EXHIBIT 10.7
AGREEMENT dated as of January 22, 1999, among TCI SATELLITE ENTERTAINMENT, INC.,
a Delaware corporation ("TSAT"), PRIMESTAR, INC., a Delaware corporation
("Primestar"), the Funding Parties (as hereinafter defined) and Paragon
Communications ("Paragon", and together with the Funding Parties, the
"Stockholders").
RECITALS
A. Primestar and each of the Funding Parties desire to enter into an Asset
Purchase Agreement, to be dated as of the date hereof (the "Medium Power
Agreement"), among Xxxxxx Electronics Corporation ("Xxxxxx"), Primestar,
PRIMESTAR Partners L.P., PRIMESTAR MDU, Inc., and the persons indicated as
stockholders of Primestar named therein (the "Funding Parties"). The Medium
Power Agreement provides for, among other things, the purchase and sale of all
of the assets of Primestar and its subsidiaries that are used in the business of
distributing the "PRIMESTAR" service, all as provided therein (the "Medium Power
Asset Sale").
B. TSAT is the holder of 100% of the outstanding shares of Class B Common
Stock of Primestar (the "Class B Common Stock"). Pursuant to the Restated
Certificate of Incorporation of Primestar, the Medium Power Asset Sale may not
be consummated without the affirmative vote of TSAT as the holder of record of
all of the Class B Common Stock. TSAT is not willing to authorize the execution
and delivery of the Medium Power Agreement or the consummation of the Medium
Power Asset Sale unless Primestar and the Funding Parties enter into this
Agreement.
C. TSAT and Primestar are parties to (i) the TSAT Tempo Agreement dated as
of February 6, 1998 (the "TSAT Tempo Agreement"), and (ii) the Agreement and
Plan of Merger dated as of February 6, 1998 (the "TSAT Merger Agreement").
D. The TSAT Merger Agreement provides for, among other things, the payment
by Primestar during the term of such agreement of certain ongoing expenses of
TSAT.
E. Primestar and each of the Funding Parties also desire to enter into an
Asset Purchase Agreement, to be dated as of the date hereof (the "High Power
Agreement"), among Xxxxxx, Primestar, Tempo Satellite, Inc., a wholly-owned
subsidiary of TSAT ("Tempo") and the Funding Parties. It is a condition to the
obligations of Xxxxxx thereunder that (i) the TSAT Tempo Agreement be amended as
provided in Exhibit A attached hereto (the "Proposed Amendment"), (ii) the TSAT
Merger Agreement be terminated in accordance with its terms, with no party
thereto having any liability to any other party to the High Power Agreement as a
result of such termination, and (iii) Space Systems/Loral, Inc. ("Loral")
consent to the assignment to
Xxxxxx, pursuant to the High Power Agreement, of the satellite construction
agreement between Tempo and Loral.
F. TSAT is not willing (i) to amend the TSAT Tempo Agreement, (ii) to
grant any releases in connection with the termination of the TSAT Merger
Agreement, or (iii) to cause Tempo to enter into the High Power Agreement unless
Primestar and the Stockholders enter into this Agreement.
G. Capitalized terms used herein and not otherwise defined have the
meanings ascribed thereto in the High Power Agreement and the Medium Power
Agreement, as applicable.
NOW THEREFORE, in consideration of the premises, of the mutual agreements
set forth herein, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement,
intending to be bound hereby, hereby agree as follows:
1. TSAT will use its best efforts to cause Loral to provide its consent to
the transactions contemplated by the High Power Agreement. Effective as of the
initial closing under the High Power Agreement (the "Initial Closing"), TSAT and
Tempo will execute and deliver the Proposed Amendment amending the TSAT Tempo
Agreement and TSAT will execute and deliver an agreement terminating the TSAT
Merger Agreement as provided in Exhibit B attached hereto.
