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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 7, 2000
REGISTRATION NO. 333-_____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ECHOSTAR COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 88-0336997
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
5701 South Santa Fe Drive
Littleton, Colorado 80120
(303) 723-1000
(Address, including zip code, and telephone
number, including area code, of registrant's principal
executive office)
------------------------------------------
David K. Moskowitz, Esq.
Senior Vice President, General Counsel and Secretary
EchoStar Communications Corporation
5701 South Santa Fe Drive
Littleton, Colorado 80120
(303) 723-1000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
With copies to:
Raymond L. Friedlob, Esq.
Gerald Raskin, Esq.
John W. Kellogg, Esq.
Friedlob Sanderson Raskin Paulson & Tourtillott, LLC
1400 Glenarm Place, Third Floor
Denver, Colorado 80202
(303) 571-1400
------------------------------------------
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box: [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box: [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please the following box. [ ]
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<TABLE>
<CAPTION>
================================================================================================================
CALCULATION OF REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE PROPOSED PROPOSED AMOUNT OF
REGISTERED REGISTERED MAXIMUM MAXIMUM REGISTRATION
OFFERING AGGREGATE FEE
PRICE PER OFFERING PRICE
NOTE (1)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
4 7/8% Convertible Subordinated Notes $1,000,000,000 100% $1,000,000,000 $264,000
due 2007
Class A Common Stock, $.01 par value 11,003,521 -- -- --
(2)(3)
================================================================================================================
</TABLE>
(1) Equals the aggregate principal amount of the securities being registered
pursuant to Rule 457(9).
(2) Represents the number of shares of Class A Common Stock that are issuable
upon conversion of the convertible notes. Pursuant to Rule 416, the
Registrant is also registering such indeterminate number of shares of Class
A Common Stock as may be issuable upon conversion of the convertible notes
as a result of the antidilution provisions of the convertible notes.
(3) Pursuant to Rule 457(i), no registration fee is required for these shares..
--------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
(ii)
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SUBJECT TO COMPLETION, DATED MARCH 6, 2000
[IMAGE NOT AVAILABLE](R)
$1,000,000,000
4 7/8% CONVERTIBLE SUBORDINATED NOTES DUE 2007
- --------------------------------------------------------------------------------
This prospectus relates to the offer and sale from time to time by
certain selling securityholders of our 4 7/8% Convertible Subordinated Notes due
2007 and the shares of our class A common stock into which the convertible notes
are convertible. The convertible notes and shares will be sold at market prices
prevailing at the time of sale or at privately negotiated prices. EchoStar will
not receive any of the proceeds from the sale of the convertible notes or the
shares into which they are convertible.
THE CONVERTIBLE NOTES:
o Maturity: January 1, 2007.
o Interest: The convertible notes will accrue interest as of the issue
date which will be payable semiannually in cash on July 1 and January
1, commencing on July 1, 2000.
o Conversion: The convertible notes are convertible into shares of our
class A common stock at any time after March 2, 2000 at a conversion
price of $90.88, subject to adjustment in certain events.
o Redemption: We can redeem the convertible notes on or after January 1,
2003. Holders of the convertible notes may also require us to redeem
all or part of their convertible notes upon a change of control event.
o Ranking: The convertible notes are general unsecured obligations
ranking junior to all of our existing and future Senior Debt. The
convertible notes also will effectively rank junior to all of our
secured debts and to all of the existing and future debts and other
liabilities of our subsidiaries. As of September 30, 1999, assuming we
had completed this offering, the convertible notes would have
effectively ranked junior to $2.05 billion of indebtedness and $628
million of other liabilities of our subsidiaries.
TRADING FORMAT:
o The convertible notes are eligible for trading in the PORTAL market of
the National Association of Securities Dealers, Inc. The convertible
notes are not expected to remain eligible for trading on the PORTAL
system and a trading market may not develop for the notes. EchoStar
does not intend to apply for listing of the convertible notes on any
securities exchange or for quotation through any automated quotation
system.
o Our common stock is traded on the Nasdaq National Market under the
symbol "DISH." On February 29, 2000 the last reported sale price of our
common stock on the Nasdaq National Market was $114.00 per share
We may amend or supplement this prospectus from time to time by filing
amendments or supplements as required. You should read this entire prospectus
and any amendments or supplements carefully before you make your investment
decision.
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR CERTAIN RISKS YOU SHOULD CONSIDER
BEFORE YOU PURCHASE ANY CONVERTIBLE NOTES OR SHARES OF CLASS A COMMON STOCK.
- --------------------------------------------------------------------------------
Neither the SEC nor any state securities commission has approved or determined
whether this prospectus is truthful or complete. Nor have they made, nor will
they make, any determination as to whether anyone should buy these securities.
Any representation to the contrary is a criminal offense.
- --------------------------------------------------------------------------------
Prospectus dated March 6, 2000
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TABLE OF CONTENTS
<TABLE>
<S> <C>
Where you can find more information...............................3
Forward-looking statements........................................3
Risk factors......................................................6
Ratio of earnings to fixed changes...............................21
Description of convertible notes.................................22
Registration rights..............................................37
Description of our capital stock.................................39
Summary of certain federal income tax considerations.............42
Selling securityholders..........................................48
Plan of distribution.............................................55
Legal Matters....................................................56
Experts ........................................................56
</TABLE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS AND IN ANY ACCOMPANYING PROSPECTUS SUPPLEMENT. NO
ONE HAS BEEN AUTHORIZED TO PROVIDE YOU WITH DIFFERENT INFORMATION.
THE CONVERTIBLE NOTES AND SHARES OF CLASS A COMMON STOCK INTO WHICH
THEY ARE CONVERTIBLE ARE NOT BEING OFFERED IN ANY JURISDICTION WHERE THE OFFER
IS NOT PERMITTED.
YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE
FRONT OF THOSE DOCUMENTS.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document that we file
with the SEC at the SEC's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to you free of
charge at the SEC's web site at http://www.sec.gov.
Our common stock is traded as "National Market Securities" on the
Nasdaq National Market. Material filed by us can be inspected at the offices of
the National Association of Securities Dealers, Inc., Reports Section, 1735 K
Street, N.W., Washington, D.C. 20006.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede previously filed
information, including information contained in this document.
We incorporate by reference the documents listed below and any future
filings we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 until this offering has been completed:
o Our Annual Report on Form 10-K for the year ended December 31,
1998.
o Our Quarterly Report on Form 10-Q for the quarter ended March 31,
1999.
o Our Quarterly Report on Form 10-Q for the quarter ended June 30,
1999.
o Our Quarterly Report on Form 10-Q for the quarter ended September
30, 1999.
o Our Current Reports on Form 8-K filed January 5, 1999, May 25,
1999, July 2, 1999, October 7, 1999, December 1, 1999, December
20, 1999 and February 28, 2000.
o The description of our common stock set forth in our Registration
Statement on Form 8-A filed on May 30, 1995.
You may request free copies of these filings by writing or telephoning
us at our principal offices, which are located at the following address:
EchoStar Communications Corporation
5701 South Santa Fe Drive
Littleton, Colorado 80120
Attention: David K. Moskowitz, Esq.
(303) 723-1000
FORWARD-LOOKING STATEMENTS
All statements contained in this prospectus, as well as statements made
in press releases and oral statements that may be made by us or by officers,
directors or employees acting on our 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 or unknown risks, uncertainties
and other factors that could cause our actual results to be materially different
from historical results or from any future results expressed or implied by such
forward-looking statements. The "Risk factors" section of this prospectus,
commencing on page 6, summarizes certain of the material risks and uncertainties
that could cause our actual results to differ materially. 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 statements wherever they appear. In this
connection, investors should consider the risks described herein and should not
place undue reliance on any forward-looking statements.
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ECHOSTAR COMMUNICATIONS CORPORATION
We are a leading provider of direct broadcast satellite, or DBS,
television services in the United States through our DISH Network business unit.
We are also an international supplier of digital satellite receiver systems and
a provider of other satellite services.
THE DISH NETWORK
We started offering subscription television services on the DISH
Network in March 1996. As of December 31, 1999, more than 3.4 million households
subscribed to DISH Network programming services. We now have five DBS satellites
in orbit which enable us to provide over 500 video and audio channels, together
with data services and high definition and interactive TV services, to consumers
across the continental United States through the use of one small satellite
dish. We believe that the DISH Network offers programming packages that have a
better "price-to-value" relationship than packages currently offered by most
other subscription television providers, particularly cable TV operators. As of
December 31, 1999, approximately 13 million United States households subscribed
to direct broadcast satellite and other direct-to-home satellite services.
During 1999, more than 1.4 million net new households subscribed to our direct
broadcast satellite services, an increase of 63% from 1998. We believe that
there continues to be significant unsatisfied demand for high quality,
reasonably priced television programming services.
ECHOSTAR TECHNOLOGIES CORPORATION
In addition to supplying EchoStar satellite receiver systems for the
DISH Network, our EchoStar Technologies Corporation subsidiary supplies similar
digital satellite receivers to international satellite TV service operators. Our
two major customers are Via Digital, a subsidiary of Telefonica, Spain's
national telephone company, and Express Vu, a subsidiary of Bell Canada,
Canada's national telephone company.
SATELLITE SERVICES
Our Satellite Services business unit primarily leases capacity on our
satellites to customers, including international services that broadcast foreign
language programming to our subscribers, and Fortune 1000 companies that use our
business television service to communicate with employees, customers and
suppliers located around the United States. In addition, we are developing a
wide range of Internet and high-speed data services. In mid-1999 we began
offering to consumers our first of its kind DISHPlayer, which combines satellite
receiver, digital VCR, gaming and Internet access capabilities all in one box.
When a consumer subscribes to the WebTV service we offer in partnership with
Microsoft, in addition to all of the video and audio channels we offer, the
DISHPlayer receiver gives consumers e-mail and unlimited Internet access on
their television.
BUSINESS STRATEGY
Our primary objective is to continue to expand our DISH Network
subscriber base and to develop as an integrated, full-service satellite company.
To achieve this objective, we plan to:
o Leverage our significant share of the DBS spectrum to offer more
channels than any other video provider in the United States, and
by offering unique programming services that will differentiate
us from our competition. These services include
satellite-delivered local signals and niche and foreign language
services;
o Offer marketing promotions that will enhance our position as a
leading provider of value-oriented programming services and
receiver systems;
o Continue to expand DISH Network distribution channels;
o Develop our ETC and Satellite Services businesses; and
o Emphasize one-stop shopping for DBS services and equipment and
superior customer service.
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RECENT DEVELOPMENTS
On each of July 19, 1999, and October 25, 1999, we completed
two-for-one splits of our outstanding class A and class B common stock. On
February 28, 2000, we announced a two-for-one stock split of our outstanding
class A and class B common stock effective March 22, 2000 to shareholders of
record as of the close of business on March 10, 2000. All references to shares
included in this Prospectus retroactively give effect to the stock splits
completed in July and October 1999, but not the announced March 22, 2000 stock
split.
On February 23, 2000, we announced the construction of three new
satellites. EchoStar VII and VIII are advanced, high-powered DBS satellites with
spot-beam technology allowing us to offer local channels in 60 or more markets
across the United States. EchoStar IX is a hybrid Ku/Ka-band satellite that may
provide new opportunities for us to pursue business-to-business customers and to
provide our subscribers with expanded internet, data and two-way wireless
communications services. Delivery of EchoStar VII and VIII is expected in
December 2001 and delivery EchoStar IX is anticipated to occur during 2002. We
are currently in discussions with launch vehicle providers for these satellites.
On February 23, 2000 we announced a joint venture with OpenTV Corp. to
offer our subscribers and other video platforms a low-cost, interactive digital
receiver with a built-in hard disk drive that will permit viewers to record
programs without video tape. Under the terms of the joint venture, OpenTV and
EchoStar contributed certain intellectual property rights and we were issued
2,252,252 shares of OpenTV common stock. The shares of OpenTV common stock are
subject to forfeiture if we fail to activate the OpenTV system in at least
500,000 set top boxes on or before February 23, 2003.
On February 1, 2000 we filed suit against DIRECTV and Thomson Consumer
Electronics, or RCA, in the Federal District Court for the District of Colorado,
alleging improper conduct in order to fend off competition. We allege that
DIRECTV has demanded that certain retailers stop displaying DISH Network
products and has threatened to cause economic damage to retailers who continue
to offer both DIRECTV and DISH Network product lines in head-to-head
competition. Further, we allege DIRECTV has acted in violation of federal and
state anti-trust laws in order to protect their market share. We intend to seek
all remedies, legal and equitable, which are available to us. It is too early in
the litigation to make an assessment of the probable outcome.
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RISK FACTORS
You should carefully consider all of the information contained in this
prospectus before deciding whether to invest in the convertible notes or the
shares of class A common stock issued upon their conversion and, in particular,
the following factors:
RISKS PRIMARILY RELATED TO OUR BUSINESS
INCREASED SUBSCRIBER TURNOVER COULD AFFECT OUR FINANCIAL PERFORMANCE
If our churn rate increases materially, it could adversely affect our
financial condition and results of operations. While we expect to be able to
continue to manage churn in line with our expectations for the remainder of this
year and while we are expanding our customer service department in response to
our increased business, we can provide no assurance that churn will not increase
in the future. In addition to churn increases reflective of our maturing
subscriber base, our significant subscriber growth also fueled increased churn
during 1999. The resulting subscriber increase reduced our customer service
responsiveness and caused delays in installation of systems. These delays caused
some customers to terminate our services. Further our litigation with the
networks in Miami and other factors, including our inability to obtain
retransmission consents of local network stations on or before May 29, 2000,
could require us to terminate delivery of network signals to a material portion
of our subscriber base, which could cause many of those subscribers to cancel
their subscription to our other services. We have sent letters to some of our
subscribers warning that their access to distant broadcast network channels
might be terminated soon and we have terminated ABC, NBC, CBS and Fox
programming to many customers. Such terminations could result in a small
reduction in average monthly revenue per subscriber and could result in
increased subscriber turnover.
INCREASED SUBSCRIBER ACQUISITION COSTS COULD AFFECT OUR FINANCIAL PERFORMANCE
We subsidize the cost of EchoStar receiver systems and their
installation in order to attract new DISH Network subscribers. Consequently, our
subscriber acquisition costs are significant. During the past several months, we
have experienced an increase in subscriber acquisition costs primarily caused by
our free system and free installation promotion which is anticipated to continue
through at least April 30, 2000. In connection with our plans to encourage as
many new subscribers as possible to be ready for the additional services that
will become available at the 110 degree orbital location, and as a result of
continuing competition and our plans to attempt to continue to drive rapid
subscriber growth, we expect that our subscriber acquisition costs during 2000
could increase by as much as $25 per subscriber or more on average. Our
subscriber acquisition costs, both in the aggregate and on a per new subscriber
activation basis, may materially increase further to the extent that we continue
or expand our bounty programs, our "free system/free installation" program, or
the DISH Network One-Rate Plan, or if we determine that more aggressive
promotions are necessary to respond to competition, or for other reasons.
Further, subscriber acquisition costs will increase in connection with the
agreement to convert Superstar C-band subscribers to our DISH Network. If
subscriber acquisition costs increase materially, it could adversely affect our
financial condition and results of operations.
WE MAY BE UNABLE TO MANAGE RAPIDLY EXPANDING OPERATIONS
If we are unable to manage our growth effectively, it could materially
adversely affect our business and results of operations. To manage our growth
effectively, we must continue to develop our internal and external sales force,
installation capability, customer service operations and information systems,
and maintain our relationships with third party vendors. We also need to
continue to expand, train and manage our employee base, and our management
personnel must assume even greater levels of responsibility.
Recent significant increases in the number of new subscribers has
resulted in customer service and installation delays and an increase in our
subscriber churn. If we are unable to sufficiently develop our installation
capability and customer service operations in a timely manner to effectively
manage this growth, we may experience a decrease in subscriber growth and an
increase in subscriber churn which could have a material adverse effect on our
business and results of operations.
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WE MAY NEED ADDITIONAL CAPITAL, WHICH MAY NOT BE AVAILABLE, IN ORDER TO CONTINUE
GROWING AND INCREASE EARNINGS
Our ability to increase earnings, and the market value and liquidity of
our common stock, will partly depend on our ability to continue growing our
business by maintaining and increasing our subscriber base. This may require
significant additional capital that we cannot be certain will be available to
us.
In connection with the launch of EchoStar V and EchoStar VI, we will
utilize the 110 degree orbital location to enhance revenue opportunities with
new value added services for our current and future subscribers, and maintain
our primary DBS service at the 119 degree orbital location. Our existing
subscribers will need to upgrade their dish and receiver systems in order to
take advantage of all of the services we offer. To encourage existing
subscribers to upgrade their systems and remain subscribers, we are subsidizing
upgrades by existing subscribers to our DISH 500 system. The cost of this
program could be significant if utilized by a large number of our existing
subscribers.
In connection with our plans to encourage as many new subscribers as
possible to be ready for the additional services that will become available at
the 110 degree orbital location, and as a result of continuing competition and
our plans to attempt to continue to drive rapid subscriber growth, we expect
that our subscriber acquisition costs during 2000 could increase by as much as
$25 per subscriber or more on average. Our subscriber acquisition costs, both in
the aggregate and on a per new subscriber activation basis, may materially
increase further to the extent that we continue to expand our bounty programs,
our "free system/free installation" program, or the DISH Network One-Rate Plan,
or if we determine that more aggressive promotions are necessary to respond to
competition, or for other reasons. Further, subscriber acquisition costs will
increase in connection with the agreement to convert Superstar C-band
subscribers to our DISH Network. If subscriber acquisition costs increase
materially, it could adversely affect our financial condition and results of
operations.
In addition, we have conditional licenses or applications pending with
the FCC for a two satellite Ku-band system, a two satellite Ka-band system, a
two satellite extended Ku-band system and (through a partly owned subsidiary) a
six satellite low earth orbit satellite system. We may need to raise additional
funds for the foregoing purposes. Further, a number of factors, some of which
are beyond our control or ability to predict, could require us to raise
additional capital. These factors include, among other things, higher than
expected subscriber acquisition costs or a defect in or the loss of any
satellite. We cannot assure you that we will be able to raise additional capital
at the time necessary or on satisfactory terms. The inability to raise
sufficient capital would have a material adverse effect on our business.
IMPEDIMENTS TO RETRANSMISSION OF LOCAL AND DISTANT BROADCAST SIGNALS; OUR LOCAL
AND DISTANT PROGRAMMING STRATEGY FACES UNCERTAINTY
The Copyright Act, as amended by the Satellite Home Viewer Improvement
Act, permits satellite retransmission of distant network channels only to
"unserved households." Whether a household qualifies as "unserved" for the
purpose of eligibility to receive a distant network channel depends, in part, on
whether that household can receive a signal of "Grade B intensity" as defined by
the FCC. In February 1999, the FCC released a report and order on these matters.
Although the FCC declined to change the values of Grade B intensity, it adopted
a method for measuring it at particular households. The FCC also endorsed a
method for predicting Grade B intensity at particular households. The FCC
recently denied in part and granted in part our petition for reconsideration,
allowing us some additional flexibility in the method for measuring Grade B
intensity but denying our requests on other matters. We cannot be sure whether
these methods are favorable to us or what weight, if any, the courts will give
to the FCC's decision. In addition, the Satellite Home Viewer Improvement Act of
1999 could adversely affect us in several respects. The legislation prohibits us
from carrying more than two distant signals for each broadcasting network and
leaves the FCC's Grade B intensity standard unchanged without future
legislation. While the Satellite Home Viewer Improvement Act of 1999 reduces the
royalty rate that we currently pay for superstation and distant network signals,
it directs the FCC to
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require us to delete substantial programming (including sports programming) from
these signals. These requirements may significantly hamper our ability to
retransmit distant network and superstation signals.
For existing customers the new legislation also would permit hundreds
of thousands of consumers to continue to receive distant network channels who
would otherwise be required to be disconnected. The new law generally would not,
however, permit consumers predicted to receive a signal of "Grade A" intensity
to continue receiving distant network channels. As a result, we believe hundreds
of thousands of consumers have or could lose access to network channels by
satellite. In anticipation of passage of the legislation, and for other reasons,
we recently ceased providing distant network channels to tens of thousands of
customers. These turn offs, together with others, could result in a temporary
material increase in subscriber turnover and a small reduction in revenue per
subscriber. Further, broadcasters could seek a permanent injunction on our sales
of local and distant network channels, which would have a material adverse
effect on our subscriber turnover, revenue, ability to attract new subscribers,
and our business operations generally. The law also instructs the FCC to enact
rules that would require us to delete substantial programming from distant
signals, including sports programming.
We currently offer programming broadcast by local affiliates of
national television networks to over 20 major population centers in the
continental United States. Although we believe that the Satellite Home Viewer
Act of 1994 permitted us to retransmit the programming of a local network
station back to its local market by satellite, several other parties oppose that
view. The Satellite Home Viewer Improvement Act of 1999 generally gives
satellite companies a statutory copyright license to retransmit local-into-local
network programming subject to obtaining the retransmission consent of the local
network station. If the retransmission consent is not obtained from a particular
local network station on or before May 29, 2000 (the six-month anniversary of
the act), we are required to cease transmission of that station's signals. We
have entered into a limited number of retransmission consent agreements and are
negotiating additional agreements. We cannot be certain, however, whether we
will obtain retransmission consents to the extent they are required from the
three major networks other than Fox's owned and operated stations or any local
affiliate or that we will receive as many consents as our DBS competitor,
DIRECTV. During our negotiations, some broadcasters have made certain demands
for retransmission consent that they have not made of cable providers, including
cash compensation demands. If we fail to receive such consents on or before May
29, 2000, we may have to turn off some viewers' access to local network
stations, which could have an adverse effect on our strategy to compete with
cable companies, which provide local programming. While the legislation directs
the FCC to impose certain restrictions on the broadcasters' flexibility in
retransmission consent negotiations, these restrictions are very limited and
could be of little practical benefit to us, particularly since the FCC is not
required to implement rules in this regard for one year from the passage of the
legislation. Consequently, our efforts to retransmit local channels by satellite
could be substantially blocked by the legislation. In sum the compulsory
copyright license under the Satellite Home Viewer Improvement Act of 1999 and
the retransmission consent rules of the Communications Act of 1934, as amended,
may not be sufficient to permit us to implement our strategy to retransmit that
programming in the most efficient and comprehensive manner.
Many other provisions of the Satellite Home Viewer Improvement Act of
1999 could adversely affect us. Among other things, the law includes the
imposition of "must carry" requirements on DBS providers. The "must carry" rules
generally would require that commencing in January 2002 satellite distributors
carry all the local broadcast stations in areas they serve, not just the four
major networks. Since we have limited capacity, the number of markets in which
we can offer local programming would be reduced by the "must carry" requirement
to carry large numbers of stations in each market we serve. The legislation also
includes provisions which could expose us to material monetary penalties, and
permanent prohibitions on the sale of all local and distant network channels,
based on what could be considered even inadvertent violations of the
legislation, prior law, or the FCC rules. Imposition of these penalties would
have a material adverse effect on our subscriber turnover, revenue, ability to
attract new subscribers, and our business operations generally. Consistent with
the requirements of the Satellite Home Viewer Improvement Act of 1999, the FCC
has commenced rulemakings on, among other things, (i) the requirement that
broadcasters negotiate in good faith regarding retransmission consents, (ii) the
requirements for satellite carriers to delete programming from certain broadcast
signals, and (iii) the predictive model for determining whether a household is
unserved. We cannot be sure that these proceedings will result in rules that are
favorable to us.
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TV NETWORKS OPPOSE OUR STRATEGY OF DELIVERING DISTANT NETWORK SIGNALS
The national networks and local affiliate stations recently challenged,
based upon copyright infringement, PrimeTime 24's methods of selling network
programming to consumers. Historically, we obtained distant broadcast network
channels for distribution to our customers through PrimeTime 24. The United
States District Court for the Southern District of Florida entered a nationwide
permanent injunction preventing PrimeTime 24 from selling its programming to
consumers unless the programming was sold in accordance with certain
stipulations in the injunction. The injunction covers "distributors" as well.
The plaintiffs in the Florida litigation informed us that they considered us a
"distributor" for purposes of that injunction. A federal district court in North
Carolina also issued an injunction against PrimeTime 24 prohibiting certain
distant signal retransmissions in the Raleigh area. The Fourth Circuit Court of
Appeals recently affirmed the North Carolina Court's decision. We have
implemented Satellite Home Viewer Act compliance procedures which materially
restrict the market for the sale of network channels by us.
In October 1998, we filed a declaratory judgment action in the United
States District Court for the District of Colorado against the four major
networks. We asked the court to enter a judgment declaring that our method of
providing distant network programming does not violate the Satellite Home Viewer
Act and hence does not infringe the networks' copyrights. In November 1998, the
four major broadcast networks and their affiliate groups filed a complaint
against us in federal court in Miami alleging, among other things, copyright
infringement. The court combined the case that we filed in Colorado with the
case in Miami and transferred it to the Miami court.
In February 1999, CBS, NBC, Fox and ABC filed a "Motion for Temporary
Restraining Order, Preliminary Injunction and Contempt Finding" against DIRECTV,
Inc. in Miami related to the delivery of distant network channels to DIRECTV
customers by satellite. Under the terms of a settlement between DIRECTV and the
networks, some DIRECTV customers were scheduled to lose access to their
satellite-provided network channels by July 31, 1999, while other DIRECTV
customers were to be disconnected by December 31, 1999. Subsequently, PrimeTime
24 and substantially all providers of satellite-delivered network programming
other than us agreed to this cut-off schedule.
The networks are pursuing a Motion for Preliminary Injunction in the
Miami Court, asking the court to enjoin us from providing network programming
except under very limited circumstances. In general, the networks want us to
turn off programming to our customers on the same schedule agreed to by DIRECTV.
A preliminary injunction hearing was held on September 21, 1999. The
Court took the issues under advisement to consider the networks' request for an
injunction, whether to hear live testimony before ruling upon the request, and
whether to hear argument on why the Satellite Home Viewer Act may be
unconstitutional, among other things. The Court did not say when a decision will
be made, or whether an additional hearing will be necessary prior to ruling upon
the networks' preliminary injunction motion.
If this case is decided against us, or a preliminary injunction is
issued, significant material restrictions on the sale of distant ABC, NBC, CBS
and Fox channels by us could result, including potentially a nationwide
permanent prohibition on our broadcast of ABC, NBC, CBS and Fox network channels
by satellite. The litigation and the new legislation discussed above, among
other things, could also require us to terminate delivery of network signals to
a material portion of our subscriber base, which could cause many of these
subscribers to cancel their subscription to our other services. While the
networks have not sought monetary damages, they have sought to recover attorney
fees if they prevail. We have sent letters to some of our subscribers warning
that their access to distant broadcast network channels might be terminated soon
and have terminated ABC, NBC, CBS and Fox programming to many customers. Such
terminations will result in a small reduction in average monthly revenue per
subscriber and could result in increased subscriber turnover.
WE DEPEND ON THE CABLE ACT FOR ACCESS TO OTHERS' PROGRAMMING
Any change in the Cable Consumer Protection and Competition Act of 1992
("Cable Act") and the FCC's rules that permit the cable industry or
cable-affiliated programmers to discriminate against competing businesses, such
as ours, in the sale of programming could adversely affect our ability to
acquire programming at all or to acquire programming on a cost-effective basis.
Under the Cable Act and the FCC's rules, cable-affiliated
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programmers generally must offer programming they have developed to all
multi-channel video programming distributors on non-discriminatory terms and
conditions. The Cable Act and the FCC's rules also prohibit some types of
exclusive programming contracts. We purchase a substantial percentage of our
programming from cable-affiliated programmers. Some of these restrictions on
cable-affiliated programmers will expire in 2002 unless the FCC extends the
rules. While we have filed several complaints with the FCC alleging
discrimination, exclusivity, or refusals to deal, we have had limited success in
convincing the FCC to grant us relief. The FCC has denied or dismissed many of
our complaints, and we believe has generally not shown a willingness to enforce
the program access rules stringently. As a result, we may be limited in our
ability to obtain access (or non-discriminatory access) to cable-affiliated
programming. In addition, the FCC recently modified certain of its attribution
rules that determine whether a programmer is affiliated with a cable operator
and therefore subject to the program access obligations. We do not yet know the
implications or impact of these modified rules.
WE EXPECT OPERATING LOSSES THROUGH AT LEAST 2000 AND CANNOT BE CERTAIN THAT WE
WILL ACHIEVE OR SUSTAIN OPERATING PROFITABILITY OR POSITIVE CASH FLOW FROM
OPERATING ACTIVITIES
Our financial performance will affect the market value of our common
stock and convertible notes. Due to the substantial expenditures necessary to
complete construction, launch and deployment of our direct broadcast satellite
system and introduction of our DISH Network service to consumers, we have
sustained significant losses in recent periods. If we do not have sufficient
income or another source of cash, it could eventually affect our ability to
service our debt and pay our other obligations. Our operating losses were $109
million, $224 million and $123 million for the years ended December 31, 1996,
1997 and 1998, respectively, and $53 million and $186 million for the nine
months ended September 30, 1998 and 1999, respectively. We had net losses of
$101 million, $313 million and $261 million for the years ended December 31,
1996, 1997 and 1998, respectively, and $148 million and $573 million for the
nine months ended September 30, 1998 and 1999, respectively. Improvements in our
results of operations depend largely upon our ability to increase our customer
base while maintaining our price structure, effectively managing our costs and
controlling subscriber turnover, which is the rate at which subscribers
terminate service. We cannot assure you that we will be effective with regard to
these matters. In addition, we incur significant acquisition costs to obtain
DISH Network subscribers. These costs, which continue to increase, magnify the
negative effects of subscriber turnover. We anticipate that we will continue to
experience operating losses through at least 2000. These operating losses may
continue beyond 2000.
WE FACE INTENSE COMPETITION FROM DIRECT BROADCAST SATELLITE AND OTHER SATELLITE
SYSTEM OPERATORS, WHICH COULD AFFECT OUR ABILITY TO GROW AND INCREASE EARNINGS
Our ability to increase earnings will partly depend on our ability to
compete in the highly competitive subscription television industry. We compete
with companies offering video, audio, data, programming and entertainment
services, including cable operators and other satellite operators. Many of these
competitors have substantially greater financial, marketing and other resources
than we have.
One competitor, DIRECTV, Inc., has launched five high powered direct
broadcast satellites and has 46 direct broadcast satellite frequencies that are
capable of full coverage of the continental United States. DIRECTV currently
offers more than 300 channels of combined video and audio programming and, as of
December 1999, had approximately 8.1 million subscribers. DIRECTV is, and will
be for the foreseeable future, in an advantageous position with regard to market
entry, programming, such as DIRECTV's exclusive sports programming and,
possibly, volume discounts for programming offers.
In addition, two other satellite companies in the U.S., including a
subsidiary of Loral Space and Communications Limited, have conditional permits
for a comparatively small number of direct broadcast satellite assignments that
can be used to provide service to portions of the United States.
The FCC has proposed to allocate additional expansion spectrum for
direct broadcast satellite services, which could create significant additional
competition in the market for subscription television services.
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OUR BUSINESS RELIES ON THE INTELLECTUAL PROPERTY OF OTHERS AND WE MAY
INADVERTENTLY INFRINGE THEIR PATENTS AND PROPRIETARY RIGHTS
Many entities, including some of our competitors, now have and may in
the future obtain patents and other intellectual property rights that cover or
affect products or services directly or indirectly related to those that we
offer. In general, if a court determines that one or more of our products
infringes on intellectual property held by others, we would be required to cease
developing or marketing those products, to obtain licenses to develop and market
those products from the holders of the intellectual property, or to redesign
those products in such a way as to avoid infringing the patent claims. If a
competitor holds intellectual property rights, the entity might be predisposed
to exercise its right to prohibit our use of its intellectual property in our
products and services at any price, thus impacting our competitive position.
We cannot assure you that we are aware of all patents and other
intellectual property rights that our products may potentially infringe. In
addition, patent applications in the United States are confidential until the
Patent and Trademark Office issues a patent and, accordingly, we cannot evaluate
the extent to which our products may infringe claims contained in pending patent
applications. Further, it is often not possible to determine definitively
whether a claim of infringement is valid, absent protracted litigation.
We cannot estimate the extent to which we may be required in the future
to obtain licenses with respect to patents held by others and the availability
and cost of any such licenses. Those costs, and their impact on net income,
could potentially be material. Damages in patent infringement cases can also
include a tripling of actual damages in certain cases. To the extent that we are
required to pay royalties to third parties to whom we are not currently making
payments, these increased costs of doing business could negatively affect our
liquidity and operating results. Various parties have asserted patent and other
intellectual property rights with respect to components within our direct
broadcast satellite system. We cannot be certain that these persons do not own
the rights they claim, that our products do not infringe on these rights, that
we would be able to obtain licenses from these persons on commercially
reasonable terms or, if we were unable to obtain such licenses, that we would be
able to redesign our products to avoid infringement.
WE COMPETE WITH CABLE TELEVISION AND OTHER LAND-BASED SYSTEMS, WHICH COULD
AFFECT OUR ABILITY TO GROW AND INCREASE EARNINGS
We encounter substantial competition in the subscription television
market from cable television and other land-based systems. Cable television
operators have a large, established customer base, and many cable operators have
significant investments in, and access to, programming. Cable television service
is currently available to more than 90% of the approximately 99 million U.S.
television households, and approximately 66% of total U.S. households currently
subscribe to cable. Cable television operators currently have an advantage
relative to us by providing local programming and service to multiple television
sets within the same household. Cable operators may also obtain a competitive
advantage through bundling their analog video service with expanded digital
video services delivered terrestrially or via satellite, efficient 2-way high
speed data transmission, and telephone service on upgraded cable systems. For
example, some cable companies now offer high speed Internet access over their
upgraded fiber optic systems, and AT&T has announced that it is seeking to
provide telephone service over Time Warner's cable system. As a result of these
and other factors, we may not be able to continue to expand our subscriber base
or compete effectively against cable television operators.
When fully deployed, new technologies could have a material adverse
effect on the demand for our direct broadcast satellite services. For example,
new and advanced local multi-point distribution services are still in the
development stage. In addition, entities such as regional telephone companies,
which are likely to have greater resources than we have, are implementing and
supporting digital video compression over existing telephone lines and digital
"wireless cable." Moreover, mergers, joint ventures, and alliances among
franchise, wireless or private cable television operators, regional Bell
operating companies and others may result in providers capable of offering
bundled cable television and telecommunications services in competition with us.
For instance, AT&T has acquired cable operator TCI and has entered into a
definitive agreement to acquire MediaOne. We may not be able to compete
successfully with existing competitors or new entrants in the market for
subscription television services.
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SATELLITE PROGRAMMING SIGNALS HAVE BEEN PIRATED, WHICH COULD CAUSE US TO LOSE
SUBSCRIBERS AND REVENUE
The delivery of subscription programming requires the use of encryption
technology to assure only those who pay can receive the programming. It is
illegal to create, sell or otherwise distribute mechanisms or devices to
circumvent that encryption. Theft of cable and satellite programming has been
widely reported and our signal encryption has been pirated and could be further
compromised in the future. We continue to respond to compromises of our
encryption system with measures intended to make signal theft of our programming
commercially uneconomical. We utilize a variety of tools to continue to
accomplish this goal. Ultimately, if other measures are not successful, it could
be necessary to replace the credit card size card that controls the security of
each consumer set top box at a material cost to us. If we can not promptly
correct a compromise in our encryption technology, it would adversely affect our
revenue and our ability to contract for video and audio services provided by
programmers.
THE REGULATORY REGIME WE OPERATE UNDER COULD CHANGE ADVERSELY
The FCC imposes different rules for "subscription" and "broadcast"
services. We believe that because we offer a subscription programming service,
we are not subject to many of the regulatory obligations imposed upon broadcast
licensees. However, we cannot be certain whether the FCC will find in the future
that we should comply with regulatory obligations as a broadcast licensee with
respect to our current and future operations, and certain parties have requested
that we be treated as a broadcaster. If the FCC determined that we are a
broadcast licensee, the FCC may require us to comply with all regulatory
obligations imposed upon broadcast licensees, which are generally subject to
more burdensome regulation than subscription service providers like us.
Under a requirement of the 1992 Cable Act, the FCC recently imposed
public interest requirements on direct broadcast satellite licenses, such as us,
to set aside four percent of channel capacity exclusively for noncommercial
programming for which we must charge programmers below-cost rates and for which
we may not impose additional charges on subscribers. This could also displace
programming for which we could earn commercial rates and could adversely affect
our financial results. In addition, the American Distance Education Consortium,
or ADEC, recently filed an informal complaint claiming that our requested rates
for carrying non-commercial programming are higher than allowed by the rules,
and a petition asking the FCC to declare that we may not use our EchoStar III
satellite at the 61.5 degree orbital location to carry ADEC's programming, but
must instead use one of our satellites at the 119 degree orbital location. The
FCC released its Order in that proceeding on November 24, 1999. The FCC ruled
that we may not use only EchoStar III at the 61.5 degree orbital location for
all of the public interest programming that we must carry. Rather, we must, at a
minimum, reserve 4% of our channels at each of our full-CONUS orbital locations
exclusively for public interest programming. The FCC also deferred
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decision on the reasonableness of our proposed fees pending additional
submission by the parties (which have been made) and ruled that we have the
right to use a third party to aid in the administration of our set-aside
obligations. The FCC's determinations may further restrict our flexibility and
require us to devote additional valuable full-CONUS capacity for public interest
programming. In addition, the FCC, on December 17, 1999, denied our request for
waiver of the public interest rules to extend the December 15, 1999 deadline by
which we had to reserve capacity for noncommercial programming. While the FCC
ruled that it would not initiate enforcement proceedings for violation of the
requirement for the period December 16, 1999 to January 7, 2000, it also stated
that it would investigate and possibly initiate enforcement proceedings for
violations occurring on December 15, 1999 or after January 7, 2000. The FCC
referred the matter to the Enforcement Division, which subsequently sent us a
letter requesting additional information. We have submitted that information and
believe we have shown that, while we were not in full compliance with the
set-aside requirement on December 15, 1999, we brought our system into
compliance with the rules by January 7, 2000. The enforcement division of the
FCC has sent a second letter requesting additional information. There can be no
assurance that the Enforcement Division will, first, agree with that view, or
second, not commence enforcement proceedings.
The FCC has commenced a rulemaking which seeks to streamline and revise
its rules governing direct broadcast satellite operators. This rulemaking
concerns many new possible direct broadcast satellite rules. There can be no
assurance about the content and effect of any new direct broadcast satellite
rules passed by the FCC.
The FCC has proposed allowing non-geostationary orbit fixed satellite
services to operate on a co-primary basis in the same frequency as DBS and
Ku-based FSS services. If the proposal is adopted, these satellite operations
could provide global high-speed data services. This would, among other things,
create additional competition for satellite and other services. The FCC has also
requested comment on a request that would allow a terrestrial service proposed
by Northpoint Communications, Inc. ("Northpoint") to retransmit local television
or other video and data services to DBS subscribers or others in the same DBS
spectrum that we use throughout the United States. Northpoint has been allowed
by the FCC to conduct experimental operations in Texas and Washington, D.C.
Furthermore, the Satellite Home Viewer Improvement Act of 1999 requires the FCC
to make a determination regarding licenses for facilities that will broadcast
signals to underserved markets by using spectrum otherwise allocated to
commercial use, possibly including our DBS spectrum. If Northpoint or other
entities become authorized to use our spectrum, they could cause harmful and
substantial interference into our service.
OUR BUSINESS DEPENDS SUBSTANTIALLY ON FCC LICENSES THAT CAN EXPIRE OR BE REVOKED
OR MODIFIED
We have licenses to operate EchoStar I and EchoStar II at the 119
degree orbital location, which both expire in 2006, a license to operate
EchoStar III at the 61.5 degree orbital location, which expires in 2008 and an
authorization to launch and operate for 10 years EchoStar V and EchoStar VI at
the 110 degree orbital location. Also, we have filed with the FCC an application
for a license to operate EchoStar IV from the 148 degree orbital location as
well as a request for a waiver of the requirement of serving Alaska and Hawaii
from that orbital location. The state of Hawaii has requested the FCC to impose
several conditions on these requested authorizations, and we have opposed many
of these conditions. We cannot be sure whether the FCC will grant these requests
or whether it will impose onerous conditions. Until recently, we operated
EchoStar IV at the 148 degree orbital location under a special temporary
authorization. Our authorization at the 148 degree orbital location requires us
to construct a satellite by December 20, 2000 and to utilize all of our
FCC-allocated frequencies at that location by December 20, 2002, or risk losing
those frequencies that we are not using. Third parties have opposed, and we
expect them to continue to oppose, some of our authorizations or pending and
future requests to the FCC for extensions, waivers and approvals.
During June 1999, we received another special temporary authorization
from the FCC to temporarily move our EchoStar IV satellite to the 110 degree
orbital location and operate it pending the launch and successful in-orbit
testing and initial operation of EchoStar V. This authorization was subject to
several conditions and expired by its own terms when EchoStar V commenced
commercial operation during November 1999.
In conjunction with our plan to provide local-into-local broadcast
service as well as cable programming from the 110 degree orbital location, we
recently moved EchoStar IV to the 119.2 degree orbital location. We have an
authorization from the FCC to operate that satellite over certain frequencies at
that location, and we recently received special temporary authorization to
operate the satellite over additional frequencies and at the 119.35 degree
orbital location (instead of the authorized 119.2 degree orbital location). Our
current plans is to transition some of
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the programming now on EchoStar I and II to EchoStar IV, which can provide
service to Alaska and Hawaii from the orbital location. In connection with that
plan, we have also petitioned the FCC to declare that we have met our due
diligence obligations for the 148 degree orbital location, or alternatively to
extend the December 20, 2000 milestone for that location. The State of Hawaii
has opposed that request and there is no assurance that it will be granted by
the FCC.
The telemetry, tracking and control operations of EchoStar I are in an
area of the spectrum called the "C-band." Although the FCC granted us
conditional authority to use these frequencies for telemetry, tracking and
control, in January 1996 a foreign government raised an objection to EchoStar
I's use of these frequencies. We cannot be certain whether that objection will
subsequently require us to relinquish the use of such C-band frequencies for
telemetry, tracking and control purposes. Further, EchoStar II's telemetry,
tracking and control operations are in the "extended" C-band. Our authorization
to use these frequencies expired on January 1, 1999. Although we have timely
applied for extension of that authorization to November 2006, we cannot be sure
that the FCC will grant our request. If we lose the ability to use these
frequencies for controlling either satellite, we would lose the satellite.
Recently, the FCC released a notice of proposed rulemaking that may prohibit
future satellite operations in the "extended" C-band frequencies. The FCC also
is no longer accepting earth station applications in that band. These recent
developments might have negative implications for us.
All of our FCC authorizations are subject to conditions as well as to
the FCC's authority to modify, cancel or revoke them. In addition, all of our
authorizations for satellite systems that are not yet operational, including the
license that we received from MCI WorldCom, are subject to construction and
progress obligations, milestones, reporting and other requirements. The FCC has
indicated that it may revoke, terminate, condition or decline to extend or renew
such authorizations if we fail to comply with applicable Communications Act
requirements. If we fail to file adequate reports or to demonstrate progress in
the construction of our satellite systems, the FCC has stated that it may cancel
our authorizations for those systems. We have not filed, or timely filed, all
required reports or other filings, and some of our construction permits have
expired, in connection with our authorized systems with the FCC. We cannot be
certain whether or not the FCC would cancel our authorizations. While we have
filed with the FCC pending requests for extensions of authorizations that have
expired, we cannot be sure how the FCC will rule on these requests.
RESTRICTIVE COVENANTS UNDER OUR INDEBTEDNESS MAY LIMIT OUR ABILITY TO OPERATE
OUR BUSINESS
The indentures relating to our long-term indebtedness contain
restrictive covenants that may inhibit our ability to manage our business,
engage in certain transactions that we believe to be beneficial to holders of
common stock and the convertible notes and to react to changing market
conditions. These restrictions, among other things, limit the ability of our
subsidiaries to:
o incur additional indebtedness;
o issue preferred stock;
o sell assets;
o create, incur or assume liens;
o merge, consolidate or sell assets;
o enter into transactions with affiliates; and
o pay dividends and make other distributions.
WE DEPEND ON OTHERS TO PRODUCE PROGRAMMING
We depend on third parties to provide us with programming services. Our
programming agreements have remaining terms ranging from one to ten years and
contain various renewal and cancellation provisions. We may not be able to renew
these agreements on favorable terms or at all, or these agreements may be
canceled prior to expiration of their original term. If we are unable to renew
any of these agreements or the other parties cancel the agreements, we cannot
assure you that we would be able to obtain substitute programming, or that such
substitute
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programming would be comparable in quality or cost to our existing programming.
In particular, the cost of sports programming has been rising rapidly. Our
competitors currently offer much of the same programming that we do. Our ability
to compete successfully will depend on our ability to continue to obtain
desirable programming and offer it attractively to our customers at competitive
prices.
