SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 9, 1997
COMSAT Corporation
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(Exact name of Registrant as specified in Charter)
District of Columbia 1-4929 52-0781863
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(State or other juris- (Commission (IRS Employer
diction of incorporation) File Number) Identification
Number)
6560 Rock Spring Drive, Bethesda, MD 20817
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(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code (301) 214-3000
Not Applicable.
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(Former name or former address, if changed since last report).
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Item 5. Other Events
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On June 9, 1997, COMSAT Corporation ("COMSAT") entered into a
Settlement Agreement (the "Settlement Agreement") with Herbert A. Denton,
Guy P. Wyser-Pratte and certain other persons and entities (collectively,
the "Group"), pursuant to which existing disputes between COMSAT and the
Group were resolved.
On May 1, 1997, certain members of the Group furnished COMSAT with a
submission dated April 30, 1997 (the "Advance Notice Submission") of their
intention to (i) nominate, and solicit proxies in support of, nine
candidates to stand for election to COMSAT's board of directors at COMSAT's
1997 Annual Meeting of Shareholders (the "1997 Annual Meeting") and (ii)
propose, and solicit proxies in support of, a non-binding resolution at the
1997 Annual Meeting (collectively, the "Proxy Contest"). The Settlement
Agreement, among other things, provides for the termination of the Proxy
Contest.
Under the terms of the Settlement Agreement, four new directors will
stand for election to COMSAT's board of directors at the 1997 Annual
Meeting, two of whom are being selected by the board and two of whom are
being selected by members of the Group. The remaining eight members of the
agreed upon slate are being selected by COMSAT's board of directors from
among the current elected directors. The COMSAT board has not yet announced
its two new candidates for election to the board of directors. The two
persons selected by the Group are Mr. Guy P. Wyser-Pratte and Mr. Larry G.
Schafran. The Settlement Agreement generally provides that COMSAT will
re-nominate Mr. Wyser-Pratte and Mr. Schafran, or designated replacement
nominees for them, on the board's slate of candidates at COMSAT's 1998
Annual Meeting of Shareholders (the "1998 Annual Meeting"). The members of
the Group agreed to vote, and to cause their affiliates and associates to
vote, their shares of COMSAT stock in favor of the agreed upon slate of
nominees at the 1997 and 1998 Annual Meetings. COMSAT's twelve elected
directors stand for election to the board annually. COMSAT's board also
includes three directors appointed by the President of the United States
who serve for three-year terms.
The Settlement Agreement further provides that following the 1997
Annual Meeting, the board of directors will establish a new strategic
planning committee to be comprised of three directors, two of whom will be
selected by the board. The third member of the committee will be Mr.
Schafran. The committee will review and make recommendations to COMSAT's
full board of directors concerning COMSAT's current and future business
operations and strategies, and the enhancement of shareholder value.
The Group also agreed to certain "standstill" provisions for a period
ending on the earlier of February 28, 1999 or 75 days prior to COMSAT's
1999 Annual Meeting of Shareholders. COMSAT may, under certain
circumstances, terminate the Settlement Agreement prior to the 1998 Annual
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Meeting, in which case the Group's two nominees will not be included on the
Board's slate of nominees and the "standstill" provisions will terminate.
The "standstill" provisions provide, among other things, that members of
the Group, and their affiliates and associates, will not (i) acquire in
excess of 5% of COMSAT's voting securities or (ii) except as otherwise
specifically provided by the Settlement Agreement, engage in any
solicitation of proxies or consents, or initiate any shareholder proposals.
In addition, pursuant to the Settlement Agreement, COMSAT has agreed to
reimburse the Group for reasonable, documented, out-of-pocket expenses in
an aggregate amount not to exceed $845,000 incurred in connection with the
Proxy Contest, the Litigation (as defined below), the solicitation by the
Group of consents to hold a special meeting of shareholders and the
negotiation of the Settlement Agreement.
The Settlement Agreement also provides that COMSAT will dismiss as to
those members of the Group who are defendants, its pending litigation in
the United States District Court for the Eastern District of Virginia
entitled COMSAT Corporation v. Bruce L. Crockett et al. (the "Litigation").
In accordance with the Settlement Agreement, the Litigation was dismissed
with prejudice as to those members of the Group who were identified as the
Group's nominees in the Advance Notice Submission and dismissed without
prejudice as to all other members of the Group who are defendants therein.
COMSAT has agreed not to reinstate the Litigation claims against such
persons while the "standstill" remains in effect.
A copy of the Settlement Agreement is filed as Exhibit 10.1 hereto and
is incorporated herein by reference. The foregoing description of the
Settlement Agreement does not purport to be complete and is qualified in
its entirety by reference to such Exhibit. A copy of the Press Release
relating to the Settlement Agreement issued by COMSAT on June 10, 1997 is
filed as Exhibit 99.1 hereto.
On June 13, 1997, the Corporation also announced that it will complete
the spin-off of its 80.67% ownership in Ascent Entertainment Group, Inc.
("Ascent") on June 27, 1997 in accordance with its previously announced
restructuring and strategic business plan. The Corporation's board of
directors has established June 19, 1997 as the record date for the special
dividend. The Corporation also announced that the record date for the 1997
Annual Meeting has been moved from July 2 to July 8, 1997 to allow for an
adequate interval between the distribution date for the spin-off and the
record date for the annual meeting. A copy of the press release issued by
COMSAT on June 13, 1997 relating to such announcements is filed as Exhibit
99.2 hereto.
In connection with the distribution, on June 3, 1997, the Corporation
and Ascent entered into a Distribution Agreement and a Tax Disaffiliation
Agreement governing the distribution and certain relationships between the
companies following the distribution. The Distribution Agreement and the
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Tax Disaffiliation Agreement are attached hereto as Exhibit 10.2 and
Exhibit 10.3, respectively, and are incorporated herein by reference.
Item 7. Financial Statements and Exhibits
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(c) Exhibits (listed according to the number assigned in Item 601 of
Regulation S-K).
Exhibit No. Description
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10.1 Settlement Agreement, dated as of June 9, 1997,
among the Corporation, Herbert A. Denton, Guy P.
Wyser-Pratte and others.
10.2 Distribution Agreement between the Corporation
and Ascent dated June 3, 1997.
10.3 Tax Disaffiliation Agreement between the Corporation
and Ascent dated June 3, 1997.
99.1 Press Release dated June 10, 1997 related to the
Settlement Agreement.
99.2 Press Release dated June 13, 1997 related to the
record dates for the Ascent Spin-off and the 1997
Annual Meeting.
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
COMSAT Corporation
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By: /s/ Alan Korobov
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Alan Korobov
Controller
Date: June 18, 1997
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EXHIBIT INDEX
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Exhibit No. Description
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10.1 Settlement Agreement, dated as of June 9, 1997,
among the Corporation, Herbert A. Denton, Guy P.
Wyser-Pratte and others.
10.2 Distribution Agreement between the Corporation
and Ascent dated June 3, 1997.
10.3 Tax Disaffiliation Agreement between the Corporation
and Ascent dated June 3, 1997.
99.1 Press Release dated June 10, 1997 related to the
Settlement Agreement.
99.2 Press Release dated June 13, 1997 related to the
record dates for the Ascent Spin-off and the 1997
Annual Meeting.
SETTLEMENT AGREEMENT
SETTLEMENT AGREEMENT, dated as of June 9th, 1997 ("Agreement"),
by and among Providence Capital, Inc., a Delaware corporation; Pacific
Equity Limited, a Hong Kong company; Providence Investors LLC, a Delaware
limited liability company; Herbert A. Denton; William Tapert; Gregory
Morey; Frederick Whitridge, Jr.; Adam Weiss; Wyser-Pratte & Co., Inc., a
New York corporation; Wyser-Pratte Management Co., Inc., a New York
corporation; Guy P. Wyser-Pratte; Eric Longmire; Robert W. Anestis; Melvin
L. Cooper; Thomas M. Davidson; Bruce W. Fennie; Lawrence C. McQuade; David
C. Mitchell; David R. Morris; A. Alex Porter; and Larry G. Schafran (the
foregoing corporations, individuals and entities being collectively
referred to herein as the "Denton/Wyser-Pratte Group"); and COMSAT
Corporation, a District of Columbia corporation (the "Company").
WHEREAS, on May 1, 1997, certain members of the
Denton/Wyser-Pratte Group furnished the Company with a submission dated
April 30, 1997 (the "Advance Notice Submission") of their intention to (i)
nominate, and solicit proxies in support of, nine candidates to stand for
election to the Company's Board of Directors (the "Board") at the Company's
1997 Annual Meeting of Shareholders (the "1997 Annual Meeting") and (ii)
propose, and solicit proxies in support of, a non-binding resolution at the
1997 Annual Meeting (collectively, the "Proxy Contest");
WHEREAS, the Company commenced an action entitled COMSAT
Corporation v. Bruce L. Crockett et. al. (the "Pending Litigation") against
Bruce L. Crockett ("Crockett"), and certain members of the
Denton/Wyser-Pratte Group in the United States District Court for the
Eastern District of Virginia;
WHEREAS, the Company and the members of the Denton/Wyser-Pratte
Group have determined that the interests of the Company and its
shareholders, and the interests of the members of the Denton/Wyser-Pratte
Group, would best be served by (i) avoiding the substantial expense and
disruption that could be expected to result from the Proxy Contest and the
Pending Litigation, (ii) nominating the persons as set forth herein for
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election as directors of the Company, (iii) terminating the Pending
Litigation against those members of the Denton/Wyser-Pratte Group who are
defendants in such lawsuit as provided herein and (iv) the receipt of other
agreements, covenants, rights and benefits as provided herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements and representations set forth herein, intending to be legally
bound hereby, the parties hereby agree as follows:
1. Settlement of Pending Litigation; Board Composition; Related
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Matters.
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(a) As promptly as practicable after the execution of this
Agreement, the Company shall take all steps necessary to dismiss, as to
those members of the Denton/Wyser-Pratte Group who are defendants therein,
the Pending Litigation with prejudice as to Messrs. Anestis, Cooper,
Davidson, Fennie, McQuade, Mitchell, Morris, Porter and Schafran and
without prejudice as to the other defendants who are members of the
Denton/Wyser-Pratte Group, and without costs or expenses. The Company
further agrees that it will not prior to the Standstill Termination Date
(as such term is hereinafter defined), in connection with the Pending
Litigation, or in the event of any further action or lawsuit involving the
Company and Crockett (irrespective of whether the Company is a plaintiff or
defendant) implead or name as a third party defendant in such action or
lawsuit any member of the Denton/Wyser-Pratte Group or otherwise bring a
new action against any member of the Denton/Wyser-Pratte Group (other than
those members as to whom the Pending Litigation has been dismissed with
prejudice) reinstating the claims made in the Pending Litigation.
(b) The Company and the Denton/Wyser-Pratte Group agree that
the twelve nominees standing for election at the 1997 Annual Meeting
scheduled to be held on August 15, 1997, shall be (i) eight persons to be
selected by the Board from among the eleven elected directors currently
serving as members of the Board, (ii) Guy Wyser-Pratte and Larry G.
Schafran (the "Denton/Wyser-Pratte Nominees"), who have been selected by
the Denton/Wyser-Pratte Group, and (iii) two individuals who are not
currently serving on the Board and who shall be selected by the Board. The
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foregoing persons are collectively referred to herein as the "1997
Nominees," and shall stand for election to serve on the Board for a term
expiring at the Company's 1998 Annual Meeting of Shareholders (the "1998
Annual Meeting") and until their respective successors shall have been duly
elected and qualified. Effective upon execution of this Agreement, the
Denton/Wyser-Pratte Group irrevocably withdraws its Advance Notice
Submission and agrees to terminate the Proxy Contest. Each of the Company
and the Denton/Wyser-Pratte Group acknowledge that (i) to the best of their
knowledge, there are no circumstances that would preclude either Mr.
Wyser-Pratte or Mr. Schafran from serving as a member of the Board and (ii)
each of Mr. Schafran and Mr. Wyser-Pratte are suitable nominees for
election to the Company's Board. The Company further acknowledges that it
currently believes that among the remaining candidates proposed for
election to the Board in the Advance Notice Submission there are suitable
Denton/Wyser-Pratte Nominees.
(c) The members of the Denton/Wyser-Pratte Group and their
Affiliates and Associates (as such terms are hereinafter defined), and the
Company, shall publicly support and recommend that the Company's
shareholders vote for the election of each of the 1997 Nominees at the 1997
Annual Meeting, and the members of the Denton/Wyser-Pratte Group shall
vote, and shall cause their Affiliates and Associates to vote, all shares
of the Company's Common Stock (the "Common Stock") which they are entitled
to vote at the 1997 Annual Meeting in favor of the election of each of the
1997 Nominees, cumulated equally among each of the 1997 Nominees. The
Company agrees that it shall cause its designated proxy holders to vote in
favor of the election of each of the 1997 Nominees, cumulated equally among
each of the 1997 Nominees with respect to any valid proxy received by the
Company for the 1997 Annual Meeting for which no contrary voting
instructions are provided.
(d) Subject to the provisions of Sections 1(f), 1(g) and 2
hereof, the Company and the Denton/Wyser-Pratte Group agree that the 1997
Nominees shall also stand for election to serve on the Board at the 1998
Annual Meeting for an additional term expiring at the Company's 1999 Annual
Meeting of Shareholders (the "1999 Annual Meeting") and until their
respective successors shall have been duly elected and qualified. The
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persons nominated in accordance with the provisions of this Agreement to
stand for election at the 1998 Annual Meeting are referred to herein as the
"1998 Nominees."
(e) The members of the Denton/Wyser-Pratte Group and their
Affiliates and Associates, and the Company, shall publicly support and
recommend that the Company's shareholders vote for the election of each of
the 1998 Nominees at the 1998 Annual Meeting, and the members of the
Denton/Wyser-Pratte Group shall vote, and shall cause their Affiliates and
Associates to vote, all shares of Common Stock which they are entitled to
vote at the 1998 Annual Meeting in favor of the election of each of the
1998 Nominees, cumulated equally among each of the 1998 Nominees. The
Company agrees that in connection with the 1998 Annual Meeting, it shall
cause its designated proxy holders to either (i) vote in favor of the
election of each of the 1998 Nominees, cumulated equally among each of the
1998 Nominees with respect to any valid proxy received by the Company for
which no contrary voting instructions are provided or (ii) cumulate such
votes in a manner that assures the election of both Denton/Wyser-Pratte
Nominees.
(f) If any Denton/Wyser-Pratte Nominee shall be unable or
unwilling to serve as a nominee or a director for any reason prior to his
election at the 1997 Annual Meeting or at the 1998 Annual Meeting, as the
case may be, or, after election as a director of the Company at the 1997
Annual Meeting or 1998 Annual Meeting, shall cease to be a member of the
Board by reason of his death, disability or resignation, the
Denton/Wyser-Pratte Group shall be entitled to designate another person
from among the nine candidates identified in the Advance Notice Submission,
reasonably acceptable to a majority of the members of the Board who are not
Denton/Wyser-Pratte Nominees (or if none of such persons is deemed
reasonably acceptable, such other person or persons who may be designated
by the Denton/Wyser-Pratte Group and are reasonably acceptable to a
majority of the members of the Board who are not Denton/Wyser-Pratte
Nominees), and any such person shall (i) become a Denton/Wyser-Pratte
Nominee for all purposes under this Agreement and (ii) be deemed to be a
member of the Denton/Wyser-Pratte Group for all purposes under this
Agreement. If any nominee or director, other than a Denton/Wyser-Pratte
Nominee, shall be unable or unwilling to serve as a nominee or a director
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prior to his or her election at the 1997 Annual Meeting or at the 1998
Annual Meeting, as the case may be, or, after election as a director of the
Company at the 1997 Annual Meeting or 1998 Annual Meeting, shall cease to
be a member of the Board by reason of his or her death, disability or
resignation, the members of the Board who are not Denton/Wyser-Pratte
Nominees shall be entitled to designate another person to serve as a
director or a nominee, as the case may be.
(g) Notwithstanding anything to the contrary contained in
this Agreement, the Company shall not be required to include any
Denton/Wyser-Pratte Nominees as 1998 Nominees unless at all times from the
date hereof until the date of the 1998 Annual Meeting the members of the
Denton/Wyser-Pratte Group collectively shall have beneficially owned at
least 150,000 shares of Common Stock, as adjusted up or down to reflect
stock splits, reverse stock splits, and other similar reorganization events
applicable to holders of Common Stock generally (the "Minimum Condition").
The Denton/Wyser-Pratte Group shall notify the Company promptly (and in any
event within 5 business days) in the event that, at any time, the
Denton/Wyser-Pratte Group shall fail to satisfy the Minimum Condition. At
the request of the Company, the Denton/Wyser-Pratte Group shall certify to
the Company in writing its compliance with the Minimum Condition prior to
the time the Board selects the 1998 Nominees and prior to the 1998 Annual
Meeting. In the event that the Denton/Wyser-Pratte Group shall have failed
at any time from the date hereof until the 1998 Annual Meeting to satisfy
the Minimum Condition and Denton/Wyser-Pratte Nominees have been nominated
to stand for election as 1998 Nominees at the 1998 Annual Meeting, then
each Denton/Wyser-Pratte Nominee shall immediately withdraw as a 1998
Nominee (or, in the absence of such withdrawal, the Company may remove the
Denton/Wyser-Pratte Nominees as 1998 Nominees). The provisions contained in
this Section 1(g) shall not in any way affect or limit the covenants and
agreements contained elsewhere in this Agreement of (i) the
Denton/Wyser-Pratte Group or (ii) the Company (other than those agreements
of the Company contained in paragraphs (b) through (h) of this Section 1).
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(h) At the first meeting of the Board following the
certification of the vote of the election of directors at the 1997 Annual
Meeting, the Board shall create a committee of the Board, to be designated
the Strategic Planning Committee, consisting of three directors, one of
whom shall be a Denton/Wyser-Pratte Nominee as designated by the
Denton/Wyser-Pratte Group, and two of whom shall be designated by the
members of the Board who are not Denton/Wyser-Pratte Nominees. The
Strategic Planning Committee shall have the authority to review and make
recommendations to the full Board concerning all aspects of the Company's
businesses and its current and future business and financial strategies,
transactional opportunities and the enhancement of shareholder value. The
Company agrees that prior to the Standstill Termination Date, it shall not
take any action to (i) disband or otherwise take any action to cause the
Strategic Planning Committee to cease to function, (ii) decrease or limit
the responsibilities of the Strategic Planning Committee or (iii) alter the
composition of the Strategic Planning Committee as provided in the first
sentence of this paragraph (h). The Strategic Planning Committee shall,
upon authorization by the Board, (i) have the power to retain financial
advisers and other experts to assist in its work and (ii) be provided with
an annual operating budget commensurate with its responsibilities. The
quorum for all meetings of the Strategic Planning Committee shall be two,
at least one of whom is the Denton/Wyser-Pratte Nominee. The act of a
majority of those present at a meeting at which a quorum is present shall
be the act of the Strategic Planning Committee, provided that the Strategic
Planning Committee may act by the unanimous written consent of its members.
2. Company's Right to Terminate Under Certain Circumstances.
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Notwithstanding anything to the contrary contained in this
Agreement, if, pursuant to Section 2.11(d) of the Company's By-laws, a
valid nomination is made of one or more nominees to stand for election to
the Board at the 1998 Annual Meeting, other than nominees chosen by the
Board pursuant to this Agreement, then the Company, in its sole discretion,
may, within five business days following its receipt of such nomination,
upon written notice to the Denton/Wyser-Pratte Group, terminate this
Agreement (the "Termination Option"), whereupon this Agreement shall be of
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no further force or effect and the parties hereto shall no longer be bound
by any terms, conditions, covenants, representations or warranties
contained herein. In the event that the Company exercises the Termination
Option, then, within five business days following receipt of notice that
the Company is exercising the Termination Option, the Denton/Wyser-Pratte
Group shall have the option, upon written notice to the Company, to require
that the Company not hold the 1998 Annual Meeting prior to the 60th day
following the date on which the Termination Option is exercised and, if
necessary, the Company shall postpone the 1998 Annual Meeting in order to
satisfy such requirement. In the event the Company exercises the
Termination Option, the Company agrees that it will take such action or
actions as may be required in order to afford the Denton/Wyser-Pratte Group
a period of not less than 14 calendar days following the date of exercise
of the Termination Option to furnish any advance nominations or
presentation of new business in accordance with the Company's By-laws.
3. Covenants of the Denton/Wyser-Pratte Group.
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(a) The date on which the covenants and agreements contained
in this Section 3 terminate is referred to herein as the "Standstill
Termination Date." The "Standstill Termination Date" shall be the earliest
of (i) February 28, 1999, (ii) 75 days prior to the date approved by the
Board for the 1999 Annual Meeting and (iii) the date the Company exercises
the Termination Option.
(b) Each member of the Denton/Wyser-Pratte Group jointly and
severally agrees that during the period commencing on the date hereof and
ending on the Standstill Termination Date, without the prior written
consent of the Board specifically expressed in a resolution adopted by a
majority of the directors other than the Denton/Wyser-Pratte Nominees, they
will not, and will cause each of their Affiliates and Associates not to,
directly or indirectly:
(i) acquire, offer or propose to acquire, or agree to
acquire (except, in any case, by way of stock dividends or other
distributions or offerings made available to holders of Voting
Securities (as such term is hereinafter defined) generally or to the
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Company's non-employee directors pursuant to any compensatory plan of
the Company, provided, that any such securities so received shall be
subject to the provisions hereof), directly or indirectly, whether by
purchase, tender or exchange offer, through the acquisition of control
of another Person (as hereinafter defined), by joining a partnership,
limited partnership, syndicate or other "group" (within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) or otherwise, any Voting Securities, if when
taken together with the Voting Securities owned by the
Denton/Wyser-Pratte Group would constitute more than 5% of the then
outstanding Voting Securities;
(ii) except as specifically provided for in Section 1
and Section 2 hereof, make, or in any way participate, directly or
indirectly, in any "solicitation" (as such term is used in the proxy
rules of the Securities and Exchange Commission (the "SEC")) of
proxies or consents (whether or not relating to the election or
removal of directors), seek to advise, encourage or influence any
Person with respect to the voting of any Voting Securities, initiate,
propose or otherwise "solicit" (as such term is used in the proxy
rules of the SEC) shareholders of the Company for the approval of
shareholder proposals whether made pursuant to Rule 14a-8 under the
Exchange Act or otherwise, induce or attempt to induce any other
Person to initiate any such shareholder proposal, or otherwise
communicate with the Company's shareholders or others pursuant to Rule
14a-1(l)(2)(iv) under the Exchange Act;
(iii) make any public announcement with respect to any
proposal or offer involving any merger, consolidation, business
combination, tender or exchange offer, sale or purchase of assets,
sale or purchase of securities, dissolution, liquidation,
restructuring, recapitalization or similar transactions of or
involving the Company or any of its Affiliates;
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(iv) form, join or in any way participate in any
"group" (within the meaning of Section 13(d)(3) of the Exchange Act)
or in any "syndicate or affiliated group" (within the meaning of
Section 304(b)(3) of the Communications Satellite Act of 1962) with
respect to any Voting Securities;
(v) deposit any Voting Securities in any voting trust
or subject any Voting Securities to any arrangement or agreement with
respect to the voting of any Voting Securities, except as specifically
set forth in Section 1 hereof;
(vi) execute any written consent as shareholders with
respect to the Company or its Voting Securities, except as set forth
in Section 1 hereof;
(vii) otherwise act, alone or in concert with others,
to control or seek to control or influence or seek to influence the
management, the Board or policies of the Company, other than through
non-public communications with the directors of the Company, including
the Denton/Wyser-Pratte Nominees acting in their capacity as directors
of the Company;
(viii) seek, alone or in concert with others, (a) to
call a meeting of shareholders, (b) representation on the Board,
except as specifically set forth in Section 1 hereof, or (c) the
removal of any member of the Board;
(ix) make any publicly disclosed proposal regarding any
of the foregoing;
(x) publicly disclose any request to amend, waive or
terminate any provision of this Agreement; or
(xi) take or cause others to take any action
inconsistent with any of the foregoing.
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(c) Nothing in paragraph (b) of this Section 3 shall be
deemed to limit, prevent or preclude any communication among or between any
of the members of the Denton/Wyser-Pratte Group that does not involve the
communication by a Denton/Wyser-Pratte Nominee of confidential information
obtained by such nominee during the term of his service as a member of the
Board of Directors of the Company or any committee thereof.
(d) Subject to compliance with the provisions of paragraph
(b) of this Section 3 and subject to compliance with applicable securities
laws, nothing shall be deemed to limit, prevent or preclude any member of
the Denton/Wyser-Pratte Group from acting as a broker, consultant or
financial adviser to any party in a business or financial transaction with
or involving the Company or any of its Affiliates.
(e) Nothing contained in paragraph (b) of this Section 3
shall be deemed in any way to prohibit or limit a Denton/Wyser-Pratte
Nominee during the term of his service as a director of the Company from
engaging in any lawful acts in his capacity as a director of the Company.
4. Representations and Warranties of the Denton/Wyser-Pratte
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Group.
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(a) Each member of the Denton/Wyser-Pratte Group which is
not a natural person represents and warrants on its own behalf that it has
the corporate power and authority to execute, deliver and carry out the
provisions of this Agreement and to consummate the transactions
contemplated hereby.
(b) Each member of the Denton/Wyser-Pratte Group which is
not a natural person represents and warrants on its own behalf that this
Agreement has been duly authorized, executed, and delivered, constitutes
its valid and binding obligation, and is enforceable against it in
accordance with its terms.
(c) Each member of the Denton/Wyser-Pratte Group who is a
natural person represents and warrants on his own behalf that he has the
power and authority to execute, deliver and carry out the provisions of
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this Agreement and to consummate the transactions contemplated hereby.
(d) Each member of the Denton/Wyser-Pratte Group who is a
natural person represents and warrants on his own behalf that this
Agreement has been duly executed and delivered, constitutes his valid and
binding obligation, and is enforceable against him in accordance with its
terms.
(e) The members of the Denton/Wyser-Pratte Group represent
and warrant that they, together with their Affiliates and Associates,
beneficially own an aggregate of 1,601,950 shares of Voting Securities as
set forth by beneficial owner and amount on Schedule A hereto and such
Voting Securities constitute all of the Voting Securities of the Company
beneficially owned by the members of the Denton/Wyser-Pratte Group and
their Affiliates and Associates.
5. Representations and Warranties of the Company. The Company
hereby represents and warrants as follows:
(a) The Company has the corporate power and authority to
execute, deliver and carry out the terms and provisions of this Agreement
and to consummate the transactions contemplated hereby, and has taken all
necessary action to authorize the execution, delivery and performance of
this Agreement and the transactions contemplated hereby.
(b) This Agreement has been duly and validly authorized,
executed and delivered by the Company and constitutes a valid and binding
agreement of the Company, enforceable in accordance with its terms.
6. Press Release. Upon execution of this Agreement, the Company
shall issue a press release substantially in the form attached hereto with
such changes as may be mutually agreed to by the Company and the
Representative (as such term is hereinafter defined). None of the parties
hereto will make any public statements (including any statements in any
filing with the Securities and Exchange Commission or any other
governmental agency) that are inconsistent with, or are otherwise contrary
to, the statements in the press release. Nothing shall preclude or prevent
11
<PAGE>
either the Company or any member of the Denton/Wyser-Pratte Group from
making public statements that are not either contrary to, or inconsistent
with, the statements in the press release, provided that all such public
statements shall be in compliance with applicable securities laws and
consistent with any such party's fiduciary duties to the Company.
7. Expenses. The Company hereby agrees to reimburse the
Denton/Wyser-Pratte Group for their reasonable, documented, out-of-pocket
expenses incurred in connection with the Denton/Wyser-Pratte solicitation
of consents to hold a special meeting of shareholders of the Company, the
Proxy Contest, the Pending Litigation (notwithstanding Section 1(a) hereof)
and the negotiation of this Agreement, in an aggregate amount not to exceed
$845,000. The Company agrees to pay such expenses by check or wire transfer
within five business days of receipt of an invoice of the same, together
with supporting documentation (such as a law firm billing statement), from
the Denton/Wyser-Pratte Group.
8. Specific Performance. Each of the members of the
Denton/Wyser-Pratte Group, on the one hand, and the Company on the other,
acknowledges and agrees that irreparable injury to the other party or
parties (as the case may be) hereto would occur in the event any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached and that such injury would not be
compensable in damages. It is accordingly agreed that each party hereto
(the "Moving Party") shall be entitled to specific enforcement of, the
terms hereof and the other parties hereto will not take action, directly or
indirectly, in opposition to the Moving Party seeking such relief on the
grounds that any other remedy or relief is available at law or in equity.
9. No Waiver. Any waiver by any party hereto of a breach of any
provision of this Agreement shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Agreement. The failure of a party hereto to insist upon
strict adherence to any term of this Agreement on one or more occasions
shall not be considered a waiver or deprive that party of the right
12
<PAGE>
thereafter to insist upon strict adherence to that term or any other term
of this Agreement.
10. Certain Definitions. As used in this Agreement, (a) the term
"Person" shall mean any individual, partnership, corporation, group,
syndicate, trust, government or agency thereof, or any other association or
entity; (b) the terms "Affiliates" and "Associates" shall have the meanings
set forth in Rule 12b-2 under the Exchange Act and shall include persons
who become Affiliates or Associates of any Person subsequent to the date
hereof; and (c) the term "Voting Securities" shall mean the shares of
Common Stock and any other securities of the Company entitled to vote in
the election of directors, or securities convertible into, or exercisable
or exchangeable for, such Common Stock or other securities, whether or not
subject to the passage of time or other contingencies.