2. (a) Subject to the consummation of the Initial Closing, Primestar
hereby agrees to pay to TSAT either (i) $65 million in cash or (ii) 1,407,307
shares (the "Shares") of Class H Common Stock of GM ("GMH Stock") out of the
4,871,448 shares of GMH Stock required to be delivered by Xxxxxx as part of the
consideration for the Medium Power Asset Sale (the applicable of the foregoing
being the "Consideration"), as Primestar may elect. The Consideration shall be
paid simultaneously with the closing of the Medium Power Asset Sale (the "Medium
Power Closing"). If Primestar elects to cause the Shares to be delivered in
payment of the Consideration, the number and kind of shares deliverable shall be
adjusted for stock dividends, stock splits, combinations, distributions,
reclassifications, recapitalizations and other similar events after January 22,
1999 and prior to the delivery of the Shares pursuant hereto, if and to the same
extent that the Parent Securities are so adjusted.
(b) If Primestar elects to pay the Consideration in cash, then
Primestar shall deliver to TSAT $65 million in cash at the Medium Power Closing.
If Primestar elects to pay the Consideration in Shares, then, subject to TSAT's
compliance with the provisions of Section 2(c), Primestar shall direct Xxxxxx to
deliver at the Medium Power Closing the Shares, registered in the name of TSAT,
to the TSAT Collateral Agent (as defined below).
(c) If Primestar elects to cause Shares to be delivered in payment of
the Consideration, then simultaneously with the delivery of the Shares as
provided in Section 2(b),
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TSAT shall enter into (i) a Share Appreciation Rights Agreement (the "SAR
Agreement") with Primestar with respect to the Shares in the form annexed as
Exhibit C hereto, and (ii) a Pledge and Security Agreement (the "Pledge
Agreement") with The Bank of New York, as Collateral Agent (the "TSAT Collateral
Agent"), in the form annexed as Exhibit D hereto, providing for the Shares to be
deposited into a collateral account with the TSAT Collateral Agent pursuant to
the Pledge Agreement to secure TSAT's obligations with respect to the SAR
Agreement.
3. TSAT acknowledges that the Medium Power Agreement contemplates that
Primestar and Xxxxxx will enter into Parent Security Documents that will
restrict the transfer of the Parent Securities for a period of one year from the
Medium Power Closing and will provide certain demand registration rights with
respect to the Parent Securities. TSAT agrees that the Shares shall be subject
to such one-year restriction on transfer, in addition to the restrictions
pursuant to the Pledge Agreement, and Primestar agrees that at the request of
TSAT the Shares, or such portion thereof as TSAT may request, will be included
in any demand registration effected pursuant to the Parent Security Documents,
on the same terms and subject to the same conditions as are applicable to
Primestar's exercise of its registration rights with respect to the Parent
Securities. If requested by Xxxxxx or Primestar, TSAT will become a party to
the Parent Security Documents with respect to the Shares, provided that the
terms thereof do not purport to impose any obligations on TSAT or its affiliates
(other than Primestar), including, without limitation, any restrictions on its
exercise of full rights of ownership of the Shares, other than as contemplated
by this Agreement or consented to by TSAT. TSAT acknowledges that neither
Primestar nor any of the Funding Parties will guarantee or in any way assume
responsibility for TSAT's obligations pursuant to such registration.
4. Notwithstanding Section 2 hereof, if the Medium Power Agreement is
terminated prior to the consummation of the Medium Power Asset Sale, TSAT's
right to receive the Consideration shall automatically terminate; provided,
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however, that Primestar shall not agree to any termination of the Medium Power
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Agreement prior to April 30, 1999. Further, Primestar shall not agree to any
other material modification or amendment to the Medium Power Agreement without
the prior written consent of TSAT, which shall not be unreasonably withheld; it
being understood and agreed that it shall not be unreasonable for TSAT to
withhold its consent to any proposed modification or amendment that would
adversely affect TSAT's rights or increase its obligations hereunder, including,
without limitation, its right to receive the Consideration (including any
condition thereto) and its right, if the Consideration is paid in Shares, to
exercise full rights of ownership thereof, subject only to the restrictions
contemplated hereby.
