SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(MARK ONE)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____________ to ___________
Commission File Nos. 0-26712
-------
33-63284
--------
PanAmSat Corporation
PanAmSat Capital Corporation
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 06-1407851
Delaware 06-1371155
- --------------------------------------------------------------------------------
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
One Pickwick Plaza, Greenwich, CT. 06830
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: 203-622-6664
--------------
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former
Fiscal Year if Changed Since Last Report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES x NO
--- ---
As of September 30, 1996, an aggregate of 19,082,737 shares of the Company's
Common Stock, 40,459,432 shares of the Company's Class A Common Stock and
40,459,431 shares of the Company's Class B Common Stock were outstanding.
<PAGE>
FORM 10-Q
PanAmSat Corporation
For the Quarter Ended September 30, 1996
----------------------------------------
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
Balance Sheets, September 30, 1996 (unaudited) and December 31, 1995.
Statements of Operations for the Nine Months Ended September 30, 1996 and 1995
(unaudited).
Statements of Operations for the Three Months ended September 30, 1996 and 1995
(unaudited).
Statements of Cash Flows for the Nine Months Ended September 30, 1996 and 1995
(unaudited).
Notes to Financial Statements.
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PART II - OTHER INFORMATION
ITEM 6 - Exhibits and Reports on Form 8-K
Signature
Cautionary Statement For Purposes Of The "Safe Harbor"
Provisions Of The Private Securities Litigation Reform Act of 1995
The Private Securities Litigation Reform Act of 1995 provides a new "safe
harbor" for certain forward-looking statements. When used in this Form 10-Q the
words "estimate," "project," "anticipate," "expect," "believe" and other
expressions used to indicate future events are intended to identify
forward-looking statements. Such statements are subject to risks and
uncertainties that could cause actual results to differ materially.
<PAGE>
PanAmSat Corporation
BALANCE SHEETS
<TABLE>
September 30, December 31,
1996 1995
--------------- --------------
<S> <C> <C>
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 3,336,719 $ 13,562,113
Accounts receivable, less allowance for doubtful
accounts of $100,000 9,423,406 4,881,255
Prepaid expenses and other current assets 13,717,889 5,594,999
-------------- --------------
TOTAL CURRENT ASSETS 26,478,014 24,038,367
SATELLITES AND OTHER PROPERTY AND
EQUIPMENT, AT COST 859,319,906 609,927,311
Less: Accumulated Depreciation
and Amortization (122,912,134) (79,177,520)
-------------- --------------
736,407,772 530,749,791
MARKETABLE SECURITIES 372,405,626 495,078,866
SATELLITE SYSTEMS UNDER DEVELOPMENT 423,247,476 377,383,581
DEBT ISSUANCE COSTS (Net of
Amortization) 9,944,437 11,414,920
OTHER ASSETS 806,054 154,287
-------------- --------------
TOTAL ASSETS $1,569,289,379 $1,438,819,812
============== ==============
</TABLE>
<PAGE>
PanAmSat Corporation
BALANCE SHEETS - (continued)
<TABLE>
September 30, December 31,
1996 1995
---------------- ----------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 4,065,094 $ 3,287,250
Accounts payable 780,873 834,405
Accrued interest 2,843,750 7,109,375
Accrued liabilities and taxes 9,983,058 7,686,452
Deferred revenue 7,439,157 6,009,836
-------------- --------------
TOTAL CURRENT LIABILITIES 25,111,932 24,927,318
LONG-TERM DEBT 616,583,843 575,283,661
DEFERRED INCOME TAXES 51,105,310 31,573,000
DEFERRED REVENUE 68,320,236 41,656,778
OTHER LIABILITIES 732,934 867,934
-------------- --------------
TOTAL LIABILITIES 761,854,255 674,308,691
-------------- --------------
COMMITMENTS AND CONTINGENCIES
PREFERRED STOCK, 12-3/4% Mandatorily
Exchangeable Senior Redeemable Preferred Stock,
$0.01 par value, 20,000,000 shares authorized,
321,050 shares issued and outstanding, 8,565
shares for accrued dividends 318,193,850 287,648,667
-------------- --------------
STOCKHOLDERS' EQUITY:
Class A Common Stock, $0.01 par value,
100,000,000 shares authorized,
40,459,432 shares issued and outstanding 404,594 404,594
Class B Common Stock, $0.01 par value,
100,000,000 shares authorized,
40,459,431 shares issued and outstanding 404,594 404,594
Common Stock, $0.01 par value,
400,000,000 shares authorized,
19,082,737 shares issued and outstanding 190,828 190,812
Additional paid-in-capital 477,324,937 477,297,753
Retained earnings (deficit) 10,916,321 (1,435,299)
-------------- ---------------
Total Stockholders' Equity 489,241,274 476,862,454
-------------- --------------
TOTAL LIABILITIES AND EQUITY $1,569,289,379 $1,438,819,812
============== ==============
</TABLE>
<PAGE>
PanAmSat Corporation
STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
September 30, September 30,
1996 1995
--------------- ---------------
<S> <C> <C>
REVENUES:
Unaffiliated parties $170,920,581 $ 68,964,209
Related parties 6,713,364 2,859,283
------------ ------------
177,633,945 71,823,492
OPERATING EXPENSES:
Direct expenses-service agreements 6,831,774 3,723,267
Sales and marketing 10,318,748 6,588,476
Engineering and technical services 12,334,312 6,952,638
General and administrative 18,641,535 10,521,560
Depreciation and amortization 45,224,473 22,000,388
Compensatory programs (Notes 1 and 5) 4,799,933 8,341,040
Reorganization costs (Note 6) 2,528,177 -
------------ ------------
100,678,952 58,127,369
------------ ------------
INCOME FROM OPERATIONS 76,954,993 13,696,123
INTEREST INCOME (17,615,682) (12,745,350)
INTEREST EXPENSE 20,588,872 12,636,131
------------ ------------
INCOME BEFORE INCOME TAXES 73,981,803 13,805,342
INCOME TAXES (NOTE 2) 31,085,000 9,041,000
------------ ------------
NET INCOME 42,896,803 4,764,342
------------ ------------
PREFERRED STOCK DIVIDEND 30,545,183 16,453,920
------------ ------------
NET INCOME (LOSS) TO COMMON SHARES $ 12,351,620 $(11,689,578)
============= ============
PRO FORMA NET LOSS TO COMMON SHARES:
HISTORICAL NET INCOME $ 4,764,342
PRO FORMA INCOME TAX BENEFIT (NOTE 2) (1,207,000)
----------
PRO FORMA NET INCOME 5,971,342
PREFERRED STOCK DIVIDEND 16,453,920
------------
PRO FORMA NET LOSS TO COMMON SHARES $(10,482,578)
============
ACTUAL AND PRO FORMA EARNINGS (LOSS) PER
COMMON SHARE $ .12 $ (0.12)
============ ============
ACTUAL AND PRO FORMA WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 100,324,978 85,877,428
============ ============
</TABLE>
<PAGE>
PanAmSat Corporation
STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
September 30, September 30,
1996 1995
--------------- ---------------
<S> <C> <C>
REVENUES:
Unaffiliated parties $ 64,410,187 $ 27,066,931
Related parties 2,516,592 949,625
------------ ------------
66,926,779 28,016,556
OPERATING EXPENSES:
Direct expenses-service agreements 3,107,203 1,172,449
Sales and marketing 3,085,276 2,393,765
Engineering and technical services 4,562,193 2,709,388
General and administrative 6,594,795 3,651,488
Depreciation and amortization 16,132,786 8,051,364
Compensatory programs (Notes 1 and 5) 4,799,933 187,440
Reorganization costs (Note 6) 2,528,177 -
------------ ------------
40,810,363 18,165,894
------------ ------------
INCOME FROM OPERATIONS 26,116,416 9,850,662
INTEREST INCOME (5,346,337) (5,042,954)
INTEREST EXPENSE 5,704,954 3,245,643
------------ ------------
INCOME BEFORE INCOME TAXES 25,757,799 11,647,973
INCOME TAXES (NOTE 2) 11,699,000 4,910,000
------------ ------------
NET INCOME 14,058,799 6,737,973
------------ ------------
PREFERRED STOCK DIVIDEND 10,525,683 9,334,050
------------ ------------
NET INCOME (LOSS) TO COMMON SHARES $ 3,533,116 $ (2,596,077)
============= ============
EARNINGS (LOSS) PER COMMON SHARE $ .04 $ (0.03)
============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 100,414,456 86,142,774
============ ============
</TABLE>
<PAGE>
PanAmSat Corporation
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
September 30, September 30,
1996 1995
--------------- ---------------
<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net income $ 42,896,803 $ 4,764,342
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 45,224,473 22,000,388
Deferred income taxes 19,532,310 4,976,000
Accretion of interest on senior subordinated
discount notes 29,835,300 26,719,491
(Accretion)collection of interest on marketable
securities (2,623,629) 484,390
Interest expense capitalized (27,269,311) (29,172,552)
Compensation expense related to corporate
reorganization - 3,849,300
Changes in assets and liabilities:
Increase in accounts receivable (4,542,151) (1,680,285)
Increase in prepaid expenses and other current
assets (8,122,890) (2,339,658)
Decrease in tax distribution receivable - 6,470,285
Decrease in accounts payable (53,532) (848,727)
Decrease in accrued interest (4,265,625) (4,265,625)
Increase in accrued liabilities and taxes 2,296,606 4,194,764
Increase in deferred revenue 28,092,779 33,278,933
Decrease in other liabilities (135,000) (50,000)
------------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 120,866,133 68,381,046
------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property and equipment (17,395,302) (14,675,782)
Expenditures for satellite systems under
development (235,670,725) (244,787,985)
Purchase of marketable securities and cash - (561,302,274)
Proceeds from insurance claim receivable - 191,084,380
Proceeds from maturity of marketable securities 125,296,869 50,000,000
Increase in other assets (671,143) (83,216)
------------- ------------
NET CASH USED IN INVESTING ACTIVITIES (128,440,301) (579,764,877)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Preferred Stock offering, net - 263,421,082
Proceeds from issuance of Common Stock, net - 228,873,873
Repayments of long-term debt (2,678,426) (1,365,133)
Proceeds from exercise of employee stock options 27,200 -
------------- ------------
NET CASH PROVIDED BY(USED IN)FINANCING
ACTIVITIES (2,651,226) 490,929,822
------------- ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (10,225,394) (20,454,009)
CASH AND EQUIVALENTS, beginning of period 13,562,113 22,854,209
------------- ------------
CASH AND EQUIVALENTS, end of period $ 3,336,719 $ 2,400,200
============= ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash received for interest $ 14,992,053 $ 13,655,521
============= ============
Cash paid for interest $ 22,288,506 $ 18,215,709
============= ============
Cash paid for income taxes $ 11,566,000 $ -
============= ============
</TABLE>
<PAGE>
FORM 10-Q
PanAmSat Corporation
NOTES TO FINANCIAL STATEMENTS
(1) Principles of Presentation.
----------------------------
PanAmSat, L.P. was the predecessor to PanAmSat Corporation (the "Company")
and operated as a Delaware limited partnership (the "Partnership"). On
March 2, 1995, pursuant to the amended Exchange and Subscription Agreement
and Plan of Reorganization, the Company, the Partnership and its partners
consummated various transactions (the "Conversion") whereby the Company
acquired the Partnership and converted it to corporate form. In connection
therewith, (i) Rene Anselmo and affiliated persons and entities (the
"Anselmo Group") exchanged their interests in the Partnership for shares of
Class A Common Stock, representing approximately 49.66% of the outstanding
common stock of the Company, (ii) Univisa Satellite Holdings,
Inc.("Univisa") exchanged its interest in the Partnership for shares of
Class B Common Stock, representing approximately 50.15% of the outstanding
common stock of the Company and (iii) a partner of the Partnership
exchanged his interest in the Partnership for shares of common stock,
representing approximately 0.19% of the outstanding common stock of the
Company. The Amended and Restated Certificate of Incorporation of the
Company provides, among other things, that holders of the Class A Common
Stock will have the right to elect the majority of the members of the
Company's board of directors and the Anselmo Group and Univisa with a veto
over certain extraordinary transactions of the Company. On April 21, 1995,
the Company completed the sale of 275,000 shares of Preferred Stock in a
public offering and received net proceeds of approximately $262 million. On
September 27, 1995 the Company completed an initial public offering of
18,920,000 shares of Common Stock, including 4,595,676 shares held by
certain selling stockholders, and received net proceeds of approximately
$229 million.
The Conversion also resulted in compensation expense consisting of
(i)approximately $4.5 million during the nine month period ended September
30, 1995 related to the assumption by the Company of phantom stock plans of
a predecessor company in the Conversion, and (ii) approximately $3.8
million, with an offsetting increase to capital, relating to a grant of a
limited partnership interest in the Partnership to the Executive Vice
President of the Company.
The interim unaudited Financial Statements should be read in conjunction
with the audited Financial Statements and the notes thereto for the year
ended December 31, 1995 included in the Company's Annual Report on Form
10-K, as filed with the Securities and Exchange Commission (Commission File
Number 33-63284) (the "Annual Form 10-K"). The balance sheet as of
September 30, 1996, and the related statements of operations and cash flows
for the nine months ended September 30, 1996 and 1995 have been prepared by
the Company and are unaudited. In the opinion of management, all
adjustments which are of a normal recurring nature necessary to present
fairly the financial position, results of operations and cash flows as of
and for the three and nine month periods ended September 30, 1996 and 1995
have been made. The accounting policies followed during the interim periods
reported are in conformity with generally accepted accounting principles
and are consistent with those applied for annual periods and described in
the Company's Annual Form 10-K. The results of operations for the nine
month periods ended September 30, 1996 and 1995 are not necessarily
indicative of the operating results for the full year.
<PAGE>
PanAmSat Corporation
NOTES TO FINANCIAL STATEMENTS
(Continued)
(2) Income Taxes.
---------------
The Conversion resulted in the establishment by the Company of a deferred
tax liability of approximately $22.9 million which was recorded during the
quarter ended March 31, 1995. As a partnership, the Partnership was not
subject to federal or state income taxes. Accordingly, no income taxes were
deducted from the net income on the Partnership's financial statements.
Substantially all of the difference between the Company's book income from
operations and taxable income for the nine months ended September 30, 1996
and book income from operations and pro forma taxable loss for the nine
months ended September 30, 1995 is attributable to the difference in
depreciation for tax and financial reporting purposes and certain deposits,
and, in 1995, the temporary difference created by a $4.5 million
non-recurring charge related to the assumption by the Company of phantom
stock plans of a predecessor company in the Conversion and the permanent
difference created by a $3.8 million charge related to a grant of a limited
partnership interest in the Partnership to the Executive Vice President of
the Company, for which the income tax benefit was specially allocated to a
predecessor entity and, in 1996, the permanent difference created by
certain expenditures incurred in connection with the Company's Agreement
and Plan of Reorganization (see Note 6).
The accompanying statements of operations present, on an unaudited pro
forma basis, net income for the nine months ended September 30, 1995 as if
the Partnership had been taxed at corporate federal and state tax rates and
as if the Conversion occurred on January 1, 1995. The pro forma tax effects
assume the net deferred tax liability as described above would have been
provided as the related temporary differences arose.
<PAGE>
PanAmSat Corporation
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(Continued)
(3) DTH Business.
-----------------
During the third quarter of 1994, the Company announced its intention to
provide DTH services in Latin America. In connection therewith, the Company
and Grupo Televisa, S.A. ("Televisa") signed a binding memorandum of
understanding in the first quarter of 1995 (the "Original MOU") to put into
operation a digital DTH satellite television broadcasting business covering
Latin America, the Caribbean and certain areas of the southern United
States.
In November 1995, the Company announced that it would serve as a satellite
service provider for the Latin America DTH service ("Latin America DTH") to
be offered by the Globo Organization ("Globo"), Televisa, The News
Corporation Limited ("News Corp.") and Tele-Communications International,
Inc. ("TCI") and that the Company would have options to acquire equity
interests in the joint ventures serving Latin America, the Caribbean and
the Southern United States, but not Brazil.
On February 29, 1996, the Company signed a binding letter agreement with
Globo, Televisa and News Corp. (the "1996 Letter Agreement") to provide
service to a series of joint ventures (the "Latin America JVs") to be
formed by them and TCI on 48 transponders ultimately on PAS-5 and PAS-6,
with temporary service on PAS-3 pending the commencement of service on
PAS-6. On June 26, 1996, a full-scale agreement was executed for service in
Brazil on 12 transponders (the "Brazil Agreement"). The 1996 Letter
Agreement remains in force for the remaining 36 transponders. This capacity
would enable the Latin America JVs to broadcast to Latin America, the
Caribbean, and certain areas of the southern United States approximately
500 digital channels and to permit distribution of program packages of
approximately 120 digital channels to specific market areas. Also under the
1996 Letter Agreement, Globo, Televisa, and News Corp. have agreed to
proportionally guarantee 100 percent of the fees for transponder services
to the Latin America JVs. These guarantee obligations may be assigned to
TCI and, with the Company's prior written consent, to new equity
participants in the Latin America JVs. Globo and News Corp have
proportionately guaranteed the obligations under the Brazil Agreement. The
Company will receive minimum service fees equivalent to the Company's best
estimate of the cost per transponder to the Company of designing,
launching, operating and insuring each satellite for the transponders used
by the Latin America JVs. The Company also will receive additional revenue
based on subscriber revenues of the Latin America JVs above a certain
threshold, except that the transponders that will be used by the Latin
America JV operating in Brazil will be charged on a fixed fee basis.
<PAGE>
PanAmSat Corporation
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(Continued)
Under a verbal agreement in principle with Televisa, PanAmSat and Televisa
also intended to form a joint venture to offer DTH services in the Iberian
Peninsula. Pursuant to a revised memorandum of understanding (the "Revised
MOU") between the Company and Televisa entered into on September 20, 1996
which incorporated the prior verbal agreement between the parties and which
superseded the Original MOU, the Company was granted an option for 10 years
to obtain 10 to 15 percent interests from Televisa in the Latin America JVs
that would service Latin America, the Caribbean, and the southern United
States, but not Brazil. In the event the option is exercised, the purchase
price would be equal to the Company's pro rata share of Televisa's
aggregate contributions to the Latin America JVs providing such service,
less all distributions by such Latin America JVs to Televisa, plus
interest. The Company has no interest nor any options to acquire an
interest in the Latin America JVs that will provide DTH service in Brazil.
In connection with the Agreement and Plan of Reorganization (see Note 6),
Televisa will purchase the Company's options under the Revised MOU.
On September 20, 1996, the Company entered into an agreement with Televisa
S.A. de C.V., an affiliate of Televisa, to provide transponder service on
up to five PAS-3 Ku-band transponders, at least three of which will be used
for distribution of television services in Spain, which may include DTH
services. The service fees reflect market rates.
The Company has significant investments in and commitments for PAS-5 and
PAS-6 which are intended to be primarily used by the Latin America JVs.
Globo, Televisa and News Corp. plan to enter into one or more definitive
agreements to implement the terms agreed in and contemplated by the 1996
Letter Agreement. No assurance can be given that the Latin America JVs will
be successful.
(4) PAS-3 Placed in Service.
---------------------------
The Company's PAS-3 satellite (a replacement for a satellite lost as a
result of a launch failure in December 1994) was launched on January 12,
1996 and commenced service on February 19, 1996. As a result, approximately
$232 million of costs included in satellite systems under development was
transferred to satellites in service and the Company incurred $15.0 million
of long-term debt in accordance with the satellite performance incentive
terms in its PAS-3 satellite construction contract during the quarter ended
March 31, 1996 (see Management's Discussion and Analysis).
(5) Compensation Plan.
---------------------
In September, 1996, the Company adopted a plan to pay a cash bonus to its
employees who would otherwise have qualified for the grant of stock options
under the Company's Long-Term Stock Investment Plan. Such compensation
totaling $4.8 million was paid in October, 1996 in lieu of stock options.
<PAGE>
PanAmSat Corporation
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(Continued)
(6) Agreement and Plan of Reorganization.
----------------------------------------
On September 20, 1996 (the "Announcement Date"), the Company and Hughes
Electronics Corporation ("Hughes") announced that they had agreeed to merge
their respective satellite service operations into a new publicly held
company ("New PanAmSat"). Under the terms of the Agreement and Plan of
Reorganization that was entered into on the Announcement Date, the Galaxy
business of Hughes will be combined to form New PanAmSat. PanAmSat
stockholders will have three options to receive payment with respect to the
outstanding shares of PanAmSat Common Stock and Class A Common Stock: (a)
one-half share of common stock of New PanAmSat and $15 in cash, (b) one
share of common stock of New PanAmSat, or (c) $30 in cash. The maximum cash
consideration to be paid to the Company's stockholders will be equal to $15
multiplied by the number of shares of Common Stock outstanding. Immediately
after the merger, Hughes will own 71.5% of New PanAmSat unless the
Company's stockholders request more shares of New PanAmSat common stock
than cash and New PanAmSat permits additional shares of its common stock to
be issued in lieu of cash to the Company's stockholders. In a separate but
related transaction, New PanAmSat will acquire all of the outstanding
shares of Univisa, Inc. the indirect holder of all of the Class B Common
Stock of the Company, for consideration that is equal to that being paid to
the holders of Common Stock and Class A Common Stock (the "Univisa
Contribution"). The transaction will require governmental approals,
including that of the U.S. Federal Communications Commission and the
Federal Trade Commission, which are expected to be completed within six to
12 months of the Announcement Date.
In connection with the above transactions, the Company will incur certain
professional and advisory fees substantially all of which are payable upon
the successful completion of the merger which aggregate approximately $20
million.
Concurrently with the merger and immediately following the Univisa
Contribution, 7.5 million shares of New PanAmSat Common Stock received by
Satellite Company, L.L.C., a Nevada limited liability company ("S Company")
and a subsidiary of Televisa, in connection with the Univisa Contribution
will be repurchased by New PanAmSat for $225 million. Following such
repurchase, either Televisa, S Company or their designee will purchase for
$225 million all of PanAmSat's rights to purchase from Televisa certain
joint ventures to be formed to offer DTH services in Latin America and the
Iberian Peninsula.
<PAGE>
PanAmSat Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Overview. The Company's first satellite, PAS-1, was launched in 1988 for
---------
service over the Atlantic Ocean Region and is the leading satellite for
television and cable programming distribution in Latin America. The
Company's second satellite, PAS-2, was launched in July 1994 for service
over the Pacific Ocean Region and is a leading satellite for distribution
in the Asia-Pacific region. The Company's PAS-4 satellite was launched in
August 1995 for service over the Indian Ocean Region and commenced service
on September 5, 1995. PAS-4 is the leading satellite for program
distribution in South Asia and Africa. The Company's PAS-3 satellite (a
replacement for a satellite lost as a result of a launch failure in
December 1994) was launched on January 12, 1996 and commenced service on
February 19, 1996 over the Atlantic Ocean Region.
During the construction period of each of its new satellites, and
thereafter, the Company may incur increased operating expenses, including
expenditures for sales and marketing in excess of the levels historically
incurred, increased engineering and technical expenses, as well as
increased general and administrative expenses, which increased expenses may
not be offset by additional revenues until the new satellites are
successfully launched and commence service. Also, commencing at the
in-service date of any successfully launched satellite, all satellite
construction costs, launch, launch insurance, capitalized interest and
development costs for such satellite will be depreciated on a straight-line
basis over the estimated useful life of the satellite. Further, after the
in-service date of any successfully launched satellite (or upon a launch
failure), the Company will be required to expense, and no longer will be
able to capitalize, interest allocable to such satellite's construction,
launch and development costs.
Revenues. Total revenues for the three months ended September 30, 1996 were
---------
$66.9 million, an increase of $38.9 million or 139% as compared to the
comparable period in 1995. Total revenues for the nine months ended
September 30, 1996 were $177.6 million, an increase of $105.8 million or
147% as compared to the comparable period in 1995.
Broadcasting services revenue for the three months ended September 30, 1996
was $56.1 million, an increase of $35.3 million, or 170% over the same
period in 1995. Broadcasting services revenue for the nine months ended
September 30, 1996 was $145.7 million, an increase of $95.3 million, or
190% over the same period in 1995. The growth in broadcasting services
revenue during the three and nine month periods was due primarily to
revenues from video services on PAS-4 and the commencement of revenues from
video services on PAS-3.
<PAGE>
PanAmSat Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(Continued)
Business communications services revenue was $10.4 million in the three
months ended September 30, 1996, increasing $3.7 million or 55%, over the
comparable period in 1995. Business communications services revenue was
$30.7 million in the nine months ended September 30, 1996, increasing $11.0
million or 56%, over the comparable period in 1995. The increase during the
three and nine month periods was primarily due to commencement of service
for several new International Digital Services network and carrier service
data contracts.
Long-distance telephone services revenue decreased from $0.5 million for
the three months ended September 30, 1995 to $0.4 million for the three
months ended September 30, 1996, a decrease of $0.1 million or 20%.
Long-distance telephone services revenue decreased from $1.7 million for
the nine months ended September 30, 1995 to $1.2 million for the nine
months ended September 30, 1996, a decrease of $0.5 million or 29%.
Direct Expenses. Direct expenses were $3.1 million, or 5% of total
----------------
revenues, in the three months ended September 30, 1996, an increase of $1.9
million or 158%, from the same period in 1995 when direct expenses were 4%
of total revenues. Direct expenses were $6.8 million, or 4% of total
revenues, in the nine months ended September 30, 1996, an increase of $3.1
million or 84%, from the same period in 1995 when direct expenses were 5%
of total revenues.
Sales and Marketing Expenses. Sales and marketing expenses were $3.1
-----------------------------
million, or 5% of total revenues, in the three months ended September 30,
1996, compared to $2.4 million, or 9% of total revenues, in the three
months ended September 30, 1995. Sales and marketing expenses were $10.3
million, or 6% of total revenues, in the nine months ended September 30,
1996, compared to $6.6 million, or 9% of total revenues, in the nine months
ended September 30, 1995. The dollar increase in sales and marketing
expenses over the three and nine month periods was primarily attributable
to the Company's efforts in marketing capacity on the PAS Global System and
the pursuit of direct-to-home opportunities worldwide.
<PAGE>
PanAmSat Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(Continued)
Engineering and Technical Expenses. Engineering and technical expenses were
-----------------------------------
$4.6 million in the three month period ended September 30, 1996, or 7% of
total revenues, compared to $ 2.7 million, or 10% of total revenues, for
the comparable period in 1995. Engineering and technical expenses were
$12.3 million in the nine month period ended September 30, 1996, or 7% of
total revenues, compared to $7.0 million, or 10% of total revenues, for the
comparable period in 1995. The dollar increase in engineering and technical
expenses during the three and nine month periods was primarily due to
telemetry, tracking and control costs for PAS-3 and PAS-4 as well as costs
associated with contracts to provide carrier monitoring services.
General and Administrative Expenses. General and administrative expenses
------------------------------------
were $6.6 million, or 10% of total revenues, in the three months ended
September 30, 1996, an increase of $2.9 million or 78%, as compared to the
same period in 1995, when general and administrative expenses were $3.7
million, or 13% of total revenues. General and administrative expenses were
$18.6 million, or 10% of total revenues, in the nine months ended September
30, 1996, an increase of $8.1 million or 77%, as compared to the same
period in 1995, when general and administrative expenses were $10.5
million, or 15% of total revenues. The dollar increase in general and
administrative expenses during the three and nine month periods was
primarily attributable to in-orbit insurance costs for PAS-3 and PAS-4 and
additional personnel costs associated with the Company's expansion.
Depreciation and Amortization. Depreciation and amortization was $16.1
------------------------------
million in the three months ended September 30, 1996, as compared to $8.1
million in the three months ended September 30, 1995, an increase of $8.0
million or 99%. Depreciation and amortization was $45.2 million in the nine
months ended September 30, 1996, as compared to $22.0 million in the nine
months ended September 30, 1995, an increase of $23.2 million or 105%. The
dollar increase in the three and nine month periods was primarily due to
depreciation expense associated with PAS-3 and PAS-4 and new communication
equipment at the Company's teleports.
Compensatory Programs. Compensatory program expense was $4.8 million in the
----------------------
three months ended September 30, 1996 compared to $0.2 million for the
comparable period in 1995, an increase of $4.6 million. Compensatory
program expense was $4.8 million in the nine months ended September 30,
1996 compared to $8.3 million for the comparable period in 1995, a decrease
of $3.5 million. Compensatory program expense during 1996 represents a cash
bonus paid to employees who would otherwise have qualified for the grant of
stock options under the Company's Long-Term Stock Investment Plan.
Compensatory program expense during 1995 is related to the assumption by
the Company of phantom stock plans of a predecessor company and the grant
of a limited partnership interest in the Partnership to the Executive Vice
President of the Company.
<PAGE>
PanAmSat Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(Continued)
Reorganization Costs. Reorganization costs of $2.5 million for the three
---------------------
and nine months ended September 30, 1996 consist of legal, accounting, and
investment banking fees associated with the Agreement and Plan of
Reorganization with Hughes announced in September 1996.
Interest. Interest income, primarily earned from highly liquid investment
---------
funds, was $5.3 million for the three months ended September 30, 1996
compared to $5.0 million for the comparable period in 1995, an increase of
$0.3 million. Interest income was $17.6 million for the nine months ended
September 30, 1996 compared to $12.7 million for the comparable period in
1995, an increase of $4.9 million. The increase in interest income during
the three and nine month periods was primarily a result of interest earned
on cash flow from operations as well as the proceeds from the offerings of
the Preferred Stock and the Common Stock in the second and third quarters
of 1995, respectively, that had not been applied to satellite systems under
development.
Interest expense, net of capitalized interest, increased from $3.2 million
in the quarter ended September 30, 1995 to $5.7 million in the same quarter
in 1996. Interest expense, net of capitalized interest, increased from
$12.6 million in the nine months ended September 30, 1995 to $20.6 million
in the same period in 1996. This additional interest expense during the
three and nine month periods was primarily the result of interest expense
on the satellite performance incentives and additional accretion of the
Discount Notes, coupled with a decrease in the amount of capitalized
interest related to satellite systems under development.
Income Taxes. The Company had an income tax provision of $11.7 million for
-------------
the three months ended September 30, 1996 compared to $4.9 million for the
comparable period in 1995. The Company had an income tax provision of $31.1
million for the nine months ended September 30, 1996 compared to $9.0
million for the comparable period in 1995.
Preferred Stock Dividend. The Company had Preferred Stock dividends of
-------------------------
$10.5 million for the three months ended September 30, 1996 compared to
$9.3 million for the comparable period in 1995. The Company had Preferred
<PAGE>
PanAmSat Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(Continued)
Stock dividends of $30.5 million for the nine months ended September 30,
1996 compared to $16.5 million for the comparable period in 1995. The
Preferred Stock dividends are a result of the issuance of the Company's
Preferred Stock on April 21, 1995.
EBITDA. EBITDA was $42.2 million in the three months ended September 30,
-------
1996, an increase of $24.3 million or 136%, as compared to $17.9 million
for the comparable period in 1995. EBITDA was $122.2 million in the nine
months ended September 30, 1996, an increase of $86.5 million or 242%, as
compared to $35.7 million for the comparable period in 1995. EBITDA was 69%
of total revenues in the first nine months of 1996 as compared to 50% of
total revenues for the same period in the prior fiscal year. The dollar
increase in EBITDA for the three and nine month periods ended September 30,
1996 was due primarily to the increase in total revenues.
Liquidity and Capital Resources. Since inception, the Company and its
--------------------------------
predecessors have financed their operations through a combination of debt
and equity financing, vendor financing, bank financing, equipment leases
and cash flow from operations. On August 5, 1993 the Company completed the
sale of $175 million aggregate principal amount of Senior Secured Notes and
$460.2 million aggregate principal amount of Discount Notes (collectively,
the "Notes") and received net proceeds of approximately $425.5 million. The
original PAS-3 satellite was destroyed during a launch failure on December
1, 1994. The Company collected in 1995 the insurance proceeds in the amount
of $214.0 million for the original PAS-3 satellite. On April 21, 1995, the
Company completed the sale of 275,000 shares of Preferred Stock in a public
offering and received net proceeds of approximately $261.8 million. On
September 27, 1995, the public offering of 18,920,000 shares of Common
Stock was completed and the Company received net proceeds of approximately
$229 million.
The total cost for the construction and launch of PAS-5 and PAS-6,
including launch insurance, certain components for spare satellites, ground
facilities and related development expenses (but excluding capitalized
interest expense) is estimated to be approximately $473 million. The
Company expects to fund $296.3 million of such costs with the net proceeds
from the offering of Preferred Stock and $70.0 million from vendor
financing. The balance of such costs and any additional costs due to cost
overruns, delays or other unanticipated expenses is anticipated to be
funded from vendor financing and future cash flow from operations.
<PAGE>
PanAmSat Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(Continued)
The total cost for the construction and launch of PAS-7 and PAS-8,
including launch insurance, ground facilities and related development
expenses (but excluding capitalized interest expense) is estimated to be
approximately $420.0 million. The Company expects to fund $224.6 million of
such costs with the net proceeds from the offering of the Common Stock. The
balance of such costs and any additional costs due to cost overruns, delays
or other unanticipated expenses is expected to be funded from vendor
financing and future cash flow from operations.
The Company believes that the net proceeds to it from the offerings of
Preferred Stock and Common Stock, vendor financing, future cash flow from
operations (assuming PAS-5 and PAS-6 are successfully launched and commence
service on the schedule currently contemplated) and cash on hand will be
sufficient to fund the Company's operations, its remaining costs for the
construction and launch of PAS-5 and PAS-6, its anticipated minimum
contractual commitments for the construction and launch of PAS-7 and PAS-8,
as well as to pursue international opportunities for DTH services which may
be identified by the Company in the future. Any additional costs due to
cost overruns, delays or other unanticipated expenses are expected to be
funded from additional vendor financing and future cash flow from
operations.
Cash flows provided by operating activities increased to $120.9 million in
the nine months ended September 30, 1996, from $68.4 million in the nine
months ended September 30, 1995. The 1996 increase is due primarily to the
significant growth in revenues for the nine months ended September 30, 1996
and the effect of non-cash charges. The Company has and will continue to
have significant non-cash charges including depreciation of satellites and
other equipment and amortization of original issue discount on its Senior
Subordinated Discount Notes, as well as significant cash interest payments
that are capitalized rather than being currently expensed.
Net cash used in investing activities decreased to $128.4 million in the
nine months ended September 30, 1996 from $579.8 million in the nine months
ended September 30, 1995. This decrease primarily reflects $235.7 million
of expenditures for satellite systems under development partially funded by
$125.3 million of proceeds from maturity of marketable securities. This
compares to $244.8 million in expenditures for satellite systems under
development and $561.3 million of purchases of marketable securities
<PAGE>
PanAmSat Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(Continued)
during the first nine months of 1995 partially funded with $191.1 million
of insurance proceeds collected on the launch failure of the original PAS-3
satellite.
Net cash used in financing activities decreased to $2.7 million in the nine
months ended September 30, 1996 from $490.9 million provided by financing
activities in the nine months ended September 30, 1995. This decrease
reflects $2.7 million in repayments of long-term debt for the nine months
ended September 30, 1996 compared to $1.4 million of repayments of
long-term debt during the first nine months of 1995 funded by $263.4
million of net proceeds collected on the offering of Preferred Stock and
$228.9 million of net proceeds collected on the issuance of Common Stock.
The remaining net proceeds were used to purchase marketable securities.
<PAGE>
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
2.3 Agreement and Plan of Reorganization dated September 20, 1996, among
Hughes Communications, Inc., Hughes Communications Galaxy, Inc.,
Hughes Communications Satellite Services, Inc., Hughes
Communications Services, Inc., Hughes Communications Carrier
Services, Inc., Hughes Communications Japan, Inc., Magellan
International, Inc., and PanAmSat Corporation.
2.4 Stock Contribution and Exchange Agreement dated as of September 20,
1996 by and among Grupo Televisa, S.A., Satellite Company, LLC,
Magellan International, Inc., and Hughes Communications, Inc.
10.10.4 Amendment Number 3 to Launch Services Agreement LKEC-9411-002 dated
14 November 1994, through Amendment No.2, dated 9 June 1995, entered
into on August 23, 1996, by and between PanAmSat Corporation and
Lockheed-Khrunichev-Energia International, Inc. (Portions of this
exhibit have been omitted subject to a request for confidential
treatment to the Securities and Exchange Commission).
10.13.1 DTH Option Purchase Agreement dated September 20, 1996, between
PanAmSat Corporation, Grupo Televisa, S.A., and Satellite Company,
L.L.C.
10.13.2 Revised DTH System in Latin America Memorandum of Understanding
dated as of September 20, 1996, between PanAmSat Corporation and
Grupo Televisa, S.A.
10.14.1 Amendment Number 1 to the PAS-5 Satellite Purchase Contract between
Hughes Aircraft Company and PanAmSat Corporation effective as of
September 3, 1996. (Portions of this exhibit have been omitted
subject to a request for confidential treatment to the Securities
and Exchange Commission).
10.16 Full-Time Transponder Service Agreement From PAS-3 (European Beam)
entered into as of September 20, 1996, by and between PanAmSat
Corporation and Televisa, S.A. (Portions of this exhibit have been
omitted subject to a request for confidential treatment to the
Securities and Exchange Commission).
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
During the quarter ended September 30, 1996, PanAmSat Corporation
filed a current report on Form 8-K dated September 23, 1996,
announcing it had agreed to enter into the Agreement and Plan of
Reorganization.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PanAmSat Corporation
Date: November 14, 1996 /s/Patrick J. Costello
----------------------
Patrick J. Costello
Chief Financial Officer
and a Duly Authorized Officer
of the Company
EXECUTION COPY
AGREEMENT AND PLAN OF REORGANIZATION
among
HUGHES COMMUNICATIONS, INC.,
HUGHES COMMUNICATIONS GALAXY, INC.,
HUGHES COMMUNICATIONS SATELLITE SERVICES, INC.,
HUGHES COMMUNICATIONS SERVICES, INC.,
HUGHES COMMUNICATIONS CARRIER SERVICES, INC.,
HUGHES COMMUNICATIONS JAPAN, INC.,
MAGELLAN INTERNATIONAL, INC.
and
PANAMSAT CORPORATION
September 20, 1996
<PAGE>
Page
----
ARTICLE I
THE ASSET CONTRIBUTION....................... 3
1.1 Contribution of the Galaxy Business.................................. 3
1.2 Exclusion of Certain Assets and Liabilities.......................... 4
1.3 Issuance of Shares of Newco Common Stock............................. 4
1.4 Conveyancing and Assumption Documents................................ 4
ARTICLE II
THE MERGER ............................. 5
2.1 Organization of the Merger Subsidiary................................ 5
2.2 The Merger........................................................... 5
2.3 Directors............................................................ 6
2.4 Officers............................................................. 6
2.5 Certificate of Incorporation and Bylaws.............................. 6
2.6 Name................................................................. 6
2.7 Actions of Newco..................................................... 6
ARTICLE III
THE CLOSING............................. 6
ARTICLE IV
EFFECT OF THE MERGER ON SECURITIES
OF PAS AND MERGER SUB........................ 6
4.1 Merger Sub Stock..................................................... 6
4.2 Conversion of PAS Shares............................................. 7
4.3 Elections by Holders of Shares....................................... 9
4.4 Proration............................................................ 11
4.5 Dividends, Fractional Shares, Etc.................................... 12
4.6 Certain Additional Prorations........................................ 13
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PAS................. 13
5.1 Organization, Standing and Power..................................... 13
5.2 Capital Structure.................................................... 14
5.3 Authority; No Violations; Consents and Approvals..................... 15
5.4 SEC Documents........................................................ 17
5.5 Information Supplied................................................. 18
5.6 Compliance with Laws................................................. 18
<PAGE>
Page
----
5.7 Litigation........................................................... 20
5.8 Taxes................................................................ 20
5.9 Employees and Agents; Benefit Plans.................................. 21
5.10 Absence of Certain Changes or Events................................. 25
5.11 Opinion of Financial Advisors........................................ 26
5.12 Insurance............................................................ 27
5.13 Intellectual Property................................................ 27
5.14 Environmental Matters................................................ 28
5.15 Investment Banking Fees and Commissions.............................. 29
5.16 Material Contracts................................................... 29
5.17 Personal Property.................................................... 31
5.18 Real Property........................................................ 31
5.19 Certain Assets and Agreements........................................ 32
(a) Ground Stations.................................................. 32
(b) Satellites and Transponders...................................... 33
(c) Tracking, Telemetry and Control Equipment........................ 33
(d) ITU Frequency Registration....................................... 33
(e) Satellite Coordination........................................... 33
5.20 IGO Determinations................................................... 34
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF
THE HUGHES PARTIES.......................... 34
6.1 Organization, Standing and Power..................................... 34
6.2 Capital Structure.................................................... 34
6.3 Authority; No Violations; Consents and Approvals..................... 35
6.4 Galaxy Financial Statements.......................................... 37
6.5 Information Supplied................................................. 37
6.6 Compliance with Laws................................................. 37
6.7 Litigation........................................................... 40
6.8 Taxes................................................................ 40
6.9 Employees and Agents; Benefit Plans.................................. 40
6.10 Absence of Certain Changes or Events................................. 44
6.11 Insurance............................................................ 46
6.12 Intellectual Property................................................ 46
6.13 Environmental Matters................................................ 47
6.14 Investment Banking Fees and Commissions.............................. 47
6.15 Material Contracts................................................... 47
6.16 Personal Property.................................................... 49
6.17 Real Property........................................................ 49
<PAGE>
Page
----
6.18 Certain Assets and Agreements........................................ 50
(a) Ground Stations.................................................. 50
(b) Satellites and Transponders...................................... 50
(c) Tracking, Telemetry and Control Equipment........................ 51
(d) ITU Frequency Registration....................................... 51
(e) Satellite Coordination........................................... 51
6.19 IGO Determinations................................................... 51
ARTICLE VII
COVENANTS.............................. 52
7.1 Interim Operations of PAS............................................ 52
(a) Ordinary Course.................................................. 52
(b) Dividends; Changes in Capital Stock.............................. 52
(c) Issuance of Securities........................................... 52
(d) Governing Documents.............................................. 53
(e) No Solicitation.................................................. 53
(f) No Spacecraft Acquisitions, Investments or Capital Expenditures.. 54
(g) No Dispositions.................................................. 54
(h) No Dissolution, Etc.............................................. 55
(i) Other Actions.................................................... 55
(j) Certain Employee Matters......................................... 55
(k) Indebtedness..................................................... 55
(l) Agreements....................................................... 56
(m) Accounting....................................................... 56
(n) Payment of Claims................................................ 56
(o) Waivers and Payments............................................. 56
(p) Insurance........................................................ 56
(q) Affiliate Transactions........................................... 56
(r) PAS Permits...................................................... 57
(s) Construction Permits and Applications............................ 57
(t) Interference..................................................... 57
(u) No Restrictive Agreements..................................... 57
(v) Certain Other Agreements......................................... 58
7.2 Interim Operations of the Galaxy Business............................ 58
(a) Ordinary Course.................................................. 58
(b) Dividends; Changes in Capital Stock.............................. 58
(c) Issuance of Securities........................................... 58
(d) Governing Documents.............................................. 59
(e) No Spacecraft Acquisitions, Investments or Capital Expenditures.. 59
(f) No Dispositions.................................................. 59
(g) No Dissolution, Etc.............................................. 59
(h) Other Actions.................................................... 59
(i) Certain Employee Matters......................................... 59
<PAGE>
Page
----
(j) Indebtedness..................................................... 60
(k) Agreements....................................................... 60
(l) Accounting....................................................... 60
(m) Payment of Claims................................................ 60
(n) Waivers and Payments............................................. 61
(o) Insurance........................................................ 61
(p) Affiliate Transactions........................................... 61
(q) Galaxy Permits................................................... 61
(r) Construction Permits and Applications. ...........................62
(s) Interference..................................................... 62
(t) No Restrictive Agreements ....................................... 62
(u) Additional Property .......................................... 62
(v) Certain Other Agreements ..................................... 63
7.3 Interim Operations of Newco.......................................... 63
7.4 Control of Galaxy and PAS............................................ 64
7.5 Registration Statement and Proxy Statement/Prospectus................ 64
7.6 PAS Stockholders' Meeting............................................ 65
7.7 Access to Information................................................ 65
7.8 Confidentiality...................................................... 66
(a) Preservation of Confidentiality.................................. 66
(b) Property Right in Confidential Information....................... 66
(c) Termination of Agreement......................................... 67
7.9 Legal Conditions, Filings and Consents............................... 67
7.10 Indemnification and Insurance for Directors and Officers............. 69
7.11 Indemnification for Excluded and Contributed Liabilities............. 70
7.12 Notices of Certain Events............................................ 72
7.13 Publicity............................................................ 73
7.14 Rule 145 Affiliates.................................................. 73
7.15 Supplemental Disclosure Schedules.................................... 73
7.16 Newco Employee Benefits Arrangements................................. 74
(a) Replacement of Retirement Plan ............................... 74
(b) Replacement of Savings Plan................................... 75
(c) Newco Stock Options........................................... 76
(d) Retiree Medical Benefits...................................... 77
(e) PAS ERISA Plans and PAS Benefit Arrangements.................. 77
(f) HCI Indemnification........................................... 77
(g) PAS Indemnification........................................... 77
7.17 Further Action....................................................... 77
7.18 Documentation of Intercompany Agreements............................. 78
7.19 Listing Application.................................................. 78
7.20 Leveraged Lease Guarantee............................................ 78
7.21 Disposition of Assets................................................ 78
7.22 Related Agreements................................................... 78
7.23 Standstill Restriction............................................... 78
<PAGE>
Page
----
7.24 Capital Expenditures and the Closed System for Cash Managent......... 79
ARTICLE VIII
CONDITIONS.............................. 79
8.1 Conditions to Each Party's Obligation to Effect the Asset Contribution,
the Univisa Contribution and the Merger............................ 79
(a) No Order......................................................... 80
(b) Stockholder Approval............................................. 80
(c) HSR Act.......................................................... 80
(d) FCC Consents..................................................... 80
(e) Other Satellite Approvals........................................ 81
(f) Other Approvals.................................................. 81
(g) Registration Statement........................................... 81
(h) Related Agreements............................................... 81
(i) Listing Application.............................................. 82
8.2 Additional Conditions to Obligations of PAS.......................... 82
(a) Representations and Warranties................................ 82
(b) Performance of Obligations....................................... 82
(c) Material Adverse Change.......................................... 82
8.3 Additional Conditions to Obligations of the Hughes Parties........... 83
(a) Representations and Warranties................................... 83
(b) Performance of Obligations....................................... 83
(c) Material Adverse Change.......................................... 83
(d) Termination of Options........................................... 83
(e) Termination of DTH Equity Obligations......................... 83
(f) Resignation of PAS Directors.................................. 84
ARTICLE IX
TERMINATION AND AMENDMENT...................... 84
9.1 Termination.......................................................... 84
9.2 Effect of Termination................................................ 85
9.3 Termination Fee. .................................................... 85
9.4 Amendment............................................................ 86
9.5 Extension; Waiver.................................................... 86
ARTICLE X
GENERAL PROVISIONS......................... 86
10.1 Nonsurvival of Representations, Warranties and Agreements............ 86
10.2 Expenses............................................................. 87
10.3 Notices.............................................................. 87
<PAGE>
Page
----
10.4 Interpretation....................................................... 88
10.5 Entire Agreement; No Third-Party Beneficiaries; Rights of Ownership.. 88
10.6 Assignment........................................................... 89
10.7 Governing Law........................................................ 89
10.8 Severability......................................................... 89
10.9 Injunctive Relief.................................................... 89
10.10 Attorneys' Fees...................................................... 89
10.11 Cumulative Remedies ................................................. 89
10.12 Counterparts......................................................... 90
<PAGE>
SCHEDULES
---------
Other than Schedule 1.1, each of the following Schedules are omitted pursuant
to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish to the
Commission supplementally a copy of any omitted Schedule upon request by the
Commission.
Schedule 1.1 Excluded Assets
Schedule 5.2 PAS Capital Structure
Schedule 5.3(b) PAS Violations
Schedule 5.3(c) PAS Consents and Approvals
Schedule 5.6(a) PAS Violations of Law
Schedule 5.6(b) PAS Permits
Schedule 5.6(c) PAS Political Environment and Violations of Certain Laws
Schedule 5.7 PAS Litigation
Schedule 5.8 PAS Taxes
Schedule 5.9(a) PAS Employees
Schedule 5.9(b) PAS Compliance w/Employment & Labor Laws
Schedule 5.9(c) PAS ERISA Plans and Benefit Arrangements
Schedule 5.9(d) PAS Compliance w/ERISA Plans and Benefit Arrangements
Schedule 5.9(e) PAS Retirement Benefits
Schedule 5.9(f) PAS Undelivered Employee Documents
Schedule 5.9(g) Effects of Agreement on PAS Employee Arrangements
Schedule 5.9(h) PAS ERISA Plan & Benefits Arrangement Suits
Schedule 5.9(i) PAS Liability for Insurance Policies Covering ERISA Plans
Schedule 5.9(j) Contributions to PAS ERISA Plans
Schedule 5.9(k) PAS Employee Lawsuits
Schedule 5.9(l) PAS Employee Loans
Schedule 5.9(m) PAS Occupational Health & Safety Compliance
Schedule 5.9(n) PAS Worker's Compensation Assessments
Schedule 5.9(o) Deductibility of PAS Employee Payments
Schedule 5.9(p) PAS Excess Parachute Payments
Schedule 5.10 PAS Absence of Changes or Events
Schedule 5.12 PAS Insurance
Schedule 5.13 PAS Intellectual Property
Schedule 5.14(b) PAS Notices of Environmental Violations
Schedule 5.14(c) PAS Obligations Under Environmental Laws
Schedule 5.14(d) Other PAS Environmental Matters
Schedule 5.16(a) PAS Material Contracts
Schedule 5.16(b) PAS Restrictive Contracts
Schedule 5.16(c) PAS Backlog
Schedule 5.17 PAS Personal Property Liens
Schedule 5.18(a) PAS Owned Real Property
Schedule 5.18(b) PAS Leased Real Property
Schedule 5.18(d) Third Party Possession of PAS Property
Schedule 5.19(a) PAS Ground Stations
Schedule 5.19(b) PAS Satellites and Transponders
Schedule 5.19(c) PAS Tracking, Telemetry and Control Equipment
Schedule 5.19(d) PAS ITU Frequency Registration
Schedule 5.19(e) PAS Satellite Coordination
Schedule 5.20 PAS IGO Determinations
<PAGE>
Schedule 6.2 Galaxy Capital Structure
Schedule 6.3(b) Galaxy Violations
Schedule 6.3(c) Galaxy Consents and Approvals
Schedule 6.4 Galaxy Financial Statements
Schedule 6.6(a) Galaxy Violations of Law
Schedule 6.6(b) Galaxy Permits
Schedule 6.6(c) Galaxy Political Environment and Violations of Certain Laws
Schedule 6.7 Galaxy Litigation
Schedule 6.8 Galaxy Taxes
Schedule 6.9(a) Galaxy Employees
Schedule 6.9(b) Galaxy Compliance w/Employment & Labor Laws
Schedule 6.9(c) Galaxy ERISA Plan and Benefit Arrangements
Schedule 6.9(d) Galaxy Compliance w/ERISA Plans and Benefit Arrangements
Schedule 6.9(e) Galaxy Retirement Benefits
Schedule 6.9(f) Galaxy Undelivered Employee Documents
Schedule 6.9(g) Effects of Agreement on Galaxy Employee Arrangements
Schedule 6.9(h) Galaxy ERISA Plan & Benefits Arrangement Suits
Schedule 6.9(i) Galaxy Liability for Insurance Policies Covering ERISA Plans
Schedule 6.9(j) Contribution to Galaxy ERISA Plans
Schedule 6.9(k) Galaxy Employee Lawsuits
Schedule 6.9(l) Galaxy Employee Loans
Schedule 6.9(m) Galaxy Occupational Health & Safety Compliance
Schedule 6.9(n) Galaxy Worker's Compensation Assessments
Schedule 6.9(o) Deductibility of Galaxy Employee Payments
Schedule 6.9(p) Galaxy Excess Parachute Payments
Schedule 6.10 Galaxy Absence of Changes or Events
Schedule 6.11 Galaxy Satellite Insurance Policy
Schedule 6.12 Galaxy Intellectual Property
Schedule 6.13(a) Galaxy Notices of Environmental Violations
Schedule 6.13(b) Other Galaxy Environmental Matters
Schedule 6.13(c) Galaxy Obligations Under Environmental Laws
Schedule 6.15(a) Galaxy Material Contracts
Schedule 6.15(b) Galaxy Restrictive Contracts
Schedule 6.15(c) Galaxy Backlog
Schedule 6.16 Galaxy Personal Property Liens
Schedule 6.17(a) Galaxy Owned Real Property
Schedule 6.17(b) Galaxy Leased Real Property
Schedule 6.17(d) Third Party Possession of Galaxy Property
Schedule 6.18(a) Galaxy Ground Stations
Schedule 6.18(b) Galaxy Satellites and Transponders
Schedule 6.18(c) Galaxy Tracking, Telemetry and Control Equipment
Schedule 6.18(d) Galaxy ITU Frequency Registration
Schedule 6.18(e) Galaxy Satellite Coordination
Schedule 6.19 Galaxy IGO Determinations
Schedule 7.1(c) PAS Issuance of Securities
Schedule 7.1(f) PAS Acquisitions and Capital Expenditures
Schedule 7.1(j) Certain PAS Employee Matters
<PAGE>
Schedule 7.1(k) PAS Indebtedness
Schedule 7.2(c) Galaxy Issuance of Securities
Schedule 7.2(e) Galaxy Acquisitions and Capital Expenditures
Schedule 7.2(i) Certain Galaxy Employee Matters
Schedule 7.2(j) Galaxy Indebtedness
Schedule 7.2(p) Galaxy Affiliate Transactions
<PAGE>
DEFINITION CROSS-REFERENCE TABLE
TERM SECTION
- ---- -------
Acquisition Proposal 7.1(e)
affiliate 7.23
Affiliate 5.6(b)
Agreement Preamble
Allocation Determination 4.3(d)
Asset Contribution Recital A
Assurance Agreement Recital C
Bankruptcy Exception 5.3(a)
Capital Expenditures for Satellites Under Construction 7.24
Cash Cap 4.4(b)
Cash Election 4.2(a)(iii)
CERCLA 5.14(a)(i)
Class A Common Stock Recital D
Class B Common Stock Recital E
Closed System 7.24
Closing Article III
Closing Date Article III
Code Recital B
Confidentiality Agreement 7.7(b)
Contributed Entities 1.1
DGCL 2.1
Disinterested Director 7.23
Dissenting Shares 4.2(d)
DTH Option Purchase Agreement Recital F
DTH Services 7.1(f)
Effective Time 2.2(b)
Election Deadline 4.3(d)
Election Form 4.3(c)
Environmental Law 5.14(a)(i)
ERISA 5.9(c)(i)
Exchange Act 4.2(e)
Exchange Agent 4.3(b)
Exchange Fund 4.3(b)
Excluded Assets 1.1
Excluded Liabilities 1.2
FCC Consent Application 7.9(c)
FCC Rules 7.1(t)
Final Order 8.1(d)
GAAP 1.1
Galaxy Preamble
Galaxy Assets 1.1
Galaxy Backlog 6.15(c)
Galaxy Balance Sheet 6.4
Galaxy Benefit Arrangement 6.9(c)(ii)
<PAGE>
TERM SECTION
- ---- -------
Galaxy Benefit Employees 6.9(c)(i)
Galaxy Business 1.1
Galaxy Data 6.18(b)
Galaxy Employees 6.9(a)
Galaxy ERISA Plans 6.9(c)(i)
Galaxy Financial Statements 6.4
Galaxy Ground Stations 6.18(a)
Galaxy Intellectual Property 6.12
Galaxy Leased Real Property 6.17(b)
Galaxy Liabilities 1.1
Galaxy Owned Real Property 6.17(a)
Galaxy Permits 6.6(b)
Galaxy Satellite 6.18(b)
Galaxy Violation 6.3(b)
Government Entity 5.3(a)
Hazardous Materials 5.14(a)(ii)
HCCS Preamble
HCI Preamble
HCJ Preamble
HCS Preamble
HCSS Preamble
HE Recital C
HE Retirement Plan 7.16(a)(i)
HE Savings Plan 7.16(b)(i)
HSR Act 5.3(c)
Hughes Indemnified Party 7.11(b)
Hughes Parties Recital C
Hughes Party Recital C
IGO Determinations 5.20
Income Tax Agreement Recital C
Indemnified Liabilities 7.10(b)
Indemnified Party 7.11(c)
Indemnified Person 7.10(b)
Indemnified Persons 7.10(b)
Indemnifying Party 7.11(c)
Interim Period 7.4
Joint Committee 7.16(c)
Law 5.6(a)
Letter of Transmittal 4.3(c)
Liabilities 7.11(a)
Liens 5.17
material adverse effect 5.1
Material Contract 5.16(a)
Maximum Cash Amount 4.4(a)
Merger Recital A
Merger Agreement 2.2
<PAGE>
TERM SECTION
- ---- -------
Merger Consideration 4.2(a)
Merger Sub 2.1
Newco Preamble
Newco Certificates 4.3(b)
Newco Common Stock 1.3
Newco Indemnified Party 7.11(a)
Newco Retirement Plan 7.16(a)(ii)
Newco Savings Plan 7.16(b)(ii)
Option Consideration 4.2(e)
Options 4.2(e)
PAS Preamble
PAS Affiliates 7.14
PAS Backlog 5.16(c)
PAS Balance Sheet 5.17
PAS Benefit Arrangement 5.9(c)(ii)
PAS Common Stock 2.5
PAS Data 5.19(b)
PAS Employees 5.9(c)(i)
PAS ERISA Plans 5.9(c)(i)
PAS Ground Stations 5.19(a)
PAS Intellectual Property 5.13
PAS Leased Real Property 5.18(b)
PAS Owned Real Property 5.18(a)
PAS Permits 5.6(b)
PAS Preferred Stock 5.2
PAS Satellite 5.19(b)
PAS Savings Plan 7.16(b)(i)
PAS SEC Documents 5.4
PAS Stockholder Approval 5.3(c)
PAS Violation 5.3(b)
PAS Voting Debt 5.2
PBGC 7.16(a)(v)
Permits 5.6(a)
Permitted Lien 5.17(ii)
Person 7.1(e)
Principal Stockholders Recital D
Principal Stockholders Agreement Recital D
Proceeds 7.21
Prorated Cash Amount 4.4(b)
Prorated Stock Amount 4.4(c)
Proxy Statement/Prospectus 7.5
Registration Rights Agreement Recital G
Registration Statement 7.5
Related Agreements 7.9(a)
Release 5.14(a)(iii)
Remedial Action 5.14(a)(iv)
<PAGE>
TERM SECTION
- ---- -------
Reorganization Recital A
Requested Cash Amount 4.4(b)
Requested Stock Amount 4.4(c)
S Company Recital A
SEC 5.2
Securities Act 4.5(b)
Share Certificate 4.2(b)
Shares 4.2(a)
Significant Subsidiary 7.1(h)
SPOT Difference 4.6
Standard Cash Consideration 4.2(a)(i)
Standard Consideration 4.2(a)(i)
Standard Election 4.2(a)(i)
Stock Consideration 4.2(a)(ii)
Stock Election 4.2(a)(ii)
Stockholder Agreement Recital H
Stock Option Plans 4.2(e)
Subsidiary 2.2(a)
Superior Acquisition Proposal 7.1(e)
tax, taxes and taxable 5.8
Televisa Recital F
Termination Fee 9.3
Transferred Retirement Plan Participants 7.16(a)(i)
Transferred Savings Plan Participants 7.16(b)(i)
Univisa Recital A
Univisa Contribution Recital A
Univisa Contribution Agreement Recital E
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"),
dated September 20, 1996, is entered into by and among HUGHES COMMUNICATIONS,
INC., a California corporation ("HCI"), HUGHES COMMUNICATIONS GALAXY, INC., a
California corporation ("Galaxy"), HUGHES COMMUNICATIONS SATELLITE SERVICES,
INC., a California corporation ("HCSS"), HUGHES COMMUNICATIONS SERVICES, INC., a
California corporation ("HCS"), HUGHES COMMUNICATIONS CARRIER SERVICES, INC., a
California corporation ("HCCS"), HUGHES COMMUNICATIONS JAPAN, INC., a California
corporation ("HCJ"), MAGELLAN INTERNATIONAL, INC., a Delaware corporation
("Newco") and PANAMSAT CORPORATION, a Delaware corporation ("PAS").
RECITALS
A. The respective Boards of Directors of each of the parties
have approved, and deem it advisable and in the best interests of their
respective companies and stockholders to consummate the reorganization provided
for herein (the "Reorganization"), pursuant to which Newco will acquire the
Galaxy Business (as defined in Section 1.1) and the business of PAS by (i) HCI
causing the contribution of assets and liabilities comprising the Galaxy
Business to Newco in exchange for shares of common stock of Newco (the "Asset
Contribution"), (ii) Satellite Company, L.L.C., a Nevada limited liability
company ("S Company"), contributing its capital stock of Univisa, Inc., a
Delaware corporation ("Univisa"), to Newco in exchange for shares of common
stock of Newco and/or cash (the "Univisa Contribution") and (iii) a subsidiary
of Newco merging with and into PAS (the "Merger").
B. For federal income tax purposes, it is intended that the
Asset Contribution, the Univisa Contribution and the Merger together qualify as
an exchange under the provisions of Section 351 of the United States Internal
Revenue Code of 1986, as amended (the "Code").
C. As a condition and inducement to PAS to enter into this
Agreement (and effect the transactions contemplated hereby) and S Company to
enter into the Univisa Contribution Agreement (as defined in Recital E) and
effect the transactions contemplated thereby, (i) concurrently with the
execution and delivery hereof, Hughes Electronics Corporation, a Delaware
corporation ("HE"), is executing and delivering the Assurance Agreement in the
form attached hereto as Exhibit A (the "Assurance Agreement"), pursuant to which
HE will (a) on or before the Closing Date (as defined in Article III), loan or
cause to be loaned to Newco and/or one or more subsidiaries of Newco (other than
PAS, Univisa, Merger Sub (as defined in Section 2.1) or any of their respective
direct or indirect subsidiaries) sufficient cash funds to pay the cash
consideration payable upon consummation of the Univisa Contribution and the
Merger, (b) cause its subsidiaries to contribute all of the assets and
liabilities comprising the Galaxy Business to Newco and (c) cause HCI, Galaxy,
HCSS, HCS, HCCS and HCJ (each, a "Hughes Party," and collectively, the "Hughes
<PAGE>
Parties") to continue to conduct the Galaxy Business in the ordinary course and
to perform their respective obligations under this Agreement and (ii) on or
before the Closing Date, HE and Newco will enter into an Income Tax
Indemnification and Allocation Agreement (the "Income Tax Agreement") in the
form attached hereto as Exhibit B.
D. As a condition and inducement to Galaxy to enter into this
Agreement (and effect the transactions contemplated hereby), concurrently with
the execution and delivery hereof, all of the beneficial and record holders of
PAS' Class A Common Stock, par value $.01 per share ("Class A Common Stock"),
and S Company, the sole stockholder of Univisa (the holders of Class A Common
Stock and S Company together, the "Principal Stockholders"), are entering into a
stockholders agreement in the form attached hereto as Exhibit C (the "Principal
Stockholders Agreement"), pursuant to which, among other things, the Principal
Stockholders have agreed to vote or cause to be voted the shares of PAS owned
directly or indirectly by such stockholders as of the date of this Agreement in
favor of the transactions contemplated hereby.
E. Newco will, immediately prior to the Merger, acquire the
stock of Univisa, which indirectly owns all of the shares of PAS' Class B Common
Stock, par value $.01 per share ("Class B Common Stock"), by exchanging with S
Company all of the outstanding capital stock of Univisa for shares of common
stock of Newco and/or cash, pursuant to the terms of the Stock Contribution and
Exchange Agreement in the form attached hereto as Exhibit D (the "Univisa
Contribution Agreement").
F. Concurrently with the execution and delivery hereof, PAS,
Grupo Televisa, S.A., a corporation (Sociedad Anonima) organized under the laws
of Mexico ("Televisa"), and S Company are entering into a purchase and sale
agreement in the form attached hereto as Exhibit E (the "DTH Option Purchase
Agreement"), pursuant to which one of Televisa, a designee or Televisa or S
Company, immediately following the Univisa Contribution, will purchase all of
PAS' rights in the DTH Option (as defined in the DTH Option Purchase Agreement).
G. Concurrently with the consummation of the Asset
Contribution, the Univisa Contribution and the Merger, the Principal
Stockholders, HCI and Newco will enter into a Registration Rights Agreement in
the form attached hereto as Exhibit F (the "Registration Rights Agreement")
pursuant to which, among other things, each of the Principal Stockholders and
HCI will have certain registration rights with respect to its shares of Newco
Common Stock.
H. Concurrently with the consummation of the Asset
Contribution, the Univisa Contribution and the Merger, Newco, HCI and the
Principal Stockholders will enter into a stockholder agreement in the form
attached hereto as Exhibit G (the "Stockholder Agreement").
I. HCI, Galaxy, HCSS, HCS, HCCS, HCJ, Newco and PAS desire to
make certain representations, warranties, covenants and agreements in connection
with the transactions contemplated hereby.
<PAGE>
AGREEMENT
In consideration of the foregoing and the mutual promises
herein and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
ARTICLE I
THE ASSET CONTRIBUTION
1.1 Contribution of the Galaxy Business. Subject to the terms and
conditions of this Agreement, at the Closing (as defined in Article III), HCI
shall cause (a) any and all of the assets, properties, interests and rights
owned, leased or used in the Galaxy Business, of every kind and description,
whether located in Galaxy, HCSS, HCS, HCCS or HCJ (collectively, the
"Contributed Entities") or their respective Affiliates (as defined in Section
5.6(b)), including, without limitation, (i) the Galaxy Permits (as defined in
Section 6.6(b)) set forth on Schedule 6.6(b), (ii) the Galaxy Intellectual
Property (as defined in Section 6.12) set forth on Schedule 6.12, (iii) all
Material Contracts (as defined in Section 5.16) relating to the Galaxy Business
set forth on Schedule 6.15, (iv) the Galaxy Owned Real Property and Galaxy
Leased Real Property (as such terms are defined in Section 6.17) set forth on
Schedules 6.17(a) and 6.17(b), respectively, (v) the Galaxy Ground Stations (as
defined in Section 6.18(a)) owned by any of the Contributed Entities, (vi) the
Galaxy Satellites (as defined in Section 6.18(b)) set forth on Schedule 6.18(b),
including all rights to any orbital slots or satellites under construction,
(vii) machinery, equipment, furniture and fixtures located at any of the Galaxy
Owned Real Property or Galaxy Leased Real Property facilities, (viii) all
prepaid expenses, prepaid royalties, advances and deposits, (ix) insurance
policies, premiums or proceeds, including, without limitation, launch and in
orbit insurance as set forth on Schedule 6.11, (x) all rights in and to
indemnity claims relating to the Galaxy Assets and the Galaxy Liabilities (as
hereafter defined), (xi) all records, files and customer lists of the Galaxy
Business, (xii) all accounts receivable, (xiii) all choses in action and other
claims relating to the Galaxy Business, (xiv) all cash and cash equivalents
related to the Galaxy Business, (xv) all other assets included on the Galaxy
Balance Sheet (as defined in Section 6.4) and (xvi) all assets related to the
Galaxy Business created after the date of the Galaxy Balance Sheet, but
specifically excluding certain categories of assets held by Galaxy, HCSS, HCS
and HCCS which are described on Schedule 1.1 (the "Excluded Assets") (all of the
assets, properties, interests and rights used in the Galaxy Business, other than
the Excluded Assets, being referred to herein as the "Galaxy Assets"), and (b)
all direct and indirect liabilities, debts, obligations, commitments, expenses,
claims, deficiencies, guaranties or endorsements of any nature, whether
absolute, accrued, contingent or otherwise, known or unknown, matured or
unmatured, arising out of, in connection with or relating to, the Galaxy
Business, including, without limitation, (i) liabilities included on the Galaxy
Balance Sheet, (ii) liabilities of the type described on the Galaxy Balance
Sheet incurred or recognized since June 30, 1996, but specifically excluding (1)
intercompany indebtedness other than related to the purchase or sale of products
and services to or from Affiliates in the ordinary course of business or
permitted to be paid from the Closed System (as defined in Section 7.24) or
otherwise under this Agreement, and (2) indebtedness for borrowed money incurred
other than in accordance with the terms of this Agreement, (iii) liabilities
arising from the Galaxy Business and not required by generally accepted
accounting practices ("GAAP") to be included on the Galaxy Balance Sheet, (iv)
<PAGE>
liabilities related to the Galaxy Employees or any Galaxy ERISA Plan or Galaxy
Benefit Arrangement, unless otherwise excluded by HCI, in which case HCI shall
provide PAS with notice of its intent to exclude such liability no later than 30
days before the Effective Time (as defined in Section 2.2(b)), and (v)
liabilities incurred under any contract assumed by Newco (collectively, the
"Galaxy Liabilities"), in each case to be transferred, conveyed, assigned and
delivered or assumed by Newco. Notwithstanding the foregoing, the parties
expressly understand and agree that the Galaxy Liabilities shall not include
liabilities arising as a result of the reorganization of the Galaxy Business
that will occur prior to the Closing or as a result of the contribution of the
Galaxy Business to Newco that will occur at the Closing. In order to effect the
foregoing transfer, conveyance, assignment, delivery and assumption, without
limitation, at the Closing: (x) Galaxy and HCSS shall convey, transfer, assign
and deliver to Newco all right, title and interest in and to the Galaxy Assets
owned by them, and (y) HCI shall convey, transfer, assign and deliver to Newco
all of HCI's right, title and interest in and to all of the issued and
outstanding shares of common stock of HCS, HCCS and HCJ. For purposes of this
Agreement, the term "Galaxy Business" means the business of HE or any of HE's
Affiliates existing on the Closing Date relating to (i) the sale or lease of, or
the provision of satellite services via, transponder capacity on satellites
operating in geostationary earth orbit in the C-band, Ka-band and Ku-band
frequencies for the transmission of video, audio and data signals; and (ii) the
provision of telemetry, tracking and control services for such satellites and
for other satellites operating in geostationary earth orbit in the C-band,
Ka-band, Ku-band, L-band and UHF-band frequencies or other frequency bands that
may be utilized in the future; but in each case excluding the sale or lease of
transponder capacity and telemetry, tracking and control services provided on or
for any satellite that has both (x) multiple (six or more) receive and transmit
beams and (y) an on-board satellite payload processor which can switch uplink
signals in one beam to a downlink signal in one of multiple beams.
1.2 Exclusion of Certain Assets and Liabilities. Immediately
prior to the transactions contemplated in Section 1.1, each of HCS, HCCS and HCJ
shall convey, transfer, assign and deliver to one or more entities controlled by
HE (that are not Contributed Entities) all of the right, title and interest of
HCS, HCCS and HCJ in and to Excluded Assets owned by them and all direct and
indirect liabilities, debts, obligations, commitments, expenses, claims,
deficiencies, guaranties or endorsements of any nature, whether absolute,
accrued, contingent or otherwise, known or unknown, matured or unmatured,
arising out of or connected with the Excluded Assets (the "Excluded
Liabilities").
1.3 Issuance of Shares of Newco Common Stock. As consideration
for the Asset Contribution, Newco shall, at the Closing, issue and deliver to
HCI, Galaxy and HCSS, in such proportion as HCI shall determine, an aggregate of
one hundred six million six hundred twenty two thousand eight hundred seven
(106,622,807) shares of common stock, par value $.01 per share, of Newco ("Newco
Common Stock").
1.4 Conveyancing and Assumption Documents. HCI, HCSS and Galaxy
shall, prior to the Closing, enter into all deeds, bills of sale, assignments,
instruments of assumption and other instruments, and obtain all third party and
regulatory consents, in each case necessary to consummate the transactions
<PAGE>
contemplated by this Article I to enable Newco to operate the Galaxy Business in
the manner such business was operated by HCI prior to the Closing Date hereof;
provided that all such instruments shall be in form and substance, and shall be
executed and delivered in a manner, reasonably satisfactory to HCI, Newco and
PAS.
ARTICLE II
THE MERGER
2.1 Organization of the Merger Subsidiary. As promptly as
practicable following the execution of this Agreement, Newco shall cause PAS
Merger Corp. ("Merger Sub") to be organized as a corporation under the Delaware
General Corporation Law (the "DGCL") for the sole purpose of effectuating the
Merger. The Certificate of Incorporation and Bylaws of Merger Sub shall be in
such forms as shall be determined by Newco in consultation with PAS as soon as
practicable following the execution of this Agreement. The authorized capital
stock of Merger Sub shall initially consist of 100 shares of common stock, par
value $.01 per share, which shall be issued to Newco at a price of $1.00 per
share. As promptly as practicable following the execution of this Agreement (but
in no event later than thirty (30) days prior to the Closing Date), Newco shall
designate, in consultation with PAS, the initial directors and officers of
Merger Sub.
2.2 The Merger. Pursuant to a Plan of Merger, in a form to be
mutually agreed upon by HCI and PAS (the "Merger Agreement"), upon the terms and
subject to the conditions set forth in this Agreement and in the Merger
Agreement, at the Closing, Merger Sub shall be merged with and into PAS in
accordance with the applicable provisions of the DGCL. PAS shall be the
surviving corporation in the Merger and shall continue its corporate existence
under the DGCL. As a result of the Merger and the Univisa Contribution, Newco
shall own, directly and indirectly, all of the common stock of PAS. The effects
and consequences of the Merger shall be as set forth herein and in the Merger
Agreement.
(a) As used in this Agreement, the term "Subsidiary," with
respect to any party, means any corporation, partnership, joint venture, other
legal entity or organization, whether incorporated or unincorporated, of which:
(i) such party or any other Subsidiary of such party is a general partner; (ii)
voting power to elect a majority of the Board of Directors or others performing
similar functions with respect to such corporation, partnership, joint venture,
other legal entity or organization is held by such party or by any one or more
of its Subsidiaries, or by such party and any one or more of its Subsidiaries;
or (iii) more than 50% of all classes of equity securities is, directly or
indirectly, owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and any one or more of its Subsidiaries.
(b) As used in this Agreement, the term "Effective Time" shall
mean the time and date which is (i) the later of the date and time of the filing
of the certificate of merger relating to the Merger with the Secretary of State
of the State of Delaware (or such other date and time as may be specified in
such certificate as may be permitted by law) or (ii) such other time and date as
HCI, Newco and PAS may agree.
<PAGE>
2.3 Directors. The directors of Merger Sub immediately prior to
the Effective Time shall be the directors of the surviving corporation in the
Merger as of the Effective Time and until their successors are duly appointed or
elected in accordance with applicable law.
2.4 Officers. The officers of Merger Sub immediately prior to the
Effective Time shall be the officers of the surviving corporation in the Merger
as of the Effective Time and until their successors are duly appointed or
elected in accordance with applicable law.
2.5 Certificate of Incorporation and Bylaws. The Certificate of
Incorporation and Bylaws of PAS in effect at the Effective Time shall be the
Certificate of Incorporation and Bylaws of the surviving corporation in the
Merger until duly amended in accordance with the terms thereof and the DGCL;
provided, that the Certificate of Incorporation of PAS shall be amended,
effective prior to the Univisa Contribution, to provide that, notwithstanding
the Univisa Contribution and the Merger, shares of Class A Common Stock, Class B
Common Stock and PAS's Common Stock, par value $.01 per share (the "PAS Common
Stock") shall retain all rights, privilegCertificate of Incorporation and
Bylaws. The Certificate of Incorporation and Bylaws of PAS in effect at the
Effective Time shall be the Certificate of Incorporation and Bylaws of the
surviving corporation in the Merger until duly amended in accordance with the
terms thereof and the DGCL; provided, that the Certificate of Incorporation of
PAS shall be amended, effective prior to the Univisa Contribution, to provide
that, notwithstanding the Univisa Contribution and the Merger, shares of Class A
Common Stock, Class B Common Stock and PAS's Common Stock, par value $.01 per
share (the "PAS Common Stock") shall retain all rights, privileges and powers
currently possessed by shares of such classes of stock.
2.6 Name. At the Effective Time, Newco will change its corporate
name to "PanAmSat Corporation" and PAS shall change its corporate name to a new
name specified by Newco.
2.7 Actions of Newco. Newco shall (a) execute the Merger
Agreement as the sole stockholder of Merger Sub, (b) cause the directors and
officers of Merger Sub to take such steps as may be necessary or appropriate to
complete the organization of Merger Sub and to approve the Merger Agreement and
(c) cause Merger Sub to perform its obligations under this Agreement and the
Merger Agreement.
ARTICLE III
THE CLOSING
Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Article
IX, the closing of the Asset Contribution, the Univisa Contribution and the
Merger shall take place at 10:00 a.m., New York time, on the seventh business
day following satisfaction or waiver of the conditions set forth in Article VIII
(the "Closing Date"), at the offices of Chadbourne & Parke LLP, New York City,
unless another date, time or place is agreed to in writing by the parties hereto
and the parties to the Univisa Contribution Agreement (the "Closing").
ARTICLE IV
EFFECT OF THE MERGER ON SECURITIES
OF PAS AND MERGER SUB
4.1 Merger Sub Stock. At the Effective Time, the shares of the
common stock of Merger Sub outstanding immediately prior to the Effective Time
shall be converted into and shall become (i) the number of shares of Class A
<PAGE>
Common Stock of the surviving corporation in the Merger that is equal to the
number of shares of, and having terms identical in all respects to, Class A
Common Stock outstanding immediately prior to the Merger and (ii) the number of
shares of Common Stock of the surviving corporation in the Merger that is equal
to the number of shares of, and having terms identical in all respects to, PAS
Common Stock outstanding immediately prior to the Merger.
4.2 Conversion of PAS Shares.
(a) Except as otherwise provided in Section 4.4 and
subject to Sections 4.2(c) and 4.2(d), at the Effective Time, each issued and
outstanding share, other than any share owned by Newco or any Subsidiary of
Newco, of PAS Common Stock and Class A Common Stock (collectively, the "Shares")
shall be converted into, at the election of the holder thereof, one of the
following (as may be adjusted pursuant to Sections 4.4 and 4.6, the "Merger
Consideration"):
(i) for each such Share with respect to which an
election to receive a combination of Newco Common Stock and cash has
been effectively made and not revoked or lost pursuant to Sections
4.3(c), (d) and (e) (a "Standard Election"), the right to receive (x)
an amount in cash equal to one-half of the Standard Cash Consideration
plus (y) one-half (0.5) share of Newco Common Stock (collectively, the
"Standard Consideration"). The "Standard Cash Consideration" means an
amount in cash equal to thirty dollars ($30.00), provided that, if the
Closing shall not have occurred on or prior to the first anniversary of
this Agreement, the Standard Cash Consideration shall be increased at a
rate equal to 9% per annum from and including the first anniversary
date to but excluding the Closing Date; or
(ii) for each such Share with respect to which an
election to receive solely Newco Common Stock has been effectively made
and not revoked or lost pursuant to Sections 4.3(c), (d) and (e) (a
"Stock Election"), the right to receive one (1) share of Newco Common
Stock (the "Stock Consideration"); or
(iii) for each such Share with respect to which an
election to receive solely cash has been effectively made and not
revoked or lost pursuant to Sections 4.3(c), (d) and (e) (a "Cash
Election"), the right to receive the Standard Cash Consideration.
(b) As a result of the Merger and without any action on
the part of the holder thereof, at the Effective Time, (i) all Shares held by
any person other than Newco (or any Subsidiary of Newco) shall cease to be
outstanding and shall be cancelled and retired and shall cease to exist, and
each such holder of Shares shall thereafter cease to have any rights with
respect to such Shares, except the right to receive, without interest, the
Merger Consideration and cash in lieu of fractional shares of Newco Common Stock
in accordance with Section 4.5(c) upon the surrender of a certificate
representing such Shares (a "Share Certificate") and (ii) all outstanding shares
of Class B Common Stock shall continue to be indirectly held by Univisa.
<PAGE>
(c) Notwithstanding anything contained in this Section
4.2 to the contrary, each Share issued and held in PAS' treasury immediately
prior to the Effective Time shall, by virtue of the Merger, cease to be
outstanding and shall be cancelled and retired without payment of any
consideration therefor.
(d) Notwithstanding anything in this Section 4.2 to the
contrary, Shares which are issued and outstanding immediately prior to the
Effective Time and which are held by stockholders who have not voted such shares
in favor of the Merger and who shall have properly exercised their rights of
appraisal for such shares in the manner provided by the DGCL (the "Dissenting
Shares") shall be deemed to have made a Cash Election for purposes of Section
4.4, but shall not be converted into or be exchangeable for the right to receive
the Merger Consideration, unless and until such holder shall have failed to
perfect or shall have effectively withdrawn or lost his right to appraisal and
payment, as the case may be. If such holder shall have so failed to perfect or
shall have effectively withdrawn or lost such right, his shares shall thereupon
be deemed to have been converted into and to have become exchangeable for, at
the Effective Time, the right to receive the Standard Consideration, without any
interest thereon. PAS shall give Newco prompt notice of any Dissenting Shares
(and shall also give Newco prompt notice of any withdrawals of such demands for
appraisal rights) and Newco shall have the right to direct all negotiations and
proceedings with respect to any such demands. Neither PAS nor the corporation
surviving the Merger shall, except with the prior written consent of Newco,
voluntarily make any payment with respect to, or settle or offer to settle, any
such demand for appraisal rights.
(e) At the Effective Time, each holder of a
then-outstanding option to purchase Shares under PAS' Long-Term Stock Investment
Plan and the Option Agreements between PAS and certain of its executive officers
and other employees (collectively, the "Stock Option Plans"), whether or not
then exercisable (the "Options"), shall, in settlement thereof, receive for each
Share subject to such Option an amount (subject to any applicable withholding
tax) in cash equal to the difference between (i) the Standard Cash Consideration
and (ii) the per Share exercise price of such Option to the extent such
difference is a positive number (such amount being hereinafter referred to as,
the "Option Consideration"); provided, however, that with respect to any person
subject to Section 16(b) of the Securities Exchange Act of 1934, as amended,
(the "Exchange Act"), any such amount shall be paid as soon as practicable after
the first date payment can be made without liability to such person under
Section 16(b) of the Exchange Act. Upon receipt of the Option Consideration, the
Option shall be canceled. The surrender of an Option to PAS in exchange for the
Option Consideration shall be deemed a release of any and all rights the holder
had or may have had in respect of such Option. Prior to the Effective Time, PAS
shall obtain all necessary consents or releases from holders of Options under
the Stock Option Plans and take all such other lawful action as may be necessary
to give effect to the transactions contemplated by this Section 4.2(e) (except
for any such action that may require the approval of PAS' stockholders). Except
as otherwise agreed to by the parties, (i) the Stock Option Plans shall
terminate as of the Effective Time and the provisions in any other plan, program
or arrangement providing for the issuance or grant of any other interest in
respect of the capital stock of PAS or any Subsidiary thereof, shall be canceled
as of the Effective Time, and (ii) PAS shall assure that following the Effective
Time no participant in the Stock Option Plans or other plans, programs or
arrangements shall have any right thereunder to acquire equity securities of
<PAGE>
PAS, the corporation surviving the Merger or any Subsidiary thereof and to
terminate all such plans.
4.3 Elections by Holders of Shares.
(a) Each person who, at the Effective Time, is a record
holder of Shares (other than holders of Shares to be cancelled as set forth in
Section 4.2(c) or Dissenting Shares) shall have the right to submit an Election
Form (as defined in Section 4.3(c)) specifying the number of Shares that such
person desires to have converted into the right to receive Newco Common Stock
and cash pursuant to the Standard Election, the number of Shares that such
person desires to have converted into the right to receive Newco Common Stock
pursuant to a Stock Election and the number of Shares that such person desires
to have converted into the right to receive cash pursuant to a Cash Election.
(b) Promptly after the Allocation Determination (as
defined in Section 4.3(d)), Newco shall deposit (or cause to be deposited) with
a bank or trust company to be designated by HCI and reasonably acceptable to PAS
(the "Exchange Agent"), for the benefit of the holders of Shares and S Company,
for exchange in accordance with this Article IV and the Univisa Contribution
Agreement, (i) cash in the amount sufficient to pay the aggregate cash portion
of the Merger Consideration and the consideration payable in the Univisa
Contribution and (ii) certificates representing the shares of Newco Common Stock
("Newco Certificates") for exchange in accordance with this Article IV and the
Univisa Contribution Agreement (the cash and shares deposited pursuant to
clauses (i) and (ii) being hereinafter referred to as the "Exchange Fund").
Newco Common Stock into which Shares shall be converted pursuant to the Merger
shall be deemed to have been issued at the Effective Time.
(c) As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of Shares
immediately prior to the Effective Time (excluding any Shares which will be
cancelled pursuant to Section 4.2(c) or Dissenting Shares) (A) a letter of
transmittal (the "Letter of Transmittal") (which shall specify that delivery
shall be effected, and risk of loss and title to Share Certificates shall pass,
only upon delivery of such Share Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Newco shall specify), (B)
instructions for use in effecting the surrender of Share Certificates in
exchange for the Merger Consideration with respect to the Shares formerly
represented thereby, and (C) an election form (the "Election Form") providing
for such holders to make the Standard Election, the Stock Election or the Cash
Election. As of the Election Deadline (as defined in Section 4.3(d)), all
holders of Shares immediately prior to the Effective Time that shall not have
submitted to the Exchange Agent or shall have properly revoked an effective,
properly completed Election Form shall be deemed to have made a Standard
Election.
(d) Any Standard Election, Stock Election or Cash
Election shall have been validly made only if the Exchange Agent shall have
received by 5:00 p.m. New York time on a date (the "Election Deadline") to be
mutually agreed upon by HCI, Newco and PAS, an Election Form properly completed
and executed (with the signature or signatures thereof guaranteed to the extent
required by the Election Form) by such holder accompanied by such holder's Share
<PAGE>
Certificates, or by an appropriate guarantee of delivery of such Share
Certificates from a member of any registered national securities exchange or of
the National Association of Securities Dealers, Inc. or a commercial bank or
trust company in the United States as set forth in such Election Form. Any
holder of Shares who has made an election by submitting an Election Form to the
Exchange Agent may, at any time prior to the Election Deadline, change such
holder's election by submitting a revised Election Form, properly completed and
signed that is received by the Exchange Agent prior to the Election Deadline.
Any holder of PAS Common Stock may at any time prior to the Election Deadline
revoke his election and withdraw his Share Certificates deposited with the
Exchange Agent by written notice to the Exchange Agent received by the close of
business on the day prior to the Election Deadline. As soon as practicable after
the Election Deadline, the Exchange Agent shall determine the allocation of the
cash portion of the Merger Consideration and the stock portion of the Merger
Consideration and shall notify Newco of its determination (the "Allocation
Determination").
(e) Upon surrender of a Share Certificate for
cancellation to the Exchange Agent, together with the Letter of Transmittal duly
executed, and such other documents as Newco or the Exchange Agent shall
reasonably request, the holder of such Share Certificate shall be entitled to
receive promptly after the Allocation Determination in exchange therefor (A) a
certified or bank cashier's check in the amount equal to the cash, if any, which
such holder has the right to receive pursuant to the provisions of this Article
IV (including any cash in lieu of fractional shares of Newco Common Stock
pursuant to Section 4.5(c)), and (B) a Newco Certificate representing that
number of shares of Newco Common Stock, if any, which such holder has the right
to receive pursuant to this Article IV (in each case less the amount of any
required withholding taxes), and the Share Certificate so surrendered shall
forthwith be cancelled. Until surrendered as contemplated by this Section
4.3(e), each Share Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive the Merger Consideration with
respect to the Shares formerly represented thereby.
(f) Newco shall have the right to make reasonable
rules, not inconsistent with the terms of this Agreement, governing the validity
of the Election Forms, the manner and extent to which Standard Elections, Stock
Elections or Cash Elections are to be taken into account in making the
determinations prescribed by Section 4.4, the issuance and delivery of
certificates for Newco Common Stock into which Shares are converted in the
Merger, and the payment of cash for Shares converted into the right to receive
cash in the Merger.
(g) Notwithstanding the foregoing provisions of this
Section 4.3, the parties hereto may decide to distribute Election Forms to PAS'
stockholders and require that holders making such elections respond prior to the
Merger, upon such additional terms and conditions as may be agreed to by the
parties.
<PAGE>
4.4 Proration.
(a) As is more fully set forth below and except as may
be paid pursuant to Section 4.5 or otherwise in respect of Dissenting Shares,
the aggregate amount of cash to be paid in the Merger and in the Univisa
Contribution (other than the cash payment of $225 million provided for in the
last sentence of Section 1.2(a) of the Univisa Contribution Agreement) shall not
exceed the product of (x) one-half (1/2) of the Standard Cash Consideration and
(y) the aggregate number of shares of PAS Common Stock, Class A Common Stock and
Class B Common Stock issued and outstanding immediately prior to the Effective
Time (such product, the "Maximum Cash Amount").
(b) In the event that the sum of the aggregate amount
of cash represented by the Cash Elections hereunder (including Cash Elections
deemed to have been made with respect to Dissenting Shares) and under the
Univisa Contribution Agreement received by the Exchange Agent (such sum, the
"Requested Cash Amount") exceeds the Maximum Cash Amount minus the aggregate
amount of cash payable on account of all Standard Elections made or deemed to
have been made hereunder or under the Univisa Contribution Agreement (such
difference, the "Cash Cap"), each holder making (or deemed to make) a Cash
Election hereunder or under the Univisa Contribution Agreement shall receive,
for each Share or Value Unit (as such term is defined in the Univisa
Contribution Agreement), as the case may be, with respect to which a Cash
Election has been made (or is deemed to have been made) hereunder or under the
Univisa Contribution Agreement, (x) cash in an amount equal to the Prorated Cash
Amount and (y) a number of shares of Newco Common Stock equal to a fraction, the
numerator of which is equal to the Standard Cash Consideration minus the
Prorated Cash Amount and the denominator of which is the Standard Cash
Consideration. The term "Prorated Cash Amount" means the greater of (i) one-half
(1/2) of the Standard Cash Consideration and (ii) the product of the Standard
Cash Consideration and a fraction, the numerator of which is the Cash Cap and
the denominator of which is the Requested Cash Amount.
(c) The aggregate number of shares of Newco Common
Stock that may be issued pursuant to Stock Elections hereunder and under the
Univisa Contribution Agreement is not subject to any maximum. In the event that
the Requested Cash Amount is less than the Cash Cap, each holder making a Stock
Election hereunder or under the Univisa Contribution Agreement shall receive, at
the option of Newco, for each Share or Value Unit, as the case may be, with
respect to which a Stock Election has been made hereunder or under the Univisa
Contribution Agreement, (x) not more than the Stock Consideration and not less
than a number of shares of Newco Common Stock equal to a fraction the numerator
of which is the Requested Stock Amount minus the difference between the Cash Cap
and the Requested Cash Amount, and the denominator of which is the Requested
Stock Amount (such whole or fractional share, the "Prorated Stock Amount") and
(y) cash in an amount equal to the product of (A) the Standard Cash
Consideration and (B) one minus the Prorated Stock Amount. The term "Requested
Stock Amount" means the product of the aggregate number of shares of Newco
Common Stock represented by Stock Elections hereunder or under the Univisa
Contribution Agreement received by the Exchange Agent and the Standard Cash
Consideration.
<PAGE>
4.5 Dividends, Fractional Shares, Etc.
(a) Notwithstanding any other provisions of this
Agreement, no dividends or other distributions declared after the Effective Time
on Newco Common Stock shall be paid with respect to any Shares which, prior to
the Effective Time, were represented by a Share Certificate until such Share
Certificate is surrendered for exchange as provided herein. Subject to the
effect of applicable Laws (as defined in Section 5.6(a)), following surrender of
any such Share Certificate, there shall be paid to the holder of the Newco
Certificates issued in exchange therefor, without interest, (i) at the time of
such surrender, the amount of dividends or other distributions with a record
date after the Effective Time theretofore payable with respect to such whole
shares of Newco Common Stock and not paid, less the amount of any withholding
taxes which may be required thereon, and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent to surrender
payable with respect to such whole shares of Newco Common Stock, less the amount
of any withholding taxes which may be required thereon.
(b) At or after the Effective Time, there shall be no
transfers on the stock transfer books of PAS of the Share Certificates which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates formerly representing any such Shares are presented
to the surviving corporation in the Merger, they shall be cancelled and
exchanged for certificates for the consideration, if any, deliverable in respect
thereof pursuant to this Agreement in accordance with the procedures set forth
in this Article IV. Share Certificates surrendered for exchange by any person
constituting an "affiliate" of PAS for purposes of Rule 145(c) under the
Securities Act of 1933, as amended (the "Securities Act"), shall not be
exchanged until Newco has received a written agreement from such person as
provided in Section 7.14.
(c) No fractional shares of Newco Common Stock shall be
issued pursuant to the Merger or the Univisa Contribution. In lieu of the
issuance of any fractional share of Newco Common Stock pursuant to the Merger or
the Univisa Contribution, cash adjustments will be paid to holders in respect of
any fractional share of Newco Common Stock that would otherwise be issuable, and
the amount of such cash adjustment shall be equal to the product of such
fractional amount and the Standard Cash Consideration.
(d) Any portion of the Exchange Fund (including the
proceeds of any investments thereof and any shares of Newco Common Stock) that
remains unclaimed by the former stockholders of PAS six months after the
Effective Time shall be delivered to Newco. Any former stockholder of PAS who
has not theretofore complied with this Article IV shall thereafter look only to
Newco for payment of the consideration payable on account of the Univisa
Contribution or the Merger, as the case may be, cash in lieu of fractional
shares and unpaid dividends and distributions on the Newco Common Stock
deliverable in respect of each share such stockholder holds as determined
pursuant to this Agreement, in each case without any interest thereon.
(e) None of HCI, its Affiliates, PAS, Newco, the
Exchange Agent or any other person shall be liable to any former holder of
Shares or shares of Class B Common Stock for any amount properly delivered to a
<PAGE>
public official pursuant to applicable abandoned property, escheat or similar
laws.
(f) In the event that any Share Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Share Certificate to be lost, stolen or destroyed and,
if required by Newco, the posting by such person of a bond in such reasonable
amount as Newco may direct as indemnity against any claim that may be made
against it with respect to such Share Certificate, the Exchange Agent will issue
in exchange for such lost, stolen or destroyed Share Certificate the applicable
Merger Consideration, cash in lieu of fractional shares, and unpaid dividends
and distributions on Shares as provided in this Section 4.5, deliverable in
respect thereof pursuant to this Agreement.
