-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D6a9ZDVFsOd6PZWibBCNyUH6AgEVlBiS/NMA/aB56NENfyaZm6rTaH+9XV3S40D3 kXDGZdRf7k/ZlVyU2ZQU0g== 0000927356-99-000679.txt : 19990416 0000927356-99-000679.hdr.sgml : 19990416 ACCESSION NUMBER: 0000927356-99-000679 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990415 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRIMESTAR INC CENTRAL INDEX KEY: 0001054666 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 841441684 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-23883 FILM NUMBER: 99594776 BUSINESS ADDRESS: STREET 1: 8085 S CHESTER STREET 2: STE 300 CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 3037124600 MAIL ADDRESS: STREET 1: 8085 S CHESTER STREET 2: STE 300 CITY: ENGLEWOOD STATE: CO ZIP: 80112 10-K405 1 FORM 10-K FOR THE YEAR ENDED 12/31/98 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1998 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from _____ to _____ Commission File Number 000-23883 PRIMESTAR, INC. --------------- (Exact name of Registrant as specified in its charter)
State of Delaware 84-1441684 - ----------------------------------------------- ---------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 8085 South Chester, Suite 300 Englewood, Colorado 80112 - ----------------------------------------------- ---------- (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 712-4600 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Class A Common Stock, par value $.01 per share Class B Common Stock, par value $.01 per share 10 7/8% Senior Subordinated Notes Due 2007 12 1/4% Senior Subordinated Discount Notes Due 2007 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [_] No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. X ----- None of PRIMESTAR, Inc.'s shares of common stock were publicly traded as of January 29, 1999. The number of shares outstanding of PRIMESTAR, Inc.'s common stock as of January 29, 1999 was: Class A Common Stock - 179,143,934 shares; Class B Common Stock - 8,465,324 shares; and Class C Common Stock - 13,332,365 shares. PRIMESTAR, INC. 1998 ANNUAL REPORT ON FORM 10-K Table of Contents Page ---- PART I Item 1. Business........................................... I-1 Item 2. Properties......................................... I-24 Item 3. Legal Proceedings.................................. I-24 Item 4. Submission of Matters to a Vote of Security Holders I-24
PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters....................... II-1 Item 6. Selected Financial Data........................... II-1 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations............... II-2 Item 7A. Quantitative and Qualitative Disclosures About Market Risk....................................... II-15 Item 8. Financial Statements and Supplementary Data....... II-15 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............ II-15 PART III Item 10. Directors and Executive Officers of the Registrant III-1 Item 11. Executive Compensation............................ III-5 Item 12. Security Ownership of Certain Beneficial Owners and Management.................................... III-14 Item 13. Certain Relationships and Related Transactions.... III-16 PART IV Item 14. Exhibits, Financial Statements and Financial Statement Schedules, and Reports on Form 8-K.................. IV-1
Item 1. Business. - ------ -------- (a) General Development of Business ------------------------------- PRIMESTAR, Inc. ("PRIMESTAR" or the "Company") is a leading distributor of digital satellite-based television services in the United States. The PRIMESTAR(R) service is broadcast from GE-2 ("GE-2"), a medium power satellite stationed at the 85 degrees West Longitude ("W.L.") orbital position. PRIMESTAR was incorporated in August 1997 as a wholly-owned subsidiary of TCI Satellite Entertainment, Inc. ("TSAT"). Effective April 1, 1998 (the "Closing Date') and pursuant to (i) a Merger and Contribution Agreement dated as of February 6, 1998 (the "Restructuring Agreement"), among the Company, TSAT, Time Warner Entertainment Company, L.P. ("TWE"), Advance/Newhouse Partnership ("Newhouse"), Comcast Corporation ("Comcast"), Cox Communications, Inc. ("Cox"), MediaOne of Delaware, Inc. ("MediaOne") and GE American Communications, Inc. ("GE Americom") and (ii) an Asset Transfer Agreement dated as of February 6, 1998 (the "TSAT Asset Transfer Agreement"), between the Company and TSAT, a business combination (the "Restructuring") was consummated. In connection with the Restructuring, the businesses of TSAT and PRIMESTAR Partners L.P. (the "Partnership") and the PRIMESTAR(R) distribution businesses of each of TWE, Newhouse, Comcast, Cox and affiliates of MediaOne (collectively, the "Non-TSAT Parties") were consolidated into PRIMESTAR. The Restructuring Agreement provided for, among other things, the contribution to PRIMESTAR (by asset transfer or merger) of the respective interests in the Partnership of TSAT, TWE, Newhouse, Cox, Comcast, MediaOne and GE Americom (the "Partnership Interests") and the respective PRIMESTAR(R) subscribers and certain other related assets and liabilities of TSAT, TWE, Newhouse, Cox, Comcast and MediaOne (the "PRIMESTAR Assets and Liabilities"), in exchange for (i) cash or an assumption of indebtedness by PRIMESTAR, (ii) shares of Class A Common Stock, $.01 par value per share, of PRIMESTAR ("Class A Common Stock"), (iii) in the case of TSAT only, shares of Class B Common Stock, $.01 par value per share, of PRIMESTAR ("Class B Common Stock"), and (iv) except in the case of TSAT and GE Americom, shares of Class C Common Stock, $.01 par value per share, of PRIMESTAR ("Class C Common Stock"), in each case in an amount determined pursuant to the Restructuring Agreement. As a result of such transactions, the Partnership became a wholly-owned subsidiary of the Company. As a result of the Restructuring, the Company owns and operates the PRIMESTAR(R) digital satellite business. The Company currently offers a direct to home ("DTH") satellite service with over 160 channels of digital video and audio programming throughout the continental United States. As of December 31, 1998, the approximate ownership of PRIMESTAR's common stock was as follows:
Ownership Name of Beneficial Owner Percentage - ------------------------ ---------- TSAT 37.23% TWE and Newhouse (collectively) 30.02% Comcast 9.50% MediaOne 9.69% Cox 9.43% GE Americom 4.13%
I-1 TSAT, through its wholly-owned subsidiary, Tempo Satellite, Inc. ("Tempo"), holds a construction permit (the "FCC Permit") issued by the Federal Communications Commission ("FCC"), authorizing construction of a high power direct broadcast satellite ("DBS") system consisting of two or more satellites delivering DBS service in 11 frequencies at the 119 degrees W.L. orbital position. Tempo is a party to a satellite construction agreement (the "Satellite Construction Agreement") with Space Systems/Loral, Inc. ("Loral") pursuant to which Tempo arranged for the construction of two high power direct broadcast satellites (the "Tempo Satellites"). Construction of the Tempo Satellites has been substantially completed. On March 8, 1997, one of the Tempo Satellites ("Tempo DBS-1") was launched into geosynchronous orbit, to be stationed in Tempo's high power orbital position 119 degrees W.L. The 119 degrees W.L. orbital position is one of three such orbital positions available for DBS service to the U.S. which are "full CONUS", meaning that they have a view of the entire continental U.S. The other Tempo Satellite ("Tempo DBS-2") presently serves as a ground spare for Tempo DBS-1. Tempo DBS-1 is currently not delivering programming to subscribers and is the subject of a contractual dispute with Loral regarding potential warranty claims by Tempo. Through various agreements with Tempo, the Company currently has rights to the capacity of the DBS system being constructed by Tempo at the 119 degrees W.L. orbital location (the "Tempo Rights"). On January 22, 1999, the Company announced that it had reached an agreement (the "Hughes Medium Power Agreement") with Hughes Electronics Corporation ("Hughes"), a subsidiary of General Motors Corporation, to sell its DBS medium-power business and assets to Hughes for $1.1 billion in cash and 4.871 million shares of General Motors Class H common stock ("GMH Stock") valued at approximately $225 million, based upon the closing price of GMH Stock on the date of the purchase agreement (the "Hughes Medium Power Transaction"). The foregoing purchase price is subject to adjustments for working capital at the date of closing. In addition, the Company is responsible for the payment of certain obligations not assumed by Hughes, satisfaction of its funded indebtedness and the payment of costs, currently estimated to range from $270 million to $340 million, associated with the termination of its high power business strategy and sale of its medium power assets. The consummation of the Hughes Medium Power Transaction is subject to various consents from PRIMESTAR's lenders; restructuring of certain of the Company's indebtedness, as described below; and other customary conditions. On February 1, 1999 and in connection with the Hughes Medium Power Transaction, the Company commenced tender offers (the "Tender Offers") to purchase 100% of the outstanding principal amount of the Company's 10 7/8% Senior Subordinated Notes due 2007 (the "Senior Subordinated Notes") at a price of $670 per $1,000 principal amount and 100% of the outstanding principal amount of the Company's 12 1/4% Senior Subordinated Discount Notes due 2007 (the "Senior Subordinated Discount Notes," and together with the Senior Subordinated Notes, the "Notes") at a price of 67% of the accreted value of the Senior Subordinated Discount Notes as of February 15, 1999. In addition, PRIMESTAR made commenced a separate offer to lenders under the Company's Senior Subordinated Credit Agreement, dated as of April 1, 1998 (the "Interim Loan Agreement"), to purchase 100% of the outstanding principal amount due thereunder at a price of $670 per $1,000 principal amount (the "Offer to Purchase"). Each of the Tender Offers and the Offer to Purchase was subject to a minimum tender condition of 90% of the outstanding principal amount of such issue. In conjunction with the Tender Offers, PRIMESTAR solicited consents to certain proposed amendments to the indentures governing the Notes and the Interim Loan that would eliminate substantially all of the restrictive covenants thereunder and would amend certain other provisions. Consummation of both the Tender Offers and the Offer to Purchase was conditioned upon the closing of the Hughes Medium Power Transaction and other conditions. Following several extensions, the Tender Offer and the Offer to Purchase expired on March 25, 1999. The minimum tender conditions were not satisfied under the Tender Offer and Offer to Purchase, and no securities or loans were purchased thereunder. I-2 Since the announcement of the Hughes Medium Power Agreement and of the proposed restructuring of the Company's senior subordinated indebtedness relating thereto (the "Proposed Debt Restructuring"), the Company has been engaged in negotiations with the representatives of an informal committee (the "Bondholders' Committee") of holders of Notes and with representatives of an informal committee (the "Bridge Lenders' Committee" and, together with the Bondholders' Committee, the "Committees") of holders of loans under the Interim Loan Agreement, with respect to the possible terms and conditions of the Proposed Debt Restructuring. In that connection, the Company has entered into confidentiality agreements with certain representatives of the Committees and has agreed to pay certain expenses of the Committees, including certain fees and expenses of their legal counsel and financial advisor. Based on the progress of such negotiations to date, the Company believes that the Proposed Debt Restructuring will be consummated on terms satisfactory to the Company and such Committees, by means of privately negotiated transactions. However, the Company has not entered into any agreements to date with respect to the terms and conditions of any such restructuring, and there can be no assurance that the Proposed Debt Restructuring will be consummated. In the event the Company is unable to negotiate certain minimum tender conditions in connection with the Proposed Debt Restructuring, the Company does not intend to consummate the Hughes Medium Power Transaction. If the Hughes Medium Power Transaction is not consummated for any reason, PRIMESTAR currently intends to continue operating its medium power business, which may require the restructuring or refinancing of certain of its liabilities. There can be no assurance that such restructuring or refinancing, if necessary, would be accomplished on terms acceptable to the Company. In a separate transaction, the Company announced that TSAT and the Company had reached an agreement (the "Hughes High Power Agreement") with Hughes to sell the Tempo Satellites, Tempo's 119 degrees W.L. orbital location license and the Tempo Rights to Hughes, for aggregate consideration valued at $500 million (the "Hughes High Power Transaction"). Due to the fact that regulatory approval is required to transfer Tempo DBS-1 and Tempo's FCC authorization for 119 degrees W.L. to Hughes, the Hughes High Power Transaction will be completed in two steps. Effective March 10, 1999, the first closing of the Hughes High Power Transaction (the "First Closing") was consummated whereby Hughes acquired Tempo DBS-2 and PRIMESTAR's option to acquire Tempo DBS-2 (the "Tempo DBS-2 Option") for aggregate consideration of $150 million. Such consideration was comprised of the following: (i) $9,750,000 paid to PRIMESTAR for the Tempo DBS-2 Option (including any amounts allocable to the Partnership in consideration of the termination and relinquishment of the Tempo Rights), (ii) $750,000 paid to TSAT to exercise the Tempo DBS-2 Option and (iii) the assumption by Hughes of $139,500,000 due to the Partnership from TSAT in exchange for Tempo DBS-2. Simultaneously with the First Closing, Hughes repaid the liability to the Partership that Hughes assumed. With regard to the sale of the remaining assets contemplated by the Hughes High Power Agreement (the "Second Closing"), Tempo has been notified that Tempo DBS-I experienced power reductions which occurred on March 29, 1999 and April 2, 1999. Although the Company does not believe the extent of such power reductions is significant, a definitive assessment of the impact on Tempo DBS-I is not yet complete. Notwithstanding the foregoing, the Second Closing, which is subject to the receipt of appropriate regulatory approvals and other customary closings conditions, is expected to be consummated in the second quarter of 1999. Effective February 6, 1998, PRIMESTAR and TSAT entered into an Agreement and Plan of Merger (the "TSAT Merger Agreement") providing for the merger of TSAT with and into PRIMESTAR, with PRIMESTAR as the surviving corporation (the "TSAT Merger"). In connection with the First Closing, the Company and TSAT terminated the TSAT Merger Agreement. In connection with the Restructuring, TSAT has been identified as the acquiror for accounting purposes and the predecessor for financial reporting purposes due to the fact that TSAT owns the largest interest in the Company immediately following the consummation of the Restructuring. Accordingly, references herein to the Company refer to TSAT and its subsidiaries for the periods prior to the Restructuring and to PRIMESTAR and its subsidiaries for the periods subsequent to the Restructuring. I-3 TSAT was incorporated in Delaware in November 1996. Prior to the Distribution (as defined below), the Company was wholly owned by Tele- Communications, Inc. ("TCI"), which, through various subsidiaries, was engaged in the business of distributing PRIMESTAR(R) from December 1990 until the consummation of the Distribution. TSAT's predecessor was incorporated in February 1995 to consolidate TCI's PRIMESTAR(R) distribution business into one subsidiary, and was merged into TSAT in connection with the Distribution. TSAT was formed to own and operate certain businesses of TCI Communications, Inc. ("TCIC"), a subsidiary of TCI, constituting TCI's collective interests in the digital satellite business. On December 4, 1996 (the "Distribution Date") TCI distributed, (the "Distribution"), as a dividend, all of the issued and outstanding TSAT common stock to the holders of record of shares of Tele-Communications, Inc., Series A TCI Group Common Stock, $1.00 par value per share (the "Series A TCI Group Stock"), and Tele-Communications, Inc., Series B TCI Group Common Stock, $1.00 par value per share (the "Series B TCI Group Stock" and, together with the Series A TCI Group Stock, the "TCI Group Stock"), on the basis of one share of TSAT Series A common stock for each ten shares of Series A TCI Group Stock, and one share of TSAT Series B common stock for each ten shares of Series B TCI Group Stock. Certain statements in this Annual Report on Form 10-K constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company, or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors include, among others: general economic and business conditions and industry trends; the continued strength of the multichannel video programming distribution industry and the satellite services industry and the growth of satellite delivered television programming; uncertainties inherent in proposed business strategies and development plans, including uncertainties regarding the Proposed Debt Restructuring; the Hughes High Power and Medium Power Transactions; future financial performance, including availability, terms and deployment of capital; the ability of vendors to deliver required equipment, software and services; availability of qualified personnel; changes in, or the failure or the inability to comply with, government regulation, including, without limitation, regulations of the FCC, and adverse outcomes from regulatory proceedings; changes in the nature of key strategic relationships with partners and joint venturers; competitor responses to the Company's products and services, and the overall market acceptance of such products and services, including acceptance of the pricing of such products and services; possible interference by satellites in adjacent orbital positions with the satellite currently being used for the Company's existing medium power satellite television business; reliance on software programs used by the Company or its suppliers containing problems related to the Year 2000; and other factors referenced in this Report. These forward-looking statements speak only as of the date of this Report. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. (b) Financial Information about Industry Segments --------------------------------------------- Not applicable. (c) Narrative Description of Business --------------------------------- I-4 Industry Overview General - ------- Digital satellite television services use communications satellites, broadcasting at Ku-band or higher frequencies, to transmit multichannel video programming directly to consumers, who receive such signals on home satellite dishes ("HSDs"). Such satellites operate in geosynchronous orbit above the equator, from orbital positions or ''slots'' allocated by international agreement to the U.S. and other national governments and assigned by such governments in accordance with local law. Orbital slots are designated by their location east or west of the zero meridian, measured in degrees of longitude, and comprise both a physical location and an assignment of broadcast spectrum in the applicable frequency band. The assigned spectrum is divided into 32 frequency channels. Such frequency channels are sometimes referred to as ''transponders'' because each transponder on a satellite generally transmits on one of such channels. At standard levels of digital compression technology currently deployed, each frequency channel can be converted on average into eight or more analog channels of video programming (depending on the video density of the programming), thereby enabling the digital satellite service operator to offer a broader variety of programming choices than analog satellite systems. Advanced compression technologies currently being tested are expected to result in substantially greater compression ratios. Digital technology enables subscribers to receive laser disc-quality picture and compact disc- quality sound from the satellite. The operator of a digital satellite television service typically enters into agreements with programmers, who deliver their programming content to the digital satellite service operator via commercial satellite, fiber optics or microwave transmissions. The digital satellite service operator generally monitors such signals for quality, and may add promotional messages, public service programming or other system-specific content. The signals are then digitized, compressed, encrypted and combined with other programming sharing a given transponder. Each transponder's signal is then uplinked, or transmitted, to the transponder owned or leased by the service operator on the service's satellite, which receives and retransmits the signal to HSDs configured and authorized to receive it. In order to receive programming, a subscriber requires (i) a properly installed HSD, which includes a dish-shaped antenna, low noise block converter (''LNB'') and related equipment, (ii) an integrated receiver/decoder (''IRD,'' sometimes referred to herein as the ''satellite receiver'' or ''set-top box''), which receives the data stream from each broadcasting transponder, separates it into separate digital programming signals, decrypts and decompresses those signals that the subscriber is authorized to receive and converts such digital signals into analog radio frequency signals, and (iii) a television set, to view and listen to the programming contained in such analog signals. A subscriber's IRD is generally connected to the digital satellite service operator's authorization center by telephone, to report the purchase of pay-per-view channels. The FCC authorizes two types of satellite services for transmission of television programming: Broadcast Satellite Service (''BSS''), which operates at high power in the Ku-band, and Fixed Satellite Service (''FSS''), which includes medium power services transmitting in the Ku-band, as well as low power analog services transmitting in the C-band. Both high power BSS satellites and medium power FSS satellites are used for digital satellite television services. High power signals can generally be received by HSDs of approximately 14 to 18 inches in diameter (depending on the geographical location of the HSD and wattage per channel), while medium power signals require HSDs of 27 to 39 inches in diameter (depending on the geographical location of the HSD and wattage per channel). Low power signals, such as those used by C-band DTH satellite services, require still larger HSDs. I-5 Generally, both high power and medium power digital satellite services provide the same high video and audio quality. However, in certain situations medium power services may be more susceptible to interference from adjacent satellites than high power services. High power services have the benefit of certain regulatory safeguards instituted by the FCC to protect BSS broadcast signals from interference from other sources. Under the FCC's current policy, BSS orbital locations are spaced at greater intervals than FSS orbital locations. There are 9 degrees of longitude between adjacent BSS orbital slots, as compared to 2 degrees between adjacent FSS locations. The smaller interval between FSS orbital locations, together with their lower power, requires the use of a relatively large HSD to prevent interference. Newly assigned FSS license holders are required to coordinate their satellite designs with the satellites previously existing at adjacent orbital locations. However, such coordination efforts between FSS license holders may not be sufficient to resolve any interference that may occur, and an FSS license holder may not have adequate recourse if the FCC assigns an adjacent location to another user that results in signal interference. In 1982, the FCC allocated a spectrum within the Ku-band for BSS services. Eight BSS orbital slots, each with 32 frequencies, have been reserved by the FCC for use by domestic DBS providers. Three of those orbital slots (101 degrees W.L., 110 degrees W.L. and 119 degrees W.L.) provide full CONUS visibility. DirecTv, Inc., a Subsidiary of Hughes ("DirecTv"), and United States Satellite Broadcasting Corporation ("USSB") are the only entities licensed for the 101 degrees W.L. orbital slot, with a total of 32 transponders. MCI Telecommunications Corporation/WorldCom ("MCI/WorldCom"), in partnership with The News Corporation Limited ("News Corp."), acquired FCC authorizations to build and operate a DBS service at the 110 degrees W.L. orbital location, using 28 transponders. EchoStar Communications Corporation ("EchoStar") holds FCC authorizations with respect to one of the remaining four transponders at 110 degrees W.L. and USSB holds FCC authorizations with respect to the other three transponders at 110 degrees W.L. EchoStar's DBS service uses 21 transponders at the 119 degrees W.L. orbital location and Tempo's FCC Permit authorizes it to build a DBS service using the remaining 11 transponders at 119 degrees W.L. Digital Satellite Services Business - ----------------------------------- Digital satellite television has been one of the fastest selling consumer electronics products in the U.S. history. As of December 31, 1998, the installed base for digital satellite services consisted of approximately 8.7 million active subscribers nationwide, as compared to approximately 6.2 million, 4.4 million and 2.2 million subscribers at December 31, 1997, 1996 and 1995, respectively. The following table shows the approximate percentage of digital satellite television subscribers served by PRIMESTAR, DirecTV (combined with USSB) and EchoStar:
As of December 31, ----------------------------------- 1998 1997 ---- ---- PRIMESTAR /1/ 26% 32% DirecTV 52% 51% EchoStar 22% 17%
- --------------------------------------- /1/ 1997 percentage reflects subscribers served by all distributors of PRIMESTAR(R). The Company believes that the following factors will contribute to the growth of the digital satellite services business. I-6 Demand for More Choice in Television Programming, Reliable Service and Better Quality Picture and Sound. Prior to the growth of cable television services, television viewers were offered a relatively limited number of channels. As the number of channels increased, consumer demand for more programming choices also increased. As a result, the multichannel video industry has experienced significant growth, both in terms of the number of content producers creating programming and the number of channels available to viewers. The Company expects that this trend will continue and consumers will desire even more programming choices than are available through cable television. The Company believes consumers are also demanding more reliable service and improved picture quality compared to what has historically been offered by over-the-air VHF and UHF broadcasters and by cable. The two most recent consumer surveys of cable and satellite customers by J.D. Power and Associates found that digital satellite television providers outranked cable providers in customer satisfaction. In the surveys, PRIMESTAR(R) ranked number one in customer satisfaction, ahead of both EchoStar and DirecTv. Large Potential Customer Base. The Company believes that there is significant unsatisfied demand for high quality, reasonably priced television programming. According to industry sources, there are approximately 98 million television households in the U.S., all of which are potential subscribers to satellite programming services. Of the estimated 98 million television households in the U.S., approximately 33 million do not currently subscribe to cable television services, and the Company believes that many of the 65 million existing cable television subscribers have a desire for greater variety of programming, improved video and audio quality, better customer service and fewer transmission interruptions. Moreover, the Company believes that cable subscribers, who typically spend approximately $42 per month on multichannel programming, and, more generally, cable subscribers who purchase premium or pay-per-view services, represent a particularly lucrative potential customer base for providers of satellite programming services. Households Unserved or Underserved by Cable. The Company believes that households not passed by cable and households served by cable systems with fewer than 40 channels provide an opportunity for customer growth. Cable systems with sufficient channel capacity (generally 54 or more channels) and good quality cable plant will not require costly upgrades to add bandwidth or incur significant maintenance costs in order to offer digital programming services. The Company believes, however, that based on current compression technology, the number of channels that a cable system would have to remove from its existing service offerings in order to use them for digital services may, in the case of cable systems with limited channel capacity, degrade the value of their analog programming offering and alienate subscribers. Accordingly, pending the availability of advances in digital compression technology now under development, such smaller cable systems will be required to incur substantial costs to upgrade their plant to expand channel capacity before they can introduce digital services. Due to the substantial capital investment required for wide scale deployment of fiber-based digital services, several cable companies have delayed originally-announced deployment schedules. Commercial Subscribers. The Company believes that digital satellite services are well suited for hotels, motels, bars, multiple dwelling units ("MDUs"), businesses, schools and other organizations with commercial applications, as well as for non-residential buildings which are not easily accessible by cable. The Company expects that some commercial organizations will in the future create increased demand for educational, foreign language, and other niche video and audio programming, as well as data services, in addition to the Company's wide variety of entertainment, sports, news and other general programming. I-7 The PRIMESTAR(R) Service - ------------------------- The Company is a leading provider of digital satellite services in the U.S. The Company owns and operates the PRIMESTAR(R) digital satellite business, which is the second largest digital satellite business and the eighth largest multichannel video programming distribution business in the U.S., measured by the number of subscribers as of December 31, 1998. The Company currently offers a medium power satellite service with over 160 channels of digital video and audio programming throughout the continental United States. The medium power service is transmitted via GE-2, which is owned by GE Americom and located at the 85 degrees W.L. orbital position. The PRIMESTAR(R) medium power service served approximately 2.3 million subscribers as of December 31, 1998. PRIMESTAR(R) includes a variety of advertiser-supported networks (sometimes referred to as ''basic cable'' channels), a broad selection of movie services, national and regional sports packages and other premium services, and multiplexed pay-per-view programming. PRIMESTAR secures its rights to broadcast such programming via satellite by entering into non-exclusive affiliation agreements with programming vendors. In addition to video services, PRIMESTAR(R) includes digital audio services and regional weather services covering ten regions of the country. Digital satellite television service requires that subscribers install HSDs for a clear line of sight to the transmitting satellite. GE-2 provides coverage to the entire continental U.S. with favorable ''look'' angles, meaning that the satellite is viewable from the entire continental U.S. at angle elevations high enough to facilitate installation of HSDs in most areas. Additionally, GE-2's orbital location over the East coast of the U.S. is considered favorable because the signal travels a shorter path through the relatively moist air of the Eastern seaboard, minimizing potential interference from bad weather. The overall PRIMESTAR(R) system is designed for high availability, and operates consistently without any significant interference approximately 99.8% of the time. As currently in effect, an Amended and Restated Memorandum between GE Americom and the Company (the "GE-2 Agreement") for the leasing of GE-2 provides for an initial lease term extending through February 2003, with an option to extend the term through the end-of-life of GE-2 (the "End-of-Life Option"). The End-of- Life Option has expired without exercise. However, the Company remains in discussions with GE Americom regarding alternatives for extension of the GE-2 Agreement, and the Company will continue to assess other alternatives if the Hughes Medium Power Transaction is not consummated. No assurance can be given that the parties will agree to an extension or that any other alternatives will be confirmed. Pursuant to the GE-2 Agreement, GE Americom provides the Company with service on 24 transponders on GE-2. The Company is currently entitled to non- preemptible service on 18 of the transponders on GE-2 and preemptible service on six transponders. Preemptible transponders are transponders that may be reassigned to restore service to protected customers if such protected customers experience transponder or satellite failure. The Company does not believe that, during the early stages of GE-2's operational life, the use of preemptible transponders is likely to interfere in any material respect with the operation of the PRIMESTAR(R) service. The Company currently receives "orbital location protected service" on all 24 of its transponders, meaning that if there is a failure of GE-2, the Company will be entitled to restore the lost service on another GE Americom medium power satellite, GE-3, which was successfully launched on September 4, 1997 into the same 85 degrees W.L. orbital position used by GE-2. Even in those circumstances, the six preemptible transponders, although protected, would remain preemptible. Upon the successful launch of another GE Americom medium power satellite, GE-4 ("GE-4"), the Company's six preemptible transponders will become non-preemptible. I-8 If PRIMESTAR extends the GE-2 Agreement and intends to use more than six of its transponders for uses other than providing the PRIMESTAR(R) service, GE Americom may reduce service from orbital location protected service to nonpreemptible or preemptible service, as the case may be. PRIMESTAR currently uses proprietary authorization, encryption and digital compression technology developed by an affiliate of General Instruments Corporation ("GI"). The Company believes that the compression technology it uses produces picture and sound quality comparable to that of other digital satellite television providers. Uplinking, encoding and compression services are provided by National Digital Television Center, Inc., a subsidiary of TCI (''NDTC''), under a Master Digital Transmission Agreement between NDTC and the Company. Although the satellite receiver used by PRIMESTAR(R) customers is not currently compatible with certain other compression systems, it can be upgraded to be compatible through equipment provided by GI, the cost of which equipment is projected to range from $150 to $200 at commercial volumes. Programming. At December 31, 1998, the Company offered consumers programming packages as described in the table below, which provide 76 to over 100 channels of audio and video programming depending upon the package. Each of the packages includes a monthly programming guide. Most of the Company's customers rent their equipment and pay an additional $3 - $10 monthly charge for equipment rental, which includes free maintenance and customer service.
Programming Package Monthly price (1) - ------------------- ----------------- PRIME Value $22.99 PRIME Variety $27.99 PRIME Entertainment $34.99 PRIME Entertainment Plus $42.99 PRIME Hits $49.99 PRIME Hits Plus $55.99
- ---------------------------------------- (1) Monthly price excludes lease fee. As of December 31, 1998, PRIMESTAR(R) also offered 15 channels of pay-per-view movies and events; a regional sports tier and other sports packages that provide expanded coverage of regular-season, out-of-market sports events; and niche services such as PBS and east and west coast feeds of ABC, NBC, CBS and FOX (to those subscribers unable to receive such networks through local affiliates). Such offerings were made on an a la carte basis. The Company contracts with and bills its residential and commercial subscribers directly for the PRIMESTAR(R) service. Most residential subscribers may terminate their service at any time upon notice to the Company. Commercial subscribers' service contracts automatically renew for successive terms unless the commercial subscribers provide 90 days' prior written notice to the Company of their intent to terminate their service at the end of the current term. In addition, a commercial customer may terminate the contract prior to the expiration of the contractual term by paying a cancellation fee. Satellite reception equipment reclaimed from terminating subscribers is tested, refurbished as necessary and placed back into service. I-9 Distribution. The Company distributes PRIMESTAR(R) services through multiple distribution channels, including sales agents, full-service providers, telemarketing agents and consumer retail outlets, such as RadioShack(R). The Company has engaged sales agents, (the ''Sales Agents''), each of which has extensive experience distributing C-band DTH satellite equipment. Sales Agents generally do not sell directly to customers, but recruit, train and maintain a network of sub-agents comprised generally of full-service independent satellite retailers. The sub-agents sell PRIMESTAR(R) services on behalf of the Company and install, service and maintain customer premises equipment for the Company's subscribers. Authorization of new customers is provided by the Company's call centers. Sales Agents are responsible for maintaining their sub-agents' inventories of HSDs and other customer premises equipment, which are provided by the Company on consignment. The Company has also contracted with independent contractors who have experience in distributing and servicing DTH satellite equipment ("full-service providers" or "FSPs") to engage them to sell, install and service their own accounts. The FSPs solicit potential subscribers by making door-to-door sales calls, setting up booths at special events and otherwise marketing the PRIMESTAR(R) service to customers in target markets in its authorized distribution areas. FSPs also install and service customers obtained through retail outlets and call centers. The Company pays the Sales Agents and FSPs commissions on equipment leased or sold, as well as an installation reimbursement to cover the cost of each new installation. The Sales Agents and FSPs also receive a residual sales commission for a contractually determined period of time (generally five years). Sales Agents are responsible for compensating their sub-agents. The Company also distributes its services through certain national consumer electronics retailers, including Radio Shack. Pursuant to the Company's national agreement with Radio Shack, Radio Shack is compensated based on the number of installations generated. The Company's distribution network is further supported by local market retailers, such as hardware stores and convenience stores, which promote the Company's services and further assist the Company in its distribution efforts. The Company operates a call center, located in Englewood, Colorado to take subscription orders and provide both sales support and customer service. In addition, the Company obtains call center support services from TCI's Boise, Idaho call center (the "Boise Call Center"), as well as call centers operated on behalf of the Company by unaffiliated third parties. The call centers offer customers around-the-clock telephone support for sales, installation, authorization and billing, as well as for repair and customer service. Equipment and Installation. Unlike other digital satellite television services, PRIMESTAR(R) does not require consumers to purchase or finance the equipment needed to receive its programming. The Company provides the HSD, satellite receiver and remote control to subscribers for a monthly rental fee ($3 - $10 per month at December 31, 1998), which includes ongoing maintenance and service at no additional charge. The monthly equipment rental fee is included in a service package that includes various levels of basic and premium programming. Satellite receivers are manufactured by GI, and packaged by GI with remote controls, and HSDs are manufactured by multiple vendors. In addition to monthly fees for programming and the purchase or lease of equipment, the Company generally charges new subscribers an installation fee ranging from $49 to $99. Certain other direct satellite service providers offer consumers the option of self-installation of the HSD and other equipment for their digital satellite systems, with an installation kit that retails for approximately $70. I-10 Competition - ----------- The business of providing video programming to consumers is highly competitive. The Company faces competition from numerous other companies offering video, audio and data products and services. The Company's existing and potential competitors comprise a broad range of companies engaged in communications and entertainment, including other digital satellite program providers, cable operators, wireless cable operators, television networks and local broadcasters and home video products companies, as well as companies developing new technologies and other purveyors of news, information and entertainment. Many of the Company's competitors have greater financial, marketing and programming resources than the Company. The Company expects that quality and variety of programming, quality of picture and service and cost will be the key bases of competition. Advances in communications technology, as well as changes in the marketplace and the regulatory and legislative environment, are constantly occurring. As a result, the Company cannot predict the effect that ongoing or future developments might have on the video programming distribution industry generally or the Company specifically. Other Digital Satellite Service Providers. In addition to the Company, several other companies offer digital satellite services and are positioned to compete with the Company for home satellite subscribers. DirecTv successfully launched its first satellite in December 1993, its second satellite in August 1994 and a third satellite in June 1995 as an in-orbit spare. The third satellite may also be operated by DirecTv to provide additional capacity. DirecTv's satellites, which are high power satellites, are located at 101 degrees W.L. DirecTv operates 27 transponders on each of its existing satellites, enabling it to offer over 175 channels of digital programming. DirecTv currently has exclusive distribution rights for out-of-market National Football League telecasts. As of December 31, 1998, according to trade publications, DirecTv served approximately 4.5 million subscribers. DirecTv has filed an application with the FCC to expand its existing satellite system and, in connection therewith, requested orbital slots located at 96.5 degrees W. L. and 105.5 degrees W.L. To implement this expansion, DirecTv must secure additional frequencies that are not currently allocated domestically for DBS use, and DirecTv has also requested an FCC rulemaking to secure such allocations. In addition, DirecTv recently entered into an agreement with PanAmSat Corp., pursuant to which DirecTv acquired additional Ku-band transponder capacity on PanAmSat's full CONUS Galaxy III-R satellite located at 95 degrees W. L. Initially, Galaxy III-R will be used to deliver six channels of foreign-language programming. Under the agreement, DirecTv will initially lease four Ku-band transponders and will have the ability to expand transponder capacity to ultimately offer up to 120 channels dedicated for special interest programming (such as programming services directed to foreign-language communities), niche programs, future business-to-business applications and high definition television transmissions. If DirecTV successfully implements this business plan, it is expected that DirecTV subscribers could utilize one 30 to 36 inch satellite dish to receive both the DBS programming offered from its 101 degrees W.L. orbital location and the FSS programming which may be offered from 95 degrees W.L. Hughes, DirecTv's parent corporation, also has received an FCC authorization to construct, launch and operate a Ka-band system, including an authorization for a Ka-band satellite at 101 degrees W.L., which may permit DirecTV to expand its satellite services. I-11 USSB owns and operates five transponders on one of DirecTv's satellites and offers a programming service separate from DirecTv's service, with over 25 channels of premium video programming not available from DirecTv. USSB's selection of programming services (and its use of transponders on the same satellite used by DirecTv, which enables subscribers to receive both DirecTv and USSB signals with a single HSD) allows it to be marketed as complementary to DirecTv, partially offsetting the competitive handicap caused by its relatively limited channel capacity. As of December 31, 1998, approximately 51% of DirecTv's 4.5 million subscribers also received USSB programming. In addition, USSB has a construction permit from the FCC that would allow it to build and launch a high power DBS system at 110 degrees W.L. (with three transponders). The 110 degrees W.L. orbital location would enable USSB to provide a second high power DBS service to the continental U.S., although with limited channel capacity. On December 14, 1998, Hughes announced that it had signed a definitive merger agreement with USSB to acquire the business and assets of USSB. Hughes intends to combine DirecTv's business with USSB's assets and business at 101 degrees W.L. The proposed transaction also includes USSB's three frequencies at 110 degrees W.L., which, pending FCC approval, DirecTv intends to use to launch Spanish-language programming services in 1999. The proposed merger is subject to USSB shareholder approval and the receipt of appropriate regulatory and antitrust approvals and is expected to close in mid-1999. Bell Atlantic Corp. ("Bell Atlantic") and SBC Communications Inc. ("SBC") have each entered into a multi-year marketing and distribution agreement with DirecTv and USSB to sell DirecTv's and USSB's satellite-television services to their telephone customers. GTE Corporation ("GTE") has entered into a similar agreement with DirecTv, and is in negotiations with USSB to similarly market and distribute USSB's programming service. The agreements enable Bell Atlantic, SBC and GTE to offer the satellite equipment for sale, for lease or with a lease-to- own option. These agreements provide a significant base of potential customers for the DirecTv and USSB DBS services and allow Bell Atlantic, SBC, GTE, DirecTv and USSB to offer customers a package of digital entertainment and communications services. As a result, the Company is at a competitive disadvantage marketing to these customers. As of December 31, 1998, EchoStar and its subsidiaries had acquired 11 transponders at 61.5 degrees W.L., one transponder at 110 degrees W.L, 21 transponders at 119 degrees W.L., 24 transponders at 148 degrees W.L. and 22 transponders at 175 degrees W.L.; and had launched one satellite into the 148 degrees W.L. slot, two satellites into the 119 degrees W.L. slot and one satellite into the 61.5 degrees slot. As of December 31, 1998, EchoStar distributed approximately 150 channels of video and audio programming to the entire continental United States from its satellite at 119 degrees W.L., and served approximately 1.9 million subscribers. In addition, EchoStar has an agreement with Dominion Video Satellite, Inc. ("Dominion") to use 3 of the 8 transponder frequencies assigned by the FCC to Dominion at 61.5 degrees W.L. The satellite in the 61.5 degrees W.L. slot is equipped with 32 transponders operating at 120 watts per channel, and includes programming complementary to that offered by EchoStar's existing service on EchoStar's first two satellites, such as educational and business programming, and retransmission of broadcast television signals. I-12 On November 30, 1998, EchoStar and MCI/WorldCom announced an agreement for the transfer to EchoStar of MCI/WorldCom's license to operate a high power DBS business at 110 degrees W.L. consisting of 28 frequencies. The agreement also includes the sale of MCI/WorldCom's two satellites currently under construction. If consummated as currently contemplated, the transaction would enable EchoStar to combine the capacity of its existing orbital slots at 119 degrees W.L. with the capacity of the orbital slots at 110 degrees W.L. and allow EchoStar to provide in excess of 500 channels of programming. In addition, the International Bureau of the FCC (the "International Bureau") has granted EchoStar a conditional authorization to construct, launch and operate a Ku-band domestic fixed satellite into the orbital position at 83 degrees W.L., immediately adjacent to that occupied by GE-2. Contrary to previous FCC policy which would have permitted operation of a satellite at the 83 degrees W.L. orbital position at a power level of only 60-90 watts (subject to coordination requirements), EchoStar has been authorized to operate at a power level of 130 watts. If EchoStar were to launch its high power satellite authorized to 83 degrees W.L. and commence operations at that location at a power level of 130 watts, it would likely cause harmful interference to the reception of the PRIMESTAR(R) signal from GE-2 by subscribers to the PRIMESTAR(R) medium power service. EchoStar has also been granted conditional authorization to construct, launch and operate a Ku-band domestic fixed satellite at the 121 degrees W.L. orbital position and two Ka-band domestic fixed satellites, including an authorization for a Ka-band satellite at 121 degrees W.L. Foreign satellite systems are also potential providers of digital satellite services within the United States. Canada, Mexico and other countries have been allocated various DBS orbital locations which are capable of providing service to part or all of the continental U.S. In general, non-U.S. licensed satellites are not allowed to provide domestic digital satellite services in the U.S. However, in April 1996, the United States entered into a bilateral agreement with Mexico which would allow, subject to certain conditions, the use of satellites licensed in Mexico to provide digital satellite services to U.S. consumers. Pursuant to such agreement, in August 1997, the FCC authorized Televisa International, LLC ("Televisa") to operate one million receive-only earth stations in the U.S., subject to certain conditions, to receive direct-to- home FSS television services from Solidaridad II, a satellite licensed by the Mexican Government. Televisa owns and operates television broadcast networks and stations in Mexico, and exports Spanish language programming to broadcast networks, broadcast stations and cable systems in the U.S. and other countries. Televisa is presently engaged in the development of direct-to-home FSS television and related services in Mexico, Latin America, North America and Europe. Televisa intends to use the Solidaridad II satellite operating in the Ku-band and located at 113 degrees W.L. to provide an FSS service of entertainment, sports, news, educational and informational video programming, primarily in the Spanish language, to customers in the U.S. All of the transmissions to Solidaridad II would originate in Mexico. The United States has indicated its willingness to enter into similar agreements with other countries in North, Central and South America. If the U.S. government moves forward with these initiatives, or if other countries authorize digital satellite service providers to use their orbital slots to serve the U.S. and the U.S. approves of such service, additional competition could be created. At this time, the Company is unable to predict the effect of such existing and future foreign satellite services upon its operations. I-13 In addition, as indicated above, the FCC has allocated certain U.S. licensed DBS frequencies to DirecTv and other parties in addition to the frequencies used to provide their existing DTH satellite services. These frequencies could provide additional capacity for existing digital satellite operators thereby enhancing their competitive position relative to the Company. Alternatively, such presently unused frequencies could enable new competitors to enter the digital satellite services business. Further, other potential competitors may provide television programming at any time by leasing transponders from an existing satellite operator. However, the number of transponders available for lease on any one satellite is generally limited, making it difficult to provide sufficient channels of programming for a viable system. To date, the PRIMESTAR(R) medium power service has been competitively disadvantaged vis-a-vis other satellite programming distributors due to its relatively larger dish size. The Company has sought to mitigate this competitive disadvantage through various programs including its equipment rental program. PRIMESTAR(R) is marketed as a service, with programming, equipment rental, maintenance and customer service included in the monthly price. In addition, each of the PRIMESTAR(R) programming packages includes a monthly programming guide at no additional charge. The up-front costs to new subscribers of PRIMESTAR(R), who are charged only an installation fee and the first month's programming and equipment rental fees, have historically been lower than the up- front costs to new subscribers of other direct satellite service providers, who typically must purchase and install an HSD, IRD and related equipment. Moreover, since the Company generally owns, services and installs all home reception equipment, the Company protects its subscribers from the inconvenience of equipment failure, maintenance concerns, self-installation and expired warranties. The Company believes that when the cost of equipment is factored in, its service is priced competitively, compared to the respective prices of other current digital satellite service providers. C-band Satellite Program Distributors. The Company also competes with C-band satellite program distributors. C-band systems have been popular (mostly in rural and semi-rural areas) since the late 1970s, and in the aggregate serve approximately 2 million subscribers as of December 31, 1998. However, digital satellite television systems use Ku-band frequencies that can be received by less expensive systems with significantly smaller dishes than those used with C- band frequencies. As a result of the smaller dish size, digital satellite television systems are more widely accepted by consumers than C-band systems, particularly in urban and suburban areas. Over the past few years, the C-band industry has been contracting. In an effort to reverse this trend, several C-band companies are currently contemplating uniting their resources to promote the C-band satellite technology in a yet undetermined manner. Cable Television. Cable television is currently available for purchase by more than 97% of the approximate 98 million U.S. television households. The cable television industry is an established provider of multichannel programming, with approximately 65 million subscribers or approximately 66% of total U.S. television households. Cable systems typically offer 30 to 80 analog channels of programming at an average monthly subscription price of approximately $42. I-14 The Company encounters a number of challenges in competing with cable television providers. First, cable television providers benefit from a strong position in the domestic consumer marketplace. Second, satellite television systems generally have not yet found it efficient to provide any local broadcast programming and, third the Satellite Home Viewer Act of 1994 (the "SHVA") prohibits the retransmission by a satellite carrier of a television broadcast signal of a network television station to households that receive a Grade B intensity over-the-air signal of a television broadcast station affiliated with such network or that receive (or within the past 90 days had received) through a cable system the signal of a television station affiliated with such network. Accordingly, PRIMESTAR(R) subscribers who are subject to the foregoing SHVA restrictions are unable to obtain such programming (which is among the most popular and desirable video programming) from the Company. Such subscribers must, instead, receive such programming either through use of a standard television antenna (traditional rooftop or set-top antenna) or by purchasing that level of cable service which includes such programming. Furthermore, since reception of digital satellite signals requires clear line of sight to the satellite, it may not be possible for some households served by cable to receive PRIMESTAR(R) as a result of large adjacent structures or other obstacles. In addition to households lacking a clear line of sight to the satellite, PRIMESTAR(R) is not available to households in apartment complexes or other MDUs that do not facilitate or allow the installation of satellite television equipment. Lastly, because IRDs are currently significantly more expensive than analog cable converters, existing cable operators are able to offer their subscribers the ability to have fully functional cable on multiple television sets in a household without significant additional cost to the customer. While cable companies currently serve a majority of the U.S. television market, the Company believes many may not be able to provide the quality and variety of programming offered by digital satellite service providers until they significantly upgrade their coaxial systems. Many cable television providers are in the process of upgrading their systems and other cable operators have announced intentions to make significant upgrades. Many proposed upgrades, such as conversion to digital format, fiber optic cabling, advanced compression technology and other technological improvements, when fully completed, will permit cable companies to increase channel capacity, thereby increasing programming alternatives, and to deliver a better quality signal. In addition, the expanded capacity may be used to provide interactive and other services. Many of the largest cable systems in the U.S. have announced plans to offer access to telephony services through their existing cable equipment, and have entered into agreements with major telephony providers to further these efforts. In some cases, certain cable systems have actually commenced trial offerings of such services. If such trials are successful, many consumers may find cable service to be more attractive than digital satellite service for the reception of programming. However, although cable systems with adequate available bandwidth may offer digital service without major rebuilds, the Company believes that, given the limits of current compression technology, other cable systems with more limited bandwidth will require major physical plant upgrades to provide digital service, and that such upgrades will require substantial investments of capital and time to complete industry-wide. As a result, the Company believes that there will be a substantial delay before cable systems can offer programming services equivalent to digital satellite television providers on a national basis and that some cable systems may never be upgraded, subject to advances in compression technology. I-15 Wireless Cable Systems. The Company also competes with multi-channel multi- point distribution systems, which deliver programming services over microwave channels to subscribers with special antennas, and other so-called ''wireless cable'' systems. Wireless cable systems operating in the U.S., currently serve an estimated 1.0 million subscribers, mostly with limited channel, analog service. Wireless cable systems typically offer 20 to 30 channels of programming with inferior image and sound quality compared to digital satellite services. However, wireless cable systems may provide their customers with local programming, a potential advantage over digital satellite television systems, and developments in compression technology are expected to significantly increase the number of channels and video and audio quality of wireless cable systems. Nevertheless, in order to upgrade their systems to implement digital transmission of high quality video and audio signals, wireless cable operators will be required to install new digital decoders in customers' homes and make certain modifications to transmission facilities, at a potentially significant cost. Wireless cable also generally requires direct line of sight from the receiver to the transmitter tower, which creates the potential for substantial interference from terrain, buildings and foliage. Telephone Companies. In addition to Bell Atlantic's, SBC's and GTE's agreements with DirecTv and USSB, certain regional telephone companies and long distance telephone companies could become significant competitors in the future, as they have expressed an interest in becoming subscription television and information providers. Legislation enacted by Congress in 1996 removed barriers to entry which previously inhibited telephone companies from competing, or made it more difficult for telephone companies to compete, in the provision of video programming and information services. Certain telephone companies have received authorization to test market video and other services in certain geographic areas using fiber optic cable and digital compression over existing telephone lines. Estimates for the timing of wide-scale deployment of such multichannel video service vary, as several telephone companies have delayed originally announced deployment schedules. In addition, several large telephone companies have announced plans to acquire or merge with existing cable and wireless cable systems. As more telephone companies begin to provide subscription television programming and other information and communications services to their customers, additional significant competition for subscribers will develop. Among other things, telephone companies have an existing relationship with substantially every household in their service area, substantial financial resources, and an existing infrastructure and may be able to subsidize the delivery of programming through their position as the sole source of telephone service to the home. VHF/UHF Broadcasters. Most areas of the U.S. are covered by traditional territorial over-the-air VHF/UHF broadcasts, which typically include three to ten channels in most markets. These stations provide local, network and syndicated programming free of charge, but each major market is generally limited in the number of available programming channels. However, the FCC has recently allocated additional digital spectrum to licensed broadcasters. During a transition period ending in 2006, each existing television station will be able to transmit programming on a digital channel that may permit multiple programming services per channel. Private Cable. Private cable is a multi-channel subscription television service where the programming is received by a satellite receiver and then transmitted via coaxial cable through private property, often MDUs, without crossing public rights of way. Private cable generally operates under an agreement with a private landowner to service a specific MDU, commercial establishment or hotel. These agreements are often exclusive arrangements with lengthy (e.g., ten-year) terms, and private cable systems generally are not subject to substantial federal, state or local regulations. The FCC recently amended its rules to allow the provision of point-to-point delivery of video programming by private cable operators and other video delivery systems in the 18 gigahertz band. Private cable operators compete with PRIMESTAR(R) for customers within the general market of consumers of subscription television services. I-16 Local Multi-Point Distribution Service. In March 1997, the FCC announced its intention to offer two local multi-point distribution service ("LMDS") licenses, one for a block of spectrum 1150 megahertz wide and the other for a 150 megahertz-wide block, in each of 493 Basic Trading Areas pursuant to an auction in the case of mutually exclusive applications. Incumbent local exchange carriers and cable operators will not be allowed to obtain in-region licenses for the larger spectrum block for three years. The FCC recently completed its auction of the LMDS licenses. While 122 licenses were not sold, the FCC stated that 95% of the population will be covered by those licenses sold. The FCC plans to re-auction those licenses not sold. The broadband 28 and 31 gigahertz LMDS spectrum allocation may enable LMDS providers to offer subscribers a wide variety of audio, video and interactive service options. Utilities. In 1996, Congress enacted legislation authorizing utility holding companies and their subsidiaries to provide video programming services, notwithstanding the Public Utility Holding Company Act. Utilities must establish separate subsidiaries and must apply to the FCC for operating authority. Several such utilities have been granted broad authority by the FCC to engage in activities which could include the provision of video programming. Other Providers of News, Information and Entertainment. The Company also competes broadly with other providers of news, information and entertainment to consumers. Regulatory Matters - ------------------ General. Pursuant to the Communications Act of 1934, as amended (the "Communications Act"), the FCC regulates the use of radio spectrum in the United States. United States DBS licensees and permittees are subject to the regulatory authority of the FCC. Although the non-technical aspects of DBS operations are generally subject to less regulation than other communications services, some regulations do apply. In addition, the FCC has proposed to adopt regulations that will affect DBS licensees and permittees. Currently, a DBS permittee must complete and file with the FCC a satellite construction contract with respect to its authorized satellite station(s) within one year of the grant of the construction permit. DBS permittees who received their permits prior to January 19, 1996 have six years from the date of permit grant to begin operating their DBS systems. New permits and permit extensions granted after January 19, 1996 provide for a four year construction period. Upon completion of construction, the FCC authorizes DBS permittees to launch and operate their satellites. Those DBS providers which control the video programming they distribute, and DBS licensees which offer broadcast service, are subject to equal employment opportunity requirements. DBS providers offering non-broadcast service from their DBS satellites are licensed to operate for ten years, while those offering broadcast services (that is, services available on a non-subscription basis) are licensed for five years. FCC licenses must be renewed at the end of each license term. FCC licenses are generally renewed in the ordinary course, absent misconduct by the licensee. In 1995, the FCC adopted several new service rules for DBS permittees and licensees. The FCC established a requirement that those entities acquiring DBS permits or licenses after January 19, 1996, must provide service to Alaska and Hawaii if such service is technically feasible. It also required that all existing DBS permittees and licensees provide service to Alaska and Hawaii from at least one of their currently assigned orbital positions or relinquish their western orbital location. In addition, the FCC revised its rules with respect to licensees' ability to use portions of their satellite capacity for non-DBS services. The FCC provided that licensees must principally use their DBS authorizations for DBS service, but that during their first five years in operations, licensees may offer non-DBS services. After five years, licensees may continue to provide non-DBS services so long as at least half of their total satellite capacity at a given orbital location is used for DBS service. I-17 In December 1996, the International Bureau concluded that foreign ownership restrictions do not apply to subscription DBS service. This decision, however, is subject to a pending review by the FCC, and the current Administration requested that the FCC reconsider its decision in a general rulemaking proceeding. As described further below, the FCC has adopted a Notice of Proposed Rulemaking and sought comments on the applicability of foreign ownership restrictions to subscription DBS providers and FSS-DTH providers, such as the Company. The Notice of Proposed Rulemaking is still pending as described below. On February 26, 1998, the FCC released a Notice of Proposed Rulemaking to consolidate the construction permit and licensing process for DBS providers, to consolidate the DBS rules with the FCC's other satellite rules, and to update the DBS technical rules. The FCC also requested comments on the application of foreign ownership limitations to subscription DBS and FSS-DTH providers; whether any limitations on cable/DBS cross-ownership are warranted and whether the FCC should have a rule of general applicability restricting cable interests in DBS licensees; whether there should be a ban on ownership of more than one DBS full CONUS orbital position; and how the delivery of DBS service can be improved to Alaska, Hawaii, and the U.S. territories and possessions. In December 1998, the FCC adopted a requirement that DBS providers, including medium power DTH providers, such as the Company, reserve four percent of their channel capacity for noncommercial programming of an educational and informational nature. In addition, the Commission imposed access requirements for federal political candidates and limited the charges operators could demand from such candidates for advertising time. The Company cannot predict how application of the FCC's current or proposed rules will affect its own operations or the operations of its competitors, or the applications pending at the FCC as described below in "Required FCC Approvals." The satellite that PRIMESTAR currently uses and the satellites it proposes to use in the future are geostationary satellites ("GSOs"). At present, no satellite systems except other GSO systems have been authorized to use the frequency bands in which the Company's satellites transmit and will transmit in the future. In 1997, an application was filed at the FCC by SkyBridge L.L.C. to construct and operate a nongeostationary satellite system ("NGSO") that would share frequencies used by the Company's satellites and other GSO satellites. In addition, the FCC initiated a rulemaking proceeding to address potential regulations for NGSO systems such as the one proposed by SkyBridge L.L.C. At the World Radiocommunication Conference ("WRC") in late 1997, the International Telecommunications Union ("ITU") adopted "provisional" technical rules that would authorize frequency sharing between GSO and NGSO systems. These provisional rules are subject to affirmation and/or modification at a WRC meeting scheduled for 1999. On November 19, 1998, the FCC released a Notice of Proposed Rulemaking whereby it proposed to implement domestically the allocation made at WRC in late 1997, to permit NGSO operations in the Ku-band. The Notice of Proposed Rulemaking also requested comment on a Petition for Rulemaking filed by Northpoint Technologies ("Northpoint") to permit the terrestrial retransmission of local television signals and the provision of data services to DBS service subscribers operating in the DBS services band. On January 11, 1999, an application was filed with the FCC requesting authorizations so that parties could begin using the Northpoint technology to provide terrestrial services to consumers using the DBS services band. I-18 The Company and many other users and operators of GSO satellite systems have expressed concerns regarding potential technical interference to GSO satellites that could be caused by NGSO systems, including those that might operate pursuant to the 1997 WRC provisional rules. The Company has participated and other GSO users and operators are participating in FCC proceedings and in the preparation process for the WRC meeting in 1999 in an attempt to assure that any rules finally adopted by the ITU and the FCC for GSO/NGSO frequency sharing would not result in unacceptable technical interference to GSO transmissions. The Company cannot predict the outcome of these various proceedings or what effect, if any, GSO/NGSO frequency sharing and GSO/terrestrial sharing would have on its technical operations or business. In addition, regulations promulgated by governmental entities other than the FCC may affect the distribution of programming by DBS providers. The SHVA provides that only "unserved households" are permitted to receive distant network signals. In other words, the SHVA prohibits the retransmission by a satellite carrier of the television broadcast signal of a network television station to households that receive a Grade B intensity over-the-air signal of a television broadcast station affiliated with such network and to households that receive (or within the past 90 days had received) through a cable system the signal of a television station affiliated with such network. The Company, the National Association of Broadcasters, certain network- affiliated television stations and their respective affiliate associations have entered into a Settlement and Compliance Agreement, which provides for pre- screening techniques for customers based on zip codes to ensure compliance with SHVA procedures, the timing for disconnecting any existing non-compliant network subscribers, and provisions for mutual release for any past or future liability. In response to a petition for rulemaking filed by EchoStar and the National Rural Telecommunications Cooperative as well as two federal court rulings regarding the delivery of distant network signals to consumers that were not qualified to receive those signals pursuant to SHVA, the FCC released a Notice of Proposed Rulemaking on November 17, 1998 seeking comments on the way it defines, measures, and predicts the strength of television signals. Television signal intensity is the key element in determining whether a household is "unserved" by a broadcast network station and is, therefore, eligible to receive a distant network signal using a home satellite dish pursuant to SHVA. As described above, only those consumers that are "unserved", meaning unable to receive an over-the-air signal of Grade B intensity of a particular local network station using rooftop antennae, are eligible to receive that network's distant signal from a satellite provider pursuant to SHVA. On February 2, 1999, the FCC released a Report and Order addressing the way it measures and predicts the strength of television signals for the purposes of the SHVA. The FCC declined to adopt a definition for "Grade B signal" solely for the purposes of the SHVA. However, the FCC adopted a methodology for measuring signal strength at individual households. In addition, the FCC recommended that satellite providers and broadcasters use a predictive model for determining whether an individual household is "unserved". Finally, the FCC encouraged Congress to modify the law and permit satellite providers to offer local into local retransmissions of broadcast signals. The FCC's new rule for measuring signal strength may impact the number of households who qualify as "unserved households". I-19 The Copyright Office reviewed the SHVA and submitted a report to Congress on August 1, 1997. Of particular note, the Copyright Office recommended the adoption of a "red zone/green zone" plan under which satellite carriers generally would be barred from retransmitting a network-affiliated station to households located within the local market area (i.e., Area of Dominant Influence) of another affiliate of the same network, but would be permitted to retransmit (subject to payment of the applicable SHVA royalty fee) a network- affiliated station to households located in any Area of Dominant Influence that is not served by an affiliate of the same network. The Copyright Office further proposed that a new royalty fee system be established that would permit satellite carriers to retransmit a network-affiliated station to households located in the local market of another affiliate upon the payment of a royalty fee which would be distributed to network affiliates. The Copyright Office also recommended that the Copyright Act be amended to expressly permit satellite carriers to retransmit a network affiliated station to households located in that station's own market. The Copyright Office took no position on whether there should be a royalty fee payment imposed for such "local into local" retransmissions. In response to a petition by EchoStar, the Copyright Office has initiated a proceeding to consider whether the retransmission of a network's affiliated station within a station's own market is permissible under the Copyright Act as presently codified. That proceeding is still pending. Lastly, the Copyright Office recommended that Congress indefinitely extend the satellite carrier license, similar to the cable compulsory license. The recommendations of the Copyright Office do not currently have legal force or effect, and will not have legal force or effect unless and until they are adopted by Congress and enacted as legislation. In 1998, Congress was unsuccessful in passing legislation that would allow local into local retransmission of broadcast signals; however, in January 1999, bills were introduced in the Senate (S. 247 and S. 303) and the House (H.R. 89) which, if enacted, would permit the retransmission of local broadcast signals within their local broadcast areas. A Copyright Arbitration Royalty Panel ("CARP"), convened pursuant to the terms of the SHVA, recommended that the Librarian of Congress adopt an increase in the royalty fees paid by satellite carriers for the distribution of superstations and network affiliates directly to homes to a level commensurate with fair market value. Specifically, the CARP recommended that the rates be increased from $0.06 per subscriber per month for network signals and $0.175 ($0.14 for certain "syndex proof" stations) per subscriber per month for superstations, to a uniform rate of $0.27 per subscriber per month for all signals. The satellite carriers filed petitions with the Librarian of Congress to set aside or modify the report, arguing, inter alia, that the new rate is unfair because it is well in excess of the effective royalty rates currently paid by cable television systems, and because the increases were made effective retroactively to July 1, 1997. The Librarian of Congress released his report on October 27, 1997, adopting CARP's recommendation. However the Librarian of Congress rejected CARP's recommendation to make the new fees retroactive, and instead, made the new fees effective as of January 1, 1998. The SBCA, representing the satellite carriers, filed a petition with the Librarian of Congress requesting a stay of the effectiveness of the rate increase, pending judicial review or congressional action. The Librarian of Congress denied the petition. The SBCA filed an unsuccessful petition seeking review of the rate increase with the U.S. Court of Appeals for the District of Columbia. The satellite carriers also have requested Congress to override the rate adjustment by legislation. The bills introduced into Congress last year failed; however, S. 247 currently proposes to decrease copyright rates by 30% for superstations and 45% for networks. No assurance can be given that the carriers will be able to obtain relief from Congress. With the rate increase, the Company (and all other direct broadcast satellite and DTH satellite service providers) may be competitively disadvantaged against cable operators. I-20 The Telecommunications Act of 1996. The Telecommunications Act of 1996 ("1996 Act") clarified that the FCC has exclusive jurisdiction over DTH satellite services, and that criminal penalties may be imposed for piracy of DTH satellite services. The 1996 Act also preempted local (but not state) governments from imposing taxes or fees on DTH services, including DBS, and directed the FCC to promulgate regulations prohibiting local (including state) governments from maintaining zoning or other regulations that impair a viewer's ability to receive video programming services through the use of DBS receive-only dishes in residential areas. The FCC has adopted rules that it believes comply with the statutory requirements. Finally, the 1996 Act requires that multichannel video programming distributors such as DBS operators scramble or block channels providing indecent or sexually explicit adult programming. Existing FCC Permits and Licenses. The Company has exercised its option under an option agreement between the Company and Tempo (the "Tempo Capacity Option Agreement") to purchase or lease 100% of the capacity of the DBS system being constructed by Tempo pursuant to the FCC Permit. As the holder of a DBS permit, Tempo is subject to FCC jurisdiction and review primarily for: (i) authorization of individual satellites (i.e. meeting minimum financial, legal, and technical standards) and earth stations, (ii) avoiding interference with other radio frequency transmitters, (iii) complying with the rules the FCC has established specifically for holders of U.S. DBS authorizations and (iv) complying with applicable provisions of the Communications Act. Under the FCC Permit, the time by which the Tempo Satellites must be operational was due to expire in May 1998. On April 3, 1998, Tempo filed a request with the FCC for an extension of that deadline pending FCC review of (i) TSAT's request for consent to the transfer of control of Tempo to PRIMESTAR (the "Transfer Application") and (ii) PRIMESTAR's application for consent to the assignment to PRIMESTAR of the high power DBS authorizations and certain assets owned by MCI (the "Assignment Application"). On April 30, 1998, the FCC determined that Tempo's satellite at 119 degrees W.L. was not operational. It did find, however, that an extension of time was warranted for that orbital location and granted an extension to Tempo for 119 degrees W.L. Such extension was granted until six months after the FCC determination on the Transfer Application and Assignment Application, with the condition that Tempo not enter into a lease agreement with PRIMESTAR or any similar lease arrangement prior to the FCC's decision on the Transfer Application and the Assignment Application. In addition, Tempo voluntarily surrendered its permit for 166 degrees W.L. Effective November 19, 1998, the Company voluntarily withdrew the Assignment Application. In an order released February 24, 1997, the International Bureau granted, subject to certain conditions, Tempo's request to launch and operate the Tempo DBS-1 satellite at 119 degrees W.L. and to test its satellite at 109.8 degrees W.L. for eight weeks. In addition, the International Bureau required Tempo to submit to the FCC information required to initiate advance publication and notification of Tempo's operations in accordance with the Radio Regulations of the International Telecommunications Union. The International Bureau also granted Tempo authority to modify its satellite design, as requested in a July 1993 application, and denied oppositions which had been filed by numerous existing and potential DBS competitors. Tempo DBS-1 was launched on March 8, 1997, and is now stationed in its authorized location at 119 degrees W.L. Tempo may need to file an application with the FCC for a license to operate the satellite in orbit. Tempo expects that the FCC would approve any such request, but cannot assure the ultimate outcome. There can be no assurance that Tempo will succeed in obtaining all requisite regulatory approvals for its operations without the imposition of restrictions on or other adverse consequences to Tempo, TSAT or PRIMESTAR. I-21 Required FCC Approvals. On July 18, 1997, TSAT and the Partnership filed the Transfer Application. The FCC released a Public Notice of the Transfer Application on July 23, 1997, establishing procedural dates for petitions to deny and responsive pleadings. EchoStar, CAI Wireless Systems, Inc., the Small Cable Business Association and Media Access Project filed petitions to deny the Transfer Application, while DirecTv and the Wireless Cable Association International filed comments on the Transfer Application. These petitions and comments request that the FCC deny or dismiss the Transfer Application on a variety of procedural and substantive grounds or that the FCC condition its approval of the Transfer Application upon PRIMESTAR's compliance with restrictions designed to ensure access to programming and protect against cross- subsidization, among other requests. TSAT and the Partnership filed a joint opposition to these petitions and comments, and the National Rural Telecommunications Cooperative filed a reply comment in support of DirecTv's comments. The petitioners and commenters filed replies to TSAT's and the Partnership's opposition on September 9, 1997. There can be no assurance that the FCC's review of these documents or the Transfer Application will be favorable, or that the FCC will not impose conditions unacceptable to TSAT, the Company, or the other Restructuring Parties in connection with its review. In support of the Transfer Application, the Partnership filed two ex parte -------- filings. The first filing was an economic study prepared by outside economic consultants which demonstrated that (1) an analysis of the Partnership's penetration in cabled areas served by a PRIMESTAR Partner and those areas served by a non-affiliated cable operator does not indicate a systematic strategy by the Partnership to compete selectively and (2) PRIMESTAR's incentives to compete are comparable to those of a stand-alone DBS operator. The second filing was an analysis of the Transfer Application proceedings using the framework established in the FCC's Bell Atlantic/NYNEX decision, as well as a summary of the -------------------- Partnership's responses to the arguments and requested conditions raised by parties during the proceedings. The FCC requested responses to those filings from interested parties. EchoStar and DirecTV argued that the Transfer Application should be denied, while BellSouth and the Wireless Cable Association requested conditions regarding the availability of programming affiliated with PRIMESTAR's owners. EchoStar also filed a motion seeking access to the underlying data used by the economic consultants or, in the alternative, deletion of the economic filing from the records. The Partnership filed a response to all of these filings on February 20, 1998, rejecting the arguments raised by the parties, and the Partnership requested expedited approval of the Transfer Application. On March 2, 1998, the Chief of the International Bureau submitted to the Company a letter request for the submission of certain documents previously submitted to the Department of Justice as well as certain information regarding the economic study described above and information regarding the programming interests of the Company's cable owners. These documents have been submitted pursuant to a suitable protective order. Several parties filed comments regarding the Company's response, reiterating their objections to the Transfer Application. The Company filed a reply denying their arguments. I-22 On November 25, 1998, Tempo and the Company requested expedited action by the FCC on the application to transfer control of Tempo to the Company. Several parties filed responses to that request, objecting to the proposed transfer. The Company and Tempo filed a join reply to those objections. On January 27, 1999, Tempo filed a joint application with DIRECTV Enterprises, Inc. seeking FCC approval to assign Tempo's DBS authorization to DIRECTV ("DIRECTV Application"). In addition, Tempo and the Company jointly filed a letter seeking to maintain the status quo with respect to the Transfer Application until the FCC decides the DIRECTV Application; therefore, Tempo and the Company requested that the Transfer Application be held in abeyance and, subject to and contemporaneously with approval of the DIRECTV Application, that the FCC dismiss the Transfer Application. EchoStar filed a petition to deny the DIRECTV Application on March 5, 1999, on the basis that DirecTv should not be allowed to control high power DBS spectrum at three full-CONUS orbital locations and that EchoStar has offered to purchase the Tempo high power DBS assets. On the same date, the Small Cable Business Association submitted a request that any grant of the DIRECTV Application be conditioned on DirecTV providing a digital add-on service that small cable systems can self-brand, and Media Access Project filed a petition to deny the application to the extent the FCC did not apply and DirecTV did not accept application of Section 310(b) of the Communications Act. DirecTV and Tempo each filed oppositions to these petitions on March 19, 1999. Responses to the DirecTV and Tempo submissions are due April 2, 1999. Antitrust Decree. The Partnership and the parties named in the action described below are subject to the jurisdiction of the U.S. District Court for the Southern District of New York to ensure compliance with an antitrust consent decree. In United States v. PRIMESTAR Partners L.P., et al., 93 Civ. 3919 (SDNY 1993) (the ''Federal Decree''), the Partnership and such parties agreed to refrain from (i) enforcing any provisions of the PRIMESTAR Partnership Agreement that affect the availability, price, terms or conditions of sale of programming to any provider of multichannel subscription television, or (ii) entering into certain other agreements restricting the availability of programming services. The Federal Decree expires in April 1999 and continues to apply to the Company since consummation of the Restructuring. The Company believes that it is currently in compliance with the Federal Decree in all material respects and that the Federal Decree does not currently have a material adverse effect on the Company or its operations. Other - ----- Legislative, administrative and/or judicial action may change all or portions of the foregoing statements relating to competition and regulation. The Company has not expended material amounts during the last three fiscal years on research and development activities. There is no one customer or affiliated group of customers to whom sales are made in an amount which exceeds 10% of the Company's revenue. Compliance with federal, state and local provisions which have been enacted or adopted regulating the discharge of material into the environment or otherwise relating to the protection of the environment has had no material effect upon the capital expenditures, results of operations or competitive position of the Company. The Company had approximately 1,100 employees as of December 31, 1998. None of the Company's employees are represented by a union and the Company believes its employee relations are good. (d) Financial Information about Foreign and Domestic Operations and Export ----------------------------------------------------------------------- Sales ----- Not applicable. I-23 Item 2. Properties. - ------ ---------- The Company owns no real estate. The Company has entered into noncancellable operating leases for all of its facilities, including its corporate headquarters and call center, both of which are located in Englewood, Colorado. All of such operating leases expire at various times through 2008. The Company believes that such facilities are in good condition and are suitable and adequate for its business operations for the foreseeable future. Item 3. Legal Proceedings. - ------ ----------------- There are no material pending legal proceedings to which the Company is a party or to which any of its property is subject, except as follows: In a civil action entitled Jerry Wayne Self v. PRIMESTAR By TCI, el al., filed in the Circuit Court of Jefferson County, Alabama, Civil Action No. 96-831, an Order of Judgment was entered against PRIMESTAR by TCI on November 12, 1997, in the amount of $4,257,242, consisting of medical expenses of $15,242, lost wages of $52,000, future lost wages of $1,040,000, physical and mental pain and suffering in an amount of $150,000 and punitive damages of $3,000,000. The judgment arises out of a case in which the plaintiff alleges that on September 19, 1995, he was riding in the front seat of a car that was struck head-on by a car driven by William Francis Hinton, causing the plaintiff to suffer injuries. The plaintiff alleges that Hinton was intoxicated and was "acting within the line and scope of his employment" for PRIMESTAR By TCI when the accident occurred. "PRIMESTAR By TCI" is a trade name currently or formerly used in certain jurisdictions by TSAT and/or its predecessors. On December 3, 1997, TSAT filed an Answer and Affirmative Defenses and a Motion to Set Aside Entry of Default and Default Judgment or in the Alternative for Relief from Judgment or in the Alternative a Motion to Reconsider or for a New Trial. On December 12, 1997, the Court entered an order setting aside the Entry of Default and Default Judgment. PRIMESTAR has agreed to indemnify TSAT for any potential liability with respect to this matter, to the extent not covered by insurance or other third party indemnification obligations. The parties settled this matter for a nominal amount, and the Court dismissed the defendant with prejudice on October 29, 1998. Such settlement represents the final resolution of this mater, and accordingly, it will not be reported in future filings. Item 4. Submission of Matters to a Vote of Security Holders. - ------ None I-24 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. - ------ --------------------------------------------------------------------- None of the Company's shares of common stock are currently publicly traded. The Company has not paid cash dividends on its common stock and has no present intention of so doing. Payment of cash dividends, if any, in the future will be determined by the Company's Board of Directors in light of its earnings, financial condition and other relevant considerations. In addition, the Company is subject to loan and other agreements that prohibit or limit the ability of the Company to pay dividends on its common equity. For further discussion of such restrictions, see "Management's Discussion and Analysis of Financial Condition and Results of Operations." Item 6. Selected Financial Data. - ------ ----------------------- Selected financial data related to the Company's financial condition and results of operations for the five years ended December 31, 1998 are summarized as follows (such information should be read in conjunction with the accompanying consolidated financial statements of the Company):
Years ended December 31, ---------------------------------------------------------- 1998 (1) 1997 1996 1995 1994 ------------- ---------- ---------- --------- -------- amounts in thousands, except per share amounts Summary Statement of Operations Data: - ------------------------------------- Revenue $ 1,289,666 561,990 417,461 208,903 30,279 Operating, selling, general and administrative expenses $(1,133,420) (481,855) (410,836) (214,117) (25,106) Impairment of long-lived assets (2) $ (950,289) -- -- -- -- Operating loss $(1,337,544) (171,599) (184,284) (60,702) (9,144) Interest expense (3) $ (145,939) (47,992) (2,023) -- -- Net loss $(1,343,704) (238,341) (140,004) (47,507) (13,688) Basic and diluted loss per common share (4) $(8.02) (3.58) (2.11) (.72)
Years ended December 31, ---------------------------------------------------------- 1998 (1) 1997 1996 1995 1994 ------------- ---------- ---------- --------- -------- amounts in thousands Summary Balance Sheet Data: - --------------------------- Property and equipment, net $ 1,148,590 1,121,937 1,107,654 889,220 397,798 Total assets $ 2,112,087 1,204,856 1,180,273 933,443 410,105 Due to the Partnership $ -- 463,133 457,685 382,900 278,772 Debt (3) $ 1,833,195 418,729 247,230 -- -- Equity (Deficit) $ (284,774) 136,269 372,358 483,584 120,526
II-1 - ---------------------- (1) In connection with the Restructuring, TSAT has been identified as the acquiror for accounting purposes and the predecessor for financial reporting purposes. Accordingly, the periods prior to the Closing Date represent the financial condition and results of operations of TSAT, and the periods subsequent to the Closing Date represent the financial condition and results of operations of TSAT, the Partnership and the Non- TSAT Parties. (2) In 1998, the Company recognized an impairment loss which represents the difference between the carrying amount and the estimated fair value of its long-lived assets. (3) Effective December 31, 1996, the Company entered into a bank credit facility with initial commitments of $350,000,000. In addition, on February 20, 1997, the Company issued the Notes with aggregate principal amounts at maturity of $475,000,000. (4) In connection with the December 4, 1996 consummation of the Distribution, the Company issued 66,408,000 shares of Company Common Stock. The basic and diluted loss per common share amounts for the years ended December 31, 1996 and 1995 assume that the shares issued pursuant to the Distribution were issued and outstanding since January 1, 1995. Accordingly the calculation of the net loss per share assumes weighted average shares outstanding of 66,408,000 for each of the years ended December 31, 1996 and 1995. Item 7. Management's Discussion and Analysis of Financial Condition - ------ ----------------------------------------------------------- and Results of Operations ------------------------- Summary of Operations - --------------------- Pursuant to the Restructuring Agreement and the TSAT Asset Transfer Agreement, the Restructuring was consummated effective April 1, 1998. In connection with the Restructuring, (a) TSAT contributed and transferred to PRIMESTAR all of TSAT's assets and liabilities except (I) the capital stock of Tempo, (II) the consideration received by TSAT in the Restructuring and (III) the rights and obligations under certain agreements with PRIMESTAR and others and (b) the business of the Partnership and the business of distributing the PRIMESTAR(R) programming service of each of TWE, Newhouse, Comcast, Cox and affiliates of MediaOne were consolidated into PRIMESTAR. Prior to the Closing Date, the PRIMESTAR(R) service was owned and operated by the Partnership and separately distributed and serviced by affiliates of the partners of the Partnership (the "Distributors"). As a result of the Restructuring, the Company owns and operates the PRIMESTAR(R) business. The Company currently offers a direct to home satellite service with over 160 channels of digital video and audio programming throughout the continental United States. The TSAT Asset Transfer was recorded at TSAT's historical cost due to the fact that, prior to the Restructuring, PRIMESTAR was a wholly-owned subsidiary of TSAT. The remaining elements of the Restructuring, as set forth above, were treated as the acquisition by PRIMESTAR of the Partnership Interests and PRIMESTAR Assets and Liabilities, of the Non-TSAT Parties, and such acquisition was accounted for using the purchase method of accounting. The fair value of the consideration issued to the Non-TSAT Parties has been allocated to the assets and liabilities acquired based upon the estimated fair values of such assets and liabilities. II-2 TSAT has been identified as the acquiror for accounting purposes and the predecessor for financial reporting purposes due to the fact that TSAT owns the largest interest in the Company immediately following the consummation of the Restructuring. Accordingly, the periods prior to the Restructuring represent the results of operations of TSAT, and the periods subsequent to the Restructuring include the results of operations of TSAT, the Partnership and the Non-TSAT Parties. To the extent not otherwise described, increases in the Company's revenue and operating, selling, general and administrative expenses in 1998, as detailed below, are primarily related to the Restructuring. The Company reported net losses of $1,343,704,000, $238,341,000 and $140,004,000 during the years ended December 31, 1998, 1997 and 1996, respectively. Improvements in the Company's results of operations are largely dependent upon its ability to increase its customer base while maintaining its pricing structure, reducing subscriber churn and effectively managing its costs. No assurance can be given that any such improvements will occur. In addition, the Company incurs significant sales commission and installation costs when its customers initially subscribe to the service. Management expects that the costs of acquiring subscribers will continue to be significant. The high cost of obtaining new subscribers also magnifies the negative effects of subscriber churn. Primarily as a result of the Restructuring, the Company's number of customers increased from 914,000 at March 31, 1998 to 2,296,000 at December 31, 1998. Exclusive of the effects of the Restructuring, the Company added 223,000 net customers during the period from April 1, 1998 to December 31, 1998, including 130,000 net customers during the fourth quarter of 1998. During the years ended December 31, 1998, 1997 and 1996, (i) the Company's annualized subscriber churn rate (which represents the annualized number of subscriber terminations divided by the weighted average number of subscribers during the period) was 33.2%, 30.1% and 38.5%, respectively and (ii) the average subscriber life implied by such subscriber churn rate was 3.0 years, 3.3 years and 2.6 years, respectively. The Company believes that the churn rate in 1998 is due in part to subscribers acquired in the Restructuring that did not meet the Company's current credit standards or customer delinquency policies. In addition, the Company has been subject to increased competitive pressures in 1998. Although the Company has initiated certain programs intended to reduce the Company's churn rate, no assurance can be given that churn rates for future periods will be lower than the current rate. If such programs are not successful and the Company's churn rate fails to improve, the financial condition and results of operations of the Company could be adversely affected. II-3 Certain financial information concerning the Company's operations is presented below (dollar amounts in thousands):
Years ended December 31, ------------------------------------------------------------------------------ 1998 1997 1996 -------------------------- ------------------------ ------------------------ Percentage Percentage Percentage of total of total of total Amount revenue Amount revenue Amount revenue ------------- ----------- ----------- ----------- ----------- ----------- Revenue: Programming and equipment rental $ 1,227,270 95% $ 512,894 91% $ 351,548 84% Installation 62,396 5 49,096 9 65,913 16 ----------- ----- --------- ---- --------- ---- Total revenue 1,289,666 100 561,990 100 417,461 100 ----------- ----- --------- ---- --------- ---- Operating costs and expenses: Charges from the Partnership (82,235) (6) (259,600) (46) (188,724) (45) Operating (565,510) (44) (23,992) (4) (28,546) (7) Selling and marketing (321,611) (25) (138,021) (25) (132,972) (32) General and administrative (117,184) (9) (60,242) (11) (60,594) (14) Transition (20,855) (2) -- -- -- -- Restructuring charges (26,025) (2) -- -- -- -- ----------- ----- --------- ---- --------- ---- (1,133,420) (88) (481,855) (86) (410,836) (98) ----------- ----- --------- ---- --------- ---- Operating Cash Flow(1) 156,246 12 80,135 14 6,625 2 Impairment of long-lived assets (950,289) (74) -- -- -- -- Stock compensation (414) -- (8,092) (2) 446 -- Depreciation and amortization (543,087) (42) (243,642) (43) (191,355) (46) ----------- ----- --------- ---- --------- ---- Operating loss $(1,337,544) (104)% $(171,599) (31)% $(184,284) (44)% =========== ===== ========= ==== ========= ====
- ----------------------------------- (1) Operating Cash Flow, which represents operating income before depreciation, amortization, stock compensation and impairment charges, is a commonly used measure of value and borrowing capacity. Operating Cash Flow is not intended to be a substitute for a measure of performance in accordance with generally accepted accounting principles and should not be relied upon as such. Furthermore, Operating Cash Flow may not be comparable to similarly titled measures reported by other companies. Operating Cash Flow should be viewed together with cash flows measured in accordance with generally accepted accounting principles. For information concerning such cash flows, see the statements of cash flows included in the accompanying consolidated financial statements. During 1998, in an effort to remain competitive, attract new customers and retain existing customers, the Company implemented various new service offerings and changed the pricing of certain of its existing offerings. For example, the Company implemented a national pricing and programming package structure effective July 1, 1998, whereby customers would receive the same programming packages for the same price throughout the country. Such national pricing structure had the effect of lowering certain rates for certain packages in certain areas of the country. In addition, the Company initiated promotional offers including installation rebates and packages with reduced rental fees. Although there can be no assurance, the Company believes that such new service offerings, pricing changes and promotional offers may attract new customers and help retain existing customers, but will have a negative impact on the Company's recurring revenue per customer and installation revenue per new customer installed. II-4 Revenue increased $727,676,000 or 129% and $144,529,000 or 35% during 1998 and 1997, respectively, as compared to the corresponding prior year. The Company's average monthly programming and equipment rental revenue per customer increased from $55 during 1997 to $56 during 1998. The average installation revenue from each customer installed decreased from $128 in 1997 to $70 in 1998. Such decrease is primarily due to a $50 rebate offer that was initiated by the Company in April 1998 and increased to $100 in September 1998. The 1997 increase in revenue represents the net effect of a $161,346,000 or 46% increase in programming and equipment rental revenue and a $16,817,000 or 26% decrease in installation revenue. The increase in programming and equipment rental revenue is primarily the result of an increase in the number of customers. Additionally, the Company's average monthly programming and equipment rental revenue per customer increased from $50 during 1996 to $55 during 1997. Such increase was primarily the result of rate increases implemented in May 1997 in conjunction with the launch of approximately 55 additional channels. The decrease in installation revenue is primarily attributable to a reduction in 1997 in the number of installations performed and a decrease from $145 during 1996 to $128 during 1997 in the average installation revenue derived from each customer installed. Through the Closing Date, the Partnership provided programming services to the Company and the other authorized Distributors in exchange for a fee based upon the number of customers receiving programming services. The Partnership also arranged for satellite capacity and uplink services, and provided national marketing and administrative support services, in exchange for a separate authorization fee from each Distributor, including the Company, based on each such Distributor's total number of authorized satellite receivers. Subsequent to the Closing Date, operating expenses are primarily comprised of programming, satellite capacity and uplink costs (costs, which prior to the Restructuring were included in charges from the Partnership) and amounts related to customer fulfillment activities. Such expenses represented 50% of revenue for the period from April 1, 1998 through December 31, 1998. Operating expenses decreased $4,554,000 or 16% during 1997, as compared to 1996. Such decrease is primarily attributable to the fact that the Company's other operating costs and expenses for the year ended December 31, 1996 included $9,292,000 of installation fees paid to TCIC that were not capitalized. Other operating costs and expenses for the year ended December 31, 1997 do not include a similar amount since the Company capitalized the full amount of installation fees paid to TCIC subsequent to the Distribution Date. Through December 31, 1996, TCIC provided the Company with certain customer fulfillment services. Charges for such services were allocated to the Company by TCIC based on scheduled rates. Such services, which included installation, maintenance, retrieval, inventory management and other customer fulfillment services, were to be performed in accordance with specified performance standards. Effective January 1, 1997, charges for customer fulfillment services provided by TCI were made pursuant to a fulfillment agreement (the "Fulfillment Agreement") entered into by the Company and TCIC in connection with the Distribution. Pursuant to the Fulfillment Agreement, TCIC continued to provide fulfillment services on an exclusive basis to the Company following the Distribution with respect to customers of the PRIMESTAR(R) medium power service. Such services were required to be performed in accordance with specified performance standards. The Fulfillment Agreement terminated on December 31, 1997. In September and October 1997, TSAT entered into agreements with regional fulfillment companies to perform the services no longer performed by TCIC. II-5 Installation charges from TCIC included direct and indirect costs of performing installations. Through the Distribution Date, the Company capitalized a portion of such charges as subscriber installation costs based upon amounts charged by unaffiliated third parties to perform similar services. Subsequent to the Distribution Date, the Company capitalized the full amount of installation fees paid to TCIC. Additionally, the scheduled rates for the services provided by TCIC under the Fulfillment Agreement exceeded the scheduled rates upon which charges, historically, were allocated to the Company for such services. In this regard, installation charges allocated to the Company by TCIC aggregated $62,461,000 during the year ended December 31, 1996. If the Fulfillment Agreement had been in effect during 1996, the estimated installation fees incurred by the Company would have been $86,186,000. Selling and marketing expenses, which represented 25% of revenue during the year ended December 31, 1998, include sales salaries and commissions, marketing and advertising expenses, and costs associated with the operation of customer service call centers. General and administrative expenses represented 9% and 11% of revenue during the years ended December 31, 1998 and 1997, respectively. The decrease in such percentage is primarily attributable to the relatively fixed nature of certain components of the Company's general and administrative expenses. The Company's selling and marketing expenses and general and administrative expenses decreased as a percentage of revenue in 1997 primarily due to (i) lower sales commissions due to a 15% decrease in installations in 1997 as compared to 1996, and (ii) the relatively fixed nature of certain components of TSAT's selling, general and administrative expenses. During the second half of 1997, the Company began offering a marketing program that allows subscribers to purchase the Company's proprietary satellite reception equipment at a price that is less than the Company's cost. Losses incurred by the Company on such sales of satellite reception equipment are included in selling expense in the period such sales are consummated and aggregated $16,057,000 and $3,538,000 during the years ended December 31, 1998 and 1997, respectively. As the Company stopped aggressively marketing this program in the fourth quarter of 1998, primarily all of the 1998 loss was recognized during the period from January 1, 1998 through September 30, 1998. In connection with the Distribution, the Company and TCI also entered into the "Transition Services Agreement", and certain other agreements. Pursuant to the Transition Services Agreement, TCIC provided certain general and administrative services to TSAT for a fee of $1.50 per subscriber per month. Amounts charged by TCIC pursuant to the Transition Services Agreement aggregated $3,174,000 and $11,579,000 during the years ended December 31, 1998 and 1997, respectively. The Transition Services Agreement was terminated in connection with the Restructuring. Through the Distribution Date, general and administrative allocations from TCIC were based upon the estimated cost of such services provided to TSAT. The amounts charged to TSAT pursuant to the Transition Services Agreement were in excess of the amounts that would have been allocated by TCIC to TSAT under the arrangement that was in effect through the Distribution Date. If the Transition Services Agreement had been effective as of January 1, 1996, selling, general and administrative expenses would have been approximately $198,200,000 for the year ended December 31, 1996. As part of the compensation paid to the Company's sales agents and FSPs, the Company pays certain residual sales commissions during specified periods following the initiation of service (generally five years). During the years ended December 31, 1998, 1997, and 1996, residual payments aggregated $25,639,000, $15,364,000 and $11,848,000, respectively, and were charged to expense as incurred. II-6 Subsequent to the Restructuring, the Non-TSAT Parties continued to operate certain non-strategic local offices (the "Transition Offices") for approximately three months (the "Transition Period") while the responsibilities of such offices were transferred to other PRIMESTAR offices. By the end of the Transition Period, all of the Transition Offices had been closed. Transition expenses include costs incurred through December 31, 1998 and charged to the Company by the Non-TSAT Parties to operate the Transition Offices during the Transition Period. During 1998, the Company reorganized its operations. In connection therewith, the Company closed certain of its local offices and reduced it corporate workforce. As a result, the Company terminated approximately 700 employees. In connection with such reorganization, the Company recognized restructuring charges of $26,025,000. Such restructuring charges related to (i) severance costs for terminated employees ($18,828,000), (ii) lease cancellation fees and other office shutdown costs ($3,617,000) and (iii) the net book value of abandoned equipment ($3,580,000). As of December 31, 1998, the Company had paid approximately $6,388,000 of the restructuring charges and had a remaining accrual of $16,057,000. The Company anticipates that the majority of such accrual will be paid during the first six months of 1999 with the balance to be paid by the end of 1999. In connection with the Hughes Medium Power Transaction, the Company concluded that it would be unable to recover the carrying value of its assets over their expected remaining useful life. Accordingly, the Company recorded an impairment loss (the "Impairment Loss") calculated as follows (amounts in thousands): Cash proceeds and working capital adjustments $1,225,466 GMH Stock 225,000 ---------- Total consideration 1,450,466 Carrying value of related long-lived assets 2,400,755 ---------- Impairment loss $ (950,289) ==========
The reduction in carrying amount of assets included in the Impairment Loss is as follows (amount is thousands):
Property and equipment: Satellite reception equipment $103,898 Subscriber installation costs 223,541 Intangible assets: Excess purchase price over acquired net assets 401,475 Tradename 221,375 -------- $950,289 ========
Depreciation expense increased $202,269,000 or 83% and $52,287,000 or 27% during 1998 and 1997, respectively, as compared to the corresponding prior year. The 1998 increase is due primarily to an increase in the Company's depreciable assets due primarily to the Restructuring. The 1997 increase is primarily the result of an increase in TSAT's depreciable assets due to capital expenditures. Changes in the Company's depreciation policies also contributed to the increase. Effective October 1, 1996, TSAT changed the method used to depreciate its subscriber installation costs, and reduced the estimated useful life of certain satellite reception equipment. The inception-to-date effect on depreciation expense of the change in depreciation method aggregated $55,304,000, and was recorded during the fourth quarter of 1996. The effect of the reduction in estimated useful life was accounted for on a prospective basis. The Company recognized amortization expense of $97,176,000 during 1998. Such amortization expense relates to intangible assets recorded in connection with the Restructuring. II-7 The Company incurred interest expense of $145,939,000 and $47,992,000 during the years ended December 31, 1998 and 1997, respectively. The increase in interest expense is due to interest incurred on the Interim Loan and the credit facility assumed from the Partnership (the "Partnership Credit Facility") as well as additional borrowings under the Company's bank credit facility (the "Bank Credit Facility"). The Company expects that it will continue to incur significant levels of interest expense in future periods. The Company's share of losses of the Partnership for 1998 represent three months of losses. In connection with the Restructuring, the Partnership became a wholly-owned subsidiary of the Company. The Company's share of the Partnership's net losses increased $17,198,000 during 1997, as compared to the corresponding prior year. The 1997 increase is primarily attributable to increases in the Partnership's interest expense and operating loss. The increase in interest expense is attributable to interest incurred on borrowings under the Partnership Credit Facility that were used to fund the construction of Tempo DBS-2. Prior to the January 1, 1997 determination that construction of Tempo DBS-2 was substantially complete, interest incurred on the applicable borrowings under the Partnership Credit Facility had been capitalized. The increase in the Partnership's operating loss occurred primarily because the increase in the Partnership's revenue did not fully offset increases in selling, marketing and certain other expenses. The Company recognized no income tax benefit during the year ended December 31, 1997 and an income tax benefit of $147,528,000 and $45,937,000 during 1998 and 1996, respectively. The income tax benefit recognized in 1998 relates to the reversal of temporary differences established in connection with the Restructuring. Recent Accounting Pronouncements - -------------------------------- In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments ------------------------------------- and Hedging Activities" ("Statement No. 133"). Statement No. 133 is effective - ---------------------- for fiscal quarters beginning after June 15, 1999. As the Company currently has no derivative instruments and does not participate in hedging activities, the Company does not anticipate that Statement No. 133 will have any effect on its results of operations or financial position. Liquidity and Capital Resources - ------------------------------- In connection with the consummation of the Restructuring, the Company paid cash to, or assumed debt of, the Non-TSAT Parties in the aggregate amount of approximately $479 million. The Company financed such cash payments and debt assumption with the proceeds from the Interim Loan and through borrowings under the Bank Credit Facility. In addition, the Company assumed indebtedness of the Partnership aggregating approximately $575 million, including $571 million outstanding under the Partnership Credit Facility and $4 million of capital lease obligations. On the Closing Date, the Company entered into the Interim Loan Agreement with certain financial institutions. The Interim Loan Agreement provided for commitments of $350 million which were used to fund the cash payments and debt assumption under the Restructuring. The commitments were fully funded to the Company on the Closing Date. The obligations under the Interim Loan Agreement were due in full one year from the Closing Date. However, the Company had the option to convert any outstanding principal amount of the Interim Loan on such date (the "Conversion Date") into a term loan maturing April 1, 2008. The Company gave notice of such conversion on March 29, 1999, in accordance with the term of the Interim Loan Agreement. II-8 In addition, on the Conversion Date, the Company became obligated to enter into a stock warrant agreement with the Lenders providing for the issuance of warrants to purchase common stock of the Company equal to 2% of the Company's outstanding common stock on the Conversion Date. The warrants are to be exercisable over a ten-year period at a nominal exercise price. Interest was payable at variable rates monthly in arrears on the last day of each month until the Conversion Date. Thereafter, interest is payable quarterly in arrears, except for any term loan converted to a fixed rate loan, in which event interest is payable on March 31 and September 30 of each year. If interest payable by the Company exceeds 15%, the Company may elect to pay all or a portion of the interest in excess of 15% by issuance of notes in an aggregate principal amount equal to such excess amount. Prior to the Conversion Date, the Company could prepay the Interim Loan without penalty. After the Conversion Date, certain limited prepayments are permitted until April 1, 2001 out of the proceeds of certain equity offerings. Otherwise, prepayment is not permitted until on or after April 1, 2003. Prepayment penalties apply to any prepayment prior to April 1, 2006, which penalties are calculated with reference to the interest rate in effect at the time of prepayment. The Interim Loan Agreement provides for mandatory prepayments of the Interim Loan upon the occurrence of certain asset sales, capital contributions, securities issuances and a change of control (as defined in the Interim Loan Agreement) of the Company. In connection with the Restructuring, the Company amended and restated the Bank Credit Facility. As amended, the Bank Credit Facility provides for maximum commitments of up to $700 million, comprising $550 million of revolving loan commitments and $150 million of term commitments. As of December 31, 1998, $513.2 million in loans were outstanding under the Bank Credit Facility, and an additional $30 million of availability had been utilized to obtain two outstanding letters of credit. The Company was in compliance with the restrictive covenants contained in the Bank Credit Facility at December 31, 1998. Additional borrowings under the Bank Credit Facility are subject to the Company's continuing compliance with such restrictive covenants, which relate primarily to the maintenance of certain ratios of cash flow to debt and cash flow to debt service, as defined. Commencing March 31, 2001, the revolving loan commitments are to be reduced quarterly, and outstanding borrowings under the term loan commitments will be payable in quarterly installments, in each case in accordance with a schedule, until final maturity at June 30, 2005. The Bank Credit Facility contains covenants regarding debt service coverage and leverage, as well as negative covenants restricting, among other things indebtedness, liens and other encumbrances, mergers or consolidation transactions, transactions with affiliates, investments, capital expenditures, and payment of dividends and other distributions. II-9 The Partnership obtained the Partnership Credit Facility, which currently allows for borrowings up to $585 million, to finance advances to Tempo for payments due in respect of the construction and launch of two high power communications satellites. Borrowings under the Partnership Credit Facility are collateralized by letters of credit (the "Partnership Letters of Credit"), which were arranged for by affiliates of the Partners (or, in the case of TSAT, affiliates of TCI) other than GE Americom. In connection with the Restructuring, the Partnership became an indirect, wholly-owned subsidiary of the Company. In addition, the Partners and TCI agreed to maintain their respective Partnership Letters of Credit through June 1999, and the Company entered into Reimbursement Agreements with respect to such letters of credit, whereby the Company agreed to indemnify the parties arranging for such letters of credit from and against all obligations thereunder and under the existing reimbursement agreements and/or other existing documentation relating thereto, including all existing and future payment obligations. The obligations of the Company under such Reimbursement Agreements are subordinated in right of payment, in the manner set forth in the Reimbursement Agreement, to all indebtedness of the Company under the Bank Credit Facility, the Interim Loan Agreement and the Notes. At December 31, 1998, the balance due under the Partnership Credit Facility was $575 million, including amounts borrowed to pay interest charges. The maturity date of the Partnership Credit Facility, as amended, is June 30, 1999. The Company currently anticipates that it will use the proceeds from the Hughes High Power Transaction to repay the Partnership Credit Facility. To the extent such proceeds are not sufficient to repay all amounts due under the Partnership Credit Facility, the stockholders of the Company have committed to make capital contributions in agreed-upon percentages to fund such deficiency. At December 31, 1998, the Company had outstanding $200 million aggregate principal amount of 10 7/8% Senior Subordinated Notes and $275 million aggregate principal amount at maturity of 12 1/4% Senior Subordinated Discount Notes. Cash interest on the Senior Subordinated Notes accrues at a rate of 10 7/8% per annum and is payable semi-annually in arrears each February 15 and August 15. Cash interest will not accrue or be payable on the Senior Subordinated Discount Notes prior to February 15, 2002. Thereafter, cash interest on the Senior Subordinated Discount Notes will accrue at a rate of 12 1/4% per annum and will be payable semi-annually in arrears on each February 15 and August 15, commencing August 15, 2002; provided, however, that at any time prior to February 15, 2002, the Company may make a Cash Interest Election (as defined in the applicable Indenture) on any interest payment date to commence the accrual of cash interest from and after the Cash Interest Date (as defined in the applicable Indenture), in which case the outstanding principal amount at maturity of each Senior Subordinated Discount Note will on such interest payment date be reduced to the Accreted Value (as defined in the applicable Indenture) of such Senior Subordinated Discount Note as of such interest payment date, and cash interest (accruing at a rate of 12 1/4% per annum from the Cash Interest Election Date) shall be payable with respect to such Senior Subordinated Discount Note on each interest payment date thereafter. The Notes mature on February 15, 2007. II-10 Pursuant to the Hughes Medium Power Agreement, it is contemplated that the Company will sell its DBS medium-power business and assets to Hughes for $1.1 billion in cash and 4.871 million shares of GMH Stock valued at approximately $225 million, based upon the closing price of GMH Stock on the date of the purchase agreement. The foregoing purchase price is subject to adjustments for working capital at the date of closing. The Company is responsible for the payment of certain obligations not assumed by Hughes, satisfaction of its funded indebtedness and the payment of costs, currently estimated to range from $270 million to $340 million, associated with the termination of certain vendor and service contracts and lease agreements related to the Company's medium power business and proposed high power business strategy (the "Shutdown Liabilities"). The consummation of the Hughes Medium Power Transaction is subject to various consents from PRIMESTAR's lenders; restructuring of certain of the Company's indebtedness, as described below; and other customary conditions. On February 1, 1999 and in connection with the Hughes Medium Power Transaction, the Company commenced the Tender Offers to purchase 100% of the outstanding principal amount of the Company's 10 7/8% Senior Subordinated Notes due 2007 at a price of $670 per $1,000 principal amount and 100% of the outstanding principal amount of the Company's 12 1/4% Senior Subordinated Discount Notes due 2007 at a price of 67% of the accreted value of the Senior Subordinated Discount Notes as of February 15, 1999. In addition, PRIMESTAR made a separate offer to lenders under the Interim Loan Agreement, to purchase 100% of the outstanding principal amount due thereunder at a price of $670 per $1,000 principal amount. Each of the Tender Offers and the Offer to Purchase was subject to a minimum tender condition of 90% of the outstanding principal amount of such issue. In conjunction with the Tender Offers, PRIMESTAR solicited consents to certain proposed amendments to the indentures governing the Notes and the Interim Loan that would eliminate substantially all of the restrictive covenants thereunder and would amend certain other provisions. Consummation of both the Tender Offers and the Offer to Purchase was conditioned upon the closing of the Hughes Medium Power Transaction and other conditions. Following several extensions, the Tender Offer and Offer to Purchase expired on March 25 1999. The minimum tender conditions were not satisfied under the Tender Offer and Offer to Purchase, and no securities or loans were purchased thereunder. Since the announcement of the Hughes Medium Power Agreement and of the proposed restructuring of the Company's senior subordinated indebtedness relating thereto, the Company has been engaged in negotiations with the Bondholders' Committee and the Bridge Lenders' Committee with respect to the possible terms and conditions of the Proposed Debt Restructuring. In that connection, the Company has entered into confidentiality agreements with certain representatives of the Committees and has agreed to pay certain expenses of the Committees, including certain fees and expenses of their legal counsel and financial advisor. Based on the progress of such negotiations to date, the Company believes that the Proposed Debt Restructuring will be consummated on terms satisfactory to the Company and such Committees, by means of privately negotiated transactions. However, the Company has not entered into any agreements to date with respect to the terms and conditions of any such restructuring, and there can be no assurance that the Proposed Debt Restructuring will be consummated. In the event the Company is unable to negotiate certain minimum tender conditions in connection with the Proposed Debt Restructuring, the Company does not intend to consummate the Hughes Medium Power Transaction. The Hughes High Power Agreement provides for the sale to Hughes of the Tempo Satellites, Tempo's 119 degrees W.L. orbital slot license and the Tempo Rights for aggregate consideration valued at $500 million. Pursuant to the Hughes High Power Agreement, Hughes would assume $465 million of TSAT's liability to the Partnership, pay TSAT $2.5 million in cash, and pay PRIMESTAR and the Partnership $32.5 million in cash in consideration for PRIMESTAR's rights to acquire Tempo's assets and the termination and relinquishment by the Partnership of the Tempo Rights. In addition, the Partnership has agreed to forgive amounts due from TSAT in excess of the $465 million to be assumed by Hughes ($4,498,000 at December 31, 1998). II-11 Effective March 10, 1999, the First Closing was consummated whereby Hughes acquired Tempo DBS-2 and PRIMESTAR's option to acquire Tempo DBS-2 (the "Tempo DBS-2 Option") for aggregate consideration of $150 million. Such consideration was comprised of the following: (i) $9,750,000 paid to PRIMESTAR and the Partnership for the Tempo DBS-2 Option and the termination of the Tempo Rights, (ii) $750,000 paid to TSAT to exercise the Tempo DBS-2 Option and (iii) the assumption by Hughes of $139,500,000 due to the Partnership from TSAT in exchange for Tempo DBS-2. Simultaneously with the First Closing, Hughes repaid the liability to the Partnership that Hughes assumed. With regard to the sale of the remaining assets contemplated by the Hughes High Power Agreement, Tempo has been notified that Tempo DBS-I experienced power reductions which occurred on March 29, 1999 and April 2, 1999. Although the Company does not believe the extent of such power reductions is significant, a definitive assessment of the impact on Tempo DBS-I is not yet complete. Notwithstanding the foregoing, the Second Closing, which is subject to the receipt of appropriate regulatory approvals and other customary closing conditions, is expected to be consummated in the second quarter of 1999. In the event the Second Closing is not consummated and the Hughes High Power Agreement is abandoned, there can be no assurance that the Company will be able to recover the carrying amount of its satellite rights. As noted above, the consideration to be received by the Company in the Hughes High Power Transaction is to be comprised of $1.1 billion in cash and 4.871 million shares of GMH Stock. Pursuant to the terms of the Hughes Medium Power Agreement, PRIMESTAR will not be able to dispose of the GMH Stock for a period of one year from the closing of the Hughes Medium Power Transaction except for certain transfers to affiliates. PRIMESTAR is considering its options with respect to the GMH Stock, but has not yet made any decisions as to the ultimate disposition of such stock. Upon consummation of the Hughes Medium Power Transaction, the Company anticipates that is would use the proceeds it receives to (i) repay amounts due under the Bank Credit Facility ($513 million at December 31, 1998), (ii) fund the retirement or purchase and cancellation of the Notes and borrowings under the Interim Loan Agreement pursuant to the Proposed Debt Restructuring (estimated at less than $656 million) and (iii) fund the Shutdown Liabilities. The Company currently estimates the total Shutdown Liabilities to range from $270 million to $340 million, comprised of employee severance, lease cancellation fees and vendor purchase commitments. In addition, the stockholders of PRIMESTAR have approved the payment to TSAT of consideration (the "PRIMESTAR Payment") in the amount of $65 million, payable in shares of GMH Stock, valued at $46.1875 (the closing price of such stock on the date of the purchase agreements with Hughes), subject to the terms and conditions set forth in an agreement dated as of January 22, 1999 (the "PRIMESTAR Payment Agreement"). In consideration of the PRIMESTAR Payment, TSAT agreed to approve the Hughes Medium Power Transaction and Hughes High Power Transaction as a stockholder of PRIMESTAR, to modify certain agreements to facilitate the Hughes High Power Transaction, and to issue the Company a share appreciation right with respect to the shares of GMH Stock received as the PRIMESTAR Payment, granting the Company the right to any appreciation in such GMH Stock over the one year period following the date of issuance, over an agreed strike price of $47.00. Pursuant to the PRIMESTAR Payment Agreement, TSAT has also agreed to forego any liquidating distribution or other payment that may be made in respect of the outstanding shares of PRIMESTAR upon any dissolution and winding-up of PRIMESTAR, or otherwise in respect of PRIMESTAR'S existing equity. Such payment is conditioned upon the closing of the Hughes Medium Power Transaction. The Company has a history of operating losses and reported an accumulated deficit at December 31, 1998. In connection with the Hughes Medium Power Transaction, affiliates of the stockholders of the Company, other than TSAT, and an affiliate of TCI have committed to make funds available to the Company, either in the form of capital contributions or loans, up to an aggregate of $1,013 million. Management of the Company believes, but cannot assure, that when such funds are combined with the proceeds from the Hughes Medium Power and High Power Transactions and the Company's existing sources of liquidity, that the Company will be able to meet its obligations as they become due and payable. In the event the Hughes Medium Power Transaction is not consummated and is abandoned, the Company currently intends to continue operating its medium power business. Under such scenario, the Company anticipates that it would curtail marketing and sales activities, reduce the number of new installations and otherwise reduce expenditures to the extent possible. The Company believes, but cannot assure, that in such event, the Company's cash flow from continuing operations, commitments from the Company's stockholders to make certain funds available to the Company and proceeds from the Hughes High Power Transaction would provide the necessary funds for the Company to meet its obligations as they become due and payable through December 31, 1999. In the event the Company is unable to meet its obligations as they become due and payable, the Company may be required to restructure or refinance certain of its liabilities. There can be no assurance that such restructuring or refinancing, if necessary, would be accomplished on terms acceptable to the Company. II-12 The Company is highly leveraged. The degree to which the Company is leveraged may adversely affect the Company's ability to compete effectively against better capitalized competitors and to withstand downturns in its business or the economy generally, and could limit its ability to pursue business opportunities that may be in the interests of the Company and its stockholders. The Company's ability to repay or refinance its debt will require the company to increase its operating cash flow or to obtain additional debt or equity financing. There can be no assurance that the Company will be successful in increasing its operating cash flow by a sufficient magnitude or in a timely manner or in raising sufficient additional debt or equity financing to enable it to repay or refinance its debt. During the years ended December 31, 1998, 1997, and 1996, the Company's operating activities provided cash of $137,175,000, $91,637,000 and $115,201,000, respectively. For the foreseeable future, the Company believes that its operating activities will represent a reliable source of liquidity. During the years ended December 31, 1998, 1997, and 1996, the Company used cash of $563,334,000, $227,327,000, and $326,621,000, respectively, to fund (i) the acquisition and installation of satellite reception equipment, and (ii) certain other capital expenditures. Based upon current business plans, assuming the Hughes Medium Power Transaction is not consummated, the Company estimates that its aggregate capital expenditures will be approximately $200 million during the year ended December 31, 1999. The Company expects that the majority of such estimated capital expenditures will be used to fund the acquisition and installation of satellite reception equipment. The actual amount of capital to be required will be primarily a function of (i) subscriber growth and churn rates, and (ii) the actual cost of purchasing and installing satellite reception equipment. Accordingly, no assurance can be given that the Company's actual capital expenditures during the year ended December 31, 1999 will not exceed the estimated capital expenditures set forth above. At December 31, 1998, PRIMESTAR's future minimum commitments to purchase satellite reception equipment aggregated approximately $44 million. As part of the compensation paid to the Company's various sales agents, the Company has agreed to pay certain residual sales commissions during specified periods following the initiation of service (generally five years). During the year ended December 31, 1998, residual sales commissions to such sales agents aggregated $25,639,000. The Company is in the process of identifying and addressing issues surrounding the Year 2000 ("Y2K") and its impact on the Company's operations. The issue surrounding the Year 2000 is whether the Company's operations and financial systems, or the systems used by the companies with whom the Company conducts business, will properly recognize and process date sensitive information before and after January 1, 2000. The following discussion is based on information currently available to the Company. The Company completed an initial assessment in October of 1998 which identified areas of risk associated with the Year 2000. The Year 2000 Program Office was established in the fourth quarter of 1998 to oversee the Company's Year 2000 project. Detailed inventories have been gathered and cost estimates have been finalized. For each functional area of the project, detailed work plans have been developed and put into place. Separate test environments completed construction and testing was initiated in the first quarter of 1999. II-13 A detail assessment of applications has been performed which identified applications requiring remediation. The assessment findings for applications showed minimal remediation, and the effort is expected to be finalized by the end of the second quarter of 1999. Testing efforts running parallel to remediation are expected to be completed by the first part of the third quarter of 1999. The exception to this is the area of network operations where the detail assessment, remediation and testing is expected to be on-going through the third quarter of 1999. The Company has identified business partners that are critical to the Company's ability to continue providing service to its customers - operations and availability of IRDs and related software; ability to deliver programming to customers; and ability to authorize, service and bill customers. The Company's Y2K plan includes the continual review and possible integrated testing of critical business functions supplied by these business partners. An event of failure by a critical business partner could have a material adverse effect on the Company's results of operations. The Company intends to monitor the Y2K efforts of such business partners, and will devise contingency plans in the event that Year 2000 failures occur. The Company has identified vendors that supply products and services and has established an on-going process to evaluate and track their Y2K readiness. Based upon responses and research with these vendors, the Company will make decisions whether to remain in the partnership or choose alternative sources. For those vendors that supply a product or service to the Company which could adversely impact daily operations in the event of a Year 2000 failure, the research and subsequent decision will be made in the second quarter of 1999. The Company has analyzed and continues to analyze its internal IT and non- IT systems. The Company believes that most of such systems are currently capable of functioning without substantial Y2K compliance problems, and that those which are not currently Y2K compliant, will be Y2K capable in a time frame that will avoid any material adverse effect on the Company. The Company intends to initiate contingency planning in the first quarter of 1999 and expects to continue to refine and test contingency plans through the fourth quarter of 1999. Through December 1998, the Company has spent approximately $250,000 for Y2K issues. The Company has completed a budget for Y2K costs, and currently estimates the cost to remediate Y2K issues will be $11,800,000, comprised primarily of $4.8 million for technical remediation and testing, $2.8 million for project management, $1.5 million for software upgrades and $1.3 million for replacement of personal computers. Additional costs could be identified during the life of the project. The Company does not currently believe that any of the foregoing will have a material adverse effect on its financial condition or its results of operations. However, the process of evaluating the Company's products and third party products and systems is ongoing. Although not expected, failures of critical suppliers and/or systems could have a material adverse effect on the Company's financial condition or results of operations. As widely publicized, Y2K compliance has many issues and aspects, not all of which the Company is able to accurately forecast or predict. There is no way to assure that Y2K will not have adverse effects on the Company, some of which could be material. TCI and the Non-TSAT parties, other than GE Americom, have arranged for letter of credit (the "GE-2 Letters of Credit") to support the Company's obligations under the GE-2 Agreement. Pursuant to the Restructuring Agreement, the Company reimburses TCI and the Non-TSAT Parties for fees related to the Partnership Letters of Credit and the GE-2 Letters of Credit. Such reimbursements aggregated $10,004,000 during the year ended December 31, 1998 and are included in interest expense in the accompanying consolidated statements of operations. II-14 The International Bureau has granted a subsidiary of EchoStar a conditional authorization to construct, launch and operate a Ku-band domestic fixed satellite into the orbital position at 83 degrees W.L., immediately adjacent to that occupied by GE-2, the medium power satellite now used to provide the PRIMESTAR(R) service. Contrary to previous FCC policy, which would have permitted operation of a satellite at the 83 degrees W.L. orbital position at a power level of only 60 to 90 watts (subject to coordination requirements) EchoStar has been authorized to operate at a power level of 130 watts. If EchoStar were to launch its high power satellite authorized to 83 degrees W.L. and commence operations at that location at a power level of 130 watts, it would likely cause harmful interference to the reception of the PRIMESTAR(R) signal from GE-2 by subscribers to the PRIMESTAR(R) medium power service. GE Americom and PRIMESTAR have each requested reconsideration of the International Bureau's authorization for EchoStar to operate at 83 degrees W.L. These requests, which were opposed by EchoStar and others, currently are pending at the International Bureau. There can be no assurance that the International Bureau will change slot assignments, or power levels, in a fashion that eliminates the potential for harmful interference. Accordingly, the ultimate outcome of this matter cannot presently be predicted. GE Americom and PRIMESTAR have attempted to resolve potential coordination problems directly with EchoStar, and the Company has advanced a counter proposition to resolve this matter. This proposition is currently under examination. It is uncertain whether any agreement in respect of such coordination between the Partnership and EchoStar will be reached, or that if such agreement is reached that coordination will resolve such interference. Item 7A. Qualitative and Quantitative Disclosures About Market Risk - -------- ---------------------------------------------------------- At December 31, 1998, the Company had $394,995,000 (or 22%) of fixed-rate debt with a weighted average interest rate of 11.43% and $1,438,200,000 (or 78%) of variable-rate debt with a weighted average interest rate of 7.3%. Accordingly, the Company is sensitive to market rate risk. To date, the Company has not entered into any derivative instruments to manage its interest rate exposure. The table below provides principal cash flows and related weighted average interest rates for the Company's debt obligations.
