanded and unreimbursed under Sections
--------
4.2, 4.3, 4.5 and 4.6, which shall be payable upon demand by the Borrower),
--- --- --- ---
owing to such Subject Lender hereunder.
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<PAGE>
(b) Upon the effective date of an assignment described in clause (a),
----------
the Borrower shall issue a replacement Note or Notes, as the case may be,
to such designated financial institution or Replacement Lender, as
applicable, and such institution shall become a "Lender" for all purposes
under this Agreement and the other Loan Documents. In the case of clause
------
(a), the Administrative Agent agrees to use all commercially reasonable
---
efforts to assist the Borrower in locating a replacement financial
institution to replace any Subject Lender; provided, however, that the
-------- -------
Borrower agrees to pay all reasonable costs and expenses incurred by the
Administrative Agent in providing such assistance.
ARTICLE V
CONDITIONS TO CREDIT EXTENSIONS
SECTION V.1. Initial Credit Extension. The obligation of each Lender and,
------------------------
if applicable, the Issuer to make the initial Credit Extension shall be subject
to the prior or concurrent satisfaction of each of the conditions precedent set
forth in this Section 5.1.
-----------
SECTION V.1.1. Subsidiary Guaranties. The Arranging Agents shall have
---------------------
received, if not otherwise restricted pursuant to the terms of the Primestar
Partnership Credit Agreement, executed counterparts of a Subsidiary Guaranty
from the Primestar Partnership, dated the Closing Date and duly executed and
delivered by an Authorized Officer of the Primestar Partnership.
SECTION V.1.2. Pledge Agreements. The Arranging Agents shall have
-----------------
received executed counterparts of (a) the Subsidiary Pledge Agreement, duly
executed and delivered by an Authorized Officer of each of TSAT Partners
Holdings, TCISE Partner 1, Inc. and TCISE Partner 2, Inc., and (b) a supplement
to the Borrower Pledge Agreement, duly executed and delivered by an Authorized
Officer of the Borrower, in each case dated the Closing Date, together with
certificates evidencing all of the issued and outstanding Capital Stock of each
Restricted Subsidiary being pledged thereunder, which certificates shall be
accompanied by undated stock powers duly executed in blank, or, if any
securities pledged pursuant to the Subsidiary Pledge Agreement or the supplement
to the Borrower Pledge Agreement are uncertificated securities, confirmation and
evidence satisfactory to the Arranging Agents that the security interest in such
uncertificated securities has been transferred to and perfected by the
Administrative Agent for the benefit of the Secured Parties in accordance with
the U.C.C., and all laws otherwise applicable to the perfection of the pledge of
such shares. The Arranging Agents and their counsel shall be satisfied that (i)
the Lien granted to the Administrative Agent, for the benefit of the Secured
Parties, in the collateral described above is a first priority (or local
equivalent thereof) security interest; and (ii) no Lien exists on any of the
collateral described above other than the Lien created in favor of the
Administrative Agent, for the benefit of the Secured Parties, pursuant to the
the Subsidiary Pledge Agreement or the supplement to the Borrower Pledge
Agreement.
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SECTION V.1.3. Contract Assignment Agreement and each Consent and
--------------------------------------------------
Agreement. The Arranging Agents shall have received executed counterparts of
- ---------
each of the Contract Assignment Agreement and each Consent and Agreement, as
applicable, duly executed and delivered by an Authorized Officer of the Borrower
and such other parties thereto.
SECTION V.1.4. Financial Information, etc. The Arranging Agents shall
--------------------------
have received
(a) three year historical financial information satisfactory to the
Arranging Agents for each of the partner distributors of the PRIMESTAR
Distribution Service; and
(b) the Pro Forma Balance Sheet.
SECTION V.1.5. Closing Date Certificate. The Arranging Agents shall have
------------------------
received the Borrower Closing Date Certificate, dated the Closing Date, duly
executed and delivered by an Authorized Officer of the Borrower, in which
certificate the Borrower shall agree and acknowledge that the statements made
therein shall be deemed to be true and correct representations and warranties of
the Borrower made as of such date and, at the time each such certificate is
delivered, such statements shall in fact be true and correct. All documents and
agreements required to be appended to the Borrower Closing Date Certificate
shall be in form and substance satisfactory to the Arranging Agents.
SECTION V.1.6. Compliance Certificate. The Arranging Agents shall have
----------------------
received an initial Compliance Certificate on a pro forma basis as if the Credit
--- -----
Extension to be made on the Closing Date had occurred as of September 30, 1997
and as to such items therein as the Arranging Agents reasonably request, dated
the Closing Date, duly executed (and with all schedules thereto duly completed)
and delivered by the chief executive, financial or accounting Authorized Officer
of the Borrower.
SECTION V.1.7. Solvency, etc. The Arranging Agents shall have received
-------------
the Solvency Certificate, dated the Closing Date.
SECTION V.1.8. Consummation of Restructuring Transaction. The Arranging
-----------------------------------------
Agents shall have received (a) evidence satisfactory to them that the
Restructuring Transaction has been (or contemporaneously with the making of the
initial Credit Extension, will be) consummated and (b) copies of the
Restructuring Agreement and all documents and agreements delivered in connection
therewith.
SECTION V.1.9. Senior Subordinated Credit Agreement. The Arranging Agents
------------------------------------
shall have received evidence satisfactory to them that (a) the Borrower has
received not less than $350,000,000 in gross proceeds from the Senior
Subordinated Credit Agreement on terms and conditions satisfactory to the
Arranging Agents, and (b) no default has occurred and is continuing under any
Subordinated Debt Document.
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SECTION V.1.10. Delivery of Transaction Documents. The Arranging Agents
---------------------------------
shall have received a fully executed copy of each of the Transaction Documents.
There shall not have been any amendments, waivers or other modifications of, or
other forbearance to exercise any rights with respect to, any of the terms or
provisions of any Transaction Document and the exhibits and schedules thereto.
SECTION V.1.11. Insurance. The Arranging Agents shall have received
---------
certified copies of the insurance policies (or binders or certificates of
insurance in respect thereof, or such other evidence of insurance satisfactory
to the Arranging Agents), from one or more insurance companies satisfactory to
the Arranging Agents, evidencing coverage required to be maintained pursuant
hereto and each Loan Document.
SECTION V.1.12. Opinion of Counsel. The Arranging Agents shall have
------------------
received an opinion, dated the Closing Date and addressed to the Agents and all
Lenders, from Sherman & Howard L.L.C., special counsel to the Obligors, in form
and substance satisfactory to the Arranging Agents.
SECTION V.1.13. Closing Fees, Expenses, etc. The Agents shall have
---------------------------
received for their own accounts, or for the account of each Lender, as the case
may be, all fees, costs and expenses due and payable pursuant to Section 3.3, if
-----------
then invoiced.
SECTION V.2. All Credit Extensions. The obligation of each Lender and the
---------------------
Issuer to make any Credit Extension shall be subject to Sections 2.1.4 and 2.1.5
-------------- -----
and the satisfaction of each of the conditions precedent set forth in this
Section 5.2.
- -----------
SECTION V.2.1. Compliance with Warranties, No Default, etc. Both before
-------------------------------------------
and after giving effect to any Credit Extension (but, if any Default of the
nature referred to in Section 8.1.5 shall have occurred with respect to any
-------------
other Indebtedness, without giving effect to the application, directly or
indirectly, of the proceeds thereof) the following statements shall be true and
correct:
(a) the representations and warranties set forth in Article VI
----------
(excluding, however, those contained in Section 6.7) and in each other Loan
-----------
Document shall, in each case, be true and correct with the same effect as
if then made (unless stated to relate solely to an earlier date, in which
case such representations and warranties shall be true and correct in all
material respects as of such earlier date);
(b) except as disclosed by the Borrower to the Administrative Agent
and the Lenders pursuant to Section 6.7,
-----------
(i) no labor controversy, litigation, arbitration or
governmental investigation or proceeding shall be pending or, to the
knowledge of the
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Borrower, threatened against the Borrower or any of its Subsidiaries
which could reasonably be expected to have a Material Adverse Effect;
and
(ii) no development shall have occurred in any labor
controversy, litigation, arbitration or governmental investigation or
proceeding disclosed pursuant to Section 6.7 which could reasonably be
-----------
expected to have a Material Adverse Effect; and
(c) no Default shall have then occurred and be continuing.
SECTION V.2.2. Credit Extension Request, etc. The Administrative Agent
-----------------------------
shall have received a Borrowing Request if Loans are being requested, or an
Issuance Request if a Letter of Credit is being requested or extended. Each of
the delivery of a Borrowing Request or Issuance Request and the acceptance by
the Borrower of the proceeds of such Credit Extension shall constitute a
representation and warranty by the Borrower that on the date of such Credit
Extension (both immediately before and after giving effect to such Credit
Extension and the application of the proceeds thereof) the statements made in
Section 5.2.1 are true and correct in all material respects.
- -------------
SECTION V.2.3. Satisfactory Legal Form. All documents executed or
-----------------------
submitted pursuant hereto by or on behalf of the Borrower or any of its
Subsidiaries or any other Obligors shall be reasonably satisfactory in form and
substance to the Arranging Agents and their counsel; the Arranging Agents and
their counsel shall have received all information, approvals, opinions,
documents or instruments as the Arranging Agents or their counsel may reasonably
request.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders, the Issuer and each Agent to enter into
this Agreement and to make Credit Extensions hereunder, the Borrower represents
and warrants unto each Agent, the Issuer and each Lender as set forth in this
Article VI.
- ----------
SECTION VI.1. Organization, etc. The Borrower and each of its
-----------------
Subsidiaries is a corporation validly organized and existing and in good
standing under the laws of the state or jurisdiction of its incorporation, is
duly qualified to do business and is in good standing as a foreign corporation
in each jurisdiction where the nature of its business requires such
qualification, and has full power and authority and holds all requisite
governmental licenses, permits and other approvals to enter into and perform its
Obligations under this Agreement and each other Loan Document and Transaction
Document to which it is a party and to own and hold under lease its property and
to conduct its business substantially as currently conducted by it.
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SECTION VI.2. Due Authorization, Non-Contravention, etc. The execution,
-----------------------------------------
delivery and performance by the Borrower of this Agreement and each other Loan
Document and Transaction Document executed or to be executed by it and the
execution, delivery and performance by each other Obligor of each Loan Document
and Transaction Document executed or to be executed by it are in each case
within each such Person's corporate powers, have been duly authorized by all
necessary corporate action, and do not:
(a) contravene any such Person's Organic Documents;
(b) contravene any Contractual Obligation binding on or affecting any
such Person;
(c) contravene any Governmental Approval or Governmental Rule binding
on or affecting any such Person; or
(d) result in, or require the creation or imposition of, any Lien on
any of such Person's properties (except as expressly permitted by this
Agreement).
SECTION VI.3. Government Approval, Regulation, etc. Except as disclosed
------------------------------------
in Item 6.3 ("Approvals") of the Disclosure Schedule, no authorization or
--------
approval or other action by, and no notice to or filing with, any Regulatory
Authority or other Person (other than those that have been, or on the Effective
Date will be, duly obtained or made and which are, or on the Effective Date will
be, in full force and effect) is required for the due execution, delivery or
performance by the Borrower of this Agreement or by the Borrower or any other
Obligor of any other Loan Document or Transaction Document to which it is a
party. Neither the Borrower nor any of its Subsidiaries is an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
or a "holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or a "subsidiary company" of a "holding
company", within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
SECTION VI.4. Validity, etc. This Agreement constitutes, and other Loan
-------------
Document and Transaction Document, executed by the Borrower constitute or will,
on the due execution and delivery thereof, constitute, the legal, valid and
binding obligations of the Borrower, enforceable against the Borrower in
accordance with their respective terms; and each other Loan Document and
Transaction Document executed pursuant hereto by each other Obligor will, on the
due execution and delivery thereof by such Obligor, constitute the legal, valid
and binding obligation of such Obligor enforceable against such Obligor in
accordance with its terms (except, in any case above, as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally and by principles of equity).