4.6 Certain Additional Prorations. In the event that the
aggregate number of shares of Newco Common Stock for which Value Units were to
be exchanged pursuant to Section 1.2(a) of the Univisa Contribution Agreement
would otherwise be less than seven million five hundred thousand (7,500,000)
(after giving effect to any prorations pursuant to Section 4.4, if applicable),
then notwithstanding anything to the contrary contained in this Agreement or in
the Univisa Contribution Agreement, (i) a number of Value Units equal to seven
million five hundred thousand (7,500,000) minus the aggregate number of shares
of Newco Common Stock for which Value Units would otherwise be exchanged
pursuant to Section 1.2(a) of the Univisa Contribution Agreement (after giving
effect to any prorations pursuant to Section 4.4, if applicable) (such
difference, the "SPOT Difference") shall be exchanged for Newco Common Stock
(after giving effect to any prorations pursuant to Section 4.4, if applicable),
(ii) the aggregate amount of cash for which Value Units were otherwise to be
exchanged pursuant to Section 1.2(a) of the Univisa Contribution Agreement
(after giving effect to any prorations pursuant to Section 4.4, if applicable)
shall be reduced by an amount equal to the product of the SPOT Difference and
the Standard Cash Consideration, and (iii) the aggregate number of Shares with
respect to which Cash Elections or Stock Elections were made hereunder shall be
adjusted in accordance with Section 4.4, if applicable, giving effect (a) first,
to the Shares as to which a Cash Election was made but which were to be
converted into the right to receive shares of Newco Common Stock in lieu of cash
in accordance with Section 4.4(b), and (b) second, to all other Shares as to
which a Stock Election was made.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PAS
PAS represents and warrants to each of the Hughes Parties as
follows:
5.1 Organization, Standing and Power. Each of PAS and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation, has all
requisite corporate power and authority necessary to own, lease and operate its
properties and to carry on its business as now being conducted, and is duly
qualified, and in good standing to own, lease and operate its properties and to
conduct business in each jurisdiction, domestic and foreign, in which the
business it is conducting, or the operation, ownership or leasing of its
properties, makes such qualification necessary, other than in such jurisdictions
<PAGE>
where the failure to so qualify or be in good standing is not likely to have a
material adverse effect on PAS and its Subsidiaries, taken as a whole. PAS and
each of its Subsidiaries has heretofore made available to HCI true, complete and
correct copies of its Certificate of Incorporation and Bylaws as currently in
effect together with all amendments thereto. No resolution has been adopted to
amend any of such Certificates of Incorporation or Bylaws except as expressly
called for by this Agreement. None of PAS or its Subsidiaries (i) has been
dissolved, adopted resolutions to dissolve or acted in any way to accomplish,
request or approve such dissolution, (ii) is a party to any merger or (iii) has
been declared bankrupt, and, to PAS' knowledge, no action or request is pending
to declare it bankrupt. PAS has made available to HCI minute books for each of
PAS and its Subsidiaries which contain complete and accurate records in all
material respects of all meetings, or consents in lieu thereof, of the
stockholders and the Board of Directors (including committees thereof) of each
such entity since its date of formation. As used in this Agreement, any
reference to any event, change or effect having a "material adverse effect" on
any person or entity means (i) such event, change or effect, individually or in
the aggregate with other events, changes, or effects, is materially adverse to
the financial condition, business, results of operations, assets, liabilities,
properties or prospects of such person or entity and (ii) such event, change or
effect, individually, or in the aggregate with other events, changes or effects,
would impair the right or ability of the parties hereto and thereto to
consummate the transactions contemplated hereby and by the Related Agreements
(as defined in Section 7.9).
5.2 Capital Structure. As of the date hereof, the authorized
capital stock of PAS consists of 100,000,000 shares of Class A Common Stock,
100,000,000 shares of Class B Common Stock, 400,000,000 shares of PAS Common
Stock and 20,000,000 shares of Preferred Stock, $.01 par value per share ("PAS
Preferred Stock"). At the close of business on September 1, 1996: (i) 40,459,432
shares of Class A Common Stock, 40,459,431 shares of Class B Common Stock,
19,081,137 shares of PAS Common Stock and 311,132.777 shares of PAS Preferred
Stock were issued and outstanding, 1,065,225 shares of PAS Common Stock were
reserved for issuance pursuant to currently outstanding options pursuant to the
Stock Option Plans, and, except for the issuance of shares of PAS Common Stock
pursuant to the exercise of the Options and except as set forth on Schedule 5.2,
there are no employment, executive termination or similar agreements providing
for the issuance of any shares of Class A Common Stock, Class B Common Stock,
PAS Common Stock or PAS Preferred Stock; (ii) no shares of Class A Common Stock,
Class B Common Stock, PAS Common Stock or PAS Preferred Stock were held by PAS
or any of its Subsidiaries; and (iii) except as set forth on Schedule 5.2, no
bonds, debentures, notes or other instruments or evidence of indebtedness having
the right to vote (or convertible into, or exercisable or exchangeable for,
securities having the right to vote) on any matters on which stockholders of PAS
may vote ("PAS Voting Debt") were issued or outstanding. All outstanding shares
of the capital stock of PAS and the outstanding capital stock of each of PAS'
Subsidiaries and all such shares which may be issued upon the exercise of
outstanding options and warrants are validly issued, fully paid and
nonassessable and no such shares are subject to preemptive or other similar
rights. Except as set forth on Schedule 5.2, all outstanding shares of capital
stock of PAS' Subsidiaries are owned by PAS or a direct or indirect wholly-owned
Subsidiary of PAS, free and clear of all liens, charges, encumbrances, claims
and options of any nature. Except as set forth on Schedule 5.2, neither PAS nor
<PAGE>
any of PAS' Subsidiaries (i) beneficially owns any capital shares or has any
other record or beneficial equity or other ownership or interest in any
corporation, partnership, joint venture, association or other entity or business
enterprise or (ii) has any commitment to contribute to the capital of, make
loans to, or share the losses of any person or entity (other than any of PAS or
any of its Subsidiaries). Except as set forth in this Section 5.2 and except for
changes since September 1, 1996 resulting from the exercise of stock options
granted pursuant to the Stock Option Plans, there are outstanding: (i) no shares
of capital stock, PAS Voting Debt or other voting securities of PAS authorized,
issued or outstanding; (ii) no securities of PAS or any Subsidiary of PAS
convertible into, or exchangeable or exercisable for, shares of capital stock,
PAS Voting Debt or other voting securities of PAS or any Subsidiary of PAS; and
(iii) no options, warrants, calls, rights (including preemptive rights),
commitments or agreements to which PAS or any Subsidiary of PAS is a party or by
which it is bound, in any case obligating PAS or any Subsidiary of PAS to issue,
deliver, sell, purchase, redeem or acquire, or cause to be issued, delivered,
sold, purchased, redeemed or acquired, additional shares of capital stock of PAS
or any PAS Voting Debt or other voting securities of PAS or of any Subsidiary of
PAS, or obligating PAS or any Subsidiary of PAS to grant, extend or enter into
any such option, warrant, call, right, convertible security, commitment or
agreement. Since September 1, 1996, PAS has not (i) granted any options,
warrants or rights to purchase shares of capital stock of PAS or (ii) amended or
repriced any Option or the Stock Option Plans, and set forth on Schedule 5.2 is
a list of all outstanding options, warrants and rights to purchase shares of
capital stock of PAS and the exercise prices relating thereto. Except as set
forth on Schedule 5.2, there are not as of the date hereof and there will not be
at the Effective Time any stockholder agreements, voting trusts or other
agreements or understandings to which PAS or any of its Subsidiaries is a party
or by which any such entity is bound relating to the voting of any shares of the
capital stock of PAS or any of its Subsidiaries. Except as set forth on Schedule
5.2, there are no restrictions on PAS to vote the stock of any of its
Subsidiaries. Except as granted in connection with the transactions contemplated
by this Agreement, no person has any rights to cause PAS or its Subsidiaries to
register with the United States Securities and Exchange Commission (the "SEC")
any securities of PAS or any of its Subsidiaries.
5.3 Authority; No Violations; Consents and Approvals.
(a) PAS has all requisite corporate power and authority
to execute and deliver this Agreement and the Related Agreements to which it is
a party and to perform its obligations hereunder and thereunder and to effect
the transactions contemplated hereby and thereby, and subject to PAS Stockholder
Approval (as defined in Section 5.3(c)), to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the Related Agreements to which PAS is a party and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of PAS, subject, if required with respect
to consummation of the Merger, to PAS Stockholder Approval. Each of this
Agreement and the Related Agreements to which PAS is a party has been duly
executed and delivered by PAS and, subject, if required with respect to
consummation of the Merger, to PAS Stockholder Approval, and assuming that each
of this Agreement and the Related Agreements to which PAS is a party constitutes
the valid and binding agreement of the other parties thereto, and subject to
obtaining all necessary approvals by Government Entities, constitutes a valid
<PAGE>
and binding obligation of PAS enforceable in accordance with its terms except
that the enforcement hereby may be limited by (a) bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (b) general
"principles of equity" (regardless of whether enforceability is considered in a
proceeding at law or in equity) (the foregoing exception, the "Bankruptcy
Exception"). For purposes of this Agreement, the term "Government Entity" means
any legislative, executive, judicial, regulatory or other governmental or
quasi-governmental authority, instrumentality or body, whether domestic or
foreign, local, state, federal or other, including, without limitation, any
administrative agency, commission or court.
(b) The execution, delivery and performance by PAS of
each of this Agreement and the Related Agreements to which PAS is a party does
not, and the consummation by PAS of the transactions contemplated hereby and
thereby will not, (x) conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both) which is likely to have a
material adverse effect on PAS and its Subsidiaries, taken as a whole, or give
rise to a right of termination, cancellation or acceleration of any obligation
or the loss of a material benefit, or the creation of a material lien, pledge,
security interest or other encumbrance on assets or property, or right of first
refusal with respect to any material asset or property (any such conflict,
violation, default, right of termination, cancellation or acceleration, loss,
creation or right of first refusal, a "PAS Violation"), under or pursuant to any
provision of the respective Certificate of Incorporation or Bylaws of PAS or
equivalent constituent document of any of its Subsidiaries or, (y) except as to
which requisite waivers or consents have been obtained and, except as set forth
on Schedule 5.3(b) hereto and assuming the consents, approvals, authorizations
or permits and filings or notifications referred to in paragraph (c) of this
Section 5.3 are duly and timely obtained or made and, if required, PAS
Stockholder Approval is obtained, result in any PAS Violation of any Material
Contract, PAS ERISA Plan (as defined in Section 5.9(c)(i)), PAS Benefit
Arrangement (as defined in Section 5.9(c)(ii)), PAS Permit (as defined in
Section 5.6(b)), or Law applicable to PAS or any of its Subsidiaries or any of
their respective properties or assets; provided, however, that nothing in this
Section 5.3 will be deemed to constitute a representation or warranty by PAS as
to any antitrust law or requirement. The Board of Directors of PAS has taken all
actions necessary under the DGCL, including approving the transactions
contemplated by this Agreement and the Related Agreements, to ensure that
Section 203 of the DGCL and the provisions of any other state takeover laws do
not, and will not, apply to the transactions contemplated hereby and thereby. No
vote of the holders of the PAS Preferred Stock is required to consummate the
Asset Contribution, the Univisa Contribution, the Merger or any of the other
transactions contemplated hereby.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, notice to, or permit from any
Government Entity, is required by or with respect to PAS or any of its
Subsidiaries in connection with the execution and delivery by PAS of any of this
Agreement or the Related Agreements to which PAS is a party or the consummation
by PAS of the transactions contemplated hereby and thereby, which if not
obtained or made is likely to have a material adverse effect on PAS' ability to
consummate the transactions contemplated hereby and thereby, except for: (A) the
filing of a premerger notification and report form by PAS under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
<PAGE>
and regulations thereunder (the "HSR Act") and the expiration or termination of
the applicable waiting period thereunder; (B) the filing with the SEC of (x) the
Proxy Statement/Prospectus and related Registration Statement (as such terms are
defined in Section 7.5) relating to a meeting of the holders of shares of common
stock of PAS to adopt this Agreement (the "PAS Stockholder Approval") and (y)
such reports under and such other compliance with the Exchange Act and the rules
and regulations thereunder, as may be required in connection with this Agreement
and the Related Agreements to which PAS is a party and the transactions
contemplated hereby and thereby; (C) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware; (D) such filings and
approvals as may be required by any applicable state securities, "blue sky" or
takeover laws; (E) such filings and approvals as may be required by any foreign
premerger notification Laws; (F) such consents, approvals, orders,
authorizations and filings required under any environmental, health or safety
law; (G) the filing with the FCC of (x) the applications and waiver requests
described in Section 7.9(c), (y) any requisite post Closing amendments to
pending FCC applications filed by PAS and its Subsidiaries, reflecting (subject
to FCC consent and consummation) the Asset Contribution, the Univisa
Contribution and the Merger, and (z) associated filings with the FCC that do not
require the FCC's consent or approval; and (H) such other consents, approvals,
orders, authorizations, registrations, declarations, filings, notices and
Permits (as defined in Section 5.6(a)) set forth on Schedule 5.3(c).
5.4 SEC Documents. PAS has made available to HCI a true and
complete copy of each form, report, schedule, registration statement and
definitive proxy statement filed by PAS with the SEC since July 29, 1993 and
prior to the date of this Agreement (the "PAS SEC Documents"), which are all the
documents (other than preliminary material) that PAS was required to file with
the SEC since such date. As of their respective dates, or, if required to be
amended, as of the date of the last such amendment, (i) the PAS SEC Documents
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such PAS SEC Documents, and (ii) none of the PAS SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Each of the financial statements of PAS included in the PAS SEC
Documents have been prepared from, and are in accordance with, the books and
records of PAS and/or its consolidated Subsidiaries, comply in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, were prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and present fairly, in all material
respects, in accordance with applicable requirements of GAAP, the consolidated
financial position of PAS and its consolidated Subsidiaries as of their
respective dates and the consolidated results of operations and the consolidated
cash flows of PAS and its consolidated Subsidiaries for the periods presented
therein. No Subsidiary of PAS is required to file any form, report or other
document with the SEC. The books and all other financial records of PAS and each
of its Subsidiaries are complete and correct in all material respects.
<PAGE>
5.5 Information Supplied. The Proxy Statement/Prospectus (as
defined in Section 7.5), or any amendment thereof or supplement thereto, will
not, on the date it is first mailed to PAS' stockholders or at the time of PAS'
stockholders meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading; provided, however, that no representation is made by PAS
with respect to statements made therein based on information supplied by any
Hughes Party for inclusion in the Proxy Statement/Prospectus. The information
supplied by PAS for inclusion in each Registration Statement (as defined in
Section 7.5) will not, on the date it is first filed with the SEC and as of the
date it becomes effective, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. Subject to the proviso set forth in the second
preceding sentence, the Proxy Statement/Prospectus, will comply as to form, in
all material respects, with the provisions of the Exchange Act and the rules and
regulations thereunder.
5.6 Compliance with Laws.
(a) Except as disclosed on Schedule 5.6(a) or the PAS
SEC Documents, the businesses of PAS and its Subsidiaries are not being
conducted in violation of any Law the violation of which is likely to have a
material adverse effect on PAS or any of its Subsidiaries. Except as disclosed
on Schedule 5.6(a), no material investigation or review by any Government Entity
with respect to PAS, any of its Subsidiaries or their respective businesses is
pending or, to the best knowledge of PAS, threatened and PAS has not received
any written citation or notification alleging any violation of any Law or Permit
the continuing violation of which is likely to have a material adverse effect on
PAS or any of its Subsidiaries. As used in this Agreement, the term "Law" means
any applicable domestic or foreign, federal, state or local laws, statutes,
regulations, rules, codes, ordinances, orders and governmental licenses,
franchises, permits and governmental authorizations enacted, adopted, issued or
promulgated by any Government Entity (including, without limitation, to the
extent applicable, those pertaining to communications, broadcasting, consumer
protection, building, zoning, environmental and occupational safety and health
requirements and all requirements of the Communications Act of 1934, as amended,
or any successor statute, and the rules and regulations of the FCC promulgated
thereunder) or common law. As used in this Agreement, the term "Permits" means
all permits (including conditional use permits), licenses, franchises,
approvals, certificates, concessions, privileges, immunities, consents or other
authorizations issued or authorized by any Government Entity.
(b) Set forth on Schedule 5.6(b) is a true and complete
list of all Permits issued to or held by PAS or any of its Subsidiaries (as
amended or modified), except for Permits which are immaterial to the assets or
business of PAS or any of its Subsidiaries (collectively, the "PAS Permits");
provided, however, that notwithstanding the foregoing materiality threshold,
Schedule 5.6(b) lists (i) all Permits issued by the FCC to PAS or any of its
Subsidiaries, (ii) all Permits, whether or not issued by the FCC, authorizing
the construction, launch or operation of the PAS Satellites or the PAS Ground
Stations (other than Permits granted or issued by local or municipal Government
Entities, such as building permits, local occupancy permits or zoning
regulations, which are not material to PAS and its Subsidiaries, taken as a
<PAGE>
whole), and (iii) all Permits issued to PAS or any of its Subsidiaries by
Government Entities that regulate broadcasting or communications, authorizing
any of PAS or its Subsidiaries to provide broadcasting or communications
services. Schedule 5.6(b) also sets forth a true and complete list of all
pending applications for Permits that would be PAS Permits if issued or granted
and all pending applications by PAS or its Subsidiaries for modification,
extension or renewal of PAS Permits. The PAS Permits are all of the Permits
required to be issued to or held by PAS or its Subsidiaries in order to allow
PAS and its Subsidiaries to own or lease their respective assets and to lawfully
conduct their respective businesses, including, without limitation, the
construction, launch and operation of, and transmitting to and from, each of the
PAS Satellites and the PAS Ground Stations (as such terms are defined in Section
5.19(a)) and the provision of broadcasting or communications services, except
where the failure to possess any such Permit is not likely to have a material
adverse effect on PAS and its Subsidiaries, taken as a whole. Notwithstanding
the generality of the preceding paragraph, except as set forth on Schedule
5.6(b), each of PAS and its Subsidiaries has fulfilled and complied in all
material respects with its obligations under each of the PAS Permits owned, held
or possessed by it, and no event has occurred or condition or state of facts
exists which constitutes or, after notice or lapse of time or both, would
constitute a breach or default under any PAS Permit and which permits or, after
notice or lapse of time or both, would permit revocation or termination of any
such PAS Permit, and neither PAS nor any of its Subsidiaries has received or has
knowledge of any written notice of cancellation or default or of any dispute
concerning any such PAS Permit, or of any such event, condition or state of
facts where the effect thereof would be material to PAS and its Subsidiaries,
taken as a whole. Each of the PAS Permits is validly held by the entities listed
on Schedule 5.6(b), is in full force and effect in all material respects, is
free and clear of all Liens (other than Permitted Liens), is unimpaired by acts
or omission of PAS or its employees, partners or Affiliates, will expire on the
date shown on Schedule 5.6(b), is valid for the balance of its current term, and
is not subject to any restriction or condition that limits in any material
respect the full operation of PAS' business as now operated. Except as set forth
on Schedule 5.6(b) and for rulemaking proceedings affecting the satellite
industry in general, no complaints, proceedings or applications are pending, or
to PAS' best knowledge, threatened, at the FCC or any other Government Entity,
that would result in the revocation, forfeiture, adverse modification,
non-renewal or suspension of any of the PAS Permits, the denial of any pending
application by PAS or its Affiliates for a Permit or a modification, extension
or renewal thereof, the issuance against PAS of any cease and desist order, or
the imposition of any administrative actions by the FCC or any other Government
Entity with respect to the PAS Permits, or that would adversely affect the
ability of the corporation surviving the Merger to continue to operate the
business of PAS and its Subsidiaries as currently operated by such parties.
Except as set forth on Schedule 5.6(b), PAS has not received any complaint that
any of the PAS Satellites or the PAS Ground Stations is causing objectionable
interference to the transmissions or reception of any other radio communications
facility, and to PAS' best knowledge, no other radio communications facility is
causing objectionable interference to the transmissions from or the receipt of
signals by any PAS Satellite or PAS Ground Station. Except as set forth on
Schedule 5.6(b), none of the PAS Permits that has been issued prior to the date
hereof is the subject of any pending renewal application; no renewal of any PAS
Permit issued by the FCC would constitute a major environmental action under the
FCC Rules excluding the impact of the FCC's new RF radiation rules adopted by
the FCC in ET Docket No. 93-62 on August 1, 1996; and PAS is not aware of any
<PAGE>
reason why the PAS Permits will not be renewed in the ordinary course or why any
of the PAS Permits might be revoked. PAS knows of the existence of no fact that,
under present Law, would disqualify PAS from consummating the Merger within the
time contemplated herein. Except as set forth on Schedule 5.6(b), all
information contained in any pending application by PAS or any of its
Subsidiaries for a Permit or modification, extension, or renewal of a PAS Permit
is true, correct and complete in all material respects. Except as set forth on
Schedule 5.6(b), PAS has duly filed or caused to be filed with the FCC all
required material reports, statements, documents, registrations, filings or
submissions with respect to the operations of the business of PAS and its
Subsidiaries, the PAS Permits issued by the FCC, PAS' and its Subsidiaries'
ownership of their assets and the pending applications by PAS or any of its
Subsidiaries for Permits or for modification, extension or renewal of PAS
Permits. All such filings complied in all material respects with Laws when made
and no deficiencies have been asserted with respect to any such filings. Except
for rulemaking proceedings affecting the satellite industry in general, no
judgment, decree, order or notice of violation has been issued by the FCC (or
other Government Entity) which permits or contemplates revocation, modification
or termination of any of the PAS Permits or which would result in any material
impairment of any rights thereunder. As used in this Agreement, the term
"Affiliate" means with respect to any person or entity, any person or entity
which directly or indirectly controls, is controlled by or is under common
control with such person or entity; provided, however, that "Affiliate" with
respect to any person or entity shall also include any person or entity of which
the first person or entity directly or indirectly owns ten percent (10%) or more
of the common equity and shall, in the case of each Hughes Party, include HE,
but exclude any person controlling HE and any person under common control with
HE but not itself controlled by HE.
(c) Except as set forth on Schedule 5.6(c), neither
PAS, its Subsidiaries or Affiliates, nor any of their respective employees, are
officials or officers of any Government Entity or any political party, and
neither PAS nor any of its Subsidiaries or Affiliates has taken, is taking or
will take, or has allowed or will allow on its behalf to be taken, any action
which would have violated or would violate the United States Foreign Corrupt
Practices Act of 1977, the U.S. Export Administration Act, as amended, or any
Laws to which such party or person is subject, relating in each case to payments
for the purpose of influencing an act or decision of a Government Entity or
government official; provided, however, that nothing in this sentence shall be
deemed to subject any party or person to any Law to which such party or person
would not otherwise be subject. Each of PAS and its Subsidiaries is in material
compliance with all domestic and foreign laws restricting or regulating the
export of technology to foreign countries.
5.7 Litigation. Except as disclosed on Schedule 5.7 or in the
PAS SEC Documents, there is no suit, action or proceeding pending or, to PAS'
knowledge, threatened against or affecting PAS or any of its Subsidiaries, nor
is there any written judgment, decree, injunction, rule or order of any
Government Entity or arbitrator outstanding against PAS or any of its
Subsidiaries.
5.8 Taxes. Each of PAS and its Subsidiaries has timely filed
or has obtained timely extensions for all tax returns required to be filed by
such party completely and accurately in all material respects and has timely
<PAGE>
paid (or PAS has paid on behalf of any such Subsidiary), or has established an
adequate reserve for the payment of, all material taxes which are required to be
paid in respect of the taxable period reflected in such returns or for periods
since the most recent date on which a return was filed. All taxes shown to be
due on the tax returns that have been filed by PAS and each of its Subsidiaries
have been timely paid. Except as provided on Schedule 5.8, neither PAS nor any
of its Subsidiaries has waived any statute of limitations in respect of taxes of
PAS or any of its Subsidiaries. Except as provided on Schedule 5.8, none of the
tax returns filed by PAS or any of its Subsidiaries has been examined by any
taxing authority, and no audit, action, proceeding or assessment is pending or
threatened by any taxing authority against PAS or any of its Subsidiaries where
such audit, proceeding or assessment is likely to have a material adverse effect
on PAS and its Subsidiaries, taken as a whole. All material taxes which PAS or
any of its Subsidiaries is required by law to withhold or to collect for payment
have been duly withheld and collected, and have been paid or accrued, reserved
against and entered on the books of PAS. There are no material liens for taxes
(other than for current taxes not yet due and payable) on the assets of PAS or
any of its Subsidiaries. PAS has previously delivered or made available to HCI
true and complete copies of its federal income tax returns for each of the
fiscal years ended December 31, 1992 through December 31, 1995. Except as set
forth on Schedule 5.8 or as provided herein, neither PAS nor any of its
Subsidiaries is a party to or bound by any agreement providing for the
allocation or sharing of taxes with any entity which is not, either directly or
indirectly, a Subsidiary of PAS. Neither PAS nor any of its Subsidiaries has
filed or is required to file a consent pursuant to or agreed to the application
of Section 341(f) of the Code. PAS is not a "United States real property holding
corporation" as defined in Section 897(c)(2) of the Code during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Code. For the purpose of
this Agreement, the term "tax" (and, with correlative meaning, the terms "taxes"
and "taxable") shall include all federal, state, local and foreign income,
profits, franchise, gross receipts, payroll, sales, employment, use, property,
withholding, excise and other taxes, duties or assessments of any nature
whatsoever, together with all interest, penalties and additions imposed with
respect to such amounts.
5.9 Employees and Agents; Benefit Plans.
(a) Schedule 5.9(a) contains a complete and accurate
list of all employees of PAS and its Subsidiaries, whether active or inactive,
indicating thereon the direct entity by whom such employee is employed and the
employee's job title. PAS also shall provide on Schedule 5.9(a) as to each such
employee, the position held, the length of service, employee loans, stock
options, annual salary, incentive bonuses, international and other allowances
and PAS' cost of dental, health (other than retiree health), life and long-term
disability insurance. Except as set forth on Schedule 5.9(a), no employee of PAS
or any of its Subsidiaries is represented by any union, or covered by any
collective bargaining or similar agreement in connection with their employment
at PAS, nor is any such employee covered by a written agreement of employment in
connection with their employment at PAS, or to PAS' knowledge, any oral
employment agreement, which cannot be terminated at will by PAS or one of its
Subsidiaries or which provides for severance pay or other compensation,
including stock option rights and deferred compensation arrangements, upon
termination of employment or upon change of control of PAS or any of its
<PAGE>
Subsidiaries. Except as listed and described on Schedule 5.9(a), neither PAS nor
any of its Subsidiaries is a party to any collective bargaining or other similar
labor agreement, including any such agreement which provides for or may give
rise to any liability or obligation for any severance or termination pay or
which will be the subject of renegotiation by virtue of the consummation of the
transactions contemplated by this Agreement, and to PAS' knowledge, no labor
organization has filed a petition to become the collective bargaining
representative with respect to PAS or any of its Subsidiaries.
(b) Except as set forth on Schedule 5.9(b), PAS and
each of its Subsidiaries have complied in all material respects with all
applicable employment and labor laws, including but not limited to those
relating to wages, hours, collective bargaining, discrimination, plant closing
notices, and the payment of social security and similar taxes, and are not
liable for any arrears of wages or any material penalties for failure to comply
with any of the foregoing. There are no lawsuits, governmental proceedings,
arbitration proceedings or written claims pending or, to PAS' knowledge,
threatened between PAS or any of its Subsidiaries and any of their employees, or
any labor union or labor organization representing or purporting to represent
any of their employees. To PAS' knowledge, there are no union organizing or
election activities involving any non-union employees of PAS or any of its
Subsidiaries which have occurred since December 31, 1993 or threatened as of the
date hereof.
(c) Schedule 5.9(c) sets forth a true and complete list
of all of the following, true, correct and complete copies of which have been
delivered to or made available to HCI:
(i) each "employee benefit plan," as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), (the "PAS ERISA Plans") maintained, contributed to
or required to be contributed to by PAS or any of its Subsidiaries, or
under which PAS or any of its Subsidiaries could incur any liability,
for the benefit of current, former and retired employees of PAS or any
of its Subsidiaries ("PAS Employees") or any beneficiaries or
dependents of any PAS Employees, except for foreign plans to which PAS
is required to contribute pursuant to the law(s) of any foreign
country;
(ii) each other plan, program, policy, contract,
agreement or arrangement providing for bonuses, pensions, deferred
compensation, stock or stock related awards, severance pay, salary
continuation or similar benefits, hospitalization, medical, dental or
disability benefits, life insurance or other employee benefits, or
compensation to or for any PAS Employee or members of any PAS
Employee's families (other than directors and officers' liability
policies), whether or not insured or funded (a "PAS Benefit
Arrangement").
(d) Except as set forth on Schedule 5.9(d), and except
where such failure is not likely to have a material adverse effect on PAS and
its Subsidiaries, taken as a whole, each PAS ERISA Plan and PAS Benefit
Arrangement has been established and maintained in all material respects in
accordance with its terms and in material compliance with all Laws. PAS has
listed on Schedule 5.9(d) all exceptions, without regard to whether such
<PAGE>
exceptions are likely to have a material adverse effect on PAS and its
Subsidiaries, taken as a whole, to this Section 5.9(d), of which PAS has actual
knowledge.
(e) Except as set forth on Schedule 5.9(e), neither PAS
nor any of its Subsidiaries have represented, promised or contracted (whether in
oral or written form) to any current or former PAS Employee (either individually
or to PAS Employees as a group) that such current or former PAS Employee(s)
would be provided with life insurance or employee health or welfare plan
benefits upon their retirement or termination of employment (except as may be
required by statute), except where such representation, promise or contract is
not likely to have a material adverse effect on PAS and its Subsidiaries, taken
as a whole. PAS has listed on Schedule 5.9(e) all exceptions, without regard to
whether such exceptions are likely to have a material adverse effect on PAS and
its Subsidiaries, taken as a whole, to this Section 5.9(e) of which PAS has
actual knowledge.
(f) Except as set forth on Schedule 5.9(f), PAS has
delivered or made available to HCI true and complete copies of all PAS ERISA
Plans, all related trust agreements, the latest summary plan descriptions, the
latest Internal Revenue Service determination letter and application therefor
for each plan which is intended to be qualified under Section 401(a) of the
Code, and all PAS Benefit Arrangements and employment severance agreements
pursuant to plans which PAS or any of its Subsidiaries has or may have any
liability. Any document listed on Schedule 5.9(f) shall be delivered by PAS to
HE within 30 days after execution of this Agreement.
(g) Except as set forth on Schedule 5.9(g), neither the
execution or delivery of this Agreement or the Related Agreements nor the
consummation of the transactions contemplated hereby or thereby (either alone or
together with any additional or subsequent events), shall constitute an event
under any PAS ERISA Plan, PAS Benefit Arrangement, loan or individual agreement
or contract that may result in any payment (whether of severance pay or
otherwise), restriction, or limitation upon the assets of any PAS ERISA Plan or
PAS Benefit Arrangement, acceleration of payment or vesting, increase in
benefits or compensation, or required funding with respect to any PAS Employee
or any of its subsidiaries or the forgiveness of any loan or other commitment of
any PAS Employee.
(h) Except as set forth on Schedule 5.9(h), there are
no pending, or, to PAS' knowledge, threatened actions or suits by or on behalf
of any PAS ERISA Plans or PAS Benefit Arrangements, by any PAS Employee or
beneficiary covered under any such PAS ERISA Plan or PAS Benefit Arrangement, or
otherwise involving any such plan or arrangement (other than routine claims for
benefits), except to the extent that such pending or threatened actions or suits
are not likely to have a material adverse effect on PAS and its Subsidiaries,
taken as a whole.
(i) Except as set forth on Schedule 5.9(i), with
respect to each PAS ERISA Plan that is funded wholly or partially through an
insurance policy, there is no liability of PAS or any of its Subsidiaries under
any such insurance policy or ancillary agreement with respect to such insurance
policy in the nature of a retroactive rate adjustment, loss sharing arrangement
or other actual or contingent liability arising wholly or partially out of
<PAGE>
events occurring prior to the Effective Time which is likely to have a material
adverse effect on PAS and its Subsidiaries, taken as a whole.
(j) Except as set forth on Schedule 5.9(j), all
employee contributions to PAS ERISA Plans to the date hereof have been properly
withheld by PAS and each of its Subsidiaries, all contributions required to be
made to each such plan by PAS and each of its Subsidiaries (including employee
contributions and compensation deferrals and employer matching or other
contributions) have been made on a timely basis or will be made on a timely
basis and all of such contributions have been or will be fully paid into the
funding arrangements for the respective PAS ERISA Plan, except where such
failure is not likely to have a material adverse effect on PAS and its
Subsidiaries, taken as a whole.
(k) Except as set forth on Schedule 5.9(k), to PAS'
knowledge, there are no pending lawsuits, governmental proceedings, arbitration
proceedings or written claims by PAS Employees against PAS or any of its
Subsidiaries or any of its PAS Employees, nor is PAS aware of any such pending
lawsuits, governmental proceedings, arbitration proceedings or written claims of
any PAS Employee pursuant to any applicable Law relating to employees, including
human rights legislation, labor standards legislation, occupational health and
safety legislation, worker's compensation legislation or any other
employment-related legislation.
(l) Schedule 5.9(l) sets forth a complete and accurate
list of any and all loans of any nature whatsoever (other than routine travel
advances) made by PAS or any of its Subsidiaries to any current or former PAS
Employee or any affiliate of any such current or former employee.
(m) PAS and each of its Subsidiaries is and has been,
and PAS' business is and has been, in compliance with all occupational health
and safety rules and regulations of applicable Law, except for noncompliance
that is not likely to have a material adverse effect on PAS and its
Subsidiaries, taken as a whole. PAS has listed on Schedule 5.9(m) all
exceptions, without regard to whether such exceptions would have a material
adverse effect on PAS and its Subsidiaries, taken as a whole, to this Section
5.9(m) of which PAS has actual knowledge.
(n) Except as set forth on Schedule 5.9(n), there are
no currently pending notices of assessment, or any other communications related
thereto which PAS or any of its Subsidiaries have received from any workers'
compensation board or similar authorities in any jurisdictions where PAS'
business is carried on and there are no assessments which are unpaid, except for
assessments and other communications that are not likely to have a material
adverse effect on PAS and its Subsidiaries, taken as a whole. PAS has listed on
Schedule 5.9(n) all exceptions, without regard to whether such exceptions are
likely to have a material adverse effect on PAS and its Subsidiaries, taken as a
whole, to this Section 5.9(n) of which PAS has actual knowledge.
(o) Except as set forth on Schedule 5.9(o), the
deductibility of any amount paid or payable to any PAS Employee will not be
disallowed by the application of Section 162(m) of the Code.
<PAGE>
(p) Except as set forth on Schedule 5.9(p), there are
no employment, severance or termination agreements, other compensation
arrangements, agreements or plans currently in effect which provide for the
payment of any amount (whether in cash, property, the vesting of property or
other benefit, right or enhancement) in connection with any of the transactions
contemplated by this Agreement or the Related Agreements to any employee,
officer, shareholder or director of PAS or any of its Subsidiaries who is a
"disqualified individual" (as such term is defined in Section 280G(c) of the
Code) that would be characterized as an "excess parachute payment" (as such term
is defined in Section 280G(b) of the Code).
(q) It is the position of PAS that Section C of each
Agreement listed in number 12 of Schedule 5.9(c) means that, if a material
change (as defined in such agreement) should occur, the executive covered by
such agreement shall be entitled to no less than the aggregate employee welfare
benefits that such executive and such executive's dependents would have received
under the provisions of the benefit arrangements, policies or practices of PAS
in effect immediately prior to a material change, at no increased cost or
expense to the executive and such executive's dependents, in the aggregate.
5.10 Absence of Certain Changes or Events. Since June 30, 1996
to the date hereof and except as otherwise disclosed on Schedule 5.10 or as
contemplated by this Agreement:
(a) each of PAS and its Subsidiaries has (i) conducted
its business only in the usual and ordinary course, (ii) operated its business
substantially in accordance with past practices, (iii) attempted to preserve its
business and assets intact and (iv) attempted to preserve the goodwill of its
business' suppliers, customers, distributors and others having business with it;
(b) there has not been any material adverse change in
the condition (physical, financial or otherwise) of the assets and liabilities
of PAS and its Subsidiaries, taken as a whole, other than usual and ordinary
change which occurs in the normal course of usage;
(c) there has not been any damage, destruction, loss or
claim (whether or not covered by insurance) that has had a material adverse
effect on PAS and its Subsidiaries, taken as a whole;
(d) neither PAS nor any of its Subsidiaries has,
directly or indirectly, declared, ordered, paid, made or set apart or resolved
to pay (i) any sum or property as a dividend or other distribution on account of
any capital thereof or (ii) any redemption, retirement, purchase or acquisition,
direct or indirect, of any capital or securities thereof;
(e) there has not been any change in any method of
accounting or accounting practice or procedure by PAS or any of its Subsidiaries
except for any such change after the date hereof required by GAAP or the SEC;
<PAGE>
(f) neither PAS nor any of its Subsidiaries has
mortgaged, pledged or subjected to any material Lien (other than Permitted Liens
(as defined in Section 5.17)) any of its material properties or assets, tangible
or intangible;
(g) neither PAS nor any of its Subsidiaries has
acquired or disposed of any material assets or properties in any transaction
with any of their Affiliates or any of their Affiliate's officers, directors,
shareholders or monthly salaried employees on terms that are more favorable than
arms' length or, except in the ordinary course of business, acquired or disposed
of any assets or properties of material value in any transaction with any other
person or entity;
(h) there has not been any material transaction or
commitment made, or any contract or other agreement entered into, by PAS or any
of its Subsidiaries relating to its assets or business (including the
acquisition or disposition of any assets) or any relinquishment by PAS or any of
its Subsidiaries of any material contract, property or other right, other than
transactions and commitments in the ordinary course of business and those
contemplated by this Agreement and the Related Agreements;
(i) neither PAS nor any of its Subsidiaries has
forgiven or cancelled any material debts or claims, or waived in any material
respect any rights without having received fair consideration therefor;
(j) there has not been any amendment of any term of any
outstanding indebtedness in excess of $50,000,000 in the aggregate or security
of PAS or any of its Subsidiaries;
(k) there has not been any loan, advance or capital
contribution to or investment (other than cash balances of PAS or any of its
Subsidiaries in money market or other short term investment accounts) to any
person or entity in excess of $5,000,000 in the aggregate, other than loans,
advances or capital contributions or investments made in the ordinary course of
business;
(l) neither PAS nor any of its Subsidiaries has
incurred any other material liabilities or obligations or given any guarantee
(whether absolute, accrued, contingent or otherwise), other than liabilities
incurred or guarantees given in the ordinary course of business; and
(m) neither PAS nor any of its Subsidiaries has
adversely modified, terminated, waived, transferred, permitted to lapse, or
failed to preserve any PAS Permit issued by the FCC, any PAS Permit relating to
the construction, launch or operation of the PAS Satellites or PAS Ground
Stations, or any PAS Permit authorizing the provision of broadcasting or
communications services in such a manner as is likely to have a material adverse
effect on the assets or business of PAS and its Subsidiaries, taken as a whole.
5.11 Opinion of Financial Advisors. Morgan Stanley & Co.
Incorporated has delivered to the Board of Directors of PAS its opinion that, as
of the date hereof, the consideration payable in connection with the Univisa
Contribution and the Merger to be received by the holders of shares of common
<PAGE>
stock of PAS is fair, from a financial point of view, to such holders. Salomon
Brothers Inc has delivered to the Board of Directors of PAS its opinion that the
consideration to be paid for the DTH Option represents fair value from a
financial point of view.
5.12 Insurance. Each of PAS and its Subsidiaries maintains
reasonably adequate insurance with respect to its properties and business
against loss or damage of the kinds customarily insured against by corporations
of established reputation engaged in the same or similar businesses and
similarly situated, of such types and in such amounts as are customarily carried
under similar circumstances by such other corporations, and, except as set forth
on Schedule 5.12, in the case of any PAS Satellite (as defined in Section
5.19(b)) which is currently in orbit, PAS carries in-orbit insurance in an
amount required by the indentures to which it is a party. A description of all
launch and in-orbit satellite insurance policies is set forth on Schedule 5.12.
5.13 Intellectual Property. Schedule 5.13 sets forth a listing
and description of all material domestic, foreign, common law, registered and
pending applications for patents, trademarks, service marks, logos, slogans,
designs, copyrights, trade names, and all material licenses running to or from
PAS or any of its Subsidiaries relating to PAS' or any of its Subsidiaries'
businesses or owned by PAS or any of its Subsidiaries. Unless expressly set
forth otherwise on Schedule 5.13, PAS and its Subsidiaries own (or where
indicated on Schedule 5.13, have a right to use), free and clear of any liens,
security interests, encumbrances or claims of others, all patents, trademarks,
service marks, logos, slogans, designs, copyrights, trade names, design
registrations, and other intellectual property listed on Schedule 5.13 and any
trade secrets, know-how, confidential information, material computer programs
(including any source code), documentation, engineering and technical drawings,
processes, methodologies, trade dress, and technology utilized in or incidental
to the businesses of PAS and its Subsidiaries (all of the foregoing items
collectively referred to as the "PAS Intellectual Property"). Except as set
forth on Schedule 5.13, (a) no proceedings are pending or, to PAS' knowledge,
threatened in writing, which challenge the validity of the ownership by PAS
and/or its Subsidiaries of the PAS Intellectual Property; (b) PAS has no
knowledge of any infringement or infringing use of any of the PAS Intellectual
Property or licenses by any person or entity, and PAS and its Subsidiaries have,
and as of the Closing Date will have, good and valid title to all of the PAS
Intellectual Property that is owned by PAS or any of its Subsidiaries and their
licenses and other rights to use will be adequate for conducting the businesses
of PAS and its Subsidiaries and enforceable in accordance with their terms; (c)
to PAS' knowledge, no infringement of any material intellectual property right
or other proprietary right of any third party has occurred or will result in any
way from the conduct of the business of PAS and its Subsidiaries by PAS or any
of its Subsidiaries or from the signing and execution of this Agreement or the
Related Agreements or the consummation of any or all of the transactions
contemplated hereby or thereby, and no written claim has been made by any third
party based upon an allegation of any such infringement; (d) the PAS
Intellectual Property is valid and in full force and effect and no aspect
thereof is subject to any outstanding order, ruling, decree, judgment or
stipulation by or with any court, arbitrator or administrative agency; and (e)
there are no restrictions on the direct or indirect transfer of any license, or
any interest therein, held by PAS or any if its Subsidiaries in respect of the
PAS Intellectual Property.
<PAGE>
5.14 Environmental Matters.
(a) For purposes of this Agreement:
(i) "Environmental Law" means all applicable
foreign, domestic, federal, state or local laws, statutes, regulations,
rules, codes, ordinances, or common law enacted, adopted, issued or
promulgated by any Government Entity, orders and permits which relate
to the protection of human health or the environment, including,
without limitation all such Environmental Laws regulating Releases or
threatened Releases of any Hazardous Materials, the Comprehensive
Environmental Response, Compensation, and Liability Act ("CERCLA") (42
U.S.C. ss.ss. 9601, et seq.), the Hazardous Materials Transportation
Act (49 U.S.C. ss.ss. 1801, et seq.), the Resource Conservation and
Recovery Act (42 U.S.C. ss.ss. 6901, et seq.), the Clean Water Act (33
U.S.C. ss.ss. 1251, et seq.), the Clean Air Act (33 U.S.C. ss.ss. 7401,
et seq.), the Toxic Substances Control Act (15 U.S.C. ss.ss.7401, et
seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7
U.S.C. ss.ss. 136, et seq.), and the Occupational Safety and Health Act
(29 U.S.C. ss. 651, et seq.), each as amended, and the regulations
promulgated pursuant thereto, and any common law and any such
applicable state or local statutes, and the regulations promulgated
pursuant thereto, as such laws are in effect on the date hereof;
(ii) "Hazardous Materials" means (i) any
substance, material or waste which is regulated under applicable
Environmental Laws, including, without limitation, any material or
substance which is defined as a "hazardous waste," "hazardous
material," "hazardous substance," "extremely hazardous waste" or
"restricted hazardous waste," "contaminant," "toxic waste" or "toxic
substance" under any provision of Environmental Law; (ii) any oil,
petroleum, petroleum fraction or petroleum derived substance; (iii) any
radioactive materials; (iv) asbestos in any form; (v) urea
formaldehyde; (vi) polychlorinated biphenyls; (vii) pesticides; or
(viii) radon.
(iii) "Release" means any release, spill,
effluent, emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the environment,
including, without limitation, the movement of Hazardous Materials
through or in the air, soil, surface water, or groundwater; and
(iv) "Remedial Action" means all actions,
including, without limitation, any capital expenditures, required by a
Government Entity or required under any Environmental Law, to (i) clean
up, remove or treat any Hazardous Materials or other substance in the
indoor or outdoor environment; (ii) prevent the Release or threat of
Release, or minimize the further Release of any Hazardous Material so
it does not endanger or threaten to endanger the public health or
welfare of the environment; or (iii) perform pre-remedial studies and
investigations or post-remedial monitoring and care pertaining or
relating to a Release.
(b) The operations of PAS and its Subsidiaries are in
substantial compliance with all Environmental Laws. Except as set forth on
Schedule 5.14(b), neither PAS nor any of its Subsidiaries has received any
<PAGE>
written notice with respect to any of its assets of any material violation of
any Environmental Law.
(c) Except as set forth on Schedule 5.14(c), there are
no conditions associated with PAS' assets, the operation of its business or PAS'
owned or, to PAS' knowledge, leased real property as currently operated that
would under applicable Environmental Law require or could reasonably be expected
to require PAS or any of its Subsidiaries to (i) undertake any action that would
materially impair the ability of PAS' business to use PAS' material owned and
leased real property as currently operated or PAS' material assets as currently
used, (ii) incur material expenditures or (iii) undertake remedial obligations
at any real property that is owned, operated or leased by PAS or that is
adjacent to real property owned, operated or leased by PAS, in each case which
would cost individually in excess of $1.0 million.
(d) Except as set forth on Schedule 5.14(d), as of the
date hereof, PAS and its Subsidiaries are not subject to any outstanding orders,
agreements or contracts with any Government Entity or other person respecting
(i) violations of Environmental Laws, (ii) Remedial Action or (iii) any Release
or threatened Release of a Hazardous Material, in either case which could be
expected to have a material adverse effect on PAS and its Subsidiaries, taken as
a whole.
5.15 Investment Banking Fees and Commissions. Except for
Morgan Stanley & Co. Incorporated and Salomon Brothers Inc (copies of whose
engagement letters with PAS have been furnished to HCI), no person or entity is
entitled to receive from PAS or any of its Subsidiaries or any of their
directors, officers or employees any investment banking, brokerage or finder's
fee or fees for financial consulting or other advisory services in connection
with this Agreement or the transactions contemplated hereby based upon
arrangements made by or on behalf of PAS, nor is any person or entity (including
stockholders of PAS) entitled to receive reimbursement from PAS or any of its
Subsidiaries for any such services or any legal fees and expenses.
5.16 Material Contracts.
(a) PAS has provided or made available to HCI or its
independent auditors and/or legal counsel (i) true and complete copies of all
written Material Contracts, or (ii) with respect to such Material Contracts that
have not been reduced to writing, a written description thereof, each of which
is listed on Schedule 5.16(a). Except as set forth on Schedule 5.16(a), neither
PAS nor any of its Subsidiaries has received any notice or has any knowledge
that any other party is, in default in any respect under any such Material
Contract, other than payment defaults under transponder lease agreements which
are not more than 90 days past due. Except as set forth on Schedule 5.16(a),
each of the Material Contracts of PAS and its Subsidiaries is in full force and
effect and constitutes a valid, legal and binding agreement of the parties
thereto, enforceable in accordance with its terms except for the Bankruptcy
Exception. As used in this Agreement, the term "Material Contract" means, as to
any person or entity, all written contracts, agreements, commitments,
arrangements, leases (including with respect to personal property), policies and
other instruments to which it or any of its Subsidiaries is a party or by which
it or any such Subsidiary is bound which, when assuming that all options to
<PAGE>
renew or extend are exercised, (x) require payments to be made in excess of
$1,000,000 per year for goods and/or services, or (y) do not by their terms
expire and are not subject to termination within six months from the date of the
execution and delivery thereof and require payments to be made in excess of
$5,000,000 individually.
(b) Except as set forth on Schedule 5.16(b), neither
PAS nor its Subsidiaries is a party, as of the date hereof, to any contract,
agreement, commitment, arrangement, lease (including with respect to personal
property), policy or other instrument that is not subject to termination by PAS
upon less than six months written notice to the other party thereto which
materially restricts or limits the right of PAS or any of its Subsidiaries or
which would, on or after the Closing Date, materially restrict or limit Newco's
or any of its Affiliates' right to conduct its business or compete, including
without limitation, any restriction on its ability to sell, lease or otherwise
provide services from available transponder capacity to any person or entity for
any purpose at any orbital location and in any frequency band, any geographical,
market segment, product line or other industry limitation, or any exclusive or
sole supply or vendor arrangement or agreement. Nothing in this Section 5.16(b)
shall preclude or require disclosure on Schedule 5.16(b) of most favored nations
provisions, options for additional services or capacity, rights of negotiation,
or similar provisions agreed to in the ordinary course of business (including,
without limitation, of the kind set forth in the agreements referenced on
Schedule 5.16(a)).
(c) As of June 30, 1996, the contracts, agreements,
commitments, arrangements, leases (including with respect to personal property)
that represent obligations of third parties to make payments to PAS in exchange
for the sale or lease of transponder capacity, have an aggregate stated amount
of unpaid payments owing to PAS of $3,026,000,000 over the remaining stated term
of such contracts, after allowance for doubtful accounts or other allowances or
deductions known as of such date which are ordinary and customary in the conduct
of PAS' business (the "PAS Backlog"). The PAS Backlog represents amounts that,
assuming the due performance by each party of its obligations under each
contract and the occurrence of no event that would permit termination of a
contract without liability to the terminating party, will be due for, and will
arise out of, bona fide sales and delivery of goods, performance of services and
other business transactions, unless the underlying contract thereto is properly
terminated in accordance with the terms thereof. Except as set forth on Schedule
5.16(c), there are no refunds, discounts or other adjustments payable by PAS
with respect to any portion of the PAS Backlog, and to the knowledge of PAS,
there are no defenses, rights of setoff, counterclaims, assignments,
restrictions, encumbrances, or conditions enforceable by any third parties on or
affecting any portion of the PAS Backlog. Except as set forth on Schedule
5.16(c), neither PAS nor any of its Subsidiaries is, or has received any notice
or has any knowledge that any other party is, in default in any material respect
under any contract representing any portion of the PAS Backlog, other than (i)
payment defaults under transponder lease agreements which are not more than 90
days past due and (ii) defaults or terminations under transponder lease
agreements that are promptly replaced by contracts providing for reasonably
equivalent or superior backlog payments.
<PAGE>
5.17 Personal Property. PAS and/or its Subsidiaries have good
and valid title to all personal property and assets (whether tangible or
intangible) reflected on the consolidated balance sheet of PAS and its
Subsidiaries as of December 31, 1995 (the "PAS Balance Sheet") or acquired after
December 31, 1995, except for property and assets sold since December 31, 1995
in the ordinary course of business and except for satellite systems under
development, with respect to which title will not be taken, other than as
provided in the applicable contract therefor; provided, that except as disclosed
on Schedule 5.17, there are no Liens with respect to any satellites under
development. Except as set forth on Schedule 5.17, none of such properties or
assets (whether real or personal) is subject to any mortgage, life interest,
lien, pledge, charge, security interest, fiduciary assignment, hypothecation or
title retention agreement relating to such properties or assets (collectively,
"Liens"), except:
(i) Liens disclosed on the PAS Balance Sheet; or
(ii) (a) Liens for taxes and other governmental
charges and assessments arising in the ordinary course of business and
in amounts comparable to the amounts of such Liens in prior years,
which are not yet due and payable or, provided that an appropriate
reserve has been established by the related person or entity, a Lien
the amount or validity of which is being contested in good faith by
appropriate proceedings, (b) Liens of landlords and Liens of carriers,
warehousemen, mechanics and materialmen and other like Liens arising in
the ordinary course of business for sums not yet due and payable and in
amounts comparable to the amounts of such Liens in past years, and (c)
Liens or imperfections on property which, individually or collectively,
as to a party or any of its Subsidiaries, are not material in amount or
do not materially detract from the value of or materially impair the
existing use of the property affected by such Lien or imperfection
(each, a "Permitted Lien").
5.18 Real Property.
(a) Schedule 5.18(a) sets forth a complete description
of all real property owned by PAS or any of its Subsidiaries (the "PAS Owned
Real Property"), together with a description of such ownership and the identity
of the entity that owns such property. PAS has good and valid title to the PAS
Owned Real Property and otherwise owns the PAS Owned Real Property free and
clear of all liens, security interests, claims and other charges and
encumbrances, except for (i) Permitted Liens and (ii) encumbrances, if any,
which do not materially impair the existing use of the property.
(b) Schedule 5.18(b) sets forth a list of all of the
land, buildings and other real property leased or sub-leased by PAS or any of
its Subsidiaries (the "PAS Leased Real Property"). PAS or one its Subsidiaries
has a good and valid leasehold interest in and right to peaceful quiet
possession as against each landlord with respect to each PAS Leased Real
Property. True and complete copies of all leases of the PAS Leased Real Property
have been made available for review to HCI. Such leases are in full force and
effect according to their terms, constitute the legal, valid and binding
obligations of PAS and/or its Subsidiaries party thereto and, to PAS' knowledge,
such leases have not been amended or modified except as disclosed in writing to
HCI. Neither PAS nor any of its Subsidiaries is in material default with respect
<PAGE>
to any of the leases of the PAS Leased Real Property, nor has any event occurred
which with the passage of time, the giving of notice, or both, would constitute
an event of default or otherwise would place PAS or any of its Subsidiaries in
material default under any of such leases; neither PAS nor any of its
Subsidiaries has received any notice of any such default or event; and, to PAS'
knowledge, no landlord is in default under any of such leases, and no event has
occurred which with the passage of time, the giving of notice, or both, would
constitute an event of default or otherwise place any landlord in default
thereunder.
(c) The PAS Owned Real Property and the PAS Leased Real
Property, together with facilities furnished under contract with others,
comprise substantially all of the real estate used in, or necessary to conduct,
PAS' business, and such use and occupancy is in conformance in all material
respects with all applicable laws, rules and regulations, including but not
limited to, applicable zoning, subdivision and other land use rules and
regulations, the violation of which is likely to have a material adverse effect
on PAS and its Subsidiaries, taken as a whole.
(d) To PAS' knowledge, other than PAS or any of its
Subsidiaries, there are no parties in possession of any portion of the PAS
Leased Real Property or the PAS Owned Real Property, whether as lessees or
sublessees thereof, or tenants at sufferance, trespassers or otherwise, except
as disclosed on Schedule 5.18(d). The location, construction, occupancy,
operation or use of the PAS Owned Real Property and, to the best knowledge of
PAS, the PAS Leased Real Property (including the buildings, improvements,
fixtures and equipment located thereon) do not contravene any laws, rules or
regulations, or any restrictive covenant or deed restriction (recorded or
otherwise), or any PAS Permit, affecting any of such property the contravention
of which is likely to have a material adverse effect on PAS and its
Subsidiaries, taken as a whole. There are no pending or, to the best knowledge
of PAS, threatened condemnation proceedings with respect to any PAS Leased Real
Property, lease, or the PAS Owned Real Property, or litigation or administrative
actions relating thereto. All buildings, improvements, fixtures and equipment
used in connection with PAS' business are located on the PAS Owned Real Property
and the PAS Leased Real Property and do not encroach on any adjoining property,
and, to the best knowledge of PAS, no buildings or improvements encroach upon
the PAS Owned Real Property or the PAS Leased Real Property which is likely to
have a material adverse effect on PAS and its Subsidiaries, taken as a whole.
5.19 Certain Assets and Agreements.
(a) Ground Stations. Each ground station, including,
without limitation, the related broadcasting facility assets (consisting of
land, building, fixtures, improvements and telemetry, tracking and control
equipment) that is owned or leased by PAS or any of its Subsidiaries in
connection with PAS' business is listed on Schedule 5.19(a) (the "PAS Ground
Stations"). Except as otherwise set forth on Schedule 5.19(a) with respect to
each such ground station, the improvements thereto and all components used in
connection therewith, including, without limitation, transmission/reception
systems and programming and data broadcasting systems, if any, (i) are in good
operating condition and repair and are suitable for their intended purposes and
(ii) are supported by a back-up, fuel-powered electricity generator capable of
generating power sufficient to meet the requirements of the operations conducted
at the ground station. The transmission/reception systems and programming and
data broadcasting systems at each such ground station have the redundancies that
are set forth on Schedule 5.19(a).
(b) Satellites and Transponders. Set forth on Schedule
5.19(b) are the following: (i) a complete and accurate list, by orbital
location, of each satellite and transponder thereon owned by PAS or any of its
Subsidiaries in connection with PAS' or any of its Subsidiaries' business (each
a "PAS Satellite"), (ii) a true and correct copy of a satellite loading chart
listing each transponder on each PAS Satellite, along with the type of
transponder (C-band, Ku-band or other) and the customer or group of related
customers that have leased or purchased capacity on such transponder and the
amount of such capacity, and (iii) the most recent "Health Status Report,"
summarizing all spacecraft related incidents and anomalies known to PAS as well
as the current status, to the best knowledge of PAS, of the subsystems on the
PAS Satellites (power, telemetry and command, reaction control, communications
and antenna). For each PAS Satellite, true, correct and complete copies of the
foregoing will be delivered or made available to HCI (all such data, records,
tapes, information, lists and reports are collectively referred to herein as the
"PAS Data") prior to the Closing Date. Such PAS Data represent, to the best
knowledge of PAS, all relevant and material information relating to the
operating condition and repair of the PAS Satellites, and the fuel life
expectancies of the PAS Satellites. The information contained in the PAS Data
is, to the best knowledge of PAS, accurate and complete records (except as to
only those informational gaps disclosed to HCI) of the subject matters covered
therein; however, PAS makes no representation or warranty as to the accuracy of
any conclusion expressed as to fuel life expectancies of the PAS Satellites.
Such PAS Satellites are to the best of PAS' knowledge, subject to the Health
Status Reports, in good condition. Except as specifically provided herein, PAS
makes no representations or warranties, express or implied, with respect to the
PAS Satellites.
(c) Tracking, Telemetry and Control Equipment. Except
as otherwise set forth on Schedule 5.19(c), to the best of PAS' knowledge, the
tracking, telemetry and control equipment (on the ground) used by third party
contractors to provide tracking, telemetry and control services related to each
PAS Satellite is (i) in good operating condition and repair, ordinary wear and
tear excepted, and (ii) not in need of maintenance or repairs except for
ordinary, routine maintenance and repairs.
(d) ITU Frequency Registration. Schedule 5.19(d)
contains a summary, by orbital location, of the status of frequency registration
at the International Telecommunications Union, of each PAS Satellite, including
the identity of the sponsoring administration and the frequency bands covered.
(e) Satellite Coordination. Except as set forth on
Schedule 5.19(e), to the best knowledge of PAS, no person or entity has asserted
that it has rights to operate a spacecraft in a manner that would result in
interference with respect to any PAS Satellite or any Satellite for which PAS
has applied for a Permit. Except as set forth on Schedule 5.19(e), PAS is not
aware of any asserted dispute with respect to PAS' continued ability to utilize
any PAS Satellite substantially in the manner that such PAS Satellite has been
<PAGE>
used in connection with the business of PAS and its Subsidiaries to date.
Schedule 5.19(e) also contains a list of all satellite coordination agreements
to which PAS or its Subsidiaries or Affiliates is a party, a summary of all
operational or technical limitations set forth therein, and a summary of all
coordination discussions with other persons or entities, domestic or foreign,
with regard to the PAS Satellites or any Satellite for which PAS has applied for
a Permit in which PAS or its Subsidiaries or Affiliates has been engaged in the
past three years.
5.20 IGO Determinations. Schedule 5.20 contains a list of all
consultations and similar arrangements that have been effectuated with INTELSAT,
EUTELSAT and other similar intergovernmental entities, including without
limitation all Article XIV(c) and XIV(d) consultations under the INTELSAT
Agreements (collectively the "IGO Determinations") with respect to the PAS
Satellites that are needed to operate the business of PAS or any of its
Subsidiaries as they are now being conducted. Except as set forth on Schedule
5.20, PAS is not aware of any difficulties in obtaining any other IGO
Determinations with respect to the PAS Satellites or any Satellite for which PAS
has applied for a Permit.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF
THE HUGHES PARTIES
Each Hughes Party and Newco represent and warrant to PAS as
follows:
6.1 Organization, Standing and Power. Each of the Hughes
Parties is a corporation duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation, has all
requisite corporate power and authority necessary to own, lease and operate its
properties and to carry on its business as now being conducted, and is duly
qualified, and in good standing to own, lease and operate its properties and to
conduct its business relating to the Galaxy Business in each jurisdiction,
domestic and foreign, in which the operation of the Galaxy Business, or the
operation, ownership or leasing of the assets necessary to operate the Galaxy
Business, makes such qualification necessary, other than in such jurisdictions
where the failure to so qualify or be in good standing is not likely to have a
material adverse effect on the Galaxy Business. Each of the Hughes Parties have
heretofore made available to PAS true, complete and correct copies of its
Certificate of Incorporation and Bylaws as currently in effect together with all
amendments thereto. No resolution has been adopted to amend any of such
Certificates of Incorporation or Bylaws except as expressly called for by this
Agreement. None of the Hughes Parties (i) has been dissolved, adopted
resolutions to dissolve or acted in any way to accomplish, request or approve
such dissolution, (ii) is a party to any merger or (iii) has been declared
bankrupt, and, to such entity's knowledge, no action or request is pending to
declare it bankrupt. The Hughes Parties have made available to PAS minute books
for each of the Hughes Parties which contain complete and accurate records in
all material respects of all meetings, or consents in lieu thereof, of the
stockholders and the Board of Directors (including committees thereof) of each
such entity since its date of formation.
6.2 Capital Structure. As of the date hereof, all of the
issued and outstanding shares of capital stock of the Contributed Entities and
Newco are validly issued, fully paid and nonassessable, are not subject to
<PAGE>
preemptive or other similar rights, and are owned by HCI free and clear of all
liens, charges, encumbrances, claims and options of any nature. Except as set
forth on Schedule 6.2, none of the Contributed Entities (i) beneficially owns
any capital shares or has any other record or beneficial equity or other
ownership or interest in any corporation, partnership, joint venture,
association or other entity or business enterprise or (ii) has any commitment to
contribute to the capital of, make loans to, or share the losses of any person
or entity (other than any of the Contributed Entities). Except as set forth in
this Section 6.2, there are outstanding: (i) no shares of capital stock, or
bonds, debentures, notes or other instruments or evidence of indebtedness having
the right to vote (or convertible into, or exchangeable for, securities having
the right to vote), or other voting securities of any Contributed Entity or
Newco authorized, issued or outstanding; (ii) no securities of any Contributed
Entity or Newco are convertible into, or exchangeable or exercisable for, shares
of capital stock, or other voting securities of the Contributed Entities or
Newco; and (iii) no options, warrants, calls, rights (including preemptive
rights), commitments or agreements to which any Contributed Entity or Newco is a
party or by which it is bound, in any case obligating any Contributed Entity or
Newco to issue, deliver, sell, purchase, redeem or acquire, or cause to be
issued, delivered, sold, purchased, redeemed or acquired, additional shares of
capital stock or other voting securities of any Contributed Entity or Newco, or
obligating any Contributed Entity or Newco to grant, extend or enter into any
such option, warrant, call, right, convertible security, commitment or
agreement. None of the Contributed Entities nor Newco has granted any options,
warrants or rights to purchase any capital stock of any Contributed Entity.
Except as set forth on Schedule 6.2, there are not as of the date hereof, and
there will not be at the Effective Time, any stockholder agreements, voting
trusts or other agreements or understandings to which any Contributed Entity or
Newco is a party or by which it is bound relating to the voting of any shares of
the capital stock of any Contributed Entity or Newco. There are no restrictions
on HCI to vote the stock of any of the Contributed Entities. Except as provided
for herein, no person has any rights to cause any Contributed Entity or Newco to
register with the SEC any securities of any Contributed Entity or Newco.
6.3 Authority; No Violations; Consents and Approvals.
(a) Each of the Hughes Parties has all requisite
corporate power and authority to execute and deliver this Agreement and the
Related Agreements to which it is a party and to perform its obligations
hereunder and thereunder and to effect the transactions contemplated hereby and
thereby. The execution, delivery and performance of this Agreement and the
Related Agreements to which a Hughes Party is a party and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of each such entity. Each of this
Agreement and the Related Agreements to which a Hughes Party is a party has been
duly executed and delivered by such Hughes Party and assuming that each of this
Agreement and the Related Agreements to which a Hughes Party is a party
constitutes the valid and binding agreement of the other parties thereto, and
subject to obtaining all necessary approvals by Government Entities, constitutes
a valid and binding obligation of such Hughes Party enforceable in accordance
with its terms except that the enforcement hereby may be limited by the
Bankruptcy Exception.
<PAGE>
(b) The execution, delivery and performance by the
Hughes Parties of each of this Agreement and the Related Agreements to which a
Hughes Party is a party does not, and the consummation by the Hughes Parties of
the transactions contemplated hereby and thereby will not, (x) conflict with or
result in any violation of, or default (with or without notice or lapse of time,
or both) which is likely to have a material adverse effect on the Galaxy
Business, or give rise to a right of termination, cancellation or acceleration
of any obligation or the loss of a material benefit, or the creation of a
material lien, pledge, security interest or other encumbrance on assets or
property, or right of first refusal with respect to any material asset or
property (any such conflict, violation, default, right of termination,
cancellation or acceleration, loss, creation or right of first refusal, a
"Galaxy Violation"), under or pursuant to any provision of the respective
Certificate of Incorporation or Bylaws of such entity or equivalent constituent
document of any of its Subsidiaries or, (y) except as to which requisite waivers
or consents have been obtained and, except as set forth on Schedule 6.3(b)
hereto and assuming the consents, approvals, authorizations or permits and
filings or notifications referred to in paragraph (c) of this Section 6.3 are
duly and timely obtained or made, result in any Galaxy Violation of any Material
Contract, Galaxy ERISA Plan (as defined in Section 6.9(c)(i)), Galaxy Benefit
Arrangement (as defined in Section 6.9(c)(ii)), Galaxy Permit (as defined in
Section 6.6(b)), or Law applicable to such entity or the Galaxy Business;
provided, however, that nothing in this Section 6.3 will be deemed to constitute
a representation or warranty by any Hughes Party as to any antitrust law or
requirement.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, notice to, or permit from any
Government Entity is required by or with respect to any Hughes Party in
connection with the execution and delivery by a Hughes Party of any of this
Agreement or the Related Agreements to which such Hughes Party is a party or the
consummation by any Hughes Party of the transactions contemplated hereby and
thereby, which if not obtained or made is likely to have a material adverse
effect on such Hughes Party's ability to consummate the transactions
contemplated hereby and thereby, except for: (A) the filing of a premerger
notification and report form by the applicable Hughes Party under the HSR Act
and the expiration or termination of the applicable waiting period thereunder;
(B) the filing with the SEC of (x) the Registration Statement (as defined in
Section 7.5), and (y) such reports under and such other compliance with the
Exchange Act and the rules and regulations thereunder, as may be required in
connection with this Agreement and the Related Agreements to which a Hughes
Party is a party and the transactions contemplated hereby and thereby; (C) such
filings and approvals as may be required by any applicable state securities,
"blue sky" or takeover laws; (D) such filings and approvals as may be required
by any foreign pre-merger notification Laws; (E) such consents, approvals,
orders, authorizations and filings required under any environmental, health or
safety law; (F) the filing with the FCC of (x) the applications and waiver
requests described in Section 7.9(c), (y) any requisite post Closing amendments
to pending FCC applications filed by the Hughes Parties, reflecting (subject to
FCC consent and consummation) the Asset Contribution, the Univisa Contribution
and the Merger, and (z) associated filings with the FCC that do not require the
FCC's consent or approval; and (G) such other consents, approvals, orders,
authorizations, registrations, declarations, filings, notices and Permits set
forth on Schedule 6.3(c).
<PAGE>
6.4 Galaxy Financial Statements. Attached as Schedule 6.4 are
audited consolidated balance sheets relating to the Galaxy Business as of
December 31, 1994 and December 31, 1995 and an unaudited consolidated balance
sheet as of June 30, 1996 (the "Galaxy Balance Sheet") and the related audited
consolidated statements of operations for the two fiscal years ended December
31, 1995 and the unaudited consolidated statements of operations for the six
month period ended June 30, 1996 (such financial statements being hereinafter
referred to collectively as the "Galaxy Financial Statements"). The Galaxy
Financial Statements have been prepared from, and are in accordance with, the
books and records of the Galaxy Business, were prepared in accordance with GAAP
applied on a consistent basis during the periods involved (except as may be
indicated therein and, with respect to the unaudited financial statements,
subject to normal year end adjustments which Galaxy's management believes would
not be material in amount or effect) and present fairly, in all material
respects, in accordance with applicable requirements of GAAP, the consolidated
financial position of the Galaxy Business as of their respective dates and the
consolidated results of operations of the Galaxy Business for the periods
presented therein. The books and all other financial records of the Galaxy
Business are complete and correct in all material respects. As of June 30, 1996,
the Contributed Entities have made capital expenditures for "satellites under
construction" of at least $175 million, all of which represents capital
expenditures incurred in the ordinary course of business and consistent with
prudent business practices and all rights to which are being transferred to
Newco hereby.
6.5 Information Supplied. The Registration Statement (as
defined in Section 7.5), or any amendment thereof or supplement thereto, will
not, on the date it is first filed with the SEC and on the date it becomes
effective contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading; provided, however, that no representation is made by any of the
Hughes Parties with respect to statements made therein based on information
supplied by PAS for inclusion in each Registration Statement. The information
supplied by any of the Hughes Parties for inclusion in the Proxy
Statement/Prospectus will not, on the date it is first mailed to the holders of
the shares of common stock of PAS or at the time of PAS' stockholder's meeting
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. Subject to the proviso set forth in the second preceding sentence,
the Proxy Statement/Prospectus, will comply as to form, in all material
respects, with the provisions of the Exchange Act and the rules and regulations
thereunder.
6.6 Compliance with Laws.
(a) Except as set forth on Schedule 6.6(a), the Galaxy
Business is not being conducted in violation of any Law the violation of which
is likely to have a material adverse effect on the Galaxy Business. Except as
disclosed on Schedule 6.6(a), no material investigation or review by any
Government Entity with respect to any of the Contributed Entities or the Galaxy
Business is pending or, to the best knowledge of any of the Hughes Parties,
threatened and none of the Hughes Parties has received any written citation or
<PAGE>
notification alleging any violation of any Law or Permit the continuing
violation of which is likely to have a material adverse effect on the Galaxy
Business.
(b) Set forth on Schedule 6.6(b) is a true and complete
list of all Permits issued to or held by any of the Hughes Parties with respect
to the Galaxy Business (as amended or modified), except for Permits which are
immaterial to the Galaxy Business (collectively, the "Galaxy Permits");
provided, however, that notwithstanding the foregoing materiality threshold,
Schedule 6.6(b) lists (i) all Permits issued by the FCC to any of the Hughes
Parties relating to the Galaxy Business, (ii) all Permits, whether or not issued
by the FCC, authorizing the construction, launch or operation of the Galaxy
Satellites or the Galaxy Ground Stations (other than Permits granted or issued
by local or municipal Government Entities, such as building permits, local
occupancy permits or zoning regulations, which are not material to the Galaxy
Business), and (iii) all Permits issued to the Hughes Parties (relating to the
Galaxy Business) by Government Entities that regulate broadcasting or
communications, authorizing any of the Contributed Entities to provide
broadcasting or communications services relating to the Galaxy Business.
Schedule 6.6(b) also sets forth a true and complete list of all pending
applications for Permits that would be Galaxy Permits if issued or granted and
all pending applications by any of the Hughes Parties for modification,
extension or renewal of Galaxy Permits. The Galaxy Permits are all of the
Permits required to be issued to or held by any of the Contributing Entities in
order to allow the Contributed Entities to own or lease their respective assets
relating to the Galaxy Business and to lawfully conduct the Galaxy Business,
including, without limitation, the construction, launch and operation of, and
transmitting to and from, each of the Galaxy Satellites and the Galaxy Ground
Stations (as such terms are defined in Section 6.18(a)), and the provision of
broadcasting or communications services, except where the failure to possess any
such Permit is not likely to have a material adverse effect on the Galaxy
Business. Notwithstanding the generality of the preceding paragraph, except as
set forth on Schedule 6.6(b), each of the Hughes Parties has fulfilled and
complied in all material respects with its obligations under each of the Galaxy
Permits owned, held or possessed by it, and no event has occurred or condition
or state of facts exists which constitutes or, after notice or lapse of time or
both, would constitute a breach or default under any Galaxy Permit and which
permits or, after notice or lapse of time or both, would permit revocation or
termination of any such Galaxy Permit, and no Hughes Party has received or has
knowledge of any written notice of cancellation or default or of any dispute
concerning any such Galaxy Permit, or of any such event, condition or state of
facts where the effect thereof would be material to the Galaxy Business. Each of
the Galaxy Permits is validly held by the entities listed on Schedule 6.6(b), is
in full force and effect in all material respects, is free and clear of all
Liens (other than Permitted Liens), is unimpaired by acts or omission of any
Hughes Party or their respective employees, partners or Affiliates, will expire
on the date shown on Schedule 6.6(b), is valid for the balance of its current
term, and, except as set forth on Schedule 6.6(b), is not subject to any
restriction or condition that limits in any material respect the full operation
of the Galaxy Business as now operated. Except as set forth on Schedule 6.6(b)
and for rulemaking proceedings affecting the satellite industry in general, no
complaints, proceedings or applications are pending, or to the Contributed
Entities' best knowledge, threatened, at the FCC or any other Government Entity,
that would result in the revocation, forfeiture, adverse modification,
non-renewal or suspension of any of the Galaxy Permits, the denial of any
pending application by any Hughes Party for a Permit in connection with the
<PAGE>
Galaxy Business or a modification, extension or renewal thereof, the issuance
against any Hughes Party of any cease and desist order with respect to the
Galaxy Business, or the imposition of any administrative actions by the FCC or
any other Government Entity with respect to the Galaxy Permits, or that would
adversely affect the ability of Newco after the Asset Contribution to continue
to operate the Galaxy Business as currently operated by the Contributed
Entities. Except as set forth on Schedule 6.6(b), none of the Hughes Parties has
received any complaint that any of the Galaxy Satellites or the Galaxy Ground
Stations is causing objectionable interference to the transmissions or reception
of any other radio communications facility, and to the best knowledge of such
entity, no other radio communications facility is causing objectionable
interference to the transmissions from or the receipt of signals by any Galaxy
Satellite or Galaxy Ground Station. Except as set forth on Schedule 6.6(b), none
of the Galaxy Permits that has been issued prior to the date hereof is the
subject of any pending renewal application; no renewal of any Galaxy Permit
issued by the FCC would constitute a major environmental action under the FCC
Rules excluding the impact of the FCC's new RF radiation rules adopted by the
FCC in ET Docket No. 93-62 on August 1, 1996; and none of the Hughes Parties is
aware of any reason why the Galaxy Permits will not be renewed in the ordinary
course or why any of the Galaxy Permits might be revoked. None of the Hughes
Parties knows of the existence of any fact that, under present Law, would
disqualify Galaxy from consummating the Asset Contribution within the time
contemplated herein. Except as set forth on Schedule 6.6(b), all information
contained in any pending application by a Hughes Party for a Permit in
connection with the Galaxy Business or modification, extension, or renewal of a
Galaxy Permit is true, correct and complete in all material respects. Except as
set forth on Schedule 6.6(b), each of the Hughes Parties have duly filed or
caused to be filed with the FCC all required material reports, statements,
documents, registrations, filings or submissions with respect to the operations
of the Galaxy Business, the Galaxy Permits issued by the FCC, the Hughes
Parties' ownership of their assets in connection with the Galaxy Business and
the pending applications by any of the Hughes Parties for Permits or for
modification, extension or renewal of Galaxy Permits. All such filings complied
in all material respects with Laws when made and no deficiencies have been
asserted with respect to any such filings. Except for rulemaking proceedings
affecting the satellite industry in general, no judgment, decree, order or
notice of violation has been issued by the FCC (or other Government Entity)
which permits or contemplates revocation, modification or termination of any of
the Galaxy Permits or which would result in any material impairment of any
rights thereunder.
(c) Except as set forth on Schedule 6.6(c), none of the
Hughes Parties, nor any of their Subsidiaries or Affiliates, nor any of their
respective employees, are officials or officers of any Government Entity or any
political party, and none of the Contributed Entities, nor any of their
Subsidiaries or Affiliates has taken, is taking or will take, or has allowed or
will allow on its behalf to be taken, any action which would have violated or
would violate the United States Foreign Corrupt Practices Act of 1977, the U.S.
Export Administration Act, as amended, or any Laws to which such party or person
is subject, relating in each case to payments for the purpose of influencing an
act or decision of a Government Entity or government official; provided,
however, that nothing in this sentence shall be deemed to subject any party or
person to any Law to which such party or person would not otherwise be subject.
<PAGE>
With respect to the Galaxy Business, each of the Hughes Parties is in material
compliance with all domestic and foreign laws restricting or regulating the
export of technology to foreign countries.
6.7 Litigation. Except as disclosed on Schedule 6.7, there is
no suit, action or proceeding pending or, to the knowledge of any of the Hughes
Parties, threatened against any of the Contributed Entities or affecting the
Galaxy Business, nor is there any written judgment, decree, injunction, rule or
order of any Government Entity or arbitrator outstanding against any Contributed
Entity in respect of the Galaxy Business.
6.8 Taxes. Each of the Contributed Entities has timely filed
or has obtained timely extensions for all tax returns required to be filed by
such party completely and accurately in all material respects and has timely
paid (or such entity's parent has paid), or has established an adequate reserve
for the payment of, all material taxes which are required to be paid in respect
of the taxable period reflected in such returns or for periods since the most
recent date on which a return was filed. All taxes shown to be due on the tax
returns that have been filed by the Contributed Entities have been timely paid.
Except as provided on Schedule 6.8, none of the Contributed Entities has waived
any statute of limitations in respect of taxes of such entity. Except as
provided on Schedule 6.8, none of the tax returns filed by the Contributed
Entities has been examined by any taxing authority, and no audit, action,
proceeding or assessment is pending or threatened by any taxing authority
against the Contributed Entities where such audit, proceeding or assessment is
likely to have a material adverse effect on the Galaxy Business. All material
taxes which any of the Contributed Entities is required by law to withhold or to
collect for payment with respect to the Galaxy Business have been duly withheld
and collected, and have been paid or accrued, reserved against and entered on
the books of such entity. There are no material liens for taxes (other than for
current taxes not yet due and payable) on the assets of any of the Contributed
Entities relating to the Galaxy Business. The Contributed Entities have
previously delivered or made available to PAS true and complete copies of their
federal income tax returns for each of the fiscal years ended December 31, 1992
through December 31, 1995. Except as set forth on Schedule 6.8 or as provided
herein, none of the Contributed Entities is a party to or bound by any agreement
providing for the allocation or sharing of taxes with any entity which is not,
either directly or indirectly, a Contributed Entity. None of the Contributed
Entities has filed or is required to file a consent pursuant to or agreed to the
application of Section 341(f) of the Code. None of the Contributed Entities is a
"United States real property holding corporation" as defined in Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
6.9 Employees and Agents; Benefit Plans.
(a) Schedule 6.9(a) contains a complete and accurate
list of all employees of the Contributed Entities who work primarily in the
Galaxy Business (the "Galaxy Employees"), whether active or inactive, indicating
thereon the direct entity by whom such employee is employed and the employee's
job title. Upon the completion of the Asset Contribution, each of the Galaxy
Employees, to the extent still employed in connection with the Galaxy Business,
will become an employee of Newco or one of its wholly-owned Subsidiaries. HCI
also shall provide on Schedule 6.9(a) or on a separate schedule that HE shall
deliver to PAS within 20 days after the execution of this Agreement, a list that
<PAGE>
specifically identifies all employees that were listed on the list provided for
in the first sentence of this subsection and who shall be employed by the Newco
as of the Effective Time showing for each, the position held, the length of
service, employee loans, stock options, annual salary, incentive bonuses,
international and other allowances and the Contributed Entities' cost of dental,
health (other than retiree health), life and long-term disability insurance.
Except as set forth on Schedule 6.9(a), no Galaxy Employee is represented by any
union, or covered by any collective bargaining or similar agreement in
connection with their employment at any Contributed Entity, nor is any such
employee covered by a written agreement of employment in connection with their
employment at any Contributed Entity, or to the knowledge of the Contributed
Entities, any oral employment agreement, which cannot be terminated at will by
any of the Contributed Entities or which provides for severance pay or other
compensation, including stock option rights and deferred compensation
arrangements, upon termination of employment or upon change of control of the
Contributed Entities. Except as listed and described on Schedule 6.9(a), none of
the Contributed Entities is a party to any collective bargaining or other
similar labor agreement, including any such agreement which provides for or may
give rise to any liability or obligation for any severance or termination pay or
which will be the subject of renegotiation by virtue of the consummation of the
transactions contemplated by this Agreement, and to each Hughes Party's
knowledge, no labor organization has filed a petition to become the collective
bargaining representative with respect to any of the Contributed Entities.
(b) Except as set forth on Schedule 6.9(b), the
Contributed Entities have complied in all material respects with all applicable
employment and labor laws with respect to the Galaxy Employees, including but
not limited to those relating to wages, hours, collective bargaining,
discrimination, plant closing notices, and the payment of social security and
similar taxes, and are not liable for any arrears of wages or any material
penalties for failure to comply with any of the foregoing. There are no
lawsuits, governmental proceedings, arbitration proceedings or written claims
pending or, to the Contributed Entities' knowledge, threatened between the
Contributed Entities and any of the Galaxy Employees, or any labor union or
labor organization representing or purporting to represent any of the Galaxy
Employees. To the Contributed Entities' knowledge, there are no union organizing
or election activities involving any non-union Galaxy Employees which have
occurred since December 31, 1993 or threatened as of the date hereof.
(c) Schedule 6.9(c) sets forth a true and complete list
of all of the following, true, correct and complete copies of which have been
delivered to or made available to PAS:
(i) each "employee benefit plan," as defined in
Section 3(3) of ERISA, (the "Galaxy ERISA Plans") maintained,
contributed to or required to be contributed to by the Galaxy Business,
or under which the Galaxy Business could incur any liability, for the
benefit of current, former and retired employees of the Contributed
Entities ("Galaxy Benefit Employees") or any beneficiaries or
dependents of any Galaxy Benefit Employees, except for foreign plans to
which the Contributed Entities are required to contribute pursuant to
the law(s) of any foreign country;
<PAGE>
(ii) each other plan, program, policy, contract,
agreement or arrangement providing for bonuses, pensions, deferred
compensation, stock or stock related awards, severance pay, salary
continuation or similar benefits, hospitalization, medical, dental or
disability benefits, life insurance or other employee benefits, or
compensation to or for any Galaxy Benefit Employee or members of any
Galaxy Benefit Employee's families (other than directors and officers'
liability policies), whether or not insured or funded (a "Galaxy
Benefit Arrangement").
(d) Except as set forth on Schedule 6.9(d), and except
where such failure is not likely to have a material adverse effect on the Galaxy
Business, each Galaxy ERISA Plan and Galaxy Benefit Arrangement has been
established and maintained in all material respects in accordance with its terms
and in material compliance with all Laws. HCI has listed on Schedule 6.9(d) all
exceptions, without regard to whether such exceptions are likely to have a
material adverse effect on the Galaxy's Business, to this Section 6.9(d) of
which HCI or any of the Contributed Entities have actual knowledge.
(e) Except as set forth on Schedule 6.9(e), none of the
Contributed Entities have represented, promised or contracted (whether in oral
or written form) to any current or former Galaxy Benefit Employee (either
individually or to Galaxy Benefit Employees as a group) that such current or
former Galaxy Benefit Employee(s) would be provided with life insurance or
employee health or welfare plan benefits upon their retirement or termination of
employment (except as may be required by statute), except where such
representation, promise or contract is not likely to have a material adverse
effect on the Galaxy Business. HCI has listed on Schedule 6.9(e) all exceptions,
without regard to whether such exceptions are likely to have a material adverse
effect on the Galaxy Business, to this Section 6.9(e) of which HCI or any of the
Contributed Entities have actual knowledge.
(f) Except as set forth on Schedule 6.9(f), HCI has
delivered or made available to PAS true and complete copies of all Galaxy ERISA
Plans, all related trust agreements, the latest summary plan descriptions, the
latest Internal Revenue Service determination letter and application therefor
for each plan which is intended to be qualified under Section 401(a) of the
Code, and all Galaxy Benefit Arrangements and employment severance agreements
pursuant to plans which the Galaxy Business has or may have any liability.
(g) Except as set forth on Schedule 6.9(g), neither the
execution or delivery of this Agreement or the Related Agreements nor the
consummation of the transactions contemplated hereby or thereby (either alone or
together with any additional or subsequent events), shall constitute an event
under any Galaxy ERISA Plan, Galaxy Benefit Arrangement, loan or individual
agreement or contract that may result in any payment (whether of severance pay
or otherwise), restriction, or limitation upon the assets of any Galaxy ERISA
Plan or Galaxy Benefit Arrangement, acceleration of payment or vesting, increase
in benefits or compensation, or required funding with respect to any Galaxy
Benefit Employee or any of its subsidiaries or the forgiveness of any loan or
other commitment of any Galaxy Benefit Employee.
<PAGE>
(h) Except as set forth on Schedule 6.9(h), there are
no pending, or, to the Contributed Entities' knowledge, threatened material
actions or suits by or on behalf of any Galaxy ERISA Plans or Galaxy Benefit
Arrangements, by any Galaxy Benefit Employee or beneficiary covered under any
such Galaxy ERISA Plan or Galaxy Benefit Arrangement, or otherwise involving any
such plan or arrangement (other than routine claims for benefits), except to the
extent that such pending or threatened actions or suits are not likely to have a
material adverse effect on the Galaxy Business.
(i) Except as set forth on Schedule 6.9(i), with
respect to each Galaxy ERISA Plan that is funded wholly or partially through an
insurance policy, there is no liability of the Galaxy Business under any such
insurance policy or ancillary agreement with respect to such insurance policy in
the nature of a retroactive rate adjustment, loss sharing arrangement or other
actual or contingent liability arising wholly or partially out of events
occurring prior to the Effective Time which is likely to have a material adverse
effect on the Galaxy Business.
(j) Except as set forth on Schedule 6.9(j), all
employee contributions to Galaxy ERISA Plans to the date hereof have been
properly withheld by the Galaxy Business, all contributions required to be made
to each such plan by the Galaxy Business (including employee contributions and
compensation deferrals and employer matching or other contributions) have been
made on a timely basis or will be made on a timely basis and all of such
contributions have been or will be fully paid into the funding arrangements for
the respective Galaxy ERISA Plan, except where such failure is not likely to
have a material adverse effect on the Galaxy Business.
(k) Except as set forth on Schedule 6.9(k), to the
Contributed Entities' knowledge, there are no pending lawsuits, governmental
proceedings, arbitration proceedings or written claims by Galaxy Benefit
Employees against the Galaxy Business or any of its Galaxy Benefit Employees,
nor are any of the Contributed Entities aware of any such pending lawsuits,
governmental proceedings, arbitration proceedings or written claims of any
Galaxy Benefit Employee pursuant to any applicable Law relating to employees,
including human rights legislation, labor standards legislation, occupational
health and safety legislation, worker's compensation legislation or any other
employment-related legislation.
(l) Schedule 6.9(l) sets forth a complete and accurate
list of any and all loans of any nature whatsoever (other than routine travel
advances) made by the Galaxy Business to any current or former Galaxy Benefit
Employee or any affiliate of any such current or former employee.
(m) The Galaxy Business is and has been in compliance
with all occupational health and safety rules and regulations of applicable Law,
except for noncompliance that is not likely to have a material adverse effect on
the Galaxy Business. HCI has listed on Schedule 6.9(m) all exceptions, without
regard to whether such exceptions would have a material adverse effect on the
Galaxy Business, to this Section 6.9(m) of which HCI or any of the Contributed
Entities have actual knowledge.
<PAGE>
(n) Except as set forth on Schedule 6.9(n), there are
no currently pending notices of assessment, or any other communications related
thereto which any Contributed Entity has received from any workers' compensation
board or similar authorities in any jurisdictions where the Galaxy Business is
carried on and there are no assessments which are unpaid, except for assessments
and other communications that are not likely to have a material adverse effect
on the Galaxy Business. HCI has listed on Schedule 6.9(n) all exceptions,
without regard to whether such exceptions are likely to have a material adverse
effect on the Galaxy Business, to this Section 6.9(n), of which HCI or any of
the Contributed Entities have actual knowledge.
(o) Except as set forth on Schedule 6.9(o), the
deductibility of any amount paid or payable to any Galaxy Benefit Employee will
not be disallowed by the application of Section 162(m) of the Code.
(p) Except as set forth on Schedule 6.9(p), there are
no employment, severance or termination agreements, other compensation
arrangements, agreements or plans currently in effect relating to the Galaxy
Business which provide for the payment of any amount (whether in cash, property,
the vesting of property or other benefit, right or enhancement) in connection
with any of the transactions contemplated by this Agreement or the Related
Agreements to any employee, officer, shareholder or director of the Galaxy
Business who is a "disqualified individual" (as such term is defined in Section
280G(c) of the Code) that would be characterized as an "excess parachute
payment" (as such term is defined in Section 280G(b) of the Code).
6.10 Absence of Certain Changes or Events. Since June 30, 1996
to the date hereof and except as otherwise disclosed on Schedule 6.10 or as
contemplated by this Agreement:
(a) each of the Contributed Entities has (i) conducted
its business related to the Galaxy Business only in the usual and ordinary
course, (ii) operated its business related to the Galaxy Business substantially
in accordance with past practices, (iii) attempted to preserve its business and
assets related to the Galaxy Business intact and (iv) attempted to preserve the
goodwill of its suppliers, customers, distributors and others having business
with it in respect of the Galaxy Business;
(b) there has not been any material adverse change in
the condition (physical, financial or otherwise) of the assets and liabilities
comprising the Galaxy Business other than usual and ordinary change which occurs
in the normal course of usage;
(c) there has not been any damage, destruction, loss or
claim (whether or not covered by insurance) that has had a material adverse
effect on the Galaxy Business;
(d) none of the Contributed Entities has, in connection
with the Galaxy Business, directly or indirectly, declared, ordered, paid, made
or set apart or resolved to pay (i) any sum or property as a dividend or other
distribution on account of any capital thereof or (ii) any redemption,
<PAGE>
retirement, purchase or acquisition, direct or indirect, of any capital or
securities thereof;
(e) there has not been any change in any method of
accounting or accounting practice or procedure by any of the Contributed
Entities with respect to the Galaxy Business except for any such change after
the date hereof required by GAAP;
(f) none of the Contributed Entities has mortgaged,
pledged or subjected to any material Lien (other than Permitted Liens) any of
its material properties or assets, tangible or intangible in each case related
to the Galaxy Business;
(g) none of the Contributed Entities has acquired or
disposed of any material assets or properties related to the Galaxy Business in
any transaction with any of its Affiliates or any of its Affiliate's officers,
directors, shareholders or monthly salaried employees on terms that are more
favorable than arms' length or, except in the ordinary course of business,
acquired or disposed of any assets or properties of material value in any
transaction with any other person or entity;
(h) there has not been any material transaction or
commitment made, or any contract or other agreement entered into, by any of the
Contributed Entities relating to the Galaxy Business (including the acquisition
or disposition of any assets) or any relinquishment by any of the Contributed
Entities of any material contract, property or other right, other than
transactions and commitments in the ordinary course of business and those
contemplated by this Agreement and the Related Agreements;
(i) none of the Contributed Entities has forgiven or
cancelled any material debts or claims, or waived in any material respect any
rights without having received fair consideration therefor, in each case related
to the Galaxy Business;
(j) there has not been any amendment of any term of any
outstanding indebtedness in excess of $50,000,000 in the aggregate or security
of any of the Contributed Entities in respect of the Galaxy Business;
(k) there has not been any loan, advance or capital
contribution to or investment (other than cash balances of the Contributed
Entities in money market or other short term investment accounts) to any person
or entity related to the Galaxy Business in excess of $5,000,000 in the
aggregate, other than loans, advances or capital contributions or investments
made in the ordinary course of business;
(l) none of the Contributed Entities has incurred any
other material liabilities or obligations or given any guarantee (whether
absolute, accrued, contingent or otherwise), other than liabilities incurred or
guarantees given in the ordinary course of business, in each case in respect of
the Galaxy Business; and
(m) none of the Contributed Entities nor any of their
Subsidiaries have adversely modified, terminated, waived, transferred, permitted
to lapse, or failed to preserve any Galaxy Permit issued by the FCC, any Galaxy
Permit relating to the construction, launch or operation of the Galaxy
<PAGE>
Satellites or Galaxy Ground Stations, or any Galaxy Permit authorizing the
provision of broadcasting or communications services in such a manner as is
likely to have a material adverse effect on the Galaxy Business or the assets
related thereto.
6.11 Insurance. Each of the Contributed Entities maintains
reasonably adequate insurance with respect to its properties and business
related to the Galaxy Business against loss or damage of the kinds customarily
insured against by corporations of established reputation engaged in the same or
similar businesses and similarly situated, of such types and in such amounts as
are customarily carried under similar circumstances by such other corporations.
A description of all launch and in-orbit satellite insurance policies is set
forth on Schedule 6.11.