Expected Maturity Date ---------------------- 1999 2000 2001 2002 2003 Thereafter ---- ---- ---- ---- ---- ---------- dollar amounts in thousands December 31, 1998 - ----------------- Long-term Debt Fixed-rate $ 921 1,013 342 368 396 391,955 Average interest rate 7.50% 7.50% 7.50% 7.50% 7.50% 11.46% Variable-rate $575,000 -- 15,000 30,000 153,200 665,000 Average interest rate 5.60% -- 6.68% 6.68% 6.68% 9.23%
Item 8. Financial Statements and Supplementary Data. - ------ ------------------------------------------- The financial statements of the Company are filed under this item beginning on page II-16. Item 9. Changes in and Disagreements with Accountants on Accounting and - ------ --------------------------------------------------------------- Financial Disclosure. -------------------- None. II-15 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders PRIMESTAR, Inc.: We have audited the accompanying consolidated balance sheets of PRIMESTAR, Inc. and subsidiaries (as defined in note 1) as of December 31, 1998 and 1997 and the related consolidated statements of operations, equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 1998. In connection with our audit of the consolidated financial statements, we have also audited the financial statement schedule listed in the index at Item 14(a). These consolidated financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and the financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of PRIMESTAR, Inc. and subsidiaries as of December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1998, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. KPMG LLP Denver, Colorado April 15, 1999 II-16 PRIMESTAR INC. AND SUBSIDIARIES Consolidated Balance Sheets December 31, 1998 and 1997
1998 1997 ------------------- ------------------- amounts in thousands Assets - ------ Cash and cash equivalents $ -- 6,084 Trade accounts receivable 117,655 40,386 Other receivables 29,387 -- ---------- --------- 147,042 40,386 Less allowance for doubtful accounts 7,442 5,307 ---------- --------- 139,600 35,079 ---------- --------- Prepaid expenses 3,967 1,262 Investment in PRIMESTAR Partners L.P. (the "Partnership") (note 3) -- 11,093 Property and equipment, at cost: Satellites -- 463,133 Satellite reception equipment 1,198,376 674,387 Subscriber installation costs 270,384 227,131 Support equipment 93,698 34,389 ---------- --------- 1,562,458 1,399,040 Less accumulated depreciation 413,868 277,103 ---------- --------- 1,148,590 1,121,937 ---------- --------- Intangible assets, net of accumulated amortization (note 6) 786,373 -- Deferred financing costs and other assets, net of accumulated amortization 33,557 29,401 ---------- --------- $2,112,087 1,204,856 ========== =========
(continued) II-17 PRIMESTAR INC. AND SUBSIDIARIES Consolidated Balance Sheets, continued December 31, 1998 and 1997
1998 1997 --------------------- --------------------- amounts in thousands Liabilities and Stockholders' Equity (Deficit) - ---------------------------------------------- Accounts payable $ 195,873 50,755 Accrued charges from related parties (note 12) 14,792 62,816 Accrued commissions 16,296 10,435 Accrued interest payable 16,142 8,658 Other accrued expenses 104,463 17,712 Deferred revenue 100,948 29,675 Due to the Partnership (note 13) -- 463,133 Debt (note 8) 1,833,195 418,729 Deferred income taxes (note 11) 75,057 -- Other liabilities 40,095 6,674 ----------- --------- Total liabilities 2,396,861 1,068,587 ----------- --------- Stockholders' Equity (Deficit) (note 9): PRIMESTAR, Inc. ("PRIMESTAR") preferred stock, $.01 par value; authorized 350,000,000 shares; none issue -- -- PRIMESTAR Class A common stock, $.01 par value; authorized 850,000,000 shares; issued 179,143,934 in 1998 1,791 -- PRIMESTAR Class B common stock, $.01 par value; authorized 50,000,000 shares; issued 8,465,324 in 1998 85 -- PRIMESTAR Class C common stock, $.01 par value; authorized 30,000,000 shares; issued 13,332,365 in 1998 133 -- PRIMESTAR Class D common stock, $.01 par value; authorized 150,000,000 shares; none issued -- -- TCI Satellite Entertainment, Inc. ("TSAT") preferred stock, $.01 per value; authorized 5,000,000 shares; none issued -- -- TSAT Series A common stock; $1 par value; authorized 185,000,000 shares; issued 58,239,136 shares in 1997 -- 58,239 TSAT Series B common stock, $1 par value; authorized 10,000,000 shares; issued 8,465,324 shares in 1997 -- 8,465 Additional paid-in capital 1,511,041 523,685 Accumulated deficit (1,797,824) (454,120) ----------- --------- Total stockholders' equity (deficit) (284,774) 136,269 ----------- --------- Commitments and contingencies (note 13) $ 2,112,087 1,204,856 =========== =========
See accompanying notes to consolidated financial statements. II-18 PRIMESTAR INC. AND SUBSIDIARIES Consolidated Statements of Operations Years ended December 31, 1998, 1997 and 1996
1998 1997 1996 ------------------- ------------------- ------------------- amounts in thousands, except per share amounts Revenue: Programming and equipment rental $ 1,227,270 512,894 351,548 Installation 62,396 49,096 65,913 ----------- -------- -------- 1,289,666 561,990 417,461 ----------- -------- -------- Operating costs and expenses: Charges from the Partnership (note 12) 82,235 259,600 188,724 Operating (note 12) 565,510 23,992 28,546 Selling, general and administrative (note 12) 438,795 198,263 193,566 Transition (note 12) 20,855 -- -- Restructuring charges (note 10) 26,025 -- -- Impairment of long-lived assets (note 2) 950,289 -- -- Stock compensation 414 8,092 (446) Depreciation (note 5) 445,911 243,642 191,355 Amortization 97,176 -- -- ----------- -------- -------- 2,627,210 733,589 601,745 ----------- -------- -------- Operating loss (1,337,544) (171,599) (184,284) ----------- -------- -------- Other income (expense): Interest expense (145,939) (47,992) (2,023) Share of losses of the Partnership (5,822) (20,473) (3,275) Other, net (1,927) 1,723 3,641 ----------- -------- -------- (153,688) (66,742) (1,657) ----------- -------- -------- Loss before income taxes (1,491,232) (238,341) (185,941) Income tax benefit (note 11) 147,528 -- 45,937 ----------- -------- -------- Net loss $(1,343,704) (238,341) (140,004) =========== ======== ======== Basic and diluted loss per common share (note 6) $ (8.02) (3.58) (2.11) =========== ======== ========
See accompanying notes to consolidated financial statements. II-19 PRIMESTAR INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity (Deficit) Years ended December 31, 1998, 1997 and 1996
PRIMESTAR Common Stock TSAT Common Stock ---------------------------------------------- ----------------------- Class A Class B Class C Series A Series B ------------------ ----------------- ------- ------------ --------- amounts in thousands Balance at January 1, 1996 $ -- -- -- -- -- Net loss -- -- -- -- -- TCIC intercompany allocations -- -- -- -- -- Net cash transfers from TCIC -- -- -- -- -- Recognition of deferred tax assets upon transfer of PRIMESTAR Partners investment in connection with Distribution (note 4) -- -- -- -- -- Adjustment to reflect consummation of Distribution (note 4) -- -- -- 57,941 8,467 Issuance of TSAT Series A Common Stock upon conversion of notes of Tele-Communications, Inc. -- -- -- 5 -- ------------------ ----------------- ------- ------- -------- Balance at December 31, 1996 -- -- -- 57,946 8,467 Net loss -- -- -- -- -- Recognition of stock compensation related to stock options and restricted stock awards -- -- -- -- -- Issuance of TSAT Series A Common Stock related to restricted stock awards -- -- -- 33 -- Issuance of TSAT Series A Common Stock upon conversion of convertible securities of Tele-Communications, Inc. -- -- -- 258 -- Conversion of TSAT Series B to TSAT Series A -- -- -- 2 (2) ------------------ ----------------- ------- ------- -------- Balance at December 31, 1997 -- -- -- 58,239 8,465 Net loss -- -- -- -- -- Recognition of stock compensation related to stock options and restricted stock awards -- -- -- -- -- Issuance of TSAT Series A Common Stock related to restricted stock awards -- -- -- 50 -- Issuance of TSAT Series A Common Stock upon conversion of convertible securities of Tele-Communications, Inc. -- -- -- 989 -- Issuance of PRIMESTAR common stock in Restructuring (note 3) 1,791 85 133 (59,278) (8,465) Reimbursement of TSAT expenses (note 12) -- -- -- -- -- ------------------ ----------------- ------- ------- -------- Balance at December 31, 1998 $1,791 85 133 -- -- ================== ================= ======= ======= ======== Due to TCI Additional Communications, Total paid-in Accumulated Inc. stockholders' capital deficit ("TCIC") equity (deficit) -------------- ----------- ---------------- ---------------- amounts in thousands Balance at January 1, 1996 -- (75,775) 559,359 483,584 Net loss -- (140,004) -- (140,004) TCIC intercompany allocations -- -- 21,009 21,009 Net cash transfers from TCIC -- -- 228,622 228,622 Recognition of deferred tax assets upon transfer of PRIMESTAR Partners investment in connection with Distribution (note 4) -- -- 29,142 29,142 Adjustment to reflect consummation of Distribution (note 4) 521,724 -- (838,132) (250,000) Issuance of TSAT Series A Common Stock upon conversion of notes of Tele-Communications, Inc. -- -- -- 5 -------------- ----------- ---------------- ---------------- Balance at December 31, 1996 521,724 (215,779) -- 372,358 Net loss -- (238,341) -- (238,341) Recognition of stock compensation related to stock options and restricted stock awards 1,781 -- -- 1,781 Issuance of TSAT Series A Common Stock related to restricted stock awards 180 -- -- 213 Issuance of TSAT Series A Common Stock upon conversion of convertible securities of Tele-Communications, Inc. -- -- -- 258 Conversion of TSAT Series B to TSAT Series A -- -- -- -- -------------- ----------- ---------------- ---------------- Balance at December 31, 1997 523,685 (454,120) -- 136,269 Net loss -- (1,343,704) -- (1,343,704) Recognition of stock compensation related to stock options and restricted stock awards 2,596 -- -- 2,596 Issuance of TSAT Series A Common Stock related to restricted stock awards (50) -- -- -- Issuance of TSAT Series A Common Stock upon conversion of convertible securities of Tele-Communications, Inc. -- -- -- 989 Issuance of PRIMESTAR common stock in Restructuring (note 3) 984,962 -- -- 919,228 Reimbursement of TSAT expenses (note 12) (152) -- -- (152) -------------- ----------- ---------------- ---------------- Balance at December 31, 1998 1,511,041 (1,797,824) -- (284,774) ============== =========== ================ ================
See accompanying notes to consolidated financial statements. II-20 PRIMESTAR INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Years ended December 31, 1998, 1997 and 1996
1998 1997 1996 ------------- --------- --------- amounts in thousands (see note 7) Cash flows from operating activities: Net loss $(1,343,704) (238,341) (140,004) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 543,087 243,642 191,355 Share of losses of the Partnership 5,822 20,473 3,275 Accretion of debt discount 20,941 16,719 -- Restructuring charges 26,025 -- -- Payments related to restructuring charges (6,388) -- -- Impairment of long-lived assets 950,289 -- -- Stock compensation 414 8,092 (446) Payments related to stock appreciation rights (2,479) -- -- Deferred income tax expense (benefit) (147,528) -- 24,708 Other non-cash charges (credits) 3,940 6,919 (311) Changes in operating assets and liabilities, net of the effect of the Restructuring: Change in receivables (79,838) (15,014) 4,364 Change in prepaids 3,417 (335) (841) Change in accruals, payables and other liabilities 132,375 42,056 24,096 Change in deferred revenue 30,802 7,426 9,005 ----------- -------- -------- Net cash provided by operating activities 137,175 91,637 115,201 ----------- -------- -------- Cash flows from investing activities: Cash paid in Restructuring (54,894) -- -- Capital expended for property and equipment (563,334) (227,327) (326,621) Capital expended for construction of satellites -- (5,448) (74,785) Additional investments in, and related advances to, the Partnership (75) (7,073) (17,552) Repayments of advances to the Partnership -- 7,815 -- Other investing activities (6,365) (1,581) (5,458) ----------- -------- -------- Net cash used in investing activities (624,668) (233,614) (424,416) ----------- -------- -------- Cash flows from financing activities: Borrowings of debt 959,761 498,061 259,000 Repayments of debt (469,858) (344,699) (263,000) Payment of deferred financing costs (9,483) (17,780) (7,000) Proceeds from issuance of common stock 989 471 -- Increase in due to the Partnership -- 5,448 74,785 Increase in due to TCIC -- -- 250,189 ----------- -------- -------- Net cash provided by financing activities 481,409 141,501 313,974 ----------- -------- -------- Net increase (decrease) in cash and cash equivalents (6,084) (476) 4,759 Cash and cash equivalents: Beginning of year 6,084 6,560 1,801 ----------- -------- -------- End of year $ -- 6,084 6,560 ============ ======== ========
See accompanying notes to financial statements. II-21 PRIMESTAR, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 1998, 1997 and 1996 (1) Organization and Basis of Presentation -------------------------------------- The accompanying consolidated financial statements of PRIMESTAR, Inc. ("PRIMESTAR" or the "Company") include the historical financial information of (i) certain satellite television assets (collectively, "TCI SATCO") of TCIC, a subsidiary of Tele-Communications, Inc. ("TCI") for periods prior to the December 4, 1996 consummation of the distribution transaction described in note 4, (ii) TSAT and its consolidated subsidiaries for the period from December 5, 1996 through March 31, 1998 and (iii) PRIMESTAR and its consolidated subsidiaries for the period subsequent to March 31, 1998. PRIMESTAR was incorporated on August 27, 1997, and subsequently, ten shares of the Company's common stock were issued to TSAT for a capital contribution of $10. All significant inter-entity and intercompany transactions have been eliminated. The Company owns and operates the PRIMESTAR(R) direct to home satellite service throughout the continental U.S. The PRIMESTAR(R) service is transmitted via a satellite ("GE-2") owned and operated by GE American Communications ("GE Americom") at the 85 West Longitude ("W.L.") orbital position. (2) The Hughes Transactions ----------------------- On January 22, 1999, PRIMESTAR announced that it had reached an agreement with Hughes Electronics Corporation ("Hughes"), a subsidiary of General Motors Corporation, to sell its medium-power direct broadcast satellite ("DBS") business and assets to Hughes for $1.1 billion in cash and 4.871 million shares of General Motors Class H common stock ("GMH Stock") valued at approximately $225 million, based on the closing price of GMH Stock on the date of the purchase agreement (the "Hughes Medium Power Transaction"). The foregoing purchase price is subject to adjustments for working capital at the date of closing. The Company is responsible for the payment of certain obligations not assumed by Hughes, satisfaction of its funded indebtedness and the payment of costs, currently estimated to range from $270 million to $340 million, associated with the termination of certain vendor and service contracts and lease agreements related to the Company's medium power business and proposed high power business strategy. The consummation of the Hughes Medium Power Transaction is subject to various consents from PRIMESTAR's lenders; restructuring of certain of the Company's indebtedness, as described below; and other customary conditions. On February 1, 1999 and in connection with the Hughes Medium Power Transaction, the Company commenced tender offers (the "Tender Offers") to purchase 100% of the outstanding principal amount of the Company's 10 7/8% Senior Subordinated Notes due 2007 (the "Senior Subordinated Notes") at a price of $670 per $1,000 principal amount and 100% of the outstanding principal amount of the Company's 12 1/4% Senior Subordinated Discount Notes due 2007 (the "Senior Subordinated Discount Notes", and together with the Senior Subordinated Notes, the "Notes") at a price of 67% of the accreted value of the Senior Subordinated Discount Notes as of February 15, 1999. (continued) II-22 PRIMESTAR, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements In addition, PRIMESTAR made a separate offer to lenders under the Company's Senior Subordinated Credit Agreement, dated as of April 1, 1998 (the "Interim Loan Agreement"), to purchase 100% of the outstanding principal amount due thereunder at a price of $670 per $1,000 principal amount (the "Offer to Purchase"). Each of the Tender Offers and the Offer to Purchase was subject to a minimum tender condition of 90% of the outstanding principal amount of such issue. In conjunction with the Tender Offers, PRIMESTAR solicited consents to certain proposed amendments to the indentures governing the Notes and the Interim Loan that would eliminate substantially all of the restrictive covenants thereunder and would amend certain other provisions. Consummation of both the Tender Offers and the Offer to Purchase was conditioned upon the closing of the Hughes Medium Power Transaction and other conditions. Following several extensions, the Tender Offer and the Offer to Purchase expired on March 25, 1999. The minimum tender conditions were not satisfied under the Tender Offer and Offer to Purchase, and no securities or loans were purchased thereunder. Since the announcement of the Hughes Medium Power Agreement and of the proposed restructuring of the Company's senior subordinated indebtedness relating thereto (the "Proposed Debt Restructuring"), the Company has been engaged in negotiations with the representatives of an informal committee (the "Bondholders' Committee") of holders of Notes and with representatives of an informal committee (the "Bridge Lenders' Committee" and, together with the Bondholders' Committee, the "Committees") of holders of loans under the Interim Loan Agreement, with respect to the possible terms and conditions of the Proposed Debt Restructuring. In that connection, the Company has entered into confidentiality agreements with certain representatives of the Committees and has agreed to pay certain expenses of the Committees, including certain fees and expenses of their legal counsel and financial advisor. Based on the progress of such negotiations to date, the Company believes that the Proposed Debt Restructuring will be consummated on terms satisfactory to the Company and such Committees, by means of privately negotiated transactions. However, the Company has not entered into any agreements to date with respect to the terms and conditions of any such restructuring, and there can be no assurance that the Proposed Debt Restructuring will be consummated. In the event the Company is unable to negotiate certain minimum tender conditions in connection with the Proposed Debt Restructuring, the Company does not intend to consummate the Hughes Medium Power Transaction. In connection with their approval of the Hughes Medium Power Transaction, the stockholders of PRIMESTAR also approved the payment to TSAT of consideration (the "PRIMESTAR Payment") in the amount of $65 million, payable in shares of GMH Stock, valued at $46.1875 (the closing price of such stock on the date of the purchase agreements with Hughes), subject to the terms and conditions set forth in an agreement dated as of January 22, 1999 (the "PRIMESTAR Payment Agreement"). In consideration of the PRIMESTAR Payment, TSAT agreed to approve the Hughes Medium Power Transaction and Hughes High Power Transaction as a stockholder of PRIMESTAR, to modify certain agreements to facilitate the Hughes High Power Transaction, and to issue the Company a share appreciation right with respect to the shares of GMH Stock received as the PRIMESTAR Payment, granting the Company the right to any appreciation in such GMH Stock over the one year period following the date of issuance, over an agreed strike price of $47.00. Pursuant to the PRIMESTAR Payment Agreement, TSAT has also agreed to forego any liquidating distribution or other payment that may be made in respect of the outstanding shares of PRIMESTAR upon any dissolution and winding-up of PRIMESTAR, or otherwise in respect of PRIMESTAR'S existing equity. Such payment is conditioned upon the closing of the Hughes Medium Power Transaction. (continued) II-23 PRIMESTAR, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements In connection with the Hughes Medium Power Transaction, the Company concluded that it would be unable to recover the carrying value of its assets over their expected remaining useful life. Accordingly, the Company has recorded an impairment loss of $950,289,000 (the "Impairment Loss"), which represents the difference between the carrying value of the Company's assets and their estimated fair value. Such fair value was based upon the estimated consideration to be received by the Company in the Hughes Medium Power Transaction. The reduction in carrying amount of assets included in the Impairment Loss is as follows (amounts in thousands):
Property and equipment: Satellite reception equipment $103,898 Subscriber installation costs 223,541 Intangible assets: Excess purchase price over acquired net assets 401,475 Tradename 221,375 -------- $950,289 ========
In a separate transaction, the Company announced that TSAT and the Company had reached an agreement with Hughes to sell (i) TSAT's authorizations granted by the Federal Communications Commission (the "FCC") and other assets and liabilities relating to a proposed DBS system being constructed by Tempo Satellite, Inc. ("Tempo"), a subsidiary of TSAT, at 119 degrees W.L. (collectively, the "Tempo DBS Assets") and (ii) PRIMESTAR's rights relating to the Tempo DBS Assets (see note 13) to Hughes, for aggregate consideration valued at $500 million (the "Hughes High Power Transaction"). Pursuant to the agreement, Hughes would assume $465 million of TSAT's liability to the Partnership, pay TSAT $2.5 million in cash and pay PRIMESTAR and the Partnership $32.5 million in cash. In addition, the Partnership has agreed to forgive amounts due from TSAT in excess of the $465 million to be assumed by Hughes ($4,498,000 at December 31, 1998). To facilitate such transaction, the Partnership would terminate and relinquish the Tempo Capacity Option, as defined in note 13. Due to the fact that regulatory approval is required to transfer certain of the Tempo DBS Assets to Hughes, the Hughes High Power Transaction will be completed in two steps. Effective March 10, 1999, the first closing of the Hughes High Power Transaction (the "First Closing") was consummated whereby Hughes acquired one of Tempo's high power satellites ("Tempo DBS-2") and PRIMESTAR's option to acquire Tempo DBS-2 (the "Tempo DBS-2 Option") for aggregate consideration of $150 million. Such consideration was comprised of the following: (i) $9,750,000 paid to PRIMESTAR and the Partnership for the Tempo DBS-2 Option and the termination of the Partnership's rights under the Tempo Capacity Option, (ii) $750,000 paid to TSAT to exercise the Tempo DBS-2 Option and (iii) the assumption by Hughes of $139,500,000 due to the Partnership from TSAT in exchange for Tempo DBS-2. Simultaneously with the First Closing, Hughes repaid the liability to the Partnership that Hughes assumed. With regard to the sale of the remaining assets contemplated by the Hughes High Power Agreement (the "Second Closing"), Tempo has been notified that its in-orbit satellite ("Tempo DBS-I") experienced power reductions which occurred on March 29, 1999 and April 2, 1999. Although the Company does not believe the extent of such power reductions is significant, a definitive assessment of the impact on Tempo DBS-I is not yet complete. Notwithstanding the foregoing, the Second Closing, which is subject to the receipt of appropriate regulatory approvals and other customary closing conditions, is expected to be consummated in the second quarter of 1999. In the event the Second Closing is not consummated and the Hughes High Power Agreement is abandoned, there can be no assurance that the Company will be able to recover the carrying amount of its satellite rights. In addition, consummation of the Hughes Medium Power Transaction is not dependent on completion of the Hughes High Power Transaction, and completion of the Hughes High Power Transaction is not dependent on consummation of the Hughes Medium Power Transaction. The Company has a history of operating losses and reported an accumulated deficit at December 31, 1998. In connection with the Hughes Medium Power Transaction, affiliates of the stockholders of the Company, other than TSAT, and an affiliate of TCI have committed to make funds available to the Company, either in the form of capital contributions or loans, up to an aggregate of $1,013 million. Management of the Company believes, but cannot assure, that when such funds are combined with the proceeds from the Hughes Medium Power and High Power Transactions and the Company's existing sources of liquidity, that the Company will be able to meet its obligations as they become due and payable. In the event the Hughes Medium Power Transaction is not consummated and is abandoned, the Company currently intends to continue operating its medium power business. Under such scenario, the Company anticipates that it would curtail marketing and sales activities, reduce the number of new installations and otherwise reduce expenditures to the extent possible. The Company believes, but cannot assure, that in such event, the Company's cash flow from continuing operations, commitments from the Company's stockholders to make certain funds available to the Company and proceeds from the Hughes High Power Transaction would provide the necessary funds for the Company to meets its obligations as they become due and payable through December 31, 1999. In the event the Company is unable to meet its obligations as they become due and payable, the Company may be required to restructure or refinance certain of its liabilities. There can be no assurance that such restructuring or refinancing, if necessary, would be accomplished on terms acceptable to the Company. (continued) II-24 PRIMESTAR, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (3) The Restructuring and the TSAT Merger ------------------------------------- The Restructuring ----------------- Effective April 1, 1998 (the "Closing Date") and pursuant to (i) a Merger and Contribution Agreement dated as of February 6, 1998 (the "Restructuring Agreement"), among the Company, TSAT, Time Warner Entertainment Company, L.P. ("TWE"), Advance/Newhouse Partnership ("Newhouse"), Comcast Corporation ("Comcast"), Cox Communications, Inc. ("Cox"), MediaOne of Delaware, Inc. ("MediaOne"), and GE Americom, and (ii) an Asset Transfer Agreement dated as of February 6, 1998 (the "TSAT Asset Transfer Agreement"), between the Company and TSAT, a business combination (the "Restructuring") was consummated. In connection with the Restructuring, TSAT contributed and transferred to the Company (the "TSAT Asset Transfer") all of TSAT's assets and liabilities except (i) the capital stock of Tempo, (ii) the consideration received by TSAT in the Restructuring and (iii) the rights and obligations of TSAT under agreements with the Company and others. In addition, (i) the business of the Partnership, (ii) the business of distributing the PRIMESTAR(R) programming service ("PRIMESTAR(R)"), including certain related assets and liabilities of each of TWE, Newhouse, Comcast, Cox and affiliates of MediaOne, and (iii) the interest in the Partnership of each of TWE, Newhouse, Comcast, Cox, affiliates of MediaOne and GE Americom (collectively, the "Non-TSAT Parties") were consolidated into the Company. In connection with the Restructuring, each of TSAT, Comcast, Cox, MediaOne, Newhouse, TWE and GE Americom received from the Company (i) cash or an assumption of indebtedness, (ii) shares of Class A Common Stock, $.01 par value per share, of the Company, ("Class A Common Stock"), (iii) in the case of TSAT only, shares of Class B Common Stock, $.01 par value per share, of the Company ("Class B Common Stock"), and (iv) except in the case of TSAT and GE Americom, shares of Class C Common Stock, $.01 par value per share, of the Company ("Class C Common Stock"), in each case in an amount determined pursuant to the Restructuring Agreement. The total consideration paid by PRIMESTAR to the Non-TSAT Parties (including assumed liabilities) aggregated approximately $2.2 billion comprising $1.3 billion of cash and assumed liabilities and $900 million of common stock. As of December 31, 1998, the approximate ownership of PRIMESTAR's common stock was as follows:
Ownership Name of Beneficial Owner Percentage ------------------------ ---------- TSAT 37.23% TWE and Newhouse (collectively) 30.02% Comcast 9.50% MediaOne 9.69% Cox 9.43% GE Americom 4.13%
(continued) II-25 PRIMESTAR, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The TSAT Asset Transfer has been recorded at TSAT's historical cost, and the remaining elements of the Restructuring, as set forth above, have been accounted for using the purchase method of accounting. The fair value of the consideration issued to the Non-TSAT Parties has been allocated to the assets and liabilities acquired based upon the estimated fair values of such assets and liabilities. TSAT has been identified as the acquirer for accounting purposes and the predecessor for financial reporting purposes due to the fact that TSAT owns the largest interest in the Company immediately following consummation of the Restructuring. The following pro forma operating results for the Company assume the Restructuring had been consummated on January 1, 1997. Such unaudited pro forma financial information is based upon historical results of operations adjusted for acquisition costs and, in the opinion of management, is not necessarily indicative of the results had the Restructuring been consummated on January 1, 1997.
Year ended December 31, ---------------------------------------------------- 1998 1997 ------------------------- ------------------------- Revenue $ 1,493,729 1,272,274 Net loss $(1,434,214) (509,620) Loss per common share $ (7.14) (2.54)
The TSAT Merger --------------- Effective February 6, 1998, PRIMESTAR and TSAT entered into an Agreement and Plan of Merger (the "TSAT Merger Agreement"), providing for the merger of TSAT with and into PRIMESTAR, with PRIMESTAR as the surviving corporation (the "TSAT Merger"). In connection with the First Closing, the Company and TSAT terminated the TSAT Merger Agreement. (4) Distribution Transaction ------------------------ On December 4, 1996 (the "Distribution Date"), TCI distributed (the "Distribution") all the capital stock of the Company to the holders of Tele-Communications, Inc. Series A TCI Group Common Stock (the "Series A TCI Group Stock") and Tele-Communications, Inc. Series B TCI Group Common Stock (the "Series B TCI Group Stock" and, together with the Series A TCI Group Stock, the "TCI Group Stock"). Holders of TCI Group Stock received one share of TSAT Series A Common Stock for each ten shares of Series A TCI Group Stock owned and one share of TSAT Series B Common Stock for each ten shares of Series B TCI Group Stock owned. In connection with the Distribution, the Company and TCI entered into various agreements, including the "Reorganization Agreement" (see below), the "Fulfillment Agreement" and the "Transition Services Agreement" (see note 12), and an amendment to TCI's existing "Tax Sharing Agreement" (see note 11). (continued) II-26 PRIMESTAR, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Pursuant to the Reorganization Agreement, on the Distribution Date, the Company issued to TCIC a promissory note (the "Company Note"), in the principal amount of $250,000,000, representing a portion of the Company's intercompany balance owed to TCIC on such date. The remainder of the Company's intercompany balance owed to TCIC on the Distribution Date (other than certain advances made to the Company by TCIC in 1996 to fund certain construction and related costs associated with the Tempo Satellites, as described in note 13) was assumed by TCI in the form of a capital contribution to the Company. On December 31, 1996, the Company entered into a bank credit agreement (the "Bank Credit Facility") and used a portion of the borrowing availability thereunder to repay in full all principal and interest due to TCIC pursuant to the Company Note. (5) Changes in Accounting --------------------- During the fourth quarter of 1996, the Company changed its depreciation policy for subscriber installation costs. Such change was adopted effective October 1, 1996 and was treated as a change in accounting policy that was inseparable from a change in estimate. Accordingly, the cumulative effect of such change for periods prior to October 1, 1996, together with the fourth quarter 1996 effect of such change, was included in the Company's depreciation expense for the fourth quarter of 1996. Consequently, this change in policy resulted in increases to the Company's depreciation expense, net loss and net loss per share for the year ended December 31, 1996 of $55,304,000 ($8,754,000 of which relates to periods prior to January 1, 1996), $41,478,000 ($6,566,000 of which relates to periods prior to January 1, 1996) and $.62 ($.10 of which relates to periods prior to January 1, 1996), respectively. The Company also revised the estimated useful life of certain satellite reception equipment on a prospective basis as of October 1, 1996. Such change in estimate resulted in increases to the Company's depreciation expense, net loss and net loss per share for the year ended December 31, 1996 of $7,796,000, $5,847,000 and $.09, respectively. (6) Summary of Significant Accounting Policies ------------------------------------------ Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less at the date of acquisition to be cash equivalents. Investment in PRIMESTAR Partners L.P. Prior to the Restructuring, the Company used the equity method to account for its investment in the Partnership. Under this method, the investment, originally recorded at cost, was adjusted to recognize the Company's share of the net earnings or losses of the Partnership as they occurred, rather than as dividends or other distributions were received, limited to the extent of the Company's investment in, and advances and commitments to, the Partnership. The Company's share of net earnings or losses of the Partnership included the amortization of the difference between the Company's investment and its share of the net assets of the Partnership. As part of the Restructuring, the Partnership became a wholly-owned subsidiary of the Company. (continued) II-27 PRIMESTAR, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Property and Equipment Property and equipment is stated at cost. Depreciation is computed on a straight-line basis using estimated useful lives of 4 to 6 years (4 to 8 years through September 30, 1996) for satellite reception equipment and 3 to 10 years for support equipment. Subscriber installation costs are depreciated over the estimated average life of a subscriber (4 years). Any subscriber installation costs that have not been fully depreciated at the time service to a subscriber is terminated are charged to depreciation expense during the period in which such termination occurs. Repairs and maintenance are charged to operations, and betterments and additions are capitalized. At the time of ordinary retirements of satellite reception equipment, sales or other dispositions of property, the original cost and cost of removal of such property are charged to accumulated depreciation, and salvage, if any, is credited thereto. The Company periodically reviews the carrying amount of its long-lived assets to determine whether current events or circumstances warrant adjustments to such carrying amounts. The Company considers historical and expected future net operating losses to be its primary indicators of potential impairment. Assets are grouped and evaluated for impairment at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets ("Assets"). The Company deems Assets to be impaired if the Company is unable to recover the carrying value of its Assets over their expected remaining useful life through a forecast of undiscounted future operating cash flows directly related to the Assets. If Assets are deemed to be impaired, the loss is measured as the amount by which the carrying amount of the Assets exceeds their fair values. PRIMESTAR generally measures fair value by considering sales prices for similar assets or by discounting estimated future cash flows. Considerable management judgment is necessary to estimate discounted future cash flows. Accordingly, actual results could vary significantly from such estimates. Intangible Assets Intangible assets at December 31, 1998 are comprised of the following (amounts in thousands): Customer relationships $390,000 Satellite rights 469,498 -------- 859,498 Accumulated amortization (73,125) -------- $786,373 ========
Customer relationships are amortized using the straight-line method over their estimated useful life of 4 years. Satellite rights represent PRIMESTAR's right to use Tempo's two high power communications satellites (the "Tempo Satellites") as described in note 13. The Company is not amortizing such rights as the Company has not launched a high power service utilizing the Tempo Satellites. (continued) II-28 PRIMESTAR, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements In connection with the Restructuring, the Company recorded tradenames of $230,000,000 and excess cost over acquired net assets of $416,901,000. Such intangible assets were amortized using the straight-line method over 20 years. As of December 31, 1998, such intangible assets were written down to their estimated fair value of zero. Such writedown has been included in the Impairment Loss described in note 2. Deferred Financing Costs Deferred financing costs are amortized over the term of the related loan facility. Revenue Recognition Programming and equipment rental revenue is recognized in the period that services are delivered. Installation revenue is recognized in the period the installation services are provided to the extent of direct selling costs. To date, direct selling costs have exceeded installation revenue. Payments received from customers at the time of installation to reduce future monthly rental fees are deferred and recognized as revenue over the average life of a customer. Programming Carriage Fees Payments received from programmers at the time of launch for which future carriage by the Company is required are deferred and recognized as a reduction of programming expense over the term of the programming contract. Advertising Costs Advertising costs are generally expensed as incurred. Amounts expensed for advertising aggregated $51,859,000, $23,062,000 and $25,622,000 during 1998, 1997 and 1996, respectively. Marketing and Direct Selling Costs Marketing and direct selling costs are expensed as incurred. The excess cost of customer premises equipment over proceeds received upon sale of such equipment is recognized at the time of sale and is included in selling expense. Residual Sales Commissions Residual sales commissions, which become payable upon the collection of programming revenue from certain subscribers, are expensed during the period in which such commissions become payable. Stock Based Compensation The Company accounts for stock-based employee compensation using the intrinsic value method pursuant to Accounting Principles Board Opinion No. 25. (continued) II-29 PRIMESTAR, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Income Taxes The Company accounts for its income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Loss Per Common Share The loss per common share for the years ended December 31, 1998 and 1997 is based on 167,615,000 and 66,658,000 weighted average shares outstanding respectively. TSAT issued 66,408,000 shares of TSAT common stock pursuant to the Distribution. The loss per share amounts set forth in the accompanying consolidated statements of operations assume that the shares issued pursuant to the Distribution were issued and outstanding since January 1, 1996. Accordingly, the calculation of the loss per share assumes weighted average shares outstanding of 66,408,000 for the year ended December 31, 1996. Excluded from the computation of diluted EPS for the years ended December 31, 1998, 1997 and 1996 are options to acquire 5,395,000, 7,894,000 and 591,000 weighted average shares of common stock, respectively, because inclusion of such options would be anti-dilutive. Comprehensive Income (Loss) The Company's total comprehensive loss for all periods presented herein did not differ from those amounts reported as net loss. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. (7) Supplemental Disclosures to Statements of Cash Flows ---------------------------------------------------- Cash paid for interest was $116,193,000, $20,224,000 and $1,946,000 during the years ended December 31, 1998, 1997 and 1996, respectively. Cash paid for income taxes was not material during the years ended December 31, 1998, 1997, and 1996. (continued) II-30 PRIMESTAR, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Significant non-cash investing and financing activities for the year ended December 31, 1998 are reflected in the following table (amounts in thousands):
Cash paid in Restructuring: Property and equipment acquired $ 716,821 Intangible assets 1,500,034 Current liabilities assumed, net of current assets (116,849) Debt assumed (903,299) Deferred tax liability (222,585) Common stock issued (919,228) ---------- $ 54,894 ==========
Transactions effected through the intercompany account with TCIC for periods prior to the Distribution have been considered to be constructive cash receipts and payments for purposes of the accompanying statements of cash flows. The non-cash effects of the Distribution are set forth in the accompanying statements of equity. Accounts payable includes accrued capital expenditures of $26,593,000, $35,645,000 and $7,713,000 at December 31, 1998, 1997 and 1996, respectively, which have been excluded from the accompanying statements of cash flows. (8) Debt ---- The components of debt are as follows:
December 31, 1998 1997 ---- ---- amounts in thousands Bank Credit Facility (a) $ 513,200 48,000 Interim Loan Agreement (b) 350,000 -- Partnership Credit Facility (c) 575,000 -- Senior Subordinated Notes (d) 200,000 200,000 Senior Subordinated Discount Notes (d) 189,722 168,781 Other 5,273 1,948 ---------- ------- $1,833,195 418,729 ========== =======
(continued) II-31 PRIMESTAR, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (a) In connection with the Restructuring, the Company amended and restated the Bank Credit Facility. As amended, the Bank Credit Facility provides for maximum commitments of up to $700 million, comprising $550 million of revolving loan commitments and $150 million of term commitments, subject to the Company's compliance with operating and financial covenants and other customary conditions. In addition to the outstanding borrowings at December 31, 1998, $30 million of availability under the Bank Credit Facility had been utilized to obtain two outstanding letters of credit. Commencing March 31, 2001, the revolving loan commitments will be reduced quarterly, and outstanding borrowings under the term loan commitments will be payable in quarterly installments, in each case in accordance with a schedule, until final maturity at June 30, 2005. Borrowings under the Bank Credit Facility bear interest at variable rates (6.7% at December 31, 1998). In addition, the Company must pay a commitment fee equal to 0.375% on the average daily unused portion of the available commitments, payable quarterly in arrears and at maturity. Such commitment fees were not significant during any of the years presented. Borrowings under the Bank Credit Facility are guaranteed by all restricted subsidiaries of the Company (defined under the Bank Credit Facility to mean each of the Company's domestic subsidiaries of which the Company owns directly or indirectly at least 80% of the outstanding capital stock), and secured by collateral assignments or other security interests. The Bank Credit Facility contains covenants regarding debt service coverage and leverage, as well as negative covenants restricting, among other things indebtedness, liens and other encumbrances, mergers or consolidation transactions, transactions with affiliates, investments, capital expenditures, and payment of dividends and other distributions. At April 1, 1999, the Company was not in compliance with one of the covenants in the Bank Credit Facility regarding the provision of audited financial statements to the lenders under the Bank Credit Facility (the "Banks") within 90 days of the Company's fiscal year-end. The Company will remedy such event of noncompliance in accordance with the terms of the Bank Credit Facility by providing its audited financial statements to the Banks prior to April 30, 1999. (b) On the Closing Date, the Company entered into the Interim Loan Agreement with certain financial institutions (the "Lenders") with respect to a $350 million unsecured senior subordinated interim loan (the "Interim Loan"). The Interim Loan Agreement provided for commitments of $350 million. The commitments were fully funded to the Company on the Closing Date. The obligations under the Interim Loan Agreement were due in full one year from the Closing Date. However, the Company had the option to convert any outstanding principal amount of the Interim Loan on such date (the "Conversion Date") into a term loan maturing on April 1, 2008. The Company gave notice of such conversion on March 29, 1999, in accordance with the terms of the Interim Loan Agreement. In addition, on the Conversion Date, the Company became obligated to enter into a stock warrant agreement with the Lenders providing for the issuance of warrants to purchase common stock of the Company equal to 2% of the Company's outstanding common stock on the Conversion Date. The warrants are to be exercisable over a ten-year period at a nominal exercise price. (continued) II-32 PRIMESTAR, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The outstanding principal under the Interim Loan Agreement bears interest at a rate per annum equal to the greater of 10% or, at the election of the Lenders, (i) a rate per annum that is equal to the corporate base rate, as provided for in the Interim Loan Agreement, (ii) the Federal Funds effective rate, plus 0.50%, or (iii) the London interbank offered rate ("LIBOR") for such period, plus in each case the Applicable Spread (as defined in the Interim Loan Agreement). The interest rate on the Interim Loan in effect at December 31, 1998 was 11.5% which included the Applicable Spread of 650 basis points. The Applicable Spread increases monthly thereafter, with a final increase to 750 basis points from and after April 1, 1999. At any time after the Conversion Date, the applicable spread is to be 850 basis points. In addition, at the request of any Lender, the interest rate on all or any portion of the term loan owing to such Lender will be converted to a fixed rate equal to the rate in effect as of the date such Lender gave notice to the Company. Interest was payable monthly in arrears on the last day of each month until the Conversion Date. Thereafter, interest is payable quarterly in arrears, except for any term loan converted to a fixed rate loan, in which event interest is payable on March 31 and September 30 of each year. If interest payable by the Company exceeds 15%, the Company may elect to pay all or a portion of the interest in excess of 15% by issuance of notes in an aggregate principal amount equal to such excess amount. Prior to the Conversion Date, the Company could prepay the Interim Loan without penalty. After the Conversion Date, certain limited prepayments are permitted until April 1, 2001 out of the proceeds of certain equity offerings. Otherwise, prepayment is not permitted until on or after April 1, 2003. Prepayment penalties apply to any prepayment prior to April 1, 2006, which penalties are calculated with reference to the interest rate in effect at the time of prepayment. The Interim Loan Agreement provides for mandatory prepayments of the Interim Loan upon the occurrence of certain asset sales, capital contributions, securities issuances and a change of control (as defined in the Interim Loan Agreement) of the Company. (continued) II-33 PRIMESTAR, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (c) The Partnership Credit Facility, as amended, allows for borrowings up to $585 million, and borrowings thereunder are collateralized by letters of credit (the "Partnership Letters of Credit"), which were arranged for by affiliates of the partners of the Partnership (the "Partners") (or, in the case of TSAT, affiliates of TCI) other than GE Americom. In connection with the Restructuring, the Partnership became an indirect, wholly-owned subsidiary of the Company. In addition, the Partners and TCI agreed to maintain their respective Partnership Letters of Credit through June 1999, and the Company entered into Reimbursement Agreements with respect to such letters of credit, whereby the Company agreed to indemnify the parties arranging for such letters of credit from and against all obligations thereunder and/or other existing documentation relating thereto, including all existing and future payment obligations. The obligations of the Company under such Reimbursement Agreements are subordinated in right of payment, in the manner set forth in the Reimbursement Agreement, to all indebtedness of the Company under the Bank Credit Facility, the Interim Loan Agreement and the Notes. Borrowings under the Partnership Credit Facility bear interest at variable rates (5.6% at December 31, 1998). In addition, the Company must pay quarterly, in arrears, a commitment fee of 3/16% per annum on the daily unused portion of the facility. Such commitment fees were not significant during the year ended December 31, 1998. The maturity date of the Partnership Credit Facility is June 30, 1999. (d) On February 20, 1997, the Company issued the Senior Subordinated Notes having an aggregate principal amount of $200,000,000 and the Senior Subordinated Discount Notes having an aggregate principal amount at maturity of $275,000,000. Cash interest on the Senior Subordinated Notes is payable semi-annually in arrears on February 15 and August 15. Cash interest will not accrue or be payable on the Senior Subordinated Discount Notes prior to February 15, 2002. Thereafter cash interest will accrue at a rate of 12-1/4% per annum and will be payable semi-annually in arrears on February 15 and August 15, commencing August 15, 2002, provided however, that at any time prior to February 15, 2002, the Company may make a Cash Interest Election (as defined) on any interest payment date to commence the accrual of cash interest from and after the Cash Election Date (as defined). The Notes will be redeemable at the option of the Company, in whole or in part, at any time after February 15, 2002 at specified redemption prices. In addition, prior to February 15, 2000, the Company may use the net cash proceeds from certain specified equity transactions to redeem up to 35% of the Notes at specified redemption prices. (continued) II-34 PRIMESTAR, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The fair value of the Company's debt is estimated based upon the quoted market prices for the same or similar issuances or on the current rates offered to the Company for debt of the same remaining maturities. With the exception of the Notes, which had an aggregate fair value of $158,090,000 at December 31, 1998, PRIMESTAR believes that the fair value and the carrying value of its debt were approximately equal at December 31, 1998. As of December 31, 1998, annual maturities of the Company's debt for each of the next five years were as follows (amounts in thousands): 1999 $575,921 2000 1,013 2001 15,342 2002 30,368 2003 153,596
(9) Stockholders' Equity ------------------------- PRIMESTAR Preferred Stock ------------------------- The Restated Certificate of Incorporation of the Company authorizes the PRIMESTAR Board of Directors (the "Board") to provide for the issuance of all or any shares of preferred stock of the Company in one or more series and to fix for each series the number of shares constituting such series and such voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof as shall be stated and expressed in the resolution or resolutions adopted by the Board providing for the issuance of such series. As of December 31, 1998, no series of preferred stock have been designated. PRIMESTAR Common Stock ---------------------- Holders of Class A Common Stock are entitled to one vote for each share of such stock held, holders of Class B Common Stock are entitled to ten votes for each share of such stock held and holders of Class C Common Stock are entitled to ten votes for each share of such stock held. Holders of Class D Common Stock are not entitled to any voting rights with respect to such shares, except as may be required by law. Each share of Class B Common Stock is convertible, at the option of the holder, into one share of Class A Common Stock. Each share of Class C Common Stock is convertible, at the option of the holder, into one share of Class B Common Stock, and will be mandatorily and automatically so converted upon the tenth anniversary of the Closing Date. TSAT Preferred Stock -------------------- Prior to the Restructuring, TSAT was authorized to issue 5,000,000 shares of Preferred Stock. (continued) II-35 PRIMESTAR, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements TSAT Common Stock ----------------- Prior to the Restructuring, the TSAT Series A Common Stock had one vote per share and the TSAT Series B Common Stock had ten votes per share. Each share of TSAT Series B Common Stock was convertible, at the option of the holder, into one share of TSAT Series A Common Stock. Employee Retirement Plan ------------------------ Prior to the Restructuring, TSAT maintained an employee stock purchase plan (the "TSAT Plan") pursuant to which employees could contribute up to 10% of their compensation. TSAT, by annual resolution of the TSAT Board of Directors (the "TSAT Board"), could elect to contribute up to 100% of the amount contributed by employees. In connection with the Restructuring and effective June 30, 1998, the TSAT Plan was merged with and into the Partnership's amended and restated retirement plan, which has been renamed the PRIMESTAR, Inc. 401(k) Savings Plan. Stock Options ------------- In June 1996, the Board of Directors of TCI (the "TCI Board") authorized TCI to permit certain of its executive officers to acquire equity interests in certain of TCI's subsidiaries. In connection therewith, the TCI Board approved the acquisition by each of two executive officers of TCI who were not employees of TSAT (the "TCI Officers"), of 1.0% of the net equity of TSAT. The TCI Board also approved the acquisition by the chief executive officer and a director of TSAT (the "TSAT Officer"), of 1.0% of the net equity of TSAT and the acquisition by an executive officer of certain TCI subsidiaries who is also a director, but not an employee, of TSAT (the "TCI Subsidiary Officer"), of 0.5% of the net equity of TSAT. The TCI Board determined to structure such transactions as grants by TSAT to such persons of options to purchase shares of TSAT Series A Common Stock representing 1.0% (in the case of each of the TCI Officers and the TSAT Officer) and 0.5% (in the case of the TCI Subsidiary Officer) of the shares of TSAT Series A Common Stock and TSAT Series B Common Stock issued and outstanding on the Distribution Date, determined immediately after giving effect to the Distribution, but before giving effect to any exercise of such options (the "Distribution Date Options"). Pursuant to the Reorganization Agreement, and (in the case of the TCI Officers and the TCI Subsidiary Officer) in partial consideration for the capital contribution made by TCI to TSAT in connection with the Distribution, TSAT agreed, effective as of the Distribution Date, to bear all obligations under such options and to enter into stock option agreements with respect to such options with each of the TCI Officers, the TSAT Officer and the TCI Subsidiary Officer Distribution Date Options to purchase 2,324,266 shares of TSAT Series A Common Stock at a per share price of $8.86 were granted on the Distribution Date. The market price of the TSAT Series A Common Stock on such date was $12.63. As originally granted, the Distribution Date Options vest in 20% cumulative increments on each of the first five anniversaries of February 1, 1996, and will be exercisable for up to ten years following February 1, 1996. Compensation expense with respect to the Distribution Date Options held by the TSAT Officer aggregated $1,026,000, $1,101,000 and $95,000 during the years ended December 31, 1998, 1997 and 1996, respectively. (continued) II-36 PRIMESTAR, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements On the Distribution Date, the TSAT Board adopted, and TCI as the sole stockholder of TSAT prior to the Distribution, approved, the TCI Satellite Entertainment, Inc. 1996 Stock Incentive Plan (the "TSAT 1996 Plan"). The TSAT 1996 Plan provides for awards to be made in respect of a maximum of 3,200,000 shares of TSAT Series A Common Stock (subject to certain anti- dilution adjustments). Awards may be made as grants of stock options, stock appreciation rights ("SARs"), restricted shares, stock units, performance awards or any combination thereof. As originally granted, options granted pursuant to the TSAT 1996 Plan vest evenly over five years from the date of grant and expire 10 years from the date of grant. In March 1998, stockholders of TSAT approved the TCI Satellite Entertainment, Inc. 1997 Nonemployee Director Stock Option Plan (the "TSAT DSOP") including the grant, effective as of February 3, 1997, to each person that as of that date was a member of the TSAT Board and was not an employee of TSAT or any of its subsidiaries, of options to purchase 50,000 shares of TSAT Series A Common Stock. Pursuant to the TSAT DSOP, options to purchase 200,000 shares of TSAT Series A Common Stock were granted at an exercise price of $8.00 per share. As originally granted, options issued pursuant to the TSAT DSOP vest and become exercisable over a five-year period from the date of grant and expire 10 years from the date of grant. In November 1997, the TSAT Board voted to increase the number of directors by one, and the director named to fill such newly created directorship received options to purchase 50,000 shares of TSAT Series A Common Stock at an exercise price of $6.50. In February 1997, certain key employees of TSAT were granted, pursuant to the TSAT 1996 Plan, an aggregate of 325,000 restricted shares of TSAT Series A Common Stock. Such restricted shares had a grant-date fair value of $8.00. As originally granted, such restricted shares vest as to 50% on January 1, 2001 and as to the remaining 50% on January 1, 2002. Compensation expense with respect to the restricted shares aggregated $1,570,000 and $585,000 during the years ended December 31, 1998 and 1997, respectively. In November 1997, the TSAT Board and the compensation committee of the TSAT Board approved modifications to the vesting provisions of all options and restricted stock awards issued pursuant to the TSAT 1996 Plan, (i) accelerating the vesting schedules under such options, to provide for vesting in three equal annual installments, commencing February 1998, and (ii) accelerating the vesting schedules under such restricted stock awards to provide for vesting of 50% on each of the second and third anniversaries of the date of granting. Options granted prior to the Distribution, which were 40% vested in February 1998, will become two-thirds vested in February 1999 and fully vested in February 2000. On April 2, 1998, the PRIMESTAR Board of Directors approved the PRIMESTAR, Inc. 1998 Incentive Plan (the "1998 PRIMESTAR Plan"). The 1998 PRIMESTAR Plan provides for awards to be made in respect of a maximum of 7,000,000 shares of Class A Common Stock. Awards may be made as grants of stock options, SARs, restricted shares, stock units, performance awards or any combination thereof. Options granted pursuant to the 1998 PRIMESTAR Plan vest evenly over three years from the date of grant and expire 10 years from the date of grant. (continued) II-37 PRIMESTAR, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The Company applies Accounting Principles Board Opinion No. 25 in accounting for its stock options, and accordingly, compensation expense has been recognized for its stock options in the accompanying financial statements using the intrinsic value method. Had the Company determined compensation expense based on the grant-date fair value method pursuant to Statement of Financial Accounting Standards No. 123, the Company's net loss and loss per share would have been $240,384,000 and $3.61 for 1997 and would not have been significantly different than the amounts reported for 1998 or 1996. The following table presents the number, weighted-average exercise price and weighted-average grant-date fair value of options to buy TSAT Series A Common Stock and Class A Common Stock.
Number of options Weighted- Weighted- --------------------------------------- average average TSAT PRIMESTAR exercise grant-date Series A Class A price fair value ------------------- ------------------ -------------- -------------- Granted in connection with ---------- Distribution 2,324,266 $8.86 $8.74 ---------- Outstanding at December 31, 1996 2,324,266 8.86 Granted 1,070,000 7.93 4.77 ---------- Outstanding at December 31, 1997 3,394,266 8.57 Options not assumed by PRIMESTAR (1) (3,394,266) Granted -- 4,934,993 7.69 5.95 Canceled -- (242,285) 7.69 ---------- ----------------- Outstanding at December 31, 1998 -- 4,692,708 7.69 ========== ================= Exercisable at December 31, 1996 -- ========== Exercisable at December 31, 1997 464,853 8.86 ========== Exercisable at December 31, 1998 -- =================
________________ (1) At the time of the Restructuring, none of the outstanding options to acquire TSAT common stock were converted into options to acquire PRIMESTAR common stock. However, PRIMESTAR assumed TSAT's liability with respect to any future cash payment to be made upon exercise by any PRIMESTAR employee of an option or SAR issued by TSAT prior to the Restructuring. (continued) II-38 PRIMESTAR, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Options outstanding at December 31, 1998 have an exercise price of $7.69 and a weighted-average remaining contractual life of approximately nine years. The respective estimated grant-date fair values of the options noted above are based on the Black-Scholes model and are stated in current annualized dollars on a present value basis. The key assumptions used in the model for purposes of these calculations include the following: (a) a discount rate equal to the 10-year Treasury rate on the date of grant; (b) a 65% volatility rate; (c) the 10-year option term; (d) the closing price of the TSAT Series A Common Stock on the date of grant; and (e) an expected dividend rate of zero. Pursuant to the Reorganization Agreement, TSAT granted to TCI an option to purchase up to 4,765,000 shares of TSAT Series A Common Stock, at an exercise price of $1.00 per share, as required by TCI from time to time to meet its obligations under the conversion features of certain convertible securities of TCI as such conversion features were adjusted as a result of the Distribution. During 1998, 1997 and 1996, TCI purchased 989,000 shares, 258,000 shares and 5,000 shares, respectively, of TSAT Series A Common Stock pursuant to such option. In connection with the Distribution, TCI and the Company also entered into a "Share Purchase Agreement" to sell to each other from time to time, at the then current market price, shares of Series A TCI Group Stock and TSAT Series A Common Stock, respectively, as necessary to satisfy their respective obligations after the Distribution Date under certain stock options and SARs held by their respective employees and non-employee directors. Other ----- At December 31, 1998, a total of 4,692,708 shares of Class A Common Stock were reserved for issuance pursuant to the 1998 PRIMESTAR Plan. In addition, one share of Class A Common Stock is reserved for each outstanding share of Class B Common Stock and Class C Common Stock. (10) Restructuring Charges --------------------- During 1998, the Company reorganized its operations. In connection therewith, the Company closed certain of its local offices and reduced its corporate work force. As a result, the Company terminated approximately 700 employees. In connection with such reorganization, the Company recognized restructuring charges of $26,025,000. Such restructuring charges related to (i) severance costs for terminated employees ($18,828,000), (ii) lease cancellation fees and other office shutdown costs ($3,617,000) and (iii) the net book value of abandoned equipment ($3,580,000). As of December 31, 1998, the Company had paid approximately $6,388,000 of the restructuring charges and has a remaining accrual of $16,057,000. (continued) II-39 PRIMESTAR, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (11) Income Taxes ------------ Through the Distribution Date, TSAT's results of operations were included in TCI's consolidated U.S. Federal income tax returns, in accordance with the existing tax sharing arrangements among TCI and its consolidated subsidiaries. Effective July 1, 1995, TCI, TCIC and certain other subsidiaries of TCI entered into a tax sharing agreement (the "Tax Sharing Agreement"), which formalized such pre-existing tax sharing arrangements and implemented additional provisions regarding the allocation of certain consolidated income tax attributes and the settlement procedures with respect to the intercompany allocation of current tax attributes. In connection with the Distribution, the Tax Sharing Agreement was amended to provide that TSAT be treated as if it had been a party to the Tax Sharing Agreement, effective July 1, 1995. TSAT's intercompany income tax allocation through the Distribution Date has been calculated in accordance with the Tax Sharing Agreement. Subsequent to the Distribution Date, the Company files separate U.S. Federal and state income tax returns. Income tax benefit (expense) for the years ended December 31, 1998, 1997 and 1996 consists of:
Current Deferred Total ---------------- ----------------- ----------------- amounts in thousands Year ended December 31, 1998: Federal $ -- 128,243 128,243 State and local -- 19,285 19,285 ---------------- ------- ------- $ -- 147,528 147,528 ================ ======= ======= Year ended December 31, 1997: Federal $ -- -- -- State and local -- -- -- ---------------- ------- ------- $ -- -- -- ================ ======= ======= Year ended December 31, 1996: Intercompany allocation $70,645 -- 70,645 Federal -- (17,699) (17,699) State and local -- (7,009) (7,009) ---------------- ------- ------- $70,645 (24,708) 45,937 ================ ======= =======
Income tax benefit (expense) differs from the amounts computed by applying the Federal income tax rate of 35% as a result of the following:
Years ended December 31 ------------------------------------------------------- 1998 1997 1996 ----------------- ----------------- ----------------- amounts in thousands Computed "expected" tax benefit $ 521,931 83,419 65,079 State and local income taxes, net of Federal income tax benefit 12,535 13,009 (2,672) Change in valuation allowance (238,739) (98,521) (16,371) Amortization of goodwill (145,915) -- -- Other (2,284) 2,093 (99) --------- ------- ------- $ 147,528 -- 45,937 ========= ======= =======
(continued) II-40 PRIMESTAR, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1998 and 1997 are presented below:
December 31, ------------------------------------------ 1998 1997 -------------------- -------------------- amounts in thousands Deferred tax assets: Net operating loss carry forwards $ 226,823 133,024 Investment in the Partnership: Due to an increase in tax basis upon transfer from TCIC to the Company 29,305 29,305 Due principally to losses recognized for financial statement purposes in excess of losses recognized for tax purposes 57 2,671 Property and equipment principally due to impairment write-offs for financial statement purposes 11,801 -- Future deductible amounts principally due to accruals deductible in later periods 12,310 5,028 --------- -------- Total deferred tax assets 280,296 170,028 Less-valuation allowance (238,739) (114,892) --------- -------- Net deferred tax assets 41,557 55,136 Deferred tax liabilities: Intangible assets recorded in purchase accounting for financial statement purposes 116,614 -- Property and equipment, principally due to differences in depreciation -- 55,136 --------- -------- Net deferred tax liability $ 75,057 -- ========= ========
The valuation allowance for deferred tax assets as of December 31, 1998 was $238,739,000. Such balance increased $123,847,000 from December 31, 1997. The valuation allowance at December 31, 1997 related to TSAT's net operating loss carryforwards which were not contributed to PRIMESTAR in the Restructuring. The Company has analyzed the sources and expected reversal periods of its deferred tax assets. The Company believes that the tax benefits attributable to deductible temporary differences will be realized to the extent of future reversals of existing taxable temporary differences. At December 31, 1998, the Company had net operating loss carry forwards for income tax purposes aggregating approximately $593,001,000 of which, if not utilized to reduce taxable income in future periods, $900,000 expire in 2005, $1,200,000 expire in 2006, $2,170,000 expire in 2008, $2,003,000 expire in 2011, $6,200,000 expire in 2012 and $580,528,000 expire in 2018. (continued) II-41 PRIMESTAR, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (12) Transactions with Related Parties --------------------------------- Pursuant to the terms of the TSAT Merger Agreement, PRIMESTAR reimbursed TSAT for all reasonable costs and expenses incurred by TSAT (i) to comply with its tax and financial reporting obligations, (ii) to maintain certain insurance coverage and (iii) to maintain its status as a publicly traded company. During the year ended December 31, 1998, such reimbursements aggregated $152,000, and have been reflected as a reduction of PRIMESTAR's equity. In addition, PRIMESTAR makes advances to TSAT for the payment of certain costs related to the Tempo Satellites and the proposed high power strategy. Such advances aggregated $6,365,000 during 1998 and have been included in intangible assets in the accompanying consolidated balance sheet. PRIMESTAR anticipates that it will recover the advances upon the sale of the Tempo Satellites to Hughes. The Company is a party to a satellite transponder service agreement, as amended (the "GE-2 Agreement") with an affiliate of GE Americom for satellite service on GE-2. As originally executed, the GE-2 Agreement had an initial term extending through February 2003 at an annual rate of $86,340,000, with an option to extend the term through the end-of-life of GE-2. The option to extend has expired without exercise. However, the Company remains in discussions with GE Americom regarding other alternatives for extension of the GE-2 Agreement, and the Company will continue to assess other alternatives if the Hughes Medium Power Transaction is not consummated. No assurance can be given that the parties will agree to any such extension, if necessary, or that any other alternatives will be confirmed. Charges to the Company for the use of GE-2 and other services provided by GE Americom aggregated $64,755,000 for the period from April 1, 1998 through December 31, 1998, and are included in operating expenses in the accompanying consolidated statement of operations. Pursuant to the GE-2 Agreement, GE Americom provides the Company with service on 24 transponders on GE-2. The Company is currently entitled to non-preemptible service on 18 of the transponders on GE-2 and preemptible service on six transponders. Preemptible transponders are transponders that may be reassigned to restore service to protected customers if such protected customers experience transponder or satellite failure. The Company does not believe that, during the early stages of GE-2's operational life, the use of preemptible transponders is likely to interfere in any material respect with the operation of the PRIMESTAR(R) service. The Company currently receives "orbital location protected service" on all 24 of its transponders, meaning that if there is a failure of GE-2, the Company will be entitled to restore the lost service on another GE Americom medium power satellite, GE-3, which was successfully launched on September 4, 1997, into the same 85 W.L. orbital position used by GE-2. Even in those circumstances, the six preemptible transponders, although protected, would remain preemptible. Upon the successful launch of another GE Americom medium power satellite, GE-4, the Company's six preemptible transponders will become non-preemptible. (continued) II-42 PRIMESTAR, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements TCI and the Non-TSAT Parties, other than GE Americom, have arranged for letters of credit (the "GE-2 Letters of Credit") to support the Company's obligations under the GE-2 Agreement. Pursuant to the Restructuring Agreement, the Company reimburses TCI and the Non-TSAT Parties for fees related to the Partnership Letters of Credit and the GE-2 Letters of Credit. Such reimbursements aggregated $10,004,000 during the year ended December 31, 1998 and are included in interest expense in the accompanying consolidated statements of operations. Since April 1, 1998, a subsidiary of TCI has provided satellite uplink services to the Company. Charges for such services aggregated $10,659,000 during 1998 and are included in operating expenses in the accompanying consolidated statement of operations. Since March 1997, TCI has provided the Company with customer support services from TCI's Boise, Idaho call center. Amounts charged by TCI to the Company for such services aggregated $24,938,000 and $12,173,000 during the years ended December 31, 1998 and 1997, respectively, and are included in selling, general and administrative expenses in the accompanying consolidated statements of operations. Subsequent to the Restructuring, the Non-TSAT Parties continued to operate certain non-strategic local offices (the "Transition Offices") for approximately three months (the "Transition Period") while the responsibilities of such offices were transferred to other PRIMESTAR offices. By the end of the Transition Period, all of the Transition Offices had been closed. Transition expenses include costs incurred through December 31, 1998 and charged to the Company by the Non-TSAT Parties to operate the Transition Offices during the Transition Period. Certain key employees of the Company hold stock options in tandem with stock appreciation rights with respect to certain common stock of TCI. Estimates of the compensation related to the options and/or stock appreciation rights granted to employees of the Company have been recorded in the accompanying consolidated financial statements, but are subject to future adjustment based upon the market value of the underlying common stock of TCI and, ultimately, on the final determination of market value when the rights are exercised. Stock compensation recognized by the Company related to such options aggregated ($2,182,000), $6,134,000 and $(541,000) during the years ended December 31, 1998, 1997 and 1996, respectively. Prior to the Restructuring, the Partnership provided programming services to TSAT and other authorized distributors in exchange for a fee based upon the number of subscribers receiving programming services. In addition, the Partnership arranged for satellite capacity and uplink services, and provided national marketing and administrative support services in exchange for a separate authorization fee. (continued) II-43 PRIMESTAR, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements TCI also provided corporate administrative services to the Company pursuant to a transition services agreement (the "Transition Services Agreement"). Pursuant to the Transition Services Agreement, the Company was required to pay TCI a monthly fee of $1.50 per qualified subscriber up to a maximum of $3,000,000 per month, and to reimburse TCI quarterly for direct, out-of- pocket expenses incurred by TCI to third parties in providing the services. Charges under the Transition Services Agreement aggregated $3,174,000 and $11,579,000 during the years ended December 31, 1998 and 1997, respectively, and are included in selling, general and administrative expenses in the accompanying consolidated statements of operations. The Transition Services Agreement was terminated in connection with the consummation of the Restructuring. Through the Distribution Date, the effects of all transactions between the Company and TCI were reflected as adjustments to a non-interest bearing intercompany account. As described in note 4, all but $250,000,000 of this intercompany account was forgiven in connection with the Distribution. Subsequent to the Distribution Date, the effects of all transactions (other than those related to the TCIC Credit Facility) have been reflected in a non-interest bearing account between the Company and TCIC and are settled periodically in cash. Through December 31, 1996, TCI provided certain installation, maintenance, retrieval and other customer fulfillment services to the Company. The costs associated with such services were allocated to the Company based upon a standard charge for each of the various customer fulfillment activities performed by TCI. During the year ended December 31, 1996, the Company's capitalized installation costs included amounts allocated from TCI of $53,169,000. Maintenance, retrieval and other operating expenses allocated from TCI to the Company aggregated $20,365,000 during the year ended December 31, 1996. Effective January 1, 1997, charges for customer fulfillment services provided by TCI were made pursuant to the Fulfillment Agreement entered into by the Company and TCI in connection with the Distribution. Pursuant to the Fulfillment Agreement, TCI continued to provide fulfillment services on an exclusive basis to the Company following the Distribution with respect to customers of the PRIMESTAR(R) medium power service. Such services were performed in accordance with specified performance standards. Charges to TSAT pursuant to the Fulfillment Agreement aggregated $54,823,000 during 1997, of which $46,498,000 were capitalized installation costs. The Fulfillment Agreement terminated on December 31, 1997. (13) Commitments and Contingencies ----------------------------- At December 31, 1998, the Company's future minimum commitments to purchase satellite reception equipment aggregated approximately $44 million The Company currently purchases all of its integrated receiver/decoders ("IRDs") from one supplier and all of its home satellite dishes ("HSDs") from a different supplier. Each supplier has certain disaster recovery plans. However, a break in production of either IRDs or HSDs could result in a slow down in the addition of new customers and a corresponding reduction in the Company's revenue. (continued) II-44 PRIMESTAR, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements As part of the compensation paid to the Company's various sales agents, the Company has agreed to pay certain residual sales commissions during specified periods following the initiation of service (generally five years). Residual payments to sales agents aggregated $25,639,000, $15,364,000, and $11,848,000 during 1998, 1997 and 1996, respectively and were charged to expense in the accompanying consolidated statements of operations. In addition to leasing transponder capacity on GE-2, the Company leases business offices and uses certain equipment under lease arrangements. Rental expense under such arrangements amounted to $9,847,000, $2,237,000, and $2,095,000 in 1998, 1997 and 1996, respectively. Included in the 1998 amount is $2,013,000 related to lease cancellation fees. It is expected that, in the normal course of business, expiring leases will be renewed or replaced by leases on other properties; thus, it is anticipated that future minimum lease commitments will not be less than the rental expense incurred during 1998, exclusive of the amounts for lease cancellations. In February 1990, Tempo entered into an option agreement with the Partnership granting the Partnership the right and option (the "Tempo Capacity Option"), upon exercise, to purchase or lease 100% of the capacity of the DBS system to be built, launched and operated by Tempo with the purchase price (or aggregate lease payments) being sufficient to cover the costs of constructing, launching and operating such DBS system. In connection with the Tempo Capacity Option and certain related matters, Tempo and the Partnership subsequently entered into two letter agreements (the "Tempo Letter Agreements") which provided for, among other things, the funding by the Partnership of milestone and other payments due under a satellite construction agreement, and certain related costs, through advances by the Partnership to Tempo. The Tempo Letter Agreements permit the Partnership to apply its advances to Tempo against any payments due under the Tempo Capacity Option with respect to its purchase or lease of satellite capacity. The aggregate funding provided to Tempo by the Partnership ($469,498,000 at December 31, 1998) is reflected as satellite rights in the accompanying consolidated balance sheet. On February 7, 1997, the Partnership exercised the Tempo Capacity Option, but no capacity lease or purchase agreement has been entered into in connection therewith. In connection with the Hughes High Power Transaction, Hughes has agreed to assume, and to satisfy and discharge, $465 million of Tempo's obligation to the Partnership for such advances, and the Partnership has agreed to forgive the remaining balance. In addition, the Partnership has agreed to terminate and relinquish its rights under the Tempo Capacity Option. Pursuant to the Restructuring Agreement, the Company has indemnified each of the Non-TSAT Parties against (i) any and all losses and liabilities, suffered or incurred by any such indemnified party resulting from any liabilities of such party assumed by the Company in the Restructuring, (ii) any and all losses and liabilities resulting from the operation by the Company of the digital satellite business, whether before, on or after the Closing Date and (iii) any and all losses and liabilities resulting from the business, affairs, assets or liabilities of the Company whether arising before, on or after the Closing Date. (continued) II-45 PRIMESTAR, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements In addition, the Company is required to indemnify each of the Non-TSAT Parties against (i) all liability for taxes, other than transfer taxes, incurred as a result of the Restructuring ("Covered Taxes") of PRIMESTAR for the taxable period that begins after the Closing Date or the portion that begins after the Closing Date of any taxable period that begins before and ends after the Closing Date, (ii) all liability for Covered Taxes failing to qualify under Section 368(a) of the Code if such failure is attributable to any action taken after the Closing by the Company (other than any such action expressly required or contemplated by the Restructuring Agreement) and (iii) all liability for any reasonable legal, accounting, appraisal, consulting or similar fees and expenses relating to the foregoing. The International Bureau of the FCC has granted a subsidiary of EchoStar Communications Corporation ("EchoStar") a conditional authorization to construct, launch and operate a Ku-band domestic fixed satellite into the orbital position at 83 degrees W.L., immediately adjacent to that occupied by GE-2, the medium power satellite now used to provide the PRIMESTAR(R) service. Contrary to previous FCC policy, which would have permitted operation of a satellite at the 83 degrees W.L. orbital position at a power level of only 60 to 90 watts (subject to coordination requirements), EchoStar has been authorized to operate at a power level of 130 watts. If EchoStar were to launch its high power satellite authorized to 83 degrees W.L. and commence operations at that location at a power level of 130 watts, it would likely cause harmful interference to the reception of the PRIMESTAR(R) signal from GE-2 by subscribers to the PRIMESTAR(R) medium power service. GE Americom and PRIMESTAR have each requested reconsideration of the International Bureau's authorization for EchoStar to operate at 83 degrees W.L. These requests, which were opposed by EchoStar and others, currently are pending at the International Bureau. There can be no assurance that the International Bureau will change slot assignments, or power levels, in a fashion that eliminates the potential for harmful interference. Accordingly, the ultimate outcome of this matter cannot presently be predicted. GE Americom and PRIMESTAR have attempted to resolve potential coordination problems directly with EchoStar, and EchoStar has advanced a proposition to resolve this matter. PRIMESTAR is currently evaluating such proposition. It is uncertain whether any agreement in respect of such coordination between the Partnership and EchoStar will be reached, or that if such agreement is reached that coordination will resolve such interference. The Company has contingent liabilities related to legal proceedings and other matters arising in the ordinary course of business. Although it is reasonably possible the Company may incur losses upon conclusion of such matters, an estimate of any loss or range of loss cannot be made. In the opinion of management, it is expected that amounts, if any, which may be required to satisfy such contingencies will not be material in relation to the accompanying financial statements. II-46 PART III Item 10. Directors and Executive Officers of the Registrant. - -------- -------------------------------------------------- The following lists the directors and executive officers of the Company, their birth dates, a description of their business experience and positions held with the Company, as of February 1, 1999.
Name Position ---- -------- Carl E. Vogel Has served as Chief Executive Officer of the Company since June 1998. Served as Chief Executive Officer of Star Choice Communications, Inc. ("Star Choice") from October 1997 to June 1998. Prior to joining Star Choice, Mr. Vogel served as President of EchoStar Communications Corporation ("EchoStar") since September 1996 and Executive Vice President and Chief Operating Officer of EchoStar from April 1994 to September 1996. From 1983 to 1994, Mr. Vogel held various senior executive positions with Jones Intercable, Inc., a major cable television operator. John C. Malone Has served as a director of the Company since the Born March 7, 1941 Restructuring. Dr. Malone has served as Chief Executive Officer of TCI since January 1994, and as Chairman of the Board of TCI since November 1996 and as Chairman of the Board and a director of TSAT since December 1996. Dr. Malone served as President of TCI from January 1994 to March 1997, as Chief Executive Officer of TCIC from March 1992 to October 1994 and as President of TCIC from 1973 to October 1994. Dr. Malone has also served as Chairman of the Board and as a director of Tele-Communications International, Inc. since May 1995. Dr. Malone is also a director of TCI, TCIC, TCI Pacific Communications, Inc., The Bank of New York, At Home Corporation, Lenfest Communications, Inc. and Cablevision Systems Corporation. Gary S. Howard Has served as a director of the Company since the Born February 22, 1951 Restructuring. Mr. Howard has served as Chief Executive Officer of TSAT since December 1996 and a director of TSAT since November 1996. From February 1995 through August 1997, Mr. Howard also served as President of TSAT. Mr. Howard is also currently an executive officer of TCI and various subsidiaries of TCI. Mr. Howard served as Senior Vice President of TCIC from October 1994 to December 1996, and as Vice President of TCIC from December 1991 through October 1994. Mr. Howard is also a director of United Video Satellite Group, Inc. and Telewest Communications plc.
III-1
Name Position ---- -------- John W. Goddard Has served as a director of the Company since the Born May 4, 1941 Restructuring. Mr. Goddard has served as a director of TSAT since December 1996. Mr. Goddard served as President and Chief Executive Officer of the cable division of Viacom International, Inc. from 1980 until his retirement in July 1996. Mr. Goddard is also a director of Diva Systems Corporation. Leo J. Hindery, Jr. Has served as a director of the Company since the Born October 31, 1947 Restructuring. Mr. Hindery has served as a director of TSAT since November 1997. Mr. Hindery has served a President and Chief Operating Officer of TCI, and as President and a director of TCIC, since March 1997. Prior to joining TCI, Mr. Hindery was the founder, Managing General Partner and Chief Executive Officer of InterMedia Partners and its affiliated entities since 1988. Mr. Hindery is also a director of Cablevision Systems Corporation and USA Networks. Joseph J. Collins Has served as a director of the Company since the Born July 27,1944 Restructuring. Mr. Collins has also served as Chairman of the Board and Chief Executive Officer of Time Warner Cable, a division of TWE, since September 1989. Daniel P. Cavallo Has served as a director of the Company since November 6, 1998. Born April 7, 1942 Mr. Cavallo has been an independent consultant in the cable television and satellite industries since April 1995. Prior to such time, Mr. Cavallo was Senior Vice President of New Channels Corp., a subsidiary of Newhouse Broadcasting Corporation. Robert J. Miron Has served as a director of the Company since the Born July 7, 1937 Restructuring. Mr. Miron has also served as the president of Advance/Newhouse Communications since April 1, 1995. Mr. Miron served as President of Newhouse Broadcasting from 1986 to April 1995. Miles L. Davenport Has served as a director of the Company since December 23, Born June 12, 1945 1998. Mr. Davenport has also served as Vice President of New Business Development of MediaOne Group since July 1998. From June 1996 to December 1998, Mr. Davenport served as President and Chief Executive Officer of Russian Telecommunications Development Corporation, a subsidiary of MediaOne Group that invests in Russian telecommunications ventures. Prior to June 1996, Mr. Davenport held various positions and was responsible for identifying, developing and managing international opportunities and investments for US WEST International.
III-2
Name Position ---- -------- Brian L. Roberts Has served as a director of the Company since December 23, Born June 28, 1959 1998. Mr. Roberts has served as President of Comcast Corporation since 1990. Mr. Roberts is also a director of At Home Corporation. Ajit M. Dalvi Has served as a director of the Company since the Born May 27, 1942 Restructuring. Mr. Dalvi has also served as Senior Vice President of Programming and Strategy for Cox since 1987. John F. Connelly Has served as a director of the Company since the Born July 3, 1943 Restructuring. Mr. Connelly has also served as Chairman of the Board, President and Chief Executive Officer of GE Americom, a subsidiary of GE, since 1991. Mr. Connelly is also a director of Gilat Satellite Networks, Ltd. Daniel J. O'Brien Has served as President and Chief Operating Officer of the Born December 23, 1958 Company since the Restructuring. Mr. O'Brien served as President of the Partnership from June 1997 to the Restructuring and as President of Time Warner Programming Co. d/b/a Time Warner Satellite Services Group from October 1993 to June 1997. Christopher Sophinos Has served as Senior Vice President, Sales and Distribution of Born January 26, 1952 the Company since the Restructuring. Has served as President of TSAT since September 1997, and was previously Senior Vice President of TSAT from February 1996. Mr. Sophinos served as the President of Boats Unlimited from November 1993 to September 1998 and has served as a director of Sophinos & Sons, Inc. since November 1993. Kenneth G. Carroll Has served as Senior Vice President, Finance, and Chief Born April 21, 1955 Financial Officer of the Company since the Restructuring. Has served as Senior Vice President and Chief Financial Officer of TSAT since February 1995. From December 1994 to May 1997, Mr. Carroll served as Vice President of TCI K-1, Inc. and as Vice President of United Artists K-1 Investments, Inc. From April 1994 through January 1995, Mr. Carroll served as Vice President of Business Operations and Chief Financial Officer of Netlink USA, a subsidiary of TCI; and from July 1992 to May 1994, Mr. Carroll served as Senior Director of Finance and Business Operations of Netlink. Marcus O. Evans Has served as Senior Vice President, General Counsel, and Born December 15, 1949 Secretary of the Company since the Restructuring. Mr. Evans served as Senior Vice President and General Counsel of the Partnership from November 1991 to the Restructuring. Effective March 5, 1999, Mr. Evans terminated his employment with the Company and is currently engaged as an independent consultant.
III-3 The directors of the Company will hold office until their successors are duly elected and qualified. The executive officers named above will be elected to serve in such capacities until their respective successors have been duly elected and have been qualified, or until their earlier death, resignation, disqualification or removal from office. The Charter and the Bylaws provide that, subject to any rights of the holders of any series of preferred stock of the Company ("PRIMESTAR Preferred Stock") outstanding at any time to elect additional directors to the PRIMESTAR Board of Directors (the "Board,") the Board will consist of eleven members, and will be comprised of Class B Directors, Class C Directors and Common Directors (each as defined below) until the Class C Termination Date. The Bylaws provide that, on and after the Class C termination Date, the Board will consist of not less than three members, the exact number of which will from time to time be determined by resolution of the Board. Currently, of the eleven members of the Board, three (the "Class B Directors") are elected by the holders of Class B Common Stock (all of which is currently held by TSAT) and six (the "Class C Directors") are elected by the holders of Class C Common Stock, in each case voting as a separate class. Pursuant to the Stockholders Agreement, currently, of the six Class C Directors, three are nominated by TWE (and TWE has agreed with Newhouse pursuant to the TWE/Newhouse Voting Agreement that of such three, one is nominated by Newhouse) and one is nominated by each of Cox, Comcast and MediaOne. The remaining two members of the Board (the "Common Directors") are nominated by a super-majority vote of the Class B Directors and Class C Directors and elected by the holders of PRIMESTAR Voting Common Stock, voting together as a single class. The number of Class B Directors will decrease as the number of shares of Class B Common Stock outstanding decreases, and the number of Class C Directors will decrease as the number of shares of Class C Common Stock outstanding decreases, in each case in accordance with a schedule set forth in the Charter. The special class rights of the holders of Class B Common Stock and the holders of Class C Common Stock, each voting as a separate class, to elect the Class B Directors and Class C Directors, respectively, will automatically terminate on the Class C Termination Date, at which time the Board will consist exclusively of Common Directors. At any time prior to the Class C Termination Date that the maximum number of Class B Directors or Class Directors is decreased, the number of Common Directors will be correspondingly increased, so that the total number of directors constituting the entire Board remains at eleven. On and after the Class C Termination Date, all members of the Board will be elected by the holders of PRIMESTAR Voting Common Stock, voting together as a single class. There are no family relations by blood, marriage or adoption, of first cousin or closer, among the above named individuals. During the past five years, none of the persons named above has had any involvement in such legal proceedings as would be material to an evaluation of his ability or integrity. Section 16(a) of the Security Exchange Act of 1934, as amended, requires the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the Security and Exchange Commission ("SEC"). Officers, directors and greater-than-ten-percent shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. III-4 Based solely on review of the copies of Forms 3, 4 and 5 and amendments thereto furnished to the Company with respect to its most recent fiscal year, or written representations that no Forms 5 were required, the Company believes that, during the year ended December 31, 1998, its officers, directors and greater-than-ten-percent beneficial owners complied with all Section 16(a) filing requirements. Item 11. Executive Compensation. ---------------------- (a) Summary Compensation Table. Certain directors, officers and employees -------------------------- of TCI and its subsidiaries (including the Company, prior to the Distribution) were granted options to purchase shares of Series A TCI Group Common Stock ("TCI Options") and stock appreciation rights with respect to shares of Series A TCI Group Common Stock ("TCI SARs") granted pursuant to various stock plans of TCI (the "TCI Plans"). Immediately prior to the Distribution, each TCI Option was divided into two separately exercisable options: (i) an option to purchase TSAT Series A Common Stock (an "Add-on TSAT Option"), exercisable for the number of shares of TSAT Series A Common Stock that would have been issued in the Distribution in respect of the shares of Series A TCI Group Stock subject to the applicable TCI Option, if such TCI Option had been exercised in full immediately prior to the Distribution Date, and containing substantially equivalent terms as the existing TCI Option, and (ii) an option to purchase Series A TCI Group Stock (an "Adjusted TCI Option"), exercisable for the same number of shares of Series A TCI Group Stock as the corresponding TCI Option had been. The aggregate exercise price of each TCI Option was allocated between the Add-on TSAT Option and the Adjusted TCI Option into which it was divided, and all other terms of the Add-on TSAT Option and Adjusted TCI Option are in all material respects the same as the terms of such TCI Option. Similar adjustments were made to the outstanding TCI SARs, resulting in the holders thereof holding Adjusted TCI SARs and Add-on TSAT SARs instead of TCI SARs, and to outstanding restricted share awards, resulting in the holders thereof holding restricted shares of TSAT Series A Common Stock in addition to restricted shares of Series A TCI Group Stock, effective immediately prior to the Distribution. As a result of the foregoing and as a result of the Restructuring, certain persons who remained TCI employees or non-employee directors after the Distribution and certain persons who were TCI employees prior to the Distribution but became TSAT employees after the Distribution and PRIMESTAR employees after the Restructuring hold both Adjusted TCI Options and separate Add-on TSAT Options and/or hold both Adjusted TCI SARs and separate Add-on TSAT SARs. The obligations with respect to the Adjusted TCI Options, Add-on TSAT Options, Adjusted TCI SARs and Add-on TSAT SARs held by TCI employees and non- employee directors are obligations solely of TCI. The obligations with respect to the Adjusted TCI Options, Add-on TSAT Options, Adjusted TCI SARs and Add-on TSAT SARs held by persons who were Company employees at the time of the Distribution and PRIMESTAR employees after the Restructuring ("Company Employees") are obligations solely of the Company. Prior to the Distribution, TCI and the TSAT entered into an agreement to sell to each other from time to time at the then current market price shares of Series A TCI Group Common Stock and Series A Common Stock, respectively, as necessary to satisfy their respective obligations under such securities. III-5 The following table is a summary of all forms of compensation paid by PRIMESTAR (or by TSAT) to the officers named therein for services rendered in all capacities to PRIMESTAR (and, prior to the Restructuring, TSAT) for the fiscal years ended December 31, 1998, 1997 and 1996 (total of five persons).
Annual Compensation Long-Term Compensation ------------------------------------------- ---------------------------- Securities Other Annual Restricted Underlying All Other Name and Principal Position Compensation Stock Award Options/ Compensation with the Company Year Salary ($) Bonus ($) ($)(5) ($) SARs ($)(9) - --------------------------- ---- --------- ------------ ------ ------------ ------------ ------- Carl E. Vogel (1) 1998 $242,308 $ 118,125 $4,393 $ -- 2,000,000 (7) $ 3,283 (Chief Executive Officer) Daniel J. O'Brien (2) 1998 $272,115 $ 310,217 $3,602 $ -- 400,000 (7) $ 4,474 (President) Christopher Sophinos (3) 1998 $223,105 $ 82,885 $5,792 $ -- 152,146 (7) $ 6,954 (Senior Vice President) 1997 $174,538 $ 70,000 $ -- $400,000 (6) 100,000 (8) $ 10,240 1996 $ 96,865 $ 10,750 $ -- $ -- -- $ -- Kenneth G. Carroll 1998 $233,327 $ 85,619 $3,546 $ -- 160,923 (7) $ 6,994 (Senior Vice President 1997 $174,538 $ 78,846 $2,182 $400,000 (6) 100,000 (8) $ 9,934 and Chief Financial Officer) 1996 $119,423 $ 33,150 $ -- $ -- -- $ 9,500 Marcus O. Evens (2) 1998 $164,711 $ 45,563 $4,271 $ -- 146,294 (7) $ 7,860 (Senior Vice President) $ 194,685(4)
- ----------------------------------------- (1) Mr. Vogel commenced employment with PRIMESTAR on June 11, 1998. Accordingly, the 1998 compensation information included in the table reflects approximately seven months of employment. (2) Messrs. O'Brien and Evans commenced employment with PRIMESTAR on April 1, 1998. Accordingly, the 1998 compensation information included in the table reflects nine months of employment. (3) Mr. Sophinos commenced employment with TSAT on February 27, 1996, and accordingly, the 1996 compensation information included in the table reflects ten months of employment. (4) This amount reflects the payment of obligations under the Partnership's Long-Term Management Incentive Plan, which obligations were assumed by PRIMESTAR in connection with the Restructuring. (5) Consists of amounts reimbursed during the year for the payment of taxes. III-6 (6) Pursuant to the TCI Satellite Entertainment, Inc. 1996 Stock Incentive Plan (the "TSAT 1996 Plan"), Messrs. Sophinos and Carroll were each granted 50,000 restricted shares of TSAT Series A Common Stock in 1997. As originally granted, such restricted shares vested as to 50% on each of January 1, 2001 and January 1, 2002. On November 10, 1997, the TSAT Board and the Compensation Committee of the TSAT Board approved modifications to the terms of such awards, accelerating the vesting provisions to provide for vesting of 50% on February 3, 1999 and as to the remaining 50% on February 3, 2000. The value of each Messrs. Sophinos' and Carroll's restricted shares at the end of 1998 was $71,900. TSAT has not paid cash dividends on the TSAT Series A Common Stock and does not anticipate paying cash dividends on the TSAT Series A Common Stock at any time in the foreseeable future. (7) Pursuant to the PRIMESTAR, Inc. 1998 Incentive Plan (the "PRIMESTAR 1998 Plan"), certain executive officers and key employees of the Company were granted stock options with tandem SARS to purchase shares of Class A Common Stock at a purchase price of $7.69. Each such grant of options vests evenly over three years from the date of grant, with such vesting period beginning April 2, 1998, first become exercisable on April 2, 1999 and expire on April 1, 2008. (8) Pursuant to the TSAT 1996 Plan, Messrs. Sophinos and Carroll were each granted options with tandem SARs to purchase 100,000 shares of TSAT Series A Common Stock at a purchase price of $8.00. As originally granted, each such grant of options vested evenly over five years with such vesting period beginning January 1, 1997, first became exercisable on January 1, 1998 and expired on December 31, 2006. On November 10, 1997, the TSAT Board and the TSAT compensation committee approved modifications to the vesting of all options issued pursuant to the TSAT 1996 Plan, accelerating the vesting schedules under such options from five to three years, commencing February 1998. (9) Includes dollar value of annual employer contributions to the TCI Employee Stock Purchase Plan (''TCI ESPP'') prior to the Distribution, TSAT contributions to the TSAT Employee Stock Purchase Plan (the "TSAT ESPP") from January 1, 1997 to March 31, 1998 and PRIMESTAR contributions to the TSAT ESPP and the PRIMESTAR, Inc. 401(k) Savings Plan (the "PRIMESTAR Savings Plan") beginning April 1, 1998. All named executives are fully vested in such plans, except Mr. Vogel. Directors who are not employees of TSAT are ineligible to participate in the TSAT ESPP, and directors who are not employees of PRIMESTAR are ineligible to participate in the PRIMESTAR Savings Plan. Also includes insurance premiums paid by (i) PRIMESTAR in 1998 for the benefit of Messrs. Vogel, O'Brien, Sophinos, Carroll and Evans in the amount of $687, $772, $766, $479 and $731, respectively and (ii) TSAT in 1997 for the benefit of Messrs. Sophinos and Carroll in the amount of $740 and $434, respectively. (b) Option and SARs Grants in Last Fiscal Year. Effective April 2, 1998, ------------------------------------------- the Board approved and adopted the PRIMESTAR 1998 Plan. The PRIMESTAR 1998 Plan provides for awards to be made in respect of a maximum of 7,000,000 shares of Class A Common Stock (subject to certain anti-dilution adjustments). Awards may be made as grants of stock options, SARs, restricted shares, stock units, performance awards or any combination thereof (collectively, "Awards"). Awards may be made to employees and to consultants and advisors to the Company who are not employees. III-7 The following table discloses information regarding stock options granted in tandem with SARs during the year ended December 31, 1998 to each of the named executive officers of the Company in respect of shares of Class A Common Stock under the PRIMESTAR 1998 Plan.
No. of % of Total Securities Options Exercise Market Underlying Granted to or Price Grant Date Options Employees in Base Price on Grant Expiration Present Name Granted (1) 1998 ($/Sh) Date($/Sh) (2) Date Value $ (3) - ---- ----------- ------------- ----------- -------------- ------------- ------------- Carl E. Vogel 2,000,000 44.6% $7.69 $7.69 April 2, 2008 $11,900,000 Daniel J. O'Brien 400,000 8.1% $7.69 $7.69 April 2, 2008 $ 2,380,000 Christopher Sophinos 152,146 3.1% $7.69 $7.69 April 2, 2008 $ 905,269 Kenneth G. Carroll 160,923 3.2% $7.69 $7.69 April 2, 2008 $ 957,492 Marcus O. Evans 146,294 3.0% $7.69 $7.69 April 2, 2008 $ 870,449
(1) Effective April 2, 1998, certain key employees of PRIMESTAR were granted, pursuant to the PRIMESTAR 1998 Plan, an aggregate of 4,934,993 options in tandem with SARs to acquire shares of Class A Common Stock at a per share exercise price of $7.69 per share. (the "1998 Grant"). Each such grant of options with tandem SARs vests evenly over three years with such vesting period beginning April 3, 1998, first becomes exercisable on April 3, 1999 and expires on April 2, 2008. (2) Represents the closing market price per share of TSAT Series A Common Stock on April 2, 1998, the date of grant. The TSAT Series A Common Stock price has been used as an estimate of the market price of Class A Common Stock due to the terms and conditions of the TSAT Merger Agreement. (3) The value shown is based on the Black-Scholes model and is stated in current annualized dollars on a present value basis. The key assumptions used in the model for purposes of this calculation include the following: (a) a 5.5% discount rate; (b) a 65% volatility factor; (c) the 10-year option term; (d) the closing price of TSAT Series A Common Stock on April 2, 1998; and (e) a per share exercise price of $7.69. The actual value an executive may realize will depend upon the extent to which the stock price exceeds the exercise price on the date the option is exercised. Accordingly, the value, if any, realized by an executive will not necessarily be the value determined by the model. III-8 (c) Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Values. --------------------------------------------------------------------- The following table provides, for the executives named in the Summary Compensation Table, information on (i) the exercise during the year ended December 31, 1998, of options to purchase Class A Common Stock, (ii) the number of shares of Class A Common Stock, represented by unexercised options owned by them at December 31, 1998, and (iii) the value of those options as of the same date.
Number of Securities Underlying Unexercised Value of Options/SARs Unexercised In- at the-Money December 31, Options/SARs at Shares 1998 (#) December 31, 1998 Acquired on Value Realized Exercisable/ ($)Excercisable/ Name Exercise (#) ($) Unexercisable Unexercisable - ---- ----------- -------------- ------------- ----------------- Carl E. Vogel Exercisable -- $ -- -- $ -- Unexercisable -- $ -- 2,000,000 $ -- Daniel J. O'Brien Exercisable -- $ -- -- $ -- Unexercisable -- $ -- 400,000 $ -- Christopher Sophinos Exercisable -- $ -- -- $ -- Unexercisable -- $ -- 152,146 $ -- Kenneth G. Carroll PRIMESTAR Class A Exercisable -- $ -- -- $ -- Unexercisable -- $ -- 160,923 $ -- TCI Common Stock (1) TCI Group Stock Exercisable -- $ -- 15,050 $ 613,589 Unexercisable -- $ -- -- $ -- Liberty Media Group Stock Exercisable -- $ -- 2,250 $ 81,630 Unexercisable -- $ -- -- $ -- TCI Ventures Group Stock Exercisable -- $ -- 12,900 $ 210,129 Unexercisable -- $ -- -- $ -- Marcus O. Evans Exercisable -- $ -- -- $ -- Unexercisable -- $ -- 146,294 $ --
- ---------------------------- (1) Certain employees of TCI who became employees of the Company in connection with the Distribution had previously been granted options with tandem SARs to acquire shares of TCI common stock. The Company assumed the obligation for such options on the Distribution Date. (d) Compensation of Directors. Members of the PRIMESTAR Board do not -------------------------- receive any compensation for their services as directors. However, all members of the PRIMESTAR Board who are not employees of a stockholder of the Company are reimbursed for expenses incurred to attend any meetings of the PRIMESTAR Board or any committee thereof. During the year ended December 31, 1998, the Company paid Mr. John Goddard, a director of the Company, $28,000 for consulting services. III-9 In consideration for Mr. Gary Howard's efforts to consummate the Restructuring, the Company paid Mr. Howard, a director of the Company, a one- time fee of $937,500. (e) Employment Contracts and Termination of Employment and Change of ---------------------------------------------------------------- Control Arrangements - -------------------- The Company has entered into an employment agreement with Carl Vogel to serve as Chairman of the Board and Chief Executive Officer of the Company (the "CEO Agreement"). The CEO Agreement commenced July 1, 1998 and ends June 30, 2001 unless terminated early in accordance with its provisions. The Company has agreed to pay Mr. Vogel a base salary of not less than (i) $450,000 per annum during the period from July 1, 1998 to June 30, 1999, (ii) $475,000 per annum from July 1, 1999 to June 30, 2000 and (ii) $500,000 per annum from July 1, 2000 to June 30, 2001 (the "CEO Base Salary"). In addition, Mr. Vogel shall be eligible to receive an annual cash bonus of between 75% and 150% of the CEO Base Salary based of the performance of the Company and of Mr. Vogel (the "CEO Bonus"). Payment of the CEO Bonus is at the sole discretion of the Company. The CEO Agreement also provides for the Company to grant Mr. Vogel options to purchase 2,000,000 shares of the Company's Class A Common Stock at a purchase price of $7.69. The Company and Mr. Vogel each have the right to terminate the CEO Agreement early upon the happening of certain events. If the Company terminates the CEO Agreement without cause or if Mr. Vogel terminates the Agreement for cause, the Company shall make severance payments to Mr. Vogel ranging from $1,200,000 to $1,750,000, depending on the circumstances and subject to Mr. Vogel executing a waiver and release agreement pursuant to which Mr. Vogel would waive any and all claims against the Company. In the event that Mr. Vogel becomes disabled during the term of the CEO Agreement, the Company has agreed to pay Mr. Vogel disability benefits for the balance of the term of the CEO Agreement and until Mr. Vogel reaches age 65 in an amount equal to 75% of the Base Salary that would have otherwise been paid pursuant to the CEO Agreement had the disability not occurred. The Company has agreed to obtain $1,000,000 of term life insurance payable upon the death of Mr. Vogel to beneficiaries designated by Mr. Vogel. The Company's obligation is contingent upon Mr. Vogel's satisfactory completion of any applications and other documentation and any physical examination that may be required and to the availability of such insurance. The Company is required to purchase this life insurance for as long as Mr. Vogel remains an employee of the Company. This insurance is in addition to any group plan generally applicable to employees of the Company. In consideration for the compensation set forth in the CEO Agreement, Mr. Vogel has agreed that during the term of employment and for a period of one year following the termination of employment, he will not, without the prior written consent of the Board of Directors of the Company, render services to others in the business of delivering multi-channel television programming in the United States by direct broadcast satellite. Mr. Vogel also agrees that he will not disclose Company confidential information during the term of employment and thereafter. III-10 The Company has entered into an employment agreement with Daniel O'Brien to serve as President and Chief Operating Officer of the Company (the "COO Agreement") for the period from April 1, 1998 through December 31, 2000, unless terminated early in accordance with its provisions. The Company has agreed to pay Mr. O'Brien a base salary of not less than (i) $350,000 per annum during the period from April 1, 1998 to June 30, 1998, (ii) $375,000 per annum from July 1, 1998 to June 30, 1999, (iii) $400,000 per annum from July 1, 1999 to June 30, 2000 and (iv) $425,000 per annum form July 1, 2000 to December 31, 2000 (the "COO Base Salary"). In addition, Mr. O'Brien shall be eligible to receive an annual cash bonus of between 75% and 150% of the COO Base Salary based of the performance of the Company and of Mr. O'Brien (the "COO Bonus"). Payment of the COO Bonus is at the sole discretion of the Company. The COO Agreement also provides for the Company to grant Mr. O'Brien, effective April 1, 1998, stock options with tandem stock appreciation rights to purchase 400,000 shares of the Company's Class A Common Stock at a purchase price of $7.69 per share. The Company and Mr. O'Brien each have the right to terminate the COO Agreement early upon the happening of certain events. If the Company terminates the COO Agreement without cause or if Mr. O'Brien terminates the Agreement for cause, the Company shall make severance payments to Mr. O'Brien equal to two times Mr. O'Brien's then COO Base Salary plus the COO Bonus. In addition, the Company shall make severance payments equal to the value of certain unvested stock options granted by Time Warner, Inc., Mr. O'Brien's former employer and current shareholder of the Company. All such severance payments are subject to execution by Mr. O'Brien of a waiver and release agreement pursuant to which Mr. O'Brien would waive any and all claims against the Company. In the event that Mr. O'Brien becomes disabled during the term of the COO Agreement, the Company has agreed to pay Mr. O'Brien disability benefits for the balance of the term of the COO Agreement and until Mr. O'Brien reaches age 65 in an amount equal to 75% of the COO Base Salary that would have otherwise been paid pursuant to the COO Agreement had the disability not occurred. In consideration for the compensation set forth in the CEO Agreement, Mr. O'Brien has agreed that during the term of employment and for a period of one year following the termination of employment, he will not, without the prior written consent of the Board of Directors of the Company, render services to others in the business of delivering multi-channel television programming in the United States by direct broadcast satellite. Mr. O'Brien also agrees that he will not disclose Company confidential information during the term of employment and thereafter. The Company has also entered into an employment agreement with Kenneth Carroll to serve as Senior Vice President, Finance and Chief Financial Officer for the Company (the "CFO Agreement"). The CFO Agreement is effective as of April 1, 1998 for a period of three years and provides for an initial base salary of $247,500 for the period of April 1, 1998 until December 31, 1998 and $264,825 thereafter with increases at the discretion of III-11 the Compensation Committee of the Board of Directors. In addition, Mr. Carroll is eligible for a target cash bonus of 45% of his annual base salary (the "Senior Vice President Bonus") based on his performance and the performance of the Company. Payment of the Senior Vice President Bonus is at the sole discretion of the Company. The CFO Agreement also provides for the Company to grant Mr. Carroll options to purchase 160,923 shares of the Company's Class A Common Stock at a purchase price of $7.69 per share. The Company and Mr. Carroll each have the right to terminate the CFO Agreement early upon the happening of certain events. If the Company terminates the CFO Agreement without cause or if Mr. Carroll terminates the CFO Agreement for good reason, the Company shall make severance payments over a period of time equal to the annual base salary in effect at the time of termination multiplied by 2.90, subject to execution by Mr. Carroll of a waiver and release agreement pursuant to which Mr. Carroll would waive any and all claims against the Company. In consideration for the compensation set forth in the CFO Agreement, Mr. Carroll has agreed that during the term of employment and for a period of one year following the termination of employment, he will not render services to others in the business of delivering multi-channel television programming in the United States by direct broadcast satellite. Mr. Carroll has also agreed that he will not disclose Company confidential information during the term of employment and thereafter. The Company has also entered into an employment agreement with Christopher Sophinos to serve as Senior Vice President, Sales and Distribution for the Company (the "Sophinos Agreement"). The Sophinos Agreement is effective as of April 1, 1998 for a period of three years and provides for an initial base salary of $235,000 for the period of April 1, 1998 until December 31, 1998 and $248,000 commencing January 1, 1999 and continuing thereafter with increases at the discretion of the Compensation Committee. In addition, Mr. Sophinos is eligible for the Senior Vice President Bonus based on Mr. Sophinos' performance and the performance of the Company. Payment of the Senior Vice President Bonus is at the sole discretion of the Company. The Sophinos Agreement also provides for the Company to grant Mr. Sophinos options to purchase 152,146 shares of the Company's Class A Common Stock at a purchase price of $7.69 per share. The Company and Mr. Sophinos each have the right to terminate the Sophinos Agreement early upon the happening of certain events. If the Company terminates the Sophinos Agreement without cause or if Mr. Sophinos terminates the Sophinos Agreement for good reason, the Company shall make severance payments over time equal to the annual base salary in effect at the time of termination multiplied by 2.90, subject to execution by Mr. Sophinos of a waiver and release agreement pursuant to which Mr. Sophinos waives any and all claims against the Company. In consideration for the compensation set forth in the Sophinos Agreement, Mr. Sophinos has agreed that during the term of employment and for a period of one year following the III-12 termination of employment, he will not render services to others in the business of delivering multi-channel television programming in the United States by direct broadcast satellite. Mr. Sophinos has also agreed that he will not disclose Company confidential information during the term of employment and thereafter. The Company has entered into a Separation and Release Agreement with Marcus O. Evans, the Company's General Counsel, effective as of March 5, 1999 (the "GC Agreement"). The GC Agreement provides for Mr. Evans to receive an initial severance payment of $207,691 and a subsequent payment of $101,250 on or before January 30, 2000. In the event that Mr. Evans is not employed as of March 4, 2000, he will be eligible to receive bi-weekly payments of $8,654 (the "Bi- weekly Payments") until the first to occur of (i) he becomes employed or (ii) he has received a total of twenty-six such payments. If Mr. Evans has not become employed at any time between March 4, 2000 and March 2, 2001 (the "Second Year"), the Company has agreed to pay him an additional $101,250 on or before March 30, 2001 (the "Second Year Bonus"). In the event that Mr. Evans becomes an independent contractor at any time during the Second Year, the Company will reduce the Bi-weekly Payments and the Second Year Bonus by the amount of Mr. Evans' Second Year independent contractor income. The GC Agreement provides for the acceleration of vesting of all options held by Mr. Evans to purchase shares of PRIMESTAR, Inc. Class A Common Stock pursuant to the PIRMESTAR, Inc. 1998 Incentive Plan and the Non-Qualified Stock Option and Stock Appreciation Rights Agreement between Mr. Evans and the Company. In exchange for the payments set forth, Mr. Evans has agreed to release the Company from any and all claims that Mr. Evans may have against the Company. The Company has separately entered into a Consulting Agreement with Mr. Evans commencing as of March 6, 1999 pursuant to which Mr. Evans is to provide legal and regulatory affairs services to the Company in exchange for payments by the Company of $175 per hour. The Consulting Agreement terminates no later than June 1, 1999 unless extended by the mutual consent of the Company and Mr. Evans. III-13 (f) Additional Information with respect to Compensation Committee ------------------------------------------------------------- Interlocks and Insider Participation in Compensation Decisions. The members of - --------------------------------------------------------------- the Company's compensation committee are Messrs. John F. Connelly and John W. Goddard, each a director of the Company. None of the members of the compensation committee are or were officers of the Company or any of its subsidiaries. Item 12. Security Ownership of Certain Beneficial Owners and Management. - -------- -------------------------------------------------------------- (a) Security Ownership of Certain Beneficial Owners. The following table ------------------------------------------------ lists stockholders believed by the Company to be the beneficial owners of more than five percent of the outstanding Company Common Stock as of December 31, 1998. Voting power in the table is computed with respect to a general election of directors. So far as is known to the Company, the persons indicated below have sole voting and investment power with respect to the shares indicated as believed to be owned by them except as otherwise stated in the notes to the table.
Number of Shares Name and Address Title Beneficially Percent Voting of Beneficial Owner of Class Owned of Class (1) Power (2) ------------------- -------- -------------- ------------ --------- TCI Satellite Entertainment, Inc. Class A 66,345,565 37.0% 38.0% 8085 S. Chester Street, Suite 300 Class B 8,465,324 100% Englewood Colorado Class C -- -- Time Warner Entertainment Company, L.P. ("TWE")(3) Class A 53,499,980 (3) 29.9% 30.7% 290 Harbor Drive Class B -- -- Stamford, Connecticut Class C 6,826,299 (3) 51.2% Comcast Primestar Holdings, Inc. Class A 16,919,448 9.5% 9.7% 1500 Market Street Class B -- -- Philadelphia, Pennsylvania Class C 2,158,827 16.2% MediaOne of Delaware, Inc.(4) Class A 17,274,638 9.6% 9.9% 5613 DTC Parkway Class B -- -- Suite 700 Class C 2,204,147 16.5% Englewood, Colorado Cox Communications, Inc. Class A 16,796,125 9.4% 9.6% 1400 Lake Hearn Drive Class B -- -- Atlanta, Georgia Class C 2,143,092 16.1% GE Capital Satellites International, Inc. Class A 8,308,178 4.6% 2.1% Four Research Way Class B -- -- Princeton, New Jersey Class C -- --
- ----------------------------- (1) Based on 179,143,934 shares of Class A Common Stock, 8,465,324 shares of Class B Common Stock and 13,332,365 shares of Class C Common Stock outstanding as of December 31, 1998. III-14 (2) Based on one vote per share for the shares of Class A Common Stock and ten votes per share for the shares of Class B Common Stock and Class C Common Stock. (3) Includes 823,900 shares of Class A Common Stock and 105,125 shares of Class C Common Stock held of record by Paragon Communications, Inc., an affiliate of TWE, and 10,587,645 shares of Class A Common Stock and 1,350,925 shares of Class C Common Stock held of record by Advance/Newhouse Partnership, for which TWE has shared voting power pursuant to a voting agreement with a term of 10 years. (4) The shares indicated are owned of record by Continental Satellite Company, Inc., etc., each of which is a wholly owned subsidiary of MediaOne of Delaware, Inc. (b) Security Ownership of Management. The following table lists the number --------------------------------- of shares of Company Common Stock believed to be owned beneficially by each director, each of the executive officers named in the above Summary Compensation Table, and all directors and executive officers as a group as of December 31, 1998, according to data furnished by the persons named. Shares issuable upon exercise of options and upon vesting of restricted shares are deemed to be outstanding for the purpose of computing the percentage ownership and overall voting power of persons believed to beneficially own such securities, but have not been deemed to be outstanding for the purpose of computing the percentage ownership or overall voting power of any other person. Voting power in the table is computed with respect to a general election of directors. So far as is known to the Company, the persons indicated below have sole voting and investment power with respect to the shares indicated as believed to be owned by them.
Number of Shares Beneficially Owned ------------------------------- Beneficially Owned Percent of Class ------------------------------- ---------------------------------------- PRIMESTAR PRIMESTAR PRIMESTAR PRIMESTAR PRIMESTAR PRIMESTAR Voting --------- --------- Class A Class B Class C Class A(1) Class B(1) Class C(1) Power(2) --------- --------- --------- ------------ ------------ ------------ --------- Directors: John C. Malone -- -- -- -- -- -- -- Leo J. Hindery, Jr. -- -- -- -- -- -- -- Gary S. Howard -- -- -- -- -- -- -- Joseph J. Collins -- -- -- -- -- -- -- Dan Cavallo -- -- -- -- -- -- -- Robert J. Miron -- -- -- -- -- -- -- Miles L. Davenport -- -- -- -- -- -- -- Brian L. Roberts -- -- -- -- -- -- -- Ajit M. Dalvi -- -- -- -- -- -- -- John F. Connelly -- -- -- -- -- -- -- John W. Goddard -- -- -- -- -- -- -- Executive Officers: Carl E. Vogel 2,000,000 -- -- 1.1% -- -- * Daniel J. O'Brien 400,000 -- -- * -- -- * Christopher Sophinos 152,146 -- -- * -- -- * Kenneth G. Carroll 160,923 -- -- * -- -- * Marcus O. Evans 146,294 -- -- * -- -- * All such directors and executive officers as a group (17 persons) 2,859,363 -- -- 1.6% -- -- *
- ---------------------------------------- * Less than one percent. (1) Based on 179,143,934, 8,465,324 and 13,332,365 share of Class A Common Stock, Class B Common Stock and Class C Common Stock, respectively, outstanding as of December 31, 1998. (2) Based on one vote per share for the shares of Class A Common Stock and ten votes per share for the shares of Class B Common Stock and Class C Common Stock outstanding. III-15 Item 13. Certain Relationships and Related Transactions. - -------- ---------------------------------------------- In connection with the Roll-up Plan, the Company entered into the following related agreements: Stockholders Agreement. Pursuant to the Restructuring Agreement, each of TWE, Newhouse, Comcast, Cox and MediaOne (collectively, the "Class C Stockholders"), the Specified Class B Stockholders (as defined below), GE Americom and PRIMESTAR entered into a Stockholders Agreement (the "Stockholders Agreement") on the Closing Date, which provides for, among other things, certain provisions relating to the nomination of directors to the PRIMESTAR Board of Directors and certain voting agreements, transfer restrictions, conversion restrictions, rights of first refusal and other rights and obligations of the Class C Stockholders, the Specified Class B Stockholders and GE Americom in connection with their respective shares of PRIMESTAR Common Stock. The term of the Stockholders Agreement will be ten years. As used herein, the term "Specified Class B Stockholders" means (i) prior to the TSAT Merger, TSAT (and for certain purposes, John C. Malone), and (ii) after the TSAT Merger, John C. Malone (and, under certain circumstances, certain other holders of Class B Common Stock). Although Dr. Malone does not own directly any shares of Class B Common Stock (all of which are owned by TSAT), he nevertheless executed the Stockholders Agreement on the Closing Date as a Specified Class B Stockholder and is entitled to exercise certain rights thereunder, including the rights of first refusal. Registration Rights Agreement. Pursuant to the Restructuring Agreement, at the Closing, a registration rights agreement (the "Registration Rights Agreement") was entered into among PRIMESTAR, TSAT, the Class C Stockholders, GE Americom and John C. Malone. The registration Rights Agreement provides that each of the Class C Stockholders, the Specified Class B Stockholders, GE Americom, respectively, and their respective affiliates, have certain rights, under specific circumstances and subject to certain conditions and exceptions, to require PRIMESTAR to register under the Securities Act all or any portion of their respective shares of Class A Common Stock and Class B Common Stock. Reimbursement Agreements. Prior to entering into the Restructuring Agreement, affiliates of each of the Partners (or, in the case of TSAT, affiliates of TCI) other than GE Americom provided letters of credit (collectively, the "PRIMESTAR Letters of Credit") to secure certain obligations of the Partnership under (i) the GE-2 Agreement and (ii) the Partnership Credit Facility. Pursuant to the TSAT Asset Transfer Agreement, PRIMESTAR assumed the rights and obligations of TSAT under the Indemnification Agreements between TSAT and the affiliates of TCI that issued PRIMESTAR Letters of Credit, which include reimbursement obligations in favor of such TCI affiliates with respect to such PRIMESTAR Letters of Credit on substantially the same terms as the Reimbursement Agreements. Each of TWE, Comcast, Cox, MediaOne and TCI (or their respective affiliates) are paid a fee in consideration of their agreement to maintain such PRIMESTAR Letters of Credit outstanding for a period of time following the Closing Date. Payments made by PRIMESTAR pursuant to the Reimbursement Agreements aggregated $10,004,000 during 1998. Letter Agreement. In connection with the execution and delivery of the Restructuring Agreement by the parties thereto, John C. Malone entered into a letter of agreement, dated February 6, 1998, for the benefit of such parties (the "Letter Agreement"). The Letter Agreement provides for, among other things, the agreement of Dr. Malone to enter into the Stockholders Agreement and the Registration Rights Agreement at the Closing of the Restructuring Transaction. III-16 TSAT Tempo Agreement. In connection with the execution and delivery of the Restructuring Agreement, TSAT and PRIMESTAR entered into the TSAT Tempo Agreement dated as of February 6, 1998, pursuant to which, among other things, TSAT granted to PRIMESTAR the exclusive and irrevocable option, exercisable at any time during the term of the TSAT Tempo Agreement, upon receipt of FCC approval of the transfer of control of Tempo to PRIMESTAR (including approval of a transfer in anticipation of a subsequent sale), to purchase from TSAT (at the Option Holder's election) either (x) all the issued and outstanding shares of capital stock of Tempo or (y) all the rights, title and interests of TSAT in, to and under the Tempo Assets (as defined below), in either case for an aggregate purchase price equal to $2.5 million plus, in the case of an asset purchase, the assumption by the Option Holder of all obligations and liabilities of Tempo in respect of the Tempo Assets, other than those incurred in violation of the TSAT Tempo Agreement. The Option Holder, in its sole discretion, is entitled to assign the TSAT Tempo Agreement and PRIMESTAR's rights, interests and obligations thereunder at any time. "Tempo Assets" means (i) the FCC Permit, (ii) the Tempo Satellites, (iii) the Satellite Construction Agreement, and (iv) all rights, claims and causes of action under the Satellite Construction Agreement, all insurance claims in respect of the Tempo Satellites, and Tempo's rights under the Tempo Option Agreement. TSAT Stockholders Agreement. In connection with the execution and delivery of the Restructuring Agreement, TSAT, John C. Malone and PRIMESTAR entered into a stockholders agreement dated as of February 6, 1998 (the "TSAT Stockholders Agreement"), which provides, among other things, that until the termination of the TSAT Merger Agreement, each TSAT Stockholder (as defined below) will vote or act by written consent with respect to (or cause to be voted or acted upon by written consent) all shares of TSAT Common Stock held of record or beneficially owned by such TSAT Stockholder and all shares of TSAT Common Stock as to which such TSAT Stockholder has voting control (1) in favor of the TSAT Merger Agreement and the transactions contemplated thereby and (2) except for the transactions contemplated by the TSAT Merger Agreement, against any merger acquisition, consolidation or similar transaction that would adversely affect the transactions contemplated by the TSAT Merger Agreement, or any amendment of the TSAT Charter or the TSAT Bylaws, without the prior written consent of PRIMESTAR. In addition, until the termination of the TSAT Merger Agreement, each TSAT Stockholder has agreed not to convert any of its shares of TSAT Series B Common Stock into shares of TSAT Series A Common Stock or to transfer any of its shares of TSAT Common Stock, except to a permitted transferee (as specified in the TSAT Stockholders Agreement) of such TSAT Stockholder that becomes a party to the TSAT Stockholders Agreement as a TSAT Stockholder and to the Stockholders Agreement as a potential Specified Class B Stockholder. Each TSAT Stockholder has also agreed, until the earliest to occur of (i) consummation of the TSAT Merger, (ii) consummation of the transactions contemplated by the TSAT Tempo Agreement and (iii) termination of the TSAT Tempo Agreement, to vote or act by written consent with respect to (or cause to be voted or acted upon by written consent) all shares of TSAT Common Stock held of record or beneficially owned by such TSAT Stockholder and all shares of TSAT Common Stock as to which such TSAT Stockholder has voting control, in favor of the TSAT Tempo Agreement and the transactions contemplated thereby. "TSAT Stockholder" means (i) Dr. Malone for so long as he holds of record or beneficially owns or has voting control of any TSAT Common Stock (or has an affiliate holding TSAT Common Stock pursuant in specified provisions of the TSAT Stockholders Agreement) and (ii) each permitted transferee (as specified in the TSAT Stockholders Agreement) that acquires record or beneficial ownership or voting control of any TSAT Common Stock from a TSAT Stockholder, as long as such permitted transferee holds of record, beneficially owns or has voting control of any TSAT Common Stock; provided that such permitted transferee becomes a party to the TSAT Stockholders Agreement in accordance therewith. III-17 TSAT Transition Services Agreement. In connection with the Restructuring, the Company and TSAT entered into a transition services agreement (the "TSAT Transition Services Agreement"). Pursuant to the TSAT Transition Services Agreement, the Company is obligated to provide to TSAT certain services for the administration and operation of TSAT's business and its subsidiaries and affiliates as a public company. Such services include (i) tax reporting, financial reporting, compliance with the requirements of applicable state corporate laws, the Securities Act, the Exchange Act and other applicable laws, compliance with NASDAQ/NM filing and other requirements, and similar services typically performed by the Company's accounting, finance, corporate, legal, investor relations and tax department personnel, (ii) administration of existing stock options, restricted stock awards and similar obligations, and (iii) such other services as TSAT and the Company may from time to time mutually determine to be necessary or desirable. As compensation for services rendered to TSAT pursuant to the TSAT Transition Service Agreement, TSAT is required to reimburse the Company quarterly for the actual direct costs and expenses incurred by the Company in providing such services, provided that the incurrence of such expenses is consistent with practices generally followed by the Company in managing or operating its own business and the businesses of its subsidiaries and affiliates. The TSAT Transition Services Agreement further provides, however, that so long as the Company is obligated to reimburse TSAT for expenses pursuant to the TSAT Merger Agreement, all obligations of TSAT to the Company pursuant to the TSAT Transition Services Agreement will be offset against, and will for all purposes be fully and irrevocably satisfied by, the obligations of the Company to TSAT pursuant to the TSAT Merger Agreement. The TSAT Merger Agreement provides that during the term thereof, the Company will reimburse TSAT for all reasonable costs and expenses (including reasonable legal fees of outside counsel and reasonable fees to TSAT's independent public accountants) incurred by TSAT (i) in preparation of tax returns and other reports to governmental entities, (ii) for payment of required taxes, franchise fees, NASDAQ/NM fees and similar fees, (iii) in compliance with its reporting obligations under the Securities Act and the Exchange Act and (iv) to maintain directors' and officers' insurance on terms reasonably acceptable to the Company. During 1998, the net amount of TSAT expenses reimbursed by the Company pursuant to the TSAT Transition Services Agreement and the TSAT Merger Agreement aggregated $152,000. The TSAT Transition Services Agreement continues in effect until the close of business on December 31, 1999 and will be renewed automatically for successive one-year periods thereafter, unless earlier terminated by (i) either party at the end of the initial term or the then current renewal term, as applicable, on not less than 120 days prior written notice to the other party, (ii) TSAT upon written notice to the Company following certain changes in control of the Company, and (iii) either party if the other party is the subject of certain bankruptcy or insolvency-related events. Additional Arrangements with TCI. John Malone is currently the Chairman of the Board and a director of TCI and is also the Chairman of the Board and a director of TSAT and is a director of the Company. Dr. Malone is also a principal stockholder of both TCI and TSAT. The Company is party to a Master Digital Transmission Agreement (the "NDTC Transmission Agreement") with NDTC, a subsidiary of TCI. Pursuant to the NDTC Transmission Agreement, NDTC provides compression, encryption and uplinking services to the Company, via Ku-band transmission on domestic satellites designated by the Company, for DTH delivery of programming signals by the Company as well as certain ancillary services. NDTC facilitates the connection of satellite authorization facilities operated by the Company to NDTC's compression encoders and provides advertising, promotional and/or public service announcement insertion services at additional rates which are negotiated on an ad hoc basis. Charges for such services aggregated $10,659,000 during 1998. III-18 TCI also provides the Company with customer support services from TCI's Boise, Idaho call center. Management believes that the rates charged by TCI to the Company approximate fair market rates, as established by agreement between the Company and TCI. Amounts charged by TCI to the Company aggregated $24,938,000 during 1998. Additional Arrangements with GE Americom. The Company is party to the GE-2 Agreement with GE Americom. Pursuant to the GE-2 Agreement, GE Americom is obligated to provide the Company with transponder service for the PRIMESTAR(R) programming service on certain GE Americom communications satellites. Since March 1997, the PRIMESTAR(R) service has been transmitted from GE-2. As originally executed, the GE-2 Agreement had an initial term extending through February 2003 at an annual rate of $86,340,000, with an option to extend the term through the end-of-life of GE-2. The option to extend has expired without exercise. However, the Company remains in discussions with GE Americom regarding other alternatives for extension of the GE-2 Agreement, and the Company will continue to assess other medium and/or high power alternatives if the Hughes Medium Power Transaction is not consummated. The Company pays GE Americom (i) fixed minimum monthly service fees per transponder based on the type of service received (e.g., non-preemptible or preemptible, non-orbital location protected or orbital location protected) and (ii) variable monthly fees, based upon the number of subscribers to the PRIMESTAR(R) programming service up to a maximum of 2 million subscribers. The Company is required to pay the fixed transponder fees for all 24 transponders, whether or not all such transponders are actually used by the Company. The GE-2 Agreement provides for credits against the transponder fees for any transponders which fail to meet the performance specifications set for in the GE-2 Agreement. During the year ended December 31, 1998, the Company paid GE Americom $64,755,000 pursuant to the GE-2 Agreement. Programming Services. The Company purchases a portion of its programming services from direct and indirect affiliates of certain of the Restructuring Parties, including, among others, (i) HBO and Cinemax, which are owned by TWE, (ii) STARZ!, Encore and DMX, which are owned by subsidiaries of TCI, (iii) Speedvision and Outdoor Life, which are owned by MediaOne, Comcast and Cox or their respective affiliates, and (iv) The Golf Channel and E! Entertainment, which are also owned by Comcast or its affiliates. The Company believes that the fees and other terms and conditions of its programming arrangements with such affiliates are, in the aggregate, comparable to the fees, terms and conditions on which it could obtain comparable programming (if available) from third parties. In connection with the Distribution, the Company and TCI entered into various agreements, including the "Reorganization Agreement," the "Transition Services Agreement," an amendment to TCI's existing "Tax Sharing Agreement," the "Indemnification Agreements," the "Trade Name and Service Mark Agreement" and the "Share Purchase Agreement," all of which are described below. Reorganization Agreement. On the Distribution Date, TCI, TCIC and a number of other TCI subsidiaries, including the Company, entered into the Reorganization Agreement, which provided for, among other things, the principal corporate transactions required to effect the Distribution, the conditions thereto and certain provisions governing the relationship between the Company and TCI with respect to and resulting from the Distribution. III-19 Pursuant to the Reorganization Agreement, TSAT, among other things, granted an option to TCI to purchase up to 4,765,000 shares of TSAT Series A Common Stock (as such number may be adjusted to reflect stock dividends, stock splits and the like), for a purchase price equal to the par value of such shares, as necessary to satisfy TCI's obligations to deliver shares of TSAT Series A Common Stock upon conversion of certain convertible securities of TCI as a result of the Distribution. During the year ended December 31, 1998, the Company issued 989,000 shares of TSAT Series A Common Stock to TCI for aggregate consideration of $989,000 under this arrangement. TCI Transition Services Agreement. During the first quarter of 1998 and pursuant to the TCI Transition Services Agreement, TCI provided to the Company certain general and administrative services. In addition, TCI has agreed to provide the Company with certain most-favored-customer rights to programming services that TCI may own in the future and access to any volume discounts that may be available to TCI for purchases of HSDs, satellite receivers and other equipment. As compensation for services rendered to the Company and for the benefits made available to the Company pursuant to the TCI Transition Services Agreement, the Company was charged a fee of $1.50 per qualified subscribing household or other residential or commercial unit (counted as one subscriber regardless of the number of satellite receivers) per month, up to a maximum of $3 million per month, and reimbursed TCI for direct, out-of-pocket expenses incurred by TCI to third parties in providing the services. During the year ending on December 31, 1998, the Company was charged $3,174,000 pursuant to the TCI Transition Services Agreement. Upon consummation of the Restructuring, TSAT and TCI agreed to terminate the TCI Transition Services Agreement. Other Arrangements. On the Distribution Date, TCI and TSAT entered into the Share Purchase Agreement, which obligates TCI and TSAT to sell to each other from time to time, at the then current market price, shares of Series A TCI Group Common Stock and TSAT Series A Common Stock, respectively, as necessary to satisfy their respective obligations under Adjusted TCI Options and Add-on TSAT Options held after the Distribution Date by their respective employees and non- employee directors. During the year ended December 31, 1998, the Company issued no shares of TSAT Series A Common Stock to TCI under this arrangement. Certain members of the Company's management and the PRIMESTAR Board have certain interests in the Roll-up Plan, as described below: Directors and Officers of PRIMESTAR. Certain of the current directors and officers of TSAT became directors and officers of PRIMESTAR upon consummation of the Restructuring and will serve as directors and officers of both TSAT and PRIMESTAR until the TSAT Merger is consummated, at which time they will cease to be officers and directors of TSAT and will continue as officers and directors of PRIMESTAR (unless they have been earlier replaced in accordance with the certificate of incorporation and bylaws of PRIMESTAR). These include Gary S. Howard, the Chief Executive Officer and a director of TSAT, who serves as a director of PRIMESTAR, and John C. Malone, Leo J. Hindery, Jr. and John W. Goddard, all of whom are directors of TSAT and serve as directors of PRIMESTAR. III-20 Treatment of TSAT Options, Stock Appreciation Rights and Restricted Stock Awards. As of December 31, 1998, executive officers and directors of TSAT held options ("TSAT Options") under the TSAT 1996 Plan to purchase an aggregate of 1,580,164 shares of TSAT Series A Common Stock at various exercise prices and subject to various vesting schedules. In the case of a tandem option or stock appreciation right ("TSAT SAR"), the related stock appreciation right or option, as the case may be, is considered to have been exercised to the extent of the number of shares of TSAT Common Stock with respect to which such related tandem option or stock appreciation right is exercised. The TSAT Options and TSAT SARs remain outstanding following the consummation of the Restructuring, as obligations of TSAT, but have been amended to provide that service as an employee of, or consultant to, PRIMESTAR following the closing date of the Restructuring is deemed to constitute service as an employee of, or consultant to, TSAT, for all purposes of such awards and the TSAT 1996 Plan. At the effective time of the TSAT Merger, (x) all TSAT Options outstanding immediately prior to the effective time of the TSAT Merger, whether vested or unvested, (y) all obligations of TSAT under the TSAT 1996 Plan and the TSAT DSOP (collectively, the "TSAT Plans") and (z) the agreements evidencing the grants of such TSAT Options will be assumed by PRIMESTAR. Pursuant to the TSAT Merger Agreement, at the effective time of the TSAT Merger, each TSAT Option outstanding immediately prior to such effective time will be deemed to constitute an option to acquire, on the same terms and conditions as were applicable under such TSAT Option, the same number of shares of PRIMESTAR Class A Common Stock as the holder of such TSAT Option would have been entitled to receive pursuant to the TSAT Merger had such holder exercised such TSAT Option in full immediately prior to the effective time of the TSAT Merger, at a price per share equal to the exercise price for the shares of Series A Common Stock otherwise purchasable pursuant to such TSAT Option; provided, however, that in the case of any option to which Section 421 of the Internal Revenue Code of 1986, as amended (the "Code") applies by reason of its qualification under either Section 422 or 424 of the Code ("qualified stock options"), the option price, the number of shares purchasable pursuant to such option and the terms and conditions of exercise of such option will be determined in order to comply with Section 424(a) of the Code. The TSAT Merger Agreement provides that PRIMESTAR will comply with the terms of the TSAT Plans and ensure, to the extent required by, and subject to the provisions of, the TSAT Plans, that the TSAT Options that qualified as qualified stock options prior to the effective time of the TSAT Merger continue to qualify as qualified stock options after such effective time. PRIMESTAR will be entitled to make any changes to the TSAT Plans as will be necessary to give effect to the TSAT Merger. TSAT SARs issued in tandem with TSAT Options will be similarly modified. On November 10, 1997, the TSAT Board and the Compensation Committee of the TSAT Board approved modifications to the vesting provisions of all TSAT Options issued pursuant to the TSAT 1996 Plan and the TSAT DSOP, accelerating the vesting schedules under such options from five to three years upon consummation of the Restructuring. Accordingly, such TSAT Options will vest in three equal annual installments, commencing February 1998. TSAT Options granted prior to the Distribution, which were 40% vested in February 1998, will become two-thirds vested in February 1999 and fully vested in February 2000. III-21 The following table indicates for each person who is an executive officer or director of PRIMESTAR and who held TSAT Options (including TSAT Options issued in tandem with TSAT SARs) at December 31, 1998, (a) the number of shares of TSAT Series A Common Stock subject to such options and/or stock appreciation rights that were vested at December 31, 1998, (b) the number of shares of TSAT Series A Common Stock subject to such options and/or stock appreciation rights that were not vested at such date, and (c) the exercise price per share of TSAT Series A Common Stock of all such options and/or stock appreciation rights (whether vested or unvested). The total number of shares of Class A Common Stock that would be subject to such options and/or stock appreciation rights immediately following the effective time of the TSAT Merger assuming that all such options and/or stock appreciation rights continue to be outstanding immediately prior to such effective time would be equal to the number of shares of TSAT Series A Common Stock identified in the table. The exercise or base price per share of Class A Common Stock of such options and/or stock appreciation rights immediately following the effective time of the TSAT Merger would be equal to the exercise price of the TSAT Options. The TSAT Options listed opposite the name of each person in the table below (including TSAT Options issued in tandem with TSAT SARs) include all TSAT Options and TSAT SARs granted to such person under incentive plans of TSAT or otherwise.
TSAT TSAT Series A Common Series A Common Exercise Price Option and Stock Subject to Stock Subject to of TSAT - ---------- Vested Options Unvested Options Options and/or SAR Holder and/or SARs and/or SARs SARs - ---------- ---------------- ---------------- -------------- Christopher Sophinos 33,333 66,667 $ 8.00 Kenneth G. Carroll 34,703 67,447 $8.00 - $23.76 John C. Malone 16,666 33,334 $ 8.00 Gary S. Howard 288,630 405,446 $8.86 - $23.76 John W. Goddard 16,666 33,334 $ 8.00 Leo J. Hindery, Jr. 16,666 33,334 $ 6.50
As of December 31, 1998, executive officers and directors of PRIMESTAR held restricted stock awards ("TSAT Restricted Stock Awards") under the TSAT 1996 Plan representing the right to receive, upon vesting as described below, an aggregate of 275,000 shares of TSAT Series A Common Stock. As originally granted, each TSAT Restricted Stock Award vested 50% on each of January 1, 2001 and January 1, 2002. On November 10, 1997, the TSAT Board and the Compensation Committee of the TSAT Board approved modifications to the terms of such awards, accelerating the vesting provisions to provide for vesting of 50% on each of the second and third anniversaries of the date of grant. At the effective time of the TSAT Merger, pursuant to the TSAT Merger Agreement, (x) all TSAT Restricted Stock Awards outstanding immediately prior to such effective time, whether vested or unvested, and the agreements evidencing the grants of such TSAT Restricted Stock Awards, will be assumed by PRIMESTAR, and (y) each TSAT Restricted Stock Award will be deemed to constitute a restricted stock award, on the same terms, with respect to a number of shares of Class A Common Stock equal to the number of shares of Series A Common Stock previously subject to such TSAT Restricted Stock Award. Indemnification. The TSAT Merger Agreement provides that all rights to indemnification for acts or omissions occurring prior to the effective time of the TSAT Merger existing in favor of the current or former directors or officers of TSAT and its subsidiaries will survive the consummation of the TSAT Merger and continue in full force and effect in accordance with their respective terms. III-22 Directors' and Officers' Liability Insurance. The TSAT Merger Agreement provides that, for a period of not less than three years from the effective time of the TSAT Merger, directors' and officers' liability insurance will be maintained by PRIMESTAR covering current TSAT directors and officers on terms and conditions no less advantageous than TSAT's existing insurance, to the extent such coverage can be maintained or procured by the payment of an annual premium not exceeding one and one-half times the current annual premium paid by TSAT for its existing coverage. III-23 PART IV Item 14. Exhibits, Financial Statements and Financial Statement Schedules - -------- ---------------------------------------------------------------- and Reports on Form 8-K ----------------------- (a) (1) Financial Statements --------------------
Included in Part II of this Report: Page No. --------------- Independent Auditors' Report II-16 Consolidated Balance Sheets, December 31, 1998 and 1997 II-17 Consolidated Statements of Operations, Years ended December 31, 1998, 1997 and 1996 II-19 Consolidated Statements of Equity (Deficit), Years ended December 31, 1998, 1997 and 1996 II-20 Consolidated Statements of Cash Flows, Years ended December 31, 1998, 1997 and 1996 II-21 Notes to Consolidated Financial Statements, December 31, 1998, 1997 and 1996 II-22
(a) (2) Financial Statement Schedules -----------------------------
Included in Part IV of this Report: (i) Financial Statement Schedules required to be filed: Schedule II - Valuation and Qualifying Accounts, IV-6 Years ended December 31, 1998, 1997 and 1996.