OUR SATELLITES ARE SUBJECT TO RISKS DURING AND AFTER LAUNCH
Satellite launches are subject to significant risks, including launch
failure, which may result in incorrect orbital placement or improper commercial
operation. Approximately 15% of all commercial geostationary satellite launches
have resulted in a total or constructive total loss. The failure rate varies by
launch vehicle and satellite manufacturer. The loss, damage or destruction of
any of our satellites as a result of electrostatic storm or collision with space
debris would have a material adverse effect on our business. EchoStar IV has
experienced certain anomalies; see "-- Insurance coverage of our satellites is
limited."
In November 1998 and 1999, certain meteoroid events occurred as the
Earth's orbit passed through the particulate trail of Comet 55P (Tempel-Tuttle).
Similar meteoroid events are expected to occur again in November 2000. These
meteoroid events pose a potential threat to all in orbit geosynchronous
satellites including our DBS satellites. While the probability that our
satellites will be damaged by space debris is very small, that probability will
increase by several orders of magnitude during these meteoroid events.
OUR SATELLITES HAVE MINIMUM DESIGN LIVES OF 12 YEARS, BUT COULD FAIL BEFORE THEN
Our ability to earn revenue wholly depends on the usefulness of our
satellites. Each of our satellites has a limited useful life. A number of
factors affect the useful lives of the satellites, including the quality of
their construction, the durability of their component parts, the longevity of
their station-keeping on orbit and the efficiency of the launch vehicle used.
The minimum design life of each of EchoStar I, EchoStar II, EchoStar III,
EchoStar IV and EchoStar V is 12 years. We can provide no assurance, however, as
to the useful lives of the satellites. Anomalies EchoStar IV has experienced
have reduced its useful life to less than 10 years. Our operating results would
be adversely affected if the useful life of any of our other satellites were
significantly shorter than 12 years. The satellite construction contracts for
our satellites contain no warranties if EchoStar I, EchoStar II, EchoStar III,
EchoStar IV or EchoStar V fails following launch. Additionally, moving any of
these satellites, either temporarily or permanently, to another orbital
location, decreases the orbital life of the satellite by up to six months per
movement. Earlier this year, we temporarily moved our EchoStar IV satellite to
the 110 degree orbital location, see "-- Our business depends substantially on
FCC licenses that can expire or be revoked or modified."
In the event of a failure or loss of any of EchoStar I, EchoStar II or
EchoStar III, we may relocate EchoStar IV and use the satellite as a replacement
for the failed or lost satellite. Such a relocation would require prior FCC
approval and, among other things, a showing to the FCC that EchoStar IV would
not cause additional interference compared to EchoStar I, EchoStar II or
EchoStar III. If we choose to use EchoStar IV in this manner, we cannot assure
you that this use would not adversely affect our ability to meet the operation
deadlines associated with our permits. Failure to meet those deadlines could
result in the loss of such permits which would have an adverse effect on our
operations.
INSURANCE COVERAGE OF OUR SATELLITES IS LIMITED
We renewed in-orbit insurance for EchoStar I, EchoStar II and EchoStar
III through July 2000. The insurance policy with respect to in-orbit operation
contains standard commercial satellite insurance provisions, including a
material change in underwriting information clause requiring us to notify our
insurers of any material change in the written underwriting information provided
to the insurers or any change in any material fact or circumstance concerning
our satellites insured under the policy. That notification could permit insurers
to renegotiate the terms and conditions if the result is a material change in
risk of loss or insurable interest. A change in the operating status of an
insured satellite or any loss occurring during the policy period does not
entitle the insurers to renegotiate the policy terms. Currently, our satellite
insurance contains customary exclusions and does not apply to loss or damage
caused by acts of war or civil insurrection, anti-satellite devices, nuclear
radiation or radioactive contamination or certain willful or intentional acts
designed to cause loss or failure of a satellite. There may be circumstances in
which insurance will not fully reimburse us for any loss. For example, as a
result of the
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failure over the past two years of three transponders on EchoStar III, resulting
in the loss of use of six transponders on EchoStar III, our new insurance policy
for EchoStar III contains a deductible of three or six transponders, depending
on the power mode that we operate in. As a result of this deductible, we are
currently insured for approximately 81% of our total transponders on EchoStar
III.
The EchoStar IV launch insurance policy provided for insurance of
$219.3 million covering the period from launch of the satellite on May 8, 1998
through May 8, 1999. Due to anomalies experienced by EchoStar IV during that
period and the resulting pending claim for a total constructive loss, we did not
obtain in-orbit insurance on EchoStar IV. Consequently, if we are unable to
resolve our pending insurance claim to our satisfaction, EchoStar IV will not be
insured if further losses occur in the future. In addition, insurance will not
reimburse us for business interruption, loss of business, profit opportunity and
similar losses that might arise from delay in the launch of any EchoStar
satellite.
We have procured normal and customary launch insurance for EchoStar V.
The launch insurance policy provides for insurance of $225.0 million covering
the period from launch of the satellite on September 23, 1999 through September
23, 2000. Before the policy expires, we expect to procure normal and customary
in-orbit insurance but might not be able to procure that insurance at reasonable
rates, or at all, if EchoStar V experiences any anomalies before that time.
WE MAY BE UNABLE TO SETTLE OUTSTANDING CLAIMS WITH INSURERS
As a result of the failure of EchoStar IV solar arrays to fully deploy
and the unrelated failure of 20 transponders to date, a maximum of approximately
16 of the 44 transponders on EchoStar IV are currently available for use at this
time. Due to the normal degradation of the solar arrays, the number of available
transponders may further decrease over time. Based on the current data from
Lockeed Martin, we expect that approximately 10 transponders will probably be
available over the remaining useful life of the satellite, absent significant
additional transponder problems or other failures. In addition to the
transponder failures, EchoStar IV has experienced anomalies affecting its
heating systems and fuel system during 1999.
In September 1998, we filed a $219.3 million insurance claim for a
constructive total loss under the launch insurance policy related to EchoStar
IV. However, if we receive $219.3 million for a constructive total loss on the
satellite, the insurers would obtain the sole right to the benefits of salvage
from EchoStar IV under the terms of the launch insurance policy. Although we
believe we have suffered a total loss of EchoStar IV under that definition in
the launch insurance policy, we intend to negotiate a settlement with the
insurers to compensate us for the reduced satellite transmission capacity and
allow us to retain title to the asset.
While there can be no assurance, we do not currently expect a material
adverse impact on short or medium term satellite operations. Although we have
not fully assessed the impairment to EchoStar IV from the transponder failures
and other anomalies, we continue to believe that insurance proceeds will be
sufficient to offset all write-downs of satellite assets that might ultimately
be necessary because of lost functionality. However, we can provide no assurance
that additional material failures will not occur, and we can provide no
assurance as to the ultimate amount that may be received from the insurance
claim, or that coverage will be available. We will continue to evaluate the
performance of EchoStar IV and may modify our loss assessment as new events or
circumstances develop.
Our satellite insurance policy for EchoStar IV consists of separate
identical policies with different carriers for varying amounts which, in
combination, create a total insured amount of $219.3 million. Two of the
participants in our insurance line have notified us they believe that our
alleged delay in providing required insurance claim information may reduce their
obligation to pay any settlement related to the claim. One carrier recently
asserted it has no obligation to pay. We strongly disagree with the position
taken by those insurers and continue to believe that the EchoStar IV insurance
claim will be resolved in a manner satisfactory to us. However, we cannot assure
you that we will receive the amount claimed or, if we do, that we will retain
title to EchoStar IV with its reduced capacity. We met with our insurance
carriers in November 1999 and are continuing discussions to resolve our claim.
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WE MAY BECOME LIABLE IN A PENDING FEE DISPUTE
In connection with the News Corporation litigation that arose in 1997,
we have a contingent fee arrangement with the attorneys who represented us in
that litigation which provides for the attorneys to be paid a percentage of any
net recovery obtained in the News Corporation litigation. The attorneys have
asserted that they may be entitled to receive payments totaling hundreds of
millions of dollars under this fee arrangement. We are vigorously contesting the
attorneys' interpretation of the fee arrangement, which we believe significantly
overstates the magnitude of our liability.
During mid-1999, we initiated litigation against the attorneys in the
District Court, Arapahoe County, Colorado, arguing that the fee arrangement is
void and unenforceable and asserting claims for breach of fiduciary duty,
constructive fraud, breach of the fee arrangement, and misappropriation of trade
secrets. In December 1999, the attorneys initiated an arbitration proceeding
before the American Arbitration Association. Currently, we are unable to predict
the outcome of arbitration or litigation regarding this fee dispute.
WE USE ONLY ONE DIGITAL BROADCAST CENTER
We rely upon a single digital broadcast center located in Cheyenne,
Wyoming, for key operations for programming signals, such as reception,
encryption and compression. Although we recently acquired a digital broadcast
center located in Gilbert, Arizona, this digital broadcast center will require
significant time and expenditures to become fully operational. If a natural or
other disaster damaged the digital broadcast center in Cheyenne, Wyoming, we
cannot assure you that we would be able to continue to provide programming
services to our customers.
COMPLEX TECHNOLOGY USED IN OUR BUSINESS COULD FAIL OR BECOME OBSOLETE
New applications and adaptations of existing and new technology,
including compression, conditional access, on screen guides and other matters,
and significant software development, are integral to our direct broadcast
satellite system and may, at times, not function as we expect. Technology in the
satellite television industry is in a rapid and continuing state of change as
new technologies develop. We cannot assure you that we and our suppliers will be
able to keep pace with technological developments. In addition, delays in the
delivery of components or other unforeseen problems in our direct broadcast
satellite system may occur that could adversely affect performance or operation
of our direct broadcast satellite system and could have an adverse effect on our
business. Further, if a competitive satellite receiver technology becomes
commonly accepted as the standard for satellite receivers in the United States,
we would be at a significant technological disadvantage.
WE DEPEND PRIMARILY ON A SINGLE RECEIVER MANUFACTURER
SCI Technology, Inc., a high-volume contract electronics manufacturer,
is the primary manufacturer of EchoStar receiver systems. JVC and VTech also
manufacture some EchoStar receiver systems for use by us and other customers of
EchoStar Technologies Corporation. JVC also manufactures other consumer
electronics products incorporating our receiver systems. If any of these vendors
are unable for any reason to produce receivers in a quantity sufficient to meet
our requirements, it would impair our ability to add additional DISH Network
subscribers and grow our technology business unit. Likewise, it would adversely
affect our results of operations.
WE HAVE FEWER DISTRIBUTION CHANNELS THAN OUR LARGEST DIRECT BROADCAST SATELLITE
COMPETITOR
We do not have manufacturing agreements or arrangements with consumer
products manufacturers other than JVC, VTech and Philips, and only JVC currently
manufactures consumer electronics equipment incorporating our receivers. As a
result, our receivers, and consequently our programming services, are less well
known to consumers than those of our largest direct satellite broadcast
competitor, DIRECTV. As alleged in the litigation we commenced against DIRECTV
on February 1, 2000, see "Recent Developments", we believe that the improper
conduct of DIRECTV has resulted in fewer retail outlets that carry our receiver
systems for sale compared to outlets that carry the DIRECTV system.
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<PAGE> 20
WE RELY ON KEY PERSONNEL
We believe that our future success will depend to a significant extent
upon the performance of Charles W. Ergen, Chairman, Chief Executive Officer and
President. The loss of Mr. Ergen could have an adverse effect on our business.
We do not maintain "key man" insurance. Although all of our executives, other
than executive officers, have executed agreements limiting their ability to work
for or consult with competitors if they leave us, we do not have any employment
agreements with any of our executive officers.
WE ARE CONTROLLED BY ONE PRINCIPAL STOCKHOLDER
Charles W. Ergen, our Chairman, Chief Executive Officer and President,
currently beneficially owns approximately 52% of our total equity securities,
assuming exercise of employee stock options, and possesses approximately 91% of
the total voting power. Thus, Mr. Ergen has the ability to elect a majority of
our directors and to control all other matters requiring the approval of our
stockholders. In addition, pursuant to a voting agreement among Mr. Ergen, News
Corporation and MCI WorldCom, News Corporation and MCI WorldCom have agreed to
vote their shares in accordance with the recommendation of our Board of
Directors for five years. For Mr. Ergen's total voting power to be reduced to
below 51%, his percentage ownership of the equity securities of EchoStar would
have to be reduced to below 10%.
FOREIGN OWNERSHIP RESTRICTIONS COULD AFFECT OUR BUSINESS PLAN
The Communications Act, and the FCC's implementing regulations, provide
that when subsidiaries of a holding company hold certain types of FCC licenses,
foreign nationals or their representatives may not own or vote more than 25% of
the total equity of the holding company, except upon an FCC public interest
determination. Although the FCC's International Bureau has ruled that these
limitations do not apply to providers of subscription direct broadcast satellite
service like us, the ruling is under challenge. Furthermore, the limitations
will apply to our licenses for fixed satellite service if we hold ourselves out
as a common carrier or if the FCC decides to treat us as such a carrier. The FCC
has noted that we have proposed to operate one of our authorized fixed satellite
service systems on a common carrier as well as a non-common carrier basis. We
have recently informed the FCC that we have no common carrier plans with respect
to that system.
Currently a subsidiary of News Corporation, an Australian corporation,
owns approximately 7% of our total outstanding stock, having 1% of our total
voting power. This ownership has increased the possibility that foreign
ownership of our stock may exceed the foreign ownership limitations if they
apply. In connection with the MCI WorldCom authorization that we received in
connection with our transactions with News Corporation, the FCC has decided to
waive any foreign ownership limitations to the extent applicable. Nevertheless,
we cannot foreclose the possibility that, in light of any subsequent FCC
decisions or policy changes, we may in the future need a separate FCC
determination that foreign ownership in excess of any applicable limits is
consistent with the public interest in order to avoid a violation of the
Communications Act or the FCC's rules.
RISKS PRIMARILY RELATED TO THE CONVERTIBLE NOTES AND OUR COMMON STOCK
WE HAVE SUBSTANTIAL INDEBTEDNESS AND ARE DEPENDENT ON OUR SUBSIDIARIES' EARNINGS
TO MAKE PAYMENTS ON OUR INDEBTEDNESS
We have substantial debt service requirements which make us vulnerable
to changes in general economic conditions. The indentures governing our
subsidiaries' debt restrict their ability to incur additional debt. Thus it is,
and will continue to be, difficult for our subsidiaries to obtain additional
debt if required or desired in order to implement our business strategy. Since
we conduct substantially all of our operations through our subsidiaries, our
ability to service our debt obligations is dependent upon the earnings of our
subsidiaries and the payment of funds by our subsidiaries to us in the form of
loans, dividends or other payments. We have few assets of significance other
than the capital stock of our subsidiaries. Our subsidiaries are separate legal
entities that have no obligation to pay any amounts due under the convertible
notes. Our subsidiaries do not guarantee the payment of the convertible notes.
Furthermore, our subsidiaries are not obligated to make funds available to us,
and creditors of our subsidiaries will have a superior claim to our
subsidiaries' assets. In addition, our subsidiaries' ability to make any
payments to us will depend on their earnings, the terms of their indebtedness,
business and tax considerations and
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<PAGE> 21
legal restrictions. The outstanding senior notes of our EchoStar DBS Corporation
subsidiary, an intermediate holding company through which we conduct
substantially all of our business, currently prohibit it from paying any
dividends to us. We cannot assure you that any of our other subsidiaries will be
able to pay dividends or otherwise distribute funds to us in an amount
sufficient to pay the principal of or interest on the convertible notes. As of
September 30, 1999, our subsidiaries had outstanding long-term debt (including
both the current and long-term portion) of approximately $2.05 billion and also
had $628 million of other liabilities. Our subsidiaries may incur significant
indebtedness in the future. If indebtedness is issued by a subsidiary, the
claims of creditors of that subsidiary would effectively rank senior to the
claims of holders of the convertible notes with respect to such subsidiary's
assets. Accordingly, there might be insufficient assets available to satisfy
your claims as a holder of the convertible notes upon an acceleration of the
maturity of the convertible notes. Our ability to meet our payment obligations
will depend on the success of our business strategy, which is subject to
uncertainties and contingencies beyond our control.
THE CONVERTIBLE NOTES ARE SUBORDINATED TO OTHER DEBT AND NOT SECURED BY ANY OF
OUR ASSETS
The convertible notes are general unsecured obligations ranking junior
to all our existing and future "Senior Debt," as that term is defined in the
indenture. See "Description of convertible notes -- Definitions." In addition,
the convertible notes are effectively junior to all our existing and future
secured indebtedness to the extent of the value of the assets securing that
indebtedness. As a result of such subordination, in the event of our bankruptcy,
liquidation or reorganization or certain other events, our assets will be
available to pay obligations on the convertible notes only after all of our
Senior Debt and all of our secured debt, to the extent of the value of the
assets securing that debt, has been paid in full. Consequently, there may not be
sufficient assets remaining to pay amounts due on any or all of the convertible
notes then outstanding. In addition, to the extent our assets cannot satisfy in
full the secured indebtedness, the holders of the secured indebtedness would
have a claim for any shortfall that would rank senior in right of payment with
respect to the convertible notes, if such secured debt were "Senior Debt," or
would rank equally in right of payment with the convertible notes if such
secured debt were not so classified. The indenture governing the convertible
notes does not prohibit or limit our or our subsidiaries' incurrence of
additional debt, including Senior Debt or secured debt, and the incurrence of
any such additional indebtedness could adversely affect our ability to pay our
obligations on the convertible notes. As of September 30, 1999, our subsidiaries
had outstanding long-term debt (including both the current and long-term
portion) of approximately $2.05 billion and also had $628 million of other
liabilities, all of which are structurally senior to the convertible notes.
FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE
Sales of a substantial number of our shares of class A common stock in
the public market in connection with this offering, or other offerings by us,
could cause the market price of our class A common stock to decline. During
October 1999, we filed a registration statement registering for sale up to
34,412,464 shares of our class A common stock by News America Incorporated and
MCI WorldCom Network Services, Inc. On December 2, 1999, News America
Incorporated and MCI WorldCom Network Services, Inc. sold 13.8 million of these
shares pursuant to an underwritten offering. In connection with that offering,
News America Incorporated and MCI WorldCom Network Services, Inc. have committed
not to sell any shares of class A common stock, other than those included in
that offering, for a period of six months and, thereafter, only as provided in
the prospectus. The sale of these shares may affect the market price of our
class A common stock.
WE MAY BE UNABLE TO REPAY OR REPURCHASE THE CONVERTIBLE NOTES UPON A CHANGE OF
CONTROL
There is no sinking fund with respect to the convertible notes, and the
entire outstanding principal amount of the convertible notes will become due and
payable at maturity. If we experience a change in control, as defined, you may
require us to repurchase all or a portion of your convertible notes prior to
maturity. See "Description of convertible notes -- Repurchase at the option of
holders." We may not have sufficient funds or be able to arrange for additional
financing to repay the convertible notes at maturity or to repurchase
convertible notes tendered to us following a change in control.
Borrowing arrangements or agreements relating to other indebtedness to
which we may become a party may contain restrictions on or prohibitions against
our repurchase of the convertible notes. If we were prohibited
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<PAGE> 22
from repurchasing the convertible notes under such financing arrangements and
could not obtain the necessary waivers or refinance the applicable borrowings,
we would be unable to repurchase the convertible notes. Our failure to
repurchase any tendered convertible notes or convertible notes due upon maturity
would constitute an event of default of the convertible notes.
THERE MAY BE NO PUBLIC MARKET FOR THE CONVERTIBLE NOTES
We cannot assure you that any market for the convertible notes will
develop or, if it does develop, that it will be maintained. If a trading market
is established, various factors could have a material adverse effect on the
trading of the convertible notes, including fluctuations in the prevailing
interest rates, changes in the market for convertible securities and changes in
the market price of our common stock. The convertible notes are eligible for
trading in the PORTAL Market. We do not intend to apply for a listing of any of
the convertible notes on any security exchange or for quotation through the
Nasdaq National Market.
OUR STOCK PRICE MAY BE VOLATILE
The price at which our common stock trades may be volatile and may
fluctuate substantially due to competition and changes in the subscription
television industry, regulatory changes, launch and satellite failures,
operating results below expectations and other factors. In addition, price and
volume fluctuations in the stock market may affect market prices for our common
stock for reasons unrelated to our operating performance.
THE SHARES OF COMMON STOCK RECEIVED UPON CONVERSION OF THE CONVERTIBLE NOTES
HAVE LIMITED VOTING RIGHTS
Our equity securities consist of common stock and preferred stock. Our
common stock has been divided into three classes with different voting rights.
Holders of class A common stock, which is the class issuable upon conversion of
the convertible notes, and holders of class C common stock are entitled to one
vote per share on all matters submitted to a vote of stockholders. Holders of
class B common stock are entitled to ten votes per share. Holders of series C
preferred stock have no voting rights except as provided by law or unless
dividends are in arrears. No class C common stock or other series of preferred
stock is currently outstanding. However, upon a "change in control" of EchoStar,
any holder of class C common stock would be entitled to ten votes per share.
Holders of common stock generally vote together as single class on matters
submitted to stockholders. Although the class A common stock represents
approximately 48% of our total common and preferred shares outstanding, it
represents only 8% of our total voting power. Holders of common stock received
upon conversion of the convertible notes will therefore not be able to
meaningfully participate in our affairs absent a restructuring of our capital
stock or the conversion of the outstanding class B common stock into class A
common stock.
WE DO NOT EXPECT TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE
We have never declared or paid any cash dividends on any class of our
common stock and we do not expect to declare dividends on our common stock in
the foreseeable future. Payment of any future dividends will depend upon our
earnings and capital requirements, restrictions in our debt facilities and other
factors our Board of Directors considers appropriate. We currently intend to
retain our earnings, if any, to support future growth and expansion.
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<PAGE> 23
RATIO OF EARNINGS TO FIXED CHANGES
<TABLE>
<CAPTION>
Nine Months
Year Ended December 31, Ended
------------------------------------------------------------------ September 30,
1994 1995 1996 1997 1998 1999
------- -------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to
fixed changes 0.78 0.13 (0.99) (1.34) (0.42) (0.99)
======= ======== ========= ========= ========= =============
Deficiency of
available earnings to
fixed charges $(6,145) $(44,198) $(188,701) $(364,290) $(317,731) $ (309,779)
======= ======== ========= ========= ========= =============
</TABLE>
For purposes of computing the ratio of earnings to fixed charges, and
the deficiency of earnings to fixed charges, earnings consist of earnings from
continuing operations before income taxes, plus fixed charges. Fixed charges
consist of interest incurred on all indebtedness and the imputed interest
component of rental expense under non-cancelable operating leases. For the years
ended December 31, 1994, 1995, 1996, 1997 and 1998 and the nine months ended
September 30, 1999, earnings were insufficient to cover the fixed charges.
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<PAGE> 24
DESCRIPTION OF CONVERTIBLE NOTES
GENERAL
The convertible notes are issued under an indenture, dated as of
December 8, 1999, to which we and U.S. Bank Trust National Association, as
trustee, are parties. The following description is a summary of the material
provisions of the indenture. It does not restate the indenture in its entirety.
We urge you to read the indenture and the registration rights agreement because
they, and not this description, define your rights as a holder of the
convertible notes. Copies of the indenture and the registration rights agreement
are available to you upon request.
You can find the definitions of certain terms used in this description
under the subheading "Definitions." In this section of the Prospectus entitled
"Description of convertible notes" when we use the terms "we," "us," "our" or
similar terms, we are referring only to EchoStar Communications Corporation, the
issuer of the convertible notes, and not to any of its subsidiaries.
The convertible notes will be general unsecured obligations of ours,
subordinated in right and priority of payment to all of our existing and future
Senior Debt as described under "-- Subordination of convertible notes" and
convertible into our class A common stock as described under "-- Conversion."
The indenture does not contain any financial covenants or restrictions on the
payment of dividends, the incurrence of Senior Debt or issuance or repurchase of
our securities. The indenture contains no covenants or other provisions to
afford protection to holders of the convertible notes in the event of a highly
leveraged transaction, except to the extent described under "-- Repurchase at
the option of holders." The convertible notes will not be guaranteed by any of
our subsidiaries.
We conduct substantially all of our operations through our
subsidiaries. We are dependent upon the cash flow of our subsidiaries to meet
our obligations, including our obligations under the convertible notes. As a
result, the convertible notes will be effectively subordinated to all existing
and future indebtedness and other liabilities and commitments of our
subsidiaries with respect to the cash flow and assets of those subsidiaries.
PRINCIPAL, MATURITY AND INTEREST
We issued $1 billion in aggregate principal amount of convertible
notes. The convertible notes will mature on January 1, 2007. Interest on the
convertible notes accrues at a rate of 4 7/8% per annum from the date of
original issuance and is be payable semiannually on July 1 and January 1,
commencing on July 1, 2000. We will make each interest payment to the holders of
record of the convertible notes on the immediately preceding June 15 and
December 15. Interest will be computed on the basis of a 360-day year comprised
of twelve 30-day months. All references herein to a payment of principal shall
include any premium that may be payable.
We are required to pay special interest on the convertible notes under
certain circumstances, all as further described under the caption "Registration
rights." All references herein to interest on the convertible notes shall
include any such special interest that may be payable and all references to a
payment of principal shall include any premium that may be payable.
The convertible notes are payable both as to principal and interest on
presentation of such convertible notes if in certificated form at our offices or
agencies maintained for such purpose or, at our option, payment of interest may
be made by check mailed to the holders of the convertible notes at their
respective addresses listed in the register of holders of convertible notes or,
if a holder who holds an aggregate principal amount of at least $5.0 million of
convertible notes so requests, by wire transfer of immediately available funds
to an account previously specified in writing by such holder to us and the
trustee. Until we designate otherwise, our office or agency will be the offices
of the trustee maintained for this purpose. The convertible notes are issued in
registered form, without coupons, and in denominations of $1,000 and integral
multiples of $1,000.
CONVERSION
The holder of any convertible note has the right, exercisable at any
time after March 2, 2000 and prior to maturity, to convert the principal amount
thereof (or any portion thereof that is an integral multiple of $1,000) into
shares of our class A common stock at a conversion price of $90.88 per share,
subject to adjustment as described
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<PAGE> 25
below (the "Conversion Price"), except that if a convertible note is called for
redemption, the conversion right will terminate at the close of business on the
business day immediately preceding the date fixed for redemption.
If any convertible notes are converted during the period after any
record date but before the next interest payment date, interest on such
convertible notes will be paid on the next interest payment date,
notwithstanding such conversion, to the holder of record on the record date of
those convertible notes. Any convertible notes that are, however, delivered to
us for conversion after any record date but before the next interest payment
date must, except as described in the next sentence, be accompanied by a payment
equal to the interest payable on such interest payment date on the principal
amount of convertible notes being converted. We will not require the payment to
us described in the preceding sentence if, during that period between a record
date and the next interest payment date, a conversion occurs on or after the
date that we have issued a redemption notice and prior to the date of
redemption. If any convertible notes are converted after an interest payment
date but on or before the next record date, no interest will be paid on those
notes. No fractional shares will be issued upon conversion, but a cash
adjustment will be made for any fractional shares.
The conversion price is subject to adjustment upon the occurrence of
certain events, including:
(1) the issuance of shares of common stock as a dividend or
distribution on our common stock;
(2) the subdivision or combination of our outstanding common stock;
(3) the issuance to substantially all holders of our common stock of
rights or warrants to subscribe for or purchase common stock (or
securities convertible into class A common stock) at a price per
share less than the then current market price per share, as
defined;
(4) the distribution of shares of our capital stock (other than
common stock), evidences of indebtedness or other assets
(excluding dividends in cash, except as described in paragraph 5
below) to all holders of our common stock;
(5) the distribution, by dividend or otherwise, of cash to all
holders of our common stock in an aggregate amount that, together
with the aggregate of any other distributions of cash that did
not trigger a Conversion Price adjustment to all holders of our
common stock within the 12 months preceding the date fixed for
determining the stockholders entitled to such distribution and
all Excess Payments in respect of each tender offer or other
negotiated transaction by us or any of our subsidiaries for our
common stock concluded within the preceding 12 months not
triggering a Conversion Price adjustment, exceeds 15% of the
product of the current market price per share (determined as set
forth below) on the date fixed for the determination of
stockholders entitled to receive such distribution times the
number of shares of our common stock outstanding on that date;
(6) payment of an Excess Payment in respect of a tender offer or
other negotiated transaction by us or any of our subsidiaries for
our common stock, if the aggregate amount of such Excess Payment,
together with the aggregate amount of cash distributions made
within the preceding 12 months not triggering a Conversion Price
adjustment and all Excess Payments in respect of each tender
offer or other negotiated transaction by us or any of our
subsidiaries for our common stock concluded within the preceding
12 months not triggering a Conversion Price adjustment, exceeds
15% of the product of the current market price per share on the
expiration of such tender offer or the consummation of such other
negotiated transaction, as the case may be, times the number of
shares of our common stock outstanding on that date; and
(7) the distribution to substantially all holders of our common stock
of rights or warrants to subscribe for securities (other than
those referred to in paragraph 3 above). In the event of a
distribution to substantially all holders of our common stock of
rights to subscribe for additional shares of our capital stock
(other than those referred to in paragraph 3 above), we may,
instead of making any adjustment in the Conversion Price, make
proper provision so that each holder of a convertible note who
converts that convertible note after the record date for such
distribution and prior to the
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<PAGE> 26
expiration or redemption of such rights will be entitled to
receive upon such conversion, in addition to shares of common
stock, an appropriate number of such rights. No adjustment of the
Conversion Price will be made until cumulative adjustments amount
to one percent or more of the Conversion Price as last adjusted.
If we reclassify or change our outstanding common stock, or consolidate
with or merge into or transfer or lease all or substantially all of our assets
to any person, or are a party to a merger that reclassifies or changes our
outstanding common stock, the convertible notes will become convertible into the
kind and amount of securities, cash or other assets which the holders of the
convertible notes would have owned immediately after the transaction if the
holders had converted their convertible notes immediately before the effective
date of the transaction.
The indenture also provides that if rights, warrants or options expire
unexercised, the Conversion Price shall be readjusted to take into account the
actual number of such warrants, rights or options, which were exercised.
In the indenture, the "current market price" per share of common stock
on any date means the average of the daily market prices for the shorter of (i)
ten consecutive business days ending on the last full trading day on the
exchange or market referred to in determining such daily market prices prior to
the time of determination (as defined in the indenture) or (ii) the period
commencing on the date next succeeding the first public announcement of the
issuance of such rights or warrants or such distribution through such last full
trading day prior to the time of determination.
We are permitted to make such reductions in the Conversion Price as we,
in our discretion, determine to be advisable in order that any stock dividend,
subdivision of shares, distribution of rights to purchase stock or securities or
distribution of securities convertible into or exchangeable for stock which we
make to our stockholders will not be taxable to the recipients.
SUBORDINATION OF CONVERTIBLE NOTES
The convertible notes are subordinate in right and priority of payment
to all of our existing and future Senior Debt. The indenture does not restrict
the amount of Senior Debt or other indebtedness that we or any of our
subsidiaries may incur. As of September 30, 1999, the convertible notes
effectively rank junior to $2.05 billion of indebtedness and $628 million of
other liabilities of our subsidiaries. Currently, We do not have any debt
outstanding other than indebtedness of our subsidiaries, trade debt and the
indebtedness represented by the convertible notes.
The payment of the principal of, interest on or any other amounts due
on the convertible notes is subordinated in right and priority of payment to the
prior payment in full of all of our Senior Debt. No payment on account of
principal of, redemption of, interest on or any other amounts due on the
convertible notes, including, without limitation, any payments on the Change of
Control Offer, and no redemption, purchase or other acquisition of the
convertible notes may be made unless (i) full payment of amounts then due on all
Senior Debt have been made or duly provided for under the terms of the
instrument governing such Senior Debt, and (ii) at the time for, or immediately
after giving effect to, any such payment, redemption, purchase or other
acquisition, there shall not exist under any Senior Debt or any agreement
pursuant to which any Senior Debt has been issued, any default which shall not
have been cured or waived and which shall have resulted in the full amount of
such Senior Debt being declared due and payable. In addition, the indenture will
provide that if we and the trustee are notified by any of the holders of any
issue of Senior Debt (the "Payment Blockage Notice") that a default has occurred
giving the holders of such Senior Debt the right to accelerate the maturity
thereof, no payment on account of principal, redemption, interest, special
interest, if any, or any other amounts due on the convertible notes and no
purchase, redemption or other acquisition of the convertible notes will be made
for the period (the "Payment Blockage Period") commencing on the date notice is
received and ending on the earlier of (A) the date on which such event of
default shall have been cured or waived or (B) 180 days from the date notice is
received. Notwithstanding the foregoing, only one Payment Blockage Notice with
respect to the same event of default or any other events of default existing and
unknown to the person giving such notice at the time of such notice on the same
issue of Senior Debt may be given during any period of 360 consecutive days
unless such event of default or such other events of default have been cured or
waived for a period of not less than 90 consecutive days. No new Payment
Blockage Period may be commenced by
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<PAGE> 27
the holders of Senior Debt during any period of 360 consecutive days unless all
events of default which triggered the preceding Payment Blockage Period have
been cured or waived.
Upon any distribution of our assets in connection with any dissolution,
winding-up, liquidation or reorganization or acceleration of the principal
amount due on the convertible notes because of any event of default, all Senior
Debt must be paid in full before the holders of the convertible notes are
entitled to any payments whatsoever.
As a result of these subordination provisions, in the event of our
insolvency, holders of the convertible notes may recover ratably less than our
general creditors.
If the payment of the convertible notes is accelerated because of an
event of default, we or the trustee shall promptly notify the holders of Senior
Debt or the trustee(s) for such Senior Debt of the acceleration. We may not pay
the convertible notes until five days after such holders or trustee(s) of Senior
Debt receive notice of such acceleration and, thereafter, may pay the
convertible notes only if the subordination provisions of the indenture
otherwise permit payment at that time.
If the trustee or any holder of convertible notes receives any payment
or distribution of our assets of any kind in contravention of any of the terms
of the indenture, whether in cash, property or securities, including, without
limitation by way of set-off or otherwise, in respect of the convertible notes
before all Senior Debt is paid in full, then such payment or distribution will
be held by the recipient in trust for the benefit of holders of Senior Debt, and
will be immediately paid over or delivered to the holders of Senior Debt or
their representative or representatives to the extent necessary to make payment
in full of all Senior Debt remaining unpaid, after giving effect to any
concurrent payment or distribution, or provision therefor, to or for the holder
of Senior Debt.
We are the exclusive obligors on the convertible notes. Since our
operations are conducted substantially through our subsidiaries, our ability to
service debt, including the convertible notes, is dependent upon the earnings of
our subsidiaries and the distribution of those earnings to, or upon loans or
other payments of funds by those subsidiaries to, us. The payment of dividends
to us and the making of loans and advances to us by our subsidiaries may be
subject to statutory or contractual restrictions, will be dependent upon the
earnings of those subsidiaries and may be subject to various business
considerations. The outstanding senior notes of our EchoStar DBS Corporation
subsidiary, an intermediate holding company through which we conduct
substantially all of our business, currently prohibit it from paying any
dividends to us.
Any right that we have to receive assets of any of our subsidiaries
upon their liquidation or reorganization (and the consequent right of the
holders of the convertible notes to participate in those assets) will be
effectively subordinated to the claims of that subsidiary's creditors (including
trade creditors), except to the extent that we ourselves are recognized as a
creditor of such subsidiary, in which case our claims would still be subordinate
to any security interests in the assets of such subsidiary and any indebtedness
of such subsidiary senior to that held by us.
The indenture will not limit the amount of additional indebtedness,
including Senior Debt, which we can create, incur, assume or guarantee, nor will
the indenture limit the amount of indebtedness and other liabilities which any
subsidiary can create, incur, assume or guarantee.
OPTIONAL REDEMPTION
We may not redeem the convertible notes prior to January 1, 2003.
Thereafter, the convertible notes are subject to redemption at our option, in
whole or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices set forth below, expressed as percentages of principal amount
plus accrued and unpaid interest thereon, in each case, to the applicable
redemption date, if redeemed during the twelve-month period beginning on January
1 of the years indicated below:
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<TABLE>
<CAPTION>
YEAR Percentage
---- ----------
<S> <C>
2003 102.786%
2004 102.089
2005 101.393
2006 100.696
2007 100.000
</TABLE>
MANDATORY REDEMPTION AND REPURCHASE
We are not required to make mandatory redemption or sinking fund
payments with respect to the convertible notes. We are, however, required to
make a Change of Control Offer with respect to a repurchase of the convertible
notes under the circumstances described under the caption "Repurchase at the
option of holders."
REPURCHASE AT THE OPTION OF HOLDERS
If a Change of Control occurs, each holder of convertible notes will
have the right to require us to repurchase all or any part of that holder's
convertible notes equal to $1,000 or an integral multiple of $1,000, pursuant to
the Change of Control Offer at a purchase price equal to 101% of the principal
amount, plus accrued and unpaid interest, if any, as of the date of purchase.
The payment will be referred to as the Change of Control Payment. Within 40 days
following any Change of Control, we will mail a notice to each holder, stating:
(1) that the Change of Control Offer is being made pursuant to the
covenant entitled "Change of Control" and that all convertible
notes tendered will be accepted for payment;
(2) the purchase price and the purchase date, which shall be no
earlier than 30 days nor later than 40 days from the date such
notice is mailed. This date is referred to as the Change of
Control Payment Date;
(3) that interest will continue to accrue on any convertible notes
not tendered, as provided in the convertible notes;
(4) that, unless we default in the payment of the Change of Control
Payment, with respect to all convertible notes accepted for
payment pursuant to the Change of Control Offer, interest will
cease to accrue after the Change of Control Payment Date;
(5) that holders electing to have any convertible notes purchased
pursuant to a Change of Control Offer will be required to
surrender the convertible notes, with the form entitled Option of
Holder to Elect Purchase on the reverse of the convertible notes
completed, to the paying agent at the address specified in the
notice prior to the close of business on the third Business Day
preceding the Change of Control Payment Date;
(6) that holders will be entitled to withdraw their election if the
paying agent receives, not later than the close of business on
the second Business Day preceding the Change of Control Payment
Date, a telegram, telex, facsimile transmission or letter stating
the name of the holder, the principal amount of convertible notes
delivered for purchase, and a statement that the holder is
withdrawing the election to have such convertible notes
purchased; and
(7) that holders whose convertible notes are being purchased only in
part will be issued new convertible notes equal in principal
amount to the unpurchased portion of the convertible notes
surrendered, which unpurchased portion must be equal to $1,000 in
principal amount.
We will comply with the requirements of Rules 13e-4 and 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent those laws and regulations are applicable in connection with the
repurchase of the convertible notes in connection with a Change of Control.
On the Change of Control Payment Date, we will, to the extent lawful,
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(1) accept for payment convertible notes or portions of convertible
notes tendered pursuant to the Change of Control Offer;
(2) deposit with the paying agent an amount equal to the Change of
Control Payment in respect of all convertible notes or portions
of convertible notes so tendered; and
(3) deliver or cause to be delivered to the trustee the convertible
notes so accepted together with an Officers' Certificate stating
the convertible notes or portions of convertible notes that have
been tendered.
The paying agent shall promptly mail to each holder of convertible
notes so accepted, or, if a holder requests, wire transfer immediately available
funds to an account previously specified in writing by the holder to us and the
paying agent, payment in an amount equal to the purchase price for such
convertible notes. The trustee shall promptly authenticate and mail to each
holder a new convertible note equal in principal amount to any unpurchased
portion of the convertible notes surrendered, if any; provided that each new
convertible note shall be in a principal amount of $1,000 or an integral
multiple of $1,000. We will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
Except as described above with respect to a Change of Control, the
indenture does not contain any other provision that permits the holders of the
convertible notes to require that we repurchase or redeem the convertible notes
in the event of a takeover, recapitalization or similar restructuring. The
Change of Control Offer requirement of the convertible notes may, in certain
circumstances, make more difficult or discourage a takeover, and, thus, the
removal of incumbent management. Management has not entered into any agreement
or plan involving a Change of Control, although it is possible that we could
decide to do so in the future. Subject to the limitations discussed below, we
could, in the future, enter into various transactions including acquisitions,
refinancings or other recapitalizations, that would not constitute a Change of
Control under the indenture, but that could increase the amount of indebtedness
outstanding at such time or otherwise affect our capital structure or credit
ratings.
Our ability to pay cash to the holders of convertible notes pursuant to
a Change of Control Offer may be limited by our then existing financial
resources. See "Risk factors." Any future credit facilities or other agreements
relating to our or our subsidiaries' indebtedness may contain prohibitions or
restrictions on our ability to effect a Change of Control Payment or may also
require a similar offer to which we or our subsidiaries may be required to
allocate resources, such as with EchoStar DBS Corporation's outstanding senior
notes. If a Change of Control occurs at a time when such prohibitions or
restrictions are in effect, we could seek the consent of our lenders to the
purchase of convertible notes and other indebtedness containing change of
control provisions or could attempt to refinance the borrowings that contain
such prohibitions or restrictions. If we do not obtain such consents or repay
such borrowings, we will be effectively prohibited from purchasing the
convertible notes. In such case, our failure to purchase tendered convertible
notes would constitute an event of default under the indenture. Moreover, the
events that constitute a Change of Control under the indenture may constitute
events of default under our future debt instruments or credit agreements of us
or our subsidiaries. Such events of default may permit the lenders under those
debt instruments or credit agreements to accelerate the debt and, if the debt is
not paid or repurchased, to enforce their security interests in what may be all
or substantially all of the assets of our subsidiaries. Therefore, our ability
to raise cash to repay or repurchase the convertible notes may be limited.
"Change of Control" means
(a) any transaction or series of transactions (including, without
limitation, a tender offer, merger or consolidation) the result
of which is that the Principal and his Related Parties or an
entity controlled by the Principal and his Related Parties (and
not controlled by any person other than the Principal or his
Related Parties) (i) sell, transfer or otherwise dispose of more
than 50% of the total Equity Interests in us beneficially owned
(as defined in Rule 13(d)(3) under the Exchange Act, but without
including any Equity Interests which may be deemed to be owned
solely by reason of the existence of any voting arrangements), by
such persons on the date of the indenture (as adjusted for stock
splits and dividends and other distributions payable in Equity
Interests) or (ii) do not have the voting power to elect at least
a majority of our Board of Directors;
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(b) the first day on which a majority of the members of our Board of
Directors are not Continuing Directors; or
(c) the sale, lease or transfer of all or substantially all of our
assets to any "Person" or "group," within the meaning of Section
13(d)(3) and 14(d)(2) of the Exchange Act or any successor
provision to either of the foregoing, including any group acting
for the purpose of acquiring, holding or disposing of securities
within the meaning of Rule 13d-5(b)(1) under the Exchange Act,
other than the Principal and his Related Parties.
"Principal" means Charles W. Ergen.
"Related Party" means, with respect to the Principal, (a) the spouse
and each immediate family member of the Principal and (b) each trust,
corporation, partnership or other entity of which the Principal beneficially
holds an 80% or more controlling interest.
SELECTION AND NOTICE
If less than all of the convertible notes are to be redeemed at any
time, selection of convertible notes for redemption will be made by the trustee
in compliance with the requirements of any securities exchange on which the
convertible notes are listed. In the absence of any requirements of any
securities exchange or if the convertible notes are not listed, selection of the
convertible note to be redeemed will be made on a pro rata basis, provided that
no convertible notes of $1,000 or less may be redeemed in part. Notice of
redemption will be mailed by first class mail at least 30 but not more than 60
days before the redemption date to each holder of convertible notes to be
redeemed at its registered address. If any convertible note is to be redeemed in
part only, the notice of redemption that relates to that convertible note shall
state the portion of the principal amount thereof to be redeemed. A new
convertible note in principal amount equal to the unredeemed portion thereof
will be issued in the name of the holder thereof upon cancellation of the
original convertible note. On and after the redemption date, interest ceases to
accrue on convertible notes or portions of them called for redemption.
COVENANTS
SALE OF ASSETS
The indenture provides that we may not sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of our properties or
assets in any one or more related transactions to another corporation, person or
entity unless:
o The entity or person to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made
is a corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia;
o The entity or person to which such sale, assignment,
transfer, lease, conveyance or other disposition will have been made
assumes all obligations pursuant to a supplemental indenture, in a form
reasonably satisfactory to the trustee, under the convertible notes and
the indenture; and
o Immediately after such transaction no default or event of
default exists.
LIMITATION ON STATUS AS INVESTMENT COMPANY
The indenture provides that we will not, and will not permit any
subsidiary to, conduct our or its business in a fashion that would cause us to
be required to register as an "investment company" (as that term is defined in
the Investment Company Act of 1940, as amended).
REPORTS
Whether or not required by the rules and regulations of the SEC, so
long as any convertible notes are outstanding, we will file with the SEC and
furnish to the holders of convertible notes all quarterly and annual financial
information required to be contained in a filing with the SEC on Forms 10-Q and
10-K, including a
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"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report by our
certified independent accountants, in each case, as required by the rules and
regulations of the SEC as in effect on the issuance date.
