TRANSITION SERVICES AGREEMENT
Transition Services Agreement (this "Agreement"), dated as of
November ___, 1996, between Tele-Communications, Inc., a Delaware corporation
("TCI"), and TCI Satellite Entertainment, Inc., a Delaware corporation (the
"Company").
RECITALS
A. TCI owns all the issued and outstanding capital stock of the
Company (the "Company Stock").
B. TCI intends to distribute (the "Distribution") the Company Stock
to the holders of its Tele-Communications, Inc. Series A TCI Group Common Stock
and Tele-Communications, Inc. Series B TCI Group Common Stock. As a result of
the Distribution, the Company will cease to be a subsidiary of TCI, and TCI and
the Company will be separate public companies.
C. This Agreement sets forth the general terms upon which, for a
period following the Distribution, TCI will provide to the Company certain
services and other benefits, including certain services currently being provided
to the Company by TCI.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, TCI and the Company hereby agree
as follows:
Section 1. Services. At the request of the Company, TCI shall provide
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services to the Company for the administration and operation of the businesses
of the Company and its subsidiaries and affiliates and shall devote thereto such
time as may be necessary for the proper and efficient administration and
operation of such businesses. The services to be provided by TCI to the Company
pursuant to this Agreement (collectively, the "Services") shall include such of
the following services as the Company may request from time to time:
(i) tax reporting, financial reporting, payroll, employee
benefit administration, workers' compensation administration,
telephone, fleet management, package delivery, management information
systems, billing, lock box, remittance processing and risk management
services;
(ii) other services typically performed by TCI's accounting,
finance, treasury, corporate, legal, tax, benefits, insurance,
facilities, purchasing, fleet management and advanced information
technology department personnel;
(iii) use of telecommunications and data facilities and of
systems and software developed, acquired or licensed by TCI from time
to time for financial forecasting, budgeting and similar purposes,
including without limitation any such software for use on personal
computers, in any case to the extent available under copyright law or
any applicable third-party contract;
(iv) technology support and consulting services; and
(v) such other management, supervisory, strategic planning or
other services as the Company and TCI may from time to time mutually
determine to be necessary or desirable.
Section 2. Supply Commitments.
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(a) Certain Definitions. As used in this Agreement, the capitalized
terms listed below have the following meanings (with the singular including the
plural and vice versa):
"Equipment": Home satellite dishes, satellite receivers and other
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equipment and materials that are available for purchase by TCI and its O&O
Subsidiaries on terms that include volume discounts and would not restrict TCI
or the applicable O&O Subsidiary from complying with Section 2(b).
"O&O Program Services": Each Programming Service that is wholly
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owned by TCI or one or more of its O&O Subsidiaries.
"O&O Subsidiaries": Those of TCI's subsidiaries in which TCI
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owns, directly or indirectly, all of the equity.
"Programming Service": Programming (including, without
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limitation, entertainment, informational, educational and home shopping
programming) that is received (whether by a distributor or a customer) via
satellite.
"Satellite Business": The business of operating direct-to-
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customer satellite delivery systems.
"Supply Commitments": The Equipment Commitment made by TCI to the
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Company in Section 2(b) and the Programming Commitment made by TCI to the
Company in Section 2(c).
"Territory": The United States and Canada.
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(b) Equipment Purchase Commitment. TCI shall, and shall cause its O&O
Subsidiaries to, make available to the Company in the manner provided below the
benefit
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of the volume discounts, if any, that are available to TCI and its O&O
Subsidiaries in purchasing Equipment (the foregoing being referred to herein as,
TCI's "Equipment Commitment"). The Company shall give TCI notice from time to
time, as much in advance as is practicable, of its intention to purchase
Equipment and, promptly after receipt of such notice but in any event not more
than 10 days thereafter, TCI shall give notice to the Company stating the price
and the terms on which TCI, or the applicable O&O Subsidiary, can make such
Equipment available to the Company (the "Terms Notice"). If the Company
determines to purchase the requested Equipment on the terms specified in the
Terms Notice, it shall deliver a purchase order for such Equipment to TCI and,
upon receipt thereof, (i) TCI shall use commercially reasonable efforts to cause
its supplier to sell such Equipment directly to the Company at the price and on
the terms specified in the Terms Notice or (ii) at TCI's sole election, TCI
shall, or shall cause the applicable O&O Subsidiary to, purchase such Equipment
and resell it to the Company at the price and on the terms specified in the
Terms Notice. If TCI elects the option set forth in clause (ii) of the preceding
sentence, it shall take all action necessary to assure that all warranties and
other rights available to the original purchaser of such Equipment are assigned
and extend to, or otherwise enforce such warranties and rights on behalf of, the
Company. TCI shall in no event have, or be required to incur, any liability to
any of its suppliers for any Equipment ordered by the Company unless (and then
only to the extent that) it has elected the option set forth in clause (ii) of
the second preceding sentence.
