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SCHEDULE 14A INFORMATION
Preliminary Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
ECHOSTAR COMMUNICATIONS CORPORATION
----------------------------------------------------
(Name of Registrant as Specified in its Charter)
---------------------------------------------------
Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
--------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement Number:
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(3) Filing Party:
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(4) Date Filed:
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February , 1999
DEAR SHAREHOLDER:
It is a pleasure for me to extend to you an invitation to attend a Special
Meeting of Shareholders of EchoStar Communications Corporation ("EchoStar").
The Special Meeting will be held on , February , 1999, at 10:00
a.m. at EchoStar's headquarters located at 5701 South Santa Fe Drive, Littleton,
Colorado 80120.
At the Special Meeting, we will ask you to consider and vote upon a
proposal to issue shares of our Class A Common Stock as consideration for the
acquisition of certain satellite broadcasting assets from The News
Corporation Limited and MCI Telecommunications Corporation. The assets
include a license to operate 28 direct broadcast satellite frequencies at the
110DEG. West Longitude orbital location (which is capable of providing
service to the entire continental United States), two Space
Systems/Loral-built satellites to be delivered in orbit and currently
expected to be launched during 1999 and other related assets and rights.
Assuming consummation of the acquisition and successful launch of the two
satellites, EchoStar expects that its DISH Network will have the capacity to
expand its current offering of more than 200 channels to approximately 500
video and audio channels broadcast nationwide.
As described in the accompanying Proxy Statement, the number of shares
of our Class A Common Stock to be issued in connection with the acquisition
is subject to adjustment based on the current trading prices of our Class A
Common Stock at the time the acquisition is consummated. If the acquisition
had been consummated on January 25, 1999, we would have been required to
issue 24,258,760 shares of Class A Common Stock, constituting approximately
31.8% of EchoStar's fully-diluted equity and 7.0% of EchoStar's total voting
power.
At the Special Meeting, we will also ask you to consider and vote upon a
proposal to amend our Amended and Restated Articles of Incorporation to clarify
certain voting provisions set forth therein.
We hope that all shareholders will be able to attend the Special Meeting.
If you plan to attend, please check the appropriate box on your proxy card.
Whether or not you plan to attend the Special Meeting personally, it is
important that you be represented. To ensure that your vote will be received
and counted, please promptly complete, date and return your proxy card in the
enclosed return envelope.
On behalf of the Board of Directors and Management, I would like to express
our
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appreciation for your support and interest in EchoStar. I look forward to
seeing you at the Special Meeting.
/s/ CHARLES W. ERGEN
CHARLES W. ERGEN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF ECHOSTAR COMMUNICATIONS CORPORATION:
Please take notice that a Special Meeting of Shareholders of EchoStar
Communications Corporation ("EchoStar") will be held on , February
, 1999, at 10:00 a.m. at EchoStar's headquarters located at 5701 South Santa
Fe Drive, Littleton, Colorado 80120, to consider and vote upon:
1. A proposal to issue shares of EchoStar's Class A Common Stock as
consideration for the acquisition of certain satellite broadcasting assets
pursuant to the Purchase Agreement dated as of November 30, 1998, by and among
American Sky Broadcasting, LLC, The News Corporation Limited, MCI
Telecommunications Corporation and EchoStar.
2. A proposal to amend EchoStar's Amended and Restated Articles of
Incorporation to clarify certain voting provisions set forth therein.
3. Any other business as may properly come before the meeting or any
adjournment thereof.
Only shareholders of record at the close of business on February , 1999
will be entitled to notice of, and to vote at, the Special Meeting or any
adjournment thereof.
By Order of the Board of Directors
/s/ DAVID K. MOSKOWITZ
DAVID K. MOSKOWITZ,
SENIOR VICE PRESIDENT, GENERAL COUNSEL,
CORPORATE SECRETARY AND DIRECTOR
February , 1999
5701 South Santa Fe Drive - Littleton, Colorado 80120 - Tel: (303) 723-1000
- -Fax: (303) 723-1999
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PROXY STATEMENT
OF
ECHOSTAR COMMUNICATIONS CORPORATION
GENERAL
This Proxy Statement is being furnished to the shareholders of EchoStar
Communications Corporation ("EchoStar") in connection with a Special Meeting
of Shareholders of EchoStar (the "Special Meeting") to be held on ,
February , 1999, at 10:00 a.m. at EchoStar's headquarters located at 5701
South Santa Fe Drive, Littleton, Colorado 80120. At the Special Meeting,
shareholders will consider and vote upon a proposal to issue shares of
EchoStar's Class A Common Stock, $0.01 par value ("Class A Shares"), as
consideration for the acquisition of certain satellite broadcasting assets
(the "110 Acquisition"). As described herein, the number of Class A Shares to
be issued is subject to adjustment based on the current trading prices of the
Class A Shares at the time the 110 Acquisition is consummated. If the 110
Acquisition had been consummated on January 25, 1999, EchoStar would have
been required to issue 24,258,760 Class A Shares, constituting approximately
31.8% of EchoStar's fully-diluted equity and 7.0% of EchoStar's total voting
power. Shareholders will also consider and vote upon a proposal to amend
EchoStar's Amended and Restated Articles of Incorporation (the "Articles").
The mailing address of EchoStar is 5701 South Santa Fe Drive, Littleton,
Colorado 80120. This Proxy Statement and the accompanying proxy are first being
sent or given to shareholders on or about February , 1999 to shareholders of
record on February , 1999 of the Class A Shares and EchoStar's Class B Common
Stock, $0.01 par value ("Class B Shares" and, together with the Class A Shares,
the "Shares").
The accompanying proxy is being solicited by the Board of Directors of
EchoStar. It may be revoked by written notice given to the Corporate Secretary
at any time before being voted. Proxies, which are attached to this form,
properly executed, duly sent to EchoStar and not revoked will be voted for the
proposals described in this Proxy Statement, in accordance with the instructions
set forth in the proxy. The Board of Directors is not aware of any other
matters proposed to be presented at the Special Meeting. If any other proposal
is properly presented, the persons named in the accompanying form of proxy will
have discretionary authority to vote thereon in accordance with their best
judgment. Presence at the Special Meeting does not of itself revoke the proxy.
SECURITIES ENTITLED TO VOTE
Shareholders of record on February , 1999 are entitled to notice of
the Special Meeting and to vote their Shares at the Special Meeting. On that
date, Class A Shares and Class B Shares were issued and
outstanding. Each of the Class A Shares is entitled to one vote per share on
each proposal to be considered by shareholders. Each of the Class B Shares
is entitled to ten votes per share on each proposal to be considered by
shareholders.
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VOTE REQUIRED
The presence at the Special Meeting, in person or by proxy, of the holders
of a majority of the total voting power of all classes of voting stock of
EchoStar taken together shall constitute a quorum for the transaction of
business at the Special Meeting. In the case of the proposal to issue Class A
Shares, the affirmative votes of a majority of the total votes cast at the
Special Meeting on the proposal in person or by proxy are required to approve
such proposal. The aggregate number of votes cast (i.e., those votes "for" or
"against" the proposal to issue Class A Shares, as well as abstentions) will be
counted for purposes of determining the minimum number of affirmative votes
required for approval of the proposal. In the case of the proposal to amend the
Articles, the affirmative votes of a majority of the voting power of EchoStar
entitled to vote are required to approve such proposal. The total number of
votes cast "for" will be counted for purposes of determining whether sufficient
affirmative votes have been cast to approve each proposal.
Abstentions from voting on a proposal by a shareholder at the Special
Meeting, as well as broker non-votes, will be considered for purposes of
determining the number of total votes present at the Special Meeting.
Abstentions will have the same effect as votes against the proposals. Broker
non-votes will not be considered as votes "for" or "against" the proposals, and
will therefore not be considered in determining whether the proposal to issue
Class A Shares has passed, but will have the same effect as votes against the
proposal to amend the Articles.
Through his ownership of Class B Shares, Charles W. Ergen, the Chairman,
President and Chief Executive Officer of EchoStar, possesses more than 93.5%
of the total voting power of EchoStar. Pursuant to the voting agreement
described below, Mr. Ergen has agreed to vote in favor of the proposal to
issue the Class A Shares. Mr. Ergen has also indicated his intention to vote
in favor of the proposal to amend the Articles. Accordingly, approval of the
proposals is assured notwithstanding a negative vote by shareholders other
than Mr. Ergen.
NASDAQ SHAREHOLDER APPROVAL REQUIREMENT
Shareholder approval of the issuance of the Class A Shares and related
actions in connection with the 110 Acquisition is not required under the Nevada
Business Corporation Act (the "Nevada Act"), the Articles or EchoStar's Bylaws.
However, the rules of the NASDAQ Stock Market (where EchoStar's Class A Shares
are traded) require shareholder approval of certain substantial issuances of
stock.
Shareholder approval of the proposed amendment to the Articles is required
under the Nevada Act, the Articles and EchoStar's Bylaws, but is not required by
NASDAQ rules.
EQUITY SECURITY OWNERSHIP
The following table sets forth, to the best knowledge of EchoStar, the
beneficial ownership of EchoStar's voting securities as of December 31, 1998
(giving effect to the February , 1999 retirement of all outstanding shares of
EchoStar's Series A preferred stock) by: (i) each person known by EchoStar to
be the beneficial owner of more than five percent of any class of EchoStar's
voting shares; (ii) each Director of EchoStar; (iii) the five highest
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compensated persons acting as an Executive Officer of EchoStar (the "Named
Executive Officers"); and (iv) all Directors and Executive Officers as a group.
Unless otherwise indicated, each person listed in the following table (alone or
with family members) has sole voting and dispositive power over the shares
listed opposite such person's name.
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
NUMBER OF PERCENTAGE OF NUMBER OF PERCENTAGE OF
NAME(1) SHARES CLASS SHARES (2) CLASS (2)
- -------------------------------------------------- ------------ -------------- ------------- ---------------
<S> <C> <C> <C> <C>
CLASS A COMMON STOCK (3):
Charles W. Ergen (4), (5), (17), (18), (19).... 30,052,731 62.1% 30,052,731 41.4%
The News Corporation Limited (6)............... - - 19,431,267 26.8%
MCI WorldCom, Inc. (6)......................... - - 4,827,493 6.7%
FMR Corp. (7).................................. 2,337,034 4.8% 2,337,034 3.2%
Wellington Management Company, LLP (8)......... 1,837,100 3.8% 1,837,100 2.5%
AMVESCAP, PLC (9).............................. 1,760,750 3.6% 1,760,750 2.4%
James DeFranco (10), (17), (18)................ 1,156,345 2.4% 1,156,345 1.6%
David K. Moskowitz (11), (17), (18)............ 84,140 * 84,140 *
Michael T. Dugan (12), (17), (18).............. 73,979 * 73,979 *
Steven B. Schaver (13), (17), (18)............. 49,677 * 49,677 *
O. Nolan Daines (14), (18)..................... 5,000 * 5,000 *
Raymond L. Friedlob (15), (18)................. 6,000 * 6,000 *
All Directors and Executive Officers as a Group
(11 persons) (16), (17), (18)................ 31,458,347 65.0% 31,458,347 43.3%
<CAPTION>
NUMBER OF PERCENTAGE OF
SHARES CLASS
-------------- ---------------
<S> <C> <C>
CLASS B COMMON STOCK:
Charles W. Ergen................................................. 29,804,401 100.0%
All Directors and Executive Officers as a Group (11 persons)..... 29,804,401 100.0%
</TABLE>
- ------------------
* Less than 1%.
(1) Except as otherwise noted, the address of each such person is 5701 Santa Fe
Drive, Littleton, Colorado 80120.
(2) Gives effect to the 110 Acquisition, assuming it had been consummated on
January 25, 1999 (see Note (6)). Also includes Class A Shares issuable
upon conversion of Mr. Ergen's Class B Shares.
(3) The following table sets forth, to the best knowledge of EchoStar, the
actual ownership of EchoStar's Class A Shares (including options
exercisable within 60 days) as of December 31, 1998 by: (i) each person
known by EchoStar to be the beneficial owner of more than five percent of
any class of EchoStar's voting shares; (ii) each Director or nominee of
EchoStar; (iii) each Named Executive Officer; and (iv) all Directors and
Executive Officers as a group:
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<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
NAME SHARES CLASS
- -------------------------------------------------------------- --------------- -----------------
<S> <C> <C>
CLASS A COMMON STOCK:
FMR Corp................................................ 2,337,034 14.4%
Wellington Management Company, LLP...................... 1,837,100 11.3%
AMVESCAP, PLC........................................... 1,760,750 10.8%
James DeFranco.......................................... 1,156,345 7.1%
Charles W. Ergen........................................ 248,329 1.5%
David K. Moskowitz...................................... 84,140 *
Michael T. Dugan........................................ 73,979 *
Steven B. Schaver....................................... 49,677 *
O. Nolan Daines......................................... 5,000 *
Raymond L. Friedlob..................................... 6,000 *
All Directors and Executive Officers as a Group (11
persons)................................................ 1,653,946 10.2%
</TABLE>
(4) Includes: (i) 1,915 Class A Shares held in EchoStar's 401(k) Employee
Savings Plan (the "401(k) Plan"); (ii) the right to acquire 70,489 Class A
Shares within 60 days upon the exercise of employee stock options; and
(iii) 29,804,401 Class A Shares issuable upon conversion of Mr. Ergen's
Class B Shares.
(5) The percentage of total voting power held by Mr. Ergen is 93.5%, after
giving effect to the exercise of the employee stock options, and would be
approximately 85.5% after also giving effect to the 110 Acquisition.
(6) The exact number of Class A Shares issuable to The News Corporation Limited
("News Corporation") and MCI Telecommunications Company ("MCI"), a
subsidiary of MCI WORLDCOM, Inc., in connection with the 110 Acquisition
will not be determinable until consummation of that transaction. The
number of Class A Shares that will be issued is subject to adjustment if
the 20 day average closing price of EchoStar's Class A Shares is less than
$15.00 or greater than $39.00. The 20 day average closing price of
EchoStar's Class A Shares as of January 21, 1999 was $48.23. The following
table illustrates, at various prices, the number of Class A Shares issuable
to News Corporation and MCI.
<TABLE>
<CAPTION>
NEWS CORPORATION MCI
---------------------------- ---------------------------
PERCENTAGE PERCENTAGE
AVERAGE SHARE PRICE SHARES OF CLASS (2) SHARES OF CLASS (2)
--------------------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
$10.00 36,045,000 38.6% 8,955,000 9.6%
$15.00 24,030,000 30.7% 5,970,000 7.6%
$39.00 24,030,000 30.7% 5,970,000 7.6%
$40.00 23,429,250 30.2% 5,820,750 7.5%
$45.00 20,826,000 28.0% 5,174,000 7.0%
$50.00 18,743,400 26.1% 4,656,600 6.5%
$55.00 17,039,455 24.5% 4,233,273 6.1%
$60.00 15,619,500 23.0% 3,880,500 5.7%
</TABLE>
(7) The address of FMR Corp. is 82 Devonshire Street, Boston, Massachusetts
02109.
(8) The address of Wellington Management Company, LLP is 75 State Street,
Boston, Massachusetts 02109.
(9) The address of AMVESCAP, PLC is 1315 Peachtree Street, N.W., Atlanta,
Georgia 30309.
(10) Includes: (i) 1,915 Class A Shares held in the 401(k) Plan; (ii) the right
to acquire 53,340 Class A Shares within 60 days upon the exercise of
employee stock options; (iii) 751 Class A Shares held as custodian for his
minor children; and (iv) 375,000 Class A Shares controlled by Mr. DeFranco
as general partner of a partnership.
(11) Includes: (i) 1,813 Class A Shares held in the 401(k) Plan; (ii) the right
to acquire 74,679 Class A Shares within 60 days upon the exercise of
employee stock options; (iii) 166 Class A Shares held as custodian for his
minor children; (iv) 3,000 Class A Shares owned by Mr. Moskowitz's spouse;
and (v) 1,023 Class A Shares held as trustee for Mr. Ergen's children.
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(12) Includes: (i) 1,853 Class A Shares held in the 401(k) Plan and (ii) the
right to acquire 72,125 Class A Shares within 60 days upon the exercise of
employee stock options.
(13) Includes: (i) 1,684 Class A Shares held in the 401(k) Plan and (ii) the
right to acquire 47,962 Class A Shares within 60 days upon the exercise of
employee stock options.
(14) Includes the right to acquire 1,000 Class A Shares within 60 days upon the
exercise of employee stock options.
(15) Includes the right to acquire 6,000 Class A Shares within 60 days upon the
exercise of employee stock options.
(16) Includes: (i) 14,486 Class A Shares held in the 401(k) Plan; (ii) the
right to acquire 351,395 Class A Shares within 60 days upon the exercise of
employee stock options; (iii) 375,000 Class A Shares held in a partnership;
(iv) 29,804,401 Class A Shares issuable upon conversion of Class B Shares;
(v) 101,023 Class A Shares held in the name of, or in trust for, minor
children and other family members; and (vi) 3,947 Class A Shares owned by
or jointly with family members.
(17) Includes 164,508 Class A Shares over which Mr. Ergen has voting power as
trustee for the 401(k) Plan. These shares also are beneficially owned
through investment power by each individual 401(k) Plan participant. The
Class A Shares individually owned by each of the Named Executives through
their participation in the 401(k) Plan are included in each respective
Named Executive's information above.
(18) Beneficial ownership percentage was calculated assuming exercise or
conversion of all Class B Shares, warrants and employee stock options
exercisable within 60 days (collectively, the "Derivative Securities") into
Class A Shares by all holders of such Derivative Securities. Assuming
exercise or conversion of Derivative Securities by such person, and only by
such person, the beneficial ownership of Class A Shares would be as
follows: Mr. Ergen, 66.5%; Mr. DeFranco, 7.4%; less than one percent for
Mr. Moskowitz, Mr. Dugan, Mr. Schaver, Mr. Daines and Mr. Friedlob; and all
Officers and Directors as a group, 67.3%.
(19) In connection with the 110 Acquisition, Mr. Ergen entered into a voting
agreement with News Corporation and MCI pursuant to which News Corporation
and MCI have agreed to vote their shares of EchoStar stock in the manner
recommended by the Board of Directors of EchoStar for a period of five
years following consummation of the 110 Acquisition. Mr. Ergen disclaims
beneficial ownership of the shares of Class A Shares to be issued to News
Corporation and MCI. See "Proposal No. 1 -- To Approve the Issuance of
Class A Shares Pursuant to the Purchase Agreement -- Information About the
Purchase Agreement -- Voting Agreement."
PROPOSAL NO. 1 -- TO APPROVE THE ISSUANCE OF CLASS A SHARES PURSUANT TO THE
PURCHASE AGREEMENT
INTRODUCTION
EchoStar has entered into a Purchase Agreement dated as of November 30,
1998 (the "Purchase Agreement") with News Corporation, American Sky
Broadcasting, LLC ("ASkyB") and MCI (together with News Corporation and ASkyB,
the "Transferors"). Under the terms of the Purchase Agreement, EchoStar will
issue Class A Shares to the Transferors and will acquire, among other things,
MCI's license to operate 28 direct broadcast satellite ("DBS") frequencies at
the 110DEG. West Longitude orbital slot and two Space Systems/Loral-built
satellites, to be
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delivered in orbit and currently expected to be launched during 1999. In
addition, the parties have agreed to stay litigation stemming from a prior
agreement between them. The number of Class A Shares to be issued is subject
to adjustment based on the current trading prices of the Class A Shares at
the time the 110 Acquisition is consummated. See "Information About the
Purchase Agreement -- Number of Shares to be Issued." If the 110 Acquisition
had been consummated on January 25, 1999, EchoStar would have been required
under the Purchase Agreement to issue 24,258,760 Class A Shares, constituting
approximately 31.8% of EchoStar's fully-diluted equity and 7.0% of EchoStar's
total voting power. By combining the capacity of the newly acquired
satellites at the 110DEG. WL orbital slot with EchoStar's current satellites
at 119DEG. WL (which is subject to FCC approval which has been applied for),
EchoStar expects that its DISH Network will have the capacity to provide
approximately 500 channels of programming, Internet and high-speed data
services and HDTV nationwide through a single 18 inch dish, and would be
positioned to become a one-dish solution for satellite-delivered local
programming to major markets across the United States. EchoStar also expects
that its DISH Network will have the capacity to serve Alaska, Hawaii, Puerto
Rico and the United States territories in the Caribbean.
Charles W. Ergen, the Chairman, President and Chief Executive Officer of
EchoStar, possesses more than 93.5% of the total voting power of EchoStar.
Pursuant to the voting agreement described below, Mr. Ergen has agreed to vote
in favor of Proposal No. 1. Accordingly, approval of Proposal No. 1 is assured
notwithstanding a negative vote by shareholders other than Mr. Ergen.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF
PROPOSAL NO. 1.
BACKGROUND OF THE ACQUISITION
PARTIES
EchoStar is a leading provider of DBS programming services in the United
States, a significant international supplier of digital satellite receiver
systems and a provider of other satellite services. EchoStar commenced its
subscription satellite television service, the DISH Network, in March 1996,
after the successful launch of its first satellite (EchoStar I) in December
1995. Since that time, EchoStar has launched three additional satellites
(EchoStar II, EchoStar III and EchoStar IV) and it now has more operational DBS
satellites than any other DBS operator in the United States. As of December 31,
1998, DISH Network had more than 1.9 million subscribers, an increase of
approximately 900,000 subscribers in 1998.
EchoStar has authorizations for more United States licensed DBS frequencies
than any other DBS competitor, including 21 frequencies at an orbital slot
(119DEG. WL) that is capable of providing DBS service to the entire continental
United States (known as "full CONUS"). From that orbital slot, EchoStar
provides consumers in the continental United States with a choice of
approximately 200 channels of digital television programming and CD quality
audio programming.
