-----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, JUgx+ZaEn7AAqGxmCSdscfBa90xiNrNl+F2RuDJ0xya1Dmhij8FjnQ4d1wayPrXu 39EM8VXIaoWRYHvnLiZSHA== 0000950109-99-001813.txt : 19990518 0000950109-99-001813.hdr.sgml : 19990518 ACCESSION NUMBER: 0000950109-99-001813 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19990513 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990513 DATE AS OF CHANGE: 19990517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PHOENIXSTAR INC CENTRAL INDEX KEY: 0001054666 STANDARD INDUSTRIAL CLASSIFICATION: 4841 IRS NUMBER: 841441684 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-23883 FILM NUMBER: 99621071 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 FORMER COMPANY: FORMER CONFORMED NAME: PRIMESTAR INC DATE OF NAME CHANGE: 19980205 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------ FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: May 13, 1999 Date of Earliest Event Reported: April 28, 1999 PHOENIXSTAR, INC. (Exact Name of Registrant as Specified in its Charter) Delaware (State or Other Jurisdiction of Incorporation) 000-23883 84-1441684 (Commission File Number) (I.R.S. Employer Identification No.) 8085 South Chester, Suite 300 Englewood, Colorado 80112 (Address of principal executive offices, including zip code) Registrant's telephone number, including area code: (303) 712-4600 PRIMESTAR, INC. (Former name, if changed since last report) Item 2. Disposition of Assets. - - ------- ---------------------- Effective April 28, 1999 (the "Hughes Closing Date") and pursuant to an asset purchase agreement dated January 22, 1999 (the "Hughes Medium Power Agreement"), Phoenixstar, Inc. (formerly PRIMESTAR, Inc.)("Phoenixstar" or the "Company") sold its medium-power direct broadcast satellite business to Hughes Electronics Corporation ("Hughes"), a subsidiary of General Motors Corporation, for aggregate consideration of $1,358.2 million (the "Hughes Medium Power Transaction"). Such consideration was comprised of $1,100 million in cash (before working capital adjustments and closing costs) and 4.871 million shares of General Motors Class H common stock ("GMH Stock") valued at $258.2 million on the Hughes Closing Date. The purchase price is subject to working capital adjustments to be settled within 90 days after the Hughes Closing Date. Item 5. Other Events. - - ------- ------------- Concurrently with the Hughes Medium Power Transaction, Phoenixstar reached an agreement (the "Lock-up Agreement") with holders of approximately 84% of the aggregate principal amount of its 10-7/8% Senior Subordinated Notes due 2007 (the "Senior Subordinated Notes"), 12-1/4% Senior Subordinated Discount Notes due 2007 (the "Senior Subordinated Discount Notes" and, together with the Senior Subordinated Notes, the "Notes"), and notes issued under its Senior Subordinated Credit Facility dated as of April 1, 1998 (the "Bridge Loans"). Holders participating in the privately negotiated transaction agreed to sell their Notes and Bridge Loans to the Company for cash equal to 85.6% of the aggregate principal amount thereof, plus stock appreciation rights ("SARs") on the shares of GMH Stock received by Phoenixstar in the Hughes Medium Power Transaction. Each SAR issued in the transaction entitles the holder to receive a payment from Phoenixstar at the end of one year from the date of issuance in the amount, if any, by which the market price per share of GMH Stock at such time exceeds $47.00 per share. Participating Note holders and bridge lenders will receive approximately 7.8 SARs per $1,000 principal amount of debt sold to Phoenixstar pursuant to the Lock-up Agreement. Participating Note holders and bridge lenders also agreed to (i) consent to the transaction with Hughes and (ii) amend the indentures by supplemental indentures (the "Supplemental Indentures") and credit agreement governing such debt obligations to remove substantially all covenants, other than the covenants to pay interest on and principal of the Notes and Bridge Loans when due and covenants relating to certain required purchase offerings. The SARs are secured by a first priority pledge and security interest in the underlying shares of GMH Stock, and such pledge and security interest have been pledged by Phoenixstar for the benefit of the holders of the SARs. The shares of GMH Stock received by Phoenixstar are subject to certain restrictions on transfer during the first year after the closing of the Hughes Medium Power Transaction, and Phoenixstar will be entitled to certain registration rights with respect to such shares following the expiration of such one-year period. Under the terms of the indentures and credit agreement governing Phoenixstar's subordinated debt, Phoenixstar is required to make an offer to purchase the remainder of the outstanding publicly traded Notes at a purchase price equal to 101% of par. In that connection, the Company has commenced an offer to purchase the remaining Notes, as described below. 1 In connection with the Hughes Medium Power Transaction, affiliates of the stockholders of the Company, other than TCI Satellite Entertainment, Inc. ("TSAT"), and an affiliate of Tele-Communications, Inc. (collectively, the "Stockholder Affiliates") 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 (the "Stockholder Commitment"). Pursuant to such commitment, the Stockholder Affiliates contributed to the Company $307.7 million on the Hughes Closing Date (the "Initial Funding Amount"). On the Hughes Closing Date, the Company used a portion of the cash proceeds from the Hughes Medium Power Transaction and the Initial Funding Amount to (i) repay principal, interest and fees due under the Company's senior bank credit facility ($537.5 million), (ii) fund amounts due pursuant to the Lock-up Agreement ($543.5 million) and (iii) fund amounts due to holders of Bridge Loans who were not party to the Lock-up Agreement pursuant to the terms of the credit agreement governing the Bridge Loans ($10.1 million). Pursuant to the indentures governing the Notes (the "Indentures"), on May 13, 1999, the Company commenced a tender offer to purchase all Notes not purchased pursuant to the Lock-up Agreement (the "Remaining Notes"), on the terms required by the Indentures. The terms and conditions of such tender offer are set forth in the Offer to Purchase, dated May 13, 1999 (the "Offer to Purchase"), sent by the Company to the holders of the Remaining Notes. The Offer to Purchase and related materials are filed as an exhibit hereto. In connection therewith, the Company also sent to the holders of the Remaining Notes notice informing them that a "change of control" had occurred and informing them of the effectiveness of the Supplemental Indentures, as required by the Indentures. In connection with their approval of the Hughes Medium Power Transaction, the stockholders of Phoenixstar also approved the payment to TSAT of consideration in the form of 1.407 million shares of GMH Stock (the "Phoenixstar Payment"), subject to the terms and conditions set forth in an agreement dated as of January 22, 1999 (the "Phoenixstar Payment Agreement"). In consideration of the Phoenixstar Payment, TSAT agreed to approve the Hughes Medium Power Transaction and Hughes High Power Transaction as a stockholder of Phoenixstar, to modify certain agreements to facilitate the Hughes High Power Transaction, and to issue to the Company a share appreciation right with respect to the shares of GMH Stock received as the Phoenixstar 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 Phoenixstar 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 Phoenixstar upon any dissolution and winding-up of Phoenixstar, or otherwise in respect of Phoenixstar's existing equity. On the Hughes Closing Date, the Company distributed to TSAT 1.407 million shares of GMH Stock in satisfaction of the Phoenixstar Payment. 2 Subsequent to the Hughes Closing Date, the Company is responsible for (i) the payment of certain obligations not assumed by Hughes, (ii) 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 not assumed by Hughes, (iii) the payment to all Note holders who participate in the tender offer for the Remaining Notes the purchase price for each Note so tendered, as provided in the Offer to Purchase, and, the repayment of principal and interest due pursuant to the Notes not paid as part of the Lock-up Agreement or Offer to Purchase and (iv) the repayment of amounts due under the Company's Partnership Credit Facility. The Company currently expects to fund such obligations with available cash, additional advances and/or contributions from the Stockholder Affiliates pursuant to the Stockholder Commitment and any proceeds received by the Company in connection with the previously announced sale to Hughes of the high power direct broadcast satellite system being constructed by Tempo Satellite, Inc (a subsidiary of TSAT), and the sale and/or termination of the Company's rights with respect thereto. 3 Item 7. Financial Statements and Exhibits. - - ------- ---------------------------------- (b) Pro forma financial information. PRIMESTAR, Inc. Condensed Pro Forma Combined Financial Statements Year ended December 31, 1998. (c) Exhibits. 4.1 Indenture between TSAT, as issuer,, and The Bank of New York, as trustee (the "Trustee"), dated as of February 20, 1997, governing the 12-1/4% Senior Subordinated Discount Notes (the "Original Discount Indenture"), incorporated by reference from TSAT's Annual Report on Form 10K for the year ended December 31, 1996 (Commission File No. 0- 21317). 4.2 Amendment and Supplement to the Original Discount Indenture, dated as of April 1, 1998, pursuant to which the Registrant assumed TSAT's obligations under the Original Discount Indenture, incorporated herein by reference from TSAT's Registrations Statement on Form S-4/A (Registration Number 333-25001), filed with the Commission on February 13, 1998, as declared effective by the Commission on February 17, 1998. Only the form of such Amendment and Supplemental Indenture was filed. 4.3 Second Supplemental Indenture to the Original Discount Indenture, dated as of April 27, 1999, between the Company and the Trustee, filed herewith. 4.4 Indenture between TSAT and the Trustee, dated as of February 20, 1997, governing the 10-7/8% Senior Subordinated Notes (the "Original Coupon Indenture"), incorporated herein by reference from TSAT's Annual Report on Form 10-K for the year ended December 31, 1996 (Commission File No. 0-21317). 4.5 Amendment and Supplement to the Original Indenture, dated as of April 1, 1998, pursuant to which the Registrant assumed TSAT's obligations under the Original Coupon Indenture, incorporated herein by reference from TSAT's registration Statement on Form S-4/A (Registration Number 333-25001), filed with the Commission on February 13, 1998, as declared effective by the Commission on February 17, 1998. Only the form of such Amendment and Supplemental Indenture was filed. 4.6 Second Supplemental Indenture to the Original Coupon Indenture, dated as of April 27, 1999, between the Company and the Trustee, filed herewith. 10.1 Funding Agreement, filed herewith. 10.2 Lock-up Agreement, filed herewith. 10.3 Indemnity Agreement, dated as of April 28, 1999, filed herewith. 10.4 Registration Rights Agreement, dated as of April 28, 1999, filed herewith. 4 10.5 Share Appreciation Rights Agreement, dated as of April 28, 1999, filed herewith. 10.6 Pledge and Security Agreement, dated as of April 28, 1999, filed herewith. 10.7 PRIMESTAR Payment Agreement, filed herewith. 10.8 Hughes Medium Power Agreement, incorporated by reference to the Company's Current Report on Form 8-K dated February 1, 1999 (Commission File No. 000-23883). 99.1 Press Release, dated April 28, 1999, filed herewith. 99.2 Press Release, dated May 13, 1999, announcing the Offer to Purchase, filed herewith. 99.3 Offer to Purchase (and related materials relating to the required tender offer for the Notes), filed herewith. 99.4 Notice of "change of control" and the effectiveness of the Supplemental Indentures, filed herewith. 5 SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: May 13, 1999 PHOENIXSTAR, INC. (Registrant) By: /s/ Kenneth G. Carroll ----------------------- Name: Kenneth G. Carroll Title: Senior Vice President and Chief Financial Officer 6 PHOENIXSTAR, INC. AND SUBSIDIARIES (formerly PRIMESTAR, Inc.) Condensed Pro Forma Combined Financial Statements December 31, 1998 (unaudited) Effective April 28, 1999 (the "Hughes Closing Date") and pursuant to an asset purchase agreement dated January 22, 1999 (the "Hughes Medium Power Agreement"), the Company sold its medium-power direct broadcast satellite business to Hughes Electronics Corporation ("Hughes"), a subsidiary of General Motors Corporation, for aggregate consideration of $1,358.2 million (the "Hughes Medium Power Transaction"). Such consideration was comprised of $1,100 million in cash (before working capital adjustments and closing costs) and 4.871 million shares of General Motors Class H common stock ("GMH Stock") valued at $258.2 million on the Hughes Closing Date. Concurrently with the Hughes Medium Power Transaction, Phoenixstar reached an agreement (the "Lock-up Agreement") with holders of approximately 84% of the aggregate principal amount of its 10-7/8% Senior Subordinated Notes due 2007 (the "Senior Subordinated Notes"), 12-1/4% Senior Subordinated Discount Notes due 2007 (the "Senior Subordinated Discount Notes" and, together with the Senior Subordinated Noted, the "Notes"), and notes issued under its Senior Subordinated Credit Facility dated as of April 1, 1998 (the "Bridge Loans"). Holders participating in the privately negotiated transaction agreed to, among other things, sell their Notes and Bridge Loans to the Company for cash equal to 85.6% of the aggregate principal amount thereof, plus stock appreciation rights on the shares of GMH Stock received by Phoenixstar in the Hughes Medium Power Transaction. Under the terms of the indentures and credit agreement governing Phoenixstar's subordinated debt, Phoenixstar is required to make an offer to purchase the remainder of the outstanding publicly traded Senior Subordinated Notes and Senior Subordinated Discount Notes at a purchase price equal to 101% of par. In that connection the Company commenced an offer to purchase the remaining Notes. In connection with the Hughes Medium Power Transaction, affiliates of the stockholders of the Company, other than TSAT, and an affiliate of Tele- Communications, Inc. (collectively, the "Stockholder Affiliates") 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 (the "Stockholder Commitment"). On the Hughes Closing Date, the Company used a portion of the cash proceeds from the Hughes Medium Power Transaction and amounts contributed by the Stockholder Affiliates on the Hughes Closing Date (the "Initial Funding Amount") to (i) repay principal, interest and fees due under the Company's senior bank credit facility, (ii) fund amounts due pursuant to the Lock-up Agreement and (iii) fund amounts due to holders of Bridge Loans who were not party to the Lock-up Agreement pursuant to the terms of the credit agreement governing the Bridge Loans. In connection with their approval of the Hughes Medium Power Transaction, the stockholders of Phoenixstar also approved the payment to TSAT of consideration in the form of 1.407 million shares of GMH Stock (the "Phoenixstar Payment"), subject to the terms and conditions set forth in an agreement dated as of January 22, 1999. On the Hughes Closing Date, the Company distributed to TSAT 1.407 million shares of GMH Stock in satisfaction of the Phoenixstar Payment. The following unaudited condensed pro forma combined balance sheet of the Company, dated as of December 31, 1998, assumes that the Hughes Medium Power Transaction had occurred as of such date. The following unaudited condensed pro forma combined statement of operations of the Company for the year ended December 31, 1998 assumes that the Hughes Medium Power Transaction had occurred as of January 1, 1998. The unaudited pro forma results do not purport to be indicative of the results of operations that would have been obtained if the Hughes Medium Power Transaction had occurred as of January 1, 1998. PHOENIXSTAR, INC. AND SUBSIDIARIES (formerly PRIMESTAR, Inc.) Condensed Pro Forma Combined Balance Sheet December 31, 1998 (unaudited)
PRIMESTAR Pro forma PRIMESTAR historical adjustments pro forma ------------ ----------- ----------- amounts in thousands Assets - - ------ Cash and cash equivalents $ -- 976,940 (1) 25,000 229,944 (2) (1,181,884)(3) Accounts receivable and prepaid expenses 143,567 (143,567)(1) -- Investment in GMH stock -- 258,187 (1) 183,600 (74,587)(4) Property and equipment, net 1,148,590 (1,148,590)(1) -- Intangible assets, net 786,373 (316,875)(1) 469,498 Deferred financing costs and other assets, net 33,557 (5,500)(1) -- (28,057)(3) ----------- ----------- ----------- $ 2,112,087 (1,433,989) 678,098 =========== =========== =========== Liabilities and Stockholders' Deficit - - ------------------------------------- Accounts payable and accrued expenses $ 331,424 (293,624)(1) 81,000 43,200 (1) Accrued interest payable 16,142 (10,507)(3) 5,635 Deferred revenue 100,948 (100,948)(1) -- Phoenixstar GMH SAR liability -- 29,229 (3) 29,229 Debt 1,833,195 (1,321)(1) 578,952 (1,252,922)(3) Deferred income taxes 75,057 (75,057)(1) -- Other liabilities 40,095 (15,033)(1) 25,062 ----------- ----------- ----------- Total liabilities 2,396,861 (1,676,983) 719,878 ----------- ----------- ----------- Stockholders' Deficit: Common stock 2,009 -- 2,009 Additional paid-in capital 1,511,041 229,944 (2) 1,740,985 Accumulated deficit (1,797,824) 63,378 (1) (1,776,330) 24,259 (3) (66,143)(4) TSAT GMH SAR receivable -- (8,444)(4) (8,444) ----------- ----------- ----------- Total stockholders' deficit (284,774) 242,994 (41,780) ----------- ----------- ----------- Commitments and contingencies $ 2,112,087 (1,433,989) 678,098 =========== =========== ===========
See accompanying notes to condensed pro forma combined financial statements. PHOENIXSTAR, INC. AND SUBSIDIARIES (formerly PRIMESTAR, Inc.) Condensed Pro Forma Combined Statement of Operations Year ended December 31, 1998 (unaudited)
PRIMESTAR Pro forma PRIMESTAR historical adjustments pro forma ------------ ------------- ----------- amounts in thousands, except per share amounts Revenue $ 1,289,666 (1,289,666)(5) -- ------------ ------------- ----------- Operating costs and expenses: Operating, selling, general and administrative 1,133,834 (1,133,834)(5) -- Impairment of long-lived assets 950,289 (950,289)(5) -- Depreciation and amortization 543,087 (543,087)(5) -- ------------ ------------- ----------- 2,627,210 (2,627,210) -- ------------ ------------- ----------- Operating loss (1,337,544) 1,337,544 -- Other expense: Interest expense (145,939) 119,117 (6) (26,822) Other, net (7,749) 7,749 (5) -- ------------ ------------- ----------- (153,688) 126,866 (26,822) ------------ ------------- ----------- Loss before income taxes (1,491,232) 1,464,410 (26,822) Income tax benefit 147,528 (147,528)(7) -- ------------ ------------- ----------- Net loss $ (1,343,704) 1,316,882 (26,822) ============ ============= =========== Basic and diluted loss per common share $ (8.02) 7.86 (.16) ============ ============ ===========
See accompanying notes to condensed pro forma combined financial statements. PHOENIXSTAR, INC. AND SUBSIDIARIES (formerly PRIMESTAR, Inc.) Notes to Condensed Pro Forma Combined Financial Statements December 31, 1998 (unaudited) (1) Represents the sale of the Company's medium power DBS assets and liabilities, exclusive of assets not acquired and liabilities not assumed by Hughes, for $1,100 million in cash (before working capital adjustments of $116.0 million and closing expenses of $7.1 million) and 4.871 million shares of GMH Stock valued at $53.00 per share (the GMH Stock closing price on the Hughes Closing Date). Also represents the recognition of liabilities in the aggregate amount of $43.2 million related to employee severance and the termination of certain leases and vendor contracts. (2) Represents the Initial Funding Amount contributed by the Stockholder Affiliates. (3) Represents the repayment of principal and accrued interest and fees pursuant to the Company's senior bank credit facility, the Notes and the Bridge Loan and the elimination of related deferred loan costs. Repayment of the Notes and Bridge Loan assumes 84% of the aggregate principal amount was repaid at 85.6% of par, and the remaining 16% of the aggregate principal amount was repaid at 101% of par. Also represents recognition of the amount due to the former lenders pursuant to the Phoenixstar GMH SAR calculated as follows: Fair value of GMH Stock on April 28, 1999 $ 53 Phoenixstar GMH SAR exercise price (47) ------------ Difference 6 Number of shares of GMH Stock subject to Phoenixstar GMH SAR x 4,871,448 ------------ Phoenixstar GMH SAR liability $ 29,228,688 ============ (4) Represents the payment of 1.407 million shares of GMH Stock (valued at $53 per share) to TSAT and the recognition of the amount due from TSAT pursuant to the TSAT GMH SAR calculated as follows: Fair value of GMH Stock on April 28, 1999 $ 53 TSAT GMH SAR exercise price (47) ------------ Difference 6 Number of shares of GMH Stock subject to TSAT GMH SAR x 1,407,307 ------------ TSAT GMH SAR receivable $ 8,443,842 ============ (5) Represents the elimination of the historical results of operations of the Company's medium power DBS business. (6) Represents the elimination of the historical interest expense related to the Company's senior bank credit facility, the Notes and the Bridge Loans. (7) Represents the assumed income tax effect of the pro forma adjustments. Exhibit Index ------------- 4.1 Indenture between TSAT, as issuer,, and The Bank of New York, as trustee (the "Trustee"), dated as of February 20, 1997, governing the 12-1/4% Senior Subordinated Discount Notes (the "Original Discount Indenture"), incorporated by reference from TSAT's Annual Report on Form 10K for the year ended December 31, 1996 (Commission File No. 0-21317). 4.2 Amendment and Supplement to the Original Discount Indenture, dated as of April 1, 1998, pursuant to which the Registrant assumed TSAT's obligations under the Original Discount Indenture, incorporated herein by reference from TSAT's Registrations Statement on Form S-4/A (Registration Number 333- 25001), filed with the Commission on February 13, 1998, as declared effective by the Commission on February 17, 1998. Only the form of such Amendment and Supplemental Indenture was filed. 4.3 Second Supplemental Indenture to the Original Discount Indenture, dated as of April 27, 1999, between the Company and the Trustee, filed herewith. 4.4 Indenture between TSAT and the Trustee, dated as of February 20, 1997, governing the 10-7/8% Senior Subordinated Notes (the "Original Coupon Indenture"), incorporated herein by reference from TSAT's Annual Report on Form 10-K for the year ended December 31, 1996 (Commission File No. 0- 21317). 4.5 Amendment and Supplement to the Original Indenture, dated as of April 1, 1998, pursuant to which the Registrant assumed TSAT's obligations under the Original Coupon Indenture, incorporated herein by reference from TSAT's registration Statement on Form S-4/A (Registration Number 333-25001), filed with the Commission on February 13, 1998, as declared effective by the Commission on February 17, 1998. Only the form of such Amendment and Supplemental Indenture was filed. 4.6 Second Supplemental Indenture to the Original Coupon Indenture, dated as of April 27, 1999, between the Company and the Trustee, filed herewith. 10.1 Funding Agreement, filed herewith. 10.2 Lock-up Agreement, filed herewith. 10.3 Indemnity Agreement, dated as of April 28, 1999, filed herewith. 10.4 Registration Rights Agreement, dated as of April 28, 1999, filed herewith. 10.5 Share Appreciation Rights Agreement, dated as of April 28, 1999, filed herewith. 10.6 Pledge and Security Agreement, dated as of April 28, 1999, filed herewith. 10.7 PRIMESTAR Payment Agreement, filed herewith. 10.8 Hughes Medium Power Agreement, incorporated by reference to the Company's Current Report on Form 8-K dated February 1, 1999 (Commission File No. 000-23883). 99.1 Press Release, dated April 28, 1999, filed herewith. 99.2 Press Release, dated May 13, 1999, announcing the Offer to Purchase, filed herewith. 99.3 Offer to Purchase (and related materials relating to the required tender offer for the Notes), filed herewith. 99.4 Notice of "change of control" and the effectiveness of the Supplemental Indentures, filed herewith. EX-4.3 2 SECOND SUPPLEMENTAL INDENTURE DTD APRIL 27, 1999 EXHIBIT 4.3 ================================================================================ PRIMESTAR, INC. and THE BANK OF NEW YORK, Trustee ____________________ SECOND SUPPLEMENTAL INDENTURE Dated as of April 27, 1999 To the Indenture Dated as of February 20, 1997 ____________________ 10-7/8%% Senior Subordinated Notes due 2007 ================================================================================ 1 SUPPLEMENTAL INDENTURE NO. 2 dated as of April 27, 1999 (this "Supplemental Indenture") between PRIMESTAR, Inc., a Delaware corporation (the "Company"), and The Bank of New York, as trustee ("Trustee"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, (i) TCI Satellite Entertainment, Inc. ("TSAT") and the Trustee entered into the Indenture, dated as of February 20, 1997 (the "Original Indenture"), with respect to $200,000,000 aggregate principal amount of 10-7/8% Senior Subordinated Notes due 2007, Series A and Series B (the "Notes") and (ii) TSAT, the Company, and the Trustee entered into the First Supplemental Indenture to the Original Indenture, dated as of April 1, 1998 (the "First Supplemental Indenture" and, together with the Original Indenture, the "Indenture"), pursuant to which the Company assumed TSAT's obligations with respect to the Notes; WHEREAS, all capitalized terms used but not defined herein shall have the same meanings ascribed to such terms in the Indenture; WHEREAS, Section 10.02 of the Indenture provides that the Company and the Trustee may amend or supplement certain provisions of the Indenture with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding; WHEREAS, the Company, Holders constituting at least a majority in principal amount of the Notes outstanding and certain other parties have entered into that certain lock-up agreement, dated as of April 20, 1999 (the "Lock-up Agreement"), pursuant to which such Holders consented to the Proposed Amendments (as defined in the Lock-up Agreement) to the Indenture; WHEREAS, in accordance with the terms of the Lock-up Agreement, the holders of a majority in principal amount of the outstanding Notes have consented to the Proposed Amendments to be effected by this Supplemental Indenture; WHEREAS, the Company has authorized the execution and delivery of this Supplemental Indenture and the Trustee has received an Opinion of Counsel and an Officers' Certificate pursuant to Sections 10.06 and 13.04 of the Indenture, and therefore the Company and the Trustee are authorized to execute and deliver this Supplemental Indenture; NOW THEREFORE, in consideration of good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 2 SECTION 1. AMENDMENTS TO INDENTURE. ----------------------- (a) Effective as of the Operative Date (as hereinafter defined), the following sections of the Indenture are hereby eliminated: Section 4.03; Section 4.04; Section 4.06; Section 4.07; Section 4.08; Section 4.09; Section 4.10; Section 4.15; Section 4.16; Section 4.17; Section 4.18; Section 4.20; Section 4.21; Section 4.22; Section 5.01; Section 5.02; Section 6.01(6); and Section 6.01(7). The text of the above sections are replaced by the phrase "Intentionally deleted", and the surrounding sections are not renumbered. (b) All definitions set forth in Section 1.01 that relate to defined terms used solely in sections deleted hereby are deleted in their entirety as of the Operative Date (as defined below). SECTION 2. MISCELLANEOUS. ------------- (a) Operative Date. The amendments to the Indenture made hereby shall --------------- only become effective on the Note Purchase Closing Date (as defined in the Lock- up Agreement) applicable to the Notes (the "Operative Date"). This Supplemental Indenture is effective upon execution. (b) Conflict with the TIA. If any provision of this Supplemental ---------------------- Indenture modifies or excludes any provision of the TIA that is required under such Act to be part of and govern the Indenture, the latter provision of the TIA shall control. If any provision hereof modifies or excludes any provision of the TIA that may be so modified or excluded, the latter provision of the TIA shall be deemed to apply to this Supplemental Indenture, as so modified or excluded, as the case may be. (c) Notes Deemed Conformed. Beginning at the Operative Date, the ----------------------- provisions of each Note then outstanding shall be deemed to be conformed, without the necessity for any reissuance or exchange of such Note or any other action on the part of the Holders, the Company or the Trustee, so as to reflect this Supplemental Indenture. (d) Successors. All agreements of the Company and the Trustee in this ----------- Supplemental Indenture and in the Indenture shall bind their respective successors. (e) Benefits of Supplemental Indenture. Nothing in this Supplemental ----------------------------------- Indenture, express or implied, shall give to any person, other than the parties hereto and their successors hereunder, any Agent and the Holders, any benefit or any legal or equitable right, remedy or claim under this Supplemental Indenture or the Indenture. 3 (f) Separability. In case any provision in this Supplemental ------------- Indenture, or in the Indenture, 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, it being intended that all of the provisions hereof shall be enforceable to the full extent permitted by law. (g) Trustee Responsibility. The Trustee assumes no duties, ----------------------- responsibilities or liabilities by reason of this Supplemental Indenture other than as set forth in the Indenture. The Trustee assumes no responsibility for the correctness of the statements herein contained, which shall be taken as statements of the Company. This Supplemental Indenture is executed and accepted by the Trustee subject to all of the terms and conditions of its acceptance of the trust under the Indenture, as fully as if said terms and conditions were herein set forth in full. (h) Headings. The Section headings of this Supplemental Indenture --------- have been inserted for convenience of reference only, are not to be considered a part of this Supplemental Indenture and shall in no way modify or restrict any of the terms or provisions hereof. (i) Counterparts. This Supplemental Indenture may be executed in ------------- counterparts, each of which shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. (j) Governing Law. This Supplemental Indenture shall be governed by -------------- and construed in accordance with the internal laws of the State of New York. 4 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the day and year first above written. PRIMESTAR, INC. By: /s/ Kenneth G. Carroll --------------------------------------------- Name: Kenneth G. Carroll Title: SVP & Chief Financial Officer THE BANK OF NEW YORK By: /s/ Walter N. Gitlin --------------------------------------------- Name: Walter N. Gitlin Title: Vice President 5 EX-4.6 3 SECOND SUPPLEMENTAL INDENTURE 12-1/4% NOTES EXHIBIT 4.6 ================================================================================ PRIMESTAR, INC. and THE BANK OF NEW YORK, Trustee ________________ SECOND SUPPLEMENTAL INDENTURE Dated as of April 27, 1999 To the Indenture Dated as of February 20, 1997 ____________________ 12-1/4%% Senior Subordinated Discount Notes due 2007 ================================================================================ 1 SUPPLEMENTAL INDENTURE NO. 2, dated as of April 27, 1999 (this "Supplemental Indenture") between PRIMESTAR, Inc., a Delaware corporation (the "Company"), and The Bank of New York, as trustee ("Trustee"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, (i) TCI Satellite Entertainment, Inc. ("TSAT") and the Trustee entered into the Indenture, dated as of February 20, 1997 (the "Original Indenture"), with respect to $275,000,000 aggregate principal amount of 12-1/4% Senior Subordinated Discount Notes due 2007, Series A and Series B (the "Notes") and (ii) TSAT, the Company, and the Trustee entered into the First Supplemental Indenture to the Original Indenture, dated as of April 1, 1998 (the "First Supplemental Indenture" and, together with the Original Indenture, the "Indenture"), pursuant to which the Company assumed TSAT's obligations with respect to the Notes; WHEREAS, all capitalized terms used but not defined herein shall have the same meanings ascribed to such terms in the Indenture; WHEREAS, Section 10.02 of the Indenture provides that the Company and the Trustee may amend or supplement certain provisions of the Indenture with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding; WHEREAS, the Company, Holders constituting at least a majority in principal amount of the Notes outstanding and certain other parties have entered into that certain lock-up agreement, dated as of April 20, 1999 (the "Lock-up Agreement"), pursuant to which such Holders consented to the Proposed Amendments (as defined in the Lock-up Agreement) to the Indenture; WHEREAS, in accordance with the terms of the Lock-up Agreement, the holders of a majority in principal amount of the outstanding Notes have consented to the Proposed Amendments to be effected by this Supplemental Indenture; WHEREAS, the Company has authorized the execution and delivery of this Supplemental Indenture and the Trustee has received an Opinion of Counsel and an Officers' Certificate pursuant to Sections 10.06 and 13.04 of the Indenture, and therefore the Company and the Trustee are authorized to execute and deliver this Supplemental Indenture; NOW THEREFORE, in consideration of good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 2 SECTION 1. AMENDMENTS TO INDENTURE. ----------------------- (a) Effective as of the Operative Date (as hereinafter defined), the following sections of the Indenture are hereby eliminated: Section 4.03; Section 4.04; Section 4.06; Section 4.07; Section 4.08; Section 4.09; Section 4.10; Section 4.15; Section 4.16; Section 4.17; Section 4.18; Section 4.20; Section 4.21; Section 4.22; Section 5.01; Section 5.02; Section 6.01(6); and Section 6.01(7). The text of the above sections are replaced by the phrase "Intentionally deleted", and the surrounding sections are not renumbered. (b) All definitions set forth in Section 1.01 that relate to defined terms used solely in sections deleted hereby are deleted in their entirety as of the Operative Date (as defined below). SECTION 2. MISCELLANEOUS. ------------- (a) Operative Date. The amendments to the Indenture made hereby shall --------------- only become effective on the Note Purchase Closing Date (as defined in the Lock- up Agreement) applicable to the Notes (the "Operative Date"). This Supplemental Indenture is effective upon execution. (b) Conflict with the TIA. If any provision of this Supplemental ---------------------- Indenture modifies or excludes any provision of the TIA that is required under such Act to be part of and govern the Indenture, the latter provision of the TIA shall control. If any provision hereof modifies or excludes any provision of the TIA that may be so modified or excluded, the latter provision of the TIA shall be deemed to apply to this Supplemental Indenture, as so modified or excluded, as the case may be. (c) Notes Deemed Conformed. Beginning at the Operative Date, the ----------------------- provisions of each Note then outstanding shall be deemed to be conformed, without the necessity for any reissuance or exchange of such Note or any other action on the part of the Holders, the Company or the Trustee, so as to reflect this Supplemental Indenture. (d) Successors. All agreements of the Company and the Trustee in this ----------- Supplemental Indenture and in the Indenture shall bind their respective successors. (e) Benefits of Supplemental Indenture. Nothing in this Supplemental ----------------------------------- Indenture, express or implied, shall give to any person, other than the parties hereto and their successors hereunder, any Agent and the Holders, any benefit or any legal or equitable right, remedy or claim under this Supplemental Indenture or the Indenture. 3 (f) Separability. In case any provision in this Supplemental ------------- Indenture, or in the Indenture, 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, it being intended that all of the provisions hereof shall be enforceable to the full extent permitted by law. (g) Trustee Responsibility. The Trustee assumes no duties, ----------------------- responsibilities or liabilities by reason of this Supplemental Indenture other than as set forth in the Indenture. The Trustee assumes no responsibility for the correctness of the statements herein contained, which shall be taken as statements of the Company. This Supplemental Indenture is executed and accepted by the Trustee subject to all of the terms and conditions of its acceptance of the trust under the Indenture, as fully as if said terms and conditions were herein set forth in full. (h) Headings. The Section headings of this Supplemental Indenture --------- have been inserted for convenience of reference only, are not to be considered a part of this Supplemental Indenture and shall in no way modify or restrict any of the terms or provisions hereof. (i) Counterparts. This Supplemental Indenture may be executed in ------------- counterparts, each of which shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. (j) Governing Law. This Supplemental Indenture shall be governed by -------------- and construed in accordance with the internal laws of the State of New York. 4 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the day and year first above written. PRIMESTAR, INC. By: /s/ Kenneth G. Carroll --------------------------------------------- Name: Kenneth G. Carroll Title: SVP & Chief Financial Officer THE BANK OF NEW YORK By: /s/ Walter N. Gitlin --------------------------------------------- Name: Walter N. Gitlin Title: Vice President 5 EX-10.1 4 FUNDING AGREEMENT EXHIBIT 10.1 FUNDING AGREEMENT ("Agreement") dated as of March 31, 1999, by and among TIME WARNER ENTERTAINMENT COMPANY, L.P., ADVANCE/NEWHOUSE PARTNERSHIP, COMCAST CORPORATION, COX COMMUNICATIONS, INC., MEDIAONE OF DELAWARE, INC., GE AMERICAN COMMUNICATIONS, INC., UNITED ARTISTS INVESTMENTS HOLDINGS, LLC, PARAGON COMMUNICATIONS (collectively, the "Funding Parties") and PRIMESTAR, INC. (the "Company"). RECITALS (A) The Funding Parties, other than United Artists Investments Holdings, LLC ("TCI"), or affiliates of such Funding Parties, are stockholders of the Company (B) The Funding Parties, other than GE American Communications, Inc. ("GEAC") are account parties under Existing Letters of Credit (as hereinafter defined). (C) GEAC is a provider of satellite services to customers including the Company and the other Funding Parties or their affiliates and states that it is entering into this Agreement in recognition of its relationship as a vendor of such services to such customers. (D) The Company is party to the Asset Purchase Agreement, dated as of January 22, 1999 (the "Medium Power Agreement"), among Hughes Electronics Corporation (the "Buyer"), the Company, PRIMESTAR Partners L.P., a wholly owned subsidiary of the Company ("PLP"), PRIMESTAR MDU, Inc., a wholly owned subsidiary of the Company ("MDU"), and the Funding Parties other than TCI. By a separate agreement (the "TCI Reimbursement Letter"), TCI has agreed to reimburse the other Funding Parties for a portion of certain obligations specified therein, including, without limitation, certain obligations assumed by such other Funding Parties under the Medium Power Agreement. (E) Section 9.10(a) of the Medium Power Agreement provides that the Company, PLP and MDU agree to use all commercially reasonable efforts to satisfy the condition that holders (the "Bondholders") of the Current Pay Notes and the Discount Notes (as hereinafter defined) and the lenders (the "Lenders") under the Company's Bridge Loans (as hereinafter defined) consent to modifications to the terms of such debt in accordance with the provisions of the Medium Power Agreement. (F) Concurrently with the execution and delivery of this Agreement, the Company is entering into one or more agreements (collectively, the "Lock-up Agreement"), among the Company and certain holders of the Current Pay Notes, Discount Notes and Bridge Loans, in order to induce such creditors (the "Senior Subordinated Creditors") to participate in the Exchange Offer and/or Private Transactions (as hereinafter defined). (G) In order to induce the Senior Subordinated Creditors to enter into the Lock-up Agreement, the Funding Parties and the Company are entering into this Agreement with the express intent that the Senior Subordinated Creditors be intended third party beneficiaries of this Agreement. (H) Each of the Funding Parties which is or has an affiliate that is a stockholder of the Company has determined that the transactions contemplated by the Medium Power Agreement and the Lock-up Agreement are in the best interests of the Company and its subsidiaries, and in the best interests of such Funding Party, and TCI has determined that the transactions contemplated by the Medium Power Agreement and the Lock-up Agreement are in the best interests of TCI. (I) Notwithstanding the specific obligations of the account parties to the Existing Letters of Credit in respect thereof, none of the Funding Parties (nor any affiliate of a Funding Party that is a stockholder of the Company) has any pre-existing legal or contractual obligation to enter into this Funding Agreement or to provide the financial support to the Company provided for herein. (J) This Agreement is, and is intended to be, a financial accommodation by the Funding Parties within the meaning of Title 11 of the United States Code. NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be bound hereby, the parties hereto hereby agree as follows: Section 1. Definitions. ----------- (a) As used in this Agreement, the following terms shall have the corresponding meanings: "Bridge Loans" means all loans made pursuant to the Interim Loan Facility, whether or not converted into `Term Loans' or exchanged for `Exchange Notes' as provided for therein. "Cash Interest Election" has the meaning ascribed thereto in the indenture governing the Discount Notes. "Closing Date" means the date that the Medium Power Asset Sale is consummated pursuant to the Medium Power Agreement. "Closing Date Required Amount" means the sum of: (i) the Senior Bank Payoff Amount, (ii) the Sub Debt Maximum Agreed Amount, and (iii) $25,000,000. 2 "Company" means PRIMESTAR, Inc. "Contingent Note Consideration" means any share appreciation right, contingent value right, security, contract or other obligation of the Company issued to holders of Current Pay Notes, Discount Notes and Bridge Loans pursuant to any Exchange Offer or Private Transaction. "Current Pay Notes" means the Company's 10-7/8% Senior Subordinated Notes due 2007, Series A and B. "Discount Notes" means the Company's 12-1/4% Senior Subordinated Discount Notes due 2007, Series A and B. "Exchange Offer" means an offer by the Company to the holders of the Current Pay Notes and the Discount Notes to tender such notes for exchange, in each case substantially on the terms provided for in the Lock-up Agreement. "Existing Letters of Credit" means any standby letters of credit issued for the account of any of the Funding Parties (or any affiliate of a Funding Party other than the Company) other than GEAC to secure the payment of any obligations of the Company or any of its subsidiaries. "Expected Closing Date Proceeds" means an amount of money equal to the net cash proceeds payable to the Company on the Closing Date under the Medium Power Agreement, as set forth in the Initial Funding Certificate. "GMH Stock" means Class H Common Stock of General Motors Corporation, a Delaware corporation. "High Power Agreement" means the Asset Purchase Agreement, dated as of January 22, 1998, among Hughes, the Company, PLP, Tempo and the stockholders of the Company listed therein "Hughes" means Hughes Electronics Corporation. "Initial Funding Amount" means an amount of money equal to the lesser of (i) the Closing Date Required Amount minus the Expected Closing Date Proceeds, ----- and (ii) the Medium Power Commitment. "Initial Funding Certificate" is defined in Section 2. "Interim Loan Facility" means the Company's Senior Subordinated Credit Agreement, dated as of April 1, 1998. "Lock-up Agreement" is defined in the recitals. 