11. Successors and Assigns. All the terms and provisions of this
Agreement shall inure to the benefit of and shall be enforceable by the
successor and assigns of the parties hereto.
12. Survival of Representations. All representations, warranties
and agreements made by the parties in this Agreement or pursuant hereto
shall survive the date hereof.
13. Entire Agreement; Amendments. This Agreement contains the
entire understanding of the parties hereto with respect to its subject
matter. There are no restrictions, agreements, promises, representations,
warranties, covenants or undertakings other than those expressly set forth
herein. This Agreement may be amended only by a written instrument duly
executed by the parties hereto or their respective successors or assigns.
14. Headings. The section headings contained in this Agreement
are for reference purposes only and shall not effect in any way the meaning
or interpretation of this Agreement.
15. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given if so given) by hand delivery, cable,
13
<PAGE>
telecopy (confirmed in writing) or telex, or by mail (registered or
certified, postage prepaid, return receipt requested) to the respective
parties hereto as follows:
If to the Company:
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, Maryland 20815
Attention: Warren Y. Zeger, Esq.,
Vice President, General
Counsel and Secretary
Telecopy: 301/214-7128
with a copy to:
Skadden, Arps, Slate, Meagher & Flom, LLP
919 Third Avenue
New York, New York 10022
Attention: Daniel E. Stoller, Esq.
Telecopy: 212/735-2000
If to the Denton/Wyser-Pratte Group:
Herbert A. Denton
Providence Capital, Inc.
730 Fifth Avenue
New York, New York 10019
Telecopy: 212/888-3203
and
Ervin Shindell, Esq.
Wyser-Pratte & Co.
63 Wall Street
New York, New York 10005
Telecopy: 212/495-5360
with copies to:
Coudert Brothers
1114 Avenue of the Americas
New York, New York 10036
Attention: Thomas J. Rice, Esq.
Telecopy: 212/626-4120
14
<PAGE>
and
Zuckerman, Spaeder, Goldstein,
Taylor & Kolker, L.L.P.
1201 Connecticut Avenue, N.W.
Washington, D.C. 20036
Attention: Roger E. Zuckerman, Esq.
Telecopy: 202/822-8106
and
Reed Smith Shaw & McClay
Suite 1100 - East Tower
1301 K Street, N.W.
Washington, D.C. 20005-3317
Attention: Douglas K. Spaulding, Esq.
Telecopy: 202/414-9299
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth
above.
16. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the District of
Columbia, without reference to the conflict of laws principles thereof.
17. Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original, but each of which together shall
constitute one and the same Agreement.
18. Denton/Wyser-Pratte Group Representative. Each member of the
Denton/Wyser-Pratte Group hereby irrevocably appoints Ervin Shindell, Esq.
as such member's attorney-in-fact and representative (the
"Representative"), in such member's place and stead, to do any and all
things and to execute any and all documents and give and receive any and
all notices or instructions in connection with this Agreement and the
transactions contemplated hereby. The Company shall be entitled to rely, as
being binding on each member of the Denton/Wyser-Pratte Group, upon any
action taken by the Representative or upon any document, notice,
instruction or other writing given or executed by the Representative.
15
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound hereby,
each of the undesigned parties has executed or caused this Agreement to be
executed on the date first above written.
COMSAT CORPORATION
By: /s/ Edwin I. Colodny
--------------------
Name: Edwin I. Colodny
Title: Chairman of the Board
PROVIDENCE CAPITAL, INC.
By: /s/ Herbert A. Denton
---------------------
Name: Herbert A. Denton
Title: President
PACIFIC EQUITY LIMITED
By: /s/ Herbert A. Denton
---------------------
Name: Herbert A. Denton
Title: Managing Director
PROVIDENCE INVESTORS LLC
By: /s/ Herbert A. Denton
---------------------
Name: Herbert A. Denton
Title: Managing Member
WYSER-PRATTE & CO., INC.
By: /s/ Guy P. Wyser-Pratte
-----------------------
Name: Guy P. Wyser-Pratte
Title: President
16
<PAGE>
WYSER-PRATTE MANAGEMENT CO., INC.
By: /s/ Guy P. Wyser-Pratte
-----------------------
Name: Guy P. Wyser-Pratte
Title: President
/s/ Herbert A. Denton
---------------------
HERBERT A. DENTON
/s/ Guy P. Wyser-Pratte
-----------------------
GUY P. WYSER-PRATTE
/s/ William Tapert
-------------------
WILLIAM TAPERT
/s/ Gregory Morey
-----------------
GREGORY MOREY
/s/ Frederick Whitridge, Jr.
----------------------------
FREDERICK WHITRIDGE, JR.
/s/ Adam Weiss
--------------
ADAM WEISS
/s/ Eric Longmire
-----------------
ERIC LONGMIRE
17
<PAGE>
/s/ Robert W. Anestis
---------------------
ROBERT W. ANESTIS
/s/ Melvin L. Cooper
--------------------
MELVIN L. COOPER
/s/ Thomas M. Davidson
----------------------
THOMAS M. DAVIDSON
/s/ Bruce W. Fennie
-------------------
BRUCE W. FENNIE
/s/ Laurence C. McQuade
-----------------------
LAURENCE C. McQUADE
/s/ David C. Mitchell
---------------------
DAVID C. MITCHELL
/s/ David R. Morris
-------------------
DAVID R. MORRIS
/s/ A. Alex Porter
------------------
A. ALEX PORTER
/s/ L.G. Schafran
-----------------
LARRY G. SCHAFRAN
18
<PAGE>
SCHEDULE A
Denton/Wyser-Pratte Group
Common Stock Ownership
<TABLE>
<CAPTION>
<S> <C> <C>
Person Shares Options
Providence Capital, Inc. 15,000 -0-
Pacific Equity Limited -0- -0-
Providence Investors LLC 25,000 -0-
Herbert A. Denton -0- -0-
William Tapert -0- 2,000
Gregory Morey 5,000 -0-
Frederick Whitridge, Jr. -0- -0-
Adam Weiss -0- -0-
Wyser-Pratte & Co., Inc. 157,900 -0-
Wyser-Pratte Management
Co., Inc. 1,342,100 -0-
Guy P. Wyser-Pratte 1,500,100 -0-
Eric Longmire -0- -0-
Robert W. Anestis 2,000 -0-
Melvin L. Cooper 1,000 -0-
Thomas M. Davidson -0- -0-
Bruce W. Fennie 2,000 -0-
Lawrence C. McQuade -0- -0-
David C. Mitchell 900 -0-
David R. Morris 250 -0-
A. Alex Porter 44,500 -0-
Larry G. Schafran -0- -0-
Graham A. Fennie 200 -0-
Jean B. Mitchell 900 -0-
Katherine Morris 250 -0-
Lynn Hecht Schafran 4,000 -0-
The Collectors' Fund L.P. 13,500 -0-
Amici Associates L.P. 31,000 -0-
</TABLE>
19
<PAGE>
Notes
Guy P. Wyser-Pratte's shares include shares held or managed by Wyser-Pratte
& Co., Inc. and Wyser-Pratte Management Co., Inc. which may be deemed to be
beneficially owned by Guy P. Wyser-Pratte. Mr. Wyser-Pratte personally has
beneficial interest in 19,900 shares directly and another 20,000 shares
through his IRA account. Mr. Wyser-Pratte owns 100 shares both beneficially
and of record.
Graham A. Fennie is the son of Bruce W. Fennie.
Jean B. Mitchell shares investment power over 900 shares with her husband
David C. Mitchell.
Katherine Morris shares voting and investment power over 200 shares with
her husband David R. Morris.
Lynn Hecht Schafran owns 4,000 shares as to which her husband Larry G.
Schafran disclaims beneficial ownership.
A. Alex Porter is a general partner in The Collectors' Fund L.P. and Amici
Associates L.P. with shared investment and voting power over the 13,500
shares held directly by The Collectors' Fund L.P. and the 31,000 shares
held directly by Amici Associates L.P.
20
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT (this "Agreement") is entered into as of
this 3rd day of June, 1997, by and between COMSAT Corporation ("COMSAT"), a
District of Columbia corporation, and Ascent Entertainment Group, Inc.
("Ascent"), a Delaware corporation.
RECITALS
A. The COMSAT Board of Directors has determined that it is appropriate
and desirable to distribute, subject to certain conditions, to the
shareholders of COMSAT on a pro rata basis all of COMSAT's interest in
Ascent's common stock, par value $0.01 per share ("Ascent Common Stock") on
the Distribution Date, as defined below (the "Distribution").
B. The Distribution is intended to qualify as a tax-free spin-off under
Section 355 of the Internal Revenue Code of 1986, as amended.
C. The parties hereto have determined that in order to accomplish the
objectives of the Distribution and to facilitate the consummation thereof,
it is necessary and desirable to restructure certain intercompany
relationships, allocate certain liabilities and provide indemnification, as
set forth herein.
D. The Ascent Board of Directors, upon the recommendation of the
disinterested directors of its Board of Directors (within the meaning of
Section 144 of the Delaware General Corporation Law), and the COMSAT Board
of Directors have approved this Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, COMSAT and Ascent, for
themselves, their successors and assigns, hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms will
have the following meanings, applicable both to the singular and the plural
forms of the terms described.
"Action" means any action, claim, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental, regulatory or other
administrative agency or commission or any arbitration tribunal.
<PAGE>
"Actual Tax Payment" has the meaning set forth in Section 4.04(d)
hereof.
"Affiliate" shall have the meaning ascribed to such term under Rule
12b-2 of the General Rules and Regulations of the SEC under the Exchange
Act or any successor rule thereto.
"After-Tax Tax-Related Losses" means an amount that, after (i)
subtraction of the aggregate additional taxes incurred or to be incurred by
the party indemnified pursuant to Section 4.04 hereof as a result of the
receipt of such payment and (ii) addition of the tax benefit to the party
indemnified pursuant to Section 4.04 hereof of any deductions taken by such
party on account such Tax-Related Losses, is equal to the amount of the
correlative Tax-Related Losses. The additional taxes and the tax benefit
referred to in the preceding sentence shall be determined using the highest
statutory marginal tax rates applicable to the party indemnified pursuant
to Section 4.04 hereof.
"Agent" means the distribution agent for the Distribution selected by
COMSAT, such selection to be reasonably acceptable to Ascent.
"Aggregate Spin-off Tax Liabilities" means the sum of the Spin-off Tax
Liabilities with respect to each Taxing Jurisdiction.
"ANS" means Ascent Network Services, Inc., a wholly-owned subsidiary
of Ascent.
"Appraisal" means the appraisal of the assets of Ascent and its
Subsidiaries by American Appraisal Associates made as of the Effective
Time.
"Ascent" means Ascent Entertainment Group, Inc.
"Ascent Books and Records" means the books and records (including
computerized records) of the Ascent Entities and all books and records
owned by COMSAT Entities which are necessary to operate the business of the
Ascent Entities including, without limitation, all such books and records
relating to Ascent Entity employees, original corporate minute books, stock
ledgers and certificates and corporate seals, and all licenses, leases,
agreements, filings relating to Ascent Entities or the business of Ascent
Entities; provided that COMSAT shall have access to, and have the right to
obtain duplicate copies of, the Ascent Books and Records in accordance with
the provisions of Article 5.
"Ascent Business" means the businesses engaged in (i) prior to the IPO
Date by COMSAT which were (A) contributed to the Ascent Entities on or
before the IPO Date and (B) owned by the Ascent Entities as of the IPO
Date, and (ii) on and after the IPO Date by the Ascent Entities.
-2-
<PAGE>
"Ascent Assets" means the assets used in the Ascent Business.
"Ascent Common Stock" has the meaning set forth in the recitals to
this Agreement.
"Ascent Covered Person" means any Ascent Entity and each individual
who served during the applicable policy period prior to the Effective Time
as a director, officer or other covered employee of such Ascent Entity, in
each case to the extent covered by a particular Insurance Policy.
"Ascent Entities" means Ascent and its Subsidiaries. "Ascent Entity"
means any of the Ascent Entities.
"Ascent Entity Employee" means any employee or former employee of an
Ascent Entity; provided, however, that any former employee of an Ascent
Entity who is employed by a COMSAT Entity as of the Distribution shall not
be deemed to be an Ascent Entity Employee.
"Best Efforts" means all reasonable efforts within the power of a
party to effect a given action, but shall not be construed so as to require
any party to take any action that would have a material adverse consequence
to the party responsible for performance of such action or make a material
payment if neither customarily nor proximately related to the performance
of such action.
"Business Day" means any day other than a Saturday, a Sunday, or a day
on which banking institutions located in the State of Maryland are
authorized or obligated by law or executive order to close.
"Change of Control," as applied to COMSAT, means (i) the acquisition
by any person (other than COMSAT or an employee benefit plan sponsored by
COMSAT) of beneficial ownership (as defined in Rule 13d-3 under the
Exchange Act) of 50% of more of the outstanding voting securities of
COMSAT; (ii) any change in the composition of the COMSAT Board of Directors
such that the Incumbent Directors cease to constitute a majority of the
Board; (iii) approval by the shareholders of a merger, share exchange,
swap, consolidation, recapitalization or other business combination which,
if consummated, would result in COMSAT's shareholders holding less than 60%
of the combined voting power of COMSAT, the surviving entity or its parent
(as applicable); or (iv) approval by the shareholders of the sale of all or
substantially all of COMSAT's assets, other than to an entity 60% of the
combined voting power of which would then be owned, directly or indirectly,
by COMSAT's shareholders.
"Code" means the Internal Revenue Code of 1986, as amended.
-3-
<PAGE>
"Control" means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract, or
otherwise.
"COMSAT" means COMSAT Corporation.
"COMSAT Assets" means the assets used in the COMSAT Business.
"COMSAT Books and Records" means the books and records (including
computerized records) of the COMSAT Entities and all books and records
owned by Ascent Entities which are necessary to operate the business of the
COMSAT Entities including, without limitation, all such books and records
relating to COMSAT Entity employees, original corporate minute books, stock
ledgers and certificates and corporate seals, and all licenses, leases,
agreements, filings relating to COMSAT Entities or the business of COMSAT
Entities (but not including the Ascent Books and Records).
"COMSAT Business" means the business engaged in by COMSAT other than
the Ascent Business.
"COMSAT Common Stock" means the common stock, no par value, of COMSAT.
"COMSAT Entities" means COMSAT and its Subsidiaries (other than
Subsidiaries that constitute Ascent Entities). "COMSAT Entity" shall mean any
of the COMSAT Entities.
"Consents" means consents, notices, waivers, regulatory approvals,
filings, amendments, permits, qualifications, transfers or other
assignments of any kind.
"Corporate Agreement" means the Corporate Agreement between COMSAT and
Ascent entered into as of December 18, 1995.
"Deemed Tax Payment" has the meaning set forth in Section 4.04(d)
hereof.
"DGCL" means the General Corporation Law of the State of Delaware, as
in effect on the date hereof and as the same may hereafter be amended from
time to time.
"Distribution" has the meaning set forth in the recitals to this
Agreement.
"Distribution Date" means the date determined by the COMSAT Board of
Directors on which the Distribution will be effected in accordance with,
and subject to, the terms and conditions specified in this Agreement.
"Distribution Taxable Year" means COMSAT's taxable year in which the
Distribution occurs.
-4-
<PAGE>
"Effective Time" means 5:00 p.m., local time in Bethesda, Maryland, on
the Distribution Date or such other time on the Distribution Date as
COMSAT's Board of Directors, in its discretion, may establish.
"Equity Securities" means any stock or other equity securities treated
as stock for tax purposes, or options, warrants, rights, convertible debt,
or any other instrument or security that affords any Person the right,
whether conditional or otherwise, to acquire stock.
"Fifty-Percent or Greater Interest" has the meaning provided in
section 355(d)(4) of the Code, provided that the aggregation rules of
section 355(d)(7) of the Code shall apply for this purpose, and further
provided that section 318(a)(2) of the Code shall apply but without regard
to the phrase "50 percent or more in value" in section 318(a)(2)(C).
Notwithstanding the foregoing, if (i) a Person acquires stock in Ascent by
reason of holding stock in COMSAT, and (ii) such Person did not acquire
stock in COMSAT pursuant to a plan (or series of related transactions)
pursuant to which such Person acquired stock representing a Fifty-Percent
or Greater Interest in COMSAT, Ascent, or any successor to either COMSAT or
Ascent, the acquisition in clause (i) shall not be taken into account for
purposes of determining whether a Person acquired stock representing a
Fifty-Percent or Greater Interest in COMSAT, Ascent, or any successor to
either COMSAT or Ascent.
"Final Determination" means (i) a final resolution of liability for
tax by IRS Form 870 or 870-AD (or any successor forms thereto), on the date
of acceptance by or on behalf of the IRS, or by a comparable form under the
laws of other jurisdictions, except that a Form 870 or 870-AD or comparable
form that reserves (whether by its terms or by operation of law) the right
of the taxpayer to file a claim for refund and/or the right of the Taxing
Authority to assert a further deficiency shall not constitute a Final
Determination; (ii) a decision, judgment, decree, or other order by any
court of competent jurisdiction with respect to which the period of time
for filing an appeal has lapsed without any such appeal being taken on any
issue pertaining to any Spin-off Tax Liabilities, (iii) a closing agreement
under section 7121 of the Code or a similar enforceable agreement under
state or local law, (iv) a decision by the Secretary of the Treasury of the
United States or similar official of a state or local government or
governmental unit to refund any Spin-off Tax Liabilities, which decision
may not be revoked, reversed, overturned or modified, or (v) a binding
settlement agreement entered into with the Taxing Authority.
"Incumbent Directors" means the directors of COMSAT as of the date of
this Agreement; provided, however, any individual whose nomination or
election is approved by a vote of three-fourths of the then Incumbent
Directors, or any person appointed by the President of the United States,
shall be deemed to be an Incumbent Director.
"Information" has the meaning ascribed in Section 5.02 of this
Agreement.
-5-
<PAGE>
"Insurance Policies" means, collectively, each insurance policy or
other form of insurance coverage maintained or provided by COMSAT for the
benefit of an Ascent Entity, director, officer or employee prior to the
Effective Time, together with all amendments, endorsements and waivers
thereto or additional policies or other forms of insurance maintained or
provided by COMSAT pursuant to the Intercompany Services Agreement.
"Intercompany Receivable Account" means the account for intercompany
receivables established pursuant to Section 5.5 of the Corporate Agreement.
"Intercompany Services Agreement" means the Intercompany Services
Agreement between COMSAT and Ascent entered into as of December 18, 1995.
"IPO" means the initial public offering of Ascent Common Stock.
"IRS" means the Internal Revenue Service.
"Losses" means any and all losses, liabilities, claims, damages,
obligations, payments, costs and expenses, matured or unmatured, absolute
or contingent, accrued or unaccrued, liquidated or unliquidated, known or
unknown (including, without limitation, the costs and expenses of any and
all Actions, threatened Actions, demands, assessments, judgments,
settlements and compromises relating thereto and attorneys' fees and any
and all expenses whatsoever reasonably incurred in investigating, preparing
or defending against any such Actions or threatened Actions).
"Network Services Business" means the trade or business conducted by
ANS prior to its merger with and into Ascent, and thereafter conducted by
Ascent, providing satellite network distribution support services,
including nationwide installation, field service, and maintenance support.
"Notice Date" with respect to Subsequent Tax Legislation or Regulation
means the earliest of (i) the date such legislation or materially identical
legislation is introduced as a bill in the United States House of
Representatives or the United States Senate, (ii) the date any amendment to
any bill incorporating such legislation is approved by the congressional
committee having jurisdiction or by the United States House of
Representatives or the United States Senate, (iii) the date any written
proposal incorporating such legislation is transmitted by the President of
the United States to Congress, (iv) the date any written proposal either by
the Chairman of the United States House of Representatives Ways and Means
Committee or the Chairman of the United States Senate Finance Committee
incorporating such legislation is published in the Bureau of National
Affairs' "Daily Tax Report," or any successor publication or (v) the date
such regulation is published in the Federal Register as proposed, temporary
or final Treasury Regulations.
"OCC" means On Command Corporation.
-6-
<PAGE>
"Person" means an individual, partnership, joint venture, corporation,
limited liability company, trust, unincorporated association, any other
entity, or a government or any department or agency or other unit thereof.
"Privileges" means all privileges that may be asserted under
applicable law including, without limitation, privileges arising under or
relating to the attorney-client relationship (including but not limited to
the attorney-client and work product privileges), the accountant-client
privilege, and privileges relating to internal evaluation processes.
"Privileged Information" means all information as to which any COMSAT
Entity or Ascent Entity is entitled to assert the protection of a
Privilege.
"Qualified Tax Counsel" means independent tax counsel of recognized
national standing which is reasonably acceptable to COMSAT and has not
previously been engaged by an Ascent Entity (other than in connection with
the transaction for which an Unqualified Tax Opinion is requested).
"Record Date" means the close of business on the date determined by
the COMSAT Board of Directors as the record date for the Distribution.
"Releases" has the meaning ascribed thereto in Section 2.02(d).
"Representation Date" means any date on which Ascent or COMSAT makes
any representation to the IRS, to COMSAT or Ascent, or to Qualified Tax
Counsel for the purpose of (i) obtaining a Subsequent Ruling, (ii) any
determination pursuant to Section 4.02(h)(ii), or (iii) obtaining an
Unqualified Tax Opinion.
"Restriction Period" means the period beginning on the date hereof and
ending on the two-year anniversary of the Effective Time.
"Ruling" means the private letter ruling, dated May 12, 1997, received by
COMSAT from the IRS
"Ruling Documents" means the request for a ruling under section 355 of
the Code, dated January 15, 1997, submitted on behalf of COMSAT to the IRS,
the exhibits thereto, and the additional materials, dated April 21, 1997
and May 5, 1997, submitted on behalf of COMSAT, and the Ruling.
"Ruling Request Exhibit A" means Exhibit A to the January 15, 1997,
letter referred to in the definition of Ruling Documents.
"SEC" means the United States Securities and Exchange Commission.
"SEC No-Action Letter" has the meaning set forth in Section 2.02.
-7-
<PAGE>
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute.
"Special Dividend" has the meaning set forth in Section 2.03(a) of this
Agreement.
"Spin-off Tax Liabilities," with respect to any Taxing Jurisdiction,
means the sum of (i) the product of (x) the additional corporate-level gain
or income recognized with respect to the failure of the Distribution to
qualify for Tax-Free Status under the income tax law of such Taxing
Jurisdiction pursuant to any settlement, final determination, judgment,
assessment, proposed adjustment or otherwise and (y) the Taxing
Jurisdiction's highest marginal tax rate applicable to the taxable income
of corporations on income of the character subject to tax and indemnified
against under Section 4.04, (ii) interest on such amount calculated
pursuant to such Taxing Jurisdiction's laws regarding interest on tax
liabilities at the highest underpayment rate for corporations in such
Taxing Jurisdiction from the date such additional gain or income was
recognized until full payment with respect thereto is made pursuant to
Section 4.04 hereof, and (iii) any penalties actually paid to such Taxing
Jurisdiction that would not have been paid if such Taxing Jurisdiction
agreed that the Distribution qualified for Tax-Free Status.
"Subsequent Ruling" means a ruling from the IRS confirming that the
consummation of a transaction or existence of a condition subsequent to the
Distribution will not result in loss of Tax-Free Status.
"Subsequent Tax Legislation or Regulation" means any bill introduced
in the United States House of Representatives or the United States Senate
that amends the Internal Revenue Code, or any amendment to any such bill;
any written proposal to amend the Internal Revenue Code that is officially
recommended by the President of the United States; any written proposal to
amend the Internal Revenue Code that is made available to the general
public either by the Chairman of the United States House of Representatives
Ways and Means Committee or the Chairman of the United States Senate
Finance Committee; or any proposed, temporary or final Treasury Regulation;
provided, however, that no such bill, amendment, proposal, or regulation
shall constitute Subsequent Tax Legislation or Regulation unless the Notice
Date of such bill, amendment, proposal or regulation is subsequent to the
date of this Agreement.
"Subsidiary" means, with respect to any specified Person, any
corporation, limited liability company, limited partnership, general
partnership or other legal entity of which such person or any of its
Subsidiaries Controls or owns, directly or indirectly, more than 50%
(without regard to dilution) of the stock or other equity interest entitled
to vote on the election of members to the board of directors or similar
governing body, and with respect to Ascent, shall include OCC.
"Tax Disaffiliation Agreement" means the Tax Disaffiliation Agreement
as set forth in Appendix B.
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"Tax-Free Status" means the qualification of the Distribution (i) as a
transaction described in section 355(a)(1) of the Code, (ii) as a
transaction in which the stock distributed thereby is qualified property
for purposes of section 355(c)(2) of the Code, and (iii) as a transaction
in which COMSAT recognizes no income or gain other than intercompany items
or excess loss accounts taken into account pursuant to the Treasury
Regulations promulgated pursuant to section 1502 of the Code.
"Tax-Related Losses" means
(i) the Aggregate Spin-off Tax Liabilities,
(ii) all accounting, legal and other professional fees, and court
costs incurred in connection with any settlement, final
determination, judgment or other determination with respect to
such Aggregate Spin-off Tax Liabilities, and
(iii) all costs, expenses and damages associated with stockholder
litigation or controversies and any amount paid by COMSAT or
Ascent in respect of the liability of shareholders, whether paid
to shareholders or to the IRS or any other taxing authority
payable by COMSAT or Ascent or their respective affiliates, in
each case resulting from the absence of Tax-Free Status for the
Distribution.
"Taxing Jurisdiction" means the United States and every other
government or governmental unit having jurisdiction to tax COMSAT or
Ascent.
"Tax Sharing Agreement" means the Tax Sharing Agreement between COMSAT
and Ascent entered into as of December 18, 1995.
"Treasury Regulations" means the temporary and final regulations
promulgated under the Code in effect on the date of this Agreement and the
corresponding sections of any regulations subsequently issued that amend or
supersede such regulations.
"Unqualified Tax Opinion" means an unqualified "will" opinion of
Qualified Tax Counsel on which COMSAT may rely, in form and substance
reasonably acceptable to COMSAT (and in determining whether an opinion is
reasonably acceptable, COMSAT may consider, among other factors, the
appropriateness of any underlying assumptions and management's
representations if used as a basis for the opinion) to the effect that a
transaction will not disqualify the Distribution from Tax-Free Status,
assuming that the Distribution would have qualified for Tax-Free Status if
such transaction did not occur. Such opinion shall be obtained at the
expense of Ascent.
1.2. Internal References. Unless the context indicates otherwise,
references to Articles, Sections and paragraphs shall refer to the
corresponding articles, sections and paragraphs in this Agreement and
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references to the parties shall mean the parties to this Agreement.
ARTICLE II
THE DISTRIBUTION
2.01 The Distribution. Subject to Section 2.03 and 2.04 hereof, on or
prior to the Distribution Date, COMSAT will deliver to the Agent for the
benefit of the holders of record of COMSAT Common Stock on the Record Date,
a single stock certificate, endorsed by COMSAT in blank, representing all
of the then outstanding shares of Ascent Common Stock owned by COMSAT, and
shall cause the transfer agent for Ascent Common Stock to instruct the
Agent to distribute on the Distribution Date the appropriate number of such
shares of Ascent to Common Stock to each holder or designated transferee or
transferees of such holder. Subject to Section 2.05, each holder of COMSAT
Common Stock as of the Record Date shall receive a number of shares of
Ascent Common Stock equal to the product of the number of shares of COMSAT
Common Stock held by such shareholder on the Record Date multiplied by a
fraction, the numerator of which is the number of shares of Ascent Common
Stock held by COMSAT and the denominator of which is the number of shares
of COMSAT Common Stock outstanding as of the Record Date. The Distribution
shall be effective as of the Effective Time. Ascent and COMSAT, as the case
may be, will provide to the Agent all share certificates and any
information required in order to complete the Distribution.
Section 2.02 Cooperation Prior to the Distribution. (a) COMSAT and
Ascent shall prepare, and COMSAT shall mail, prior to the Distribution
Date, to the holders of COMSAT Common Stock, an information statement (the
"Information Statement"), which shall set forth appropriate disclosure
concerning Ascent, the Distribution and other matters. COMSAT shall prepare
and file, at its expense, a request for no action advice from the SEC (the
"SEC No-Action Letter") seeking staff confirmation: (i) that registration
of the Ascent Common Stock to be issued in the Distribution is not required
under the Securities Act, or (ii) in the alternative, that the staff will
not recommend any enforcement action to the SEC in the event that the
Ascent Common Stock to be issued in the Distribution is not so registered.
COMSAT shall use its Best Efforts to obtain all necessary clearances from
the SEC as soon as practicable.
(b) Ascent shall take all such action as shall be necessary or
appropriate to assure that the Ascent Common Stock to be issued in the
Distribution has been duly qualified, registered, or exempted therefrom
under the securities or blue sky laws of states, other political
subdivisions of the United States or foreign jurisdictions in which COMSAT
shareholders reside as of the Record Date, including making any necessary
filings, notices or paying any applicable fees. COMSAT shall cooperate with
Ascent in such effort; provided that Ascent shall pay all fees and expenses
in connection with the foregoing. Ascent shall use its Best Efforts to
obtain all such clearances as soon as practicable.