IV-1 (a) (3) Exhibits -------- The following exhibits are filed herewith or are incorporated by reference herein (according to the number assigned to them in Item 601 of Regulation S-K) as noted: 2 - Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession: 2.1 Reorganization Agreement dated as of December 4, 1996, among Tele-Communications, Inc. ("TCI"), TCI Communications, Inc. ("TCIC"), Tempo Enterprises, Inc., TCI Digital Satellite Entertainment, Inc., TCI K-1, Inc. ("TCI K-1"), United Artists K-1 Investments, Inc. ("UA K-1"), TCI SE Partner 1, Inc. ("TCISE 1"), TCI SE Partner 2, Inc. ("TCISE 2") and TCI Satellite Entertainment, Inc. ("TSAT"). (c) 2.2 Merger and Contribution Agreement dated as of February 6, 1998, among PRIMESTAR, Inc. (the "Company"), TSAT, Time Warner Entertainment Company L. P. ("TWE"), Advance/Newhouse Partnership ("Newhouse"), Comcast Corporation ("Comcast"), Cox Communications, Inc. ("Cox"), MediaOne of Delaware, Inc. ("MediaOne") and GE American Communications, Inc. ("GE Americom"). (b) 2.3 Asset Transfer Agreement dated as of February 6, 1998, between the Company and TSAT. (b) 2.4 Agreement and Plan of Merger dated as of February 6, 1998, between the Company and TSAT. (b) 2.5 Guarantee Agreement dated as of February 6, 1998, by US WEST Media Group, Inc. ("US West"), in favor of each of the Company, TSAT, TWE, Newhouse, Comcast, Cox and GE Americom. (b) 2.6 Letter Agreement dated as of February 6, 1998, between John C. Malone and the Company, TSAT, TWE, Newhouse, Comcast, Cox , MediaOne and GE Americom, for the benefit of the Company, TSAT, TWE, Newhouse, Comcast, Cox, MediaOne and GE Americom. (b) 2.7 Form of Stockholders Agreement among he Company, TSAT, TWE, Newhouse, Comcast, Cox, MediaOne, Continental Satellite company, Inc./, Continental Satellite Company of Chicago, Inc., Continental Satellite Company of Minnesota, Inc., Continental Satellite company of New England, Inc., Continental Satellite Company of Michigan, Inc., Continental Satellite Company of Ohio, Inc., Continental Satellite Company of Virginia, Inc., MediaOne Satellite II, Inc., GE Americom and John C. Malone. (b) 2.8 Form of Registration Rights Agreement among the Company, TSAT, TWE, Newhouse, Comcast, Cox, MediaOne, Continental Satellite Company, Inc., Continental Satellite Company of Chicago, Inc., Continental Satellite Company of Minnesota, Inc., Continental Satellite Company of New England, Inc., Continental Satellite Company of Michigan, Inc., Continental Satellite Company of Ohio, Inc., Continental Satellite Company of Virginia, Inc., MediaOne Satellite II, Inc., GE Americom and John C. Malone. (b)
IV-2
2 - Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession (continued): 2.9 Stockholders Agreement dated as of February 6, 1998, among the Company, TSAT and John C. Malone. (b) 2.10 TSAT Tempo Agreement dated as of February 6, 1998, between the Company and TSAT. (b) 3 - Articles of Incorporation and Bylaws: 3.1 Amended and Restated Certificate of Incorporation of the Company. (b) 3.2 Amended and Restated Bylaws of the Company. (b) 4 - Instruments Defining the Rights of Security Holders: 4.1 Specimen certificate representing shares of Class A Common Stock of the Company. (b) 4.2 Specimen certificate representing shares of Class B Common Stock of the Company. (b) 4.3 Indenture dated as of February 20, 1997 between TSAT and Bank of New York, as Trustee, with respect to $200 million principal amount of 10-7/8% Senior Subordinated Notes due 2007.(d) 4.4 Indenture dated as of February 20, 1997 between TSAT and Bank of New York, as Trustee, with respect to $275 million principal amount of 12-1/4% Senior Subordinated Discount Notes due 2007.(d) 4.5 Registration Rights Agreement - Senior Subordinated Notes, dated as of February 20, 1997, among TSAT and Donaldson, Lufkin and Jenrette Securities Corporation; Merrill Lynch, Pierce, Fenner and Smith Incorporated; NationsBanc Capital Markets, Inc.; and Scotia Capital Markets (USA) Inc. (d) 4.6 Registration Rights Agreement - Senior Subordinated Discount Notes, dated as of February 20, 1997, among TSAT and Donaldson, Lufkin and Jenrette Securities Corporation; Merrill Lynch, Pierce, Fenner and Smith Incorporated; NationsBanc Capital Markets, Inc.; and Scotia Capital Markets (USA) Inc. (d) 10 - Material Contracts 10.1 Indemnification Agreement dated as of December 4, 1996, by and between the Company and TCI UA 1, Inc. (d) 10.2 First Amendment to Indemnification Agreement dated as of December 31, 1997 between the Company and TCI UA I, Inc. (c)
IV-3
10 - Material Contracts (continued): 10.3 Indemnification Agreement dated as of December 4, 1996, by and between the Company and TCIC. (d) 10.4 First Amendment to Indemnification Agreement dated as of December 31, 1997 between the Company and TCI Communications, Inc. (c) 10.5 Option Agreement dated February 8, 1990, between Tempo and K Prime Partners, L.P. (e) 10.6 Letter Agreement dated July 30, 1993, between Tempo and PRIMESTAR Partners, L.P. relating to FSS. (e) 10.7 Letter Agreement dated July 30, 1993, between Tempo and PRIMESTAR Partners, L.P. relating to BSS. (e) 10.8 Amended and Restated Reimbursement Agreement dated March 1, 1995, between TCI UA 1, Inc., Chemical Bank and The Toronto Dominion Bank. (e) 10.9 Senior Subordinated Credit Agreement, dated as of April 1, 1998 among PRIMESTAR, Inc., as Borrower, the Guarantors party hereto, the Lenders party hereto, Merrill Lynch & Co., as Arranger and Syndication Agent, Morgan Stanley Senior Funding, Inc., as Administrative Agent, and Donaldson, Lufkin & Jenerette Securities Corporation, as Documentation Agent. (a) 10.10 Credit Agreement, dated as of March 9, 1994, among PRIMESTAR Partners, L.P., the Lenders party hereto, The Bank of New York, Chemical Bank and Citibank, N.A. as Managing Agents, The Bank of New York, as Documentation Agent and Chemical Bank, as Administrative Agent, as amended by Amendment No. 1 dated November 21, 1994, as amended by Amendment No. 2 dated February 27, 1997, as amended by Amendment No. 3 dated June 2, 1997, as amended by Amendment No. 4 dated December 19, 1997 and as amended by Amendment No. 5 dated September 29, 1998. (a) 10.11 U.S. $700,000,000 Credit Agreement, dated as of March 31, 1998 among PRIMESTAR, Inc., as Borrower, The Bank of Nova Scotia, as Administrative Agent, Nationsbank of Texas, N.A., as Syndication Agent, Credit Lyonnais New York Branch, as Documentation Agent, Various Financial Institutions, as Lenders and The Bank of Nova Scotia, Credit Lyonnais New York Branch and Nationsbank of Texas, N.A., as Arranging Agents. (a) 10.12 Share Purchase Agreement dated as of December 4, 1996, between TCI and the Company. (d) 10.13 Option Agreement dated as of December 4, 1996, between TCI and the Company.(d)
IV-4
10 - Material Contracts (continued): Indemnification Agreement dated as of June 11, 1997 among News Corp., the Company, 10.14 the Partnership, Time Warner, Comcast, Cox, MediaOne, Newhouse, and GE Americom. (b) 10.15 Asset Purchase Agreement among the Company, PRIMESTAR Partners, L.P., PRIMESTAR MDU, Inc., the Stockholders of PRIMESTAR, Inc. listed herein and Hughes Electronics Corporation, dated as of January 22, 1999. (f) 10.16 Asset Purchase Agreement by and among Hughes Electronics Corporation, the Company, PRIMESTAR Partners L.P., Tempo Satellite, Inc. and the Stockholders of PRIMESTAR listed herein, dated as of January 22, 1999. (f) 21 Subsidiaries of the Registrant.(a) 27 Financial Data Schedule.(a)
- ------------------------------- (a) Filed herewith. (b) Incorporated by reference to the Company's Registration Statement on Form S-4 filed with the SEC on February 9, 1998 (Registration No. 333- 45835). (c) Incorporated by reference to TSAT's Annual Report on Form 10-K for the year ended December 31, 1997 (Commission File No. 0-21317). (d) Incorporated by reference to TSAT's Annual Report on Form 10-K for the year ended December 31, 1996 (Commission File No. 0-21317). (e) Incorporated by reference to TSAT's Registration Statement on Form 10 filed with the Securities and Exchange Commission ("SEC") on November 15, 1996 (Registration No. 0-21317). (f) Incorporated by reference to the Company's Current Report on Form 8-K, dated February 1, 1999. (b) Reports on Form 8-K filed during the quarter ended December 31, 1998: None. IV-5 Schedule II ----------- PRIMESTAR, INC. Valuation and Qualifying Accounts Years ended December 31, 1998, 1997 and 1996
Additions Deductions --------------- ------------------ Balance at Charged to Write-offs Balance beginning profit net of at end Description of year and loss recoveries of year - ----------- --------------- --------------- ------------------ ------------- amounts in thousands Year ended December 31, 1998: Allowance for doubtful receivables - trade $5,307 43,460 (41,325) 7,442 =============== =============== ================= ============= Year ended December 31, 1997: Allowance for doubtful receivables - trade $4,666 18,339 (17,698) 5,307 =============== =============== ================= ============= Year ended December 31, 1996: Allowance for doubtful receivables - trade $4,819 19,235 (19,388) 4,666 =============== =============== ================= =============
IV-6 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PRIMESTAR, INC. By: /s/ Carl E. Vogel ------------------------------- Name: Carl E. Vogel Title: Chief Executive Officer Dated April 15, 1999 Pursuant to the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the date indicated:
Signature Title Date --------- ----- ---- /s/ Carl E. Vogel April 15, 1999 ------------------------------------ Carl E. Vogel Chief Executive Officer /s/ John C. Malone April 15, 1999 ------------------------------------ John C. Malone Director /s/ Leo J. Hindery, Jr. April 15, 1999 ------------------------------------ Leo J. Hindery, Jr. Director /s/ Garry S. Howard April 15, 1999 ------------------------------------ Garry S. Howard Director /s/ Joseph J. Collins April 15, 1999 ------------------------------------ Joseph J. Collins Director /s/ Daniel P. Cavallo April 15, 1999 ------------------------------------ Daniel P. Cavallo Director /s/ Robert J. Miron April 15, 1999 ------------------------------------ Robert J. Miron Director /s/ Miles L. Davenport April 15, 1999 ------------------------------------ Miles L. Davenport Director
IV-7
Signature Title Date --------- ----- ---- /s/ Brian L. Roberts April 15, 1999 ------------------------------------ Joseph J. Collins Director /s/ Ajit M. Dalvi April 15, 1999 ------------------------------------ Ajit M. Dalvi Director /s/ John F. Connelly April 15, 1999 ------------------------------------ John F. Connelly Director /s/ John W. Goddard April 15, 1999 ------------------------------------ John W. Goddard Director /s/ Daniel J. O'Brien April 15, 1999 ------------------------------------ Daniel J. O'Brien President and Chief Operating Officer /s/ Kenneth G. Carroll April 15, 1999 ------------------------------------ Kenneth G. Carroll Senior Vice President and Chief Financial Officer (Principal Financial Officer) /s/ Scott D. Macdonald April 15, 1999 ------------------------------------ Scott D. Macdonald Vice President and Controller (Principal Accounting Officer)
IV-8 Exhibit Index ------------- The following exhibits are filed herewith or are incorporated by reference herein (according to the number assigned to them in Item 601 of Regulation S-K) as noted: 2 - Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession: 2.1 Reorganization Agreement dated as of December 4, 1996, among Tele-Communications, Inc. ("TCI"), TCI Communications, Inc. ("TCIC"), Tempo Enterprises, Inc., TCI Digital Satellite Entertainment, Inc., TCI K-1, Inc. ("TCI K-1"), United Artists K-1 Investments, Inc. ("UA K-1"), TCI SE Partner 1, Inc. ("TCISE 1"), TCI SE Partner 2, Inc. ("TCISE 2") and TCI Satellite Entertainment, Inc. ("TSAT"). (c) 2.2 Merger and Contribution Agreement dated as of February 6, 1998, among PRIMESTAR, Inc. (the "Company"), TSAT, Time Warner Entertainment Company L. P. ("TWE"), Advance/Newhouse Partnership ("Newhouse"), Comcast Corporation ("Comcast"), Cox Communications, Inc. ("Cox"), MediaOne of Delaware, Inc. ("MediaOne") and GE American Communications, Inc. ("GE Americom"). (b) 2.3 Asset Transfer Agreement dated as of February 6, 1998, between the Company and TSAT. (b) 2.4 Agreement and Plan of Merger dated as of February 6, 1998, between the Company and TSAT. (b) 2.5 Guarantee Agreement dated as of February 6, 1998, by US WEST Media Group, Inc. ("US West"), in favor of each of the Company, TSAT, TWE, Newhouse, Comcast, Cox and GE Americom. (b) 2.6 Letter Agreement dated as of February 6, 1998, between John C. Malone and the Company, TSAT, TWE, Newhouse, Comcast, Cox , MediaOne and GE Americom, for the benefit of the Company, TSAT, TWE, Newhouse, Comcast, Cox, MediaOne and GE Americom. (b) 2.7 Form of Stockholders Agreement among he Company, TSAT, TWE, Newhouse, Comcast, Cox, MediaOne, Continental Satellite company, Inc./, Continental Satellite Company of Chicago, Inc., Continental Satellite Company of Minnesota, Inc., Continental Satellite company of New England, Inc., Continental Satellite Company of Michigan, Inc., Continental Satellite Company of Ohio, Inc., Continental Satellite Company of Virginia, Inc., MediaOne Satellite II, Inc., GE Americom and John C. Malone. (b) 2.8 Form of Registration Rights Agreement among the Company, TSAT, TWE, Newhouse, Comcast, Cox, MediaOne, Continental Satellite Company, Inc., Continental Satellite Company of Chicago, Inc., Continental Satellite Company of Minnesota, Inc., Continental Satellite Company of New England, Inc., Continental Satellite Company of Michigan, Inc., Continental Satellite Company of Ohio, Inc., Continental Satellite Company of Virginia, Inc., MediaOne Satellite II, Inc., GE Americom and John C. Malone. (b)
2 - Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession (continued): 2.9 Stockholders Agreement dated as of February 6, 1998, among the Company, TSAT and John C. Malone. (b) 2.10 TSAT Tempo Agreement dated as of February 6, 1998, between the Company and TSAT. (b)
3 - Articles of Incorporation and Bylaws: 3.1 Amended and Restated Certificate of Incorporation of the Company. (b) 3.2 Amended and Restated Bylaws of the Company. (b) 4 - Instruments Defining the Rights of Security Holders: 4.1 Specimen certificate representing shares of Class A Common Stock of the Company. (b) 4.2 Specimen certificate representing shares of Class B Common Stock of the Company. (b) 4.3 Indenture dated as of February 20, 1997 between TSAT and Bank of New York, as Trustee, with respect to $200 million principal amount of 10-7/8% Senior Subordinated Notes due 2007.(d) 4.4 Indenture dated as of February 20, 1997 between TSAT and Bank of New York, as Trustee, with respect to $275 million principal amount of 12-1/4% Senior Subordinated Discount Notes due 2007.(d) 4.5 Registration Rights Agreement - Senior Subordinated Notes, dated as of February 20, 1997, among TSAT and Donaldson, Lufkin and Jenrette Securities Corporation; Merrill Lynch, Pierce, Fenner and Smith Incorporated; NationsBanc Capital Markets, Inc.; and Scotia Capital Markets (USA) Inc. (d) 4.6 Registration Rights Agreement - Senior Subordinated Discount Notes, dated as of February 20, 1997, among TSAT and Donaldson, Lufkin and Jenrette Securities Corporation; Merrill Lynch, Pierce, Fenner and Smith Incorporated; NationsBanc Capital Markets, Inc.; and Scotia Capital Markets (USA) Inc. (d) 10 - Material Contracts 10.1 Indemnification Agreement dated as of December 4, 1996, by and between the Company and TCI UA 1, Inc. (d) 10.2 First Amendment to Indemnification Agreement dated as of December 31, 1997 between the Company and TCI UA I, Inc. (c)
10 - Material Contracts (continued): 10.3 Indemnification Agreement dated as of December 4, 1996, by and between the Company and TCIC. (d) 10.4 First Amendment to Indemnification Agreement dated as of December 31, 1997 between the Company and TCI Communications, Inc. (c) 10.5 Option Agreement dated February 8, 1990, between Tempo and K Prime Partners, L.P. (e) 10.6 Letter Agreement dated July 30, 1993, between Tempo and PRIMESTAR Partners, L.P. relating to FSS. (e) 10.7 Letter Agreement dated July 30, 1993, between Tempo and PRIMESTAR Partners, L.P. relating to BSS. (e) 10.8 Amended and Restated Reimbursement Agreement dated March 1, 1995, between TCI UA 1, Inc., Chemical Bank and The Toronto Dominion Bank. (e) 10.9 Senior Subordinated Credit Agreement, dated as of April 1, 1998 among PRIMESTAR, Inc., as Borrower, the Guarantors party hereto, the Lenders party hereto, Merrill Lynch & Co., as Arranger and Syndication Agent, Morgan Stanley Senior Funding, Inc., as Administrative Agent, and Donaldson, Lufkin & Jenerette Securities Corporation, as Documentation Agent. (a) 10.10 Credit Agreement, dated as of March 9, 1994, among PRIMESTAR Partners, L.P., the Lenders party hereto, The Bank of New York, Chemical Bank and Citibank, N.A. as Managing Agents, The Bank of New York, as Documentation Agent and Chemical Bank, as Administrative Agent, as amended by Amendment No. 1 dated November 21, 1994, as amended by Amendment No. 2 dated February 27, 1997, as amended by Amendment No. 3 dated June 2, 1997, as amended by Amendment No. 4 dated December 19, 1997 and as amended by Amendment No. 5 dated September 29, 1998. (a) 10.11 U.S. $700,000,000 Credit Agreement, dated as of March 31, 1998 among PRIMESTAR, Inc., as Borrower, The Bank of Nova Scotia, as Administrative Agent, Nationsbank of Texas, N.A., as Syndication Agent, Credit Lyonnais New York Branch, as Documentation Agent, Various Financial Institutions, as Lenders and The Bank of Nova Scotia, Credit Lyonnais New York Branch and Nationsbank of Texas, N.A., as Arranging Agents. (a) 10.12 Share Purchase Agreement dated as of December 4, 1996, between TCI and the Company. (d) 10.13 Option Agreement dated as of December 4, 1996, between TCI and the Company.(d)
10 - Material Contracts (continued): 10.14 Indemnification Agreement dated as of June 11, 1997 among News Corp., the Company, the Partnership, Time Warner, Comcast, Cox, MediaOne, Newhouse, and GE Americom. (b) 10.15 Asset Purchase Agreement among the Company, PRIMESTAR Partners, L.P., PRIMESTAR MDU, Inc., the Stockholders of PRIMESTAR, Inc. listed herein and Hughes Electronics Corporation, dated as of January 22, 1999. (f) 10.16 Asset Purchase Agreement by and among Hughes Electronics Corporation, the Company, PRIMESTAR Partners L.P., Tempo Satellite, Inc. and the Stockholders of PRIMESTAR listed herein, dated as of January 22, 1999. (f) 21 Subsidiaries of the Registrant.(a) 27 Financial Data Schedule.(a)
- ---------------------- (a) Filed herewith. (b) Incorporated by reference to the Company's Registration Statement on Form S-4 filed with the SEC on February 9, 1998 (Registration No. 333- 45835). (c) Incorporated by reference to TSAT's Annual Report on Form 10-K for the year ended December 31, 1997 (Commission File No. 0-21317). (d) Incorporated by reference to TSAT's Annual Report on Form 10-K for the year ended December 31, 1996 (Commission File No. 0-21317). (e) Incorporated by reference to TSAT's Registration Statement on Form 10 filed with the Securities and Exchange Commission ("SEC") on November 15, 1996 (Registration No. 0-21317). (f) Incorporated by reference to the Company's Current Report on Form 8-K, dated February 1, 1999. EX-10.9 2 SENIOR SUBORDINATED CREDIT AGREEMENT EXHIBIT 10.9 ================================================================================ SENIOR SUBORDINATED CREDIT AGREEMENT dated as of April 1, 1998 among PRIMESTAR, INC., as Borrower, THE GUARANTORS party hereto, THE LENDERS party hereto, MERRILL LYNCH & CO., as Arranger and Syndication Agent, MORGAN STANLEY SENIOR FUNDING, INC., as Administrative Agent, and DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION, as Documentation Agent ================================================================================ TABLE OF CONTENTS/a/
Section Heading Page - ------- ------- ---- SECTION 1. DEFINITIONS................................................................................ 1 1.1 Certain Defined Terms...................................................................... 1 1.2 Accounting Terms........................................................................... 39 1.3 Rules of Construction...................................................................... 40 SECTION 2. AMOUNT AND TERMS OF LOAN COMMITMENT AND LOANS; NOTES...................................................................................... 40 2.1 Initial Loan and Initial Note.............................................................. 40 A. Initial Loan Commitment........................................................... 40 B. Notice of Borrowing............................................................... 40 C. Disbursement of Funds............................................................. 41 D. Initial Notes..................................................................... 41 E. Scheduled Payment of Initial Loan................................................. 41 F. Termination of Initial Loan Commitments........................................... 41 G. Pro Rata Borrowings............................................................... 42 2.2 Term Loan and Term Note.................................................................... 42 A. Term Loan Commitment.............................................................. 42 B. Notice of Conversion/Borrowing.................................................... 42 C. Making of Term Loan............................................................... 42 D. Maturity Date of Term Loan........................................................ 42 E. Term Notes........................................................................ 42 2.3 Interest on the Loans...................................................................... 43 A. Rate of Interest.................................................................. 43 B. Interest Payments................................................................. 43 C. Post-Maturity Interest............................................................ 44 D. Computation of Interest........................................................... 44 2.4 Letter Agreements.......................................................................... 44 2.5 Prepayments; Mandatory Offers and Payments................................................. 44 A. Prepayments and Mandatory Offers.................................................. 44 B. Manner and Time of Payment........................................................ 48 C. Payments on Non-Business Days..................................................... 48 D. Notation of Payment............................................................... 48 2.6 Use of Proceeds............................................................................ 48 A. Initial Loan...................................................................... 48 B. Term Loan......................................................................... 48 C. Margin Regulations................................................................ 48 2.7 Breakage; Illegality....................................................................... 48 A. Breakage.......................................................................... 48
_____________________ a This Table of Contents is not a part of the Agreement to which it is attached but is inserted for convenience of reference only. -i-
Section Heading Page - ------- ------- ---- B. Illegality........................................................................ 49 SECTION 3. CONDITIONS TO LOANS........................................................................ 49 3.1 Conditions to Initial Loan................................................................. 49 A. Corporate Proceedings, Documents, Resolutions, Etc................................ 49 B. New PRIMESTAR Senior Credit Facility.............................................. 51 C. Assumption Agreements............................................................. 51 D. Restructuring Agreements.......................................................... 51 E. No Other Debt..................................................................... 52 F. Consummation of Transactions...................................................... 52 G. Approvals......................................................................... 52 H. No Default Under This Agreement and Other Agreements.............................. 53 I. No Legal Bar...................................................................... 53 J. No Material Adverse Change........................................................ 53 K. No Dividends...................................................................... 53 L. No Violation of Law............................................................... 53 M. Fees and Expenses................................................................. 53 N. Accuracy of Representations and Warranties........................................ 53 O. Subordination Arrangements........................................................ 54 3.2 Conditions to Term Loan.................................................................... 54 A. Notice of Conversion.............................................................. 54 B. No Bankruptcy..................................................................... 54 C. No Payment Default................................................................ 54 D. No Acceleration of New PRIMESTAR Senior Credit Facility or Existing Notes........................................................................... 54 E. Officers' Certificate............................................................. 54 F. Term Notes........................................................................ 54 G. Fees and Expenses................................................................. 54 H. Margin Rules...................................................................... 54 SECTION 4. REPRESENTATIONS AND WARRANTIES............................................................. 54 4.1 Organization, Etc.......................................................................... 54 4.2 Due Authorization, Non-Contravention, Etc.................................................. 55 A. General........................................................................... 55 B. Subordinated Debt................................................................. 55 4.3 Government Approval, Regulation, Etc....................................................... 55 4.4 Validity, Etc.............................................................................. 55 4.5 Financial Information...................................................................... 56 4.6 No Material Adverse Change................................................................. 56 4.7 Litigation, Labor Controversies, Etc....................................................... 56 4.8 Compliance with Laws....................................................................... 56 4.9 Subsidiaries............................................................................... 56 4.10 Ownership of Properties.................................................................... 56 4.11 Taxes...................................................................................... 57 4.12 Pension and Welfare Plans.................................................................. 57 4.13 Environmental Matters...................................................................... 57 4.14 Intellectual Property...................................................................... 58 4.15 Regulations T, U and X..................................................................... 58
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Section Heading Page - ------- ------- ---- 4.16 Accuracy of Information.................................................................... 58 SECTION 5. AFFIRMATIVE COVENANTS (INITIAL LOAN AND TERM LOAN)......................................... 59 5.1 Financial Information, Reports, Notices, Etc............................................... 59 5.2 Compliance with Laws, Etc.................................................................. 60 5.3 Maintenance of Properties.................................................................. 61 5.4 Insurance.................................................................................. 61 5.5 Books and Records.......................................................................... 61 5.6 Environmental Covenant..................................................................... 62 5.7 [Reserved]................................................................................. 62 5.8 Lenders Meeting............................................................................ 62 5.9 Use of Proceeds............................................................................ 62 5.10 Payments in U.S Dollars.................................................................... 62 5.11 Take-Out Financing......................................................................... 62 A. Refinancing of Loans, Initial Notes, Term Notes and Exchange Notes................ 62 B. Required Refinancing of Loans, Notes, Term Notes and Exchange Notes......................................................................... 64 5.12 Exchange of Term Notes..................................................................... 64 5.13 Register................................................................................... 65 SECTION 6. NEGATIVE COVENANTS (INITIAL LOAN).......................................................... 65 6.1 Business Activities........................................................................ 65 6.2 Indebtedness............................................................................... 66 6.3 Liens...................................................................................... 67 6.4 Sale and Leaseback......................................................................... 68 6.5 Investments................................................................................ 68 6.6 Restricted Payments, Etc................................................................... 68 6.7 [Reserved]................................................................................. 69 6.8 Subsidiaries............................................................................... 69 6.9 Take or Pay Contracts...................................................................... 69 6.10 Consolidation, Merger, Etc................................................................. 69 6.11 Permitted Dispositions..................................................................... 69 6.12 Senior Subordinated Indebtedness........................................................... 70 6.13 Guarantees................................................................................. 70 6.14 Refinancing of Loans in Part............................................................... 70 6.15 Modification of Certain Agreements......................................................... 70 6.16 Transactions with Affiliates............................................................... 70 6.17 Negative Pledges, Restrictive Agreements, Etc.............................................. 71 6.18 Restrictions on Leases and ASkyB Transaction............................................... 71 6.19 Restrictions on TSAT Partners Holdings and Its Subsidiaries................................ 71 SECTION 6A. NEGATIVE COVENANTS (TERM LOAN)............................................................. 72 6A.1 Limitation on Restricted Payments.......................................................... 72 6A.2 Limitation on Indebtedness................................................................. 75 6A.3 Limitation on Transactions with Affiliates................................................. 78 6A.4 Limitation on Liens........................................................................ 79 6A.5 Limitation on Senior Subordinated Indebtedness............................................. 80
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Section Heading Page - ------- ------- ---- 6A.6 Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries............................................................................. 80 6A.7 Guaranty of Notes by Subsidiaries.......................................................... 81 6A.8 Merger, Sale of Assets; Etc................................................................ 81 6A.9 Disposition of Proceeds of Asset Sales..................................................... 82 6A.10 Payments for Consent....................................................................... 84 6A.11 Tempo Satellites; Maintenance of Insurance................................................. 84 6A.12 Designation of Unrestricted Subsidiaries................................................... 85 6A.13 Refinancing of Loans in Part............................................................... 86 SECTION 7. EVENTS OF DEFAULT.......................................................................... 86 7.1 Failure To Make Payments When Due.......................................................... 86 7.2 Default in Other Agreements................................................................ 87 7.3 Change of Control; Breach of Certain Covenants............................................. 87 7.4 Breach of Warranty......................................................................... 87 7.5 Other Defaults Under Agreement or Loan Documents........................................... 87 7.6 Involuntary Bankruptcy; Appointment of Custodian, Etc...................................... 87 7.7 Voluntary Bankruptcy; Appointment of Custodian, Etc........................................ 88 7.8 Judgments and Attachments.................................................................. 88 7.9 Dissolution................................................................................ 88 7.10 Guarantee.................................................................................. 88 7.11 Foreclosure................................................................................ 88 SECTION 8. SUBORDINATION.............................................................................. 89 8.1 Loans and Notes Subordinated to Senior Indebtedness........................................ 89 8.2 No Payment on Loans and Notes in Certain Circumstances; Payments Held in Trust.................................................................................... 89 A. No Payments in Certain Circumstances.............................................. 89 B. Payments Held in Trust............................................................ 90 8.3 Payment Over of Proceeds upon Dissolution, Etc............................................. 90 A. Payment Over...................................................................... 90 B. Payments Held in Trust............................................................ 91 8.4 Subrogation................................................................................ 91 8.5 Obligations of Borrower Unconditional...................................................... 92 8.6 Notice to Arranger......................................................................... 92 8.7 Reliance on Judicial Order or Certificate of Liquidating Agent............................. 93 8.8 Arranger's Relation to Senior Indebtedness................................................. 93 8.9 Subordination Rights not Impaired by Acts or Omissions of Borrower or Holders of Senior Indebtedness................................................................... 93 8.10 Lenders Authorize Arranger To Effectuate Subordination of Loans and Notes.................. 94 8.11 This Section not To Prevent Events of Default.............................................. 94 8.12 Arranger's Compensation not Prejudiced..................................................... 94 8.13 No Waiver of Subordination Provisions...................................................... 94 8.14 Acceleration of Loans and Notes............................................................ 94 SECTION 9. THE AGENTS................................................................................. 94 9.1 General Provisions......................................................................... 94
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Section Heading Page - ------- ------- ---- 9.2 Indemnification............................................................................ 96 9.3 Consents Under Other Loan Documents........................................................ 97 SECTION 10. GUARANTEE.................................................................................. 97 10.1 Unconditional Guarantee.................................................................... 97 10.2 Severability............................................................................... 97 10.3 Release of a Guarantor..................................................................... 97 10.4 Limitation of Guarantor's Liability........................................................ 98 10.5 Contribution............................................................................... 98 10.6 Subordination of Subrogation and Other Rights.............................................. 98 SECTION 11. SUBORDINATION OF GUARANTEE OBLIGATIONS..................................................... 98 11.1 Guarantee Obligations Subordinated to Guarantor Senior Indebtedness........................ 98 11.2 No Payment on Guarantees in Certain Circumstances; Payments Held in Trusts................. 99 A. No Payments in Certain Circumstances.............................................. 99 B. Payments Held in Trust............................................................ 99 11.3 Payment Over of Proceeds upon Dissolution, Etc............................................. 100 A. Payment Over...................................................................... 100 B. Payments Held in Trust............................................................ 100 11.4 Subrogation................................................................................ 101 11.5 Obligations of Guarantors Unconditional................................................... 101 11.6 Notice to Arranger........................................................................ 101 11.7 Reliance on Judicial Order or Certificate of Liquidating Agent............................ 102 11.8 Arranger's Relation to Guarantor Senior Indebtedness...................................... 102 11.9 Subordination Rights not Impaired by Acts or Omissions of the Guarantors or Lenders of Guarantor Senior Indebtedness................................................ 103 11.10 Lenders Authorize Arranger To Effectuate Subordination of Guarantee....................... 103 11.11 This Article not To Prevent Events of Default............................................. 103 11.12 Arranger's Compensation not Prejudiced.................................................... 103 11.13 No Waiver of Guarantee Subordination Provisions........................................... 103 11.14 Payments May Be Paid Prior to Dissolution................................................. 104 SECTION 12. MISCELLANEOUS............................................................................. 104 12.1 Participations in and Assignments of Loans and Notes...................................... 104 A. Assignments...................................................................... 104 B. Participations................................................................... 104 C. Certain Assignments Permitted.................................................... 105 D. Information...................................................................... 105 E. No Assignment to Borrower........................................................ 105 12.2 Expenses.................................................................................. 105 12.3 Indemnity................................................................................. 106 12.4 Setoff.................................................................................... 107 12.5 Amendments and Waivers.................................................................... 107 12.6 Independence of Representations, Warranties and Covenants................................. 108 12.7 Entirety.................................................................................. 108 12.8 Notices................................................................................... 108 12.9 Survival of Warranties and Certain Agreements............................................. 108
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Section Heading Page - ------- ------- ---- 12.10 Failure or Indulgence not Waiver; Remedies Cumulative..................................... 109 12.11 Severability.............................................................................. 109 12.12 Headings.................................................................................. 109 12.13 Applicable Law............................................................................ 109 12.14 Successors and Assigns; Subsequent Holders of Notes....................................... 109 12.15 Counterparts; Effectiveness............................................................... 109 12.16 Consent to Jurisdiction; Venue; Waiver of Jury Trial...................................... 110 A. New York Jurisdiction............................................................ 110 B. Venue............................................................................ 110 C. Trial by Jury Waiver............................................................. 110 12.17 Payments Pro Rata......................................................................... 110 A. Pro Rata Payments................................................................ 110 B. Sharing of Payments.............................................................. 110 12.18 Taxes and Other Taxes..................................................................... 111 A. Covered Taxes.................................................................... 111 B. Other Taxes...................................................................... 113 C. Refunds.......................................................................... 113 D. Receipts......................................................................... 113 E. Survival......................................................................... 113 12.19 Waiver of Stay, Extension or Usury Laws................................................... 113 12.20 Additional Costs.......................................................................... 114 12.21 Confidentiality........................................................................... 115 12.22 Acknowledgments........................................................................... 115 Signatures............................................................................................... S-1
-vi- SCHEDULES SCHEDULE 3.1E Debt and Contingent Obligations at Closing Date SCHEDULE 4.3 Approvals SCHEDULE 4.7 Litigation SCHEDULE 4.9 Subsidiaries SCHEDULE 4.13 Environmental Matters SCHEDULE 4.14 Intellectual Property SCHEDULE 6.2 Ongoing Indebtedness SCHEDULE 6.3 Ongoing Liens SCHEDULE 6.5 Ongoing Investments EXHIBITS A FORM OF INITIAL NOTE B FORM OF TERM NOTE C [RESERVED] D FORM OF NOTICE OF BORROWING E FORM OF NOTICE OF CONVERSION F [RESERVED] G FORM OF REGISTRATION RIGHTS AGREEMENT H FORM OF OPINION OF SHERMAN AND HOWARD - SPECIAL COUNSEL FOR LOAN PARTIES I FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT J FORM OF SECTION 12.18 CERTIFICATE K FORM OF NOTATION OF GUARANTEE -vii- This Senior Subordinated Credit Agreement is dated as of April 1, 1998, and entered into by and among PRIMESTAR, Inc., a Delaware corporation ("Borrower" or "New PRIMESTAR"), the Guarantors party hereto, the Lenders party -------- ------------- hereto (the "Lenders"), Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & ------- Smith Incorporated, as Arranger and Syndication Agent ("Merrill Lynch" or the ------------- "Arranger"), Morgan Stanley Senior Funding, Inc., as Administrative Agent (the -------- "Administrative Agent"), and Donaldson, Lufkin & Jenrette Securities -------------------- Corporation, as Documentation Agent (the "Documentation Agent"). ------------------- R E C I T A L S : WHEREAS, Borrower desires that the Lenders extend a senior subordinated credit facility to Borrower in connection with the Restructuring Transaction (as defined herein); NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto hereby agree as follows: SECTION 1. DEFINITIONS 1.1 Certain Defined Terms --------------------- The following terms used in this Agreement shall have the following meanings: "Acquired Indebtedness" shall mean Indebtedness of a Person (a) --------------------- assumed in connection with an Acquisition from such Person or (b) existing at the time such Person becomes a Restricted Subsidiary or is merged or consolidated with or into Borrower or any Restricted Subsidiary. "Acquired Person" shall mean, with respect to any specified Person, --------------- any other Person which merges with or into or becomes a Subsidiary of such specified Person. "Acquisition" shall mean (i) any capital contribution (by means of ----------- transfers of cash or other property to others or payments for property or services for the account or use of others, or otherwise) by Borrower or any Restricted Subsidiary to any other Person, or any acquisition or purchase of Equity Interests of any other Person by Borrower or any Restricted Subsidiary, in either case pursuant to which such Person shall become a Restricted Subsidiary or shall be consolidated or merged with or into Borrower or any Restricted Subsidiary or (ii) any acquisition by Borrower or any Restricted Subsidiary of the assets of any Person which constitute substantially all of an operating unit or line of business of such Person or which is otherwise outside of the ordinary course of business. "Administrative Agent" see the introduction to this Agreement. -------------------- "Affiliate" shall mean --------- (x) prior to the Conversion Date, any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person (excluding with respect to Borrower any (i) trustee under, or any committee with responsibility for administering, any Plan, (ii) Lender and (iii) Agent); a Person shall be deemed to be "controlled by" another Person if such other Person possesses, directly or indirectly, power: (a) to vote 10% or more of the securities having ordinary -2- voting power for the election of directors or managing general partners; or (b) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise, and (y) on and after the Conversion Date, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided, -------- however, that (i) beneficial ownership of 10.0% or more of the voting power ------- of the then outstanding voting securities of a Person shall be deemed to be control; and (ii) no individual, other than a director of Borrower or an officer of Borrower with a policymaking function, shall be deemed an Affiliate of Borrower or any of its Subsidiaries, solely by reason of such individual's employment, position or responsibilities by or with respect to Borrower or any of its Subsidiaries; provided, however, that no Agent or -------- ------- any of their respective Affiliates shall be treated as an Affiliate of Borrower or of any Subsidiary of Borrower. "Affiliate Transaction" see Section 6A.3. --------------------- "Agents" shall mean the Arranger, the Administrative Agent and the ------ Documentation Agent. "Agreement" shall mean this Senior Subordinated Credit Agreement dated --------- as of April 1, 1998, as amended and in effect from time to time. "Alternate Base Rate" shall mean for any day, a rate per annum that is ------------------- --------- equal to the higher of (i) the Prime Rate, or (ii) the Federal Funds Rate, plus ---- 0.50%. "Annualized Cash Flow" shall mean, as of any date of determination, -------------------- EBITDA for the Fiscal Quarter ending on or immediately prior to such date of determination multiplied by four. "Applicable Rate" shall mean for each Monthly Period and each Six --------------- Month Period, at the election of the Agents, either (i) the Alternate Base Rate, or (ii) the LIBOR Rate then in effect. "Applicable Spread" shall mean (x) with respect to the Initial Loans, ----------------- from the Closing Date up to and including June 30, 1998, 475 basis points, and thereafter according to the following schedule: From To Spread ---- -- ------ July 1, 1998 July 31, 1998 525 bps August 1, 1998 August 31, 1998 550 bps September 1, 1998 September 30, 1998 575 bps October 1, 1998 October 31, 1998 600 bps November 1, 1998 November 30, 1998 625 bps December 1, 1998 December 31, 1998 650 bps January 1, 1999 January 31, 1999 675 bps February 1, 1999 February 28, 1999 700 bps March 1, 1999 March 31, 1999 725 bps April 1, 1999 April 30, 1999 750 bps -3- and (y) with respect to the Term Loans, 8.50%. In addition, during the continuance of any Event of Default, the Applicable Spread will increase by 2.00% over the Applicable Spread then in effect. "Arranger" see the introduction to this Agreement. -------- "ASkyB Satellite" shall mean either of the high power communications --------------- satellites to be purchased by New PRIMESTAR in the ASkyB Transaction. "ASkyB Transaction" shall mean the acquisition by New PRIMESTAR from ----------------- MCI Telecommunications Corporation ("MCI"), The News Corporation Limited ("News --- ---- Corp.") and American Sky Broadcasting LLC, a wholly owned Subsidiary of News - ---- Corp. ("ASkyB"), of the ASkyB Satellites, certain authorizations granted to MCI ----- by the FCC and certain related contracts, all pursuant to an asset acquisition agreement dated as of June 11, 1997 among Primestar Partnership, News Corp., MCI, ASkyB and, for certain purposes only, each Partner. "Asset Sale" shall mean any direct or indirect sale, conveyance, ---------- transfer, lease (that has the effect of a disposition) or other disposition (including, without limitation, any merger, consolidation or sale-leaseback transaction) to any Person other than Borrower or a Wholly Owned Restricted Subsidiary, in one transaction or a series of related transactions, of (i) any Equity Interest of any Restricted Subsidiary; (ii) any material license, franchise or other authorization of Borrower or any Restricted Subsidiary; (iii) any assets of Borrower or any Restricted Subsidiary which constitute substantially all of an operating unit or line of business of Borrower or any Restricted Subsidiary; or (iv) any other property or asset of Borrower or any Restricted Subsidiary outside of the ordinary course of business (including the receipt of proceeds paid on account of the loss of or damage to any property or asset (other than to the extent such proceeds are used to replace or repair such assets or property) and awards of compensation for any asset taken by condemnation, eminent domain or similar proceedings). The term "Asset Sale" shall also include the receipt of any damages or other amounts due under the Satellite Construction Agreement to Borrower or any Subsidiary (including, without limitation, the refund of the full purchase price of any Tempo Satellite which has not been delivered pursuant to the terms thereof) from a Person other than Borrower or its Subsidiaries. The term "Asset Sale" shall not include (a) any transaction consummated in compliance with Section 6A.8 and the creation of any Lien not prohibited by Section 6A.4; provided, however, that any transaction -------- -------- consummated in compliance with Section 6A.8 involving a sale, conveyance, assignment, transfer, lease or other disposal of less than all of the properties or assets of Borrower and the Restricted Subsidiaries shall be deemed to be an Asset Sale with respect to the properties or assets of Borrower and the Restricted Subsidiaries that are not so sold, conveyed, assigned, transferred, leased or otherwise disposed of in such transaction; (b) sales of property or equipment that has become worn out, obsolete or damaged or otherwise unsuitable for use in connection with the business of Borrower or any Restricted Subsidiary, as the case may be; (c) any transaction consummated in compliance with Section 6A.1; and (d) sales of accounts receivable for cash at fair market value. In addition, solely for purposes of Section 6A.9, any sale, conveyance, transfer, lease or other disposition of any property or asset, whether in one transaction or a series of related transactions, involving assets with a Fair Market Value not in excess of $10.0 million in any fiscal year shall be deemed not to be an Asset Sale. "Asset Transfer Agreements" shall mean the MediaOne Asset Transfer ------------------------- Agreement, the Newhouse Asset Transfer Agreement and the TWE Asset Transfer Agreement. "Assignment and Assumption Agreement" shall mean an agreement ----------------------------------- substantially in the form of Exhibit I with respect to a proposed assignment. --------- -4- "Assumption Agreements" shall mean the TWE Assumption Agreement, the --------------------- Newhouse Assumption Agreement, the New PRIMESTAR/TWE Assumption Agreement and the New PRIMESTAR/Newhouse Assumption Agreement. "Authorized Officer" shall mean, with respect to Borrower and any ------------------ other Loan Party, those of its officers or managing members (in the case of a limited liability company) whose signatures and incumbency shall have been certified by Borrower to the Agents and the Lenders. "Bankruptcy Law" shall mean Title 11 of the United States Code -------------- entitled "Bankruptcy", as now and hereafter in effect, or any successor statute or any other United States federal, state or local law or the law of any other jurisdiction relating to bankruptcy, insolvency, winding up, liquidation, reorganization or relief of debtors, whether in effect on the date hereof or hereafter. "Bankruptcy Order" shall mean any court order made in a proceeding ---------------- pursuant to or within the meaning of any Bankruptcy Law, containing an adjudication of bankruptcy or insolvency, or providing for liquidation, winding up, dissolution or reorganization, or appointing a custodian of a debtor or of all or any substantial part of a debtor's property, or providing for the staying, arrangement, adjustment or composition of indebtedness or other relief of a debtor. "Basic Documents" shall mean the Reorganization Agreement, the --------------- Transition Services Agreement, the Tax Sharing Agreement, the Reimbursement Agreements, the Trade Name and Service Mark License Agreement, the Share Purchase Agreement, the Partnership Agreement, the Partnership Credit Agreement, the Tempo Option, the Tag-Along Agreement and the Tempo Letter Agreements. "Board of Directors" shall mean, with respect to any Person, the Board ------------------ of Directors of such Person, or any authorized committee of that Board of Directors. "Board Resolution" shall mean, with respect to any Person, a duly ---------------- adopted resolution of the Board of Directors of such Person. "Borrower" see the introduction to this Agreement. -------- "Business Day" shall mean any day excluding Saturday, Sunday and any ------------ day which is a legal holiday under the laws of New York, New York or is a day on which banking institutions therein located are authorized or required by law or other governmental action to close. "Capitalized Lease Liabilities" shall mean, all monetary obligations ----------------------------- of Borrower or any of its Restricted Subsidiaries under any leasing or similar arrangement which, in accordance with GAAP, would be classified as capitalized leases, and, for purposes of this Agreement and each other Loan Document, the amount of such obligations shall be the capitalized amount thereof. "Capital Lease Obligation" shall mean, at the time any determination ------------------------ thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be so required to be capitalized on the balance sheet in accordance with GAAP. "Cash Equivalent Investment" shall mean, at any time: -------------------------- -5- (a) any direct obligation of (or guaranteed by) the United States Government (or any agency or instrumentality thereof) maturing not more than one year after such time; (b) commercial paper, maturing not more than nine months from the date of issue, which is issued by (i) a corporation (other than an Affiliate of any Obligor) organized under the laws of any state of the United States or of the District of Columbia and rated A-1 by S&P or P-1 by Moody's, or (ii) any Lender (or its holding company); (c) any certificate of deposit or bankers acceptance, maturing not more than one year after such time, which is issued by either (i) any bank organized under the laws of the United States (or any State thereof) and which has (x) a credit rating of Aa or better from Moody's or a comparable rating from S&P and (y) a combined capital and surplus greater than $500,000,000 (or the Dollar equivalent thereof), or (ii) any Lender; (d) any repurchase agreement entered into with any Lender or any commercial banking institution of the stature referred to in clause (c)(i) which (i) is secured by a fully perfected security interest in any obligation of the type described in clause (a), and (ii) has a market value at the time such repurchase agreement is entered into of not less than 100% of the repurchase obligation of such commercial banking institution thereunder; or (e) money market funds that invest substantially all of their assets in the investments described in clauses (a) through (d) above. "Cash Equivalents" shall mean (a) U.S. Dollars; (b) securities issued ---------------- or directly and fully guaranteed or insured by the U.S. government or any agency or instrumentality thereof having maturities of not more than six months from the date of acquisition; (c) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any domestic commercial bank having capital and surplus in excess of $500 million; (d) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (b) and (c) entered into with any financial institution meeting the qualifications specified in clause (c) above; (e) commercial paper rated A-1 or better by S&P or P-1 or better by Moody's maturing within six months after the date of acquisition; and (f) money market funds that invest substantially all of their assets in any of the investments described in clauses (a) through (e). "C-Band Dividends" see Section 6A.1. ---------------- -6- "C-Band Entity" see Section 6A.1. ------------- "C-Band Investment" see Section 6A.1. ----------------- "CERCLA" shall mean the Comprehensive Environmental Response, ------ Compensation and Liability Act of 1980, as amended. "CERCLIS" shall mean the Comprehensive Environmental Response ------- Compensation Liability Information System List. "Change of Control" shall mean the occurrence of one or more of the ----------------- following events: (i) prior to the Conversion Date, (a) any "person" or "group" (as such terms are used in Rule 13d-5 under the Exchange Act, and Sections 13(d) and 14(d) of the Exchange Act) of persons (other than John Malone, the legal heirs of John Malone or any Primestar Partner) becomes, directly or indirectly, in a single transaction or in a related series of transactions by way of merger, consolidation, or other business combination or otherwise, the "beneficial owner" (as such term is used in Rule 13d-3 of the Exchange Act) of 25% or more of the outstanding shares of Voting Equity Interests of Borrower; or (b) during any consecutive two-year period calculated in accordance with GAAP, individuals who at the beginning of such period constituted the board of directors of Borrower (together with any new directors whose election by such board of directors or whose nomination for election by the stockholders of Borrower was approved by a vote of at least a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason (other than by action of the Permitted Holders) to constitute a majority of the board of directors of Borrower then in office; and (ii) on and after the Conversion Date, the occurrence of any of the following events (whether or not approved by the Board of Directors of Borrower): (a) any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of the Exchange Act or any successor provision to either of the foregoing, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act), excluding Permitted Holders, is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to have "beneficial ownership" of all securities that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time, upon the happening of an event or otherwise), directly or indirectly, of more than 35% of the total voting power of the then outstanding Voting Equity Interests of Borrower; (b) Borrower consolidates with, or merges with or into, another Person, or Borrower or the Restricted Subsidiaries sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of the assets of Borrower and the Restricted Subsidiaries (determined on a consolidated basis) to any Person (other than a Wholly Owned Restricted Subsidiary), or any Person consolidates with, or merges with or into, Borrower, in any such event pursuant to a transaction in which the outstanding Voting Equity Interests of Borrower are converted into or exchanged for cash, notes or other property, other than any such transaction where (i) the outstanding Voting Equity Interests of Borrower are converted into or exchanged for (1) Qualified Equity Interests of the surviving or transferee corporation or (2) cash, notes or other property in an amount which could be paid by Borrower as a Restricted Payment under this Agreement and (ii) immediately after such transaction the Person or Persons that "beneficially owned" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to have "beneficial ownership" of all securities that such Person has the -7- right to acquire, whether such right is exercisable immediately or only after the passage of time) immediately prior to such transaction, directly or indirectly, a majority of the total voting power of the then outstanding Voting Equity Interests of Borrower "beneficially own" (as so determined) a majority of the total voting power of the then outstanding Voting Equity Interests of the surviving or transferee Person; (c) during any consecutive two-year period, individuals who at the beginning of such period constituted the Board of Directors of Borrower (together with any new directors whose election by the Board of Directors of Borrower or whose nomination for election by the stockholders of Borrower was approved by a vote of at least a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason (other than by action of the Permitted Holders) to constitute a majority of the Board of Directors of Borrower then in office; or (d) the liquidation or dissolution of Borrower. "Change of Control Date" see Section 2.5A(iv)(a)(1). ---------------------- "Closing Date" shall mean the date on which the Initial Loan is made ------------ and the conditions set forth in Section 3.1 are satisfied or waived in accordance with Section 12.5. "Code" shall mean the Internal Revenue Code of 1986, as amended from ---- time to time, and the regulations promulgated and rulings issued thereunder. Section references to the Code are to the Code as in effect at the date of this Agreement and any subsequent provisions of the Code amendatory thereof, supplemental thereto or substituted therefor. "Comcast" shall mean Comcast Corporation, a Pennsylvania corporation. ------- "Comcast DBS Merger Agreement" shall mean the agreement and plan of ---------------------------- merger dated as of February 6, 1998 between New PRIMESTAR and Comcast DBS, Inc., an affiliate of Comcast, pursuant to which Comcast DBS, Inc. will merge with and into New PRIMESTAR. "Comcast Satellite Merger Agreement" shall mean the agreement and plan ---------------------------------- of merger dated as of February 6, 1998 between New PRIMESTAR and Comcast Satellite Communications, Inc., an affiliate of Comcast, pursuant to which Comcast Satellite Communications, Inc. will merge with and into New PRIMESTAR. "Commitment Letter" shall mean the Interim Loan Commitment Letter ----------------- dated March 12, 1998 among New PRIMESTAR, TSAT, Merrill Lynch Capital Corporation, Morgan Stanley Bridge Fund, L.L.C. and DLJ Bridge Finance, Inc. "Common Stock" shall mean, of any Person, any and all shares, ------------ interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of, such Person's common stock, whether outstanding on the Closing Date or issued after the Closing Date, and includes, without limitation, all series and classes of such common stock. "Consolidated Income Tax Expense" shall mean, with respect to Borrower ------------------------------- for any period, the provision for federal, state, local and foreign income taxes payable by Borrower and the Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP. -8- "Consolidated Interest Expense" shall mean, with respect to Borrower ----------------------------- for any period, without duplication, the sum of (i) the interest expense of Borrower and the Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, including, without limitation, (a) any amortization of debt discount; (b) the net cost under Interest Rate Protection Obligations (including any amortization of discounts); (c) the interest portion of any deferred payment obligation; (d) all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing; and (e) all capitalized interest and all accrued interest; (ii) the interest component of Capital Lease Obligations paid, accrued and/or scheduled to be paid or accrued by Borrower and the Restricted Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP; and (iii) dividends and distributions in respect of Disqualified Equity Interests actually paid in cash by Borrower during such period as determined on a consolidated basis in accordance with GAAP. "Consolidated Net Income" shall mean, with respect to any period, the ----------------------- net income of Borrower and the Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, adjusted, to the extent included in calculating such net income, by excluding, without duplication, (a) all extraordinary gains or losses and all gains and losses from the sales or other dispositions of assets out of the ordinary course of business (net of taxes, fees and expenses relating to the transaction giving rise thereto) for such period; (b) that portion of such net income derived from or in respect of Investments in Persons other than Restricted Subsidiaries, except to the extent actually received in cash by Borrower or any Restricted Subsidiary (subject, in the case of any Restricted Subsidiary, to the provisions of clause (e) of this definition); (c) the portion of such net income (or loss) allocable to minority interests in any Person (other than a Restricted Subsidiary) for such period, except to the extent actually received in cash by Borrower or any Restricted Subsidiary (subject, in the case of any Restricted Subsidiary, to the provisions of clause (e) of this definition); (d) net income (or loss) of any other Person combined with Borrower or any Restricted Subsidiary on a "pooling of interests" basis attributable to any period prior to the date of combination; and (e) the net income of any Restricted Subsidiary to the extent that the declaration of dividends or similar distributions by that Restricted Subsidiary of that income is not at the time (regardless of any waiver) permitted, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulations applicable to that Restricted Subsidiary or its Equity Interest holders. "Consolidated Operating Cash Flow" shall mean, with respect to any -------------------------------- period, Consolidated Net Income for such period (i) increased (without duplication) by the sum of (a) Consolidated Income Tax Expense for such period to the extent deducted in determining Consolidated Net Income for such period; (b) Consolidated Interest Expense for such period to the extent deducted in determining Consolidated Net Income for such period; (c) all dividends on Preferred Equity Interests to the extent not taken into account in computing Consolidated Net Income for that period; (d) depreciation, amortization and any other non-cash items for such period to the extent deducted in determining Consolidated Net Income for such period (other than any non-cash item which requires the accrual of, or a reserve for, cash charges for any future period) of Borrower and the Restricted Subsidiaries, including, without limitation, amortization of capitalized debt issuance costs for such period; and (e) solely for purposes of determining the Debt to Operating Cash Flow Ratio, non-recurring charges to the extent deducted in determining Consolidated Net Income, all of the foregoing determined on a consolidated basis in accordance with GAAP, and (ii) decreased by non-cash items (including non-recurring gains and non- recurring items of income) to the extent they increase Consolidated Net Income (including the partial or entire reversal of reserves taken in prior periods) for such period. Consolidated Operating Cash Flow for Borrower for any period shall be calculated by subtracting therefrom any dividends received from any C- Band Entity in such period and the Consolidated Operating Cash Flow for such period of each Restricted C-Band Subsidiary in each case to the extent that Restricted Payments have been made pursu- -9- ant to clause (ix) of the second paragraph of Section 6A.1 with such dividends or such Consolidated Operating Cash Flow. "Contingent Liability" shall mean any agreement, undertaking or -------------------- arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the Indebtedness of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person. The amount of any Person's obligation under any Contingent Liability shall (subject to any limitation set forth therein) be deemed to be the outstanding amount of the debt, obligation or other liability guaranteed thereby. "Contractual Obligation" shall mean, as applied to any Person, any ---------------------- provision of any Security issued by that Person or of any indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject. "Controlled Group" shall mean all members of a controlled group of ---------------- corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with Borrower, are treated as a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA. "Conversion Date" shall mean the one year anniversary of the Closing --------------- Date. "Covered Taxes" see Section 12.18A. ------------- "Cox" shall mean Cox Communications, Inc., a Delaware corporation. --- "Cox Merger Agreement" shall mean the agreement and plan of merger -------------------- dated as of February 6, 1998 between New PRIMESTAR and Cox Satellite, Inc., an affiliate of Cox, pursuant to which Cox Satellite, Inc. will merge with and into New PRIMESTAR. "Credit Documents" shall mean this Agreement, the Notes, the Senior ---------------- Subordinated Indenture, the Exchange Notes and the Guarantees. "Creditor" shall mean any Agent and any Lender. -------- "Cumulative Operating Cash Flow" shall mean, as at any date of ------------------------------ determination, the positive cumulative Consolidated Operating Cash Flow realized during the period commencing on the Closing Date and ending on the last day of the most recent fiscal quarter immediately preceding the date of determination for which consolidated financial information of Borrower is available or, if such cumulative Consolidated Operating Cash Flow for such period is negative, the negative amount by which cumulative Consolidated Operating Cash Flow is less than zero. "Custodian" shall mean any receiver, interim receiver, receiver and --------- manager, trustee, assignee, liquidator, sequestrator or similar official charged with maintaining possession or control over property for one or more creditors, whether under any Bankruptcy Law or otherwise. -10- "DBS" shall mean direct broadcast satellite. --- "Debt to Operating Cash Flow Ratio" shall mean the ratio of (a) the --------------------------------- Total Consolidated Indebtedness (including all Permitted Indebtedness then outstanding) as of the date of calculation (the "Determination Date") to (b) ------------------ four times the Consolidated Operating Cash Flow for the latest fiscal quarter for which financial information is available immediately preceding such Determination Date (the "Measurement Period"). For purposes of calculating ------------------ Consolidated Operating Cash Flow for the Measurement Period immediately prior to the relevant Determination Date, (I) any Person that is a Restricted Subsidiary on the Determination Date (or would become a Restricted Subsidiary on such Determination Date in connection with the transaction that requires the determination of such Consolidated Operating Cash Flow) will be deemed to have been a Restricted Subsidiary at all times during such Measurement Period, (II) any Person that is not a Restricted Subsidiary on such Determination Date (or would cease to be a Restricted Subsidiary on such Determination Date in connection with the transaction that requires the determination of such Consolidated Operating Cash Flow) will be deemed not to have been a Restricted Subsidiary at any time during such Measurement Period, and (III) if Borrower or any Restricted Subsidiary shall have in any manner (x) acquired (including through an Acquisition or the commencement of activities constituting such operating business) or (y) disposed of (including by way of an Asset Sale or the termination or discontinuance of activities constituting such operating business) any operating business during such Measurement Period or after the end of such period and on or prior to such Determination Date, such calculation will be made on a pro forma basis in accordance with GAAP as if, in the case of an --------- Acquisition or the commencement of activities constituting such operating business, all such transactions had been consummated on the first day of such Measurement Period and, in the case of an Asset Sale or termination or discontinuance of activities constituting such operating business, all such transactions had been consummated prior to the first day of such Measurement Period; provided, however, that such pro forma adjustment shall not give effect -------- ------- --------- to the Operating Cash Flow of any Acquired Person to the extent that such Person's net income would be excluded pursuant to clause (e) of the definition of Consolidated Net Income. For purposes of determining Total Consolidated Indebtedness as of any Determination Date, the sum of all Indebtedness outstanding under the New PRIMESTAR Senior Credit Facility on such Determination Date and all amounts that Borrower or any Restricted Subsidiary could borrow under the New PRIMESTAR Senior Credit Facility on such Determination Date (assuming the satisfaction of all conditions precedent under the New PRIMESTAR Senior Credit Facility other than conditions relating solely to incremental amounts being available under the New PRIMESTAR Senior Credit Facility) shall be deemed to be outstanding and added to Total Consolidated Indebtedness on such Determination Date (but without duplication). "Designated Guarantor Senior Indebtedness" shall mean, with respect to ---------------------------------------- any Guarantor, (a) any Indebtedness of such Guarantor outstanding under the New PRIMESTAR Senior Credit Facility and (b) any other Guarantor Senior Indebtedness of such Guarantor which, at the time of determination, has an aggregate outstanding principal amount outstanding, together with any commitments to lend additional amounts, of at least $25.0 million if the instrument governing such Guarantor Senior Indebtedness expressly states that such Indebtedness is Guarantor Senior Indebtedness for purposes of this Agreement and a Board Resolution setting forth such designation by the Company has been filed with the Arranger. "Designated Senior Indebtedness" shall mean (a) any Indebtedness ------------------------------ outstanding under the New PRIMESTAR Senior Credit Facility and (b) any other Senior Indebtedness which, at the time of determination, has an aggregate principal amount outstanding, together with any commitments to lend additional amounts, of at least $25.0 million, if the instrument governing such Senior Indebtedness expressly states that such Indebtedness is "Designated Senior Indebtedness" for purposes of this Agreement and a Board Resolution setting forth such designation by Borrower has been filed with the Arranger. -11- "Designation" see Section 6A.12A. ----------- "Designation Amount" see Section 6A.12A. ------------------ "Determination Date" see the definition of "Debt to Operating Cash ------------------ Flow Ratio". "Disposition" shall mean, with respect to any Person, any merger, ----------- consolidation or other business combination involving such Person (whether or not such Person is the Surviving Person) or the sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of such Person's assets. "Disqualified Equity Interest" shall mean any Equity Interest which, ---------------------------- by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable, at the option of the holder thereof, in whole or in part, or exchangeable (other than at the option of Borrower) into Indebtedness on or prior to the earlier of the maturity date of the Term Notes or the date on which no Term Notes remain outstanding. "Distribution" shall mean the distribution by TCI on December 4, 1996, ------------ in the form of a dividend, to the holders of record of Tele-Communications, Inc. Series A TCI Group Common Stock and Tele-Communications, Inc. Series B TCI Group Common Stock on November 12, 1996 (other than certain subsidiaries of TCI that waived such dividend) of all the issued and outstanding shares of common stock of the predecessor of TSAT. "Documentation Agent" see the introduction to this Agreement. ------------------- "EBITDA" shall mean, for Borrower and its Restricted Subsidiaries, for ------ any applicable period, the sum (without duplication) for such period of: (a) Net Income, plus - ---- (b) the amount deducted in determining Net Income representing amortization (including amortization with respect to goodwill, deferred financing costs, other non-cash interest income and expense and all other intangible assets), plus - ---- (c) the amount deducted in determining Net Income of all federal, state and local income taxes (whether paid in cash or deferred), plus - ---- (d) Total Interest Expense plus, without duplication, any non-cash interest expense, plus - ---- (e) the amount deducted in determining Net Income representing depreciation of assets, -12- plus - ---- (f) the amount deducted in determining Net Income representing other non-cash expenses. "Eligible Assignee" shall mean (A) (i) a commercial bank organized ----------------- under the laws of the United States of America or any state thereof; (ii) a savings and loan association or savings bank organized under the laws of the United States or any state thereof; (iii) a commercial bank organized under the laws of any other country or a political subdivision thereof; provided, however, -------- ------- that (x) such bank is acting through a branch or agency located in the United States or (y) such bank is organized under the laws of a country that is a member of the Organization for Economic Cooperation and Development or a political subdivision of such country; and (iv) any other entity which is an "accredited investor" (as defined in Regulation D under the Securities Act) which extends credit or buys loans as one of its businesses including, but not limited to, insurance companies, mutual funds and lease financing companies, in each case (under clauses (i) through (iv) above) that is reasonably acceptable to the Arranger; and (B) any Lender and any Affiliate of any Lender. "Engagement Letter" shall mean the Interim Loan Engagement Letter ----------------- dated March 12, 1998 among New PRIMESTAR, TSAT, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated and Donaldson, Lufkin & Jenrette Securities Corporation. "Environmental Laws" shall mean all applicable federal, state or local ------------------ statutes, laws, ordinances, codes, rules, regulations and guidelines (including consent decrees and administrative orders) relating to public health and safety and protection of the environment. "Equity Interests" in any Person shall mean any and all shares, ---------------- interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) corporate stock or other equity participations, including partnership interests, whether general or limited, in such Person, including any Preferred Equity Interests. "ERISA" shall mean the United States Employee Retirement Income ----- Security Act of 1974, as amended, and any successor statute thereto of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to Sections of ERISA also refer to any successor sections thereto. "ERISA Affiliate" shall mean, with respect to any Loan Party, any --------------- trade or business (whether or not incorporated) that, together with such Loan Party, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA Entity" shall mean each Loan Party and each ERISA Affiliate of ------------ each Loan Party. "Event of Default" see Section 7. ---------------- "Exchange Act" shall mean the Securities Exchange Act of 1934, as ------------ amended from time to time, and any successor statute, and all rules and regulations of the SEC promulgated thereunder. "exchange notes" see Section 5.11A(v)(a). -------------- "Exchange Notes" see Section 5.12(ii). -------------- -13- "Exchange Offer" see Section 5.11A(v)(a). -------------- "Exchange Request" see Section 5.12. ---------------- "Excluded Taxes" see Section 12.18A. -------------- "Existing Facility Repayment" shall mean the repayment of all --------------------------- indebtedness and permanent termination of all commitments by Borrower in respect of the Partnership Working Capital Facility. "Existing Indebtedness" shall mean any Indebtedness of Borrower and --------------------- its Subsidiaries in existence on the Closing Date until such amounts are repaid (including, without limitation, obligations pursuant to each Reimbursement Agreement and the Reorganization Agreement) and identified on Schedule 6.2. ------------ "Existing Indentures" shall mean the Existing Senior Subordinated ------------------- Notes Indenture and the Existing Senior Subordinated Discount Notes Indenture. "Existing Note Assumption" shall mean the assumption by New PRIMESTAR ------------------------ of all obligations of TSAT under the Existing Indentures and the Existing Notes and the release of TSAT from all such obligations. "Existing Note Assumption Agreement" shall mean the agreement dated as ---------------------------------- of March 31, 1998 between TSAT and New PRIMESTAR pursuant to which the Existing Note Assumption was effected. "Existing Notes" shall mean the Existing Senior Subordinated Notes and -------------- the Existing Senior Subordinated Discount Notes. "Existing Senior Subordinated Discount Notes" shall mean the 12-1/4% ------------------------------------------- Senior Subordinated Discount Notes issued by TSAT under an indenture dated as of February 20, 1997 between TSAT and The Bank of New York, as trustee. "Existing Senior Subordinated Discount Notes Indenture" shall mean the ----------------------------------------------------- Indenture dated as of February 20, 1997, by and between TSAT and The Bank of New York as trustee, under which the Existing Senior Subordinated Discount Notes were issued. "Existing Senior Subordinated Notes" shall mean the 10-7/8% Senior ---------------------------------- Subordinated Notes issued by TSAT under an indenture dated as of February 20, 1997 between TSAT and The Bank of New York, as trustee. "Existing Senior Subordinated Notes Indenture" shall mean the -------------------------------------------- Indenture dated as of February 20, 1997, by and between TSAT and the Bank of New York as trustee, under which the Existing Senior Subordinated Notes were issued. "Expiration Date" see the definition of "Offer to Purchase" below. --------------- "Fair Market Value" shall mean with respect to any asset, the price ----------------- (after taking into account any liabilities relating to such asset) which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing and able buyer, neither of which is under any compulsion to complete the transaction; provided, however, that the Fair Market -------- ------- Value of any such asset or assets shall be de- -14- termined conclusively by the Board of Directors of Borrower acting in good faith, and shall be evidenced by resolutions of the Board of Directors of Borrower delivered to the Arranger. "FCC" shall mean the Federal Communications Commission. --- "Federal Funds Rate" shall mean, for any period, a fluctuating ------------------ interest rate equal for each day during such period to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Arranger from three Federal Funds brokers of recognized standing selected by the Arranger. "Fee Letter" shall mean the Interim Loan Fee Letter dated March 12, ---------- 1998 among New PRIMESTAR, TSAT, Merrill Lynch Capital Corporation, Morgan Stanley Bridge Fund, L.L.C. and DLJ Bridge Finance, Inc. "Fiscal Quarter" shall mean a quarter ending on the last day of March, -------------- June, September and December. "Fiscal Year" shall mean any period of twelve consecutive calendar ----------- months ending on December 31; references to a Fiscal Year with a number corresponding to any calendar year (e.g., the "1997 Fiscal Year") refer to the --- Fiscal Year ending on December 31 of such calendar year. "F.R.S. Board" shall mean the Board of Governors of the Federal ------------ Reserve System or any successor thereto. "Funding Guarantor" see Section 10.5. ----------------- "GAAP" shall mean United States generally accepted accounting ---- principles as in effect from time to time, which are applicable to the circumstances as of the date of determination. "GE Americom" shall mean GE American Communications, Inc., a Delaware ----------- corporation. "GE Americom Merger Agreement" shall mean the agreements and plan of ---------------------------- merger dated as of February 6, 1998 between New PRIMESTAR and GE Americom Services, Inc., an affiliate of GE Americom, pursuant to which GE Americom Services, Inc. will merge with and into New PRIMESTAR. "GE-2 Agreement" shall mean the Amended and Restated Memorandum of -------------- Agreement, effective as of October 18, 1996, between Primestar Partnership and GE Americom and, upon the execution of the Service Agreement (as defined in the GE-2 Agreement) between Primestar Partnership and GE Americom contemplated therein, shall include such Service Agreement, as amended and in effect from time to time. "Governmental Approval" shall mean any action, authorization, consent, --------------------- approval, license, lease, ruling, permit, tariff, rate, certification, exemption, filing, variance, claim, order, judgment, decree, publication, notices to, declarations of or with or registration by or with any Governmental Authority. -15- "Governmental Authority" shall mean the government of the United ---------------------- States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government, whether now or hereafter constituted and/or existing. "Governmental Rule" shall mean any statute, law, regulation, ----------------- ordinance, rule, judgment, order, decree, permit, concession, grant, franchise, license, agreement, directive, guideline, policy, requirement, or other governmental authorization including any conditions thereof, restriction or any similar form of published or otherwise known decision of or determination by, or any interpretation or administration of any of the foregoing by, any Governmental Authority, whether now or hereafter in effect (including any Environmental Law). "Guarantees" shall mean, collectively, the guarantees delivered to the ---------- Lenders by the Guarantors pursuant to Section 10 which are evidenced by notations of guarantee substantially in the form of Exhibit K. --------- "Guarantors" shall mean each of the Subsidiaries of Borrower, if any, ---------- that guarantees Borrower's obligations under this Agreement pursuant to Section 6.13. "Guarantor Blockage Period" see Section 11.2A. ------------------------- "Guarantor Payment Blockage Notice" see Section 11.2A. --------------------------------- "Guarantor Senior Indebtedness" shall mean, with respect to any ----------------------------- Guarantor, at any date, (a) all Obligations of such Guarantor under the New PRIMESTAR Senior Credit Facility; (b) all Interest Rate Protection Obligations of such Guarantor; (c) all Obligations of such Guarantor under stand-by letters of credit; and (d) all other Indebtedness of such Guarantor for borrowed money, including principal, premium, if any, and interest (including Post-Petition Interest) on such Indebtedness, unless the instrument under which such Indebtedness of such Guarantor for money borrowed is Incurred expressly provides that such Indebtedness for money borrowed is not senior or superior in right of payment to such Guarantor's Guaranty of the Loans, and all renewals, extensions, modifications, amendments or refinancings thereof. Notwithstanding the foregoing, Guarantor Senior Indebtedness shall not include (a) to the extent that it may constitute Indebtedness, any Obligation for federal, state, local or other taxes; (b) any Indebtedness between such Guarantor, Borrower or any Subsidiary of Borrower; (c) to the extent that it may constitute Indebtedness, any obligation in respect of any trade payable incurred for the purchase of goods or materials, or for services obtained, in the ordinary course of business; (d) that portion of any Indebtedness that is Incurred in violation of this Agreement; provided, however, that such Indebtedness shall be deemed not to -------- ------- have been Incurred in violation of this Agreement for purposes of this clause (d) if (i) the holder(s) of such Indebtedness or their representative or the Company shall have furnished to the Arranger an opinion of independent legal counsel, unqualified in all material respects, addressed to the Arranger (which legal counsel may, as to matters of fact, rely upon an Officers' Certificate of Borrower) to the effect that the Incurrence of such Indebtedness does not violate the provisions of this Agreement or (ii) in the case of any obligations under the New PRIMESTAR Senior Credit Facility, the holder(s) of such obligations or their agent or representative shall have received a representation from the Company to the effect that the Incurrence of such Indebtedness does not violate the provisions of this Agreement; (e) Indebtedness evidenced by such Guarantor's Guaranty of the Loans; (f) Indebtedness of such Guarantor that is expressly subordinate or junior in right of payment to any other Indebtedness of such Guarantor; (g) to the extent that it may constitute Indebtedness, any obligation owing under leases (other than -16- Capital Lease Obligations) or management agreements; and (h) any obligation that by operation of law is subordinated to any general unsecured obligations of such Guarantor. "Guaranty" see Section 6A.7. -------- "Hazardous Materials" shall mean ------------------- (a) any "hazardous substance", as defined by CERCLA; (b) any "hazardous waste", as defined by the Resource Conservation and Recovery Act, as amended; or (c) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material or substance (including any petroleum product) within the meaning of any other applicable federal, state or local law, regulation, ordinance or requirement (including consent decrees and administrative orders) relating to or imposing liability or standards of conduct concerning any hazardous, toxic or dangerous waste, substance or material, all as amended. "Hedging Obligations" shall mean, with respect to any Person, all ------------------- liabilities of such Person under currency exchange agreements, interest rate swap agreements, interest rate cap agreements and interest rate collar agreements, and all other agreements or arrangements designed to protect such Person against fluctuations in interest rates or currency exchange rates. "High Power Satellite Transmission Business" shall mean the business ------------------------------------------ of the acquisition, transmission and sale of programming in the high power direct broadcast satellite business utilizing broadcast satellite service operating in the Ku-band (including any provision of such services to cable operators or other media providers) which may utilize all or part of satellites owned or leased by Borrower or a Subsidiary and all other activities relating thereto or arising therefrom other than the construction, sale or financing of broadcast satellites. "High Power Satellite Transmission Subsidiary" shall mean a Wholly- -------------------------------------------- Owned Restricted Subsidiary of Borrower which engages in, or acts as a distributor for, the High Power Satellite Transmission Business. "Impermissible Qualification" shall mean, relative to the opinion or --------------------------- certification of any independent public accountant as to any financial statement of Borrower, any qualification or exception to such opinion or certification: (a) which is of a "going concern" or similar nature; (b) which relates to the limited scope of examination of matters relevant to such financial statement; or (c) which relates to the treatment or classification of any item in such financial statement and which, as a condition to its removal, would require an adjustment to such item the effect of which would be to cause Borrower to be in default of any of its obligations under Section 6.4. -17- "Incur" shall mean, with respect to any Indebtedness, to incur, ----- create, issue, assume, guarantee or otherwise become liable for or with respect to, or become responsible for the payment of, contingently or otherwise, such Indebtedness; provided, however, that the term "Incur" shall not include -------- ------- conversions or continuations of Loans. "Indebtedness" shall mean ------------ (x) prior to the Conversion Date, (a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (b) all obligations, contingent or otherwise, relative to the face amount of all letters of credit, whether or not drawn, and banker's acceptances issued for the account of such Person; (c) all obligations of such Person as lessee under leases which have been or should be, in accordance with GAAP, recorded as Capitalized Lease Liabilities; (d) net liabilities of such Person under all Hedging Obligations; (e) whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services, and indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse; and (f) all Contingent Liabilities of such Person in respect of any of the foregoing; for all purposes of this Agreement, the Indebtedness of any Person shall include the recourse Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer; and (y) on and after the Conversion Date, (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (a) every obligation of such Person for money borrowed; (b) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses; (c) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person; (d) every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable incurred in the ordinary course of business and payable in accordance with industry practices, or other accrued liabilities arising in the ordinary course of business which are not overdue or which are being contested in good faith); (e) every Capital Lease Obligation of such Person; (f) every net obligation under interest rate swap or similar agreements or foreign currency hedge, exchange or similar agreements of such Person; (g) every obligation of the type referred to in clauses (a) through (f) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed or is responsible or liable for, directly or indirectly, as obligor, guarantor or otherwise; and (h) any and all deferrals, renewals, extensions and refundings of, or amendments, modifications or supplements to, any liability of the kind described in any of the preceding clauses (a) through (g) above. Indebtedness (a) shall never be calculated taking into account any cash and cash equivalents held by such Person; (b) shall not include obligations of any Person (x) arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds in the ordinary course of business, provided that such obligations are extinguished within two Business Days of their incurrence unless covered by an overdraft line, (y) resulting from the endorsement of negotiable instruments for collection in the ordinary course of business and (z) under stand-by letters of credit to the extent collateralized by cash or Cash Equivalents; (c) which provides that an amount less than the principal amount thereof shall be due upon any declaration of acceleration thereof shall be deemed to be incurred or outstanding in an amount equal to the accreted value thereof at the date of -18- determination; (d) shall include the liquidation preference and any mandatory redemption payment obligations in respect of any Disqualified Equity Interests of Borrower or any Restricted Subsidiary; and (e) shall not include obligations under performance bonds, performance guarantees, surety bonds and appeal bonds, letters of credit or similar obligations, incurred in the ordinary course of business (other than under any such agreement, to the extent relating to any obligation of an Unrestricted Subsidiary). "Indemnitee" see Section 12.3. ---------- "Independent Financial Advisor" shall mean a nationally recognized, ----------------------------- accounting, appraisal, investment banking firm or consultant engaged in the satellite business that is, in the judgment of the Board of Directors of Borrower, qualified to perform the task for which it has been engaged (i) which is not an Affiliate of, and whose directors, officers and employees are not Affiliates of, Borrower and (ii) which, in the judgment of the Board of Directors of Borrower, is independent and qualified to perform the task for which it is to be engaged. "Initial Loan Commitment" see Section 2.1A. ----------------------- "Initial Loan" see Section 2.1A. ------------ "Initial Notes" see Section 2.1D. ------------- "In-Orbit Insurance" shall mean, with respect to a Tempo Satellite (or ------------------ any replacement thereof), In-Orbit insurance providing coverage beginning not earlier than 180 days after the launch of such Tempo Satellite (or any replacement thereof) in an amount which is equal to or greater than the cost of construction, launch and insurance of such Tempo Satellite (or any replacement thereof), which insurance shall provide pro rata benefits to the insured upon a --- ---- loss of more than 20% of the capacity of such Tempo Satellite (or any replacement thereof) and shall compensate the insured for a total loss upon a loss of more than 50% of the capacity of such Tempo Satellite (or any replacement thereof). "Insolvency or Liquidation Proceeding" shall mean, with respect to any ------------------------------------ Person, any liquidation, dissolution or winding up of such Person, or any bankruptcy, reorganization, insolvency, receivership or similar proceeding with respect to such Person, whether voluntary or involuntary. "Interest Period" shall mean, with respect to the Initial Loans, 30 --------------- days, and with respect to the Term Loans, six months. "Interest Rate Determination Date" shall mean (x) the second Business -------------------------------- Day on which banks in New York and London are open prior to the Closing Date or the Conversion Date, as the case may be, and (y) with respect to any Monthly Period or Six Month Period, the second Business Day prior to the first Business Day of such Monthly Period or Six Month Period, as the case may be, on which banks in New York City and London are open. "Interest Rate Protection Obligations" shall mean, with respect to any ------------------------------------ Person, the Senior Indebtedness Obligations of such Person under interest rate swap agreements, interest rate cap agreements and interest rate collar agreements, and other similar agreements or arrangements. "Investment" shall mean, with respect to any Person, ---------- -19- (x) prior to the Conversion Date, (a) any loan or advance made by such Person to any other Person (excluding commission, travel, petty cash and similar advances to officers and employees made in the ordinary course of business); (b) any Contingent Liability of such Person incurred in connection with loans or advances described in clause (a); and (c) any ownership or similar interest held by such Person in any other Person; the amount of any Investment shall be the original principal or capital amount thereof less all returns of principal or equity thereon and shall, if made by the transfer or exchange of property other than cash, be deemed to have been made in an original principal or capital amount equal to the fair market value of such property at the time of such Investment; and (y) on and after the Conversion Date, any direct or indirect loan, advance, guarantee or other extension of credit or capital contribution to (by means of transfers of cash or other property or assets to others or payments for property or services for the account or use of others, or otherwise), or purchase or acquisition of capital stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any other Person. The amount of any Investment shall be the original cost of such Investment, plus the cost of all additions thereto, and minus the ---- ----- amount of any portion of such Investment repaid to such Person in cash as a repayment of principal or a return of capital, as the case may be, but without any other adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment. In determining the amount of any Investment involving a transfer of any property or asset other than cash, such property shall be valued at its fair market value at the time of such transfer, as determined in good faith by the board of directors (or comparable body) of the Person making such transfer. "Lenders" see the introduction to this Agreement and shall include any ------- assignee of any Loan, Note or Loan Commitment to the extent of such assignment. "LIBOR Rate" shall mean, relative to any Interest Period, the rate of ---------- interest determined as follows: (a) on the Interest Determination Date, the Arranger shall obtain the offered quotation(s) that appear on the Reuter's Screen for Dollar deposits for a period comparable to such Interest Period. If at least two such offered quotations appear on the Reuter's Screen, the LIBOR Rate shall be the arithmetic average (rounded upwards, if necessary, to the nearest 1/16th of 1%) of such offered quotations, as determined by the Arranger; or (b) if the Reuter's Screen is not available or has been discontinued, the LIBOR Rate shall be the rate per annum which the Arranger in good faith determines to be the arithmetic average (rounded as aforesaid) of the offered quotations for Dollar deposits in an amount comparable to the Arranger's share of the relevant amount in respect of which the LIBOR Rate is being determined for a period comparable to the relevant LIBOR Interest Period that leading banks in New York City selected by the Arranger are quoting at 11:00 A.M. on the Interest Determination Date in the New York Interbank Market to major international banks. "Lien" shall mean any lien, mortgage, charge, security interest, ---- hypothecation, assignment for security or encumbrance of any kind (including any conditional sale or capital lease or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest). "Loan Commitment" shall mean the Initial Loan Commitment and the Term --------------- Loan Commitment. -20- "Loan Documents" shall mean this Agreement, the Initial Notes, the -------------- Term Notes, the Guarantees, the Senior Subordinated Indenture, the Exchange Notes and the Registration Rights Agreement. "Loan Party" shall mean Borrower and any Guarantor. ---------- "Loans" shall mean, collectively, the Initial Loan and the Term Loan. ----- "Loral" shall mean Space Systems/Loral, Inc., a New York corporation. ----- "Losses" of any Person shall mean the losses, liabilities, claims ------ (including those based upon negligence, strict or absolute liability and liability in tort), damages, expenses, obligations, penalties, actions, judgments, encumbrances, liens, penalties, fines, suits, reasonable costs or disbursements of any kind or nature whatsoever (including reasonable fees and expenses of counsel in connection with any Proceeding commenced or threatened in writing, whether or not such Person shall be designated a party thereto) at any time (including following the payment of the Obligations) incurred by, imposed on or asserted against such Person. "Margin Stock" shall mean margin stock within the meaning of ------------ Regulations T, U and X of the F.R.S. Board. "Material Adverse Change" shall mean a material adverse change or any ----------------------- condition or event that could be expected to result in a material adverse change in the business, assets, liabilities (contingent or otherwise), operations, condition (financial or otherwise), prospects, solvency, properties, regulatory environment, licenses, programming or material agreements of Borrower and its Subsidiaries, taken as a whole (except that for purposes of Section 4, the words "prospects", "properties", "regulatory environment", "licenses", and "programming or material agreements" shall not apply). "Material Adverse Effect" shall mean (a) a material adverse effect ----------------------- upon the business, assets, liabilities (contingent or otherwise), operations, condition (financial or otherwise), prospects, solvency, properties, regulatory environment, licenses, programming or material agreements of Borrower and its Subsidiaries, taken as a whole (except that for purposes of Section 4, the words "prospects", "properties", "regulatory environment", "licenses", and "programming or material agreements" shall not apply), or (b) the impairment in any material respect of the ability of any Loan Party to perform, or the impairment in any material respect of the ability of the Agents or Lenders to enforce, any Loan Document or any of the Obligations. "Material Subsidiary" shall mean, with respect to any accounting ------------------- period, any Restricted Subsidiary of Borrower (i) whose revenues constitute greater than 5% of the aggregate dollar value of the revenues of Borrower and its Subsidiaries, taken as a whole, for such accounting period or (ii) the fair market value of whose assets at any time during such accounting period is greater than 5% of the fair market value of all of the assets of Borrower and its Restricted Subsidiaries at such time. "Maturity Date" see Section 2.2D. ------------- "Maximum Cash Interest Rate" shall mean an interest rate of 15% per -------------------------- --- annum; provided, however, that (x) in computing such interest rate there shall - ----- -------- ------- be excluded any additional interest payable pursuant to Section 2.3C, and (y) in computing such interest rate, fees paid to the Lenders shall not be deemed an interest payment. -21- "Maximum Interest Rate" shall mean an interest rate of 16% per annum; --------------------- --- ----- provided, however, that (x) in computing such interest rate there shall be - -------- ------- excluded any additional interest payable pursuant to Section 2.3C, and (y) in computing such interest rate, fees paid to the Lenders shall not be deemed an interest payment. "MDUs" shall mean hotels, motels, bars, restaurants, businesses, ---- schools and other multiple dwelling units. "Measurement Period" see the definition of "Debt to Operating Cash ------------------ Flow Ratio" above. "MediaOne" shall mean MediaOne of Delaware, Inc., a Delaware -------- corporation. "MediaOne Asset Transfer Agreement" shall mean the asset transfer --------------------------------- agreement among MediaOne, certain of its affiliates and New PRIMESTAR, pursuant to which MediaOne and such affiliates will contribute certain assets to New PRIMESTAR, and New PRIMESTAR will assume certain liabilities of MediaOne and such affiliates. "Merger Agreements" shall mean the Comcast DBS Merger Agreement, the ----------------- Comcast Satellite Merger Agreement, the Cox Merger Agreement and the GE Americom Merger Agreement. "Merger and Contribution Agreement" shall mean the agreement dated as --------------------------------- of February 6, 1998 (as amended by the side letter dated as of March 30, 1998) among New PRIMESTAR and each of the Partners. "Merrill Lynch" see the introduction to the Agreement. ------------- "Monthly Period" shall mean the period commencing on the last calendar -------------- day of each month, if such day is a Business Day, or the first Business Day succeeding the last calendar day of each month and ending on the day next preceding the first Business Day of the following Monthly Period; provided, -------- however, that the first Monthly Period shall commence on the Closing Date. - ------- "Moody's" shall mean Moody's Investors Service, Inc. ------- "Multiemployer Plan" shall mean a "multiemployer plan," as defined in ------------------ Section 4001(a)(3) of ERISA, (i) to which any ERISA Entity is contributing, or at any time within the immediately preceding five calendar years has contributed, (ii) to which any ERISA Entity has, or, at any time within the immediately preceding five calendar years has had, an obligation to contribute or (iii) with respect to which any ERISA Entity retains any liability. "NAIC" shall mean the National Association of Insurance Commissioners. ---- "Net Cash Proceeds" shall mean the aggregate proceeds in the form of ----------------- cash or Cash Equivalents received by Borrower or any Restricted Subsidiary in respect of any Asset Sale, including all cash or Cash Equivalents received upon any sale, liquidation or other exchange of proceeds of Asset Sales received in a form other than cash or Cash Equivalents, net of (a) the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof; (b) taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements); (c) amounts required to be applied to the -22- repayment of Indebtedness secured by a Lien on the asset or assets that were the subject of such Asset Sale; (d) amounts deemed, in good faith, appropriate by the Board of Directors of Borrower to be provided as a reserve, in accordance with GAAP, against any liabilities associated with such assets which are the subject of such Asset Sale (provided that the amount of any such reserves shall be deemed to constitute Net Cash Proceeds at the time such reserves shall have been released or are not otherwise required to be retained as a reserve); and (e) with respect to Asset Sales by Subsidiaries, the portion of such cash payments attributable to Persons holding a minority interest in such Subsidiary. Net Cash Proceeds shall always be net of any actual application of any such proceeds to the Loans. "Net Income" shall mean, for any period, the aggregate of all amounts ---------- (exclusive of all amounts in respect of any non-cash extraordinary gains and any non-cash extraordinary losses) which, in accordance with GAAP, would be included as net income on the consolidated financial statements of Borrower and its Restricted Subsidiaries for such period. "New PRIMESTAR" see the introduction to this Agreement. ------------- "New PRIMESTAR/Newhouse Assumption" shall mean the assumption by New --------------------------------- PRIMESTAR of certain obligations of Newhouse under the Newhouse Assumption Agreement, and the release of Newhouse from such obligations. "New PRIMESTAR/Newhouse Assumption Agreement" shall mean the ------------------------------------------- assumption agreement dated as of the date hereof by and among Newhouse, New PRIMESTAR and each of the other parties to the Newhouse Assumption Agreement, pursuant to which the New PRIMESTAR/Newhouse Assumption will be effected. "New PRIMESTAR Senior Credit Facility" shall mean the senior credit ------------------------------------ agreement dated as of March 31, 1998 among New PRIMESTAR, the lenders party thereto from time to time, and The Bank of Nova Scotia, NationsBank of Texas, N.A. and Credit Lyonnais New York Branch, as Arranging Agents, including related notes, guarantees, security agreements, pledge agreements, mortgages, other collateral documents and note agreements and other instruments and agreements executed in connection therewith, including any deferrals, renewals, waivers, extensions, replacements, refinancings or refundings thereof, or amendments, modifications or supplements thereto and any agreement providing therefor, whether by or with the same or any other lender, creditor, group of lenders or group of creditors, and including related notes, guarantees, security agreements, pledge agreements, mortgages, other collateral documents (including all Loan Documents (as defined in the New PRIMESTAR Senior Credit Facility)) and note agreements and other instruments and agreements executed in connection therewith. "New PRIMESTAR/TWE Assumption" shall mean the assumption by New ---------------------------- PRIMESTAR of certain obligations of TWE under the TWE Senior Credit Agreement, including without limitation those assumed pursuant to the TWE Assumption Agreement, and the release of TWE from such obligations. "New PRIMESTAR/TWE Assumption Agreement" shall mean the assumption -------------------------------------- agreement dated as of the date hereof by and among TWE and New PRIMESTAR, pursuant to which the New PRIMESTAR/TWE Assumption will be effected. "Newhouse" shall mean Advance/Newhouse Partnership, a New York general -------- partnership. -23- "Newhouse Asset Transfer Agreement" shall mean the asset transfer --------------------------------- agreement dated as of February 6, 1998, as amended, between Newhouse and New PRIMESTAR. "Newhouse Assumption" shall mean the assumption by Newhouse of certain ------------------- obligations of TWE-A/N under the TWE-A/N Senior Credit Agreement and the release of TWE-A/N from such obligations. "Newhouse Assumption Agreement" shall mean the assumption agreement ----------------------------- dated as of the date hereof by and among Newhouse and TWE-A/N, pursuant to which the Newhouse Assumption was effected. "Non-U.S. Lender" see Section 12.18A. --------------- "Note Amount" see Section 2.5A(iv)(b). ----------- "Note Portion of Unutilized Net Cash Proceeds" see Section -------------------------------------------- 2.5A(iv)(b). "Notes" shall mean, collectively, the Initial Notes and the Term ----- Notes. "Notice of Borrowing" shall mean a notice substantially in the form of ------------------- Exhibit D with respect to a proposed borrowing hereunder. - --------- "Notice of Conversion" shall mean a notice substantially in the form -------------------- of Exhibit E with respect to a proposed conversion. --------- "Notice Date" see Section 2.3A(ii). ----------- "Obligations" shall mean all obligations of every nature of Borrower ----------- and the Guarantors from time to time owed to the Lenders and the Agents under the Loan Documents, whether for principal, reimbursements, interest, fees, expenses, indemnities or otherwise, and whether primary, secondary, direct, indirect, contingent, fixed or otherwise (including obligations of performance). "Offering" see Section 5.11A(i). -------- "Offer" see the definition of "Offer to Purchase" below. ----- "Offer to Purchase" shall mean a written offer (the "Offer") sent by ----------------- ----- or on behalf of Borrower by first-class mail, postage prepaid, to each Lender at his notice for address pursuant to Section 12.8 on the date of the Offer offering to purchase up to the principal amount of Term Notes specified in such Offer at the purchase price specified in such Offer. Unless otherwise required by applicable law, the Offer shall specify an expiration date (the "Expiration ---------- Date") of the Offer to Purchase, which shall be not less than 20 Business Days - ---- nor more than 60 days after the date of such Offer, and a settlement date (the "Purchase Date") for purchase of Term Notes to occur no later than five Business ------------- Days after the Expiration Date. Borrower shall notify the Arranger at least 15 Business Days (or such shorter period as is acceptable to the Arranger) prior to the mailing of the Offer of Borrower's obligation to make an Offer to Purchase, and the Offer shall be mailed by Borrower or, at Borrower's request, by the Arranger in the name and at the expense of Borrower. The Offer shall contain all the information required by applicable law to be included therein. The Offer also shall contain information concerning the business of Borrower and its Subsidiaries which Borrower in good faith believes will enable such Lenders to make an informed decision with respect to the Offer to Purchase (which -24- at a minimum will include (i) the most recent annual and quarterly consolidated financial statements of Borrower and a financial analysis substantially similar to a "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in a Form S-1 registration statement filed by an issuer on its behalf with the SEC (which requirements may be satisfied by delivery of such documents together with the Offer), (ii) a description of material developments in Borrower's business subsequent to the date of the latest of such financial statements referred to in clause (i) (including a description of the events requiring Borrower to make the Offer to Purchase), (iii) if applicable, appropriate pro forma financial information concerning the Offer to Purchase and the events requiring Borrower to make the Offer to Purchase and (iv) any other information required by applicable law to be included therein). The Offer shall contain all instructions and materials necessary to enable such Lenders to tender Term Notes pursuant to the Offer to Purchase. The Offer shall also state: (1) the Section of this Agreement pursuant to which the Offer to Purchase is being made; (2) the Expiration Date and the Purchase Date; (3) the aggregate principal amount of the outstanding Term Notes offered to be purchased by Borrower pursuant to the Offer to Purchase (including, if less than 100%, the manner by which such amount has been determined pursuant to the Section of this Agreement requiring the Offer to Purchase) (the "Purchase -------- Amount"); ------ (4) the purchase price to be paid by Borrower for each $1,000 aggregate principal amount of Term Notes accepted for payment (the "Purchase Price"); -------------- (5) the place or places where Term Notes are to be surrendered for tender pursuant to the Offer to Purchase; (6) that interest on any Term Note not tendered or tendered but not purchased by Borrower pursuant to the Offer to Purchase will continue to accrue; (7) that on the Purchase Date the Purchase Price will become due and payable upon each Term Note being accepted for payment pursuant to the Offer to Purchase and that interest thereon shall cease to accrue on and after the Purchase Date; (3) that each holder electing to tender all or any portion of a Term Note pursuant to the Offer to Purchase will be required to surrender such Term Note at the place or places specified in the Offer prior to the close of business on the Expiration Date (such Term Note being, if Borrower or the Arranger so requires, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to Borrower and the Arranger duly executed by, the holder thereof or his attorney duly authorized in writing); (9) that Lenders will be entitled to withdraw all or any portion of Term Notes tendered if Borrower receives, not later than the close of business on the fifth Business Day next preceding the Expiration Date, a telegram, telex, facsimile transmission or letter setting forth the name of the holder, the principal amount of the Term Note the -25- holder tendered, the certificate number of the Term Note the holder tendered and a statement that such holder is withdrawing all or a portion of his tender; (10) that (a) if Term Notes in an aggregate principal amount at maturity less than or equal to the Purchase Amount are duly tendered and not withdrawn pursuant to the Offer to Purchase, Borrower shall purchase all such Term Notes and (b) if Term Notes in an aggregate principal amount in excess of the Purchase Amount are tendered and not withdrawn pursuant to the Offer to Purchase, Borrower shall purchase Term Notes having an aggregate principal amount equal to the Purchase Amount on a pro rata basis (with -------- such adjustments as may be deemed appropriate so that only Term Notes in denominations of $1,000 principal amount at maturity or integral multiples thereof shall be purchased); and (11) that in the case of any holder whose Term Note is purchased only in part, Borrower shall execute and the Arranger shall authenticate and deliver to the holder of such Term Note without service charge, a new Term Note or Term Notes, of any authorized denomination as requested by such holder, in an aggregate principal amount equal to and in exchange for the unpurchased portion of the Term Note so tendered. An Offer to Purchase shall be governed by and effected in accordance with the provisions above pertaining to any Offer. References above to principal amount shall mean and refer to principal amount at maturity, unless the context otherwise requires. "Officer" shall mean the Chairman of the Board of Directors, the ------- President, any Vice President, the Chief Financial Officer, the Controller, the Treasurer or the Secretary of any Person. "Officers' Certificate" shall mean, as applied to any corporation, a --------------------- certificate executed on behalf of such corporation by at least one Officer. "Organic Document" shall mean, relative to any Person, as applicable, ---------------- its certificate of incorporation, by-laws, certificate of partnership, partnership agreement, certificate of formation limited liability agreement. "Original Term Notes" see Section 2.2D. ------------------- "Other Indebtedness" see Section 2.5A(iv)(b). ------------------ "Other Taxes" see Section 12.18B. ----------- "Participant" see Section 12.1B. ----------- "Partner" shall mean any of TSAT, TWE, Newhouse, Comcast, Cox, ------- MediaOne and GE Americom. "Partner Business" see Section 3.1J. ---------------- -26- "Partner Entity" shall mean any Affiliate of any Partner that will -------------- transfer assets to or merge with New PRIMESTAR pursuant to any Restructuring Agreement. "Partnership Agreement" shall mean the Limited Partnership Agreement --------------------- of Primestar Partnership (then known as K Prime Partners, L.P.), dated as of February 8, 1990, as amended and in effect from time to time. "Partnership Credit Agreement" shall mean the bank credit facility ---------------------------- obtained by Primestar Partnership to finance advances to Tempo for payments due in respect of the Tempo Satellites under the Satellite Construction Agreement, and supported by letters of credit arranged for by affiliates of the partners of the Partnership (other than GE Americom Services, Inc.). "Partnership Working Capital Facility" shall mean the existing $50.0 ------------------------------------ million working capital facility of Primestar Partnership. "Payment Blockage Notice" see Section 8.2A. ----------------------- "Payment Blockage Period" see Section 8.2A. ----------------------- "Payment Office" shall mean the office of the Arranger located at 250 -------------- Vesey Street, New York, New York 10281. "Pension Plan" shall mean a "pension plan", as such term is defined in ------------ Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which Borrower or any corporation, trade or business that is, along with Borrower, a member of a Controlled Group, may have liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA. "Permitted Holder" shall mean any of (i) the estate or the heirs of ---------------- Bob Magness (a shareholder of TSAT), (ii) John C. Malone (a shareholder of TSAT, the Chief Executive Officer of TCI, and a director of TCI and of TSAT) or the estate or heirs of John C. Malone, (iii) any Restricted Subsidiary, (iv) Persons who were partners of Primestar Partnership immediately prior to the Restructuring Transaction and their respective controlled Affiliates, (v) TCI and its Subsidiaries, (vi) any of the Permitted Transferees of the Persons referred to in clauses (i) through (v), and (vii) any person or group controlled by each or any of the Persons referred to in clauses (i) through (vi). "Permitted Indebtedness" see Section 6A.2. ---------------------- "Permitted Investments" shall mean (a) Cash Equivalents; (b) --------------------- Investments in prepaid expenses, negotiable instruments held for collection and lease, utility and workers' compensation, performance and other similar deposits; (c) loans and advances to employees made in the ordinary course of business not to exceed $1.0 million in the aggregate at any one time outstanding; (d) Interest Rate Protection Obligations; (e) bonds, notes, debentures or other securities received as a result of Asset Sales permitted under Section 6A.9 not to exceed 15% of the total consideration for such Asset Sales; (f) transactions with officers, directors and employees of Borrower or any Restricted Subsidiary entered into in the ordinary course of business (including compensation or employee benefit arrangements with any such director or employee); (g) Investments existing as of the Closing Date and any amendment, extension, renewal or modification thereof to the extent that any -27- such amendment, extension, renewal or modification does not require Borrower or any Restricted Subsidiary to make any additional cash or non-cash payments or provide additional services in connection therewith; (h) any Investment to the extent that the consideration therefor consists of Qualified Equity Interests of Borrower; (i) any Investment consisting of a guarantee by a Restricted Subsidiary of Senior Indebtedness or any guarantee permitted under clause (e) of the second paragraph of Section 6A.2; (j) shares of Equity Interests of TCI purchased pursuant to the Share Purchase Agreement; (k) shares of the common stock of ResNet acquired pursuant to the conversion of the ResNet Subordinated Loan; (l) warrants of ResNet acquired pursuant to the conversion of the ResNet Subordinated Loan or the exercise of the ResNet Option; and (m) shares of the common stock of ResNet acquired pursuant to any exercise of warrants at a de -- minimis exercise price. - ------- "Permitted Junior Securities" shall mean any securities of Borrower or --------------------------- any other Person that are (i) equity securities without special covenants or (ii) subordinated in right of payment to all Senior Indebtedness that may at the time be outstanding, to substantially the same extent as, or to a greater extent than, the Loans and Notes are subordinated as provided in this Agreement, in any event pursuant to a court order so providing and as to which (a) the rate of interest on such securities shall not exceed the effective rate of interest on the Loans and Notes on the date of this Agreement, (b) such securities shall not be entitled to the benefits of covenants or defaults materially more beneficial to the holders of such securities than those in effect with respect to the Loans and Notes on the date of this Agreement and (c) such securities shall not provide for amortization (including sinking fund and mandatory prepayment provisions) commencing prior to the date six months following the final scheduled maturity date of the Senior Indebtedness (as modified by the plan of reorganization or readjustment pursuant to which such securities are issued). "Permitted Liens" shall mean (a) Liens on property of a Person --------------- existing at the time such Person is merged into or consolidated with Borrower or any Restricted Subsidiary; provided, however, that such Liens were in existence -------- ------- prior to the contemplation of such merger or consolidation and do not secure any property or assets of Borrower or any Restricted Subsidiary other than the property or assets subject to the Liens prior to such merger or consolidation; (b) Liens imposed by law such as carriers', warehousemen's and mechanics' Liens and other similar Liens arising in the ordinary course of business which secure payment of obligations not more than 60 days past due or which are being contested in good faith and by appropriate proceedings; (c) Liens existing on the Closing Date; (d) Liens securing only this Agreement, the Loans and Notes; (e) Liens in favor of Borrower or any Restricted Subsidiary so long as held by Borrower or any Restricted Subsidiary; (f) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted; provided, however, that any reserve or other appropriate -------- ------- provision as shall be required in conformity with GAAP shall have been made therefor; (g) easements, reservation of rights of way, restrictions and other similar easements, licenses, restrictions on the use of properties, or minor imperfections of title that in the aggregate are not material in amount and do not in any case materially detract from the properties subject thereto or interfere with the ordinary conduct of the business of Borrower and the Restricted Subsidiaries; (h) Liens resulting from the deposit of cash or notes in connection with contracts, tenders or expropriation proceedings, or to secure workers' compensation, surety or appeal bonds, costs of litigation when required by law and public and statutory obligations or obligations under franchise arrangements entered into in the ordinary course of business; (i) Liens securing Indebtedness consisting of Capital Lease Obligations, Purchase Money Indebtedness, mortgage financings, industrial revenue bonds or other monetary obligations, in each case incurred solely for the purpose of financing all or any part of the purchase price or cost of construction or installation of assets used in the business of Borrower or the Restricted Subsidiaries, or repairs, additions or improvements to such assets; provided, however, that (I) such Liens -------- ------- secure Indebtedness in an amount not in excess of the original purchase price or the original cost of any such assets or repair, addition or improvement thereto (plus an amount equal to the reasonable fees and expenses in connection with the incurrence of such -28- Indebtedness), (II) such Liens do not extend to any other assets of Borrower or the Restricted Subsidiaries (and, in the case of repair, addition or improvements to any such assets, such Lien extends only to the assets (and improvements thereto or thereon) repaired, added to or improved), (III) the Incurrence of such Indebtedness is permitted by Section 6A.2, and (IV) such Liens attach within 90 days of such purchase, construction, installation, repair, addition or improvement; (j) Liens to secure any refinancings, renewals, extensions, modifications or replacements (collectively, "refinancing") (or ----------- successive refinancings), in whole or in part, of any Indebtedness secured by Liens referred to in the clauses above so long as such Lien does not extend to any other property (other than improvements thereto); (k) Liens securing letters of credit entered into in the ordinary course of business and consistent with past business practice; (l) Liens on and pledges of the Equity Interests of any Unrestricted Subsidiary securing any Indebtedness of such Unrestricted Subsidiary; and (m) any calls or rights of first refusal with respect to any partnership interests, and any rights of the Partnership to remove a partner's representative from the partners committee of the Partnership, under the Partnership Agreement as in effect on the Issue Date. "Permitted Refinancing" shall mean, relative to any Indebtedness, any --------------------- other Indebtedness which is incurred to repay and retire in full such refinanced Indebtedness and all other monetary obligations in respect of such refinanced Indebtedness; provided, however, that -------- ------- (a) other than with respect to Subordinated Debt, such refinancing Indebtedness shall not be incurred in an original principal amount which exceeds the aggregate amount on the date of such refinancing of the outstanding amount of such refinanced Indebtedness plus the then aggregate amount of all such other monetary obligations in respect thereof; (b) the weighted average life of such refinancing Indebtedness shall not be less than the weighted average life on the date of such refinancing of such refinanced Indebtedness; (c) other than reasonable and customary fees, discounts and commissions payable in connection with the refinancing Indebtedness, the refinancing Indebtedness shall not impose on Borrower or any Restricted Subsidiary rates of interest, prepayment changes or other fees or other amounts that are more than 2% per annum higher that the highest respective --------- amounts thereof payable in respect of such refinanced Indebtedness excluding the effect of any equity security issued in connection with such Indebtedness; (d) the refinancing Indebtedness shall not contain terms and conditions that, taken as a whole, make the refinancing Indebtedness materially more burdensome to Borrower or the Restricted Subsidiaries, or, except in the case of the refinancing of Indebtedness permitted under clause (c) of Section 6.2, materially more beneficial to the holders of the refinancing Indebtedness, than the terms in effect on the date of such refinancing of the refinanced Indebtedness; and (e) if such refinanced Indebtedness is Subordinated Debt, the refinancing Indebtedness shall not contain rights and remedies that, taken as a whole, are materially more detrimental to the Lenders or materially more beneficial to the holders of the refinancing Indebtedness, than the terms in effect on the date of such refinancing of the refinanced Indebtedness. "Permitted Transferee" shall mean, with respect to any Person: (a) in -------------------- the case of any Person who is a natural person, such individual's spouse or children, any trust for such individual's benefit or the benefit of such individual's spouse or children, or any corporation or partnership in which the direct and beneficial owner of all of the equity interest is such Person or such individual's spouse or children or any trust for -29- the benefit of such persons; (b) in the case of any Person who is a natural person, the heirs, executors, administrators or personal representatives upon the death of such Person or upon the incompetency or disability of such Person for purposes of the protection and management of such individual's assets; and (c) in the case of any Person who is not a natural person, any Affiliate of such Person. "Person" shall mean and include natural persons, corporations, limited ------ liability companies, limited partnerships, general partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof. "PIK Interest Amount" see Section 2.3B. ------------------- "Plan" shall mean any employee pension benefit plan (other than a ---- Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and (i) which is maintained or contributed to by any Loan Party or any of their respective ERISA Affiliates or (ii) with respect to which any Loan Party retains any liability. "Post-Petition Interest" shall mean, with respect to any Senior ---------------------- Indebtedness of any Person, all interest accrued or accruing on such Indebtedness after the commencement of any Insolvency or Liquidation Proceeding against such Person in accordance with and at the contract rate (including, without limitation, any rate applicable upon default) specified in the agreement or instrument creating, evidencing or governing such Indebtedness, whether or not, pursuant to applicable law or otherwise, the claim for such interest is allowed as a claim in such Insolvency or Liquidation Proceeding. "Potential Event of Default" shall mean a condition or event which, -------------------------- after notice or lapse of time or both, would constitute an Event of Default if that condition or event were not cured or removed within any applicable grace or cure period. "Preferred Equity Interest" in any Person shall mean an Equity ------------------------- Interest of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over Equity Interests of any other class in such Person. "Prime Rate" shall mean for any day, a rate per annum that is equal to ---------- --------- the corporate base rate of interest established by Arranger from time to time, changing when and as said corporate base rate changes. The corporate base rate is not necessarily the lowest rate charged by the Arranger to its customers. "PRIMESTAR Distribution Service" shall mean the distribution of the ------------------------------ PRIMESTAR Programming as described in the Proxy. "Primestar Partners" shall mean, collectively, TSAT, Time Warner ------------------ Entertainment Company, L.P., Advance/Newhouse Partnership, Comcast Corporation, Cox Communications, Inc., MediaOne of Delaware, Inc. and GE American Communications, Inc. "Primestar Partnership" shall mean PRIMESTAR Partners, L.P., a --------------------- Delaware limited partnership. -30- "Proceeding" shall mean any claim, counterclaim, action, judgment, ---------- suit, hearing, governmental investigation, arbitration or proceeding, including by or before any Governmental Authority and whether judicial or administrative. "Property" shall mean any right or interest in or to property or -------- assets of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible and including Equity Interests or other ownership interests of any Person. "Proxy" shall mean the definitive proxy statement/prospectus of TSAT ----- dated as of February 9, 1998 mailed to the shareholders of TSAT in connection with the Restructuring Transaction. "Public Equity Offering" shall mean an underwritten public offering of ---------------------- Qualified Equity Interests of Borrower pursuant to an effective registration statement filed under the Securities Act (excluding registration statements filed on Form S-8). "Purchase Amount" see the definition of "Offer to Purchase" above. --------------- "Purchase Date" see the definition of "Offer to Purchase" above. ------------- "Purchase Money Indebtedness" shall mean Indebtedness of Borrower or --------------------------- any Restricted Subsidiary Incurred for the purpose of financing all or any part of the purchase price or the cost of construction or improvement of any property (other than integrated receiver/decoders or related equipment); provided, -------- however, that the aggregate principal amount of such Indebtedness does not - ------- exceed the lesser of the Fair Market Value of such property or such purchase price or cost, including any refinancing of such Indebtedness that does not increase the aggregate principal amount (or accreted amount, if less) thereof as of the date of refinancing. "Purchase Price" see the definition of "Offer to Purchase" above. -------------- "Qualified Equity Interest" in any Person shall mean any Equity ------------------------- Interest in such Person other than any Disqualified Equity Interest. "Quarterly Date" see Section 2.3B. -------------- "Refinancing" shall mean the public offering or private placement and ----------- sale by Borrower of the Refinancing Securities contemplated by Section 5.11, in order to refinance, as applicable, the Loans, Notes, Term Notes, the Exchange Notes and all Obligations owing in respect of this Agreement and the other Loan Documents and all obligations under the Senior Subordinated Indenture. "Refinancing Securities" shall mean the unsecured senior subordinated ---------------------- notes of Borrower or any of its Subsidiaries proposed to be sold in order to consummate the Refinancing. "Refinancing Securities Notice" see Section 5.11B. ----------------------------- "Register" see Section 5.13. -------- "Registration Rights Agreement" shall mean a registration rights ----------------------------- agreement substantially in the form of Exhibit G (with such changes therein as --------- the Agents and Borrower shall approve). -31- "Regulatory Authority" shall mean any national, state or local -------------------- government, any political subdivision or any governmental, quasi-governmental, judicial, public or statutory instrumentality, authority, body or entity, other regulatory bureau, authority, body or entity, foreign or domestic, including the Federal Deposit Insurance Corporation, the Comptroller of the Currency, the F.R.S. Board, any central bank or any comparable authority. "Reimbursement Agreement" shall mean each reimbursement agreement ----------------------- dated as of the Closing Date between New PRIMESTAR, on the one hand, and each Partner (other than TSAT) and/or their respective affiliates and affiliates of TCI, respectively, on the other hand; and "Reimbursement Agreements" shall mean all of them. "Related Acquisition" see Section 6A.2(j). ------------------- "Related Parties" see Section 9.1. --------------- "Release" shall mean a "release", as such term is defined in CERCLA. ------- "Reorganization Agreement" shall mean the agreement entered into on ------------------------ December 4, 1996 by TCI, TCIC and a number of other TCI subsidiaries, including Borrower (as Successor in interest to TSAT) and its subsidiaries, which provided for, among other things, the principal corporate transactions to effect the Distribution, the conditions thereto and certain provisions governing the relationship between Borrower and TCI with respect to and resulting from the Distribution, as amended and in effect from time to time. "Required Lenders" shall mean Lenders holding in the aggregate more ---------------- than 50% of (a) prior to the Closing Date, the Loan Commitments, and (b) on and after the Closing Date, the outstanding principal amount of the Notes. "Required Refinancing Securities" see Section 5.11B. ------------------------------- "Requirement of Law" shall mean as to any Person, the certificate of ------------------ incorporation and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject. "ResNet" shall mean ResNet Communications, Inc., a Delaware ------ corporation. "ResNet Option" shall mean the Option Agreement between TSAT and ------------- ResNet dated October 21, 1996, as amended and in effect from time to time. "ResNet Subordinated Loan" shall mean the subordinated loan in the ------------------------ principal amount of $36,604,000 made by TSAT to ResNet, as amended and in effect from time to time. "Resource Conservation and Recovery Act" shall mean the Resource -------------------------------------- Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as amended. -- --- "Restricted C-Band Subsidiary" see Section 6A.1. ---------------------------- -32- "Restricted Junior Payment" shall mean (a) any dividend or ------------------------- distribution, direct or indirect, on account of any Equity Interests in Borrower or any of its Subsidiaries now or hereafter outstanding, except a dividend payable solely in shares of that class of stock or in any junior class of stock to the holders of that class, provided that the issuance of such stock or junior class of stock is not an incurrence of Indebtedness, (b) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any Equity Interests in Borrower or any of its Subsidiaries now or hereafter outstanding, (c) any payment or prepayment of principal of, premium, if any, or interest, fees or other charges on or with respect to, and any redemption, purchase, retirement, defeasance, sinking fund or similar payment and any claim for rescission with respect to, any Subordinated Debt of Borrower or any of its Subsidiaries other than a Permitted Refinancing, or (d) any payment made to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire Equity Interests in Borrower or any of its Subsidiaries now or hereafter outstanding. "Restricted Payments" see Section 6A.1. ------------------- "Restricted Subsidiary" shall mean (a) prior to the Conversion Date, --------------------- each U.S. Subsidiary of Borrower, other than an Unrestricted Subsidiary, of which Borrower owns directly or indirectly at least 80% of the outstanding Voting Equity Interests, and (b) on and after the Conversion Date, any Subsidiary of Borrower that has not been designated by the Board of Directors of Borrower, by a resolution of the Board of Directors of Borrower delivered to the Arranger, as an Unrestricted Subsidiary pursuant to Section 6A.12; provided, -------- however, that, for the purposes of this clause (b), each Subsidiary which as of - ------- the Conversion Date has been and is designated as an Unrestricted Subsidiary under the Existing Indentures is designated as an Unrestricted Subsidiary as of the Conversion Date. Any such designation pursuant to clause (b) may be revoked by a resolution of the Board of Directors of Borrower delivered to the Arranger, subject to the provisions of Section 6A.12. "Restructuring Agreements" shall mean each of the Asset Transfer ------------------------ Agreements, the Existing Note Assumption Agreement, the Merger Agreements, the Merger and Contribution Agreement, the TSAT Merger Agreement, the TSAT Asset Transfer Agreement, the Restructuring Registration Rights Agreement, the Reimbursement Agreements, the Stockholders Agreement, the TWE-Newhouse Voting Agreement, the TSAT Stockholders Agreement, the TSAT Tempo Agreement and the U S West Guarantee Agreement. "Restructuring Registration Rights Agreement" shall mean the ------------------------------------------- registration rights agreement dated as of the Closing Date among New PRIMESTAR, each of the Partners, Continental Satellite Company of Chicago, Inc., Continental Satellite of Minnesota, Inc., Continental Satellite Company of New England, Inc., Continental Satellite Company of Ohio, Inc., Continental Satellite Company of Michigan, Inc., Continental Satellite Company of Virginia, Inc., MediaOne Satellite II, Inc., Paragon Communications and John C. Malone. "Restructuring Transaction" shall mean, collectively, the business ------------------------- combination transactions contemplated by the Asset Transfer Agreements, the Existing Note Assumption Agreement, the Merger Agreements, the Merger and Contribution Agreement (excluding, however, the transactions contemplated by the TSAT Merger Agreement and the TSAT Tempo Agreement) and the TSAT Asset Transfer Agreement. "Reuter's Screen" shall mean the display designated at page "LIBO" on --------------- the Reuter Monitor System or such other display on the Reuter Monitor System as may replace such page displaying the London interbank offered rates as of 11:00 A.M., London time, on the day on which the relevant determination is made. -33- "Revocation" see Section 6A.12B. ---------- "Roll-Up Documents" shall mean, collectively, the TSAT Asset Transfer ----------------- Agreement, the Restructuring Agreement, the TSAT Merger Agreement, and all contracts, agreements and documents delivered in connection with each of the foregoing. "S&P" shall mean Standard & Poor's Corporation. --- "Satellite Construction Agreement" shall mean the fixed price -------------------------------- satellite construction agreement between Loral and Tempo dated as of February 22, 1990, as amended and in effect from time to time. "SEC" shall mean the Securities and Exchange Commission. --- "Section 12.18 Certificate" see Section 12.18A. ------------------------- "Securities" shall mean any limited, general or other partnership ---------- interest, or any stock, shares, voting trust certificates, bonds, debentures, notes or other Equity Interests or evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or any certificates of interest, shares, or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire any of the foregoing, but shall not include any evidence of the Obligations. "Securities Act" shall mean the Securities Act of 1933, as amended -------------- from time to time, and any successor statute, and all rules and regulations of the SEC promulgated thereunder. "Senior Indebtedness" shall mean, at any date, (a) all obligations of ------------------- Borrower under the New PRIMESTAR Senior Credit Facility; (b) all Interest Rate Protection Obligations of Borrower; (c) all obligations of Borrower under stand by letters of credit; and (d) all other Indebtedness of Borrower for borrowed money, including principal, premium, if any, and interest (including Post- Petition Interest) on such Indebtedness, unless the instrument under which such Indebtedness of Borrower for money borrowed is Incurred expressly provides that such Indebtedness for money borrowed is not senior or superior in right of payment to the Notes, and all renewals, extensions, modifications, amendments or refinancings thereof. Notwithstanding the foregoing, Senior Indebtedness shall not include (a) to the extent that it may constitute Indebtedness, any obligation for federal, state, local or other taxes; (b) any Indebtedness among or between Borrower and any Subsidiary of Borrower; (c) to the extent that it may constitute Indebtedness, any obligation in respect of any trade payable Incurred for the purchase of goods or materials, or for services obtained, in the ordinary course of business; (d) that portion of any Indebtedness that is Incurred in violation of this Agreement; provided, however, that such -------- ------- Indebtedness shall be deemed not to have been Incurred in violation of this Agreement for purposes of this clause (d) if (I) the holder(s) of such Indebtedness or their representative or Borrower shall have furnished to the Arranger an opinion of independent legal counsel, unqualified in all material respects, addressed to the Arranger (which legal counsel may, as to matters of fact, rely upon an Officers' Certificate of Borrower) to the effect that the Incurrence of such Indebtedness does not violate the provisions of this Agreement or (II) in the case of any obligations under the New PRIMESTAR Senior Credit Facility, the holder(s) of such obligations or their agent or representative shall have received a representation from Borrower to the effect that the Incurrence of such Indebtedness does not violate the provisions of this Agreement; (e) Indebtedness evidenced by the Existing Notes or the Notes; (f) Indebtedness of Borrower that is expressly subordinate or junior in right of payment to any other Indebtedness of Borrower; (g) to the extent that it may constitute Indebtedness, any obligation owing under leases (other than Capital Lease Obligations) or manage- -34- ment agreements; and (h) any obligation that by operation of law is subordinate to any general unsecured obligations of Borrower. "Senior Management" shall mean the chief executive officer, chief ----------------- financial officer, chief operating officer, treasurer, controller and corporate counsel of Borrower, or any of them, as in effect from time to time. "Senior Subordinated Indenture" shall mean an indenture between ----------------------------- Borrower and a trustee substantially in the form of Merrill Lynch's customary high yield indenture (which shall include guarantees by Subsidiaries of the Exchange Notes if and to the extent that the Existing Notes are guaranteed by Subsidiaries of Borrower), modified as appropriate for the Exchange Notes and having principal negative covenants substantially identical to Section 6A and principal events of default substantially identical to Section 7 (with such changes therein as the Required Lenders (which consent shall be conclusively deemed given if a Lender does not object to the draft thereof within five Business Days of receipt thereof) and Borrower shall approve, and, at such time as notes issued thereunder are sold in a public offering, with other appropriate changes to reflect such public offering), as the same may at any time be amended, modified and supplemented and in effect. "Share Purchase Agreement" shall mean the share purchase agreement ------------------------ entered into by TCI and TSAT on December 4, 1996, as amended and in effect from time to time. "Six Month Period" shall mean the period commencing on the Conversion ---------------- Date and ending on the date which is the last calendar day of the month six months after the Conversion Date (or if such last calendar day is not a Business Day, the next Business Day) and each interval thereafter which begins on the next day after the end of the prior period and ends on the date which is the last calendar day of the month which is six months thereafter (or the next Business Day if such last calendar day is not a Business Day). "Stockholders Agreement" shall mean the stockholders agreement dated ---------------------- as of the Closing Date among New PRIMESTAR, each of the Partners, Paragon Communications, certain affiliates of MediaOne and John C. Malone, regarding shares of capital stock of New PRIMESTAR. "Strategic Equity Investor" shall mean a corporation or entity with an ------------------------- equity market capitalization, a net asset value or annual revenues of at least $1.5 billion that primarily owns and operates businesses in the telecommunications, information systems, entertainment, cable television, programming, electronics or similar or related industries. "Subordinated Debt" shall mean (i) Indebtedness incurred under the ----------------- Reimbursement Agreements, and (ii) other unsecured Indebtedness of Borrower subordinated in right of payment to the Obligations pursuant to documentation containing interest rates, maturities, amortization schedules, covenants, defaults, remedies, subordination provisions and other material terms in form and substance reasonably satisfactory to the Required Lenders. "Subordinated Debt Document" shall mean, as the context may require, -------------------------- each indenture, note, debenture or other agreement evidencing or relating to Subordinated Debt, and each instrument, document or agreement prepared or executed in connection therewith, in each case as the same may be amended, supplemented, amended and restated or otherwise modified in accordance with Section 6.15. "Subordinated Indebtedness" shall mean any Indebtedness of Borrower ------------------------- which is expressly subordinated in right of payment to the Loans. -35- "Subordination Arrangement" shall mean any agreement between Borrower ------------------------- and/or its Subsidiaries, as applicable, Primestar Partnership and the Partners providing for the subordination to the Loans and to the obligations under the New PRIMESTAR Senior Credit Facility of the reimbursement obligations of Borrower and its Subsidiaries to any Partner relating to letters of credit issued on behalf of Primestar Partnership for which the Partners provide credit support. "Subsequent Initial Note" see Section 2.1D. ----------------------- "Subsequent Term Note" see Section 2.2E. -------------------- "Subsidiary" shall mean, with respect to any Person, (a) any ---------- corporation of which the outstanding Voting Equity Interests having at least a majority of the votes entitled to be cast in the election of directors of such entity shall at the time be owned, directly or indirectly, by such Person, or (b) any other Person of which at least a majority of Voting Equity Interests are at the time, directly or indirectly, owned by such first named Person. "Surviving Person" shall mean with respect to any Person involved in ---------------- or that makes any Disposition, the Person formed by or surviving such Disposition or the Person to which such Disposition is made. "Take-Out Banks" shall mean Merrill Lynch, Pierce, Fenner & Smith -------------- Incorporated, Morgan Stanley Senior Funding, Inc. and Donaldson, Lufkin & Jenrette Securities Corporation. "Tag-Along Agreement" shall mean the agreement dated as of February 8, ------------------- 1990, originally entered into by and among Cox Enterprises, Inc., Comcast, Continental, Newhouse, Tempo, TCIC and TCI Development Corporation, a subsidiary of TCI, as amended and in effect from time to time. "Tax Sharing Agreement" shall mean the tax sharing agreement effective --------------------- as of July 1, 1995 among TCI, TCIC and certain other consolidated subsidiaries of TCI, as amended. In connection with the Distribution, the Tax Sharing Agreement was amended on December 3, 1996 to provide that Borrower (as successor in interest to TSAT) be treated as if it had been a party to the Tax Sharing Agreement effective July 1, 1995, as amended and in effect from time to time. "Tax Benefit" see Section 12.18C. ----------- "Taxes" shall mean all taxes, assessments, fees, levies, imposts, ----- duties, penalties, deductions, liabilities, withholdings or other charges of any nature whatsoever, including interest penalties, from time to time or at any time imposed by any law, rule or regulation or any Governmental Authority. "TCI" shall mean Tele-Communications, Inc., a Delaware corporation. --- "TCISE Partner 1" shall mean TCISE Partner 1, Inc., a Delaware --------------- corporation. "TCISE Partner 2" shall mean TCISE Partner 2, Inc., a Delaware --------------- corporation. "Tempo" shall mean Tempo Satellite, Inc., an Oklahoma corporation. ----- "Tempo Option" shall mean Primestar Partnership's right and option, ------------ granted by Tempo under the option agreement entered into by Tempo and Primestar Partnership in February 1991 to purchase or -36- lease 100% of the capacity of a DBS system to be built, launched, and operated by Tempo pursuant to the FCC Permit, as amended and in effect from time to time. "Tempo Letter Agreements" shall mean the two letter agreements, dated ----------------------- as of July 1993, entered into by Tempo and Primestar in connection with the Tempo Option and certain related matters and any refinancings thereof. "Tempo Satellite" shall mean either of the two high power direct --------------- broadcast satellites which Tempo has agreed to purchase from Loral pursuant to the Satellite Construction Agreement. "Term Loan Commitment" see Section 2.2A. -------------------- "Term Loan" see Section 2.2A. --------- "Term Notes" see Section 2.2E. ---------- "Total Consolidated Indebtedness" shall mean, as at any date of ------------------------------- determination, an amount equal to the aggregate amount of all Indebtedness and the aggregate liquidation preference of all Disqualified Equity Interests of Borrower and the Restricted Subsidiaries outstanding as of such date of determination (other than Indebtedness owing to and Disqualified Equity Interests held by Borrower or any of its Restricted Subsidiaries not subject to any lien in favor of any Person other than Borrower or any Restricted Subsidiary of Borrower). "Total Debt" shall mean, on any date of determination, with respect to ---------- Borrower and its Restricted Subsidiaries, an amount equal to the sum of (a) the outstanding principal amount of all Indebtedness as of such date of the type referred to in clause (x)(a) of the definition of "Indebtedness" (which, in the case of the loans under the New PRIMESTAR Senior Credit Facility, shall be deemed to equal the amount of loans under the New PRIMESTAR Senior Credit Facility outstanding on the last day of the Fiscal Quarter ending on or immediately preceding the date of determination), plus (b) the maximum aggregate ---- amount of Indebtedness as of such date of the type described in clause (x)(b) of the definition of "Indebtedness" (which, in the case of Letter of Credit Outstandings as defined in the New PRIMESTAR Senior Credit Facility, shall be deemed to equal the amount of Letter of Credit Outstandings on the last day of the Fiscal Quarter ending on or immediately preceding the date of determination), plus (c) the aggregate amount as of such date of the ---- Indebtedness described in clause (x)(c) of the definition of "Indebtedness," plus (d) (without duplication) the aggregate amount on such date of the - ---- Contingent Liabilities in respect of any of the foregoing (other than in connection with the Reimbursement Agreements). "Total Debt to Annualized Cash Flow Ratio" shall mean the ratio of (a) ---------------------------------------- Total Debt to (b) Annualized Cash Flow. -- "Total Interest Expense" shall mean, for any period, the sum of (a) ---------------------- the aggregate cash interest expense (net of cash interest income) of Borrower and its Restricted Subsidiaries (including, to the extent Borrower or any of its Restricted Subsidiaries have any Contingent Liability in respect of such interest expense, (i) in respect of any pro forma calculations, the interest --- ----- expense of Unrestricted Subsidiaries, and (ii) in respect of any period which does not include any pro forma calculation, the amount of such interest expense --- ----- actually paid or payable by Borrower or any Restricted Subsidiary) for such period, as determined in accordance with GAAP, including the portion of any payments made in respect of Capitalized Lease Liabilities allocable to interest expense plus (b) all commitment, letter of credit, guarantee, line of credit or ---- similar fees -37- (no matter how designated) paid or scheduled or required to be paid by Borrower and its Restricted Subsidiaries to any lender in exchange for such lender's commitment to lend to Borrower and its Restricted Subsidiaries, including, without limitation, the commitment fee in respect of the loans and letters of credit under the New PRIMESTAR Senior Credit Facility. "Trade Name and Service Mark License Agreement" shall mean the trade --------------------------------------------- name and service mark license agreement between Borrower (as successor in interest to TSAT) and TCI dated December 4, 1996, as amended and in effect from time to time. "Transaction Costs" shall mean the fees, costs and expenses payable by ----------------- Borrower pursuant hereto and other fees, costs and expenses payable by Borrower or a Subsidiary of Borrower in connection with the Transactions. "Transaction Documents" shall mean the Roll-Up Documents, the --------------------- Reimbursement Agreement, the Partnership Credit Agreement, the Primestar Partnership Agreement and the TSAT Tempo Agreement. "Transactions" shall mean, collectively, (i) the Restructuring ------------ Transaction, (ii) the extensions of credit under the New PRIMESTAR Senior Credit Facility, (iii) the incurrence of the Interim Loan hereunder on the Closing Date, (iv) the transactions contemplated by the Assumption Agreements, (v) the Existing Note Assumption and (vi) any other transaction on the Closing Date contemplated in relation to the foregoing. "Transition Services Agreement" shall mean the agreement dated as of ----------------------------- December 4, 1996 between TCI and Borrower (as successor in interest to TSAT), pursuant to which TCI provides to Borrower certain services and other benefits, including certain administrative and other services that were provided to TSAT by TCI prior to the Distribution, as amended and in effect from time to time. "Trigger Date" see Section 6A.9. ------------ "TSAT" shall mean TCI Satellite Entertainment, Inc., a Delaware ---- corporation. "TSAT Asset Transfer Agreement" shall mean the asset transfer ----------------------------- agreement dated as of February 6, 1998 between TSAT and New PRIMESTAR, pursuant to which TSAT will contribute certain assets to New PRIMESTAR, and New PRIMESTAR will assume certain liabilities of TSAT. "TSAT Merger" shall mean the merger of TSAT with and into New ----------- PRIMESTAR. "TSAT Merger Agreement" shall mean the agreement dated as of February --------------------- 6, 1998 between New PRIMESTAR and TSAT, pursuant to which the TSAT Merger may be effected. "TSAT Partners Holdings" means TSAT Partners Holdings, Inc., a ---------------------- Delaware corporation. "TSAT Stockholders Agreement" shall mean the agreement dated as of --------------------------- February 6, 1998 among New PRIMESTAR, TSAT and John C. Malone, regarding shares of capital stock of TSAT. "TSAT Tempo Agreement" shall mean the agreement dated as of February -------------------- 6, 1998 between New PRIMESTAR and TSAT, which provides, among other things, that on the terms and conditions set forth -38- therein, upon receipt of FCC approval of the transfer of control of Tempo to Borrower, TSAT will (at Borrower's election) either sell all the issued and outstanding shares of Equity Interests of Tempo to Borrower or liquidate Tempo and sell all of its rights, title and interests in, to and under Tempo's assets to Borrower, as such agreement is amended, supplemented, amended and restated or otherwise modified from time to time. "TWE" shall mean Time Warner Entertainment Company, L.P., a Delaware --- limited partnership. "TWE Asset Transfer Agreement" shall mean the asset transfer agreement ---------------------------- dated as of February 6, 1998, as amended, among TWE, certain of its affiliates and New PRIMESTAR, pursuant to which TWE and such affiliates contributed certain assets to New PRIMESTAR, and New PRIMESTAR assumed certain liabilities of TWE and such affiliates. "TWE Assumption" shall mean the assumption by TWE of certain -------------- obligations of TWE-A/N under the TWE-A/N Senior Credit Agreement and the release of TWE-A/N from such obligations. "TWE Assumption Agreement" shall mean the assumption agreement dated ------------------------ as of the date hereof by and among TWE, TWE-A/N and each of the other parties to the TWE-A/N Senior Credit Agreement, pursuant to which the TWE Assumption was effected. "TWE Partner" shall mean each Person who shall from time to time be ----------- admitted as a partner of TWE in accordance with the TWE Partnership Agreement. "TWE Partnership Agreement" shall mean the agreement of limited ------------------------- partnership of TWE dated as of October 29, 1991 by and among Time Warner Inc., U S West, Inc. and certain of their respective subsidiaries. "TWE Senior Credit Agreement" shall mean the senior credit agreement --------------------------- dated as of April 1, 1998, by and among TWE, the lenders party thereto and the agents party thereto. "TWE-A/N" shall mean Time Warner Entertainment-Advance/Newhouse ------- Partnership, a New York general partnership. "TWE-A/N Partner" shall mean TWE, Newhouse and each other Person who --------------- shall from time to time be admitted as a partner of TWE-A/N in accordance with the TWE-A/N Partnership Agreement. "TWE-A/N Partnership Agreement" shall mean the partnership agreement ----------------------------- dated as of September 9, 1994 by and between TWE and Newhouse. "TWE-A/N Senior Credit Agreement" shall mean the senior credit ------------------------------- agreement dated as of April 1, 1998, by and among TWE-A/N, the lenders party thereto and the agents party thereto. "TWE-Newhouse Voting Agreement" shall mean the voting agreement dated ----------------------------- as of February 6, 1998 between TWE and Newhouse regarding shares of capital stock of New PRIMESTAR. "Unrestricted Subsidiary" shall mean ----------------------- -39- (a) prior to the Conversion Date, any U.S. Subsidiary formed or acquired after the Closing Date and designated by Borrower as an "Unrestricted Subsidiary" and accepted as such by the Required Lenders, and (b) on and after the Conversion Date, any Subsidiary of Borrower designated as such pursuant to Section 6A.12. Any such designation pursuant to clause (b) may be revoked by a resolution of the Board of Directors of Borrower delivered to the Arranger, subject to the provisions of Section 6A.12. "Unutilized Net Cash Proceeds" see Section 6A.9. ---------------------------- "U.S. Dollars" shall mean the lawful money of the United States of ------------ America. "U.S. Subsidiary" shall mean any Subsidiary that is incorporated or --------------- organized under the laws of the United States or a state thereof. "U S West Guarantee Agreement" shall mean the guarantee agreement ---------------------------- dated as of February 6, 1998 by U S West Media Group, Inc. in favor of each of TSAT, New PRIMESTAR, TWE, Newhouse, Comcast, Cox and GE Americom relating to the Merger and Contribution Agreement. "Voting Equity Interests" shall mean Equity Interests in a corporation ----------------------- or other Person with voting power under ordinary circumstances entitling the holders thereof to elect the Board of Directors or other governing body of such corporation or Person. "Weighted Average Life to Maturity" shall mean, when applied to any --------------------------------- Indebtedness at any date, the number of years obtained by dividing (a) the sum of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required scheduled payment of principal, including payment of final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (b) the then outstanding aggregate principal amount of such Indebtedness. "Wholly Owned Restricted Subsidiary" shall mean any Restricted ---------------------------------- Subsidiary all of the outstanding Voting Equity Interests (other than directors' qualifying shares) of which are owned, directly or indirectly, by Borrower. "wholly owned Subsidiary" shall mean, with respect to any Person, any ----------------------- corporation, association or other entity of which 100% (other than directors' qualifying shares) of the total voting power of shares of stock or other equity interest entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other wholly owned Subsidiaries of that Person or a combination thereof. 