3 "Medium Power Agreement" is defined in the recitals. "Medium Power Asset Sale" means the sale of the medium-power business to Hughes pursuant to the terms of the Medium Power Agreement. "Medium Power Commitment" means $540 million. "Minimum Tender Condition" shall have the meaning assigned to such term in the Lock-up Agreement. "Non-Debt Payment" means a payment made by any Funding Party to or for the benefit of the Company, with no expectation of, or right to, repayment. "Notes" means and includes each of the Bridge Loans, the Current Pay Notes, and the Discount Notes. "Partnership Credit Facility" means PLP's Credit Agreement, dated as of March 9, 1994, as amended. "PLP" is defined in the recitals. "Post-Closing Working Capital Requirements" means, for any period following the Closing Date, (i) the aggregate amount of all Scheduled Post-Closing Obligations that are due and payable, or by their terms will become due and payable, during the period in question, less (ii) the aggregate amount of all ---- cash and cash equivalents of the Company on hand or in banks at the beginning of such period and available to be used to satisfy Scheduled Post-Closing Obligations. "Private Transaction" means any transaction or series of transactions by which the Company acquires (i) Current Pay Notes and Discount Notes or (ii) Bridge Loans, in either case in an aggregate principal amount that would meet the Minimum Tender Condition with respect to such securities or loans, on substantially the terms provided for in the Lock-up Agreement. "Pro Rata Share" means, for each Funding Party, the percentage set forth opposite the name of such Funding Party on Schedule I attached hereto. "Reimbursement Agreements" means those reimbursement agreements, each dated as of April 1, 1998, between the Company and each of the Funding Parties other than GEAC, or affiliates thereof, which provide for, among other things, the assumption by the Company of all the obligations of such Funding Party (or affiliate) under its respective Existing Letter of Credit and the existing reimbursement agreements and/or other existing documentation between such party and the issuing bank relating to such letter of credit, including all existing and future payment obligations of such party thereunder, and the indemnification by the Company of such party for any and all 4 losses, claims, damages, liabilities, deficiencies, obligations, costs and expenses of such party relating thereto. "Required Funding Parties" means Funding Parties with an aggregate Pro Rata Share in excess of 55%. "Scheduled Post-Closing Obligations" means and includes each of the obligations of the Company and its subsidiaries set forth on Schedule IV attached hereto (including, without limitation, estimates of the Company's ordinary costs and expenses to be incurred after the Closing Date during the Shutdown Period), as such schedule may be modified by the Company, with the consent of the Required Funding Parties, from time to time. "Senior Bank Payoff Amount" means the amount required by the Company in accordance with the Senior Credit Facility to pay and discharge in full on the Closing Date all monetary obligations of the Company under the Senior Credit Facility, including without limitation the aggregate principal amount of, and accrued unpaid interest on, all loans then outstanding thereunder, and all accrued unpaid commitment fees and other expenses thereunder, as set forth in the aggregate on the Initial Funding Certificate. "Senior Credit Facility" means the Company's $700,000,000 Credit Agreement, dated as of March 31, 1998. "Shutdown Costs" means all obligations and liabilities of the Company and its subsidiaries on the Closing Date, other than (i) the Senior Bank Payoff Amount, (ii) all obligations and liabilities of the Company under the Discount Notes, the Current Pay Notes and the Bridge Loans, (iii) any such obligations or liabilities assumed by Hughes on the Closing Date pursuant to the Medium Power Agreement or assumed by Hughes pursuant to the High Power Agreement, and (iv) any such obligations or liabilities to the extent backed by Existing Letters of Credit. "Shutdown Period" means the period beginning on the Closing Date and ending on the earlier to occur of (i) the fourth anniversary of the Closing Date and (ii) the last day of the fourth calendar month following the payment or satisfaction and discharge in full of all Shutdown Costs. "Sub Debt Maximum Agreed Amount" means the sum of: (i) 88.2% of the aggregate principal amount of the Current Pay Notes, the Discount Notes and the Bridge Loans outstanding on the Closing Date, determined in the case of the Discount Notes as if the Company had made a Cash Interest Election as of February 15, 1999, and (ii) 100% of all accrued unpaid interest through the Closing Date under the Current Pay Notes, the Discount Notes and the Bridge Loans, determined in the case of the Discount Notes as if the Company had made a Cash Interest Election as of February 15, 1999, as set forth in the aggregate on the Initial Funding Certificate. "TCI Reimbursement Letter" is defined in Recital (D). "Tempo" means Tempo Satellite, Inc. 5 "TSAT Consideration Shares" means the number of shares of GMH Stock equal to the product of (65,000,000/225,000,000) multiplied by 4,871,448 (i.e., 1,407,307.2 shares of GMH Stock). "Working Capital Facility" has the meaning provided in Section 6(a) hereof. "Working Capital Sub-Commitment" means the Medium Power Commitment less (x) ---- the Initial Funding Amount, (y) the sum of all amounts paid by the Funding Parties as additional funding pursuant to Section 5(b) hereof, and (z) the sum of all amounts paid by the Funding Parties to the Company or TSAT (as defined herein) pursuant to Section 5(c) hereof; provided, however, that if any ----------------- Scheduled Post-Closing Obligation is satisfied or discharged for an amount less than that shown on Schedule IV, the Working Capital Sub-Commitment shall be reduced by the amount of such difference; and provided further that if the ---------------- Company sells (including pursuant to any forward sale contract or similar arrangement) or otherwise disposes of any GMH Stock that it obtains from the closing of the Medium Power Asset Sale, and the proceeds of such transaction are available to the Company to pay Scheduled Post-Closing Obligations (without violating the contractual obligations of the Company to any third party, including, without limitation, the obligations of the Company under the Pledge and Security Agreement to be entered into pursuant to the Lock-up Agreement), the Working Capital Sub-Commitment shall be reduced by the net proceeds received from such sale, taking into consideration any amounts required to be paid to the Senior Subordinated Creditors pursuant to any share appreciation rights granted to such creditors under the Lock-up Agreement. (b) Capitalized terms used herein and not otherwise defined have the meanings ascribed thereto in the Medium Power Agreement. Section 2. Funding Amounts; Schedule. ------------------------- As soon as practicable after delivery by the Company of the Preliminary Working Capital Certificate pursuant to Section 4.2 of the Medium Power Agreement, but in any event not less than 10 days prior to the Closing Date, the Company shall deliver to each of the Funding Parties a certificate (the "Initial Funding Certificate"), signed by the Chief Financial Officer and Chief Executive Officer of the Company and approved by the Board of Directors of the Company, showing in reasonable detail the amount and calculation of: (i) the Expected Closing Date Proceeds, determined in accordance with the Preliminary Working Capital Certificate, (ii) the Senior Bank Payoff Amount, (iii) the Sub Debt Maximum Agreed Amount (including the components of such amount as described in clauses (i) and (ii) of the definition thereof) and (iv) the Initial Funding Amount. The Initial Funding Certificate shall also include a detailed projection of the Company's Post-Closing Working Capital Requirements for each calendar month for the 12-month period following the Closing Date. An unsigned draft of the Initial Funding Certificate, prepared for informational purposes based on the current best estimates of the Company as to the items to be stated therein, is attached to this Agreement as Schedule III. 6 Section 3. Agreement to Provide Initial Non-Debt Funding. --------------------------------------------- Subject to the conditions set forth in Section 4, on or before the Closing Date, each of the Funding Parties shall pay and deliver to the Company, as an equity investment, contribution to capital or Non-Debt Payment (as such Funding Party shall determine), such Funding Party's Pro Rata Share of the Initial Funding Amount, by wire transfer of immediately available funds. Section 4. Conditions to Initial Funding; Conditions to Medium Power Sale. -------------------------------------------------------------- (a) The obligation of each of the Funding Parties pursuant to Section 3 hereof to pay its Pro Rata Share of the Initial Funding Amount shall be subject to the satisfaction or waiver (to the extent waivable) on or before the Closing Date of each of the following conditions : (i) the Minimum Tender Condition; (ii) all other conditions to the closing of the Exchange Offer (provided, however, that this condition shall be satisfied to the extent ------------------ that the Minimum Tender Condition is met through one or more Private Transactions); (iii) the absence of the filing of any petition with respect to the Company or PLP as debtor under the United States Bankruptcy Code; and (iv) the closing of the Medium Power Asset Sale. (b) The Company acknowledges that satisfaction of the Minimum Tender Condition will constitute satisfaction of the Debt Tender Condition for all purposes of the Medium Power Agreement, and that any failure of the Minimum Tender Condition to be satisfied on or before the Closing Date will constitute a failure of the Debt Tender Condition for such purposes. The Company does not intend to consummate the Medium Power Asset Sale if the Minimum Tender Condition is not satisfied on or before the Closing Date. Section 5. Additional Non-Debt Funding. --------------------------- (a) The Company shall provide each of the Funding Parties as promptly as practicable with copies of (i) the Estimated Working Capital Certificate, (ii) the Final Working Capital Certificate (as defined in the Medium Power Agreement), (iii) any written notice of disagreement delivered to Hughes pursuant to Section 4.2(a)(iii) of the Medium Power Agreement, and (iv) in the event of any arbitration pursuant to such Section 4.2(a)(iii), the written report of the Arbiter in connection therewith. (b) In the event that the Company is required to make a working capital adjustment in favor of Hughes pursuant to Section 4.2 of the Medium Power Agreement, whether 7 as an adjustment to the purchase price or a payment pursuant to Section 4.2(a)(iii), then, within five business days after any such adjustment or payment, upon written demand by the Company, each of the Funding Parties shall pay and deliver to the Company, as an equity investment, contribution to capital or Non-Debt Payment (as such Funding Party shall determine), such Funding Party's Pro Rata Share of such adjustment or payment, by wire transfer of immediately available funds; provided, however, that the aggregate obligations -------- ------- of any Funding Party pursuant to this Section 5, plus the portion of the Initial Funding Amount paid by such Funding Party, shall not exceed such Funding Party's Pro Rata Share of the Medium Power Commitment. (c) (i) Reference is made to the Agreement dated as of January 22, 1999 (the "TSAT Agreement"), between TCI Satellite Entertainment, Inc. ("TSAT") and the Company, pursuant to which the Company has agreed, on the terms and subject to the conditions set forth therein, to make a payment to TSAT in the amount of $65,000,000 (the "TSAT Consideration"), in consideration of the undertakings by TSAT made therein, and not as a dividend on TSAT's common stock of the Company, and in consideration of the obligations of the Funding Parties hereunder. Subject to the satisfaction or waiver, on or before the Closing Date, of each of the conditions set forth in clauses (i), (ii), (iii) and (iv) of Section 4(a), as and when the TSAT Consideration is due and payable to TSAT pursuant to the TSAT Agreement, the Company shall pay the TSAT Consideration by delivering the TSAT Consideration Shares as provided in the TSAT Agreement. In the event that the Company does not provide TSAT with good and valid title to the TSAT Consideration Shares free and clear of all liens and encumbrances, other than those contemplated by the TSAT Agreement, each of the Funding Parties shall pay and deliver (or cause to be paid and delivered) to TSAT, in the form of cash or shares of GMH Stock (as such Funding Party shall determine), with shares of GMH Stock being valued on the same basis used to establish the value of the TSAT Consideration Shares, such Funding Party's Pro Rata Share of the TSAT Consideration. The Company and each of the Funding Parties acknowledge that TSAT shall be entitled to rely on and enforce the obligations of the Funding Parties hereunder as an express third-party beneficiary. In that connection, TSAT acknowledges that no Funding Party shall have any liability for the payment duties of any other Funding Party with respect to payments required by this Section 5(c) as guarantor, co-obligor or otherwise. (ii) The Company hereby represents and warrants to each Funding Party that the transfer of the TSAT Consideration Shares to TSAT pursuant to this Section 5(c) will not violate any provisions of the Medium Power Agreement or the Lock-up Agreement. Section 6. Working Capital Facility. ------------------------ (a) Subject to the satisfaction or waiver, on the Closing Date, of the conditions set forth in Section 4 of this Agreement, each of the Funding Parties hereby agrees to make available to the Company, under a revolving credit facility or similar arrangement (the "Working Capital Facility") mutually acceptable to the Company and the Required Funding Parties (and consistent with the terms of this Agreement), subordinated loans and/or other extensions of credit necessary 8 to fund the Post-Closing Working Capital Requirements of the Company during the Shutdown Period, up to such Funding Party's Pro Rata Share of the Working Capital Sub-Commitment (b) All loans and/or other extensions of credit made by the Funding Parties to the Company pursuant to the Working Capital Facility shall be junior and subordinated in right of payment to the prior indefeasible payment in full of all obligations of the Company outstanding on the Closing Date under the Senior Credit Facility, the Current Pay Notes, the Discount Notes, the Bridge Loans, the Shutdown Costs and the Contingent Note Consideration. All cash interest accruing under the Working Capital Facility shall be due and payable only at maturity; however interest accruing during any period prior to maturity may be payable in kind. (c) The Working Capital Facility shall remain outstanding at all times during the Shutdown Period. (d) Drawings under the Working Capital Facility shall be used by the Company only to pay (i) Scheduled Post-Closing Obligations, (ii) costs and expenses incurred by the Company after the Closing Date in the ordinary course, and (iii) any additional amounts approved by the Required Funding Parties. The Working Capital Facility may provide as a drawing condition that the Company certify to the Funding Parties the specific Scheduled Post-Closing Obligations to be satisfied with the proceeds of any drawing and any mitigation efforts undertaken by the Company with respect to such Shutdown Costs. (e) At the end of the Shutdown Period, if the aggregate obligations of the Company to the Funding Parties under the Working Capital Facility, including the principal amount of all loans and other extensions of credit thereunder and all unpaid interest accrued thereon, shall exceed the assets of the Company available to repay such obligations, including without limitation any GMH Stock then held by the Company, or any proceeds thereof, then each of the Funding Parties shall convert its Pro Rata Share of such excess into an equity investment, contribution to capital or Non-Debt Payment (as such Funding Party shall determine) to the Company. Section 7. Existing Letters of Credit. -------------------------- (a) The parties acknowledge that: (i) an aggregate of $575 million principal amount of loans are currently outstanding under the Partnership Credit Facility; (ii) such loans are due and payable in full on June 30, 1999, together with accrued unpaid interest of not more than $15 million; (iii) the full and timely payment of such principal and interest are secured by (A) Existing Letters of Credit issued for the account of Funding Parties (or affiliates thereof), other than GEAC, in the aggregate drawable amount of $580 million and (B) a standby letter of credit issued for the account of the Company pursuant to the Senior Credit Facility in the maximum drawable amount of $5 million; (iv) the initial closing under the High Power Agreement occurred on March 10, 1999; (v) the second closing under the High Power Agreement is expected to occur prior to June 30, 1999; and (vi) assuming consummation of both closings under the High Power Agreement, the Partnership expects to receive an aggregate of $465 million in satisfaction of the Reimbursement Obligation (as 9 defined in the High Power Agreement), which amount will be available to apply against amounts due under the Partnership Credit Facility. (b) On or before June 30, 1999, each of the Funding Parties, other than GEAC, will pay or contribute to the Company sufficient funds to enable the Company to pay (or to enable the Company to cause the Partnership to pay) against amounts due under the Partnership Credit Facility (including interest and principal) an amount equal to the product of (x) $125 million, times (y) the percentage set forth opposite the name of such Funding Party on Schedule II attached hereto. Amounts paid by any Funding Party pursuant to this Section 7(b) shall constitute an equity investment in, capital contribution to, or Non- Debt Payment (as such Funding Party shall determine) to the Company, and shall be in addition to the obligations of such Funding Party pursuant to Section 3 and Section 5 hereunder. (c) If prior to June 30, 1999, the Subsequent Closing under the High Power Agreement shall not have occurred, then, on or before June 30, 1999, each of the Funding Parties, other than GEAC, will advance to the Company sufficient funds to enable the Company to pay (or to enable the Company to cause the Partnership to pay) against amounts due under the Partnership Credit Facility an amount equal to the product of (x) $348.25 million, times (y) the percentage set forth opposite the name of such Funding Party on Schedule II attached hereto. Amounts advanced by any Funding Party pursuant to this Section 7(c) shall be ratably secured by a security interest in the In-Orbit Satellite Assets, to the full extent of the Company's rights and interests therein. (d) On or before June 30, 1999, taking into account all payments theretofore made pursuant Section 7(b) hereof (and, if the Subsequent Closing shall not have occurred under the High Power Agreement, pursuant to Section 7(c) hereof) , the Company will pay or cause the Partnership to pay in full all obligations of the Partnership under the Partnership Credit Facility, including without limitation the principal amount of all outstanding loans thereunder, all accrued unpaid interest thereon, and any and all fees and expenses due in respect thereof, against the termination and release in full of the Existing Letters of Credit. The parties acknowledge that the Company shall utilize for such payments $139.5 million of cash proceeds from the Initial Closing under the High Power Agreement (which amount shall be so applied as soon as practicable after the date hereof, subject to any applicable agreements with third parties, and in any event on the Closing Date, subject to the closing of the Medium Power Asset Sale) and, if the Subsequent Closing occurs prior to June 30, 1999, $325.5 million of cash proceeds therefrom, and the Company agrees that it shall not use such proceeds for any other purpose, assuming the full and timely performance by each of the Funding Parties, other than GEAC, of their respective obligations hereunder. (e) Notwithstanding anything in the Reimbursement Agreements to the contrary, if a drawing is made under an Existing Letter of Credit issued for the account of any Funding Party (or for the account of an affiliate of such Funding Party), such Funding Party shall immediately and automatically cause the reimbursement obligation of the Company with respect to such drawing to be converted into an equity investment in, capital contribution to, or Non-Debt Payment (as such Funding Party shall determine) to the Company by such Funding Party (or affiliate). Any such equity 10 investment, capital contribution or Non-Debt Payment shall reduce the obligations of such Funding Party pursuant to Sections 7(b) and 7(c) hereunder, but shall be in addition to the obligations of such Funding Party pursuant to Section 3 and Section 5 hereunder. Section 8. Entire Agreement; Amendment. --------------------------- (a) This Agreement embodies the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes any and all prior or contemporaneous agreements with respect to such subject matter, whether written or oral or claimed to arise from any course of conduct. (b) Subject to any restrictions on amendment provided for in the Lock-up Agreements, this Agreement may be amended by written agreement of the Company and the Required Funding Parties; provided, however, that no such -------- -------- amendment shall increase the Medium Power Commitment, the obligations of each Funding Party pursuant to Section 7 hereof, or the Pro Rata Share of any Funding Party without the prior written consent of each Funding Party so affected, and provided further that no amendment or waiver to the provisions of Section 4 - - ---------------- hereof or Sections 2, 5(c) and 6, which are subject to the conditions of Section 4 hereof, shall be effective without the prior written consent thereto of each Funding Party nor shall any amendment of Section 5(c) hereof be effective without the prior written consent of TSAT, and provided further that no ---------------- amendment or waiver to this Agreement shall result in the disparate treatment of any Funding Party without the consent of such Funding Party. Except as expressly provided in this Section 8, this Agreement may not be modified or amended, nor may any term or provision of this Agreement be waived. Section 9. Representation Regarding Scheduled Post-Closing Obligations. The ----------------------------------------------------------- Company hereby represents and warrants to each of the Funding Parties that, to the best knowledge of the Company after due inquiry, the Scheduled Post-Closing Obligations include all monetary obligations of the Company and its subsidiaries on a consolidated basis anticipated to exist on the Closing Date, other than (A) any such obligations required to be assumed by Hughes on the Closing Date pursuant to the Medium Power Agreement, (B) any such obligations under the Senior Credit Facility, the Current Pay Notes, the Discount Notes, the Bridge Loans and the Partnership Credit Facility, (C) the contingent and/or disputed obligations set forth on Schedule V attached hereto, and (D) such other obligations of the Company and its subsidiaries as shall not individually or in the aggregate exceed $3,000,000. The Company shall use its best efforts from time to time prior to the Closing Date, as required, to prepare draft updates to Schedule IV for approval by the Required Funding Parties. Section 10. Assignment; Parties Bound and Benefited. --------------------------------------- (a) This Agreement may not be assigned or delegated without the prior written consent of the Company and the Required Funding Parties, except by operation of law. 11 (b) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, and the provisions of Section 5(c) of this Agreement shall inure to the benefit of TSAT and its successors and permitted assigns. (c) Each of the parties to the Lock-up Agreement (other than the Company) (the "Signing Creditors") is intended to be a third-party beneficiary of this Agreement, and shall have the right to rely on and enforce this agreement in such capacity, subject (after the termination of the Lock-up Agreement) to the right of the parties hereto to modify, amend or waive any provision of this Agreement as provided herein, to the extent such modification, amendment or waiver shall not materially adversely affect any such third-party beneficiary. TSAT is intended to be a third-party beneficiary of Section 5(c) this Agreement, and shall have the right to rely on and enforce this Agreement in such capacity. Prior to the payment to the Signing Creditors of the Agreed Consideration (as defined in the Lock-up Agreement), the obligations of the Funding Parties to the Company or to TSAT hereunder shall be subordinated to the rights of the Signing Creditors under the Lock-up Agreement, and any distributions made by the Funding Parties to the Company or TSAT shall be held in trust for the benefit of the Signing Creditors and paid over to the Signing Creditors until they have been paid the Agreed Consideration in accordance therewith. (d) Other than as specifically set forth in this Section 10, no other party is intended to be a third-party beneficiary of this Agreement. Section 11. Notices. ------- All notices, requests, consents, demands, elections and other communications required or permitted hereunder shall be in writing and shall be given to the intended recipients at their addresses or facsimile numbers as last provided to the parties hereto. Section 12. Paragraph Headings. ------------------ The paragraph headings used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of or be taken into consideration in interpreting this Agreement. Section 13. Governing Law and Jurisdiction. ------------------------------ 12 This Agreement shall be construed in accordance with and governed by the internal laws of the State of New York without giving effect to any conflicts of laws principles. Each party hereto hereby irrevocably submits to the jurisdiction of any New York State court sitting in the Borough of Manhattan or any federal court sitting in the Borough of Manhattan in respect of any suit, action or proceeding arising out of or relating to this Agreement and the transactions pursuant hereto and in connection herewith, and irrevocably agrees that all claims in respect of any such suit, action or proceeding shall be heard and determined in any such court. Each party irrevocably waives any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Section 14. Specific Performance. -------------------- Without intending to limit the remedies available to the Company, each of the Funding Parties acknowledges and agrees that a violation by such Funding Party of any terms of this Agreement will cause irreparable injury for which an adequate remedy at law is not available. Therefore, the parties agree that the Company shall be entitled to an injunction, restraining order or other form of equitable relief from any court of competent jurisdiction compelling a Funning Party, and their respective successors, to specifically perform, and restraining such party from committing any breach of, or threatened breach of, any provision of this Agreement. Section 15. Severability. ------------ In case any provision in this Agreement 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, it being intended that all of the provisions hereof shall be enforceable to the full extent permitted by law. Section 16. Maximum Liability of TCI; Several Liability of each Funding Party. ----------------------------------------------------------------- (a) Notwithstanding anything to the contrary contained herein, (i) the total equity contributions, Non-Debt Payments and outstanding loans made by TCI hereunder shall not at any time exceed (and shall be counted toward) the maximum liability of TCI under the TCI Reimbursement Letter, as then in effect, and (ii) nothing herein shall alter or otherwise affect or limit the respective rights and obligations under the TCI Reimbursement Letter of the parties thereto. (b) No Funding Party shall have any liability for the payment duties or other obligations of any other Funding Party hereunder, as guarantor, co-obligor or otherwise. 13 Section 17. Indemnification. --------------- Notwithstanding anything to the contrary contained herein, the Company shall continue to maintain insurance for its directors and officers adequate to enable the Company to indemnify all of its current, former and future officers and directors to the full extent permitted by law. The Working Capital Facility can be drawn to pay premiums necessary to maintain indemnification insurance. Section 18. Representations and Warranties. ------------------------------ Each of the Company and each Funding Party hereby acknowledges, warrants and represents as to itself that the following statements are true, correct and complete as of the date hereof: (a) It has all requisite power and authority to enter into this Agreement and to carry out the transactions contemplated by, and perform its respective obligations under, this Agreement; (b) The execution and delivery of this Agreement and the performance of its obligations hereunder have been duly authorized by all necessary action on its part, it has been duly authorized to make the representations and commitments included herein, and the person executing and delivering this Agreement on behalf of it has been duly authorized to do so; (c) The execution, delivery and performance by it of this Agreement do not and shall not violate any provision of law, rule or regulation applicable to it or any of its subsidiaries or its organizational documents or those of any of its subsidiaries; and (d) This Agreement is its legal, valid and binding obligation, enforceable against it by each other party hereto (and each intended third party beneficiary hereof) in accordance with its terms. Section 19. Termination. ----------- This Agreement shall terminate upon the commencement of a case by or against the Company or any Funding Party under Title 11, United States Code. Section 20. Counterparts. ------------ This Agreement may be executed in counterparts, each of which shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 14 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered on and as of the date first written above. PRIMESTAR, INC. _______________________________ Name: Title: TIME WARNER ENTERTAINMENT COMPANY, L.P., by AMERICAN TELEVISION AND COMMUNICATIONS CORPORATION, a general partner _______________________________ Name: Title: ADVANCE/NEWHOUSE PARTNERSHIP, by ADVANCE COMMUNICATION CORP., as general partner _______________________________ Name: Title: COMCAST CORPORATION _______________________________ Name: Title: COX COMMUNICATIONS, INC. _______________________________ Name: Title: MEDIAONE OF DELAWARE, INC. _______________________________ Name: Title: GE AMERICAN COMMUNICATIONS, INC. _______________________________ Name: Title: UNITED ARTISTS INVESTMENTS HOLDINGS, LLC _______________________________ Name: Title: PARAGON COMMUNICATIONS, by AMERICAN TELEVISION AND COMMUNICATIONS CORPORATION, a general partner _______________________________ Name: Title: EX-10.2 5 LOCK-UP AGREEMENT EXHIBIT 10.2 LOCK-UP AGREEMENT This Agreement (this "Agreement" or this "Lock-up Agreement"), dated as of April ___, 1999, is made by and among PRIMESTAR, Inc., a Delaware corporation (the "Company") and each of the undersigned holders (each a "Holder") (each a "Party" and, collectively, the "Parties") of Notes issued by the Company under the documents listed on Schedule 1 (the "Existing Agreements"). The obligations of each Holder hereunder shall be several, and not joint or joint and several. R E C I T A L S (A) Each Holder is either the record holder of, beneficial owner of or serves as investment manager or financial advisor with investment discretion and authority over various funds or other accounts which own certain of the Bridge Loans, Discount Notes, or Current Pay Notes. The amount of Notes held by each Holder or funds or other accounts as to which such Holder acts as an investment manager or financial advisor with investment discretion and authority, is set forth on Schedule 2 attached hereto. (B) The Holders of (i) Bridge Loans and (ii) Discount Notes and Current Pay Notes have formed unofficial committees (each, a "Committee" and, collectively, the "Committees") to represent the members of such Committees in negotiations with the Company regarding the Notes. (C) The Company has entered into the Medium Power Agreement, which provides for the Medium Power Asset Sale. (D) The Debt Tender Condition is a condition precedent to the obligations of the Company under the Medium Power Agreement. (E) In order to facilitate the closing of the Medium Power Asset Sale, the Parties desire to enter into this Agreement and to perform their respective obligations hereunder. NOW, THEREFORE, in consideration of the foregoing and for good and valuable consideration, the Company and the Holders agree as follows: Section 1. Certain Definitions. For purposes of this Agreement, the ------------------- following terms have the corresponding meanings: "Actual Lock-up Percentage" means the percentage of holders of the Notes, by aggregate principal amount of Notes held, that enter into this Agreement; provided, however, that if the Company commences an Exchange Offer with respect - - ----------------- to the Bonds, the Actual Lock-up Percentage shall include, in addition to the foregoing, the percentage of the holders of the Notes, by aggregate principal amount of Notes held, that exchange Bonds in the Exchange Offer. "Bonds" means, collectively, the Current Pay Notes and the Discount Notes. "Bridge Holder's Minimum Pro Rata Share" means, for each Holder of Bridge Loans, the percentage that the principal amount of such Holder's Bridge Loans purchased pursuant to a Private Transaction bears to the aggregate principal amount of Notes outstanding immediately prior to the Medium Power Closing Date. "Bridge Loans" means and includes all notes issued by the Company pursuant to the Senior Subordinated Credit Agreement dated as of April 1, 1998 (the "Interim Loan Agreement"), whether or not converted into `Term Loans' or exchanged for `Exchange Notes' as provided for therein. 2 "Cash Interest Election" has the meaning ascribed thereto in the Indenture governing the Discount Notes. "Current Pay Notes" means the Company's 10-7/8% Senior Subordinated Discount Notes due 2007, Series A and B. "Debt Tender Condition" means the condition precedent to the obligations of the Company under the Medium Power Agreement that holders of Notes representing at least 80% in aggregate principal amount of the Notes (including at least 51% in aggregate principal amount of each tranche of the Notes) consent to the Medium Power Asset Sale and agree to a reduction in the aggregate principal amount of such Notes (or agree to sell such Notes to the Company or its designee at a price equal to such reduced aggregate principal amount), as further described in the Medium Power Agreement and the schedules thereto. "Discount Notes" means the Company's 12 1/4% Senior Subordinated Discount Notes due 2007, Series A and B. All references herein to the "principal amount" of any Discount Notes shall mean the principal amount at maturity of such Notes determined as if the Company had made a Cash Interest Election as of February 15, 1999. "Exchange Offer" means with respect to each tranche of Bonds, an offer by the Company to the holders of such tranche of Bonds to tender such Bonds for exchange, substantially on the terms of the Private Transaction with the Holders of Bridge Loans and subject to the conditions set forth herein. An Exchange Offer shall also include a solicitation of consents to the Proposed Amendments. "Funding Agreement" means an agreement among the Company and each of the Funding Parties, substantially in the form of Exhibit A attached hereto. 3 "Funding Parties" shall have the meaning ascribed to such term in the Funding Agreement. "GMH Shares" means an aggregate of 4,871,448 shares of the Class H Common Stock, par value $0.10 per share, of General Motors Corporation. "High Power Agreement" means the Asset Purchase Agreement dated as of January 22, 1999, among Hughes, the Company, PRIMESTAR Partners L.P., Tempo Satellite, Inc., and the stockholders of the Company (or affiliates thereof) listed therein. "High Power Asset Sale" means (i) the assignment to Hughes, pursuant to the High Power Agreement, of the Company's option to acquire 100% of the capital stock of Tempo Satellite, Inc., or 100% of its assets and the assumption of liabilities, (ii) the exercise by Hughes of such option to acquire 100% of the assets of Tempo Satellite, Inc., subject to its liabilities, and (iii) all other transactions contemplated thereby, taken as a whole. "Holder's Notes" means, with respect to any Holder, the principal amount of Notes set forth opposite the name of such Holder in Schedule 2, together with any additional Notes acquired by such Holder (or acquired by a fund or other account as to which such Holder serves as investment manager or financial advisor with investment discretion and authority) after the date hereof (provided that such Holder has complied with the provisions of Section 12(l) hereof). "Hughes" means Hughes Electronics Corporation. "Indemnity Agreement" means an Indemnity Agreement between each of the Funding Parties and the Holders, substantially in the form of Exhibit B hereto. "Indentures" mean (i) the Indenture dated as of February 20, 1997, by and between TSAT and The Bank of New York (the "Trustee") with respect to the Discount Notes, as amended by the First Supplemental Indenture dated as of April 1, 1998, by and among TSAT, the Company and the 4 Trustee, pursuant to which the Company assumed TSAT's obligations with respect to the Discount Notes, and (ii) the Indenture dated as of February 20, 1997, by and between TSAT and the Trustee, with respect to the Current Pay Notes, as amended by the First Supplemental Indenture dated as of April 1, 1998, by and among TSAT, the Company and the Trustee, pursuant to which the Company assumed TSAT's obligations with respect to the Current Pay Notes. "Medium Power Agreement" means the Asset Purchase Agreement dated as of January 22, 1999, among Hughes, the Company, PRIMESTAR Partners L.P., PRIMESTAR MDU, Inc., and the stockholders of the Company (or affiliates thereof) listed therein. "Medium Power Asset Sale" means the sale to Hughes, pursuant to the Medium Power Agreement, by the Company (and the subsidiaries of the Company party thereto), on the terms and conditions set forth therein, of substantially all the assets of the Company. "Medium Power Closing Date" means the date that the Medium Power Asset Sale is consummated pursuant to the Medium Power Agreement. "Minimum Tender Percentage" means 80%. "Notes" means and includes each of the Bridge Loans and each of the Bonds. All references herein to any "tranche" of Notes or Bonds shall mean the Bridge Loans, the Current Pay Notes or the Discount Notes, as applicable. "Note Purchase Closing Date" means (i) in the case of any Private Transaction, the Medium Power Closing Date, and (ii) in the case of any Exchange Offer, the later of (A) the Medium Power Closing Date and (B) the third business day after the expiration of the period that such Exchange Offer is required to be kept open under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, including any extensions of such period required as 5 a result of any amendment to the terms of such Exchange Offer otherwise permitted by this Agreement. "Person" means any individual, partnership, corporation, limited liability company, association, trust, joint venture, unincorporated organization or other entity. "Pledge and Security Agreement" means a pledge and security agreement with respect to the GMH Shares, substantially in the form of Exhibit C. "Private Transaction" means any transaction or series of transactions by which the Company acquires (i) the Bonds or (ii) Bridge Loans, on the terms and conditions set forth herein. Each Holder that enters into a Private Transaction with the Company shall be deemed to have consented to the Proposed Amendment for each tranche of Notes held by such Holder, with respect to all Notes of such tranche with respect to which such Holder has sole or shared voting power. "Proposed Amendment" means, with respect to each of the Existing Agreements, an amendment to such Existing Agreement eliminating substantially all of the covenants therein, other than the covenants to pay interest on and principal of the Notes when due and certain covenants relating to required purchase offers, as well as certain events of default. The Proposed Amendment to the Interim Loan Agreement will be set forth in an amendment between the Company and the agents thereunder, and the Proposed Amendment to each of the Indentures will be set forth in supplemental indentures thereto, to be entered into in accordance with the terms of such Existing Agreements, as applicable. A summary of each of the Proposed Amendments is attached hereto as Schedule 3. "Pro Rata Share" means, for each Holder, the percentage that the principal amount of such Holder's Notes purchased pursuant to one or more Exchange Offers and/or Private Transactions 6 bears to the aggregate principal amount of all Notes purchased pursuant to one or more Exchange Offers and/or Private Transactions. "Registration Rights Agreement" means a Registration Rights Agreement relating to the Share Appreciation Rights, substantially in the form of Exhibit E. "SEC" means the Securities and Exchange Commission. "SEC Communication" means a written or oral communication from the staff of the SEC, received by the Company or any of its representatives or advisors (including, without limitation, legal counsel) prior to the Medium Power Closing Date, advising, in substance, that the staff of the SEC would view the Company's purchase of Notes (or of any of the Notes of one or more tranches) in one or more Private Transactions, including without limitation any offering or sale of Share Appreciation Rights in connection therewith, as a violation or potential violation of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any other applicable U.S. Federal securities law. "Senior Bank Facility" means the Company's Senior Credit Agreement dated as of March 31, 1998, between the Company and the parties thereto, as amended. "Share Appreciation Rights" means transferable rights issued by (i) the Company or (ii) a trust or special purpose vehicle established by the Company with the consent of a majority of the Holders by principal amount, substantially in the form of Exhibit F attached hereto, entitling the holders thereof to payment by the issuer, on the terms and subject to the conditions set forth therein, based on the appreciation, if any, in the market value of an aggregate of 4,871,448 shares of the Class H Common Stock, par value $0.10 per share, of General Motors Corporation. 7 "Tender Fraction" means the quotient of the Minimum Tender Percentage divided by the Actual Lock-up Percentage, expressed as a fraction. "Transaction Documents" shall have the meaning ascribed to such term in Section 17 hereof. "TSAT" means TCI Satellite Entertainment, Inc. Section 2. Purchase and Sale of Notes. (a) The Company hereby agrees to -------------------------- buy from each Holder, and such Holder hereby agrees to sell, on the applicable Note Purchase Closing Date, such Holder's Notes, on the terms and conditions set forth herein. The aggregate purchase price for all Notes purchased from each Holder pursuant to this Section 2 shall be equal to (i) $850 for each $1,000 principal amount of Notes so purchased, plus (ii) such Holder's Pro Rata Share of the Share Appreciation Rights (collectively, the "Agreed Consideration"); provided, however, that if the Actual Lock-up Percentage exceeds the Minimum - - ----------------- Tender Percentage, the Company will pay the Agreed Consideration to each Holder with respect to that fraction of such Holder's Notes equal to the Tender Fraction, and will pay to each Holder cash in the amount of 101% of the principal amount of the remainder of such Holder's Notes (the "101 Consideration") on (i) the Note Purchase Closing Date, if all Holder's Notes are purchased pursuant to Private Transactions and (ii) if an Exchange Offer is commenced pursuant to the terms hereunder, on the consummation of such Exchange Offer. In addition, on the applicable Note Purchase Closing Date (and earlier if otherwise required), the Company shall pay all accrued and unpaid interest (determined, in the case of the Discount Notes, as if the Company had made a Cash Interest Election as of February 15, 1999) in respect of the Notes purchased on such date through the date of such payment, whether or not then due. Anything contained herein to the contrary notwithstanding, the obligation of the Company to purchase and pay for the Notes under this Section 2, whether pursuant to an Exchange Offer or Private Transaction, 8 shall be subject to the condition that, on or prior to the first Note Purchase Closing Date, the Medium Power Asset Sale shall have been consummated and the conditions listed in Section 20, as in effect at such time, shall have been satisfied. (b) In the event a Note Purchase Closing Date occurs with respect to the Bridge Loans prior to a Note Purchase Closing Date with respect to the Bonds, then the amount payable with respect to such Bridge Loans on the applicable Note Purchase Closing Date shall be equal to (i) $850 for each $1,000 principal amount of Notes so purchased, plus (ii) such Holder's Bridge Holder's Minimum Pro Rata Share of the Share Appreciation Rights. On any subsequent Note Purchase Closing Date, subject to Section 3(e) hereof, such a Holder of Bridge Loans shall receive as additional consideration (i) any additional Share Appreciation Rights and (ii) any 101 Consideration to which such Holder of Bridge Loans may be entitled to receive pursuant to Section 2(a), calculated on the basis of all Notes purchased to such date. (c) The closing of each purchase of Notes referenced in Section 2(a) above shall take place at the offices of Ropes & Gray, 885 Third Avenue, New York, New York (or at such other place as the Medium Power Asset Sale shall be closing, if such closings are concurrent) at 10:00 a.m. (Eastern time) on the applicable Note Purchase Closing Date, subject to the satisfaction or waiver (if waivable) of the terms and conditions set forth herein, at which time the Company shall deliver the consideration set forth in Section 2(a). The cash portion of such consideration shall, unless otherwise requested by each Holder, be paid by wire transfer of immediately available federal funds. (d) If the Company receives from Hughes any consideration in respect of the Medium Power Asset Sale or the High Power Asset Sale, not currently provided for in the Medium Power Agreement or in the High Power Agreement ("Additional Consideration"), the Company shall 9 increase the aggregate cash consideration being paid to the Holders pursuant to this Section 2 by an aggregate amount equal to 80% of such Additional Consideration; provided, however, that any Additional Consideration must be -------- ------- provided for in an amendment to the Medium Power Agreement or the High Power Agreement. For purposes of clarifying what constitutes "Additional Consideration", (i) the execution by the Company and Hughes of the Agency Agreement, dated as of February 25, 1999 and (ii) the assumption by Hughes of working capital or other obligations of the Company, shall not constitute Additional Consideration. Section 3. Exchange Offer or Private Transaction. (a) Each purchase and ------------------------------------- sale of Notes pursuant to Section 2 above shall be effected by means of a Private Transaction, unless the Company has received an SEC Communication, in which case any such purchase and sale of the Bonds may be effected by means of (i) an Exchange Offer, or (ii) a combination of the Exchange Offer and one or more Private Transactions, subject to compliance with the requirements of the U.S. Federal securities laws and the rules and regulations of the SEC promulgated thereunder, in accordance with the SEC Communication and any written legal opinion from Company counsel. (b) If the Company shall commence an Exchange Offer with respect to any tranche of Bonds, the Company will commence such Exchange Offer within five business days after the first Note Purchase Closing Date and keep it open for at least 20 business days. (c) If the Company shall consummate, pursuant to a Private Transaction, the purchase and sale of any Note of a tranche of Notes, it shall purchase all the Notes of such tranche held by the Holders hereunder pursuant to one or more Private Transactions. (d) The Company shall promptly notify the parties specified in Section 23 of any SEC Communication received by the Company or any of its representatives. If such SEC 10 Communication is in writing, such notice shall include a copy thereof; if in oral form, a fair summary thereof in writing, certified as accurate by an officer of the Company. (e) In the event that Bridge Loans are purchased before the Bonds, the definitive calculation of each Holder's Pro Rata Share of the Share Appreciation Rights, and each Holder's 101 Consideration, shall be made upon consummation of the Exchange Offer. In the event that the Exchange Offer is not consummated for any reason, then at such time, if any, that the Exchange Offer is withdrawn or abandoned, then the Company and those Holders which have sold Notes (the "Selling Holders") to the Company hereunder shall engage in good faith negotiations to determine the amount, if any, of additional 101 Consideration and Share Appreciation Rights in excess of the Bridge Holder's Minimum Pro Rata Share of Share Appreciation Rights which should be paid to such Selling Holders. In determining such amounts, the parties shall take into account, among other things, the consideration, if any, paid to Holders whose Notes were not purchased hereunder or in the Exchange Offer and the value of the Share Appreciation Rights as of the time of such negotiations. Section 4. Terms of the Exchange Offer and Private Transaction. The terms --------------------------------------------------- and conditions of all Private Transactions effected hereunder, including any amendments thereto, shall be identical in all material respects, except for such differences as shall be necessary to reflect the identity of the Holder, the tranche and amount of Notes to be sold thereunder, and the manner in which such Holder holds such Notes, and the terms and conditions of such Private Transactions shall be identical in all material respects with those of any Exchange Offer commenced hereunder, except for such differences as shall be reasonable and customary in the context of the transactions contemplated hereby, or as required by applicable law or regulation. Certain reasonable and 11 customary differences reflected in an Exchange Offer would include, without limitation, a minimum tender condition not greater than the Minimum Tender Percentage and a provision permitting the Company to refuse to purchase the Bonds pursuant to this Agreement upon the occurrence of the following events: (a) there shall be instituted or pending any action, proceeding or formal investigation by or before any United States state or Federal court or government agency or authority, which challenges the making of the Exchange Offer, the acquisition of Notes pursuant to the Exchange Offer or the obtaining of consents to the Proposed Amendments pursuant to the Exchange Offer; (b) a statute, rule, regulation, judgment, order, stay, decree or injunction shall have been proposed (with a proposed effective date prior to the expected closing date for the Exchange Offer), promulgated, enacted, entered, enforced or deemed to be applicable by any United States state or Federal court or government agency or authority, which would directly or indirectly prohibit, prevent, restrict or delay consummation of the Exchange Offer; (c) the Trustee under either Indenture shall have objected in any respect to, or taken any action that could, in the sole judgment of the Company, adversely affect the consummation of the Exchange Offer or the Company's ability to effect the Proposed Amendments, or shall have taken any action that challenges the validity or effectiveness of the procedures used by the Company in soliciting consents to the Proposed Amendments (including the form thereof) or in the making of the Exchange Offer or the acceptance of or payment for any of the Bonds; or (d) upon the occurrence of any of the events described in Sections 4(a), 4(b) and 4(c) hereof, the Company shall use its best efforts to cure such events; if such an event is not cured within 15 days after the Company's refusal to purchase any of the Bonds as a result of the occurrence of 12 any event described in Sections 4(a), 4(b) and 4(c), then, the holders of a majority of the Bonds held by Holders then outstanding (provided, however, that ----------------- for purposes of voting, any Bonds held by the Company shall not be voted and shall not be counted for any voting purposes) shall have the right to terminate this Agreement upon delivery of written notice to the Company and the other Holders. Section 5. Amendments to the Exchange Offer or Private Transaction. The ------------------------------------------------------- Company shall have no right to amend any Exchange Offer or Private Transaction hereunder, provided, however, that the Company (i) may amend any Exchange Offer ----------------- so as to extend the Exchange Offer (subject to Section 4(d) hereof), if at the time of any such extension the conditions to closing set forth in such Exchange Offer shall not have been satisfied or waived, or to reduce any minimum tender condition of such Exchange Offer permitted by Section 4, and (ii) may, subject to Section 4 hereof, amend any Exchange Offer or Private Transaction to increase the aggregate purchase price payable thereunder above the Agreed Consideration or to waive any closing condition of the Company thereunder. Section 6. Tender in Exchange Offer; No Revocation, Etc. (a) If the --------------------------------------------- Company commences an Exchange Offer for Bonds of any tranche held by any Holder, then subject to the conditions set forth in Section 9(a), on or before the termination date for such Exchange Offer, such Holder shall (i) execute a "Letter of Transmittal and Consent" pursuant to such Exchange Offer with respect to that fraction of all Bonds of such tranche that such Holder directly or indirectly holds, manages or advises equal to the Tender Fraction, and (ii) tender and deliver all such Bonds to the Company pursuant to such Exchange Offer, accompanied by such executed Letters of Transmittal and Consent. 