(c) Programming Supply Commitment. With respect to each O&O Program
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Service, TCI shall, or shall cause the applicable O&O Subsidiary to, offer to
provide such Programming Service to the Company for distribution to the
subscribers of its Satellite Business ("Satellite Subscribers") in the Territory
on most-favored-customer terms and conditions ("MFN") (the foregoing being
referred to herein as, TCI's "Programming Commitment"). The Company's
distribution to its Satellite Subscribers of each O&O Program Service offered to
and accepted by it shall be subject to a term-by-term MFN against all other
distributors distributing such O&O Program Service by means of the same
technology to a number of subscribers that is equal to or less than the number
of Satellite Subscribers of such O&O Program Service (a "Comparable
Distributor") (i.e., a size-based MFN), on the material terms, provisions,
covenants and consideration given to or accepted from any of such distributors,
taken as a whole. After giving effect to the foregoing, it is the intent of the
parties that the Company's rates for the O&O Program Services in its Satellite
Business shall not be higher than the lowest rate(s) given to any Comparable
Distributor in the same distribution technology. The availability of any such
rate(s) may be subject to conditions that are logically linked to such lower
rate(s), and which conditions provide a direct, immediate or foreseeable,
economic and quantifiable benefit to TCI or the applicable O&O Subsidiary (e.g.
packaging and other pricing features, channel placement discounts, multiple
service carriage incentives, tiering rate(s) or volume discounts).
Notwithstanding the foregoing, any such condition must relate exclusively to the
O&O Program Service for which such lower rate(s) is offered. If a more favorable
term is given to or accepted from any Comparable Distributor of an O&O Program
Service, then TCI shall promptly notify the Company of such more favorable
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term and shall, or shall cause the applicable O&O Subsidiary to, offer the
Company such more favorable term for the same amount of time that such more
favorable term is or was available to such distributor for such O&O Program
Service. The Company shall accept or reject such more favorable term within
thirty (30) days of receipt of notice from TCI, and if the Company does not
accept or reject such more favorable term within such thirty (30)-day period,
then the Company shall be deemed to have rejected such more favorable term.
Without limiting the foregoing, TCI shall, or shall cause the applicable O&O
Subsidiary to, offer the Company as part of all present and future affiliation
agreements entered into by TCI or any of its affiliated companies with respect
to any O&O Program Service, the MFN set forth in this Section 2(c) for
distribution of such O&O Program Service in the Satellite Business. TCI and the
Company acknowledge that the Company now purchases and for the foreseeable
future will purchase its programming requirements from PRIMESTAR Partners, L.P.
("PRIMESTAR"). Accordingly, in order to effectuate the intent of the foregoing
provisions of this Section 2(c), TCI will use its good faith efforts to
negotiate an arrangement with PRIMESTAR whereby the benefits of the foregoing
provisions of this Section 2(c) are passed through PRIMESTAR to the Company;
provided, however, that no such arrangement shall expand the obligations of TCI
hereunder, whether to include any other partner of PRIMESTAR or otherwise.
(d) Termination of Commitments. TCI's obligations under this Section
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2, including its Supply Commitments, shall terminate immediately and without any
requirement of notice if any of the events described in clauses (ii) and (iii)
of the first sentence of Section 4(b) shall occur with respect to the Company.
If the Company delivers an executed purchase order for Equipment to TCI pursuant
to Section 2(a) and fails to purchase the same in accordance with the terms and
conditions specified in the Terms Notice, then TCI may terminate the Equipment
Commitment and its obligations under Section 2(b) by giving notice to such
effect to the Company within 30 days thereafter. Further, if the Company fails
to make payments required for any O&O Program Services provided to it pursuant
to Section 2(c) as and when due and such failure continues beyond the expiration
of any applicable grace period, then TCI may terminate the Programming
Commitment and its obligations under Section 2(c) by giving notice to such
effect to the Company within 30 days thereafter.