1.2 Accounting Terms ---------------- For the purposes of this Agreement, all accounting terms not otherwise defined herein shall have the meanings assigned to them in conformity with GAAP. -40- 1.3 Rules of Construction --------------------- In each Loan Document, unless the context clearly requires otherwise (or such Loan Document clearly provides otherwise), references to (i) the plural include the singular, the singular the plural and the part the whole; (ii) Persons includes their respective permitted successors and assigns or, in the case of governmental Persons, Persons succeeding to the relevant functions of such Persons; (iii) statutes and related regulations include any amendments of same and any successor statutes and regulations; and (iv) time shall be a reference to New York City time. In each Loan Document, unless the context clearly requires otherwise (or such Loan Document clearly provides otherwise), (i) "amend" shall mean ----- "amend, amend and restate, supplement or modify"; and "amended" and "amendment" ------- --------- shall have meanings correlative to the foregoing; (ii) in the computation of periods of time from a specified date to a later specified date, "from" shall ---- mean "from and including"; "to" and "until" shall mean "to but excluding"; and -- ----- "through" shall mean "to and including"; (iii) "hereof," "herein" and ------- ------ ------ "hereunder" (and similar terms) in this Agreement or any other Loan Document --------- refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular provision of this Agreement or such other Loan Document; (iv) "including" (and similar terms) shall mean "including without --------- limitation" (and similarly for similar terms); (v) "or" has the inclusive -- meaning represented by the phrase "and/or"; (vi) "satisfactory to" any Agent or --------------- Lender shall mean in form, scope and substance and on terms and conditions satisfactory to such Agent or Lender; and (vii) references to "the date hereof" --------------- shall mean the date first set forth above. A. In this Agreement unless the context clearly requires otherwise, any reference to (i) an Annex, Exhibit or Schedule is to an Annex, Exhibit or Schedule, as the case may be, attached to this Agreement and constituting a part hereof, and (ii) a Section or other subdivision is to a Section or such other subdivision of this Agreement. B. No doctrine of construction of ambiguities in agreements or instruments against the interests of the party controlling the drafting thereof shall apply to any Loan Document. SECTION 2. AMOUNT AND TERMS OF LOAN COMMITMENT AND LOANS; NOTES 2.1 Initial Loan and Initial Note ----------------------------- A. Initial Loan Commitment. Subject to the terms and conditions of ----------------------- this Agreement and in reliance upon the representations and warranties of Borrower herein set forth, the Lenders hereby severally agree to lend to Borrower on the Closing Date $115,186,966.90 in the aggregate (the "Initial ------- Loan") (which Initial Loan shall, when taken together with the amounts assumed - ---- by Borrower pursuant to the New PRIMESTAR/Newhouse Assumption Agreement and the New PRIMESTAR/TWE Assumption Agreement equal an aggregate amount of $350,000,000.00), each such Lender committing severally and not jointly to lend the amount set forth next to such Lender's name on the signature pages hereto. The Lenders' commitments to make the Initial Loan to Borrower pursuant to this Section 2.1A are herein called individually, an "Initial Loan Commitment" and ----------------------- collectively, the "Initial Loan Commitments". ------------------------ B. Notice of Borrowing. When Borrower desires to borrow under this ------------------- Section 2.1, it shall deliver to the Arranger a Notice of Borrowing no later than 11:00 A.M., at least one Business Day in advance of the Closing Date or such later date as shall be agreed to by the Arranger. The Notice of Borrowing shall -41- specify the applicable date of borrowing (which shall be a Business Day). Upon receipt of such Notice of Borrowing, the Arranger shall promptly notify each Lender of its share of the Initial Loan and the other matters covered by the Notice of Borrowing. C. Disbursement of Funds. (i) No later than 12:00 Noon on the --------------------- Closing Date, each Lender will make available its pro rata share of the Initial --- ---- Loan requested to be made on such date in the manner provided below. All amounts shall be made available to the Arranger in U.S. Dollars and immediately available funds at the Payment Office and the Arranger promptly will make available to Borrower by depositing to its account at the Payment Office (or to such other account or accounts or Persons as Borrower may designate) the aggregate of the amounts so made available in the type of funds received. Unless the Arranger shall have been notified by any Lender prior to the Closing Date that such Lender does not intend to make available to the Arranger its portion of the Initial Loan to be made on such date, the Arranger may assume that such Lender has made such amount available to the Arranger on such date, and the Arranger, in reliance upon such assumption, may (in its sole discretion and without any obligation to do so) make available to Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Arranger by such Lender and the Arranger has made same available to Borrower, the Arranger shall be entitled to recover such corresponding amount from such Lender. If such Lender does not pay such corresponding amount forthwith upon the Arranger's demand therefor, the Arranger shall promptly notify Borrower, and Borrower shall immediately pay such corresponding amount to the Arranger. The Arranger shall also be entitled to recover from such Lender or Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Arranger to Borrower to the date such corresponding amount is recovered by the Arranger, at a rate per annum equal to (x) if paid by such Lender, the overnight Federal --- ----- Funds Rate or (y) if paid by Borrower, the then applicable rate of interest on the Loans. (ii) Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its Initial Loan Commitment hereunder or to prejudice any rights which Borrower may have against any Lender as a result of any default by such Lender hereunder. D. Initial Notes. Borrower shall execute and deliver to each Lender ------------- on the Closing Date which requests an Initial Note an Initial Note dated the Closing Date substantially in the form of Exhibit A to evidence the portion of --------- the Initial Loan made on such date by such Lender and with appropriate insertions ("Original Initial Notes"). On each interest payment date prior to ---------------------- the Conversion Date on which Borrower elects to pay a PIK Interest Amount pursuant to Section 2.3B (if and to the extent Borrower is permitted to pay a PIK Interest Amount in lieu of cash), Borrower shall execute and deliver to each Lender on such interest payment date a note dated such interest payment date substantially in the form of Exhibit A in a principal amount equal to such --------- Lender's pro rata portion of such PIK Interest Amount and with other appropriate insertions (each a "Subsequent Initial Note" and, together with the Original ----------------------- Initial Notes, the "Initial Notes"). A Subsequent Initial Note shall bear ------------- interest at a rate per annum from the date of its issuance at the same rate per --------- --- annum borne by all Initial Notes. - ----- E. Scheduled Payment of Initial Loan. Subject to Section 2.2, --------------------------------- Borrower shall pay in full the outstanding amount of the Initial Loan and all other Obligations owing hereunder no later than the Conversion Date. F. Termination of Initial Loan Commitments. The Initial Loan --------------------------------------- Commitments hereunder shall terminate on the earliest of (i) the date on which Borrower, TWE-A/N, or any Partner informs the Lenders that it has decided not to proceed with the Restructuring Transaction, (ii) the date on which any Restruc- -42- turing Agreement is terminated in accordance with its terms or (iii) April 15, 1998 if the Initial Loan is not made by such date. Borrower shall have the right, without premium or penalty, to reduce or terminate the Initial Loan Commitments of the Lenders hereunder at any time. Any such reduction or termination shall be made pro rata among the Lenders based on their respective --- ---- Initial Loan Commitments. The Initial Loan Commitments shall automatically and permanently terminate in their entirety on the Closing Date immediately after the making of the Initial Loan on such date. G. Pro Rata Borrowings. The Initial Loan shall be made by the ------------------- Lenders pro rata on the basis of their respective Initial Loan Commitments. It --- ---- is understood that no Lender shall be responsible for any default by any other Lender of its obligation to make its portion of the Initial Loan hereunder and that each Lender shall be obligated to make its portion of the Initial Loan hereunder regardless of the failure of any other Lender to fulfill its commitments hereunder. 2.2 Term Loan and Term Note ----------------------- A. Term Loan Commitment. Subject to the terms and conditions of this -------------------- Agreement and in reliance upon the representations and warranties of Borrower herein set forth, the Lenders hereby severally agree, on the Conversion Date, if the Initial Loans have not been repaid, to convert the then outstanding principal amount of the Initial Notes into a term loan (the "Term Loan"), such --------- Term Loan to be in the aggregate principal amount of the then outstanding principal amount of the Initial Notes. The Lenders' commitments to make the Term Loan to Borrower pursuant to this Section 2.2A are herein called individually, the "Term Loan Commitment" and collectively, the "Term Loan -------------------- --------- Commitments". - ----------- B. Notice of Conversion/Borrowing. If Borrower has not repaid the ------------------------------ Initial Loan in full on or prior to the Conversion Date, then Borrower shall convert the then outstanding principal amount of the Initial Notes into a Term Loan under this Section 2.2. Borrower shall deliver to the Lenders a Notice of Conversion no later than 11:00 A.M., at least two Business Days in advance of the Conversion Date. The Notice of Conversion shall specify the principal amount of the Initial Notes outstanding on the Conversion Date to be converted into a Term Loan. C. Making of Term Loan. Upon satisfaction or waiver of the ------------------- conditions precedent specified in Section 3.2 hereof, each Lender shall extend to Borrower the Term Loan to be issued on the Conversion Date by such Lender by cancelling on its records a corresponding principal amount of the Initial Notes held by such Lender, which corresponding principal amount of the Initial Notes shall be satisfied by the conversion into a Term Loan in accordance with this Section 2.2. D. Maturity Date of Term Loan. The Term Loan shall mature and -------------------------- Borrower shall pay in full the outstanding principal amount thereof and accrued interest thereon on April 1, 2008 (the "Maturity Date"). ------------- E. Term Notes. Borrower, as borrower, shall execute and deliver to ---------- each Lender on the Conversion Date which requests a Term Note, a Term Note dated the Conversion Date substantially in the form of Exhibit B to evidence the Term --------- Loan made on such date, in the principal amount of the Initial Notes held by such Lender on such date and with other appropriate insertions (collectively, the "Original Term Notes"). On or after the Conversion Date, on each interest ------------------- payment date on which Borrower elects to pay a PIK Interest Amount pursuant to Section 2.3B (if and to the extent Borrower is permitted to pay a PIK Interest Amount in lieu of cash), Borrower shall execute and deliver to each Lender on such interest payment date a note dated such interest payment date substantially in the form of Exhibit B in a principal amount equal to such --------- -43- Lender's pro rata portion of such PIK Interest Amount and with other appropriate --- ---- insertions (each a "Subsequent Term Note" and, together with the Original Term -------------------- Notes, the "Term Notes"). A Subsequent Term Note shall bear interest at the same ---- ----- rate borne by all Term Notes. 2.3 Interest on the Loans --------------------- A. Rate of Interest. (i) The Initial Loan shall bear interest on ---------------- the unpaid principal amount thereof from the Closing Date through maturity (whether by prepayment, acceleration or otherwise) for each Monthly Period (or part thereof) at a rate per annum equal to the lesser of (x) the greater of (1) --- ----- the Applicable Rate for such period plus the Applicable Spread; or (2) 10% or ---- (y) the Maximum Interest Rate. (ii) The Term Loan shall bear interest on the unpaid principal amount thereof from the date made through maturity (whether by prepayment, acceleration or otherwise) for each Six Month Period (or part thereof) at a rate per annum --- ----- equal to the lesser of (x) the greater of (1) the Applicable Rate plus the ---- Applicable Spread or (2) 10% or (y) the Maximum Interest Rate. At any time after the Conversion Date, at the request of any Lender, all or any portion of the Term Loan owing to such Lender shall bear interest at a fixed rate per annum --- ----- equal to the rate in effect as of the Notice Date, effective for such portion so elected by such Lender from and after the first interest payment date with respect to such Term Loan after such notice; provided, however, that no such -------- ------- conversion shall be permitted in respect of amounts to be voluntarily prepaid following receipt of a notice of prepayment pursuant to Section 2.5A. In order to request the conversion of such portion of the Term Loan to a fixed rate loan, the Lender shall notify the Arranger in writing (the date of such notice, the "Notice Date") of its intention to do so at least five Business Days and not ----------- greater than 10 Business Days prior to the next succeeding interest payment date indicating the amount of the Term Loan for which it is requesting conversion to a fixed rate Term Loan, and the Arranger shall so notify Borrower at least two Business Days prior to such next succeeding interest payment date. Upon the conversion of a portion of a Term Loan to a fixed rate Term Loan an appropriate notation will be made on the Term Note and, on and after the first interest payment date following the receipt by Borrower of a notice hereunder, such portion of the Term Loan which is converted to a fixed rate Term Loan (and any Exchange Note issued in respect thereof) shall bear interest at the rate in effect on the applicable Notice Date until repaid. B. Interest Payments. Interest shall be payable (i) with respect to ----------------- the Initial Loan, monthly in arrears on the last day of each month beginning April 30, 1998, and ending on the Conversion Date, upon any prepayment of the Initial Loan (to the extent accrued on the amount being prepaid) and at maturity of the Initial Loan in respect of any amounts paid on such date and not converted to Term Loans and (ii) with respect to the Term Loan, quarterly in arrears on each March 31, June 30, September 30 and December 31 of each year (each, a "Quarterly Date"), commencing on the first of such dates to follow the -------------- Conversion Date, upon any prepayment of the Term Loan (to the extent accrued on the amount being prepaid) and at maturity of the Term Loan. If any Term Loan is converted to a fixed rate Term Loan pursuant to Section 2.3A(ii), the interest payment dates with respect thereto shall be each March 31 and September 30 of each year, beginning with the first of such dates to occur after the first Quarterly Date after the applicable Notice Date, and upon prepayment (to the extent of the amount being prepaid) and at the maturity thereof. If, on any interest payment date, the interest accrued for the period prior to such interest payment date exceeds the amount that would have accrued at the Maximum Cash Interest Rate, Borrower may pay all or a portion of the interest payable in excess of the amount of interest that would be payable on such date at the Maximum Cash Interest Rate by issuance of Subsequent Initial Notes or Subsequent Term Notes, as the case may be, in an aggregate principal amount equal to the amount of such interest being so paid in Subsequent Initial Notes or Subsequent Term Notes (the "PIK Interest Amount"); provided, however, ------------------- -------- ------- that any ac- -44- crued interest unpaid on the due date of the payment of principal of any Loan shall be paid solely in cash on the principal so due. C. Post-Maturity Interest. Any principal payments on the Loans not ----------------------- paid when due and, to the extent permitted by applicable law, any interest payment on the Loans not paid when due, in each case whether at stated maturity, by acceleration or otherwise, shall thereafter bear interest payable upon demand at a rate which is 2.00% per annum in excess of the rate of interest otherwise --- ----- payable under this Agreement for the Loans. D. Computation of Interest. Interest on the Loans shall be computed ----------------------- on the basis of a 360-day year and the actual number of days elapsed in the period during which it accrues (and with respect to any Term Loan converted to a fixed rate Term Loan pursuant to Section 2.3A(ii), 12 months, each consisting of 30 days). In computing interest on the Loans, the date of the making of the Loans shall be included and the date of payment shall be excluded; provided, -------- however, that if a Loan is repaid on the same day on which it is made, one day's - ------- interest shall be paid on that Loan. 2.4 Letter Agreements ----------------- Borrower agrees to pay to the Agents and certain of their respective Affiliates the fees set forth in the Commitment Letter and Fee Letter. 2.5 Prepayments; Mandatory Offers and Payments ------------------------------------------ A. Prepayments and Mandatory Offers. -------------------------------- (i) Voluntary Prepayments of Loans. ------------------------------ (a) Voluntary Prepayments of Initial Loan. Borrower may, upon not ------------------------------------- less than three Business Days' prior written or telephonic notice confirmed in writing to the Arranger, at any time and from time to time, prepay the Initial Loan without penalty or premium and in whole or in part in an aggregate minimum amount of $500,000 and integral multiples of $100,000 in excess of that amount. Amounts of the Initial Loan so prepaid may not be reborrowed. (b) Voluntary Prepayments of Term Loan. ---------------------------------- (1) Voluntary Prepayment. Except as provided in this Section -------------------- 2.5A(i)(b), Borrower may not prepay the Term Loan prior to April 1, 2003. Borrower may, upon not less than 20 Business Days' prior written or telephonic notice confirmed in writing to the Arranger at any time and from time to time, on and after April 1, 2003, prepay the Term Loan, in whole or in part, in an aggregate minimum amount of $500,000 and integral multiples of $100,000 in excess of such amount, at 100% of the principal amount thereof, plus a premium equal to, for each Lender, the interest rate in effect on such Lender's portion of the Term Loan on the date notice of prepayment is given multiplied by the following factor plus accrued and unpaid interest thereon, if any, to the date of prepayment if prepaid during the twelve-month period commencing on April 1 of the year set forth below: -45-
YEAR PREMIUM FACTOR 2003.................................................. 1/2 2004.................................................. 1/3 2005.................................................. 1/6 2006 and thereafter................................... 0
(2) Voluntary Prepayment upon Public Equity Offering or ASkyB --------------------------------------------------------- Transaction. Prior to April 1, 2001, Borrower may, other than in any ----------- circumstance resulting in a Change of Control, prepay up to an aggregate principal amount of the Term Loan equal to 35% of the aggregate principal amount of the Term Loan outstanding on the Conversion Date at a prepayment price equal to the principal amount of the Term Loan so prepaid, plus a premium equal to, for each Lender, the rate of interest in effect on such Lender's portion of the Term Loan on the date notice of prepayment is given, plus accrued and unpaid interest thereon, if any, to the prepayment date with the net cash proceeds of (a) one or more Public Equity Offerings of common equity of Borrower and/or (b) a sale or series of related sales of Qualified Equity Interests of Borrower to Strategic Equity Investors, in any such case resulting in gross cash proceeds to Borrower of at least $100.0 million in the aggregate; provided, however, that at least an -------- ------- aggregate principal amount of the Term Loan equal to 65% of the aggregate principal amount of the Term Loan outstanding on the Conversion Date would remain outstanding immediately after giving effect to any such prepayment (excluding any Term Loan owned by Borrower or any of its Affiliates). Notice of any such prepayment must be given within 60 days after date of the last Public Equity Offering or sale of Qualified Equity Interests of Borrower to Strategic Equity Investors resulting in gross cash proceeds to Borrower, when aggregated with all prior Public Equity Offerings and sales of Qualified Equity Interests of Borrower to Strategic Equity Investors, of at least $100.0 million. In addition, prior to April 1, 2001, Borrower may prepay up to an aggregate principal amount of the Term Loan equal to 25% of the aggregate principal amount of the Term Loan outstanding on the Conversion Date at a prepayment price equal to the principal amount of the Term Loan so prepaid, plus a premium equal to, for each Lender, the rate of interest in effect on such Lender's portion of the Term Loan on the date notice of prepayment is given, plus accrued and unpaid interest thereon, if any, to the prepayment date upon the consummation of the ASkyB Transaction; provided, however, -------- ------- that at least an aggregate principal amount of the Term Loan equal to 65% of the aggregate principal amount of the Term Loan outstanding on the Conversion Date would remain outstanding immediately after giving effect to any such prepayment (excluding any Term Loan owned by Borrower or any of its Affiliates). Notice of prepayment must be given within 60 days after the consummation of the ASkyB Transaction. (3) Pro Rata Prepayment Under Senior Subordinated Indenture. If any ------------------------------------------------------- Exchange Notes are outstanding, any prepayment pursuant to Section 2.5A(i)(b)(1), or (2) shall be made pro rata with an optional redemption of --- ---- Exchange Notes under the Senior Subordinated Indenture. (4) No Reborrowing. Amounts of the Term Loan so prepaid may not be -------------- reborrowed. (ii) Mandatory Prepayments of Initial Loan. ------------------------------------- (a) Mandatory Prepayments of Initial Loan from Asset Sales and ---------------------------------------------------------- Dispositions of Tempo Satellites. To the extent permitted by all other -------------------------------- agreements governing any Indebtedness (including the -46- New PRIMESTAR Senior Credit Facility and the Partnership Credit Facility) and after application required to such Indebtedness (or if no such Indebtedness or any commitment in respect thereof is then outstanding), Borrower shall, or shall cause its Subsidiaries to, prepay the Initial Loan (without penalty or premium) with (1) the Net Cash Proceeds received from any Asset Sale in excess of $5.0 million since the Closing Date, and (2) the net amount of cash received by Borrower or any of its Subsidiaries pursuant to any agreement or arrangement upon the sale or other disposition by TSAT of any Tempo Satellite in excess of $5.0 million since the Closing Date, in each case on a date not later than five (5) Business Days after the date of the application to all other Indebtedness so required as a result of the consummation of such Asset Sale or sale or disposition of a Tempo Satellite. (b) Mandatory Prepayments of Initial Loan from Capital Contributions ---------------------------------------------------------------- or Issuances of Securities. Concurrently with the receipt by Borrower or -------------------------- any Subsidiary of proceeds from the issuance of Securities or from any capital contribution (other than proceeds received from Securities issued by Borrower or any Subsidiary to Borrower or any Subsidiary and other than to the extent no cash proceeds are received (such as where the consideration provided to the seller in an acquisition is Securities and other than proceeds of any capital contribution by Borrower or any Restricted Subsidiaries to Borrower or any Restricted Subsidiaries and other than capital contributions or payments contemplated by the Restructuring Agreements as in effect on the Closing Date)), Borrower shall prepay the Initial Loan in a principal amount equal to the lesser of the cash proceeds thereof (net of expenses payable by Borrower in connection with the issuance thereof and net of accrued interest due pursuant to Section 2.5A(iii) as a result of such prepayment) or the aggregate principal amount of the Initial Notes then outstanding. (c) Notice. Borrower shall notify the Arranger of any prepayment to ------ be made pursuant to this Section 2.5A(ii) at least two Business Days prior to such prepayment date (unless shorter notice is satisfactory to the Required Lenders). (iii) Borrower's Mandatory Prepayment Obligation; Application of ---------------------------------------------------------- Prepayments. All prepayments shall include payment of accrued interest on ----------- the principal amount so prepaid and shall be applied to payment of interest before application to principal. (iv) Mandatory Offer to Purchase Initial Notes and Term Notes. -------------------------------------------------------- (a) Mandatory Offer to Purchase Term Notes on Change of Control. (1) ----------------------------------------------------------- Following the occurrence of a Change of Control (the date of such occurrence being the "Change of Control Date"), Borrower shall notify the ---------------------- Arranger and the Lenders of such occurrence in the manner prescribed by this Agreement and shall, within 20 days after the Change of Control Date, make an Offer to Purchase all Term Notes then outstanding at a purchase price in cash equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, if any, to the Purchase Date. Borrower's obligations may be satisfied if a third party makes the Offer to Purchase in the manner, at the times and otherwise in compliance with the requirements of this Agreement applicable to an Offer to Purchase made by Borrower and purchases all Term Notes validly tendered and not withdrawn under such Offer to Purchase. Each Lender shall be entitled to tender all or any portion of the Term Notes owned by such Lender pursuant to the Offer to Purchase, subject to the requirement that any portion of a Term Note tendered must be tendered in an integral multiple of $1,000 principal amount. (2) On or prior to the Purchase Date specified in the Offer to Purchase, Borrower shall (i) accept for payment all Term Notes or portions thereof validly tendered pursuant to the Offer, (ii) -47- deposit with the Arranger money sufficient to pay the Purchase Price of all Term Notes or portions thereof so accepted and (iii) deliver or cause to be delivered to the Arranger for cancellation all Term Notes so accepted together with an Officers' Certificate stating the Term Notes or portions thereof accepted for payment by Borrower. The Arranger shall promptly mail or deliver to Lenders whose Term Notes are so accepted payment in an amount equal to the Purchase Price for such Term Notes, and the Arranger shall promptly authenticate and mail or deliver to each Lender a new Term Note or Term Notes equal in principal amount to any unpurchased portion of the Term Note surrendered as requested by the Lender. Any Term Note not accepted for payment shall be promptly mailed or delivered by Borrower to the Lender thereof. Borrower shall publicly announce the results of the Offer on or as soon as practicable after the Purchase Date. (b) Mandatory Offer to Purchase Initial Notes and Term Notes on Asset ----------------------------------------------------------------- Sale. Borrower shall, within 20 days after each Trigger Date, make an ---- Offer to Purchase all outstanding Notes up to a maximum principal amount (expressed as a multiple of $1,000) of Notes equal to the Note Portion of Unutilized Net Cash Proceeds. Such Offer to Purchase shall be made at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the Purchase Date; provided, however, that the Offer to Purchase may be deferred until there -------- ------- are aggregate Unutilized Net Cash Proceeds equal to or in excess of $15.0 million, at which time the entire amount of such Unutilized Net Cash Proceeds, and not just the amount in excess of $15.0 million, shall be applied as required pursuant to this paragraph. In the event that any other Indebtedness of Borrower which ranks pari ---- passu with the Securities (including the Senior Subordinated Discount ----- Notes) (the "Other Indebtedness") requires that an offer to purchase to be ------------------ made to repurchase such Other Indebtedness upon the consummation of any Asset Sale, Borrower may apply the Unutilized Net Cash Proceeds otherwise required to be applied to an Offer to Purchase to offer to purchase such Other Indebtedness and to an Offer to Purchase so long as the amount of such Unutilized Net Cash Proceeds applied to repurchase the Notes is not less than the Note Portion of Unutilized Net Cash Proceeds. With respect to any Unutilized Net Cash Proceeds, Borrower shall make the Offer to Purchase in respect thereof at the same time as the analogous offer to purchase is made under the Senior Subordinated Indenture and pursuant to any Other Indebtedness and the Purchase Date in respect thereof shall be the same as the purchase date in respect thereof pursuant to the Senior Subordinated Indenture and pursuant to any Other Indebtedness. For purposes of this Section 2.5A(iv)(b), "Note Portion of Unutilized -------------------------- Net Cash Proceeds" means the amount of the Unutilized Net Cash Proceeds ----------------- equal to the product of (x) the Unutilized Net Cash Proceeds and (y) a fraction the numerator of which is the principal amount of all Notes tendered pursuant to the Offer to Purchase related to such Unutilized Net Cash Proceeds (the "Note Amount") and the denominator of which is the sum ----------- of the Note Amount and the lesser of the aggregate principal face amount or accreted value as of the relevant purchase date of all Other Indebtedness tendered pursuant to a concurrent offer to purchase such Other Indebtedness made at the time of such Offer to Purchase. With respect to any Offer to Purchase effected pursuant to this Section 2.5A(iv)(b), as among the Term Notes, to the extent that the principal amount of the Notes tendered pursuant to such Offer to Purchase exceeds the Note Portion of Unutilized Net Cash Proceeds with respect thereto, such Notes shall be purchased pro rata based on the principal --- ---- amount of such Term Notes tendered by each Lender. -48- Each Lender shall be entitled to tender all or any portion of the Notes owned by such Lender pursuant to the Offer to Purchase, subject to the requirement that any portion of a Note tendered must be tendered in an integral multiple of $1,000 principal amount and subject to any proration among tendering Lenders as described above. B. Manner and Time of Payment. All payments of principal and -------------------------- interest and fees hereunder and under the Notes by Borrower shall be made without defense, set-off or counterclaim and in same-day funds and delivered to the Arranger, unless otherwise specified, not later than 12:00 Noon (New York time) on the date due at the Payment Office for the account of the Lenders; funds received by the Arranger after that time shall be deemed to have been paid by Borrower on the next succeeding Business Day. Borrower hereby authorizes the Arranger to charge its account with the Arranger in order to cause timely payment to be made of all principal, interest and fees due hereunder (subject to sufficient funds being available in its account for that purpose). C. Payments on Non-Business Days. Whenever any payment to be made ----------------------------- hereunder or under the Notes shall be stated to be due on a day which is not a Business Day, the payment shall be due on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest hereunder or under the Notes or of the commitment and other fees hereunder, as the case may be. D. Notation of Payment. Each Lender agrees that before disposing of ------------------- any Note held by it, or any part thereof (other than by granting participations therein), such Lender will make a notation thereon of all principal payments previously made thereon and of the date to which interest thereon has been paid and will notify Borrower of the name and address of the transferee of that Note; provided, however, that the failure to make (or any error in the making of) such - -------- ------- a notation or to notify Borrower of the name and address of such transferee shall not limit or otherwise affect the obligation of Borrower hereunder or under such Notes with respect to the Loans and payments of principal or interest on any such Note. 2.6 Use of Proceeds --------------- A. Initial Loan. The proceeds of the Initial Loan shall be applied ------------ by Borrower, together with borrowings under the New PRIMESTAR Senior Credit Facility, to pay Transaction Costs and to consummate the Restructuring Transaction and the Existing Facility Repayment. B. Term Loan. The proceeds of the Term Loan shall be used to cancel --------- any outstanding amount of Initial Notes converted to Term Notes on such date. C. Margin Regulations. No portion of the proceeds of any borrowing ------------------ under this Agreement shall be used by Borrower in any manner to purchase or carry Margin Stock within the meaning of the applicable requirements of Regulation T, U, or X or any other regulation of the F.R.S. Board or to violate the Exchange Act, in each case as in effect on the date or dates of such borrowing and such use of proceeds. 2.7 Breakage; Illegality -------------------- A. Breakage. Upon (i) failure to make any Loan upon receipt of -------- Notice of Borrowing, (ii) failure to make any Conversion upon receipt of Notice of Conversion, or (iii) any prepayment of principal of any Loan under Section 2.5 or acceleration of maturity of the Loans or Notes pursuant to Section 7 or for any other reason, other than on the last day of the applicable Interest Period therefor, Borrower shall pay upon demand by any Lender the amount required to compensate such Lender for any losses, costs or expenses -49- which it may reasonably incur as a result of such failure, payment or acceleration, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund or maintain any Loan. B. Illegality. Notwithstanding any other provision of this ---------- Agreement, if the introduction of or any change in any law or regulation or in the interpretation of any law or regulation shall make it unlawful, or any central bank or other Governmental Authority shall assert that it is unlawful, for any Lender or its lending office to perform its obligations hereunder to make available LIBOR Loans or to continue to fund or maintain LIBOR Loans hereunder, then, on notice thereof and demand therefor by such Lender to Borrower through the Arranger, such Lender's Loans will automatically, upon such demand, Convert into an Alternate Base Rate Loan until the Arranger shall notify Borrower that such Lender has determined that the circumstances causing such suspension no longer exist. SECTION 3. CONDITIONS TO LOANS 3.1 Conditions to Initial Loan -------------------------- The effectiveness of the Loan Documents and the obligations of the Lenders to make the Initial Loan are subject to prior or concurrent satisfaction of each of the following conditions: A. Corporate Proceedings, Documents, Resolutions, Etc. On or before -------------------------------------------------- the Closing Date, all corporate and other proceedings taken or to be taken by each Loan Party, each Partner and each Affiliate of each Partner in connection with the Transactions and all documents incidental thereto not previously found acceptable by the Required Lenders and Agents shall be reasonably satisfactory in form and substance to the Required Lenders and the Agents, and the Agents shall have received on behalf of the Lenders the following items, each of which shall be in form and substance reasonably satisfactory to the Required Lenders and the Agents and, unless otherwise noted, dated the Closing Date: 1. Charter. A certified copy of each Loan Party's charter, together ------- with a certificate of status, compliance, good standing or the like with respect to each Loan Party issued by the appropriate government officials of the jurisdiction of its organization, each to be dated a recent date prior to the Closing Date; 2. Bylaws. A copy of each Loan Party's bylaws, certified as of the ------ Closing Date by its Secretary or one of its Assistant Secretaries; 3. Resolutions. Resolutions of the Board of Directors of each Loan ----------- Party, approving and authorizing the execution, delivery and performance of each Loan Document to which it is a party, and any other documents, instruments and certificates required to be executed by such Loan Party in connection herewith and with the Transactions and approving and authorizing the execution, delivery and payment of the Notes, each such resolution certified as of the Closing Date by its Secretary or one of its Assistant Secretaries as being in full force and effect without modification or amendment; 4. Incumbency Certificates. Signature and incumbency certificates of ----------------------- each officer of any Loan Party executing any Loan Document; -50- 5. Executed Agreement and Notes. Executed copies of this Agreement ---------------------------- and, for each Lender that requests an Initial Note prior to the Closing Date, the Initial Notes substantially in the form of Exhibit A executed in --------- accordance with Section 2.1D, drawn to the order of the Lenders and with appropriate insertions; 6. Notice of Borrowing. An originally executed Notice of Borrowing ------------------- substantially in the form of Exhibit D, signed by the President or a Vice --------- President of Borrower on behalf of Borrower; 7. Legal Opinions. Originally executed copies of one or more -------------- favorable written opinions of Sherman and Howard, special counsel for the Loan Parties, substantially in the form of Exhibit H and addressed to the --------- Agents on behalf of the Lenders; 8. Restructuring Agreements and Closing Documents. (i) Executed or ---------------------------------------------- conformed copies of each Restructuring Agreement and any amendments thereto made on or prior to the Closing Date, (ii) an Officers' Certificate from Borrower stating that each Restructuring Agreement is on the Closing Date in full force and effect with respect to Borrower and, to Borrower's knowledge, with respect to each other party thereto and no material term or condition thereof has been amended, modified or waived from the form most recently provided to the Lenders and the Agents a reasonable time prior to the Closing Date except with the prior written consent of the Required Lenders and the Agents, (iii) an Officers' Certificate from Borrower stating that Borrower and each of its Subsidiaries party thereto has performed or complied with all agreements and conditions contained in each Restructuring Agreement and any agreements or documents referred to therein required to be performed or complied with by such party on or before the Closing Date, and neither Borrower nor any of its Subsidiaries is in default in the performance or compliance with any of the terms or provisions thereof, and (iv) all closing documents relating to the Restructuring Transaction and all such counterpart originals or certified copies of such documents, instruments, certificates and opinions as the Required Lenders or the Agents may reasonably request; 9. New PRIMESTAR Senior Credit Facility. (i) Executed or conformed ------------------------------------ copies of the New PRIMESTAR Senior Credit Facility and any amendments thereto made on or prior to the Closing Date, (ii) an Officers' Certificate from Borrower stating that the New PRIMESTAR Senior Credit Facility is in full force and effect on the Closing Date and no material term or condition thereof has been amended, modified or waived from the form most recently provided to the Lenders and the Agents a reasonable time prior to the Closing Date except with the prior written consent of the Required Lenders and the Agents, (iii) an Officers' Certificate from Borrower stating that Borrower and each of its Subsidiaries party thereto has performed or complied with all agreements and conditions contained in the New PRIMESTAR Senior Credit Facility and any agreements or documents referred to therein required to be performed or complied with by such party on or before the Closing Date, and neither Borrower nor any of its Subsidiaries is in default in the performance or compliance with any of the terms or provisions thereof and (iv) all closing documents relating to the New PRIMESTAR Senior Credit Facility and all such counterpart originals or certified copies of such documents, instruments, certificates and opinions as the Required Lenders or the Agents may reasonably request; 10. Public Documents. Copies of all documents and materials filed ---------------- publicly by Borrower and TSAT in connection with the Restructuring Transaction and the other Transactions; -51- 11. Pro Forma Balance Sheet. A primary condensed pro forma combined ----------------------- balance sheet which meets the requirements of Regulation S-X under the Securities Act of Borrower and its Subsidiaries dated as of September 30, 1997, immediately after giving effect to the Transactions and the incurrence of all obligations contemplated herein, which pro forma combined balance sheet shall be in form and substance satisfactory to the Agents and the Required Lenders and consistent in all material respects with the proposed legal and capital structure (both debt and equity) and the forecast previously provided to the Lenders, which shall be satisfactory in all respects to the Agents. 12. Solvency Certificate. An Officers' Certificate from the chief -------------------- financial officer of Borrower, in form and substance satisfactory to the Arranger, together with such other evidence reasonably requested by the Agents or the Lenders with respect to the solvency of Borrower immediately after giving effect to the Transactions and the other transactions contemplated hereby; 13. Officers' Certificates. An Officers' Certificate from Borrower ---------------------- in form and substance satisfactory to the Arranger stating that (i) the representations and warranties in Section 4 are true, correct and complete on and as of the Closing Date to the same extent as though made on and as of that date (or if such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date), (ii) all conditions to the consummation of the Restructuring Transaction have been satisfied (or provisions satisfactory to the Agents have been made for the satisfaction thereof) substantially on the terms set forth in the Restructuring Agreements and have not been waived or amended without the prior written consent of the Required Lenders and the Agents, and (iii) all conditions precedent set forth herein to the making of the Initial Loan have been satisfied (to the best knowledge of Borrower with respect to Section 3.1K to the extent relating to Persons other than Borrower and TSAT); 14. Other Documents. Executed or conformed copies of all other --------------- material agreements executed in connection with the Transactions including all such other legal opinions, corporate documents and other documents and/or certificates as the Lenders or the Agents may reasonably request. B. New PRIMESTAR Senior Credit Facility. The New PRIMESTAR Senior ------------------------------------ Credit Facility shall have been entered into by each of the parties thereto and shall be in full force and effect with commitments thereunder for not less than $650.0 million, of which not less than $100 million shall be drawn on the Closing Date to effect the Restructuring Transaction, and the Required Lenders and the Agents shall be satisfied (i) with all terms and conditions of the New PRIMESTAR Senior Credit Facility and all other agreements to be entered into in connection therewith, and (ii) that no term thereof has been amended, modified or waived since the draft most recently delivered to the Lenders a reasonable period of time prior to the Closing Date. All conditions precedent to the extensions of credit under the New PRIMESTAR Senior Credit Facility shall have been satisfied (or provisions satisfactory to the Agents have been made for the satisfaction thereof) (without waiver or amendment thereof) other than the consummation of the Restructuring Transaction and delivery of opinion letters (but which shall have been negotiated), and the Agents and the Lenders shall have received satisfactory evidence of the same. C. Assumption Agreements. The Assumption Agreements shall each have --------------------- been duly authorized, executed and delivered by each of the parties thereto and shall be in full force and effect. All conditions precedent to the assignments and releases under each Assumption Agreement shall have been satisfied. D. Restructuring Agreements. Each Restructuring Agreement and other ------------------------ agreement (including debt assumption agreements) to be entered into in connection with the Transactions and the TSAT -52- Merger shall have been entered into by each of the parties thereto and shall be in full force and effect, and the Required Lenders and the Agents shall be satisfied (a) with all the terms and conditions of each Restructuring Agreement and all other agreements to be entered into in connection therewith, and (b) that no term thereof has been amended, modified or waived since the draft most recently delivered to and approved by the Lenders, a reasonable period of time prior to the Closing Date. All conditions precedent to the consummation of the Restructuring Transaction under each Restructuring Agreement shall have been satisfied (or provisions satisfactory to the Agents have been made for the satisfaction thereof) (without waiver or amendment thereof) and delivery of opinion letters (but which shall have been negotiated) the Agents and the Lenders shall have received satisfactory evidence of the same. E. No Other Debt. After giving effect to the Transactions and the ------------- other transactions contemplated hereby, Borrower and its Subsidiaries shall have outstanding no Indebtedness or Preferred Stock (or guarantee or other contingent obligation in respect thereof) other than (a) the loans and other obligations under the New PRIMESTAR Senior Credit Facility and the Partnership Credit Facility, (b) the Existing Notes, (c) the Initial Loan, and (d) such other Indebtedness and contingent obligations (including the Reimbursement Agreements) as are on terms and conditions and in amounts reasonably acceptable to the Required Lenders, and are set forth in Schedule 3.1E, and in no event are ------------- materially different from the Indebtedness and contingent obligations of New PRIMESTAR to be in place upon consummation of the Transactions as described in the pro forma financial statements included in the Proxy. --- ----- F. Consummation of Transactions. Each of the Transactions (other ---------------------------- than extensions of credit under this Agreement) shall have been consummated prior to, or shall be consummated contemporaneously with, the making of the Initial Loans in all material respects in accordance with the terms hereof and in accordance with terms of documentation (without the waiver of any material condition unless consented to by the Required Lenders) that are in form and substance reasonably satisfactory to the Lenders. The Existing Facility Repayment shall have been consummated prior to, or shall be consummated contemporaneously with the making of the Initial Loan in accordance with the terms of documentation (without the waiver of any material condition unless consented to by the Required Lenders) that is in form and substance reasonably satisfactory to the Lenders. All security interests relating to the Partnership Working Capital Facility shall have been released (with appropriate evidence thereof provided to the Arranger). G. Approvals. On or before the Closing Date all requisite --------- Governmental Authorities and third parties shall have approved or consented to the Transactions and the other transactions contemplated hereby and by the Restructuring Agreements (other than the TSAT Merger and the TSAT Tempo Agreement) and the New PRIMESTAR Senior Credit Facility to the extent required without the imposition of any material adverse condition, and such approval or consent shall be in full force and effect (and the Agents shall have received satisfactory evidence of the same); there shall be no governmental or judicial action, actual or threatened, that has or could reasonably be expected to have the effect of restraining, preventing or imposing materially adverse conditions on any of the Transactions or the other transactions contemplated hereby or by any Restructuring Agreement or the New PRIMESTAR Senior Credit Facility and with respect to any pending governmental or judicial action, all appeal periods have expired. Each of the transactions contemplated by the Restructuring Agreements that the shareholders of TSAT were solicited by the Proxy to approve shall have been approved by holders of not less than 66-2/3% of the outstanding voting power of the Voting Equity Interests of TSAT entitled to vote on the Restructuring Transaction (and the Agents shall have received satisfactory evidence of the same from TSAT). H. No Default Under This Agreement and Other Agreements. No Event of ---------------------------------------------------- Default or Potential Event of Default shall have occurred and be continuing or would result from the Initial Loan or the No- -53- tice of Borrowing or the Transactions, or from the application of the proceeds therefrom under this Agreement, the New PRIMESTAR Senior Credit Facility or the Existing Notes or Existing Indebtedness; all conditions to borrowing under the New PRIMESTAR Senior Credit Facility shall have been satisfied (or provisions have been made for satisfaction thereof). No party to any Restructuring Agreement shall be in breach or default of any material provision of such Restructuring Agreement. I. No Legal Bar. The Initial Loan and the use of proceeds thereof ------------ shall not contravene, violate or conflict with, nor involve any Lender in a violation of, any law, rule, injunction, or regulation or determination of any Governmental Authority. J. No Material Adverse Change. There shall not have occurred or -------------------------- become known in the judgment of the Lenders any condition or event that has resulted in a Material Adverse Change or that could reasonably be expected to result in any Material Adverse Change with respect to Borrower, TSAT, Primestar Partnership or the business (or related properties, assets or affiliates) of any Partner relating to the distribution of the PRIMESTAR(R) programming service (each, a "Partner Business"), together with their respective subsidiaries taken ---------------- as a whole, as the case may be (both before and after giving effect to the Transactions) since December 31, 1996. K. No Dividends. There shall not have been any dividend or ------------ distribution of any kind declared or paid by Borrower, TSAT or any Partner Business on its Equity Interests since the date of the latest financial statements of such entity, respectively, included in the Proxy (other than any assets (including cash) of any Partner Business not required to be contributed pursuant to the Restructuring Agreements). L. No Violation of Law. The Lenders and their counsel shall be ------------------- satisfied that the consummation of the Transactions and the related financings, including the funding of the Initial Loan hereunder and the transactions contemplated by the New PRIMESTAR Senior Credit Facility, shall be in compliance with all applicable laws, rules and regulations of all Governmental Authorities. There shall not have been any statute, rule, regulation, injunction or order applicable to the Transactions or the transactions contemplated by the New PRIMESTAR Senior Credit Facility, promulgated, enacted, entered or enforced by any Governmental Authority, nor shall there be pending any Proceeding involving a substantial likelihood of an order, decree, ruling or finding that would prohibit, restrict, delay, impose adverse or burdensome restrictions upon or otherwise materially adversely affect terms and conditions of or the consummation of the Restructuring Transaction or the transactions contemplated by the New PRIMESTAR Senior Credit Facility. M. Fees and Expenses. All accrued fees and expenses (including the ----------------- reasonable fees and expenses of Cahill Gordon & Reindel, legal counsel to the Arranger and Lenders) of the Agents and Lenders in connection herewith and with the Engagement Letter, the Fee Letter and the Commitment Letter shall have been paid or provisions have been made for payment thereof on the Closing Date. N. Accuracy of Representations and Warranties. The representations ------------------------------------------ and warranties made by Borrower in Section 4, and by each Loan Party in each of the other Loan Documents to which it is a party, shall be true, complete and correct on and as of the Closing Date with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date). O. Subordination Arrangements. The Required Lenders shall be -------------------------- satisfied with all terms and conditions (and the documentation therefor) of the Subordination Arrangements. -54- 3.2 Conditions to Term Loan ----------------------- The obligation of the Lenders to make the Term Loan on the Conversion Date is subject to the prior or concurrent satisfaction or waiver of the following conditions precedent: A. Notice of Conversion. The Agents shall have received in -------------------- accordance with the provisions of Section 2.2B an originally executed Notice of Conversion. B. No Bankruptcy. None of Borrower or any of its Material ------------- Subsidiaries shall be subject to a Bankruptcy Order or a bankruptcy or other insolvency proceeding and no Event of Default or Potential Event of Default shall have occurred under Section 7.6, 7.7 or 7.9. C. No Payment Default. No Event of Default or Potential Event of ------------------ Default (whether matured or not) shall have occurred under Section 7.1. D. No Acceleration of New PRIMESTAR Senior Credit Facility or ---------------------------------------------------------- Existing Notes. No Event of Default shall have occurred under Section 7.2 with - -------------- respect to the New PRIMESTAR Senior Credit Facility or the Existing Notes. E. Officers' Certificate. On the Conversion Date, the Agents shall --------------------- have received an Officers' Certificate from Borrower dated the Conversion Date and satisfactory in form and substance to the Agents, to the effect that the conditions in this Section 3.2 are satisfied on and as of the Conversion Date. F. Term Notes. Borrower shall have executed and delivered to the ---------- Agents on the Conversion Date for delivery to the Lenders Term Notes dated the Conversion Date substantially in the form of Exhibit B to evidence the Term --------- Loan, in the principal amount of (which principal amount shall be the aggregate principal amount of the Initial Loan outstanding on the Conversion Date) the Term Loan and with other appropriate insertions. G. Fees and Expenses. All accrued fees and expenses owing to the ----------------- Agents and the Lenders (including the reasonable fees and expenses of a law firm serving as counsel to the Agents and Lenders) shall have been paid. H. Margin Rules. The making of the Term Loan shall not violate ------------ Regulation T, U or X or any other regulation of the F.R.S. Board. SECTION 4. REPRESENTATIONS AND WARRANTIES In order to induce the Lenders to enter into this Agreement and to make the Loans, Borrower represents and warrants to the Lenders that, at the time of execution hereof and immediately after giving effect to the consummation of the Transactions and on the Conversion Date, the following statements are true, correct and complete: 4.1 Organization, Etc. ----------------- Borrower and each of its Subsidiaries is a corporation validly organized and existing and in good standing under the laws of the state or jurisdiction of its incorporation, is duly qualified to do business -55- and is in good standing as a foreign corporation in each jurisdiction where the nature of its business requires such qualification, and has full power and authority and holds all requisite governmental licenses, permits and other approvals to enter into and perform its Obligations under this Agreement, the Notes, each other Credit Document and each Restructuring Agreement to which it is a party and to own and hold under lease its property and to conduct its business substantially as currently conducted by it. 4.2 Due Authorization, Non-Contravention, Etc. ----------------------------------------- A. General. The execution, delivery and performance by Borrower of ------- this Agreement, the Notes, each other Credit Document and each Restructuring Agreement executed or to be executed by it and the execution, delivery and performance by each Guarantor of each Credit Document and Restructuring Agreement executed or to be executed by it are in each case within each such Person's corporate powers, have been duly authorized by all necessary corporate action, and do not (a) contravene any such Person's Organic Documents; (b) contravene any Contractual Obligation binding on or affecting any such Person; (c) contravene any Governmental Approval or Governmental Rule binding on or affecting any such Person; or (d) result in, or require the creation or imposition of, any Lien on any of such Person's Properties (except as expressly permitted by this Agreement). B. Subordinated Debt. The making of the Credit Extensions, and the ----------------- acceptance thereof by Borrower, do not violate the provisions of any Subordinated Debt Document or of the Existing Indentures. 4.3 Government Approval, Regulation, Etc. ------------------------------------ Except as disclosed in Schedule 4.3 ("Approvals"), no authorization or ------------ approval or other action by, and no notice to or filing with, any Governmental Authority or other Person (other than those that have been, or on the Closing Date will be, duly obtained or made and which are, or on the Closing Date will be, in full force and effect) is required for the due execution, delivery or performance by Borrower of this Agreement or the Notes or by Borrower or any Guarantor of any other Credit Document or Restructuring Agreement to which it is a party. Neither Borrower nor any of its Subsidiaries is an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. 4.4 Validity, Etc. ------------- This Agreement constitutes, and the Notes, each other Credit Document and each Restructuring Agreement executed by Borrower or any of its Subsidiaries will, on the due execution and delivery thereof, constitute, the legal, valid and binding obligations of Borrower or such Subsidiary, enforceable against Borrower or such Subsidiary in accordance with their respective terms; and each Credit Document and Restructuring Agreement executed by each Guarantor will, on the due execution and delivery thereof by such Guarantor, constitute the legal, valid and binding obligation of such Guarantor enforceable against such Guar- -56- antor in accordance with its terms (except, in any case above, as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally and by principles of equity). 4.5 Financial Information --------------------- The financial statements of Borrower and its Subsidiaries heretofore furnished to the Agents and each Lender have been prepared in accordance with GAAP. All balance sheets, all statements of operations, shareholders' equity and cash flows and all other financial information of each of Borrower and its Subsidiaries furnished pursuant to Section 5.1 have been and will for periods following the Closing Date be prepared in accordance with GAAP consistently applied, and do or will present fairly the consolidated financial position of the corporations covered thereby as at the date thereof and the results of their operations for the periods then ended, except that quarterly financial statements need not include footnote disclosure and may be subject to ordinary year-end adjustment. 4.6 No Material Adverse Change -------------------------- There has been no Material Adverse Change since December 31, 1996. 4.7 Litigation, Labor Controversies, Etc. ------------------------------------ Except as disclosed in Schedule 4.7 ("Litigation"), there is no ------------ pending or, to the knowledge of Borrower, threatened litigation, action, proceeding, or labor controversy affecting Borrower or any of its Subsidiaries, or any of their respective Properties, businesses, assets or revenues, which (a) could have a Material Adverse Effect or (b) could adversely affect the legality, validity or enforceability of this Agreement, the Notes, any other Credit Document or any Restructuring Agreement. 4.8 Compliance with Laws -------------------- Borrower and its Subsidiaries have complied in all material respects with all applicable Governmental Approvals and Governmental Rules of any Governmental Authority having jurisdiction over the conduct of its businesses or the ownership of its properties. 4.9 Subsidiaries ------------ Borrower has no Subsidiaries, except those Subsidiaries (a) which are identified in Schedule 4.9 ("Existing Subsidiaries") of ------------ the Disclosure Schedule; or (b) which are permitted to have been organized or acquired in accordance with Section 6.5 or Section 6.10. 4.10 Ownership of Properties ----------------------- Except as permitted pursuant to Section 4.14 or Section 6.3, Borrower and each of its Subsidiaries owns (a) in the case of owned real property, good and marketable fee title to, and (b) in the case of owned personal property, good and valid title to, or, in the case of leased real or personal property, valid and -57- enforceable leasehold interests (as the case may be) in, all of its properties and assets, real and personal, tangible and intangible, of any nature whatsoever, free and clear in each case of all Liens or claims, except for Liens permitted pursuant to Section 6.3. 4.11 Taxes ----- Borrower and each of its Subsidiaries has filed all tax returns and reports required by law to have been filed by it and has paid all taxes and governmental charges thereby shown to be due and owing, except any such taxes or charges which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. 4.12 Pension and Welfare Plans ------------------------- During the twelve-consecutive-month period prior to the date of the execution and delivery of this Agreement and prior to the date of any extension of credit hereunder, no steps have been taken to terminate any Plan (other than a standard termination under Section 4041(b) of ERISA), and no contribution failure has occurred with respect to any Plan sufficient to give rise to a Lien under Section 302(f) of ERISA. No condition exists or event or transaction has occurred with respect to any Plan which might result in the incurrence by Borrower or any member of the Controlled Group of any material liability, fine or penalty. 4.13 Environmental Matters --------------------- Except as set forth in Schedule 4.13 ("Environmental Matters") ------------- (a) all facilities and property (including underlying groundwater) owned or leased by Borrower or any of its Subsidiaries have been, and continue to be, owned or leased by Borrower and its Subsidiaries in material compliance with all Environmental Laws; (b) there are no pending or threatened and, to the best of Borrower's knowledge, there have been not past (i) claims, complaints, notices or requests for information received by Borrower or any of its Subsidiaries with respect to any alleged violation of any Environmental Law, or (ii) complaints, notices or inquiries to Borrower or any of its Subsidiaries regarding potential liability under any Environmental Law; (c) there have been no Releases of Hazardous Materials at, on or under any property now or previously owned or leased by Borrower or any of its Subsidiaries that, singly or in the aggregate, have, or could reasonably be expected to have, a Material Adverse Effect; (d) Borrower and its Subsidiaries have been issued and are in material compliance with all permits, certificates, approvals, licenses and other authorizations relating to environmental matters and necessary or desirable for their businesses; (e) no property now or previously owned or leased by Borrower or any of its Subsidiaries is listed or proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list of sites requiring investigation or clean-up; -58- (f) there are no underground storage tanks, active or abandoned, including petroleum storage tanks, on or under any property now or previously owned or leased by Borrower or any of its Subsidiaries that, singly or in the aggregate, have, or could reasonably be expected to have, a Material Adverse Effect; (g) neither Borrower nor any Subsidiary of Borrower has directly transported or directly arranged for the transportation of any Hazardous Material to any location which is listed or proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list or which is the subject of federal, state or local enforcement actions or other investigations which may lead to material claims against Borrower or such Subsidiary thereof for any remedial work, damage to natural resources or personal injury, including claims under CERCLA; (h) there are no polychlorinated biphenyls or friable asbestos present at any property now or previously owned or leased by Borrower or any Subsidiary of Borrower that, singly or in the aggregate, have, or could reasonably be expected to have, a Material Adverse Effect; and (i) no conditions exist at, on or under any property now or previously owned or leased by Borrower which, with the passage of time, or the giving of notice or both, would give rise to liability under any Environmental Law. 4.14 Intellectual Property --------------------- Each of Borrower and its Subsidiaries owns and possesses or licenses (as the case may be) all such patents, patent rights, trademarks, trademark rights, trade names, trade name rights, service marks, service mark rights and copyrights necessary for the conduct of the businesses of Borrower and its Subsidiaries as now conducted without, individually or in the aggregate, any infringement upon rights of other Persons, in each case except as could not reasonably be expected to result in a Material Adverse Effect, and there is no individual patent, patent right, trademark, trademark right, trade name, trade name right, service mark, service mark right or copyright the loss of which could reasonably be expected to have a Material Adverse Effect, except as may be disclosed in Schedule 4.14 ("Intellectual Property"). ------------- 4.15 Regulations T, U and X ---------------------- Neither Borrower nor any of its Subsidiaries is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Loan will be used to purchase or carry margin stock or otherwise for a purpose which violates, or would be inconsistent with, F.R.S. Board Regulation T, U or X. Terms for which meanings are provided in F.R.S. Board Regulation T, U or X or any regulations substituted therefor, as from time to time in effect, are used in this Section with such meanings. 4.16 Accuracy of Information ----------------------- None of the factual information heretofore or contemporaneously furnished by or on behalf of Borrower in writing to any Agent, or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby (true and complete copies of which were furnished to the Agents and each Lender in connection with its execution and delivery hereof), contains any untrue statement of a material fact on the date as of which such information is dated or certified, and none of the other factual information hereafter furnished in connection with this Agreement or any other Credit Document or any Restructuring Agreement by Borrower or any Guarantor to any Agent or any Lender will contain any untrue statement of a mate- -59- rial fact on the date as of which such information is dated or certified and, as of the date of the execution and delivery of this Agreement by the Agents and each Lender, the information delivered prior to the date of execution and delivery of this Agreement (unless such information specifically relates to a prior date) does not, and the factual information hereafter furnished shall not on the date as of which such information is dated or certified, omit to state any material fact necessary to make any information not misleading under the circumstances. SECTION 5. AFFIRMATIVE COVENANTS (INITIAL LOAN AND TERM LOAN) Borrower covenants and agrees that, until the Loans and the Notes and all other amounts due under this Agreement have been indefeasibly paid in full it shall, and shall cause each of its Subsidiaries to, fully and timely perform all covenants in this Section 5 required to be performed by any of them. 5.1 Financial Information, Reports, Notices, Etc. -------------------------------------------- Borrower will furnish, or will cause to be furnished, to each Lender and each Agent copies of the following financial statements, reports, notices and information: A. as soon as available and in any event within 45 days (and 60 days, in the case of Borrower and its Restricted Subsidiaries) after the end of each of the first three Fiscal Quarters of each Fiscal Year of Borrower, a consolidated balance sheet of Borrower and its Restricted Subsidiaries and a consolidated balance sheet of Borrower and its Subsidiaries, in each case as of the end of such Fiscal Quarter and consolidated statements of earnings and cash flows of Borrower and its Restricted Subsidiaries and consolidated statements of earnings and cash flows of Borrower and its Subsidiaries and consolidated statements of earnings and cash flows of Borrower and its Subsidiaries, in each case of the period commencing at the end of the previous Fiscal Year and ending with the end of such Fiscal Quarter and a profit and loss statement for such Fiscal Quarter, certified as complete and correct by the chief financial Authorized Officer of Borrower; B. as soon as available and in any event within 90 days (and 105 days, in the case of Borrower and its Restricted Subsidiaries) after the end of each Fiscal Year of Borrower, a copy of the annual audited financial statements for such Fiscal Year for Borrower and its consolidated Subsidiaries, including therein a consolidated balance sheet of Borrower and its Restricted Subsidiaries as of the end of such Fiscal Year and consolidated statements of earnings and cash flows of Borrower and its Restricted Subsidiaries for such Fiscal Year, in each case as audited (without any Impermissible Qualification) by KPMG Peat Marwick or independent public accountants of national standing acceptable to the Agents; C. Borrower shall deliver to the Lenders within 45 days after the end of each of the first three Fiscal Quarters of Borrower and within 90 days after the close of each Fiscal Year a certificate signed by the principal executive officer, principal financial officer or principal accounting officer stating that a review of the activities of Borrower has been made under the supervision of the signing officers with a view to determining whether a Potential Event of Default or Event of Default has occurred and whether or not the signers know of any Potential Event of Default or Event of Default by Borrower that occurred during such Fiscal Quarter or Fiscal Year. If they do know of such a Potential Event of Default or Event of Default, the certificate shall describe all such Potential Events of Defaults or Events of Default, their status and the action Borrower is taking or proposes to take with respect thereto. The first certificate to be delivered by Borrower pursuant to this Section 5.1C shall be for the Fiscal Quarter ending June 30, 1998. -60- D. as soon as possible and in any event within three Business Days after Borrower or any of its Subsidiaries obtains knowledge of the occurrence of a Potential Event of Default, a statement of the chief executive, financial or accounting Authorized Officer of Borrower setting forth details of such Potential Event of Default and the action which Borrower has taken and proposes to take with respect thereto; E. as soon as possible and in any event within three Business Days after Borrower or any of its Subsidiaries obtains knowledge of (x) the occurrence of any material adverse development with respect to any litigation, action, proceeding or labor controversy of the type and materiality described in Schedule 6.7 ("Litigation"), or (y) the commencement of any litigation, action, proceeding or labor controversy of the type and materiality described in Schedule 6.7 ("Litigation"), notice thereof and, to the extent the Agents reasonably request, copies of all documentation relating thereto; F. promptly after the sending or filing thereof, copies of all reports and registration statements which Borrower or any of its Subsidiaries files with the SEC or any national securities exchange; G. immediately upon becoming aware of (i) the institution of any steps by Borrower or any other Person to terminate any Pension Plan (other than a standard termination under Section 4041(b) of ERISA), (ii) the failure to make a required contribution to any Pension Plan if such failure is sufficient to give rise to a Lien under Section 302(f) of ERISA, (iii) the taking of any action with respect to a Pension Plan which would result in the requirement that Borrower furnish a bond or other security to the PBGC or such Pension Plan, or (iv) the occurrence of any event with respect to any Pension Plan which could reasonably be expected to result in the incurrence by Borrower of any material liability, fine or penalty, notice thereof and copies of all documentation relating thereto; H. promptly when available and in any event within 15 Business Days after the last day of each Fiscal Year of Borrower (commencing after the Closing Date), a budget for the then current Fiscal Year of Borrower, which budget shall contain on a quarterly basis a projected statement of earnings and sources and uses of funds of Borrower and its Restricted Subsidiaries, prepared in reasonable detail by the chief accounting, financial or executive Authorized Officer of Borrower; and I. such other information respecting the condition or operations, financial or otherwise, of Borrower or any of its Subsidiaries as any Lender may from time to time reasonably request (including information and reports from the chief accounting, financial or executive Authorized Officer of Borrower, in such detail as any Agent or any Lender may reasonably request, with respect to the terms of and information provided pursuant to Section 5.1C). 5.2 Compliance with Laws, Etc. ------------------------- Borrower will, and will cause each of its Subsidiaries to, comply in all material respects with all applicable Governmental Rules and Governmental Approvals of all Regulatory Authorities, such compliance to include: A. the maintenance and preservation of Borrower's and its Subsidiaries' corporate existence; and B. the payment, before the same become delinquent, of all taxes, assessments and governmental charges imposed upon it or upon its property except to the extent being diligently contested in -61- good faith by appropriate proceedings and for which adequate reserves, if any, in accordance with GAAP shall have been set aside on its books. 5.3 Maintenance of Properties ------------------------- Borrower will, and will cause each of its Subsidiaries to, maintain, preserve, protect and keep its properties in good repair, working order and condition (ordinary wear and tear excepted), and make necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times unless Borrower determines in good faith that the continued maintenance of any of its properties is no longer economically desirable. 5.4 Insurance --------- Borrower shall maintain, and shall cause each of its Subsidiaries to maintain: (i) physical damage insurance on all real and personal property on an all-risk basis (including, loss in transit, flood and earthquake insurance) and public liability insurance against claims for personal injury, death or property damage suffered by others upon, in or about any premises occupied by it or occurring as a result of its ownership, maintenance or operation of any airplanes, automobiles, trucks or other vehicles or other facilities (including any machinery used therein or thereupon) or as the result of the use of products manufactured, constructed or sold by it or services rendered by it in an amount as is usually carried by Persons of comparable size engaged in the same or a similar business and similarly situated; (ii) such other types of insurance with respect to its business as is usually carried by Persons of comparable size engaged in the same or a similar business and similarly situated, and, in any event, all insurance otherwise required under any Subordinated Debt Document; and (iii) all worker's compensation or similar insurance as may be required under the laws of any state or jurisdiction in which it may be engaged in business. All insurance shall be provided (1) by insurers authorized by Lloyds of London to underwrite such risks, (2) by insurers having an A.M. Best policyholders rating of not less than A- (except with respect to insurers providing insurance of the type described in clause (iii), in which case such insurers shall have an A.M. Best policyholders rating of not less than B+) or (3) by such other insurers as the Agents may approve in writing; provided, however, that if the -------- ------- rating of any of such insurers is downgraded, Borrower and each of its Subsidiaries, as the case may be, shall only be required to obtain replacement insurance with an insurer satisfying the requirements of this clause at the stated expiration of the insurance policy maintained with the insurer whose rating was so downgraded. 5.5 Books and Records ----------------- Borrower will, and will cause each of its Subsidiaries to, keep books and records which accurately reflect all of its business affairs and transactions and permit the Agents and each Lender or any of their respective representatives, at reasonable times and intervals, to visit all of its offices, to discuss its financial matters with its officers and independent public accountant (and Borrower hereby authorizes such independent public accountant to discuss Borrower's financial matters with each Lender or any of their respective representatives whether or not any representative of Borrower is present) and to examine (and, at the expense -62- of Borrower, photocopy extracts from) any of its books or other corporate records. Borrower shall pay any fees of such independent public accountant incurred in connection with any Agent's or any Lender's exercise of its rights pursuant to this Section 5.5. 5.6 Environmental Covenant ---------------------- Borrower will, and will cause each of its Subsidiaries to: (i) use and operate all of its facilities and properties in material compliance with all Environmental Laws, keep all necessary permits, approvals, certificates, licenses and other authorizations relating to environmental matters in effect and remain in material compliance therewith, and handle all Hazardous Materials in material compliance with all applicable Environmental Laws; (ii) promptly notify the Agents and provide copies upon receipt of all written claims, complaints, notices or inquiries relating to the condition of its facilities and properties in respect of, or as to compliance with, Environmental Laws, and shall promptly resolve any non- compliance with Environmental Laws and keep its property free of any Lien imposed by any Environmental Law; and (iii) provide such information and certifications which the Arranging Agents may reasonably request from time to time to evidence compliance with this Section 5.6. 5.7 [Reserved] ---------- 5.8 Lenders Meeting --------------- Borrower will participate in a meeting with the Lenders once during each fiscal year to be held at a location and a time selected by Borrower and reasonably satisfactory to the Lenders. 5.9 Use of Proceeds --------------- Borrower shall apply the proceeds of the Loans solely to finance the Restructuring Transaction and the Existing Facility Repayment and to pay related fees and expenses. 5.10 Payments in U.S. Dollars ------------------------ All payments of any Obligations to be made hereunder or under the Notes by Borrower or any other obligor with respect thereto shall be made solely in U.S. Dollars or such other currency as is then legal tender for public and private debts in the United States of America. 5.11 Take-Out Financing ------------------ A. Refinancing of Loans, Initial Notes, Term Notes and Exchange ------------------------------------------------------------ Notes. As soon as practicable after the Closing Date, Borrower will use its reasonable best efforts to effectuate an offering and sale of the Refinancing Securities or other debt or equity securities to Persons other than Borrower or any of its Subsidiaries or such other financing transactions, in each case reasonably acceptable in form and substance to the Agents after consultation with Borrower, for the purpose of refinancing the principal amount, as applicable, of the Loans, Initial Notes, Term Notes and the Exchange Notes and paying interest accrued thereon and all fees, expenses, commissions and other amounts payable under the Loan Documents and in connection with the Refi- -63- nancing, which will yield an amount sufficient to refinance the principal amount, as applicable, of the Loans, Initial Notes, Term Notes and the Exchange Notes and pay interest accrued thereon and all fees, expenses, commissions and all other amounts payable under the Loan Documents and in connection with the Refinancing, including, but not limited to: (i) preparing an offering memorandum for a private offering (the "Offering") of the Refinancing Securities; --------- (ii) in the event that the Offering is not consummated, in connection with any other public offering or private placement of debt securities, promptly preparing a registration statement or offering memorandum containing such disclosures as may be appropriate and customary for such documents, and using its best efforts to cause any such registration statement to become effective under the Securities Act; (iii) executing underwriting or placement agreements, to reflect the terms of the refinancing, and containing covenants, representations and warranties, indemnities and delivery of legal opinions, officers' certificates and accountants' comfort letters, all in form and substance satisfactory to the Agents in their reasonable judgment; (iv) in connection with any public offering or private placement of debt or equity securities (including the Refinancing Securities), offering such securities on terms and conditions, including, but not limited to, interest rates, yields, maturities, covenants and redemption dates and prices, as the Agents consider appropriate, in consultation with Borrower, in light of market conditions and Borrower's financial condition and prospects at the time of sale, in an amount to be agreed upon by Borrower and the Agents, but in no event less than an amount which will provide to Borrower net proceeds sufficient to refinance the indebtedness under this Agreement and the Senior Subordinated Indenture, and containing such disclosures as may be appropriate and customary for such documents; (v) (a) in connection with any private placement of debt securities (including the Offering), filing and causing to become effective a registration statement (within such periods of time as the Agents may reasonably request prior to such private placement) with respect to a registered offer to exchange (an "Exchange Offer") any such privately -------------- placed debt securities for notes of Borrower with terms identical in all material respects (the "exchange notes") to such privately placed debt -------------- securities (except that the exchange notes will not contain terms with respect to transfer restrictions or interest rate increases), and causing such Exchange Offer to be consummated within such period of time as the Agents may reasonably request prior to such period of time; and (b) in the event any debt securities are sold in a private placement, causing the debt or equity securities held by the purchasers (including the Agents or their Affiliates) in such a private placement to be registered pursuant to such number of registration statements over such period of time as the Agents may reasonably request prior to such private placement; (vi) paying all reasonable costs and expenses of engaging a qualified independent underwriter in connection with any public offering and, to the extent necessary, a private placement of debt or equity securities; (vii) assisting the Agents or their Affiliates in connection with the marketing of any debt or equity securities to be offered publicly or placed privately; and -64- (viii) providing such other cooperation and assistance as is customarily provided by issuers in connection with the private placement and/or public sale of securities. B. Required Refinancing of Loans, Notes, Term Notes and Exchange ------------------------------------------------------------- Notes. Following the Closing Date and upon notice (a "Refinancing Securities - ----- ---------------------- Notice") by the Take-Out Banks, Borrower will issue and sell unsecured senior - ------ subordinated debt securities (any such securities, the "Required Refinancing -------------------- Securities") after a full marketing thereof in an amount of up to the lesser of - ---------- (a) the aggregate outstanding principal amount, as applicable, of the Loans, Notes, Term Notes and Exchange Notes (but in no event less than $75 million), or (b) $500 million upon such terms and conditions as are specified by the Take-Out Banks in the Refinancing Securities Notice; provided, however, that: (i) the -------- ------- Take-Out Banks, in their reasonable discretion, shall determine whether the Required Refinancing Securities issued to refinance the Loans, Notes, Term Notes and Exchange Notes shall be issued through a registered public offering or a private placement; (ii) such Required Refinancing Securities will contain such terms (including registration rights, in the event of a private placement), conditions and covenants as are customary for similar financings and are reasonably satisfactory in all respects to the Take-Out Banks; and (iii) all other arrangements with respect to such Required Refinancing Securities shall be reasonably satisfactory in all respects to the Take-Out Banks in light of then prevailing market conditions. Subject to the foregoing, the Required Refinancing Securities will have such terms, including interest rates, yields, and redemption prices, as the Take-Out Banks consider appropriate, in consultation with Borrower, in light of market conditions, and Borrower's financial condition and prospects at the time of sale. 5.12 Exchange of Term Notes ---------------------- Borrower will, on the fifth Business Day following the written request (the "Exchange Request") of the holder of any Term Note (or beneficial owner of ---------------- a portion thereof): (i) Execute and deliver, cause each Guarantor to execute and deliver, and cause a bank or trust company acting as trustee thereunder to execute and deliver, the Senior Subordinated Indenture, if such Senior Subordinated Indenture has not previously been executed and delivered; (ii) Execute and deliver to such holder or beneficial owner in accordance with the Senior Subordinated Indenture a note in the form attached to the Senior Subordinated Indenture (the "Exchange Notes") -------------- bearing interest as set forth therein in exchange for such Term Note dated the date of the issuance of such Exchange Note, payable to the order of such holder or owner, as the case may be, in the same principal amount as such Term Note (or portion thereof) being exchanged, and cause each Guarantor to endorse its guarantee thereon; and (iii) Execute and deliver, and cause each Guarantor to execute and deliver, to such holder or owner, as the case may be, a Registration Rights Agreement in the form of Exhibit G, if such Registration Rights Agreement --------- has not previously been executed and delivered or, if such Registration Rights Agreement has previously been executed and delivered and such holder or owner is not already a party thereto, permit such holder or owner to become a party thereto. The Exchange Request shall specify the principal amount of the Term Notes to be exchanged pursuant to this Section 5.12 which shall be at least $5,000,000 and integral multiples of $500,000 in excess thereof. Term Notes delivered to Borrower under this Section 5.12 in exchange for Exchange Notes shall be cancelled by Borrower and the corresponding amount of the Term Loan shall be deemed repaid and the Ex- -65- change Notes shall be governed by and construed in accordance with the terms of the Senior Subordinated Indenture. The bank or trust company acting as trustee under the Senior Subordinated Indenture shall at all times be a corporation organized and doing business under the laws of the United States of America or the State of New York, in good standing and having its principal offices in the Borough of Manhattan, in The City of New York, which is authorized under such laws to exercise corporate trust powers and is subject to supervision or examination by Federal or State authority and which has a combined capital and surplus of not less than $50,000,000. 5.13 Register -------- Borrower hereby designates the Arranger to serve as Borrower's agent, solely for purposes of this Section 5.13, to maintain a register (the "Register") on which it will record the Loans made by each of the Lenders and -------- each repayment in respect of the principal amount of the Loans of each Lender. Failure to make any such recordation, or any error in such recordation shall not affect Borrower's obligations in respect of such Loans. With respect to any Lender, the transfer of the Loan Commitments of such Lender and the rights to the principal of, and interest on, any Loan made pursuant to such Loan Commitments shall not be effective until such transfer is recorded on the Register maintained by the Arranger with respect to ownership of such Loan Commitments and Loans and prior to such recordation all amounts owing to the transferor with respect to such Loan Commitments and Loans shall remain owing to the transferor. The registration of assignment or transfer of all or part of any Loan Commitments and Loans shall be recorded by the Arranger on the Register only upon the receipt by the Agents of a properly executed and delivered Assignment and Assumption Agreement pursuant to Section 12.1A. Coincident with the delivery of such an Assignment and Assumption Agreement to the Arranger for acceptance and registration of assignment or transfer of all or part of a Loan, or as soon thereafter as practicable, the assigning or transferor Lender shall surrender the Note evidencing such Loan, and thereupon one or more new Notes of the same type and in the same aggregate principal amount shall be issued to the assigning or transferor Lender and/or the new Lender. SECTION 6. NEGATIVE COVENANTS (INITIAL LOAN) Borrower covenants and agrees that until the earlier of (x) the satisfaction in full of the Initial Loans and the Initial Notes and all other Obligations due under this Agreement or (y) the Conversion Date, it shall, and shall cause each of its Subsidiaries to, fully and timely perform all covenants in this Section 6 required to be performed by any of them. 6.1 Business Activities ------------------- Borrower will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, engage in any business activity, except the business of providing satellite broadcasting service to residential and commercial customers and such activities as are reasonably incidental or substantially similar thereto. -66- 6.2 Indebtedness ------------ Borrower will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist or otherwise become or be liable in respect of any Indebtedness, other than, without duplication, the following: (a) Indebtedness under the New PRIMESTAR Senior Credit Facility in an aggregate principal amount not to exceed $750 million and other obligations (including Hedging Obligations in respect of credit extensions thereunder); (b) Indebtedness identified in Schedule 6.2 ("Ongoing Indebtedness") ------------ of the Disclosure Schedule; (c) Indebtedness of Borrower in respect of (i) Capitalized Lease Liabilities, (ii) Indebtedness the proceeds of which are used to acquire an asset by Borrower (or used to acquire such an asset within 60 days of the incurrence thereof) and (iii) unsecured Indebtedness; provided, however, -------- ------- that the aggregate amount of all Indebtedness outstanding pursuant to this clause (c) at the time any of the same is created, assumed or incurred (together with the principal amount of all other Indebtedness permitted under this clause (c)) shall not at any time exceed $200,000,000 at such time after giving effect thereto and any Permitted Refinancings thereof; (d) Indebtedness of any Restricted Subsidiary owing to Borrower or any other Restricted Subsidiary or of Borrower to any Restricted Subsidiary, which Indebtedness shall not be forgiven or otherwise discharged for any consideration other than payment in full or in part (provided that only the amount repaid in part shall be discharged) in cash; --------- (e) (i) Subordinated Debt of Borrower and (ii) any Permitted Refinancing thereof; provided, however, that any Permitted Refinancing of -------- ------- Subordinated Debt must be on terms substantially similar to those in the Subordinated Debt Documents existing on the Effective Date; and (f) the Loans, the Guarantees, the Exchange Notes and any Refinancing Securities, and any guarantee of the Existing Notes by any Guarantor; provided, however, that no Indebtedness otherwise permitted by clause (d) or (e) - -------- ------- shall be permitted to be incurred if a Potential Event of Default or an Event of Default has occurred and is continuing or would result therefrom; provided, -------- further, however, that (1) no Indebtedness permitted under clauses (b) through - ------- ------- (e) of this Section 6.2 shall be (i) permitted if such Indebtedness is incurred in reliance upon a general exception for permitted Indebtedness under any Subordinated Debt Document unless all other available exceptions for Indebtedness of such type under such an agreement have been fully utilized by Borrower or its Subsidiary, as applicable or (ii) designated as "Designated Senior Indebtedness" (as defined in any Subordinated Debt Document) without the prior written consent of the Required Lenders, and (2) no Indebtedness may be incurred pursuant to clauses (a), (c), or (e) if after giving pro forma effect thereto the Total Debt to Annualized Cash Flow Ratio would be greater than 7.25:1.0. -67- 6.3 Liens ----- Borrower will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien upon any of its property, revenues or assets, whether now owned or hereafter acquired, except: (a) Liens securing payment of Senior Indebtedness and Guarantor Senior Indebtedness, granted pursuant to any document entered into in connection therewith; (b) until the Closing Date, Liens securing payment of Indebtedness of the type permitted and described in Section 6.2(b); (c) Liens securing Capitalized Lease Liability Indebtedness and purchase money Indebtedness of the type permitted and described in Section 6.2(c) (and securing only the assets that are financed with the proceeds of such Indebtedness); (d) Liens existing as of the Closing Date and disclosed in Schedule -------- 6.3 ("Ongoing Liens"); --- (e) Liens for taxes, assessments or other governmental charges or levies not at the time delinquent or thereafter payable without penalty or being diligently contested in good faith by appropriate proceedings and for which adequate reserves, if any, in accordance with GAAP shall have been set aside on its books; (f) Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in the ordinary course of business for sums not overdue or being diligently contested in good faith by appropriate proceedings and for which adequate reserves, if any, in accordance with GAAP shall have been set aside on its books; (g) Liens incurred or deposits made in the ordinary course of business in connection with workmen's compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of tenders, statutory and regulatory obligations, bids, leases and contracts or other similar obligations (other than for borrowed money) entered into in the ordinary course of business or to secure obligations on surety or appeal bonds or performance or return-of-money bonds; (h) judgment Liens in existence less than 45 days after the entry thereof or with respect to which execution has been stayed or the payment of which is covered in full (subject to a customary deductible) by insurance maintained with responsible insurance companies or which do not otherwise result in an Event of Default under Section 7.8; and (i) easements, rights-of-way, municipal and zoning ordinances or similar restrictions, minor defects or irregularities in title and other similar charges or encumbrances not interfering in any material respect with the ordinary conduct of the business of Borrower or its Subsidiaries or the value or utility of the property to which such Lien is attached. -68- 6.4 Sale and Leaseback ------------------ Borrower will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into any agreement or arrangement with any other Person providing for the leasing by Borrower or any of its Restricted Subsidiaries of real or personal property which has been or is to be sold or transferred by Borrower or any of its Restricted Subsidiaries to such other Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of Borrower or any of its Restricted Subsidiaries. 6.5 Investments ----------- Borrower will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, make, incur, assume or suffer to exist any Investment in any other Person, except: (a) Investments existing on the Effective Date and Investments to be existing immediately after giving effect to the Restructuring Transaction, each identified in Schedule 6.5 ("Ongoing Investments"); ------------ (b) Cash Equivalent Investments; (c) without duplication, Investments by Borrower to the extent permitted as Indebtedness pursuant to Section 6.2; (d) Investments constituting (i) accounts receivable arising, (ii) trade debt granted, or (iii) deposits made in connection with the purchase price of goods or services, in each case in the ordinary course of business; (e) other Investments by Borrower not to exceed $200,000,000 in the aggregate; and (f) Investments in Persons which are Restricted Subsidiaries so long as, before and after giving effect to such Investment, no Potential Event of Default has occurred and is continuing or is caused thereby; provided, however, that - --------- ------- (g) any Investment which when made complies with the requirements of clause (a), (b) or (c) of the definition of the term "Cash Equivalent Investment" may continue to be held notwithstanding that such Investment if made thereafter would not comply with such requirements; and (h) no Investment otherwise permitted by clause (c), (d), (e) or (f) shall be permitted to be made if any Potential Event of Default or Event of Default has occurred and is continuing or would result therefrom. 6.6 Restricted Payments, Etc. ------------------------ Borrower shall not, and shall not permit any Subsidiary to, make any Restricted Junior Payment, except that: -69- (a) dividends or distributions to Borrower in respect of its Equity Interests in any of its Subsidiaries; (b) so long as no (x) Event of Default or (y) Potential Event of Default of which Senior Management was aware or should have been aware has occurred and is continuing (or would result therefrom), (i) payments by Borrower of interest accrued on the Subordinated Debt when due and (ii) any Restricted Junior Payment of the type set forth in clause (c) of the definition thereof to the extent that such Restricted Junior Payment arises from the issuance of common stock of Borrower and is otherwise on terms satisfactory to the Agents; and (c) Unrestricted Subsidiaries may refinance in whole or in part from time to time any of its Indebtedness so long as any such refinancing is not recourse in any manner to Borrower or any other Subsidiary and does not require the imposition (contingently or otherwise) of any Lien on the assets of Borrower or any Restricted Subsidiary. 6.7 [Reserved] 6.8 Subsidiaries ------------ Borrower will not have any Subsidiaries other than Restricted Subsidiaries and Unrestricted Subsidiaries. Borrower will not permit any Subsidiary to issue any Capital Stock (whether for value or otherwise) to any Person other than Borrower. 6.9 Take or Pay Contracts --------------------- Borrower will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or be a party to any arrangement for the purchase of materials, supplies, other property or services if such arrangement by its express terms requires that payment be made by Borrower or such Restricted Subsidiary regardless of whether such materials, supplies, other property or services are in fact or can be required to be delivered or furnished to it. 6.10 Consolidation, Merger, Etc. -------------------------- Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, liquidate or dissolve, consolidate with, or merge into or with, any other corporation, or purchase or otherwise acquire all or substantially all of the assets of any Person (or of any division thereof) except that (i) TSAT may merge with and into Borrower pursuant to the TSAT Merger and on terms and conditions satisfactory to a majority of Lenders, (ii) the transactions contemplated by the Restructuring Transaction may be made in accordance with the terms of the Restructuring Agreements and (iii) any Restricted Subsidiary may liquidate or dissolve voluntarily into, and may merge with and into, Borrower or any other Restricted Subsidiary; provided, however, -------- ------- that, in the case of the merger of any Subsidiary into Borrower, Borrower shall be the surviving corporation and continue to be incorporated under the laws of a State of the United States. 6.11 Permitted Dispositions ---------------------- Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, sell, transfer, lease, contribute or otherwise convey (including by way of merger), or grant options, warrants or other rights with respect to, any of Borrower's or such Subsidiaries' assets (including accounts receivable or -70- Equity Interests of Subsidiaries) to any Person unless such sale, transfer, lease, contribution or conveyance of such assets is (i) in the ordinary course of its business (and does not constitute a sale, transfer, lease, contribution or other conveyance of all or a substantial part of Borrower's or such Subsidiary's assets) or is of obsolete or worn out property, (ii) permitted by Section 6.10, (iii) between Restricted Subsidiaries or from a Subsidiary to Borrower or (iv) of other assets of Borrower having a value (determined based on the higher of book and fair market value) not to exceed $30,000,000 for the term of this Agreement. 6.12 Senior Subordinated Indebtedness -------------------------------- Neither Borrower nor any of the Guarantors shall, directly or indirectly, Incur any Indebtedness (other than the Notes, the Exchange Notes, the Required Refinancing Securities and the Guarantees, as the case may be) that by its terms (or by the terms of any agreement governing such Indebtedness) would expressly rank senior in right of payment to the Loans, Notes and Guarantees and expressly rank subordinate in right of payment to any Senior Indebtedness. 6.13 Guarantees ---------- Borrower will not permit any of its domestic Subsidiaries to, directly or indirectly, incur any guarantee of any Senior Indebtedness of the Company which has registration rights (including the requirement to effect an exchange offer registered under the Securities Act) or which is registered under the Securities Act, in each case unless such Subsidiary executes a Guarantee of the Obligations of Borrower under this Agreement. Thereafter, such Subsidiary shall be a Guarantor for all purposes of this Agreement. 6.14 Refinancing of Loans in Part ---------------------------- Borrower shall not, nor shall Borrower cause or permit any of its Subsidiaries to, Incur any Indebtedness to Refinance the Loans in part other than the Refinancing Securities, the Required Refinancing Securities or the Exchange Notes, unless the terms, conditions, covenants, events of default and other provisions in respect of the events of default and other provisions in respect of the instruments evidencing the Indebtedness Incurred to Refinance the Loans in part shall have been approved in writing by the Required Lenders (which consent shall be conclusively deemed given if a Lender does not object to the draft thereof within five Business Days of receipt thereof) (which approval shall not be unreasonably withheld) prior to the Incurrence of any such Indebtedness. 6.15 Modification of Certain Agreements ---------------------------------- Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, consent to any amendment, supplement, amendment and restatement, waiver or other modification of any of, or enter into any forbearance from exercising any rights with respect to, the terms or provisions contained in, or applicable to, (i) any Transaction Document, if the effect of such amendment, supplement, amendment and restatement, waiver or modification or forbearance might individually or in the aggregate have a Material Adverse Effect, or (ii) any Subordinated Debt Document. 6.16 Transactions with Affiliates ---------------------------- Borrower will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into, or cause, suffer or permit to exist any arrangement or contract with any of its other Affiliates or any Unrestricted Subsidiary, other than in connection with the Roll-up Plan unless such arrangement or -71- contract is on fair and reasonable terms and is an arrangement or contract of the kind which would be entered into by a prudent Person in the position of Borrower or such Subsidiary with a Person which is not one of its Affiliates. 6.17 Negative Pledges, Restrictive Agreements, Etc. --------------------------------------------- Borrower will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into any agreement (excluding the New PRIMESTAR Senior Credit Facility (and any agreements or instruments defined in the New PRIMESTAR Senior Credit Facility as "Loan Documents), this Agreement and any other Loan Document or any document pursuant to which any Indebtedness permitted by clause (c) of Section 6.2 is permitted but solely with respect to any asset acquired solely with the proceeds of such Indebtedness and no other asset of Borrower or any Subsidiary) prohibiting: (a) the creation or assumption of any Lien upon its properties, revenues or assets, whether now owned or hereafter acquired, to the extent that any such negative pledge would prohibit the creation or first priority perfection of any Liens of the type described in clause (a) of Section 6.3 (other than in the case of Capitalized Leases to the extent of Liens solely in the assets subject to such Capitalized Lease); (b) the ability of Borrower or any other Obligor to amend or otherwise modify this Agreement or any other Loan Document; or (c) the ability of any Restricted Subsidiary to make any payments, directly or indirectly, to Borrower by way of dividends, advances, repayments of loans or advances, reimbursements of management and other intercompany charges, expenses and accruals or other returns on Investments, or any other agreement or arrangement which restricts the ability of any such Subsidiary to make any payment, directly or indirectly, to Borrower. 6.18 Restrictions on Leases and ASkyB Transaction -------------------------------------------- Borrower will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, (a) enter into any agreement or arrangement with Tempo or any other Person providing for the leasing by Borrower or any of its Restricted Subsidiaries of high power satellite transmission capacity unless (i) such agreement or arrangement is on fair and reasonable terms and is an agreement or arrangement of the kind which would be entered into by a prudent Person in the position of Borrower or such Restricted Subsidiary with such Person, and (ii) the Agents consent in writing (such consent not to be unreasonably withheld or delayed), or (b) consummate the ASkyB Transaction (as defined in the Proxy) without the consent of all Lenders. 6.19 Restrictions on TSAT Partners Holdings and Its Subsidiaries ----------------------------------------------------------- Borrower shall not permit TSAT Partners Holdings, nor any of TSAT Partners Holdings' Subsidiaries to, directly or indirectly, (i) engage in any business activity other than, in the case of TSAT Partners Holdings, in connection with the continuing ownership of the issued and outstanding shares of Equity Interests of TCISE Partner 1 and TCISE Partner 2, and in the case of TSAT Partners Holdings' Subsidiaries, in connection with the continuing ownership of partnership interest in the Primestar Partnership; (ii) create, incur, assume, suffer to exist or otherwise become liable in respect of any Indebtedness other than in respect of the New Primestar Senior Credit Facility; (iii) create, incur, assume or enter into any agreement which by its terms creates, incurs or assumes any Lien upon any of its assets, whether now owned or hereafter acquired -72- other than in respect of the New Primestar Senior Credit Facility; (iv) make, incur, assume or suffer to exist any Investment in any other Person other than, in the case of TSAT Partners Holdings, in connection with the continuing ownership of the issued and outstanding shares of Equity Interests of TCISE Partner 1 and TCISE Partner 2, and in the case of TSAT Partners Holdings' Subsidiaries in connection with the continuing ownership of partnership interest in the Primestar Partnership; (v) make or commit to make any capital expenditure or enter into any arrangement which would give rise to any Capitalized Lease Liability; (vi) enter into any arrangement which involves the leasing by such Person from any lessor of any real or personal property (or any interest therein) other than the lease of office space incidental to its ordinary course of business; (vii) wind-up, liquidate or dissolve, consolidate or amalgamate with, or merge into or with any other corporation or purchase or otherwise acquire all or any part of the assets of any Person (or division thereof); or (viii) sell, transfer, lease or otherwise dispose of, or grant to any Person options, warrants or other rights with respect to any of its assets, unless otherwise permitted by this Agreement and except as set forth in the Primestar Partnership Agreement. SECTION 6A. NEGATIVE COVENANTS (TERM LOAN) Borrower covenants and agrees that from and after issuance of the Term Loan and the Term Notes until the satisfaction in full of the Term Loan and the Term Notes and all other Obligations due under this Agreement it shall, and shall cause each of its Restricted Subsidiaries to, fully and timely perform all covenants in this Section 6A required to be performed by any of them. 6A.1 Limitation on Restricted Payments --------------------------------- Borrower shall not, and shall not cause or permit any Restricted Subsidiary to, directly or indirectly, (i) declare or pay any dividend or any other distribution on any Equity Interests of Borrower or any Restricted Subsidiary or make any payment or distribution to the direct or indirect holders (in their capacities as such) of Equity Interests of Borrower or any Restricted Subsidiary (other than any dividends, distributions and payments made to Borrower or any Restricted Subsidiary and dividends or distributions payable to any Person solely in Qualified Equity Interests of Borrower or in options, warrants or other rights to purchase Qualified Equity Interests of Borrower); (ii) purchase, redeem or otherwise acquire or retire for value any Equity Interests of Borrower or any Restricted Subsidiary (other than any such Equity Interests owned by Borrower or any Restricted Subsidiary); (iii) purchase, redeem, defease or retire for value, or make any principal payment on, prior to any scheduled maturity, scheduled repayment or scheduled sinking fund payment, any Subordinated Indebtedness (other than any Subordinated Indebtedness held by any Restricted Subsidiary); or (iv) make any Investment (other than Permitted Investments) in any Person (other than in Borrower, any Restricted Subsidiary or a Person that becomes a Restricted Subsidiary, or is merged with or into or consolidated with Borrower or a Restricted Subsidiary (provided Borrower or a Restricted Subsidiary is the survivor) as a result of or in connection with such Investment) -73- (such payments or any other actions (other than the exceptions thereto) described in (i), (ii), (iii) and (iv) collectively, "Restricted Payments"), ------------------- unless (a) no Potential Event of Default or Event of Default shall have occurred and be continuing at the time or after giving effect to such Restricted Payment; (b) immediately after giving effect to such Restricted Payment, Borrower would be able to Incur $1.00 of Indebtedness (other than Permitted Indebtedness) under the Debt to Operating Cash Flow Ratio of the first paragraph of Section 6A.2; and (c) immediately after giving effect to such Restricted Payment, the aggregate amount of all Restricted Payments declared or made on or after the Closing Date does not exceed an amount equal to the sum of (1) the difference between (x) the Cumulative Operating Cash Flow determined at the time of such Restricted Payment and (y) 150% of cumulative Consolidated Interest Expense of Borrower determined for the period commencing on the Closing Date and ending on the last day of the most recent fiscal quarter immediately preceding the date of such Restricted Payment for which consolidated financial information of Borrower is available, plus (2) the ---- aggregate net cash proceeds received by Borrower either (x) as capital contributions to Borrower after the Closing Date or (y) from the issue and sale (other than to a Restricted Subsidiary) of its Qualified Equity Interests after the Closing Date (excluding the net proceeds from any issuance and sale of Qualified Equity Interests (I) in connection with the ASkyB Transaction (except that in calculating the ability to make a Restricted Payment under clause (iv) of the previous paragraph, 25% thereof may be included) or (II) to the extent financed, directly or indirectly, using funds borrowed from Borrower or any Restricted Subsidiary until and to the extent such borrowing is repaid), plus (3) the principal amount (or ---- accrued or accreted amount, if less) of any Indebtedness of Borrower or any Restricted Subsidiary Incurred after the Closing Date which has been converted into or exchanged for Qualified Equity Interests of Borrower, plus (4) in the case of the disposition or repayment of any Investment ---- constituting a Restricted Payment made after the Closing Date, an amount (to the extent not included in the computation of Cumulative Operating Cash Flow) equal to the lesser of: (i) the return of capital with respect to such Investment and (ii) the amount of such Investment which was treated as a Restricted Payment, in either case, less the cost of the disposition of such Investment and net of taxes, plus (5) so long as the Designation ---- thereof was treated as a Restricted Payment made after the Closing Date, with respect to any Unrestricted Subsidiary that has been redesignated as a Restricted Subsidiary after the Closing Date in accordance with Section 6A.12, Borrower's proportionate interest in an amount equal to the excess of (x) the total assets of such Subsidiary, valued on an aggregate basis at Fair Market Value, over (y) the total liabilities of such Subsidiary, determined in accordance with GAAP (and provided that such amount shall not in any case exceed the Designation Amount with respect to such Restricted Subsidiary upon its Designation), plus (6) (to the extent not included in ---- the computation of Cumulative Operating Cash Flow) the amount of cash dividends or cash distributions (other than to pay taxes) received from any Unrestricted Subsidiary since the Closing Date, minus (7) the greater of ----- (i) $0 and (ii) the Designation Amount (measured as of the date of Designation) with respect to any Subsidiary of Borrower which has been designated as an Unrestricted Subsidiary after the Closing Date in accordance with Section 6A.12. For purposes of this clause (c), in the event that any Person in whom an Investment was made on or after the Closing Date that was included in the aggregate amount of Restricted Payments made on or after the Closing Date becomes a Restricted Subsidiary, so long as such Person remains a Restricted Subsidiary, the aggregate amount of Restricted Payments declared or made on or after the Closing Date shall be reduced by an amount equal to the lesser of (A) the amount of Investments made in such Person that was treated as a Restricted Payment and -74- (B) Borrower's proportionate interest in an amount equal to the excess of (x) the total assets of such Subsidiary at the date it became a Restricted Subsidiary, valued on such date on an aggregate basis at Fair Market Value, over (y) the total liabilities on such date of such Subsidiary, determined in accordance with GAAP. The foregoing provisions will not prevent (i) the payment of any dividend or distribution on, or redemption of, Equity Interests within 60 days after the date of declaration of such dividend or distribution or the giving of formal notice of such redemption, if at the date of such declaration or giving of formal notice such payment or redemption would comply with the provisions of this Agreement; (ii) the purchase, redemption, retirement or other acquisition of any Equity Interests of Borrower in exchange for, or out of the net cash proceeds of the substantially concurrent issue and sale (other than to a Restricted Subsidiary) of, Qualified Equity Interests of Borrower; provided, -------- however, that any such net cash proceeds and the value of any Equity Interests - ------- issued in exchange for such retired Equity Interests are excluded from clause (c)(2) of the preceding paragraph (and were not included therein at any time); (iii) the purchase, redemption, retirement, defeasance or other acquisition of Subordinated Indebtedness, or any other payment thereon, made in exchange for, or out of the net cash proceeds of, a substantially concurrent issue and sale (other than to a Restricted Subsidiary) of (x) Qualified Equity Interests of Borrower; provided, however, that any such net cash proceeds and the value of -------- ------- any Equity Interests issued in exchange for Subordinated Indebtedness are excluded from clauses (c)(2) and (c)(3) of the preceding paragraph (and were not included therein at any time) or (y) other Subordinated Indebtedness having no stated maturity for the payment of principal thereof prior to the final stated maturity of the Notes; (iv) Investments made within three years of the Closing Date in Persons engaged in the provision of C-band direct-to-home television programming services (any such person, a "C-Band Entity"); provided, however, ------------- -------- ------- that (x) immediately after giving effect to such Investment Borrower or a Restricted Subsidiary owns not less than 50.0% of the voting power of the outstanding Voting Equity Interests in such C-Band Entity and not less than 50.0% of the outstanding economic Equity Interests in such C-Band Entity and (y) the aggregate amount of such Investments made since the Closing Date shall not exceed $90.0 million (any such Investment made pursuant to this clause (iv) a "C-Band Investment"); (v) Investments in ResNet so long as ResNet is engaged in ----------------- whole or in substantial part in the business of providing entertainment, data, information and/or telecommunications services to MDUs and other commercial markets, not to exceed $45.0 million in the aggregate since the Closing Date; (vi) any Investment to the extent that the consideration therefor consists of the net cash proceeds of the substantially concurrent issue and sale (other than to a Restricted Subsidiary) of Qualified Equity Interests of Borrower; provided, -------- however, that any such net cash proceeds are excluded from clause (c)(2) of the - ------- preceding paragraph (and were not included therein at any time); (vii) the purchase, redemption or other acquisition, cancellation or retirement for value of Equity Interests of Borrower or any Restricted Subsidiary held by officers or employees or former officers or employees of Borrower or any Restricted Subsidiary (or their estates or beneficiaries under their estates), upon death, disability, retirement or termination of employment, not to exceed $3.0 million in any calendar year and $15.0 million in the aggregate since the Closing Date; plus, in each case, the amount of net cash proceeds received by Borrower or a - ---- Restricted Subsidiary on account of life insurance policies relating to the officer or employee whose Equity Interest is being purchased, redeemed, acquired, cancelled or retired; (viii) Investments in any other Person engaged in the satellite, telecommunications, entertainment, electronics or any related industry, not to exceed $50.0 million in the aggregate outstanding at any time; (ix) the payment of dividends in any period (I) on preferred stock of Borrower issued in connection with any C-Band Investment in a C-Band Entity, but only up to the amount of cash dividends ("C-Band Dividends") received by Borrower from ---------------- such C-Band Entity in the same period (to the extent that such cash dividends have not otherwise been expended by Borrower) or (II) issued in connection with any C-Band Investment which results in any C-Band Entity becoming a Restricted Subsidiary (such Restricted Subsidiary, a "Restricted C-Band Subsidiary"), but ---------------------------- only up to the amount of Consolidated Operating Cash Flow received as cash dividends by Borrower from the Restricted C-Band Subsidiaries in the same period (to the extent that -75- such cash dividends have not otherwise been expended by Borrower); provided, -------- however, that no such dividends pursuant to this clause (ix) shall be permitted - ------- to the extent that C-Band Dividends or the Consolidated Operating Cash Flow of any Restricted C-Band Subsidiary to be utilized to effect any such dividends was included in the calculation of Cumulative Operating Cash Flow at any time prior to the payment of such dividends; or (x) the repurchase of Equity Interests of Borrower in an amount not to exceed $10.0 million in the aggregate since the Closing Date; provided, however, that in the case of each of clauses (ii), -------- -------- (iii), (iv), (v), (vi), (viii), (ix) and (x) no Potential Event of Default or Event of Default shall have occurred and be continuing or would arise therefrom. For purposes of this paragraph, any Investment made in any Person that subsequently becomes a Restricted Subsidiary shall be deemed not to be outstanding so long as such Person is a Restricted Subsidiary. For purposes of clause (ix) of the preceding paragraph, in determining Consolidated Operating Cash Flow of any Restricted C-Band Subsidiary, the definition of "Consolidated Operating Cash Flow" shall be used, but references in such definition to Borrower and the Restricted Subsidiaries shall be deemed to refer to the Restricted C-Band Subsidiary and its Subsidiaries. Borrower shall not calculate such Consolidated Operating Cash Flow of any Restricted C- Band Subsidiary in any manner, or take any other action, that would result in such Consolidated Operating Cash Flow being greater than what it would have been if such Restricted C-Band Subsidiary were an Affiliate of Borrower that was not a Restricted Subsidiary. In determining the amount of Restricted Payments permissible under this Section 6A.1, amounts expended pursuant to clauses (i), (vii) and (x) of the second preceding paragraph shall be included as Restricted Payments and amounts expended pursuant to clauses (ii), (iii), (iv), (v), (vi), (viii) and (ix) shall be excluded. The amount of any non-cash Restricted Payment shall be deemed to be equal to the Fair Market Value thereof at the date of the making of such Restricted Payment. If after the date of making any Investment made in compliance with this Section 6A.1 which is a guarantee, letter of credit or other credit support any payments are made in respect of such Investment, such payment shall not be deemed an additional Restricted Payment to the extent the amount thereof, when added together with all other payments made in respect of such Investment since the date such Investment was made, is not in excess of the amount of the Investment. 6A.2 Limitation on Indebtedness -------------------------- Borrower shall not, and shall not cause or permit any Restricted Subsidiary to, directly or indirectly, Incur any Indebtedness (including Acquired Indebtedness) or issue any Disqualified Equity Interests, except for Permitted Indebtedness; provided, however, that Borrower may Incur Indebtedness -------- ------- (including Acquired Indebtedness) and Borrower may issue Disqualified Equity Interests if, at the time of and immediately after giving pro forma effect to --------- such Incurrence of Indebtedness or issuance of Disqualified Equity Interests and the application of the proceeds therefrom, the Debt to Operating Cash Flow Ratio would be less than or equal to (i) 7.25 to 1.0 if the date of such Incurrence is on or before December 31, 1999, (ii) 6.50 to 1.0 if the date of such Incurrence is after December 31, 1999 and on or prior to December 31, 2001, and (iii) 5.75 to 1.0 if the date of such Incurrence is after December 31, 2001. The foregoing limitations will not apply to the Incurrence by Borrower (or any Restricted Subsidiary with respect to clauses (b), (c), (d), (e), (g), (h), (i), (j), (l) and (m) below of this paragraph) of any of the following (collectively, "Permitted Indebtedness"), each of which shall be given ---------------------- independent effect: (a) Indebtedness under the Term Notes, this Agreement, the Exchange Notes and the Senior Subordinated Indenture; -76- (b) the Existing Notes and other Existing Indebtedness; (c) Indebtedness under the New PRIMESTAR Senior Credit Facility in an aggregate principal amount at any one time outstanding not to exceed the sum of (A) $750.0 million, plus (B) any amounts outstanding under the New ---- PRIMESTAR Senior Credit Facility that utilize subparagraph (n) of this paragraph of this Section 6A.2; (d) (x) Indebtedness or Disqualified Equity Interests of any Restricted Subsidiary owed or issued to and held by Borrower or any Restricted Subsidiary and (y) Indebtedness or Disqualified Equity Interests of Borrower owed or issued to and held by any Restricted Subsidiary which is unsecured and subordinated in right of payment to the payment and performance of Borrower's obligations under any Senior Indebtedness, the Notes, this Agreement, the Senior Subordinated Indenture and the Exchange Notes (or pledged to secure any Senior Indebtedness); provided, however, -------- ------- that an Incurrence of Indebtedness or issuance of Disqualified Equity Interests that is not permitted by this clause (d) shall be deemed to have occurred upon (i) any sale or other disposition of any Indebtedness or Disqualified Equity Interests of Borrower or any Restricted Subsidiary referred to in this clause (d) to a Person (other than Borrower or any Restricted Subsidiary), (ii) any sale or other disposition of Equity Interests of any Restricted Subsidiary which holds Indebtedness or Disqualified Equity Interests of Borrower or another Restricted Subsidiary such that such Restricted Subsidiary ceases to be a Restricted Subsidiary, or (iii) the designation of a Restricted Subsidiary which holds Indebtedness or Disqualified Equity Interests of Borrower or any other Restricted Subsidiary as an Unrestricted Subsidiary; (e) guarantees by any Restricted Subsidiary of Senior Indebtedness of Borrower; provided, however, that if any such guarantee shall be Incurred -------- ------- in respect of any Senior Indebtedness of Borrower which has registration rights (including the requirement to effect an exchange offer registered under the Securities Act) or which is registered under the Securities Act, such Restricted Subsidiary shall guarantee the Notes on a senior subordinated basis as provided in this Agreement; (f) Interest Rate Protection Obligations of Borrower or any Restricted Subsidiary relating to Indebtedness of Borrower or any Restricted Subsidiary (which Indebtedness is otherwise permitted to be Incurred under this Section 6A.2); provided, however, that the notional -------- ------- principal amount of such Interest Rate Protection Obligations does not exceed the principal amount of the Indebtedness to which such Interest Rate Protection Obligations relate; (g) Purchase Money Indebtedness and Capital Lease Obligations which do not exceed $35.0 million in the aggregate at any one time outstanding; (h) Indebtedness or Disqualified Equity Interests to the extent representing a replacement, renewal, refinancing or extension (collectively, a "refinancing") of outstanding Indebtedness or Disqualified ----------- Equity Interests Incurred in compliance with the Debt to Operating Cash Flow Ratio of the first paragraph of this Section 6A.2 or clause (a), (b), (i), (j), (k), (l) or (n) of this paragraph of this Section 6A.2; provided, -------- however, that (i) any such refinancing shall not exceed the sum of the ------- principal amount (or, if such Indebtedness or Disqualified Equity Interests provide for a lesser amount to be due and payable upon a declaration of acceleration thereof at the time of such refinancing, an amount no greater than such lesser amount) of the Indebtedness or Disqualified Equity Interests being refinanced, plus the amount of accrued interest or ---- dividends thereon, plus the amount of any reasonably determined prepayment ---- premium necessary to accomplish such refinancing and such reasonable fees -77- and expenses incurred in connection therewith, (ii) Indebtedness representing a refinancing of Indebtedness other than Senior Indebtedness shall have a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of the Indebtedness being refinanced, (iii) Indebtedness that is pari passu with the Notes may only be refinanced ---------- with Indebtedness that is made pari passu with or subordinate in right of ---------- payment to the Notes and Subordinated Indebtedness or Disqualified Equity Interests may only be refinanced with Subordinated Indebtedness or Disqualified Equity Interests, (iv) no Restricted Subsidiary may Incur Indebtedness to refinance Indebtedness of Borrower (except that if the Indebtedness being refinanced is guaranteed by a Restricted Subsidiary, such Restricted Subsidiary may guarantee such refinanced Indebtedness) and (v) with respect to any refinancing of Indebtedness Incurred pursuant to clause (i), (j), (k), (l) or (n) of this paragraph, such refinancing pursuant to this clause (h) shall also be deemed to be Incurred pursuant to clause (i), (j), (k), (l) or (n), as the case may be, of this paragraph (for the avoidance of doubt, the result of which is that a refinancing does not create new debt Incurrence capacity under such clauses); (i) Indebtedness to fund purchases of inventory of integrated receiver decoders and other related subscriber equipment to be used in the business of Borrower and the Restricted Subsidiaries not to exceed in the aggregate at any time outstanding the lesser of (x) 50% of the aggregate cost of such decoders and equipment and (y) $150.0 million; (j) Indebtedness (including Acquired Indebtedness) Incurred to effect the acquisition of other satellite communications businesses (or Persons engaged in such business) (a "Related Acquisition") or to make C-Band ------------------- Investments (so long as such C-Band Investment results in the ownership by Borrower or any Restricted Subsidiary of not less than 50% of the economic Equity Interests and 50% of the Voting Equity Interests in the subject Person or is made to fund the acquisition of other satellite communications businesses by such Person in whom the C-Band Investment is being made (so long as such acquisition is effected by such Person or one of its Subsidiaries)); provided, however, that (i) the aggregate amount of any -------- -------- such Indebtedness Incurred to effect any such Related Acquisition shall not exceed (x) $750.00 per subscriber acquired in such Related Acquisition if such Related Acquisition is in the medium or high power segment of the satellite communications industry or (y) $500.00 per subscriber acquired in such Related Acquisition if such Related Acquisition is in the C-Band segment of the satellite communications industry; (ii) such Related Acquisition is effected through Borrower or any Restricted Subsidiary or a Person that becomes a Restricted Subsidiary; (iii) the aggregate amount of any such Indebtedness Incurred to effect any C-Band Investments shall not exceed (x) if such C-Band Investment is the initial Investment in the Person in whom the C-Band Investment is being made, $250.00 per subscriber existing at the time thereof of such Person in whom such C-Band Investment is being made and (y) $250.00 per subscriber acquired if such C-Band Investment is made to fund the acquisition by the Person in whom such C- Band Investment is being made of other satellite communications businesses; and (iv) any such Indebtedness Incurred by any Restricted Subsidiary shall only be permitted to be Incurred if it is Acquired Indebtedness and shall not be Incurred if such Acquired Indebtedness was Incurred in connection with, in contemplation of or with a view to such transaction; (k) Indebtedness under the Partnership Credit Agreement (or any refinancing thereof) to the extent such obligation was Incurred by Primestar Partnership to finance any Tempo Satellite or under any agreement by Borrower or any Restricted Subsidiary to indemnify the Persons who were partners of Primestar Partnership prior to the Closing Date or their Affiliates for any obligation of any such Person or Affiliate under any guarantee, letter of credit or other credit support with respect to any obligations of Primestar Partnership under the Partnership Credit Agreement or the GE-2 Agreement; -78- (l) Indebtedness Incurred in connection with the business objective of migrating Borrower's (or any Restricted Subsidiary's) medium power customers to Borrower's (or any Restricted Subsidiary's) high power satellite transmission service in an aggregate amount not to exceed $150.0 million at any time outstanding; (m) Indebtedness arising from agreements providing for indemnification, adjustment of purchase price or similar obligations Incurred in connection with the disposition of any business, assets or Restricted Subsidiary of Borrower in an amount not to exceed the gross proceeds actually received by Borrower or any Restricted Subsidiary in connection with such disposition; and (n) in addition to the items referred to in clauses (a) through (m) above, Indebtedness of Borrower (including any Indebtedness under the Senior Credit Facility that utilizes this subparagraph (n)) in an aggregate amount at any time outstanding not to exceed $75.00 per subscriber of Borrower and the Restricted Subsidiaries at the date of Incurrence thereof. Indebtedness of any Person or any of its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary (or is merged into or consolidated with Borrower or any Restricted Subsidiary), whether or not such Indebtedness was incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary (or being merged into or consolidated with Borrower or any Restricted Subsidiary), shall be deemed Incurred at the time any such Person becomes a Restricted Subsidiary or merges into or consolidates with Borrower or any Restricted Subsidiary. If Borrower Incurs any Indebtedness pursuant to the Debt to Operating Cash Flow Ratio of the first paragraph of this Section 6A.2 and includes in the calculation thereof C-Band Dividends or the Consolidated Operating Cash Flow of any Restricted C-Band Subsidiary, then such Indebtedness will be deemed to not have been Incurred in compliance with this Section 6A.2 (unless otherwise incurrable at such time under any of subparagraphs (a) through (o) of the second paragraph of this Section 6A.2) if Borrower or any Restricted Subsidiary thereafter makes any Restricted Payment pursuant to clause (ix) of the second paragraph of Section 6A.1 and such Indebtedness could not have been Incurred at the time of its Incurrence if any such Restricted Payment were made immediately prior to such Incurrence. For purposes of determining any particular amount of Indebtedness under this Section 6A.2, guarantees, Liens or obligations with respect to letters of credit supporting Indebtedness otherwise included in the determination of such particular amount shall not be included. For purposes of determining compliance with this Section 6A.2, in the event that an item of Indebtedness may be Incurred through the first paragraph of this Section 6A.2 or by meeting the criteria of one or more of the types of Indebtedness described in the second paragraph of this Section 6A.2 (or the definitions of the terms used therein), Borrower, in its sole discretion, may, at the time of such Incurrence, (i) classify such item of Indebtedness under and comply with either of such paragraphs (or any of such definitions), as applicable, (ii) classify and divide such item of Indebtedness into more than one of such paragraphs (or definitions), as applicable, and (iii) elect to comply with such paragraphs (or definitions), as applicable, in any order. 6A.3 Limitation on Transactions with Affiliates ------------------------------------------ Borrower shall not, and shall not cause or permit any Restricted Subsidiary to, directly or indirectly, conduct any business or enter into any transaction (or series of related transactions) with or for the -79- benefit of any of their respective Affiliates or any beneficial holder of 10% or more of the Equity Interests of Borrower or any officer or director of Borrower or any Restricted Subsidiary (each an "Affiliate Transaction"), unless such --------------------- Affiliate Transaction is on terms which are no less favorable to Borrower or such Restricted Subsidiary, as the case may be, than would be available in a comparable transaction with an unaffiliated third party. If such Affiliate Transaction (or series of related Affiliate Transactions) involves aggregate payments or other consideration having a Fair Market Value in excess of $15.0 million, Borrower shall not, and shall not cause or permit any Restricted Subsidiary to, enter into such Affiliate Transaction, unless a majority of the disinterested members of the Board of Directors of Borrower shall have approved such Affiliate Transaction and determined that such Affiliate Transaction complies with the foregoing provisions; provided, however, that if such -------- ------- Affiliate Transaction is in the ordinary course of business consistent with the past practice of any business of Borrower or a Restricted Subsidiary, including the High Power Satellite Transmission Business, then there shall be no need to comply with this sentence. In the event that Borrower obtains a written opinion from an Independent Financial Advisor stating that the terms of an Affiliate Transaction are fair, from a financial point of view, to Borrower or the Restricted Subsidiary involved in such Affiliate Transaction, as the case may be, such opinion will conclusively meet the requirements of the first sentence of this paragraph and there shall be no need to comply with the second sentence of this paragraph. Notwithstanding the foregoing, the restrictions set forth in this covenant shall not apply to (i) transactions with or among Borrower and any Restricted Subsidiary or between or among Restricted Subsidiaries; (ii) customary directors' fees, indemnification and similar arrangements, consulting fees, employee salaries, bonuses or employment agreements, compensation or employee benefit arrangements and incentive arrangements with any officer, director or employee of Borrower or any Restricted Subsidiary entered into in the ordinary course of business (including customary benefits thereunder) and payments under any indemnification arrangements permitted by applicable law; (iii) the Basic Documents and the Restructuring Agreements, each as in effect on the Closing Date, including any amendment or extension thereof that does not otherwise violate any other covenant set forth in this Agreement, and any transactions undertaken pursuant to any other contractual obligations in existence on the Closing Date (as in effect on the Closing Date); (iv) the issue and sale by Borrower to its stockholders of Qualified Equity Interests; (v) any Restricted Payments made in compliance with Section 6A.1; (vi) loans and advances to officers, directors and employees of Borrower and the Restricted Subsidiaries for travel, entertainment, moving and other relocation expenses, in each case made in the ordinary course of business and consistent with past business practices; (vii) the Incurrence of intercompany Indebtedness permitted pursuant to clause (d) of the second paragraph of Section 6A.2; (viii) the pledge of Equity Interests of Unrestricted Subsidiaries to support the Indebtedness thereof; and (ix) the Restructuring Transactions. 6A.4 Limitation on Liens ------------------- Borrower shall not, and shall not cause or permit any Restricted Subsidiary to, directly or indirectly, Incur any Liens of any kind against or upon any of their respective properties or assets now owned or hereafter acquired, or any proceeds therefrom or any income or profits therefrom, to secure any Indebtedness unless contemporaneously therewith effective provision is made to secure the Notes equally and ratably with such Indebtedness with a Lien on the same properties and assets securing Indebtedness for so long as such Indebtedness is secured by such Lien, except for (i) Liens on securing any Senior Indebtedness or any guarantee of Senior Indebtedness by any Restricted Subsidiary and (ii) Permitted Liens. -80- 6A.5 Limitation on Senior Subordinated Indebtedness ---------------------------------------------- Borrower shall not, directly or indirectly, Incur any Indebtedness that by its terms would expressly rank senior in right of payment to the Notes and expressly rank junior in right of payment to any Senior Indebtedness. 