13 (b) Prior to the termination of this Agreement as provided in Section 13, each Holder agrees that it will not (i) revoke or withdraw any tender made by it of the Holder's Notes pursuant to any Exchange Offer commenced hereunder, (ii) revoke or modify any consent to the Proposed Amendments delivered by it, or (iii) seek to amend, modify or terminate any Private Transaction entered into by such Holder hereunder, except as expressly provided herein or therein. Section 7. Support of the Exchange Offer or Private Transaction. (a) Each ---------------------------------------------------- Holder agrees that from and after the date hereof, (i) it will not vote for, consent to, provide any support for, participate in the formulation of, or solicit or encourage others to formulate any other tender offer, settlement offer, or exchange offer for the Notes other than any Exchange Offer or Private Transaction commenced hereunder; (ii) it will use its reasonable and appropriate efforts to cause the Committees to take all appropriate actions, including, without limitation, execution and distribution to holders of Notes of a letter asking such holders to tender their Notes in any Exchange Offer, deemed to be advisable in order to cause the consummation of any Exchange Offer commenced hereunder or, subject to compliance with applicable securities laws, rules and regulations, to cause such holders of Notes to sell or exchange in any such Exchange Offer or in Private Transactions Notes in an aggregate principal amount equal to at least 80% of the aggregate principal amount of Notes outstanding on the date hereof, including at least 51% of the aggregate principal amount of each tranche of Notes; and (iii) it will permit public disclosure, including in a press release, of the contents of this Agreement, including, but not limited to, the commitments given in this Section 7(a), but not including information with respect to individual Holder's ownership of Notes; provided, however, that ----------------- nothing herein shall be deemed to prevent any Holder from taking any action which 14 it is obligated to take in the performance of any fiduciary or similar duty which the Holder owes to any other Person. (b) Each Holder further agrees that it will not object to or otherwise commence any proceeding to oppose any Exchange Offer commenced hereunder, or any Private Transaction, and shall not take any action that is inconsistent with, or that would delay the consummation of any Exchange Offer or Private Transaction hereunder; provided, however, that nothing herein shall be ----------------- deemed to prevent any Holder from taking any action which it is obligated to take in the performance of any fiduciary or similar duty which the Holder owes to any other Person. Section 8. Certain Obligations of Each Holder. (a) Subject to the ----------------------------------- satisfaction of the conditions set forth in Section 9(a) hereof: (i) Each Holder hereby waives any default, event of default or other breach under any of the Notes or Existing Agreements that such Holder might otherwise have claimed to exist on the date hereof or arising hereafter and agrees to forbear until the termination of this Agreement from the exercise of any rights or remedies such Holder may have under the Existing Agreements, applicable law or otherwise (including, in the case of any Notes governed by an indenture, instructing the trustee under such indenture to refrain from taking actions on its behalf, and, in the case of any Notes governed by a credit agreement, instructing the agents under such credit agreement to refrain from taking actions on its behalf), provided, however, ----------------- that, upon any termination of this Agreement pursuant to any of 15 subsections (ii) through (vii) of Section 13(a) hereof, the foregoing waivers and forbearance shall be null and void and of no force and effect whatsoever; (ii) Each Holder of the Bonds hereby agrees (A) to cooperate with the Company or any other Person to enable The Depository Trust Company (the "DTC"), the ultimate holder of record of the Bonds, to convey its consent to the Proposed Amendments to the Indentures to the Trustee prior to the Note Purchase Closing Date for such Bonds; provided, --------- however, that the Proposed Amendments shall not become effective until ------- the Note Purchase Closing Date for such Bonds and (B) to remit its Bonds to the Trustee's account at the DTC on the applicable Note Purchase Closing Date. (iii) Each Holder of a Bridge Loan hereby agrees (A) to extend the period of time by which the Company is required to deliver financial statements pursuant to Section 5.1(B) of the Interim Loan Agreement to April 15, 1999, and (B) until the termination of this Agreement, to waive any right which may arise if any "going concern" or similar qualification in the audit report referred to therein would be an "Impermissible Qualification" (as defined in the Interim Loan Agreement) under such Section 5.1(B), provided, however, that, upon ----------------- any termination of this Agreement pursuant to any of subsections (ii) through (vii) of Section 13(a) hereof, the waiver in clause (B) of this 16 paragraph shall be null and void and of no force and effect whatsoever with respect to any audit report qualification, other than a qualification that is dependent on the closing of the Medium Power Asset Sale. (iv) Each Holder hereby agrees to execute and deliver to the Company, on or before the Medium Power Closing Date, such Holder's written consent to the Medium Power Asset Sale, substantially in the form of Exhibit G attached hereto. Such consent shall provide for the waiver of all covenants, terms and conditions of the Notes and the Existing Agreements that (A) would prohibit the Medium Power Asset Sale, or (B) would cause the Medium Power Asset Sale to give rise to any default, additional liability, mandatory prepayment or offer to purchase upon a "change of control" under any of the Notes or Existing Agreements, including, without limitation, under Section 5.01 of each of the Indentures or under Section 6A.8 of the Interim Loan Agreement; provided, however, the waivers of such Holder set forth in clause (B) ----------------- of this subsection 8(a)(iv) shall be null and void and of no force and effect whatsoever, upon the earlier of (I) the failure or refusal by the Company to purchase the Notes of any Holder as set forth in Section 2 hereof, on or before the applicable Note Purchase Closing Date or (II) 17 termination of this Agreement pursuant to subsections (ii) through (vii) of Section 13(a) hereof. (b) Subject to the satisfaction of the conditions set forth in Sections 9(a) and 9(b) hereof, each Holder hereby agrees to execute and deliver to the Company, on or before the Note Purchase Closing Date, a mutual written release signed by such Holder substantially in the form of Exhibit H attached hereto. Such release shall provide for, among other things, the waiver, release, discharge and agreement not to sue each of the Company, its current, former and future stockholders, their respective subsidiaries and affiliates, all former, current or future officers, directors, employees, agents, advisors and representatives of any of the foregoing (including without limitation the initial purchasers who purchased the Bonds from the Company's predecessor and the agents, arrangers and syndicators of the Bridge Loans, and any and all of their affiliates, former, current or future officers, directors, employees, agents, advisors and representatives), and the predecessors, successors and assigns of each of the foregoing (collectively, the "Releasees") as to all liabilities of any kind that the Holder ever had, has or hereafter may have against any Releasee as a result of or in any manner related to the Holder's purchase, ownership or sale of the Notes. (c) Subject to the satisfaction of the conditions set forth in Sections 9(a) and 9(b) hereof, each Holder hereby further consents, with respect to all of such Holder's Notes, to the adoption of the Proposed Amendments, effective as of the purchase of such Holder's Notes as set forth in Section 2 on the Note Purchase Closing Date. (d) Any additional Notes acquired by a Holder after the date hereof shall automatically be deemed to be subject to the terms of this Agreement. Each Holder shall promptly 18 advise the Company of the acquisition of any such additional Notes and promptly deliver to the Company a revised and restated version of Schedule 2. (e) Each Holder hereby agrees that it shall not sell, use, assign, transfer or otherwise dispose of any of the Notes, or any other securities of or claims against the Company unless the transferee agrees in writing to be bound by all the terms of this Agreement by executing (i) a counterpart signature page of this Agreement and (ii) the "Form of Provisions for Transfer of Agreement" attached as Exhibit D to this Agreement, and delivering a copy of such items to the Company. Any such transfer shall be effective only upon receipt of such items by the Company and, upon receipt thereof, the selling Holder shall be relieved of all obligations hereunder. Section 9. Conditions to the Obligations of Each Holder. (a) The -------------------------------------------- obligations of each Holder set forth in Section 8(a), Section 8(b) and Section 8(c), and, if an Exchange Offer is commenced hereunder, the obligation of such Holder to tender its Notes thereunder, are subject to (i) the prior execution and delivery of the Funding Agreement by each of the parties thereto, (ii) there having occurred no material breach of the Funding Agreement by any party thereto, and (iii) there having occurred no termination of this Agreement prior to the Holders' performance of such obligations. (b) The obligations of each Holder to sell its Notes in any Private Transaction or pursuant to any Exchange Offer hereunder, to deliver a release as set forth in Section 8(b) and to consent to the Proposed Amendments as set forth in Section 8(c), are subject to the following: (i) the payment and delivery to such Holder of the aggregate purchase price set forth in Section 2 hereof, including, without limitations, the issuance of the Share Appreciation Rights; 19 (ii) the execution and delivery by the Funding Parties of the Indemnity Agreement; (iii) the execution and delivery by the Company (or the issuer, if different from the Company) of the Registration Rights Agreement and the Pledge and Security Agreement and delivery by the Company of the Collateral (as defined in the Pledge and Security Agreement) to the collateral agent under the Pledge and Security Agreement; (iv) the execution and delivery of the Funding Agreement by each of the parties thereto and the continued effectiveness of such Funding Agreement; (v) the payment by the Company of certain fees and expenses of the Committees of holders of Notes in the amount of $3,150,000; (vi) the payment in full by the Company of all obligations of the Company under its Senior Bank Facility and the termination of all commitments thereunder; (vii) the execution and delivery by TSAT and the Company of the TSAT SARs (as defined in the Pledge and Security Agreement), by the parties to the TSAT Pledge Agreement (as defined in the Pledge and Security Agreement) and the delivery of the collateral thereunder (including 1,407,307 shares of Class H Common Stock, par value $0.10 per share, of General Motors Corporation) pursuant to the terms thereof and the delivery of all of the above to the Collateral Agent (as defined in the Pledge and 20 Security Agreement) under the terms of the Pledge and Security Agreement. (viii) the receipt of customary officer's certificates from the Company. Section 10. Certain Obligations of the Company. (a) Subject to the ---------------------------------- performance by each Holder of its obligations to be performed pursuant to this Agreement on or before the date required for such performance (assuming satisfaction of the conditions to such obligations set forth herein), the Company shall, on the Medium Power Closing Date: (i) perform all obligations of the Company to be performed under the Medium Power Purchase Agreement; (ii) waive the Debt Tender Condition; and (iii) upon the closing of the Medium Power Asset Sale, apply the cash proceeds received by the Company thereunder on the Medium Power Closing Date as provided in Section 10(b); 21 (b) Subject to the closing of the Medium Power Sale and on or prior to each Note Purchase Closing Date hereunder, as applicable, the Company shall: (i) purchase from each Holder, whose Notes are being purchased on such Note Purchase Closing Date, all Notes subject to this Agreement on the terms set forth herein and make, or cause to be made, the payment and delivery to such Holder of the aggregate purchase price set forth in Section 2 hereof, including, without limitation, the issuance of the Share Appreciation Rights and payment of all accrued and unpaid interest; (ii) deliver to each Holder concurrently with the purchase of such Holder's Notes, the Indemnity Agreement, duly executed by each of the Funding Parties; (iii) execute and deliver the Registration Rights Agreement and the Pledge and Security Agreement to each Holder whose Notes are being purchased on such Note Purchase Closing Date; (iv) provide a certificate, executed by each of the Funding Parties, confirming the due execution and delivery of the Funding Agreement by each of such parties thereto and the continued effectiveness of such 22 Funding Agreement, to each Holder whose Notes are being purchased on such Note Purchase Closing Date; (v) execute and deliver counterparts to the mutual release signed by the Holders pursuant to Section 9(b) hereof; (vi) on the first Note Purchase Closing Date only, pay certain fees and expenses of the Committees of holders of Notes in the amount of $3,150,000; and (vii) on the first Note Purchase Closing Date only, pay and discharge in full all obligations of the Company under the Senior Bank Facility and terminate all commitments thereunder and provide a certificate of the President of the Company confirming the payment in full by the Company of all obligations of the Company under its Senior Bank Facility and the termination of all commitments thereunder. (c) On the Medium Power Closing Date, upon the closing of the Medium Power Asset Sale, the Company shall deposit into escrow pursuant to an "Escrow Agreement" substantially in the form of Exhibit I attached hereto an amount equal to (i) 88.2% of the aggregate principal amount of the Current Pay Notes, the Discount Notes and the Bridge Loans outstanding immediately prior to the Medium Power Closing Date, determined in the case of the Discount Notes as if the Company had made a Cash Interest Election as of February 15, 1999, plus (ii) ---- 100% of all accrued unpaid interest through the Medium Power Closing Date under the Current Pay Notes, the Discount 23 Notes and the Bridge Loans, determined in the case of the Discount Notes as if the Company had made a Cash Interest Election as of February 15, 1999, minus ----- (iii) all cash paid to Holders on the first Note Purchase Closing Date. Such Escrow Agreement shall prohibit the escrowed funds from being used during the term thereof for any purpose whatsoever other than to pay the tender or purchase price of Notes in accordance with this Agreement and any accrued unpaid interest thereon. (d) The Company shall close all Private Transactions simultaneously with the closing of the Medium Power Asset Sale, and shall close all purchases of Notes pursuant to any Exchange Offers as promptly thereafter as possible. (e) The Company shall not amend the Funding Agreement prior to the final Note Purchase Closing Date hereunder; thereafter, the Company shall not amend the Funding Agreement in a manner that adversely affects the Holders without the consent of Holders of 66-2/3% of the aggregate principal balance of Notes; provided, however, that for purposes of voting, any Notes held by the Company - - ----------------- shall not be voted and shall not be counted for any voting purposes. Section 11. Representations and Warranties of the Company. The Company --------------------------------------------- hereby acknowledges, warrants and represents that the following statements are true, correct and complete as of the date hereof, and will be true, correct and complete on the Note Purchase Closing Date: (a) Power and Authority. It has all requisite power and authority to ------------------- enter into this Agreement and to carry out the transactions contemplated by, and perform its respective obligations under, this Agreement; (b) Authorization. The execution and delivery of this Agreement and the ------------- performance of its obligations hereunder have been duly authorized by all necessary action on its part, it has been duly authorized to make the representations and commitments included herein, and 24 the person executing and delivering this Agreement on behalf of the Company has been duly authorized to do so; (c) Organization. The Company is a corporation duly organized, validly ------------ existing and in good standing under the laws of the State of Delaware. (d) No Conflicts. The execution, delivery and performance by it of this ------------ Agreement and any other agreement provided for hereunder, and consummation of the transactions provided for hereunder or thereunder, do not and shall not violate any provision of law, rule or regulation applicable to it or any of its subsidiaries or its organizational documents or those of any of its subsidiaries; (e) Binding Obligation. This Agreement is the legally valid and binding ------------------ obligation of the Company, enforceable against it by each Holder in accordance with the terms of this Agreement; (f) Acknowledgment. This Agreement is the product of good faith -------------- negotiations between the Company and the Holders and/or their representatives; and (g) Representation by Counsel. It has been represented by counsel in ------------------------- connection with this Agreement and the transactions contemplated by this Agreement. The provisions of this Agreement shall be interpreted in a reasonable manner to effect the intent of the parties hereto. Section 12. Acknowledgments, Warranties and Representations of the ------------------------------------------------------ Holders. Each Holder hereby acknowledges, warrants and represents that, as to such Holder, the following statements are true, correct and complete as of the date hereof, and will be true, correct and complete on the applicable Note Purchase Closing Date: 25 (a) Power and Authority. It has all requisite power and authority to ------------------- enter into this Agreement and to carry out the transactions contemplated by, and perform its respective obligations under, this Agreement; (b) Authorization. The execution and delivery of this Agreement and the ------------- performance of its obligations hereunder have been duly authorized by all necessary action on its part, it has been duly authorized to make the representations and commitments included herein, and the person executing and delivering this Agreement on behalf of the Holder has been duly authorized to do so; (c) Organization. Such Holder (except if such Holder is an individual) ------------ is an organization duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization. (d) No Conflicts. The execution, delivery and performance by it of this ------------ this Agreement and any other agreement provided for hereunder, and consummation of the transactions provided for hereunder or thereunder, do not and shall not violate any provision of law, rule or regulation applicable to it or any of its subsidiaries or its organizational documents or those of any of its subsidiaries, or any participation agreement relating to any Notes to which such Holder is a party; (e) Binding Obligation. This Agreement is the legally valid and binding ------------------ obligation of the undersigned, enforceable by the Company against it in accordance with the terms of this Agreement; (f) Acknowledgment. This Agreement is the product of good faith -------------- negotiations between the Company and the Holders and/or their representatives; 26 (g) Representation by Counsel. It has been represented by counsel in ------------------------- connection with this Agreement and the transactions contemplated by this Agreement. The provisions of this Agreement shall be interpreted in a reasonable manner to effect the intent of the parties hereto; (h) Securities Held by Holder. Set forth in Schedule 2 attached hereto ------------------------- is the amount of Notes with respect to which the Holder is record holder, beneficial owner or serves as investment manager or financial advisor with investment discretion and authority; (i) Reliance by Company. It is making the commitments and ------------------- representations included in this Agreement to induce the Company to take action subsequent to the effective date of this Agreement, to consummate the Medium Power Asset Sale and to implement the transactions contemplated by the Exchange Offer or Private Transaction, as applicable, and that the Company is relying upon such commitments and representations; (j) Information Reviewed by Holders. Each Holder has reviewed, or has ------------------------------- had the opportunity to review, with the assistance of professional financial and legal advisors of its choosing, sufficient information necessary for it to decide to tender the Holder's Notes pursuant to the Exchange Offer or enter into a Private Transaction, as applicable; (k) Accredited Investor/QIB Status. It is an accredited investor ------------------------------ ("Accredited Investor") within the meaning of the Securities Act of 1933, as amended (the "Securities Act"), and the rules and regulations of the SEC promulgated thereunder, or a qualified institutional buyer ("QIB") within the meaning of Rule 144A under the Securities Act, and that it has such experience and expertise in financial matters as to enable it to evaluate the potential risks and benefits of entering into this Agreement and to make all investment decisions relating thereto. It is entering into this Agreement and acquiring the Share Appreciation Rights to be acquired by it hereunder for its 27 own account, or a fund or other account as to which such Holder serves as investment manager or financial advisor with investment discretion and authority, and not with a view to the distribution thereof, and has not participated in any public offering of any Share Appreciation Rights or any general solicitation or public offering to Holders to enter into this Agreement; and (l) Record Date. Such Holder is the record holder of or the beneficial ----------- owner of, or serves as investment manager or financial advisor with investment discretion and authority for the record holder or beneficial owner of, the Notes listed opposite the name of such Holder on Schedule 2 attached hereto as of the date of this Agreement (such date being the record date for the Private Transactions and any Exchange Offer), or, if such Holder (or any fund or account for which such Holder serves as investment manager or financial advisor with investment discretion and authority) acquired any Notes after the date of this Agreement, such Holder has caused the Company to be provided with a letter, substantially in the form of Exhibit J attached hereto, signed by or on behalf of the person or entity that was the record holder or beneficial owner of such Notes on such record date. Section 13. Termination of this Agreement. (a)This Agreement shall ----------------------------- terminate upon the earliest to occur of (i) the purchase by the Company of all Notes held by the Holders through one or more Exchange Offers and/or Private Transactions and the payment or delivery of the consideration therefor set forth in Section 2 hereof, and the execution and delivery of the Indemnity Agreement, the Pledge and Security Agreement, the Registration Rights Agreement, the Share Appreciation Rights, consents to the Medium Power Asset Sale (in substantially the form of Exhibit G attached hereto), mutual releases (in substantially the form of Exhibit H attached hereto) and the escrow agreement (as provided in Section 10(c) hereof, but only if there is an Exchange Offer); (ii) 28 the commencement of a case by or against the Company or any Funding Party under Title 11, United States Code, (iii) the acceleration of the obligations of the Company under the Senior Bank Facility prior to the Medium Power Closing Date, (iv) the giving of notice by the Company required under Section 14 that the closing of the second portion of the High Power Agreement will take place prior to the closing of the Medium Power Asset Sale, (v) the failure of the Company to purchase, whether by Exchange Offer or Private Transaction, all Holders' Notes on or prior to the applicable Note Purchase Closing Date, (vi) the occurrence of the events specified in Section 4(d) hereof or (vii) 5:00 p.m., Eastern time on May 21, 1999; provided, however, that in the event the Company has commenced an ----------------- Exchange Offer in accordance with this Agreement which has not been consummated by May 21, 1999, in the absence of the events set forth in Section 4(d) hereof, the "May 21, 1999" date shall be extended to the date four business days after the date upon which such Exchange Offer is consummated in accordance with this Agreement; provided, further, that any termination of this Agreement shall not ----------------- limit the remedies of any Party for a breach of this Agreement prior to such termination. (b) Upon termination of this Agreement pursuant to any of subsections (a)(ii) through (a)(vii) of this Section 13: (i) the waivers under Section 8 hereof by any Holder all of whose Notes have not been purchased pursuant to this Agreement (a "Remaining Holder"), and any waivers delivered by the Company to any Remaining Holder under Section 10(b)(v) hereof, shall be null 29 and void and of no force or effect whatsoever, except as expressly provided in Section 8(a)(iii); (ii) a Remaining Holder may exercise any rights and remedies it may have under the Existing Agreements, applicable law or otherwise; (iii) any release delivered by a Remaining Holder under Section 8(c) shall be null and void and of no force or effect whatsoever; and (iv) neither the Company nor any of the Holders shall have any obligations under this Agreement to any other Party hereto, except as expressly provided in the proviso at the end of ------- Section 13(a). (c) The provisions of Section 10(e) shall survive any termination of this Agreement pursuant to clause (i) of Section 13(a). Section 14. Termination of Ground Satellite Escrow Agreement. The Escrow ------------------------------------------------ Agreement dated as of March 10, 1999, among the Company, PRIMESTAR Partners L.P. and each of the Committees (the "Ground Satellite Escrow Agreement") shall remain in full force and effect until such time as the Medium Power Closing Date and the first Note Purchase Closing Date. Attached hereto as Schedule 4 is a list of the bank accounts in which the Company holds the funds subject to the Ground Satellite Escrow Agreement. The Company agrees that it shall give to the Holders written notice of the closing of the second portion of the High Power Agreement if such closing is scheduled to occur before the consummation of the Medium Power Asset Sale; such notice 30 shall be given to the Holders not less than three business days prior to the scheduled closing of the second portion of the High Power Agreement. Section 15. No Waiver of Participation. The Company and each Holder each -------------------------- expressly acknowledges and agrees that, except as expressly provided in this Agreement, nothing herein is intended to, or does, in any manner waive, limit, impair or restrict the ability of any Party to protect and to preserve all of its rights, remedies and interests, including, without limitation, with respect to its claims against and interests in the Company. Section 16. Further Assurances. Each Holder hereby further covenants and ------------------ agrees to execute and deliver all further agreements and take all further action that may be reasonably necessary or desirable, or that the Company may reasonably request, in order to enforce and effectively implement the terms and conditions of this Agreement. Until the final Note Purchase Closing Date, the Company agrees to allow any holder of Notes that is a QIB or an Accredited Investor to become a party to this Agreement. The final Note Purchase Closing Date shall be the first and only Note Purchase Closing Date if the Company purchases all of the Holders' Notes in Private Transactions on the Medium Power Closing Date. Section 17. Complete Agreement; Modification of Agreement. This --------------------------------------------- Agreement, the Indemnity Agreement, the Pledge and Security Agreement, the Registration Rights Agreement, the Share Appreciation Rights, the consents to the Medium Power Asset Sale (in substantially the form of Exhibit G attached hereto), the mutual releases (in substantially the form of Exhibit H attached hereto) (including, without limitation, the Schedules and Exhibits attached hereto) (collectively, the "Transaction Documents"), constitute the complete agreement between the Parties with respect to the subject matter hereof and thereof and supersede all prior and contemporaneous negotiations, 31 agreements and understandings with respect to the subject matter hereof and thereof. The Transaction Documents (with the exception of the Pledge and Security Agreement, which may be modified pursuant to the terms and conditions contained therein) may not be modified, altered, amended or waived except by an agreement in writing signed by the Company and the Holders of at least 66-2/3% of the aggregate principal balance of the Notes and a majority of the aggregate principal balance of each tranche of Notes, provided however, that the Agreed -------- ------- Consideration shall not be reduced without the consent of each Holder affected, and provided further that for purposes of voting, any Notes held by the Company -------- ------- shall not be voted and shall not be counted for any voting purposes. Section 18. Specific Performance. The Parties acknowledge and agree that -------------------- money damages would not be a sufficient remedy for any breach of this Agreement by any Party and each non-breaching Party shall be entitled to specific performance and injunctive or other equitable relief as a remedy of any such breach, and each Party agrees to waive any requirement for the securing or posting of a bond in connection with such remedy. Section 19. Parties. This Agreement shall be binding upon, and inure to ------- the benefit of, the Parties and their respective successors and assigns. Nothing in this Agreement, express or implied, shall give to any person or entity, other than the Parties, any benefit or any legal or equitable right, remedy or claim under this Agreement, and no other person or entity shall be a third-party beneficiary hereof. Section 20. Effectiveness; Modification of Certain Percentages. This -------------------------------------------------- Agreement shall not become effective and binding on the Parties unless and until counterpart signature pages hereto shall have been executed and delivered by the Company and Holders holding Notes that 32 constitute in the aggregate at least (i) 80% of the outstanding principal amount of Notes (the "Effectiveness Percentage") and (ii) a majority of the outstanding principal amount of each tranche of the Notes (the "Tranche Percentage"). The Company, in its sole discretion, may (but shall have no obligation to) reduce either the Effectiveness Percentage or the Tranche Percentage for the benefit of the Company. Section 21. Governing Law; Consent to Jurisdiction. This Agreement shall -------------------------------------- be construed in accordance with and governed by the internal laws of the State of New York without giving effect to any conflicts of laws principles. Each party hereto irrevocably submits to the jurisdiction of any New York State court sitting in the Borough of Manhattan or any federal court sitting in the Borough of Manhattan in respect of any suit, action or proceeding arising out of or relating to this Agreement and the transactions pursuant hereto and in connection herewith, and irrevocably agrees that all claims in respect of any such suit, action or proceeding shall be heard and determined in any such court. Each party irrevocably waives any objection which it may now or hereafter have to the laying of the venue of such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Section 22. Limitation of Obligations. Nothing contained in this ------------------------- Agreement shall be deemed to obligate any Party to engage in any action that can reasonably be expected to involve a violation of law. Section 23. Notices. All notices, requests, demands, claims, and other ------- communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given (i) upon telephonic confirmation of facsimile, (ii) when sent by overnight 33 delivery or (iii) when mailed by registered or certified mail return receipt requested and postage prepaid, to the addresses listed on the signature pages hereto. Any party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address, telephone number or telecopier number for such recipient (i) if such recipient is the Company, as set forth below: PRIMESTAR, Inc. 8085 South Chester Street Suite 300 Englewood, Colorado 80112 Telephone: (303) 712-4600 Telecopy: (303) 712-4973 Attention.: Chief Financial Officer with a copy to: Baker & Botts, L.L.P. 599 Lexington Avenue New York, New York 10022 Telephone: (212) 705-5000 Telecopy: (212) 705-5125 Attention: Marc A. Leaf, Esq. and (ii) if such recipient is a Holder, as set forth on the signature pages hereto, with copies to: Orrick, Herrington & Sutcliffe, LLP 666 Fifth Avenue New York, New York 10022 Telephone: (212) 506-5000 Telecopy: (212) 506-5151 Attention: Duncan N. Darrow, Esq. and Ropes & Gray One International Place Boston, Massachusetts 02110 Telephone: (617) 951-7000 Telecopy: (617) 951-7050 34 Attention: William F. McCarthy, Esq. using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other party notice in the manner herein set forth. Section 24. Counterparts. This Agreement may be executed in any number of ------------ counterparts, each of which shall, collectively and separately, constitute one agreement. [signature pages follow] 35 IN WITNESS WHEREOF, the undersigned parties have executed this Lock-up Agreement as of the date first above written. PRIMESTAR, INC. By:________________________________ Name: Title: NAME OF HOLDER __________________________________________ (Please type or print proper name of Holder) By:_____________________________________ Name:_____________________________________ Title: ___________________________________ Address: __________________________________ __________________________________ __________________________________ Facsimile No.:______________________________ Telephone No.:______________________________ Taxpayer Identification No.:_____________________ 36 EX-10.3 6 INDEMNITY AGREEMENT EXHIBIT 10.3 INDEMNITY AGREEMENT This Indemnity Agreement (the "Agreement" or the "Indemnity Agreement") is dated the ___ day of April, 1999 among the entities listed on the signature pages hereof as Holders (each individually a "Holder" and collectively, the "Holders"), and the parties listed on the signature pages hereof as Indemnitors (each individually an "Indemnitor" and collectively, the "Indemnitors"). RECITALS A. PRIMESTAR, Inc. ("Primestar") is the obligor with respect to (i) notes ("Bridge Loans") issued by Primestar pursuant to the Senior Subordinated Credit Agreement dated as of April 1, 1998, (ii) Primestar's 12-1/4% Senior Subordinated Discount Notes due 2007, Series A and B (the "Discount Notes") and (iii) Primestar's 10-7/8% Senior Subordinated Notes due 2007, Series A and B (the "Current Pay Notes" and, together with the Bridge Loans and the Discount Notes, the "Notes"). B. The Holders have entered into a lock-up agreement (the "Lock-up Agreement") with Primestar under the terms of which the Holders will agree to exchange with Primestar each one thousand ($1,000) dollars principal amount of Notes (pursuant to the terms of the Lock-up Agreement) for the consideration set forth in Section 2 of the Lock-up Agreement (the "Exchange Consideration"). Capitalized terms used herein but not defined shall have the meanings ascribed to such terms in the Lock-up Agreement. C. Affiliates of the Indemnitors are stockholders of Primestar and/or the account parties under certain outstanding standby letters of credit that secure certain other obligations of Primestar or its subsidiaries and will derive substantial benefits as a result of Primestar consummating the transactions contemplated by the Lock-up Agreement. D. Indemnitors' delivery to the Holders of this Indemnity Agreement is a condition to the Holders' consummation of the transactions contemplated by the Lock-up Agreement. E. The Indemnitors are the Funding Parties (as defined in the Funding Agreement). NOW, THEREFORE, in consideration of the premises and of the covenants and agreements contained herein and in the Lock-up Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby covenant and agree as follows: AGREEMENTS 1. Indemnification. --------------- Subject to the condition precedent set forth in Section 2 of this Agreement, each of the Indemnitors agrees to indemnify and hold harmless each Holder, each beneficial owner of, or party with an interest in, Notes held by such Holder and their officers, directors, agents and advisers (collectively, the "Indemnitees") from and against such Indemnitor's Pro Rata Share (as defined in the Funding Agreement) of any and all losses, claims, damages, liabilities and expenses (including, without limitation, all reasonable legal fees and other costs of defense) ("Loss") which the Indemnitees, or any of them, may become subject by reason of any action to avoid the transfer of, or otherwise recover, the Exchange Consideration, (which shall include any transfer or payment made in respect of or as security for any Exchange Consideration) any portion thereof or the value thereof, brought by or on behalf of any bankruptcy estate of Primestar or any affiliate of Primestar, or any assignee of such bankruptcy estate, or any present or future creditor of Primestar or any affiliate of Primestar, or any assignee of such a creditor, under (S)(S)544, 547, 548 or 550 of the United States Bankruptcy Code or under the Uniform Fraudulent Transfer Act, the Uniform Fraudulent Conveyance Act or any similar preference or fraudulent conveyance provision of statute or common law as in effect in any state or other jurisdiction; provided, however, that no Indemnitor shall indemnify an -------- ------- Indemnitee if such Indemnitee files an involuntary bankruptcy against Primestar or any of its affiliates at any time after the closing of the transactions contemplated by the Lock-up Agreement; provided, further, that no Indemnitor -------- ------- shall have any liability for the payment duties or other obligations of any other Indemnitor hereunder, as guarantor, co-obligor or otherwise. 2. Condition Precedent. ------------------- Anything contained herein to the contrary notwithstanding, the obligations of each Indemnitor under Section 1 of this Agreement shall not be applicable, and shall have no force or effect, unless (i) such Indemnitor shall be in default in any material respect of the obligations of such Indemnitor under the Funding Agreement, or (ii) in respect of a Loss resulting from a bankruptcy case -- of Primestar, such Indemnitor or any affiliate of such Indemnitor shall have received any recovery or distribution from the bankruptcy estate of Primestar in such bankruptcy case (a "Recovery"), and then only to the extent of such Recovery. 3. Assignment of Recovery. ---------------------- In the event that any Indemnitor or any affiliate of such Indemnitor shall receive any Recovery, whether or not such Indemnitor or affiliate sought a Recovery, such Recovery shall be held in trust for the benefit of the Indemnitees and will be turned over to the Indemnitees within five business days after such receipt for application to the obligations, if any, of such Indemnitor under Section 1 above, until such obligations shall have been satisfied in full. -2- 4. Binding Effect. -------------- This Agreement shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. No assignment by an Indemnitor shall relieve an Indemnitor from its obligations hereunder. 5. Notices. ------- All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given (i) upon telephonic confirmation of facsimile, (ii) when sent by overnight delivery or (iii) when mailed by registered or certified mail return receipt requested and postage prepaid, to the addresses listed on the signature pages hereto. Any party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address, telephone number or telecopier number for such recipient (i) if such recipient is an Indemnitor, as set forth on the signature pages hereof, with a copy to: Baker & Botts, L.L.P. 599 Lexington Avenue New York, New York 10022 Telephone: (212) 705-5000 Telecopy: (212) 705-5125 Attention: Marc A. Leaf, Esq. and (ii) if such recipient is a Holder, as set forth on the signature pages hereto, with copies to: Orrick, Herrington & Sutcliffe, LLP 666 Fifth Avenue New York, New York 10022 Telephone: (212) 506-5000 Telecopy: (212) 506-5151 Attention: Duncan N. Darrow, Esq. and Ropes & Gray One International Place Boston, Massachusetts 02110 Telephone: (617) 951-7000 Telecopy: (617) 951-7050 Attention: William F. McCarthy, Esq. using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is -3- received by the intended recipient. Any party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other party notice in the manner herein set forth. 6. General; Choice of Law; Consent to Jurisdiction. ----------------------------------------------- The invalidity or unenforceability of any provision hereof shall not affect the validity or enforceability of any other provision hereof, and any invalid or unenforceable provision shall be modified so as to be enforceable to the maximum extent of its validity or enforceability. The headings in this Agreement are for convenience of reference only and shall not limit, alter or otherwise affect the meaning hereof. This Agreement constitutes the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior and current understandings and agreements, whether written or oral, with respect to such subject matter. This Agreement may be executed in any number of counterparts, which together shall constitute one instrument. No amendment of any provision of this Indemnity Agreement shall be valid unless the same shall be in writing and signed by the Holders and the Indemnitors. This Agreement shall be construed in accordance with and governed by the internal laws of the State of New York without giving effect to any conflicts of laws principles. Each party hereto hereby irrevocably submits to the jurisdiction of any New York State court sitting in the Borough of Manhattan or any federal court sitting in the Borough of Manhattan in respect of any suit, action or proceeding arising out of or relating to this Agreement and the transactions pursuant hereto and in connection herewith, and irrevocably agrees that all claims in respect of any such suit, action or proceeding shall be heard and determined in such court. Each party irrevocably waives any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. 7. Agreement on Certain Trading Activities. --------------------------------------- Each Indemnitor agrees that during the 15 calendar day period from and including April 21, 2000, through and including May 5, 2000, it shall refrain, and shall cause Primestar to refrain, from any trading activity in shares of the Class H Common Stock, par value $.10 per share, of General Motors Corporation (the "GMH Stock"), or any security convertible into, or exercisable or exchangeable for, shares of GMH Stock, with the purpose of reducing the market price of the GMH Stock over such 15 calendar day period. Without limiting the generality of the foregoing, nothing in this Section 7 shall be construed to prohibit any trading, portfolio, treasury or pension management activity in the ordinary course of business by or on behalf of an Indemnitor. Anything contained herein to the contrary notwithstanding, in the event of any "Reorganization Event," as such term is defined in the Share Appreciation Rights, all references in this Section 7 to shares of GMH Stock shall thereafter mean and refer to shares of "Covered Stock," as such term is defined in the Share Appreciation Rights. -4- IN WITNESS WHEREOF, the parties hereto have executed this Indemnity Agreement on the date first written above. HOLDER: ____________________________________________ (Please type or print proper name of Holder) By:________________________________________ Name:_____________________________________ Title:_____________________________________ Address: ___________________________________ ___________________________________ ___________________________________ Telecopy No.:_______________________________ Telephone No.:______________________________ INDEMNITORS: ____________________________________ (Please type or print proper name of Indemnitor) By:______________________________________ Name:____________________________________ Title:___________________________________ Address:___________________________________ ___________________________________ ___________________________________ Telecopy No.:______________________________ Telephone No.:_____________________________ EX-10.4 7 REGISTRATION RIGHTS AGREEMENT EXHIBIT 10.4 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT ("Agreement"), dated as of April 28, --------- 1999 by and among PRIMESTAR, Inc., a Delaware corporation (the "Company"), each other party whose name is set forth on the signature pages hereof beneath the heading "Holder" (each a "Holder" and collectively, the "Holders"), and, if ------ ------- other than the Company, the issuer of the SARs whose name is set forth on the signature pages hereof beneath the heading "Issuer" (if applicable, the "Issuer", provided that if no such entity is a party to this Agreement, ------ -------- ---- references herein to the Issuer shall be deemed references to the Company) . WHEREAS, the Issuer has agreed to grant to each Holder certain share appreciation rights (the "SARs") pursuant to those certain Share Appreciation ---- Rights Agreements dated as of the date hereof (the "SAR Agreements") between -------------- each respective Holder and the Issuer, evidencing such Holder's right to receive certain payments upon an increase in the value of the Class H Common Stock, par value $0.10 per share, of General Motors Corporation (the "GMH Stock"). The --------- SARs are "restricted securities" (as defined in Rule 144 under the Securities Act), and the Issuer has agreed to provide the registration rights set forth herein, which rights shall be effective as of the issuance of the SARs (the "Closing"). - - -------- NOW, THEREFORE, in consideration of the premises and of the mutual agreements and covenants hereinafter set forth, the parties hereto agree as follows (capitalized terms used herein but not defined herein shall have the meanings ascribed to such terms in the SAR Agreements): 1. Certain Definitions. As used in this Agreement, the following ------------------- terms shall have the corresponding meanings: Best Efforts: With respect to any undertaking by the Issuer hereunder, ------------ the best efforts of the Issuer with respect to such undertaking at the time thereof, taking into account all relevant circumstances, provided, however, that -------- ------- the Issuer shall not be required to do any of the following: (i) dispose of any of its assets; (ii) hold any of its assets separately from any other assets; (iii) modify its capital structure; (iv) agree to the appointment of any trustee or receiver; (v) qualify to do business in any jurisdiction in which it would not otherwise be required to qualify; or (vi) agree to amend any provision of, or waive any right of the Issuer under, any of the Lock-up Agreement, the Funding Agreement, the Pledge and Security Agreement, any SAR Agreement or this Agreement. Commission: The Securities and Exchange Commission, or any other ---------- Federal agency at the time administering the Securities Act or the Exchange Act. Exchange Act: The Securities and Exchange Act of 1934, as amended, or ------------ any successor Federal statute, and the rules and regulations of the Commission promulgated thereunder, as they each may, from time to time, be in effect. 1 Prospectus: The prospectus included in the Registration Statement as ---------- of the date it becomes effective under the Securities Act and, in the case of references to the Prospectus as of a date subsequent to the effective date of the Registration Statement, as amended or supplemented as of such date, including all documents incorporated by reference therein, as amended, and each prospectus supplement relating to the offering and sale of any of the Registrable Securities. Registrable Securities: All of the SARs issued to Holders pursuant to ---------------------- the SAR Agreements. Any Registrable Security will cease to be a Registrable Security when (i) a registration statement covering such Registrable Security has been declared effective by the Commission and such Registrable Security has been disposed of pursuant to such effective registration statement, (ii) such Registrable Security is no longer held by a Holder or any permitted transferee of such Holder or (iii) all of the SARs then held by a Holder and/or its permitted transferees could be sold without registration in a single transaction pursuant to Rule 144 under the Securities Act. Registration Statement: A registration statement of the Issuer on any ---------------------- form (to be selected by the Issuer) for which the Issuer then qualifies and which permits the secondary resale thereunder of the number of Registrable Securities required pursuant to this Agreement to be included therein. The term "Registration Statement" shall also include all exhibits and financial statements and schedules and documents incorporated by reference in such Registration Statement when it becomes effective under the Securities Act, and in the case of the references to the Registration Statement as of a date subsequent to the effective date, as amended or supplemented as of such date. Securities Act: The Securities Act of 1933, as amended, or any -------------- successor Federal statute, and the rules and regulations of the Commission promulgated thereunder, as they each may, from time to time, be in effect. 