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(c) COMSAT and Ascent shall use their respective Best Efforts to cause
the conditions set forth in Section 2.03 and 2.04 to be satisfied and to
effect the Distribution on the Distribution Date.
(d) As soon as practical and, in any event, prior to the Distribution
Date, Ascent and COMSAT shall coordinate to determine the extent of any
obligations, guaranties, performance or surety bonds, letters of assurance
or comfort, or any other liability of any COMSAT Entity relating to Ascent
Entity or the assets of any Ascent Entity and vice versa. Ascent shall use
its Best Efforts to obtain the release of all COMSAT Entities from all such
obligations, guaranties, bonds, assurances or liabilities prior to the
Distribution Date, unless waived by COMSAT in its discretion (collectively,
the "Releases").
(e) Each of the parties hereto agrees that it will use its Best
Efforts to obtain, prior to the Distribution Date, all Consents required,
desirable or appropriate to effect the Distribution. Schedule 2.02(e) sets
forth a listing of all material Consents which the parties hereto have
determined as of the date of this Agreement to be required, desirable or
appropriate in connection with the Distribution and which party shall have
responsibility for obtaining each such Consent prior to the Distribution
Date.
(f) COMSAT and Ascent shall consult and cooperate with one another
prior to the Distribution Date with regard to publicity relating to the
Distribution.
(g) Subject to Section 2.03 and 2.04, COMSAT and Ascent shall use
their respective Best Efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, all things necessary or desirable under
applicable law, to consummate the transactions contemplated under this
Agreement; provided, that it is expressly understood and agreed that
COMSAT's Board of Directors reserves the right in its sole discretion to
determine not to proceed with the Distribution at any time prior to the
declaration of the Special Dividend.
2.03 Mutual Conditions to the Distribution. Each of the following
conditions shall have been satisfied or waived by mutual agreement of
COMSAT and Ascent (acting through its Board of Directors upon the
recommendation of the disinterested members of the Ascent Board of
Directors) prior to the Distribution:
(a) COMSAT's Board of Directors shall have given final approval for
the Distribution by declaring a special dividend (the "Special Dividend")
and establishment of the Record Date.
(b) No order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Distribution shall be in effect.
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(c) The Ruling shall not have been revoked or adversely modified.
2.04 Conditions to the Distribution Waivable By COMSAT. Each of the
following conditions shall have been satisfied or waived by COMSAT in its
discretion prior to the Distribution:
(a) Ascent shall have delivered to COMSAT all Releases in accordance
with Section 2.02(d) of this Agreement.
(b) All Consents contemplated by Section 2.02(e) of this Agreement
shall have been received.
(c) The merger of ANS with and into Ascent, with Ascent being the
surviving corporation, shall have been consummated.
(d) All sums due and payable, including any applicable accrued
interest thereon, by either party under the Intercompany Receivable Account
shall have been satisfied and settled in accordance with Section 3.05 of
this Agreement.
2.05 Fractional Shares. The parties agree that the Agent shall be
directed as soon as practical after the Distribution Date to determine the
number of whole shares and fractional shares of Ascent Common Stock
allocable to each holder of record of COMSAT Common Stock as of the Record
Date, to aggregate all such fractional shares and sell the whole shares
obtained thereby at then prevailing prices and to cause to be distributed
to such holder to which a fractional share shall be allocable such holder's
ratable share of the proceeds of such sale, after making appropriate
deductions of the amount required to be withheld for federal income
purposes and after deducting an amount equal to all brokerage charges,
commissions and transfer taxes attributed to such sale. COMSAT and the
Agent shall use their respective Best Efforts to aggregate the shares of
Ascent Common Stock that may be held by any beneficial owner thereof
through more than one account in determining the number of fractional
shares allocable to such beneficial owner.
ARTICLE III
INTERCOMPANY MATTERS
3.01 Corporate Agreement; Intercompany Services Agreement and Tax
Sharing Agreement. The Corporate Agreement is hereby amended, effective as
of the Effective Time, to remove Articles II through IV, Sections 5.1 and
5.2 of Article V thereof and all definitions contained in Article I which
are exclusive to those provisions. Appendix A to the Corporate Agreement is
hereby amended, effective as of the Effective Time, to read as set forth in
Appendix A to this Agreement. The remaining provisions of the Corporate
Agreement shall remain in full force and effect. The Intercompany Services
Agreement shall terminate as of the Effective Time of the Distribution. The
Tax Sharing Agreement shall be superseded as of the Effective Time by the
Tax Disaffiliation Agreement as set forth in Appendix B hereto.
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3.02 Directors. Allen E. Flower, Vice President and Chief Financial
Officer of COMSAT, and Alan G. Korobov, Controller of COMSAT, shall resign
as directors of Ascent effective as of the Effective Time. Warren Y. Zeger,
Vice President, General Counsel and Secretary of COMSAT, shall resign as a
director of OCC effective as of the Effective Time. Vacancies on Ascent's
and OCC's Board of Directors which exist on or prior to the Distribution
shall be filled in a manner consistent with Ascent's and OCC's existing
certificates of incorporation and by-laws.
3.03 Employee Benefit Plans.
(a) Ascent Option Plans. Prior to the Distribution Date, Ascent shall
use its Best Efforts to cause a sufficient number of options to acquire
Ascent Common Stock to be canceled, such that the shares of Ascent Common
Stock owned by COMSAT shall constitute not less than 80.01% of the
outstanding Common Stock of Ascent immediately prior to the Distribution on
a fully-diluted basis after giving effect to the exercise of any remaining
outstanding options, and exchanged for stock appreciation rights on terms
approved by Ascent's Board of Directors.
(b) COMSAT Benefit Plans. Ascent Entity Employees participated in
certain of the employee benefit plans sponsored by COMSAT and administered
by the COMSAT Benefits Department prior to the IPO date and, in the case of
certain plans described in Section 4 of the Intercompany Services
Agreement, subsequent to the IPO Date. The vesting of options, restricted
stock awards and restricted stock units under the COMSAT Employee Stock
Option Plan and Key Employee Stock Plans shall continue as long as the
employee holding such rights continues to be employed by an Ascent Entity.
With respect to COMSAT options held by an Ascent Entity Employee that have
not fully vested on or before the Distribution Date, such options shall
terminate 90 days after the date that such options become fully vested.
With respect to COMSAT options held by an Ascent Entity Employee that have
fully vested on or before the Distribution Date, subject to the approval of
the Compensation Committee of COMSAT's Board of Directors, such options
shall terminate 90 days after the date that all of any such employee's
options shall have become fully vested. Ascent shall reimburse COMSAT for
the costs associated with the continued vesting, exercise, or lapse of
restrictions related to the options, restricted stock awards and restricted
stock units held by any existing or former employee of any Ascent Entity on
and after the Distribution Date (the "Benefit Extension Costs"), unless
such costs have been previously reimbursed or paid to COMSAT by an Ascent
Entity. Ascent agrees to pay any Benefit Extension Costs within 10 business
days after receipt of a written invoice therefor. Any invoiced balances
that remain unpaid after such date shall bear interest until paid in full
at the rate set forth in Section 5.5(c) of the Corporate Agreement. To the
extent not previously paid, any unpaid Benefit Extension Costs, together
with any accrued interest thereon, may be debited by COMSAT from any
amounts owed to Ascent by COMSAT pursuant to the Tax Disaffiliation
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Agreement. To the extent applicable, the eligibility of Ascent Entity
Employees to participate in the following plans shall terminate as of
Distribution Date, namely COMSAT's: Flexible Benefits Plan, Dependent Care
Spending Account Plan, Heath Care Spending Plan, Short-Term Disability Plan
and Long-Term Disability Plan. On or prior to the Distribution Date, Ascent
shall establish a deferred compensation plan, and all payment obligations
to Ascent Entity Employees for deferred compensation under COMSAT's
existing deferred compensation plan, none of which obligations shall be due
and payable prior to the Distribution Date, shall be assumed by Ascent on
or prior to the Distribution Date, and Ascent shall be credited for all
such amounts previously contributed by Ascent toward such balances in the
Intercompany Receivable Account at 100% of the amounts contributed in
respect of Ascent Entity Employees.
3.04 Insurance.
(a) Removal from Coverage Under Insurance Policies. COMSAT has
historically provided insurance coverage for Ascent through various
Insurance Policies maintained by COMSAT for the benefit of itself and its
Subsidiaries for general liability, directors and officers liability,
automobile liability, workers compensation, excess/umbrella liability,
property and other types of losses. From and after the Effective Time,
Ascent will be responsible for obtaining and maintaining such insurance
coverages as it deems necessary or appropriate separately from the COMSAT
Insurance Policies. COMSAT shall cooperate with Ascent in Ascent's efforts
to obtaining replacement insurance coverages from and after the
Distribution Date.
(b) Claims. COMSAT and Ascent each agree that (i) COMSAT and Ascent
shall each have the right to present claims to COMSAT's insurers under the
Insurance Policies which include Ascent or the Ascent Covered Persons as an
insured, and (ii) COMSAT shall submit such claims to COMSAT's insurers on a
timely basis (assuming COMSAT is given all information required to prepare
and submit the claim sufficiently in advance the date required for
submission to permit submission on a timely basis) or, if possible under
the relevant insurance policy, COMSAT will cooperate with Ascent so as to
permit Ascent to submit such claims directly to the insurers. In either
event, the submitting party shall provide the other party with copies of
all such written notices of insurance claims for review and afford the
other party an opportunity to comment in advance of the provision of such
written notices to such insurers. The submitting party shall provide the
other party with copies of all other written communications between the
submitting party and the insurers related to such claims Ascent shall
reimburse COMSAT for all reasonable costs which COMSAT incurs in submitting
or assisting with the submission of such claims (including, but not limited
to, allocated compensation, salary, overhead expense and legal fees and
expenses). To the extent that losses by Ascent are not covered such
insurers, COMSAT will not have any obligation or liability to reimburse
Ascent for such losses. The parties acknowledge and agree that certain
policies are written on an "occurrence" basis and may provide coverage to
Ascent for incidents occurring prior to the Distribution Date, even though
the claim was first made after the Distribution Date, and that other such
policies are written on a "claims made" basis and that such policies may
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not provide coverage to Ascent for incidents occurring prior to the
Distribution Date but which are first reported after the Distribution Date.
(c) Insured Losses. With respect to any insured losses covered by the
Insurance Policies, COMSAT shall pay over to Ascent any insurance proceeds
it receives on account claims for losses made by or on behalf of any Ascent
Covered Person, net of the amount of any applicable premium adjustments,
retrospectively-rated premium adjustments or other such costs which are
paid or reasonably estimated by COMSAT to be paid by COMSAT in the ordinary
course of business and any costs incurred by COMSAT in collecting such
proceeds (including, but not limited to, allocated compensation, salary,
overhead expense and legal fees and expenses). If COMSAT's estimate of such
adjustments or other costs proves to be too small or too great, the
difference between the estimate and the actual adjustments and other costs
shall be paid back to COMSAT or over to Ascent, respectively, within one
year after the initial payment of the insurance proceeds is made.
(d) Deductibles. Responsibility for deductible or self-insured amounts
with respect to any insurance policy provided or maintained prior to the
Effective Time as it relates to Ascent or any Ascent Covered Person shall
be borne 100% by Ascent. Notwithstanding the foregoing, if COMSAT and
Ascent are involved in the same claim, COMSAT and Ascent shall negotiate in
good faith the fair allocation of any self-insurance retention or other
deductible payable under the insurance policy. Such allocation shall be
based upon all relevant factors, including, without limitation and as
appropriate, the relative number of persons affiliated with COMSAT and
Ascent that are involved in such claim, the relative claims and damages
asserted against each party, each party or persons relative contribution or
fault, the benefits derived by each party or person and the nature of the
allegations with respect to each such party or person.
(e) Adjustment of Premiums Paid. If COMSAT receives a refund or rebate
of any portion of the insurance premiums previously paid to COMSAT by
Ascent in respect of the Insurance Policies as a result of Ascent being
removed from coverage under any Insurance Policy pursuant to Section
3.04(a) of this Agreement after the Effective Time, COMSAT shall pay such
amount to Ascent; provided that no adjustment shall be made for insurance
coverage that has been terminated for which the premium has been previously
paid in full and is nonrefundable; and provided, further, that in
calculating any such adjustment, any increased premium or other costs
associated with a reduction in the total policy amount, assets covered,
persons insured or loss of volume-related discounts ("Breakage Costs")
shall be deducted from the amount that would otherwise be refunded. If the
Breakage Costs associated with termination of Ascent's participation in all
or any portion of the insurance by Ascent exceed the amount of premiums
that have been or would have been paid in respect of such insurance over
the remaining term of the affected policy or policies, Ascent shall
reimburse COMSAT for the amount of any such Breakage Costs, less the amount
of any premium reductions associated with the termination of Ascent's
participation in the insurance coverage. In the event that there are any
retroactive premium adjustments under the Insurance Policies relating to
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coverage prior to the Distribution Date, in the case of an increase, Ascent
shall pay to COMSAT or, in the case of a decrease, COMSAT shall pay to
Ascent, Ascent's pro rata share (based on the prior relative premium
payments made by each party) of any such adjustment.
(f) Access to Insurance Information. Upon the reasonable request of
Ascent from time to time during the period in which claims are open or can
be made under any Insurance Policy, (i) COMSAT shall provide Ascent with a
true and complete copy of each Insurance Policy and (ii) subject to Section
5.06, COMSAT shall provide Ascent with reasonable access to all applicable
risk management data for the purpose of obtaining information with respect
to any insurance claim relating to any Ascent Covered Person. COMSAT shall
provide Ascent with reasonable access to all litigation pleadings and other
documents and correspondence relating to any Ascent Covered Person, and
copies thereof as reasonably requested by Ascent. COMSAT shall cause to be
delivered to Ascent all updates of the Ascent claims histories as
reasonably requested by Ascent until all claims are closed, or until
earlier notified by Ascent. Notwithstanding Section 3.06, all reasonable
out-of-pocket costs and expenses (including, but not limited to, allocated
compensation, salary, overhead expense and legal fees and expenses)
reasonably incurred by COMSAT in complying with this Section 3.04(f) shall
be reimbursed by COMSAT promptly upon presentation of invoices therefor.
3.05 Intercompany Receivables and Interest. All sums due and payable,
including any applicable accrued interest thereon, by either party under
the Intercompany Receivable Account shall be paid and settled prior to the
Effective Time.
3.06 Expenses.
(a) General. Except as otherwise provided in this Agreement, the
Corporate Agreement, Tax Disaffiliation Agreement or any written agreement
between COMSAT and Ascent, all costs and expenses of any party hereto in
connection with the Distribution shall be paid by the party that incurs
such costs and expenses.
(b) The costs and expenses associated with the printing and
distribution of the Information Statement shall be borne by COMSAT.
(c) All costs of printing and engraving stock certificates and fees of
any transfer agent engaged by Ascent, and all fees relating to listing
Ascent Common Stock for quotation on the Nasdaq National Market System,
shall be paid by Ascent. The fees and expenses of the Agent, information
agents or similar consultants engaged by Ascent or COMSAT in connection
with effecting the Distribution shall be paid by Ascent. COMSAT shall pay
Ascent $75,000 to be applied against such costs on the Distribution Date.
(d) In the event that COMSAT does not consummate the Distribution
after a Change of Control of COMSAT has occurred, COMSAT shall reimburse
Ascent for its reasonable documented out-of-pocket expenses directly
incurred in negotiating this Agreement or in carrying out the actions
specifically required to be performed by Ascent hereunder.
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3.07 Indemnification. Appendix C sets forth the indemnification
obligations of the parties as to certain matters and is incorporated herein
by reference.
3.08 Intellectual Property. The parties agree that issues related to
intellectual property shall be governed by Appendix D hereto.
3.09 Dispute Resolution Procedures. Except as otherwise provided
herein, the parties agree to the following dispute resolution procedures
with respect to any disputes that arise under this Agreement, the Tax
Disaffiliation Agreement or the Corporate Agreement. COMSAT or any COMSAT
Entity, on the one hand, and Ascent or any Ascent Entity, on the other
hand, shall appoint up to three members from their managerial staffs to
serve on a joint committee (the "Dispute Resolution Committee"). The
Dispute Resolution Committee shall meet at either COMSAT's or Ascent's
principal executive offices, or such other location as they may mutually
agree, whichever is more appropriate in light of the issue to be discussed,
at such time as either may demand upon reasonable advance notice, for the
purpose of resolving any dispute arising under this Agreement, the Tax
Disaffiliation Agreement or the Corporate Agreement. No dispute under this
Agreement or the Tax Disaffiliation Agreement shall be the subject of any
formal legal proceeding between the parties hereto before being considered
by the Dispute Resolution Committee. If the Dispute Resolution Committee is
unable to resolve any dispute submitted to it by any party hereto within 15
days after such submission, the Dispute Resolution Committee shall refer
the issue to the Chief Executive Officer of COMSAT and Ascent for
resolution. If such officers are unable to resolve such dispute within 10
days after referral, either party may then proceed to take any legal action
available to it. Notwithstanding the foregoing, if any breach or threatened
breach of this Agreement would cause COMSAT or Ascent irreparable harm for
which monetary damages either would not be available or would be a
insufficient remedy, such party may immediately seek legal redress without
first complying with the dispute resolution procedures provided for in this
Section 3.09.
3.10 Further Assurances. In addition to the actions specifically
provided for elsewhere in this Agreement, each party hereto shall cooperate
with the other, and execute and deliver, or use its reasonable Best Efforts
to cause to be executed and delivered, all instruments, including
instruments of conveyance, assignment and transfer, and to make all filings
with, and to obtain all consents, approvals or authorizations of, any
governmental or regulatory authority or any other person under any permit,
license, agreement, indenture or other instrument, and take all such other
actions as such party may reasonably be requested to take by any other
party hereto from time to time, consistent with the terms of this
Agreement, in order to effectuate the provisions and purposes of this
Agreement and any transfers of assets and liabilities which may be incident
hereto.
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ARTICLE IV
TAX MATTERS RELATED TO DISTRIBUTION
4.01 Representations Specific to Distribution Tax Matters.
(a) Ascent hereby represents and warrants that (i) it has examined the
Ruling Documents and (ii) to Ascent's best knowledge after due inquiry, to
the extent descriptive of Ascent and its Subsidiaries or the Ascent
Business (including, without limitation, the representations in the Ruling
Documents to the extent that they relate to the plans, proposals,
intentions, and policies of Ascent and its Subsidiaries), the facts
presented and the representations made therein are true and correct, except
to the extent that any such facts or representations:
(A) set forth facts about COMSAT and its Subsidiaries (other than
Ascent and its Subsidiaries), INTELSAT, or Inmarsat;
(B) by their terms, express the opinions of the management of
COMSAT regarding the management, operation or financial prospects or
results of Ascent and its Subsidiaries;
(C) describe or characterize the views of investors or analysts
in the investment community with respect to Ascent's financial prospects or
results;
(D) describe or characterize the purposes of COMSAT management for
the Distribution;
(E) describe or characterize events that occurred more than five
years before January 15, 1997;
(F) describe or analyze Federal Communications Commission rules,
regulations, orders, guidelines or policies;
(G) are inconsistent with statements made in Ascent's Annual
Report on Form 10-K for the year ended December 31, 1996 as filed with the
SEC as of March 31, 1997 and not including any subsequent amendments;
(H) set forth legal conclusions;
(I) are included in the request for the SEC No-Action Letter, but
this exception shall not apply to the same or similar facts or
representations that are set forth elsewhere in the Ruling Documents; or
(J) are specifically noted in Exhibit 4.01(a) hereto.
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(b) Ascent hereby represents and warrants that it has no plan or
intention of taking any action, or failing or omitting to take any action,
that would (i) cause the Distribution not to have Tax-Free Status or (ii)
cause any representation or factual statement made in the Ruling Documents
to be untrue in a manner which would have an adverse effect on the Tax-Free
Status of the Distribution.
(c) Ascent hereby represents and warrants to COMSAT that, to the
knowledge of Ascent, the Distribution is not part of a plan (or series of
related transactions) pursuant to which a Person will acquire stock
representing a Fifty-Percent or Greater Interest in Ascent or any successor
to Ascent.
4.02 Covenants Specific to Distribution Tax Matters.
(a) Ascent shall not take any action, nor fail or omit to take any
action, that would (i) cause the Distribution not to have Tax-Free Status
or (ii) cause any representation made in the Ruling Documents to be untrue
in a manner which would have an adverse effect on the Tax-Free Status of
the Distribution; provided, however, that Ascent shall not be considered to
have breached the covenants contained in this subsection (a) by virtue of a
disposition or discontinuation due to circumstances beyond Ascent's control
as described in the final sentence of Section 4.02(b).
(b) Until the first day after the Restriction Period, Ascent shall
continue the active conduct of the Network Services Business. Ascent shall
not liquidate, dispose of, or otherwise discontinue the conduct of any
material portion of the Network Services Business. Ascent shall continue
the active conduct of the Network Services Business primarily through
officers and employees of Ascent (and not through independent contractors).
For purposes of this subsection (b), asset retirements and discontinuances
of product lines with respect to the Network Services Business in the
ordinary course of business and dispositions and discontinuations due to
circumstances beyond Ascent's control shall not be treated as a disposition
or discontinuation of a portion of the Network Services Business.
(c) Until the first day after the one-year anniversary of the
Effective Time, Ascent shall not sell or otherwise issue to any Person, or
redeem or otherwise acquire from any Person, any Equity Securities of
Ascent; provided, however, that (i) the adoption by Ascent of a rights plan
shall not constitute a sale or issuance of Equity Securities and (ii)
purchases meeting the requirements of section 4.05(1)(b) of Rev. Proc.
96-30 shall not constitute a redemption or acquisition of stock of Ascent
for purposes of this Section 4.02(c).
(d) Ascent shall not (i) solicit any Person to make a tender offer for
the Equity Securities of Ascent, (ii) participate in or support any
unsolicited tender offer for the Equity Securities of Ascent, or (iii)
approve any proposed business combination or any transaction which results
in any Person owning at least 20% of the stock of Ascent involving (x)
until the first day after the Restriction Period, any Person with whom
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there have been negotiations pertaining to the sale of Ascent as have been
disclosed by COMSAT to Ascent previously in writing or any Affiliate of
such Person, or (y) for six months after the Effective Time, any other
Person. In addition, Ascent shall not at any time, whether before or
subsequent to the expiration of the Restriction Period, engage in any
action described in clauses (i), (ii), or (iii) of the preceding sentence
if it is pursuant to an arrangement negotiated (in whole or in part) prior
to the Distribution, even if at the time of the Distribution it is subject
to various conditions.
(e) Until the first day after the Restriction Period, Ascent shall not
sell, transfer, or otherwise dispose of or agree to dispose of assets
(including, for such purpose, any shares of capital stock of a Subsidiary)
that, in the aggregate, constitute more than 60% of the gross assets of
Ascent, nor shall Ascent and its Subsidiaries sell, transfer, or otherwise
dispose of or agree to dispose of assets (including, for such purpose, any
shares of capital stock of a Subsidiary) that, in the aggregate, constitute
more than 60% of the consolidated gross assets of Ascent and its
Subsidiaries. The foregoing sentence shall not apply to sales, transfers,
or dispositions of assets in the ordinary course of business. The
percentages of gross assets or consolidated gross assets of Ascent or
Ascent and its Subsidiaries, as the case may be, sold, transferred, or
otherwise disposed of, shall be based on the fair market value of the gross
assets of Ascent and its Subsidiaries as of the Effective Time, and for
this purpose, the values set forth in the Appraisal shall be conclusive.
Sales, transfers or other dispositions by Ascent or any of its Subsidiaries
to Ascent or any of its Subsidiaries are not subject to this Section
4.02(e) to the extent not inconsistent with the structure necessary for the
Distribution to qualify for Tax-Free Status.
(f) Until the first day after the Restriction Period, Ascent and its
Subsidiaries shall not voluntarily dissolve or liquidate or engage in any
merger, consolidation or other reorganization. The foregoing sentence shall
not apply to transactions in which Ascent acquires another corporation,
limited liability company, limited partnership, general partnership or
joint venture solely for cash or other consideration that is not Equity
Securities of Ascent. Reorganizations of Ascent with its Subsidiaries, and
liquidations of Ascent's Subsidiaries, are not subject to this Section
4.02(f) to the extent not inconsistent with the structure necessary for the
Distribution to qualify for Tax-Free Status.
(g) Until the first day after the Restriction Period, Ascent shall not
contribute or otherwise transfer to a Subsidiary of Ascent any of the
assets formerly owned by ANS and transferred to Ascent pursuant to the
liquidation of ANS.
(h) Any of the provisions of Sections 4.02(b), (c), (d), (e), (f), and
(g) shall be waived with respect to any particular transaction or
transactions if (i) COMSAT or Ascent has obtained a ruling from the IRS, in
form and substance reasonably satisfactory to COMSAT, to the effect that
such proposed transaction will not adversely affect the Tax-Free Status of
the Distribution, (ii) COMSAT has determined, in its sole and absolute
discretion, which discretion shall be exercised in good faith solely to
preserve the Tax-Free Status of the Distribution, that it could not
reasonably be expected that such proposed transaction would have a material
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adverse effect on the Tax-Free Status of the Distribution, or (iii) with
respect to a transaction occurring at least one year after the Effective
Time, Ascent obtains an Unqualified Tax Opinion with respect to such
proposed transaction. Waiver with respect to one transaction or group of
transactions shall not constitute a waiver with respect to any other
transaction.
(i) COMSAT shall not take any action, nor fail or omit to take any
action, that would (i) cause the Distribution not to have Tax-Free Status
or (ii) cause any representation made in the Ruling Documents to be untrue
in a manner which would have an adverse effect on the Tax-Free Status of
the Distribution.
4.03 Cooperation Related to Distribution Tax Matters.
(a) Until the first day after the Restriction Period, each of COMSAT
and Ascent shall furnish the other with a copy of any ruling request that
Ascent or COMSAT or any of their respective Subsidiaries may file with the
IRS and any opinion received that relates to or otherwise reasonably could
be expected to have an effect on the Tax-Free Status of the Distribution.
(b) Ascent shall cooperate with COMSAT in connection with (i) any
determination pursuant to Section 4.02(h)(ii) above or (ii) COMSAT's
request for a Subsequent Ruling. Such cooperation shall include, without
limitation, providing any information and/or representations reasonably
requested by COMSAT or its counsel to enable COMSAT or its counsel to
obtain and maintain any Subsequent Ruling, provided that Ascent's
reasonable refusal to give a representation will not be deemed a failure to
cooperate. From and after any Representation Date until the first day after
the two-year anniversary of the date that COMSAT makes the correlative
determination or receives the correlative Subsequent Ruling, Ascent shall
not take (nor shall it refrain from taking) any action that would have
caused a representation given by Ascent in connection with any such
determination or COMSAT's request for a Subsequent Ruling to have been
untrue as of the relevant Representation Date, had Ascent intended to take
(or refrain from taking) such action on the relevant Representation Date.
(c) COMSAT shall cooperate with Ascent in connection with (i) any
determination pursuant to Section 4.02(h)(ii) above, (ii) a request by
Ascent that COMSAT seek a Subsequent Ruling, or (iii) a request for an
Unqualified Tax Opinion. Such cooperation shall include, without
limitation, providing any information and/or representations required to
enable COMSAT or its counsel to obtain and maintain any Subsequent Ruling
or for Ascent to obtain an Unqualified Tax Opinion, provided that COMSAT's
reasonable refusal to give a representation will not be deemed to be a
failure to cooperate. From and after any Representation Date until the
first day after the two-year anniversary of the date that COMSAT makes the
correlative determination or the Subsequent Ruling or Unqualified Tax
Opinion is received, COMSAT shall not take (nor shall it refrain from
taking) any action that would have caused a representation given by COMSAT
in connection with any such determination, COMSAT's request for a
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Subsequent Ruling, or Ascent's request for an Unqualified Tax Opinion to
have been untrue as of the relevant Representation Date, had COMSAT
intended to take (or refrain from taking) such action on the relevant
Representation Date. COMSAT shall not amend any Ruling Document without the
prior consent of Ascent, which shall not be unreasonably withheld or
delayed.
(d) Until the first day after the Restriction Period, Ascent will
provide adequate notice to COMSAT of any action described in paragraphs (b)
through (g) of Section 4.02 above, without regard to the exceptions
thereto, within a period of time sufficient to enable COMSAT (i) to make
the determination referred to in Section 4.02(h)(ii), (ii) to prepare and
seek any Subsequent Ruling in connection with such proposed transaction, or
(iii) to seek injunctive relief pursuant to Section 4.05 hereof in a court
of competent jurisdiction. Each such notice shall set forth the terms and
conditions of the proposed transaction, including, without limitation, the
nature of any related action proposed to be taken by the board of directors
of Ascent, the approximate number of shares of Ascent stock (if any)
proposed to be sold by Ascent or otherwise issued by Ascent, the
approximate value of Ascent's assets (or assets of any of the Ascent
Subsidiaries) proposed to be transferred, and the proposed timetable for
such transaction, all with sufficient particularity to enable COMSAT to
make such determination, to prepare and seek such Subsequent Ruling, or
seek such injunctive relief. Promptly, but in any event within 30 days,
after COMSAT receives such written notice from Ascent, COMSAT shall notify
Ascent in writing of such determination or of COMSAT's intent to seek a
Subsequent Ruling and the proposed date for the initial submission thereof,
which date shall not be more than 60 days after COMSAT so notifies Ascent
of its intent to seek such Subsequent Ruling, provided that such 30-day
period or 60-day period, as the case may be, shall be appropriately
extended for any period of noncompliance by Ascent with this Section 4.03.