News Corporation is a diversified international communications company, of
which K. Rupert Murdoch is chairman and chief executive. ASkyB is a
wholly-owned subsidiary of News
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Corporation formed for the purpose of developing, owning and operating a DBS
television service covering the United States. MCI is a wholly-owned
subsidiary of MCI WORLDCOM, Inc. MCI WORLDCOM, Inc. is principally engaged in
the provision of domestic and international voice and data communications
services.
BACKGROUND OF NEGOTIATIONS AND PENDING LITIGATION
During February 1997, EchoStar and News Corporation announced an
agreement (the "News Agreement") pursuant to which, among other things, News
Corporation agreed to acquire approximately 50% of the outstanding capital
stock of EchoStar. News Corporation also agreed to make available for use by
EchoStar the DBS permit for 28 frequencies at 110DEG. WL purchased by MCI
for more than $682 million following a 1996 Federal Communications Commission
("FCC") auction. During late April 1997, substantial disagreements arose
between the parties regarding their obligations under the News Agreement.
Those substantial disagreements led the parties to litigation.
In mid-1997, EchoStar filed a complaint seeking specific performance of
the News Agreement and damages, including lost profits. News Corporation
filed an answer and counterclaims seeking unspecified damages, denying all of
the material allegations and asserting numerous defenses. Discovery
commenced on July 3, 1997, and the case was set for trial commencing March
1999.
In connection with the 110 Acquisition, the litigation between EchoStar and
News Corporation has been stayed and will be dismissed with prejudice upon
closing or if the transaction is terminated for reasons other than the breach
by, or failure to fill a condition within the control of, News Corporation or
MCI.
REGULATORY APPROVALS
The 110 Acquisition is subject to the receipt of regulatory approvals. The
Federal Trade Commission and the United States Department of Justice provided
"early termination" of Hart-Scott-Rodino antitrust review of the 110 Acquisition
on December 16, 1998.
The 110 Acquisition is also conditioned on, among other things, receipt of
FCC approval of the assignment of MCI's DBS license for 28 frequency channels at
110DEG. WL. EchoStar has requested FCC approval for the assignment to EchoStar
of all FCC authorizations involved in the 110 Acquisition. The United States
Department of Justice has filed comments in support of the application. Several
parties have opposed the application on various grounds or have requested
conditions, including arguing that alien ownership limitations and other
broadcast qualification requirements apply, requesting program access conditions
with respect to News Corporation's programming and requesting conditions in
connection with service to Alaska and Hawaii. EchoStar cannot be sure how the
FCC will rule on any of these oppositions or requests. In a 1995 rulemaking,
the FCC had imposed a one-time rule which effectively prevented DBS operators
from using channels at more than one full CONUS location. If the FCC were to
reimpose this rule, EchoStar would not be able to preserve both its requested
authorization at 110DEG. WL and its existing licenses at 119DEG. WL. Although
EchoStar has vigorously argued in its
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application for approval that the FCC need not and should not reimpose that
rule, and the Department of Justice took the same view in its comments,
EchoStar cannot be sure how the FCC will rule.
The 110 Acquisition, and EchoStar's implementation of its business plan
with respect to the acquired assets, may require additional approvals, consents
and modifications.
The FCC's alien ownership requirements prohibit aliens from owning or
voting more than 25% of the equity interests of certain FCC licensee without
specific authorization from the FCC. It is possible that News Corporation,
which would be considered an "alien" for this purpose, will acquire more than
25% of EchoStar's equity interests in connection with the 110 Acquisition.
See "Equity Security Ownership -- Note (6)." EchoStar does not believe that
the alien ownership restriction will be applicable to the 110 Acquisition.
If the FCC were to so apply the restriction and the 110 Acquisition could not
be restructured, the 110 Acquisition might not be consummated.
THE ASSETS TO BE ACQUIRED
Under the Purchase Agreement, EchoStar will obtain MCI's license to
operate 28 DBS frequencies at the 110DEG. WL full CONUS orbital location;
in-orbit delivery of two Space Systems/Loral-built satellites (described
below), currently expected to be launched during 1999; a recently-constructed
digital broadcast operations center located in Gilbert, Arizona; a worldwide
license agreement to manufacture and distribute set-top boxes internationally
using NDS Limited encryption/decoding technology; a commitment by an
affiliated entity of News Corporation to purchase from EchoStar Technologies
Corporation (a wholly-owned indirect subsidiary of EchoStar) a minimum of
500,000 set-top boxes; and a three-year no fee retransmission consent
agreement for EchoStar's DISH Network to rebroadcast Fox Broadcasting Company
owned-and-operated local station signals to their respective markets. The
Transferors will bear the costs of the construction, launch and insurance of
the two Space Systems/Loral-built satellites, including launch insurance and
one year of in-orbit service insurance. EchoStar and MCI also agreed that
MCI will have the non-exclusive right to bundle DISH Network service with
MCI's telephony service offerings on mutually agreeable terms. In addition,
EchoStar agreed to carry the Fox News Channel on the DISH Network. EchoStar
received standard launch support payments in exchange for carrying the
programming.
EchoStar will acquire two DBS satellites if the 110 Acquisition is
consummated. EchoStar V and EchoStar VI each are high power Space Systems/Loral
Series FS-1300 satellites. EchoStar V is equipped with 32 Ku-band transponders
that will operate at approximately 110 watts per channel (switchable to 16
transponders operating at approximately 220 watts per channel). EchoStar VI is
also equipped with 32 Ku-band transponders that will operate at approximately
120 watts per channel (switchable to 16 transponders operating at approximately
240 watts per channel). Each transponder is capable of transmitting multiple
digital video, audio and data channels. EchoStar V and EchoStar VI each have a
minimum design life of 12 years.
The Purchase Agreement provides that EchoStar V and EchoStar VI, which
are being manufactured by Space Systems/Loral will be delivered in orbit at
no cost to EchoStar. Subject to certain exceptions, the satellite purchase
agreement requires delivery of EchoStar V by August 31, 1999 and EchoStar VI
in the
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fourth quarter of 1999. The satellite purchase agreement requires Space
Systems/Loral to pay liquidated damages for delay of $500,000 for the first day
and $100,000 per day thereafter, capped at $2,000,000, if EchoStar V is not
delivered on time. The agreement provides that no damages will be payable by
Space Systems/Loral for late delivery of EchoStar VI.
EchoStar V is expected to be launched during the third quarter of 1999 on
an Atlas IIAS launch vehicle. EchoStar VI is expected to be launched during the
fourth quarter of 1999 on a Proton K/Block DM four stage launch vehicle.
Although there can be no assurance, EchoStar is trying to arrange earlier launch
dates for both satellites.
EchoStar plans to contribute the acquired assets to EchoStar Satellite
Corporation, one of EchoStar's indirect, wholly-owned subsidiaries, promptly
following closing of the 110 Acquisition.
By combining the capacity of the newly acquired assets at the 110DEG.
WL orbital slot and EchoStar's current satellites at 119DEG. WL (which is
subject to FCC approval which has been applied for), EchoStar expects that
its DISH Network will have the capacity to provide approximately 500 channels
of programming, Internet and high-speed data services and HDTV nationwide
through a single 18 inch dish, and would be positioned to become a one-dish
solution for satellite-delivered local programming to major markets across
the United States. EchoStar also expects that its DISH Network will have the
capacity to serve Alaska, Hawaii, Puerto Rico and the United States
territories in the Caribbean.
INFORMATION ABOUT THE PURCHASE AGREEMENT
The Purchase Agreement sets forth the principal terms on which the 110
Acquisition will be consummated. The Purchase Agreement contains
representations, warranties, covenants and agreements of the parties, and also
specifies conditions to the consummation of the 110 Acquisition and terms under
which the 110 Acquisition may be terminated or abandoned.
We have outlined the important terms of the Purchase Agreement below. The
Purchase Agreement is included as Exhibit A to this Proxy Statement. You should
read the entire Purchase Agreement because the description below is only a
summary, does not purport to be complete and is qualified in its entirety by
reference to the Purchase Agreement. The parties have entered or will enter
into other agreements in connection with the 110 Acquisition, including a voting
agreement and a registration rights agreement. This section also describes the
terms of certain of these other agreements.
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NUMBER OF SHARES TO BE ISSUED
Based on the adjustment described below, if the 110 Acquisition had been
consummated on January 25, 1999, EchoStar would have been required under the
Purchase Agreement to issue 24,258,760 Class A Shares, constituting
approximately 31.8% of EchoStar's fully-diluted equity and 7.0% of EchoStar's
total voting power.
The Purchase Agreement provides that EchoStar will transfer an aggregate
of 30,000,000 Class A Shares to News Corporation, ASkyB and MCI, with
24,030,000 of these shares issued to ASkyB or a direct or indirect
wholly-owned subsidiary of News Corporation designated by ASkyB (the "ASkyB
Buyer") and the remaining 5,970,000 shares issued to MCI or a direct or
indirect wholly-owned subsidiary of MCI designated by MCI (the "MCI Buyer").
These share amounts will be adjusted according to the average of the daily
closing stock prices of the Class A Shares for the 20 business days ending
two days prior to the closing date (the "Current Market Value"). If the
Current Market Value is less than $15.00 per share, then EchoStar will issue
such number of additional Class A Shares pro rata to each of the ASkyB Buyer
and the MCI Buyer that will bring the total Current Market Value of the
shares issued to them up to $450,000,000 (provided that News Corporation,
ASkyB and MCI do not collectively own of record or vote shares corresponding
to more than 49.9% of the total outstanding voting power of EchoStar). If
the Current Market Value is greater than $39.00 per share, then the total
number of shares issued to each of the ASkyB Buyer and the MCI Buyer will be
reduced pro rata until the Current Market Value of the shares issued to them
is not greater than $1.17 billion. See "Equity Security Ownership -- Note
(6)."
COVENANTS
Each of the parties has agreed to give all required notices to third
parties (and, in the case of EchoStar, to its stockholders) and to use its best
efforts to obtain all required consents in connection with the 110 Acquisition.
Each of the parties has agreed to take any additional action that may be
necessary, proper or advisable to effect to the fullest extent feasible the
consummation of the transactions contemplated by the Purchase Agreement and
related agreements in connection with any notices to, filings with and approvals
of governmental agencies and third parties that it may be required to give, make
or obtain, and shall refrain from taking any action which could reasonably be
expected to make less likely that such authorizations, consents and approvals
will be given, made or obtained on the terms provided for in the Purchase
Agreement.
Each of the Transferors has agreed during the period prior to the closing
to use commercially reasonable efforts in the ordinary course of business to
preserve the value and utility of the assets to be transferred and the goodwill
of its suppliers and others having business relations with it with respect to
any assets to be transferred and to perform and observe all terms, conditions
and consents under the satellite contracts and all licenses and permits with
respect to the assets to be transferred, except where it would not have a
material adverse effect on EchoStar's use of such assets or its benefits
therefrom. EchoStar has agreed during the period prior to the closing not to
issue any common stock at a price less than the Current Market Price (as defined
in the Purchase Agreement), except for issuances pursuant to existing rights and
options.
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<PAGE>
The parties have agreed to take all reasonable steps necessary, including
the implementation of an alternate agreement that to the fullest extent feasible
in light of any regulatory constraint assures the parties as nearly as possible
the same economic results as if the transactions contemplated by the Purchase
Agreement had occurred as contemplated (with certain exceptions) and would be
reasonably expected to not require FCC consent or to result in consent, if
required.
The Transferors have agreed that until the date of an order of the FCC (or,
in the case of an order of a bureau thereof, the later of October 31, 1999 or
five days from the date of such order) which conditionally grants (on material
terms unacceptable to EchoStar) or denies the FCC's consent to the assignment of
MCI's 110DEG. WL authorizations to EchoStar, they shall not, and shall not
authorize or permit any representative, to solicit, initiate, encourage or
entertain discussions, inquiries or proposals or participate in any discussions
or negotiations for the purpose or with the intention of leading to any proposal
or offer from any person which constitutes or concerns, or may reasonably be
expected to lead to, any proposal for a merger or other business combination
involving any proposal or offer to acquire any portion of the assets to be
transferred.
INDEMNIFICATION
EchoStar and the Transferors have agreed to indemnify the other for
breaches of a representation, warranty, covenant or agreement contained in the
Purchase Agreement, provided that the right to indemnification for breach of a
representation or warranty will terminate 18 months after the closing of the 110
Acquisition.
CONDITIONS TO CLOSING THE 110 ACQUISITION
Both EchoStar's and the Transferors' obligations to consummate the 110
Acquisition are subject to certain conditions. These include (among other
things) the absence of injunctions or litigation that would prevent the 110
Acquisition from closing; receipt of necessary regulatory clearance; receipt of
all consents required by the other party; execution and delivery by the other
party of the registration rights agreement (described below), the litigation
settlement and release and certain other contracts; and the accuracy in all
material respects of the representations and warranties of the other party.
TERMINATION
The parties may terminate the Purchase Agreement at any time prior to the
closing by mutual written consent. Either the Transferors or EchoStar may
terminate the agreement if (i) by the later of December 31, 1999 and 60 days
following the date of an order from an FCC bureau which conditionally approves
(on material terms unacceptable to EchoStar) the assignment of the MCI license
to EchoStar, the FCC does not release a preliminary approval, or such
preliminary approval is so released but does not become a final approval within
30 days thereafter, (ii) within 60 days following the date of an FCC order which
conditionally approves (on material terms unacceptable to EchoStar) or denies
the assignment of the MCI license to EchoStar, the FCC does not release a
preliminary approval, or such preliminary approval is so released but does not
become a final approval within 30 days thereafter or (iii) within 60 days
following the date of an
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<PAGE>
FCC order or approval which conditionally approves the assignment of the MCI
license to EchoStar, the parties are unable to satisfy a condition (with
certain exceptions).
The Transferors or EchoStar may also terminate the Purchase Agreement if
the other party is in breach in any material respect of certain of the
representations or warranties set forth in the Purchase Agreement. If the
breach is curable, the breaching party has 60 days to cure. If the breach is
incapable of cure within 60 days and the breaching party has acted reasonably
diligently to cure the breach, then the Purchase Agreement will not be
terminated, so long as the breach remains subject to cure and the breaching
party acts continuously with reasonable diligence in attempting to cure.
If the Purchase Agreement is terminated for any reason other than for
breach of a representation or warranty, EchoStar will be required to purchase
EchoStar VI from the Transferors, together with related rights, immediately
following the later of termination or in-orbit delivery, at a purchase price
equal to the actual direct payments made under the satellite contract, and
EchoStar will assume all obligations of the Transferors under the satellite
contract relating to orbital performance incentives. In the alternative,
EchoStar may elect to purchase EchoStar V. If the Purchase Agreement is
terminated by the Transferors for breach of EchoStar's representations or
warranties, the Transferors may elect to sell either satellite to EchoStar, and
if terminated due to the Transferors' breach of their representations or
warranties, EchoStar may elect to purchase either satellite.
If the Purchase Agreement is terminated for EchoStar's breach of its
representations or warranties or based on the above-specified FCC matters, the
Transferors will be entitled to file a litigation settlement and release with
respect to the stated litigation, except that if so terminated because of an FCC
order or approval which contains a condition within the control of the
Transferors, and such condition is not satisfied, the litigation will not be
dismissed.
RESTRICTIONS ON TRANSFER
The Purchase Agreement restricts transfer of the Class A Shares to be
issued in connection with the 110 Acquisition. The Purchase Agreement
provides, among other things, that the Transferors may not transfer more than
10% of the shares issued at the closing until all amounts due under the
satellite contract have been paid or prepaid. The Purchase Agreement also
provides that for two years after closing, the Transferors may not transfer
to third parties more than one-third of the shares issued to them during each
365-day period. However, shares permitted to be sold during the first
365-day period but not sold may be added to the amounts permitted to be sold
during the second such period, and the Transferors will be permitted to sell
shares in a firm underwritten offering registered under the Securities Act of
1933, as amended, in an amount not to exceed (i) the difference between 50%
of the shares issued to the Transferors and the number of shares disposed of
during the first 365-day period or (ii) the difference between 80% of the
shares issued to the Transferors and the number of shares sold during the
first and second 365-day periods.
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<PAGE>
CLOSING DATE
The Purchase Agreement provides that the closing of the 110 Acquisition
will take place on the fifth business day following the satisfaction or waiver
of all conditions or obligations of the parties to consummate the transactions
contemplated by the Purchase Agreement, or such other date as the parties
mutually determine.
REGISTRATION RIGHTS AGREEMENT
As a condition to consummation of the 110 Acquisition, EchoStar will
enter into a registration rights agreement pursuant to which it will agree to
register the Class A Shares issuable pursuant to the Purchase Agreement and
use its best efforts to cause such registration statement to become effective
as soon as reasonably practicable and, in any event, within 90 days following
the closing date. In addition, EchoStar will grant the Transferors demand
registration rights that are exercisable if EchoStar becomes and remains
ineligible to use Form S-3 for a period of 30 days and for a period of five
years after consummation of the 110 Acquisition, "piggyback" registration
rights covering resale of the Class A Shares issued pursuant to the Purchase
Agreement.
VOTING AGREEMENT
In connection with the Purchase Agreement, each of the parties thereto and
Charles W. Ergen, Chairman, President and Chief Executive Officer of EchoStar,
entered into a voting agreement dated as of November 30, 1998. Pursuant to the
voting agreement, Mr. Ergen agreed to vote any shares owned by him in favor of
the Purchase Agreement and the transactions contemplated thereby. Mr. Ergen
also agreed not to reduce his voting power in EchoStar to 50% or less until the
shareholders of EchoStar approve the Purchase Agreement and the transactions
contemplated thereby. Also pursuant to the voting agreement, each of MCI and
News Corporation agreed that for a period of five years after the closing of the
transactions contemplated by the Purchase Agreement, neither it nor its
affiliates will (i) attempt to influence the voting of EchoStar securities (such
as through a solicitation of proxies or an election contest); (ii) participate
in any way in a "group" within the meaning of section 13(d)(3) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") with respect to EchoStar
securities; (iii) otherwise act to control or influence the management, Board of
Directors or affairs of EchoStar or its affiliates or seek to effectuate a
business combination or similar transaction with respect to EchoStar or its
affiliates; (iv) deposit the securities of EchoStar in a voting trust or similar
arrangement; (v) initiate or propose, or induce another to initiate or propose,
a tender offer or shareholder proposal with respect to EchoStar or its
affiliates; or (vi) enter into any negotiation, arrangement or understanding
with any third party with respect to any of the above.
Also, pursuant to the voting agreement, each of MCI and News Corporation
has agreed that for a period of five years after the closing of the
transactions contemplated by the Purchase Agreement, it will, and will cause
its subsidiaries and affiliates to, (i) with respect to the election of
directors of EchoStar, vote as recommended by the Board of Directors of
EchoStar; and (ii) with respect to any other stockholder action, either vote as
recommended by the Board of Directors or abstain, except that such restrictions
in (ii) will not apply to actions which would discriminate against the holders
of EchoStar's Class A Shares relative to holders of any other class of
EchoStar's equity
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<PAGE>
securities or News Corporation or MCI relative to any other holder of EchoStar's
equity securities.
EFFECTS OF ADOPTION OF THE PROPOSAL
Mr. Ergen has agreed in the voting agreement to vote in favor of the
proposal to issue Class A Shares. Accordingly, approval of the proposal is
assured notwithstanding a negative vote by stockholders other than Mr. Ergen.
The successful passage of the proposal will result in a large increase in
the amount of EchoStar's Class A Shares issued and outstanding. This increase
will result in the immediate dilution of the percentage interests of EchoStar's
Class A Shares currently outstanding. Adoption of the proposal will also affect
the exercise of EchoStar's voting power. See "--Voting Power."
SHAREHOLDER RIGHTS
No holders of EchoStar stock have any preemptive rights relating to the
proposed issuance of Class A Shares. Dissenting shareholders also will not have
appraisal rights.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF
PROPOSAL NO. 1.
PROPOSAL 2 -- TO AMEND THE ARTICLES TO CLARIFY CERTAIN VOTING PROVISIONS
The voting provisions of EchoStar's Bylaws provide that if a quorum is
present at a shareholder meeting, the affirmative vote of a majority of the
shares represented at the meeting and entitled to vote on the subject matter
constitutes the act of the shareholders. The Articles provide that "[n]ot
withstanding any provision contained in the [Nevada Law] requiring the vote of
shares of two-thirds of the voting power of the Corporation to take action,
absent a provision contained herein to the contrary, the affirmative vote of a
majority of the voting power shall be the act of the shareholders." The Board
of Directors believes that this provision of the Articles was intended solely to
reduce the burden of supermajority voting requirements under Nevada law (which
would apply to enumerated extraordinary corporate actions), and not to replace
the ordinary voting provisions set forth in the Bylaws with a more onerous
standard.
To clarify this intention, the Board of Directors proposes to amend the
Articles to add a voting provision parallel to that set forth in the Bylaws.
The form of the proposed amendment is set forth as Exhibit B to this Proxy
Statement. Given that the purpose of the amendment is to clarify the provisions
of the Articles, the Board of Directors does not view the proposed amendment as
having a substantial effect on the interests of shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF
PROPOSAL NO. 2.