2. Shelf Registration. ------------------ (a) As promptly as possible, but in any event no later than thirty days after the Closing, the Issuer shall prepare and file with the Commission a Registration Statement with respect to the offering and sale of the Registrable Securities by the Holders on a delayed or continuous basis pursuant to Rule 415 under the Securities Act (such Registration Statement, a "Shelf Registration ------------------ Statement"). The Issuer shall use its Best Efforts to cause the Shelf - - --------- Registration Statement to become effective as soon as practicable after the filing thereof. (b) The Issuer will use its Best Efforts to cause the Shelf Registration Statement to remain effective, and to file promptly with the Commission such amendments and supplements as may be necessary to keep the Prospectus current and in compliance with the Securities Act until the sooner to occur of the Determination Date and the sale of all of the Registrable Securities covered by such Shelf Registration Statement. Notwithstanding the foregoing, the Issuer shall not be required to keep any Shelf Registration Statement effective if there are no Registrable Securities outstanding. 2 (c) The Issuer shall notify the Holders (A) when a Shelf Registration Statement becomes effective; (B) when the filing of a post-effective amendment to a Shelf Registration Statement or supplement to the Prospectus is required, when the same is filed, and in the case of a post-effective amendment, when the same becomes effective; (C) of any request by the Commission for any amendment of, or supplement to, a Shelf Registration Statement or any Prospectus relating thereto or for additional information, and (D) of the entry of any stop order suspending the effectiveness of such Shelf Registration Statement or of the initiation of any proceedings for that purpose. The Issuer shall furnish to each Holder a conformed copy of the Shelf Registration Statement as declared effective by the Commission and of each post-effective amendment thereto, and such number of copies of the final Prospectus and of each post-effective amendment or supplement thereto as may reasonably be required to facilitate the distribution of the Registrable Securities. (d) The Shelf Registration Statement shall be prepared by the Issuer in accordance with the Securities Act and the rules and regulations promulgated thereunder. The section of the Shelf Registration Statement entitled "Selling Stockholders" shall be prepared in accordance with the requirements of Item 507 of Regulation S-K promulgated by the Commission under the Securities Act ("Regulation S-K") and shall be based upon the information provided by each - - ---------------- Holder to the Issuer pursuant to Section 4(a). The section of the Shelf Registration Statement entitled "Plan of Distribution" shall be prepared in accordance with the requirements of Item 508 of Regulation S-K, shall be based upon the information provided by each Holder to the Issuer pursuant to Section 4(a), except that the Plan of Distribution shall not permit any underwritten public offering of the Registrable Securities unless Holders in the aggregate of ------ more than fifty percent (50%) of the Registrable Securities elect to undertake such an underwritten public offering, in which case there shall be permitted under this Registration Rights Agreement and the Shelf Registration Statement contemplated hereby a single underwritten public offering of Registrable Securities. (e) Promptly, and in any event within fifteen days, after having been notified by a Holder of such Holder's intention to distribute Registrable Securities in a manner contemplated by the Shelf Registration Statement in the section entitled "Plan of Distribution" and after having received the information required to be delivered to the Issuer by such Holder as provided in Section 4(c), the Issuer will, if necessary, (i) prepare a supplement to the Prospectus based upon the information so provided and file the same with the Commission pursuant to Rule 424(b) under the Securities Act and (ii) register or qualify the Registrable Securities to be sold under the securities or blue sky laws of such jurisdictions in the United States as such Holder shall reasonably request; provided, however, that the Issuer shall in no event be required to -------- ------- qualify to do business as a foreign corporation or as a dealer in any jurisdiction where it is not so qualified, to conform its capitalization or the composition of its assets at the time to the securities or blue sky laws of any such jurisdiction, to execute or file any general consent to service of process under the laws of any jurisdiction, to take any action that would subject it to service of process in suits other than those arising out of the offer and sale of Registrable Securities, or to subject itself to taxation in any jurisdiction where it has not theretofore done so. 3 3. Expenses of Registration. All expenses in connection with a Shelf ------------------------ Registration Statement, any qualification or compliance with federal or state laws required in connection therewith, and the distribution of the Registrable Securities shall, as between each Holder and the Issuer, be borne as follows: (a) The Issuer shall pay and be responsible for the registration fee payable under the Securities Act, blue sky fees and expenses, if applicable, and all fees and disbursements of the Issuer's counsel and accountants. The Issuer will not engage the services of a printer with respect to the Shelf Registration Statement or the Prospectus, but will arrange for the photocopying thereof and bear the photocopying costs. (b) Each Holder shall pay all fees and disbursements of its own counsel and advisers, all stock transfer fees (including the cost of all transfer tax stamps) or expenses, if any, and all other expenses (including brokerage discounts, commissions and fees) related to the distribution of the Registrable Securities owned by such Holder that have not expressly been assumed by the Issuer as set forth above. 4. Holders' Covenants Regarding the Registrable Securities. Each ------------------------------------------------------- Holder, severally and not jointly, covenants and agrees with the Issuer that: (a) Holder will cooperate with the Issuer in connection with the preparation of the Shelf Registration Statement, and for so long as the Issuer is obligated to keep the Shelf Registration Statement effective, Holder will provide to the Issuer, in writing, for use in the Shelf Registration Statement, all information regarding Holder, its plan of distribution of the Registrable Securities and such other information as may be necessary to enable the Issuer to prepare the Registration Statement and Prospectus covering the Registrable Securities and to maintain the currency and effectiveness thereof. (b) During such time as Holder may be engaged in a distribution of the Registrable Securities, Holder will comply with Regulation M promulgated under the Exchange Act and pursuant thereto will, among other things: (i) not engage in any stabilization activity in connection with the securities of the Issuer in contravention of such Regulation; (ii) distribute the Registrable Securities owned by Holder solely in the manner described in the Registration Statement; (iii) cause to be furnished to each agent or broker-dealer to or through whom the Registrable Securities may be offered, or to the offeree if an offer is made directly by Holder, such copies of the Prospectus (as amended and supplemented to such date) and documents incorporated by reference therein as may be required by such agent, broker-dealer or offeree; and (iv) not bid for or purchase any securities of the Issuer or attempt to induce any person to purchase any securities of the Issuer in contravention of the Exchange Act. (c) With respect to any distribution pursuant to the Shelf Registration Statement, at least ten (10) days prior to any distribution of the Registrable Securities, Holder will advise the Issuer in writing of the dates on which the distribution will commence and terminate, the 4 number and type of the Registrable Securities to be sold, the terms and the manner of sale (including, to the extent applicable, the purchase price, the name of any agent or broker-dealer to or through whom such distribution is being made, and the amount of any selling commissions or other items constituting compensation to such agent or broker-dealer) and the number of Registrable Securities that will be owned beneficially by Holder after giving effect to such sale. (d) If the Issuer gives Holder written notice that the filing by the Issuer of a post-effective amendment to a Shelf Registration Statement, supplement to the Prospectus, or a current report on Form 8-K is required to permit the continued distribution of Registrable Securities under the Shelf Registration Statement without violation of any applicable securities laws or regulations, then Holder will forthwith discontinue disposition of Registrable Securities pursuant to the Shelf Registration Statement, provided that the ------------- Issuer shall file such post-effective amendment to such Shelf Registration Statement, supplement to the Prospectus and/or current report on Form 8-K within five business days thereafter and, in the case of a post-effective amendment to the Shelf Registration Statement, shall notify Holder at such time as such post- effective amendment becomes effective. If the Issuer gives Holder written notice of the entry of a stop order suspending the effectiveness of a Shelf Registration Statement, Holder will forthwith discontinue disposition of Registrable Securities pursuant to such Shelf Registration Statement until notified in writing by the Issuer that such stop order has been rescinded. If so directed by the Issuer, each Holder will deliver to the Issuer, at the Issuer's expense, all copies of the most recent Shelf Registration Statement, preliminary Prospectus, Prospectus or post-effective amendment or supplement thereto covering any Registrable Securities in such Holder's possession at the time of Holder's receipt of any notice contemplated by this Section 4(d). (e) Holder acknowledges that neither General Motors Corporation nor Hughes Electronics Corporation nor any of their respective subsidiaries or affiliates (collectively, the "GM Parties") is a party to this Agreement and ---------- that neither Holder nor the Issuer has any right to require the GM Parties or the applicable Covered Share Issuer to provide any information in connection with the Shelf Registration Statement or the Prospectus included therein or otherwise to assist the Issuer in complying with its obligations under this Agreement. Holder further acknowledges that the Issuer shall have no liability to Holder for any failure of the Shelf Registration Statement to become effective to the extent that such failure to become effective is attributable to the failure by any GM Party or the applicable Covered Share Issuer to provide information required by law or otherwise cooperate in connection with the preparation of the Shelf Registration Statement or the Prospectus included therein. 5. Indemnification. --------------- (a) The Issuer and the Company, jointly and severally, agree to indemnify and hold harmless each Holder, its directors and officers, if any, each person, if any, who controls such Holder within the meaning of either the Securities Act or the Exchange Act and any agent, employee, professional advisor, broker-dealer or underwriter engaged by such Holder (the "Issuer ------ Indemnified Parties") from and against any losses, claims, damages or - - ------------------- liabilities, joint or 5 several, to which such Issuer Indemnified Parties may become subject, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) are based upon any untrue statement or alleged untrue statement of a material fact contained in the Shelf Registration Statement or the Prospectus, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and, subject to Section 5(c), the Issuer and the Company, jointly and severally, agree to reimburse each Issuer Indemnified Party for any legal or other expenses reasonably incurred by it in connection with investigating or defending any such loss, claim, damage or liability; provided, however, that neither the Issuer nor -------- ------- the Company will indemnify or hold harmless any Issuer Indemnified Party from or against any such loss, claim, damage, liability or expense if the untrue statement, omission or allegation thereof upon which such losses, claims, damages, liabilities or expenses are based (x) was made in reliance upon and in conformity with written information provided by any Issuer Indemnified Party specifically for use or inclusion in the Shelf Registration Statement, or (y) was made in any Prospectus used after such time as the Issuer advised the Holders that the filing of a post-effective amendment or supplement thereto was required, except the Prospectus as so amended or supplemented. (b) Each Holder severally and not jointly agrees to indemnify and hold harmless the Issuer, the Company, and each of their respective directors and officers, each person, if any, who controls the Issuer or the Company, as applicable, within the meaning of either the Securities Act or the Exchange Act, any agent, employee, professional advisor, broker-dealer or underwriter engaged by the Company, each other Holder, its directors and officers, each person, if any, who controls such other Holder within the meaning of either the Securities Act or the Exchange Act, and any agent, employee, professional advisor, broker- dealer or underwriter engaged by such Holder (the "Holder Indemnified Parties"), -------------------------- from and against any losses, claims, damages or liabilities, joint or several, to which the Holder Indemnified Parties may become subject, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Shelf Registration Statement or the Prospectus, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, if the statement or omission was made in reliance upon and in conformity with written information provided by such Holder specifically for use or inclusion in the Shelf Registration Statement, or (ii) the use of any Prospectus after such time as the Issuer has advised such Holder that the filing of a post-effective amendment or supplement thereto is required, except the Prospectus as so amended or supplemented; and, subject to Section 5(c), such Holder will reimburse such Holder Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage or liability. Each Holder's indemnification and reimbursement obligations shall be limited to such Holder's proceeds from the sale of SARs. (c) Each party entitled to indemnification under this Section 5 (the "Indemnified Party") shall give notice to the party required to provide - - ------------------ indemnification (the "Indemnifying Party") promptly after such Indemnified Party ------------------ has actual knowledge of any claim as 6 to which indemnity may be sought, and the Indemnifying Party may participate at its own expense in the defense, or if he or it so elects, to assume the defense of any such claim and any action or proceeding resulting therefrom, including the employment of counsel and the payment of all expenses. The failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party from its obligations to indemnify such Indemnified Party, except to the extent the Indemnified Party's failure to so notify actually prejudices the Indemnifying Party's ability to defend against such claim, action or proceeding; it being understood and agreed that the failure to so notify the Indemnifying Party prior to the execution of a binding settlement agreement or the entry of a judgment or issuance of an award with respect to a claim, action or proceeding shall constitute actual prejudice to the Indemnifying Party's ability to defend against such claim, action or proceeding. In the event that the Indemnifying Party elects to assume the defense in any action or proceeding, the Indemnified Party shall have the right to employ separate counsel in any such action or proceeding and to participate in the defense thereof, but the fees and expenses of such separate counsel shall be such Indemnified Party's expense unless (i) the Indemnifying Party has agreed to pay such fees and expenses or (ii) the named parties to any such action or proceeding (including any impleaded parties) include an Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that there may be a conflict of interest between such Indemnified Party and the Indemnifying Party in the conduct of the defense of such action (in which case, if such Indemnified Party notifies the Indemnifying Party that he or it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not assume the defense of such action or proceeding on such Indemnified Party's behalf, it being understood, however, that the Indemnifying Party shall not, in connection with any one such action or proceeding or separate but substantially similar or related actions or proceedings arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys at any time for all Indemnified Parties, which firm shall be designated in writing by the applicable Holder or the Issuer and the Company acting jointly, as the case may be). No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of the Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. The Indemnifying Party shall not be liable for any settlement of any such action or proceeding effected without its written consent, but if settled with its written consent, or if there be a final judgment for the plaintiff in any such action or proceeding, the Indemnifying Party shall indemnify and hold harmless the Indemnified Party from and against any loss or liability by reason of such settlement or judgment. (d) If the indemnification provided for under this Section 5 is unavailable to or insufficient to hold the Indemnified Party harmless under subparagraphs (a) or (b) above in respect of any losses, claims, damages or liabilities referred to therein for any reason other than as specified therein, then the Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and such Indemnified Party on the other in connection with the statements or omissions which resulted in such 7 losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by (or omitted to be supplied by) the Issuer or the applicable Holder, the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission, the relative benefits received by each party from the sale of the Registrable Securities and any other equitable considerations appropriate under the circumstances. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages or liabilities referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 6 Notices. All notices, requests, demands, claims, and other ------- communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given (i) upon telephonic confirmation of facsimile, (ii) when sent by overnight delivery or (iii) when mailed by registered or certified mail return receipt requested and postage prepaid, to the addresses listed on the signature pages hereto. Any party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address, telephone number or telecopier number for such recipient (i) if such recipient is the Issuer or the Company, set forth below: 8085 South Chester, Suite 300 Englewood, Colorado 80112 Telephone: (303) 712-4600 Telecopy: (303) 712-4977 Attention: Chief Financial Officer with a copy to: Baker & Botts, L.L.P. 599 Lexington Avenue New York, New York 10022 Telephone: (212) 705-5000 Telecopy: (212) 705-5125 Attention: Marc A. Leaf, Esq. and (ii) if such recipient is a Holder, as set forth on the signature pages hereto, with copies to: Orrick, Herrington & Sutcliffe, LLP 666 Fifth Avenue New York, New York 10022 Telephone: (212) 506-5000 8 Telecopy: (212) 506-5151 Attention: Duncan N. Darrow, Esq. and Ropes & Gray One International Place Boston, Masschusetts 02110 Telephone: (617) 951-7000 Telecopy: (617) 951-7050 Attention: William F. McCarthy, Esq. using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other party notice in the manner herein set forth. 7 Amendment. Any provision of this Agreement may be amended or --------- modified, in whole or in part at any time by an agreement in writing to which the Company and the Issuer are parties and which is approved by Holders of a majority in principal amount of SARs, provided that such Holders shall be -------- ---- registered as Holders in the SAR Register and such Holders shall not include the Company, Issuer, or any of their respective affiliates. No consent, waiver or similar act shall be effective unless in writing. 8 Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 9 Governing Law; Consent to Jurisdiction. This Agreement shall be -------------------------------------- construed in accordance with and governed by the internal laws of the State of New York without giving effect to any conflicts of laws principles. Each party hereto irrevocably submits to the jurisdiction of any New York State court sitting in the Borough of Manhattan or any federal court sitting in the Borough of Manhattan in respect of any suit, action or proceeding arising out of or relating to this Agreement and the transactions pursuant hereto and in connection herewith, and irrevocably agrees that all claims in respect of any such suit, action or proceeding shall be heard and determined in any such court. Each party irrevocably waives any objection which it may now or hereafter have to the laying of the venue of such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. 10 Assignment. Each Holder may, in connection with any transfer of ---------- SARs permitted by the applicable SAR Agreement (whether made pursuant to Rule 144 of the Securities 9 Act or otherwise, but not if such transfer is made pursuant to a valid Registration Statement), assign its rights under this Agreement to the same person(s) to whom the Holder is making such a permitted transfer or transfers. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 11 Entire Agreement. The provisions of this Agreement, together ---------------- with the SAR Agreements and the Lock-up Agreement, set forth the complete understanding and intention of the parties with respect to the subject matter hereof and supersede all prior agreements or understandings, whether written or oral, relating to the subject matter hereof. 10 IN WITNESS WHEREOF, the undersigned has executed this signature page intending to be bound by the foregoing Registration Rights Agreement as of the date first above written. PRIMESTAR, INC. By:______________________________________________ Name: Title: ISSUER: ------------------------------------------------- ------------------------------------------------- By: Name: IN WITNESS WHEREOF, the undersigned has executed this signature page intending to be bound by the foregoing Registration Rights Agreement as of the date first above written. HOLDER: __________________________________________ (Please type or print proper name of Holder) By:____________________________________ Name:__________________________________ Title: __________________________________ Address: __________________________________ __________________________________ __________________________________ Telecopy No.:______________________________ Telephone No.:____________________________ Taxpayer Identification No.:_______________ EX-10.5 8 SHARE APPRECIATION RIGHTS EXHIBIT 10.5 THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDEDUserFinancial Printing GroupTHE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. IN ADDITION, THE TRANSFERABILITY OF THESE SECURITIES IS RESTRICTED AS SET FORTH BELOW. PRIMESTAR, INC. No. April 28, 1999 Share Appreciation Rights with Respect to Shares of --------------------------------------------------- Class H Common Stock of General Motors Corporation -------------------------------------------------- _________________ Void After May 10, 2000 _________________ The undersigned PRIMESTAR, INC. (the "Issuer"), HEREBY GRANTS to , its successors and assigns (the "Holder"), the number of share appreciation rights (the "Share Appreciation Rights" or "SARs") set forth on such Holder's signature page of this agreement (this "Agreement"). Each SAR represents the right of the Holder thereof to receive from the Issuer, on the terms and conditions set forth herein, the Per Share Settlement Amount (as defined herein), if any, with respect to one share of Class H Common Stock, $0.10 par value per share (the "GMH Stock"), of General Motors Corporation (as each such share of GMH Stock is adjusted from time to time as provided in Section 2 of this Agreement, a "Covered Share"). The Share Appreciation Rights are being originally issued pursuant to a Lock-up Agreement dated as of April 20, 1999 (the "Lock-up Agreement") between PRIMESTAR, Inc. ("Primestar") and certain holders of senior subordinated indebtedness of Primestar and are part of a series of share appreciation rights granted by the Issuer in connection therewith. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto in Section 16 of this Agreement. SECTION 1. Exercise of SARs. (a) The SARs represented by this ---------------- Agreement shall automatically be exercised for the benefit of the registered Holder hereof on May 5, 2000 (the "Determination Date"). (b) On the Determination Date, the Holder shall be entitled to receive from the Issuer a payment in cash in respect of each SAR owned by such Holder on the Determination Date equal to (x) the Fair Market Value of a Covered Share on the Determination Date plus (y) the Distribution Amount (if any) per Covered ---- Share, minus (z) the Strike Price per Covered Share (such amount so calculated, ----- the "Per Share Settlement Amount"). The gross payment to be made to each Holder of SARs shall be equal to the product of the Per Share Settlement multipied by the total number of SARs owned by such Holder (the "Aggregate Settlement Amount"); provided, however, that if the Aggregate Settlement Amount on the -------- ------- Determination Date is equal to or less than zero, then no payment shall be required to be made by the Issuer hereunder. The SARs shall be exercisable solely for cash as provided herein, and do not represent a right to purchase or receive any shares of GMH Stock or any other property. Payment of the Aggregate Settlement Amount shall be made by wire transfer in immediately available funds on the third business day following the Determination Date (the "Settlement Date"). The Aggregate Settlement Amount shall be fixed on the Determination Date. If the Issuer shall fail to pay any part of the Aggregate Settlement Amount hereunder (if any) on the Settlement Date, the unpaid portion of such Aggregate Settlement Amount shall accrue interest from the Settlement Date until the date paid, at the rate of 12% per annum, payable monthly. SECTION 2. Adjustment of Strike Price and Covered Shares. Upon the --------------------------------------------- occurrence of any Dilution Event, the Strike Price per Covered Share and the Covered Shares subject to each SAR in effect immediately prior to such event shall be adjusted as follows: a. In the case of a Dilution Event of a type described in clauses (i), (ii), (iii) or (iv) of the definition thereof, the Covered Shares shall be adjusted to equal the number of shares of Covered Stock (or, in the case of a reclassification of the type described in clause (iv) of such definition, the number of shares of such other class or series of common stock of the Covered Share Issuer) which a holder of the Covered Shares immediately prior to such event would have owned or been entitled to receive in respect thereof immediately following such event. b. In the case of a Dilution Event of the type described in clause (v) of such definition, the Covered Shares shall be adjusted to equal the number of shares of Covered Stock equal to the number of such shares constituting the Covered Shares immediately prior to such Dilution Event, times a fraction, the numerator of which shall be (1) the ----- number of shares of Covered Stock outstanding on the record date for such event, plus (2) the number of additional shares of Covered Stock offered for subscription or purchase pursuant to such rights or warrants, and the denominator of which shall be (x) the number of shares of Covered Stock outstanding on the record date for such event, plus (y) the number of additional shares of Covered Stock which the aggregate offering price of the total number of shares of Covered Stock offered pursuant to such rights or warrants would purchase at the Fair Market Value of the Covered Stock on the business day next following the record date for such issuance; provided, however, that -------- ------- if any such rights or warrants shall expire without exercise on or before the Determination Date, then an appropriate adjustment shall be made to reverse the adjustment provided for by this clause (b) to the extent of such expired unexercised rights or warrants. 2 c. In the case of any Dilution Event, the Strike Price shall be adjusted by multiplying the Strike Price in effect immediately prior to such event by a fraction, the numerator of which shall be the number of shares of Covered Stock constituting the Covered Shares immediately prior to such event, and the denominator of which shall be the number of shares of Covered Stock constituting the Covered Shares immediately following such event. d. Any shares of Covered Stock issuable in payment of a dividend shall be deemed to have been issued immediately prior to the close of business on the record date for such dividend for purposes of calculating the number of outstanding shares of Covered Stock under this paragraph 2. e. All calculations under this Section shall be made to the nearest $.001 or to the nearest one-tenth of a share, as the case may be. SECTION 3. Reorganization Events. (a) In the event, at any time --------------------- during the period from the date hereof through the trading day immediately preceding the Determination Date (such period, the "Adjustment Period"), of (i) any capital reorganization of the Covered Share Issuer, (ii) any reclassification of the capital stock of the Covered Share Issuer (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a stock dividend or subdivision, split-up or combination or shares), (iii) any consolidation or merger of the Covered Share Issuer with or into another person (other than a consolidation or merger in which the Covered Share Issuer is the continuing corporation and which does not result in any change in the common stock of the Covered Share Issuer), (iv) any statutory exchange in which the Covered Shares are mandatorily exchanged for securities of another issuer, (v) any sale, transfer, assignment or other disposition of 80% or more of the business of Hughes Electronics Corporation ("Hughes") (based on the fair market value of the assets, both tangible and intangible, of Hughes as of the time that any such proposed sale, transfer, assignment or other disposition is approved by the board of directors of the Covered Share Issuer), or (vi) any complete liquidation of the Covered Share Issuer (any such event, a "Reorganization Event"), then after the consummation of such Reorganization Event, all references herein to the Covered Shares shall mean and refer to the kind and number of shares of stock or other securities or property of the Covered Share Issuer (or of the person or entity resulting from such Reorganization Event) to which the Holder would have otherwise been entitled if such Holder had held the Covered Shares as in effect hereunder immediately prior to such Reorganization Event; provided, however, that in the -------- ------- case of any Reorganization Event that provides for alternate forms of consideration, after the consummation of such Reorganization Event, all references herein to the Covered Shares shall mean and refer to the kind and number of shares of stock or other securities or property of the Covered Share Issuer (or of the person or entity resulting from such Reorganization Event) into or for which the shares of Covered Stock pledged under the Pledge and Security Agreement immediately prior to such Reorganization Event are converted, exchanged or redeemed in such Reorganization Event. The provisions of this Section 3 shall similarly apply to successive reorganizations, reclassifications, consolidations and mergers and sales and other dispositions. (b) Anything contained herein to the contrary notwithstanding, if upon the consummation of any Reorganization Event, the Covered Shares shall consist solely of cash and/or 3 property other than Reported Securities, then within 30 days after the closing of such Reorganization Event and the receipt by the Issuer (or by the Collateral Agent under the Pledge and Security Agreement) of such cash and/or property other than Reported Securities, the Issuer shall provide the Holder with the written notice required by Section 4 of this Agreement, which notice shall include the Fair Market Value per Covered Share, as determined in accordance with this Agreement, and the date of such notice shall constitute the Determination Date for all purposes hereof. SECTION 4. Notice of Certain Transactions. In the event of (a) any ------------------------------ adjustment in the Strike Price after the date hereof, (b) the consummation of any Reorganization Event, or (c) receipt by the Issuer of any Dividend, the Issuer shall give written notice thereof to the Holder, including in any such notice pursuant to clause (b) of this Section 4 (to the best knowledge of the Issuer) the number, kind or class of shares or other securities or property which shall constitute the Covered Shares after the occurrence of such action. The Holder acknowledges that any such notice shall be based on publicly available information provided by or on behalf of the Covered Share Issuer and that each Holder is responsible for confirming the information and calculations set forth therein. The Issuer shall not have any liability whatsoever for any error or omission in such notice, except for any such error or omission resulting solely from the bad faith or gross negligence of the Issuer. SECTION 5. Certain Other Rights of Holder. The Holder shall be ------------------------------ entitled to the rights of a holder of SARs under the Registration Rights Agreement and the Pledge and Security Agreement, in accordance with the terms thereof. SECTION 6. Transfer and Securities Law Provisions. -------------------------------------- (a) The issuance of the SARs has not been registered under the Securities Act, or under the securities or "blue sky" laws of any state, in reliance upon exemptions from the registration provisions thereof. Holder represents that it is acquiring the SARs for investment for its own account or the account of an affiliate, and not with the view to, or for resale in connection with, any distribution thereof, nor with any present intention of distributing the same. (b) The Holder shall have the right to require the Issuer to register the SARs under the Securities Act, for offering and sale on a delayed or continuous basis pursuant to Rule 415 thereunder, on such terms and conditions as are set forth in the Registration Rights Agreement. However, the SARs shall not be transferable except pursuant to an effective registration statement under the Securities Act or a valid exemption from the registration provisions thereof. (c) Upon the request of the Holder at any time prior to the Expiration Date that the Issuer is not subject to the reporting requirements of the Exchange Act, the Issuer shall provide to the Holder and to any prospective purchaser designated by the Holder that is a "qualified institutional buyer" within the meaning of Securities Act Rule 144A, the following information, which shall be reasonably current in relation to the date of any proposed resale of any SARs: (i) a very brief statement of the nature of the business of the Issuer and the products and services, if any, that it offers; and (ii) the Issuer's most recent balance sheet and profit and loss and retained earnings statements, and similar financial statements for each of the two preceding fiscal years, which financial statements shall be audited to the extent reasonably available. 4 (d) Subject to the last sentence of Section 6(b) hereof, the SARs shall be transferable in denominations of at least 1,000 SARs by registration of such transfer on the books and records of the Issuer (or any transfer agent appointed by the Issuer) to be maintained for such purpose (the "SAR Register"), upon surrender of this Agreement at the office of the Issuer or another office or agency designated by the Issuer, together with a written assignment substantially in the form of Schedule 1 attached hereto, duly executed by the Holder or its duly appointed legal representative or attorney-in-fact. Upon such surrender, the Issuer shall, at its expense, promptly execute and deliver a new agreement substantially in the form of this Agreement (a "SAR Agreement"), in the name of the assignee and in the denomination specified in such instrument of assignment, and shall issue promptly to the assignor a new SAR Agreement evidencing the number of SARs (if any) not assigned. Any SARs properly assigned in compliance herewith may be exercised by the new holder thereof whether of not the Issuer shall have issued and delivered the SAR Agreement with respect thereto. However, the Issuer shall not be required to pay and deliver the Aggregate Settlement Amount of any SAR to any person other than the registered Holder thereof on the SAR Register. SECTION 7. Lost, Stolen, Mutilated or Destroyed SAR. If this ---------------------------------------- Agreement is lost, stolen, mutilated or destroyed, the Issuer may, on such terms as to indemnity or otherwise as it may in its discretion impose (which shall, in the case of a mutilated Agreement, include the surrender thereof), provide the Holder with a duplicate counterpart of this Agreement with respect to the SARs represented thereby. Any such new SAR Agreement shall constitute a separate contractual obligation of the Issuer in accordance with its terms, whether or not the allegedly lost, stolen, mutilated or destroyed SAR Agreement shall be at any time enforceable by anyone. SECTION 8. No Stockholder Rights. Neither this Agreement nor the --------------------- SARs represented hereby shall entitle the Holder to any voting rights or other rights as a holder of Covered Shares or a stockholder of the Issuer. SECTION 9. Withholding for Taxes. It shall be a condition precedent --------------------- to any exercise of the SARs represented hereby that the Holder make provision acceptable to the Issuer for the payment or withholding of any and all Federal, state and local taxes required to be withheld by the Issuer to satisfy any tax liability of the Holder associated with such exercise, as determined in good faith by the Board of Directors of the Issuer on the advice of counsel. SECTION 10. Notices. All notices, requests, demands, claims, and ------- other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given (i) upon telephonic confirmation of facsimile, (ii) when sent by overnight delivery or (iii) when mailed by registered or certified mail return receipt requested and postage prepaid, to the addresses listed on the signature pages hereto. Any party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address, telephone number or telecopier number for such recipient (i) if such recipient is the Issuer or the Company, set forth below: 8085 South Chester, Suite 300 Englewood, Colorado 80112 Telephone: (303) 712-4600 Telecopy: (303) 712-4977 5 Attention: Chief Financial Officer with a copy to: Baker & Botts, L.L.P. 599 Lexington Avenue New York, New York 10022 Telephone: (212) 705-5000 Telecopy: (212) 705-5125 Attention: Marc A. Leaf, Esq. and (ii) if such recipient is a Holder, as set forth on the signature pages hereto, with copies to: Orrick, Herrington & Sutcliffe, LLP 666 Fifth Avenue New York, New York 10022 Telephone: (212) 506-5000 Telecopy: (212) 506-5151 Attention: Duncan N. Darrow, Esq. and Ropes & Gray One International Place Boston, Massachusetts 02110 Telephone: (617) 951-7000 Telecopy: (617) 951-7050 Attention: William F. McCarthy, Esq. using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other party notice in the manner herein set forth. SECTION 11. Governing Law. This Agreement and the SARs represented ------------- hereby shall be construed in accordance with and governed by the internal laws of the State of New York without giving effect to any conflicts of laws principles. Each party hereto hereby irrevocably submits to the jurisdiction of any New York State court sitting in the Borough of Manhattan or any federal court sitting in the Borough of Manhattan in respect of any suit, action or proceeding arising out of or relating to this Agreement and the transactions pursuant hereto and in connection herewith, and irrevocably agrees that all claims in respect of any such suit, action or proceeding shall be heard and determined in such court. Each party irrevocably waives any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such 6 court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. SECTION 12. Construction. References in this Agreement to "this ------------ Agreement" and the words "herein," "hereof," "hereunder" and similar terms refer to this Agreement, including all Schedules as a whole, unless the context otherwise requires. The headings of the paragraphs of this Agreement have been included for convenience of reference only, are not to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. SECTION 13. Duplicate Originals. The Issuer and Holder may sign any ------------------- number of copies of this Agreement. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 14. Entire Agreement. Except with respect to the Lock-up ---------------- Agreement, the Registration Rights Agreement, and the Pledge and Security Agreement, this Agreement is in satisfaction of and in lieu of all prior discussions and agreements, oral or written, between the Issuer and the Holder with respect to the subject matter hereof. Each of the Issuer and Holder hereby declares and represents that no promise or agreement not herein expressed has been made and that this Agreement, together with the Lock-up Agreement, the Registration Rights Agreement, and the Pledge and Security Agreement contains the entire agreement between and among the parties hereto with respect to the SARs and supersedes any prior or contemporaneous agreements and understandings between the Issuer and the Holder or any other person regarding the SARs. SECTION 15. Amendment. This Agreement may be reasonably amended, --------- modified or supplemented by the Issuer, without the consent of the Holder to cure any ambiguity or to correct or supplement any provision herein which may be defective. Except as provided above, this Agreement may be amended, modified or supplemented only by written agreement of the parties hereto or their permitted assigns and transferees. SECTION 16. Definitions. As used in this Agreement, the following ----------- terms shall have the corresponding meanings: "Adjustment Period" is defined in Section 3. "Aggregate Settlement Amount" is defined in Section 1. "Agreement" is defined in the initial paragraph of this Agreement. "Appraiser" means an investment banking firm of national reputation selected on the Note Purchase Closing Date by the Issuer and a majority of Holders as defined in the Lock-up Agreement that is not affiliated with Hughes, the Issuer or the Holder. "Closing Price" of a share of any class or series of capital stock on any day means the last sale price (or, if no last sale is reported, the average of the high bid and low asked prices) for a share of such class or series of capital stock on such day (or, if such day is not a trading day, on the immediately preceding trading day) as quoted on the principal United States national stock exchange on which such shares are listed, or if such class or series of capital stock is not listed on a United States national stock 7 exchange, as reported on NASDAQ or, if not reported on NASDAQ, as quoted by the National Quotation Bureau Incorporated. If for any trading day the Closing Price of a share of such class or series of capital stock is not determinable by any of the foregoing means, then the Closing Price for such day shall be determined in good faith by the issuer's Board of Directors on the basis of such quotations and other considerations as such Board may deem appropriate. "Covered Share Issuer" shall mean General Motors Corporation or such other entity as shall be the issuer of the Covered Shares. "Covered Shares" shall mean the number of shares of GMH Stock subject to each SAR (which initially shall be one), as the same shall be adjusted from time to time in accordance with this Agreement. "Covered Stock" means the GMH Stock or such other class or series of stock of the Covered Share Issuer represented by the Covered Shares. "Determination Date" is defined in Section 1, subject to adjustment as provided in Section 3. "Dilution Event" means the occurrence of any of the following actions by the Covered Share Issuer: (i) the payment of a stock dividend or distribution on the Covered Stock, payable in additional shares of Covered Stock; (ii) any stock split or other subdivision of the Covered Stock; (iii) any reverse stock split or combination of the Covered Stock into a smaller number of shares of such stock; (iv) the issuance by reclassification of the Covered Stock of shares of any other class or series of common stock of the Covered Share Issuer (other than any stock split, reverse stock split or other transaction of the type described in clause (ii) or (iii) of this definition, and other than a reclassification that would constitute a Reorganization Event); or (v) the issuance of any rights or warrants to all holders of the Covered Stock, entitling them to subscribe for or purchase shares of Covered Stock (other than any dividend reinvestment or odd lot plan) at a price per share less than the Fair Market Value of such shares on the business day next following the record date for such issuance. "Distribution Amount" means, for each Covered Share, the amount of all Dividends paid in respect of such Covered Share, the record date for which shall occur on or after the date hereof and prior to the fifth business day preceding the Determination Date. To the extent that any 8 such Dividend is paid in securities or other property, other than cash, the amount of such Dividend shall be determined as follows: (i) for any Reported Securities received in an Dividend, such amount shall be the Fair Market Value of such Reported Securities on the Determination Date; and (ii) for any property received in any Dividend other than cash or Reported Securities, such amount shall be the Fair Market Value of such property on the date such property is received. For purposes of calculating the Distribution Amount, any cash, Reported Securities or other property receivable in a Dividend shall be deemed to have been received immediately prior to the close of business on the record date for such Dividend or, if there is no record date for such Dividend, immediately prior to the close of business on the effective date of such Dividend. "Dividend" means any dividend or distribution payable on all the outstanding Covered Stock, other than any dividend or distribution that would constitute a Dilution Event or Reorganization Event. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor statute or statutes thereto, and the rules and regulations promulgated by the Securities and Exchange Commission thereunder. References to any specific section of the Exchange Act or rule thereunder shall include any successor section or rule. "Fair Market Value" means, as of any date, (i) in the case of any Reported Security, the average of the Closing Prices of such Reported Security for each of the five trading days immediately preceding such date, and (ii) in the case of any other property, the fair market value of such property on such date, as determined by an Appraiser, taking into account all circumstances deemed relevant by such Appraiser. "GMH Stock" is defined in the initial paragraph of this Agreement. "Holder" is defined in the initial paragraph of this Agreement. "Hughes" is defined in Section 3. "Issuer" is defined in the initial paragraph of this Agreement. "Lock-up Agreement" is defined in the initial paragraph of this Agreement. "NASDAQ" means The Nasdaq Stock Market, Inc. "Per Share Settlement Amount" is defined in Section 1. "Pledge and Security Agreement" means the Pledge and Security Agreement dated as of the date hereof, between PRIMESTAR, Inc. or, if the issuer of share appreciation rights 9 pursuant to share appreciation rights agreements substantially in the form of this Agreement entered into on the date hereof is an entity other than PRIMESTAR, Inc., such entity, and the Collateral Agent named therein, for the ratable benefit of the Holder and the holders of the other share appreciation rights agreements substantially in the form of this Agreement entered into by the Issuer on the date hereof. "Reorganization Event" is defined in Section 3. "Reported Securities" means any securities that (A) are (i) listed on a United States national securities exchange, (ii) reported on a United States national securities system subject to last sale reporting, or (iii) traded in the over-the-counter market and reported on the National Quotation Bureau or similar organization and (B) are either (x) perpetual equity securities or (y) non-perpetual equity or debt securities with a stated maturity after the Determination Date. "Registration Rights Agreement" means the Registration Rights Agreement dated as of the date hereof, among PRIMESTAR, Inc., the original holder of this Agreement, the original holders of the other share appreciation rights agreements substantially in the form of this Agreement entered into by the Issuer on the date hereof and, if the issuer of share appreciation rights pursuant to any such agreement is an entity other than PRIMESTAR, Inc., such entity. "SARs" means Share Appreciation Rights. "SAR Register" is defined in Section 7. "Securities Act" means the Securities Act of 1933, as amended from time to time, or any successor statute or statutes thereto, and the rules and regulations promulgated by the Securities and Exchange Commission thereunder. Reference to any specific section of the Securities Act or rule thereunder shall include any successor section or rule. "Settlement Date" is defined in Section 1. "Share Appreciation Rights" is defined in the initial paragraph of this Agreement. "Strike Price" means, initially, $47 per Covered Share, as such amount may be adjusted from time to time in accordance with the terms of this Agreement. 