SECTION VI.5. Financial Information. The financial statements of the
---------------------
Borrower and its Subsidiaries furnished to the Arranging Agents and each Lender
pursuant to Section 5.1.4 have been prepared in accordance with GAAP. All
-------------
balance sheets, all statements of operations,
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shareholders' equity and cash flows and all other financial information of each
of the Borrower and its Subsidiaries furnished pursuant to Section 7.1.1 have
-----
been and will for periods following the Effective Date be prepared in accordance
with GAAP consistently applied, and do or will present fairly the consolidated
financial position of the corporations covered thereby as at the dates thereof
and the results of their operations for the periods then ended, except that
quarterly financial statements need not include footnote disclosure and may be
subject to ordinary year-end adjustment.
SECTION VI.6. No Material Adverse Effect. There has been no Material
--------------------------
Adverse Effect since December 31, 1996.
SECTION VI.7. Litigation, Labor Controversies, etc. Except as disclosed
------------------------------------
in Item 6.7 ("Litigation") of the Disclosure Schedule, there is no pending or,
--------
to the knowledge of the Borrower, threatened litigation, action, proceeding, or
labor controversy affecting the Borrower or any of its Subsidiaries, or any of
their respective properties, businesses, assets or revenues, which (a) could
have a Material Adverse Effect or (b) could adversely affect the legality,
validity or enforceability of this Agreement or any other Loan Document or
Transaction Document.
SECTION VI.8. Compliance with Laws. The Borrower and its Subsidiaries
--------------------
have complied in all material respects with all applicable Governmental
Approvals and Governmental Rules of any Regulatory Authority having jurisdiction
over the conduct of its businesses or the ownership of its properties.
SECTION VI.9. Subsidiaries. The Borrower has no Subsidiaries, except
------------
those Subsidiaries:
(a) which are identified in Item 6.9 ("Existing Subsidiaries") of the
--------
Disclosure Schedule; or
(b) which are permitted to have been organized or acquired in
accordance with Section 7.2.5 or 7.2.10.
------------- ------
SECTION VI.10. Ownership of Properties. Except as permitted pursuant to
-----------------------
Section 6.14 or Section 7.2.3, the Borrower and each of its Subsidiaries owns
- ------------ -------------
(a) in the case of owned real property, good and marketable fee title to, and
(b) in the case of owned personal property, good and valid title to, or, in the
case of leased real or personal property, valid and enforceable leasehold
interests (as the case may be) in, all of its properties and assets, real and
personal, tangible and intangible, of any nature whatsoever, free and clear in
each case of all Liens or claims, except for Liens permitted pursuant to Section
-------
7.2.3.
- -----
SECTION VI.11. Taxes. The Borrower and each of its Subsidiaries has filed
-----
all tax returns and reports required by law to have been filed by it and has
paid all taxes and governmental charges thereby shown to be due and owing,
except any such taxes or charges
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which are being diligently contested in good faith by appropriate proceedings
and for which adequate reserves in accordance with GAAP shall have been set
aside on its books.
SECTION VI.12. Pension and Welfare Plans. During the twelve-consecutive-
-------------------------
month period prior to the date of the execution and delivery of this Agreement
and prior to the date of any Credit Extension hereunder, no steps have been
taken to terminate any Pension Plan (other than a standard termination under
Section 4041(b) of ERISA), and no contribution failure has occurred with respect
to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of
ERISA. No condition exists or event or transaction has occurred with respect to
any Pension Plan which might result in the incurrence by the Borrower or any
member of the Controlled Group of any material liability, fine or penalty.
SECTION VI.13. Environmental Warranties. Except as set forth in Item 6.13
------------------------ ---------
("Environmental Matters") of the Disclosure Schedule:
(a) all facilities and property (including underlying groundwater)
owned or leased by the Borrower or any of its Subsidiaries have been, and
continue to be, owned or leased by the Borrower and its Subsidiaries in
material compliance with all Environmental Laws;
(b) there are no pending or threatened and, to the best of the
Borrower's knowledge, there have been no past
(i) claims, complaints, notices or requests for information
received by the Borrower or any of its Subsidiaries with respect to
any alleged violation of any Environmental Law, or
(ii) complaints, notices or inquiries to the Borrower or any of
its Subsidiaries regarding potential liability under any Environmental
Law;
(c) there have been no Releases of Hazardous Materials at, on or
under any property now or previously owned or leased by the Borrower or any
of its Subsidiaries that, singly or in the aggregate, have, or could
reasonably be expected to have, a Material Adverse Effect;
(d) the Borrower and its Subsidiaries have been issued and are in
material compliance with all permits, certificates, approvals, licenses and
other authorizations relating to environmental matters and necessary or
desirable for their businesses;
(e) no property now or previously owned or leased by the Borrower or
any of its Subsidiaries is listed or proposed for listing on the National
Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state
list of sites requiring investigation or clean-up;
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(f) there are no underground storage tanks, active or abandoned,
including petroleum storage tanks, on or under any property now or
previously owned or leased by the Borrower or any of its Subsidiaries that,
singly or in the aggregate, have, or could reasonably be expected to have,
a Material Adverse Effect;
(g) neither the Borrower nor any Subsidiary of the Borrower has
directly transported or directly arranged for the transportation of any
Hazardous Material to any location which is listed or proposed for listing
on the National Priorities List pursuant to CERCLA, on the CERCLIS or on
any similar state list or which is the subject of federal, state or local
enforcement actions or other investigations which may lead to material
claims against the Borrower or such Subsidiary thereof for any remedial
work, damage to natural resources or personal injury, including claims
under CERCLA;
(h) there are no polychlorinated biphenyls or friable asbestos
present at any property now or previously owned or leased by the Borrower
or any Subsidiary of the Borrower that, singly or in the aggregate, have,
or could reasonably be expected to have, a Material Adverse Effect; and
(i) no conditions exist at, on or under any property now or
previously owned or leased by the Borrower which, with the passage of time,
or the giving of notice or both, would give rise to liability under any
Environmental Law.
SECTION VI.14. Intellectual Property. Each of the Borrower and its
---------------------
Subsidiaries owns and possesses or licenses (as the case may be) all such
patents, patent rights, trademarks, trademark rights, trade names, trade name
rights, service marks, service mark rights and copyrights necessary for the
conduct of the businesses of the Borrower and its Subsidiaries as now conducted
without, individually or in the aggregate, any infringement upon rights of other
Persons, in each case except as could not reasonably be expected to result in a
Material Adverse Effect, and there is no individual patent, patent right,
trademark, trademark right, trade name, trade name right, service mark, service
mark right or copyright the loss of which could reasonably be expected to have a
Material Adverse Effect, except as may be disclosed in Item 6.14 ("Intellectual
---------
Property") of the Disclosure Schedule.
SECTION VI.15. Regulations U and X. Neither the Borrower nor any of its
-------------------
Subsidiaries is engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock, and no proceeds of any Credit Extensions
will be used to purchase or carry margin stock or otherwise for a purpose which
violates, or would be inconsistent with, F.R.S. Board Regulation U or X. Terms
for which meanings are provided in F.R.S. Board Regulation U or X or any
regulations substituted therefor, as from time to time in effect, are used in
this Section with such meanings.
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SECTION VI.16. Accuracy of Information. None of the factual information
-----------------------
heretofore or contemporaneously furnished by or on behalf of the Borrower in
writing to any Agent, the Issuer or any Lender for purposes of or in connection
with this Agreement or any transaction contemplated hereby (true and complete
copies of which were furnished to each Arranging Agent, the Issuer and each
Lender in connection with its execution and delivery hereof), contains any
untrue statement of a material fact on the date as of which such information is
dated or certified, and none of the other factual information hereafter
furnished in connection with this Agreement or any other Loan Document or any
Transaction Document by the Borrower or any other Obligor to any Agent, the
Issuer or any Lender will contain any untrue statement of a material fact on the
date as of which such information is dated or certified and, as of the date of
the execution and delivery of this Agreement by each Arranging Agent and each
Lender, the information delivered prior to the date of execution and delivery of
this Agreement (unless such information specifically relates to a prior date)
does not, and the factual information hereafter furnished shall not on the date
as of which such information is dated or certified, omit to state any material
fact necessary to make any information not misleading.
SECTION VI.17. Subordinated Debt. The making of the Credit Extensions,
-----------------
and the acceptance thereof by the Borrower, does not violate the provisions of
any Subordinated Debt Document.
ARTICLE VII
COVENANTS
SECTION VII.1. Affirmative Covenants. The Borrower agrees with each
---------------------
Agent, the Issuer and each Lender that, until all Commitments have terminated
and all Obligations have been paid and performed in full, the Borrower will
perform or cause to be performed the obligations set forth in this Section 7.1.
-----------
SECTION VII.1.1. Financial Information, Reports, Notices, etc. The
--------------------------------------------
Borrower will furnish, or will cause to be furnished, to each Lender, the Issuer
and each Agent copies of the following financial statements, reports, notices
and information:
(a) as soon as available and in any event within 45 days (and 60
days, in the case of the Borrower and its Restricted Subsidiaries) after
the end of each of the first three Fiscal Quarters of each Fiscal Year of
the Borrower, a consolidated balance sheet of the Borrower and its
Restricted Subsidiaries and a consolidated balance sheet of the Borrower
and its Subsidiaries, in each case as of the end of such Fiscal Quarter and
consolidated statements of earnings and cash flows of the Borrower and its
Restricted Subsidiaries and consolidated statements of earnings and cash
flows of the Borrower and its Subsidiaries, in each case for the period
commencing at the end of the previous Fiscal Year and ending with the end
of such Fiscal Quarter and a profit and loss statement for
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such Fiscal Quarter, certified as complete and correct by the chief
financial Authorized Officer of the Borrower;
(b) as soon as available and in any event within 90 days (and 105
days, in the case of the Borrower and its Restricted Subsidiaries) after
the end of each Fiscal Year of the Borrower, a copy of the annual audited
financial statements for such Fiscal Year for the Borrower and its
consolidated Subsidiaries, including therein a consolidated balance sheet
of the Borrower and its Restricted Subsidiaries as of the end of such
Fiscal Year and consolidated statements of earnings and cash flow of the
Borrower and its Restricted Subsidiaries for such Fiscal Year, in each case
as audited (without any Impermissible Qualification) by KPMG Peat Marwick
or independent public accountants of national standing acceptable to the
Arranging Agents;
(c) as soon as available and in any event within 60 days after the
end of each of the first three Fiscal Quarters of each Fiscal Year of the
Borrower and within 105 days after the end of the Fiscal Year of the
Borrower, a Compliance Certificate, executed by the chief executive,
financial or accounting Authorized Officer of the Borrower, showing (in
reasonable detail and with appropriate calculations and computations in all
respects reasonably satisfactory to the Arranging Agents) compliance with
the financial covenants set forth in Article VII;
-----------
(d) as soon as possible and in any event within three Business Days
after the Borrower or any of its Subsidiaries obtains knowledge of the
occurrence of a Default, a statement of the chief executive, financial or
accounting Authorized Officer of the Borrower setting forth details of such
Default and the action which the Borrower has taken and proposes to take
with respect thereto;
(e) as soon as possible and in any event within three Business Days
after the Borrower or any of its Subsidiaries obtains knowledge of (x) the
occurrence of any material adverse development with respect to any
litigation, action, proceeding or labor controversy of the type and
materiality described in Item 6.7 ("Litigation") of the Disclosure
--------
Schedule, or (y) the commencement of any litigation, action, proceeding or
labor controversy of the type and materiality described in Item 6.7
--------
("Litigation") of the Disclosure Schedule, notice thereof and, to the
extent the Arranging Agents reasonably request, copies of all documentation
relating thereto;
(f) promptly after the sending or filing thereof, copies of all
reports and registration statements which the Borrower or any of its
Subsidiaries files with the SEC or any national securities exchange;
(g) immediately upon becoming aware of (i) the institution of any
steps by the Borrower or any other Person to terminate any Pension Plan
(other than a standard termination under Section 4041(b) of ERISA), (ii)
the failure to make a required contribution to any Pension Plan if such
failure is sufficient to give rise to a Lien under
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Section 302(f) of ERISA, (iii) the taking of any action with respect to a
Pension Plan which would result in the requirement that the Borrower
furnish a bond or other security to the PBGC or such Pension Plan, or (iv)
the occurrence of any event with respect to any Pension Plan which could
reasonably be expected to result in the incurrence by the Borrower of any
material liability, fine or penalty, notice thereof and copies of all
documentation relating thereto;
(h) promptly when available and in any event within 15 Business Days
after the last day of each Fiscal Year of the Borrower (commencing after
the Effective Date), a budget for the then current Fiscal Year of the
Borrower, which budget shall contain on a quarterly basis a projected
statement of earnings and sources and uses of funds of the Borrower and its
Restricted Subsidiaries, prepared in reasonable detail by the chief
accounting, financial or executive Authorized Officer of the Borrower; and
(i) such other information respecting the condition or operations,
financial or otherwise, of the Borrower or any of its Subsidiaries as any
Lender or the Issuer through the Administrative Agent may from time to time
reasonably request (including information and reports from the chief
accounting, financial or executive Authorized Officer of the Borrower, in
such detail as any Arranging Agent or any Lender or Issuer through the
Administrative Agent may reasonably request, with respect to the terms of
and information provided pursuant to the Compliance Certificate).