6.12 Intellectual Property. Schedule 6.12 sets forth a listing
and description of all material domestic, foreign, common law, registered and
pending applications for patents, trademarks, service marks, logos, slogans,
designs, copyrights, trade names, and all material licenses running to or from
the Contributed Entities relating to the Galaxy Business. Unless expressly set
forth otherwise on Schedule 6.12, the Contributed Entities own (or where
indicated on Schedule 6.12 have a right to use), free and clear of any liens,
security interests, encumbrances or claims of others, all patents, trademarks,
service marks, logos, slogans, designs, copyrights, trade names, design
registrations, and other intellectual property listed on Schedule 6.12 and any
trade secrets, know-how, confidential information, material computer programs
(including any source code), documentation, engineering and technical drawings,
processes, methodologies, trade dress, and technology utilized in or incidental
to the Galaxy Business (all of the foregoing items collectively referred to as
the "Galaxy Intellectual Property"). Except as set forth on Schedule 6.12, (a)
no proceedings are pending or, to the knowledge of the Hughes Parties,
threatened in writing, which challenge the validity of the ownership by the
Contributed Entities of the Galaxy Intellectual Property; (b) none of the Hughes
Parties has any knowledge of any infringement or infringing use of any of the
Galaxy Intellectual Property or licenses by any person or entity, and the
Contributed Entities have, and as of the Closing Date Newco will have, good and
valid title to all the Galaxy Intellectual Property that is owned by the
Contributed Entities, and their licenses and other rights to use will be
adequate for conducting the Galaxy Business and enforceable in accordance with
their terms; (c) to the Contributed Entities' knowledge, no infringement of any
material intellectual property right or other proprietary right of any third
party has occurred or will result in any way from the conduct of the Galaxy
Business or from the signing and execution of this Agreement or the Related
Agreements or the consummation of any or all of the transactions contemplated
hereby or thereby, and no written claim has been made by any third party based
upon an allegation of any such infringement; (d) the Galaxy Intellectual
Property is valid and in full force and effect and no aspect thereof is subject
to any outstanding order, ruling, decree, judgment or stipulation by or with any
court, arbitrator or administrative agency; and (e) there are no restrictions on
the direct or indirect transfer of any license, or any interest therein, held by
the Galaxy Business in respect of the Galaxy Intellectual Property.
<PAGE>
6.13 Environmental Matters.
(a) The operations of each of the Contributed Entities
relating to the Galaxy Businesses are in substantial compliance with all
Environmental Laws with respect to its conduct of the Galaxy Business. Except as
set forth on Schedule 6.13(a), none of the Contributed Entities have received
any written notice with respect to any of its assets of any material violation
of any Environmental Law with respect to the Galaxy Business.
(b) Except as set forth on Schedule 6.13(b), there are
no conditions associated with assets of the Galaxy Business, the operation of
the Galaxy Business or owned or, to each Contributed Entity's Knowledge, leased
real property that relate to the Galaxy Business as currently operated that
would under applicable Environmental Law require or could reasonably be expected
to require any of the Contributed Entities to (i) undertake any action that
would materially impair the ability of such entity to use the material owned and
leased real property that relate to the Galaxy Business as currently operated or
the material assets of the Galaxy Business as currently used, (ii) incur
material expenditures or (iii) undertake remedial obligations at any real
property that is owned, operated or leased by any of the Contributed Entities or
that is adjacent to real property owned, operated or leased by such entity in
connection with the Galaxy Business which would cost individually in excess of
$1.0 million.
(c) Except as set forth on Schedule 6.13(c), as of the
date hereof, none of the Contributed Entities is subject to any outstanding
orders, agreements or contracts with any Government Entity or other person
respecting (i) violations of Environmental Laws, (ii) Remedial Action or (iii)
any Release or threatened Release of a Hazardous Material, in either case which
could be expected to have a material adverse effect on the Galaxy Business.
6.14 Investment Banking Fees and Commissions. Except for
Greenhill & Co., LLC and Donaldson, Lufkin & Jenrette Securities Corporation
(copies of whose engagement letters with HE have been furnished to PAS), no
person or entity is entitled to receive from the Hughes Parties or any of their
Subsidiaries or any of their directors, officers or employees any investment
banking, brokerage or finder's fee or fees for financial consulting or other
advisory services in connection with this Agreement or the transactions
contemplated hereby based upon arrangements made by or on behalf of the Hughes
Parties, nor is any person or entity entitled to receive reimbursement from the
Hughes Parties or any of their Subsidiaries for any such services or any legal
fees and expenses.
6.15 Material Contracts.
(a) HCI has provided or made available to PAS or its
independent auditors and/or legal counsel (i) true and complete copies of all
written Material Contracts relating to the Galaxy Business, or (ii) with respect
to such Material Contracts that have not been reduced to writing, a written
description thereof, each of which is listed on Schedule 6.15(a). Except as set
forth on Schedule 6.15(a), none of the Contributed Entities has received any
notice or has any knowledge that any other party is, in default in any respect
under any such Material Contract, other than payment defaults under transponder
<PAGE>
lease agreements which are not more than 90 days past due. Each of the Material
Contracts relating to the Galaxy Business is in full force and effect and
constitutes a valid, legal and binding agreement of the parties thereto,
enforceable in accordance with its terms except for the Bankruptcy Exception.
(b) Except as set forth on Schedule 6.15(b), none of
the Hughes Parties is a party, as of the date hereof, to any contract,
agreement, commitment, arrangement, lease (including with respect to personal
property), policy or other instrument that is not subject to termination by such
Hughes Party upon less than six months written notice to the other party thereto
which materially restricts or limits the right of any Hughes Party or, which
would, on or after the Closing Date, materially restrict or limit Newco's or any
of its Affiliates' right to conduct its business or compete, including without
limitation, any restriction on its ability to sell, lease or otherwise provide
services from available transponder capacity to any person or entity for any
purpose at any orbital location and in any frequency band, any geographical,
market segment, product line or other industry limitation, or any exclusive or
sole supply or vendor arrangement or agreement. Nothing in this Section 6.15(b)
shall preclude or require disclosure on Schedule 6.15(b) of most favored nations
provisions, options for additional services or capacity, rights of negotiation,
or similar provisions agreed to in the ordinary course of business (including,
without limitation, of the kind set forth in the agreements referenced on
Schedule 6.15(a)).
(c) As of June 30, 1996, the contracts, agreements,
commitments, arrangements, leases (including with respect to personal property)
that represent obligations of third parties to make payments to any Hughes Party
in exchange for the sale or lease of transponder capacity, have an aggregate
stated amount of unpaid payments owing to the Hughes Parties of $3,394,000,000
over the remaining stated term of such contracts, after allowance for doubtful
accounts or other allowances or deductions known as of such date which are
ordinary and customary in the conduct of the Galaxy Business (the "Galaxy
Backlog"). The Galaxy Backlog represents amounts that, assuming the due
performance by each party of its obligations under each contract and the
occurrence of no event that would permit termination of a contract without
liability to the terminating party, will be due for, and will arise out of, bona
fide sales and delivery of goods, performance of services and other business
transactions, unless the underlying contract thereto is properly terminated in
accordance with the terms thereof. Except as set forth on Schedule 6.15(c),
there are no refunds, discounts or other adjustments payable by any Hughes Party
with respect to any portion of the Galaxy Backlog, and to the knowledge of
Galaxy, there are no defenses, rights of setoff, counterclaims, assignments,
restrictions, encumbrances, or conditions enforceable by any third parties on or
affecting any portion of the Galaxy Backlog. Except as set forth on Schedule
6.15(c), none of the Hughes Parties is, or has received any notice or has any
knowledge that any other party is, in default in any material respect under any
contract representing any portion of the Galaxy Backlog, other than (i) payment
defaults under transponder lease agreements which are not more than 90 days past
due (ii) defaults under contracts representing the Galaxy Backlog that do not
have a stated backlog in excess of $500,000 in the aggregate for the stated
contract term, and (iii) defaults or terminations under transponder lease
agreements that are promptly replaced by contracts providing for reasonably
equivalent or superior backlog payments.
<PAGE>
6.16 Personal Property. The Contributed Entities have, and
immediately after the Closing Newco will have, good and valid title to all
personal property and assets (whether tangible or intangible) related to the
Galaxy Business reflected on the consolidated balance sheet of the Galaxy
Business as of June 30, 1996 or acquired after June 30, 1996, except for
property and assets sold since June 30, 1996 in the ordinary course of business
and except for satellite systems under development by the Galaxy Business, with
respect to which title will not be taken, other than as provided in the
applicable contract therefor provided that except as disclosed on Schedule 6.16
there are no material Liens with respect to any satellites under development.
Except as set forth on Schedule 6.16, none of such properties or assets (whether
real or personal) is subject to any Liens, except:
(i) Liens disclosed on the Galaxy Balance Sheet; or
(ii) any Permitted Liens.
6.17 Real Property.
(a) Schedule 6.17(a) sets forth a complete description
of all real property owned by the Contributed Entities that relate to the Galaxy
Business (the "Galaxy Owned Real Property"), together with a description of such
ownership and the identity of the entity that owns such property. The
Contributed Entities have good and valid title to the Galaxy Owned Real Property
and otherwise own the Galaxy Owned Real Property free and clear of all liens,
security interests, claims and other charges and encumbrances, except for (i)
Permitted Liens and (ii) encumbrances, if any, which do not materially impair
the existing use of the property.
(b) Schedule 6.17(b) sets forth a list of all of the
land, buildings and other real property leased or sub-leased by the Contributed
Entities in connection with the Galaxy Business (the "Galaxy Leased Real
Property"). The Contributed Entities have a good and valid leasehold interest in
and right to peaceful quiet possession as against each landlord with respect to
each Galaxy Leased Real Property. True and complete copies of all leases of the
Galaxy Leased Real Property have been made available for review to PAS. Such
leases are in full force and effect according to their terms, constitute the
legal, valid and binding obligations of the Contributed Entity that is a party
thereto and, to the Contributed Entities' knowledge, such leases have not been
amended or modified except as disclosed in writing to PAS. None of the
Contributed Entities is in material default with respect to any of the leases of
the Galaxy Leased Real Property, nor has any event occurred which with the
passage of time, the giving of notice, or both, would constitute an event of
default or otherwise would place such Contributed Entity in material default
under any of such leases; none of the Contributed Entities have received any
notice of any such default or event; and, to the Contributed Entities'
knowledge, no landlord is in default under any of such leases, and no event has
occurred which with the passage of time, the giving of notice, or both, would
constitute an event of default or otherwise place any landlord in default
thereunder.
(c) The Galaxy Owned Real Property and the Galaxy
Leased Real Property, together with facilities furnished under contract with
others, comprise substantially all of the real estate used in, or necessary to
conduct, the Galaxy Business, and such use and occupancy is in conformance in
<PAGE>
all material respects with all applicable laws, rules and regulations, including
but not limited to, applicable zoning, subdivision and other land use rules and
regulations, the violation of which is likely to have a material adverse effect
on the Galaxy Business.
(d) To the Contributed Entities' knowledge, other than
the Contributed Entities, there are no parties in possession of any portion of
the Galaxy Leased Real Property or the Galaxy Owned Real Property, whether as
lessees or sublessees thereof, or tenants at sufferance, trespassers or
otherwise, except as disclosed on Schedule 6.17(d). The location, construction,
occupancy, operation or use of the Galaxy Owned Real Property and, to the best
knowledge of the Contributed Entities, the Galaxy Leased Real Property
(including the buildings, improvements, fixtures and equipment located thereon)
do not contravene any laws, rules or regulations, or any restrictive covenant or
deed restriction (recorded or otherwise), or any Galaxy Permit, affecting any of
such property the contravention of which is likely to have a material adverse
effect on the Galaxy Business. There are no pending or, to the best knowledge of
the Contributed Entities, threatened condemnation proceedings with respect to
any Galaxy Leased Real Property, lease, or the Galaxy Owned Real Property, or
litigation or administrative actions relating thereto. All buildings,
improvements, fixtures and equipment used in connection with the Galaxy Business
are located on the Galaxy Owned Real Property and the Galaxy Leased Real
Property and do not encroach on any adjoining property, and, to the best
knowledge of the Hughes Parties, no buildings or improvements encroach upon the
Galaxy Owned Real Property or the Galaxy Leased Real Property which is likely to
have a material adverse effect on the Galaxy Business.
6.18 Certain Assets and Agreements.
(a) Ground Stations. Each ground station, including,
without limitation, the related broadcasting facility assets (consisting of
land, building, fixtures, improvements and telemetry, tracking and control
equipment) that is owned or leased by any of the Contributed Entities in
connection with the Galaxy Business is listed on Schedule 6.18(a) (the "Galaxy
Ground Stations"). Except as otherwise set forth on Schedule 6.18(a), with
respect to each such ground station, the improvements thereto and all components
used in connection therewith, including, without limitation,
transmission/reception systems and programming and data broadcasting systems, if
any, (i) are in good operating condition and repair and are suitable for their
intended purposes and (ii) are supported by a back-up, fuel-powered electricity
generator capable of generating power sufficient to meet the requirements of the
operations conducted at the ground station. The transmission/reception systems
and programming and data broadcasting systems at each such ground station have
the redundancies that are set forth on Schedule 6.18(a).
(b) Satellites and Transponders. Set forth on Schedule
6.18(b) are the following: (i) a complete and accurate list, by orbital
location, of each satellite and transponder thereon owned or leased in
connection with the Galaxy Business (each a "Galaxy Satellite"), (ii) a true and
correct copy of a satellite loading chart listing each transponder on each
Galaxy Satellite, along with the type of transponder (C-band, Ku-band or other)
and the customer or group of related customers that have leased or purchased
capacity on such transponder and the amount of such capacity, (iii) the most
<PAGE>
recent "Health Status Report," summarizing all spacecraft related incidents and
anomalies known to the Galaxy Business as well as the current status, to the
best knowledge of the Contributed Entities, of the subsystems on the Galaxy
Satellites (power, telemetry and command, reaction control, communications and
antenna), and (iv) a list of all satellites under construction, all satellites
that have been constructed but not launched, including describing the status of
launch insurance, the coverage thereunder and the premium to be paid in
connection therewith. For each Galaxy Satellite, true, correct and complete
copies of the foregoing will be delivered or made available to PAS (all such
data, records, tapes, information, lists and reports are collectively referred
to herein as the "Galaxy Data") prior to the Closing Date. Such Galaxy Data
represent, to the best knowledge of the Contributed Entities, all relevant and
material information relating to the operating condition and repair of the
Galaxy Satellites, and the fuel life expectancies of the Galaxy Satellites. The
information contained in the Galaxy Data is, to the best knowledge of the
Contributed Entities, accurate and complete records (except as to only those
informational gaps disclosed to PAS) of the subject matters covered therein;
however, such parties make no representation or warranty as to the accuracy of
any conclusion expressed as to fuel life expectancies of the Galaxy Satellites.
Such Galaxy Satellites are to the best knowledge of each of the Hughes Parties,
subject to the Health Status Reports, in good condition. Except as specifically
provided herein, no representation or warranty, express or implied, is made with
respect to the Galaxy Satellites.
(c) Tracking, Telemetry and Control Equipment. Except
as otherwise set forth on Schedule 6.18(c), to the best knowledge of the
Contributed Entities, the tracking, telemetry and control equipment (on the
ground) used by third party contractors to provide tracking, telemetry and
control services related to each Galaxy Satellite is (i) in good operating
condition and repair, ordinary wear and tear excepted, and (ii) not in need of
maintenance or repairs except for ordinary, routine maintenance and repairs.
(d) ITU Frequency Registration. Schedule 6.18(d)
contains a summary, by orbital location, of the status of frequency registration
at the International Telecommunications Union, of each Galaxy Satellite,
including the identity of the sponsoring administration and the frequency bands
covered.
(e) Satellite Coordination. Except as set forth on
Schedule 6.18(e), to the best knowledge of the Contributed Entities, no person
or entity has asserted that it has rights to operate a spacecraft in a manner
that would result in interference with respect to any Galaxy Satellite or any
Satellite to be used in connection with the Galaxy Business for which a
Contributed Entity has applied for a Permit. Except as set forth on Schedule
6.18(e), none of the Contributed Entities is aware of any asserted dispute with
respect to such entity's continued ability to utilize any Galaxy Satellite
substantially in the manner that such Galaxy Satellite has been used in
connection with the Galaxy Business to date. Schedule 6.18(e) also contains a
list of all satellite coordination agreements to which any of the Contributed
Entities or their Affiliates is a party, a summary of all operational or
technical limitations set forth therein and a summary of all coordination
discussions with other persons or entities, domestic or foreign, with regard to
the Galaxy Satellites or any Satellite to be used in connection with the Galaxy
Business for which a Contributed Entity has applied for a Permit in which any of
<PAGE>
the Contributed Entities or their Affiliates has been engaged in the past three
years.
6.19 IGO Determinations. Schedule 6.19 contains a list of all
IGO Determinations with respect to the Galaxy Satellites that are needed to
operate Galaxy Business as it is now being conducted. Except as set forth on
Schedule 6.19, none of the Contributed Entities is aware of any difficulties in
obtaining any other IGO Determinations with respect to the Galaxy Satellites or
any Satellite to be used in connection with the Galaxy Business for which a
Contributed Entity has applied for a Permit.
ARTICLE VII
COVENANTS
7.1 Interim Operations of PAS. Except as expressly
contemplated or permitted by this Agreement or any of the Related Agreements, or
to the extent that HCI shall otherwise consent in writing, during the period
from the date of this Agreement and continuing until the Closing Date, PAS
agrees as to PAS and its Subsidiaries that:
(a) Ordinary Course. PAS and its Subsidiaries shall
carry on their businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted, and shall use
commercially reasonable efforts and, to the extent necessary to conduct normal
operations, cause each of its Subsidiaries to use commercially reasonable
efforts to preserve intact its present business organizations, to keep available
the services of its current officers and employees and to preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that its goodwill and ongoing business shall not be impaired in
any material respect at the Closing Date. For the avoidance of doubt, it is
understood that, subject to the limitations on investment, disposition and
incurrence of indebtedness in subsections (f), (g) and (k) below, the pursuit of
and consummation by PAS of strategic partnerships, joint ventures, acquisitions
and similar activities and investments shall be considered to be in the
"ordinary course" for PAS if, in each case, such activities and investments are
ancillary to the sale or lease of, or the provision of service or capacity via,
transponders by PAS.
(b) Dividends; Changes in Capital Stock. PAS shall not,
and shall not permit any of its Subsidiaries to: (i) declare, set aside or pay
any dividends on or make other distributions (whether in cash, securities or
property or any combination thereof) in respect of any class or series of its
capital stock, except for non-cash dividends in respect of PAS Preferred Stock,
or cash dividends or distributions paid on or with respect to the capital stock
of a wholly owned Subsidiary; (ii) split, combine, subdivide or reclassify any
of its capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock; or (iii) repurchase, redeem or otherwise acquire, or permit any
Subsidiary to purchase or otherwise acquire, any shares of the capital stock or
other securities of PAS or any of its Affiliates.
(c) Issuance of Securities. Other than as provided or
allowed herein and except as set forth on Schedule 7.1(c) or pursuant to the
exercise of Options, PAS shall not, and shall not permit any of its Subsidiaries
<PAGE>
to, issue, pledge or sell, or authorize the issuance, pledge or sale of
additional shares of capital stock of any class, or securities convertible into
capital stock of any class, or any rights, warrants or options to acquire any
convertible securities or capital stock, or any other securities in respect of,
in lieu of, or in substitution for, shares of common stock outstanding on the
date hereof or (ii) amend, waive or otherwise modify any of the terms of any
option, warrant or stock option plan of it or any of its Subsidiaries.
(d) Governing Documents. PAS shall not, and shall not
permit any of its Subsidiaries to, amend or propose to amend their respective
Certificates of Incorporation or Bylaws.
(e) No Solicitation. From the date hereof through the
Closing Date or the earlier termination of this Agreement, PAS shall not, and
shall not permit any of its Subsidiaries, or any of its or their officers,
directors, employees, representatives, agents or Affiliates (including, without
limitation, any investment banker, attorney or accountant retained by PAS or any
of its Subsidiaries) to, directly or indirectly, enter into, solicit, initiate
or continue any discussions or negotiations with, or encourage or respond to any
inquiries or proposals by, or participate in any negotiations with, or provide
any information to, or otherwise cooperate in any other way with, any
corporation, partnership, person or other entity or group (each, a "Person")
(other than HCI, Galaxy or any of their Affiliates or representatives),
concerning any offer or proposal which constitutes or is reasonably likely to
lead to any Acquisition Proposal; provided that the Board of Directors of PAS
may, in the event of an unsolicited Acquisition Proposal, engage in negotiations
or discussions with, or provide information or data to, any Person relating to
an Acquisition Proposal if (x) the Acquisition Proposal is a bona fide
fully-financed written offer submitted to PAS' Board of Directors and such Board
of Directors, after consulting with a nationally recognized investment bank,
determines that such Acquisition Proposal is economically superior to the
transactions contemplated by this Agreement and the Related Agreements (a
"Superior Acquisition Proposal"), and (y) PAS' Board of Directors determines,
after having received the written opinion of outside legal counsel to PAS, that
the failure to engage in such negotiations or discussions or provide such
information would result in a breach of the fiduciary duties of the Board of
Directors of PAS under applicable law. Then, in such event, the Board of
Directors may withdraw or modify its approval or recommendation of the Merger or
this Agreement, approve or recommend the Superior Acquisition Proposal or
terminate this Agreement pursuant to Section 9.1(g) hereof. HCI shall have the
right to match any such Superior Acquisition Proposal, and have such matching
proposal immediately accepted by PAS, for five (5) business days after HCI is
informed of the necessary determinations in clauses (x) and (y) of the preceding
sentence with respect to such Superior Acquisition Proposal. Any information
furnished to any Person in connection with an Acquisition Proposal shall be
provided pursuant to a confidentiality agreement in customary form on terms not
more favorable to such Person than the terms contained in the Confidentiality
Agreement (as defined in Section 7.6). Subject to all of the foregoing
requirements, PAS will immediately notify HCI orally and in writing if any
discussions or negotiations are sought to be initiated, any inquiry or proposal
is made, or any information is requested by any Person with respect to any
Acquisition Proposal or which could lead to an Acquisition Proposal and
immediately notify HCI of all material terms of any proposal which it may
receive in respect of any such Acquisition Proposal, including the identity of
<PAGE>
the Person making the Acquisition Proposal or the request for information, if
known, and thereafter shall inform HCI on a timely, ongoing basis of the status
and content of any discussions or negotiations with such a third party,
including immediately reporting any material changes to the terms and conditions
thereof. PAS shall, and shall cause its Subsidiaries and Affiliates, and will
use its best efforts to ensure their respective officers, directors, employees,
investment bankers, attorneys, accountants and other agents to, immediately
cease and cause to be terminated all discussions and negotiations that have
taken place prior to the date hereof, if any, with any Persons conducted
heretofore with respect to any Acquisition Proposal. As used in this Agreement,
"Acquisition Proposal" shall mean any of the following (other than the
transactions contemplated hereunder) involving PAS or any of its Subsidiaries:
(i) any merger, consolidation, share exchange, recapitalization, business
combination, or other similar transaction; (ii) any sale, lease exchange,
mortgage, pledge, transfer or other disposition of 10% or more of the assets of
PAS and its Subsidiaries, taken as a whole, in a single transaction or series of
transactions; (iii) any tender offer or exchange for or other purchase of 10% or
more of the outstanding shares of the capital stock of PAS or the filing of a
registration statement under the Securities Act in connection therewith; or (iv)
any public announcement of a proposal, plan or intention to do any of the
foregoing. Nothing contained in this Section 7.1(e) shall prohibit PAS or its
Board of Directors from taking and disclosing to its stockholders a position
with respect to a tender offer by a third party pursuant to Rules 14d-9 and
14e-2(a) promulgated under the Exchange Act or making such disclosure as may be
required by applicable law.
(f) No Spacecraft Acquisitions, Investments or Capital
Expenditures. Except as listed on Schedule 7.1(f), PAS shall not, and shall not
permit any of its Subsidiaries to (i) acquire or agree to acquire any satellite
or other spacecraft which PAS has not, on the date of this Agreement, previously
agreed in writing to acquire, or (ii) make one or more investments or capital
expenditures exceeding $35,000,000 in the aggregate in any twelve month period
for all such investments or expenditures that occur from the date hereof;
provided, however, that PAS may (A) replace any satellite lost in a launch or in
orbit, (B) continue capital programs now underway as described on Schedule
7.1(f), plus additional expenses solely for change orders of up to 10% of the
progress payments on each satellite remaining to be paid as of the date hereof,
and (C) purchase such terrestrial equipment as necessary to supply customers in
the ordinary course in connection with leases of transponder capacity by such
customers. Notwithstanding the foregoing, PAS shall not, and shall not permit
any of its Subsidiaries to provide financing for, make any additional investment
in, or make any capital expenditure for the benefit of, any business engaged in
DTH Services unless such financing, investment or expenditure is ancillary to
the sale or lease of, or other provision of service or capacity via,
transponders. As used in this Agreement, "DTH Services" means any video, audio,
data or other information services provided by satellite and intended for direct
reception by the general public.
(g) No Dispositions. Other than as contemplated hereby
and other than dispositions in the ordinary course of business consistent with
past practice which are not material in the aggregate to PAS and its
Subsidiaries, taken as a whole, PAS shall not, and shall not permit any of its
Subsidiaries to, sell, pledge, lease, dispose of, encumber or otherwise
authorize the sale, disposition, grant, encumbrance, lease (whether such lease
is an operating or capital lease) of any of its assets.
<PAGE>
(h) No Dissolution, Etc. Except as otherwise permitted
or contemplated by this Agreement, PAS shall not authorize, recommend, propose
or announce an intention to adopt a plan of complete or partial liquidation or
dissolution of PAS or any of its Significant Subsidiaries. As used in this
Agreement, the term "Significant Subsidiary" has the meaning assigned to it in
Regulation S-X under the Exchange Act.
(i) Other Actions. PAS will not voluntarily take, and
will not permit any of its Subsidiaries voluntarily to take or agree or commit
voluntarily to take, any action that results in any of PAS' representations or
warranties hereunder being untrue in any material respect or in any of PAS'
covenants hereunder or any other conditions to the Asset Contribution, the
Univisa Contribution or the Merger not being satisfied in all material respects.
Notwithstanding the foregoing, no action permitted by this Section 7.1 or
contemplated by this Agreement shall be construed to have caused a breach of a
representation or warranty contained herein.
(j) Certain Employee Matters. Except as described on
Schedule 7.1(j), PAS and its Subsidiaries shall not: (A) grant any increases in
the compensation or fringe benefits of any of its directors, officers, or key
employees; (B) pay or agree to pay any pension, retirement allowance, severance,
termination or other employee benefit not required or contemplated by any of the
existing PAS ERISA Plans or PAS Benefit Arrangements as in effect on the date
hereof to any such director, officer or key employee, whether past or present;
(C) other than with respect to new hires consistent with past practice enter
into any new, or materially amend any existing, employment or severance or
termination agreement with any such director, officer or key employee; or (D)
establish, adopt, enter into, or amend any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, savings, welfare, deferred compensation, employment, termination,
severance or other employee benefit plan, agreement, trust, fund, policy or
arrangement for the benefit or welfare of any directors, officers or current or
former employees, except in each case (i) to the extent required by applicable
law or regulation, (ii) pursuant to collective bargaining agreements as in
effect on the date of this Agreement, (iii) for cash bonuses in lieu of options
not to exceed $5,000,000 in the aggregate, (iv) normal bonuses and normal
increases to officers and key employees consistent with past practice or other
agreements which PAS believes are necessary for the continued conduct of PAS'
business in the ordinary course, or (v) for amendments to PAS ERISA Plan(s) or
PAS Benefits Arrangement(s) which have been disclosed to HCI prior to the
execution of this Agreement or which would not materially increase the cost of
benefits to PAS and its Subsidiaries, taken as a whole, in the aggregate.
(k) Indebtedness. Except as set forth on Schedule
7.1(k), and except for borrowing in the ordinary course of business consistent
with past practices under its existing credit facilities or arrangements, PAS
shall not, and shall not permit any of its Subsidiaries to, assume, incur or
pre-pay any indebtedness for borrowed money or guarantee any such indebtedness
or issue or sell any debt securities or warrants or rights to acquire any debt
securities of such party or any of its Subsidiaries or guarantee any debt
securities of others or enter into any lease other than in the ordinary course
(whether such lease is an operating or capital lease), or create any mortgages,
liens, security interests or other encumbrances on the property of PAS or any of
its Subsidiaries in connection with any indebtedness thereof, or enter into any
<PAGE>
"keep well" or other agreement or arrangement to maintain the financial
condition of another person; provided that PAS may enter into any such "keep
well" agreement or arrangement if the payment of the full amount of the
obligation represented by such agreement could then be made as an investment
under Section 7.1(f).
(l) Agreements. Except as permitted by Section 7.1(f)
or as otherwise contemplated by this Agreement, PAS shall not, and shall not
permit any of its Subsidiaries to, enter into, materially modify, rescind,
terminate, waive, release or otherwise amend any of the terms or provisions of
any Material Contract, other than in the ordinary course of business consistent
with past practice.
(m) Accounting. PAS shall not, and shall not permit any
of its Subsidiaries to, take any action, other than in the ordinary course of
business, consistent with past practice or as required by the SEC or by law, to
effect any material change in any of its current accounting policies, procedures
and practices.
(n) Payment of Claims. PAS shall not, and shall not
permit any of its Subsidiaries to, pay, discharge or satisfy any material
claims, liabilities or obligations (absolute, accrued, asserted, unasserted,
contingent or otherwise), other than such payment, discharge or satisfaction in
the ordinary course of business and consistent with past practice.
(o) Waivers and Payments. PAS shall not, and shall not
permit any of its Subsidiaries to, other than in the ordinary course of business
and consistent with past practice, waive any rights of substantial value or make
any payment, direct or indirect, of any material liability before the same comes
due in accordance with its terms, except to the extent (and only to the extent)
to which PAS receives fair value in exchange for such waiver or payment.
(p) Insurance. PAS shall not and shall not permit any
of its Subsidiaries to, fail to maintain its existing insurance coverage of all
types in effect or, in the event any such coverage shall be terminated or lapse,
to the extent available at reasonable cost, procure substantially similar
substitute insurance policies which in all material respects are in at least
such amounts and against such risks as are currently covered by such policies.
Notwithstanding the foregoing, PAS shall not renew any spacecraft insurance
policy other than at the best available rate after competitive bidding.
(q) Affiliate Transactions. PAS shall not, and shall
not permit any of its Subsidiaries to, engage in any transaction with, or enter
into any agreement, arrangement, or understanding with, directly or indirectly,
any of such entity's affiliates (as defined in Rule 12(b)-2 under the Exchange
Act) which involves the transfer of consideration or has a financial impact on
such entity, other than pursuant to such agreements, arrangements, or
understandings (i) existing on the date of this Agreement (all of which such
agreements are considered to be Material Contracts for purposes of Section
5.16), (ii) which are done on terms that the Board of Directors of PAS
determines in good faith to be equal to, or more favorable to PAS, than the
terms that PAS would be able to obtain from third parties in similar
<PAGE>
transactions and/or for similar goods or services or (iii) which are permitted
by Section 7.1(o) hereof including PAS and any of its Subsidiaries.
(r) PAS Permits. PermExcept for Permits which lapse or
expire due to ordinary course changes in the business of PAS, PAS shall not
surrender, allow to expire or be terminated, modify adversely, forfeit, or fail
to renew or extend under regular terms any of the PAS Permits issued by the FCC
(other than those related to PAS Ground Stations) or give the FCC or other
Government Entity with jurisdiction any grounds to institute any proceeding for
the revocation, suspension, or adverse modification of any PAS Permit issued by
the FCC. Should the FCC or other Government Entity with jurisdiction institute
any proceedings for the suspension, revocation or adverse modification of any of
such PAS Permits, PAS shall use commercially reasonable efforts to promptly
contest such proceedings and to seek to have such proceedings terminated in a
manner that is favorable to PAS.
(s) Construction Permits and Applications. PAS will use
commercially reasonable efforts to maintain each FCC construction Permit (if
any) listed on Schedule 5.6 in effect until the applicable construction projects
are complete and will not, by act or omission, cause, or fail to use
commercially reasonable efforts to avoid having, any pending FCC application
listed on Schedule 5.6 to be dismissed or denied, except where (i) the loss of
such Permit or pending application would not have a material adverse effect on
PAS and its Subsidiaries, taken as a whole or (ii) the maintenance of any such
Permit would require an expenditure which would be in violation of subsection
(f) above.
(t) Interference.rferPAS shall use commercially
reasonable efforts to protect the transmissions to and from the PAS Satellites
and the PAS Ground Stations from interference from other radio communications
facilities (existing or proposed), to the extent that such interference is
prohibited by FCC Rules or inconsistent with rights accorded the PAS Satellites
under the ITU's Radio Regulations and shall promptly notify HCI of any actual or
threatened interference. As used in this Agreement, "FCC Rules" means,
collectively, the Communications Act of 1934, as amended, or any successor
statute, and the rules, regulations, orders and policies of the FCC promulgated
thereunder.
(u) No Restrictive Agreements. Neither PAS nor any of
its Subsidiaries shall enter into any contract, agreement, commitment,
arrangement, lease (including with respect to personal property), policy or
other instrument that (i) does not expire by the later of one (1) year after the
date hereof or six (6) months after the Closing or (ii) is not subject to
termination by PAS upon less than six months written notice to the other party
thereto, which in either case materially restricts or limits PAS' or such
Subsidiary's right to conduct its business or compete, including, without
limitation, any restriction on its ability to sell, lease or otherwise provide
services from available transponder capacity to any person or entity for any
purpose at any orbital location and in any frequency band, any geographical
market segment, product line or other industry limitation, or any exclusive or
sole supply or vendor arrangement or agreement. Nothing in this Section 7.1(u)
shall preclude or require PAS or any of its Subsidiaries from entering into
agreements containing most favored nation provisions, options for additional
services or capacity, rights of negotiation, or similar provisions, in each case
in the ordinary course of business.
<PAGE>
(v) Certain Other Agreements. PAS shall not, and shall
not permit any of its Subsidiaries to, enter into any contract, commitment or
arrangement, whether written or oral, to do any of the acts prohibited by this
Section 7.1 or to authorize, recommend, propose or announce an intention to do
the same. Notwithstanding the foregoing, PAS may enter into an agreement with
the landlord of the part of the PAS Leased Property located in Greenwich,
Connecticut to increase the square footage of such leased space by approximately
9,000 square feet on commercially reasonable terms and conditions, and PAS may
enter into the lease agreement described on Schedule 5.18(d) on commercially
reasonable terms and conditions.
7.2 Interim Operations of the Galaxy Business. Except as
expressly contemplated or permitted by this Agreement or any of the Related
Agreements, or to the extent that PAS shall otherwise consent in writing, during
the period from the date of this Agreement and continuing until the Closing
Date, HCI and Galaxy agree as to the Galaxy Business that:
(a) Ordinary Course. HCI shall cause each of the
Contributed Entities to carry on the Galaxy Business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and to
use commercially reasonable efforts, to the extent necessary to conduct normal
operations, to preserve intact its present business organizations, to keep
available the services of its current officers and Galaxy Employees and to
preserve its relationships with customers, suppliers and others having business
dealings with it to the end that its goodwill and ongoing business shall not be
impaired in any material respect at the Closing Date. For the avoidance of
doubt, it is understood that, subject to the limitations on investment,
dispositions and incurrence of indebtedness in subsections (f), (g) and (k)
below, the pursuit of and consummation by the Contributed Entities of strategic
partnerships, joint ventures, acquisitions and similar activities and
investments shall be considered to be in the "ordinary course" for the
Contributed Entities if, in each case, such activities and investments are
ancillary to the sale or lease of, or the provision of service or capacity via,
transponders by the Contributed Entities.
(b) Dividends; Changes in Capital Stock. None of the
Contributed Entities shall: (i) declare, set aside or pay any dividends on or
make other distributions (whether in cash, securities or property or any
combination thereof) in respect of any class or series of its capital stock,
except for non-cash dividends in respect of preferred stock, or cash dividends
or distributions paid on or with respect to the capital stock of a wholly owned
Subsidiary; (ii) split, combine, subdivide or reclassify any of its capital
stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock; or
(iii) repurchase, redeem or otherwise acquire, or permit any Subsidiary to
purchase or otherwise acquire, any shares of the capital stock or other
securities of HCI or any of its Affiliates.
(c) Issuance of Securities. Other than as provided or
allowed herein and except as set forth on Schedule 7.2(c) or pursuant to the
exercise of Options, none of the Contributed Entities shall issue, pledge or
sell, or authorize the issuance, pledge or sale of additional shares of capital
<PAGE>
stock of any class, or securities convertible into capital stock of any class,
or any rights, warrants or options to acquire any convertible securities or
capital stock, or any other securities in respect of, in lieu of, or in
substitution for, shares of common stock outstanding on the date hereof or (ii)
amend, waive or otherwise modify any of the terms of any option, warrant or
stock option plan of it. Except as otherwise contemplated hereby, HCI will make
no transfer of the capital stock of any of the Contributed Entities, whether to
an Affiliate or otherwise.
(d) Governing Documents. None of the Contributed
Entities shall amend or propose to amend their respective Certificates or
Articles of Incorporation or Bylaws.
(e) No Spacecraft Acquisitions, Investments or Capital
Expenditures. Except as listed on Schedule 7.2(e), none of the Contributed
Entities shall (i) acquire or agree to acquire any satellite or other spacecraft
which a Contributed Entity has not, on the date of this Agreement, previously
agreed in writing to acquire, or (ii) except as required pursuant to Section
7.24, make one or more investments or capital expenditures exceeding $35,000,000
in the aggregate in any twelve month period for all such investments or
expenditures that occur from the date hereof; provided, however, that any
Contributed Entity may replace any satellite lost in a launch or in orbit.
(f) No Dispositions. Other than as contemplated hereby
and other than dispositions in the ordinary course of business consistent with
past practice which are not material in the aggregate to the Galaxy Business,
HCI shall not, and shall not permit any of its Subsidiaries to, sell, pledge,
lease, dispose of, encumber or otherwise authorize the sale, disposition, grant,
encumbrance, lease (whether such lease is an operating or capital lease) of any
of the assets related to the Galaxy Business.
(g) No Dissolution, Etc. Except as otherwise permitted
or contemplated by this Agreement, HCI shall not authorize, recommend, propose
or announce an intention to adopt a plan of complete or partial liquidation or
dissolution of any of HCI or any of the Contributed Entities.
(h) Other Actions. None of the Hughes Parties will
voluntarily take, or permit any of their Subsidiaries voluntarily to take or
agree or commit voluntarily to take, any action that results in any of the
Hughes Parties' representations or warranties hereunder being untrue in any
material respect or in any of the Hughes Parties' covenants hereunder or any
other conditions to the Asset Contribution, the Univisa Contribution or the
Merger not being satisfied in all material respects. Notwithstanding the
foregoing, no action permitted by this Section 7.2 or contemplated by this
Agreement shall be construed to have caused a breach of a representation or
warranty contained herein.
(i) Certain Employee Matters. Except as described on
Schedule 7.2(i), HCI shall not permit any of the Contributed Entities or any of
their Subsidiaries to: (A) grant any increases in the compensation or fringe
benefits of any of its directors, officers, or key employees; (B) pay or agree
to pay any pension, retirement allowance, severance, termination or other
employee benefit not required or contemplated by any of the existing Galaxy
ERISA Plans or Galaxy Benefit Arrangements as in effect on the date hereof to
<PAGE>
any such director, officer or key employee, whether past or present; (C) other
than with respect to new hires consistent with past practice enter into any new,
or materially amend any existing, employment or severance or termination
agreement with any such director, officer or key employee; or (D) establish,
adopt, enter into, or amend any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
savings, welfare, deferred compensation, employment, termination, severance or
other employee benefit plan, agreement, trust, fund, policy or arrangement for
the benefit or welfare of any directors, officers or current or former
employees, except in each case (i) to the extent required by applicable law or
regulation, (ii) pursuant to collective bargaining agreements as in effect on
the date of this Agreement, (iii) for normal increases and bonuses to officers
and key employees consistent with past practice or other agreements which HCI
believes are necessary for the continued conduct of the Galaxy Business in the
ordinary course, or (iv) for amendments to Galaxy ERISA Plan(s) or Galaxy
Benefit Arrangement(s) which have been disclosed to PAS prior to the execution
of this Agreement or which would not materially increase the cost of benefits to
the Galaxy Business, in the aggregate.
(j) Indebtedness. Except (i) as set forth on Schedule
7.2(j) and (ii) as incurred, guaranteed or created in connection with financing
the transactions contemplated hereby, HCI shall not permit any of the
Contributed Entities or any of their Subsidiaries to assume, incur or pre-pay
any indebtedness for borrowed money or guarantee any such indebtedness or issue
or sell any debt securities or warrants or rights to acquire any debt securities
of such party or any of its Subsidiaries or guarantee any debt securities of
others or enter into any lease other than in the ordinary course (whether such
lease is an operating or capital lease), or create any mortgages, liens,
security interests or other encumbrances on the property of the Galaxy Business
in connection with any indebtedness thereof, or enter into any "keep well" or
other agreement or arrangement to maintain the financial condition of another
person; provided that any of the Contributed Entities may enter into any such
"keep well" agreement or arrangement if the payment of the full amount of the
obligation represented by such agreement could then be made under Section
7.2(e).
(k) Agreements. Except as permitted by Section 7.2(e)
or as otherwise contemplated by this Agreement, HCI shall not permit any of the
Contributed Entities or any of their Subsidiaries to enter into, materially
modify, rescind, terminate, waive, release or otherwise amend any of the terms
or provisions of any Material Contract, other than in the ordinary course of
business consistent with past practice.
(l) Accounting. HCI shall not permit any of the
Contributed Entities or any of their Subsidiaries to take any action, other than
in the ordinary course of business, consistent with past practice or as required
by the SEC or by law, to effect any material change in any of its current
accounting policies, procedures and practices.
(m) Payment of Claims. HCI shall not permit any of the
Contributed Entities or any of their Subsidiaries to pay, discharge or satisfy
any material claims, liabilities or obligations (absolute, accrued, asserted,
unasserted, contingent or otherwise), other than such payment, discharge or
satisfaction in the ordinary course of business and consistent with past
practice.
<PAGE>
(n) Waivers and Payments. HCI shall not permit any of
the Contributed Entities or any of their Subsidiaries to, other than in the
ordinary course of business and consistent with past practice, waive any rights
of substantial value or make any payment, direct or indirect, of any material
liability before the same comes due in accordance with its terms, except to the
extent (and only to the extent) to which HCI or any of the Contributed Entities
receives equivalent value in exchange for such waiver or payment.
(o) Insurance. HCI shall not permit any of the
Contributed Entities or any of their Subsidiaries to fail to maintain its
existing insurance coverage of all types in effect with respect to the Galaxy
Business or, in the event any such coverage shall be terminated or lapse, to the
extent available at reasonable cost, procure substantially similar substitute
insurance policies which in all material respects are in at least such amounts
and against such risks as are currently covered by such policies.
Notwithstanding the foregoing, HCI shall not permit any of the Contributed
Entities to renew any spacecraft insurance policy other than at the best
available rate after competitive bidding.
(p) Affiliate Transactions. Except as set forth on
Schedule 7.2(p), HCI shall not permit any of the Contributed Entities or any of
their Subsidiaries to engage in any transaction with, or enter into any
agreement, arrangement, or understanding relating to the Galaxy Business with,
directly or indirectly, any of such entity's affiliates (as defined in Rule
12(b)-2 under the Exchange Act) which involves the transfer of consideration or
has a financial impact on such entity, other than pursuant to such agreements,
arrangements, or understandings (i) existing on the date of this Agreement (all
of which such agreements are considered to be Material Contracts for purposes of
Section 6.15) (ii) which are done on terms that the Board of Directors of the
relevant Contributed Entity determines in good faith to be equal to, or more
favorable to such Contributed Entity, than the terms such entity would be able
to obtain from third parties in similar transactions and/or for similar goods or
services or (iii) which are permitted by Section 7.2(n) hereof involving HCI or
any of the Contributed Entities and any of their respective Subsidiaries.
(q) Galaxy Permits. Except for (i) Permits listed on
Schedule 6.6(b) which are indicated on such schedule to be subject to
termination by the FCC upon the launch of another satellite into the location
where certain Galaxy Satellites now are operating, and (ii) Permits which lapse
or expire due to ordinary course changes in the Galaxy Business, HCI shall not
permit any of the Contributed Entities or any of their Subsidiaries to
surrender, allow to expire or be terminated, modify adversely, forfeit, or fail
to renew or extend under regular terms any of the Galaxy Permits issued by the
FCC (other than those related to Galaxy Ground Stations), or give the FCC or
other Government Entity with jurisdiction any grounds to institute any
proceeding for the revocation, suspension, or adverse modification of any Galaxy
Permit issued by the FCC. Should the FCC or other Government Entity with
jurisdiction institute any proceedings for the suspension, revocation or adverse
modification of any such Galaxy Permits, HCI shall cause the Contributed Entity
to use commercially reasonable efforts to promptly contest such proceedings and
to seek to have such proceedings terminated in a manner that is favorable to
such entities.
<PAGE>
(r) Construction Permits and Applications. HCI shall
cause the Contributed Entity to use commercially reasonable efforts to maintain
each FCC construction Permit (if any) listed on Schedule 6.6(b) in effect until
the applicable construction projects are complete and will use commercially
reasonable efforts to avoid having any pending FCC application listed on
Schedule 6.6(b) be dismissed or denied, except where (i) the loss of such Permit
or pending application would not have a material adverse effect on the Galaxy
Business or (ii) the maintenance of any such Permit would require an expenditure
which would be in violation of subsection (e) above; provided, however, that
Galaxy may, prior to or in connection with the Closing, amend the applications
currently pending before the FCC for the Galaxy/Spaceway system in order to (i)
make HCI or one of its Affiliates the applicant for Ka-band satellites at the
following orbital locations: 49(Degree)W, 99(Degree)W, 101(Degree)W,
25(Degree)E, 54(Degree)E, 101(Degree)E, 111(Degree)E and 164(Degree)E, and (ii)
make Newco the applicant for the rest of the BSS and Ka-band satellites sought
in such application.
(s) Interference. HCI shall cause the Contributed
Entities to use their commercially reasonable efforts to protect the
transmissions to and from the Galaxy Satellites and the Galaxy Ground Stations
from interference from other radio communications facilities (existing or
proposed), to the extent that such interference is prohibited by FCC Rules or
inconsistent with rights accorded the Galaxy Satellites under the ITU's Radio
Regulations and shall promptly notify PAS of any actual or threatened
interference.
(t) No Restrictive Agreements. None of the Contributed
Entities shall enter into any contract, agreement, commitment, arrangement,
lease (including with respect to personal property), policy or other instrument
that (i) does not expire by the later of one (1) year after the date hereof or
six (6) months after the Closing or (ii) is not subject to termination by such
entity upon less than six months written notice to the other party thereto,
which in either case materially restricts or limits such entity's ability to
conduct its business or compete, including, without limitation, any restriction
on its right to sell, lease or otherwise provide services from available
transponder capacity to any person or entity for any purpose at any orbital
location and in any frequency band, any geographical, market segment, product
line or other industry limitation, or any exclusive or sole supply or vendor
arrangement or agreement. Nothing in this Section 7.2(t) shall preclude or
require any Contributed Entity from entering into agreements containing most
favored nation provisions, options for additional services or capacity, rights
of negotiation, or similar provisions, in each case in the ordinary course of
business.
(u) Additional Property. HCI shall cause one of the
Contributed Entities to acquire a leasehold interest, for a term of at least 30
years and otherwise on commercially reasonable terms and conditions, in and to
the real property on which are located the ground station and other improvements
currently owned by HCSS located off of East Garton Road in Castle Rock,
Colorado. In addition, such lease shall provide that any domestic or
international satellite arc shall not be blocked by any improvement or structure
on any adjoining land owned or controlled by HCSS, its successors and assigns.
HCI shall cause one of the Contributed Entities to continue to negotiate, on
commercially reasonable terms, for the acquisition of the fee interest of Texaco
Exploration and Production, Inc. in and to approximately 752 acres located off
Telegraph Road in Fillmore, California. In connection with the above mentioned
acquisitions, PAS and its counsel shall be delivered copies of any draft
<PAGE>
agreements and, from time to time, shall be advised of the status of these
matters. HCSS shall use best efforts (not involving the payment of money) to
obtain customary non-disturbance agreements from the superior lessors of the
lease described in item #2 of Schedule 6.17(b). Notwithstanding the foregoing,
HCSS may enter into the lease agreement described on Schedule 6.17(d) on
commercially reasonable terms and conditions.
(v) Certain Other Agreements. HCI shall not and shall
not permit any of the Contributed Entities or any of their Subsidiaries to enter
into any contract, commitment or arrangement, whether written or oral, to do any
of the acts prohibited by this Section 7.2 or to authorize, recommend, propose
or announce an intention to do the same.
7.3 Interim Operations of Newco.
(a) Except as contemplated by this Agreement, or with
the prior written consent of PAS, during the period from the date of this
Agreement to the Closing Date, Newco will conduct no operations and will
preserve intact its business organization. Without limiting the generality of
the foregoing and except as otherwise contemplated by this Agreement or in
connection with the financing of the cash portion of the consideration payable
in the Univisa Contribution and the Merger or the refinancing of indebtedness of
Newco, Galaxy or PAS, Newco will not, prior to the Closing Date, without the
prior written consent of PAS:
(i) adopt any amendment to its Certificate of
Incorporation or Bylaws; provided, that on or prior to the Closing Newco shall
amend its Certificate of Incorporation in form and substance reasonably
satisfactory to PAS, to provide for the protections set forth in Section 9.4(b)
herein;
(ii) issue, pledge or sell, or authorize the
issuance, pledge or sale of additional shares of capital stock of any class, or
securities convertible into capital stock of any class, or any rights, warrants
or options to acquire any convertible securities or capital stock, or any other
securities in respect of, in lieu of, or in substitution for, shares of common
stock outstanding on the date hereof;
(iii) declare, set aside or pay any dividend or
other distribution (whether in cash, securities or property or any combination
thereof) in respect of any class or series of its capital stock;
(iv) authorize, recommend, propose or announce an
intention to adopt a plan of complete or partial liquidation or dissolution;
(v) take, or agree to commit to take, any action
that would make any representation or warranty contained in Article VI hereof
inaccurate in any respect at, or as of any time prior to, the Closing Date; or
(vi) enter into a contract, commitment or
arrangement to do any of the foregoing, or to authorize, recommend, propose or
announce an intention to do any of the foregoing.
<PAGE>
7.4 Control of Galaxy and PAS. During the period from the date
of this Agreement and continuing until the Closing Date (the "Interim Period"),
control of the operations of PAS and its Subsidiaries shall remain with PAS and
control of the Galaxy Business shall remain with HCI and the Contributed
Entities. HCI agrees that neither it nor any of its Subsidiaries shall control,
direct, supervise, or attempt to control, direct or supervise, the operations of
PAS during this period. Likewise, the parties agree that neither PAS nor any of
its Subsidiaries shall control, direct, supervise, or attempt to control, direct
or supervise, the operations of the Galaxy Business during the Interim Period.
Notwithstanding anything in this Agreement to the contrary, no action shall be
taken hereunder constituting an assignment or transfer of control of an FCC
license, permit, authorization or application requiring the prior consent or
approval of the FCC without first obtaining such consent or approval.
7.5 Registration Statement and Proxy Statement/Prospectus.
Promptly following the date of this Agreement, HCI, Galaxy, Newco and PAS shall
cooperate and prepare, and PAS shall file with the SEC, the proxy statement with
respect to the meeting of the stockholders of PAS in connection with the PAS
Merger (the "Proxy Statement/Prospectus"), and HCI shall cause Newco to file
with the SEC one or more Registration Statements on appropriate forms under the
Securities Act and the Exchange Act with respect to the securities of Newco
issuable in connection with the Merger or in connection with the financing of
the cash portion of the consideration payable in the Univisa Contribution and
the Merger or the refinancing of indebtedness of Newco, the Contributed Entities
or PAS (each, a "Registration Statement"). The Proxy Statement/Prospectus will
be included in the Registration Statement filed with respect to the shares of
Newco Common Stock issuable in connection with the Merger. The respective
parties will cause the Proxy Statement/Prospectus and each Registration
Statement to comply as to form in all material respects with the applicable
provisions of the Securities Act, the Exchange Act and the rules and regulations
thereunder. Newco shall use commercially reasonable efforts, and each of the
Contributed Entities and PAS will cooperate with Newco, to have each
Registration Statement declared effective by the SEC as promptly as practicable
and to keep each Registration Statement effective as long as is necessary to
consummate the transactions contemplated hereunder. The respective parties
shall, as promptly as practicable, provide copies of any written comments
received from the SEC with respect to the Proxy Statement/Prospectus and/or each
Registration Statement to each other and advise each other of any verbal
comments with respect thereto received from the SEC. Newco shall use
commercially reasonable efforts to obtain, prior to the effective date of each
Registration Statement, all necessary state securities law or "blue sky" permits
or approvals required to carry out the transactions contemplated by such
Registration Statement and will pay all expenses incident thereto. Newco agrees
that the Proxy Statement/Prospectus and each amendment or supplement thereto at
the time of mailing thereof and at the time of the meeting of stockholders of
PAS, or, in the case of a Registration Statement and each amendment or
supplement thereto, at the time it is filed and becomes effective, will not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; provided,
however, that the foregoing shall not apply to the extent that any such untrue
statement of a material fact or omission to state a material fact was made by
Newco in reliance upon and in conformity with written information concerning PAS
furnished to Newco by PAS, specifically for use in the Proxy
Statement/Prospectus. PAS agrees that the written information concerning PAS
<PAGE>
provided by it for inclusion in the Proxy Statement/Prospectus and each
amendment or supplement thereto, at the time of mailing thereof and at the time
of the meeting of stockholders of PAS, or, in the case of written information
concerning PAS provided by PAS for inclusion in a Registration Statement or any
amendment or supplement thereto, at the time it is filed and becomes effective,
will not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. No amendment or supplement to the Proxy Statement/Prospectus will be
made by PAS or Newco without the approval of the other parties hereto, which
shall not be unreasonably withheld. Newco will advise PAS, promptly after it
receives notice thereof, of the time when a Registration Statement has become
effective or any supplement or amendment has been filed, the issuance of any
stop order, the suspension of the qualification of the Newco Common Stock
issuable in connection with the transactions contemplated hereby for offering or
sale in any jurisdiction, or any request by the SEC for amendment of the Proxy
Statement/Prospectus or a Registration Statement or comments thereon and
responses thereto or requests by the SEC for additional information.
7.6 PAS Stockholders' Meeting. PAS will, as soon as
practicable following the date of this Agreement, take all action necessary in
accordance with applicable law and its Certificate of Incorporation and Bylaws
to promptly call, give notice of, convene and hold a PAS stockholders meeting
for the purpose of voting on this Agreement and the transactions contemplated
hereby. The Board of Directors of PAS shall, subject to its fiduciary duties,
recommend this Agreement's approval by its stockholders and PAS shall take all
lawful reasonable action to solicit such approval, including, without
limitation, timely mailing of the Proxy Statement/Prospectus, subject to the
provisions of Section 7.1(e); provided, however, that nothing in this sentence
shall modify or eliminate PAS' absolute obligations in the prior sentence.
7.7 Access to Information.
(a) Each party (but as to the Hughes Parties, only in
connection with the Galaxy Business) shall (and shall cause each of its
Subsidiaries to) afford to the officers, employees, accountants, counsel,
financing sources and other representatives of each other party reasonable
access, during normal business hours during the period prior to the Closing
Date, to all its properties, books, contracts, commitments and records and those
of its Subsidiaries (including any tax returns or other tax related information
pertaining to the party providing such information and its Subsidiaries) and,
during such period, each party shall (and shall cause each of its Subsidiaries
to) (but as to the Hughes Parties, only in connection with the Galaxy Business)
furnish promptly to each other party (i) a copy of each report, schedule,
registration statement and other document filed or received by such party or any
such Subsidiary during such period pursuant to requirements of federal
securities laws and (ii) all other information concerning the business,
properties and personnel of such party or any such Subsidiary as any other party
may reasonably request (including any tax returns or other tax related
information pertaining to any party or its Subsidiaries, as the case may be);
provided that, as to competitively sensitive information such as pricing or
<PAGE>
customer specific information, each party shall make such sensitive information
available only to the other parties' advisers, lawyers and accountants (who
shall maintain the confidentiality of such information consistent with the past
practices of the parties to this Agreement) but not to the other parties, and,
with respect to information protected by the attorney-client privilege, neither
party shall be obligated to make such information available to the other party
or its representatives. Each party agrees that it will not, and will cause its
representatives not to, use any information obtained pursuant to this Section
7.7 for any purpose unrelated to the consummation of the transactions
contemplated by this Agreement.
(b) A Confidentiality Agreement, dated as of July 19,
1996 between PAS and HE (the "Confidentiality Agreement"), shall apply with
respect to information furnished thereunder or hereunder and any other
activities contemplated thereby.
7.8 Confidentiality.
(a) Preservation of Confidentiality Preservation of
Confidentiality. In connection with the negotiation of this Agreement, the
preparation for the consummation of the transactions contemplated hereby and the
performance of obligations hereunder, each party acknowledges that it will have
access to confidential information relating to the other parties. The parties
shall treat such information as confidential, preserve the confidentiality
thereof and not disclose such information, except to their respective advisors
and consultants in connection with the transactions contemplated hereby. Each of
the parties agrees to maintain in confidence, and not to disclose to any third
party, any ideas, methods, developments, inventions, improvements and business
plans and information which are the confidential information of any other party.
If, however, confidential information is disclosed, the disclosing party shall
immediately notify each of the other parties in writing and take all steps
required to prevent further disclosure.
(b) Property Right in Confidential Information Property
Right in Confidential Information. Until the Closing Date, all confidential
information shall remain the property of the party who originally possessed such
information. In the event of the termination of this Agreement for any reason
whatsoever, each party shall return to the other parties all documents, work
papers and other material (including all copies thereof) obtained from such
parties in connection with the transactions contemplated hereby and will use
commercially reasonable efforts, including, without limitation, instructing its
employees and others who have had access to such information, to keep
confidential and not to use any such information, unless such information is
now, or is hereafter disclosed, through no act or omission of such party, in any
manner making it available to the general public. If any party is required by
any Law or order to disclose any confidential information, it shall provide the
other parties with prompt notice of such request so that such other parties may
seek an appropriate protective order or other appropriate remedy and/or waive
compliance with the provisions of this Agreement. If, in the absence of a
protective order or other remedy or the receipt of such a waiver, a party is
nonetheless compelled by Law or order to disclose confidential information, then
such party may disclose that portion of the confidential information which such
Law or order requires to be disclosed, provided that such party uses its
reasonable efforts to preserve the confidentiality of the information, whereupon
such disclosure shall not constitute a breach of this Agreement.
<PAGE>
(c) Termination of Agreement Termination of Agreement.
Subject to any Law, each party hereto shall, and shall cause their Subsidiaries,
Affiliates and representatives who obtain such information to, hold in
confidence all such non-public information until such time as such information
is otherwise publicly available, and, if this Agreement is terminated and if so
requested by another party, each party and its Affiliates will, and will cause
their Subsidiaries, Affiliates and representatives who obtain such information
to, deliver to such other party all documents, work papers and other material
(including copies extracts and summaries thereof) obtained by or on behalf of
any of them directly or indirectly as a result of this Agreement or in
connection herewith, whether so obtained before or after the execution hereof.
7.9 Legal Conditions, Filings and Consents.
(a) Each of the Hughes Parties and PAS will (i)
cooperate with one another in determining whether any actions or filings are
required in connection with obtaining any Government Entity approvals required
to consummate the transactions contemplated by this Agreement and the Univisa
Contribution Agreement (together with the "Collateral Agreements" thereunder),
the Principal Stockholders Agreement, the Newco Stockholders Agreement, the
Registration Rights Agreement, the Assurance Agreement, the Income Tax
Indemnification and Allocation Agreement and the DTH Option Purchase Agreement
(together, the "Related Agreements") (including, without limitation, furnishing
all information required under the HSR Act), (ii) cooperate with one another in
determining whether any actions, consents, approvals or waivers are required to
be obtained from any corporate or equivalent governing body of any party, any of
their Subsidiaries, or any stockholder of the foregoing, or whether any actions,
consents, approvals or waivers are required to be obtained from any third
parties, such as parties to any material contracts, in connection with the
consummation of the transactions contemplated by this Agreement and the Related
Agreements, (iii) endeavor in good faith to take all such actions or make any
such filings, furnish information required in connection therewith, and seek in
a timely manner to obtain any such actions, consents, approvals or waivers and
(iv) promptly cooperate with and furnish information to each other in connection
with any such requirements imposed upon any of them or any of their Subsidiaries
in connection with the Univisa Share Contribution and the Merger and the other
transactions contemplated by this Agreement and the Related Agreements. Without
limiting the generality or effect of the foregoing, each of the Hughes Parties
and PAS will, and will cause its Subsidiaries to, take all commercially
reasonable actions necessary to obtain (and will cooperate with each other in
obtaining) in a timely manner any consent, authorization, order or approval of,
or any exemption by, any Government Entity or other public or private third
party, required to be obtained or made by such entity in connection with the
Asset Contribution, the Univisa Contribution, the Merger, this Agreement, any
Related Agreement or the taking of any action contemplated hereby or thereby.
Notwithstanding the foregoing, none of the parties shall be obligated hereby to
enter into any consent decree or settlement agreement in order to resolve any
such action.
(b) Without limiting the generality of the foregoing,
each party will, and each such party will cause their respective Subsidiaries
to, diligently take or cooperate in the taking of all steps reasonably necessary
or desirable and proper to prosecute expeditiously all requisite applications of
<PAGE>
HCI, the Contributed Entities and PAS to the FCC and all similar foreign
agencies seeking their consent to the transactions contemplated by this
Agreement and to obtain a determination by the FCC that the grant of the
applications made by HCI, the Contributed Entities and/or PAS to the FCC
including those described in Section 7.9(c) below will serve the public
interest, convenience and necessity. Each party will use commercially reasonable
efforts to resolve such objections, if any, which may be asserted with respect
to the transactions contemplated hereby and by all Related Agreements under any
law. In the event an administrative proceeding or suit is instituted challenging
the transactions contemplated hereby, each party will use commercially
reasonable efforts to resist or resolve such proceeding or suit consistent with
the terms of this Agreement. Each party will use commercially reasonable efforts
to take such action as may be required (i) by any Government Entity in order to
resolve such objections as it may have to the transactions contemplated hereby
or (ii) by any federal or state court of the United States, in any suit brought
by a private party or Government Entity challenging the transactions
contemplated hereby, in order to avoid the entry of any order which has the
effect of preventing the consummation of the transactions contemplated hereby on
terms consistent with the terms of this Agreement to take any action that is
likely to have a material adverse effect on it.
(c) Within fifteen (15) days after the date hereof, the
parties will file one or more requisite applications with the FCC requesting its
written consent to the transactions contemplated by this Agreement
(collectively, the "FCC Consent Application"). To the extent that any pending
applications for Permits have not been granted by the Closing Date, PAS, HCI or
a Contributed Entity, as the case may be, will immediately after closing, file
all necessary documents with the FCC or equivalent agencies to amend those
pending applications to reflect the consummation of the Asset Contribution, the
Univisa Contribution and the Merger. In addition, to the extent that the Asset
Contribution, the Univisa Contribution and the Merger will result in a change in
ownership or control of an applicant for a Galaxy FCC Permit or a PAS FCC Permit
that requires, under FCC Rules, that a major amendment be filed by that
applicant after the Closing Date, within fifteen (15) days after the date
hereof, HCI, a Contributed Entity or PAS, as appropriate, will file or cause to
be filed by one of its Affiliates all appropriate documents requesting that the
FCC exempt such a major amendment from any applicable "cut off" date and will
also file such requests for any other required waivers of the FCC's rules and
policies as to which the parties may agree. HCI, the Contributed Entities and
PAS shall coordinate with each other prior to making any filings contemplated by
this Section 7.9(c).
(d) If and to the extent that any lease, license,
contract, commitment or other agreement, including, without limitation,
transponder lease agreements, which would otherwise be included within the
definition of "Galaxy Assets," or any claim, right or benefit arising thereunder
or resulting therefrom, is not capable of being transferred or conveyed to Newco
in the Asset Contribution without the approval, consent or waiver of the other
party thereto, and such approval, consent or waiver has not been obtained prior
to the Closing, or if such transfer or conveyance would constitute a breach
thereof, Galaxy or HCSS, as the case may be, shall hold such asset for the
exclusive benefit of PAS and shall either obtain such consent or approval or
provide PAS with the rights and benefits of the affected lease, license,
contract, commitment, or other agreement for the term of such lease, license,
<PAGE>
contract, commitment or other agreement; provided that PAS shall assume the
obligations and burdens thereunder.
7.10 Indemnification and Insurance for Directors and Officers.
(a) From and after the Closing Date all rights to
indemnification now existing in favor of individuals who at or prior to the
Closing Date were directors or officers of any of the Contributed Entities,
Newco or PAS or any of their respective Subsidiaries as set forth in their
respective organizational documents shall survive the Asset Contribution, the
Univisa Contribution and the Merger with respect to matters existing or
occurring at or prior to the Closing Date and shall continue in full force and
effect for a period of five years following the Closing Date.
(b) Each of HCI, the Contributed Entities, Newco and
PAS shall, and from and after the Closing Date, Newco shall indemnify, defend
and hold harmless each person who is now, or has been at any time prior to the
date hereof or who becomes prior to the Closing Date, an officer or director of
HCI, any Contributed Entity, Newco or PAS or any of their respective
Subsidiaries (each individually an "Indemnified Person" and, collectively, the
"Indemnified Persons") against all losses, claims, damages, costs, expenses
(including attorneys' fees and expenses), liabilities or judgments or amounts
that are paid in settlement with the approval of the Indemnified Person (which
approval shall not be unreasonably withheld) as a result of or in connection
with any threatened or actual claim, action, suit, proceeding or investigation
based in whole or in part on or arising in whole or in part out of the fact that
such person is or was a director or officer of HCI, any Contributed Entity,
Newco or PAS or any of their respective Subsidiaries or out of or in connection
with activities in such capacity, whether pertaining to any matter existing or
occurring at or prior to the Closing Date and whether asserted or claimed prior
to, or at or after, the Closing Date ("Indemnified Liabilities"), including all
Indemnified Liabilities based in whole or in part on, or arising in whole or in
part out of, or pertaining to this Agreement or the transactions contemplated
hereby, in each case to the full extent a corporation is permitted under the
corporate law of the state in which it is incorporated to indemnify any such
person and, without limiting the generality or effect of the foregoing, to the
fullest extent provided in the respective organizational documents of HCI, the
Contributed Entities, Newco and PAS and their respective Subsidiaries as in
effect on the date hereof. Newco will pay expenses in advance of the final
disposition of any such action or proceeding to each Indemnified Person to the
fullest extent permitted by law and, without limiting the generality or effect
of the foregoing, to the fullest extent provided in the respective
organizational documents of HCI, the Contributed Entities, Newco and PAS and
their respective Subsidiaries as in effect on the date hereof. Without limiting
the generality or effect of the foregoing, in the event any such claim, action,
suit, proceeding or investigation is brought against any Indemnified Persons
(whether arising before or after the Closing Date), (i) the Indemnified Persons
may retain counsel reasonably satisfactory to HCI or PAS, or from and after the
Closing, Newco, and HCI or PAS shall, or from and after the Closing, Newco
shall, pay all fees and expenses of such counsel for the Indemnified Persons
promptly as statements therefore are received and (ii) HCI or PAS shall, or from
and after the Closing, Newco shall use all reasonable efforts to assist in the
vigorous defense of any such matter, provided that none of HCI or PAS, or from
and after the Closing, Newco shall be liable for any settlement effected without
<PAGE>
its prior written consent, which consent shall not unreasonably be withheld. Any
Indemnified Party wishing to claim indemnification under this Section 7.10, upon
learning of any such claim, action, suit, proceeding or investigation, shall
notify HCI or PAS, or from and after the Closing, Newco (but the failure so to
notify shall not relieve a party from any liability which it may have under this
Section 7.10 except and only to the extent such failure materially prejudices
such party), and shall deliver to HCI or PAS, or from and after the Closing,
Newco, any undertaking contemplated or required by the corporate law of its
state in which it is incorporated. The Indemnified Persons as a group may retain
only one law firm to represent them with respect to each such matter unless
there is, in the opinion of counsel to an Indemnified Person, under applicable
standards of professional conduct, a conflict on any significant issue between
the positions of any two or more Indemnified Persons or unless different
defenses may exist. Each of HCI, the Contributed Entities, Newco and PAS agrees
that all rights to indemnification, including provisions relating to advances of
expenses incurred in defense of any action or suit, existing in favor of the
Indemnified Persons with respect to matters occurring through the Closing Date,
shall survive the Asset Contribution, the Univisa Contribution and the Merger
and shall continue in full force and effect for a period of not less than four
years from the Closing Date; provided, however, that all rights to
indemnification in respect of any Indemnified Liabilities asserted or made
within such period shall continue until the disposition of such Indemnified
Liabilities.
(c) For a period of five years after the Closing Date,
Newco will maintain in effect or replace with equivalent policies of directors'
and officers' liability insurance as maintained by HCI, the Contributed
Entities, Newco or PAS, as the case may be, and their respective Subsidiaries
with respect to matters arising before the Closing Date, provided that Newco
shall not be required to pay an annual premium for such insurance in excess of
175% of the last annual premium paid by HCI, a Contributed Entity, Newco or PAS,
as the case may be, prior to the date hereof, but in such case shall purchase as
much coverage as possible for such amount.
(d) The provisions of this Section 7.10 are intended to
be for the benefit of, and shall be enforceable by, each Indemnified Person, his
or her heirs and personal representatives and shall be binding on HCI, each
Contributed Entity, Newco, PAS and on all successors and assigns thereof. In the
event that Newco or any of its successors or assigns (i) reorganizes or
consolidates with or merges into any other person and is not the resulting,
continuing or surviving corporation or entity in such consolidation or merger or
(ii) liquidates, dissolves or transfers all or substantially all of its
properties and assets to any person, then, and in each such case, proper
provision will be made so that the successors and assigns of such surviving
corporations assume the obligations set forth in this Section 7.10.
7.11 Indemnification for Excluded and Contributed Liabilities.
(a) HCI agrees to indemnify, defend and hold harmless
Newco and each of its Subsidiaries and their respective successors-in-interest
against any losses, claims, damages or liabilities, joint or several, arising
out of or in connection with any loss, claim, damage or liability against or
pertaining to any Hughes Party and/or their Affiliates (other than Newco and its
Subsidiaries) other than the Galaxy Liabilities, and HCI shall reimburse Newco,
<PAGE>
each such Subsidiary and each such successor-in-interest (each, a "Newco
Indemnified Party") for any legal or any other expenses reasonably incurred by
any of them in connection with investigating or defending any such loss, claim,
damage or liability.
(b) Newco agrees to indemnify, defend and hold harmless
each of HCI and Galaxy and their Subsidiaries after the Closing, and their
respective successors-in-interest against any losses, claims, damages or
liabilities, joint or several, arising out of or in connection with the Galaxy
Liabilities assumed by Newco pursuant to the terms hereof, and Newco shall
reimburse HCI or Galaxy, as the case may be, and each of their Subsidiaries and
each such successor-in-interest (each, a "Hughes Indemnified Party") for any
legal or any other expenses reasonably incurred by any of them in connection
with investigating or defending any such loss, claim, damage, liability or
action.
(c) Whenever any claim shall arise for indemnification
under this Section 7.11, the Newco Indemnified Party or the Hughes Indemnified
Party, as the case may be (in either case, an "Indemnified Party"), shall
promptly notify the other party providing such indemnification (an "Indemnifying
Party") in writing of such claim and, when known, the facts constituting the
basis for such claim (in reasonable detail). Failure by any Indemnified Party to
so notify the Indemnifying Party shall not relieve such Indemnifying Party of
any liability hereunder except to the extent that such failure materially
prejudices such Indemnifying Party.
(d) After the notice required by Section 7.11(c), if
the Indemnifying Party undertakes to defend any such claim, then the
Indemnifying Party shall be entitled, if it so elects, to take control of the
defense and investigation with respect to such claim and to employ and engage
attorneys of its own choice to handle and defend the same, at the Indemnifying
Party's cost, risk and expense, upon written notice to the Indemnified Party of
such election, which notice acknowledges such Indemnifying Party's obligation to
provide indemnification hereunder. The Indemnifying Party shall not settle any
third-party claim that is the subject of indemnification without the written
consent of the Indemnified Party, which consent shall not be unreasonably
withheld; provided, however, that the Indemnifying Party may settle a claim
without the Indemnified Party's consent if such settlement (i) makes no
admission or acknowledgement of liability or culpability with respect to such
Indemnified Party, (ii) includes a complete release of the Indemnified Party and
(iii) does not require the Indemnified Party to make any payment or forego or
take any action. The Indemnified Party shall cooperate in all reasonable
respects with the Indemnifying Party and its attorneys in the investigation,
trial and defense of any lawsuit or action with respect to such claim and any
appeal arising therefrom (including the filing in the Indemnified Party's name
of appropriate cross-claims and counterclaims). The Indemnified Party may, at
its own cost, participate in any investigation, trial and defense of such
lawsuit or action controlled by the Indemnifying Party and any appeal arising
therefrom.
(e) If, after receipt of a claim notice pursuant to
Section 7.11(c), the Indemnifying Party does not undertake to defend any such
claim, the Indemnified Party may, but shall have no obligation to, contest any
lawsuit or action with respect to such claim and the Indemnifying Party shall be
bound by the result obtained with respect thereto by the Indemnified Party
(including, without limitation, the settlement thereof without the consent of
<PAGE>
the Indemnifying Party). If there are one or more legal defenses available to
the Indemnified Party that conflict with those available to the Indemnifying
Party, the Indemnified Party shall have the right at the expense of the
Indemnifying Party to assume the defense of the lawsuit or action; provided,
however, that the Indemnified Party may not settle such lawsuit or action
without the consent of the Indemnifying Party, which consent shall not be
unreasonably withheld.
(f) At any time after the commencement of defense of
any lawsuit or action, the Indemnifying Party may request the Indemnified Party
to agree in writing to the abandonment of such contest or to the payment or
compromise by the Indemnifying Party of such claim, whereupon such action shall
be taken unless the Indemnified Party determines that the contest should be
continued and so notifies the Indemnifying Party in writing within 15 days of
receipt of such request from the Indemnifying Party. If the Indemnified Party
determines that the contest should be continued, the Indemnifying Party shall be
liable hereunder only to the extent of the lesser of (i) the amount which the
other party(ies) to the contested claim had agreed to accept in payment or
compromise as of the time the Indemnifying Party made its request therefor to
the Indemnified Party or (ii) such amount for which the Indemnifying Party may
be liable with respect to such claim by reason of the provisions hereof.
7.12 Notices of Certain Events.
HCI and PAS shall promptly notify each other of:
(i) any notice or other communication from any
person alleging that the consent of such person is or may be required
in connection with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any
Government Entity in connection with the transactions contemplated by
this Agreement;
(iii) any actions, suits, claims, investigations
or proceedings commenced or, to the actual knowledge of the executive
officers of the notifying party, threatened against, relating to or
involving or otherwise affecting such party or any of its Subsidiaries;
(iv) an administrative or other order or
notification relating to any material violation or claimed violation of
Law;
(v) any facts of which it becomes aware relating
to it that would cause the FCC to withhold or adversely determine any
consent or ruling that the parties will be seeking pursuant to Section
7.9(c) hereof;
(vi) the occurrence or non-occurrence of any event
the occurrence or non-occurrence of which would cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Closing Date;
<PAGE>
(vii) any facts of which it becomes aware with
respect to any spacecraft related incidents or anomalies in connection
with any Galaxy Satellite or any PAS Satellite; and
(viii) any material failure of any party to comply
with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section 7.12
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
7.13 Publicity. So long as this Agreement is in effect, the
parties will consult with each other and will mutually agree prior to the
issuance of any press release or public announcement pertaining to this
Agreement or the Related Agreements or the transactions contemplated hereby or
thereby, including the Merger and the Asset Contribution, and shall not issue
any such press release or make any such public announcement or permit any of
their Subsidiaries to do the same prior to such consultation and agreement,
except as may be required by applicable law or by obligations pursuant to any
listing agreement with a national securities exchange (including the Nasdaq
National Market), in which case the party proposing to issue such press release
or make such public announcement shall use reasonable efforts to consult in good
faith with the other party before issuing any such press release or making any
such public announcement, except for the FCC filings and HSR filings
contemplated herein.
7.14 Rule 145 Affiliates. At least 30 days prior to the
Closing Date, PAS shall deliver to Galaxy a letter identifying, to the best of
PAS' knowledge, all persons who PAS expects will be, at the time of PAS'
stockholder's meeting to consider the transactions contemplated by this
Agreement, deemed to be "affiliates" of PAS for purposes of Rule 145 under the
Securities Act ("PAS Affiliates"). PAS shall use its reasonable best efforts to
cause each person or entity who is identified as a PAS Affiliate to deliver to
HCI on or prior to the Closing Date an agreement substantially in the form of
Exhibit H to this Agreement.
7.15 Supplemental Disclosure Schedules. Each of HCI, Galaxy
and PAS shall supplement their respective Schedules delivered in connection with
this Agreement as of the Closing Date to the extent necessary to reflect matters
permitted by, or consented to by, the other parties under this Agreement. In
addition, from time to time prior to the Effective Time, each of HCI and PAS
will promptly deliver to the other parties such amended or supplemental
Schedules as may be necessary to make the Schedules accurate and complete in all
material respects as of the Closing Date; provided, however, that updating the
information contained on the Schedules shall not be deemed an amendment of this
Agreement unless the new information added to any such schedule reflects changes
or actions taken since the date of this Agreement that are permitted under
Section 7.1 (with respect to PAS) and Section 7.2 (with respect to Galaxy). If
not deemed an amendment, such supplement shall not have any effect for the
purpose of determining the satisfaction of the conditions set forth in Article
VIII of this Agreement.
<PAGE>
7.16 Newco Employee Benefits Arrangements.
(a) Replacement of Retirement Plan.
(i) The accrued benefits and liabilities, and
assets attributable to such accrued benefits and liabilities, under the HE
Non-Bargaining Retirement Plan, and the trust related thereto (the "HE
Retirement Plan"), of participants in such plan who are actively employed by the
Galaxy Business immediately prior to the Effective Time, who have not retired
under the HE Retirement Plan as of the Effective Time and who become employees
of Newco effective as of the Effective Time or within 90 days thereafter (the
"Transferred Retirement Plan Participants") shall, unless otherwise agreed to by
PAS and HE, be transferred to a new trust under a separate plan established by
Newco for the Transferred Retirement Plan Participants and other Newco
employees, as hereinafter set forth. Newco shall, with the cooperation of HE,
use its best efforts to accomplish the transfer of the foregoing assets and
liabilities.
(ii) Effective as of the Effective Time, Newco
shall, unless otherwise agreed to by PAS and HE, establish a separate plan (the
"Newco Retirement Plan") which shall be qualified under Section 401(a) of the
Code and a trust related thereto which shall be exempt from taxation under
Section 501(a) of the Code. The Newco Retirement Plan shall be a defined benefit
cash balance plan, or other type of retirement plan agreed to by PAS and HE. To
the extent permitted by applicable law, credit for past service with the Galaxy
Business or PAS prior to the Effective Time shall be given under the Newco
Retirement Plan for the purposes of vesting and eligibility to participate. The
Newco Retirement Plan shall, unless otherwise agreed to by PAS and HE, contain
provisions for future contributions at a rate of 3 - 3 1/2% of the compensation
of the participating Newco employees after the Effective Time.
(iii) The transfer of assets and liabilities from
the HE Retirement Plan to the Newco Retirement Plan shall be conditioned upon
the receipt of requisite governmental approvals. Newco shall submit to the
Internal Revenue Service a request for a determination letter as to the tax
qualification and exempt status of the Newco Retirement Plan. Upon receipt by
Newco and HE of such determination letter, or an opinion of counsel reasonably
acceptable to HE and PAS, that the Newco Retirement Plan is tax qualified and
exempt, HE and Newco shall file promptly with the Internal Revenue Service any
required notice on Forms 5310-A regarding the transfer of assets and liabilities
relating to the Transferred Retirement Plan Participants from the HE Retirement
Plan to the Newco Retirement Plan. After proper notice has been given on Forms
5310-A without receiving an adverse response from the appropriate governmental
agencies, the assets of the HE Retirement Plan transferable to such Newco
Retirement Plan as provided herein shall be so transferred, but in no event
later than 90 days after the Forms 5310-A have been filed with the Internal
Revenue Service.
(iv) No assets and liabilities shall be
transferred unless the requirements of Section 414(l) of the Code are met with
respect to the transfer. Assets to be transferred from the HE Retirement Plan to
the Newco Retirement Plan shall be in cash. After the transfer of assets and
liabilities, the payment of benefits accrued under the HE Retirement Plan prior
<PAGE>
to the Effective Time and payable to the Transferred Retirement Plan
Participants shall be the sole responsibility of Newco.
(v) The amount of plan assets to be transferred
from the HE Retirement Plan to the Newco Retirement Plan shall be an amount
determined by subtracting (B) from (A), where (A) as of the Effective Time
equals the actuarially computed present value of all accrued benefits
attributable to the Transferred Pension Plan Participants, determined on an
ongoing plan basis employing the same actuarial assumptions as were used in
determining plan funding for the most recently completed plan year, and where
(B) is any benefit payment attributable to accrued benefits to be transferred to
and assumed under the Newco Retirement Plan, made after the Effective Time and
prior to the transfer of plan assets and accompanying liabilities. The
transferred assets shall exclude any receivable contributions. The amount of
assets transferred in connection with the foregoing accrued benefits and
liabilities shall not be less than the assets necessary to fund the accrued
benefits and liabilities that would be transferred using the appropriate plan
termination assumptions of the Pension Benefit Guaranty Corporation ("PBGC")
under Section 414(l) of the Code.
(vi) The amount of the accrued benefits and
liabilities and assets attributable thereto to be transferred from the HE
Retirement Plan to the Newco Retirement Plan in accordance with this Section
7.3(b) shall be jointly determined by actuaries selected by Newco and HE. In the
event of dispute between the actuaries selected by Newco and HE as to whether
the actuarial calculations so determined are calculated in accordance with this
Section 7.3(b), Newco and HE shall jointly select a third actuarial firm of
national repute to review the calculation and the determination of the third
actuarial firm shall be final and binding. In the event that Newco and HE are
unable to select a third actuarial firm, an arbitrator shall appoint a third
actuarial firm to make such determination, which appointment and determination
shall be final and binding upon HE and Newco. Such arbitrator shall be appointed
in accordance with the Commercial Arbitration Rules of the Los Angeles,
California office of the American Arbitration Association. Newco shall pay the
cost of the Newco's actuaries, HE shall pay the cost of HE's actuaries and, to
the extent necessary, the cost of the third actuarial firm and arbitrator shall
be shared equally between Newco and HE.
(b) Replacement of Savings Plan.
(i) The accounts and account balances and
liabilities under the HE Salaried Employees' Thrift and Savings Plan and the
trust related thereto (the "HE Savings Plan") and the Advantage Benefits
Consultants Inc. Regional Prototype Defined Contribution Plan and Trust (the
"PAS Savings Plan") of active participants of such plans who become employees of
Newco as of the Effective Time or within 90 days thereafter and former
participants of the PAS Savings Plan, including without limitation retired
participants and former participants entitled to deferred vested benefits and
beneficiaries thereof under the PAS Savings Plan ("Transferred Savings Plan
Participants"), shall, unless otherwise agreed to by PAS and HE, be transferred
to a new trust under a separate plan established by Newco for the Transferred
Savings Plan Participants and other Newco employees effective as of the
Effective Time, either in a direct trust-to-trust transfer or in participant
directed rollover distributions as hereinafter set forth. Newco shall, with the
<PAGE>
cooperation of HE, use its best efforts to accomplish the transfer of the
foregoing assets and liabilities.
(ii) Effective as of the Effective Time, Newco
shall establish a defined contribution pension plan (the "Newco Savings Plan")
which shall be qualified under Sections 401(a) and (k) of the Code and a trust
related thereto which shall be exempt from taxation under Section 501(a) of the
Code. The Newco Savings Plan shall contain provisions comparable to and no less
favorable in the aggregate than the HE Savings Plan (other than the investment
in GMH stock and matching contribution features) and, subject to applicable law,
shall, unless otherwise agreed to by PAS and HE, provide for employer matching
contributions at a rate of 4% of compensation, which may, in the discretion of
Newco, be made in common stock of Newco, if the stock of Newco is publicly
traded. To the extent permitted by applicable law, credit for past service with
PAS and the Galaxy Business prior to the Effective Time shall be given under the
Newco Savings Plan for the purposes of vesting and eligibility to participate.
(iii) The transfer of assets and liabilities from
the HE Savings Plan and the PAS Savings Plan to the Newco Savings Plan shall be
conditioned upon the receipt of requisite governmental approvals. Newco shall
submit to the Internal Revenue Service a request for a determination letter as
to the tax qualification and exempt status of the Newco Savings Plan. Upon
receipt by Newco and HE of a determination letter from the Internal Revenue
Service, or an opinion of counsel reasonably acceptable to HE and PAS, that the
Newco Savings Plan is qualified under Section 401(a) and (k) of the Code, the
assets of the PAS Savings Plan and HE Savings Plan that are transferable to the
Newco Savings Plan as provided herein shall be so transferred, but in no event
later than 90 days after receipt by Newco and HE of such determination letter,
whichever occurs later.
(iv) No assets and liabilities shall be
transferred in a direct trust-to-trust transfer unless the requirements of
Section 414(l) of the Code are met with respect to the transfer. After the
transfer of assets and liabilities, the payment of benefits to the Transferred
Savings Plan Participants accrued under the HE Savings Plan and PAS Savings Plan
shall be the sole responsibility of Newco.
(c) Newco Stock Options. Newco shall provide stock
options to certain employees from and after the time that Newco's stock is
publicly held. As soon as practicable after execution of the Merger Agreement, a
committee shall be established which shall be composed of representatives of PAS
and HCI (the "Joint Committee"). The Joint Committee shall make recommendations
to the Board of Directors of Newco with regard to such stock options including,
but not limited to, the following: (i) the form of stock option offered, which
may be incentive stock options, nonqualified stock options, or a combination
thereof; (ii) eligibility requirements to receive such stock options; (iii)
vesting requirements; (iv) term of the stock options; (v) exercise price; and
(vi) the maximum number of shares to be offered through stock options, if
required by law. The Joint Committee shall make such recommendations, and take
all other actions necessary to carry out the requirements of this provision, by
the Effective Time. Any stock options issued by Newco shall be registered with
the applicable governmental agencies and shall comply with all applicable
securities laws. The Board of Directors of Newco shall act upon such
recommendations and, if necessary, obtain stockholder approval for the issuance
<PAGE>
of Newco stock pursuant to the options described herein.
(d) Retiree Medical Benefits. As soon as practicable
after the Effective Time, HCI or one of its Affiliates shall pay to all Galaxy
Employees who are being transferred to Newco, who have not retired under a
Galaxy retiree medical plan and who would be entitled to receive medical
benefits upon retirement under a Galaxy ERISA Plan (as defined in Section
6.9(c)(i)) or any other plan or policy maintained by the Galaxy Business, HCI or
one of its Affiliates, an amount of cash to be determined by HCI, after
consultation with PAS, but in no case shall such cash amount paid to each
employee be less than the cash amount to which the employee is legally entitled,
if any.
(e) PAS ERISA Plans and PAS Benefits Arrangements.
Prior to the Effective Time, PAS shall take all actions which are reasonably
necessary or appropriate to correct any material defects with respect to the
compliance of each PAS ERISA Plan and PAS Benefit Arrangement with all Laws,
including any actions which are reasonably necessary or appropriate to qualify
any PAS ERISA Plan that is intended to be tax qualified under Section 401(a) of
the Code.
(f) HCI Indemnification. HCI agrees to indemnify,
defend and hold harmless Newco and each of its Subsidiaries and their respective
successor(s)-in-interest against any losses, claims, damages or liabilities,
joint or several, arising from the Galaxy Business' participation in a
controlled group, as defined in Section 414(b), (c), (m), and (o) of the Code,
prior to the Effective Time except with respect to any losses, claims, damages
or liabilities relating to the Galaxy Employees, who will be employed by Newco
as of the Effective Time, the Galaxy ERISA Plans or the Galaxy Benefit
Arrangements.
(g) PAS Indemnification. PAS agrees to indemnify,
defend and hold harmless Newco and each of its Subsidiaries and their respective
successor(s)-in-interest against any losses, claims, damages or liabilities,
joint or several, arising from PAS' participation in a controlled group as
defined in Section 414(b), (c), (m) and (o) of the Code prior to the Effective
Time except with respect to any losses, claims, damages or liabilities relating
to PAS' employees who will be employed by Newco as of the Effective Time, the
PAS ERISA Plans or the PAS Benefit Arrangements.
7.17 Further Action. Each party hereto shall, subject to the
fulfillment at or before the Closing Date of each of the conditions of
performance set forth herein or the waiver thereof, perform such further acts
and execute such documents as may be reasonably required to effect the
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing, if the consummation period for consummating the Asset
Contribution, the Univisa Contribution and the Merger pursuant to consents
granted by the FCC expires prior to the date established for the Closing Date,
then each party will use its commercially reasonable efforts to obtain one or
more extensions of the effectiveness of such consents so as to permit the
consummation of the transactions contemplated by this Agreement in accordance
with this Agreement. Each party hereto also agrees to cooperate with the other
parties hereto in connection with communicating with Government Entities in
<PAGE>
connection with obtaining approvals of such entity required to effectuate the
transactions contemplated hereby.
7.18 Documentation of Intercompany Agreements. On or prior to
the Closing Date, each Contributed Entity shall enter into written agreements to
document all previously undocumented arrangements with Affiliates of the
Contributed Entities for material goods or services provided to the Galaxy
Business, which new agreements shall be in form reasonably satisfactory to PAS
and in substance consistent with the description of such arrangements set forth
on Schedule 6.15.
7.19 Listing Application. Following execution of the
Agreement, Newco shall prepare and submit to the New York Stock Exchange or the
Nasdaq National Market a listing application covering the shares of Newco Common
Stock issuable in the Asset Contribution and the Merger, and shall use
reasonable efforts to obtain, prior to the Closing Date, approval for the
listing of such Newco Common Stock, subject to official notice of issuance.
7.20 Leveraged Lease Guarantee. Promptly following the
Closing, Newco shall enter into a customary agreement to pay and indemnify HE
for obligations arising under existing guarantees provided by HE of leveraged
leases of transponders used in the Galaxy Business.
7.21 Disposition of Assets. During the period from the date of
this Agreement and continuing until the Closing Date, HCI shall cause all
proceeds from any source with respect to the disposition (whether voluntary or
involuntary) of any asset or group of assets disposed of in related transactions
valued in excess of $60,000 (other than for satellites under construction)
included in the Galaxy Business (net of (i) all taxes that are paid prior to the
Closing as a result of such disposition if the Contributed Entity owning such
asset or assets was a stand-alone company, (ii) any liabilities related to such
asset or assets to the extent they no longer remain with the Galaxy Business and
were not already netted from the proceeds of such disposition, and (iii) any and
all reasonable transaction expenses (except normal recurring and operating
expenses of the Galaxy Business) related to such disposition) to be separately
identified and retained within the Closed System (as defined in Section 7.24)
(the "Proceeds").
7.22 Related Agreements. Each of the Parties to this Agreement
shall, and shall cause each of its Subsidiaries to, enter into and take all
actions necessary to consummate the transactions contemplated by each of the
Related Agreements to which it is a party, subject in each case to the terms and
conditions of each such Related Agreement.
7.23 Standstill Restriction. For five years following the
Closing, none of the Hughes Parties or their affiliates shall acquire, or come
to hold, beneficially or otherwise, whether by purchase, exchange or otherwise,
individually or in the aggregate more than eighty-one percent (81%) of the
outstanding equity interests in Newco, except (i) pursuant to a merger which is
approved by the holders of majority of the shares of Newco Common Stock not
owned directly or indirectly by HE or any of its affiliates, (ii) pursuant to a
tender offer recommended by the Disinterested Directors of Newco and second-step
<PAGE>
merger which offers the same per share consideration to all holders of Newco
Common Stock and in which more than half the outstanding Newco Common Stock not
owned by HCI and its affiliates at the inception of the transaction is either
tendered or voted in favor of the transaction, and (iii) except pursuant to such
other transaction as shall provide for parity of treatment of holders of Newco
Common Stock and is approved by the holders of a majority of the shares of
Common Stock not owned by HCI and its affiliates and by a majority of the
Disinterested Directors of Newco. As used in this Agreement, "Disinterested
Director" means a director of Newco that is not an existing or retired employee
of Newco or any of its affiliates. As used in this Section 7.23, "affiliate"
shall have the meaning set forth in Rule 12b-2 under the Securities Exchange Act
of 1934, as amended.
7.24 Capital Expenditures and the Closed System for Cash
Management. Commencing as of July 1, 1996, HE will cause the Galaxy Business to
operate as a separate stand-alone entity with respect to all aspects of its cash
management including retention of the cash receipts and proceeds from all
sources of the business together with the payment of all necessary operating
expenses of the business (excluding non-cash outlays for expenses such as
depreciation and amortization) and capital outlays (including those expenses and
capital outlays that are directly attributable to the business but which may,
for convenience purposes, be paid by HE and redistributed to the Galaxy
Business). The Galaxy Business will also be responsible for the payment of all
properly allocated costs of the Galaxy Business, including its allocated share
of corporate and sector "General & Administrative" costs consistent with the
past accounting practices of the Galaxy Business. The Galaxy Business will
compute an income tax provision for the taxable earnings of the business in
accordance with GAAP and will provide for the appropriate income taxes of the
business including the determination and recognition of necessary deferred tax
amounts (which deferred tax amounts may not be deducted as cash expenses). The
aforementioned practices will constitute a "Closed System" of cash management.
It is explicitly understood that HCI will be required to use cash proceeds
retained in the business (other than Proceeds which may not be used for such
purpose and which shall be part of the "Galaxy Assets" at the Closing) to fund
additions to its "Capital Expenditures for Satellites Under Construction"
accounts. For purposes of this Agreement, "Capital Expenditures for Satellites
Under Construction" shall include manufacturing, launch and launch insurance,
progress payments and capitalized interest amounts. HCI, with the assistance of
HE, will continue to manage and pursue its capital expenditures program for the
construction and development of satellites during the period from July 1, 1996
through the Closing as it deems necessary in the ordinary course of its business
and consistent with prudent business practices. To the extent that additions to
HCI's "Capital Expenditures for Satellites Under Construction" accounts as
determined on a consistent basis and in accordance with GAAP and HCI's
historical accounting practices and procedures, during the period from July 1,
1996 through the Closing of the Merger do not equal or exceed $575 million in
the aggregate, HE shall be obligated to make up any difference in cash at the
Closing.