10 IN WITNESS WHEREOF, the undersigned has executed this signature page intending to be bound by the foregoing Share Appreciation Rights Agreement as of the date first above written. ISSUER: PRIMESTAR, INC. By:_______________________________________________ Name: Kenneth G. Carroll Title: Senior Vice President and Chief Financial Officer ATTEST: - - --------------------- Secretary IN WITNESS WHEREOF, the undersigned has executed this signature page intending to be bound by the foregoing Share Appreciation Rights Agreement as of the date first above written. HOLDER: __________________________________________ (Please type or print proper name of Holder) By:_____________________________________ Name:_____________________________________ Title: ___________________________________ Address: __________________________________ __________________________________ __________________________________ Telecopy No.:______________________________ Telephone No.:____________________________ Taxpayer Identification No.:______________ Number of Share Appreciation Rights: ________________________ Schedule 1 ---------- [Form of] ASSIGNMENT (To be executed only upon assignment of the SARs) FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers ____ Share Appreciation Rights unto ______________________________________________________________________ (name and address of assignee must be printed or typewritten) (the "Transferee"), together with all right, title and interest therein, and does hereby irrevocably constitute and appoint _______________________ Attorney-in-fact, to transfer said Share Appreciation Rights on the books of ___________________ (the "Issuer") or its duly authorized transfer agent with full power of substitution in the premises. Dated: ________________________ Signature: ______________________________ ______________________________ ______________________________ ________________________, The above-mentioned Transferee, does hereby give notice of the above-written assignment to the Issuer, or the Issuer's duly authorized transfer agent, and in presenting this Assignment does request that the transfer of ownership effected hereby be noted in the SAR Register, and does further request that any payments made now or hereafter by the Issuer with respect to the SARs transferred to Transferee hereby be made to the account of Transferee at: [Wire Transfer Instructions] Signature: ______________________________ ______________________________ ______________________________ 13 EX-10.6 9 PLEDGE AND SECURITY AGREEMENT EXHIBIT 10.6 PLEDGE AND SECURITY AGREEMENT THIS PLEDGE AND SECURITY AGREEMENT (this "Agreement") is made on and as of this ___ day of April, 1999, by and between PRIMESTAR, Inc., a Delaware corporation, as pledgor ("Pledgor"), and The Bank of New York, as collateral agent (the "Collateral Agent"). RECITALS A. Reference is made to the several Share Appreciation Right Agreements ("SAR Agreements"), each dated as of the date hereof, between Pledgor and the initial holders named therein. This Agreement is the Pledge and Security Agreement referred to in each of the SAR Agreements. Capitalized terms used in this Agreement and not defined herein have the meanings ascribed to such terms in the SAR Agreements. B. The SAR Agreements provide for the issuance by Pledgor of share appreciation rights ("SARs"), on the terms set forth therein, with respect to an aggregate of 4,871,448 shares (the "GMH Shares") of the Class H Common Stock of General Motors Corporation ("GMH Stock") being acquired concurrently herewith by the Pledgor, in connection with sale by the Pledgor of its medium power assets. C. The Pledgor is the holder of those certain share appreciation rights ("TSAT SARs") with respect to 1,407,307 shares of GMH Stock granted to Pledgor by TCI Satellite Entertainment, Inc. ("TSAT") pursuant to a share appreciation rights agreement (the "TSAT SAR Agreement") between TSAT and Pledgor dated as of the date hereof, and the rights of Pledgor thereunder are secured by the Pledge and Security Agreement (the "TSAT Pledge Agreement") dated the date hereof, entered into between TSAT and The Bank of New York, as collateral agent (the "TSAT Collateral Agent") . D. Pledgor desires to grant to the Collateral Agent, for the ratable benefit of the initial holders of the SARs and their successors and permitted assigns (collectively, the "Secured Parties") a pledge of and security interest in all of Pledgor's right, title and interest in, to and under the Collateral (as defined herein) from time to time pledged hereunder, to secure (i) the full and timely payment by Pledgor to each registered holder of SARs, on the terms and subject to the conditions set forth in the SAR Agreements, of the obligations of Pledgor thereunder and (ii) the payment of the reasonable costs and expenses (including, without limitation, attorneys' fees and expenses) incurred by the Collateral Agent or any Secured Party in connection with enforcing their rights under this Agreement after an Event of Default (as defined herein) has occurred (collectively, the "Secured Obligations") on the Settlement Date (as defined in the SAR Agreements). NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be bound hereby, the parties hereto hereby agree as follows: 1. Grant of Security Interest. The Pledgor hereby assigns, pledges, -------------------------- transfers and grants to the Collateral Agent, on behalf of and for the ratable benefit of the Secured Parties, a security interest in all of Pledgor's right, title and interest in, to and under the property described in Section 2 below (collectively, the "Collateral"), to secure the full and timely payment by Pledgor of the Secured Obligations. 2. Collateral. The Collateral shall consist of all right, title and ---------- interest of the Pledgor in, to and under each of the following, in each case whether now owned or existing or hereafter acquired or arising: (a) 3,464,141 shares of GMH Stock represented by certificate number CHF086305; (b) TSAT SARs with respect to 1,407,307 shares of GMH Stock represented by the TSAT SAR Agreement; (c) The TSAT Pledge Agreement; (d) 1,407,307 shares of GMH Stock represented by certificate number CHF086306 owned beneficially and of record by TSAT and pledged to the TSAT Collateral Agent for the benefit of Pledgor pursuant to the TSAT Pledge Agreement; (e) The Cash Collateral Account, any and all funds at any time held in such account, and any and all rights of the Pledgor to payments made in respect of such account; and (f) All proceeds of any of the foregoing. 3. Appointment of Custodian. The Pledgor hereby appoints the Collateral ------------------------ Agent to act as agent, bailee and custodian for the benefit of the Pledgor and the Secured Parties as their respective interests shall appear with respect to the Collateral. The Collateral Agent hereby accepts such appointment and agrees to maintain and hold all Collateral at any time delivered to it as agent, bailee and custodian for the benefit of the Pledgor and the Secured Parties in accordance with the terms of this Agreement. The Collateral Agent agrees to act in accordance with this Agreement and in accordance with any written instructions properly delivered hereunder. The Collateral Agent shall deliver possession of the Collateral to the Pledgor or any other person named by Pledgor, or otherwise release any Collateral from the lien created hereby, only in accordance with the express terms of this Agreement or otherwise upon the written instruction of the Pledgor and/or the Secured Parties, as applicable. 4. Certain Actions to Maintain Perfection of Security Interest. The ----------------------------------------------------------- Pledgor agrees (i) that the lien created or purported to be created hereunder shall at all times be valid and enforceable against the Pledgor and all third parties, in accordance with the terms hereof, as security for the Secured Obligations, (ii) that the lien created by this Agreement with respect to the Collateral described in Sections 2(a), 2(b), 2(c), 2(e), and, subject always to the proviso of this clause (ii), Section 2(f) (to the extent the Cash Collateral Account and the funds therein represent proceeds from the Collateral described in Sections 2(a), 2(b), 2(c) or 2(e)), shall be a first priority perfected lien, provided that, with respect to Collateral described in Section 2(d) and, only to - - ------------- the extent that Collateral described in Section 2(f) relates to Collateral described in Section 2(d), Section 2(f), the lien created by this Agreement shall be a perfected lien subordinate only to the lien in favor of the TSAT Collateral Agent for the benefit of the Pledgor created under the TSAT Pledge Agreement, and (iii) that the Collateral shall not at any time be subject to any other lien. The Pledgor shall take all action that may be necessary or desirable so as at all times (a) to maintain the validity, perfection, enforceability and priority of the liens created or purported to be created hereunder in conformity with the requirements of the immediately preceding sentence, (b) to protect and preserve the Collateral and (c) to protect and preserve, and to enable the exercise and enforcement of, the rights of the Secured Parties therein and hereunder. 5. Delivery of Collateral. Pledgor agrees that the GMH Shares, the TSAT ---------------------- SARs and any other certificated securities that may from time constitute Collateral hereunder shall be evidenced by certificates, and (ii) that all such certificates shall be accompanied by stock powers, executed in blank, or by other proper instruments of assignment duly executed by Pledgor, and by any such other instruments or documents as the Collateral Agent may reasonably request. 6. Custody of Collateral. Upon the Collateral Agent's receipt of the --------------------- Collateral, the Collateral Agent shall retain exclusive possession and custody thereof, subject to the terms of this Agreement, for purposes of perfecting the security interest therein of the Secured Parties. The Collateral Agent shall make appropriate notations in its books and records to reflect that the Collateral contained therein has been pledged to the Secured Parties and is held by the Collateral Agent for the benefit of the Pledgor and the Secured Parties as their respective interests appear hereunder. Except as otherwise expressly provided in this Agreement, all instruments representing Collateral shall be (i) held by the Collateral Agent in fire-proof vaults, safe deposit boxes or file cabinets under its exclusive custody and control and (ii) segregated from all such documents held by The Bank of New York for its own account or for the account of other persons. The Collateral Agent shall not have any duty to collect dividends, or other amounts due or to become due on any Collateral or, except as expressly set forth herein, to take any action to preserve any rights of the Pledgor or the Secured Parties as against any person obligated with respect to any Collateral. 7. Release of Collateral. During the term of this Agreement, the --------------------- Collateral shall be released only as follows: 3 (a) From the Determination Date through the Termination Date, so long as no Event of Default shall have occurred and be continuing, the Collateral Agent shall (i) release to the Pledgor for sale or otherwise, or (ii) sell in accordance with the instructions of the Pledgor, in either case promptly upon Pledgor's written request, all or any portion of the Collateral that constitutes Covered Shares; provided that, in the case of -------- any release pursuant to clause (i) of this subsection, Pledgor shall simultaneously deposit or cause to be deposited into the Cash Collateral Account (as defined below), and in the case of any sale by the Collateral Agent pursuant to clause (ii) of this subsection, the Collateral Agent shall deposit into the Cash Collateral Account out of the proceeds of such sale, in cash, an amount equal to the product of (A) the Per Share Settlement Amount times (B) the number of Covered Shares so sold or ----- released. (b) On the Settlement Date, the Collateral Agent shall pay, by wire transfer of immediately available funds, the Aggregate Settlement Amount owing to each registered Holder of a SAR under the applicable SAR Agreement pursuant to instructions, which shall include the Aggregate Settlement Amount and wire transfer instructions for such Holder, certified in writing to the Collateral Agent two business days prior to the Settlement Date by the Company, or, during an Event of Default, the registered Holder of a SAR. Payments of the Aggregate Settlement Amount pursuant to this Section 7(b) shall be made first, from amounts on deposit in the Cash Collateral ----- Account at the end of the business day preceding the Settlement Date, including cash, if any, that Pledgor has deposited in the Cash Collateral Account to enable the payment of Aggregate Settlement Amounts hereunder, and second, from the proceeds of the sale by the Collateral Agent, at the ------ instruction of the Pledgor or, during an Event of Default, the Required Secured Parties, of such amount of Pledged Securities as shall be required to enable the Collateral Agent to pay the Aggregate Settlement Amount for each registered Holder with respect to whom the Collateral Agent has received the certification described in the first sentence of this Section 7(b). Any amounts realized from a sale of Pledged Securities in excess of the amount required to pay the Aggregate Settlement Amounts owing on the Settlement Date and any other Secured Obligations hereunder shall be deposited in the Cash Collateral Account and distributed in accordance with Section 7(c). (c) On the first business day following the date all obligations of the Pledgor under the SARs shall have been satisfied or discharged in full (the "Termination Date"), the lien and security interest created by this Agreement on and in the Collateral shall automatically be released, and the entire Collateral, including without limitation all amounts in the Cash Collateral Account, shall be returned to the Pledgor on or promptly following such date, and the Collateral Agent shall execute and deliver such agreements, termination statements or other documents or filings as the Pledgor shall reasonably request to evidence or effect the release of such lien and security interest. 4 8. Cash Collateral Account. All cash proceeds of any Collateral ----------------------- hereunder, including, without limitation, all cash distributions and dividends with respect to such Collateral, and all amounts paid by or on behalf of the Pledgor pursuant to Section 7(a)(i) shall be paid directly to a "no access" account of the Pledgor maintained with the Collateral Agent (the "Cash Collateral Account"). Until the Termination Date, the Cash Collateral Account shall be under the exclusive dominion and control of the Collateral Agent for the ratable benefit of each of the Secured Parties, and any transfer or withdrawal of funds therefrom shall be governed by this Agreement. On the Termination Date, all amounts on deposit in the Cash Collateral Account shall be paid to the Pledgor in accordance with Section 7(c) hereof. The Pledgor shall not have the right to amend the TSAT SARs or TSAT Pledge Agreement without the consent of the Required Secured Parties. 9. Rights of Pledgor With Respect to The Collateral. Notwithstanding ------------------------------------------------ Pledgor's pledge of the Collateral under this Agreement, Pledgor shall have during the term of this Agreement, except as expressly set forth to the contrary in this Agreement, all rights associated with the ownership of the Collateral, including, without limitation, in the case of the GMH Shares and any other securities from time to time constituting Collateral (collectively, "Pledged Securities"), (a) all voting and consensual rights relating to Pledged Securities and (b) the right to make any election to which a holder of Pledged Securities may become entitled with respect to any dividend or distribution on, or conversion, exchange, reclassification or other change to, such Pledged Securities, including without limitation any election with respect to the consideration to be received in any merger affecting the issuer of such Pledged Securities, together with all other rights now or hereafter associated with ownership of any Pledged Securities. 10. Sale of Collateral. Upon any sale or other disposition of the ------------------ Collateral pursuant to this Agreement, upon Event of Default or otherwise, the Collateral Agent shall have the right to deliver, assign and transfer to the purchaser thereof (including the Pledgor) the Collateral or portion thereof so sold or disposed of and all proceeds thereof shall be promptly transmitted to the Collateral Agent for application by the Collateral Agent in accordance with Section 7 of this Agreement. Each purchaser (including Pledgor) at any such sale or other disposition shall hold the Collateral free from any claim or right of whatever kind. The Pledgor hereby specifically waives (to the extent permitted by law) all rights of stay or appraisal which it has or may have under any rule of law or statute now existing or hereafter adopted. Nothing herein contained shall be construed as an assumption by the Collateral Agent, any other Secured Party or any of their respective appointees of any liability of the Pledgor with respect to any of the Collateral, and the Pledgor shall be and remain responsible for all such liabilities. Pledgor hereby acknowledges that any sale by the Collateral Agent of any Pledged Securities must be made in compliance with the Securities Act of 1933 (the "Securities Act"), all other Federal securities laws, as well as any applicable Blue Sky or other state securities laws which may impose limitations as to the manner in which a Secured Party or any other person may sell, transfer or otherwise dispose of securities. Pledgor acknowledges that any sale or disposition contemplated pursuant hereto may be at prices and on terms less favorable to any Secured Party than those obtainable through a public sale without any applicable restrictions, and, notwithstanding such 5 circumstances, Pledgor agrees that any such sale or other disposition shall be deemed to have been made in a commercially reasonable manner. 11. Standard of Care of Collateral Agent; Duties; Indemnification. The ------------------------------------------------------------- Collateral Agent is a bailee for hire and shall hold the Collateral in accordance with customary standards for those engaged as custodians of commercial documents in similar capacities. Notwithstanding anything to the contrary contained herein: (a) The provisions of this Agreement set forth the exclusive duties of the Collateral Agent and no implied duties or obligations shall be read into this Agreement against the Collateral Agent. The Collateral Agent shall not be bound in any way by any agreement or contract other than this Agreement and any other agreement to which it is a party. The Collateral Agent shall not be required to ascertain or inquire as to the performance or observance of any of the conditions or agreements to be performed or observed by any other party, except as specifically provided in this Agreement. The Collateral Agent disclaims any responsibility for the validity or accuracy of the recitals to this Agreement and any representations and warranties contained herein, unless specifically identified as recitals, representations or warranties of the Collateral Agent. (b) Throughout the term of this Agreement, the Collateral Agent shall have no responsibility for ascertaining the value of any Collateral, the title of any party therein, the validity or adequacy of the security afforded thereby, or the validity of this Agreement (except as to Collateral Agent's authority to enter into this Agreement and to perform its obligations hereunder). (c) The Collateral Agent shall not be under any duty to examine or pass upon the genuineness, validity or legal sufficiency of any of the documents constituting part of the Collateral, and shall be entitled to assume that all documents constituting part of such Collateral are genuine and valid and that they are what they purport to be, and that any endorsements or assignments thereof are genuine and valid. The Collateral Agent may rely upon and shall be protected in acting in good faith upon any notice, resolution, request, consent, order, certificate, report, statement or other paper or document appearing on its face to be genuine and to have been signed or presented by the proper party or parties or by a person or persons authorized to act on behalf of the proper party or parties. The Collateral Agent shall not be liable for any action or omission to act as bailee except for its own gross negligence or willful misconduct. (d) No provision of this Agreement shall require the Collateral Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if, in its sole judgment, it shall believe that repayment of such funds or adequate indemnity against such risk or liability is not assured to it. 6 (e) The Collateral Agent is not responsible for preparing or filing any reports or returns relating to Federal, state or local income taxes with respect to this Agreement, other than for the Collateral Agent's compensation or for reimbursement of expenses. (f) The Pledgor agrees to reimburse and hold harmless the Collateral Agent, its directors, officers, employees and agents from and against any and all liability, damage, claim (whether asserted by the Pledgor, the Secured Parties or any other person) and loss and reasonable out-of-pocket expenses (including reasonable counsel fees and expenses) arising from or connected with the Collateral Agent's execution and performance of this Agreement, including the claims of any third parties (including any assignee) relating to the Collateral Agent's execution and performance of this Agreement, except in any such case for any liability, damage, claim, loss or expense resulting from gross negligence or willful misconduct on the part of the Collateral Agent. (g) The Collateral Agent shall have the power to employ such agents as it may deem necessary or appropriate in the performance of its duties and the exercise of its powers under this Agreement and shall not be liable for the acts or omissions of any agent appointed with due care by it hereunder. (h) Notwithstanding anything to the contrary herein, this Section 11 shall survive the termination of this Agreement. 12. Fees and Expenses of Collateral Agent. The Collateral Agent shall ------------------------------------- notify the Pledgor of all fees, expenses and charges of the Collateral Agent arising out of the Collateral Agent's execution and performance of its duties and obligations under this Agreement, and such reasonable fees, expenses and charges shall be paid promptly by the Pledgor. The Collateral Agent may employ, at the Pledgor's reasonable expense, such legal counsel and other experts as it deems necessary in connection with performing its duties and obligations under this Agreement. Notwithstanding anything to the contrary contained herein, this provision shall survive the termination of this Agreement. 13. Removal or Resignation of Collateral Agent. Pledgor, with the consent ------------------------------------------ of Secured Parties who are registered Holders on the SAR Register, other than the Pledgor, the Issuer, or any affiliate, holding in the aggregate a majority of the total number of SARs outstanding at any time (the "Required Secured Parties"), may at any time remove and discharge the Collateral Agent from the performance of its duties under this Agreement. Any such removal shall be effective immediately if such termination is for cause or upon not less than 30 days' prior written notice to the Collateral Agent if such termination is without cause. In addition, the Collateral Agent may, at any time, effective upon 30 days' prior written notice to the Pledgor and the Secured Parties of the appointment of a successor Collateral Agent, terminate its agreement to act as the Collateral Agent under both this Agreement and the TSAT Pledge Agreement. Upon the date of any such termination, the Collateral Agent shall promptly deliver the Collateral then held by it or its agents to the successor Collateral Agent and shall execute and shall promptly deliver, upon payment of all amounts owed it hereunder, such notices, instructions and 7 assignments as may be reasonably necessary or desirable to transfer the rights of the Collateral Agent with respect to the Collateral to the successor Collateral Agent. The appointment of the Collateral Agent by the Pledgor pursuant to Section 3 above shall constitute the appointment of any successor Collateral Agent designated pursuant to this Section 13. 14. Availability of Documents. Each of the Pledgor, each Secured Party and ------------------------- their respective agents, accountants, attorneys and auditors will be permitted during normal business hours at any time and from time to time upon reasonable notice to the Collateral Agent to examine (to the extent permitted by applicable law) the files, documents, records and other papers in the possession or under the control of the Collateral Agent relating to any or all of the Collateral and to make copies thereof. All costs and expenses associated with the exercise from time to time by the Pledgor or any Secured Party of its rights under this Section 14 shall be for the account of the Pledgor or such Secured Party. 15. Representations and Warranties of Pledgor. The Pledgor hereby ----------------------------------------- represents and warrants that: (a) except with respect to the Collateral described in Section 2(d) and, to the extent that Collateral described in Section 2(f) relates to Collateral described in Section 2(d), Collateral described in Section 2(f), the Pledgor is the sole owner of the Collateral (or, in the case of after acquired Collateral, and subject to the exception set forth in this Section 15(a), at the time the Pledgor acquires rights in the Collateral, will be the sole owner thereof); (b) except for the lien under the TSAT Agreement and the lien granted hereunder to the Secured Parties, no Person has (or, in the case of after-acquired Collateral, at the time the Pledgor acquires rights therein, will have) any right, title, claim or interest (by way of security interest or other lien or charge or otherwise) in, against or to all or any of the Collateral; (c) no consent of any other Person is required for the grant of the security interest provided herein by the Pledgor in any of the Collateral (except for any consent of Hughes Electronics Corporation or General Motors Corporation, which has been received), nor will any consent need to be obtained for the Secured Parties to exercise their rights with respect to any of the Collateral, and (d) no filings, except for such filings as have been made, are being made concurrently with the execution of this Agreement, or will be made by the Pledgor within the time period required by applicable law, are required to perfect the lien granted by this Agreement. 16. Covenants of Pledgor. The Pledgor hereby agrees: (a) to procure, -------------------- execute and deliver from time to time any and all endorsements, assignments, financing statements, notices and other writings necessary or appropriate to perfect, maintain and protect the Collateral Agent's security interest hereunder and the priority thereof and to deliver promptly to the Collateral Agent all originals of Collateral or proceeds consisting of chattel paper or instruments; (b) not to surrender or lose possession of (other than to the Collateral Agent or as otherwise permitted by this Agreement), sell, encumber, or otherwise dispose of or transfer, any Collateral or right or interest therein other than as otherwise permitted under this Agreement; (c) to account fully for and promptly to deliver to the Collateral Agent, in the form received, all proceeds received, endorsed to the Collateral Agent as appropriate and accompanied by such assignments and powers, duly executed, as the Collateral Agent shall request, and until so delivered all 8 Collateral and proceeds shall be held in trust for the Collateral Agent, separate from all other property of the Pledgor and identified as being subject to the interest of the Collateral Agent; (d) not to move its chief executive office to a new location unless (i) the Required Secured Parties shall have approved such move in writing or (ii) (A) the Pledgor shall have given the Secured Parties not less than 20 days prior notice thereof, (B) the new location shall be within one of the 50 States of the United States or the District of Columbia and (C) the Collateral Agent shall have received such evidence reasonably satisfactory to it as it may reasonably request (including acknowledgment copies of financing statements and opinions of counsel) that Pledgor's rights with respect to the Collateral will not be adversely affected by such move; (e) to do, to the extent permitted by this Agreement, all acts to maintain, preserve and protect the Collateral that an owner of assets of the same type as the Collateral would deem customarily necessary or desirable therefor; and (f) to appear in and defend, at the Pledgor's cost and expense, any action or proceeding which may affect its title to or the Secured Parties' interest in the Collateral. 17. Authorized Action by Collateral Agent. The Pledgor hereby irrevocably ------------------------------------- appoints the Collateral Agent as its attorney-in-fact, coupled with an interest, to do (but the Collateral Agent shall not be obligated to and shall incur no liability to the Pledgor or any third party for not so doing), at the request and direction of the Required Secured Parties upon the occurrence of an Event of Default and while such Event of Default is continuing, any act which the Pledgor is obligated by this Agreement to do, and to exercise such rights and powers as the Pledgor might exercise with respect to the Collateral, including the right to (a) collect by legal proceedings or otherwise and endorse, receive and receipt for all interest, payments, proceeds and other sums and property now or hereafter payable on or on account of the Collateral; (b) preserve the Collateral; (c) transfer the Collateral to the Collateral Agent's own or its nominee's name; or (d) sell or otherwise dispose of the Collateral (provided -------- that nothing in this Section 17 shall limit the power of the Collateral Agent to - - ---- sell Pledged Securities as provided in this Agreement). Notwithstanding anything contained herein, in no event shall the Collateral Agent or any Secured Party be required to make any presentment, demand or protest or give any notice, and neither the Collateral Agent nor any Secured Party need take any action to preserve any rights against any prior party or any other person in connection with the Secured Obligations or with respect to the Collateral. The Collateral Agent is, and shall at all times continue to be, authorized to file financing statements (and amendments to, and continuation statements in respect of, financing statements) with respect to the Collateral without the signature of the Pledgor in such filing offices as shall be necessary or appropriate for the purpose of perfecting maintaining the perfection of the security interest provided for herein. The Collateral Agent shall give the Pledgor a copy of each filing so made prior thereto or promptly thereafter. 18. Default and Remedies. -------------------- (a) As used herein, the term "Event of Default" means the occurrence of any of the following events: 9 (i) the Pledgor's failure to pay or cause to be paid, when due, to each registered holder of SARs, the full Aggregate Settlement Amount and any other outstanding Secured Obligations payable to such registered holder in respect of its SARs, as provided in the SAR Agreements; (ii) any representation of the Pledgor in this Agreement shall have been untrue in any material respect when made; (iii) the Pledgor shall breach in any material respect any covenant of the Pledgor in this Agreement; (iv) the Pledgor shall make an assignment for the benefit of creditors or admit in writing its inability to pay its debts as they mature or come due, or shall petition or apply for the appointment of a trustee or other custodian, liquidator or receiver, or shall commence any case or other proceeding under any bankruptcy, reorganization, arrangement, insolvency , readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or if any such case or other proceeding shall be commenced against the Pledgor, the Pledgor shall indicate its approval thereof, consent thereto or acquiescence therein or such petition or application shall not have been dismissed within 90 days after the filing thereof; (v) a decree or order shall be entered appointing any such trustee, custodian, liquidator or receiver or adjudicating the Pledgor bankrupt or insolvent, or approving a petition in any such case or other proceeding, or a decree or order for relief is entered in respect of the Pledgor in a case under Federal bankruptcy laws as now or hereafter constituted; or (vi) any event of default under the TSAT SARs or the TSAT Pledge Agreement. (b) On or after the Determination Date, upon the occurrence and during the continuation of any Event of Default (whether such Event of Default first occurred before or on or after the Determination Date), the Collateral Agent, upon request of the Required Secured Parties, shall: (i) foreclose or otherwise enforce the Secured Parties' lien in the Collateral in any manner permitted by law or provided for hereunder; or sell or otherwise dispose of the Collateral or any part thereof at one or more public or private sale, for credit or future delivery (without the assumption of any credit risk), on such terms and in such manner as the Collateral Agent may determine to be commercially reasonable (taking into account the circumstances under which the Collateral is being sold); and (ii) pay and distribute to the registered holders of the SARs, ratably in proportion to the number of SARs held, out of the Cash Collateral Account (and against delivery of SAR Agreements representing such SARs, or such other evidence as the Collateral Agent shall 10 reasonably request), any and all amounts then due and payable to such registered holders in respect of such SARs, which amounts shall be satisfied and discharged to the extent of any such payments actually received. 19. Cumulative Rights. The rights, powers and remedies of the Collateral ----------------- Agent and the Secured Parties under this Agreement shall be in addition to all rights, powers and remedies given to the Collateral Agent and the Secured Parties by virtue of any statute or rule of law, the SAR Agreements or any other agreement, all of which rights, powers and remedies shall be cumulative and may be exercised successively or concurrently. Without limiting the generality of the foregoing, the Collateral Agent shall have all rights of a secured party under the New York Uniform Commercial Code and other applicable New York law. 20. Waiver. Any waiver, forbearance, failure or delay by the Collateral ------ Agent or the Secured Parties in exercising, or the exercise or beginning of exercise by the Collateral Agent or the Secured Parties of, any right, power or remedy, simultaneous or later, shall not preclude the further, simultaneous or later exercise thereof, and every right, power or remedy of the Collateral Agent or the Secured Parties shall continue in full force and effect. 21. Binding Upon Successors. All rights and obligations of the Pledgor, ----------------------- the Collateral Agent and the Secured Parties under this Agreement shall bind and inure to the benefit of the Pledgor, the Collateral Agent and the Secured Parties and their successors and assigns. 22. Entire Agreement; Severability. This Agreement contains the entire ------------------------------ security agreement and agency agreement, with respect to the Collateral, among the Collateral Agent, the Secured Parties and the Pledgor (other than the TSAT Pledge Agreement, to the extent applicable). If any of the provisions of this Agreement shall be held invalid or unenforceable, this Agreement shall be construed as if not containing such provisions, and the rights and obligations of the parties hereto shall be construed and enforced accordingly. 23. Choice of Law; Submission to Jurisdiction. This Agreement shall be ----------------------------------------- construed in accordance with and governed by the internal laws of the State of New York without giving effect to any conflicts of laws principles, and terms used herein, except as otherwise (by reference or otherwise) defined herein shall have the meanings given to them in the New York Uniform Commercial Code. Each party hereto irrevocably submits to the jurisdiction of any New York State court sitting in the Borough of Manhattan or any Federal court sitting in the Borough of Manhattan in respect of any suit, action or proceeding arising out of or relating to this Agreement and the transactions pursuant hereto and in connection herewith, and irrevocably agrees that all claims in respect of any such suit, action or proceeding shall be heard and determined in any such court. Each party irrevocably waives any objection which it may now or hereafter have to the laying of the venue of such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. 11 24. Amendments, Etc. No amendment or waiver of any provision of this --------------- Agreement, nor consent to any departure by the Pledgor or the Collateral Agent here from, shall be effective unless the same shall have been effected in accordance with Section 15 of the SAR Agreements. 25. Notice. All notices, requests, demands, claims, and other ------ communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given to the intended recipient (i) upon telephonic confirmation of facsimile, (ii) when sent by overnight delivery or (iii) seventy-two hours after deposit in the United States mail when mailed by first class mail, postage prepaid, to the addresses or telecopier number, as applicable, listed below or on the signature pages hereto. Any party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address, telephone number or telecopier number for such recipient (i) if such recipient is the Collateral Agent, set forth on the signature page hereof; (ii) if such recipient is the Pledgor, set forth below: 8085 South Chester, Suite 300 Englewood, Colorado 80112 Telephone: (303) 712-4600 Telecopy: (303) 712-4977 Attention: Chief Financial Officer with a copy to: Baker & Botts, L.L.P. 599 Lexington Avenue New York, New York 10022 Telephone: (212) 705-5000 Telecopy: (212) 705-5125 Attention: Marc A. Leaf, Esq. and (iii) if such recipient is a Holder, as set forth on the signature pages to the relevant SAR Agreement, with copies to: Orrick, Herrington & Sutcliffe, LLP 666 Fifth Avenue New York, New York 10022 Telephone: (212) 506-5000 Telecopy: (212) 506-5151 Attention: Duncan N. Darrow, Esq. and 12 Ropes & Gray One International Place Boston, Massachusetts 02110 Telephone: (617) 951-7000 Telecopy: (617) 951-7050 Attention: William F. McCarthy, Esq. Notices, requests, demands, claims or other communications may be sent by any other means (including personal delivery, expedited courier, messenger service, telecopy, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other party notice in the manner herein set forth. 26. Execution in Counterparts. This Agreement may be executed in ------------------------- counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. 27. Removal of Collateral Agent under TSAT Pledge Agreement. Pledgor ------------------------------------------------------- hereby covenants and agrees, for the benefit of the Secured Parties, that Pledgor shall not consent to the removal and discharge of the collateral agent under the TSAT Pledge Agreement pursuant to Section 13 thereof, without the consent of the Required Secured Parties hereunder. 13 IN WITNESS WHEREOF, the Pledgor and the Collateral Agent have caused this Agreement to be executed and delivered as of the day and year first above written. PRIMESTAR, INC. By: _______________________________________ Name: Title: THE BANK OF NEW YORK, as Collateral Agent By: _______________________________________ Name: Walter N. Gitlin Title: Vice President Notice Address: 101 Barclay Street Floor 21 West New York, New York 10286 Attn: Corporate Trust Trust Administration Telecopy No.: 212-815-5915 Telephone No.: 212-815-5375 14 EX-10.7 10 PRIMESTAR PAYMENT AGREEMENT EXHIBIT 10.7 AGREEMENT dated as of January 22, 1999, among TCI SATELLITE ENTERTAINMENT, INC., a Delaware corporation ("TSAT"), PRIMESTAR, INC., a Delaware corporation ("Primestar"), the Funding Parties (as hereinafter defined) and Paragon Communications ("Paragon", and together with the Funding Parties, the "Stockholders"). RECITALS A. Primestar and each of the Funding Parties desire to enter into an Asset Purchase Agreement, to be dated as of the date hereof (the "Medium Power Agreement"), among Hughes Electronics Corporation ("Hughes"), Primestar, PRIMESTAR Partners L.P., PRIMESTAR MDU, Inc., and the persons indicated as stockholders of Primestar named therein (the "Funding Parties"). The Medium Power Agreement provides for, among other things, the purchase and sale of all of the assets of Primestar and its subsidiaries that are used in the business of distributing the "PRIMESTAR" service, all as provided therein (the "Medium Power Asset Sale"). B. TSAT is the holder of 100% of the outstanding shares of Class B Common Stock of Primestar (the "Class B Common Stock"). Pursuant to the Restated Certificate of Incorporation of Primestar, the Medium Power Asset Sale may not be consummated without the affirmative vote of TSAT as the holder of record of all of the Class B Common Stock. TSAT is not willing to authorize the execution and delivery of the Medium Power Agreement or the consummation of the Medium Power Asset Sale unless Primestar and the Funding Parties enter into this Agreement. C. TSAT and Primestar are parties to (i) the TSAT Tempo Agreement dated as of February 6, 1998 (the "TSAT Tempo Agreement"), and (ii) the Agreement and Plan of Merger dated as of February 6, 1998 (the "TSAT Merger Agreement"). D. The TSAT Merger Agreement provides for, among other things, the payment by Primestar during the term of such agreement of certain ongoing expenses of TSAT. E. Primestar and each of the Funding Parties also desire to enter into an Asset Purchase Agreement, to be dated as of the date hereof (the "High Power Agreement"), among Hughes, Primestar, Tempo Satellite, Inc., a wholly-owned subsidiary of TSAT ("Tempo") and the Funding Parties. It is a condition to the obligations of Hughes thereunder that (i) the TSAT Tempo Agreement be amended as provided in Exhibit A attached hereto (the "Proposed Amendment"), (ii) the TSAT Merger Agreement be terminated in accordance with its terms, with no party thereto having any liability to any other party to the High Power Agreement as a result of such termination, and (iii) Space Systems/Loral, Inc. ("Loral") consent to the assignment to Hughes, pursuant to the High Power Agreement, of the satellite construction agreement between Tempo and Loral. F. TSAT is not willing (i) to amend the TSAT Tempo Agreement, (ii) to grant any releases in connection with the termination of the TSAT Merger Agreement, or (iii) to cause Tempo to enter into the High Power Agreement unless Primestar and the Stockholders enter into this Agreement. G. Capitalized terms used herein and not otherwise defined have the meanings ascribed thereto in the High Power Agreement and the Medium Power Agreement, as applicable. NOW THEREFORE, in consideration of the premises, of the mutual agreements set forth herein, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement, intending to be bound hereby, hereby agree as follows: 1. TSAT will use its best efforts to cause Loral to provide its consent to the transactions contemplated by the High Power Agreement. Effective as of the initial closing under the High Power Agreement (the "Initial Closing"), TSAT and Tempo will execute and deliver the Proposed Amendment amending the TSAT Tempo Agreement and TSAT will execute and deliver an agreement terminating the TSAT Merger Agreement as provided in Exhibit B attached hereto. 2. (a) Subject to the consummation of the Initial Closing, Primestar hereby agrees to pay to TSAT either (i) $65 million in cash or (ii) 1,407,307 shares (the "Shares") of Class H Common Stock of GM ("GMH Stock") out of the 4,871,448 shares of GMH Stock required to be delivered by Hughes as part of the consideration for the Medium Power Asset Sale (the applicable of the foregoing being the "Consideration"), as Primestar may elect. The Consideration shall be paid simultaneously with the closing of the Medium Power Asset Sale (the "Medium Power Closing"). If Primestar elects to cause the Shares to be delivered in payment of the Consideration, the number and kind of shares deliverable shall be adjusted for stock dividends, stock splits, combinations, distributions, reclassifications, recapitalizations and other similar events after January 22, 1999 and prior to the delivery of the Shares pursuant hereto, if and to the same extent that the Parent Securities are so adjusted. (b) If Primestar elects to pay the Consideration in cash, then Primestar shall deliver to TSAT $65 million in cash at the Medium Power Closing. If Primestar elects to pay the Consideration in Shares, then, subject to TSAT's compliance with the provisions of Section 2(c), Primestar shall direct Hughes to deliver at the Medium Power Closing the Shares, registered in the name of TSAT, to the TSAT Collateral Agent (as defined below). (c) If Primestar elects to cause Shares to be delivered in payment of the Consideration, then simultaneously with the delivery of the Shares as provided in Section 2(b), 2 TSAT shall enter into (i) a Share Appreciation Rights Agreement (the "SAR Agreement") with Primestar with respect to the Shares in the form annexed as Exhibit C hereto, and (ii) a Pledge and Security Agreement (the "Pledge Agreement") with The Bank of New York, as Collateral Agent (the "TSAT Collateral Agent"), in the form annexed as Exhibit D hereto, providing for the Shares to be deposited into a collateral account with the TSAT Collateral Agent pursuant to the Pledge Agreement to secure TSAT's obligations with respect to the SAR Agreement. 3. TSAT acknowledges that the Medium Power Agreement contemplates that Primestar and Hughes will enter into Parent Security Documents that will restrict the transfer of the Parent Securities for a period of one year from the Medium Power Closing and will provide certain demand registration rights with respect to the Parent Securities. TSAT agrees that the Shares shall be subject to such one-year restriction on transfer, in addition to the restrictions pursuant to the Pledge Agreement, and Primestar agrees that at the request of TSAT the Shares, or such portion thereof as TSAT may request, will be included in any demand registration effected pursuant to the Parent Security Documents, on the same terms and subject to the same conditions as are applicable to Primestar's exercise of its registration rights with respect to the Parent Securities. If requested by Hughes or Primestar, TSAT will become a party to the Parent Security Documents with respect to the Shares, provided that the terms thereof do not purport to impose any obligations on TSAT or its affiliates (other than Primestar), including, without limitation, any restrictions on its exercise of full rights of ownership of the Shares, other than as contemplated by this Agreement or consented to by TSAT. TSAT acknowledges that neither Primestar nor any of the Funding Parties will guarantee or in any way assume responsibility for TSAT's obligations pursuant to such registration. 4. Notwithstanding Section 2 hereof, if the Medium Power Agreement is terminated prior to the consummation of the Medium Power Asset Sale, TSAT's right to receive the Consideration shall automatically terminate; provided, -------- however, that Primestar shall not agree to any termination of the Medium Power - - ------- Agreement prior to April 30, 1999. Further, Primestar shall not agree to any other material modification or amendment to the Medium Power Agreement without the prior written consent of TSAT, which shall not be unreasonably withheld; it being understood and agreed that it shall not be unreasonable for TSAT to withhold its consent to any proposed modification or amendment that would adversely affect TSAT's rights or increase its obligations hereunder, including, without limitation, its right to receive the Consideration (including any condition thereto) and its right, if the Consideration is paid in Shares, to exercise full rights of ownership thereof, subject only to the restrictions contemplated hereby. 