4.04 Indemnification Specific to Distribution Tax Matters.
(a) Notwithstanding any provision of this Agreement to the contrary,
Ascent shall indemnify and hold harmless COMSAT (and any successor thereto)
against any After-Tax Tax-Related Losses incurred by COMSAT to the extent
such After-Tax Tax-Related Losses are caused by any breach by Ascent of any
of its representations, warranties, or covenants made pursuant to this
Article IV.
(b) Notwithstanding any provision of this Agreement to the contrary,
COMSAT shall indemnify and hold harmless Ascent (and any successor thereto)
against any After-Tax Tax-Related Losses incurred by Ascent to the extent
such After-Tax Tax-Related Losses are caused by any breach by COMSAT of its
covenant made pursuant to Section 4.02(i) or solely by the inaccuracy of
any facts or representations about COMSAT and its Subsidiaries (other than
Ascent and its Subsidiaries), INTELSAT or Inmarsat contained in the Ruling
Documents.
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(c) To the extent After-Tax Tax-Related Losses are attributable to
Subsequent Tax Legislation or Regulation, such losses shall be borne
equally by COMSAT and Ascent. The party making actual payment of such
losses shall be indemnified by the other party to the extent of the other
party's allocated share of such losses.
(d) To the extent an indemnification obligation relates to Spin-off
Tax Liabilities, the indemnifying party shall make payment pursuant to such
indemnification obligation within 30 days after the earlier of (i) the date
the indemnified party makes a payment of taxes, interest, or penalties with
respect to a proposed adjustment of taxes or an assessment of tax
deficiency asserted or made by any Taxing Jurisdiction that is premised in
whole or part on Spin-off Tax Liabilities, including a payment made in
settlement of an asserted tax deficiency (each, an "Actual Tax Payment"),
or (ii) the date the indemnified party gives written notice to the
indemnifying party that the indemnified party has notified any Taxing
Jurisdiction, or gives the indemnifying party written notice of an
acknowledgment by any Taxing Jurisdiction, that such proposed adjustment of
taxes or tax deficiency would not result in a net payment by the
indemnified party because of the carryover, carryback or carryforward of
net operating losses or credits, the crediting of previously paid taxes,
the utilization of deductions or credits not claimed on the indemnified
party's tax returns as originally filed, the exclusion of income reported
on such returns, or the utilization of any other tax attributes that offset
the asserted taxes (each, a "Deemed Tax Payment"). The amount payable
pursuant to the preceding sentence shall be the After-Tax Tax-Related
Losses implied by such Actual Tax Payments and Deemed Tax Payments.
(e) To the extent an indemnification obligation does not relate to
Spin-off Tax Liabilities, the indemnifying party shall make payment
pursuant to such indemnification obligation within 30 days after the
indemnified party makes a payment that is a Tax-Related Loss.
(f) In the event that the indemnified party is refunded any amounts
previously paid with respect to Spin-off Tax Liabilities prior to a Final
Determination with respect to such Spin-off Tax Liabilities, to the extent
such amounts previously paid by the indemnified party were paid to the
indemnified party by the indemnifying party pursuant to Sections 4.04(a),
(b) or (c), the indemnified party shall, within 30 days after the receipt
thereof, deposit such refunded amounts in an interest-bearing escrow
account maintained by a commercial bank or trust company chosen by the
indemnified party in its sole discretion. To the extent that, pursuant to a
Final Determination, the indemnified party is entitled to retain any
amounts so deposited, the indemnified party shall, within 30 days after the
date of such Final Determination, return such amounts, together with any
interest thereon paid by the Taxing Jurisdiction or paid by the commercial
bank or trust company maintaining the escrow account in which such amounts
were deposited, but without any other allowance for interest or any other
charge for the use of money. In the event that the indemnified party is
refunded or receives credit for any amounts previously paid with respect to
Spin-off Tax Liabilities pursuant to a Final Determination with respect to
such Spin-off Tax Liabilities, to the extent such amounts previously paid
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by the indemnified party were paid to the indemnified party by the
indemnifying party pursuant to Sections 4.04(a), (b) or (c), the
indemnified party shall, within 30 days after the receipt of such refund or
credit, return such amounts to the indemnifying party.
(g) (i) In connection with this indemnification obligation, the
indemnifying party shall, acting in good faith and at the indemnifying
party's own expense, conduct all proceedings, subject to clause (ii) of
this subsection (g), relating to the indemnified matter, but shall allow
the indemnified party, at the indemnified party's own expense, to
participate fully in such proceedings. The indemnifying party may not
settle any such proceedings without the consent of the indemnified party,
which consent shall not be unreasonably withheld. In the event that any
procedure or forum that the indemnifying person desires to utilize requires
payment of all or any portion of Spin-off Tax Liabilities, it shall be the
responsibility of the indemnifying party to provide to the indemnified
party funds sufficient to make such payment. (ii) If a liability
indemnified hereunder is grouped with other unrelated asserted liabilities
or issues in a proceeding, the parties shall use their respective Best
Efforts to cause the indemnified liability to be the subject of a separate
proceeding. If such severance is not possible, the indemnifying party shall
assume and direct and be responsible only for the matters relating to the
indemnified liability, and the choice of forum for the proceeding shall be
determined by mutual agreement of the parties, which shall not be
unreasonably withheld or delayed. If the parties are unable to agree as to
the choice of the forum, the forum selection shall be determined through
the dispute resolution procedures set forth in Section 3.09.
(h) COMSAT shall be indemnified and held harmless pursuant to this
Section 4.04 without regard to the fact that (i) COMSAT or Ascent may have
received a Subsequent Ruling pursuant to Section 4.02(h)(i), (ii) COMSAT
may have made a determination pursuant to Section 4.02(h)(ii), or (iii)
Ascent may have obtained an Unqualified Tax Opinion pursuant to Section
4.02(h)(iii). COMSAT shall be indemnified and held harmless pursuant to
this Section 4.04 without regard to whether a transaction is subject to
Sections 4.02(b), (c), (d), (e), (f), or (g).
(i) Notwithstanding anything to the contrary contain in this
Agreement, no indemnification pursuant to this Section 4.04 shall be
available to either party for any Loss, unless the Tax-Free Status of the
Distribution has been lost.
4.05 Enforcement. The parties hereto acknowledge that irreparable harm
would occur in the event that any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. The parties hereto agree that, in order to preserve the Tax-Free
Status of the Distribution, injunctive relief is appropriate to prevent any
violation of the foregoing covenants, provided, however, that injunctive
relief shall not be the exclusive legal or equitable remedy for any such
violation.
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ARTICLE V
ACCESS TO INFORMATION AND SERVICES
5.01 Provision of Corporate Records.
(a) COMSAT shall arrange as soon as practicable following the
Distribution Date, to the extent not previously delivered, for the
transportation (at Ascent's cost) to Ascent of the Ascent Books and Records
in its possession, except to the extent such items are already in the
possession of Ascent or an Ascent Entity. Such Ascent Books and Records
shall be the property of Ascent, but shall be available to COMSAT for
review and duplication until COMSAT shall notify Ascent in writing that
such records are no longer of use to COMSAT.
(b) Ascent shall arrange as soon as practicable following the
Distribution Date, to the extent not previously delivered for the
transportation (at COMSAT's cost) to COMSAT of the COMSAT Books and Records
in its possession, except to the extent such items are already in the
possession of COMSAT. The COMSAT Books and Records shall be the property of
COMSAT, but shall be available to Ascent for review and duplication until
Ascent shall notify COMSAT in writing that such records are no longer of
use to Ascent.
5.02 Access to Information. From and after the Distribution Date,
COMSAT shall afford to Ascent and its authorized accountants, counsel and
other designated representatives reasonable access (including using
reasonable efforts to give access to persons or firms possessing
information) and duplicating rights during normal business hours to all
records, books, contracts, instruments, computer data and other data and
information relating to pre-Distribution operations (collectively,
"Information") within COMSAT's possession insofar as such access is
reasonably required by Ascent for the conduct of its business, subject to
appropriate restrictions for classified or Privileged Information.
Similarly, Ascent shall afford to COMSAT and its authorized accountants,
counsel and other designated representatives reasonable access (including
using reasonable efforts to give access to persons or firms possessing
information) and duplicating rights during normal business hours to
Information within Ascent's possession, insofar as such access is
reasonably required by COMSAT for the conduct of its business, subject to
appropriate restrictions for classified or Privileged Information.
Information may be requested under this Article V for the legitimate
business purposes of either party, including without limitation, audit,
accounting, claims (including claims for indemnification hereunder),
litigation and tax purposes, as well as for purposes of fulfilling
disclosure and reporting obligations and for performing this Agreement, the
Corporate Agreement, the Tax Disaffiliation Agreement and the transactions
contemplated hereby and thereby.
5.03 Production of Witnesses. At all times from and after the
Distribution Date, each of Ascent and COMSAT shall use reasonable efforts
to make available to the other, upon written request, its and its
Subsidiaries' officers, directors, employees and agents as witnesses to the
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extent that such persons may reasonably be required in connection with any
Action.
5.04 Reimbursement. A party providing Information or witness services
to the other party under this Article V shall be entitled to receive from
the recipient, upon the presentation of invoices therefor, payments of such
amounts, relating to supplies, disbursements and other out-of-pocket
expenses (at cost) and direct and indirect expenses of employees who are
witnesses or otherwise furnish assistance (at cost), as may be reasonably
incurred in providing such Information or witness services.
5.05 Retention of Records. Except as otherwise required by law or
otherwise agreed in writing, each of COMSAT and Ascent may destroy or
otherwise dispose of any of the Information, which is material Information
and is not contained in other Information retained by COMSAT or Ascent, as
the case may be, at any time after the earlier of the tenth anniversary of
this Agreement or the time at which such information is at least ten years
old, provided that, prior to such destruction or disposal, (a) it shall
provide no less than 90 or more than 120 days prior written notice to the
other, specifying in reasonable detail the Information proposed to be
destroyed or disposed of and (b) if a recipient of such notice shall
request in writing prior to the scheduled date for such destruction or
disposal that any of the Information proposed to be destroyed disposed of
be delivered to such requesting party, the party proposing the destruction
or disposal shall promptly arrange for the delivery of such of the
Information as was requested at the expense of the party requesting such
Information.
5.06 Confidentiality. Each of COMSAT and its Subsidiaries on the one
hand, and Ascent and its Subsidiaries on the other hand, shall hold, and
shall cause its consultants and advisors to hold, in strict confidence, all
Information concerning the other in its possession or furnished by the
other or the other's representatives pursuant to this Agreement (except to
the extent that such Information has been (i) in the public domain through
no fault of such party or (ii) later lawfully acquired from other sources
by such party), and each party shall not release or disclose such
Information to any other person, except its auditors, attorneys, financial
advisors, rating agencies, bankers and other consultants and advisors,
unless compelled to disclose by judicial or administrative process or, as
reasonably advised by its counsel or by other requirements of law, or
unless such Information is reasonably required to be disclosed in
connection with (x) any litigation with any third-parties or litigation
between COMSAT Entities and the Ascent Entities, (y) any contractual
agreement to which the COMSAT Entities or the Ascent Entities are currently
parties, or (z) in exercise of either parties' rights hereunder.
5.07 Privileged Matters. COMSAT and Ascent recognize that legal and
other professional services that have been and will be provided prior to
the Distribution Date have been and will be rendered for the benefit of
both the COMSAT Entities and the Ascent Entities and that both the COMSAT
Entities and the Ascent Entities should be deemed to be the client for the
purposes of asserting all Privileges. To allocate the interests of each
party in the Privileged Information, the parties agree as follows:
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(a) COMSAT shall be entitled, in perpetuity, to control the assertion
or waiver of all Privileges in connection with Privileged Information which
relates solely to the COMSAT Entities, whether or not the Privileged
Information is in the possession of or under the control of COMSAT or
Ascent. COMSAT shall also be entitled, in perpetuity, to control the
assertion or waiver of all Privileges in connection with Privileged
Information that relates solely to the subject matter of any claims
constituting COMSAT Entity liabilities, now pending or which may be
asserted in the future, in any lawsuits or other proceedings initiated
against or by COMSAT, whether or not the Privileged Information is in the
possession of or under the control of COMSAT or Ascent.
(b) Ascent shall be entitled, in perpetuity, to control the assertion
or waiver of all Privileges in connection with Privileged Information which
relates solely to the Ascent Entities, whether or not the Privileged
Information is in the possession of or under the control of COMSAT or
Ascent. Ascent shall also be entitled, in perpetuity, to control the
assertion or waiver of all Privileges in connection with Privileged
Information which relates solely to the subject matter of any claims
constituting Ascent liabilities, now pending or which may be asserted in
the future, in any lawsuits or other proceedings initiated against or by
Ascent, whether or not the Privileged Information is in the possession of
Ascent or under the control of COMSAT or Ascent.
(c) COMSAT and Ascent agree that they shall have a shared Privilege,
with equal right to assert or waive, subject to the restrictions in this
Section 5.07, with respect to all Privileges not allocated pursuant to the
terms of Sections 5.07(a) and (b). (All Privileges relating to any claims,
proceedings, litigation, disputes, or other matters which involve both
COMSAT and Ascent in respect of which COMSAT and Ascent retain any
responsibility or liability under this Agreement, shall be subject to a
shared Privilege.)
(d) No party shall intentionally waive any Privilege which could be
asserted under any applicable law, and in which the other party has a
shared Privilege, without the consent of the other party, except to the
extent reasonably required in connection with any litigation with
third-parties or as provided in subsection (e) below. Consent shall be in
writing, or shall be deemed to be granted unless written objection is made
within twenty (20) days after notice upon the other party requesting such
consent.
(e) In the event of any litigation or dispute between a COMSAT Entity
and an Ascent Entity, either party may waive a Privilege in which the other
party has a shared Privilege, without obtaining the consent of the other
party, provided that such waiver of a shared Privilege shall be effective
only as to the use of Privileged Information with respect to the litigation
or dispute between the COMSAT Entity and the Ascent Entity, and shall not
operate as a waiver of the shared Privilege with respect to third-parties.
(f) Upon receipt by any party of any subpoena, discovery or other
request which arguably calls for the production or disclosure of
Information subject to a shared Privilege or as to which the other party
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has the sole right hereunder to assert a Privilege, or if any party obtains
knowledge that any of its current or former directors, officers, agents or
employees have received any subpoena, discovery or other requests which
arguably calls for the production or disclosure of such Privileged
Information, such party shall promptly notify the other party of the
existence of the request and shall provide the other party a reasonable
opportunity to review the Information and to assert any rights it may have
under this Section 5.07 or otherwise to prevent the production or
disclosure of such Privileged Information.
(g) The transfer of the Ascent Books and Records and the COMSAT Books
and Records and other Information between COMSAT and its Subsidiaries and
Ascent and its Subsidiaries, is made in reliance on the agreement of COMSAT
and Ascent, as set forth in Sections 5.04 and 5.05, to maintain the
confidentiality of Privileged Information and to assert and maintain all
applicable Privileges. The access to information being granted pursuant to
Sections 5.01 and 5.02 hereof, the agreement to provide witnesses and
individuals pursuant to Section 5.03 hereof and the transfer of Privileged
Information between COMSAT and its Subsidiaries and Ascent and its
Subsidiaries pursuant to this Agreement shall not be deemed a waiver of any
Privilege that has been or may be asserted under this Agreement or
otherwise.
ARTICLE VI
MISCELLANEOUS
6.01 Limitation of Liability. Neither COMSAT nor Ascent shall be
liable to the other for any special, punitive or consequential damages
arising in connection with this Agreement, the Corporate Agreement, the Tax
Disaffiliation Agreement, the Distribution or the other matters
contemplated herein or therein.
6.02 Subsidiaries. COMSAT agrees and acknowledges that COMSAT shall be
responsible for the performance by each COMSAT Entity of the obligations
hereunder applicable to such COMSAT Entity. Ascent agrees and acknowledges
that Ascent shall be responsible for the performance by each Ascent Entity
of the obligations hereunder applicable to such Ascent Entity.
6.03 Amendments; Waivers; Remedies. This Agreement, the Corporate
Agreement and the Tax Disaffiliation Agreement may not be amended or
terminated, nor may any failure of performance or default be waived,
orally, except by a writing duly executed by or on behalf of the parties
hereto (and, in the case of Ascent, based upon the recommendations of the
disinterested directors of the Ascent Board of Directors). Any such
amendment or waiver shall be validly and sufficiently authorized for
purposes of this Agreement if it is signed on behalf of COMSAT or Ascent by
any of their respective presidents or vice presidents. No failure on the
part of COMSAT, any transferee or Ascent to exercise, and no delay in
exercising, any right hereunder or thereunder shall operate as a waiver
thereof (except as expressly provided herein or therein); nor shall any
single or partial exercise thereof or the exercise of any other right
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein and therein provided are cumulative and not
exclusive of any remedies provided at law or in equity.
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6.04 Severability. If any provision of this Agreement or the
application of any such provision to any party or circumstances shall be
determined by any court of competent jurisdiction or fully authorized
arbitration tribunal to be invalid, illegal or unenforceable to any extent,
the remainder of this Agreement or such provision of the application of
such provision to such party or circumstances, other than those to which it
is so determined to be invalid, illegal or unenforceable, shall remain in
full force and effect to the fullest extent permitted by law and shall not
be affected thereby, unless such a construction would be unreasonable.
6.05 Notices. Any notice, instruction, direction or demand under the
terms of this Agreement required to be in writing will be duly given upon
delivery, if delivered by hand or facsimile transmission, or five (5) days
after posting if sent by certified mail, return receipt requested to the
following addresses:
COMSAT:
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, Maryland 20815
Attention: Allen E. Flower
Vice President and Chief Financial Officer
Telecopy No.: 301/214-5131
With copy (which shall not constitute notice) to:
Warren Y. Zeger
Vice President, General Counsel and Secretary
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, Maryland 20815
Telecopy No.: 301/214-5128
and
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Ascent:
Ascent Entertainment Group, Inc.
1200 Seventeenth Street
Denver, Colorado 80202
Attention: James A. Cronin III
Executive Vice President, Finance and
Chief Operating Officer
Telecopy No.: 303/595-0204
With copy (which shall not constitute notice) to:
Arthur M. Aaron
Vice President, Business and Legal Affairs
and Secretary
Ascent Entertainment Group, Inc.
1200 Seventeenth Street
Denver, Colorado 80202
Telecopy No.: 303/595-0127
or to such other address as either party may have furnished to the other in
writing in accordance with this Section 6.6.
6.06 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original instrument, but all
of which together shall constitute but one and the same agreement.
6.07 Governing Law. This Agreement and the transactions contemplated
hereby shall be construed in accordance with, and governed by, the laws of
the State of Maryland without giving effect to the conflicts of law
principles thereof. Each party hereby agrees that any legal action or
proceedings with respect to Agreement, the Corporate Agreement, the Tax
Disaffiliation Agreement, the Distribution or the other matters
contemplated herein or therein shall be brought in a federal or state court
located in the State of Maryland, and each of the parties hereby consents
to the jurisdiction of such courts and hereby waives any objections on the
grounds of venue, forum non conveniens, situs of the action, improper forum
or any similar grounds. Each party hereby waives the right to trial by jury
in any such action.
6.08 Successors; Assignment. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective
successors and assigns. Neither party may assign or transfer any of its
rights or duties under this Agreement to any person or entity without the
prior written consent of the other party, except by operation of law.
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6.09 Termination. This Agreement may be terminated (i) at any time
prior to the Effective Time by a resolution approved by COMSAT's Board of
Directors in its sole discretion; or (ii) at any time after September 1,
1997, but prior to time at which COMSAT's Board of Directors declares the
Special Dividend and sets the Record Date pursuant to Section 2.03(a) of
this Agreement, by a resolution approved by Ascent's Board of Directors
acting upon the recommendations of the disinterested directors of the
Ascent Board of Directors in its sole discretion.
6.10 No Third Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto and shall not be deemed to confer upon third
parties (including any employee of a COMSAT Entity or Ascent Entity) any
remedy, claim, reimbursement, cause of action or other right in excess of
those existing without reference to this Agreement.
6.11 Entire Agreement. This Agreement constitutes the entire
understanding of the parties hereto with respect to the subject matter
hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
signed by their duly authorized representatives.
COMSAT CORPORATION
By: /s/ A. E. Flower
-------------------------
Allen E. Flower
Vice President and Chief
Financial Officer
ASCENT ENTERTAINMENT GROUP, INC.
By: /s/ James A. Cronin III
-------------------------
James A. Cronin III
Executive Vice President, Finance and
Chief Operating Officer
<PAGE>
Appendix A
to the
DISTRIBUTION AGREEMENT
between
COMSAT Corporation
and
Ascent Entertainment Group, Inc.
<PAGE>
CONTINGENT LIABILITIES AND CONTINGENT BENEFITS
Section 1 - Definitions
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Capitalized terms that are used in this Appendix have the meaning
ascribed to such term in the Corporate Agreement or, to the extent not
therein defined, the meaning set forth below. Words importing only the
singular include the plural and vice versa where the context requires.
"Action" means any litigation or other judicial, regulatory or
administrative proceeding (including audits of taxes other than federal or
state income taxes, including state franchise taxes measured by income).
"Acts or Omissions" means significant active and direct participation
by a Party in the conduct that resulted in the Contingent Liability or
Contingent Benefit; provided, however, that approvals, non-approvals or
rejections of budgets, strategic business plans and other corporate plans
shall not constitute Acts or Omissions with respect to any particular
conduct.
"Benefit" means a significant, identifiable financial benefit that
directly flows to a Party from the Acts or Omissions that resulted in the
Contingent Liability or Contingent Benefit; provided, however, that the
payment of dividends to COMSAT by one or more of its Subsidiaries shall not
constitute a Benefit to COMSAT or to any of COMSAT's other Subsidiaries
with respect to any particular Acts or Omissions of the Subsidiary paying
such dividends.
"Contingent Benefit" means a Benefit of one or both of the Parties
which was not booked for financial reporting purposes prior to the
Effective Date that is attributable to either (a) an event which occurred
prior to the Initial Public Offering Date, (b) a condition which existed
prior to the Initial Public Offering Date, or (c) an event which occurred
after the Initial Public Offering Date but which was attributable to the
Initial Public Offering; provided, however, that in any case the Action
that resulted in the Contingent Benefit must have been filed or otherwise
commenced within 5 years after the Initial Public Offering Date.
"Contingent Liability" means a liability (to the extent not covered by
insurance) of one or both of the Parties which was not booked for financial
reporting purposes prior to the Effective Date that is attributable to
either (a) an event which occurred prior to the Initial Public Offering
Date, (b) a condition which existed prior to the Initial Public Offering
Date, or (c) an event which occurred after the Initial Public Offering Date
but which was attributable to the Initial Public Offering; provided,
however, that in any case the Action that resulted in uninsured liability
must have been filed or otherwise commenced within 5 years after the
Initial Public Offering Date.
"Judgment" means any judgment or other determination of liability
entered by a court or regulatory or administrative authority, any
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settlement entered into or consented to by both of the Parties, or any
dismissal of a third party claim; provided, however, that a stipulated
judgment or order of dismissal (or equivalent) by which a court approves a
settlement of an Action entered into by only one of the Parties, including
class action settlements, shall not be deemed to be a Judgment. For
example, the assessment of a tax deficiency (other than a federal or state
income tax deficiency) after the conclusion of an audit and the exhaustion
of the taxpayer's administrative remedies is a Judgment.
"Named Party" means a Party which has one or more members that are
named as a defendant (or equivalent) in an Action. For example, if Ascent
is the taxpayer being audited by a taxing authority, Ascent would be a
Named Party in such Action.
"Party" means a party to this Agreement and each Subsidiary of such
party, other than the other party and its Subsidiaries.
Section 2 - Defense and Prosecution of Actions
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2.1 The Parties will cooperate and consult with each other in
connection with the defense or prosecution of any Action in which both
Parties are or potentially may be involved (even if both Parties are not
Named Parties in the Action), including but not limited to Actions which
might result in a Contingent Liability or Contingent Benefit.
2.2 If only one of the Parties is a Named Party in an Action, such
Named Party shall be responsible for both the defense or prosecution of the
Action (in cooperation and consultation with the other Party) and all of
the Benefits and/or costs associated with such Action until such time as
such Benefits or costs may be subject to allocation as a Contingent Benefit
or Contingent Liability under this Agreement. Nothing in this Section 2.2,
however, shall preclude either Party from joining the other party as a
Named Party to the Action, in which case costs shall be allocated in
accordance with Section 2.3.
2.3 If both Parties are Named Parties in an Action, they shall agree
on the responsibility for both the defense or prosecution of the Action and
the Benefits and costs associated with such Action until such time as such
Benefits and costs may be subject to allocation as a Contingent Benefit or
Contingent Liability under this Agreement. Such agreement shall take into
consideration the manner in which any Contingent Benefit or Contingent
Liability resulting from the Action would be allocated under Section 3.3.
For example, if both COMSAT and Ascent were Named Parties in an action
which arose out of Ascent's hotel in-room entertainment business, the
Parties should agree that Ascent would be primarily responsible for the
defense of the Action and would bear all of the costs associated with such
defense until such time as such costs may be subject to allocation as a
Contingent Liability under this Agreement.
2.4 Each Party shall bear its own internal costs (such as the salaries
of in-house legal counsel and other personnel) incurred in connection with
the defense or prosecution of any Action.
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Section 3 - Contingent Liabilities and Contingent Benefits
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3.1 The allocation rules set forth in Section 3.3 shall apply to all
Contingent Liabilities and Contingent Benefits of the Parties which result
from Judgments, except for those Actions relating to federal and state
income taxes, including state franchise taxes measured by income, which
shall be governed by the Tax Disaffiliation Agreement. For example,
Contingent Liabilities may be based on contract, tort (including business
torts such as alleged violations of the antitrust laws), tax (other than
federal and state income tax), environmental, workers' compensation, ERISA,
securities, regulatory and other common law and statutory claims.
3.2 Except as the Parties may otherwise agree, any Contingent
Liability or Contingent Benefit which results from a settlement (as opposed
to a Judgment) entered into by only one of the Parties will not be subject
to allocation under this Agreement.
3.3 The Parties agree to allocate Contingent Benefits and pay the
costs of Contingent Liabilities which result from Judgments (and any
settlements entered into by only one of the Parties which the Parties may
agree are subject to allocation under this Agreement) in accordance with
the following allocation rules:
(a) Named Party Rule. Except as otherwise provided in paragraphs (b)
through (f) below, if only one of the Parties is a Named Party in an
Action, the Contingent Liability or Contingent Benefit shall be allocated
solely to that Party.
(b) COMSAT Rule. If the Contingent Liability or Contingent Benefit is
attributable solely to the Acts or Omissions of the COMSAT Entities and the
Ascent Entities did not, in the case of a Contingent Liability, receive any
Benefit from such Acts or Omissions or, in the case of a Contingent
Benefit, contribute to or participate in the Acts giving rise to such
Contingent Benefit, then the Contingent Liability or Contingent Benefit, as
applicable, shall be allocated solely to the COMSAT Entities.
(c) Ascent Rule. If the Contingent Liability or Contingent Benefit is
attributable solely to the Acts or Omissions of Ascent and the COMSAT
Entities did not, in the case of a Contingent Liability, receive any
Benefit from such Acts or Omissions or, in the case of a Contingent
Benefit, contribute to or participate in the Acts giving rise to such
Contingent Benefit, then the Contingent Liability or Contingent Benefit, as
applicable, shall be allocated solely to Ascent.
(d) Joint Rule. In the case of a Contingent Liability, if either (1)
the Contingent Liability is attributable to the Acts or Omissions of both
the COMSAT Entities and the Ascent Entities, or (2) the Party not
responsible for the Acts or Omissions resulting in the Contingent Liability
received a Benefit from such Acts or Omissions, the Parties will use their
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best efforts to attempt to agree on an equitable means of sharing the
Contingent Liability which reasonably reflects both (a) the nature of each
Party's Acts or Omissions, and (b) any Benefit to each Party from the Acts
or Omissions that resulted in such Contingent Liability. In the case of a
Contingent Benefit, if either (1) the Contingent Benefit is attributable to
the Acts or Omissions of both the COMSAT Entities and the Ascent Entities,
or (2) the Party not responsible for the Acts or Omissions resulting in the
Contingent Benefit contributed to or participated in the Acts giving rise
to such Contingent Benefit, the Parties will use their best efforts to
attempt to agree on an equitable means of sharing the Contingent Benefit
which reasonably reflects both (a) the nature of each Party's Acts or
Omissions, (b) the relative contribution of each Party that gave rise to
the Contingent Benefit, and (c) the Benefits or costs paid by each party in
respect of such Contingent Benefit.
(e) Employee Rule. Notwithstanding paragraphs (a) through (d) above
and except as may otherwise be provided for under any of the
indemnification provisions of this Agreement, the Tax Disaffiliation
Agreement or the Intercompany Services Agreement, if the Contingent
Liability results from the claim of an employee, or former employee of a
member of the COMSAT Entities or Ascent Entities and is related to such
person's employment, the Contingent Liability shall be allocated to the
Party by whom such person was employed at the time when the Acts or
Omissions that resulted in the Contingent Liability occurred. For example,
if an employee of one of the Ascent Entities who was injured while working
for an Ascent Entity later transferred to COMSAT, any Contingent Liability
relating to such injury would be allocated solely to the Ascent Entities.