EVENTS OF DEFAULT AND REMEDIES
The indenture provides that each of the following constitutes an event
of default:
(1) default for 30 days in the payment when due of interest on the
convertible notes;
(2) a default in the payment of principal of any convertible note
when due at its stated maturity, upon optional redemption, in
connection with a Repurchase Offer, upon declaration, or
otherwise;
(3) our failure to comply for 30 days after notice with any of our
obligations under the covenants described under "Repurchase at
the option of holders" and "Sale of assets" (in each case, other
than a failure to purchase convertible notes in connection with a
Repurchase Offer);
(4) our failure for 60 days after notice to comply with certain other
covenants and agreements contained in the indenture or the
convertible notes;
(5) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by us or any of our
subsidiaries that is a "significant subsidiary" or any group of
two or more subsidiaries that, taken as a whole, would constitute
a significant subsidiary, or the payment of which is guaranteed
by us or any of our subsidiaries that is a significant subsidiary
or any group of two or more subsidiaries that, taken as a whole,
would constitute a significant subsidiary, whether such
Indebtedness or guarantee now exists, or is created after the
issuance date, which default
(1) is caused by a failure to pay when due principal or
interest on such Indebtedness within the grace period
provided in such Indebtedness, which payment default
continues beyond any applicable grace period; or
(2) results in the acceleration of such Indebtedness prior
to its express maturity; and, in each case, the principal
amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under
which there has been a payment default or the maturity of
which has been so accelerated, aggregates $50.0 million
or more;
(6) failure by us or any subsidiary of ours that is a significant
subsidiary or any group of two or more subsidiaries that, taken
as a whole, would constitute a significant subsidiary to pay
final judgments for the payment of money (other than any judgment
as to which a reputable insurance company has accepted liability
subject to customary terms) aggregating in excess of $50.0
million, which judgments are not paid, wired, discharged or
stayed within 60 days after their entry;
(7) certain events of bankruptcy or insolvency with respect to us or
any subsidiary of ours that is a significant subsidiary or any
group of two or more subsidiaries that, taken as a whole, would
constitute a significant subsidiary; and
(8) the approval by our shareholders of any merger, amalgamation or
consolidation by us (whether or not we are the surviving
corporation) and whether or not such merger, amalgamation or
consolidation is in one or more related transactions if, (i) the
successor corporation, person or entity (A) does not assume all
the obligations, pursuant to a supplemental indenture in a form
reasonably satisfactory to the trustee, under the convertible
notes and the indenture (to the extent any such supplemental
indenture may be necessary, in the opinion of the trustee, to
evidence our continuing obligations under the indenture) and (B)
is not a corporation, person or entity organized or existing
under the laws of the United States, any state thereof or the
District of Columbia or (ii) immediately after the transaction,
any default or event of default exists.
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If any event of default occurs and is continuing, the trustee or the
holders of at least 25% in principal amount of the then outstanding convertible
notes may declare all the convertible notes to be due and payable immediately,
subject to the provisions limiting payment described in "--Subordination."
Notwithstanding the foregoing, if a default occurs from (i) the events described
in paragraph 8 above regarding merger, amalgamation or consolidation or (ii)
certain events of bankruptcy or insolvency, with respect to us or any
significant subsidiary, all outstanding convertible notes will become due and
payable without further action or notice. Holders of the convertible notes may
not enforce the indenture or the convertible notes except as provided in the
indenture. Subject to certain limitations, holders of a majority in principal
amount of the then outstanding convertible notes may direct the trustee in its
exercise of any trust or power. The trustee may withhold from holders of the
convertible notes notice of any continuing default or event of default, except a
default or event of default relating to the payment of principal or interest, if
it determines that withholding notice is in their interest.
If the convertible notes are accelerated because an event of default
has occurred and is continuing as a result of the acceleration of any
Indebtedness described in paragraph 5 above, the acceleration shall be
automatically annulled if:
o the holders of any, Indebtedness described in such paragraph
5, above, have rescinded the declaration of acceleration in respect of
such Indebtedness within 30 days after the date of such declaration;
o the annulment of the acceleration of the convertible notes
would not conflict with any judgment or decree of a court of competent
jurisdiction; and
o all existing events of default, except for nonpayment of
principal of or interest on the convertible notes that became due
solely because of the acceleration of the convertible notes, have been
cured or waived.
The holders of a majority in aggregate principal amount of the then
outstanding convertible notes by notice to the trustee may on behalf of all of
the holders waive any existing default or event of default and its consequences
under the indenture except a continuing default or event of default in the
payment of interest on or the principal of the convertible notes.
We are required to deliver to the trustee annually a statement
regarding compliance with the indenture, and we are required, upon becoming
aware of any default or event of default, to deliver to the trustee a statement
specifying that default or event of default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS
No director, officer, employee, incorporator or shareholder of ours, as
such, shall have any liability for any of our obligations under the convertible
notes or the indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each holder of the convertible notes by
accepting a convertible note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the convertible notes.
Such waiver may not be effective to waive liabilities under the federal
securities laws, and it is the view of the SEC that a waiver of such liabilities
is against public policy.
UNCLAIMED MONEY; PRESCRIPTION
If money deposited with the trustee or paying agent for the payment of
principal or interest remains unclaimed for two years, the trustee and the
paying agent shall pay the money back to us at our written request. After that,
holders of convertible notes entitled to the money must look to us for payment
unless an abandoned property law designates another person and all liability of
the trustee and the paying agent shall cease. Other than as described in this
paragraph, the indenture does not provide for any prescription period for the
payment of interest and principal on the convertible notes.
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BOOK-ENTRY, DELIVERY AND FORM
The convertible notes were sold to qualified institutional buyers in
reliance on Rule 144A ("Rule 144A Notes"). Convertible notes were also sold to a
limited number of accredited investors in transactions exempt from registration
under the Securities Act ("Accredited Investor Notes"). Except as set forth
below, convertible notes were issued in registered, global form in minimum
denominations of $1,000 (subject to a minimum initial purchase amount of
$100,000 in the case of Accredited Investor Notes) and integral multiples of
$1,000 in excess thereof.
Rule 144A Notes initially will be represented by one or more
convertible notes in registered global form without interest coupons
(collectively, the "Global Notes"). The Global Notes will be deposited upon
issuance with the trustee as custodian for The Depository Trust Company ("DTC"),
in New York, New York, and registered in the name of DTC or its nominee, in each
case for credit to an account of a direct or indirect participant in DTC as
described below.
Except as set forth below, the Global Notes may be transferred, in
whole and not in part, only to another nominee of DTC or to a successor of DTC
or its nominee. Beneficial interests in the Global Notes may not be exchanged
for convertible notes in certificated form except in the limited circumstances
described below. See "--Exchange of global notes for certificated notes."
Except in the limited circumstances described below, owners of beneficial
interests in the Global Notes will not be entitled to receive physical delivery
of convertible notes in certificated form.
Accredited Investor Notes will be issued only in registered,
certificated (i.e., non-global) form without interest coupons. Accredited
Investor Notes may not be exchanged for beneficial interests in any Global Note
except in the limited circumstances described below. See "Exchange of
certificated notes for global notes."
Rule 144A Notes (including beneficial interests in the Global Notes)
and Accredited Investor Notes will be subject to certain restrictions on
transfer and will bear a restrictive legend as described under "Notice to
investors." In addition, transfers of beneficial interests in the Global Notes
will be subject to the applicable rules and procedures of DTC and its direct or
indirect participants, which may change from time to time.
DEPOSITORY PROCEDURES
The following description of the operations and procedures of DTC are
provided solely as a matter of convenience. These operations and procedures are
solely within the control of the respective settlement systems and are subject
to changes by them. We take no responsibility for these operations and
procedures and urge investors to contact the system or their participants
directly to discuss these matters.
DTC has advised us that DTC is a limited-purpose trust company created
to hold securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
in accounts of its Participants. The Participants include securities brokers and
dealers (including the initial purchasers), banks, trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly (collectively, the "Indirect Participants").
Persons who are not Participants may beneficially own securities held by or on
behalf of DTC only through the Participants or the Indirect Participants. The
ownership interests in, and transfers of ownership interests in, each security
held by or on behalf of DTC are recorded on the records of the Participants and
Indirect Participants.
DTC has also advised us that, pursuant to procedures established by it:
(1) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the initial purchasers with portions
of the principal amount of the Global Notes; and
(2) ownership of these interests in the Global Notes will be shown
on, and the transfer of ownership thereof will be effected only
through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect
Participants (with respect to other owners of beneficial interest
in the Global Notes).
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Investors in the Global Notes who are Participants in DTC's system may
hold their interests therein directly through DTC. Investors in the Global Notes
who are not Participants may hold their interests therein indirectly through
organizations which are Participants in such system. All interests in a Global
Note are subject to the procedures and requirements of DTC. The laws of some
states require that certain persons take physical delivery in definitive form of
securities that they own. Consequently, the ability to transfer beneficial
interests in a Global Note to such persons will be limited to that extent.
Because DTC can act only on behalf of Participants, which in turn act on behalf
of Indirect Participants, the ability of a person having beneficial interests in
a Global Note to pledge such interests to persons that do not participate in the
DTC system, or otherwise take actions in respect of such interests, may be
affected by the lack of a physical certificate evidencing such interests.
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL
NOT HAVE CONVERTIBLE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL
DELIVERY OF CONVERTIBLE NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED
THE REGISTERED OWNERS OR "HOLDERS" THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal and interest, of, premium, and
special interest, if any, and interest on a Global Note registered in the name
of DTC or its nominee will be payable to DTC in its capacity as the registered
holder under the indenture. Under the terms of the indenture, we and the trustee
will treat the persons in whose names the convertible notes, including the
Global Notes, are registered as the owners thereof for the purpose of receiving
payments and for all other purposes. Consequently, neither we, the trustee, nor
any agent of ours or the trustee has or will have any responsibility or
liability for:
o any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of
beneficial ownership interest in the Global Notes or for maintaining,
supervising or reviewing any of DTC's records or any Participant's or
Indirect Participant's records relating to the beneficial ownership
interests in the Global Notes; or
o any other matter relating to the actions and practices of
DTC or any of its Participants or Indirect Participants.
DTC has advised us that its current practice, upon receipt of any
payment in respect of securities such as the convertible notes (including
principal and interest), is to credit the accounts of the relevant Participants
with the payment on the payment date unless DTC has reason to believe it will
not receive payment on such payment date. Each relevant Participant is credited
with an amount proportionate to its beneficial ownership of an interest in the
principal amount of the relevant security as shown on the records of DTC.
Payments by the Participants and the Indirect Participants to the beneficial
owners of convertible notes will be governed by standing instructions and
customary practices and will be the responsibility of the Participants or the
Indirect Participants and will not be the responsibility of DTC, the trustee or
EchoStar. Neither we nor the trustee will be liable for any delay by DTC or any
of its Participants in identifying the beneficial owners of the convertible
notes, and we and the trustee may conclusively rely on and will be protected in
relying on instructions from DTC or its nominee for all purposes.
Subject to the transfer restrictions set forth under "Notice to
investors," transfers between Participants in DTC will be effected in accordance
with DTC's procedures, and will be settled in same-day funds.
DTC has advised us that it will take any action permitted to be taken
by a holder of convertible notes only at the direction of one or more
Participants to whose account DTC has credited the interests in the Global Notes
and only in respect of such portion of the aggregate principal amount of the
convertible notes as to which such Participant or Participants has or have given
such direction. However, if there is an event of default under the convertible
notes, DTC reserves the right to exchange the Global Notes for legended
convertible notes in certificated form, and to distribute such convertible notes
to its Participants.
EXCHANGE OF GLOBAL NOTES FOR CERTIFICATED NOTES
A Global Note is exchangeable for definitive convertible notes in
registered certificated form ("Certificated Notes") if:
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(1) DTC (a) notifies us that it is unwilling or unable to continue as
depositary for the Global Notes and we fail to appoint a
successor depositary or (b) has ceased to be a clearing agency
registered under the Exchange Act;
(2) we, at our option, notify the trustee in writing that we elect to
cause the issuance of the Certificated Notes; or
(3) there shall have occurred and be continuing a default or event of
default with respect to the convertible notes.
In addition, beneficial interests in a Global Note may be exchanged for
Certificated Notes upon prior written notice given to the trustee by or on
behalf of DTC in accordance with the indenture. In all cases, Certificated Notes
delivered in exchange for any Global Note or beneficial interests in Global
Notes will be registered in the names, and issued in any approved denominations,
requested by or on behalf of the depositary (in accordance with its customary
procedures) and will bear the restrictive legend referred to in "Notice to
investors," unless that legend is not required by applicable law.
EXCHANGE OF ACCREDITED INVESTOR NOTES FOR GLOBAL NOTES
Accredited Investor Notes, which will be issued in certificated form,
may not be exchanged for beneficial interests in a global note unless such
exchange occurs in connection with a transfer of such Accredited Investor Notes
and the transferor first delivers to the trustee a written certificate (in the
form provided in the indenture) to the effect that such transfer will comply
with the appropriate transfer restrictions applicable to such convertible notes.
See "Notice to investors."
SAME DAY SETTLEMENT AND PAYMENT
We will make payments in respect of the convertible notes represented
by the global notes (including principal, premium, if any, and interest and
special interest, if any) by wire transfer of immediately available funds to the
accounts specified by the Global Note Holder. We will make all payments of
principal, interest, premium and special interest, if any, with respect to
Certificated Notes by wire transfer of immediately available funds to the
accounts specified by the Holders thereof or, if no such account is specified or
permitted to be specified, by mailing a check to each such Holder's registered
address. The convertible notes represented by the Global Notes are expected to
be eligible to trade in the PORTAL market and to trade in DTC's Same-Day Funds
Settlement System, and any permitted secondary market trading activity in such
convertible notes will, therefore, be required by DTC to be settled in
immediately available funds. We expect that secondary trading in any
Certificated Notes will also be settled in immediately available funds.
TRANSFER AND EXCHANGE
A holder may transfer or exchange interests in the convertible notes in
accordance with procedures described in "Book-entry; delivery and form." The
registrar and the trustee may require a holder, among other things, to furnish
appropriate endorsements and transfer documents and we may require a holder to
pay any taxes and fees required by law or permitted by the indenture. We are not
required to transfer or exchange any convertible note selected for redemption.
Also, we are not required to transfer or exchange any convertible note for a
period of 15 days before a selection of convertible notes to be redeemed.
The registered holder of a convertible note will be treated as the
owner of it for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next succeeding paragraph, the indenture or
the convertible notes may be amended or supplemented with the consent of the
holders of at least a majority in aggregate principal amount of the then
outstanding convertible notes, as applicable, including consents obtained in
connection with a tender offer or exchange offer for the convertible notes, and
any existing default or compliance with any provision of the indenture or the
convertible notes may be waived with the consent of the holders of a majority in
aggregate principal amount
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of then outstanding convertible notes, including consents obtained in connection
with a tender offer or exchange offer for the convertible notes.
Without the consent of each holder affected, an amendment or waiver may
not:
o reduce the amount of convertible notes whose holders must
consent to an amendment, supplement or waiver;
o reduce the principal of or change the fixed maturity of any
convertible note or alter the provisions with respect to the redemption
of the convertible notes, except for repurchases of the convertible
notes pursuant to the covenant described above under the caption "--
Repurchase at the option of holders;"
o reduce the rate of or change the time for payment or accrual
of interest on any convertible note;
o waive a default in the payment of principal of or interest on
any convertible notes, except a rescission of acceleration of the
convertible notes by the holders of at least a majority in aggregate
principal amount of the convertible notes and a waiver of the payment
default that resulted from such acceleration;
o make any convertible note payable in money other than that
stated in the convertible notes;
o make any change in the provisions of the indenture relating
to waivers of past defaults or the rights of holders of convertible
notes to receive payments of principal of or interest on the
convertible notes;
o waive a redemption payment with respect to any convertible
note;
o impair the right to convert the convertible notes into common
stock;
o modify the conversion or subordination provision of the
indenture in a manner adverse to the holders of the convertible notes;
or
o make any change in the foregoing amendment and waiver
provisions.
Notwithstanding the foregoing, without the consent of any holder of
convertible notes, we and the trustee may amend or supplement the indenture or
the convertible notes to cure any ambiguity, defect or inconsistency, to provide
for uncertificated convertible notes in addition to or in place of certificated
convertible notes, to provide for the assumption of our obligations to holders
of the convertible notes in the case of a merger or consolidation or certain
transfers or leases, to make any change that would provide any additional rights
or benefits to the holders of the convertible notes or that does not adversely
affect the legal rights under the indenture of any such holder, or to comply
with requirements of the SEC in order to maintain the qualification of the
indenture under the Trust Indenture Act.
GOVERNING LAW AND JUDGMENTS
The convertible notes and the indenture will be governed exclusively by
and construed in accordance with the laws of the State of New York without
giving effect to applicable principles of conflicts of laws to the extent that
the application of the law of another jurisdiction would be required thereby.
We will submit to the jurisdiction of the United States federal and New
York state courts located in the borough of Manhattan, City and State of New
York for purposes of all legal actions and proceedings instituted in connection
with the convertible notes and indenture.
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CONCERNING THE TRUSTEE
The indenture contains limitations on the rights of the trustee, should
it become a creditor of ours, to obtain payment of claims in certain cases, or
to realize on certain property received in respect of any such claim as security
or otherwise. The trustee may engage in other transactions; however, if it
acquires any conflicting interest it must eliminate that conflict within 90
days, apply to the SEC for permission to continue or resign.
The holders of the majority in aggregate principal amount of the then
outstanding convertible notes have the right to direct the time, method and
place of conducting any proceeding for exercising any remedy available to the
trustee under the indenture, subject to certain exceptions. The indenture
provides that in case an event of default shall occur, which shall not be cured
or waived, the trustee is required, in the exercise of its power, to use the
degree of care of a prudent man in the conduct of his own affairs. Subject to
such provisions, the trustee is under no obligation to exercise any of its
rights or powers under the indenture at the request of any holder of convertible
notes, unless the holder shall have offered to the trustee security and
indemnity satisfactory to it against any loss, liability or expense.
DEFINITIONS
The following are selected defined terms used in the indenture.
Reference is made to the indenture for a full definition of all terms, as well
as certain other terms used in this description of the convertible notes for
which no definition is provided.
"Capital Stock" means any and all shares, interests, participations,
rights or other equivalents, however designated, of corporate stock, including,
without limitation, partnership interests.
"Continuing Director" means, as of any date of determination, any
member of our Board of Directors who:
(a) was a member of such Board of Directors on the date of the
indenture; or
(b) was nominated for election or elected to such Board of Directors
with the affirmative vote of a majority of the Continuing
Directors who were members of such Board at the time of such
nomination or election or was nominated for election or elected
by the Principal and his Related Parties.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock, but excluding any Indebtedness that is
convertible into, or exchangeable for, Capital Stock.
"Excess Payment" means the excess of (A) the aggregate of the cash and
value of other consideration paid by us or any of our subsidiaries with respect
to shares of ours acquired in a tender offer or other negotiated transaction
over (B) the market value of such acquired shares after giving effect to the
completion of a tender offer or other negotiated transaction.
"Exchange Rate Contract" means, with respect to any Person, any
currency swap agreements, forward exchange rate agreements, foreign currency
futures or options, exchange rate collar agreements exchange rate insurance and
other agreements or arrangements, or combination thereof, the principal purpose
of which is to provide protection against fluctuations in currency exchange
rates. An Exchange Rate Contract may also include an Interest Rate Agreement.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession,
which are in effect on the issuance date and are applied on a consistent basis.
"Guarantee" means a guarantee, other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner, including, without limitation, letters of credit and
reimbursement agreements in respect thereof, of all or any part of any
Indebtedness.
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"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit, of reimbursement agreements in respect thereof, or representing the
balance deferred and unpaid of the purchase price of any property (which
purchase price is due more than six months after the placing into service or
delivery of such property) including pursuant to capital leases and
sale-and-leaseback transactions, or representing any hedging obligations under
an Exchange Rate Contract or an Interest Rate Agreement, except any such balance
that constitutes an accrued expense or trade payable, if and to the extent any
of the foregoing indebtedness, other than obligations under an Exchange Rate
Contract or an Interest Rate Agreement, would appear as a liability upon a
balance sheet of such Person prepared in accordance with GAAP, and also
includes, to the extent not otherwise included, the Guarantee of items which
would be included within this definition. The amount of any Indebtedness
outstanding as of any date shall be the accreted value thereof, in the case of
any Indebtedness issued with original issue discount. Indebtedness shall not
include liabilities for taxes of any kind.
"Interest Rate Agreement" means, with respect to any person, any
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement or other similar agreement the principal purpose of which is to
protect the Party indicated therein against fluctuations in interest rates.
"Issuance Date" means the date on which the convertible notes are first
authenticated and issued.
"Repurchase Offer" means a Change of Control Offer.
"Senior Debt" means the principal of, interest on and other amounts due
on (i) our Indebtedness, whether outstanding on the date of the indenture or
thereafter created incurred, assumed or guaranteed by us, for money borrowed
from banks or other financial institutions; (ii) our Indebtedness, whether
outstanding on the date of the indenture or thereafter created incurred, assumed
or guaranteed by us; (iii) our Indebtedness under interest rate swaps, caps or
similar hedging agreements and foreign exchange contracts, currency swaps or
similar agreements: unless, in the instrument creating or evidencing or pursuant
to which Indebtedness under (i) or (ii) is outstanding, it is expressly provided
that such Indebtedness is not senior in right of payment to the convertible
notes. Senior Debt includes, with respect to the obligations described in
clauses (i) and (ii) above, interest accruing, pursuant to the terms of such
Senior Debt, on or after the filing of any petition in bankruptcy or for
reorganization relating to us, whether or not post-filing interest is allowed in
such proceeding, at the rate specified in the instrument governing the relevant
obligation. Notwithstanding anything to the contrary in the foregoing, Senior
Debt shall not include: (a) Indebtedness of or amounts owed by us for
compensation to employees, or for goods or materials purchased in the ordinary
course of business, or for services; and (b) Indebtedness which we owe to any of
our subsidiaries.
"Significant Subsidiary" means any subsidiary of ours which is a
"significant subsidiary" as defined in Rule 1-02(v) of Regulation S-X under the
Securities Act and the Exchange Act, as such Regulation is in effect on the date
of the indenture.
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REGISTRATION RIGHTS
The following summary of the registration rights provided in the
registration rights agreement and the convertible notes is not complete. You
should refer to the registration rights agreement and the convertible notes for
a full description of the registration rights that apply to the convertible
notes.
Pursuant to a registration rights agreement we have agreed for the
benefit of the holders of the convertible notes, that (i) we will, at our cost,
within 90 days after the closing of the sale of the convertible notes (the
"Closing"), file a shelf registration statement (the "Shelf Registration
Statement) with the SEC with respect to resales of the convertible notes and the
common stock issuable upon conversion thereof, (ii) we will use our best efforts
to cause such Shelf Registration Statement to be declared effective by the SEC
within 270 days after the Closing, and (iii) we will use our best efforts to
keep such Shelf Registration Statement continuously effective under the
Securities Act until, subject to certain exceptions specified in the
registration rights agreement, the second anniversary of the date of the
Closing. We will be permitted to suspend use of the prospectus that is part of
the Shelf Registration Statement during certain periods of time and in certain
circumstances relating to pending corporate developments and public filings with
the SEC and similar events. If (a) we fail to file the Shelf Registration
Statement required by the registration rights agreement on or before 90 days
after closing, (b) such Shelf Registration Statement is not declared effective
by the SEC on or prior to 270 days after closing (the "Effectiveness Target
Date") or (c) the Shelf Registration Statement is effective but thereafter
ceases to be effective or usable in connection with resales of Transfer
Restricted Securities (as defined below) during the periods specified in the
registration rights agreement (each such event referred to in clauses (a)
through (c) above a "Registration Default"), then we will pay special interest
to each holder of convertible notes, with respect to the first 90
consecutive-day period immediately following the occurrence of such Registration
Default, an amount equal to an increase in the annual interest on the
convertible notes of 0.25% and with respect to each subsequent 90
consecutive-day period, an amount equal to an increase in the annual interest
rate on the convertible notes of 0.25% until all Registration Defaults have been
cured up to a maximum increase in the annual rate of interest on the convertible
notes equal to 1.0%. All accrued special interest will be paid by us on each
subsequent interest payment date in cash. Such payment will be made to the
holder of the Global Notes by wire transfer of immediately available funds or by
federal funds check and to holders of Certificated Notes, if any, by wire
transfer to the accounts specified by them (to the extent permitted under the
indenture) or by mailing checks to their registered addresses if no such
accounts have been specified by them. Following the cure of all Registration
Defaults, the accrual of special interest will cease.
For purposes of the foregoing, "Transfer Restricted Securities" means
each convertible note and the common stock issuable upon conversion thereof
until (i) the date on which such convertible note or the common stock issuable
upon conversion thereof has been effectively registered under the Securities Act
and disposed of in accordance with the Shelf Registration Statement, (ii) the
date on which such convertible note or the common stock issuable upon conversion
thereof is distributed to the public pursuant to Rule 144(k) under the
Securities Act (or any similar provision then in effect) or is saleable pursuant
to Rule 144(k) under the Act or (iii) the date on which such convertible note or
the common stock issuable upon the conversion thereof ceases to be outstanding.
If the Company expects to file and obtain the effectiveness of a Shelf
Registration Statement within 30 days of the effective date of the Registration
Rights Agreement (an "Expedited Filing"), it shall (x) mail, as promptly as
reasonably practicable after the effective date of the Registration Rights
Agreement to the holders of Transfer Restricted Securities, a Notice and
Questionnaire, in substantially the form attached hereto as Appendix A (a
"Notice and Questionnaire"), with a response deadline of 30 days from the date
of such notice (the "Expedited Filing Questionnaire Deadline"), and (y) as
promptly as practicable after the response deadline but in any event no later
than 30 days thereafter, prepare a prospectus supplement (and if required file
an amendment or a supplement to the Shelf Registration Statement) or take such
other measures, if any, as are necessary to include in the Shelf Registration
Statement the Transfer Restricted Securities of Electing Holders (as defined
below). If the Company does not intend to make an Expedited Filing, it shall
mail the Notice and Questionnaire to the holders of Transfer Restricted
Securities not less than 20 business days prior to the time the Company intends
in good faith to have the Shelf Registration Statement declared effective (the
"Effective Time"). No holder of Transfer Restricted Securities shall be entitled
to be named as a selling security holder in the Shelf Registration Statement as
of the effective time of such Shelf Registration Statement (or in the first
prospectus supplement filed thereafter in the case of the
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Expedited Filing), and no holder of Transfer Restricted Securities shall be
entitled to use the prospectus forming a part thereof for offers and resales of
Transfer Restricted Securities at any time, unless such Holder has returned a
completed and signed Notice and Questionnaire to the Company by the deadline for
response set forth therein.
The Company shall not be required to take any action to name such
holder as a selling securityholder in the Shelf Registration Statement until
such holder has returned a completed and signed Notice and Questionnaire to the
Company. Following its receipt of such Notice and Questionnaire, the Company
will as promptly as possible, but not prior to the next required amendment or
supplement to the Shelf Registration Statement, include the Transfer Restricted
Securities covered thereby in the Shelf Registration Statement (if not
previously included). The term "Electing Holder" shall mean any holder of
Transfer Restricted Securities that has returned a completed and signed Notice
and Questionnaire to the Company in accordance with the preceding two
paragraphs.
We will provide to each registered holder of convertible notes, or the
common stock issuable upon conversion of the convertible notes, who is named in
the prospectus and who so requests in writing, copies of the prospectus which
will be a part of such Shelf Registration Statement, notify each such holder
when such Shelf Registration Statement for the convertible notes or the common
stock issuable upon conversion of the convertible notes has become effective and
take certain other actions as required to permit unrestricted resales of the
convertible notes or the common stock issuable upon conversion of the
convertible notes. A holder of the convertible notes or the common stock
issuable upon conversion of the convertible notes that sells such securities
pursuant to a Shelf Registration Statement generally will be required to be
named as a selling securityholder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the registration rights agreement which are
applicable to such holder, including certain indemnification and contribution
rights and obligations.
Upon the initial sale of convertible notes or common stock issuable
upon conversion of the convertible notes, each selling holder will be required
to deliver a notice of such sale to the trustee and us. The notice will, among
other things, identify the sale as a transfer pursuant to the Shelf Registration
Statement, certify that the prospectus delivery requirements, if any, of the
Securities Act have been complied with, and certify that the selling holder and
the aggregate principal amount of securities owned by such holder are identified
in the related prospectus in accordance with the applicable rules and
regulations under the Securities Act.
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DESCRIPTION OF OUR CAPITAL STOCK
GENERAL
Our authorized capital stock currently consists of:
o 1,600,000,000 shares of common stock, of which 800,000,000
shares are designated class A common stock, 400,000,000 shares are
designated class B common stock and 400,000,000 shares are designated
class C common stock; and
o 20,000,000 shares of preferred stock, including 2,300,000
shares of 6 3/4% Series C cumulative convertible preferred stock.
As of February 11, 2000, 113,948,160 shares of class A common stock
were issued and outstanding and held of record by 4,476 stockholders,
119,217,604 shares of class B common stock were issued and outstanding and held
of record by Charles W. Ergen, our Chairman, Chief Executive Officer and
President, and no shares of class C common stock were issued and outstanding. As
of February 11, 2000, 443,563 shares of Series C preferred stock were issued and
outstanding. All outstanding shares of the class A common stock and class B
common stock are fully paid and nonassessable. A summary of the powers,
preferences and rights of the shares of each class of common stock and each
series of preferred stock is described below.
The transfer agent for our capital stock, including the class A common
stock, is American Securities Transfer & Trust, Inc.
On each of July 19, 1999 and October 25, 1999, we completed two-for-one
splits of our outstanding class A and class B common stock.
CLASS A COMMON STOCK
Each holder of class A common stock is entitled to one vote for each
share owned of record on all matters submitted to a vote of stockholders. Except
as otherwise required by law, the class A common stock votes together with the
class B common stock and the class C common stock on all matters submitted to a
vote of stockholders. Subject to the preferential rights of any outstanding
series of preferred stock and to any restrictions on the payment of dividends
imposed under the terms of our indebtedness, the holders of class A common stock
are entitled to such dividends as may be declared from time to time by our Board
of Directors from legally available funds and, together with the holders of the
class B common stock, are entitled, after payment of all prior claims, to
receive pro rata all of our assets upon a liquidation. Holders of class A common
stock have no redemption, conversion or preemptive rights.
CLASS B COMMON STOCK
Each holder of class B common stock is entitled to ten votes for each
share of class B common stock on all matters submitted to a vote of
stockholders. Except as otherwise required by law, the class B common stock
votes together with the class A common stock and the class C common stock on all
matters submitted to a vote of the stockholders. Each share of class B common
stock is convertible, at the option of the holder, into one share of class A
common stock. The conversion ratio is subject to adjustment from time to time
upon the occurrence of certain events, including: (i) dividends or distributions
on class A common stock payable in class A common stock or certain other capital
stock; (ii) subdivisions, combinations or certain reclassifications of class A
common stock; and (iii) issuances of rights, warrants or options to purchase
class A common stock at a price per share less than the fair market value of the
class A common stock. Each share of class B common stock is entitled to receive
dividends and distributions upon liquidation on a basis equivalent to that of
the class A common stock and class C common stock.
CLASS C COMMON STOCK
Each holder of class C common stock is entitled to one vote for each
share of class C common stock on all matters submitted to a vote of
stockholders. Except as otherwise required by law, the class C common stock
votes together with class A common stock and the class B common stock on all
matters submitted to a vote of stockholders. Each share of class C common stock
is convertible into class A common stock on the same terms as
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the class B common stock. Each share of class C common stock is entitled to
receive dividends and distributions upon liquidation on a basis equivalent to
that of the class A common stock and class B common stock. Upon a change of
control of our company, each holder of outstanding shares of class C common
stock is entitled to cast ten votes for each share of class C common stock held
by such holder. We do not currently intend to issue any shares of class C common
stock. Under current National Association of Securities Dealers rules, we are
not able to issue class C common stock so long as the class A common stock is
quoted on the Nasdaq National Market.
PREFERRED STOCK
Our Board of Directors is authorized to divide the preferred stock into
series and, with respect to each series, to determine the preferences and rights
and the qualifications, limitations or restrictions of the series, including the
dividend rights, conversion rights, voting rights, redemption rights and terms,
liquidation preferences, sinking fund provisions, the number of shares
constituting the series and the designation of such series. Our Board of
Directors may, without stockholder approval, issue additional preferred stock of
existing or new series with voting and other rights that could adversely affect
the voting power of the holders of common stock and could have certain
anti-takeover effects.
SERIES C PREFERRED STOCK
As of February 11, 2000, holders of an aggregate of approximately 1.9
million shares of the Company's 6 3/4% Series C cumulative convertible preferred
stock had converted their shares into approximately 15 million shares of class A
common stock.
Holders of the Series C preferred stock were entitled to a quarterly
cash payment of $0.844 per share through November 1, 1999, which was funded from
a deposit account created when the Series C preferred stock was issued.
Dividends began to accrue on the Series C preferred stock on November 2, 1999,
and holders of the Series C preferred stock are entitled to receive cumulative
dividends at an annual rate of 6 3/4% of the liquidation preference, payable
quarterly in arrears, commencing February 1, 2000. Dividends may, at our option,
be paid in cash or by delivery of shares of class A common stock. The Series C
preferred stock is redeemable at any time on or after November 1, 2000, in whole
or in part, at our option, in cash or by delivery of class A common stock at
specified redemption premiums.
Upon any change of control, if the market value of our class A common
stock is less than the conversion price, holders of Series C preferred stock
would have a one time option to convert all of their outstanding shares into
shares of class A common stock at an adjusted conversion price equal to the
greater of the market value as of the change of control date and 66.67% of the
market value as of the date of the initial offering of the Series C preferred
stock. In lieu of issuing the shares of class A common stock issuable upon
conversion in the event of a change of control, we may, at our option, make a
cash payment equal to the market value of such class A common stock otherwise
issuable.
The Series C preferred stock is convertible at any time, unless
previously redeemed, at the option of the holder thereof, into that number of
whole shares of class A common stock as is equal to the liquidation preference
divided by a conversion price of $6 3/32 subject to adjustment under certain
circumstances.
The Series C preferred stock ranks senior to the class A common stock
and senior or pari passu with other existing and future offerings of preferred
stock in right of payment. Holders of the Series C preferred stock have no
voting rights with respect to general corporate matters except as provided by
law or upon certain dividend arrearages. The affirmative vote or consent of
holders of at least 66 2/3% of the outstanding Series C preferred stock is
required for the issuance of any class or series of our stock (or security
convertible into our stock) ranking senior to or pari passu with the Series C
preferred stock as to dividends or liquidation rights (other than additional
shares of Series B preferred stock or certain pari passu securities with an
aggregate liquidation preference not to exceed $100 million) and for amendments
to our articles of incorporation that would affect adversely the rights of
holders of the Series C preferred stock.
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LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Our articles of incorporation provide that our directors are not
personally liable to us or our stockholders for monetary damages for any breach
of fiduciary duty as a director, except in certain cases where liability is
mandated by Nevada corporate law. The provision has no effect on any
non-monetary remedies that may be available to us or our stockholders and does
not relieve us or our directors from complying with federal or state securities
laws. Our articles of incorporation and by-laws provide for indemnification, to
the fullest extent permitted by Nevada corporate law, of any person who is or
was involved in any manner in any investigation, claim or other proceeding by
reason of the fact that such person is or was a director or officer of our
company, or is or was serving at our request as a director or officer of another
corporation, against all expenses and liabilities actually and reasonably
incurred by such person in connection with the investigation, claim or other
proceeding. However, no indemnification may be made for any claim, issue or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of such person's duty to us.
NEVADA LAW AND LIMITATIONS ON CHANGES IN CONTROL
The Nevada Revised Statutes prevent an "interested stockholders"
defined generally as a person owning 10% or more of a corporation's outstanding
voting stock, from engaging in a "combination" with a publicly-held Nevada
corporation for three years following the date such person became an interested
stockholder unless, before such person became an interested stockholder, the
board of directors of the corporation approved the transaction in which the
interested stockholder became an interested stockholder or approves the
combination.
The provisions authorizing our Board of Directors to issue preferred
stock without stockholder approval and the provisions of the Nevada Revised
Statutes relating to combinations with interested stockholders could have the
effect of delaying, deferring or preventing a change in our control or the
removal of our existing management. Each of the indentures relating to the
senior notes of EchoStar DBS Corporation (one of our wholly-owned subsidiaries)
also contains provisions with respect to a change of control. The series C
preferred stock certificate of designation also contains certain change of
control provisions.
Charles W. Ergen, our Chairman, President and Chief Executive Officer,
owns 119,217,604 shares of class B common stock, which constitute all of the
outstanding class B shares. These shares are transferable to other persons,
subject to securities laws limitations. If Mr. Ergen transferred a substantial
portion of his shares of class B common stock, a change in control of EchoStar
would result and Mr. Ergen would receive any premium paid for control of our
company. In addition, any such change in control would result in an obligation
on the part of EchoStar DBS Corporation, our wholly-owned subsidiary, to offer
to purchase at a premium all of its outstanding senior notes.
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SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain United States federal
income tax considerations that may be relevant to the purchase, ownership and
disposition of the convertible notes and the class A common stock into which the
convertible notes may be converted, but does not purport to be a complete
analysis of all the potential tax considerations relating thereto. This summary
deals only with holders that will hold convertible notes and class A common
stock as capital assets and does not address tax considerations applicable to
investors that may be subject to special tax rules such as dealers in
securities, financial institutions, insurance companies, tax-exempt entities,
persons holding the convertible notes as part of a hedging or conversion
transaction, a straddle or a constructive sale, persons whose functional
currency is not the United States dollar, and holders of convertible notes that
did not acquire the convertible notes in the initial distribution thereof at
their original issue price. In addition, this discussion does not consider the
effect of any estate, gift or other tax laws.
As used in this summary:
o A "United States Holder" means a beneficial owner of the
convertible notes or the class A common stock into which the
convertible notes may be converted, who or that:
o is a citizen or resident of the United States;
o is a corporation or other entity taxable as a corporation
created or organized in or under the laws of the United
States or political subdivision thereof;
o is an estate the income of which is subject to U.S. federal
income taxation regardless of its source; or
o is a trust if (a) a U.S. court is able to exercise
supervision over the administration of the trust and one or
more U.S. fiduciaries have authority to control all
substantial decisions of the trust, or (b) the trust has a
valid election in effect under applicable U.S. treasury
regulations to be treated as a United States Person;
o A "Foreign Holder" is a beneficial owner of convertible notes or
class A common stock that is not a United States Holder;
o "Code" means the U.S. Internal Revenue Code of 1986, as amended
to date;
o "IRS" means the U.S. Internal Revenue Service.
THE DISCUSSION OF THE UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
BELOW IS BASED ON CURRENTLY EXISTING PROVISIONS OF THE CODE, THE APPLICABLE
TREASURY REGULATIONS PROMULGATED AND PROPOSED UNDER THE CODE, JUDICIAL DECISIONS
AND ADMINISTRATIVE INTERPRETATIONS, ALL OF WHICH ARE SUBJECT TO CHANGE, POSSIBLY
ON A RETROACTIVE BASIS. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER YOU ARE
STRONGLY URGED TO CONSULT YOUR TAX ADVISOR WITH RESPECT TO YOUR PARTICULAR TAX
SITUATION AND THE PARTICULAR TAX EFFECTS OF ANY STATE, LOCAL NON-UNITED STATES
OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.
UNITED STATES HOLDER
CONVERTIBLE NOTES
Stated interest. A United States Holder will be required to include in
gross income the stated interest on a convertible note at the time that such
interest accrues or is received, in accordance with the United States Holder's
regular method of accounting for federal income tax purposes.
Sale, exchange or redemption of the convertible notes. A United States
Holder's tax basis in a convertible note will be its cost. A United States
Holder generally will recognize gain or loss on the sale, exchange or retirement
(including a redemption by us) of a convertible note in an amount equal to the
difference between the
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amount of cash plus the net fair market value of any property received, other
than any such amount received in respect to accrued interest (which will be
taxable as such if not previously included in income), and the United States
Holder's tax basis in the convertible note. Gain or loss recognized on the sale,
exchange or retirement of a convertible note generally will be a capital gain or
loss. In the case of a non-corporate United States Holder, the federal tax rate
applicable to capital gains will depend upon the United States Holder's holding
period for the convertible notes, with a preferential rate available for
convertible notes held for more than one year, and upon the United States
Holder's marginal tax rate for ordinary income. The deductibility of capital
losses is subject to limitations.
CONVERSION OF THE CONVERTIBLE NOTES
A United States Holder generally will not recognize any income, gain,
or loss upon conversion of a convertible note into class A common stock (except
with respect to cash received in lieu of a fractional share of class A common
stock). Such United States Holder's basis in the class A common stock received
on conversion of a convertible note will be the same as such United States
Holder's tax basis in the convertible note at the time of conversion (reduced by
any basis allocable to a fractional share interest as described below), and the
holding period for the class A common stock received on conversion will include
the holding period of the convertible note converted.
Cash received in lieu of a fractional share of class A common stock
will be treated as a payment in exchange for the fractional share interest in
the class A common stock. Accordingly, the receipt of cash in lieu of a
fractional share of class A common stock will generally result in capital gain
or loss (measured by the difference between the cash received for the fractional
share and the holder's basis in the fractional share).
CONSTRUCTIVE DIVIDENDS
The conversion price of the convertible notes is subject to adjustment
under specified circumstances. Under Section 305 of the Code and applicable
treasury regulations, adjustments or the failure to make adjustments to the
Conversion Price of the convertible notes may result in a taxable constructive
dividend to United States Holders, resulting in ordinary income to the extent of
our earnings and profits, if, and to the extent that, the adjustments in the
Conversion Price increase the proportionate interest of a United States Holder
of a convertible note in our fully diluted stock, class A common stock, whether
or not the United States Holder ever converts the convertible notes into our
class A common stock.
DIVIDENDS ON CLASS A COMMON STOCK
Dividends paid on class A common stock generally will be includible in
the income of a United States Holder as ordinary income to the extent of our
current or accumulated earnings and profits. Subject to certain limitations, a
corporate taxpayer holder of class A common stock that receives dividends
thereon generally will be eligible for a dividends-received deduction equal to
70% of the dividends received.
SALE, EXCHANGE OR REDEMPTION OF CLASS A COMMON STOCK
Upon the sale, exchange or redemption of class A common stock, a United
States Holder generally will recognize capital gain or loss equal to the
difference between the amount realized on the sale, exchange or redemption and
the United States Holder's adjusted basis in the class A common stock. In the
case of a non-corporate United States Holder, the federal tax rate applicable
to capital gains will depend upon the United States Holder's holding period for
the class A common stock, with a preferential rate available for class A common
stock held for more than one year, and upon the holder's marginal tax rate for
ordinary income. The deductibility of capital loss is subject to limitations.
FOREIGN HOLDERS
CONVERTIBLE NOTES
Stated Interest. Payments of interest on a convertible note to a
Foreign Holder will not be subject to United States federal withholding tax
provided that:
43
<PAGE> 46
o the holder does not actually or constructively own 10% or
more of the total combined voting power of all classes of our stock
entitled to vote (treating, for such purpose, convertible notes held by
a holder as having been converted into our class A common stock);
o the holder is not a controlled foreign corporation that is
related to us through stock ownership; and
o either (a) the beneficial owner of the convertible note,
under penalties of perjury, provides us or our agent with its name and
address and certifies that it is not a United States person or (b) a
securities clearing organization, bank, or other financial institution
that holds customers' securities in the ordinary course of its trade or
business (a "financial institution") certifies to us or our agent,
under penalties of perjury, that such a statement has been received
from the beneficial owner by it or another financial institution and
furnishes to us or our agent a copy thereof.
For purposes of this summary, we refer to this exemption from U.S.
federal withholding tax as the "Portfolio Interest Exemption." Under United
States treasury regulations, which generally are effective for payments made
after December 31, 2000, subject to certain transition rules, the certification
under penalties of perjury described above may also be provided by a qualified
intermediary on behalf of one or more beneficial owners or other intermediaries,
provided that such intermediary has entered into a withholding agreement with
the IRS and certain other conditions are met.
The gross amount of payments to a Foreign Holder of interest that does
not qualify for the Portfolio Interest Exemption and that is not effectively
connected to a United States trade or business will be subject to United States
federal withholding tax at the rate of 30%, unless a United States income tax
treaty applies to reduce or eliminate withholding.
A Foreign Holder will generally be subject to tax in the same manner as
a United States Holder with respect to payments of interest if such payments are
effectively connected with the conduct of a trade or business by the Foreign
Holder in the United States and, if an applicable tax treaty so provides, such
gain is attributable to an office or other fixed place of business maintained in
the United States by the Foreign Holder. Such effectively connected income
received by a Foreign Holder, which is a corporation, may in certain
circumstances be subject to an additional "branch profits tax" at a 30% rate or,
if applicable, a lower treaty rate.