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CAPITALIZATION
On January 25, 1999, EchoStar DBS Corporation, EchoStar's wholly-owned
subsidiary, consummated an offering of $375,000,000 principal amount of its 9
1/4 % Senior Notes due 2006 and $1,625,000,000 principal amount of its 9 3/8%
Senior Notes due 2009 (the "Offering"). Concurrently with the consummation
of the Offering, EchoStar consummated tender offers for EchoStar DBS
Corporation's 12 1/2% Senior Secured Notes due 2002 (the "1997 Notes"), DISH
Ltd.'s 12 7/8% Senior Secured Discount Notes due 2004 (the "1994 Notes") and
EchoStar Satellite Broadcasting Corporation's 13 1/8% Senior Secured Discount
Notes due 2004 (the "1996 Notes"), pursuant to which more than 99% of the
outstanding notes of each such series were retired. In addition, on February
,1999, EchoStar consummated a tender offer for its 12 1/8% Senior Preferred
Exchange Notes (the "Preferred Exchange Notes"), which EchoStar had recently
exchanged for its 12 1/8% Series B Senior Redeemable Exchangeable Preferred
Stock due 2004 (the "Series B Preferred").
The following table sets forth: (i) the consolidated capitalization of
EchoStar, on a historical basis as of September 30, 1998, and (ii) the
consolidated capitalization of EchoStar on an adjusted basis assuming
consummation of the 110 Acquisition and giving effect to the Offering and the
application of the net proceeds thereof pursuant to the terms of the Tender
Offers. The historical information in this table is derived from the
Consolidated Financial Statements of the Company, and should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and the
notes incorporated by reference herein.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
-------------------------------------
ACTUAL AS ADJUSTED
-------------------------------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Cash, cash equivalents, and marketable investment securities......... $ 361,404 $ 391,040
Restricted cash and marketable investment securities................. 76,583 - (1)
----------------- ---------------
Total cash, cash equivalents, and marketable investment securities 437,987 391,040 (2)
----------------- ---------------
----------------- ---------------
Total assets $1,814,293 $ 2,939,155 (2)
----------------- ---------------
----------------- ---------------
Long-term debt (net of current portion):
Mortgages and notes payable....................................... $ 49,548 $ 49,548
1994 Notes........................................................ 552,776 -
1996 Notes........................................................ 481,966 -
1997 Notes........................................................ 375,000 -
9 1/4% Senior Notes due 2006...................................... - 375,000
9 3/8% Senior Notes due 2009...................................... - 1,625,000
----------------- --------------------
Total long-term debt............................................ 1,459,290 2,049,548
12 1/8% Series B Senior Redeemable Exchangeable Preferred Stock, $.01
par value, none and 900,000 shares authorized, respectively; none,
218,673 and 0 shares issued and outstanding, respectively; subject
to mandatory redemption on July 1, 2004 at a price of $1,000 per
share plus all accumulated and unpaid dividends................... 219,016 -
Stockholder's Equity (Deficit):
Preferred Stock, 20,000,000 shares authorized (inclusive of
900,00 shares designated as Series B Preferred Stock, see
Note 8):
8% Series A Cumulative Preferred Stock, 1,616,681 shares
issued and outstanding, including cumulative accrued
dividends of $5,454............................................. 20,506 -
63/4% Series C Cumulative Convertible Preferred Stock, none and 106,803 106,803
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2,300,000 shares issued and outstanding.....................
Class A Common Stock, $.01 par value, 200,000,000 shares
authorized, 15,224,396 and 39,483,156 shares issued and
outstanding, respectively....................................... 152 395
Class B Common Stock, $.01 par value, 100,000,000 shares
authorized, 29,804,401 shares issued and outstanding............ 298 298
Class C Common Stock, $.01 par value, 100,000,000 shares
authorized, none outstanding.................................... - -
Common Stock Warrants............................................. 12 12
Additional paid-in capital........................................ 230,295 1,400,052 (3)
Accumulated deficit............................................... (610,599) (1,006,473) (4)
----------------- ---------------
Total stockholders' equity (deficit).............................. (252,533) 501,087
----------------- ---------------
Total capitalization.............................................. $1,206,757 $ 2,550,635
----------------- ---------------
----------------- ---------------
</TABLE>
- --------------------
(1) Restrictions on cash held in escrow under the terms of indentures have been
or, in the case of the Preferred Exchange Notes, will be removed upon the
prepayment of the applicable notes. The restricted cash balances as of
September 30, 1998 have been reclassified and included in the "as adjusted"
amount of cash, cash equivalents and marketable investment securities.
(2) The increase in the Company's total assets includes $1.17 billion of assets
to be acquired by EchoStar pursuant to the 110 Acquisition offset by an
approximately $46.9 decrease in total cash, cash equivalents and marketable
investment securities as a result of the Tender Offers and EchoStar's
redemption on February ,1999 of all of its outstanding Series A Cumulative
Preferred Stock (the "Series A Preferred").
(3) The increase in the Company's additional paid-in capital consists of the
additional assets valued at $1.17 billion, to be acquired by EchoStar in
the 110 Acquisition. Based on the 20-day average closing price of
EchoStar's Class A Shares as of January 21, 1999, EchoStar would issue
24,258,760 to consummate the 110 Acquisition. See "Equity Security
Ownership - Note (6)."
(4) The increase in accumulated deficit results from (a) interest expense of
approximately $49.5 million from September 30, 1998 through January 25,
1999, the date of consummation of the Tender Offers (other than with
respect to the Preferred Exchange Notes) and debt to be repurchased and
paid, (b) dividends on the Series B Preferred Stock for the period between
January 1, 1999 and January 4, 1999 (the date on which the Series B
Preferred Stock was exchanged into Preferred Exchange Notes) and interest
expense on the Preferred Exchange Notes for the period between January 4,
1999 and February 2, 1999 (the assumed closing date of that Tender Offer)
totaling approximately $10.3 million, (c) approximately $67.4 million to
redeem the Series A Preferred Stock and (d) the estimated extraordinary
loss of approximately $268.7 million that EchoStar expects to report in
1999 upon the early retirement of the notes pursuant to the Tender Offers.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by EchoStar (File No. 0-26176) with the
Securities and Exchange Commission are incorporated herein by reference:
(a) its Annual Report on Form 10-K for the fiscal year ended December 31,
1997;
(b) its Quarterly Reports on Form 10-Q for the periods ended March 31,
1998, June 30, 1998 and September 30, 1998; and
(c) its Current Reports on Form 8-K filed with the SEC on December 1,
1998, December 24, 1998 and January 5, 1999.
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All documents filed by EchoStar pursuant to Section 13(a) , 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Proxy Statement and
prior to the date of the Special Meeting shall be deemed to be incorporated by
reference in this Proxy Statement and to be part hereof from the date of filing
of such documents. All information appearing in this Proxy Statement is
qualified in this entirety by the information and financial statements
(including notes thereto) appearing in the documents incorporated by reference
herein.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be modified or superseded, for purposes
of this Proxy Statement, to the extent that a statement contained herein or in
any subsequently filed document that is deemed to be incorporated herein
modifies or supersedes any such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement.
THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE THAT ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. ECHOSTAR HEREBY UNDERTAKES TO PROVIDE
WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF
THIS PROXY STATEMENT HAS BEEN DELIVERED, ON WRITTEN OR ORAL REQUEST OF ANY SUCH
PERSON, A COPY OF ANY AND ALL OF THE DOCUMENTS REFERRED TO ABOVE THAT HAVE BEEN
OR MAY BE INCORPORATED INTO THIS PROXY STATEMENT BY REFERENCE, OTHER THAN
EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED
BY REFERENCE INTO SUCH DOCUMENTS). THESE DOCUMENTS ARE AVAILABLE UPON REQUEST
FROM ECHOSTAR COMMUNICATIONS CORPORATION, 5701 SOUTH SANTA FE DRIVE, LITTLETON,
COLORADO 80120, ATTENTION: DAVID K. MOSKOWITZ, FACSIMILE NUMBER (303) 723-1699.
IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE
RECEIVED BY FEBRUARY , 1999.
WHERE TO GET ADDITIONAL INFORMATION
EchoStar files annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements
or other information EchoStar files at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. The
SEC filings of EchoStar are also available to the public from commercial
document retrieval services and on the Internet through the website maintained
by the SEC at "http://www.sec.gov." EchoStar Class A Shares are traded on the
NASDAQ National Market System and reports and other information concerning
EchoStar can also be inspected at the NASDAQ National Market Exchange, 1735 K
Street, N.W., Washington, D.C. 20546.
COST OF PROXY STATEMENT
The cost of the solicitation of proxies will be borne by EchoStar. In
addition to the use of the mails, proxies may be solicited personally, by
telephone or by a few regular employees of EchoStar without additional
compensation. EchoStar does not expect to pay any compensation
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for the solicitation of proxies but will reimburse brokerage firms, custodians,
nominees, fiduciaries and other persons holding stock in their names, or in the
names of nominees, at approved rates, for their expenses in forwarding proxy
material to beneficial owners of securities held of record by such persons and
obtaining their proxies.
SUBMISSION OF SHAREHOLDER PROPOSALS
FOR 1999 ANNUAL MEETING
Proposals of shareholders intended to be submitted at the 1999 Annual
Meeting of Shareholders were required to have been received by EchoStar at the
above address no later than December 30, 1998 to be eligible for inclusion in
EchoStar's proxy statement and the accompanying proxy for such meeting.
OTHER BUSINESS
The Board of Directors knows of no other business that will be presented to
the Special Meeting of Shareholders other than that which is set forth in this
Proxy Statement.
FORWARD-LOOKING STATEMENTS
All statements contained herein, as well as statements made in press
releases and oral statements that may be made by EchoStar or by officers,
directors or employees of EchoStar acting on its behalf, that are not statements
of historical fact constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors that
could cause the actual results of EchoStar to be materially differently from
historical results or from any future results expressed or implied by such
forward-looking statements. Among the factors that could cause actual results
to differ materially are the following: a total or partial loss of a satellite
due to operational failures, space debris or otherwise; a decrease in sales of
digital equipment and related services to international service providers; a
decrease in DISH Network subscriber growth; an increase in subscriber
acquisition costs; impediments to the retransmission of local or distant
broadcast network signals; lower than expected demand for EchoStar's delivery of
local broadcast network signals; an unexpected business interruption due to the
failure of third parties to remediate year 2000 issues; the inability of
EchoStar to retain or obtain necessary authorizations from the FCC; an increase
in competition from cable, DBS, other satellite system operators and other
providers of subscription television services; the introduction of new
technologies and competitors into the subscription television business; a merger
of existing DBS competitors; a change in the regulations governing the
subscription television service industry; the outcome of any litigation in which
EchoStar or its subsidiaries may be involved; failure to consummate the 110
Acquisition pursuant to the Purchase Agreement or the failure of the satellites
to be acquired to be successfully launched or to become operational, or a delay
in such launch or operation; general business and economic conditions; and other
risk factors described from time to time in reports filed with the Securities
and Exchange Commission by EchoStar. In addition to statements that explicitly
describe such risks and uncertainties, readers are urged to consider statements
that include the terms "believes," "belief," "expects," "plans," "anticipates,"
"intends" or the like to be uncertain and forward-looking. All cautionary
statements made herein should be read as being applicable to all forward-looking
22
<PAGE>
statements where they appear. In this connection, investors should consider the
risks described herein.
By Order of the Board of Directors
DAVID K. MOSKOWITZ
SENIOR VICE PRESIDENT, GENERAL COUNSEL,
CORPORATE SECRETARY AND DIRECTOR
EXHIBIT A Purchase Agreement dated as of November 30, 1998, by and among
American Sky Broadcasting, LLC, The News Corporation Limited, MCI
Telecommunications Corporation and EchoStar Communications
Corporation.
EXHIBIT B Form of Certificate of Amendment of the Amended and Restated
Articles of Incorporation of EchoStar Communications Corporation.
23
<PAGE>
EXHIBIT A
PURCHASE AGREEMENT
dated as of
November 30, 1998
by and among
AMERICAN SKY BROADCASTING, LLC,
THE NEWS CORPORATION LIMITED,
MCI TELECOMMUNICATIONS CORPORATION
and
ECHOSTAR COMMUNICATIONS CORPORATION
<PAGE>
Table of Contents
Page
1. Definitions............................................................1
2. Purchase and Sale......................................................7
(a) Shares to be Purchased by the Transferors.........................7
(b) Assets to be Transferred to Seller................................8
(c) Assumption of Liabilities.........................................9
(d) The Closing.......................................................9
(e) Deliveries at Closing.............................................9
3. Representations and Warranties of Seller..............................10
(a) Representations and Warranties True, Correct and Complete........10
(b) Organization of Seller and the Significant Subsidiaries..........10
(c) Power and Authority of Seller....................................10
(d) Power and Authority of Significant Subsidiaries..................11
(e) Corporate Authorization..........................................11
(f) Governmental Authorization.......................................11
(g) Noncontravention.................................................12
(h) Capitalization...................................................12
(i) SEC Filings......................................................13
(j) Absence of Certain Changes.......................................14
(k) Brokers' Fees....................................................14
4. Representations and Warranties of the Transferors.....................14
(a) Representations and Warranties True, Correct and Complete........15
(b) Organization of the Transferors..................................15
(c) Power and Authority of the Transferors...........................15
(d) Corporate Authorization..........................................15
(e) Governmenal Authorization........................................16
(f) Noncontravention.................................................16
(g) Gilbert Property.................................................17
(h) Assigned Contracts...............................................19
(i) Intellectual Property............................................20
(j) Litigation.......................................................20
(k) Legal Compliance.................................................20
(l) FCC Matters......................................................22
(m) Transferred Assets...............................................23
(n) Broker's Fees....................................................23
(o) Resale...........................................................23
5. Further Agreements of the Parties.....................................24
(a) General..........................................................24
(b) Notices and Consents.............................................24
(c) Operation of Business............................................25
(d) Assignment of the MCI FCC License................................26
(e) Earth Station Authorizations.....................................27
(f) Satellites.......................................................27
(g) Sony Contract....................................................29
(h) Full Access......................................................29
(i) Notice of Developments...........................................30
(j) NDS Equipment....................................................30
(k) Abeyance of EchoStar Litigation..................................30
(l) Transfer Taxes and Prorations....................................31
(m) Further Assurances...............................................31
(n) No Solicitation..................................................31
(o) Bundling.........................................................31
(p) Casualty Condemnation............................................31
(q) Title Insurance..................................................32
(r) Surveys..........................................................33
6. Conditions to Obligation to Close.....................................33
(a) Conditions to Obligation of the Transferors......................33
(b) Conditions to Obligation of Seller...............................34
7. Remedies for Breach of this Agreement.................................36
(a) Survival.........................................................36
(b) Indemnification Provisions for Benefit of the Transferors........36
(c) Indemnification Provisions for Benefit of Seller.................36
(d) Notification; Rights of Parties to Settle or Defend..............37
(e) Exclusive Remedy.................................................37
(f) Limitations......................................................38
8. Termination...........................................................38
(a) Termination of Agreement.........................................38
(b) Effect of Termination............................................39
9. Miscellaneous.........................................................40
(a) Press Releases and Announcements.................................40
(b) No Third-Party Beneficiaries.....................................41
<PAGE>
(c) Entire Agreement.................................................41
(d) Succession and Assignment........................................41
(e) Counterparts.....................................................41
(f) Headings.........................................................41
(g) Notices..........................................................41
(h) Governing Law....................................................42
(i) Amendments and Waivers...........................................42
(j) Severability.....................................................43
(k) Expenses.........................................................43
(l) Construction.....................................................43
(m) Restrictions on Transfer..........................................43
(n) Legends..........................................................44
(o) Specific Performance.............................................45
(p) Incorporation of Schedules.......................................45
<PAGE>
Schedules
2(b)(i)(I) Gilbert Property
2(b)(i)(II) Furniture, Fixtures and Equipment
2(b)(ii) Gilbert Contracts
2(b)(v) Satellite Contracts
3(g) Noncontravention
3(h) Capitalization
3(i) SEC Filings
3(j) Absence of Certain Changes
4(f) Noncontravention
4(g)(i) Permitted Liens
4(g)(iii) Gilbert Property Improvements
4(g)(v) Insurance Policies
4(h) Assigned Contracts
4(j) Litigation
4(k) Legal Compliance
4(l)(i) FCC Matters
4(l)(ii) Earth Station Authorizations
4(l)(v) Insurance Policies
6(a)(ii) Consents
6(b)(ii) Consents
Exhibits
A Components License Agreement
B Fox News Channel Affiliation Agreement
C Registration Rights Agreement
D Retransmission Consent Agreement
E Settlement Agreement and Mutual Release
F Set Top Box Agreement
G Voting Agreement
H Abeyance Stipulation
I Special Warranty Deed
<PAGE>
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is entered into as of
November 30, 1998, by and among American Sky Broadcasting, LLC, a limited
liability company organized under the laws of the State of Delaware ("ASkyB");
The News Corporation Limited, a corporation organized under the laws of South
Australia ("News Corporation"); MCI Telecommunications Corporation, a
corporation organized under the laws of the State of Delaware ("MCI"); and
EchoStar Communications Corporation, a corporation organized under the laws of
the State of Nevada ("Seller"). ASkyB, News Corporation and MCI are referred to
collectively herein as the "Transferors." ASkyB, News Corporation, MCI and
Seller are referred to collectively herein as the "Parties."
RECITALS
WHEREAS, the Transferors own certain assets relating to the direct
broadcast satellite ("DBS") business;
WHEREAS, the Transferors desire to dispose of such assets, and Seller
desires to acquire such assets; and
WHEREAS, the Transferors have agreed to transfer such assets to Seller (or
one or more direct or indirect wholly owned Subsidiaries of Seller) in
consideration for, among other things, shares of Seller's Class A Common Stock,
par value $.01 per share ("Class A Common Stock"), upon the terms and subject to
the conditions set forth herein
NOW, THEREFORE, in consideration of the premises and the respective
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. Definitions.
"Acceptable Alternative Arrangement" means any arrangement
satisfactory to Seller and its counsel and to the Transferors and their
respective counsel that: (a) to the fullest extent feasible in light of any
regulatory constraint assures the Parties as nearly as possible the same
economic results as if the transactions contemplated by this Agreement and the
Collateral Agreements had occurred as contemplated herein and therein; provided,
however, that no Party shall be obligated to enter into any such arrangement
which would require it to make expenditures or dispose of assets in excess of
the amount of expenditures or assets contemplated by this Agreement and the
Collateral Agreements unless compensated for such arrangement; (b) would, in the
reasonable judgment of Seller and the Transferors, be reasonably expected either
not to require FCC consent or to result in such consent, if required; and (c)
would, in the reasonable judgment of Seller and the Transferors, be reasonably
expected to result in clearance of the arrangement by the relevant antitrust
enforcement agencies, if required.
"Affiliate" means any person or entity controlling, controlled
by, or under common control with, an entity. Control of any entity shall mean
the possession, direct or indirect, of the powers to direct or cause the
direction of the management and policies of a person, whether through the
ownership of voting securities, by contract or otherwise.
"ASkyB Buyer" has the meaning set forth in Section 2(a)(i)(A
hereof.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could reasonably form the
basis for any specified consequence.
"Bureau Order" means an order released by a bureau or other
division or subdivision of the FCC under delegated authority which conditionally
grants (and such condition is a Material Condition which is unacceptable to
Seller) the FCC's consent to the assignment of the MCI FCC License to Seller or
Newco.
"Collateral Agreements" means the Registration Rights Agreement,
the Fox News Channel Affiliation Agreement, the Settlement and Mutual Release
Agreement, the Components License Agreement, the Retransmission Consent
<PAGE>
Agreement, the Set Top Box Agreement and the Voting Agreement.
"Communications Act" means the federal Communications Act of
1934, as amended.
"Components License Agreement" means the Components License for
NDS MPEG 2, DVB Conformant Digital Receivers, to be entered into by and between
NDS Limited and EchoStar Technologies Corporation, containing the terms and
conditions set forth in Exhibit A annexed hereto.
"Current Market Price" means the average of the daily closing
prices per share of Class A Common Stock for the 20 trading days ending on (a)
with respect to Section 2(a)(ii), the date that is two trading days prior to the
Closing Date; (b) with respect to Section 5(c)(i)(B), the date on which Seller
enters the contract governing the purchase in question; provided, however that
if such contract provides for a price which, whether or not so specified, was
based on the price reported on a national securities exchange at the time of
negotiation of the business arrangement or the execution of the agreement, then
Current Market Price means the price so provided; and provided further, that in
the case of shares issued pursuant to Seller's Employee Stock Purchase Plan,
Current Market Price means 85% of the closing price of Class A Common Stock on
the last business day of each calendar quarter in which shares were deemed sold
under such plan; and (c) with respect to 5(c)(i)(C), the date of the issuance or
grant of the rights, options or warrants in question. The closing price for each
day shall be the last reported sales price regular way or, in case no such
reported sale takes place on such day, the closing bid price regular way, in
either case on the principal national securities exchange (including, for
purposes hereof, The Nasdaq National Market ("Nasdaq")) on which the Class A
Common Stock is listed or admitted to trading or, if the Class A Common Stock is
not listed or admitted to trading on any national securities exchange, the
highest reported bid price for the Class A Common Stock as furnished by the
National Association of Securities Dealers, Inc. through Nasdaq or a similar
organization if Nasdaq is no longer reporting such information. If on any such
date the Class A Common Stock is not listed or admitted to trading on any
national securities exchange and is not quoted by Nasdaq or any similar
organization, thefair value of a share of Class A Common Stock on such date, as
determined in good faith by the Board of Directors of Seller, whose
determination shall be conclusive absent manifest error, shall be used.
"Damages" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, diminution in value, obligations,
Taxes, liens, losses, expenses, and fees, including all attorneys' fees and
court costs, whether or not arising out of a claim by a third party.
"Earth Station Facilities" means (a) the six earth station
facilities located on the Gilbert Property and corresponding to the Earth
Station Authorizations, and (b) the six additional 6.1 meter receive-only earth
station facilities also located on the Gilbert Property, with respect to which
there has been no FCC registration.
