Contribution And Exchange Agreement

CONTRIBUTION AND EXCHANGE AGREEMENT (TSAT)


among


TCI SATELLITE ENTERTAINMENT, INC.


and


LIBERTY LSAT, INC.
LIBERTY LSAT II, INC.


Dated as of March 16, 2000


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TABLE OF CONTENTS


1. Definitions................................................................................................1


2. Authorization of Securities................................................................................6


3. Issuance of Preferred Stock and Contributions..............................................................6


4. Closing....................................................................................................6


5. Register of Securities; Restrictions on Transfer of Securities.............................................7


6. Representations and Warranties by the Company..............................................................7


7. Representations and Warranties by the Investors...........................................................11


8. Conditions Precedent to the Investor's Obligations at the Closing.........................................13


9. Conditions Precedent to the Company's Obligations at the Closing..........................................15


10. Affirmative Covenants.....................................................................................16


11. Indemnification and Enforcement...........................................................................19


12. Miscellaneous............................................................................................ 21


ANNEXES


A Certificate of Stock Designation for Series A Preferred Stock B Certificate of Stock Designation for Series B Preferred Stock C Form of PCS Share Trust Certificate D Proposed Amendments to Certificate of Incorporation E Registration Rights Agreement


6(a) Capitalization 6(c) Subsidiaries 6(d) Required Consents 6(h) Material Undisclosed Liabilities 6(i) Material Adverse Changes 6(j) Material Defaults


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CONTRIBUTION AND EXCHANGE AGREEMENT (TSAT)


This Contribution and Exchange Agreement (TSAT) is made as of March 16, 2000, by and among TCI Satellite Entertainment, Inc., a Delaware corporation (the "COMPANY"), Liberty LSAT, Inc., a Delaware corporation ("WIRELESS SUB 1") and Liberty LSAT II, Inc., a Delaware corporation ("WIRELESS SUB 2" and together with Wireless Sub 1, the "INVESTORS").


The Investors desire to acquire, and the Company desires to issue to Investors, shares of Preferred Stock (as hereinafter defined) on the terms and conditions set forth in this Agreement. Such acquisition and issuance will be made concurrently with, or immediately following, the consummation of the transactions described in that Contribution Agreement among Liberty KASTR Corp., Liberty XMSR, Inc., Liberty Astro, Inc., LSAT Astro, LLC and LMI/LSAT Holdings, Inc. (collectively, the "LIBERTY AFFILIATES"), the Company and Liberty Satellite, LLC (the "SATELLITE VENTURE") dated the same date as this Agreement (the "SATELLITE VENTURE CONTRIBUTION AGREEMENT").


For United States federal income tax purposes, it is intended that the transactions contemplated by this Agreement will qualify as a tax-free contribution under Section 351 of the Internal Revenue Code of 1986, as amended.


Accordingly, in consideration of the covenants and agreements set forth in this Agreement and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:


1. DEFINITIONS. Unless the context otherwise requires, the terms defined in this SECTION 1 will have the meanings specified in this SECTION 1 for all purposes of this Agreement, applicable to both the singular and plural forms. All accounting terms defined in this SECTION 1 and other accounting terms used in this Agreement will, except as otherwise provided for herein, be construed in accordance with those generally accepted accounting principles that the Company is required to employ by the terms of this Agreement. If and so long as the Company has any Subsidiary, the accounting terms defined in this SECTION 1 and other accounting terms appearing in this Agreement will be determined on a consolidated basis for the Company and each of its Subsidiaries, and the financial statements and other financial information to be furnished by the Company pursuant to this Agreement will be prepared on a consolidated basis.


"ACTION" will have the meaning assigned to it in SECTION 11(c).


"AFFILIATE" will mean any Person which directly or indirectly controls, is controlled by, or is under common control with, the indicated Person. For purposes of this SECTION 1, "control" when used with respect to any Person includes the direct or indirect beneficial ownership of 50% or more of the voting securities or voting equity or partnership interests of such Person, or the power to direct


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or cause the direction of the management or policies of such Person, whether by contract or otherwise.


"AGREEMENT" will mean this Contribution and Exchange Agreement (TSAT).


"APPLICABLE LAW" will mean all provisions of constitutions, statutes, rules, regulations, and orders of Governmental Authorities applicable to the Company, including the Licenses, the Communications Act of 1934, as amended, Environmental Laws, and Title 17 of the United States Code and all orders and decrees of all courts and arbitrators in proceedings or actions to which the Company is a party or by which it is bound.