To claim the benefit of a tax treaty or to claim exemption from
withholding because the income is effectively connected with a U.S. trade or
business, the Foreign Holder must provide a properly executed Form 1001 or 4224,
as applicable, prior to the payment of interest. These forms must be
periodically updated. United States treasury regulations, which generally are
effective for payments made after December 31, 2000, subject to certain
transition rules, require Foreign Holders or, under certain circumstances, a
qualified intermediary to file a withholding certificate with our withholding
agent to obtain the benefit of an applicable tax treaty providing for a lower
rate of withholding tax. Such certificate must contain, among other information,
the name and address of the Foreign Holder.
Foreign Holders should consult their own tax advisors regarding
applicable income tax treaties, which may provide different rules.
Sale, exchange or redemption of the convertible notes. A Foreign Holder
generally will not be subject to United States federal income tax or withholding
tax on gain realized on the sale or exchange of convertible notes unless (1) the
holder is an individual who was present in the United States for 183 days or
more during the taxable year, and certain other conditions are met, (2) the gain
is effectively connected with the conduct of a trade or business of the holder
in the United States and, if an applicable tax treaty so provides, such gain is
attributable to an office or other fixed place of business maintained in the
United States by such holder or (3) EchoStar is or has been a "United States
real property holding corporation" (a "USRPHC") within a specified time period,
as described below under "-- Sale, exchange or redemption of class A common
stock," and the holder owns or has owned (actually or constructively) more than
5% of the total value of the convertible notes at any time during the shorter of
the five-year period preceding the date of the disposition or the holder's
holding period (in which case the gain will be treated as effectively connected
income as described in (2)). In the case of (2), such effectively connected
44
<PAGE> 47
income received by a Foreign Holder which is a corporation may in certain
circumstances be subject to an additional "branch profits tax" at a 30% rate or,
if applicable, a lower treaty rate. Additionally, in the case of (3), it is
possible that a Foreign Holder that initially owns 5% or less of the total value
of the convertible notes may subsequently be considered to own more than 5% of
the total value of the convertible notes due to other holders' conversion of
convertible notes into class A common stock. Regardless of whether a disposition
of any convertible note is taxable to the seller pursuant to the rules regarding
USRPHCs, the withholding requirements of Section 1445 of the Code generally will
not be applicable to a purchaser of the convertible notes or a financial
intermediary involved in any such transaction.
CONVERSION OF THE CONVERTIBLE NOTES
In general, no United States federal income tax or withholding tax will
be imposed upon the conversion of a convertible note into class A common stock
by a Foreign Holder except (1) to the extent the class A common stock is
considered attributable to accrued interest not previously included in income,
which may be taxable under the rules set forth in "Foreign Holders -- Stated
Interest," (2) with respect to the receipt of cash in lieu of fractional shares
by Foreign Holders upon conversion of a convertible note, in each case where
either the conditions described in (1) or (2) above under "Foreign Holders --
Sale, exchange or redemption of the convertible notes" is satisfied or (3) we
are a United States real property holding corporation as discussed below, the
holder owns or has owned (actually or constructively) more than 5% of the value
of the convertible notes at any time during the shorter of the five-year period
preceding the date of conversion of the holder's holding period, and certain
other conditions apply. For purposes of (3), it is possible that a Foreign
Holder that initially owns 5% or less of the total value of the convertible
notes may subsequently be considered to own more than 5% of the total value of
the convertible notes due to other holders' conversion of convertible notes into
class A common stock. Regardless of whether a conversion of any convertible note
is taxable to the seller pursuant to the rules regarding USRPHCs, the
withholding requirements of Section 1445 of the Code generally will not be
applied to us or a financial intermediary involved in any such transaction.
SALE, EXCHANGE OR REDEMPTION OF CLASS A COMMON STOCK
A Foreign Holder will generally not be subject to United States federal
income tax or withholding tax on the sale or exchange of class A common stock
unless either of the conditions described in (1) or (2) above under "Foreign
Holders -- Sale, exchange or redemption of the convertible notes" is satisfied
or EchoStar is or has been a United States real property holding corporation, or
a USRPHC, as defined above, for United States federal income tax purposes at any
time within the shorter of the five-year period preceding such disposition or
such Foreign Holder's holding period. We do not believe we are, nor do we
believe we have ever been a USRPHC. Further, we do not expect in the foreseeable
future to become a USRPHC. If the Company is, or becomes, a USRPHC, so long as
the class A common stock continues to be regularly traded on an established
securities market within the meaning of Section 897(c)(3) of the Code, only a
Foreign Holder who holds or held directly, indirectly or constructively, at any
time during the shorter of the five-year period preceding the date of
disposition or the holder's holding period, more than 5% of the class A common
stock will be subject to U.S. federal income tax on the disposition of the class
A common stock. For purposes of the ownership test described above, a Foreign
Holder of convertible notes will be considered as constructively owning the
class A common stock into which such notes are convertible. Regardless of
whether a disposition of class A common stock is taxable to the seller pursuant
to the rules regarding USRPHCs, the withholding requirements of Section 1445 of
the Code generally will not be applicable to a purchaser of the class A common
stock or a financial intermediary involved in any such transaction.
45
<PAGE> 48
DISTRIBUTIONS ON CLASS A COMMON STOCK
Distributions by us with respect to the class A common stock that are
treated as dividends paid or deemed paid (including a deemed distribution on the
convertible notes or class A common stock as described above under "United
States Holders -- Constructive dividends") to a Foreign Holder, excluding
dividends that are effectively connected with the conduct of a trade or business
in the United States by such Holder which are taxable as described below, will
be subject to United States federal withholding tax at a 30% rate, or lower rate
provided under any applicable income tax treaty. Except to the extent that an
applicable tax treaty otherwise provides, a Foreign Holder will be subject to
tax in the same manner as a United States Holder on dividends paid or deemed
paid that are effectively connected with the conduct of a trade or business in
the United States by the Foreign Holder. If such Foreign Holder is a foreign
corporation, it may in certain circumstances also be subject to a United States
"branch profits tax" on such effectively connected income at a 30% rate or such
lower rate as may be specified by an applicable income tax treaty. Even though
such effectively connected dividends are subject to income tax, and may be
subject to the branch profits tax, they will not be subject to U.S. withholding
tax if the Foreign Holder delivers IRS Form 4224 to the payor.
Under current United States treasury regulations, dividends paid to an
address in a foreign country are presumed to be paid to a resident of that
country, unless the payor has knowledge to the contrary, for purposes of the
withholding discussed above, and under the current interpretation of United
States treasury regulations, for purposes of determining the applicability of a
tax treaty rate. Under United States treasury regulations which generally are
effective for payments made after December 31, 2000, subject to certain
transition rules, however, a Foreign Holder of class A common stock who wishes
to claim the benefit of an applicable treaty rate would be required to satisfy
applicable certification requirements. In addition, under current United States
treasury regulations, in the case of class A common stock held by a foreign
partnership, or other fiscally transparent entities, the certification
requirement would generally be applied to the partners of the partnership and
the partnership would be required to provide certain information, including a
United States taxpayer identification number. The treasury regulations also
provide look-through rules for tiered partnerships.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to payments
of principal, premium, if any, and interest on a convertible note, dividends on
class A common stock, and payments of the proceeds of the sale of a convertible
note or class A common stock to certain non-corporate United States Holders, and
a 31% backup withholding tax may apply to such payment if the United States
Holder (1) fails to furnish or certify his correct taxpayer identification
number to the payer in the manner required, (2) is notified by the IRS that he
has failed to report payments of interest or dividends properly or (3) under
certain circumstances, fails to certify that he has not been notified by the IRS
that he is subject to backup withholding for failure to report interest or
dividend payments.
Information reporting requirements will apply to payments of interest
or dividends to Foreign Holders where such interest or dividends are subject to
withholding or are exempt from United States withholding tax pursuant to a tax
treaty, or where such interest is exempt from United States tax under the
Portfolio Interest Exemption discussed above. Copies of these information
returns may also be made available under the provisions of a specific treaty or
agreement to the tax authorities of the country in which the Foreign Holder
resides.
Treasury regulations provide that backup withholding and information
reporting will not apply to payments of principal on the convertible notes by
the Company to a Foreign Holder if the Foreign Holder certifies as to its status
as a Foreign Holder under penalties of perjury or otherwise establishes an
exemption (provided that neither the Company nor its paying agent has actual
knowledge that the holder is a United States person or that the conditions of
any other exemption are not, in fact, satisfied).
The payment of the proceeds from the disposition of convertible notes
or class A common stock to or through the United States office of any broker,
United States or foreign, will be subject to information reporting and possible
backup withholding unless the owner certifies as to its non-United States status
under penalty of perjury or otherwise establishes an exemption, provided that
the broker does not have actual knowledge that the holder is a United States
person or that the conditions of any other exemption are not, in fact,
satisfied. The payment of the proceeds from the disposition of a convertible
note or class A common stock to or through a non-United States
46
<PAGE> 49
office of a non-United States broker that is not a United States related person
will not be subject to information reporting or backup withholding. For this
purpose, a "United States related person" is:
o a "controlled foreign corporation" for United States
federal income tax purposes; or
o a foreign person 50% or more of whose gross income from all
sources for the three-year period ending with the close of its taxable
year preceding the payment, or for such part of the period that the
broker has been in existence, is derived from activities that are
effectively connected with the conduct of a United States trade or
business.
In the case of the payment of proceeds from the disposition of
convertible notes or class A common stock to or through a non-United States
office of a broker that is either a United States person or a United States
related person, treasury regulations require information reporting on the
payment unless the broker has documentary evidence in its files that the owner
is a Foreign Holder and the broker has no knowledge to the contrary.
Any amounts withheld under the backup withholding rules will be allowed
as a refund or a credit against such holder's United States federal income tax
liability provided the required information is furnished to the IRS.
United States treasury regulations, which generally are effective for
payments made after December 31, 2000, subject to certain transition rules, will
generally expand the circumstances under which information reporting and backup
withholding may apply Holders of convertible notes should consult their tax
advisors regarding the application of the information and reporting and backup
withholding rules, including such treasury regulations.
THE ABOVE SUMMARY DOES NOT DISCUSS ALL ASPECTS OF U.S. FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO A PARTICULAR HOLDER OF CONVERTIBLE NOTES IN
LIGHT OF HIS, HER OR ITS PARTICULAR CIRCUMSTANCES AND INCOME TAX SITUATION. EACH
HOLDER OF CONVERTIBLE NOTES SHOULD CONSULT HIS, HER OR ITS TAX ADVISOR AS TO THE
SPECIFIC TAX CONSEQUENCES TO THE HOLDER OF THE OWNERSHIP AND DISPOSITION OF THE
CONVERTIBLE NOTES INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS, OR SUBSEQUENT REVISIONS OF THESE TAX LAWS.
47
<PAGE> 50
SELLING SECURITYHOLDERS
The convertible notes were originally issued by EchoStar and sold by
the initial purchasers in transactions not requiring registration under the
Securities Act or applicable state securities laws. The initial purchasers of
the convertible notes offered and sold the convertible notes to persons they
reasonably believed to be qualified institutional buyers in reliance on Rule
144A under the Securities Act and to a limited number of other "accredited
investors" (as defined in Rule 501(a)(1), (2) or (7) of the Securities Act).
Selling securityholders, which includes their transferees, pledgees or donees
and their successors, may from time to time offer and sell pursuant to this
prospectus any or all of the convertible notes or shares of class A common stock
into which they are convertible.
The following table provides information, as of the date of this
prospectus, regarding the principal amount of the convertible notes and shares
of class A common stock beneficially owned that may be offered and sold by each
selling securityholder. The information is based upon information provided to us
by each selling securityholder. The selling securityholders may have sold,
transferred or otherwise disposed of all or any portion of their convertible
notes or acquired additional convertible notes since the date on which they
provided information to us. Any of the foregoing would have been pursuant to
transactions not requiring registration under the Securities Act or applicable
state securities laws.
Because the selling securityholders may offer all or some portion of
the convertible notes and shares of class A common stock into which they are
convertible, we cannot estimate the amount of convertible notes or the number of
shares of class A common stock that will be held by the selling securityholders
upon termination of such sales.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF CONVERTIBLE SHARES OF CLASS A
NOTES BENEFICIALLY COMMON STOCK SHARES OF CLASS A
OWNED AND OWNED PRIOR TO COMMON STOCK
NAME OFFERED HEREBY (1) THE OFFERING (1)(2) OFFERED HEREBY (2)
<S> <C> <C> <C>
1976 Distribution Trust FBO Aerin $ 13,000 143
Lauder/Zinterhofer
1976 Distribution Trust FBO Jane A. Lauder $ 13,000 143
AIG/National Union Fire Ins. $ 680,000 7,482
Allstate Life Insurance Co. $ 2,500,000 27,509
Aloha Airlines Non-Pilots Pension Trust $ 180,000 1,981
Aloha Airlines Pilots Retirement Trust $ 100,000 1,100
Alta Partners $10,000,000 110,035
Argent Classic Convertible Arbitrage Fund $16,000,000 176,056
(Bermuda) L.P.
Aristeia Trading, LLC $ 1,750,000 19,256
Aristeia International, LLC $ 3,250,000 35,761
Arkansas PERS $ 1,560,000 17,165
Arkansas Teachers Retirement System $ 4,289,000 47,194
Baptist Health of South Florida $ 287,000 3,158
</TABLE>
48
<PAGE> 51
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF CONVERTIBLE SHARES OF CLASS A
NOTES BENEFICIALLY COMMON STOCK SHARES OF CLASS A
OWNED AND OWNED PRIOR TO COMMON STOCK
NAME OFFERED HEREBY (1) THE OFFERING (1)(2) OFFERED HEREBY (2)
<S> <C> <C> <C>
Bancroft Convertible Fund, Inc. $ 1,000,000 11,004
Bank Austria Cayman Island, Ltd. $ 5,000,000 55,018
Bank of America $ 10,650,000 117,188
Securities, LLC
Bankers Trust, Trustee for Daimler Chrysler $ 6,000,000 66,021
Corp. Emp. #1 Pension Plan Ltd. 4/1/89
BBT Fund, L.P. $ 4,000,000 44,014
Bear, Stearns & Co., Inc. $ 5,500,000 60,519
Black Diamond Offshore, Ltd. $ 1,183,000 13,017
BNP Arbitrage SNC $ 10,150,000 111,686
Boston Museum of Fine Arts $ 195,000 2,146
BVI Social Security Board $ 33,000 363
C&H Sugar Company, Inc. $ 285,000 3,136
Calpers $ 12,000,000 132,042
Canyon Value Realization (Cayman) Ltdt $ 13,900,000 152,949
Christian Science Trustees for Gifts and $ 365,000 4,016
Endowments
Chrysler Corporation Master Retirement $ 7,150,000 78,675
Trust*
City University of New York $ 82,000 902
Conseco Direct Life $ 1,150,000 12,654
Cova Bond-Debenture Fund $ 1,500,000 16,505
Delaware PERS $ 1,415,000 15,570
Delphi Foundation, Inc. $ 32,000 352
Delta Air Lines Master Trust* $ 3,565,000 39,228
Deutsche Bank Securities, Inc. $ 110,018,000 1,210,585
Donaldson Lufkin & Jenrette $ 33,000,000 363,116
Double Black Diamond Offshore, LDC $ 3,187,000 35,068
Ellsworth Convertible Growth and Income $ 1,000,000 11,004
Fund, Inc.
Engineers Joint Pension Fund $ 589,000 6,481
</TABLE>
49
<PAGE> 52
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF CONVERTIBLE SHARES OF CLASS A
NOTES BENEFICIALLY COMMON STOCK SHARES OF CLASS A
OWNED AND OWNED PRIOR TO COMMON STOCK
NAME OFFERED HEREBY (1) THE OFFERING (1)(2) OFFERED HEREBY (2)
<S> <C> <C> <C>
Fidelity Advisor Series II: Fidelity Advisor $ 600,000 6,602
Strategic Income Fund
Fidelity Financial Trust: Fidelity Convertible $ 21,000,000 231,074
Securities Fund
Fidelity Fixed-Income Trust: Fidelity High $ 10,240,000 112,676
Income Fund
Fidelity Management Trust Company on $ 5,330,000 58,649
behalf of accounts managed by it
Fidelity Puritan Trust: Fidelity Puritan Fund $ 30,000,000 330,106
Fidelity School Street Trust: Fidelity $ 80,000 880
Strategic Income Fund
Fiduciary Trust Intl. $ 250,000 2,751
Forest Alternatives Strategies Fund II, LP $ 350,000 3,851
Series A5I
Forest Alternatives Strategies Fund II, LP $ 225,000 2,476
Series A5M
Forest Fulcrum Fund LP $ 2,250,000 24,758
Forest Global Convertible Fund Series A-5 $ 9,025,000 99,307
Forest Performance Fund, LP $ 1,000,000 11,004
Forrestal Funding Master Trust $ 5,000,000 55,018
Franklin & Marshall $ 450,000 4,952
Fuji U.S. Income Open $ 1,000,000 11,004
General Motors Employees Global Group $ 6,032,000 66,373
Pension Trust
General Motors Foundation, Inc. $ 328,000 3,609
Grable Foundation $ 121,000 1,331
Grace Brothers Limited $ 2,500,000 27,509
Grady Hospital $ 123,000 1,353
Granville Capital Corporation $ 20,500,000 225,572
Hawaiian Airlines Employees Pension Plan- $ 155,000 1,706
IAM
</TABLE>
50
<PAGE> 53
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF CONVERTIBLE SHARES OF CLASS A
NOTES BENEFICIALLY COMMON STOCK SHARES OF CLASS A
OWNED AND OWNED PRIOR TO COMMON STOCK
NAME OFFERED HEREBY (1) THE OFFERING (1)(2) OFFERED HEREBY (2)
<S> <C> <C> <C>
Hawaiian Airlines Pension Plan for Salaried $ 40,000 440
Employees
Hawaiian Airlines Pilots Retirement Plan $ 240,000 2,641
HBK Master Fund, L.P. $ 58,750,000 646,457
Highbridge International, LLC $ 16,290,000 179,247
ICI American Holdings Trust $ 680,000 7,482
Island Holdings $ 30,000 330
JMG Capital Partners, LP $ 1,000,000 11,004
JMG Convertible Investments, LP $ 11,750,000 129,291
KD Offshore Fund CV $ 500,000 5,502
Kellner DiLeo & Co. $ 500,000 5,502
LB Series Fund Inc. High Yield Portfolio $ 4,250,000 46,765
LB Series Fund Inc. Income Portfolio $ 1,400,000 15,405
Liberty View Funds, L.P. $ 1,500,000 16,505
Lincoln National Convertible Securities $ 2,500,000 27,509
Fund
Lipper Convertibles, LP $ 8,000,000 88,028
Lipper Offshore Convertibles, LP $ 2,000,000 22,007
LLT, Limited $ 550,000 6,052
Local Initiatives Support Corporation $ 51,000 561
Lord Abbett & Co Investment Trust - High $ 250,000 2,751
Yield Fund
Lord Abbett & Co Oxford Fund $ 1,500,000 16,505
Lord Abbett Bond Debenture Fund $ 13,050,000 143,596
Lutheran Brotherhood High Yield Fund $ 1,500,000 16,505
Lutheran Brotherhood Income Fund $ 900,000 9,903
Lyxor Master Fund $ 1,250,000 13,754
Mainstay Convertible Fund $ 2,650,000 29,159
Maryland Retirement System $ 1,777,000 19,553
</TABLE>
51
<PAGE> 54
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF CONVERTIBLE SHARES OF CLASS A
NOTES BENEFICIALLY COMMON STOCK SHARES OF CLASS A
OWNED AND OWNED PRIOR TO COMMON STOCK
NAME OFFERED HEREBY (1) THE OFFERING (1)(2) OFFERED HEREBY (2)
<S> <C> <C> <C>
Mass Mutual Corporate Investors $ 400,000 4,401
Mass Mutual High Yield Partners II, LLC $ 3,200,000 35,211
Mass Mutual Participation Investors $ 240,000 2,641
Massachusetts Mutual Life Insurance $ 3,200,000 35,211
Merrill Lynch Convertible Fund, Inc. $ 600,000 6,602
Merrill Lynch Insurance Group $ 292,000 3,213
Morgan Stanley Dean Witter Income Builder $ 5,000,000 55,018
Fund
Morgan Stanley Dean Witter Variable $ 1,400,000 15,405
Income Builder Fund
Motors Insurance Corporation $ 1,608,000 17,694
Motion Picture Industry Health Plan - Active $ 930,000 10,233
Member Fund*
Motion Picture Industry Health Plan - $ 465,000 5,117
Retiree Member Fund*
Museum of Fine Arts, Boston $ 140,000 1,540
Nalco Chemical Company $ 310,000 3,411
New Hampshire Retirement System $ 810,000 8,913
New Orleans Fire Fighters $ 130,000 1,430
New York Life Insurance Company $ 18,000,000 198,063
New York Life Insurance and Annuity $ 2,000,000 22,007
Corporation
Nicholas Appelgate Convertible Fund $ 1,206,000 13,270
Nomura Securities International Inc. $ 2,750,000 30,260
Northwest Mutual Life Insurance Co. $ 6,000,000 66,021
Occidential Pretroleum $ 220,000 2,421
OCM Convertible Trust* $ 4,350,000 47,865
OCM Convertible Limited Partnership* $ 230,000 2,531
Ohio BWC $ 151,000 1,662
</TABLE>
52
<PAGE> 55
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF CONVERTIBLE SHARES OF CLASS A
NOTES BENEFICIALLY COMMON STOCK SHARES OF CLASS A
OWNED AND OWNED PRIOR TO COMMON STOCK
NAME OFFERED HEREBY (1) THE OFFERING (1)(2) OFFERED HEREBY (2)
<S> <C> <C> <C>
Palladin Securities $ 1,550,000 17,055
Parker-Hannifin Corporation $ 270,000 2,971
Partner Reinsurance Company, Ltd.* $ 1,280,000 14,085
Penn Treaty Network American Insurance $ 400,000 4,401
Co.
PGEP III, LLC $ 1,150,000 12,654
Physicians Life $ 458,000 5,040
Pilgrim Convertible Fund $ 5,256,000 57,835
Pro Mutual $ 510,000 5,612
Putnam Asset Allocation Funds-Balanced $ 800,000 8,803
Portfolio
Putnam Asset Allocation Funds- $ 500,000 5,502
Conservative Portfolio
Putnam Balanced Retirement Fund $ 260,000 2,861
Putnam Convertible Income-Growth Trust $ 11,000,000 121,039
Putnam Convertible Opportunity and Income $ 380,000 4,181
Trust
Quattro Fund Ltd. $ 1,000,000 11,004
Queen's Health Plan $ 60,000 660
Ramius Securities, LLC $ 2,500,000 27,509
Saar Holdings CDO Limited $ 1,850,000 20,357
San Diego City Retirement $ 1,186,000 13,050
San Diego County Convertible $ 3,422,000 37,654
SG-Cowen Securities $ 14,000,000 154,049
Shell Pension Trust $ 172,000 1,893
Southport Management Partners, L.P. $ 600,000 6,602
Southport Partners International, Ltd. $ 1,200,000 13,204
Starvest Combined Portfolio $ 935,000 10,288
</TABLE>
53
<PAGE> 56
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF CONVERTIBLE SHARES OF CLASS A
NOTES BENEFICIALLY COMMON STOCK SHARES OF CLASS A
OWNED AND OWNED PRIOR TO COMMON STOCK
NAME OFFERED HEREBY (1) THE OFFERING (1)(2) OFFERED HEREBY (2)
<S> <C> <C> <C>
State of Connecticut Combined Investment $ 9,510,000 104,643
Funds*
State of Oregon Equity $ 6,900,000 75,924
State of Oregon/SAIF Corporation $ 8,450,000 92,980
State Employees' Retirement Fund of the $ 4,005,000 44,069
State of Delaware*
State Street Bank Custodian for GE Pension $ 3,150,000 34,661
Trust
Summer Hill Equity Income LLC $ 135,000 1,485
STI Capital Management $ 3,500,000 38,512
Sylvan IMA Ltd $ 1,800,000 19,806
TQA Master Plus Fund, Ltd. $ 5,400,000 59,419
The TCW Group, Inc. $ 22,725,000 250,055
University of Rochester $ 130,000 1,430
Value Line Convertible Fund, Inc. $ 1,000,000 11,004
Value Realization Fund, LP $ 11,225,000 123,515
Value Realization Fund B, LP $ 800,000 8,803
Vanguard Convertible Securities Fund, Inc.* $ 7,015,000 77,190
Variable Insurance Products Fund: High $ 2,000,000 22,007
Income Portfolio
Variable Insurance Products Fund III: $ 100,000 1,100
Balanced Portfolio
Wake Forest University $ 1,437,000 15,812
White River Securities, LLC $ 5,500,000 60,519
Worldwide Transactions, Ltd. $ 280,000 3,081
Writers Guild-Industry Health Fund $ 360,000 3,961
Zeneca Holdings Pension Trust $ 650,000 7,152
Other current and future holders of $ 276,519,000 3,042,683
convertible notes (3)
TOTALS $1,000,000,000 11,003,521
</TABLE>
- ----------
54
<PAGE> 57
(1) Includes shares of class A common stock into which the notes are
convertible.
(2) Assumes a conversion price of $90.88 per share and the payment of
cash in lieu of fractional shares.
(3) Information concerning other selling securityholders, including
current holders of convertible notes for which we have not
received information regarding their holdings of convertible
notes and class A common stock, will be included in supplements
to this prospectus, if required. For purposes of this table, we
have assumed that such holders do not beneficially own any other
shares of class A common stock, other than the shares issuable
upon conversion of the convertible notes.
None of the selling securityholders has had any material relationship
with EchoStar or its affiliates within the past three years.
Information concerning the selling securityholders may change from time
to time and any such changed information will be set forth in supplements to
this prospectus if and when necessary. In addition, the conversion price of the
convertible notes may be adjusted under certain circumstances which will change
the number of shares of class A common stock received upon their conversion.
PLAN OF DISTRIBUTION
The selling securityholders and their successors (which term includes
their transferees, pledgees or donees of their successors) may sell the
convertible notes and the class A common stock into which they are convertible
directly to purchasers or through underwriters, broker-dealers or agents, who
may receive compensation in the form of discounts, concessions or commissions
from the selling securityholders or the purchasers (which discounts, concessions
or commissions as to any particular underwriter, broker-dealer or agent may be
in excess of those customary in the types of transactions involved).
The convertible notes and the class A common stock into which they are
convertible may be sold in one or more transactions at fixed prices, at
prevailing market prices at the time of sale, at prices related to such
prevailing market prices, at varying prices determined at the time of sale, or
at negotiated prices. Such sales may be effected in transactions (which may
involve crosses or block transactions) (1) on any national securities exchange
or quotation service on which the notes or the class A common stock may be
listed or quoted at the time of sale, (2) in the over- the-counter market, (3)
in transactions otherwise than on such exchanges or services or in the
over-the-counter market, (4) through the writing of options (whether such
options are listed on an options exchange or otherwise), or (5) through the
settlement of short sales. In connection with the sale of the convertible notes
and the class A common stock received upon their conversion or otherwise, the
selling securityholders may enter into hedging transactions with broker-dealers
or other financial institutions which may in turn engage in short sales of the
notes or the class A common stock, into which they are convertible and deliver
these securities to close out such short positions, or loan or pledge the notes
or the class A common stock into which they are convertible to broker-dealers
that in turn may sell these securities.
The aggregate proceeds to the selling securityholders from the sale of
the convertible notes or class A common stock into which they are convertible
offered by them hereby will be the purchase price of such notes or common stock
less discounts and commissions, if any. Each of the selling securityholders
reserves the right to accept and, together with their agents from time to time,
to reject, in whole or in part, any proposed purchase of notes or common stock
to be made directly or through agents. We will not receive any of the proceeds
from this offering.
Our outstanding class A common stock is listed for trading on Nasdaq
National Market. We do not intend to list the convertible notes for trading on
any national securities exchange or on the Nasdaq National market and can give
no assurance about the development of any trading market for the notes.
55
<PAGE> 58
In order to comply with the securities laws of some states, if
applicable, the convertible notes and class A common stock into which they are
convertible may be sold in such jurisdictions only through registered or
licensed brokers or dealers. In addition, in some states the convertible notes
and class A common stock into which they are convertible may not be sold unless
they have been registered or qualified for sale or an exemption from
registration or qualification requirements is available and is complied with.
The selling securityholders and any underwriters, broker-dealers or
agents that participate in the sale of the notes and common stock into which
they are convertible may be "underwriters" within the meaning of Section 2(11)
of the Securities Act. Any discounts, commissions, concessions or profit they
earn on any resale or the shares may be underwriting discounts and commissions
under the Securities Act. Selling securityholders who are "underwriters" within
the meaning of Section 2(11) of the Securities Act will be subject to the
prospectus delivery requirements of the Securities Act. The selling
securityholders have acknowledged that they understand their obligations to
comply with the provisions of the Exchange Act and the rules thereunder relating
to stock manipulation, particularly Regulation M, and have agreed that they will
not engage in any transaction in violation of such provisions.
In addition, any securities covered by this prospectus which qualify
for sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold
under Rule 144 or Rule 144A rather than pursuant to this prospectus. A selling
securityholder may not sell any convertible notes or class A common stock
described herein and may not transfer, devise or gift such securities by other
means not described in this prospectus.
To the extent required, the specific convertible notes or shares of
class A common stock to be sold, the names of the selling securityholders, the
respective purchase prices and public offering prices, the names of any agent,
dealer or underwriter, and any applicable commissions or discounts with respect
to a particular offer will be set forth in an accompanying prospectus supplement
or, if appropriate, a post-effective amendment to the registration statement of
which this prospectus is a part.
LEGAL MATTERS
Friedlob Sanderson Raskin Paulson & Tourtillott, LLC, Denver, Colorado,
will pass on the validity of the convertible notes and the class A common stock
issuable upon their conversion. Mr. Friedlob, a member of the firm, is also a
member of our Board of Directors and currently owns options to acquire 14,000
shares of class A common stock. Friedlob Sanderson Raskin Paulson & Tourtillott,
LLC will rely on an opinion of Hale Lane Peek Dennison Howard and Anderson,
Reno, Nevada, as to matters of Nevada law.
EXPERTS
The audited financial statements incorporated by reference in this
Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto and are included
herein in reliance upon the authority of such firm as experts in giving said
report.
56
<PAGE> 59
================================================================================
March 7, 2000
[IMAGE NOT AVAILABLE](R)
$1,000,000,000
47/8% Convertible Subordinated Notes Due 2007
-----------------------------------------
PROSPECTUS
-----------------------------------------
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in the prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted. The information contained in this prospectus is correct
only as of the date of this prospectus, regardless of the time of the delivery
of this prospectus or any sale of these securities.
- --------------------------------------------------------------------------------
<PAGE> 60
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than any
underwriting discounts and commissions, payable by the registrant in connection
with the sale of the securities being registered. All amounts are estimates
except the SEC registration fee. All of the costs and expenses other than the
NASDAQ Fee will be borne by the selling shareholders on a pro rata basis, based
on the number of shares originally requested to be included in this registration
statement.
<TABLE>
<S> <C>
SEC registration fee $264,000
NASDAQ Fee --
Legal fees and expenses 30,000
Accounting fees and expenses 7,500
Printing fees 1,500
Transfer agent fees 50
Miscellaneous 950
--------
Total $304,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Chapter 78.7502(1) of the Nevada Revised Statutes allows EchoStar to
indemnify any person made or threatened to be made a party to any action (except
an action by or in the right of EchoStar, a "derivative action"), by reason of
the fact that he is or was a director, officer, employee or agent of EchoStar,
or is or was serving at the request of EchoStar as a director, officer, employee
or agent of another corporation, against expenses including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with the action, suit or proceeding if he acted in a good
faith manner which he reasonably believed to be in or not opposed to the best
interests of EchoStar and, with respect to any criminal proceeding, had no
reasonable cause to believe that his conduct was unlawful. Under chapter
78.7502(2), a similar standard of care applies to derivative actions, except
that indemnification is limited solely to expenses (including attorneys' fees)
incurred in connection with the defense or settlement of the action and court
approval of the indemnification is required where the person seeking
indemnification has been found liable to EchoStar. In addition, Chapter
78.751(2) allows EchoStar to advance payment of indemnifiable expenses prior to
final disposition of the proceeding in question. Decisions as to the payment of
indemnification are made by a majority of the Board of Directors at a meeting at
which a quorum of disinterested directors is present, or by written opinion of
special legal counsel, or by the stockholders.
Provisions relating to liability and indemnification of officers and
directors of EchoStar for acts by such officers and directors are contained in
Article IX of the Amended and Restated Articles of Incorporation of EchoStar and
Article IX of EchoStar's by-laws. These provisions state, among other things,
that, consistent with and to the extent allowable under Nevada law, and upon the
decision of a disinterested majority of EchoStar's Board of Directors, or a
written opinion of outside legal counsel, or EchoStar's stockholders: (1)
EchoStar shall indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative and whether formal or
informal (other than an action by or in the right of EchoStar) by reason of the
fact that he is or was a director, officer, employee, fiduciary or agent of
EchoStar, or is or was serving at the request of EchoStar as director, officer,
employee, fiduciary or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding,
if he conducted himself in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of EchoStar, and with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful; and (2) EchoStar shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of EchoStar to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee, fiduciary
or agent of EchoStar, or is or was serving at the request of EchoStar as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust,
II-1
<PAGE> 61
employee benefit plan or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of EchoStar,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to EchoStar unless and
only to the extent that the court in which such action or suit was brought shall
determine upon application that despite the adjudication of liability but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
ITEM 16. EXHIBITS
4.1 Indenture, dated as of December 8, 1999, between EchoStar Communications
Corporation and U.S. Bank Trust National Association, as trustee, including
the form of 47/8% Convertible Subordinated Note Due 2007 attached as
Exhibit A thereto
4.2 Registration Rights Agreement, dated as of December 8, 1999, by and among
EchoStar Communications Corporation and the initial purchasers
5.1 Opinion of Hale Lane Peek Dennison Howard and Anderson
5.2 Opinion of Friedlob Sanderson Raskin Paulson & Tourtillott, LLC
12.1 Computation of Ratio of Earnings to Fixed Changes
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Hale Lane Peek Dennison Howard and Anderson (included in Exhibit
5.1)
23.3 Consent of Friedlob Sanderson Raskin Paulson & Tourtillott, LLC (included
in Exhibit 5.2)
24.1 Power of Attorney (included on page II-4 of this registration statement)
25.1 Form T-1 Statement of Eligibility of U.S. Bank Trust National Association
to act as trustee under the Indenture
- -----------
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this registration
statement or any material change to such information in this
registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
II-2
<PAGE> 62
(2) That, for the purpose of determining any liability under the 1933
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) For purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(6) To file an application for the purpose of determining the
eligibility of the trustee to act under ss. 310 of the Trust Indenture Act in
accordance with the rules and regulations prescribed by the Commission under ss.
305(b)(2) of the Act.
II-3
<PAGE> 63
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Littleton, State of Colorado on March 7, 2000.
ECHOSTAR COMMUNICATIONS CORPORATION
By: /s/ David K. Moskowitz
-----------------------------------
David K. Moskowitz
Senior Vice President, General
Counsel, Secretary and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Charles W. Ergen, Steven B. Schaver and
David K. Moskowitz, and each of them, his attorney-in-fact, for him in any and
all capacities, to sign any amendments to this registration statement, and any
related registration statement filed pursuant to Rule 462(b), and to file the
same, with exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Charles W. Ergen Chief Executive Officer, President and Director March 7, 2000
- ----------------------------- (Principal Executive Officer)
Charles W. Ergen
/s/ Steven B. Schaver Chief Financial Officer March 7, 2000
- ----------------------------- (Principal Financial Officer)
Steven B. Schaver
/s/ James DeFranco Director March 7, 2000
- -----------------------------
James DeFranco
/s/ David K. Moskowitz Director March 7, 2000
- -----------------------------
David K. Moskowitz
/s/ Raymond L. Friedlob Director March 7, 2000
- -----------------------------
Raymond L. Friedlob
/s/ O. Nolan Daines Director March 7, 2000
- -----------------------------
O. Nolan Daines
</TABLE>
II-4
<PAGE> 64
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number Title
- ------ -----
<S> <C>
4.1 Indenture, dated as of December 8, 1999, between EchoStar Communications
Corporation and U.S. Bank Trust National Association, as trustee, including
the form of 47/8% Convertible Subordinated Note Due 2007 attached as
Exhibit A thereto
4.2 Registration Rights Agreement, dated as of December 8, 1999, by and among
EchoStar Communications Corporation and the initial purchasers
5.1 Opinion of Hale Lane Peek Dennison Howard and Anderson
5.2 Opinion of Friedlob Sanderson Raskin Paulson & Tourtillott, LLC
12.1 Computation of Ratio of Earnings to Fixed Changes
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Hale Lane Peek Dennison Howard and Anderson (included in Exhibit
5.1)
23.3 Consent of Friedlob Sanderson Raskin Paulson & Tourtillott, LLC (included
in Exhibit 5.2)
24.1 Power of Attorney (included on page II-4 of this registration statement)
25.1 Form T-1 Statement of Eligibility of U.S. Bank Trust National Association
to act as trustee under the Indenture
</TABLE>
II-5
<PAGE> 1
EXHIBIT 4.1
EXECUTION COPY
================================================================================
ECHOSTAR COMMUNICATIONS CORPORATION
$1,000,000,000
4 7/8% CONVERTIBLE SUBORDINATED NOTES DUE 2007
----------------------------
INDENTURE
Dated as of December 8, 1999
----------------------------
----------------------------
U.S. Bank Trust National Association
as Trustee
----------------------------
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I.
Section 1.01. Definitions...............................................1
Section 1.02. Other Definitions.........................................5
Section 1.03. Incorporation by Reference of Trust Indenture Act.........6
Section 1.04. Rules of Construction.....................................6
ARTICLE II. THE NOTES..................................................7
Section 2.01. Form and Dating...........................................7
Section 2.02. Execution and Authentication..............................9
Section 2.03. Registrar and Paying Agent................................9
Section 2.04. Paying Agent to Hold Money in Trust......................10
Section 2.05. Holder Lists.............................................10
Section 2.06. Transfer and Exchange....................................10
Section 2.07. Replacement Notes........................................15
Section 2.08. Outstanding Notes........................................15
Section 2.09. Treasury Notes...........................................15
Section 2.10. Temporary Notes; Global Notes............................15
Section 2.11. Cancellation.............................................16
Section 2.12. Defaulted Interest.......................................16
ARTICLE III. REDEMPTION................................................17
Section 3.01. Notices to Trustee.......................................17
Section 3.02. Selection of Notes to Be Redeemed........................17
Section 3.03. Notice of Redemption.....................................17
Section 3.04. Effect of Notice of Redemption...........................18
Section 3.05. Deposit of Redemption Price..............................18
Section 3.06. Notes Redeemed in Part...................................18
Section 3.07. Optional Redemption......................................18
Section 3.08. Mandatory Redemption.....................................18
Section 3.09. Purchase Offer...........................................19
ARTICLE IV. COVENANTS.................................................20
Section 4.01. Payment of Notes.........................................20
Section 4.02. Reports..................................................21
Section 4.03. Compliance Certificate...................................21
Section 4.04. Stay, Extension and Usury Laws...........................22
Section 4.05. Corporate Existence......................................22
Section 4.06. Taxes....................................................22
Section 4.07. Change of Control........................................22
Section 4.08. Limitation on Status As Investment Company...............22
ARTICLE V. CONVERSION................................................23
Section 5.01. Conversion Privilege.....................................23
Section 5.02. Conversion Procedure.....................................23
Section 5.03. Fractional Shares........................................24
Section 5.04. Taxes on Conversion......................................24
Section 5.05. Company to Provide Stock.................................24
Section 5.06. Adjustment of Conversion Price...........................24
Section 5.07. No Adjustment............................................27
Section 5.08. Other Adjustments........................................27
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Section 5.09. Adjustments for Tax Purposes.............................28
Section 5.10. Notice of Adjustment.....................................28
Section 5.11. Notice of Certain Transactions...........................28
Section 5.12. Effect of Reclassifications, Consolidations, Mergers or
Sales on Conversion Privilege............................28
Section 5.13. Trustee's Disclaimer.....................................29
ARTICLE VI. SUBORDINATION.............................................30
Section 6.01. Agreement to Subordinate and Ranking.....................30
Section 6.02. No Payment on Notes if Senior Debt in Default............30
Section 6.03. Distribution on Acceleration of Notes; Dissolution and
Reorganization; Subrogation of Notes...................31
Section 6.04. Reliance by Senior Debt on Subordination Provisions......33
Section 6.05. No Waiver of Subordination Provisions....................34
Section 6.06. Trustee's Relation to Senior Debt........................34
Section 6.07. Other Provisions Subject Hereto..........................35
ARTICLE VII. SUCCESSORS................................................35
Section 7.01. Sale of Assets...........................................35
Section 7.02. Successor Corporation Substituted........................35
ARTICLE VIII. DEFAULTS AND REMEDIES.....................................36
Section 8.01. Events of Default........................................36
Section 8.02. Acceleration.............................................38
Section 8.03. Other Remedies...........................................38
Section 8.04. Waiver of Past Defaults..................................38
Section 8.05. Control by majority......................................38
Section 8.06. Limitation on Suits......................................39
Section 8.07. Rights of Holders to Receive Payment.....................39
Section 8.08. Collection Suit by Trustee...............................39
Section 8.09. Trustee May File Proofs of Claim.........................39
Section 8.10. Priorities...............................................40
Section 8.11. Undertaking for Costs....................................40
ARTICLE IX. TRUSTEE...................................................40
Section 9.01. Duties of Trustee........................................40
Section 9.02. Rights of Trustee........................................41
Section 9.03. Individual Rights of Trustee.............................41
Section 9.04. Trustee's Disclaimer.....................................41
Section 9.05. Notice of Defaults.......................................42
Section 9.06. Reports by Trustee to Holders............................42
Section 9.07. Compensation and Indemnity...............................42
Section 9.08. Replacement of Trustee...................................43
Section 9.09. Successor Trustee by Merger, Etc.........................44
Section 9.10. Eligibility; Disqualification............................44
Section 9.11. Preferential Collection of Claims Against Company........44
ARTICLE X. DISCHARGE OF INDENTURE....................................44
Section 10.01. Termination of Company's Obligations.....................44
Section 10.02. Repayment to Company.....................................44
ARTICLE XI. AMENDMENTS, SUPPLEMENTS AND WAIVERS.......................44
Section 11.01. Without Consent of Holders...............................44
Section 11.02. With Consent of Holders..................................45
Section 11.03. Compliance with Trust Indenture Act......................46
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
Section 11.04. Revocation and Effect of Consents........................46
Section 11.05. Notation on or Exchange of Notes.........................46
Section 11.06. Trustee Protected........................................46
ARTICLE XII. MISCELLANEOUS.............................................47
Section 12.01. Trust Indenture Act Controls.............................47
Section 12.02. Notices..................................................47
Section 12.03. Communication by Holders with Other Holders..............47
Section 12.04. Certificate and Opinion as to Conditions Precedent.......47
Section 12.05. Statements Required in Certificate or Opinion............48
Section 12.06. Rules by Trustee and Agents..............................48
Section 12.07. Legal Holidays...........................................48
Section 12.08. No Recourse Against Others...............................48
Section 12.09. Counterparts and Facsimile Signatures....................48
Section 12.10. Variable Provisions......................................49
Section 12.11. Governing Law, Submission to Jurisdiction................49
Section 12.12. No Adverse Interpretation of Other Agreements............49
Section 12.13. Successors...............................................50
Section 12.14. Severability.............................................50
Section 12.15. Table of Contents, Headings, Etc.........................50
</TABLE>
iii
<PAGE> 5
INDENTURE, dated as of December 8, 1999, between EchoStar
Communications Corporation, a Nevada corporation (the "COMPANY"), and U.S. Bank
Trust National Association, a national banking association, as trustee (the
"TRUSTEE").
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders (as defined in Section 1.01 hereof)
of the Company's 4 7/8% Convertible Subordinated Notes due 2007 (the "NOTES"):
ARTICLE I.
SECTION 1.01. DEFINITIONS.
"AFFILIATE" of any specified Person means any other Person directly
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided, however,
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control.
"AGENT" means any Registrar, Paying Agent or Conversion Agent.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
authorized committee of the Board of Directors.
"BOARD RESOLUTION" means a duly authorized resolution of the Board of
Directors.
"BUSINESS DAY" means any day that is not a Legal Holiday.
"CAPITAL STOCK" means any and all shares, interests, participations,
rights or other equivalents, however designated, of corporate stock, including,
without limitation, partnership interests.