6A.6 Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries --------------------------------------------------------------- Borrower shall not, and shall not cause or permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary to (a) pay dividends or make any other distributions to Borrower or any other Restricted Subsidiary on its Equity Interests or with respect to any other interest or participation in, or measured by, its profits, or pay any Indebtedness owed to Borrower or any other Restricted Subsidiary, (b) make loans or advances to, or guarantee any Indebtedness or other obligations of, Borrower or any other Restricted Subsidiary or (c) transfer any of its properties or assets to Borrower or any other Restricted Subsidiary, except for such encumbrances or restrictions existing under or by reason of (i) the New PRIMESTAR Senior Credit Facility, the Existing Indentures, any Basic Document, any Restructuring Agreement, the Senior Subordinated Indenture or any other agreement of Borrower or the Restricted Subsidiaries outstanding on the Closing Date, in each case as in effect on the Closing Date, and any amendments, restatements, renewals, replacements or refinancings thereof; provided, however, that any such amendment, restatement, -------- ------- renewal, replacement or refinancing is no more restrictive in the aggregate with respect to such encumbrances or restrictions than those contained in the New PRIMESTAR Senior Credit Facility as in effect on the Closing Date; (ii) applicable law; (iii) any instrument governing Indebtedness or Equity Interests of an Acquired Person acquired by Borrower or any Restricted Subsidiary as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred by such Acquired Person in connection with, as a result of or in contemplation of such acquisition); provided, however, that such encumbrances -------- ------- and restrictions are not applicable to Borrower or any Restricted Subsidiary, or the properties or assets of Borrower or any Restricted Subsidiary, other than the Acquired Person; (iv) customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices; (v) Purchase Money Indebtedness for property acquired in the ordinary course of business that imposes encumbrances and restrictions only on the property so acquired; (vi) any agreement for the sale or disposition of the Equity Interests or assets of any Restricted Subsidiary; provided, however, that such -------- ------- encumbrances and restrictions described in this clause (vi) are only applicable to such Restricted Subsidiary or assets, as applicable, and any such sale or disposition is made in compliance with Section 6A.9 to the extent applicable thereto; (vii) refinancing Indebtedness permitted under clause (h) of the second paragraph of Section 6A.2; provided, however, that the encumbrances and -------- ------- restrictions contained in the agreements governing such Indebtedness are no more restrictive in the aggregate than those contained in the agreements governing the Indebtedness being refinanced immediately prior to such refinancing; (viii) this Agreement or the Senior Subordinated Indenture; or (ix) any such customary encumbrance or restriction existing under any other security agreement, instrument or document hereafter in effect; provided, however, that the terms -------- ------- and conditions of any such encumbrance or restriction are not more restrictive than those contained in the New PRIMESTAR Senior Credit Facility as in effect on the Closing Date. Anything contained herein to the contrary notwithstanding, Borrower and its Subsidiaries shall in no event be prohibited or restrained from granting, and causing to be effective, any lien or security interest securing the obligations of Borrower and the Restricted Subsidiaries under the New PRIMESTAR Senior Credit Facility. -81- 6A.7 Guaranty of Notes by Subsidiaries --------------------------------- In the event that any Restricted Subsidiary (other than a Guarantor), directly or indirectly, guarantees any Indebtedness of Borrower pursuant to clause (e) of the second paragraph of Section 6A.2, Borrower shall cause such Restricted Subsidiary to concurrently guarantee (a "Guaranty") Borrower's -------- Obligations under this Agreement and the Loans and Notes to the same extent that such Restricted Subsidiary guaranteed Borrower's Obligations under such other Indebtedness (including waiver of subrogation, if any); provided, however, that -------- ------- the Guaranty shall be subordinated in right of payment to all Guarantor Senior Indebtedness (which shall include such guarantee of such other Indebtedness) pursuant to the subordination provisions of Section 11, provided, further, -------- ------- however, that each Subsidiary issuing a Guaranty will be automatically and - ------- unconditionally released and discharged from its obligations under such Guaranty upon the release or discharge of the guarantee of the Indebtedness that resulted in the creation of such Guaranty, except a discharge or release by, or as a result of, any payment under the guarantee of such Other Indebtedness by such Guarantor. Borrower shall cause each Restricted Subsidiary issuing a Guaranty to (i) execute and deliver to the Arranger a supplemental indenture in form reasonably satisfactory to the Arranger pursuant to which such Restricted Subsidiary shall become a party to this Agreement and thereby unconditionally guarantee all of Borrower's Obligations under the Loans and Notes and this Agreement on the terms set forth in Section 10 and Section 11 hereof and (ii) deliver to the Arranger an opinion of counsel that such supplemental agreement has been duly authorized, executed and delivered by such Restricted Subsidiary and constitutes a legal, valid, binding and enforceable obligation of such Restricted Subsidiary (which opinion may be subject to customary assumptions and qualifications). Thereafter, such Restricted Subsidiary shall (unless released in accordance with the terms of this Agreement) be a Guarantor for all purposes of this Agreement. 6A.8 Merger, Sale of Assets; Etc. --------------------------- A. Borrower shall not consolidate with or merge with or into (whether or not Borrower is the Surviving Person) any other entity and Borrower shall not and shall not cause or permit any Restricted Subsidiary to, sell, convey, assign, transfer, lease or otherwise dispose of all or substantially all of Borrower's properties and assets (determined on a consolidated basis for Borrower and the Restricted Subsidiaries) to any entity in a single transaction or series of related transactions, unless: (i) either (x) Borrower shall be the Surviving Person or (y) the Surviving Person (if other than Borrower) shall be a corporation organized and validly existing under the laws of the United States of America or any State thereof or the District of Columbia, and shall, in any such case, expressly assume by an assumption agreement or a supplemental indenture, as the case may be, the due and punctual payment of the principal of, premium, if any, and interest on all the Term Notes and the performance and observance of every covenant of the Loan Documents or to be performed or observed on the part of Borrower; (ii) immediately thereafter, no Potential Event of Default or Event of Default shall have occurred and be continuing; and (iii) immediately after giving effect to any such transaction involving the Incurrence by Borrower or any Restricted Subsidiary, directly or indirectly, of additional Indebtedness (and treating any Indebtedness not previously an obligation of Borrower or any Restricted Subsidiary in connection with or as a result of such transaction as having been Incurred at the time of such transaction), the Surviving Person could Incur, on a pro forma basis after --------- giving effect to such transaction as if it had occurred at the beginning of the latest fiscal quarter for which consolidated financial statements of Borrower are available, at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) under the Debt to Operating Cash Flow Ratio of the first paragraph of Section 6A.2. Notwithstanding the foregoing, the TSAT Merger shall be permitted so long as it is consummated pursuant to the terms and conditions contained in the TSAT Merger Agreement as in effect on the Closing Date or as amended thereafter, which amendment, if material, must be approved by the Required Lenders. -82- For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all the properties and assets of one or more Restricted Subsidiaries the Equity Interest of which constitutes all or substantially all the properties and assets of Borrower shall be deemed to be the transfer of all or substantially all the properties and assets of Borrower. In the event of any transaction (other than a lease) described in and complying with the conditions listed in the second immediately preceding paragraph in which Borrower is not the Surviving Person and the Surviving Person is to assume all the Obligations of Borrower under the Loan Documents pursuant to an agreement in form and substance satisfactory to the Arranger, such Surviving Person shall succeed to, and be substituted for, and may exercise every right and power of, Borrower and Borrower shall be discharged from its Obligations under the Loan Documents. B. Subject to the requirements of subparagraph A of this Section 6A.8, in the event of a sale of all or substantially all the assets of any Guarantor or all of the Equity Interests of any Guarantor, by way of merger, consolidation or otherwise, then the Surviving Person of any such merger consolidation, or such Guarantor, if all of its Equity Interests are sold, shall be released and relieved of any and all obligations under the Guarantee of such Guarantor if (i) the Person or entity surviving such merger or consolidation or acquiring the Equity Interests of such Guarantor is not a Restricted Subsidiary, and (ii) the Net Cash Proceeds from such sale are used after such sale in a manner that complies with the provisions of Section 6A.9. Except as provided in the preceding sentence, no Guarantor shall consolidate with or merge with or into another Person, whether or not such Person is affiliated with such Guarantor and whether or not such Guarantor is the Surviving Person, unless (i) the Surviving Person (if other than such Guarantor) is a corporation organized and validly existing under the laws of the United States, any State thereof or the District of Columbia, (ii) the Surviving Person (if other than such Guarantor) expressly assumes all the obligations of such Guarantor under the Guarantee and this Agreement pursuant to an assumption agreement or a supplemental indenture in a form reasonably satisfactory to the Agents, (iii) at the time of and immediately after such Disposition, no Default or Event of Default shall have occurred and be continuing, and (iv) immediately after giving effect to any such transaction involving the Incurrence by Borrower or any Guarantor, directly or indirectly, of additional Indebtedness (and treating any Indebtedness not previously an obligation of Borrower or any Guarantor in connection with or as a result of such transaction as having been Incurred at the time of such transaction), the Surviving Person could Incur, on a pro forma basis after giving effect to such transaction as if it had occurred at the beginning of the latest fiscal quarter for which consolidated financial statements of Borrower are available, at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) under the Debt to Operating Cash Flow Ratio of the first paragraph of Section 6A.2; provided, however, that clause (iv) of this paragraph shall not be a condition to a merger or consolidation of a Guarantor if such merger or consolidation only involves Borrower and/or one or more Wholly Owned Restricted Subsidiaries. 6A.9 Disposition of Proceeds of Asset Sales -------------------------------------- A. Borrower shall not, and shall not cause or permit any Restricted Subsidiary to, directly or indirectly, make any Asset Sale, unless (i) Borrower or such Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the assets sold or otherwise disposed of and (ii) at least 85% of such consideration consists of (A) cash or Cash Equivalents, (B) properties and capital assets to be used in the same or related lines of business being conducted by Borrower or any Restricted Subsidiary at such time or (C) Equity Interests in one or more Persons which thereby become Restricted Subsidiaries whose assets consist primarily of properties and capital assets used in the same or related lines of business being conducted by Borrower or any Restricted Subsidiary at such time. The amount of any (i) Indebtedness (other than any Subordinated Indebtedness) of Borrower or any Restricted Sub- -83- sidiary that is actually assumed by the transferee in such Asset Sale and from which Borrower and the Restricted Subsidiaries are fully released shall be deemed to be cash for purposes of determining the percentage of cash consideration received by Borrower or the Restricted Subsidiaries and (ii) notes or other similar obligations received by Borrower or the Restricted Subsidiaries from such transferee that are converted, sold or exchanged within thirty days of the related Asset Sale by Borrower or the Restricted Subsidiaries into cash shall be deemed to be cash, in an amount equal to the net cash proceeds realized upon such conversion, sale or exchange for purposes of determining the percentage of cash consideration received by Borrower or the Restricted Subsidiaries. Borrower or such Restricted Subsidiary, as the case may be, may (i) apply the Net Cash Proceeds of any Asset Sale within 375 days of receipt thereof to repay Senior Indebtedness and permanently reduce any related commitment, (ii) commit in writing to acquire, construct or improve properties and capital assets to be used in the same or related lines of business being conducted by Borrower or any Restricted Subsidiary at such time and so apply such Net Cash Proceeds within 375 days after the receipt thereof, or (iii) apply the Net Cash Proceeds of any Asset Sale within 375 days after receipt thereof to the making of any Investment which is permitted to be made under Section 6A.1. To the extent all or part of the Net Cash Proceeds of any Asset Sale are not applied within 375 days of such Asset Sale (each such 375th day, a "Trigger Date") as described in clause (i), (ii) or (iii) of the immediately ------------ preceding paragraph (such Net Cash Proceeds, the "Unutilized Net Cash ------------------- Proceeds"), Borrower shall comply with Section 2.5A(iv)(b). - -------- B. So long as Borrower or any Restricted Subsidiary is directly or indirectly obligated, contingently or otherwise, for any obligations under the Partnership Credit Agreement (pursuant to any letter of credit, guarantee or other credit support or otherwise) or has any obligation under any Permitted Indebtedness under clause (k) of Section 6A.2 above, for purposes of the foregoing covenant, the sale or lease of either or both Tempo Satellites (whether or not the Person owning such Tempo Satellite is a Restricted Subsidiary), or any transponder thereon or capacity thereof, to any Person (other than Borrower or any Restricted Subsidiary) shall be considered an Asset Sale (to the extent of the interest of Borrower and its Subsidiaries in such Tempo Satellite, transponder thereon or capacity thereof) unless if such sale or lease is to any other Person, the net proceeds thereof are applied to the balance due under the Partnership Credit Agreement until the Partnership Credit Agreement is permanently repaid in full and all commitments to extend credit thereunder are permanently terminated. Borrower shall not and shall not cause or permit any Subsidiary to enter into or suffer to exist any agreement, instrument, encumbrance or restriction which would, directly or indirectly, limit, prohibit or restrict the compliance by Borrower and its Subsidiaries with the foregoing sentence. C. If Borrower or any Restricted Subsidiary is engaged in the High Power Satellite Transmission Business, Borrower shall not, and shall not cause or permit any such High Power Satellite Transmission Subsidiary to, sell, convey, transfer, lease, assign, or otherwise encumber (except for Permitted Liens and except for Liens and other encumbrances permitted under the New PRIMESTAR Senior Credit Facility) (i) any Tempo Satellite (or any contract rights related to the construction, launch or insurance thereof), to the extent of the interest of Borrower and its Subsidiaries in such Tempo Satellite, (ii) any orbital slot owned by Borrower or any Subsidiary, (iii) the Equity Interests of any Subsidiary which owns any Tempo Satellite or any orbital slot or any right, license, authorization or permit with respect to any such orbital slot owned by such Subsidiary, or any other interest in an orbital slot which may be sold or otherwise disposed of in compliance with all applicable law (including the Communications Act and the rules and regulations promulgated thereunder) or (iv) the income or profits of any of the foregoing, unless in any such case immediately after such a transaction Borrower or such High Power Satellite Transmission Subsidiary has in place dedicated sat- -84- ellite capacity, or a binding agreement providing for dedicated satellite capacity, sufficient to serve its High Power Satellite Transmission Business at least until the stated maturity of the Term Notes and files such agreement with the Arranger together with an Officers' Certificate certifying that such agreement meets the foregoing criteria; provided, however, that in no event -------- ------- shall the covenant be construed to prevent Borrower from discontinuing its High Power Satellite Transmission Business. 6A.10 Payments for Consent -------------------- Neither Borrower nor any of its Subsidiaries may, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Lender for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Agreement or the Notes unless such consideration is offered to be paid or agreed to be paid to all Lenders that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. 6A.11 Tempo Satellites; Maintenance of Insurance ------------------------------------------ A. Prior to 180 days following the successful launch of any Tempo Satellite launched on or before December 31, 1997, Borrower shall not terminate the Satellite Construction Agreement or amend, modify or refrain from enforcing any provision thereof in any manner adverse to Borrower or any of its Subsidiaries or the holders of the Term Notes in any material respect, as determined by the Board of Directors of Borrower, and shall not amend, modify or refrain from enforcing any provision thereof regarding the rights of Borrower under the Satellite Construction Agreement (if any) with respect to any failure of any Tempo Satellite that may occur in connection with the launch thereof or during the 180 day period immediately thereafter. B. Upon the earliest to occur of (x) the TSAT Merger, (y) the exercise by Borrower or one of its Restricted Subsidiaries of the Tempo Option and (z) failure of either Loral or TSAT to comply with the terms of any agreement with respect to maintenance of In-Orbit Insurance as such agreements are in effect on the date hereof, with respect to the Tempo Satellite (or any permanent replacement thereof), if Borrower or any Subsidiary is engaged in the High Power Satellite Transmission Business, so long as (i) Borrower or such Subsidiary engaged in the High Power Satellite Transmission Business does not have in place other dedicated in-orbit satellite capacity or (ii) a ground spare satellite of comparable or superior quality and capacity has not been completely constructed and available to be launched (pursuant to a binding agreement, a copy of which has been filed with the Arranger) in each case sufficient capacity to permit Borrower or the Subsidiary conducting the High Power Satellite Transmission Business to conduct such business on a competitive basis and service its subscribers, then within 30 days after the acceptance of any Tempo Satellite by Borrower or any Subsidiary after completion of in-orbit testing by the builder thereof, Borrower shall, or shall cause a Restricted Subsidiary to, obtain (to the extent commercially available upon reasonable terms), and thereafter maintain, In-Orbit Insurance with respect to the Tempo Satellite (or any permanent replacement thereof) providing the servicing capacity with respect to such High Power Satellite Transmission Business. Borrower or such Restricted Subsidiary shall be named as the insured under such In-Orbit Insurance (provided, however, that only a senior secured creditor of Borrower or a -------- ------- Restricted Subsidiary may also be designated as a named insured under such In- Orbit Insurance). C. Immediately upon consummation of the ASkyB Transaction, so long as (i) Borrower or such Subsidiary engaged in the High Power Satellite Transmission Business does not have in place other dedicated in-orbit satellite capacity or (ii) a ground spare satellite of comparable or superior quality and capacity has not been completely constructed and available to be launched, in each case sufficient capacity to permit Borrower or the Restricted Subsidiary engaged in the High Power Satellite Transmission Business to conduct -85- such business on a competitive basis and service its subscribers, then within 30 days after the consummation of the ASkyB Transaction, Borrower shall, or shall cause a Restricted Subsidiary to, obtain (to the extent commercially available upon reasonable terms), and thereafter to maintain, In-Orbit Insurance with respect to the ASkyB Satellite (or any permanent replacement thereof). D. In the event that Borrower or any of its Subsidiaries receives any damages or other amounts due under the Satellite Construction Agreement (including, without limitation, the refund of the full purchase price of any Tempo Satellite which has not been delivered pursuant to the terms thereof) all such amounts shall be deemed to be Net Cash Proceeds from an Asset Sale and Borrower shall apply such proceeds as required by the second and third full paragraphs under Section 6A.9A, except as provided by Section 6A.9B. 6A.12 Designation of Unrestricted Subsidiaries ---------------------------------------- A. Each Subsidiary of Borrower that has been designated as of the Closing Date under the Existing Indentures as an Unrestricted Subsidiary pursuant to the terms thereof (and which designation as of the Closing Date has not been revoked thereunder) is initially designated by Borrower as an Unrestricted Subsidiary as of the Closing Date. Borrower may designate after the Closing Date any other Subsidiary of Borrower as an "Unrestricted Subsidiary" under this Agreement (a "Designation") so long as such Subsidiary is ----------- also on the same date designated as an Unrestricted Subsidiary pursuant to the Existing Indentures and the Senior Subordinated Indenture (if in effect) and only if: (i) no Potential Event of Default or Event of Default shall have occurred and be continuing at the time of or after giving effect to such Designation; (ii) at the time of and after giving effect to such Designation, Borrower could Incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) under the Debt to Operating Cash Flow Ratio of the first paragraph of Section 6A.2; and (iii) Borrower would be permitted to make an Investment (other than a Permitted Investment) at the time of Designation (assuming the effectiveness of such Designation) pursuant to the first paragraph of Section 6A.1 in an amount (the "Designation Amount") equal to the Fair ------------------ Market Value of Borrower's proportionate interest in the net worth of such Subsidiary on such date calculated in accordance with GAAP. Notwithstanding the above, no Subsidiary of Borrower shall be designated an Unrestricted Subsidiary which (i) holds the partnership interest in (or any debt or equity interest in) Primestar Partnership or distributes, directly or indirectly, PRIMESTAR(R) television programming service or has any right, title or interest in the revenue or profits in, or holds any Lien in respect of, such partnership interests or such distribution; (ii) conducts, directly or indirectly, the High Power Satellite Transmission Business or the business of distributing high power DBS services to subscribers (or, if the proposed wholesale strategy is implemented, the business of distributing the wholesale service to cable system operators), or has any interest in any such business or the right to receive the income or profits therefrom; or (iii) holds any right, title or interest in the assets transferred to Borrower pursuant to the ASkyB Transaction. Neither Borrower nor any Restricted Subsidiary shall at any time (x) provide credit support for, subject any of its property or assets (other than the Equity Interests of any Unrestricted Subsidiary) to the satisfaction of, or guarantee, any Indebtedness of any Unrestricted Subsidiary (including any undertaking, -86- agreement or instrument evidencing such Indebtedness), (y) be directly or indirectly liable for any Indebtedness of any Unrestricted Subsidiary, or (z) be directly or indirectly liable for any Indebtedness which provides that the holder thereof may (upon notice, lapse of time or both) declare a default thereon or cause the payment thereof to be accelerated or payable prior to its final scheduled maturity upon the occurrence of a default with respect to any Indebtedness of any Unrestricted Subsidiary, except, in the case of clause (x) or (y), to the extent otherwise permitted under the terms of this Agreement, including, without limitation, pursuant to Section 6A.1 and Section 6A.9, and except for any non-recourse guarantee given solely to support the pledge by Borrower or any Restricted Subsidiary of the Equity Interests of any Unrestricted Subsidiary. B. Borrower may revoke any Designation of a Subsidiary as an Unrestricted Subsidiary (a "Revocation") if: ---------- (i) no Potential Event of Default or Event of Default shall have occurred and be continuing at the time of and after giving effect to such Revocation; and (ii) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding immediately following such Revocation would, if Incurred at such time, have been permitted to be Incurred for all purposes of this Agreement. All Designations and Revocations must be evidenced by resolutions of the Board of Directors of Borrower delivered to the Arranger certifying compliance with the foregoing provisions. 6A.13 Refinancing of Loans in Part. ---------------------------- Borrower shall not, nor shall Borrower cause or permit any of it Subsidiaries to, Incur any Indebtedness to Refinance the Loans in part other than the Refinancing Securities, the Required Refinancing Securities or the Exchange Notes, unless the terms, conditions, covenants, events of default and other provisions in respect of the events of default and other provisions in respect of the instruments evidencing the Indebtedness Incurred to Refinance the Loans in part shall have been approved in writing by the Agents (which approval shall not be unreasonably withheld) prior to the Incurrence of any such Indebtedness. SECTION 7. EVENTS OF DEFAULT If any of the following conditions or events (each, an "Event of -------- Default") shall occur and be continuing: - ------- 7.1 Failure To Make Payments When Due --------------------------------- Failure to pay any installment of principal of the Loans when due, whether at stated maturity, by acceleration, by notice of prepayment or otherwise (whether or not such payment is prohibited by Section 8); or failure to pay any interest on the Loans or any other amount due under this Agreement (i) prior to the Conversion Date, within five days or more after the date due, or (ii) on and after the Conversion Date, within 30 days or more after the date due (in any case whether or not such payment is prohibited by Section 8); or -87- 7.2 Default in Other Agreements --------------------------- Failure of Borrower or any of its Material Subsidiaries to pay at final maturity any principal on one or more issues of Indebtedness of Borrower or of any of its Subsidiaries (other than Indebtedness referred to in Section 7.1) or breach or default by Borrower or any of its Material Subsidiaries with respect to any other term of any one or more issues of Indebtedness of Borrower or of any of its Material Subsidiaries or any agreement or instrument evidencing or securing such Indebtedness and such default or breach results in the acceleration of that Indebtedness prior to its stated maturity and, in either case, the principal amount of such Indebtedness and all other such Indebtedness of Borrower and its Subsidiaries in respect of which there is a failure to pay principal or interest or which has been so accelerated equals $15,000,000 or more; or 7.3 Change of Control; Breach of Certain Covenants ---------------------------------------------- A. The occurrence of a Change of Control prior to the Conversion Date. B. Failure of Borrower to perform or comply with any covenant, term or condition contained in Section 2.5A(iv); or 7.4 Breach of Warranty ------------------ Any representation, warranty or certification made by Borrower or any other Loan Party in any Loan Document or in any statement or certificate at any time given by Borrower in writing pursuant hereto or thereto or in connection herewith or therewith shall be false or incorrect in any material respect on the date as of which made or deemed made; or 7.5 Other Defaults Under Agreement or Loan Documents ------------------------------------------------ Borrower shall (x) default in the performance of or compliance with any covenant, term or condition contained in Section 6 of this Agreement, or (y) default in the performance of or compliance with any covenant, term or condition contained in this Agreement or the other Loan Documents (other than those covered by Sections 7.1, 7.3, 7.4, 7.5(x), or 7.10) and, with respect to this Section 7.5(y), such default shall not have been remedied or waived in accordance with this Agreement within 30 days after the date of written notice from the holder or holders of not less than 25% in aggregate principal amount of the Loans then outstanding of such default; or 7.6 Involuntary Bankruptcy; Appointment of Custodian, Etc. ------------------------------------------------------ A court of competent jurisdiction enters a Bankruptcy Order under any Bankruptcy Law that: (A) is for relief against Borrower or any Material Subsidiary in an involuntary case or proceeding, or (B) appoints a Custodian of Borrower or any Material Subsidiary for all or substantially all of its properties, or (C) orders the liquidation of Borrower or any Material Subsidiary, and in each case the order or decree remains unstayed and in effect for 60 days; or -88- 7.7 Voluntary Bankruptcy; Appointment of Custodian, Etc. ---------------------------------------------------- Borrower or any Material Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case or proceeding, or (B) consents to the entry of a Bankruptcy Order for relief against it in an involuntary case or proceeding, or (C) consents to the appointment of a Custodian of it or for all or substantially all of its property, or (D) makes a general assignment for the benefit of its creditors or files a proposal or scheme of arrangement involving the rescheduling or composition of its indebtedness, or (E) consents to the filing of a petition in bankruptcy against it, or (F) shall generally not pay its debts when such debts become due or shall admit in writing its inability to pay its debts generally; or 7.8 Judgments and Attachments ------------------------- Any money judgment, writ or warrant of attachment, or similar process involving in any individual case or in the aggregate at any time an amount in excess of $15,000,000 (to the extent not covered by third-party insurance as to which the insurance company has acknowledged responsibility) shall be entered or filed against Borrower or any of its Material Subsidiaries or any of their respective properties or assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of 60 days or in any event later than five days prior to the date of any proposed sale thereunder; or 7.9 Dissolution ----------- Any order, judgment or decree shall be entered against Borrower or any Material Subsidiary decreeing the dissolution or split-up of Borrower or that Material Subsidiary and such order shall remain undischarged or unstayed for a period in excess of 30 days; or 7.10 Guarantee --------- (i) Any Guarantee or any material provision thereof shall cease to be in full force or effect (other than in accordance with its express terms), or (ii) any Guarantor or any Person acting by or on behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations under its Guarantee, or (iii) any Guarantor shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed, after giving effect to any applicable grace periods, pursuant to its Guarantee; or 7.11 Foreclosure ----------- The agent under the New PRIMESTAR Senior Credit Facility or any other party entitled to act thereunder commences judicial proceedings to foreclose on the collateral securing the Indebtedness or ex- -89- ercises any right under applicable law or any instrument evidencing a security interest or other encumbrance in respect of such collateral to take ownership or effect the transfer of such collateral in lieu of foreclosure; THEN (i) upon the occurrence of any Event of Default described in the foregoing Sections 7.6 or 7.7 with respect to Borrower, all of the unpaid principal amount of and accrued interest on the Loans and all other outstanding Obligations shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by Borrower, and the commitments of the Lenders hereunder shall thereupon automatically terminate, and (ii) upon the occurrence of any other Event of Default, the Agents shall, upon written notice of the holder or holders of at least 25% in aggregate principal amount of the Loans then outstanding, by written notice to Borrower, declare all of the unpaid principal amount of and accrued interest on the Loans and all other outstanding Obligations to be, and the same shall forthwith become, due and payable, and the obligations of the Lenders hereunder shall thereupon terminate; provided, -------- however, that so long as the New PRIMESTAR Senior Credit Facility shall be in - ------- full force and effect, if an Event of Default shall have occurred and be continuing (other than an Event of Default with respect to Borrower described in Section 7.6 or Section 7.7), the Loans shall not become due and payable until the earlier to occur of (x) five Business Days following delivery of written notice of such acceleration of the Loans to the agent under the New PRIMESTAR Senior Credit Facility and (y) the acceleration (ipso facto or otherwise) of any ---- ----- Indebtedness under the New PRIMESTAR Senior Credit Facility. Nevertheless, if at any time after acceleration of the maturity of the Loans, Borrower shall pay all arrears of interest and all payments on account of the principal thereof which shall have become due otherwise than by acceleration (with interest on principal and, to the extent permitted by law, on overdue interest, at the rates specified in this Agreement or the Notes) and all Events of Default and Potential Events of Default (other than non-payment of principal of and accrued interest on the Loans and the Notes due and payable solely by virtue of acceleration) shall be remedied or waived pursuant to Section 12.5, then the Agents shall, upon written notice of the holders of a majority in aggregate principal amount of the Loans then outstanding, by written notice to Borrower rescind and annul the acceleration and its consequences; but such action shall not affect any subsequent Event of Default or Potential Event of Default or impair any right consequent thereon. SECTION 8. SUBORDINATION 8.1 Loans and Notes Subordinated to Senior Indebtedness --------------------------------------------------- Borrower covenants and agrees, and the Arranger and each Lender by its acceptance thereof likewise covenant and agree, that all Loans and Notes shall be issued subject to the provisions of this Section 8; and each person holding any Loan or Note, whether upon original issue or upon transfer, assignment or exchange thereof, accepts and agrees that all payments of the principal of and interest on the Loans and Notes by Borrower shall, to the extent and in the manner set forth in this Section 8, be subordinated and junior in right of payment to the prior payment in full in cash of all amounts payable under Senior Indebtedness. 8.2 No Payment on Loans and Notes in Certain Circumstances; Payments Held in Trust ---------------------- A. No Payments in Certain Circumstances. No direct or indirect ------------------------------------ payment (excluding any payment or distribution of Permitted Junior Securities) by or on behalf of Borrower of principal of or interest on the Loans and Notes, whether pursuant to the terms of the Loans or Notes, upon acceleration, pursuant to an Offer to Purchase or otherwise, shall be made if, at the time of such payment, there exists a default in the -90- payment of all or any portion of the obligations on any Designated Senior Indebtedness, whether at maturity, on account of mandatory redemption or prepayment, acceleration or otherwise, and such default shall not have been cured or waived or the benefits of this sentence waived by or on behalf of the holders of such Designated Senior Indebtedness. In addition, during the continuance of any non-payment event of default with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may be immediately accelerated, and upon receipt by the Arranger of written notice (a "Payment ------- Blockage Notice") from the holder or holders of such Designated Senior - --------------- Indebtedness or the trustee or agent acting on behalf of such Designated Senior Indebtedness, then, unless and until such event of default has been cured or waived or has ceased to exist or such Designated Senior Indebtedness has been discharged or repaid in full in cash or the benefits of these provisions have been waived by the holders of such Designated Senior Indebtedness, no direct or indirect payment (excluding any payment or distribution of Permitted Junior Securities) shall be made by or on behalf of Borrower of principal of or interest on the Loans or Notes, except from those funds held in trust for the benefit of Holders of any Securities pursuant to the procedures set forth in Article Nine hereof, to such Holders, during a period (a "Payment Blockage Period") commencing on the date of receipt of such notice by the Arranger and ending 179 days thereafter. Notwithstanding anything herein or in the Securities to the contrary, (x) in no event shall a Payment Blockage Period extend beyond 179 days from the date the Payment Blockage Notice in respect thereof was given, (y) there shall be a period of at least 181 consecutive days in each 360-day period when no Payment Blockage Period is in effect and (z) not more than one Payment Blockage Period may be commenced with respect to the Loans or Notes during any period of 360 consecutive days. No event of default that existed or was continuing on the date of commencement of any Payment Blockage Period with respect to the Designated Senior Indebtedness initiating such Payment Blockage Period (to the extent the holder of Designated Senior Indebtedness, or trustee or agent, giving notice commencing such Payment Blockage Period had knowledge of such existing or continuing event of default) may be, or be made, the basis for the commencement of any other Payment Blockage Period by the holder or holders of such Designated Senior Indebtedness or the trustee or agent acting on behalf of such Designated Senior Indebtedness, whether or not within a period of 360 consecutive days, unless such event of default has been cured or waived for a period of not less than 90 consecutive days. B. Payments Held in Trust. In the event that, notwithstanding the ---------------------- foregoing, any payment shall be received by the Arranger or any Lender when such payment is prohibited by Section 8.2A, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Designated Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Designated Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that, upon notice from the Arranger to the holders of Designated Senior Indebtedness that such prohibited payment has been made, the holders of the Designated Senior Indebtedness (or their representative or representatives or a trustee) notify the Arranger in writing of the amounts then due and owing on the Designated Senior Indebtedness, if any, and only the amounts specified in such notice to the Arranger shall be paid to the holders of Designated Senior Indebtedness. 8.3 Payment Over of Proceeds upon Dissolution, Etc. ---------------------------------------------- A. Payment Over. Upon any payment or distribution of assets or ------------ securities of Borrower of any kind or character, whether in cash, property or securities (excluding any payment or distribution of Permitted Junior Securities), upon any dissolution or winding-up or liquidation or reorganization of Borrower, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all Senior Indebtedness shall first be paid in full in cash before the Lenders or the Arranger on behalf of such Lenders -91- shall be entitled to receive any payment by Borrower of the principal of or interest on the Loans or Notes, or any payment by Borrower to acquire any of the Loans or Notes for cash, property or securities, or any distribution with respect to the Loans or Notes of any cash, property or securities (excluding any payment or distribution of Permitted Junior Securities). Before any payment may be made by, or on behalf of, Borrower of the principal of or interest on the Loans or Notes upon any such dissolution or winding-up or liquidation or reorganization, any payment or distribution of assets or securities of Borrower of any kind or character, whether in cash, property or securities (excluding any payment or distribution of Permitted Junior Securities), to which the Lenders or the Arranger on their behalf would be entitled, but for the subordination provisions of this Agreement, shall be made by Borrower or by any receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, directly to the holders of the Senior Indebtedness (pro --- rata to such holders on the basis of the respective amounts of Senior - ---- Indebtedness held by such holders) or their representatives or to the trustee or trustees or agent or agents under any agreement or indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay all such Senior Indebtedness in full in cash after giving effect to any prior or concurrent payment, distribution or provision therefor to or for the holders of such Senior Indebtedness. B. Payments Held in Trust. In the event that, notwithstanding the ---------------------- foregoing provision prohibiting such payment or distribution, any payment or distribution of assets or securities of Borrower of any kind or character, whether in cash, property or securities (excluding any payment or distribution of Permitted Junior Securities), shall be received by the Arranger or any Lender at a time when such payment or distribution is prohibited by Section 8.3A and before all obligations in respect of Senior Indebtedness are paid in full in cash, or payment provided for, such payment or distribution shall be received and held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness (pro rata to such holders on the basis of the -------- respective amounts of Senior Indebtedness held by such holders) or their respective representatives, or to the trustee or trustees or agent or agents under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, for application to the payment of Senior Indebtedness remaining unpaid until all such Senior Indebtedness has been paid in full in cash after giving effect to any prior or concurrent payment, distribution or provision therefor to or for the holders of such Senior Indebtedness. The consolidation of Borrower with, or the merger of Borrower with or into, another corporation or the liquidation or dissolution of Borrower following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided in Section 6A.8 shall not be deemed a dissolution, winding- up, liquidation or reorganization for the purposes of this Section 8.3 if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Section 6A.8. 8.4 Subrogation ----------- Upon the payment in full in cash of all Senior Indebtedness, or provision for payment, the Lenders shall be subrogated to the rights of the holders of Senior Indebtedness to receive payments or distributions of cash, property or securities of Borrower made on such Senior Indebtedness until the principal of and interest on the Loans and Notes shall be paid in full in cash; and, for the purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of any cash, property or securities to which the Lenders or the Arranger on their behalf would be entitled except for the provisions of this Section 8, and no payment over pursuant to the provisions of this Section 8 to the holders of Senior Indebtedness by Lenders or the Arranger on their behalf shall, as between Borrower, its creditors other than holders of Senior Indebtedness, and the Lenders, be deemed to be a payment by Borrower to or on account of the Senior Indebtedness. -92- It is understood that the provisions of this Section 8 are and are intended solely for the purpose of defining the relative rights of the Lenders, on the one hand, and the holders of the Senior Indebtedness, on the other hand. If any payment or distribution to which the Lenders would otherwise have been entitled but for the provisions of this Section 8 shall have been applied, pursuant to the provisions of this Section 8, to the payment of all amounts payable under Senior Indebtedness, then and in such case, the Lenders shall be entitled to receive from the holders of such Senior Indebtedness any payments or distributions received by such holders of Senior Indebtedness in excess of the amount required to make payment in full, or provision for payment, of such Senior Indebtedness. 8.5 Obligations of Borrower Unconditional ------------------------------------- Nothing contained in this Section 8 or elsewhere in this Agreement or in the Notes is intended to or shall impair, as among Borrower and the Lenders, the obligation of Borrower, which is absolute and unconditional, to pay to the Lenders the principal of and interest on the Loans and Notes as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Lenders and creditors of Borrower other than the holders of the Senior Indebtedness, nor shall anything herein or therein prevent the Lenders or the Arranger on their behalf from exercising all remedies otherwise permitted by applicable law upon default under this Agreement, subject to the rights, if any, under this Section 8 of the holders of the Senior Indebtedness in respect of cash, property or securities of Borrower received upon the exercise of any such remedy. Without limiting the generality of the foregoing, nothing contained in this Section 8 shall restrict the right of the Arranger or the Lenders to take any action to declare the Securities to be due and payable prior to their stated maturity pursuant to Section 7 or to pursue any rights or remedies hereunder; provided, however, that all Senior Indebtedness then due and payable shall first - -------- ------- be paid in full before the Lenders or the Arranger are entitled to receive any direct or indirect payment from Borrower of principal of or interest on the Loans and Notes. 8.6 Notice to Arranger ------------------ Borrower shall give prompt written notice to the Arranger of any fact known to Borrower which would prohibit the making of any payment to or by the Arranger in respect of the Loans or Notes pursuant to the provisions of this Section 8. The Arranger shall not be charged with knowledge of the existence of any event of default with respect to any Senior Indebtedness or of any other facts which would prohibit the making of any payment to or by the Arranger unless and until the Arranger shall have received notice in writing to that effect signed by an Officer of Borrower, or by a holder of Senior Indebtedness or trustee or agent therefor; and prior to the receipt of any such written notice, the Arranger shall be entitled to assume that no such facts exist; provided, however, that if the Arranger shall not have received the notice - -------- ------- provided for in this Section 8.6 at least two Business Days prior to the date upon which by the terms of this Agreement any moneys shall become payable for any purpose (including, without limitation, the payment of the principal of or interest on any Loan or Note), then, regardless of anything herein to the contrary, the Arranger shall have full power and authority to receive any moneys from Borrower and to apply the same to the purpose for which they were received, and shall not be affected by any notice to the contrary which may be received by it on or after such prior date. Nothing contained in this Section 8.6 shall limit the right of the holders of Senior Indebtedness to recover payments as contemplated by Section 8.3. The Arranger shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or itself to be a holder of any Senior Indebt- -93- edness (or a trustee on behalf of, or other representative of, such holder) to establish that such notice has been given by a holder of such Senior Indebtedness or a trustee or representative on behalf of any such holder. In the event that the Arranger determines in good faith that any evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Section 8, the Arranger may request such Person to furnish evidence to the reasonable satisfaction of the Arranger as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Section 8, and if such evidence is not furnished, the Arranger may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. 8.7 Reliance on Judicial Order or Certificate of Liquidating Agent -------------------------------------------------------------- Upon any payment or distribution of assets or securities referred to in this Section 8, the Arranger and the Lenders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which bankruptcy, dissolution, winding-up, liquidation or reorganization proceedings are pending, or upon a certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, delivered to the Arranger or to the Lenders for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other indebtedness of Borrower, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Section 8. 8.8 Arranger's Relation to Senior Indebtedness ------------------------------------------ The Arranger shall be entitled to all the rights set forth in this Section 8 with respect to any Senior Indebtedness which may at any time be held by it in its individual or any other capacity to the same extent as any other holder of Senior Indebtedness, and nothing in this Agreement shall deprive the Arranger of any of its rights as such holder. With respect to the holders of Senior Indebtedness, the Arranger undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Section 8, and no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be read into this Agreement or the Notes against the Arranger. The Arranger shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness (except as provided in Section 8.3B). The Arranger shall not be liable to any such holders if the Arranger shall in good faith mistakenly pay over or distribute to Lenders or to Borrower or to any other person cash, property or securities to which any holders of Senior Indebtedness shall be entitled by virtue of this Section 8 or otherwise. 8.9 Subordination Rights not Impaired by Acts or Omissions of Borrower or Holders of Senior Indebtedness --------------------------------------------------------- No right of any present or future holders of any Senior Indebtedness to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of Borrower or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by Borrower with the terms of this Agreement, regardless of any knowledge thereof which any such holder may have or otherwise be charged with. The provisions of this Section 8 are intended to be for the benefit of, and shall be enforceable directly by, the holders of Senior Indebtedness. -94- 8.10 Lenders Authorize Arranger To Effectuate Subordination of Loans and Notes --------------------------------------------------------------- Each Lender by his acceptance of Loans and Notes authorizes and expressly directs the Arranger on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Section 8, and appoints the Arranger his attorney-in-fact for such purposes, including, in the event of any dissolution, winding-up, liquidation or reorganization of Borrower (whether in bankruptcy, insolvency, receivership, reorganization or similar proceedings or upon an assignment for the benefit of creditors or otherwise) tending towards liquidation of the business and assets of Borrower, the filing of a claim for the unpaid balance of its Loans and Notes in the form required in those proceedings. 8.11 This Section not To Prevent Events of Default --------------------------------------------- The failure to make a payment on account of principal of or interest on the Loans or Notes by reason of any provision of this Section 8 shall not be construed as preventing the occurrence of an Event of Default specified in Section 7.1. 8.12 Arranger's Compensation not Prejudiced -------------------------------------- Nothing in this Section 8 shall apply to amounts due to the Arranger pursuant to other sections in this Agreement. 8.13 No Waiver of Subordination Provisions ------------------------------------- Without in any way limiting the generality of Section 8.9, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Arranger or the Lenders, without incurring responsibility to the Lenders and without impairing or releasing the subordination provided in this Section 8 or the obligations hereunder of the Lenders to the holders of Senior Indebtedness, do any one or more of the following: (a) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding or secured; (b) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (c) release any Person liable in any manner for the collection of Senior Indebtedness; and (d) exercise or refrain from exercising any rights against Borrower and any other Person. 8.14 Acceleration of Loans and Notes ------------------------------- If payment of the Loans or Notes is accelerated because of an Event of Default, Borrower shall promptly notify holders of the Senior Indebtedness of the acceleration. SECTION 9. THE AGENTS 9.1 General Provisions ------------------ Each of the Lenders hereby irrevocably appoints the Arranger as its agent and authorizes the Arranger to take such actions on its behalf and to exercise such powers as are delegated to the Arranger by the -95- terms hereof, together with such actions and powers as are reasonably incidental thereto. Each Lender authorizes the Agents to enter into the Assumption Agreements on behalf of itself and all of the Lenders. The Lender or other financial institution serving as any Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not such Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with Borrower or any Subsidiary or other Affiliate thereof as if it were not such Agent hereunder. No Agent shall have any duties or obligations except those expressly set forth herein. Without limiting the generality of the foregoing, (a) no Agent shall be subject to any fiduciary or other implied duties, regardless of whether an Event of Default or Potential Event of Default has occurred and is continuing, (b) no Agent shall have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that such Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 12.5), and (c) except as expressly set forth herein, no Agent shall have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to Borrower or any Subsidiary that is communicated to or obtained by the financial institution serving as such Agent or any of its Affiliates in any capacity. No Agent shall be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 12.5) or in the absence of its own gross negligence or willful misconduct. No Agent shall be deemed to have knowledge of any Event of Default or Potential Event of Default unless and until written notice thereof is given to the Arranger and such Agent by Borrower or a Lender, and no Agent shall be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or under any other Loan Document or in connection herewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement or any other Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Section 3 or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to such Agent. Each Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. Each Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. Each Agent may consult with legal counsel (who may be counsel for Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. Each Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by such Agent. Each Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Affiliates, directors, officers, employees, agents and advisors ("Related Parties"). The exculpatory --------------- provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of each Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as such Agent. -96- Any Agent may resign at any time by notifying the Lenders and Borrower. Upon any such resignation, the Required Lenders shall have the right, in consultation with Borrower, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. The fees payable by Borrower to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between Borrower and such successor. After the Agent's resignation hereunder, the provisions of this Section 9 shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as such Agent. Each Lender acknowledges that it has, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any related agreement or any document furnished hereunder or thereunder. No Agent shall be deemed a trustee or other fiduciary on behalf of any party. 9.2 Indemnification --------------- Each Lender agrees to indemnify and hold harmless each Agent (to the extent not promptly reimbursed under Section 12.3, but without limiting the obligations of Borrower under Section 12.3), ratably in accordance with the aggregate principal amount of the Loans held by the Lenders (or, if no Loans are at the time outstanding, ratably in accordance with their respective Loan Commitments), for any and all liabilities (including pursuant to any Environmental Law), obligations, losses, damages, penalties, actions, judgments, deficiencies, suits, costs, expenses (including reasonable attorney's fees) or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against such Agent (including by any Lender) arising out of or by reason of any investigation in or in any way relating to or arising out of any Loan Document or any other documents contemplated by or referred to therein for any action taken or omitted to be taken by such Agent under or in respect of any of the Loan Documents or other such documents or the transactions contemplated thereby (including the costs and expenses that Borrower is obligated to pay under Section 12.3, but excluding, unless a Potential Event of Default has occurred and is continuing, normal administrative costs and expenses incident to the performance of its agency duties hereunder) or the enforcement of any of the terms hereof or thereof or of any such other documents; provided, however, that -------- ------- no Lender shall be liable for any of the foregoing to the extent they are determined by a court of competent jurisdiction in a final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of the party to be indemnified. The agreements set forth in this Section 9.2 shall survive the payment of all Loans and other obligations hereunder and shall be in addition to and not in lieu of any other indemnification agreements contained in any other Loan Document. -97- 9.3 Consents Under Other Loan Documents ----------------------------------- Except as otherwise provided in this Agreement and the other Loan Documents, the Arranger may, with the prior consent of the Required Lenders (but not otherwise), consent to any modification, supplement or waiver under any of the other Loan Documents. SECTION 10. GUARANTEE 10.1 Unconditional Guarantee ----------------------- Each Guarantor hereby unconditionally, jointly and severally, guarantees to each Lender and to the Arranger and its successors and assigns that: the principal of and interest on the Loans and Notes will be promptly paid in full when due, subject to any applicable grace period, whether at maturity, by acceleration or otherwise, and interest on the overdue principal and interest on any overdue interest on the Loans and Notes and all other obligations of Borrower to the Lenders or the Arranger hereunder or under the Loans and Notes will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; subject, however, to the limitations set forth in Section 10.4. Each Guarantor hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Loans and Notes, the absence of any action to enforce the same, any waiver or consent by any Lender with respect to any provisions hereof or thereof, the recovery of any judgment against Borrower, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of Borrower, any right to require a proceeding first against Borrower, protest, notice and all demands whatsoever and covenants that the Guarantee will not be discharged except by complete performance of the obligations contained in the Loan Documents, and this Guarantee. If any Lender or the Arranger is required by any court or otherwise to return to Borrower, any Guarantor, or any custodian, trustee, liquidator or other similar official acting in relation to Borrower or any Guarantor, any amount paid by Borrower or any Guarantor to the Arranger or such Lender, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor further agrees that, as between each Guarantor, on the one hand, and the Lenders and the Arranger, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Section 7 for the purpose of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any acceleration of such obligations as provided in Section 7, such obligations (whether or not due and payable) shall forth become due and payable by each Guarantor for the purpose of this Guarantee. 10.2 Severability ------------ In case any provision of this Guarantee shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 10.3 Release of a Guarantor ---------------------- If Section 6A.8B is complied with, or if Section 6A.7 provides for any Person who becomes a Guarantor after the Issue Date to be released from its Guarantee then the applicable Guarantor shall be deemed released from all obligations under this Section 10 without any further action required on the part of the Arranger or any Lender. The Arranger shall, at the sole cost and expense of Borrower and upon receipt at -98- the reasonable request of the Arranger of an opinion of counsel that the provisions of this Section 10.3 have been complied with, deliver an appropriate instrument evidencing such release upon receipt of a request by Borrower accompanied by an Officers' Certificate certifying as to the compliance with this Section 10.03. Any Guarantor not so released remains liable for the full amount of principal of and interest on the Loans and Notes and the other obligations of Borrower hereunder as provided in this Section 10. 10.4 Limitation of Guarantor's Liability ----------------------------------- Each Guarantor, and by its acceptance hereof each Lender and the Arranger, hereby confirms that it is the intention of all such parties that the guarantee by such Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or conveyance for purposes of title 11 of the United States Code, as amended, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar U.S. Federal or state or other applicable law. To effectuate the foregoing intention, the Lenders and such Guarantor hereby irrevocably agree that the obligations of such Guarantor under the Guarantee shall be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to Section 10.4, result in the obligations of such Guarantor under the Guarantee not constituting such fraudulent transfer or conveyance. 10.5 Contribution ------------ In order to provide for just and equitable contribution among the Guarantors, the Guarantors agree, inter se, that in the event any payment or distribution is made by any Guarantor (a "Funding Guarantor") under the ----------------- Guaranty, such Funding Guarantor shall be entitled to a contribution from all other Guarantors in a pro rata amount, based on the net assets of each Guarantor --- ---- (including the Funding Guarantor), determined in accordance with GAAP, subject to Section 10.4, for all payments, damages and expenses incurred by that Funding Guarantor in discharging Borrower's obligations with respect to the Loans or Notes or any other Guarantor's obligations with respect to the Guarantee. 10.6 Subordination of Subrogation and Other Rights --------------------------------------------- Each Guarantor hereby agrees that any claim against Borrower that arises from the payment, performance or enforcement of such Guarantor's obligations under its Guarantee or any Loan Document, including, without limitation, any right of subrogation, shall be subject and subordinate to, and no payment with respect to any such claim of such Guarantor shall be made before, the payment in full in cash of all outstanding Loans and Notes in accordance with the provisions provided therefor in this Agreement. SECTION 11. SUBORDINATION OF GUARANTEE OBLIGATIONS 11.1 Guarantee Obligations Subordinated to Guarantor Senior ------------------------------------------------------ Indebtedness ------------ Each Guarantor covenants and agrees, and the Arranger and each Lender by its acceptance thereof likewise covenant and agree, that the Guarantee shall be issued subject to the provisions of this Section 11; and each Person holding any Loan or Note, whether upon original issue or upon transfer, assignment or exchange thereof, accepts and agrees that all payments of the principal of and interest on the Loans or Notes pursuant to the Guarantee made by or on behalf of any Guarantor shall, to the extent and in the manner set forth in this Section 11, be subordinated and junior in right of payment to the prior payment in full in cash of all amounts payable under Guarantor Senior Indebtedness of such Guarantor. -99- 11.2 No Payment on Guarantees in Certain Circumstances; Payments Held ---------------------------------------------------------------- in Trusts --------- A. No Payments in Certain Circumstances. No direct or indirect ------------------------------------ payment (excluding any payment or distribution of Permitted Junior Securities) by or on behalf of any Guarantor of principal of or interest on the Loans or Notes pursuant to such Guarantor's Guarantee, whether pursuant to the terms of the Loans or Notes, upon acceleration or otherwise, shall be made if, at the time of such payment, there exists a default in the payment of all or any portion of the obligations on any Designated Guarantor Senior Indebtedness of such Guarantor, whether at maturity, on account of mandatory redemption or prepayment, acceleration or otherwise, and such default shall not have been cured or waived or the benefits of this sentence waived by or on behalf of the Lenders of such Designated Guarantor Senior Indebtedness. In addition, during the continuance of any non-payment event of default with respect to any Designated Guarantor Senior Indebtedness pursuant to which the maturity thereof may be immediately accelerated, and upon receipt by the Arranger of written notice (the "Guarantor Payment Blockage Notice") from the Lender or Lenders of --------------------------------- such Designated Guarantor Senior Indebtedness or the Arranger or agent acting on behalf of such Designated Guarantor Senior Indebtedness, then, unless and until such event of default has been cured or waived or has ceased to exist or such Designated Guarantor Senior Indebtedness has been discharged or paid in full in cash or the benefits of these provisions have been waived by the Lenders of such Designated Guarantor Senior Indebtedness, no direct or indirect payment (excluding any payment or distribution of Permitted Junior Securities) shall be made by or on behalf of such Guarantor of principal or interest on the during a period (a "Guarantor Blockage Period") commencing on the date of receipt of such ------------------------- notice by the Arranger and ending 179 days thereafter. Notwithstanding anything herein or in the Loans or Notes to the contrary, (x) in no event shall a Guarantor Blockage Period extend beyond 179 days from the date the Guarantor Payment Blockage Notice in respect thereof was given, (y) there shall be a period of at least 181 consecutive days in each 360- day period when no Guarantor Blockage Period is in effect and (z) not more than one Guarantor Blockage Period may be commenced with respect to any Guarantor during any period of 360 consecutive days. No event of default that existed or was continuing on the date of commencement of any other Guarantor Blockage Period with respect to the Designated Guarantor Senior Indebtedness initiating such Guarantor Blockage Period (to the extent the Lender of Designated Guarantor Senior Indebtedness, or the trustee or agent acting on behalf of such Designated Guarantor Senior Indebtedness, giving notice commencing such Guarantor Blockage Period had knowledge of such existing or continuing event of default) may be, or be made, the basis for the commencement of any other Guarantor Blockage Period by the Lender or Lenders of such Designated Guarantor Senior Indebtedness or the Arranger or agent acting on behalf of such Designated Guarantor Senior Indebtedness, whether or not within a period of 360 consecutive days, unless such event of default has been cured or waived for a period of not less than 90 consecutive days. B. Payments Held in Trust. In the event that, notwithstanding the ---------------------- foregoing, any payment shall be received by the Arranger or any Lender when such payment is prohibited by Section 11.2A, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the Lenders of such Designated Guarantor Senior Indebtedness or their respective representatives, or to the trustee under any agreement pursuant to which any of such Designated Guarantor Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that, upon notice from the Arranger to the Lenders of such Designated Guarantor Senior Indebtedness that such prohibited payment has been made, the Lenders of such Designated Guarantor Senior Indebtedness (or their representative or representatives or a trustee) notify the Arranger in writing of the amounts then due and owing on such Designated Guarantor Senior Indebtedness, if any, and only the amounts specified in such notice to the Arranger shall be paid to the Lenders of such Designated Guarantor Senior Indebtedness. -100- 11.3 Payment Over of Proceeds upon Dissolution, Etc. ---------------------------------------------- A. Payment Over. Upon any payment or distribution of assets or ------------ securities of any Guarantor of any kind or character, whether in cash, property or securities (excluding any payment or distribution of Permitted Junior Securities), upon any dissolution or winding-up or liquidation or reorganization of such Guarantor, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all Guarantor Senior Indebtedness of such Guarantor shall first be paid in full before the Lenders or the Arranger on behalf of such Lenders shall be entitled to receive any payment by such Guarantor of the principal of or interest on the Loans or Notes pursuant to such Guarantor's Guarantee, or any payment to acquire any of the Loans or Notes for cash, property or securities, or any distribution with respect to the Loans or Notes of any cash, property or Loans or Notes (excluding any payment or distribution of Permitted Junior Securities). Before any payment may be made by, or on behalf of, any Guarantor of the principal of or interest on the Loans and Notes upon any such dissolution or winding-up or liquidation or reorganization, any payment or distribution of assets or securities of such Guarantor of any kind or character, whether in cash, property or securities (excluding any payment or distribution of Permitted Junior Securities), to which the Lenders or the Arranger on their behalf would be entitled, but for the subordination provisions of this Agreement, shall be made by such Guarantor or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, directly to the Lenders of the Guarantor Senior Indebtedness of such Guarantor (pro rata to such Lenders on the -------- basis of the respective amounts of such Guarantor Senior Indebtedness held by such Lenders) or their representatives or to the trustee or agent or agents under any agreement pursuant to which any of such Guarantor Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay all such Guarantor Senior Indebtedness in full in cash after giving effect to any prior or concurrent payment, distribution or provision therefor to or for the Lenders of such Guarantor Senior Indebtedness. B. Payments Held in Trust. In the event that, notwithstanding the ---------------------- foregoing provision prohibiting such payment or distribution, any payment or distribution of assets or securities of any Guarantor of any kind or character, whether in cash, property or securities (excluding any payment or distribution of Permitted Junior Securities), shall be received by the Arranger or any Lender at a time when such payment or distribution is prohibited by Section 11.3A and before all obligations in respect of the Guarantor Senior Indebtedness of such Guarantor are paid in full in cash, or payment provided for, such payment or distribution shall be received and held in trust for the benefit of, and shall be paid over or delivered to, the Lenders of such Guarantor Senior Indebtedness (pro rata to such Lenders on the basis of the respective amounts of such --- ---- Guarantor Senior Indebtedness held by such Lenders) or their respective representatives, or to the trustee or agent or agents under any agreement pursuant to which any of such Guarantor Senior Indebtedness may have been issued, as their respective interests may appear, for application to the payment of such Guarantor Senior Indebtedness remaining unpaid until all such Guarantor Senior Indebtedness has been paid in full in cash after giving effect to any prior or concurrent payment, distribution or provision therefor to or for the Lenders of such Guarantor Senior Indebtedness. The consolidation of any Guarantor with, or the merger of any Guarantor with or into, another corporation or the liquidation or dissolution of any Guarantor following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided in Section 6A.8 shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 11.3 if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article Five. -101- 11.4 Subrogation ----------- Upon the payment in full in cash of all Guarantor Senior Indebtedness of a Guarantor, or provision for payment, the Lenders shall be subrogated to the rights of the Lenders of such Guarantor Senior Indebtedness to receive payments or distributions of cash, property or securities of such Guarantor made on such Guarantor Senior Indebtedness until the principal of and interest on the Loans and Notes shall be paid in full in cash; and, for the purposes of such subrogation, no payments or distributions to the Lenders of such Guarantor Senior Indebtedness of any cash, property or securities to which the Lenders or the Arranger on their behalf would be entitled except for the provisions of this Section 11, and no payment over pursuant to the provisions of this Section 11 to the Lenders of such Guarantor Senior Indebtedness by Lenders or the Arranger on their behalf shall, as between such Guarantor, its creditors other than Lenders of such Guarantor Senior Indebtedness, and the Lenders, be deemed to be a payment by such Guarantor to or on account of such Guarantor Senior Indebtedness. It is understood that the provisions of this Section 11 are and are intended solely for the purpose of defining the relative rights of the Lenders, on the one hand, and the Lenders of Guarantor Senior Indebtedness of each Guarantor, on the other hand. If any payment or distribution to which the Lenders would otherwise have been entitled but for the provisions of this Section 11 shall have been applied, pursuant to the provisions of this Section 11, to the payment of all amounts payable under Guarantor Senior Indebtedness, then and in such case, the Lenders shall be entitled to receive from the Lenders of such Guarantor Senior Indebtedness any payments or distributions received by such Lenders of Guarantor Senior Indebtedness in excess of the amount required to make payment in full, or provision for payment, of such Guarantor Senior Indebtedness. 11.5 Obligations of Guarantors Unconditional --------------------------------------- Nothing contained in this Section 11 or elsewhere in this Agreement or in the Loans, Notes or the Guarantees is intended to or shall impair, as among the Guarantors and the Lenders, the obligation of each Guarantor, which is absolute and unconditional, to pay to the Lenders the principal of and interest on the Loans and Notes as and when the same shall become due and payable in accordance with the terms of the Guarantee of such Guarantor, or is intended to or shall affect the relative rights of the Lenders and creditors of any Guarantor other than the Lenders of Guarantor Senior Indebtedness of such Guarantor, nor shall anything herein or therein prevent the Lender or the Arranger on their behalf from exercising all remedies otherwise permitted by applicable law upon default under this Agreement, subject to the rights, if any, under this Section 11 of the Lenders of Guarantor Senior Indebtedness in respect of cash, property or securities of any Guarantor received upon the exercise of any such remedy. Without limiting the generality of the foregoing, nothing contained in this Section 11 shall restrict the right of the Lenders or the Arranger to take any action to declare the Loans and Notes to be due and payable prior to their stated maturity pursuant to Section 7 or to pursue any rights or remedies hereunder; provided, however, that all Guarantor Senior Indebtedness of any -------- ------- Guarantor then due and payable shall first be paid in full before the Lenders or the Arranger are entitled to receive any direct or indirect payment from such Guarantor of principal of or interest on the Loans and Notes pursuant to such Guarantor's Guarantee. 11.6 Notice to Arranger ------------------ Borrower and each Guarantor shall give prompt written notice to the Arranger of any fact known to Borrower or such Guarantor which would prohibit the making of any payment to or by the Arranger in respect of the Securities pursuant to the provisions of this Section 11. The Arranger shall not be charged -102- with knowledge of the existence of any event of default with respect to any Guarantor Senior Indebtedness or of any other facts which would prohibit the making of any payment to or by the Arranger unless and until the Arranger shall have received notice in writing to that effect signed by an Officer of Borrower or such Guarantor, or by a Lender of Guarantor Senior Indebtedness or the trustee or agent therefor; and prior to the receipt of any such written notice, the Arranger shall be entitled to assume that no such facts exist; provided, -------- however, that if the Arranger shall not have received the notice provided for in - ------- this Section 11.6 at least two Business Days prior to the date upon which by the terms of this Agreement any moneys shall become payable for any purpose (including, without limitation, the payment of the principal of or interest on any Loan or Note), then, regardless of anything herein to the contrary, the Arranger shall have full power and authority to receive any moneys from any Guarantor and to apply the same to the purpose for which they were received, and shall not be affected by any notice to the contrary which may be received by it on or after such prior date. Nothing contained in this Section 11.6 shall limit the right of the Lenders of Guarantor Senior Indebtedness to recover payments as contemplated by Section 11.3. The Arranger shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or itself to be a Lender of any Guarantor Senior Indebtedness (or a trustee on behalf of, or other representative of, such Lender) to establish that such notice has been given by a Lender of such Guarantor Senior Indebtedness or a trustee or representative on behalf of any such Lender. In the event that the Arranger determines in good faith that any evidence is required with respect to the right of any Person as a Lender of Guarantor Senior Indebtedness to participate in any payment or distribution pursuant to this Section 11, the Arranger may request such Person to furnish evidence to the reasonable satisfaction of the Arranger as to the amount of Guarantor Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Section 11, and if such evidence is not furnished, the Arranger may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. 11.7 Reliance on Judicial Order or Certificate of Liquidating Agent -------------------------------------------------------------- Upon any payment or distribution of assets or securities of a Guarantor referred to in this Section 11, the Arranger and the Lenders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which bankruptcy, dissolution, winding-up, liquidation or reorganization proceedings are pending, or upon a certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, delivered to the Arranger or to the Lenders for the purpose of ascertaining the Persons entitled to participate in such distribution, the Lenders of Guarantor Senior Indebtedness of such Guarantor and other indebtedness of such Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Section 11. 11.8 Arranger's Relation to Guarantor Senior Indebtedness ---------------------------------------------------- The Arranger shall be entitled to all the rights set forth in this Section 11 with respect to any Guarantor Senior Indebtedness which may at any time be held by it in its individual or any other capacity to the same extent as any other Lender of Guarantor Senior Indebtedness, and nothing in this Agreement shall deprive the Arranger of any of its rights as such Lender. With respect to the Lenders of Guarantor Senior Indebtedness, the Arranger undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Section 11, and no implied covenants or obligations with respect to the Lenders of Guarantor Senior Indebtedness shall be -103- read into this Agreement against the Arranger. The Arranger shall not be deemed to owe any fiduciary duty to the Lenders of Guarantor Senior Indebtedness (except as provided in Section 11.3B). The Arranger shall not be liable to any such Lenders if the Arranger shall in good faith mistakenly pay over or distribute to Lenders or to Borrower or to any other person cash, property or securities to which any Lenders of Guarantor Senior Indebtedness shall be entitled by virtue of this Section 11 or otherwise. 11.9 Subordination Rights not Impaired by Acts or Omissions of the Guarantors or Lenders of Guarantor Senior Indebtedness ------------------------------------------------------------- No right of any present or future Lenders of any Guarantor Senior Indebtedness to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of any Guarantor or by any act or failure to act, in good faith, by any such Lender, or by any noncompliance by any Guarantor with the terms of this Agreement, regardless of any knowledge thereof which any such Lender may have or otherwise be charged with. The provisions of this Section 11 are intended to be for the benefit of, and shall be enforceable directly by, the Lenders of Guarantor Senior Indebtedness. 11.10 Lenders Authorize Arranger To Effectuate Subordination of --------------------------------------------------------- Guarantee --------- Each Lender by its acceptance of Loans and Notes authorizes and expressly directs the Arranger on its behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Section 11, and appoints the Arranger its attorney-in-fact for such purposes, including, in the event of any dissolution, winding-up, liquidation or reorganization of any Guarantor (whether in bankruptcy, insolvency, receivership, reorganization or similar proceedings or upon an assignment for the benefit of creditors or otherwise) tending towards liquidation of the business and assets of such Guarantor, the filing of a claim for the unpaid balance of its Loans and Notes in the form required in those proceedings. 11.11 This Article not To Prevent Events of Default --------------------------------------------- The failure to make a payment on account of principal of or interest on the Securities by reason of any provision of this Section 11 shall not be construed as preventing the occurrence of an Event of Default specified in Section 7.1. 11.12 Arranger's Compensation not Prejudiced -------------------------------------- Nothing in this Section 11 shall apply to amounts due to the Arranger pursuant to other sections in this Agreement. 11.13 No Waiver of Guarantee Subordination Provisions ----------------------------------------------- Without in any way limiting the generality of Section 11.9, the Lenders of Guarantor Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Arranger or the Lenders, without incurring responsibility to the Lenders and without impairing or releasing the subordination provided in this Section 11 or the obligations hereunder of the Lenders to the Lenders of Guarantor Senior Indebtedness, do any one or more of the following: (a) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Guarantor Senior Indebtedness or any instrument evidencing the same or any agreement under which Guarantor Senior Indebtedness is outstanding or secured; (b) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Guarantor -104- Senior Indebtedness; (c) release any Person liable in any manner for the collection of Guarantor Senior Indebtedness; and (d) exercise or refrain from exercising any rights against any Guarantor and any other Person. 11.14 Payments May Be Paid Prior to Dissolution ----------------------------------------- Nothing contained in this Section 11 or elsewhere in this Agreement shall prevent (i) a Guarantor, except under the conditions described in Section 11.2, from making payments of principal of and interest on the Loans or Notes, or from depositing with the Arranger any moneys for such payments, or (ii) the application by the Arranger of any moneys deposited with it for the purpose of making such payments of principal of and interest on the Loans or Notes, to the Lenders entitled thereto unless at least two Business Days prior to the date upon which such payment becomes due and payable, the Arranger shall have received the written notice provided for in Section 11.2B or in Section 11.6. A Guarantor shall give prompt written notice to the Arranger of any dissolution, winding-up, liquidation or reorganization of such Guarantor. SECTION 12. MISCELLANEOUS 12.1 Participations in and Assignments of Loans and Notes ---------------------------------------------------- A. Assignments. Each Lender shall have the right at any time to ----------- sell, assign, transfer or negotiate all or any portion of its Notes or its Loan Commitment only to one or more Eligible Assignees; provided, however, that no -------- ------- Lender shall be entitled at any time to sell, assign, transfer or negotiate all or any portion of its Notes or its Loan Commitment to an Eligible Assignee (other than any Lender or any Affiliate of any Lender) without the consent of Borrower (not to be unreasonably withheld, delayed or conditioned). In the case of any sale, transfer or negotiation of all or part of the Notes or any Loan Commitment authorized under this Section 12.1A, the assignee, transferee or recipient shall become a party to this Agreement as a Lender by execution of an Assignment and Assumption Agreement substantially in the form of Exhibit I; --------- provided, however, that (i) at such time Section 2.1A or 2.2A, as the case may - -------- ------- be, shall be deemed modified to reflect the Loan Commitment of such new Lender and of the existing Lenders, (ii) upon surrender of the Notes of the assigning Lender, new Notes will be issued, at Borrower's expense, to such new Lender and to the assigning Lender, such new Notes to be in conformity with the requirements of Section 2.1D or 2.2E as the case may be (with appropriate modifications) to the extent needed to reflect the revised Loan Commitment, (iii) the Arranger shall receive at the time of each such assignment (other than by Merrill Lynch Capital Corporation and other than any assignment to a Lender or any Affiliate of a Lender), from the assigning or assignee Lender, the payment of a non-refundable assignment fee of $3,500, and (iv) such transfer or assignment will not be effective until recorded by the Arranger on the Register pursuant to Section 5.14. To the extent of any assignment pursuant to this Section 12.1A, the assigning Lender shall be relieved of its obligations hereunder with respect to its assigned Loan Commitment, and the assignee, transferee or recipient shall have, to the extent of such sale, assignment, transfer or negotiation, the same rights, benefits and obligations as it would if it were a Lender with respect to such Notes or Loan Commitment, including, without limitation, the right to approve or disapprove actions which, in accordance with the terms hereof, require the approval of a Lender. B. Participations. A Lender may sell or agree to sell to one or more -------------- other Eligible Assignees a participation in all or any part of its Loans held by it, or in its Loan Commitment, in which event each purchaser of a participation (a "Participant") shall be entitled to the rights and benefits of the provisions ----------- of Section 12.18 and Section 12.20 (provided, however, that no Participant shall -------- ------- be entitled to receive any greater amount pursuant to Section 12.18 and Section 12.20 than the transferor Lender would have been entitled to receive in respect of the participation effected by such transferor Lender had no participation occurred) with -105- respect to its participation in such Loans and Loan Commitment as Loan if such Participant were a "Lender" for purposes of said Section, but, except as otherwise provided in Section 12.4, shall not have any other rights or benefits under this Agreement or any Note or any other Loan Document (the Participant's rights against such Lender in respect of such participation to be those set forth in the agreements executed by such Lender in favor of the Participant). All amounts payable by Borrower to any Lender under Section 12.18 and Section 12.20 in respect of Loans and its Loan Commitment shall be no greater than the amount that would have applied if such Lender had not sold or agreed to sell any participation in such Loans and Loan Commitment, and as if such Lender were funding each of such Loan and Loan Commitment in the same way that it is funding the portion of such Loan and Loan Commitment in which no participations have been sold. In no event shall a Lender that sells a participation agree with the Participant to take or refrain from taking any action hereunder or under any other Loan Document, except that such Lender may agree with the Participant that it will not, without the consent of the Participant, agree to any modification or amendment set forth in subclauses (ii), (iii) or (iv) of the proviso to Section 12.5. C. Certain Assignments Permitted. In addition to the assignments and ----------------------------- participations permitted under the foregoing provisions of this Section 12.1, any Lender may assign and pledge all or any portion of its Loans and its Notes to any Federal Reserve Bank as collateral security pursuant to Regulation A and any Operating Circular issued by such Federal Reserve Bank and, in the case of a Lender that is an investment fund, any such Lender may assign or pledge any portion of its Loans and its Notes to its trustee in support of its obligations to its trustee, without notice to or consent of Borrower and the Agents. No such assignment shall release the assigning Lender from its obligations hereunder. D. Information. A Lender may furnish any information concerning ----------- Borrower or any Subsidiary in the possession of such Lender from time to time to assignees and participants (including prospective assignees and participants) subject, however, to the provisions of Section 12.21. In addition, each of the Agents may furnish any information concerning Borrower or any of its Affiliates in such Agent's possession to any Affiliate of such Agent subject to the provisions of Section 12.21. E. No Assignment to Borrower. Anything in this Section 12.1 to the ------------------------- contrary notwithstanding, no Lender may assign or participate any interest in any Loan held by it hereunder to Borrower or any of its Subsidiaries without the prior written consent of each Lender. 12.2 Expenses -------- Whether or not the transactions contemplated hereby shall be consummated, Borrower agrees to promptly pay (i) all the actual and reasonable out-of-pocket costs and expenses of preparation of the Loan Documents and all the costs of furnishing all opinions by counsel for Borrower (including without limitation any opinions requested by the Lender as to any legal matters arising hereunder), and of Borrower's performance of and compliance with all agreements and conditions contained herein on its part to be performed or complied with; (ii) the fees, expenses and disbursements of one law firm serving as counsel to the Lenders in connection with the negotiation, preparation, execution and administration of the Loan Documents and the Loans hereunder, and any amendments, modifications and waivers hereto or thereto and consents to departures from the terms hereof and thereof (whether or not effective or consummated); and (iii) after the occurrence of an Event of Default, all reasonable out-of-pocket costs and expenses (including reasonable attorneys fees and expenses, and costs of settlement) actually incurred by the Lenders or the Agents in enforcing any Obligations of or in collecting any payments due from Borrower hereunder or under the Notes by reason of such Event of Default or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a "work-out" or of any insolvency or bankruptcy proceedings. -106- Notwithstanding anything to the contrary in this Agreement or any other Loan Document, Borrower and its Subsidiaries shall have no obligation to pay, or to indemnify the Agents or Lenders in respect of, any amounts arising from any disputes between or among Agents and/or Lenders not arising out of action by Borrower or any other Loan Party. 12.3 Indemnity --------- Borrower hereby agrees to indemnify each Creditor and their respective Affiliates, directors, trustees, officers, employees and agents (each, an "Indemnitee") from, and hold each of them harmless against, and that no ---------- Indemnitee will have any liability for, any and all Losses incurred by any of them (including any and all Losses incurred by any Agent to any Lender, whether or not any Creditor is a party thereto) directly or indirectly arising out of or by reason of or relating to the negotiation, execution, delivery, performance, administration or enforcement of any Loan Document, any of the transactions contemplated by the Loan Documents, any breach by any Loan Party of any representation, warranty, covenant or other agreement contained in any Loan Document in connection with any of the Transactions, the use or proposed use of any of the Loans or the use of any collateral security for the Loans (including the exercise by any Creditor of the rights and remedies or any power of attorney with respect thereto and any action or inaction in respect thereof), but excluding any such Losses to the extent finally determined by a court of competent jurisdiction in a final and nonappealable judgment to have arisen from the gross negligence or bad faith of the Indemnitee. Without limiting the generality of the foregoing, Borrower will indemnify each Creditor and each other Indemnitee from, and hold each Creditor and each other Indemnitee harmless against, any Losses described in the preceding sentence arising under any Environmental Law as a result of (a) the past, present or future operations of Borrower or any Subsidiary (or any predecessor in interest to Borrower or any Subsidiary), (b) the past, present or future condition of any site or facility owned, operated, leased or used at any time by Borrower or any Subsidiary (or any such predecessor in interest), or (c) any Release or threatened Release of any Hazardous Materials at, on, under or from any such site or facility; provided, however, that the indemnity hereunder -------- ------- shall be subject to the exclusions from indemnification set forth in the preceding sentence. To the extent that the undertaking to indemnify and hold harmless set forth in this Section 12.3 or any other provision of any Loan Document providing for indemnification is unenforceable because it is violative of any law or public policy or otherwise, Borrower shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all indemnified liabilities incurred by any of the Persons indemnified hereunder. Borrower also agrees that no Indemnitee shall have any liability (whether direct or indirect, in contract or tort or otherwise) for any Losses to any Loan Party or any Loan Party's security holders or creditors resulting from, arising out of, in any way related to or by reason of any matter referred to in any indemnification or expense reimbursement provisions set forth in this Agreement or any other Loan Document, except to the extent that any Loss is determined by a court of competent jurisdiction in a final nonappealable judgment to have resulted from the gross negligence or bad faith of such Indemnitee. Borrower agrees that, without the prior written consent of the Agents, which consent shall not be unreasonably withheld, no Loan Party will settle, compromise or consent to the entry of any judgment in any pending or threatened Proceeding in respect of which indemnification is reasonably likely to be sought under the indemnification provisions of this Section 12.3 (whether or not any Indemnitee is an actual or poten- -107- tial party to such Proceeding), unless such settlement, compromise or consent includes an unconditional written release of each Indemnitee from all liability arising out of such Proceeding and does not include any statement as to an admission of fault, culpability or failure to act by or on behalf of any Indemnitee and does not involve any payment of money or other value by any Indemnitee or any injunctive relief or factual findings or stipulations binding on any Indemnitee. 12.4 Setoff ------ Subject to Section 8, in addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence and during the continuance of any Event of Default, each Lender, the Agents, each Participant and each subsequent holder of any Note is hereby authorized by Borrower at any time or from time to time, without notice to Borrower, or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, including, but not limited to, Indebtedness evidenced by certificates of deposit, whether matured or unmatured but not including trust accounts or any other accounts held for the benefit of another Person) and any other Indebtedness at any time held or owing by such Person or that subsequent holder to or for the credit or the account of Borrower against and on account of the obligations and liabilities of Borrower to such Person or that subsequent holder under this Agreement and the Notes, including, but not limited to, all claims of any nature or description arising out of or connected with this Agreement or the Notes, irrespective of whether or not (a) such Person or that subsequent holder shall have made any demand hereunder or (b) such Person or that subsequent holder shall have declared the principal of or the interest on its portion of the Loans and its Notes and other amounts due hereunder to be due and payable as permitted by Section 7 and although said obligations and liabilities, or any of them, may be contingent or unmatured. 12.5 Amendments and Waivers ---------------------- No amendment, modification, termination or waiver of any term or provision of this Agreement, of the Notes, any Guarantee or, prior to the execution and delivery thereof, of the form of the Registration Rights Agreement or consent to any departure by Borrower or any Guarantor therefrom, shall in any event be effective without the prior written concurrence of Borrower or such Guarantor, as the case may be, and the Required Lenders; provided, however, -------- ------- that, (x) without the prior written consent of each Lender affected, an amendment, modification, termination or waiver of this Agreement, any Notes, any Guarantee, and, prior to the execution and delivery thereof, of the form of Registration Rights Agreement or consent to departure from a term or provision hereof or thereof may not: (i) reduce the principal amount of Notes whose holders must consent to any such amendment, modification, termination, waiver or consent; (ii) reduce the amount of or reduce the rate of or extend the time for payment of principal or interest on any Note; (iii) reduce the principal amount of any Note; (iv) make any Note payable in money other than that stated in the Note; (v) make any change in Section 2.5A(iv) or in the definition of Change of Control, in the last paragraph of Section 7 or in this Section 12.5; (vi) reduce the rate or extend the time of payment of fees or other compensation payable to the Lenders hereunder; (vii) modify the provisions of Sections 8 or 11 or any of the defined terms related thereto in any manner adverse to the Lenders; (viii) add conditions to Section 3.2 or 5.12; (ix) release any Guarantor that is a Material Subsidiary from its Guarantee or (x) waive performance by Borrower of its obligations under, or consent to any departure from any of the terms and provisions of, Section 2.5A(iv), and (b) without the consent of the Agents, no such amendment, modification, termination or waiver may amend, modify, terminate or waive any provision of Section 9 as the same applies to the Agents or any other provision of this Agreement as it relates to the rights of the Agents. No amendment, modification or waiver of any provision of this Agreement, the Notes, any Guarantee shall adversely affect the rights of the holders of Senior Indebtedness or the holders of Guarantor Senior Indebtedness without their consent. Any -108- waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on Borrower in any case shall entitle Borrower to any further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this Section 12.5A shall be binding upon each holder of the Notes at the time outstanding, each further holder of the Notes, and, if signed by Borrower or a Guarantor, on Borrower and such Guarantor. 12.6 Independence of Representations, Warranties and Covenants --------------------------------------------------------- The representations, warranties and covenants contained herein shall be independent of each other and no exception to any representation, warranty or covenant shall be deemed to be an exception to any other representation, warranty or covenant contained herein unless expressly provided, nor shall any such exception be deemed to permit any action or omission that would be in contravention of applicable law. 12.7 Entirety -------- The Loan Documents embody the entire agreement of the parties and supersede all prior agreements and understandings, if any, relating to the subject matter hereof and thereof, except that the syndication provisions of the Commitment Letter shall survive. 12.8 Notices ------- Unless otherwise provided herein, any notice or other communications herein required or permitted to be given shall be in writing and may be personally served, telecopied, telexed or sent by mail and shall be deemed to have been given when delivered in person, upon receipt of telecopy or telex against receipt of answer back or four Business Days after depositing it in the mail, registered or certified, with postage prepaid and properly addressed; provided, however, that notices shall not be effective until received. For the - -------- ------- purposes hereof, the addresses of the parties hereto (until notice of a change thereof is delivered as provided in this Section 12.8) shall be set forth under each party's name on the signature pages hereto and any additional Guarantors shall (until notice of a change thereof is delivered as provided in this Section 12.8) have the address set forth under Borrower's name on the signature page hereto. 12.9 Survival of Warranties and Certain Agreements --------------------------------------------- All agreements, representations and warranties made herein shall survive the execution and delivery of this Agreement, the making of the Loans hereunder and the execution and delivery of the Notes and, notwithstanding the making of the Loans, the execution and delivery of the Notes or any investigation made by or on behalf of any party, shall continue in full force and effect. The closing of the transactions herein contemplated shall not prejudice any right of one party against any other party in respect of anything done or omitted hereunder or in respect of any right to damages or other remedies. Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of Borrower set forth in Sections 12.2, 12.3 and 12.20 and the agreements of the Lenders set forth in Section 12.20 shall survive the payment of the Loans and the Notes and the termination of this Agreement. -109- 12.10 Failure or Indulgence not Waiver; Remedies Cumulative ----------------------------------------------------- No failure or delay on the part of the Agents or any Lender or any holder of any Note in the exercise of any power, right or privilege hereunder, under a Guarantee or under the Notes shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing under this Agreement, under a Guarantee or the Notes are cumulative to and not exclusive of any rights or remedies otherwise available. 12.11 Severability ------------ In case any provision in or obligation under this Agreement, under a Guarantee or the Notes shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. 12.12 Headings -------- Sections and Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. 12.13 Applicable Law -------------- THIS AGREEMENT, EACH GUARANTEE AND THE NOTES SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW. 12.14 Successors and Assigns; Subsequent Holders of Notes --------------------------------------------------- This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of the Lenders. The terms and provisions of this Agreement and each Guarantee shall inure to the benefit of any assignee or transferee of the Notes pursuant to Section 12.1A, and in the event of such transfer or assignment, the rights and privileges herein conferred upon the Lenders shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. In determining whether the holders of a sufficient aggregate principal amount of the Loans shall have consented to any action under this Agreement, any amount of the Loans owned or held by Borrower, any Guarantor or any of its Affiliates shall be disregarded. Borrower's rights or any interest therein hereunder may not be assigned without the prior express written consent of each of the Lenders. 12.15 Counterparts; Effectiveness --------------------------- This Agreement and any amendments, waivers, consents or supplements may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. This Agreement shall become effective upon the execution of a counterpart hereof -110- by each of the parties hereto, and delivery thereof to the Agents or, in the case of the Lenders, written telex or facsimile notice or telephonic notification (confirmed in writing) of such execution and delivery. The Agents will give Borrower and each Lender prompt notice of the effectiveness of this Agreement. 12.16 Consent to Jurisdiction; Venue; Waiver of Jury Trial ---------------------------------------------------- A. New York Jurisdiction. Any legal action or proceeding with --------------------- respect to this Agreement, any Note or any Guarantee may be brought in the Supreme Court of the State of New York sitting in New York County and the appellate courts thereof, the courts of the United States for the Southern District of New York and the appellate courts thereof, and, by execution and delivery of this Agreement, each of the parties to this Agreement hereby irrevocably accepts for itself and in respect of its respective property, generally and unconditionally, the jurisdiction of the aforesaid courts. Each of the parties to this Agreement hereby further irrevocably waives any claim that any such courts lack jurisdiction over itself, and agrees not to plead or claim, in any legal action or proceeding with respect to this Agreement, the Notes or the Guarantees brought in any of the aforesaid courts, that any such court lacks jurisdiction over such party. Each of the parties to this Agreement irrevocably consents to the service of process in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such party, at its respective address for notices pursuant to Section 12.8, such service to become effective 30 days after such mailing. To the extent permitted by law, each of the parties to this Agreement hereby irrevocably waives any objection to such service of process and further irrevocably waives and agrees not to plead or claim in any action or proceeding commenced hereunder or under any Note or any Guarantee that service of process was in any way invalid or ineffective. Nothing herein shall affect the right of any party to this Agreement to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against any party in any other jurisdiction. B. Venue. Each of the parties to this Agreement hereby irrevocably ----- waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement, the Notes or the Guarantees brought in the courts referred to in clause A above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. C. Trial by Jury Waiver. Each of the parties to this Agreement -------------------- hereby irrevocably waives all right to a trial by jury in any action, proceeding or counterclaim arising out of or relating to this Agreement, the Notes or the Guarantees or the transactions contemplated hereby or thereby. 12.17 Payments Pro Rata ----------------- A. Pro Rata Payments. The Arranger agrees that promptly after its ----------------- receipt of each payment of any interest or premium on or principal of the Notes from or on behalf of Borrower or any Guarantor, it shall, except as otherwise provided in this Agreement, distribute such payment to the Lenders (other than any Lender that has consented in writing to waive its pro rata share of such --- ---- payment) pro rata based upon their respective pro rata shares, if any, of such --- ---- --- ---- payment. B. Sharing of Payments. Each of the Lenders agrees that, if it ------------------- should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or banker's lien, by counterclaim or cross action, by the enforcement of any right under the Loan Documents, or otherwise) which is applicable to the payment of the principal of, or interest on, the Loans of a sum which with respect to the related sum or sums received by other Lenders is in a greater proportion than the total of -111- such Obligation then owed and due to such Lender bears to the total of such Obligation then owed and due to all of the Lenders immediately prior to such receipt, then such Lender receiving such excess payment shall purchase for cash without recourse or warranty from the other Lenders an interest in the Obligations of Borrower to such Lenders in such amount as shall result in a proportional participation by all of the Lenders in such amount; provided, -------- however, that if all or any portion of such excess amount is thereafter - ------- recovered from such Lender, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. Borrower consents to the foregoing. 12.18 Taxes and Other Taxes --------------------- A. Covered Taxes. So long as such Lender has complied in all ------------- material respects with this Section 12.18A, any and all payments by any Loan Party hereunder or under any other Loan Document shall be made free and clear of and without deduction or withholding for any and all present or future Taxes (other than Excluded Taxes), unless such Taxes are required by law or the administration thereof to be deducted or withheld (all such nonexcluded Taxes being hereinafter referred to as "Covered Taxes"). If Borrower or any other ------------- Loan Party shall be required by any applicable law or the administration thereof to deduct or withhold any Covered Taxes from or in respect of any sum payable hereunder or under any other Loan Document, (a) the sum payable shall be increased as may be necessary so that after making all required deductions or withholdings (including deductions or withholdings applicable to additional amounts paid under this paragraph), the Lender receives an amount equal to the sum it would have received if no such deduction or withholding had been made; (b) Borrower or such Loan Party shall make such deductions or withholdings; and (c) Borrower or such Loan Party forthwith shall pay the full amount deducted or withheld to the relevant taxation or other authority in accordance with applicable law. If any amounts are payable in respect of Covered Taxes pursuant to the preceding sentence, Borrower and each other Loan Party agrees jointly and severally to reimburse each Agent and Lender, upon the written request of such Agent or Lender, for taxes imposed on or measured by the net income or net profits of such Agent or Lender pursuant to the laws of the jurisdiction in which such Agent or Lender is organized or in which the principal office lending office or of such Agent or Lender is located or under the laws of any political subdivision or taxing authority of any such jurisdiction by reason of the making of payments in respect of Covered Taxes pursuant to this Section 12.18 (including pursuant to this sentence). Borrower will furnish to the Arranger within 45 days after the date the payment of any Covered Taxes is due pursuant to applicable law certified copies of tax receipts evidencing such payment by Borrower or another Loan Party. Borrower and each other Loan Party jointly and severally agrees to indemnify and hold harmless each Agent and Lender, and to reimburse such Agent or Lender, upon its written request, for the amount of any Covered Taxes so levied or imposed and paid by such Agent or Lender and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto whether or not correctly or legally asserted. Payment under this indemnification shall be made within 30 days from the date the Agents or such Lender makes written demand therefor. A certificate as to the amount of such Covered Taxes or Other Taxes and evidence of payment thereof submitted to Borrower shall be prima facie evidence, absent manifest error, of ----------- the amount due from Borrower to the Agents or such Lender. "Excluded Taxes" shall mean, except as provided in the third sentence -------------- of the immediately preceding paragraph, any tax imposed on or measured by the net income or net profits of a Lender and all franchise taxes, taxes on doing business or taxes measured by or in respect of capital or net worth imposed on any Lender or its lending office, or any branch or affiliate thereof, in each case, imposed, levied, collected, withheld or assessed (A) pursuant to the laws of the jurisdiction in which it is organized or the jurisdiction in which the principal office or lending office of such Lender is located or any subdivision thereof or therein or (B) as a result of a present or former connection between such Lender and the Governmental Authority imposing such net income or net profits tax (other than any such connection arising solely from such Lender -112- having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement, the Guarantees or any Note). Each Lender that is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) (a "Non-U.S. Lender") agrees to --------------- deliver to Borrower and the Arranger on or prior to the Closing Date, or in the case of a Lender that is an assignee or transferee of an interest under this Agreement pursuant to Section 12.2 (unless the respective Lender was already a Lender hereunder immediately prior to such assignment or transfer), on the date of such assignment or transfer to such Lender, (i) two accurate and complete original signed copies of Internal Revenue Service Form 4224 or 1001 (or successor forms) certifying to such Lender's entitlement to a complete exemption from, or reduction in rate of, United States withholding tax with respect to payments to be made under this Agreement and under any Note (or, with respect to any assignee Lender, at least as extensive as the assigning Lender), or (ii) if the Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue Service Form 1001 or 4224 pursuant to clause (i) above, (x) a certificate substantially in the form of Exhibit J (any such certificate, a "Section 12.18 Certificate") and (y) two - --------- ------------------------- accurate and complete original signed copies of Internal Revenue Service Form W- 8 (or successor form) certifying to such Lender's entitlement to a complete exemption from, or reduction in rate of, United States withholding tax with respect to payments to be made under this Agreement and under any Note (or, with respect to any assignee Lender, at least as extensive as the assigning Lender). In addition, each Lender agrees that from time to time after the Closing Date, when a lapse in time or change in circumstances renders the previous certification obsolete or inaccurate in any material respect, it will deliver to Borrower and the Arranger two new accurate and complete original signed copies of Internal Revenue Service Form 4224 or 1001, or Form W-8 and a Section 12.18 Certificate, as the case may be, and such other forms as may be required in order to confirm or establish the entitlement of such Lender to a continued exemption from or reduction in United States withholding tax with respect to payments under this Agreement and any Note, or it shall immediately notify Borrower and the Arranger of its inability to deliver any such Form or Certificate, in which case such Lender shall not be required to deliver any such form or certificate pursuant to this Section 12.18. Notwithstanding the foregoing, no Lender shall be required to deliver any such form or certificate if a change in treaty, law or regulation has occurred prior to the date on which such delivery would otherwise be required that renders any such form or certificate inapplicable or would prevent the Lender from duly completing and delivering any such form or certificate with respect to it and such Lender so advises Borrower. Each Person that shall become a participant pursuant to Section 12.1 shall, upon the effectiveness of the related transfer, be required to provide all the forms and statements required pursuant to this Section 12.18; provided, however, that in the case of a participant such participant shall - -------- ------- furnish all such required forms and statements to the Lender from which the related participation shall have been purchased. Borrower shall not be required to indemnify any Non-U.S. Lender, or to pay any additional amounts to any Non- U.S. Lender, in respect of U.S. Federal withholding tax pursuant to paragraph (a) above to the extent that (i) the obligation to withhold amounts with respect to U.S. Federal withholding tax existed on the date such Non-U.S. Lender became a party to this Agreement (or, in the case of a Non-U.S. participant, on the date such participant became a participant hereunder); provided, however, that -------- ------- this clause (i) shall not apply to the extent that (x) the indemnity payments or additional amounts any Lender (or participant) would be entitled to receive (without regard to this clause (i)) do not exceed the indemnity payment or additional amounts that the Person making the assignment, participation or transfer to such Lender (or participant) would have been entitled to receive in the absence of such assignment, participation or transfer, or (y) such assignment, participation or transfer had been requested by Borrower, (ii) the obligation to pay such additional amounts would not have arisen but for a failure by such Non-U.S. Lender or Non-U.S. participant to comply with the provisions of this Section 12.18 or (iii) any of the representations or certifications made by a Non-U.S. Lender or Non-U.S. participant pursuant to this Section 12.18 are incorrect at the time a payment hereunder is made, other than by reason of any change in treaty, law or regulation having effect after the date -113- such representations or certifications were made. Notwithstanding anything to the contrary contained in the preceding sentence or elsewhere in this Section 12.18, Borrower and each other Loan Party agrees jointly and severally to pay additional amounts and to indemnify each Lender in the manner set forth in this Section 12.18 (without regard to the identity of the jurisdiction requiring the deduction or withholding) in respect of any amounts deducted or withheld by it as described in the immediately preceding sentence as a result of any changes after the Closing Date in any applicable law, treaty, governmental rule, regulation, guideline or order, or in the interpretation thereof, relating to the deducting or withholding of income or similar Covered Taxes. B. Other Taxes. Borrower and each other Loan Party agrees jointly ----------- and severally to pay forthwith any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies (all such taxes, charges and levies being herein referred to as "Other Taxes") imposed by ----------- any jurisdiction (or any political subdivision or taxing authority thereof or therein) which arise from any payment made by Borrower or any other Loan Party hereunder or under any of the other Loan Documents or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any of the other Loan Documents. C. Refunds. If Borrower or any other Loan Party pays any additional ------- amount under this Section 12.18 to a Lender and such Lender determines in its sole discretion that it has actually received or realized in connection therewith any refund or any reduction of, or credit against, its tax liabilities in or with respect to the taxable year in which the additional amount is paid (a "Tax Benefit"), such Lender shall pay to Borrower or such Loan Party an amount ----------- that the Lender shall, in its sole discretion, determine is equal to the net benefit, after tax, which was obtained by the Lender in such year as a consequence of such Tax Benefit; provided, however, that (i) such Lender shall -------- ------- not be required to make any payment under this paragraph of this Section 12.18 if an Event of Default shall have occurred and be continuing; (ii) any taxes that are imposed on a Lender as a result of a disallowance or reduction (including through the expiration of any tax credit carryover or carryback of such Lender that otherwise would not have expired) of any Tax Benefit with respect to which such Lender has made a payment to Borrower or such Loan Party pursuant to this paragraph of this Section 12.18 shall be treated as a tax for which Borrower and the other Loan Parties are obligated to indemnify such Lender pursuant to this Section 12.18 without any exclusions or defenses; (iii) such Lender shall not be required to make any payment under this paragraph of this Section 12.18 in excess of such additional amounts received by such Lender; and (iv) nothing in this paragraph of this Section 12.18 shall require the Lender to disclose to Borrower or any other Loan Party any information determined by such Lender in its sole discretion to be confidential (including its tax returns). D. Receipts. Borrower and each other Loan Party shall furnish to the -------- Agents and each of the Lenders the original or a certified copy of a receipt evidencing any payment of Taxes or Other Taxes made by Borrower or such Loan Party as soon as such receipt becomes available. E. Survival. The provisions of this Section 12.18 shall survive the -------- termination of the Agreement and repayment of all Obligations. 12.19 Waiver of Stay, Extension or Usury Laws --------------------------------------- Borrower and the Guarantors covenant (to the extent that they may lawfully do so) that they will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive Borrower or the Guarantors from paying all or any portion of the principal of or interest on the Loans as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the perform- -114- ance of this Agreement; and (to the extent that they may lawfully do so) Borrower and the Guarantors hereby expressly waive all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Agents, but will suffer and permit the execution of every such power as though no such law had been enacted. 12.20 Additional Costs ---------------- If the adoption of, or any change in, any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority or the NAIC made subsequent to the date hereof: (i) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Note or any Loan made by it or change the basis of taxation of payments to such Lender in respect thereof by any Governmental Authority (except for Covered Taxes and Other Taxes and changes in the rate of tax on the overall net income of such Lender or its applicable lending office, or any affiliate thereof or franchise tax by any Governmental Authority); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the LIBOR Rate hereunder; or (iii) shall impose on such Lender any other condition (excluding Taxes); and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making or maintaining Loans or to reduce any amount receivable hereunder in respect thereof then, in any such case, Borrower shall promptly pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such increased cost or reduced amount receivable. If any Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall promptly notify Borrower, through the Arranger, of the event by reason of which it has become so entitled. In the event that any Lender shall have determined that the adoption of any law, rule, regulation or guideline regarding capital adequacy (or any change therein or in the interpretation or application thereof) or compliance by any Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any central bank or Governmental Authority or the NAIC, in each case, made subsequent to the date hereof including, without limitation, the issuance of any final rule, regulation or guideline, does or shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, after submission by such Lender to Borrower (with a copy to the Arranger) of a written request therefor, Borrower shall promptly pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. A certificate as to any additional amounts setting forth the calculation of such additional amounts pursuant to this Section 12.20 submitted by such Lender, through the Arranger, to Borrower shall be conclusive in the absence of clearly demonstrable error. Without limiting the survival of any other covenant -115- hereunder, this Section 12.20 shall survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder. 12.21 Confidentiality --------------- Each Lender shall hold all non-public information obtained pursuant to the requirements of or in connection with this Agreement in accordance with such Lender's customary procedures (which shall be reasonably prudent for purposes of maintaining confidentiality) for handling confidential information of this nature and in accordance with safe and sound banking practices; provided, -------- however, that (x) unless specifically prohibited by applicable law or court - ------- order, each Lender shall notify Borrower of any request by any governmental agency or representative thereof (other than any such request in connection with any examination of the financial condition of such Lender by such governmental agency) for disclosure of any such non-public information prior to disclosure of such information; and (y) in no event shall any Lender be obligated or required to return any materials furnished by Borrower or any of its Subsidiaries. 12.22 Acknowledgments --------------- Borrower hereby acknowledges that: (a) it has been advised by counsel in connection with the negotiation, execution and delivery of the Loan Documents; (b) no Agent or Lender has any fiduciary or similar relationships to Borrower and the relationship between the Agents and Lenders on the one hand, and Borrower, on the other hand, is solely that of debtor and creditor; and (c) no joint venture exists among the Agents and Lenders or among Borrower and the Agents and Lenders. [Signature Pages Follow] S-1 WITNESS the due execution hereof by the respective duly authorized officers of the undersigned as of the date first written above. BORROWER: PRIMESTAR, INC. By:________________________________________________ Name: Title: Notice Address: c/o TCI Satellite Entertainment, Inc. 8085 South Chester, Suite 300 Englewood, Colorado 80112 Telephone: (303)712-4600 Telecopy: (303) Attention: Chief Financial Officer S-2 AGENTS: MERRILL LYNCH & CO., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, as Arranger and Syndication Agent By:__________________________________________________ Name: Title: Notice Address: World Financial Center 250 Vesey Street, North Tower New York, New York 10281 Attention: Robert W.M. Stevens Telephone: (212)449-8221 Telecopy: (212)449-8230 S-3 MORGAN STANLEY SENIOR FUNDING, INC., as Administrative Agent By:_____________________________________________ Name: Title: Notice Address: 1585 Broadway 30th Floor New York, New York 10036 Attention: Joel Feldmann Telephone: (212)761-1288 Telecopy: (212)761-0587 S-4 DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION, as Documentation Agent By:___________________________________________ Name: Title: Notice Address: 277 Park Avenue New York, New York 10172 Attention: Paul Thompson, III Telephone: (212)892-3661 Telecopy: (212)892-7539 S-5 LENDERS: Commitment: $ MERRILL LYNCH CAPITAL CORPORATION By:__________________________________________ Name: Title: Notice Address: World Financial Center 250 Vesey Street, North Tower New York, New York 10281 Attention: Robert W.M. Stevens Telephone: (212)449-8221 Telecopy: (212)449-8230 S-6 Commitment: $ MORGAN STANLEY SENIOR FUNDING, INC. By:______________________________________ Name: Title: Notice Address: 1585 Broadway 30th Floor New York, New York 10036 Attention: Joel Feldmann Telephone: (212)761-1288 Telecopy: (212)761-0587 S-7 Commitment: $ DLJ BRIDGE FINANCE, INC. By:_________________________________ Name: Title: Notice Address: 277 Park Avenue New York, New York 10172 Attention: Paul Thompson, III Telephone: (212)892-3661 Telecopy: (212)892-7539 EX-10.10 3 CREDIT AGREEMENT DATED 03-09-1994 EXHIBIT 10.10 EXECUTION COPY $565,000,000 CREDIT AGREEMENT Dated as of March 9, 1994 Among PRIMESTAR PARTNERS, L.P., THE BANKS LISTED ON THE SIGNATURE PAGES HEREOF, THE BANK OF NEW YORK, CHEMICAL BANK and CITIBANK, N.A., as Managing Agents, THE BANK OF NEW YORK, as Documentation Agent and CHEMICAL BANK, as Administrative Agent TABLE OF CONTENTS Page ---- 1 CREDIT FACILITY............................................... 1 1.01. Commitment to Lend........................................ 1 1.02. Letters of Credit......................................... 1 1.03. Manner of Borrowing....................................... 2 1.04. Interest.................................................. 4 (a) Rates............................................... 4 (b) Payment............................................. 4 (c) Conversion and Continuation......................... 4 (d) Maximum Interest Rate............................... 5 1.05. Repayment................................................. 6 1.06. Prepayments............................................... 6 (a) Optional Prepayments................................ 6 (b) Mandatory Prepayments............................... 6 1.07. Limitation on Types of Loans.............................. 7 1.08. Reduction and Termination of Commitments.................. 7 (a) Optional Reduction of Commitments................... 7 (b) Termination of Commitments.......................... 7 1.09. Commitment Fees........................................... 8 1.10. Computation of Interest and Commitment Fee................ 8 1.11. Evidence of Indebtedness.................................. 8 1.12. Payments by the Borrower.................................. 8 (a) Time, Place and Manner.............................. 8 (b) No Reductions....................................... 9 (c) Authorization to Charge Accounts.................... 9 (d) Extension of Payment Dates.......................... 9 1.13. Distribution of Payments by the Administrative Agent...... 9 1.14. Taxes..................................................... 10 (a) Taxes Payable by the Borrower....................... 10 (b) Taxes Payable by the Administrative Agent or any Bank............................................... 11 (c) Credits and Deductions.............................. 11 (d) Exemption from U.S. Withholding and Backup Withholding Taxes.................................. 11 1.15. Pro Rata Treatment........................................ 12 1.16. Cash Collateral Account................................... 13 1.17. Liability of Partners..................................... 14 2 CONDITIONS TO LOANS........................................ 14 2.01. Conditions to Initial Loans............................ 14 2.02. Conditions to Each Loan................................ 15 3 CERTAIN REPRESENTATIONS AND WARRANTIES..................... 16 3.01. Organization; Power; Qualification..................... 16 3.02. Authorization; Enforceability; Required Consents; Absence of Conflicts.................................. 17 3.03. Litigation............................................. 17 3.04. Compliance With Law.................................... 17 3.05. Project Documents...................................... 17 (a) Delivery......................................... 17 (b) Absence of Defaults.............................. 18 3.06. Investment Company Act................................. 18 4 CERTAIN COVENANTS.......................................... 18 A 4.01 Preservation of Existence, Scope of Business, Compliance with Law, Preservation of Enforceability... 18 4.02. Use of Proceeds........................................ 18 B 4.03. Merger or Consolidation................................ 19 5 INFORMATION................................................ 19 5.01. Information to Be Furnished............................ 19 (a) Quarterly Financial Statements................... 19 (b) Year End Financial Statements; Accountants' Certificate...................................... 19 (c) Officer's Certificate as to Financial Statements and Defaults.......................... 20 (d) Requested Information............................. 20 (e) Notice of Defaults, Material Adverse Changes and Other Matters................................ 20 (f) Opinions of Counsel for Issuing Banks............. 21 5.02. Accuracy of Financial Statements and Information....... 21 (a) Historical Financial Statements................... 21 (b) Future Financial Statements....................... 21 (c) Historical Information............................ 21 (d) Future Information................................ 22 5.03. Additional Covenants Relating to Disclosure.......... 22 (a) Accounting Methods and Financial Records........ 22 (b) Visits, Inspections and Discussions............. 22 5.04. Authorization of Third Parties to Deliver Information......................................... 22 6 DEFAULT.................................................. 23 6.01. Events of Default.................................... 23 6.02. Remedies upon Event of Default....................... 25 7 ADDITIONAL CREDIT FACILITY PROVISIONS.................... 26 7.01 Mandatory Suspension and Conversion of Fixed Rate Loans.......................................... 26 7.02. Regulatory Changes................................... 27 7.03. Funding Losses....................................... 28 7.04. Certain Determinations............................... 28 7.05. Change of Lending Office............................. 29 7.06. Replacement of Banks................................. 29 8 THE AGENTS............................................... 30 8.01. Appointment and Powers............................... 30 8.02. Limitation on Agents' Liability...................... 30 8.03. Defaults............................................. 31 8.04. Rights as a Bank..................................... 31 8.05. Indemnification...................................... 31 8.06. Non Reliance on Agents and Other Banks............... 32 8.07. Resignation of the Administrative Agent.............. 32 9 MISCELLANEOUS............................................ 33 9.01. Notices and Deliveries............................... 33 (a) Manner of Delivery.............................. 33 (b) Addresses....................................... 33 (c) Effectiveness................................... 35 (d) Reasonable Notice............................... 36 9.02. Expenses; Indemnification............................ 36 9.03. Amounts Payable Due upon Request for Payment......... 37 9.04. Remedies of the Essence.............................. 37 9.05. Rights Cumulative.................................... 37 9.06. Disclosures.......................................... 37 9.07. Amendments; Waivers.................................. 38 9.08. Set-Off; Suspension of Payment and Performance....... 38 9.09. Sharing of Recoveries................................ 39 9.10. Assignments and Participations....................... 40 (a) Assignments..................................... 40 (b) Participations.................................. 40 9.11. Governing Law........................................ 41 9.12. Judicial Proceedings; Waiver of Jury Trial........... 41 9.13. Reference Banks...................................... 42 9.14. Severability of Provisions........................... 42 9.15. Counterparts......................................... 42 9.16. Survival of Obligations.............................. 42 9.17. Entire Agreement..................................... 42 9.18. Successors and Assigns............................... 43 10 INTERPRETATION.......................................... 43 10.01. Defined Terms........................................ 43 10.02. Other Interpretive Provisions........................ 54 10.03. Accounting Matters................................... 55 10.04. Representations and Warranties....................... 55 10.05. Captions............................................. 55 10.06. Interpretation of Related Documents.................. 56 ANNEX A Banks, Lending Offices, Notice Addresses and Commitments Schedule 1.03 NOTICE OF BORROWING Schedule 1.04(c)(iv) NOTICE OF CONVERSION OR CONTINUATION Schedule 1.06(a) NOTICE OF PREPAYMENT Schedule 2.01(a) CERTIFICATE AS TO RESOLUTIONS, ETC. Annex A RESOLUTIONS OF PARTNERS COMMITTEE Schedule 2.01(d) FORM OF OPINION OF BORROWERS' COUNSEL Schedule 2.01(e) FORM OF OPINION OF ISSUING BANK'S COUNSEL Schedule 2.01(f) FORM OF OPINION OF MANAGING AGENTS' COUNSEL Schedule 3.02 SCHEDULE OF REQUIRED CONSENTS AND GOVERNMENTAL APPROVALS Schedule 5.01(c) CERTIFICATE AS TO FINANCIAL STATEMENTS AND DEFAULTS Schedule 5.02(a) SCHEDULE OF HISTORICAL FINANCIAL INFORMATION Schedule 9.10(a) NOTICE OF ASSIGNMENT Schedule 10.01-(1) SCHEDULE OF PARTICIPATING PARTNERS AND PARENT COMPANIES Schedule 10.01-(2) SCHEDULE OF REQUIRED LC AMOUNTS EXHIBIT A FORM OF NOTE EXHIBIT B FORM OF LETTER OF CREDIT EXHIBIT C FORM OF COLLATERAL ACCOUNT AGREEMENT CREDIT AGREEMENT Dated as of March 9, 1994 PRIMESTAR PARTNERS, L.P., a Delaware limited partnership, the BANKS listed on the signature pages hereof, THE BANK OF NEW YORK, CHEMICAL BANK and CITIBANK, N.A., as Managing Agents, THE BANK OF NEW YORK, as Documentation Agent and CHEMICAL BANK, as Administrative Agent, agree as follows (with certain terms used herein being defined in Article 10): ARTICLE 1 CREDIT FACILITY --------------- Section 1.01. Commitment to Lend. Upon the terms and subject to the ------------------ conditions of this Agreement, each Bank agrees to make, from time to time during the period from the Agreement Date through the Termination Date, one or more Loans to the Borrower in an aggregate unpaid principal amount not exceeding at any time such Bank's Commitment at such time; provided, however, that no Loan -------- ------- shall be made if and to the extent that the amount thereof, together with the amount of all other Loans to be made at such time and the aggregate unpaid principal amount of all other Loans then outstanding, would exceed the Availability Amount. Within such limits, and upon such terms and subject to such conditions, amounts may be borrowed, repaid and reborrowed. Subject to Section 1.07 and the other terms and conditions of this Agreement, the Loans may, at the option of the Borrower, be made as, and from time to time continued as or converted into, Base Rate, CD Rate or Eurodollar Rate Loans of any permitted Type, or any combination thereof. The aggregate amount of the Commitments on the Agreement Date is $565,000,000. Section 1.02. Letters of Credit. (a) The Borrower shall provide or ----------------- cause to be provided on the Agreement Date, and shall maintain or cause to be maintained in full force and effect at all times thereafter through the Repayment Date, one or more Letters of Credit in an aggregate undrawn face amount not less than the Required LC Amount from time to time in effect. (b) The obligation of the Borrower to so maintain Letters of Credit may be satisfied by (i) a renewal and/or an increase in the face amount of the applicable Letter or Letters of Credit, which renewal and increase shall be advised to the beneficiary of such Letter or Letters of Credit pursuant to documentation satisfactory in form and substance to the Managing Agents, (ii) the issuance of one or more replacement Letters of Credit in the appropriate face amount or amounts, (iii) the issuance of one or more additional Letters of Credit in the appropriate face amount or amounts, or (iv) any combination thereof. (c) In the event that existing Letters of Credit are required to be renewed and/or increased, or replacement or additional Letters of Credit are required to be issued, in order for the Borrower to be in compliance with Section 1.02(a) on any Letter of Credit Event Date, binding, unconditional commitments, satisfactory in form and substance to the Managing Agents, for such renewals and/or increases of Letters of Credit or such replacement or additional Letters of Credit shall be delivered to the Administrative Agent no later than the 45th day preceding such Letter of Credit Event Date, and the Borrower shall promptly on such 45th day notify the Administrative Agent of any failure to do so. (d) The Letters of Credit shall be drawable (i) at any time and from time to time in the aggregate amount due and payable under this Agreement and the Notes at such time, whether for principal, interest, fees or other amounts payable, and whether such amounts have become due and payable at maturity, by reason of mandatory prepayment or acceleration or otherwise and (ii) as provided in Section 1.16 hereof. Drawings under the Letters of Credit (other than drawings made pursuant to Section 1.16), together with applications of cash collateral, if any, held pursuant to Section 1.16, shall be made under each Participating Partner's Attributable Letter of Credit pro rata in accordance with the percentage set forth on Schedule 10.01-(1) opposite the name of such Participating Partner. Subject to the provisions of the next sentence, in any case where the Attributable Letter of Credit of a Participating Partner consists of more than one Letter of Credit, drawings shall be made thereunder pro rata in accordance with the relative amounts thereof. In the event that an Attributable Letter of Credit of a Participating Partner is such by virtue of the second sentence of the definition of Attributable Letter of Credit, no drawing shall be made thereunder unless all other Attributable Letters of Credit of such Participating Partner shall have been drawn in full and all cash collateral, if any, held pursuant to Section 1.16 hereof and attributable to such Participating Partner shall have been fully applied as provided in Section 1.16, and pending such drawing or application in full, such drawing and such application shall be made pro rata in accordance with the relative amounts of such Letters of Credit and cash collateral. 2 Section 1.03. Manner of Borrowing. (a) The Borrower shall give the ------------------- Administrative Agent notice (which shall be irrevocable) no later than 11:00 a.m. (New York time) on, in the case of Base Rate Loans, the Business Day, in the case of CD Rate Loans, two Business Days, and, in the case of Eurodollar Rate Loans, the third Eurodollar Business Day, before the requested date for the making of such Loans. Each such notice shall be in the form of Schedule 1.03 ------------- and shall specify (i) the requested date for the making of the requested Loans, which shall be, in the case of Domestic Rate Loans, a Business Day and, in the case of Eurodollar Rate Loans, a Eurodollar Business Day, (ii) the Type or Types of Loans requested and (iii) the amount of each such Type of Loan, the aggregate of which amounts for all Types of Loans requested shall be (A) in the case of CD Rate or Eurodollar Rate Loans, $5,000,000 or any greater integral multiple of $1,000,000, (B) in the case of Base Rate Loans, $1,000,000 or any greater integral multiple of $1,000,000 or (C) if less, the aggregate amount of the unused Commitments. Upon receipt of any such notice, the Administrative Agent shall promptly notify each Bank of the contents thereof and of the amount and Type of each Loan to be made by such Bank on the requested date specified therein. (b) Not later than 1:00 p.m. (New York time) on each requested date for the making of Loans, each Bank shall make available to the Administrative Agent, in Dollars in funds immediately available to the Administrative Agent at the Administrative Agent's Office, the Loans to be made by such Bank on such date. Any Bank's failure to make any Loan to be made by it on the requested date therefor shall not relieve any other Bank of its obligation to make any Loan to be made by such other Bank on such date, but such other Bank shall not be liable for such failure. (c) Unless the Administrative Agent shall have received notice from a Bank prior to 12:00 noon (New York time) on the requested date for the making of any Loans that such Bank will not make available to the Administrative Agent the Loans requested to be made by such Bank on such date, the Administrative Agent may assume that such Bank has made such Loans available to the Administrative Agent on such date in accordance with Section 1.03(b) and the Administrative Agent in its sole discretion may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount on behalf of such Bank. If and to the extent such Bank shall not have so made available to the Administrative Agent the Loans requested to be made by such Bank on such date and the Administrative Agent shall have so made available to the Borrower a corresponding amount on behalf of such Bank, such Bank shall, 3 on demand, pay to the Administrative Agent such corresponding amount together with interest thereon, for each day from the date such amount shall have been so made available by the Administrative Agent to the Borrower until the date such amount shall have been repaid to the Administrative Agent, at the Federal Funds Rate until (and including) the third Business Day after demand is made and thereafter at the Alternate Base Rate. If such Bank does not pay such corresponding amount promptly upon the Administrative Agent's demand therefor, the Administrative Agent shall promptly notify the Borrower and the Borrower shall immediately repay such corresponding amount to the Administrative Agent together with accrued interest thereon at the applicable rate or rates provided in Section 1.04(a), provided that the Administrative Agent shall not draw under the Letters of Credit or apply cash collateral to satisfy such payment obligation prior to the third Business Day after the day on which such notice to the Borrower shall have been given. (d) All Loans made available to the Administrative Agent in accordance with Section 1.03(b) shall be disbursed by the Administrative Agent not later than 2:00 p.m. (New York time) on the requested date therefor in Dollars in funds immediately available to the Borrower by credit to an account of the Borrower at the Administrative Agent's Office or in such other manner as may have been specified in the applicable notice and as shall be acceptable to the Administrative Agent. Section 1.04. Interest. (a) Rates. Each Loan shall bear interest -------- ----- on the outstanding principal amount thereof until due at a rate per annum equal to, (i) so long as it is a Base Rate Loan, the Alternate Base Rate as in effect from time to time, (ii) so long as it is a CD Rate Loan, the applicable Adjusted CD Rate plus 9/16% and (iii) so long as it is a Eurodollar Rate Loan, the applicable Adjusted Eurodollar Rate plus 7/16%. If all or any part of a Loan or any other amount due and payable under the Loan Documents is not paid when due (whether at maturity, by reason of mandatory prepayment or acceleration or otherwise), such unpaid amount shall, to the maximum extent permitted by Applicable Law, bear interest for each day during the period from the date such amount became so due until it shall be paid in full (whether before or after judgment) at a rate per annum equal to the applicable Post-Default Rate. (b) Payment. Interest shall be payable, (i) in the case of Base Rate ------- Loans, on each Interest Payment Date, (ii) in the case of CD and Eurodollar Rate Loans, on the last day of each applicable Interest Period (and, in the case of a CD or Eurodollar Rate Loan having an Interest Period longer than 90 4 days or three months, respectively, at intervals of 90 days and three months, respectively, after the first day of such Interest Period), (iii) in the case of any Loan, when such Loan shall be due (whether at maturity, by reason of notice of prepayment or acceleration or otherwise) or converted, but only to the extent then accrued on the amount then so due or converted. Interest at the Post- Default Rate shall be payable on demand. (c) Conversion and Continuation. (i) All or any part of the --------------------------- principal amount of Loans of any Type may, on any Business Day, be converted into any other Type or Types of Loans, except that (A) Fixed Rate Loans may be converted only on the last day of an applicable Interest Period and (B) Domestic Rate Loans may be converted into Eurodollar Rate Loans only on a Eurodollar Business Day. (ii) Base Rate Loans shall continue as Base Rate Loans unless and until such Loans are converted into Loans of another Type. Fixed Rate Loans of any Type shall continue as Loans of such Type until the end of the then current Interest Period therefor, at which time they shall be automatically converted into Base Rate Loans unless the Borrower shall have given the Administrative Agent notice in accordance with Section 1.04(c)(iv) requesting either that such Loans continue as Loans of such Type for another Interest Period or that such Loans be converted into Loans of another Type at the end of such Interest Period. (iii) Notwithstanding anything to the contrary contained in Section 1.04(c)(i) or (ii), during a Default, the Administrative Agent may notify the Borrower that Loans may only be converted into or continued as Loans of certain specified Types and, thereafter, until no Default shall continue to exist, Loans may not be converted into or continued as Loans of any Type other than one or more of such specified Types. (iv) The Borrower shall give the Administrative Agent notice (which shall be irrevocable) of each conversion of Loans or continuation of Fixed Rate Loans no later than 12:00 noon (New York time) on, in the case of a conversion into or a continuation of Base Rate Loans, the Business Day, in the case of a conversion into or continuation of CD Rate Loans, two Business Days, and, in the case of a conversion into or continuation of Eurodollar Rate Loans, the third Eurodollar Business Day, before the requested date of such conversion or continuation. Each notice of conversion or continuation shall be in the form of Schedule 1.04(c)(iv) and shall specify (A) the requested date of such -------------------- conversion or continuation, (B) the amount and Type and, in the case of Fixed Rate Loans, the last day of the applicable 5 Interest Period of the Loans to be converted or continued and (C) the amount and Type or Types of Loans into which such Loans are to be converted or as which such Loans are to be continued. Upon receipt of any such notice, the Administrative Agent shall promptly notify each Bank of (x) the contents thereof, (y) the amount and Type and, in the case of Fixed Rate Loans, the last day of the applicable Interest Period of each Loan to be converted or continued by such Bank and (z) the amount and Type or Types of Loans into which such Loans are to be converted or as which such Loans are to be continued. (d) Maximum Interest Rate. Nothing contained in the Loan Documents --------------------- shall require the Borrower at any time to pay interest at a rate exceeding the Maximum Permissible Rate. If interest payable by the Borrower on any date would exceed the maximum amount permitted by the Maximum Permissible Rate, such interest payment shall automatically be reduced to such maximum permitted amount, and, to the extent permitted under Applicable Law, interest for any subsequent period, to the extent less than the maximum amount permitted for such period by the Maximum Permissible Rate, shall be increased by the unpaid amount of such reduction. To the extent permitted under Applicable Law, any interest actually received for any period in excess of such maximum amount permitted for such period shall be deemed to have been applied as a prepayment of the Loans. Section 1.05. Repayment. The Loans shall mature and become due and --------- payable, and shall be repaid by the Borrower, in full on the Termination Date. Section 1.06. Prepayments. (a) Optional Prepayments. The Borrower ----------- -------------------- may, at any time and from time to time, prepay the Loans in whole or in part, without premium or penalty (but subject to Section 7.03), except that any partial prepayment shall be in an aggregate principal amount of $5,000,000 in the case of a prepayment of CD Rate or Eurodollar Rate Loans, and $1,000,000 in the case of a prepayment of Base Rate Loans, or, in each case, any greater integral multiple of $1,000,000. The Borrower shall give the Administrative Agent notice of each prepayment pursuant to this Section 1.06(a) no later than 11:00 a.m. (New York time) on, in the case of a prepayment of Base Rate Loans, the Business Day, in the case of a prepayment of CD Rate Loans, two Business Days, and, in the case of a prepayment of Eurodollar Rate Loans, the third Eurodollar Business Day, before the date of such prepayment. Each such notice of prepayment shall be in the form of Schedule 1.06(a) and shall specify (i) the ---------------- date such prepayment is to be made and (ii) the amount and Type and, in the case of Fixed Rate Loans, the last day of the applicable Interest Period of the Loans to be prepaid. Upon 6 receipt of any such notice, the Administrative Agent shall promptly notify each Bank of the contents thereof and the amount and Type and, in the case of Fixed Rate Loans, the last day of the applicable Interest Period of each Loan of such Bank to be prepaid. Amounts to be prepaid pursuant to this Section 1.06(a) shall be paid together with interest thereon as provided in Section 1.04(b) and shall, as of the Administrative Agent's close of business at the Administrative Agent's Office on the day preceding the date specified in the applicable notice of prepayment, irrevocably be due and payable on such specified date. (b) Mandatory Prepayments. --------------------- (i) In the event that the Borrower shall have failed to comply with the requirements of Section 1.02(a) as of any Letter of Credit Event Date and such failure shall continue for 90 days thereafter, the Borrower shall, on such 90th day, prepay the principal of and interest on the Loans and the Notes, together with the amount, if any, due with respect thereto under Section 7.03, and all other amounts owing under the Loan Documents. This subsection (b)(i) is subject, without limitation, to the second sentence of Section 5.01(f). (ii) In the event that, at any time, the sum of (A) the aggregate principal amount of Loans outstanding at such time, (B) the aggregate amount of accrued and unpaid interest thereon and accrued and unpaid fees payable under the Loan Documents and (C) the aggregate amount of interest and fees that would accrue for the three month period commencing on the date of determination (or, if less, the period from the date of determination through the date that is 30 days after the next Increase Date), assuming such Loans remained outstanding during such period and bore interest throughout such period at the weighted average rate applicable to such Loans on the date of determination, exceeds the sum of the Available Letter of Credit Amount and the Available Cash Collateral Amount, the Borrower shall, within five Business Days, prepay the Loans in an amount such that, after giving effect thereto, no such excess shall continue to exist. This subsection (b)(ii) is subject, without limitation, to the second sentence of Section 5.01(f). Section 1.07. Limitation on Types of Loans. Notwithstanding anything ---------------------------- to the contrary contained in this Agreement, the Borrower shall borrow, prepay, convert and continue Loans in a manner such that (a) the aggregate principal 7 amount of Fixed Rate Loans of the same Type and having the same Interest Period shall at all times be not less than $5,000,000, (b) there shall not be, at any one time, more than ten Interest Periods in effect with respect to Fixed Rate Loans of all Types and (c) no Interest Period shall extend beyond the Termination Date. Section 1.08. Reduction and Termination of Commitments. (a) ---------------------------------------- Optional Reduction of Commitments. The Borrower may permanently reduce the - --------------------------------- Commitments by giving the Administrative Agent notice (which shall be irrevocable) thereof no later than 11:00 a.m. (New York time) on the third Business Day before the requested date of such reduction, except that (i) any partial reduction of the Commitments shall be in an aggregate amount of $5,000,000 or any greater integral multiple of $1,000,000 and (ii) no reduction may reduce the Commitments to an amount less than the aggregate amount of the outstanding Loans. Upon receipt of any such notice, the Administrative Agent shall promptly notify each Bank of the contents thereof and the amount to which such Bank's Commitment is to be reduced. In connection with each such reduction, the Required LC Amount for the then current period specified on Schedule 10.01-(2) and for each subsequent period specified thereon shall - ------------------ automatically be reduced by the amount of such reduction of Commitments, and such reduction in the Required LC Amount shall be applied to each of the amounts set forth on such Schedule for each such period opposite the name of each Participating Partner on a pro rata basis. (b) Termination of Commitments. The Commitments shall terminate on -------------------------- the day that the Borrower shall be required to make the prepayment provided for in Section 1.06(b)(i). Section 1.09. Commitment Fees. The Borrower shall pay to the --------------- Administrative Agent for the account of each Bank a commitment fee on the daily unused amount of such Bank's Commitment for each day from the Agreement Date through the Termination Date at a rate per annum of 3/16%, payable on successive Interest Payment Dates, on the Termination Date and on the date of any reduction of such Commitment (to the extent accrued and unpaid on the amount of the reduction). None of the fees payable under any of the Loan Documents shall be refundable in whole or in part. Section 1.10. Computation of Interest and Commitment Fee. Interest ------------------------------------------ calculated on the basis of the Adjusted CD Rate or the Adjusted Eurodollar Rate, the Federal Funds Rate or the Base CD Rate (as defined in the definition of Alternate Base Rate) and the commitment fee shall be computed on the basis of a year of 8 360 days and paid for the actual number of days elapsed. Interest calculated on the basis of the Prime Rate shall be computed on the basis of a year of 365 or 366 days, as applicable, and paid for the actual number of days elapsed. Interest for any period shall be calculated from and including the first day thereof to but excluding the last day thereof. Section 1.11. Evidence of Indebtedness. Each Bank's Loans and the ------------------------ Borrower's obligation to repay such Loans with interest in accordance with the terms of this Agreement shall be evidenced by this Agreement, the records of such Bank and a single Note payable to the order of such Bank. The records of each Bank shall be prima facie evidence of such Bank's Loans and accrued interest thereon and of all payments made in respect thereof. Section 1.12. Payments by the Borrower. (a) Time, Place and Manner. ------------------------ ----------------------- All payments due to the Administrative Agent under the Loan Documents shall be made to the Administrative Agent at the Administrative Agent's Office or at such other address as the Administrative Agent may designate by notice to the Borrower. All payments due to any Bank under the Loan Documents shall, in the case of payments on account of principal of or interest on the Loans or fees, be made to the Administrative Agent at the Administrative Agent's Office and, in the case of all other payments, be made directly to such Bank at its Domestic Lending Office or at such other address as such Bank may designate by notice to the Borrower. All payments due to any Bank under the Loan Documents, whether made to the Administrative Agent or directly to such Bank, shall be made for the account of, in the case of payments in respect of Eurodollar Rate Loans, such Bank's Eurodollar Lending Office and, in the case of all other payments, such Bank's Domestic Lending Office. A payment shall not be deemed to have been made on any day unless such payment has been received by the required Person, at the required place of payment, in Dollars in funds immediately available to such Person at such place, no later than 12:00 noon (New York time) on such day; provided, however, that the failure of the Borrower to make any such payment by - -------- ------- such time shall not constitute a Default hereunder so long as such payment is received no later than 3:00 p.m. (New York time) on such day, but any such payment received later than 12:00 noon (New York time) on such day shall be deemed to have been made on the next Business Day for the purpose of calculating interest on the amount paid, which interest, in the case of any such payment received later than 3:00 p.m. (New York time), shall be calculated for such one- day period on the basis of the applicable Post-Default Rate. 9 (b) No Reductions. All payments due to the Administrative Agent or ------------- any Bank under the Loan Documents, and all other terms, conditions, covenants and agreements to be observed and performed by the Borrower thereunder, shall be made, observed or performed by the Borrower without any reduction or deduction whatsoever, including any reduction or deduction for any set-off, recoupment, counterclaim (whether sounding in tort, contract or otherwise) or Tax, except for any withholding or deduction for Taxes required to be withheld or deducted under Applicable Law. (c) Authorization to Charge Accounts. The Borrower hereby authorizes -------------------------------- the Administrative Agent and each Bank, if and to the extent any amount payable by the Borrower under the Loan Documents (whether payable to such Person or to any other Person that is the Administrative Agent or a Bank) is not otherwise paid when due, to charge such amount against any or all of the accounts of the Borrower with such Person or any of its Affiliates (whether maintained at a branch or office located within or without the United States), with the Borrower remaining liable for any deficiency. The Person so charging any such amount shall give notice thereof to the Borrower, either before or after such charge, but the failure to give such notice shall not affect such Person's rights hereunder. (d) Extension of Payment Dates. Whenever any payment to the -------------------------- Administrative Agent or any Bank under the Loan Documents would otherwise be due (except by reason of acceleration) on a day that is not a Business Day, or, in the case of payments of the principal of Eurodollar Rate Loans, a Eurodollar Business Day, such payment shall instead be due on the next succeeding Business or Eurodollar Business Day, as the case may be, unless, in the case of a payment of the principal of Eurodollar Rate Loans, such extension would cause payment to be due in the next succeeding calendar month, in which case such due date shall be advanced to the next preceding Eurodollar Business Day. If the date any payment under the Loan Documents is due is extended (whether by operation of any Loan Document, Applicable Law or otherwise), such payment shall bear interest for such extended time at the rate of interest applicable hereunder. Section 1.13. Distribution of Payments by the Administrative Agent. ---------------------------------------------------- (a) The Administrative Agent shall promptly distribute to each Bank its ratable share of each payment received by the Administrative Agent under the Loan Documents for the account of the Banks by credit to an account of such Bank at the Administrative Agent's Office or by wire transfer to an account of such Bank at an office of any other commercial bank located in the United States. 