(f) Express Provision Rule. Notwithstanding paragraphs (a) through
(e), where the parties have agreed to allocate a Contingent Liability or
Contingent Benefit or have provided for indemnification pursuant to an
express provision of this Agreement, the Corporate Agreement or the Tax
Disaffiliation Agreement, such provision shall control.
The applicable allocation rule set forth in paragraphs (b), (c), (d),
(e) and (f) above shall apply even if a Party to which all or part of the
Contingent Liability or Contingent Benefit is to be allocated is not a
Named Party in the Action and regardless of whether such Party may have
been dismissed from the Action by virtue of a motion, settlement or
otherwise.
3.4 The amount of a Contingent Liability subject to allocation under
this Agreement shall include, and the amount of any Contingent Benefit
available for allocation shall be reduced by, the costs of any Judgment
entered by a court or judicial, regulatory or administrative authority in
an Action (or the cost of any settlement entered into by both of the
Parties), the costs of defending or prosecuting the Action (including court
costs, sanctions imposed by a court, attorneys' fees, experts' fees and all
other external expenses, and the cost of any interest or penalties with
respect to any such Judgment.
3.5 Exhibit A-1 (Schedule of Actions) contains a list of all Actions
pending or threatened as of the date of this Agreement, in which the
Parties believe that a Judgment would be reasonably likely to result in a
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Contingent Liability or Contingent Benefit and the manner in which such
Contingent Liability or Contingent Benefit shall be allocated under this
Agreement, notwithstanding the general allocation rules set forth in
Section 3.3.
3.6 The Named Party in an Action in which an adverse Judgment would be
reasonably likely to result in a Contingent Liability or a favorable
Judgment would be reasonably likely to result in a Contingent Benefit to be
allocated under this Agreement shall use its best efforts to notify the
other Party of the Action (unless the other Party is also a Named Party in
the same Action) within 30 days after the service of process on, or other
initial written notice of the Action to, such Named Party. The notice shall
include the following information: (a) caption of the Action, including the
docket number and the name of the court or other judicial, regulatory or
administrative authority before which the Action is pending; (b) names of
the parties involved in the Action, if not disclosed in the caption; (c)
brief statement of the claims alleged; (d) amount of the liability alleged
or expected to be alleged, if known; and (e) which of the allocation rules
set forth in Section 3.3 such Party believes would be applicable.
3.7 Notwithstanding the provisions of Section 3.6, no Party shall be
relieved of its obligations under this Agreement with respect to a
Contingent Liability unless such Party can demonstrate by a preponderance
of the evidence that it was substantially prejudiced by the failure of the
other Party to either (a) list the action in Exhibit A-1 (Schedule of
Actions) pursuant to Section 3.5, or (b) give timely notice of the Action
pursuant to Section 3.6.
3.8 Except as otherwise provided in Exhibit A-1 or as the Parties may
otherwise agree, any Contingent Liability or Contingent Benefit resulting
from the Actions either (a) listed in Exhibit A-1 (Schedule of Actions) or
(b) for which notice is given pursuant to Section 3.6 shall be allocated
according to the applicable rule set forth in Section 3.3.
(Exhibit A-1 follows)
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Exhibit A-1
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Schedule of Pending or Threatened Actions
CONTINGENT LIABILITIES AND CONTINGENT BENEFITS ALLOCATED SOLELY TO ASCENT
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1. The Anschutz claim described in the letter to Deloitte & Touche LLP
dated October 20, 1995 from Wilmer, Cutler & Pickering.
2. The Miramax litigation described in the letter dated October 3,
1995 to Deloitte & Touche LLP from Williams & Connolly.
3. Certain individuals and corporations that were sellers under the
Asset Purchase Agreement (the "Beacon Purchase Agreement") dated as of
October 27, 1994 among Beacon, COMSAT such sellers (the "Sellers") and
others, have made certain claims regarding the contingent payments due such
Sellers pursuant to the Purchase Agreement. All Contingent Liabilities and
Contingent Benefits arising out of the Beacon Purchase Agreement (including
but not limited to those matters described on Schedule 4.19 thereto),
arising out of Ascent's ownership interest in Beacon Communications Corp.,
or associated with any Action that may be brought by the Sellers in respect
of the Beacon Purchase Agreement or related matters shall be allocated to
Ascent.
4. The Hoskins litigation described in the letter dated October 5,
1995 to Deloitte & Touche LLP from Akin, Gump, Strauss, Hauer & Feld,
L.L.P.
5. All Contingent Liabilities and Contingent Benefits arising out of
Ascent's ownership interest in the Nuggets and the Avalanche shall be
allocated to Ascent.
6. Broadcast Music, Incorporated ("BMI"), the representative of many
composers and publishers of musical works for the licensing of the public
performance rights to such works under U.S. copyright law, has contacted
Ascent and OCC to negotiate a licensing agreement and royalty arrangement
for the use of music in the movies shown by OCC in its pay-per-view in-room
entertainment systems. BMI has requested a royalty rate of 0.40% of the
gross revenues generated from the purchase of films (applicable to both
feature and adult films) containing BMI-represented music, and an interim
rate of 0.30% of gross revenues. Ascent and OCC believe a substantially
lower royalty rate should be applicable and that such royalties are
inapplicable to adult films. All Contingent Liabilities and Contingent
Benefits associated with the BMI claim or BMI royalties shall be allocated
to Ascent.
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7. American Society of Composers, Authors and Publishers ("ASCAP"),
the representative of many composers and publishers of musical works for
the licensing of the public performance rights to such works under U.S.
copyright law, is currently requesting hotels to sign its new "Standard
Agreement" that obligates the hotel to pay for pay-per-view music royalties
if the provider of such services does not do so. Certain OCC contracts with
hotels require OCC to indemnify the hotels for any costs they incur for the
payment of copyright royalty obligations related to pay-per-view movies.
The royalty rates in the Standard Agreement vary depending on several
factors, but they are in all cases significantly higher than OCC believes
it could negotiate from ASCAP directly. Thus, negotiations are being
initiated to acquire the lowest royalty rate feasible. OCC believes that
the royalty rates for ASCAP licensed music should be no higher than for BMI
licensed music, and that because ASCAP controls considerably less motion
picture music than does BMI, it is reasonable that payments to ASCAP should
be considerably less. All Contingent Liabilities and Contingent Benefits
associated with ASCAP royalties or claims shall be allocated to Ascent.
8. Showtime Networks, Inc. ("Showtime") filed suit against CVE in New
York State Court claiming that CVE was in breach of the agreement under
which Showtime provides CVE with its "Showtime" and "The Movie Channel"
services. The Showtime suit alleged that CVE failed to use its best efforts
to promote "Showtime" and "The Movie Channel" and that CVE failed to pay
certain license fees. The Showtime suit subsequently was dismissed with
prejudice as a result of a settlement in which CVE agreed to pay a portion
of the license fees in dispute and enter into a new license agreement. All
Contingent Liabilities and Contingent Benefits associated with the
settlement with Showtime or any subsequent Actions which may have been
brought by Showtime pertaining to CVE or OCC shall be allocated to Ascent.
9. The Leask litigation described in the letter to Deloitte & Touche
LLP dated January 10, 1995 from Wilson, Sonsini, Goodrich & Rosati. COMSAT
reached a post-judgment settlement with Mr. Leask under which OCV will pay
Mr. Leask $1.54 million in return of his release of all claims against OCV.
All Contingent Liabilities and Contingent Benefits associated with the
settlement with Mr. Leask or any subsequent Actions which may be brought by
Mr. Leask, if any, pertaining to OCV shall be allocated to Ascent.
10. On February 16, 1995, OCV filed a lawsuit against LodgeNet
Entertainment Corporation ("Lodgenet") alleging infringement of an OCV
patent on in-room entertainment systems. On November 28, 1995, Lodgenet was
granted summary judgment on the issues of limiting the period during which
Lodgenet might be liable for damages to begin on November 22, 1994, and OCV
has sought reconsideration of that decision. On March 22, 1996, LodgeNet
filed suit against On Command Corporation (OCC) in the U.S. District Court
in South Dakota alleging infringement of a patent acquired by LodgeNet on
March 5, 1996 and seeking injunctive relief and damages, which case is in
the process of being transferred to the Federal Court for the Northern
District of California and is scheduled to go to trial in late 1997. All
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Contingent Benefits and Contingent Liabilities associated with the Lodgenet
litigation or any subsequent litigation brought by LodgeNet or any Ascent
Entity related thereto shall be allocated to Ascent.
12. In response to concerns of Hilton Hotels Corporation ("Hilton"), a
key customer and shareholder of OCV, Ascent, CVE, OCV and COMSAT entered
into a letter agreement with Hilton dated December 8, 1995 (as amended, the
"Hilton Agreement"). The Hilton Agreement initially provided, among other
terms, that: (a) an independent investment banker would be engaged to
review the contribution by CVE of substantially all of its in-room
entertainment assets to OCV in a transaction reflected in the Contribution
Agreement dated August 1, 1995 between CVE and OCV (the "CVE Contribution")
with respect to the value of the consideration received by OCV and the
value of the OCV shares issued in the transaction, and the parties agreed
to be bound by the recommendation of such investment banker (the
"Contribution Recommendation"), including, if necessary, at CVE's option,
paying cash to OCV or the minority stockholders of OCV (the "CVE Cash
Payment"), retiring shares of OCV owned by Ascent (the "OCV Share
Retirement") or reallocating shares of OCV owned by Ascent (the "OCV Share
Reallocation") to the minority stockholders of OCV. The Corporate Agreement
(see Section 19 of Exhibit A-1 to Appendix A thereto) provided that, if
applicable, COMSAT would either: (i) reimburse CVE or Ascent for the amount
of the CVE Cash Payment, or (ii) make a cash payment or transfer property
to CVE or Ascent with a valuation equal to the value of the OCV shares
surrendered or retired at COMSAT's option (the "CVE Contribution
Indemnification Obligation"). The Hilton Agreement was amended as of August
13, 1996 to provide, among other things, that the number of shares issued
to CVE, now known as ANS, in connection with the CVE Contribution, would be
reduced. In satisfaction of the CVE Contribution Indemnification
Obligation, COMSAT made a cash payment to Ascent of $1,820,227.59 on
November 5, 1996. Ascent and ANS hereby acknowledge receipt of such funds
and respectively, each on behalf of itself and its affiliates, directors,
officers successors and assigns, hereby fully release each of the COMSAT
Entities, and their respective affiliates, directors, officers, employees,
agents, and their respective successors and assigns, from and against any
and all claims, demands, obligations, actions, liabilities, causes of
action or damages of every kind or nature whatsoever, in law or in equity,
arising out of or related to the CVE Contribution, the Hilton Agreement and
the CVE Contribution Indemnification Obligation. All Contingent Liabilities
arising out of the CVE Contribution, the Hilton Agreement or associated
with any Action, if any, that may be brought by an OCV or On Command
Corporation shareholder in respect of the CVE Contribution shall be
allocated to Ascent.
CONTINGENT LIABILITIES AND CONTINGENT BENEFITS ALLOCATED SOLELY TO COMSAT
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13. On April 14, 1995, COMSAT filed a lawsuit against General
Instrument Corporation ("GI") and two San Francisco area cable television
companies alleging infringement of COMSAT's patent on conditional access
technology for the encrytion and decryption of television signals. On May
23, 1995, GI filed a counterclaim against COMSAT asserting that COMSAT
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tortiously interfered with and defamed GI's business in bringing the patent
infringement suit and publicly announcing it. GI and Scientific-Atlanta,
Inc. entered into a settlement agreement with COMSAT settling all claims
with respect to the patent in question (the "GI/SA Settlement Agreement").
All Contingent Benefits and Contingent Liabilities associated with the
GI/SA Settlement Agreement shall be allocated to COMSAT.
14. The PanAmSat antitrust litigation contained in the letter dated
January 27, 1995 to Deloitte & Touche LLP from Howrey & Simon.
15. The Amplica chemical spill proceeding described in the letter
dated January 27, 1995 to Deloitte & Touche LLP from Howrey & Simon.
16. The Mendoza commercial litigation described in the letter dated
January 30, 1995 to Deloitte & Touche LLP from Patton, Boggs & Blow.
17. The Florida Department of Environmental Protection proceeding
described in the letter dated February 3, 1995 to Deloitte & Touche LLP
from Hearne, Graziano & Nader, P.A.
18. The Belcom pending and threatened litigation and related matters
described in the letter dated February 5, 1996 from Latham & Watkins.
19. On April 23, 1997, COMSAT filed suit against Bruce Crockett and
others alleging, among other things, that Mr. Crockett had breached certain
terms of his termination agreement with COMSAT. All Contingent Benefits and
Contingent Liabilities associated with the Crockett litigation shall be
allocated to COMSAT.
CONTINGENT LIABILITIES AND CONTINGENT BENEFITS ALLOCATED TO EITHER COMSAT OR
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ASCENT OR BOTH, AS APPLICABLE
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20. COMSAT has a number of federal and state tax contingencies, both
asserted and unasserted, which will be allocated in accordance with the Tax
Disaffiliation Agreement.
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Appendix B
to the
DISTRIBUTION AGREEMENT
between
COMSAT Corporation
and
Ascent Entertainment Group, Inc.
<PAGE>
TAX DISAFFILIATION AGREEMENT
THIS TAX DISAFFILIATION AGREEMENT, dated as of June 3, 1997, is made
and entered into by and between COMSAT Corporation, a District of Columbia
corporation ("COMSAT"), and Ascent Entertainment Group, Inc., a Delaware
corporation ("Ascent"), and supersedes the Tax Sharing Agreement dated as
of December 18, 1995 by and between COMSAT and Ascent (the "Tax Sharing
Agreement"), as of the date specified in and subject to the conditions of
Article XII hereof.
RECITALS
WHEREAS, COMSAT is the common parent corporation of an affiliated
group of corporations within the meaning of Section 1504(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and Ascent is a member of
such affiliated group; and
WHEREAS, the affiliated group of which COMSAT is the common parent and
Ascent is a member files a consolidated Federal income tax return pursuant
to Code Section 1501; and
WHEREAS, the parties hereto contemplate that COMSAT will make a
distribution (the "Distribution") with respect to its common stock of all
of the common stock of Ascent held by COMSAT pursuant to the Distribution
Agreement, dated as of the date hereof, by and between COMSAT and Ascent
(the "Distribution Agreement"); and
WHEREAS, COMSAT and Ascent desire to provide for the allocation of
liabilities, procedures to be followed, and other matters with respect to
certain taxes in the event the Distribution takes place.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
1. "Adjustment" shall mean the deemed increase or decrease in a Tax,
determined on an issue-by-issue or transaction-by-transaction basis, as
appropriate, and using the assumptions set forth in the next sentence,
<PAGE>
resulting from an adjustment made or proposed by a Taxing Authority with
respect to any amount reflected or required to be reflected on any Return
relating to such Tax. For purpose of determining such deemed increase or
decrease in a Tax, the following assumptions will be used: (a) in the case
of any Income Tax, the highest marginal Tax rate or, in the case of any
other Tax, the highest applicable Tax rate, in each case in effect with
respect to that Tax for the Taxable period or any portion of the Taxable
period to which the adjustment relates; and (b) such determination shall be
made without regard to whether any actual increase or decrease in such Tax
will in fact be realized with respect to the Return to which such
adjustment relates.
2. "Affiliate" shall mean, with respect to any Person, any
partnership, joint venture, corporation, limited liability company, trust,
unincorporated association, or other entity directly or indirectly
controlling or controlled by, or under direct or indirect common control
with, such Person.
3. "After-Tax Basis" in reference to an Article VI Indemnity Payment
shall mean an amount that, after (i) subtraction of the aggregate
additional Taxes incurred or to be incurred by the party receiving the
Article VI Indemnity Payment as a result of the receipt of such payment and
(ii) addition of the tax benefit to the party receiving the Article VI
Indemnity Payment on account of the Adjustment to which such Article VI
Indemnity Payment relates, is equal to the amount of the correlative
Adjustment. "After-Tax Basis" in reference to an Article VI Benefit Payment
shall mean an amount that, after (i) addition of the aggregate additional
Taxes incurred or to be incurred by the party making the Article VI Benefit
Payment on account of the Ascent Tax Benefit or the COMSAT Tax Benefit to
which such Article VI Benefit Payment relates and (ii) subtraction of the
tax benefit to the party making the Article VI Benefit Payment as a result
of the making of such payment, is equal to the amount of the correlative
Ascent Tax Benefit or COMSAT Tax Benefit. For purpose of determining such
additional taxes incurred or to be incurred and such tax benefit, the
following assumptions will be used: (a) in the case of any Income Tax, the
highest marginal Tax rate or, in the case of any other Tax, the highest
applicable Tax rate, in each case in effect with respect to that Tax for
the Taxable period or any portion of the Taxable period to which the
Article VI Indemnity Payment or Article VI Benefit Payment relates; and (b)
such determination shall be made without regard to whether any actual
additional taxes or tax benefit will in fact be realized with respect to
the Return to which such payment relates.
4. "Agreement" shall mean this Tax Disaffiliation Agreement,
including any schedules, exhibits and appendices attached hereto.
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5. "Article VI Benefit Payment" shall mean a payment made under
section 2 of Article VI hereof that is a payment with respect to an Ascent
Tax Benefit or a COMSAT Tax Benefit.
6. "Article VI Indemnity Payment" shall mean a payment made under
section 2 of Article VI hereof that is an indemnity payment with respect to
an Ascent Tax Adjustment or a COMSAT Tax Adjustment.
7. "Ascent Consolidated Group" shall mean, for any taxable year prior
to the Distribution, the affiliated group of corporations of which Ascent
would be the common parent for consolidated Federal income tax return
filing purposes if it were not a subsidiary of COMSAT, and, as of the
Distribution Date and thereafter, the affiliated group of corporations of
which Ascent will be the common parent for consolidated Federal income tax
return filing purposes, and any other corporations that are or become
members of such affiliated group. If, subsequent to the Distribution,
Ascent ceases to be the common parent of an affiliated group, "Ascent
Consolidated Group" shall refer to the affiliated group of which Ascent or
a successor is a member or, in the event that Ascent ceases to be either
the common parent or a member of any affiliated group, to Ascent or a
successor. To the extent required to carry out the intent of any provision
of this Agreement, "Ascent Consolidated Group" shall also refer to any
corporation that, subsequent to the Distribution, leaves the affiliated
group of which Ascent is the common parent or otherwise a member.
8. "Ascent Tax Adjustment" shall mean, with respect to any Taxable
period or portion of a Taxable period, and as computed separately with
respect to each Tax, the net increase in each such Tax equal to the sum of
all Adjustments made pursuant to a Final Determination with respect to each
such Tax for each such Taxable period or portion of a Taxable period that
are attributable to the Ascent Consolidated Group; provided, however, that
any Adjustment comprising a Restructuring Adjustment shall not be
considered in determining the amount of any Ascent Tax Adjustment.
9. "Ascent Tax Benefit" shall mean, with respect to any Taxable period
or portion of a Taxable period, and as computed separately with respect to
each Tax, the net decrease in each such Tax equal to the sum of all
Adjustments made pursuant to a Final Determination with respect to each
such Tax for each such Taxable period or portion of a Taxable period that
are attributable to the Ascent Consolidated Group; provided, however, that
any Adjustment comprising a Restructuring Adjustment shall not be
considered in determining the amount of any Ascent Tax Benefit.
10. "Base Rate," with respect to any Person, shall mean the highest
marginal interest rate paid by that Person on such Person's outstanding
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indebtedness for borrowed money in effect from time to time, or, if the
Person does not have indebtedness for borrowed money, ten percent per
annum.
11. "Code" shall have the meaning set forth in the Recitals to this
Agreement.
12. "Combined Consolidated Group" shall mean for any taxable year the
affiliated group of corporations comprised of the COMSAT Consolidated Group
and the Ascent Consolidated Group.
13. "Combined Consolidated Return" shall mean a consolidated Federal
income tax return filed for the Combined Consolidated Group.
14. "COMSAT Consolidated Group" shall mean for any taxable year the
affiliated group of corporations of which COMSAT is the common parent, and
any other corporations which become members of the affiliated group, but
excluding members of the Ascent Consolidated Group. If, subsequent to the
Distribution, COMSAT ceases to be the common parent of an affiliated group,
"COMSAT Consolidated Group" shall refer to the affiliated group of which
COMSAT or a successor is a member or, in the event that COMSAT ceases to be
either the common parent or a member of any consolidated group, to COMSAT
or a successor.
15. "COMSAT Tax Adjustment" shall mean, with respect to any Taxable
period or portion of a Taxable period, and as computed separately with
respect to each Tax, the net increase in each such Tax equal to the sum of
all Adjustments made pursuant to a Final Determination with respect to each
such Tax for each such Taxable period or portion of a Taxable period that
are attributable to the COMSAT Consolidated Group; provided, however, that
any Adjustment comprising a Restructuring Adjustment shall not be
considered in determining the amount of any COMSAT Tax Adjustment.
16. "COMSAT Tax Benefit" shall mean, with respect to any Taxable
period or portion of a Taxable period, and as computed separately with
respect to each Tax, the net decrease in each such Tax equal to the sum of
all Adjustments made pursuant to a Final Determination with respect to each
such Tax for each such Taxable period or portion of a Taxable period that
are attributable to the COMSAT Consolidated Group; provided, however, that
any Adjustment comprising a Restructuring Adjustment shall not be
considered in determining the amount of any COMSAT Tax Benefit.
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17. "Controlling Party" shall mean the member of the Combined
Consolidated Group, that filed, or, if a Return was not filed, was required
pursuant to this Agreement to file a Return that is the subject of any Tax
Contest, or any successor and/or assign of any of the foregoing.
18. "Distribution" shall have the meaning set forth in the Recitals to
this Agreement.
19. "Distribution Agreement" shall have the meaning set forth in the
Recitals to this Agreement.
20. "Distribution Date" shall mean the date the Distribution becomes
effective pursuant to the Distribution Agreement.
21. "Federal Income Taxes" and "Federal Income Tax Liability" shall
mean the taxes imposed by sections 11, 55, 59A, and 1201(a) of the Code, or
any successor provisions to such sections and any other income-based U.S.
Federal taxes which are hereinafter imposed upon corporations.
22. "Final Determination" shall mean the final resolution of liability
for any Tax for a Taxable period, (i) by IRS Form 870 or 870-AD (or any
successor forms thereto), on the date of acceptance by or on behalf of the
Taxing Authority, or by a comparable form under the laws of other
jurisdictions; except that a Form 870 or 870-AD or comparable form that
reserves (whether by its terms or by operation of law) the right of the
taxpayer to file a claim for refund and/or the right of the Taxing
Authority to assert a further deficiency shall not constitute a Final
Determination: (ii) by a decision, judgment, decree, or other order by a
court of competent jurisdiction, which has become final and unappealable;
(iii) by a closing agreement or accepted offer in compromise under Section
7121 or 7122 of the Code (or any successor provisions thereto), or
comparable agreements under the laws of other jurisdictions; (iv) by any
allowance of a refund or credit in respect of an overpayment of tax, but
only after the expiration of all periods during which such refund may be
recovered (including by way of offset) by the Taxing Authority; or (v) by
any other final disposition, including by reason of the expiration of the
applicable statute of limitations or by mutual agreement of the parties.
23. "Group" shall mean the COMSAT Consolidated Group or the Ascent
Consolidated Group.
24. "Income Taxes" shall mean Federal Income Taxes and other Taxes
that are imposed on or measured by net income and not gross receipts or
sales.
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25. "Indemnified Party" shall have the meaning set forth Article VIII,
section 1 of this Agreement.
26. "Indemnifying Party" shall have the meaning set forth in Article
VIII, section 1 of this Agreement.
27. "Interested Party" shall mean COMSAT or any other member of the
COMSAT Consolidated Group, or Ascent or any other member of the Ascent
Consolidated Group (including any successor and/or assign of any of each of
the foregoing), as the case may be, to the extent (a) such Person is not
the Controlling Party with respect to a Tax Contest; and (b) such Person
(i) may be liable for, or required to make, any indemnity payment,
reimbursement or other payment pursuant to the provisions of this Agreement
with respect to such Tax Contest; or (ii) may be entitled to receive any
indemnity payment, reimbursement or other payment pursuant to the
provisions of this Agreement with respect to such Tax Contest; provided,
however, that in no event shall a member of either the COMSAT Consolidated
Group or the Ascent Consolidated Group, as the case may be, be an
Interested Party in a Tax Contest in which another member of its Group is
the Controlling Party with respect to the Tax Contest.
28. "IRS" shall mean the Internal Revenue Service.
29. "Person" shall mean an individual, partnership, joint venture,
corporation, limited liability company, trust, unincorporated association,
any other entity, or a government or any department or agency or other unit
thereof.
30. "Post-Affiliation Year" shall have the meaning set forth in
Article III, section 3.
31. "Regulations" or "Treas. Reg." shall mean the final or temporary
U.S. Treasury regulations in effect from time to time.
32. "Restructuring Adjustment" shall mean, with respect to any Taxable
period or portion of a Taxable period, and as computed separately with
respect to each Tax, the net increase or decrease in each such Tax, as the
case may be, equal to the sum of all Adjustments made pursuant to a Final
Determination with respect to each such Tax for each Taxable period or
portion of a Taxable period that are attributable to, or as a result of,
the Distribution.
33. "Return" shall mean any return, report, form or similar statement
or document (including, without limitation, any related or supporting
information or schedule attached thereto and any information return, claim
for refund, amended return and declaration of estimated tax) that has been
or is required to be filed with any Taxing Authority or that has been or is
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required to be furnished to any Taxing Authority in connection with the
determination, assessment or collection of any Taxes or the administration
of any laws, regulations or administrative requirements relating to any
Taxes.
34. "Straddle Period" shall mean any Taxable period of the Combined
Consolidated Group (or any member thereof) that includes but does not end
on the Distribution Date, other than a Taxable Period that begins on the
Distribution Date.
35. "Tax" (and, with correlative meanings, "Taxes" and "Taxable")
shall mean, without limitation, and as determined on a
jurisdiction-by-jurisdiction basis, each foreign or U.S. federal, state,
local or municipal income, alternative or add-on minimum, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium,
property or any other tax, custom, tariff, impost, levy, duty, government
fee or other like assessment or charge of any kind whatsoever, together
with any interest or penalty, addition to tax or additional amount related
thereto, imposed by any Taxing Authority.
36. "Taxing Authority" shall mean any government or any subdivision,
agency, commission or authority thereof, or any quasi-governmental or
private body having jurisdiction over the assessment, determination,
collection or other imposition of Taxes.
37. "Tax Contest" shall mean, without limitation, any audit,
examination, claim, suit, action or other proceeding relating to Taxes in
which an Adjustment to Taxes may be proposed, collected or assessed and in
respect of which an indemnity payment, reimbursement, other payment, or
entitlement to receive or retain tax benefits may be sought under or arises
pursuant to this Agreement.
38. "Tax Sharing Agreement" shall have the meaning set forth in the
Recitals to this Agreement.
ARTICLE II
RETURNS
1. COMSAT shall have the sole and exclusive responsibility for the
preparation and filing of the consolidated U.S. Federal income tax return
of the Combined Consolidated Group, including any amended returns and any
other returns, documents, or statements required to be filed with the IRS
with respect to the determination of the Federal Income Tax Liability of
the Combined Consolidated Group. All returns shall be filed by COMSAT on a
timely basis, taking into account extensions of the due date for the filing
of such returns.
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2. The Ascent Consolidated Group shall continue to join in filing a
consolidated Federal income tax return with the COMSAT Consolidated Group
for all such taxable years for which the Ascent Consolidated Group is
eligible to do so under the Code and the Regulations, unless COMSAT shall
request and be granted permission to discontinue filing on a consolidated
basis or shall otherwise properly elect not to file on a consolidated basis
in any particular case.
3. COMSAT shall make all Federal income tax payments, including
estimated payments, with respect to consolidated tax returns of the
Combined Consolidated Group, and COMSAT shall have the right to exercise
all powers of a common parent with respect to filing the consolidated
Federal income tax returns as are conferred on it by the Regulations.
4. COMSAT shall be the sole and exclusive agent of the Ascent
Consolidated Group and any member of such group in any and all matters
relating to the U.S. Federal Income Tax Liability of the Combined
Consolidated Group for all consolidated return years. After consultation
with Ascent with respect to all Returns in which Ascent joins, COMSAT
shall, inter alia, have the right with respect to any Federal consolidated
returns which it files (a) to determine (i) the manner in which such
returns shall be prepared and filed, including, without limitation, the
manner in which any item of income, gain, loss, deduction or credit shall
be reported, (ii) whether any extensions of the due dates for filing of
such returns or of the applicable statutes of limitations may be requested
and (iii) the elections that will be made by any member of the Combined
Consolidated Group, (b) to file and prosecute any claim for refund and (c)
to determine whether any refunds, to which the Combined Consolidated Group
may be entitled, shall be paid by way of refund or credited against the tax
liability of the Combined Consolidated Group. Ascent hereby irrevocably
appoints COMSAT as its agent and attorney-in-fact to take such action
(including the execution of documents) as COMSAT may deem appropriate to
effect the foregoing.
5. COMSAT shall, in its sole discretion, determine whether it is
appropriate to make any elections pursuant to Treas. Reg. Sections
1.1502-76(b)(2)(ii) or (iii). Ascent and each member of the Ascent
Consolidated Group shall file with their Returns all statements required to
effectuate any such election.