"AUTHORIZED SIGNATORY" will mean such senior personnel of the Company as may be duly authorized and designated in writing by the Company to execute documents, agreements and instruments on behalf of the Company.


"BOARD" will mean the Board of Directors of the Company.


"BUSINESS DAY" will mean a day on which banks are open for the transaction of business in New York.


"CERTIFICATE OF INCORPORATION" will mean the Company's Certificate of Incorporation, as amended.


"CLOSING" will have the meaning assigned to it in SECTION 4.


"CLOSING DATE" will have the meaning assigned to it in SECTION 4.


"COMMISSION" will mean the Securities and Exchange Commission.


"COMPANY" will have the meaning assigned to it in the introductory paragraph of this Agreement.


"COMPANY SEC REPORTS" will have the meaning assigned to it in SECTION 6(m).


"DESIGNATIONS" will have the meaning assigned to it in SECTION 2.


"ENVIRONMENTAL LAWS" will mean any and all federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, permit conditions, decrees or requirements of any Governmental Authority regulating, relating to or imposing liability or standards of conduct concerning environmental protection matters, including those relating to releases, discharges, emissions or disposals to air, water, land or ground water, to the withdrawal or use of ground water, to the use, handling or disposal of polychlorinated biphenyls, asbestos or urea formaldehyde, to the treatment, storage, disposal or management of hazardous substances (including petroleum, crude oil


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or any fraction thereof, or other hydrocarbons), pollutants or contaminants, to exposure to toxic, hazardous or other controlled, prohibited or regulated substances, including any provisions under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Section 9601 ET SEQ.) or the Resource Conservation and Recovery Act of 1976, as amended (42 U.S.C. Section 6901, ET SEQ.).


"EQUITY SECURITIES" will mean the stock of, and any similar interest in, the Company and all securities (whether stock or indebtedness) convertible or exchangeable, with or without consideration, into or for any stock or similar interest and all securities (whether stock or indebtedness) carrying any warrant or right to subscribe to or purchase any stock or similar interest or any such warrant or right.


"EXCHANGE ACT" will mean the Securities Exchange Act of 1934, as amended.


"FCC" will mean the Federal Communications Commission or any successor agency.


"FCC LICENSE" will mean any construction permit, community antennae relay service, broadcast auxiliary license, earth station registration, business radio, microwave or special safety radio service license issued by the FCC pursuant to the Communications Act of 1934, as amended, and any other FCC license from time to time necessary or advisable for the operation of the Company's business.


"FINANCIALS" will have the meaning assigned to it in SECTION 6(h).


"GOVERNMENTAL AUTHORITY" will mean the United States of America, any state, commonwealth, territory or possession of the United States of America and any political subdivision or quasi-governmental authority of any of the same, including any court, tribunal, department, commission, council, board, bureau, agency, county, municipality, province, parish or other instrumentality of any of the foregoing.


"HOLDER" of any Security will mean the record owner of such Security.


"HSR ACT" will mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.


"INDEMNIFIED PARTY" will have the meaning assigned to it in SECTION 11(c).


"INDEMNIFYING PARTY" will have the meaning assigned to it in SECTION 11(c).


"INTERNAL REVENUE CODE" will mean the Internal Revenue Code of 1986, as amended.


"INVESTORS" will have the meaning assigned to it in the introductory paragraph of this Agreement.


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"LICENSES" will mean any license, permit, certificate of need, authorization, certification, accreditation, franchise, approval or grant of rights, whether based upon any agreement, statute, order, ordinance or otherwise granted by any Governmental Authority to the Company or any Subsidiary necessary or appropriate for the Company or any Subsidiary to engage in its business as currently conducted, including in order to provide direct broadcast satellite, telecommunication, local, long distance and wireless telephone services, cable television services or internet services to residential, commercial or governmental users, including FCC Licenses, together with any amendment, modification or replacement with respect thereto.


"LIEN" will mean with respect to any property, any mortgage, lien, pledge, charge, security interest or other encumbrance of any kind, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement and any lease deemed to constitute a security interest and any option or other agreement to give any security interest).


"LOSSES" will have the meaning assigned to it in SECTION 11(a).


"MATERIAL AGREEMENT" will have the meaning assigned to it in SECTION 6(j).


"MATERIALLY ADVERSE EFFECT" will mean any materially adverse effect upon the business operation, assets, liabilities, financial condition, results of operations or business prospects of the Company or any of its Subsidiaries, or the ability of the Company to perform this Agreement or observe the terms of the Designations, resulting from any act, omission, situation, status, event or undertaking, either singly or taken together.