SECTION VII.1.2. Compliance with Laws, etc. The Borrower will, and will
-------------------------
cause each of its Subsidiaries to, comply in all material respects with all
applicable Governmental Rules and Governmental Approvals of all Regulatory
Authorities, such compliance to include:
(a) the maintenance and preservation of the Borrower's and its
Subsidiaries' corporate existence; and
(b) the payment, before the same become delinquent, of all taxes,
assessments and governmental charges imposed upon it or upon its property
except to the extent being diligently contested in good faith by
appropriate proceedings and for which adequate reserves, if any, in
accordance with GAAP shall have been set aside on its books.
SECTION VII.1.3. Maintenance of Properties. The Borrower will, and will
-------------------------
cause each of its Subsidiaries to, maintain, preserve, protect and keep its
properties in good repair, working order and condition (ordinary wear and tear
excepted), and make necessary and proper repairs, renewals and replacements so
that its business carried on in connection therewith may be properly conducted
at all times unless the Borrower determines in good faith that the continued
maintenance of any of its properties is no longer economically desirable.
SECTION VII.1.4. Insurance. The Borrower shall maintain, and shall cause
---------
each of its Subsidiaries to maintain:
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(a) physical damage insurance on all real and personal property on an
all-risk basis (including, loss in transit, flood and earthquake insurance)
and public liability insurance against claims for personal injury, death or
property damage suffered by others upon, in or about any premises occupied
by it or occurring as a result of its ownership, maintenance or operation
of any airplanes, automobiles, trucks or other vehicles or other facilities
(including any machinery used therein or thereupon) or as the result of the
use of products manufactured, constructed or sold by it or services
rendered by it in an amount as is usually carried by Persons of comparable
size engaged in the same or a similar business and similarly situated;
(b) such other types of insurance with respect to its business as is
usually carried by Persons of comparable size engaged in the same or a
similar business and similarly situated, and, in any event, all insurance
otherwise required under any Subordinated Debt Document; and
(c) all worker's compensation or similar insurance as may be required
under the laws of any state or jurisdiction in which it may be engaged in
business.
All insurance shall be provided (i) by insurers authorized by Lloyds of London
to underwrite such risks, (ii) by insurers having an A.M. Best policyholders
rating of not less than A- (except with respect to insurers providing insurance
of the type described in clause (c), in which case such insurers shall have an
----------
A.M. Best policyholders rating of not less than B+) or (iii) by such other
insurers as the Arranging Agents may approve in writing; provided, that if the
--------
rating of any of such insurers is downgraded, the Borrower and each of its
Subsidiaries, as the case may be, shall only be required to obtain replacement
insurance with an insurer satisfying the requirements of this clause at the
stated expiration of the insurance policy maintained with the insurer whose
rating was so downgraded.
SECTION VII.1.5. Books and Records. The Borrower will, and will cause
-----------------
each of its Subsidiaries to, keep books and records which accurately reflect all
of its business affairs and transactions and permit the Agent and each Lender or
any of their respective representatives, at reasonable times and intervals, to
visit all of its offices, to discuss its financial matters with its officers and
independent public accountant (and the Borrower hereby authorizes such
independent public accountant to discuss the Borrower's financial matters with
each Lender or its representatives whether or not any representative of the
Borrower is present) and to examine (and, at the expense of the Borrower,
photocopy extracts from) any of its books or other corporate records. The
Borrower shall pay any fees of such independent public accountant incurred in
connection with any Agent's or any Lender's exercise of its rights pursuant to
this Section.
SECTION VII.1.6. Environmental Covenant. The Borrower will, and will
----------------------
cause each of its Subsidiaries to,
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(a) use and operate all of its facilities and properties in material
compliance with all Environmental Laws, keep all necessary permits,
approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in material compliance
therewith, and handle all Hazardous Materials in material compliance with
all applicable Environmental Laws;
(b) promptly notify the Administrative Agent and provide copies upon
receipt of all written claims, complaints, notices or inquiries relating to
the condition of its facilities and properties in respect of, or as to
compliance with, Environmental Laws, and shall promptly resolve any non-
compliance with Environmental Laws and keep its property free of any Lien
imposed by any Environmental Law; and
(c) provide such information and certifications which the Arranging
Agents may reasonably request from time to time to evidence compliance with
this Section 7.1.6.
-------------
SECTION VII.1.7. Future Subsidiaries. Upon any Person becoming, after the
-------------------
Effective Date, a Restricted Subsidiary of the Borrower, or upon the Borrower
directly or indirectly acquiring additional Capital Stock of any existing
Restricted Subsidiary having voting rights or contingent voting rights, the
Borrower shall notify the Administrative Agent of such acquisition, and, unless
otherwise agreed to among the Borrower, the Administrative Agent and the
Required Lenders,
(a) such Person shall execute and deliver to the Administrative Agent
(i) a Subsidiary Guaranty and (ii) if such Person is a Collateral
Subsidiary, the Subsidiary Security Agreement, in each case in a manner
satisfactory to the Administrative Agent; and
(b) the Borrower shall pledge or caused to be pledged, pursuant to
the Borrower Pledge Agreement or the Subsidiary Pledge Agreement, as
applicable, to the Administrative Agent for its benefit and that of the
Secured Parties (i) all of the outstanding shares of Capital Stock of such
Person, along with undated stock powers for such certificates, executed in
blank (or, if any such shares of Capital Stock are uncertificated,
confirmation and evidence satisfactory to the Administrative Agent that the
security interest in such uncertificated securities has been transferred to
and perfected by the Administrative Agent, for the benefit of the Secured
Parties, in accordance with Section 8-313 and Section 8-321 of the U.C.C.
or any other similar or local or foreign law which may be applicable), and
(ii) all intercompany notes, if any, evidencing Indebtedness in favor of
the Borrower or a Restricted Subsidiary, as applicable, made by such Person
(which shall, unless the Administrative Agent shall otherwise agree, be in
form satisfactory to the Administrative Agent);
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together, in each case, with such opinions of legal counsel for the Borrower
(which shall be from counsel reasonably satisfactory to the Administrative
Agent) relating thereto, which legal opinions shall be in form and substance
reasonably satisfactory to the Administrative Agent.
SECTION VII.1.8. Additional Collateral. (a) The Borrower shall, and
---------------------
shall cause each of its Collateral Subsidiaries to, cause the Administrative
Agent, on behalf of the Secured Parties, to have at all times a first priority
perfected security interest (subject only to Liens and encumbrances permitted
under Section 7.2.3) in all of the property (real and personal) owned from time
-------------
to time by the Borrower or such Collateral Subsidiary to the extent the same
constitutes or would constitute "Collateral" under the Borrower Security
Agreement, the Subsidiary Security Agreement, the Borrower Pledge Agreement or
the Subsidiary Pledge Agreement. Without limiting the generality of the
foregoing, the Borrower shall, and shall cause each of its Collateral
Subsidiaries to, execute, deliver and/or file (as applicable) or cause to be
executed, delivered and/or filed (as applicable), the pledge agreement(s), the
security agreement(s), Uniform Commercial Code (Form UCC-1) financing
statements, Uniform Commercial Code (Form UCC-3) termination statements, and
other documentation necessary to grant and perfect such security interest, in
each case in form and substance satisfactory to the Administrative Agent
together, in each case, with such opinions of legal counsel for the Borrower
(which shall be from counsel reasonably satisfactory to the Administrative
Agent) relating thereto, which legal opinions shall be in form and substance
reasonably satisfactory to the Administrative Agent.
(b) The Borrower shall (i) cause each Restricted Subsidiary which has
assets (exclusive of assets owned by such Restricted Subsidiary on the Effective
Date) and/or in which the Borrower or any Subsidiary has made Investments
aggregating for all such assets and Investments (without duplication) $5,000,000
or more (valued at the greater of book and fair market value) to promptly (x)
execute the Subsidiary Security Agreement and (y) comply with the requirements
of clause (a) above, and (ii) cause Restricted Subsidiaries to promptly (x)
----------
execute the Subsidiary Security Agreement and (y) comply with the requirements
of clause (a) above so that the aggregate amount of all assets (exclusive of
----------
assets owned by such Restricted Subsidiary on the Effective Date) owned by
Restricted Subsidiaries and/or in which the Borrower or any Subsidiary has made
Investments aggregating for all such assets and Investments (without
duplication) not subject to the Subsidiary Security Agreement does not exceed
$10,000,000 (valued at the greater of book and fair market value) in the
aggregate at any time (each Restricted Subsidiary described in the foregoing
clauses (i) and (ii) being a "Collateral Subsidiary").
- ----------- ---- ---------------------
SECTION VII.1.9. Rate Protection Agreements. If at any time the one month
--------------------------
LIBO Rate shall be greater than or equal to 6.50% for a period of five
consecutive Business Days as determined by the Administrative Agent, the
Borrower shall, within 30 days of the end of such period, enter into interest
rate protection agreements in form and substance satisfactory to the Arranging
Agents for a minimum period of three years and in a notional principal amount
equal to at least the excess of (i) an amount equal to 50% of the aggregate
outstanding Total Debt over (ii) the aggregate principal amount of Indebtedness
which bears interest at a fixed rate for a
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period of at least three years from the end of such period, and such rate
protection agreements to be in all respects satisfactory to the Arranging
Agents.
SECTION VII.1.10. Future Leased Property. The Borrower shall, and shall
----------------------
cause each of its Restricted Subsidiaries to, use its (and their) best efforts
to deliver to the Administrative Agent an estoppel letter in a form satisfactory
to the Administrative Agent executed by the lessor of any real property in the
U.S. that is leased by the Borrower or such Restricted Subsidiary for a term in
excess of one year, to the extent the value of any personal property to be held
at such leased property exceeds (or it is anticipated that the value of such
personal property will, during the term of such leasehold term, exceed)
$7,500,000.
SECTION VII.1.11. Use of Proceeds. The Borrower shall apply the proceeds
---------------
of the Credit Extensions solely
(a) to finance the acquisition of the direct broadcast satellite
business of the Partners in an amount not to exceed $250,000,000;
(b) for Capital Expenditures of the Borrower and the Restricted
Subsidiaries; and
(c) for working capital and general corporate purposes of the
Borrower and the Restricted Subsidiaries.
SECTION VII.2. Negative Covenants. The Borrower agrees with the Agents,
------------------
the Issuer and each Lender that, until all Commitments have terminated and all
Obligations have been paid and performed in full, the Borrower will, and will
cause its Subsidiaries to, perform the obligations set forth in this Section
-------
7.2.
SECTION VII.2.1. Business Activities. The Borrower will not, and will not
-------------------
permit any of its Restricted Subsidiaries to, engage in any business activity,
except those described in the first recital and such activities as are
----- -------
reasonably incidental or substantially similar thereto.