"CHANGE OF CONTROL" means (a) any transaction or series of
transactions (including, without limitation, a tender offer, merger or
consolidation) the result of which is that the Principal and his Related Parties
or an entity controlled by the Principal and his Related Parties (and not
controlled by any person other than the Principal or his Related Parties) (i)
sell, transfer or otherwise dispose of more than 50% of the total Equity
Interests in the Company beneficially owned (as defined in Rule 13(d)(3) under
the Exchange Act but without including any Equity Interests which may be deemed
to be owned solely by reason of the existence of any voting arrangements), by
such persons on the date hereof (as adjusted for stock splits and dividends and
other distributions payable in Equity Interests) or (ii) do not have the voting
power to elect at least a majority of the Board of Directors; (b) the first day
on which a majority of the members of the Board of Directors are not Continuing
Directors; or (c)the sale, lease or transfer of all or substantially all of our
assets to any "Person" or "group", within the meaning of Section 13(d)(3) and
14(d)(2) of the Exchange Act or any successor provision to either of the
foregoing, including any group acting for the purpose of acquiring, holding or
disposing of securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act other than the Principal and his Related Parties.
<PAGE> 6
"COMMON STOCK" means the Class A common stock, par value $0.01 per
share, of the Company as the same exists at the date of the execution of this
Indenture or as such stock may be constituted from time to time.
"COMPANY" means the party named as such above until a successor
replaces it in accordance with Article VII and thereafter means the successor.
"CONTINUING DIRECTOR" means, as of any date of determination, any
member of the Board of Directors who: (a) was a member of such Board of
Directors on the date hereof; or (b) was nominated for election or elected to
such Board of Directors with the affirmative vote of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election or was nominated for election or elected by the Principal
and his Related Parties.
"DAILY MARKET PRICE" means the price of a share of Common Stock on the
relevant date, determined (a) on the basis of the last reported sale price
regular way of the Common Stock as reported on the Nasdaq National Market (the
"NNM"), or if the Common Stock is not then listed on the NNM, as reported on
such national securities exchange upon which the Common Stock is listed, or (b)
if there is no such reported sale on the day in question, on the basis of the
average of the closing bid and asked quotations regular way as so reported, or
(c) if the Common Stock is not listed on the NNM or on any national securities
exchange, on the basis of the average of the high bid and low asked quotations
regular way on the day in question in the over-the-counter market as reported by
the National Association of Securities Dealers Automated Quotation System, or if
not so quoted, as reported by National Quotation Bureau, Incorporated, or a
similar organization.
"DEFAULT" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"DEPOSITARY" shall mean The Depository Trust Company, its nominees and
their respective successors.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock, but excluding any Indebtedness that is
convertible into, or exchangeable for Capital Stock.
"EXCESS PAYMENT" means the excess of (A) the aggregate of the cash and
value of other consideration paid by the Company or any of its Subsidiaries with
respect to shares of the Company acquired in a tender offer or other negotiated
transaction over (B) the market value of each such acquired shares after giving
effect to the completion of a tender offer or other negotiated transaction.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE RATE CONTRACT" means, with respect to any Person, any
currency swap agreements, forward exchange rate agreements, foreign currency
futures or options, exchange rate collar agreements, exchange rate insurance and
other agreements or arrangements, or combination thereof, the principal purpose
of which is to provide protection against fluctuations in currency exchange
rates. An Exchange Rate Contract may also include an Interest Rate Agreement.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such
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<PAGE> 7
other statements by such other entity as approved by a significant segment of
the accounting profession, which are in effect on the Issuance Date and are
applied on a consistent basis.
"GUARANTEE" means a guarantee, other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner, including, without limitation, letters of credit and
reimbursement agreements in respect thereof, of all or any part of any
Indebtedness.
"HOLDER" means a Person in whose name a Note is registered in the
register referred to in Section 2.03.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit, or reimbursement agreements in respect thereof, or representing the
balance deferred and unpaid of the purchase price of any property (which
purchase price is due more than six months after the placing into service or
delivery of such property) including pursuant to capital leases and
sale-and-leaseback transactions, or representing any hedging obligations under
an Exchange Rate Contract or an Interest Rate Agreement, except any such balance
that constitutes an accrued expense or trade payable, if and to the extent any
of the foregoing indebtedness, other than obligations under an Exchange Rate
Contract or an Interest Rate Agreement, would appear as a liability upon a
balance sheet of such Person prepared in accordance with GAAP, and also
includes, to the extent not otherwise included, the Guarantee of items which
would be included within this definition. The amount of any Indebtedness
outstanding as of any date shall be the accreted value thereof, in the case of
any Indebtedness issued with original issue discount. Indebtedness shall not
include liabilities for taxes of any kind.
"INDENTURE" means this Indenture, as amended from time to time.
"INITIAL PURCHASERS" means Donaldson, Lufkin & Jenrette Securities
Corporation, Banc of America Securities LLC, Bear, Stearns & Co. Inc., Lehman
Brothers Inc., ING Barings Furman Selz LLC and CIBC World Markets Corp.
"INTEREST RATE AGREEMENT" means, with respect to any Person, any
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement or other similar agreement the principal purpose of which is to
protect the party indicated therein against fluctuations in interest rates.
"ISSUANCE DATE" means the date on which the Notes are first
authenticated and issued.
"NOTES" has the meaning set forth in the preamble hereto.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFICERS' CERTIFICATE" means a certificate of the Company signed by
two Officers, one of whom must be the Chairman of the Board, the President, the
Treasurer or a Vice President of the Company.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
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<PAGE> 8
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"PURCHASE AGREEMENT" means the Purchase Agreement, dated as of December
2, 1999, among the Company and the Initial Purchasers.
"PRINCIPAL" means Charles W. Ergen.
"REGISTRATION DEFAULT" has the meaning set forth in Section 2 of the
Notes.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement relating to the Notes and the underlying Common Stock, dated December
8, 1999, among the Company and the Initial Purchasers party thereto.
"RELATED PARTY" means, with respect to the Principal, (a) the spouse
and each immediate family member of the Principal and (b) each trust,
corporation, partnership or other entity of which the Principal beneficially
holds an 80% or more controlling interest.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SENIOR DEBT" means the principal of, interest on and other amounts due
on (i) Indebtedness of the Company, whether outstanding on the date hereof or
thereafter created, incurred, assumed or guaranteed by the Company, for money
borrowed from banks or other financial institutions; (ii) Indebtedness of the
Company, whether outstanding on the date hereof or thereafter created, incurred,
assumed or guaranteed by the Company; and (iii) Indebtedness of the Company
under interest rate swaps, caps or similar hedging agreements and foreign
exchange contracts, currency swaps or similar agreements: unless, in the
instrument creating or evidencing or pursuant to which Indebtedness under (i) or
(ii) is outstanding, it is expressly provided that such Indebtedness is not
senior in right of payment to the Notes. Senior Debt includes, with respect to
the obligations described in clauses (i) and (ii) above, interest accruing,
pursuant to the terms of such Senior Debt, on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company, whether or
not post-filing interest is allowed in such proceeding, at the rate specified in
the instrument governing the relevant obligation. Notwithstanding anything to
the contrary in the foregoing, Senior Debt shall not include: (a) Indebtedness
of or amounts owed by the Company for compensation to employees, or for goods or
materials purchased in the ordinary course of business, or for services; and (b)
Indebtedness of the Company to a Subsidiary of the Company.
"SHELF REGISTRATION STATEMENT" shall have the meaning set forth in the
Registration Rights Agreement.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary of the Company which is a
"significant subsidiary" as defined in Rule 1-02(v) of Regulation S-X under the
Securities Act and the Exchange Act, as such Regulation is in effect on the date
hereof.
"SPECIAL INTEREST" has the meaning set forth in Section 2 of the Notes.
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<PAGE> 9
"SUBSIDIARY" means any corporation, association or other business
entity of which more than 50% of the total voting power of shares of Capital
Stock entitled, without regard to the occurrence of any contingency, to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more of the other
Subsidiaries of that Person or a combination thereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (Sections)
77aaa-77bbbb) as in effect on the date of execution of this Indenture.
"TRUSTEE" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor.
"TRUST OFFICER" means the Chairman of the Board, the President or any
other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
DEFINED
TERM IN SECTION
- ---- ----------
<S> <C>
"ACCREDITED INVESTOR RESTRICTED NOTES"............... 2.01
"AGENT MEMBER"....................................... 2.01
"BANKRUPTCY LAW"..................................... 8.01
"CEDEL".............................................. 2.01
"CHANGE OF CONTROL PAYMENT".......................... 4.07
"COMMENCEMENT DATE".................................. 3.09
"CONVERSION AGENT"................................... 2.03
"CONVERSION DATE".................................... 5.02
"CONVERSION PRICE"................................... 5.01
"CONVERSION SHARES".................................. 5.06
"CUSTODIAN".......................................... 8.01
"DISTRIBUTION DATE".................................. 5.06
"DISTRIBUTION RECORD DATE"........................... 5.06
"EUROCLEAR".......................................... 2.01
"EVENT OF DEFAULT"................................... 8.01
"GLOBAL NOTE"........................................ 2.01
"LEGAL HOLIDAY"...................................... 12.07
"OFFER AMOUNT"....................................... 3.09
"OFFICER"............................................ 12.11
"PAYING AGENT"....................................... 2.03
"PAYMENT BLOCKAGE NOTICE"............................ 6.02
"PAYMENT BLOCKAGE PERIOD"............................ 6.02
"PAYMENT DEFAULT".................................... 8.01
"PURCHASE DATE"...................................... 3.09
"PURCHASE OFFER"..................................... 3.09
"QIBS"............................................... 2.01
"REGULATION S"....................................... 2.01
"REGULATION S GLOBAL NOTE" .......................... 2.01
"REGISTRAR".......................................... 2.03
"RESTRICTED NOTES"................................... 2.01
</TABLE>
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<PAGE> 10
<TABLE>
<CAPTION>
DEFINED
TERM IN SECTION
- ---- ----------
<S> <C>
"RIGHTS"............................................. 5.06
"RULE 144A".......................................... 2.01
"RULE 144A GLOBAL NOTE".............................. 2.01
"TENDER PAYMENT DATE" ............................... 5.06
"TENDER PERIOD"...................................... 3.09
</TABLE>
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"INDENTURE SECURITIES" means the Notes;
"INDENTURE SECURITY HOLDER" means a Holder of a Note;
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE" or "institutional trustee" means the Trustee; and
"OBLIGOR" on the Notes means the Company or any other obligor on the
Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP consistently applied;
(c) "OR" is not exclusive;
(d) words in the singular include the plural, and in the
plural include the singular;
(e) provisions apply to successive events and transactions;
(f) references to sections of or rules under the Securities
Act shall be deemed to include substitute, replacement or successor
sections or rules adopted by the SEC from time to time; and
(g) a reference to "$" or U.S. Dollars is to United States
dollars.
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<PAGE> 11
ARTICLE II.
THE NOTES
SECTION 2.01. FORM AND DATING.
(a) General.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto, which is hereby incorporated by
reference and expressly made a part of this Indenture. The Notes may have
notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company is subject, if any, or usage (provided that any
such notation, legend or endorsement is in a form acceptable to the Company).
The Company shall furnish any such legend not contained in Exhibit A to the
Trustee in writing. Each Note shall be dated the date of its authentication. The
Notes shall be in denominations of $1,000 and integral multiples thereof. The
terms and provisions of the Notes set forth in Exhibit A are part of this
Indenture and to the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby. However, to the extent any provision of any
Note conflicts with the express provisions of this Indenture, the provisions of
this Indenture shall govern and be controlling.
(b) Global Notes.
The Notes are being offered and sold by the Company pursuant to the
Purchase Agreement.
Notes transferred in reliance on Regulation S under the Securities Act
("REGULATION S"), as provided in Section 2.06(a)(ii) hereof, shall be issued in
the form of one or more permanent Global Notes in definitive, fully registered
form without interest coupons with the Global Notes Legend and Restricted Notes
Legend set forth in Exhibit A hereto (the "REGULATION S GLOBAL NOTE"), which
shall be deposited on behalf of the transferee of the Notes represented thereby
with the Trustee, as custodian, for the Depositary, and registered in the name
of the Depositary or the nominee of the Depositary for the accounts of
designated agents holding on behalf of the Euroclear System ("EUROCLEAR") or
Cedelbank ("CEDEL"), duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The aggregate principal amount of the
Regulation S Global Note may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depositary or its nominee
as hereinafter provided.
Notes offered and sold to Qualified Institutional Buyers ("QIBS") in
reliance on Rule 144A under the Securities Act ("RULE 144A"), as provided in the
Purchase Agreement, shall be issued initially in the form of one or more
permanent Global Notes in definitive, fully registered form without interest
coupons with the Global Notes Legend and Restricted Notes Legend set forth in
Exhibit A hereto ("RULE 144A GLOBAL NOTE"), which shall be deposited on behalf
of the purchasers of the Notes represented thereby with the Trustee, as
custodian for the Depositary, and registered in the name of the Depositary or a
nominee of the Depositary, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The aggregate principal amount of the Rule 144A
Global Note may from time to time be increased or decreased by adjustments made
on the records of the Trustee and the Depositary or its nominee as hereinafter
provided.
(c) Book-Entry Provisions.
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<PAGE> 12
This Section 2.01(c) shall apply only to the Regulation S Global Note
and the Rule 144A Global Note issued in the form of one or more permanent Global
Notes (collectively, the "GLOBAL NOTES") deposited with or on behalf of the
Depositary.
The Company shall execute and the Trustee shall, in accordance with
this Section 2.01(c), authenticate and deliver initially one or more Global
Notes that (a) shall be registered in the name of the Depositary for such Global
Note or Global Notes or the nominee of such Depositary and (b) shall be
delivered by the Trustee to such Depositary or pursuant to such Depositary's
instructions or held by the Trustee as custodian for the Depositary.
Members of, or participants in, the Depositary ("AGENT MEMBERS") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depositary or by the Trustee as the custodian of the
Depositary or under such Global Note, and the Depositary may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the absolute
owner of such Global Note for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any agent of
the Company or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depositary or impair, as between
the Depositary and its Agent Members, the operation of customary practices of
such Depositary governing the exercise of the rights of an owner of a beneficial
interest in any Global Note.
(d) Certificated Notes.
Notes offered and sold to "accredited investors" (as defined in Rule
501 (a) (1), (2), (3) or (7) of Regulation D under the Securities Act), as
provided in the Purchase Agreement, shall be issued in the form of one or more
certificated Notes (subject to a minimum initial purchase amount of $100,000) in
definitive, fully registered form without interest coupons with the Restricted
Notes Legend set forth in Exhibit A hereto ("ACCREDITED INVESTOR RESTRICTED
NOTES"), which shall be registered in the name of such Accredited Investor or
its nominee, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. Such Accredited Investor Restricted Notes may only be
transferred in reliance on Regulation S or to QIBs in reliance on Rule 144A.
Notwithstanding the foregoing, Notes offered and sold on the Issuance
Date to "accredited investors" (as defined above) shall be issued initially in
the form of one or more permanent Global Notes in definitive, fully registered
form without interest coupons with the Global Notes Legend and Restrictive Notes
Legend set forth in Exhibit A ("AI Global Note"), which shall be deposited on
behalf of the purchasers of the Notes represented thereby with the Trustee, as
custodian for the Depositary, and registered in the name of the Depositary or a
nominee of the Depositary, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. Such AI Global Note shall be deemed to be a
Global Note for all purposes of this Indenture. Promptly after the Issuance
Date, the Company shall cause the purchasers of the AI Global Note to arrange
with the Depositary for the exchange of such AI Global Note for Accredited
Investor Restricted Notes. Upon receipt by the principal Registrar of
instructions from the Depositary directing the principal Registrar to
authenticate and deliver one or more Accredited Investor Restricted Notes of the
same aggregate principal amount as the beneficial interest in the AI Global Note
to be exchanged, such instructions to contain the name or names of the Holder or
Holders of such Accredited Investor Restricted Note or Notes, the authorized
denominations of the Accredited Investor Restricted Note or Notes to be so
issued and appropriate delivery instructions, then the principal Registrar will
instruct the Depositary to reduce the AI Global Note by the aggregate principal
amount of the beneficial interest therein to be exchanged and to debit from the
account of the Person making such exchange the beneficial interest in the AI
Global Note that is being exchanged, and
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<PAGE> 13
concurrently with such reduction and debit the Company shall execute, and the
Trustee shall authenticate and deliver, one or more Accredited Investor
Restricted Notes of the same aggregate principal amount in accordance with the
instructions referred to above. Certificated Notes may be issued as aforesaid
notwithstanding any other provision of this Indenture to the contrary
restricting the issuance of certificated Notes.
In addition to the provisions of Section 2.10, owners of beneficial
interests in Global Notes may, if the Company, at its option, notifies the
Trustee in writing that it elects to cause the issuance of certificated Notes,
receive a certificated Note, which certificated Note shall bear the Restricted
Notes Legend set forth in Exhibit A hereto (the "RESTRICTED NOTES") unless
otherwise provided in this Section 2.01(d) and Section 2.06(b) hereof.
After a transfer of any Notes during the period of the effectiveness of
a Shelf Registration Statement with respect to the Notes and pursuant thereto,
all requirements for Restricted Notes Legends on such Note will cease to apply,
and a certificated Note without a Restricted Notes Legend will be available to
the Holder of such Notes.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
One Officer shall sign the Notes for the Company by manual or facsimile
signature.
If an Officer whose signature is on a Note no longer holds that office
at the time the Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of an authorized officer of the Trustee. The signature shall be conclusive
evidence that the Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by an
Officer, authenticate (1) Notes for original issue up to an aggregate principal
amount stated in paragraph 5 of the Notes. The aggregate principal amount of
Notes outstanding at any time may not exceed $1,000,000,000 except as provided
in Section 2.07.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders, the
Company or an Affiliate.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain (i) offices or agencies where the Notes may
be presented for registration of transfer or for exchange ("REGISTRAR") (ii)
offices or agencies where the Notes may be presented for payment ("PAYING
AGENT") and (iii) offices or agencies where the Notes may be presented for
conversion ("CONVERSION AGENT"). The Company initially designates the Trustee at
its corporate trust offices to act as principal Registrar, Paying Agent and
Conversion Agent. The principal Registrar shall keep a register of the Notes and
of their transfer and exchange. The Company may appoint one or more
co-registrars, one or more additional paying agents and one or more additional
Conversion Agents in such other locations as it shall determine. The term
"Registrar" includes any co-registrar, the term "Paying Agent" includes any
additional paying agent and the term "Conversion Agent" includes any additional
conversion agent. The Company may change any Paying Agent, Registrar or
Conversion
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<PAGE> 14
Agent without prior notice to any Holder. The Company shall notify the Trustee
of the name and address of any Agent not a party to this Indenture. If the
Company fails to appoint or maintain another entity as Registrar, Paying Agent
or Conversion Agent, the Trustee shall act as such. The Company or any of its
Affiliates may act as Paying Agent, Registrar or Conversion Agent.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal or interest on the Notes, and will notify the Trustee of any default
by the Company in making any such payment. While any such default continues, the
Trustee may require a Paying Agent to pay all money held by it to the Trustee
and to account for any money disbursed by it. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or an Affiliate
of the Company) shall have no further liability for the money. If the Company or
an Affiliate of the Company acts as Paying Agent, it shall segregate and hold in
a separate trust fund for the benefit of the Holders all money held by it as
Paying Agent.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the Company shall furnish to the
Trustee on or before each interest payment date and at such other times as the
Trustee may request in writing a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Holders.
SECTION 2.06. TRANSFER AND EXCHANGE.
Whenever Notes are presented to the Registrar or a co-registrar with a
request to register a transfer or to exchange them for an equal principal amount
of Notes of other denominations, the Registrar shall register the transfer or
make the exchange if its requirements for such transactions are met. To permit
registrations of transfers and exchanges, the Company shall issue and the
Trustee shall authenticate Notes at the Registrar's request. No service charge
shall be made for any registration of transfer or exchange (except as otherwise
expressly permitted herein), but the Company may require payment of a sum
sufficient to cover any transfer tax or similar governmental charge payable in
connection therewith (other than any such transfer tax or similar governmental
charge payable upon exchanges pursuant to Sections 2.10, 3.06 or 11.05 hereof).
The Company shall not be required (i) to issue, register the transfer
of or exchange any Note for a period beginning at the opening of business 15
days before the day of any selection of Notes to be redeemed under Section 3.02
hereof and ending at the close of business on the day of selection, or (ii) to
register the transfer, or exchange, of any Note so selected for redemption in
whole or in part, except the unredeemed portion of any Note being redeemed in
part.
(a) Notwithstanding any provision to the contrary herein, so
long as a Global Note remains outstanding and is held by or on behalf
of the Depositary, transfers of a Global Note, in whole or in part, or
of any beneficial interest therein, shall only be made in accordance
with Section 2.01(b) and this Section 2.06(a); provided, however, that
beneficial interests in a Global Note may be transferred to Persons who
take delivery thereof in the form of a beneficial interest
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<PAGE> 15
in the same Global Note in accordance with the transfer restrictions
set forth in the Restricted Notes Legend and under the heading "Notice
to investors" in the Company's Offering Memorandum dated December 2,
1999.
(i) Except for transfers or exchanges made in
accordance with clauses (ii) through (iv) of this Section
2.06(a), transfers of a Global Note shall be limited to
transfers of such Global Note in whole, but not in part, to
nominees of the Depositary or to a successor of the Depositary
or such successor's nominee.
(ii) Rule 144A Global Note to Regulation S Global Note.
If an owner of a beneficial interest in the Rule 144A Global
Note deposited with the Depositary or the Trustee as custodian
for the Depositary wishes at any time to transfer its interest
in such Rule 144A Global Note to a Person who is required to
take delivery thereof in the form of an interest in the
Regulation S Global Note, such owner may, subject to the rules
and procedures of the Depositary, exchange or cause the exchange
of such interest for an equivalent beneficial interest in the
Regulation S Global Note. Upon receipt by the principal
Registrar of (1) instructions given in accordance with the
Depositary's procedures from an Agent Member directing the
principal Registrar to credit or cause to be credited a
beneficial interest in the Regulation S Global Note in an amount
equal to the beneficial interest in the Rule 144A Global Note to
be exchanged, (2) a written order given in accordance with the
Depositary's procedures containing information regarding the
participant account of the Depositary and the Euroclear or Cedel
account to be credited with such increase and (3) a certificate
in the form of Exhibit B attached hereto given by the Holder of
such beneficial interest, then the principal Registrar shall
instruct the Depositary to reduce or cause to be reduced the
principal amount of the Rule 144A Global Note and to increase or
cause to be increased the principal amount of the Regulation S
Global Note by the aggregate principal amount of the beneficial
interest in the Rule 144A Global Note equal to the beneficial
interest in the Regulation S Global Note to be exchanged or
transferred, to credit or cause to be credited to the account of
the Person specified in such instructions a beneficial interest
in the Regulation S Global Note equal to the reduction in the
principal amount of the Rule 144A Global Note and to debit or
cause to be debited from the account of the Person making such
exchange or transfer the beneficial interest in the Rule 144A
Global Note that is being exchanged or transferred.
(iii) Regulation S Global Note to Rule 144A Global
Note. If an owner of a beneficial interest in the Regulation S
Global Note deposited with the Depositary or with the Trustee as
custodian for the Depositary wishes at any time to transfer its
interest in such Regulation S Global Note to a Person who is
required to take delivery thereof in the form of an interest in
the Rule 144A Global Note, such Holder may, subject to the rules
and procedures of Euroclear or Cedel, as the case may be, and
the Depositary, exchange or cause the exchange of such interest
for an equivalent beneficial interest in the Rule 144A Global
Note. Upon receipt by the principal Registrar of (1)
instructions from Euroclear or Cedel, if applicable, and the
Depositary, directing the principal Registrar to credit or cause
to be credited a beneficial interest in the Rule 144A Global
Note equal to the beneficial interest in the Regulation S Global
Note to be exchanged or transferred, (2) a written order
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<PAGE> 16
given in accordance with the Depositary's procedures containing
information regarding the participant account of the Depositary
and (3) a certificate in the form of Exhibit C attached hereto
given by the owner of such beneficial interest, then Euroclear
or Cedel or the principal Registrar, as the case may be, will
instruct the Depositary to reduce or cause to be reduced the
Regulation S Global Note and to increase or cause to be
increased the principal amount of the Rule 144A Global Note by
the aggregate principal amount of the beneficial interest in the
Regulation S Global Note to be exchanged or transferred, and the
principal Registrar shall instruct the Depositary, concurrently
with such reduction, to credit or cause to be credited to the
account of the Person specified in such instructions a
beneficial interest in the Rule 144A Global Note equal to the
reduction in the principal amount of the Regulation S Global
Note and to debit or cause to be debited from the account of the
Person making such exchange or transfer the beneficial interest
in the Regulation S Global Note that is being exchanged or
transferred.
(iv) Global Note to Restricted Note. If an owner of a
beneficial interest in a Global Note deposited with the
Depositary or with the Trustee as custodian for the Depositary
wishes at any time to transfer its interest in such Global Note
to a Person who is required to take delivery thereof in the form
of a Restricted Note, such owner may, subject to the rules and
procedures of Euroclear or Cedel, if applicable, and the
Depositary, cause the exchange of such interest for one or more
Restricted Notes of any authorized denomination or denominations
and of the same aggregate principal amount. Upon receipt by the
principal Registrar of (1) instructions from Euroclear or Cedel,
if applicable, and the Depositary directing the principal
Registrar to authenticate and deliver one or more Restricted
Notes of the same aggregate principal amount as the beneficial
interest in the Global Note to be exchanged, such instructions
to contain the name or names of the designated transferee or
transferees, the authorized denomination or denominations of the
Restricted Notes to be so issued and appropriate delivery
instructions, (2) a certificate in the form of Exhibit D
attached hereto given by the owner of such beneficial interest
to the effect set forth therein, (3) a certificate in the form
of Exhibit E attached hereto given by the Person acquiring the
Restricted Notes for which such interest is being exchanged, to
the effect set forth therein, and (4) such other certifications,
legal opinions or other information as the Company may
reasonably require to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject
to, the registration requirements of the Securities Act, then
Euroclear or Cedel, if applicable, or the principal Registrar,
as the case may be, will instruct the Depositary to reduce or
cause to be reduced such Global Note by the aggregate principal
amount of the beneficial interest therein to be exchanged and to
debit or cause to be debited from the account of the Person
making such transfer the beneficial interest in the Global Note
that is being transferred, and concurrently with such reduction
and debit the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Restricted Notes of the
same aggregate principal amount in accordance with the
instructions referred to above.
(v) Restricted Note to Restricted Note. If a Holder of
a Restricted Note wishes at any time to transfer such Restricted
Note to a Person who is required to take delivery thereof in the
form of a Restricted Note, such Holder may, subject to
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the restrictions on transfer set forth herein and in such
Restricted Note, cause the exchange of such Restricted Note for
one or more Restricted Notes of any authorized denomination or
denominations and of the same aggregate principal amount. Upon
receipt by the principal Registrar of (1) such Restricted Note,
duly endorsed as provided herein, (2) instructions from such
Holder directing the principal Registrar to authenticate and
deliver one or more Restricted Notes of the same aggregate
principal amount as the Restricted Note to be exchanged, such
instructions to contain the name or authorized denomination or
denominations of the Restricted Notes to be so issued and
appropriate delivery instructions, (3) a certificate from the
Holder of the Restricted Note to be exchanged in the form of
Exhibit D attached hereto, (4) a certificate in the form of
Exhibit E attached hereto given by the Person acquiring the
Restricted Notes for which such interest is being exchanged, to
the effect set forth therein, and (5) such other certifications,
legal opinions or other information as the Company may
reasonably require to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject
to, the registration requirements of the Securities Act, then
the Registrar shall cancel or cause to be canceled such
Restricted Note and concurrently therewith, the Company shall
execute, and the Trustee shall authenticate and deliver, one or
more Restricted Notes of the same aggregate principal amount, in
accordance with the instructions referred to above.
(vi) Restricted Note to Rule 144A Global Note. If an
owner of a Restricted Note registered in the name of such owner
wishes at any time to transfer such Restricted Note to a Person
who is required to take delivery thereof in the form of an
interest in the Rule 144A Global Note, such Holder may, subject
to the rules and procedures of the Depositary, exchange or cause
the exchange of such Restricted Note for an equivalent
beneficial interest in the Rule 144A Global Note. Upon receipt
by the principal Registrar of (1) instructions from the Company,
directing the principal Registrar (A) to credit or cause to be
credited a beneficial interest in the Rule 144A Global Note
equal to the principal amount of the Restricted Note to be
exchanged or transferred and (B) to cancel such Restricted Note
to be exchanged or transferred, (2) a written order given in
accordance with the Depositary's procedures containing
information regarding the participant account of the Depositary
and (3) a certificate in the form of Exhibit C attached hereto
given by the owner of such Restricted Note, then the principal
Registrar will instruct the Trustee to cancel such Restricted
Note and will instruct the Depositary to increase or cause to be
increased the principal amount of the Rule 144A Global Note by
the principal amount of the Restricted Note to be exchanged or
transferred, and the principal Registrar shall instruct the
Depositary, concurrently with such cancellation of the
Restricted Note, to credit or cause to be credited to the
account of the Person specified in such instructions a
beneficial interest in the Rule 144A Global Note equal to the
principal amount of the Restricted Note to be canceled by the
Trustee.
(vii) Restricted Note to Regulation S Global Note. If
an owner of a Restricted Note registered in the name of such
owner wishes at any time to transfer such Restricted Note to a
Person who is required to take delivery thereof in the form of
an interest in the Regulation S Global Note, such owner may,
subject to the rules and procedures of the Euroclear or Cedel,
as the case may be, exchange
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or cause the exchange of such Restricted Note for an equivalent
beneficial interest in the Regulation S Global Note. Upon
receipt by the principal Registrar of (1) instructions from the
Company, directing the principal Registrar (A) to credit or
cause to be credited a beneficial interest in the Regulation S
Global Note equal to the principal amount of the Restricted Note
to be exchanged or transferred and (B) to cancel such Restricted
Note to be exchanged or transferred, (2) a written order given
in accordance with the Depositary's procedures containing
information regarding the participant account of the Euroclear
or Cedel account to be credited with such increase and (3) a
certificate in the form of Exhibit B attached hereto given by
the Holder of such Restricted Note, then the principal Registrar
will instruct the Trustee to cancel such Restricted Note and
will instruct the Depositary to increase or cause to be
increased the principal amount of the Regulation S Global Note
by the principal amount of the Restricted Note to be exchanged
or transferred, and the principal Registrar shall instruct the
Depositary, concurrently with such cancellation of the
Restricted Note, to credit or cause to be credited to the
account of the Person specified in such instructions a
beneficial interest in the Regulation S Global Note equal to the
principal amount of the Restricted Note to be canceled by the
Trustee.
(viii) Other Exchanges. In the event that a beneficial
interest in a Global Note is exchanged for a certificated Note
in definitive registered form pursuant to Section 2.10, prior to
the effectiveness of a Shelf Registration Statement with respect
to such Notes, such Notes may be exchanged only in accordance
with such procedures as are substantially consistent with the
provisions of clauses (ii) through (v) above (including the
certification requirements intended to ensure that such
transfers comply with Rule 144A, Rule 144, Regulation S or any
other available exemption from registration, as the case may be)
and such other procedures as may from time to time be adopted by
the Company.
(b) Except in connection with a Shelf Registration Statement
contemplated by and in accordance with the terms of the Registration
Rights Agreement, if Notes are issued upon the transfer, exchange or
replacement of Notes bearing the Restricted Securities Legend set forth
in Exhibit A hereto, or if a request is made to remove such Restricted
Notes Legend on Notes, the Notes so issued shall bear the Restricted
Notes Legend, or the Restricted Notes Legend shall not be removed, as
the case may be, unless there is delivered to the Company such
satisfactory evidence, which may include an opinion of counsel, as may
be reasonably required by the Company, that neither the legend nor the
restrictions on transfer set forth therein are required to ensure that
transfers thereof comply with the provisions of Rule 144A, Rule 144,
Regulation S or any other available exemption from registration under
the Securities Act or, with respect to Restricted Notes, that such
Notes are not "restricted" within the meaning of Rule 144 under the
Securities Act. Upon provision of such satisfactory evidence, the
Trustee, at the direction of the Company, shall authenticate and
deliver Notes that do not bear the legend.
(c) Neither the Company nor the Trustee shall have any
responsibility for any actions taken or not taken by the Depositary and
the Company shall have no responsibility for any actions taken or not
taken by the Trustee as agent or custodian of the Depositary.
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SECTION 2.07. REPLACEMENT NOTES.
If the Holder of a Note claims that the Note has been lost, destroyed
or wrongfully taken or if such Note is mutilated and is surrendered to the
Trustee, the Company shall issue and the Trustee shall authenticate a
replacement Note if the Trustee's and the Company's requirements are met. If
required by the Trustee or the Company, an indemnity bond must be sufficient in
the judgment of both to protect the Company, the Trustee, any Agent or any
authenticating agent from any loss which any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note.
In case any such mutilated, destroyed, lost or stolen Note has become
or is about to become due and payable, or is about to be purchased by the
Company pursuant to Article III hereof, the Company in its discretion may,
instead of issuing a new Note, pay or purchase such Note, as the case may be.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, and those described in this Section as not outstanding.
If a Note is replaced, paid or purchased pursuant to Section 2.07
hereof, it ceases to be outstanding unless the Trustee receives proof
satisfactory to it that the replaced, paid or purchased Note is held by a bona
fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
Except as set forth in Section 2.09 hereof, a Note does not cease to be
outstanding because the Company or an Affiliate of the Company holds the Note.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company or an Affiliate of the Company shall be considered as though they are
not outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes that the Trustee knows are so owned shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES; GLOBAL NOTES.
(a) Until definitive Notes are ready for delivery, the Company
may prepare and the Trustee shall authenticate temporary Notes.
Temporary Notes shall be substantially in the form of definitive Notes
but may have variations that the Company considers appropriate for
temporary Notes. Without unreasonable delay, the Company shall prepare
and the Trustee shall authenticate definitive Notes in exchange for
temporary Notes. Holders of temporary Notes shall be entitled to all of
the benefits of this Indenture.
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<PAGE> 20
(b) A Global Note deposited with the Depositary or with the
Trustee as custodian for the Depositary pursuant to Section 2.01 shall
be transferred to the beneficial owners thereof in the form of
certificated Notes only in accordance with Section 2.01(d) or if such
transfer complies with Section 2.06 and (i) the Depositary notifies the
Company that it is unwilling or unable to continue as Depositary for
such Global Note or if at any time such Depositary ceases to be a
"clearing agency" registered under the Exchange Act and a successor
Depositary is not appointed by the Company within 90 days after receipt
of such notice or after it becomes aware of such cessation or (ii) an
Event of Default has occurred and is continuing.
(c) Any Global Note that is transferable to the beneficial
owners thereof in the form of certificated Notes pursuant to Section
2.01(d) or to this Section 2.10 shall be surrendered by the Depositary
to the Trustee to be so transferred, in whole or from time to time in
part, without charge, and the Trustee shall authenticate and deliver,
upon such transfer of each portion of such Global Note, an equal
aggregate principal amount of Notes of authorized denominations in the
form of certificated Notes. Any portion of a Global Note transferred
pursuant to this Section 2.10 shall be executed, authenticated and
delivered only in denominations of $1,000 and any integral multiple
thereof and registered in such names as the Depositary shall direct.
Any Note in the form of certificated Notes delivered in exchange for an
interest in the Global Notes shall, except as otherwise provided by
Section 2.06(b) bear the Restricted Notes Legend set forth in Exhibit A
hereto.
(d) The registered Holder of a Global Note may grant proxies
and otherwise authorize any Person, including Agent Members and Persons
that may hold interests through Agent Members, to take any action which
a Holder is entitled to take under this Indenture or the Notes.
(e) In the event of the occurrence of either of the events
specified in Section 2.10(b), the Company will promptly make available
to the Trustee a reasonable supply of certificated Notes in definitive,
fully registered form without interest coupons.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar, Paying Agent and Conversion Agent shall forward to
the Trustee any Notes surrendered to them for registration of transfer, exchange
or payment. The Trustee shall promptly cancel all Notes surrendered for
registration of transfer, exchange, payment, conversion, replacement or
cancellation and shall destroy such Notes and furnish a certificate regarding
such destruction to the Company. The Company may not issue new Notes to replace
Notes that it has paid or that have been delivered to the Trustee for
cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company fails to make a payment of interest on the Notes, it
shall pay such defaulted interest plus any interest payable on the defaulted
interest, in any lawful manner. It may pay such defaulted interest, plus any
such interest payable on it, to the Persons who are Holders on a subsequent
special record date. The Company shall fix any such record date and payment
date, provided that no such record date shall be less than 10 days prior to the
related payment date for such defaulted interest. At least 15 days before any
such record date, the Company shall mail to Holders a notice that states the
special record date, the related payment date and amount of such interest to be
paid.
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ARTICLE III.
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of the Notes and Section 3.07 hereof, it shall notify the
Trustee of the redemption date and the principal amount of Notes to be redeemed.
The Company shall give each notice to the Trustee provided for in this Section
3.01 at least 35 days before the redemption date (unless a shorter notice period
shall be reasonably satisfactory to the Trustee).
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed at any time, selection
of Notes shall be made by the Trustee on a pro rata basis or by lot or by a
method that complies with the requirements of any exchange on which the Notes
are listed and that the Trustee considers fair and appropriate, provided that no
Notes of $1,000 or less shall be redeemed in part. The Trustee shall make the
selection not more than 60 days and not less than 30 days before the redemption
date from Notes outstanding not previously called for redemption. Notes and
portions of Notes selected shall be in amounts of $1,000 or integral multiples
of $1,000. Provisions of this Indenture that apply to Notes called for
redemption also apply to portions of Notes called for redemption. The Trustee
shall notify the Company promptly of the Notes or portions of Notes to be called
for redemption.
If any Note selected for partial redemption is converted in part after
such selection, the converted portion of such Note shall be deemed (so far as
may be) to be the portion to be selected for redemption. The Notes (or portions
thereof) so selected shall be deemed duly selected for redemption for all
purposes hereunder, notwithstanding that any such Note is converted in whole or
in part before the mailing of the notice of redemption. Upon any redemption of
less than all the Notes, the Company and the Trustee may treat as outstanding
any Notes surrendered for conversion during the period 15 days next preceding
the mailing of a notice of redemption and need not treat as outstanding any Note
authenticated and delivered during such period in exchange for the unconverted
portion of any Note converted in part during such period.
SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail, by first class mail, a notice of redemption to each
Holder whose Notes are to be redeemed at its registered address. The notice
shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is to be redeemed in part only, the portion of
the principal amount thereof redeemed, and that, after the redemption
date, upon surrender of such Note, a new Note in principal amount equal
to the unredeemed portion thereof shall be issued in the name of the
Holder thereof upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
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(e) that Notes called for redemption must be surrendered to
the Paying Agent to collect the redemption price plus accrued interest,
if any;
(f) that interest on Notes called for redemption ceases to
accrue on and after the redemption date; and
(g) the paragraph of the Notes pursuant to which the Notes
called for redemption are being redeemed.
Such notice shall also state the current Conversion Price and the date
on which the right to convert such Notes or portions thereof into Common Stock
of the Company will expire.
At the Company's request, the Trustee shall give notice of redemption
in the Company's name and at its expense; provided that the Company shall have
delivered to the Trustee, at least 45 days prior to the redemption date, an
Officers' Certificate requesting that the Trustee give such notice and setting
forth the information to be stated in such notice, as provided in the preceding
paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become due and payable on the redemption
date at the price set forth in the Note. A notice of redemption may not be
conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
On or before the redemption date, the Company shall deposit with the
Trustee or with the Paying Agent money sufficient to pay the redemption price of
and accrued interest on all Notes to be redeemed on that date unless theretofore
converted into Common Stock pursuant to the provisions hereof. The Trustee or
the Paying Agent shall return to the Company any money not required for that
purpose.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and the Trustee shall authenticate for the Holder at the expense of the
Company a new Note equal in principal amount to the unredeemed portion of the
Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
The Company may redeem all or any portion of the Notes, upon the terms
and at the redemption prices set forth in the Notes. Any redemption pursuant to
this Section 3.07 shall be made pursuant to the provisions of Section 3.01
through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION
The Company shall not be required to make mandatory redemption payments
or sinking fund payments with respect to the Notes.
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SECTION 3.09. PURCHASE OFFER.
(a) In the event that, pursuant to Section 4.07 hereof, the
Company shall commence an offer to all Holders of the Notes to purchase
Notes (the "PURCHASE OFFER"), the Company shall follow the procedures
in this Section 3.09.
(b) The Purchase Offer shall remain open for a period
specified by the Company which shall be no less than 30 calendar days
and no more than 40 calendar days following its commencement (the
"COMMENCEMENT DATE") (as determined in accordance with Section 4.07
hereof), except to the extent that a longer period is required by
applicable law (the "TENDER PERIOD"). Upon the expiration of the Tender
Period (the "PURCHASE DATE"), the Company shall purchase the principal
amount of all of the Notes required to be purchased pursuant to Section
4.07 hereof (the "OFFER AMOUNT").
(c) If the Purchase Date is on or after an interest payment
record date and on or before the related interest payment date, any
accrued interest shall be paid to the Person in whose name a Note is
registered at the close of business on such record date, and no
additional interest will be payable to Holders who tender Notes
pursuant to the Purchase Offer.
(d) The Company shall provide the Trustee with notice of the
Purchase Offer at least 10 days before the Commencement Date.
(e) On or before the Commencement Date, the Company or the
Trustee (at the expense of the Company) shall send, by first class
mail, a notice to each of the Holders, which shall govern the terms of
the Purchase Offer and shall state:
(i) that the Purchase Offer is being made pursuant to
this Section 3.09 and Section 4.07 hereof, that all Notes
validly tendered will be accepted for payment and the length of
time the Purchase Offer will remain open;
(ii) the purchase price (as determined in accordance
with Section 4.07 hereof) and the Purchase Date, and that all
Notes tendered will be accepted for payment;
(iii) that any Note or portion thereof not tendered or
accepted for payment will continue to accrue interest;
(iv) that, unless the Company defaults in the payment
of the purchase price, any Note or portion thereof accepted for
payment pursuant to the Purchase Offer will cease to accrue
interest after the Purchase Date;
(v) that Holders electing to have a Note or portion
thereof purchased pursuant to any Purchase Offer will be
required to surrender the Note, with the form entitled "Option
of Holder to Elect Purchase" on the reverse of the Note
completed, to the Company, a depositary, if appointed by the
Company, or a Paying Agent at the address specified in the
notice prior to the close of business on the third Business Day
preceding the Purchase Date;
(vi) that Holders will be entitled to withdraw their
election if the Company, depositary or Paying Agent, as the case
may be, receives, not later than
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the close of business on the second Business Day preceding the
Purchase Date, or such longer period as may be required by law,
a letter or a telegram, telex or facsimile transmission (receipt
of which is confirmed and promptly followed by a letter) setting
forth the name of the Holder, the principal amount of the Note
or portion thereof the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have
the Note or portion thereof purchased;
(vii) that Holders whose Notes were purchased only in
part will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered.
(f) On or prior to the Purchase Date, the Company shall
irrevocably deposit with the Trustee or a Paying Agent in immediately
available funds an amount equal to the Offer Amount to be held for
payment in accordance with the terms of this Section 3.09. On the
Purchase Date, the Company shall, to the extent lawful, (i) accept for
payment the Notes or portions thereof properly tendered pursuant to the
Purchase Offer, (ii) deliver or cause the depositary or Paying Agent to
deliver to the Trustee Notes so accepted and (iii) deliver to the
Trustee an Officers' Certificate stating such Notes or portions thereof
have been accepted for payment by the Company in accordance with the
terms of this Section 3.09. The Depositary, the Paying Agent or the
Company, as the case may be, shall promptly (but in any case not later
than ten (10) calendar days after the Purchase Date) mail or deliver to
each tendering Holder an amount equal to the purchase price of the
Notes tendered by such Holder and accepted by the Company for purchase,
and the Trustee shall promptly authenticate and mail or deliver to such
Holders a new Note equal in principal amount to any unpurchased portion
of the Note surrendered. Any Notes not so accepted shall be promptly
mailed or delivered by or on behalf of the Company to the Holder
thereof. The Company will publicly announce in a newspaper of general
circulation the results of the Purchase Offer on the Purchase Date.
(g) The Purchase Offer shall be made by the Company in
compliance with all applicable provisions of the Exchange Act, and all
applicable tender offer rules promulgated thereunder, and shall include
all instructions and materials necessary to enable such Holders to
tender their Notes.
ARTICLE IV.
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay the principal of, premium, if any and interest
on, the Notes on the dates and in the manner provided in the Notes. Principal,
premium, if any, and interest shall be considered paid on the date due if the
Paying Agent (other than the Company or an Affiliate of the Company) holds on
that date money designated for and sufficient to pay all principal, premium, if
any, and interest then due. To the extent lawful, the Company shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
(i) overdue principal and premium, if any, at the rate borne by the Notes,
compounded semiannually; and (ii) overdue installments of interest or (without
regard to any applicable grace period) at the same rate, compounded
semiannually.
Whenever in this Indenture or the Notes there is mentioned, in any
context, the payment of principal (and premium, if any), Offer Amount, interest
or any other amount payable under or with
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respect to any Note such mention shall be deemed to include mention of the
payment of Special Interest provided for in Section 2 of the Notes to the extent
that, in such context, Special Interest is, was or would be payable in respect
thereof pursuant to the provisions of Section 2 of the Notes and express mention
of the payment of Special Interest (if applicable) in any provisions hereof
shall not be construed as excluding Special Interest in those provisions hereof
where such express mention is not made (if applicable).