5. Notwithstanding the termination of the TSAT Merger Agreement, Primestar shall continue to pay or reimburse TSAT for all reasonable costs and expenses of the nature that the TSAT Merger Agreement required Primestar to bear, as specified in the following sentence, that are incurred or accrued prior to or with respect to periods prior to the effective date of the termination of the TSAT Merger Agreement, it being understood and agreed by Primestar and TSAT that the aggregate amount of the costs and expenses of such nature that may be incurred 3 following the date hereof through the date of termination of the TSAT Merger Agreement will not exceed $150,000. If the Medium Power Agreement is terminated prior to the consummation of the Medium Power Asset Sale, or if (for whatever reason, other than a breach by TSAT of this Agreement or the Medium Power Agreement) TSAT shall not have received the Consideration by May 7, 1999, then, without limitation of TSAT's rights or remedies, Primestar shall reimburse TSAT for all reasonable costs and expenses (including reasonable legal fees of outside counsel and reasonable fees of TSAT's independent public accountants) incurred by TSAT that are in excess of the aggregate amount actually received by TSAT pursuant to the High Power Agreement in payment of the exercise price of the Option and were incurred during the period commencing on the effective date of the termination of the TSAT Merger Agreement and ending on June 30, 2000 (i) in preparation of tax returns and other reports to Governmental Entities, (ii) for payment of required taxes, franchise fees, NASDAQ fees and similar fees, (iii) in complying with its reporting obligations under the Securities Act and the Exchange Act and (iv) to maintain D&O Insurance on terms reasonably acceptable to Primestar (capitalized terms used in this Section 5 having the meanings ascribed thereto in the TSAT Merger Agreement). It is further understood and agreed that Primestar shall be solely responsible for all legal and other costs and expenses incurred or required to be incurred in order to comply with the requirements of and effect the transactions contemplated by the High Power Agreement (including, without limitation, for Tempo Satellite, Inc. to maintain its FCC licenses pending the transfer thereof) and that TSAT and Tempo shall have no liability therefor. 6. (a) Subject to the following sentence, TSAT further agrees that effective upon the receipt in full by it of the cash, or of good and valid title to the Shares, being delivered in payment of the Consideration, free and clear of all liens and encumbrances not contemplated by this Agreement, and in consideration of the Stockholders' having agreed to the indemnification provisions of the Medium Power Agreement and the High Power Agreement and having entered into or agreed to enter into the Additional Liability Agreements (as defined below) and to perform their obligations thereunder all without any requirement (and by its execution hereof, each Stockholder confirms, on behalf of itself and each of its subsidiaries that are stockholders of Primestar, the waiver of any such requirement) that TSAT become a party to any such agreement or contribute to, or indemnify any Stockholder (or any such subsidiary) against, any payment(s) made or required to be made thereunder: (i) it shall waive its rights as a stockholder of Primestar to participate in any dividends or distributions by Primestar to its stockholders as such, whether in liquidation or otherwise, or any payments made by Primestar in redemption of its stock, in an aggregate amount up to and including $65 million; and (ii) subject to the approval of TSAT's stockholders, it will transfer all (but not less than all) of its Primestar stock (the "TSAT Shares") to the other stockholders of Primestar (each, a "purchaser"), pro rata in accordance with their respective percentage equity interests in Primestar (net of TSAT's interest), provided that the consummation of such purchase does not and will not (A) violate any provision of law, rule or regulation applicable to the purchaser or by 4 which the purchaser or its assets are bound or subject or the organizational documents of the purchaser or (B) result in (whether with the giving of notice or passage of time or both) any breach or violation of or default under any indebtedness of the purchaser or any material agreement or arrangement to which the purchaser is a party or by which it or its assets are bound or subject. If at any time TSAT no longer has indefeasible title to the Consideration as a result of a claim by any person (other than TSAT) based on a theory of illegal dividends, illegal redemption, fraudulent conveyance or preference or any similar theory, then at TSAT's election the agreements of TSAT in the preceding sentence shall be of no further force and effect, and its ownership of the TSAT Shares and its rights as a Primestar stockholder shall be reinstated, prospectively and not retroactively. Nothing contained in the foregoing is intended to limit or affect TSAT's rights under this Agreement, the Medium Power Agreement or the High Power Agreement, or under any other agreement with Primestar. For purposes of the foregoing, "Additional Liability Agreements" means each of the following: the Contribution Agreement, dated as of January 22, 1999, among certain of the Stockholders; the Funding Agreement referred to in Section 7 hereof, and the Indemnity Agreement (in the form annexed hereto as Exhibit E) to be entered into by the Stockholders that will be parties to the Funding Agreement and the holders of certain debt instruments issued by Primestar. (b) TSAT shall call a meeting of its stockholders to be held as promptly as practicable for the purpose of voting upon the transfer by TSAT of the TSAT Shares contemplated by clause (ii) of the first section of Section 6(a) and shall use its reasonable best efforts to obtain such approval. 7. TSAT shall be entitled to rely on and enforce, as an express third party beneficiary, the obligations of the Funding Parties under Section 5(c) of the Funding Agreement in the form annexed hereto as Exhibit F to be entered into by Primestar, the Funding Parties and United Artists Investments, LLC, and no amendment of Section 5(c), of Section 8(b) (as it relates to the requirement of TSAT's consent to any amendment of Section 5(c)) or of Section 10(b) (as its relates to Section 5(c)) shall be effected without the prior written consent of TSAT. 8. This Agreement shall terminate automatically upon the termination of the Medium Power Agreement and abandonment of the transactions contemplated thereby. Upon termination of this Agreement as provided in the immediately preceding sentence, this Agreement shall become null and void and of no further force and effect, except for the provisions of Section 5, this Section 8, Section 9 and Section 10. 9. This Agreement shall be construed in accordance with and governed by the internal laws of the State of New York without giving effect to any conflicts of laws principles. Each party hereto hereby irrevocably submits to the jurisdiction of any New York State court sitting in the Borough of Manhattan or any federal court sitting in the Borough of Manhattan in respect of any suit, action or proceeding arising out of or relating to this Agreement and the 5 transactions contemplated hereby, and irrevocably agrees that all claims in respect of any such suit, action or proceeding shall be heard and determined in any such court. Each party irrevocably waives any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. 10. Without intending to limit the remedies available to any party hereto, each party acknowledges and agrees that a violation by such party of any of the terms of this Agreement will cause irreparable injury for which an adequate remedy at law is not available and accordingly, the nonbreaching party shall be entitled to an injunction, restraining order or other form of equitable relief from any court of competent jurisdiction compelling the breaching party to specifically perform, and restraining such party from committing any breach of, or threatened breach of, any provision of this Agreement. 11. This Agreement may be executed in counterparts, each of which shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 6 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered on and as of the date first written above. PRIMESTAR, INC. ADVANCE/NEWHOUSE PARTNERSHIP, By ADVANCE COMMUNICATION CORP., as general partner By: _____________________________________ By: _____________________________________ Name: Name: Title: Title: TIME WARNER ENTERTAINMENT COMCAST CORPORATION COMPANY, L.P., By AMERICAN TELEVISION AND COMMUNICATIONS By: _____________________________________ CORPORATION, Name: a general partner Title: By: _____________________________________ MEDIAONE OF DELAWARE, INC. Name: Title: By: _____________________________________ Name: Title: COX COMMUNICATIONS, INC. TCI SATELLITE ENTERTAINMENT, INC. By: _____________________________________ By: _____________________________________ Name: Name: Title: Title: GE AMERICAN COMMUNICATIONS, TEMPO SATELLITE, INC. INC. By: _____________________________________ By: _____________________________________ Name: Name: Title: Title:
PARAGON COMMUNICATIONS, a Colorado general partnership, By: AMERICAN TELEVISION AND COMMUNICATIONS CORPORATION, a general partner, By: _____________________________________ Name: Title: EX-99.1 11 PRESS RELEASE EXHIBIT 99.1 [LOGO OF PRIMESTAR, INC. APPEARS HERE] FOR IMMEDIATE RELEASE Contacts: --------- PRIMESTAR, Inc. Media Relations ------------------------------- Richard Edmonds 212/521-5212 PRIMESTAR, Inc. Investor Relations ---------------------------------- Sean Clarke 303/712-4647 PRIMESTAR COMPLETES SALE OF ITS MEDIUM POWER ASSETS ENGLEWOOD, CO. April 29, 1999 - PRIMESTAR, Inc. ("PRIMESTAR") announced today that it has completed the previously announced sale of its medium power direct broadcast satellite business to Hughes Electronics Corporation ("Hughes"). PRIMESTAR received $1.1 billion in cash and 4,871,000 shares of General Motors Corporation Class H Common Stock (NYSE: GMH) for the transferred assets, which constitute substantially all of the operating assets of PRIMESTAR. PRIMESTAR will officially change its name to "Phoenixstar, Inc.". PRIMESTAR announced that it reached agreement with holders of approximately 84% of the aggregate principal amount of its 10-7/8% Senior Subordinated Notes due 2007 (the "Senior Subordinated Notes"), 12-1/4% Senior Subordinated Discount Notes due 2007 (the "Senior Subordinated Discount Notes"), and notes issued under its Senior Subordinated Credit Facility dated as of April 1, 1998 (the "Bridge Loans"), to clear the way for the closing. Holders participating in the privately negotiated transaction agreed to consent to the transaction with Hughes, amend the indentures and credit agreement governing such debt obligations to remove substantially all covenants, and sell their notes and bridge loans to the Company for cash equal to 85.6% of the aggregate principal amount thereof, plus stock appreciation rights ("SARs") on PRIMESTAR's GMH shares. Each stock appreciation right issued in the transaction entitles the holder to receive a payment from PRIMESTAR at the end of one year in the amount, if any, by which the market price per share of GMH stock at such time exceeds $47.00 per share. Participating note holders and bridge lenders will receive approximately 7.8 SARs per $1,000 principal amount of debt sold to PRIMESTAR pursuant to the agreement. (more) SALE OF MEDIUM POWER ASSETS, page 2 Under terms of the indentures and credit agreement governing PRIMESTAR's senior subordinated debt, PRIMESTAR is required to make an offer to purchase the remainder of the outstanding publicly traded Senior Subordinated Notes and Senior Subordinated Discount Notes and the Bridge Loans at a purchase price equal to 101% of par. PRIMESTAR intends to comply with the terms of its indentures and credit agreement. Pursuant to a previously announced arrangement, PRIMESTAR has transferred to TCI Satellite Entertainment, Inc. ("TSAT") (OTC: TSATA, TSATB), as compensation for certain undertakings by TSAT in connection with the Hughes transactions, 1,407,000 shares of the GMH stock, subject to a stock appreciation right issued by TSAT in favor of PRIMESTAR on the same terms as the stock appreciation rights issued in the negotiated debt restructuring. TSAT owns a 37% interest in PRIMESTAR. The GMH shares transferred to TSAT are pledged to secure the stock appreciation right issued by TSAT to PRIMESTAR. PRIMESTAR in turn has pledged such stock appreciation right and security interest, together with all GMH shares held by PRIMESTAR, to secure the stock appreciation rights issued by PRIMESTAR in the negotiated debt restructuring. In addition to the medium power transaction, Hughes agreed in January 1999 to purchase PRIMESTAR's rights to acquire the high power DBS assets of Tempo Satellite, Inc. ("Tempo"), a subsidiary of TSAT. The first closing under the high power purchase agreement, relating to Tempo's ground-spare satellite and related assets, closed in March. A second closing under such agreement, relating to Tempo's in-orbit satellite and related assets, including Tempo's rights under its FCC authorizations with respect to 11 transponders in the 119 degree W.L. orbital position, is subject to regulatory approvals and is expected to occur mid-year. ### EX-99.2 12 PRESS RELEASE RE: TENDER OFFER/NAME CHANGE EXHIBIT 99.2 Phoenixstar, Inc. FOR IMMEDIATE RELEASE Contact: -------- Phoenixstar, Inc. Investor Relations Sean Clarke: (303) 712-4859 Phoenixstar Announces Tender Offer and Name Change Englewood, Colorado, May 13, 1999 - Phoenixstar, Inc., formerly known as PRIMESTAR, Inc. (the "Company"), announced today that it has commenced a tender offer (the "Offer") for its 12-1/4% Senior Subordinated Discount Notes due 2007 (the "Senior Subordinated Discount Notes") and its 10-7/8% Senior Subordinated Notes due 2007 (the "Senior Subordinated Notes" and, together with the Senior Subordinated Discount Notes, the "Notes"), each of which were originally issued by TCI Satellite Entertainment, Inc. On April 28, 1999, the Company completed its previously announced sale (the "Medium Power Sale") of its medium power direct broadcast satellite business, which constituted substantially all of the operating assets of the Company, to Hughes Electronics Corporation. Pursuant to the terms of the Medium Power Sale, the Company officially changed its name to "Phoenixstar, Inc." on April 29, 1999. The indentures governing the Notes require the Company make an offer to purchase, on the terms set forth in such indentures, any outstanding Notes upon the sale by the Company of substantially all of its assets. The Company is offering to purchase (i) the Senior Subordinated Discount Notes, from holders of such Notes as of May 7, 1999, at a price equal to 101% of the accreted value of each Senior Subordinated Discount Note as of the date of payment and (ii) the Senior Subordinated Notes, from holders of such Notes as of May 7, 1999, at a price equal to 101% of the principal amount of each Senior Subordinated Note, plus any accrued and unpaid interest accumulated thereon up to the date of payment. The Offer is set to expire at 5:00 p.m., New York City time, on Thursday, June 10, 1999 (unless further extended at the Company's option pursuant to the terms of the Offer). Payment for the Notes pursuant to the Offer will be made in cash and must be made within five business days after the expiration date. The Company entered into a privately negotiated agreement, dated as of April 20, 1999 (the "Lock-up Agreement"), with certain holders of Notes, pursuant to which such holders agreed to sell their Notes to the Company pursuant to the terms of such agreement; therefore, the Company shall not be required to accept, pursuant to the Offer, from any holder that is party to the Lock-up Agreement, any Notes sold or required to be sold under the Lock-up Agreement. As of June 15, 1999, the current expected date of payment for the Offer, (i) 101% of the accreted value of the Senior Subordinated Discount Notes will be $735.87 for each $1,000 principal amount at maturity of such Notes and (ii) 101% of the principal amount, plus accrued and unpaid interest to such date, of the Senior Subordinated Notes will be $1,046.25 for each $1,000 principal amount of such Notes. The Depositary and Paying Agent for the Offer is The Bank of New York. The Offer is being made pursuant to an Offer to Purchase (and related materials), which more fully sets forth the terms of the Offer. Additional information concerning the terms of the Offer, tendering Notes and conditions to the Offer may be obtained from the Company by phoning the telephone number listed above. ### EX-99.3 13 CHANGE OF CONTROL OFFER EXHIBIT 99.3 PHOENIXSTAR, INC. (formerly known as PRIMESTAR, Inc.) Change of Control Offer To Purchase for Cash Any and All Outstanding 10 7/8% Senior Subordinated Notes due February 15, 2007 and 12 1/4% Senior Subordinated Discount Notes due February 15, 2007 Phoenixstar, Inc., formerly known as PRIMESTAR, Inc. (the "Company"), hereby offers to purchase for cash, on the terms and subject to the conditions set forth in this Change of Control Offer (as the same may be amended or supplemented from time to time, the "Offer to Purchase") and the related Letter of Transmittal (which together constitute the "Offer"), any and all of its outstanding 10 7/8% Senior Subordinated Notes due February 15, 2007 (the "Senior Subordinated Notes") and its 12 1/4% Senior Subordinated Discount Notes due February 15, 2007 (the "Senior Subordinated Discount Notes" and, together with the Senior Subordinated Notes, the "Notes"), at a purchase price of (i) 101% of the principal amount of each Senior Subordinated Note purchased pursuant to the terms and conditions set forth in this Offer, plus any accrued and unpaid interest accumulated thereon up to the date the Notes are accepted for purchase and of payment, as provided herein (the "Purchase Date"), net to the seller in cash, and (ii) 101% of the Accreted Value of each Senior Subordinated Discount Note purchased pursuant to the terms and conditions set forth in this Offer, net to the seller in cash (collectively the "Offer Price"). As used herein, the term "Accreted Value" has the meaning ascribed to such term in the Indenture governing the Senior Subordinated Discount Notes. As of June 15, 1999 (the date on which the Company currently expects to accept for purchase and pay for all Notes properly tendered pursuant to the Offer), the Accreted Value of the Senior Subordinated Discount Notes will be $728.58 for each $1,000 principal amount at maturity of such Notes. Interest or Accreted Value on any Note not tendered or tendered but not purchased by the Company pursuant to this Offer to Purchase will continue to accrue or accrete, as the case may be. Tenders of Notes pursuant to the Offer will be accepted only in denominations of $1,000 or integral multiples thereof. Holders of Notes ("Holders") whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered. Each Note purchased and each such new Note issued shall be in denominations of $1,000 and integral multiples thereof.
CUSIP No. Security Tender Offer Consideration - - --------- -------- -------------------------- 872298AB0 12 1/4% Senior Subordinated Discount 101% of Accreted Value as of the Purchase Date. Notes due February 15, 2007, Series A 872298AF1 12 1/4% Senior Subordinated Discount 101% of Accreted Value as of the Purchase Date. Notes due February 15, 2007, Series B 872298AA2 10 7/8% Senior Subordinated Notes due 101% of the Note's principal amount, plus any accrued and February 15, 2007, Series A unpaid interest accumulated thereon up to the Purchase Date. 872298AE4 10 7/8% Senior Subordinated Notes due 101% of the Note's principal amount, plus any accrued and February 15, 2007, Series B unpaid interest accumulated thereon up to the Purchase Date.
THE NOTES REFERRED TO HEREIN WERE ORIGINALLY ISSUED BY TCI SATELLITE ENTERTAINMENT, INC. - - -------------------------------------------------------------------------------- THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON JUNE 10, 1999, UNLESS THE OFFER IS EXTENDED (JUNE 10, 1999 OR SUCH LATER DATE TO WHICH THE OFFER IS EXTENDED BEING HEREINAFTER REFERRED TO AS THE "EXPIRATION DATE"). HOLDERS MUST TENDER NOTES ON OR PRIOR TO THE EXPIRATION DATE (AND MUST NOT HAVE WITHDRAWN SUCH NOTES) IN ORDER TO RECEIVE THE OFFER PRICE. TENDERED NOTES MAY BE WITHDRAWN AT ANY TIME NOT LATER THAN THE CLOSE OF BUSINESS ON THE FIFTH BUSINESS DAY PRECEDING THE EXPIRATION DATE. - - -------------------------------------------------------------------------------- The Offer constitutes an offer to purchase following the occurrence of a change of control pursuant to Section 4.14 of the Notes' respective Indentures, each dated as of February 20, 1997, between TCI Satellite Entertainment, Inc. ("TSAT") and The Bank of New York, as trustee (the "Trustee"), as supplemented and amended on April 1, 1998 (pursuant to which the Company assumed TSAT's obligations for the Notes) and April 27, 1999 (each, an "Indenture" and collectively, the "Indentures"). The Company has commenced the Offer in connection with the Asset Purchase Agreement, dated as of January 22, 1999 (the "Asset Purchase Agreement"), among the Company, PRIMESTAR Partners L.P., PRIMESTAR MDU, Inc., the stockholders of the Company named therein and Hughes Electronics Corporation (the "Purchaser"), pursuant to which the Purchaser agreed to acquire the Company's medium power direct broadcast satellite business (the "Medium Power Business") for aggregate consideration consisting of $1.1 billion in cash (subject to adjustment based on the Company's closing working capital position, as provided in the Asset Purchase Agreement) and 4,871,448 shares (the "GMH Shares") of the Class H Common Stock of General Motors Corporation (collectively, the "Purchase Price"). The sale of the Company's Medium Power Business, pursuant to the Asset Purchase Agreement, was consummated on April 28, 1999. The assets sold to the Purchaser pursuant to the Asset Purchase Agreement constituted substantially all the assets of the Company and its subsidiaries, which resulted in a Change of Control as defined in Section 1.01 of the Indentures. The Notes are obligations solely of Phoenixstar, Inc. (formerly known as PRIMESTAR, Inc.). Neither Hughes Electronics Corporation nor TCI Satellite Entertainment, Inc. have any obligation whatsoever in respect of any Notes, whether or not tendered or accepted for purchase pursuant to the Offer. Section 4.14 of each of the Indentures requires the Company to make an offer to purchase all outstanding Notes within twenty days after the Company undergoes a Change of Control. The purpose of the Offer is to acquire all of the Company's outstanding Notes. Holders who tender Notes that are purchased pursuant to the Offer shall be paid the Offer Price for such Notes on the Purchase Date, which will occur promptly after the Expiration Date, and in no event later than five business days after the Expiration Date. On the Purchase Date the Offer Price will become due and payable upon each Note accepted for payment pursuant to this Offer to Purchase. From and after the Purchase Date interest shall cease to accrue on the Senior Subordinated Notes accepted for purchase hereunder and the Accreted Value of all Senior Subordinated Discount Notes accepted for purchase hereunder shall cease to accrete. Requests for additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Company. ii The Bank of New York will be the depositary and the paying agent for the Offer (the "Depositary"). Any Holder desiring to tender all or any portion of such Holder's Notes should either (i) complete and sign the Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal and mail or deliver it together with the tendered Notes and any other required documents to the Depositary or tender such Notes pursuant to the procedure for book-entry transfer set forth in "The Offer--Procedure for Tendering Notes"; or (ii) request such Holder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such Holder. A Holder who has Notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact that entity if such Holder desires to tender such Notes. Any Holder who desires to tender such Holder's Notes and whose Notes are not immediately available or who cannot comply with the procedures for book- entry transfer on a timely basis may tender such Notes by following the procedures for guaranteed delivery set forth in "The Offer--Procedure for Tendering Notes." The Depository Trust Company ("DTC") has authorized DTC participants that hold Notes on behalf of beneficial owners of Notes through DTC to tender their Notes as if they were Holders. To effect a tender, DTC participants may, in lieu of physically completing and signing the Letter of Transmittal, transmit their acceptance to DTC through the DTC Automated Tender Offer Program ("ATOP"), for which the transaction will be eligible, and follow the procedure for book-entry transfer set forth in "The Offer--Procedure for Tendering Notes." A beneficial owner of Notes that are held of record by a custodian bank, depositary, broker, trust company or other nominee must instruct such nominee to tender the Notes on the beneficial owner's behalf. See "The Offer--Procedure for Tendering Notes." See "Special Factors" for a discussion of certain factors that should be considered in evaluating the Offer. ----------------------------------------------- THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTIONS NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS OFFER TO PURCHASE AND LETTER OF TRANSMITTAL. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. THE OFFER TO PURCHASE DOES NOT CONSTITUTE AN OFFER TO PURCHASE IN ANY JURISDICTION IN WHICH, OR TO OR FROM ANY PERSON TO OR FROM WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER UNDER ANY APPLICABLE SECURITIES OR BLUE SKY LAWS. THE DELIVERY OF THIS OFFER TO PURCHASE SHALL NOT UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN ANY ATTACHMENTS HERETO OR IN THE AFFAIRS OF THE COMPANY OR ANY OF ITS AFFILIATES SINCE THE DATE HEREOF. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS OFFER TO PURCHASE AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MAY NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE DEPOSITARY. iii THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO A TENDER OF NOTES. iv TABLE OF CONTENTS ----------------- PAGE ---- INTRODUCTION.................................................... 1 PURPOSE OF THE OFFER............................................ 1 SOURCE AND AMOUNT OF FUNDS...................................... 2 SPECIAL FACTORS................................................. 2 Effects of the Asset Purchase Agreement.................... 2 Limited Market for the Notes............................... 2 Subsequent Company Repurchases or Defeasance of Notes...... 3 DESCRIPTION OF NOTES............................................ 3 General.................................................... 3 THE OFFER....................................................... 4 Principal Terms of the Offer............................... 4 Acceptance for Payment and Payment for Notes............... 6 Procedure for Tendering Notes.............................. 7 Procedures for Guaranteed Delivery......................... 8 Other Effects of Tender.................................... 9 Withdrawal Rights.......................................... 10 Interest on Notes.......................................... 10 Certain Legal Matters...................................... 10 Depositary and Paying Agent................................ 11 CERTAIN INCOME TAX CONSEQUENCES................................. 11 ADDITIONAL INFORMATION.......................................... 12 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE................. 13 MISCELLANEOUS................................................... 13 v INTRODUCTION The Company hereby offers to purchase for cash, on the terms and subject to the conditions set forth in the Offer, any and all of the outstanding Notes at the Offer Price. The Offer Price is equal to (i) 101% of the principal amount of each Senior Subordinated Note purchased pursuant to the terms and conditions set forth in this Offer, plus any accrued and unpaid interest accumulated thereon up to the Purchase Date, net to the seller in cash and (ii) 101% of the Accreted Value of each Senior Subordinated Discount Note purchased pursuant to the terms and conditions set forth in this Offer, net to the seller in cash. As used herein, the term "Accreted Value" has the meaning ascribed to such term in the Indenture governing the Senior Subordinated Discount Notes. As of June 15, 1999 (which the Company currently expects will be the Purchase Date), the Accreted Value of the Senior Subordinated Discount Notes will be $728.58 for each $1,000 principal amount at maturity of such Notes. If a Holder's Notes are not properly tendered pursuant to the Offer on or prior to the Expiration Date, such Holder will not receive the Offer Price. Notes may not be withdrawn after the close of business on the fifth business day preceding the Expiration Date. See the procedures for withdrawal described below in "The Offer--Withdrawal Rights." Holders who tender their Notes will not be obligated to pay brokerage fees or commissions on the purchase by the Company of Notes pursuant to the Offer. The Company will pay or reimburse all fees and expenses of The Bank of New York, the Depositary and paying agent for the Offer, and all other costs and expenses in connection with the Offer. The Company expressly reserves the absolute right, in its sole discretion, from time to time after the Expiration Date, (i) to purchase any Notes through open market or privately negotiated transactions, one or more additional tender or exchange offers, or otherwise, upon such terms and at such prices as it may determine, and (ii) to exercise its rights under the Indentures to discharge its obligations with respect to the Notes by complying with the terms and conditions of the Indentures. The purchase of Notes pursuant to the Offer would reduce the number of Notes that might otherwise trade publicly. This could adversely affect, among other things, the liquidity or prices realizable in sales of the Notes following the completion of the Offer. See "Special Factors--Limited Market for the Notes" for a discussion of these and other possible effects of the Offer. Holders are urged to read the Offer to Purchase and Letter of Transmittal carefully before deciding whether to tender their Notes pursuant to the Offer. PURPOSE OF THE OFFER Pursuant to Section 4.14 of the Indentures, the Company is required to offer to purchase all of its outstanding Notes, at the Offer Price, within 20 days after the occurrence of a Change of Control (as defined in Section 1.01 of the Indentures). On April 28, 1999, the Company consummated the Asset Purchase Agreement, pursuant to which, subject to the terms and conditions set forth therein, the Purchaser purchased the Medium Power Business, which constituted substantially all the assets of the Company and its subsidiaries, resulting in a Change of Control as defined in the Indentures. Holders who tender Notes that are purchased pursuant to the Offer shall be paid the Offer Price on or before the Purchase Date. On the Purchase Date the Offer Price will become due and payable upon each Note accepted for payment pursuant to this Offer to Purchase. From and after the Purchase Date interest shall cease to accrue on the Senior Subordinated Notes accepted for purchase hereunder and the Accreted Value of all Senior Subordinated Discount Notes accepted for purchase hereunder shall cease to accrete. SOURCE AND AMOUNT OF FUNDS The total amount of funds required by the Company to pay the total Offer Price, plus any accrued and unpaid interest required to be paid pursuant to the Offer, in connection with the Offer is estimated to be approximately $117,482,196 (assuming all outstanding Notes are tendered and accepted for payment prior to the Expiration Date, and the Purchase Date is June 15, 1999). The Company plans to use the proceeds from the Asset Purchase Agreement to pay the Offer Price. If necessary, any additional funds required will be obtained by the Company in the form of capital contributions, equity investments or other non-debt payments to the Company pursuant to a Funding Agreement, dated as of March 31, 1999, between the Company and the other parties thereto. SPECIAL FACTORS Effects of the Asset Purchase Agreement Pursuant to the Asset Purchase Agreement, the Company has sold substantially all of its assets. As a result, the Company is required to make a purchase offer to the Holders pursuant to Section 4.14 of each of the Indentures. In addition, as a result of the consummation of the transactions provided for in the Asset Purchase Agreement, the Company will not generate any recurring revenue from operations, and will not have revenue from any sources sufficient to pay the principal and interest on Notes as they come due. Consequently, the liquidity, market value and price volatility of any Notes that remain outstanding following the consummation of the Offer will likely be adversely affected. Limited Market for the Notes In April 1999, in connection with the consummation of the Asset Purchase Agreement, the Company entered into an agreement (the "Lock-up Agreement") with the holders of approximately 68.45% of the aggregate principal amount of the Senior Subordinated Notes and the holders of approximately 74.57% of the aggregate principal amount at maturity of the Senior Subordinated Discount Notes. Those holders party to the Lock-up Agreement sold (the "Lock-up Sale") their Notes to the Company for cash equal to approximately 85.6% of the aggregate principal amount thereof, plus stock appreciation rights on the GMH Shares. In addition, those holders party to the Lock-up Agreement consented to amend the Indentures in order to remove substantially all of the covenants contained therein, other than the covenants to pay interest on and principal of the Notes when due and covenants relating to required purchase offers. In addition, the Notes are not listed on any national or regional securities exchange. To the extent that the Notes have been tendered pursuant to the Lock-up Sale or are tendered and accepted in the Offer, any existing trading market for the Notes that are not tendered pursuant to the Offer and remain outstanding will be severely limited. A debt security with a smaller outstanding principal amount available for trading (a smaller "float") may 2 command a lower price than would a comparable debt security with a larger float. Also, the removal of almost all of the protective covenants contained in the Indentures may be expected to cause a dimunition in the price of the Notes. As a result of the foregoing factors, the liquidity, market value and price volatility of any Notes that remain outstanding are expected to be adversely affected. Holders of unpurchased Notes may attempt to obtain quotations for the Notes from their brokers; however, there can be no assurance that any trading market will exist for the Notes following the Lock-up Sale or the consummation of the Offer. The extent of the public market for the Notes following the consummation of the Offer would depend upon the number of Holders remaining at such time, the interest in maintaining a market in such Notes on the part of securities firms, and other factors. Although the Company believes that the Notes may currently trade on a negotiated basis between certain market makers and holders of the Notes, no generally reliable public pricing information for the Notes is available. Holders of Notes are urged to contact their brokers to obtain the best available information as to potential current market prices. Subsequent Company Repurchases or Defeasance of Notes The Company expressly reserves the absolute right, in its sole discretion, from time to time after the Expiration Date (i) to purchase any Notes through open market or privately negotiated transactions, one or more additional tender or exchange offers, or otherwise, upon such terms and at such prices as it may determine and (ii) to exercise its rights under the Indentures to discharge its obligations with respect to the Notes by depositing certain securities with the Trustee and otherwise complying with Article Nine of each of the Indentures. DESCRIPTION OF NOTES The following is a summary of certain terms of the Notes, forms of which (together with the Indentures described below) have been filed as exhibits to the Company's filings with the Securities and Exchange Commission and can be obtained as described under the caption "Additional Information." The following summary of the terms of the Notes is qualified in its entirety by reference to the full text of the Notes and the Indentures as so filed. Capitalized terms used herein that are not otherwise defined have the meanings assigned to them in the Indentures, copies of which may be obtained from the Company or the Trustee. General Senior Subordinated Notes. The Senior Subordinated Notes are senior subordinated unsecured obligations of the Company. The Senior Subordinated Notes are governed by the Indenture dated February 20, 1997, between TSAT and the Trustee, which Indenture was supplemented and amended by two Supplemental Indentures. The First Supplemental Indenture, dated as of April 1, 1998, had the effect of causing TSAT's obligations under the Senior Subordinated Notes to be assumed by the Company thereby releasing TSAT. The Second Supplemental Indenture, dated as of April 27, 1999, eliminated substantially all of the covenants in the Indenture other than the covenants to pay interest on and principal of the Notes when due and covenants relating to the Company's obligation to make an offer to purchase the Notes upon certain circumstances (such Indenture, as so amended and supplemented, the 3 "Senior Subordinated Note Indenture"). The Senior Subordinated Notes mature on February 15, 2007. Cash interest on the Senior Subordinated Notes is payable semiannually, on each February 15 and August 15, to the persons in whose names the Senior Subordinated Notes are registered at the close of business on February 1 or August 1 (or, if such date is not a business day, the next succeeding business day) prior to the payment date, at an annual rate of 10 7/8%. The Senior Subordinated Notes are redeemable by the Company at any time on or after February 15, 2002, at the redemption prices set forth in the Senior Subordinated Note Indenture, plus accrued and unpaid interest thereon, if any, to the date of redemption. Senior Subordinated Discount Notes. The Senior Subordinated Discount Notes are senior subordinated unsecured obligations of the Company. The Senior Subordinated Discount Notes are governed by the Indenture dated February 20, 1997, between TSAT and the Trustee, which Indenture was supplemented and amended by two Supplemental Indentures. The First Supplemental Indenture, dated as of April 1, 1998, had the effect of causing TSAT's obligations under the Senior Subordinated Discount Notes to be assumed by the Company thereby releasing TSAT. The Second Supplemental Indenture, dated as of April 27, 1999, eliminated substantially all of the covenants in the Indenture other than the covenants to pay interest on and principal of the Notes when due and covenants relating to the Company's obligation to make an offer to purchase the Notes upon certain circumstances (such Indenture, as so amended and supplemented, the "Senior Subordinated Discount Note Indenture"). The Senior Subordinated Discount Notes mature on February 15, 2007. Cash interest on the Senior Subordinated Discount Notes does not accrue nor is it payable prior to February 15, 2002 (unless the Company makes a Cash Interest Election as described below). Thereafter, interest on the Senior Subordinated Discount Notes accrues at an annual rate of 12 1/4%, payable in cash semiannually, on each February 15 and August 15, to the persons in whose names the Senior Subordinated Discount Notes are registered at the close of business on February 1 or August 1 (or, if such date is not a business day, the next succeeding business day) prior to the payment date, at an annual rate of 12 1/4%. Prior to February 15, 2002 the Company may make a Cash Interest Election on any interest payment date in accordance with the terms and conditions set forth in the Senior Subordinated Discount Note Indenture. Upon the making of a Cash Interest Election, the principal amount of each outstanding Senior Subordinated Discount Note will be fixed to equal the Accreted Value of such Note as of the date of such election, and cash interest on such principal amount shall thereafter accrue at the rate provided for in the Indenture and thereafter be payable on each subsequent interest payment date. The Senior Subordinated Discount Notes are redeemable by the Company at any time on or after February 15, 2002 at the redemption prices set forth in the Senior Subordinated Discount Note Indenture, plus accrued and unpaid interest thereon, if any, to the date of redemption. THE OFFER Principal Terms of the Offer The Offer. The Company hereby offers to purchase for cash, on the terms and subject to the conditions set forth in the Offer, all of the outstanding Notes at the Offer Price. The Offer Price is equal to: (i) 101% of the principal amount of each Senior Subordinated Note purchased pursuant to the terms and conditions set forth in this Offer, plus any accrued and unpaid interest accumulated thereon up to the Purchase Date, net to the seller in cash and (ii) 101% of the Accreted Value of each Senior Subordinated Discount Note purchased pursuant to the terms and conditions set forth in this Offer, net to the seller in cash. As used herein, the term "Accreted Value" has the meaning ascribed to such term in the Indenture governing the Senior Subordinated Discount Notes. As of June 15, 1999 (which the Company currently expects 4 will be the Purchase Date), the Accreted Value of the Senior Subordinated Discount Notes will be $728.58 for each $1,000 principal amount at maturity of such Notes. Tenders of the Notes pursuant to the Offer will be accepted only in denominations of $1,000 or integral multiples thereof. In the case of any Holder whose Notes are purchased only in part, the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Notes without service charge, a new Note or Notes, of any authorized denomination as requested by such Holder, in an aggregate principal amount (at maturity, in the case of the Senior Subordinated Discount Notes) equal to and in exchange for the unpurchased portion of the Notes so tendered. Each Note purchased and each such new Note issued shall be in denominations of $1,000 and integral multiples thereof. On the terms and subject to the conditions of the Offer, the Company will accept for payment, and thereby purchase, all Notes validly tendered on or prior to the Expiration Date and not properly withdrawn on or prior to the close of business on the fifth business day preceding the Expiration Date in the manner described in "--Withdrawal Rights." The term "Expiration Date" means 5:00 p.m., New York City time, on June 10, 1999, unless and until the Company, in its sole discretion, has extended the period of time for which the Offer is open, in which event the term Expiration Date will mean the latest time and date on which the Offer, as so extended by the Company, expires. Extension or Amendment of the Offer. The Company expressly reserves the right, at any time or from time to time, at its sole discretion, and regardless of the circumstances, to (i) extend the period of time during which the Offer is open by giving oral or written notice of such extension to the Depositary and (ii) amend the Offer (if permitted by the Indentures) in any respect by giving oral or written notice of such amendment to the Depositary. The rights reserved by the Company in this paragraph include the Company's right, without limitation, in its sole discretion, to extend or amend the Offer (if permitted by the Indentures). Any extension or amendment will be followed as promptly as practicable by public announcement thereof, such announcement, in the case of an extension, to be issued no later than 5:00 p.m., New York City time, on the next business day after the previously scheduled Expiration Date. Without limiting the manner in which the Company may choose to make any public announcement, the Company currently intends to make announcements by issuing a press release to the Dow Jones News Service and/or the PR Newswire. If the Company extends the Offer, then, without prejudice to the Company's rights under the Offer, the Depositary may retain tendered Notes on behalf of the Company, and such Notes may not be withdrawn, except as described below in "--Withdrawal Rights." The Offer Price for the Senior Subordinated Notes only will include all accrued and unpaid interest on such Notes accumulated up to the Purchase Date. If the Company makes a material change in the terms of the Offer or the information concerning the Offer or waives a material condition of the Offer, the Company will disseminate additional tender offer materials and extend the Offer. As used in this Offer to Purchase, "business day" means a day (other than Saturday or Sunday) on which the DTC and banks in New York are open for business. The Offer to Purchase, Letter of Transmittal and other relevant materials are being mailed by the Company to record holders of Notes as of May 7, 1999 (the "Record Date") and are being furnished to brokers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the Company's list of Holders or, if applicable, who are listed as participants in the DTC's security participant listing, for subsequent transmittal to beneficial Holders. 