EXHIBIT 10.38
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OPTION AGREEMENT
Option Agreement (this "Agreement"), dated as of December 4, 1996, by
and between Tele-Communications, Inc., a Delaware corporation ("TCI"), and TCI
Satellite Entertainment, Inc., a Delaware corporation ("TCISE").
RECITALS
A. TCI owns all the issued and outstanding capital stock of TCISE
("TCISE Stock"). TCI intends to distribute (the "Distribution") the TCISE Stock
to the holders of its Tele-Communications, Inc. Series A TCI Group Common Stock
("TCI Series A Stock") and Tele-Communications Inc. Series B TCI Group Common
Stock. As a result of the Distribution, TCISE will cease to be a subsidiary of
TCI, and TCI and TCISE will be separate public companies.
B. As a result of the Distribution, the conversion rights of the TCI
Series D Convertible Preferred Stock ("TCI Preferred Stock") will be adjusted so
that holders of TCI Preferred Stock will receive on conversion, in addition to
shares of TCI Series A Stock, the same number of shares of Series A Common
Stock, par value $1.00 per share, of TCISE ("TCISE Series A Stock") that they
would have received had they converted their TCI Preferred Stock to TCI Series A
Stock (and Tele-Communications, Inc. Series A Liberty Media Group Common Stock)
prior to the Distribution.
D. As a result of the Distribution, either (x) the conversion rate
for the Convertible Notes due December 12, 2021 of TCI UA, Inc. ("Convertible
Notes") will be adjusted so that the conversion price will be reduced (and the
number of shares of TCI Series A Stock issuable upon conversion increased) or
(y) the conversion rights of the Convertible Notes will be adjusted so that
holders of Convertible Notes will be entitled to receive on conversion shares of
TCISE Series A Stock in addition to shares of TCI Series A Stock.
E. This Agreement sets forth the terms and conditions on which, from
time to time, TCI shall have the right to purchase from TCISE and TCISE shall
have the obligation to sell to TCI up to 4,761,599 shares of TCISE Series A
Stock in such amounts as may be required from time to time to satisfy TCI's
obligations following the Distribution under the TCI Preferred Stock and the
Convertible Notes.
NOW, THEREFORE, in consideration of the mutual covenants contained in
the Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1 Option Grant.
TCISE hereby grants to TCI an option to purchase, from time to time,
in accordance with the terms and conditions set forth herein, up to 4,761,599
shares of TCISE Series A Stock at a purchase price of $1.00 per share, in such
amounts as may be required to satisfy TCI's obligations following the
Distribution under the TCI Preferred Stock and the Convertible Notes. Such
option may be exercised by TCI, in whole or in part, at any time, and from time
to time.
Section 2 Call Rights.
Immediately upon notice to TCI by a securityholder of TCI that such
securityholder is exercising a conversion privilege of the TCI Preferred Stock
or the Convertible Notes (an "Exercise Notice"), TCI shall have the right,
exercisable upon written notice (a "Call Notice") thereof, given at any time
within ten business days after receipt of such Exercise Notice, to require TCISE
to sell to TCI, at a purchase price of $1.00 per share, that number of shares of
TCISE Series A Stock, as are issuable upon such exercise, as indicated in such
Exercise Notice.
Section 3 Call Notices.
(a) Notice. A Call Notice shall state the number of shares of TCISE
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Series A Stock to be purchased pursuant to Section 2 above, the date upon which
the sale of such shares shall take place (which shall be at least three and not
more than five business days after the date of such Call Notice) and the name or
names of the persons to whom such shares are to be issued. TCI shall attach to
each Call Notice a copy of the Exercise Notice to which such Call Notice
relates.
(b) Designees. TCI may require the shares purchased by it hereunder
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to be issued in either TCI's name or in the name of its designee. If TCI
requests any shares to be issued in the name of TCI's designee, such designee
shall be the securityholder named in the Exercise Notice(s) to which the Call
Notice relating to such shares relates.
Section 4 Representations and Warranties.
(a) TCI. TCI represents and warrants that it shall give a Call
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Notice and purchase shares under this Agreement only in such amounts and at such
times as required by the conversion of any shares of TCI Preferred Stock or of
any Convertible Notes.
(b) TCISE. TCISE represents and warrants that:
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(i) all the shares of TCISE Series A Stock sold pursuant to this
Agreement shall be duly and validly authorized by TCISE and, upon
the issuance and delivery of such shares against payment therefor by
TCI, such shares will be duly and validly issued and fully paid and
non-assessable; and
(ii) all the shares of TCISE Series A Stock sold pursuant to
this Agreement are, or at the time of issuance will be, registered
under the Securities Act of 1933, as amended (the "Securities Act"),
or are, or at the time of issuance will be, exempt from such
registration pursuant to Rule 144 of the General Rules and
Regulations of the Securities and Exchange Commission under the
Securities Act.
Section 5 Miscellaneous.
(a) Successors and Assigns. This Agreement and the rights, interests
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or obligations hereunder shall not be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior written consent of
the other party. Any assignment or delegation in contravention of this Agreement
shall be void and shall not relieve the assigning or delegating party of any
obligation hereunder. Subject to the foregoing provisions of this Section 5(a),
this Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns.
(b) Counterparts. This Agreement may be executed in counterparts,
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each of which shall be deemed an original and all of which together shall
constitute one and the same instrument.
(c) Notices. All notices and other communications required or
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permitted to be given by any provision of this Agreement shall be in writing and
sent, for same day delivery, by hand or by facsimile transmission (with
acknowledgment received), charges prepaid and addressed to the intended
recipient as follows, or to such other address or number as may be specified
from time to time by like notice to the parties:
(i) If to TCI:
Tele-Communications, Inc.
0000 XXX Xxxxxxx
Xxxxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
Attention: General Counsel
(ii) If to TCISE:
TCI Satellite Entertainment, Inc.
0000 Xxxxx Xxxxxxx #000
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Corporate Counsel
(d) Headings. The section headings used in this Agreement are for
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reference purposes only and shall not affect the meaning or interpretation of
any term or provision of this Agreement.
(e) Entire Agreement; No Third-Party Beneficiaries. This Agreement
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(i) constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between TCI and TCISE with respect to the
subject matter of this Agreement, and (ii) is not intended to confer any rights
or remedies upon any person other than the parties hereto and their successors
and permitted assigns.
Dated: Dece,ber 4, 1996
TELE-COMMUNICATIONS, INC.
By:/s/ Xxxxxxx X. Xxxxx
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Name: Xxxxxxx X. Xxxxx
Title: Executive Vice President
TCI SATELLITE ENTERTAINMENT, INC.
By:/s/ Xxxx X. Xxxxxx
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Name: /s/ Xxxx X. Xxxxxx
Title: President