"Environmental Laws" means all foreign, federal, state and local
laws, statutes, ordinances, rules and regulations, now or hereafter in effect,
and in each case as amended or supplemented from time to time, and any permits
issued thereunder, relating to the protection of human health and safety, the
environment, or hazardous or toxic substances or wastes, pollutants or
contaminants.
"FCC" means the Federal Communications Commission and any
successor agency thereto.
"FCC Approval" means an order released by the FCC (and not by a
bureau or other division or subdivision thereof pursuant to delegated authority)
which is in full force and effect and has not been reversed, reconsidered,
stayed, enjoined, set aside, annulled or suspended, and the thirty (30) day
period for any such action on the FCC's own motion has expired, and which
grants, or conditionally grants (other than subject to a Material Condition
which is unacceptable to Seller), the FCC's consent to the assignment of the MCI
FCC License to Seller or Newco; provided, however, that timely rejection of an
FCC order by Seller or Newco shall not affect the status of such order as an FCC
Approval.
"FCC Order" means an order released by the FCC (and not by a
bureau or other division or subdivision thereof pursuant to delegated authority)
<PAGE>
which is in full force and effect and has not been reversed, reconsidered,
stayed, enjoined, set aside, annulled or suspended, and the thirty (30) day
period for any such action on the FCC's own motion has expired, and which
conditionally grants (and such condition is a Material Condition which is
unacceptable to Seller) or denies the FCC's consent to the assignment of the MCI
FCC License to Seller or Newco; provided, however, that timely rejection of an
FCC order by Seller or Newco shall not affect the status of such order as an FCC
Order.
"Fox News Channel Affiliation Agreement" means the Fox News
Channel Affiliation Agreement, entered into by and between EchoStar Satellite
Corporation and Fox News Network, LLC as of the date hereof, annexed as Exhibit
B hereto.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Intellectual Property" means all (a) patents, patent
applications, patent disclosures and improvements thereto, (b) trademarks,
service marks, trade dress, logos, trade names and corporate names and
registrations and applications for registration thereof, (c) copyrights and
registrations and applications for registration thereof, (d) mask works and
registrations and applications for registration thereof, (e) computer software,
data and documentation, (f) trade secrets and confidential business information
(including ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing
and production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, (g) other proprietary rights, and (h) copies and tangible
embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable inquiry and
investigation.
"Liability" means any liability or obligation of any nature
(whether known or unknown, whether absolute or contingent, whether liquidated or
unliquidated, and whether due or to become due), including any liability for
Taxes.
"LIBOR Rate" means relative to any interest period, the rate of
interest determined as follows: (a) on the interest determination date, the
lending party shall obtain the offered quotation(s) that appear on the Reuter's
Screen for Dollar deposits for a period comparable to such interest period. If
at least two such offered quotations appear on the Reuter's Screen, the LIBOR
Rate shall be the arithmetic average (rounded upwards, if necessary to the
nearest 1/16th of 1%) of such offered quotations, as determined by the lending
party; or (b) if the Reuter's Screen is not available or has been discontinued,
the LIBOR Rate shall be the rate per annum which the lending party in good faith
determines to be the arithmetic average (rounded as aforesaid) of the offered
quotations for Dollar deposits in an amount comparable to the lending party's
share of the relevant amount in respect of which the LIBOR Rate is being
determined for a period comparable to the relevant LIBOR Interest Period that
lending banks in New York City selected by the lending party are quoting at
11:00 A.M. on the interest determination date in New York Interbank Market to
major international banks.
"Liens" means, with respect to any property or assets, any
mortgage, deed of trust, pledge, hypothecation, assignment, security interest,
lien, charge, easement, encumbrance, preference, priority or other security
agreement or preferential arrangement of any kind or nature with respect to such
property or assets (including, without limitation, any conditional sale or other
title retention agreement having substantially the same economic effect as any
of the foregoing).
"Material Condition" has the meaning set forth in Section 5(d)
hereof.
"MCI Buyer" has the meaning set forth in Section 2(a)(i)(B)
hereof.
"MCI FCC License" means MCI's FCC authorization to construct,
launch and operate satellites in the Direct Broadcast Satellite Service
<PAGE>
operating over 28 frequency channels at the 110(0) West Longitude orbital
location (FCC DA 96-2165, released December 20, 1996).
"Newco" has the meaning set forth in Section 2(b) hereof.
"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
"Person" means an individual, partnership, trust, corporation,
joint venture, limited liability company, association, government bureau or
agency or other entity of whatever kind or nature.
"Preliminary FCC Approval" means an order released by the FCC
(and not by a bureau or other division or subdivision thereof pursuant to
delegated authority) which grants, or conditionally grants (other than subject
to a Material Condition which is unacceptable to Seller), the FCC's consent to
the assignment of the MCI FCC License to Seller or Newco.
"Registration Rights Agreement," means the Registration Rights
Agreement to be entered into by and among Seller, MCI (or a direct or indirect
wholly-owned subsidiary of MCI) and ASkyB (or a direct or indirect wholly-owned
subsidiary of News Corporation), in the form of Exhibit C annexed hereto.
"Regulatory Provisions" means all applicable requirements of the
Communications Act and the published policies, rules, decisions, and regulations
of the FCC as amended from time to time.
"Requisite Corporate Approvals" means the approval of Seller's
Board of Directors and its stockholders and, if applicable, the Board of
Directors of any Subsidiary of Seller required pursuant to applicable law with
respect to the authorization of Seller or such Subsidiary to execute and deliver
this Agreement and the Collateral Agreements to which it is a party and to
perform the transactions contemplated hereby and thereby.
"Retransmission Consent Agreement" means the Retransmission
Consent Agreement, to be entered into by and between Fox Television Holdings,
Inc. and Seller, in the form of Exhibit D annexed hereto.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Security Interest" means any mortgage, pledge, security
interest, encumbrance, charge, or other lien, other than (a) liens arising under
worker's compensation, unemployment insurance, social security, retirement, and
similar legislation, (b) liens on goods in transit incurred pursuant to
documentary letters of credit, and (c) other liens arising in the Ordinary
Course of Business and not incurred in connection with the borrowing of money,
the extension of credit or default or potential default of money owed.
"Seller Material Adverse Effect" means a material adverse effect
on the business, assets, operations, prospects or condition (financial or
otherwise) of the Seller and its Subsidiaries, taken as a whole, excluding any
change or development resulting from (a) events adversely affecting any of the
principal markets served by the business of Seller or (b) general economic
conditions, including changes in the economies of any of the jurisdictions in
which Seller or any of its Subsidiaries conduct business.
"Settlement Agreement and Mutual Release" means the Settlement
Agreement and Mutual Release, to be entered into by and among Seller, Charles W.
Ergen, News Corporation and ASkyB, in the form of Exhibit E annexed hereto.
"Set Top Box Agreement" means the Development and Supply
Agreement for Set Top Boxes, to be entered into by and between Seller and a DBS
company in which News Corporation has an interest, containing the terms and
conditions set forth in Exhibit F annexed hereto.
"Significant Subsidiary" means any Subsidiary of Seller that (i)
falls within the definition of "significant subsidiary" set forth in Rule 1-02
of Regulation S-X under the Securities Act, (ii) is subject to the periodic
reporting requirements of the Securities Exchange Act or (iii) is, or becomes, a
party to this Agreement or any of the Collateral Agreements.
<PAGE>
"Subsidiary" of a specified Person means any corporation or other
entity of which securities or other ownership interests having ordinary voting
power to elect a majority of the Board of Directors or other Persons performing
similar functions are directly or indirectly owned by such Person.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code ss. 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, however denominated, including
any interest, penalty, or addition thereto, whether disputed or not.
"Transferred Asset Material Adverse Effect" means a material
adverse effect on the use by or benefit to Seller of any of the Transferred
Assets, excluding any change or development resulting from (a) events adversely
affecting any of the principal markets served by the businesses of Seller or any
of its Subsidiaries, or (b) general economic conditions, including changes in
the economies of any of the jurisdictions in which Seller or any of its
Subsidiaries conduct business.
"U.S. Satellite Business" means any proposed or ongoing uses of
communications satellites to provide direct-to-home (including hotels, motels,
bars, restaurants, multiple dwelling units and other similar uses) video and
associated audio programming services using FSS/BSS frequencies directly to the
antennas or other reception equipment of customers or subscribers of such
business activity principally in the United States, or to multiple dwelling
units comprising such customers or subscribers.
"Voting Agreement" means the letter agreement entered into by and
among Charles W. Ergen, Seller, MCI, News Corporation and ASkyB, as of the date
hereof, annexed as Exhibit G hereto.
2. Purchase and Sale
(a) Shares to be Purchased by the Transferors
(i) At the Closing (as hereinafter defined), upon the
terms and subject to the conditions set forth in this Agreement, the
Transferors agree to purchase from Seller, and Seller agrees to issue
and sell to the Transferors, an aggregate of 30,000,000 shares (the
"Shares") of Seller's Class A Common Stock, subject to adjustment (x)
for any stock split, stock dividend, subdivision or combination of the
Common Stock (as hereinafter defined) or any other action having a
similar effect on the Common Stock, and (y) as set forth in Section
2(a)(ii) below, as follows:
(A) 24,030,000 shares of Class A Common Stock
shall be issued and sold to ASkyB or a direct or indirect wholly-owned
Subsidiary of News Corporation designated by ASkyB (the "ASkyB Buyer"); and
(B) 5,970,000 shares of Class A Common Stock
shall be issued and sold to MCI or a direct or indirect wholly-owned
Subsidiary of MCI designated by MCI (the "MCI Buyer").
(ii) The number of shares of Common Stock issuable to
the ASkyB Buyer and the MCI Buyer pursuant to Section 2(a)(i) shall be
subject to adjustment as follows: (A) if the Current Market Price is
less than $15.00 per share (subject to adjustment for any stock split,
stock dividend, subdivision or combination of the Common Stock or any
change in corporate structure affecting the Common Stock), then Seller
shall issue such number of additional shares of Common Stock to the
ASkyB Buyer and the MCI Buyer, on a pro rata basis, so that the total
market value of the Shares issued to them (based on such Current
Market Price) is not less than $450,000,000; provided, however, that
in no event shall the Transferors collectively own of record or vote
shares corresponding to more than 49.9% of the total outstanding
voting power of Seller or more voting power of Seller than all other
shareholders of Seller; or (B) if the Current Market Price is greater
than $39.00 per share (subject to adjustment for any stock split,
stock dividend, subdivision or combination of the Common Stock or any
change in corporate structure affecting the Common Stock), then the
number of Shares issued to the ASkyB Buyer and the MCI Buyer shall be
reduced, on a pro rata basis, so that the total market value of the
Shares issued
<PAGE>
to them (based on such Current Market Price) is not greater than
$1,170,000,000.
(b) Assets to be Transferred to Seller. At the Closing, upon the terms
and subject to the conditions set forth in this Agreement, and in consideration
for the Shares to be purchased by the Transferors hereunder, each of the
Transferors agrees to assign, transfer and convey to Seller, or, at Seller's
option, one or more direct or indirect wholly owned Subsidiaries of Seller
(collectively, "Newco") all of its right, title and interest in and to the
specified assets set forth below (collectively, the "Transferred Assets"):
(i) Gilbert Property. ASkyB shall transfer and convey
to Seller or Newco all of its right, title and interest in and to
certain real property located in Gilbert, Arizona, as more
particularly described in Section 2(b)(i)(I) of the Transferor
Disclosure Schedule (as hereinafter defined), and all improvements
thereon, including, without limitation, (A) all buildings, Earth
Station Facilities and other structures, (B) the fixtures, furniture
and equipment described in Section 2(b)(i)(II) of the Transferor
Disclosure Schedule, and all instruction manuals and other personal
property (including all warranties associated therewith), and (C) keys
to such property, to the extent the foregoing are owned by the
Transferors (the "Gilbert Property").
(ii) Gilbert Contracts. ASkyB shall assign all of its
right, title and interest in and to all maintenance and equipment
contracts entered into with respect to the Gilbert Property, including
all warranties set forth therein (collectively the "Gilbert
Contracts"), as set forth in Section 2(b)(ii) of the Transferor
Disclosure Schedule including, among others, the equipment contract
with Sony Electronics, Inc. (the "Sony Contract"), except that the
Transferred Assets shall not include, and the Transferors shall not
assign to Seller, any of the Gilbert Contracts that Seller designates
as "Excluded Contracts" in accordance with Section 5(c)(iii) hereof.
(iii) MCI FCC License. MCI shall assign, transfer and
convey to Seller or Newco all of its right, title and interest to (A)
the MCI FCC License and (B) the application for minor modification and
clarification of license conditions for the MCI FCC License filed by
MCI on May 5, 1997, and to any application for modification of the MCI
FCC License that may be required to be filed hereafter until Closing.
(iv) Earth Station Authorizations. ASkyB shall
assign, transfer and convey to Seller or Newco all of its right, title
and interest in and to its FCC earth station authorizations in respect
of the Gilbert Property (the "Earth Station Authorizations") under
Call Signs E980174, E980178, E980180, E970394, E970395 and E970396.
(v) Satellite Contracts and Satellite Work in
Process. Each of the Transferors shall assign all of its respective
right, title and interest in and to the agreements and insurance
policies or arrangements set forth in Section 2(b)(v) of the
Transferor Disclosure Schedule annexed hereto, including but not
limited to the satellites and launches work in process pursuant
thereto, and all deliverables pursuant to those agreements, and
including all rights to enforce such contracts (collectively, the
"Satellite Contracts" and, together with the Gilbert Contracts, but
excluding any Excluded Contracts, the "Assigned Contracts"), in
accordance with the terms of the Satellite Contracts.
(vi) Intellectual Property. The Transferors shall
assign, transfer and convey all of their respective right, title and
interest in and to any Intellectual Property acquired from the U.S.
government or other parties to the Satellite Contracts in connection
with the MCI FCC License, the Earth Station Authorizations or the
Assigned Contracts.
It is specifically acknowledged and agreed by the Seller that the
Transferors are not assigning, transferring and conveying to Seller any assets
pursuant to this Agreement other than the Transferred Assets.
(c) Assumption of Liabilities. Except as provided in Sections 5(f)(vii)
and 5(g) hereof, effective as of the Closing, and upon the terms and subject to
the conditions of this Agreement, Seller agrees to assume all liabilities and
obligations of the Transferors and their Affiliates arising under the Assigned
<PAGE>
Contracts and the other Transferred Assets, including all obligations of the
Transferors under the MCI FCC License and the Earth Station Authorizations,
including, without limitation, obligations with respect to completion of
satellite construction, system deployment and provision of telemetry, tracking
and control services.
(d) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Squadron, Ellenoff,
Plesent & Sheinfeld, LLP, 551 Fifth Avenue, New York, New York, commencing at
9:00 a.m. local time on the fifth business day following the satisfaction or
waiver of all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby or such other date as the Transferors and
Seller may mutually determine (the "Closing Date").
(e) Deliveries At Closing. (i) Seller shall deliver to the Transferors
the various certificates, instruments, agreements and documents referred to in
Section 6(a) below, (ii) the Transferors shall deliver to Seller the various
certificates, instruments, agreements and documents referred to in Section 6(b)
below and (iii) Seller shall deliver to the Transferors duly executed and
authenticated stock certificates, representing all of the Shares to be purchased
by the MCI Buyer and the ASkyB Buyer pursuant hereto. The certificates
representing the Shares shall initially bear the legend set forth in Section
9(n) hereto.
<PAGE>
3. Representations and Warranties. Seller represents and warrants
to the Transferors as follows:
(a) Representations and Warranties True, Correct and Complete. Seller
represents and warrants to each of the Transferors that the statements contained
in this Section 3 that are qualified by reference to materiality or a material
adverse effect are true, correct and complete as of the date of this Agreement
and will be true, correct and complete as of the Closing Date, and that all of
the other statements made in this Section 3 that are not so qualified are true,
correct and complete in all material respects as of the date of this Agreement
and will be true, correct and complete in all material respects as of the
Closing Date, except, in each case, (i) for such representations and warranties
that are expressly made as of the date of this Agreement, in which case such
representations and warranties need only to be true, correct and complete on and
as of the date of this Agreement, (ii) for such representations and warranties
that are expressly made as of an earlier date, in which case such
representations and warranties need only to be true, correct and complete on and
as of such earlier date and (iii) as disclosed in a document referring
specifically to the representations and warranties in this Section 3 which has
been delivered by Seller to each of the Transferors on or prior to the date
hereof (the "Seller Disclosure Schedule"). Nothing in the Seller Disclosure
Schedule shall be deemed adequate to disclose an exception to a representation
or warranty made herein unless the Seller Disclosure Schedule identifies the
exception with reasonable particularity and describes the relevant facts in
reasonable detail. Without limiting the generality of the foregoing, the mere
listing (or inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made herein
(unless the representation or warranty itself solely addresses the existence of
the ocument or other item). The Seller Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section.
(b) Organization of Seller and the Significant Subsidiaries
(i) Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Nevada,
and each of the Significant Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation.
(ii) As of the date hereof, Seller and each of the
Significant Subsidiaries is duly qualified or licensed to do business
as a foreign corporation and is in good standing, in each jurisdiction
where the character of the property owned or leased by it, or the
nature of its activities, makes such qualification or licensing
necessary, except for those jurisdictions where the failure to be so
qualified or licensed and in good standing would not, individually or
in the aggregate, have a Seller Material Adverse Effect.
(c) Power and Authority of Seller
(i) Seller has all requisite corporate power and
authority to own, lease and operate its properties as now conducted
and to execute and deliver this Agreement and each Collateral
Agreement to which it is a party, including any additional documents
contemplated by this Agreement, and to perform its obligations
hereunder and thereunder.
(ii) As of the date hereof, Seller has all governmental
licenses, authorizations, consents and approvals required to own,
lease and operate its properties as now conducted, except where the
failure to have such governmental licenses, authorizations, consents
and approvals would not, individually or in the aggregate, have a
Seller Material Adverse Effect.
(d) Power and Authority of Significant Subsidiaries
(i) As of the date hereof, each Significant Subsidiary
has all requisite corporate power and authority and all governmental
licenses, authorizations, consents and approvals required to own,
lease and operate its properties as now conducted, except where the
failure to have such governmental licenses, authorizations, consents
and approvals would not, individually or in the aggregate,
<PAGE>
have a Seller Material Adverse Effect.
(ii) Each Significant Subsidiary which is, or will be,
a party to this Agreement or a Collateral Agreement has, or will have,
as of the date of execution of this Agreement or such Collateral
Agreement, all requisite corporate power and authority to execute and
deliver such Collateral Agreement and to perform its obligation
thereunder.
(e) Corporate Authorization. The execution, delivery and performance
by Seller of this Agreement and the execution, delivery and performance by
Seller and each Significant Subsidiary of each of the Collateral Agreements to
which Seller or such Significant Subsidiary is a party, and the consummation of
the transactions contemplated hereby and thereby, have been duly authorized by
all necessary corporate action of Seller and such Significant Subsidiary, as the
case may be, other than shareholder approval pursuant to the rules and
regulations of Nasdaq, which shall be obtained on or prior to the Closing Date.
This Agreement and each of the Collateral Agreements to which Seller or a
Significant Subsidiary is a party, including any additional documents
contemplated by this Agreement, constitutes (or when executed, will constitute)
the valid and legally binding obligation of Seller and such Significant
Subsidiary, as the case may be, enforceable against each of Seller and such
Significant Subsidiary, as the case may be, in accordance with each document's
respective terms and conditions, except to the extent that such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization or other
laws affecting the enforcement of creditors' rights generally or by general
equitable principles.
(f) Governmental Authorization. The execution, delivery and performance
by Seller of this Agreement and each of the Collateral Agreements to which it is
a party, and the consummation of the transactions contemplated hereby and
thereby, do not require any consent, approval, authorization or permit of, or
filing with or notification to any governmental or regulatory authority, except
(A) for (i) compliance with any applicable requirements of the Hart-Scott-Rodino
Act, and the rules and regulations thereunder; (ii) compliance with any
applicable provisions of the Securities Act, and the rules and regulations
thereunder, state securities or "blue sky" laws and state takeover laws, and
approval of the inclusion of the Shares for trading on Nasdaq; (iii) compliance
with any applicable requirements of the Securities Exchange Act and the rules
and regulations thereunder; and (iv) compliance with any applicable requirements
of the Regulatory Provisions or (B) where the failure to obtain such consents,
approvals, authorizations and permits, or to make such filings or notifications,
would not prevent or delay in any material respect the consummation of the
transactions contemplated hereby or thereby or otherwise prevent Seller from
performing its obligations under this Agreement or any of the Collateral
Agreements to which it is a party in accordance with the terms and subject to
the conditions hereof and thereof, and would not, individually or in the
aggregate, have a Seller Material Adverse Effect.
(g) Noncontravention. Except as set forth in Section 3(g) of the Seller
Disclosure Schedule and Section 3(f) hereof, the execution, delivery and
performance of this Agreement and each of the Collateral Agreements to which
Seller or a Significant Subsidiary is a party do not, and the consummation of
the transactions contemplated hereby and thereby will not, (A) contravene or
conflict with the certificate of incorporation, by-laws or other organizational
documents of Seller, or any Significant Subsidiary; (B) contravene, conflict
with or constitute a violation of any provision of any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court binding upon or
applicable to Seller or any Significant Subsidiary or any of their respective
properties or assets, which contravention, conflict or violation could
reasonably be expected to have a Seller Material Adverse Effect; (C) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel, require any notice or give rise to a loss of any benefit under, any
contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, Security
Interest or other arrangement to which Seller or any Significant Subsidiary is a
party or by which any of them is bound or to which any of their assets is
subject or result in the creation or imposition of any Security Interests on any
assets of Seller or any Significant Subsidiary, which contravention, violation,
conflict, breach, default, acceleration, termination, modification,
cancellation, or loss of benefit would have a Seller Material Adverse Effect or
adversely affect the ability of Seller or any Significant Subsidiary to
consummate the transactions contemplated hereby or by the Collateral Agreements;
<PAGE>
or (D) assuming approval by Seller's shareholders in accordance with the rules
and regulations of Nasdaq, violate or conflict with the rules, regulations or
listing requirements of Nasdaq or any other exchange or trading market on which
Seller's securities may be listed or traded.