5. Notwithstanding the termination of the TSAT Merger Agreement, Primestar
shall continue to pay or reimburse TSAT for all reasonable costs and expenses of
the nature that the TSAT Merger Agreement required Primestar to bear, as
specified in the following sentence, that are incurred or accrued prior to or
with respect to periods prior to the effective date of the termination of the
TSAT Merger Agreement, it being understood and agreed by Primestar and TSAT that
the aggregate amount of the costs and expenses of such nature that may be
incurred
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following the date hereof through the date of termination of the TSAT Merger
Agreement will not exceed $150,000. If the Medium Power Agreement is terminated
prior to the consummation of the Medium Power Asset Sale, or if (for whatever
reason, other than a breach by TSAT of this Agreement or the Medium Power
Agreement) TSAT shall not have received the Consideration by May 7, 1999, then,
without limitation of TSAT's rights or remedies, Primestar shall reimburse TSAT
for all reasonable costs and expenses (including reasonable legal fees of
outside counsel and reasonable fees of TSAT's independent public accountants)
incurred by TSAT that are in excess of the aggregate amount actually received by
TSAT pursuant to the High Power Agreement in payment of the exercise price of
the Option and were incurred during the period commencing on the effective date
of the termination of the TSAT Merger Agreement and ending on June 30, 2000 (i)
in preparation of tax returns and other reports to Governmental Entities, (ii)
for payment of required taxes, franchise fees, NASDAQ fees and similar fees,
(iii) in complying with its reporting obligations under the Securities Act and
the Exchange Act and (iv) to maintain D&O Insurance on terms reasonably
acceptable to Primestar (capitalized terms used in this Section 5 having the
meanings ascribed thereto in the TSAT Merger Agreement). It is further
understood and agreed that Primestar shall be solely responsible for all legal
and other costs and expenses incurred or required to be incurred in order to
comply with the requirements of and effect the transactions contemplated by the
High Power Agreement (including, without limitation, for Tempo Satellite, Inc.
to maintain its FCC licenses pending the transfer thereof) and that TSAT and
Tempo shall have no liability therefor.
6. (a) Subject to the following sentence, TSAT further agrees that
effective upon the receipt in full by it of the cash, or of good and valid title
to the Shares, being delivered in payment of the Consideration, free and clear
of all liens and encumbrances not contemplated by this Agreement, and in
consideration of the Stockholders' having agreed to the indemnification
provisions of the Medium Power Agreement and the High Power Agreement and having
entered into or agreed to enter into the Additional Liability Agreements (as
defined below) and to perform their obligations thereunder all without any
requirement (and by its execution hereof, each Stockholder confirms, on behalf
of itself and each of its subsidiaries that are stockholders of Primestar, the
waiver of any such requirement) that TSAT become a party to any such agreement
or contribute to, or indemnify any Stockholder (or any such subsidiary) against,
any payment(s) made or required to be made thereunder:
(i) it shall waive its rights as a stockholder of Primestar to
participate in any dividends or distributions by Primestar to its stockholders
as such, whether in liquidation or otherwise, or any payments made by Primestar
in redemption of its stock, in an aggregate amount up to and including $65
million; and
(ii) subject to the approval of TSAT's stockholders, it will transfer
all (but not less than all) of its Primestar stock (the "TSAT Shares") to the
other stockholders of Primestar (each, a "purchaser"), pro rata in accordance
with their respective percentage equity interests in Primestar (net of TSAT's
interest), provided that the consummation of such purchase does not and will not
(A) violate any provision of law, rule or regulation applicable to the purchaser
or by
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which the purchaser or its assets are bound or subject or the organizational
documents of the purchaser or (B) result in (whether with the giving of notice
or passage of time or both) any breach or violation of or default under any
indebtedness of the purchaser or any material agreement or arrangement to which
the purchaser is a party or by which it or its assets are bound or subject.