5 The Offer is not open to those Holders as of the Record Date that were party to the Lock-up Agreement and, pursuant thereto, have previously sold or have agreed to sell their Notes to the Company, with respect to any Notes sold or required to be sold by such Holders pursuant to the Lock-up Agreement. Therefore, the aggregate principal amount of the outstanding Senior Subordinated Notes that the Company is offering to purchase pursuant to this Offer to Purchase is $63,101,000 and the aggregate Accreted Value as of the Record Date of the outstanding Senior Subordinated Discount Notes that the Company is offering to purchase pursuant to this Offer to Purchase is approximately $50,337,115. These amounts constitute all of the principal amounts outstanding as of the Record Date for each tranche of Notes, minus the principal amounts of Notes sold or required to be sold to the Company by certain Holders pursuant to the Lock-up Agreement. Acceptance for Payment and Payment for Notes On the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Company will accept for payment, and thereby purchase, and will pay the Offer Price for all Notes validly tendered on or prior to the Expiration Date (and not properly withdrawn in the manner described in "--Withdrawal Rights") on or before the Purchase Date. On the Purchase Date the Offer Price will become due and payable pursuant to this Offer to Purchase. Interest shall cease to accrue on the Senior Subordinated Notes accepted for purchase hereunder and the Accreted Value of all Senior Subordinated Discount Notes accepted for purchase hereunder shall cease to accrete. In all cases, payment for Notes purchased pursuant to the Offer will be made only after timely receipt by the Depositary of (i) the Notes, or timely confirmation (a "Book-Entry Confirmation") of the book-entry transfer of such Notes into the Depositary's account at the DTC (the "Book-Entry Transfer Facility") in accordance with the procedures described in "--Procedure for Tendering Notes," (ii) a properly completed and duly executed Letter of Transmittal or facsimile thereof, with any required signature guarantees, or an Agent's Message (as hereafter defined) in the case of a book-entry transfer, and (iii) all other documents required by the Letter of Transmittal. The term "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Notes which are the subject of such Book-Entry Confirmation, that such participant has received and agrees to be bound by the terms of the Letter of Transmittal, and that the Company may enforce such agreement against such participant. For purposes of the Offer, the Company will be deemed to have accepted for payment, and thereby purchased, tendered Notes if, as and when the Company gives oral or written notice to the Depositary of its acceptance of such Notes for payment. Payment for Notes accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for the tendering Holders for the purposes of receiving payment from the Company and transmitting payments to the tendering Holders. Payments for the Senior Subordinated Notes only will include all accrued interest accumulated up to the Purchase Date. Under no circumstances will any interest be payable by the Company because of any delay in transmission of funds by the Depositary to the Holders of purchased Notes. If any tendered Notes are not accepted for payment pursuant to the terms and conditions of the Offer for any reason, or if more Notes than are tendered are submitted to the Depositary, Notes for such unpurchased or untendered Notes will be returned, without expense to the submitting Holder (or, in the case of Notes tendered by the book-entry transfer of such Notes into the Depositary's account at the Book-Entry Transfer Facility in 6 accordance with the procedures set forth in "--Procedure for Tendering Notes," such Notes will be credited to an account maintained within such Book-Entry Transfer Facility), as promptly as practicable following the expiration, termination, or withdrawal of the Offer. Each Note purchased and each new Note issued shall be in denominations of $1,000 or integral multiplies thereof. If, prior to the Expiration Date, the Company increases the consideration offered to Holders pursuant to the Offer, such increased consideration will be paid to all Holders whose Notes are purchased pursuant to the Offer whether or not such Notes have been tendered prior to such increase in consideration. The Company reserves the right, in its sole discretion, to transfer or assign to any person, in whole or from time to time in part, Notes now or hereafter beneficially owned by it. Any transfer or assignment contemplated in this paragraph will not relieve the Company of its obligations under the Offer and will in no way prejudice the rights of tendering Holders to receive payment for Notes validly tendered and accepted for payment pursuant to the Offer. Procedure for Tendering Notes For Notes to be validly tendered pursuant to the Offer, a properly completed and duly executed Letter of Transmittal or facsimile thereof, with any required signature guarantees, or an Agent's Message in the case of a book-entry transfer, and all other documents required by the Letter of Transmittal, must be received by the Depositary at its address set forth on the back cover of this Offer to Purchase on or prior to the Expiration Date. In addition, either (i) Notes must be received by the Depositary, together with the Letter of Transmittal, at such address, or such Notes must be tendered pursuant to the procedures for book-entry tender described below and a Book-Entry Confirmation received by the Depositary, in each case on or prior to the Expiration Date, or (ii) the guaranteed delivery procedure described below must be complied with. Delivery of documents to an account established by the Depositary at the Book- Entry Transfer Facility does not constitute delivery to the Depositary. Letter of Transmittals and Notes should be sent to the Depositary, not to the Company. In order for any tender of Notes to be valid, it must be in proper form. All questions as to the form of documents and the validity, eligibility (including time of receipt) and acceptance for payment of any tender of Notes, and all other determinations by the Company contemplated by the Offer, including in respect of the conditions to the Offer, will be determined by the Company, in its sole discretion, which determination will be final and binding on all parties. The Company reserves the right to waive any defect or irregularity in the tender of any Notes. No tender of Notes will be deemed to have been validly made until all defects and irregularities have been cured or waived. None of the Company, the Depositary or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. The Company's interpretation of the terms and conditions of the Offer (including this Offer to Purchase and Letter of Transmittal and instructions thereto) will be final and binding. The Depositary will establish an account with respect to the Notes at the Book-Entry Transfer Facility for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the Book-Entry Transfer Facility's system may make book-entry delivery of Notes by causing such Book-Entry Transfer Facility to transfer such Notes into the Depositary's account in accordance with such Book-Entry Transfer Facility's procedure for such transfer. Although delivery of Notes may be effected through 7 book-entry at the Book-Entry Transfer Facility, a properly completed and duly executed Letter of Transmittal or Facsimile thereof, with any required signature guarantees, or an Agent's Message in the case of a book-entry transfer, and all other documents required by the Letter of Transmittal, must, in any case, be transmitted to and received by the Depositary at its address set forth on the back cover of this Offer to Purchase on or prior to the Expiration Date, or the guaranteed delivery procedure described below must be complied with. To effectively tender Notes that are held through DTC, DTC participants may also tender beneficial owners' Notes to the Depositary's account maintained at the DTC for the benefit of the Depositary through the DTC's ATOP system, including transmission of a computer generated message that acknowledges and agrees to be bound by the terms of the Letter of Transmittal. By complying with DTC's ATOP procedures with respect to the Offer, the DTC participant confirms on behalf of itself and the beneficial owner of the tendered Notes all provisions of the Letter of Transmittal applicable to it and such beneficial owners as fully as if it completed, executed and returned the Letter of Transmittal to the Depositary. If Notes are tendered otherwise than (i) by a registered holder of such Notes or (ii) for the account of a financial institution that is a participant in the Securities Transfer Agents Medallion Program, the Stock Exchange Medallion Program or the New York Stock Exchange, Inc. Medallion Signature Program (each an "Eligible Institution"), all signatures on the Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 1 of the Letter of Transmittal for the proper procedure for tendering in this manner. If the Notes are registered in the name of a person other than the signer of a Letter of Transmittal, the Notes must be endorsed or accompanied by appropriate instruments of power, in either case signed exactly as the name or names of the registered holder or holders appear on the Notes, with the signatures on the Notes or such instruments of power guaranteed as provided in the Letter of Transmittal. See Instruction 1 of the Letter of Transmittal. The method of delivery of all required documents is at the election and risk of each Holder. Delivery of such documents will be deemed made only when actually received by the Depositary. If delivery is by mail, the use of registered mail with return receipt requested, properly insured, is recommended, and it is recommended that the mailing be made sufficiently in advance of the Expiration Date to permit delivery to the Depositary prior to such date. Procedures for Guaranteed Delivery If a Holder desires to tender Notes pursuant to the Offer and such Holder's Notes are not immediately available or such Holder cannot deliver such Holder's Notes and all other required documents to the Depositary on or prior to the Expiration Date, or if the procedure for book-entry transfer cannot be completed on a timely basis, such Notes may nevertheless be tendered if all of the following guaranteed delivery procedures are complied with: (i) such tenders are made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Company herewith, is received by the Depositary as provided below on or prior to the Expiration Date; and (iii) the Notes for all physically delivered Notes in proper form for transfer or a Book-Entry Confirmation, together with a properly completed and duly executed Letter of Transmittal or facsimile thereof, with any required signature guarantees, or Agent's Message in the case of a book- entry transfer, and 8 all other documents required by the Letter of Transmittal, are received by the Depositary within five business days after the date of such Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a signature guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. In all cases, payment for Notes tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of such Notes or of a Book-Entry Confirmation relating to such Notes and a properly completed and duly executed Letter of Transmittal or facsimile thereof, with any required signature guarantees, or an Agent's Message in the case of a book-entry transfer, and all other documents required by the Letter of Transmittal. Other Effects of Tender By executing a Letter of Transmittal as set forth above, a tendering Holder irrevocably appoints designees of the Company as such Holder's attorneys-in-fact and proxies, each with full power of substitution and resubstitution, in the manner set forth in the Letter of Transmittal, to the full extent of such Holder's rights with respect to the Notes tendered by such Holder and accepted for payment by the Company and with respect to any and all other Notes or other securities issued or issuable in respect of such Notes on or after the date of this Offer to Purchase. All such proxies will be considered coupled with an interest in the tendered Notes. Such appointment will be effective when, and only to the extent that, the Company accepts such Notes for payment pursuant to the Offer. Upon such appointment, all prior proxies given by such Holder with respect to such Notes will be revoked, without further action, and no subsequent proxies with respect thereto may be given by such Holder (and, if given, will not be deemed effective). The designees of the Company will be empowered, among other things, to exercise all voting and other rights of such Holder as they in their sole discretion may deem proper at any meeting of the Holders or otherwise. In order for Notes to be validly tendered, upon the acceptance for payment of such Notes, the Company must be able to exercise full voting rights with respect to such Notes (or other securities or rights), including voting at any meeting of Holders, whether or not scheduled, and consenting to any action to be taken by Holders in the absence of a meeting. Subject to, and effective upon, the acceptance for purchase of, and payment for, the Notes tendered pursuant to the Offer, the Holder hereby (i) sells, assigns and transfers to, or upon the order of, the Company, all right, title and interest in and to the Notes that are being tendered pursuant to the Offer and (ii) releases and discharges the Company and any and all other persons from any and all claims that such Holder is entitled to receive additional principal or interest payments with respect to the Notes or to participate in any redemption or defeasance of the Notes and any claims arising out of the Holder's ownership of the Notes or any decline in the value thereof. The tender of Notes pursuant to one of the procedures described above will constitute a binding agreement between the tendering Holder and the Company on the terms and subject to the conditions of the Offer, including the tendering Holder's representation and warranty that (i) such Holder has full power and authority to tender, sell, assign and transfer such Notes and (ii) when the same are accepted for payment by the Company, the Company will acquire good, marketable, and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and will not be subject to any adverse claim. 9 Withdrawal Rights Tenders of Notes may be withdrawn at any time not later than the close of business on the fifth business day preceding the Expiration Date (but not thereafter, except as otherwise described below). For a withdrawal of a tender of Notes to be effective, a written or facsimile transmission notice of withdrawal must be received by the Depositary not later than the close of business on the fifth business day preceding the Expiration Date at its address set forth on the back cover of this Offer to Purchase. Any such notice of withdrawal must (i) specify the name of the person who tendered the Notes to be withdrawn, (ii) contain the description of the Notes to be withdrawn and identify the CUSIP/certificate number or numbers shown on the particular certificate evidencing such Notes (unless such Notes were tendered by book-entry transfer) and the aggregate principal amount represented by such Notes (in the case of Senior Subordinated Notes) and the aggregate principal amount at maturity represented by such Notes (in the case of Senior Subordinated Discount Notes) and (iii) be signed by the Holder of such Notes in the same manner as the original signature on the Letter of Transmittal by which such Notes were tendered (including any required signature guarantees), if any, or be accompanied by (x) documents of transfer sufficient to have the Trustee register the transfer of the Notes into the name of the person withdrawing such Notes and (y) a properly completed irrevocable proxy that authorized such person to effect such revocation on behalf of such Holder. If the Notes to be withdrawn have been delivered or otherwise identified to the Depositary, a signed notice of withdrawal is effective immediately upon written or facsimile notice of withdrawal even if physical release is not yet effected. Any Notes properly withdrawn will be deemed to be not validly tendered for purposes of the Offer. Withdrawal of Notes can be accomplished only in accordance with the foregoing procedures. The Notes are debt obligations of the Company. There are no appraisal or other similar statutory rights in connection with the Offer. All questions as to the validity (including time of receipt) of notices of withdrawal will be determined by the Company, in the Company's sole discretion (whose determination shall be final and binding). None of the Company, the Depositary, the Trustee or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal, or incur any liability for failure to give any such notification. Interest on Notes Interest under any of the Notes payable as of an interest payment date prior to the date of acceptance for payment of Notes tendered pursuant to the Offer will be retained by the registered owner of the Notes on which such interest was paid as of such date. The Offer Price for the Senior Subordinated Notes only will include any interest on such Notes that is accrued and unpaid up to the Purchase Date. Certain Legal Matters The Company is not aware of any approval or other action by any domestic or foreign governmental or administrative agency that would be required prior to the acquisition of Notes by the Company pursuant to the Offer or any state takeover statute that is applicable to the Offer. Should any such approval or other action be required, or any such state takeover statute be applicable, the Company will evaluate at such time whether such approval or 10 action will be sought or compliance with such takeover statute will be effected. There can be no assurance that any such approval, action or compliance, if needed, would be obtained or effected or, if obtained or effected, would be obtained or effected without substantial conditions or adverse consequences. Depositary and Paying Agent The depositary and paying agent for the Offer is The Bank of New York. All deliveries to or correspondence with the Depositary relating to the Offer should be directed to the address or telephone number set forth on the back cover of this Offer to Purchase. The Company will pay the Depositary and paying agent reasonable and customary compensation for its services in connection with the Offer, plus reimbursement for out-of-pocket expenses. The Company will indemnify the Depositary and paying agent against certain liabilities and expenses in connection therewith, including liabilities under the federal securities laws. Brokers, dealers, commercial banks and trust companies will be reimbursed by the Company for customary mailing and handling expenses incurred by them in forwarding material to their customers. The Company will not pay any fees or commissions to any broker, dealer or other person in connection with the solicitation of tenders of Notes pursuant to the Offer. CERTAIN INCOME TAX CONSEQUENCES The following discussion is a summary of certain anticipated U.S. federal income tax consequences of the Offer to Holders of Notes. This discussion is general in nature, and does not discuss all aspects of U.S. federal income taxation that may be relevant to a particular Holder in light of the Holder's particular circumstances, or to certain types of Holders subject to special treatment under U.S. federal income tax laws (such as insurance companies, tax- exempt organizations, financial institutions, brokers, dealers in securities, and taxpayers that are neither citizens nor residents of the United States, or that are foreign corporations, foreign partnerships or foreign estates or trusts as to the United States). In addition, the discussion does not consider the effect of any foreign, state, local or other tax laws, or any U.S. tax considerations other than U.S. federal income tax considerations (e.g., estate or gift tax), that may be applicable to particular Holders. Further, this summary assumes that Holders hold their Notes as "capital assets" (generally, property held for investment) within the meaning of section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"). This summary is based on the Code and U.S. Treasury Regulations, rulings, administrative pronouncements and decisions in effect as of the date hereof, all of which are subject to change or differing interpretations at any time with possible retroactive effect. EACH HOLDER IS URGED TO CONSULT ITS OWN TAX ADVISOR TO DETERMINE THE FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES TO IT OF THE OFFER. Tax Considerations for Tendering Holders. A sale of Notes by a Holder pursuant to the Offer will be a taxable transaction to such Holder for U.S. federal income tax purposes. A Holder will generally recognize capital gain (subject to the market discount rules discussed below) or loss on the sale of a Note in an amount equal to the difference between (i) the amount of cash received for such Note, other than the portion of such amount that is properly allocable to accrued but previously unpaid interest (other than accrued original issue discount), which amounts will be taxed as ordinary income, and (ii) the Holder's "adjusted tax basis" for such Note at the time of 11 sale. Such capital gain or loss will be long-term if the Holder held the Note for more than one year at the time of such sale. Generally, a Holder's adjusted tax basis for a Note will be equal to the cost of the Note to such Holder, increased by the amount of any original issue discount previously included in such Holder's gross income up to the date of disposition, less any payments (other than stated interest payments on the Senior Subordinated Notes) received on the Notes. If applicable, a Holder's tax basis in a Note would be increased by any market discount previously included in income by such Holder pursuant to an election to include market discount in gross income currently as it accrues, or would be reduced by the amount of any amortizable bond premium that the Holder has previously elected to offset against interest inclusion. An exception to the capital gain treatment described above may apply to a Holder who purchased a Note at a "market discount." Subject to a statutory de minimis exception, market discount is the excess of (i) the sum of the original issue price of the Note and the aggregate amount of original issue discount includable in gross income of all Holders of such Notes during periods before the acquisition of the Note over (ii) the Holder's tax basis in such Note immediately after its acquisition by such Holder. In general, unless the Holder has elected to include market discount in income currently as it accrues, any gain realized by a Holder on the sale of a Note having market discount in excess of a de minimis amount will be treated as ordinary income to the extent of the market discount that has accrued on the Note (on a straight line basis or, at the election of the Holder, on a constant interest rate basis) while such Note was held by the Holder. Backup Withholding. The receipt of the Offer Price by a Holder who tenders its Notes may be subject to backup withholding at the rate of 31% with respect to such payments unless such Holder (i) is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact, or (ii) provides a correct taxpayer identification number, certifies as to no loss of exemption from backup withholding and otherwise complies with applicable requirements of the backup withholding rules. Any amount withheld under these rules will be credited against the Holder's U.S. federal income tax liability. A Holder who does not provide its correct taxpayer identification number may be subject to penalties imposed by the Internal Revenue Service. THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF U.S. FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO PARTICULAR HOLDERS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES AND INCOME TAX SITUATIONS. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE OFFER, INCLUDING THE EFFECT OF ANY FEDERAL, STATE, LOCAL, FOREIGN OR OTHER LAWS. ADDITIONAL INFORMATION The Company is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is required to file with the Commission periodic reports and other information relating to its business, financial condition and other matters. Attached hereto are the Company's most recent annual financial statements and the Company's most recent Form 8-K that were filed with the Commission. The Company is required to disclose in such reports certain information, as of particular dates, concerning operating results and financial condition, its officers and directors, the principal holders of its securities, any material interests of such persons in transactions with the Company and other matters. These reports and other informational filings required by the Exchange Act should be available for inspection at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and also should be available for 12 inspection and copying at the regional offices of the Commission located at Citicorp Center, 500 West Madison Street, Chicago, Illinois 60611 and 7 World Trade Center, 13th Floor, New York, New York 10048. The Commission maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. Such reports, proxy and information statements and other information may be found on the Commission's Web site address, http://www.sec.gov. Copies of such material may be obtained by mail, upon payment of the Commission's customary fees, from the Commission's principal office at Judiciary Plaza, 450 Fifth Street, Washington, D.C. 20549. Information regarding the Company may also be obtained at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents which have been filed by the Company pursuant to the Exchange Act are hereby incorporated by reference in this Offer to Purchase: 1. The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998. 2. The Company's Current Report on Form 8-K, dated on May 13, 1999. All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Offer to Purchase and prior to the Expiration Date will be deemed to be incorporated by reference in this Offer to Purchase and be a part hereof from the dates of filing such documents or reports. Any statement contained in a document incorporated or deemed to be incorporated by reference herein will be deemed to be modified or superseded for purposes of the Offer to Purchase to the extent that a statement contained herein, or in any other subsequently filed document which also is or is deemed to be incorporated herein, modifies or supersedes such statement. Any such statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this Offer to Purchase. MISCELLANEOUS No person has been authorized to give any information or make any representation other than as contained in this Offer to Purchase or the Letter of Transmittal and, if given or made, such information or representation must not be relied upon as having been authorized. The Offer is being made to all Holders who own Notes as of the Record Date except that parties to the Lock-up Agreement may not tender hereunder any Notes sold or required to be sold to the Company by such parties pursuant to the Lock- up Agreement. The Company is not aware of any jurisdiction in which the making of the Offer is prohibited by administrative or judicial action pursuant to a state statute. If the Company becomes aware of any jurisdiction where the making of the Offer is so prohibited, the Company will make a good faith effort to comply with any such statute or seek to have such statute declared inapplicable to the Offer. If, after such good faith effort, the Company cannot comply with any applicable statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the Holders in such jurisdiction. In those jurisdictions where securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer will be deemed to be made on behalf of the Company by one or more registered brokers or dealers licensed under the laws of such jurisdiction. The Offer will not be made, and will be deemed not to have been made, in those jurisdictions where securities, blue-sky or other laws prohibit the Offer from being made. 13 PHOENIXSTAR, INC. May 13, 1999 14 Facsimile copies of the Letter of Transmittal will be accepted. The Letter of Transmittal and Notes and any other required documents should be sent by each Holder or his broker, dealer, commercial bank, trust company or nominee to the Depositary at the address set forth below: ________________ The Depositary and Paying Agent for the Offer is: THE BANK OF NEW YORK _________________________ By Mail, Hand or Overnight Courier: The Bank of New York Reorganization Department 101 Barclay Street, Floor 7E New York, New York 10286 Attention: Theresa Gass, Corporate Trust Operations By Facsimile Transmission: (For Eligible Institutions Only) (212) 815-4699 For Information or Confirmation by Telephone: (212) 815-5942 _________________________ Any questions or requests for assistance or additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Company at the telephone number and location listed below. You may also contact your broker, dealer, commercial bank or trust company for assistance concerning the Offer. PHOENIXSTAR, INC. 8085 South Chester, Suite 3000 Englewood, CO 80112 (303) 712-4647 Attention: Sean Clarke LETTER OF TRANSMITTAL To Tender Any and All Outstanding 10 7/8% Senior Subordinated Notes due February 15, 2007 and 12 1/4% Senior Subordinated Discount Notes due February 15, 2007 of PHOENIXSTAR, INC. (formerly known as PRIMESTAR, INC.) Pursuant to the Change of Control Offer, dated May 13, 1999 - - -------------------------------------------------------------------------------- THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON JUNE 10, 1999, UNLESS THE OFFER IS EXTENDED (JUNE 10, 1999 OR SUCH LATER DATE TO WHICH THE OFFER IS EXTENDED BEING HEREAFTER REFERRED TO AS THE EXPIRATION DATE"). HOLDERS OF NOTES MUST TENDER NOTES ON OR PRIOR TO THE "EXPIRATION DATE (AND NOT HAVE WITHDRAWN SUCH NOTES) IN ORDER TO RECEIVE THE OFFER PRICE. TENDERED NOTES MAY BE WITHDRAWN AT ANY TIME NOT LATER THAN THE CLOSE OF BUSINESS ON THE FIFTH BUSINESS DAY PRECEDING THE EXPIRATION DATE. - - -------------------------------------------------------------------------------- The Notes referred to herein were originally issued by TCI Satellite Entertainment, Inc. To Depositary: The Bank of New York By Hand/Overnight Courier: Confirm by Telephone: By Mail: The Bank of New York (212) 815-5942 The Bank of New York Reorganization Department Reorganization Department 101 Barclay Street, Floor 7E By Facsimile Transmission: 101 Barclay Street, Floor 7E New York, New York 10286 (212) 815-4699 New York, New York 10286 Attention: Theresa Gass, Corporate Attention: Theresa Gass, Corporate Trust Operations Trust Operations
Delivery of this Letter of Transmittal to an address other than as set forth above will not constitute a valid delivery. The instructions contained herein and the Offer to Purchase should be read carefully before this Letter of Transmittal is completed. By execution hereof, the undersigned acknowledges receipt of the Change of Control Offer dated May 13, 1999 (as the same may be amended from time to time, the "Offer to Purchase") and this Letter of Transmittal and instructions hereto (the "Letter of Transmittal"), which together constitute the offer to purchase by the Company (the "Offer") of any and all of the Company's outstanding 10 7/8% Senior Subordinated Notes due February 15, 2007 (the "Senior Subordinated Notes") and 12 1/4% Senior Subordinated Discount Notes due February 15, 2007 (the "Senior Subordinated Discount Notes" and, together with the Senior Subordinated Notes, the "Notes"), upon the terms and subject to the conditions set forth in the Offer to Purchase.
CUSIP NO. Security --------- -------- 872298AB0 12 1/4% Senior Subordinated Discount Notes due February 15, 2007, Series A 872298AF1 12 1/4% Senior Subordinated Discount Notes due February 15, 2007, Series B 872298AA2 10 7/8% Senior Subordinated Notes due February 15, 2007, Series A 872298AE4 10 7/8% Senior Subordinated Notes due February 15, 2007, Series B
1 Use this Letter of Transmittal only to tender Notes pursuant to the Offer. This Letter of Transmittal is to be used by Holders if (i) Notes are to be physically delivered to The Bank of New York (the "Depositary") herewith by Holders, (ii) tender of Notes is to be made by book-entry to the Depositary's account at The Depository Trust Company ("DTC") pursuant to the procedures set forth in the Offer to Purchase under the caption "The Offer--Procedure for Tendering Notes" by any financial institution that is a participant in DTC and whose name appears on a security participant listing as the owner of Notes (a Holder and any such DTC participant, acting on behalf of Holders, are referred to herein as an "Acting Holder"), unless an Agent's Message (as defined below) is delivered in connection with such book-entry transfer, or (iii) tender of Notes is to be made according to the guaranteed delivery procedures set forth in the Offer to Purchase under the caption "The Offer--Procedure for Tendering Notes." Delivery of documents to DTC does not constitute delivery to the Depositary. The undersigned has completed, executed and delivered this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Offer. All capitalized terms used herein and not defined shall have the respective meanings ascribed to them in the Offer to Purchase. Your bank or broker can assist you in completing this form. The instructions included with this Letter of Transmittal must be followed. Requests for additional copies of the Offer to Purchase, Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Company. See Instruction 10 below. Subject to, and effective upon, the acceptance for purchase of, and payment for, the Notes tendered with this Letter of Transmittal, the undersigned hereby (i) sells, assigns and transfers to, or upon the order of, the Company, all right, title and interest in and to the Notes that are being tendered hereby and (ii) releases and discharges the Company and any and all other persons from any and all claims that such Holder is entitled to receive additional principal or interest payments with respect to the Notes or to participate in any redemption or defeasance of the Notes and any claims arising out of the Holder's ownership of the Notes or any decline in the value thereof. 2 METHOD OF DELIVERY [_] CHECK HERE IF CERTIFICATES FOR TENDERED NOTES ARE ENCLOSED HEREWITH. - - -------------------------------------------------------------------------------- [_] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH DTC AND COMPLETE THE FOLLOWING: Name of Tendering Institution: ------------------------------------------------- Account Number with DTC: ------------------------------------------------------- Transaction Code Number: ------------------------------------------------------- If Holders desire to tender Notes pursuant to the Offer and (i) such Notes are not lost but are not immediately available, (ii) time will not permit this Letter of Transmittal, such Notes or other required documents to reach the Depositary prior to the Expiration Date, or (iii) the procedures for book entry transfer (including delivery of an Agent's Message) cannot be completed prior to the Expiration Date, such Holders may effect a tender of such Notes in accordance with the guaranteed delivery procedures set forth in the Offer to Purchase under the caption "The Offer--Procedure for Tendering Notes." See Instruction 1 below. - - -------------------------------------------------------------------------------- [_] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name of Registered Holder(s): -------------------------------------------------- Window Ticket No. (if any): ---------------------------------------------------- Date of Execution of Notice of Guaranteed Delivery: ---------------------------- Name of Eligible Institution that Guaranteed Delivery: ------------------------- If Delivered by Book-Entry Transfer: ------------------------------------------- Account Number with DTC: ------------------------------------------------------- Transaction Code Number: ------------------------------------------------------- 3 List below the Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, list the CUSIP/certificate numbers and principal amounts on a separately executed schedule and affix the schedule to this Letter of Transmittal. Tenders of Notes will be accepted only in principal amounts equal to $1,000 or integral multiples thereof. - - -------------------------------------------------------------------------------------------------------------------------- DESCRIPTION OF SENIOR SUBORDINATED NOTES - - -------------------------------------------------------------------------------------------------------------------------- Aggregate Name(s) and Address(es) of Holder(s) Certificate Principal Amount Principal Amount (Please fill in, if blank) Number(s)* Represented** Tendered - - -------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------- - - -------------------------------------------------------------------------------------------------------------------------- TOTAL PRINCIPAL AMOUNT OF SENIOR SUBORDINATED NOTES - - -------------------------------------------------------------------------------------------------------------------------- * Need not be completed by Holders tendering by book-entry transfer (see below). ** Unless otherwise indicated in the column labeled "Principal Amount Tendered" and subject to the terms and conditions of the Offer to Purchase, a Holder will be deemed to have tendered the entire aggregate principal amount represented by the Senior Subordinated Notes indicated in the column labeled "Aggregate Principal Amount Represented." See Instruction 2. - - --------------------------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------------------------- DESCRIPTION OF SENIOR SUBORDINATED DISCOUNT NOTES - - -------------------------------------------------------------------------------------------------------------------------- Aggregate Principal Amount Principal Amount Name(s) and Address(es) of Holder(s) Certificate At Maturity At Maturity (Please fill in, if blank) Number(s)* Represented** Tendered - - ------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------- - - -------------------------------------------------------------------------------------------------------------------------- TOTAL PRINCIPAL AMOUNT AT MATURITY OF SENIOR SUBORDINATED DISCOUNT NOTES - - -------------------------------------------------------------------------------------------------------------------------- * Need not be completed by Holders tendering by book-entry transfer (see below). ** Unless otherwise indicated in the column labeled "Principal Amount Tendered" and subject to the terms and conditions of the Offer to Purchase, a Holder will be deemed to have tendered the entire aggregate principal amount at maturity represented by the Senior Subordinated Discount Notes indicated in the column labeled "Aggregate Principal Amount Represented." See Instruction 2. - - --------------------------------------------------------------------------------------------------------------------------
HOLDERS WHO WISH TO ACCEPT THE OFFER AND TENDER THEIR NOTES MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY. 4 NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. Ladies and Gentlemen: Upon the terms and subject to the conditions of the Offer, the undersigned hereby tenders to the Company the principal amount of Senior Subordinated Notes, and principal amount at maturity of Senior Subordinated Discount Notes, indicated above. Subject to, and effective upon, the acceptance for purchase of, and payment for, the Notes tendered with this Letter of Transmittal, the undersigned hereby (i) sells, assigns and transfers to, or upon the order of, the Company, all right, title and interest in and to the Notes that are being tendered hereby and (ii) releases and discharges the Company and any and all other persons from any and all claims that such Holder is entitled to receive additional principal or interest payments with respect to the Notes or to participate in any redemption or defeasance of the Notes and any claims arising out of the Holder's ownership of the Notes or any decline in the value thereof. The undersigned hereby irrevocably constitutes and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that the Depositary also acts as the agent of the Company) with respect to such Notes, with full power of substitution and resubstitution (such power-of-attorney being deemed to be an irrevocable power coupled with an interest) to (i) present such Notes and all evidences of transfer and authenticity to, or transfer ownership of, such Notes on the account books maintained by DTC to, or upon the order of, the Company, (ii) present such Notes for transfer of ownership on the books of the Company and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Notes. The undersigned understands that tenders of Notes may be withdrawn only by written notice of withdrawal received by the Depositary not later than the close of business on the fifth business day preceding the Expiration Date. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Notes tendered hereby and that when such Notes are accepted for purchase and payment by the Company, the Company will acquire good title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim or right. The undersigned will, upon request, execute and deliver any additional documents deemed by the Depositary or the Company to be necessary or desirable to complete the sale, assignment and transfer of the Notes tendered hereby. The undersigned understands that tenders of Notes pursuant to any of the procedures described in the Offer to Purchase under the caption "The Offer" and in the instructions hereto, and acceptance thereof by the Company, will constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Offer. For purposes of the Offer, the undersigned understands that the Company will be deemed to have accepted for purchase validly tendered Notes (or defectively tendered Notes with respect to which the Company has waived such defect) if, as and when the Company gives oral, to be followed by written, notice thereof to the Depositary. 5 The undersigned understands that, under certain circumstances and subject to certain conditions of the Offer (each of which the Company may waive) set forth in the Offer to Purchase, the Company may not be required to accept for purchase any of the Notes tendered (including Notes tendered after the Expiration Date). Any Notes not accepted for purchase will be returned promptly to the undersigned at the address set forth above unless otherwise indicated herein under "Special Issuance and Special Delivery Instructions" below. All authority conferred or agreed to be conferred by this Letter of Transmittal shall survive the death or incapacity of the undersigned and every obligation of the undersigned under this Letter of Transmittal shall be binding upon the undersigned's heirs, personal representatives, executors, administrators, successors, assigns, trustees in bankruptcy and other legal representatives. The undersigned understands that the delivery and surrender of the Notes is not effective, and the risk of loss of the Notes does not pass to the Depositary, until receipt by the Depositary of this Letter of Transmittal, or a facsimile hereof, properly completed and duly executed, together with all accompanying evidences of authority and any other required documents in form satisfactory to the Company. All questions as to the form of all documents and the validity (including time of receipt) and acceptance of tenders and withdrawals of Notes will be determined by the Company, in its sole discretion, which determination shall be final and binding. Unless otherwise indicated herein under "Special Issuance and Special Delivery Instructions," the undersigned hereby requests that any Notes representing principal amounts not tendered or not accepted for purchase be issued in the name(s) of the undersigned (and in the case of Notes tendered by book-entry transfer, by credit to the account at DTC) and checks constituting payments for Notes to be purchased be issued to the order of the undersigned. Similarly, unless otherwise indicated herein under "Special Issuance and Special Delivery Instructions," the undersigned hereby requests that any Notes representing principal amounts not tendered or not accepted for purchase and checks constituting payments for Notes to be purchased be delivered to the undersigned at the address(es) shown above. In the event that the "Special Issuance Instructions" box or the "Special Delivery Instructions" box or both are completed, the undersigned hereby requests that any Notes representing principal amounts not tendered or not accepted for purchase be issued in the name(s) of and checks constituting payments for Notes to be purchased be issued in the name(s) of and be delivered to, the person(s) at the address(es) so indicated, as applicable. The undersigned recognizes that the Company has no obligation pursuant to the "Special Issuance Instructions" box or "Special Delivery Instructions" box to transfer any Notes from the name of the registered holder(s) thereof if the Company does not accept for purchase any of the principal amount of such Notes so tendered. 6 - - -------------------------------------------------------------------------------- PLEASE SIGN HERE (To Be Completed By All Tendering Holders of Notes Regardless of Whether Notes Are Being Physically Delivered Herewith, Unless an Agent's Message Is Delivered in Connection With A Book-Entry Transfer of Such Notes) The completion, execution and delivery of this Letter of Transmittal will constitute an acceptance of the Offer to tender Notes. This Letter of Transmittal must be signed by the registered holder(s) of Notes exactly as their name(s) appear(s) on the Notes or, if tendered by a participant in DTC, exactly as such participant's name appears on a security participant listing as the owner of Notes, or by person(s) authorized to become registered holder(s) by endorsements and documents transmitted with this Letter of Transmittal. If the signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below under "Capacity" and submit evidence satisfactory to the Company of such person's authority to so act. See Instruction 3 below. If the signature appearing below is not of the registered holder(s) of the Notes, then the registered holder(s) must sign a valid proxy or bond power. X ------------------------------------------------------------------------------- X ------------------------------------------------------------------------------- (Signature(s) of Holder(s) or Authorized Signatory) Date: 1999 ------------- Name(s): ----------------------------------------------------------------------- ------------------------------------------------------------------------- (Please Print) Capacity: ---------------------------------------------------------------------- Address: ----------------------------------------------------------------------- ------------------------------------------------------------------------- (Including Zip Code) Area Code and Telephone No.: --------------------------------------------------- PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN SIGNATURE GUARANTEE (See Instruction 3 below) Certain Signatures Must be Guaranteed by an Eligible Institution - - -------------------------------------------------------------------------------- (Name of Eligible Institution Guaranteeing Signatures) - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- (Address (including zip code) and Telephone Number (including area code) of Firm) - - -------------------------------------------------------------------------------- (Authorized Signature) - - -------------------------------------------------------------------------------- (Printed Name) - - -------------------------------------------------------------------------------- (Title) Date: 1999 ------------- - - -------------------------------------------------------------------------------- 7 - - -------------------------------------------------------------------------------- SPECIAL ISSUANCE INSTRUCTIONS (See Instructions 2, 3, 4, and 6) To be completed ONLY if Notes in a principal amount not tendered or not accepted for purchase are to be issued in the name of, or checks constituting payments for Notes to be in connection with the Offer are to be issued to the order of, someone other than the person or persons whose signature(s) appear(s) within this Letter of Transmittal or issued to an address different from that shown in the box entitled "Description of Notes" within this Letter of Transmittal, or if Notes tendered by book-entry transfer that are not accepted for purchase are to be credited to an account maintained at DTC other than the one designated above. Issue [_] Notes [_] Checks (check as applicable) Name --------------------------------------------------------------------------- (Please Print) Address ------------------------------------------------------------------------ (Please Print) - - -------------------------------------------------------------------------------- Zip Code - - -------------------------------------------------------------------------------- Taxpayer Identification or Social Security Number (See Substitute Form W-9 herein) Credit unpurchased Notes by book-entry transfer to the DTC account set forth below: - - -------------------------------------------------------------------------------- (DTC Account Number) Name of Account Party: - - -------------------------------------------------------------------------------- PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN SIGNATURE GUARANTEE (See Instruction 3 below) Certain Signatures Must be Guaranteed by an Eligible Institution - - -------------------------------------------------------------------------------- (Name of Eligible Institution Guaranteeing Signatures) - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- (Address (including zip code) and Telephone Number (including area code) of Firm) - - -------------------------------------------------------------------------------- (Authorized Signature) - - -------------------------------------------------------------------------------- (Printed Name) - - -------------------------------------------------------------------------------- (Title) Date: , 1999 ----------------- SPECIAL DELIVERY INSTRUCTIONS (See Instructions 2, 3, 4, and 6) To be completed ONLY if Notes in a principal amount not tendered or not accepted for purchase or checks constituting payments for Notes to be purchased are to be sent to someone other than the person or persons whose signature(s) appear(s) within this Letter of Transmittal or to an address different from the shown in the box entitled "Description of Notes" within the Letter of Transmittal. Deliver [_] Notes [_] Checks (check as applicable) Name --------------------------------------------------------------------------- (Please Print) Address ------------------------------------------------------------------------ (Please Print) - - -------------------------------------------------------------------------------- Zip Code - - -------------------------------------------------------------------------------- Taxpayer Identification or Social Security Number (See Substitute Form W-9 herein) - - -------------------------------------------------------------------------------- 8 INSTRUCTIONS These Instructions Form Part of the Terms and Conditions of the Offer 1. Delivery of this Letter of Transmittal and Notes or Book-Entry Confirmations; Guaranteed Delivery Procedures; Withdrawal of Tender. To tender Notes in the Offer, the Notes (or a confirmation of any book-entry transfer into the Depositary's account with DTC of Notes tendered electronically, as well as a properly completed and duly executed copy (or facsimile) of this Letter of Transmittal (or Agent's Message (as defined below) in connection with a book- entry transfer), and any other documents required by this Letter of Transmittal, must be received by the Depositary at its address set forth herein on or prior to 5:00 p.m., New York City time, on the Expiration Date. The method of delivery of this Letter of Transmittal, Notes and all other required documents to the Depositary is at the election and risk of Holders. If such delivery is by mail, it is suggested that Holders use properly insured registered mail, return receipt requested, and that the mailing be made sufficiently in advance of the Expiration Date, to permit delivery to the Depositary on or prior to such date. Except as otherwise provided below, the delivery will be deemed made when actually received or confirmed by the Depositary. This Letter of Transmittal and Notes should be sent only to the Depositary, not to the Company. The term "Agent's Message" means a message transmitted to DTC to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that DTC has received an express acknowledgment from the participant in DTC tendering the Notes, that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and the Company may enforce such agreement against the participant. If a Holder desires to tender Notes pursuant to the Offer and (i) such Notes are not lost but are not immediately available, (ii) time will not permit this Letter of Transmittal, Notes or other required documents to reach the Depositary on or prior to the Expiration Date, or (iii) the procedures for book- entry transfer cannot be completed on or prior to the Expiration Date, such Holder may effect a tender of Notes in accordance with the guaranteed delivery procedures set forth in the Offer to Purchase under the caption "The Offer--Procedure for Tendering Notes." Pursuant to the guaranteed delivery procedures: (a) such tender must be made by or through an Eligible Institution (defined as an institution that is a member of a Signature Guarantee Program recognized by the Depositary, i.e., the Securities Transfer Agents Medallion Program (STAMP), the Stock Exchange Medallion Program (SEMP) and the New York Stock Exchange, Inc. Medallion Signature Program (MSP)); (b) on or prior to the Expiration Date the Depositary must have received from such Eligible Institution, at one of the addresses of the Depositary set forth herein, a properly completed and duly executed Notice of Guaranteed Delivery (by mail or hand delivery) substantially in the form provided by the Company, setting forth the name(s) and address(es) of the Acting Holder(s), and the principal amount of Notes being tendered and stating that the tender is being made thereby and guaranteeing that within 5 business days after the date of the Notice of Guaranteed Delivery, a properly completed and duly executed Letter of Transmittal, or a facsimile thereof, or an Agent's Message together with the Notes (or confirmation of book-entry transfer of such Notes into the Depositary's account with DTC as described above), and any other documents required by this Letter of Transmittal and the instructions hereto, will be deposited by such Eligible Institution with the Depositary; and 9 (c) this Letter of Transmittal or a facsimile hereof, properly completed, or an Agent's Message, and all physically delivered Notes in proper form for transfer (or confirmation of book-entry transfer of such Notes into the Depositary's account with DTC as described above, including an Agent's Message in connection therewith) and all other required documents must be received by the Depositary within 5 business days after the date of the Notice of Guaranteed Delivery. Tenders of Notes may be withdrawn by written notice of withdrawal received by the Depositary delivered by mail, hand delivery or facsimile transmission, which notice must be received by the Depositary at one of its addresses set forth herein not later than the close of business on the fifth business day preceding the Expiration Date. To be effective, notice of withdrawal of tendered Notes must (i) be received by the Depositary not later than the close of business on the fifth business day next preceding the Expiration Date as its address set forth herein, (ii) specify the name of the person who deposited the Notes to be withdrawn (the "Depositor"), the name in which the Notes are registered (or, if tendered by book-entry transfer, the name of the participant in DTC whose name appears on a security participant listing as the owner of such Notes) if different from that of the Depositor, (iii) state the principal amount of Notes to be withdrawn and (iv) be signed by the Acting Holder in the same manner as the original signature on this Letter of Transmittal (including any required signature guarantee(s)) or be accompanied by evidence satisfactory to the Company and the Depositary that the person withdrawing the tender has succeeded to beneficial ownership of the Notes. If Notes have been delivered or otherwise identified (through confirmation of book-entry transfer of such Notes) to the Depositary, the name of the Acting Holder and the Notes withdrawn must also be furnished to the Depositary as aforesaid, prior to the physical release of the withdrawn Notes (or, in the case of Notes transferred by book-entry transfer, the name and number of the account at DTC to be credited with withdrawn Notes). 