(h) Capitalization
(i) As of the date hereof, the authorized capital
stock of Seller consists of (x) 400,000,000 shares of Common Stock,
par value $.01 per share, of which 200,000,000 shares are designated
Class A Common Stock, 100,000,000 shares are designated Class B Common
Stock, and 100,000,000 shares are designated Class C Common Stock (the
Class A Common Stock, the Class B Common Stock and the Class C Common
Stock are referred to collectively herein as the "Common Stock"), and
(y) 20,000,000 shares of Preferred Stock. As of the date hereof,
15,268,708 shares of Class A Common Stock, 29,804,401 shares of Class
B Common Stock, no shares of Class C Common Stock, 1,616,681 shares of
Preferred Stock, which has been designated 8% Series A Cumulative
Preferred Stock, 225,301 shares of Preferred Stock, which has been
designated 121/8% Series B Senior Redeemable Exchangeable Preferred
Stock, par value $.01 per share, and 2,300,000 shares of Preferred
Stock, which has been designated 6 3/4% Series C Cumulative
Convertible Preferred Stock, are issued and outstanding and no shares
of any class or series are held in treasury.
(ii) All of the issued and outstanding shares of
capital stock of Seller have been, and on the Closing Date will be,
duly authorized, validly issued, fully paid and nonassessable.
(iii) As of the Closing Date, the Shares will have
been duly authorized and, when issued to the ASkyB Buyer and the MCI
Buyer, upon payment of the consideration therefor, will be validly
issued, fully paid and non-assessable, and the issuance will not be
subject to (x) any Liens (other than those relating to the activities
of the Transferors) or (y) any preemptive or similar rights of any
security holder of Seller.
(iv) As of the date hereof, except as set forth in
Section 3(h) of the Seller Disclosure Schedule, (A) all of the issued
shares of capital stock of each Significant Subsidiary of Seller are
owned, directly or indirectly, by Seller; (B) there are no outstanding
or authorized convertible or exchangeable securities of Seller or any
Significant Subsidiary, options, warrants, rights, contracts, calls,
puts, rights to subscribe, conversion rights, or agreements or
commitments pursuant to which any Person has any rights to acquire
from Seller or any Significant Subsidiary, and neither Seller nor any
Significant Subsidiary has any obligations, contingent or otherwise,
to repurchase, redeem or otherwise acquire any shares of capital stock
or voting securities of Seller or any Significant Subsidiary; (C)
there are no outstanding or authorized stock appreciation, phantom
stock or similar rights of Seller or any Significant Subsidiary; and
(D) there are no voting trusts, proxies or any other agreements or
understandings to which Seller or any Significant Subsidiary is a
party or of which it has Knowledge with respect to the voting of the
capital stock or voting securities of Seller or any Significant
Subsidiary.
(i) SEC Filings
(i) Seller has filed all forms, reports and documents
required to be filed by it with the Securities and Exchange Commission
("SEC") since January 1, 1995, and Seller has heretofore made
available to the Transferors, in the form filed with the SEC
(including any exhibits thereto), (A) the Annual Reports on Form 10-K
of Seller for the fiscal years ended December 31, 1995, December 31,
1996 and December 31, 1997 (the "1997 Annual Report"), respectively,
and the Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, 1998, June 30, 1998 and September 30, 1998 (the "September
Quarterly Report"), respectively; (B) all proxy and information
statements relating to meetings of stockholders of Seller (whether
annual or special) held since January 1, 1995; and (C) all other
reports and registration statements (including all Quarterly Reports
on Form 10-Q and Current Reports on Form 8-K) filed by Seller with the
SEC since January 1, 1995 (including all amendments to each of the
foregoing, the forms, reports and other documents referred to in
clauses (A) through (C) being referred to herein, collectively, as the
"Seller Disclosure
<PAGE>
Documents"). The Seller Disclosure Documents and other forms, reports
or other documents filed by Seller with the SEC after the date of this
Agreement but prior to the Closing Date (x) were prepared, or will be
prepared, in accordance with the Securities Act or the Securities
Exchange Act, as the case may be, and the rules and regulations
thereunder, and (y) did not at the time they were filed, or will not
at the time they are filed, with the SEC contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were made,
not misleading.
(ii) Each of the consolidated financial statements
(including any notes thereto) contained in the Annual Reports on Form
10-K of Seller for the fiscal years ended December 31, 1995, December
31, 1996 and December 31, 1997, and Quarterly Reports on Form 10-Q of
Seller for the quarterly periods through and including September 30,
1998, was prepared in accordance with generally accepted accounting
principles and all applicable rules of the SEC and fairly presents in
all material respects the consolidated financial position, results of
operations and cash flows of each of Seller and its consolidated
Subsidiaries as at the respective dates thereof and for the respective
periods indicated therein, subject, in the case of unaudited
statements, to normal year-end adjustments.
(iii) Except as set forth in the 1997 Annual Report and
the September Quarterly Report, or as otherwise set forth in Section
3(i) of the Seller Disclosure Schedule, neither Seller nor its
consolidated Subsidiaries had, as of the respective dates thereof, any
Liability that (i) would be required under generally accepted
accounting principles to be reflected in such consolidated balance
(including the notes thereto) or (ii) would reasonably be expected to
have, individually or in the aggregate, a Seller Material Adverse
Effect.
(j) Absence of Certain Changes. As of the date hereof, since September
30, 1998, and except as (i) set forth in the 1997 Annual Report or in the
September Quarterly Report or (ii) disclosed in Section 3(j) of the Seller
Disclosure Schedule, or as otherwise contemplated by this Agreement or the
Collateral Agreements, there has not been any event, occurrence or development
of a state of circumstances or facts which has had or reasonably would be
expected to have a Seller Material Adverse Effect.
(k) Brokers' Fees. Neither Seller nor any Subsidiary of Seller has
any Liability or obligation to pay any fees or commissions to any broker, finder
or agent with respect to the transactions contemplated by this Agreement for
which any of the Transferors would be liable.
4. Representations and Warranties of the Transferors. Each of ASkyB,
News Corporation and MCI, jointly and severally, represents and warrants to
Seller as follows:
(a) Representations and Warranties True, Correct and Complete. Each of
ASkyB, News Corporation and MCI represents and warrants to Seller that the
statements contained in this Section 4 that are qualified by reference to
materiality or a material adverse effect are true, correct and complete as of
the date of this Agreement and will be true, correct and complete as of the
Closing Date and all other statements in this Section 4 that are not so
qualified are true, correct and complete in all material respects as of the date
of this Agreement and will be true, correct and complete in all material
respects as of the Closing Date except, in each case, (i) for such
representations and warranties that are expressly made as of the date of this
Agreement, in which case such representations and warranties need only to be
true, correct and complete on and as of the date of this Agreement, (ii) for
such representations and warranties that are expressly made as of an earlier
date, in which case such representations and warranties need only to be true,
correct and complete on and as of such earlier date and (iii) as disclosed in a
document referring specifically to the representations and warranties in this
Section 4 which has been delivered by the Transferors to Seller on or prior to
the date hereof (the "Transferor Disclosure Schedule"). Nothing in the
Transferor Disclosure Schedule shall be deemed adequate to disclose an exception
to a representation or warranty made herein unless the Transferor Disclosure
Schedule identifies the exception with reasonable particularity and describes
the relevant facts in reasonable detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other item
<PAGE>
shall not be deemed adequate to disclose an exception to a representation or
warranty made herein (unless the representation or warranty itself solely
addrsses the existence of the document or other item). The Transferor Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this Section.
(b) Organization of the Transferors. ASkyB is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware. News Corporation is a corporation duly organized under
the laws of South Australia, Australia. MCI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
(c) Power and Authority of the Transferors
(i) Each of the Transferors has all requisite
corporate or limited liability company power and authority to own,
lease and operate the Transferred Assets as now conducted and to
execute and deliver this Agreement and each Collateral Agreement to
which it is a party, including any additional documents contemplated
by this Agreement, and to perform its obligations hereunder and
thereunder.
(ii) Each of the Transferors has all governmental
licenses, authorizations, consents and approvals required to own,
lease and operate the Transferred Assets being transferred by it,
except where the failure to have such governmental licenses,
authorizations, consents and approvals would not, individually or in
the aggregate, have a Transferred Asset Material Adverse Effect.
(d) Corporate Authorization. The execution, delivery and performance by
each of the Transferors of this Agreement and each of the Collateral Agreements
to which such Transferor is a party, and the consummation of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action of each Transferor. This Agreement and each of the Collateral
Agreements to which each Transferor is a party, including any additional
documents contemplated by this Agreement, constitutes (or when executed, will
constitute) the valid and legally binding obligation of each Transferor,
enforceable against each Transferor, in accordance with each document's
respective terms and conditions, except to the extent that such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization or other
laws affecting the enforcement of creditors' rights generally or by general
equitable principles.
(e) Governmental Authorization. The execution, delivery and performance
by each Transferor of this Agreement and each of the Collateral Agreements to
which each Transferor is a party, and the consummation of the transactions
contemplated hereby and thereby, do not require any consent, approval,
authorization or permit of, or filing with or notification to any governmental
or regulatory authority, except (A) for (i) compliance with any applicable
requirements of the Hart-Scott-Rodino Act, and the rules and regulations
thereunder; (ii) compliance with any applicable provisions of the Securities Act
and the rules and regulations thereunder, state securities or "blue sky" laws
and state takeover laws; (iii) compliance with any applicable requirements of
the Securities Exchange Act, and the rules and regulations thereunder; and (iv)
compliance with any applicable requirements of the Regulatory Provisions, and
(B) where the failure to obtain such consents, approvals, authorizations and
permits, or to make such filings or notifications, would not prevent or delay in
any material respect the consummation of the transactions contemplated hereby or
thereby or otherwise prevent the Transferors from performing their respective
obligations under this Agreement or any of the Collateral Agreements to which
such Transferor is a party in accordance with the terms and subject to the
conditions hereof and thereof, and would not, individually or in the aggregate,
have a Transferred Asset Material Adverse Effect.
(f) Noncontravention. Except as set forth in Section 4(f) of the
Transferor Disclosure Schedule and Section 4(e) hereof, the execution, delivery
and performance of this Agreement and each of the Collateral Agreements to which
each of the Transferors is a party do not, and the consummation of the
transactions contemplated hereby and thereby will not, (A) contravene or
conflict with the certificate of incorporation, by-laws or other organizational
or charter documents of each of the Transferors; (B) contravene or conflict with
or constitute a violation of any provision of any statute, regulation, rule,
judgment, order, decree, stipulation, injunction, charge, or other restriction
of any government, governmental agency, or court binding upon or applicable to
any of the Transferors, or any of their respective properties or assets; or (C)
<PAGE>
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, require any notice or give rise to a loss of any benefit under, any
of the Transferred Assets or any contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, Security Interest or other arrangement to which any
of the Transferors is a party or by which any of them is bound or to which any
of the Transferred Assets, is subject or result in the creation or imposition of
any Security Interests on any of the Transferred Assets, which contravention,
violation, conflict, breach, default, acceleration, termination, modification,
cancellation, or loss of benefit would have a Transferred Asset Material Adverse
Effect or adversely affect the ability of any Transferor to consummate the
transactions contemplated hereby or by the Collateral Agreements.
(g) Gilbert Property
(i) ASkyB owns good and marketable title to the
Gilbert Property, free and clear of all Liens or other matters
affecting Seller's or its Subsidiaries' title to or possession of the
Gilbert Property, except for Liens (a) for taxes and other
governmental charges, assessments or fees which are not yet due and
payable or (b) set forth on Section 4(g)(i) of the Transferor
Disclosure Schedule.
(ii) There are no outstanding options or rights of
first refusal to purchase the Gilbert Property, or any portion thereof
or interest therein; and there are no leases, subleases, licenses,
concessions or other agreements, written or oral, granting to any
party or parties the right of use or occupancy of any portion of the
Gilbert Property.
(iii) ASkyB and News Corporation shall keep and
maintain the Gilbert Property substantially in the same condition as
it exists on the date hereof and shall preserve the Gilbert Property
from deterioration, other than ordinary wear and tear; provided,
however, that Seller acknowledges and agrees that the Transferors are
under no obligation to continue construction of or make any additional
improvements to any of the structures, furniture, fixtures or
equipment located at the Gilbert Property, including, without
limitation, the improvements described in Section 4(g)(iii) of the
Transferor Disclosure Schedule, other than pursuant to the Gilbert
Contracts.
(iv) With respect to the Gilbert Property:
(A) as of the date hereof, there are no pending
or, to the Knowledge of any of the Transferors, threatened condemnation
proceedings relating to the Gilbert Property;
(B) there are no parties (other than ASkyB) in
possession of the Gilbert Property who are lawfully in possession;
(C) the use and condition of and the operations
on the Gilbert Property are in compliance with Environmental Laws, except where
the failure to comply, individually or in the aggregate, would not have a
Transferred Asset Material Adverse Effect;
(D) as of the date hereof, (i) there are no
judicial or administrative actions, proceedings or investigations pending or, to
the Knowledge of any Transferor, currently threatened to revoke any
environmental permits required for the current use of and the operations on the
Gilbert Property, and (ii) ASkyB has not received any written notice from any
governmental entity or written notice from any Person to the effect that there
is lacking such permit;
(E) as of the date hereof, there are no
judicial or administrative actions, proceedings, or investigations pending or,
to the Knowledge of any Transferor, currently threatened against ASkyB alleging
the violation of, or liability pursuant to, any Environmental Law, except for
liabilities or violations which could not reasonably be expected to have,
individually or in the aggregate, a Transferred Asset Material Adverse Effect;
(F) except as set forth in Section
4(g)(iv)(H) of the Transferor Disclosure Schedule, neither ASkyB nor News
Corporation has Knowledge of, nor has filed any notice with respect to the
Gilbert Property under any Environmental Law indicating, past or present
<PAGE>
treatment, storage, transfer, release, manufacture, presence or disposal of or
reporting a release or currently threatened release of hazardous material into
the environment, except for such releases that could not reasonably be expected
to have, individually or in the aggregate, a Transferred Asset Material Adverse
Effect;
(G) neither ASkyB nor News Corporation is
subject to any outstanding order, injunction, judgment, decree, ruling,
assessment, or arbitration award or any agreement with any governmental entity
or other Person, or to any federal, state, local or foreign investigation
respecting (i) Environmental Laws or (ii) the release or currently threatened
release of any hazardous material, except in either case for such orders,
injunctions, judgments, decrees, rulings, assessments, arbitration awards, or
agreements which could not reasonably be expected to have, individually or in
the aggregate, a Transferred Asset Material Adverse Effect;
(H) except as set forth in Section 4(g)(iv)(H)
of the Transferor Disclosure Schedule, none of the operations on the Gilbert
Property involves or, to ASkyB's Knowledge, previously involved the generation,
transportation, treatment, storage, release, use, manufacture or disposal of
hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any state, local or
foreign equivalent, except for as may be permitted by law or as could not
reasonably be expected to have, individually or in the aggregate, a Transferred
Asset Material Adverse Effect;
(I) ASkyB will provide to Seller, a promptly
as practicable, all environmental reports the existence of which it is aware
concerning the Gilbert Property;
(J) as of the date hereof, ASkyB has expended
to date in respect of the Gilbert Property not less than $109 million, excluding
capitalized interest;
(K) as of the date hereof, (1) the buildings and
improvements are located within the boundary lines of the Gilbert Property, and
do not encroach on any easement which may burden the land, (2) the land does not
serve any adjoining property for any purpose inconsistent with the use of the
land, and (3) the Gilbert Property is not located within any flood plain,
wetland, or subject to any similar type of restriction for which any permits or
licenses necessary for the use thereof have not been obtained, except where such
encroachment or restriction would not, individually or in the aggregate, have a
Transferred Asset Material Effect;
(L) as of the date hereof, all facilities
located on the Gilbert Property are supplied with utilities and other services
necessary for the current use and operation of such facilities; and
(M) as of the date hereof, the Gilbert
Property abuts on and has direct vehicular access to a public road.
(v) Section 4(g)(v) of the Transferor Disclosure
Schedule sets forth a listing of all insurance policies (other than
title insurance) in force associated with the Gilbert Property and the
amount of coverage thereunder. Each such insurance policy is in full
force and effect, and the rights of the parties thereunder will not be
affected in any material respect by the transactions contemplated by
this Agreement and the Collateral Agreements. ASkyB shall maintain all
such insurance policies or similar coverages until the Closing Date,
and shall obtain an endorsement to all such policies requiring the
insurer to notify Seller prior to any cancellation or termination
thereof or amendment thereto.
(h) Assigned Contracts
(i) The Transferors have delivered to Seller a
correct and complete copy of each Assigned Contract, as amended to
date, listed in Sections 2(b)(ii) and (v) of the Transferor Disclosure
Schedule.
(ii) Except as set forth in Section 4(h) of the
Transferor Disclosure Schedule, each of the Transferors has complied
<PAGE>
with and performed in all material respects all of its obligations
required to be performed under each of the Assigned Contracts to which
it is a party.
(iii) Except as set forth in Section 4(h) of the
Transferor Disclosure Schedule, with respect to each Assigned Contract
so listed: (A) the arrangement or agreement is legal, valid and
binding obligation of the applicable Transferor and, to the Knowledge
of such Transferor, each of the other parties thereto, enforceable
against such parties in accordance with the terms thereof, and is in
full force and effect; (B) the arrangement or agreement will continue
to be legal, valid, binding and enforceable and in full force and
effect on identical terms immediately following the Closing; (C) none
of the Transferors is in breach or default under any Assigned Contract
to which it is a party, and no event has occurred which, with notice
or lapse of time, or both, would constitute a breach or default by any
of the Transferors, or permit termination, modification, or
acceleration, under the arrangement or agreement; (D) to the Knowledge
of the Transferors, no third party is in breach or default under any
Assigned Contract, and no event has occurred which, with notice or
lapse of time, or both, would constitute a breach or default by such
party thereunder or permit termination, modification, or acceleration,
under the arrangement or agreement; (E) none of the Transferors has
received written notice canceling, terminating or repudiating or
exercising any option to cancel, terminate or repudiate under any of
the Assigned Contracts to which it is a party and none of the
Transferors has any Knowledge that any party has failed to comply with
or perform all of its obligations required to be performed under any
of the Assigned Contracts; (F) none of the Transferors has any
Knowledge that the validity of any of the Assigned Contracts to which
it is a party is being contested by a third party; (G) neither Sky I
nor Sky II (as hereinafter defined) have been delivered into storage;
and (H) as of the date hereof, the Transferors know of no reason why
the launch vehicle will not be available by the August 31, 1999 date
with respect to Sky I or the fourth quarter of 1999 date with respect
to Sky II, specified in Sections 5(f)(ii) and 5(f)(iii), respectively,
other than as set forth in the letter dated September 18, 1998 from
James Dongog of International Launch Services to an employee of Loral.
(iv) Subject to the receipt of necessary consents,
the execution and delivery by the Transferors of this Agreement and
the Collateral Agreements to which a Transferor is a party and the
consummation of the transactions contemplated hereby and thereby have
not resulted and will not result in a breach or default under, or
permit any party to modify any obligation under, or cause or permit
any termination, cancellation or loss of benefits under, any of the
Assigned Contracts.
(i) Intellectual Property. Each of the Transferors owns or has the right
to use pursuant to license, sublicense, agreement or permission all Intellectual
Property currently necessary for the construction, use or operation of the
Transferred Assets. The Transferors have no Knowledge of any condition or event
that would prevent Seller from obtaining in a timely manner all Intellectual
Property necessary to complete the construction and launch of Sky I and Sky II
at no cost to Seller, or to use or operate any of the Transferred Assets.
(j) Litigation. Sections 4(j), 4(l)(i) and 4(l)(ii) of the Transferor
Disclosure Schedule sets forth each instance in which any Transferor (i) is
subject to any unsatisfied judgment, order, decree, stipulation, injunction, or
charge or (ii) is a party or, to the Knowledge of such Transferor and the
directors and officers (and employees with responsibility for litigation
matters) of such Transferor or any Subsidiary of such Transferor, is threatened
to be made a party to any charge, complaint, action, suit, proceeding, hearing,
or investigation of or in any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any arbitrator,
other than any judgment, order, decree, stipulation, injunction, charge,
complaint, action, suit, proceeding, hearing or investigation that, individually
or in the aggregate, would not reasonably be expected to have a Transferred
Asset Material Adverse Effect.
(k) Legal Compliance. Except as set forth in Sections 4(k), 4(l)(i) and
4(l)(ii) of the Transferor Disclosure Schedule, as of the date hereof, and, with
respect to the Satellite Contracts and the MCI FCC License, as of the Closing
Date as well, each of the Transferors has complied in all material respects, and
the Transferred Assets, including the operations thereof, are in compliance in
<PAGE>
all material respects, with all laws (including, without limitation, all
Environmental Laws), including rules and regulations thereunder, of federal,
state, local and foreign governments (and all agencies thereof), except for
failures which would not, individually or in the aggregate, reasonably be
expected to have a Transferred Asset Material Adverse Effect or a material
adverse effect on the consummation of the transactions contemplated by this
Agreement and the Collateral Agreements, and no charge, complaint, action, suit,
proceeding, hearing, investigation, claim, demand, or notice has been filed or
commenced against any Transferor alleging any failure to comply with any such
law or regulation which, individually or in the aggregate, could reasonably be
expected to have a Transferred Asset Material Adverse Effect.