SECTION 4.02. REPORTS.
Whether or not required by the rules and regulations of the SEC, so
long as any Notes are outstanding, the Company shall file with the SEC and
furnish to the Trustee and to the Holders of Notes, all quarterly and annual
financial information required to be contained in a filing with the SEC on Forms
10-Q and 10-K, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual information
only, a report thereon by the Company's certified independent accountants, in
each case, as required by the rules and regulations of the SEC as in effect on
the Issuance Date.
SECTION 4.03. COMPLIANCE CERTIFICATE.
The Company shall deliver to the Trustee, within 90 days after the end
of each fiscal year of the Company, an Officers' Certificate stating that a
review of the activities of the Company and its subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under, and complied with the covenants
and conditions contained in, this Indenture, and further stating, as to each
such Officer signing such certificate, that to the best of his knowledge the
Company has kept, observed, performed and fulfilled each and every covenant, and
complied with the covenants and conditions contained in this Indenture and is
not in default in the performance or observance of any of the terms, provisions
and conditions hereof (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which he may have
knowledge) and that to the best of his knowledge no event has occurred and
remains in existence by reason of which payments on account of the principal or
of interest, if any, on the Notes are prohibited.
One of the Officers signing such Officers' Certificate shall be either
the Company's principal executive officer, principal financial officer or
principal accounting officer.
The Company will so long as any of the Notes are outstanding, deliver
to the Trustee, forthwith upon becoming aware of any Default or Event of Default
an Officers' Certificate specifying such Default or Event of Default.
Immediately upon the occurrence of any Registration Default giving rise
to Special Interest or the cure of any such Registration Default, the Company
shall give the Trustee notice thereof and of the event giving rise to such
Registration Default or the cure of any such Registration Default (such notice
to be contained in an Officers' Certificate) and prior to receipt of such
Officers' Certificate the Trustee shall be entitled to assume that no such
Registration Default has occurred or been cured, as the case may be.
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SECTION 4.04. STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
SECTION 4.05. CORPORATE EXISTENCE.
Subject to Article VII hereof, to the extent permitted by law the
Company will do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence and the corporate, partnership or
other existence of each subsidiary of the Company in accordance with the
respective organizational documents of each subsidiary and the rights (charter
and statutory), licenses and franchises of the Company; provided, however, that
the Company shall not be required to preserve any such right, license or
franchise, or the corporate, partnership or other existence of any subsidiary,
if the preservation thereof is no longer desirable in the conduct of the
business of the Company and its subsidiaries taken as a whole.
SECTION 4.06. TAXES.
The Company shall, and shall cause each of its subsidiaries to, pay
prior to delinquency all material taxes, assessments and governmental levies,
except as contested in good faith and by appropriate proceedings.
SECTION 4.07. CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder of
Notes shall have the right to require the Company to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of such
Holder's Notes pursuant to the Purchase Offer at a purchase price equal
to 101% of the principal amount thereof plus accrued and unpaid
interest to the date of purchase (the "CHANGE OF CONTROL PAYMENT").
(b) Within 40 days following any Change of Control, the
Company shall mail to each Holder the notice provided by Section
3.09(e).
SECTION 4.08. LIMITATION ON STATUS AS INVESTMENT COMPANY.
The Company shall not, and shall not permit any Subsidiary to, conduct
its business in a fashion that would cause the Company to be required to be
registered as an "investment company" (as that term is defined in the Investment
Company Act of 1940, as amended.
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ARTICLE V.
CONVERSION
SECTION 5.01. CONVERSION PRIVILEGE.
A Holder of a Note may convert it into fully paid and nonassessable
shares of Common Stock at any time after 90 days following the Issuance Date and
prior to maturity at the Conversion Price then in effect, except that, with
respect to any Note called for redemption, such conversion right shall terminate
at the close of business on the Business Day immediately preceding the
redemption date (unless the Company shall default in making the redemption
payment when it becomes due, in which case the conversion right shall terminate
on the date such default is cured). The number of shares of Common Stock
issuable upon conversion of a Note is determined by dividing the principal
amount of such Note by the conversion price in effect on the Conversion Date
(the "CONVERSION PRICE").
The initial Conversion Price is stated in paragraph 11 of the Notes and
is subject to adjustment as provided in this Article V.
A Holder may convert a portion of a Note equal to any integral multiple
of $1,000. Provisions of this Indenture that apply to conversion of all of a
Note also apply to conversion of a portion of it.
SECTION 5.02. CONVERSION PROCEDURE.
To convert a Note, a Holder must satisfy the requirements in paragraph
11 of the Notes. The date on which the Holder satisfies all of those
requirements is the conversion date (the "CONVERSION DATE"). As soon as
practicable after the Conversion Date, the Company shall deliver to the Holder
through the Conversion Agent a certificate for the number of whole shares of
Common Stock issuable upon the conversion and a check for any fractional share
determined pursuant to Section 5.03 hereof. The Person in whose name the
certificate is registered shall become the stockholder of record on the
Conversion Date and, as of such date, such Person's rights as a Holder shall
cease; provided, however, that no surrender of a Note on any date when the stock
transfer books of the Company shall be closed shall be effective to constitute
the Person entitled to receive the shares of Common Stock upon such conversion
as the stockholder of record of such shares of Common Stock on such date, but
such surrender shall be effective to constitute the Person entitled to receive
such shares of Common Stock as the stockholder of record thereof for all
purposes at the close of business on the next succeeding day on which such stock
transfer books are open; provided further, however, that such conversion shall
be at the Conversion Price in effect on the date that such Note shall have been
surrendered for conversion, as if the stock transfer books of the Company had
not been closed.
No payment or adjustment will be made for accrued and unpaid interest
on a converted Note, but if any holder surrenders a Note for conversion after
the close of business on the record date for the payment of an installment of
interest and prior to the opening of business on the next interest payment date,
then, notwithstanding such conversion, the interest payable on such interest
payment date shall be paid to the holder of such Note on such record date;
provided, however, that such Note, when surrendered for conversion, must be
accompanied by payment to the Company of an amount equal to the interest payable
on such interest payment date on the portion so converted; provided further,
however, that such payment to the Company described in the immediately preceding
proviso shall not be required in connection with any conversion of a Note that
occurs on or after the date that the Company has issued a notice of redemption
pursuant to Section 3.03 hereof and prior to the date of such redemption.
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If a Holder converts more than one Note at the same time, the number of
whole shares of Common Stock issuable upon the conversion shall be based on the
total principal amount of Notes converted.
Upon surrender of a Note that is converted in part, the Trustee shall
authenticate for the Holder a new Note equal in principal amount to the
unconverted portion of the Note surrendered.
SECTION 5.03. FRACTIONAL SHARES.
The Company will not issue fractional shares of Common Stock upon
conversion of a Note. In lieu thereof, the Company will pay an amount in cash
based upon the Daily Market Price of the Common Stock on the trading day prior
to the date of conversion.
SECTION 5.04. TAXES ON CONVERSION.
The issuance of certificates for shares of Common Stock upon the
conversion of any Note shall be made without charge to the converting Holder for
such certificates or for any tax in respect of the issuance of such
certificates, and such certificates shall be issued in the respective names of,
or in such names as may be directed by, the Holder or Holders of the converted
Note; provided, however, that in the event that certificates for shares of
Common Stock are to be issued in a name other than the name of the Holder of the
Note converted, such Note, when surrendered for conversion, shall be accompanied
by an instrument of transfer, in form satisfactory to the Company, duly executed
by the registered Holder thereof or his duly authorized attorney; and provided
further, however, that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificates in a name other than that of the Holder of the
converted Note, and the Company shall not be required to issue or deliver such
certificates unless or until the Person or Persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid or is
not applicable.
SECTION 5.05. COMPANY TO PROVIDE STOCK.
The Company shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued Common Stock, solely for
the purpose of issuance upon conversion of Notes as herein provided, a
sufficient number of shares of Common Stock to permit the conversion of all
outstanding Notes for shares of Common Stock. All shares of Common Stock which
may be issued upon conversion of the Notes shall be duly authorized, validly
issued, fully paid and nonassessable when so issued. Shares of Common Stock
issuable upon conversion of a Restricted Note shall bear such restrictive
legends as the Company shall provide in accordance with applicable law. If
shares of Common Stock are to be issued upon conversion of a Restricted Note and
they are to be registered in a name other than that of the Holder of such
Restricted Note, then the Person in whose name such shares of Common Stock are
to be registered must deliver to the Trustee a certificate satisfactory to the
Company and signed by such Person as to compliance with the restrictions on
transfer contained in such restrictive legends.
SECTION 5.06. ADJUSTMENT OF CONVERSION PRICE.
The Conversion Price shall be subject to adjustment from time to time
as follows:
(a) In case the Company shall (1) pay a dividend in shares of
Common Stock to all holders of Common Stock, (2) make a distribution in
shares of Common Stock to all holders of
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Common Stock, (3) subdivide its outstanding shares of Common Stock into
a greater number of shares of Common Stock or (4) combine its
outstanding shares of Common Stock into a smaller number of shares of
Common Stock, the Conversion Price in effect immediately prior to such
action shall be adjusted so that the holder of any Note thereafter
surrendered for conversion shall be entitled to receive the number of
shares of Common Stock which he would have owned immediately following
such action had such Notes been converted immediately prior thereto.
Any adjustment made pursuant to this subsection (a) shall become
effective immediately after the record date in the case of a dividend
or distribution and shall become effective immediately after the
effective date in the case of a subdivision or combination.
(b) In case the Company shall issue rights or warrants to
substantially all holders of Common Stock entitling them (for a period
commencing no earlier than the record date for the determination of
holders of Common Stock entitled to receive such rights or warrants and
expiring not more than 45 days after such record date) to subscribe for
or purchase shares of Common Stock (or securities convertible into
Common Stock) at a price per share less than the current market price
(as determined pursuant to subsection (f) below) of the Common Stock on
such record date, the Conversion Price shall be adjusted so that the
same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to such record date by a fraction of
which the numerator shall be the number of shares of Common Stock
outstanding on such record date, plus the number of shares of Common
Stock which the aggregate offering price of the offered shares of
Common Stock (or the aggregate conversion price of the convertible
securities so offered) would purchase at such current market price, and
of which the denominator shall be the number of shares of Common Stock
outstanding on such record date plus the number of additional shares of
Common Stock offered (or into which the convertible securities so
offered are convertible). Such adjustments shall become effective
immediately after such record date.
(c) In case the Company shall distribute to all holders of
Common Stock shares of capital stock of the Company other than Common
Stock, evidences of indebtedness or other assets (other than cash
dividends out of current or retained earnings), or shall distribute to
substantially all holders of Common Stock, rights or warrants to
subscribe for securities (other than those referred to in subsection
(b) above), then in each such case the Conversion Price shall be
adjusted so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the
date of such distribution by a fraction of which the numerator shall be
the current market price (determined as provided in subsection (f)
below) of the Common Stock on the record date mentioned below less the
then fair market value (as determined by the Board of Directors, whose
determination shall be conclusive evidence of such fair market value
and described in a Board Resolution) of the portion of the assets so
distributed or of such subscription rights or warrants applicable to
one share of Common Stock, and of which the denominator shall be such
current market price of the Common Stock. Such adjustment shall become
effective immediately after the record date for the determination of
the holders of Common Stock entitled to receive such distribution.
Notwithstanding the foregoing, in the event that the Company shall
distribute rights or warrants (other than those referred to in
subsection (b) above) ("RIGHTS") pro rata to holders of Common Stock,
the Company may, in lieu of making any adjustment pursuant to this
Section 5.06, make proper provision so that each holder of a Note who
converts such Note (or any portion thereof) after the record date for
such distribution and prior to the expiration or redemption of the
Rights shall be entitled to receive upon such conversion, in addition
to the shares of Common Stock issuable upon such conversion (the
"CONVERSION SHARES"), a number of Rights to be determined as follows:
(i) if such
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conversion occurs on or prior to the date for the distribution to the
holders of Rights of separate certificates evidencing such Rights (the
"DISTRIBUTION DATE"), the same number of Rights to which a holder of a
number of shares of Common Stock equal to the number of Conversion
Shares is entitled at the time of such conversion in accordance with
the terms and provisions of and applicable to the Rights; and (ii) if
such conversion occurs after the Distribution Date, the same number of
Rights to which a holder of the number of shares of Common Stock into
which the principal amount of the Note so converted was convertible
immediately prior to the Distribution Date would have been entitled on
the Distribution Date in accordance with the terms and provisions of
and applicable to the Rights.
(d) In case the Company shall, by dividend or otherwise, at
any time distribute to all holders of its Common Stock cash (including
any distributions of cash out of current or retained earnings of the
Company but excluding any cash that is distributed as part of a
distribution requiring a Conversion Price adjustment pursuant to
paragraph (c) of this Section 5.06) in an aggregate amount that,
together with the sum of (x) the aggregate amount of any other
distributions to all holders of its Common Stock made in cash plus (y)
all Excess Payments, in each case made within the 12 months preceding
the date fixed for determining the stockholders entitled to such
distribution (the "DISTRIBUTION RECORD DATE") and in respect of which
no Conversion Price adjustment pursuant to paragraphs (c) or (e) of
this Section 5.06 or this paragraph (d) has been made, exceeds 15% of
the product of the current market price per share (determined as
provided in paragraph (f) of this Section 5.06) of the Common Stock on
the Distribution Record Date times the number of shares of Common Stock
outstanding on the Distribution Record Date (excluding shares held in
the treasury of the Company), the Conversion Price shall be reduced so
that the same shall equal the price determined by multiplying such
Conversion Price in effect immediately prior to the effectiveness of
the Conversion Price reduction contemplated by this paragraph (d) by a
fraction of which the numerator shall be the current market price per
share (determined as provided in paragraph (f) of this Section 5.06) of
the Common Stock on the Distribution Record Date less the amount of
such cash and other consideration (including any Excess Payments) so
distributed applicable to one share (based on the pro rata portion of
the aggregate amount of such cash and other consideration (including
any Excess Payments), divided by the shares of Common Stock outstanding
on the Distribution Record Date) of Common Stock and the denominator
shall be such current market price per share (determined as provided in
paragraph (f) of this Section 5.06) of the Common Stock on the
Distribution Record Date, such reduction to become effective
immediately prior to the opening of business on the day following the
Distribution Record Date.
(e) In case a tender offer or other negotiated transaction
made by the Company or any Subsidiary for all or any portion of the
Common Stock shall be consummated, if an Excess Payment is made in
respect of such tender offer or other negotiated transaction and the
amount of such Excess Payment, together with the sum of (x) the
aggregate amount of all Excess Payments plus (y) the aggregate amount
of all distributions to all holders of the Common Stock made in cash
(specifically including distributions of cash out of retained
earnings), in each case made within the 12 months preceding the date of
payment of such current negotiated transaction consideration or
expiration of such current tender offer, as the case may be (the
"TENDER PAYMENT DATE"), and as to which no adjustment pursuant to
paragraph (c) or paragraph (d) of this Section 5.06 or this paragraph
(e) has been made, exceeds 15% of the product of the current market
price per share (determined as provided in paragraph (f) of this
Section 5.06) of the Common Stock on the Tender Payment Date times the
number of shares of Common Stock outstanding (including any tendered
shares but excluding any shares held in the treasury of the
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Company) on the Tender Payment Date, the Conversion Price shall be
reduced so that the same shall equal the price determined by
multiplying such Conversion Price in effect immediately prior to the
effectiveness of the Conversion Price reduction contemplated by this
paragraph (e) by a fraction of which the numerator shall be the current
market price per share (determined as provided in paragraph (f) of this
Section 5.06) of the Common Stock on the Tender Payment Date less the
amount of such Excess Payments and such cash distributions, if any,
applicable to one share (based on the pro rata portion of the aggregate
amount of such Excess Payments and such cash distributions, divided by
the shares of Common Stock outstanding on the Tender Payment Date) of
Common Stock and the denominator shall be such current market price per
share (determined as provided in paragraph (f) of this Section 5.06) of
the Common Stock on the Tender Payment Date, such reduction to become
effective immediately prior to the opening of business on the day
following the Tender Payment Date.
(f) The current market price per share of Common Stock on any
date shall be deemed to be the average of the Daily Market Prices for
the shorter of (i) ten consecutive business days ending on the last
full trading day on the exchange or market referred to in determining
such Daily Market Prices prior to the time of determination or (ii) the
period commencing on the date next succeeding the first public
announcement of the issuance of such rights or such warrants or such
other distribution or such negotiated transaction through such last
full trading day on the exchange or market referred to in determining
such Daily Market Prices prior to the time of determination.
(g) In any case in which this Section 5.06 shall require that
an adjustment be made immediately following a record date, the Company
may elect to defer (but only until five Business Days following the
filing by the Company with the Trustee of the certificate described in
Section 5.10 hereof) issuing to the holder of any Note converted after
such record date the shares of Common Stock and other Capital Stock of
the Company issuable upon such conversion over and above the shares of
Common Stock and other Capital Stock of the Company issuable upon such
conversion only on the basis of the Conversion Price prior to
adjustment; and, in lieu of the shares the issuance of which is so
deferred, the Company shall issue or cause its transfer agents to issue
due bills or other appropriate evidence of the right to receive such
shares.
SECTION 5.07. NO ADJUSTMENT.
No adjustment in the Conversion Price shall be required until
cumulative adjustments amount to 1% or more of the Conversion Price as last
adjusted; provided, however, that any adjustments which by reason of this
Section 5.07 are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Article V
shall be made to the nearest cent or to the nearest one-hundredth of a share, as
the case may be. No adjustment need be made for rights to purchase Common Stock
pursuant to a Company plan for reinvestment of dividends or interest. No
adjustment need be made for a change in the par value or no par value of the
Common Stock.
SECTION 5.08. OTHER ADJUSTMENTS.
(a) In the event that, as a result of an adjustment made pursuant to
Section 5.06 hereof, the holder of any Note thereafter surrendered for
conversion shall become entitled to receive any shares of Capital Stock of the
Company other than shares of its Common Stock, thereafter the Conversion Price
of such other shares so receivable upon conversion of any Note shall be subject
to adjustment from time to
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time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to Common Stock contained in this Article V.
(b) In the event that shares of Common Stock are not delivered after
the expiration of any of the rights or warrants referred to in Section 5.06(b)
and Section 5.06(c) hereof, the Conversion Price shall be readjusted to the
Conversion Price which would otherwise be in effect had the adjustment made upon
the issuance of such rights or warrants been made on the basis of delivery of
only the number of shares of Common Stock actually delivered.
SECTION 5.09. ADJUSTMENTS FOR TAX PURPOSES.
The Company may make such reductions in the Conversion Price, in
addition to those required by Section 5.06 hereof, as it determines to be
advisable in order that any stock dividend, subdivision of shares, distribution
or rights to purchase stock or securities or distribution of securities
convertible into or exchangeable for stock made by the Company to its
stockholders will not be taxable to the recipients thereof.
SECTION 5.10. NOTICE OF ADJUSTMENT.
Whenever the Conversion Price is adjusted, the Company shall promptly
mail to Holders at the addresses appearing on the Registrar's books a notice of
the adjustment and file with the Trustee an Officers' Certificate briefly
stating the facts requiring the adjustment and the manner of computing it. The
certificate shall be conclusive evidence of the correctness of such adjustment.
SECTION 5.11. NOTICE OF CERTAIN TRANSACTIONS.
In the event that:
(1) the Company takes any action which would require an adjustment in
the Conversion Price;
(2) the Company takes any action that would require a supplemental
indenture pursuant to Section 5.12; or
(3) there is a dissolution or liquidation of the Company;
a Holder of a Note may wish to convert such Note into shares of Common Stock
prior to the record date for or the effective date of the transaction so that he
may receive the rights, warrants, securities or assets which a holder of shares
of Common Stock on that date may receive. Therefore, the Company shall mail to
Holders at the addresses appearing on the Registrar's books and the Trustee a
notice stating the proposed record or effective date, as the case may be. The
Company shall mail the notice at least 15 days before such date; however,
failure to mail such notice or any defect therein shall not affect the validity
of any transaction referred to in clause (1), (2) or (3) of this Section 5.11.
SECTION 5.12. EFFECT OF RECLASSIFICATIONS, CONSOLIDATIONS, MERGERS OR SALES ON
CONVERSION PRIVILEGE.
If any of the following shall occur, namely: (i) any reclassification
or change in the Common Stock issuable upon conversion of Notes (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), (ii) any
consolidation or merger to which the Company is a party other than a merger in
which the Company is
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the continuing corporation and which does not result in any reclassification of,
or change (other than a change in name, or par value, or from par value to no
par value, or from no par value to par value or as a result of a subdivision or
combination) in, the Common Stock or (iii) any sale or conveyance of all or
substantially all of the property or business of the Company as an entirety,
then the Company, or such successor or purchasing corporation, as the case may
be, shall, as a condition precedent to such reclassification, change,
consolidation, merger, sale or conveyance, execute and deliver to the Trustee a
supplemental indenture in form reasonably satisfactory to the Trustee providing
that the holder of each Note then outstanding shall have the right to convert
such Note into the kind and amount of shares of stock and other securities and
property (including cash) receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock deliverable upon conversion of such Note immediately prior to such
reclassification, change, consolidation, merger, sale or conveyance. Such
supplemental indenture shall provide for adjustments of the Conversion Price
which shall be as nearly equivalent as may be practicable to the adjustments of
the Conversion Price provided for in this Article V. The foregoing, however,
shall not in any way affect the right a holder of a Note may otherwise have,
pursuant to clause (ii) of the last sentence of subsection (c) of Section 5.06
hereof, to receive Rights upon conversion of a Note. If, in the case of any such
consolidation, merger, sale or conveyance, the stock or other securities and
property (including cash) receivable thereupon by a holder of Common Stock
includes shares of stock or other securities and property of a corporation other
than the successor or purchasing corporation, as the case may be, in such
consolidation, merger, sale or conveyance, then such supplemental indenture
shall also be executed by such other corporation and shall contain such
additional provisions to protect the interests of the holders of the Notes as
the Board of Directors of the Company shall reasonably consider necessary by
reason of the foregoing. The provision of this Section 5.12 shall similarly
apply to successive consolidations, mergers, sales or conveyances.
In the event the Company shall execute a supplemental indenture
pursuant to this Section 5.12, the Company shall promptly file with the Trustee
an Officers' Certificate briefly stating the reasons therefor, the kind or
amount of shares of stock or securities or property (including cash) receivable
by holders of the Notes upon the conversion of their Notes after any such
reclassification, change, consolidation, merger, sale or conveyance and any
adjustment to be made with respect thereto.
SECTION 5.13. TRUSTEE'S DISCLAIMER.
The Trustee has no duty to determine when an adjustment under this
Article V should be made, how it should be made or what such adjustment should
be, but may accept as conclusive evidence of the correctness of any such
adjustment, and shall be protected in relying upon the Officers' Certificate
with respect thereto which the Company is obligated to file with the Trustee
pursuant to Section 5.10 hereof. The Trustee makes no representation as to the
validity or value of any securities or assets issued upon conversion of Notes,
and the Trustee shall not be responsible for the Company's failure to comply
with any provisions of this Article V.
The Trustee shall not be under any responsibility to determine the
correctness of any provisions contained in any supplemental indenture executed
pursuant to Section 5.12, but may accept as conclusive evidence of the
correctness thereof, and shall be protected in relying upon, the Officers'
Certificate with respect thereto which the Company is obligated to file with the
Trustee pursuant to Section 5.12 hereof.
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ARTICLE VI.
SUBORDINATION
SECTION 6.01. AGREEMENT TO SUBORDINATE AND RANKING.
The Company, for itself and its successors, and each holder, by his
acceptance of Notes, agree that the payment of the principal of or interest on
or any other amounts due on the Notes is subordinated in right and priority of
payment, to the extent and in the manner stated in this Article VI, to the prior
payment in full of all existing and future Senior Debt. The Notes shall rank
pari passu with, and shall not be senior in right of payment to such other
Indebtedness of the Company whether outstanding on the date of this Indenture or
hereafter created, incurred, issued or guaranteed by the Company, whenever the
instrument creating or evidencing such Indebtedness expressly provides that such
Indebtedness ranks pari passu with the Notes.
SECTION 6.02. NO PAYMENT ON NOTES IF SENIOR DEBT IN DEFAULT.
Anything in this Indenture to the contrary notwithstanding, no payment
on account of principal of or redemption of, interest on or other amounts due on
the Notes, and no redemption, purchase, or other acquisition of the Notes, shall
be made by or on behalf of the Company (i) unless full payment of amounts then
due for principal and interest and of all other amounts then due on all Senior
Debt has been made or duly provided for pursuant to the terms of the instrument
governing such Senior Debt, (ii) if, at the time of such payment, redemption,
purchase or other acquisition, or immediately after giving effect thereto, there
shall exist under any Senior Debt, or any agreement pursuant to which any Senior
Debt is issued, any default, which default shall not have been cured or waived
and which default shall have resulted in the full amount of such Senior Debt
being declared due and payable or (iii) if, at the time of such payment,
redemption, purchase or other acquisition, the Trustee shall have received
written notice from any of the holders of Senior Debt or such holder's
representative (a "PAYMENT BLOCKAGE NOTICE") that there exists under such Senior
Debt, or any agreement pursuant to which such Senior Debt is issued, any
default, which default shall not have been cured or waived, permitting the
holders thereof to declare any amounts of such Senior Debt due and payable, but
only for the period (the "PAYMENT BLOCKAGE PERIOD") commencing on the date of
receipt of the Payment Blockage Notice and ending (unless earlier terminated by
notice given to the Trustee by the holders of such Senior Debt) on the earlier
of (a) the date on which such event of default shall have been cured or waived
or (b)180 days from the receipt of the Payment Blockage Notice. Upon termination
of the Payment Blockage Period, payments on account of principal of or interest
on the Notes (other than, subject to Section 6.03 hereof, amounts due and
payable by reason of the acceleration of the maturity of the Notes) and
redemptions, purchases or other acquisitions may be made by or on behalf of the
Company. Notwithstanding anything herein to the contrary, (a) only one Payment
Blockage Notice may be given during any period of 360 consecutive days with
respect to the same event of default or any other events of default on the same
issue of Senior Debt existing and known to the Person giving such notice at the
time of such notice unless such event of default or such other events of default
have been cured or waived for a period of not less than 90 consecutive days and
(b) no new Payment Blockage Period may be commenced by the holder or holders of
the same issue of Senior Debt or their representative or representatives during
any period of 360 consecutive days unless all events of default which were the
object of the immediately preceding Payment Blockage Notice, and any other event
of default on the same issue of Senior Debt existing and known to the Person
giving such notice at the time of such notice, have been cured or waived.
In the event that, notwithstanding the provisions of this Section 6.02,
payments are made by or on behalf of the Company in contravention of the
provisions of this Section 6.02, such payments shall be
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held by the Trustee, any Paying Agent or the Holders, as applicable, in trust
for the benefit of, and shall be paid over to and delivered to, the holders of
Senior Debt or their representative or the trustee under the indenture or other
agreement (if any), pursuant to which any instruments evidencing any Senior Debt
may have been issued for application to the payment of all Senior Debt ratably
according to the aggregate amounts remaining unpaid to the extent necessary to
pay all Senior Debt in full in accordance with the terms of such Senior Debt,
after giving effect to any concurrent payment or distribution to or for the
holders of Senior Debt.
The Company shall give prompt written notice to the Trustee and any
Paying Agent of any default or event of default under any Senior Debt or under
any agreement pursuant to which any Senior Debt may have been issued.
SECTION 6.03. DISTRIBUTION ON ACCELERATION OF NOTES; DISSOLUTION AND
REORGANIZATION; SUBROGATION OF NOTES.
(a) If the Notes are declared due and payable because of the occurrence
of an Event of Default, the Company or the Trustee shall give prompt written
notice to the holders of all Senior Debt or to the trustee(s) for such Senior
Debt of such acceleration. The Company may not pay the principal of or interest
on or any other amounts due on the Notes until five days after such holders or
trustee(s) of Senior Debt receive such notice and, thereafter, the Company may
pay the principal of or interest on or any other amounts due on the Notes only
if the provisions of this Article VI permit such payment.
(b) Upon (i) any acceleration of the principal amount due on the Notes
because of an Event of Default or (ii) any distribution of assets of the Company
upon any dissolution, winding up, liquidation or reorganization of the Company
(whether in bankruptcy, insolvency or receivership proceedings or upon an
assignment for the benefit of creditors or any other dissolution, winding up,
liquidation or reorganization of the Company):
(1) the holders of all Senior Debt shall first be entitled to
receive payment in full of the principal thereof, the interest thereon
and any other amounts due thereon before the Holders are entitled to
receive payment on account of the principal of or interest on or any
other amounts due on the Notes;
(2) any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities (other
than securities of the Company as reorganized or readjusted or
securities of the Company or any other corporation provided for by a
plan of reorganization or readjustment the payment of which is
subordinate, at least to the extent provided in this Article VI with
respect to the Notes, to the payment in full without diminution or
modification by such plan of all Senior Debt), to which the Holders or
the Trustee would be entitled except for the provisions of this Article
VI, shall be paid by the liquidating trustee or agent or other Person
making such a payment or distribution, directly to the holders of
Senior Debt (or their representatives(s) or trustee(s) acting on their
behalf), ratably according to the aggregate amounts remaining unpaid on
account of the principal of or interest on and other amounts due on the
Senior Debt held or represented by each, to the extent necessary to
make payment in full of all Senior Debt remaining unpaid, after giving
effect to any concurrent payment or distribution to the holders of such
Senior Debt; and
(3) in the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities (other
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than securities of the Company as reorganized or readjusted, or
securities of the Company or any other corporation provided for by a
plan of reorganization or readjustment the payment of which is
subordinate, at least to the extent provided in this Article VI with
respect to the Notes, to the payment in full without diminution or
modification by such plan of Senior Debt), shall be received by the
Trustee or the Holders before all Senior Debt is paid in full, such
payment or distribution shall be held in trust for the benefit of, and
be paid over to upon request by a holder of the Senior Debt, the
holders of the Senior Debt remaining unpaid (or their representatives)
or trustee(s) acting on their behalf, ratably as aforesaid, for
application to the payment of such Senior Debt until all such Senior
Debt shall have been paid in full, after giving effect to any
concurrent payment or distribution to the holders of such Senior Debt.
Subject to the payment in full of all Senior Debt, the Holders shall be
subrogated to the rights of the holders of Senior Debt to receive payments or
distributions of cash, property or securities of the Company applicable to the
Senior Debt until the principal of and interest on the Notes shall be paid in
full and, for purposes of such subrogation, no such payments or distributions to
the holders of Senior Debt of cash, property or securities which otherwise would
have been payable or distributable to Holders shall, as between the Company, its
creditors other than the holders of Senior Debt, and the Holders, be deemed to
be a payment by the Company to or on account of the Senior Debt, it being
understood that the provisions of this Article VI are and are intended solely
for the purpose of defining the relative rights of the Holders, on the one hand,
and the holders of Senior Debt, on the other hand.
Nothing contained in this Article VI or elsewhere in this Indenture or
in the Notes is intended to or shall (i) impair, as between the Company and its
creditors other than the holders of Senior Debt, the obligation of the Company,
which is absolute and unconditional, to pay to the Holders the principal of and
interest on the Notes as and when the same shall become due and payable in
accordance with the terms of the Notes or is intended to or (ii) affect the
relative rights of the Holders and creditors of the Company other than holders
of Senior Debt or, as between the Company and the Trustee, the obligations of
the Company to the Trustee, or (iii) prevent the Trustee or the Holders from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article VI of the
holders of Senior Debt in respect of cash, property and securities of the
Company received upon the exercise of any such remedy.
Upon distribution of assets of the Company referred to in this Article
VI, the Trustee, subject to the provisions of Section 9.01 hereof, and the
Holders shall be entitled to rely upon a certificate of the liquidating trustee
or agent or other Person making any distribution to the Trustee or to the
Holders for the purpose of ascertaining the Persons entitled to participate in
such distribution, the holders of the Senior Debt and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article VI.
The Trustee, however, shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt. Nothing contained in this Article VI or elsewhere in
this Indenture, or in any of the Notes, shall prevent the good faith application
by the Trustee of any moneys which were deposited with it hereunder, prior to
its receipt of written notice of facts which would prohibit such application,
for the purpose of the payment of or on account of the principal of or interest
on, the Notes unless, prior to the date on which such application is made by the
Trustee, the Trustee shall be charged with notice under Section 6.03(d) hereof
of the facts which would prohibit the making of such application.
(c) The provisions of this Article VI shall not be applicable to any
cash, properties or securities received by the Trustee or by any Holder when
received as a holder of Senior Debt and nothing in
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Section 9.11 hereof or elsewhere in this Indenture shall deprive the Trustee or
such Holder of any of its rights as such holder.
(d) The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment of
money to or by the Trustee in respect of the Notes pursuant to the provisions of
this Article VI. The Trustee, subject to the provisions of Section 9.01 hereof,
shall be entitled to assume that no such fact exists unless the Company or any
holder of Senior Debt or any trustee therefor has given such notice to the
Trustee. Notwithstanding the provisions of this Article VI or any other
provisions of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any fact which would prohibit the making of any payment of
monies to or by the Trustee in respect of the Notes pursuant to the provisions
in this Article VI, unless, and until three Business Days after, the Trustee
shall have received written notice thereof from the Company or any holder or
holders of Senior Debt or from any trustee therefor; and, prior to the receipt
of any such written notice, the Trustee, subject to the provisions of Section
9.01 hereof, shall be entitled in all respects conclusively to assume that no
such facts exist; provided that if on a date not less than three Business Days
immediately preceding the date upon which by the terms hereof any such monies
may become payable for any purpose (including, without limitation, the principal
of or interest on any Note), the Trustee shall not have received with respect to
such monies the notice provided for in this Section 6.03(d), than anything
herein contained to the contrary notwithstanding, the Trustee shall have full
power and authority to receive such monies and to apply the same to the purpose
for which they were received, and shall not be affected by any notice to the
contrary which may be received by it on or after such prior date.
The Trustee shall be entitled to rely on the delivery to it of a
written notice by a Person representing himself to be a holder of Senior Debt
(or a trustee on behalf of such holder) to establish that such notice has been
given by a holder of Senior Debt (or a trustee on behalf of any such holder or
holders). In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any Person as a holder of
Senior Debt to participate in any payment or distribution pursuant to this
Article VI, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Debt held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article VI, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment; nor shall the Trustee be
charged with knowledge of the curing or waiving of any default of the character
specified in Section 6.02 hereof or that any event or any condition preventing
any payment in respect of the Notes shall have ceased to exist, unless and until
the Trustee shall have received an Officers' Certificate to such effect.
(e) The provisions of this Section 6.03 applicable to the Trustee shall
also apply to any Paying Agent for the Company.
SECTION 6.04 RELIANCE BY SENIOR DEBT ON SUBORDINATION PROVISIONS.
Each Holder of any Note by his acceptance thereof acknowledges and
agrees that the foregoing subordination provisions are, and are intended to be,
an inducement and a consideration for each holder of any Senior Debt, whether
such Senior Debt was created or acquired before or after the issuance of the
Notes, to acquire and continue to hold, or to continue to hold, such Senior
Debt, and such holder of Senior Debt shall be deemed conclusively to have relied
on such subordination provisions in acquiring and continuing to hold, or in
continuing to hold, such Senior Debt. Notice of any default in the payment
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of any Senior Debt, except as expressly stated in this Article VI, and notice of
acceptance of the provisions hereof are hereby expressly waived. Except as
otherwise expressly provided herein, no waiver, forbearance or release by any
holder of Senior Debt under such Senior Debt or under this Article VI shall
constitute a release of any of the obligations or liabilities of the Trustee or
Holders of the Notes provided in this Article VI.
SECTION 6.05. NO WAIVER OF SUBORDINATION PROVISIONS.
Except as otherwise expressly provided herein, no right of any present
or future holder of any Senior Debt to enforce subordination as herein provided
shall at any time in any way be prejudiced or impaired by any act or failure to
act on the part of the Company or by any act or failure to act, in good faith,
by any such holder, or by any noncompliance by the Company with the terms,
provisions and covenants of this Indenture, regardless of any knowledge thereof
any such holder may have or be otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Debt may, at any time and from time to time, without the
consent of, or notice to, the Trustee or the Holders of the Notes, without
incurring responsibility to the Holders of the Notes and without impairing or
releasing the subordination provided in this Article VI or the obligations
hereunder of the Holders of the Notes to the holders of Senior Debt, do any one
or more of the following: (i) change the manner, place or terms of payment of,
or renew or alter, Senior Debt, or otherwise amend or supplement in any manner
Senior Debt or any instrument evidencing the same or any agreement under which
Senior Debt is outstanding; (ii) sell, exchange, release or otherwise dispose of
any property pledged, mortgaged or otherwise securing Senior Debt; (iii) release
any Person liable in any manner for the collection of Senior Debt; and (iv)
exercise or refrain from exercising any rights against the Company or any other
Person.
SECTION 6.06. TRUSTEE'S RELATION TO SENIOR DEBT.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article VI in respect of any Senior Debt at any time
held by it, to the same extent as any holder of Senior Debt, and nothing in
Section 9.11 hereof or elsewhere in this Indenture shall deprive the Trustee of
any of its rights as such holder.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform or to observe only such of its covenants and obligation, as are
specifically set forth in this Article VI, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not owe any fiduciary duty to
the holders of Senior Debt but shall have only such obligations to such holders
as are expressly set forth in this Article VI.
Each Holder of a Note by his acceptance thereof authorizes and directs
the Trustee on his behalf to take such action as may be necessary or appropriate
to effectuate the subordination provided in this Article VI and appoints the
Trustee his attorney-in-fact for any and all such purposes, including, in the
event of any dissolution, winding up or liquidation or reorganization under any
applicable bankruptcy law of the Company (whether in bankruptcy, insolvency or
receivership proceedings or otherwise), the timely filing of a claim for the
unpaid balance of such Holder's Notes in the form required in such proceedings
and the causing of such claim to be approved. If the Trustee does not file a
claim or proof of debt in the form required in such proceedings prior to 30 days
before the expiration of the time to file such claims or proofs, then any holder
or holders of Senior Debt or their representative or representatives shall have
the right to demand, sue for, collect, receive and receipt for the payments and
distributions in
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respect of the Notes which are required to be paid or delivered to the holders
of Senior Debt as provided in this Article VI and to file and prove all claims
therefore and to take all such other action in the name of the holders or
otherwise, as such holders of Senior Debt or representative thereof may
determine to be necessary or appropriate for the enforcement of the provisions
of this Article VI.
SECTION 6.07. OTHER PROVISIONS SUBJECT HERETO.
Expect as expressly stated in this Article VI, notwithstanding anything
contained in this Indenture to the contrary, all the provisions of this
Indenture and the Notes are subject to the provisions of this Article VI.
However, nothing in this Article VI shall apply to or adversely affect the
claims of, or payment, to, the Trustee pursuant to Section 9.07 hereof.
Notwithstanding the foregoing, the failure to make a payment on account of
principal of or interest on the Notes by reason of any provision of this Article
VI shall not be construed as preventing the occurrence of an Event of Default
under Section 8.01 hereof.
ARTICLE VII.
SUCCESSORS
SECTION 7.01. SALE OF ASSETS.
The Company may not sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its properties or assets in one or more
related transactions to, another corporation, Person or entity unless:
(a) the entity or Person to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made
is a corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia;
(b) the entity or Person to which such sale, assignment,
transfer, lease, conveyance or other disposition will have been made
assumes all the Obligations of the Company, pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee, under the
Notes and this Indenture; and
(c) immediately after such transaction no Default or Event
of Default exists.
SECTION 7.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 7.01 or Section 8.01(i) hereof, the
successor corporation formed by such consolidation or into or with which the
Company is merged or to which such sale, assignment, transfer, lease, conveyance
or other disposition is made shall succeed to, and be substituted for and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor Person has been named as the Company herein;
provided, however, that the predecessor Company in the case of a sale,
assignment, transfer, lease, conveyance or other disposition shall not be
released from the obligation to pay the principal of and interest on the Notes.
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ARTICLE VIII.
DEFAULTS AND REMEDIES
SECTION 8.01. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" occurs if:
(a) the Company defaults in the payment of interest on any
Note when the same becomes due and payable and the Default continues
for a period of 30 days after the date due and payable;
(b) the Company defaults in the payment of the principal of
any Note when the same becomes due and payable at maturity, upon
optional redemption, in connection with a Purchase Offer, upon
declaration or otherwise;
(c) the Company fails to observe or perform for a period of 30
days after notice any covenant or agreement contained in Sections 4.07
and 7.01 hereof (other than, in the case of Section 4.07 a failure to
purchase Notes in connection with a Purchase Offer) hereof;
(d) the Company fails to observe or perform any other covenant
or agreement contained in this Indenture or the Notes, required by it
to be performed and the Default continues for a period of 60 days after
notice from the Trustee to the Company or from the Holders of 25% in
aggregate principal amount of the then outstanding Notes to the Company
and the Trustee stating that such notice is a "Notice of Default";
(e) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its
Subsidiaries that is a Significant Subsidiary or any group of two or
more Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary, or the payment of which is guaranteed by the
Company or any of its Subsidiaries that is a Significant Subsidiary or
any group of two or more Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary, whether such Indebtedness or
guarantee now exists or is created after the Issuance Date, which
default:
(i) is caused by a failure to pay when due principal of
or interest on such Indebtedness within the grace period
provided for in such Indebtedness (which failure continues
beyond any applicable grace period) (a "PAYMENT DEFAULT") or
(ii) results in the acceleration of such Indebtedness
prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there is a
Payment Default or the maturity of which has been so
accelerated, aggregates $50 million or more;
(f) failure by the Company or any of its Subsidiaries that is
a Significant Subsidiary or any group of two or more Subsidiaries that,
taken as a whole, would constitute a Significant Subsidiary to pay
final judgments for the payment of money (other than any judgment as to
which a reputable insurance company has accepted liability subject to
customary terms)
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aggregating in excess of $50 million, which judgments are not paid,
discharged or stayed within 60 days after their entry;
(g) the Company or any of its Subsidiaries that is a
Significant Subsidiary or any group of two or more Subsidiaries that,
taken as a whole, would constitute a Significant Subsidiary pursuant to
or within the meaning of any Bankruptcy Law:
(i) commences a voluntary case;
(ii) consents to the entry of an order for relief
against it in an involuntary case in which it is the debtor;
(iii) consents to the appointment of a Custodian of it
or for all or substantially all of its property;
(iv) makes a general assignment for the benefit of its
creditors; or
(v) generally is unable to pay its debts as the same
become due;
(h) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(i) is for relief against the Company or any of its
Subsidiaries that is a Significant Subsidiary or any group of
two or more Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary in an involuntary case;
(ii) appoints a Custodian of the Company or any of its
Subsidiaries that is a Significant Subsidiary or any group of
two or more Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary or for all or substantially
all of its property; or
(iii) orders the liquidation of the Company or any of
its Subsidiaries that is a Significant Subsidiary or any group
of two or more Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary, and the order or decree
remains unstayed and in effect for 60 days; and
(i) The approval by the shareholders of the Company of any
merger, amalgamation or consolidation by the Company (whether or not
the Company is the surviving corporation) and whether or not such
merger, amalgamation or consolidation is in one or more related
transactions if, (x) the successor corporation, Person or entity (A)
does not assume all the Obligations of the Company, pursuant to a
supplemental indenture in a form reasonably satisfactory to the
Trustee, under the Notes and this Indenture (to the extent any such
supplemental indenture may be necessary, in the opinion of the Trustee,
to evidence the Company's continuing obligations under the Indenture)
and (B) is not a corporation, Person or entity organized or existing
under the laws of the United States, any state thereof or the District
of Columbia or (y) immediately after such transaction, any Default or
Event of Default exists.
The term "BANKRUPTCY LAW" means Title 11, U.S. Code or any similar federal,
state or foreign law for the relief of debtors or the protection of creditors.
The term "CUSTODIAN" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
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SECTION 8.02. ACCELERATION.
If an Event of Default (other than an Event of Default specified in
clauses (g), (h), and (i) of Section 8.01 hereof) occurs and is continuing, the
Trustee by notice to the Company, or the Holders of at least 25% in principal
amount of the then outstanding Notes by notice to the Company and the Trustee,
may declare all the Notes to be due and payable. Upon such declaration, the
principal of, premium, if any, and interest on the Notes shall be due and
payable immediately. If an Event of Default specified in clause (g), (h) or (i)
of Section 8.01 hereof occurs, such an amount shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder.
If the Notes have been declared due and payable as a result of the
acceleration of Indebtedness prior to its express maturity pursuant to Section
8.01(e)(ii), such declaration shall be automatically rescinded if the
acceleration of such Indebtedness has been rescinded or annulled within 30 days
after such acceleration in accordance with the mortgage, indenture or instrument
under which it was issued and the conditions set forth in clauses (i) and (ii)
in the next paragraph are satisfied.