"MAXIMUM AMOUNT" will have the meaning assigned to it in SECTION 11(a).


"MINIMUM AMOUNT" will have the meaning assigned to it in SECTION 11(a).


"PCS SHARES" will have the meaning assigned to it in SECTION 3.


"PCS TRUST DOCUMENTS" will mean the Trust Agreement of the Liberty PCS Trust entered into as of March 9, 1999 between TCI Wireless Holdings, Inc., as Grantor, and M. LaVoy Robison, as Trustee; the Stipulation entered on August 23, 1999, in the United States District Court for the District of Columbia in UNITED STATES OF AMERICA V. AT&T CORP. AND TELE-COMMUNICATIONS, INC., No. 98-CV03170; the Final Judgment entered on August 23, 1999, in the United States District Court for the District of Columbia in UNITED STATES OF AMERICA V. AT&T CORP. AND TELECOMMUNICATIONS, INC., No. 98-CV03170; the Order adopted March 5, 1999 by the FCC in the Matter of Applications for Consent to Transfer of Control of Licenses and Section 214 Authorizations from Tele-Communications, Inc. to AT&T Corp., CS Docket No. 98-178; the Top Up Right Agreement entered into as of March 9, 1999, among France Telecom S.A., Deutsche Telekom AG, and Liberty PCS Trust; and the Standstill Agreement dated as of March 9, 1999, between Sprint Corporation and the Liberty PCS Trust.


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"PERSON" will mean any natural person or any corporation, trust, association, company, partnership, limited liability company, joint venture or other entity, including any Governmental Authority.


"PREFERRED STOCK" will have the meaning assigned to it in SECTION 2.


"PROPOSED AMENDMENTS" will have the meaning assigned to it in SECTION 8(d).


"REGISTRATION RIGHTS AGREEMENT" will have the meaning assigned to it in SECTION 8(g)(ix).


"REQUIRED CONSENTS" will mean any and all consents, authorizations and approvals required for the execution, delivery and performance by the Company of this Agreement and the Designations, each in accordance with their respective terms, and the consummation of the transactions contemplated by this Agreement and the Designations.


"SATELLITE VENTURE" will have the meaning assigned it in the second paragraph of this Agreement.


"SATELLITE VENTURE CONTRIBUTION AGREEMENT" will have the meaning assigned to it in the second paragraph of this Agreement.


"SECURITIES" will have the meaning assigned to it in SECTION 2.


"SECURITIES ACT" will mean the Securities Act of 1933, as amended.


"SERIES A PREFERRED STOCK" will have the meaning assigned to it in SECTION 2.


"SERIES B COMMON STOCK" will have the meaning assigned to it in SECTION 2.


"SERIES B PREFERRED STOCK" will have the meaning assigned to it in SECTION 2.


"SUBSIDIARY" will mean (i) any corporation of which 50% or more of the voting stock, or any partnership or limited liability company of which 50% or more of outstanding interests, is at any time owned by the Company, or by one or more Subsidiaries of the Company, or by the Company and one or more Subsidiaries of the Company, and (ii) any other entity which is controlled or capable of being controlled by the Company or by one or more Subsidiaries of the Company or by the Company and one or more Subsidiaries of the Company.


"TRADING PRICE" means, with respect to the PCS Shares as of the Closing Date, the last reported sale price of shares of Sprint PCS Group Common Stock as reported on the New York Stock Exchange on the day that is two full trading days before the Closing Date. For purposes of this definition, a "trading day" is a day on which the New York Stock Exchange is open for the transaction of business (unless such trading will have been suspended for the entire day).


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"WIRELESS SUB 1" will have the meaning assigned to it in the introductory paragraph of this Agreement.


"WIRELESS SUB 2" will have the meaning assigned to it in the introductory paragraph of this Agreement.


2. AUTHORIZATION OF SECURITIES. The Company has authorized the issuance of an aggregate of 150,000 shares of its Cumulative Preferred Stock, Series A (the "SERIES A PREFERRED STOCK") and 150,000 shares of its Cumulative Convertible Voting Preferred Stock, Series B (the "SERIES B PREFERRED STOCK"), each having the rights, preferences and privileges set forth with respect to such series in their respective Certificates of Stock Designation (hereinafter referred to as the "DESIGNATIONS"), copies of which are attached hereto as ANNEX A and ANNEX B, respectively. The shares of Series B Preferred Stock are convertible into shares of Series B Common Stock of the Company (the "SERIES B COMMON STOCK") upon the terms and conditions set forth in the Designations. The Series A Preferred Stock and the Series B Preferred Stock are sometimes referred to collectively herein as the "PREFERRED STOCK" and the Preferred Stock and Series B Common Stock are sometimes referred to collectively as the "SECURITIES."