ARTICLE VIII
CONDITIONS
8.1 Conditions to Each Party's Obligation to Effect the Asset
Contribution, the Univisa Contribution and thConditions to Each Party's
<PAGE>
Obligation to Effect the Asset Contribution, the Univisa Contribution and the
Merger. The respective obligations of each party to effect the Asset
Contribution, the Univisa Contribution and the Merger shall be subject to the
satisfaction on or prior to the Closing Date (or, if permissible, waiver by the
party for whose benefit such conditions exist) of the following conditions:
(a) No Order. No Government Entity shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation or order
(whether temporary, preliminary or permanent) which is in effect and which
materially restricts, prevents or prohibits consummation of the transactions
contemplated by this Agreement or any of the Related Agreements; provided,
however, that the parties shall use their commercially reasonable efforts to
cause any such decree, judgment, injunction or other order to be vacated or
lifted.
(b) Stockholder Approval. This Agreement and the
transactions contemplated hereby shall have been approved in the manner required
by applicable law or by the applicable regulations of any stock exchange or
other regulatory body, as the case may be, of the holders of the issued and
outstanding shares of common stock of PAS.
(c) HSR Act. Any waiting period applicable to the
consummation of the transactions contemplated hereby under the HSR Act shall
have expired or been terminated, and no action shall have been instituted by the
Department of Justice or the Federal Trade Commission challenging or seeking to
enjoin the consummation of the transactions contemplated hereby, which action
shall not have been withdrawn by the party instituting such action or dismissed
or terminated pursuant to a final, non-appealable judgment of a United States
federal court.
(d) FCC Consents. (i) The FCC shall have granted by
Final Order the FCC Consent Application, without conditions, qualifications or
other restrictions that are likely to have a material adverse effect immediately
after the Closing Date, on Newco or any of its Subsidiaries (other than the loss
of pending applications at the FCC for Permits), whether imposed by the FCC or
any other Government Entity; and (ii) except for Permits which lapse, expire or
are terminated due to ordinary course changes in the business of PAS and the
Galaxy Business, as the case may be, except as otherwise contemplated by this
Agreement, each of the PAS Permits and the Galaxy Permits issued by the FCC
shall be in full force and effect, unimpaired by any acts or omissions of
Galaxy, PAS or their officers, directors, employees or agents. As used in this
Agreement, the term "Final Order" means an order, action or decision of a
Government Entity that has not been reversed, stayed or enjoined and as to which
the time to appeal, petition for certiorari or seek reargument or rehearing or
administrative reconsideration or review has expired and as to which no appeal,
reargument, petition for certiorari or rehearing or petition for reconsideration
or application for review is pending or as to which any right to appeal,
reargue, petition for certiorari or rehearing or reconsideration or review has
been waived in writing by each party having such a right or, if any appeal,
reargument, petition for certiorari or rehearing or reconsideration or review
thereof has been sought, the order or judgment of the court or agency has been
affirmed by the highest court (or the administrative entity or body) to which
the order was appealed or from which the argument or rehearing or
reconsideration or review was sought, or certiorari has been denied, and the
time to take any further appeal or to seek certiorari or further reargument or
rehearing, or reconsideration or review, has expired. Notwithstanding the
<PAGE>
foregoing, HCI shall have the unilateral right within 60 days after public
notice of such order, action or decision by the FCC to elect to waive this
condition if HCI determines, in its sole discretion, that any pending appeal is
not likely to have a material adverse effect on Newco and its Subsidiaries,
taken as a whole, following the Asset Contribution, the Univisa Contribution and
the Merger; provided that, if HCI fails to waive this condition within such
60-day period, then either party shall have the right to terminate this
Agreement.
(e) Other Satellite Approvals. Each Government Entity
other than the FCC that has issued to PAS or any of its Subsidiaries (i) any
Permit with respect to the operation of or transmission to or from a PAS
Satellite or a ground station that communicates with a PAS Satellite (ii) any
Permit with respect to the provision of broadcasting or communications services
shall have, where required by applicable Law, approved the transfer of control
or assignment, as applicable, of all such Permits as a result of the Merger
without any material qualifications, restrictions or limitations and such
approval shall have become a Final Order. Each Government Entity that has issued
to any of the Contributed Entities (i) any Permit with respect to the operation
of or transmission to or from a Galaxy Satellite or a ground station that
communicates with a Galaxy Satellite, or (ii) any Permit with respect to the
provision of broadcasting or communications services shall have, where required
by applicable Law, approved the transfer of control or assignment, as
applicable, of all such permits as a result of the Asset Contribution without
any material qualifications, restrictions or limitations and such approval shall
have become a Final Order.
(f) Other Approvals. All other approvals or orders by
Government Entities required to be obtained, and all filings, notices or
declarations required to be made before any Government Entity (other than the
FCC), by any party prior to the consummation of the transactions contemplated
hereunder shall have been obtained from, and made with, all required Government
Entities except for such authorizations, consents, waivers, orders, approvals,
filings, notices or declarations, the failure to obtain or make which would not
be likely to have a material adverse effect at or after the Closing Date, on
Newco or any of its Subsidiaries.
(g) Registration Statement. The Registration Statement
with respect to the shares of Newco Common Stock issuable in connection with the
Merger shall have become effective and shall be effective at the Effective Time,
and no stop order suspending effectiveness of such Registration Statement shall
have been issued, no action, suit, proceeding or investigation by the SEC to
suspend the effectiveness thereof shall have been initiated and be continuing,
or, to the knowledge of HCI or PAS, threatened, and all necessary approvals
under state securities laws relating to the issuance or trading of the shares of
Newco Common Stock to be issued in connection with the Merger shall have been
received.
(h) Related Agreements. Each of the Related Agreements
shall have been executed, delivered and, to the extent required to be performed
by such agreements on or prior to the Closing Date, performed (or capable of
being performed concurrently with consummation of the transactions contemplated
hereby) by the parties thereto.
<PAGE>
(i) Listing Application. The shares of Newco Common
Stock issuable in the Merger shall have been approved, upon official notice of
issuance, for listing on either the New York Stock Exchange or the Nasdaq
National Market.
8.2 Additional Conditions to Obligations of PAS. The
obligation of PAS to effect the transactions contemplated hereby is subject to
the satisfaction of the following conditions, any or all of which may be waived
in whole or in part by PAS:
(a) Representations and Warranties. Each of the
representations and warranties of the Hughes Parties set forth in this Agreement
shall be true and correct in all material respects (without regard to any
materiality limitations contained in any such representation or warranty, except
that, subject to the next sentence below, the representation of HCI set forth in
the last sentence of Section 6.4 shall be true and correct in all respects) as
of the date of this Agreement (except to the extent such representations and
warranties speak as of an earlier date or have been amended pursuant to Section
7.15 and, other than with respect to the representation of HCI set forth in the
last sentence of Section 6.4, except for inaccuracies or omissions having or
reasonably likely to have, individually or in the aggregate, an economic impact
or consequence (or diminution in value) on the Galaxy Business of less than
$50,000,000. A breach of the last sentence of Section 6.4 shall not be
considered a failure of this condition precedent, provided any deficiency is
cured by the Closing Date. PAS shall have received certificates of each of the
Chief Executive Officer and the Chief Financial Officer of HCI to that effect.
(b) Performance of Obligations. Each of the Hughes
Parties and HE shall have performed in all material respects (other than the
obligations of the Hughes Parties and HE pursuant to Sections 7.21 and 7.24,
which shall be performed as agreed herein without regard to materiality) all
obligations required to be performed by it under this Agreement and the Related
Agreements to which it is a party on or before the Closing Date. PAS shall have
received certificates of the Chief Executive Officer and Chief Financial Officer
of HCI to that effect. Notwithstanding the foregoing, the obligations of PAS to
effect the transactions contemplated by this Agreement shall not be relieved by
the failure of any of the foregoing conditions if such failure is the result,
directly or indirectly, of any breach by PAS of any of its material obligations
under this Agreement.
(c) Material Adverse Change. Since the date of this
Agreement, there shall have been no change, occurrence or circumstance (or
series of changes, occurrences or circumstances) in the business, operations,
properties, assets, condition (financial or otherwise) or the results of
operations or prospects of the assets of the Galaxy Business having or
reasonably likely to have, individually or in the aggregate, an adverse economic
impact or consequence (including diminution in value) of more than $200,000,000.
Notwithstanding the foregoing, for purposes of this Section 8.2(c) none of the
following shall be deemed to be a "change," "occurrence" or "circumstance": (i)
the loss, denial or dismissal of any pending application for a Galaxy Permit
that has been filed with the FCC or (ii) a loss, to the extent caused by or
related to (A) a mere delay in the receipt of revenue, as opposed to the
cancellation or modification of a contract, and the consequent loss of revenue
related to such delay or (B) the launch or in-orbit failure of any Galaxy
Satellite, to the extent such loss is covered by insurance.
<PAGE>
8.3 Additional Conditions to Obligations of the Hughes
Parties. The obligations of the Hughes Parties to effect the transactions
contemplated hereby are subject to the satisfaction of the following conditions,
any or all of which may be waived in whole or in part by HCI:
(a) Representations and Warranties. Each of the
representations and warranties of PAS set forth in this Agreement shall be true
and correct in all material respects (without regard to any materiality
limitations contained in any such representation or warranty) as of the date of
this Agreement (except to the extent such representations and warranties speak
as of an earlier date or have been amended pursuant to Section 7.15), except for
inaccuracies or omissions having or reasonably likely to have, individually or
in the aggregate, an economic impact or consequence (or diminution in value) on
PAS and its Subsidiaries taken as a whole of less than $50,000,000. HCI shall
have received certificates of the Chief Financial Officer and Chief Executive
Officer of PAS to that effect.
(b) Performance of Obligations. PAS shall have
performed in all material respects all obligations required to be performed by
it under this Agreement and the Related Agreements to which it is a party on or
before the Closing Date. HCI shall have received certificates of the Chief
Executive Officer and Chief Financial Officer of PAS to that effect.
Notwithstanding the foregoing, the obligations of HCI to effect the transactions
contemplated by this Agreement shall not be relieved by the failure of any of
the foregoing conditions if such failure is the result, directly or indirectly,
of any breach by any Hughes Party of any of their material obligations under
this Agreement.
(c) Material Adverse Change. Since the date of this
Agreement, there shall have been no change, occurrence or circumstance (or
series of changes, occurrences or circumstances) in the business, operations,
properties, assets, condition (financial or otherwise) or the results of
operations or prospects of the assets of PAS having or reasonably likely to
have, individually or in the aggregate, an adverse economic impact or
consequence (including diminution in value) of more than $200,000,000.
Notwithstanding the foregoing, for purposes of this Section 8.3(c) none of the
following shall be deemed to be a "change," "occurrence" or "circumstance": (i)
the loss, denial or dismissal of any pending application for a PAS Permit that
has been filed with the FCC or (ii) a loss, to the extent caused by or related
to (A) a mere delay in the receipt of revenue, as opposed to the cancellation or
modification of a contract, and the consequent loss of revenue related to such
delay or (B) the launch or in-orbit failure of any PAS Satellite, to the extent
such loss is covered by insurance.
(d) Termination of Options. PAS shall have delivered to
HCI written evidence of the agreement by each holder of Options to terminate
such Options on or before the Effective Time.
(e) Termination of DTH Equity Obligations. PAS shall
have delivered to HCI evidence satisfactory to HCI that PAS will, as of the
Closing Date, terminate all of its obligations under that certain Memorandum of
Understanding, dated as of March 27, 1995, between PAS and Televisa, and the
oral agreement between such parties regarding an equity interest in a DTH
venture in the Iberian Peninsula.
<PAGE>
(f) Resignation of PAS Directors. PAS shall have
delivered to HCI a letter of resignation from each person that is a director of
PAS immediately prior to the Closing, which resignation shall be effective as of
the Effective Time.
ARTICLE IX
TERMINATION AND AMENDMENT
9.1 Termination. This Agreement may be terminated and the
Asset Contribution, the Univisa Contribution and the Merger may be abandoned at
any time prior to the Closing Date, whether before or after stockholder approval
of the Merger:
(a) by mutual written consent of HCI and PAS or by
mutual actions of their respective Boards of Directors;
(b) by either PAS or HCI, so long as such party is not
in breach of its obligations hereunder, if the Asset Contribution, the Univisa
Contribution and the Merger shall not have been consummated on or before that
date which is fifteen (15) months from the date of this Agreement; provided,
however, that the right to terminate this Agreement under this Section 9.1(b)
shall not be available to HCI or PAS if failure to fulfill any obligation under
this Agreement by a Hughes Party (in the case of HCI) or PAS (in the case of
PAS) has been the cause of or resulted in the failure of either the Asset
Contribution, the Univisa Contribution or the Merger to occur on or before such
date, but the non-breaching party of the Hughes Parties or PAS that desires to
proceed with the transactions contemplated hereby shall consummate such
transactions as promptly as practicable;
(c) by either PAS or HCI upon a breach of any
representation, warranty, covenant or agreement on the part of PAS (with respect
to HCI) or a Hughes Party (with respect to PAS) contained in this Agreement; or
if any representation or warranty of PAS (with respect to HCI) or a Hughes Party
(with respect to PAS) shall have become inaccurate or incomplete, in any case
such that the conditions set forth in Sections 8.2 or 8.3, as the case may be,
would be incapable of being satisfied on the Closing Date; provided, that in any
case, a willful or reckless breach shall be deemed to cause such conditions to
be incapable of being satisfied for purposes of this Section 9.1;
(d) by either HCI or PAS if any injunction or order of
a court or other competent authority preventing the consummation of any of the
Asset Contribution, the Univisa Contribution or the Merger shall have become
permanent, final and non-appealable;
(e) By either of PAS or HCI, if this Agreement and the
Merger shall fail to receive the requisite vote for approval and adoption by the
stockholders of PAS;
(f) By HCI, if (i) the Board of Directors of PAS shall
withdraw, modify or change its recommendation of this Agreement in a manner
adverse to any of the Hughes Parties or shall have resolved to do any of the
foregoing, (ii) the Board of Directors of PAS shall have recommended to the
stockholders of PAS any Acquisition Proposal or (iii) a tender offer or exchange
offer for 15% or more of the outstanding shares of PAS Common Stock is
<PAGE>
commenced, and the Board of Directors of PAS recommends that the holders of such
stock tender their shares in such tender or exchange offer; or
(g) By PAS' Board of Directors if, in the exercise of
its good faith judgment as to fiduciary duties owed to its stockholders imposed
by law, and, provided that PAS' Board of Directors shall have complied with each
of the requirements set forth in Section 7.1(e), PAS' Board of Directors adopts
a Superior Acquisition Proposal.
9.2 Effect of Termination. In the event of termination of this
Agreement by HCI or PAS as provided in Section 9.1, (a) written notice thereof
shall forthwith be given to the other parties specifying the provision hereof
pursuant to which such termination is made and (b) this Agreement shall
forthwith become void and there shall be no liability or obligation on the part
of any party or their respective Subsidiaries, Affiliates, officers, directors
or stockholders except to the extent that such termination results from the
willful or reckless breach by any party hereto of any of its representations or
warranties, or of any of its covenants or agreements, in each case, as set forth
in this Agreement. The last sentence of Section 7.7(a) and the provisions of
Sections 7.8 and 9.3 shall survive any termination of this Agreement, unless
otherwise agreed by HCI and PAS. Moreover, in the event of termination of this
Agreement pursuant to Sections 9.1(c), 9.1(f) or 9.1(g), nothing herein shall
prejudice the ability of the terminating party (with respect to a termination
pursuant to Section 9.1(c)) or HCI (with respect to a termination pursuant to
Section 9.1(f) or 9.1(g)) from seeking damages from any other party for any
willful breach of this Agreement, including, without limitation, attorney's
fees, and the right to pursue any remedy at law or in equity.
9.3 Termination Fee. PAS agrees that if this Agreement shall
be terminated pursuant to (i) Section 9.1(b) hereof at any time when (a) an
Acquisition Proposal shall have been made by a third party but shall not have
been rejected by PAS and (b) PAS or any of its Subsidiaries or PAS' stockholders
shall thereafter consummate or agree to consummate a transaction which would
constitute an Acquisition Proposal with any person within twelve (12) months
from the date of such termination, (ii) Section 9.1(e) (with respect to the
failure to obtain the requisite vote by the stockholders of PAS) and there shall
have been made and not withdrawn or rejected an Acquisition Proposal, (iii)
Section 9.1(f), or (iv) Section 9.1(g), then in any such event PAS shall pay to
HCI an amount equal to $80,000,000 (the "Termination Fee"), payable (x) in the
case of termination under clause (i) above upon signing of a definitive
agreement relating to such Acquisition Proposal referred to in clause (i) of
this Section 9.3, or, if no such agreement is executed, then at the closing (and
as a condition to the Closing) of such Acquisition Proposal, and (y) within one
business day of termination of this Agreement upon any termination of this
Agreement described in clauses (ii), (iii), or (iv) above. In any case in which
a Termination Fee is payable by PAS under this Section 9.3, PAS also shall
assume and pay or reimburse HCI for all reasonable fees and expenses incurred by
HCI and its Affiliates (including the fees and expenses of their counsel,
accountants, financial advisors and funding sources) which are specifically
related to the matters contemplated by this Agreement and the Related
Agreements, but not to exceed $7,500,000 in the aggregate, payable concurrently
with the payment of the Termination Fee. PAS acknowledges that the agreements
contained in this Section 9.3 hereof are an integral part of the transactions
contemplated by this Agreement. Accordingly, if PAS shall fail to pay when due
<PAGE>
any amounts which shall become due under Section 9.3 hereof, PAS shall in
addition hereto pay to HCI all costs and expenses (including fees and
disbursements of counsel) incurred in collecting such overdue amounts, together
with interest on such overdue amounts from the date such payment was required to
be made until the date such payment is received at a rate per annum equal to the
"reference rate" as announced from time to time by Bank of America NT&SA. Any
payment required to be made pursuant to Section 9.3 shall be made when due by
wire transfer of immediately available funds to an account designed by HCI.
9.4 Amendment.
(a) Subject to applicable law, this Agreement may be
amended, modified or supplemented only by written agreement of the parties at
any time prior to the Effective Date with respect to any of the terms contained
herein; provided, however, that, after this Agreement is adopted by PAS'
stockholders, no such amendment or modification shall reduce the amount or
change the form of consideration to be delivered to the holders of Shares or
adversely affect the rights of such holders of Shares without the consent of
PAS' stockholders duly obtained. In addition, HCI agrees not to amend, modify or
terminate any of the Univisa Contribution Agreement, the Collateral Trust
Agreement or the Pledge and Security Agreement without the prior written
approval of PAS.
(b) In the enforcement, interpretation or amendment of
any provisions herein or under the Related Agreements by Newco affecting the
rights and obligations of HE or its Affiliates following the Closing, Newco
shall be represented by a committee of the Board of Directors of Newco comprised
solely of Disinterested Directors.
9.5 Extension; Waiver. At any time prior to the Effective
Time, and subject to applicable law, the parties hereto, by action taken or
authorized by their respective Boards of Directors, may, to the extent legally
allowed: (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto; (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto; and (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party. The failure of any party hereto to
assert any of its rights hereunder shall not constitute a waiver of such rights.
ARTICLE X
GENERAL PROVISIONS
10.1 Nonsurvival of Representations, Warranties and
Agreements. None of the representations, warranties, covenants and agreements in
this Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except for the agreements contained in Sections 7.10
and 7.11 hereof and for those other covenants and agreements specifically
requiring performance following the Closing. The Confidentiality Agreement shall
survive the execution and delivery of this Agreement, and the provisions of the
<PAGE>
Confidentiality Agreement shall apply to all information and material delivered
by any party hereunder.
10.2 Expenses. Whether or not the Asset Contribution, the
Univisa Contribution and the Merger are consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses except as expressly
provided herein and except that (a) the filing fees in connection with the HSR
Act filing, (b) the filing fees in connection with the filing of the Proxy
Statement/Prospectus and the Registration Statements with the SEC, (c) the
filing fees in connection with necessary applications to the FCC and similar
foreign agencies, (d) the expenses incurred in connection with printing and
mailing the Registration Statement and the Proxy Statement/Prospectus and (e)
fees and expenses related to any expert consultants (excluding attorneys and
accountants) retained in connection with or related to any of the applications
or filings otherwise contemplated by this Section 10.2, shall be shared equally
by the Hughes Parties, on the one hand, and PAS, on the other hand.
10.3 Notices. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when received if
personally delivered; when transmitted if transmitted by telecopy, electronic or
digital transmission method; the day after it is sent, if sent for next day
delivery to a domestic address by recognized overnight delivery service (e.g.,
Federal Express); and upon receipt, if sent by certified or registered mail,
return receipt requested. In each case notice shall be sent to:
(a) if to any of the Hughes Parties, to:
Hughes Electronics Corporation
7200 Hughes Terrace
Los Angeles, California 90045
Attention: Kenneth N. Heintz
Telephone: (310) 568-7600
Telecopy: (310) 568-6774
and
Hughes Electronics Corporation
7200 Hughes Terrace
Los Angeles, California 90045
Attention: Robert Hall
Telephone: (310) 568-7600
Telecopy: (310) 568-7834
<PAGE>
with a copy to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attention: Bruce R. Lederman, Esq.
Telephone: (213) 485-1234
Telecopy: (213) 891-8763
(b) if to PAS, to:
PanAmSat Corporation
One Pickwick Plaza
Greenwich, Connecticut 06830
Attention: Frederick A. Landman
Telephone: (203) 622-6664
Telecopy: (203) 622-9163
with a copy to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Dennis J. Friedman, Esq.
Telephone: (212) 408-5200
Telecopy: (212) 541-5369
10.4 Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the word "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available. This
Agreement shall not be construed for or against either party by reason of the
authorship or alleged authorship of any provision hereof or by reason of the
status of the respective parties.
10.5 Entire Agreement; No Third-Party Beneficiaries; Rights of
Ownership. This Agreement (together with the Related Agreements and any other
documents and instruments referred to herein, including exhibits and schedules)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and, except as provided in Section 7.10 (which is intended
to be for the benefit of the persons referred to therein and their
beneficiaries, and may be enforced by them as third-party beneficiaries), is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
<PAGE>
10.6 Assignment. Neither this Agreement nor any of the rights,
interests, obligations hereunder shall be assigned by either of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other party. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
10.7 Governing Law. This Agreement shall be construed,
interpreted and the rights of the parties determined in accordance with the laws
of the State of Delaware (without reference to the choice of law provisions),
except with respect to matters of law concerning the internal corporate affairs
of any corporate entity which is a party to or the subject of this Agreement,
and as to those matters the law of the jurisdiction under which the respective
entity derives its powers shall govern.
10.8 Severability. Each party agrees that, should any court or
other competent authority hold any provision of this Agreement or part hereof to
be null, void or unenforceable, or order any party to take any action
inconsistent herewith or not to take an action consistent herewith or required
hereby, the validity, legality and enforceability of the remaining provisions
and obligations contained or set forth herein shall not in any way be affected
or impaired thereby, unless the foregoing inconsistent action or the failure to
take an action constitutes a material breach of this Agreement or makes the
Agreement impossible to perform, in which case this Agreement shall terminate
pursuant to Article IX hereof. Upon any such holding that any provision of this
Agreement is null, void or unenforceable, the parties will negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated by this Agreement are consummated to the extent
possible. Except as otherwise contemplated by this Agreement, to the extent that
a party hereto took an action inconsistent herewith or failed to take action
consistent herewith or required hereby pursuant to an order or judgment of a
court or other competent authority, such party shall incur no liability or
obligation unless such party did not in good faith seek to resist or object to
the imposition or entering of such order or judgment.
10.9 Injunctive Relief. The parties acknowledge that it will
be impossible to measure in money the damages that would be suffered if the
parties fail to comply with any of the obligations herein imposed on them and
that in the event of any such failure, an aggrieved person or entity will be
irreparably damaged and will not have an adequate remedy at law. Any such person
or entity shall, therefore, be entitled to injunctive relief, including specific
performance, to enforce such obligations, and if any action should be brought in
equity to enforce any of the provisions of this Agreement, none of the parties
shall raise the defense that there is an adequate remedy at law.
10.10 Attorneys' Fees. If any party to this Agreement brings
an action to enforce its rights under this Agreement, the prevailing party shall
be entitled to recover its costs and expenses, including without limitation
reasonable attorneys' fees, incurred in connection with such action, including
any appeal of such action.
10.11 Cumulative Remedies. All rights and remedies of either
party hereto are cumulative of each other and of every other right or remedy
such party may otherwise have at law or in equity, and the exercise of one or
<PAGE>
more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies.
10.12 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same instrument
and shall become effective when executed and delivered by each of the parties.
<PAGE>
EXECUTION COPY
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement and Plan of Reorganization to be signed by their respective officers
thereunto duly authorized, all as of the date first written above.
HUGHES COMMUNICATIONS, INC.
By: /s/ Jerald F. Farrell
-----------------------------
Jerald F. Farrell
President
HUGHES COMMUNICATIONS
GALAXY, INC.
By: /s/ Jerald F. Farrell
-----------------------------
Jerald F. Farrell
President
HUGHES COMMUNICATIONS
SATELLITE SERVICES, INC.
By: /s/ Jerald F. Farrell
-----------------------------
Jerald F. Farrell
President
HUGHES COMMUNICATIONS
SERVICES, INC.
By: /s/ Jerald F. Farrell
-----------------------------
Jerald F. Farrell
President
HUGHES COMMUNICATIONS
CARRIER SERVICES, INC.
By: /s/ Jerald F. Farrell
-----------------------------
Jerald F. Farrell
President
HUGHES COMMUNICATIONS
JAPAN, INC.
By: /s/ Jerald F. Farrell
-----------------------------
Jerald F. Farrell
President
MAGELLAN INTERNATIONAL, INC.
By: /s/ Charles H. Noski
-----------------------------
Charles H. Noski
President
PANAMSAT CORPORATION
By: /s/ Frederick A. Landman
-----------------------------
Frederick A. Landman
President
<PAGE>
EXHIBIT A
Assurance Agreement
<PAGE>
EXHIBIT A
- ---------
ASSURANCE AGREEMENT
This ASSURANCE AGREEMENT (this "Agreement"), dated September
20, 1996, is entered into by and between HUGHES ELECTRONICS CORPORATION, a
Delaware corporation ("HE"), PANAMSAT CORPORATION, a Delaware corporation
("PAS"), SATELLITE COMPANY, LLC, a Nevada limited liability company ("S
Company") and MAGELLAN INTERNATIONAL, INC., a Delaware corporation ("Newco").
RECITALS
A. Concurrently with the execution and delivery hereof, (i) PAS is
entering into an Agreement and Plan of Reorganization (the "Reorganization
Agreement") with Hughes Communications, Inc., a California corporation ("HCI"),
Hughes Communications Galaxy, Inc., a California corporation ("Galaxy"), Hughes
Communications Satellite Services, Inc., a California corporation ("HCSS"),
Hughes Communications Services, Inc., a California corporation ("HCS"), Hughes
Communications Carrier Services, Inc., a California corporation ("HCCS"), Hughes
Communications Japan, Inc., a California corporation ("HCJ"), and Newco, and
(ii) S Company is entering into a share exchange agreement (the "Univisa
Contribution Agreement") with Newco, pursuant to which agreements Newco will
acquire (i) the existing businesses of certain subsidiaries of HCI that together
comprise the Galaxy Business (as defined in the Reorganization Agreement) and
(ii) the business of PAS.
B. As a condition and inducement to PAS to enter into the
Reorganization Agreement (and effect the transactions contemplated thereby) and
S Company to enter into the Univisa Contribution Agreement (and effect the
transactions contemplated thereby) HE has agreed to enter into this Agreement
and perform its obligations contemplated hereby.
C. Capitalized terms used herein and not otherwise defined herein shall
have the meanings set forth in the Reorganization Agreement.
AGREEMENT
In consideration of the foregoing and the mutual promises
contained herein and in the Reorganization Agreement and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. Provision or Arrangement of Financing. On or before the Closing
Date, HE will loan or arrange for one or more persons or entities that are not
affiliated with either PAS or HE (each such person or entity, an "Unaffiliated
Person") to loan to Newco and/or to one or more Subsidiaries of Newco (other
than PAS, Univisa, Merger Sub or any of their respective direct or indirect
Subsidiaries) one billion seven hundred twenty-five million dollars
($1,725,000,000), plus interest required under the Reorganization Agreement,
which loan shall be funded on the Closing Date or as needed by Newco to pay the
cash required by Newco to consummate the Univisa Contribution (including Newco's
repurchase of shares of Newco Common Stock contemplated thereby) and the Merger;
provided, however, that (i) HE's obligation to make or arrange any such loan or
loans shall be conditioned upon satisfaction of all conditions to Closing
contained in Sections 8.1 and 8.3 of the Reorganization Agreement; and (ii) if
any such loan or loans are provided by an Unaffiliated Person, HE shall not be
obligated to provide any form of guarantee or other credit enhancement in
support of any such loan or loans provided by one or more Unaffiliated Persons.
In the event HE makes any such loan or loans to Newco, the terms of such loan or
loans shall be commercially reasonable as determined by Chase Manhattan Bank,
Bank of America NT&SA and a third bank, if necessary to decide matters upon
which such banks have failed to agree, chosen by such two banking institutions.
2. Contribution of Galaxy Business. Subject to the terms and conditions
set forth in the Reorganization Agreement, HE shall cause its Subsidiaries to
take all actions necessary for Newco to own, upon consummation of the
transactions contemplated by the Reorganization Agreement, all right, title and
interest in and to the assets necessary to conduct the Galaxy Business, together
with the Galaxy Liabilities. HE represents and warrants that (i) the Galaxy
Employees are all of the employees who work primarily in the Galaxy Business,
(ii) the Galaxy Assets are all of the assets used in the Galaxy Business and
(iii) the Galaxy Business is conducted entirely through and by HCI and its
subsidiaries, Galaxy, HCSS, HCS, HCCS and HCJ.
3. Operation of Galaxy Business in Ordinary Course. Subject to the
terms and conditions set forth in the Reorganization Agreement, HE shall cause
its Subsidiaries to continue to operate the Galaxy Business in a manner
consistent with the operation of the Galaxy Business prior to the date hereof.
4. Performance Obligations. Subject to the terms and conditions set
forth in the Reorganization Agreement, HE shall cause its Subsidiaries,
including HCI, Galaxy, HCSS, HCS, HCCS, HCJ and Newco, to perform their
respective obligations under the Reorganization Agreement and the Related
Agreements. Within 45 days after the Closing Date, Newco shall provide HE with a
reasonably detailed statement regarding compliance by HCI and its Affiliates
with the funding requirements of the Reorganization Agreement, which statement
shall be accompanied by a request for payment of any funding deficiency or an
acknowledgment of any reimbursement of any overfunding that is owed. Promptly
following the giving of such notice, HE or Newco, as the case may be, shall make
the payment set forth in such notice. Without limiting the foregoing, HE agrees
that where in the Reorganization Agreement or the Related Agreements it is
stated that HE or its Affiliates will take or refrain from taking certain
actions, HE will, or will cause its relevant Affiliate to, take or refrain from
taking such action, as required by the pertinent provision.
5. Leveraged Lease Guaranty. Subsequent to the Closing Date, HE shall
continue to guaranty leveraged leases of transponders used in the Galaxy
Business entered into prior to the date of this Agreement.
6. Cross License of Intellectual Property. Prior to the Closing, HE
shall, and shall cause its Subsidiaries to, enter into negotiations with
representatives of PAS with the intent of executing and delivering at Closing a
non-exclusive, royalty-free, perpetual Cross License Agreement, with standard
terms and conditions mutually acceptable to HCI and PAS, whereby Newco shall
have the right to use any HE Licensed Intellectual Property that was used in the
Galaxy Business on or before the Closing and HE shall have the right to use any
Galaxy Licensed Intellectual Property that was used in the Hughes Electronics
businesses on or before the Closing. As used in this Agreement, the phrase "HE
Licensed Intellectual Property" shall refer to all domestic, foreign, common
law, registered and pending applications for patents, copyrights, trade secrets,
know-how, confidential information, computer programs (including any source
code), documentation, engineering and technical drawings, processes,
methodologies, and technology (excluding any Intellectual Property owned and
developed by Galaxy) of HE and its Affiliates that was used in the Galaxy
Business on or before Closing. As used in this Agreement, the phrase "Galaxy
Licensed Intellectual Property" shall mean all Newco owned domestic, foreign,
common law, registered and pending applications for patents, copyrights, trade
secrets, know-how, confidential information, computer programs (including any
source code), documentation, engineering and technical drawings, processes,
methodologies, and technology that are conveyed to Newco pursuant to Section 1.1
of the Reorganization Agreement.
7. Miscellaneous.
(a) Termination. This Agreement and all obligations contained hereunder
shall terminate upon the date on which the Reorganization Agreement is
terminated; provided that HE shall remain liable for its obligations hereunder
if the termination of the Reorganization Agreement is pursuant to Section 9.1(c)
thereof.
(b) Expenses. All costs and expenses incurred in connection with this
Agreement and transactions contemplated hereby shall be paid by the party
incurring such expenses.
(c) Interpretation. Headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the word "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." This Agreement shall not be construed for or
against either party by reason of the authorship or alleged authorship of any
provision hereof or by reason of the status of the respective parties.
(d) Entire Agreement; No Third-Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and is not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder.
(e) Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto whether
by operation of law or otherwise without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding upon
and for the benefit of and be enforceable by the parties and their respective
successors and assigns.
(f) Governing Law. This Agreement shall be construed, interpreted and
the rights of the parties determined in accordance with the laws of the State of
Delaware (without reference to the choice of law provisions), except with
respect to matters of law concerning the internal corporate affairs of any
corporate entity which is a party to or the subject of this Agreement, and as to
those matters the law of the jurisdiction under which the respective entity
derives its powers shall govern.
(g) Severability. Each party agrees that, should any court or other
competent authority hold any provision of this Agreement or part hereof to be
null, void or unenforceable, or order any party to take any action inconsistent
herewith or not to take an action consistent herewith or required hereby, the
validity, legality and enforceability of the remaining provisions and
obligations contained or set forth herein shall not in any way be affected or
impaired thereby. Upon any such holding that any provision of this Agreement is
null, void or unenforceable, the parties will negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions contemplated
by this Agreement are consummated to the extent possible. Except as otherwise
contemplated by this Agreement, to the extent that a party hereto took an action
inconsistent herewith or failed to take action consistent herewith or required
hereby pursuant to an order or judgment of a court or other competent authority,
such party shall incur no liability or obligation unless such party did not in
good faith seek to resist or object to the imposition or entering of such order
or judgment.
(h) Injunctive Relief. The parties acknowledge that it will be
impossible to measure in money the damages that would be suffered if the parties
fail to comply with any of the obligations herein imposed on them and that in
the event of any such failure, an aggrieved person or entity will be irreparably
damaged and will not have an adequate remedy at law. Any such person or entity
shall, therefore, be entitled to injunctive relief, including specific
performance, to enforce such obligations, and if any action should be brought in
equity to enforce any of the provisions of this Agreement, none of the parties
shall raise the defense that there is an adequate remedy at law.
(i) Attorneys' Fees. If any party to this Agreement brings an action to
enforce its rights under this Agreement, the prevailing party shall be entitled
to recover its costs and expenses, including without limitation reasonable
attorneys' fees, incurred in connection with such action, including any appeal
of such action.
(j) Cumulative Remedies. All rights and remedies of either party hereto
are cumulative of each other and of every other right or remedy such party may
otherwise have at law or in equity, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
(k) Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same instrument and
shall become effective when executed and delivered by each of the parties.
(l) Amendments, Waivers, Etc.
(i) This Agreement may not be amended, changed, supplemented,
waived or otherwise modified or terminated, except upon the execution and
delivery of a written agreement executed by the parties hereto.
(ii) In the enforcement, interpretation or amendment of any
provisions herein by Newco affecting the rights and obligations of HE or its
Affiliates following the Closing, Newco shall be represented by a subcommittee
of the Board of Directors of Newco comprised solely of Disinterested Directors.
(iii) HE hereby agrees that no failure or delay by PAS, S Company
or Newco, as the case may be, in exercising any right or remedy that any may
have hereunder shall operate as a waiver of such right or remedy. HE hereby
waives notice or demand of performance in the acceptance of its obligations
hereunder. HE agrees that PAS, S Company or Newco may at any time, without
notice to or consent of HE, and without in any manner affecting the liability of
HE hereunder, amend, extend, modify, supplement or waive any term or condition
of the Reorganization Agreement, and HE shall be bound by, and this Agreement
shall automatically extend to the Reorganization Agreement as so amended,
extended, modified, supplemented or waived without any action required by HE.
The liability and obligations of HE hereunder shall be primary, direct and
absolute and HE hereby waives any right to require that resort be had against
any other person.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Assurance
Agreement as of the date first written above.
HUGHES ELECTRONICS CORPORATION
By:
--------------------------------
Charles H. Noski
Senior Vice President and
Chief Financial Officer
PANAMSAT CORPORATION
By:
-------------------------------
Frederick A. Landman
President
MAGELLAN INTERNATIONAL, INC.
By:
-------------------------------
Charles H. Noski
President
SATELLITE COMPANY, LLC
By:
-------------------------------
Name:
Title:
<PAGE>
EXHIBIT B
Income Tax Indemnification and Allocation Agreement
<PAGE>
INCOME TAX INDEMNIFICATION AND ALLOCATION AGREEMENT
This AGREEMENT (this "Agreement"), dated as of __________ __,
199_, is entered into by and between HUGHES ELECTRONICS CORPORATION, a Delaware
corporation ("HE"), and MAGELLAN INTERNATIONAL, INC., a Delaware corporation
("Newco").
RECITALS
A. HE, HCI, Galaxy, HCSS, HCS, HCCS, HCJ, PAS and Newco are
parties to an Agreement and Plan of Reorganization dated as of September 20,
1996 (the "Reorganization Agreement"), pursuant to which (i) each of Galaxy and
HCSS will transfer certain of their assets, liabilities, business and operations
to Newco, (ii) HCI will transfer all of the stock of each of HCS, HCCS and HCJ
to Newco, and (iii) the common and Class A stockholders of PAS and S Company
will transfer, directly and indirectly, all of their stock in PAS to Newco.
B. The foregoing transfers pursuant to the Reorganization
Agreement are intended to comprise an integrated transaction subject to Section
351 of the Internal Revenue Code of 1986, as amended (the "Code").
C. General Motors Corporation ("GM") is the common parent of
an affiliated group of corporations within the meaning of Section 1504(a) of the
Code (the "GM Group"), which, upon consummation of the Reorganization, will
include HE, HCI, Galaxy and HCSS.
D. Upon consummation of the Reorganization Agreement, Newco
will be the common parent of a separate affiliated group of corporations within
the meaning of Section 1504(a) of the Code (the "Newco Group"), which will
include HCS, HCCS, HCJ, Univisa, Univisa Satellite Holdings, Inc., PAS and the
subsidiaries of PAS.
E. HE has agreed to indemnify and hold harmless the Newco
Group against all federal, state and local income tax liabilities of Galaxy,
HCSS, HCS, HCCS and HCJ for taxable years and other periods ending on or before,
or including, the Closing Date, on the terms provided herein.
F. After the Closing Date, the parties will not treat the
operations of HE and its subsidiaries as being unitary, for state and local
income tax reporting purposes, with those of Newco and its subsidiaries, except
as determined by HE, in its reasonable judgment, based on applicable state or
local law, or as required by a state or local tax authority.
AGREEMENT
In consideration of the foregoing and the mutual promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, HE and Newco, intending to be legally
bound, agree as follows:
Article 1
Definitions
1.01 For purposes of this Agreement, the following terms shall
have the meanings ascribed to them below:
"Accounting Firm" -- Deloitte & Touche, LLP.
"Affected Newco Group Member(s)" -- with respect to an Overlap
Group, the member or members of the Newco Group included therein.
"Closing Date" -- the date on which the Reorganization
Agreement is consummated.
"Disaffiliation Year" -- as to any member of the Newco Group,
a taxable year or other period in which such member is not included in an
Overlap Group after having been so included.
"Dispute Notice" -- as defined in Section 2.2(f) hereof.
"Galaxy" -- Hughes Communications Galaxy, Inc.
"GM Group" -- as defined in the introductory paragraphs
hereof.
"HCCS" -- Hughes Communications Carrier Services, Inc.
"HCI" -- Hughes Communications, Inc.
"HCJ" -- Hughes Communications Japan, Inc.
"HCS" -- Hughes Communications Services, Inc.
"HCSS" -- Hughes Communications Satellite Services, Inc.
"HE Federal Adjustment" -- any adjustment to federal Income
Tax liability, whether initiated by the Internal Revenue Service or by taxpayer,
through a claim for refund or otherwise, to any item of income, gain, loss,
expense, deduction or credit of Galaxy, HCSS, HCS, HCCS or HCJ included in a
consolidated federal income tax return of the GM Group for any taxable year
ending on or before the Closing Date, which adjustment has become final, whether
by judicial decision, settlement, closing agreement or otherwise.
"HE State Adjustment" -- any adjustment to state Income Tax
liability by a state or local tax authority or by taxpayer, through a claim for
refund or otherwise, to any item of income, gain, loss, expense, deduction or
credit of Galaxy, HCSS, HCS, HCCS or HCJ included in a consolidated or combined
state or local income tax return of the GM Group or any component thereof, or in
a separate state or local income tax return, for any taxable year or period
ending on or before, or including, the Closing Date, which adjustment has become
final, whether by judicial decision, settlement, closing agreement or otherwise.
"HE Subsidiaries" -- as defined in Section 4.01.
"Income Taxes" -- for purposes of this agreement, taxes
imposed by any federal, state, local or other taxing authority of or in the
United States which are on, based upon, measured by, or with respect to (A) net
or gross income of the taxpayer or (B) multiple bases (including, but not
limited to, corporate franchise, doing business or occupation Taxes) if one or
more of the bases upon which such Tax may be based upon, measured by, or
calculated with respect to, is described in clause (A) above.
"Newco Group" -- as defined in the introductory paragraphs
hereof.
"Newco Overlap Tax or Refund" -- with respect to a taxable
year (or other period) of an Overlap Group, the hypothetical consolidated,
combined or separate state or local income tax liability or rights to refunds
for such taxable year or other period of the Affected Newco Group Members,
calculated as if such Affected Newco Group Members were a separate group of
corporations filing a consolidated or combined return (or, in the case of a
single member, a separate return) in accordance with applicable state or local
law for all taxable periods. The Newco Overlap Tax shall be determined annually,
with respect to each Overlap Group, in accordance with the following principles:
(1) loss and credit carryovers of the Affected Newco
Group Members for taxable years ending after the Closing Date, shall be
taken into account, to the extent permitted by applicable state or
local law (on the hypothetical basis referred to in the first sentence
of this paragraph), whether or not such carryovers were taken into
account in computing the Overlap Group Tax Liability for a preceding
taxable year; provided, however, that to the extent that such
carryovers were taken into account in computing the Overlap Group Tax
Liability for a preceding taxable year, this provision shall be applied
as if there were no applicable limitation on the number of years to
which the applicable losses or credits may be carried;
(2) for purposes of clause (1), the first taxable
year ending after the Closing Date shall be deemed to have commenced on
the day after the Closing Date, based, to the extent practicable, on an
interim closing of the books of the GM Group members included in the
Overlap Group, in accordance with the principles of Treasury Regulation
Section 1.1502-76, as if separate returns had been filed for the HE
Subsidiaries for such Pre-Closing Tax Period and all prior taxable
periods;
(3) items of income, gain, loss, expense, deduction
and credit of the Affected Newco Group Members shall be determined
based on the elections and methods of computation specified by HE and
used in the Overlap Group's consolidated or combined state or local
income tax return for the taxable year.
"Overlap Group" -- as defined in the definition of "Parent."
"Overlap Group Tax Liability" -- with respect to an Overlap
Group, the consolidated or combined state or local income tax liability of such
Overlap Group, as determined under applicable state or local law, for any
taxable year for which such Overlap Group files or is required to file a
consolidated or combined state or local income tax return.
"Parent" -- GM or such other corporation which shall be the
parent of, or which shall be responsible for filing a consolidated or combined
state or local income tax return for, a group of corporations that includes at
least one member of the GM Group and at least one member of the Newco Group
("Overlap Group"). It is understood that both the identity of the Parent of an
Overlap Group and the membership of an Overlap Group may differ from one
jurisdiction to another.
"Separate Federal Income Tax Liability" -- for any taxable
year or other period, the federal income tax liability of the Newco Group,
calculated on a consolidated basis.
"Separate State or Local Tax Liability" -- for any taxable
year or other period and for each applicable state or local jurisdiction, the
state or local income tax liability of the Newco Group or any member or members
thereof, calculated on a separate, consolidated or combined basis, as
applicable.
"Surviving NOL" -- as defined in Section 3.06(c) hereof.
"Tax Changes" -- as defined in Section 2.02(b) hereof.
"With (Without) Calculation" -- as defined in Section 2.02(c)
hereof.
Article 2
Indemnity
2.01 By HE. (a) Subject to Section 2.02 hereof, HE shall be
responsible for and shall indemnify and hold harmless the Newco Group against,
and shall be entitled to any refund of, Income Taxes (including interest,
penalties and other additions) of each of Newco, Galaxy, HCSS, HCS, HCCS and HCJ
for all taxable years or other periods ending on or before, or including (for
the portion of the taxable year ending at the close of business on), the Closing
Date, including, without limitation, Income Taxes of the HE Subsidiaries
relating to or arising out of the transfers by them pursuant to the
Reorganization Agreement. HE shall also indemnify and hold harmless the Newco
Group for all taxable years (or other periods) against any liability (as a
result of Treasury Regulation Section 1.1502-6(a) or otherwise) for Income Taxes
imposed with respect to HE or any other person (other than the HE Subsidiaries)
which is or has ever been affiliated with HE or the HE Subsidiaries, or with
whom HE or the HE Subsidiaries otherwise joins or has ever joined (or is or has
ever been required to join) in filing any consolidated, combined or unitary tax
return, prior to the Closing).
(b) Transfer taxes (such as license fees, registration fees,
stamp duties, documentation fees, sales taxes, property taxes and other similar
taxes or charges, together with any penalties, fines or interest thereon or
other additions thereto, but not including Income Taxes) applicable to the
transfers by HCI and the HE Subsidiaries pursuant to the Reorganization
Agreement shall be for the account of HE. HE shall indemnify and hold harmless
Newco and the other members of the Newco Group from and against all liability
for such transfer taxes.
2.02 Tax Benefits and Detriments
(a) If an HE Federal Adjustment or an HE State Adjustment
results in a tax benefit or detriment (as described below) to the Newco Group or
any member thereof, Newco will pay the amount of such tax benefit to HE, or HE
will pay the amount of such tax detriment to Newco, as such tax benefit or
detriment is realized, as hereinafter provided.
(b) HE will notify Newco promptly of any HE Federal Adjustment
and any HE State Adjustment that may result in a tax benefit or detriment to the
Newco Group or any member thereof. Each such notification (a "Change Notice")
shall be in writing and shall explain with reasonable specificity the change or
changes ("Tax Changes") to: (i) the federal income tax attributes of the
affected member or members of the Newco Group to be reflected in the
consolidated federal income tax returns, including amended returns with respect
to prior years, to be filed by the Newco Group; and (ii) the state and local
income tax attributes of the affected member or members of the Newco Group to be
reflected in the consolidated, combined or separate state and local income tax
returns, including amended returns with respect to prior years, to be filed by
the Newco Group or any member or members thereof.
(c) With respect to each taxable year ending after the Closing
Date, Newco will calculate the Separate Federal Income Tax Liability of the
Newco Group, first, by taking into account, to the extent permitted by
applicable law, all Tax Changes, as described in all current and prior year
Change Notices (the "With Calculation"); and, second, by disregarding all such
Tax Changes (the "Without Calculation"). If the Newco Group's Separate Federal
Income Tax Liability under the With Calculation exceeds its Separate Federal
Income Tax Liability under the Without Calculation, HE shall pay the amount of
such excess to Newco. If the Newco Group's Separate Federal Income Tax Liability
under the Without Calculation exceeds its Separate Federal Income Tax Liability
under the With Calculation, Newco shall pay the amount of such excess to HE.
(d) With respect to each taxable year ending after the Closing
Date, Newco will calculate, for each applicable state and local jurisdiction,
the Separate State or Local Tax Liability of the Newco Group or the members
thereof, on a consolidated, combined or separate basis, as applicable, first, by
taking into account, to the extent permitted by applicable law, all Tax Changes,
as described in all current and prior year Change Notices (the "With
Calculation"); and, second, by disregarding all such Tax Changes (the "Without
Calculation"). If the Newco Group's Separate State or Local Tax Liability under
the With Calculation exceeds its Separate State or Local Tax Liability under the
Without Calculation, HE shall pay the amount of such excess to Newco. If the
Newco Group's Separate State or Local Tax Liability under the Without
Calculation exceeds its Separate State or Local Tax Liability under the With
Calculation, Newco shall pay the amount of such excess to HE.
(e) All calculations and payments required pursuant to this
Section 2.02 with respect to a taxable year shall be made by the due date
(including extensions) of Newco's consolidated federal income tax return for
such year. Newco shall, at least 60 days before such due date, deliver to HE,
for its review, work papers setting forth with reasonable specificity the With
and Without Calculations and the Tax Changes taken into account for purposes of
such Calculations.
(f) If HE wishes to dispute any With and Without Calculations,
it shall deliver to Newco, within 30 days after receipt of Newco's work papers,
a notice ("Dispute Notice") specifying in recordable detail those items as to
which HE disagrees, the reasons for disagreement and its proposed adjustments to
the With and Without Calculations. If a Dispute Notice is delivered, HE and
Newco shall use their reasonable best efforts to reach agreement on the disputed
items or amounts. If HE and Newco cannot reach agreement within 10 days of the
delivery of a Dispute Notice, the disputed items will be submitted to the
Accounting Firm for determination, as provided herein. The Accounting Firm shall
deliver to HE and Newco, as promptly as practicable, a written report setting
forth its determination of the disputed items, which determination shall be
final, conclusive and binding on the parties and shall not be subject to appeal
to any court or tribunal. HE and Newco shall each bear its own expenses in
connection with the preparation of work papers, the issuance of Dispute Notices
and the submission of disputes to the Accounting Firm, except that the fees and
expenses of the Accounting Firm shall be shared equally by HE and Newco.
Article 3
State and Local Income Taxes of Overlap Groups
3.01 Applications. This Article 3 shall be applicable only to
the extent that HE determines, in its reasonable judgment, based on applicable
state or local law, or a state or local tax authority requires, that state or
local income tax returns should be filed with respect to an Overlap Group. The
sole obligations and rights to refunds of the Newco Group in respect of state
and local Income Taxes of an Overlap Group is as provided in this Article 3.
3.02 Estimated Tax Payments. Not less than fifteen (15)
business days prior to the date on which Parent is required to make payments of
estimated tax on behalf of an Overlap Group (including payments of tax due with
a request for an extension to file), Newco shall submit to HE a calculation of
the separate estimated tax liability of the Affected Newco Group Members,
determined based on the Newco Overlap Tax (with respect to such Overlap Group)
for the taxable year in question. Newco shall pay the amount so calculated to HE
not later than the due date of Parent's estimated tax payment. Newco shall also
remit to HE the amount of any interest, penalties or other additions to tax
which would have been due on such estimated payment, if Newco had made such
payment directly to the applicable tax authority.
3.03 Payment of Separate Group Tax Liability. For each taxable
year (or other period) of an Overlap Group, Newco, on behalf of the Affected
Newco Group Members, shall prepare and deliver to HE, within four months after
the end of the taxable year, a calculation of the Newco Overlap Tax (with
respect to such Overlap Group) for such taxable year (or other period). Not
later than the filing due date (including extensions) for the Overlap Group for
such taxable year, (a) Newco shall pay to HE the excess, if any, of the Newco
Overlap Tax for such taxable year (or applicable portion thereof) over the
estimated tax payments previously made by Newco to HE in respect thereof,
together with any interest, penalties or other additions to tax which would have
been due if Newco had made such payment directly to the applicable tax
authority, or (b) HE shall pay to Newco an amount equal to the excess, if any,
of such estimated tax payments previously made by Newco over such Newco Overlap
Tax, or (c) HE shall pay to Newco the amount of the Newco Overlap Refund for
such taxable year (or component thereof), if any, together with any interest
thereon which would have been receivable if Newco had received such refund
directly from the applicable taxing authority plus the amount of any estimated
tax payments previously made by Newco for such taxable year (or portion
thereof).
3.04 Subsequent Adjustments. If the Overlap Group Tax
Liability of an Overlap Group (or any item entering into the computation
thereof) is adjusted by a state or local tax authority, then, as such
adjustments become final, by judicial decision, settlement, closing agreement or
otherwise, the Newco Overlap Tax (with respect to such Overlap Group) shall be
recomputed to the extent necessary to reflect such adjustments, and Newco shall
pay to HE any increase, or HE shall pay to Newco any decrease, in the Newco
Overlap Tax. Any such payment shall be due not later than (i) five business days
before the due date for any additional payment of tax by the Parent, (ii) five
business days after the receipt of a refund by any member of the Overlap Group
or (iii) five business days after the adjustment in question becomes final, if
such adjustment does not result in a payment of additional tax or receipt of a
refund. Newco shall also pay to HE any interest, penalties or additions to tax
which would have been due, if Newco had made such payment directly to the
applicable tax authority. The parties recognize that the Overlap Group Tax
Liability of an Overlap Group and the Newco Overlap Tax may be recomputed under
this Section 3.04 or Section 3.05 hereof more than once.
3.05 Other Recomputations. If an adjustment to the Overlap
Group Tax Liability of an Overlap Group, or to the related Newco Overlap Tax, is
not provided for in Section 3.04 hereof (such as a recomputation of amounts due
hereunder to reflect a carryback item or an erroneous calculation), then either
HE or Newco, as the case may be, shall make a payment to the other in such
amount and at such time as shall be determined in accordance with the principles
of Section 3.04 hereof.
3.06 Termination of Overlap Group. If an Overlap Group is
terminated:
(a) HE and Newco shall consult with and provide each other
with such information as may relate to the prior inclusion of members of either
Group in the Overlap Group.
(b) Unless otherwise consented to by the Parent, neither the
Newco Group nor any member thereof shall elect to carry back to a taxable year
of an Overlap Group any losses or other tax attributes incurred in a
Disaffiliation Year, unless otherwise required by law.
(c) If net operating loss carryovers generated by an Affected
Newco Group Member while included in an Overlap Group have not been used, prior
to the first Disaffiliation Year, in calculating the related Newco Overlap Tax
and have not expired, but rather have been used by the GM Group in a
Disaffiliation Year or have otherwise been retained by the GM Group (the
"Surviving NOL"), HE shall pay to Newco the amount, if any, by which, for a
Disaffiliation Year, the state or local income tax liability of such Affected
Newco Group Members would be reduced if the Surviving NOL (net of any portion
hereof taken into account under this Section 3.06(c) in a prior Disaffiliation
Year), were an available net operating loss carryforward to such Disaffiliation
Year (subject to the expiration thereof or to any limitation on the use thereof
under applicable state or local law). HE shall pay such amount to Newco not
later than the date on which Newco is required to satisfy such state or local
income tax liability for such Disaffiliation Year.
3.07 Disputes. If HE or Newco disputes any calculation of any
tax liability or required payment under this Article 3, such dispute shall be
finally resolved by the Accounting Firm using the dispute resolution procedures
set forth in Article 2 hereof.
Article 4
Miscellaneous Provisions
4.01 Preparation and Filing of Tax Returns. HE shall prepare
and timely file or shall cause to be prepared and timely filed all Federal,
state and local Income Tax returns in respect of Galaxy, HCSS, HCS, HCCS and HCJ
(the "HE Subsidiaries"), their assets or activities that (i) are required to be
filed on or before the Closing Date or (ii) are required to be filed after the
Closing Date and (A) are includable in the Income Tax returns of the GM Group or
(B) are with respect to Income Taxes and are required to be filed on a separate
tax return basis for any taxable year (or period thereof) ending on or before
the Closing Date. Newco shall prepare or cause to be prepared and shall file or
cause to be filed all other tax returns required of HCS, HCCS and HCJ, or in
respect of their assets or activities (or the assets and activities of Galaxy
and HCSS transferred to Newco). Any such tax returns filed after the date of
this Agreement shall be prepared on a basis consistent with the last previous
such tax returns filed in respect of the HE Subsidiaries, unless HE or Newco, as
the case may be, concludes that there is no reasonable basis for such position.
4.02 Tax Sharing Agreements. From and after the Closing Date,
neither the Newco Group nor any member thereof shall be a party to or have any
liability under any tax sharing agreement or arrangement, other than this
Agreement, with any member of the GM Group.
4.03 Carryforwards and Carrybacks. Newco shall cause HCS, HCCS
and HCJ to elect, where permitted by law, to carry forward any net operating
loss, charitable contribution or other item arising after the Closing Date that
could, in the absence of such an election, be carried back to a taxable period
of the GM Group ending on or before the Closing Date in which HCS, HCCS and HCJ
were included in a consolidated tax return of the GM Group. Newco, on its own
behalf and on behalf of its affiliates, hereby waives any right to use or apply
any net operating loss, charitable contribution or other item (other than any
net capital loss, foreign tax credit or research and development credit which
are not permitted by law to be carried forward) of HCS, HCCS and HCJ for any tax
year ending on any date following the Closing Date to any period of HCS, HCCS,
and HCJ ending on or before the Closing Date and reserves the right to use or
apply any such net capital loss, foreign tax credit or research and development
credit of HCS, HCCS, and HCJ for any tax year ending on any date following the
Closing Date to any period of HCS, HCCS or HCJ ending on or before the Closing
Date, provided, however, that if any such net capital loss, foreign tax credit
or research and development credit shall be carried back to any such period,
Newco shall indemnify HE and its affiliates (other than HCS, HCCS and HCJ) for
all reasonable costs and expenses incurred by HE or any of such affiliates in
filing such claims or in connection with any audit of such claims.
4.04 Refunds. HE shall be entitled to retain, or receive
immediate payment from Newco or any of its subsidiaries or affiliates (including
HCS, HCCS and HCJ) of, any refund or credit with respect to Income Taxes
(including, without limitation, refunds and credits arising by reason of amended
tax returns filed after the Closing Date or otherwise) with respect to any tax
period ending on or before the Closing Date relating to the HE Subsidiaries;
provided, however, that (i) Newco, HCS, HCCS and HCJ shall be entitled to
retain, or receive immediate payment from HE of, any such refund or credit to
the extent that such refund or credit arises as a result of the use or
application (as provided in Section 4.03) of any net capital loss, foreign tax
credit or research and development credit of HCS, HCCS or HCJ for any tax year
ending on any date following the Closing Date to any period of HCS, HCCS or HCJ
ending on or before the Closing Date and (ii) to the extent that HE or any of
its affiliates (other than HCS, HCCS and HCJ) would, but for the carryback by
HCS, HCCS or HCJ of any such net capital loss, foreign tax credit or research
and development credit, be entitled to a refund or credit in respect of any net
capital loss, foreign tax credit or research and development credit of HE or any
of HE's affiliates (other than HCS, HCCS and HCJ), HE shall be entitled to
receive immediate payment from Newco of the amount of any such amount to the
extent Newco has previously received a refund or credit from a carryback to HE's
return. Newco and HCS, HCCS and HCJ shall be entitled to retain, or receive
immediate payment from HE of, any refund or credit with respect to Income Taxes
with respect to any taxable period beginning after the Closing Date relating to
HCS, HCCS and HCJ.
4.05 Method of Payment. Unless the parties otherwise agree,
all payments by a party pursuant to this Agreement shall be made by wire
transfer to a bank account designated from time to time by the other party. The
paying party shall also provide a notice of payment to the recipient.
4.06 Interest. If any payment hereunder is not timely paid,
interest shall accrue on the unpaid amount at the applicable federal, state or
local rate, as the case may be, for deficiencies. A payment will be deemed to be
timely paid only if actually received by the payee on or before the due date
thereof.
4.07 Cooperation; Document Retention; Confidentiality.
(a) Upon the reasonable request, HE and Newco shall promptly
provide (and shall cause their respective subsidiaries to provide) the
requesting party with such cooperation and assistance, documents and other
information, without charge, as may be necessary or reasonably helpful in
connection with (i) the preparation and filing of any original or amended tax
return, (ii) the conduct of any audit or other examination or any judicial or
administrative proceeding involving to any extent taxes or tax returns within
the scope of this Agreement, or (iii) the verification by a party of an amount
payable hereunder to, or receivable hereunder from, another party. Such
cooperation and assistance shall include, without limitation: the provision on
demand of books, records, documentation or other information relating to any
relevant tax return; the execution of any document that may be necessary or
reasonably helpful in connection with the filing of any tax return by GM, Newco
or any member of the GM Group or Newco Group, or in connection with any audit,
proceeding, suit or action of the type generally referred to in the preceding
sentence, including, without limitation, the execution of powers of attorney and
extensions of applicable statutes of limitations; the prompt and timely filing
of appropriate claims for refund; and the use of reasonable best efforts to
obtain any documentation from a governmental authority or a third party that may
be necessary or helpful in connection with the foregoing. Each party shall make
its employees and facilities available on a mutually convenient basis to
facilitate such cooperation.
(b) HE and Newco shall retain or cause to be retained all tax
returns, and all books, records, schedules, workpapers and other documents
relating thereto, until the expiration of all applicable statutes of limitations
(including any waivers or extensions thereof). The parties hereto shall notify
each other in writing of any waivers, extensions or expirations of applicable
statutes of limitations, and shall provide at least thirty (30) days prior
written notice of any intended destruction of the documents referred to in the
preceding sentence. A party giving such a notification shall not dispose of any
of the foregoing materials without first obtaining the written approval (which
may not be unreasonably withheld) of the notified party.
(c) Except as required by law or with the prior written
consent of the other party, all tax returns, documents, schedules, workpapers
and similar items made available under this Section 4.03 or otherwise pursuant
to this Agreement, and all information contained in any of the foregoing shall
be kept confidential by the parties hereto and their representatives, shall not
be disclosed to any other person or entity and shall be used only for the
purposes provided herein.
4.08 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the respective successors and assigns of the
parties hereto, but no assignment (other than an assignment by HE of its rights
and obligations hereunder to another member of the GM Group to which HE shall
have assigned all of its right, title and interest in and to the Newco capital
stock then owned by HE or a subsidiary thereof) shall relieve any party's
obligations hereunder without the written consent of the other party.
4.09 Interpretation. Whenever reference in this Agreement is
made to a Section, such reference shall be to a Section hereof unless otherwise
indicated. The headings contained herein are for purposes of reference only and
shall not in any way affect the meaning and interpretation of this Agreement.
Whenever the words "include," "includes" or "including" are used herein, they
shall be deemed to be followed by the words "without limitation." This Agreement
shall not be construed for or against any party by reason of the authorship or
alleged authorship of any provision hereof or by reason of the status of the
respective parties.
4.10 Entire Understanding. This Agreement sets forth the
entire understanding of the parties hereto with respect to the subject matter
hereof. This Agreement may not be amended without the written consent of each of
the parties hereto.
4.11 Conflict of Law. The validity, interpretation and
performance of this Agreement shall be controlled by and construed under the
laws of the State of Delaware (without reference to the choice of law
provisions).
4.12 Notices. All notices, requests, demands, statements,
bills and other communications under this Agreement shall be in writing and
shall be deemed to have been duly given when received, if personally delivered;
when transmitted, if transmitted by telecopy; the day after it is sent, if sent
for next day delivery to a domestic address by a recognized overnight delivery
service; and upon receipt, if sent by certified or registered mail, return
receipt requested. In each case, notice shall be sent:
(a) To Hughes:
Director, Taxes
Hughes Electronics Corporation
7200 Hughes Terrace
P.O. Box 45066
Los Angeles, California 90045-0066
Telecopy: (310) 568-7096
(b) To Newco:
Robert Hall
Hughes Electronics Corporation
7200 Hughes Terrace
Los Angeles, California 90045-0066
Telecopy: (310) 568-7834
and
Kenneth N. Heintz
Hughes Electronics Corporation
7200 Hughes Terrace
Los Angeles, California 90045-0066
Telecopy: (310) 568-6774
4.13 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4.14 Disputes. To the extent not otherwise provided herein,
any dispute between the parties shall be finally resolved by the Accounting Firm
using the dispute resolution procedures set forth in Article 2 hereof.
4.15 Effective Date. This Agreement shall be effective as of
the Closing Date.
<PAGE>
EXECUTION COPY IN WITNESS WHEREOF, the parties have executed
this Income Tax Indemnification and Allocation Agreement as of the day and year
first above written.
HUGHES ELECTRONICS CORPORATION
By: /s/ Charles H. Noski
--------------------------------
Charles H. Noski
Senior Vice President and
Chief Financial Officer
MAGELLAN INTERNATIONAL, INC.
By: /s/ Charles H. Noski
--------------------------------
Charles H. Noski
President
<PAGE>
EXHIBIT C
Principal Stockholders Agreement
<PAGE>
PRINCIPAL STOCKHOLDERS AGREEMENT
This PRINCIPAL STOCKHOLDERS AGREEMENT (this "Agreement"),
dated September 20, 1996, is entered into by and among HUGHES COMMUNICATIONS,
INC., a California corporation ("HCI"), HUGHES COMMUNICATIONS GALAXY, INC., a
California corporation ("Galaxy"), SATELLITE COMPANY, L.L.C., a Nevada limited
liability company ("S Company"), UNIVISA SATELLITE HOLDINGS, INC., a Delaware
corporation which owns all of the outstanding Class B Common Stock of Panamsat
Corporation (the "Class B Holder"), the holders of Class A Common Stock of
Panamsat Corporation (the "Class A Holders"), and the Trustees of that certain
Voting Trust of certain holders of Class A Common Stock of Panamsat Corporation
(the "Class A Trustee," and together with S Company, the Class B Holder, and the
Class A Holders, the "Stockholders").
RECITALS
A. Immediately prior to the execution of this Agreement,
Galaxy, HCI and Panamsat Corporation have entered into an Agreement and Plan of
Reorganization (as such agreement may hereafter be amended from time to time,
the "Reorganization Agreement"), and HCI, Galaxy, S Company and Grupo Televisa,
S.A. have entered into a Stock Contribution and Exchange Agreement (as such
agreement may hereafter be amended from time to time, the "Univisa Contribution
Agreement").
B. As an inducement and a condition to entering into the
Reorganization Agreement and the Univisa Contribution Agreement, HCI and Galaxy
have required that the Stockholders agree, and the Stockholders have agreed, to
enter into this Agreement.
AGREEMENT
In consideration of the foregoing and the mutual promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto, intending to be
legally bound, agree as follows:
1. Certain Definitions. Capitalized terms used and
not defined herein have the respective meanings ascribed to them in the
Reorganization Agreement. For purposes of this Agreement:
"Beneficially Own" or "Beneficial Ownership" with
respect to any securities shall mean having "beneficial ownership" of such
securities (as determined pursuant to Rule 13d-3 under the Exchange Act),
including pursuant to any agreement, arrangement or understanding, whether or
not in writing. Without duplicative counting of the same securities by the same
holder, securities Beneficially Owned by a Person shall include securities
Beneficially Owned by all other Persons with whom such Person would constitute a
"group" within the meaning of Section 13(d) of the Exchange Act.
<PAGE>
"Common Stock" shall mean at any time the Class A
Common Stock, par value $.01 per share, the Class B Common Stock, $.01 per
share, and the Common Stock, par value $ .01 per share, of Panamsat Corporation.
"Existing Shares" shall mean the shares of Common
Stock owned by the Stockholders on the date hereof.
"Permitted Transfer" means a sale, transfer,
assignment or other disposition to a Permitted Transferee.
"Permitted Transferee" means, as to the Class A
Holders, any other Class A Holder and any person who is (A) the spouse or former
spouse of, or any lineal descendent of, or any spouse of such lineal descendant
of, or the grandparent, parent, brother or sister of, or spouse of such brother
or sister of, a Class A Holder or Permitted Transferee; (B) upon the death of
any Class A Holder or any Permitted Transferee of such person, the executors of
the estate of such Class A Holder or such Permitted Transferee, and any of such
Class A Holder's or such Permitted Transferee's heirs, testamentary trustees,
devisees, or legatees; (C) any trust principally for the benefit of one or more
of the foregoing Class A Holders or Permitted Transferees; (D) upon the
disability of any Class A Holder or Permitted Transferee, any guardian or
conservator of such Class A Holder or such Permitted Transferee; or (E) any
corporation, partnership or other entity if all of the beneficial ownership is
held by Class A Holders or Permitted Transferees; provided that in each case
such transferee assumes and agrees to perform and becomes a party to this
Agreement, agrees not to make an Acquisition Proposal, and agrees not to dissent
in the Merger, all on terms reasonably acceptable to HCI and Galaxy, and
provided further that as a result of any such transfer no Class A Common Stock
is converted into Common Stock, par value $ .01 per share, of Panamsat
Corporation. For purposes of this Agreement, when a Permitted Transferee has
acquired Shares in accordance herewith, such person shall be deemed a
"Stockholder" hereunder.
"Person" shall mean an individual, corporation,
limited liability company, partnership, joint venture, association, trust,
unincorporated organization or other entity.
"Shares" shall mean the Existing Shares and any
shares of Common Stock acquired by any Stockholder in any capacity after the
date hereof and prior to the termination of this Agreement. "Shares" shall
include Shares acquired upon the exercise of options, warrants or rights, the
conversion or exchange of convertible or exchangeable securities, or by means of
purchase, dividend, distribution, gift, bequest, inheritance or as a successor
in interest in any capacity or otherwise. In the event of a stock dividend or
distribution, or any change in the Common Stock by reason of any stock dividend,
split-up, recapitalization, reclassification, combination, exchange of shares or
the like, the term "Shares" shall be deemed to refer to and include the Shares
as well as all such stock dividends and distributions and any shares into which
or for which any or all of the Shares may be changed, reclassified or exchanged
and appropriate adjustments shall be made to the terms and provisions of this
Agreement. "Shares" shall also include voting trust certificates issued in
respect of any Shares. Notwithstanding the foregoing, "Shares" shall not include
Common Stock issued upon exercise of Panamsat Corporation employee options
covering up to 200,000 shares, which options are outstanding on the date hereof.
<PAGE>
2. Voting of Shares; No Inconsistent Agreements.
(a) Each Stockholder hereby severally and not jointly
and solely with respect to the Shares held of record or Beneficially Owned by
such Stockholder, agrees that during the period commencing on the date hereof
and continuing until the termination of this Agreement in accordance with its
terms, at any meeting (whether annual or special and whether or not an adjourned
or postponed meeting) of the holders of Common Stock, however called, or in
connection with any written consent of the holders of Common Stock, such
Stockholder shall vote (or cause to be voted) the shares of Common Stock held of
record or Beneficially Owned by such Stockholder (i) in favor of the Merger, the
execution, delivery and performance of the Reorganization Agreement and the
approval and adoption of the terms thereof and each of the other actions
contemplated by the Reorganization Agreement and this Agreement and any actions
required in furtherance thereof and hereof (the "Subject Transactions"); (ii)
against any Acquisition Proposal and against any action or agreement that would
result in a breach in any respect of any covenant, representation or warranty or
any other obligation or agreement under the Reorganization Agreement or the
Univisa Contribution Agreement or this Agreement; and (iii) except as otherwise
agreed to in writing in advance by HCI and Galaxy, and regardless of the status
of the Merger and the transactions contemplated by this Agreement, the
Reorganization Agreement, or the Univisa Contribution Agreement, against the
following actions (other than pursuant to the terms of this Agreement, the
Reorganization Agreement, or the Univisa Contribution Agreement): (A) any
extraordinary corporate transaction, such as a merger, consolidation or other
business combination involving Panamsat Corporation or any of its Subsidiaries;
(B) any sale, lease or transfer by Panamsat Corporation of a material amount of
assets (including stock) of Panamsat Corporation or any of its Subsidiaries, or
a reorganization, restructuring, recapitalization, special dividend, dissolution
or liquidation of Panamsat Corporation or any of its Subsidiaries; or (C)(1) any
change in a majority of the persons who constitute the board of directors of
Panamsat Corporation or any of its Subsidiaries; (2) any change in the present
capitalization of Panamsat Corporation or any of its Subsidiaries including any
proposal to sell a substantial equity interest in Panamsat Corporation or any of
its Subsidiaries; (3) any amendment of Panamsat Corporation or any of its
Subsidiaries' charters or By-laws; (4) any other change in Panamsat Corporation
or any of its Subsidiaries' corporate structure or business; or (5) any other
action which, in the case of each of the matters referred to in clauses (C)(1),
(2), (3) or (4), is intended, or could reasonably be expected, to impede,
interfere with, delay, postpone, or materially adversely affect the Merger and
the transactions contemplated by this Agreement, the Reorganization Agreement
and the Univisa Contribution Agreement.
(b) Each Stockholder severally and not jointly agrees
that it shall not enter into any agreement or understanding with any Person the
effect of which would be inconsistent with or violative of the provisions and
agreements contained herein, including in this Section 2. Further, each
Stockholder severally and not jointly agrees that it will, if the Board of
Directors of Panamsat Corporation fails or refuses (other than as a result of
breach by HCI or any of its Affiliates of the Reorganization Agreement or
because HCI and its Affiliates will not or cannot satisfy the conditions
<PAGE>
precedent thereto) to submit the Subject Transactions to Panamsat Corporation
stockholders, vote all Shares held of record or Beneficially Owned by it to (i)
call or cause to be called a special meeting of stockholders of Panamsat
Corporation (or effect a written consent) to remove the directors of Panamsat
Corporation who have so failed or refused, or to increase the size of the Board
of Directors and elect a majority of new directors who will submit the Subject
Transactions to the stockholders of Panamsat Corporation for a vote, and (ii)
use its reasonable efforts to effect such removal and replacement, or increase
and election, and the submission of the Subject Transactions to the stockholders
of Panamsat Corporation; and (iii), at any time after initial approval by the
stockholders of Panamsat Corporation of the Subject Transactions, if so
requested by HCI, to approve all or any actions incident to the Subject
Transactions or the other matters referred to in this Section 2 by stockholder
written consent.
3. Other Stockholder Covenants.
(a) Restriction on Transfer; Proxies and
Non-interference. From the date hereof through the Closing Date or the earlier
termination of this Agreement in accordance with its terms, and except for
Permitted Transfers or as expressly permitted herein or by the Reorganization
Agreement or the Univisa Contribution Agreement in connection with the
transactions contemplated hereby and thereby, each Stockholder severally and not
jointly agrees that it shall not directly or indirectly:
(i) offer for sale, sell, transfer, tender,
pledge, encumber, assign or otherwise dispose of, or enter into any contract,
option or other arrangement or understanding with respect to, or consent to the
offer for sale, sale, transfer, tender, pledge, encumbrance, assignment or other
disposition of (collectively, "transfer"), any or all of the Shares or any
interest therein; provided that nothing in this Agreement shall in any manner
restrict the ability of the Stockholders to pledge or encumber any Shares in
connection with one or more bona fide loans or advances to such Stockholder by
one or more institutional lenders, but only if and so long as (A) each such
lender expressly (on behalf of itself and any transferee of the collateral)
assumes and agrees to perform and becomes a party to this Agreement, agrees not
to make an Acquisition Proposal, and agrees not to dissent in the Merger, which
agreement shall be on terms reasonably acceptable to HCI and Galaxy, (B) as a
result of such pledge or encumbrance the subject Shares are not converted into
Common Stock, par value $ .01 per share, of Panamsat Corporation, and (C), in
the event of any foreclosure or other sale or retention of Shares by such a
lender, the subject Shares are so converted (a loan or advance meeting such
requirements being herein called a "Loan");
(ii) grant any proxies or powers of attorney,
deposit the Shares into a voting trust or enter into a voting agreement with
respect to the Shares; provided that nothing in this Agreement shall in any
manner restrict the ability of any Stockholder to enter into any voting
agreement in connection with any Loan which is operative only upon default under
such Loan and is not inconsistent with this Agreement; or
(iii) take any action that would make any
representation or warranty of such Stockholder contained herein untrue or
incorrect or would result in a breach by such Stockholder of its obligations
<PAGE>
under this Agreement or a breach by Panamsat Corporation of its obligations
under the Reorganization Agreement.
Notwithstanding the foregoing, at any time or times prior to the Closing S
Company (and, indirectly, the Class B Holder), on the one hand, and the Class A
Holders as a group, on the other hand, and their respective Permitted
Transferees, shall each have the right to sell, directly or indirectly, up to an
aggregate of 2,500,000 Shares (i.e., up to an aggregate of 5,000,000 Shares
collectively); provided that, by mutual agreement between S Company and the
Class A Holders, the foregoing Share amounts may be increased to up to 5,000,000
Shares each (i.e., up to an aggregate of 10,000,000 Shares, collectively).
Except for Shares converted to Common Stock, par value $ .01 per share, of
Panamsat Corporation and sold in a registered public offering or pursuant to
Rule 144 under the Securities Act (which shall upon such sale cease to be
subject to this Agreement), Shares transferred pursuant to the next preceding
sentence may be transferred only if the Shares upon transfer are converted to
Common Stock, par value $ .01 per share, of Panamsat Corporation, and, on terms
reasonably acceptable to HCI and Galaxy, the transferee assumes and agrees to
perform and becomes a party to this Agreement, agrees not to make an Acquisition
Proposal, and not to dissent in the Merger. Notwithstanding any of the
foregoing, no transfer of Shares may be made during a period of up to 30 days
prior to the Closing commencing on such date as HCI shall notify the
Stockholders to cease transfers pursuant to this sentence.
(b) No Solicitation.
(i) From the date hereof through the Closing
Date or the earlier termination of this Agreement in accordance with its terms,
each Stockholder severally and not jointly agrees that it shall not, and shall
not permit any of its Subsidiaries, or any of its or their officers, directors,
employees, representatives, agents or Affiliates (including, without limitation,
any investment banker, attorney or accountant retained by any Stockholder) to,
directly or indirectly, enter into, solicit, initiate or continue any
discussions or negotiations with, or encourage or respond to any inquiries or
proposals by, or participate in any negotiations with, or provide any
information to, or otherwise cooperate in any other way with, any Person or
group, other than HCI, Galaxy and their Affiliates, concerning any Acquisition
Proposal. Each Stockholder severally and not jointly agrees that it will
immediately notify HCI and Galaxy if any discussions or negotiations are sought
to be initiated, any inquiry or proposal is made, or any information is
requested with respect to any Acquisition Proposal, and notify HCI and Galaxy of
the terms of any proposal which it may receive in respect of any such
Acquisition Proposal, including the identity of the prospective purchaser or
soliciting party if known.
(ii) Each Stockholder severally and not jointly
further agrees to use its best efforts as a stockholder to cause Panamsat
Corporation not to, directly or indirectly, solicit, initiate, seek, or
encourage (including by way of furnishing information or assistance), or take
other action to facilitate, any inquiries or the making of any proposal which
constitutes or may reasonably be expected to lead to, an Acquisition Proposal.
<PAGE>
(iii) The provisions of this Section 3(b) shall
not prohibit any director of Panamsat Corporation from taking actions in his
capacity as such which are permitted or required under the Reorganization
Agreement.
(c) Reliance. Each Stockholder understands and
acknowledges that HCI and Galaxy are entering into the Reorganization Agreement
and the Univisa Contribution Agreement in reliance upon each Stockholder's
execution and delivery of this Agreement.
(d) Further Assurances. From time to time, at HCI or
Galaxy's request and without further consideration, each Stockholder severally
and not jointly agrees that it shall execute and deliver such additional
documents and take all such further lawful action as may be necessary or
desirable to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement. Without
limitation, each Class A Holder which is a party thereto and the Class A Trustee
agrees severally and not jointly that it will cause the Voting Trust Agreement
dated as of February 28, 1995 to be amended to the extent required (if any) to
permit each and all of them to enter into and perform this Agreement.
(e) Stockholder Termination Fee. In the event that
the Reorganization Agreement is terminated in circumstances under which the
Termination Fee is payable by Panamsat Corporation to HCI pursuant to Section
9.3 of the Reorganization Agreement, and any Acquisition Proposal is
consummated, then each Stockholder shall pay to HCI one business day after
determination of an amount (the "Stockholder Termination Fee") equal to the
product of (x) the number of Shares Beneficially Owned by such Stockholder on
the date hereof (as set forth on Exhibit A hereto), multiplied by (y) the excess
of (i) the per share value of consideration paid or payable in consequence of
consummation of the Acquisition Proposal (with the value of any non-cash
consideration being determined by agreement of HCI and such Stockholder) over
(ii) $30. In the event that the consideration paid or payable in consequence of
consummation of the Acquisition Proposal: (i) consists solely of cash, then the
Stockholder Termination Fee shall be payable solely in cash, or (ii) consists of
cash and other non-cash property, or solely non-cash property, then the
Stockholder Termination Fee shall be payable in cash and such non-cash property
in the same proportion as the cash bears to the value of the non-cash property
issued or issuable in consequence of consummation of the Acquisition Proposal
(as such value is determined above).
If HCI and such Stockholder fail to agree promptly on the
value of such non-cash consideration, then the parties shall appoint an
independent investment banking firm reasonably acceptable to HCI and such
Stockholder to act as arbitrator (the "Arbitrator"). Upon the selection of the
Arbitrator, HCI on the one hand and such Stockholder on the other shall deliver
to the Arbitrator and to each other their last and final offer concurrently in
writing (the "Certified Offers"). The Certified Offers shall list one amount
which the submitting party asserts is the appropriate valuation of such non-cash
consideration as of the date of submittal. The Arbitrator's sole role shall be
to select which one of the two Certified Offers most closely approximates the
valuation the Arbitrator would have determined for such non-cash consideration,
taking into account current market valuations of any publicly traded securities
which constitute such non-cash consideration. The Arbitrator shall notify the
parties of such determination. The determination of the Arbitrator shall be
binding on the parties. All costs and expenses of the Arbitrator shall be borne
by the parties whose Certified Offer is not selected.
<PAGE>
Each Stockholder acknowledges that the agreements contained in
this Section 3(e) are an integral part of the transactions contemplated by this
Agreement and the Reorganization Agreement. Accordingly, if the Stockholder
shall fail to pay when due any amounts which shall become due under Section 3(e)
hereof, the Stockholder shall in addition hereto pay to HCI all costs and
expenses (including fees and disbursements of counsel) incurred in collecting
such overdue amounts, together with interest on such overdue amounts from the
date such payment was required to be made until the date such payment is
received at a rate per annum equal to the "reference rate" as announced from
time to time by Bank of America, NT&SA. Any payment required to be made pursuant
to this Section 3(e) shall be made when due by wire transfer of immediately
available funds to an account designated by HCI.
4. Representations and Warranties of Stockholders.
Each Stockholder hereby severally and not jointly (and solely with respect to
itself and the Shares held of record or Beneficially Owned by such Stockholder)
represents and warrants to HCI and Galaxy as follows:
(a) Ownership of Shares. Such Stockholder is the
record and/or Beneficial Owner of the Existing Shares set forth on Exhibit A
hereto. On the date hereof, the Existing Shares constitute all of the Shares
owned of record or Beneficially Owned by such Stockholder. With respect to the
number of shares set forth opposite such Stockholder's name on Exhibit A hereto,
and with the exceptions noted thereon, such Stockholder has sole voting power
and sole power to issue instructions with respect to the matters set forth in
Sections 2 and 3 hereof, sole power of disposition, sole power of conversion,
sole power to demand appraisal rights and sole power to agree to all of the
matters set forth in this Agreement, in each case with respect to all of the
Existing Shares with no limitations, qualifications or restrictions on such
rights, subject to applicable securities laws and the terms of this Agreement.
The execution and delivery of this Agreement does not cause an automatic
conversion of the Shares.
(b) Due Authorization. Such Stockholder is, as
applicable, duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization, and has all requisite capacity, power and
authority to execute and deliver this Agreement and perform its obligations
hereunder. The execution and delivery by such Stockholder of this Agreement and
the performance by such Stockholder of its obligations hereunder have been duly
and validly authorized by such Stockholder and no other proceedings on the part
of the such Stockholder are necessary to authorize the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by such Stockholder and constitutes a valid and binding agreement
enforceable against such Stockholder in accordance with its terms except to the
extent (i) such enforcement may be limited by applicable bankruptcy, insolvency
or similar laws affecting creditors rights and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
<PAGE>
(c) No Conflicts. Except for filings, authorizations,
consents and approvals contemplated by the Reorganization Agreement or the
Univisa Contribution Agreement and necessary for the consummation of the
transactions contemplated hereby and thereby, no filing with, and no permit,
authorization, consent or approval of, any state or federal public body or
authority is necessary for the execution of this Agreement by such Stockholder
and the consummation by such Stockholder of the transactions contemplated hereby
and (ii) none of the execution and delivery of this Agreement by such
Stockholder, the consummation by such Stockholder of the transactions
contemplated hereby or compliance by such Stockholder with any of the provisions
hereof shall (A) conflict with or result in any breach of the organizational
documents of such Stockholder, (B) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or give
rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or provisions
of any note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which such Stockholder is a party or by which such
Stockholder or any of its properties or assets may be bound, or (C) violate any
order, writ, injunction, decree, judgment, statute, rule or regulation
applicable to such Stockholder or any of its properties or assets.
(d) No Encumbrances. Except as set forth on Exhibit
A, the Shares and the certificates representing such Shares are now, and at all
times during the term hereof, will be, held by such Stockholder, or by a
nominee, custodian or trust for the benefit of such Stockholder, free and clear
of all liens, claims, security interests, proxies, voting trusts or agreements,
understandings or arrangements or any other encumbrances whatsoever, except for
any such arising hereunder.
(e) No Finder's Fees. No broker, investment banker,
financial advisor or other person is entitled to any broker's, finder's,
financial adviser's or other similar fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
such Stockholder.
5. Representations and Warranties of HCI and Galaxy.
HCI and Galaxy jointly and severally represent and warrant to the Stockholders
as follows:
(a) Organization. Each of HCI and Galaxy is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation, and has all requisite corporate power or other
power and authority to execute and deliver this Agreement and perform its
obligations hereunder. The execution and delivery by HCI and Galaxy of this
Agreement and the performance by HCI and Galaxy of their obligations hereunder
have been duly and validly authorized by their respective Board of Directors
and, except as contemplated by the Reorganization Agreement, no other corporate
proceedings on the part of HCI or Galaxy are necessary to authorize the
execution, delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby.
(b) Agreement. This Agreement has been duly and
validly executed and delivered by HCI and Galaxy and constitutes a valid and
binding agreement of HCI and Galaxy enforceable against HCI and Galaxy in
accordance with its terms, except that (i) such enforcement may be subject to
<PAGE>
applicable bankruptcy, insolvency, or other similar laws, now or hereafter in
effect, affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceedings therefor may be brought.
(c) No Conflicts. Except for filings, authorizations,
consents, and approvals contemplated by the Reorganization Agreement or the
Univisa Contribution Agreement and necessary for the consummation of the
transactions contemplated hereby and thereby, (i) no filing with, and no permit,
authorization, consent or approval of, any state or federal public body or
authority is necessary for the execution of this Agreement by HCI and Galaxy and
the consummation by HCI and Galaxy of the transactions contemplated hereby, and
(ii) none of the execution and delivery of this Agreement by HCI and Galaxy, the
consummation by HCI and Galaxy of the transaction contemplated hereby or
compliance by HCI and Galaxy with any of the provisions hereof shall (A)
conflict with or result in any breach of the charter or bylaws of HCI or Galaxy,
(B) result in a violation or breach of, or constitute (with or without notice or
lapse of time or both) a default (or give rise to any third-party right of
termination, cancellation, material modifications or acceleration) under any of
the terms, conditions or provisions of any note, loan agreement, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding, agreement
or other instrument or obligation of any kind to which HCI or Galaxy is a party
or by which HCI or Galaxy of their respective properties or assets may be bound,
or (C) violate any order, writ, injunction, decree, judgment, statute, rule or
regulation applicable to HCI or Galaxy or their respective properties or assets.
6. Legend.
(a) Each Stockholder severally and not jointly agrees
with, and covenants to, HCI and Galaxy that such Stockholder shall not request
that Panamsat Corporation register the transfer (by book-entry or otherwise) of
any certificate or uncertificated interest representing any of the Shares,
unless such transfer is in compliance with this Agreement.
(b) Each Stockholder severally and not jointly agrees
that it shall promptly after the date hereof surrender to Galaxy all
certificates representing the Shares held by such Stockholder, and Galaxy shall
place the following legend on such certificates, which legend, except as
otherwise expressly provided in this Agreement, shall remain on such
certificates until the earliest of a sale thereof in a registered public
offering or pursuant to Rule 144 under the Securities Act or the termination of
this Agreement:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN AGREEMENT,
DATED AS OF SEPTEMBER 20, 1996 AMONG CERTAIN STOCKHOLDERS, HUGHES
COMMUNICATIONS, INC. AND HUGHES COMMUNICATIONS GALAXY, INC. THE SHARES
ARE SUBJECT TO RESTRICTIONS ON TRANSFER OR ENCUMBRANCE AND VOTING. A
COPY OF THIS AGREEMENT IS AVAILABLE AT THE PRINCIPAL OFFICE OF THE
COMPANY."
<PAGE>
7. Termination. Subject to the next two sentences,
this Agreement shall terminate upon the earliest of (i) the Closing Date, (ii)
termination of the Reorganization Agreement in accordance with its terms, or
(iii) termination of the Univisa Contribution Agreement in accordance with its
terms; provided that the provisions of Section 3(e) and of Section 10 shall
survive any termination of this Agreement, and provided further that no such
termination shall relieve any party of liability for a breach hereof prior to
termination. If the Reorganization Agreement is terminated and a termination fee
is payable pursuant to Section 9.3 thereof, at the election of HCI and Galaxy,
this Agreement shall not terminate and the Stockholders will vote their Shares
as provided in Section 2(a). In any event, this Agreement shall terminate no
later than twenty-four (24) months after the date hereof. Any approval, adoption
or consent by any Stockholder pursuant to Section 3(a) shall be null and void ab
initio if the Reorganization Plan or the Univisa Contribution Agreement is
terminated other than pursuant to or as a result of Section 9.3 of the
Reorganization Agreement.
8. Confidentiality and Public Announcements. The
parties recognize that successful consummation of the transactions contemplated
by this Agreement may be dependent upon confidentiality with respect to the
matters referred to herein. In this connection, pending public disclosure
thereof, each of the parties hereto severally and not jointly agrees not to
disclose or discuss such matters with anyone not a party to this Agreement
(other than its counsel, advisors, corporate parents and Affiliates) without the
prior written consent of the other parties hereto, except for filings required
pursuant to the Exchange Act and the rules and regulations thereunder or
disclosures its counsel advises are necessary in order to fulfill its
obligations imposed by law or the requirements of any securities exchange. At
all times during the term of this Agreement, the parties hereto will consult
with each other before issuing or making any reports, statements or releases to
the public with respect to this Agreement or the transactions contemplated
hereby and will use good faith efforts to agree on the text of public reports,
statements or releases. For purposes of this Section, any consultation or
consent required of HCI or Galaxy may be obtained from either, and any
consultation or consent required from the Stockholders may be obtained from (x)
in respect of Class A Holders and the Class A Trustee, Mary Anselmo, and (y) in
respect of the Class B Holder and S Company, Lawrence Dam.
9. Voting Agreement. Each of HCI and Galaxy agrees
that it shall vote (or cause to be voted) all shares of Common Stock with
respect to which HCI or Galaxy has voting power in favor of the Merger, the
execution and delivery of the Reorganization Agreement and the Univisa
Contribution Agreement and the approval and adoption of the terms thereof and
each of the other actions contemplated by the Reorganization Agreement and the
Univisa Contribution Agreement and any action required in furtherance thereof.
<PAGE>
10. General Provisions.
(a) Nonsurvival of Representations, Warranties and
Agreements. Except as provided in Section 7, none of the representations,
warranties, covenants and agreements in this Agreement shall survive the Closing
Date.
(b) Expenses. Whether or not the transactions
contemplated hereby are consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses, except as otherwise specifically
noted herein or in the Reorganization Agreement.
(c) Notices. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when received if
personally delivered; when transmitted if transmitted by telecopy, electronic or
digital transmission method; the day after it is sent, if sent for next day
delivery to a domestic address by recognized overnight delivery service (e.g.,
Federal Express); and upon receipt, if sent by certified or registered mail,
return receipt requested. In each case notice shall be sent to:
(i) if to HCI or Galaxy, to:
Hughes Communications, Inc.
1500 Hughes Way
Long Beach, CA 90810-9928
Attention: Jerald F. Farrell, President
Telephone: (310) 525-5010
Telecopy: (310) 525-5015
with copies to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attention: Bruce R. Lederman, Esq.
Telephone: (213) 485-1234
Telecopy: (213) 891-8763
(ii) if to the Stockholders, to the respective
addresses and with the copies set forth on Exhibit A.
(d) Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. Headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the word "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". This Agreement shall not be construed for or
<PAGE>
against either party by reason of the authorship or alleged authorship of any
provision hereof or by reason of the status of the respective parties. All terms
defined in this Agreement in the singular shall have comparable meanings when
used in the plural, and vice versa, unless otherwise specified.
(e) Entire Agreement; No Third-Party Beneficiaries.
This Agreement constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof and is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
(f) Assignment. Except in connection with Permitted
Transfers or as permitted in Section 3(a), neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned (whether by
operation of law or otherwise) by any Stockholder without the consent of HCI and
Galaxy, or by HCI or Galaxy without the consent of the Stockholders holding 66_%
of the Shares subject to this Agreement. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
(g) Governing Law. This Agreement shall be construed,
interpreted and the rights of the parties determined in accordance with the laws
of the State of Delaware (without reference to the choice of law provisions),
except with respect to matters of law concerning the internal corporate affairs
of any corporate entity which is a party to or the subject of this Agreement,
and as to those matters the law of the jurisdiction under which the respective
entity derives its powers shall govern.
(h) Severability. Each party agrees that, should any
court or other competent authority hold any provision of this Agreement or part
hereof to be null, void or unenforceable, or order any party to take any action
inconsistent herewith or not to take an action consistent herewith or required
hereby, the validity, legality and enforceability of the remaining provisions
and obligations contained or set forth herein shall not in any way be affected
or impaired thereby. Upon any such holding that any provision of this Agreement
is null, void or unenforceable, the parties will negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that the transactions
contemplated by this Agreement are consummated to the extent possible. Except as
otherwise contemplated by this Agreement, to the extent that a party hereto took
an action inconsistent herewith or failed to take action consistent herewith or
required hereby pursuant to an order or judgment of a court or other competent
authority, such party shall incur no liability or obligation unless such party
did not in good faith seek to resist or object to the imposition or entering of
such order or judgment.
