EXHIBIT 10.40
June 1997
TCI/TSAT TAX SHARING AGREEMENT
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Dear Ladies and Gentlemen:
We refer to the Tax Sharing Agreement effective July 1, 1995, as amended by
the First Amendment dated as of October 1995, and the Second Amendment dated as
of October 1996, to which Tele-Communications, Inc. ("TCI") and TCI Satellite
Entertainment, Inc. ("TSAT") are signatories (as so amended, the "Tax Sharing
Agreement"). We also refer to the Reorganization Agreement dated as of December
4, 1996 (the "Reorganization Agreement") among TCI, TSAT and the other parties
thereto, with respect to the distribution of all the capital stock of TSAT in a
transaction intended to be a tax-free spin-off under Section 355 of the Internal
Revenue Code (such distribution pursuant to the Reorganization Agreement, the
"Distribution").
In connection with a proposed business combination among TSAT, the other
partners of PRIMESTAR Partners, L.P. ("PRIMESTAR") and certain affiliates of
such partners, TSAT has asked TCI to confirm the arrangements that currently
exist between TCI and TSAT with respect to certain tax matters. Accordingly,
TCI hereby agrees with TSAT as follows:
1. Neither TSAT nor any of its subsidiaries has any obligation under the
Tax Sharing Agreement to indemnify TCI, any other member of the TCI Group, or
the TCI shareholders for any Tax (or any costs incurred by TCI, members of the
TCI Group, or the TCI shareholders in connection with the assessment or
collection thereof) resulting from the Distribution failing to qualify as a tax-
free distribution pursuant to Section 355 of the Internal Revenue Code.
2. Pursuant to the Tax Sharing Agreement, TCI is obligated to indemnify
TSAT and its subsidiaries for any Taxes (including any reasonable out-of-pocket
costs incurred by TSAT and its subsidiaries in connection with the assessment or
collection thereof) resulting from the Distribution failing to qualify as a tax-
free distribution pursuant to Section 355 of the Internal Revenue Code.
3. To the best knowledge of TCI, TSAT's total payment obligations under
the Tax Sharing Agreement could not reasonably be expected to exceed $5 million.
4. The sole agreement between TCI or the TCI Group, on the one hand, and
TSAT or any of its subsidiaries, on the other, relating
to Taxes is the Tax Sharing Agreement. As of the date of the Distribution, the
sole Agreement, if any, between any of the TCI shareholders, on the one hand,
and TSAT or any of its subsidiaries, on the other, relating to Taxes is the Tax
Sharing Agreement.
"Taxes" means all forms of taxation, whenever created or imposed, and
whether by the United States or a foreign governmental entity, or by a local,
municipal, governmental, tribal, state, federation or other body, and shall
include income, sales, use, ad valorem, gross receipts, value added, franchise,
transfer, recording, withholding, payroll, employment, excise, occupation,
premium or property taxes, together with related interest, penalties and
additions to tax, or additional amounts imposed by any taxing authority
(domestic or foreign) upon the TCI Group or any Subgroup or any of their
respective members or branches. Notwithstanding the foregoing, however, the
term "Taxes" shall not include unclaimed property or escheat taxes.
"TCI Group" means all present or former members of the affiliated group
(within the meaning of Section 1504(a) of the Internal Revenue Code) of which
TCI is the common parent, other than TSAT and its subsidiaries.
TELE-COMMUNICATIONS, INC.,
a Delaware corporation,
by
/s/ Xxxxxxx X. Xxxxx
_______________________________
Name: Xxxxxxx X. Xxxxx
Title: Executive Vice President
ACCEPTED AND AGREED BY:
TCI SATELLITE ENTERTAINMENT
INC., a Delaware Corporation,
by
/s/ Xxxx X. Xxxxxx
____________________________
Name: Xxxx X. Xxxxxx
Title: President