<PAGE>
(l) FCC Matters
(i) Except as set forth in Section 4(l)(i) of the
Transferor Disclosure Schedule, the MCI FCC License is valid; MCI
controls and has always controlled the MCI FCC License and the system
authorized thereunder; MCI has timely and completely performed all
obligations required to date under the MCI FCC License; MCI has timely
submitted all filings and reports required thereunder; MCI has taken
all actions required of MCI to date to achieve international
coordination of the authorized system, including, without limitation,
all actions required to date to achieve (a) all necessary
modifications to the International Telecommunication Union's Region 2
Broadcasting-Satellite Service Plan and associated feeder link plan
set forth at Appendices 30 and 30A to the International Radio
Regulations and (b) coordination of the system's Telemetry, Tracking
and Control functions; and has proceeded with the construction of the
DBS system with "diligence" (as such term is used in the Regulatory
Provisions); and such DBS system has been designed and is being
constructed to comply with, and when so constructed will be in
compliance with, all obligations required to date under the MCI FCC
License and the applicable Regulatory Provisions, including without
limitation the geographic service requirements currently imposed on
DBS permittees.
(ii) Except as set forth in Section 4(l)(ii) of the
Transferor Disclosure Schedule, ASkyB's Earth Station Authorizations
are valid and in full force and effect, ASkyB has performed to date
all obligations required to be performed thereunder, and the Gilbert
Property includes Earth Station Facilities that are fully capable of
operating in accordance thereto.
(iii) MCI has delivered to Seller a true, correct and
complete copy of the MCI FCC License. The MCI FCC License is in full
force and effect and is unimpaired by any materially adverse
condition. MCI has delivered to Seller true, correct and complete
copies of all material correspondence from the FCC to MCI relating to
the MCI FCC License and all material correspondence, submissions
and/or other filings from MCI to the FCC relating thereto sent to or
received by MCI subsequent to the auction of 28 frequency channels at
the 110(0) West Longitude orbital location. Except as set forth in
Section 4(l)(i) of the Transferor Disclosure Schedule, no application,
action or proceeding is pending for the renewal or modification of the
MCI FCC License, and no application, complaint, action or proceeding
is pending or, to the Knowledge of MCI, threatened, that may result in
the revocation, modification, non-renewal or suspension of the license
or the imposition of any administrative or judicial sanction with
respect to MCI. MCI has no Knowledge of any failure of MCI to comply
(whether or not known by or disclosed to the FCC or any other Person)
in all material respects with all Regulatory Provisions applicable to
the U.S. Satellite Business, and with the terms and conditions of the
MCI FCC License, including, but not limited to, any due diligence
obligations or reporting requirements associated with the MCI FCC
License.
(iv) Except for the Earth Station Authorizations,
neither ASkyB nor News Corporation holds or controls any license in
connection with the U.S. Satellite Business contemplated to be
operated by MCI, News Corporation and ASkyB.
(v) Section 4(l)(v) of the Transferor Disclosure
Schedule sets forth a listing of all insurance policies in force
associated with any satellite or other facility related to the
Transferred Assets. Each such insurance policy is in full force and
effect, and the rights of the parties thereunder will not be affected
in any material respect by the transactions contemplated by this
Agreement or any Collateral Agreement.
(vi) Except as contemplated by Section 5(b) hereof,
no consent, approval, authorization, order or waiver of, or filing
with, the FCC is required under the applicable Regulatory Provisions
to be obtained or made by MCI in connection with the transactions
contemplated by this Agreement, except such as may already have been
obtained and made.
(m) Transferred Assets
<PAGE>
(i) No Person other than the Transferors and their
respective Affiliates has any right, title or interest in, or with
respect to, the MCI FCC License, and the rights being transferred by
MCI hereunder with regard to the MCI FCC License, constitute all of
the rights, including contractual rights, held by the Transferors and
their respective Affiliates with regard to the MCI FCC License. Any
rights of News Corporation or ASkyB or any of their Affiliates
relating to the MCI FCC License are either included in the Transferred
Assets or will be terminated prior to the Closing.
(ii) No Person, other than ASkyB, has any right, title
or interest in, or with respect to, the Earth Station Authorizations,
and the rights being transferred by ASkyB hereunder with regard to the
Earth Station Authorizations constitute all of the rights, including
contractual rights, held by ASkyB with regard to the Earth Station
Authorizations. The Satellite Contracts include all of the contracts,
agreements, understandings, rights, insurance policies and
arrangements necessary for the construction, launch or insurance of
Sky I and Sky II. The Gilbert Contracts include all of the maintenance
and equipment contracts, agreements, understandings, rights,
warranties and arrangements of ASkyB with respect to the Gilbert
Property.
(n) Broker's Fees. The Transferors do not have any Liability or
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement for which the Seller
would be liable.
(o) Resale. Each of the ASkyB Buyer and the MCI Buyer is acquiring the
Shares under this Agreement for its own account solely for the purpose of
investment and not with a view to, or for offer or sale in connection with, any
distribution thereof in violation of the Securities Act. Each of the ASkyB Buyer
and the MCI Buyer has such knowledge and experience in financial and business
matters as to be capable of evaluating the risks and merits of an investment in
the Shares and is able to bear the economic risk of such investment. Each of the
ASkyB Buyer and the MCI Buyer acknowledges and agrees that none of the Shares
have been registered under the Securities Act and such Shares may be sold or
disposed of in the absence of such registration only pursuant to an exemption
from such registration and in accordance with the terms of this Agreement and
Seller's transfer agent is authorized to place stop transfer instructions on the
Seller's stock transfer records and may refuse to transfer any Shares not
transferred in compliance therewith or in compliance with the restrictions on
transfer set forth in Section 9(m).
5. Further Agreements of the Parties
(a) General. Each of the Parties will cooperate to its fullest extent
and use its respective best efforts to take all action and to do all things
necessary, proper, or advisable to consummate and make effective the
transactions contemplated by this Agreement (including satisfying the closing
conditions set forth in Section 6 below) as soon as practicable following the
date of this Agreement.
(b) Notices and Consents. Seller shall give all required notices to
its stockholders and to third parties, and shall use its best efforts to obtain
all required consents, including, without limitation, all Requisite Corporate
Approvals and all required consents of Seller's bondholders, all consents
required by Nasdaq or any other exchange where Seller's securities may be listed
or trading and any other material third-party consents that may be required or
that the Transferors reasonably may request, in connection with the transactions
contemplated by this Agreement. Each of the Transferors shall give all required
notices to third parties, and shall use its best efforts to obtain all required
consents, including, without limitation, all consents required by counterparties
to the Satellite Contracts, regulatory authorities and any other material
third-party consents that may be required or that Seller reasonably may request,
in connection with the transactions contemplated by this Agreement. Within five
(5) calendar days following the date of this Agreement, each of the Parties
shall file any Notification and Report Forms and related materials that it may
be required to file with the Federal Trade Commission ("FTC") and the Antitrust
Division of the United States Department of Justice (the "Antitrust Division")
under the Hart-Scott-Rodino Act, and shall make any further filings pursuant
thereto that may be necessary, proper or advisable. Within five (5) calendar
days following the date of this Agreement, each of the Parties shall make all
notifications and file all applications and related materials that it may be
required to file with the FCC or any other federal, state or foreign government
<PAGE>
or governmental agency having authority with respect to licenses, permits or
authorizations for the use of orbital slots or the provision of communications
services or other communications licenses, permits or authorizations in
connection with the transactions contemplated hereby, and shall use its best
efforts to obtain at the earliest practicable date all necessary consents,
authorizations and approvals, including FCC Approval for assignment of the MCI
FCC License. As promptly as is practicable after the date of this Agreement,
each of the Parties shall take any additional action, including, without
limitation, the implementation of an Acceptable Alternative Arrangement, and any
additional filings, submissions or applications required by the FCC, the FTC and
the Antitrust Division, that may be necessary, proper or advisable to effect to
the fullest extent feasible the consummation of the transactions contemplated by
this Agreement and the Collateral Agreements in connection with any other
notices to, filings with, and authorizations, consents and approvals of,
governments, governmental agencies and third parties that it may be required to
give, make or obtain and shall refrain from taking any action the purpose or
effect of which could reasonably be expected to make less likely that such
authorizations, consents and approvals will not be given, made or obtained on
the terms provided for in this Agreement. Without limiting the generality of the
foregoing, each party shall: (i) use all reasonable efforts to cooperate in all
respects with each oher in connection with any filing, submission, adversarial
proceeding or the timing thereof; (ii) in connection with any investigation or
other inquiry, including any proceeding initiated by a private party, keep the
other parties informed on a timely basis of any material communication received
by such party from, or given by such party to, the FTC, the Antitrust Division,
the FCC or any other governmental authority and of any material communication
received or given in connection with any proceeding by a private party, in each
case regarding any of the transactions contemplated by this Agreement, and
permit any other party to preview any material communication given by or to it;
and (iii) consult with each other, in advance of any meeting or conference with
such governmental authorities or, in connection with any proceeding by a private
party. The Parties will use their best efforts to obtain such approvals as
promptly as possible and, in this regard, provide all information reasonably
requested, assist and cooperate with one another to make the necessary filings
and take such steps as may be necessary to secure the non-objection of the
relevant antitrust and regulatory authorities, including FCC Approval for
assignment of the MCI FCC License.
(c) Operation of Business
(i) During the period between the date hereof and the
Closing Date, (A) each of the Transferors shall use commercially
reasonable efforts in the Ordinary Course of Business, (1) to preserve
the value and utility of the Transferred Assets, (2) to preserve the
goodwill of its suppliers and others having business relations with
such Transferor with respect to any Transferred Assets and (3) to
perform and observe all the terms, covenants and conditions required
to be performed and observed by it under the Satellite Contracts and
all FCC and other governmental permits, licenses and other
authorizations with respect to the Transferred Assets, in each case,
except to the extent that a failure to do so would not result in a
Transferred Asset Material Adverse Effect; provided, however, that
timely requests for extension of operation or certification deadlines
applicable to Earth Station Authorizations shall be deemed to be a
commercially reasonable effort required by this paragraph; (B) except
as contemplated by this Agreement, the Transferors shall not agree to
materially modify the deliverables pursuant to, or waive any material
performance under, any of the Assigned Contracts without the consent
of Seller, which consent shall not be unreasonably withheld; (C)
except for the issuance of shares of Common Stock pursuant to the
exercise of outstanding rights, warrants, options, convertible
securities or exchangeable securities (including any of the foregoing
that are assumed in connection with the acquisition of any Person),
Seller shall not issue any shares of Common Stock (or securities
convertible into or exchangeable for Common Stock) at a price per
share (or having a conversion or exchange price per share, if a
security convertible into or exchangeable for Common Stock) less than
the Current Market Price per share of Common Stock; (D) Seller shall
not issue or fix a record date for the issuance to holders of Common
Stock of righs, options, or warrants to subscribe for or purchase
Common Stock (or securities convertible into or exchangeable for
Common Stock) at a price per share (or having a conversion or exchange
price per share, if a security convertible into or exchangeable for
Common Stock) less than the Current Market Price per share of Common
Stock (excluding any of the foregoing that are assumed or issued in
connection with the acquisition of any Person); and (E)
<PAGE>
MCI shall take all actions reasonably necessary to keep the MCI FCC
License in full force and effect until the Closing.
(ii) If it comes to the attention of any of the
Transferors that any events or circumstances regarding the Transferred
Assets require the taking of any action to preserve the value and
utility of the Transferred Assets, such Transferor will (A) promptly
notify Seller of such events or circumstances and of any potential
responses to such events and circumstances of which such Transferor is
aware and (B) take such actions as shall be requested by Seller and
reasonably required to preserve such value and utility.
(iii) At any time after the date hereof, until the
date that is 30 days prior to the Closing Date, Seller may notify the
Transferors in writing that it does not require the assignment of one
or more of the Gilbert Contracts. In such case, the Transferors shall
be permitted to terminate any such contract, and it shall be
designated an "Excluded Contract" for purposes of this Agreement and
shall no longer be included in the Transferred Assets.
(d) Assignment of the MCI FCC License. In accordance with Section 5(b),
upon execution of this Agreement, ASkyB, News Corporation, MCI and Seller shall
seek FCC Approval of the assignment of the MCI FCC License to Seller or Newco.
Each of the Transferors and Seller shall take all reasonable steps necessary,
and shall supply to the other parties and/or to the FCC all information
reasonably necessary, to obtain such FCC Approval, and shall take all reasonable
steps necessary, including the implementation of an Acceptable Alternative
Arrangement, to effect to the fullest extent feasible the consummation of the
transactions contemplated in this Agreement and the Collateral Agreements , and
shall cooperate with respect to any required submission to the FCC and/or the
International Telecommunication Union, including any submission required to
allow use of the 110(0) and 119(0) West Longitude orbital locations in
conjunction with a single consumer satellite receive antenna; provided, however,
that nothing contained in this Agreement shall create any obligation on the part
of Seller to accept (as a condition to receipt of such FCC Approval or
otherwise): (i) any restriction (other than a restriction imposed in respect of
the identity of the owners of Seller's outstanding voting securities) on the
right of Seller to operate pursuant to the MCI FCC License or the DBS
authorizations held by Subsidiaries of Seller with respect to frequency channels
at 61.5(degree) West Longitude, 119(degree) West Longitude and 148(degree) West
Longitude orbital locations, including, without limitation, the right to use all
assigned frequency channels authorized thereunder to provide high-powered DBS
services, other than any such restrictions generally imposed on operators of
high-powered DBS services, by applicable Regulatory Provisions and restrictions
of the types generally and customarily imposed by the FCC on operators of
high-powered DBS services and such other restrictions, which, individually or in
the aggregate, do not have a Transferred Asset Material Adverse Effect or a
Seller Material Adverse Effect; (ii) any change in the management or ownership
(other than as contemplated hereunder) of Seller, or in any voting or other
rights of any shareholder of Seller other than the Transferors; or (iii) a
requirement that Seller dispose of all or any part of the 21 frequency channels
at 119(Degree) West Longitude, the 11 frequency channels at 61.5(Degree) West
Longitude or the 24 frequency channels at 148(Degree) West Longitude owned by
Subsidiaries of Seller, other than any such restrictions generally imposed on
operators of high-powered DBS services, by applicable regulatory provisions and
restrictions of the types generally and customarily imposed by the FCC on
operators of high-powered DBS services and such other restrictions, which,
individually or in the aggregate, do not have a Seller Material Adverse Effect
(each of the conditions contained in the foregoing Sections 5(d)(i), (ii) and
(iii), which Seller is under no obligation to accept, are referred to herein as
a "Material Condition"). If the parties implement an Acceptable Alternative
Arrangement in lieu of assigning the MCI FCC License to Seller as provided
herein, Seller shall have the continuing right and option, exercisable in its
sole discretion, and for no additional consideration to the Transferors beyond
that contemplated by this Agreement, to require the Transferors to immediately
assign the MCI FCC License to Seller, upon receipt of FCC Approval, in which
case the Acceptable Alternative Arrangement shall be canceled concurrently with
the effectiveness of such assignment. MCI shall continue to perform all of its
material obligations under the MCI FCC License until the earlier of the Closing
Date or the date of termination of this Agreement, and shall continue to remain
in "diligence" (as the term is used in the FCC's rules and as defined in the
Regulatory Provisions), and to hold a valid authorization for its DBS System,
until the earlier of the Closing Date or the date of termination of this
Agreement. If the Closing Date shall not have occurred by December 20, 2000, MCI
shall confirm to Seller completion of construction of the first satellite on its
<PAGE>
proposed DBS system by December 20, 2000.
(e) Earth Station Authorization. Subject to Section 4(l)(ii) of the
Transferor Disclosure Schedule, until the earlier of the Closing Date or
termination date of this Agreement, ASkyB shall continue to perform all of its
obligations under its Earth Station Authorizations and to hold valid
authorizations (including through seeking the extension of deadlines for
construction and certification contained in the existing authorizations).
(f) Satellites
(i) From the date of this Agreement until the Closing
Date, the Transferors agree to continue to perform their respective
obligations under the Satellite Contracts.
(ii) The Transferors hereby confirm that, pursuant to
the Contract dated February 26, 1996 between MCI and Space Systems
Loral, Inc. ("Loral"), as amended by Amendment No. 1 dated March 26,
1996, and Amendment No. 2 dated as of November 25, 1998 (as amended,
the "Loral Contract"), the acceptance on-orbit of Satellite No. 1 (as
defined in the Loral Contract) ("Sky I") is scheduled to occur no
later than August 31, 1999 (subject to launch vehicle availability, as
set forth in Amendment No. 2 to said Contract). The Transferors agree
to attempt to integrate satellite construction and launch preparation
as expeditiously as possible so as to provide for the potential to
move up the launch dates for each of Sky I and Sky II in the event
that earlier launch dates become available. Notwithstanding anything
to the contrary in this Section 5(f)(ii), the Transferors shall have
no obligation to approve the launch of Sky I for a date prior to the
Closing Date; provided, however, that the Transferors shall use their
best efforts to ensure that the launch shall occur at the earliest
practicable date following the Closing in accordance with the terms
and provisions of the Loral Contract, including, to the extent
permitted under the Loral Contract, delaying the launch date for the
shortest incremental periods of time possible which are consistent
with the then reasonably anticipated Closing Date.
(iii) Transferors hereby agree to direct Loral to
resume work immediately after the date hereof on Satellite No. 2 (as
defined in the Loral Contract) ("Sky II") by exercising Option No. 3
of the Loral Contract (as defined in Amendment No. 2 of the Loral
Contract). Transferors hereby confirm that Loral has agreed to use its
best efforts to ship and launch Sky II by the fourth quarter of 1999.
(iv) As soon as reasonably practicable following the
Closing Date, the Transferors agree to provide to Seller, at no cost
to Seller, the consulting services of Romulo Pontual with respect to
the construction and launch of Sky I and Sky II, which services shall
be provided on an "as needed" basis, up to the full time and efforts
of Mr. Pontual.
(v) Prior to the Closing Date, the Transferors shall
use commercially reasonable efforts consistent with past practice to
provide that Loral will continue to perform under the Satellite
Contracts in accordance with their terms in order to achieve
completion of construction and launch of each of Sky I and Sky II at
the earliest practicable date.
(vi) On or prior to the Closing Date, the Transferors
shall provide for policies of insurance covering Sky I and Sky II,
which policies shall either name Seller or a wholly owned Subsidiary
of Seller designated by Seller as the named insured, or cause such
policies to be issued in the name of Seller or such Subsidiary,
providing for insurance in the amount of $225 million per satellite
and continuing for one year following launch, regardless of the actual
date of launch, and which shall otherwise contain such customary terms
and conditions as Seller reasonably requests; provided, however, that
to the extent the Transferors are able to terminate existing policies
and receive a full refund in respect thereof, Seller may request the
Transferors to procure, and if requested the Transferors shall
procure, from such insurance companies or brokers as Seller directs,
insurance ("Seller's Launch Insurance") in the amount of $225 million
per satellite, per launch plus one year in orbit, containing such
customary industry terms and conditions as Seller shall reasonably
request.
<PAGE>
(vii) Subject to Section 8(b) of this Agreement, from
and after the Closing Date, the Transferors shall continue to pay, on
behalf of Seller, as and when due, all amounts due under the Satellite
Contracts, as such obligations to pay arise pursuant to the Satellite
Contacts in existence as of the Closing Date, or, in the event of a
breach or termination of any Satellite Contract for any reason, as
such obligations to pay would reasonably be expected to have arisen
pursuant to the Satellite Contracts in existence as of the Closing
Date had there been no such breach or termination; provided, however,
that if Seller agrees to a modification of any of the Satellite
Contracts and as a result is entitled to a reduction in the purchase
price therein, the Transferors shall be only obligated to pay the
purchase price as so reduced. In the event the Transferors fail to
make such payments within the time periods provided in the Satellite
Contracts, the Transferors shall either (x) pay, in addition to the
amounts due, any penalties that become due under the Satellite
Contracts as a result of such failure or (y) in the event that Seller
elects to make such payments, promptly pay to Seller an amount equal
to such payments, together with interest thereon at a rate of 17.5%
per annum from the date of Seller's payment until the date of the
Transferors' repayment.
(viii) In the event the Transferors are unable to
procure the necessary consents to assignment of any of the Satellite
Contracts, from and after the Closing Date the Transferors shall use
their respective best efforts to provide to Seller all of the benefits
received or to be received under such Satellite Contracts, and the
Transferors shall assign to Seller all of their right, title and
interest in and to each of Sky I and Sky II immediately following
their receipt of title thereto from Loral pursuant to Section 12.1 of
the Loral Contract. In addition, from and after the Closing Date, if
the Transferors have not assigned all of the Satellite Contracts
pursuant to this Agreement, Seller shall have the right to direct all
actions to be taken in connection with such unassigned Satellite
Contracts.
(g) Sony Contract.
(i) From and after the Closing Date, the Transferors
shall continue to pay, on behalf of Seller, as and when due, all
amounts due under the Sony Contract as such obligations to pay arise
pursuant to the Sony Contract in existence as of the Closing Date, or,
in the event of a breach or termination of the Sony Contract for any
reason, as such obligations to pay would reasonably be expected to
have arisen pursuant to the Sony Contract in existence as of the
Closing Date hereof had there been no such breach or termination;
provided, however, if Seller agrees to a modification of the Sony
Contract and as a result is entitled to a reduction in the purchase
price therein, the Transferors shall be only obligated to pay the
purchase price as so reduced. In the event the Transferors fail to
make such payments within the time periods provided in the Sony
Contract, the Transferors shall either (x) pay, in addition to the
amounts due, any penalties that become due under the Sony Contract as
a result of such failure or (y) in the event that Seller elects to
make such payments, promptly pay to Seller an amount equal to such
payments, together with interest thereon at a rate of 17.5% per annum
from the date of Seller's payment until the date of the Transferors'
repayment.