(i) Injunctive Relief. The parties acknowledge that
it will be impossible to measure in money the damages that would be suffered if
the parties fail to comply with any of the obligations herein imposed on them
and that in the event of any such failure, an aggrieved person or entity will be
irreparably damaged and will not have an adequate remedy at law. Any such person
or entity shall, therefore, be entitled to injunctive relief, including specific
performance, to enforce such obligations, and if any action should be brought in
equity to enforce any of the provisions of this Agreement, none of the parties
shall raise the defense that there is an adequate remedy at law.
<PAGE>
(j) Attorneys' Fees. If any party to this Agreement
brings an action to enforce its rights under this Agreement, the prevailing
party shall be entitled to recover its costs and expenses, including without
limitation reasonable attorneys' fees, incurred in connection with such action,
including any appeal of such action.
(k) Cumulative Remedies. All rights and remedies of
either party hereto are cumulative of each other and of every other right or
remedy such party may otherwise have at law or in equity, and the exercise of
one or more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies.
(l) Counterparts. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
instrument and shall become effective when executed and delivered by each of the
parties.
(m) Amendments, Waivers, Etc. This Agreement may not
be amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(n) Binding Agreement. Each Stockholder agrees that
this Agreement and the obligations hereunder shall attach to the Shares and,
except as permitted in Section 3(a), shall be binding upon any person or entity
to which legal or Beneficial Ownership of such shares shall pass, whether by
operation of law or otherwise, including, without limitation, such Stockholder's
heirs, distributees, guardians, administrators, executors, legal
representatives, or successors or other transferees (for value or otherwise) and
any other successors in interest. Notwithstanding any transfer of Shares, except
as provided in Section 3(a), the transferor shall remain liable for the
performance of all obligations under this Agreement of the transferor.
(o) Obligations of the Stockholders. The liabilities
and obligations of each Stockholder under any provision of this Agreement are
several and not joint and apply solely to such Stockholder and to the Shares
held of record or Beneficially Owned by such Stockholder. No Stockholder shall
have any liability or obligation under this Agreement for any act, omission or
breach by any other Stockholder.
(p) Service of Process. Each of the parties hereto
irrevocably consents to the service of any process, pleading, notices or other
papers by the mailing of copies thereof by registered, certified or first class
mail, postage prepaid, to such party at such party's address set forth herein,
or by any other method provided or permitted under Delaware law. Additionally,
each party hereby appoints RL&F Service Corp., One Rodney Square, Wilmington,
Delaware 19801 as agent for service of process in Delaware.
(i) Consent and Jurisdiction. Each party irrevocably
and unconditionally agrees and consents that any suit, action or other legal
proceeding arising out of or related to this Agreement shall be brought and
heard in New Castle County, State of Delaware and each party irrevocably
consents to personal jurisdiction in any and all tribunals in said County.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Principal
Stockholders Agreement as of the date first written above.
HUGHES COMMUNICATIONS, INC.
By: /s/ Jerald F. Farrell
---------------------------
Jerald F. Farrell
President
HUGHES COMMUNICATIONS GALAXY, INC.
By: /s/ Jerald F. Farrell
---------------------------
Jerald F. Farrell
President
SATELLITE COMPANY, L.L.C.
By: /s/ Guillermo Canedo White
---------------------------
Guillermo Canedo White
Authorized Signatory
UNIVISA SATELLITE HOLDINGS, INC.
By: /s/ Lawrence W. Dam
---------------------------
Lawrence W. Dam
President
<PAGE>
CLASS A STOCKHOLDERS
/s/ Mary Anselmo
-------------------------------------------------------------------------
Name: Mary Anselmo, individually, and as a trustee of the Article VII
Trust created by the RENE ANSELMO REVOCABLE TRUST DATED JUNE 10,
1994 and as a successor trustee under the Voting Trust Agreement
dated as of February 28, 1995 and as a trustee of the RAYCE
ANSELMO TRUST DATED DECEMBER 23, 1991
/s/ Frederick A, Landman
-------------------------------------------------------------------------
Name: Frederick A. Landman, individually and as a trustee of the
Article VII Trust created by the RENE ANSELMO REVOCABLE TRUST
DATED JUNE 10, 1994 and as a successor trustee under the Voting
Trust Agreement dated as of February 28, 1995
/s/ Lourdes Saralegui
-------------------------------------------------------------------------
Name: Lourdes Saralegui, individually and as a trustee of the Article
VII Trust created by the RENE ANSELMO REVOCABLE TRUST DATED JUNE
10, 1994 and as a successor trustee under the Voting Trust
Agreement dated as of February 28, 1995
/s/ Pier Landman
-------------------------------------------------------------------------
Name: Pier Landman, individually and as the sole trustee of the CHLOE
LANDMAN TRUST DATED JUNE 10, 1988 and the sole trustee of the
RISSA LANDMAN TRUST DATED JUNE 10, 1988
/s/ Edward J. Landau
-------------------------------------------------------------------------
Name: Edward J. Landau, as co-trustee of the FREDERICK A. LANDMAN
IRREVOCABLE TRUST DATED DECEMBER 22, 1995
/s/ Patrick J. Costello
-------------------------------------------------------------------------
Name: Patrick J. Costello, as co-trustee of the FREDERICK A. LANDMAN
IRREVOCABLE TRUST DATED DECEMBER 22, 1995
/s/ Reverge Anselmo
-------------------------------------------------------------------------
Name: Reverge Anselmo, individually
<PAGE>
Exhibit A
to Principal Stockholders Agreement
- --------------------------------------------------------------------------------
NUMBER OF SHARES
............................................
NAME AND ADDRESS FOR NOTICE CLASS A CLASS B COMMON
OF RECORD OF RECORD OF RECORD
BENEFICIARY BENEFICIARY BENEFICIARY
- --------------------------------------------------------------------------------
HCI
Galaxy
Satellite Company, L.L.C.
Univisa Satellite Holdings, Inc.
Mary Anselmo
Mary Anselmo, as Trustee
Reverge Anselmo
Reverge Anselmo, as Trustee
Patrick Costello, Trustee
Edward J. Landau, Trustee
Frederick A. Landman
Frederick A. Landman, as Trustee
Pier Landman, Trustee
TOTAL 0.00 0.00 0.00
Encumbrances:
Notice Copies:
Note A:
All of the Shares listed opposite the names of the Class A
Holders above are subject to the provisions of a Voting Trust Agreement dated as
of February 28, 1995 among the Class A Holders, a copy of which has been made
available to HCI and Galaxy, and are owned of record by the Class A Trustees. In
addition, ___________________ has the sole dispositive power over the Shares
listed opposite the Article VII Trust created by the ____________ Revocable
Trust dated June 10, 1994 and the Shares listed opposite their name above.
<PAGE>
EXHIBIT D
Univisa Contribution Agreement
See Exhibit 2.4 to Form 10-Q filed herewith.
<PAGE>
EXHIBIT E
DTH Option Purchase Agreement
See Exhibit 10.13.1 to Form 10-Q filed herewith.
<PAGE>
EXHIBIT F
Registration Rights Agreement
<PAGE>
EXHIBIT F
- ---------
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated
as of _________________, 199__, is entered into by and among MAGELLAN
INTERNATIONAL, INC., a Delaware corporation (the "Company"), and the persons
listed on the signature page hereof (the "Stockholders").
RECITALS
A. The Company and the Stockholders desire to enter
into this Agreement for the purpose of granting to the Stockholders certain
rights with respect to registering under the Securities Act of 1933, as amended,
shares of Common Stock, par value $.01 per share, of the Company.
B. The Common Stock is being acquired by the
Stockholders pursuant to the transactions (the "Transactions") contemplated by
the Agreement and Plan of Reorganization, dated as of September 20, 1996, among
Panamsat Corporation, Hughes Communications, Inc., and the Company, among others
(the "Plan of Reorganization"), and the Stock Contribution and Exchange
Agreement, dated as of September 20, 1996, among Satellite Company, L.L.C.,
Hughes Communications, Inc., and the Company, among others (the "Exchange
Agreement").
C. The Stockholders are also parties to a Stockholder
Agreement of even date (the "Stockholder Agreement").
AGREEMENT
In consideration of the Recitals and mutual promises contained
herein, and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties, intending to be legally bound,
hereby agree as follows:
1. Definitions. As used in this Agreement, the
following terms shall have the following meanings:
"Advice" shall have the meaning set forth in Section 5 hereof.
"Affiliate" means, with respect to any specified person, any
other person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified person. For the purposes of this
definition, "control" when used with respect to any specified person, means the
power to direct the management and policies of such person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Business Day" means any day that is not a Saturday, a Sunday
or a legal holiday on which banking institutions in the State of New York are
not required to be open.
"Capital Stock" means, with respect to any person, any and all
shares, interests, participations or other equivalents (however designated) of
corporate stock issued by such person, including each class of common stock and
preferred stock of such person.
"Class A Holder" means a Holder whose Common Stock was
received in the Transactions in respect of the Class A Common Stock of Panamsat
Corporation.
"Class B Holder" means a Holder whose Common Stock was
received in the Transactions pursuant to the Exchange Agreement.
"Common Stock" means the Common Stock, par value $0.01 per
share, of the Company issued to any Holder named on the signature pages hereof
in the Transactions or any other shares of capital stock or other securities of
the Company into which such shares of Common Stock shall be reclassified or
changed, including, by reason of a merger, consolidation, reorganization or
recapitalization. If the Common Stock has been so reclassified or changed, or if
the Company pays a dividend or makes a distribution on the Common Stock in
shares of capital stock or subdivides (or combines) its outstanding shares of
Common Stock into a greater (or smaller) number of shares of Common Stock, a
share of Common Stock shall be deemed to be such number of shares of stock and
amount of other securities to which a holder of a share of Common Stock
outstanding immediately prior to such change, reclassification, exchange,
dividend, distribution, subdivision or combination would be entitled.
"Company" shall have the meaning set forth in the heading hereof.
"Delay Period" shall have the meaning set forth in Section 2(d)
hereof.
"Demand Notice" shall have the meaning set forth in Section 2(a)
hereof.
"Demand Registration" shall have the meaning set forth in Section 2(b)
hereof.
"Effectiveness Period" shall have the meaning set forth in Section
2(d) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Hold Back Period" shall have the meaning set forth in Section 4
hereof.
"Holder" means a person who owns Registrable Shares and is either (i)
a Stockholder or (ii) a Permitted Transferee.
"Inclusion Notice" shall have the meaning set forth in Section 2(a).
"Hughes Communications, Inc. Holder" means Hughes Communications, Inc.
and any Holder whose Common Stock was issued to Hughes Communications, Inc. in
the Transactions.
"Interruption Period" shall have the meaning set forth in Section 5
hereof.
"Permitted Assignee" means a Holder who acquires (a) more than $ 15
million in value of Common Stock at the date of transfer from a Holder, or (b)
Common Stock from a Holder in a transfer in which consent to assignment of this
Agreement is granted pursuant to Section 10(e), in either case in a transfer
exempt pursuant to Rule "4(1-1/2)" (or any similar private transfer exemption),
provided that in each case the transferee assumes and agrees to perform and
becomes a party to this Agreement.
"Permitted Transferees" means, as to any Hughes Communications, Inc.
Holder, any controlled Affiliate of GM or any Permitted Transferee; as to S
Company, Grupo Televisa, S.A., any controlled Affiliate of Grupo Televisa, S.A.,
or any Permitted Transferee; and as to the Class A Holders, (A) any other Class
A Holder, (B) any person who is the spouse or former spouse of, or any lineal
descendent of, or any spouse of such lineal descendant of, or the grandparent,
parent, brother or sister of, or spouse of such brother or sister of, a Class A
Holder or Permitted Transferee of such person; (C) upon the death of any Class A
Holder or any Permitted Transferee of such person, the executors of the estate
of such Class A Holder or Permitted Transferee, any of such Class A Holder's or
such Permitted Transferee's heirs, testamentary trustees, devisees, or legatees;
(D) any trust principally for the benefit of one or more of the foregoing Class
A Holders or Permitted Transferees; (E) upon the disability of any Class A
Holder or Permitted Transferee, any guardian or conservator of such Class A
Holder or Permitted Transferee; or (F) any corporation, partnership or other
entity if all of the beneficial ownership is held by Class A Holders or any
Permitted Transferees; and as to any Stockholders, any person who is a Permitted
Assignee; provided that in each case such transferee assumes and agrees to
perform and becomes a party to this Agreement.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Piggyback Registration" shall have the meaning set forth in Section 3
hereof.
"Prospectus" means the prospectus included in any Registration
Statement (including a prospectus that discloses information previously omitted
from a prospectus filed as part of an effective registration statement in
reliance upon Rule 430A), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the
Registrable Shares covered by such Registration Statement and all other
amendments and supplements to such prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.
"Registrable Shares" means shares of Common Stock unless (i) they have
been effectively registered under Section 5 of the Securities Act and disposed
of pursuant to an effective Registration Statement, or (ii) all of such Common
Stock of a Holder can be freely sold and transferred without restriction under
Rule 144 or Rule 145 under the Securities Act or any successor rule such that,
after any such transfer referred to in this clause (ii), such securities may be
freely transferred without restriction under the Securities Act. Notwithstanding
the foregoing, any shares of Common Stock held by a Stockholder shall be
"Registrable Shares" until such Stockholder ceases to own at least 1% of the
then outstanding Common Stock, $ .01 par value, of the Company. Further, no
Holder who is not a Stockholder shall be deemed to own Registrable Shares after
five years from the date hereof.
"Registration" means registration under the Securities Act of an
offering of Registrable Shares pursuant to a Demand Registration or a Piggyback
Registration.
"Registration Period" means, as to any Holder, the period beginning on
the date hereof and ending on the date when such Holder no longer owns any
Registrable Shares.
"Registration Statement" means any registration statement under the
Securities Act of the Company that covers any of the Registrable Shares pursuant
to the provisions of this Agreement, including the related Prospectus, all
amendments and supplements to such registration statement, including pre- and
post-effective amendments, all exhibits thereto and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Shelf Registration" shall have the meaning set forth in Section 2(b)
hereof.
"Stockholder Agreement" shall have the meaning set forth in Recital C.
"Transactions" shall have the meaning set forth in Recital B.
"Underwritten Registration or Underwritten Offering" means a
registration under the Securities Act in which securities of the Company are
sold to an underwriter for reoffering to the public.
2. Demand Registration.
(a) Subject to the last sentence of this Section 2(a), any
Holder shall have the right during the Registration Period, by written notice
(the "Demand Notice") given to the Company, to request the Company to register
under and in accordance with the provisions of the Securities Act all or any
portion of the Registrable Shares designated by such Holders; provided, however,
that the aggregate value (at the respective dates of such notices) of
Registrable Shares requested to be registered pursuant to any Demand Notice and
pursuant to any related Inclusion Notices received pursuant to the following
sentence shall be at least $ 100 million. Upon receipt of any such Demand
Notice, the Company shall promptly notify all other Holders of the receipt of
such Demand Notice and allow them the opportunity to include Registrable Shares
held by them in the proposed registration by submitting their own written notice
to the Company requesting inclusion of a specified number of such Holders'
Registrable Securities (the "Inclusion Notice"). In connection with any Demand
Registration in which more than one Holder participates, in the event that such
Demand Registration involves an underwritten offering and the managing
underwriter or underwriters participating in such offering advise in writing the
Holders of Registrable Shares to be included in such offering that the total
number of Registrable Shares to be included in such offering exceeds the amount
that can be sold in (or during the time of) such offering without delaying or
jeopardizing the success of such offering (including the price per share of the
Registrable Shares to be sold), then the amount of Registrable Shares to be
offered for the account of such Holders shall be reduced pro rata on the basis
of the number of Registrable Shares to be registered by each such Holder;
provided if the registration of Registrable Shares held by Mary Anselmo is
necessary in connection with any payment of estate taxes by her estate, such
registration by the estate of Mary Anselmo shall have priority over any
registration of Registrable Shares by a Class B Holder or any Holder who
acquired such securities directly or indirectly from or through a Class B
Holder. The Class A Holders as a group and the Class B Holders as a group shall
each be entitled to three Demand Registrations pursuant to this Section 2;
Hughes Communications, Inc. shall be entitled to six Demand Registrations
pursuant to this Section 2; if any such Demand Registration does not become
effective or is not maintained for a period (whether or not continuous) of at
least 180 days (or such shorter period as shall terminate when all the
Registrable Shares covered by such Demand Registration (other than any shares
reserved for issuance upon exercise of the underwriters' overallotment option)
have been sold pursuant thereto), the affected Holders will be entitled to an
addition Demand Registration pursuant hereto. It is agreed that the registration
of Registrable Shares pursuant to an Inclusion Notice shall not be deemed to be
a Demand Registration. Nothing in this Section 2(a) shall limit any rights
pursuant to Section 3 hereof. Nothing in this Agreement shall limit the rights
and obligations of the parties under the Stockholder Agreement, including
pursuant to Sections 2(a) and 2(b) thereof. Notwithstanding anything herein to
the contrary, the exercise of each Demand Registration under this Section 2(a)
by the Class A Holders shall require the approval of the Class A Holders, and
their Permitted Transferees, owning a majority of the Registrable Shares then
owned by all Class A Holders and their Permitted Transferees.
(b) The Company, within 45 days of the date on which the
Company receives a Demand Notice given by Holders in accordance with Section
2(a) hereof, shall file with the SEC, and the Company shall thereafter use
commercially reasonable efforts to cause to be declared effective, a
Registration Statement on the appropriate form for the registration and sale, in
accordance with the intended method or methods of distribution, of the total
number of Registrable Shares specified by the Holders in such Demand Notice,
which may include a "shelf" registration (a "Shelf Registration") pursuant to
Rule 415 under the Securities Act (a "Demand Registration").
(c) The Company shall use commercially reasonable efforts
to cause the Registration Statement to be declared effective and to keep each
Registration Statement filed pursuant to this Section 2 continuously effective
and usable for the resale of the Registrable Shares covered thereby (i) in the
case of a Registration that is not a Shelf Registration, for a period of 90 days
from the date on which the SEC declares such Registration Statement effective
and (ii) in the case of a Shelf Registration, for a period of 180 days from the
date on which the SEC declares such Registration Statement effective, in either
case (x) until all the Registrable Shares covered by such Registration Statement
(other than any shares reserved for issuance upon exercise of the underwriters'
overallotment option) have been sold pursuant to such Registration Statement,
and (y) as such period may be extended pursuant to this Section 2.
(d) The Company shall be entitled to postpone the filing of
any Registration Statement otherwise required to be prepared and filed by the
Company pursuant to this Section 2, or suspend the use of any effective
Registration Statement under this Section 2, for a reasonable period of time,
but not in excess of 90 days (a "Delay Period"), if the chief executive officer
or chief financial officer of the Company determines that in such executive
officer's reasonable judgment and good faith the registration and distribution
of the Registrable Shares covered or to be covered by such Registration
Statement would materially interfere with any pending material financing,
acquisition or corporate reorganization or other material corporate development
involving the Company or any of its subsidiaries or would require premature
disclosure thereof and promptly gives the Holders written notice of such
determination, containing a general statement of the reasons for such
postponement and an approximation of the period of the anticipated delay;
provided, however, that (i) the aggregate number of days included in all Delay
Periods during any consecutive 12 months shall not exceed the aggregate of (x)
120 days minus (y) the number of days occurring during all Hold Back Periods and
Interruption Periods during such consecutive 12 months and (ii) a period of at
least 60 days shall elapse between the termination of any Delay Period, Hold
Back Period or Interruption Period and the commencement of the immediately
succeeding Delay Period. If the Company shall so postpone the filing of a
Registration Statement, the Holders of Registrable Shares to be registered shall
have the right to withdraw the request for registration by giving written notice
from the Holders of a majority of the Registrable Shares that were to be
registered to the Company within 45 days after receipt of the notice of
postponement or, if earlier, the termination of such Delay Period (and, in the
event of such withdrawal, such request shall not be counted for purposes of
determining the number of requests for registration to which the Holders of
Registrable Shares are entitled pursuant to this Section 2). The time period for
which the Company is required to maintain the effectiveness of any Registration
Statement shall be extended by the aggregate number of days of all Delay
Periods, all Hold Back Periods and all Interruption Periods occurring during
such Registration and such period and any extension thereof is hereinafter
referred to as the "Effectiveness Period." The Company shall not be entitled to
initiate a Delay Period unless it shall (A) to the extent permitted by
agreements with other security holders of the Company, concurrently prohibit
sales by such other security holders under registration statements covering
securities held by such other security holders and (B) in accordance with the
Company's policies from time to time in effect, forbid purchases and sales in
the open market by senior executives of the Company.
(e) The Company shall not include any securities that are
not Registrable Shares in any Registration Statement filed pursuant to this
Section 2 without the prior written consent of (i) the Class A Holders of a
majority in number of the Registrable Shares held by Class A Holders covered by
such Registration Statement, and (ii) the Class B Holder(s) of a majority in
number of the Registrable Shares held by such Class B Holders covered by such
Registration Statement, and (iii) Hughes Communications, Inc. Holders with
respect to Registrable Shares held by such Hughes Communications, Inc. Holders
covered by such Registration Statement.
(f) Holders of a majority in number of the Registrable
Shares to be included in a Registration Statement pursuant to this Section 2
may, at any time prior to the effective date of the Registration Statement
relating to such Registration, revoke such request by providing a written notice
to the Company revoking such request. The Holders of Registrable Shares who
revoke such request shall reimburse the Company for all its out-of-pocket
expenses incurred in the preparation, filing and processing of the Registration
Statement; provided, however, that, if such revocation was pursuant to Section
2(d) (for a postponement) or was based on the Company's failure to comply in any
material respect with its obligations hereunder, such reimbursement shall not be
required, and such registration shall not count against the maximum number of
Demand Registrations to which the applicable Holders are entitled under Section
2(a). In addition, if pursuant to the terms of this Section 2(f), the Holders
reimburse the Company for its out of pocket expenses incurred in the
preparation, filing and processing of any Registration Statement requested, and
subsequently revoked by such Holder(s), such registration shall not count
against the maximum number of Demand Registrations to which the applicable
Holder(s) are entitled under Section 2(a).
3. Piggyback Registration.
(a) Right to Piggyback. If at any time during the
Registration Period the Company proposes to file a registration statement under
the Securities Act with respect to a public offering of securities of the same
type as the Registrable Shares pursuant to a firm commitment underwritten
offering solely for cash for its own account (other than a registration
statement (i) on Form S-8 or any successor forms thereto, or (ii) filed solely
in connection with a dividend reinvestment plan or employee benefit plan of the
Company or its Affiliates) or for the account of any holder of securities of the
same type as the Registrable Shares (to the extent that the Company has the
right to include Registrable Shares in any registration statement to be filed by
the Company on behalf of such holder), then the Company shall give written
notice of such proposed filing to the Holders at least 15 days before the
anticipated effective date. Such notice shall offer the Holders the opportunity
to register such amount of Registrable Shares as they may request (a "Piggyback
Registration"). Subject to Section 3(b) hereof, the Company shall include in
each such Piggyback Registration all Registrable Shares with respect to which
the Company has received written requests for inclusion therein within 10 days
after notice has been given to the Holders. Each Holder shall be permitted to
withdraw all or any portion of the Registrable Shares of such Holder from a
Piggyback Registration at any time prior to the effective date of such Piggyback
Registration; provided, however, that if such withdrawal occurs after the filing
of the Registration Statement with respect to such Piggyback Registration, the
withdrawing Holders shall reimburse the Company for the portion of the
registration expenses payable with respect to the Registrable Shares so
withdrawn.
(b) Priority on Piggyback Registrations. The Company shall
permit the Holders to include all such Registrable Shares on-the-same terms and
conditions as any similar securities, if any, of the Company included therein.
Notwithstanding the foregoing, if the Company or the managing underwriter or
underwriters participating in such offering advise the Holders in writing that
the total amount of securities requested to be included in such Piggyback
Registration exceeds the amount which can be sold in (or during the time of)
such offering without delaying or jeopardizing the success of the offering
(including the price per share of the securities to be sold), then the amount of
securities to be offered for the account of the Holders and other holders of
securities who have piggyback registration rights with respect thereto shall be
reduced (to zero if necessary) pro rata on the basis of the number of common
stock equivalents requested to be registered by each such Holder or holder
participating in such offering.
(c) Right to Abandon. Nothing in this Section 3 shall
create any liability on the part of the Company to the Holders if the Company in
its sole discretion should decide not to file a registration statement proposed
to be filed pursuant to Section 3(a) hereof or to withdraw such registration
statement subsequent to its filing and prior to the later of its effectiveness
or the release of the Registrable Shares for public offering by the managing
underwriter, in the case of an underwritten public offering, regardless of any
action whatsoever that a Holder may have taken, whether as a result of the
issuance by the Company of any notice hereunder or otherwise.
4. Holdback Agreement. If (i) the Company shall file a
registration statement with respect to the Common Stock or similar securities or
securities convertible into, or exchangeable or exercisable for, such securities
and (ii) the Company (in the case of a nonunderwritten public offering by the
Company pursuant to such registration statement) advises the Holders in writing
that a public sale or distribution of Registrable Shares would materially
adversely affect such offering or the managing underwriter or underwriters (in
the case of an underwritten public offering by the Company pursuant to such
registration statement) advises the Company in writing (in which case the
Company shall notify the Holders) that a public sale or distribution of
Registrable Shares would have material adverse impact on such offering, then
each Holder shall, to the extent not inconsistent with applicable law, refrain
from effecting any public sale or distribution of Registrable Shares during the
10 days prior to the effective date of such registration statement and until the
earliest of (A) the abandonment of such offering, (B) 90 days from the effective
date of such registration statement and (C) if such offering is an underwritten
offering, the termination of any "hold back" period obtained by the underwriter
or underwriters in such offering from the Company in connection therewith (each
such period, a "Hold Back Period").
5. Registration Procedures. In connection with the
registration obligations of the Company pursuant to and in accordance with
Sections 2 and 3 hereof (and subject to Sections 2 and 3 hereof), the Company
shall use commercially reasonable efforts to effect such registration to permit
the sale of such Registrable Shares in accordance with the intended method or
methods of disposition thereof, and pursuant thereto the Company shall as
expeditiously as possible (but subject to Sections 2 and 3 hereof):
(a) At least ten (10) business days before filing a
Registration Statement or prospectus or any amendments or supplements thereto,
furnish to the Holders who are participating in such Registration Statement and
the underwriters, if any, copies of all such documents proposed to be filed,
which documents will be subject to the review of such Holders and such
underwriters (and their respective counsel), and, in the case of a Demand
Registration, the Company will not file any Registration Statement or amendment
thereto or any prospectus or any supplement thereof to which the Registering
Holders or the underwriters, if any, shall reasonably object;
(b) prepare and file with the SEC a Registration Statement
for the sale of the Registrable Shares on any form for which the Company then
qualifies or which counsel for the Company shall deem appropriate in accordance
with such Holders' intended method or methods of distribution thereof, subject
to Section 2(b) hereof, and, subject to the Company's right to terminate or
abandon a registration pursuant to Section 3(c) hereof, use commercially
reasonable efforts to cause such Registration Statement to become effective and
remain effective as provided herein;
(c) prepare and file with the SEC such amendments
(including post-effective amendments) to such Registration Statement, and such
supplements to the related Prospectus, as may be required by the rules,
regulations or instructions applicable to the Securities Act during the
applicable period in accordance with the intended methods of disposition
specified by the Holders of the Registrable Shares covered by such Registration
Statement, make generally available earnings statements satisfying the
provisions of Section 11(a) of the Securities Act (provided that the Company
shall be deemed to have complied with this clause if it has complied with Rule
158 under the Securities Act), and cause the related Prospectus as so
supplemented to be filed pursuant to Rule 424 under the Securities Act;
provided, however, that before filing a Registration Statement or Prospectus, or
any amendments or supplements thereto (other than reports required to be filed
by it under the Exchange Act), the Company shall furnish to the Holders of
Registrable Shares covered by such Registration Statement and their counsel for
review and comment, copies of all documents required to be filed;
(d) notify the Holders of any Registrable Shares covered by
such Registration Statement promptly and (if requested) confirm such notice in
writing, (i) when a Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to such Registration Statement or
any post-effective amendment, when the same has become effective, (ii) of any
request by the SEC for amendments or supplements to such Registration Statement
or the related Prospectus or for additional information regarding such Holders,
(iii) of the issuance by the SEC of any stop order suspending the effectiveness
of such Registration Statement or the initiation of any proceedings for that
purpose, (iv) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, and (v) of the happening of any
event that requires the making of any changes in such Registration Statement,
Prospectus or documents incorporated or deemed to be incorporated therein by
reference so that they will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading:
(e) use commercially reasonable efforts to obtain the
withdrawal of any order suspending the effectiveness of such Registration
Statement, or the lifting of any suspension of the qualification or exemption
from qualification of any Registrable Shares for sale in any jurisdiction in the
United States;
(f) furnish to the Holder of any Registrable Shares covered
by such Registration Statement, each counsel for such Holders and each managing
underwriter, if any, without charge, one conformed copy of such Registration
Statement, as declared effective by the SEC, and of each post-effective
amendment thereto, in each case including financial statements and schedules and
all exhibits and reports incorporated or deemed to be incorporated therein by
reference; and deliver, without charge, such number of copies of the preliminary
prospectus, any amended preliminary prospectus, each final Prospectus and any
post-effective amendment or supplement thereto, as such Holder may reasonably
request in order to facilitate the disposition of the Registrable Shares of such
Holder covered by such Registration Statement in conformity with the
requirements of the Securities Act;
(g) prior to any public offering of Registrable Shares
covered by such Registration Statement, use commercially reasonable efforts to
register or qualify such Registrable Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as the Holders of such
Registrable Shares shall reasonably request in writing; provided, however, that
the Company shall in no event be required to qualify generally to do business as
a foreign corporation or as a dealer in any jurisdiction where it is not at the
time so qualified or to execute or file a general consent to service of process
in any such jurisdiction where it has not theretofore done so or to take any
action that would subject it to general service of process or taxation in any
such jurisdiction where it is not then subject;
(h) upon the occurrence of any event contemplated by
paragraph 5(d)(v) above, prepare a supplement or post-effective amendment to
such Registration Statement or the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference and file any
other required document so that, as thereafter delivered to the purchasers of
the Registrable Shares being sold thereunder (including upon the termination of
any Delay Period), such Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;
(i) use commercially reasonable efforts to cause all
Registrable Shares covered by such Registration Statement to be listed on each
securities exchange or automated interdealer quotation system, if any, on which
similar securities issued by the Company are then listed or quoted;
(j) use commercially reasonable efforts to comply with all
applicable rules and regulations of the SEC and any securities exchange or
regulatory body;
(k) on or before the effective date of such Registration
Statement, provide the transfer agent of the Company for the Registrable Shares
with printed certificates for the Registrable Shares covered by such
Registration Statement which are in a form eligible for deposit with The
Depository Trust Company;
(l) if such offering is an underwritten offering, make
available for inspection by any Holder of Registrable Shares included in such
Registration Statement, any underwriter participating in any offering pursuant
to such Registration Statement, and any attorney, accountant or other agent
retained by any such Holder or underwriter (collectively, the "Inspectors"),
such financial and other records and other information, pertinent corporate
documents and properties of any of the Company and its subsidiaries and
affiliates (collectively, the "Records"), as shall be reasonably necessary to
enable them to exercise their due diligence responsibilities; provided, however,
that the Records that the Company determines, in good faith, to be confidential
and which it notifies the Inspector in writing are confidential shall not be
disclosed to any Inspector unless such Inspector signs a confidentiality
agreement reasonably satisfactory to the Company, which agreement shall permit
the disclosure of such Records in such Registration Statement or the related
Prospectus if either (i) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in such Registration Statement or (ii) the
release of such Records is ordered pursuant to a subpoena or other order from a
court of competent jurisdiction; provided however, that (A) any decision
regarding the disclosure of information pursuant to subclause (i) shall be made
only after consultation with counsel for the applicable Inspectors and the
Company and (B) with respect to any release of Records pursuant to subclause
(ii), each Holder of Registrable Shares agrees that it shall, promptly after
learning that disclosure of such Records is sought in a court having
jurisdiction, give notice to the Company so that the Company, at the Company's
expense, may undertake appropriate action to prevent disclosure of such Records;
and
(m) if such offering is an underwritten offering, enter
into such agreements (including an underwriting agreement in form, scope and
substance as is customary in underwritten offerings) and take all such other
appropriate and reasonable actions requested by the Holders of a majority of the
Registrable Shares being sold in connection therewith (including those
reasonably requested by the managing underwriters) in order to expedite or
facilitate the disposition of such Registrable Shares, and in such connection,
(i) use commercially reasonable efforts to obtain opinions of counsel to the
Company and updates thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managing underwriters and
counsel to the Holders of the Registrable Shares being sold), addressed to each
selling Holder of Registrable Shares covered by such Registration Statement and
each of the underwriters as to the matters customarily covered in opinions
requested in underwritten offerings and such other matters may be reasonably
requested by such counsel and underwriters, (ii) use commercially reasonable
efforts to obtain "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any subsidiary of the Company
or of any business acquired by the Company for which financial statements and
financial data are, or are required to be, included in the Registration
Statement), addressed to each selling Holder of Registrable Shares covered by
the Registration Statement (unless such accountants shall be prohibited from so
addressing such letters by applicable standards of the accounting profession)
and each of the underwriters, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in connection
with underwritten offerings (iii) if requested and if an underwriting agreement
is entered into, provide indemnification provisions and procedures substantially
to the effect set forth in Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section. The above shall be done at each closing
under such underwriting or similar agreement, or as and to the extent required
thereunder. In addition, the Company agrees (i) not to effect any public sale or
distribution of its Common Stock, par value $.01 per share, or any securities
convertible into or exchangeable or exercisable for such securities, during the
10 days prior to the effective date of any underwritten Demand or Piggyback
Registration and until the earliest of (A) the abandonment of such offering, or
(B) the termination of any "hold back" period reasonably requested by the
underwriters (with exceptions for issuances pursuant to outstanding options,
warrants, and convertible or exchangeable securities, pursuant to employee and
dividend reinvestment plans, and such other exceptions as are customary or
agreed with the managing underwriter).
The Company may require each Holder of Registrable Shares
covered by a Registration Statement to furnish such information regarding such
Holder and such Holder's intended method of disposition of such Registrable
Shares as it may from time to time reasonably request in writing. If any such
information is not furnished within a reasonable period of time after receipt of
such request, the Company may exclude such Holder's Registrable Shares from such
Registration Statement.
Each Holder of Registrable Shares covered by a Registration
Statement agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 5(d)(ii), 5(d)(iii),
5(d)(iv) or 5(d)(v) hereof, that such Holder shall forthwith discontinue
disposition of any Registrable Shares covered by such Registration Statement or
the related Prospectus until receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 5(h) hereof, or until such Holder is
advised in writing (the "Advice") by the Company that the use of the applicable
Prospectus may be resumed, and has received copies of any amended or
supplemented Prospectus or any additional or supplemental filings which are
incorporated, or deemed to be incorporated, by reference in such Prospectus
(such period during which disposition is discontinued being an "Interruption
Period") and, if requested by the Company, the Holder shall deliver to the
Company (at the expense of the Company) all copies then in its possession, other
than permanent file copies then in such holder's possession, of the Prospectus
covering such Registrable Shares at the time of receipt of such request.
Each Holder of Registrable Shares covered by a Registration
Statement further agrees not to utilize any material other than the applicable
current preliminary prospectus or Prospectus in connection with the offering of
such Registrable Shares.
6. Registration Expenses. Whether or not any Registration
Statement is filed or becomes effective, the Company shall pay all costs, fees
and expenses incident to the Company's performance of or compliance with this
Agreement, including (i) all registration and filing fees, including NASD filing
fees, (ii) all fees and expenses of compliance with securities or Blue Sky laws,
including reasonable fees and disbursements of counsel in connection therewith,
(iii) printing expenses (including expenses of printing certificates for
Registrable Shares and of printing preliminary and final prospectuses if the
printing of prospectuses is requested by the Holders or the managing
underwriter, if any), (iv) messenger, telephone and delivery expenses, (v) fees
and disbursements of counsel for the Company, (vi) fees and disbursements of all
independent certified public accountants of the Company (including expense of
any "cold comfort" letters required in connection with this Agreement) and all
other persons retained by the Company in connection with this Agreement and the
Registration Statement, and (vii) all other costs, fees and expenses incident to
the Company's performance or compliance with this Agreement. Notwithstanding the
foregoing, the fees and expenses of any persons retained by any Holder,
including counsel for such Holders, and any discounts, commissions or brokers'
fees or fees of similar securities industry professionals and any transfer taxes
relating to the disposition of the Registrable Shares by a Holder, will be
payable by such Holder and the Company will have no obligation to pay any such
amounts.
7. Underwriting Requirements.
(a) Subject to Section 7(b) hereof, any Holder giving a
Demand Notice shall have the right, by written notice, to request that any
Demand Registration provide for an underwritten offering.
(b) In the case of any underwritten offering pursuant to a
Demand Registration, the Holders of a majority of the Registrable Shares covered
by the Demand Notice to be disposed of in connection therewith shall select the
institution or institutions that shall manage or lead such offering, which
institution or institutions shall be reasonably satisfactory to the Company. In
the case of any underwritten offering pursuant to a Piggyback Registration, the
Company shall select the institution or institutions that shall manage or lead
such offering.
8. Indemnification.
(a) Indemnification by the Company. The Company shall,
without limitation as to time, indemnify and hold harmless, to the full extent
permitted by law, each Holder of Registrable Shares whose Registrable Shares are
covered by a Registration Statement or Prospectus, the officers, directors and
agents and employees of each of them, each Person who controls each such Holder
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the officers, directors, agents and employees of each such
controlling person, to the fullest extent lawful, from and against any and all
losses, claims, damages, liabilities, judgment, costs (including, without
limitation, costs of preparation and reasonable attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of or based upon any untrue
or alleged untrue statement of a material fact contained in such Registration
Statement or Prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or based upon any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as the same are based upon
information furnished in writing to the Company by or on behalf of such Holder
expressly for use therein or by any underwriter in a Demand Registration;
provided, however, that the Company shall not be liable to any such Holder to
the extent that any such Losses arise out of or are based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any preliminary prospectus if (i) having previously been furnished by or on
behalf of the Company with copies of the Prospectus, such Holder failed to send
or deliver a copy of the Prospectus with or prior to the delivery of written
confirmation of the sale of Registrable Shares by such Holder to the person
asserting the claim from which such Losses arise and (ii) the Prospectus would
have corrected in all material respects such untrue statement or alleged untrue
statement or such omission or alleged omission; and provided further, however,
that the Company shall not be liable in any such case to the extent that any
such Losses arise out of or are based upon an untrue statement or alleged untrue
statement or omission or alleged omission in the Prospectus, if (x) such untrue
statement or alleged untrue statement, omission or alleged omission is corrected
in all material respects in an amendment or supplement to the Prospectus and (y)
having previously been furnished by or on behalf of the Company with copies of
the Prospectus as so amended or supplemented, such Holder thereafter fails to
deliver such Prospectus as so amended or supplemented, prior to or currently
with the sale of Registrable Shares. In connection with any Underwritten
Offering, the Company will also indemnify underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, their officers and directors and each Person who controls such
Persons (within the meaning of Section 15 of the Securities Act) to the same
extent as provided above with respect to Indemnification of Holders of
Registrable Shares, or on such other terms as are reasonable and customary and
requested by the managing underwriter.
(b) Indemnification by Holder of Registrable Shares. In
connection with any Registration Statement in which a Holder is participating,
such Holder shall furnish to the Company in writing such information as the
Company reasonably requests for use in connection with such Registration
Statement or the related Prospectus and agrees to indemnify, to the full extent
permitted by law, the Company, its directors, officers, agents or employees,
each Person who controls the Company (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act) and the directors, officers,
agents or employees of such controlling Persons, from and against all Losses
arising out of or based upon any untrue or alleged untrue statement of a
material fact contained in such Registration Statement or the related Prospectus
or any amendment or supplement thereto, or any preliminary prospectus, or
arising out of or based upon any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, to the extent, but only to the extent, that such untrue or alleged
untrue statement or omission or alleged omission is based upon any information
so furnished in writing by or on behalf of such Holder to the Company expressly
for use in such Registration Statement or Prospectus.
(c) If any Person shall be entitled to indemnity hereunder
(an "Indemnified Party"), indemnified party shall give prompt notice to the
party from which such indemnity is sought (the "Indemnifying Party") of any
claim or of the commencement of any proceeding with respect to indemnitee party
seeks indemnification or contribution pursuant hereto; provided, however, that
the delay or failure to so notify the indemnifying party shall not relieve the
indemnifying party from any obligation or liability except to the extent that
the indemnifying party has been prejudiced by such delay or failure. The
indemnifying party shall have the right, exercisable by giving written notice to
an indemnified party promptly after the receipt of written notice from such
indemnified party of such claim or proceeding, to assume, at the indemnifying
party's expense, the defense of any such claim or proceeding, with counsel
reasonably satisfactory to such indemnified party; provided, however, that (i)
an indemnified party shall have the right to employ separate counsel in any such
claim or proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless: (1) the indemnifying party agrees to pay such fees and expenses; (2) the
indemnifying party fails promptly to assume the defense of such claim or
proceeding or fails to employ counsel reasonably satisfactory to such
indemnified party; or (3) the named parties to any proceeding (including
impleaded parties) include both such indemnified party and the indemnifying
party, and such indemnified party shall have been advised by counsel that there
may be one or more legal defenses available to it that are inconsistent with
those available to the indemnifying party or that a conflict of interest is
likely to exist among such indemnified party and any other indemnified parties
(in which case the indemnifying party shall not have the right to assume the
defense of such action on behalf of such indemnified party); and (ii) subject to
clause (3) above, the indemnifying party shall not, in connection with any one
such claim or proceeding or separate but substantially similar or related claims
or proceedings in the same jurisdiction, arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one firm of attorneys (together with appropriate local counsel) at any time for
all of the indemnified parties, or for fees and expenses that are not
reasonable. Whether or not such defense is assumed by the indemnifying party,
such indemnified party shall not be subject to any liability for any settlement
made without its consent. The indemnifying party shall not consent to entry of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release, in form and substance reasonably satisfactory to
the indemnified party, from all liability in respect of such claim or litigation
for which such indemnified party would be entitled to indemnification hereunder.
(d) Contribution. If the indemnification provided for in
this Section 8 is unavailable to an indemnified party in respect of any Losses
(other than in accordance with its terms), then each applicable indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such Losses, in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party, on the one hand, and such indemnified party, on the other
hand, in connection with the actions, statements or omissions that resulted in
such Losses as well as any other relevant equitable considerations. The relative
fault of such indemnifying party, on the one hand, and indemnified party, on the
other hand, shall be determined by reference to, among other things, whether any
action in question, including any untrue statement of a material fact or
omission or alleged omission to state a material fact, has been taken by, or
relates to information supplied by, such indemnifying party or indemnified
party, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent any such action, statement or omission. The
amount paid or payable by a party as a result of any Losses shall be deemed to
include any legal or other fees or expenses incurred by such party in connection
with any investigation or proceeding. The parties hereto agree that it would not
be just and equitable if contribution pursuant to this Section 8(d) were
determined by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in the this Section
8(d). Notwithstanding the provision of this Section 8(d), an indemnifying party
that is a Holder shall not be required to contribute any amount which is in
excess of the amount by which the total proceeds received by such Holder from
the sale of the Registrable Shares sold by such Holder (net of all underwriting
discounts and commissions) exceeds the amount of any damages that such
indemnifying party has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
9. Rule 144. If the Company shall have filed a registration
statement pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act, the
Company covenants that it will timely file the reports required to be filed by
it under the Securities Act or the Exchange Act (including but not limited to
the reports under Sections 13 and 15(d) of the Exchange Act referred to in
subparagraph (c)(1) of Rule 144 adopted by the SEC under the Securities Act) and
the rules and regulations adopted by the SEC thereunder (or if the Company is
not required to file such reports, the Company will, upon the request of any
Holder of Registrable Shares, make publicly available other information), and
will take such further action as any Holder of Registrable Shares may reasonably
request, all to the extent required from time to time to enable such Holder of
Registrable Shares to sell Registrable Shares within the exemption provided by
(i) Rule 144 under the Securities Act, as such Rule may be amended from time to
time, or (ii) any similar rule or regulation hereafter adopted by the SEC. Upon
the request of any Holder of Registrable Shares, the Company will deliver to
such Holder a written statement as to whether it has complied with such
requirements.
10. Miscellaneous.
(a) Termination. This Agreement and the obligations of the
Company and the Holders hereunder (other than Section 8 hereof) shall terminate
on the first date on which no Registrable Shares remain outstanding.
All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered;
when transmitted if transmitted by telecopy, electronic or digital transmission
method; the day after it is sent, if sent for next day delivery to a domestic
address by recognized overnight delivery service (e.g., Federal Express); and
upon receipt, if sent by certified or registered mail, return receipt requested.
In each case notice shall be sent to: [to come]
Interpretation. When a reference is made in this Agreement
to Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the word "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". This Agreement shall not be construed for or against either party
by reason of the authorship or alleged authorship of any provision hereof or by
reason of the status of the respective parties. All terms defined in this
Agreement in the singular shall have the same comparable meanings when used in
the plural and vice versa, unless otherwise specified.
Entire Agreement; No Third-Party Beneficiaries. This
Agreement constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof and is not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder.
Assignment. Neither this Agreement nor any of the rights,
interests, or obligations hereunder shall be assigned (whether by operation of
law or otherwise) by any Holder without the consent of the Company, or by the
Company without the consent of Holders of at least a majority in number of the
Registrable Shares then outstanding provided that any Holder can assign its
rights hereunder to a Permitted Transferee or Permitted Assignee of $15 million
or more in value of Common Stock without the consent of the Company. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns. In no event shall any transferee of Common Stock be entitled, solely as
a result of such transfer, to any of the benefits of this Agreement or to
enforce the same.
(f) Governing Law. This Agreement shall be construed,
interpreted and the rights of the parties determined in accordance with the laws
of the State of Delaware (without reference to the choice of law provisions),
except with respect to matters of law concerning the internal corporate affairs
of any corporate entity which is a party to or the subject of this Agreement,
and as to those matters the law of the jurisdiction under which the respective
entity derives its powers shall govern.
Severability. Each party agrees that, should any court or
other competent authority hold any provision of this Agreement or part hereof to
be null, void or unenforceable, or order any party to take any action
inconsistent herewith or not to take an action consistent herewith or required
hereby, the validity, legality and enforceability of the remaining provisions
and obligations contained or set forth herein shall not in any way be affected
or impaired thereby. Upon any such holding that any provision of this Agreement
is null, void or unenforceable, the parties will negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that the transactions
contemplated by this Agreement are consummated to the extent possible. Except as
otherwise contemplated by this Agreement, to the extent that a party hereto took
an action inconsistent herewith or failed to take action consistent herewith or
required hereby pursuant to an order or judgment of a court or other competent
authority, such party shall incur no liability or obligation unless such party
did not in good faith seek to resist or object to the imposition or entering of
such order or judgment.
Injunctive Relief. The parties acknowledge that it will be
impossible to measure in money the damages that would be suffered if the parties
fail to comply with any of the obligations herein imposed on them and that in
the event of any such failure, an aggrieved person or entity will be irreparably
damaged and will not have an adequate remedy at law. Any such person or entity
shall, therefore, be entitled to injunctive relief, including specific
performance, to enforce such obligations, and if any action should be brought in
equity to enforce any of the provisions of this Agreement, none of the parties
shall raise the defense that there is an adequate remedy at law.
Attorneys' Fees. If any party to this Agreement brings an
action to enforce its rights under this Agreement, the prevailing party shall be
entitled to recover its costs and expenses, including without limitation
reasonable attorneys' fees, incurred in connection with such action, including
any appeal of such action.
Cumulative Remedies. All rights and remedies of any party
hereto are cumulative of each other and of every other right or remedy such
party may otherwise have at law or in equity, and the exercise of one or more
rights or remedies shall not prejudice or impair the concurrent or subsequent
exercise of other rights or remedies.
Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same instrument and
shall become effective when executed and delivered by each of the parties.
(l) Amendments and Waivers. Except as otherwise provided
herein, the provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of Holders
of at least a majority in number of the Registrable Shares then outstanding, or
the Holders have obtained the written consent of the Company.
(m) Other Agreements. Without the approval of Holders
owning at least two-thirds in interest of each of the Hughes Communications,
Inc. Holders, the Class A Holders, and the Class B Holders of the Registrable
Shares, the Company shall not enter into any registration rights agreement
ranking pari passu or senior to this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first above written.
MAGELLAN INTERNATIONAL, INC.
By:
-----------------------------
Charles H. Noski
President
STOCKHOLDERS
HUGHES COMMUNICATIONS, INC.
By:
-----------------------------
Jerald F. Farrell
President
SATELLITE COMPANY, L.L.C.
By:
-----------------------------
Member
<PAGE>
CLASS A STOCKHOLDERS
Name: Mary Anselmo, individually, and as a trustee of the Article VII
Trust created by the RENE ANSELMO REVOCABLE TRUST DATED JUNE 10,
1994 and as a successor trustee under the Voting Trust Agreement
dated as of February 28, 1995 and as a trustee of the RAYCE
ANSELMO TRUST DATED DECEMBER 23, 1991
Name: Frederick A. Landman, individually and as a trustee of
the Article VII Trust created by the RENE ANSELMO
REVOCABLE TRUST DATED JUNE 10, 1994 and as a successor
trustee under the Voting Trust Agreement dated as of
February 28, 1995
Name: Lourdes Saralegui, individually and as a trustee of the
Article VII Trust created by the RENE ANSELMO REVOCABLE
TRUST DATED JUNE 10, 1994 and as a successor trustee
under the Voting Trust Agreement dated as of February
28, 1995
Name: Pier Landman, individually and as the sole trustee of
the CHLOE LANDMAN TRUST DATED JUNE 10, 1988 and the sole
trustee of the RISSA LANDMAN TRUST DATED JUNE 10, 1988
Name: Edward J. Landau, as co-trustee of the FREDERICK A.
LANDMAN IRREVOCABLE TRUST DATED DECEMBER 22, 1995
Name: Patrick J. Costello, as co-trustee of the FREDERICK A.
LANDMAN IRREVOCABLE TRUST DATED DECEMBER 22, 1995
Name: Reverge Anselmo, individually
<PAGE>
EXHIBIT G
Stockholder Agreement
<PAGE>
EXHIBIT G
- ---------
STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT (this "Agreement"), dated as of
_________ __, 199__, is entered into by and among MAGELLAN INTERNATIONAL, INC.,
a Delaware corporation ("Holding Company" or the "Company"), HUGHES
COMMUNICATIONS, INC., a California corporation ("HCI"), the Class A Holders
listed on the signature page hereof (the "Class A Holders"), and SATELLITE
COMPANY, L.L.C., a Nevada limited liability company ("S Company").
RECITALS
A. Pursuant to that certain Agreement and Plan of
Reorganization by and among Panamsat Corporation, HCI and Hughes Communications
Galaxy, Inc. and certain other subsidiaries of HCI (as such agreement may be
hereafter amended from time to time, the "Reorganization Agreement"), HCI has
organized Holding Company to acquire Hughes Communications Galaxy, Inc. and
cause a subsidiary of Holding Company to merge with and into Panamsat
Corporation in each case upon the terms and conditions set forth in the
Reorganization Agreement.
B. Pursuant to that certain Stock Contribution and Exchange
Agreement by and among HCI, Hughes Communications Galaxy, Inc., S Company and
Grupo Televisa, S.A. (as such agreement may be hereafter amended from time to
time, the "Univisa Contribution Agreement"), HCI and Hughes Communications
Galaxy, Inc. have agreed to cause Holding Company to acquire from S Company all
of the outstanding shares of capital stock of Univisa, Inc., a Delaware
corporation which indirectly owns all of the shares of Class B Common Stock, par
value $.01 per share, of Panamsat Corporation.
C. Pursuant to the Reorganization Agreement and the Univisa
Contribution Agreement, each of Panamsat Corporation and Hughes Communications
Galaxy, Inc. will become subsidiaries of Holding Company, and HCI, the Class A
Holders and S Company will become stockholders of Holding Company.
D. The parties desire to enter into this Agreement to regulate
certain aspects of their relationships with regard to each other and Holding
Company.
AGREEMENT
In consideration of the foregoing and the mutual promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto, intending to be
legally bound thereby, agree as follows:
1. Certain Defined Terms. Capitalized terms used and not
defined herein have the respective meanings ascribed to them in the
Reorganization Agreement. For purposes of this Agreement:
"Affiliate" means with respect to any person or entity (i) any
other person or entity directly or indirectly controlling or controlled by or
under direct or indirect common control with that person or entity, (ii) any
spouse, immediate family member or other relative who has the same principal
residence of any person (in the case of an individual), (iii) any trust in which
any person or entity has a beneficial interest and (iv) any corporation or other
organization of which any such persons or entities described in clause (i) or
(ii) above collectively own more than 50% of the equity of such entity.
"Closed Periods" means the total of (a) the number of days
prior to Closing during which PanAmSat Corporation Common Stock could not be
sold as a result of notices given by HCI pursuant to the last sentence of
Section 3(a) of the Principal Stockholders Agreement, and (b) any Delay Periods,
Hold Back Periods or Interruption Periods (each as defined in the Registration
Rights Agreement) which occur after the Commencement Date (as defined in Section
2(b)(i)) and result in a delay or suspension of a Demand Registration or a
Piggyback Registration (as defined in the Registration Rights Agreement) by the
Minority Stockholders or their Permitted Transferees.
"Ending Date" means the date when restrictions on the ability
of HCI and its Affiliates to sell or transfer Shares under Section 2(b) end.
That date shall be the earliest of (a) a Termination Event or (b) twelve (12)
months after the Commencement Date plus Closed Periods, if any.
"Exempt Transfer" means any transfer of Shares by HCI or its
Affiliates to any of its or their Affiliates (other than the Company or any of
its Subsidiaries).
"Holding Company Common Stock" means the common stock, $.01
par value, of Holding Company.
"HCI Sale" means any sale, exchange or other disposition by
HCI or its Affiliates of Shares, other than an Exempt Transfer or a sale of
Shares pursuant to a registration statement under the Securities Act, which at
the time of determination represent more than 5% of the outstanding Holding
Company Common Stock. "HCI Sale" shall not include, in the case of Holding
Company or any of its Subsidiaries, any sale of Holding Company Common Stock.
Nothing in this Agreement shall limit any rights the Stockholders may have to
participate in any such offering under the Registration Rights Agreements, nor
shall the definition "HCI Sale" limit the restrictions contained in Section 2(b)
in any way.
"HCI Total Sale" means, as of any date of determination, the
sale, exchange or other disposition by HCI and each of its Affiliates other than
in an Exempt Transfer of 100% of their Shares.
"Low Ownership Event" means, as of any date of determination,
any sale, exchange or other disposition of Shares by the Minority Stockholders
which causes the Minority Stockholders to beneficially own, in the aggregate,
less than the Requisite Level.
"Minority Stockholders" means, each of the Class A Holders, S
Company and their respective Permitted Transferees, which collectively shall be
the "Minority Stockholders".
"Permitted Transfers" means a sale, transfer or assignment or
other disposition to a Permitted Transferee.
"Permitted Transferees" means, as to HCI, any transferee in an
Exempt Transfer or any Permitted Transferee; as to S Company, Grupo Televisa,
S.A., any controlled Affiliate of Grupo Televisa, S.A., or any Permitted
Transferee; as to the Class A Holders, (A) any other Class A Holder, (B) any
person who is the spouse or former spouse of, or any lineal descendent of, or
any spouse of such lineal descendant of, or the grandparent, parent, brother or
sister of, or spouse of such brother or sister of, a Class A Holder or Permitted
Transferee of such person; (C) upon the death of any Class A Holder or any
Permitted Transferee of such person, the executors of the estate of such Class A
Holder or Permitted Transferee, any of such Class A Holder's or such Permitted
Transferee's heirs, testamentary trustees, devisees, or legatees; (D) any trust
principally for the benefit of one or more of the foregoing Class A Holders or
Permitted Transferees; (E) upon the disability of any Class A Holder or
Permitted Transferee, any guardian or conservator of such Class A Holder or
Permitted Transferee; or (F) any corporation, partnership or other entity if all
of the beneficial ownership is held by Class A Holders or any Permitted
Transferees; and as to any Stockholders, any person to whom a transfer may be
made pursuant to the provisions of Section 8(e); provided that in each of the
foregoing cases such transferee assumes and agrees to perform and becomes a
party to this Agreement.
"Registration Rights Agreement" means the agreement of that
-------------------------------
name of even date among the parties.
"Requisite Level" means 5% or more of the number of shares of
Holding Company Common Stock outstanding immediately after the consummation of
the transactions contemplated by the Reorganization Agreement and the Univisa
Contribution Agreement and prior to any further issuances for refinancing or
other purposes, as such total number is adjusted to reflect stock splits,
combinations, stock dividends, recapitalizations, reclassifications, and similar
transactions.
"Shares" means the shares of Holding Company Common Stock
owned by the Stockholders at the time of determination.
"Stockholders" means, collectively, HCI, and its Affiliates
who own Shares, the Class A Holders, S Company, and their respective Permitted
Transferees, each of which shall individually be a "Stockholder".
"Termination Event" means a Low Ownership Event or an HCI
Total Sale.
2. Certain Restrictions on the Purchase and Sale of Shares.
(a) Take-Along Right. HCI on behalf of itself and its
Affiliates hereby agrees:
(i) With respect to any proposed HCI Sale, each
Minority Stockholder (each a "Take-Along Stockholder"), shall have the right
(the "Take-Along Right") to join in such sale and to sell a number of whole
Shares equal to the number derived by multiplying the total number of Shares
proposed to be transferred by a fraction, the numerator of which is the total
number of Shares owned by such Take-Along Stockholder and the denominator of
which is the total number of Shares owned by HCI and its Affiliates and all
Take-Along Stockholders proposing to so join.
(ii) Any Shares purchased from Take-Along
Stockholders pursuant to this Section 2(a) shall be paid for at the same price
per Share and (to the extent applicable) upon the same terms and conditions as
such proposed transfer by HCI and its Affiliates.
(iii) HCI shall (on its own behalf and on behalf
of any of its Affiliates effecting an HCI Sale), not less than 30 days prior to
such proposed HCI Sale, notify each Take-Along Stockholder in writing of such
HCI Sale (the "Sale Notice"). Such notice shall: (A) state the number of Shares
proposed to be transferred, (B) identify the proposed purchaser(s), (C) state
the proposed amount and form of consideration and terms and conditions of
payment, and (D) confirm that each proposed purchaser has been informed of the
Take-Along Right provided for in this Section 2(a) and has agreed to purchase
Shares in accordance with the terms thereof.
(iv) The Take-Along Right may be exercised by any
Take-Along Stockholder by delivery of a written notice to HCI proposing to sell
Shares (the "Take-Along Notice") within 30 days following the Sale Notice, which
Take-Along Notice shall state the amount of Shares that such Take-Along
Stockholder proposes to include in such transfer. If no Take-Along Notice is
received during such 30-day period, HCI and its Affiliates shall have the right,
for a 30-day period after the expiration of such 30-day period, to transfer the
Shares specified in the Sale Notice on terms and conditions no more favorable
than those stated in such notice.
(v) In the event that a purchaser refuses to
purchase Shares from the Take-Along Stockholders on the same terms and
conditions as specified in the Sale Notice, then HCI and its Affiliates shall
not sell any Shares to that purchaser in the HCI Sale.
(b) Certain Sale Restrictions.
(i) Neither HCI nor its Affiliates may, directly
or indirectly, issue, sell, exchange or otherwise dispose of, or offer or agree,
directly or indirectly, to issue, sell, exchange or otherwise dispose (including
through purchase by the Company or any of its Affiliates) of Shares or common
equity of the Company or any of its Subsidiaries, or any interest therein, or
securities convertible into or exercisable or exchangeable for Shares or such
common equity interests, or offer or enter into any contract, option or other
arrangement or understanding to effect any such transactions, during the period
(A) beginning on the Closing and (B) ending on the Ending Date, provided,
however, that restrictions on sales by the Company shall not commence (the
"Commencement Date") until the earlier of (x) the first anniversary of the
Closing (eighteen months following the Closing in the event the Minority
Stockholders or their Affiliates sell more than five million Panamsat Shares
(other than to Permitted Transferees) between the date of the Reorganization
Agreement and the Closing) and (y) the date the Company shall notify the
Minority Stockholders that it has completed the refinancing of up to $1.5
billion of indebtedness incurred by the Company in connection with the
transactions contemplated by the Reorganization Agreement and the Univisa
Contribution Agreement (it being agreed that the exemption from the restriction
on sales by the Company pursuant to this clause shall only apply to sales, the
net proceeds of which are entirely used to refinance such indebtedness); and
provided further that the foregoing restrictions shall not apply to reasonable
issuances by the Company for employee plans, in acquisitions from
non-Affiliates, pursuant to a dividend reinvestment plan, or upon exercise or
conversion of previously issued options, warrants or convertible securities.
(ii) Each of the Minority Stockholders agrees
severally and not jointly and solely with respect to itself and the Shares owned
beneficially or of record by it, not to offer, sell or transfer the Shares, or
any interest therein, or securities convertible into Shares, or offer or enter
into any contract, option or other arrangement or understanding to effect any
sale or transfer of Shares or interests therein or securities convertible into
or exercisable or exchangeable for Shares, to any person that is not a Permitted
Transferee, after the Closing and prior to the Commencement Date.
Notwithstanding the foregoing, Minority Stockholders may offer and sell or
transfer Shares, or interests therein, or securities convertible into or
exercisable or exchangeable for Shares, to persons other than Permitted
Transferees in private transactions with the consent of HCI, which consent will
be granted if, in HCI's reasonable judgment, such transfer will not materially
and adversely affect Holding Company's financing plans or on the price of or
demand for Holding Company Common Stock, and the purchaser provides assurances
satisfactory to HCI that it will not prior to the Commencement Date sell any of
such Shares at a time or with an effect which may materially and adversely
affect such financing plans of Holding Company or the price of or demand for
Holding Company Common Stock. Further notwithstanding the foregoing, the
Minority Stockholders may pledge their Shares as collateral for a bona fide
loan, provided that the lender, on terms reasonably acceptable to HCI and the
Company, agrees that upon liquidation of such collateral the lender or any
transferee will assume and agree to perform this Agreement or, if requested by
HCI or the Company, waive all rights under this Agreement.
(c) Standstill Right. HCI agrees that HCI and its
Affiliates shall not acquire or come to hold beneficially or otherwise, whether
by purchase, exchange or otherwise, more than 81% of the outstanding common
equity interests in Holding Company, except (i) pursuant to a merger which is
approved by the holders of a majority of the shares of Holding Company Common
Stock not owned by HCI and its Affiliates, (ii) pursuant to a tender offer
recommended by a majority of the Disinterested Directors of the Holding Company
and second-step merger which offers the same per share consideration to all
holders of Holding Company Common Stock and in which more than half the
outstanding Holding Company Common Stock not owned by HCI and its Affiliates at
the inception of the transaction is either tendered or voted in favor of the
transaction, and (iii) except pursuant to such other transaction as shall
provide for parity of treatment of holders of Holding Company Common Stock and
is approved by the holders of a majority of the shares of Holding Company Common
Stock not owned by HCI and its Affiliates and by a majority of the Disinterested
Directors of Holding Company.
3. Governance and Business Operations.
(a) Board of Directors. The Stockholders, on
behalf of themselves and their Affiliates and Permitted Transferees, hereby
agree to take all necessary action (including, without limitation, voting the
Common Stock of the Company beneficially owned by them, calling special meetings
of stockholders of the Company and executing and delivering written consents)
such that the Board of Directors of the Company shall consist of ten (10)
members designated as herein provided. HCI shall designate all members of the
Board of Directors not designated by the Minority Stockholders. For so long as
Mr. Frederick A. Landman is Chief Executive Office of the Company, he shall be
one of HCI's designees. The Minority Stockholders shall be entitled to initially
designate two (2) directors of the Company, one (1) of whom may be designated by
the Class A Holders and one (1) of whom may be designated by S Company. For so
long as the Class A Holders and their Permitted Transferees, as a group (the "A
Group"), beneficially own a number of Shares which is greater than the number of
shares comprising 4% of the outstanding Common Stock of the Company immediately
after the consummation of the transactions contemplated by the Reorganization
Agreement and the Univisa Contribution Agreement and prior to any further
issuances for refinancing or other purposes (as such Shares may be adjusted to
reflect stock splits, combinations, stock dividends, recapitalizations,
reclassifications, and similar transactions, the "Director Minimum Shares"), at
each subsequent meeting of stockholders of the Company (or action by consent in
lieu thereof), the A Group shall be entitled to designate one director, to be
selected by a majority vote of the Shares beneficially owned by the A Group. For
so long as S Company and its Permitted Transferees, as a group (the "B Group"),
beneficially own a number of Shares greater than the Director Minimum Shares, at
each subsequent meeting of stockholders of the Company (or action by consent in
lieu thereof), the B Group shall be entitled to designate one director, to be
selected by a majority vote of the Shares benefically owned by the B Group.
(b) Transactions with Affiliates. HCI and its
Affiliates (other than the Company and its Subsidiaries) shall not propose or
approve any loan, advance or guarantee to, from, or for the benefit of, or sell,
lease, transfer or otherwise dispose of any of their properties or assets to, or
for the benefit of, or purchase or lease any property or assets from, or enter
into or amend any contract, agreement or understanding with, Holding Company or
any Subsidiary of Holding Company, except on terms that are no less favorable to
Holding Company or such Subsidiary than those (including, without limitation,
prices) ordinarily entered into in comparable transactions by HCI or the
relevant Affiliate on an arms' length basis with an unrelated party. All
material transactions (and all other transactions which the Chief Executive
Officer of the Holding Company may designate) between HCI and its Affiliates on
the one hand, and Holding Company or its Subsidiaries on the other, shall be
reviewed by a committee comprised of Disinterested Directors, and approval of
such transactions by such committee shall be conclusive evidence of compliance
with the provisions of this Section 3(b). Upon such approval, unless required by
such directors after due consideration, Holding Company or such Subsidiaries may
enter into and perform the approved transactions with HCI and its Affiliates
without competitive bidding or other special procedures.
(c) HE Covenant Not to Compete. HCI agrees:
(i) Until the fifth anniversary after the Closing
Date, HE and any entity owned 50% or more by HE (excluding Holding Company and
its Subsidiaries) (the "Committing Companies") shall not compete with Holding
Company or any of its Subsidiaries after the Closing in the "Galaxy Business"
(as defined below) in any geographic area except as allowed under subsection
(iii) below.
(ii) As used herein, the "Galaxy Business" shall
mean: (A) the sale or lease of, or the provision of satellite services via,
transponder capacity on satellites operating in geostationary earth orbit in the
C-band, Ka-band and Ku-band frequencies for the transmission of video, audio and
data signals; and (B) the provision of telemetry, tracking and control services
for such satellites and for other satellites operating in geostationary earth
orbit in the C-band, Ka-band, Ku-band, L-band and UHF-band frequencies or other
frequency bands that may be utilized in the future; but in each case excluding
the sale or lease of transponder capacity and telemetry, tracking and control
services provided on or for any satellite that has both (x) multiple (six or
more) receive and transmit beams and (y) an on-board satellite payload processor
which can switch uplink signals in one beam to a downlink signal in one of
multiple beams.
(iii) The Committing Companies shall not be
restricted from conducting any business that falls within the following
categories (the "Exclusivity Exceptions"):
(A) All aspects of the direct-to-home satellite
business, whether done through Galaxy Latin America, DIRECTV International,
Inc., DIRECTV USA or any other entity owned 50% or more by HE including, but not
limited to, (x) the provision of services directly to consumers via satellite;
(y) the sale or lease of transponders or channels therein to third parties
engaging in the direct-to-home satellite business in which any of the Committed
Companies is involved (whether by ownership of an interest in a satellite or any
part of the capacity thereof or in any related or associated business), whether
in the FSS or BSS bands; and (z) the provision of programming to cable head
ends, which in each of cases (y) and (z) is ancillary to any direct-to-home
satellite business in which the Committing Companies have an interest; provided
that if there is excess capacity available on a satellite used primarily in the
direct-to-home satellite business, the sale or lease of such excess capacity
shall not be precluded by the foregoing restriction;
(B) All aspects of value added services, i.e., the
sale of business services which include the provision of transponder capacity
that is ancillary to the provision of such services by the Committing Companies
including, but not limited to, shared hub VSAT business or DIRECPC or distance
learning or any similar type of services that may now or in the future be
provided or developed by HE or any of its Affiliates (other than Holding Company
and its Subsidiaries);
(C) All aspects of the business of providing
satellite or transponder capacity or portions thereof of any type or kind to the
United States government, or any department or agency thereof;
(D) The provision by the Committing Companies of
project financing, or the acceptance by any of them of a minority equity
position in any other satellite operating or service company, as part of a
satellite sale;
(E) All aspects of the business of manufacturing
and selling or leasing satellites in their entirety, other than the sale or
lease of individual transponders or portions thereof (except with respect to
such sale or lease of transponders as otherwise provided for in this Section
(iii)); and
(F) As part of the acquisition of a third party
where the competing business is not a substantial part of such acquired business
provided that such competing business shall be disposed of in a commercially
reasonable manner as soon as commercially reasonable after such acquisition.
(iv) The parties acknowledge that the Galaxy
Business does not include, and the Committing Companies are retaining, the
following: all aspects of the business of providing mobile satellite services
and all aspects of the satellite-based business commonly referred to by HE as
the "Spaceway" business.
(d) Holding Company's Covenant Not to Compete.
Holding Company and its controlled Affiliates shall not engage in any aspect of
the direct broadcast satellite business other than through the sale or lease of
transponders or channels therein or the provision of transponder services and
the provision of other value added services ancillary thereto to third parties
engaged in the direct broadcast satellite business, provided that Holding
Company and its Subsidiaries shall not be precluded from providing project
financing to such third parties or the acceptance of a minority equity position
in a third party in connection with the sale or lease of transponders or
channels therein or the provision of transponder services. For so long as Grupo
Televisa, S.A. and its controlled Affiliates own any Holding Company Common
Stock, neither Holding Company nor any of its controlled Affiliates will own an
equity interest in a direct-to-home enterprise offering predominantly Spanish
language programming in the Americas or the Iberian Peninsula.
(e) First Offer Rights. In the event that Holding
Company determines to launch a satellite with the following frequencies: Ku BSS
frequencies (11.7 - 12.5 Ghz in Region 1, 12.2 - 12.7 Ghz in Region 2 and 11.7 -
12.2 Ghz in Region 3) (the "BSS Band") into any of the following orbital slots
as such orbital slots may be modified in the FCC authorization process, the ITU
registration process, or in the course of frequency coordination with other
systems: East Longitude: 36(Degree), 40(Degree), 48(Degree), 54(Degree),
101(Degree), 124.5(Degree), 132(Degree), 149(Degree), 164(Degree) and
173(Degree); and West Longitude: 49(Degree) and 67(Degree) (the "BSS
Satellites"), the Company shall give HE or its designated Subsidiaries (referred
to herein as the "HE Designee") notice of such determination and the HE Designee
shall have the opportunity (the "First Opportunity") to enter into a full life
service agreement with respect to some or all, but not less than half of the
available capacity in the BSS Band on the applicable BSS Satellite, of the BSS
transponders (the "BSS Transponders") on the first BSS Satellite that the
Company intends to place into each such slot on terms and conditions to be
negotiated in good faith and consistent with normal business practice. The
negotiation period with respect to capacity on each such BSS Satellite shall be
for three months (the "Negotiation Period"). The Negotiation Period may be
initiated by either party on notice to the other at any time within the time
period set forth below. Applied separately to each BSS Satellite, the
Negotiation Period shall begin on the date on which the Company notifies the HE
Designee of a firm commitment to construct a BSS Satellite; and shall commence
not more than thirty months prior to the proposed launch of the BSS Satellite
and end not later than fifteen (15) months prior to the date that the BSS
Satellite is scheduled to be launched. If negotiations are not initiated by
either party by such date or successfully concluded with a binding service
agreement within the Negotiation Period, unless HE has given Company a final
offer (as defined below), neither party shall have any further obligation
pursuant to this Section 3(e), with respect to the BSS Satellite in question.
The conclusion or failure to conclude such an agreement as to one orbital slot
shall not, however, affect the parties' rights and obligations hereunder as to
the remaining BSS Satellites for other orbital slots referenced in this Section,
if still extant.
At any time prior to the end of the applicable negotiation
period specified above, HE shall have the right to make to the Company HE's
"best and final offer" (a "Final Offer") of the price at which it is willing to
enter into an end of life service agreement for a stated number of BSS
Transponders on the BSS Satellite, which must be on terms and conditions that
are otherwise acceptable to the Company.
If HE makes the Final Offer, for as long as it is held open
(i.e., that it may be accepted by the Company without HE's subsequent right to
withdraw it), the Company will not, without first offering HE the opportunity to
do so, enter into a purchase or long term transponder service agreement for the
same number or fewer BSS Band transponders than proposed by HE at a lower price
per BSS Transponder (which, for the purposes of comparison, will be calculated
on a net present value basis as determined by the Company, but notified to HE so
that HE may make an adjustment in its offer to reflect this net present value)
than the price stated in the Final Offer. The Company may condition its offer to
HE on HE's acceptance of such other price, quantity, length of term and other
terms and conditions that the Company would offer a third party at the time (the
"Revised Offer"). HE shall have ten (10) days to accept the Company's Revised
Offer or it shall be deemed to have been rejected. For the avoidance of doubt,
the previous sentence shall not apply to the Company's acceptance of the Final
Offer, as to which no further acceptance or rejection by HE is required or
permitted. The Company shall also notify HE at such time as the Company lowers
its price for long term transponder agreements on the applicable BSS satellite
for the number of transponders and for the service terms which had been included
in the Final Offer, which notice shall be given not fewer than ten (10) business
days before the reduced price is offered to any third party, during which period
HE will have the right to accept such revised offer. As used in this Section
3(e), "Company" or "Holding Company" includes its Subsidiaries or any of them.
4. Representations and Warranties of Minority
Stockholders. Each Minority Stockholder hereby severally and not jointly (and
solely with respect to itself and the Shares owned of record or beneficially by
such Stockholder) represents and warrants to HCI and the Company as follows:
(a) Ownership of Shares. Such Minority Stockholder
is the record and beneficial owner of the Shares set forth on Exhibit A hereto,
and such shares constitute all of the Shares owned of record or beneficially by
such Minority Stockholder. With respect to the number of shares set forth
opposite such Minority Stockholder's name on Exhibit A hereto, and with the
exceptions noted thereon, such Minority Stockholder has sole voting power and
sole power to issue instructions with respect to the matters set forth in
Sections 2 and 3 hereof, sole power of disposition, sole power of conversion,
sole power to demand appraisal rights and sole power to agree to all of the
matters set forth in this Agreement, in each case with no limitations,
qualifications or restrictions on such rights, subject to applicable securities
laws and the terms of this Agreement.
(b) Due Authorization. Such Minority Stockholder
is, as applicable, duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization, and has all requisite capacity,
power and authority to execute and deliver this Agreement and perform its
obligations hereunder. The execution and delivery by such Minority Stockholder
of this Agreement and the performance by such Minority Stockholder of its
obligations hereunder have been duly and validly authorized by such Minority
Stockholder and no other proceedings on the part of such Minority Stockholder
are necessary to authorize the execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by such Minority
Stockholder and constitutes a valid and binding agreement enforceable against
such Stockholder in accordance with its terms except to the extent (i) such
enforcement may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors rights and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
(c) No Conflicts. Except for filings,
authorizations, consents and approvals as contemplated by the Reorganization
Agreement or the Univisa Contribution Agreement and necessary for the
consummation of the transactions contemplated thereby which have been obtained,
(i) no filing with, and no permit, authorization, consent or approval of, any
state or federal public body or authority is necessary for the execution of this
Agreement by such Minority Stockholder and the consummation by such Minority
Stockholder of the transactions contemplated hereby and (ii) none of the
execution and delivery of this Agreement by such Minority Stockholder, the
consummation by such Minority Stockholder of the transactions contemplated
hereby or compliance by such Minority Stockholder with any of the provisions
hereof shall (A) conflict with or result in any breach of the organizational
documents of such Minority Stockholder, (B) result in a violation or breach of,
or constitute (with or without notice or lapse of time or both) a default (or
give rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or provisions
of any note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which such Minority Stockholder is a party or by which
such Minority Stockholder or any of its properties or assets may be bound, or
(C) violate any order, writ, injunction, decree, judgment, statute, rule or
regulation applicable to such Minority Stockholder or any of its properties or
assets.
5. Representations and Warranties of HCI. The
Company and HCI jointly and severally represent and warrant to each Minority
Stockholder as follows:
(a) Organization. Each such corporation is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, and has all requisite corporate power or
other power and authority to execute and deliver this Agreement and perform its
obligations hereunder. The execution and delivery by such corporation of this
Agreement and the performance by such corporation of its obligations hereunder
have been duly and validly authorized by all necessary corporate action of such
corporation.
(b) Agreement. This Agreement has been duly and
validly executed and delivered by such corporation and constitutes a valid and
binding agreement of such corporation enforceable against it in accordance with
its terms, except that (i) such enforcement may be subject to applicable
bankruptcy, insolvency, or other similar laws, now or hereafter in effect,
affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceedings therefor may be brought.
(c) No Conflicts. Except for filings,
authorizations, consents, and approvals as contemplated by the Reorganization
Agreement or the Univisa Contribution Agreement and necessary for the
consummation of the transactions contemplated thereby which have been obtained,
(i) no filing with, and no permit, authorization, consent or approval of, any
state or federal public body or authority is necessary for the execution of this
Agreement by such corporation and the consummation by such corporation of the
transactions contemplated hereby, and (ii) none of the execution and delivery of
this Agreement by such corporation, the consummation by such corporation of the
transaction contemplated hereby or compliance by such corporation with any of
the provisions hereof shall (A) conflict with or result in any breach of the
charter or bylaws of such corporation, (B) result in a violation or breach of,
or constitute (with or without notice or lapse of time or both) a default (or
give rise to any third-party right of termination, cancellation, material
modifications or acceleration) under any of the terms, conditions or provisions
of any note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which such corporation is a party or by which such
corporation of its properties or assets may be bound, or (C) violate any order,
writ, injunction, decree, judgment, statute, rule or regulation applicable to
such corporation or its properties or assets.
6. Legend.
(a) Each Stockholder severally and not jointly
agrees that it will not request Holding Company to register the transfer (by
book-entry or otherwise) of any certificate or uncertificated interest
representing any of the Shares, unless such transfer is made in compliance with
this Agreement.
(b) Each Stockholder severally and not jointly
agrees that it shall promptly after the date hereof surrender to Holding Company
all certificates representing the Shares held by such Stockholder, and Holding
Company shall place the following legend on such certificates, which legend
shall remain on such certificates until the sale of such Shares to a person who
is not a Stockholder or the termination of this Agreement, whichever is earlier:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN AGREEMENT, DATED
AS OF _________ __, 199__ BETWEEN STOCKHOLDERS AND THE COMPANY. THE SHARES
ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND VOTING. A COPY OF SUCH AGREEMENT
IS AVAILABLE AT THE PRINCIPAL OFFICE OF THE COMPANY."
7. Term of Agreement. This Agreement has been
entered into in connection with the transactions contemplated by the
Reorganization Agreement described in Recital A and the Univisa Contribution
Agreement described in Recital B and shall become effective upon the Closing.
This Agreement shall terminate upon the earlier of (i) five years from the
Closing Date, or (ii) the occurrence of a Termination Event. Notwithstanding the
foregoing, the provisions of Sections 2(c) (Standstill), 3(b) (Transactions with
Affiliates), 3(c) and (d) (covenants not to compete), 3(e) (first offer), and 8
(miscellaneous) shall terminate five years after the Closing Date.
8. Miscellaneous.
(a) Expenses. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses.
(b) Notices. All notices, requests, demands and
other communications which are required or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given when received if
personally delivered; when transmitted if transmitted by telecopy, electronic or
digital transmission method; the day after it is sent, if sent for next day
delivery to a domestic address by recognized overnight delivery service (e.g.,
Federal Express); and upon receipt, if sent by certified or registered mail,
return receipt requested. In each case notice shall be sent to: [to come].
Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. Headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the word "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". This Agreement shall not be construed for or
against either party by reason of the authorship or alleged authorship of any
provision hereof or by reason of the status of the respective parties. All terms
defined in this Agreement in the singular shall have comparable meanings when
used in the plural, and vice versa, unless otherwise specified.
(d) Entire Agreement; No Third-Party
Beneficiaries. This Agreement constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof and is not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder.
(e) Assignment. Except to a Permitted Transferee,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned (whether by operation of law or otherwise) by any Minority
Stockholder without the consent of HCI or by HCI or its Affiliates without the
consent of Minority Stockholders holding 66_% of the Shares held by Minority
Stockholders, which consent may be granted or withheld in such party's
discretion. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns. No person who is not a Stockholder or
Permitted Transferee who acquires Shares shall have any rights under this
Agreement except to the extent that the assignment thereof has been approved as
required by Section 8(e), nor any obligations hereunder except to the extent
expressly assumed.
(f) Governing Law. This Agreement shall be
construed, interpreted and the rights of the parties determined in accordance
with the laws of the State of Delaware (without reference to the choice of law
provisions), except with respect to matters of law concerning the internal
corporate affairs of any corporate entity which is a party to or the subject of
this Agreement, and as to those matters the law of the jurisdiction under which
the respective entity derives its powers shall govern.
(g) Severability. Each party agrees that, should
any court or other competent authority hold any provision of this Agreement or
part hereof to be null, void or unenforceable, or order any party to take any
action inconsistent herewith or not to take an action consistent herewith or
required hereby, the validity, legality and enforceability of the remaining
provisions and obligations contained or set forth herein shall not in any way be
affected or impaired thereby. Upon any such holding that any provision of this
Agreement is null, void or unenforceable, the parties will negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated by this Agreement are consummated to the extent
possible. Except as otherwise contemplated by this Agreement, to the extent that
a party hereto took an action inconsistent herewith or failed to take action
consistent herewith or required hereby pursuant to an order or judgment of a
court or other competent authority, such party shall incur no liability or
obligation unless such party did not in good faith seek to resist or object to
the imposition or entering of such order or judgment.
(h) Injunctive Relief. The parties acknowledge
that it will be impossible to measure in money the damages that would be
suffered if the parties fail to comply with any of the obligations herein
imposed on them and that in the event of any such failure, an aggrieved person
or entity will be irreparably damaged and will not have an adequate remedy at
law. Any such person or entity shall, therefore, be entitled to injunctive
relief, including specific performance, to enforce such obligations, and if any
action should be brought in equity to enforce any of the provisions of this
Agreement, none of the parties shall raise the defense that there is an adequate
remedy at law.
(i) Attorneys' Fees. If any party to this
Agreement brings an action to enforce its rights under this Agreement, the
prevailing party shall be entitled to recover its costs and expenses, including
without limitation reasonable attorneys' fees, incurred in connection with such
action, including any appeal of such action.
(j) Cumulative Remedies. All rights and remedies
of either party hereto are cumulative of each other and of every other right or
remedy such party may otherwise have at law or in equity, and the exercise of
one or more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies.
(k) Counterparts. This Agreement may be executed
in two or more counterparts, all of which shall be considered one and the same
instrument and shall become effective when executed and delivered by each of the
parties.
(l) Amendments, Waivers, Etc. This Agreement may
not be amended, changed, supplemented, or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
parties hereto; provided that performance hereof by any Minority Stockholder may
be waived by HCI and performance hereof by HCI, its Affiliates or the Company
may be waived by Minority Stockholders holding 66 2/3 % of the Shares held by
Minority Stockholders.
(m) Obligations of Stockholders. The liabilities
and obligations of each Stockholder under any provision of this Agreement are
several and not joint and apply solely to such Stockholder and to the Shares
held of record or beneficially owned by such Stockholder. No Stockholder shall
have any liability or obligation under this Agreement for any act, omission or
breach by any other Stockholder.
(n) Service of Process. Each of the parties hereto
irrevocably consents to the service of any process, pleading, notices or other
papers by the mailing of copies thereof by registered, certified or first class
mail, postage prepaid, to such party at such party's address set forth herein,
or by any other method provided or permitted under Delaware law. Additionally,
each party hereby appoints RL&F Service Corp., One Rodney Square, Wilmington,
Delaware 19810, as agent for service of process in Delaware.
(o) Consent and Jurisdiction. Each party
irrevocably and unconditionally agrees and consents that any suit, action or
other legal proceeding arising out of or related to this Agreement shall be
brought and heard in New Castle County, State of Delaware, and each party
irrevocably consents to personal jurisdiction in any and all tribunals in said
County.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Stockholder
Agreement as of the date first above written.
MAGELLAN INTERNATIONAL, INC.
By:
-----------------------------
Charles H. Noski
President
HUGHES COMMUNICATIONS, INC.
By:
-----------------------------
Jerald F. Farrell
President
SATELLITE COMPANY, L.L.C.
By:
-----------------------------
Guillermo Canedo White
Authorized Signatory
<PAGE>
CLASS A STOCKHOLDERS
Name: Mary Anselmo, individually and as a trustee of the Article VII
Trust created by the RENE ANSELMO REVOCABLE TRUST DATED JUNE 10,
1994 and as a successor trustee under the Voting Trust Agreement
dated as of February 28, 1995 and as a trustee of the RAYCE
ANSELMO TRUST DATED DECEMBER 23, 1991
Name: Frederick A. Landman, individually and as a trustee of the
Article VII Trust created by the RENE ANSELMO REVOCABLE TRUST
DATED JUNE 10, 1994 and as a successor trustee under the Voting
Trust Agreement dated as of February 28, 1995
Name: Lourdes Saralegui, individually and as a trustee of the Article
VII Trust created by the RENE ANSELMO REVOCABLE TRUST DATED JUNE
10, 1994 and as a successor trustee under the Voting Trust
Agreement dated as of February 28, 1995
Name: Pier Landman, individually and as the sole trustee of the CHLOE
LANDMAN TRUST DATED JUNE 10, 1988 and the sole trustee of the
RISSA LANDMAN TRUST DATED JUNE 10, 1988
Name: Edward J. Landau, as co-trustee of the FREDERICK A. LANDMAN
IRREVOCABLE TRUST DATED DECEMBER 22, 1995
Name: Patrick J. Costello, as co-trustee of the FREDERICK A. LANDMAN
IRREVOCABLE TRUST DATED DECEMBER 22, 1995
Name: Reverge Anselmo, individually
<PAGE>
EXHIBIT A
Stockholders Agreement
- --------- ----------------------------------------------------------------------
NUMBER OF SHARES OF COMMON STOCK
------------------------------------
NAME AND ADDRESS FOR NOTICE OF RECORD BENEFICIALLY
- --------------------------------------------------------------------------------
HCI
GALAXY
SATELLITE COMPANY, L.L.C.
Univisa Satellite Holdings, Inc.
Mary Anselmo
Mary Anselmo, as Trustee
Reverge Anselmo
Reverge Anselmo, as Trustee
Patrick Costello, Trustee
Edward J. Landau, Trustee
Frederick A. Landman
Frederick A. Landman, as Trustee
Pier Landman, Trustee
TOTAL 0.00 0.00
Encumbrances:
Notice Copies:
Note A:
All of the Shares listed opposite the names of the Class A Holders
above are subject to the provisions of a Voting Trust Agreement dated as of
February 28, 1995 among the Class A Holders, a copy of which has been made
available to HCI and Cosmo, and are owned of record by the Class A Trustees. In
addition, has the sole dispositive power over the Shares listed opposite the
Article VII Trust created by the Revocable Trust dated June 10, 1994 and the
Shares listed opposite their name above.
<PAGE>
1.1-3
Schedule 1.1
EXCLUDED ASSETS
1. Spaceway Business
a. All rights under Contracts primarily related to the Spaceway
Business, including Contracts with partners or potential partners
or investors, local operators or system developers and Contracts
related to the provision of office space, equipment, furniture,
administrative and maintenance services. "Spaceway Business" means
the business of HCI and its subsidiaries to construct and maintain
a global or regional network of satellites that have processor
payloads and multiple spot beams. "Contracts" means any agreement,
contract, lease, note, loan, evidence of indebtedness, purchase,
order, letter of credit, indenture, security or pledge agreement,
franchise agreement, undertaking, practice, covenant not to
compete, employment agreement, license, instrument, obligation or
commitment to which a person is a party or is bound, whether oral
or written.
b. All employees employed primarily in connection with the Spaceway
Business.
c. All Galaxy Intellectual Property primarily related to or generated
by the Spaceway Business.
d. All Permits held or applied for primarily in connection with
the Spaceway Business, including, without limitation,
applications filed with the Federal Communications Commission
for Ka-band satellites at the following orbital locations:
49(Degree)W, 99(Degree)W, 101(Degree)W, 25(Degree)E,
54(Degree)E, 101(Degree)E, 111(Degree)E and 164(Degree)E.
e. All furniture, office equipment and other assets related primarily
to the Spaceway Business.
f. All other information and documentation related primarily to the
Spaceway Business.
2. Mobile Business
a. All rights under Contracts (to which one or more of Galaxy,
HCSS, HCS, HCCS and HCJ is or are a party or parties) that are
related to primarily the Mobile Business, including Contracts
with partners or potential partners, local operators, system
developers and Contracts related to the provision of office
space, equipment, furniture, administrative and maintenance
services. "Mobile Business" means the business presently being
developed by HCI and its subsidiaries primarily to provide
mobile telecommunications services through satellite delivery.
b. All employees employed primarily in connection with the Mobile
Business.
c. All Galaxy Intellectual Property related primarily to or generated
by the Mobile Business.
d. All Permits held or applied for primarily in connection with the
Mobile Business.
e. All furniture, office equipment and other assets related primarily
to the Mobile Business.
f. All other information and documentation related primarily to the
Mobile Business.
3. American Mobile Satellite Corporation ("AMSC")
a. All capital stock or warrants, options or other rights to acquire
capital stock held by HCI or any of its Subsidiaries of AMSC.
b. All rights under Contracts (to which one or more of Galaxy, HCSS,
HCS, HCCS and HCJ is or are a party or parties) that are related
primarily to the oversight or financing of AMSC, including
Contracts related to office space, equipment, furniture,
administrative and maintenance services.
c. All employees employed primarily to oversee AMSC.
d. All Galaxy Intellectual Property related primarily to or generated
by AMSC.
e. All other information and documentation related primarily to AMSC.
4. ICO Global Communications ("ICO")
a. All capital stock or warrants, options or other rights to acquire
capital stock held by HCI or any of its Subsidiaries of ICO.
b. All rights under Contracts (to which one or more of Galaxy, HCSS,
HCS, HCCS and HCJ is or are a party or parties) that are related
primarily to the oversight or financing of ICO or entered into
with ICO, including Contracts related to office space, equipment,
furniture, administrative and maintenance services.
c. All employees employed primarily to oversee ICO.
d. All Galaxy Intellectual Property related primarily to or generated
by HCI or any of its Subsidiaries related to ICO.
e. All other information and documentation related primarily to ICO.
5. Litigation
a. All rights of Galaxy, HCSS, HCS, HCCS and HCJ in connection with
the lawsuit known as Hughes Communications Galaxy, Inc. v. United
States of America, Case No. 91-1032C.
6. Insurance policies - All insurance policies except those listed on
Schedule 6.11.
7. Real Estate
a. Castle Rock Land: Castle Rock, Colorado
b. Schiller Park Asset: Schiller Park, Illinois
c. California Broadcast Center (Building and Land): Long Beach,
California
STOCK CONTRIBUTION AND EXCHANGE AGREEMENT
by and among
GRUPO TELEVISA, S.A.
as "Parent"
and
SATELLITE COMPANY, LLC
as "Contributor"
and
MAGELLAN INTERNATIONAL, INC.
as "Newco"
and
HUGHES COMMUNICATIONS, INC.
as "HCI"
dated as of September 20, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I CONTRIBUTION AND EXCHANGE OF STOCK................ 2
1.1 Contribution and Exchange of Stock........................ 2
1.2 Consideration for Stock................................... 2
ARTICLE II CLOSING........................................... 3
2.1 Closing................................................... 3
2.2 Documents to be Delivered................................. 3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
CONTRIBUTING GROUP......................... 4
3.1 Organization, Standing and Power.......................... 4
3.2 Capital Structure......................................... 5
3.3 Authority; No Violations; Consents and Approvals.......... 6
3.4 Univisa Financial Statements.............................. 8
3.5 Parent Financial Statements............................... 8
3.6 No Adverse Change......................................... 9
3.7 Compliance with Laws...................................... 9
3.8 Litigation................................................ 10
3.9 Taxes..................................................... 10
3.10 Material Contracts........................................ 11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE NEWCO GROUP. 11
4.1 Organization, Standing and Power.......................... 11
4.2 Authority; No Violation................................... 12
4.3 Certain Representations. ................................ 13
ARTICLE V COVENANTS BETWEEN SIGNING AND CLOSING............. 13
5.1 Interim Operations of Univisa and the Subsidiaries........ 13
5.2 Interim Operations of the Newco Group..................... 14
5.3 Access to Information..................................... 14
5.4 Legal Conditions, Filings and Consents.................... 15
5.5 Notices of Certain Events................................. 15
5.6 Publicity................................................. 16
5.7 Further Action............................................ 16
5.8 Rights to "Univisa" Name.................................. 17
5.9 Statement of Liabilities.................................. 17
5.10 Trustee................................................... 18
<PAGE>
ARTICLE VI CONDITIONS........................................ 19
6.1 Conditions to Each Party's Obligation to Effect the
Univisa Contribution.................................... 19
6.2 Additional Conditions to Obligations of the Contributing
Group................................................... 19
6.3 Additional Conditions to Obligations of the Newco Group... 20
ARTICLE VII ACTIONS BY THE CONTRIBUTING GROUP AND THE NEWCO
GROUP AFTER THE CLOSING.................. 22
7.1 Books and Records......................................... 22
7.2 Further Assurances........................................ 22
7.3 Tax Reporting of Univisa Contribution..................... 22
7.4 No Dissolution, Etc; Capital Structure.................... 23
7.5 Confidentiality........................................... 23
ARTICLE VIII INDEMNIFICATION................................... 24
8.1 Survival.................................................. 24
8.2 Indemnification........................................... 25
ARTICLE IX TERMINATION AND AMENDMENT......................... 31
9.1 Termination............................................... 31
9.2 Effect of Termination..................................... 31
9.3 Amendment................................................. 32
9.4 Extension; Waiver......................................... 32
ARTICLE X GENERAL PROVISIONS................................ 32
10.1 Termination of Confidentiality Agreement.................. 32
10.2 Expenses.................................................. 32
10.3 Notices................................................... 32
10.4 Interpretation............................................ 34
10.5 Entire Agreement.......................................... 34
10.6 Assignment................................................ 34
10.7 Governing Law............................................. 35
10.8 Severability.............................................. 35
10.9 Service of Process; Consent to Jurisdiction............... 35
10.10 Injunctive Relief......................................... 36
10.11 Arbitration............................................... 36
10.12 Attorneys' Fees........................................... 36
10.13 Cumulative Remedies....................................... 36
10.14 Counterparts.............................................. 36
10.15 Investment Representations................................ 36
<PAGE>
EXHIBIT A
EXHIBIT B
EXHIBIT C
Each of the following Schedules are omitted pursuant to Item 601(b)(2) of
Regulation S-K. The Company agrees to furnish to the Commission supplementally
a copy of any omitted Schedule upon request by the Commission.