6. (a) Subject to section 4 of this Article II, COMSAT shall, on
behalf of the Combined Consolidated Group (or any member thereof), prepare
and file or cause to be prepared and filed all Returns of the Combined
Consolidated Group (or any member thereof) (i) with respect to any Taxable
period ending prior to January 1, 1997, and (ii) with respect to Income
Taxes for (x) any Taxable period beginning after December 31, 1996, and
ending on or before the Distribution Date and (y) any Straddle Period.
Subject to Article III, Article V, and Article VI hereof, COMSAT shall pay
or cause to be paid all Taxes shown to be due and payable on such Returns.
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(b) COMSAT shall prepare and file or cause to be prepared and
filed all Returns of the COMSAT Consolidated Group (or any member thereof)
for any Taxable period beginning on or after the Distribution Date and
shall pay or cause to be paid all Taxes shown to be due and payable by the
COMSAT Consolidated Group (or any member thereof) on such Returns. Ascent
shall prepare and file or cause to be prepared and filed all Returns of the
Ascent Consolidated Group (or any member thereof) (i) with respect to any
Taxable period beginning after December 31, 1996, other than Returns with
respect to Income Taxes for (x) any Taxable period beginning after December
31, 1996, and ending on or before the Distribution Date and (y) any
Straddle Period, and (ii) for any Taxable period beginning on or after the
Distribution Date, and shall pay or cause to be paid all Taxes shown to be
due and payable by the Ascent Consolidated Group (or any member thereof) on
such Returns.
(c) All Taxes other than the Taxes discussed in Article III and
Article V hereof shall be paid by the entity that incurs such Taxes. In the
event COMSAT has paid any such Taxes as agent for a member of the Ascent
Consolidated Group, such member shall reimburse COMSAT therefor.
ARTICLE III
CALCULATION AND PAYMENT OF TAX SHARING PAYMENTS
1. For each taxable year for which COMSAT files a Combined
Consolidated Return, Federal Income Tax Liability shall be allocated among
the members of the Combined Consolidated Group in the same manner as the
applicable methods in effect under Treas. Reg. Section 1.1552-1 for such
year, provided that the Combined Consolidated Group shall in any event be
treated as having elected the percentage method under Treas. Reg. Section
1.1502-33(d)(3), utilizing a fixed percentage of 100 percent.
2. a. Prior to March 15 following each taxable year for which a
Combined Consolidated Return is filed, COMSAT may prepare a preliminary tax
calculation ("Preliminary Tax Calculation") for such taxable year. Ascent
shall pay to COMSAT by such March 15 the amount, if any, of the Federal
Income Tax Liability (allocated as provided in Section 1 of this Article
III) of the Ascent Consolidated Group determined pursuant to the
Preliminary Tax Calculation.
b. Within 10 days after the date on which a Combined Consolidated
Return for the taxable year is filed, Ascent shall make a payment to COMSAT
in an amount equal to the amount, if any, by which the Federal Income Taxes
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actually paid by COMSAT with respect to such taxable year (which may be
zero), but not including any amount received by COMSAT from Ascent pursuant
to paragraph (a) of this Section 2, exceed the Federal Income Tax Liability
allocated to members of the COMSAT Consolidated Group under Section 1 of
this Article (which may be a negative amount). No interest shall be payable
in respect of any amount payable to COMSAT pursuant to the preceding
sentence.
c. Within 10 days after the date on which a Combined Consolidated
Return for the taxable year is filed, COMSAT shall make a payment to Ascent
in an amount equal to the amount, if any, by which the amounts (which may
be zero) actually paid by Ascent to COMSAT pursuant to paragraph (a) of
this Section 2 exceed the Federal Income Tax Liability allocated to members
of the Ascent Consolidated Group under Section 1 of this Article (which may
be a negative amount). No interest shall be payable in respect of any
amount payable to Ascent pursuant to the preceding sentence.
d. It is the intention of the parties hereto that the
interpretation of paragraphs (b) and (c) of this section 2 of Article III
be consistent with the results reflected in their previous computations
made and course of dealing under paragraphs (b) and (c) of section 2 of
Article III of the Tax Sharing Agreement as heretofore in effect.
e. COMSAT shall furnish to Ascent the Preliminary Tax Calculation
(if any) no later than 10 days prior to March 15 of the year following the
taxable year, and shall furnish to Ascent the allocation of tax liability
under Section 1 of this Article no later than 10 days before the Combined
Consolidated Return for the taxable year is filed.
f. The provisions of this section 2 shall not apply to Returns
governed by section 6(b) of Article II hereof.
3. If, for any taxable year beginning on or after the Distribution
Date ("Post-Affiliation Year"), a member of the Ascent Consolidated Group
(or a successor to such member) incurs net operating losses that could be
carried back to a Combined Consolidated Return, the common parent of the
affiliated group of which such member of the Ascent Consolidated Group (or
a successor to such member) is a member for such Post-Affiliation Year
shall timely make an irrevocable election pursuant to Treas. Reg. Section
1.1502-21T(b)(3)(i) (or successor regulation) to relinquish the entire
carryback period with respect to such net operating losses. Regardless of
whether the common parent of the affiliated group of which such member (or
its successor) is a member for such Post-Affiliation Year timely makes such
irrevocable election, COMSAT shall have no payment obligation in respect of
any such net operating losses incurred by such member of the Ascent
Consolidated Group in any Post-Affiliation Year.
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4. If, in any Post-Affiliation Year, a net capital loss, excess tax
credit or any other tax attribute of a member of the Ascent Consolidated
Group is carried back and actually utilized in a Combined Consolidated
Return, COMSAT shall pay such member an amount equal to the actual
reduction in tax resulting from the utilization of such tax attribute;
provided however, that if such utilization is subsequently displaced by
other tax attributes, a recomputation shall be made and such member shall
repay to COMSAT any amount necessary to reflect the actual utilization of
such tax attribute following such displacement. Any payments made under
this Section 4 shall reflect interest under Article IV to the extent that
interest is actually paid to or received from the Internal Revenue Service
with respect to the utilization of such attribute.
5. Subsequent to the Distribution, a payment shall be made between
COMSAT and Ascent to reflect the difference, if any, between the amount of
alternative minimum tax credit allocated to any member of the Ascent
Consolidated Group under Prop. Treas. Reg. Section 1.1502-55(h)(6) or
successor provisions and the allocable amount of alternative minimum tax
paid by such member (and not subsequently credited against regular tax) as
reflected in the prior sections of this Article III. Such payment shall be
made no later than 10 days after the filing of the Combined Consolidated
Return for the taxable year that includes the Distribution Date.
ARTICLE IV
INTEREST
1. Interest required to be paid by or to Ascent pursuant to this
Agreement shall, unless otherwise specified, be computed at the rate and in
the manner provided in the Code for interest on underpayments (including
large corporate underpayments, if applicable) and overpayments,
respectively, of Federal income tax for the relevant period.
2. Any interest charge required to be paid by or to Ascent pursuant to
this Agreement with respect to any state or local income tax or franchise
tax return shall be computed at the rate and in the manner as provided
under the applicable state or local statute for interest on underpayments
and overpayments of such tax for the relevant period.
ARTICLE V
STATE & LOCAL TAXES
The principles expressed with respect to the Combined Consolidated
Group Federal income tax matters throughout this Agreement (including
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Article II, Article VI, and Article X) shall apply with equal force and
effect to state and local income and franchise Tax matters to the extent
such Taxes are determined on a combined or consolidated basis, including
the preparation and filing of state and local income tax and franchise tax
Returns required to be filed by the Combined Consolidated Group.
ARTICLE VI
INDEMNIFICATION
1. (a) COMSAT hereby agrees to indemnify and hold each member of the
Ascent Consolidated Group harmless with respect to any Federal Income Tax
Liability of the Combined Consolidated Group where such liability arises
solely by reason of the member being severally liable for any taxes of the
COMSAT Consolidated Group pursuant to Treas. Reg. Section 1.1502-6.
(b) Ascent hereby agrees to indemnify and hold each member of the
COMSAT Consolidated Group harmless with respect to any Federal Income Tax
Liability of the Combined Consolidated Group where such liability arises
solely by reason of the member being severally liable for any taxes of the
Ascent Consolidated Group pursuant to Treas. Reg. Section 1.1502-6.
(c) Ascent hereby agrees to indemnify and hold each member of the
COMSAT Consolidated Group harmless from and against any and all
liabilities, claims and expenses resulting from any action or failure to
act on the part of Ascent or any member of the Ascent Consolidated Group
that is in contravention of the provisions of this Agreement.
(d) COMSAT hereby agrees to indemnify and hold each member of the
Ascent Consolidated Group harmless from and against any and all
liabilities, claims and expenses resulting from any action or failure to
act on the part of COMSAT or any member of the COMSAT Consolidated Group
that is in contravention of the provisions of this Agreement.
2. (a) (i) Except as provided in paragraph (ii) of this section 2(a)
of Article VI, Ascent shall be liable for, and shall indemnify and hold
harmless, as appropriate, any member of the COMSAT Consolidated Group on an
After-Tax Basis against any and all Ascent Tax Adjustments for any Taxable
period or portion of a Taxable period ending or deemed to end on or before
the Distribution Date, in each case with respect to any Return of the
Ascent Consolidated Group (or any member thereof), the COMSAT Consolidated
Group (or any member thereof) or the Combined Consolidated Group (or any
member thereof). Except as provided in section 3 of Article III, Ascent
shall be entitled to receive on an After-Tax Basis the amount of any Ascent
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Tax Benefits for any Taxable period or portion of a Taxable period ending
or deemed to end on or before the Distribution Date with respect to any
Return of the Ascent Consolidated Group (or any member thereof), the COMSAT
Consolidated Group (or any member thereof) or the Combined Consolidated
Group (or any member thereof).
(ii) Ascent shall not be required to indemnify COMSAT for
any penalty or addition to tax in the nature of a penalty (but shall
nevertheless indemnify COMSAT for tax and interest as otherwise provided
herein) imposed with respect to an item in a return that was prepared by
COMSAT, unless Ascent (x) provided COMSAT with erroneous or incomplete
information that resulted in the imposition of such penalty, or (y) was
consulted with respect to, or allowed to review prior to filing, the
treatment of such item in the return and did not expressly request COMSAT
to alter the treatment of the item giving rise to the penalty in a manner
that would have caused such penalty not to be imposed.
(b) (i) COMSAT shall be liable for, and shall indemnify and hold
harmless, as appropriate, any member of the Ascent Consolidated Group on an
After-Tax Basis against any and all COMSAT Tax Adjustments for any Taxable
period or portion of a Taxable period ending or deemed to end on or before
the Distribution Date, in each case with respect to any Return of the
Ascent Consolidated Group (or any member thereof), the COMSAT Consolidated
Group (or any member thereof) or the Combined Consolidated Group (or any
member thereof). COMSAT shall be entitled to receive on an After-Tax Basis
the amount of any COMSAT Tax Benefits for any Taxable period or portion of
a Taxable period ending or deemed to end on or before the Distribution Date
with respect to any Return of the Ascent Consolidated Group (or any member
thereof), the COMSAT Consolidated Group (or any member thereof) or the
Combined Consolidated Group (or any member thereof).
(ii) COMSAT shall be liable for, and shall indemnify and
hold harmless, as appropriate, any member of the Ascent Consolidated Group
on an After-Tax Basis against any penalty or addition to tax in the nature
of a penalty imposed with respect to an item in a return that was prepared
by COMSAT, unless Ascent (x) provided COMSAT with erroneous or incomplete
information that resulted in the imposition of such penalty, or (y) was
consulted with respect to, or allowed to review prior to filing, the
treatment of such item in the return and did not expressly request COMSAT
to alter the treatment of the item giving rise to the penalty in a manner
that would have caused such penalty not to be imposed.
3. (a) The indemnification provisions of this Agreement shall
supplement the indemnification provisions of the Distribution Agreement. In
particular, the Distribution Agreement provides for indemnification with
respect to any Restructuring Adjustment.
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(b) To the extent there is any conflict between the indemnification
provisions of this Agreement and the indemnification provisions of the
Distribution Agreement, the indemnification provisions of the Distribution
Agreement shall control.
ARTICLE VII
TAX CONTESTS
1. The Controlling Party shall promptly notify all Interested Parties
of (a) the commencement of any Tax Contest pursuant to which such
Interested Parties may be required to make or entitled to receive an
indemnity payment, reimbursement or other payment under this Agreement; and
(b) any Final Determination made with respect to any Tax Contest pursuant
to which such Interested Parties may be required to make or entitled to
receive any indemnity payment, reimbursement or other payment under this
Agreement. The failure of a Controlling Party to promptly notify any
Interested Party as specified in the preceding sentence shall not relieve
any such Interested Party of any liability and/or obligation which it may
have to the Controlling Party under this Agreement.
2. The Controlling Party shall have the right to contest, litigate,
compromise and settle any Adjustment that is made or proposed in a Tax
Contest; provided, however, that the prior written consent of each
Interested Party shall be required, which consent may not be unreasonably
withheld. The Controlling Party shall permit each Interested Party and the
counsel of its choice to participate in any such contest, litigation,
compromise or settlement of any Adjustment in a Tax Contest. All costs,
including legal and accounting expenses, of any Tax Contest are to be borne
by the party incurring such costs.
ARTICLE VIII
PROCEDURE AND PAYMENT
1. Any Person entitled to any indemnification, reimbursement or other
payment under this Agreement with respect to the amount of any Adjustment
that has become immediately due and payable (the "Indemnified Party") shall
notify in writing the Person against whom such indemnification,
reimbursement or other payment is sought (the "Indemnifying Party") of its
right to and the amount of such indemnification, reimbursement or other
payment; provided, however, that the failure to notify the Indemnifying
Party shall not relieve the Indemnifying Party from any liability and/or
obligation which it may have to an Indemnified Party on account of the
provisions contained in this Agreement, and in no event shall such failure
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relieve the Indemnifying Party from any other liability or obligation which
it may have to such Indemnified Party. Except as otherwise provided in this
Agreement, the Indemnifying Party shall make such indemnity payment,
reimbursement or other payment to the Indemnified Party within [ten] days
of the receipt of the written notice specified in the preceding sentence.
2. Any indemnity payment, reimbursement or other payment required to
be made pursuant to this Agreement by an Indemnifying Party to an
Indemnified Party shall be made by wire transfer of immediately available
funds to such bank and/or other account of the Indemnified Party as from
time to time the Indemnified Party shall have directed the Indemnifying
Party in writing, or in such other manner as the Indemnified Party may
direct in writing.
3. Any indemnity payment, reimbursement or other payment required to
be made by an Indemnifying Party pursuant to this Agreement shall bear
interest, from the date such payment is due under this Agreement until
payment in full is received by the Indemnified Party, at [a rate per annum
equal at all times to 4% per annum above the Base Rate then in effect of
the Person obligated to make such payment]. In the event that the rate
provided for in the preceding sentence exceeds the maximum rate allowed by
applicable law, the maximum legal interest rate shall apply.
ARTICLE IX
COOPERATION
1. COMSAT and Ascent shall provide each other with such assistance and
documents, without charge and in a timely fashion, as may be reasonably
requested by such person in connection with (i) the preparation of any
Return, (ii) the conduct of any Tax Contest, (iii) any matter relating to
Taxes of any shareholder of COMSAT, or (iv) any other matter that is the
subject of this Agreement. Such assistance shall include, without
limitation: (i) the prompt provision of books, records, Returns,
documentation or other information relating to any relevant Return; (ii)
the execution of any document that may be necessary or reasonably helpful
in connection with the filing of any Return, or in connection with any Tax
Contest, including, without limitation, the execution of powers of attorney
and extensions of applicable statutes of limitations; and (iii) the use of
reasonable efforts to obtain any documentation from a governmental
authority or a third party that may be necessary or reasonably helpful in
connection with the foregoing. Each party shall make its employees and
facilities available on a mutually convenient basis to facilitate such
cooperation.
2. COMSAT and each other member of the COMSAT Consolidated Group, and
Ascent and each other member of the Ascent Consolidated Group, shall retain
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or cause to be retained all Returns, schedules and workpapers, and all
material records or other documents relating thereto, until the expiration
of the statute of limitations (including any waivers or extensions thereof)
with respect to the Taxable periods to which such Returns and other
documents relate or until the expiration of any additional period that
either COMSAT or Ascent, as the case may be, may reasonably request in
writing with respect to specifically designated material records or
documents. If COMSAT or Ascent intends to destroy any material and relevant
records or documents, it shall provide the other party with advance notice
and the opportunity to copy or take possession of such records or
documents. The parties hereto will notify each other in writing of any
waivers or extensions of the applicable statute of limitations that may
affect the period for which the foregoing records or documents must be
retained.
ARTICLE X
PARTNERSHIPS, ETC.
In the case of any partnership, limited liability company, or other
Person that is not treated as a corporation under the Code and for that
reason is not a member of the COMSAT Consolidated Group or the Ascent
Consolidated Group:
1. Responsibility for filing the Returns and payment of Taxes of such
Person under Articles II, III, and V of this Agreement shall be determined
as if such Person were a corporation.
2. Such Person shall, for other purposes of this Agreement, be treated
as a member of the Combined Consolidated Group, the COMSAT Consolidated
Group, or the Ascent Consolidated Group, as appropriate, if it would be so
treated if it were a corporation.
ARTICLE XI
MISCELLANEOUS PROVISIONS
1. COMSAT and Ascent agree that any information furnished one another
pursuant to this Agreement is confidential and, except as, and to the
extent, required during the course of an audit or litigation or otherwise
required by law, shall not be disclosed to another person or entity.
2. This Agreement shall be binding upon and inure to the benefit of
any successor to any of the parties, by merger, acquisition of assets or
otherwise, to the same extent as if the successor had been an original
party to this Agreement.
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<PAGE>
3. This Agreement shall be governed by and construed in accordance
with the laws of the State of Maryland without giving effect to conflicts
of law principles thereof.
4. Each of the parties hereto shall cause to be performed, and hereby
guarantees the performance of, all actions, agreements and obligations set
forth herein to be performed by any Affiliate of such party; provided,
however, that for purposes of the foregoing, no Person shall be considered
an Affiliate of a party if such Person is a member of another party's
Group.
5. This Agreement may be amended from time to time by agreement in
writing executed by all the parties hereto or all of the parties then bound
thereby. This Agreement constitutes the entire agreement with respect to
the subject matter hereof and supersedes all prior written and oral
understandings with respect thereto.
6. Any notice, request or other communication required or permitted
under this Agreement shall be in writing and shall be sufficiently given if
personally delivered or if sent by facsimile or by registered or certified
mail, postage prepaid, addressed as follows:
COMSAT:
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, Maryland 20817
Attention: Allen E. Flower
Vice President and Chief Financial Officer
Telecopy No.: (301) 214-7131
With a copy (which shall not constitute notice) to:
Warren Y. Zeger
Vice President, General Counsel and Secretary
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, Maryland 20817
Telecopy No.: (301) 214-7128
and
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<PAGE>
Ascent:
Ascent Entertainment Group, Inc.
One Tabor Center, Suite 2800
1200 17th Street
Denver, Colorado 80202
Attention: James A. Cronin, III
Chief Operating Officer
and Executive Vice President, Finance
Telecopy No.: (303) 595-0823
With a copy (which shall not constitute notice) to:
Arthur M. Aaron
Vice President, Business and Legal Affairs and Secretary
Ascent Entertainment Group, Inc.
One Tabor Center, Suite 2800
1200 17th Street
Denver, Colorado 80202
Telecopy No.: (303) 595-0127
or to such other address as either party may have furnished to the other in
writing in accordance with this Section 7.
7. In case any one or more of the provisions contained in this
Agreement should be invalid, illegal or unenforceable, the enforceability
of the remaining provisions hereof shall not in any way be affected or
impaired thereby. It is hereby stipulated and declared to be the intention
of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions hereof without including any terms,
provisions, covenants and restrictions that may hereafter be declared
invalid, void or unenforceable. In the event that any such term, provision,
covenant or restriction is hereafter held to be invalid, void or
unenforceable, the parties hereto agree to use their best efforts to find
and employ an alternate means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or
restriction.
8. Neither the failure nor any delay on the part of any party hereto
to exercise any right under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right preclude any
other or further exercise of the same or any other right, nor shall any
waiver of any right with respect to any occurrence be construed as a waiver
of such right with respect to any other occurrence.
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<PAGE>
9. This Agreement is solely for the benefit of the parties to this
Agreement and their respective Affiliates and should not be deemed to
confer upon third parties any remedy, claim, liability, reimbursement,
claim of action or other right in excess of those existing without this
Agreement.
10. This Agreement may be executed in any number of counterparts, each
such counterpart being deemed to be an original instrument, and all of such
counterparts shall together constitute one and the same instrument. The
section numbers and captions herein are for convenience of reference only,
do not constitute part of this Agreement and shall not be deemed to limit
or otherwise affect any of the provisions hereof.
11. Nothing in this Agreement is intended to change or otherwise
affect any previous tax election made by or on behalf of the Combined
Consolidated Group (including the election with respect to the calculation
of earnings and profits under Code Section 1552 and the regulations
thereunder).
12. Subject to the provisions hereof, the parties hereto shall make,
execute, acknowledge and deliver such other instruments and documents, and
take all such other actions, as may be reasonably required in order to
effectuate the purposes of this Agreement and to consummate the
transactions contemplated hereby. Subject to the provisions hereof, each
party shall, in connection with entering into this Agreement, performing
its obligations hereunder and taking any and all actions relating hereto,
comply with all applicable laws, regulations, orders and decrees, obtain
all required consents and approvals and make all required filings with any
governmental agency, other regulatory or administrative agency, commission
or similar authority and promptly provide the other party with all such
information as it may reasonably request in order to be able to comply with
the provisions of this sentence.
13. Any ambiguities shall be resolved without regard to which party
drafted the Agreement.
ARTICLE XII
EFFECTIVE DATE
1. This Agreement shall become effective as of the Distribution Date,
and shall not become effective if the Distribution does not take place. In
the event the Distribution does not take place, the Tax Sharing Agreement
shall continue with the same force and effect it would have had if this
Agreement had not been entered into.
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<PAGE>
2. If the Distribution takes place, this Agreement shall supersede the
Tax Sharing Agreement. This Agreement shall terminate and be of no further
force or effect only upon the expiration of all applicable statutes of
limitations relating to Taxes that are the subject of a reimbursement,
indemnification, or other payment obligation hereunder; provided, however,
that the confidentiality provisions of Article XI, section 1 shall survive
indefinitely.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their authorized representatives.
COMSAT CORPORATION
By: /s/ A. E. Flower
-------------------------
Allen E. Flower
Vice President and Chief
Financial Officer
ASCENT ENTERTAINMENT GROUP, INC.
By: /s/ James A. Cronin III
-------------------------
James A. Cronin, III
Executive Vice President, Finance and
Chief Operating Officer
<PAGE>
Appendix C
to the
DISTRIBUTION AGREEMENT
between
COMSAT Corporation
and
Ascent Entertainment Group, Inc.
<PAGE>
Appendix C
Indemnification
---------------
3.07.01 Indemnification by COMSAT. Except with respect to (i) tax
matters which shall be governed by Section 4.04 of this Agreement and the
Tax Disaffiliation Agreement, (ii) matters related to the IPO which shall
be governed by Section 5.3 of the Corporate Agreement, (iii) claims for
which insurance proceeds or other amounts are received which shall be
governed by Section 3.04 of this Agreement, COMSAT shall indemnify, defend
and hold harmless, on an After Tax Basis, the Ascent Entities and each of
their respective directors, officers and employees and each of the heirs,
executors, successors and assigns of any of the foregoing (the "Ascent
Indemnitees") from and against any and all Losses of the Ascent Indemnitees
arising out of or due to the failure or alleged failure of any COMSAT
Entity to pay, perform or otherwise discharge any of the following items:
(a) All Losses arising (whether before, on or after the Distribution
Date) in connection with the COMSAT Assets or the COMSAT Business, whether
such Losses relate to events, occurrences or circumstances occurring or
existing, or whether such Losses are asserted, before, on or after the
Distribution Date.
(b) All Losses arising out of or based upon any untrue statement or
alleged untrue statement of material fact or omission or alleged omission
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, with respect to all information
contained in the Information Statement; provided, however, that such
indemnification shall not apply to any Losses to the extent such Losses
arise out of or are based upon any statement or omission or alleged
statement or omission relating to any Ascent Entity which was supplied for
inclusion by any Ascent Entity.
(c) All Losses resulting from a final adjudication of any litigation
initiated by persons acting in their capacity as a shareholder or creditor
of any COMSAT Entity and arising out of the transactions contemplated by
this Agreement, except for such Losses which have been expressly assumed by
Ascent hereunder.
(d) All Losses relating to any Contingent Liability allocated to any
COMSAT Entity pursuant to Section 3.01 and Appendix A of this Agreement.
(e) All Losses incurred by any Ascent Entity as a result of a material
breach of this Agreement by COMSAT.
Anything in this Section 3.07.01 to the contrary notwithstanding, no COMSAT
Entity shall have any liability to any Ascent Entity in respect of any Tax
<PAGE>
(as such term is defined in the Tax Disaffiliation Agreement), except as
otherwise expressly provided in this Agreement or in the Tax Disaffiliation
Agreement.
3.07.02 Indemnification by Ascent. Except with respect to (i) tax
matters which shall be governed by Section 4.04 of this Agreement and the
Tax Disaffiliation Agreement, (ii) matters related to the IPO which shall
be governed by Section 5.3 of the Corporate Agreement, (iii) claims for
which insurance proceeds or other amounts are received which shall be
governed by Section 3.04 of this Agreement, Ascent shall indemnify, defend
and hold harmless, on an After Tax Basis, the COMSAT Entities and each of
their respective directors, officers and employees and each of the heirs,
executors, successors and assigns of any of the foregoing (the "COMSAT
Indemnitees") from and against any and all Losses of the Ascent Indemnitees
arising out of or due to the failure or alleged failure of any COMSAT
Entity to pay, perform or otherwise discharge any of the following items:
(a) All Losses arising (whether before, on or after the Distribution
Date) in connection with the Ascent Assets or the Ascent Business, whether
such Losses relate to events, occurrences or circumstances occurring or
existing, or whether such Losses are asserted, before, on or after the
Distribution Date.
(b) All Losses arising out of or based upon any untrue statement or
alleged untrue statement of material fact or omission or alleged omission
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, with respect to all information
relating to any Ascent Entity provided by an Ascent Entity which is
contained in the Information Statement or any report under the Exchange Act
filed with the SEC by COMSAT or any Ascent Entity; provided, however, that
such indemnification shall not apply to any Losses to the extent such
Losses arise out of or are based upon any statement or omission or alleged
statement or omission relating to any COMSAT Entity which was supplied for
inclusion by any COMSAT Entity.
(c) All Losses resulting from a final adjudication of litigation
initiated by persons acting in their capacity as a shareholder or creditor
of Ascent and arising out of the transactions contemplated by this
Agreement, except for such Losses which have been expressly assumed by
COMSAT hereunder; provided, that, it is agreed and understood by the
parties hereto that the foregoing is neither intended, nor shall be
construed to place with any Ascent Entity the burden of any Loss of, or to
provide from any Ascent Entity any indemnification to, any COMSAT Entity
arising from any claim of breach of fiduciary duty of COMSAT, as the
controlling shareholder of Ascent, in respect of such transactions.
(d) All Losses relating to any Contingent Liability allocated to
Ascent pursuant to Section 3.01 and Appendix A of this Agreement.
(e) All Losses incurred by any COMSAT Entity as a result of a material
breach of this Agreement by Ascent.
<PAGE>
Anything in this Section 3.07.02 to the contrary notwithstanding, no Ascent
Entity shall have any liability to any COMSAT Entity in respect of any Tax
(as such term is defined in the Tax Disaffiliation Agreement), except as
otherwise expressly provided in this Agreement or in the Tax Disaffiliation
Agreement.
3.07.03 Limitations on Indemnification Obligations. The amount which
any party (an "Indemnifying Party") is or may be required to pay to any
other party (an "Indemnitee") pursuant to Section 3.07.01 or 3.07.02 shall
be reduced (including, without limitation, retroactively) by any Insurance
Proceeds or other amounts actually recovered by or on behalf of such
Indemnitee, in reduction of the related Loss. If an Indemnitee shall have
received payment (an "Indemnity Payment") required by this Agreement from
an Indemnifying Party in respect of any Loss and shall subsequently
actually receive Insurance Proceeds or other amounts in respect of such
Loss, then such Indemnitee shall pay to such Indemnifying Party a sum equal
to the amount of such Insurance Proceeds or other amounts actually received
(up to but not in excess of the amount of any indemnity payment made
hereunder). An insurer who would otherwise be obligated to pay any claim
shall not be relieved of the responsibility with respect thereto, or,
solely by virtue of the indemnification provisions hereof, have any
subrogation rights with respect thereto, it being expressly understood and
agreed no insurer or any other third party shall be entitled to a
"windfall" (i.e., a benefit they would not be entitled to receive in the
absence of the indemnification provisions) by virtue of the indemnification
provisions hereof.
3.07.04 Procedures for Indemnification of Third Party Claims.
Procedures for Indemnification of Third Party Claims shall be as follows:
(a) If an Indemnitee shall receive notice or otherwise learn of the
assertion by a person (including, without limitation, any governmental
entity) who is not a party to this Agreement (or an Affiliate of either
party) of a claim or of the commencement by any such person of any Action
(a "Third Party Claim") with respect to which an Indemnifying Party may be
obligated to provide indemnification pursuant to Section 3.07.01, 3.07.02
or any other Section of this Agreement, such Indemnitee shall give such
Indemnifying Party written notice thereof promptly after becoming aware of
such Third Party Claim; provided that the failure of any Indemnitee to give
notice as provided in this Section 3.07.04(a) shall not relieve the
Indemnifying Party of its obligations hereunder, except to the extent that
such Indemnifying Party is actually prejudiced by such failure to give
notice. Such notice shall describe the Third Party Claim in reasonable
detail.