Except as otherwise provided in the immediately preceding paragraph,
the Holders of a majority in principal amount of the then outstanding Notes by
notice to the Trustee may rescind an acceleration and its consequences (i) if
the rescission would not conflict with any judgment or decree of a court of
competent jurisdiction and (ii) if all existing Events of Default have been
cured or waived except nonpayment of principal or interest on the Notes that has
become due solely because of the acceleration of the Notes.
SECTION 8.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal or interest on the
Notes or to enforce the performance of any provision of the Notes or this
Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. All remedies are cumulative
to the extent permitted by law.
SECTION 8.04. WAIVER OF PAST DEFAULTS.
The Holders of a majority in principal amount of the then outstanding
Notes by notice to the Trustee may on behalf of all of the Holders of the Notes
waive an existing Default or Event of Default and its consequences except a
continuing Default or Event of Default in the payment of the principal of or
interest on any Note. When a Default or Event of Default is waived, it is cured
and ceases; but no such waiver shall extend to any subsequent or other Default
or impair any right consequent thereon.
SECTION 8.05. CONTROL BY MAJORITY.
The Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
it. However, the Trustee may refuse to follow any direction that
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conflicts with law or this Indenture, is unduly prejudicial to the rights of
other Holders, or would involve the Trustee in personal liability.
SECTION 8.06. LIMITATION ON SUITS.
A Holder may pursue a remedy with respect to this Indenture or the
Notes only if:
(a) the Holder gives to the Trustee notice of a continuing
Event of Default;
(b) the Holders of at least 25% in principal amount of the
then outstanding Notes make a request to the Trustee to pursue the
remedy;
(c) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of indemnity; and
(e) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Notes do not give the Trustee
a direction inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.
SECTION 8.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal and interest on the Note, on or
after the respective due dates expressed in the Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of the Holder made pursuant to this
Section 8.07.
SECTION 8.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 8.01(a) or (b), hereof
occurs and is continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Company for the whole amount of
principal and interest remaining unpaid on the Notes and interest on overdue
principal and interest and such further amount as shall be sufficient to cover
the costs and, to the extent lawful, expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
SECTION 8.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee and
the Holders allowed in any judicial proceedings relative to the Company, its
creditors or its property. Nothing contained herein shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
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SECTION 8.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee for amounts due under Section 9.07 hereof;
Second: to the holders of Senior Debt to the extent required by Article
VI;
Third: to Holders for amounts due and unpaid on the Notes for principal
and interest, ratably, without preference or priority of any kind, according to
the amounts due and payable on the Notes for principal and interest,
respectively; and
Fourth: to the Company.
The Trustee may fix a record date and payment date for any payment to
Holders made pursuant to this Section 8.10.
SECTION 8.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 8.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 8.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE IX.
TRUSTEE
SECTION 9.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.
(b) Except during the continuance of an Event of Default: (i) the
Trustee need perform only those duties that are specifically set forth in this
Indenture and no others and (ii) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture and to confirm
the correctness of all mathematical computations.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that: (i) this paragraph does not limit the effect of
paragraph (b) of this Section 9.01; (ii) the Trustee shall not be liable for any
error of judgment
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made in good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts and (iii) the Trustee shall not be
liable with respect to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section 8.05 hereof.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section 9.01.
(e) The Trustee may refuse to perform any duty or exercise any right or
power unless it receives indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 9.02. RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel, or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible for
the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers.
(e) The Trustee shall not be charged with knowledge of any Event of
Default under subsection (c), (d), (e), (f) or (i) (and subsection (a) or (b) if
the Trustee does not act as Paying Agent) of Section 8.01 or of the identity of
any Significant Subsidiary or of any group of two or more Subsidiaries that,
taken as a whole, would constitute a Significant Subsidiary unless either (1) a
Trust Officer of the Trustee assigned to its corporate trust department shall
have actual knowledge thereof, or (2) the Trustee shall have received notice
thereof in accordance with Section 12.02 hereof from the Company or any Holder.
SECTION 9.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or an
Affiliate with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. However, the Trustee is subject to Sections
9.10 and 9.11 hereof.
SECTION 9.04. TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Notes, it shall not be accountable for the Company's use
of the proceeds from the Notes, and it shall not
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be responsible for any statement of the Company in the Indenture or any
statement in the Notes other than its authentication or for compliance by the
Company with the Registration Rights Agreement.
SECTION 9.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders a notice of the Default
or Event of Default within 90 days after it occurs. Except in the case of a
Default or Event of Default in payment on any Note, the Trustee may withhold the
notice if and so long as a committee of its Trust Officers in good faith
determines that withholding the notice is in the interests of Holders.
SECTION 9.06. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after the reporting date stated in Section 12.10, the
Trustee shall mail to Holders a brief report dated as of such reporting date
that complies with TIA Section 313(a) if and to the extent required by such
(section) 313(a). The Trustee also shall comply with TIA Section 313(b)(2). The
Trustee shall also transmit by mail all reports as required by TIA Section
313(c).
A copy of each report at the time of its mailing to Holders shall be
filed with the SEC and each stock exchange on which the Notes are listed. The
Company shall notify the Trustee when the Notes are listed on any stock
exchange.
SECTION 9.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services hereunder. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Company
shall reimburse the Trustee upon request for all reasonable disbursements,
expenses and advances incurred or made by it. Such disbursements and expenses
may include the reasonable disbursements, compensation and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee against any loss or liability
incurred by it except as set forth in the next paragraph. The Trustee shall
notify the Company promptly of any claim for which it may seek indemnity. The
Company shall defend the claim and the Trustee shall cooperate in the defense.
The Trustee may have separate counsel and the Company shall pay the reasonable
fees, disbursements and expenses of such counsel. The Company need not pay for
any settlement made without its consent, which consent shall not be unreasonably
withheld.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through negligence or bad faith.
To secure the Company's payment obligations in this Section 9.07, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee, except money or property held in trust to pay
principal and interest on particular Notes.
Without prejudice to any other rights available to the Trustee under
applicable law, when the Trustee incurs expenses or renders services after an
Event of Default specified in Section 8.01(g) or (h) hereof occurs, the expenses
and the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
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All amounts owing to the Trustee under this Section 9.07 shall be
payable by the Company in United States dollars.
SECTION 9.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 9.08.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 9.10 hereof,
unless the Trustee's duty to resign is stayed as provided in TIA
Section 310(b);
(b) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee
or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the then outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 9.10 hereof, unless the
Trustee's duty to resign is stayed as provided in TIA Section 310(b), any
Holder who has been a bona fide Holder of a Note for at least six months may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, subject to the lien provided for
in Section 9.07 hereof. Notwithstanding replacement of the Trustee pursuant to
this Section 9.08 hereof, the Company's obligations under Section 9.07 hereof
shall continue for the benefit of the retiring trustee with respect to expenses
and liabilities incurred by it prior to such replacement.
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SECTION 9.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
SECTION 9.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1) and (5). The Trustee shall always have a
combined capital and surplus as stated in Section 12.10 hereof. The Trustee is
subject to TIA Section 310(b).
SECTION 9.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
ARTICLE X.
DISCHARGE OF INDENTURE
SECTION 10.01. TERMINATION OF COMPANY'S OBLIGATIONS.
This Indenture shall cease to be of further effect (except that the
Company's obligations under Sections 9.07 and 10.02 hereof shall survive) when
all outstanding Notes theretofore authenticated and issued have been delivered
to the Trustee for cancellation and the Company has paid all sums payable
hereunder.
SECTION 10.02. REPAYMENT TO COMPANY.
The Trustee and the Paying Agent shall promptly pay to the Company upon
request any excess money or securities held by them at any time.
The Trustee and the Paying Agent shall pay to the Company upon request
any money held by them for the payment of principal or interest that remains
unclaimed for two years after the date upon which such payment shall have become
due; provided, however, that the Company shall have first caused notice of such
payment to the Company to be mailed to each Holder entitled thereto no less than
30 days prior to such payment. After payment to the Company, the Trustee and the
Paying Agent shall have no further liability with respect to such money and
Holders entitled to the money must look to the Company for payment as general
creditors unless any applicable abandoned property law designates another
Person.
ARTICLE XI.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 11.01. WITHOUT CONSENT OF HOLDERS.
The Company and the Trustee may amend or supplement this Indenture or
the Notes without the consent of any Holder:
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(a) to cure any ambiguity, defect or inconsistency;
(b) to comply with Sections 5.12 and 7.01 hereof;
(c) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
(d) to make any change that provides additional rights or
benefits to the Holders of the Notes;
(e) to make any change that does not adversely affect the
interests hereunder of any Holder; or
(f) to qualify the Indenture under the TIA or to comply with
the requirements of the SEC in order to maintain the qualification of
the Indenture under the TIA.
SECTION 11.02. WITH CONSENT OF HOLDERS.
Subject to Section 8.07 hereof, the Company and the Trustee may amend
or supplement this Indenture or the Notes with the written consent of the
Holders of at least a majority in principal amount of the then outstanding
Notes. Subject to Sections 8.04 and 8.07 hereof, the Holders of a majority in
principal amount of the Notes then outstanding may also waive compliance in a
particular instance by the Company with any provision of this Indenture or the
Notes. However, without the consent of each Holder affected, an amendment,
supplement or waiver under this Section 11.02 may not:
(a) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of
any Note or alter the provisions of Section 6 of the Notes;
(c) reduce the rate of or change the time for payment or
accrual of interest on any Note;
(d) waive a default in the payment of the principal of or
interest on any Note, except a rescission of acceleration of the Notes
by the Holders of at least a majority in aggregate principal amount of
the Notes and a waiver of the payment default that resulted from such
acceleration;
(e) make any Note payable in money other than that stated in
the Note;
(f) make any change in Section 8.04 or 8.07 hereof;
(g) waive a redemption payment with respect to any Note;
(h) impair the right to convert the Notes into Common Stock;
(i) modify Article V or VI in a manner adverse to the Holders
of Notes; and
(j) make any change in the foregoing amendment and waiver
provisions of this Article XI.
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To secure a consent of the Holders under this Section 11.02, it shall
not be necessary for the Holders to approve the particular form of any proposed
amendment, supplement or waiver, but it shall be sufficient if such consent
approves the substance thereof.
After an amendment, supplement or waiver under this Section 11.02
becomes effective, the Company shall mail to Holders a notice briefly describing
the amendment or waiver.
SECTION 11.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment to this Indenture or the Notes shall be set forth in a
supplemental indenture that complies with the TIA as then in effect.
SECTION 11.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. However, any such Holder or subsequent Holder may revoke the consent as to
his Note or portion of a Note if the Trustee receives the notice of revocation
before the date on which the Trustee receives an Officers' Certificate
certifying that the Holders of the requisite principal amount of Notes have
consented to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the
provisions of the immediately preceding paragraph, those Persons who were
Holders at such record date (or their duly designated proxies), and only those
Persons, shall be entitled to consent to such amendment, supplement or waiver or
to revoke any consent previously given, whether or not such Persons continue to
be Holders after such record date. No consent shall be valid or effective for
more than 90 days after such record date unless consents from Holders of the
principal amount of Notes required hereunder for such amendment or waiver to be
effective shall have also been given and not revoked within such 90-day period.
After an amendment, supplement or waiver becomes effective it shall
bind every Holder, unless it is of the type described in any of clauses (a)
through (j) of Section 11.02 hereof. In such case, the amendment or waiver shall
bind each Holder who has consented to it and every subsequent Holder that
evidences the same debt as the consenting Holder's Note.
SECTION 11.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment or
waiver on any Note thereafter authenticated. The Company in exchange for all
Notes may issue and the Trustee shall authenticate new Notes that reflect the
amendment or waiver.
Failure to make such notation on a Note or to issue a new Note as
aforesaid shall not affect the validity and effect of such amendment or waiver.
SECTION 11.06. TRUSTEE PROTECTED.
The Trustee shall sign all supplemental indentures, except that the
Trustee may, but need not, sign any supplemental indenture that adversely
affects its rights.
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ARTICLE XII.
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS.
This Indenture is subject to the provisions of the TIA that are
required to be incorporated into this Indenture (or, prior to the registration
of the Notes pursuant to the Registration Rights Agreement, would be required to
be incorporated into this Indenture if it were qualified under the TIA), and
shall, to the extent applicable, be governed by such provisions. If any
provision of this Indenture limits, qualifies, or conflicts with another
provision which is required (or would be so required) to be incorporated in this
Indenture by the TIA, the incorporated provision shall control.
SECTION 12.02. NOTICES.
Any notice or communication by the Company or the Trustee to the other
is duly given if in writing and delivered in Person or mailed by first class
mail to the other's address stated in Section 12.10 hereof. The Company or the
Trustee by notice to the other may designate additional or different addresses
for subsequent notices or communications.
Any notice or communication to a Holder shall be mailed by first class
mail to such Holder's address shown on the register kept by the Registrar.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
All other notices or communications shall be in writing.
In case by reason of the suspension of regular mail service, or by
reason of any other cause, it shall be impossible to mail any notice as required
by the Indenture, then such method of notification as shall be made with the
approval of the Trustee shall constitute a sufficient mailing of such notice.
SECTION 12.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA Section 312(c).
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate stating that, in the opinion of
the signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
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(b) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than pursuant to Section 4.03)
shall include:
(a) a statement that the Person signing such certificate or
rendering such opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, such
Person has made such examination or investigation as is necessary to
enable such Person to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been complied with.
SECTION 12.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by, or a meeting of,
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 12.07. LEGAL HOLIDAYS.
A "LEGAL HOLIDAY" is a Saturday, a Sunday or a day on which banking
institutions in the State of New York are not required to be open. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period. If any other operative date for purposes of
this Indenture shall occur on a Legal Holiday then for all purposes the next
succeeding day that is not a Legal Holiday shall be such operative date.
SECTION 12.08. NO RECOURSE AGAINST OTHERS.
A director, officer, employee, incorporator or shareholder of the
Company, as such, shall not have any liability for any Obligations of the
Company under the Notes or this Indenture or for any claim based on, in respect
of or by reason of such Obligations or their creation. Each Holder by accepting
a Note waives and releases all such liability. The waiver and release are part
of the consideration for the issue of the Notes.
SECTION 12.09. COUNTERPARTS AND FACSIMILE SIGNATURES.
This Indenture may be executed by manual or facsimile signature in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
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SECTION 12.10. VARIABLE PROVISIONS.
"OFFICER" means the Chairman of the Board, the President, any Vice
President, the Treasurer, the Secretary, any Assistant Treasurer or any
Assistant Secretary of the Company.
The first certificate pursuant to Section 4.03 hereof shall be for the
fiscal year ended on December 31, 1999.
The reporting date for Section 9.06 hereof is December 31, of each
year. The first reporting date is December 31, 2000.
The Trustee shall always have a combined capital and surplus of at
least $25,000,000 as set forth in its most recent published annual report of
condition.
The Company's address is:
EchoStar Communications Corporation
5701 South Santa Fe Drive
Littleton, Colorado 80120
Attention: David Moskowitz, Esq.
Senior Vice President and General Counsel
The Trustee's address is:
U.S. Bank Trust National Association
180 E. 5th Street
St. Paul, MN 55101
Attention: Corporate Trust Administration
SECTION 12.11. GOVERNING LAW, SUBMISSION TO JURISDICTION.
THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE
AND THE NOTES, WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF.
To the extent permitted by applicable law, the Company irrevocably
submits to the nonexclusive jurisdiction of any federal or state court in the
Borough of Manhattan, City and State of New York, United States of America, in
any suit or proceeding based on or arising under this Indenture and the Notes
and irrevocably agrees that all claims in respect of such suit or proceeding may
be determined in any such court. The Company irrevocably and fully waives the
defense of an inconvenient forum to the maintenance of such suit or proceeding.
SECTION 12.12. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or an Affiliate. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
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<PAGE> 54
SECTION 12.13. SUCCESSORS.
All agreements of the Company in this Indenture and the Notes shall
bind its successor. All agreements of the Trustee in this Indenture shall bind
its successor.
SECTION 12.14. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 12.15. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table, and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
ECHOSTAR COMMUNICATIONS CORPORATION,
as Company
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
U.S. BANK TRUST NATIONAL ASSOCIATION, as
Trustee
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE> 56
EXHIBIT A
[FORM OF FACE OF NOTE]
[Global Notes Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Notes Legend]
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY AND ANY SHARES OF COMMON STOCK ISSUED UPON CONVERSION
HEREOF MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY AND ANY SHARES OF COMMON STOCK
ISSUED UPON CONVERSION HEREOF MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
ONLY (1) (a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, IF AVAILABLE, (c) OUTSIDE
THE UNITED STATES TO A NON-U.S. PERSON IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR
A-1
<PAGE> 57
(3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE PURCHASER WILL, AND EACH
SUBSEQUENT PURCHASER IS REQUIRED TO, NOTIFY ANY SUBSEQUENT PURCHASER FROM IT OF
THE SECURITY EVIDENCED HEREBY OR ANY COMMON STOCK ISSUABLE UPON CONVERSION
HEREOF OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
A-2
<PAGE> 58
No. ________
$
-----
CUSIP No. [ ]/CINS No. [ ]
4 7/8% CONVERTIBLE SUBORDINATED NOTE DUE 2007
EchoStar Communications Corporation, a Nevada corporation (the
"COMPANY"), promises to pay to __________________________ or registered assigns,
the principal sum of ____________________ $[____________] [, or such other
amount as is indicated on Schedule A hereof* ,] on January 1, 2007, subject to
the further provisions of this Note set forth on the reverse hereof which
further provisions shall for all purposes have the same effect as if set forth
at this place.
Interest Payment Dates: January 1 and July 1, commencing July 1, 2000
Record Dates: June 15 and December 15
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by one of its duly authorized officers.
Dated:
-------------------------------
ECHOSTAR COMMUNICATIONS CORPORATION
by:
----------------------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 4 7/8% Convertible Subordinated Notes due 2007 described in
the within-mentioned Indenture.
U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee
By:
--------------------------------------
Authorized Signatory
- ------------------------------
* Applicable to Global Notes Only
A-3
<PAGE> 59
[FORM OF REVERSE OF NOTE]
ECHOSTAR COMMUNICATIONS CORPORATION
4 7/8 % Convertible Subordinated Note due 2007
1. Interest. ECHOSTAR COMMUNICATIONS CORPORATION, a Nevada corporation
(the "COMPANY"), is the issuer of 4 7/8 % Convertible Subordinated Notes due
2007 (the "Notes"). The Notes will accrue interest at a rate of 4 7/8 % per
annum. The Company promises to pay interest on the Notes in cash semiannually on
each January 1 and July 1, commencing on July 1, 2000, to Holders of record on
the immediately preceding December 15 and June 15, respectively. Interest on the
Notes will accrue from the most recent date to which interest has been paid, or
if no interest has been paid, from December 8, 1999. Interest will be computed
on the basis of a 360-day year of twelve 30-day months. The Company will pay
interest on overdue principal at the interest rate borne by the Notes,
compounded semiannually, and it shall pay interest on overdue installments of
interest (without regard to any applicable grace period) at the same interest
rate compounded semiannually.
2. Registration Rights. The Holder of this Note is entitled to the
benefits of a Registration Rights Agreement, dated as of December 8, 1999, among
the Company and the Initial Purchasers (the "Registration Rights Agreement").
Pursuant to the Registration Rights Agreement the Company has agreed for the
benefit of the Holders of the Notes, that (i) it will, at its cost, within 90
days after the closing of the sale of the Notes (the "Closing"), file a shelf
registration statement (the "Shelf Registration Statement") with the Securities
and Exchange Commission (the "Commission") with respect to resales of the Notes
and the Common Stock issuable upon conversion thereof, (ii) it will use its best
efforts to cause such Shelf Registration Statement to be declared effective
within 270 days after the Closing, and (iii) it will use its best efforts to
keep such Shelf Registration Statement continuously effective under the
Securities Act, subject to certain exceptions specified in the Registration
Rights Agreement until the second anniversary of the date of the Closing. The
Company will be permitted to suspend use of the prospectus that is part of the
Shelf Registration Statement during certain periods of time and in certain
circumstances relating to pending corporate developments and public filings with
the SEC and similar events. If (a) the Company fails to file the Shelf
Registration Statement required by the Registration Rights Agreement on or
before the date specified above for such filing, (b) such Shelf Registration
Statement is not declared effective by the Commission on or prior to the date
specified above for such effectiveness, or (c) the Shelf Registration Statement
is declared effective but thereafter ceases to be effective or useable in
connection with resales of Transfer Restricted Securities (as defined in the
Registration Rights Agreement) during the periods specified in the Registration
Rights Agreement (each such event referred to in clauses (a) through (c) above a
"Registration Default"), then the Company will pay special interest to each
Holder of Transfer Restricted Securities, with respect to the first consecutive
90-day period immediately following the occurrence of such Registration Default
in an amount equal to an increase in the annual interest rate on the Notes of
0.25% ("SPECIAL INTEREST") and with respect to each subsequent consecutive
90-day period, an amount equal to an increase in the annual interest rate on the
Notes of 0.25% until all Registration Defaults have been cured, up to a maximum
increase in the annual interest rate on the Notes equal to 1.0%. All accrued
Special Interest shall be paid by the Company on each Interest Payment Date for
which Special Interest is owed to the Holders of Global Notes by wire transfer
of immediately available funds or by federal funds check and to Holders of
certificated Notes registered as such as of the preceding Record Date by mailing
checks to their registered addresses. Following the cure of all Registration
Defaults, the application of Special Interest will cease.
3. Method of Payment. The Company will pay interest on the Notes
(except defaulted interest) to the Persons who are registered Holders of Notes
at the close of business on the record date for
A-4
<PAGE> 60
the next interest payment date even though Notes are canceled after the record
date and on or before the interest payment date. Holders must surrender Notes to
a Paying Agent to collect principal and premium payments. The Company will pay
principal, premium, if any, interest and Special Interest, if any, in money of
the United States that at the time of payment is legal tender for payment of
public and private debts. However, the Company may pay principal, premium, if
any, interest and Special Interest, if any, by check payable in such money. It
may mail an interest or Special Interest check to a Holder's registered address.
If a Holder of not less than an aggregate principal amount of $5.0 million of
Notes so requests, principal, premium, if any, interest and Special Interest, if
any, may be paid by wire transfer of immediately available funds to an account
previously specified in writing by such Holder to the Company and the Trustee.
4. Paying Agent, Conversion Agent and Registrar. The Trustee will act
as Paying Agent, Conversion Agent and Registrar. The Company may change any
Paying Agent, Conversion Agent or Registrar without prior notice. The Company or
any of its Affiliates may act in any such capacity.
5. Indenture. The Company issued the Notes under an Indenture, dated as
of December 8, 1999 (the "INDENTURE"), between the Company and U.S. Bank Trust
National Association, as Trustee. The terms of the Notes include those stated in
the Indenture and those made part of the Indenture by the Trust Indenture Act of
1939 (15 U.S. Code Sections 77aaa-77bbbb) as in effect on the date of the
Indenture. The Notes are subject to, and qualified by, all such terms, certain
of which are summarized hereon, and Holders are referred to the Indenture and
such Act for a statement of such terms. The Notes are unsecured general
obligations of the Company limited to $1,000,000,000 in aggregate principal
amount and subordinated in right of payment to all existing and future Senior
Debt of the Company.
6. Optional Redemption. The Notes are not redeemable at the Company's
option prior to January 1, 2003. Thereafter, the Notes will be subject to
redemption at the option of the Company, in whole or in part, upon not less than
30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount thereof) set forth below plus accrued and unpaid
interest thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on January 1 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C> <C>
2003.................. 102.786%
2004.................. 102.089%
2005.................. 101.393%
2006.................. 100.696%
2007.................. 100.000%
</TABLE>
7. Notice of Redemption. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder of
the Notes to be redeemed at his address of record. The Notes in denominations
larger than $1,000 may be redeemed in part but only in integral multiples of
$1,000. In the event of a redemption of less than all of the Notes, the Notes
will be chosen for redemption by the Trustee in accordance with the Indenture.
On and after the redemption date, interest ceases to accrue on the Notes or
portions of them called for redemption.
If this Note is redeemed subsequent to a record date with respect to
any interest payment date specified above and on or prior to such interest
payment date, then any accrued interest will be paid to the Person in whose name
this Note is registered at the close of business on such record date.
A-5
<PAGE> 61
8. Mandatory Redemption. The Company will not be required to make
mandatory redemption or repurchase payments with respect to the Notes. There are
no sinking fund payments with respect to the Notes.
9. Repurchase at Option of Holder. If there is a Change of Control, the
Company shall be required to offer to purchase on the Purchase Date all
outstanding Notes at a purchase price equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest, if any, to the Purchase Date.
Holders of Notes that are subject to an offer to purchase will receive a Change
of Control offer from the Company prior to any related Purchase Date and may
elect to have such Notes or portions thereof in authorized denominations
purchased by completing the form entitled "Option of Holder to Elect Purchase"
appearing below.
10. Subordination. The payment of the principal of, interest on or any
other amounts due on the Notes is subordinated in right of payment to all
existing and future Senior Debt of the Company, as described in the Indenture.
Each Holder, by accepting a Note, agrees to such subordination and authorizes
and directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided and appoints the Trustee
as its attorney-in-fact for such purpose.
11. Conversion. The Holder of any Note has the right, exercisable at
any time after 90 days following the Issuance Date and prior to the close of
business (New York time) on the date of the Note's maturity, to convert the
principal amount thereof (or any portion thereof that is an integral multiple of
$1,000) into shares of Common Stock at the initial Conversion Price of $90.88
per share, subject to adjustment under certain circumstances as set forth in the
Indenture, except that if a Note is called for redemption, the conversion right
will terminate at the close of business on the Business Day immediately
preceding the date fixed for redemption.
To convert a Note, a Holder must (1) complete and sign a conversion
notice substantially in the form set forth below, (2) surrender the Note to a
Conversion Agent, (3) furnish appropriate endorsements or transfer documents if
required by the Registrar or Conversion Agent and (4) pay any transfer or
similar tax, if required. Upon conversion, no adjustment or payment will be made
for interest or dividends, but if any Holder surrenders a Note for conversion
after the close of business on the record date for the payment of an installment
of interest and prior to the opening of business on the next interest payment
date, then, notwithstanding such conversion, the interest payable on such
interest payment date will be paid to the registered Holder of such Note on such
record date; provided, however, that such Note, when surrendered for conversion,
must be accompanied by payment to the Company of an amount equal to the interest
payable on such interest payment date on the portion so converted; provided
further, however, that such payment to the Company described in the immediately
preceding proviso shall not be required in connection with any conversion of a
Note that occurs on or after the date that the Company has issued a notice of
redemption pursuant to Section 3.03 of the Indenture and prior to the date of
redemption. The number of shares issuable upon conversion of a Note is
determined by dividing the principal amount of the Note converted by the
Conversion Price in effect on the Conversion Date. No fractional shares will be
issued upon conversion but a cash adjustment will be made for any fractional
interest.
A Note in respect of which a Holder has delivered an "Option of Holder
to Elect Purchase" form appearing below exercising the option of such Holder to
require the Company to purchase such Note may be converted only if the notice of
exercise is withdrawn as provided above and in accordance with the terms of the
Indenture. The above description of conversion of the Notes is qualified by
reference to, and is subject in its entirety by, the more complete description
thereof contained in the Indenture.
A-6
<PAGE> 62
12. Denominations, Transfer, Exchange. The Notes are in registered
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered, and Notes may be exchanged, as
provided in the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
need not exchange or register the transfer of any Note or portion of a Note
selected for redemption (except the unredeemed portion of any Note being
redeemed in part). Also, it need not exchange or register the transfer of any
Note for a period of 15 days before a selection of Notes to be redeemed.
13. Persons Deemed Owners. Except as provided in paragraph 3 of this
Note, the registered Holder of a Note may be treated as its owner for all
purposes.
14. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for two years, the Trustee and the Paying Agent shall pay the
money back to the Company at its written request. After that, Holders of Notes
entitled to the money must look to the Company for payment unless an abandoned
property law designates another Person and all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
15. Defaults and Remedies. The Notes shall have the Events of Default
set forth in Section 8.01 of the Indenture. Subject to certain limitations in
the Indenture, if an Event of Default occurs and is continuing, the Trustee by
notice to the Company or the Holders of at least 25% in aggregate principal
amount of the then outstanding Notes by notice to the Company and the Trustee
may declare all the Notes to be due and payable immediately, except that in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency, all unpaid principal and interest accrued on the Notes shall become
due and payable immediately without further action or notice. The Holders of a
majority in principal amount of the Notes then outstanding by written notice to
the Trustee may rescind an acceleration and its consequences if the rescission
would not conflict with any judgment or decree and if all existing Events of
Default have been cured or waived except nonpayment of principal or interest
that has become due solely because of the acceleration. Holders may not enforce
the Indenture or the Notes except as provided in the Indenture. Subject to
certain limitations, Holders of a majority in principal amount of the then
outstanding Notes issued under the Indenture may direct the Trustee in its
exercise of any trust or power. The Company must furnish annually compliance
certificates to the Trustee. The above description of Events of Default and
remedies is qualified by reference, and subject in its entirety, to the more
complete description thereof contained in the Indenture.
16. Amendments, Supplements and Waivers. Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the then outstanding
Notes (including consents obtained in connection with a tender offer or exchange
offer for Notes), and any existing default may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding Notes. Without
the consent of any Holder, the Indenture or the Notes may be amended among other
things, to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for assumption of the Company's obligations to Holders, to make any
change that does not adversely affect the rights of any Holder or to qualify the
Indenture under the TIA or to comply with the requirements of the SEC in order
to maintain the qualification of the Indenture under the TIA.
17. Trustee Dealings with the Company. The Trustee, in its individual
or any other capacity may become the owner or pledgee of the Notes and may
otherwise deal with the Company or an Affiliate
A-7
<PAGE> 63
with the same rights it would have, as if it were not Trustee, subject to
certain limitations provided for in the Indenture and in the TIA. Any Agent may
do the same with like rights.
18. No Recourse Against Others. A director, officer, employee,
incorporator or shareholder of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of or by reason of such obligations or their
creation. Each Holder of the Notes by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Notes.
19. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL
GOVERN THE INDENTURE AND THE NOTES WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS
THEREOF.
20. Authentication. The Notes shall not be valid until authenticated by
the manual signature of an authorized officer of the Trustee or an
authenticating agent.
21. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and UGMA (= Uniform Gifts to
Minors Act).
The Company will furnish to any Holder of the Notes upon written
request and without charge a copy of the Indenture. Request may be made to:
EchoStar Communications Corporation
5701 South Santa Fe Drive
Littleton, Colorado 80120
Attention of: David Moskowitz, Esq.
Senior Vice President and General Counsel
A-8
<PAGE> 64
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to
------------------------------------------
(Insert assignee's social security or tax I.D. no.)
------------------------------------------
------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint _________________________________ agent to transfer this
Note on the books of the Company. The agent may substitute another to act for
him.
Your Signature:
----------------------------------------------------------
(Sign exactly as your name appears on
the other side of this Note)
Date:
------------------
Signature Guarantee: *
--------------------------------------------
In connection with any transfer of any of the Notes evidenced by this
certificate occurring prior to the date that is two years after the later
of the date of original issuance of such Notes and the last date, if any,
on which such Notes were owned by the Company or any Affiliate of the
Company, the undersigned confirms that such Notes are being transferred:
CHECK ONE BOX BELOW
(1) [ ] to the Company or any subsidiary thereof,
(2) [ ] to a qualified institutional buyer in compliance with Rule 144A,
(3) [ ] outside the United States in compliance with Rule 904
under the Securities Act,
(4) [ ] pursuant to the exemption from registration provided by
Rule 144 under the Securities Act (if available) or
(5) [ ] pursuant to an effective registration statement
under the Securities Act.
- --------------------------
* Signature must be guaranteed by a participant in a recognized signature
guaranty medallion program or other signature guarantor acceptable to the
Trustee.
A-9
<PAGE> 65
--------------------------
Signature
Signature Guarantee*
- --------------------------
* Signature must be guaranteed by a participant in a recognized signature
guaranty medallion program or other signature guarantor acceptable to the
Trustee.
- ------------------------------------------------------------------
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Note
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
Date:
---------------------
- --------------------------
* Signature must be guaranteed by a participant in a recognized signature
guaranty medallion program or other signature guarantor acceptable to the
Trustee.
NOTICE: To be executed by an executive officer
A-10
<PAGE> 66
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note or a portion thereof repurchased
by the Company pursuant to Section 3.09 or 4.07 of the Indenture, check the box:
[ ]
If the purchase is in part, indicate the portion (in denominations of
$1,000 or any integral multiple thereof) to be purchased:
-----------------
Your Signature:
----------------------------------------------------------
(Sign exactly as your name appears on
the other side of this Note)
Date:
------------------------
Signature Guarantee:**/
- --------------------------
**/ Signature must be guaranteed by a participant in a recognized signature
guaranty medallion program or other signature guarantor acceptable to the
Trustee.
A-11
<PAGE> 67
ELECTION TO CONVERT
To EchoStar Communications Corporation:
The undersigned owner of this Note hereby irrevocably exercises the
option to convert this Note, or the portion below designated, into Common Stock
of EchoStar Communications Corporation in accordance with the terms of the
Indenture referred to in this Note, and directs that the shares issuable and
deliverable upon conversion, together with any check in payment for fractional
shares, be issued in the name of and delivered to the undersigned, unless a
different name has been indicated in the assignment below. If the shares are to
be issued in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto.
Any Holder of Notes, upon the exercise of its conversion rights in
accordance with the terms of the Indenture and the Note, agrees to be bound by
the terms of the Registration Rights Agreement relating to the Common Stock
issuable upon conversion of the Notes.
Date:
in whole ___
Portions of Note to be converted ($1,000 or integral
multiples thereof): $
----------
----------------------------------------------------
Signature
Please Print or Typewrite Name and Address,
Including Zip Code, and Social Security or Other
Identifying Number
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
Signature Guarantee: *
-----------
- --------------------------
* Signature must be guaranteed by a participant in a recognized signature
guaranty medallion program or other signature guarantor acceptable to the
Trustee.
A-12
<PAGE> 68
[TO BE ATTACHED TO GLOBAL NOTES]
SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount of this Global Note shall be
$__________________. The following increases or decreases in the principal
amount of this Global Note have been made:
<TABLE>
<CAPTION>
===========================================================================================================
Amount of Amount of Principal amount Signature of Date of exchange
decrease in increase in of this Global authorized officer following such
principal amount principal amount Note of Trustee or decrease or
of this Global of this Global Notes Custodian increase
Note Note
<S> <C> <C> <C> <C>
- --------------- ---------------- --------------- ----------------- ---------------
- --------------- ---------------- --------------- ----------------- ---------------
- --------------- ---------------- --------------- ----------------- ---------------
- --------------- ---------------- --------------- ----------------- ---------------
- --------------- ---------------- --------------- ----------------- ---------------
- --------------- ---------------- --------------- ----------------- ---------------
- --------------- ---------------- --------------- ----------------- ---------------
- --------------- ---------------- --------------- ----------------- ---------------
- --------------- ---------------- --------------- ----------------- ---------------
- --------------- ---------------- --------------- ----------------- ---------------
- --------------- ---------------- --------------- ----------------- ---------------
- --------------- ---------------- --------------- ----------------- ---------------
- --------------- ---------------- --------------- ----------------- ---------------
- --------------- ---------------- --------------- ----------------- ---------------
- --------------- ---------------- --------------- ----------------- ---------------
- --------------- ---------------- --------------- ----------------- ---------------
- --------------- ---------------- --------------- ----------------- ---------------
- --------------- ---------------- --------------- ----------------- ---------------
- --------------- ---------------- --------------- ----------------- ---------------
- --------------- ---------------- --------------- ----------------- ---------------
- --------------- ---------------- --------------- ----------------- ---------------
- --------------- ---------------- --------------- ----------------- ---------------
- --------------- ---------------- --------------- ----------------- ---------------
===========================================================================================================
</TABLE>
A-13
<PAGE> 69
EXHIBIT B
FORM OF TRANSFER CERTIFICATE FOR TRANSFER
FROM RULE 144A GLOBAL NOTE OR RESTRICTED NOTE
TO REGULATION S GLOBAL NOTE
(Transfers pursuant to Section 2.06(a)(ii) or 2.06(a)(vii)
of the Indenture)
U.S. Bank Trust National Association, as Trustee
180 E. 5th Street
St. Paul, MN 55101
Attn: Corporate Trust Administration
Re: EchoStar Communications Corporation 4 7/8% Convertible
Subordinated Notes due 2007 (the "NOTES")
Reference is hereby made to the Indenture, dated as December 8, 1999
(the "INDENTURE"), between EchoStar Communications Corporation, as Issuer, and
U.S. Bank Trust National Association, as Trustee.
This letter relates to $[_________] [check one] (i) aggregate
principal amount of Notes which are held in the form of the Rule 144A Global
Note (CUSIP No. __________) with the Depositary or (ii) principal amount of
Restricted Note (CUSIP No. _____________) registered, in either case, in the
name of [name of transferor] (the "TRANSFEROR") to effect the transfer of the
Notes in exchange for an equivalent beneficial interest in the Regulation S
Global Notes.
In connection with such request, the Transferor does hereby certify
that such transfer has been effected in accordance with (i) the transfer
restrictions set forth in the Notes and (ii) that:
(1) the offer of the Notes was not made to a Person in the United
States;
(2) the transaction was executed in, on or through the facilities of a
designated offshore securities market and neither the Transferor nor any
Person acting on its behalf knows that the transaction was pre-arranged
with a buyer in the United States;
(3) no directed selling efforts have been made in contravention of the
requirements of Rule 903(b) or 904(b) of Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the United States Securities Act of 1933, as
amended (the "SECURITIES ACT").
In addition, if the sale is made during a distribution compliance
period and the provisions of Rule 903(c)(2) or (3) or Rule 904(c)(1) of
Regulation S are applicable thereto, we confirm that such sale has been made in
accordance with the applicable provisions of Rule 903(c)(2) or (3) or Rule
904(c)(1), as the case may be.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings
B-1
<PAGE> 70
or official inquiry with respect to the matters covered hereby. Capitalized
terms used in this certificate and not otherwise defined in the Indenture have
the meanings set forth in Regulation S.
[Name of Transferor]
By:
---------------------------
Name:
Title:
Dated:
cc: EchoStar Communications Corporation
5701 South Santa Fe Drive
Littleton, Colorado 80120
Attention of: David Moskowitz, Esq.
Senior Vice President and General Counsel
B-2
<PAGE> 71
EXHIBIT C
FORM OF TRANSFER CERTIFICATE FOR TRANSFER
FROM REGULATION S GLOBAL NOTE OR RESTRICTED NOTE
TO RULE 144A GLOBAL NOTE
(Transfers pursuant to Section 2.06(a)(iii) or 2.06(a)(vi)
of the Indenture)
U.S. Bank Trust National Association, as Trustee
180 E. 5th Street
St. Paul, MN 55101
Attn: _____________
Re: EchoStar Communications Corporation 4 7/8% Convertible
Subordinated Notes due 2007 (the "NOTES")
Reference is hereby made to the Indenture, dated as of December 8,
1999 (the "INDENTURE"), between EchoStar Communications Corporation, as Issuer,
U.S. Bank Trust National Association, as Trustee. Capitalized terms used but not
defined herein shall have the respective meanings given them in the Indenture.
This letter relates to $[ ] [check one] (i) [ ]aggregate principal
amount of Notes which are held in the form of the Regulation S Global Note
(CUSIP No. ____) with the Depositary or (ii) [ ]principal amount of Restricted
Note (CUSIP No. ____________) registered, in each case, in the name of [name of
transferor] (the "TRANSFEROR") to effect the transfer of the Notes in exchange
for an equivalent beneficial interest in the Rule 144A Global Note.
In connection with such request, and in respect of such Notes the Transferor
does hereby certify that such Notes are being transferred in accordance with (i)
the transfer restrictions set forth in the Notes and (ii) Rule 144A under the
United States Securities Act of 1933, as amended, to a transferee that the
Transferor reasonably believes is purchasing the Notes for its own account or an
account with respect to which the transferee exercises sole investment
discretion and the transferee and any such account is a "qualified institutional
buyer" within the meaning of Rule 144A, in a transaction meeting the
requirements of Rule 144A and in accordance with applicable securities laws of
any state of the United States or any other jurisdiction.
[Name of Transferor],
By:
---------------------------
Name:
Title:
Dated:
cc: EchoStar Communications Corporation
5701 South Santa Fe Drive
Littleton, Colorado 80120
Attention of: David Moskowitz, Esq.
Senior Vice President and General Counsel
C-1
<PAGE> 72
EXHIBIT D
FORM OF TRANSFER CERTIFICATE FOR TRANSFER
FROM GLOBAL NOTE OR RESTRICTED
NOTE TO RESTRICTED NOTE
(Transfers pursuant to Section 2.06(a)(iv)
or Section 2.06(a)(v) of the Indenture)
U.S. Bank Trust National Association, as Trustee
180 E. 5th Street
St. Paul, MN 55101
Attn: _____________
Re: EchoStar Communications Corporation 4 7/8% Convertible
Subordinated Notes due 2007 (the "NOTES")
Reference is hereby made to the Indenture, dated as of December 8,
1999 (the "INDENTURE"), between EchoStar Communications Corporation, as Issuer,
and U.S. Bank Trust National Association, as Trustee. Capitalized terms used but
not defined herein shall have the respective meanings given them in the
Indenture.
This letter relates to $[ ] aggregate principal amount of Notes which
are held [in the form of the [Rule 144A/Regulation S] [Global] [Restricted] Note
(CUSIP No. [ ] CINS No. [ ]) [with the Depositary] in the name of [name of
transferor] (the "TRANSFEROR") to effect the transfer of the Notes.
In connection with such request, and in respect of such Notes, the
Transferor does hereby certify that such Notes are being transferred (i) in
accordance with the transfer restrictions set forth in the Notes and (ii) in
accordance with applicable securities laws of any state of the United States or
any other jurisdiction.
*Insert, if appropriate.
[Name of Transferor],
By:
---------------------------
Name:
Title:
Dated:
cc: EchoStar Communications Corporation
5701 South Santa Fe Drive
Littleton, Colorado 80120
Attention of: David Moskowitz, Esq.
Senior Vice President and General Counsel
D-1
<PAGE> 73
APPENDIX E
FORM OF LETTER TO BE DELIVERED BY ACCREDITED INSTITUTIONAL INVESTORS
EchoStar Communications Corporation
5701 South Santa Fe Drive
Littleton, Colorado 80120
Ladies and Gentlemen:
We are delivering this letter in connection with our acquisition of
4 7/8% Convertible Subordinated Notes due January 1, 2007 (the "Notes") of
EchoStar Communications Corporation, a Nevada corporation (the "Company"), as
more fully described in the Confidential Offering Memorandum (the "Offering
Memorandum") relating to the initial offering of the Notes.
We hereby confirm that:
(i) we are an "accredited investor" within the meaning of Rule
501 (a) (1), (2), (3) or (7) under the Securities Act of 1933, as
amended (the "Securities Act"), or an entity in which all of the
equity owners are accredited investors within the meaning of Rule 501
(a) (1), (2), (3) or (7) under the Securities Act (an "Institutional
Accredited Investor");
(ii) (A) any purchase of the Notes by us will be for our own
account or for the account of one or more other Institutional
Accredited Investors or as fiduciary for the account of one or more
trusts, each of which is an "accredited investor" within the meaning
of Rule 501 (a) (7) under the Securities Act and for each of which we
exercise sole investment discretion or (B) we are a "bank", within the
meaning of Section 3 (a) (2) of the Securities Act, or a "savings and
loan association" or other institution described in Section 3 (a) (5)
(A) of the Securities Act that is acquiring the Notes as fiduciary for
the account of one or more institutions for which we exercise sole
investment discretion;
(iii) in the event that we purchase any of the Notes, we will
acquire Notes having a minimum purchase price of not less than
$100,000 for our own account or for any separate account for which we
are acting;
(iv) we have such knowledge and experience in financial and
business matters that we are capable of evaluating the merits and
risks of purchasing the Notes;
(v) we are not acquiring the Notes with a view to distribution
thereof or with any present intention of offering or selling any of
the Notes, except inside the United States in accordance with Rule
144A under the Securities Act or outside the United States in
accordance with Regulation S under the Securities Act, as provided
below, provided that the disposition of our property and the property
of any accounts for which we are acting as fiduciary shall remain at
all times within our control; and
(vi) we have received a copy of the Offering Memorandum relating
to the offering of the Notes and acknowledge that we have had access
to such financial and other information, and have been afforded the
opportunity to ask such questions of representatives of the Company
and receive answers thereto, as we deem necessary in connection with
our decision to acquire the Notes.