SCHEDULE 3.2(c) - Investments (Other than Subsidiaries)
SCHEDULE 3.2(e) - Subsidiaries
SCHEDULE 3.3(b) - Agreements Requiring Consent
SCHEDULE 3.8 - Litigation
SCHEDULE 3.9 - Taxes
SCHEDULE 3.10 - Material Contracts
SCHEDULE 4.2(b) - Newco Group Violations
SCHEDULE 4.2(c) - Newco Group Consents and Approvals
<PAGE>
DEFINITION CROSS-REFERENCE TABLE
TERM SECTION
- ---- -------
Agreement Preamble
Asset Contribution Recitals
Balance Sheet 3.4
Balance Sheet Date 3.4
Bankruptcy Exception 3.3(a)
Cash Election 1.2(a)(iii)
Claim 8.2(f)
Claim Notice 8.2(f)
Class B Common Stock Recitals
Closing 2.1
Closing Date 2.1
Collateral Agreements 1.2(b)
Collateral Trust Agreement 1.2(b)
Contributing Group Preamble
Contributing Group Violation 3.3(b)
Contributor Preamble
Contributor's Refund 8.2(e)
Code Recitals
Damages 8.2(a)(i)
Distributed Assets 5.1(c)
Distributees 5.1(c)
Distribution Agreements 5.1(c)
Distributions 5.1(c)
Exchange Act 3.3(c)
FCC 3.7(a)
Financial Statements 3.4
GAAP 3.4
Galaxy Recitals
Governmental Entity 3.3(c)
HCI Preamble
HSR Act 3.3(c)
Hughes Parties Recitals
JAMS 10.11
Known Liabilities Estimate 5.9(a)
Law 3.7(a)
Liability 5.1(b)
Liens 1.1
Material Contract 3.10
Merger Recitals
Merger Sub Recitals
Mexican GAAP 3.5
Newco Preamble
<PAGE>
Newco Group Preamble
Newco Group Violation 4.2(b)
PanAmSat Recitals
Parent Preamble
Parent Balance Sheet 3.5
Parent Balance Sheet Date 3.5
Parent Distributees 5.1(c)
Parent Financial Statements 3.5
Permits 3.7(b)
Pledge Agreement 1.2(b)
Post Closing Periods 8.2(c)
Pre-Closing Portion of a Straddle Period 8.2(c)
Pre-Closing Periods 8.2(a)(ii)
Principal Stockholders Agreement 3.2(c)
Reorganization Agreement Recitals
Required Expenditures 5.1(c)
SEC 3.2(c)
Securities Act 10.15(b)
Standard Cash Consideration 1.2(a)(i)
Standard Election 1.2(a)(i)
Statement of Liabilities 5.9(a)
Stock Election 1.2(a)(ii)
Straddle Periods 8.2(c)
Subsidiary 3.2(f)
Tax Matter 8.2(g)(ii)
Transaction Liabilities 5.1(d)
Trustee 1.2(b)
Trust Holdback 1.2(b)
Univisa Recitals
Univisa Contribution 1.1
Univisa Stock 3.2(a)
USHI Recitals
USHI Stock 3.2(b)
Value Unit 1.1(a)
Value Unit Consideration 1.2(a)
<PAGE>
STOCK CONTRIBUTION AND EXCHANGE AGREEMENT
This STOCK CONTRIBUTION AND EXCHANGE AGREEMENT (this
"Agreement"), dated as of September 20, 1996, is entered into by and among Grupo
Televisa, S.A., a corporation (sociedad anonima) organized under the laws of
Mexico ("Parent"), and Satellite Company, LLC, a Nevada limited liability
company ("Contributor," and together with Parent, the "Contributing Group"), and
Magellan International, Inc., a Delaware corporation ("Newco") and Hughes
Communications, Inc., a California corporation ("HCI," and together with Newco,
the "Newco Group").
RECITALS
A. The respective Boards of Directors of HCI, Hughes
Communications Galaxy, Inc., a California corporation ("Galaxy") and certain
other subsidiaries of HCI (together with HCI and Galaxy, the "Hughes Parties")
and PanAmSat Corporation, a Delaware corporation ("PanAmSat"), have approved,
and deem it advisable and in the best interests of their respective companies
and stockholders to consummate the reorganization provided for pursuant to an
Agreement and Plan of Reorganization dated as of the date hereof by and between,
among others, Galaxy and PanAmSat (the "Reorganization Agreement").
B. As a condition and inducement to the Hughes Parties and
PanAmSat to enter into the Reorganization Agreement (and effect the transactions
contemplated thereby), concurrently with the execution and delivery thereof,
each member of the Contributing Group and the Newco Group are entering into this
Agreement.
C. Pursuant to the Reorganization Agreement, Newco will
acquire the business of Galaxy and the business of PanAmSat by: (i) HCI causing
the contribution of assets and liabilities comprising the business of Galaxy to
Newco in exchange for shares of common stock of Newco (the "Asset
Contribution"), (ii) Contributor contributing its capital stock of Univisa,
Inc., a Delaware corporation ("Univisa"), which owns all of the outstanding
stock of Univisa Satellite Holdings, Inc., a Delaware corporation ("USHI"),
which owns all of the Class B Common Stock, par value $.01 per share, of
PanAmSat (the "Class B Common Stock"), to Newco in exchange for the
consideration set forth in Section 1.2 and (iii) the merger of a Delaware
corporation ("Merger Sub"), with and into PanAmSat, with PanAmSat remaining as
the surviving corporation (the "Merger").
D. For federal income tax purposes, it is intended that the
Asset Contribution, the Univisa Contribution (as defined in Section 1.1) and the
Merger, together qualify as an exchange under the provisions of Section 351 of
the United States Internal Revenue Code of 1986, as amended (the "Code").
E. In addition to the common stock of USHI, Univisa owns other
assets and Subsidiaries (as defined in Section 3.2), and as a condition to the
consummation of the transactions contemplated hereby, has agreed to distribute
all of its assets, Subsidiaries and Liabilities (as defined in Section 5.1(b))
(other than the stock of USHI, the Class B Common Stock and cash to pay certain
<PAGE>
costs, expenses and Liabilities allocated to Univisa under this Agreement) prior
to the Closing (as defined in Section 2.1).
F. As a condition to the consummation of the transactions
contemplated hereby, the Contributing Group has agreed to indemnify forever the
Newco Group against any and all Liabilities to be distributed prior to the
Closing.
AGREEMENT
In consideration of the foregoing and the mutual promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
<PAGE>
ARTICLE I
CONTRIBUTION AND EXCHANGE OF STOCK
1.1 Contribution and Exchange of Stock. Upon the terms and
subject to the conditions contained herein, Contributor will contribute, convey,
transfer, assign and deliver to Newco, and Newco will acquire on the Closing
Date, all of the outstanding Univisa Stock (as defined in Section 3.2(a)), free
and clear of any claim, lien, pledge, option, charge, security interest,
encumbrance or other rights of third parties of any nature whatsoever ("Liens")
(the "Univisa Contribution").
1.2 Consideration for Stock.
(a) Upon the terms and subject to the conditions
contained herein, as consideration for the Univisa Contribution, promptly after
the Allocation Determination, Newco shall, subject to Section 1.2(c), distribute
to Contributor consideration with an aggregate value deemed by the parties as of
the date hereof to be equal to the product of $30 multiplied by the number of
shares of Class B Common Stock owned by USHI immediately prior to the Effective
Time (the "Value Unit Consideration"), which shall be divided into units with a
deemed value of $30 each (each such unit, a "Value Unit"), each such Value Unit
to be exchanged at the election of Contributor for one of the following (subject
to Section 4.6 of the Reorganization Agreement):
(i) for each Value Unit with respect to which a
written election to receive a combination of Newco Common Stock and
cash has been delivered by Contributor to Newco no later than the
Election Deadline (a "Standard Election"), the right to receive (x) an
amount in cash equal to one-half (1/2) of the Standard Cash
Consideration plus (y) one-half (1/2) share of Newco Common Stock; or
(ii) except as otherwise provided in Section 4.4 of
the Reorganization Agreement, for each such Value Unit with respect to
which a written election to receive solely Newco Common Stock has been
delivered by Contributor to Newco no later than the Election Deadline
(a "Stock Election"), the right to receive one (1) share of Newco
Common Stock; or
<PAGE>
(iii) except as otherwise provided in Section 4.4 of
the Reorganization Agreement, for each such Value Unit with respect to
which a written election to receive solely cash has been delivered by
Contributor to Newco no later than the Election Deadline (a "Cash
Election"), the right to receive the Standard Cash Consideration.
(b) Immediately upon the receipt of the consideration
specified in Section 1.2, (a) seven million five hundred thousand (7,500,000)
shares of Newco Common Stock received by Contributor shall be repurchased by
Newco for $225 million in cash.
(c) The Trust Holdback shall be deducted from the
Value Unit Consideration. For purposes of this Section 1.2, the "Trust Holdback"
shall be an amount in cash equal to the sum of (i) an amount equal to the Known
Liabilities Estimate (as defined in Section 5.9) and (ii) $25 million, and five
million (5,000,000) shares of Newco Common Stock, provided, however, that if the
Contributor shall have received less than twelve million five hundred thousand
(12,500,000) shares of Newco Common Stock as consideration for the Univisa
Contribution, the Trust Holdback shall include all of the shares of Newco Common
Stock received by Contributor after giving effect to the repurchase of shares of
Newco Common Stock pursuant to Section 1.2(b) and the amount of cash shall be
increased by an amount equal to the product of (a) the difference between five
million (5,000,000) and the number of shares of Newco Common Stock received by
the Contributor after giving effect to the repurchase of shares of Newco Common
Stock pursuant to Section 1.2(b) and (b) the Standard Cash Consideration. At the
time the Contributor receives the Value Unit Consideration, Newco shall,
pursuant to a Collateral Trust Agreement substantially in the form attached
hereto as Exhibit A (the "Collateral Trust Agreement") and a Pledge and Security
Agreement substantially in the form attached hereto as Exhibit B (the "Pledge
Agreement," and together with the Collateral Trust Agreement, the "Collateral
Agreements"), assign and deliver the Trust Holdback to the trustee named therein
(the "Trustee"), pending the determination of Parent's and Contributor's
indemnification obligations, if any, as set forth in Section 8.2. Capitalized
terms used in this Section 1.2 without meaning shall have the meanings assigned
to such terms in the Reorganization Agreement.
ARTICLE II
CLOSING
2.1 Closing. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Article IX, the closing of the Univisa Contribution shall occur immediately
after the consummation of the Asset Contribution and immediately before, and on
the same day as, the consummation of the Merger (the "Closing Date"), at the
offices of Chadbourne & Parke LLP, 30 Rockefeller Plaza, New York, NY 10112,
unless another date, time or place is agreed to in writing by the parties hereto
(the "Closing").
2.2 Documents to be Delivered. To effect the Univisa
Contribution, Contributor and Newco shall, on the Closing Date, deliver the
following:
<PAGE>
(a) Contributor shall deliver to Newco certificate(s)
evidencing all of the outstanding shares of the Univisa Stock, free and clear of
any Liens, duly endorsed in blank for transfer or accompanied by stock powers
duly executed in blank.
(b) Each party shall each deliver all documents
required to be delivered pursuant to Article VI.
(c) All instruments and documents executed and
delivered to Newco pursuant hereto shall be in form and substance, and shall be
executed in a manner, reasonably satisfactory to Newco. All instruments and
documents executed and delivered to Contributor pursuant hereto shall be in form
and substance, and shall be executed in a manner, reasonably satisfactory to
Contributor.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTING GROUP
Each member of the Contributing Group represents and warrants
as of the date hereof, on a joint and several basis, to each member of the Newco
Group as follows:
3.1 Organization, Standing and Power. Each member of the
Contributing Group, Univisa and each Subsidiary (as defined in Section 3.2) of
Univisa is duly organized, validly existing and (if applicable) in good standing
under the laws of its respective jurisdiction of formation, has all requisite
power and authority necessary to own, lease and operate its properties and to
carry on its business as now being conducted, and is duly qualified, and in good
standing to own, lease and operate its properties and to conduct business in
each jurisdiction, domestic and foreign, in which the business it is conducting,
or the operation, ownership or leasing of its properties, makes such
qualification necessary, other than in such jurisdictions where the failure so
to qualify or be in good standing would not have a material adverse economic
impact on the assets or business of such member of the Contributing Group,
Univisa and the Subsidiaries of Univisa, taken as a whole, or impair the right
or ability of the parties hereto to consummate the transactions contemplated
hereby. Each member of the Contributing Group, Univisa and each Subsidiary of
Univisa has heretofore made available true, complete and correct copies of its
Certificate of Incorporation and Bylaws (or other organizational documents, as
appropriate) as currently in effect together with all amendments thereto. No
resolution has been adopted to amend any of such Certificates of Incorporation
or Bylaws (or other organizational documents, as appropriate) except as
expressly called for by this Agreement. No member of the Contributing Group,
Univisa nor any Subsidiary of Univisa (i) has been dissolved, adopted
resolutions to dissolve or acted in any way to accomplish, request or approve
such dissolution, (ii) is a party to any merger or (iii) has been declared
bankrupt, and, to each such entity's knowledge, no action or request is pending
to declare it bankrupt. Contributor has made available to Newco minute books for
each of Univisa and its Subsidiaries which contain complete and accurate records
in all material respects of all meetings, or consents in lieu thereof, of the
shareholders and the Board of Directors (including committees thereof) of each
such entity since its date of formation.
<PAGE>
3.2 Capital Structure.Structure
(a) Univisa has authorized 100 shares of Common
Stock, $1.00 par value per share, 100 shares of which are issued and outstanding
(some of which may be redeemed by Univisa prior to the Closing) (the "Univisa
Stock"), and no shares of preferred stock. All of the outstanding shares of
Univisa Stock are owned by Contributor of record and beneficially, free and
clear of any Liens.
(b) USHI has authorized 100 shares of Common Stock,
$1.00 par value per share, 10 shares of which are issued and outstanding (the
"USHI Stock"), and no shares of preferred stock. All of the outstanding shares
of USHI Stock are owned by Univisa of record and beneficially, free and clear of
any Liens.
(c) All of the shares of the Univisa Stock and the
USHI Stock are validly issued, fully paid and nonassessable and no such shares
are subject to preemptive or other similar rights. Other than the Subsidiaries
set forth on Schedule 3.2(e), USHI and the Class B Common Stock, neither Univisa
nor USHI (i) beneficially owns any capital shares or has any other record or
beneficial equity or other ownership or interest in any corporation,
partnership, joint venture, association or other entity or business enterprise
or (ii) has any commitment to contribute to the capital of, make loans to, or
share the losses of any person or entity. Except as set forth in Sections 3.2(a)
or (b), there are outstanding: (i) no shares of capital stock or other voting
securities of Univisa or USHI authorized, issued or outstanding; (ii) no
securities convertible into, or exchangeable or exercisable for, shares of
capital stock or other voting securities of Univisa or USHI; and (iii) no
options, warrants, calls, rights (including preemptive rights), commitments or
agreements obligating either member of the Contributing Group, Univisa or any
Subsidiary of Univisa to issue, deliver, sell, purchase, redeem or acquire, or
cause to be issued, delivered, sold, purchased, redeemed or acquired, additional
shares of capital stock or other voting securities of Univisa or USHI, or
obligating Univisa or USHI to grant, extend or enter into any such option,
warrant, call, right, convertible security, commitment or agreement. Except as
set forth on Schedule 3.2(c), there are not any stockholder agreements, voting
trusts or other agreements or understandings to which either member of the
Contributing Group, Univisa or any Subsidiary of Univisa is a party or by which
it is bound relating to the voting of any shares of the capital stock of Univisa
or USHI. There are no restrictions on Univisa to vote the stock of USHI other
than the Principal Stockholders Agreement dated as of the date hereof, by and
between HCI, Galaxy, Contributor, the holders of Class A Common Stock of
PanAmSat and the Trustee of the Voting Trust of certain holders of Class A
Common Stock of PanAmSat (the "Principal Stockholders Agreement"). No person or
entity has any rights to cause either member of the Contributing Group, Univisa
or any Subsidiary of Univisa to register with the United States Securities and
Exchange Commission (the "SEC") any securities of Univisa or USHI.
(d) USHI is the record and beneficial owner of 100%
of the issued and outstanding shares of Class B Common Stock, free and clear of
any Liens. As of the date hereof, there is a total of 40,459,431 shares of Class
B Common Stock issued and outstanding. All of the shares of Class B Common Stock
owned by USHI are validly issued, fully paid and nonassessable and no such
shares are subject to preemptive or other similar rights. Except as set forth in
<PAGE>
this Section 3.2(d), there are outstanding: (i) no securities of either member
of the Contributing Group, Univisa or any Subsidiary of Univisa convertible
into, or exchangeable or exercisable for, shares of Class B Common Stock; and
(ii) no options, warrants, calls, rights (including preemptive rights),
commitments or agreements to which either member of the Contributing Group,
Univisa or any Subsidiary of Univisa is a party or by which it is bound, in any
case obligating either member of the Contributing Group, Univisa or any
Subsidiary of Univisa to deliver, sell, purchase, redeem or acquire, or cause to
be delivered, sold, purchased, redeemed or acquired, additional shares of Class
B Common Stock, or obligating either member of the Contributing Group, Univisa
or any Subsidiary of Univisa to grant, extend or enter into any such option,
warrant, call, right, convertible security, commitment or agreement. Except as
set forth in the Principal Stockholders Agreement, there are not any stockholder
agreements, voting trusts or other agreements or understandings to which either
member of the Contributing Group, Univisa or any Subsidiary of Univisa is a
party or by which it is bound relating to the voting of any shares of the Class
B Common Stock. Except for the Principal Stockholders Agreement, there are no
restrictions on USHI to vote the shares of the Class B Stock. No person has any
rights to cause either member of the Contributing Group, Univisa or any
Subsidiary of Univisa to register with the SEC any shares of the Class B Common
Stock. All of the outstanding shares of Class B Common Stock are owned by USHI
free and clear of any Liens. The execution and delivery of this Agreement will
not cause, directly or indirectly, any of the shares of the Class B Common Stock
to be converted into any other capital stock of PanAmSat.
(e) Schedule 3.2(e) sets forth a complete and
accurate list of each Subsidiary of Univisa as of the date hereof, each of which
is, as of the date hereof, directly or indirectly, wholly-owned by Univisa, free
and clear of any Liens. Schedule 3.2(e) also contains the jurisdiction of
incorporation or organization of each Subsidiary of Univisa as of the date
hereof, each jurisdiction in which such Subsidiary is qualified to do business
and the number of shares of such Subsidiary outstanding.
(f) As used in this Agreement, the word "Subsidiary,"
with respect to any party, means, as of any date of determination, any
corporation, partnership, joint venture or other organization, whether
incorporated or unincorporated, of which, as of such date of determination: (i)
such party or any other Subsidiary of such party is a general partner; (ii)
voting power to elect a majority of the Board of Directors or others performing
similar functions with respect to such corporation, partnership, joint venture
or other organization is held by such party or by any one or more of its
Subsidiaries, or by such party and any one or more of its Subsidiaries; or (iii)
more than 50% of all classes of equity securities is, directly or indirectly,
owned or controlled by such party or by any one or more of its Subsidiaries, or
by such party and any one or more of its Subsidiaries.
3.3 Authority; No Violations; Consents and Approvals.
(a) Each member of the Contributing Group has all
requisite power and authority to execute and deliver this Agreement and the
Collateral Agreements and to perform its obligations hereunder and thereunder
and to effect the transactions contemplated hereby and thereby. The execution,
<PAGE>
delivery and performance of each of this Agreement and the Collateral Agreements
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by all necessary action on the part of each member of the
Contributing Group. This Agreement has been, and each of the Collateral
Agreements, will be, duly executed and delivered by each member of the
Contributing Group, and assuming that each of this Agreement and the Collateral
Agreements constitutes the valid and binding agreement of each member of the
Newco Group, and assuming the consents, approvals, authorizations or permits and
filings or notifications referred to in paragraph (c) of this Section 3.3 are
duly and timely obtained or made, constitutes (or, with respect to each of the
Collateral Agreements, will constitute when executed and delivered) a valid and
binding obligation of each member of the Contributing Group enforceable in
accordance with its terms except that the enforcement hereof and thereof may be
limited by (a) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally
and (b) general "principles of equity" (regardless of whether enforceability is
considered in a proceeding at law or in equity) (the foregoing exception, the
"Bankruptcy Exception").
(b) The execution, delivery and performance by each
member of the Contributing Group of each this Agreement and the Collateral
Agreements does not, and the consummation by each member of the Contributing
Group of the transactions contemplated hereby and thereby will not, (x) conflict
with, or result in any violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or the loss of a material benefit under, or the
creation of a material Lien on assets or property, or right of first refusal
with respect to any material asset or property (any such conflict, violation,
default, right of termination, cancellation or acceleration, loss, creation or
right of first refusal, a "Contributing Group Violation"), pursuant to any
provision of the respective Certificate of Incorporation or Bylaws or equivalent
constituent document of either member of the Contributing Group or, (y) except
as to which requisite waivers or consents have been obtained and, except as set
forth on Schedule 3.3(b) hereto and assuming the consents, approvals,
authorizations or permits and filings or notifications referred to in paragraph
(c) of this Section 3.3 are duly and timely obtained or made, result in any
Contributing Group Violation of any material loan or credit agreement, note,
mortgage, indenture, lease, or other material agreement, obligation, instrument,
Permit (as defined in Section 3.7(b)), judgment, order, decree or Law applicable
to either member of the Contributing Group or any of their respective properties
or assets; provided, however, that nothing in this Section 3.3 will be deemed to
constitute a representation or warranty by either member of the Contributing
Group as to any antitrust law or requirement.
(c) No consent, approval, order or authorization of,
or registration, declaration or filing with, notice to, or permit from any
legislative, executive, judicial, regulatory or other governmental or
quasi-governmental authority, instrumentality or body, whether domestic or
foreign, local, state, federal or other, including any administrative agency,
commission or court ("Governmental Entity"), is required by or with respect to
either member of the Contributing Group in connection with the execution and
delivery by either member of the Contributing Group of this Agreement or any of
<PAGE>
the Collateral Agreements, or the consummation by either member of the
Contributing Group of the transactions contemplated hereby and thereby, which if
not obtained or made would have a material adverse economic impact on the assets
or business of such member, or a member of the Newco Group, or would have a
material adverse effect on either member of the Contributing Group's ability to
consummate the transactions contemplated hereby, except for: (A) the filing of a
premerger notification and report form by the Contributing Group under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended and the rules
and regulations thereunder (the "HSR Act") and the expiration or termination of
the applicable waiting period thereunder; (B) the filing with the SEC of such
reports under and such other compliance with the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder (the "Exchange Act"),
as may be required in connection with this Agreement and the Collateral
Agreements and the transactions contemplated hereby and thereby; and (C) such
filings and approvals as may be required by any applicable state securities or,
"blue sky" laws.
3.4 Univisa Financial Statements. The Financial Statements
have been prepared from, and are in accordance with, the books and records of
Univisa and its consolidated Subsidiaries and were prepared in accordance with
United States generally accepted accounting principles ("GAAP") applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and present fairly, in all material respects, in accordance with
applicable requirements of GAAP the consolidated financial position of Univisa
and its consolidated Subsidiaries as of their respective dates and the
consolidated results of operations and the consolidated cash flows of Univisa
and its consolidated Subsidiaries for the periods presented therein. The books
and all other financial records of Univisa and each of its Subsidiaries are
complete and correct in all material respects. "Financial Statements" shall mean
the audited Balance Sheet, Consolidated Statements of Income and Consolidated
Statements of Stockholder's Equity for Univisa and its consolidated Subsidiaries
for the three year period ended as of the Balance Sheet Date, together with the
notes thereon and the related unqualified report of Coopers & Lybrand, Univisa's
certified public accountants, previously delivered to each member of the Newco
Group. "Balance Sheet" shall mean the Consolidated Balance Sheet of Univisa as
of December 31, 1995, previously delivered to each member of the Newco Group.
"Balance Sheet Date" shall mean December 31, 1995.
3.5 Parent Financial Statements. The Parent Financial
Statements have been prepared from, and are in accordance with, the books and
records of Parent and its consolidated Subsidiaries and were prepared in
accordance with Mexican generally accepted accounting principles ("Mexican
GAAP") applied on a consistent basis during the periods involved (except as may
be indicated in the notes thereto) and present fairly, in all material respects,
in accordance with applicable requirements of Mexican GAAP the consolidated
financial position of Parent and its consolidated Subsidiaries as of their
respective dates and the consolidated results of operations and the consolidated
cash flows of Parent and its consolidated Subsidiaries for the periods presented
therein. The books and all other financial records of Parent and each of its
Subsidiaries are complete and correct in all material respects. "Parent
Financial Statements" shall mean the audited Parent Balance Sheet, Consolidated
Statements of Income, Consolidated Statements of Changes in Stockholder's Equity
and Consolidated Statements of Changes in Financial Position for Parent and its
<PAGE>
consolidated Subsidiaries for the three year period ended as of the Parent
Balance Sheet Date, together with the notes thereon and the related unqualified
report of Coopers & Lybrand Despacho Roberto Casas Alatriste, Parent's certified
public accountants, previously delivered to each member of the Newco Group.
"Parent Balance Sheet" shall mean the Consolidated Balance Sheet of Parent as of
December 31, 1995, previously delivered to each member of the Newco Group.
"Parent Balance Sheet Date" shall mean December 31, 1995.
3.6 No Adverse Change. Since the Parent Balance Sheet Date to
the date hereof, there has been no change in the financial condition, results of
operation, business or assets of Parent which materially adversely affects the
ability of Parent to perform its obligations under this Agreement or any of the
Collateral Agreements.
3.7 Compliance with Laws.
(a) The businesses of Univisa and its Subsidiaries
have not been and are not being conducted in material violation of any Law. No
material investigation or review by any Governmental Entity with respect to
Univisa, any of its Subsidiaries or their respective businesses is pending or,
to the knowledge of the Contributing Group, threatened and neither Univisa nor
any of its Subsidiaries has received any written citation or notification
alleging any material violation of any Law or Permit with respect to which all
necessary corrective action has not been taken. "Law" shall mean any applicable
domestic or foreign, federal, state or local laws, statutes, regulations, rules,
codes, ordinances, orders and governmental licenses, franchises, permits and
governmental authorizations enacted, adopted, issued or promulgated by any
Governmental Entity (including those pertaining to communications, broadcasting,
consumer protection, building, zoning, environmental and occupational safety and
health requirements and all requirements of the Communications Act of 1934, as
amended, or any successor statute, and the rules and regulations of the Federal
Communication Commission (the "FCC")) or common law.
(b) Univisa and its Subsidiaries possess, as of the
date hereof, all material permits, licenses, franchises, approvals,
certificates, concessions, privileges, immunities, consents or other
authorizations issued or authorized or required to be issued by any Governmental
Entity (collectively, "Permits") necessary to allow Univisa and its Subsidiaries
to own or lease their assets and to lawfully conduct their respective
businesses.
(c) Neither Univisa or its Subsidiaries, nor any of
their respective employees are officials or officers of any Governmental Entity
or any political party, and neither Univisa nor any of its Subsidiaries or
affiliates has taken, is taking or will take, or has allowed or will allow on
its behalf to be taken, any action which violated or would violate the United
States Foreign Corrupt Practices Act of 1977, the U.S. Export Administration
Act, as amended, or any laws of any jurisdiction to which such party or person
is subject, relating in each case to payments for the purpose of influencing an
act or decision of a government agency or official; provided, however, that
nothing in this sentence shall be deemed to subject any party or person to any
law to which such party or person would not otherwise be subject. Each of
Univisa and its Subsidiaries is in material compliance with all domestic and
<PAGE>
foreign laws restricting or regulating the export of technology to foreign
countries.
3.8 Litigation. Except as disclosed on Schedule 3.8, there is
no suit, action or proceeding pending or, to either member of the Contributing
Group's knowledge, threatened against or affecting Univisa or any of its
Subsidiaries, nor is there any written judgment, decree, injunction, rule or
order of any Governmental Entity or arbitrator outstanding against Univisa or
any of its Subsidiaries.
3.9 Taxes. Each of Univisa and its Subsidiaries has timely
filed (or has obtained timely extensions for) all tax returns required to be
filed by such party completely and accurately in all material respects and has
timely paid (or Univisa has paid on behalf of any such Subsidiary), or has
established an adequate reserve for the payment of, all material taxes which are
required to be paid in respect of the taxable period reflected in such returns
or for periods since the most recent date on which a return was filed. All taxes
shown to be due on the tax returns that have been filed by Univisa and each of
its Subsidiaries have been timely paid. Except as provided on Schedule 3.9,
neither Univisa nor any of its Subsidiaries has waived any statute of
limitations in respect of taxes of Univisa or any of its Subsidiaries. Except as
set forth in Schedule 3.9, none of the tax returns filed by Univisa or any of
its Subsidiaries has been examined by any taxing authority, and no audit,
action, proceeding or assessment is pending or, to either member of the
Contributing Group's knowledge, threatened by any taxing authority against
Univisa or any of its Subsidiaries. All material taxes which Univisa or any of
its Subsidiaries is required by law to withhold or to collect for payment have
been duly withheld and collected, and have been paid or accrued, reserved
against and entered on the books of Univisa. There are no material Liens for
taxes (other than for current taxes not yet due and payable) on the assets of
Univisa or any of its Subsidiaries. Neither Univisa nor any of its Subsidiaries
has any gains from intercompany transactions (within the meaning of the
consolidated return regulations of the Code) which will be recognized after the
Closing Date. Univisa has previously delivered or made available true and
complete copies of its federal income tax returns for each of the fiscal years
ended December 31, 1992 through December 31, 1995. Except as set forth on
Schedule 3.9, neither Univisa nor any of its Subsidiaries is a party to or bound
by any agreement providing for the allocation or sharing of taxes with any
entity which is not, either directly or indirectly, a Subsidiary of Univisa.
Neither Univisa nor any of its Subsidiaries has filed or is required to file a
consent pursuant to or agreed to the application of Section 341(f) of the Code.
Univisa is not a "United States real property holding corporation" as defined in
Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code. For the purpose of this Agreement, the term "tax"
(and, with correlative meaning, the terms "taxes" and "taxable") shall include
all federal, state, local and foreign income, profits, franchise, gross
receipts, payroll, sales, employment, use, property, withholding, excise and
other taxes, duties or assessments of any nature whatsoever, together with all
interest, penalties and additions imposed with respect to such amounts.
<PAGE>
3.10 Material Contracts. Univisa has provided or made
available to each member of the Newco Group or its independent auditors (i) true
and complete copies of all Material Contracts, or (ii), with respect to such
Material Contracts that have not been reduced to writing, a written description
thereof, each of which is listed on Schedule 3.10. Except as set forth on
Schedule 3.10, neither Univisa nor any of its Subsidiaries is, or has received
any notice that, nor does the Contributing Group have any knowledge that, any
other party is in default in any respect under any such Material Contract. As
used in this Agreement, the term "Material Contract" means, as to any person or
entity, all written contracts, agreements, commitments, arrangements, leases
(including with respect to personal property), policies and other instruments to
which it or any of its Subsidiaries is a party or by which it or any such
Subsidiary is bound (other than intercompany arrangements which will be
cancelled, and for which mutual releases will be granted with respect thereto,
prior to the Closing) which, when assuming that all options to renew or extend
are exercised, (x) require payments to be made, individually or in the
aggregate, in excess of $1,000,000 per year for goods and/or services, or (y) do
not by their terms expire and are not subject to termination within six months
from the date of the execution and delivery thereof and require payments to be
made, individually or in the aggregate, in excess of $1,000,000.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE NEWCO GROUP
Each member of the Newco Group represents and warrants as of
the date hereof, on a joint and several basis, to each member of the
Contributing Group as follows:
4.1 Organization, Standing and Power. Each member of the Newco
Group is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation, has all requisite corporate
power and authority necessary to own, lease and operate its properties and to
carry on its business as now being conducted, and is duly qualified, and in good
standing to own, lease and operate its properties and to conduct business in
each jurisdiction, domestic and foreign, in which the business it is conducting,
or the operation, ownership or leasing of its properties, makes such
qualification necessary, other than in such jurisdictions where the failure so
to qualify or be in good standing would not have a material adverse economic
impact on the assets or business of either member of the Newco Group or impair
the right or ability of the parties hereto to consummate the transactions
contemplated hereby. Each member of the Newco Group has heretofore made
available true, complete and correct copies of its Certificate of Incorporation
and Bylaws as currently in effect together with all amendments thereto. No
resolution has been adopted to amend any of such Certificates of Incorporation
or Bylaws except as expressly called for by this Agreement. No member of the
Newco Group (i) has been dissolved, adopted resolutions to dissolve or acted in
any way to accomplish, request or approve such dissolution, (ii) is a party to
any merger and (iii) has been declared bankrupt, and, to each member of the
Newco Group's knowledge, no action or request is pending to declare it bankrupt.
Newco has made available minute books which contain complete and accurate
records in all material respects of all meetings, or consents in lieu thereof,
of the shareholders and the Board of Directors (including committees thereof)
since its date of formation.
<PAGE>
4.2 Authority; No Violations; Consents and Approvals.
(a) Each member of the Newco Group has all requisite
corporate power and authority to execute and deliver each of this Agreement and
the Collateral Agreements to which it is a party to perform its obligations
hereunder and thereunder and to effect the transactions contemplated hereby and
thereby. The execution, delivery and performance of each of this Agreement and
the Collateral Agreements to which it is party and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of each member of the Newco Group. This
Agreement has been, and each of the Collateral Agreements to which it is a party
will be, duly executed and delivered by each member of the Newco Group and
assuming that each of this Agreement and the Collateral Agreements to which it
is a party constitutes the valid and binding agreement of the other parties
thereto, and assuming the consents, approvals, authorizations or permits and
filings or notifications referred to in paragraph (c) of this Section 4.2 are
duly and timely obtained or made, constitutes (or, with respect to each of the
Collateral Agreements to which it is a party, will constitute when executed and
delivered) a valid and binding obligation of each member of the Newco Group
enforceable in accordance with its terms except that the enforcement hereby may
be limited by the Bankruptcy Exception.
(b) The execution, delivery and performance by each
member of the Newco Group of each of this Agreement and the Collateral
Agreements to which it is a party does not, and the consummation by each member
of the Newco Group of the transactions contemplated hereby and thereby will not,
(x) conflict with or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or the loss of a material benefit
under, or the creation of a material Lien on assets or property, or right of
first refusal with respect to any material asset or property (any such conflict,
violation, default, right of termination, cancellation or acceleration, loss,
creation or right of first refusal, a "Newco Group Violation"), pursuant to any
provision of the Certificate of Incorporation or Bylaws of either member of the
Newco Group or, (y) except as to which requisite waivers or consents have been
obtained and, except as set forth on Schedule 4.2(b) hereto and assuming the
consents, approvals, authorizations or permits and filings or notifications
referred to in paragraph (c) of this Section 4.2 are duly and timely obtained or
made, result in any Newco Group Violation of any material loan or credit
agreement, note, mortgage, indenture, lease, or other material agreement,
obligation, instrument, permit, judgment, order, decree or Law applicable to
either member of the Newco Group or its properties or assets; provided, however,
that nothing in this Section 4.2 will be deemed to constitute a representation
or warranty by either member of the Newco Group as to any antitrust law or
requirement.
(c) No consent, approval, order or authorization of,
or registration, declaration or filing with, notice to, or permit from any
Governmental Entity, is required by or with respect to either member of the
Newco Group in connection with the execution and delivery by each member of the
Newco Group of each of this Agreement and the Collateral Agreements to which it
is a party or the consummation by each member of the Newco Group of the
transactions contemplated hereby and thereby, which if not obtained or made
<PAGE>
would have a material adverse economic impact on the assets or business of such
member, or a member of the Contributing Group, or would have a material adverse
effect on either member of the Newco Group's ability to consummate the
transactions contemplated hereby or thereby, except for: (A) the filing of a
premerger notification and report form by the Newco Group under the HSR Act and
the expiration or termination of the applicable waiting period thereunder; (B)
the filing with the SEC of such reports under and such other compliance with the
Exchange Act and the rules and regulations thereunder, as may be required in
connection with this Agreement and the Collateral Agreements and the
transactions contemplated hereby and thereby; (C) such filings and approvals as
may be required by any applicable state securities or "blue sky" laws; and (D)
such other consents, approvals, orders, authorizations, registrations,
declarations, filings, notices and Permits set forth in Schedule 4.2(c).
4.3 Certain Representations. No member of the Newco Group has
any plan or intention to (and no such member has any plan or intention to cause
or permit Univisa, USHI or PanAmSat to) liquidate (completely or partially) or
dissolve Univisa or USHI, or merge, consolidate or combine Univisa or USHI with
or into Newco, PanAmSat or any other entity, other than a merger of USHI into
Univisa qualifying as a tax-free liquidation under Section 332 of the Code.
ARTICLE V
COVENANTS BETWEEN SIGNING AND CLOSING
5.1 Interim Operations of Univisa and the Subsidiaries. During
the period from the date of this Agreement and continuing until the Closing
Date, each member of the Contributing Group agrees for itself and for its
Subsidiaries that:
(a) New Business. Neither Univisa nor any of its
Subsidiaries shall engage in or enter into any new business activities unrelated
to their business activities as of the date hereof.
(b) Payment of Liabilities. Univisa shall, and shall
cause its Subsidiaries to, pay, discharge and satisfy any direct or indirect
liability, indebtedness, obligation, commitment, expense, claim, deficiency,
guaranty or endorsement of any type, whether accrued, absolute, contingent,
matured, unmatured, known or unknown or otherwise ("Liability") that becomes due
on or before the Closing.
(c) Required Distributions. On or prior to the
Closing Date and pursuant to agreements reasonably satisfactory to HCI (the
"Distribution Agreements"), Univisa and its Subsidiaries shall, in redemption of
a portion of the Univisa Stock, distribute and transfer (the "Distributions") to
Parent, Contributor and their designees (other than Univisa or USHI)
(collectively, Parent, Contributor and such distributees are referred to herein
as the "Parent Distributees") all of Univisa's right, title and interest in any
and all assets of Univisa and its Subsidiaries (or the proceeds of the
disposition thereof), whether tangible or intangible and whether fixed,
contingent or otherwise, including the stock of all of Univisa's Subsidiaries
(the "Distributed Assets"); provided, however, that neither Univisa nor its
Subsidiaries shall distribute or otherwise transfer (i) any shares of the USHI
<PAGE>
Stock, (ii) except as permitted under the Principal Stockholders Agreement, any
shares of the Class B Common Stock and (iii) cash sufficient to pay all costs,
liabilities and expenses (including taxes) incurred by Univisa or USHI in
connection with the transactions contemplated by this Agreement that are the
responsibility of Univisa which have not been paid prior to the Closing
(collectively, the "Required Expenditures"). Such Distribution Agreements shall
provide for, among other things, indemnification, on a joint and several basis,
by the Parent Distributees in favor of Newco substantially similar to the
indemnities provided by the Contributing Group in favor of Newco in Article
VIII.
(d) Assumption and Release of Liabilities. Prior to
the Closing Date and pursuant to the Distribution Agreements, the Contributing
Group shall assume, and shall cause the Parent Distributees to assume, any and
all Liabilities of Univisa and USHI arising out of, or relating to, or connected
with, occurrences, operations or events prior to, at or as of and through the
last date the transactions contemplated by this Agreement and the Reorganization
Agreement are consummated (including any Liabilities set forth on the Schedules
hereto or on the Statement of Liabilities), or arising out of, or relating to,
the Distributed Assets or other former assets of Univisa or USHI either prior
to, at, as of, or after the Closing (the "Transaction Liabilities").
Concurrently with the Distributions, the Contributing Group shall, and shall
cause its Subsidiaries and affiliates, to the extent legally permissible, to,
(i) release Univisa and USHI from any and all Transaction Liabilities or other
Liabilities owing to such entities and (ii) use its reasonable best efforts to
have Univisa and USHI released from any and all Transaction Liabilities owing to
all other persons or entities.
(e) Other Actions. Each member of the Contributing
Group shall not take, and shall not permit any of its Subsidiaries to take or
agree or commit to take, any ction that results in any condition to the Closing
not being satisfied in all material respects.
5.2 Interim Operations of the Newco Group. During the period
from the date of this Agreement and continuing until the Closing Date, each
member of the Newco Group agrees that it will not take any action that results
in any condition to the Closing not being satisfied in all material respects.
5.3 Access to Information. Each member of the Contributing
Group shall (and shall cause each of its Subsidiaries to) afford to the
officers, employees, accountants, counsel, financing sources and other
representatives of each member of the Newco Group reasonable access, during
normal business hours during the period prior to the Closing Date, to all of
Univisa's properties, books, contracts, commitments and records and those of
Univisa's Subsidiaries (including any tax returns or other tax related
information pertaining to Univisa and its Subsidiaries and including any
information to be included in any registration statement to be filed by Newco
with respect to the Newco Common Stock issued in connection with the
transactions contemplated by this Agreement and the Reorganization Agreement)
and, during such period, each member of the Contributing Group shall (and shall
cause each of its Subsidiaries to) furnish promptly to each member of the Newco
Group all other information concerning the business, properties and personnel of
<PAGE>
Univisa or any Subsidiary as either member of the Newco Group may reasonably
request (including any tax returns or other tax related information pertaining
to Univisa or its Subsidiaries, as the case may be and including any information
to be included in any registration statement to be filed by Newco with respect
to the Newco Common Stock issued in connection with the transactions
contemplated by this Agreement and the Reorganization Agreement). Each member of
the Newco Group shall not, and shall cause its representatives not to, use any
information obtained pursuant to this Section 5.3 for any purpose unrelated to
the consummation of the transactions contemplated by this Agreement.
5.4 Legal Conditions, Filings and Consents. During the period
from the date of this Agreement and continuing until the Closing Date:
(a) Each party will (i) cooperate with one another in
determining whether any actions or filings are required in connection with
obtaining any Governmental Entity approvals required to consummate the
transactions contemplated by this Agreement (including, without limitation,
furnishing all information required under the HSR Act), (ii) cooperate with one
another in determining whether any actions, consents, approvals or waivers are
required to be obtained from any corporate or equivalent governing body of any
party, any of their subsidiaries, or any stockholder of the foregoing, or
whether any actions, consents, approvals or waivers are required to be obtained
from any third parties, such as parties to any material contracts, in connection
with the consummation of the transactions contemplated by this Agreement, (iii)
endeavor in good faith to take all such actions or make any such filings,
furnish information required in connection therewith, and seek in a timely
manner to obtain any such actions, consents, approvals or waivers and (iv)
promptly cooperate with and furnish information to each other in connection with
any such requirements imposed upon any of them or any of their subsidiaries in
connection with the Univisa Contribution and the other transactions contemplated
by this Agreement. Without limiting the generality or effect of the foregoing,
each party will take all commercially reasonable actions necessary to obtain
(and will cooperate with each other in obtaining) in a timely manner any
consent, authorization, order or approval of, or any exemption by, any
Governmental Entity or other public or private third party, required to be
obtained or made by such party in connection with the Univisa Contribution, this
Agreement or the taking of any action contemplated hereby.
(b) The parties acknowledge that the transactions
described in this Agreement are an integral part of transactions contemplated by
the Reorganization Agreement, that those transactions require the prior written
consent of the FCC, that this Agreement will not be consummated prior to the
Closing of the Asset Contribution, and, to the extent applicable to any of the
stockholders of PanAmSat, that the obligations contained in Section 5.4(a) apply
with respect to any and all applications and filings made with Governmental
Entities pursuant to Section 7.9 of the Reorganization Agreement.
5.5 Notices of Certain Events.
During the period from the date of this Agreement and
continuing until the Closing Date, each party shall promptly notify the other
parties hereto of:
<PAGE>
(i) any notice or other communication from any person alleging
that the consent of such person is or may be required in connection with such
party's consummation of the transactions contemplated by this Agreement;
(ii) any notice or other communication from any Governmental
Entity in connection with such party's consummation of the transactions
contemplated by this Agreement;
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to the actual knowledge of the executive officers of the notifying
party, threatened against, relating to or involving or otherwise affecting such
party or any of its subsidiaries;
(iv) an administrative or other order or notification relating to
any violation or claimed violation of Law by such party;
(v) the occurrence or non-occurrence of any event the occurrence
or non-occurrence of which would cause any representation or warranty of such
party contained in this Agreement to be untrue or inaccurate in any material
respect at or prior to the Closing Date; and
(vi) any material failure of such party to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder;
provided, however, that the delivery of any notice pursuant to this Section 5.5
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
5.6 Publicity. During the period from the date of this
Agreement and continuing until the Closing Date, the parties will consult with
each other and will mutually agree prior to the issuance of any press release or
public announcement pertaining to this Agreement or the transactions
contemplated hereby, and shall not issue any such press release or make any such
public announcement or permit any of their Subsidiaries to do the same prior to
such consultation and agreement, except as may be required by applicable Law or
the applicable rules of any securities exchange (including the Nasdaq National
Market) or except as otherwise permitted by the Reorganization Agreement, in
which case the party proposing to issue such press release or make such public
announcement shall use reasonable efforts to consult in good faith with the
other party before issuing any such press release or making any such public
announcement and except for the FCC filings and HSR filings contemplated herein.
5.7 Further Action. During the period from the date of this
Agreement and continuing until the Closing Date, each party hereto shall,
subject to the fulfillment at or before the Closing Date of each of the
conditions of performance set forth herein or the waiver thereof, perform such
further acts and execute such documents as may be reasonably required to effect
the transactions contemplated by this Agreement.
<PAGE>
5.8 Rights to "Univisa" Name. Prior to the Closing Date, the
names of "Univisa, Inc." and "Univisa Satellite Holdings, Inc." shall be changed
such that Univisa shall not be included in such names. After the Closing, Parent
and its Subsidiaries shall retain all right, title and interest in and to the
name "Univisa".
5.9 Statement of Liabilities.
(a) Contributor shall prepare and deliver to HCI, at
least 90 days prior to the anticipated Closing Date, a statement of all of the
Liabilities of each of Univisa and USHI estimated or projected as of the Closing
Date (such statement, as it may be revised pursuant to Section 5.9(b), is
referred to herein as the "Statement of Liabilities"). Within 30 days of such
date of delivery, HCI shall be entitled to verify the accuracy of the Statement
of Liabilities and shall determine in good faith the amount reasonably necessary
to satisfy in full all of the Liabilities set forth on such Statement, including
the amount reasonably necessary to satisfy on and after the Closing, in full,
all taxes for all taxable years and other periods ending on or before or
including (for the Pre-Closing Portions of any Straddle Periods (as defined in
Section 8.2(c)) the Closing Date, including, any and all such taxes attributable
to any and all distributions of assets by Univisa made in contemplation of the
transactions contemplated by this Agreement or the Reorganization Agreement,
including the distribution of the Distributed Assets by Univisa to the Parent
Distributees (such amount, as it may be revised pursuant to Section 5.9(b), is
referred to herein as the "Known Liabilities Estimate"). During such 30 day
period, HCI and its representatives shall have access to the management,
employees and counsel for Univisa and its Subsidiaries and to such documents and
other information relating to such Statement as it shall reasonably request.
Within five days of the expiration of such 30 day period, HCI shall notify
Contributor of any dispute with respect to the Statement of Liabilities, and
Contributor shall notify HCI of any dispute with respect to the Known
Liabilities Estimate, and any such dispute(s) which cannot be resolved after
good faith negotiations and in any event within five days from the date
Contributor or HCI, as the case may be, is so notified, shall be referred to an
arbitrator pursuant to Section 10.11, whose determination on such matters shall
be made within 30 days of such referral and shall be final and binding on the
parties and whose fees and expenses shall be paid by the party who does not
prevail in such action, unless the arbitrator determines another method is more
equitable.
(b) Contributor shall prepare and deliver to HCI, at
least 10 days before the anticipated Closing Date, an amendment to the Statement
of Liabilities, setting forth any changes that have occurred (or are expected to
occur) from the period beginning on the date when the Statement of Liabilities
was provided to HCI and ending on the Closing Date. Within five days of such
date of delivery, HCI shall be entitled to verify the accuracy of the amended
Statement of Liabilities and shall determine in good faith whether the Known
Liabilities Estimate should be revised to satisfy in full all of the Liabilities
set forth on such amended Statement. During such five day period, HCI and its
representatives shall have access to the management, employees and counsel for
Univisa and its Subsidiaries and to such documents and other information
relating to such Statement as it shall reasonably request. Immediately after the
expiration of such five day period, HCI shall notify Contributor of any dispute
with respect to such amended Statement, and Contributor shall notify HCI of any
<PAGE>
dispute with respect to any revisions to the Known Liabilities Estimate, and any
such dispute(s) which cannot be resolved after good faith negotiations prior to
the Closing, shall be referred to an arbitrator pursuant to Section 10.11, whose
determination on such matters shall be made as promptly as practicable (either
before or after the Closing, however, such arbitration shall in no way delay the
Closing if all other conditions to the Closing set forth in Article VI have been
satisfied or waived by the party for whose benefit such conditions exist) and
shall be final and binding on the parties and whose fees and expenses shall be
paid by the party who does not prevail in such action, unless the arbitrator
determines another method is more equitable. Any adjustments that are required
as a result of such arbitration shall be made as promptly as practicable after
such determination.
(c) Notwithstanding the failure to include any
Liability on the Schedule of Liabilities, or the inclusion of an amount
different from the actual amount needed to satisfy in full any Liability set
forth on the Schedule of Liabilities, or any determination of an arbitrator
under Section 10.11, the actual amount of all Transaction Liabilities shall
remain and be the responsibility of the Contributing Group, and the Contributing
Group shall indemnify and save and hold harmless in full the Newco Group with
respect to any such Transaction Liabilities to the extent set forth in Section
8.2(a)(ii).
(d) When making any determinations under this Section
5.9, the arbitrator may consider the following: the reasonable likelihood of
future claims of the type or class of claims which is the subject of dispute,
the Contributing Group's ability to satisfy current and future claims and the
availability of insurance. No amounts will be required to be allocated to the
Known Liabilities Estimate with respect to Univisa's obligations under its
licensing/distribution agreements to distribute Parent's programming (although
other obligations under or related to such agreements could be allocated to the
Known Liabilities Estimate, for example, Liabilities associated with
indemnification obligations under such contracts).
5.10 Trustee.
(a) Each party acknowledges that the Collateral
Agreements have not been reviewed by any Trustee, and that upon the designation
of such Trustee, such Trustee may request that certain revisions be made to such
agreements. Each party will cooperate with one another in good faith to reach
mutual agreement on such revisions.
(b) Prior to the Closing and pursuant to the
Collateral Agreements, the parties shall select a Trustee with respect to the
Collateral Agreements which Trustee shall be a bank or trust company in good
standing, organized under the laws of the United States of America or any State,
doing business in or having a correspondent relationship with a bank or trust
company doing business in the Borough of Manhattan, City of New York, State of
New York, and having a capital and surplus (including subordinated capital notes
and earned surplus) aggregating at least $500,000,000. If the parties are unable
to find a bank or trust company that satisfies the foregoing conditions and that
is willing to serve as the Trustee, then each of the parties shall use its
reasonable best efforts to find another qualified entity that is reasonably
acceptable to each other and that is willing to serve as the Trustee.
<PAGE>
ARTICLE VI
CONDITIONS
6.1 Conditions to Each Party's Obligation to Effect the
Univisa Contribution. The respective obligations of each party to effect the
Univisa Contribution shall be subject to the satisfaction on or prior to the
Closing Date (or, if permissible, waiver by each party for whose benefit such
conditions exist) of the following conditions:
(a) No Order. No Governmental Entity shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation
or order (whether temporary, preliminary or permanent) which is in effect and
which materially restricts, prevents or prohibits consummation of the
transactions contemplated by this Agreement; provided, however, that the parties
shall use their commercially reasonable efforts to cause any such decree,
judgment, injunction or other order to be vacated or lifted.
(b) HSR Act. Any waiting period applicable to the
consummation of the transactions contemplated hereby under the HSR Act shall
have expired or been terminated, and no action shall have been instituted by the
Department of Justice or the Federal Trade Commission challenging or seeking to
enjoin the consummation of the transactions contemplated hereby, which action
shall not have been withdrawn by the party instituting such action or dismissed
or terminated pursuant to a final, non-appealable judgment of a United States
federal court.
(c) Other Approvals. All other approvals or orders by
Governmental Entities required to be obtained, and all filings, notices or
declarations required to be made before any Governmental Entity, by any party
prior to the consummation of the transactions contemplated hereunder shall have
been obtained from, and made with, all required Governmental Entities, except
for such authorizations, consents, waivers, orders, approvals, filings, notices
or declarations, the failure to obtain or make would not be likely to have a
material adverse effect at or after the Closing Date, on Newco and its
Subsidiaries taken as a whole, or on Univisa and its Subsidiaries taken as a
whole.
(d) No Conversion or Exchange. The Certificate of
Incorporation of PanAmSat shall have been amended so that the consummation of
the transactions contemplated by this Agreement shall not cause the shares of
Class B Common Stock outstanding as of the date hereof to be converted or
exchanged into any other shares of the capital stock of PanAmSat.
6.2 Additional Conditions to Obligations of the Contributing
Group. The obligations of each member of the Contributing Group to effect the
transactions contemplated hereby is subject to the satisfaction of the following
conditions, any or all of which may be waived in whole or in part by
Contributor:
(a) Reorganization Agreement. All of the conditions
to the obligations of PanAmSat (other than the execution, delivery and
performance of this Agreement) under the Reorganization Agreement shall have
been satisfied or waived by PanAmSat.
<PAGE>
(b) Representations and Warranties. Each of the
representations and warranties of each member of the Newco Group set forth in
this Agreement shall be true and correct in all material respects as of the date
of this Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Closing Date. Contributor shall have
received certificates of each of the President or a Vice President and the Chief
Financial Officer of each member of the Newco Group to that effect.
(c) Performance of Obligations. Each member of the
Newco Group shall have performed in all material respects all material
obligations required to be performed by it under this Agreement on or before the
Closing Date. Contributor shall have received certificates of the President or a
Vice President and the Chief Financial Officer of each member of the Newco Group
to that effect. Notwithstanding the foregoing, the obligations of the
Contributing Group to effect the transactions contemplated by this Agreement
shall not be relieved by the failure of the foregoing conditions if such failure
is the result, directly or indirectly, of any material breach by either member
of the Contributing Group of any of its material obligations under this
Agreement.
(d) Ancillary Agreements. Each member of the Newco
Group shall have executed and delivered the Collateral Trust Agreement, Newco
shall have executed and delivered the Registration Rights Agreement and each of
Newco and HCI shall have executed and delivered the Stockholder Agreement, each
of which shall be in full force and effect.
(e) Legal Opinion. Contributor shall have received
opinions addressed to each member of the Contributing Group of counsel to each
member of the Newco Group, dated the Closing Date, with respect to the due
authorization, execution and delivery by each member of the Newco Group of each
of this Agreement and the Collateral Agreements to which it is a party, and the
enforceability of each of this Agreement and the Collateral Agreements to which
it is a party against each member of the Newco Group, with such exceptions and
qualifications as are customary and reasonable under the laws of the applicable
jurisdiction. In rendering such opinion, such counsel may rely upon certificates
of public officers and, as to matters of fact, upon certificates of duly
authorized representatives of either member of the Newco Group; provided, that
copies of such certificates still be contemporaneously delivered to Contributor.
6.3 Additional Conditions to Obligations of the Newco Group.
The obligations of each member of the Newco Group to effect the transactions
contemplated hereby are subject to the satisfaction of the following conditions,
any or all of which may be waived in whole or in part by HCI:
(a) Reorganization Agreement. All of the conditions
to the obligations of HCI (other than the execution, delivery and performance of
this Agreement) under the Reorganization Agreement shall have been satisfied or
waived by HCI.
(b) Representations and Warranties. Each of the
representations and warranties of each member of the Contributing Group set
forth in this Agreement shall be true and correct in all material respects as of
the date of this Agreement and (except for the representations and warranties
<PAGE>
set forth in Sections 3.8, 3.9 and 3.10) as of the Closing Date. HCI shall have
received certificates of the President or a Vice President and the Chief
Financial Officer of each member of the Contributing Group to that effect.
(c) Performance of Obligations. Each member of the
Contributing Group shall have performed in all material respects all material
obligations required to be performed by it under this Agreement on or before the
Closing Date. HCI shall have received certificates of the President or a Vice
President and the Chief Financial Officer of each member of the Contributing
Group to that effect. Notwithstanding the foregoing, the obligations of the
Newco Group to effect the transactions contemplated by this Agreement shall not
be relieved by the failure of the foregoing conditions if such failure is the
result, directly or indirectly, of any material breach by either member of the
Newco Group of any of its material obligations under this Agreement.
(d) Ancillary Agreements. Each of Parent and
Contributor shall have executed and delivered the Collateral Trust Agreement and
the Pledge Agreement, and Contributor shall have executed and delivered the
Registration Rights Agreement and the Stockholder Agreement, each of which shall
be in full force and effect.
(e) Legal Opinions.
(i) HCI shall have received opinions addressed to
each member of the Newco Group of Fried, Frank, Harris, Shriver &
Jacobson and Mexican counsel to each member of the Contributing Group,
dated the Closing Date, with respect to the due authorization, execution
and delivery by each member of the Contributing Group of each of this
Agreement and the Collateral Agreements, and the enforceability of each
of this Agreement and the Collateral Agreements against each member of
the Contributing Group, and the validity and perfection of the security
interests created under the Collateral Agreements, with such exceptions
and qualifications as are customary and reasonable under the laws of the
applicable jurisdiction. In rendering such opinion, such counsel may rely
upon certificates of public officers and, as to matters of fact, upon
certificates of duly authorized representatives of either member of the
Contributing Group; provided, that copies of such certificates still be
contemporaneously delivered to HCI.
(ii) HCI shall have received an opinion addressed
to each member of the Newco Group of Fried, Frank, Harris, Shriver &
Jacobson, dated as of the Closing Date, substantially in the form of
Exhibit C attached hereto, to the effect that neither Univisa nor USHI
will recognize any taxable gain or loss for United States federal income
tax purposes with respect to the Class B Common Stock held by USHI as a
result of the consummation in accordance with their terms of the
transactions required to be effected pursuant to this Agreement or the
Reorganization Agreement, including the consummation of the Asset
Contribution, the Univisa Contribution and the Merger.
<PAGE>
(f) Subsidiary and Assets at Closing. At the Closing
Date, Univisa's sole Subsidiary will be USHI, and Univisa's sole assets will
consist of (i) all of the USHI Stock, which stock shall be owned of record and
beneficially by Univisa, free and clear of any Liens, and (ii) cash sufficient
to pay all Required Expenditures. At the Closing Date, USHI's sole asset will be
all of the issued and outstanding shares of the Class B Common Stock, all of
which will be owned of record and beneficially by USHI, free and clear of any
Liens.
(g) Liabilities. At the Closing Date, except for the
Liabilities set forth on the Statement of Liabilities, neither Univisa nor USHI
shall have any Liabilities.
(h) Known Liabilities Estimate. The Known Liabilities
Estimate shall be equal to or less than $150 million.
(i) Employee and Director Matters. Neither Univisa
nor USHI shall have any employees at Closing. All members of the respective
Boards of Directors of Univisa and USHI shall resign from such boards effective
as of the Closing.
(j) Material Changes. Since the date hereof, there
has been no change in the financial condition, results of operation, business or
assets of Parent which materially adversely affects the ability of Parent to
perform its obligations under this Agreement or any of the Collateral
Agreements.
ARTICLE VII
ACTIONS BY THE CONTRIBUTING GROUP AND
THE NEWCO GROUP AFTER THE CLOSING
7.1 Books and Records. Each member of the Contributing Group
and the Newco Group agree that so long as any books, records and files relating
to the business, properties, assets or operations of Univisa and USHI, to the
extent that they pertain to the Univisa Stock prior to the Closing Date, remain
in existence and available, each party (at its expense) shall have the right to
inspect and to make copies of the same at any time during business hours for any
proper purpose. Each of the parties hereto agrees to maintain any such books,
records and files in its possession for a period of seven years after the
Closing Date.
7.2 Further Assurances. On and after the Closing Date, each
member of the Contributing Group and the Newco Group will take all appropriate
action and execute all documents, instruments or conveyances of any kind which
may be reasonably necessary or advisable to (i) carry out any of the provisions
hereof, and (ii) prepare, file with and have declared effective by the SEC any
applicable registration statement with respect to the Newco Common Stock to be
issued in connection with the transactions contemplated by this Agreement and
the Reorganization Agreement.
7.3 Tax Reporting of Univisa Contribution. Each of Parent,
HCI, Contributor and Newco agrees to record and report for all federal, state
and local tax purposes the Univisa Contribution solely as an acquisition of
Univisa Stock by Newco in exchange for the consideration set forth in Section
<PAGE>
1.2, and neither Parent, HCI, Contributor nor Newco shall make, or cause or
permit to be made, a Code Section 338 election or similar election under a
provision of any law with respect to the acquisition of Univisa Stock.
7.4 No Dissolution, Etc; Capital Structure. For a period of
two years from the Closing Date, neither member of the Newco Group shall (and
neither shall cause or permit Univisa, USHI or PanAmSat to):
(i) liquidate (completely or partially), dissolve,
merge, consolidate or combine Univisa or USHI with or into Newco,
PanAmSat or any other entity;
(ii) recapitalize in any way the classes of Class
A Common Stock, Class B Common Stock and Common Stock of PanAmSat as they
exist on the Closing Date;
(iii) liquidate (partially or completely),
dissolve, merge, consolidate or combine PanAmSat with or into (a) Univisa
or USHI, (b) Newco or (c) any other person, except in the case of clause
(c), a merger, consolidation or combination of which PanAmSat is the
survivor; or
(iv) distribute or otherwise transfer Class B
Common Stock to Newco or any other person, or contribute or otherwise
transfer the Class A Common Stock of PanAmSat or the Common Stock of
PanAmSat to Univisa or USHI.
7.5 Confidentiality.
(a) Preservation of Confidentiality. In connection
with the negotiation of this Agreement, the preparation for the consummation of
the transactions contemplated hereby and the performance of obligations
hereunder, each party acknowledges that it will have access to confidential
information relating to the other parties. The parties shall treat such
information as confidential, preserve the confidentiality thereof and not
disclose such information, except to their respective affiliates, Subsidiaries,
advisors, representatives and consultants in connection with the transactions
contemplated hereby, and except as required by Law or the applicable rules of
any securities exchange. Each of the parties agrees to maintain in confidence,
and not to disclose to any third party, any ideas, methods, developments,
inventions, improvements and business plans and information which are the
confidential information of any other party, except to their respective
affiliates, Subsidiaries, advisors, representatives and consultants in
connection with the transactions contemplated hereby, and except as required by
Law or the applicable rules of any securities exchange. If, however,
confidential information is disclosed, the disclosing party shall immediately
notify each of the other parties in writing and take all steps required to
prevent further disclosure.
(b) Property Right in Confidential Information. Until
the Closing Date, all confidential information shall remain the property of the
party who originally possessed such information. In the event of the termination
of this Agreement for any reason whatsoever, each party shall return to the
other parties, all documents, work papers and other material (including all
<PAGE>
copies thereof) obtained from such parties in connection with the transactions
contemplated hereby and will use commercially reasonable efforts, including,
without limitation, instructing its employees and others who have had access to
such information, to keep confidential and not to use any such information,
unless such information is now, or is hereafter disclosed, through no act or
omission of such party, in any manner making it available to the general public.
If any party is required by any Law or the applicable rules of any securities
exchange to disclose any confidential information, it shall provide the other
parties with prompt notice of such request so that such other parties may seek
an appropriate protective order or other appropriate remedy and/or waive
compliance with the provisions of this Agreement. If, in the absence of a
protective order or other remedy or the receipt of such a waiver, a party is
nonetheless compelled by Law or the applicable rules of any securities exchange
to disclose confidential information, then such party may disclose that portion
of the confidential information which such Law or rule requires to be disclosed,
provided that such party uses its reasonable efforts to preserve the
confidentiality of the information, whereupon such disclosure shall not
constitute a breach of this Agreement.
(c) Termination of Agreement. Subject to any Law,
each party hereto shall, and shall cause their Subsidiaries, affiliates,
advisors, representatives and consultants who obtain such information to, hold
in confidence all such non-public information until such time as such
information is otherwise publicly available, except as required by Law or the
applicable rules of any securities exchange, and, if this Agreement is
terminated and if so requested by another party, each party and its affiliates
will, and will cause their Subsidiaries, affiliates, advisors, representatives
and consultants who obtain such information to, deliver to such other party all
documents, work papers and other material (including copies extracts and
summaries thereof) obtained by or on behalf of any of them directly or
indirectly as a result of this Agreement or in connection herewith, whether so
obtained before or after the execution hereof.
ARTICLE VIII
INDEMNIFICATION
8.1 Survival and Time Limitations.
(a) Representations and Warranties. All statements
contained in the Schedules hereto or in any certificate or instrument of
conveyance delivered by or on behalf of the parties pursuant to this Agreement
or in connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the parties hereunder. The representations and
warranties of each party contained herein or made hereunder shall survive until
the expiration of all applicable statutes of limitations (including, without
limitation, all periods of extension, whether automatic or permissive), without
regard to any investigation made by any of the parties hereto. All claims for
indemnification under Sections 8.2(a)(i)(m) or 8.2(b)(i) (other than any claim
for indemnification solely with respect to a breach of the representation in
Section 4.3) must be asserted on or prior to the date of termination of the
foregoing survival periods. If a claim for indemnification under Sections
8.2(a)(i)(m) or 8.2(b)(i) (other than any claim for indemnification solely with
respect to a breach of the representation in Section 4.3) is made before the
<PAGE>
expiration of the applicable survival period referred to above, then
(notwithstanding the expiration of such survival period) the representation or
warranty applicable to such claim shall survive until, but only for purposes of,
the resolution of such claim.
(b) Covenants. All of the covenants and agreements of
each party contained herein or made hereunder shall survive indefinitely. Claims
for indemnification under Sections 8.2(a)(i)(n), 8.2(b)(i) (solely with respect
to a breach of the representation in Section 4.3) or 8.2(b)(ii) shall survive
indefinitely and may be asserted indefinitely.
(c) General Indemnity. Claims may be made for general
indemnity and to be saved and held harmless under Section 8.2(a)(ii) at any
time, and from time to time, no matter when the claim, or the event or act
giving rise to the claim, occurs or arises.
8.2 Indemnification.
(a) By Parent and Contributor.
(i) Parent and Contributor, jointly and severally,
shall indemnify, save and hold harmless each member of the Newco Group,
its affiliates and Subsidiaries, and its and their respective
representatives, successors and assigns, from and against any and all
costs, losses (including diminution in value), taxes, Liabilities,
obligations, damages, lawsuits, deficiencies, claims, demands, and
expenses (whether or not arising out of third-party claims), including
interest, penalties, costs of mitigation, losses in connection with any
Environmental Law (including any clean-up or remedial action), lost
profits and other losses (including consequential damages), damages to
the environment, reasonable attorneys' fees and all amounts paid in
investigation, defense or settlement of any of the foregoing
(collectively, "Damages"), incurred in connection with, arising out of,
resulting from or incident to (m) any breach of any representation or
warranty or the inaccuracy of any representation, made by either member
of the Contributing Group in or pursuant to this Agreement and (n) any
breach of any covenant or agreement made by either member of the
Contributing Group in or pursuant to this Agreement.
(ii) In addition, without duplication, and as a
condition to the consummation of the transactions contemplated hereby by
each member of the Newco Group, Parent and Contributor, jointly and
severally, shall indemnify, save and hold harmless each member of the
Newco Group, its affiliates and Subsidiaries, and its and their
respective representatives, successors and assigns from and against any
and all Damages incurred in connection with, arising out of, resulting
from or incident to (o) administering either of the Collateral
Agreements, (p) any and all Transaction Liabilities, excluding any and
all tax Liabilities, (q) any and all taxes of Univisa or USHI (or any
other entity that is or was at any time a Subsidiary or other affiliate
of Univisa or USHI or either of them) for all taxable years and other
periods ending on or before or including (for the Pre-Closing Portions of
any Straddle Periods) the Closing Date ("Pre-Closing Periods"), including
any and all such taxes attributable to any and all distributions of
assets by Univisa or its Subsidiaries made in contemplation of the
<PAGE>
transactions contemplated by this Agreement or the Reorganization
Agreement, including the distribution of the Distributed Assets by
Univisa or its Subsidiaries to the Parent Distributees, (r) any and all
taxes imposed on taxable income or gain recognized by Univisa or USHI for
United States federal, state or local income tax purposes with respect to
the Class B Common Stock held by USHI solely with respect to the Asset
Contribution, the Univisa Contribution, the Merger and/or the
consummation of any other agreement expressly provided for in this
Agreement or the Reorganization Agreement, in each case in accordance
with their respective terms, but not with respect to any income or gain
recognized on the sale, exchange or other disposition of the Class B
Common Stock after the Closing Date, (s) any and all Liabilities imposed
upon either member of the Newco Group by reason of Newco's status as
transferee of the Univisa Stock and (t) any and all taxes of either
member of the Newco Group imposed on the actual or constructive receipt
of indemnity payments in respect of Damages under this Section 8.2(a) to
the extent necessary to make the after-tax amount of such payments equal
to the amount of such Damages incurred by the Newco Group; provided
however, that notwithstanding the foregoing, Parent and Contributor shall
not be responsible for payment of, and shall not be required to
indemnify, save or hold harmless any member of the Newco Group, its
affiliates or Subsidiaries or its or their respective representatives,
successors or assigns from or against, any and all Damages incurred in
connection with, arising out of, resulting from or incident to (1) any
breach of any representation, warranty, covenant or agreement, or the
inaccuracy of any representation, warranty, covenant or agreement, in any
case, made by either member of the Newco Group in Sections 4.3, 7.3 or
7.4 of this Agreement, or (2) any transactions consummated after the
Closing on the Closing Date, other than transactions required to be
effected on the Closing Date pursuant to this Agreement or the
Reorganization Agreement.
(iii) Payments by a member of the Newco Group, its
affiliates and Subsidiaries, and its and their respective
representatives, successors and assigns, of amounts for which
indemnification is sought hereunder, shall not be a condition precedent
to recovery hereunder.
(iv) Notwithstanding the foregoing, neither HCI,
nor its affiliates or Subsidiaries (other than Newco) shall be entitled
to be indemnified for Damages under this Section 8.2 to the extent that
(A) such Damages arise out of or result from HCI's ownership of Newco
Common Stock and (B) Newco is being fully indemnified hereunder with
respect to such Damages.
(b) By the Newco Group. Newco and HCI, jointly and
severally, shall indemnify and save and hold harmless Parent, Contributor, their
respective affiliates and subsidiaries, and their respective representatives,
successors and assigns from and against any and all Damages incurred in
connection with, arising out of, resulting from or incident to (i) any breach of
any representation or warranty or the inaccuracy of any representation, made by
either member of the Newco Group in or pursuant to this Agreement; or (ii) any
<PAGE>
breach of any covenant or agreement made by either member of the Newco Group in
or pursuant to this Agreement.
Payments by Parent, Contributor, their respective affiliates
and Subsidiaries, and their respective representatives, successors and assigns,
of amounts for which indemnification is sought hereunder, shall not be a
condition precedent to recovery hereunder.
(c) Straddle Periods. Responsibility for payment of
any and all taxes which are reported on tax returns which cover both Pre-Closing
Periods and periods after the Closing ("Post-Closing Periods") (collectively,
"Straddle Periods") shall be apportioned, subject to and except as set forth in
Section 8.2(a)(ii), between Contributor, on the one hand, and Univisa, on the
other hand, based on the actual operations and transactions of Univisa and USHI
(and any entity that is or was at any time during a Straddle Period a Subsidiary
or other affiliate of Univisa) during the portion of such Straddle Period ending
on the Closing Date, including the consummation of the Univisa Contribution, the
Asset Contribution, the Merger and the other transactions required to be
effected pursuant to this Agreement and the Reorganization Agreement, in
accordance with their respective terms (the "Pre-Closing Portion of a Straddle
Period"), and the portion thereof beginning on the day after the Closing Date.
Each such period shall be deemed to be a separate taxable period.
(d) Filings. All tax returns of Univisa and USHI (and
any entity that is or was at any time during a relevant taxable period a
Subsidiary or other affiliate of Univisa) for Pre-Closing Periods and Straddle
Periods shall be prepared at Contributor's cost and expense, and under the
direction and control of Contributor; provided,however, that any portion of any
Straddle Period return for which Univisa has liability hereunder shall be
subject to the review and consent of Univisa, which consent shall not be
unreasonably withheld.
(e) Refunds. Any refunds or credits of any and all
taxes received by or credited to Univisa or USHI (or any entity that is or was
at any time during a Pre-Closing Period a Subsidiary or other affiliate of
Univisa) attributable to Pre-Closing Periods ("Contributor's Refunds") shall be
for the benefit of Contributor, and Newco and HCI shall use reasonable efforts
to obtain and promptly pay over to Contributor any Contributor's Refunds.
(f) Defense of Claims. If a claim for Damages (other
than a claim for Damages pursuant to clauses (q), (r), (s) or (t) of Section
8.2(a)(ii) which shall be governed solely by the provisions of Section
8.2(g)(ii)) (a "Claim") is to be made by a party entitled to indemnification
hereunder against the indemnifying party, the party claiming such
indemnification shall give written notice (a "Claim Notice") to the indemnifying
party as soon as practicable after the party entitled to indemnification becomes
aware of any fact, condition or event which may give rise to Damages for which
indemnification may be sought under this Section 8.2. If any lawsuit or
enforcement action is filed against any party entitled to the benefit of
indemnity hereunder, written notice thereof shall be given to the indemnifying
party as promptly as practicable (and in any event within 15 calendar days after
<PAGE>
the service of the citation or summons). The failure of any indemnified party to
give timely notice hereunder shall not affect rights to indemnification
hereunder, except to the extent that the indemnifying party demonstrates actual
damage caused by such failure. After such notice, if the indemnifying party
shall acknowledge in writing to the indemnified party that the indemnifying
party shall be obligated under the terms of its indemnity hereunder in
connection with such lawsuit or action and so long as the indemnifying party has
not committed a Make-Whole Breach (as such term is defined in the Collateral
Trust Agreement), then the indemnifying party shall be entitled, if it so elects
at its own cost, risk and expense, (i) to take control of the defense and
investigation of such lawsuit or action, (ii) to employ and engage attorneys of
its own choice and reasonably satisfactory to the indemnified party to handle
and defend the same unless the named parties to such action or proceeding
include both the indemnifying party and the indemnified party and the
indemnified party has been advised in writing by counsel that there may be one
or more legal defenses available to such indemnified party that are different
from or additional to those available to the indemnifying party, in which event
the indemnified party shall be entitled, at the indemnifying party's cost, risk
and expense, to separate counsel of its own choosing, and (iii) to compromise or
settle such claim, which compromise or settlement can be made without the
written consent of the indemnified party, so long as such compromise or
settlement solely provides for monetary relief and includes an unconditional
release of each indemnified party from all Liabilities arising out of such
claim, and in other instances will require the written consent of the
indemnified party, such consent not to be unreasonably withheld; provided,
however, if such lawsuit or action involves a breach of the representations and
warranties set forth in Section 3.2,(with respect to the ownership of Univisa or
USHI), then, notwithstanding the foregoing, the indemnified party shall be
entitled to control such remediation or resolution, including to take control of
the defense and investigation of such lawsuit or action, to employ and engage
attorneys of its own choice to handle and defend the same, at the indemnifying
party's cost, risk and expense, and to compromise or settle such Claim;
provided, further, however, that such Claim shall not be compromised or settled
without the written consent of the indemnifying party, which consent shall not
be unreasonably withheld. If the indemnifying party fails to assume the defense
of such claim within 15 calendar days after receipt of the Claim Notice, the
indemnified party against which such claim has been asserted will (upon
delivering notice to such effect to the indemnifying party) have the right to
undertake, at the indemnifying party's cost and expense, the defense, compromise
or settlement of such claim on behalf of and for the account and risk of the
indemnifying party. The indemnifying party shall reimburse, as an interim
measure during the pendency of any Claim, the indemnified party on a monthly
basis for all reasonable legal or other expenses incurred in connection with
investigating or defending any such Claim. Any such interim reimbursement
payments which are not made within 30 days of a request for reimbursement, shall
bear interest at the rate of 9% per annum from the date of such request. In the
event the indemnified party assumes the defense of the claim, the indemnified
party will keep the indemnifying party reasonably informed of the progress of
any such defense, compromise or settlement. The indemnifying party shall be
liable for any settlement of any action effected pursuant to and in accordance
with this Section 8.2 and for any final judgment (subject to any right of
appeal), and the indemnifying party agrees to indemnify and hold harmless an
indemnified party from and against any Damages by reason of such settlement or
judgment.
<PAGE>
The indemnified party shall cooperate in all reasonable
respects with the indemnifying party and such attorneys in the investigation,
trial and defense of such lawsuit or action and any appeal arising therefrom;
provided, however, that the indemnified party may, at its own cost, participate
in the investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom. The parties shall cooperate with each other in any
notifications to insurers.
(g) Cooperation in Tax Matters.
(i) Each member of the Contributing Group and the
Newco Group shall (a) each provide one another (and its counsel) with
such assistance, and cooperate fully with one another, as and to the
extent reasonably requested by any of them in connection with the
preparation or filing of any tax return for Pre-Closing Periods and
Straddle Periods, any Contributor's Refund or any defense or settlement
of any Tax Matter (including, without limitation, in the case of Newco,
by providing any necessary powers of attorney in respect of Univisa or
USHI in connection with any Tax Matter relating to any tax Liability
for which Parent and Contributor would be liable under Section
8.2(a)(ii)), relating to any tax Liability of Univisa, USHI or any of
their respective Subsidiaries or affiliates, (b) retain and provide one
another with any records or other information that may be relevant to
any such tax return, Contributor's Refund or Tax Matter, and (c)
provide one another with any final determination of any audit or
examination, proceeding, or determination that affects any amount
required to be shown on any such tax return of the other(s) (or any
Subsidiary or affiliate of Univisa) for any period. Without limiting
the generality of the foregoing, each member of the Contributing Group
and the Newco Group shall each retain, until the applicable statutes of
limitations (including any extensions) have expired, copies of all tax
returns, supporting work schedules, and other records or information
that may be relevant to any such tax return, Contributor's Refund or
Tax Matter and shall not destroy or otherwise dispose of any such
records without first providing the other party with a reasonable
opportunity to review and copy the same.
(ii) Newco and HCI shall promptly notify Parent and
Contributor in writing upon receipt by Newco, HCI or any of their
respective affiliates or Subsidiaries (including Univisa and USHI) of
notice of any pending or threatened tax audits or assessments which may
affect the tax Liabilities of Univisa or USHI (or any entity that is or
was at any time a Subsidiary or other affiliate of Univisa or USHI) for
which Parent and Contributor would be liable under clauses (q), (r),
(s) or (t) of Section 8.2(a)(ii), and Parent and Contributor shall
promptly notify Newco and HCI in writing upon receipt by Parent,
Contributor or any of their respective affiliates of notice of any
pending or threatened tax audits or assessments which may affect the
tax Liabilities of Univisa or USHI (or any entity that is or was at any
time a Subsidiary or other affiliate of Univisa) for which Newco and
HCI would be liable under this Agreement. The failure of any
<PAGE>
indemnified party to give timely notice hereunder shall not affect
rights to indemnification hereunder, except to the extent that the
indemnifying party demonstrates actual damage caused by such failure.
Contributor shall have the right to represent and control Univisa's and
USHI's and any of their respective affiliates' or Subsidiaries'
interests in any audit or proceeding, including any audit, examination,
assessment, notice of deficiency or other adjustment or proposed
adjustment, or administrative or judicial proceeding, the settlement of
any of the foregoing, any waiver or extension of the statute of
limitations, or the filing of any amended return (a "Tax Matter"),
involving a tax Liability for which Contributor and Parent would be
liable under Section 8.2(a)(ii) and to employ counsel of its choice at
its expense; provided, however, Newco shall represent and control the
interests of Univisa and USHI if Contributor commits a Make-Whole
Breach. Newco and HCI shall have the right to represent and control
Univisa's and USHI's (and any of their respective affiliates' or
Subsidiaries') interests in any Tax Matter involving a tax Liability
for which Newco and HCI would be liable under this Agreement and to
employ counsel of their choice at their expense. With respect to any
Tax Matter in which Contributor exercises its right to represent and
control the interests of Univisa and USHI, Contributor and Newco shall
fully cooperate with one another and shall, except as they may
otherwise agree, jointly attend all meetings and proceedings and
jointly prepare all protests, briefs and other documents.
(h) Brokers and Finders. Pursuant to the provisions
of this Section 8.2, each member of the Newco Group, on the one hand, and each
member of the Contributing Group, on the other hand, shall indemnify, hold
harmless and defend one another from the payment of any and all broker's and
finder's expenses, commissions, fees or other forms of compensation which may be
due or payable from or by the indemnifying party, or may have been earned by any
third party acting on behalf of the indemnifying party in connection with the
negotiation and execution hereof and the consummation of the transactions
contemplated hereby.
(i) Treatment of Indemnity Payments. Newco, HCI and
Contributor agree to treat all indemnity payments made pursuant to this
Agreement as adjustments to the consideration for the Univisa Contribution set
forth in Section 1.2.
(j) Holdback Amount. As security for the due and
punctual payment of each and all present and future indemnities, Liabilities and
obligations of every type and description of either member of the Contributing
Group at any time arising under, pursuant to, or in respect of this Article
VIII, at the Closing, each member of the Contributing Group shall duly execute
and deliver each of the Collateral Agreements and all assignments, financing
statements and other instruments required thereunder or pursuant thereto. Each
of the parties hereto agrees and acknowledges that the Trust Holdback shall not
be the exclusive source of indemnification for the Newco Group from Contributor
and Parent pursuant to this Article VIII, but that the Newco Group may proceed
directly against Contributor and Parent at law, equity or otherwise.
<PAGE>
ARTICLE IX
TERMINATION AND AMENDMENT
9.1 Termination. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by mutual written consent of Contributor and HCI;
(b) by Contributor or HCI, so long as such party is
not in material breach of its material obligations hereunder, if the Univisa
Contribution shall not have been consummated on or before the date that is 15
months from the date of this Agreement;
(c) by Contributor, if the conditions set forth in
Section 6.2 shall not have been complied with or performed on or prior to the
Closing Date and Contributor shall not have materially breached any of its
material representations, warranties, covenants or agreements contained herein,
and such noncompliance or nonperformance shall not have been cured or eliminated
(or by its nature cannot be cured or eliminated) on or before the Closing Date;
(d) by HCI, if the conditions set forth in Section
6.3 shall not have been complied with or performed on or prior to the Closing
Date and HCI shall not have materially breached any of its material
representations, warranties, covenants or agreements contained herein, and such
noncompliance or nonperformance shall not have been cured or eliminated (or by
its nature cannot be cured or eliminated) on or before the Closing Date;
(e) by Contributor or HCI if any injunction or order
of a court or other competent authority preventing the consummation of the
Univisa Contribution shall have become permanent, final and non-appealable; or
(f) by Contributor or by HCI if for any reason the
Reorganization Agreement shall have been terminated; provided, however, that the
right to terminate this Agreement under this Section 9.1(f) shall not be
available to Contributor if the Reorganization Agreement shall have been
terminated by PanAmSat pursuant to either Section 9.1(e), Section 9.1(f) or
Section 9.1(g) thereof.
9.2 Effect of Termination. In the event of termination of this
Agreement by any party as provided in Section 9.1, (a) written notice thereof
shall forthwith be given to the other parties specifying the provision hereof
pursuant to which such termination is made and (b) this Agreement shall
forthwith become void and there shall be no Liability on the part of any party
hereto or their respective Subsidiaries, affiliates, officers, directors or
stockholders, except to the extent that such termination results from the
willful or reckless breach by a party hereto of any of its representations or
warranties, or of any of its covenants or agreements, in each case, as set forth
in this Agreement. The provisions of Sections 7.5 and 10.2 shall survive any
termination of this Agreement, unless otherwise agreed by the parties.
<PAGE>
9.3 Amendment. Subject to applicable law, this Agreement may
be amended, modified or supplemented only by written agreement of the parties at
any time prior to the Closing Date with respect to any of the terms contained
herein.
9.4 Extension; Waiver. At any time prior to the Closing Date,
and subject to applicable law, the parties hereto, by action taken or authorized
by their respective Boards of Directors, may, to the extent legally allowed: (i)
extend the time for the performance of any of the obligations or other acts of
the other parties hereto; (ii) waive their rights with respect to any
inaccuracies in the representations and warranties of the other parties
contained herein or in any document delivered pursuant hereto; and (iii) waive
their rights with respect to compliance with any of the agreements of the other
parties or conditions contained herein to their respective obligations. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party.
The failure of any party hereto to assert any of its rights hereunder shall not
constitute a waiver of such rights.
ARTICLE X
GENERAL PROVISIONS
10.1 Termination of Confidentiality Agreement. The
Confidentiality Agreement by and between Hughes Electronics Corporation and
Univisa dated September 4, 1996 shall terminate and be of no further force and
effect upon execution and delivery of this Agreement.
10.2 Expenses. Whether or not the Univisa Contribution is
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expenses except as expressly provided herein or in the Collateral
Agreements and except that Univisa shall reimburse each member of the Newco
Group for the following fees and out-of-pocket expenses, only to the extent that
such fees and out-of-pocket expenses are incurred incident to the preparation of
this Agreement (including all exhibits and schedules hereto) and the
consummation of the transactions contemplated hereby and not incident to the
preparation of the Reorganization Agreement and the transactions contemplated
thereby: (a) the reasonable fees and disbursements of counsel for each member of
the Newco Group, including any opinions to be rendered by such counsel; (b) the
fees and disbursements of the certified public accountants for each member of
the Newco Group; (c) all out-of-pocket expenses incurred by any member of the
Newco Group; and (d) without duplication, all out-of-pocket costs and expenses
incurred by any member of the Newco Group or any of its Subsidiaries in
complying with Section 7.4; provided, however, that the aggregate of all the
fees, disbursements and expenses described in clauses (a), (b) and (c) shall not
exceed $500,000.
10.3 Notices. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when received if
personally delivered; when transmitted if transmitted by telecopy, electronic or
digital transmission method; the day after it is sent, if sent for next day
delivery to a domestic address by recognized overnight delivery service (e.g.,
<PAGE>
Federal Express); and upon receipt, if sent by certified or registered mail,
return receipt requested. In each case notice shall be sent to:
(a) if to Newco, to:
Magellan International, Inc.
c/o Hughes Communications, Inc.
P.O. Box 9712
Long Beach, CA 90810-9928
Attention: President
Telephone: (310) 525-5010
Telecopy: (310) 525-5015
and if to HCI, to:
Hughes Communications, Inc.
P.O. Box 9712
Long Beach, CA 90810-9928
Attention: President
Telephone: (310) 525-5010
Telecopy: (310) 525-5015
in each case, with a copy to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attention: Bruce R. Lederman, Esq.
Telephone: (213) 485-1234
Telecopy: (213) 891-8763
(b) if to Parent, to:
Grupo Televisa, S.A.
Avenida Chapultepec No. 28
5th Piso
Colonia Doctores
Mexico D.F. 06724
Attention: Chief Financial Officer
Telephone: 011-525-709-3333
Telecopy: 011-525-224-5629
<PAGE>
and if to Contributor, to:
Satellite Company, LLC
Fonovisa Centroamerica, S.A.
De Popa de Curridabat 25 Mts. Este
Edificio Galerias del Este
Local 8
San Jose, Costa Rica
Attention: Oscar Aldana
Telephone: 011-506-253-0758
Telecopy: 011-506-224-0836
in each case, with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Joseph A. Stern, Esq.
Telephone: (212) 859-8000
Telecopy: (212) 859-4000
10.4 Interpretation. When a reference is made in this
Agreement to Sections or Articles, such reference shall be to a Section or
Article of this Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the word "include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation". The phrase
"made available" in this Agreement shall mean that the information referred to
has been made available if requested by the party to whom such information is to
be made available. This Agreement shall not be construed for or against either
party by reason of the authorship or alleged authorship of any provision hereof
or by reason of the status of the respective parties.
10.5 Entire Agreement. This Agreement (together with any
documents and instruments referred to herein, including exhibits and schedules)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and is not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder.
10.6 Assignment. Except for assignments by a member of the
Holding Group to any affiliate or Subsidiary of such member with respect of some
or all of its rights under Article VIII (which assignment can be made without
the written consent of Contributor), neither this Agreement nor any of the
rights, interests, obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of HCI, in the event of an assignment by either member of the
Contributing Group, or Contributor, in the event of an assignment by either
<PAGE>
member of the Newco Group. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
10.7 Governing Law. This Agreement shall be construed,
interpreted and the rights of the parties determined in accordance with the laws
of the State of New York (without reference to the choice of law provisions),
except with respect to matters of law concerning the internal corporate affairs
of any corporate entity which is a party to or the subject of this Agreement,
and as to those matters the law of the jurisdiction under which the respective
entity derives its powers shall govern.
10.8 Severability. Each party agrees that, should any court or
other competent authority hold any provision of this Agreement or part hereof to
be null, void or unenforceable, or order any party to take any action
inconsistent herewith or not to take an action consistent herewith or required
hereby, the validity, legality and enforceability of the remaining provisions
and obligations contained or set forth herein shall not in any way be affected
or impaired thereby, unless the foregoing inconsistent action or the failure to
take an action constitutes a material breach of this Agreement or makes the
Agreement impossible to perform, in which case this Agreement shall terminate
pursuant to Article IX. Upon any such holding that any provision of this
Agreement is null, void or unenforceable, the parties will negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated by this Agreement are consummated to the extent
possible. Except as otherwise contemplated by this Agreement, to the extent that
a party hereto took an action inconsistent herewith or failed to take action
consistent herewith or required hereby pursuant to an order or judgment of a
court or other competent authority, such party shall incur no Liability unless
such party did not in good faith seek to resist or object to the imposition or
entering of such order or judgment.
10.9 Service of Process; Consent to Jurisdiction.
(a) Service of Process. Each of the parties hereto
irrevocably consents to the service of any process, pleading, notices or other
papers by the mailing of copies thereof by registered, certified or first class
mail, postage prepaid, to such party at such party's address set forth herein,
or by any other method provided or permitted under New York law. Additionally,
each member of the Contributing Group hereby appoints Univisa, Inc., 767 Fifth
Ave., New York, N.Y. 10153 as agent for service of process in New York and each
member of the Newco Group hereby appoints C T Corporation System, 1633 Broadway,
New York, NY 10019 as agent for service of process in New York.
(b) Consent and Jurisdiction. Each party irrevocably
and unconditionally agrees and consents that any suit, action or other legal
proceeding arising out of or related to this Agreement shall be brought and
heard in the Borough of Manhattan, State of New York and each party irrevocably
consents to personal jurisdiction in any and all tribunals in said Borough.
<PAGE>
10.10 Injunctive Relief. The parties acknowledge that it will
be impossible to measure in money the damages that would be suffered if the
parties fail to comply with any of the obligations herein imposed on them and
that in the event of any such failure, an aggrieved person or entity will be
irreparably damaged and will not have an adequate remedy at law. Any such person
or entity shall, therefore, be entitled to injunctive relief, including specific
performance, to enforce such obligations, and if any action should be brought in
equity to enforce any of the provisions of this Agreement, none of the parties
shall raise the defense that there is an adequate remedy at law.
10.11 Arbitration. Notwithstanding anything herein to the
contrary, in the event that there shall be a dispute among the parties arising
out of or relating to Section 5.9, Article VIII or the Collateral Trust
Agreement, the parties agree that such dispute shall be resolved by final and
binding arbitration in Los Angeles, California, administered by Judicial
Arbitration & Mediation Services, Inc. ("JAMS"), in accordance with JAMS' rules
of practice then in effect or such other procedures as the parties may agree to
prior to the Closing. Depositions may be taken and other discovery may be
obtained during such arbitration proceedings to the same extent as authorized in
civil judicial proceedings. Any award issued as a result of such arbitration
shall be final and binding between the parties thereto, and shall be enforceable
by any court having jurisdiction over the party against whom enforcement is
sought. The fees and expenses of such arbitration (including reasonable
attorneys' fees) or any action to enforce an arbitration award shall be paid by
the party that does not prevail in such arbitration, unless the arbitrator
determines another method is more equitable.
10.12 Attorneys' Fees. Subject to Section 10.11, if any party
to this Agreement brings an action to enforce its rights under this Agreement,
the prevailing party shall be entitled to recover its costs and expenses,
including reasonable attorneys' fees, incurred in connection with such action,
including any appeal of such action.
10.13 Cumulative Remedies. All rights and remedies of each
party hereto are cumulative of each other and of every other right or remedy
such party may otherwise have at law or in equity, and the exercise of one or
more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies.
10.14 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same instrument
and shall become effective when executed and delivered by each of the parties.
10.15 Investment Representations.
(a) Contributor is acquiring the Newco Common Stock
with its own funds or property for investment, for its own account, and not as a
nominee or agent for any other person, firm or corporation, and not with a view
to the sale or distribution of all or any part thereof, and Contributor has no
present intention of selling, granting participation in, or otherwise
distributing any of the Newco Common Stock. Contributor does not have any
contract, undertaking, agreement or arrangement with any person, firm or
<PAGE>
corporation to sell, transfer or grant participation to such person, firm or
corporation, with respect to any of the Newco Common Stock.
(b) Contributor understands and agrees that (i) the
Newco Common Stock will not be registered under the Securities Act of 1933, as
amended (the "Securities Act"), in part based upon an exemption from the
registration predicated on the accuracy and completeness of its representations
and warranties appearing herein and (ii) Contributor shall not sell, transfer or
assign any shares of the Newco Common Stock until they are registered under the
Act or an exemption from the registration and prospectus delivery requirements
of the Act is available, and (iii) there is no assurance that such an exemption
from registration will ever be available or that the Newco Common Stock will
ever be able to be sold.