(b) An Indemnifying Party may elect to defend or to seek to settle or
compromise, at such Indemnifying Party's own expense and such Indemnifying
Party's own counsel, any Third Party Claim, as provided hereafter. Within
30 days after receipt of notice from an Indemnitee in accordance with
Section 3.07.04(a) (or sooner, if the nature of such Third Party Claim so
requires), the Indemnifying Party shall notify the Indemnitee of its
election whether the Indemnifying Party will assume responsibility for
<PAGE>
defending such Third Party Claim. After notice from an Indemnifying Party
to an Indemnitee of its election to assume the defense of a Third Party
Claim, such Indemnifying Party shall not be liable to such Indemnitee under
this Section 3.07 for any legal or other expenses (except expenses approved
in advance by the Indemnifying Party) subsequently incurred by such
Indemnitee in connection with the defense thereof; provided that if the
defendants with respect to any such Third Party Claim include both the
Indemnifying Party and one or more Indemnitees and in any Indemnitee's
reasonable judgment a conflict of interest between one or more of such
Indemnitees and such Indemnifying Party exists in respect of such claim,
such Indemnitees shall have the right to employ separate counsel to
represent such Indemnitees and in that event the reasonable fees and
expenses of such separate counsel (but not more than one separate counsel
reasonably satisfactory to the Indemnifying Party) shall be paid by such
Indemnifying Party. If an Indemnifying Party elects not to assume
responsibility for defending a Third Party Claim, or fails to notify an
Indemnitee of its election as provided in this Section 3.07.04(b), such
Indemnitee may defend or, subject to the remainder of this Section
3.07.04(b), seek to compromise or settle such Third Party Claim without
prejudice to such Indemnitee's rights, if any, to continue to seek
indemnification hereunder. Notwithstanding the foregoing, neither an
Indemnifying Party nor an Indemnitee may settle or compromise any claim
over the objection of the other; provided, however, that consent to
settlement or compromise shall not be unreasonably withheld or delayed.
Neither an Indemnifying Party nor an Indemnitee shall consent to entry of
any judgment or enter into any settlement of any Third Party Claim which
does not include as an unconditional term thereof the giving by a claimant
or plaintiff to such Indemnitee, in the case of a consent or settlement by
an Indemnifying Party, or to the Indemnifying Party, in the case of a
consent or settlement by an Indemnitee, of a written release from all
liability in respect to such Third Party Claim.
(c) If an Indemnifying Party chooses to defend or to seek to
compromise or settle any Third Party Claim, the related Indemnitee shall
make reasonably available to such Indemnifying Party any personnel or any
books, records or other documents within its control or which it otherwise
has the ability to make available that are necessary or appropriate for
such defense, settlement or compromise of such Third Party Claims, subject
to the establishment of reasonably appropriate confidentiality arrangements
and arrangements to preserve any applicable privilege (including, the
attorney-client privilege) and shall cooperate in such defense, compromise
or settlement. If an Indemnifying Party chooses to defend or to seek to
compromise or settle any Third Party Claim, the related Indemnitee shall be
entitled to attend and participate in any such proceeding, discussion or
negotiation at its own expense.
(d) Notwithstanding anything else in this Section 3.07.04 to the
contrary, if an Indemnifying Party notifies the related Indemnitee in
writing of such Indemnifying Party's desire to settle or compromise a Third
Party Claim on the basis set forth in such notice (provided that such
settlement or compromise includes as an unconditional term thereof the
giving by the claimant or plaintiff of a written release of the Indemnitee
from all liability in respect thereof and does not include any non-monetary
<PAGE>
remedy) and provides the Indemnitee a copy of a written proposal of the
applicable claimant to settle on such terms, and the Indemnitee shall
notify the Indemnifying Party in writing that such Indemnitee declines to
accept any such settlement or compromise, such Indemnitee may continue to
contest such Third Party Claim, free of any participation by such
Indemnifying Party, at such Indemnitee's sole expense. In such event, the
obligation of such Indemnifying Party to such Indemnitee with respect to
such Third Party Claim shall be equal to (i) the costs and expenses of such
Indemnitee prior to the date such Indemnifying Party notifies such
Indemnitee of the offer to settle or compromise (to the extent such costs
and expenses are otherwise indemnifiable hereunder) plus (ii) the lesser of
(A) the amount of any offer of settlement or compromise which such
Indemnitee declined to accept and (B) the actual out-of-pocket amount such
Indemnitee is obligated to pay subsequent to such date as a result of such
Indemnitee's continuing to defend such Third Party Claim (including
attorneys fees and expenses).
(e) Any claim on account of a Loss which does not result from a Third
Party Claim shall be asserted by written notice given by the Indemnitee to
the related Indemnifying Party. Such Indemnifying Party shall have a period
of 30 days after the receipt of such notice within which to respond
thereto. If such Indemnifying Party does not respond within such 30-day
period, such Indemnifying Party shall be deemed to have refused to accept
responsibility to make payment. If such Indemnifying Party does not respond
within such 30-day period or rejects such claim in whole or in part, such
Indemnitee shall follow the dispute resolution procedures set forth in
Section 3.10.
(f) In addition to any adjustments required pursuant to Section
3.07.03, if the amount of any Loss shall, at any time subsequent to the
payment required by this Agreement, be reduced by recovery, settlement or
otherwise, the amount of such reduction, less any expenses incurred in
connection therewith, shall promptly be repaid by the Indemnitee to the
Indemnifying Party.
(g) In the event of payment by an Indemnifying Party to any Indemnitee
in connection with any Third Party Claim, such Indemnifying Party shall be
subrogated to and shall stand in the place and the place of such Indemnitee
as to any events or circumstances in respect of which such Indemnitee may
have any right or claim relating to such Third Party Claim against any
claimant or plaintiff asserting such Third Party Claim or against any other
person. Such Indemnitee shall cooperate with such Indemnifying Party in a
reasonable manner, and at the cost and expense of such Indemnifying Party,
in prosecuting any subrogated right or claim.
(h) If any indemnity payment required to be made hereunder is
denominated in a currency other than United States dollars, such payment
shall be made in United States dollars and the amount thereof shall be
computed using the foreign exchange rate for such currency determined as of
the date that notice of the claim with respect to which such indemnity
payment is made or given by, or on behalf of, the Indemnitee to the
Indemnifying Party.
<PAGE>
3.07.05 Remedies Cumulative. The remedies provided in this Section
3.07 shall be cumulative and shall not preclude assertion by any Indemnitee
of any other rights or the seeking of any and all other remedies against
any Indemnifying Party.
3.07.06 Survival of Indemnities. The obligations of each of COMSAT and
Ascent under this Section 3.07 shall survive the sale or other transfer by
it of any assets or businesses or the assignment by it of any liabilities,
with respect to any Loss of the other related to such assets, businesses or
liabilities.
<PAGE>
Appendix D
to the
DISTRIBUTION AGREEMENT
between
COMSAT Corporation
and
Ascent Entertainment Group, Inc.
<PAGE>
Appendix D
3.09.01 Trademarks and Service Marks of the Ascent Entities. After the
Distribution Date, the following Trademarks and Service Marks shall be the
sole property of the Ascent Entities.
1. "ASCENT" -- U.S. Trademark Application Serial No. 75/067,785 in
the name of Ascent Entertainment Group, Inc.
2. "ASCENT and Design" -- U.S. Trademark Application Serial No.
75/067,784 in the name of Ascent Entertainment Group, Inc.
3. "ASCENT ENTERTAINMENT" -- U.S. Trademark Application Serial No.
75/027,908 in the name of Ascent Entertainment Group, Inc.
4. "SKY SPORTS" -- U.S. Trademark Application Serial No. 75/006,595
in the name of COMSAT Entertainment Group, Inc.
5. "A and Design" -- U.S. Trademark Application Serial No.
74/709,738 in the name of COMSAT Video Enterprises, Inc.
6. "A and Design" -- U.S. Trademark Application Serial No.
74/709,499 in the name of COMSAT Video Enterprises, Inc.
7. "COLORADO AVALANCHE" -- U.S. Trademark Application Serial No.
74/709,500 in the name of COMSAT Video Enterprises, Inc.
8. "COLORADO AVALANCHE and Design" -- U.S. Trademark Application
Serial No. 74/709,736 in the name of COMSAT Video Enterprises,
Inc.
9. "COLORADO AVALANCHE" -- U.S. Trademark Application Serial No.
74/709,496 in the name of COMSAT Video Enterprises, Inc.
10. "AVALANCHE" -- U.S. Trademark Application Serial No. 74/692,389
in the name of COMSAT Video Enterprises, Inc.
11. "AVALANCHE" -- U.S. Trademark Application Serial No. 74/691,969
in the name of COMSAT Video Enterprises, Inc.
12. "SATELLITE CINEMA" -- U.S. Trademark Application Serial No.
74/181,597, Registration No. 1,684,682 issued on April 28, 1992
in the name of COMSAT Video Enterprises, Inc.
13. "SATELLITE CINEMA" -- U.S. Trademark Application Serial No.
73/480,346, Registration No. 1,347,015 issued on July 2, 1985,
now in the name of COMSAT Video Enterprises, Inc.
<PAGE>
14. "VIDEONOW" -- U.S. Trademark Application Serial No. 75/061,905 in
the name of On Command Video Corporation.
15. "OCV and Design" -- U.S. Trademark Application Serial No.
75/060,999 in the name of On Command Video Corporation.
16. "OCV" -- U.S. Trademark Application Serial No. 75/060,997 in the
name of On Command Video Corporation.
17. "ON COMMAND VIDEO" -- U.S. Trademark Application Serial No.
75/060,998 in the name of On Command Video Corporation.
18. "ON COMMAND VIDEO" -- U.S. Trademark Application Serial No.
73/827,699, Registration No. 1,597,838 issued on May 22, 1990 in
the name of On Command Video Corporation.
19. "BEACON and Design" -- U.S. Trademark Application Serial No.
74/300,741, Registration No. 1,792,994 issued on September 14,
1993 in the name of Beacon Communication.
20. "BEACON and Design" -- U.S. Trademark Application Serial No.
74/294,962, Registration No. 1,856,194 issued on September 27,
1994 in the name of Beacon Communication.
21. "BEACON and Design" -- U.S. Trademark Application Serial No.
73/614,001, Registration No. 1,475,873 issued on February 9, 1988
in the name of Beacon Communication.
3.09.02 Trademarks and Service Marks of the Ascent Entities. After the
Distribution Date, the following Trademarks and Service Marks shall be the
sole property of the COMSAT Entities.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
MARK APPL. # FILING DATE REGIS. NO. REGIS. DATE STATUS
ACCUSHAPE 324,550 08/20/81 1,218,974 12/07/82 Registered
ACP 75/168,563 09/19/96 Pending
Bringing You the
World and Beyond 74/425,369 08/17/93 1,891,364 04/25/95 Registered
CAVP 75/183,177 10/11/96 Pending
C-LINK 74/057,137 05/08/90 1,631,104 01/08/91 Registered
COMSAT 242,564 04/04/66 828,366 05/02/67 Registered
COMSAT 25,455 03/18/80 1,200,243 07/06/82 Registered
COMSAT 74/684,901 06/06/95 1,974,971 05/21/96 Registered
COMSAT 74/114,514 11/13/90 1,666,705 12/03/91 Registered
COMSAT 74/514,234 04/19/94 1,964,981 04/02/96 Registered
COMSAT & design 247,010 06/01/66 840,195 12/05/67 Registered
COMSAT STAR 07/15/96 Pending
<PAGE>
COMSTAR 117,025 02/23/77 1,095,461 07/04/78 Registered
COMTEX 74/114,513 11/13/90 1,666,107 11/26/97 Registered
CRUISE CALLING 765,469 11/25/88 1,553,272 08/22/89 Registered
CRUISE CALLING & design 73/766,455 11/30/88 1,553,273 08/22/89 Registered
CRUISEPHONE 73/765,484 11/25/88 1,603,461 06/26/90 Registered
Design of Globe 244,803 05/03/66 833,818 08/15/67 Registered
Design of Globe 74/118,787 11/28/90 1,670,224 12/31/91 Registered
DIAL 1 FIRST 75/168,906 09/19/96 Pending
DIAL COMSAT FIRST 75/230,583 01/24/97 Pending
DIALAIR 74/056,655 05/07/90 1,676,403 02/18/92 Registered
DIGISAT 75/182,654 10/11/96 Pending
DIGISAT (Old) 81,318 03/24/76 1,049,215 09/28/76 Registered
FLIGHTNEWS 74/097,509 09/17/90 1,732,239 11/10/92 Registered
FUTURE IS NOW 07/15/96 Pending
MARICOPY 74/115,082 11/13/90 1,661,962 10/22/91 Registered
MARIFACTS 74/070,547 06/19/90 1,650,748 07/16/91 Registered
MARIPRESS 74/070,549 06/19/90 1,648,362 06/18/91 Registered
OFFICE IN THE SKY 74/005,881 11/29/89 1,644,106 05/07/91 Registered
ONE PLANET.
NO BOUNDARIES. 75/204,007 11/18/96 Pending
PLANET 1 74/736,381 09/25/95 Pending
PLANET ONE 74/736,288 09/01/95 Pending
PLANET 1 75/067,949 03/05/96 Pending
RSi Design 871,199 06/17/69 Registered
RSi w/Design 871,200 06/17/69 Registered
SATCOM TECHNOLOGIES 370,017 06/16/82 1,369,833 11/12/85 Registered
SEAMAIL 765,483 11/25/88 1,555,117 09/05/89 Registered
SEAPHONE 765,468 11/25/88 1,633,752 02/05/91 Registered
SURE TRACK 74/187,032 07/22/91 Pending
TEXTEL 74/114,510 11/13/90 1,666,106 11/26/91 Registered
TERRASAT 75/134,989 07/16/96 Pending
WE BRING YOU THE WORLD 74/316,521 09/23/92 1,885,506 03/21/95 Registered
WORLDWIDE COM. NOW! 74/607,574 12/06/94 1,985,120 07/09/96 Registered
WORLDWIDE COM. NOW!
CWS & Design 74/607,553 12/06/94 1,972,470 05/07/96 Registered
</TABLE>
TAX DISAFFILIATION AGREEMENT
THIS TAX DISAFFILIATION AGREEMENT, dated as of June 3, 1997, is made
and entered into by and between COMSAT Corporation, a District of Columbia
corporation ("COMSAT"), and Ascent Entertainment Group, Inc., a Delaware
corporation ("Ascent"), and supersedes the Tax Sharing Agreement dated as
of December 18, 1995 by and between COMSAT and Ascent (the "Tax Sharing
Agreement"), as of the date specified in and subject to the conditions of
Article XII hereof.
RECITALS
WHEREAS, COMSAT is the common parent corporation of an affiliated
group of corporations within the meaning of Section 1504(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and Ascent is a member of
such affiliated group; and
WHEREAS, the affiliated group of which COMSAT is the common parent and
Ascent is a member files a consolidated Federal income tax return pursuant
to Code Section 1501; and
WHEREAS, the parties hereto contemplate that COMSAT will make a
distribution (the "Distribution") with respect to its common stock of all
of the common stock of Ascent held by COMSAT pursuant to the Distribution
Agreement, dated as of the date hereof, by and between COMSAT and Ascent
(the "Distribution Agreement"); and
WHEREAS, COMSAT and Ascent desire to provide for the allocation of
liabilities, procedures to be followed, and other matters with respect to
certain taxes in the event the Distribution takes place.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
1. "Adjustment" shall mean the deemed increase or decrease in a Tax,
determined on an issue-by-issue or transaction-by-transaction basis, as
appropriate, and using the assumptions set forth in the next sentence,
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resulting from an adjustment made or proposed by a Taxing Authority with
respect to any amount reflected or required to be reflected on any Return
relating to such Tax. For purpose of determining such deemed increase or
decrease in a Tax, the following assumptions will be used: (a) in the case
of any Income Tax, the highest marginal Tax rate or, in the case of any
other Tax, the highest applicable Tax rate, in each case in effect with
respect to that Tax for the Taxable period or any portion of the Taxable
period to which the adjustment relates; and (b) such determination shall be
made without regard to whether any actual increase or decrease in such Tax
will in fact be realized with respect to the Return to which such
adjustment relates.
2. "Affiliate" shall mean, with respect to any Person, any
partnership, joint venture, corporation, limited liability company, trust,
unincorporated association, or other entity directly or indirectly
controlling or controlled by, or under direct or indirect common control
with, such Person.
3. "After-Tax Basis" in reference to an Article VI Indemnity Payment
shall mean an amount that, after (i) subtraction of the aggregate
additional Taxes incurred or to be incurred by the party receiving the
Article VI Indemnity Payment as a result of the receipt of such payment and
(ii) addition of the tax benefit to the party receiving the Article VI
Indemnity Payment on account of the Adjustment to which such Article VI
Indemnity Payment relates, is equal to the amount of the correlative
Adjustment. "After-Tax Basis" in reference to an Article VI Benefit Payment
shall mean an amount that, after (i) addition of the aggregate additional
Taxes incurred or to be incurred by the party making the Article VI Benefit
Payment on account of the Ascent Tax Benefit or the COMSAT Tax Benefit to
which such Article VI Benefit Payment relates and (ii) subtraction of the
tax benefit to the party making the Article VI Benefit Payment as a result
of the making of such payment, is equal to the amount of the correlative
Ascent Tax Benefit or COMSAT Tax Benefit. For purpose of determining such
additional taxes incurred or to be incurred and such tax benefit, the
following assumptions will be used: (a) in the case of any Income Tax, the
highest marginal Tax rate or, in the case of any other Tax, the highest
applicable Tax rate, in each case in effect with respect to that Tax for
the Taxable period or any portion of the Taxable period to which the
Article VI Indemnity Payment or Article VI Benefit Payment relates; and (b)
such determination shall be made without regard to whether any actual
additional taxes or tax benefit will in fact be realized with respect to
the Return to which such payment relates.
4. "Agreement" shall mean this Tax Disaffiliation Agreement,
including any schedules, exhibits and appendices attached hereto.
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5. "Article VI Benefit Payment" shall mean a payment made under
section 2 of Article VI hereof that is a payment with respect to an Ascent
Tax Benefit or a COMSAT Tax Benefit.
6. "Article VI Indemnity Payment" shall mean a payment made under
section 2 of Article VI hereof that is an indemnity payment with respect to
an Ascent Tax Adjustment or a COMSAT Tax Adjustment.
7. "Ascent Consolidated Group" shall mean, for any taxable year prior
to the Distribution, the affiliated group of corporations of which Ascent
would be the common parent for consolidated Federal income tax return
filing purposes if it were not a subsidiary of COMSAT, and, as of the
Distribution Date and thereafter, the affiliated group of corporations of
which Ascent will be the common parent for consolidated Federal income tax
return filing purposes, and any other corporations that are or become
members of such affiliated group. If, subsequent to the Distribution,
Ascent ceases to be the common parent of an affiliated group, "Ascent
Consolidated Group" shall refer to the affiliated group of which Ascent or
a successor is a member or, in the event that Ascent ceases to be either
the common parent or a member of any affiliated group, to Ascent or a
successor. To the extent required to carry out the intent of any provision
of this Agreement, "Ascent Consolidated Group" shall also refer to any
corporation that, subsequent to the Distribution, leaves the affiliated
group of which Ascent is the common parent or otherwise a member.
8. "Ascent Tax Adjustment" shall mean, with respect to any Taxable
period or portion of a Taxable period, and as computed separately with
respect to each Tax, the net increase in each such Tax equal to the sum of
all Adjustments made pursuant to a Final Determination with respect to each
such Tax for each such Taxable period or portion of a Taxable period that
are attributable to the Ascent Consolidated Group; provided, however, that
any Adjustment comprising a Restructuring Adjustment shall not be
considered in determining the amount of any Ascent Tax Adjustment.
9. "Ascent Tax Benefit" shall mean, with respect to any Taxable period
or portion of a Taxable period, and as computed separately with respect to
each Tax, the net decrease in each such Tax equal to the sum of all
Adjustments made pursuant to a Final Determination with respect to each
such Tax for each such Taxable period or portion of a Taxable period that
are attributable to the Ascent Consolidated Group; provided, however, that
any Adjustment comprising a Restructuring Adjustment shall not be
considered in determining the amount of any Ascent Tax Benefit.
10. "Base Rate," with respect to any Person, shall mean the highest
marginal interest rate paid by that Person on such Person's outstanding
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indebtedness for borrowed money in effect from time to time, or, if the
Person does not have indebtedness for borrowed money, ten percent per
annum.
11. "Code" shall have the meaning set forth in the Recitals to this
Agreement.
12. "Combined Consolidated Group" shall mean for any taxable year the
affiliated group of corporations comprised of the COMSAT Consolidated Group
and the Ascent Consolidated Group.
13. "Combined Consolidated Return" shall mean a consolidated Federal
income tax return filed for the Combined Consolidated Group.
14. "COMSAT Consolidated Group" shall mean for any taxable year the
affiliated group of corporations of which COMSAT is the common parent, and
any other corporations which become members of the affiliated group, but
excluding members of the Ascent Consolidated Group. If, subsequent to the
Distribution, COMSAT ceases to be the common parent of an affiliated group,
"COMSAT Consolidated Group" shall refer to the affiliated group of which
COMSAT or a successor is a member or, in the event that COMSAT ceases to be
either the common parent or a member of any consolidated group, to COMSAT
or a successor.
15. "COMSAT Tax Adjustment" shall mean, with respect to any Taxable
period or portion of a Taxable period, and as computed separately with
respect to each Tax, the net increase in each such Tax equal to the sum of
all Adjustments made pursuant to a Final Determination with respect to each
such Tax for each such Taxable period or portion of a Taxable period that
are attributable to the COMSAT Consolidated Group; provided, however, that
any Adjustment comprising a Restructuring Adjustment shall not be
considered in determining the amount of any COMSAT Tax Adjustment.
16. "COMSAT Tax Benefit" shall mean, with respect to any Taxable
period or portion of a Taxable period, and as computed separately with
respect to each Tax, the net decrease in each such Tax equal to the sum of
all Adjustments made pursuant to a Final Determination with respect to each
such Tax for each such Taxable period or portion of a Taxable period that
are attributable to the COMSAT Consolidated Group; provided, however, that
any Adjustment comprising a Restructuring Adjustment shall not be
considered in determining the amount of any COMSAT Tax Benefit.
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17. "Controlling Party" shall mean the member of the Combined
Consolidated Group, that filed, or, if a Return was not filed, was required
pursuant to this Agreement to file a Return that is the subject of any Tax
Contest, or any successor and/or assign of any of the foregoing.
18. "Distribution" shall have the meaning set forth in the Recitals to
this Agreement.
19. "Distribution Agreement" shall have the meaning set forth in the
Recitals to this Agreement.
20. "Distribution Date" shall mean the date the Distribution becomes
effective pursuant to the Distribution Agreement.
21. "Federal Income Taxes" and "Federal Income Tax Liability" shall
mean the taxes imposed by sections 11, 55, 59A, and 1201(a) of the Code, or
any successor provisions to such sections and any other income-based U.S.
Federal taxes which are hereinafter imposed upon corporations.
22. "Final Determination" shall mean the final resolution of liability
for any Tax for a Taxable period, (i) by IRS Form 870 or 870-AD (or any
successor forms thereto), on the date of acceptance by or on behalf of the
Taxing Authority, or by a comparable form under the laws of other
jurisdictions; except that a Form 870 or 870-AD or comparable form that
reserves (whether by its terms or by operation of law) the right of the
taxpayer to file a claim for refund and/or the right of the Taxing
Authority to assert a further deficiency shall not constitute a Final
Determination: (ii) by a decision, judgment, decree, or other order by a
court of competent jurisdiction, which has become final and unappealable;
(iii) by a closing agreement or accepted offer in compromise under Section
7121 or 7122 of the Code (or any successor provisions thereto), or
comparable agreements under the laws of other jurisdictions; (iv) by any
allowance of a refund or credit in respect of an overpayment of tax, but
only after the expiration of all periods during which such refund may be
recovered (including by way of offset) by the Taxing Authority; or (v) by
any other final disposition, including by reason of the expiration of the
applicable statute of limitations or by mutual agreement of the parties.
23. "Group" shall mean the COMSAT Consolidated Group or the Ascent
Consolidated Group.
24. "Income Taxes" shall mean Federal Income Taxes and other Taxes
that are imposed on or measured by net income and not gross receipts or
sales.
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25. "Indemnified Party" shall have the meaning set forth Article VIII,
section 1 of this Agreement.
26. "Indemnifying Party" shall have the meaning set forth in Article
VIII, section 1 of this Agreement.
27. "Interested Party" shall mean COMSAT or any other member of the
COMSAT Consolidated Group, or Ascent or any other member of the Ascent
Consolidated Group (including any successor and/or assign of any of each of
the foregoing), as the case may be, to the extent (a) such Person is not
the Controlling Party with respect to a Tax Contest; and (b) such Person
(i) may be liable for, or required to make, any indemnity payment,
reimbursement or other payment pursuant to the provisions of this Agreement
with respect to such Tax Contest; or (ii) may be entitled to receive any
indemnity payment, reimbursement or other payment pursuant to the
provisions of this Agreement with respect to such Tax Contest; provided,
however, that in no event shall a member of either the COMSAT Consolidated
Group or the Ascent Consolidated Group, as the case may be, be an
Interested Party in a Tax Contest in which another member of its Group is
the Controlling Party with respect to the Tax Contest.
28. "IRS" shall mean the Internal Revenue Service.
29. "Person" shall mean an individual, partnership, joint venture,
corporation, limited liability company, trust, unincorporated association,
any other entity, or a government or any department or agency or other unit
thereof.
30. "Post-Affiliation Year" shall have the meaning set forth in
Article III, section 3.
31. "Regulations" or "Treas. Reg." shall mean the final or temporary
U.S. Treasury regulations in effect from time to time.
32. "Restructuring Adjustment" shall mean, with respect to any Taxable
period or portion of a Taxable period, and as computed separately with
respect to each Tax, the net increase or decrease in each such Tax, as the
case may be, equal to the sum of all Adjustments made pursuant to a Final
Determination with respect to each such Tax for each Taxable period or
portion of a Taxable period that are attributable to, or as a result of,
the Distribution.
33. "Return" shall mean any return, report, form or similar statement
or document (including, without limitation, any related or supporting
information or schedule attached thereto and any information return, claim
for refund, amended return and declaration of estimated tax) that has been
or is required to be filed with any Taxing Authority or that has been or is
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required to be furnished to any Taxing Authority in connection with the
determination, assessment or collection of any Taxes or the administration
of any laws, regulations or administrative requirements relating to any
Taxes.
34. "Straddle Period" shall mean any Taxable period of the Combined
Consolidated Group (or any member thereof) that includes but does not end
on the Distribution Date, other than a Taxable Period that begins on the
Distribution Date.
35. "Tax" (and, with correlative meanings, "Taxes" and "Taxable")
shall mean, without limitation, and as determined on a
jurisdiction-by-jurisdiction basis, each foreign or U.S. federal, state,
local or municipal income, alternative or add-on minimum, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium,
property or any other tax, custom, tariff, impost, levy, duty, government
fee or other like assessment or charge of any kind whatsoever, together
with any interest or penalty, addition to tax or additional amount related
thereto, imposed by any Taxing Authority.
36. "Taxing Authority" shall mean any government or any subdivision,
agency, commission or authority thereof, or any quasi-governmental or
private body having jurisdiction over the assessment, determination,
collection or other imposition of Taxes.
37. "Tax Contest" shall mean, without limitation, any audit,
examination, claim, suit, action or other proceeding relating to Taxes in
which an Adjustment to Taxes may be proposed, collected or assessed and in
respect of which an indemnity payment, reimbursement, other payment, or
entitlement to receive or retain tax benefits may be sought under or arises
pursuant to this Agreement.
38. "Tax Sharing Agreement" shall have the meaning set forth in the
Recitals to this Agreement.
ARTICLE II
RETURNS
1. COMSAT shall have the sole and exclusive responsibility for the
preparation and filing of the consolidated U.S. Federal income tax return
of the Combined Consolidated Group, including any amended returns and any
other returns, documents, or statements required to be filed with the IRS
with respect to the determination of the Federal Income Tax Liability of
the Combined Consolidated Group. All returns shall be filed by COMSAT on a
timely basis, taking into account extensions of the due date for the filing
of such returns.
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2. The Ascent Consolidated Group shall continue to join in filing a
consolidated Federal income tax return with the COMSAT Consolidated Group
for all such taxable years for which the Ascent Consolidated Group is
eligible to do so under the Code and the Regulations, unless COMSAT shall
request and be granted permission to discontinue filing on a consolidated
basis or shall otherwise properly elect not to file on a consolidated basis
in any particular case.
3. COMSAT shall make all Federal income tax payments, including
estimated payments, with respect to consolidated tax returns of the
Combined Consolidated Group, and COMSAT shall have the right to exercise
all powers of a common parent with respect to filing the consolidated
Federal income tax returns as are conferred on it by the Regulations.