2. Partial Tenders. Tenders of Notes pursuant to the Offer will be accepted only in principal amounts (or, in the case of the Senior Subordinated Discount Notes, face amounts representing principal amounts at maturity) equal to $1,000 or integral multiples thereof. If less than the entire principal amount of any Notes evidenced by a submitted certificate is tendered, the tendering Holder must fill in the principal amount tendered in the last column of the box entitled "Description of Notes" herein. The entire principal amount for all the Notes delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. If the entire principal amount of all Notes is not tendered or not accepted for purchase, the principal amount of Notes not tendered or not accepted for purchase will be sent (or, if tendered by book- entry transfer, returned by credit to the account at DTC designated herein) to the Acting Holder unless otherwise provided in the appropriate box on this Letter of Transmittal (see Instruction 4), promptly after the Notes are accepted for purchase. 3. Signatures on this Letter of Transmittal; Bond Powers and Endorsement; Guarantee of Signatures. If this Letter of Transmittal is signed by the registered holder(s) of the Notes tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the certificate(s) without alteration, enlargement or any chance whatsoever. If this Letter of Transmittal is signed by a participant in DTC whose name is shown as the owner of the Notes tendered hereby, the signature must correspond with the name shown on the security participant listing as the owner of the Notes. IF THE LETTER OF TRANSMITTAL IS EXECUTED BY A HOLDER OF NOTES WHO IS NOT THE REGISTERED HOLDER, THEN THE REGISTERED HOLDER MUST SIGN A VALID BOND POWER, WITH THE SIGNATURE OF SUCH REGISTERED HOLDER GUARANTEED BY AN ELIGIBLE INSTITUTION. 10 If any of the Notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any tendered Notes are registered in different names, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal and any necessary accompanying documents as there are different names in which the Notes are held. If this Letter of Transmittal is signed by the Acting Holder, and the principal amount of Notes not tendered or accepted for purchase are to be issued (or if any principal amount of Notes that is not tendered or not accepted for purchase is to be reissued or returned) to or, if tendered by book-entry transfer, credited to the account at DTC of the Acting Holder, and checks constituting payments for Notes to be purchased are to be issued to the order of the Acting Holder, then the Acting Holder need not endorse any Notes, nor provide a separate bond power. In any other case (including if this Letter of Transmittal is not signed by the Acting Holder), the Acting Holder must either properly endorse the Notes tendered or transmit a separate properly completed bond power with this Letter of Transmittal (in either case, executed exactly as the name(s) of the registered holder(s) appear(s) on such Notes, and, with respect to a participant in DTC whose name appears on a security position listing as the owner of Notes, exactly as the name(s) of the participant(s) appear(s) on such security position listing), with the signature on the endorsement or bond power guaranteed by an Eligible Institution, unless such bond powers are executed by an Eligible Institution. If this Letter of Transmittal or any Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to the Company of their authority so to act must be submitted with this Letter of Transmittal. Endorsements on Notes, signatures on bond powers provided in accordance with this Instruction 3 by registered holders not executing this Letter of Transmittal must be guaranteed by an Eligible Institution. No signature guarantee is required if: (i) this Letter of Transmittal is signed by the registered Holder(s) of the Notes tendered herewith (or by a participant in DTC whose name appears on a security position listing as the owner of Notes) and the payments for the Notes to be purchased, or any Notes for principal amounts not tendered or not accepted for purchase are to be issued, directly to such registered holder(s) (or, if signed by a participant in DTC, and Notes for principal amounts not tendered or not accepted for purchase are to be credited to such participant's account at DTC) and the "Special Issuance Instructions" box of this Letter of Transmittal has not been completed; or (ii) such Notes are tendered for the account of an Eligible Institution. In all other cases, all signatures on Letters of Transmittal accompanying Notes must be guaranteed by an Eligible Institution. 4. Special Issuance and Special Delivery Instructions. Tendering Holders should indicate in the applicable box or boxes the name and address to which Notes for principal amounts not tendered or not accepted for purchase or checks constituting payments for Notes to be purchased are to be issued or sent, if different from the name and address of the Acting Holder signing this Letter of Transmittal. In the case of issuance in a different name, the taxpayer identification or social security number of the person named must also be indicated. If no instructions are given, Notes not tendered or not accepted for purchase will be returned to the Acting Holder of the Notes tendered. Any Holder of Notes tendering by book-entry transfer may request that Notes not tendered or not accepted for purchase be credited to such account at DTC as such Holder may designate under the caption "Special Issuance Instructions." If no such instructions are given, any such Notes not tendered or not accepted for purchase will be returned by crediting the account at DTC designated above. 11 5. Taxpayer Identification Number. Each tendering Holder is required to provide the Depositary with the Holder's correct taxpayer identification number ("TIN"), generally the Holder's social security or federal employer identification number, on Substitute Form W-9, as is provided under "Important Tax Information" below, or, alternatively, to establish another basis for exemption from backup withholding. A Holder must cross out item (2) in the Certification box on Substitute Form W-9 if such Holder is subject to backup withholding. Failure to provide the information on the form may subject the tendering Holder to 31% federal income tax backup withholding on the payments made to the Holder or other payee with respect to Notes purchased pursuant to the Offer. The box in Part 3 of the form should be checked if the tendering Holder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked and the Depositary is not provided with a TIN within 60 days, thereafter the Depositary will withhold 31% from all such payments with respect to the Notes to be purchased until a TIN is provided to the Depositary. 6. Transfer Taxes. The Company will pay all transfer taxes applicable to the purchase and transfer of Notes pursuant to the Offer, except in the case of deliveries of Notes for principal amounts not tendered or not accepted for payment that are registered or issued in the name of any person other than the Acting Holder of Notes tendered hereby. 7. Irregularities. All questions as to the form of all documents and the validity (including time of receipt) and acceptance of the tenders and withdrawals of Notes will be determined by the Company, in its sole discretion, which determination shall be conclusive, binding and final. Alternative, conditional or contingent tenders will not be considered valid. The Company reserves the absolute right to reject any or all tenders of Notes that are not in proper form or the acceptance of which would, in the Company's opinion, be unlawful. The Company also reserves the right to waive any defects, irregularities or conditions of tender as to particular Notes. The Company's interpretations of the terms and conditions of the Offer(including the instructions in this Letter of Transmittal) will be conclusive, binding and final. Any defect or irregularity in connection with tenders of Notes must be cured within such time as the Company determines, unless waived by the Company. Tenders of Notes shall not be deemed to have been made until all defects or irregularities have been waived by the Company or cured. None of the Company, the Depositary or any other person will be under any duty to give notice of any defects or irregularities in tenders of Notes, or will incur any liability to Holders for failure to give any such notice. 8. Waiver of Conditions. The Company expressly reserves the absolute right, in its sole discretion, to amend or waive any of the conditions to the Offer in the case of any Notes tendered, in whole or in part, at any time and from time to time. 9. Mutilated, Lost, Stolen, or Destroyed Notes. Any Holder of Notes whose Notes have been mutilated, lost, stolen or destroyed should write to or telephone The Bank of New York (which is the Trustee for the Notes under each Indenture and the Depositary and paying agent hereunder) at the address or telephone number set forth in the back of this Letter of Transmittal. 10. Requests for Additional Copies. Requests for additional copies of the Offer to Purchase and this Letter of Transmittal may be directed to the Company, whose address and telephone number appears in the back of this Letter of Transmittal. 12 IMPORTANT TAX INFORMATION Under federal income tax laws, a Holder whose tendered Notes are accepted for payment is required to provide the Depositary (as payer) with such Holder's correct TIN on Substitute Form W-9 below or otherwise establish a basis for exemption from backup withholding. If such Holder is an individual, the TIN is his social security number. If the Depositary is not provided with the correct TIN, a $50 penalty may be imposed by the Internal Revenue Service, and payments made with respect to Notes purchased pursuant to the Offer may be subject to backup withholding. Failure to comply truthfully with the backup withholding requirements also may result in the imposition of severe criminal and/or civil fines and penalties. Certain Holders (including, among others, all corporations and certain foreign persons) are not subject to these backup withholding and reporting requirements. Exempt Holders should furnish their TIN, write "Exempt" on the face of the Substitute Form W-9, and sign, date and return the Substitute Form W-9 to the Depositary. A foreign person, including entities, may qualify as an exempt recipient by submitting to the Depositary a properly completed Internal Revenue Service Form W-8, signed under penalties of perjury, attesting to that Holder's foreign status. A Form W-8 can be obtained from the Depositary. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional instructions. If backup withholding applies, the Depositary is required to withhold 31% of any payments made to the Holder or other payee. Backup withholding is not an additional federal income tax. Rather, the Federal income tax liability of persons subject to backup withholding will be credited by the amount of tax withheld. If withholding results in an overpayment of taxes a refund may be obtained from the Internal Revenue Service. Purpose of Substitute Form W-9 To prevent backup withholding on payments made with respect to Notes purchased pursuant to the Offer, the Holder is required to provide the Depositary with either: (i) the Holder's correct TIN by completing the form below, certifying that the TIN provided on Substitute Form W-9 is correct (or that such Holder is awaiting a TIN) and that (A) the Holder has not been notified by the Internal Revenue Service that the Holder is subject to backup withholding as a result of failure to report all interest or dividends; or (B) the Internal Revenue Service has notified the Holder that the Holder is no longer subject to backup withholding; or (ii) an adequate basis for exemption. What Number to Give the Depositary The Holder is required to give the Depositary the TIN (e.g., social security number or employer identification number) of the registered holder of the Notes. If the Notes are held in more than one name or are held not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. 13
- - ----------------------------------------------------------------------------------------------------------------------- Part 1--PLEASE PROVIDE YOUR TIN IN -------------------------------------------- SUBSTITUTE THE BOX AT RIGHT AND CERTIFY BY Social security number Form W-9 SIGNING AND DATING BELOW. OR Department of the Treasury -------------------------------------------- Internal Revenue Employer identification number Service ---------------------------------------------------------------------------------------- Part 2--Certification--Under Penalties of Perjury, I Part 3C Certify that: Payer's Request for Taxpayer (1) The number shown on this form is my correct Awaiting TIN [_] Identification Number (TIN) Taxpayer Identification Number (or I am waiting for a number to be issued to be issued to me) and (2) I am not subject to backup withholding either because I have not been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of failure to report all interest or dividends, or the IRS has notified me that I am no longer subject to backup withholding. ----------------------------------------------------------------------------------------- Certificate instructions--You must cross out item (2) in Part 2 above if you have been notified by the IRS that you are subject to backup withholding because of under reporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS stating that you are no longer subject to backup withholding, do not cross out item (2). SIGNATURE DATE , 199 -------------------------------- --------------- -- - - ------------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9 - - -------------------------------------------------------------------------------- CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number within 60 days, 31 percent of all reportable payments made to me thereafter will be withheld until I provide a number. ,1999 - - ----------------------------------------- ----------------------------- Signature Date - - -------------------------------------------------------------------------------- 14 THE DEPOSITARY AND PAYING AGENT FOR THE OFFER IS: THE BANK OF NEW YORK
By Hand/Overnight Courier: For Information or By Mail: The Bank of New York Confirmation by Telephone: The Bank of New York Reorganization Department (212) 815-5942 Reorganization Department 101 Barclay Street, Floor 7E 101 Barclay Street, Floor 7E New York, New York 10286 Facsimile Transmission: New York, New York 10286 Attention: Theresa Gass, Corporate (For Eligible Institutions Attention: Theresa Gass, Corporate Trust Operations Only) Trust Operations (212) 815-4699
Any requests for additional copies of this Letter of Transmittal, the Offer to Purchase and the Notice of Guaranteed Delivery may be directed to the Company at the telephone number and location listed below. You may also contact your broker, dealer, commercial bank or trust company for assistance concerning the Offer. PHOENIXSTAR, INC. c/o Sean Clarke 8085 South Chester Suite 300 Englewood, CO 80112 (303) 712-4647 15 NOTICE OF GUARANTEED DELIVERY for 10 7/8% Senior Subordinated Notes due February 15, 2007 and 12 1/4% Senior Subordinated Discount Notes due February 15, 2007 of PHOENIXSTAR, INC. (formerly known as PRIMESTAR, INC.) This form or one substantially equivalent hereto must be used to accept the Offer (as defined below) if notes representing the 10 7/8% Senior Subordinated Notes due February 15, 2007 (the "Senior Subordinated Notes") or the 12 1/4% Senior Subordinated Discount Notes due February 15, 2007 (the "Senior Subordinated Discount Notes" and together with the Senior Subordinated Notes, the "Notes") of Phoenixstar, Inc., formerly known as PRIMESTAR, Inc., are not immediately available or time will not permit all required documents to reach the Depositary on or prior to the Expiration Date (as defined in the Offer To Purchase (as defined below)) or if the procedure for book-entry transfer cannot be completed on a timely basis. Such form may be delivered by hand or sent by telegram, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution (as defined under the caption "The Offer-- Procedure for Tendering Notes" in the Offer To Purchase). The Notes referred to herein were originally issued by TCI Satellite Entertainment, Inc.
CUSIP NO. Security - - --------- -------- 872298AB0 12 1/4% Senior Subordinated Discount Notes due February 15, 2007, Series A 872298AF1 12 1/4% Senior Subordinated Discount Notes due February 15, 2007, Series B 872298AA2 10 7/8% Senior Subordinated Notes due February 15, 2007 Series A 872298AE4 10 7/8% Senior Subordinated Notes due February 15, 2007, Series B
The Depositary and Paying Agent for the Offer is: THE BANK OF NEW YORK By Hand, Mail or Overnight Courier: The Bank of New York Reorganization Department 101 Barclay Street, Floor 7E New York, New York 10286 Attention: Theresa Gass, Corporate Trust Operations By Facsimile Transmission: (For Eligible Institutions Only) (212) 815-4699 For Information or Confirmation by Telephone: (212) 815-5942 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on the Letter of Transmittal is required to be guaranteed by an Eligible Institution under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. Ladies and Gentlemen: The undersigned hereby tenders to Phoenixstar, Inc., formerly known as PRIMESTAR, Inc., on the terms and subject to the conditions set forth in its Change of Control Offer, dated May 13, 1999 (as it may be supplemented and amended from time to time, the "Offer To Purchase"), and the related Letter of Transmittal (which together constitute the "Offer"), receipt of which is hereby acknowledged, the principal amount of Notes indicated below pursuant to the guaranteed delivery procedures set forth under the caption "The Offer--Procedure for Tendering Notes" in the Offer To Purchase. (Please Type or Print) Name(s): Principal Amount of Notes Tendered: ------ ------------------------------------- Address: If Notes will be delivered by ----------------------------- book-entry transfer, check box: ------------------------------------- ------------------------------------- [_] The Depository Trust Company Zip Code Account Number: Area Code and Telephone Number: -------------------- ------ Dated: Signature(s): ----------------------------- ------------------------ Certificate No(s). (if available): ------- GUARANTEE (not to be used for signature guarantee) The undersigned, a financial institution that is a participant in the Securities Transfer Agents Medallion Program, the Stock Exchange Medallion Program, or the New York Stock Exchange, Inc. Medallion Signature Program, hereby guarantees to deliver to the Depositary the Notes, as applicable, tendered hereby, in proper form for transfer, or a Book-Entry Confirmation (as defined in "The Offer--Acceptance for Payment and Payment for Notes" in the Offer To Purchase) with respect to such Notes, together with a properly completed and duly executed Letter of Transmittal or facsimile thereof, with any required signature guarantees, or an Agent's Message (as defined in "The Offer-- Acceptance for Payment and Payment for Notes" in the Offer To Purchase) in the case of a book-entry transfer, and any other required documents, all within five business days from the date hereof. - - ---------------------------------- ------------------------------------------ Name of Firm Authorized Signature - - ---------------------------------- ------------------------------------------ Address Name (Please Type or Print) - - ---------------------------------- ------------------------------------------ City, State Zip Code Title - - ---------------------------------- ------------------------------------------ Area Code and Telephone Number Date DO NOT SEND CERTIFICATES WITH THIS FORM. CERTIFICATES SHOULD BE SENT WITH THE LETTER OF TRANSMITTAL. PHOENIXSTAR, INC. (formerly known as PRIMESTAR, INC.) Offer to Purchase for Cash All of its Outstanding 10 7/8% Senior Subordinated Notes due February 15, 2007 and 12 1/4% Senior Subordinated Discount Notes due February 15, 2007, Pursuant to the Offer To Purchase dated May 13, 1999 - - -------------------------------------------------------------------------------- THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON JUNE 10, 1999, UNLESS THE OFFER IS EXTENDED (JUNE 10, 1999 OR SUCH LATER DATE TO WHICH THE OFFER IS EXTENDED BEING HEREINAFTER REFERRED TO AS THE "EXPIRATION DATE"). HOLDERS OF NOTES MUST TENDER NOTES ON OR PRIOR TO THE EXPIRATION DATE (AND MUST NOT HAVE WITHDRAWN SUCH NOTES) IN ORDER TO RECEIVE THE OFFER PRICE. TENDERED NOTES MAY BE WITHDRAWN AT ANY TIME NOT LATER THAN THE CLOSE OF BUSINESS ON THE FIFTH BUSINESS DAY PRECEDING THE EXPIRATION DATE. - - -------------------------------------------------------------------------------- May 13, 1999 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: Phoenixstar, Inc., formerly known as PRIMESTAR, Inc., a Delaware corporation (the "Company"), is offering to purchase all of its outstanding 10 7/8% Senior Subordinated Notes due February 15, 2007 (the "Senior Subordinated Notes") and its 12 1/4% Senior Subordinated Discount Notes due February 15, 2007 (the "Senior Subordinated Discount Notes" and together with the Senior Subordinated Notes, the "Notes"), upon the terms and subject to the conditions set forth in the Change of Control Offer, dated May 13, 1999, (as it may be supplemented and amended from time to time, the "Offer to Purchase") and the related Letter of Transmittal (which together constitute the "Offer"). All capitalized terms used herein shall have the meaning set forth in the Offer to Purchase. The Notes referred to herein were originally issued by TCI Satellite Entertainment, Inc. Enclosed herewith are copies of the following documents: 1. The Change of Control Offer; 2. The Letter of Transmittal for the Notes for your use and for the information of your clients, together with guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9 providing information relating to backup federal income tax withholding; 3. Notice of Guaranteed Delivery to be used to accept the Offer if the Notes and all other required documents cannot be delivered to the Depositary on or prior to the Expiration Date; 4. A form of letter which may be sent to your clients for whose account you hold the Notes in your name or in the name of a nominee, with space provided for obtaining such clients' instructions with regard to the Offer to Purchase; 5. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9; and 6. A return envelope addressed to the Depositary. We urge you to contact your clients as promptly as possible. DTC Participants will be able to execute tenders through the DTC Automated Tender Offer Program (ATOP). The Company will not pay any fees or commissions to any broker or dealer of other person for soliciting tenders of the Notes pursuant to the Offer. You will be reimbursed for customary mailing and handling expenses incurred by you in forwarding the enclosed materials to your clients. Additional copies of the enclosed materials may be obtained from the Company, at the address and telephone number set forth on the back page of the enclosed Offer to Purchase. Very truly yours, PHOENIXSTAR, INC. NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON AS AN AGENT OF THE COMPANY OR THE DEPOSITARY OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER NOT CONTAINED IN THE OFFER TO PURCHASE OR THE LETTER OF TRANSMITTAL. PHOENIXSTAR, INC. (formerly known PRIMESTAR, INC.) Offer To Purchase for Cash Any and All Outstanding 10 7/8% Senior Subordinated Notes due February 15, 2007 and 12 1/4% Senior Subordinated Discount Notes due February 15, 2007 (which were originally issued by TCI Satellite Entertainment, Inc.) - - -------------------------------------------------------------------------------- THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON JUNE 10, 1999, UNLESS THE OFFER IS EXTENDED (JUNE 10, 1999 OR SUCH LATER DATE TO WHICH THE OFFER IS EXTENDED BEING HEREINAFTER REFERRED TO AS THE "EXPIRATION DATE"). HOLDERS OF NOTES MUST TENDER NOTES ON OR PRIOR TO THE EXPIRATION DATE (AND MUST NOT HAVE WITHDRAWN SUCH NOTES) IN ORDER TO RECEIVE THE OFFER PRICE. TENDERED NOTES MAY BE WITHDRAWN NOT LATER THAN THE CLOSE OF BUSINESS ON THE FIFTH BUSINESS DAY PRECEDING THE EXPIRATION DATE. - - -------------------------------------------------------------------------------- May 13, 1999 TO OUR CLIENTS: Enclosed for your consideration is the Change of Control Offer, dated May 13, 1999 (as it may be supplemented and amended from time to time, the "Offer to Purchase") and the accompanying Letter of Transmittal (the "Letter of Transmittal") relating to the offer (the "Offer") by Phoenixstar, Inc., formerly known as PRIMESTAR, Inc., a Delaware corporation (the "Company") to purchase its 10 7/8% Senior Subordinated Notes due February 15, 2007 (the "Senior Subordinated Notes") and its 12 1/4% Senior Subordinated Discount Notes due February 15, 2007 (the "Senior Subordinated Discount Notes" and together with the Senior Subordinated Notes, the "Notes") at a price per Note set forth in the Offer to Purchase. Tenders of the Notes pursuant to the Offer will be accepted only in denominations of $1,000 or integral multiples thereof. In the case of any Holder whose Notes are purchased only in part, the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Notes without service charge, a new Note or Notes, of any authorized denomination as requested by such Holder, in an aggregate principal amount (at maturity, in the case of the Senior Subordinated Discount Notes) equal to and in exchange for the unpurchased portion of the Notes so tendered. All capitalized terms used herein shall have the meaning set forth in the Offer to Purchase. We are the registered Holder of Notes held by us for your account. A tender of any such Notes can be made only by us as the registered Holder and pursuant to your instructions. The Letter of Transmittal is furnished to you for your information only and cannot be used by you to tender Notes held by us for your account. Accordingly, we request instructions as to whether you wish us to tender any or all such Notes held by us for your account, pursuant to the terms and conditions set forth in the Offer to Purchase and the Letter of Transmittal. We urge you to read the Offer to Purchase and the Letter of Transmittal carefully before instructing us to tender your Notes. Your instructions to us should be forwarded as promptly as possible in order to permit us to tender Notes on your behalf in accordance with the provisions of the Offer. Notes tendered pursuant to the Offer may only be withdrawn under the circumstances described in the Offer to Purchase. Your attention is directed to the following: 1. The Offer constitutes an offer to purchase following the occurrence of a change of control, pursuant to Section 4.14 of the Notes' respective Indentures, each dated as of February 20, 1997, between TCI Satellite Entertainment, Inc. ("TSAT") and The Bank of New York, as supplemented and amended on April 1, 1998 (pursuant to which the Company assumed TSAT's obligations for the Notes) and April 27, 1999 (each, an "Indenture" and collectively, the "Indentures"). The Company has commenced the Offer in connection with the Asset Purchase Agreement, dated as of January 22, 1999 (the "Asset Purchase Agreement"), among the Company, PRIMESTAR Partners L.P., PRIMESTAR MDU, Inc., the stockholders of the Company named therein and Hughes Electronics Corporation (the "Purchaser"), pursuant to which the Purchaser agreed to acquire the Company's medium power direct broadcast satellite business for aggregate consideration consisting of $1.1 billion in cash (subject to adjustment based on the Company's closing working capital position, as provided in the Asset Purchase Agreement) and 4,871,448 shares of the Class H Common Stock of General Motors Corporation (collectively, the "Purchase Price"). The sale of the Company's Medium Power Business, pursuant to the Asset Purchase Agreement, was consummated on April 28, 1999. The assets sold to the Purchaser pursuant to the Asset Purchase Agreement constitute substantially all the assets of the Company and its subsidiaries, resulting in a Change of Control as defined in Section 1.01 of the Indentures. Section 4.14 of the Indentures requires the Company to make an Offer to Purchase all outstanding Notes within 20 days after the Company undergoes a Change of Control. The purpose of the Offer is to acquire all of the Company's outstanding Notes.. 2. The Offer to Purchase and Letter of Transmittal. 3. Tendering holders may withdraw any tender of Notes at any time at or prior to 5:00 p.m., New York City time, on the fifth business day preceding the Expiration Date as provided in the Offer to Purchase. 4. Any transfer taxes incident to the transfer of Notes from the tendering Holder to the Company will be paid by the Company, except as provided in the Offer to Purchase and the instructions to the Letter of Transmittal. 5. The Offer will expire at 5:00 p.m., New York City time, on June 10, 1999, unless extended. The Offer is being made to all record holders of Notes as of May 7, 1999 (the "Record Date") that were not party to the Lock-up Agreement, as defined in the Offer to Purchase. The Company is not aware of any jurisdiction in which the making of the Offer is prohibited by administrative or judicial action pursuant to a state statute. If the Company becomes aware of any jurisdiction where the making of the Offer is so prohibited, the Company will make a good faith effort to comply with any such statute or seek to have such statute declared inapplicable to the Offer. If, after such good faith effort, the Company cannot comply with any applicable statute, the Offer will not be made to 2 (nor will tenders be accepted from or on behalf of) the Holders in such jurisdiction. In those jurisdictions where securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer will be deemed to be made on behalf of the Company by one or more registered brokers or dealers licensed under the laws of such jurisdiction. The Offer will not be made, and will be deemed not to have been made, in those jurisdictions where securities, blue-sky or other laws prohibit the Offer from being made. If you wish to have us tender any or all of the Notes held by us for your account, please so instruct us by completing, detaching and returning to us the instruction form set forth on the next page. If you authorize a sale of your Notes, the entire principal amount of Senior Subordinated Notes (or entire principal amount at maturity of Senior Subordinated Discount Notes) held for your account will be sold, unless otherwise specified below. 3 Instruction With Respect to PHOENIXSTAR, Inc. (formerly known as PRIMESTAR, INC.) Offer To Purchase for Cash Any and All Outstanding 10 7/8% Senior Subordinated Notes Due February 15, 2007 and 12 1/4% Senior Subordinated Discount Notes due February 15, 2007 The undersigned acknowledge(s) receipt of your letter and the enclosed Change of Control Offer, dated May 13, 1999 (as it may be supplemented and amended from time to time, the "Offer to Purchase") and the accompanying Letter of Transmittal relating to the offer (the "Offer") by Phoenixstar, Inc., formerly known as PRIMESTAR, Inc., to purchase its 10 7/8% Senior Subordinated Notes due February 15, 2007 (the "Senior Subordinated Notes") and its 12 1/4% Senior Subordinated Discount Notes due February 15, 2007 (the "Senior Subordinated Discount Notes" and together with the Senior Subordinated Notes, the "Notes"). This will instruct you to accept the Offer with respect to the Notes indicated below held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer to Purchase. FOR SENIOR SUBORDINATED NOTES Principal Amount of Senior Subordinated Notes in Respect of Which the Offer is to be Accepted - - -------------------------------- FOR SENIOR SUBORDINATED DISCOUNT NOTES Principal Amount at Maturity of Senior Subordinated Discount Notes in Respect of Which the Offer is to be Accepted - - -------------------------------- SIGN HERE Dated: ________________ __, 1999 -------------------------------- Signature -------------------------------- Signature -------------------------------- -------------------------------- -------------------------------- Name(s) (Please Print) Address and Zip Code Area Code and Telephone No. 4 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 Guidelines for Determining the Proper Identification Number to Give the Payer.-- Social Security numbers have nine digits separated by two hyphens: i.e. 000-00- 0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer.
- - ------------------------------------------------------- ---------------------------------------------------- Give the Give the EMPLOYER SOCIAL SECURITY IDENTIFICA- For this type of account: number of-- For this type of account: TION number of - - ------------------------------------------------------- ---------------------------------------------------- 1. Individual The individual 6. Sole proprietorship The owner(3) 2. Two or more individuals The actual owner of 7. A valid trust, estate, The legal entity (Do (joint account) the account or, if or pension trust not furnish the combined funds, the identifying number first individual on of the personal the account(l) representative or trustee unless the legal entity itself is not designated in the account title.) (4) 3. Custodian account of a The minor(2) minor (Uniform Gift to Minors Act) 4. a. The usual revocable The grantor-trustee(l) savings trust (grantor is also trustee) 8. Corporate The corporation b. So-called trust account The actual owner(l) 9. Association, club, The organization that is not a legal or religious, charitable, valid trust under state educational or other law tax-exempt organization 5. Sole proprietorship The owner(3) 10. Partnership The partnership 11. A broker or The broker or registered nominee nominee 12. Account with the The public entity Department of Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments - - ------------------------------------------------------- ----------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Show the name of the owner. (4) List first and circle the name of the legal trust, estate, or pension trust. Note: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 Page 2 Section references are to the Internal Revenue Code Obtaining a Number If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service (the "IRS") and apply for a number. Payees Exempt from Backup Withholding The following is a list of payees exempt from backup withholding and for which no information reporting is required. For interest and dividends, all listed payees are exempt except item (9). For broker transactions, payees listed in (1) through (13) and a person registered under the Investment Advisers Act of 1940 who regularly acts as a broker are exempt. Payments subject to reporting under sections 6041 and 6041A are generally exempt from backup withholding only if made to payees described in items (1) through (7), except that a corporation (except certain hospitals described in Regulations section 1.6041-3(c)) that provides medical and health care services or bills and collects payments for such services is not exempt from backup withholding or information reporting. Only payees described in items (2) through (6) are exempt from backup withholding for barter exchange transactions, patronage dividends, and payments by certain fishing boat operators. (1) A corporation. (2) An organization exempt from tax under section 501(a), or an individual retirement plan ("IRA"), or a custodial account under section 403(b)(7), if the account satisfies the requirements of section 401(f)(2). (3) The United States or any of its agencies or instrumentalities. (4) A State, the District of Columbia, a possession of the United States, or any of their political subdivisions or instrumentalities. (5) A foreign government or any of its political subdivisions, agencies or instrumentalities. (6) An international organization or any of its agencies or instrumentalities. (7) A foreign central bank of issue. (8) A dealer in securities or commodities required to register in the United States or a possession of the United States. (9) A futures commission merchant registered with the Commodity Futures Trading Commission. (10) A real estate investment trust. (11) An entity registered at all times during the tax year under the Investment Company Act of 1940. (12) A common trust fund operated by a bank under section 584(a). (13) A financial institution. (14) A middleman known in the investment community as a nominee or listed in the most recent publication of the American Society of Corporate Secretaries, Inc., Nominee List. (15) A trust exempt from tax under section 664 or described in section 4947. Payments of dividends and patronage dividends generally not subject to backup withholding also include the following: . Payments to nonresident aliens subject to withholding under section 1441. . Payments to partnerships not engaged in a trade or business in the United States and that have at least one nonresident alien partner. . Payments of patronage dividends not paid in money. . Payments made by certain foreign organizations. Payments of interest not generally subject to backup withholding include the following: . Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. . Payments of tax-exempt interest (including exempt interest dividends under section 852). . Payments described in section 6049(b)(5) to nonresident aliens. . Payments on tax-free covenant bonds under section 1451. . Payments made by certain foreign organizations. . Mortgage interest paid to you. Payments that are not subject to information reporting are also not subject to backup withholding. For details see sections 6041, 6041(A), 6042, 6044, 6045, 6049, 6050A and 6050N, and the regulations under such sections. Privacy Act Notice.--Section 6109 requires you to give your correct taxpayer identification number to persons who must file information returns with the IRS to report interest, dividends, and certain other income paid to you, mortgage interest you paid, the acquisition or abandonment of secured property, cancellation of debt, or contributions you made to an IRA. The IRS uses the numbers for identification purposes and to help verify the accuracy of your tax return. You must provide your taxpayer identification number whether or not you are required to file a tax return. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. Penalties (1) Penalty for Failure to Furnish Taxpayer Identification Number.--If you fail to furnish your correct taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) Civil Penalty for False Information With Respect To Withholding.--If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a $500 penalty. (3) Criminal Penalty for Falsifying Information.--Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. EX-99.4 14 NOTICE OF CHANGE OF CONTROL EXHIBIT 99.4 PHOENIXSTAR, INC. (FORMERLY KNOWN AS PRIMESTAR, INC.) Notice of Change of Control And Notice of Supplemental Indenture With respect to its 10 7/8% Senior Subordinated Notes due February 15, 2007 and 12 1/4% Senior Subordinated Discount Notes due February 15, 2007 (originally issued by TCI Satellite Entertainment, Inc.) NOTICE IS HEREBY GIVEN to all record holders ("Holders"), as of May 7, 1999 (the "Record Date"), of 10 7/8% Senior Subordinated Notes due February 15, 2007 (the "Senior Subordinated Notes") and 12 1/4% Senior Subordinated Discount Notes due February 15, 2007 (the "Senior Subordinated Discount Notes" and, together with the Senior Subordinated Notes, the "Notes"), of Phoenixstar, Inc., formerly known as PRIMESTAR, Inc., (the "Company"), that are not party to the Lock-up Agreement (as defined herein), pursuant to Sections 4.14 and 10.02 of the Notes' respective Indentures, each dated as of February 20, 1997, between TCI Satellite Entertainment, Inc. ("TSAT") and The Bank of New York as Trustee (the "Trustee"), as supplemented and amended by the First Supplemental Indentures, each dated as of April 1, 1998 (pursuant to which the Company assumed TSAT's obligations for the Notes) and the Second Supplemental Indentures, each dated as of April 27, 1999 (each an "Indenture" and collectively, the "Indentures"). The Company entered into an Asset Purchase Agreement, dated as of January 22, 1999 (the "Asset Purchase Agreement") between the Company, PRIMESTAR Partners L.P., PRIMESTAR MDU, Inc., the stockholders of the Company named therein and Hughes Electronics Corporation (the "Purchaser"), pursuant to which the Purchaser agreed to acquire the Company's medium power direct broadcast satellite business (the "Medium Power Business") for aggregate consideration consisting of $1.1 billion in cash (subject to adjustment based on the Company's closing working capital position, as provided in the Asset Purchase Agreement) and 4,871,448 shares of the Class H Common Stock of General Motors Corporation (collectively, the "Purchase Price"). The sale of the Company's Medium Power Business, pursuant to the Asset Purchase Agreement, was consummated on April 28, 1999. The assets sold to the Purchaser pursuant to the Asset Purchase Agreement constituted substantially all the assets of the Company and its subsidiaries. Change of Control Right The consummation of the Asset Purchase Agreement constituted a "Change of Control" under Section 4.14 of the Indentures. As a result, under the Indentures, each Holder of the Notes as of the Record Date has the right (the "Change of Control Right"), until 5:00 p.m., Eastern time, on June 10, 1999 (the "Expiration Date"), to require the Company to purchase such Holder's Notes in whole or in part in integral multiples of $1,000 at a purchase price payable in cash in an amount equal to (i) 101% of the principal amount of each Senior Subordinated Note, plus any accrued and unpaid interest accumulated thereon up to the Purchase Date (as hereinafter defined), net to the seller in cash, and (ii) 101% of the Accreted Value on the Purchase Date of each Senior Subordinated Discount Note, net to the seller in cash (collectively the "Offer Price"). As used herein, the term "Accreted Value" has the meaning ascribed to such term in the Indenture governing the Senior Subordinated Discount Notes. The Notes will be purchased by the Company in accordance with the terms and subject to the conditions set forth in the Change of Control Offer, dated as of May 13, 1999 (as the same may be amended from time to time, the "Offer to Purchase") and the related Letter of Transmittal and instructions thereto (the "Letter of Transmittal") (which together constitute the "Offer"), copies of which are enclosed herewith. Holders who tender Notes that are purchased pursuant to the Offer shall be paid the Offer Price for such Notes promptly after the Expiration Date, but in no event later than five business days after the Expiration Date (the "Purchase Date"). On the Purchase Date the Offer Price will become due and payable upon each Note being accepted for payment pursuant to the Offer to Purchase. Interest shall cease to accrue on the Senior Subordinated Notes accepted for purchase and the Accreted Value of all Senior Subordinated Discount Nots accepted for purchase hereunder shall cease to accrete. In the case of any Holder whose Notes are purchased only in part, the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Notes without service charge, a new Note or Notes, of any authorized denomination as requested by such Holder, in an aggregate principal amount (at maturity, in the case of the Senior Subordinated Discount Notes) equal to and in exchange for the unpurchased portion of the Notes so tendered. Each Note purchased and each such new Note issued shall be in denominations of $1,000 and integral multiples thereof. Anything contained herein to the contrary notwithstanding, the Company shall not be required to accept, pursuant to the Offer to Purchase, from any Holder that is a party to the Lock-up Agreement (as defined herein), any Notes sold or required to be sold under the Lock-up Agreement. For Notes to be validly tendered pursuant to the Offer, a properly completed and duly executed Letter of Transmittal or facsimile thereof, with any required signature guarantees, or an Agent's Message, as defined in the Offer to Purchase, in the case of a book-entry transfer, and all other documents required by the Letter of Transmittal, must be received by The Bank of New York (the "Depositary") at its address set forth on the back cover of the Offer to Purchase, on or prior to the Expiration Date. In addition, either (i) Notes must be received by the Depositary, together with the Letter of Transmittal, at such address, or such Notes must be tendered pursuant to the procedures for book-entry tender described in the Offer to Purchase and a Book-Entry Confirmation received by the Depositary, in each case on or prior to the Expiration Date, or (ii) the guaranteed delivery procedure described in the Offer to Purchase must be complied with. Delivery of documents to an account established by the Depositary at the Book-Entry Transfer Facility does not constitute delivery to the Depositary. See "The Offer--Procedure for Tendering Notes" in the Offer to Purchase for a more detailed description of the procedures that must be followed in order to validly tender the Notes pursuant to the Offer. Letter of Transmittals and Notes should be sent to the Depositary, and not to the Company. Tenders of Notes, pursuant to the Offer, may be withdrawn at any time at or prior to 5:00 p.m., New York City time, on the fifth business day preceding the Expiration Date. For a withdrawal of a tender of Notes to be effective, a written or facsimile transmission notice of withdrawal must be received by the Depositary at or prior to 5:00 p.m., New York City time, on the fifth business day preceding the Expiration Date at its address set forth on the back cover of the Offer to Purchase. Any such notice of withdrawal must (i) specify the name of the person who tendered the Notes to be withdrawn, (ii) contain the description of the Notes to be withdrawn and identify the CUSIP/certificate number or numbers shown on the particular certificate evidencing such Notes (unless such Notes were tendered by book-entry transfer) and the aggregate principal amount represented by such Notes (in the case of Senior Subordinated Notes) and the aggregate principal amount at maturity represented by such Notes (in the case of Senior Subordinated Discount Notes) and (iii) be signed by the Holder of such Notes in the same manner as the original signature on the Letter of Transmittal by which such Notes were tendered (including any required signature guarantees), if any, or be accompanied by (x) documents of transfer sufficient to have the Trustee register the transfer of the Notes into the name of the person withdrawing such Notes and (y) a properly completed irrevocable proxy that authorized such person to effect such revocation on behalf of such Holder. See "The Offer-Withdrawal Rights" in the Offer to Purchase for a more detailed description of the procedures that must be followed in order to validly withdraw tendered Notes. Amendments to the Indentures Pursuant to the Second Supplemental Indentures On April 20, 1999, the Company entered into a lock-up agreement (the "Lock- up Agreement") with certain holders of its senior subordinated indebtedness, including Holders of at least a majority in principal amount of each tranche of the Notes. In connection with the Lock-up Agreement, such Holders consented to amend the Indentures as set forth below. On April 27, 1999, in accordance with Section 10.02 of each of the Indentures, the Company amended the Indentures with the consent of the Holders of at least a majority in principal amount of the Notes. Each of the Second Supplemental Indentures became effective on the Note Purchase Closing Date (as defined in the Lock-up Agreement), which is the date that the Company sold its Medium Power Business, April 28, 1999. The Second Supplemental Indentures eliminated the following sections of the Indentures: Section 4.03; Section 4.04; Section 4.06; Section 4.07; Section 4.08; Section 4.09; Section 4.10; Section 4.15; Section 4.16; Section 4.17; Section 4.18; Section 4.21; Section 4.22; Section 5.01; Section 5.02; Section 6.01(6); and Section 6.01(7). The elimination of these sections served to eliminate substantially all of the covenants in the Indentures other than the covenants to pay interest on and principal of the Notes when due and covenants relating to the Company's obligation to make an offer to purchase the Notes upon certain circumstances. PHOENIXSTAR, INC. May 13, 1999 -----END PRIVACY-ENHANCED MESSAGE-----