Section 3. Compensation for Services and Supply Commitments. As compensation
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for Services rendered to the Company pursuant to this Agreement and for the
Supply Commitments, the Company (i) shall reimburse TCI for all direct, out-of-
pocket expenses to third parties actually incurred by TCI in providing such
Services, provided that the incurrence of such expenses is consistent with
practices generally followed by TCI in managing or operating its own business
and the businesses of its subsidiaries and affiliates and (ii) shall pay to TCI
$1.50 per Subscriber per month (the "Subscriber Fee"), up to a maximum of
$3,000,000 per month, commencing with the month of January 1997. TCI shall keep
true, complete and accurate books of account containing such particulars as may
be necessary for the purpose of calculating the above expenses. Reimbursement
amounts pursuant to clause (i) of the first sentence of this Section 3 shall be
billed quarterly by TCI and shall be due and
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payable in full within 30 days after receipt of invoice. Amounts payable
pursuant to clause (ii) of the first sentence of this Section 3 shall be payable
monthly in arrears on the last day of each calendar month based on the number of
Subscribers as of the end of the immediately preceding calendar month. For
purposes hereof, a "Subscriber" is a single family household, residential
dwelling unit in a multiple dwelling unit (e.g. an apartment, condominium, etc.)
or commercial establishment (e.g. a bar, hotel, etc.) (in each case, counted as
one subscriber regardless of the number of IRDs (as such term is commonly
understood in the satellite industry)), that pays the Company or a subsidiary
thereof the monthly price for its satellite service and has paid at least one
month's charges in full, but excluding any such household, dwelling unit or
commercial establishment whose account with the Company remains unpaid for more
than 30 days from the original date of billing therefor. The Company shall keep
true, complete and accurate books of account containing such particulars as may
be necessary for the determination of the number of its Subscribers.
Section 4. Term.
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(a) Term. This Agreement shall become effective on the date of the
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Distribution and shall continue until the close of business on December 31, 1999
(the "Initial Term") and shall be renewed automatically for successive one-year
periods thereafter (each a "Renewal Term"), unless earlier terminated in
accordance with Section 4(b).
(b) Termination. Except as otherwise expressly provided herein, this
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Agreement and the rights and obligations of the parties hereunder shall remain
in effect until terminated as provided below or, with respect to the parties'
rights and obligations under Sections 2(b) and 2(c), as provided in Section
2(d):
(i) Either party may terminate this Agreement effective as of
the end of the Initial Term or the then current Renewal Term, as
applicable, by giving not less than 180 days prior written notice to
the other party.
(ii) TCI may terminate this Agreement upon written notice to the
Company if any person or group (other than TCI, any subsidiary of TCI
or any Controlling Person of the Company or TCI) acquires beneficial
ownership of shares of capital stock representing 50% or more, by
voting power, of the outstanding shares of voting capital stock of the
Company.
(iii) Either party may terminate this Agreement upon written
notice to the other party if such other party shall file a petition in
bankruptcy or insolvency, or a petition for reorganization or
adjustment of debts or for the appointment of a receiver or trustee of
all or a substantial portion of its property, or shall make an
assignment for the benefit of creditors, or if a petition in
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bankruptcy or other petition described in this paragraph shall be
filed against such other party and shall not be discharged within 120
days thereafter.
For purposes of this Section 4(b), the term "beneficial ownership" shall be
defined and construed in accordance with Rule 13d-3 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and the term "group" shall be
defined and construed in accordance with Section 13(d) of the Exchange Act. In
addition, for purposes of this Section 4(b), "Controlling Person" shall mean as
to any person each of (1) the Chairman of the Board of such person as of the
date of this Agreement, (2) the President of such person as of the date of this
Agreement, (3) each of the directors of such person as of the date of this
Agreement, (4) the respective family members, estates and heirs of each of the
persons referred to in clauses (1) through (3) above and any trust or other
investment vehicle for the primary benefit of any of such persons or their
respective family members or heirs, (5) Xxxxxx-Tribune Corporation, a Delaware
corporation or any successor thereto by merger or consolidation and (6) the
trustee under the qualified employee stock purchase plan or any successor plan
of such person. As used with respect to any person, the term "family member"
means the spouse, siblings and lineal descendants of such person. The trustee
under the qualified employee stock purchase plan or any successor plan of any
person shall be deemed to have beneficial ownership of all shares of common
stock of such person held under the plan, whether or not allocated to or vested
in participants' accounts.
(c) Effect of Termination. In the event of any termination of this
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Agreement, each party shall remain liable for all obligations of such party
accrued hereunder prior to the date of such termination, including, without
limitation, all obligations of the Company (i) to reimburse TCI for services
provided hereunder through the termination date and to pay the Subscriber Fee
for the month in which the termination date occurs (provided that if the
termination occurs prior to the last calendar day of a month, such fee shall be
prorated based on the number of days elapsed in such month prior to and
including the termination date), in each case as provided in Section 3 hereof,
and (ii) to pay for any Equipment or Programming Service supplied pursuant
hereto. The provisions of Section 5 of this Agreement shall survive
indefinitely, notwithstanding any termination hereof.