(c) By reason of its net worth, Contributor is an
"accredited investor" (as defined in Regulation D promulgated under the
Securities Act). Contributor was not formed for the specific purpose of
acquiring the stock issued pursuant to this Agreement. Contributor's purchase is
directed by a sophisticated person as described in Regulation D promulgated
under the Securities Act.
(d) Contributor understands and acknowledges that
each certificate representing the Newco Common Stock issued to Contributor in
the Univisa Contribution will bear a legend to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED, PLEDGED
OR HYPOTHECATED EXCEPT PURSUANT TO (I) A REGISTRATION STATEMENT WITH
RESPECT TO SUCH SECURITIES, WHICH IS EFFECTIVE UNDER SUCH ACT, OR (II)
ANY EXEMPTION FROM REGISTRATION UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES, INCLUDING RULE 144, PROVIDED AN OPINION OF
COUNSEL IS FURNISHED, REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO
MAGELLAN INTERNATIONAL, INC., THAT AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT IS AVAILABLE."
Contributor hereby agrees not to offer, sell or otherwise transfer the shares of
Newco Common Stock in violation of the foregoing legend.
[signature page to follow]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
GRUPO TELEVISA, S.A.
By: /s/ Guillermo Canedo White
--------------------------------
Name: Guillermo Canedo White
Title: Executive Vice President
SATELLITE COMPANY, LLC
By: /s/ Guillermo Canedo White
--------------------------------
Name: Guillermo Canedo White
Title: Authorized Signatory
MAGELLAN INTERNATIONAL, INC.
By: /s/ Charles H. Noski
--------------------------------
Name: Charles H. Noski
Title: President
HUGHES COMMUNICATIONS, INC.
By: /s/ Jerald F. Farrell
--------------------------------
Name: Jerald F. Farrell
Title: President
<PAGE>
EXHIBIT A
to Stock Contribution and Exchange Agreement
COLLATERAL TRUST AGREEMENT
This COLLATERAL TRUST AGREEMENT (this "Agreement"), dated as
of __________ __ 199_, is entered into by and among MAGELLAN INTERNATIONAL,
INC., a Delaware corporation ("Newco"), HUGHES COMMUNICATIONS, INC., a
California corporation ("HCI," and together with Newco, the "Newco Group"),
SATELLITE COMPANY, LLC, a Nevada limited liability company ("Contributor"),
GRUPO TELEVISA, S.A., a corporation (Sociedad Anonima) organized under the laws
of Mexico ("Parent"), and [__________], a national banking association with its
office at [_______], as Collateral Trustee for Newco Group (the "Trustee").
RECITALS
A. The Newco Group, Contributor and Parent have entered into a
Stock Contribution and Exchange Agreement, dated as of September 20, 1996 (the
"Stock Contribution and Exchange Agreement"), which provides, among other
things, for the transfer by Contributor of all of the stock of Univisa, Inc.
("Univisa"), a Delaware corporation, to Newco.
B. The Stock Contribution and Exchange Agreement provides that
Contributor and Parent, jointly and severally, shall indemnify, save and hold
harmless the Newco Group, its affiliates and Subsidiaries, with respect to
certain matters upon the terms and subject to the conditions provided in the
Stock Contribution and Exchange Agreement and that as security therefor (and not
in lieu thereof) a trust estate shall be established for the protection of the
Newco Group, its affiliates and Subsidiaries.
C. A material condition to the consummation of the transactions
contemplated by the Stock Contribution and Exchange Agreement is that the
parties hereto enter into this Agreement and that Contributor, Parent and the
Trustee enter into a Pledge and Security Agreement of even date (the "Pledge and
Security Agreement").
D. The Trustee has agreed to hold the Trust Estate (as defined
herein) in accordance with the terms and provisions contained herein.
AGREEMENT
In consideration of the foregoing and the mutual promises
contained herein and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties, intending to be legally
bound, hereby agree as follows:
<PAGE>
1. Defined Terms.
(a) For purposes of this Agreement:
"cash" means United States Dollars in such form as may, at the
time, be legal tender for the payment of debts in the United States.
"Cash Equivalents" means United States Dollar indebtedness in
the form of (i) marketable direct obligations issued or unconditionally
guaranteed by the United States Government or issued by any agency thereof and
backed by the full faith and credit of the United States, in each case maturing
within 90 days from the date of acquisition thereof, (ii) marketable direct
obligations issued by any state of the United States of America or any political
subdivision of any such state or any public instrumentality thereof maturing
within 90 days from the date of acquisition thereof and, at the time of
acquisition, having a rating in one of the two highest rating categories
obtainable from either Standard & Poor's Corporation or Moody's Investors
Service, Inc. (or, if at any time, neither of such rating services shall be
rating such obligations, then from such other nationally recognized rating
services as may be acceptable to Newco), (iii) certificates of deposit maturing
within 90 days from the date of acquisition thereof and issued by any commercial
bank which accepts deposits insured by the Federal Deposit Insurance Corporation
and which has a combined capital and surplus greater than $500 million and a
long term certificate of deposit rating in one of the two highest rating
categories obtainable from either Standard & Poor's Corporation or Moody's
Investors Service, Inc. (or, if at any time, neither of such rating services
shall be rating such obligations, then from such other nationally recognized
rating services as may be acceptable to Newco) (any such commercial bank, an
"Acceptable Bank"); (iv) repurchase agreements, Eurodollar deposits and bankers
acceptances maturing within 90 days from the date of acquisition thereof and
issued by an Acceptable Bank, and (v) investments in money market funds that
invest solely in Cash Equivalents or repurchase agreements secured by such Cash
Equivalents described in clauses (i) and (ii) above.
"Event of Default" has the meaning assigned in the Pledge and
Security Agreement.
"Expiration Date" means the last day in the 91-day period
following the expiration of the statutes of limitations applicable to the
assessment of any tax against Univisa or USHI (or any affiliate or Subsidiary of
either of them) with respect to all Pre-Closing Periods taking into account any
waivers, extensions or tollings of any such statutes of limitation; provided,
however, that if as of the last day of such 91-day period there are any Tax
Claims, then, notwithstanding the foregoing, the Expiration Date shall not occur
until the day immediately following the day on which there are no Tax Claims.
"Fair Market Value" means, as of any date of determination,
the average of the Quoted Prices of Newco Common Stock for the 20 consecutive
trading days prior to such date of determination.
<PAGE>
"Final Tax Amount" means, as of any date of determination, the
amount, if any, of a Liability or Damages in respect of taxes of Univisa or USHI
(or any affiliate or Subsidiary of either of them) for which Contributor and
Parent would be liable under Section 8.2(a)(ii) of the Stock Contribution and
Exchange Agreement, which taxes (a) are determined to be due and payable as of
such date pursuant to (i) a final determination made by, or settlement concluded
with, the applicable taxing authority with respect to such taxes or (ii) a
final, binding and nonappealable judgment rendered with respect to such taxes
and (b) are unpaid as of such date.
"Newco Common Stock" means Common Stock, $ .01 par value, of
Newco.
"Known Liabilities" means Liabilities or Damages which are
Indemnification Obligations that are now or hereafter included as Scheduled
Liabilities or are the subject of a Liabilities Claim.
"Liabilities Claim" means a claim (other than a Tax Claim) by
any party that a Liability or Damages which are Indemnification Obligations
exist, but only to the extent that such claimed Liability or Damages are not
included as Scheduled Liabilities.
"Maintenance Level" means (i) prior to the third anniversary
of the date hereof, $5 million, (ii) on and after the third and prior to the
tenth anniversary of the date hereof, $2 million, and (iii) -0- thereafter.
"Pending Amounts" means, at any time, the aggregate amount of
all Liabilities Claims, except Liabilities Claims in respect of a Liability or
Damages for which both (i) it has been and remains agreed or determined, in
accordance with Section 6 hereof, that a reserve should or should not be
maintained as part of the Scheduled Liabilities and (ii) no claim, dispute,
arbitration or proceeding is pending as to the amount of any such reserve.
"Quoted Price" means the last reported sale price of Newco
Common Stock as reported by NASDAQ or, if Newco Common Stock is listed on a
national securities exchange, the last reported sale price on such exchange
(which shall be for consolidated trading if applicable to such exchange), or if
neither so reported or listed, the last reported bid price of Newco Common
Stock.
"Scheduled Liabilities" means Known Liabilities listed on the
Schedule of Liabilities to be maintained pursuant to Section 6.
"Tax Claim" means, as of any date of determination, a claim
asserted or assessed in any (i) revenue agent's report, (ii) notice of proposed
adjustment, (iii) notice of deficiency, (iv) notice of assessment, (v) judicial
pleading, (vi) other written document of similar import received from a taxing
authority or (vii) potential claim relating to an applicable requirement or
obligation to notify a state or local taxing authority with respect to a federal
income tax adjustment involving a claim described in clauses (i) - (vi),
involving, in any case, a Liability or Damages in respect of taxes of Univisa or
USHI (or any affiliate or Subsidiary of either of them) for which Contributor
and Parent would be liable under Section 8.2(a)(ii) of the Stock Contribution
<PAGE>
and Exchange Agreement but only to the extent that such claim has not been
resolved pursuant to either (a) a final determination made by, or settlement
concluded with, the applicable taxing authority with respect to such claim, or
(b) a final, binding and nonappealable judgment rendered with respect to such
claim.
"Tax Reserve" means 100% of the amount of any Tax Claim or
Final Tax Amount, as applicable.
"Unknown Liabilities" means Liabilities or Damages which are
Indemnification Obligations but are not Known Liabilities.
(b) Capitalized terms used herein without definition shall
have the meanings ascribed to them in the Stock Contribution and Exchange
Agreement.
2. Declaration of Trust. To secure the payment, observance and
performance by Contributor and Parent of each and all of their present and
future indemnities, liabilities and obligations at any time arising under,
pursuant to or in respect of Article VIII of the Stock Contribution and Exchange
Agreement (collectively, the "Indemnification Obligations"), and the covenants
and conditions of this Agreement and the Pledge and Security Agreement
(collectively, including the Indemnification Obligations, the "Secured
Obligations"), Newco grants and transfers to the Trustee to hold, and the
Trustee is hereby authorized and directed by the Contributor and Parent to
accept, and the Trustee hereby accepts, in trust under this Agreement, for the
benefit of Newco Group, its affiliates, Subsidiaries and all other present and
future holders of any of the Secured Obligations and each and all of their
members, successors and assigns, all right, title and interest in the following
property:
(a) the amount of the Scheduled Liabilities set forth
on the Statement of Liabilities, in cash and/or Cash Equivalents (as such may be
increased or decreased hereafter pursuant to the provisions hereof, "Fund A");
and
(b) $25 million in cash plus _____/1/ shares of Newco
Common Stock, represented by certificate number [__] issued for such number of
shares in the name of Contributor, accompanied by an assignment thereof duly
executed in blank by Contributor (as such cash amount or number of shares may be
increased or decreased hereafter pursuant to the provisions hereof, "Fund B")
(collectively, the "Initial Trust Estate," and together with (i) all rights and
interests of the Trustee under the Pledge and Security Agreement, (ii) any and
all other property at any time hereafter transferred to the Trustee in trust
under this Agreement, and (iii) any and all present and future income,
distributions, substitutions, replacements and proceeds of or from the Initial
Trust Estate and any other such property, the "Trust Estate"). The Trustee, its
- ------------------------
1. The number of shares to be inserted here shall be five million (5,000,000)
shares, adjusted to reflect stock splits, stock dividends, reclassifications and
similar transactions; cash may be substituted for shares at the rate of $30 per
share.
<PAGE>
successors in trust under this Agreement and its assigns and the assigns of its
successors and assigns in trust shall have and hold the foregoing Trust Estate
until released to Newco Group or Contributor in accordance with the terms
hereof, in trust nevertheless, under and subject to the terms and conditions set
forth herein for the benefit of Newco Group and as security for and for the
enforcement of the payment, observance and performance of all Secured
Obligations (it being understood that, while all of the Trust Estate secures all
Secured Obligations, Fund A shall be allocated for administrative purposes to
Scheduled Liabilities and Fund B shall be allocated for administrative purposes
to Unknown Liabilities, Liabilities Claims, Final Tax Amounts and Tax Claims).
Newco Group, Contributor and Parent hereby consent to the foregoing declaration
of trust and agree that the Trust Estate is to be held and applied by the
Trustee subject to the further covenants, conditions and trust set forth herein.
3. (a) Appointment of Representative. Contributor and
Parent hereby designate , -------, ------- and --------, or any one of them, as
their duly appointed agents and attorneys-in-fact, with full power of
substitution, in any and all capacities, for all purposes of this Agreement
(each, a "Representative"). Actions and inactions by such Representatives under
this Agreement shall be binding and conclusive on Contributor and Parent and may
be relied upon by the other parties hereto. Contributor and/or Parent, upon 10
days' written notice to the other parties, may remove any Representative or
appoint another Representative. No Representative shall be liable for any action
taken or omitted by it, or any action suffered by it to be taken or omitted, in
good faith, and in the exercise of its own best judgment.
(b) Appointment of Indemnitees' Agent. Newco and HCI
hereby appoint , ---------, --------- and ----------, or any one of them, as
their duly appointed agents and attorneys-in-fact, with full power of
substitution, in any and all capacities, for all purposes of this Agreement
(each, an "Indemnitees' Agent"). Actions and inactions by such Indemnitees'
Agents under this Agreement shall be binding and conclusive on Newco Group and
may be relied upon by the other parties hereto. HCI or Newco, upon 10 days'
written notice to the other parties, may remove any Indemnitees' Agent or
appoint another Indemnitees' Agent. No Indemnitees' Agent shall be liable for
any action taken or omitted by it, or any action suffered by it to be taken or
omitted, in good faith, and in the exercise of its own best judgment.
4. Investment and Valuation of Trust Estate.
(a) The Trustee hereby acknowledges receipt of the
Initial Trust Estate. Until such time as the Trust Estate shall be distributed
by the Trustee as provided herein, the portion of the Trust Estate which does
not consist of Newco Common Stock shall be invested and reinvested by the
Trustee in accordance with the written instructions of the Representative,
subject to the following limitations:
(i) Such funds shall be invested and reinvested
solely:
(1) at the risk of Contributor and Parent;
<PAGE>
(2) in the name of the Trustee or its nominee and in
such amounts as the Representative shall designate; and
(3) in any of the following:
A) either (x) Cash Equivalents as the Trustee from
time to time may be directed in writing by the Representative, unless an Event
of Default is then continuing, or (y) Cash Equivalents of the type described in
clauses (i), (ii) or (iii) in the definition of "Cash Equivalents" as the
Trustee from time to time may be directed by the Indemnitees' Agent, whenever an
Event of Default is continuing; or
B) such other instruments as may be specifically
approved in writing by both the Representative and the Indemnitees' Agent.
(ii) If and to the extent the Representative and
Indemnitees' Agent do not provide the Trustee with written instructions
directing the investment or reinvestment of any of the Trust Estate, the Trustee
shall hold such cash or invest in such Cash Equivalents of the type described in
clauses (i), (ii) and (iii) in the definition of "Cash Equivalents," as the
Trustee shall, in its discretion, determine.
(b) The Trustee shall be entitled to sell or redeem
any such investment as necessary to make any distributions required under this
Agreement and shall not be liable or responsible for any loss resulting from any
such sale or redemption.
(c) Income, if any, resulting from the investment of
the Trust Estate shall be for the account of Contributor, but shall be held as
part of the Trust Estate, subject to the provisions of this Agreement.
(d) For purposes of this Agreement, as of any date of
valuation, and unless otherwise expressly provided herein, Newco Common Stock
shall be valued at Fair Market Value and cash or Cash Equivalents shall be
valued at face value unless, in the case of Cash Equivalents, the obligor is (or
more probably than not is) unable to pay the Cash Equivalent at maturity or upon
demand, in which case the Cash Equivalent shall be valued at such amount,
including zero, as the Trustee may in good faith determine.
5. Required Trust Estate Values.
(a) The Trust Estate shall be valued by the Trustee
at the end of each calendar quarter (a "quarterly valuation").
(b) (i) After the date hereof and prior to the date
which is 16 months after the date hereof, at any quarterly valuation the value
of Fund B shall be no less than $ 175 million, of which no less than $ 25
million shall be cash or Cash Equivalents.
(ii) After the date which is 16 months after the
date hereof and prior to the termination of this Agreement, at any such
quarterly valuation, the value of Fund B shall be no less than $ 100 million, of
which no less than $ 25 million shall be cash or Cash Equivalents.
<PAGE>
(iii) After the Expiration Date, the value of Fund
B may be reduced to the Maintenance Level, all of which may be maintained in
Newco Common Stock.
Notwithstanding the foregoing, while there is any Tax Claim, Final Tax Amount or
pending Liabilities Claim, Fund B shall be maintained in an amount equal to the
sum of all Tax Reserves for all Tax Claims, Final Tax Amounts, the Maintenance
Level, all Pending Amounts, and all other amounts required to be paid out from
or maintained in Fund B.
(c) At any quarterly valuation, the value of Fund A
shall be no less than the then amount of Scheduled Liabilities.
(d) If the values of Funds A and B as determined by
the Trustee in any quarterly evaluation are less than the values then required
to be maintained under Sections 5(b) and 5(c) hereof (a "deficiency"), the
Trustee shall notify the parties and, within 15 days, Contributor and Parent
shall cause to be deposited with the Trustee, as part of the Trust Estate, cash
or Cash Equivalents in the amount of the deficiency in Fund A and cash or Cash
Equivalents or Newco Common Stock in the amount of the deficiency in Fund B,
provided that no less than $ 25 million of Fund B shall at all times consist of
cash or Cash Equivalents (such deposits, a "Make-Whole Payment").
Notwithstanding the foregoing, if the deficiency in Fund B would be eliminated
if the value of the Newco Common Stock increased 11.1 % or less, the deficiency
in Fund B need not be deposited.
(e) If the values of Funds A and B as determined by
the Trustee in any quarterly evaluation are more than the values then required
to be maintained under Sections 5(b) and (c) hereof (a "surplus"), the Trustee
shall notify the parties and, within 15 days, shall cause the surplus of cash or
Cash Equivalents in Fund A to be released to Contributor, and shall cause the
surplus of cash or Cash Equivalents or Newco Common Stock in Fund B to be
released to Contributor, provided that no less than $ 25 million of Fund B shall
at all times consist of cash and Cash Equivalents. Notwithstanding the
foregoing, if the surplus in Fund B would be eliminated if the value of the
Newco Common Stock decreased by 10% or less, the surplus in Fund B shall not be
released. Further, no amount shall be released to Contributor pursuant to this
Section 5(e) while an Event of Default is continuing hereunder.
(f) Contributor and Parent may deliver a Make-Whole
Payment consisting of cash, Cash Equivalents or (to the extent permitted under
Section 5(d) hereof) Newco Common Stock owned by Contributor or Parent or by any
Subsidiary of Parent, if, in the case of Newco Common Stock owned by any such
Subsidiary, (i) such Subsidiary executes and delivers to the Trustee an
agreement reasonably satisfactory to the Trustee and Newco Group by which such
Subsidiary agrees to join in and be bound by this Agreement and the Pledge and
Security Agreement on the same terms and conditions as those by which Parent is
bound, together with such financing statements, assignments and transfer
instruments requested as to such Subsidiary by the Trustee or Newco Group, and
(ii) Parent executes and delivers to the Trustee an instrument warranting the
due authorization, execution, delivery, legality and enforceability of such
<PAGE>
agreement, financing statements, assignments and transfer instruments and
guaranteeing due and punctual payment and performance of all liabilities and
obligations of such Subsidiary thereunder.
6. Trust Estate Scheduled Liabilities - Determination and Payment.
(a) The Trustee shall maintain on an ongoing basis a
schedule of Known Liabilities (the "Schedule of Liabilities"). The initial
Schedule of Liabilities is the Statement of Liabilities. Each Scheduled
Liability shall be stated at an amount equal to its liquidated amount if it is a
Known Liability which is liquidated (i.e., in an amount certain) or at its
related reasonable reserve if it is a Known Liability which is unliquidated
(i.e., in an amount which is uncertain or contingent). The liquidated amount or
the reserve, as the case may be, with respect to any Known Liability is its
"Scheduled Amount." Amounts claimed under Tax Claims and Final Tax Amounts shall
not be Scheduled Liabilities.
(b) The Schedule of Liabilities shall also include
for Known Liabilities which are liquidated their respective discrete (one or
more) or periodic due dates and the names and addresses of the persons entitled
to payment. Unless the Representative or Indemnitees' Agent shall give notice to
the Trustee at least 10 days prior to the due date of any Known Liability which
is liquidated that payment should not be made on such due date, the Trustee
shall pay from Fund A Known Liabilities which are liquidated when due, and the
related Known Liability shall be deemed satisfied and removed (to the extent
satisfied) from the Schedule of Liabilities.
(c) If Known Liabilities which are liquidated arise
after the date hereof, the party who becomes aware of such Known Liabilities
shall give notice, and provide relevant documentation, if any, to the other
parties. If the Representative did not give such notice and does not object to
such notice within 10 days of the notice, the subject Known Liabilities shall be
added to the Schedule of Liabilities.
(d) If Known Liabilities which are unliquidated arise
after the date hereof, the party who becomes aware of such Known Liabilities
shall give notice, and provide relevant documentation, if any, to the other
parties and shall propose a reasonable reserve therefor. If no party objects to
such notice within 10 days of the notice, the subject Known Liabilities shall be
added to the Schedule of Liabilities at the amount of the proposed reserve.
(e) If there shall occur any developments or events
which cause any party to reasonably believe that the reserve for a Known
Liability which is unliquidated or the scheduled amount of a Known Liability
which is liquidated should be adjusted, the party shall give notice to the other
parties of the proposed adjustment and the basis therefor. If no party objects
to such notice within 10 days of the notice, the reserve or Scheduled Amount for
such Known Liability shall be adjusted as proposed.
(f) If Known Liabilities which are unliquidated
become liquidated through final resolution or settlement, the party responsible
for the resolution shall give notice to the other parties of the nature and
amount of the resolution and present evidence thereof in the form of a release,
<PAGE>
receipt, or otherwise. If no party objects to such notice within 10 days of the
notice, the subject Known Liability shall be deemed liquidated at the amount of
the resolution and, up to the Scheduled Amount, shall be paid as provided in
Subsection (b) above.
(g) In addition, if the Representative shall give
notice to the other parties hereto at least 15 days prior to a quarterly
valuation that Parent or Contributor has satisfied, or caused to be satisfied,
any Known Liability and shall present evidence thereof in the form of a receipt,
release or other proof of its claim, then if the Indemnitees' Agent does not
give notice of objection within 10 days of the Representative's notice, the
Trustee shall reimburse Contributor or Parent (as the case may be) for the
amount paid in satisfaction of the Known Liability up to its Scheduled Amount.
Such Known Liability shall thereafter be deemed satisfied and removed (to the
extent satisfied) from the Schedule of Liabilities.
(h) In addition, if the Indemnitees' Agent shall give
notice to the other parties hereto at least 15 days prior to a quarterly
valuation that HCI or Newco has incurred or has satisfied, or caused to be
satisfied, any Known Liability and shall present evidence thereof in the form of
a receipt, release or other proof of its claim, then if the Representative does
not give notice of objection within 10 days of the Indemnitees' Agent's notice,
the Trustee shall reimburse HCI or Newco (as the case may be) for the amount
paid in satisfaction of the Known Liability up to its Scheduled Amount. Such
Known Liability shall thereafter be deemed satisfied and removed (to the extent
satisfied) from the Schedule of Liabilities.
(i) When so directed in writing by a Representative
upon at least 10 days' prior written notice, if (and only if) no Make-Whole
Breach is then continuing under Section 8(c) hereof, Indemnitees' Agent shall
direct the Trustee (i) to sell or otherwise liquidate (in any commercially
reasonable manner set forth in the Representative's notice) Cash Equivalents or
Newco Common Stock held by the Trustee in Fund B as necessary to pay and
discharge a Tax Claim or Final Tax Amount and (ii) to pay directly to the taxing
authority certified in the Representative's notice to be entitled to payment of
such Tax Claim or Final Tax Amount, on account and in satisfaction of such Tax
Claim or Final Tax Amount, such amount as is set forth in the Representative's
notice.
7. Certain Disputes. In the event that either a Representative
or Indemnitees' Agent shall give notice of objection to any notice given under
any of the provisions of Section 6, the parties (other than the Trustee) shall
promptly meet and confer and attempt to resolve the objection. If they succeed,
they shall promptly and jointly notify the Trustee and the Trustee shall act in
accordance with the notice. If they shall not succeed within 15 days of the
notice of objection, they shall, within an additional 45 days, commence and
complete an arbitration proceeding in accordance with the provisions of Section
24 hereof. Unless the parties shall otherwise jointly instruct the Trustee, the
Trustee shall act with respect to the subject Known Liability in accordance with
the arbitrator's award when received. A party must have a reasonable basis in
giving any such notice of objection and shall set forth the basis of its
objection in the notice.
<PAGE>
8. Certain Releases and Substitutions; Consequences of Make-Whole Breach.
(a) When so directed in writing by a Representative
upon at least 10 days' prior written notice, Indemnitees' Agent shall instruct
the Trustee to release from Fund B and deliver to Contributor any or all cash,
Cash Equivalents and Newco Common Stock then held by the Trustee in Fund B, but
only if prior to any such release and delivery there is deposited with the
Trustee, to be held as part of the Trust Estate and as part of Fund B, an
irrevocable standby letter of credit which shall be issued in favor of the
Trustee in an amount at least equal to the value of the cash, Cash Equivalents
and Newco Common Stock so to be released and which shall be in form and
substance and issued by a bank satisfactory to Newco in its reasonable
discretion (a "Letter of Credit"). Each Letter of Credit in any event (i) must
be available for payment to the Trustee under each, any and all of the
circumstances under which any payment by the Trustee is or becomes due from the
Trust Estate pursuant to the provisions of this Agreement and, in addition, (ii)
must be freely available for payment to the Trustee in the full amount of such
Letter of Credit at all times during the period that commences on the 30th day
prior to the date on which such Letter of Credit, by its terms, expires, unless
a substitute Letter of Credit has been delivered to and approved and accepted by
the Trustee. Unless otherwise instructed by Indemnitees' Agent, the Trustee
shall draw or demand payment under each Letter of Credit, for the full amount of
such Letter of Credit, at least 20 days prior to its expiration. The Trustee
shall also draw or demand payment under Letters of Credit at any time when the
assets in Fund B may be applied to fund payment of a Known Liability or a Tax
Claim or Final Tax Amount or any other amount payable from Fund B. For purposes
of valuation of Fund B, the amount that is available to be drawn, but has not
been drawn, under any Letter of Credit held in Fund B shall be counted as Cash
Equivalents.
(b) When so directed in writing by a Representative
upon at least five days prior written notice, Indemnitees' Agent shall instruct
the Trustee to release from Fund B and deliver to Contributor the number of
shares of Newco Common Stock specified in such notice, but only if Contributor
transfers to the Trustee, to be held as part of the Trust Estate, cash in an
amount equal to the Fair Market Value of such shares of Newco Common Stock,
concurrently with and in exchange for delivery of such shares of Newco Common
Stock.
(c) If Contributor and Parent at any time fail to
deposit any Make-Whole Payment required to be deposited by them pursuant to
Section 5(d) hereof (a "Make-Whole Breach"), then at all times thereafter until
the full amount of such Make-Whole Payment is received by the Trustee, in cash
and as part of the Trust Estate, (i) Indemnitees' Agent shall have the sole
power to direct and control the application of the Trust Estate to the
settlement, payment and satisfaction of any and all Scheduled Liabilities,
Liabilities Claims, Final Tax Amounts and Tax Claims (whether or not disputed or
liquidated), at such times and in such amounts, manner and order and on such
conditions as Indemnitees' Agent from time to time, in its sole discretion, may
determine and (ii) the Trustee shall honor all instructions received by it in
writing from Indemnitees' Agent to collect any or all Cash Equivalents, sell any
or all Newco Common Stock and otherwise liquidate any and all property of the
Trust Estate and pay, from cash in the Trust Estate, any or all such Scheduled
Liabilities, Liabilities Claims, Final Tax Amounts and Tax Claims, in such
amount, manner and order as Indemnitees' Agent in its sole discretion may elect
<PAGE>
and direct, in each case (x) whether or not any claim so paid has then been
settled or liquidated or is then binding upon Contributor or Parent under any
judgment or award, (y) whether or not Contributor or Parent has participated in
or approved any settlement or payment of any claim, and (z) whether or not
Parent or Contributor has given the Trustee notice of objection to any such
instructions or notice of any demand for arbitration or judicial relief in
respect thereof. No such action by Indemnitees' Agent shall be determinative of
any liability of Parent or Contributor for or as to any Liability or Damages
pursuant to the provisions of the Stock Contribution and Exchange Agreement.
9. Termination of Agreement.
(a) Ninety (90) days after the 10th anniversary of
the date hereof (the "Cut-off Date"), any property in the Trust Estate in excess
of the amount required to pay the sum of all Scheduled Liabilities, all Tax
Reserves for all Tax Claims and Final Tax Amounts, all Pending Amounts, and all
other amounts required to be paid from Fund B (the "Excess Amount") shall be
released to Contributor, unless at such time the statute of limitations
applicable to the assessment of United States federal income tax against Univisa
or USHI (or any affiliate or Subsidiary of either of them) with respect to any
Pre-Closing Period shall not have expired, in which event any Excess Amount
shall be determined and released to Contributor upon the day following the
earliest to occur of (i) the expiration of such statute of limitations, (ii) a
final determination by the Internal Revenue Service to the effect that neither
Univisa nor USHI (nor any affiliate or Subsidiary of either of them) has any
unsatisfied liability for taxes for which Parent and Contributor would be liable
pursuant to Section 8.2(a)(ii) of the Stock Contribution and Exchange Agreement,
and (iii) the assertion of a Tax Claim by the Internal Revenue Service.
(b) After the Cut-off Date, no Known Liabilities
shall be added to the Schedule of Liabilities other than as a result of the
determination of Pending Amounts.
(c) After satisfaction and discharge of all remaining
Scheduled Liabilities and Final Tax Amounts, determination of all Pending
Amounts and final, indefeasible and nonappealable satisfaction and discharge of
all Tax Claims and Liabilities Claims, all amounts remaining in the Trust Estate
shall be delivered to Contributor.
(d) Upon the final distribution of all of the Trust
Estate in accordance with the terms of this Agreement, this Agreement shall
terminate.
10. Directions to Trustee. Both prior to and after the
occurrence of any Event of Default, the Trustee shall exercise and enforce its
rights and remedies under the Pledge and Security Agreement in accordance with
such instructions as the Trustee from time to time may receive from Newco Group,
so long as such instructions do not, in the good faith opinion of the Trustee,
require it to engage in any action which would violate any law or expose it to
liability for which it has not received indemnification from Newco Group on
terms reasonably satisfactory to it.
<PAGE>
11. Tax Matters. Each party to this Agreement shall provide a
completed IRS Form W-8 or Form W-9 to the Trustee at the signing of this
Agreement. The Trustee may delay accepting Trust Estate until the IRS forms have
been provided. Subject to Section 14, Newco Group, Contributor and Parent,
jointly and severally, covenant and agree to indemnify and hold the Trustee
harmless against all liability for tax withholding and/or reporting for any
payments made by the Trustee pursuant to this Agreement.
12. Duties of the Trustee. The Trustee shall have no duties or
responsibilities other than those expressly set forth in this Agreement, and no
implied duties or obligations shall be read into this Agreement against the
Trustee. The Trustee shall have no duty to enforce any obligation of any person,
other than as provided herein. The Trustee shall be under no liability to anyone
by reason of any failure on the part of any party hereto or any maker, endorser
or other signatory of any document or any other person to perform such person's
obligations under any such document.
13. Liability of the Trustee; Withdrawal. The Trustee shall
not be liable for any action taken or omitted by it, or any action suffered by
it to be taken or omitted, in good faith, and in the exercise of its own best
judgment, and may rely conclusively and shall be protected in acting upon any
order, notice, demand, certificate, opinion or advice of counsel (including
counsel chosen by the Trustee), statement, instrument, report or other paper or
document (not only as to its due execution and the validity and effectiveness of
its provisions, but also as to the truth and acceptability of any information
therein contained) which is believed by the Trustee to be genuine and to be
signed or presented by the proper person(s). The Trustee shall not be held
liable for any error in judgment made in good faith by an officer of the Trustee
unless it shall be proved that the Trustee was grossly negligent in ascertaining
the pertinent facts or acted intentionally in bad faith. The Trustee shall not
be bound by any notice of demand, or any waiver, modification, termination or
rescission of this Agreement or any of the terms hereof, unless evidenced by a
writing delivered to the Trustee signed by the proper party or parties and, if
the duties or rights of the Trustee are affected, unless it shall give its prior
written consent thereto.
Without limitation, the Trustee shall not be responsible for
and may conclusively rely upon and shall be protected, indemnified and held
harmless by Contributor and Parent, acting jointly and severally, for the
sufficiency or accuracy of the form of, or the execution, validity, value or
genuineness of any document or property received, held or delivered by it
hereunder, or of the signature or endorsement thereon, or for any description
therein; nor shall the Trustee be responsible or liable in any respect on
account of the identity, authority or rights of the persons executing or
delivering or purporting to execute or deliver an document, property or this
Agreement.
In the event that the Trustee shall become involved in any
arbitration or litigation relating to the Trust Estate, the Trustee is
authorized to comply with any final, binding and nonappealable decision reached
through such arbitration or litigation.
The Trustee may resign at any time and be discharged from its
duties or obligations hereunder by giving notice to the other parties. Such
resignation shall take effect when a successor Trustee has been appointed by
<PAGE>
Newco and has accepted the trusts herein provided. If a successor Trustee does
not take office within 60 days after the retiring Trustee resigns, the retiring
Trustee may petition any court of competent jurisdiction for the appointment of
a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to Newco Group. Thereupon, the
resignation of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Agreement. The successor Trustee shall mail a notice of its succession to
Contributor and Parent. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee provided all sums owing
to the retiring Trustee have been paid.
14. The Trustee's Fee. All fees and reasonable expenses of the
Trustee for its services hereunder, shall be paid by Contributor and Parent.
Newco Group, Contributor and Parent, jointly and severally, hereby agree to
indemnify the Trustee for, and to hold it harmless against any loss, liability
or expense incurred without negligence or wilful misconduct on the part of the
Trustee, including without limitation legal or other fees arising out of or in
connection with its entering into this Agreement and carrying out its duties
hereunder, including without limitation the costs and expenses of defending
itself against any claim of liability in the premises or any action for
interpleader. The Trustee shall be under no obligation to institute or defend
any action, suit, or legal proceeding in connection herewith, unless first
indemnified and held harmless to its satisfaction in accordance with the
foregoing, except that the Trustee shall not be indemnified against any loss,
liability or expense arising out of its bad faith, gross negligence or willful
misconduct. Such indemnity shall survive the termination or discharge of this
Agreement or resignation of the Trustee. The Trustee shall be reimbursed by
Contributor and Parent for any reasonable expenses or disbursements incurred in
connection with the performance of the Trustee's obligations hereunder including
without limitation the actual cost of legal services should the Trustee deem it
necessary to retain an attorney.
15. Inspection. All funds or other property held as part of
the Trust Estate shall at all times be clearly identified as being held by the
Trustee hereunder. Any party hereto may at any time during the Trustee's
business hours (with reasonable notice) inspect any records or reports relating
to the Trust Estate.
16. Notices. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when received if
personally delivered when transmitted if transmitted by telecopy, electronic or
digital transmission method; the day after it is sent, if sent for next day
delivery to a domestic address by recognized overnight delivery service (e.g.
Federal Express); and upon receipt, if sent by certified or registered mail,
return receipt requested. In each case notice shall be sent to:
<PAGE>
(a) If to Contributor or the Representative:
SATELLITE COMPANY, LLC
----------------------------------
----------------------------------
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Joseph A. Stern, Esq.
Telephone: (212) 859-8000
Telecopy: (212) 859-4000
(b) If to Parent:
GRUPO TELEVISA, S.A.
----------------------------------
----------------------------------
(c) If to Newco, HCI or Indemnitees' Agent:
MAGELLAN INTERNATIONAL, INC.
c/o Hughes Communications, Inc.
----------------------------------
with a copy to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attention: Bruce R. Lederman, Esq.
Telephone: (213) 485-1234
Telecopy No.: (213) 891-8763
(d) If to the Trustee:
---------------------------------
---------------------------------
17. Non-Exclusive Remedy. Newco Group, Contributor and Parent
agree and acknowledge that the Trust Estate shall not be Newco Group's exclusive
method of receiving indemnification from Contributor and Parent pursuant to
Section 8.2 of the Stock Contribution and Exchange Agreement and Contributor and
Parent shall be and remain in all respects personally liable for all
Indemnification Obligations and each liability may be enforced by any lawful
means.
<PAGE>
18. Modification. Subject to applicable law, this Agreement
may be amended, modified or supplemented only by written agreement of the
parties at any time prior to the Closing Date with respect to any of the terms
contained herein.
19. Interpretation. When a reference is made in this Agreement
to Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the word "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". This Agreement shall not be construed for or against either party
by reason of the authorship or alleged authorship of any provision hereof or by
reason of the status of the respective parties.
20. Assignment. Except for assignments by a member of the
Newco Group to any affiliate or Subsidiary of such member with respect of some
or all of its rights under this Agreement (which assignment can be made without
the written consent of Contributor or Parent), neither this Agreement, nor any
of the rights, interests or obligations hereunder, shall be assigned by any of
the parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
21. Governing Law. This Agreement shall be construed,
interpreted and the rights of the parties determined in accordance with the laws
of the State of New York (without reference to the choice of law provisions).
22. Interest in Trust Estate. Neither Contributor nor Parent
has any interest in the Trust Estate except only as to any property which has
been released from the Trust Estate and delivered to Contributor or Parent as
herein provided, effective upon such release and delivery.
Severability. Each party agrees that, should any court or other
competent authority hold any provision of this Agreement or part hereof to be
null, void or unenforceable, or order any party to take any action inconsistent
herewith or not to take an action consistent herewith or required hereby, the
validity, legality and enforceability of the remaining provisions and
obligations contained or set forth herein shall not in any way be affected or
impaired thereby,
Upon any such holding that any provision of this Agreement is null, void or
unenforceable, the parties will negotiate in good faith to modify this Agreement
so as to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated by this
Agreement are consummated to the extent possible. Except as otherwise
contemplated by this Agreement, to the extent that a party hereto took an action
inconsistent herewith or failed to take action consistent herewith or required
hereby pursuant to an order or judgment of a court or other competent authority,
such party shall incur no Liability unless such party did not in good faith seek
to resist or object to the imposition or entering of such order or judgment.
<PAGE>
24. Arbitration. Notwithstanding anything herein to the
contrary, in the event that there shall be a dispute among the parties arising
out of or relating to this Agreement, the parties agree that such dispute shall
be resolved by final and binding arbitration in Los Angeles, California,
administered by Judicial Arbitration & Mediation Services, Inc. ("JAMS"), in
accordance with JAMS' rules of practice then in effect or such other procedures
as the parties may agree to prior to the Closing. Depositions may be taken and
other discovery may be obtained during such arbitration proceedings to the same
extent as authorized in civil judicial proceedings. Any award issued as a result
of such arbitration shall be final and binding between the parties thereto, and
shall be enforceable by any court having jurisdiction over the party against
whom enforcement is sought. The fees and expenses of such arbitration (including
reasonable attorneys' fees) or any action to enforce an arbitration award shall
be paid by the party that does not prevail in such arbitration.
25. Cumulative Remedies. All rights and remedies of each party
hereto are cumulative of each other and of every other right or remedy such
party may otherwise have at law or in equity, and the exercise of one or more
rights or remedies shall not prejudice or impair the concurrent or subsequent
exercise of other rights or remedies.
26. Counterparts. This Agreement may be executed in two or
more counterparts, each of which will be considered one and the same instrument
and shall become effective when executed and delivered by each of the parties.
27. Specimen Signature. The Representative and Indemnitees'
Agent shall each present a specimen signature to the Trustee upon the execution
hereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Collateral Trust Agreement as of the date first written above.
[SIGNATURES FOLLOW]
<PAGE>
"Newco"
MAGELLAN INTERNATIONAL, INC.,
a Delaware corporation
By:
------------------------------------
Name:
Title:
"HCI"
HUGHES COMMUNICATIONS, INC.,
a California corporation
By:
------------------------------------
Name:
Title:
"Contributor"
SATELLITE COMPANY, LLC,
a Nevada limited liability corporation
By:
------------------------------------
Name:
Title:
"Parent"
GRUPO TELEVISA, S.A.,
a corporation (Sociedad Anonima) organized
under the laws of Mexico
By:
------------------------------------
Name:
Title:
"Collateral Trustee"
a national banking association
By:
------------------------------------
Name:
Title:
<PAGE>
EXHIBIT B
to Stock Contribution and Exchange Agreement
PLEDGE AND SECURITY AGREEMENT
This PLEDGE AND SECURITY AGREEMENT (this "Agreement"), dated
as of ___________ __, 199_, is entered into by SATELLITE COMPANY, LLC, a Nevada
limited liability company, and GRUPO TELEVISA, S.A., a corporation (Sociedad
Anonima) organized under the laws of Mexico (together, the "Debtors"), in favor
of ________________, as Trustee under the Collateral Trust Agreement described
below ("Secured Party").
RECITALS
A. The Debtors and Magellan International, Inc., a Delaware
corporation ("Newco"), and Hughes Communications, Inc., a California corporation
("HCI" and, together with Newco, the "Newco Group") are parties to a Stock
Contribution and Exchange Agreement, dated as of September 20, 1996.
B. Pursuant to the Stock Contribution and Exchange Agreement,
(i) the Debtors and Newco Group have entered into a Collateral Trust Agreement
with Secured Party, as Trustee, dated as of __________ __, 199_, under which
Secured Party holds the Trust Estate therein described in trust as set forth
therein (the "Collateral Trust Agreement"), and (ii) the Debtors are executing
and delivering this Pledge and Security Agreement to Secured Party to hold as
part of such Trust Estate.
AGREEMENT
In consideration of the foregoing and the mutual promises
contained herein and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Debtors, intending to be legally
bound, hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1 Collateral Trust Agreement Definitions. The
following terms shall have the meanings assigned to them in the Collateral Trust
Agreement:
Cash Equivalents
Newco Common Stock
Initial Trust Estate
Stock Contribution and Exchange Agreement
Trust Estate
<PAGE>
SECTION 1.2 U.C.C. Definitions. Where applicable and except as
otherwise expressly provided herein, terms used herein (whether or not
capitalized) shall have the respective meanings assigned to them in the Uniform
Commercial Code as in effect in the State of New York on the date of the Stock
Contribution and Exchange Agreement (the "Code").
SECTION 1.3 Certain Defined Terms. As used in this Agreement,
the following terms shall have the following meanings:
"Agreement" means this Pledge and Security Agreement.
"Collateral" is defined in Section 2.1.
"Event of Default" means any of the following events: (i) a
Debtor fails to pay any Secured Obligation when due, and such failure continues
for 10 calendar days after either (A) it is acknowledged in writing by any
Debtor or (B) such Secured Obligation is determined to be due and payable in
arbitration proceedings conducted in accordance with Section 24 of the
Collateral Trust Agreement or by order of a court of competent jurisdiction;
(ii) any representation or warranty made by any Debtor in the Collateral Trust
Agreement or this Agreement proves to have been inaccurate in any material
respect when made, and such inaccuracy continues for 30 calendar days after
written notice thereof is given to the Debtors by Secured Party or by Newco
Group; (iii) any Debtor fails to perform or observe any term, covenant or
agreement contained in the Collateral Trust Agreement or this Agreement, and
such failure continues for 30 calendar days after either (A) it is acknowledged
in writing by any Debtor or (B) such failure is determined to have occurred and
such term, covenant or agreement is determined to be enforceable in arbitration
proceedings conducted in accordance with Section 24 of the Collateral Trust
Agreement or by order of a court of competent jurisdiction; (iv) any Debtor
admits in writing its inability to pay its debts generally or makes a general
assignment for the benefit of creditors; (v) any proceeding is instituted by or
against any Debtor seeking an order for relief under the United States
Bankruptcy Code or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts or the
appointment of a receiver, trustee, custodian or other similar official for it
or for any substantial part of its property under any law relating to
bankruptcy, insolvency, liquidation or reorganization or relief of debtors and
either (A) any such relief in any such proceeding is sought or consented to by
it or an order for any such relief is entered against it, or (B) any such
proceeding instituted against it remains undismissed and unstayed for a period
of 60 calendar days; (vi) any Debtor takes any corporate action to authorize any
of the actions described in clause v above; (vii) any provision of the
Collateral Trust Agreement or this Agreement for any reason ceases to be valid
and binding on any Debtor in any respect materially adverse to Secured Party or
the holders of Secured Obligations, and a valid and binding reasonably
<PAGE>
equivalent substitute is not offered to Secured Party, to be held in trust as
part of the Trust Estate, within 30 calendar days after written notice thereof
is given to the Debtors by Secured Party or by Newco Group; (viii) any Debtor
repudiates or purports to revoke or terminate, in any material respect, any of
its obligations under the Collateral Trust Agreement or this Agreement, and such
event continues for 10 calendar days after written notice thereof is given to
the Debtors by Secured Party or by Newco Group; or (ix) the Collateral Trust
Agreement and this Agreement for any reason do not create or cease to create a
valid and perfected first priority security interest in any property described
herein as part of the Collateral, and such event continues for 10 calendar days
after written notice thereof is given to the Debtors by Secured Party or by
Newco Group.
"Lien" means any mortgage, deed of trust, lien, pledge,
charge, security interest, hypothecation, assignment, deposit arrangement or
encumbrance of any kind in respect of any asset, whether or not filed, recorded
or otherwise perfected or effective under applicable law, as well as the
interest of a vendor or lessor under any conditional sale agreement, capital or
finance lease or other title retention agreement relating to such asset.
"Proceeds" includes (i) any and all payments, dividends, cash,
options, warrants, rights, instruments and other property of any type or nature
at any time received, receivable or otherwise distributed, voluntarily or
involuntarily, on account of, in respect of or in replacement, substitution or
exchange for any item of Collateral or upon the collection, sale, or other
disposition of any item of Collateral; (ii) any and all insurance or payments
under any indemnity, warranty or guaranty now or hereafter payable in respect of
any item of Collateral or any proceeds thereof or any loss relating thereto;
(iii) any and all claims against any person or entity based on or in any respect
relating to or arising from any item of Collateral; (iv) any and all "proceeds"
of any Collateral, as the term "proceeds" is used in the Code; and (v) any and
all property and interests in property acquired with or in exchange for any of
the foregoing.
"Secured Obligations" means each and all present and future
indemnities, liabilities and obligations of every type and description of any or
all of the Debtors at any time arising under, pursuant to or in respect of (i)
Article VIII of the Stock Contribution and Exchange Agreement, (ii) this
Agreement, or (iii) the Collateral Trust Agreement (in each case whether now
outstanding or hereafter arising or incurred, whether sole, joint, several, or
joint and several and, in the case of each Debtor, whether owed by it or by any
other Debtor) and all costs and expenses incurred by Secured Party in asserting,
collecting, enforcing or protecting its security interest in any Collateral in
any bankruptcy case or insolvency proceeding to which any Debtor may be party
and all collection costs and enforcement expenses incurred by Secured Party in
retaking, holding, preparing for sale, selling or otherwise disposing of or
realizing on any Collateral or otherwise exercising or enforcing any of its
<PAGE>
rights or remedies hereunder, together with Secured Party's reasonable
attorneys' fees and disbursements and court costs related thereto.
"Secured Party" means ____________, as Trustee under the
Collateral Trust Agreement and any successor Trustee thereunder.
ARTICLE II
SECURITY INTEREST AND COLLATERAL
SECTION 2.1 Creation of Security Interest. As security for
the due and punctual payment and performance of each and all of the Secured
Obligations, each Debtor hereby grants Secured Party a security interest in all
right, title and interest of such Debtor in, to, under or derived from the
following property (collectively, the "Collateral"), in each case whether now
owned or hereafter acquired by such Debtor and wherever located:
(a) NEWCO COMMON STOCK: The shares of stock described
in Schedule A hereto and all other stock of Newco at any time transferred
to or held by Secured Party as part of the Trust Estate;
(b) CASH, CASH EQUIVALENTS AND OTHER ASSETS OF THE
TRUST ESTATE: All cash, Cash Equivalents and other property of every type
and description now or at any time hereafter constituting part of the
Trust Estate;
(c) INTEREST IN THE TRUST ESTATE OR UNDER THE TRUST
AGREEMENT: All rights and interests of every type and description,
whenever and however arising, in or to the Trust Estate or in, to or
under the Collateral Trust Agreement; and
(d) PROCEEDS: All Proceeds, except Proceeds that have
been released from the Trust Estate and delivered to Contributor pursuant
to the Collateral Trust Agreement.
SECTION 2.2 Delivery of Instruments. All stock certificates,
notes, bonds, debentures and other instruments constituting Collateral shall be
delivered to and held by Secured Party, without any notice from or demand by
Secured Party, in each case in suitable form for transfer by delivery or
accompanied by duly executed instruments of transfer or assignments in blank or
with appropriate endorsements, in form and substance satisfactory to Secured
Party.
<PAGE>
SECTION 2.3 Further Assurances. Each Debtor will promptly (and
in no event later than five days after request by Secured Party) execute and
deliver, and use its reasonable and diligent best efforts to obtain from others,
any and all instruments and documents (including, without limitation,
assignments, transfer documents and transfer notices, financing statements and
other lien notices), in form and substance satisfactory to Secured Party, and
take all other actions which are necessary or, in the good faith judgment of
Secured Party, desirable or appropriate to create, perfect, protect, or enforce
Secured Party's security interests in the Collateral, to enable Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral, to protect the Collateral against the rights, claims or interests of
third persons, or to effect or to assure further the purposes and provisions of
this Agreement, and the Debtors will pay all costs related thereto and all
reasonable expenses incurred by Secured Party in connection therewith.
SECTION 2.4 Survival of Security Interest. Except as otherwise
required by law, the security interest granted hereby shall, except as to
property released from the Trust Estate and delivered to or for account of the
Debtors by Secured Party pursuant to the Collateral Trust Agreement, (i) remain
enforceable as security for any and all Secured Obligations, whether now
outstanding or created or incurred at any future time, until all of the Secured
Obligations have been indefeasibly paid, retired and discharged, and (ii)
survive any sale, exchange or other disposition by a Debtor of its interest in
any Collateral and remain enforceable against each transferee and subsequent
owner of such interest, even if such sale, exchange or other disposition is
permitted at the time under the Collateral Trust Agreement.
SECTION 2.5 Reinstatement. If at any time any payment on any
Secured Obligation is set aside, avoided, or rescinded or must otherwise be
restored or returned, this Agreement and the security interest created hereby
shall remain in full force and effect and, if previously released or terminated,
shall be automatically and fully reinstated, without any necessity for any act,
consent or agreement of any Debtor, as fully as if such payment had never been
made and as fully as if any such release or termination had never become
effective.
<PAGE>
ARTICLE III
DEBTORS' REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties. The Debtors
represent and warrant that:
(a) Schedule A completely and accurately describes
the cash and Newco Common Stock delivered to Secured Party as part of
the Initial Trust Estate pursuant to the Collateral Trust Agreement.
(b) Each Debtor's chief executive office is located
at the address shown as the chief executive office on Schedule B
hereto. No Debtor has any place of business within the United States.
All tangible Collateral and all of each Debtor's records relating to
any intangible Collateral owned by it are kept solely at such chief
executive office.
(c) No Debtor does business, or at any time during
the five years preceding the date of this Agreement has done business,
within the United States.
(d) Each Debtor at all times is (or, as to any item
of Collateral acquired after the date hereof, will be) the sole legal
and beneficial owner of all Collateral reflected on its books and
records as belonging to it and has exclusive possession and control
thereof free and clear of any and all Liens, subject to the Collateral
Trust Agreement and this Agreement and the interests, possession and
control granted to Secured Party thereunder. No financing statement,
notice of lien, mortgage, deed of trust or instrument similar in effect
covering the Collateral, any portion thereof, or any proceeds thereof,
exists or is on file in any public office, except as may have been
filed in favor of Secured Party.
(e) All originals of all stock certificates, notes,
bonds, debentures and other instruments constituting Collateral have
been delivered to Secured Party with all necessary or appropriate
endorsements.
(f) Except as set forth in Schedule D and except for
the Code, no Debtor and no Collateral purported to be granted by it is
subject to any requirement of law or contractual obligation which
prohibits, restricts, or limits the execution, delivery or performance
of this Agreement or the creation, perfection or enforcement of the
security interest purported to be created hereby.
<PAGE>
(g) Neither Debtor has a United States federal
taxpayer identification number.
(h) Each Debtor is a corporation or limited liability
company organized, validly existing and in good standing under the laws
of the jurisdiction in which it is organized and is duly qualified to do
business and in good standing in each jurisdiction where its material
assets are located or its material operations are conducted, except where
the failure to be so qualified could not reasonably be expected to cause
a change that would be material and adverse to such Debtor.
(i) Each Debtor has the corporate or partnership
power to execute, deliver and perform its obligations under the
Collateral Trust Agreement and this Agreement.
(j) The execution, delivery and performance by each
Debtor of the Collateral Trust Agreement and this Agreement (i) have been
duly authorized by all necessary action of its board of directors or
governing authority, (ii) do not contravene its certificate or articles
of incorporation or by-laws or its members agreement or other governing
document, and (iii) do not and will not result in or require the creation
of any Lien (other than pursuant to the Collateral Trust Agreement and
this Agreement) upon any of its property or assets.
(k) No authorization or approval or other action by,
and no notice to or filing with, any governmental officer, department,
agency or authority is required for the due execution, delivery and
performance by each Debtor of the Collateral Trust Agreement, except the
filing of financing statements to perfect Secured Party's security
interest which have been duly filed.
(l) The Collateral Trust Agreement and this Agreement
are legal, valid and binding obligations of each Debtor, enforceable
against each Debtor in accordance with their respective terms, subject to
laws generally affecting the enforcement of creditors' rights.
(m) The execution, delivery and performance by each
Debtor of the Collateral Trust Agreement and this Agreement (i) do and
will comply with all applicable laws, (ii) do and will comply with, and
do not and will not conflict with, constitute a breach of or give rise to
any Lien, default, event of default or other adverse consequence under,
any note, indenture, undertaking, agreement or other contractual
obligation that is binding upon any Debtor or secured by or enforceable
against any property of any Debtor.
<PAGE>
(n) Secured Party holds an enforceable and perfected
first Lien in the Collateral. No other Liens are outstanding against the
Collateral.
ARTICLE IV
COVENANTS OF THE DEBTORS
SECTION 4.1 Covenants. Each Debtor covenants and agrees that so
long as the security interest created hereby remains outstanding:
(a) Each Debtor will deliver to Secured Party each
instrument included in the Collateral as set forth in Section 2.3.
(b) No Debtor will (i) cause, permit or suffer any
voluntary or involuntary change in its name, identity or corporate
structure, or in the location of its chief executive office, or (ii)
keep any tangible Collateral or any records relating to any Claim owned
by it, or permit or suffer any such Collateral or records to be moved,
to any other location unless (in each case) (x) Schedule B has first
been appropriately supplemented with respect thereto, and (y) an
appropriate financing statement has been filed in the proper office and
in the proper form, and all other requisite actions have been taken, to
perfect or continue the perfection (without loss of priority) of
Secured Party's security interest in the Collateral.
(c) Each Debtor will defend the Collateral against
all claims and demands of all persons at any time claiming the same or
any interest therein.
(d) No Debtor will encumber, sell, exchange or
otherwise dispose of any item of Collateral or any interest therein, or
permit or suffer any such item to be encumbered, sold, exchanged or
otherwise disposed of, unless (i) such action is permitted at the time
under the Collateral Trust Agreement and (ii) the Debtors make all
payments on account of the Secured Obligations required to be made
therefrom, or in exchange or substitution therefor, and each Debtor
takes all other actions required to be taken in connection therewith,
under the Collateral Trust Agreement.
(e) Secured Party is hereby authorized to file one or
more financing statements or fixture filings, and continuations thereof
and amendments thereto, relative to all or any part of the Collateral,
without the signature of any Debtor where permitted by law. A copy of
this Agreement may be filed as a financing statement wherever permitted
by law.
<PAGE>
(f) Secured Party may at any time (but shall not be
obligated to) (i) perform any of the obligations of any Debtor under
this Agreement if such Debtor fails to perform such obligation within
30 calendar days after written demand by Secured Party and (ii) make
any payments and do any other acts Secured Party may deem necessary or
desirable to protect its security interest in the Collateral,
including, without limitation, the right to pay, purchase, contest or
compromise any Lien that attaches or is asserted against any Collateral
and to appear in and defend any action or proceeding relating to the
Collateral, and the Debtors will promptly reimburse Secured Party for
all payments made by Secured Party in doing so, together with interest
thereon at the judgment rate and all costs and expenses related thereto
as set forth in Section 9.10.
ARTICLE V
VOTING RIGHTS, DIVIDENDS AND DISTRIBUTIONS
SECTION 5.1 Voting Rights. So long as no Event of Default has
occurred and is continuing or would result from any exercise thereof, the
Debtors shall have and may exercise all voting rights with respect to any and
all Newco Common Stock held in the Trust Estate, except that the Debtors may not
and will not act or vote in favor of any action that would be or cause an Event
of Default or any event which, with the giving of notice or lapse of time (or
both), would constitute an Event of Default. Upon the occurrence of an Event of
Default, Secured Party may (but shall not be obligated to) suspend or terminate
the Debtors' right to exercise voting rights with respect to any or all such
Newco Common Stock, by giving written notice of such suspension or termination
to the Debtors, and Secured Party shall thereupon have the sole right and power
to exercise such voting rights.
SECTION 5.2 Dividends, Distributions and Payments. Secured
Party shall be entitled to receive and hold as part of the Trust Estate, subject
to the Collateral Trust Agreement, all dividends and distributions on the Newco
Common Stock, all income from Cash Equivalents and all Proceeds.
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.1 Remedies. Upon and at any time after the
occurrence of any Event of Default, and from time to time on each occasion when
an Event of Default has occurred and is continuing, Secured Party may exercise
and enforce each and all of the rights and remedies available to a secured party
<PAGE>
upon default under the Code or other applicable law and each and all of the
following rights and remedies:
(a) Secured Party may notify any or all account
debtors and obligors on any Collateral to make payment directly to
Secured Party.
(b) Secured Party may take possession of all items of
Collateral that are not then in its possession and require the person
or entity in possession thereof to deliver such Collateral to Secured
Party at one or more locations designated by Secured Party and
reasonably convenient to it and the Debtors.
(c) Secured Party may cause any or all Newco Common
Stock and other instruments or investment securities constituting part
of the Trust Estate to be transferred into Secured Party's name and
exercise and enforce any or all of the rights, interests, privileges
and remedies of a holder against the issuer thereof, as freely and
fully as if Secured Party were the absolute owner but as a secured
party and as part of the Trust Estate.
(d) Secured Party may sell or otherwise dispose of
any or all of the Collateral or any part thereof in one or more parcels
and from time to time in any quantity or portion and on any number of
occasions, at a public sale or in a private sale or transaction, on any
exchange or market or at Secured Party's offices or at any other
location, for cash, on credit or for future delivery, and may enter
into all contracts necessary or appropriate in connection therewith,
without any notice whatsoever unless required by law, subject to the
following limitations:
(1) Secured Party may sell or otherwise dispose of
Newco Common Stock held in the Trust Estate at any particular
time only if the cash and the immediately realizable net
liquidation value of Cash Equivalents and Letters of Credit
then held in the Trust Estate are not sufficient to pay in
full (i) all amounts which Secured Party is then required or
has then been instructed to pay out from the Trust Estate
pursuant to the Collateral Trust Agreement and (ii) all
Secured Obligations which are then payable; and
(2) Secured Party shall not sell or otherwise dispose
of shares of Newco Common Stock at any particular time in
excess of a number of shares (determined on a rounded-up
commercially reasonable regular lot basis) the proceeds of
which would be sufficient, when added to the cash and the
immediately realizable net liquidation value of Cash
Equivalents and Letters of Credit then held in the Trust
Estate, to pay in full (i) all amounts which Secured Party is
then required or has then been instructed to pay out from the
<PAGE>
Trust Estate pursuant to the Collateral Trust Agreement , (ii)
all amounts which Secured Party in good faith anticipates it
will be required or instructed to pay out from the Trust
Estate on account of Known Liabilities and pending Tax Claims
pursuant to the Collateral Trust Agreement within the next 90
calendar days (and for such purpose Secured Party may rely
conclusively on a certificate as to such amounts given to
Secured Party by Newco Group), and (iii) all Secured
Obligations which are then payable.
The Debtors agree that at least 10 calendar days' written notice to the
Debtors of the time and place of any public sale or the time after
which any private sale is to be made shall be commercially reasonable.
The giving of notice of any such sale or other disposition shall not
obligate Secured Party to proceed with the sale or disposition, and any
such sale or disposition may be postponed or adjourned from time to
time, without further notice.
(e) Secured Party may, on a royalty-free basis, use and
license use of any trademark, trade name, trade style, copyright,
patent or technical knowledge or process owned, held or used by any
Debtor in respect of any Collateral as to which any right or remedy of
Secured Party is exercised or enforced.
In addition, each holder of any Secured Obligation may exercise and enforce such
rights and remedies for the collection of such Secured Obligation as may be
available to it by law or agreement.
SECTION 6.2 Remedies Cumulative. Secured Party may exercise
and enforce each right and remedy available to it upon the occurrence of an
Event of Default either before or concurrently with or after, and independently
of, any exercise or enforcement of any other right or remedy of Secured Party or
any holder of any Secured Obligation against any person, entity or property. All
such rights and remedies shall be cumulative, and no one of them shall exclude
or preclude any other.
SECTION 6.3 Surplus; Deficiency. Any surplus proceeds of any
sale or other disposition of Collateral by Secured Party remaining after all the
Secured Obligations are indefeasibly paid in full and discharged shall be paid
over to the Debtors or to whomever may be lawfully entitled to receive such
surplus or as a court of competent jurisdiction may direct, except that if any
contingent, unliquidated or unmatured Secured Obligation then remains
outstanding, such surplus proceeds may be retained by Secured Party and held as
Collateral until such time as all outstanding Secured Obligations have been
determined, liquidated and indefeasibly paid in full and discharged. The Debtors
shall be and remain liable for any deficiency.
<PAGE>
SECTION 6.4 Information Related to Collateral. If Secured
Party determines to sell or otherwise dispose of any Collateral, the Debtors
shall, and shall cause any person controlled by any Debtor to, furnish to
Secured Party all information Secured Party may request that pertains or could
pertain to the value or condition of such Collateral or would or might
facilitate its sale.
SECTION 6.5 Sale Exempt from Registration. Secured Party shall
be entitled at any such sale, if it deems it advisable to do so, to restrict the
prospective bidders or purchasers to persons who will provide assurances
satisfactory to Secured Party that they may be offered and sold the Collateral
to be sold without registration under the Securities Act of 1933, as amended
(the "Securities Act"), or any other applicable state or federal statute, and
upon the consummation of any such sale, Secured Party shall have the right to
assign, transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold. Secured Party may solicit offers to buy the Collateral, or
any part of it, from a limited number of investors deemed by Secured Party, in
its commercially reasonable judgment, to meet the requirements to purchase
securities under Regulation D promulgated under the Securities Act (or any other
regulation of similar import). If Secured Party solicits such offers from such
investors, then the acceptance by Secured Party of the highest offer obtained
therefrom shall be deemed to be a commercially reasonable method of disposition
of the Collateral.
SECTION 6.6 Registration Rights. If Secured Party determines
that registration of any securities constituting Collateral under the Securities
Act or other applicable law is required or desirable in connection with any
foreclosure sale, each Debtor will use its best efforts to assist and cooperate
in all respects reasonably requested by Secured Party or Newco Group in causing
such registration to become effective and to be kept effective for such time as
may be reasonably necessary in the opinion of Secured Party, except that no
Debtor shall be obligated under this Section 6.6 to exercise any registration
rights that may be available to it with respect to Newco Common Stock.
ARTICLE VII
THE SECURED PARTY
SECTION 7.1 Collateral Trust Agreement Provisions. Secured
Party is executing and delivering this Agreement, and accepting the security
interests, rights, remedies, powers and benefits conferred upon Secured Party
hereby, as Trustee under the Collateral Trust Agreement. The provisions of the
Collateral Trust Agreement and all rights, powers, immunities and indemnities
granted to the Trustee under the Collateral Trust Agreement shall apply in
respect of such execution, delivery and acceptance and in respect of any and all
actions taken or omitted by Secured Party under, in connection with or with
respect to this Agreement.
<PAGE>
SECTION 7.2 No Liability. Secured Party makes no statement,
promise, representation or warranty whatsoever, and shall have no liability
whatsoever, to any holder of any Secured Obligations as to the authorization,
execution, delivery, legality, enforceability or sufficiency of this Agreement
or as to the creation, perfection, priority or enforceability of any security
interest granted hereunder or as to existence, ownership, quality, condition,
value or sufficiency of any Collateral or as to any other matter whatsoever.
SECTION 7.3 Holders Bound. Except where the consent of others
may be required pursuant to the express provisions of the Collateral Trust
Agreement, any modification, amendment, waiver, termination or discharge of any
security interest, right, remedy, power or benefit conferred upon Secured Party
hereby that is effectuated in a writing signed by Secured Party shall be binding
upon all holders of Secured Obligations if it is authorized in the Collateral
Trust Agreement or directed in writing by Newco Group.
SECTION 7.4 Duty of Care. Neither Secured Party nor any
director, officer, employee, attorney or agent of Secured Party shall be
obligated to care for the Collateral hereunder or to collect, enforce, vote, or
protect the Collateral or any rights or interests of any Debtor related thereto
or to preserve or enforce any rights which any Debtor or any other Person may
have against any third party, except only that Secured Party shall exercise
reasonable care in physically safekeeping any item of Collateral that was
delivered into Secured Party's possession. Secured Party shall be deemed to have
exercised such reasonable care if the Collateral is accorded treatment
substantially equal to that which Secured Party accords to its own property or
if it selects, with reasonable care, a custodian or agent to hold such
collateral for Secured Party's account.
ARTICLE VIII
EXONERATION WAIVERS
SECTION 8.1 Rights and Interests not Prejudiced, Affected or
Impaired. Neither the security interests granted hereby, nor the trusts and
interests created under the Collateral Trust Agreement nor any power, privilege,
right or remedy of Secured Party relating thereto, nor the beneficial interest
of Newco Group and other holders of Secured Obligations therein and thereunder
shall at any time in any way be prejudiced, affected or impaired by any act or
failure to act on the part of any of the Debtors or by any act or failure to act
on the part of Secured Party or Newco Group or any other holder of Senior
Secured Obligations or by any breach or default by any of them in the
<PAGE>
performance or observance of any promise, covenant or obligation enforceable by
any Debtor, regardless of any knowledge thereof that Secured Party or Newco
Group and any such other holder may have or otherwise be charged with.
(a) Without in any way limiting the generality of the
foregoing, Secured Party, Newco Group and each other holder of any
Secured Obligations may at any time and from time to time, without the
consent of or notice to any Debtor, without incurring any
responsibility or liability to any Debtor and without in any manner
prejudicing, affecting or impairing any such security interest, trust,
interest, power, privilege, right or remedy or the obligations of the
Debtors to Secured Party, Newco Group and the other holders of Secured
Obligations:
(i) Make loans and advances to any one or
more of the Debtors, or issue, guaranty or obtain letters of
credit for account of any one or more of the Debtors or
otherwise extend credit to any one or more of the Debtors, in
any amount and without any limitation or restriction
whatsoever, on any terms, whether pursuant to a commitment or
as a discretionary advance and whether or not any default or
event of default or failure of condition is then continuing;
(ii) Change the manner, place or terms of
payment or extend the time of payment of, or renew or alter,
compromise, accelerate, extend, refinance, release or
discharge, any Secured Obligation or any other indebtedness or
liability of any of the Debtors or any agreement, guaranty,
lien or obligation of any of the Debtors or any other person
or entity in any manner related thereto, or otherwise amend,
supplement or change in any manner any Secured Obligation or
any such indebtedness or liability or any such agreement,
guaranty, lien or obligation;
(iii) In any manner modify, transform,
change, refinance, replace, reclassify, subordinate or
recharacterize any such indebtedness or liability;
(iv) Release or discharge any guaranty or
any other lien, right, remedy or claim against any person or
entity;
(v) Take or fail to take any collateral
security for any Secured Obligation or take or fail to take
any action which may be necessary or appropriate to ensure
that any lien upon any property securing any Secured
Obligation is duly enforceable or perfected or entitled to
priority as against any other lien or to ensure that any
proceeds of any property subject to any lien are applied to
the payment of any Secured Obligation;
<PAGE>
(vi) Release, discharge or permit the lapse
of any or all liens upon any property at any time securing any
Secured Obligation;
(vii) Exercise or enforce, in any manner,
order or sequence, or fail to exercise or enforce, any right
or remedy against any one or more of the Debtors or in respect
of the Collateral or the Trust Estate or any other collateral
security or any other person, entity or property in respect of
any Secured Obligation or lien securing any Secured Obligation
or any right under this Agreement or the Collateral Trust
Agreement; or
(viii) Sell, exchange, release, foreclose
upon or otherwise deal with any property that may at any time
be subject to any lien securing any Secured Obligation.
(b) No exercise, delay in exercising or failure to
exercise any right arising under this Agreement or the Collateral Trust
Agreement, no act or omission of Secured Party, Newco Group or any
other holder of any Secured Obligation in respect of any or all of the
Debtors or any other person or entity or the Collateral or the Trust
Estate or any other collateral security for any Secured Obligation or
any right arising under this Agreement or the Collateral Trust
Agreement, no change, impairment, or suspension of any right or remedy
of Secured Party, Newco Group or any other holder of any Secured
Obligation, and no other act, failure to act, circumstance, occurrence
or event which, but for this provision, would or could act as a release
or exoneration of the obligations of any Debtor shall in any way
affect, decrease, diminish or impair any of the obligations of the
Debtors under this Agreement or give any Debtor or any other person or
entity any recourse or defense against Secured Party, Newco Group or
any other holder of Secured Obligations in respect of any security
interest, trust, interest, power, privilege, right or remedy arising
under this Agreement or the Collateral Trust Agreement.
ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.1 Notices. All notices, requests, approvals,
consents and other communications required or permitted to be made hereunder
shall, except as otherwise provided, be given in the manner specified and to the
addresses set forth in Section 16 of the Collateral Trust Agreement.
<PAGE>
SECTION 9.2 Headings. The various headings in this Agreement
are inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement or any provision hereof.
SECTION 9.3 Changes. This Agreement or any provision hereof
may be changed, waived, or terminated only by a statement in writing signed by
the party against which such change, waiver or termination is sought to be
enforced. Any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 9.4 Debtors Remain Liable. Each Debtor shall remain
liable under all contracts and agreements included in the Collateral to the
extent set forth therein to perform all of its duties and obligations thereunder
to the same extent as if this Agreement had not been executed. The exercise or
enforcement by Secured Party of any of its rights and remedies under this
Agreement or in respect of the Collateral shall not release any Debtor from any
of its duties or obligations under any such contracts or agreements. Secured
Party shall not be obligated to perform any such duties or obligations and shall
not be liable for any breach thereof.
SECTION 9.5 No Waiver. No failure by Secured Party to
exercise, or delay by Secured Party in exercising, any power, right or remedy
under this Agreement shall operate as a waiver thereof. No waiver by Secured
Party shall be effective unless given in a writing signed by it. No waiver so
given shall operate as a waiver in respect of any other matter or in respect of
the same matter on a future occasion. Acceptance of or acquiescence in a course
of performance in respect of this Agreement shall not waive or affect the
construction or interpretation of the terms of this Agreement even if the
accepting or acquiescing party had knowledge of the nature of the performance
and opportunity for objection.
SECTION 9.6 Entire Agreement. This Agreement and the
Collateral Trust Agreement are intended by the parties as a final expression of
their agreement and a complete and exclusive statement of the terms and
conditions related to the subject matter thereof.
SECTION 9.7 Severability. If any provision of this Agreement
is invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions hereof, or of such provision in
any other application, shall not be in any way affected or impaired thereby and
such other provisions and applications shall be enforceable to the fullest
extent lawful.
<PAGE>
SECTION 9.8 Power of Attorney. Each Debtor hereby appoints and
constitutes Secured Party or any delegate, nominee or agent acting for Secured
Party as such Debtor's attorney-in-fact with the power and authority (but not
the duty), in the name of such Debtor or in the name of Secured Party or such
delegate, nominee or agent, to (i) execute, deliver and file such financing
statements, agreements, deeds and writings as such Debtor is required to
execute, deliver or file hereunder, (ii) endorse, collect or transfer any item
of Collateral which such Debtor is required to endorse, collect or transfer
hereunder or which Secured Party is permitted to endorse, collect or transfer
hereunder, (iii) make any payments or take any action under Section 2.3 or
Section 4.1(f), (iv) take any other action required of such Debtor or permitted
to Secured Party hereunder, and (v) take any action reasonably necessary or
incidental to any of the foregoing. This power of attorney is coupled with an
interest and is irrevocable as to the Debtors. Secured Party shall have no duty
whatsoever to exercise any power herein granted it.
SECTION 9.9 Counterparts. This Agreement and any amendments,
waivers, consents or supplements may be executed in any number of counterparts,
each of which when so executed and delivered shall be deemed an original, but
all of which shall together constitute one and the same agreement.
SECTION 9.10 Costs and Expenses. The Debtors hereby agree to
pay or reimburse Secured Party for all reasonable costs and expenses (including,
without limitation, reasonable attorneys' fees and disbursements and court
costs) incurred in connection with or as a result of the exercise or enforcement
by Secured Party of any right or remedy available to it or the protection or
enforcement of Secured Party's interest in the Collateral in any bankruptcy case
or insolvency proceeding.
SECTION 9.11 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER
OF JURY TRIAL; LIMITATION OF LIABILITY; WAIVER OF BOND.
(a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND INTERPRETED UNDER THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO
THE EXTENT THAT THE PERFECTION OF THE SECURITY INTERESTS HEREUNDER IN
RESPECT OF ANY PARTICULAR COLLATERAL IS GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(b) SUBMISSION TO JURISDICTION. ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS
OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
EACH PARTY HERETO CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
<PAGE>
TO THE JURISDICTION OF THOSE COURTS. EACH PARTY IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE
TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN
RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. SERVICE OF
ANY SUMMONS, COMPLAINT OR OTHER PROCESS MAY BE MADE BY ANY MEANS
PERMITTED BY NEW YORK LAW.
(c) WAIVER OF JURY TRIAL. EACH PARTY HERETO WAIVES
ALL RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE COLLATERAL
TRUST AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY IN
ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY
OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT
TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE, AND AGREES THAT ANY SUCH
CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A
JURY. WITHOUT LIMITING THE FOREGOING, EACH PARTY FURTHER AGREES THAT
ITS RIGHT TO A TRIAL BY JURY IS HEREBY WAIVED AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO
CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE
COLLATERAL TRUST AGREEMENT OR ANY PROVISION HEREOF OR THEREOF. THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT AND THE COLLATERAL TRUST AGREEMENT.
(d) LIMITATION OF LIABILITY. NO CLAIM MAY BE MADE BY
THE DEBTORS AGAINST SECURED PARTY OR THE AFFILIATES, DIRECTORS,
OFFICERS, EMPLOYEES, ATTORNEYS OR AGENTS OF SECURED PARTY FOR ANY
SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY
CLAIM (WHETHER BASED UPON BREACH OF CONTRACT, TORT, BREACH OF STATUTORY
DUTY OR ANY OTHER THEORY OF LIABILITY) ARISING OUT OF OR RELATED TO THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR
EVENT OCCURRING IN CONNECTION THEREWITH, AND THE DEBTORS HEREBY WAIVE,
RELEASE AND AGREE NOT TO SUE UPON ANY CLAIM FOR ANY SUCH DAMAGES,
WHETHER OR NOT NOW ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO
EXIST IN THEIR FAVOR.
<PAGE>
(e) WAIVER OF BOND. THE DEBTORS WAIVE THE POSTING OF
ANY BOND OTHERWISE REQUIRED OF SECURED PARTY IN CONNECTION WITH THE
ENFORCEMENT OF ANY OF ITS REMEDIES HEREUNDER, INCLUDING, WITHOUT
LIMITATION, ANY ORDER OR WRIT FOR REPLEVIN OR DELIVERY OF POSSESSION OF
ANY COLLATERAL.
SECTION 8.12 Successors and Assigns. This Agreement is binding
upon and enforceable against the Debtors and their respective successors and
assigns. It shall inure to the benefit of and may be enforced by Secured Party
and its successors and assigns, for the benefit of Newco Group and each and
every other person or entity which at any time holds or is entitled to enforce
any of the Secured Obligations and each of their respective heirs,
representatives, successors and assigns.
SECTION 8.13 Joint and Several Obligation. This Agreement and
the security interest granted by each Debtor hereunder and all obligations of
each Debtor hereunder shall be the joint and several obligation of each Debtor
and may be freely enforced against each Debtor for the full amount of the
Secured Obligations, without regard to whether enforcement is sought or
available against any other Debtor.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Pledge and Security
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
SATELLITE COMPANY, LLC,
a Nevada limited liability company
By:
-----------------------------------
Title:
GRUPO TELEVISA, S.A.,
a corporation (Sociedad Anonima)
organized under the laws of Mexico
By:
-----------------------------------
Title:
------------------------,
a corporation, as Trustee
By:
-----------------------------------
Information included herein, marked with [*], is being filed pursuant to a
request for confidential treatment.
Amendment Number 3 to
Launch Services Agreement LKEC-9411-002
dated 14 November 1994, through
Amendment Number 2, dated 9 June 1995
This Amendment Number 3 (the "Amendment") is entered into this 23rd day
of August, 1996, by and between PanAmSat Corporation, a Connecticut corporation
and the successor in interest to PanAmSat, L.P. ("PanAmSat" or "Customer"), and
Lockheed-Khrunichev-Energia International, Inc. ("LKEI" or "Contractor"). This
Amendment amends that certain Launch Services Agreement, dated November 14,
1994, by and between PanAmSat and LKEI (the "Agreement"). All capitalized terms
used in this Amendment, unless otherwise specified, have the meanings set forth
in the Agreement.
WHEREAS, PanAmSat and LKEI each desire to make certain changes to the
Agreement.
NOW, THEREFORE, in consideration of the mutual benefits to be derived,
and for other good and valuable consideration, the receipt of which is hereby
acknowledged, PanAmSat and LKEI agree that:
1. Payment Schedule for Launch B. The payment schedule set forth in
------------------------------
Section 6.1 is modified with respect to Launch B as follows:
********************** *********************
********************** *********************
********************** *********************
********************** *********************
********************** *********************
********************** *********************
********************** *********************
********************** *********************
<PAGE>
The information below, marked with [*], is being filed pursuant to a request for
confidential treatment.
2. Manner and Payment Location. In accordance with the LKEI notice,
----------------------------
LKEB-9604-0077, dated 15 April 1996, Section 6.3 (Article 6.3 in the notice
above) is deleted in its entirety and the following inserted in lieu thereof:
"6.3 Manner and Payment Location. All payments in connection with this
----------------------------
Agreement shall be made in immediately available funds to Contractor' s account
by telegraphic bank transfer, with telex notice from the issuing bank to the
receiving bank as follows:
Citibank N. A.
One Penn's Way
New Castle, DE 19720
******************
******************
3. Designated Launch Period. The table set forth in Section 7.1 of
-------------------------
the Agreement is amended in its entirety to read as follows:
"Launch Period
-------------
PAS A (Hughes 601 HP Satellite) 04/01/97-06/30/97
PAS B (Loral FS- 1300) 01/01/98-03/31/98
PAS C (satellite configuration TBD) 10/01/98-12/31/98
* Final satellite identity and configuration to be determined no later
than L-18 months for affected launch."
For the avoidance of doubt, reference in the Agreement to the original
Launch Period designated in the Agreement shall refer to the above schedule.
<PAGE>
The information below, marked with [*], is being filed pursuant to a request for
confidential treatment.
4. Right to Retain Payments. The portion of the table (entitled
-------------------------
"Amount or % of Contract Price") relating to the Launch of PAS-B set forth in
Section 20.5 of the Agreement is amended in its entirety to read as follows:
"Date Launch B
---- --------
Current to 7/31/96 ***
08/01/96-01/31/97 ***
01/31/97 *** "
5. Replacement Launch Services. Sections 34.3 and 34.4 of the
----------------------------
Agreement are amended in their entirety to read as follows:
"34.3 Election of Replacement Launch Services. Within ****** after a
----------------------------------------
determination of a Launch-Mission Failure, or within ********* after a
successful launch in which there is a Payload Failure, Customer may elect to
obtain Replacement Launch Services, by providing written notification to the
Contractor Representative identified in Article 31, NOTICES, of this Agreement.
a. This Notice shall specifically cite this Article and identify
the affected launch, including launch date and payload for
which the Replacement Launch Service is being obtained; and
<PAGE>
The information below, marked with [*], is being filed pursuant to a request for
confidential treatment.
b. The Contractor shall, if requested by Customer, provide a
********************************************** from the date of notification. If
an earlier Launch Period is requested by Customer then, subject to obligations
of the Contractor to other customers of Contractor and the availability of a
Launch Opportunity, the Contractor shall assign the earlier Launch Period. The
foregoing notwithstanding, the parties shall negotiate in good faith to
establish the price of a Replacement Launch within the pricing parameters set
forth in Section 34.5 below within two (2) weeks following Customer' s
notification. If the parties are unable to agree upon a price within the two (2)
week period, unless Customer agrees, subject to any further negotiation that may
be conducted, to pay the maximum price required under Section 34.5 or, if less,
Contractor' s last best offer, Contractor' s obligations to provide Customer
with a Replacement Launch within the period specified shall slip day for day
until an agreement upon price is reached.
34.4 Determination of Launch Slot or Launch Period. Within 30 days
----------------------------------------------
after receipt of Customer' s notice pursuant to paragraph 34.4 above, the
Parties shall mutually agree upon a Launch Slot or a Launch Period, as
applicable, taking into account the Customer' s request as well as the available
launch opportunities."
6. Technical Provisions
--------------------
***********
***********
***********
***********
***********
<PAGE>
7. Execution in Counterparts. This Amendment may be executed in
--------------------------
several counterparts, each of which shall be deemed an original, and all of
these counterparts together shall constitute but one and the same instrument.
Each of the parties have duly executed and delivered this
Amendment as of the day and year first written above.
PANAMSAT CORPORATION
BY: /s/ Frederick A. Landman
---------------------------
NAME: Frederick A. Landman
TITLE: President and CEO
LOCKHEED-KHRUNICHEV-ENERGIA
INTERNATIONAL, INC.
BY: /s/ Ronald D. Stoneburner
---------------------------
NAME: Ronald D. Stoneburner
TITLE: Vice President, Contracts
DTH OPTION PURCHASE AGREEMENT
This DTH Option Purchase Agreement (this "Agreement"), dated
September 20, 1996, between PanAmSat Corporation, a Delaware corporation
("PAS"), Grupo Televisa, S.A., a Mexican corporation ("Televisa") and Satellite
Company, L.L.C., a Nevada Limited Liability Company ("S Company").
A. PAS and Televisa have entered into a DTH System in Latin America
Memorandum of Understanding dated as of March 27, 1995 (the "Original
MOU"), as revised pursuant to a Revised DTH System in Latin America
Memorandum of Understanding of even date herewith (the "Revised MOU").
Pursuant to Section 2.4.1 of the Original MOU and Section 1.1 of the
Revised MOU, and pursuant to oral understandings, PAS has obligations
or rights to purchase (such agreements or options to purchase, the "DTH
Options"), subject to fulfillment of its indenture obligations, equity
ownership in a company or companies formed to sell program services to
consumers in the Americas and the Iberian peninsula.
B. Concurrently with the execution and delivery of this Agreement, PAS is
entering into an Agreement and Plan of Reorganization (the
"Reorganization Agreement") with Hughes Communications, Inc. ("HCI"),
Hughes Communications Galaxy, Inc., Hughes Communications Satellite
Services, Inc., Hughes Communications Services, Inc., Hughes
Communications Carrier Services, Inc., Hughes Communications Japan,
Inc. and Magellan International, Inc. ("Newco"), pursuant to which,
among other things, Newco will acquire the existing businesses of
certain subsidiaries of HCI that together comprise the Galaxy Business
(as defined in the Reorganization Agreement) and the business of PAS.
C. It is a condition to the closing under the Reorganization Agreement
that PAS dispose of the DTH Options.
In consideration of the foregoing premises and the agreements,
covenants and conditions set forth below, the parties agree as follows:
1. Sale of DTH Option.
1.1 Upon the terms and subject to the conditions contained
herein, at a closing (the "Closing") occurring substantially concurrently with
the payment by Newco of consideration pursuant to Section 1.2 of the Stock
Contribution and Exchange Agreement of even date herewith between Televisa, S
Company, Newco and Hughes Communications, Inc., PAS will sell, convey, transfer,
assign and deliver (i) unless the proviso to Section 1.3 hereof is applicable,
at Televisa's option, to Televisa and/or a designee or designees of Televisa, or
(ii) only if the proviso to Section 1.3 hereof is applicable, at S Company's
option, to S Company and/or a designee or designees of S Company, all of PAS's
<PAGE>
right, title and interest in and to the DTH Options (collectively, the "PAS DTH
Option Sale").
1.2 Upon the terms and subject to the conditions contained
herein, at the Closing, as consideration for the PAS DTH Option Sale, subject to
Section 1.3 hereof, Televisa shall pay and/or cause to be paid to PAS the sum of
U.S. $225,000,000 (the "DTH Option Amount").
1.3 To effect the PAS DTH Option Sale, at the Closing (a) PAS
shall assign, convey, transfer and sell (i) unless the proviso to this Section
1.3 is applicable, at Televisa's option, to Televisa and/or a designee or
designees of Televisa, or (ii) only if the proviso to this Section 1.3 is
applicable, at S Company's option, to S Company and/or a designee or designees
of S Company, the DTH Options free and clear of any claim, lien, pledge, option,
charge, security interest, encumbrance or other rights of third parties of any
nature whatsoever, and (b) Televisa shall pay and/or caused to be paid an amount
in cash equal to the DTH Option Amount to PAS by wire transfer of immediately
available funds to an account designated by PAS; provided, that if Televisa is
otherwise unable to pay and/or caused to be paid the DTH Option Amount to PAS at
the Closing, then S Company shall acquire and/or cause to be acquired by a
designee or designees of S Company the DTH Options, and S Company shall pay
and/or caused to be paid by a designee or designees of S Company the DTH Option
Amount to PAS.
1.4 (a) In the event that the proviso to Section 1.3 hereof is
not applicable, unless otherwise provided in a written notice by Televisa to PAS
at the Closing, PAS shall sell, convey, transfer, assign and deliver the DTH
Options to Televisa at the Closing.
(b) Only in the event that the proviso to Section 1.3 hereof
is applicable, unless otherwise provided in a written notice by S Company to PAS
at the Closing, PAS shall sell, convey, transfer, assign and deliver the DTH
Options to S Company at the Closing.
2. Representations, Warranties, Covenants and Agreements.
2.1 PAS hereby represents and warrants to Televisa, S Company
and their designees, and each of Televisa and S Company (on behalf of each of
them and their designees, if any) hereby represents and warrants to PAS, that
(i) such party has all requisite corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder and to effect
the transactions contemplated hereby, (ii) the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of such party, (iii) this Agreement has been duly executed and
delivered by such party, and assuming that this Agreement constitutes the valid
and binding agreement of the other party hereto, constitutes a valid and binding
obligation of such party enforceable in accordance with its terms except that
the enforcement hereby may be limited by bankruptcy, insolvency, fraudulent
<PAGE>
transfer, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or in
equity), (iv) no consent, approval, order or authorization of, or registration,
declaration or filing with, notice to, or permit from any legislative,
executive, judicial, regulatory or other governmental or quasi-governmental
authority, instrumentality or body, whether domestic or foreign, local, state,
federal or other, including, without limitation, any administrative agency,
commission or court, or other public or private third party, is required by or
with respect to such party in connection with the execution and delivery by such
party of this Agreement or the consummation by such party of the transactions
contemplated hereby.
2.2 Each of the parties hereto hereby agrees that it will
cooperate with one another and endeavor in good faith to take all actions
required in connection with the consummation of the transactions contemplated by
this Agreement.
3. Binding Effect.
This Agreement is a binding agreement between the parties, and
may be amended or modified only by a written instrument executed by the parties.
This Agreement constitutes the entire understanding and agreement of the parties
with respect to the matters described herein and all prior agreements and
understandings, whether written or oral related thereto, are merged herein and
superseded hereby, except as set forth in Section 9 below.
4. No Third Party Beneficiaries.
Nothing contained in this Agreement is intended to confer on
any person or entity, other than the parties hereto, any rights, remedies or
obligations.
5. Governing Law.
This Agreement will be governed by and construed in accordance
with the laws of the State of New York, without giving effect to principles of
conflicts of laws.
6. Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall constitute an original agreement.
7. Termination.
This Agreement may be terminated at any time prior to the
Closing by PAS or Televisa (the date of such termination being referred to as a
"Termination Date") if for any reason the Reorganization Agreement shall have
been terminated in accordance with its terms. In the event of the termination of
<PAGE>
this Agreement as provided in the preceding sentence, written notice thereof
shall forthwith be given to the other party and this Agreement shall forthwith
become void and there shall be no liability on the part of either party hereto
except to the extent that such termination results from the breach by such party
hereto of any of its representations or warranties, or of any of its covenants
or agreements, in each case, as set forth in this Agreement.
8. Further Rights.
Notwithstanding anything contained herein to the contrary,
upon the termination of this Agreement pursuant to Section 7, Televisa may
extend this Agreement for a period of up to 12 months following the Termination
Date (the "Extension Period") by written notice to PAS given within the
Extension Period. Upon such extension, the transactions contemplated herein
shall close prior to the expiration of the Extension Period, as the same may be
further extended as provided in clause (b) below, on the terms and conditions
set forth herein, provided that (a) the $225 million purchase price specified
herein shall be increased by an amount equal to interest at the rate of 10% per
annum from the Termination Date until the payment of the purchase price, and (b)
if PAS enters into an agreement to effect a business combination within the
Extension Period and if Televisa has committed to purchase the DTH Options in
connection with such business combination, the closing of the purchase and sale
may be adjourned, at Televisa's option, until the consummation of such business
combination.
9. Termination of Agreements.
Upon the consummation of the purchase by Televisa or its
designee of the DTH Options as provided herein, all rights and obligations of
the parties under the Original MOU and the Revised MOU shall, except as
expressly provided below, be terminated and extinguished and neither party shall
have any further obligation to the other. Notwithstanding the immediately
preceding sentence, the provisions of Section 2 of the Revised MOU shall not be
terminated or extinguished and shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the day and year first above written.
GRUPO TELEVISA, S.A.
By: /s/ Guillermo Canedo White
--------------------------------
Name: Guillermo Canedo White
Title: Executive Vice President
SATELLITE COMPANY, L.L.C.
By: /s/ Guillermo Canedo White
--------------------------------
Name: Guillermo Canedo White
Title: Authorized Signatory
PANAMSAT CORPORATION
By: /s/ Frederick A. Landman
--------------------------------
Name: Frederick A. Landman
Title: President and Chief Executive
Officer
REVISED
DTH SYSTEM IN LATIN AMERICA
MEMORANDUM OF UNDERSTANDING
This Revised Memorandum of Understanding ("Revised MOU") dated
as of September 20, 1996 is made in respect of that certain DTH System in Latin
America Memorandum of Understanding ("Original MOU") dated as of March 27, 1995,
between PanAmSat Corporation, a Delaware corporation ("PanAmSat"), and Grupo
Televisa, S.A., a Mexican corporation ("Televisa"). Unless otherwise
specifically set forth herein, capitalized terms used in this Revised MOU which
are defined in the Original MOU are used as defined in the Original MOU.
A. Televisa has entered, or is about to enter, into a
Memorandum of Understanding (the "North America MOU") with The News Corporation
Limited or its designee ("News Corp.") and Telecommunications International,
Inc. or its designee ("TCII") relating to the establishment and operation of a
DTH business (the ("North America Platform") in the Territory, as therein
defined. It is anticipated that the North America Platform will be divided
between the North America Platform/Mexico and the North America Platform/U.S.
(which together with any divided Multi-Country Platforms described below are
sometimes referred to herein as "sub-Platforms"), as more specifically defined
and described in the North America MOU. A copy of the North America MOU is
attached to this Revised MOU as Exhibit A.
B. Televisa has entered, or is about to enter, into a
Memorandum of Understanding (the "Multi-Country MOU") with News Corp., TCII and
Globo Participacoes Ltda. ("Globo") relating to the establishment and operation
of a DTH business in those countries in Latin America which are included in the
Multi-Country Platform, as defined in the Multi-Country MOU. It is anticipated
that Argentina and Chile will be divided from the Multi-Country Platform into a
separate sub-Platform or sub-Platforms as described in the Multi-Country MOU. A
copy of the Multi-Country MOU is attached to this Revised MOU as Exhibit B. The
North America MOU and the Multi-Country MOU are collectively called the "News
MOUs" and Televisa, News Corp., Globo and TCII and their respective affiliates
in their capacity as owners of the North America Platform and the Multi-Country
Platform are collectively called the "Platform Partners" and are sometimes
individually called a "Platform Partner."
C. News Corp. and Globo have entered, or are about to enter,
into a Memorandum of Understanding (the "Brazil MOU") relating to the
establishment of a DTH business in Brazil. Televisa shall have no participation
in the ownership or operation (other than as described in the News MOUs) in the
DTH business in Brazil.
<PAGE>
D. In order to facilitate the arrangements under the News
MOUs, Televisa and PanAmSat desire to modify their agreements in the Original
MOU and enter into new agreements as provided herein, subject to the terms and
conditions of this Revised MOU.
In consideration of the foregoing premises and the agreements,
covenants and conditions set forth below, the parties agree as follows:
1. PanAmSat Ownership in North America Platform and
Multi-Country Platform; Tag Along Rights.