10 (b) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Banks under the Loan Documents that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent in its sole discretion may, in reliance upon such assumption, cause to be distributed to each Bank on such due date a corresponding amount with respect to the amount then due such Bank. If and to the extent the Borrower shall not have so made such payment in full to the Administrative Agent and the Administrative Agent shall have so distributed to any Bank a corresponding amount, such Bank shall, on demand, repay to the Administrative Agent the amount so distributed together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Administrative Agent, at the Federal Funds Rate until (and including) the third Business Day after demand is made and thereafter at the Alternate Base Rate. Section 1.14. Taxes. (a) Taxes Payable by the Borrower. If any Tax ----- ----------------------------- (other than Bank Taxes) is required to be withheld or deducted from, or is otherwise payable by the Borrower in connection with, any payment to the Administrative Agent or any Bank under the Loan Documents, the Borrower (i) shall, if required, withhold or deduct the amount of such Tax from such payment and, in any case, pay such Tax to the appropriate taxing authority in accordance with Applicable Law and (ii) shall pay to the Administrative Agent or such Bank, as applicable, such additional amounts as may be necessary so that the net amount received by the Administrative Agent or such Bank with respect to such payment, after withholding or deducting all such Taxes required to be withheld or deducted, is equal to the full amount payable under the Loan Documents. If any such Tax is withheld or deducted from, or is otherwise payable by the Borrower in connection with, any payment payable to the Administrative Agent or any Bank under the Loan Documents, the Borrower shall, as soon as possible after the date of such payment, furnish to the Administrative Agent or such Bank, as applicable, the original or a certified copy of a receipt for such Tax from the applicable taxing authority. If any payment due to the Administrative Agent or any Bank under the Loan Documents is or is expected to be made without withholding or deducting therefrom, or otherwise paying in connection therewith, any such Tax payable to any taxing authority, the Borrower shall, within 30 days after any request from the Administrative Agent or such Bank, as applicable, furnish to the Administrative Agent or such Bank a certificate from such taxing authority, or an opinion 11 of counsel acceptable to the Administrative Agent or such Bank, in either case stating that no Tax payable to such taxing authority was or is, as the case may be, required to be withheld or deducted from, or otherwise paid by the Borrower in connection with, such payment. (b) Taxes Payable by the Administrative Agent or any Bank. The ----------------------------------------------------- Borrower shall, promptly upon request by the Administrative Agent or any Bank for the payment thereof, pay to the Administrative Agent or such Bank, as the case may be, (i) all Taxes (other than Bank Taxes) payable by the Administrative Agent or such Bank, as the case may be, with respect to any payment due to the Administrative Agent or such Bank under the Loan Documents and (ii) all Taxes (other than Bank Taxes) payable by the Administrative Agent or such Bank as a result of payments made by the Borrower (whether made to a taxing authority or to the Administrative Agent or such Bank) pursuant to Section 1.14(a) or (b). (c) Credits and Deductions. If the Administrative Agent or any Bank ---------------------- is, in its sole opinion, able to apply for any credit, deduction or other reduction in Bank Taxes by reason of any payment made by the Borrower under Section 1.14(a) or (b), the Administrative Agent or such Bank, as the case may be, shall use reasonable efforts to obtain such credit, deduction or other reduction and, upon receipt thereof, will pay to the Borrower such amount, not exceeding the increased amount paid by the Borrower, as is equal to the net after-tax value to the Administrative Agent or such Bank, in its sole opinion, of such part of such credit, deduction or other reduction as it considers to be allocable to such payment by the Borrower, having regard to all of the Administrative Agent's or such Bank's dealings giving rise to similar credits, deductions or other reductions in relation to the same tax period and to the cost of obtaining the same; provided, however, that (i) the Administrative Agent -------- ------- or such Bank, as the case may be, shall not be obligated to disclose to the Borrower any information regarding its tax affairs or computations and (ii) nothing in this Section 1.14(c) shall interfere with the right of the Administrative Agent or such Bank to arrange its tax affairs as it deems appropriate. (d) Exemption from U.S. Withholding and Backup Withholding Taxes. ------------------------------------------------------------ (i) Each Bank that is not a "United States person" (as such term is defined in Section 7701(a)(30) of the Code) shall submit to the Borrower and the Administrative Agent (A) on or before the fifth day prior to the first date that interest or fees are payable to it under the Loan Documents, (1) two duly completed and signed copies of Internal Revenue Service Form 1001 or 4224 or any successor form, in each case entitling 12 such Bank to a complete exemption from withholding of any United States federal income taxes on all amounts to be received by such Bank under the Loan Documents, and (2) a duly completed and signed copy of Internal Revenue Service Form W-8 or W-9 or any successor form, in each case entitling such Bank to a complete exemption from United States backup withholding tax on all amounts to be received by such Bank under the Loan Documents, and (B) from time to time thereafter, prior to the expiration or obsolescence of any previously delivered form or upon any previously delivered form becoming inaccurate or inapplicable, such further duly completed and signed copies of such forms or such other forms or certificates, in each case entitling such Bank to exemption from withholding of United States federal income taxes and from United States backup withholding tax to the maximum extent to which such Bank is then entitled under Applicable Law. Each Bank shall promptly notify the Borrower and the Administrative Agent if (A) it is required to withdraw or cancel any form or certificate previously submitted by it or any such form or certificate has otherwise become ineffective or inaccurate or (B) payments to it are or will be subject to withholding of United States federal income taxes or United States backup withholding tax to a greater extent than the extent to which payments to it were previously subject. Upon the request of the Borrower or the Administrative Agent, each Bank that is a United States person (as defined above) shall from time to time submit to the Borrower and the Administrative Agent a certificate to the effect that it is such a United States person. (ii) Notwithstanding anything to the contrary contained herein, the Borrower shall not be required to pay any additional amount in respect of withholding of United States income taxes or United States backup withholding tax pursuant to Section 1.14 or Section 7.02 to any Bank that (A) is not, on the date this Agreement is executed by such Bank (or, in the case of a Person that became a Bank by assignment, on the date of such assignment), either (x) entitled to submit Form 1001 entitling such Bank to a complete exemption from withholding on all amounts to be received by such Bank pursuant to this Agreement and the Loans or Form 4224 relating to all amounts to be received by such Bank pursuant to this Agreement and the Loans or (y) a United States person, or (B) is no longer entitled to submit Form 1001 or Form 4224 (or any successor form as shall be adopted from time to time by the relevant United States taxing authorities) as a result of any change in circumstances or other event other than a Regulatory Change. Section 1.15. Pro Rata Treatment. Except to the extent otherwise ------------------ provided herein, (a) Loans of each Type to be made on any day shall be made by the Banks pro rata in accordance 13 with their respective Commitments, (b) Loans of the Banks shall be converted and continued pro rata in accordance with their respective amounts of Loans of the Type and, in the case of Fixed Rate Loans, having the Interest Period being so converted or continued, (c) each reduction in the Commitments shall be made pro rata in accordance with the respective amounts thereof and (d) each payment of the principal of or interest on the Loans or of fees shall be made for the account of the Banks pro rata in accordance with the respective amounts thereof then due and payable. Section 1.16. Cash Collateral Account. In the event that, (a) as of ----------------------- the tenth Business Day preceding a Letter of Credit Event Date, any Letter of Credit scheduled to expire on such Letter of Credit Event Date shall not have been renewed or replaced in the manner and to the extent necessary in order for (i) the Borrower to be in compliance with Section 1.02(a) on such Letter of Credit Event Date or (ii) the sum of (x) the aggregate principal amount of Loans outstanding at such time, (y) the aggregate amount of accrued and unpaid interest thereon and accrued and unpaid fees payable under the Loan Documents and (z) the aggregate amount of interest and fees that would accrue for the three month period (or, if less, the period from the date of determination through the date that is 30 days after the next Increase Date) commencing on the date of determination, assuming such Loans remained outstanding during such period and bore interest throughout such period at the weighted average rate applicable to such Loans on the date of determination, to be no greater than the sum of the Available Letter of Credit Amount and the Available Cash Collateral Amount (assuming such Letter of Credit were to so expire) on such Letter of Credit Event Date or (b) as of the ninetieth day after the first day on which an Issuing Bank shall have failed to maintain the Required LC Rating (without the Letter or Letters of Credit issued by such Issuing Bank being replaced by a Letter or Letters of Credit), the Administrative Agent shall be entitled to draw in full on such expiring Letter or Letters of Credit or on such Letter or Letters of Credit issued by such Issuing Bank, as the case may be, and, as provided in the Collateral Account Agreement, hold the proceeds of such drawing in a cash collateral account maintained at the Administrative Agent's Office as collateral securing the prompt payment when due (whether at maturity, by reason of mandatory prepayment or acceleration or otherwise) of the principal and interest on the Loans and the Notes and all other amounts payable to the Administrative Agent and the Banks under the Loan Documents. Such cash collateral, together with drawings under Letters of Credit, shall be applied to such amounts on a pro rata basis as provided in Section 1.02(d). In the event that, at any time, the sum of the Available Letter of Credit 14 Amount and the Available Cash Collateral Amount are in excess of the amount necessary for the Borrower to be in compliance with Section 1.02(a) at such time, and so long as no mandatory prepayment pursuant to Section 1.06(b) shall then be due and payable, the Administrative Agent shall, upon the Borrower's request, release its lien on such cash collateral to the extent of such excess and return such excess funds deposited therein to the Borrower or its designee. The Borrower hereby agrees to execute and deliver to the Administrative Agent from time to time as required by the Administrative Agent such statements, instruments or other documents as shall reasonably be necessary or desirable in order to further effectuate the purposes of this Section 1.16. This Section 1.16 is subject, without limitation, to the second sentence of Section 5.01(f). Section 1.17. Liability of Partners. No Partner and no Affiliate of --------------------- any Partner shall be liable for the payment or performance of the obligations of the Borrower under the Loan Documents (and no recourse shall be had, whether by levy, execution or otherwise, for the payment or performance of any such obligation against any Partner or any such Affiliate or against any assets of any thereof), by reason of the status of such Partner as a Partner or for any other reason; except that the provisions of this Section 1.17 shall not limit or otherwise affect the Agents' and the Banks' rights under the Loan Documents with respect to the Letters of Credit or the proceeds of draws thereunder. ARTICLE 2 CONDITIONS TO LOANS ------------------- Section 2.01. Conditions to Initial Loans. The obligation of each --------------------------- Bank to make its initial Loan is subject to the fulfillment of the conditions that (1) during the period from December 31, 1992 through the date of such Loan, there has been no material adverse change with respect to the business, operations or prospects of the Borrower, except for the operating losses of the Borrower incurred during such period and changes affecting the cable television or DBS industries generally and (2) the Managing Agents shall have received each of the following, in form and substance and, in the case of the materials referred to in clauses (a), (b), (c), (g) and (j), certified in a manner satisfactory to the Managing Agents: (a) a certificate of the Secretary or an Assistant Secretary of the Borrower, dated the requested date for the making of such Loan, substantially in the form of Schedule 2.01(a), to which shall be attached ---------------- copies of the resolutions referred to in such certificate; 15 (b) a copy of the Limited Partnership Agreement of the Borrower; (c) a good standing certificate with respect to the Borrower, issued as of a recent date by the Secretary of State or other appropriate official of the Borrower's jurisdiction of formation; (d) an opinion of counsel for the Borrower, dated the requested date for the making of such Loan, in the form of Schedule 2.01(d), with ---------------- such changes as the Managing Agents shall approve; (e) an opinion of counsel for each Issuing Bank, dated not later than the requested date for the making of such Loan, substantially in the form of Schedule 2.01(e), with such changes as the Managing Agents shall ---------------- approve (which approval shall not be unreasonably withheld); (f) an opinion of Winthrop, Stimson, Putnam & Roberts, special counsel for the Managing Agents, dated the requested date for the making of such Loan, in the form of Schedule 2.01(f); ---------------- (g) a copy of each Governmental Approval and other consent or approval listed on Schedule 3.02; ------------- (h) a duly executed Note for each Bank and a duly executed Collateral Account Agreement; (i) one or more Letters of Credit in an aggregate face amount equal to the initial Required LC Amount; (j) a copy of each of the Project Documents as in effect on the date of such delivery; and (k) evidence of the payment or arrangements to make the payment of all amounts payable at such time pursuant to Section 9.02. Section 2.02. Conditions to Each Loan. The obligation of each Bank ----------------------- to make each Loan requested to be made by it, including its initial Loan, is subject to the fulfillment of each of the following conditions: (a) the Administrative Agent shall have received a notice of borrowing with respect to such Loan complying with the requirements of Section 1.03; 16 (b) each Representation and Warranty shall be true and correct at and as of the time such Loan is to be made, both with and without giving effect to such Loan and all other Loans to be made at such time and to the application of the proceeds thereof; (c) no Default shall have occurred and be continuing at the time such Loan is to be made or would result from the making of such Loan and all other Loans to be made at such time or from the application of the proceeds thereof; (d) in the event that such Loan is to be made on a day that is within the period of ten Business Days preceding a Letter of Credit Event Date, the Administrative Agent shall have received such renewals and increases of existing Letters of Credit, or such replacement or additional Letters of Credit, or such combination thereof, as shall be necessary to enable the Borrower to be in compliance with Section 1.02(a) on such Letter of Credit Event Date, after giving effect to the second sentence of Section 5.01(f); (e) in the event that such Loan is to be made on a day that is within the 90 day period following a Letter of Credit Event Date on which the Borrower shall not have been in compliance with Section 1.02(a), the Administrative Agent shall have received such renewals and increases of existing Letters of Credit, or such replacement or additional Letters of Credit, or such combination thereof, as shall be necessary to enable the Borrower to be in compliance with Section 1.02(a) on the date of such Loan, after giving effect to the second sentence of Section 5.01(f); and (f) such Loan will not contravene any Applicable Law applicable to such Bank. Except to the extent that the Borrower shall have disclosed in the notice of borrowing, or in a subsequent notice given to the Banks prior to 5:00 p.m. (New York time) on the Business Day before the requested date for the making of the requested Loans, that a condition specified in clause (b) or (c) above will not be fulfilled as of the requested time for the making of such Loans, the Borrower shall be deemed to have made a Representation and Warranty as of the time of the making of such Loans that the conditions specified in such clauses have been fulfilled as of such time. No such disclosure by the Borrower that a condition specified in clause (b) or (c) above will not be fulfilled as of the requested time for the making of the requested Loans shall affect the right of each Bank to not make the Loans requested to be made by it if, in such Bank's 17 determination, such condition has not been fulfilled at such time. ARTICLE 3 CERTAIN REPRESENTATIONS AND WARRANTIES -------------------------------------- In order to induce each Bank to enter into this Agreement and to make each Loan requested to be made by it, the Borrower represents and warrants as follows: Section 3.01. Organization; Power; Qualification. The Borrower is a ---------------------------------- limited partnership duly organized, validly existing and in good standing under the laws of its jurisdiction of formation, has the power and authority to own its property and to carry on its business as now being and hereafter proposed to be conducted and is duly qualified and in good standing, and is authorized to do business, in all jurisdictions in which the character of its properties or the nature of its business requires such qualification or authorization, except for qualifications and authorizations the lack of which, singly or in the aggregate, has not had and will not have a Materially Adverse Effect on any Loan Document. Section 3.02. Authorization; Enforceability; Required Consents; ------------------------------------------------- Absence of Conflicts. The Borrower has the power, and has taken all necessary - -------------------- action (including, any necessary action by its partners or any committee of representatives of its partners) to authorize it, to execute, deliver and perform in accordance with their respective terms the Loan Documents and to borrow hereunder in the unused amount of the Commitments. This Agreement has been, and each of the other Loan Documents when delivered to the Administrative Agent will have been, duly executed and delivered by the Borrower and is, or when so delivered will be, a legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by equitable principles. The execution, delivery and performance in accordance with their respective terms by the Borrower of the Loan Documents, and each borrowing hereunder, including a borrowing in the amount of the unused Commitments, do not and (absent any change in any Applicable Law or applicable Contract to which the Borrower is a party or by which the Borrower or any of its properties may be bound) will not (a) require any Governmental Approval or any other consent or approval, including any consent or approval of the partners of the Borrower, other than Governmental Approvals and other consents and approvals that have been obtained, are final and not subject to review on appeal 18 or to collateral attack, are in full force and effect and, in the case of any such required under any Applicable Law or under any Contract to which the Borrower is a party or by which the Borrower or any of its properties may be bound, in each case as in effect on the Agreement Date, are listed on Schedule -------- 3.02, or (b) violate, conflict with, result in a breach of, constitute a default - ---- under, or result in or require the creation of any lien or other encumbrance upon any assets of the Borrower under, (i) any Contract to which the Borrower is a party or by which the Borrower or any of its properties may be bound or (ii) any Applicable Law. Section 3.03. Litigation. There are not, in any court or before any ---------- arbitrator of any kind or before or by any governmental or non-governmental body, any actions, suits or proceedings pending against or in any other way relating to or affecting the Borrower or any Loan Document, except actions, suits or proceedings that, if adversely determined, would not, singly or in the aggregate, have a Materially Adverse Effect on any Loan Document. Section 3.04. Compliance With Law. The Borrower is in compliance ------------------- with Applicable Law, except for such noncompliance as would not have a Materially Adverse Effect on any Loan Document. Section 3.05. Project Documents. (a) Delivery. The Borrower has ----------------- -------- delivered to the Administrative Agent a copy of each of the Project Documents and all material amendments, modifications and supplements thereof or thereto, in each case as in effect on the date of such delivery. (b) Absence of Defaults. No default on the part of the Borrower or, ------------------- to the knowledge of the Borrower, on the part of any other party thereto exists under or with respect to any of the Project Documents, except for such defaults as would not have a Materially Adverse Effect on any Loan Document. Section 3.06. Investment Company Act. The Borrower is not an ---------------------- "investment company" or a Person "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940. ARTICLE 4 CERTAIN COVENANTS ----------------- From the Agreement Date and until the Repayment Date, A. The Borrower shall: ------------------ 19 Section 4.01. Preservation of Existence, Scope of Business, --------------------------------------------- Compliance with Law, Preservation of Enforceability. (a) Preserve and maintain - --------------------------------------------------- its partnership existence and all of its other franchises, licenses, rights and privileges, (b) engage only in business in substantially the same field as the business conducted on the Agreement Date, (c) comply with Applicable Law (d) take all action and obtain all consents and Governmental Approvals required so that its obligations under the Loan Documents will at all times be legal, valid and binding and enforceable in accordance with their respective terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by equitable principles), except that this Section 4.01 (other than clause (a), insofar as it requires the Borrower to preserve its partnership existence) shall not apply in any circumstance where noncompliance, together with all other noncompliances with this Section 4.01, will not have a Materially Adverse Effect on any Loan Document. Section 4.02. Use of Proceeds. Use the proceeds of the Loans only --------------- to: (a) refinance any interim financing provided by Loral, the Participating Partners or any other entity to commence or continue construction of the Satellites; (b) finance payments under the Satellite Construction Contract; (c) fund the payment of interest and fees and other amounts due hereunder and the cost of interest rate hedging arrangements; and (d) fund expenses for construction monitoring (including the refinancing of any interim financing thereof) and for working capital relating to the Project. None of the proceeds of any of the Loans shall be used to purchase or carry, or to reduce or retire or refinance any credit incurred to purchase or carry, any margin stock (within the meaning of Regulations U and X of the Board of Governors of the Federal Reserve System) or to extend credit to others for the purpose of purchasing or carrying any margin stock. If requested by any Bank, the Borrower shall complete and sign Part I of a copy of Federal Reserve Form U-1 referred to in Regulation U and deliver such copy to such Bank. B. The Borrower shall not: ---------------------- 20 Section 4.03. Merger or Consolidation. Merge or consolidate with any ----------------------- Person, except that, if after giving effect thereto no Default would exist, this Section 4.03 shall not apply to any merger or consolidation of the Borrower with any one or more Persons, provided that the Borrower shall be the continuing Person. ARTICLE 5 INFORMATION ----------- Section 5.01. Information to Be Furnished. From the Agreement Date --------------------------- and until the Repayment Date, the Borrower shall furnish to the Administrative Agent, with sufficient copies for each of the Banks: (a) Quarterly Financial Statements. As soon as available and in any ------------------------------ event within 60 days after the close of each of the first three quarterly accounting periods in each fiscal year of the Borrower, commencing with the quarterly period ended March 31, 1994, a balance sheet of the Borrower as at the end of such quarterly period and the related statements of income and changes in cash balance of the Borrower for such quarterly period and for the elapsed portion of the fiscal year ended with the last day of such quarterly period, setting forth in each case in comparative form the figures for the corresponding periods of the previous fiscal year. (b) Year-End Financial Statements; Accountants' Certificate. As soon ------------------------------------------------------- as available and in any event within 120 days after the end of each fiscal year of the Borrower, commencing with the fiscal year ended December 31, 1993 or, in the case of clause (iii) below, 1994: (i) a balance sheet of the Borrower as at the end of such fiscal year and the related statements of operations, partners' capital (deficit) and cash flows of the Borrower for such fiscal year, setting forth in comparative form the figures as at the end of and for the previous fiscal year; (ii) an audit report of Price Waterhouse, or other independent certified public accountants of recognized national standing, on such financial statements, which report shall not contain any exception as to scope that is not satisfactory to the Managing Agents; and (iii) a certificate of such accountants addressed to the Banks and in form and substance satisfactory to the 21 Managing Agents stating that they have caused this Agreement to be reviewed in making the examination necessary for their report on such consolidated financial statements and that nothing came to their attention that caused them to believe that, as of the date of such financial statements, any Default existed or, if such is not the case, specifying such Default and its nature, when it occurred and whether it is continuing. (c) Officer's Certificate as to Financial Statements and Defaults. ------------------------------------------------------------- At the time that financial statements are furnished pursuant to Section 5.01(a) or (b), a certificate of the president or chief financial officer of the Borrower in the form of Schedule 5.01(c). ---------------- (d) Requested Information. From time to time and promptly upon --------------------- written request of any Bank, such Information regarding the Loan Documents, the Loans or the business, assets, Liabilities, financial condition or results of operations of the Borrower as such Bank may reasonably request, in each case in form and substance satisfactory to the requesting Bank. (e) Notice of Defaults, Material Adverse Changes and Other Matters. -------------------------------------------------------------- Promptly upon obtaining knowledge thereof, notice of: (i) any Default, (ii) the commencement of, or the occurrence or nonoccurrence of any change or event relating to, any action, suit or proceeding that would cause the Representation and Warranty contained in Section 3.03 to be incorrect if made at such time, and (iii) any material amendment or modification of, or supplement to, the Limited Partnership Agreement of the Borrower or any of the Project Documents. (f) Opinions of Counsel for Issuing Banks. On the day that any ------------------------------------- Letter of Credit is issued, renewed or increased, an opinion of counsel for the applicable Issuing Bank with respect to such Letter of Credit or the renewal or increase thereof, substantially in the form of Schedule 2.01(e), with such ---------------- changes as the Managing Agents shall approve (which approval shall not be unreasonably withheld). In the event that such opinion is not delivered at the time of the issuance of a Letter of Credit or the renewal or increase thereof, such Letter of Credit shall be deemed not to have been issued, or such renewal or increase thereof shall be deemed not to have taken place, as the case may 22 be, for the purposes of Sections 1.06(b), 1.16 and 2.02(d) and (e) until such time as such opinion is delivered. Section 5.02. Accuracy of Financial Statements and Information. ------------------------------------------------ (a) Historical Financial Statements. The Borrower hereby represents ------------------------------- and warrants that (i) Schedule 5.02(a) sets forth a complete and correct list of ---------------- the financial statements submitted by the Borrower to the Banks in order to induce them to execute and deliver this Agreement, (ii) such financial statements are complete and correct and present fairly, in accordance with Generally Accepted Accounting Principles (other than, in the case of unaudited financial statements, the statement of changes in cash balance and except that unaudited financial statements are subject to normal year-end adjustments and do not contain all of the footnote disclosures required by Generally Accepted Accounting Principles), the financial position of the Borrower as at their respective dates, results of operations, partners' capital (deficit) and cash flows of the Borrower for the respective periods to which such statements relate. (b) Future Financial Statements. The financial statements delivered --------------------------- pursuant to Section 5.01(a) or (b) shall be complete and correct and present fairly, in accordance with Generally Accepted Accounting Principles (other than, in the case of unaudited financial statements, the statement of changes in cash balance and except that unaudited financial statements are subject to normal year-end adjustments and do not contain all of the footnote disclosures required by Generally Accepted Accounting Principles), the financial position of the Borrower and the results of operations, partners' capital (deficit) and cash flows of the Borrower for the respective periods to which such statements relate, and the furnishing of the same to the Banks shall constitute a representation and warranty by the Borrower made on the date the same are furnished to the Banks to that effect. (c) Historical Information. The Borrower hereby represents and ---------------------- warrants that all Information (other than any projections or any financial forecasts contained therein) furnished to the Managing Agents or the Banks in writing by or on behalf of the Borrower prior to the Agreement Date in connection with or pursuant to the Loan Documents and the relationships established thereunder, at the time the same was so furnished, but in the case of Information dated as of a prior date, as of such date, was complete and correct in the light of the purpose for which it was prepared. 23 (d) Future Information. All Information (other than any projections ------------------ or any financial forecasts contained therein) furnished to the Administrative Agent, the Managing Agents or the Banks in writing by or on behalf of the Borrower on or after the Agreement Date in connection with or pursuant to the Loan Documents or in connection with or pursuant to any amendment or modification of, or waiver of rights under, the Loan Documents, shall, at the time the same is so furnished, but in the case of Information dated as of a prior date, as of such date, (i) be complete and correct in the light of the purpose for which it was prepared, (ii) not contain any untrue statement of a material fact, and (iii) not omit to state a material fact necessary in order to make the statements contained therein not misleading in the light of the circumstances under which they were made, and the furnishing of the same to the Administrative Agent, the Managing Agents or any Bank shall constitute a representation and warranty by the Borrower made on the date the same are so furnished to the effect specified in clauses (i), (ii) and (iii). Section 5.03. Additional Covenants Relating to Disclosure. From the ------------------------------------------- Agreement Date and until the Repayment Date, the Borrower shall: (a) Accounting Methods and Financial Records. Maintain a system of ---------------------------------------- accounting, and keep such books, records and accounts (which shall be true and complete), as may be required or necessary to permit the preparation of financial statements required to be delivered pursuant to Section 5.01(a) and (b). (b) Visits, Inspections and Discussions. Permit representatives ----------------------------------- (whether or not officers or employees) of any Bank, from time to time, as often as may be reasonably requested, to (i) visit any of its premises or property, (ii) inspect, and verify the amount, character and condition of, any of its property, (iii) review and make extracts from its books and records, including management letters prepared by its independent certified public accountants, and (iv) discuss with its officers, employees and independent certified public accountants its business, assets, liabilities, financial condition, results of operation and business prospects (and by this provision the Borrower authorizes said officers, employees and accountants to discuss such matters). Section 5.04. Authorization of Third Parties to Deliver Information. ----------------------------------------------------- The Borrower hereby agrees that any opinion, report or other Information delivered to the Administrative Agent, the Managing Agents or the Banks pursuant to the Loan Documents (including under Article 2 or this Article 24 5) is hereby deemed to have been authorized and directed by the Borrower to be delivered for the benefit of the Administrative Agent, the Managing Agents and the Banks. The Borrower agrees to promptly execute and deliver from time to time such further authorizations to effect the purposes of this Section 5.04 as the Administrative Agent, the Managing Agents or any Bank may reasonably request. ARTICLE 6 DEFAULT ------- Section 6.01. Events of Default. Each of the following shall ----------------- constitute an Event of Default, whatever the reason for such event and whether it shall be voluntary or involuntary, or within or without the control of the Borrower, or be effected by operation of law or pursuant to any judgment or order of any court or any order, rule or regulation of any governmental or nongovernmental body: (a) Any payment of principal of or interest on any of the Loans or the Notes or of fees shall not be made when and as due (whether at maturity, by reason of mandatory prepayment or acceleration or otherwise) and in accordance with the terms of this Agreement and the Notes and, except in the case of payments of principal, such failure shall continue for three Business Days or, in the case of the obligation (including as such obligation relates to principal) provided for in the last sentence of Section 1.03(c), two Business Days; (b) Any Representation and Warranty made or deemed to be made by the Borrower shall at any time prove to have been incorrect or misleading in any material respect when made; (c) The Borrower shall default in the performance or observance of: (i) any covenant or agreement contained in Section 4.01(a) (insofar as such Section requires the preservation of the partnership existence of the Borrower), 4.01(d), 4.03 or 5.01(e)(i); or (ii) any term, covenant, condition or agreement contained in any Loan Document (other than the covenants contained in Section 1.02(a) and (c) and Section 5.01(f) or any term, covenant, condition or agreement a default in the performance or observance of which is elsewhere in this Section specifically dealt with) and, if capable of being remedied, such default shall continue unremedied for a period of, in the case of Section 5.03(b), 10 days and, in all other cases, 30 days from the earlier of the date on which the Administrative Agent shall have given 25 notice of such default to the Borrower and the date on which the Borrower either obtained knowledge thereof or reasonably should have obtained knowledge thereof; (d) (i) The Borrower shall (A) commence a voluntary case under the Federal bankruptcy laws (as now or hereafter in effect), (B) file a petition seeking to take advantage of any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, (C) consent to or fail to contest in a timely and appropriate manner any petition filed against it in an involuntary case under such bankruptcy laws or other laws, (D) apply for, or consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver, custodian, trustee, liquidator or the like of itself or of a substantial part of its assets, domestic or foreign, (E) admit in writing its inability to pay, or generally not be paying, its debts (other than those that are the subject of bona fide disputes) as they become due, (F) make a general assignment for the benefit of creditors, or (G) take any partnership action for the purpose of effecting any of the foregoing; (ii) (A) A case or other proceeding shall be commenced against the Borrower seeking (1) relief under the Federal bankruptcy laws (as now or hereafter in effect) or under any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, or (2) the appointment of a trustee, receiver, custodian, liquidator or the like of the Borrower, or of all or any substantial part of the assets, domestic or foreign, of the Borrower, and such case or proceeding shall continue undismissed and unstayed for a period of 60 consecutive days, or (B) an order granting the relief requested in such case or proceeding against the Borrower (including an order for relief under such Federal bankruptcy laws) shall be entered; (e) A judgment or order for the payment of money shall be entered against the Borrower by any court, and such judgment or order shall continue undischarged and unstayed for a period of 60 consecutive days in which the aggregate amount of all such judgments and orders exceeds $1,000,000; (f) Any Participating Partner, any of its Affiliates or the Borrower asserts in writing addressed to the Administrative Agent or any Bank (or institutes any proceeding seeking to establish) that (i) any Loan Document is invalid, not binding or unenforceable in its entirety, (ii) any obligation of the Borrower to pay the principal of or interest on the Loans (or 26 any other material payment obligation of the Borrower) pursuant to any Loan Document or any right of the Administrative Agent under the Loan Documents to draw on any Letter of Credit is invalid, not binding or unenforceable or (iii) any other provision of any Loan Document is invalid, not binding or unenforceable if the Required Banks shall have determined in good faith that the assertion or proceeding under this clause (iii), if determined adversely to the Banks, would have a materially adverse effect on the obligations of the Borrower or the rights of the Banks under the Loan Documents taken as a whole; (g) Participating Partners, or Affiliates thereof, 51% of the outstanding capital securities or other equity interests having ordinary voting power of which is owned, directly or indirectly, by Parent Companies, shall at any time cease to own at least 51% of the partnership interests in the Borrower; (h) The Borrower or Tempo shall give notice to the Banks, Loral or, in the case of any such notice by the Borrower, Tempo, of the determination by the Borrower or Tempo, as the case may be, to terminate construction of the Satellites, and such notice shall not be revoked or rescinded for 15 Business Days after the date on which such notice shall have been given; or (i) Any Letter of Credit shall be or become invalid, not binding or unenforceable in any respect, and such invalidity, lack of binding effect or unenforceability shall continue for three Business Days. Section 6.02. Remedies upon Event of Default. During the continuance ------------------------------ of any Event of Default (other than one specified in Section 6.01(d)) and in every such event, the Administrative Agent, upon notice to the Borrower, may do either or both of the following: (a) declare, in whole or, from time to time, in part, the principal of and interest on the Loans and the Notes and all other amounts owing under the Loan Documents to be, and the Loans and the Notes and all such other amounts shall thereupon and to that extent become, due and payable and the Administrative Agent shall thereupon be entitled immediately (subject to the pro rata requirements of Sections 1.02(d) and 1.16) to draw on the Letters of Credit and apply the proceeds thereof and the cash collateral, if any, held pursuant to Section 1.16 to the payment of such amounts, and (b) terminate, in whole or, from time to time, in part, the Commitments. Upon the occurrence of an Event of Default specified in Section 6.01(d), automatically and without any notice to the Borrower, (a) the principal of and interest on the Loans and the Notes and all other amounts owing under the Loan Documents shall be due and payable and the Administrative Agent shall thereupon be entitled immediately (subject to the pro 27 rata requirements of Sections 1.02(d) and 1.16) to draw on the Letters of Credit and apply the proceeds thereof and the cash collateral, if any, held pursuant to Section 1.16 to the payment of such amounts, and (b) the Commitments shall terminate. Presentment, demand, protest or notice of any kind (other than the notice provided for in the first sentence of this Section 6.02) are hereby expressly waived. ARTICLE 7 ADDITIONAL CREDIT FACILITY PROVISIONS ------------------------------------- Section 7.01. Mandatory Suspension and Conversion of Fixed Rate ------------------------------------------------- Loans. A Bank's obligations to make, continue or convert into Fixed Rate Loans of any Type shall be suspended, all such Bank's outstanding Loans of that Type shall be converted on the last day of their applicable Interest Periods (or, if earlier, in the case of clause (c) below, on the last day such Bank may lawfully continue to maintain Loans of that Type or, in the case of clause (d) below, on the day determined by such Bank to be the last Business Day before the effective date of the applicable restriction) into, and all pending requests for the making or continuation of or conversion into Loans of such Type by such Bank shall be deemed requests for, Base Rate Loans, if: (a) on or prior to the determination of an interest rate for a Fixed Rate Loan of that Type for any Interest Period, the Administrative Agent determines that for any reason appropriate information is not available to it for purposes of determining the Adjusted CD Rate or the Adjusted Eurodollar Rate, as the case may be, for such Interest Period; (b) on or prior to the first day of any Interest Period for a Fixed Rate Loan of that Type, such Bank determines that the Adjusted CD Rate or the Adjusted Eurodollar Rate, as the case may be, as determined by the Agent for such Interest Period would not accurately reflect the cost to such Bank of making, continuing or converting into a Fixed Rate Loan of such Type for such Interest Period; (c) at any time such Bank determines that any Regulatory Change makes it unlawful or impracticable for such Bank or its applicable Lending Office to make, continue or convert into any Fixed Rate Loan of that Type, or to comply with its obligations hereunder in respect thereof; or (d) such Bank determines that, by reason of any Regulatory Change, such Bank or its applicable Lending Office is restricted, directly or indirectly, in the amount 28 that it may hold of (i) a category of liabilities that includes deposits by reference to which, or on the basis of which, the interest rate applicable to Fixed Rate Loans of that Type is directly or indirectly determined or (ii) the category of assets that includes Fixed Rate Loans of that Type. If, as a result of this Section 7.01, any Loan of any Bank that would otherwise be made or maintained as or converted into a Fixed Rate Loan of any Type for any Interest Period is instead made or maintained as or converted into a Base Rate Loan, then, unless the corresponding Loan of each of the other Banks is also to be made or maintained as or converted into a Base Rate Loan, such Loan shall be treated as being a Fixed Rate Loan of such Type for such Interest Period for all purposes of this Agreement (including the timing, application and proration among the Banks of interest payments, conversions and prepayments) except for the calculation of the interest rate borne by such Loan. The Administrative Agent shall promptly notify the Borrower and each Bank of the existence or occurrence of any condition or circumstance specified in clause (a) above, and each Bank shall promptly notify the Borrower and the Administrative Agent of the existence or occurrence of any condition or circumstance specified in clause (b), (c) or (d) above applicable to such Bank's Loans, but the failure by the Administrative Agent or such Bank to give any such notice shall not affect such Bank's rights hereunder. Section 7.02. Regulatory Changes. If in the determination of any ------------------ Bank (a) any Regulatory Change shall directly or indirectly (i) reduce the amount of any sum received or receivable by such Bank with respect to any Loan or the return to be earned by such Bank on any Loan, (ii) impose a cost on such Bank or any Affiliate of such Bank that is attributable to the making or maintaining of, or such Bank's commitment to make, any Loan, (iii) require such Bank or any Affiliate of such Bank to make any payment on or calculated by reference to the gross amount of any amount received by such Bank under any Loan Document or (iv) reduce, or have the effect of reducing, the rate of return on any capital of such Bank or any Affiliate of such Bank that such Bank or such Affiliate is required to maintain on account of any Loan or such Bank's commitment to make any Loan and (b) such reduction, increased cost or payment shall not be fully compensated for by an adjustment in the applicable rates of interest payable under the Loan Documents, then the Borrower shall pay to such Bank such additional amounts as such Bank determines will, together with any adjustment in the applicable rates of interest payable hereunder, fully compensate for such reduction, increased cost or payment. Such additional amounts 29 shall be payable, in the case of those applicable to prior periods, within 15 days after request by such Bank for such payment and, in the case of those applicable to future periods, on the dates specified, or determined in accordance with a method specified, by such Bank. Each Bank will promptly notify the Borrower of any determination made by it referred to in clauses (a) and (b) above, but the failure to give such notice shall not affect such Bank's right to compensation. Notwithstanding the foregoing, the Borrower will not be required to reimburse any Bank for any reductions, increased costs or payments under this Section 7.02 arising prior to 90 days preceding the date of such notice, unless the applicable Regulatory Change is imposed retroactively. In the case of a Regulatory Change which is retroactive in effect, such notice shall be provided to the Borrower not later than 90 days from the date that such Bank reasonably should have learned of such Regulatory Change, and the Borrower's obligation to compensate such Bank for such reduction, increased cost or payment is contingent upon the provision of such timely notice (but any failure by such Bank to provide such timely notice shall not affect the Borrower's reimbursement obligations with respect to (x) reductions, increased costs or payments incurred or made from the date as of which the Regulatory Change became effective to the date that is 90 days after such Bank reasonably should have learned of such Regulatory Change and (y) reductions, increased costs or payments incurred or made following the provision of such notice). Section 7.03. Funding Losses. The Borrower shall pay to each Bank, -------------- upon request, such amount or amounts as such Bank determines are necessary to compensate it for any loss, cost or expense (excluding loss of applicable margin) incurred by it as a result of (a) any payment, prepayment or conversion of a Fixed Rate Loan on a date other than the last day of an Interest Period for such Fixed Rate Loan or (b) a Fixed Rate Loan for any reason attributable to the Borrower (including a failure, in the determination of the Banks, to meet conditions) not being made or converted, or any payment of principal thereof or interest thereon not being made (whether or not, in the case of an optional prepayment, such prepayment was revocable or had become irrevocable as provided in Section 1.06(a)), on the date therefor determined in accordance with the applicable provisions of this Agreement. At the election of such Bank, and without limiting the generality of the foregoing, but without duplication, such compensation on account of losses may include an amount equal to the excess of (i) the interest that would have been received from the Borrower under this Agreement (excluding applicable margin) on any amounts to be reemployed during an Interest Period or its remaining portion over (ii) the interest component of the return that such Bank determines it could have obtained had it placed 30 such amount on deposit in the interbank Dollar market selected by it for a period equal to such Interest Period or its remaining portion. Section 7.04. Certain Determinations. In making the determinations ---------------------- contemplated by Sections 7.01, 7.02 and 7.03, each Bank may make such estimates, assumptions, allocations and the like that such Bank in good faith determines to be appropriate, and such Bank's selection thereof in accordance with this Section 7.04, and the determinations made by such Bank on the basis thereof, shall be final, binding and conclusive upon the Borrower, except, in the case of such determinations, for manifest errors in computation or transmission. Each Bank shall furnish to the Borrower upon request a certificate outlining in reasonable detail the computation of any amounts claimed by it under Sections 7.02 and 7.03 or, to the extent not confidential, the determinations made by it under Sections 7.01(b) and (d) and the assumptions underlying such computations or determinations. Section 7.05. Change of Lending Office. If an event occurs with ------------------------ respect to a Lending Office of any Bank that obligates the Borrower to pay any amount under Section 1.14, makes operable the provisions of clause (b), (c) or (d) of Section 7.01 or entitles such Bank to make a claim under Section 7.02, such Bank shall, if requested by the Borrower, use reasonable efforts to designate another Lending Office or Offices the designation of which will reduce the amount the Borrower is so obligated to pay, eliminate such operability or reduce the amount such Bank is so entitled to claim, provided that such designation would not, in the sole and absolute discretion of such Bank, be disadvantageous to such Bank in any manner or contrary to such Bank's policies. Each Bank may at any time and from time to time change any Lending Office and shall give notice of any such change to the Administrative Agent and the Borrower. Except in the case of a change in Lending Offices made at the request of the Borrower, the designation of a new Lending Office by any Bank shall not obligate the Borrower to pay any amount to such Bank under Section 1.14, make operable the provisions of clause (b), (c) or (d) of Section 7.01 or entitle such Bank to make a claim under Section 7.02 if such obligation, the operability of such clause or such claim results solely from such designation and not from a subsequent Regulatory Change. Section 7.06. Replacement of Banks. If any Bank requests -------------------- compensation pursuant to Section 1.14 or 7.02 hereof, or such Bank's obligation to make or continue, or to convert Loans of any other Type into, any Type of Fixed Rate Loan shall be suspended pursuant to Section 7.01 hereof, the Borrower, upon three Business Days' notice, may require that such Bank transfer 31 all of its right, title and interest under this Agreement and such Bank's Note to any bank or other financial institution identified by the Borrower (i) if such proposed transferee agrees to assume all of the obligations of such Bank hereunder for consideration equal to the outstanding principal amount of such Bank's Loans, together with the interest thereon to the date of such transfer, and satisfactory arrangements are made for payment to such Bank of all other amounts payable hereunder to such Bank on or prior to the date of such transfer (including any fees accrued hereunder and any amounts which would be payable under Section 7.03 hereof as if all of such Bank's Loans were prepaid in full on such date) and (ii) if such Bank being replaced has requested compensation pursuant to Section 1.14 or 7.02 hereof, such proposed transferee's aggregate requested compensation, if any, pursuant to said Section 1.14 or 7.02 with respect to such replaced Bank's Loans would be, under Applicable Law in effect at the time of the transfer, lower than that of the Bank replaced. Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements of the Borrower contained in Sections 1.14, 7.02, 7.03 and 9.02 (without duplication of any payments made to such Bank by the Borrower or the proposed transferee) shall survive for the benefit of any Bank replaced under this Section 7.06 with respect to the time prior to such replacement. ARTICLE 8 THE AGENTS ---------- Section 8.01. Appointment and Powers. Each Bank hereby irrevocably ---------------------- appoints and authorizes the Agents, individually and in their respective capacities as Agents, and the Agents hereby agree, to act as the agents for such Bank under the Loan Documents with such powers as are delegated to the respective Agents by the terms thereof, together with such other powers as are reasonably incidental thereto. The Agents' duties shall be purely ministerial and they shall have no duties or responsibilities except those expressly set forth in the Loan Documents. None of the Agents shall be required under any circumstances to take any action that, in its judgment, (a) is contrary to any provision of the Loan Documents or Applicable Law or (b) would expose it to any Liability or expense against which it has not been indemnified to its satisfaction. None of the Agents shall, by reason of its serving as an Agent, be a trustee or other fiduciary for any Bank. Section 8.02. Limitation on Agents' Liability. None of the Agents ------------------------------- nor any of their respective directors, officers, employees or agents shall be liable or responsible for any action taken or omitted to be taken by it or them under or in connection with the Loan Documents, except for its or their own gross 32 negligence or willful misconduct. None of the Agents shall be responsible to any Bank for (a) any recitals, statements, representations or warranties contained in the Loan Documents or in any certificate or other document referred to or provided for in, or received by any of the Banks under, the Loan Documents, (b) the validity, effectiveness or enforceability of the Loan Documents or any such certificate or other document or (c) any failure by the Borrower to perform any of its obligations under the Loan Documents. Each of the Agents may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact so long as such Agent was not grossly negligent in selecting or directing such agents or attorneys-in-fact. Each of the Agents shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telex, telecopier, telegram or cable) believed by it to be genuine and correct and to have been signed or given by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by such Agent. As to any matters not expressly provided for by the Loan Documents, each of the Agents shall in all cases be fully protected in acting, or in refraining from acting, under the Loan Documents in accordance with instructions signed by the Required Banks, and such instructions of the Required Banks and any action taken or failure to act pursuant thereto shall be binding on all of the Banks. Section 8.03. Defaults. The Administrative Agent shall not be deemed -------- to have knowledge of the occurrence of a Default (other than the non-payment to it of principal of or interest on Loans or fees) unless the Administrative Agent has received notice from a Bank or the Borrower specifying such Default and stating that such notice is a "Notice of Default". In the event that the Administrative Agent has knowledge of such a non-payment or receives such a notice of the occurrence of a Default, the Administrative Agent shall give prompt notice thereof to the Banks. In the event of any Default, the Administrative Agent shall (a) in the case of a Default that constitutes an Event of Default, take either or both of the actions referred to in clauses (a) and (b) of the first sentence of Section 6.02 if so directed by the Required Banks and (b) in the case of any Default, take such other action with respect to such Default as shall be reasonably directed by the Required Banks. Unless and until the Administrative Agent shall have received such directions, in the event of any Default, the Administrative Agent may (but, subject to Section 8.02, shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interests of the Banks. In the event that the 33 Administrative Agent shall be entitled to make a drawing under the Letters of Credit, the Administrative Agent shall do so if and as directed by the Required Banks and, absent such directions, may (but shall not be obligated to) do so if it shall deem such action advisable in the best interests of the Banks; provided, however, that notwithstanding the foregoing, the Administrative Agent - -------- ------- shall exercise its right to draw in full under any Letter of Credit the expiration of which would result in the aggregate unpaid principal amount of all Loans outstanding to exceed the Availability Amount unless it shall have been directed not to so draw by all of the Banks. Section 8.04. Rights as a Bank. Each Person acting as an Agent that ---------------- is also a Bank shall, in its capacity as a Bank, have the same rights and powers under the Loan Documents as any other Bank and may exercise the same as though it were not acting as an Agent, and the term "Bank" or "Banks" shall include such Person in its individual capacity. Each Person acting as an Agent (whether or not such Person is a Bank) and its Affiliates may (without having to account therefor to any Bank) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with the Borrower and its Affiliates, including acting as an Issuing Bank, as if it were not acting as an Agent, and such Person and its Affiliates may accept fees and other consideration from the Borrower and its Affiliates for services in connection with the Loan Documents or otherwise without having to account for the same to the Banks. Section 8.05. Indemnification. The Banks agree to indemnify each of --------------- the Agents (to the extent not reimbursed by the Borrower hereunder), ratably on the basis of the respective principal amounts of the Loans outstanding made by the Banks (or, if no Loans are at the time outstanding, ratably on the basis of their respective Commitments), for any and all Liabilities, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against such Agent (including the costs and expenses that the Borrower is obligated to pay hereunder) in any way relating to or arising out of the Loan Documents or any other documents contemplated thereby or referred to therein or the transactions contemplated thereby or the enforcement of any of the terms thereof or of any such other documents, provided that no Bank shall be liable for any of the foregoing to the extent they arise from gross negligence or willful misconduct by such Agent. Section 8.06. Non-Reliance on Agents and Other Banks. Each Bank -------------------------------------- agrees that it has made and will continue to make, 34 independently and without reliance on any of the Agents or any other Bank, and based on such documents and information as it deems appropriate, its own credit analysis of the Borrower and its own decision to enter into the Loan Documents and to take or refrain from taking any action in connection therewith. None of the Agents shall be required to keep itself informed as to the performance or observance by the Borrower of the Loan Documents or any other document referred to or provided for therein or to inspect the properties or books of the Borrower. Except for notices, reports and other documents and information expressly required to be furnished to the Banks by the Administrative Agent under the Loan Documents, none of the Agents shall have any obligation to provide any Bank with any information concerning the business, status or condition of the Borrower or the Loan Documents that may come into the possession of such Agent or any of its Affiliates. Section 8.07. Resignation of the Administrative Agent. The --------------------------------------- Administrative Agent or any other Agent may at any time give notice of its resignation to the Banks and the Borrower. Upon receipt of any such notice of resignation, the Required Banks may, after consultation with the Borrower, appoint a successor Agent, which shall be a bank, trust company or other financial institution with combined capital and surplus, as determined on the basis of its most recent published statement or report of financial condition, of not less than $500,000,000. If no successor Agent shall have been so appointed by the Required Banks and shall have accepted such appointment within 30 days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Banks and after consultation with the Borrower, appoint a successor Agent, which shall be a bank, trust company or other financial institution with combined capital and surplus, as determined on the basis of its most recent published statement or report of financial condition, of not less than $500,000,000. Upon the acceptance by any Person of its appointment as a successor Agent, such Person shall thereupon succeed to and become vested with all the rights, powers, privileges, duties and obligations of the retiring Agent and the retiring Agent shall be discharged from its duties and obligations as Agent under the Loan Documents, provided, that no Person's -------- appointment as a successor Administrative Agent shall be effective until all collateral, if any, held by the retiring Administrative Agent pursuant to the Collateral Account Agreement shall have been transferred to such Person. After any retiring Agent's resignation as Agent, the provisions of this Article 8 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as an Agent. 35 ARTICLE 9 MISCELLANEOUS ------------- Section 9.01. Notices and Deliveries. (a) Manner of Delivery. All ---------------------- ------------------ notices, communications and, unless the Borrower shall have been otherwise instructed by an Agent or by the Bank to which materials are to be furnished, materials (including all Information) to be given or delivered pursuant to the Loan Documents shall, except in those cases where giving notice by telephone is expressly permitted, be given or delivered in writing (which shall include telex and telecopy transmissions). Notices under Sections 1.03, 1.04(c), 1.06, 1.08 and 6.02 may be by telephone, promptly confirmed in writing. In the event of a discrepancy between any telephonic notice and any written confirmation thereof, such written confirmation shall be deemed the effective notice except to the extent that the Administrative Agent has acted in reliance on such telephonic notice. (b) Addresses. All notices, communications and, unless the Borrower --------- shall have been otherwise instructed by an Agent or by the Bank to which materials are to be furnished, materials to be given or delivered pursuant to the Loan Documents shall be given or delivered at the following respective addresses and telecopier and telephone numbers and to the attention of the following individuals or departments: (i) if to the Borrower, to it at: 100 North Presidential Boulevard Bala Cynwyd, PA 19004 Telecopier No.: (215) 660-6112 Telephone No.: (215) 660-6100 Attention: Lawrence L. Epstein Marcus O. Evans, Esq. with a copy to: Reed Smith Shaw & McClay 435 Sixth Avenue Pittsburgh, PA 15219 Telecopier No.: (412) 288-3064 Telephone No.: (412) 288-3131 Attention: Bruce D. Evans, Esq. 36 (ii) if to the Administrative Agent, to it at: 270 Park Avenue New York, NY 10017 Telecopier No.: (212) 270-2056 and (212) 270-3942 Telephone No.: (212) 270-4683 and (212) 270-4145 Attention: M. Elizabeth Mason J. Cheryl Boucher Margaret Harvey with a copy to: 140 East 45th Street New York, New York 10017 Telecopier No.: (212) 622-0002 Telephone No.: (212) 622-0011 Attention: Janet Belden (iii) if to any Bank, to it at the address or telecopier or telephone number and to the attention of the individual or department, set forth below such Bank's name under the heading "Notice Address" on Annex A or, in the case ------- of a Bank that becomes a Bank pursuant to an assignment, set forth under the heading "Notice Address" in the Notice of Assignment given to the Borrower and the Administrative Agent with respect to such assignment; or at such other address or telecopier or telephone number or to the attention of such other individual or department as the party to which such information pertains may hereafter specify for the purpose in a notice specifically providing such information for use in connection with the Loan Documents given to (x) if the party to which such information pertains is the Borrower, the 37 Administrative Agent and each Bank, (y) if the party to which such information pertains is the Administrative Agent, the Borrower and each Bank and (z) if the party to which such information pertains is a Bank, the Borrower and the Administrative Agent. (c) Effectiveness. Each notice and communication and any material to ------------- be given or delivered pursuant to the Loan Documents shall be deemed so given or delivered (i) if sent by registered or certified mail, postage prepaid, return receipt requested, on the third Business Day after such notice, communication or material, addressed as above provided, is delivered to a United States post office and a receipt therefor is issued thereby, (ii) if sent by any other means of physical delivery, when such notice, communication or material is delivered to the appropriate address as above provided, (iii) if sent by telex, when such notice, communication or material is transmitted to the appropriate number determined as above provided in this Section 9.01 and the appropriate answer- back is received, (iv) if sent by telecopier, when such notice, communication or material is transmitted to the appropriate telecopier number as above provided and is received at such number and (v) if given by telephone, when communicated to the individual or any member of the department specified as the individual or department to whose attention notices, communications and materials are to be given or delivered, or, in the case of notice by the Administrative Agent to the Borrower under Section 6.02 given by telephone as above provided, if any individual or any member of the department to whose attention notices, communications and materials are to be given or delivered is unavailable at the time, to any other officer or employee of the Borrower, except that (x) notices of a change of address, telex, telecopier or telephone number or individual or department to whose attention notices, communications and materials are to be given or delivered shall not be deemed given until received, (y) notices, communications and materials to be given or delivered to the Administrative Agent or any Bank pursuant to Sections 1.03, 1.04(c), 1.06, 1.08, 1.13(b) and 5.01(e) shall not be deemed given or delivered until received by the Administrative Agent or such Bank and (z) in the event that materials to be given or delivered pursuant to Article 5 are not in fact received by the Agent or Bank to which they are required to be furnished such Agent or Bank shall be entitled to request that the Borrower again attempt to effect delivery of such materials. Notwithstanding the foregoing, Letters of Credit, amendments, modifications or supplements thereof or thereto, commitments with respect thereto and other notices or communications with respect thereto shall not be deemed given or delivered until received by the Administrative Agent. 38 (d) Reasonable Notice. To the extent permitted by Applicable Law, it ----------------- is agreed that any requirement under Applicable Law of reasonable notice by the Administrative Agent or the Banks to the Borrower of any event in connection with, or in any way related to, the Loan Documents or the exercise by the Administrative Agent or the Banks of any of their rights thereunder shall be met if notice of such event is given to the Borrower in the manner prescribed above at least 10 days before (i) the date of such event or (ii) the date after which such event will occur. Section 9.02. Expenses; Indemnification. Whether or not any Loans ------------------------- are made hereunder, the Borrower shall: (a) pay or reimburse the Administrative Agent and each Bank for all transfer, documentary, stamp and similar taxes, and all recording and filing fees and taxes, payable in connection with, arising out of, or in any way related to, the execution, delivery and performance of the Loan Documents or the making of the Loans; (b) pay or reimburse the Managing Agents and the Administrative Agent for all reasonable out-of-pocket costs and expenses (including reasonable fees and disbursements of legal counsel, appraisers, accountants and other experts reasonably employed or retained by the Managing Agents or the Administrative Agent) incurred by the Managing Agents and the Administrative Agent in connection with, arising out of, or in any way related to (i) the negotiation, preparation, execution and delivery of (A) the Loan Documents and (B) whether or not executed, any waiver, amendment or consent thereunder or thereto (unless such waiver, amendment or consent was not executed by the Borrower and not proposed or requested by the Borrower and was objected to by the Borrower in a written notice delivered to the Managing Agents), (ii) the administration of and any operations under the Loan Documents or the Letters of Credit or (iii) protecting, preserving, exercising or enforcing any of the rights of the Administrative Agent or the Banks under or related to the Loan Documents or the Letters of Credit; (c) pay or reimburse each Bank for all reasonable out-of-pocket costs and expenses (including reasonable fees and disbursements of legal counsel and other experts reasonably employed or retained by such Bank) incurred by such Bank in connection with, arising out of, or in any way related to protecting, preserving, exercising or enforcing during a Default any of its rights under or related to the Loan Documents or the Letters of Credit; and 39 (d) indemnify and hold each Indemnified Person harmless from and against all losses (including judgments, penalties and fines) suffered, and pay or reimburse each Indemnified Person for all reasonable out-of-pocket costs and expenses (including reasonable fees and disbursements of legal counsel and other experts reasonably employed or retained by such Indemnified Person) incurred, by such Indemnified Person in connection with, arising out of, or in any way related to (i) any Loan Document Related Claim (whether asserted by such Indemnified Person or the Borrower or any other Person), including the prosecution or defense thereof and any litigation or proceeding with respect thereto (whether or not, in the case of any such litigation or proceeding, such Indemnified Person is a party thereto), or (ii) any investigation, governmental or otherwise, arising out of, related to, or in any way connected with, the Loan Documents or the relationships established thereunder, except that the foregoing indemnity shall not be applicable to any loss suffered by any Indemnified Person to the extent such loss is determined by a judgment of a court that is binding on the Borrower and such Indemnified Person, final and not subject to review on appeal, to be the result of acts or omissions on the part of such Indemnified Person constituting (x) gross negligence or (y) willful misconduct. Section 9.03. Amounts Payable Due upon Request for Payment. All -------------------------------------------- amounts payable by the Borrower under Section 9.02 and under the other provisions of the Loan Documents shall, except as otherwise expressly provided, be due 20 days following written request for the payment thereof. Section 9.04. Remedies of the Essence. The various rights and ----------------------- remedies of the Administrative Agent and the Banks under the Loan Documents are of the essence of those agreements, and the Administrative Agent and the Banks shall be entitled to obtain a decree requiring specific performance of each such right and remedy. Section 9.05. Rights Cumulative. Each of the rights and remedies of ----------------- the Administrative Agent and the Banks under the Loan Documents shall be in addition to all of their other rights and remedies under the Loan Documents and Applicable Law, and nothing in the Loan Documents shall be construed as limiting any such rights or remedies. Section 9.06. Disclosures. The Administrative Agent and each Bank ----------- agrees to exercise all reasonable efforts to keep any information delivered or made available by the Borrower 40 confidential from anyone other than Persons employed or retained by the Administrative Agent or such Bank who are or are expected to become engaged in evaluating, approving, structuring or administering the Loans, provided, that -------- the Administrative Agent and the Banks may disclose to, and exchange and discuss with, any other Person (the Administrative Agent, the Banks and each such other Person being hereby authorized to do so) any information concerning the Borrower (whether received by the Administrative Agent, the Banks or such other Person in connection with or pursuant to the Loan Documents or otherwise) for the purpose of (a) complying with Applicable Law, (b) protecting, preserving, exercising or enforcing any of their rights under or related to the Loan Documents, (c) performing any of their obligations under or related to the Loan Documents or (d) consulting with respect to any of the foregoing matters. Section 9.07. Amendments; Waivers. Any term, covenant, agreement or ------------------- condition of the Loan Documents may be amended, and any right under the Loan Documents may be waived, if, but only if, such amendment or waiver is in writing and is signed by the Required Banks and, if the rights and duties of the Administrative Agent are affected thereby, by the Administrative Agent and, in the case of an amendment or a waiver of a right of the Borrower, by the Borrower; provided, however, that no amendment or waiver shall be effective, -------- ------- unless in writing and signed by each Bank, to the extent it (a) increases the amount or extends the term of any Bank's Commitment, (b) reduces the principal of or the rate of interest on any Bank's Loans or Note or the fees payable to such Bank hereunder, (c) postpones any date fixed for any payment of principal of or interest on any Bank's Loans or Note or the fees payable to such Bank hereunder, (d) releases or otherwise acquiesces in the termination of any Letter of Credit or the release of any cash collateral held pursuant to Section 1.16 if such release or termination would result in the aggregate unpaid principal amount of all Loans to exceed the Availability Amount, (e) amends the definitions of Availability Amount, Letter of Credit or Required LC Rating or amends the form of Letter of Credit or the annexes thereto set forth on Exhibit ------- B or, in each case, waives the applicability thereof, (f) waives any Event of - - Default arising under Section 6.01(g) or (g) amends Section 1.15, this Section 9.07 or any other provision of this Agreement (or, in each case, the related definitions) requiring the consent or other action of all of the Banks. Unless otherwise specified in such waiver, a waiver of any right under the Loan Documents shall be effective only in the specific instance and for the specific purpose for which given. No election not to exercise, failure to exercise or delay in exercising any right, nor any course of dealing or performance, shall operate as a waiver of any right of any party under the 41 Loan Documents or Applicable Law, nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right of any party under the Loan Documents or Applicable Law. Section 9.08. Set-Off; Suspension of Payment and Performance. The ---------------------------------------------- Administrative Agent and each Bank is hereby authorized by the Borrower, at any time and from time to time, without notice, (a) during any Event of Default, to set off against, and to appropriate and apply to the payment of, the Liabilities of the Borrower under the Loan Documents (whether owing to such Person or to any other Person that is the Administrative Agent or a Bank and whether matured or unmatured, fixed or contingent or liquidated or unliquidated) any and all Liabilities owing by the Administrative Agent or such Bank or any of its Affiliates to the Borrower (whether payable in Dollars or any other currency, whether matured or unmatured and, in the case of Liabilities that are deposits, whether general or special, time or demand and however evidenced and whether maintained at a branch or office located within or without the United States) and (b) during any Default, to suspend the payment and performance of such Liabilities owing by such Person or its Affiliates and, in the case of Liabilities that are deposits, to return as unpaid for insufficient funds any and all checks and other items drawn against such deposits. Section 9.09. Sharing of Recoveries. (a) Each Bank agrees that, if, --------------------- for any reason, including as a result of (i) the exercise of any right of counterclaim, set-off, banker's lien or similar right, (ii) its claim in any applicable bankruptcy, insolvency or other similar law being deemed secured by a Debt owed by it to the Borrower, including a claim deemed secured under Section 506 of the Bankruptcy Code, or (iii) the allocation of payments by the Administrative Agent or the Borrower in a manner contrary to the provisions of Section 1.15, such Bank shall receive payment of a proportion of the aggregate amount due and payable to it hereunder as principal of or interest on the Loans or fees that is greater than the proportion received by any other Bank in respect of the aggregate of such amounts due and payable to such other Bank hereunder, then the Bank receiving such proportionately greater payment shall purchase participations (which it shall be deemed to have done simultaneously upon the receipt of such payment) in the rights of the other Banks hereunder so that all such recoveries with respect to such amounts due and payable hereunder (net of costs of collection) shall be pro rata; provided that if all or part of such proportionately greater payment received by the purchasing Bank is thereafter recovered by or on behalf of the Borrower from such Bank, such purchases shall be rescinded and the purchase 42 prices paid for such participations shall be returned to such Bank to the extent of such recovery, but without interest (unless the purchasing Bank is required to pay interest on the amount recovered to the Person recovering such amount, in which case the selling Bank shall be required to pay interest at a like rate). The Borrower expressly consents to the foregoing arrangements and agrees that any holder of a participation in any rights hereunder so purchased or acquired pursuant to this Section 9.09(a) shall, with respect to such participation, be entitled to all of the rights of a Bank under Sections 7.02, 9.02 and 9.08 (subject to any condition imposed on a Bank hereunder with respect thereto) and may exercise any and all rights of set-off with respect to such participation as fully as though the Borrower were directly indebted to the holder of such participation for Loans in the amount of such participation. (b) Each Bank agrees to exercise any right of counterclaim, set-off, banker's lien or similar right that it may have in respect of the Borrower in a manner so as to apportion the amount subject to such exercise, on a pro rata basis, between (i) obligations of the Borrower for amounts subject to the sharing provisions of Section 9.09(a) and (ii) other Liabilities of the Borrower. Section 9.10. Assignments and Participations. (a) Assignments. (i) ------------------------------ ----------- The Borrower may not assign any of its rights or obligations under this Agreement or the Notes without the prior written consent of each Bank, and no assignment of any such obligation shall release the Borrower therefrom unless each Bank shall have consented to such release in writing specifically referring to the obligation from which the Borrower is to be released. (ii) Each Bank may from time to time assign any or all of its rights and obligations under the Loan Documents to one or more Persons; provided that, -------- except in the case of the grant of a security interest to a Federal Reserve Bank (which may be made without condition or restriction) or an assignment by a Bank to any of its Affiliates (which also may be made without condition or restriction other than as set forth in clause (D) below), no such assignment shall be effective unless (A) the assignment is consented to by the Borrower (unless an Event of Default specified in Section 6.01(d) with respect to the Borrower exists) and the Managing Agents (such consents not to be unreasonably withheld), (B) in the case of a partial assignment, after giving effect thereto, the Commitment of the assignor Bank shall be not less than $15,000,000, (C) any assignment other than to a Bank shall involve the assignment of not less than $10,000,000 of the assignor Bank's Commitment, (D) a Notice of 43 Assignment with respect to the assignment, duly executed by the assignor and the assignee, shall have been given to the Borrower and the Administrative Agent and (E) except in the case of an assignment by the Bank that is the Administrative Agent or by a Bank to any of its Affiliates, the Administrative Agent shall have been paid an assignment fee of $2,500 by the assignor or assignee. Upon any effective assignment, the assignor shall be released from the obligations so assigned and, in the case of an assignment of all of its Loans and Commitment, shall cease to be a Bank. In the event of any effective assignment by a Bank, the Borrower shall, against receipt of the existing Note of the assignor Bank, issue a new Note to the assignee Bank and, in the case of a partial assignment, to the assignor Bank, appropriately reflecting such assignment. (b) Participations. Each Bank may from time to time sell or -------------- otherwise grant participations in any or all of its rights and obligations under the Loan Documents without the consent of the Borrower, the Managing Agents or any other Bank. In the event of any such grant by a Bank of a participation, such Bank's obligations under the Loan Documents to the other parties thereto shall remain unchanged, such Bank shall remain solely responsible for the performance thereof, and the Borrower, the Administrative Agent and the other Banks may continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations thereunder. A Bank may not grant to any holder of a participation the right to require such Bank to take or omit to take any action under the Loan Documents, except that a Bank may grant to any such holder the right to require such holder's consent to any amendment or waiver for which the consent of each Bank affected thereby is required under Section 9.02. Each holder of a participation in any rights under the Loan Documents, if and to the extent the applicable participation agreement so provides, shall, with respect to such participation, be entitled to all of the rights of a Bank as fully as though it were a Bank under Sections 1.14, 7.02, 7.03 and 9.02(d) and may exercise any and all rights of set-off with respect to such participation as fully as though the Borrower were directly indebted to the holder of such participation for Loans in the amount of such participation; provided, however, -------- ------- that no holder of a participation shall be entitled to any amounts that would otherwise be payable to it with respect to its participation under Section 1.14 or 7.02 unless such amounts would have been payable to the Bank that granted such participation if such participation had not been granted. Section 9.11. Governing Law. This Agreement and the Notes (including ------------- matters relating to the Maximum Permissible Rate) shall be construed in accordance with and governed by the 44 law of the State of New York (without giving effect to its choice of law principles). Section 9.12. Judicial Proceedings; Waiver of Jury Trial. Any ------------------------------------------ judicial proceeding brought against the Borrower with respect to any Loan Document Related Claim may be brought in any court of competent jurisdiction in the City of New York, and, by execution and delivery of this Agreement, the Borrower, to the extent permitted by Applicable Law, (a) accepts, generally and unconditionally, the nonexclusive jurisdiction of such courts and any related appellate court and irrevocably agrees to be bound by any judgment rendered thereby in connection with any Loan Document Related Claim and (b) irrevocably waives any objection it may now or hereafter have as to the venue of any such proceeding brought in such a court or that such a court is an inconvenient forum. To the extent permitted by Applicable Law, the Borrower hereby waives personal service of process and consents that service of process upon it may be made by certified or registered mail, return receipt requested, at its address specified or determined in accordance with the provisions of Section 9.01(b), and service so made shall be deemed completed on the third Business Day after such service is deposited in the mail. Nothing herein shall affect the right of the Administrative Agent, any Bank or any other Indemnified Person to serve process in any other manner permitted by law or shall limit the right of the Administrative Agent, any Bank or any other Indemnified Person to bring proceedings against the Borrower in the courts of any other jurisdiction. To the extent permitted in accordance with Applicable Law (including Applicable Law relating to jurisdiction and venue), any judicial proceeding by the Borrower against the Administrative Agent or any Bank involving any Loan Document Related Claim shall be brought only in a court located in the City and State of New York. THE BORROWER, EACH AGENT AND EACH BANK HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING ANY LOAN DOCUMENT RELATED CLAIM. Section 9.13. Reference Banks. Each Reference Bank shall furnish to --------------- the Administrative Agent timely information for the purpose of determining the CD Rate and the Eurodollar Rate. If any Reference Bank shall notify the Administrative Agent that thenceforth it shall not be able to furnish such information in a timely manner or shall assign all of its Loans or Commitment to a Person that is not an Affiliate of such Reference Bank, the Administrative Agent shall, with the consent of the Required Banks and after consultation with the Borrower, appoint another Bank (which Bank, or, in the event that the long- term deposits and debt securities of such Bank shall not be rated by a nationally-recognized credit rating agency, the parent holding company in the corporate group of which such Bank is a member, 45 shall have a credit rating with respect to long-term deposits, or, if its long- term deposits are not rated, its long-term debt securities from a nationally- recognized credit rating agency substantially equivalent to the Bank, or the parent holding company in the corporate group of which such Bank is a member, being replaced) as a Reference Bank in place of such Reference Bank. Section 9.14. Severability of Provisions. Any provision of the Loan -------------------------- Documents that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions thereof or affecting the validity or enforceability of such provision in any other jurisdiction. To the extent permitted by Applicable Law, the Borrower hereby waives any provision of Applicable Law that renders any provision of the Loan Documents prohibited or unenforceable in any respect. Section 9.15. Counterparts. This Agreement may be signed in any ------------ number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto were upon the same instrument. Section 9.16. Survival of Obligations. Except as otherwise expressly ----------------------- provided therein, the rights and obligations of the Borrower, the Administrative Agent, the Banks and the other Indemnified Persons under Sections 1.14, 7.02, 7.03, 7.04, 8.05 and 9.02 shall survive the Repayment Date. Section 9.17. Entire Agreement. This Agreement and the Notes embody ---------------- the entire agreement among the Borrower, the Administrative Agent and the Banks relating to the subject matter hereof and supersede all prior agreements, representations and understandings, if any, relating to the subject matter hereof. Section 9.18. Successors and Assigns. All of the provisions of this ---------------------- Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. ARTICLE 10 INTERPRETATION -------------- Section 10.01. Defined Terms. For the purposes of this Agreement: ------------- "Adjusted CD Rate" means, for any Interest Period, a rate per annum ---------------- equal to the sum (rounded upward, if necessary, to 46 the next higher 1/100 of 1%) of (a) the rate obtained by dividing (i) the CD Rate for such Interest Period by (ii) a percentage equal to 1 minus the Reserve Requirement in effect from time to time during such Interest Period plus (b) the ---- Assessment Rate in effect from time to time during such Interest Period. "Adjusted Eurodollar Rate" means, for any Interest Period, a rate per ------------------------ annum (rounded upward, if necessary, to the next higher 1/16 of 1%) equal to the rate obtained by dividing (a) the Eurodollar Rate for such Interest Period by (b) a percentage equal to 1 minus the Reserve Requirement in effect from time to time during such Interest Period. "Administrative Agent" means Chemical Bank, as administrative agent -------------------- for the Banks under the Loan Documents, and any successor Administrative Agent appointed pursuant to Section 8.07. "Administrative Agent's Office" means the address of the ----------------------------- Administrative Agent specified in or determined in accordance with the provisions of Section 9.01(b). "Affiliate" means, with respect to a Person, any other Person that, --------- directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such first Person; unless otherwise specified, "Affiliate" means an Affiliate of the Borrower. "Agent" means the Administrative Agent, the Documentation Agent or any ----- of the Managing Agents. "Agreement" means this Agreement, including all schedules, annexes and --------- exhibits hereto. "Agreement Date" means the date set forth as such on the last -------------- signature page hereof, being the date on which the Agreement shall have been executed and delivered by the parties hereto and thereby become effective. "Alternate Base Rate" means, for any day, a rate per annum equal to ------------------- the highest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Rate for such day plus 0.5%, and (c) the Base CD Rate on such day plus 1%. For purposes hereof: "Base CD Rate" shall mean the sum of (a) the product of (i) ------------ the Three-Month Secondary CD Rate and (ii) a fraction, the numerator of which is one and the denominator of which is one minus the Reserve Requirement in effect on such day and (b) the Assessment Rate in effect on such day; and "Three-Month ----------- Secondary CD Rate" shall mean, for any day, the secondary market rate for three- - ----------------- 47 month certificates of deposit reported as being in effect on such day (or, if such day shall not be a Business Day, the next preceding Business Day) by the Board of Governors of the Federal Reserve System (the "Board") through the ----- public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day), or, if such rate shall not be so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 A.M., New York City time, on such day (or, if such day shall not be a Business Day, on the next preceding Business Day) by the Administrative Agent from three New York City negotiable certificate of deposit dealers of recognized standing selected by it. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Rate, respectively. "Applicable Law" means, anything in Section 9.11 to the contrary -------------- notwithstanding, (a) all applicable common law and principles of equity and (b) all applicable provisions of all (i) constitutions, statutes, rules, regulations and orders of governmental bodies, (ii) Governmental Approvals and (iii) orders, decisions, judgments and decrees of all courts (whether at law or in equity or admiralty) and arbitrators. "Assessment Rate" means, at any time, the rate determined by the --------------- Administrative Agent to be the average of the annual rate (rounded upwards, if necessary, to the next higher 1/100th of 1%) then estimated by each of the Reference Banks as the net annual assessment rate that will be employed in determining the annual assessment payable by such bank to the Federal Deposit Insurance Corporation (or any successor) for insuring domestic Dollar deposits at such bank. "Attributable Letter of Credit" means, with respect to any ----------------------------- Participating Partner, a Letter of Credit issued on behalf of or otherwise attributable to such Participating Partner, as indicated in such Letter of Credit or otherwise communicated by the Borrower to or determined by the Administrative Agent. For purposes solely of the second sentence of Section 1.02(d), a Letter of Credit shall constitute an Attributable Letter of Credit of a particular Participating Partner (the "Non-Increasing Partner") notwithstanding that such Letter of Credit may have been issued on behalf of or be otherwise attributable to another 48 Participating Partner if such Letter of Credit was issued in lieu of an Attributable Letter of Credit of the Non-Increasing Partner that would have had to have been issued, renewed or increased to enable the Borrower to be in compliance with Section 1.02(a) on any Letter of Credit Event Date but was in fact not so issued, renewed or increased in compliance with this Agreement. In the event that, at any time, more than one Letter of Credit shall have been issued on behalf of or be otherwise attributable to a Participating Partner (including as provided in the preceding sentence), such Letters of Credit, taken as a whole, shall constitute the Attributable Letter of Credit of such Participating Partner. "Availability Amount" means, at any time, the sum of the Available ------------------- Letter of Credit Amount and the Available Cash Collateral Amount minus the sum ----- of (a) the aggregate amount of accrued and unpaid interest on the outstanding Loans at such time and accrued and unpaid fees payable under the Loan Documents and (b) the aggregate amount of interest and fees that would accrue for the three month period (or, if less, the period from the date of determination through the date that is 30 days after the next Increase Date) commencing on the date of determination, assuming such Loans remained outstanding during such period and bore interest throughout such period at the weighted average rate applicable to such Loans on the date of determination. "Available Cash Collateral Amount" means, at any time, the amount of -------------------------------- cash collateral, if any, held pursuant to Section 1.16 hereof less such portion thereof, if any, that would not be available to be applied at such time as a result of the requirement set forth in Section 1.16 that applications of cash collateral be made on a pro rata basis. "Available Letter of Credit Amount" means, at any time, the aggregate --------------------------------- undrawn face amount of all Letters of Credit at such time less such portion thereof, if any, that would not be available to be drawn at such time as a result of the requirement set forth in Section 1.02(d) that drawings under Letters of Credit be made on a pro rata basis. "Bank" means (a) any Person listed on the signature pages hereof ---- following the Borrower and (b) any Person that has been assigned any or all of the rights or obligations of a Bank pursuant to Section 9.10(a). "Bank Tax" means any Tax based on or measured by net income, any -------- franchise Tax and any doing business Tax imposed upon any Bank or any Agent by any jurisdiction (or any political 49 subdivision thereof) in which such Bank, such Agent or any Lending Office is located. "Base Rate Loan" means any Loan the interest on which is, or is to be, -------------- as the context may require, computed on the basis of the Alternate Base Rate. "Borrower" means PrimeStar Partners, L.P., a Delaware limited -------- partnership. "Business Day" means any day other than a Saturday, Sunday or other ------------ day on which banks in New York City are authorized to close. "CD Rate" means, for any Interest Period, the rate per annum ------- determined by the Administrative Agent to be the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of the rates per annum determined, respectively, by each Reference Bank to be the prevailing rate per annum (similarly rounded) bid at approximately 10:00 a.m. (New York time) (or as soon thereafter as is practicable) on the first day of such Interest Period by two or more New York certificate of deposit dealers of recognized standing selected by such Reference Bank for the purchase at face value of certificates of deposit of such Reference Bank in the secondary market in an amount comparable to the principal amount of the CD Rate Loan of such Reference Bank to which such Interest Period applies and with a maturity comparable to such Interest Period. If any Reference Bank is unable or otherwise fails to furnish the Administrative Agent with appropriate rate information in a timely manner, the Administrative Agent shall determine the CD Rate based on the rate information furnished by the remaining Reference Banks. "CD Rate Loan" means any Loan the interest on which is, or is to be, ------------ as the context may require, computed on the basis of the Adjusted CD Rate. "Code" means the Internal Revenue Code of 1986. ---- "Collateral Account Agreement" means the Collateral Account Agreement ---------------------------- in the form of Exhibit C. --------- "Commitment" of any Bank means (a) the amount set forth opposite such ---------- Bank's name under the heading "Commitment" on Annex A or, in the case of a Bank ------- that becomes a Bank pursuant to an assignment, the amount of the assignor's Commitment assigned to such Bank, in either case, as the same may be reduced from time to time pursuant to Section 1.08 or increased or reduced from time to time pursuant to assignments in accordance with Section 50 9.10(a), or (b) as the context may require, the obligation of such Bank to make Loans in an aggregate unpaid principal amount not exceeding such amount. "Contract" means (a) any agreement (whether bi-lateral or uni-lateral -------- or executory or non-executory, including an indenture, lease or license, (b) any deed or other instrument of conveyance, (c) any certificate of incorporation or charter and (d) any by-law. "Debt" means any Liability that constitutes "debt" or "Debt" under ---- section 101(11) of the Bankruptcy Code or under the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any analogous Applicable Law. "Default" means any condition or event that constitutes an Event of ------- Default or that with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default, provided that any failure of the -------- Borrower to satisfy the payment obligation in the last sentence of Section 1.03(c) shall not constitute a Default prior to the third Business Day after the day on which notice to the Borrower shall have been given as provided therein. "Documentation Agent" means The Bank of New York. ------------------- "Dollars" and the sign "$" mean lawful money of the United States of ------- - America. "Domestic Lending Office" of any Bank means (a) the branch or office ----------------------- of such Bank set forth below such Bank's name under the heading "Domestic Lending Office" on Annex A or, in the case of a Bank that becomes a Bank ------- pursuant to an assignment, the branch or office of such Bank set forth under the heading "Domestic Lending Office" in the Notice of Assignment given to the Borrower and the Administrative Agent with respect to such assignment or (b) such other branch or office of such Bank designated by such Bank from time to time as the branch or office at which its Domestic Rate Loans are to be made or maintained. Each Bank may from time to time designate separate Domestic Lending Offices for its Base Rate Loans and CD Rate Loans, in which case all references to the Domestic Lending Office of such Bank shall be deemed to refer to either or both of such Offices, as the context may require. "Domestic Rate Loan" means any CD Rate Loan or Base Rate Loan. ------------------ 51 "Eurodollar Business Day" means any Business Day on which dealings in ----------------------- Dollar deposits are carried on in the London interbank market and on which commercial banks are open for domestic and international business (including dealings in Dollar deposits) in London, England. "Eurodollar Lending Office" of any Bank means (a) the branch or office ------------------------- of such Bank set forth below such Bank's name under the heading "Eurodollar Lending Office" on Annex A or, in the case of a Bank that becomes a Bank ------- pursuant to an assignment, the branch or office of such Bank set forth under the heading "Eurodollar Lending Office" in the Notice of Assignment given to the Borrower and the Administrative Agent with respect to such assignment or (b) such other branch or office of such Bank designated by such Bank from time to time as the branch or office at which its Eurodollar Rate Loans are to be made or maintained. "Eurodollar Rate" means, for any Interest Period, the rate per annum --------------- determined by the Administrative Agent to be the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the rates per annum determined, respectively, by each Reference Bank to be the rate at which such Reference Bank offered or would have offered to place with first-class banks in the London interbank market deposits in Dollars in amounts comparable to the Eurodollar Rate Loan of such Reference Bank to which such Interest Period applies, for a period equal to such Interest Period, at 11:00 a.m. (London time) on the second Eurodollar Business Day before the first day of such Interest Period. If any Reference Bank is unable or otherwise fails to furnish the Administrative Agent with appropriate rate information in a timely manner, the Administrative Agent shall determine the Eurodollar Rate based on the rate information furnished by the remaining Reference Banks. "Eurodollar Rate Loan" means any Loan the interest on which is, or is -------------------- to be, as the context may require, computed on the basis of the Adjusted Eurodollar Rate. "Event of Default" means any of the events specified in Section 6.01. ---------------- "Federal Funds Rate" means, for any day, the weighted average of the ------------------ rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York or, if such rate is not so published for any day that is a Business Day, the average of quotations for such day on such transactions received by Chemical Bank from 52 three Federal funds brokers of recognized standing selected by such bank. "Fixed Rate Loan" means any CD Rate Loan or Eurodollar Rate Loan. --------------- "Generally Accepted Accounting Principles" means, at any time, ---------------------------------------- generally accepted accounting principles in effect in the United States at such time. "Governmental Approval" means any authorization, consent, approval, --------------------- license or exemption of, registration or filing with, or report or notice to, any governmental unit. "Increase Date" means any date on which the Required LC Amount is ------------- scheduled to increase in accordance with Schedule 10.01-(2). ------------------ "Indemnified Person" means any Person that is, or at any time was, an ------------------ Agent, a Bank, an Affiliate of an Agent or a Bank or a director, officer, employee or agent of any such Person. "Information" means data, certificates, reports, statements (excluding ----------- financial statements), documents and other information. "Interest Payment Date" means the last day of March, June, September --------------------- and December of each year. "Interest Period" means a period commencing, in the case of the first --------------- Interest Period applicable to a Fixed Rate Loan, on the date of the making of, or conversion into, such Loan, and, in the case of each subsequent, successive Interest Period applicable thereto, on the last day of the immediately preceding Interest Period, and ending, depending on the Type of Loan, in the case of Eurodollar Interest Periods, on the same day in the first, second, third, sixth or, if made available by each of the Banks, twelfth calendar month thereafter, and, in the case of CD Interest Periods, on the day 30, 60, 90 or 180 days thereafter, except that (a) any Interest Period that would otherwise end on a day that is not a Business Day or, in the case of a Eurodollar Interest Period or a CD Interest Period for CD Rate Loans being converted into Eurodollar Rate Loans, a Eurodollar Business Day shall be extended to the next succeeding Business Day or Eurodollar Business Day, as the case may be, unless, in the case of a Eurodollar Interest Period, such Eurodollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding 53 Eurodollar Business Day and (b) any Eurodollar Interest Period that begins on the last Eurodollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month in which such Interest Period ends) shall end on the last Eurodollar Business Day of a calendar month. "CD Interest Period" and "Eurodollar Interest Period" mean, ------------------ -------------------------- respectively, an Interest Period applicable to CD Rate Loans and Eurodollar Rate Loans. "Issuing Bank" means, with respect to any Letter of Credit, the ------------ financial institution that is the issuer of such Letter of Credit. "Lending Office" of any Bank means the Domestic Lending Office or the -------------- Eurodollar Lending Office of such Bank. "Letter of Credit" means a letter of credit substantially in the form ---------------- of Exhibit B with such changes as the Managing Agents shall approve (which --------- approval shall not be unreasonably withheld) (i) issued by an Issuing Bank that has the Required LC Rating on the date of issuance of such Letter of Credit and the date on which any commitment with respect thereto is delivered to the Administrative Agent, and, if applicable, on each date on which such Letter of Credit is renewed or increased and the date on which any commitment with respect thereto is delivered to the Administrative Agent, (ii) issued for the account of a Participating Partner or any entity that owns, directly or indirectly, 100% of the capital stock or other equity interests of such Participating Partner (or otherwise not referencing the account party), (iii) issued for the benefit of the Administrative Agent on behalf of the Banks and (iv) having a term of not less than one year (or such shorter period as may exist between the date of issuance or renewal of such Letter of Credit and the next Increase Date or, if applicable, the Termination Date). "Letter of Credit Event Date" means any date on which, whether as a --------------------------- result of the expiration of one or more Letters of Credit, the occurrence of an Increase Date, or otherwise, the Letters of Credit will no longer, unless existing Letters of Credit are renewed and/or increased, or replacement or additional Letters of Credit are issued, as provided in Section 1.02(b), be in an aggregate undrawn face amount equal to or greater than the greater of (a) the Required LC Amount in effect on such date, and (b) the sum of (i) the aggregate principal amount of outstanding Loans on such date, (ii) the aggregate amount of accrued and unpaid interest thereon and accrued and unpaid fees payable under the Loan Documents and (iii) the aggregate amount of interest and fees that would accrue for the three month period (or, if less, 54 the period from the date of determination through the date that is 30 days after the next Increase Date) commencing on the date of determination, assuming such Loans remained outstanding during such period and bore interest throughout such period at the weighted average rate applicable to such Loans on the date of determination. "Liability" of any Person means any indebtedness, liability, --------- obligation, covenant or duty of or binding upon such Person or any of its assets, of any kind, nature or description, direct or indirect, absolute or contingent, due or not due, contractual or tortious, or liquidated or unliquidated. "Loan" means any amount advanced by a Bank pursuant to Section 1.01. ---- "Loan Document Related Claim" means any claim or dispute (whether --------------------------- arising under Applicable Law, including any "environmental" or similar law, under Contract or otherwise and, in the case of any proceeding relating to any such claim or dispute, whether civil, criminal, administrative or otherwise) in any way arising out of, related to, or connected with, the Loan Documents, the relationships established thereunder or any actions or conduct thereunder or with respect thereto, whether such claim or dispute arises or is asserted before or after the Agreement Date or before or after the Repayment Date. "Loan Documents" means (a) this Agreement, the Notes and the -------------- Collateral Account Agreement and (b) all other agreements, documents and instruments hereafter executed and delivered or otherwise provided pursuant to which the obligations under any agreement, document or instrument referred to in clause (a) are guaranteed or secured or, in the case of such security, evidenced or perfected. "Loan Document" shall not include any Letter of Credit. "Loral" means Space Systems/Loral, Inc., a Delaware corporation. ----- "Managing Agents" means The Bank of New York, Chemical Bank and --------------- Citibank, N.A. "Materially Adverse Effect" means, with respect to any Loan Document, ------------------------- any adverse effect on the binding nature, validity or enforceability thereof as an obligation of the Borrower. "Maximum Permissible Rate" means, with respect to interest payable on ------------------------ any amount, the rate of interest on such amount that, if exceeded, could, under Applicable Law, result in 55 (a) civil or criminal penalties being imposed on the payee or (b) the payee's being unable to enforce payment of (or, if collected, to retain) all or any part of such amount or the interest payable thereon. "Note" means any promissory note in the form of Exhibit A. ---- --------- "Notice of Assignment" means any notice to the Borrower and the -------------------- Administrative Agent with respect to an assignment pursuant to Section 9.10(a) in the form of Schedule 9.10(a). ---------------- "Parent Company" means the Persons so designated on Schedule 10.01- -------------- -------------- (1). "Participating Partners" means the Persons so designated on Schedule ---------------------- -------- 10.01-(1). - --------- "Partner" means all limited and general partners of the Borrower. ------- "Person" means any individual, sole proprietorship, corporation, ------ partnership, trust, unincorporated organization, mutual company, joint stock company, estate, union, employee organization, government or any agency or political subdivision thereof. "Post-Default Rate" means, with respect to principal of Loans, the ----------------- rate otherwise applicable under Section 1.04(a) plus 2% and, with respect to any other amounts payable under the Loan Documents, the Alternate Base Rate as in effect for each day plus 2%. "Prime Rate" means the prime commercial lending rate of Chemical Bank, ---------- as publicly announced to be in effect from time to time. The Prime Rate shall be adjusted automatically, without notice, on the effective date of any change in such prime commercial lending rate. The Prime Rate is not necessarily Chemical Bank's lowest rate of interest. "Project" means the project to construct and launch up to two ------- Satellites pursuant to the Satellite Construction Contract and the other Project Documents. "Project Documents" means the Satellite Construction Contract and all ----------------- related agreements, instruments and documents (i) to which the Borrower or Tempo is a party or (ii) which are known to the Borrower and in which the Borrower, directly or indirectly, has rights (excluding rights which the Borrower has, 56 directly or indirectly, through Loral) and which are, in each such case, material to the completion of the Project and the Borrower's interest therein (including, but not limited to, the letter agreements dated July 30, 1993 between Tempo and the Borrower relating to the DBSS and FSS satellite systems). "Project Documents" shall not include the Loan Documents or the Letters of Credit. "Reference Banks" means The Bank of New York, Chemical Bank and --------------- Citibank, N.A., and any replacement Reference Bank appointed pursuant to Section 9.13. "Regulation D" means Regulation D of the Board of Governors of the ------------ Federal Reserve System. "Regulation U" means Regulation U of the Board of Governors of the ------------ Federal Reserve System. "Regulatory Change" means any Applicable Law, interpretation, ----------------- directive, request or guideline (whether or not having the force of law), or any change therein or in the administration or enforcement thereof, that becomes effective or is implemented or first required or expected to be complied with after the Agreement Date, whether the same is (a) the result of an enactment by a government or any agency or political subdivision thereof, a determination of a court or regulatory authority, or otherwise or (b) enacted, adopted, issued or proposed before or after the Agreement Date, including any such that imposes, increases or modifies any Tax, reserve requirement, insurance charge, special deposit requirement, assessment or capital adequacy requirement, but excluding any such that imposes, increases or modifies any Bank Tax. "Repayment Date" means the later of (a) the termination of the -------------- Commitments (whether as a result of the occurrence of the Termination Date, reduction to zero pursuant to Section 1.08 or termination pursuant to Section 1.08 or 6.02) and (b) the payment in full of the Loans and all other amounts payable or accrued hereunder. "Representation and Warranty" means any representation or warranty --------------------------- made or deemed to be made by the Borrower pursuant to or under Section 2.02, Article 3, Section 5.02 or any other provision of this Agreement or the Collateral Account Agreement, WHETHER OR NOT (EXCEPT TO THE EXTENT OTHERWISE EXPRESSLY PROVIDED) THE INFORMATION THAT IS THE SUBJECT MATTER THEREOF IS WITHIN THE KNOWLEDGE OF THE BORROWER. 57 "Required Banks" means, at any time, Banks having not less than 51% of -------------- the Loans outstanding or, if there are no Loans outstanding, not less than 51% of the aggregate amount of the Commitments. "Required LC Amount" means, at any time during any period specified in ------------------ Schedule 10.01-(2), the total Letter of Credit amount set forth for such period - ------------------ on Schedule 10.01-(2) (as the same may be reduced from time to time as provided ------------------ in Section 1.08(a)), minus, in each case, the Available Cash Collateral Amount. Without limiting the foregoing, the increased Required LC Amount scheduled to take effect on an Increase Date shall take effect at the Administrative Agent's opening of business in the Administrative Agent's Office on such Increase Date. "Required LC Rating" means, with respect to an Issuing Bank, a minimum ------------------ rating with respect to long-term deposits (or, if such Issuing Bank has no such rating, long-term senior unsecured debt) of such Issuing Bank of A (or an equivalent rating) by two nationally recognized statistical rating organizations. "Reserve Requirement" means, at any time, the then current maximum ------------------- rate for which reserves (including any marginal, supplemental or emergency reserve) are required to be maintained under Regulation D by member banks of the Federal Reserve System in New York City with deposits exceeding five billion Dollars against (a) in the case of a Base Rate or CD Rate Loan, negotiable certificates of deposit in an amount of $100,000 or more with an overnight term in the case of Base Rate Loans or a term comparable to the Interest Period applicable to such Loan in the case of CD Rate Loans and (b) in the case of a Eurodollar Rate Loan, "Eurocurrency liabilities", as that term is used in Regulation D. The Adjusted CD and Adjusted Eurodollar Rates shall be adjusted automatically on and as of the effective date of any change in the applicable Reserve Requirement. "Satellites" means the satellites to be constructed and launched ---------- pursuant to the Satellite Construction Contract and the other Project Documents, with either (i) thirty-two 107-watt Ku-band transponders on board or (ii) if Tempo or the Borrower shall so elect, sixteen 200-watt Ku-band transponders on board. "Satellite Construction Contract" means (i) until the date upon which ------------------------------- the Borrower or Tempo elects to proceed to construct the Satellites for the benefit of the Borrower under either (a) Contract No. TPO-1-290 by and between Tempo and Loral for Tempo Direct Broadcast Satellite System (the "DBSS Contract") or (b) Contract No. TPO-1-693 by and between Tempo and Loral for Tempo Fixed Satellite Systems (the "FSS Contract"), the DBSS 58 Contract and the FSS Contract, and (ii) on and after such date, the DBSS Contract or the FSS Contract, as the case may be, under which the Satellites are being constructed for the benefit of the Borrower pursuant to such election. "Tax" means any Federal, State or foreign tax, assessment or other --- governmental charge or levy (including any withholding tax) upon a Person or upon its assets, revenues, income or profits. "Tempo" means Tempo Satellite, Inc., an Oklahoma corporation. ----- "Termination Date" means June 30, 1997. ---------------- "Type" means, with respect to Loans, any of the following, each of ---- which shall be deemed to be a different "Type" of Loan: Base Rate Loans, CD Rate Loans having a 30-day Interest Period, CD Rate Loans having a 60-day Interest Period, CD Rate Loans having a 90-day Interest Period, CD Rate Loans having a 180-day Interest Period, Eurodollar Rate Loans having a one-month Interest Period, Eurodollar Rate Loans having a two-month Interest Period, Eurodollar Rate Loans having a three-month Interest Period, Eurodollar Rate Loans having a six-month Interest Period and Eurodollar Rate Loans having a twelve-month Interest Period. Any CD Rate Loan or Eurodollar Rate Loan having an Interest Period with a duration that differs from the duration specified for a Type of CD Rate Loan or Eurodollar Rate Loan, as the case may be, listed above solely as a result of the operation of clauses (a) and (b) of the definition of "Interest Period" shall be deemed to be a Loan of such above-listed Type notwithstanding such difference in duration of Interest Periods. Section 10.02. Other Interpretive Provisions. (a) Except as ----------------------------- otherwise specified herein, all references herein (i) to any Person shall be deemed to include such Person's successors and assigns, (ii) to any Applicable Law defined or referred to herein shall be deemed references to such Applicable Law or any successor Applicable Law as the same may have been or may be amended or supplemented from time to time and (iii) to any Loan Document or Contract defined or referred to herein shall be deemed references to such Loan Document or Contract (and, in the case of any Note or any other instrument, any instrument issued in substitution therefor) as the terms thereof may have been or may be amended, supplemented, waived or otherwise modified from time to time. (b) When used in this Agreement, the words "herein", "hereof" and "hereunder" and words of similar import shall refer 59 to this Agreement as a whole and not to any provision of this Agreement, and the words "Article", "Section", "Annex", "Schedule" and "Exhibit" shall refer to Articles and Sections of, and Annexes, Schedules and Exhibits to, this Agreement unless otherwise specified. (c) Whenever the context so requires, the neuter gender includes the masculine or feminine, the masculine gender includes the feminine, and the singular number includes the plural, and vice versa. (d) Any item or list of items set forth following the word "including", "include" or "includes" is set forth only for the purpose of indicating that, regardless of whatever other items are in the category in which such item or items are "included", such item or items are in such category, and shall not be construed as indicating that the items in the category in which such item or items are "included" are limited to such items or to items similar to such items. (e) Each authorization in favor of any Agent, the Banks or any other Person granted by or pursuant to this Agreement shall be deemed to be irrevocable and coupled with an interest. Section 10.03. Accounting Matters. Unless otherwise specified ------------------ herein, all accounting determinations hereunder and all computations utilized by the Borrower in complying with the covenants contained herein shall be made, all accounting terms used herein shall be interpreted, and all financial statements required to be delivered hereunder shall be prepared, in accordance with Generally Accepted Accounting Principles. Section 10.04. Representations and Warranties. All Representations ------------------------------ and Warranties shall be deemed made (a) in the case of any Representation and Warranty contained in this Agreement at the time of its initial execution and delivery, at and as of the Agreement Date, (b) in the case of any Representation and Warranty contained in this Agreement or any other document at the time any Loan is made, at and as of such time and (c) in the case of any particular Representation and Warranty, wherever contained, at such other time or times as such Representation and Warranty is made or deemed made in accordance with the provisions of this Agreement or the document pursuant to, under or in connection with which such Representation and Warranty is made or deemed made. Section 10.05. Captions. Captions to Articles, Sections and -------- subsections of, and Annexes, Schedules and Exhibits 60 to, this Agreement are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or in any way affect the meaning or construction of any provision of this Agreement. Section 10.06. Interpretation of Related Documents. Except as ----------------------------------- otherwise specified therein, terms that are defined herein that are used in Notes or the Collateral Account Agreement or certificates, opinions and other documents in the forms of the Schedules attached hereto delivered in connection herewith shall have the meanings ascribed to them herein and such documents shall be otherwise interpreted in accordance with the provisions of this Article 10. 61 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers all as of the Agreement Date. PRIMESTAR PARTNERS, L.P. By _____________________________ Name: Title: CHEMICAL BANK, as Administrative Agent, as a Managing Agent and as a Bank By _____________________________ Name: Title: THE BANK OF NEW YORK, as Documentation Agent, as a Managing Agent and as a Bank By _____________________________ Name: Title: CITIBANK, N.A., as a Managing Agent and as a Bank By _____________________________ Name: Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By _____________________________ Name: Title: 62 THE FIRST NATIONAL BANK OF BOSTON By _____________________________ Name: Title: BANK OF HAWAII By _____________________________ Name: Title: BANK OF MONTREAL By _____________________________ Name: Title: THE BANK OF NOVA SCOTIA By _____________________________ Name: Title: THE BANK OF TOKYO TRUST COMPANY By _____________________________ Name: Title: BANQUE NATIONALE DE PARIS 63 By _____________________________ Name: Title: CANADIAN IMPERIAL BANK OF COMMERCE By _____________________________ Name: Title: CREDIT LYONNAIS NEW YORK BRANCH By _____________________________ Name: Title: CRESTAR BANK By _____________________________ Name: Title: DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCH By _____________________________ Name: Title: By _____________________________ Name: Title: THE FUJI BANK, LIMITED, LOS ANGELES AGENCY By _____________________________ Name: Title: 64 THE INDUSTRIAL BANK OF JAPAN, LIMITED By _____________________________ Name: Title: LTCB TRUST COMPANY By _____________________________ Name: Title: MELLON BANK, N.A. By _____________________________ Name: Title: NATIONSBANK OF TEXAS, N.A. By _____________________________ Name: Title: THE NIPPON CREDIT BANK, LTD. By _____________________________ Name: Title: PNC BANK, NATIONAL ASSOCIATION By _____________________________ Name: Title: 65 ROYAL BANK OF CANADA By _____________________________ Name: Title: SHAWMUT BANK, N.A. By _____________________________ Name: Title: SOCIETE GENERALE By _____________________________ Name: Title: THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH By _____________________________ Name: Title: Agreement Date: ________ __, 1994 66 ANNEX A Banks, Lending Offices and Notice Addresses Commitment - ---------------------- ---------- THE BANK OF NEW YORK $33,000,000.00 Domestic Lending Office: The Bank of New York One Wall Street New York, NY 10286 Eurodollar Lending Office: The Bank of New York One Wall Street New York, NY 10286 Notice Address: The Bank of New York One Wall Street New York, NY 10286 Telecopy No.: (212) 635-8595/8593 Telephone No.: (212) 635-8843 Attention: Jim Whitaker Banks, Lending Offices and Notice Addresses Commitment - ---------------------- ---------- CHEMICAL BANK $33,000,000.00 Domestic Lending Office: Chemical Bank 270 Park Avenue New York, NY 10017 Eurodollar Lending Office: Chemical Bank 270 Park Avenue New York, NY 10017 Notice Address: Chemical Bank 270 Park Avenue New York, NY 10017 Telecopy No.: (212) 270-2056/3942 Telephone No.: (212) 270-4683/4145 Attention: M. Elizabeth Mason J. Cheryl Boucher Margaret Harvey 2 Banks, Lending Offices and Notice Addresses Commitment - ---------------------- ---------- CITIBANK, N.A. $33,000,000.00 Domestic Lending Office: Citibank, N.A. 399 Park Avenue New York, NY 10043 Eurodollar Lending Office: Citibank, N.A. 399 Park Avenue New York, NY 10043 Notice Address: Citibank, N.A. 399 Park Avenue New York, NY 10043 Telecopy No.: (212) 793-6873 Telephone No.: (212) 559-8564 Attention: Eric Huttner 3 Banks, Lending Offices and Notice Addresses Commitment - ---------------------- ---------- BANK OF AMERICA NATIONAL TRUST $24,000,000 AND SAVINGS ASSOCIATION Domestic Lending Office: Bank of America National Trust and Savings Association 1850 Gateway Boulevard Concord, CA 94520 Attention: Account Administrator Eurodollar Lending Office: Bank of America National Trust and Savings Association 1850 Gateway Boulevard Concord, CA 94520 Attention: Account Administrator Notice Address: Bank of America National Trust and Savings Association Entertainment/Media Group 335 Madison Avenue, 5th Floor New York, NY 10017 Telecopy No.: (212) 503-7173 Telephone No.: (212) 503-8352 Attention: Barry Dunn 4 Banks, Lending Offices and Notice Addresses Commitment - ---------------------- ---------- THE FIRST NATIONAL BANK OF BOSTON $24,000,000 Domestic Lending Office: The First National Bank of Boston Media and Entertainment Department 100 Federal Street MSN 01-04-01 Boston, MA 02110 Eurodollar Lending Office: The First National Bank of Boston Media and Entertainment Department 100 Federal Street MSN 01-04-01 Boston, MA 02110 Notice Address: The First National Bank of Boston Media and Entertainment Department 100 Federal Street MSN 01-04-01 Boston, MA 02110 Telecopy No.: (617) 434-3401 Telephone No.: (617) 434-5335 Attention: Maureen Forrester 5 Banks, Lending Offices and Notice Addresses Commitment - ---------------------- ---------- BANK OF HAWAII $13,750,000 Domestic Lending Office: Bank of Hawaii 130 Merchant Street Honolulu, HI 96813 Eurodollar Lending Office: Bank of Hawaii 130 Merchant Street Honolulu, HI 96813 Notice Address: Bank of Hawaii 130 Merchant Street Honolulu, HI 96813 Telecopy No.: (808) 537-8301 Telephone No.: (808) 537-8433 Attention: Curtis Chin 6 Banks, Lending Offices and Notice Addresses Commitment - ---------------------- ---------- BANK OF MONTREAL $13,750,000 Domestic Lending Office: Harris Trust & Savings Association Chicago, IL 60603 ABA# 07100 288 Eurodollar Lending Office: Harris Trust & Savings Association Chicago, IL 60603 ABA# 07100 288 Notice Address: Bank of Montreal 430 Park Avenue, 16th Floor New York, NY 10022 Telecopy No.: (212) 605-1648 Telephone No.: (212) 605-1615 Attention: Gretchen Shugart/Toshie Y. Davis 7 Banks, Lending Offices and Notice Addresses Commitment - ---------------------- ---------- THE BANK OF NOVA SCOTIA $28,000,000 Domestic Lending Office: The Bank of Nova Scotia 1 Liberty Plaza, 26th Floor New York, NY 10006 Eurodollar Lending Office: The Bank of Nova Scotia 1 Liberty Plaza, 26th Floor New York, NY 10006 Notice Address: The Bank of Nova Scotia 1 Liberty Plaza, 26th Floor New York, NY 10006 Telecopy No.: (212) 225-5090/5091 Telephone No.: (212) 225-5079 Attention: Roy Pottle 8 Banks, Lending Offices and Notice Addresses Commitment - ---------------------- ---------- THE BANK OF TOKYO TRUST COMPANY $28,000,000 Domestic Lending Office: The Bank of Tokyo Trust Company National Banking Department 1251 Avenue of the Americas New York, NY 10116-3138 Eurodollar Lending Office: The Bank of Tokyo Trust Company National Banking Department 1251 Avenue of the Americas New York, NY 10116-3138 Notice Address: The Bank of Tokyo Trust Company National Banking Department 1251 Avenue of the Americas New York, NY 10116-3138 Telecopy No.: (212) 782-6440 Telephone No.: (212) 782-4324 Attention: Charles Poer 9 Banks, Lending Offices and Notice Addresses Commitment - ---------------------- ---------- BANQUE NATIONALE DE PARIS $13,750,000 Domestic Lending Office: Banque Nationale de Paris Corporate Banking 725 South Figueroa Street Los Angeles, CA 90017 Eurodollar Lending Office: Banque Nationale de Paris Corporate Banking 725 South Figueroa Street Los Angeles, CA 90017 Notice Address: Banque Nationale de Paris Corporate Banking 725 South Figueroa Street Los Angeles, CA 90017 Telecopy No.: (213) 488-9602 Telephone No.: (213) 488-9120 Attention: Janice Ho 10 Banks, Lending Offices and Notice Addresses Commitment - ---------------------- ---------- CANADIAN IMPERIAL BANK OF COMMERCE $24,000,000 Domestic Lending Office: Canadian Imperial Bank of Commerce 2727 Paces Ferry Road Suite 1200 Atlanta, GA 30339 Eurodollar Lending Office: Canadian Imperial Bank of Commerce 2727 Paces Ferry Road Suite 1200 Atlanta, GA 30339 Telecopy No.: (404) 319-4950 Telephone No.: (404) 319-4840 Attention: Layne Carson Notice Address: Canadian Imperial Bank of Commerce 425 Lexington Avenue New York, NY 10017 Telecopy No.: (212) 856-3558 Telephone No.: (212) 856-3862 Attention: Lelia Kelly 11 Banks, Lending Offices and Notice Addresses Commitment - ---------------------- ---------- CREDIT LYONNAIS NEW YORK BRANCH $28,000,000 Domestic Lending Office: Credit Lyonnais New York Branch 1301 Avenue of the Americas New York, NY 10019 Eurodollar Lending Office: Credit Lyonnais New York Branch 1301 Avenue of the Americas New York, NY 10019 Notice Address: Credit Lyonnais New York Branch 1301 Avenue of the Americas New York, NY 10019 Telecopy No.: (212) 459-3179 Telephone No.: (212) 261-7343 Attention: Silvana Burdick 12 Banks, Lending Offices and Notice Addresses Commitment - ---------------------- ---------- CRESTAR BANK $13,750,000 Domestic Lending Office: Crestar Bank 919 East Main Street Richmond, VA 23219-6665 Eurodollar Lending Office: Crestar Bank 919 East Main Street Richmond, VA 23219-6665 Notice Address: Crestar Bank 919 East Main Street Richmond, VA 23219-6665 Telecopy No.: (804) 782-5413 Telephone No.: (804) 782-5833 Attention: Thomas C. Palmer 13 Banks, Lending Offices and Notice Addresses Commitment - ---------------------- ---------- DEUTSCHE BANK AG NEW YORK AND/OR $24,000,000 CAYMAN ISLANDS BRANCH Domestic Lending Office: Deutsche Bank AG New York Branch 31 West 52nd Street New York, NY 10019 Eurodollar Lending Office: Deutsche Bank AG Cayman Islands Branch 31 West 52nd Street New York, NY 10019 Notice Address: Deutsche Bank AG New York and/or Cayman Islands Branch 31 West 52nd Street New York, NY 10019 Telecopy No.: (212) 474-8236 Telephone No.: (212) 474-8212 Attention: Carolynn Longworth/Solveigh Marcks 14 Banks, Lending Offices and Notice Addresses Commitment - ---------------------- ---------- THE FUJI BANK, LIMITED, $24,000,000 LOS ANGELES AGENCY Domestic Lending Office: The Fuji Bank, Limited, Los Angeles Agency 333 South Grand Avenue Los Angeles, CA 90071 Eurodollar Lending Office: The Fuji Bank, Limited, Los Angeles Agency 333 South Grand Avenue Los Angeles, CA 90071 Notice Address: The Fuji Bank, Limited, Los Angeles Agency 333 South Grand Avenue Los Angeles, CA 90071 Telecopy No.: (213) 253-4198 Telephone No.: (213) 253-4186 Attention: Elly Whalen 15 Banks, Lending Offices and Notice Addresses Commitment - ---------------------- ---------- THE INDUSTRIAL BANK OF JAPAN, LIMITED $24,000,000 Domestic Lending Office: The Industrial Bank of Japan, Limited 245 Park Avenue New York, NY 10167 Eurodollar Lending Office: The Industrial Bank of Japan, Limited 245 Park Avenue New York, NY 10167 Notice Address: The Industrial Bank of Japan, Limited 245 Park Avenue New York, NY 10167 Telecopy No.: (212) 682-2870 Telephone No.: (212) 309-6498 Attention: Jeff Cole 16 Banks, Lending Offices and Notice Addresses Commitment - ---------------------- ---------- LTCB TRUST COMPANY $28,000,000 Domestic Lending Office: LTCB Trust Company 165 Broadway, 49th Floor New York, NY 10006 Eurodollar Lending Office: LTCB Trust Company 165 Broadway, 49th Floor New York, NY 10006 Notice Address: LTCB Trust Company 165 Broadway, 49th Floor New York, NY 10006 Telecopy No.: (212) 608-2371 Telephone No.: (212) 335-4561 Attention: Ryan Tyler 17 Banks, Lending Offices and Notice Addresses Commitment - ---------------------- ---------- MELLON BANK, N.A. $13,750,000 Domestic Lending Office: Mellon Bank, N.A. One Mellon Bank Center 500 Grant Street Pittsburgh, PA 15258 Eurodollar Lending Office: Mellon Bank, N.A. One Mellon Bank Center 500 Grant Street Pittsburgh, PA 15258 Notice Address: Mellon Bank, N.A. One Mellon Bank Center 500 Grant Street Pittsburgh, PA 15258 Telecopy No.: (412) 236-6375 Telephone No.: (412) 234-2472 Attention: Maribeth Donnelly 18 Banks, Lending Offices and Notice Addresses Commitment - ---------------------- ---------- NATIONSBANK OF TEXAS, N.A. $13,750,000 Domestic Lending Office: Nationsbank of Texas, N.A. 901 Main Street, 67th Floor Dallas, TX 75202 Eurodollar Lending Office: Nationsbank of Texas, N.A. 901 Main Street, 67th Floor Dallas, TX 75202 Notice Address: Nationsbank of Texas, N.A. 901 Main Street, 67th Floor Dallas, TX 75202 Telecopy No.: (214) 508-0980 Telephone No.: (214) 508-0921 Attention: Brian Corum 19 Banks, Lending Offices and Notice Addresses Commitment - ---------------------- ---------- PNC BANK, NATIONAL ASSOCIATION $24,000,000 Domestic Lending Office: PNC Bank, National Association Broad & Chestnut Street Philadelphia, PA 19101 Eurodollar Lending Office: PNC Bank, National Association Broad & Chestnut Street Philadelphia, PA 19101 Notice Address: PNC Bank, National Association Broad & Chestnut Street Philadelphia, PA 19101 Telecopy No.: (215) 585-6880 Telephone No.: (215) 585-6468 Attention: Marlene Dooner 20 Banks, Lending Offices and Notice Addresses Commitment - ---------------------- ---------- ROYAL BANK OF CANADA $13,750,000 Domestic Lending Office: Royal Bank of Canada Financial Square New York, NY 10005-3531 Eurodollar Lending Office: Royal Bank of Canada Financial Square New York, NY 10005-3531 Notice Address: Royal Bank of Canada Financial Square New York, NY 10005-3531 Telecopy No.: (212) 428-6460 Telephone No.: (212) 428-6288 Attention: Barbara Meijer 21 Banks, Lending Offices and Notice Addresses Commitment - ---------------------- ---------- SHAWMUT BANK, N.A. $24,000,000 Domestic Lending Office: Shawmut Bank, N.A. 777 Main Street, MSN 397 Hartford, CT 06115 Eurodollar Lending Office: Shawmut Bank, N.A. 777 Main Street, MSN 397 Hartford, CT 06115 Notice Address: Shawmut Bank, N.A. 777 Main Street, MSN 397 Hartford, CT 06115 Telecopy No.: (203) 986-5367 Telephone No.: (203) 986-5612 Attention: Barbara Hillmeyer 22 Banks, Lending Offices and Notice Addresses Commitment - ---------------------- ---------- SOCIETE GENERALE $24,000,000 Domestic Lending Office: Societe Generale 50 Rockefeller Plaza New York, NY 10020 Eurodollar Lending Office: Societe Generale 50 Rockefeller Plaza New York, NY 10020 Notice Address: Credit Contact: Societe Generale 50 Rockefeller Plaza New York, NY 10020 Telecopy No.: (212) 830-6240 Telephone No.: (212) 830-6148 Attention: Bryan Peterman Operations Contact: Societe Generale 50 Rockefeller Plaza New York, NY 10020 Telecopy No.: (212) 830-6240 Telephone No.: (212) 830-6482 Attention: Kris Schiavone 23 Banks, Lending Offices and Notice Addresses Commitment - ---------------------- ---------- THE SUMITOMO BANK, LIMITED, $28,000,000 NEW YORK BRANCH Domestic Lending Office: The Sumitomo Bank, Limited, New York Branch One World Trade Center Suite 9651 New York, NY 10048 Eurodollar Lending Office: The Sumitomo Bank, Limited, New York Branch One World Trade Center Suite 9651 New York, NY 10048 Notice Address: The Sumitomo Bank, Limited, New York Branch One World Trade Center Suite 9651 New York, NY 10048 Telecopy No.: (212) 524-0612 Telephone No.: (212) 553-1832 Attention: Leo Pagarigan 24 Banks, Lending Offices and Notice Addresses Commitment - ---------------------- ---------- THE NIPPON CREDIT BANK, LTD. $13,750,000*/ - Domestic Lending Office: The Nippon Credit Bank, Ltd. 245 Park Avenue, 30th Floor New York, NY 10167 Eurodollar Lending Office: The Nippon Credit Bank, Ltd. 245 Park Avenue, 30th Floor New York, NY 10167 Notice Address: The Nippon Credit Bank, Ltd. 245 Park Avenue, 30th Floor New York, NY 10167 Telecopy No.: (212) 490-2867 Telephone No.: (212) 984-1343 Attention: Peter Griffith 20066381.10 - ------------------- *. Pursuant to an assignment by the Managing Agents dated as of March 10, 1994. 25 EXECUTION COPY AMENDMENT NO. 1 dated as of November 21, 1994 to CREDIT AGREEMENT dated as of March 9, 1994 THIS AMENDMENT NO. 1 (this "Amendment"), dated as of November 21, 1994, among PRIMESTAR PARTNERS, L.P., a Delaware limited partnership (the "Borrower"), the banks listed on the signature pages hereof (the "Banks") and CHEMICAL BANK, as Administrative Agent (the "Agent") (with capitalized terms used herein and not otherwise defined having the meaning ascribed thereto in the Credit Agreement hereinafter referred to), W I T N E S S E T H: ------------------- WHEREAS, the Borrower, the Banks, The Bank of New York, Chemical Bank and Citibank, N.A., as Managing Agents, The Bank of New York, as Documentation Agent and the Agent have entered into a Credit Agreement dated as of March 9, 1994 (the "Credit Agreement"); and WHEREAS, the Borrower has requested, and the Banks and the Agent have agreed to, the amendment to the Credit Agreement more fully set forth in this Amendment; and WHEREAS, such amendment shall be of benefit, either directly or indirectly, to the Borrower, NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Borrower, the Banks and the Agent agree as follows: 1. Amendment. Upon and after the Amendment Effective Date (as --------- defined in Section 3 below), the existing Schedule 10.01-(2) shall be replaced in its entirety with a new Schedule 10.01-(2) in the form of Annex A attached hereto. 2. Representations and Warranties. In order to ------------------------------ induce the Banks toagree to amend the Credit Agreement, the Borrower makes the following representations and warranties which shall survive the execution and delivery of this Amendment: (a) No Default has occurred and is continuing; and (b) Each of the representations and warranties set forth in Article 3 of the Credit Agreement are true and correct as though such representations and warranties were made at and as of the Amendment Effective Date (as defined in Section 3 below) except to the extent that any such representations or warranties are made as of a specified date or with respect to a specified period of time, in which case such representations and warranties shall be made as of such specified date or with respect to such specified period. Each of the representations and warranties made under the Credit Agreement (including those made herein) shall survive to the extent provided therein and not be waived by the execution and delivery of this Amendment. 3. Amendment Effective Date. This Amendment shall become effective ------------------------ as of the date first referenced above on the date on which all of the following conditions precedent shall have been satisfied (the "Amendment Effective Date"): (a) The Agent shall have received this Amendment, executed by the Borrower and the Required Banks. (b) The Borrower shall have paid all expenses payable under Section 4 of this Amendment to the extent invoices therefor have been given to the Borrower on or prior to the date that this Amendment has been executed as provided in clause (a) above. 4. Payment of Expenses. The Borrower hereby agrees to pay all ------------------- reasonable costs and expenses incurred by the Agent in connection with the preparation, execution and delivery of this Amendment and any other documents or instruments which may be delivered in connection herewith, including, without limitation, the reasonable fees and expenses of Winthrop, Stimson, Putnam & Roberts, which fees of counsel shall be payable on the date hereof. 5. Counterparts. This Amendment may be executed in counterparts and ------------ by different parties hereto in separate counterparts each of which, when so executed and delivered, shall be deemed to be an original and all of which, when taken together, shall constitute one and the same instrument. 6. Ratification. The Credit Agreement, as amended by this Amendment, ------------ is and shall continue to be in full force and effect and is hereby in all respects confirmed, approved and -2- ratified. 7. Governing Law. This Amendment and the rights and obligations of ------------- the parties hereunder shall be construed in accordance with and governed by the laws of the State of New York (without giving effect to its choice of law principles). 