3. ISSUANCE OF PREFERRED STOCK AND CONTRIBUTION. Upon the terms and subject to the conditions herein contained, the Company agrees to issue to Wireless Sub 2, and Wireless Sub 2 agrees to acquire from the Company, at the Closing on the Closing Date, 150,000 shares of Series A Preferred Stock. Upon the terms and subject to the conditions herein contained, the Company agrees to issue to Wireless Sub 1, and Wireless Sub 1 agrees to acquire from the Company, at the Closing on the Closing Date, 150,000 shares of Series B Preferred Stock. In exchange for such issuance, the Investors will each contribute to the Company trust certificates issued by the Liberty PCS Trust representing an economic interest in a number of shares of Sprint PCS Group Common Stock having an aggregate value on the Closing Date, calculated at the Trading Price, equal to $150,000,000 (the aggregate of such contributions is referred to as the "PCS SHARES"), and the Company will assume the applicable obligations arising in connection with the PCS Shares under the PCS Trust Documents. The trust certificates and the interests represented thereby will be subject to the terms of the PCS Trust Documents.


4. CLOSING. The closing of the issuance to the Investors of the Securities (the "CLOSING") will occur at the offices of Sherman & Howard L.L.C. in Denver, Colorado, at 10:00 A.M., mountain time, on the satisfaction or waiver of the conditions to Closing set forth in SECTIONS 8 and 9, or at such different time or day as the Investors and the Company may agree (the "CLOSING DATE"). At the Closing, the Company will deliver to the Investors certificates evidencing the number of shares of Series A Preferred Stock and Series B Preferred Stock issued to them in accordance with SECTION 3, each of which will be registered in the appropriate Investor's name, and the Investors will each deliver to the Company trust certificates in the form of ANNEX C representing an interest in the number of PCS Shares prescribed by SECTION 3.


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5. REGISTER OF SECURITIES; RESTRICTIONS ON TRANSFER OF SECURITIES.


(a) REGISTER OF SECURITIES. The Company or its duly appointed agent will maintain a separate register for the shares of each series and class of Equity Securities, for the registration of the issuance and sale of all such shares. All transfers of Preferred Stock, or Series B Common Stock issued upon conversion of Series B Preferred Stock, will be recorded on the register maintained by the Company or its agent, and the Company will be entitled to regard the registered Holder of such Securities as the actual Holder of the Securities so registered until the Company or its agent is required to record a transfer of such Securities on its register. Subject to SECTION 5(b) hereof, the Company or its agent will be required to record any such transfer when it receives the Security to be transferred, duly and properly endorsed by the registered Holder thereof or by its attorney-in-fact duly authorized in writing.


(b) RESTRICTIONS ON TRANSFER.


(i) The Investors will not sell, transfer, assign, pledge, hypothecate or otherwise dispose of any of the Securities except in compliance with the Securities Act and the registration or qualification requirements of any applicable state securities laws or any exemption therefrom.


(ii) The certificates evidencing the Preferred Stock, each certificate issued in transfer thereof, and each certificate evidencing the Series B Common Stock issued upon conversion of shares of the Preferred Stock will bear a legend substantially to the effect of the following, along with any legend required under any applicable state securities laws:


"The securities evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended, or under
any applicable state securities laws. These securities may not be
sold or transferred in the absence of such registration or an
exemption therefrom under such Act and under any applicable state
securities laws."


(iii) The Company will make a notation on its records and may give instructions to any transfer agent of the Series B Common Stock or Preferred Stock in order to implement the restrictions on transfer set forth in this SECTION 5(b).


6. REPRESENTATIONS AND WARRANTIES BY THE COMPANY. To induce the Investors to enter into this Agreement and to consummate the transactions contemplated hereby, the Company covenants with, and represents and warrants to, the Investors as follows:


(a) ORGANIZATION; POWER; QUALIFICATION; CAPITAL STOCK.