1.1 PanAmSat Right to Purchase. PanAmSat shall have the right
to purchase from Televisa non-voting equity interests of 15% in the North
America Platform/Mexico, 12% in the North America Platform/U.S., 14% in the
Multi-Country Platform (excluding Argentina and Chile) and 10% in the
Multi-Country Platform for Argentina and Chile, all of such equity interests
being determined on a fully-diluted basis and all being subject to dilution pro
rata with Televisa in the event that additional partners other than the Platform
Partners are admitted to the Platforms (the "PanAmSat Interests"), which right
shall be exercised in full and not in part on or before the tenth anniversary of
the date of this Revised MOU. Until and unless PanAmSat exercises its right to
purchase the PanAmSat Interests, such interests shall be owned and held by
Televisa or one or more wholly-owned Platform SRLs, as defined below. All voting
rights with respect to the PanAmSat Interests will be exercised by Televisa at
all times. The purchase price for the PanAmSat Interests shall be equal to the
share of Televisa's capital contributions to the respective Platforms allocable
to the PanAmSat Interests, to the extent such contributions have not been
recovered through distributions to Televisa by the Platforms, (a) plus interest
on the outstanding balance thereof from time to time (calculated from the date
of each contribution or of each expenditure made and credited by the Platform(s)
to the capital commitment of Televisa) at the rate of 9.75% per annum, (b) plus
any taxes incurred and/or reductions in tax benefits suffered by Televisa
attributable to such transfer (other than income tax on the interest component
of the purchase price), and (c) minus interest on outstanding balance of the
Reimbursable Expenses, as defined below, from time to time (calculated from the
date of each such Reimbursable Expense) at the rate of 9.75% per annum. Televisa
acknowledges that in no event may PanAmSat exercise its right to purchase the
PanAmSat Interests prior to the date (the "Indenture Covenant Date") on which
PanAmSat was required to purchase its ownership interest in Holdco under the
first sentence of such Section 2.4.1 of the Original MOU. The parties shall
execute a definitive option agreement granting the right to purchase the
PanAmSat Interests as provided in this Section 1.1 as soon as practicable
following the execution of this Revised MOU.
<PAGE>
1.1.1 Subject to the terms of Section 1.1.2 below, PanAmSat
agrees to take the PanAmSat Interests through one or more special
purpose Mexican sociedades de responsabilidad limitada (the "Platform
SRLs") where (x) its taking such interests directly in the Platforms
(i) would act to prevent Televisa from achieving consolidation
treatment for Mexican tax or accounting purposes with respect to its
ownership in the Platform or (ii) is the only legally effective
mechanism under which Televisa would have the perpetual and exclusive
ability and right to exercise the voting rights associated with
PanAmSat's interest in the Platform and (y) subject to Section 1.1.2
below, PanAmSat is reasonably satisfied that taking its ownership
through the Platform SRLs as opposed to taking a direct interest in the
Platforms would not result in any negative tax effect upon PanAmSat.
1.1.2 It is the intention of the parties that where Section
1.1.1 would call for the use of one or more Platform SRLs by Televisa
and PanAmSat, the PanAmSat Interests in each Platform (or each
sub-Platform as the case may be) will be held in a separate Platform
SRL, provided, however that upon Televisa's request, the PanAmSat
Interests in more than one Platform or sub-Platform may be held in one
Platform SRL if (i) Televisa's reasonable tax or accounting
circumstances require same and (ii) PanAmSat will not suffer any
adverse effect as a result of same as to which adverse effect PanAmSat
has not been adequately indemnified and held harmless by Televisa. In
the case where holding the PanAmSat Interests, or any of them, in a
Platform SRL would not satisfy the condition set forth in clause (y) of
Section 1.1.1, Televisa may (a) deliver the affected PanAmSat Interest
to PanAmSat in the Platform directly, (b) deliver the affected PanAmSat
Interest to PanAmSat in another form of entity reasonably acceptable to
PanAmSat which otherwise satisfies the conditions of Section 1.1.1 and
Section 1.2 below, or (c) upon Televisa's agreement to indemnify
PanAmSat and hold it harmless from such negative tax effect and to put
PanAmSat in the same tax position in which it would have been had it
taken such PanAmSat Interest directly, which agreement shall be in form
and substance reasonably acceptable to PanAmSat, require PanAmSat to
accept the PanAmSat Interest in a Platform SRL.
1.2 Minority Equity Holder Rights. Televisa covenants and
agrees with PanAmSat that: (a) DTH activities of the Platform Partners conducted
within the respective territories covered by the North America Platform and the
Multi-Country Platform will be conducted exclusively in such Platforms and
through no other corporation, partnership or other form of business organization
until the Platform is dissolved and no follow-on DTH business is thereafter
operated by two or more of the Platform Partners one of which is Televisa
(unless PanAmSat is given the opportunity to invest therein in the same
<PAGE>
proportion to Televisa's equity and in the same manner as in the dissolved
Platform) or, as to any Platform Partner or Platform Partners, the withdrawal of
such Platform Partner or Platform Partners from a Platform with the consent of
the other Platform Partners, (b) if Televisa owns its interests in the North
America Platform and/or the Multi-Country Platform in a Platform SRL in which
PanAmSat has taken an ownership interest as contemplated in Section 1.1 above,
Televisa's ownership in such Platform(s) will be, directly and indirectly,
exclusively through such Platform SRL(s) and such Platform SRL(s) shall be
special purpose entities with Televisa (and/or its wholly-owned affiliates) and
PanAmSat as the sole equity owners and with no business, assets, liabilities,
commitments or understandings other than their stock interest in such
Platform(s) and the liabilities, commitments and understandings related thereto
as described in the News MOUs, (c) all transactions (other than those
transactions which are specifically described in the News MOUs) directly or
indirectly between the Platform Partners and the Platforms will be at arm's
length on commercially reasonable terms, or PanAmSat will be made financially
whole by Televisa, (d) if PanAmSat is holding its ownership interest in a
Platform through a Platform SRL and the Platform's securities become publicly
traded, at PanAmSat's request from time to time, Televisa will cause PanAmSat's
ownership interest in the Platform SRL, or such part thereof which PanAmSat may
desire to sell in a market transaction or transactions, to be converted to a
direct interest in the Platform in the securities which are publicly traded in
order to allow PanAmSat to effect such a transaction or transactions, which
transactions shall be subject on a pro rata basis with Televisa to any transfer
limitations imposed by the Platform on the Platform Partners, (e) Televisa will
furnish PanAmSat, or an independent third party selected by PanAmSat and
reasonably acceptable to Televisa and the other Platform Partners, with
reasonable access to the books and records of the Platforms (subject to normal
and customary confidentiality provisions) to allow PanAmSat to ascertain whether
the foregoing covenants have been complied with. To the extent the covenants set
forth above contemplate action or inaction on the part of the Platform Partners
other than Televisa, Televisa will use all reasonable efforts to obtain such
action or inaction. Moreover, Televisa, at PanAmSat's request, will enforce such
covenants at the Platform level or at its election may in lieu of such
enforcement indemnify and hold PanAmSat harmless from any loss, cost or damage
which may result by reason of Televisa's failure to enforce such covenants. In
no event will Televisa consent to any breach or non-performance of such
covenants by the Platform Partners unless the Platforms or PanAmSat receive
indemnification reasonably acceptable to them. In the event Televisa is required
by PanAmSat to enforce such covenants where Televisa has not consented to the
breach or non-performance thereof by the other Platform Partners, PanAmSat will
pay a share of the costs of such enforcement which share will be pro rata with
Televisa if Televisa is enforcing such covenants for PanAmSat and for its own
account (or Televisa otherwise obtains the benefit of such enforcement) or which
<PAGE>
share will be 100% if Televisa is enforcing such covenants solely for PanAmSat
and does not obtain any of the benefit therefrom. Notwithstanding the foregoing,
Televisa's sole obligation shall be to act or refrain from acting in accordance
with this Section and Televisa shall have no liability to PanAmSat hereunder by
reason of the acts or omissions of the third parties including the other
Platform Partners. Anything in this Section 1.2 to the contrary notwithstanding,
if the rights granted to PanAmSat herein are broader than the rights granted to
TCII with respect to the specific matters described in clauses (a) and (c)
through (e), then PanAmSat shall accept the same rights as are accorded to TCII
with respect to such matters. The rights described in this Section 1.2 shall be
more specifically set forth in long-form documentation which shall be negotiated
and executed as soon as practicable following the execution of this Revised MOU.
1.3 Tag Along Right; Bring Along Right. Televisa grants to
PanAmSat the right (the "Tag Along Right") to participate, on a pro rata basis
in any sale or other disposition by Televisa which is effected either directly
or through a Platform SRL as described above, as the case may be, of any
ownership interest held by it in the North America Platform or the Multi-Country
Platform (whether at the Platform level or the Platform SRL level) on the same
terms and conditions as such sale or disposition is made by Televisa or other
person or entity. In the event such a transaction occurs prior to the Indenture
Covenant Date, PanAmSat shall be entitled to receive, on exercise of the Tag
Along Right, an amount in respect of the portion of the PanAmSat Interests which
would otherwise have been includable in such transaction equal to the purchase
price or other consideration which would have been received by PanAmSat less the
purchase price which PanAmSat would have been required to pay under Section 1.1
above upon the purchase of such portion calculated as of the date the
transaction is consummated. The Tag Along Right shall be exercised not later
than twenty days following receipt by PanAmSat of written notice of all material
terms of the proposed transaction. Televisa shall have a comparable "bring
along" right to require PanAmSat to sell the PanAmSat Interest in any of the
Platforms either directly or through a Platform SRL as described above, as the
case may be, if Televisa wishes to sell all of its interest in a Platform in a
bona fide arm's length transaction with a third party for fair market value. The
rights described in this Section 1.3 shall be more specifically set forth in
long-form documentation which shall be negotiated and executed as soon as
practicable following the execution of this Revised MOU.
1.4 PanAmSat Right to Sell Interest. PanAmSat shall have the
right to sell its interest in the Platforms (or the applicable Platform SRL(s),
as the case may be) to the extent, if any, such right is provided in the News
MOUs, subject to a right of first refusal in Televisa and/or News Corp., Globo
and TCII.
<PAGE>
1.5 Televisa Right to Cash Out Option Under Certain
Circumstances. The parties acknowledge that Section 6 of the Schedule of General
Terms to each of the News MOUs (the "Section 6 Provisions") provides that any
transferee of Televisa shall be subject to any obligations of Televisa with
respect to exclusivity and non-competition under the News MOUs. Except as
contemplated hereby, during the term of this Agreement (except for a Permitted
Violation), neither PanAmSat nor any of its subsidiaries shall own any equity
interest in a predominantly Spanish-language DTH service in the Americas. Except
for circumstances constituting a Permitted Violation, as defined below, PanAmSat
shall not be permitted to exercise its right to purchase the PanAmSat Interests
if such exercise would cause Televisa to be in violation of the Section 6
Provisions and shall have no recourse or remedy as a result thereof. In the
event that at the time of the exercise of PanAmSat's right to purchase the
PanAmSat Interests, PanAmSat or its affiliates would cause Televisa to be in
violation of the Section 6 Provisions by reason of a Permitted Violation,
Televisa shall have the right, in lieu of delivery of the PanAmSat Interests, to
pay to PanAmSat an amount equal to the net fair market value of the PanAmSat
Interests. For purposes of this paragraph: a "Permitted Violation" will be a
violation of the Section 6 Provisions which occurs (or would occur upon the
exercise of PanAmSat's right to purchase the PanAmSat Interests) by reason of
any circumstance or characteristic of any person, firm, corporation or other
entity which acquires an interest in PanAmSat by stock purchase, asset purchase,
merger, consolidation or otherwise (an "acquisition"), which circumstance or
characteristic occurs or exists prior to the acquisition; and the "net fair
market value" of the PanAmSat Interests shall be the fair market value,
determined in a process reasonably acceptable to both parties which process will
take to account the minority position and the liquidity of the PanAmSat
Interests, of the PanAmSat Interests less the purchase price required to be paid
at the time of the exercise of the purchase right.
2. Reimbursement of PanAmSat Expenses; Indemnification.
2.1 Reimbursement of Expenses. Televisa acknowledges that
PanAmSat has incurred out-of-pocket expenses in the performance of its duties
under the Original MOU which expenses shall not be required to be incurred by
PanAmSat under this Revised MOU, including, but not necessarily limited to the
purchase of compression and related equipment from National Transcommunications
Limited and the purchase of other equipment for provision of DTH technical
services; the making of a deposit to Pace Micro Technology Ltd. in connection
with a seed order for 50,000 integrated receiver/decoders ("IRDs"); travel and
consulting expenses in the performance of the services under Sections 3.1.1 and
3.1.2 of the Original MOU; and construction of improvements to house equipment
for the provision of DTH technical services at PanAmSat's Atlanta, Georgia and
Homestead, Florida facilities, the total amount of which is $18,877,652.33 as
shown in the itemized schedule attached to this Revised MOU as Exhibit C (the
<PAGE>
"Reimbursable Expenses"), plus any applicable sales tax with respect to
equipment which will be used in any state where such tax is applicable and
PanAmSat is liable for or is responsible for the collection of same. Promptly
upon the execution of this Revised MOU, Televisa shall reimburse PanAmSat for
all such expenses, or shall cause the Platforms or the Platform Partners to
reimburse PanAmSat for all such expenses, it being understood that such
obligation shall be subject to PanAmSat's undertaking to attempt mitigation as
provided below. At Televisa's request, PanAmSat will invoice the Platform
Partners for the Reimbursable Expenses in such proportions as Televisa directs,
provided that if PanAmSat has not been paid by a Platform Partner within 30 days
of the date of this Revised MOU, Televisa will pay PanAmSat and PanAmSat will
assign such invoice to Televisa. PanAmSat shall hold all equipment for which it
is paid hereunder for the account of Televisa, and Televisa shall collect such
equipment (to the extent it will not be used by PanAmSat in the provision of
technical services to the Platforms under separate agreement) not later than
forty-five days following the execution of this Revised MOU. Anything in the
foregoing to the contrary notwithstanding, at the request of Televisa, PanAmSat
agrees to use reasonable efforts to mitigate the costs to be reimbursed under
this Section 2 (either through resale, use of the equipment in PanAmSat's
business (to be determined in PanAmSat's sole discretion) or return to the
manufacturer for credit), where mitigation is reasonably appropriate and
practicable, and any sums received by PanAmSat from such mitigation attempts (or
the cost of any equipment retained by PanAmSat and used in its business) shall
be promptly turned over to Televisa or to the Platforms or Platform Partners in
the same proportions as they paid the Reimbursable Expenses. In the case where
PanAmSat retains equipment for use in its business, the calculation of the price
to be paid upon the purchase of the PanAmSat Interests under the formula set
forth in Section 1.1 shall not include a credit for interest on the equipment
which was so retained. The parties acknowledge that the Platform Partners (or
some of them) are currently negotiating with PanAmSat to use PanAmSat's teleport
in Homestead, Florida for services related to the Platforms, and in connection
therewith may make a payment in respect of the expenses set forth in Exhibit C
to this Revised MOU (the "DTH Teleport Arrangement"). In the event a payment is
made in respect of the expenses set forth in Exhibit C under the DTH Teleport
Arrangement as provided above, Televisa will be given a credit against its
obligation hereunder equal to the amount of such payment. All equipment to be
delivered by PanAmSat to Televisa and/or the Platforms or Platform Partners
under this Section 2 shall be delivered without representation or warranty,
except that PanAmSat shall assign its rights to representations and warranties
from the vendor to the extent that same are assignable by PanAmSat.
2.2 Indemnification Against Certain Liabilities. Televisa
acknowledges that PanAmSat has undertaken certain obligations and incurred
contractual liabilities in the performance of its obligations under Sections
3.1.1 and 3.1.2 of the Original MOU including, but not necessarily limited to,
<PAGE>
the execution of (a) a long-term agreement with National Transcommunications
Limited for compression and related equipment and (b) a memorandum of
understanding for the purchase of IRDs with Pace Micro Technology Ltd. (the
agreements described in clauses (a) and (b) being collectively called the
"Indemnified Agreements"), all of which agreements were executed with the
knowledge and consent of Televisa. Televisa hereby indemnifies PanAmSat and
agrees to hold PanAmSat harmless from and against any and all losses, costs,
expenses or liabilities which may be incurred by PanAmSat as a result of any
claim made against PanAmSat under or by reason of the Indemnified Agreements
(including reasonable attorneys' fees and costs in defending any such claim or
in asserting PanAmSat's rights under this indemnification). PanAmSat shall give
prompt notice to Televisa of any such claim (provided that failure to give such
notice shall not affect Televisa's indemnification herein except to the extent
of any actual damage or prejudice suffered by Televisa as a result thereof),
Televisa shall have the right to defend the same exclusively (unless Televisa
fails to defend same in a timely manner in which event PanAmSat shall have the
right to assume the defense at Televisa's expense upon written notice to
Televisa), and PanAmSat shall not settle or compromise any such claim without
the written consent of Televisa (except that if PanAmSat has assumed the defense
of the claim under the immediately preceding phrase, PanAmSat shall have the
right to settle or compromise such claim at Televisa's cost). At the request of
Televisa, PanAmSat shall cooperate with and provide assistance to Televisa in
(a) obtaining for the Platforms the benefits of any or all of the Indemnified
Agreements to the extent of PanAmSat's benefits thereunder, and (b) compromising
or settling any claims in respect of the Indemnified Agreements.
3. Binding Effect; Termination of Original MOU. This Revised
MOU is a binding agreement between the parties, and may be amended or modified
only by a written instrument executed by the parties. By executing this Revised
MOU, PanAmSat consents to the execution by Televisa of the News MOUs and the
consummation of the transactions contemplated therein, subject to performance of
this Revised MOU. Upon the execution of this Revised MOU, the Original MOU shall
be deemed terminated and superseded and all rights and obligations of the
parties thereunder shall be terminated and of no further force or effect. While
this Revised MOU looks to the formation of definitive agreements, the failure of
the parties to execute such definitive agreements shall have no effect upon the
obligations of the parties hereunder and the terms and conditions of this
Revised MOU shall remain binding upon the parties. This Revised MOU and the
exhibits and schedules attached hereto constitute the entire understandings and
agreements of the parties with respect to the matters described herein and all
prior agreements and understandings, whether written or verbal related thereto,
other than an indemnification agreement between Televisa and PanAmSat dated
January 22, 1996 relating to certain agreements between PanAmSat and Irdeto,
B.V. which indemnification agreement shall survive this Revised MOU and shall
not be extinguished, are merged herein and superseded hereby.
<PAGE>
4. No Third Party Beneficiaries. Nothing contained in this
Revised MOU is intended to confer on any person or entity (including News, Globo
and/or TCII), other than the parties hereto, any rights, remedies or
obligations.
5. Governing Law. This Revised MOU will be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to principles of conflicts of laws.
6. Publicity. The terms of this Revised MOU and the
transactions contemplated herein shall not be disclosed or announced by the
parties without prior written notice from the disclosing party to the other
party received by the other party at least one business day prior to the
announcement to the extent practicable. The parties acknowledge that it is in
the best interests of both parties that any announcement of the News MOUs and of
this Revised MOU be coordinated. Copies of all news releases pertaining to this
Revised MOU, the News MOUs or the transactions contemplated herein or therein
made by either party shall be sent to the other party at least one hour prior to
release to the extent practicable.
7. Counterparts. This Revised MOU may be executed in one or
more counterparts each of which shall constitute an original agreement.
IN WITNESS WHEREOF, the parties have caused this Revised MOU
to be duly executed as of the day and year first above written.
GRUPO TELEVISA, S.A.
By:
------------------------------------
Name: Guillermo Canedo White
Title: Executive Vice President
PANAMSAT CORPORATION
By:
------------------------------------
Name: Frederick A. Landman
Title: President and Chief Executive
Officer
Information contained herein, marked with [*], is being filed pursuant to a
request for confidential treatment.
AMENDMENT NUMBER 1
TO THE
PAS-5 SATELLITE PURCHASE CONTRACT
BETWEEN
HUGHES AIRCRAFT COMPANY
AND
PANAMSAT CORPORATION
This Amendment Number 1 to the PAS-5 Satellite Purchase Contract (hereinafter
referred to as the "Contract") is effective as of the date signed (the later
date if the signing date is different for each Party) by and between:
PANAMSAT CORPORATION, a Delaware corporation (hereinafter referred to as
"Buyer"), with its principal place of business at One Pickwick Plaza, Suite 270,
Greenwich, Connecticut, and
HUGHES AIRCRAFT COMPANY, a Delaware corporation, acting through its HUGHES SPACE
AND COMMUNICATIONS COMPANY (hereinafter referred to as "Hughes"), with offices
located at 2020 East Imperial Highway, El Segundo, California.
WHEREAS, the parties hereby agree to amend the Terms & Conditions and the
Exhibit B Spacecraft Technical Specifications including the PAS-5 Antenna
Coverages and City Specifications; and
NOW, THEREFORE, in consideration of the mutual benefit to be derived, the
Parties hereby agree that the Contract is amended as follows:
1. With respect to the Spacecraft Technical Specifications, the specifications
have been defined and the Ku Band payload modified per the direction of the
Buyer. As a result, the total KU Band operating output power
******************** and ******************************************************.
Replace Exhibit B, Appendix A, with Exhibit B, Appendix A, Amendment 1.
Throughout the Contract, the number of Ku-Band transponders shall be changed to
six (6) Medium, 60 watt and eighteen (18) High Powered, 110 watt Ku-Band
transponders on pages 1, 4, 5, 6, & 16.
<PAGE>
The information below, marked with [*], is being filed pursuant to a request for
confidential treatment.
The Useful Commercial Life definition on page 7 is amended from "...eighteen
(18)..." and changed to "...twenty-one (21) or more Ku-Band Equivalents are
Failed Transponders".
The section 4.2.1.1 definition of "Successfully Operating Payload" shall be
amended to state "The Ku-Band Payload shall be deemed to be Successfully
Operating if a number of Ku-Band transponders that represent twenty-two (22) or
more Ku-Band Equivalents are Successfully Operating Transponders (as defined
below)".
Replace each amended section with "Amendment 1".
2. With respect to the PAS-5 Satellite Purchase Contract price, ******* the
price ********************** with a corresponding ******* in the Phase 2
Progress Payments to ******************************* in Incentive Obligation
payments. Replace section 4.1 with section 4.1, Amendment 1.
3. With respect to the ************* PAS-5 Satellite Purchase Contract price
*******, sections 11.1.2(c), 11.2.2(c), 15.3.9, and 15.3.11 shall be changed
from ************* to **************. Section 12.4 liability limit for Hughes
shall *********************. All sections shall be replaced with "Amendment 1".
4. With respect to the Progress Payment Schedule, ****************************
******************************************; and, replace the Exhibit 4.1 Payment
Schedule with Exhibit 4.1, Amendment 1.
5. With respect to the Incentive Obligation payments, ******** the section
4.2.2.1 example figured using a *************************** from the
************************ ********* payload modification). This ******** only
applies in the event PanAmSat selects the ********* launcher for which case the
spacecraft specified Operational Lifetime has been ********* years from 15.0
years because of the payload modification changes. For the remaining designated
launch vehicles, the specified operational lifetime remains 15 years and the
Incentive Obligation payments ***************************************** for the
payload modification for a total of ***************.
The percentage of the Incentive Obligation payments attributable to the payload
shall be based on Ku-Band Equivalents and amended as follows:
C-Band ***
Medium Powered Ku-Band ***
High Powered Ku-Band ***
<PAGE>
The information below, marked with [*], is being filed pursuant to a request for
confidential treatment.
The definition of Specified Operational Lifetime is amended accordingly. Also,
replace 4.2.2.1 and 4.2.2.3 with 4.2.2.1 and 4.2.2.3, Amendment 1.
6. With respect to the spacecraft delivery schedule, all delivery dates shall
be ******************. Replace section 3.1.3 with section 3.1.3, Amendment 1.
For clarity and continuity, the new Contract pages are designated with
"Amendment 1" in the lower right hand corner. Additionally, changes on each new
page have been underlined with deletions noted with a caret.
There is no modification to the Contract except as expressly set forth above.
IN WITNESS WHEREOF, the Parties have executed this Amendment 1 to the PAS-5
Contract.
HUGHES AIRCRAFT COMPANY, ACTING PANAMSAT CORPORATION
THROUGH ITS HUGHES SPACE AND
COMMUNICATIONS COMPANY
By: /s/ Brad H. Heckel By: /s/ Fred Landman
-------------------------- --------------------------
Brad H. Heckel Fred Landman
Title: Manager, Major Commercial Title: President
Contracts
Date: 8/29/96 Date: 9/3/96
Information included herein, marked with [*], is being filed pursuant to a
request for confidential treatment.
FULL-TIME TRANSPONDER SERVICE AGREEMENT
FROM PAS-3 (EUROPEAN BEAM)
--------------------------
This Agreement (the "Agreement") is entered into as of this 20th day of
September, 1996, by and between PanAmSat Corporation, a Delaware corporation
("PanAmSat") and Televisa, S.A. de C.V., a sociedad responsabilidad limitada,
formed under the laws of the United Mexican States ("Customer"). This Agreement
covers the provision of twenty-four hour fixed term non-preemptible video
channel satellite signal reception and retransmission service (the "Service") by
PanAmSat to Customer. The Service shall be supplied by PanAmSat, in outerspace,
initially from three (3) transponders and later from a total of up to five (5)
transponders with the bandwidth and in the band and beam that are identified in
Appendix A to this Agreement from the Atlantic Ocean Region Satellite referred
to by the parties as PAS-3 aka PAS-3R (the "Satellite") that has been
constructed by Hughes Aircraft Company for PanAmSat, as described in Appendix B,
and that was launched in January 1996. The transponders on the Satellite and the
beams in which these transponders are grouped are referred to as
"Transponder(s)" and the "Beam(s)," respectively.
AGREEMENT
---------
In consideration of the foregoing and of the mutual promises set forth
below, PanAmSat and Customer mutually agree as follows:
ARTICLE 1 PROVISION OF SERVICE
--------------------
1.1 The Service. PanAmSat agrees to provide, and Customer agrees to
accept, Service meeting the "Service Specifications" set forth in Appendix C.
Except as otherwise specifically permitted under this Agreement, PanAmSat shall
not preempt or interrupt the provision of Service to Customer. In no event shall
<PAGE>
these exceptions be construed so as to permit PanAmSat to preempt Service to
Customer so as to allow PanAmSat to use the capacity formerly used to provide
Service to Customer for itself or for another customer.
1.2 Beam and Transponder Designation. The Beam, and subject to Sections
1.2A and 5.3 and Appendix C, the particular Transponders upon which Customer
shall be provided Service (the "Service Transponders") shall be identified by
PanAmSat from the Transponders listed in Appendix A prior to the commencement of
Service from the relevant Transponders; provided that, if it still meets the
Service Specifications, one of the "Initial Group" (as defined below) of Service
Transponders shall be Transponder 11.
1.2A. Beam Election. The Initial Group of Service Transponders shall
all be provided from the group of Transponders shown in Appendix A with a Europe
downlink Beam. Not later than thirty (30) days after the date of this Agreement,
Customer may elect, on notice to PanAmSat, to have the "Remaining Two" (as
defined below) Service Transponders provided from the Transponders shown in
Appendix A in the North American downlink Beam. If Customer fails to give such
notice, said Remaining Two Service Transponders shall be provided from
Transponders shown in Appendix A in the Europe downlink Beam.
1.3 Television Service. The Service is designed for, and shall be used
by, Customer primarily for transmission of its own "Television Service," which,
for purposes of this Agreement means video programming, with associated audio
signals, for broadcast, cable, direct to home, or other distribution purposes.
In addition, on a secondary basis, the Service may be used for audio, data and
teletext signals and any other one way electronic information subject to the
control of Customer, however transmitted, whether in the form of data, teletext
or packets and whether contained or transmitted within subcarriers, the VBI, or
other portion of the signal or RF carrier; provided that in no event may the
Service be used for switched public international telecommunications services.
For purposes of this Agreement, Customer's Television Service shall be deemed to
include the Television Services of entities that control, are controlled by, or
are under common control with Customer ("Commonly Controlled Entities"),
including entities in which there is a minimum of 25% common equity ownership
<PAGE>
with Customer (i.e., Televisa, S.A. de C.V.). Customer's Television Service
shall also be deemed to include Television Services of other entities if these
Services are delivered as part of a "DTH Service" that is provided by Customer
or a Commonly Controlled Entity (for purposes of this sentence, applying a 10%
common equity with Customer standard) and for which the Customer also provides
programming. To qualify for the above exception, all of the programming that is
provided by the "DTH Service" must be marketed and provided primarily to
individual end user recipients as part of a package of programming services,
using the same conditional access system. In all events, Customer shall remain
responsible to PanAmSat for all uses of the Services permitted hereunder.
1.3A Additional Use Restrictions on SSA Transponders. Customer
acknowledges and agrees that, notwithstanding anything in Section 1.3 above to
the contrary, if it elects to take Service from the SSA Transponders, its use
(and all uses that may be permitted under Section 1.3 above) shall be subject to
all of the restrictions that PanAmSat is required to impose on customers under
that certain letter agreement, dated February 29, 1996, by and among PanAmSat,
Customer, The News Corporation Limited ("News"), and Globo Comunicacoes e
Participacoes (formerly Globo Participacoes, Ltda.) ("Globo"), as the same may
be amended, and such agreements that may be reached, or amended, as contemplated
in said letter agreement.
1.4 Transmission Plan for Transponders. Customer's transmissions to the
Satellite (which may be performed by one or more third party uplink providers,
as provided in Section 4.2 below) shall conform to digital transmission plan to
be submitted by Customer to PanAmSat and that shall be subject to PanAmSat's
prior written approval. The transmission plan shall include such information as
called for in the form of transmission plan that is attached hereto as Appendix
E and such other technical information as PanAmSat may require in its reasonable
engineering judgment to manage the operation of its Satellite. Customer shall be
permitted to modify this transmission plan from time to time, subject to
PanAmSat's prior written approval. PanAmSat shall not unreasonably withhold its
approval of a transmission plan or modification to such a plan, which approval
shall be based solely upon the considerations identified in Section 4.1 below.
<PAGE>
PanAmSat makes no representation, warranty, or covenant regarding the efficacy
of the use of any number of carriers or other alternative uses of capacity
provided under this Agreement. If not otherwise provided by PanAmSat pursuant to
separate agreement, Customer will provide PanAmSat, at no cost to PanAmSat, with
equipment necessary to decode its signals. It is understood that, in some
circumstances, PanAmSat may provide uplink services to Customer, in which event
Customer shall not be responsible to PanAmSat for the technical operation or
performance of such PanAmSat-provided uplinks under this or other sections of
this Agreement.
1.5 Interim Marketing of the Capacity.
----------------------------------
(a) If Customer does not initially require all of the
capacity provided hereunder, for use from the "Initial Service Date" as defined
below through the first anniversary thereof, upon Customer's request, PanAmSat
shall use all reasonable efforts to market services from the Service
Transponders (which Customer would thereafter cease to employ) to other
potential customers for video, data, or other uses, as market demand and
technical considerations may warrant, as reasonably determined by PanAmSat in
consultation with Customer, and subject to PanAmSat's reasonable discretion with
regard to the terms and conditions of service and selection of appropriate
customers, which shall be consistent with its general practices in this regard.
In such event,
(i) PanAmSat shall actively market services from the
Service Transponders in good faith provided that PanAmSat shall not be obligated
to use the Service Transponders ahead of any other capacity that PanAmSat may
also have available for comparable service. Unless otherwise agreed by both
parties, the marketing shall be for full-time, fixed term uses. In addition,
subject to the considerations stated above, if Customer identifies to PanAmSat a
potential customer who desires to purchase service from PanAmSat that employs
the Service Transponders, PanAmSat shall seek, in good faith, promptly to enter
into a service agreement with said customer, provided that if PanAmSat was
already in negotiations with said potential customer for other PanAmSat
capacity, PanAmSat shall not be required to discontinue such negotiations; and
<PAGE>
(ii) PanAmSat shall credit against Customer's next
monthly service fee (which shall continue to be payable as adjusted above)
one-half of such amounts that are actually received from other customers for
service from the Service Transponders for the previous month (less costs
reasonably incurred by PanAmSat for providing any related services and
equipment, not provided to Customer, that may be associated with the provision
of such service, e.g., turnaround, compression, or other terrestrial services or
facilities) up to the amount of the service fees paid by Customer for the
applicable period for the Service Transponders made available by Customer to
PanAmSat for remarketing under this Section 1.5. In addition, after deducting
the costs specified above, if the monthly service fees actually received by
PanAmSat for service from the Service Transponders exceed the monthly service
fees to be paid to PanAmSat by Customer for the remarketed capacity (the "Excess
Amount") in addition to crediting the next month's Service Fee payment, PanAmSat
shall pay Customer one-half of such Excess Amount.
ARTICLE 2. TERM, SERVICE TERM.
-------------------
2.1 Term. The term of this Agreement (the "Term") shall commence upon
the first date above written and, unless previously terminated in accordance
with Article 7, shall remain effective until the end of "Service Term," as
defined below.
2.2 Service Term.
-------------
(a) The Service Term for the first three Service
Transponders (the "Initial Group") shall start on March 1, 1997 (the "Initial
Service Date"). PanAmSat hereby certifies to Customer that the Satellite has
been placed in its assigned orbital position with all three Service Transponders
capable of providing Service meeting the Service Specifications and now
available.
(b) The Service Term for one or both of the remaining two
Service Transponders (the "Remaining Two") shall start on the later of: (i) the
date(s) that Customer receives certification(s) from PanAmSat that such Service
Transponder(s) are available and are capable of providing Service in accordance
<PAGE>
with the Service Specifications, or (ii) June 1, 1997. If it would be true and
correct, PanAmSat shall give such certification(s) (as to one or both of the
Transponders) not later than the later of: (i) sixty-one days after the date of
the "Service Date" for the "Transponders" in the "NTSC Beam" or the "SSA Beam,"
as applicable, of the satellite referred to by the parties as PAS-6 (an all
Ku-band satellite now under construction for PanAmSat by Space Systems/Loral,
Inc., and currently scheduled to be launched into an AOR orbit in November or
December 1996), or (ii) June 1, 1997. Customer acknowledges and agrees that the
existing customers for four of the seven NTSC Beam Transponders and all of the
"SSA Beam" Transponders that are identified in Appendix A may be permitted to
retain some or all of them if not all of the transponders in the comparable
beam(s) of PAS-6 meet their specifications after the launch of that satellite,
in which event such transponder(s) would not be available to Customer. Once one
or more of said Transponders are assigned to Customer, however, such existing
customers will have no further right to use them.
(c) The Service Term for all Service Transponders shall
continue until 23:59, Greenwich Mean Time, May 31, 2007.
2.3 Service Term Extension. Not later than May 31, 2006, Customer may
notify PanAmSat of its desire to extend the Service Term to the end of life of
the Satellite. In this event, PanAmSat and Customer shall negotiate in good
faith to establish the monthly Service Fee for an extended Service Term, which
fee shall not be increased by a percentage that is greater than that which is
equal to the increase in the CPI (as defined below) from the Initial Service
Date to the month and year in which an extended Service Term commences. Unless
otherwise agreed in writing, all other provisions of this Agreement shall apply
during such extended Term. The "CPI" means the Consumer Price Index now known as
the United States Bureau of Labor Statistics Consumer Price Index for Urban Wage
Earners and Clerical Workers, All Items, for All Urban Consumers. If such CPI
shall be discontinued, the foregoing calculations shall be made using a
reasonably equivalent successor or comparable measure of increases in the cost
of living in the United States. If Customer does not agree to such CPI increase
<PAGE>
The information below, marked with [*], is being filed pursuant to a request for
confidential treatment.
and PanAmSat and Customer do not agree upon another monthly Service Fee for the
extended Service Term, within ninety (90) days of Customer's notice of its
desire to extend, neither party shall have any obligation to the other with
respect to the provision of Service from the Satellite beyond the end of the
initial Service Term.
ARTICLE 3. CUSTOMER PAYMENTS.
------------------
3.1 Service Fee. For each month of the Service Term beginning on the
Initial Service Date, Customer agrees to pay, for each Service Transponder from
which Service was made available during the month, the monthly "Service Fee"
**************************************************************************** per
Service Transponder. Customer shall deposit with PanAmSat ******************
************************************************************************ within
five days of the first date above written and shall deposit an additional
*******************************************************************************
***************** within thirty (30) days of the first date above written for a
total deposit of *********************************************************
**************************************** (the "Deposit"). Of this Deposit, (i)
************ shall be applied to the Service Fee for the Initial Group of three
Service Transponders for the first two months of the Service Term, and (ii) the
balance shall be applied to the Service Fee for the Remaining Two Service
Transponders for the first two months that such Transponders are used for the
provision of Service hereunder. If one or both of the Service Transponders of
the Remaining Two does not become available for Customer's use during the
Service Term, the portion of the Deposit to be applied to such Service
Transponder(s) shall then be applied to the aggregate Service Fee then due
hereunder for other Service Transponders until exhausted. Customer shall make
each and all other payments of the Service Fee, in advance, no later than the
first business day of each month of the Service Term.
3.2 Reservation Fee. In consideration for PanAmSat having reserved and
continuing to reserve capacity for Customer under this and earlier agreements,
Customer agrees to pay PanAmSat a reservation fee of ********** United States
Dollars (****************). Said reservation fee shall be due and payable upon
<PAGE>
The information below, marked with [*], is being filed pursuant to a request for
confidential treatment.
the "Closing" of the transaction described in that certain "DTH Option
Agreement," dated the same date as this Agreement, by and between PanAmSat and
Customer. The parties acknowledge and agree that this Section 3.2 shall survive
the termination of the Agreement and that the reservation fee shall be due in
full, as stated above, without offset, even if this Agreement has been otherwise
terminated for any reason whatsoever.
3.3 Manner Of Payment. All payments by Customer shall be made in U.S.
dollars; shall be deemed to be made only upon receipt by PanAmSat of collected
funds; and shall be made by bank wire transfer to such bank account as PanAmSat
may designate by notice to Customer, or by cashier's or certified check, from a
U.S. bank, delivered to PanAmSat at its principal place of business, as
designated in Section 14.5(b).
3.4 Late Payment. Any payment due from Customer to PanAmSat that is not
received by PanAmSat on the date that it is due shall be subject to a
delinquency charge (liquidated damages) at the rate of ******************* per
month on such overdue amount from the due date until it is actually received by
PanAmSat. Customer acknowledges that such delinquency charge is reasonable under
all the circumstances existing as of this date.
3.5 Taxes. Customer is solely responsible for any taxes, charges,
levies, or duties, which may be asserted by any local, state, or national
governmental entity as a result of the Service provided to Customer and/or
Customer's use of said Service, with the exception of any income (for the
avoidance of doubt, not including non-U.S. withholding in countries where
PanAmSat is not otherwise directly subject to paying income taxes), property or
employment taxes imposed on PanAmSat in the United States; provided, that, to
the extent that taxes may be imposed with respect to the Satellite itself,
Customer shall be responsible only for a pro rata share (to be reasonably
determined by PanAmSat) in proportion to the capacity of the Satellite used by
Customer, but in no event greater than a fraction equal to the number of Service
Transponders divided by the number of Transponders on the Satellite.
<PAGE>
ARTICLE 4. CUSTOMER'S OBLIGATIONS IN USING THE SERVICE.
--------------------------------------------
4.1 Non-interference and Use Restrictions. Customer's transmissions to
and from the Satellite and its use of the Service shall comply with all
applicable governmental laws, rules and regulations, and with the operational
requirements (the "Operational Requirements") set forth in Appendix D, as the
same may be modified from time to time by PanAmSat, in its reasonable
discretion, but only for good technical cause(s). Customer will follow
established practices and procedures for frequency coordination and will not use
the Service Transponders, or any portion thereof, in a manner which would or
could reasonably be expected to, under standard engineering practice, interfere
with the use of any other Transponder, the Satellite, or any other satellite or
transponder on such satellite, or cause physical harm to the Service
Transponders, any other Transponder, the Satellite, or any other in-orbit
satellite or transponder on such satellite. Provided that Customer's
transmissions conform with the transmission plan approved by PanAmSat under
Section 1.4 above, Customer complies with the Operational Requirements, as the
same may be modified as provided above, and Customer immediately ceases any
transmission upon being notified by PanAmSat of any violation of this Section
4.1 (even if such transmission is in conformity with the Operational
Requirements), Customer shall not be deemed to be in breach of its obligations
under the preceding sentence.
4.2 No Terrestrial Facilities. Subject to the exception stated in
Section 1.4 above, with respect to PanAmSat-provided uplinks, if any, Customer
shall be responsible for the provision, installation, operation and maintenance
of all earth station facilities and equipment ("Customer-Provided Facilities"),
for transmitting signals to, or receiving signals from, the Satellite in
accordance with the requirements set forth in this Agreement. Customer shall
also be responsible for acquiring all authorizations necessary for installation
and operation of Customer-Provided Facilities. Customer shall be permitted to
contract with third parties to transmit its signals to, or receive its signals
from the Satellite; provided, that, Customer requires its contractors to agree
with PanAmSat to comply with all of the requirements set forth in this Agreement
regarding transmissions to, or reception from, the Satellite. If Customer
retains third parties (other than PanAmSat) as permitted by the previous
sentence, these third parties' facilities shall be deemed to be
<PAGE>
Customer-Provided Facilities and the acts and omissions of these third parties
in connection with the transmission or reception of Customer's signals shall be
deemed to be the acts and omissions of such third parties and of Customer. Any
provision by PanAmSat (or by an affiliated company) to Customer of earth station
or other terrestrial facilities or services shall be the subject of a separate
agreement.
4.3 Customer's Transmitting Stations. Customer will configure, equip
and operate its transmit facilities so that the interface of these facilities,
in space, with the Satellite shall conform to the characteristics and technical
parameters of the Satellite. Customer will follow PanAmSat's procedures for
initiating or terminating any transmission to the Satellite. Customer will
operate all transmit facilities in a manner that allows for cessation of, and
will cease, transmission immediately upon receiving notice from PanAmSat under
Section 14.5(a) ("Telephone Notices"). Customer will furnish information on a
continuing basis as reasonably required by PanAmSat to prepare for, initiate,
provide, maintain and immediately discontinue the use of the Service upon notice
by PanAmSat.
PanAmSat shall have the right, but not the obligation, subject to such
reasonable confidentiality restrictions as Customer may impose, to inspect any
Customer-Provided Facilities together with associated facilities and equipment
used by Customer, or by a third party under the authority of Customer, to
transmit to the Service Transponders. PanAmSat will use all reasonable efforts
to schedule inspections to minimize the disruption of the operation of the
facilities, and Customer shall make the facilities available for inspection at
all reasonable times. Customer shall, upon PanAmSat's request, provide measured
proof that any transmit facility meets or exceeds the sidelobe envelope
described in Appendix D.
4.4 Consistent Application of Satellite Operating Procedures. PanAmSat
shall have similar (but not necessarily identical) restrictions not to interfere
with or cause physical harm to the Satellite, its Transponders, and other
satellites and their transponders, as contained in this Agreement with all other
customers, including any of its Affiliates, having a right to uplink to the
Satellite and shall enforce these restrictions (and, to the extent it may use
<PAGE>
the Satellite for its own services, follow these restrictions itself) in a
consistent and nondiscriminatory manner vis-a-vis Customer and the other
customers with a right to uplink to the Satellite. Allowing for the fact
(understood and accepted by Customer) that technical variations in the kinds of
transmissions that different customers may employ, different performance
characteristics of different Transponders, differences in the use of adjacent
frequencies or the same frequencies on other satellites, other technical
factors, and the use of different uplink providers and facilities may require
the application of different restrictions to achieve the same non-interference
and satellite protection goals, PanAmSat shall not require Customer to follow
Operational Requirements or transmission procedures that are more stringent than
those imposed upon other customers on the same Satellite in comparable technical
circumstances.
ARTICLE 5. OUTAGES.
5.1 Confirmed Outage. There shall be deemed to have occurred a
"Confirmed Outage" of Service on a Service Transponder if Service on a Service
Transponder fails to meet the Service Specifications for a continuing and
uninterrupted period of thirty (30) minutes (or, if Service failure is
intermittent, a cumulative period of thirty (30) minutes or more during any
one-hour period) and such failure is confirmed by PanAmSat. Any Outage Credits
shall be measured in accordance with the procedures set forth in Section 5.2.
5.2 Outage Credits. If there is a Confirmed Outage of Service on a
Service Transponder during the Service Term, PanAmSat shall credit to Customer's
next payment an "Outage Credit" that shall be determined by the following
formula:
Outage Credit equals:
N multiplied by S;
---
M
where,
<PAGE>
N = the number of hours (or portion thereof) during a month that there is a
Confirmed Outage on a particular Transponder
M = the number of hours in the month, and
S = Customer's Service Fee, applicable to the affected Service Transponder,
for said month
Customer shall not be entitled to any Outage Credit for any Service failure that
does not constitute a Confirmed Outage. For purposes of determining Outage
Credits, each failure that is confirmed by PanAmSat shall be measured as
commencing from the later to occur of (i) Customer's cessation of use of the
affected Service Transponder and (ii) notice from Customer to PanAmSat of such
failure. Any such failure shall be deemed to have ended upon the earlier to
occur of (i) Customer's resumption of use of the Service and (ii) notice to
Customer from PanAmSat that Service on the affected Service Transponder has been
restored to the Service Specifications.
5.3 Transponder Service Failure. If, after the Initial Service Date
(or, with respect to the Remaining Two Service Transponders, after they are
placed in Service), a Service Transponder fails to meet the Service
Specifications for: (a) any period of six (6) consecutive hours, or (b) a
cumulative period of twelve (12) hours during any consecutive 30-day period, or
(c) any period of time following a catastrophic event under circumstances that
make it clearly ascertainable that a failure described in clauses (a) or (b)
will occur, Service on such Transponder shall be deemed to have failed on a
"Confirmed Basis." Any such failure must be confirmed by PanAmSat, which it
shall take steps to do as expeditiously as possible. If confirmed, the failure
shall be measured as commencing from notice from Customer to PanAmSat of such
failure (provided that the affected Service Transponder is, in fact, not meeting
the Service Specifications). Any such failure shall be deemed to have ended upon
notice from PanAmSat to Customer that the affected Service Transponder is
capable of meeting the Service Specifications (provided that the affected
Service Transponder is, in fact, meeting the Service Specifications); provided,
further, that if PanAmSat enters into an agreement to provide Ku-band capacity
<PAGE>
from the Satellite on which a Service Transponder is located and such agreement
provides that, for purposes of employing said "Spare Equipment" on the
Satellite, failure on a Confirmed Basis shall be deemed to have occurred in less
than the applicable time periods specified above, PanAmSat shall determine
whether a failure on a Confirmed Basis has occurred for Service Transponder on
the same Satellite under this Agreement using the time periods specified in such
other agreement.
In the event Service on a Service Transponder fails on a Confirmed
Basis, PanAmSat shall, as soon as possible and to the extent technically
feasible, employ certain redundant equipment units, as described in Appendix B
("Spare Equipment") on a first-needed, first-served basis as among Customer and
other Transponder owners, lessees, and users, including without limitation,
PanAmSat and its predecessors in interest ("Protected Parties"), as a substitute
for a Service Transponder equipment unit which has failed, provided that
PanAmSat may elect to use "Substitute Capacity" (as provided below), if
available, in lieu of using Spare Equipment.
Customer acknowledges and agrees that the Spare redundancy plan of the
Satellite may require PanAmSat to reassign certain traveling wave tube
amplifiers ("TWTAs") among Transponders to make use of a Spare. In circumstances
in which a spare TWTA is required to be employed for any customer and to do so
requires a change in the TWTA assigned to Customer, Customer shall, on notice
from PanAmSat, cease transmitting to the applicable Service Transponder(s) to
allow the TWTA that is assigned to its Transponder(s) to be reassigned and a
different unit (that meets the Service Specifications) to be put in its place.
PanAmSat shall use all reasonable efforts to keep to a minimum the time during
which Customer is required to cease transmitting under this paragraph, in
accordance with good engineering practices, to make the shift in the
assignments.
If (a) a Service Transponder fails to meet its Service Specifications
on a Confirmed Basis, and (b) the Spare Equipment associated with such Service
Transponder is not available, and (c) equivalent capacity on another Transponder
meeting the Service Specifications in the same Beam of the Satellite as such
Service Transponder (the "Substitute Capacity"), is available, and its use by
<PAGE>
Customer in accordance with PanAmSat's Operational Requirements would not be
predicted to interfere with the use or rights of others using the Satellite,
then PanAmSat shall, as soon as possible and to the extent technically feasible,
employ such Substitute Capacity for the Service Transponder to satisfy
PanAmSat's Service obligations under this Agreement. PanAmSat may condition its
provision of Substitute Capacity on Customer's acceptance, in writing, of
additional restrictions on its use so as to protect other Protected Parties from
interference. If Customer does not accept such conditions, PanAmSat shall not be
obligated to provide Customer with the Substitute Capacity. In the event that
PanAmSat employs such Substitute Capacity for a Service Transponder, such
Substitute Capacity shall be deemed to be such Service Transponder for all
purposes under this Agreement.
In the event that two or more Transponders simultaneously fail to meet
their respective service or performance specifications and are entitled to
restoral under any applicable agreement with PanAmSat, then the Protected Party
who first executed a definitive agreement as to the affected Satellite with
PanAmSat or its predecessors in interest shall, to the extent technically
feasible, have priority as to use of the Spare Equipment; provided that, if
service from a Transponder is provided to more than one Protected Party (for
example, if there are two customers each taking service from one-half of a
Transponder), PanAmSat's decision may be made in accordance with the order that
the earliest Protected Party(ies) using the Transponder(s) executed agreements
with PanAmSat or its predecessors in interest. As used in this Section 5.3, the
term "simultaneously" shall be deemed to mean occurring within a 12-hour period.
All determinations as to when failures requiring protection shall have occurred,
for purposes of determining whether the failures are "simultaneous," shall be
made by PanAmSat in its sole reasonable discretion. Customer acknowledges and
agrees, without limitation, that the letter agreement dated February 29, 1996,
by and among PanAmSat, Customer, News, and Globo constituted such a definitive
agreement. PanAmSat also has a pre-existing definitive agreement for Ku-band
capacity on the Satellites with Liberty Sports, Inc. Accordingly, Customer
acknowledges and agrees that the priority rights fall behind the rights of the
customers under such agreements or successor entities or agreements.
<PAGE>
5.4 Degraded Service. If a Service Transponder, while operational, does
not meet the Service Specifications, Customer shall have the right, within ten
(10) days of being notified of this condition, provisionally to waive the
Service Specifications to the extent that they are not met.
If Customer gives such a provisional waiver, Customer shall
have an additional fifty (50) days (for a total of sixty from being notified of
the condition) in which to determine whether to accept the degraded Service and
grant a permanent waiver of the Service Specifications to reflect the affected
Transponder(s)' current operating level, or not. The termination provisions of
Section 7.3 shall also be stayed during any period in which Customer is
considering electing a permanent waiver. During this period, Customer and
PanAmSat shall negotiate in good faith, to the extent that the degradation
reflects a material loss in the Service provided, to reach agreement as an
appropriate Service Fee reduction for the affected capacity (which would, if
agreed, be applied retroactively to the time of the failure to meet the
applicable Service Specifications), provided that nothing herein shall require
that a price reduction be given or that an agreement be reached.
If Customer gives a provisional waiver, it shall take and pay
for (without Outage Credit) the affected degraded Service, as if provided in
accordance with the Service Specifications until the conclusion of the sixty day
period specified above. On or before the end of this sixty-day period, either
Customer shall grant a permanent waiver of the Service Specifications (subject
to any change in Service Fee as to which both Customer and PanAmSat shall have
agreed) or the termination provisions of this Agreement, as to the capacity that
does not meet the Service Specifications shall, at that time, apply.
If a permanent waiver is given, it shall be deemed to apply
retroactively to the time of such failure to meet the Service Specifications. In
such event the Service Specifications for the affected Service Transponder(s)
shall be reduced to reflect the current operating level of the affected Service
Transponder(s); provided that PanAmSat continues, if there are further steps may
practically be taken, to use reasonable efforts to restore the affected Service
Transponder to meet the Service Specifications; provided further that if any
<PAGE>
price reduction was agreed upon, the restoration of a Service Transponder to its
Service Specifications shall also result in the restoration of the original
Service Fee to be paid for the applicable capacity from that point forward. For
the avoidance of doubt, a waiver given under this Section 5.4 shall not, unless
otherwise agreed by Customer, be deemed to apply to any further reduction in
performance from the operating level of the affected Service Transponders at the
time that the waiver was given.
5.5 Customer Cooperation. If the Service fails to meet the Service
Specifications, Customer shall use all reasonable efforts to cooperate and aid
PanAmSat in curing such failure; provided that all reasonable efforts can be
done at no cost to Customer. These obligations of Customer shall include, but
not be limited to, the following:
(a) At the request of PanAmSat, if there is a problem that
can be compensated for by increasing the power of its transmission to the
Satellite, without affecting its Service, Customer shall do so to the extent it
can with existing equipment; and
(b) Permitting PanAmSat, at PanAmSat's option, and at
PanAmSat's cost and expense, to upgrade the Customer-Provided Facilities.
5.6 Application to Individual Service Transponders. All determinations
as to Confirmed Outages, failures of Service on a Confirmed Basis, Outage
Credits, and protection rights to be made under this Article 5 shall be made on
an individual Service Transponder by Service Transponder basis.
ARTICLE 6. PREEMPTIVE RIGHTS.
------------------
6.1 (a) Preemptive Rights In Abnormal Circumstances. Customer
recognizes that it may be necessary, in unusual or abnormal technical situations
or other unforeseen technical conditions, for PanAmSat deliberately to preempt
or interrupt Service to Customer from, and Customer's use of, one or more of the
<PAGE>
Service Transponders, solely in order to protect the overall health and
performance of the Satellite. Such decisions shall be made by PanAmSat in its
sole discretion, exercised in good faith. To the extent technically feasible,
PanAmSat shall give Customer at least 24 hours' notice of such preemption or
interruption and will use all reasonable efforts to schedule and conduct its
activities during periods of such preemption or interruption so as to minimize
the disruption of the services on the Satellite. Customer shall immediately
cease transmissions to the Satellite at such time as its Service is preempted or
interrupted pursuant to this Section. To the extent that such preemption results
in a loss to Customer of Service sufficient to constitute a failure of Service
on a Confirmed Basis, Customer shall have all the rights and remedies regarding
termination set forth in Articles 7 and regarding Outage Credits under Section
5.2.
(b) Testing in the Event of Failure. If the Service is not
meeting Service Specifications, but Customer elects to continue to use (and pay
for) the Service, as degraded, PanAmSat may, with Customer's reasonable consent
as to the time such action will be taken, interrupt Customer's use as necessary
to perform testing or take any other action that may be appropriate to attempt
to restore Service to the Service Specifications. In such event, PanAmSat shall
coordinate activities with affected customer(s) and shall use all reasonable
efforts to minimize the overall disruption of use to the affected customer(s).
If Customer refuses to provide the consent referred to in the first sentence of
Section 6.1(b) when such consent is requested, the availability of remedies for
failure to meet Service Specifications, including the use of Spares and
termination for failure to meet Service Specifications shall be commensurately
delayed.
ARTICLE 7. TERMINATION RIGHTS.
-------------------
7.1 Reserved.
7.2 Reserved.
7.3 Termination For Service Failure. Subject to Section 5.4 above, on a
Service Transponder by Service Transponder basis, this Agreement shall
<PAGE>
automatically terminate if Service fails on a Confirmed Basis, unless, within
thirty days of such failure, PanAmSat provides Service meeting the Service
Specifications using any available Transponder and/or Spare Equipment. In the
event Service from one or more of the Service Transponders fails on a Confirmed
Basis and PanAmSat does not provide Service meeting the Service Specifications
using Spare Equipment or other available Transponder(s), if any, but Service is
still being provided in accordance with the Service Specifications from other
Service Transponder(s), this Agreement shall continue as to the remaining
Service Transponder(s), with service fee calculations made based upon the number
of Service Transponders being supplied.
7.4 Satellite Out Of Service. PanAmSat may determine to take the
Satellite out of service if: (a) in PanAmSat's judgment, the remaining fuel on
board the Satellite is no longer sufficient to maintain geosynchronous orbit
within plus or minus 0.05 degrees, allowing sufficient fuel for de-orbiting the
Satellite, or (b) the Satellite suffers failure of eight (8) or more C-band
Transponders or eight (8) or more Ku-band Transponders. In such event, PanAmSat
shall promptly notify Customer of such determination and of the date the
Satellite will be taken out of service. On the date that the Satellite is taken
out of Service, this Agreement shall automatically terminate.
7.5 Termination By PanAmSat For Cause. PanAmSat may terminate this
Agreement if Customer fails: (a) to make payment of any amount due and such
amount remains unpaid within ten (10) business days after receiving from
PanAmSat a notice of such nonpayment (but, except for the Deposit, only if the
payment is at least twenty (20) business days past due at the time of
termination), or (b) to cease any activity in violation of Section 4.1 or 6.1
upon receiving telephone or facsimile notice from PanAmSat (provided that
PanAmSat shall not be entitled to terminate the Agreement under this clause (b)
if all of the following requirements are met: (i) Customer is (and remains) in
compliance with Section 15.5(a), and the operator on duty mistakenly did not
implement PanAmSat's initial notice; (ii) the mistake was rectified as soon as
it became apparent to Customer; (iii) appropriate steps are taken to prevent a
future recurrence of the mistake and the problem is not recurring; and (iv) no
damage occurred as a result of the mistake or Customer immediately reimburses
and indemnifies PanAmSat for all such damage, or (c) to cease any other activity
<PAGE>
The information below, marked with [*], is being filed pursuant to a request for
confidential treatment.
in violation of Customer's material obligations under this Agreement within
thirty (30) days after receiving from PanAmSat a notice of such violation.
In the event of a termination under Section 7.5(a), other than for
failure to pay the Deposit, PanAmSat may declare immediately due and payable the
remaining Service Fee payments for all of the Service Transponders based on the
then predicted life of the Satellite, discounted for present value at a rate of
*************** per annum from the date paid to the date otherwise due in the
absence of termination, and apply any remaining unapplied portion of the Deposit
against the termination liability. In the event of a termination under Section
7.5(b) or (c), Customer shall be responsible for payments of the remaining
Service Fee payments that would be otherwise due and as they would otherwise
become due on and after the date of such termination; provided that if Customer
fails to make payment of any such amount due and such amount remains unpaid
within ten (10) business days after receiving from PanAmSat a notice of such
nonpayment (but only if payment is at least twenty (20) business days due at the
time of termination), then PanAmSat may declare immediately due and payable the
remaining Service Fee payments, discounted for present value as provided above,
and apply any remaining unapplied portion of the Deposit against the termination
liability.
In the event of such termination, in addition to all of PanAmSat's
other remedies at law or in equity, PanAmSat shall be entitled to use the
Service Transponders or to provide service on such Transponders to whomever
PanAmSat sees fit, and Customer shall not be entitled to any equitable relief
with respect to such use or any refund of amounts paid to PanAmSat; provided, as
follows: In the event that Customer has paid (and, if applicable, continues
timely to pay to) PanAmSat all amounts due hereunder including, without
limitation, pursuant to the preceding paragraphs of this Section 7.5 (the
"Termination Payment(s)"), PanAmSat shall use all reasonable efforts to
re-market service from the Service Transponders and in the event PanAmSat
subsequently reaches an agreement to provide service to a third party via a
Service Transponder during the period Service otherwise would have been provided
to Customer via such Service Transponder, PanAmSat shall remit to Customer as a
refund of the Termination Payment(s) any service fees it receives from such
<PAGE>
third party with respect to such Service Transponder, applicable to such period,
up to the amount paid by Customer for such Service Transponders for the period
for which Customer did not receive Service, less (i) any amounts owed by
Customer to PanAmSat under this Agreement; (ii) any reasonable costs (including
reasonable attorneys' fees) incurred by PanAmSat in attempting to collect such
amounts from Customer; (iii) any other direct damages incurred by PanAmSat as a
result of Customer's breach of its obligations hereunder; (iv) any reasonable
costs (including reasonable attorneys' fees) incurred by PanAmSat in marketing
such Service Transponder to, or negotiating a service agreement with, third
parties; and (v) any costs reasonably incurred by PanAmSat in providing related
services and equipment for which PanAmSat is not separately reimbursed that may
be associated with the provision of such service in addition to those agreed to
be provided under this Agreement. Nothing herein shall be deemed to require
PanAmSat to enter into such a service agreement, if the nature of the party, the
party's proposed use of the service or demand for terms and conditions for
service, or other reasonable and appropriate factors, lead PanAmSat reasonably
and in good faith to determine not to enter such a service agreement; nor shall
PanAmSat be obligated to use the capacity formerly used to provide Service to
Customer ahead of any other capacity that PanAmSat may also have available.
Customer acknowledges that the foregoing rights of PanAmSat: (i) are reasonable
under all of the circumstances existing as of this date; (ii) constitute
liquidated damages for the loss of a bargain; and (iii) do not constitute a
penalty.
7.6 Rights and Obligations Upon Termination. Upon termination of this
Agreement in accordance with any of Sections 7.3 or 7.4 above, or Sections 7.7
or 8.1 below, PanAmSat shall promptly refund to Customer any portion of the
Service Fee (including any applicable portion of the Deposit) applicable to any
period during which Service has not been made available to Customer. The
termination of this Agreement for any reason in accordance with this Agreement
shall extinguish all of PanAmSat's obligations to provide, and Customer's
obligations to accept and pay for, Service for the Satellite, but shall not
relieve either party of any obligation that may have arisen prior to such
termination, including (without limitation), under Section 7.5 above, nor shall
<PAGE>
termination affect the parties' obligations under Section 3.2 ("Reservation
Fee") or Article 11 ("Confidentiality") that shall survive the termination of
this Agreement.
7.7 Termination for Patent Infringement. In the event that: (a)
PanAmSat's use or provision of Service from the Satellite or the Service
Transponders infringes upon the patents or intellectual property rights of third
parties; (b) such infringement exists independent of the combination of the
Service with any Customer-Provided Facilities; and (c) as a result, Customer
cannot use the Service without infringing upon the patent or intellectual
property rights of third parties, Customer may terminate this Agreement upon
thirty (30) days' notice to PanAmSat, unless (i) such infringement ceases to
exist within this thirty (30)-day notice period; or (ii) PanAmSat agrees (to the
extent that Customer is not protected under the indemnity provided by PanAmSat's
satellite manufacturer) to indemnify and hold harmless Customer from any claim
or suit based on such infringement and arising from PanAmSat's continued
provision and Customer's continued use of the Service on and after the date that
PanAmSat agrees to so indemnify Customer. In this latter instance, Customer
agrees to cooperate with PanAmSat and the satellite manufacturer, as applicable,
in the defense of such claim and specifically agrees, as a condition to this
indemnity, to take all steps within its power that are required of it and/or
that are necessary for PanAmSat to take in order to receive the benefits of the
satellite manufacturer's indemnity, in accordance with the relevant provisions
of PanAmSat's contract with the satellite manufacturer.
ARTICLE 8. FORCE MAJEURE.
--------------
8.1 Failure To Commence Service Or To Perform. Any failure or delay in
the performance by PanAmSat of its obligation to commence or to continue to
provide Service shall not be a breach of this Agreement, if such failure or
delay results from any Act of God, governmental action (whether in its sovereign
or contractual capacity), or any other circumstance reasonably beyond the
control of PanAmSat, including, but not limited to, receive earth station sun
outage, meteorological or astronomical disturbances, earthquake, hurricane,
snowstorm, fire, flood, strikes, labor disputes, war, civil disorder, epidemics,
quarantines, embargoes, or acts or omissions of Customer or any third parties
<PAGE>
(except that the acts or omissions of third parties acting on behalf of
PanAmSat, including PanAmSat's satellite manufacturer and launch contractor,
shall not constitute a force majeure unless their acts and omissions are
themselves the result of force majeure conditions of the kind set forth above).
The foregoing notwithstanding, PanAmSat shall provide Customer with Outage
Credits when applicable in accordance with Section 5.2 of this Agreement in
circumstances in which PanAmSat is unable to perform because of force majeure
conditions, with the exception of force majeure conditions that are attributable
to sun outages, meteorological or astronomical disturbances, or acts or
omissions of Customer or its employees, agents, or contractors (other than
PanAmSat) other than acts or omissions taken in accordance with Appendix D.
Subject to the following sentence, either party shall be permitted to terminate
this Agreement if, because of force majeure conditions: (a) Service meeting the
Service Specifications cannot be recommenced within sixty (60) days; or (b) the
nature of the force majeure event makes it clearly ascertainable that Service
meeting the Service Specifications will not be able to recommence within this
sixty (60) day period. Customer shall not be permitted to terminate this
Agreement if PanAmSat's inability to perform is due to acts or omissions of
Customer or its employees, agents, or contractors that are not in conformance
with Appendix D or for intermittent failure of Service due to any or all of the
following: sun outages, meteorological or astronomical disturbances. The
foregoing notwithstanding, to the extent a failure to provide Service results
from a malfunction of the Satellite, Customer's rights of termination shall be
governed by Section 7.3 of this Agreement and not this Section 8.1.
ARTICLE 9. LIMITATION OF LIABILITY AND INDEMNIFICATION.
--------------------------------------------
9.1 Limitation Of PanAmSat's Liability. ANY AND ALL EXPRESS AND IMPLIED
WARRANTIES, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR ANY PURPOSE OR USE, ARE EXPRESSLY EXCLUDED AND DISCLAIMED. IT IS
EXPRESSLY AGREED THAT PANAMSAT's SOLE OBLIGATION AND CUSTOMER'S EXCLUSIVE
REMEDIES FOR ANY CAUSE WHATSOEVER ARISING OUT OF OR RELATING TO THIS AGREEMENT
ARE LIMITED TO THOSE SET FORTH IN SECTIONS 5.2, 5.3, 8.1, 9.4, AND 9.5 AND
<PAGE>
ARTICLE 7 AND ALL OTHER REMEDIES OF ANY KIND ARE EXPRESSLY EXCLUDED. In no event
shall PanAmSat be liable for any incidental or consequential damages or loss of
revenues, whether foreseeable or not, occasioned by any defect in the Satellite,
the Transponders or the provision of Service to Customer, any delay in the
provision of Service to Customer, any failure of PanAmSat to provide Service, or
any other cause whatsoever.
9.2 Limitation Of Liability Of Others. Without limiting the generality
of the foregoing, Customer acknowledges and agrees that it shall have no right
of recovery for the satisfaction of any cause whatsoever, arising out of or
relating to this Agreement, against (a) any supplier of services or equipment to
PanAmSat in connection with the construction, launch, operation, maintenance,
tracking, telemetry and control of the Satellite or the Service Transponder(s),
or the provision of Service to Customer in any circumstances in which PanAmSat
would be obligated to indemnify the supplier, or (b) any officer, director,
employee, agent or partner of (i) PanAmSat or (ii) any service or equipment
provider under 9.2(a). PanAmSat acknowledges and agrees that it shall have no
right of recovery for the satisfaction of any cause whatsoever, arising out of
or related to this Agreement, against any officer, director, employee, agent or
partner of Customer, except with respect to any partner of Customer or agent of
Customer to the extent arising out of the transmission of signals to the
Satellite by it or on its behalf.
9.3 Indemnification. Customer shall defend and indemnify the "PanAmSat
Group" (defined herein to mean PanAmSat and all officers, directors, employees,
agents and partners of PanAmSat) from any claims, liabilities, losses, costs, or
damages, including attorneys' fees and costs, arising out of the provision of
Service to Customer from, or Customer's use of, the Satellite or the Service
Transponder(s), that (a) is caused by the fault or negligence of Customer, (b)
arises under a warranty, representation, or statement by Customer to any third
party in connection with transmissions carried on the Service Transponders, (c)
arises out of the transmissions carried on the Service Transponders, including
any libel, slander, obscenity, indecency, pornography, religious fanaticism, or
political advocacy, infringement of copyright, infringement of patents, breach
in the privacy or security of transmissions; or (d) arises out of disputes
<PAGE>
between or among Customer and any program supplier to Customer and/or any other
entity that may be permitted to use the Service under other provisions of this
Agreement The limitation of liability set forth in this Article 9 shall apply
to, and the indemnifications set forth in this Article 9 shall run in favor of,
the PanAmSat Group.
9.4 Equitable Relief. Nothing contained in this Article 9 or elsewhere
in this Agreement shall preclude either party from seeking injunctive relief to
prevent a willful breach or to compel performance in the event of a willful
failure to comply with this Agreement.
9.5 Patents, Copyrights, Mask Work Rights and Proprietary Computer
Programs. To the extent that the manufacturer of the Satellite or any part
thereof may be obligated to indemnify PanAmSat for any infringement of any
patent, copyright, "mask work" (as defined in the Semiconductor Chip Protection
Act, 17 U.S.C. Secs. 901-14) right or other proprietary computer right with
respect to the manufacture of, or provision of services from the Satellite and
the Service Transponders and such indemnification obligations may be passed
through to protect PanAmSat's customers, PanAmSat shall pass such protection
through to Customer; provided, that PanAmSat makes no representation or warranty
that any manufacturer's indemnification obligation exists or will continue to
exist or may be passed through; and provided further that, to the extent such
indemnification rights are limited, PanAmSat may equitably share such
indemnification protections for the common benefit of PanAmSat and its
customers.
9.6 Indemnitor Rights. If Customer is obligated to provide
indemnification pursuant to this Article 9 or PanAmSat undertakes to indemnify
Customer under Section 7.7, the indemnifying party (the "Indemnitor") shall
promptly defend any claims against the party entitled to indemnification (the
"Indemnitee") with counsel of Indemnitor's choosing at its own cost and expense.
The Indemnitee shall allow the Indemnitor to control the defense and cooperate
with, and assist as reasonably requested by, Indemnitor in the defense of any
such claim, including the settlement thereof on a basis stipulated by Indemnitor
(with Indemnitor being responsible for all costs and expenses of defending such
claim or making such settlement); provided, however, that (1) Indemnitor will
<PAGE>
not, without the Indemnitee's consent, settle or compromise any claim or consent
to any entry of judgment which does not include the giving by the claimant or
the plaintiff to the Indemnitee of an unconditional release from all liability
for which the Indemnitor does not fully indemnify the Indemnitee with respect to
such claim, (2) the Indemnitee shall be entitled to participate at its sole
expense in support of Indemnitor's action in the defense of any such claim and
to employ counsel at the Indemnitee's own expense to assist in the handling of
such claim, and (3) the Indemnitee shall have the right to pay, settle or
compromise any such claim as to itself, provided that in such event Indemnitor
shall be relieved of any liability or obligation which would otherwise then or
thereafter have existed or arisen in respect of such claim.
ARTICLE 10. SUBORDINATION AND ASSIGNMENT.
-----------------------------
10.1 No Property Interest Created. This Agreement is a service contract
and does not grant, and Customer shall not assert, any right, interest, or lien
upon the property or assets of PanAmSat, including any satellite or related
equipment which it may own.
10.2 Collateral Trustee
------------------
(a) Customer hereby acknowledges that this Agreement and all
rights granted to Customer hereunder are subject and subordinate to a security
interest and lien in favor of First Trust National Association (the "Trustee"),
as the same may be assigned (the "Security Interest") in and to the
Transponder(s) that may be owned and operated by PanAmSat and which are the
subject of this Agreement (and/or the proceeds from the sale or other
disposition of all or any portion thereof, or any insurance that may be received
by PanAmSat as a result of any loss or destruction of, or damage to, the
Transponders identified above). The Security Interest shall be deemed to arise
under all security agreements, indentures, mortgages, pledge agreements and
other collateral documents between Trustee and PanAmSat, including all renewals,
modifications, consolidations or replacements thereto (collectively, the
"Collateral Documents"). Notwithstanding the Security Interest, the Trustee
agrees that Customer shall continue to have the benefits of this Agreement
notwithstanding any default on the part of PanAmSat under the Collateral
<PAGE>
Documents, so long as (i) Customer is not in default under the terms and
conditions of this Agreement, (ii) Customer shall not pay any of its obligations
under this Agreement more than 30 days prior to their scheduled payment date
under this Agreement, (iii) this Agreement is not supplemented, amended or
extended or otherwise modified in any manner which adversely affects the
interests of the Trustee on behalf of the holders of the Senior Secured Notes
(as defined in the Collateral Documents) in a degree greater than the manner in
which it adversely affects PanAmSat, and (iv) after receipt of notice from the
Trustee of a default by PanAmSat under the Collateral Documents, Customer agrees
to make, and makes, all payments thereafter as instructed by the Trustee.
(b) Customer acknowledges and consents to the foreclosure,
should it occur, upon this Agreement by the Trustee or its designee, successor
or assignee, and the consequent replacement of PanAmSat under this Agreement by
the Trustee, its designee, successor or assignee, or another purchaser or
assignee, provided that any successor to PanAmSat under this Agreement (i)
expressly assumes PanAmSat's obligations hereunder for the benefit of Customer,
and (ii) succeeds to substantially all of the right, title, and interest in and
to all assets of PanAmSat reasonably necessary for such successor to perform its
obligations under this Agreement. Upon such succession and assumption by a party
other than the Trustee, the Trustee and its successors under this Agreement,
other than the ultimate successor, shall be released from any further liability
under this Agreement.
(c) The Trustee shall be entitled to exercise all rights and
to cure any defaults of PanAmSat under this Agreement, within such cure period
as may be available to PanAmSat under this Agreement. Upon receipt of notice
from the Trustee, Customer agrees to accept such exercise and cure by the
Trustee and to render all or any part of the performance due by Customer under
this Agreement to the Trustee.
(d) The Trustee shall be deemed an express third party
beneficiary of this Section 10.2. This Section 10.2 shall be self-operative and
no further instrument of subordination shall be required by any security
agreement, mortgage or other document reflecting the Security Interest to make
<PAGE>
this subordination effective. In confirmation of such acknowledged
subordination, Customer shall execute promptly any instrument or certificate
which PanAmSat or the Trustee may reasonably request.
10.3 Subordination to Other Entities. Customer acknowledges and agrees
that PanAmSat may grant additional security interests in the Transponders and/or
the Satellite to other parties. In such event, the provisions set forth above or
similar provisions, to the extent that changes are requested by another secured
party, shall apply.
10.4 PanAmSat's Right To Assign. Customer agrees that PanAmSat may
assign its rights and interests under this Agreement and to the Satellite(s) and
any or all sums due or to become due under this Agreement to an assignee for any
reason; provided that, except with respect to the granting of a security
interest or the assignment of a right to payment, such assignee agrees in
writing to assume all of the duties and obligations of PanAmSat hereunder.
Customer agrees that upon receipt of notice from PanAmSat of such assignment,
Customer shall perform all of its obligations directly for the benefit of the
assignee and shall pay all sums due or to become due directly to the assignee,
if so directed. Upon receipt of notice of such assignment, Customer agrees to
execute and deliver to PanAmSat such documentation as assignee may reasonably
require from PanAmSat. As used in this Section 10.4, assign shall mean to grant,
sell, assign, encumber or otherwise convey directly or indirectly, in whole or
in part.
10.5 Customer Assignment. Customer may assign its rights under this
Agreement only in whole, only to an entity that is a Commonly Controlled Entity
with Customer (i.e., with Televisa S.A. de C.V.), and only if the following
conditions are satisfied: (a) the proposed assignee in writing assumes all of
Customer's obligations with respect to this Agreement and agrees to be treated
as Customer for all purposes under this Agreement; (b) such written undertaking
is delivered to PanAmSat at least thirty (30) days in advance of the assignment;
(c) Customer guarantees assignee's performance of payment obligations; and (d)
the assignee agrees in writing to continue the programming practices of
Customer. As used in this Section 10.5, assign shall mean to grant, sell,
assign, encumber, otherwise convey, license, lease, sublease, or permit the
utilization of, directly or indirectly, in whole or in part; provided that
<PAGE>
Customer shall be permitted to sublease its rights to Commonly Controlled
Entities on a Transponder by Transponder basis in accordance with Section 1.3.
Without limitation, any assignee shall be required to use the Transponders
assigned in accordance with Section 1.3.
10.6 Successors. Subject to all the provisions concerning assignments,
above, this Agreement shall be binding on and shall inure to the benefit of any
successors and assigns of the parties, provided that no assignment of this
Agreement shall relieve either party of its obligations to the other party,
without the express written consent of the other party, not to be unreasonably
withheld. Any purported assignment by either party not in compliance with the
provisions of this Agreement shall be null and void and of no force and effect.
10.7 No Resale. Except as expressly permitted in Sections 1.3 and 10.5,
the Service is provided for Customer's own use and in no event shall Customer be
permitted to resell the Service, in whole or in part, to any other person or
entity.
ARTICLE 11. CONFIDENTIALITY.
----------------
11.1 Publicity. The terms of this Agreement and the transactions
contemplated herein shall be kept strictly confidential by the parties and their
advisors; provided, however, that the parties may disclose such information: (i)
to their respective shareholders, directors, officers, partners, lenders,
insurance agents, and advisors on an as needed and confidential basis; (ii) to
regulatory authorities or the general public if and to the extent a party is
required by law or securities exchange rules or regulations to make such
disclosures (including, but not limited to, in connection with a public
offering); and (iii) to actual and proposed potential partners, investors,
lenders, and successors in interest on an as needed and confidential basis.
Subject to the proviso of the preceding sentence, the parties will mutually
agree on the timing and substance of the initial announcement of this Agreement
to the general public. To the extent practicable, any other disclosures to the
general public will be coordinated and approved by the parties prior to release.
<PAGE>
ARTICLE 12. REPRESENTATIONS, WARRANTIES AND COVENANTS.
------------------------------------------
PanAmSat has obtained, and shall use all reasonable effort to maintain,
all consents and authorizations from the FCC and other governmental entities
that may be necessary to provide the Service as contemplated in this Agreement;
provided that, except as it may relate to actions that may need to be taken with
third parties or non-U.S. governmental agencies a "best efforts" standard shall
apply to PanAmSat's activities before the FCC with respect to PAS-3. PanAmSat
shall, in this regard, also use all reasonable efforts through the International
Telecommunications Union coordination process and, whenever required to do so by
the United States government, through coordination with the operators of
adjacent satellites, so as to secure such FCC or other authorizations from
governmental entities with jurisdiction over PanAmSat that may be necessary for
PanAmSat to provide the Service. Subject to the understanding that certain
consents and authorizations have not yet been obtained and that certain
applications in this regard may be pending or subsequently filed with the FCC or
other applicable governmental entity, PanAmSat and Customer each represents and
warrants to, and agrees with, the other that:
12.1 Authority. It has the right, power and authority to enter into and
perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement shall not result in the breach or non-performance
of any document, instrument or agreement by which it is bound.
12.2 Partnership And Corporate Approvals. It has taken all requisite
partnership or corporate action, as applicable, to approve execution, delivery
and performance of this Agreement, and this Agreement constitutes a legal, valid
and binding obligation upon itself.
12.3 Consents.
---------
(a) The fulfillment of its obligations will not constitute a
material violation of any existing applicable law, rule, regulation or order of
any governmental authority. All necessary public or private consents,
permissions, agreements, licenses or authorizations necessary for the
<PAGE>
performance of its obligations under this Agreement to which it is subject have
been obtained, or it will use all reasonable efforts to obtain, in a timely
manner.
(b) PanAmSat and Customer each acknowledges that the use of
the Service may be subject to the applicable consultation obligations of the
International Telecommunications Satellite Organization Agreement ("Intelsat"),
as to which, if any further consultation is required, PanAmSat shall take the
lead in securing, and, if Service is to be provided within Europe, of the
European Telecommunications Satellite Organization Agreement. PanAmSat and
Customer shall cooperate with each other to meet these obligations. PanAmSat
shall also use all reasonable efforts to assist Customer in Customer's efforts
to secure landing rights in the Territory.
12.4 Litigation. To the best of its knowledge, there is no outstanding
or threatened judgment, pending litigation or proceeding, involving or affecting
the transactions provided for in this Agreement, except as has been previously
disclosed in writing by either party to the other and/or to its counsel.
12.5 No Broker. It does not know of any broker, finder or intermediary
involved in connection with the negotiations and discussions incident to the
execution of this Agreement, or of any broker, finder or intermediary who might
be entitled to a fee or commission upon the consummation of the transactions
contemplated by this Agreement.
12.6 Good Faith. Each party shall carry out its obligations under this
Agreement, including (without limitation) with respect to all matters requiring
that a consent be given, in good faith.
<PAGE>
ARTICLE 13. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF PANAMSAT.
-----------------------------------------------------------------
13.1 Orbital Location. PanAmSat has been authorized to construct,
launch and operate the Satellite in geosynchronous orbit at 43l West Longitude.
PanAmSat shall use such orbital location (or, to the extent that PanAmSat
obtains FCC authority to do so, any location within five degrees of 43l W.L.),
unless prevented by subsequent order of the FCC, in which event PanAmSat shall
use such orbital position closest to the range identified above that the FCC may
designate. PanAmSat shall use all reasonable efforts to resist any move of the
Satellite from outside the orbital range specified above. In the event that
PanAmSat is required to change the Satellite's orbital location, such change
shall not affect the continuing validity of this Agreement, except to the extent
such change prevents PanAmSat from providing Service that meets the Service
Specifications, in which event the termination provision set forth in Article 7
shall apply.
13.2 Government Authorizations. PanAmSat shall use all reasonable
efforts to obtain and maintain all necessary governmental authorizations or
permissions to operate the Satellite and to comply in all material respects with
all FCC and other governmental regulations regarding the operation of the
Satellite; provided that, except as it may relate to actions that may need to be
taken with third parties or non-U.S. governmental agencies, a "best efforts"
standard shall apply to PanAmSat's activities before the FCC with respect to
PAS-3
13.3 Operational Reports. PanAmSat shall provide Customer a quarterly
written operational report concerning the Satellite which shall include
information regarding the status of Spare Equipment and updated projections
regarding the predicted life of the Satellite. PanAmSat shall also notify
Customer as soon as practicable of any significant anomalies with respect to the
Satellite which have a material effect on the Service Transponder(s) or
materially reduce the projected life of the Satellite.
ARTICLE 14. MISCELLANEOUS.
--------------
14.1 Applicable Law And Entire Agreement. This Agreement shall be
interpreted according to the laws of the State of New York, U.S.A. Subject to
the following sentence, the parties agree that the appropriate and exclusive
<PAGE>
forum for any disputes arising under this agreement shall be the United States
District Court for the Southern District of New York. Each party consents to the
jurisdiction of this court, but, if that court determines it lacks jurisdiction,
consents to the jurisdiction of the State courts of New York. The parties agree
to waive any or all rights they may have to a jury trial with respect to
disputes arising under this Agreement. Each party agrees that service of process
in any action or proceeding shall be deemed sufficient if mailed, first class,
postage prepaid, to the other at the address set forth in Section 14.5(b), as
the same may be changed in accordance with that Section. This Agreement
constitutes the entire agreement between the parties and supersedes all previous
understandings, commitments or representations concerning its subject matter.
For the avoidance of doubt, except as it relates to the provision of satellite
capacity for the Iberian Peninsula, that certain DTH System in Latin America
Memorandum of Understanding by and between Televisa and PanAmSat, dated March
27, 1995 (the "DTH MOU"), and any other agreements which may have been, or in
the future may be, executed thereunder are not superseded and, subject to such
other agreements as the parties may have now entered or may in the future enter,
remain binding commitments of the parties thereto. This Agreement may not be
amended or modified in any way, and none of its provisions may be waived, except
by a prior writing signed by an authorized officer of each party.
14.2 Severability; Reconstitution. Nothing contained in this Agreement
shall be construed so as to require the commission of any act contrary to law.
In the event that the transactions set forth in this Agreement are challenged
before a court or regulatory body of competent jurisdiction by other persons or
entities not parties hereto, PanAmSat and Customer agree that each will use its
all reasonable efforts before such court or regulatory body to support the
continuing operation of this Agreement by its terms. If any provision of this
Agreement shall be invalid or unenforceable, the provisions of this Agreement so
affected shall be curtailed and limited only to the extent necessary to permit
compliance with the minimum legal requirements; provided that if the effect is
such so that the economic relationships or benefits and burdens contemplated
under the Agreement are substantially affected, the parties shall seek and use
all reasonable efforts to reconstitute this Agreement so as best possible to
restore to each party to the economic position contemplated in this Agreement.
<PAGE>
14.3 No Third Party Beneficiary. The provisions of this Agreement are
for the benefit only of Customer and PanAmSat, and, except as provided under
Section 10.2 and 10.3, no third party may seek to enforce or benefit from these
provisions, except that both parties acknowledge and agree that the
non-interference requirements of Section 4.1 are intended for the benefit of
both PanAmSat and all other Protected Parties, and that the provisions of
Sections 9.2 and 9.3 are intended for the benefit of the PanAmSat Group. The
foregoing notwithstanding, no Protected Party who has the right to uplink to the
Satellite shall be entitled to third party beneficiary rights to enforce Section
4.1 against Customer, unless the agreement giving such other Protected Party the
right to uplink to the Satellite also gives Customer comparable third party
beneficiary rights against it. Any other Protected Party shall have the right,
as a third party beneficiary (a) to enforce the non-interference requirements of
Section 4.1, against Customer directly, in an action brought solely by itself,
or (b) to join with PanAmSat or any other Protected Parties in bringing an
action against Customer for violation of the non-interference requirements of
Section 4.1. Any member of the PanAmSat Group shall have the right to enforce,
as a third party beneficiary, the provisions of Sections 9.2 and 9.3 either by
(a) an action brought solely by itself, or (b) joining PanAmSat, or other
members of the PanAmSat Group in bringing an action against Customer for
violation of Sections 9.2 or 9.3.
14.4 Non-Waiver Of Breach. Either party may specifically waive any
breach of this Agreement by the other party, provided that no such waiver shall
be binding or effective unless in writing and no such waiver shall constitute a
continuing waiver of similar or other breaches. A waiving party may at any time,
upon notice given in writing to the breaching party, direct future compliance
with the waived term or terms of this Agreement, in which event the breaching
party shall comply as directed from such time forward.
14.5 Notices.
--------
(a) Telephone Notices. For the purpose of receiving notices
from PanAmSat regarding preemption, interference or other technical problems,
including with respect to Service failure and restoration, Customer shall
maintain at each earth station transmitting signals to the Satellite a telephone
<PAGE>
that is continuously staffed at all times during which customer is transmitting
signals to the Satellite and an automatic facsimile machine in operation and
capable of receiving messages from PanAmSat at all times. THOSE PERSONS STAFFING
THE EARTH STATION, FOR THE PURPOSES OF RECEIVING SUCH MESSAGES FROM PANAMSAT,
MUST HAVE THE TECHNICAL CAPABILITY AND ABSOLUTE AUTHORITY IMMEDIATELY TO
TERMINATE OR MODIFY THE TRANSMISSION IF NOTIFIED BY PANAMSAT. PanAmSat shall
also maintain a telephone that is continuously staffed for the purposes of
receiving notices regarding the matters identified above. All such notices shall
be made in English and shall be effective upon the placement of a telephone call
from one party to the other. Each party shall promptly confirm all telephone
notices that may be given under this Agreement in writing in accordance with
Section 14.5(b) below. Any unsuccessful efforts to reach a party by telephone
shall be followed by telecopy and telephone calls to other contact points, e.g.,
the corporate headquarters of the other party, that said party may have provided
the notifying party.
(b) General Notices. All notices and other communications
from either party to the other, except as otherwise stated in this Agreement,
shall be in English writing and, shall be deemed received upon actual delivery
or completed facsimile addressed to the other party as follows:
To PanAmSat if by recognized courier PanAmSat Corporation
service or by personal delivery to One Pickwick Plaza
its principal place of Greenwich, Connecticut 06830
business: Attention: General Counsel
To PanAmSat if by facsimile: 203-622-9163
Attention: General Counsel
With a copy to:
- ---------------
If by recognized courier service or Goldberg, Godles, Wiener & Wright
by personal delivery to its principal 1229 Nineteenth Street, N.W.
place of business: Washington, D.C. 20036
Attention: Henry Goldberg
<PAGE>
If by facsimile: 202-429-4912
Attention: Henry Goldberg
To Customer if by recognized courier Felix Araujo
service or by personal delivery to its Vice President of Operations
principal place of Grupo Televisa S.A.
business: Balderas 120
Col. Centro
Mexico, D.F. Mexico
To Customer if by facsimile: 011-525-709-7651
With a copy to:
- ---------------
If by recognized courier service or by Eugenio Gamboa
personal delivery to its principal Director, Technological Development
place of business: Grupo Televisa, S.A. de C.V.
Insurgentes 694, 3rd Floor
Col Del Valle
MEXICO DF
If by facsimile: 011 525 628 8547
and to Lawrence W. Dam, Esq.
President
Univisa, Inc.
2121 Avenue of the Stars
Suite 3300
Los Angeles, CA 90067
If by facsimile: 310-286-1613
and to Norman P. Leventhal, Esq.
Leventhal, Senter & Lerman
2000 K Street, N.W., Suite 600
Washington, D.C. 20006
If by facsimile: 202-293-7783
<PAGE>
Each party will advise the other of any change in the address, designated
representative or telephone or facsimile number.
For the avoidance of doubt, notices and certifications given by either
party to the other while relevant to the timing of further action by the
notified party shall not be deemed in and of themselves to establish the fact
stated in the notice. So, for example, under Section 5.3, the fact that Customer
notifies PanAmSat that the Service does not meet the Service Specifications
and/or that PanAmSat notifies Customer that the Service has been restored to its
Service Specifications shall not be deemed conclusive evidence, in and of
itself, of failure and/or restoration. Each party shall timely notify the other
if said party believes that any such notice is inaccurate.
14.6 Headings. The descriptive headings of the Articles and sections of
this Agreement are inserted for convenience only and do not constitute a part of
this Agreement.
14.7 Documents. Each party agrees to execute, and, if necessary, to
file with the appropriate governmental entities and international organizations,
such documents as the other party shall reasonably request in order to carry out
the purposes of this Agreement.
14.8 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, and all such
counterparts together shall constitute but one and the same instrument.
ARTICLE 15. SUCCESSOR SATELLITE.
--------------------
In the event that: (i) the Service Term of this Agreement has been
extended to the end of life of the Satellite pursuant to Section 2.3 of this
Agreement, and (ii) PanAmSat, or a commonly controlled entity (collectively
referred to as "PanAmSat" for purposes of this Section 15.1) determines to
launch a "Successor Satellite" (as defined herein) during the Term hereof, with
<PAGE>
transponders covering substantially the same coverage area as the Service
Transponders, PanAmSat shall give Customer the right to enter into a full-life
service agreement with respect to up to the number of Service Transponders from
which Service is taken under this Agreement that are substantially equivalent to
or technically upgraded from, the Service Transponders on terms and conditions
to be negotiated. The negotiation period shall be for three months, during which
time each party agrees to negotiate in good faith. The three-month negotiating
period may be initiated by either party on notice to the other at any time
within the time period set forth below. The negotiation period shall not begin
earlier than the date on which both of the following conditions have been
satisfied: (a) PanAmSat notifies Customer of a firm intent to launch a Successor
Satellite and of the commencement of marketing activities with respect thereto;
and (b) three years prior to the proposed launch date of the Successor
Satellite. The negotiation period shall not commence, if at all, later than the
date that the Successor Satellite has been successfully launched and placed in
to geostationary orbit at its designated orbital location. If negotiations are
not initiated by such date or successfully concluded with a binding purchase or
service agreement within the three-month negotiation period, neither party shall
have any further obligation pursuant to this Section 15.1. The conclusion or
failure to conclude such an agreement for a transponder or transponders on a
Successor Satellite shall not otherwise affect the parties' obligations
hereunder. For purposes of this Section 15.1, the term "Successor Satellite"
shall mean any satellite containing Ku-band capacity that PanAmSat launches or
causes to be launched to replace the Satellite at its presently assigned
location or at such other orbital location to which the FCC may authorize the
Satellite to be moved. For the avoidance of doubt, each party acknowledges and
agrees that the rights specified in this Article XV shall terminate upon the
termination of this Agreement for any reason.
<PAGE>
Each of the parties has duly executed and delivered this Agreement as
of the day and year first written above.
PANAMSAT CORPORATION
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
TELEVISA, S.A. de C.V.
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
LIST OF APPENDICES
A. Group of Transponders From Which Service Transponders Shall be Designated
B. Satellite Description and Spare Equipment
C. Service Specifications
D. Operational Requirements
E. Form of Transmission Plan
<PAGE>
APPENDIX A
GROUP OF TRANSPONDERS FROM WHICH
SERVICE TRANSPONDERS SHALL BE DESIGNATED
(PAS-3)
UPLINK DOWNLINK
Transp. # MHz Band Beam Band Beam
- --------- --- ---- ---- ---- ----
1-K 54 Ku Eur/No. Amer V Ku Europe H*
5-K 54 Ku Eur/No. Amer V Ku Europe H*
7 E-K 64 Ku Eur/No. Amer V Ku Europe H
9-K 54 Ku Eur/No. Amer V Ku Europe V*
11 E-K 54 Ku Eur/No. Amer V Ku Europe V
13-K 54 Ku Eur/No. Amer V Ku Europe V*
15 E-K 64 Ku Eur/No. Amer V Ku Europe V
2-K 54 Ku Eur/No. Amer H Ku No. Amer V**
6-K 54 Ku Eur/No. Amer H Ku No. Amer V**
10-K 54 Ku Eur/No. Amer H Ku No. Amer V**
14-K 54 Ku Eur/No. Amer H Ku No. Amer V**
- -----------------------------------------
* To be switched from NSA Beam.
** To be switched from SSA Beam.
<PAGE>
APPENDIX B
SATELLITE DESCRIPTION AND SPARE EQUIPMENT
*
APPENDIX C
SERVICE SPECIFICATIONS
*
APPENDIX D
OPERATIONAL REQUIREMENTS
*
APPENDIX E
FORM OF TRANSMISSION PLAN
*
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the PanAmSat
Form 10-Q for the quarterly period ended September 30, 1996 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,336,719
<SECURITIES> 372,405,626
<RECEIVABLES> 9,423,406
<ALLOWANCES> (100,000)
<INVENTORY> 0
<CURRENT-ASSETS> 26,478,014
<PP&E> 859,319,906
<DEPRECIATION> (122,912,134)
<TOTAL-ASSETS> 1,569,289,379
<CURRENT-LIABILITIES> 25,111,932
<BONDS> 616,583,843
318,193,850
0
<COMMON> 1,000,016
<OTHER-SE> 488,241,258
<TOTAL-LIABILITY-AND-EQUITY> 1,569,289,379
<SALES> 177,633,945
<TOTAL-REVENUES> 177,633,945
<CGS> 0
<TOTAL-COSTS> 100,678,952
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,973,190
<INCOME-PRETAX> 73,981,803
<INCOME-TAX> 31,085,000
<INCOME-CONTINUING> 42,896,803
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,896,803
<EPS-PRIMARY> .12
<EPS-DILUTED> 0
</TABLE>