(ii) In the event the Transferors are unable to
procure the necessary consents to assignment of the Sony Contract,
from and after the Closing Date the Transferors shall use their
respective best efforts to provide to Seller all of the benefits
received or to be received under the Sony Contract. In addition, from
and after the Closing Date, if the Transferors have not assigned the
Sony Contract pursuant to this Agreement, Seller shall have the right
to direct all actions to be taken in connection with the Sony
Contract.
(h) Full Access. From the date of this Agreement through the Closing,
each of the Transferors, on the one hand, and Seller, on the other hand,
shall afford to the other party and its representatives free and full access
at all reasonable times to the properties, personnel, books and records
relating to the Transferred Assets or of the Seller, as the case may be (such
access not to unreasonably interfere with the business of such party),
subject to compliance with all export control restrictions, to the extent
applicable, in order that the other party may have full opportunity to make
such investigations as it may reasonably desire to make of all matters
relating to the transactions contemplated hereunder. Notwithstanding the
foregoing, Seller shall not be obligated to
<PAGE>
disclose any information that is competitively sensitive or strategically
sensitive, and if Seller shall determine to withhold any information on such
grounds, a reasonable summary of the portions thereof that are not competitively
or strategically sensitive shall be provided to the party requesting information
pursuant to this Section 5(h). Any information provided pursuant to this Section
5(h) shall be kept confidential by the Transferors and Seller, as applicable,
and shall not be revealed to any Person other than the respective officers,
directors, employees, agents and representatives of such parties (it being
agreed that the Transferors, on the one hand, and Seller, on the other hand,
shall be liable for any breach of this Section 5(h) by any of their respective
officers, directors, employees, agents and representatives), except to the
extent such information (i) is or becomes generally available to the public
(other than as a result of a breach of this Section 5(h) by the recipient of
such information) or (ii) is required to be disclosed under any applicable law
or under subpoena or other legal process. No such investigation shall diminish
in ay respect any of the representations or warranties of the Parties. The
Parties shall be entitled to seek injunctive relief or such other remedy as may
be available at law or in equity for any breach by another Party of this
Section.
(i) Notice of Developments. Each Party will give prompt written notice
to the others of any material development affecting the ability of the Parties
to consummate the transactions contemplated by this Agreement or any of the
Collateral Agreements, including, but not limited to, a breach of a
representation, warranty or covenant of this Agreement. No disclosure by any
Party pursuant to this Section 5(i) shall, however, be deemed to amend or
supplement the Seller Disclosure Schedule or Transferor Disclosure Schedule or
to prevent or cure any misrepresentation, breach of warranty or breach of
covenant.
(j) NDS Equipment. The Parties agree that all equipment previously
delivered by any Affiliate of News Corporation to Seller or its Subsidiaries
(the "NDS Equipment") at its broadcast operations center at Cheyenne, Wyoming or
elsewhere, will be removed by News Corporation or an Affiliate at the expense of
News Corporation or such Affiliate. The Parties further agree that any
agreements related to the acquisition and delivery of the NDS Equipment are
terminated as of the date of this Agreement and shall be of no further force or
effect. News Corporation, on the one hand, and the Seller, on the other hand, on
behalf of themselves and their respective Affiliates, agree to fully, finally
and forever release and discharge Seller or News Corporation, as the case may
be, and their respective Affiliates, officers, directors, employees,
representatives and agents from and against any and all claims, actions,
damages, liabilities, costs or expenses arising out of or relating to the NDS
Equipment.
(k) Abeyance of EchoStar Litigation. Seller, News Corporation and
ASkyB shall promptly as practicable following the date of this Agreement file
the Stipulation annexed as Exhibit H hereto with the United States District
Court for the District of Colorado to stay all discovery, deadlines, motions and
other proceedings in EchoStar Communications Corporation v. The News Corporation
Limited, pending in the United States District Court for the District of
Colorado (the "EchoStar Litigation").
(l) Transfer Taxes and Prorations. Any sales or other transfer taxes
resulting from the transfer of the Transferred Assets shall be borne one-half by
the Transferors, on the one hand, and one-half by the Seller, on the other hand.
Notwithstanding the foregoing, real estate taxes and other customary prorations
made in connection with the sale of real property in the state of Arizona shall
be made as of the Closing Date in accordance with Arizona custom and usage.
(m) Further Assurances. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement or the Collateral Agreements or the transactions contemplated hereby
or thereby, including, among other things, the orderly transfer and transition
of the Transferred Assets from the Transferors to Seller or Newco, as the case
may be, each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
Party reasonably may request, the costs and expenses of such actions to be borne
one-half by the Transferors, on the one hand, and one-half by the Seller, on the
other hand, except as otherwise provided in this Agreement or any of the
Collateral Agreements. None of the Parties shall take any action or fail to take
any action which would reasonably be expected to frustrate the intent and
purposes of this Agreement and the Collateral Agreements or the transactions
contemplated hereby or thereby.
<PAGE>
(n) No Solicitation. Except for the transactions contemplated by
this Agreement, from and after the date of this Agreement, until the date of an
FCC Order or, in the case of a Bureau Order, the later of October 31, 1999 or
five days from the date of such Bureau Order, none of the Transferors shall, nor
shall they authorize or permit any officer, director or employee of, or any
investment banker, attorney, accountant, or other representative retained by,
any one of them to, directly or indirectly, solicit, initiate, encourage or
entertain (including by way of furnishing information) discussions, inquiries,
offers or proposals or participate in any discussions or negotiations for the
purpose or with the intention of leading to any proposal or offer from any
Person which constitutes or concerns, or may reasonably be expected to lead to,
any proposal for a merger or other business combination involving any proposal
or offer to acquire any portion of the Transferred Assets. Each of the
Transferors shall promptly (and in any event within two business days) notify
Seller of any inquiry it receives from any Person with respect to the subject
matter of the first sentence of this Section 5(n).
(o) Bundling. Seller and MCI agree that, following the Closing, MCI
shall have the non-exclusive right to bundle Seller's DBS service with MCI's
telephony service offerings on mutually agreeable terms.
(p) Casualty; Condemnation.
(i) The Transferors, after learning of any fire or
other casualty on or to the Gilbert Property, shall promptly notify
Seller thereof, and, as soon as reasonably practicable thereafter, the
Transferors shall provide Seller with an estimate of the cost of
repairs and the amount of insurance proceeds available to undertake
such repairs. Within ten (10) days after receipt of such notices and
estimates, Seller shall in turn notify the Transferors whether Seller
wants the Transferors to commence repair of the resultant damage of
the Gilbert Property. If Seller wants the Transferors to so commence,
or if Transferors, in the exercise of prudent business judgment,
decide to so commence, the Transferors shall proceed to repair the
Gilbert Property but shall not be obligated to expend more than any
collected insurance proceeds and the amount of any insurance
deductible. Should such fire or other casualty create an emergency
situation, the Transferors may elect to take such measures to protect,
secure and repair the Gilbert Property as the Transferors in their own
discretion determine. At the Closing Date, the Transferors shall pay
to Seller any proceeds they have received in respect of any such fire
or other casualty; provided, however, that if the Transferors have
undertaken any repairs in accordance with this Section 5(p)(i), the
Transferors shall turn over to Seller the balance of any unused
insurance proceeds in the Transferors' possession. At the Closing, the
Transferors shall also assign (without warranty or recourse to the
Transferors) to Seller all of the Transferors' rights to any payments
to be made after the Closing Date under any hazard insurance policy
then in effect with respect to the Gilbert Property. If it is
necessary to prosecute a claim to maximize the proceeds of insurance
recovery, from and after the Closing Date the Transferors shall
diligently undertake such prosecution for the benefit of Selle. The
Transferors shall not enter into any agreement to undertake repairs
with a term that extends beyond the Closing Date without the prior
written consent of Seller, which consent shall not be unreasonably
withheld. Following the Closing Date, except as set forth above, the
Transferors shall have no further liability or responsibility with
respect to any such preceding fire or other casualty at the Gilbert
Property. Following the Closing Date, Seller shall reimburse the
Transferors for the cost of any repairs made by the Transferors prior
to the Closing and not reimbursed by the Transferors' hazard insurance
company, to the extent Seller receives any insurance proceeds from and
after the Closing Date.
(ii) At the Closing Date, the Transferors shall pay
to Seller any proceeds it has received in respect of any taking of any
part of the Gilbert Property, and shall assign to Seller without
recourse or warranty its right to any future proceeds in respect
thereof. Following the Closing Date, the Transferors shall have no
further liability or responsibility with respect to any such preceding
taking or proceeding regarding the Gilbert Property. If it is
necessary to prosecute a claim to maximize the proceeds of taking
recovery, from and after the Closing Date the Transferors shall
diligently undertake such prosecution for the benefit of Seller.
(q) Title Insurance. ASkyB will obtain, not later than thirty
<PAGE>
(30) calendar days following the date of this Agreement with respect to the
Gilbert Property, a commitment for an extended coverage ALTA Owner's Policy of
Title Insurance Form 1992 issued by a Chicago Title Insurance Company or such
other title insurer reasonably satisfactory to Seller (and, if requested by
Seller, reinsured in whole or in part by one or more insurance companies and
pursuant to a direct access agreement reasonably acceptable to Seller), such
amount as Seller reasonably may determine to be the fair market value of such
real property (including all improvements located thereon), insuring title to
such real property to be in the name of Seller as of the Closing (subject only
to the title exceptions described above in Section 4(g)(i) of the Transferor
Disclosure Schedule) and containing in substance such endorsements as ASkyB
obtained in Chicago Title Insurance Company Policy No. 106 0000449, a copy of
which has been furnished to Seller. The cost of such title policy shall be borne
one-half by the Transferors, on the one hand, and one-half by Seller, on the
other hand.
(r) Surveys. With respect to the Gilbert Property, ASkyB will procure in
preparation for the Closing a current survey certified to Seller, prepared by a
licensed surveyor and conforming to current ATLA Minimum Detail Requirements for
Land Title Surveys, disclosing the location of all improvements, easements,
party walls, sidewalks, roadways, utility lines, and other matters shown
customarily on such surveys, and showing access affirmatively to a public street
or road (the "Survey"). The cost of the Survey shall be borne one-half by the
Transferors, on the one hand, and one-half by Seller, on the other hand.
6. Conditions to Obligation to Close
(a) Conditions to Obligation of the Transferors. The obligation of each
of the Transferors to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions on or prior to the Closing, any of which may be waived by News
Corporation:
(i) The representations and warranties of Seller set
forth in Sections 3(b)(i), 3(c)(i), 3(d)(ii), 3(e), 3(g)(A), 3(g)(D)
and 3(h)(iii) that are qualified by materiality or a material adverse
effect shall be true and correct at and as of the Closing Date, and
all other representations and warranties of Seller set forth in such
Sections that are not so qualified shall be true and correct in all
material respects at and as of the Closing Date, except, in each case,
(i) for such representations and warranties that are expressly made as
of an earlier date in which case such representations and warranties
shall only be true and correct on and as of such earlier date and (ii)
as disclosed in the Seller Disclosure Schedule;
(ii) Seller shall have procured all of the consents
and approvals specified in Section 6(a)(ii) of the Seller Disclosure
Schedule;
(iii) There shall be no statute, law, judgment,
decree, injunction, rule or order of any federal, state, local or
foreign government, governmental authority, governmental department,
commission, administrative or regulatory agency, instrumentality,
court or arbitrator ("Governmental Entities") outstanding that
prohibits, restricts or delays consummation of the transactions
contemplated by this Agreement;
(iv) Seller shall have delivered to the Transferors a
certificate, dated the Closing Date, in form and substance reasonably
satisfactory to the Transferors, executed by an executive officer of
Seller, to the effect that each of the conditions specified above in
Section 6(a)(i)-(iii) is satisfied in all respects;
(v) All applicable waiting periods (and any
extensions thereof) under the Hart-Scott-Rodino Act shall have expired
or otherwise been terminated, and the Parties shall have received the
FCC Approval and other authorizations, consents and approvals of other
Governmental Entities set forth in the Seller Disclosure Schedule and
the Transferor Disclosure Schedule;
(vi) The Transferors shall have received from counsel
to Seller an opinion addressed to the Transferors and dated as of the
Closing Date in form and substance reasonably satisfactory to the
Transferors;
<PAGE>
(vii) Seller shall have executed and delivered to the
Transferors the Registration Rights Agreement;
(viii) Seller shall have executed and delivered, and
shall have caused Charles W. Ergen to execute and deliver, to the
Transferors the Settlement Agreement and Mutual Release;
(ix) Seller shall have caused to be executed and
delivered to the Transferors the Set Top Box Agreement;
(x) Seller shall have executed and delivered to the
Transferors the Retransmission Consent Agreement; and
(xi) Seller shall have executed and delivered to the
Transferors an Assignment and Assumption Agreement with respect to the
Assigned Contracts, in a form to be mutually agreed upon by the
parties thereto (the "Contract Assignment and Assumption"), and the
assumption of the Assigned Contracts and the MCI FCC License shall be
effective as of the Closing Date.
In the event that one or more of the preceding conditions to the
Transferor's obligations to close have not been satisfied on or prior to the
Closing Date, the Transferors may nonetheless proceed to close (without waiving
such condition) and seek a purchase price adjustment from or pursue a cause of
action for damages against Seller for the failure of Seller to satisfy such
condition.
(b) Conditions to Obligation of Seller. The obligation of Seller to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions on or prior to the
Closing, any of which may be waived by Seller:
(i) The representations and warranties of each of the
Transferors set forth in Sections 4(b) (excluding the representations
and warranties with respect to good standing status), 4(c)(i), 4(d),
4(f)(A), 4(h)(iii)(A), 4(h)(iii)(B), 4(h)(iii)(C), 4(l)(i) and 4(m)(i)
that are qualified by reference to materiality or a material adverse
effect shall be true and correct at and as of the Closing Date, and
all other representations and warranties set forth in such sections
that are not so qualified shall be true and correct in all material
respects at and as of the Closing Date except, in each case, (i) for
such representations and warranties that are expressly made as of an
earlier date, in which case such representations and warranties shall
only be true and correct on and as of such earlier date and (ii) as
disclosed in the Transferor Disclosure Schedule;
(ii) The Transferors shall have procured all of the
consents specified in Section 6(b)(ii) of the Transferor Disclosure
Schedule; provided, however, that if the Transferors are unable to
procure a consent to the assignment of an Assigned Contract, but are
able to provide Seller with all of the benefits under such Assigned
Contract at no additional cost to Seller, then Seller shall waive this
condition with respect to such Assigned Contract;
(iii) There shall be no statute, law, judgment,
decree, injunction, rule or order of any Governmental Entity which
prohibits, restricts or delays consummation of the transactions
contemplated by this Agreement;
(iv) Each of the Transferors shall have delivered to
Seller a certificate, dated the Closing Date, in form and substance
reasonably satisfactory to Seller, executed by an executive officer of
each of the Transferors, respectively, to the effect that (A) each of
the conditions specified above in Section 6(b)(i)-(iii) is satisfied
in all respects and (B) the representations and warranties set forth
in Section 4(o) are true and correct in all material respects;
(v) All applicable waiting periods (and any
extensions thereof) under the Hart-Scott-Rodino Act shall have expired
or otherwise been terminated, and the Parties shall have received the
FCC Approval and other authorizations, consents and approvals of other
Governmental Entities set forth in the Seller Disclosure Schedule and
the Transferor Disclosure Schedule;
<PAGE>
(vi) Seller shall have received from counsel to MCI,
an opinion or opinions addressed to Seller and dated as of the Closing
Date in form and substance reasonably satisfactory to Seller;
(vii) The Transferors shall have executed and
delivered to Seller the Registration Rights Agreement;
(viii) The Transferors shall have executed and
delivered the Settlement Agreement and Mutual Release;
(ix) The Transferors shall have caused to be executed
and delivered to Seller the Set Top Box Agreement;
(x) The Transferors shall have caused to be executed
and delivered to Seller the Retransmission Consent Agreement;
(xi) The Transferors shall have caused to be executed
and delivered to Seller the Components License Agreement;
(xii) The Transferors shall have delivered to Seller a
Special Warranty Deed in the form of Exhibit I annexed hereto,
conveying the Gilbert Property to Seller;
(xiii) The Transferors shall have satisfied their
obligations contained in Section 5(f)(vi) hereof; and
(xiv) The Transferors shall have executed and
delivered to Seller the Contract Assignment and Assumption, and an
instrument or instruments of transfer in form and substance reasonably
satisfactory to Seller with respect to the transfer of the Earth
Station Authorizations and the Intellectual Property set forth in
Section 2(b)(vi), and the assignment of all Assigned Contracts, the
MCI FCC License, the Earth Station Authorization and the Intellectual
Property shall be effective as of the Closing Date.
In the event that one or more of the preceding conditions to
Seller's obligations to close have not been satisfied on or prior to the Closing
Date, Seller may nonetheless proceed to close (without waiving such condition)
and seek a purchase price adjustment from or pursue a cause of action for
damages against the Transferors for the failure of the Transferors to satisfy
such condition.
7. Remedies for Breach of this Agreement
(a) Survival. All covenants and agreements contained in this Agreement
and the right to indemnification with respect to all representations and
warranties contained in this Agreement or in any certificate, document or
statement delivered pursuant hereto, shall survive (and not be affected in any
respect by) the Closing, any investigation conducted by any party hereto and any
information which any party may receive. Notwithstanding anything to the
contrary in the foregoing, the right to indemnification with respect to each
representation and warranty (but not the covenants and other agreements)
contained in this Agreement or made pursuant to any certificate, document or
statement delivered pursuant hereto shall terminate on the last day of the
eighteenth month after the month that includes the Closing Date (the "Survival
Date"); provided, however, that the right to indemnification with respect to
such representations and warranties, and the Liability of any party with respect
thereto, shall not terminate with respect to any claim, whether or not fixed as
to Liability or liquidated as to amount, with respect to which such party has
been given written notice prior to the Survival Date.
(b) Indemnification Provisions for Benefit of the Transferors. Seller
shall indemnify each of the Transferors and their respective shareholders,
officers, directors, employees, agents and Affiliates (collectively, "Transferor
Indemnitees") and hold each of them harmless from and against and in respect of
any Damages directly or indirectly incurred by any of them as a result of any
breach of a representation, warranty, covenant or agreement of Seller made
hereunder. For purposes of determining any such Damages incurred by the
Transferor Indemnitees, no regard shall be given to the adjustment provisions
set forth in Section 2(a)(ii) hereof.
(c) Indemnification Provisions for Benefit of Seller. Each of News
Corporation, MCI and ASkyB, jointly and severally, shall indemnify Seller, and
its shareholders, officers, directors, employees, agents and Affiliates and hold
each of them harmless from and against and in respect of any Damages directly or
<PAGE>
indirectly incurred by any of them as a result of any breach of a
representation, warranty, covenant or agreement of News Corporation, ASkyB, the
ASkyB Buyer, MCI or the MCI Buyer made hereunder other than Section 4(g)(i), if
any Damages suffered as a result thereof are recoverable under Seller's title
insurance policy.
(d) Notification; Rights of Parties to Settle or Defend. Promptly after
the occurrence of any event which may give rise to a claim for indemnification
under this Section 7, the party entitled to indemnification (the "Indemnified
Party") shall notify the indemnifying party (the "Indemnitor") in writing of
such claim (the "Claims Notice"). The Claims Notice shall describe the asserted
liability in reasonable detail, and shall indicate the amount (estimated, if
necessary and to the extent feasible) of the Damages that have been or may be
suffered by the Indemnified Party. Failure by the Indemnified Party to give a
Claims Notice to the Indemnitor in accordance with the provisions of this
Section 7(d) shall not relieve the Indemnitor of its obligations hereunder
except to the extent that the Indemnitor has been actually and materially
prejudiced by such failure. The Indemnitor may elect to compromise or defend, at
its own expense, by its own counsel and to the extent an election with respect
to such compromise or defense is available to the Indemnified Party, any
asserted liability. If the Indemnitor elects to compromise or defend such
asserted liability, it shall within 30 calendar days (or sooner, if the nature
of the asserted liability so requires) notify the Indemnified Party of its
intent to do so, and the Indemnified Party shall cooperate, at the expense of
the Indemnitor, in the compromise of, or defense against, such asserted
liability. If the Indemnitor elects to defend any claim, the Indemnified Party
shall make available to the Indemnitor any books, records or other documents
within its control that are necessary or appropriate for such defense. If the
Indemnitor elects not to compromise or defend the asserted liability, fails to
notify the Indemnified Party of its election as herein provided or contests its
obligation to indemnify under this Agreement (or if counsel to the Indemnified
Party advises such party that there may be a potetial conflict of interest
between the Indemnitor and the Indemnified Party, or between the Indemnified
Party and any other indemnified party, or that different or additional defenses
from those available to the Indemnified Party may be available to any other
indemnified party), the Indemnified Party may pay, compromise or defend (at the
expense of the Indemnitor) such asserted liability as the Indemnified Party
considers appropriate. The Parties agree to cooperate fully with one another in
the defense, settlement or compromise of any asserted liability. Notwithstanding
the foregoing, neither the Indemnitor nor the Indemnified Party may settle or
compromise any claim over the objection of the other; provided, however, that
consent to settlement or compromise shall not be unreasonably withheld. In any
event, the Indemnified Party and the Indemnitor may participate, at their own
expense, in the defense of such asserted liability. For the avoidance of doubt,
the rights to indemnification under this Agreement shall arise in the event of
both claims asserted directly by one Party against the other as well as claims
asserted by third parties against a Party.