8. Reference to Agreement. From and after the Amendment Effective ---------------------- Date, each reference in the Credit Agreement to "this Agreement," "hereof," "hereunder" or words of like import, and all references to the Credit Agreement in any and all agreements, instruments, documents, notes, certificates and other writings of every kind and nature, shall be deemed to mean the Credit Agreement as modified and amended by this Amendment. -3- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective authorized officers as of the date first above written. PRIMESTAR PARTNERS, L.P. By:_____________________________ Name: Title: CHEMICAL BANK, as Agent and as a Bank By:_____________________________ Name: Title: THE BANK OF NEW YORK By:_____________________________ Name: Title: CITIBANK, N.A., By:_____________________________ Name: Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By:_____________________________ Name: Title: THE FIRST NATIONAL BANK OF BOSTON By:_____________________________ Name: Title: -5- BANK OF HAWAII By:_____________________________ Name: Title: BANK OF MONTREAL By:_____________________________ Name: Title: THE BANK OF NOVA SCOTIA By:_____________________________ Name: Title: THE BANK OF TOKYO TRUST COMPANY By:_____________________________ Name: Title: BANQUE NATIONALE DE PARIS By:_____________________________ Name: Title: CANADIAN IMPERIAL BANK OF COMMERCE By:_____________________________ Name: Title: CREDIT LYONNAIS NEW YORK BRANCH By:_____________________________ Name: Title: -7- CRESTAR BANK By:_____________________________ Name: Title: DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCH By:_____________________________ Name: Title: By:_____________________________ Name: Title: THE FUJI BANK, LIMITED, LOS ANGELES AGENCY By:_____________________________ Name: Title: THE INDUSTRIAL BANK OF JAPAN, LIMITED By:_____________________________ Name: Title: LTCB TRUST COMPANY By: _____________________________ Name: Title: MELLON BANK, N.A. By:_____________________________ Name: Title: -9- NATIONSBANK OF TEXAS, N.A. By:_____________________________ Name: Title: THE NIPPON CREDIT BANK, LTD. By:_____________________________ Name: Title: PNC BANK, NATIONAL ASSOCIATION By:_____________________________ Name: Title: ROYAL BANK OF CANADA By:_____________________________ Name: Title: SHAWMUT BANK, N.A. By:_____________________________ Name: Title: SOCIETE GENERALE -10- By:_____________________________ Name: Title: THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH By:_____________________________ Name: Title: -11- EXECUTION COPY AMENDMENT NO. 2 dated as of February 27, 1997 to CREDIT AGREEMENT dated as of March 9, 1994 THIS AMENDMENT NO. 2 (this "Amendment"), dated as of February 27, 1997, among PRIMESTAR PARTNERS, L.P., a Delaware limited partnership (the "Borrower"), the banks listed on the signature pages hereof (the "Banks"), and THE CHASE MANHATTAN BANK (formerly known as Chemical Bank), as Administrative Agent (with capitalized terms used herein and not otherwise defined having the meanings ascribed thereto in the Credit Agreement hereinafter referred to), W I T N E S S E T H: WHEREAS, the Borrower, the Banks, The Bank of New York, The Chase Manhattan Bank (formerly known as Chemical Bank) and Citibank, N.A., as Managing Agents, The Bank of New York, as Documentation Agent, and The Chase Manhattan Bank (formerly known as Chemical Bank), as Administrative Agent, have entered into a Credit Agreement dated as of March 9, 1994, as amended by Amendment No. 1 thereto, dated as of November 21, 1994 (as so amended, the "Credit Agreement"); and WHEREAS, the Borrower has requested, and the Banks and the Administrative Agent have agreed to, the amendments to the Credit Agreement more fully set forth in this Amendment; and WHEREAS, such amendments shall be of benefit, either directly or indirectly, to the Borrower, NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Borrower, the Banks and the Administrative Agent agree as follows: 1. Amendments. Effective as of February 27, 1997, but subject to ---------- the fulfillment of the conditions set forth in Section 3 below, the Credit Agreement shall be amended as follows: (a) Section 1.02(c) shall be amended by substituting the number "20th" for the number "45th" each time such number appears therein; (b) Annex A shall be amended to provide that the amount of the Commitments for each of The Bank of New York Company, Inc., The Chase Manhattan Bank and Citibank, N.A. shall be $39,666,666.67, $39,666,666.67 and $21,666,666.66, respectively; and (c) Schedule 10.01-(2) shall be amended to read in its entirety as set forth on Schedule 10.01-(2) hereto. 2. Representations and Warranties. In order to induce the Banks to ------------------------------ agree to amend the Credit Agreement, the Borrower makes the following representations and warranties which shall survive the execution and delivery of this Amendment: (a) No Default has occurred and is continuing; and (b) Each of the representations and warranties set forth in Article 3 of the Credit Agreement are true and correct as though such representations and warranties were made at and as of the Amendment Effective Date (as defined in Section 3 below) except to the extent that any such representations or warranties are made as of a specified date or with respect to a specified period of time, in which case such representations and warranties shall be made as of such specified date or with respect to such specified period. Each of the representations and warranties made under the Credit Agreement (including those made herein) shall survive to the extent provided therein and not be waived by the execution and delivery of this Amendment. 3. Amendment Effective Date. The amendments to the Credit Agreement ------------------------ effected pursuant to Section 1 hereof shall become effective as of February 27, 1997 (the "Amendment Effective Date"), so long as on or prior to such date all of the following conditions precedent shall have been satisfied: (a) The Administrative Agent shall have received each of the following, in form and substance satisfactory to the Administrative Agent: (i) this Amendment, duly executed by the Borrower and each of the Banks; (ii) the Master Assignment and Assumption Agreement, substantially in the form attached hereto as Exhibit A, duly executed by the Agents, the Assignors and Assignees listed therein and acknowledged and agreed to by the Borrower; 2 (iii) a certified copy of such resolutions of the Partners Committee of the Borrower as the Administrative Agent shall reasonably request; and (iv) such opinions of counsel for the Borrower as the Administrative Agent shall reasonably request. (b) The Borrower shall have paid all expenses payable under Section 4 of this Amendment to the extent invoices therefor have been given to the Borrower, with a reasonable opportunity for the Borrower to review such invoices, prior to the Amendment Effective Date. 4. Payment of Expenses; Replacement Notes. The Borrower hereby -------------------------------------- agrees to pay all reasonable costs and expenses incurred by the Managing Agents in connection with the preparation, execution and delivery of this Amendment and any other documents or instruments which may be delivered in connection herewith, including, without limitation, the reasonable fees and expenses of Winthrop, Stimson, Putnam & Roberts. The Borrower hereby agrees, promptly following the Amendment Effective Date, to provide a duly executed replacement Note to each of The Bank of New York Company, Inc., The Chase Manhattan Bank and Citibank, N.A. against receipt of its existing Note in order to reflect the increase of the Commitments of each such Bank effected hereby. 5. References to Certain Agents. (a) Chemical Bank has merged with ---------------------------- Chase Manhattan Bank, N.A., with the surviving entity having the name "The Chase Manhattan Bank". Therefore, any and all references in the Credit Agreement to Chemical Bank shall be deemed to refer to The Chase Manhattan Bank, the surviving entity. (b) In addition to its capacities as a Managing Agent and as a Bank, Citibank, N.A. shall also serve under the Credit Agreement in the capacity of Syndication Agent. 6. Counterparts. This Amendment may be executed in counterparts and ------------ by different parties hereto in separate counterparts each of which, when so executed and delivered, shall be deemed to be an original and all of which, when taken together, shall constitute one and the same instrument. 7. Ratification. The Credit Agreement, as amended by this ------------ Amendment, is and shall continue to be in full force and effect and is hereby in all respects confirmed, approved and ratified. 8. Governing Law. The rights and duties of the parties under this ------------- Amendment shall, pursuant to New York General Obligations Law Section 5-1401, be governed by the law of the State of New York. 9. Reference to Agreement. From and after the Amendment Effective ---------------------- Date, each reference in the Credit Agreement to "this Agreement," "hereof," "hereunder" or words of like import, and all references to the Credit Agreement in any and all agreements, instruments, documents, notes, certificates and other writings of every kind and nature, shall be deemed to mean the Credit Agreement as modified and amended by this Amendment. 3 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective authorized officers as of the date first above written. PRIMESTAR PARTNERS, L.P. By:______________________________ Name: Title: THE CHASE MANHATTAN BANK (formerly known as Chemical Bank), as Administrative Agent and as a Bank By:______________________________ Name: Title: THE BANK OF NEW YORK COMPANY, INC. By:______________________________ Name: Title: CITIBANK, N.A. By: _____________________________ Name: Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: _____________________________ Name: Title: BANK OF HAWAII By: _____________________________ Name: Title: BANK OF MONTREAL By: _____________________________ Name: Title: THE BANK OF NOVA SCOTIA By: _____________________________ Name: Title: BANK OF TOKYO - MITSUBISHI TRUST COMPANY (formerly known as The Bank of Tokyo Trust Company) By: _____________________________ Name: Title: 5 BANQUE NATIONALE DE PARIS By: _____________________________ Name: Title: CANADIAN IMPERIAL BANK OF COMMERCE By: _____________________________ Name: Title: CREDIT LYONNAIS NEW YORK BRANCH By: _____________________________ Name: Title: CRESTAR BANK By: _____________________________ Name: Title: DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCH By: _____________________________ Name: Title: By: _____________________________ 6 Name: Title: FLEET NATIONAL BANK (formerly known as Shawmut Bank, N.A.) By: _____________________________ Name: Title: THE FUJI BANK, LIMITED, LOS ANGELES AGENCY By: _____________________________ Name: Title: THE INDUSTRIAL BANK OF JAPAN, LIMITED By: _____________________________ Name: Title: LTCB TRUST COMPANY By: _____________________________ Name: Title: MELLON BANK, N.A. 7 By: _____________________________ Name: Title: NATIONSBANK OF TEXAS, N.A. By: _____________________________ Name: Title: THE NIPPON CREDIT BANK, LTD. By: _____________________________ Name: Title: PNC BANK, NATIONAL ASSOCIATION By: _____________________________ Name: Title: ROYAL BANK OF CANADA By: _____________________________ Name: Title: SOCIETE GENERALE By: _____________________________ Name: 8 Title: THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH By: _____________________________ Name: Title: 9 EXECUTION COPY AMENDMENT NO. 3 dated as of June 2, 1997 to CREDIT AGREEMENT dated as of March 9, 1994 THIS AMENDMENT NO. 3 (this "Amendment"), dated as of June 2, 1997, among PRIMESTAR PARTNERS, L.P., a Delaware limited partnership (the "Borrower"), the banks listed on the signature pages hereof (the "Banks"), and THE CHASE MANHATTAN BANK (formerly known as Chemical Bank), as Administrative Agent (with capitalized terms used herein and not otherwise defined having the meanings ascribed thereto in the Credit Agreement hereinafter referred to), W I T N E S S E T H: WHEREAS, the Borrower, the Banks, The Bank of New York, The Chase Manhattan Bank (formerly known as Chemical Bank) and Citibank, N.A., as Managing Agents, The Bank of New York, as Documentation Agent, and The Chase Manhattan Bank (formerly known as Chemical Bank), as Administrative Agent, have entered into a Credit Agreement dated as of March 9, 1994, as amended by Amendment No. 1 thereto, dated as of November 21, 1994 and Amendment No. 2 thereto, dated as of February 27, 1997 (as so amended, the "Credit Agreement"); and WHEREAS, the Borrower has requested, and the Banks and the Administrative Agent have agreed to, the amendment to the Credit Agreement more fully set forth in this Amendment; and WHEREAS, such amendment shall be of benefit, either directly or indirectly, to the Borrower, NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Borrower, the Banks and the Administrative Agent agree as follows: 1. Amendment. Upon and after the Amendment Effective Date (as --------- defined in Section 3 hereof), the Credit Agreement shall be amended by replacing the definition of "Termination Date" set forth in Section 10.01 in its entirety as follows: "'Termination Date' means December 31, 1997." ---------------- 2. Representations and Warranties. In order to induce the Banks to ------------------------------ agree to amend the Credit Agreement, the Borrower makes the following representations and warranties which shall survive the execution and delivery of this Amendment: (a) No Default has occurred and is continuing; and (b) Each of the representations and warranties set forth in Article 3 of the Credit Agreement are true and correct as though such representations and warranties were made at and as of the Amendment Effective Date (as defined in Section 3 hereof) except to the extent that any such representations or warranties are made as of a specified date or with respect to a specified period of time, in which case such representations and warranties shall be made as of such specified date or with respect to such specified period. Each of the representations and warranties made under the Credit Agreement (including those made herein) shall survive to the extent provided therein and not be waived by the execution and delivery of this Amendment. 3. Amendment Effective Date. The amendment to the Credit Agreement ------------------------ effected pursuant to Section 1 hereof shall become effective as of the date first referenced above on the date on which all of the following conditions precedent shall have been satisfied (the "Amendment Effective Date"): (a) The Administrative Agent shall have received this Amendment, duly executed by the Borrower and each of the Banks; (b) The Administrative Agent shall have received evidence satisfactory to it that the Letters of Credit required to be maintained by the Borrower pursuant to Section 1.02(a) of the Credit Agreement shall have been renewed and/or replaced such that no Letter of Credit shall cease, in accordance with its terms, to be in full force and effect prior to December 31, 1997; and (c) The Borrower shall have paid all expenses payable under Section 4 of this Amendment to the extent invoices therefor have been given to the Borrower, with a reasonable opportunity for the Borrower to review such invoices, prior to the Amendment Effective Date. 4. Payment of Expenses. The Borrower hereby agrees to pay all ------------------- reasonable costs and expenses incurred by the Managing Agents in connection with the preparation, 2 execution and delivery of this Amendment and any other documents or instruments which may be delivered in connection herewith, including, without limitation, the reasonable fees and expenses of Winthrop, Stimson, Putnam & Roberts. 5. Counterparts. This Amendment may be executed in counterparts and ------------ by different parties hereto in separate counterparts each of which, when so executed and delivered, shall be deemed to be an original and all of which, when taken together, shall constitute one and the same instrument. 6. Ratification. The Credit Agreement, as amended by this ------------ Amendment, is and shall continue to be in full force and effect and is hereby in all respects confirmed, approved and ratified. 7. Governing Law. The rights and duties of the parties under this ------------- Amendment shall, pursuant to New York General Obligations Law Section 5-1401, be governed by the law of the State of New York. 8. Reference to Agreement. From and after the Amendment Effective ---------------------- Date, each reference in the Credit Agreement to "this Agreement," "hereof," "hereunder" or words of like import, and all references to the Credit Agreement in any and all agreements, instruments, documents, notes, certificates and other writings of every kind and nature, shall be deemed to mean the Credit Agreement as modified and amended by this Amendment. 3 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective authorized officers as of the date first above written. PRIMESTAR PARTNERS, L.P. By:______________________________ Name: Title: THE CHASE MANHATTAN BANK (formerly known as Chemical Bank), as Administrative Agent and as a Bank By:______________________________ Name: Title: THE BANK OF NEW YORK COMPANY, INC. By:______________________________ Name: Title: CITIBANK, N.A. By:_____________________________ Name: Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: _____________________________ Name: Title: BANK OF HAWAII By: _____________________________ Name: Title: BANK OF MONTREAL By: _____________________________ Name: Title: THE BANK OF NOVA SCOTIA By: _____________________________ Name: Title: BANK OF TOKYO - MITSUBISHI TRUST COMPANY (formerly known as The Bank of Tokyo Trust Company) By: _____________________________ Name: Title: 5 BANQUE NATIONALE DE PARIS By:_____________________________ Name: Title: By:_____________________________ Name: Title: CANADIAN IMPERIAL BANK OF COMMERCE By:_____________________________ Name: Title: CREDIT LYONNAIS NEW YORK BRANCH By:_____________________________ Name: Title: CRESTAR BANK By:_____________________________ Name: Title: DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCH By:_____________________________ 6 Name: Title: By:_____________________________ Name: Title: FLEET NATIONAL BANK (formerly known as Shawmut Bank, N.A.) By:_____________________________ Name: Title: THE FUJI BANK, LIMITED, LOS ANGELES AGENCY By:_____________________________ Name: Title: THE INDUSTRIAL BANK OF JAPAN, LIMITED By:_____________________________ Name: Title: LTCB TRUST COMPANY By:_____________________________ Name: Title: 7 MELLON BANK, N.A. By:_____________________________ Name: Title: NATIONSBANK OF TEXAS, N.A. By:_____________________________ Name: Title: BANK OF IRELAND By:_____________________________ Name: Title: PNC BANK, NATIONAL ASSOCIATION By:_____________________________ Name: Title: ROYAL BANK OF CANADA By:_____________________________ Name: Title: SOCIETE GENERALE 8 By:_____________________________ Name: Title: THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH By:_____________________________ Name: Title: 9 EXECUTION COPY AMENDMENT NO. 4 dated as of December 19, 1997 to CREDIT AGREEMENT dated as of March 9, 1994 THIS AMENDMENT NO. 4 (this "Amendment"), dated as of December 19, 1997, among PRIMESTAR PARTNERS, L.P., a Delaware limited partnership (the "Borrower"), the banks listed on the signature pages hereof (the "Banks"), and THE CHASE MANHATTAN BANK (formerly known as Chemical Bank), as Administrative Agent (with capitalized terms used herein and not otherwise defined having the meanings ascribed thereto in the Credit Agreement hereinafter referred to), W I T N E S S E T H: WHEREAS, the Borrower, the Banks, The Bank of New York, The Chase Manhattan Bank (formerly known as Chemical Bank) and Citibank, N.A., as Managing Agents, The Bank of New York, as Documentation Agent, Citibank, N.A., as Syndication Agent, and The Chase Manhattan Bank (formerly known as Chemical Bank), as Administrative Agent, have entered into a Credit Agreement dated as of March 9, 1994, as amended by Amendment No. 1 thereto, dated as of November 21, 1994, Amendment No. 2 thereto, dated as of February 27, 1997 and Amendment No. 3 thereto, dated as of June 2, 1997 (as so amended, the "Credit Agreement"); and WHEREAS, the Borrower has requested, and the Banks and the Administrative Agent have agreed to, the amendment to the Credit Agreement more fully set forth in this Amendment; and WHEREAS, such amendment shall be of benefit, either directly or indirectly, to the Borrower, NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Borrower, the Banks and the Administrative Agent agree as follows: 1. Amendment. Upon and after the Amendment Effective Date (as --------- defined in Section 3 hereof), the Credit Agreement shall be amended by replacing the definition of "Termination Date" set forth in Section 10.01 in its entirety as follows: "'Termination Date' means September 30, 1998." ---------------- 2. Representations and Warranties. In order to induce the Banks to ------------------------------ agree to amend the Credit Agreement, the Borrower makes the following representations and warranties which shall survive the execution and delivery of this Amendment: (a) No Default has occurred and is continuing; and (b) Each of the representations and warranties set forth in Article 3 of the Credit Agreement are true and correct as though such representations and warranties were made at and as of the Amendment Effective Date (as defined in Section 3 hereof) except to the extent that any such representations or warranties are made as of a specified date or with respect to a specified period of time, in which case such representations and warranties shall be made as of such specified date or with respect to such specified period. Each of the representations and warranties made under the Credit Agreement (including those made herein) shall survive to the extent provided therein and not be waived by the execution and delivery of this Amendment. 3. Amendment Effective Date. The amendment to the Credit Agreement ------------------------ effected pursuant to Section 1 hereof shall become effective as of the date first referenced above on the date on which all of the following conditions precedent shall have been satisfied (the "Amendment Effective Date"): (a) The Administrative Agent shall have received this Amendment, duly executed by the Borrower and each of the Banks; (b) The Administrative Agent shall have received evidence satisfactory to it that the Letters of Credit required to be maintained by the Borrower pursuant to Section 1.02(a) of the Credit Agreement shall have been renewed and/or replaced such that no Letter of Credit shall cease, in accordance with its terms, to be in full force and effect prior to September 30, 1998; and (c) The Borrower shall have paid all expenses payable under Section 4 of this Amendment to the extent invoices therefor have been given to the Borrower, with a reasonable opportunity for the Borrower to review such invoices, prior to the Amendment Effective Date. 2 4. Payment of Expenses. The Borrower hereby agrees to pay all ------------------- reasonable costs and expenses incurred by the Managing Agents in connection with the preparation, execution and delivery of this Amendment and any other documents or instruments which may be delivered in connection herewith, including, without limitation, the reasonable fees and expenses of Winthrop, Stimson, Putnam & Roberts. 5. Counterparts. This Amendment may be executed in counterparts and ------------ by different parties hereto in separate counterparts each of which, when so executed and delivered, shall be deemed to be an original and all of which, when taken together, shall constitute one and the same instrument. 6. Ratification. The Credit Agreement, as amended by this ------------ Amendment, is and shall continue to be in full force and effect and is hereby in all respects confirmed, approved and ratified. 7. Governing Law. The rights and duties of the parties under this ------------- Amendment shall, pursuant to New York General Obligations Law Section 5-1401, be governed by the law of the State of New York. 8. Reference to Agreement. From and after the Amendment Effective ---------------------- Date, each reference in the Credit Agreement to "this Agreement," "hereof," "hereunder" or words of like import, and all references to the Credit Agreement in any and all agreements, instruments, documents, notes, certificates and other writings of every kind and nature, shall be deemed to mean the Credit Agreement as modified and amended by this Amendment. 3 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective authorized officers as of the date first above written. PRIMESTAR PARTNERS, L.P. By:___________________________________________________ Name: Title: THE CHASE MANHATTAN BANK, as Administrative Agent and as a Bank By:___________________________________________________ Name: Title: THE BANK OF NEW YORK, as Documentation Agent By:___________________________________________________ Name: Title: THE BANK OF NEW YORK COMPANY, INC. By:___________________________________________________ Name: Title: CITIBANK, N.A., as Syndication Agent and as a Bank By:___________________________________________________ Name: Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By:___________________________________________________ Name: Title: BANK OF HAWAII By:___________________________________________________ Name: Title: BANK OF MONTREAL By:___________________________________________________ Name: Title: THE BANK OF NOVA SCOTIA By:___________________________________________________ Name: Title: BANK OF TOKYO - MITSUBISHI TRUST COMPANY By:___________________________________________________ Name: Title: BANQUE NATIONALE DE PARIS By:___________________________________________________ Name: Title: By:___________________________________________________ Name: Title: CANADIAN IMPERIAL BANK OF COMMERCE By:___________________________________________________ Name: Title: CREDIT LYONNAIS NEW YORK BRANCH By:___________________________________________________ Name: Title: CRESTAR BANK By:___________________________________________________ Name: Title: DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCH By:___________________________________________________ Name: Title: By:___________________________________________________ Name: Title: FLEET NATIONAL BANK By:___________________________________________________ Name: Title: THE FUJI BANK, LIMITED, LOS ANGELES AGENCY By:___________________________________________________ Name: Title: THE INDUSTRIAL BANK OF JAPAN, LIMITED By:___________________________________________________ Name: Title: LTCB TRUST COMPANY By:___________________________________________________ Name: Title: MELLON BANK, N.A. By:___________________________________________________ Name: Title: NATIONSBANK OF TEXAS, N.A. By:___________________________________________________ Name: Title: BANK OF IRELAND By:___________________________________________________ Name: Title: PNC BANK, NATIONAL ASSOCIATION By:___________________________________________________ Name: Title: ROYAL BANK OF CANADA By:___________________________________________________ Name: Title: SOCIETE GENERALE By:___________________________________________________ Name: Title: THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH By:___________________________________________________ Name: Title: EXECUTION COPY AMENDMENT NO. 5 dated as of September 29, 1998 to CREDIT AGREEMENT dated as of March 9, 1994 THIS AMENDMENT NO. 5 (this "Amendment"), dated as of September 29, 1998, among PRIMESTAR PARTNERS, L.P., a Delaware limited partnership (the "Borrower"), the banks listed on the signature pages hereof (the "Banks"), and THE CHASE MANHATTAN BANK, as Administrative Agent (with capitalized terms used herein and not otherwise defined having the meanings ascribed thereto in the Credit Agreement hereinafter referred to), W I T N E S S E T H: WHEREAS, the Borrower, the Banks, The Bank of New York, The Chase Manhattan Bank and Citibank, N.A., as Managing Agents, The Bank of New York, as Documentation Agent, Citibank, N.A., as Syndication Agent, and The Chase Manhattan Bank, as Administrative Agent, have entered into a Credit Agreement dated as of March 9, 1994, as amended by Amendment No. 1 thereto, dated as of November 21, 1994, Amendment No. 2 thereto, dated as of February 27, 1997, Amendment No. 3 thereto, dated as of June 2, 1997 and Amendment No. 4 thereto, dated as of December 19, 1997 (as so amended, the "Credit Agreement"); and WHEREAS, the Borrower has requested, and the Banks and the Administrative Agent have agreed to, the amendments to the Credit Agreement more fully set forth in this Amendment; and WHEREAS, such amendments shall be of benefit, either directly or indirectly, to the Borrower, NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Borrower, the Banks and the Administrative Agent agree as follows: 1. Amendments. Upon and after the Amendment Effective Date (as ---------- defined in Section 4 hereof), the Credit Agreement shall be amended as follows: (a) Section 1.04(a)(iii) shall be amended by deleting the percentage "7/16%" appearing therein and inserting in place thereof the percentage "3/5%". (b) Section 5.01(a) shall be amended as follows: (i) by inserting immediately following the heading "Quarterly --------- Financial Statements." the symbol "(i)"; --------------------- (ii) by deleting the "." appearing at the end of new clause (i) and inserting in place thereof a ";"; and (iii) by inserting a new clause (ii) to read in its entirety as follows: "(ii) As soon as available and in any event within 60 days after the close of each of the first three quarterly accounting periods in each fiscal year of Primestar, commencing with the quarterly period ended September 30, 1998, a balance sheet of Primestar as at the end of such quarterly period and the related statements of operations and stockholder's equity of Primestar for such quarterly period and statements of operations, stockholder's equity and cash flows for the elapsed portion of the fiscal year ended with the last day of such quarterly period, setting forth in each case in comparative form the figures for the corresponding periods of the previous fiscal year." (c) Section 5.01(b) shall be amended to read in its entirety as follows: "(b) Year-End Financial Statements; Accountants' Certificate. (i) -------------------------------------------------------- As soon as available and in any event within 120 days after the end of each fiscal year of the Borrower, a balance sheet of the Borrower as at the end of such fiscal year and the related statements of operations, partners' capital (deficit) and cash flows of the Borrower for such fiscal year, setting forth in comparative form the figures as at the end of and for the previous fiscal year; (ii) (A) As soon as available and in any event within 120 days after the end of each fiscal year of Primestar, commencing with the fiscal year ended December 31, 1998, a balance sheet of Primestar as at the end of such fiscal year and the related statements of operations, stockholder's equity and cash flows of Primestar for such fiscal year, setting forth in comparative form the figures as at the end of and for the previous fiscal year; and (B) an audit report of independent certified public accountants of recognized national standing, on such financial statements of Primestar, which report shall not contain any exception as to scope that is not satisfactory to the Managing Agents." (d) Section 5.01(c) shall be amended by inserting immediately following the words "the Borrower" the words "or Primestar, as applicable". (e) Section 10.01 shall be amended as follows: (i) by replacing the definition of "Termination Date" with the following: ""Termination Date" means June 30, 1999." ---------------- (ii) by inserting the following new definition in alphabetical order: ""Primestar" means Primestar Inc., a Delaware corporation." --------- (f) Schedule 5.01(c) shall be replaced in its entirety with new Schedule 5.01(c) attached hereto as Annex A. ------- (g) Annex A shall be amended to provide that the amount of the Commitment and, if applicable, the Lending Offices and Notice Address information for each of the Banks listed on Annex B hereto shall be as set forth ------- on such Annex B with respect to each such Bank. 2. Representations and Warranties. In order to induce the Banks to ------------------------------ agree to amend the Credit Agreement, the Borrower makes the following representations and warranties which shall survive the execution and delivery of this Amendment: (a) No Default has occurred and is continuing; and (b) Each of the representations and warranties set forth in Article 3 of the Credit Agreement are true and correct as though such representations and warranties were made at and as of the Amendment Effective Date except to the extent that any such representations or warranties are made as of a specified date or with respect to a specified period of time, in which case such representations and warranties shall be made as of such specified date or with respect to such specified period. Each of the representations and warranties made under the Credit Agreement (including those made herein) shall survive to the extent provided therein and not be waived by the execution and delivery of this Amendment. 3. Termination of CD Rate Loan Option. The Borrower hereby ---------------------------------- acknowledges and agrees that, notwithstanding anything to the contrary contained in the Credit Agreement, from and after the Amendment Effective Date, no Loan shall be made, converted or continued as a CD Rate Loan and the Borrower shall not have the right to request the making, conversion or continuation of Loans as CD Rate Loans. 4. Amendment Effective Date. The amendments to the Credit Agreement ------------------------ effected pursuant to Section 1 and Section 3 hereof shall become effective as of the date first referenced above on the date on which all of the following conditions precedent shall have been satisfied (the "Amendment Effective Date"): (a) the Administrative Agent shall have received this Amendment, duly executed by the Borrower and each of the Banks; (b) the Administrative Agent shall have received evidence satisfactory to it that the Letters of Credit required to be maintained by the Borrower pursuant to Section 1.02(a) of the Credit Agreement shall have been renewed and/or replaced such that no Letter of Credit shall cease, in accordance with its terms, to be in full force and effect prior to June 30, 1999; (c) the Administrative Agent shall have received (i) the Master Assignment and Assumption Agreement, substantially in the form attached hereto as Exhibit A, duly executed by the Agents, the Assignors and --------- Assignees listed therein and acknowledged and agreed to by the Borrower (the "Assignment Agreement") and (ii) payment of each Purchase Price (as defined in the Assignment Agreement) as required in Section 1 of the Assignment Agreement; (d) the Borrower shall have paid to the Administrative Agent the fees payable pursuant to the letter agreement executed in connection with this Amendment by the Borrower and the Managing Agents; and (e) the Borrower shall have paid all expenses payable under Section 5(a) of this Amendment to the extent invoices therefor have been given to the Borrower, with a reasonable opportunity for the Borrower to review such invoices, prior to the Amendment Effective Date. 5. Payment of Expenses; Delivery of Notes. (a) The Borrower hereby -------------------------------------- agrees to pay all reasonable costs and expenses incurred by the Managing Agents in connection with the preparation, execution and delivery of this Amendment and any other documents or instruments which may be delivered in connection herewith, including, without limitation, the reasonable fees and expenses of Winthrop, Stimson, Putnam & Roberts. (b) The Borrower hereby agrees, promptly following the Amendment Effective Date, to provide a duly executed Note to each Bank reflecting its Commitment after giving effect to the Master Assignment and Assumption Agreement, against, in the case of Banks that were parties to the Credit Agreement prior to the Amendment Effective Date, receipt of each such Bank's existing Note. 6. Counterparts. This Amendment may be executed in counterparts and ------------ by different parties hereto in separate counterparts each of which, when so executed and delivered, shall be deemed to be an original and all of which, when taken together, shall constitute one and the same instrument. 7. Ratification. The Credit Agreement, as amended by this ------------ Amendment, is and shall continue to be in full force and effect and is hereby in all respects confirmed, approved and ratified. 8. Governing Law. The rights and duties of the parties under this ------------- Amendment shall, pursuant to New York General Obligations Law Section 5-1401, be governed by the law of the State of New York. 9. Reference to Agreement. From and after the Amendment Effective ---------------------- Date, each reference in the Credit Agreement to "this Agreement," "hereof," "hereunder" or words of like import, and all references to the Credit Agreement in any and all agreements, instruments, documents, notes, certificates and other writings of every kind and nature, shall be deemed to mean the Credit Agreement as modified and amended by this Amendment. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective authorized officers as of the date first above written. PRIMESTAR PARTNERS, L.P. By:___________________________________________________ Name: Title: THE CHASE MANHATTAN BANK, as Administrative Agent and as a Bank By:___________________________________________________ Name: Title: THE BANK OF NEW YORK, as Documentation Agent By:___________________________________________________ Name: Title: THE BANK OF NEW YORK COMPANY, INC. By:___________________________________________________ Name: Title: CITIBANK, N.A., as Syndication Agent and as a Bank By:___________________________________________________ Name: Title: ABN AMRO BANK N.V. By:___________________________________________________ Name: Title: By:___________________________________________________ Name: Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By:___________________________________________________ Name: Title: BANK OF MONTREAL By:___________________________________________________ Name: Title: THE BANK OF NOVA SCOTIA By:___________________________________________________ Name: Title: BANK OF TOKYO - MITSUBISHI TRUST COMPANY By:___________________________________________________ Name: Title: BANQUE NATIONALE DE PARIS By:___________________________________________________ Name: Title: By:___________________________________________________ Name: Title: CANADIAN IMPERIAL BANK OF COMMERCE By:___________________________________________________ Name: Title: CREDIT LYONNAIS NEW YORK BRANCH By:___________________________________________________ Name: Title: CRESTAR BANK By:___________________________________________________ Name: Title: DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCH By:___________________________________________________ Name: Title: By:___________________________________________________ Name: Title: DRESDNER BANK AG, NEW YORK & GRAND CAYMAN BRANCHES By:___________________________________________________ Name: Title: By:___________________________________________________ Name: Title: FIRST UNION NATIONAL BANK By:___________________________________________________ Name: Title: FLEET NATIONAL BANK By:___________________________________________________ Name: Title: THE INDUSTRIAL BANK OF JAPAN, LIMITED By:___________________________________________________ Name: Title: MELLON BANK, N.A. By:___________________________________________________ Name: Title: NATIONSBANK, N.A. (as successor by merger to NationsBank of Texas, N.A.) By:___________________________________________________ Name: Title: PNC BANK, NATIONAL ASSOCIATION By:___________________________________________________ Name: Title: ROYAL BANK OF CANADA By:___________________________________________________ Name: Title: SOCIETE GENERALE By:___________________________________________________ Name: Title: THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH By:___________________________________________________ Name: Title: TORONTO DOMINION (TEXAS) INC. By:___________________________________________________ Name: Title: U.S. BANK NATIONAL ASSOCIATION By:___________________________________________________ Name: Title: EX-10.11 4 CREDIT AGREEMENT DATED 03-31-1998 EXHIBIT 10.11 [EXECUTION COPY] ================================================================================ U.S. $700,000,000 CREDIT AGREEMENT, dated as of March 31, 1998, among PRIMESTAR, INC., as the Borrower, THE BANK OF NOVA SCOTIA, as the Administrative Agent, NATIONSBANK OF TEXAS, N.A., as the Syndication Agent, CREDIT LYONNAIS NEW YORK BRANCH, as the Documentation Agent, VARIOUS FINANCIAL INSTITUTIONS, as the Lenders, and THE BANK OF NOVA SCOTIA, CREDIT LYONNAIS NEW YORK BRANCH and NATIONSBANK OF TEXAS, N.A., as the Arranging Agents. ================================================================================
TABLE OF CONTENTS ----------------- Section Page - ------- ---- ARTICLE IDEFINITIONS AND ACCOUNTING TERMS 1.1. Defined Terms...................................................... 3 1.2. Use of Defined Terms............................................... 36 1.3. Cross-References................................................... 36 1.4. Accounting and Financial Determinations............................ 36
ARTICLE II COMMITMENTS, BORROWING AND ISSUANCEPROCEDURES, NOTES AND LETTERS OF CREDIT 2.1. Commitments........................................................ 37 2.1.1. Revolving Loan Commitment and Swing Line Loan Commitment........... 37 2.1.2. Letter of Credit Commitment........................................ 38 2.1.3. Term Loan Commitment............................................... 38 2.1.4. Lenders Not Permitted or Required to Make Loans.................... 38 2.1.5. Issuer Not Permitted or Required to Issue Letters of Credit........ 39 2.2. Reduction of the Commitment Amounts................................ 39 2.2.1. Optional........................................................... 39 2.2.2. Mandatory.......................................................... 40 2.3. Borrowing Procedures............................................... 40 2.3.1. Borrowing Procedure................................................ 40 2.3.2. Swing Line Loans................................................... 41 2.4. Continuation and Conversion Elections.............................. 42 2.5. Funding............................................................ 42 2.6. Issuance Procedures................................................ 43 2.6.1. Other Lenders' Participation....................................... 43 2.6.2. Disbursements...................................................... 43 2.6.3. Reimbursement...................................................... 44 2.6.4. Deemed Disbursements............................................... 44 2.6.5. Nature of Reimbursement Obligations................................ 45 2.7. Register; Notes.................................................... 45
i ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES 3.1. Repayments and Prepayments; Application............................. 47 3.1.1. Repayments and Prepayments.......................................... 47 3.1.2. Application......................................................... 49 3.2. Interest Provisions................................................. 50 3.2.1. Rates............................................................... 50 3.2.2. Post-Maturity Rates................................................. 50 3.2.3. Payment Dates....................................................... 51 3.3. Fees................................................................ 51 3.3.1. Commitment Fee...................................................... 51 3.3.2. Agency Fees......................................................... 52 3.3.3. Letter of Credit Fee................................................ 52
ARTICLE IV CERTAIN FIXED RATE AND OTHER PROVISIONS 4.1. Fixed Rate Lending Unlawful......................................... 52 4.2. Deposits Unavailable................................................ 52 4.3. Increased Fixed Rate Loan Costs, etc................................ 53 4.4. Funding Losses...................................................... 53 4.5. Increased Capital Costs............................................. 54 4.6. Taxes............................................................... 54 4.7. Payments, Computations, etc......................................... 57 4.8. Sharing of Payments................................................. 57 4.9. Setoff.............................................................. 58 4.10. Lender's Duty to Mitigate........................................... 58 4.11. Replacement of Lenders.............................................. 59
ARTICLE V CONDITIONS TO CREDIT EXTENSIONS 5.1. Initial Credit Extension............................................ 60 5.1.1. Subsidiary Guaranties............................................... 60 5.1.2. Pledge Agreements................................................... 60 5.1.3. Contract Assignment Agreement and each Consent and Agreement........ 60 5.1.4. Financial Information, etc.......................................... 60 5.1.5. Closing Date Certificate............................................ 61 5.1.6. Compliance Certificate.............................................. 61 5.1.7. Solvency, etc....................................................... 61 5.1.8. Consummation of Restructuring Transaction........................... 61
ii 5.1.9. Senior Subordinated Credit Agreement............................... 61 5.1.10. Delivery of Transaction Documents.................................. 61 5.1.11. Insurance.......................................................... 62 5.1.12. Opinion of Counsel................................................. 62 5.1.13. Closing Fees, Expenses, etc........................................ 62 5.2. All Credit Extensions.............................................. 62 5.2.1. Compliance with Warranties, No Default, etc........................ 62 5.2.2. Credit Extension Request, etc...................................... 63 5.2.3. Satisfactory Legal Form............................................ 63
ARTICLE VI REPRESENTATIONS AND WARRANTIES 6.1. Organization, etc.................................................. 63 6.2. Due Authorization, Non-Contravention, etc.......................... 63 6.3. Government Approval, Regulation, etc............................... 64 6.4. Validity, etc...................................................... 64 6.5. Financial Information.............................................. 64 6.6. No Material Adverse Effect......................................... 65 6.7. Litigation, Labor Controversies, etc............................... 65 6.8. Compliance with Laws............................................... 65 6.9. Subsidiaries....................................................... 65 6.10. Ownership of Properties............................................ 65 6.11. Taxes.............................................................. 65 6.12. Pension and Welfare Plans.......................................... 65 6.13. Environmental Warranties........................................... 66 6.14. Intellectual Property.............................................. 67 6.15. Regulations U and X................................................ 67 6.16. Accuracy of Information............................................ 67 6.17. Subordinated Debt.................................................. 68
ARTICLE VII COVENANTS 7.1. Affirmative Covenants.............................................. 68 7.1.1. Financial Information, Reports, Notices, etc....................... 68 7.1.2. Compliance with Laws, etc.......................................... 70 7.1.3. Maintenance of Properties.......................................... 70 7.1.4. Insurance.......................................................... 70 7.1.5. Books and Records.................................................. 71 7.1.6. Environmental Covenant............................................. 71 7.1.7. Future Subsidiaries................................................ 72
iii 7.1.8. Additional Collateral.............................................. 73 7.1.9. Rate Protection Agreements......................................... 73 7.1.10. Future Leased Property............................................. 74 7.1.11. Use of Proceeds.................................................... 74 7.2. Negative Covenants................................................. 74 7.2.1. Business Activities................................................ 74 7.2.2. Indebtedness....................................................... 74 7.2.3. Liens.............................................................. 76 7.2.4. Financial Condition and Operations................................. 77 7.2.5. Investments........................................................ 78 7.2.6. Restricted Payments, etc........................................... 79 7.2.7. Capital Expenditures, etc.......................................... 79 7.2.8. Subsidiaries....................................................... 80 7.2.9. Take or Pay Contracts.............................................. 80 7.2.10. Consolidation, Merger, etc......................................... 80 7.2.11. Permitted Dispositions............................................. 81 7.2.12. Modification of Certain Agreements................................. 81 7.2.13. Transactions with Affiliates....................................... 81 7.2.14. Negative Pledges, Restrictive Agreements, etc...................... 81 7.2.15. Sale and Leaseback................................................. 82 7.2.16. Restrictions on Leases and ASkyB Transaction....................... 82 7.2.17. Restrictions on TSAT Partners Holdings and Its Subsidiaries........ 82
ARTICLE VIII EVENTS OF DEFAULT 8.1. Listing of Events of Default....................................... 83 8.1.1. Non-Payment of Obligations......................................... 83 8.1.2. Breach of Warranty................................................. 83 8.1.3. Non-Performance of Certain Covenants and Obligations............... 83 8.1.4. Non-Performance of Other Covenants and Obligations................. 83 8.1.5. Default on Other Indebtedness...................................... 84 8.1.6. Judgments.......................................................... 84 8.1.7. Pension Plans...................................................... 84 8.1.8. Control of the Borrower............................................ 84 8.1.9. Bankruptcy, Insolvency, etc........................................ 84 8.1.10. Impairment of Security, etc........................................ 85 8.1.11. Material Adverse Change............................................ 85 8.2. Action if Bankruptcy............................................... 85 8.3. Action if Other Event of Default................................... 86
ARTICLE IX THE AGENTS iv 9.1. Actions............................................................ 86 9.2. Funding Reliance, etc.............................................. 87 9.3. Exculpation........................................................ 87 9.4. Successor.......................................................... 87 9.5. Loans by Agents.................................................... 88 9.6. Credit Decisions................................................... 88 9.7. Copies, etc........................................................ 88 9.8. The Agents......................................................... 89
ARTICLE X MISCELLANEOUS PROVISIONS 10.1. Waivers, Amendments, etc........................................... 89 10.2. Notices............................................................ 90 10.3. Payment of Costs and Expenses...................................... 90 10.4. Indemnification.................................................... 91 10.5. Survival........................................................... 92 10.6. Severability....................................................... 93 10.7. Headings........................................................... 93 10.8. Execution in Counterparts, Effectiveness, etc...................... 93 10.9. Governing Law; Entire Agreement.................................... 93 10.10. Successors and Assigns............................................. 93 10.11. Sale and Transfer of Loans and Notes; Participations in Loans and Notes.................................................... 94 10.11.1. Assignments........................................................ 94 10.11.2. Participations..................................................... 95 10.12. Other Transactions................................................. 96 10.13. Execution on Behalf of Corporation................................. 96 10.14. Forum Selection and Consent to Jurisdiction........................ 97 10.15. Waiver of Jury Trial............................................... 98
v CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of March 31, 1998 (amending and restating the Existing Credit Agreement, as defined below), is among PRIMESTAR, INC., a Delaware corporation (the "Borrower"), the various financial institutions as are -------- or may become parties hereto (collectively, the "Lenders"), NATIONSBANK OF ------- TEXAS, N.A. ("NationsBank"), as syndication agent for the Lenders (in such ----------- capacity, the "Syndication Agent"), CREDIT LYONNAIS NEW YORK BRANCH ("Credit ----------------- ------ Lyonnais"), as documentation agent for the Lenders (in such capacity, the - -------- "Documentation Agent"), each of Credit Lyonnais, NationsBank and THE BANK OF - -------------------- NOVA SCOTIA ("Scotiabank") as arranging agents for the Lenders (in such ---------- capacity, the "Arranging Agents"), and Scotiabank, as administrative agent for ---------------- the Lenders and such Agents (in such capacity, the "Administrative Agent"; -------------------- together with the Arranging Agents, the Syndication Agent and the Documentation Agent, the "Agents" and each an "Agent"). ------ ----- W I T N E S S E T H: ------------------- WHEREAS, the Borrower and its various Restricted Subsidiaries (such capitalized term, and other capitalized terms used herein, to have the meanings provided in Section 1.1) are engaged in the business of providing satellite ----------- broadcasting service to residential and commercial subscribers, and businesses and activities directly related thereto; WHEREAS, pursuant to the Credit Agreement, dated as of December 31, 1996 (the "Original Credit Agreement"), among TCI Satellite Entertainment, Inc., a ------------------------- Delaware corporation ("TSAT"), certain financial institutions from time to time ---- party thereto (the "Original Lenders"), NationsBank, as syndication agent, ---------------- Credit Lyonnais, as documentation agent, each of Credit Lyonnais, NationsBank and Scotiabank, as arranging agents, and Scotiabank, as administrative agent, the Original Lenders made extensions of credit to TSAT on terms set forth therein; WHEREAS, pursuant to the Amended and Restated Credit Agreement, dated as of June 26, 1997 (as amended, supplemented, amended and restated or otherwise modified prior to the date hereof, the "Existing Credit Agreement"), among TSAT, ------------------------- certain financial institutions from time to time party thereto (the "Existing -------- Lenders"), NationsBank, as syndication agent, Credit Lyonnais, as documentation - ------- agent, each of Credit Lyonnais, NationsBank and Scotiabank, as arranging agents, and Scotiabank, as administrative agent, the Existing Lenders made extensions of credit to TSAT on terms set forth therein; WHEREAS, (i) pursuant to the Asset Transfer Agreement, dated as of February 6, 1998 (the "TSAT Asset Transfer Agreement"), between TSAT and the Borrower, ----------------------------- TSAT has agreed to transfer all of its assets and liabilities related to its medium power business to the Borrower in consideration for stock of the Borrower (the "TSAT Asset Transfer"), (ii) pursuant to the Merger ------------------- and Contribution Agreement (and the other agreements referenced therein), dated as of February 6, 1998 (the "Restructuring Agreement"), among the Borrower, TSAT and the other ----------------------- Partners, the businesses of TSAT and the Primestar Partnership, and the PRIMESTAR Distribution Service, will be consolidated into the Borrower (the "Restructuring Transaction"), and (iii) pursuant to the Agreement and Plan of - -------------------------- Merger Agreement, dated as of February 6, 1998 (the "TSAT Merger Agreement"), --------------------- between TSAT and the Borrower, and subject to the satisfaction of certain conditions, TSAT has agreed to merge with and into the Borrower, with the Borrower as the surviving corporation (the "TSAT Merger", and collectively with ----------- the TSAT Asset Transfer and the Restructuring, the "Roll-up Plan", all as more ------------ fully described in the Proxy); WHEREAS, pursuant to the Assumption and Amendment Agreement, the Borrower has assumed TSAT's obligations under the Existing Credit Agreement and has requested that the Existing Credit Agreement be amended and restated in its entirety to become effective and binding on the Borrower pursuant to the terms of this Agreement, and the Lenders (including the Existing Lenders) have agreed (subject to the terms of the Assumption and Amendment Agreement) to amend and restate the Existing Credit Agreement in its entirety to read as set forth in this Agreement, and it has been agreed by the parties to the Existing Credit Agreement that the commitments which the Existing Lenders have agreed to extend to TSAT under the Existing Credit Agreement shall be extended or advanced to the Borrower upon the amended and restated terms and conditions contained in this Agreement with the intent that the terms of this Agreement shall supersede the terms of the Existing Credit Agreement (which shall hereafter have no further effect upon the parties thereto, other than for accrued fees and expenses, and indemnification provisions, accrued and owing under the terms of the Existing Credit Agreement on or prior to the date hereof or arising (in the case of an indemnification) under the terms of the Existing Credit Agreement); provided, -------- that any Rate Protection Agreements with any one or more Existing Lenders (or their respective s) shall continue unamended (other than their assumption by the Borrower) and in full force and effect; WHEREAS, in connection with amending and restating the Existing Credit Agreement, the Borrower desires to obtain from the Lenders (and the Issuer, as the case may be): (a) a Term Loan Commitment, pursuant to which Borrowings of Term Loans, in a maximum aggregate principal amount not to exceed $150,000,000, will be made to the Borrower in a single Borrowing occurring on the Closing Date; (b) a Revolving Loan Commitment (to include availability for Revolving Loans, Swing Line Loans and Letters of Credit), pursuant to which Borrowings of Revolving Loans, in a maximum aggregate principal amount (together with all Swing Line Loans and Letter of Credit Outstandings) not to exceed $550,000,000, will be made to the Borrower from time to time prior to the Revolving Loan Commitment Termination Date; (c) a Letter of Credit Commitment, pursuant to which the Issuer will issue Letters of Credit, in a maximum aggregate Stated Amount at any one time outstanding not to exceed $100,000,000, for the account of the Borrower from time to time prior to the -2- Revolving Loan Commitment Termination Date (provided that the aggregate -------- amount of Letter of Credit Outstandings, together with the outstanding principal amount of Revolving Loans and Swing Line Loans, at any time shall not exceed the then existing Revolving Loan Commitment Amount); and (d) a Swing Line Loan Commitment, pursuant to which Borrowings of Swing Line Loans, in a maximum aggregate principal amount not to exceed $15,000,000, will be made to the Borrower from time to time prior to the Revolving Loan Commitment Termination Date (provided, that the aggregate -------- outstanding principal amount of such Swing Line Loans, together with Revolving Loans and Letter of Credit Outstandings, at any time shall not exceed the then existing Revolving Loan Commitment Amount); with all the proceeds of the Credit Extensions to be used for the purposes specified in Section 7.1.11; and -------------- WHEREAS, the Existing Lenders, the Lenders and the Issuer are willing, on the terms and subject to the conditions hereinafter set forth (including Article ------- V), to amend and restate the Existing Credit Agreement in its entirety pursuant - - to the terms of this Agreement, and the Lenders and the Issuer are willing to extend such Commitment and make such Loans to the Borrower and issue (or participate in) Letters of Credit for the account of the Borrower; NOW, THEREFORE, the parties hereto agree as set forth above and as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION I.1. Defined Terms. The following capitalized terms (whether or ------------- not underscored) when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof): "Administrative Agent" is defined in the preamble and includes each other -------------------- -------- Person as shall have subsequently been appointed as the successor Administrative Agent pursuant to Section 9.4. ----------- "Affiliate" of any Person means any other Person which, directly or --------- indirectly, controls, is controlled by or is under common control with such Person (excluding with respect to the Borrower any (i) trustee under, or any committee with responsibility for administering, any Plan, (ii) Lender and (iii) Agent). A Person shall be deemed to be "controlled by" another Person if such other Person possesses, directly or indirectly, power: -3- (a) to vote 10% or more of the securities having ordinary voting power for the election of directors or managing general partners; or (b) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. "Agent" and "Agents" are defined in the preamble and include each other ----- ------ -------- Person as shall have subsequently been appointed as a successor Agent pursuant to Section 9.4. ----------- "Agreement" means, on any date, this Credit Agreement as originally in --------- effect on the Effective Date and as thereafter from time to time amended, supplemented, amended and restated, or otherwise modified and in effect on such date. "Alternate Base Rate" means, on any date and with respect to all Base Rate ------------------- Loans, a fluctuating rate of interest per annum equal to the higher of: (a) the Base Rate in effect on such day; and (b) the Federal Funds Rate in effect on such day plus 1/2 of 1%. Changes in the rate of interest on that portion of any Loans maintained as Base Rate Loans will take effect simultaneously with each change in the Alternate Base Rate. The Administrative Agent will give notice promptly to the Borrower and the Lenders of changes in the Alternate Base Rate. "Annualized Cash Flow" means, as of any date of determination, EBITDA for -------------------- the Fiscal Quarter ending on or immediately prior to such date of determination multiplied by four. "Annualized Cash Flow to Pro Forma Debt Service Ratio" means the ratio of ---------------------------------------------------- (a) Annualized Cash Flow to (b) Pro Forma Debt Service. -- "Annualized Cash Flow to Total Interest Expense Ratio" means, as of the ---------------------------------------------------- last day of any Fiscal Quarter, the ratio of (a) Annualized Cash Flow to (b) -- Total Interest Expense for such Fiscal Quarter and the three immediately preceding Fiscal Quarters. "Annual Pro-Forma Interest Expense" means, as of any date of determination, --------------------------------- Pro-Forma Interest Expense for the four complete Fiscal Quarters immediately succeeding such date of determination. "Applicable Margin" means: ----------------- -4- (a) with respect to the unpaid principal amount of each Term Loan maintained as (i) a Base Rate Loan, 1.25%, (ii) a LIBO Rate Loan, 2.25%, and (iii) a CD Rate Loan, 2.375%; and (b) with respect to the unpaid principal amount of each Revolving Loan, the applicable percentage set forth under the applicable column below:
Total Debt Base Rate LIBOR CD to Annualized Cash Margin Margin Margin Flow Ratio --------- -------- ------ ------------------ Greater than or equal 1.250% 2.250% 2.375% to 7.0:1 Greater than or equal 1.000% 2.000% 2.125% to 6.5:1 and less than 7.0:1 Greater than or equal 0.750% 1.750% 1.875% to 6.0:1 and less than 6.5:1 Greater than or equal 0.500% 1.500% 1.625% to 5.5:1 and less than 6.0:1 Greater than or equal 0.250% 1.250% 1.375% to 5.0:1 and less than 5.5:1 Less than 5.0:1 0.000% 0.875% 1.000%
The Total Debt to Annualized Cash Flow Ratio used to compute the Applicable Margin shall be the Total Debt to Annualized Cash Flow Ratio set forth in the Compliance Certificate most recently delivered by the Borrower to the Administrative Agent; changes in the Applicable Margin resulting from a change in the Total Debt to Annualized Cash Flow Ratio shall become effective upon delivery by the Borrower to the Administrative Agent of a new Compliance Certificate pursuant to clause (c) of Section 7.1.1. If the Borrower shall fail ---------- ------------- to deliver a Compliance Certificate within 60 days after the end of any Fiscal Quarter (or within 105 days, in the case of the last Fiscal Quarter of the Fiscal Year) as required pursuant to clause (c) of Section 7.1.1, the Applicable ---------- ------------- Margin from and including the 61st (or 106th, as the case may be) day after the end of such Fiscal Quarter to but not including the date the Borrower delivers to the Administrative Agent a Compliance Certificate shall conclusively equal the highest Applicable Margin set forth above for such type of Loans. -5- "Arranging Agents" is defined in the preamble and includes each other ---------------- -------- Person as shall have subsequently been appointed as a successor Arranging Agent pursuant to Section 9.4. ----------- "ASkyB Satellite" means either of the high power communications satellites --------------- to be purchased by the Borrower in the ASkyB Transaction. "ASkyB Transaction" means the acquisition by the Borrower from MCI ----------------- Telecommunications Corporation ("MCI"), the News Corporation Limited ("News --- ---- Corp.") and American Sky Broadcasting LLC, a wholly-owned Subsidiary of News - ----- Corp. ("ASkyB"), of the ASkyB Satellites, certain authorizations granted to MCI ----- by the Federal Communications Commission and certain related contracts, all pursuant to an asset acquisition agreement, dated as of June 11, 1997, among the Primestar Partnership, News Corp., MCI, ASkyB and, for certain purposes only, the Partners. "Assessment Rate" means, for any Interest Period for CD Rate Loans, the net --------------- annual assessment rate (rounded upwards, if necessary, to the next higher 1/100 of 1%) estimated by the Administrative Agent to be the then current annual assessment payable by the Administrative Agent to the Federal Deposit Insurance Corporation (or any successor) for insuring time deposits at offices of the Administrative Agent in the United States. "Assignee Lender" is defined in Section 10.11.1. --------------- --------------- "Assumption and Amendment Agreement" means the Assumption and Amendment ---------------------------------- Agreement, dated as of the date hereof, among TSAT, the Borrower, the Existing Lenders, the Lenders and the Agents. "Authorized Officer" means, relative to the Borrower and any other Obligor, ------------------ those of its officers or managing members (in the case of a limited liability company) whose signatures and incumbency shall have been certified by the Borrower to the Arranging Agents and the Lenders. "Base Rate" means, at any time, the rate of interest then most recently --------- established by Scotiabank in New York, New York as its base rate for Dollars loaned in the United States. The Base Rate is not necessarily intended to be the lowest rate of interest determined by Scotiabank in connection with extensions of credit. "Base Rate Loan" means a Loan bearing interest at a fluctuating rate -------------- determined by reference to the Alternate Base Rate. "Borrower" is defined in the preamble. -------- -------- "Borrower Closing Date Certificate" means the closing date certificate, --------------------------------- dated as of the Closing Date, executed and delivered by the Borrower pursuant to Section 5.1.5, substantially in the form of Exhibit K hereto. - ------------- --------- -6- "Borrower Pledge Agreement" means the Pledge Agreement, dated as of the ------------------------- Effective Date, executed and delivered by the Borrower, substantially in the form of Exhibit F-1 hereto, as amended, supplemented, amended and restated or ----------- otherwise modified from time to time. "Borrower Security Agreement" means the Security Agreement, dated as of the --------------------------- Effective Date, executed and delivered by the Borrower, substantially in the form of Exhibit G-1 hereto, as amended, supplemented, amended and restated or ----------- otherwise modified from time to time. "Borrowing" means the Loans of the same type and, in the case of Fixed Rate --------- Loans, having the same Interest Period made by all Lenders required to make such Loans on the same Business Day and pursuant to the same Borrowing Request in accordance with Section 2.1. ----------- "Borrowing Request" means a Loan request and certificate duly executed by ----------------- an Authorized Officer of the Borrower, substantially in the form of Exhibit B --------- hereto. "Business Day" means ------------ (a) any day which is neither a Saturday or Sunday nor a legal holiday on which banks are authorized or required to be closed in New York, New York; and (b) relative to the making, continuing, prepaying or repaying of any LIBO Rate Loans, any day which is a Business Day described in clause (a) ---------- above and which is also a day on which dealings in Dollars are carried on in the interbank eurodollar market of the Administrative Agent's LIBOR Office. "Capital Expenditures" means, for any period, the aggregate amount of all -------------------- expenditures of the Borrower and its Restricted Subsidiaries for fixed or capital assets made during such period which, in accordance with GAAP, would be classified as capital expenditures. "Capital Stock" means, with respect to any Person, any and all shares, ------------- interests, participations or other equivalents (however designated, whether voting or non-voting) of such Person's capital, whether now outstanding or issued after the Effective Date. "Capitalized Lease Liabilities" means all monetary obligations of the ----------------------------- Borrower or any of its Restricted Subsidiaries under any leasing or similar arrangement which, in accordance with GAAP, would be classified as capitalized leases, and, for purposes of this Agreement and each other Loan Document, the amount of such obligations shall be the capitalized amount thereof. "Cash Equivalent Investment" means, at any time: -------------------------- (a) any direct obligation of (or guaranteed by) the United States Government (or any agency or instrumentality thereof) maturing not more than one year after such time; -7- (b) commercial paper, maturing not more than nine months from the date of issue, which is issued by (i) a corporation (other than an Affiliate of any Obligor) organized under the laws of any state of the United States or of the District of Columbia and rated A-1 by S&P or P-1 by Moody's, or (ii) any Lender (or its holding company); (c) any certificate of deposit or bankers acceptance, maturing not more than one year after such time, which is issued by either (i) any bank organized under the laws of the United States (or any State thereof) and which has (x) a credit rating of Aa or better from Moody's or a comparable rating from S&P and (y) a combined capital and surplus greater than $500,000,000 (or the Dollar equivalent thereof); or (ii) any Lender; (d) any repurchase agreement entered into with any Lender or any commercial banking institution of the stature referred to in clause (c)(i) ------------- which (i) is secured by a fully perfected security interest in any obligation of the type described in clause (a), and ---------- (ii) has a market value at the time such repurchase agreement is entered into of not less than 100% of the repurchase obligation of such commercial banking institution thereunder; or (e) money market funds that invest substantially all of their assets in the investments described in clauses (a) through (d) above. ----------- --- "CD Rate" means, relative to any Interest Period for CD Rate Loans, the ------- rate of interest determined by the Administrative Agent to be the arithmetic average (rounded upwards, if necessary, to the nearest 1/16 of 1%) of the prevailing rates per annum bid at 12:00 noon, New York City time (or as soon thereafter as practicable), on the first day of such Interest Period by two or more certificate of deposit dealers of recognized standing located in New York, New York for the purchase at face value from the Administrative Agent of its certificates of deposit in an amount approximately equal to the CD Rate Loan being made or maintained by the Administrative Agent to which such Interest Period applies and having a maturity approximately equal to such Interest Period. -8- "CD Rate Loan" means a Loan bearing interest, at all times during an ------------ Interest Period applicable to such Loan, at a fixed rate determined by reference to the CD Rate (Reserve Adjusted). "CD Rate (Reserve Adjusted)" means, relative to any Loan to be made, -------------------------- continued or maintained as, or converted into, a CD Rate Loan for any Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) determined pursuant to the following formula: CDR(RA) = CDR + AR ------------------ (1.00 - CDRR) where: CDR(RA) = CD Rate (Reserve Adjusted) CDR = CD Rate CDRR = CD Reserve Requirement AR = Assessment Rate The CD Rate (Reserve Adjusted) for any Interest Period for CD Rate Loans will be determined by the Administrative Agent on the basis of the CD Reserve Requirement and Assessment Rate in effect on, and the applicable rates furnished to and received by the Administrative Agent on, the first day of such Interest Period. "CD Reserve Requirement" means, relative to any Interest Period for CD Rate ---------------------- Loans, a percentage (expressed as a decimal) equal to the maximum aggregate reserve requirements (including all basic, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements), specified under regulations issued from time to time by the F.R.S. Board and then applicable to the class of banks of which the Administrative Agent is a member, on deposits of the type used as a reference in determining the CD Rate and having a maturity approximately equal to such Interest Period. "CERCLA" means the Comprehensive Environmental Response, Compensation and ------ Liability Act of 1980, as amended. "CERCLIS" means the Comprehensive Environmental Response Compensation ------- Liability Information System List. "Change in Control" means ----------------- (a) any "person" or "group" (as such terms are used in Rule 13d-5 under the Exchange Act, and Sections 13(d) and 14(d) of the Exchange Act) of persons (other than John Malone, the legal heirs of John Malone or any Primestar Partner) becomes, directly or indirectly, in a single transaction or in a related series of transactions by way of merger, consolidation, or other business combination or otherwise, the "beneficial owner" (as -9- such term is used in Rule 13d-3 of the Exchange Act) of 25% or more of the outstanding shares of Voting Stock of the Borrower; or (b) during any consecutive two-year period calculated in accordance with GAAP, individuals who at the beginning of such period constituted the board of directors of the Borrower (together with any new directors whose election by such board of directors or whose nomination for election by the stockholders of the Borrower was approved by a vote of at least a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason (other than by action of the Permitted Holders) to constitute a majority of the board of directors of the Borrower then in office. "Closing Date" means the date of the initial Credit Extension, not to be ------------ later than April 30, 1998. "Code" means the Internal Revenue Code of 1986, and the regulations ---- thereunder, in each case as amended, reformed or otherwise modified from time to time. "Collateral Subsidiary" is defined in clause (b) of Section 7.1.8. --------------------- ---------- ------------- "Commitment" means, as the context may require, the Revolving Loan ---------- Commitment, the Term Loan Commitment, the Letter of Credit Commitment or the Swing Line Loan Commitment. "Commitment Amount" means, as the context may require, the Revolving Loan ----------------- Commitment Amount, the Term Loan Commitment Amount, the Letter of Credit Commitment Amount or the Swing Line Loan Commitment Amount. "Commitment Termination Date" means, as the context may require, the --------------------------- Revolving Loan Commitment Termination Date or the Term Loan Commitment Termination Date. "Commitment Termination Event" means ---------------------------- (a) the occurrence of any Event of Default described in clauses (a) ----------- through (d) of Section 8.1.9; or --- ------------- (b) the occurrence and continuance of any other Event of Default and either (i) the declaration of all or any portion of the Loans to be due and payable pursuant to Section 8.3, or ----------- -10- (ii) the giving of notice by the Administrative Agent, acting at the direction of the Required Lenders, to the Borrower that the Commitments have been terminated. "Compliance Certificate" means a certificate duly completed and executed by ---------------------- an Authorized Officer of the Borrower, substantially in the form of Exhibit L --------- hereto, as amended, supplemented, amended and restated or otherwise modified from time to time, together with such changes thereto as the Administrative Agent may from time to time reasonably request for the purpose of monitoring the Borrower's compliance with the financial covenants contained herein. "Concentration Account Agreement" means any concentration account agreement ------------------------------- executed and delivered by a concentration account bank, in each case substantially in the form of Exhibit E to a Security Agreement, as amended, supplemented, amended and restated or otherwise modified from time to time. "Consent and Agreement" means any consent and agreement executed and --------------------- delivered in connection with the Contract Assignment Agreement, each substantially in the form of Exhibit J hereto, as amended, supplemented, amended --------- and restated or otherwise modified from time to time. "Contingent Liability" means any agreement, undertaking or arrangement by -------------------- which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the Indebtedness of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person. The amount of any Person's obligation under any Contingent Liability shall (subject to any limitation set forth therein) be deemed to be the outstanding amount of the debt, obligation or other liability guaranteed thereby. "Continuation/Conversion Notice" means a notice of continuation or ------------------------------ conversion and certificate duly executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit D hereto. --------- "Contract Assignment Agreement" means a contract assignment agreement, ----------------------------- executed and delivered by the Borrower, substantially in the form of Exhibit I --------- hereto, as amended, supplemented, amended and restated or otherwise modified from time to time. "Contractual Obligation", as applied to any Person, means any provision of ---------------------- any Securities issued by that Person or any indenture, mortgage, deed of trust, security agreement, pledge agreement, guaranty, contract, undertaking, agreement or instrument to which that Person is a party or by which it or any of its properties is bound, or to which it or any of its properties is subject. -11- "Controlled Group" means all members of a controlled group of corporations ---------------- and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA. "Copyright Security Agreement" means any copyright security agreement ---------------------------- executed and delivered by the Borrower or a Restricted Subsidiary, as the case may be, in each case substantially in the form of Exhibit C to a Security Agreement, as amended, supplemented, amended and restated or otherwise modified from time to time. "Covered Taxes" means any Taxes other than Taxes imposed with respect to ------------- any Agent or any Lender by reason of a connection between such Agent or such Lender and the relevant taxing jurisdiction, including a connection arising from such Person being or having been a citizen or resident of such jurisdiction, or having or having had a permanent establishment or fixed place of business or being or having been engaged in business therein, but excluding a connection arising solely from such Person having executed, delivered, performed its obligations or received any payment under, or enforced, this Agreement or any other Loan Document. Taxes shall be considered Covered Taxes if such Taxes are imposed on (i) the Agent solely by reason of a connection between a Lender (but not the Agent) and the relevant taxing jurisdiction or (ii) a Lender solely by reason of a connection between the Agent or any other Lender (but not such Lender) and the relevant taxing jurisdiction. "Credit Extension" means, as the context may require, ---------------- (a) the making of a Loan by a Lender; or (b) the issuance of any Letter of Credit, or the extension of any Stated Expiry Date of any existing Letter of Credit, by the Issuer and participation in such Letter of Credit by the Lenders pursuant to the terms of this Agreement. The conversion or continuation of any Loan shall not constitute a new Credit Extension. "Credit Extension Request" means, as the context may require, any Borrowing ------------------------ Request or Issuance Request. "Default" means any Event of Default or any condition, occurrence or event ------- which, after notice or lapse of time or both, would constitute an Event of Default. "Disbursement" is defined in Section 2.6.2. ------------ ------------- "Disbursement Date" is defined in Section 2.6.2. ----------------- ------------- -12- "Disclosure Schedule" means the Disclosure Schedule attached hereto as ------------------- Schedule I, as it may be amended, supplemented, amended and restated or - ---------- otherwise modified from time to time by the Borrower with the written consent of the Administrative Agent and the Required Lenders. "Documentation Agent" is defined in the preamble and includes each other ------------------- -------- Person as shall have subsequently been appointed as the successor Documentation Agent pursuant to Section 9.4. ----------- "Dollar" and the sign "$" mean lawful money of the United States. ------ - "Domestic Office" means, relative to any Lender, the office of such Lender --------------- designated as such Lender's "Domestic Office" opposite its name on Schedule II ----------- hereto or in a Lender Assignment Agreement, or such other office of a Lender (or any successor or assign of such Lender) within the United States as may be designated from time to time by notice from such Lender, as the case may be, to each other Person party hereto. "EBITDA" means, for the Borrower and its Restricted Subsidiaries, for any ------ applicable period, the sum (without duplication) for such period of: (a) Net Income, plus - ---- (b) the amount deducted in determining Net Income representing amortization (including amortization with respect to goodwill, deferred financing costs, other non-cash interest income and expense and all other intangible assets), plus - ---- (c) the amount deducted in determining Net Income of all federal, state and local income taxes (whether paid in cash or deferred), plus - ---- (d) Total Interest Expense plus, without duplication, any non-cash interest expense, plus - ---- (e) the amount deducted in determining Net Income representing depreciation of assets, plus - ---- -13- (f) the amount deducted in determining Net Income representing other non-cash expenses. "Effective Date" means the date this Agreement becomes effective pursuant -------------- to Section 10.8. ------------ "Environmental Laws" means all applicable federal, state or local statutes, ------------------ laws, ordinances, codes, rules, regulations and guidelines (including consent decrees and administrative orders) relating to public health and safety and protection of the environment. "Equity Interests", with respect to any Person, means any Capital Stock ---------------- issued by such Person, regardless of class or designation, or any limited or general partnership interest in such Person, regardless of designation, and all warrants, options, purchase rights, conversion or exchange rights, voting rights, calls or claims of any character with respect thereto. "ERISA" means the Employee Retirement Income Security Act of 1974, as ----- amended, and any successor statute thereto of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA also refer to any successor sections thereto. "Event of Default" is defined in Section 8.1. ---------------- ----------- "Exchange Act" means the Securities Exchange Act of 1934, as amended. ------------ "Exemption Certificate" is defined in clause (b)(ii) of Section 4.6. --------------------- -------------- ----------- "Existing Credit Agreement" is defined in the third recital. ------------------------- ----- ------- "Existing Lenders" is defined in the third recital. ---------------- ----- ------- "Federal Funds Rate" means, for any period, a fluctuating rate of interest ------------------ per annum equal for each day during such period to: (a) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York; or (b) if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. -14- "Fiscal Quarter" means a quarter ending on the last day of March, June, -------------- September and December. "Fiscal Year" means any period of twelve consecutive calendar months ending ----------- on December 31; references to a Fiscal Year with a number corresponding to any calendar year (e.g., the "1997 Fiscal Year") refer to the Fiscal Year ending on ---- December 31 of such calendar year. "Fixed Rate Loan" means any CD Rate Loan or any LIBO Rate Loan. --------------- "F.R.S. Board" means the Board of Governors of the Federal Reserve System ------------ or any successor thereto. "GAAP" is defined in Section 1.4. ---- ----------- "Governmental Approval" means any action, authorization, consent, approval, --------------------- license, lease, ruling, permit, tariff, rate, certification, exemption, filing, variance, claim, order, judgment, decree, publication, notices to, declarations of or with or registration by or with any Regulatory Authority. "Governmental Rule" means any statute, law, regulation, ordinance, rule, ----------------- judgment, order, decree, permit, concession, grant, franchise, license, agreement, directive, guideline, policy, requirement, or other governmental authorization including any conditions thereof, restriction or any similar form of published or otherwise known decision of or determination by, or any interpretation or administration of any of the foregoing by, any Regulatory Authority, whether now or hereafter in effect (including any Environmental Law). "Hazardous Material" means: ------------------ (a) any "hazardous substance", as defined by CERCLA; (b) any "hazardous waste", as defined by the Resource Conservation and Recovery Act, as amended; or (c) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material or substance (including any petroleum product) within the meaning of any other applicable federal, state or local law, regulation, ordinance or requirement (including consent decrees and administrative orders) relating to or imposing liability or standards of conduct concerning any hazardous, toxic or dangerous waste, substance or material, all as amended. "Hedging Obligations" means, with respect to any Person, all liabilities of ------------------- such Person under currency exchange agreements, interest rate swap agreements, interest rate cap agreements -15- and interest rate collar agreements, and all other agreements or arrangements designed to protect such Person against fluctuations in interest rates or currency exchange rates. "herein", "hereof", "hereto", "hereunder" and similar terms contained in ------ ------ ------ --------- this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular Section, paragraph or provision of this Agreement or such other Loan Document. "Impermissible Qualification" means, relative to the opinion or --------------------------- certification of any independent public accountant as to any financial statement of the Borrower, any qualification or exception to such opinion or certification: (a) which is of a "going concern" or similar nature; (b) which relates to the limited scope of examination of matters relevant to such financial statement; or (c) which relates to the treatment or classification of any item in such financial statement and which, as a condition to its removal, would require an adjustment to such item the effect of which would be to cause the Borrower to be in default of any of its obligations under Section ------- 7.2.4. ----- "including" and "include" mean including without limiting the generality of --------- ------- any description preceding such term, and, for purposes of this Agreement and each other Loan Document, the parties hereto agree that the rule of ejusdem ------- generis shall not be applicable to limit a general statement, which is followed - ------- by or referable to an enumeration of specific matters, to matters similar to the matters specifically mentioned. "Indebtedness" of any Person means, without duplication: ------------ (a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (b) all obligations, contingent or otherwise, relative to the face amount of all letters of credit, whether or not drawn, and banker's acceptances issued for the account of such Person; (c) all obligations of such Person as lessee under leases which have been or should be, in accordance with GAAP, recorded as Capitalized Lease Liabilities; (d) net liabilities of such Person under all Hedging Obligations; -16- (e) whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services, and indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse; and (f) all Contingent Liabilities of such Person in respect of any of the foregoing. For all purposes of this Agreement, the Indebtedness of any Person shall include the recourse Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer. "Indemnified Liabilities" is defined in Section 10.4. ----------------------- ------------ "Indemnified Parties" is defined in Section 10.4. ------------------- ------------ "Interest Period" means, relative to any Fixed Rate Loan, the period --------------- beginning on (and including) the date on which such Fixed Rate Loan is made or continued as, or converted into, a Fixed Rate Loan pursuant to Section 2.3 or ----------- 2.4 and shall end on (but exclude) the day which is, in the case of a CD Rate - --- Loan, 30, 60 or 90 (or if available to all relevant Lenders and at the discretion of the Administrative Agent, 180) days thereafter, or which, in the case of a LIBO Rate Loan, numerically corresponds to such date one, two, three or six (or if available to all relevant Lenders and at the discretion of the Administrative Agent, twelve) months thereafter (or, if such month has no numerically corresponding day, on the last Business Day of such month), as the Borrower may select in its relevant notice pursuant to Section 2.3 or 2.4; ----------- --- provided, however, that: - -------- ------- (a) the Borrower shall not be permitted to select Interest Periods to be in effect at any one time which have expiration dates occurring on more than fifteen different dates; (b) if such Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next following Business Day (unless such next following Business Day is the first Business Day of a calendar month, in which case such Interest Period shall end on the Business Day next preceding such numerically corresponding day); and (c) no Interest Period for any Loan (i) may be selected for any Loan made prior to a date following the Effective Date agreed to in writing by the Borrower and the Administrative Agent which would end after such date and (ii) may end later than the Stated Maturity Date. -17- "Investment" means, relative to any Person: ---------- (a) any loan or advance made by such Person to any other Person (excluding commission, travel, petty cash and similar advances to officers and employees made in the ordinary course of business); (b) any Contingent Liability of such Person incurred in connection with loans or advances described in clause (a); and ---------- (c) any ownership or similar interest held by such Person in any other Person. The amount of any Investment shall be the original principal or capital amount thereof less all returns of principal or equity thereon and shall, if made by the transfer or exchange of property other than cash, be deemed to have been made in an original principal or capital amount equal to the fair market value of such property at the time of such Investment. "Issuance Request" means a Letter of Credit request and certificate duly ---------------- executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit C hereto. - --------- "Issuer" means Scotiabank in its capacity as issuer of the Letters of ------ Credit. Scotiabank may act or decline to act as the Issuer in its sole discretion. At the request of Scotiabank, another Lender or an Affiliate of Scotiabank may issue one or more Letters of Credit hereunder. "Law Change" is defined in clause (b) of Section 4.6. ---------- ---------- ----------- "Lender Assignment Agreement" means a lender assignment agreement, --------------------------- substantially in the form of Exhibit E hereto. --------- "Lenders" is defined in the preamble and, in addition, shall include any ------- -------- commercial bank or other financial institution that becomes a Lender pursuant to Section 10.11.1. - --------------- "Lender's Environmental Liability" means any and all losses, liabilities, -------------------------------- obligations, penalties, claims, litigation, demands, defenses, costs, judgments, suits, proceedings, damages (including consequential damages), disbursements or expenses of any kind or nature whatsoever (including reasonable attorneys' fees at trial and appellate levels and experts' fees and disbursements and expenses incurred in investigating, defending against or prosecuting any litigation, claim or proceeding) which may at any time be imposed upon, incurred by or asserted or awarded against any Lender or any of such Lender's parent and subsidiary corporations, and their Affiliates, shareholders, directors, officers, employees, and agents in connection with or arising from: (a) any Hazardous Material on, in, under or affecting all or any portion of any property of the Borrower or any of its Subsidiaries, the groundwater thereunder, or any -18- surrounding areas thereof to the extent caused by Releases from the Borrower's or any of the Borrower's Subsidiaries' or any of their respective predecessors' properties; (b) any misrepresentation, inaccuracy or breach of any warranty, contained or referred to in Section 6.13; ------------ (c) any violation or claim of violation by the Borrower or any of its Subsidiaries of any Environmental Laws; or (d) the imposition of any lien for damages caused by or the recovery of any costs for the cleanup, release or threatened release of Hazardous Material by the Borrower or any of its Subsidiaries, or in connection with any property owned or formerly owned by the Borrower or any of its Subsidiaries. "Letter of Credit" is defined in Section 2.1.2. ---------------- ------------- "Letter of Credit Commitment" means, with respect to the Issuer, the --------------------------- Issuer's obligation to issue Letters of Credit pursuant to Section 2.1.2 and, ------------- with respect to each of the other Lenders, the obligations of each such Lender to participate in such Letters of Credit pursuant to Section 2.6.1. ------------- "Letter of Credit Commitment Amount" means, on any date, $100,000,000, as ---------------------------------- such amount may be permanently reduced from time to time pursuant to Section ------- 2.2. - --- "Letter of Credit Outstandings" means, on any date, an amount equal to the ----------------------------- sum of: (a) the then aggregate amount which is undrawn and available under all issued and outstanding Letters of Credit, plus - ---- (b) the then aggregate amount of all unpaid and outstanding Reimbursement Obligations. "LIBO Rate" means, relative to any Interest Period for LIBO Rate Loans, the --------- rate of interest determined as follows: (a) on the date two Business Days prior to the first day of such Interest Period, the Administrative Agent shall obtain the offered quotation(s) that appear on the Reuter's Screen for Dollar deposits for a period comparable to such Interest Period. If at least two such offered quotations appear on the Reuter's Screen, the LIBO Rate shall be the arithmetic average (rounded upwards, if necessary, to the nearest 1/16th of 1%) of such offered quotations, as determined by the Administrative Agent; or -19- (b) if the Reuter's Screen is not available or has been discontinued, the LIBO Rate shall be the rate per annum which the Administrative Agent in good faith determines to be the arithmetic average (rounded as aforesaid) of the offered quotations for Dollar deposits in an amount comparable to the Administrative Agent's share of the relevant amount in respect of which the LIBO Rate is being determined for a period comparable to the relevant LIBO Interest Period that leading banks in New York City selected by the Administrative Agent are quoting at 11:00 a.m. on the date two Business Days prior to the first day of such Interest Period in the New York Interbank Market to major international banks. "LIBO Rate Loan" means a Loan bearing interest, at all times during an -------------- Interest Period applicable to such Loan, at a fixed rate of interest determined by reference to the LIBO Rate (Reserve Adjusted). "LIBO Rate (Reserve Adjusted)" means, relative to any Loan to be made, ---------------------------- continued or maintained as, or converted into, a LIBO Rate Loan for any Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/16th of 1%) determined pursuant to the following formula: LIBO Rate = LIBO Rate ------------------------------------- (Reserve Adjusted) 1.00 - LIBOR Reserve Percentage The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate Loans will be determined by the Administrative Agent on the basis of the LIBOR Reserve Percentage in effect, and the applicable rates furnished to and received by the Administrative Agent from Scotiabank two Business Days before, the first day of such Interest Period. "LIBOR Office" means, relative to any Lender, the office of such Lender ------------ designated as such Lender's "LIBOR Office" opposite its name on Schedule II ----------- hereto or in a Lender Assignment Agreement, or such other office of a Lender as designated from time to time by notice from such Lender to the Borrower and the Administrative Agent, whether or not outside the United States, which shall be making or maintaining LIBO Rate Loans of such Lender hereunder. "LIBOR Reserve Percentage" means, relative to any Interest Period for LIBO ------------------------ Rate Loans, the reserve percentage (expressed as a decimal) equal to the maximum aggregate reserve requirements (including all basic, emergency, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements) specified under regulations issued from time to time by the F.R.S. Board and then applicable to assets or liabilities consisting of or including "Eurocurrency Liabilities", as currently defined in Regulation D of the F.R.S. Board, and applicable to all Lenders, having a term approximately equal or comparable to such Interest Period. -20- "Lien" means any security interest, mortgage, pledge, hypothecation, ---- assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge against or interest in property, or other priority or preferential arrangement of any kind or nature whatsoever, to secure payment of a debt or performance of an obligation. "Loan" means, as the context may require, a Revolving Loan, a Term Loan or ---- a Swing Line Loan. "Loan Documents" collectively means this Agreement, the Notes, the Letters -------------- of Credit, each Rate Protection Agreement relating to Hedging Obligations of the Borrower or any of its Subsidiaries, each Borrowing Request, each Issuance Request, the Borrower Pledge Agreement, the Subsidiary Pledge Agreement, the Borrower Security Agreement, the Subsidiary Security Agreement, each Patent Security Agreement, each Trademark Security Agreement, each Copyright Security Agreement, the Contract Assignment Agreement, each Consent and Agreement, the Concentration Account Agreement, each Subsidiary Guaranty, the Assumption and Amendment Agreement and each other agreement, certificate, document or instrument delivered in connection with this Agreement and such other agreements, whether or not specifically mentioned herein or therein. "Loral" means Space Systems/Loral, Inc., a New York corporation. ----- "Material Adverse Effect" means a material adverse effect on (a) the ----------------------- financial condition, operations, assets, business or properties of (i) the Borrower, (ii) the Borrower and its Subsidiaries, taken as a whole, or (iii) the Borrower and its Restricted Subsidiaries, taken as a whole, (b) the rights and remedies of the Administrative Agent or any Secured Party under any Loan Document, (c) the ability of the Borrower or any other Obligor to perform its Obligations under any Loan Document or Transaction Document to which it is or becomes a party or (d) the perfection or priority of the Secured Parties' Liens upon the collateral described in any Loan Document. "Monthly Payment Date" means the twentieth day of each calendar month, or, -------------------- if any such day is not a Business Day, the next succeeding Business Day. "Moody's" means Moody's Investors Service, Inc. ------- "Net Disposition Proceeds" means, with respect to a Permitted Disposition ------------------------ or any other disposition of the assets of the Borrower or any of its Subsidiaries, the excess of (a) the gross cash proceeds received by the Borrower or any of its Subsidiaries from any Permitted Disposition (including the receipt of (i) proceeds paid on account of the loss of or damage to any property or asset and awards of compensation for any asset taken by condemnation, eminent domain or similar proceedings and (ii), after payment in full of all obligations under the Primestar Partnership Credit Agreement, damages or -21- other amounts due under the Satellite Construction Agreement (including the refund of the full purchase price of any Tempo Satellite which has not been delivered pursuant to the terms thereof)) and any cash payments received in respect of promissory notes or other non-cash consideration delivered to the Borrower or such Subsidiary in respect of any Permitted Disposition or other disposition, less - ---- (b) the sum of (i) all reasonable and customary fees and expenses with respect to legal, investment banking, brokerage and accounting and other professional fees, sales commissions and disbursements and all other reasonable fees, expenses and charges, in each case actually incurred in connection with such Permitted Disposition other than such amounts which have been paid to Affiliates of the Borrower in violation of Section 7.2.13, -------------- (ii) all taxes and other governmental costs and expenses actually paid or estimated by the Borrower (in good faith) to be payable in cash in connection with such Permitted Disposition; provided, however, that if, after the payment of all taxes with -------- ------- respect to such Permitted Disposition, the amount of estimated taxes, if any, exceeded the tax amount actually paid in cash in respect of such Permitted Disposition, the Commitment Amount shall be automatically reduced by the aggregate amount of such excess, pursuant to clause (b) of Section 2.2.2, ---------- ------------- (iii) payments made by the Borrower or any of its Subsidiaries to retire Indebtedness secured by a Lien on the assets subject to such disposition (other than the Loans) of the Borrower or any of its Subsidiaries where payment of such Indebtedness is required in connection with such Permitted Disposition, and (iv) an amount of such proceeds, which, at the option of the Borrower and so long as no Default shall have occurred and be continuing, the Borrower uses or causes the applicable Subsidiary to use such proceeds to purchase substantially similar assets useful in the business of the Borrower or such Subsidiary (with such assets or interests collectively referred to as "Qualified Assets") within 345 ---------------- days after the consummation (and with the proceeds) of such sale, conveyance or disposition, and in the event the Borrower or such Subsidiary elects to exercise its right to purchase Qualified Assets with the Net Disposition Proceeds pursuant to this clause, the Borrower shall deliver a certificate of an Authorized Officer to the Administrative Agent within 30 days following the receipt of Net Disposition Proceeds setting forth the amount of the Net Disposition Proceeds which the Borrower or such Subsidiary expects to use to purchase Qualified Assets during such 345-day period. -22- If and to the extent that the Borrower or such Subsidiary has elected to reinvest Net Disposition Proceeds as permitted above, then on the date which is 345 days after the relevant sale, conveyance or disposition, the Borrower shall deliver a certificate of an Authorized Officer to the Administrative Agent certifying as to the amount and use of such Net Disposition Proceeds actually used to purchase Qualified Assets. To the extent such Net Disposition Proceeds are not so used to purchase Qualified Assets then the Commitment Amount shall be automatically reduced by an amount equal to the aggregate amount of such proceeds not so used to purchase Qualified Assets. "Net Income" means, for any period, the aggregate of all amounts (exclusive ---------- of all amounts in respect of any non-cash extraordinary gains and any non-cash extraordinary losses) which, in accordance with GAAP, would be included as net income on the consolidated financial statements of the Borrower and its Restricted Subsidiaries for such period. "Non-U.S. Lender" means any Lender that is not a U.S. Person. --------------- "Note" means, as the context may require, a Revolving Note, a Term Note or ---- a Swing Line Note. "Obligations" means all obligations (monetary or otherwise, whether ----------- absolute or contingent, matured or unmatured, direct or indirect, choate or inchoate, sole, joint, several or joint and several, due or to become due, heretofore or hereafter contracted or acquired) of the Borrower and each other Obligor arising under or in connection with this Agreement and each other Loan Document. "Obligor" means, as the context may require, the Borrower, each Restricted ------- Subsidiary and any other Person (other than a Secured Party) to the extent such Person is obligated under this Agreement or any other Loan Document. "Organic Document" means, relative to any Obligor, as applicable, its ---------------- certificate of incorporation, by-laws, certificate of partnership, partnership agreement, certificate of formation, limited liability agreement and all shareholder agreements, voting trusts and similar arrangements applicable to any of such Obligor's partnership interests, limited liability company interests or authorized shares of Capital Stock. "Original Credit Agreement" is defined in the second recital. ------------------------- ------ ------- "Original Lenders" is defined in the second recital. ---------------- ------ ------- "Participant" is defined in Section 10.11.2. ----------- --------------- -23- "Partners" means, collectively, TSAT, Time Warner Entertainment Company, -------- L.P., Advance/Newhouse Partnership, Comcast Corporation, Cox Communications, Inc., MediaOne of Delaware, Inc. and GE American Communications, Inc. "Patent Security Agreement" means any patent security agreement executed ------------------------- and delivered by the Borrower or a Restricted Subsidiary, as the case may be, in each case substantially in the form of Exhibit A to a Security Agreement, as amended, supplemented, amended and restated or otherwise modified from time to time. "Payment Date" means (a) until such time as there is no requirement in any ------------ Subordinated Debt Document that interest thereunder be paid other than semi- annually, a Monthly Payment Date, and (b) thereafter, a Quarterly Payment Date. "PBGC" means the Pension Benefit Guaranty Corporation and any entity ---- succeeding to any or all of its functions under ERISA. "Pension Plan" means a "pension plan", as such term is defined in Section ------------ 3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which the Borrower or any corporation, trade or business that is, along with the Borrower, a member of a Controlled Group, may have liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA. "Percentage" means, relative to any Lender, the applicable percentage ---------- relating to Revolving Loans or Term Loans, as the case may be, as set forth opposite its name on Schedule II hereto under the applicable column heading or ----------- set forth in a Lender Assignment Agreement, as such percentage may be adjusted from time to time pursuant to Lender Assignment Agreement(s) executed by such Lender and its Assignee Lender(s) and delivered pursuant to Section 10.11.1. --------------- "Permitted Disposition" means a sale, disposition or other conveyance of --------------------- assets by the Borrower or any of its Subsidiaries in accordance with the terms of clause (iv) of Section 7.2.11 or as otherwise agreed to by the Required ----------- -------------- Lenders. "Permitted Holder" shall have the meaning set forth in the Senior ---------------- Subordinated Notes Indenture and the Senior Subordinated Discount Notes Indenture. "Permitted Refinancing" means, relative to any Indebtedness, any other --------------------- Indebtedness which is incurred to repay and retire in full such refinanced Indebtedness and all other monetary obligations in respect of such refinanced Indebtedness; provided, however, that -------- ------- (a) other than with respect to Subordinated Debt, such refinancing Indebtedness shall not be incurred in an original principal amount which exceeds the aggregate amount -24- on the date of such refinancing of the outstanding amount of such refinanced Indebtedness plus the then aggregate amount of all such other monetary obligations in respect thereof; (b) the weighted average life of such refinancing Indebtedness shall not be less than the weighted average life on the date of such refinancing of such refinanced Indebtedness; (c) other than reasonable and customary fees, discounts and commissions payable in connection with the refinancing Indebtedness, the refinancing Indebtedness shall not impose on the Borrower or any Restricted Subsidiary rates of interest, prepayment charges or other fees or amounts that are more than 2% per annum higher that the highest respective amounts thereof payable in respect of such refinanced Indebtedness excluding the effect of any equity security issued in connection with such Indebtedness; (d) the refinancing Indebtedness shall not contain terms and conditions that, taken as a whole, make the refinancing Indebtedness materially more burdensome to the Borrower or Restricted Subsidiaries, or, except in the case of the refinancing of Indebtedness permitted under clause (c) of Section 7.2.2, materially more beneficial to the holders of ---------- ------------- the refinancing Indebtedness, than the terms in effect on the date of such refinancing of the refinanced Indebtedness (provided that the Lenders -------- acknowledge and agree that if the covenants contained in any refinancing Indebtedness in respect of the Senior Subordinated Credit Agreement are substantially similar to the covenants contained in Article 6A of the Senior Subordinated Credit Agreement, such covenants shall be acceptable to the Lenders); and (e) if such refinanced Indebtedness is Subordinated Debt, the refinancing Indebtedness shall not contain rights and remedies that, taken as a whole, are materially more detrimental to the Lenders or materially more beneficial to the holders of the refinancing Indebtedness, than the terms in effect on the date of such refinancing of the refinanced Indebtedness. "Person" means any natural person, corporation, limited liability company, ------ partnership, joint venture, joint stock company, firm, association, trust or unincorporated organization, government, governmental agency, court or any other legal entity, whether acting in an individual, fiduciary or other capacity. "Plan" means any Pension Plan or Welfare Plan. ---- "Pledge Agreement" means, as the context may require, the Borrower Pledge ---------------- Agreement and/or the Subsidiary Pledge Agreement. -25- "Pledged Subsidiary" means, at any time, each Subsidiary in respect of ------------------ which the Administrative Agent has been granted, at such time, a security interest in and to, or a pledge of, (i) any of the issued and outstanding shares of Capital Stock of such Subsidiary, or (ii) any intercompany notes of such Subsidiary owing to the Borrower or another Subsidiary of the Borrower. "PRIMESTAR Distribution Service" means the distribution of the PRIMESTAR ------------------------------ Programing as described in the Proxy. "Primestar Partnership" means PRIMESTAR Partners, L.P., a Delaware limited --------------------- partnership. "Primestar Partnership Agreement" means the Limited Partnership Agreement ------------------------------- of the Primestar Partnership (then known as K Prime Partners, L.P.), dated as of February 8, 1990, as amended. "Primestar Partnership Credit Agreement" means the bank credit facility -------------------------------------- obtained by the Primestar Partnership to finance advances to Tempo for payments due in respect of the Tempo Satellite under the Satellite Construction Agreement, and supported by letters of credit arranged for by Affiliates of the Partners. "Pro-Forma Balance Sheet" means the primary condensed pro forma combined ----------------------- --- ----- balance sheet of the Borrower and its Subsidiaries, as of September 30, 1997, delivered pursuant to Section 5.1.4, certified by the chief financial or ------------- accounting Authorized Officer of the Borrower, giving effect to the consummation of all the transactions contemplated by this Agreement and reflecting the resulting capital structure (debt and equity) of the Borrower. "Pro-Forma Debt Service" means, on any date of determination, in respect of ---------------------- the Borrower and its Restricted Subsidiaries, the sum of (a) all Annual Pro- Forma Interest Expense, plus (b) scheduled principal payments including the ---- current maturities thereof, due on Total Debt for the four Fiscal Quarters immediately succeeding such date of determination thereof plus (c) an amount ---- equal to the excess of the (i) sum of (x) the aggregate principal amount of all Loans and (y) the Letters of Credit Outstanding on such date over (ii) the Commitment Amount as such Commitment Amount is scheduled to be reduced pursuant to clause (a) of Section 2.2.2 during the four Fiscal Quarters immediately ---------- ------------- succeeding such date of determination. "Pro-Forma Interest Expense" means, for any period for which a -------------------------- determination thereof is to be made, the sum of (a) the amount of all interest which is payable in cash during such period on Total Debt of the Borrower and its Restricted Subsidiaries on a consolidated basis which, without duplication, is scheduled to be paid or will accrue during such period, including, without limitation, in respect of the Loans and Subordinated Debt plus (b) all ---- commitment, line of credit, letter of credit, guarantee and similar fees (no matter how designated) scheduled or required to be paid by the Borrower and its Restricted Subsidiaries to any lender in exchange for such lender's -26- commitment to lend to the Borrower and its Restricted Subsidiaries, including, without limitation, the commitment fee in respect of the Loans and Letters of Credit, which is scheduled or required to be paid by the Borrower and its Restricted Subsidiaries during such period. For purposes of calculating Pro- Forma Interest Expense (i) where any item of interest on any Total Debt varies or depends upon a variable rate of interest, such rate shall be assumed to equal the rate in effect on the date of calculation thereof and (ii) the principal amount outstanding under any revolving or line of credit facility shall be assumed to be the outstanding principal balance thereunder on the last day of the Fiscal Quarter immediately preceding the period in respect of which the calculation of Pro-Forma Interest Expense is being determined as adjusted for any scheduled principal payments during such period. "Proxy" means the proxy statement filed by TSAT on January 26, 1998. ----- "Qualified Assets" is defined in clause (b)(iv) of the definition of Net ---------------- -------------- Disposition Proceeds. "Quarterly Payment Date" means the last day of March, June, September and ---------------------- December, or, if any such day is not a Business Day, the next succeeding Business Day. "Rate Protection Agreement" means, collectively, any interest rate swap, ------------------------- cap, collar or similar agreement entered into or assumed by the Borrower pursuant to the terms of this Agreement or the Existing Credit Agreement under which the counterparty to such agreement is (or at the time such Rate Protection Agreement was entered into, was) a Lender or an Affiliate of a Lender. "Register" is defined in clause (b) of Section 2.7. -------- ---------- ----------- "Regulatory Authority" means any national, state or local government, any -------------------- political subdivision or any governmental, quasi-governmental, judicial, public or statutory instrumentality, authority, body or entity, other regulatory bureau, authority, body or entity, foreign or domestic, including the Federal Deposit Insurance Corporation, the Comptroller of the Currency, the F.R.S. Board, any central bank or any comparable authority. "Refunded Swing Line Loans" is defined in clause (b) of Section 2.3.2. ------------------------- ---------- ------------- "Reimbursement Agreement" means each Reimbursement Agreement, dated as of ----------------------- the Closing Date, between the Borrower, on the one hand, and each of the Partners (other than TSAT) and/or their respective affiliates and affiliates of Tele-Communications, Inc., respectively, on the other hand. "Reimbursement Obligation" is defined in Section 2.6.3. ------------------------ ------------- "Release" means a "release", as such term is defined in CERCLA. ------- ------- -27- "Required Lenders" means, at any time: ---------------- (a) prior to the date that no Lender has a Percentage in excess of 20% of the then aggregate outstanding principal amount of the Loans and the Commitments, Lenders holding 100% of the then aggregate outstanding principal amount of the Loans and the Commitments; and (b) on and after such date, Lenders holding at least 51% of the then aggregate outstanding principal amount of the Loans and the Commitments. "Resource Conservation and Recovery Act" means the Resource Conservation -------------------------------------- and Recovery Act, 42 U.S.C. Section 6901, et seq., as amended. -- --- "Restricted Junior Payment" means (a) any dividend or distribution, direct ------------------------- or indirect, on account of any Equity Interests in the Borrower or any of its Subsidiaries now or hereafter outstanding, except a dividend payable solely in shares of that class of stock or in any junior class of stock to the holders of that class, provided that the issuance of such stock or junior class of stock is not an incurrence of Indebtedness, (b) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any Equity Interests in the Borrower or any of its Subsidiaries now or hereafter outstanding, (c) any payment or prepayment of principal of, premium, if any, or interest, fees or other charges on or with respect to, and any redemption, purchase, retirement, defeasance, sinking fund or similar payment and any claim for rescission with respect to, any Subordinated Debt of the Borrower or any of its Subsidiaries other than a Permitted Refinancing or (d) any payment made to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire Equity Interests in the Borrower or any of its Subsidiaries now or hereafter outstanding. "Restricted Subsidiary" means each U.S. Subsidiary of the Borrower other --------------------- than an Unrestricted Subsidiary of which the Borrower owns directly or indirectly at least 80% of the outstanding Capital Stock. "Restructuring Agreement" is defined in the fourth recital. ----------------------- ------ ------- "Restructuring Transaction" is defined in the fourth recital. ------------------------- ------ ------- "Revolving Loan" is defined in clause (a) of Section 2.1.1. -------------- ---------- ------------- "Revolving Loan Commitment" means, relative to any Lender, such Lender's ------------------------- obligation (if any) to make Revolving Loans pursuant to clause (a) of Section ---------- ------- 2.1.1. - ----- -28- "Revolving Loan Commitment Amount" means, (i) prior to the consummation of -------------------------------- the Restructuring Transaction, $135,000,000 and (ii) thereafter, $550,000,000, as such amount may be reduced from time to time pursuant to Section 2.2. ----------- "Revolving Loan Commitment Termination Date" means the earliest of ------------------------------------------ (a) April 30, 1998 (if the Closing Date has not occurred on or prior to such date); (b) June 30, 2005; (c) the date on which the Revolving Loan Commitment Amount is terminated in full or reduced to zero pursuant to Section 2.2; and ----------- (d) the date on which any Commitment Termination Event occurs. Upon the occurrence of any event described in the preceding clauses (c) or (d), ----------- --- the Revolving Loan Commitments shall terminate automatically and without any further action. "Revolving Loan Lender" is defined in clause (a) of Section 2.1.1. --------------------- ---------- ------------- "Revolving Note" means a promissory note of the Borrower payable to any -------------- Revolving Loan Lender, in the form of Exhibit A-1 hereto (as such promissory ----------- note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of the Borrower to such Revolving Loan Lender resulting from outstanding Revolving Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "Reuter's Screen" shall mean the display designated at page "LIBO" on the --------------- Reuter Monitor System or such other display on the Reuter Monitor System as may replace such page displaying the London interbank offered rates as of 11:00 a.m., London time, on the day on which the relevant determination is made. "Roll-up Plan" is defined in the fourth recital. ------------ ------ ------- "Roll-Up Documents" means, collectively, the TSAT Asset Transfer Agreement, ----------------- the Restructuring Agreement, the TSAT Merger Agreement, and all contracts, agreements and documents delivered in connection with each of the foregoing. "S&P" means Standard & Poor's Rating Services. --- "Satellite Construction Agreement" means the fixed price satellite -------------------------------- construction agreement between Loral and Tempo, dated as of February 22, 1990. -29- "Scotiabank" is defined in the preamble. ---------- -------- "SEC" means the Securities and Exchange Commission. --- "Secured Parties" means, collectively, the Lenders, the Issuer, each Agent, --------------- each counterparty to a Rate Protection Agreement that is (or at the time such Rate Protection Agreement was entered into, was) a Lender or an Affiliate thereof and (in each case), each of their respective successors, transferees and assigns. "Securities" means any limited, general or other partnership interest, or ---------- any stock, shares, voting trust certificates, bonds, debentures, notes or other Equity Interests or evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or any certificates of interest, shares, or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire any of the foregoing, but shall not include any evidence of the Obligations. "Security Agreement" means, as the context may require, the Borrower ------------------ Security Agreement and/or the Subsidiary Security Agreement. "Senior Debt" means, at any time, all outstanding Total Debt which is not ----------- Subordinated Debt. "Senior Debt to Annualized Cash Flow Ratio" means, as of any date of ----------------------------------------- determination, the ratio of (a) Senior Debt to (b) Annualized Cash Flow. -- "Senior Management" means the chief executive officer, chief financial ----------------- officer, chief operating officer, treasurer, controller and corporate counsel of the Borrower, or any of them, as in effect from time to time. "Senior Subordinated Credit Agreement" means the Senior Subordinated Credit ------------------------------------ Agreement, dated as of April 1, 1998, among the Borrower, the Guarantors party thereto from time to time, the Lenders party thereto from time to time, Merrill Lynch & Co., as Arranger and Syndication Agent, Morgan Stanley Dean Witter, as Administrative Agent, and Donaldson, Lufkin & Jenrette Securities Corporation, as Documentation Agent, including related notes, guarantees, other collateral documents and note agreements and other instruments and agreements executed in connection therewith, including any permitted deferrals, renewals, waivers, extensions, replacements, refinancings or refundings thereof, or permitted amendments, modifications or supplements thereto and any agreement providing therefor, whether by or with the same or any other lender, creditor, group of lenders or group of creditors, and including related notes, guarantees, other collateral documents (including all Loan Documents (as defined in the Senior Subordinated Credit Agreement)) and note agreements and other instruments and agreements executed in connection therewith. -30- "Senior Subordinated Discount Notes" means the $275,000,000 aggregate ---------------------------------- principal amount at maturity of 12 1/4% senior subordinated discount notes due 2007 of the Borrower issued under the Senior Subordinated Discount Notes Indenture. "Senior Subordinated Discount Notes Indenture" means the Indenture, dated -------------------------------------------- as of February 20, 1997, by and between The Bank of New York, as trustee, and the Borrower, as Issuer. "Senior Subordinated Notes" means the $200,000,000 original principal ------------------------- amount of 10 7/8% senior subordinated notes due 2007 of the Borrower issued under the Senior Subordinated Notes Indenture. "Senior Subordinated Notes Indenture" means the Indenture, dated as of ----------------------------------- February 20, 1997, by and between The Bank of New York, as trustee, and the Borrower, as Issuer. "Solvency Certificate" means the certificate executed and delivered by the -------------------- chief financial or accounting Authorized Officer of the Borrower pursuant to Section 5.1.7, substantially in the form of Exhibit M hereto. - ------------- --------- "Stated Amount" of each Letter of Credit means the total amount available ------------- to be drawn under such Letter of Credit upon the issuance thereof. "Stated Expiry Date" is defined in Section 2.6. ------------------ ----------- "Stated Maturity Date" means June 30, 2005. -------------------- "Subject Debt" is defined in Section 8.1.5. ------------ ------------- "Subject Lender" is defined in Section 4.11. -------------- ------------ "Subordinated Debt" means (i) the Senior Subordinated Notes and the Senior ----------------- Subordinated Discount Notes, (ii) Indebtedness incurred under the Senior Subordinated Credit Agreement, including the Exchange Notes, the Term Notes and any PIK Notes, each as defined in and pursuant to the terms of the Senior Subordinated Credit Agreement, (iii) Indebtedness incurred under the Reimbursement Agreements and (iv) other unsecured Indebtedness of the Borrower subordinated in right of payment to the Obligations pursuant to documentation containing interest rates, maturities, amortization schedules, covenants, defaults, remedies, subordination provisions and other material terms in form and substance reasonably satisfactory to the Required Lenders. "Subordinated Debt Document" means, as the context may require, each -------------------------- indenture, note, debenture or other agreement evidencing or relating to Subordinated Debt, and each instrument, document or agreement prepared or executed in connection therewith, in each case as the same -31- may be amended, supplemented, amended and restated or otherwise modified in accordance with Section 7.2.12 -------------- "Subsidiary" means, with respect to any Person, any corporation, ---------- partnership or other business entity of which more than 50% of the outstanding Capital Stock (or other ownership interest) having ordinary voting power to elect a majority of the board of directors, managers or other voting members of the governing body of such entity (irrespective of whether at the time Capital Stock (or other ownership interest) of any other class or classes of such entity shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by such Person, by such Person and one or more other Subsidiaries of such Person, or by one or more other Subsidiaries of such Person. Unless the context otherwise specifically requires, the term "Subsidiary" shall be a reference to a Subsidiary of the Borrower. "Subsidiary Guarantor" means each Restricted Subsidiary party to a -------------------- Subsidiary Guaranty. "Subsidiary Guaranty" means, as the context may require, any guaranty ------------------- executed and delivered by a Subsidiary Guarantor pursuant to the Original Credit Agreement, Section 5.1.1 or clause (a) of Section 7.1.7, in each case ------------- ---------- ------------- substantially in the form of Exhibit H hereto, as amended, supplemented, amended --------- and restated or otherwise modified from time to time. "Subsidiary Pledge Agreement" means the pledge agreement executed and --------------------------- delivered by a Restricted Subsidiary pursuant to Section 5.1.2, 7.1.7 or 7.1.8, ------------- ----- ----- substantially in the form of Exhibit F-2 hereto, as amended, supplemented, ----------- amended and restated or otherwise modified from time to time. "Subsidiary Security Agreement" means a security agreement executed and ----------------------------- delivered by a Restricted Subsidiary pursuant to Section 7.1.7 or 7.1.8, ------------- ----- substantially in the form of Exhibit G-2 hereto, as amended, supplemented, ----------- amended and restated or otherwise modified from time to time. "Syndication Agent" is defined in the preamble and includes each other ----------------- -------- Person as shall have subsequently been appointed as a successor Syndication Agent pursuant to Section 9.4. ----------- "Swing Line Lender" means, subject to the terms of this Agreement, ----------------- Scotiabank. "Swing Line Loan" is defined in clause (b) of Section 2.1.1. --------------- ---------- ------------- "Swing Line Loan Commitment" is defined in clause (b) of Section 2.1.1. -------------------------- ---------- ------------- "Swing Line Loan Commitment Amount" means, on any date, $15,000,000, as --------------------------------- such amount may be reduced from time to time pursuant to Section 2.2. ----------- -32- "Swing Line Note" means a promissory note of the Borrower payable to the --------------- Swing Line Lender, in the form of Exhibit A-3 hereto (as such promissory note ----------- may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of the Borrower to the Swing Line Lender resulting from outstanding Swing Line Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "Taxes" means any present or future income, excise, stamp or franchise ----- taxes and other taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by (i) the United States or any taxing authority or political subdivision thereof or (ii) any other jurisdiction as a result of a connection between the Borrower and such taxing jurisdiction, and in each case any interest, additions to tax, penalties or additional amounts payable with respect thereto. "TCISE Partner 1" means TCISE Partner 1, Inc., a Delaware corporation. --------------- "TCISE Partner 2" means TCISE Partner 2, Inc., a Delaware corporation. --------------- "Tempo" means Tempo Satellite, Inc., an Oklahoma corporation. ----- "Tempo Satellite" means either of the two high power direct broadcast --------------- satellites which Tempo has agreed to purchase from Loral pursuant to the Satellite Construction Agreement. "Term Loan" is defined in Section 2.1.3. --------- ------------- "Term Loan Commitment" means, relative to any Lender, such Lender's -------------------- obligation (if any) to make Term Loans pursuant to Section 2.1.3. ------------- "Term Loan Commitment Amount" means, after the consummation of the --------------------------- Restructuring Transaction, $150,000,000. "Term Loan Commitment Termination Date" means the earliest of: ------------------------------------- (a) April 30, 1998 (if the Term Loans have not been made on or prior to such date); (b) the Closing Date (immediately after the making of the Term Loans on such date); and (c) the date on which any Commitment Termination Event occurs. Upon the occurrence of any event described in clauses (b) or (c), the Term Loan ----------- --- Commitments shall terminate automatically and without any further action. "Term Note" means a promissory note of the Borrower payable to any Lender, --------- in the form of Exhibit A-2 hereto (as such promissory note may be amended, ----------- endorsed or otherwise -33- modified from time to time), evidencing the aggregate Indebtedness of the Borrower to such Lender resulting from outstanding Term Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "Total Debt" means, on any date of determination, with respect to the ---------- Borrower and its Restricted Subsidiaries, an amount equal to the sum of (a) the outstanding principal amount of all Indebtedness as of such date of the type referred to in clause (a) of the definition of "Indebtedness" (which, in the ---------- case of the Loans, shall be deemed to equal the amount of Loans outstanding on the last day of the Fiscal Quarter ending on or immediately preceding the date of determination), plus (b) the maximum aggregate amount of Indebtedness as of ---- such date of the type described in clause (b) of the definition of ---------- "Indebtedness" (which, in the case of Letter of Credit Outstandings, shall be deemed to equal the amount of Letter of Credit Outstandings on the last day of the Fiscal Quarter ending on or immediately preceding the date of determination), plus (c) the aggregate amount as of such date of the ---- Indebtedness described in clause (c) of the definition of "Indebtedness", plus ---------- ---- (d) (without duplication) the aggregate amount on such date of the Contingent Liabilities in respect of any of the foregoing (other than in connection with the Reimbursement Agreements). "Total Debt to Annualized Cash Flow Ratio" means the ratio of (a) Total ---------------------------------------- Debt to (b) Annualized Cash Flow. -- "Total Interest Expense" means, for any period, the sum of (a) the ---------------------- aggregate cash interest expense (net of cash interest income) of the Borrower and its Restricted Subsidiaries (including, to the extent the Borrower or any of its Restricted Subsidiaries have any Contingent Liability in respect of such interest expense, (i) in respect of any pro forma calculations, the interest --- ----- expense of Unrestricted Subsidiaries and (ii) in respect of any period which does not include any pro forma calculation, the amount of such interest expense --- ----- actually paid or payable by the Borrower or any Restricted Subsidiary) for such period, as determined in accordance with GAAP, including the portion of any payments made in respect of Capitalized Lease Liabilities allocable to interest expense plus (b) all commitment, letter of credit, guarantee, line of credit or ---- similar fees (no matter how designated) paid or scheduled or required to be paid by the Borrower and its Restricted Subsidiaries to any lender in exchange for such lender's commitment to lend to the Borrower and its Restricted Subsidiaries, including, without limitation, the commitment fee in respect of the Loans and Letters of Credit. "Trademark Security Agreement" means any trademark security agreement ---------------------------- executed and delivered by the Borrower or a Restricted Subsidiary, as the case may be, in each case substantially in the form of Exhibit B to a Security Agreement, as amended, supplemented, amended and restated or otherwise modified from time to time. "Transaction Documents" collectively means the Roll-Up Documents, the --------------------- Reimbursement Agreements, the Primestar Partnership Credit Agreement, the Primestar Partnership Agreement and the TSAT Tempo Agreement. -34- "TSAT" is defined in the second recital. ---- ------ ------- "TSAT Asset Transfer" is defined in the fourth recital. ------------------- ------ ------- "TSAT Asset Transfer Agreement" is defined in the fourth recital. ----------------------------- ------ ------- "TSAT Merger" is defined in the fourth recital. ----------- ------ ------- "TSAT Merger Agreement" is defined in the fourth recital. --------------------- ------ ------- "TSAT Partners Holdings" means TSAT Partners Holding, Inc., a Delaware ---------------------- corporation. "TSAT Tempo Agreement" means the TSAT Tempo Agreement, dated as of February -------------------- 6, 1998, between TSAT and the Borrower, which provides, among other things, that on the terms and conditions set forth therein, upon receipt of Federal Communications Commission approval of the transfer of control of Tempo to the Borrower, TSAT will (at the Borrower's election) either sell all the issued and outstanding shares of Capital Stock of Tempo to the Borrower or liquidate Tempo and sell all of its rights, title and interests in, to and under Tempo's assets to the Borrower, as such agreement is amended, supplemented, amended and restated or otherwise modified from time to time. "type" means, relative to any Loan, the portion thereof, if any, being ---- maintained as a Base Rate Loan or a LIBO Rate Loan. "U.C.C." means the Uniform Commercial Code as from time to time in effect ------ in the State of New York. "United States" or "U.S." means the United States of America, its fifty ------------- ---- states and the District of Columbia. "Unrestricted Subsidiary" means any U.S. Subsidiary formed or acquired ----------------------- after the Effective Date and designated by the Borrower as an "Unrestricted Subsidiary" and accepted as such by the Required Lenders. "U.S. Person" means any Person that is a "United States person" within the ----------- meaning of Section 7701(a)(30) of the Code (or any applicable successor provision). "U.S. Subsidiary" means any Subsidiary that is incorporated or organized --------------- under the laws of the United States or a state thereof. -35- "Voting Stock" means, with respect to any Person, Capital Stock of any ------------ class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person. "Welfare Plan" means a "welfare plan", as such term is defined in section ------------ 3(1) of ERISA. "wholly-owned" means, with respect to any direct or indirect Subsidiary, ------------ any Subsidiary all of the outstanding common stock (or similar equity interest) of which (other than any director's qualifying shares or investments by foreign nationals mandated by applicable laws) is owned directly or indirectly by the Borrower. SECTION I.2. Use of Defined Terms. Unless otherwise defined or the -------------------- context otherwise requires, terms for which meanings are provided in this Agreement shall have such meanings when used in each other Loan Document, the Disclosure Schedule, or any Borrowing Request, Issuance Request, Continuation/Conversion Notice, Compliance Certificate, notice or other communications delivered from time to time in connection with this Agreement or any other Loan Document. SECTION I.3. Cross-References. Unless otherwise specified, references in ---------------- this Agreement and in each other Loan Document to any Article or Section are references to such Article or Section of this Agreement or such other Loan Document, as the case may be, and, unless otherwise specified, references in any Article, Section or definition to any clause are references to such clause of such Article, Section or definition. SECTION I.4. Accounting and Financial Determinations. Unless otherwise --------------------------------------- specified, all accounting terms used herein or in any other Loan Document shall be interpreted, and all accounting determinations and computations hereunder or thereunder (including under Section 7.2.4) shall be made in accordance with ------------- those generally accepted accounting principles ("GAAP") applied in the ---- preparation of the financial statements referred to in clause (a) of Section 5.1.11 of the Original Credit Agreement. Unless otherwise expressly provided, all financial covenants and defined financial terms shall be computed on a consolidated basis for the Borrower and its Restricted Subsidiaries, in each case without duplication. If any preparation in the financial statements referred to in Section 7.1.1 hereafter occasioned by the promulgation of rules, ------------- regulations, pronouncements and opinions by or required by the Financial Accounting Standards Board or the American Institute of Certified Public Accountants (or successors thereto or agencies with similar functions) result in a change in any results, amounts, calculations, ratios, standards or terms found in this Agreement or any Loan Document from those which would be derived or be applicable absent such changes, the Borrower may reflect such changes in the financial statements and certificates required to be delivered pursuant to Section 7.1.1, but calculations of financial covenants shall be made without - ------------- giving effect to any such changes. Upon the request of the Borrower or any Lender the parties hereto agree to enter into negotiations in order to amend the financial covenants and other terms of this Agreement if there occur any changes in GAAP that have a material effect on the financial statements of the Borrower and its -36- Subsidiaries, so as to equitably reflect such changes with the desired result that the criteria for evaluating the Borrower's and its Subsidiaries' financial condition and such other terms shall be the same in all material respects after such changes as if the changes had not been made. ARTICLE II COMMITMENTS, BORROWING AND ISSUANCE PROCEDURES, NOTES AND LETTERS OF CREDIT SECTION II.1. Commitments. On the terms and subject to the conditions of ----------- this Agreement (including Sections 2.1.4, 2.1.5 and Article V), -------------- ----- --------- (a each Lender severally agrees to make Loans (other than Swing Line Loans) pursuant to the Commitments and the Swing Line Lender agrees to make Swing Line Loans pursuant to the Swing Line Loan Commitment, in each case as described in this Section 2.1; and ----------- (b the Issuer severally agrees that it will issue Letters of Credit pursuant to Section 2.1.2, and each Revolving Loan Lender severally agrees ------------- that it will purchase participation interests in such Letters of Credit pursuant to Section 2.6.1. ------------- SECTION II.1.1. Revolving Loan Commitment and Swing Line Loan Commitment. -------------------------------------------------------- (a From time to time on any Business Day occurring prior to the Revolving Loan Commitment Termination Date, each Lender that has a Revolving Loan Commitment (referred to as a "Revolving Loan Lender") will --------------------- make loans (relative to such Revolving Loan Lender, its "Revolving Loans") --------------- to the Borrower equal to such Lender's Percentage of the aggregate amount of each Borrowing of Revolving Loans requested by the Borrower to be made on such day. On the terms and subject to the conditions hereof, the Borrower may from time to time borrow, prepay and reborrow the Revolving Loans. (b From time to time on any Business Day occurring prior to the Revolving Loan Commitment Termination Date, the Swing Line Lender will make loans (relative to the Swing Line Lender, its "Swing Line Loans") to the ---------------- Borrower equal to the principal amount of the Swing Line Loans requested by the Borrower to be made on such day. The Commitment of the Swing Line Lender described in this clause (b) is herein referred to as its "Swing ---------- ----- Line Loan Commitment". On the terms and subject to the conditions hereof, -------------------- the Borrower may from time to time borrow, prepay and reborrow Swing Line Loans. SECTION II.1.2. Letter of Credit Commitment. From time to time on any --------------------------- Business Day occurring prior to the Revolving Loan Commitment Termination Date, the Issuer will: -37- (a issue one or more standby letters of credit (relative to the Issuer, its "Letter of Credit") for the account of the Borrower in the ---------------- Stated Amount requested by the Borrower on such day; or (b extend the Stated Expiry Date of an existing Letter of Credit previously issued hereunder to a date not later than the earlier of (x) the Revolving Loan Commitment Termination Date and (y) one year from the date of such extension. SECTION II.1.3. Term Loan Commitment. In a single Borrowing (which shall -------------------- be a Business Day) occurring on the Closing Date, each Lender that has a Term Loan Commitment will make loans (relative to such Lender, its "Term Loans") to ---------- the Borrower equal to such Lender's Percentage of the aggregate amount of the Borrowing of Term Loans requested by the Borrower to be made on such day. No amounts paid or prepaid with respect to Term Loans may be reborrowed. SECTION II.1.4. Lenders Not Permitted or Required to Make Loans. No ----------------------------------------------- Lender shall be permitted or required to: (a) make any Revolving Loans if, after giving effect thereto, the aggregate outstanding principal amount of all Revolving Loans (i) of all Revolving Loan Lenders, together with the aggregate amount of all Letter of Credit Outstandings and the outstanding principal amount of all Swing Line Loans, would exceed the then existing Revolving Loan Commitment Amount; or (ii) of such Revolving Loan Lender, together with such Revolving Loan Lender's Percentage of the aggregate amount of all Letter of Credit Outstandings and such Revolving Loan Lender's Percentage of the outstanding principal amount of all Swing Line Loans, would exceed such Revolving Loan Lender's Percentage of the then existing Revolving Loan Commitment Amount; (b) make any Term Loans, if after giving effect thereto, the aggregate outstanding principal amount of all Term Loans (i) of all Lenders with Term Loan Commitments would exceed the Term Loan Commitment Amount; or (ii) of such Lender with a Term Loan Commitment would exceed such Lender's Percentage of the Term Loan Commitment Amount; (c) participate in any Letter of Credit if, after giving effect thereto, (i) all Letter of Credit Outstandings, together with the aggregate outstanding principal amount of all Revolving Loans of all Revolving Loan Lenders and the outstanding principal amount of all Swing Line Loans, would exceed the Revolving Loan Commitment Amount; or (ii) such Lender's Percentage of all Letter of Credit Outstandings, together with the aggregate outstanding principal amount of all Revolving Loans of such Lender and the outstanding principal amount of all Swing Line Loans of such Lender, would exceed such Lender's Percentage of the then existing Revolving Loan Commitment Amount; or -38- (d) make any Swing Line Loans if, after giving effect thereto, (i) the aggregate outstanding principal amount of all Swing Line Loans would exceed the then existing Swing Line Loan Commitment Amount; or (ii) unless otherwise agreed to by the Swing Line Lender, in its sole discretion, the sum of all Swing Line Loans and Revolving Loans made by the Swing Line Lender plus the Swing Line Lender's Percentage multiplied by the aggregate amount of Letter of Credit Outstandings would exceed the amount determined by multiplying the Swing Line Lender's Percentage by the then existing Revolving Loan Commitment Amount. SECTION II.1.5. Issuer Not Permitted or Required to Issue Letters of ---------------------------------------------------- Credit. No Issuer shall be permitted or required to issue, extend or renew any - ------ Letter of Credit if, after giving effect thereto, (a) the aggregate amount of all Letter of Credit Outstandings would exceed the Letter of Credit Commitment Amount; or (b) the sum of the aggregate amount of all Letter of Credit Outstandings plus the aggregate principal amount of all Revolving Loans and Swing Line Loans then outstanding would exceed the Revolving Loan Commitment Amount. SECTION II.2. Reduction of the Commitment Amounts. The Commitment Amounts ----------------------------------- are subject to reduction from time to time pursuant to this Section 2.2. ----------- SECTION II.2.1. Optional. The Borrower may, from time to time on any -------- Business Day occurring after the Effective Date, voluntarily reduce the amount of the Revolving Loan Commitment Amount, the Swing Line Loan Commitment Amount or the Letter of Credit Commitment Amount on the Business Day so specified by the Borrower; provided, however, that all such reductions shall require at least -------- ------- three Business Day's prior notice to the Administrative Agent and be permanent, and any partial reduction of any Commitment Amount shall be in a minimum amount of $5,000,000 and in an integral multiple of $1,000,000. Any reduction of the Revolving Loan Commitment Amount which reduces the Revolving Loan Commitment Amount below the then current amount of the Swing Line Loan Commitment Amount shall result in an automatic and corresponding reduction of the Swing Line Loan Commitment Amount to the amount of the Revolving Loan Commitment Amount, as so reduced, without any further action on the part of the Swing Line Lender or otherwise. SECTION II.2.2. Mandatory. On each date set forth below, the Revolving --------- Loan Commitment Amount shall, without any further action, automatically and permanently be reduced by the percentage of the Revolving Loan Commitment Amount as in effect on March 31, 2001 set forth opposite the corresponding date below: Date Percentage ---- Reduction ---------- 03/31/01 2.5% 06/30/01 2.5% 09/30/01 2.5% -39- Date Percentage ---- Reduction --------- 12/31/01 2.5% 03/31/02 5.0% 06/30/02 5.0% 09/30/02 5.0% 12/31/02 5.0% 03/31/03 6.25% 06/30/03 6.25% 09/30/03 6.25% 12/31/03 6.25% 03/31/04 8.5% 06/30/04 8.5% 09/30/04 8.5% 12/31/04 8.5% 03/31/05 5.5% 06/30/05 5.5%; provided, however, that on the Revolving Loan Commitment Termination Date, the - -------- ------- Revolving Loan Commitment Amount shall be zero. Voluntary reductions of the Revolving Loan Commitment Amount made pursuant to Section 2.2.1 shall be applied ------------- pro rata to diminish the amount of scheduled reductions to the Revolving Loan - --- ---- Commitment Amount thereafter becoming effective pursuant to this Section. SECTION II.3. Borrowing Procedures. Loans (other than Swing Line Loans) -------------------- shall be made by the Lenders in accordance with Section 2.3.1, and Swing Line ------------- Loans shall be made by Scotiabank in accordance with Section 2.3.2. ------------- SECTION II.3.1. Borrowing Procedure. In the case of other than Swing Line ------------------- Loans, by delivering a Borrowing Request to the Administrative Agent on or before 12:00 noon, New York time, on a Business Day, the Borrower may from time to time irrevocably request, on not less than one Business Day's notice in the case of Base Rate Loans, or not less than three Business Days' notice in the case of Fixed Rate Loans, and in either case not more than five Business Days' notice, that a Borrowing be made in a minimum amount of $1,000,000 and an integral multiple of $500,000, or in the unused amount of the applicable Commitment; provided, however, that all initial Loans shall be made as Base Rate -------- ------- Loans. On the terms and subject to the conditions of this Agreement, each Borrowing shall be comprised of the type of Loans, and shall be made on the Business Day, specified in such Borrowing Request. In the case of other than Swing Line Loans, on or before 11:00 a.m., New York time, on such Business Day each Lender that has a Commitment to make the Loans being requested shall deposit with the Administrative Agent same day funds in an amount equal to such Lender's Percentage of the requested -40- Borrowing. Such deposit will be made to an account which the Administrative Agent shall specify from time to time by notice to the Lenders. To the extent funds are received from the Lenders, the Administrative Agent shall make such funds available to the Borrower by wire transfer to the accounts the Borrower shall have specified in its Borrowing Request. No Lender's obligation to make any Loan shall be affected by any other Lender's failure to make any Loan. SECTION II.3.2. Swing Line Loans. ---------------- (a By telephonic notice, promptly followed (within one Business Day) by the delivery of a confirming Borrowing Request, to the Swing Line Lender on or before 12:00 noon, New York time, on the Business Day the proposed Swing Line Loan is to be made, the Borrower may from time to time irrevocably request that Swing Line Loans be made by the Swing Line Lender in an aggregate minimum principal amount of $500,000 and an integral multiple of $100,000. All Swing Line Loans shall be made as Base Rate Loans and shall not be entitled to be converted into Fixed Rate Loans. The proceeds of each Swing Line Loan shall be made available by the Swing Line Lender, by its close of business on the Business Day telephonic notice is received by it as provided in this clause to the Borrower by wire transfer to the account the Borrower shall have specified in its notice therefor. (b If (i) any Swing Line Loan shall be outstanding for more than four Business Days; (ii) any Swing Line Loan is or will be outstanding on a date when the Borrower requests that a Revolving Loan be made; or (iii) any Default shall occur and be continuing, each Revolving Loan Lender (other than the Swing Line Lender) irrevocably agrees that it will, at the request of the Swing Line Lender, make a Revolving Loan (which shall initially be funded as a Base Rate Loan) in an amount equal to such Lender's Percentage of the aggregate principal amount of all such Swing Line Loans then outstanding (such outstanding Swing Line Loans hereinafter referred to as the "Refunded Swing Line Loans"). On or before 12:00 noon, New York time, ------------------------- on the first Business Day following receipt by each Lender of a request to make Revolving Loans as provided in the preceding sentence, each Revolving Loan Lender shall deposit in an account specified by the Swing Line Lender the amount so requested in same day funds and such funds shall be applied by the Swing Line Lender to repay the Refunded Swing Line Loans. At the time the aforementioned Lenders make the above referenced Revolving Loans, the Swing Line Lender shall be deemed to have made, in consideration of the making of the Refunded Swing Line Loans, Revolving Loans in an amount equal to the Swing Line Lender's Percentage of the aggregate principal amount of the Refunded Swing Line Loans. Upon the making (or deemed making, in the case of the Swing Line Lender) of any Revolving Loans pursuant to this clause, the amount so funded shall become outstanding as a Revolving Loan of such Revolving Loan Lender and shall no longer be owed as a the Swing Line Loan. All interest payable with respect to any Revolving Loans made (or deemed made, in the case of the Swing Line Lender) pursuant to this clause shall be appropriately adjusted to reflect the period of time during which the Swing Line -41- Lender had outstanding Swing Line Loans in respect of which such Revolving Loans were made. Each Revolving Loan Lender's obligation to make the Revolving Loans referred to in this clause shall be absolute and unconditional and shall not be affected by any circumstance, including (i) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line Lender, any Obligor or any Person for any reason whatsoever; (ii) the occurrence or continuance of any Default; (iii) any adverse change in the condition (financial or otherwise) of any Obligor; (iv) the acceleration or maturity of any Obligations or the termination of any Commitment after the making of any Swing Line Loan; (v) any breach of this Agreement or any other Loan Document by any Person; or (vi) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. SECTION II.4. Continuation and Conversion Elections. By delivering a ------------------------------------- Continuation/Conversion Notice to the Administrative Agent on or before 12:00 noon, New York time, on a Business Day, the Borrower may from time to time irrevocably elect, on not less than three Business Days' notice nor more than five Business Days' notice, that all, or any portion in an aggregate minimum amount of $1,000,000 and an integral multiple of $500,000, Loans be, in the case of Base Rate Loans, converted into Fixed Rate Loans of either type or in the case of Fixed Rate Loans of either type, be converted into a Base Rate Loan or a Fixed Rate Loan of the other type or continued as a Fixed Rate Loan of such type (in the absence of delivery of a Continuation/Conversion Notice with respect to any Fixed Rate Loan at least three Business Days before the last day of the then current Interest Period with respect thereto, such Fixed Rate Loan shall, on such last day, automatically convert to a Base Rate Loan); provided, however, -------- ------- that (i) each such conversion or continuation shall be pro rated among the applicable outstanding Loans of all Lenders that have made such Loans, and (ii) no portion of the outstanding principal amount of any Loans may be continued as, or be converted into, Fixed Rate Loans when any Default has occurred and is continuing. SECTION II.5. Funding. Each Lender may, if it so elects, fulfill its ------- obligation to make, continue or convert LIBO Rate Loans hereunder by causing one of its foreign branches or Affiliates (or an international banking facility created by such Lender) to make or maintain such LIBO Rate Loan; provided, -------- however, that such Fixed Rate Loan shall nonetheless be deemed to have been made - ------- and to be held by such Lender, and the obligation of the Borrower to repay such Fixed Rate Loan shall nevertheless be to such Lender for the account of such foreign branch, Affiliate or international banking facility. In addition, the Borrower hereby consents and agrees that, for purposes of any determination to be made for purposes of Section 4.1, 4.2, 4.3 or 4.4, it shall be conclusively ----------- --- --- --- assumed that each Lender elected to fund all LIBO Rate Loans by purchasing Dollar deposits in its LIBOR Office's interbank eurodollar market. SECTION II.6. Issuance Procedures. By delivering to the Administrative ------------------- Agent an Issuance Request on or before 12:00 noon, New York time, on a Business Day, the Borrower may, from time to time irrevocably request, on not less than three nor more than ten Business Days' notice, in the case of an initial issuance of a Letter of Credit for the account of the -42- Borrower, and not less than three Business Days' prior notice, in the case of a request for the extension of the Stated Expiry Date of a Letter of Credit, that the Issuer issue, or extend the Stated Expiry Date of, as the case may be, an irrevocable Letter of Credit in such form as may be requested by the Borrower and approved by the Issuer, solely for the purposes described in Section 7.1.11. -------------- Each Letter of Credit shall by its terms be stated to expire on a date (its "Stated Expiry Date") no later than the earlier to occur of (i) the Revolving ------------------ Loan Commitment Termination Date or (ii) one year from the date of its issuance. The Issuer will make available to the beneficiary thereof the original of each Letter of Credit which it issues hereunder. The Issuer shall give prompt written notice to the Administrative Agent of the Stated Amount of any such Letter of Credit so issued. SECTION II.6.1. Other Lenders' Participation'. Upon the issuance of each ----------------------------- Letter of Credit issued by the Issuer pursuant hereto, and without further action, each Lender (other than the Issuer) that has a Commitment shall be deemed to have irrevocably purchased, to the extent of its Percentage to make Revolving Loans, a participation interest in such Letter of Credit (including the Contingent Liability and any Reimbursement Obligation with respect thereto), and such Revolving Loan Lender shall, to the extent of its Percentage to make Revolving Loans, be responsible for reimbursing promptly (and in any event within one Business Day) the Issuer for Reimbursement Obligations which have not been reimbursed by the Borrower in accordance with Section 2.6.3. In addition, ------------- such Revolving Loan Lender shall, to the extent of its Percentage to make Revolving Loans, be entitled to receive a ratable portion of the Letter of Credit fees payable pursuant to Section 3.3.3 with respect to each Letter of ------------- Credit (other than the issuance fees payable to the Issuer of such Letter of Credit pursuant to the last sentence of Section 3.3.3) and of interest payable ------------- pursuant to Section 3.2 with respect to any Reimbursement Obligation. To the ----------- extent that any Revolving Loan Lender has reimbursed the Issuer for a Disbursement as required by this Section, such Lender shall be entitled to receive its ratable portion of any amounts subsequently received (from the Borrower or otherwise) in respect of such Disbursement. SECTION II.6.2. Disbursements. The Issuer will notify the Borrower and ------------- the Administrative Agent promptly of the presentment for payment of any Letter of Credit issued by the Issuer, together with notice of the date (the "Disbursement Date") such payment shall be made (each such payment, a - ------------------ "Disbursement"). Subject to the terms and provisions of such Letter of Credit - ------------- and this Agreement, the Issuer shall make such payment to the beneficiary (or its designee) of such Letter of Credit. Prior to 12:00 noon, New York time, on the first Business Day following the Disbursement Date, the Borrower will reimburse the Administrative Agent, for the account of the Issuer, for all amounts which the Issuer has disbursed under such Letter of Credit, together with interest thereon at a rate per annum equal to the rate per annum then in effect for Base Rate Loans (with the then Applicable Margin accruing on such amount) pursuant to Section 3.2 for the period from the Disbursement Date ----------- through the date of such reimbursement. Without limiting in any way the foregoing and notwithstanding anything to the contrary contained herein or in any separate application for any Letter of Credit, the Borrower hereby acknowledges and agrees that it shall be obligated to reimburse the Issuer upon each -43- Disbursement of a Letter of Credit, and it shall be deemed to be the obligor for purposes of each such Letter of Credit issued hereunder. SECTION II.6.3. Reimbursement. The obligation (a "Reimbursement ------------- ------------- Obligation") of the Borrower under Section 2.6.2 to reimburse the Issuer with - ---------- ------------- respect to each Disbursement (including interest thereon), and, upon the failure of the Borrower to reimburse the Issuer, each Lender's obligation under Section ------- 2.6.1 to reimburse the Issuer, shall be absolute and unconditional under any and - ----- all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower or such Lender, as the case may be, may have or have had against the Issuer or any such Lender, including any defense based upon the failure of any Disbursement to conform to the terms of the applicable Letter of Credit (if, in the Issuer's good faith opinion, such Disbursement is determined to be appropriate) or any non-application or misapplication by the beneficiary of the proceeds of such Letter of Credit; provided, however, that after paying -------- ------- in full its Reimbursement Obligation hereunder, nothing herein shall adversely affect the right of the Borrower or such Lender, as the case may be, to commence any proceeding against the Issuer for any wrongful Disbursement made by the Issuer under a Letter of Credit as a result of acts or omissions constituting gross negligence or willful misconduct on the part of the Issuer. SECTION II.6.4. Deemed Disbursements. Upon the occurrence and during the -------------------- continuation of any Default of the type described in Section 8.1.9 or, with ------------- notice from the Administrative Agent, upon the occurrence and during the continuation of any other Event of Default, (a an amount equal to that portion of all Letter of Credit Outstandings attributable to the then aggregate amount which is undrawn and available under all Letters of Credit issued and outstanding hereunder shall, without demand upon or notice to the Borrower, be deemed to have been paid or disbursed by the Issuer under such Letters of Credit (notwithstanding that such amount may not in fact have been so paid or disbursed); and (b upon notification by the Administrative Agent to the Borrower of its obligations under this Section, the Borrower shall be immediately obligated to reimburse the Issuer for the amount deemed to have been so paid or disbursed by the Issuer. Any amounts so payable by the Borrower pursuant to this Section shall be deposited in cash with the Administrative Agent and held as collateral security for the Obligations in connection with the Letters of Credit issued by the Issuer. At such time when the Defaults or Events of Default giving rise to the deemed disbursements hereunder shall have been cured or waived, the Administrative Agent shall return to the Borrower all amounts then on deposit with the Administrative Agent pursuant to this Section which have not been applied to the partial satisfaction of such Obligations. SECTION II.6.5. Nature of Reimbursement Obligations. The Borrower and, to ----------------------------------- the extent set forth in Section 2.6.1, each Revolving Loan Lender shall assume ------------- all risks of the acts, -44- omissions or misuse of any Letter of Credit by the beneficiary thereof. The Issuer (except to the extent of its own gross negligence or wilful misconduct) shall not be responsible for: (a the form, validity, sufficiency, accuracy, genuineness or legal effect of any Letter of Credit or any document submitted by any party in connection with the application for and issuance of a Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (b the form, validity, sufficiency, accuracy, genuineness or legal effect of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or the proceeds thereof in whole or in part, which may prove to be invalid or ineffective for any reason; (c failure of the beneficiary to comply fully with conditions required in order to demand payment under a Letter of Credit; (d errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise; or (e any loss or delay in the transmission or otherwise of any document or draft required in order to make a Disbursement under a Letter of Credit. None of the foregoing shall affect, impair or prevent the vesting of any of the rights or powers granted to the Issuer or any Revolving Loan Lender hereunder. In furtherance and not in limitation or derogation of any of the foregoing, any action taken or omitted to be taken by the Issuer in good faith (and not constituting gross negligence or willful misconduct) shall be binding upon the Borrower and each such Lender, and shall not put the Issuer under any resulting liability to the Borrower or any such Lender, as the case may be. SECTION II.7. Register; Notes. --------------- (a Each Lender may maintain in accordance with its usual practice an account or accounts evidencing the Indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. In the case of a Lender that does not request, pursuant to clause (b)(ii) below, execution and delivery of a Note evidencing the Loans -------------- made by such Lender to the Borrower, such account or accounts shall, to the extent not inconsistent with the notations made by the Administrative Agent in the Register, be conclusive and binding on the Borrower absent manifest error; provided, however, that the failure of any Lender to maintain such -------- ------- account or accounts shall not limit or otherwise affect any Obligations of the Borrower or any other Obligor. -45- (b (i) The Borrower hereby designates the Administrative Agent to serve as the Borrower's agent, solely for the purpose of this clause (b), ---------- to maintain a register (the "Register") on which the Administrative Agent -------- will record each Lender's Commitment, the Loans made by each Lender and each repayment in respect of the principal amount of the Loans of each Lender and annexed to which the Administrative Agent shall retain a copy of each Lender Assignment Agreement delivered to the Administrative Agent pursuant to Section 10.11.1. Failure to make any recordation, or any error --------------- in such recordation, shall not affect the Borrower's obligation in respect of such Loans. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person in whose name a Loan (and, as provided in clause (ii), the Note evidencing such Loan, if any) is registered as the ----------- owner thereof for all purposes of this Agreement, notwithstanding notice or any provision herein to the contrary. A Lender's Commitment and the Loans made pursuant thereto may be assigned or otherwise transferred in whole or in part only by registration of such assignment or transfer in the Register. Any assignment or transfer of a Lender's Commitment or the Loans made pursuant thereto shall be registered in the Register only upon delivery to the Administrative Agent of a Lender Assignment Agreement duly executed by the assignor thereof and the compliance by the parties thereto with the other requirements of Section 10.11.1. No assignment or transfer --------------- of a Lender's Commitment or the Loans made pursuant thereto shall be effective unless such assignment or transfer shall have been recorded in the Register by the Administrative Agent as provided in this Section. (ii) The Borrower hereby agrees that, upon the request to the Administrative Agent by any Lender, the Borrower will execute and deliver to such Lender, as applicable, a Revolving Note, Swing Line Note or a Term Note evidencing the Loans made by such Lender. The Borrower hereby irrevocably authorizes each Lender to make (or cause to be made) appropriate notations on the grid attached to such Lender's Notes (or on any continuation of such grid), which notations, if made, shall evidence, inter alia, the date of, the outstanding principal amount of, and the ----- ---- interest rate and Interest Period applicable to the Loans evidenced thereby. Such notations shall, to the extent not inconsistent with the notations made by the Administrative Agent in the Register, be conclusive and binding on the Borrower absent manifest error; provided, however, that -------- ------- the failure of any Lender to make any such notations shall not limit or otherwise affect any Obligations of the Borrower or any other Obligor. The Loans evidenced by any Note and interest thereon shall at all times (including after assignment pursuant to Section 10.11.1) be payable to the --------------- order of the payee named therein and its registered assigns. ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES -46- SECTION III.1. Repayments and Prepayments; Application. --------------------------------------- SECTION III.1.1. Repayments and Prepayments. The Borrower shall repay in -------------------------- full the unpaid principal amount of each Loan upon the applicable Stated Maturity Date therefor. Prior thereto, payments and prepayments of Loans shall or may be made as set forth below. (a From time to time on any Business Day, the Borrower may make a voluntary prepayment, in whole or in part, of the outstanding principal amount of any (i) Loans (other than Swing Line Loans), provided, however, that -------- ------- (A) any such prepayment of Loans shall be made pro rata --- ---- among Loans of the same type and, if applicable, having the same Interest Period of all Lenders; (B) no such prepayment of any Fixed Rate Loan may be made on any day other than the last day of the Interest Period for such Loan unless the Borrower complies with Section 4.4 in ----------- respect thereof; (C) all such voluntary prepayments shall require, in the case of Fixed Rate Loans, at least three Business Days' prior written notice and, in the case of Base Rate Loans, at least one Business Day's prior written notice, and in either case not more than five Business Days' prior written notice to the Administrative Agent; and (D) all such voluntary partial prepayments shall be in an aggregate minimum amount of $1,000,000 and integral multiples of $500,000; (ii) Swing Line Loans, provided, however, that -------- ------- (A) all such voluntary prepayments shall require prior telephonic notice to the Swing Line Lender on or before 1:00 p.m., New York time, on the day of such prepayment (such notice to be confirmed in writing within 24 hours thereafter); and (B) all such voluntary partial prepayments shall be in an aggregate minimum amount of $500,000 and an integral multiple of $100,000. (b On each date when the sum of (i) the aggregate outstanding principal amount of all Revolving Loans and Swing Line Loans and (ii) the aggregate amount of all Letter of Credit Outstandings exceeds the Revolving Loan Commitment Amount (as it may be reduced from time to time, including pursuant to Section 2.2 and Section 3.1.2), the ----------- ------------- -47- Borrower shall make a mandatory prepayment of Revolving Loans or Swing Line Loans (or both) and, if necessary, give cash collateral to the Administrative Agent pursuant to an agreement satisfactory to the Administrative Agent to collateralize Letter of Credit Outstandings, in an aggregate amount equal to such excess. (c On the Stated Maturity Date and on each Quarterly Payment Date set forth below, the Borrower shall make a scheduled repayment of the aggregate outstanding principal amount, if any, of all Term Loans in an amount equal to the percentage of the aggregate outstanding principal amount of Term Loans on March 31, 2001 set forth opposite such date: Date Percentage ---- Reduction --------- 03/31/01 2.5% 06/30/01 2.5% 09/30/01 2.5% 12/31/01 2.5% 03/31/02 5.0% 06/30/02 5.0% 09/30/02 5.0% 12/31/02 5.0% 03/31/03 6.25% 06/30/03 6.25% 09/30/03 6.25% 12/31/03 6.25% 03/31/04 8.5% 06/30/04 8.5% 09/30/04 8.5% 12/31/04 8.5% 03/31/05 5.5% 06/30/05 5.5%. (d Concurrently with the receipt by the Borrower of any Net Disposition Proceeds, the Borrower shall make a mandatory prepayment of the Loans in an amount equal to 100% of such Net Disposition Proceeds to be applied as set forth in Section 3.1.2 unless the Borrower, within 345 days ------------- after receipt by the Borrower of such proceeds, reinvests such Net Disposition Proceeds in like assets. To the extent such Net Disposition Proceeds are not so applied during such 345-day period, the Borrower shall make a mandatory prepayment of the Loans (and shall reduce the Revolving Loan Commitment) to be applied as set forth in Section 3.1.2. ------------- -48- (e shall, immediately upon any acceleration of the Stated Maturity Date of any Loans pursuant to Section 8.2 or Section 8.3, the Borrower ----------- ----------- shall repay all the Loans, unless, pursuant to Section 8.3, only a portion ----------- of all Loans is so accelerated (in which case the portion so accelerated shall be so paid). Each prepayment of any Loans made pursuant to this Section shall be without premium or penalty, except as may be required by Section 4.4. No prepayment of ----------- principal of any Revolving Loans or Swing Line Loans pursuant to clauses (a) or ----------- (b) shall cause a reduction in the Revolving Loan Commitment Amount or the Swing - --- Line Loan Commitment, as the case may be. SECTION III.1.2. Application. Amounts prepaid shall be applied as set ----------- forth in this Section. (a Subject to clause (b), each prepayment or repayment of the ---------- principal of the Loans shall be applied, to the extent of such prepayment or repayment, first, to the principal amount thereof being maintained as ----- Base Rate Loans, second, to the principal amount thereof being maintained ------ as LIBO Rate Loans, and third, to the principal amount thereof being ----- maintained as CD Rate Loans. (b Each prepayment of Loans made pursuant to clause (d) of Section ---------- ------- 3.1.1 shall be applied (i) first, pro rata to a mandatory prepayment of the ----- --- ---- outstanding principal amount of all Term Loans (with the amount of such prepayment of the Term Loans being applied to the remaining Term Loan amortization payments pro rata in accordance with the amount of each such --- ---- remaining Term Loan amortization payment) until all Term Loans have been repaid in full, and (ii) second, once all Term Loans have been repaid in full, pro rata to the repayment of any outstanding Revolving Loans and a --- ---- corresponding reduction of the Revolving Loan Commitment Amount (applied pro rata to the amount of scheduled reductions of the Revolving Loan --- ---- Commitment Amount set forth in Section 2.2.2). ------------- SECTION III.2. Interest Provisions. Interest on the outstanding principal ------------------- amount of Loans shall accrue and be payable in accordance with this Section 3.2. ----------- SECTION III.2.1. Rates. Pursuant to an appropriately delivered Borrowing ----- Request or Continuation/Conversion Notice, the Borrower may elect that Loans comprising a Borrowing accrue interest at a rate per annum: (a on that portion maintained from time to time as a Base Rate Loan, equal to the sum of the Alternate Base Rate from time to time in effect plus the Applicable Margin; provided that all Swing Line Loans shall always accrue interest at the then effective Applicable Margin for Revolving Loans maintained as Base Rate Loans; -49- (b on that portion maintained as a CD Rate Loan, during each Interest Period applicable thereto, equal to the sum of the CD Rate (Reserve Adjusted) for such Interest Period plus the Applicable Margin; and (c on that portion maintained as a LIBO Rate Loan, during each Interest Period applicable thereto, equal to the sum of the LIBO Rate (Reserve Adjusted) for such Interest Period plus the Applicable Margin. All Fixed Rate Loans shall bear interest from and including the first day of the applicable Interest Period to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such Fixed Rate Loan. SECTION III.2.2. Post-Maturity Rates. After the date any principal amount ------------------- of any Loan or Reimbursement Obligation is due and payable (whether on the Stated Maturity Date, upon acceleration or otherwise), or after any other monetary Obligation of the Borrower shall have become due and payable, the Borrower shall pay, but only to the extent permitted by law, interest (after as well as before judgment) on such amounts at a rate per annum equal to the rate (including any Applicable Margin) applicable to such Loan from time to time in effect plus an additional margin of 2%. ---- SECTION III.2.3. Payment Dates. Interest accrued on each Loan shall be ------------- payable, without duplication: (a on the Stated Maturity Date therefor; (b on the date of any payment or prepayment, in whole or in part, of principal outstanding on such Loan on the principal amount so paid or prepaid; (c with respect to Base Rate Loans, on each Payment Date occurring after the Effective Date; (d with respect to Fixed Rate Loans, on the last Business Day of each applicable Interest Period (and, (i) until such time as there is no requirement in any Subordinated Debt Document that interest thereunder be paid other than semi-annually, if such Interest Period shall exceed 30 days or one month, as the case may be, on the 30th day or one month anniversary of such Interest Period, as the case may be, and (ii) thereafter, if such Interest Period shall exceed 90 days or three months, as the case may be, on the 90th day or third-month anniversary of such Interest Period, as the case may be); (e with respect to any Base Rate Loans converted into Fixed Rate Loans on a day when interest would not otherwise have been payable pursuant to clause (c), on the date of such conversion; and ---------- -50- (f on that portion of any Loans the Stated Maturity Date of which is accelerated pursuant to Section 8.2 or Section 8.3, immediately upon such ----------- ----------- acceleration. Interest accrued on Loans or other monetary Obligations arising under this Agreement or any other Loan Document after the date such amount is due and payable (whether on the Stated Maturity Date, upon acceleration or otherwise) shall be payable upon demand. SECTION III.3. Fees. The Borrower agrees to pay the fees set forth in ---- this Section 3.3. All such fees shall be non-refundable. ----------- SECTION III.3.1. Commitment Fee. The Borrower agrees to pay to the -------------- Administrative Agent for the account of each Lender, for the period (including any portion thereof when any of its Commitments are suspended by reason of the Borrower's inability to satisfy any condition of Article V) commencing on the --------- Effective Date and continuing through the Revolving Loan Commitment Termination Date, a commitment fee in an amount equal to 0.375% per annum of such Lender's Percentage of the sum of the average daily unused portion of the Revolving Loan Commitment Amount (net of Letter of Credit Outstandings). All commitment fees payable pursuant to this Section shall be calculated on a year comprised of 365 days and payable by the Borrower in arrears on the Closing Date and thereafter on each Payment Date (commencing with the first Payment Date following the Effective Date) and on the Revolving Loan Commitment Termination Date. The making of Swing Line Loans shall not constitute usage of the Revolving Loan Commitment with respect to the calculation of commitment fees to be paid by the Borrower to the Lenders. SECTION III.3.2. Agency Fees. The Borrower agrees to pay to the Arranging ----------- Agents and the Administrative Agent, for their own account, such fees in such amounts and on such dates as agreed to in writing by the Borrower and the applicable Agent. SECTION III.3.3. Letter of Credit Fee. The Borrower agrees to pay to the -------------------- Administrative Agent, for the pro rata account of the Issuer and each Revolving --- ---- Loan Lender, a Letter of Credit fee in an amount equal to the then Applicable Margin for Revolving Loans maintained as LIBO Rate Loans, multiplied by the Stated Amount of each such Letter of Credit, such fees being payable on the date of issuance of each Letter of Credit (for the period from the date of issuance to the earlier of the expiration date of the applicable Letter of Credit and the immediately succeeding Quarterly Payment Date) and thereafter quarterly in advance on each Quarterly Payment Date. The Borrower further agrees to pay to the Issuer such fees and other amounts in such amounts and at such times as may be agreed to by the Borrower and the Issuer in writing. ARTICLE IV CERTAIN FIXED RATE AND OTHER PROVISIONS -51- SECTION IV.1. Fixed Rate Lending Unlawful. If any Lender shall determine --------------------------- (which determination shall, upon notice thereof to the Borrower and the Lenders, be conclusive and binding on the Borrower) that the introduction of or any change in or in the interpretation of any law makes it unlawful, or any Regulatory Authority asserts that it is unlawful, for such Lender to make, continue or maintain any Loan as, or to convert any Loan into, a Fixed Rate Loan, the obligations of such Lender to make, continue, maintain or convert any such Fixed Rate Loan shall, upon such determination, forthwith be suspended until such Lender shall notify the Administrative Agent that the circumstances causing such suspension no longer exist, and all outstanding Fixed Rate Loans of that type shall automatically convert into Base Rate Loans at the end of the then current Interest Periods with respect thereto or sooner, if required by such law or assertion. SECTION IV.2. Deposits Unavailable. If the Administrative Agent shall -------------------- have determined that (a Dollar deposits in the relevant amount and for the relevant Interest Period are not available to the Administrative Agent in its relevant market; or (b by reason of circumstances affecting the Administrative Agent's relevant market, adequate means do not exist for ascertaining the interest rate applicable hereunder to Fixed Rate Loans, then, upon notice from the Administrative Agent to the Borrower and the Lenders, the obligations of all Lenders under Section 2.3 and Section 2.4 to make or ----------- ----------- continue any Loans as, or to convert any Loans into, Fixed Rate Loans shall forthwith be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. SECTION IV.3. Increased Fixed Rate Loan Costs, etc. The Borrower agrees ------------------------------------ to reimburse each Lender for any increase in the cost to such Lender of, or any reduction in the amount of any sum receivable by such Lender in respect of, making, continuing or maintaining (or of its obligation to make, continue or maintain) any Loans as, or of converting (or of its obligation to convert) any Loans into, Fixed Rate Loans that arise in connection with (i) any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in after the date hereof of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any court or Regulatory Authority except for such changes with respect to increased capital costs and taxes which are governed by Sections 4.5 and 4.6, respectively, or ------------ --- (ii) any changes in reserve requirements for "Eurocurrency Liabilities" as defined in Regulation D of the F.R.S. Board which are not included in the calculation of "LIBOR Reserve Percentage". Such Lender shall promptly notify the Administrative Agent and the Borrower in writing of the occurrence of any such event, such notice to state, in reasonable detail, the reasons therefor and the additional amount required fully to compensate such Lender for such -52- increased cost or reduced amount. Such additional amounts shall be payable by the Borrower directly to such Lender within five days of its receipt of such notice, and such notice shall, in the absence of manifest error, be conclusive and binding on the Borrower. SECTION IV.4. Funding Losses. In the event any Lender shall incur any -------------- loss or expense (including any loss (other than loss of profit) or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to make, continue or maintain any portion of the principal amount of any Loan as, or to convert any portion of the principal amount of any Loan into, a Fixed Rate Loan) as a result of (a) any conversion or repayment or prepayment of the principal amount of any Fixed Rate Loans on a date other than the scheduled last day of the Interest Period applicable thereto, whether pursuant to Section 3.1 or ----------- otherwise; (b) any Loans not being made as Fixed Rate Loans in accordance with the Borrowing Request therefor; or (c) any Loans not being continued as, or converted into, Fixed Rate Loans in accordance with the Continuation/Conversion Notice therefor, then, upon the written notice of such Lender to the Borrower (with a copy to the Administrative Agent), the Borrower shall, within five days of its receipt thereof, pay directly to such Lender such amount as will (in the reasonable determination of such Lender) reimburse such Lender for such loss or expense; provided, however, that such loss or expense shall not include loss of the - -------- ------- Applicable Margin with respect to any Loan accruing after the date of such payment. Such written notice (which shall include calculations in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on the Borrower. SECTION IV.5. Increased Capital Costs. If any change in, or the ----------------------- introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any court or Regulatory Authority, affects or would affect the amount of capital required or expected to be maintained by any Lender or any Person controlling such Lender, and such Lender determines (in good faith but in its sole and absolute discretion) that the rate of return on its or such controlling Person's capital as a consequence of the Commitments or the Loans made, or the Letters of Credit issued or participated in, by such Lender is reduced to a level below that which such Lender or such controlling Person could have achieved but for the occurrence of any such circumstance, then, in any such case upon notice from time to time by such Lender to the Borrower, the Borrower shall immediately pay directly to such Lender additional amounts sufficient to compensate such Lender or such controlling Person for such reduction in rate of return. A statement of such Lender as to any such additional amount or amounts (including calculations thereof in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on the Borrower. In -53- determining such amount, such Lender may use any method of averaging and attribution that it (in its sole and absolute discretion) shall deem applicable. SECTION IV.6. Taxes. ----- (a) All payments by the Borrower of principal of, and interest on, or other amounts in respect of, the Loans and all other amounts payable hereunder (including fees) and the Notes shall be made free and clear of and without deduction for any Taxes, except to the extent that any such withholdings or deductions are required by applicable law, rule or regulations. In that event, the Borrower will (i) pay directly to the relevant authority the full amount of Taxes required to be so withheld or deducted; (ii) promptly forward to the Administrative Agent an official receipt or other documentation satisfactory to the Administrative Agent evidencing such payment to such authority; and (iii) if such Taxes are Covered Taxes, pay to the Administrative Agent for the account of the Lenders such additional amount or amounts as is necessary to ensure that the net amount actually received by each Lender will equal the full amount such Lender would have received had no such withholding or deduction been required. In addition, if the Borrower, any Lender, or any Agent is required by law at any time to pay any Covered Tax on, or calculated by reference to, any sum received or receivable by or on behalf of any Lender or any Agent under this Agreement or any Notes, then (i) with respect solely to any such requirement with respect to a Lender or an Agent, any applicable Lender or Agent shall, as promptly as practicable following such Person having notice of such requirement, give notice to the Borrower of such requirement and (ii) the Borrower shall, promptly after having received such notice, pay or procure the payment of such Covered Tax. If the Borrower pays any such Covered Taxes as required by the immediately preceding sentence, then the Borrower will promptly forward to the Administrative Agent an official receipt or other documentation satisfactory to the Administrative Agent evidencing such payment of Covered Taxes to the relevant taxing authority. Without prejudice to the preceding provisions, if any Agent or any Lender is required by law to make any payment on account of Covered Taxes on or in relation to any sum received under this Agreement or any Note, or any liability for Covered Taxes in respect of any such sum is imposed, levied or assessed against any Lender or any Agent, the Borrower will indemnify each such Lender and Agent for the full amount of Covered Taxes paid by such Lender or Agent (as the case may be), whether or not such Covered Taxes were correctly or legally asserted. Such indemnification shall be made within 30 days of the demand of the Lender or Agent therefor. In addition, if the Borrower fails to -54- remit to the Administrative Agent, for the account of the respective Lenders, the required receipts or other required documentary evidence of its payment of any Taxes, the Borrower shall indemnify the Lenders for any incremental Taxes, interest or penalties that may become payable by any Lender as a result of any such failure. For purposes of this Section 4.6, ----------- the transfer by the Administrative Agent or any Lender to or for the account of any Lender of any sum received from the Borrower on account of amounts required to be paid by the Borrower hereunder in respect of Covered Taxes imposed with respect to the recipient shall be deemed a payment by the Borrower of such amounts. (b) Each Lender that is an original signatory to this Agreement and each Agent hereby severally (but not jointly) represent that, under applicable law and treaties in effect as of the Effective Date, no United States federal income taxes will be required to be withheld by the Administrative Agent or the Borrower with respect to any payments to be made to such Person in respect of this Agreement. Each Lender that is an original signatory hereto (and each Person which becomes a Lender by assignment, transfer or participation pursuant to Section 10.11 hereof) and ------------- each Agent (and each Person that becomes an Agent by appointment pursuant to Section 9.4 hereof), agrees severally (but not jointly) that, on or ----------- prior to the Effective Date (or such assignment, transfer or appointment, as the case may be) it will in each case deliver to the Borrower and the Administrative Agent the following: (i) in the case of a Person other than a Non-U.S. Lender, two copies of a statement certifying that such Person is a U.S. Person, which statement shall contain the address, if any, of such Person's office or place of business in the United States, and shall be signed by an authorized officer of such Person, together with two duly completed copies of United States Internal Revenue Service Form W-9 (or applicable successor form) (unless it establishes to the reasonable satisfaction of the Borrower that it is otherwise eligible for an exemption from backup withholding tax or other applicable withholding tax), or (ii) in the case of a Non-U.S. Lender, either (A) two duly completed copies of United States Internal Revenue Service Form 1001 or 4224 (or applicable successor form) certifying in each case that such Person is entitled to receive payments under this Agreement and the Notes payable to it without deduction or withholding of any United States federal income taxes and two duly completed copies of United States Internal Revenue Service Form W-8 or Form W-9 (or applicable successor form) or (B) in the case of an assignee Lender that is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and that does not comply with the requirements of clause (i) hereof, then a statement in substantially the form of Exhibit N hereto (an "Exemption --------- --------- Certificate") to the effect that such assignee Lender is eligible for ----------- a complete exemption from withholding of United States withholding tax under Section 871(h) or Section -55- 881(c) of the Code and two duly completed and signed original copies of Internal Revenue Service Form W-8. Each Person who delivers to the Borrower and the Administrative Agent a Form W-8, W-9, 1001 or 4224, or applicable successor form, pursuant to this clause, further undertakes to deliver to the Borrower and the Administrative Agent two further copies of said Form W-8, W-9, 1001, 4224, or applicable successor form, or other manner of certification, as the case may be, on or before the date that any such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower, and such extensions or renewals thereof as may reasonably be requested by the Borrower, certifying that such Person is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, unless in any such case any change in law, rule, regulation, treaty or directive, or in the interpretation or application thereof (a "Law Change"), has occurred prior to the date on which any such ---------- delivery would otherwise be required, which Law Change renders any such form inapplicable or which would prevent such Person from duly completing and delivering any such form with respect to it. (c) The agreements in this Section shall survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder. (d) No Lender shall be given the benefit of the provisions of clause ------ (a) above during such time that such Lender has failed to comply with --- clause (b) above. ---------- SECTION IV.7. Payments, Computations, etc. Unless otherwise expressly --------------------------- provided, all payments by the Borrower pursuant to this Agreement or any other Loan Document shall be made by the Borrower to the Administrative Agent for the pro rata account of the Lenders entitled to receive such payment. All such - --- ---- payments required to be made to the Administrative Agent shall be made, without setoff, deduction or counterclaim, not later than 12:00 noon, New York time, on the date due, in same day or immediately available funds, to such account as the Administrative Agent shall specify from time to time by notice to the Borrower. The failure of the Borrower to make any such payment by such time shall not constitute a Default hereunder, provided that such payment is received by the Administrative Agent in immediately available funds by 4:00 p.m. on such due date, but any such payment made after 1:00 p.m. on such due date shall be deemed to have been made on the next Business Day for the purpose of calculating interest on amounts outstanding on the Obligations unless the Administrative Agent in fact was able to remit to each Lender its pro-rata share of such payment by 4:00 p.m. on such due date. Funds received after that time shall be deemed to have been received by the Administrative Agent on the next succeeding Business Day. The Administrative Agent shall promptly remit in same day funds to each Lender its share, if any, of such payments received by the Administrative Agent for the account of such Lender. All interest (including interest on LIBO Rate Loans) shall be computed on the basis of the actual number of days (including the first day but excluding the last day) occurring during the period for which such interest or fee is payable over a year -56- comprised of 360 days (or, in the case of interest on a Base Rate Loan (calculated at other than the Federal Funds Rate) and fees, 365 days or, if appropriate, 366 days). Whenever any payment to be made shall otherwise be due on a day which is not a Business Day, such payment shall (except as otherwise required by clause (c) of the definition of the term "Interest Period") be made ---------- on the next succeeding Business Day and such extension of time shall be included in computing interest and fees, if any, in connection with such payment. SECTION IV.8. Sharing of Payments. If any Lender shall obtain any payment ------------------- or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of any Loan or Reimbursement Obligation (other than pursuant to the terms of Section 4.3, 4.4, 4.5 or 4.6) in excess of its pro rata ----------- --- --- --- --- ---- share of payments then or therewith obtained by all Lenders, such Lender shall purchase from the other Lenders such participations in Credit Extensions made by them as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided, however, that if -------- ------- all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Lender, the purchase shall be rescinded and each Lender which has sold a participation to the purchasing Lender shall repay to the purchasing Lender the purchase price to the ratable extent of such recovery together with an amount equal to such selling Lender's ratable share (according to the proportion of (a) the amount of such selling Lender's required repayment to the purchasing Lender to (b) total amount so recovered from the purchasing -- Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section may, to the fullest extent permitted by law, exercise all its rights of payment (including pursuant to Section 4.9) with respect to such participation ----------- as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section to share in the benefits of any recovery on such secured claim. SECTION IV.9. Setoff. Each Lender shall, upon the occurrence and during ------ the continuance of any Default described in clauses (a) through (d) of Section ----------- --- ------- 8.1.9 or, with the consent of the Required Lenders, upon the occurrence and - ----- during the continuance of any other Event of Default, have the right to appropriate and apply to the payment of the Obligations owing to it (whether or not then due), and (as security for such Obligations) the Borrower hereby grants to each Lender a continuing security interest in, any and all balances, credits, deposits, accounts or moneys of the Borrower then or thereafter maintained with such Lender; provided, however, that any such appropriation and application -------- ------- shall be subject to the provisions of Section 4.8. Each Lender agrees promptly ----------- to notify the Borrower and the Administrative Agent after any such setoff and application made by such Lender; provided, however, that the failure to give -------- ------- such notice shall not affect the validity of such setoff and application. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff under applicable law or otherwise) which such Lender may have. -57- SECTION IV.10. Lender's Duty to Mitigate'. Each Lender, as promptly as -------------------------- practicable after it becomes aware of the occurrence of an event or the existence of a condition that would cause it to be affected under Section 4.1, ----------- 4.2, 4.3, 4.5 or 4.6 or that would entitle such Lender to receive payments under - --- --- --- --- Section 4.3, will give notice thereof to the Borrower and the Administrative - ----------- Agent and, to the extent not inconsistent with such Lender's internal policies, such Lender shall use commercially reasonable efforts to make, fund or maintain its affected LIBO Rate Loans through another lending office of such Lender if, as a result thereof, the additional moneys which would otherwise be required to be paid to such Lender pursuant to Section 4.2, 4.3, 4.5 or 4.6, as the case may ----------- --- --- --- be, would be materially reduced, or the illegality or other adverse circumstances which would otherwise require a conversion of such Loans pursuant to Section 4.1 would cease to exist, and if, as determined by such Lender in its ----------- reasonable discretion, the making, funding or maintaining of such Loans through such other lending office would not otherwise adversely affect such Loans or such Lender. SECTION IV.11. Replacement of Lenders. Each Lender hereby severally ---------------------- agrees as set forth in this Section: (a) If any Lender (a "Subject Lender") makes demand upon the Borrower -------------- for (or if the Borrower is otherwise required to pay) amounts pursuant to Section 4.2, 4.3, 4.5 or 4.6, or gives notice pursuant to Section 4.1 ----------- --- --- --- ----------- requiring a conversion of such Subject Lender's LIBO Rate Loans to Base Rate Loans, the Borrower may, within 90 days of receipt by the Borrower of such demand or notice (or the occurrence of such other event causing the Borrower to be required to pay such compensation), as the case may be, give notice (a "Replacement Notice") in writing to the Administrative Agent and ------------------ such Subject Lender of its intention to replace such Subject Lender with a financial institution designated in such Replacement Notice. If the Administrative Agent shall, in the exercise of its reasonable discretion and within 30 days of its receipt of such Replacement Notice, notify the Borrower and such Subject Lender in writing that the designated financial institution is satisfactory to the Administrative Agent, then such Subject Lender shall, so long as no Default shall have occurred and be continuing (and subject to the payment of any amounts due pursuant to Section 4.4), ----------- assign, in accordance with Section 10.11.1, all of its Commitments, Loans, --------------- Notes and other rights and obligations under this Agreement and all other Loan Documents (including, without limitation, Reimbursement Obligations) to such designated financial institution; provided, however, that (i) such -------- ------- assignment shall be without recourse, representation or warranty (other than that such Lender owns the Commitments, Loans and Notes being assigned, free and clear of any Liens) and shall be on terms and conditions reasonably satisfactory to such Subject Lender and such designated financial institution and (ii) the purchase price paid by such designated financial institution shall be in the amount of such Subject Lender's Loans and its Percentage of outstanding Reimbursement Obligations, together with all accrued and unpaid interest and fees in respect thereof, plus all other amounts (other than the amounts demanded and unreimbursed under Sections -------- 4.2, 4.3, 4.5 and 4.6, which shall be payable upon demand by the Borrower), --- --- --- --- owing to such Subject Lender hereunder. -58- (b) Upon the effective date of an assignment described in clause (a), ---------- the Borrower shall issue a replacement Note or Notes, as the case may be, to such designated financial institution or Replacement Lender, as applicable, and such institution shall become a "Lender" for all purposes under this Agreement and the other Loan Documents. In the case of clause ------ (a), the Administrative Agent agrees to use all commercially reasonable --- efforts to assist the Borrower in locating a replacement financial institution to replace any Subject Lender; provided, however, that the -------- ------- Borrower agrees to pay all reasonable costs and expenses incurred by the Administrative Agent in providing such assistance. ARTICLE V CONDITIONS TO CREDIT EXTENSIONS SECTION V.1. Initial Credit Extension. The obligation of each Lender and, ------------------------ if applicable, the Issuer to make the initial Credit Extension shall be subject to the prior or concurrent satisfaction of each of the conditions precedent set forth in this Section 5.1. ----------- SECTION V.1.1. Subsidiary Guaranties. The Arranging Agents shall have --------------------- received, if not otherwise restricted pursuant to the terms of the Primestar Partnership Credit Agreement, executed counterparts of a Subsidiary Guaranty from the Primestar Partnership, dated the Closing Date and duly executed and delivered by an Authorized Officer of the Primestar Partnership. SECTION V.1.2. Pledge Agreements. The Arranging Agents shall have ----------------- received executed counterparts of (a) the Subsidiary Pledge Agreement, duly executed and delivered by an Authorized Officer of each of TSAT Partners Holdings, TCISE Partner 1, Inc. and TCISE Partner 2, Inc., and (b) a supplement to the Borrower Pledge Agreement, duly executed and delivered by an Authorized Officer of the Borrower, in each case dated the Closing Date, together with certificates evidencing all of the issued and outstanding Capital Stock of each Restricted Subsidiary being pledged thereunder, which certificates shall be accompanied by undated stock powers duly executed in blank, or, if any securities pledged pursuant to the Subsidiary Pledge Agreement or the supplement to the Borrower Pledge Agreement are uncertificated securities, confirmation and evidence satisfactory to the Arranging Agents that the security interest in such uncertificated securities has been transferred to and perfected by the Administrative Agent for the benefit of the Secured Parties in accordance with the U.C.C., and all laws otherwise applicable to the perfection of the pledge of such shares. The Arranging Agents and their counsel shall be satisfied that (i) the Lien granted to the Administrative Agent, for the benefit of the Secured Parties, in the collateral described above is a first priority (or local equivalent thereof) security interest; and (ii) no Lien exists on any of the collateral described above other than the Lien created in favor of the Administrative Agent, for the benefit of the Secured Parties, pursuant to the the Subsidiary Pledge Agreement or the supplement to the Borrower Pledge Agreement. -59- SECTION V.1.3. Contract Assignment Agreement and each Consent and -------------------------------------------------- Agreement. The Arranging Agents shall have received executed counterparts of - --------- each of the Contract Assignment Agreement and each Consent and Agreement, as applicable, duly executed and delivered by an Authorized Officer of the Borrower and such other parties thereto. SECTION V.1.4. Financial Information, etc. The Arranging Agents shall -------------------------- have received (a) three year historical financial information satisfactory to the Arranging Agents for each of the partner distributors of the PRIMESTAR Distribution Service; and (b) the Pro Forma Balance Sheet. SECTION V.1.5. Closing Date Certificate. The Arranging Agents shall have ------------------------ received the Borrower Closing Date Certificate, dated the Closing Date, duly executed and delivered by an Authorized Officer of the Borrower, in which certificate the Borrower shall agree and acknowledge that the statements made therein shall be deemed to be true and correct representations and warranties of the Borrower made as of such date and, at the time each such certificate is delivered, such statements shall in fact be true and correct. All documents and agreements required to be appended to the Borrower Closing Date Certificate shall be in form and substance satisfactory to the Arranging Agents. SECTION V.1.6. Compliance Certificate. The Arranging Agents shall have ---------------------- received an initial Compliance Certificate on a pro forma basis as if the Credit --- ----- Extension to be made on the Closing Date had occurred as of September 30, 1997 and as to such items therein as the Arranging Agents reasonably request, dated the Closing Date, duly executed (and with all schedules thereto duly completed) and delivered by the chief executive, financial or accounting Authorized Officer of the Borrower. SECTION V.1.7. Solvency, etc. The Arranging Agents shall have received ------------- the Solvency Certificate, dated the Closing Date. SECTION V.1.8. Consummation of Restructuring Transaction. The Arranging ----------------------------------------- Agents shall have received (a) evidence satisfactory to them that the Restructuring Transaction has been (or contemporaneously with the making of the initial Credit Extension, will be) consummated and (b) copies of the Restructuring Agreement and all documents and agreements delivered in connection therewith. SECTION V.1.9. Senior Subordinated Credit Agreement. The Arranging Agents ------------------------------------ shall have received evidence satisfactory to them that (a) the Borrower has received not less than $350,000,000 in gross proceeds from the Senior Subordinated Credit Agreement on terms and conditions satisfactory to the Arranging Agents, and (b) no default has occurred and is continuing under any Subordinated Debt Document. -60- SECTION V.1.10. Delivery of Transaction Documents. The Arranging Agents --------------------------------- shall have received a fully executed copy of each of the Transaction Documents. There shall not have been any amendments, waivers or other modifications of, or other forbearance to exercise any rights with respect to, any of the terms or provisions of any Transaction Document and the exhibits and schedules thereto. SECTION V.1.11. Insurance. The Arranging Agents shall have received --------- certified copies of the insurance policies (or binders or certificates of insurance in respect thereof, or such other evidence of insurance satisfactory to the Arranging Agents), from one or more insurance companies satisfactory to the Arranging Agents, evidencing coverage required to be maintained pursuant hereto and each Loan Document. SECTION V.1.12. Opinion of Counsel. The Arranging Agents shall have ------------------ received an opinion, dated the Closing Date and addressed to the Agents and all Lenders, from Sherman & Howard L.L.C., special counsel to the Obligors, in form and substance satisfactory to the Arranging Agents. SECTION V.1.13. Closing Fees, Expenses, etc. The Agents shall have --------------------------- received for their own accounts, or for the account of each Lender, as the case may be, all fees, costs and expenses due and payable pursuant to Section 3.3, if ----------- then invoiced. SECTION V.2. All Credit Extensions. The obligation of each Lender and the --------------------- Issuer to make any Credit Extension shall be subject to Sections 2.1.4 and 2.1.5 -------------- ----- and the satisfaction of each of the conditions precedent set forth in this Section 5.2. - ----------- SECTION V.2.1. Compliance with Warranties, No Default, etc. Both before ------------------------------------------- and after giving effect to any Credit Extension (but, if any Default of the nature referred to in Section 8.1.5 shall have occurred with respect to any ------------- other Indebtedness, without giving effect to the application, directly or indirectly, of the proceeds thereof) the following statements shall be true and correct: (a) the representations and warranties set forth in Article VI ---------- (excluding, however, those contained in Section 6.7) and in each other Loan ----------- Document shall, in each case, be true and correct with the same effect as if then made (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date); (b) except as disclosed by the Borrower to the Administrative Agent and the Lenders pursuant to Section 6.7, ----------- (i) no labor controversy, litigation, arbitration or governmental investigation or proceeding shall be pending or, to the knowledge of the -61- Borrower, threatened against the Borrower or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect; and (ii) no development shall have occurred in any labor controversy, litigation, arbitration or governmental investigation or proceeding disclosed pursuant to Section 6.7 which could reasonably be ----------- expected to have a Material Adverse Effect; and (c) no Default shall have then occurred and be continuing. SECTION V.2.2. Credit Extension Request, etc. The Administrative Agent ----------------------------- shall have received a Borrowing Request if Loans are being requested, or an Issuance Request if a Letter of Credit is being requested or extended. Each of the delivery of a Borrowing Request or Issuance Request and the acceptance by the Borrower of the proceeds of such Credit Extension shall constitute a representation and warranty by the Borrower that on the date of such Credit Extension (both immediately before and after giving effect to such Credit Extension and the application of the proceeds thereof) the statements made in Section 5.2.1 are true and correct in all material respects. - ------------- SECTION V.2.3. Satisfactory Legal Form. All documents executed or ----------------------- submitted pursuant hereto by or on behalf of the Borrower or any of its Subsidiaries or any other Obligors shall be reasonably satisfactory in form and substance to the Arranging Agents and their counsel; the Arranging Agents and their counsel shall have received all information, approvals, opinions, documents or instruments as the Arranging Agents or their counsel may reasonably request. ARTICLE VI REPRESENTATIONS AND WARRANTIES In order to induce the Lenders, the Issuer and each Agent to enter into this Agreement and to make Credit Extensions hereunder, the Borrower represents and warrants unto each Agent, the Issuer and each Lender as set forth in this Article VI. - ---------- SECTION VI.1. Organization, etc. The Borrower and each of its ----------------- Subsidiaries is a corporation validly organized and existing and in good standing under the laws of the state or jurisdiction of its incorporation, is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of its business requires such qualification, and has full power and authority and holds all requisite governmental licenses, permits and other approvals to enter into and perform its Obligations under this Agreement and each other Loan Document and Transaction Document to which it is a party and to own and hold under lease its property and to conduct its business substantially as currently conducted by it. -62- SECTION VI.2. Due Authorization, Non-Contravention, etc. The execution, ----------------------------------------- delivery and performance by the Borrower of this Agreement and each other Loan Document and Transaction Document executed or to be executed by it and the execution, delivery and performance by each other Obligor of each Loan Document and Transaction Document executed or to be executed by it are in each case within each such Person's corporate powers, have been duly authorized by all necessary corporate action, and do not: (a) contravene any such Person's Organic Documents; (b) contravene any Contractual Obligation binding on or affecting any such Person; (c) contravene any Governmental Approval or Governmental Rule binding on or affecting any such Person; or (d) result in, or require the creation or imposition of, any Lien on any of such Person's properties (except as expressly permitted by this Agreement). SECTION VI.3. Government Approval, Regulation, etc. Except as disclosed ------------------------------------ in Item 6.3 ("Approvals") of the Disclosure Schedule, no authorization or -------- approval or other action by, and no notice to or filing with, any Regulatory Authority or other Person (other than those that have been, or on the Effective Date will be, duly obtained or made and which are, or on the Effective Date will be, in full force and effect) is required for the due execution, delivery or performance by the Borrower of this Agreement or by the Borrower or any other Obligor of any other Loan Document or Transaction Document to which it is a party. Neither the Borrower nor any of its Subsidiaries is an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. SECTION VI.4. Validity, etc. This Agreement constitutes, and other Loan ------------- Document and Transaction Document, executed by the Borrower constitute or will, on the due execution and delivery thereof, constitute, the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms; and each other Loan Document and Transaction Document executed pursuant hereto by each other Obligor will, on the due execution and delivery thereof by such Obligor, constitute the legal, valid and binding obligation of such Obligor enforceable against such Obligor in accordance with its terms (except, in any case above, as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally and by principles of equity). SECTION VI.5. Financial Information. The financial statements of the --------------------- Borrower and its Subsidiaries furnished to the Arranging Agents and each Lender pursuant to Section 5.1.4 have been prepared in accordance with GAAP. All ------------- balance sheets, all statements of operations, -63- shareholders' equity and cash flows and all other financial information of each of the Borrower and its Subsidiaries furnished pursuant to Section 7.1.1 have ----- been and will for periods following the Effective Date be prepared in accordance with GAAP consistently applied, and do or will present fairly the consolidated financial position of the corporations covered thereby as at the dates thereof and the results of their operations for the periods then ended, except that quarterly financial statements need not include footnote disclosure and may be subject to ordinary year-end adjustment. SECTION VI.6. No Material Adverse Effect. There has been no Material -------------------------- Adverse Effect since December 31, 1996. SECTION VI.7. Litigation, Labor Controversies, etc. Except as disclosed ------------------------------------ in Item 6.7 ("Litigation") of the Disclosure Schedule, there is no pending or, -------- to the knowledge of the Borrower, threatened litigation, action, proceeding, or labor controversy affecting the Borrower or any of its Subsidiaries, or any of their respective properties, businesses, assets or revenues, which (a) could have a Material Adverse Effect or (b) could adversely affect the legality, validity or enforceability of this Agreement or any other Loan Document or Transaction Document. SECTION VI.8. Compliance with Laws. The Borrower and its Subsidiaries -------------------- have complied in all material respects with all applicable Governmental Approvals and Governmental Rules of any Regulatory Authority having jurisdiction over the conduct of its businesses or the ownership of its properties. SECTION VI.9. Subsidiaries. The Borrower has no Subsidiaries, except ------------ those Subsidiaries: (a) which are identified in Item 6.9 ("Existing Subsidiaries") of the -------- Disclosure Schedule; or (b) which are permitted to have been organized or acquired in accordance with Section 7.2.5 or 7.2.10. ------------- ------ SECTION VI.10. Ownership of Properties. Except as permitted pursuant to ----------------------- Section 6.14 or Section 7.2.3, the Borrower and each of its Subsidiaries owns - ------------ ------------- (a) in the case of owned real property, good and marketable fee title to, and (b) in the case of owned personal property, good and valid title to, or, in the case of leased real or personal property, valid and enforceable leasehold interests (as the case may be) in, all of its properties and assets, real and personal, tangible and intangible, of any nature whatsoever, free and clear in each case of all Liens or claims, except for Liens permitted pursuant to Section ------- 7.2.3. - ----- SECTION VI.11. Taxes. The Borrower and each of its Subsidiaries has filed ----- all tax returns and reports required by law to have been filed by it and has paid all taxes and governmental charges thereby shown to be due and owing, except any such taxes or charges -64- which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. SECTION VI.12. Pension and Welfare Plans. During the twelve-consecutive- ------------------------- month period prior to the date of the execution and delivery of this Agreement and prior to the date of any Credit Extension hereunder, no steps have been taken to terminate any Pension Plan (other than a standard termination under Section 4041(b) of ERISA), and no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA. No condition exists or event or transaction has occurred with respect to any Pension Plan which might result in the incurrence by the Borrower or any member of the Controlled Group of any material liability, fine or penalty. SECTION VI.13. Environmental Warranties. Except as set forth in Item 6.13 ------------------------ --------- ("Environmental Matters") of the Disclosure Schedule: (a) all facilities and property (including underlying groundwater) owned or leased by the Borrower or any of its Subsidiaries have been, and continue to be, owned or leased by the Borrower and its Subsidiaries in material compliance with all Environmental Laws; (b) there are no pending or threatened and, to the best of the Borrower's knowledge, there have been no past (i) claims, complaints, notices or requests for information received by the Borrower or any of its Subsidiaries with respect to any alleged violation of any Environmental Law, or (ii) complaints, notices or inquiries to the Borrower or any of its Subsidiaries regarding potential liability under any Environmental Law; (c) there have been no Releases of Hazardous Materials at, on or under any property now or previously owned or leased by the Borrower or any of its Subsidiaries that, singly or in the aggregate, have, or could reasonably be expected to have, a Material Adverse Effect; (d) the Borrower and its Subsidiaries have been issued and are in material compliance with all permits, certificates, approvals, licenses and other authorizations relating to environmental matters and necessary or desirable for their businesses; (e) no property now or previously owned or leased by the Borrower or any of its Subsidiaries is listed or proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list of sites requiring investigation or clean-up; -65- (f) there are no underground storage tanks, active or abandoned, including petroleum storage tanks, on or under any property now or previously owned or leased by the Borrower or any of its Subsidiaries that, singly or in the aggregate, have, or could reasonably be expected to have, a Material Adverse Effect; (g) neither the Borrower nor any Subsidiary of the Borrower has directly transported or directly arranged for the transportation of any Hazardous Material to any location which is listed or proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list or which is the subject of federal, state or local enforcement actions or other investigations which may lead to material claims against the Borrower or such Subsidiary thereof for any remedial work, damage to natural resources or personal injury, including claims under CERCLA; (h) there are no polychlorinated biphenyls or friable asbestos present at any property now or previously owned or leased by the Borrower or any Subsidiary of the Borrower that, singly or in the aggregate, have, or could reasonably be expected to have, a Material Adverse Effect; and (i) no conditions exist at, on or under any property now or previously owned or leased by the Borrower which, with the passage of time, or the giving of notice or both, would give rise to liability under any Environmental Law. SECTION VI.14. Intellectual Property. Each of the Borrower and its --------------------- Subsidiaries owns and possesses or licenses (as the case may be) all such patents, patent rights, trademarks, trademark rights, trade names, trade name rights, service marks, service mark rights and copyrights necessary for the conduct of the businesses of the Borrower and its Subsidiaries as now conducted without, individually or in the aggregate, any infringement upon rights of other Persons, in each case except as could not reasonably be expected to result in a Material Adverse Effect, and there is no individual patent, patent right, trademark, trademark right, trade name, trade name right, service mark, service mark right or copyright the loss of which could reasonably be expected to have a Material Adverse Effect, except as may be disclosed in Item 6.14 ("Intellectual --------- Property") of the Disclosure Schedule. SECTION VI.15. Regulations U and X. Neither the Borrower nor any of its ------------------- Subsidiaries is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Credit Extensions will be used to purchase or carry margin stock or otherwise for a purpose which violates, or would be inconsistent with, F.R.S. Board Regulation U or X. Terms for which meanings are provided in F.R.S. Board Regulation U or X or any regulations substituted therefor, as from time to time in effect, are used in this Section with such meanings. -66- SECTION VI.16. Accuracy of Information. None of the factual information ----------------------- heretofore or contemporaneously furnished by or on behalf of the Borrower in writing to any Agent, the Issuer or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby (true and complete copies of which were furnished to each Arranging Agent, the Issuer and each Lender in connection with its execution and delivery hereof), contains any untrue statement of a material fact on the date as of which such information is dated or certified, and none of the other factual information hereafter furnished in connection with this Agreement or any other Loan Document or any Transaction Document by the Borrower or any other Obligor to any Agent, the Issuer or any Lender will contain any untrue statement of a material fact on the date as of which such information is dated or certified and, as of the date of the execution and delivery of this Agreement by each Arranging Agent and each Lender, the information delivered prior to the date of execution and delivery of this Agreement (unless such information specifically relates to a prior date) does not, and the factual information hereafter furnished shall not on the date as of which such information is dated or certified, omit to state any material fact necessary to make any information not misleading. SECTION VI.17. Subordinated Debt. The making of the Credit Extensions, ----------------- and the acceptance thereof by the Borrower, does not violate the provisions of any Subordinated Debt Document. ARTICLE VII COVENANTS SECTION VII.1. Affirmative Covenants. The Borrower agrees with each --------------------- Agent, the Issuer and each Lender that, until all Commitments have terminated and all Obligations have been paid and performed in full, the Borrower will perform or cause to be performed the obligations set forth in this Section 7.1. ----------- SECTION VII.1.1. Financial Information, Reports, Notices, etc. The -------------------------------------------- Borrower will furnish, or will cause to be furnished, to each Lender, the Issuer and each Agent copies of the following financial statements, reports, notices and information: (a) as soon as available and in any event within 45 days (and 60 days, in the case of the Borrower and its Restricted Subsidiaries) after the end of each of the first three Fiscal Quarters of each Fiscal Year of the Borrower, a consolidated balance sheet of the Borrower and its Restricted Subsidiaries and a consolidated balance sheet of the Borrower and its Subsidiaries, in each case as of the end of such Fiscal Quarter and consolidated statements of earnings and cash flows of the Borrower and its Restricted Subsidiaries and consolidated statements of earnings and cash flows of the Borrower and its Subsidiaries, in each case for the period commencing at the end of the previous Fiscal Year and ending with the end of such Fiscal Quarter and a profit and loss statement for -67- such Fiscal Quarter, certified as complete and correct by the chief financial Authorized Officer of the Borrower; (b) as soon as available and in any event within 90 days (and 105 days, in the case of the Borrower and its Restricted Subsidiaries) after the end of each Fiscal Year of the Borrower, a copy of the annual audited financial statements for such Fiscal Year for the Borrower and its consolidated Subsidiaries, including therein a consolidated balance sheet of the Borrower and its Restricted Subsidiaries as of the end of such Fiscal Year and consolidated statements of earnings and cash flow of the Borrower and its Restricted Subsidiaries for such Fiscal Year, in each case as audited (without any Impermissible Qualification) by KPMG Peat Marwick or independent public accountants of national standing acceptable to the Arranging Agents; (c) as soon as available and in any event within 60 days after the end of each of the first three Fiscal Quarters of each Fiscal Year of the Borrower and within 105 days after the end of the Fiscal Year of the Borrower, a Compliance Certificate, executed by the chief executive, financial or accounting Authorized Officer of the Borrower, showing (in reasonable detail and with appropriate calculations and computations in all respects reasonably satisfactory to the Arranging Agents) compliance with the financial covenants set forth in Article VII; ----------- (d) as soon as possible and in any event within three Business Days after the Borrower or any of its Subsidiaries obtains knowledge of the occurrence of a Default, a statement of the chief executive, financial or accounting Authorized Officer of the Borrower setting forth details of such Default and the action which the Borrower has taken and proposes to take with respect thereto; (e) as soon as possible and in any event within three Business Days after the Borrower or any of its Subsidiaries obtains knowledge of (x) the occurrence of any material adverse development with respect to any litigation, action, proceeding or labor controversy of the type and materiality described in Item 6.7 ("Litigation") of the Disclosure -------- Schedule, or (y) the commencement of any litigation, action, proceeding or labor controversy of the type and materiality described in Item 6.7 -------- ("Litigation") of the Disclosure Schedule, notice thereof and, to the extent the Arranging Agents reasonably request, copies of all documentation relating thereto; (f) promptly after the sending or filing thereof, copies of all reports and registration statements which the Borrower or any of its Subsidiaries files with the SEC or any national securities exchange; (g) immediately upon becoming aware of (i) the institution of any steps by the Borrower or any other Person to terminate any Pension Plan (other than a standard termination under Section 4041(b) of ERISA), (ii) the failure to make a required contribution to any Pension Plan if such failure is sufficient to give rise to a Lien under -68- Section 302(f) of ERISA, (iii) the taking of any action with respect to a Pension Plan which would result in the requirement that the Borrower furnish a bond or other security to the PBGC or such Pension Plan, or (iv) the occurrence of any event with respect to any Pension Plan which could reasonably be expected to result in the incurrence by the Borrower of any material liability, fine or penalty, notice thereof and copies of all documentation relating thereto; (h) promptly when available and in any event within 15 Business Days after the last day of each Fiscal Year of the Borrower (commencing after the Effective Date), a budget for the then current Fiscal Year of the Borrower, which budget shall contain on a quarterly basis a projected statement of earnings and sources and uses of funds of the Borrower and its Restricted Subsidiaries, prepared in reasonable detail by the chief accounting, financial or executive Authorized Officer of the Borrower; and (i) such other information respecting the condition or operations, financial or otherwise, of the Borrower or any of its Subsidiaries as any Lender or the Issuer through the Administrative Agent may from time to time reasonably request (including information and reports from the chief accounting, financial or executive Authorized Officer of the Borrower, in such detail as any Arranging Agent or any Lender or Issuer through the Administrative Agent may reasonably request, with respect to the terms of and information provided pursuant to the Compliance Certificate). SECTION VII.1.2. Compliance with Laws, etc. The Borrower will, and will ------------------------- cause each of its Subsidiaries to, comply in all material respects with all applicable Governmental Rules and Governmental Approvals of all Regulatory Authorities, such compliance to include: (a) the maintenance and preservation of the Borrower's and its Subsidiaries' corporate existence; and (b) the payment, before the same become delinquent, of all taxes, assessments and governmental charges imposed upon it or upon its property except to the extent being diligently contested in good faith by appropriate proceedings and for which adequate reserves, if any, in accordance with GAAP shall have been set aside on its books. SECTION VII.1.3. Maintenance of Properties. The Borrower will, and will ------------------------- cause each of its Subsidiaries to, maintain, preserve, protect and keep its properties in good repair, working order and condition (ordinary wear and tear excepted), and make necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times unless the Borrower determines in good faith that the continued maintenance of any of its properties is no longer economically desirable. SECTION VII.1.4. Insurance. The Borrower shall maintain, and shall cause --------- each of its Subsidiaries to maintain: -69- (a) physical damage insurance on all real and personal property on an all-risk basis (including, loss in transit, flood and earthquake insurance) and public liability insurance against claims for personal injury, death or property damage suffered by others upon, in or about any premises occupied by it or occurring as a result of its ownership, maintenance or operation of any airplanes, automobiles, trucks or other vehicles or other facilities (including any machinery used therein or thereupon) or as the result of the use of products manufactured, constructed or sold by it or services rendered by it in an amount as is usually carried by Persons of comparable size engaged in the same or a similar business and similarly situated; (b) such other types of insurance with respect to its business as is usually carried by Persons of comparable size engaged in the same or a similar business and similarly situated, and, in any event, all insurance otherwise required under any Subordinated Debt Document; and (c) all worker's compensation or similar insurance as may be required under the laws of any state or jurisdiction in which it may be engaged in business. All insurance shall be provided (i) by insurers authorized by Lloyds of London to underwrite such risks, (ii) by insurers having an A.M. Best policyholders rating of not less than A- (except with respect to insurers providing insurance of the type described in clause (c), in which case such insurers shall have an ---------- A.M. Best policyholders rating of not less than B+) or (iii) by such other insurers as the Arranging Agents may approve in writing; provided, that if the -------- rating of any of such insurers is downgraded, the Borrower and each of its Subsidiaries, as the case may be, shall only be required to obtain replacement insurance with an insurer satisfying the requirements of this clause at the stated expiration of the insurance policy maintained with the insurer whose rating was so downgraded. SECTION VII.1.5. Books and Records. The Borrower will, and will cause ----------------- each of its Subsidiaries to, keep books and records which accurately reflect all of its business affairs and transactions and permit the Agent and each Lender or any of their respective representatives, at reasonable times and intervals, to visit all of its offices, to discuss its financial matters with its officers and independent public accountant (and the Borrower hereby authorizes such independent public accountant to discuss the Borrower's financial matters with each Lender or its representatives whether or not any representative of the Borrower is present) and to examine (and, at the expense of the Borrower, photocopy extracts from) any of its books or other corporate records. The Borrower shall pay any fees of such independent public accountant incurred in connection with any Agent's or any Lender's exercise of its rights pursuant to this Section. SECTION VII.1.6. Environmental Covenant. The Borrower will, and will ---------------------- cause each of its Subsidiaries to, -70- (a) use and operate all of its facilities and properties in material compliance with all Environmental Laws, keep all necessary permits, approvals, certificates, licenses and other authorizations relating to environmental matters in effect and remain in material compliance therewith, and handle all Hazardous Materials in material compliance with all applicable Environmental Laws; (b) promptly notify the Administrative Agent and provide copies upon receipt of all written claims, complaints, notices or inquiries relating to the condition of its facilities and properties in respect of, or as to compliance with, Environmental Laws, and shall promptly resolve any non- compliance with Environmental Laws and keep its property free of any Lien imposed by any Environmental Law; and (c) provide such information and certifications which the Arranging Agents may reasonably request from time to time to evidence compliance with this Section 7.1.6. ------------- SECTION VII.1.7. Future Subsidiaries. Upon any Person becoming, after the ------------------- Effective Date, a Restricted Subsidiary of the Borrower, or upon the Borrower directly or indirectly acquiring additional Capital Stock of any existing Restricted Subsidiary having voting rights or contingent voting rights, the Borrower shall notify the Administrative Agent of such acquisition, and, unless otherwise agreed to among the Borrower, the Administrative Agent and the Required Lenders, (a) such Person shall execute and deliver to the Administrative Agent (i) a Subsidiary Guaranty and (ii) if such Person is a Collateral Subsidiary, the Subsidiary Security Agreement, in each case in a manner satisfactory to the Administrative Agent; and (b) the Borrower shall pledge or caused to be pledged, pursuant to the Borrower Pledge Agreement or the Subsidiary Pledge Agreement, as applicable, to the Administrative Agent for its benefit and that of the Secured Parties (i) all of the outstanding shares of Capital Stock of such Person, along with undated stock powers for such certificates, executed in blank (or, if any such shares of Capital Stock are uncertificated, confirmation and evidence satisfactory to the Administrative Agent that the security interest in such uncertificated securities has been transferred to and perfected by the Administrative Agent, for the benefit of the Secured Parties, in accordance with Section 8-313 and Section 8-321 of the U.C.C. or any other similar or local or foreign law which may be applicable), and (ii) all intercompany notes, if any, evidencing Indebtedness in favor of the Borrower or a Restricted Subsidiary, as applicable, made by such Person (which shall, unless the Administrative Agent shall otherwise agree, be in form satisfactory to the Administrative Agent); -71- together, in each case, with such opinions of legal counsel for the Borrower (which shall be from counsel reasonably satisfactory to the Administrative Agent) relating thereto, which legal opinions shall be in form and substance reasonably satisfactory to the Administrative Agent. SECTION VII.1.8. Additional Collateral. (a) The Borrower shall, and --------------------- shall cause each of its Collateral Subsidiaries to, cause the Administrative Agent, on behalf of the Secured Parties, to have at all times a first priority perfected security interest (subject only to Liens and encumbrances permitted under Section 7.2.3) in all of the property (real and personal) owned from time ------------- to time by the Borrower or such Collateral Subsidiary to the extent the same constitutes or would constitute "Collateral" under the Borrower Security Agreement, the Subsidiary Security Agreement, the Borrower Pledge Agreement or the Subsidiary Pledge Agreement. Without limiting the generality of the foregoing, the Borrower shall, and shall cause each of its Collateral Subsidiaries to, execute, deliver and/or file (as applicable) or cause to be executed, delivered and/or filed (as applicable), the pledge agreement(s), the security agreement(s), Uniform Commercial Code (Form UCC-1) financing statements, Uniform Commercial Code (Form UCC-3) termination statements, and other documentation necessary to grant and perfect such security interest, in each case in form and substance satisfactory to the Administrative Agent together, in each case, with such opinions of legal counsel for the Borrower (which shall be from counsel reasonably satisfactory to the Administrative Agent) relating thereto, which legal opinions shall be in form and substance reasonably satisfactory to the Administrative Agent. (b) The Borrower shall (i) cause each Restricted Subsidiary which has assets (exclusive of assets owned by such Restricted Subsidiary on the Effective Date) and/or in which the Borrower or any Subsidiary has made Investments aggregating for all such assets and Investments (without duplication) $5,000,000 or more (valued at the greater of book and fair market value) to promptly (x) execute the Subsidiary Security Agreement and (y) comply with the requirements of clause (a) above, and (ii) cause Restricted Subsidiaries to promptly (x) ---------- execute the Subsidiary Security Agreement and (y) comply with the requirements of clause (a) above so that the aggregate amount of all assets (exclusive of ---------- assets owned by such Restricted Subsidiary on the Effective Date) owned by Restricted Subsidiaries and/or in which the Borrower or any Subsidiary has made Investments aggregating for all such assets and Investments (without duplication) not subject to the Subsidiary Security Agreement does not exceed $10,000,000 (valued at the greater of book and fair market value) in the aggregate at any time (each Restricted Subsidiary described in the foregoing clauses (i) and (ii) being a "Collateral Subsidiary"). - ----------- ---- --------------------- SECTION VII.1.9. Rate Protection Agreements. If at any time the one month -------------------------- LIBO Rate shall be greater than or equal to 6.50% for a period of five consecutive Business Days as determined by the Administrative Agent, the Borrower shall, within 30 days of the end of such period, enter into interest rate protection agreements in form and substance satisfactory to the Arranging Agents for a minimum period of three years and in a notional principal amount equal to at least the excess of (i) an amount equal to 50% of the aggregate outstanding Total Debt over (ii) the aggregate principal amount of Indebtedness which bears interest at a fixed rate for a -72- period of at least three years from the end of such period, and such rate protection agreements to be in all respects satisfactory to the Arranging Agents. SECTION VII.1.10. Future Leased Property. The Borrower shall, and shall ---------------------- cause each of its Restricted Subsidiaries to, use its (and their) best efforts to deliver to the Administrative Agent an estoppel letter in a form satisfactory to the Administrative Agent executed by the lessor of any real property in the U.S. that is leased by the Borrower or such Restricted Subsidiary for a term in excess of one year, to the extent the value of any personal property to be held at such leased property exceeds (or it is anticipated that the value of such personal property will, during the term of such leasehold term, exceed) $7,500,000. SECTION VII.1.11. Use of Proceeds. The Borrower shall apply the proceeds --------------- of the Credit Extensions solely (a) to finance the acquisition of the direct broadcast satellite business of the Partners in an amount not to exceed $250,000,000; (b) for Capital Expenditures of the Borrower and the Restricted Subsidiaries; and (c) for working capital and general corporate purposes of the Borrower and the Restricted Subsidiaries. SECTION VII.2. Negative Covenants. The Borrower agrees with the Agents, ------------------ the Issuer and each Lender that, until all Commitments have terminated and all Obligations have been paid and performed in full, the Borrower will, and will cause its Subsidiaries to, perform the obligations set forth in this Section ------- 7.2. SECTION VII.2.1. Business Activities. The Borrower will not, and will not ------------------- permit any of its Restricted Subsidiaries to, engage in any business activity, except those described in the first recital and such activities as are ----- ------- reasonably incidental or substantially similar thereto. SECTION VII.2.2. Indebtedness. The Borrower will not, and will not permit ------------ any of its Restricted Subsidiaries to, create, incur, assume or suffer to exist or otherwise become or be liable in respect of any Indebtedness, other than, without duplication, the following: (a) Indebtedness in respect of the Credit Extensions and other Obligations (including Hedging Obligations in respect of such Credit Extensions); (b) Indebtedness identified in Item 7.2.2(b) ("Ongoing Indebtedness") ------------- of the Disclosure Schedule; (c) Indebtedness of the Borrower in respect of (i) Capitalized Lease Liabilities, (ii) Indebtedness the proceeds of which are used to acquire an asset by the Borrower (or -73- used to acquire such an asset within 60 days of the incurrence thereof) and (iii) unsecured Indebtedness; provided, that the aggregate amount of all -------- Indebtedness outstanding pursuant to this clause (c) at the time any of the ---------- same is created, assumed or incurred (together with the principal amount of all other Indebtedness permitted under this clause (c)) shall not at any ---- time exceed $100,000,000 at such time after giving effect thereto and any Permitted Refinancings thereof; (d) Indebtedness of any Restricted Subsidiary owing to the Borrower or any other Restricted Subsidiary or of the Borrower to any Restricted Subsidiary, which Indebtedness (i) shall, in the case of Indebtedness owing to the Borrower, if evidenced by one or more promissory notes, be duly delivered in pledge pursuant to the Borrower Pledge Agreement to the Administrative Agent; and (ii) shall not be forgiven or otherwise discharged for any consideration other than payment in full or in part (provided that -------- only the amount repaid in part shall be discharged) in cash; (e) Subordinated Debt of the Borrower and any Permitted Refinancing thereof; provided, that any Permitted Refinancing of the Senior -------- Subordinated Credit Agreement must be on terms substantially similar to those contained in the Senior Subordinated Notes and the Senior Subordinated Notes Indenture; and (f) Indebtedness of any Subsidiary in respect of the Senior Subordinated Credit Agreement; provided, however, that no Indebtedness otherwise permitted by clause (d) or (e) - -------- ------- ---------- --- shall be permitted to be incurred if a Default has occurred and is continuing or would result therefrom; provided, further, however, that no Indebtedness -------- ------- ------- permitted under clauses (b) through (e) of this Section 7.2.2 shall be (i) ----------- --- ------------- permitted if such Indebtedness is incurred in reliance upon a general exception for permitted Indebtedness under any Subordinated Debt Document unless all other available exceptions for Indebtedness of such type under such an agreement have been fully utilized by the Borrower or its Subsidiary, as applicable or (ii) designated as "Designated Senior Indebtedness" (as defined in any Subordinated Debt Document) without the prior written consent of the Required Lenders. Notwithstanding the foregoing, the Borrower may (i) exchange the Series A Senior Subordinated Notes and the Series A Senior Subordinated Discount Notes for the Series B Senior Subordinated Notes and the Series B Senior Subordinated Discount Notes, and (ii) issue the Exchange Notes, the Term Notes and any PIK Notes, each as defined in and pursuant to the terms of the Senior Subordinated Credit Agreement. -74- SECTION VII.2.3. Liens. The Borrower will not, and will not permit any of ----- its Restricted Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of its property, revenues or assets, whether now owned or hereafter acquired, except: (a) Liens securing payment of the Obligations, granted pursuant to any Loan Document; (b) until the Closing Date, Liens securing payment of Indebtedness of the type permitted and described in clause (b) of Section 7.2.2; ---------- ------------- (c) Liens securing Capitalized Lease Liability Indebtedness and purchase money Indebtedness of the type permitted and described in clause ------ (c) of Section 7.2.2 (and securing only the assets that are financed with --- ------------- the proceeds of such Indebtedness); (d) Liens existing as of the Effective Date and disclosed in Item ---- 7.2.3(d) ("Ongoing Liens") of the Disclosure Schedule; -------- (e) Liens for taxes, assessments or other governmental charges or levies not at the time delinquent or thereafter payable without penalty or being diligently contested in good faith by appropriate proceedings and for which adequate reserves, if any, in accordance with GAAP shall have been set aside on its books; (f) Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in the ordinary course of business for sums not overdue or being diligently contested in good faith by appropriate proceedings and for which adequate reserves, if any, in accordance with GAAP shall have been set aside on its books; (g) Liens incurred or deposits made in the ordinary course of business in connection with workmen's compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of tenders, statutory and regulatory obligations, bids, leases and contracts or other similar obligations (other than for borrowed money) entered into in the ordinary course of business or to secure obligations on surety or appeal bonds or performance or return-of-money bonds; (h) judgment Liens in existence less than 45 days after the entry thereof or with respect to which execution has been stayed or the payment of which is covered in full (subject to a customary deductible) by insurance maintained with responsible insurance companies or which do not otherwise result in an Event of Default under Section 8.1.6; and ------------- (i) easements, rights-of-way, municipal and zoning ordinances or similar restrictions, minor defects or irregularities in title and other similar charges or encumbrances not interfering in any material respect with the ordinary conduct of the -75- business of the Borrower or its Subsidiaries or the value or utility of the property to which such Lien is attached. SECTION VII.2.4. Financial Condition and Operations. The Borrower will ---------------------------------- not permit to occur any of the events set forth below. (a) Senior Debt to Annualized Cash Flow Ratio. The Borrower will not ----------------------------------------- permit the Senior Debt to Annualized Cash Flow Ratio at any time during any period set forth below to be greater than the ratio set forth opposite such period:
Senior Debt to Annualized Cash Period Flow Ratio ------ ---------- Effective Date to (and 4.50:1 including) 06/30/98 07/01/98 to (and 4.50:1 including) 09/30/98 10/01/98 to (and 4.25:1 including) 12/31/98 01/01/99 to (and 4.00:1 including) 06/30/99 07/01/99 and thereafter 4.00:1
(b) Total Debt to Annualized Cash Flow Ratio. The Borrower will not ---------------------------------------- permit the Total Debt to Annualized Cash Flow Ratio at any time during any period set forth below to be greater than the ratio set forth opposite such period:
Total Debt to Annualized Cash Period Flow Ratio ------ ---------- Effective Date to (and 7.25:1 including) 06/30/98 07/01/98 to (and 6.75:1 including) 09/30/98 10/01/98 to (and 6.25:1 including) 12/31/98 01/01/99 to (and 5.75:1 including) 06/30/99 07/01/99 and thereafter 5.50:1
-76- (c) Annualized Cash Flow to Total Interest Expense Ratio. The ---------------------------------------------------- Borrower will not permit the Annualized Cash Flow to Total Interest Expense Ratio at any time during any period set forth below to be less than the ratio set forth opposite such period:
Annualized Cash Flow to Total Interest Period Expense Ratio ------ ------------- Effective Date to (and 1.75:1 including) 12/31/98 01/01/99 and thereafter 2.00:1
(d) Annualized Cash Flow to Pro Forma Debt Service Ratio. The ---------------------------------------------------- Borrower will not permit the Annualized Cash Flow to Pro Forma Debt Service Ratio at any time after the Effective Date to be less than 1.10:1. SECTION VII.2.5. Investments. The Borrower will not, and will not permit ----------- any of its Restricted Subsidiaries to, make, incur, assume or suffer to exist any Investment in any other Person, except: (a) Investments existing on the Effective Date and Investments to be existing immediately after giving effect to the Restructuring Transaction, each identified in Item 7.2.5(a) ("Ongoing Investments") of the Disclosure ------------- Schedule; (b) Cash Equivalent Investments; (c) without duplication, Investments by the Borrower to the extent permitted as Indebtedness pursuant to Section 7.2.2; ------------- (d) Investments constituting (i) accounts receivable arising, (ii) trade debt granted, or (iii) deposits made in connection with the purchase price of goods or services, in each case in the ordinary course of business; (e) other Investments by the Borrower not to exceed $150,000,000 in the aggregate; and (f) Investments in Persons which are Restricted Subsidiaries so long as, before and after giving effect to such Investment, no Default has occurred and is continuing or is caused thereby; provided, however, that - -------- ------- (g) any Investment which when made complies with the requirements of clause (a), (b) or (c) of the definition of the term "Cash Equivalent ---------- --- --- Investment" may -77- continue to be held notwithstanding that such Investment if made thereafter would not comply with such requirements; and (h) no Investment otherwise permitted by clause (c), (d), (e) or (f) ---------- --- --- --- shall be permitted to be made if any Default has occurred and is continuing or would result therefrom. SECTION VII.2.6. Restricted Payments, etc. The Borrower shall not and ------------------------ shall not permit any Subsidiary to make any Restricted Junior Payment, except: (a) dividends or distributions to the Borrower in respect of its Equity Interests in any of its Subsidiaries; (b) so long as no (x) Event of Default or (y) Default of which Senior Management was aware or should have been aware has occurred and is continuing (or would result therefrom), (i) payments by the Borrower of interest accrued on the Subordinated Debt when due and (ii) any Restricted Junior Payment of the type set forth in clause (c) of the definition ---------- thereof to the extent that such Restricted Junior Payment is made with proceeds from the issuance of, or capital contribution in respect of, common stock of the Borrower and is otherwise on terms satisfactory to the Arranging Agents; and (c) Unrestricted Subsidiaries may refinance in whole or in part from time to time any of its Indebtedness so long as any such refinancing is not recourse in any manner to the Borrower or any other Subsidiary and does not require the imposition (contingently or otherwise) of any Lien on the assets of the Borrower or any Restricted Subsidiary. SECTION VII.2.7. Capital Expenditures, etc. In any Fiscal Year ------------------------- immediately following a Fiscal Year in which the Total Debt to Annualized Cash Flow Ratio is greater than 5.50:1, the Borrower will not, and will not permit any of its Restricted Subsidiaries to, make or commit to make Capital Expenditures in such Fiscal Year, except Capital Expenditures which do not aggregate in excess of $650,000,000 in such Fiscal Year; provided, however, that -------- ------- (i) to the extent Capital Expenditures are made in any Fiscal Year in an amount less than the maximum amount permitted for such Fiscal Year, the Capital Expenditures which the Borrower or its Restricted Subsidiaries may make or commit to make in the next following Fiscal Year shall be increased by 50% of the amount of the permitted Capital Expenditures not so made in the immediately preceding Fiscal Year (the "Carry-Forward Amount"), but no further carry forward -------------------- of such Carry-Forward Amount to any other succeeding Fiscal Year shall be permitted, and (ii) no portion of any Carry-Forward Amount shall be used in any Fiscal Year until the entire amount of the Capital Expenditures permitted to be made or committed to be made in such Fiscal Year shall have been used. SECTION VII.2.8. Subsidiaries. The Borrower will not have any ------------ Subsidiaries other than Restricted Subsidiaries and Unrestricted Subsidiaries. The Borrower will not permit any -78- Subsidiary to issue any Capital Stock (whether for value or otherwise) to any Person other than the Borrower. SECTION VII.2.9. Take or Pay Contracts. The Borrower will not, and will --------------------- not permit any of its Restricted Subsidiaries to, enter into or be a party to any arrangement for the purchase of materials, supplies, other property or services if such arrangement by its express terms requires that payment be made by the Borrower or such Restricted Subsidiary regardless of whether such materials, supplies, other property or services are in fact or can be required to be delivered or furnished to it. SECTION VII.2.10. Consolidation, Merger, etc. The Borrower will not, and -------------------------- will not permit any of its Subsidiaries to, liquidate or dissolve, consolidate with, or merge into or with, any other corporation, or purchase or otherwise acquire all or substantially all of the assets of any Person (or of any division thereof) except that (i) TSAT may merge with and into the Borrower pursuant to the TSAT Merger and on terms and conditions satisfactory to a Lenders holding a majority of the outstanding Loans and Commitments, (ii) the transactions contemplated by the Restructuring Transaction may be made in accordance with the terms of the Restructuring Agreement and (iii) any Restricted Subsidiary may liquidate or dissolve voluntarily into, and may merge with and into, the Borrower or (subject to clauses (a) and (b)), any other Collateral Subsidiary; ----------- --- provided, however, that, subject to Section 7.1.8, - -------- ------- ------------- (a) in no event shall any Pledged Subsidiary merge with and into (i) any Subsidiary other than another Pledged Subsidiary unless (A) the Required Lenders shall have given their prior written consent thereto, or (B) after giving effect thereto, the Administrative Agent shall have a perfected pledge of, and security interest in and to, all of the issued and outstanding shares of Capital Stock of the surviving Person in form and substance satisfactory to the Administrative Agent and its counsel, pursuant to such documentation and opinions as shall be necessary and appropriate in the opinion of the Administrative Agent and its counsel to create, perfect or maintain the collateral position of the Administrative Agent and the Lenders therein as contemplated by this Agreement; or (ii) any other Pledged Subsidiary if, after giving effect to such merger, the Administrative Agent has less than that percentage of the issued and outstanding shares of the surviving Person pledged to it than it had pledged to it immediately prior to such merger; and (b) in the case of the merger of any Subsidiary into the Borrower, the Borrower shall be the surviving corporation and continue to be incorporated under the laws of a State of the United States. -79- SECTION VII.2.11. Permitted Dispositions. The Borrower will not, and will ---------------------- not permit any of its Subsidiaries to, sell, transfer, lease, contribute or otherwise convey (including by way of merger), or grant options, warrants or other rights with respect to, any of the Borrower's or such Subsidiaries' assets (including accounts receivable or Capital Stock of Subsidiaries) to any Person unless such sale, transfer, lease, contribution or conveyance of such assets is (i) in the ordinary course of its business (and does not constitute a sale, transfer, lease, contribution or other conveyance of all or a substantial part of the Borrower's or such Subsidiary's assets) or is of obsolete or worn out property, (ii) permitted by Section 7.2.10, (iii) subject to Section 7.1.8, -------------- ------------- between Restricted Subsidiaries or from a Subsidiary to the Borrower or (iv) of other assets of the Borrower having a value (determined based on the higher of book and fair market value) not to exceed $30,000,000 for the term of this Agreement. SECTION VII.2.12. Modification of Certain Agreements. The Borrower will ---------------------------------- not, and will not permit any of its Subsidiaries to, consent to any amendment, supplement, amendment and restatement, waiver or other modification of any of, or enter into any forbearance from exercising any rights with respect to, the terms or provisions contained in, or applicable to, (i) any Transaction Document, if the effect of such amendment, supplement, amendment and restatement, waiver or modification or forbearance might individually or in the aggregate have a Material Adverse Effect, or (ii) any Subordinated Debt Document. SECTION VII.2.13. Transactions with Affiliates. The Borrower will not, ---------------------------- and will not permit any of its Restricted Subsidiaries to, enter into, or cause, suffer or permit to exist any arrangement or contract with any of its other Affiliates or any Unrestricted Subsidiary, other than in connection with the Roll-up Plan, unless such arrangement or contract is on fair and reasonable terms and is an arrangement or contract of the kind which would be entered into by a prudent Person in the position of the Borrower or such Subsidiary with a Person which is not one of its Affiliates. SECTION VII.2.14. Negative Pledges, Restrictive Agreements, etc. The --------------------------------------------- Borrower will not, and will not permit any of its Restricted Subsidiaries to, enter into any agreement (excluding this Agreement and any other Loan Document or any document pursuant to which any Indebtedness permitted by clause (c) of ---------- Section 7.2.2 is permitted but solely with respect to any asset acquired solely - ------------- with the proceeds of such Indebtedness and no other asset of the Borrower or any Subsidiary) prohibiting (a) the creation or assumption of any Lien upon its properties, revenues or assets, whether now owned or hereafter acquired, to the extent that any such negative pledge would prohibit the creation or first priority perfection of any Liens of the type described in clause (a) of Section ---------- ------- 7.2.3 (other than in the case of Capitalized Leases to the extent of Liens ----- solely in the assets subject to such Capitalized Lease); (b) the ability of the Borrower or any other Obligor to amend or otherwise modify this Agreement or any other Loan Document; or -80- (c) the ability of any Restricted Subsidiary to make any payments, directly or indirectly, to the Borrower by way of dividends, advances, repayments of loans or advances, reimbursements of management and other intercompany charges, expenses and accruals or other returns on investments, or any other agreement or arrangement which restricts the ability of any such Subsidiary to make any payment, directly or indirectly, to the Borrower. SECTION VII.2.15. Sale and Leaseback. The Borrower will not, and will not ------------------ permit any of its Restricted Subsidiaries to, enter into any agreement or arrangement with any other Person providing for the leasing by the Borrower or any of its Restricted Subsidiaries of real or personal property which has been or is to be sold or transferred by the Borrower or any of its Restricted Subsidiaries to such other Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Borrower or any of its Restricted Subsidiaries. SECTION VII.2.16. Restrictions on Leases and ASkyB Transaction. The -------------------------------------------- Borrower will not, and will not permit any of its Restricted Subsidiaries to, (a) enter into any agreement or arrangement with Tempo or any other Person providing for the leasing by the Borrower or any of its Restricted Subsidiaries of high power satellite transmission capacity unless (i) such agreement or arrangement is on fair and reasonable terms and is an agreement or arrangement of the kind which would be entered into by a prudent Person in the position of the Borrower or such Restricted Subsidiary with such Person, and (ii) the Arranging Agents consent in writing (such consent not to be unreasonably withheld or delayed), or (b) consummate the ASkyB Transaction without the consent of all Lenders. SECTION VII.2.17. Restrictions on TSAT Partners Holdings and Its ---------------------------------------------- Subsidiaries. The Borrower shall not permit TSAT Partners Holdings. nor any of - ------------ TSAT Partners Holdings' Subsidiaries to (i) engage in any business activity other than, in the case of TSAT Partners Holdings, in connection with the continuing ownership of the issued and outstanding shares of Capital Stock of TCISE Partner 1 and TCISE Partner 2, and in the case of TSAT Partners Holdings' Subsidiaries, in connection with the continuing ownership of partnership interests in the Primestar Partnership; (ii) create, incur, assume, suffer to exist or otherwise become liable in respect of any Indebtedness other than in respect of the Obligations; (iii) create, incur, assume or enter into any agreement which by its terms creates, incurs or assumes any Lien upon any of its assets, whether now owned or hereafter acquired; (iv) make, incur, assume or suffer to exist any Investment in any other Person other than, in the case of TSAT Partners Holdings, in connection with the continuing ownership of the issued and outstanding shares of Capital Stock of TCISE Partner 1 and TCISE Partner 2, and in the case of TSAT Partners Holdings' Subsidiaries, in connection with the continuing ownership of partnership interests in the Primestar Partnership; (v) make or commit to make any Capital Expenditure or enter into any arrangement which would give rise to any Capitalized Lease Liability; (vi) enter into any arrangement which involves the leasing by such Person from any lessor of any real or personal property (or any interest therein) other than the lease of office space incidental to its ordinary course of business; (vii) wind-up, -81- liquidate or dissolve, consolidate or amalgamate with, or merge into or with any other corporation or purchase or otherwise acquire all or any part of the assets of any Person (or division thereof); or (viii) sell, transfer, lease or otherwise dispose of, or grant to any Person options, warrants or other rights with respect to any of its assets, unless otherwise permitted by this Agreement and except as set forth in the Primestar Partnership Agreement. ARTICLE VIII EVENTS OF DEFAULT SECTION VIII.1. Listing of Events of Default. Each of the following ---------------------------- events or occurrences described in this Section 8.1 shall constitute an "Event ----------- ----- of Default". - ---------- SECTION VIII.1.1. Non-Payment of Obligations. The Borrower shall default -------------------------- in the payment or prepayment when due of (a) any Reimbursement Obligation or any deposit of cash for collateral purposes pursuant to Section 2.6.2 or Section 2.6.4, as the case ------------- ------------- may be; (b) any principal of any Loan other than in respect of a voluntary prepayment thereof; or (c) any interest on any Loan or any fee described in Article III or ----------- of any other Obligation and such default shall continue unremedied for a period of five days. SECTION VIII.1.2. Breach of Warranty. Any representation or warranty of ------------------ the Borrower or any other Obligor made or deemed to be made hereunder or in any other Loan Document executed by it or any other writing or certificate furnished by or on behalf of the Borrower or any other Obligor to any Agent, the Issuer or any Lender for the purposes of or in connection with this Agreement or any such other Loan Document (including any certificates delivered pursuant to Article ------- V), is or shall be incorrect when made or deemed to have been made in any material respect. SECTION VIII.1.3. Non-Performance of Certain Covenants and Obligations. ---------------------------------------------------- The Borrower shall default in the due performance and observance of any of its obligations under Section 7.1.11 or Section 7.2. -------------- ----------- SECTION VIII.1.4. Non-Performance of Other Covenants and Obligations. The -------------------------------------------------- Borrower or any other Obligor shall default in the due performance and observance of any other agreement contained herein or in any other Loan Document executed by it, and such default shall continue unremedied for a period of 30 days after notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender. -82- SECTION VIII.1.5. Default on Other Indebtedness. A default shall occur in ----------------------------- the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any Indebtedness (other than Indebtedness described in Section 8.1.1) or any other item which, in accordance with GAAP, ------------- would be included as a liability on the liability side of the balance sheet of such Person as of the date at which Indebtedness is to be determined (collectively the "Subject Debt") of the Borrower or any of its Subsidiaries or ------------ the Primestar Partnership having a principal amount, individually or in the aggregate, in excess of $15,000,000, or a default shall occur in the performance or observance of any obligation or condition with respect to such Indebtedness (subject to any applicable grace period) if the effect of such default is to accelerate the maturity of any such Subject Debt or such default shall permit the holder or holders of such Subject Debt, or any trustee or agent for such holders, to cause or declare such Subject Debt to become due and payable or to require such Subject Debt to be prepaid, redeemed, purchased or defeased, or to cause an offer to purchase or defease such Subject Debt to be required to be made, prior to its expressed maturity. SECTION VIII.1.6. Judgments. Any judgment or order for the payment of --------- money in excess of $15,000,000 (exclusive of any amounts fully covered by insurance (less any applicable deductible) or indemnification and as to which the insurer or the indemnifying party, as the case may be, has acknowledged its responsibility to cover such judgment or order) shall be rendered against the Borrower or any of its Subsidiaries and such judgment shall not have been vacated or discharged or stayed or bonded pending appeal within 45 days after the entry thereof. SECTION VIII.1.7. Pension Plans. Any of the following events shall occur ------------- with respect to any Pension Plan (a) the institution of any steps by the Borrower, any member of its Controlled Group or any other Person to terminate a Pension Plan if, as a result of such termination, the Borrower or any such member could be required to make a contribution to such Pension Plan, or could reasonably expect to incur a liability or obligation to such Pension Plan, in excess of $1,000,000; or (b) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under section 302(f) of ERISA. SECTION VIII.1.8. Control of the Borrower. Any Change in Control shall ----------------------- occur. SECTION VIII.1.9. Bankruptcy, Insolvency, etc. The Borrower, any of its --------------------------- Subsidiaries or the Primestar Partnership shall (a) become insolvent or generally fail to pay, or admit in writing its inability or unwillingness generally to pay, debts as they become due; -83- (b) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for any substantial part of the property of any thereof, or make a general assignment for the benefit of creditors; (c) in the absence of such application, consent or acquiescence, permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for a substantial part of the property of any thereof, and such trustee, receiver, sequestrator or other custodian shall not be discharged within 60 days, provided that the Borrower, each such Subsidiary hereby expressly authorizes the Administrative Agent and each Lender to appear in any court conducting any relevant proceeding during such 60-day period to preserve, protect and defend their rights under this Agreement and the other Loan Documents; (d) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect thereof, and, if any such case or proceeding is not commenced by the Borrower or any such Subsidiary, such case or proceeding shall be consented to or acquiesced in by the Borrower or such Subsidiary, as the case may be, or shall result in the entry of an order for relief or shall remain for 60 days undismissed, provided that the Borrower and each Subsidiary hereby expressly authorizes the Administrative Agent and each Lender to appear in any court conducting any such case or proceeding during such 60-day period to preserve, protect and defend their rights under the Loan Documents; or (e) take any corporate action authorizing, or in furtherance of, any of the foregoing. SECTION VIII.1.10. Impairment of Security, etc. Any Loan Document, or any --------------------------- Lien granted thereunder, shall (except in accordance with its terms), in whole or in part, terminate, cease to be effective or cease to be the legally valid, binding and enforceable obligation of any Obligor party thereto; the Borrower, any other Obligor or any other party shall, directly or indirectly, contest in any manner such effectiveness, validity, binding nature or enforceability; or, except as permitted under any Loan Document, any Lien securing any Obligation shall, in whole or in part, cease to be a perfected first priority Lien. SECTION VIII.1.11. Material Adverse Change. There has been a material ----------------------- adverse change in the consolidated financial condition, results of operations, assets, business or properties of the Borrower and its Subsidiaries, taken as a whole, or the Borrower and its Restricted Subsidiaries, taken as a whole. SECTION VIII.2. Action if Bankruptcy. If any Event of Default described -------------------- in clauses (a) through (d) of Section 8.1.9 shall occur, the Commitments (if not ----------- --- ------------- theretofore terminated) shall automatically terminate and the outstanding principal amount of all outstanding Loans and all -84- other Obligations (including Reimbursement Obligations) shall automatically be and become immediately due and payable, without notice or demand and the Borrower shall automatically and immediately be obligated to deposit with the Administrative Agent cash collateral in an amount equal to all Letter of Credit Outstandings. SECTION VIII.3. Action if Other Event of Default. If any Event of Default -------------------------------- (other than any Event of Default described in clauses (a) through (d) of Section ----------- --- ------- 8.1.9) shall occur for any reason, whether voluntary or involuntary, and be - ----- continuing, the Administrative Agent, upon the direction of the Required Lenders, shall by notice to the Borrower declare all or any portion of the outstanding principal amount of the Loans and other Obligations (including Reimbursement Obligations) to be due and payable and/or the Commitments (if not theretofore terminated) to be terminated, whereupon the full unpaid amount of such Loans and other Obligations which shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand or presentment, and/or, as the case may be, the Commitments shall terminate and the Borrower shall automatically and immediately be obligated to deposit with the Administrative Agent cash collateral in an amount equal to all Letter of Credit Outstandings. ARTICLE IX THE AGENTS SECTION IX.1. Actions. Each Lender hereby appoints Scotiabank as its ------- Administrative Agent, NationsBank as its Syndication Agent, Credit Lyonnais as its Documentation Agent and each of Scotiabank, NationsBank and Credit Lyonnais as an Arranging Agent, in each case under and for purposes of this Agreement and each other Loan Document. Each Lender authorizes each Agent to act on behalf of such Lender under this Agreement and each other Loan Document and, in the absence of other written instructions from the Required Lenders received from time to time by such Agent (with respect to which each Agent agrees that it will comply, except as otherwise provided in this Section or as otherwise advised by counsel in order to avoid contravention of applicable law), to exercise such powers hereunder and thereunder as are specifically delegated to or required of such Agent by the terms hereof and thereof, together with such powers as may be reasonably incidental thereto. Each Lender hereby indemnifies (which indemnity shall survive any termination of this Agreement) each Agent, pro rata according --- ---- to such Lender's Percentage, from and against any and all liabilities, obligations, losses, damages, claims, costs or expenses of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against, such Agent in any way relating to or arising out of this Agreement and any other Loan Document, including reasonable attorneys' fees, and as to which such Agent is not reimbursed by the Borrower; provided, however, that no Lender -------- ------- shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, claims, costs or expenses which are determined by a court of competent jurisdiction in a final proceeding to have resulted solely from such Agent's gross negligence or wilful misconduct. No Agent shall be required to take any action hereunder or under any other Loan Document, or to prosecute or -85- defend any suit in respect of this Agreement or any other Loan Document, unless it is indemnified hereunder to its satisfaction. If any indemnity in favor of any Agent shall be or become, in such Agent's determination, inadequate, such Agent may call for additional indemnification from the Lenders and cease to do the acts indemnified against hereunder until such additional indemnity is given. SECTION IX.2. Funding Reliance, etc. Unless the Administrative Agent --------------------- shall have been notified by telephone, confirmed in writing, by any Lender by 5:00 p.m., New York time, on the Business Day prior to a Borrowing that such Lender will not make available the amount which would constitute its Percentage of such Borrowing on the date specified therefor, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent and, in reliance upon such assumption, make available to the Borrower a corresponding amount. If and to the extent that such Lender shall not have made such amount available to the Administrative Agent, such Lender and the Borrower severally agree to repay the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date the Administrative Agent made such amount available to the Borrower to the date such amount is repaid to the Administrative Agent, at the interest rate applicable at the time to Loans comprising such Borrowing (in the case of the Borrower) and (in the case of a Lender), at the Federal Funds Rate (for the first two Business Days after which such amount has not been repaid, and thereafter at the interest rate applicable to Loans comprising such Borrowing. SECTION IX.3. Exculpation. None of the Agents nor any of their respective ----------- directors, officers, employees or agents shall be liable to any Lender for any action taken or omitted to be taken by it under this Agreement or any other Loan Document, or in connection herewith or therewith, except for its own wilful misconduct or gross negligence, nor responsible for any recitals or warranties herein or therein, nor for the effectiveness, enforceability, validity or due execution of this Agreement or any other Loan Document, nor for the creation, perfection or priority of any Liens purported to be created by any of the Loan Documents, or the validity, genuineness, enforceability, existence, value or sufficiency of any collateral security, nor to make any inquiry respecting the performance by any Obligor of its obligations hereunder or under any other Loan Document. Any such inquiry which may be made by an Agent shall not obligate it to make any further inquiry or to take any action. Each Agent shall be entitled to rely upon advice of counsel concerning legal matters and upon any notice, consent, certificate, statement or writing which such Agent believes to be genuine and to have been presented by a proper Person. SECTION IX.4. Successor. Any Agent may resign as such at any time upon at --------- least 30 days' prior notice to the Borrower and all Lenders. If an Agent at any time shall resign, the Required Lenders may appoint another Lender as a successor Agent which, with the prior written consent of the Borrower, not to be unreasonably withheld or delayed, shall thereupon become such an Agent hereunder. If no such successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Agent's giving notice of resignation, then the retiring Agent may, on behalf of the Lenders, -86- appoint a successor Agent, which shall be one of the Lenders or a commercial banking institution organized under the laws of the U.S. (or any State thereof) or a U.S. branch or agency of a commercial banking institution, and having (x) a combined capital and surplus of at least $500,000,000 and (y) a credit rating of A or better by Moody's or a comparable rating by S&P; provided, however, that -------- ------- if, after expending all reasonable commercial efforts, such retiring Agent is unable to find a commercial banking institution which is willing to accept such appointment and which meets the qualifications set forth in clause (y) above, ---------- such retiring Agent, shall be permitted to appoint as its successor from all available commercial banking institutions willing to accept such appointment such institution having the highest credit rating of all such available and willing institutions. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall be entitled to receive from the retiring Agent such documents of transfer and assignment as such successor Agent may reasonably request, and shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agent's resignation hereunder as the Agent, the provisions of (a) this Article IX shall inure to its benefit as to any actions ---------- taken or omitted to be taken by it while it was the Agent under this Agreement; and (b) Section 10.3 and Section 10.4 shall continue to inure to its ------------ ------------ benefit. SECTION IX.5. Loans by Agents. Each Agent shall have the same rights and --------------- powers with respect to (x) the Credit Extensions made by it or any of its Affiliates, and (y) the Notes held by it or any of its Affiliates as any other Lender and may exercise the same as if it were not an Agent. Each Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or Affiliate of the Borrower as if such Agent were not an Agent hereunder. SECTION IX.6. Credit Decisions. Each Lender acknowledges that it has, ---------------- independently of the Agents and each other Lender, and based on such Lender's review of the financial information of the Borrower, this Agreement, the other Loan Documents (the terms and provisions of which being satisfactory to such Lender) and such other documents, information and investigations as such Lender has deemed appropriate, made its own credit decision to extend its Commitments. Each Lender also acknowledges that it will, independently of the Agents and each other Lender, and based on such other documents, information and investigations as it shall deem appropriate at any time, continue to make its own credit decisions as to exercising or not exercising from time to time any rights and privileges available to it under this Agreement or any other Loan Document. SECTION IX.7. Copies, etc. The Administrative Agent shall give prompt ----------- notice to each Lender of each notice or request required or permitted to be given to the Administrative Agent by the Borrower pursuant to the terms of this Agreement (unless concurrently delivered to the Lenders by the Borrower). The Administrative Agent will distribute to each Lender each -87- document or instrument received for its account and copies of all other communications received by the Administrative Agent from the Borrower for distribution to the Lenders by the Administrative Agent in accordance with the terms of this Agreement or any other Loan Document. SECTION IX.8. The Agents. Notwithstanding anything else to the contrary ---------- contained in this Agreement or any other Loan Document, none of the Documentation Agent, the Syndication Agent or the Arranging Agents, in such capacity, shall have any rights, duties or responsibilities under this Agreement or any other Loan Document, or any fiduciary relationship with any Secured Party, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against any of such Agent in such capacity. ARTICLE X MISCELLANEOUS PROVISIONS SECTION X.1. Waivers, Amendments, etc. The provisions of this Agreement ------------------------ and of each other Loan Document may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by the Borrower and the Required Lenders; provided, however, that no such -------- ------- amendment, modification or waiver shall: (a) extend any Commitment Termination Date or the date of any mandatory Commitment reduction under clause (a) of Section 2.2.2 or modify ---------- ------------- this Section 10.1 without the consent of all Lenders; ------------ (b) increase the aggregate amount of any Lender's Percentage of any Commitment Amount, increase the aggregate amount of any Loans required to be made by a Lender pursuant to its Commitments or reduce any fees described in Article III payable to any Lender without the consent of such ----------- Lender; (c) extend the Stated Maturity Date for any Lender's Loan or the due date of any interest thereon, or reduce the principal amount of or rate of interest on any Lender's Loan, without the consent of such Lender (it being understood and agreed, however, that any vote to rescind any acceleration made pursuant to Section 8.2 and Section 8.3 of amounts owing with respect ----------- ----------- to the Loans and other Obligations shall only require the vote of the Required Lenders); (d) change the definition of "Required Lenders" or any requirement hereunder that any particular action be taken by all Lenders without the consent of all Lenders; -88- (e) increase the Stated Amount of any Letter of Credit unless consented to by the Issuer; (f) except as permitted by the Borrower Security Agreement, Borrower Pledge Agreement, Subsidiary Security Agreement or Subsidiary Guarantee, release (i) any of the guarantees of any Restricted Subsidiary or (ii) all or substantially all of the collateral or Pledged Shares as such term is defined in the Borrower Pledge Agreement), in either case without the consent of all Lenders as expressly provided herein or therein; or (g) affect adversely the interests, rights or obligations of the Administrative Agent qua the Administrative Agent, the Syndication Agent --- qua the Syndication Agent, the Documentation Agent qua the Documentation --- --- Agent, any Arranging Agent qua Arranging Agent or the Issuer qua Issuer, --- --- unless consented to by such Agent or the Issuer, as the case may be. No failure or delay on the part of any Agent, the Issuer or any Lender in exercising any power or right under this Agreement or any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on the Borrower in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by any Agent, the Issuer or any Lender under this Agreement or any other Loan Document shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder. SECTION X.2. Notices. All notices and other communications provided to ------- any party hereto under this Agreement or any other Loan Document shall be in writing or by facsimile and addressed, delivered or transmitted to such party at its address or facsimile number set forth opposite its name on Schedule II ----------- hereto or set forth in the Lender Assignment Agreement or at such other address or facsimile number as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any notice, if transmitted by facsimile, shall be deemed given when the confirmation of transmission thereof is received by the transmitter. SECTION X.3. Payment of Costs and Expenses. The Borrower agrees to pay on ----------------------------- demand all expenses of the Administrative Agent (including the fees and out-of- pocket expenses of counsel to the Administrative Agent and of local counsel, if any, who may be retained by counsel to the Administrative Agent) in connection with (a) the negotiation, preparation, execution and delivery of this Agreement and of each other Loan Document, including schedules and exhibits, and any amendments, waivers, consents, supplements or other modifications to this Agreement or any other -89- Loan Document as may from time to time hereafter be required, whether or not the transactions contemplated hereby are consummated; and (b) the filing, recording, refiling or rerecording of any Loan Document and/or any Uniform Commercial Code financing statements relating thereto and all amendments, supplements, amendments and restatements and other modifications to any thereof and any and all other documents or instruments of further assurance required to be filed or recorded or refiled or rerecorded by the terms hereof or the terms of any Loan Document; and (c) the preparation and review of the form of any document or instrument relevant to this Agreement or any other Loan Document. The Borrower further agrees to pay, and to save each Agent, the Issuer and the Lenders harmless from all liability for, any stamp or other taxes which may be payable in connection with the execution or delivery of this Agreement, the Credit Extensions hereunder, or the issuance of the Notes, Letters of Credit or any other Loan Documents. The Borrower also agrees to reimburse each Agent, the Issuer and each Lender upon demand for all reasonable out-of-pocket expenses (including reasonable attorneys' fees and legal expenses of counsel to each Agent, the Issuer and the Lenders) incurred by each Agent, the Issuer or such Lenders in connection with (x) the negotiation of any restructuring or "work- out" with the Borrower, whether or not consummated, of any Obligations and (y) the enforcement of any Obligations. SECTION X.4. Indemnification. In consideration of the execution and --------------- delivery of this Agreement by each Lender and the extension of the Commitments, the Borrower hereby indemnifies, exonerates and holds each Agent, the Issuer and each Lender and each of their respective officers, directors, employees and agents (collectively, the "Indemnified Parties") free and harmless from and ------------------- against any and all actions, causes of action, suits, losses, costs, liabilities and damages, and expenses incurred in connection therewith (irrespective of whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought), including reasonable attorneys' fees and disbursements, whether incurred in connection with actions between or among the parties hereto or the parties hereto and third parties (collectively, the "Indemnified Liabilities"), incurred by the Indemnified Parties or any of them - ------------------------ as a result of, or arising out of, or relating to (a) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Credit Extension, including all Indemnified Liabilities arising in connection with the transactions contemplated hereby; (b) the entering into and performance of this Agreement and any other Loan Document by any of the Indemnified Parties (including any action brought by or on behalf of the Borrower as the result of any determination by the Required Lenders pursuant to Article V not to fund any Credit --------- Extension); -90- (c) any investigation, litigation or proceeding related to any acquisition or proposed acquisition by the Borrower or any of its Subsidiaries of all or any portion of the stock or assets of any Person, whether or not any Agent, the Issuer or any Lender is party thereto; (d) any investigation, litigation or proceeding related to any environmental cleanup, audit, compliance or other matter relating to the protection of the environment or the Release by the Borrower or any of its Subsidiaries of any Hazardous Material; (e) the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission, discharging or releases from, any real property owned or operated by the Borrower or any Subsidiary thereof of any Hazardous Material (including any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any Environmental Law), regardless of whether caused by, or within the control of, the Borrower or such Subsidiary; or (f) each Agent's and each Lender's Environmental Liability (the indemnification herein shall survive repayment of the Notes and any transfer of the property of the Borrower or any of its Subsidiaries by foreclosure or by a deed in lieu of foreclosure for any Agent's or Lender's Environmental Liability, regardless of whether caused by, or within the control of, the Borrower or such Subsidiary); except for any such Indemnified Liabilities arising for the account of a particular Indemnified Party by reason of the relevant Indemnified Party's gross negligence or wilful misconduct. The Borrower and its successors and assigns hereby waive, release and agree not to make any claim or bring any cost recovery action against, any Agent, the Issuer or any Lender under CERCLA or any state equivalent, or any similar law now existing or hereafter enacted. It is expressly understood and agreed that to the extent that any of such Persons is strictly liable under any Environmental Laws, the Borrower's obligation to such Person under this indemnity shall likewise be without regard to fault on the part of the Borrower with respect to the violation or condition which results in liability of such Person. If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. SECTION X.5. Survival. The obligations of the Borrower under Sections -------- -------- 4.3, 4.4, 4.5, 4.6, 10.3 and 10.4, and the obligations of the Lenders under --- --- --- ---- ---- Section 9.1, shall in each case survive any assignment from one Lender to - ----------- another (in the case of Sections 10.3 and 10.4) and any termination of this ------------- ---- Agreement, the payment in full of all the Obligations and the termination of all the Commitments. The representations and warranties made by the Borrower and each other Obligor in this Agreement and in each other Loan Document shall survive the execution and delivery of this Agreement and each such other Loan Document. -91- SECTION X.6. Severability. Any provision of this Agreement or any other ------------ Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION X.7. Headings. The various headings of this Agreement and of each -------- other Loan Document are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or such other Loan Document or any provisions hereof or thereof. SECTION X.8. Execution in Counterparts, Effectiveness, etc. This --------------------------------------------- Agreement may be executed by the parties hereto in several counterparts, each of which shall be an original and all of which shall constitute together but one and the same agreement. This Agreement shall become effective when counterparts hereof executed on behalf of the Borrower, each Agent and each Lender (or notice thereof satisfactory to the Arranging Agents) shall have been received by the Arranging Agents and notice thereof shall have been given by the Administrative Agent to the Borrower and each Lender. SECTION X.9. Governing Law; Entire Agreement. THIS AGREEMENT AND EACH ------------------------------- OTHER LOAN DOCUMENT (INCLUDING WITHOUT LIMITATION PROVISIONS WITH RESPECT TO INTEREST, LOAN CHARGES AND COMMITMENT FEES) SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF A SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. This Agreement and the other Loan Documents constitute the entire understanding among the parties hereto with respect to the subject matter hereof and thereof and supersede any prior agreements, written or oral, with respect thereto. SECTION X.10. Successors and Assigns. This Agreement shall be binding ---------------------- upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that: -------- ------- (a) the Borrower may not assign or transfer its rights or obligations hereunder without the prior written consent of the Administrative Agent and all Lenders; and -92- (b) the rights of sale, assignment and transfer of the Lenders are subject to Section 10.11. ------------- SECTION X.11. Sale and Transfer of Loans and Notes; Participations in ------------------------------------------------------- Loans and Notes. Each Lender may assign, or sell participations in, its Loans, - --------------- Letters of Credit and Commitments to one or more other Persons in accordance with this Section 10.11. ------------- SECTION X.11.1. Assignments. Upon prior notice to the Borrower and the ----------- Arranging Agents, any Lender, (a) with the consent of the Borrower and the Administrative Agent (which consents shall not be unreasonably delayed or withheld and, with respect to the consent of the Borrower, shall not be required if an Event of Default has occurred and is continuing) may at any time assign and delegate to one or more commercial banks or other financial institutions, and (b) with notice to the Borrower and the Administrative Agent, but without the consent of the Borrower or the Administrative Agent, may assign and delegate to any of its Affiliates or to any other Lender (each Person described in either of the foregoing clauses as being the Person to whom such assignment and delegation is to be made, being hereinafter referred to as an "Assignee Lender"), all or any fraction of such Lender's total Loans, --------------- Letter of Credit Outstandings and Commitments in a minimum aggregate amount of $5,000,000 (or, if less, the entire remaining amount of such Lender's Loans, Letter of Credit Outstandings and Commitment); provided, however, that the -------- ------- assigning Lender must assign a pro-rata portion of each of its Revolving Loan Commitment, outstanding Revolving Loans and interest in Letter of Credit Outstandings. The Borrower and each other Obligor and the Administrative Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned and delegated to an Assignee Lender until (c) written notice of such assignment and delegation, together with (i) payment instructions, (ii) the Internal Revenue Service Forms or other statements contemplated or required to be delivered pursuant to Section ------- 4.6, if applicable, and (iii) addresses and related information with respect to such Assignee Lender, shall have been delivered to the Borrower and the Administrative Agent by such Lender and such Assignee Lender; (d) such Assignee Lender shall have executed and delivered to the Borrower and the Administrative Agent a Lender Assignment Agreement, accepted by the Administrative Agent; (e) the processing fees described below shall have been paid; and -93- (f) the Administrative Agent shall have registered such assignment and delegation in the Register pursuant to clause (b) of Section 2.7. ---------- ----------- From and after the date that the Administrative Agent accepts such Lender Assignment Agreement and such assignment and delegation is registered in the Register pursuant to clause (b) of Section 2.7, (x) the Assignee Lender ---------- ----------- thereunder shall be deemed automatically to have become a party hereto and to the extent that rights and obligations hereunder have been assigned and delegated to such Assignee Lender in connection with such Lender Assignment Agreement, shall have the rights and obligations of a Lender hereunder and under the other Loan Documents, and (y) the assignor Lender, to the extent that rights and obligations hereunder have been assigned and delegated by it in connection with such Lender Assignment Agreement, shall be released from its obligations hereunder and under the other Loan Documents. Within five Business Days after its receipt of notice that the Administrative Agent has received and accepted an executed Lender Assignment Agreement (and if requested by the Assignee Lender), but subject to clause (c), the Borrower shall execute and deliver to the ---------- Administrative Agent (for delivery to the relevant Assignee Lender) a new Note (if requested by such Assignee Lender pursuant to Section 2.7(b)(ii)) evidencing ------------------ such Assignee Lender's assigned Loans and Commitments and, if the assignor Lender has retained Loans and Commitments hereunder (and if requested by such Lender), a replacement Note in the principal amount of the Loans and Commitments retained by the assignor Lender hereunder (such Note to be in exchange for, but not in payment of, any Note then held by such assignor Lender). Each such Note shall be dated the date of the predecessor Note. The assignor Lender shall mark each predecessor Note "exchanged" and deliver each of them to the Borrower. Accrued interest and fees shall be paid as provided in the Lender Assignment Agreement, and shall be paid at the same time or times provided in any predecessor Note and in this Agreement. Such assignor Lender or such Assignee Lender must also pay a processing fee in the amount of $3,500 to the Administrative Agent upon delivery of any Lender Assignment Agreement. Any attempted assignment and delegation not made in accordance with this Section ------- 10.11.1 shall be null and void. Notwithstanding anything to the contrary set - ------- forth above, any Lender may (without requesting the consent of the Borrower or the Administrative Agent) pledge its Loans to a Federal Reserve Bank in support of borrowings made by such Lender from such Federal Reserve Bank. SECTION X.11.2. Participations. Upon prior written notice to the Borrower -------------- and the Administrative Agent, any Lender may at any time sell to one or more commercial banks or other Persons (each of such commercial banks and other Persons being herein called a "Participant") participating interests in any of ----------- the Loans, Commitments, or other interests of such Lender hereunder; provided, -------- however, that - ------- (a) no participation contemplated in this Section 10.11 shall relieve ------------- such Lender from its Commitments or its other obligations hereunder or under any other Loan Document; -94- (b) such Lender shall remain solely responsible for the performance of its Commitments and such other obligations; (c) the Borrower and each other Obligor and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and each of the other Loan Documents; (d) no Participant, unless such Participant is an Affiliate of such Lender or is itself a Lender, shall be entitled to require such Lender to take or refrain from taking any action hereunder or under any other Loan Document, except that such Lender may agree with any Participant that such Lender will not, without such Participant's consent, take any actions of the type described in clause (a), (b), (f) or, to the extent requiring the ---------- --- --- consent of each Lender, clause (c) of Section 10.1; and ---------- ------------ (e) the Borrower shall not be required to pay any amount under this Agreement that is greater than the amount which it would have been required to pay had no participating interest been sold. The Borrower acknowledges and agrees that each Participant, for purposes of Sections 4.3, 4.4, 4.5, 4.6, 4.8, 4.9, 7.1.1, 10.3 and 10.4, shall be considered - ------------ --- --- --- --- --- ----- ---- ---- a Lender. Each Participant shall only be indemnified for increased costs pursuant to Section 4.3, 4.5 or 4.6 if and to the extent that the Lender which ----------- --- --- sold such participating interest to such Participant concurrently is entitled to make, and does make, a claim on the Borrower for such increased costs. Any Lender that sells a participating interest in any Loan, Commitment or other interest to a Participant under this Section 10.11.2 shall indemnify and hold --------------- harmless the Borrower and the Administrative Agent from and against any taxes, penalties, interest or other costs or losses (including, without limitation, reasonable attorneys' fees and expenses) incurred or payable by the Borrower or the Administrative Agent as a result of the failure of the Borrower or the Administrative Agent to comply with its obligations to deduct or withhold any Taxes from any payments made pursuant to this Agreement to such Lender or the Administrative Agent, as the case may be, which Taxes would not have been incurred or payable if such Participant had been a Non-U.S. Lender that was entitled to deliver to the Borrower, the Administrative Agent or such Lender, and did in fact so deliver, a duly completed and valid Form 1001 or 4224 (or applicable successor form) entitling such Participant to receive payments under this Agreement without deduction or withholding of any United States federal taxes. SECTION X.12. Other Transactions. Nothing contained herein shall preclude ------------------ any Agent, the Issuer or any other Lender from engaging in any transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Borrower or any of its Affiliates in which the Borrower or such Affiliate is not restricted hereby from engaging with any other Person. -95- SECTION X.13. Execution on Behalf of Corporation. Any signature by any ---------------------------------- Authorized Officer on this Agreement, any Loan Document and any other instrument and certificate executed or to be executed pursuant to or in connection with this Agreement or such other Loan Documents is provided only in such Authorized Officer's capacity as a corporate officer, and not in any way in such Authorized Officer's personal capacity. SECTION X.14. Forum Selection and Consent to Jurisdiction. ANY LITIGATION ------------------------------------------- BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE ARRANGING AGENTS, THE LENDERS, THE ISSUER OR THE BORROWER IN CONNECTION HEREWITH OR THEREWITH SHALL, TO THE EXTENT PERMITTED BY APPLICABLE LAW, BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT -------- ------- AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE ARRANGING AGENTS' OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE PERSONAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION, SUBJECT TO THE BORROWER'S RIGHT TO CONTEST SUCH JUDGMENT BY MOTION OR APPEAL ON ANY GROUNDS NOT EXPRESSLY WAIVED IN THIS SECTION 10.14. THE BORROWER HEREBY ------------- IRREVOCABLY APPOINTS CT CORPORATION SYSTEM (THE "PROCESS AGENT"), WITH AN OFFICE ------------- ON THE DATE HEREOF AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, UNITED STATES, AS ITS AGENT TO RECEIVE, ON THE BORROWER'S BEHALF AND ON BEHALF OF THE BORROWER'S PROPERTY, SERVICE OF THE COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER PROCESS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. SUCH SERVICE MAY BE MADE BY MAILING OR DELIVERING A COPY OF SUCH PROCESS TO THE BORROWER IN CARE OF THE PROCESS AGENT AT THE PROCESS AGENT'S ABOVE ADDRESS, AND THE BORROWER HEREBY IRREVOCABLY AUTHORIZES AND DIRECTS THE PROCESS AGENT TO ACCEPT SUCH SERVICE ON ITS BEHALF. AS AN ALTERNATIVE METHOD OF SERVICE, THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK AT THE ADDRESS FOR NOTICES SPECIFIED IN SECTION 10.2. THE BORROWER HEREBY ------------ -96- EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. SECTION X.15. Waiver of Jury Trial. THE AGENTS, THE LENDERS, THE ISSUER -------------------- AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENTS, THE LENDERS, THE ISSUER OR THE BORROWER IN CONNECTION HEREWITH OR THEREWITH. THE BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENTS, THE LENDERS AND THE ISSUER ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT. -97- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. PRIMESTAR, INC. By: --------------------------------------- Title: THE BANK OF NOVA SCOTIA, as an Arranging Agent and as the Administrative Agent By: --------------------------------------- Title: CREDIT LYONNAIS NEW YORK BRANCH, as an Arranging Agent and as the Documentation Agent By: --------------------------------------- Title: NATIONSBANK OF TEXAS, N.A., as an Arranging Agent and as the Syndication Agent By: --------------------------------------- Title: Lenders: ------- THE BANK OF NOVA SCOTIA By: -------------------------------------- Title: CREDIT LYONNAIS NEW YORK BRANCH By: -------------------------------------- Title: NATIONSBANK OF TEXAS, N.A. By: -------------------------------------- Title: LONG TERM CREDIT BANK OF JAPAN, LTD. By: -------------------------------------- Title: ABN AMRO BANK N.V. By: -------------------------------------- Title: GENERAL ELECTRIC CAPITAL CORPORATION By: -------------------------------------- Title: BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION By: -------------------------------------- Title: COLORADO NATIONAL BANK By: -------------------------------------- Title: SOCIETE GENERALE, NEW YORK BRANCH By: -------------------------------------- Title: BANK OF MONTREAL By: -------------------------------------- Title: ROYAL BANK OF CANADA By: -------------------------------------- Title: FLEET BANK, N.A. By: -------------------------------------- Title: BARCLAYS BANK PLC By: -------------------------------------- Title: BEAR STEARNS INVESTMENT PRODUCTS, INC. By: -------------------------------------- Title: EX-21 5 SUBSIDIARIES OF THE REGISTRANT Exhibit 21 PRIMESTAR, Inc. a Delaware corporation incorporated on August 27, 1997 Fed ID # 84-1441684 SUBSIDIARY INFORMATION Subsidiary Fed ID # State of Inc. Date of Inc. - ------------------------------------------------------------------ PRIMESTAR MDU, Inc. 84-1352884 Delaware 6/21/96 PRIMESTAR Partner Holdings, Inc. 84-1385150 Delaware 2/19/97 PRIMESTAR Partner 1, 84-1353963 Colorado 7/9/96 Inc. (a subsidiary of PRIMESTAR Partner Holdings, Inc.) PRIMESTAR Partner 2, 84-1353961 Colorado 7/9/96 Inc. (a subsidiary of PRIMESTAR Partner Holdings, Inc.) PRIMESTAR Partners, 23-2601075 Delaware 2/16/90 L.P. EX-27 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PRIMESTAR, INC.'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 0 0 147,042 7,442 0 0 1,562,458 413,868 2,112,087 0 1,833,195 0 0 2,009 (286,783) 2,112,087 0 1,289,666 0 647,745 543,087 0 145,939 (1,491,232) (147,528) (1,343,704) 0 0 0 (1,343,704) (8.02) (8.02)
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