E-1
<PAGE> 74
We understand that the Notes are being offered in a transaction not
involving any public offering within the United States within the meaning of the
Securities Act and that the Notes have not been registered under the Securities
Act, and we agree, on our own behalf and on behalf of each account for which we
acquire any Notes, that if in the future we decide to resell, pledge or
otherwise transfer such Notes, such Notes may be offered, resold, pledged or
otherwise transferred only: (a) to the Company or any of its subsidiaries, (b)
to a person whom the seller reasonably believes is a Qualified Institutional
Buyer or "QIB" (as defined in Rule 144A under the Securities Act) purchasing for
its own account or for the account of a QIB in a transaction meeting the
requirements of Rule 144A, (c) in an offshore transaction meeting the
requirements of Rule 904 of the Securities Act, (d) in a transaction meeting the
requirements of Rule 144 under the Securities Act, (e) to an Institutional
Accredited Investor that, prior to such transfer, furnishes the trustee a signed
letter containing certain representations and agreements relating to the
transfer of the Notes (in substantially this form) and, if such transfer is in
respect of an aggregate principal amount of Notes less than $100,000, an opinion
of counsel acceptable to the Company that such transfer is in compliance with
the Securities Act, (f) in accordance with another exemption from the
registration requirements of the Securities Act (and based upon an opinion of
counsel acceptable to the Company) or (g) pursuant to an effective registration
statement and, in each case, in accordance with the applicable securities laws
of any state of the United States, or any other applicable jurisdiction. We
understand that the registrar and transfer agent for the Notes will not be
required to accept for registration of transfer any Notes acquired by us, except
upon presentation of evidence satisfactory to the Company and the transfer agent
that the foregoing restrictions on transfer have been complied with. We further
understand that any Notes acquired by us will be in the form of definitive
physical certificates and will bear a legend reflecting the substance of this
paragraph.
We acknowledge that the Company and others will rely upon our
confirmations, acknowledgments and agreements set forth herein, and we agree to
notify you promptly in writing if any of our representations or warranties
herein ceases to be accurate and complete.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS.
Dated:
------------------------- ------------------------------
(Name of Purchaser)
By:
---------------------------
Name:
Title:
Address:
E-2
<PAGE> 1
EXHIBIT 4.2
EXECUTION COPY
================================================================================
$1,000,000,000
4 7/8% CONVERTIBLE SUBORDINATED NOTES DUE 2007
REGISTRATION RIGHTS AGREEMENT
Dated as of December 8, 1999
by and among
ECHOSTAR COMMUNICATIONS CORPORATION
and
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
================================================================================
<PAGE> 2
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of December 8, 1999 by and among EchoStar Communications
Corporation, a Nevada corporation (the "COMPANY"), and Donaldson, Lufkin &
Jenrette Securities Corporation, Banc of America Securities LLC, Bear, Stearns &
Co Inc., Lehman Brothers Inc. ING Barings Furman Selz LLC and CIBC World Markets
Corp., (each an "INITIAL PURCHASER" and collectively, the "INITIAL PURCHASERS").
The Company proposes to issue and sell to the Initial Purchasers (the "INITIAL
PLACEMENT") $750,000,000 in aggregate principal amount of its 4 7/8% Convertible
Notes due 2007 (the "FIRM NOTES"). The Company also proposes to issue and sell
to the Initial Purchasers not more than $250,000,000 principal amount of its
4 7/8% Convertible Subordinated Notes due 2007 (the "ADDITIONAL NOTES" and,
together with the Firm Notes, the "NOTES"). As an inducement to the Initial
Purchasers to enter into the purchase agreement, dated as of December 2, 1999
(the "PURCHASE AGREEMENT"), and in satisfaction of a condition to the Initial
Purchasers' obligations thereunder, the Company agrees with the Initial
Purchasers, (i) for the benefit of the Initial Purchasers and (ii) for the
benefit of the holders from time to time of the Notes whose names appear in the
register maintained by the Registrar in accordance with the provisions of the
Indenture (as defined in Section 1 hereof) (including the Initial Purchasers),
as follows:
SECTION 1. DEFINITIONS
Capitalized terms used herein without definition shall have their
respective meanings set forth in the Purchase Agreement. As used in this
Agreement, the following capitalized defined terms shall have the following
meanings:
"ACT" means the Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder.
"AFFILIATE" of any specified person means any other person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such specified person. For purposes of this definition, control of
a person means the power, direct or indirect, to direct or cause the direction
of the management and policies of such person whether by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"AGREEMENT" means this Registration Rights Agreement.
"CLOSING DATE" has the meaning set forth in the Purchase Agreement.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the class A common stock of the Company, par value
$0.01 per share, issuable upon the conversion of the Notes.
"COMPANY" means EchoStar Communications Corporation.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"HOLDER" has the meaning set forth in Section 2 hereof.
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<PAGE> 3
"INDENTURE" means the Indenture, dated as of December 8, 1999, between
the Company and the Trustee, relating to the Notes, as the same may be amended
from time to time in accordance with the terms thereof.
"INITIAL PLACEMENT" has the meaning set forth in the preamble hereto.
"INITIAL PURCHASERS" means, collectively, Donaldson, Lufkin & Jenrette
Securities Corporation, Banc of America Securities LLC, Bear, Stearns & Co.
Inc., Lehman Brothers Inc., ING Barings Furman Selz LLC and CIBC World Markets
Corp.
"LOSSES" has the meaning set forth in Section 7(d) hereof.
"MAJORITY HOLDERS" means the Holders of a majority of the aggregate
principal amount of securities registered under a Shelf Registration Statement.
"NOTES" has the meaning set forth in the preamble hereto.
"PROSPECTUS" means the prospectus included in any Shelf Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of Transfer Restricted Securities covered by such Shelf
Registration Statement, and all amendments and supplements to the Prospectus,
including post-effective amendments.
"SHELF REGISTRATION" means a registration effected pursuant to Section
3 hereof.
"SHELF REGISTRATION PERIOD" has the meaning set forth in Section 3
hereof.
"SHELF REGISTRATION STATEMENT" means a "shelf" registration statement
of the Company pursuant to the provisions of Section 3 hereof that covers some
or all of the Transfer Restricted Securities as applicable, on an appropriate
form under Rule 415 under the Act, or any similar rule that may be adopted by
the Commission, amendments and supplements to such registration statement,
including post-effective amendments, and in each case, including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"SUPPLEMENT DELAY PERIOD" means any period commencing on the date of
receipt by a Holder of Transfer Restricted Securities of any notice from the
Company of the existence of any fact or event of the kind described in Section
4(b)(2) hereof and ending on the date of receipt by such Holder of an amended or
supplemented Shelf Registration Statement or Prospectus, as contemplated by
Section 4(h) hereof, or the receipt by such Holder of written notice from the
Company (the "ADVICE") that the use of the Prospectus may be resumed, and the
receipt of copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus.
"TRANSFER RESTRICTED SECURITIES" means each Note and the Common Stock
issuable upon conversion thereof until (i) the date on which such Note or the
Common Stock issuable upon conversion thereof has been effectively registered
under the Act and disposed of in
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<PAGE> 4
accordance with the Shelf Registration Statement, (ii) the date on which such
Note or Common Stock issuable upon conversion thereof is distributed to the
public pursuant to Rule 144 under the Act (or any similar provision then in
effect) or is saleable pursuant to Rule 144(k) under the Act or (iii) the date
on which such Note (A) is converted into Common Stock in accordance with the
terms and provisions of the Indenture or (B) otherwise ceases to be outstanding.
"TRUSTEE" means the trustee with respect to the Notes under the
Indenture.
"UNDERWRITER" means any underwriter of Notes in connection with an
offering thereof under a Shelf Registration Statement.
SECTION 2. HOLDERS
A person is deemed to be a holder of Transfer Restricted Securities
(each, a "HOLDER") whenever such person becomes the registered holder of such
Transfer Restricted Securities under the Indenture and includes broker-dealers
that hold Transfer Restricted Securities (i) as a result of market making
activities and other trading activities and (ii) which were acquired directly
from the Company or an Affiliate.
SECTION 3. SHELF REGISTRATION
The Company shall within 90 days of the date of original issuance of
the Notes, file with the Commission and thereafter shall use its reasonable best
efforts to cause to be declared effective under the Act on or prior to 270 days
(plus any additional days allowed as a result of a Supplement Delay Period)
after the date of original issuance of the Notes, a Shelf Registration Statement
relating to the offer and sale of the Transfer Restricted Securities by the
Holders from time to time in accordance with the methods of distribution elected
by such Holders and set forth in such Shelf Registration Statement.
The Company shall use its best efforts to keep the Shelf Registration
Statement continuously effective in order to permit the Prospectus forming part
thereof to be usable by Holders for a period of two years from the date of
original issuance of the Notes or such shorter period that will terminate when
(i) all the Transfer Restricted Securities covered by the Shelf Registration
Statement have been sold pursuant to the Shelf Registration Statement, (ii) the
date on which, in the opinion of counsel to the Company, all of the Transfer
Restricted Securities then held by the Holders may be sold by such Holders in
the public United States securities markets in the absence of a registration
statement covering such sales or (iii) the date on which there ceases to be
outstanding any Transfer Restricted Securities (in any such case, such period
being called the "SHELF REGISTRATION PERIOD"). The Company shall be deemed not
to have used its reasonable best efforts to keep the Shelf Registration
Statement effective during the requisite period if it voluntarily takes any
action that would result in Holders of Transfer Restricted Securities covered
thereby not being able to offer and sell such securities during that period,
unless (i) such action is required by applicable law, (ii) such action is taken
by the Company in good faith and for valid business reasons (not including
avoidance of the Company's obligations hereunder), including the acquisition or
divestiture of assets, so long as the Company promptly thereafter complies with
the requirements of Section 4(h) hereof, if applicable or (iii) such action is
taken because of any fact or circumstance giving rise to a Supplement Delay
Period.
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<PAGE> 5
SECTION 4. REGISTRATION PROCEDURES
In connection with any Shelf Registration Statement, the following
provisions shall apply:
(a) The Company shall ensure that (i) any Shelf Registration Statement
and any amendment thereto and any Prospectus forming part thereof and any
amendment or supplement thereto complies in all material respects with the Act
and the rules and regulations thereunder, (ii) any Shelf Registration Statement
and any amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any Prospectus forming part of any Shelf Registration Statement, and any
amendment or supplement to such Prospectus, does not include an untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements, in the light of the circumstances under which they were made,
not misleading.
(b) (1) The Company shall advise the Initial Purchasers and the Holders
of Transfer Restricted Securities named in any Shelf Registration Statement,
and, if requested by the Initial Purchasers or any such Holder, confirm such
advice in writing when a Shelf Registration Statement and any amendment thereto
has been filed with the Commission and when the Shelf Registration Statement or
any post-effective amendment thereto has become effective.
(2) The Company shall advise the Initial Purchasers and the Holders
of Transfer Restricted Securities named in any Shelf Registration Statement,
which have provided in writing to the Company a telephone or facsimile number
and address for notices, and, if requested by the Initial Purchasers or any such
Holder, confirm such advice in writing:
(i) of any request by the Commission for amendments or supplements
to the Shelf Registration Statement or the Prospectus included therein
or for additional information;
(ii) of the initiation by the Commission of proceedings relating to
a stop order suspending the effectiveness of the Shelf Registration
Statement;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Shelf Registration Statement;
(iv) of the receipt by the Company of any notification with respect
to the suspension of the qualification of the securities included
therein for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose; and
(v) of the existence of any fact and the happening of any event
(including, without limitation, pending negotiations relating to, or
the consummation of, a transaction or the occurrence of any event which
would require additional disclosure of material non-public information
by the Company in the Shelf Registration Statement as to which the
Company has a bona fide business purpose for preserving confidential or
which renders the Company unable to comply with Commission
requirements) that, in the opinion of the Company, makes untrue any
statement of a material fact made in its Shelf Registration Statement,
the Prospectus or any amendment or supplement thereto or any document
incorporated by reference therein or requires the making of any changes
in the Shelf
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<PAGE> 6
Registration Statement or the Prospectus so that, as of such date, the
statements therein are not misleading and do not omit to state a
material fact required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading, provided,
that the foregoing obligation shall only arise if the Company has been
notified by the Trustee or Transfer Agent that the Shelf Registration
Statement is being used to effect transfers of Transfer Restricted
Securities as provided by Section 4(o) below.
Such advice may be accompanied by an instruction to suspend the use of
the Prospectus until the requisite changes have been made.
(c) The Company shall use its best efforts to obtain the withdrawal of
any order suspending the effectiveness of any Shelf Registration Statement at
the earliest possible time.
(d) The Company shall use its best efforts to furnish to each selling
Holder named in any Shelf Registration Statement who so requests in writing and
who has provided to the Company an address for notices, without charge, at least
one conformed copy of such Shelf Registration Statement and any post-effective
amendment thereto, including financial statements and, if the Holder so requests
in writing, all exhibits and schedules (including those incorporated by
reference).
(e) The Company shall, during the Shelf Registration Period, deliver to
each Holder of Transfer Restricted Securities named in any Shelf Registration
Statement and who has provided to the Company an address for notices, without
charge, as many copies of the Prospectus (including each preliminary Prospectus)
contained in such Shelf Registration Statement and any amendment or supplement
thereto as such Holder may reasonably request; subject to any notice by the
Company in accordance with Section 5(b) hereof, the Company consents to the use
of the Prospectus or any amendment or supplement thereto by each of the selling
Holders for the purposes of offering and resale of the Transfer Restricted
Securities covered by the Prospectus in accordance with the applicable
regulations promulgated under the Act.
(f) Prior to any offering of Transfer Restricted Securities pursuant to
any Shelf Registration Statement, the Company shall register or qualify or
cooperate with the Holders of Transfer Restricted Securities named therein and
their respective counsel in connection with the registration or qualification of
such Transfer Restricted Securities for offer and sale under the securities or
blue sky laws of such jurisdictions of the United States as any such Holders
reasonably request in writing not later than the date that is five business days
prior to the date upon which this Agreement specifies that the Shelf
Registration Statement shall become effective; provided, however, that the
Company will not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which would
subject it to general or unlimited service of process or to taxation in any such
jurisdiction where it is not then so subject.
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<PAGE> 7
(g) The Company shall cooperate with the Holders of Transfer Restricted
Securities to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold pursuant to any Shelf
Registration Statement free of any restrictive legends and in such denominations
and registered in such names as Holders may request in writing at least two
business days prior to sales of securities pursuant to such Shelf Registration
Statement.
(h) Upon the occurrence of any event contemplated by paragraph
(b)(2)(v) hereof, the Company shall promptly prepare a post-effective amendment
to any Shelf Registration Statement or an amendment or supplement to the related
Prospectus or file any other required document so that as thereafter delivered
to purchasers of the Transfer Restricted Securities covered thereby, the
Prospectus will not include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided that
in the event of a material business transaction (including, without limitation,
pending negotiations relating to such a transaction) which would, in the opinion
of counsel to the Company, require disclosure by the Company in the Shelf
Registration Statement of material non-public information for which the Company
has a bona fide business purpose for not disclosing, then for so long as such
circumstances exist, the Company shall not be required to prepare and file a
supplement or post-effective amendment hereunder.
(i) Not later than the effective date of any such Shelf Registration
Statement hereunder, the Company shall cause to be provided a CUSIP number for
the Notes registered under such Shelf Registration Statement, and provide the
applicable trustee with certificates for such Notes in a form eligible for
deposit with The Depository Trust Company.
(j) The Company shall make generally available to its security holders
in a regular filing on Form 10-Q or 10-K, an earnings statement satisfying the
provisions of Rule 158 (which need not be audited) for the twelve-month period
commencing after effectiveness of the Shelf Registration Statement, provided
that the Company shall be allowed to fulfill its obligations pursuant to this
Section 4(j) by publicly filing such reports on the Commission's EDGAR database.
(k) The Company may require each Holder of Transfer Restricted
Securities, which are to be sold pursuant to any Shelf Registration Statement,
to furnish to the Company within 20 business days after written request for such
information has been made by the Company, such information regarding the Holder
and the distribution of such securities as the Company may from time to time
reasonably require for inclusion in such Shelf Registration Statement and such
other information as may be necessary or advisable in the reasonable opinion of
the Company and its counsel, in connection with such Shelf Registration
Statement. No Holder of Transfer Restricted Securities shall be entitled to be
named as a selling Holder in the Shelf Registration Statement as of the
effective time of such Shelf Registration Statement (or in the first prospectus
supplement filed thereafter in the case of an expedited filing that the Company
expects to file and obtain effectiveness within 30 days of this Agreement), and
no holder of Transfer Restricted Securities shall be entitled to use the
prospectus forming a part thereof for offers and resales of Transfer Restricted
Securities at any time, unless such Holder has returned a completed and signed
notice and questionnaire to the Company by the deadline for response set forth
therein. The Company shall not be required to take any action to name such
Holder as a selling Holder in
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<PAGE> 8
the Shelf Registration Statement until such Holder has returned a completed and
signed notice and questionnaire to the Company. Following its receipt of such
notice and questionnaire, the Company will, as promptly as possible, but not
prior to the next required amendment or supplement to the Shelf Registration
Statement, include the Transfer Restricted Securities covered thereby in the
Shelf Registration Statement (if not previously included). No Holder of Transfer
Restricted Securities shall be entitled to the benefit of any Special Interest
(as set forth in the Notes) under the Indenture and the Notes or be entitled to
use the Prospectus unless and until such Holder has furnished the information
required by this Section 4(k) and all such information required to be disclosed
in order to make the information previously furnished to the Company by such
Holder not materially misleading.
(l) The Company shall, if requested, promptly incorporate in a
Prospectus supplement or post-effective amendment to a Shelf Registration
Statement, such information as the Majority Holders reasonably agree should be
included therein in order to effect their distribution of the Notes and shall
make all required filings of such Prospectus supplement or post-effective
amendment as soon as notified of the matters to be incorporated in such
Prospectus supplement or post-effective amendment; provided, however, that the
Company shall not be required to take any action pursuant to this Section 4(l)
that would, in the opinion of counsel for the Company, violate applicable law or
to include information the disclosure of which at the time would have an adverse
effect on the business or operations of the Company and/or its subsidiaries, as
determined in good faith by the Company.
(m) The Company shall enter into such agreements and take all other
reasonably appropriate actions in order to expedite or facilitate the
registration or the disposition of the Transfer Restricted Securities, and in
connection therewith, if an underwriting agreement is entered into, cause the
same to contain indemnification and contribution provisions and procedures no
less favorable than those set forth in Section 7 (or such other provisions and
procedures acceptable to the Majority Holders), with respect to all parties to
be indemnified pursuant to Section 7 from Holders of Notes to the Company.
(n) The Company shall upon receipt of a reasonable request in writing
therefor:
(i) make reasonably available at reasonable times prior to the
effectiveness of the related Shelf Registration Statement for
inspection by representatives of the Holders of Transfer Restricted
Securities to be registered thereunder and any attorney, accountant or
other agent retained by the Holders, at the office where normally kept
during normal business hours, all financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the Company's officers, directors and employees
to supply all relevant information reasonably requested by the Holders'
attorneys, accountants or other agents in connection with any such
Shelf Registration Statement as is customary for similar due diligence
examinations; provided, however, that the foregoing inspection and
information gathering shall be coordinated by one counsel designated by
the Holders and that such persons shall first agree in writing with the
Company that any information that is designated in writing by the
Company, in good faith, as confidential at the time of delivery of such
information shall be kept confidential by such person, unless such
disclosure is made in connection with a court
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<PAGE> 9
proceeding or required by law, or such information becomes available to
the public generally or through a third party without an accompanying
obligation of confidentiality;
(ii) obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the Majority Holders), addressed to each
selling Holder covering such matters (in form, scope and substance) as
those matters set forth in Section 9(e)(i), (ii), (iii) and (iv) of the
Purchase Agreement;
(iii) obtain "cold comfort" letters (or, in the case of any person
that does not satisfy the conditions for receipt of a "cold comfort"
letter specified in Statement on Auditing Standards No. 72, an
"agreed-upon procedures letter") and updates thereof from the
independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company
for which financial statements and financial data are, or are required
to be, included in the Shelf Registration Statement), addressed where
reasonably practicable to each selling Holder of Transfer Restricted
Securities registered thereunder and the underwriters, if any, in
customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with primary underwritten
offerings; and
(iv) deliver such documents and certificates as may be reasonably
requested by the Majority Holders, including those to evidence
compliance with Section 4(h).
The foregoing actions set forth in clauses (ii), (iii) and (iv) of
this Section 4(n) shall, if reasonably requested by the Majority
Holder, be performed upon the effectiveness of such Shelf Registration
Statement and the effectiveness of each post-effective amendment
thereto.
(v) The Company may offer securities of the Company other than the
Notes under the Shelf Registration Statement, except where such offer
would conflict with the terms of the Purchase Agreement.
(o) The Company shall provide instructions to the Trustee or Transfer
Agent, as applicable, to notify the Company of any requested transfer of
Transfer Restricted Securities using the Shelf Registration Statement and to
only effect such transfer upon confirmation from the Company or its counsel that
the Shelf Registration Statement conforms to the requirements of Section 4(a)
above.
SECTION 5. HOLDERS' AGREEMENTS
Each Holder of Transfer Restricted Securities severally but not
jointly, by the acquisition of such Transfer Restricted Securities, agrees:
(a) To furnish the information required to be furnished pursuant to
Section 4(k) hereof within the time period set forth therein.
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<PAGE> 10
(b) That upon receipt of a notice of the commencement of a Supplement
Delay Period, it will keep the fact of such notice confidential, forthwith
discontinue disposition of its Transfer Restricted Securities pursuant to the
Shelf Registration Statement, and will not deliver any Prospectus forming a part
thereof until receipt of the amended or supplemented Shelf Registration
Statement or Prospectus, as applicable, as contemplated by Section 4(h) hereof,
or until receipt of the Advice. If a Supplement Delay Period occurs, the Shelf
Registration Period shall be extended by the number of days which the Supplement
Delay Period comprises; provided that the Shelf Registration Period shall not be
extended if the Company has received an opinion of counsel (which counsel, if
different from counsel to the Company referred to in Section 9(e) of the
Purchase Agreement, shall be reasonably satisfactory to the Majority Holders of
the Transfer Restricted Securities named in the Shelf Registration Period and
which opinion shall be in writing if the Majority of the Holders so request) to
the effect that the Transfer Restricted Securities can be freely tradeable
without the continued effectiveness of the Shelf Registration Statement.
(c) If so directed by the Company in a notice of the commencement of a
Supplement Delay Period, each Holder of Transfer Restricted Securities will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering the Transfer Restricted Securities.
(d) Sales of such Transfer Restricted Securities pursuant to a Shelf
Registration Statement shall only be made in the manner set forth in such
currently effective Shelf Registration Statement.
SECTION 6. REGISTRATION EXPENSES
The Company shall bear all expenses incurred in connection with the
performance of its obligations under Sections 3 and 4 hereof and will reimburse
the Holders for the reasonable fees and disbursements of one firm or counsel
designated by the Majority Holders to act as counsel for the Holders in
connection with any Shelf Registration Statement. Notwithstanding the foregoing
or anything in this Agreement to the contrary, each Holder shall pay all
underwriting discounts and commission of any underwriters with respect to any
Transfer Restricted Securities sold by it.
SECTION 7. INDEMNIFICATION AND CONTRIBUTION
(a) In connection with Shelf Registration Statement and to the extent
permitted by law, the Company agrees to indemnify and hold harmless each Holder
of Transfer Restricted Securities covered thereby (including each Initial
Purchaser), the directors, officers, employees, partners, representatives and
agents of each such Holder and each person who controls any such Holder within
the meaning of either Section 15 of the Act or Section 20 of the Exchange Act
against any and all losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject under the Act, the Exchange Act or
other federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of, or are based upon, any untrue statement or alleged untrue
statement of a material fact contained in the Shelf Registration Statement as
originally filed or in any amendment thereof, or in any preliminary Prospectus
or Prospectus, or in any
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<PAGE> 11
amendment thereof or supplement thereto, or arise out of, or are based upon, the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
to reimburse each such indemnified party, as incurred, for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that (i) the Company will not be liable in any case to the extent that any such
loss, claim, damage or liability arises out of, or is based upon, any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information
furnished to the Company by or on behalf of any such Holder specifically for
inclusion therein and (ii) the Company will not be liable to any indemnified
party under this indemnity agreement with respect to the Shelf Registration
Statement or Prospectus to the extent that any such loss, claim, damage or
liability of such indemnified party results solely from an untrue statement of a
material fact contained in, or the omission of a material fact from, the Shelf
Registration Statement or Prospectus, which untrue statement or omission was
corrected in an amended or supplemented Shelf Registration Statement or
Prospectus, if the person alleging such loss, claim, damage or liability was not
sent or given, at or prior to the written confirmation of such sale, a copy of
the amended or supplemented Shelf Registration Statement or Prospectus if the
Company had previously furnished copies thereof to such indemnified party and if
delivery of a prospectus is required by the Act and was not so made. This
indemnity agreement will be in addition to any liability which the Company may
otherwise have.
(b) Each Holder of Transfer Restricted Securities covered by a Shelf
Registration Statement (including each Initial Purchaser) severally agrees to
indemnify and hold harmless (i) the Company, (ii) each of its directors, (iii)
each of its officers who signs such Shelf Registration Statement and (iv) each
person who controls the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Company to each such Holder, but only with reference to written
information relating to such Holder furnished to the Company by or on behalf of
such Holder specifically for inclusion in the documents referred to in the
foregoing indemnity. This indemnity agreement will be in addition to any
liability which any such Holder may otherwise have. In no event shall any
Holder, its directors, officers or any person who controls such Holder be liable
or responsible for any amount in excess of the amount by which the total amount
received by such Holder with respect to its sale of Transfer Restricted
Securities pursuant to a Shelf Registration Statement exceeds (i) the amount
paid by such Holder for such Transfer Restricted Securities and (ii) the amount
of any damages that such Holder, its directors, officers or any person who
controls such Holder has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission.
(c) Promptly after receipt by an indemnified party under this Section 7
of notice of the commencement of any action, the indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 7, notify the indemnifying party in writing of the commencement thereof;
but the failure to so notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to assume the defense of
10
<PAGE> 12
any such claim and to appoint counsel of the indemnifying party's choice at the
indemnifying party's expense to represent the indemnified party in any action
for which indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel (and local counsel) if (i) the use of counsel chosen by
the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or potential defendants in,
or targets of, any such action include both the indemnified party and the
indemnifying party, and the indemnified party reasonably concluded that there
may be legal defenses available to it and/or other indemnified parties that are
different from or additional to those available to the indemnifying party, (iii)
the indemnifying party did not employ counsel satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after notice
of the institution of such action or (iv) the indemnifying party authorized the
indemnified party to employ separate counsel at the expense of the indemnifying
party. The indemnifying party shall indemnify and hold harmless the indemnified
party from and against all losses, claims, damages and liabilities by reason of
any settlement of any action (i) effected with its written consent or (ii)
effected without its written consent if the settlement is entered into more than
twenty business days after the indemnifying party has received a request from
the indemnified party for reimbursement for the fees and expenses of counsel (in
any case where such fees and expenses are at the expense of the indemnifying
party) and, prior to the date of such settlement, the indemnifying party has
failed to comply with such reimbursement request. Notwithstanding the
immediately preceding sentence, if at any time an indemnified party has
requested an indemnifying party to reimburse the indemnified party for fees and
expenses of counsel, an indemnifying party shall not be liable for any
settlement of the nature contemplated by the immediately preceding sentence
effected without its consent if such indemnifying party (i) reimburses such
indemnified party in accordance with such request to the extent that it
considers such request to be reasonable and (ii) provides written notice to the
indemnified party substantiating the unpaid balance as unreasonable, in each
case, prior to the date of settlement. An indemnifying party shall not, without
the prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding for which indemnification or contribution may
be sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action), unless such settlement, compromise
or consent includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding and does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) In the event that the indemnity provided in paragraph (a) or (b) of
this Section 7 is unavailable or insufficient to hold harmless an indemnified
party for any reason, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall to the extent permitted by law have a
joint and several obligation to contribute to the aggregate losses, claims,
damages and liabilities (including legal or other expenses reasonably incurred
in connection with investigating or defending same) (collectively "LOSSES") to
which such indemnified party may be
11
<PAGE> 13
subject in such proportion as is appropriate to reflect the relative benefits
received by such indemnifying party, on the one hand, and such indemnified
party, on the other hand, from the Initial Placement and the Shelf Registration
Statement that resulted in such Losses; provided, however, that in no case shall
any Initial Purchaser be responsible, in the aggregate, for any amount in excess
of the purchase discount or commission applicable to such Note, as set forth in
Section 2 of the Purchase Agreement. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the indemnifying
party and the indemnified party shall contribute in such proportion as is
appropriate to reflect not only such relative benefits, but also the relative
fault of such indemnifying party, on the one hand, and such indemnified party,
on the other hand, in connection with the statements or omissions which resulted
in such Losses, as well as any other relevant equitable considerations. Benefits
received by the Company shall be deemed to be equal to the sum of (x) the total
net proceeds from the Initial Placement (in each case, before deducting
expenses) as set forth in Section 2 of the Purchase Agreement and (y) the total
amount of additional interest that the Company was not required to pay as a
result of registering the securities covered by the Shelf Registration Statement
that resulted in such Losses. Benefits received by the Initial Purchasers shall
be deemed to be equal to the total purchase discounts and commissions as set
forth in Section 2 of the Purchase Agreement, and benefits received by any other
Holders shall be deemed to be equal to the value of the Transfer Restricted
Securities sold by such Holders under the Shelf Registration Statement. Relative
fault shall be determined by reference to whether any alleged untrue statement
or omission relates to information provided by the indemnifying party, on the
one hand, or by the indemnified party, on the other hand. The parties agree that
it would not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation that does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 7, each person who controls a Holder within the meaning of either
the Act or the Exchange Act and each director, officer, employee and agent of
such Holder shall have the same rights to contribution as such Holder, and each
person who controls the Company within the meaning of either the Act or the
Exchange Act, each officer of the Company who has signed the Shelf Registration
Statement and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to the applicable terms and
conditions of this paragraph (d).
(e) The provisions of this Section 7 shall remain in full force and
effect, regardless of any investigation made by or on behalf of any Holder or
the Company or any of the officers, directors or controlling persons referred to
in Section 7 hereof, and will survive the sale by a Holder of Transfer
Restricted Securities or Exchange Notes.
SECTION 8. RULE 144A AND RULE 144
The Company agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in which the
Company (I) is not subject to Section 13 or 15(d) of the Exchange Act, to make
available, upon request of any Holder, to such Holder or beneficial owner of
Transfer Restricted Securities in connection with any sale thereof and any
prospective purchaser of such Transfer Restricted Securities designated by such
Holder or
12
<PAGE> 14
beneficial owner, the information required by Rule 144A(d)(4) under the Act in
order to permit resales of such Transfer Restricted Securities pursuant to Rule
144A, and (ii) is subject to Section 13 or 15 (d) of the Exchange Act, to make
all filings required thereby in a timely manner in order to permit resales of
such Transfer Restricted Securities pursuant to Rule 144.
SECTION 9. MISCELLANEOUS
(a) No Inconsistent Agreements. The Company has not, as of the date
hereof, entered into, nor shall it, on or after the date hereof, enter into, any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders herein or otherwise conflicts with the provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, qualified, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of the
Holders of at least a majority of the then outstanding aggregate principal
amount of Notes; provided, however, that with respect to any matter that
directly or indirectly affects the rights of any Initial Purchaser hereunder,
the Company shall obtain the written consent of each such Initial Purchaser
against which such amendment, qualification, supplement, waiver or consent is to
be effective. Notwithstanding the foregoing (except the foregoing proviso), a
waiver or consent to depart from the provisions hereof, with respect to a
matter, which relates exclusively to the rights of Holders whose securities are
being sold pursuant to a Shelf Registration Statement and does not directly or
indirectly affect the rights of other Holders, may be given by the Majority
Holders, determined on the basis of Notes being sold rather than registered
under such Shelf Registration Statement.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telex, telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the most current address given by such
holder to the Company in accordance with the provisions of this Section
9(c), which address initially is, with respect to each Holder, the
address of such Holder maintained by the registrar under the Indenture
(ii) with a copy in like manner to Donaldson, Lufkin & Jenrette
Securities Corporation;
(iii) if to the Initial Purchasers, initially at the respective
addresses set forth in the Purchase Agreement; and
(iv) if to the Company, initially at its address set forth in the
Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given when received.
13
<PAGE> 15
Upon the date of filing of a Shelf Registration Statement notice shall
be delivered to Donaldson, Lufkin & Jenrette Securities Corporation, on behalf
of the Initial Purchasers (in the form attached hereto as Exhibit A) and shall
be addressed to: Attention: Louise Guarneri (Compliance Department), 277 Park
Avenue, New York, New York 10172.
The Initial Purchasers or the Company by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
(d) Successors and Assigns. This Agreement shall inure to the benefit
of, and be binding upon, the successors and assigns of each of the parties
hereto, including, without the need for an express assignment or any consent by
the Company thereto, subsequent Holders of Notes. The Company hereby agrees to
extend the benefits of this Agreement to any Holder of Notes and any such Holder
may specifically enforce the provisions of this Agreement as if an original
party hereto.
(e) Counterparts. This agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original, and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This agreement shall be governed by and construed in
accordance with the internal laws of the State of New York applicable to
agreements made and to be performed in said State (without reference to the
conflict of law rules thereof).
(h) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and the
remaining provisions hereof shall not be in any way impaired or affected
thereby, it being intended that all of the rights and privileges of the parties
shall be enforceable to the fullest extent permitted by law.
(i) Notes Held by the Company, etc. Whenever the consent or approval of
Holders of a specified percentage of principal amount of Notes is required
hereunder, Notes held by the Company or its Affiliates (other than subsequent
Holders of Notes if such subsequent Holders are deemed to be Affiliates solely
by reason of their holdings of such Notes) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
(j) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto with respect
to the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
14
<PAGE> 16
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
ECHOSTAR COMMUNICATIONS CORPORATION
By: /s/ David K. Moskowitz
-----------------------------------------
Name: David K. Moskowitz, Esq.
Title: Senior Vice President and General
Counsel
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ J. Tracy Mehr
-----------------------------------------
Name: J. Tracy Mehr
Title: Vice President
15
<PAGE> 17
EXHIBIT A
NOTICE OF FILING OF
SHELF REGISTRATION STATEMENT
To: Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, New York 10172
Attention: Louise Guarneri (Compliance Department)
Fax: (212) 892-7272
From: EchoStar Communications Corporation
4 7/8% Convertible Subordinated Notes due 2007
Date: , 199
---------------------- --
For your information only (NO ACTION REQUIRED):
Today, ______, ____, we filed a Shelf Registration Statement with the
Securities and Exchange Commission.
16
<PAGE> 1
EXHIBIT 5.1
HALE LANE PEEK
DENNISON HOWARD AND ANDERSON
A Professional Corporation
Attorneys and Counsellors at Law
<TABLE>
<S> <C> <C>
Office Address: (775) 327-3000 Mailing Address:
100 West Liberty Street, Tenth Floor (775) 786-7900 Post Office Box 3237
Reno, Nevada 89501 Facsimile (775) 786-6179 Reno, Nevada 89505
</TABLE>
March 3, 2000
EchoStar Communications Corporation
5701 South Santa Fe Drive
Littleton, CO 80120
Ladies and Gentlemen:
We have acted as special Nevada counsel for EchoStar Communications
Corporation, a Nevada corporation (the "Company"), in connection with the filing
by the Company with the Securities and Exchange Commission of a Registration
Statement on Form S-3 (the "Registration Statement") with respect to the
proposed offering and sale by certain stockholders of up to an aggregate of
$1,000,000,000 in principal amount of 4-7/8% Convertible Subordinated Notes due
2007 (the "Notes") and the shares of Class A Common Stock of the Company, par
value $.01 per share, issuable upon conversion thereof (the "Conversion
Shares"), pursuant to a public offering.
In so acting, we have examined such documents, records and matters of law
as we have deemed relevant and necessary for the purposes of this opinion. In
rendering the opinion hereinafter set forth, we have assumed the validity of and
relied upon the representations of the Company as to certain factual matters
relevant thereto.
On the basis of our examination, it is our opinion that (a) the Notes being
registered are legally and validly issued, and (b) the Conversion Shares being
registered, when issued in accordance with the terms of the Notes and their
associated indenture, will be legally and validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the heading "Legal
Matters" in the prospectus included in the Registration Statement. In giving
this consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the rules and regulations of the Securities and Exchange
Commission.
Very truly yours,
/s/ HALE LANE PEEK DENNISON
HOWARD AND ANDERSON
<TABLE>
<S> <C>
LAS VEGAS OFFICE: 2300 West Sahara Avenue, Eighth Floor, Box 8, Las Vegas, Nevada 89102
(702) 362-5118 o Facsimile (702) 365-6940
CARSON CITY OFFICE: 777 East William Street, Suite 201, Post Office Box 2620, Carson City, Nevada 89702
(702) 684-6000 o Facsimile (702) 684-6001
</TABLE>
<PAGE> 1
EXHIBIT 5.2
Friedlob Sanderson Raskin
Paulson & Tourtillott, LLC
1400 Glenarm Place, Suite 300
Denver, Colorado 80202
Tel- 303.571.1400
Fax- 303.575.3157
March 7, 2000
EchoStar Communications Corporation
5701 South Santa Fe Drive
Littleton, CO 80120
Ladies and Gentlemen:
We have acted as counsel for EchoStar Communications Corporation, a
Nevada corporation (the "Company"), in connection with the filing by the Company
with the Securities and Exchange Commission of a registration statement on Form
S-3 (the "Registration Statement") with respect to $1,000,000,000 aggregate
principal amount of 4 7/8% Convertible Subordinated Notes due 2007 (the
"Notes"), and 11,003,521 shares of the Company's Class A common stock, $.01 par
value, issuable upon conversion of the Notes (the "Conversion Shares"). The
Notes and the Conversion Shares are to be offered and sold by certain
securityholders of the Company.
We have examined the Registration Statement and such documents and
records of the Company and other documents as we have deemed necessary for the
purpose of this opinion. In rendering the opinion hereinafter set forth, we have
assumed the validity of and relied upon the representations of the Company as to
certain factual matters relevant thereto. Based upon the foregoing, we are of
the opinion that (i) the Notes have been duly authorized and, assuming due
authentication by the trustee for the Notes, are valid and binding obligations
of the Company, subject to applicable bankruptcy and insolvency laws and the
application of general principals of equity, and (ii) upon conversion of the
Notes in accordance with their terms and the indenture pursuant to which they
were issued, the Conversion Shares will be duly authorized, validly issued,
fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and any amendment thereto, including any and all
post-effective amendments, and to the reference to our firm in the Prospectus of
the Registration Statement under the heading "Legal Matters." In giving such
consent, we do not hereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission.
Very truly yours,
/s/ FRIEDLOB SANDERSON RASKIN
PAULSON & TOURTILLOTT, LLC
<PAGE> 1
Exhibit 12.1
ECHOSTAR COMMUNICATIONS CORPORATION AND SUBSIDIARIES AND AFFILIATES
COMPUTATION OF RATIOS
(IN THOUSANDS)
(UNAUDITED)
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES:
<TABLE>
<CAPTION>
Nine Months
Year Ended December 31, Ended
--------------------------------------------------------------------- September 30,
1994 1995 1996 1997 1998 1999
--------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before
taxes ....................... $ 489 $ (17,231) $(155,679) $(312,679) $(260,838) $ (303,753)
Series A Preferred
Stock dividends ............. 939 1,204 1,204 1,204 1,204 124
Series B Preferred
Stock dividend .............. 6,164 26,874 241
Series C Preferred
Stock dividend .............. 1,074 7,137 5,661
Interest expense ............ 21,408 23,985 61,487 104,192 167,529 149,532
Capitalized interest ........ 5,695 25,763 31,818 43,169 21,678 --
Interest component
of rent expense (1) ......... 94 71 84 64 74 74
--------- --------- --------- --------- --------- -------------
Total fixed charges ........ 28,136 51,023 94,593 155,867 224,496 155,632
Earnings before
fixed charges ............... $ 21,991 $ 6,825 $ (94,108) $(208,423) $ (93,235) $ (154,147)
Ratio of earnings to
fixed changes ............... 0.78 0.13 (0.99) (1.34) (0.42) (0.99)
========= ========= ========= ========= ========= =============
Deficiency of
available earnings to
fixed charges ............... $ (6,145) $ (44,198) $(188,701) $(364,290) $(317,731) $ (309,779)
========= ========= ========= ========= ========= =============
</TABLE>
- ---------------------
(1) The interest component of rent expense has been estimated by taking the
difference between the gross rent expense and net present value of rent
expense using a weighted-average cost of capital of approximately 13%
for the years ended December 31, 1994, through December 31, 1998. The
weighted-average cost of capital for the nine months ended
September 30, 1999 approximated 9%. The cost of capital used to
calculate the interest component of rent expense is representative of
the Company's outstanding secured borrowings during each respective
period.
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of our report dated
March 2, 1999 and included in EchoStar Communication Corporation's Form 10-K for
the year ended December 31, 1998 and to all references to our Firm included in
or made part of this Registration Statement.
Denver, Colorado,
March 3, 2000.
/s/ Arthur Andersen, LLP
-------------------------
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM T-1
Statement of Eligibility Under the
Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee
U.S. BANK TRUST NATIONAL ASSOCIATION
(Exact name of Trustee as specified in its charter)
United States 41-0257700
(State of Incorporation) (I.R.S. Employer
Identification No.)
U.S. Bank Trust Center
180 East Fifth Street
St. Paul, Minnesota 55101
(Address of Principal Executive Offices) (Zip Code)
ECHOSTAR COMMUNICATIONS CORPORATION
(Exact name of Registrant as specified in its charter)
Nevada 88-0336997
(State of Incorporation) (I.R.S. Employer
Identification No.)
5701 South Santa Fe Drive
Littleton, Colorado 80120
(303) 723-1000
(Address of Principal Executive Offices)
4 7/8% CONVERTIBLE SUBORDINATED NOTES DUE 2007
(Title of the Indenture Securities)
<PAGE> 2
GENERAL
1. General Information Furnish the following information as to the Trustee.
(a) Name and address of each examining or supervising authority to which
it is subject.
Comptroller of the Currency
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS If the obligor or any
underwriter for the obligor is an affiliate of the Trustee, describe each
such affiliation.
None
See Note following Item 16.
Items 3-15 are not applicable because to the best of the Trustee's
knowledge the obligor is not in default under any Indenture for which the
Trustee acts as Trustee.
16. LIST OF EXHIBITS List below all exhibits filed as a part of this statement
of eligibility and qualification.
1. Copy of Articles of Association.*
2. Copy of Certificate of Authority to Commence Business.*
3. Authorization of the Trustee to exercise corporate trust powers
(included in Exhibits 1 and 2; no separate instrument).*
4. Copy of existing By-Laws.*
5. Copy of each Indenture referred to in Item 4. N/A.
6. The consents of the Trustee required by Section 321(b) of the act.
7. Copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or examining
authority is incorporated by reference to Registration Number
333-70709.
* Incorporated by reference to Registration Number 22-27000.
<PAGE> 3
NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligors within three
years prior to the date of filing this statement, or what persons are owners of
10% or more of the voting securities of the obligors, or affiliates, are based
upon information furnished to the Trustee by the obligors. While the Trustee has
no reason to doubt the accuracy of any such information, it cannot accept any
responsibility therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, U.S. Bank Trust National Association, an Association organized and
existing under the laws of the United States, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, and its seal to be hereunto affixed and attested, all
in the City of Saint Paul and State of Minnesota on the 1st day of March, 2000.
U.S. BANK TRUST NATIONAL ASSOCIATION
--------------------------------
Richard H. Prokosch
Asst. Vice President
- -------------------------------
Harry Hall, Jr.
Assistant Secretary
<PAGE> 4
NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligors within three
years prior to the date of filing this statement, or what persons are owners of
10% or more of the voting securities of the obligors, or affiliates, are based
upon information furnished to the Trustee by the obligors. While the Trustee has
no reason to doubt the accuracy of any such information, it cannot accept any
responsibility therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, U.S. Bank Trust National Association, an Association organized and
existing under the laws of the United States, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, and its seal to be hereunto affixed and attested, all
in the City of Saint Paul and State of Minnesota on the 1st day of March, 2000.
U.S. BANK TRUST NATIONAL ASSOCIATION
/s/ Richard H. Prokosch
----------------------------------
Richard H. Prokosch
Asst. Vice President
/s/ Harry Hall, Jr.
- ------------------------------
Harry Hall, Jr.
Assistant Secretary
<PAGE> 5
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939, the
undersigned, U.S. BANK TRUST NATIONAL ASSOCIATION hereby consents that reports
of examination of the undersigned by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon its request therefor.
Dated: March 1, 2000
U.S. BANK TRUST NATIONAL ASSOCIATION
------------------------------
Richard H. Prokosch
Asst. Vice President
<PAGE> 6
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939, the
undersigned, U.S. BANK TRUST NATIONAL ASSOCIATION hereby consents that reports
of examination of the undersigned by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon its request therefor.
Dated: March 1, 2000
U.S. BANK TRUST NATIONAL ASSOCIATION
/s/ Richard H. Prokosch
-------------------------------
Richard H. Prokosch
Asst. Vice President