(i) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company has the corporate power and authority to own or lease and operate its properties and to carry on its business as it is now being and


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hereafter proposed to be conducted. The Company is duly qualified, in good standing and authorized to do business in each jurisdiction in which the character of its properties or the nature of its businesses requires such qualification or authorization. ANNEX 6(a) sets forth the number of authorized shares of each class and series of Equity Securities of the Company, the par value per share, and the number of issued and outstanding shares of each such class and series on the date hereof, after giving effect to the transactions contemplated hereby. Except as described on ANNEX 6(a) attached hereto, the Company does not have outstanding any stock or other securities convertible into or exchangeable for any shares of its Equity Securities, nor are there any preemptive or other rights to subscribe for or to purchase, or any other rights to subscribe for or to purchase, or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments, or claims of any character relating to, any Equity Securities or any stock or securities convertible into or exchangeable for any Equity Securities. Except as set forth on ANNEX 6(a), the Company is not subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its Equity Securities or to register any shares of its Equity Securities, and there are no agreements restricting the transfer of any shares of the Company's Equity Securities.


(ii) Other than the Preferred Stock to be issued to the Investors pursuant to this Agreement, there are no shares of preferred stock of the Company or its Subsidiaries outstanding. The Preferred Stock has been duly authorized and, when issued and paid for pursuant to the terms of this Agreement, will be duly authorized, validly issued, fully paid and nonassessable, will have the rights, preferences and privileges specified in the Designations and will be free and clear of all Liens and restrictions, other than Liens that might have been created by the Investors and restrictions on transfer imposed by SECTION 5(b) hereof; and the Series B Common Stock issuable upon conversion of the Preferred Stock has been (or will be upon the effectiveness of the Proposed Amendments) duly authorized and reserved for issuance upon conversion of the Preferred Stock and, when issued will be duly authorized, validly issued, fully paid and nonassessable Series B Common Stock, and clear of all Liens and restrictions, other than Liens that might have been created by the Investors and restrictions imposed by SECTION 5(b) hereof.


(b) AUTHORIZATION. The Company has the corporate power and has taken all necessary corporate action to authorize it to issue the Preferred Stock and to execute, deliver and perform this Agreement and the Designations in accordance with their respective terms, and to consummate the transactions contemplated by this Agreement and the Designations. This Agreement has been duly executed and delivered by the Company and is, along with the Designations, a legal, valid and binding obligation of the Company enforceable in accordance with its terms, subject, as to enforcement of remedies, to the following qualifications: (i) certain equitable remedies are discretionary and, in particular, may not be available where damages are considered an adequate remedy at law; and (ii) enforcement may be limited by bankruptcy, insolvency, liquidation, reorganization, reconstruction and other similar laws affecting enforcement of creditors' rights generally (insofar as any such law relates to the bankruptcy, insolvency or similar event of the Company).


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(c) SUBSIDIARIES. The Subsidiaries of the Company are listed in ANNEX 6(c) attached hereto. The Company owns all of the outstanding capital stock of each Subsidiary, except as set forth in ANNEX 6(c).


(d) COMPLIANCE WITH OTHER DOCUMENTS AND CONTEMPLATED TRANSACTIONS. Except for, and subject to the receipt of the Required Consents, all of which are set forth in ANNEX 6(d), the execution, delivery and performance by the Company of this Agreement and the Designations, each in accordance with their respective terms, and the consummation of the transactions contemplated by this Agreement and the Designations, do not and will not (i) require any consent, approval, authorization, permit or license which has not already been obtained from, or effect any filing or registration which has not already been effected with, any federal, state or local regulatory authority, (ii) violate any Applicable Law with respect to the Company, (iii) conflict with, result in a breach of, or constitute a default under the Certificate of Incorporation or the bylaws of the Company, or under any indenture, agreement, or other instrument, including the Licenses, to which the Company or any Subsidiary of the Company is a party or by which any such company or its properties may be bound, or (iv) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by the Company or any of its Subsidiaries. All Notification and Report Forms required to be filed under the HSR Act with respect to the transactions contemplated by this Agreement have been filed and the applicable waiting period under the HSR Act has been terminated.


(e) LICENSES. All material Licenses necessary to the operation of the Company's business have been authorized by the grantors thereof and are in full force and effect, and the Company is in compliance in all material respects with all of the provisions thereof.


(f) COMPLIANCE WITH LAW. The Company is in compliance in all material respects with all Applicable Laws.


(g) LITIGATION. There is no action, suit or proceeding pending or, to the best of the Company's knowledge, threatened against or in any other manner relating directly and adversely to, the Company or any of its properties in any court or before any arbi ...