Section 5. Limitation of Liability. TCI, its affiliates, directors, officers,
employees, agents and permitted assigns (each, a "TCI Party" and, together, the
"TCI Parties") shall not be liable (whether such liability is direct or
indirect, in contract or tort or otherwise) to the Company or any of the
Company's affiliates, directors, officers, employees, agents, securityholders,
creditors or permitted assigns, for any liabilities, claims, damages, losses or
expenses (including, without limitation, any special, indirect, incidental or
consequential damages) ("Losses") arising out of, related to, or in connection
with the Services, the Supply Commitments or this Agreement, except to the
extent that such Losses result from the gross negligence or willful misconduct
of TCI, in which case TCI's liability with respect to the Services shall be
limited to a refund of that portion of the amounts actually paid by the Company
hereunder which, as determined by TCI, represented the cost to the Company of
the Services in question. With
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regard to the Supply Commitments, the remedies, if any, available with respect
to any Equipment or Programming Service supplied shall be as provided in the
applicable purchase order or supply contract. In the event of any willful
failure to perform the applicable Supply Commitment, the Company shall not be
obligated to make any further payments of the Subscriber Fee until the Supply
Commitments are honored and shall be entitled to reimbursement of the Subscriber
Fee paid with respect to any period in which TCI has failed or refused to honor
its Supply Commitments. The Company hereby agrees to indemnify and hold harmless
the TCI Parties from and against any and all Losses (including, without
limitation, reasonable fees and expenses of counsel) incurred by any TCI Party
arising out of or in connection with or by reason of this Agreement or any
Services, Equipment or Programming Services provided by TCI hereunder, other
than any liability of TCI to the Company as contemplated by the foregoing
provisions of this Section 5.
Section 6. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire
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agreement between the parties hereto with respect to the subject matter hereof
and supersedes all previous agreements, negotiations, understandings and
commitments with respect to such subject matter, whether or not in writing.
(b) Governing Law. This Agreement and the legal relations between
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the parties with respect hereto shall be governed by and construed in accordance
with the laws of the State of Colorado, without regard to conflicts of laws
rules thereof.
(c) Notices. All notices, demands and other communications under
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this Agreement shall be in writing and shall be deemed to have been duly given:
(i) on the day of delivery if delivered personally to the party to whom notice
is to be given; (ii) on the day of transmission if sent via facsimile
transmission to the facsimile number given below (answer back received);
(iii) on the day of delivery by Federal Express or similar overnight courier; or
(iv) on the third day after mailing, if mailed to the party to whom notice is to
be given, by United States first class mail, registered or certified, postage
prepaid and properly addressed, to the party as follows:
If to TCI:
Tele-Communications, Inc.
0000 XXX Xxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
Facsimile: (000) 000-0000
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If to the Company:
TCI Satellite Entertainment, Inc.
0000 Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxx, President
Facsimile: (000) 000-0000
with a separate copy to the Company's Corporate Counsel at the same
address.
Any party may change its address for the purpose of this Section by giving the
other party written notice of its new address in the manner set forth above.
(d) Amendment. This Agreement may not be amended or modified in any
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respect except by a written agreement signed by the parties hereto.
(e) Successors and Assigns; No Third-Party Beneficiaries. This
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Agreement and all of the provisions hereof shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns. Neither this Agreement nor any of the rights, interests and obligations
hereunder shall be assigned by either party hereto, by operation of law or
otherwise, without the prior written consent of the other party. Nothing
contained in this Agreement, except as expressly set forth, is intended to
confer upon any other persons other than the parties hereto and their respective
successors and permitted assigns, any rights or remedies.
(f) Counterparts. This Agreement may be executed in one or more
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counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(g) No Waiver. No waiver by either party hereto of any term or
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condition of this Agreement, in any one or more instances, shall operate as a
waiver of such term or condition at any other time. No waiver of any term or
condition hereof shall be effective unless in a writing signed by the party
entitled to give such waiver.
(h) Relations between the Parties. The parties are independent
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contractors. Nothing in this Agreement shall constitute either party, or any of
such party's officers, directors, agents or employees, a partner, agent or
employee of, or joint venturer with, the other party.
(i) Severability. If any provision of this Agreement or the
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application thereof to any person or circumstance shall be held to be invalid or
unenforceable, the remainder of this Agreement, or the application of such
provision to persons or circumstances other than those to which it was held to
be invalid or unenforceable, shall not be affected thereby, provided that the
parties shall negotiate in good faith with respect to an equitable modification
of the provision or application thereof held to be invalid.
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(j) Confidentiality. All information obtained by TCI or the Company
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concerning the other pursuant to this Agreement shall, except as required in the
performance hereof or by law, be maintained in confidence by TCI, the Company
and their respective employees.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first written above.
TELE-COMMUNICATIONS, INC.
By:
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Name:
Title:
TCI SATELLITE ENTERTAINMENT, INC.
By:
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Name:
Title:
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