(e) Exclusive Remedy. Except with respect to a termination of this
Agreement pursuant to Section 8(a)(ii) or Section 8(a)(iii) hereof, the Parties
acknowledge and agree that the indemnity rights set forth in this Section 7 are
to be their exclusive monetary remedies for breaches of the representations,
warranties and covenants contained herein; provided, however, that nothing in
this Section 7(e) shall limit in any way the availability of specific
performance, injunctive relief or other equitable remedies to which a Party may
otherwise be entitled or a cause of action for fraud.
(f) Limitations. Any indemnity amounts payable by an Indemnitor
hereunder shall be net of any tax benefit received by the Indemnified Party as a
result of the claim or event giving rise to indemnification.
8. Termination
(a) Termination of Agreement.
The Parties may terminate this Agreement only as provided
below:
(i) The Parties may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(ii) The Transferors may terminate this Agreement by
giving written notice to Seller at any time prior to the Closing in
the event Seller is in breach, in any material respect, of any of the
representations and warranties set forth in Section 6(a)(i), unless
such breach shall be subject to cure, in which event termination may
<PAGE>
only be effected if such breach shall remain uncured on the 60th day
following receipt of notice of breach; provided, however, that if any
such breach is incapable of cure within 60 days and Seller acted
reasonably diligently during such 60-day period in attempting to cure
such breach, this Agreement shall not be terminated pursuant to this
Section 8(a)(ii) for so long as the breach remains subject to cure and
Seller acts continuously with reasonable diligence in attempting to
cure such breach;
(iii) Seller may terminate this Agreement by giving
written notice to the Transferors at any time prior to the Closing in
the event any of the Transferors is in breach, in any material
respect, of any of the representations and warranties set forth in
Section 6(b)(i), unless such breach shall be subject to cure, in which
event, termination may only be effected if such breach shall remain
uncured on the 60th day following receipt of notice of breach;
provided, however, that if any such breach is incapable of cure within
60 days and the breaching party acted reasonably diligently during
such 60-day period in attempting to cure such breach, this Agreement
shall not be terminated pursuant to this Section 8(a)(iii) for so long
as the breach remains subject to cure and the breaching party acts
continuously with reasonable diligence in attempting to cure such
breach; or
(iv) Either the Transferors or Seller may terminate
this Agreement by giving written notice to Seller or the Transferors,
as the case may be:
(A) if, within the later of (x) December 31, 1999
and (y) sixty (60) days following the date of a Bureau Order, the
FCC does not release a Preliminary FCC Approval, or if such
Preliminary FCC Approval is released within such sixty (60) day
period but does not become an FCC Approval within thirty (30)
days thereafter;
(B) if, within sixty (60) days following the date
of an FCC Order, the FCC does not release a Preliminary FCC
Approval, or if such Preliminary FCC Approval is released within
such sixty (60) day period but does not become an FCC Approval
within thirty (30) days thereafter; or
(C) if within sixty (60) days following the date
of an FCC Approval or FCC Order which conditionally grants the
FCC's consent to the assignment of the MCI FCC License to Seller
or Newco, the Parties are unable to satisfy a condition other
than a Material Condition.
(b) Effect of Termination
(i) If any Party terminates this Agreement pursuant
to Section 8(a), this Agreement shall become null and void and all
obligations of the Parties hereunder shall terminate without any
Liability of any Party to any other Party, except for (A) any
Liability of any Party then in breach and (B) the provisions of the
third sentence of Section 5(h) relating to confidential information
which shall survive termination.
(ii) Notwithstanding the foregoing, (A) if this
Agreement is terminated for any reason other than pursuant to
Section 8(a)(ii) or Section 8(a)(iii), Seller shall purchase from
the Transferors, and the Transferors shall sell to Seller, Sky II,
together with all rights associated therewith, immediately
following the later of the date of termination or the Transferors'
receipt of title to Sky II from Loral pursuant to Article 12.1 of
the Loral Contract, i.e., in-orbit delivery, at a purchase price
equal to the actual direct payments made under the Loral Contract
in respect of Sky II through the date of purchase, and Seller shall
assume all obligations of the Transferors with respect to Sky II
under Article 13 of the Loral Contract dealing with orbital
performance incentives; provided, however, that, as an alternative
to purchasing Sky II, Seller may, at its option, purchase Sky I,
together with all rights associated therewith, from the
Transferors, immediately following the later of the date of
termination or the Transferors' receipt of title to Sky I from
Loral pursuant to Article 12.1 of the Loral Contract, i.e.,
in-orbit delivery, at a purchase price equal to the actual direct
payments made under the Loral Contract in respect of Sky I through
the date of
<PAGE>
purchase, and Seller shall assume all obligations of Transferors with
respect to Sky I under Article 13 of the Loral Contract dealing with
orbital performance incentives; (B) if this Agreement is terminated by
the Transferors pursuant to Section 8 (a)(ii), the Transferors may
elect to sell to Seller, and if so elected Seller shall purchase from
the Transferors, at the Transferors' option, either Sky I or Sky II,
together with all rights associated therewith, immediately following
the later of the date of termination or the Transferors' receipt of
title thereto from Loral pursuant to Article 12.1 of the Loral
Contract, i.e, in-orbit delivery, at a purchase price equal to the
actual direct payments made under the Loral Contract in respect of Sky
I or Sky II, as applicable, through the date of purchase, and Seller
shall assume all obligations of the Transferors with respect to Sky I
or Sky II, as the case may be, under Article 13 of the Loral Contract
dealing with orbital performance incentives; or (C) if this Agreement
is terminated by Seller pursuant to Section 8(a)(iii), Seller may
elect to purchase from the Transferors, and if so elected the
Transferors shall sell to Seller, at Seller's option, either Sky I or
Sky II, together with all rights associated therewith, immediately
following the later of the date of termination or the Transferors'
receipt of title thereto from Loral pursuant to Article 12.1 of the
Loral Contract, i.e, in-orbit delivery, at a purchase price equal to
the actual direct payments made under the Loral Contract in respect of
Sky I or Sky II, as applicable, through the date of purchase, and
Seller shall assume all obligations of the Transferors with respect to
Sky I or Sky II, as the case may be, under Article 13 of the Loral
Contract dealing with orbital performance incentives. As an
alternative to the foregoing provisions with respect to the
Transferors' sale to Seller of Sky I or Sky II, and subject to Loral's
prior written consent, Transferors may assign to Seller the Loral
Contract as it relates to the applicable satellite, together with all
rights associated therewith. In all events, Transferors may also
assign Seller's Launch Insurance, if any, relating to the applicable
satellite, in which event, the purchase price for such satellite,
shall include the actual direct payments made with respect to such
satellite under Seller's Launch Insurance policy. The purchase price
for either Sky I or Sky II shall be payable in cash on or prior to the
180th day (the "Payment Date") following the assignment of the Loral
Contract, the termination of this Agreement or the Transferors'
receipt of title thereto from Loral pursuant to Article 12.1 of the
Loral Contract (the "Transfer Date"), i.e, in-orbit delivery, as
applicable, together with interest thereon at the LIBOR rate from the
Transfer Date to the payment date of such purchase price; provided,
however, that if Seller fails to pay such purchase price, together
with all accrued interest thereon, on or prior to the Payment Date,
interest will accrue on such unpaid purchase price and accrued
interest at a rate of 17.5% per annum from the 181st day following the
Transfer Date to the payment date therefor. All representations,
warranties and covenants of the Transferors in this Agreement with
respect to the Satellite Contracts shall be applicable in connection
with the purchase or assignment of either Sky I or Sky II pursuant to
this paragraph.
(iii) Without limiting the generality of subSection
(b)(i) above, if this Agreement is terminated pursuant to either
Section 8(a)(ii) or Section 8(a)(iv), Seller, News Corporation and
ASkyB shall promptly as practicable following the date of such
termination execute and file the Settlement Agreement and Mutual
Release and the Final Stipulation of Dismissal annexed thereto with
the United States District Court for the District of Colorado to
dismiss the EchoStar Litigation with prejudice provided, however, if
this Agreement is terminated pursuant to Section 8(a)(iv)(C) because
an FCC Approval or FCC Order contained a condition that is within the
control of the Transferors, and such condition is not satisfied, even
though the Seller acted in good faith in connection therewith, the
EchoStar Litigation shall not be dismissed.
9. Miscellaneous
(a) Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party, which
approval shall not be unreasonably withheld; provided, however, that no Party
shall be prohibited from making any public disclosure it believes in good faith
on advice of counsel is required by law or regulation, including, the rules and
regulations of any securities exchange or inter-dealer quotation system upon
<PAGE>
which the securities of one of the Parties are listed or admitted for trading(in
which case the disclosing Party will advise the other Parties prior to making
the disclosure). Prior to the making of any disclosure required by law or
regulation, the disclosing Party shall consult with the other Parties, to the
extent feasible, as to the content of such public announcement or press release
and provide the other Party with an opportunity to review and comment thereon.
(b) No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the Schedules hereto
and the Collateral Agreements referred to herein), constitutes the entire
agreement among the Parties and supersedes any prior understandings, agreements,
or representations by or among the Parties, written or oral, that may have
related in any way to the subject matter hereof (except for any contemporaneous
writing signed by Seller, on the one hand, and any of the Transferors, on the
other hand, which specifically refers to their Agreement).
(d) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests or obligations hereunder without the prior written
approval of the Transferors and Seller, except as provided in Sections 2(a) and
(b) with respect to the designation of the ASkyB Buyer (if it is not a Party),
the MCI Buyer (if it is not a Party) and Newco and in Section 9(m)(iv) with
respect to the transfer of Shares to direct or indirect wholly-owned
Subsidiaries of News Corporation or MCI; provided, however, that as a condition
to any such designation, ASkyB, MCI Buyer and Newco, as the case may be, shall
agree in writing to be bound by all of the provisions of this Agreement
applicable to the Party making such designation; and provided further, that as a
condition to any transfer pursuant to Section 9(m)(iv), the transferee shall
agree in writing to be bound by the restrictions set forth in Section 9(m).
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered
<PAGE>
or certified mail, return receipt requested, postage prepaid, and addressed to
the intended recipient as set forth below:
If to Seller: EchoStar Communications Corporation
5701 South Santa Fe Drive
Littleton, Colorado 80120
Attn: David K. Moskowitz, Esq.
Senior Vice President,
General Counsel and Secretary
Telecopy: (303) 723-1699
If to MCI: MCI Telecommunications Corporation
1801 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attn: Michael Salsbury, Esq.
General Counsel
Telecopy: (202) 887-3353
If to ASkyB or News The News Corporation Limited
Corporation: c/o News America Incorporated
1211 Avenue of the Americas
New York, New York 10036
Attn: Arthur M. Siskind, Esq.
Senior Executive Vice
President and Group General Counsel
Telecopy: (212) 768-2029
Any Party may give any notice, request, demand, claim, or other
communication hereunder 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 individual for whom it is intended. Any Party may
change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(h) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
(i) Amendments and Waivers. No amendment of any provisions of this
Agreement shall be valid unless the same shall be in writing and signed by the
Parties hereto. Any Party may waive compliance by another Party with any
provision of this Agreement, which waiver must be in writing. No waiver by any
Party of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
(j) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(k) Expenses. Except as otherwise provided in this Agreement, each of
the Parties shall bear its own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
(l) Construction. The language used in this Agreement will be deemed to
be
<PAGE>
the language chosen by the Parties to express their mutual intent, and no
rule of strict construction shall be applied against any Party. Any reference
to any federal, state, local, or foreign statute or law shall be deemed also
to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. Any reference to the "transactions contemplated
hereby," the "transactions contemplated by this Agreement," the "transactions
contemplated under this Agreement" or the "transactions contemplated pursuant
to this Agreement" shall be deemed to also refer to any other document,
agreement or certificate to be executed or delivered on or prior to the
Closing. The Parties intend that each representation, warranty, and covenant
contained herein shall have independent significance. If any Party has
breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative
levels of specificity) which the Party has not breached shall not detract
from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
(m) Restrictions on Transfer. Notwithstanding anything to the contrary
set forth herein or in the Registration Rights Agreement, the ASkyB Buyer and
the MCI Buyer agree that:
(i) Until such time (the "Completion Date") as all
amounts due under the Satellite Contracts have been paid (including,
at the Transferors' option, through the payment into escrow of all
amounts scheduled to become due under the Satellite Contracts), the
ASkyB Buyer and the MCI Buyer (collectively, the "Buyers") may,
directly or indirectly, sell, assign, transfer, pledge, hypothecate or
otherwise dispose of any interest in the Shares (a "Disposition") in
an amount not to exceed 10% of the Shares issued to the Buyers on the
Closing Date (subject to adjustment for any stock split, stock
dividend, subdivision or combination of the Common Stock or any other
action having a similar effect on the Common Stock);
(ii) Subject to subsection (i) above, from and after
the Closing Date and during the two-year period commencing on the
Closing Date, Dispositions may be made by the ASkyB Buyer and the MCI
Buyer in an amount not to exceed for each 365-day period thereafter
one-third (1/3) of the Shares issued to the Buyers on the Closing Date
(subject to adjustment for any stock split, stock dividend,
subdivision or combination of the Common Stock or any other change in
corporate structure affecting the Common Stock); provided, however,
that any Shares permitted to be sold, but not sold during the first
365-day period, shall be added to the number of Shares permitted to be
sold during the second 365-day period; and provided, further, that the
ASkyB Buyer and the MCI Buyer shall be permitted pursuant to a firm
commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act, to make a Disposition
of Shares in an amount not to exceed (x) the difference between 50% of
the Shares issued to the Buyers and the number of shares Disposed of
by the Buyers in accordance with this subSection (ii) during the first
365-day period, or (y) the difference between 80% of the Shares issued
to the buyers and the number of Shares Disposed of by the buyers in
accordance with this subSection (ii) during the first and second
365-day periods;
(iii) Subject to subsection (i) above, from and after
the second anniversary of the Closing Date, Dispositions may be made
by the ASkyB Buyer and the MCI Buyer without regard to any restriction
on the amount of Shares sold, except as may be imposed by applicable
law; and
(iv) Nothing contained in this Section 9(m) shall
limit the right of the ASkyB Buyer or the MCI Buyer to transfer any of
its Shares to a direct or indirect wholly-owned subsidiary of either
MCI or News Corporation.
(n) Legends. The Transferors agree to the placement on certificates
representing the Shares purchased pursuant hereto, of a legend, substantially as
set forth below (except that such legend shall not be placed on any Shares that
have been registered under the Securities Act or if, in the opinion of counsel
(which opinion shall be in form and substance satisfactory to Seller), such
legend is no longer required under the Securities Act):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
<PAGE>
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION, AND MAY NOT BE OFFERED, SOLD, PLEDGED, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
ANY APPLICABLE SECURITIES LAWS OF SUCH OTHER STATE OR JURISDICTION.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS (INCLUDING THE PROVISIONS THAT RESTRICT THE TRANSFER OF
SUCH SECURITIES) OF A PURCHASE AGREEMENT, DATED AS OF NOVEMBER 30,
1998, AMONG AMERICAN SKY BROADCASTING, LLC, THE NEWS CORPORATION
LIMITED, MCI TELECOMMUNICATIONS CORPORATION AND ECHOSTAR
COMMUNICATIONS CORPORATION (THE "COMPANY"), COPIES OF WHICH ARE ON
FILE AT THE OFFICES OF THE SECRETARY OF THE COMPANY. THE HOLDER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE AGREES THAT IT WILL COMPLY
WITH THE FOREGOING RESTRICTIONS."
(o) Speciic Performance. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event of any of the
provisions of this Agreement are not performed in accordance with their specific
terms or are otherwise breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of the Agreement and to enforce specifically this
Agreement and the terms and Agreement and the terms and provisions hereof in any
action instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter, in addition to any other remedy to
which they may be entitled, at law or in equity.
(p) Incorporation of Schedules. The Schedules identified in this
Agreement, including the Seller Disclosure Schedule and the Transferor
Disclosure Schedule, are incorporated herein by reference in their entirety and
made a part hereof.
[Signature Page Follows]
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
AMERICAN SKY BROADCASTING, LLC
By: /s/ Lawrence A. Jacobs
Name: Lawrence A. Jacobs
Title: Senior Vice President
THE NEWS CORPORATION LIMITED
By: /s/ Arthur M. Siskind
Name: Arthur M. Siskind
Title: Director
MCI TELECOMMUNICATIONS CORPORATION
By: /s/ William S. Armistead
Name: William S. Armistead
Title: Vice President
ECHOSTAR COMMUNICATIONS CORPORATION
By: /s/ David K. Moskowitz
Name: David K. Moskowitz
Title: Senior Vice President
<PAGE>
EXHIBIT B
CERTIFICATE OF AMENDMENT
OF THE
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
ECHOSTAR COMMUNICATIONS CORPORATION
EchoStar Communications Corporation (the "Corporation"), a corporation
organized and existing under the laws of the State of Nevada, does hereby
certify:
FIRST: That the Board of Directors of the Corporation duly adopted a
resolution setting forth the proposed amendment to the Corporation's Amended and
Restated Articles of Incorporation, declaring such amendment to be advisable and
submitting such amendment to the shareholders of the Corporation for
consideration thereof at a special meeting of shareholders on February , 1999
at the principal offices of the Corporation.
SECOND: That at such special meeting of shareholders, such amendment was
approved by receiving the affirmative vote of a majority of the total voting
power of the Corporation entitled to vote at the meeting, in accordance with
Section 78.390 of the Nevada General Corporation Law ("NGCL"). Pursuant to
Article III, Section 3.5 of the Corporation's Bylaws, and in accordance with
Section 78.390 of the NGCL, prompt written notice was given to all shareholders
of record of such special meeting.
The resolution approving the amendment is as follows:
RESOLVED, that ARTICLE V, Paragraph 1, Subparagraph (b) of the
Corporation's Amended and Restated Articles of Incorporation is hereby amended
and restated to read as follows:
"(b) A quorum for the purpose of shareholder meetings shall consist
of a majority of the voting power of the Corporation. If a quorum is
present, the effective vote of a majority of the voting power represented
at the meeting and entitled to vote on the subject matter shall be the act
of the shareholders, unless the vote of a greater proportion or number is
required by any provisions contained in the NGCL. Notwithstanding any
provisions contained in the NGCL requiring the vote of shares possessing
two-thirds of the voting power of the Corporation to take action, absent a
provision herein to the contrary, in the case of such provisions the
affirmative vote of a majority of the voting power shall be the act of the
shareholders."
B-1
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
hereunto affixed and this Certificate of Amendment of the Amended and Restated
Articles of Incorporation to be signed by its President and Corporate Secretary
this day of February, 1999.
ECHOSTAR COMMUNICATIONS CORPORATION
By:
----------------------------------------
Charles W. Ergen, President
By:
----------------------------------------
David K. Moskowitz, Corporate Secretary
STATE OF COLORADO )
) ss.
COUNTY OF )
I, the undersigned, a notary public, hereby certify that on February ,
1999, the foregoing persons appeared before me and acknowledged that they were
the President and Corporate Secretary of EchoStar Communications Corporation, a
Nevada corporation, and stated, under oath, that they executed the foregoing
Certificate of Amendment of the Amended and Restated Articles of Incorporation
and that the facts and matters stated therein are true to the best of their
knowledge, information and belief.
---------------------------------------
Notary Public
Address:
------------------------------------------
B-2
<PAGE>
PROXY PROXY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints David K. Moskowitz and Steven B. Schaver,
each with the power to appoint his substitute, and hereby authorizes them to
represent and to vote as designated below, all the shares of Class A Common
Stock and Class B Common Stock of EchoStar Communications Corporation
("EchoStar"), held of record by the undersigned on February , 1999, at the
Special Meeting of Shareholders to be held on February , 1999, or any
adjournment thereof.
1. PROPOSAL TO ISSUE SHARES OF ECHOSTAR'S CLASS A COMMON STOCK AS
CONSIDERATION FOR THE ACQUISITION OF CERTAIN SATELLITE BROADCASTING ASSETS
PURSUANT TO THE PURCHASE AGREEMENT DATED AS OF NOVEMBER 30, 1998, BY AND AMONG
AMERICAN SKY BROADCASTING, LLC, THE NEWS CORPORATION LIMITED, MCI
TELECOMMUNICATIONS CORPORATION AND ECHOSTAR.
/ / FOR / / AGAINST / / ABSTAIN
2. PROPOSAL TO AMEND ECHOSTAR'S AMENDED AND RESTATED ARTICLES OF
INCORPORATION TO CLARIFY CERTAIN VOTING PROVISIONS SET FORTH THEREIN.
3. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
SPECIAL MEETING OR ANY ADJOURNMENT THEREOF.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE THIS PROXY WILL
BE VOTED FOR PROPOSAL NO. 1 AND PROPOSAL NO. 2. THIS PROXY CONFERS
DISCRETIONARY AUTHORITY WITH RESPECT TO PROPOSALS NOT KNOWN OR DETERMINED AT THE
TIME OF THE MAILING OF THE NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO THE
UNDERSIGNED.
The undersigned hereby acknowledges receipt of the Notice of Special
Meeting of Shareholders and Proxy Statement furnished herewith.
Dated: ____________________,1999
-------------------------------------
Signature
-------------------------------------
Signature if held jointly
Signatures should agree with the name(s)
stenciled hereon. Executors, administrators,
trustees, guardians and attorneys should
indicate when signing. Attorneys should
submit powers of attorney.
<PAGE>
PLEASE SIGN AND RETURN THIS PROXY IN THE ENCLOSED PRE-ADDRESSED ENVELOPE.
THE TENDER OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND
THE MEETING OR TO SUBMIT A LATER DATED REVOCATION OR AMENDMENT TO THIS PROXY ON
ANY OF THE ISSUES SET FORTH ABOVE.