If at any time TSAT no longer has indefeasible title to the Consideration as a
result of a claim by any person (other than TSAT) based on a theory of illegal
dividends, illegal redemption, fraudulent conveyance or preference or any
similar theory, then at TSAT's election the agreements of TSAT in the preceding
sentence shall be of no further force and effect, and its ownership of the TSAT
Shares and its rights as a Primestar stockholder shall be reinstated,
prospectively and not retroactively. Nothing contained in the foregoing is
intended to limit or affect TSAT's rights under this Agreement, the Medium
Power Agreement or the High Power Agreement, or under any other agreement with
Primestar. For purposes of the foregoing, "Additional Liability Agreements"
means each of the following: the Contribution Agreement, dated as of January 22,
1999, among certain of the Stockholders; the Funding Agreement referred to in
Section 7 hereof, and the Indemnity Agreement (in the form annexed hereto as
Exhibit E) to be entered into by the Stockholders that will be parties to the
Funding Agreement and the holders of certain debt instruments issued by
Primestar.
(b) TSAT shall call a meeting of its stockholders to be held as
promptly as practicable for the purpose of voting upon the transfer by TSAT of
the TSAT Shares contemplated by clause (ii) of the first section of Section 6(a)
and shall use its reasonable best efforts to obtain such approval.
7. TSAT shall be entitled to rely on and enforce, as an express third
party beneficiary, the obligations of the Funding Parties under Section 5(c) of
the Funding Agreement in the form annexed hereto as Exhibit F to be entered into
by Primestar, the Funding Parties and United Artists Investments, LLC, and no
amendment of Section 5(c), of Section 8(b) (as it relates to the requirement of
TSAT's consent to any amendment of Section 5(c)) or of Section 10(b) (as its
relates to Section 5(c)) shall be effected without the prior written consent of
TSAT.
8. This Agreement shall terminate automatically upon the termination of
the Medium Power Agreement and abandonment of the transactions contemplated
thereby. Upon termination of this Agreement as provided in the immediately
preceding sentence, this Agreement shall become null and void and of no further
force and effect, except for the provisions of Section 5, this Section 8,
Section 9 and Section 10.
9. This Agreement shall be construed in accordance with and governed by
the internal laws of the State of New York without giving effect to any
conflicts of laws principles. Each party hereto hereby irrevocably submits to
the jurisdiction of any New York State court sitting in the Borough of Manhattan
or any federal court sitting in the Borough of Manhattan in respect of any suit,
action or proceeding arising out of or relating to this Agreement and the
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transactions contemplated hereby, and irrevocably agrees that all claims in
respect of any such suit, action or proceeding shall be heard and determined in
any such court. Each party irrevocably waives any objection which it may now or
hereafter have to the laying of the venue of any such suit, action or proceeding
brought in any such court and any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.
10. Without intending to limit the remedies available to any party hereto,
each party acknowledges and agrees that a violation by such party of any of the
terms of this Agreement will cause irreparable injury for which an adequate
remedy at law is not available and accordingly, the nonbreaching party shall be
entitled to an injunction, restraining order or other form of equitable relief
from any court of competent jurisdiction compelling the breaching party to
specifically perform, and restraining such party from committing any breach of,
or threatened breach of, any provision of this Agreement.
11. This Agreement may be executed in counterparts, each of which shall
for all purposes be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered on and as of the date first written above.
PRIMESTAR, INC. ADVANCE/XXXXXXXX PARTNERSHIP,
By ADVANCE COMMUNICATION CORP.,
as general partner
By: _____________________________________ By: _____________________________________
Name: Name:
Title: Title:
TIME WARNER ENTERTAINMENT COMCAST CORPORATION
COMPANY, L.P.,
By AMERICAN TELEVISION AND
COMMUNICATIONS By: _____________________________________
CORPORATION, Name:
a general partner Title:
By: _____________________________________ MEDIAONE OF DELAWARE, INC.
Name:
Title:
By: _____________________________________
Name:
Title:
XXX COMMUNICATIONS, INC. TCI SATELLITE ENTERTAINMENT,
INC.
By: _____________________________________ By: _____________________________________
Name: Name:
Title: Title:
GE AMERICAN COMMUNICATIONS, TEMPO SATELLITE, INC.
INC.
By: _____________________________________ By: _____________________________________
Name: Name:
Title: Title:
PARAGON COMMUNICATIONS, a
Colorado general partnership,
By: AMERICAN TELEVISION AND COMMUNICATIONS
CORPORATION,
a general partner,
By: _____________________________________
Name:
Title:
