Exhibit 2.2
March 23, 2001
Loral SpaceCom DBS Holdings, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Gentlemen:
We refer to that certain Operating Agreement of R/L DBS Company L.L.C.
("R/L DBS") dated as of March 6, 1996 (the "Operating Agreement") between Loral
Aerospace Holdings, Inc. ("LAHI") and Rainbow DBS Holdings, Inc. ("Rainbow").
LAHI's interest in R/L DBS was assigned to Loral SpaceCom DBS Holdings, Inc.
("Loral") on April 22, 1996. Each of Loral and Rainbow currently holds a 50%
membership interest in R/L DBS. Loral has indicated that it will not
participate in funding R/L DBS in the future and would like to sell its
interest in R/L DBS to Rainbow or an affiliate of Rainbow on the terms and
conditions set forth herein. Accordingly, Loral and Rainbow agree as follows:
1. Rainbow shall fund or arrange the funding of R/L DBS' requirements as
Rainbow may determine is necessary or appropriate in the form of
non-recourse loans on commercially reasonable terms.
2. Upon satisfaction of the conditions set forth in paragraph 10 below,
Loral shall sell, and Rainbow shall purchase (the "Sale"), for the
purchase price described below (the "Purchase Price"), all of Loral's
interest in R/L DBS, free and clear of any liens, claims or
encumbrances, other than those related to any litigation and other
proceeding involving Continental Satellite Corporation or the
Contemplated Transactions (as defined in the R/L DBS membership
agreement).
3. The Purchase Price shall be equal to:
a. In the event that Rainbow causes R/L DBS to contract with an
affiliate of Loral (including Space Systems/Loral, Inc.) for the
procurement of a satellite, then the Purchase Price shall be
equal to an amount which yields a net present discounted value of
$20 million calculated as set forth in paragraph 4 below.
Loral SpaceCom DBS Holdings, Inc.
March 23, 2001
Page 2
b. In the event that Rainbow does not cause R/L DBS to contract with
an affiliate of Loral (including Space Systems/Loral, Inc.) for
the procurement of a satellite, but instead causes R/L DBS to
contract with another satellite vendor for the procurement of
such a satellite, then the Purchase Price shall be equal to an
amount which yields a net present discounted value of $40 million
calculated as set forth in paragraph 4 below.
4. Net present discounted value shall be calculated using a discount rate
of 8% per annum and shall be calculated from the date a payment(s) is
made pursuant to paragraph 5, 6 or 7 below to April 1, 2001.
5. The Purchase Price shall be payable as follows. Rainbow shall pay to
Loral two percent (2%) of net revenues (gross revenues less bad debt)
of R/L DBS (or any successor entity) until the Purchase Price shall
have been paid in full. These payments shall be paid on an annual
basis, in each case for the prior fiscal year of R/L DBS, within 120
days of the last day of such fiscal year. Rainbow may at its option
also elect to accelerate payment of such amounts to Loral. It is
understood and agreed that, except as provided in paragraphs 6 and 7
below, the Purchase Price shall be payable solely out of the Company's
net revenues, if any, in accordance with this paragraph 5.
6. In the event that all or substantially all of the membership interests
in R/L DBS (or any securities into which such membership interests are
converted or any securities of a company, substantially all of which
assets consist, whether directly or indirectly, of equity interests in
R/L DBS or any successor entity), or substantially all of the assets
of R/L DBS, are sold to a third party unaffiliated with Rainbow prior
to the time that the Purchase Price had been fully paid (the "Third
Party Sale"), Rainbow shall pay to Loral on the closing date of the
Third Party Sale a Make Whole Payment. The "Make-Whole Payment" shall
be a payment the net present discounted value of which when added to
the net present discounted value of all prior payments made by Rainbow
to Loral prior to the closing date of the Third Party Sale shall equal
$20 million (in the case that the Purchase Price is determined by
paragraph 3a above) or $40 million (in the case that the Purchase
Price is determined by paragraph 3b above). The net present discounted
value of any payment shall be determined as set forth in paragraph 4
above.
7. In the event that Rainbow or its affiliates (other than R/L DBS) shall
sell some or all of its membership interests in R/L DBS (or any
securities into which such membership interests are converted or any
securities of a company, substantially all of which assets consist,
whether directly or indirectly, of equity interests in R/L DBS or any
successor entity) prior to the time that the
Loral SpaceCom DBS Holdings, Inc.
March 23, 2001
Page 3
Purchase Price had been fully paid, then Rainbow shall pay to Loral
on the closing date of such sale an amount equal to the value of the
consideration received by Rainbow or its affiliates (other than R/L
DBS) for such sale; provided however that in no event shall Loral
receive an amount under this paragraph 7 of the net present
discounted value of which when added to the net present discounted
value of all prior payments made by Rainbow to Loral prior to the
closing date of such sale is greater than $20 million (in the case
that the Purchase Price is determined by paragraph 3a above) or $40
million (in the case that the Purchase Price is determined by
paragraph 3b above). The net present discounted value of any payment
shall be determined as set forth in paragraph 4 above.
8. Rainbow agrees that prior to the time that the Purchase Price is
paid in full to Loral, R/L DBS (or any successor entity) shall not
(i) pay any dividends, make any distributions or otherwise make any
payments in respect of its equity interests or (ii) make any
payments in respect of loans incurred pursuant to paragraph 1 above.
9. It is acknowledged and agreed that Rainbow shall have the right to
select the party with whom R/L DBS will contract for the procurement
of any satellite in its sole discretion, and, pursuant to Article VI
of the Operating Agreement, Loral hereby consents, and shall be
deemed to have voted in favor of, any actions by Rainbow necessary
or appropriate in Rainbow's sole judgment to negotiate and execute a
satellite procurement contract on behalf of R/L DBS with a party
selected by Rainbow.
10. Rainbow's obligation to purchase Loral's interest in R/L DBS is
subject to the receipt of any necessary regulatory approvals,
including any necessary approvals of the FCC and the expiration of
any applicable waiting periods under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act. Rainbow and Loral agree to use all reasonable
efforts to obtain any such required approvals. Application for such
approvals to effectuate the purchase provided for herein shall be
made at such time as Rainbow determines, provided that such
application shall be made no later than March 23, 2002 or such later
date as Loral may agree.
11. Rainbow agrees that it shall not take any action to alter R/L DBS'
corporate structure, the manner in which R/L DBS holds its assets or
the structure of Rainbow's holdings in R/L DBS so as to avoid the
benefits intended to be conferred on Loral pursuant to paragraphs 5,
6 or 7 above.
All of Rainbow's obligations under this Agreement are conditioned upon the
receipt of approval by Rainbow's board of directors. If such approval is not
obtained and
Loral SpaceCom DBS Holdings, Inc.
March 23, 2001
Page 4
Rainbow so advises Loral in writing by no later than April 17, 2001, then this
Agreement shall terminate and be of no force and effect.
This Agreement shall be interpreted, construed and governed and the rights
of the parties shall be determined in all respects, according to the laws of
the State of New York, without reference to its conflicts of laws rules.
Very truly yours,
RAINBOW DBS HOLDINGS, INC.
By: /s/ Xxxxx X. Xxxxxx
--------------------------------
Xxxxx X. Xxxxxx
Senior Vice President and
General Counsel
Accepted and Agreed to:
LORAL SPACECOM DBS
HOLDINGS, INC.
By: /s/ Xxx Xxxx
-----------------------------