SECTION VII.2.2. Indebtedness. The Borrower will not, and will not permit
------------
any of its Restricted Subsidiaries to, create, incur, assume or suffer to exist
or otherwise become or be liable in respect of any Indebtedness, other than,
without duplication, the following:
(a) Indebtedness in respect of the Credit Extensions and other
Obligations (including Hedging Obligations in respect of such Credit
Extensions);
(b) Indebtedness identified in Item 7.2.2(b) ("Ongoing Indebtedness")
-------------
of the Disclosure Schedule;
(c) Indebtedness of the Borrower in respect of (i) Capitalized Lease
Liabilities, (ii) Indebtedness the proceeds of which are used to acquire an
asset by the Borrower (or
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used to acquire such an asset within 60 days of the incurrence thereof) and
(iii) unsecured Indebtedness; provided, that the aggregate amount of all
--------
Indebtedness outstanding pursuant to this clause (c) at the time any of the
----------
same is created, assumed or incurred (together with the principal amount of
all other Indebtedness permitted under this clause (c)) shall not at any
----
time exceed $100,000,000 at such time after giving effect thereto and any
Permitted Refinancings thereof;
(d) Indebtedness of any Restricted Subsidiary owing to the Borrower
or any other Restricted Subsidiary or of the Borrower to any Restricted
Subsidiary, which Indebtedness
(i) shall, in the case of Indebtedness owing to the Borrower, if
evidenced by one or more promissory notes, be duly delivered in pledge
pursuant to the Borrower Pledge Agreement to the Administrative Agent;
and
(ii) shall not be forgiven or otherwise discharged for any
consideration other than payment in full or in part (provided that
--------
only the amount repaid in part shall be discharged) in cash;
(e) Subordinated Debt of the Borrower and any Permitted Refinancing
thereof; provided, that any Permitted Refinancing of the Senior
--------
Subordinated Credit Agreement must be on terms substantially similar to
those contained in the Senior Subordinated Notes and the Senior
Subordinated Notes Indenture; and
(f) Indebtedness of any Subsidiary in respect of the Senior
Subordinated Credit Agreement;
provided, however, that no Indebtedness otherwise permitted by clause (d) or (e)
- -------- ------- ---------- ---
shall be permitted to be incurred if a Default has occurred and is continuing or
would result therefrom; provided, further, however, that no Indebtedness
-------- ------- -------
permitted under clauses (b) through (e) of this Section 7.2.2 shall be (i)
----------- --- -------------
permitted if such Indebtedness is incurred in reliance upon a general exception
for permitted Indebtedness under any Subordinated Debt Document unless all other
available exceptions for Indebtedness of such type under such an agreement have
been fully utilized by the Borrower or its Subsidiary, as applicable or (ii)
designated as "Designated Senior Indebtedness" (as defined in any Subordinated
Debt Document) without the prior written consent of the Required Lenders.
Notwithstanding the foregoing, the Borrower may (i) exchange the Series A
Senior Subordinated Notes and the Series A Senior Subordinated Discount Notes
for the Series B Senior Subordinated Notes and the Series B Senior Subordinated
Discount Notes, and (ii) issue the Exchange Notes, the Term Notes and any PIK
Notes, each as defined in and pursuant to the terms of the Senior Subordinated
Credit Agreement.
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SECTION VII.2.3. Liens. The Borrower will not, and will not permit any of
-----
its Restricted Subsidiaries to, create, incur, assume or suffer to exist any
Lien upon any of its property, revenues or assets, whether now owned or
hereafter acquired, except:
(a) Liens securing payment of the Obligations, granted pursuant to
any Loan Document;
(b) until the Closing Date, Liens securing payment of Indebtedness of
the type permitted and described in clause (b) of Section 7.2.2;
---------- -------------
(c) Liens securing Capitalized Lease Liability Indebtedness and
purchase money Indebtedness of the type permitted and described in clause
------
(c) of Section 7.2.2 (and securing only the assets that are financed with
--- -------------
the proceeds of such Indebtedness);
(d) Liens existing as of the Effective Date and disclosed in Item
----
7.2.3(d) ("Ongoing Liens") of the Disclosure Schedule;
--------
(e) Liens for taxes, assessments or other governmental charges or
levies not at the time delinquent or thereafter payable without penalty or
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves, if any, in accordance with GAAP shall have been
set aside on its books;
(f) Liens of carriers, warehousemen, mechanics, materialmen and
landlords incurred in the ordinary course of business for sums not overdue
or being diligently contested in good faith by appropriate proceedings and
for which adequate reserves, if any, in accordance with GAAP shall have
been set aside on its books;
(g) Liens incurred or deposits made in the ordinary course of
business in connection with workmen's compensation, unemployment insurance
or other forms of governmental insurance or benefits, or to secure
performance of tenders, statutory and regulatory obligations, bids, leases
and contracts or other similar obligations (other than for borrowed money)
entered into in the ordinary course of business or to secure obligations on
surety or appeal bonds or performance or return-of-money bonds;
(h) judgment Liens in existence less than 45 days after the entry
thereof or with respect to which execution has been stayed or the payment
of which is covered in full (subject to a customary deductible) by
insurance maintained with responsible insurance companies or which do not
otherwise result in an Event of Default under Section 8.1.6; and
-------------
(i) easements, rights-of-way, municipal and zoning ordinances or
similar restrictions, minor defects or irregularities in title and other
similar charges or encumbrances not interfering in any material respect
with the ordinary conduct of the
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business of the Borrower or its Subsidiaries or the value or utility of the
property to which such Lien is attached.
SECTION VII.2.4. Financial Condition and Operations. The Borrower will
----------------------------------
not permit to occur any of the events set forth below.
(a) Senior Debt to Annualized Cash Flow Ratio. The Borrower will not
-----------------------------------------
permit the Senior Debt to Annualized Cash Flow Ratio at any time during any
period set forth below to be greater than the ratio set forth opposite such
period:
<TABLE>
<CAPTION>
Senior Debt
to Annualized Cash
Period Flow Ratio
------ ----------
<S> <C>
Effective Date to (and 4.50:1
including) 06/30/98
07/01/98 to (and 4.50:1
including) 09/30/98
10/01/98 to (and 4.25:1
including) 12/31/98
01/01/99 to (and 4.00:1
including) 06/30/99
07/01/99 and thereafter 4.00:1
</TABLE>
(b) Total Debt to Annualized Cash Flow Ratio. The Borrower will not
----------------------------------------
permit the Total Debt to Annualized Cash Flow Ratio at any time during any
period set forth below to be greater than the ratio set forth opposite such
period:
<TABLE>
<CAPTION>
Total Debt
to Annualized Cash
Period Flow Ratio
------ ----------
<S> <C>
Effective Date to (and 7.25:1
including) 06/30/98
07/01/98 to (and 6.75:1
including) 09/30/98
10/01/98 to (and 6.25:1
including) 12/31/98
01/01/99 to (and 5.75:1
including) 06/30/99
07/01/99 and thereafter 5.50:1
</TABLE>
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<PAGE>
(c) Annualized Cash Flow to Total Interest Expense Ratio. The
----------------------------------------------------
Borrower will not permit the Annualized Cash Flow to Total Interest Expense
Ratio at any time during any period set forth below to be less than the
ratio set forth opposite such period:
<TABLE>
<CAPTION>
Annualized Cash Flow
to Total Interest
Period Expense Ratio
------ -------------
<S> <C>
Effective Date to (and 1.75:1
including) 12/31/98
01/01/99 and thereafter 2.00:1
</TABLE>
(d) Annualized Cash Flow to Pro Forma Debt Service Ratio. The
----------------------------------------------------
Borrower will not permit the Annualized Cash Flow to Pro Forma Debt Service
Ratio at any time after the Effective Date to be less than 1.10:1.
SECTION VII.2.5. Investments. The Borrower will not, and will not permit
-----------
any of its Restricted Subsidiaries to, make, incur, assume or suffer to exist
any Investment in any other Person, except:
(a) Investments existing on the Effective Date and Investments to be
existing immediately after giving effect to the Restructuring Transaction,
each identified in Item 7.2.5(a) ("Ongoing Investments") of the Disclosure
-------------
Schedule;
(b) Cash Equivalent Investments;
(c) without duplication, Investments by the Borrower to the extent
permitted as Indebtedness pursuant to Section 7.2.2;
-------------
(d) Investments constituting (i) accounts receivable arising, (ii)
trade debt granted, or (iii) deposits made in connection with the purchase
price of goods or services, in each case in the ordinary course of
business;
(e) other Investments by the Borrower not to exceed $150,000,000 in
the aggregate; and
(f) Investments in Persons which are Restricted Subsidiaries so long
as, before and after giving effect to such Investment, no Default has
occurred and is continuing or is caused thereby;
provided, however, that
- -------- -------
(g) any Investment which when made complies with the requirements of
clause (a), (b) or (c) of the definition of the term "Cash Equivalent
---------- --- ---
Investment" may
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<PAGE>
continue to be held notwithstanding that such Investment if made thereafter
would not comply with such requirements; and
(h) no Investment otherwise permitted by clause (c), (d), (e) or (f)
---------- --- --- ---
shall be permitted to be made if any Default has occurred and is continuing
or would result therefrom.
SECTION VII.2.6. Restricted Payments, etc. The Borrower shall not and
------------------------
shall not permit any Subsidiary to make any Restricted Junior Payment, except:
(a) dividends or distributions to the Borrower in respect of its
Equity Interests in any of its Subsidiaries;
(b) so long as no (x) Event of Default or (y) Default of which Senior
Management was aware or should have been aware has occurred and is
continuing (or would result therefrom), (i) payments by the Borrower of
interest accrued on the Subordinated Debt when due and (ii) any Restricted
Junior Payment of the type set forth in clause (c) of the definition
----------
thereof to the extent that such Restricted Junior Payment is made with
proceeds from the issuance of, or capital contribution in respect of,
common stock of the Borrower and is otherwise on terms satisfactory to the
Arranging Agents; and
(c) Unrestricted Subsidiaries may refinance in whole or in part from
time to time any of its Indebtedness so long as any such refinancing is not
recourse in any manner to the Borrower or any other Subsidiary and does not
require the imposition (contingently or otherwise) of any Lien on the
assets of the Borrower or any Restricted Subsidiary.
SECTION VII.2.7. Capital Expenditures, etc. In any Fiscal Year
-------------------------
immediately following a Fiscal Year in which the Total Debt to Annualized Cash
Flow Ratio is greater than 5.50:1, the Borrower will not, and will not permit
any of its Restricted Subsidiaries to, make or commit to make Capital
Expenditures in such Fiscal Year, except Capital Expenditures which do not
aggregate in excess of $650,000,000 in such Fiscal Year; provided, however, that
-------- -------
(i) to the extent Capital Expenditures are made in any Fiscal Year in an amount
less than the maximum amount permitted for such Fiscal Year, the Capital
Expenditures which the Borrower or its Restricted Subsidiaries may make or
commit to make in the next following Fiscal Year shall be increased by 50% of
the amount of the permitted Capital Expenditures not so made in the immediately
preceding Fiscal Year (the "Carry-Forward Amount"), but no further carry forward
--------------------
of such Carry-Forward Amount to any other succeeding Fiscal Year shall be
permitted, and (ii) no portion of any Carry-Forward Amount shall be used in any
Fiscal Year until the entire amount of the Capital Expenditures permitted to be
made or committed to be made in such Fiscal Year shall have been used.
SECTION VII.2.8. Subsidiaries. The Borrower will not have any
------------
Subsidiaries other than Restricted Subsidiaries and Unrestricted Subsidiaries.
The Borrower will not permit any
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<PAGE>
Subsidiary to issue any Capital Stock (whether for value or otherwise) to any
Person other than the Borrower.
SECTION VII.2.9. Take or Pay Contracts. The Borrower will not, and will
---------------------
not permit any of its Restricted Subsidiaries to, enter into or be a party to
any arrangement for the purchase of materials, supplies, other property or
services if such arrangement by its express terms requires that payment be made
by the Borrower or such Restricted Subsidiary regardless of whether such
materials, supplies, other property or services are in fact or can be required
to be delivered or furnished to it.
SECTION VII.2.10. Consolidation, Merger, etc. The Borrower will not, and
--------------------------
will not permit any of its Subsidiaries to, liquidate or dissolve, consolidate
with, or merge into or with, any other corporation, or purchase or otherwise
acquire all or substantially all of the assets of any Person (or of any division
thereof) except that (i) TSAT may merge with and into the Borrower pursuant to
the TSAT Merger and on terms and conditions satisfactory to a Lenders holding a
majority of the outstanding Loans and Commitments, (ii) the transactions
contemplated by the Restructuring Transaction may be made in accordance with the
terms of the Restructuring Agreement and (iii) any Restricted Subsidiary may
liquidate or dissolve voluntarily into, and may merge with and into, the
Borrower or (subject to clauses (a) and (b)), any other Collateral Subsidiary;
----------- ---
provided, however, that, subject to Section 7.1.8,
- -------- ------- -------------
(a) in no event shall any Pledged Subsidiary merge with and into
(i) any Subsidiary other than another Pledged Subsidiary unless
(A) the Required Lenders shall have given their prior written consent
thereto, or (B) after giving effect thereto, the Administrative Agent
shall have a perfected pledge of, and security interest in and to, all
of the issued and outstanding shares of Capital Stock of the surviving
Person in form and substance satisfactory to the Administrative Agent
and its counsel, pursuant to such documentation and opinions as shall
be necessary and appropriate in the opinion of the Administrative
Agent and its counsel to create, perfect or maintain the collateral
position of the Administrative Agent and the Lenders therein as
contemplated by this Agreement; or
(ii) any other Pledged Subsidiary if, after giving effect to
such merger, the Administrative Agent has less than that percentage of
the issued and outstanding shares of the surviving Person pledged to
it than it had pledged to it immediately prior to such merger; and
(b) in the case of the merger of any Subsidiary into the Borrower,
the Borrower shall be the surviving corporation and continue to be
incorporated under the laws of a State of the United States.
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<PAGE>
SECTION VII.2.11. Permitted Dispositions. The Borrower will not, and will
----------------------
not permit any of its Subsidiaries to, sell, transfer, lease, contribute or
otherwise convey (including by way of merger), or grant options, warrants or
other rights with respect to, any of the Borrower's or such Subsidiaries' assets
(including accounts receivable or Capital Stock of Subsidiaries) to any Person
unless such sale, transfer, lease, contribution or conveyance of such assets is
(i) in the ordinary course of its business (and does not constitute a sale,
transfer, lease, contribution or other conveyance of all or a substantial part
of the Borrower's or such Subsidiary's assets) or is of obsolete or worn out
property, (ii) permitted by Section 7.2.10, (iii) subject to Section 7.1.8,
-------------- -------------
between Restricted Subsidiaries or from a Subsidiary to the Borrower or (iv) of
other assets of the Borrower having a value (determined based on the higher of
book and fair market value) not to exceed $30,000,000 for the term of this
Agreement.
SECTION VII.2.12. Modification of Certain Agreements. The Borrower will
----------------------------------
not, and will not permit any of its Subsidiaries to, consent to any amendment,
supplement, amendment and restatement, waiver or other modification of any of,
or enter into any forbearance from exercising any rights with respect to, the
terms or provisions contained in, or applicable to, (i) any Transaction
Document, if the effect of such amendment, supplement, amendment and
restatement, waiver or modification or forbearance might individually or in the
aggregate have a Material Adverse Effect, or (ii) any Subordinated Debt
Document.
SECTION VII.2.13. Transactions with Affiliates. The Borrower will not,
----------------------------
and will not permit any of its Restricted Subsidiaries to, enter into, or cause,
suffer or permit to exist any arrangement or contract with any of its other
Affiliates or any Unrestricted Subsidiary, other than in connection with the
Roll-up Plan, unless such arrangement or contract is on fair and reasonable
terms and is an arrangement or contract of the kind which would be entered into
by a prudent Person in the position of the Borrower or such Subsidiary with a
Person which is not one of its Affiliates.
SECTION VII.2.14. Negative Pledges, Restrictive Agreements, etc. The
---------------------------------------------
Borrower will not, and will not permit any of its Restricted Subsidiaries to,
enter into any agreement (excluding this Agreement and any other Loan Document
or any document pursuant to which any Indebtedness permitted by clause (c) of
----------
Section 7.2.2 is permitted but solely with respect to any asset acquired solely
- -------------
with the proceeds of such Indebtedness and no other asset of the Borrower or any
Subsidiary) prohibiting
(a) the creation or assumption of any Lien upon its properties,
revenues or assets, whether now owned or hereafter acquired, to the extent
that any such negative pledge would prohibit the creation or first priority
perfection of any Liens of the type described in clause (a) of Section
---------- -------
7.2.3 (other than in the case of Capitalized Leases to the extent of Liens
-----
solely in the assets subject to such Capitalized Lease);
(b) the ability of the Borrower or any other Obligor to amend or
otherwise modify this Agreement or any other Loan Document; or
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<PAGE>
(c) the ability of any Restricted Subsidiary to make any payments,
directly or indirectly, to the Borrower by way of dividends, advances,
repayments of loans or advances, reimbursements of management and other
intercompany charges, expenses and accruals or other returns on
investments, or any other agreement or arrangement which restricts the
ability of any such Subsidiary to make any payment, directly or indirectly,
to the Borrower.
SECTION VII.2.15. Sale and Leaseback. The Borrower will not, and will not
------------------
permit any of its Restricted Subsidiaries to, enter into any agreement or
arrangement with any other Person providing for the leasing by the Borrower or
any of its Restricted Subsidiaries of real or personal property which has been
or is to be sold or transferred by the Borrower or any of its Restricted
Subsidiaries to such other Person or to any other Person to whom funds have been
or are to be advanced by such Person on the security of such property or rental
obligations of the Borrower or any of its Restricted Subsidiaries.
SECTION VII.2.16. Restrictions on Leases and ASkyB Transaction. The
--------------------------------------------
Borrower will not, and will not permit any of its Restricted Subsidiaries to,
(a) enter into any agreement or arrangement with Tempo or any other Person
providing for the leasing by the Borrower or any of its Restricted Subsidiaries
of high power satellite transmission capacity unless (i) such agreement or
arrangement is on fair and reasonable terms and is an agreement or arrangement
of the kind which would be entered into by a prudent Person in the position of
the Borrower or such Restricted Subsidiary with such Person, and (ii) the
Arranging Agents consent in writing (such consent not to be unreasonably
withheld or delayed), or (b) consummate the ASkyB Transaction without the
consent of all Lenders.
SECTION VII.2.17. Restrictions on TSAT Partners Holdings and Its
----------------------------------------------
Subsidiaries. The Borrower shall not permit TSAT Partners Holdings. nor any of
- ------------
TSAT Partners Holdings' Subsidiaries to (i) engage in any business activity
other than, in the case of TSAT Partners Holdings, in connection with the
continuing ownership of the issued and outstanding shares of Capital Stock of
TCISE Partner 1 and TCISE Partner 2, and in the case of TSAT Partners Holdings'
Subsidiaries, in connection with the continuing ownership of partnership
interests in the Primestar Partnership; (ii) create, incur, assume, suffer to
exist or otherwise become liable in respect of any Indebtedness other than in
respect of the Obligations; (iii) create, incur, assume or enter into any
agreement which by its terms creates, incurs or assumes any Lien upon any of its
assets, whether now owned or hereafter acquired; (iv) make, incur, assume or
suffer to exist any Investment in any other Person other than, in the case of
TSAT Partners Holdings, in connection with the continuing ownership of the
issued and outstanding shares of Capital Stock of TCISE Partner 1 and TCISE
Partner 2, and in the case of TSAT Partners Holdings' Subsidiaries, in
connection with the continuing ownership of partnership interests in the
Primestar Partnership; (v) make or commit to make any Capital Expenditure or
enter into any arrangement which would give rise to any Capitalized Lease
Liability; (vi) enter into any arrangement which involves the leasing by such
Person from any lessor of any real or personal property (or any interest
therein) other than the lease of office space incidental to its ordinary course
of business; (vii) wind-up,
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<PAGE>
liquidate or dissolve, consolidate or amalgamate with, or merge into or with any
other corporation or purchase or otherwise acquire all or any part of the assets
of any Person (or division thereof); or (viii) sell, transfer, lease or
otherwise dispose of, or grant to any Person options, warrants or other rights
with respect to any of its assets, unless otherwise permitted by this Agreement
and except as set forth in the Primestar Partnership Agreement.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION VIII.1. Listing of Events of Default. Each of the following
----------------------------
events or occurrences described in this Section 8.1 shall constitute an "Event
----------- -----
of Default".
- ----------
SECTION VIII.1.1. Non-Payment of Obligations. The Borrower shall default
--------------------------
in the payment or prepayment when due of
(a) any Reimbursement Obligation or any deposit of cash for
collateral purposes pursuant to Section 2.6.2 or Section 2.6.4, as the case
------------- -------------
may be;
(b) any principal of any Loan other than in respect of a voluntary
prepayment thereof; or
(c) any interest on any Loan or any fee described in Article III or
-----------
of any other Obligation and such default shall continue unremedied for a
period of five days.
SECTION VIII.1.2. Breach of Warranty. Any representation or warranty of
------------------
the Borrower or any other Obligor made or deemed to be made hereunder or in any
other Loan Document executed by it or any other writing or certificate furnished
by or on behalf of the Borrower or any other Obligor to any Agent, the Issuer or
any Lender for the purposes of or in connection with this Agreement or any such
other Loan Document (including any certificates delivered pursuant to Article
-------
V), is or shall be incorrect when made or deemed to have been made in any
material respect.
SECTION VIII.1.3. Non-Performance of Certain Covenants and Obligations.
----------------------------------------------------
The Borrower shall default in the due performance and observance of any of its
obligations under Section 7.1.11 or Section 7.2.
-------------- -----------
SECTION VIII.1.4. Non-Performance of Other Covenants and Obligations. The
--------------------------------------------------
Borrower or any other Obligor shall default in the due performance and
observance of any other agreement contained herein or in any other Loan Document
executed by it, and such default shall continue unremedied for a period of 30
days after notice thereof shall have been given to the Borrower by the
Administrative Agent or any Lender.
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<PAGE>
SECTION VIII.1.5. Default on Other Indebtedness. A default shall occur in
-----------------------------
the payment when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any Indebtedness (other than Indebtedness
described in Section 8.1.1) or any other item which, in accordance with GAAP,
-------------
would be included as a liability on the liability side of the balance sheet of
such Person as of the date at which Indebtedness is to be determined
(collectively the "Subject Debt") of the Borrower or any of its Subsidiaries or
------------
the Primestar Partnership having a principal amount, individually or in the
aggregate, in excess of $15,000,000, or a default shall occur in the performance
or observance of any obligation or condition with respect to such Indebtedness
(subject to any applicable grace period) if the effect of such default is to
accelerate the maturity of any such Subject Debt or such default shall permit
the holder or holders of such Subject Debt, or any trustee or agent for such
holders, to cause or declare such Subject Debt to become due and payable or to
require such Subject Debt to be prepaid, redeemed, purchased or defeased, or to
cause an offer to purchase or defease such Subject Debt to be required to be
made, prior to its expressed maturity.
SECTION VIII.1.6. Judgments. Any judgment or order for the payment of
---------
money in excess of $15,000,000 (exclusive of any amounts fully covered by
insurance (less any applicable deductible) or indemnification and as to which
the insurer or the indemnifying party, as the case may be, has acknowledged its
responsibility to cover such judgment or order) shall be rendered against the
Borrower or any of its Subsidiaries and such judgment shall not have been
vacated or discharged or stayed or bonded pending appeal within 45 days after
the entry thereof.
SECTION VIII.1.7. Pension Plans. Any of the following events shall occur
-------------
with respect to any Pension Plan
(a) the institution of any steps by the Borrower, any member of its
Controlled Group or any other Person to terminate a Pension Plan if, as a
result of such termination, the Borrower or any such member could be
required to make a contribution to such Pension Plan, or could reasonably
expect to incur a liability or obligation to such Pension Plan, in excess
of $1,000,000; or
(b) a contribution failure occurs with respect to any Pension Plan
sufficient to give rise to a Lien under section 302(f) of ERISA.
SECTION VIII.1.8. Control of the Borrower. Any Change in Control shall
-----------------------
occur.
SECTION VIII.1.9. Bankruptcy, Insolvency, etc. The Borrower, any of its
---------------------------
Subsidiaries or the Primestar Partnership shall
(a) become insolvent or generally fail to pay, or admit in writing
its inability or unwillingness generally to pay, debts as they become due;
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(b) apply for, consent to, or acquiesce in, the appointment of a
trustee, receiver, sequestrator or other custodian for any substantial part
of the property of any thereof, or make a general assignment for the
benefit of creditors;
(c) in the absence of such application, consent or acquiescence,
permit or suffer to exist the appointment of a trustee, receiver,
sequestrator or other custodian for a substantial part of the property of
any thereof, and such trustee, receiver, sequestrator or other custodian
shall not be discharged within 60 days, provided that the Borrower, each
such Subsidiary hereby expressly authorizes the Administrative Agent and
each Lender to appear in any court conducting any relevant proceeding
during such 60-day period to preserve, protect and defend their rights
under this Agreement and the other Loan Documents;
(d) permit or suffer to exist the commencement of any bankruptcy,
reorganization, debt arrangement or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution, winding up or liquidation
proceeding, in respect thereof, and, if any such case or proceeding is not
commenced by the Borrower or any such Subsidiary, such case or proceeding
shall be consented to or acquiesced in by the Borrower or such Subsidiary,
as the case may be, or shall result in the entry of an order for relief or
shall remain for 60 days undismissed, provided that the Borrower and each
Subsidiary hereby expressly authorizes the Administrative Agent and each
Lender to appear in any court conducting any such case or proceeding during
such 60-day period to preserve, protect and defend their rights under the
Loan Documents; or
(e) take any corporate action authorizing, or in furtherance of, any
of the foregoing.
SECTION VIII.1.10. Impairment of Security, etc. Any Loan Document, or any
---------------------------
Lien granted thereunder, shall (except in accordance with its terms), in whole
or in part, terminate, cease to be effective or cease to be the legally valid,
binding and enforceable obligation of any Obligor party thereto; the Borrower,
any other Obligor or any other party shall, directly or indirectly, contest in
any manner such effectiveness, validity, binding nature or enforceability; or,
except as permitted under any Loan Document, any Lien securing any Obligation
shall, in whole or in part, cease to be a perfected first priority Lien.
SECTION VIII.1.11. Material Adverse Change. There has been a material
-----------------------
adverse change in the consolidated financial condition, results of operations,
assets, business or properties of the Borrower and its Subsidiaries, taken as a
whole, or the Borrower and its Restricted Subsidiaries, taken as a whole.
SECTION VIII.2. Action if Bankruptcy. If any Event of Default described
--------------------
in clauses (a) through (d) of Section 8.1.9 shall occur, the Commitments (if not
----------- --- -------------
theretofore terminated) shall automatically terminate and the outstanding
principal amount of all outstanding Loans and all
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other Obligations (including Reimbursement Obligations) shall automatically be
and become immediately due and payable, without notice or demand and the
Borrower shall automatically and immediately be obligated to deposit with the
Administrative Agent cash collateral in an amount equal to all Letter of Credit
Outstandings.
SECTION VIII.3. Action if Other Event of Default. If any Event of Default
--------------------------------
(other than any Event of Default described in clauses (a) through (d) of Section
----------- --- -------
8.1.9) shall occur for any reason, whether voluntary or involuntary, and be
- -----
continuing, the Administrative Agent, upon the direction of the Required
Lenders, shall by notice to the Borrower declare all or any portion of the
outstanding principal amount of the Loans and other Obligations (including
Reimbursement Obligations) to be due and payable and/or the Commitments (if not
theretofore terminated) to be terminated, whereupon the full unpaid amount of
such Loans and other Obligations which shall be so declared due and payable
shall be and become immediately due and payable, without further notice, demand
or presentment, and/or, as the case may be, the Commitments shall terminate and
the Borrower shall automatically and immediately be obligated to deposit with
the Administrative Agent cash collateral in an amount equal to all Letter of
Credit Outstandings.
ARTICLE IX
THE AGENTS
SECTION IX.1. Actions. Each Lender hereby appoints Scotiabank as its
-------
Administrative Agent, NationsBank as its Syndication Agent, Credit Lyonnais as
its Documentation Agent and each of Scotiabank, NationsBank and Credit Lyonnais
as an Arranging Agent, in each case under and for purposes of this Agreement and
each other Loan Document. Each Lender authorizes each Agent to act on behalf of
such Lender under this Agreement and each other Loan Document and, in the
absence of other written instructions from the Required Lenders received from
time to time by such Agent (with respect to which each Agent agrees that it will
comply, except as otherwise provided in this Section or as otherwise advised by
counsel in order to avoid contravention of applicable law), to exercise such
powers hereunder and thereunder as are specifically delegated to or required of
such Agent by the terms hereof and thereof, together with such powers as may be
reasonably incidental thereto. Each Lender hereby indemnifies (which indemnity
shall survive any termination of this Agreement) each Agent, pro rata according
--- ----
to such Lender's Percentage, from and against any and all liabilities,
obligations, losses, damages, claims, costs or expenses of any kind or nature
whatsoever which may at any time be imposed on, incurred by, or asserted
against, such Agent in any way relating to or arising out of this Agreement and
any other Loan Document, including reasonable attorneys' fees, and as to which
such Agent is not reimbursed by the Borrower; provided, however, that no Lender
-------- -------
shall be liable for the payment of any portion of such liabilities, obligations,
losses, damages, claims, costs or expenses which are determined by a court of
competent jurisdiction in a final proceeding to have resulted solely from such
Agent's gross negligence or wilful misconduct. No Agent shall be required to
take any action hereunder or under any other Loan Document, or to prosecute or
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<PAGE>
defend any suit in respect of this Agreement or any other Loan Document, unless
it is indemnified hereunder to its satisfaction. If any indemnity in favor of
any Agent shall be or become, in such Agent's determination, inadequate, such
Agent may call for additional indemnification from the Lenders and cease to do
the acts indemnified against hereunder until such additional indemnity is given.
SECTION IX.2. Funding Reliance, etc. Unless the Administrative Agent
---------------------
shall have been notified by telephone, confirmed in writing, by any Lender by
5:00 p.m., New York time, on the Business Day prior to a Borrowing that such
Lender will not make available the amount which would constitute its Percentage
of such Borrowing on the date specified therefor, the Administrative Agent may
assume that such Lender has made such amount available to the Administrative
Agent and, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If and to the extent that such Lender shall not have made
such amount available to the Administrative Agent, such Lender and the Borrower
severally agree to repay the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
the Administrative Agent made such amount available to the Borrower to the date
such amount is repaid to the Administrative Agent, at the interest rate
applicable at the time to Loans comprising such Borrowing (in the case of the
Borrower) and (in the case of a Lender), at the Federal Funds Rate (for the
first two Business Days after which such amount has not been repaid, and
thereafter at the interest rate applicable to Loans comprising such Borrowing.
SECTION IX.3. Exculpation. None of the Agents nor any of their respective
-----------
directors, officers, employees or agents shall be liable to any Lender for any
action taken or omitted to be taken by it under this Agreement or any other Loan
Document, or in connection herewith or therewith, except for its own wilful
misconduct or gross negligence, nor responsible for any recitals or warranties
herein or therein, nor for the effectiveness, enforceability, validity or due
execution of this Agreement or any other Loan Document, nor for the creation,
perfection or priority of any Liens purported to be created by any of the Loan
Documents, or the validity, genuineness, enforceability, existence, value or
sufficiency of any collateral security, nor to make any inquiry respecting the
performance by any Obligor of its obligations hereunder or under any other Loan
Document. Any such inquiry which may be made by an Agent shall not obligate it
to make any further inquiry or to take any action. Each Agent shall be entitled
to rely upon advice of counsel concerning legal matters and upon any notice,
consent, certificate, statement or writing which such Agent believes to be
genuine and to have been presented by a proper Person.
SECTION IX.4. Successor. Any Agent may resign as such at any time upon at
---------
least 30 days' prior notice to the Borrower and all Lenders. If an Agent at any
time shall resign, the Required Lenders may appoint another Lender as a
successor Agent which, with the prior written consent of the Borrower, not to be
unreasonably withheld or delayed, shall thereupon become such an Agent
hereunder. If no such successor Agent shall have been so appointed by the
Required Lenders, and shall have accepted such appointment, within 30 days after
the retiring Agent's giving notice of resignation, then the retiring Agent may,
on behalf of the Lenders,
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<PAGE>
appoint a successor Agent, which shall be one of the Lenders or a commercial
banking institution organized under the laws of the U.S. (or any State thereof)
or a U.S. branch or agency of a commercial banking institution, and having (x) a
combined capital and surplus of at least $500,000,000 and (y) a credit rating of
A or better by Moody's or a comparable rating by S&P; provided, however, that
-------- -------
if, after expending all reasonable commercial efforts, such retiring Agent is
unable to find a commercial banking institution which is willing to accept such
appointment and which meets the qualifications set forth in clause (y) above,
----------
such retiring Agent, shall be permitted to appoint as its successor from all
available commercial banking institutions willing to accept such appointment
such institution having the highest credit rating of all such available and
willing institutions. Upon the acceptance of any appointment as Agent hereunder
by a successor Agent, such successor Agent shall be entitled to receive from the
retiring Agent such documents of transfer and assignment as such successor Agent
may reasonably request, and shall thereupon succeed to and become vested with
all rights, powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring Agent's resignation hereunder as the Agent, the
provisions of
(a) this Article IX shall inure to its benefit as to any actions
----------
taken or omitted to be taken by it while it was the Agent under this
Agreement; and
(b) Section 10.3 and Section 10.4 shall continue to inure to its
------------ ------------
benefit.
SECTION IX.5. Loans by Agents. Each Agent shall have the same rights and
---------------
powers with respect to (x) the Credit Extensions made by it or any of its
Affiliates, and (y) the Notes held by it or any of its Affiliates as any other
Lender and may exercise the same as if it were not an Agent. Each Agent and its
Affiliates may accept deposits from, lend money to, and generally engage in any
kind of business with the Borrower or any Subsidiary or Affiliate of the
Borrower as if such Agent were not an Agent hereunder.
SECTION IX.6. Credit Decisions. Each Lender acknowledges that it has,
----------------
independently of the Agents and each other Lender, and based on such Lender's
review of the financial information of the Borrower, this Agreement, the other
Loan Documents (the terms and provisions of which being satisfactory to such
Lender) and such other documents, information and investigations as such Lender
has deemed appropriate, made its own credit decision to extend its Commitments.
Each Lender also acknowledges that it will, independently of the Agents and each
other Lender, and based on such other documents, information and investigations
as it shall deem appropriate at any time, continue to make its own credit
decisions as to exercising or not exercising from time to time any rights and
privileges available to it under this Agreement or any other Loan Document.
SECTION IX.7. Copies, etc. The Administrative Agent shall give prompt
-----------
notice to each Lender of each notice or request required or permitted to be
given to the Administrative Agent by the Borrower pursuant to the terms of this
Agreement (unless concurrently delivered to the Lenders by the Borrower). The
Administrative Agent will distribute to each Lender each
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document or instrument received for its account and copies of all other
communications received by the Administrative Agent from the Borrower for
distribution to the Lenders by the Administrative Agent in accordance with the
terms of this Agreement or any other Loan Document.
SECTION IX.8. The Agents. Notwithstanding anything else to the contrary
----------
contained in this Agreement or any other Loan Document, none of the
Documentation Agent, the Syndication Agent or the Arranging Agents, in such
capacity, shall have any rights, duties or responsibilities under this Agreement
or any other Loan Document, or any fiduciary relationship with any Secured
Party, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or otherwise exist
against any of such Agent in such capacity.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION X.1. Waivers, Amendments, etc. The provisions of this Agreement
------------------------
and of each other Loan Document may from time to time be amended, modified or
waived, if such amendment, modification or waiver is in writing and consented to
by the Borrower and the Required Lenders; provided, however, that no such
-------- -------
amendment, modification or waiver shall:
(a) extend any Commitment Termination Date or the date of any
mandatory Commitment reduction under clause (a) of Section 2.2.2 or modify
---------- -------------
this Section 10.1 without the consent of all Lenders;
------------
(b) increase the aggregate amount of any Lender's Percentage of any
Commitment Amount, increase the aggregate amount of any Loans required to
be made by a Lender pursuant to its Commitments or reduce any fees
described in Article III payable to any Lender without the consent of such
-----------
Lender;
(c) extend the Stated Maturity Date for any Lender's Loan or the due
date of any interest thereon, or reduce the principal amount of or rate of
interest on any Lender's Loan, without the consent of such Lender (it being
understood and agreed, however, that any vote to rescind any acceleration
made pursuant to Section 8.2 and Section 8.3 of amounts owing with respect
----------- -----------
to the Loans and other Obligations shall only require the vote of the
Required Lenders);
(d) change the definition of "Required Lenders" or any requirement
hereunder that any particular action be taken by all Lenders without the
consent of all Lenders;
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(e) increase the Stated Amount of any Letter of Credit unless
consented to by the Issuer;
(f) except as permitted by the Borrower Security Agreement, Borrower
Pledge Agreement, Subsidiary Security Agreement or Subsidiary Guarantee,
release (i) any of the guarantees of any Restricted Subsidiary or (ii) all
or substantially all of the collateral or Pledged Shares as such term is
defined in the Borrower Pledge Agreement), in either case without the
consent of all Lenders as expressly provided herein or therein; or
(g) affect adversely the interests, rights or obligations of the
Administrative Agent qua the Administrative Agent, the Syndication Agent
---
qua the Syndication Agent, the Documentation Agent qua the Documentation
--- ---
Agent, any Arranging Agent qua Arranging Agent or the Issuer qua Issuer,
--- ---
unless consented to by such Agent or the Issuer, as the case may be.
No failure or delay on the part of any Agent, the Issuer or any Lender in
exercising any power or right under this Agreement or any other Loan Document
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power or right preclude any other or further exercise thereof or the
exercise of any other power or right. No notice to or demand on the Borrower in
any case shall entitle it to any notice or demand in similar or other
circumstances. No waiver or approval by any Agent, the Issuer or any Lender
under this Agreement or any other Loan Document shall, except as may be
otherwise stated in such waiver or approval, be applicable to subsequent
transactions. No waiver or approval hereunder shall require any similar or
dissimilar waiver or approval thereafter to be granted hereunder.
SECTION X.2. Notices. All notices and other communications provided to
-------
any party hereto under this Agreement or any other Loan Document shall be in
writing or by facsimile and addressed, delivered or transmitted to such party at
its address or facsimile number set forth opposite its name on Schedule II
-----------
hereto or set forth in the Lender Assignment Agreement or at such other address
or facsimile number as may be designated by such party in a notice to the other
parties. Any notice, if mailed and properly addressed with postage prepaid or
if properly addressed and sent by pre-paid courier service, shall be deemed
given when received; any notice, if transmitted by facsimile, shall be deemed
given when the confirmation of transmission thereof is received by the
transmitter.
SECTION X.3. Payment of Costs and Expenses. The Borrower agrees to pay on
-----------------------------
demand all expenses of the Administrative Agent (including the fees and out-of-
pocket expenses of counsel to the Administrative Agent and of local counsel, if
any, who may be retained by counsel to the Administrative Agent) in connection
with
(a) the negotiation, preparation, execution and delivery of this
Agreement and of each other Loan Document, including schedules and
exhibits, and any amendments, waivers, consents, supplements or other
modifications to this Agreement or any other
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Loan Document as may from time to time hereafter be required, whether or
not the transactions contemplated hereby are consummated; and
(b) the filing, recording, refiling or rerecording of any Loan
Document and/or any Uniform Commercial Code financing statements relating
thereto and all amendments, supplements, amendments and restatements and
other modifications to any thereof and any and all other documents or
instruments of further assurance required to be filed or recorded or
refiled or rerecorded by the terms hereof or the terms of any Loan
Document; and
(c) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document.
The Borrower further agrees to pay, and to save each Agent, the Issuer and the
Lenders harmless from all liability for, any stamp or other taxes which may be
payable in connection with the execution or delivery of this Agreement, the
Credit Extensions hereunder, or the issuance of the Notes, Letters of Credit or
any other Loan Documents. The Borrower also agrees to reimburse each Agent, the
Issuer and each Lender upon demand for all reasonable out-of-pocket expenses
(including reasonable attorneys' fees and legal expenses of counsel to each
Agent, the Issuer and the Lenders) incurred by each Agent, the Issuer or such
Lenders in connection with (x) the negotiation of any restructuring or "work-
out" with the Borrower, whether or not consummated, of any Obligations and (y)
the enforcement of any Obligations.
SECTION X.4. Indemnification. In consideration of the execution and
---------------
delivery of this Agreement by each Lender and the extension of the Commitments,
the Borrower hereby indemnifies, exonerates and holds each Agent, the Issuer and
each Lender and each of their respective officers, directors, employees and
agents (collectively, the "Indemnified Parties") free and harmless from and
-------------------
against any and all actions, causes of action, suits, losses, costs, liabilities
and damages, and expenses incurred in connection therewith (irrespective of
whether any such Indemnified Party is a party to the action for which
indemnification hereunder is sought), including reasonable attorneys' fees and
disbursements, whether incurred in connection with actions between or among the
parties hereto or the parties hereto and third parties (collectively, the
"Indemnified Liabilities"), incurred by the Indemnified Parties or any of them
- ------------------------
as a result of, or arising out of, or relating to
(a) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of any Credit Extension,
including all Indemnified Liabilities arising in connection with the
transactions contemplated hereby;
(b) the entering into and performance of this Agreement and any other
Loan Document by any of the Indemnified Parties (including any action
brought by or on behalf of the Borrower as the result of any determination
by the Required Lenders pursuant to Article V not to fund any Credit
---------
Extension);
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(c) any investigation, litigation or proceeding related to any
acquisition or proposed acquisition by the Borrower or any of its
Subsidiaries of all or any portion of the stock or assets of any Person,
whether or not any Agent, the Issuer or any Lender is party thereto;
(d) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to the
protection of the environment or the Release by the Borrower or any of its
Subsidiaries of any Hazardous Material;
(e) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any real
property owned or operated by the Borrower or any Subsidiary thereof of any
Hazardous Material (including any losses, liabilities, damages, injuries,
costs, expenses or claims asserted or arising under any Environmental Law),
regardless of whether caused by, or within the control of, the Borrower or
such Subsidiary; or
(f) each Agent's and each Lender's Environmental Liability (the
indemnification herein shall survive repayment of the Notes and any
transfer of the property of the Borrower or any of its Subsidiaries by
foreclosure or by a deed in lieu of foreclosure for any Agent's or Lender's
Environmental Liability, regardless of whether caused by, or within the
control of, the Borrower or such Subsidiary);
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's gross
negligence or wilful misconduct. The Borrower and its successors and assigns
hereby waive, release and agree not to make any claim or bring any cost recovery
action against, any Agent, the Issuer or any Lender under CERCLA or any state
equivalent, or any similar law now existing or hereafter enacted. It is
expressly understood and agreed that to the extent that any of such Persons is
strictly liable under any Environmental Laws, the Borrower's obligation to such
Person under this indemnity shall likewise be without regard to fault on the
part of the Borrower with respect to the violation or condition which results in
liability of such Person. If and to the extent that the foregoing undertaking
may be unenforceable for any reason, the Borrower hereby agrees to make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
SECTION X.5. Survival. The obligations of the Borrower under Sections
-------- --------
4.3, 4.4, 4.5, 4.6, 10.3 and 10.4, and the obligations of the Lenders under
--- --- --- ---- ----
Section 9.1, shall in each case survive any assignment from one Lender to
- -----------
another (in the case of Sections 10.3 and 10.4) and any termination of this
------------- ----
Agreement, the payment in full of all the Obligations and the termination of all
the Commitments. The representations and warranties made by the Borrower and
each other Obligor in this Agreement and in each other Loan Document shall
survive the execution and delivery of this Agreement and each such other Loan
Document.
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SECTION X.6. Severability. Any provision of this Agreement or any other
------------
Loan Document which is prohibited or unenforceable in any jurisdiction shall, as
to such provision and such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of
this Agreement or such Loan Document or affecting the validity or enforceability
of such provision in any other jurisdiction.
SECTION X.7. Headings. The various headings of this Agreement and of each
--------
other Loan Document are inserted for convenience only and shall not affect the
meaning or interpretation of this Agreement or such other Loan Document or any
provisions hereof or thereof.
SECTION X.8. Execution in Counterparts, Effectiveness, etc. This
---------------------------------------------
Agreement may be executed by the parties hereto in several counterparts, each of
which shall be an original and all of which shall constitute together but one
and the same agreement. This Agreement shall become effective when counterparts
hereof executed on behalf of the Borrower, each Agent and each Lender (or notice
thereof satisfactory to the Arranging Agents) shall have been received by the
Arranging Agents and notice thereof shall have been given by the Administrative
Agent to the Borrower and each Lender.
SECTION X.9. Governing Law; Entire Agreement. THIS AGREEMENT AND EACH
-------------------------------
OTHER LOAN DOCUMENT (INCLUDING WITHOUT LIMITATION PROVISIONS WITH RESPECT TO
INTEREST, LOAN CHARGES AND COMMITMENT FEES) SHALL EACH BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK
(INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK), EXCEPT TO THE EXTENT THAT THE
VALIDITY OR PERFECTION OF A SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER,
IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. This Agreement and the other
Loan Documents constitute the entire understanding among the parties hereto with
respect to the subject matter hereof and thereof and supersede any prior
agreements, written or oral, with respect thereto.
SECTION X.10. Successors and Assigns. This Agreement shall be binding
----------------------
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that:
-------- -------
(a) the Borrower may not assign or transfer its rights or obligations
hereunder without the prior written consent of the Administrative Agent and
all Lenders; and
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(b) the rights of sale, assignment and transfer of the Lenders are
subject to Section 10.11.
-------------
SECTION X.11. Sale and Transfer of Loans and Notes; Participations in
-------------------------------------------------------
Loans and Notes. Each Lender may assign, or sell participations in, its Loans,
- ---------------
Letters of Credit and Commitments to one or more other Persons in accordance
with this Section 10.11.
-------------
SECTION X.11.1. Assignments. Upon prior notice to the Borrower and the
-----------
Arranging Agents, any Lender,
(a) with the consent of the Borrower and the Administrative Agent
(which consents shall not be unreasonably delayed or withheld and, with
respect to the consent of the Borrower, shall not be required if an Event
of Default has occurred and is continuing) may at any time assign and
delegate to one or more commercial banks or other financial institutions,
and
(b) with notice to the Borrower and the Administrative Agent, but
without the consent of the Borrower or the Administrative Agent, may assign
and delegate to any of its Affiliates or to any other Lender
(each Person described in either of the foregoing clauses as being the Person to
whom such assignment and delegation is to be made, being hereinafter referred to
as an "Assignee Lender"), all or any fraction of such Lender's total Loans,
---------------
Letter of Credit Outstandings and Commitments in a minimum aggregate amount of
$5,000,000 (or, if less, the entire remaining amount of such Lender's Loans,
Letter of Credit Outstandings and Commitment); provided, however, that the
-------- -------
assigning Lender must assign a pro-rata portion of each of its Revolving Loan
Commitment, outstanding Revolving Loans and interest in Letter of Credit
Outstandings. The Borrower and each other Obligor and the Administrative Agent
shall be entitled to continue to deal solely and directly with such Lender in
connection with the interests so assigned and delegated to an Assignee Lender
until
(c) written notice of such assignment and delegation, together with
(i) payment instructions, (ii) the Internal Revenue Service Forms or other
statements contemplated or required to be delivered pursuant to Section
-------
4.6, if applicable, and (iii) addresses and related information with
respect to such Assignee Lender, shall have been delivered to the Borrower
and the Administrative Agent by such Lender and such Assignee Lender;
(d) such Assignee Lender shall have executed and delivered to the
Borrower and the Administrative Agent a Lender Assignment Agreement,
accepted by the Administrative Agent;
(e) the processing fees described below shall have been paid; and
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(f) the Administrative Agent shall have registered such assignment
and delegation in the Register pursuant to clause (b) of Section 2.7.
---------- -----------
From and after the date that the Administrative Agent accepts such Lender
Assignment Agreement and such assignment and delegation is registered in the
Register pursuant to clause (b) of Section 2.7, (x) the Assignee Lender
---------- -----------
thereunder shall be deemed automatically to have become a party hereto and to
the extent that rights and obligations hereunder have been assigned and
delegated to such Assignee Lender in connection with such Lender Assignment
Agreement, shall have the rights and obligations of a Lender hereunder and under
the other Loan Documents, and (y) the assignor Lender, to the extent that rights
and obligations hereunder have been assigned and delegated by it in connection
with such Lender Assignment Agreement, shall be released from its obligations
hereunder and under the other Loan Documents. Within five Business Days after
its receipt of notice that the Administrative Agent has received and accepted an
executed Lender Assignment Agreement (and if requested by the Assignee Lender),
but subject to clause (c), the Borrower shall execute and deliver to the
----------
Administrative Agent (for delivery to the relevant Assignee Lender) a new Note
(if requested by such Assignee Lender pursuant to Section 2.7(b)(ii)) evidencing
------------------
such Assignee Lender's assigned Loans and Commitments and, if the assignor
Lender has retained Loans and Commitments hereunder (and if requested by such
Lender), a replacement Note in the principal amount of the Loans and Commitments
retained by the assignor Lender hereunder (such Note to be in exchange for, but
not in payment of, any Note then held by such assignor Lender). Each such Note
shall be dated the date of the predecessor Note. The assignor Lender shall mark
each predecessor Note "exchanged" and deliver each of them to the Borrower.
Accrued interest and fees shall be paid as provided in the Lender Assignment
Agreement, and shall be paid at the same time or times provided in any
predecessor Note and in this Agreement. Such assignor Lender or such Assignee
Lender must also pay a processing fee in the amount of $3,500 to the
Administrative Agent upon delivery of any Lender Assignment Agreement. Any
attempted assignment and delegation not made in accordance with this Section
-------
10.11.1 shall be null and void. Notwithstanding anything to the contrary set
- -------
forth above, any Lender may (without requesting the consent of the Borrower or
the Administrative Agent) pledge its Loans to a Federal Reserve Bank in support
of borrowings made by such Lender from such Federal Reserve Bank.
SECTION X.11.2. Participations. Upon prior written notice to the Borrower
--------------
and the Administrative Agent, any Lender may at any time sell to one or more
commercial banks or other Persons (each of such commercial banks and other
Persons being herein called a "Participant") participating interests in any of
-----------
the Loans, Commitments, or other interests of such Lender hereunder; provided,
--------
however, that
- -------
(a) no participation contemplated in this Section 10.11 shall relieve
-------------
such Lender from its Commitments or its other obligations hereunder or
under any other Loan Document;
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(b) such Lender shall remain solely responsible for the performance
of its Commitments and such other obligations;
(c) the Borrower and each other Obligor and the Administrative Agent
shall continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement and each of
the other Loan Documents;
(d) no Participant, unless such Participant is an Affiliate of such
Lender or is itself a Lender, shall be entitled to require such Lender to
take or refrain from taking any action hereunder or under any other Loan
Document, except that such Lender may agree with any Participant that such
Lender will not, without such Participant's consent, take any actions of
the type described in clause (a), (b), (f) or, to the extent requiring the
---------- --- ---
consent of each Lender, clause (c) of Section 10.1; and
---------- ------------
(e) the Borrower shall not be required to pay any amount under this
Agreement that is greater than the amount which it would have been required
to pay had no participating interest been sold.
The Borrower acknowledges and agrees that each Participant, for purposes of
Sections 4.3, 4.4, 4.5, 4.6, 4.8, 4.9, 7.1.1, 10.3 and 10.4, shall be considered
- ------------ --- --- --- --- --- ----- ---- ----
a Lender. Each Participant shall only be indemnified for increased costs
pursuant to Section 4.3, 4.5 or 4.6 if and to the extent that the Lender which
----------- --- ---
sold such participating interest to such Participant concurrently is entitled to
make, and does make, a claim on the Borrower for such increased costs. Any
Lender that sells a participating interest in any Loan, Commitment or other
interest to a Participant under this Section 10.11.2 shall indemnify and hold
---------------
harmless the Borrower and the Administrative Agent from and against any taxes,
penalties, interest or other costs or losses (including, without limitation,
reasonable attorneys' fees and expenses) incurred or payable by the Borrower or
the Administrative Agent as a result of the failure of the Borrower or the
Administrative Agent to comply with its obligations to deduct or withhold any
Taxes from any payments made pursuant to this Agreement to such Lender or the
Administrative Agent, as the case may be, which Taxes would not have been
incurred or payable if such Participant had been a Non-U.S. Lender that was
entitled to deliver to the Borrower, the Administrative Agent or such Lender,
and did in fact so deliver, a duly completed and valid Form 1001 or 4224 (or
applicable successor form) entitling such Participant to receive payments under
this Agreement without deduction or withholding of any United States federal
taxes.
SECTION X.12. Other Transactions. Nothing contained herein shall preclude
------------------
any Agent, the Issuer or any other Lender from engaging in any transaction, in
addition to those contemplated by this Agreement or any other Loan Document,
with the Borrower or any of its Affiliates in which the Borrower or such
Affiliate is not restricted hereby from engaging with any other Person.
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SECTION X.13. Execution on Behalf of Corporation. Any signature by any
----------------------------------
Authorized Officer on this Agreement, any Loan Document and any other instrument
and certificate executed or to be executed pursuant to or in connection with
this Agreement or such other Loan Documents is provided only in such Authorized
Officer's capacity as a corporate officer, and not in any way in such Authorized
Officer's personal capacity.
SECTION X.14. Forum Selection and Consent to Jurisdiction. ANY LITIGATION
-------------------------------------------
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE ARRANGING AGENTS, THE LENDERS, THE
ISSUER OR THE BORROWER IN CONNECTION HEREWITH OR THEREWITH SHALL, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS
OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT
-------- -------
AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE ARRANGING
AGENTS' OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER
PROPERTY MAY BE FOUND. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO
THE PERSONAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE
PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE
BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION,
SUBJECT TO THE BORROWER'S RIGHT TO CONTEST SUCH JUDGMENT BY MOTION OR APPEAL ON
ANY GROUNDS NOT EXPRESSLY WAIVED IN THIS SECTION 10.14. THE BORROWER HEREBY
-------------
IRREVOCABLY APPOINTS CT CORPORATION SYSTEM (THE "PROCESS AGENT"), WITH AN OFFICE
-------------
ON THE DATE HEREOF AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, UNITED STATES, AS
ITS AGENT TO RECEIVE, ON THE BORROWER'S BEHALF AND ON BEHALF OF THE BORROWER'S
PROPERTY, SERVICE OF THE COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER
PROCESS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. SUCH SERVICE MAY
BE MADE BY MAILING OR DELIVERING A COPY OF SUCH PROCESS TO THE BORROWER IN CARE
OF THE PROCESS AGENT AT THE PROCESS AGENT'S ABOVE ADDRESS, AND THE BORROWER
HEREBY IRREVOCABLY AUTHORIZES AND DIRECTS THE PROCESS AGENT TO ACCEPT SUCH
SERVICE ON ITS BEHALF. AS AN ALTERNATIVE METHOD OF SERVICE, THE BORROWER
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL,
POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK
AT THE ADDRESS FOR NOTICES SPECIFIED IN SECTION 10.2. THE BORROWER HEREBY
------------
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EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY
SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT
ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT
THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF
ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE,
ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH
RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES TO THE
FULLEST EXTENT PERMITTED BY LAW SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS
UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION X.15. Waiver of Jury Trial. THE AGENTS, THE LENDERS, THE ISSUER
--------------------
AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE TO THE
FULLEST EXTENT PERMITTED BY LAW ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE AGENTS, THE LENDERS, THE ISSUER OR THE BORROWER IN CONNECTION HEREWITH OR
THEREWITH. THE BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND
SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH
OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE AGENTS, THE LENDERS AND THE ISSUER ENTERING INTO
THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
PRIMESTAR, INC.
By:
---------------------------------------
Title:
THE BANK OF NOVA SCOTIA, as an Arranging
Agent and as the Administrative Agent
By:
---------------------------------------
Title:
CREDIT LYONNAIS NEW YORK BRANCH, as an
Arranging Agent and as the Documentation
Agent
By:
---------------------------------------
Title:
NATIONSBANK OF TEXAS, N.A., as an Arranging
Agent and as the Syndication Agent
By:
---------------------------------------
Title:
<PAGE>
Lenders:
-------
THE BANK OF NOVA SCOTIA
By:
--------------------------------------
Title:
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH
By:
--------------------------------------
Title:
<PAGE>
NATIONSBANK OF TEXAS, N.A.
By:
--------------------------------------
Title:
<PAGE>
LONG TERM CREDIT BANK OF JAPAN, LTD.
By:
--------------------------------------
Title:
<PAGE>
ABN AMRO BANK N.V.
By:
--------------------------------------
Title:
<PAGE>
GENERAL ELECTRIC CAPITAL CORPORATION
By:
--------------------------------------
Title:
<PAGE>
BANK OF AMERICA NATIONAL TRUST & SAVINGS
ASSOCIATION
By:
--------------------------------------
Title:
<PAGE>
COLORADO NATIONAL BANK
By:
--------------------------------------
Title:
<PAGE>
SOCIETE GENERALE, NEW YORK BRANCH
By:
--------------------------------------
Title:
<PAGE>
BANK OF MONTREAL
By:
--------------------------------------
Title:
<PAGE>
ROYAL BANK OF CANADA
By:
--------------------------------------
Title:
<PAGE>
FLEET BANK, N.A.
By:
--------------------------------------
Title:
<PAGE>
BARCLAYS BANK PLC
By:
--------------------------------------
Title:
<PAGE>
BEAR STEARNS INVESTMENT PRODUCTS, INC.
By:
--------------------------------------
Title:
<PAGE>
Exhibit 21
PRIMESTAR, Inc.
a Delaware corporation
incorporated on August 27, 1997
Fed ID # 84-1441684
SUBSIDIARY INFORMATION
Subsidiary Fed ID # State of Inc. Date of Inc.
- ------------------------------------------------------------------
PRIMESTAR MDU, Inc. 84-1352884 Delaware 6/21/96
PRIMESTAR Partner
Holdings, Inc. 84-1385150 Delaware 2/19/97
PRIMESTAR Partner 1, 84-1353963 Colorado 7/9/96
Inc. (a subsidiary of
PRIMESTAR Partner
Holdings, Inc.)
PRIMESTAR Partner 2, 84-1353961 Colorado 7/9/96
Inc. (a subsidiary of
PRIMESTAR Partner
Holdings, Inc.)
PRIMESTAR Partners, 23-2601075 Delaware 2/16/90
L.P.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PRIMESTAR,
INC.'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 147,042
<ALLOWANCES> 7,442
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,562,458
<DEPRECIATION> 413,868
<TOTAL-ASSETS> 2,112,087
<CURRENT-LIABILITIES> 0
<BONDS> 1,833,195
0
0
<COMMON> 2,009
<OTHER-SE> (286,783)
<TOTAL-LIABILITY-AND-EQUITY> 2,112,087
<SALES> 0
<TOTAL-REVENUES> 1,289,666
<CGS> 0
<TOTAL-COSTS> 647,745
<OTHER-EXPENSES> 543,087
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 145,939
<INCOME-PRETAX> (1,491,232)
<INCOME-TAX> (147,528)
<INCOME-CONTINUING> (1,343,704)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,343,704)
<EPS-PRIMARY> (8.02)
<EPS-DILUTED> (8.02)
</TABLE>