4. COMSAT shall be the sole and exclusive agent of the Ascent
Consolidated Group and any member of such group in any and all matters
relating to the U.S. Federal Income Tax Liability of the Combined
Consolidated Group for all consolidated return years. After consultation
with Ascent with respect to all Returns in which Ascent joins, COMSAT
shall, inter alia, have the right with respect to any Federal consolidated
returns which it files (a) to determine (i) the manner in which such
returns shall be prepared and filed, including, without limitation, the
manner in which any item of income, gain, loss, deduction or credit shall
be reported, (ii) whether any extensions of the due dates for filing of
such returns or of the applicable statutes of limitations may be requested
and (iii) the elections that will be made by any member of the Combined
Consolidated Group, (b) to file and prosecute any claim for refund and (c)
to determine whether any refunds, to which the Combined Consolidated Group
may be entitled, shall be paid by way of refund or credited against the tax
liability of the Combined Consolidated Group. Ascent hereby irrevocably
appoints COMSAT as its agent and attorney-in-fact to take such action
(including the execution of documents) as COMSAT may deem appropriate to
effect the foregoing.
5. COMSAT shall, in its sole discretion, determine whether it is
appropriate to make any elections pursuant to Treas. Reg. Sections
1.1502-76(b)(2)(ii) or (iii). Ascent and each member of the Ascent
Consolidated Group shall file with their Returns all statements required to
effectuate any such election.
6. (a) Subject to section 4 of this Article II, COMSAT shall, on
behalf of the Combined Consolidated Group (or any member thereof), prepare
and file or cause to be prepared and filed all Returns of the Combined
Consolidated Group (or any member thereof) (i) with respect to any Taxable
period ending prior to January 1, 1997, and (ii) with respect to Income
Taxes for (x) any Taxable period beginning after December 31, 1996, and
ending on or before the Distribution Date and (y) any Straddle Period.
Subject to Article III, Article V, and Article VI hereof, COMSAT shall pay
or cause to be paid all Taxes shown to be due and payable on such Returns.
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(b) COMSAT shall prepare and file or cause to be prepared and
filed all Returns of the COMSAT Consolidated Group (or any member thereof)
for any Taxable period beginning on or after the Distribution Date and
shall pay or cause to be paid all Taxes shown to be due and payable by the
COMSAT Consolidated Group (or any member thereof) on such Returns. Ascent
shall prepare and file or cause to be prepared and filed all Returns of the
Ascent Consolidated Group (or any member thereof) (i) with respect to any
Taxable period beginning after December 31, 1996, other than Returns with
respect to Income Taxes for (x) any Taxable period beginning after December
31, 1996, and ending on or before the Distribution Date and (y) any
Straddle Period, and (ii) for any Taxable period beginning on or after the
Distribution Date, and shall pay or cause to be paid all Taxes shown to be
due and payable by the Ascent Consolidated Group (or any member thereof) on
such Returns.
(c) All Taxes other than the Taxes discussed in Article III and
Article V hereof shall be paid by the entity that incurs such Taxes. In the
event COMSAT has paid any such Taxes as agent for a member of the Ascent
Consolidated Group, such member shall reimburse COMSAT therefor.
ARTICLE III
CALCULATION AND PAYMENT OF TAX SHARING PAYMENTS
1. For each taxable year for which COMSAT files a Combined
Consolidated Return, Federal Income Tax Liability shall be allocated among
the members of the Combined Consolidated Group in the same manner as the
applicable methods in effect under Treas. Reg. Section 1.1552-1 for such
year, provided that the Combined Consolidated Group shall in any event be
treated as having elected the percentage method under Treas. Reg. Section
1.1502-33(d)(3), utilizing a fixed percentage of 100 percent.
2. a. Prior to March 15 following each taxable year for which a
Combined Consolidated Return is filed, COMSAT may prepare a preliminary tax
calculation ("Preliminary Tax Calculation") for such taxable year. Ascent
shall pay to COMSAT by such March 15 the amount, if any, of the Federal
Income Tax Liability (allocated as provided in Section 1 of this Article
III) of the Ascent Consolidated Group determined pursuant to the
Preliminary Tax Calculation.
b. Within 10 days after the date on which a Combined Consolidated
Return for the taxable year is filed, Ascent shall make a payment to COMSAT
in an amount equal to the amount, if any, by which the Federal Income Taxes
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actually paid by COMSAT with respect to such taxable year (which may be
zero), but not including any amount received by COMSAT from Ascent pursuant
to paragraph (a) of this Section 2, exceed the Federal Income Tax Liability
allocated to members of the COMSAT Consolidated Group under Section 1 of
this Article (which may be a negative amount). No interest shall be payable
in respect of any amount payable to COMSAT pursuant to the preceding
sentence.
c. Within 10 days after the date on which a Combined Consolidated
Return for the taxable year is filed, COMSAT shall make a payment to Ascent
in an amount equal to the amount, if any, by which the amounts (which may
be zero) actually paid by Ascent to COMSAT pursuant to paragraph (a) of
this Section 2 exceed the Federal Income Tax Liability allocated to members
of the Ascent Consolidated Group under Section 1 of this Article (which may
be a negative amount). No interest shall be payable in respect of any
amount payable to Ascent pursuant to the preceding sentence.
d. It is the intention of the parties hereto that the
interpretation of paragraphs (b) and (c) of this section 2 of Article III
be consistent with the results reflected in their previous computations
made and course of dealing under paragraphs (b) and (c) of section 2 of
Article III of the Tax Sharing Agreement as heretofore in effect.
e. COMSAT shall furnish to Ascent the Preliminary Tax Calculation
(if any) no later than 10 days prior to March 15 of the year following the
taxable year, and shall furnish to Ascent the allocation of tax liability
under Section 1 of this Article no later than 10 days before the Combined
Consolidated Return for the taxable year is filed.
f. The provisions of this section 2 shall not apply to Returns
governed by section 6(b) of Article II hereof.
3. If, for any taxable year beginning on or after the Distribution
Date ("Post-Affiliation Year"), a member of the Ascent Consolidated Group
(or a successor to such member) incurs net operating losses that could be
carried back to a Combined Consolidated Return, the common parent of the
affiliated group of which such member of the Ascent Consolidated Group (or
a successor to such member) is a member for such Post-Affiliation Year
shall timely make an irrevocable election pursuant to Treas. Reg. Section
1.1502-21T(b)(3)(i) (or successor regulation) to relinquish the entire
carryback period with respect to such net operating losses. Regardless of
whether the common parent of the affiliated group of which such member (or
its successor) is a member for such Post-Affiliation Year timely makes such
irrevocable election, COMSAT shall have no payment obligation in respect of
any such net operating losses incurred by such member of the Ascent
Consolidated Group in any Post-Affiliation Year.
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4. If, in any Post-Affiliation Year, a net capital loss, excess tax
credit or any other tax attribute of a member of the Ascent Consolidated
Group is carried back and actually utilized in a Combined Consolidated
Return, COMSAT shall pay such member an amount equal to the actual
reduction in tax resulting from the utilization of such tax attribute;
provided however, that if such utilization is subsequently displaced by
other tax attributes, a recomputation shall be made and such member shall
repay to COMSAT any amount necessary to reflect the actual utilization of
such tax attribute following such displacement. Any payments made under
this Section 4 shall reflect interest under Article IV to the extent that
interest is actually paid to or received from the Internal Revenue Service
with respect to the utilization of such attribute.
5. Subsequent to the Distribution, a payment shall be made between
COMSAT and Ascent to reflect the difference, if any, between the amount of
alternative minimum tax credit allocated to any member of the Ascent
Consolidated Group under Prop. Treas. Reg. Section 1.1502-55(h)(6) or
successor provisions and the allocable amount of alternative minimum tax
paid by such member (and not subsequently credited against regular tax) as
reflected in the prior sections of this Article III. Such payment shall be
made no later than 10 days after the filing of the Combined Consolidated
Return for the taxable year that includes the Distribution Date.
ARTICLE IV
INTEREST
1. Interest required to be paid by or to Ascent pursuant to this
Agreement shall, unless otherwise specified, be computed at the rate and in
the manner provided in the Code for interest on underpayments (including
large corporate underpayments, if applicable) and overpayments,
respectively, of Federal income tax for the relevant period.
2. Any interest charge required to be paid by or to Ascent pursuant to
this Agreement with respect to any state or local income tax or franchise
tax return shall be computed at the rate and in the manner as provided
under the applicable state or local statute for interest on underpayments
and overpayments of such tax for the relevant period.
ARTICLE V
STATE & LOCAL TAXES
The principles expressed with respect to the Combined Consolidated
Group Federal income tax matters throughout this Agreement (including
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Article II, Article VI, and Article X) shall apply with equal force and
effect to state and local income and franchise Tax matters to the extent
such Taxes are determined on a combined or consolidated basis, including
the preparation and filing of state and local income tax and franchise tax
Returns required to be filed by the Combined Consolidated Group.
ARTICLE VI
INDEMNIFICATION
1. (a) COMSAT hereby agrees to indemnify and hold each member of the
Ascent Consolidated Group harmless with respect to any Federal Income Tax
Liability of the Combined Consolidated Group where such liability arises
solely by reason of the member being severally liable for any taxes of the
COMSAT Consolidated Group pursuant to Treas. Reg. Section 1.1502-6.
(b) Ascent hereby agrees to indemnify and hold each member of the
COMSAT Consolidated Group harmless with respect to any Federal Income Tax
Liability of the Combined Consolidated Group where such liability arises
solely by reason of the member being severally liable for any taxes of the
Ascent Consolidated Group pursuant to Treas. Reg. Section 1.1502-6.
(c) Ascent hereby agrees to indemnify and hold each member of the
COMSAT Consolidated Group harmless from and against any and all
liabilities, claims and expenses resulting from any action or failure to
act on the part of Ascent or any member of the Ascent Consolidated Group
that is in contravention of the provisions of this Agreement.
(d) COMSAT hereby agrees to indemnify and hold each member of the
Ascent Consolidated Group harmless from and against any and all
liabilities, claims and expenses resulting from any action or failure to
act on the part of COMSAT or any member of the COMSAT Consolidated Group
that is in contravention of the provisions of this Agreement.
2. (a) (i) Except as provided in paragraph (ii) of this section 2(a)
of Article VI, Ascent shall be liable for, and shall indemnify and hold
harmless, as appropriate, any member of the COMSAT Consolidated Group on an
After-Tax Basis against any and all Ascent Tax Adjustments for any Taxable
period or portion of a Taxable period ending or deemed to end on or before
the Distribution Date, in each case with respect to any Return of the
Ascent Consolidated Group (or any member thereof), the COMSAT Consolidated
Group (or any member thereof) or the Combined Consolidated Group (or any
member thereof). Except as provided in section 3 of Article III, Ascent
shall be entitled to receive on an After-Tax Basis the amount of any Ascent
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Tax Benefits for any Taxable period or portion of a Taxable period ending
or deemed to end on or before the Distribution Date with respect to any
Return of the Ascent Consolidated Group (or any member thereof), the COMSAT
Consolidated Group (or any member thereof) or the Combined Consolidated
Group (or any member thereof).
(ii) Ascent shall not be required to indemnify COMSAT for
any penalty or addition to tax in the nature of a penalty (but shall
nevertheless indemnify COMSAT for tax and interest as otherwise provided
herein) imposed with respect to an item in a return that was prepared by
COMSAT, unless Ascent (x) provided COMSAT with erroneous or incomplete
information that resulted in the imposition of such penalty, or (y) was
consulted with respect to, or allowed to review prior to filing, the
treatment of such item in the return and did not expressly request COMSAT
to alter the treatment of the item giving rise to the penalty in a manner
that would have caused such penalty not to be imposed.
(b) (i) COMSAT shall be liable for, and shall indemnify and hold
harmless, as appropriate, any member of the Ascent Consolidated Group on an
After-Tax Basis against any and all COMSAT Tax Adjustments for any Taxable
period or portion of a Taxable period ending or deemed to end on or before
the Distribution Date, in each case with respect to any Return of the
Ascent Consolidated Group (or any member thereof), the COMSAT Consolidated
Group (or any member thereof) or the Combined Consolidated Group (or any
member thereof). COMSAT shall be entitled to receive on an After-Tax Basis
the amount of any COMSAT Tax Benefits for any Taxable period or portion of
a Taxable period ending or deemed to end on or before the Distribution Date
with respect to any Return of the Ascent Consolidated Group (or any member
thereof), the COMSAT Consolidated Group (or any member thereof) or the
Combined Consolidated Group (or any member thereof).
(ii) COMSAT shall be liable for, and shall indemnify and
hold harmless, as appropriate, any member of the Ascent Consolidated Group
on an After-Tax Basis against any penalty or addition to tax in the nature
of a penalty imposed with respect to an item in a return that was prepared
by COMSAT, unless Ascent (x) provided COMSAT with erroneous or incomplete
information that resulted in the imposition of such penalty, or (y) was
consulted with respect to, or allowed to review prior to filing, the
treatment of such item in the return and did not expressly request COMSAT
to alter the treatment of the item giving rise to the penalty in a manner
that would have caused such penalty not to be imposed.
3. (a) The indemnification provisions of this Agreement shall
supplement the indemnification provisions of the Distribution Agreement. In
particular, the Distribution Agreement provides for indemnification with
respect to any Restructuring Adjustment.
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(b) To the extent there is any conflict between the indemnification
provisions of this Agreement and the indemnification provisions of the
Distribution Agreement, the indemnification provisions of the Distribution
Agreement shall control.
ARTICLE VII
TAX CONTESTS
1. The Controlling Party shall promptly notify all Interested Parties
of (a) the commencement of any Tax Contest pursuant to which such
Interested Parties may be required to make or entitled to receive an
indemnity payment, reimbursement or other payment under this Agreement; and
(b) any Final Determination made with respect to any Tax Contest pursuant
to which such Interested Parties may be required to make or entitled to
receive any indemnity payment, reimbursement or other payment under this
Agreement. The failure of a Controlling Party to promptly notify any
Interested Party as specified in the preceding sentence shall not relieve
any such Interested Party of any liability and/or obligation which it may
have to the Controlling Party under this Agreement.
2. The Controlling Party shall have the right to contest, litigate,
compromise and settle any Adjustment that is made or proposed in a Tax
Contest; provided, however, that the prior written consent of each
Interested Party shall be required, which consent may not be unreasonably
withheld. The Controlling Party shall permit each Interested Party and the
counsel of its choice to participate in any such contest, litigation,
compromise or settlement of any Adjustment in a Tax Contest. All costs,
including legal and accounting expenses, of any Tax Contest are to be borne
by the party incurring such costs.
ARTICLE VIII
PROCEDURE AND PAYMENT
1. Any Person entitled to any indemnification, reimbursement or other
payment under this Agreement with respect to the amount of any Adjustment
that has become immediately due and payable (the "Indemnified Party") shall
notify in writing the Person against whom such indemnification,
reimbursement or other payment is sought (the "Indemnifying Party") of its
right to and the amount of such indemnification, reimbursement or other
payment; provided, however, that the failure to notify the Indemnifying
Party shall not relieve the Indemnifying Party from any liability and/or
obligation which it may have to an Indemnified Party on account of the
provisions contained in this Agreement, and in no event shall such failure
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<PAGE>
relieve the Indemnifying Party from any other liability or obligation which
it may have to such Indemnified Party. Except as otherwise provided in this
Agreement, the Indemnifying Party shall make such indemnity payment,
reimbursement or other payment to the Indemnified Party within [ten] days
of the receipt of the written notice specified in the preceding sentence.
2. Any indemnity payment, reimbursement or other payment required to
be made pursuant to this Agreement by an Indemnifying Party to an
Indemnified Party shall be made by wire transfer of immediately available
funds to such bank and/or other account of the Indemnified Party as from
time to time the Indemnified Party shall have directed the Indemnifying
Party in writing, or in such other manner as the Indemnified Party may
direct in writing.
3. Any indemnity payment, reimbursement or other payment required to
be made by an Indemnifying Party pursuant to this Agreement shall bear
interest, from the date such payment is due under this Agreement until
payment in full is received by the Indemnified Party, at [a rate per annum
equal at all times to 4% per annum above the Base Rate then in effect of
the Person obligated to make such payment]. In the event that the rate
provided for in the preceding sentence exceeds the maximum rate allowed by
applicable law, the maximum legal interest rate shall apply.
ARTICLE IX
COOPERATION
1. COMSAT and Ascent shall provide each other with such assistance and
documents, without charge and in a timely fashion, as may be reasonably
requested by such person in connection with (i) the preparation of any
Return, (ii) the conduct of any Tax Contest, (iii) any matter relating to
Taxes of any shareholder of COMSAT, or (iv) any other matter that is the
subject of this Agreement. Such assistance shall include, without
limitation: (i) the prompt provision of books, records, Returns,
documentation or other information relating to any relevant Return; (ii)
the execution of any document that may be necessary or reasonably helpful
in connection with the filing of any Return, or in connection with any Tax
Contest, including, without limitation, the execution of powers of attorney
and extensions of applicable statutes of limitations; and (iii) the use of
reasonable efforts to obtain any documentation from a governmental
authority or a third party that may be necessary or reasonably helpful in
connection with the foregoing. Each party shall make its employees and
facilities available on a mutually convenient basis to facilitate such
cooperation.
2. COMSAT and each other member of the COMSAT Consolidated Group, and
Ascent and each other member of the Ascent Consolidated Group, shall retain
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<PAGE>
or cause to be retained all Returns, schedules and workpapers, and all
material records or other documents relating thereto, until the expiration
of the statute of limitations (including any waivers or extensions thereof)
with respect to the Taxable periods to which such Returns and other
documents relate or until the expiration of any additional period that
either COMSAT or Ascent, as the case may be, may reasonably request in
writing with respect to specifically designated material records or
documents. If COMSAT or Ascent intends to destroy any material and relevant
records or documents, it shall provide the other party with advance notice
and the opportunity to copy or take possession of such records or
documents. The parties hereto will notify each other in writing of any
waivers or extensions of the applicable statute of limitations that may
affect the period for which the foregoing records or documents must be
retained.
ARTICLE X
PARTNERSHIPS, ETC.
In the case of any partnership, limited liability company, or other
Person that is not treated as a corporation under the Code and for that
reason is not a member of the COMSAT Consolidated Group or the Ascent
Consolidated Group:
1. Responsibility for filing the Returns and payment of Taxes of such
Person under Articles II, III, and V of this Agreement shall be determined
as if such Person were a corporation.
2. Such Person shall, for other purposes of this Agreement, be treated
as a member of the Combined Consolidated Group, the COMSAT Consolidated
Group, or the Ascent Consolidated Group, as appropriate, if it would be so
treated if it were a corporation.
ARTICLE XI
MISCELLANEOUS PROVISIONS
1. COMSAT and Ascent agree that any information furnished one another
pursuant to this Agreement is confidential and, except as, and to the
extent, required during the course of an audit or litigation or otherwise
required by law, shall not be disclosed to another person or entity.
2. This Agreement shall be binding upon and inure to the benefit of
any successor to any of the parties, by merger, acquisition of assets or
otherwise, to the same extent as if the successor had been an original
party to this Agreement.
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<PAGE>
3. This Agreement shall be governed by and construed in accordance
with the laws of the State of Maryland without giving effect to conflicts
of law principles thereof.
4. Each of the parties hereto shall cause to be performed, and hereby
guarantees the performance of, all actions, agreements and obligations set
forth herein to be performed by any Affiliate of such party; provided,
however, that for purposes of the foregoing, no Person shall be considered
an Affiliate of a party if such Person is a member of another party's
Group.
5. This Agreement may be amended from time to time by agreement in
writing executed by all the parties hereto or all of the parties then bound
thereby. This Agreement constitutes the entire agreement with respect to
the subject matter hereof and supersedes all prior written and oral
understandings with respect thereto.
6. Any notice, request or other communication required or permitted
under this Agreement shall be in writing and shall be sufficiently given if
personally delivered or if sent by facsimile or by registered or certified
mail, postage prepaid, addressed as follows:
COMSAT:
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, Maryland 20817
Attention: Allen E. Flower
Vice President and Chief Financial Officer
Telecopy No.: (301) 214-7131
With a copy (which shall not constitute notice) to:
Warren Y. Zeger
Vice President, General Counsel and Secretary
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, Maryland 20817
Telecopy No.: (301) 214-7128
and
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<PAGE>
Ascent:
Ascent Entertainment Group, Inc.
One Tabor Center, Suite 2800
1200 17th Street
Denver, Colorado 80202
Attention: James A. Cronin, III
Chief Operating Officer
and Executive Vice President, Finance
Telecopy No.: (303) 595-0823
With a copy (which shall not constitute notice) to:
Arthur M. Aaron
Vice President, Business and Legal Affairs and Secretary
Ascent Entertainment Group, Inc.
One Tabor Center, Suite 2800
1200 17th Street
Denver, Colorado 80202
Telecopy No.: (303) 595-0127
or to such other address as either party may have furnished to the other in
writing in accordance with this Section 7.
7. In case any one or more of the provisions contained in this
Agreement should be invalid, illegal or unenforceable, the enforceability
of the remaining provisions hereof shall not in any way be affected or
impaired thereby. It is hereby stipulated and declared to be the intention
of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions hereof without including any terms,
provisions, covenants and restrictions that may hereafter be declared
invalid, void or unenforceable. In the event that any such term, provision,
covenant or restriction is hereafter held to be invalid, void or
unenforceable, the parties hereto agree to use their best efforts to find
and employ an alternate means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or
restriction.
8. Neither the failure nor any delay on the part of any party hereto
to exercise any right under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right preclude any
other or further exercise of the same or any other right, nor shall any
waiver of any right with respect to any occurrence be construed as a waiver
of such right with respect to any other occurrence.
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<PAGE>
9. This Agreement is solely for the benefit of the parties to this
Agreement and their respective Affiliates and should not be deemed to
confer upon third parties any remedy, claim, liability, reimbursement,
claim of action or other right in excess of those existing without this
Agreement.
10. This Agreement may be executed in any number of counterparts, each
such counterpart being deemed to be an original instrument, and all of such
counterparts shall together constitute one and the same instrument. The
section numbers and captions herein are for convenience of reference only,
do not constitute part of this Agreement and shall not be deemed to limit
or otherwise affect any of the provisions hereof.
11. Nothing in this Agreement is intended to change or otherwise
affect any previous tax election made by or on behalf of the Combined
Consolidated Group (including the election with respect to the calculation
of earnings and profits under Code Section 1552 and the regulations
thereunder).
12. Subject to the provisions hereof, the parties hereto shall make,
execute, acknowledge and deliver such other instruments and documents, and
take all such other actions, as may be reasonably required in order to
effectuate the purposes of this Agreement and to consummate the
transactions contemplated hereby. Subject to the provisions hereof, each
party shall, in connection with entering into this Agreement, performing
its obligations hereunder and taking any and all actions relating hereto,
comply with all applicable laws, regulations, orders and decrees, obtain
all required consents and approvals and make all required filings with any
governmental agency, other regulatory or administrative agency, commission
or similar authority and promptly provide the other party with all such
information as it may reasonably request in order to be able to comply with
the provisions of this sentence.
13. Any ambiguities shall be resolved without regard to which party
drafted the Agreement.
ARTICLE XII
EFFECTIVE DATE
1. This Agreement shall become effective as of the Distribution Date,
and shall not become effective if the Distribution does not take place. In
the event the Distribution does not take place, the Tax Sharing Agreement
shall continue with the same force and effect it would have had if this
Agreement had not been entered into.
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<PAGE>
2. If the Distribution takes place, this Agreement shall supersede the
Tax Sharing Agreement. This Agreement shall terminate and be of no further
force or effect only upon the expiration of all applicable statutes of
limitations relating to Taxes that are the subject of a reimbursement,
indemnification, or other payment obligation hereunder; provided, however,
that the confidentiality provisions of Article XI, section 1 shall survive
indefinitely.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their authorized representatives.
COMSAT CORPORATION
By: /s/ A. E. Flower
-------------------------
Allen E. Flower
Vice President and Chief
Financial Officer
ASCENT ENTERTAINMENT GROUP, INC.
By: /s/ James A. Cronin III
-------------------------
James A. Cronin, III
Executive Vice President, Finance and
Chief Operating Officer
FROM: COMSAT Corporation
6560 Rock Spring Drive
Bethesda, MD 20817
PHONE: 301 214 3442
FAX: 301 214 7130
DATE: June 10, 1997
For Immediate Release
- ---------------------
COMSAT AND DENTON/WYSER-PRATTE GROUP
SETTLE PROXY CONTEST
Bethesda, Md. -- COMSAT Corporation announced today that it has
settled a potential proxy contest with Herbert A. Denton and Guy P.
Wyser-Pratte in connection with the election of directors at COMSAT's 1997
annual meeting of shareholders. The annual meeting is scheduled for August
15, 1997.
Under the terms of the settlement agreement, four new directors will
stand for election to COMSAT's board of directors, two of whom are being
selected by the board and two of whom are being selected by members of the
Denton/Wyser-Pratte group. The remaining eight members of the slate will be
selected by COMSAT's board of directors from among the current elected
directors.
The COMSAT board will announce its two new selections later this
month. The two designees of the Denton/Wyser-Pratte group are Mr.
Wyser-Pratte and Mr. Larry G. Schafran, managing general partner of L.G.
Schafran and Associates and chairman of the executive committee of Dart
Group Corporation.
The agreement also provides that the Denton/Wyser-Pratte group will be
entitled to re-nominate Mr. Wyser-Pratte and Mr. Schafran, or designate
replacement nominees for them to be included on the board's slate of
candidates at the 1998 annual meeting of shareholders. The group has agreed
to support the election of the agreed upon slate of nominees at the 1997
and 1998 annual meetings.
COMSAT does not have a classified board of directors. The 12 elected
directors stand for election annually. COMSAT's board also includes three
directors appointed by the President of the United States who serve for
three-year terms.
Under the agreement, the company will establish a new Strategic Planning
Committee to be comprised of three directors, two of whom will be selected by
the board. The third member of the committee will be Mr. Schafran. The
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<PAGE>
COMSAT/Proxy Contest -- Page 2
committee will review and make recommendations to the company's full board
concerning the company's current and future business operations and
strategies, and the enhancement of shareholder value.
In connection with the settlement, COMSAT is dismissing its litigation
claims against the members of the Denton/Wyser-Pratte group who are
defendants in the lawsuit.
Betty C. Alewine, president and chief executive officer of COMSAT
Corporation, said: "We are pleased that this dispute has been resolved and
that COMSAT will be able to spare its shareholders a costly and disruptive
proxy contest. The settlement will enable the board of directors and
management to continue to focus their full attention on the business of the
company and the successful implementation of its restructuring and its
strategic plan announced in the first quarter of this year. We will
continue to move forward with our first and foremost goal of enhancing
shareholder value."
Speaking on behalf of the Denton/Wyser-Pratte group, Mr. Wyser-Pratte,
who beneficially owns approximately 1.5 million COMSAT shares, said, "We
are pleased that we will have the opportunity to work constructively with
COMSAT toward the shared goal of enhancing both the long and short term
value of the company." Mr. Denton added, "Today's agreement demonstrates
the commitment of all parties to addressing the shareholders' interests in
a significant and positive way."
COMSAT Corporation (NYSE:CQ) is a provider of international
communications services and products.
###
CONTACT: Ruth Pachman/Caroline Gentile Kekst and Co. (212) 521-4800
Gary Sharpe COMSAT, Director Investor Relations (301) 214-3244
FROM: COMSAT Corporation
6560 Rock Spring Drive
Bethesda, MD 20817
PHONE: 301 214 3442
FAX: 301 214 7130
DATE: June 13, 1997
For Immediate Release
- ---------------------
COMSAT TO COMPLETE
ASCENT SPIN-OFF THIS MONTH
-- Company Implements Key Component of Strategic Plan --
BETHESDA, Md. - COMSAT Corporation (NYSE:CQ) announced today that it
will complete the spin-off of its 80.67% ownership interest in Ascent
Entertainment Group, Inc. (Nasdaq:GOAL) to its shareholders in accordance
with its previously announced restructuring and new strategic business
plan. COMSAT's board of directors has declared a special dividend to COMSAT
shareholders and established June 19, 1997, as the record date and June 27,
1997, as the payment date for the dividend.
"The divestiture of Ascent meets another important milestone in
COMSAT's strategic plan to enhance shareholder value by refocusing the
company on its satellite and networking services businesses," said Betty C.
Alewine, COMSAT president and chief executive officer. "We announced that
we would divest Ascent by the end of the second half of 1997, and I'm
delighted to say that we are right on schedule with this key component of
our restructuring plan."
The distribution will be made on a pro rata basis with COMSAT
shareholders receiving approximately one-half share of Ascent stock for
each share of COMSAT stock held on the record date. COMSAT owns 24 million
shares of Ascent and has over 49 million shares of common stock
outstanding. Cash will be paid to holders in lieu of fractional shares.
As previously announced, COMSAT recently received a positive ruling
from the Internal Revenue Service that the distribution of Ascent stock
will not be taxable to the corporation or its shareholders.
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COMSAT/Ascent -- Page 2
The corporation also announced that the record date for determining
the shareholders entitled to vote at its annual shareholders' meeting has
been changed from July 2 to July 8, 1997. The purpose of this change is to
allow for an adequate interval between the distribution date for the
spin-off and the record date for the annual meeting. The annual
shareholders meeting is scheduled for August 15, 1997.
COMSAT Corporation is a global provider of international
communications services and products.
# # #
CONTACT: Janet Dewar, Vice President, Corporate Affairs 301.214.3442
Gary Sharpe, Director, Investor Relations 301.214.3244
